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What changed in Skillz Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Skillz Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+467 added−420 removedSource: 10-K (2025-11-06) vs 10-K (2024-08-29)

Top changes in Skillz Inc.'s 2024 10-K

467 paragraphs added · 420 removed · 288 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

53 edited+25 added−13 removed38 unchanged
Biggest changeThe trust and fairness we foster with our player community is part of the foundation upon which our business is built. Fair Play Our proprietary platform provides certainty that every player is fairly matched against another real player. That is the bedrock of competition, and a critical tenet of skill-based gaming.
Biggest changeFair Play Our proprietary platform fairly matches real players against other real players, which we believe is a bedrock of competition, and a critical tenet of skill-based gaming. We believe there are competitors that may not be following similar ethical fairness practices and may utilize bots instead of matching their users against real human opponents.
Our developer portal has been built such that an average game developer can implement our SDK in about a day, with little or no technical support. Once a game goes live on our platform, the developer portal provides game developers with a single system through which they can access analytics on user behavior and monetization for their games.
Our developer portal has been built such that an average game developer can implement our SDK in about a day, with little or no technical support. Once a game goes live on our platform, the developer portal provides developers with a single system through which they can access analytics on user behavior and monetization for their games.
This allows the developers to do what they do best — build great games — while we help them on all other fronts by delivering services such as payments, analytics, LiveOps, prize fulfillment and customer service. Historically, a small number of games have accounted for a substantial portion of our revenue.
This allows the developers to do what they do best — build great games — while we help them on other fronts by delivering services such as payments, analytics, LiveOps, prize fulfillment and customer service. Historically, a small number of games have accounted for a substantial portion of our revenue.
While we are firmly committed to full compliance with all applicable laws and have developed appropriate policies and procedures in order to comply with the requirements of the evolving regulatory regimes, we cannot ensure that our compliance program will prevent the violation of one or more laws or regulations, or that a violation by us or an employee will not result in the imposition of a monetary fine.
While we are committed to compliance with all applicable laws and have developed appropriate policies and procedures in order to comply with the requirements of the evolving regulatory regimes, we cannot ensure that our compliance program will prevent the violation of one or more laws or regulations, or that a violation by us or an employee will not result in the imposition of a monetary fine.
Compliance Because we handle, collect, store, receive, transmit and otherwise process certain personal information of users and employees, we are also subject to federal, state and foreign laws related to the privacy and protection of such data, including the General Data Protection Regulation of the European Union (“GDPR”) and the California Consumer Privacy Act (“CCPA”).
Compliance We handle, collect, store, receive, transmit and otherwise process certain personal information of users and employees, and we are subject to federal, state and foreign laws related to the privacy and protection of such data, including the General Data Protection Regulation of the European Union (“GDPR”) and the California Consumer Privacy Act (“CCPA”).
The contents of, or information accessible through, our websites are not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
The contents of, or information accessible through, our websites are not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 13 TABLE OF CONTENTS
As of December 31, 2023, we enabled cash prizes in 45 states and the District of Columbia. Skillz enables cash prizes in all states except for Arkansas, Connecticut, Delaware, Louisiana and South Dakota.
As of December 31, 2024, we enabled cash prizes in 45 states and the District of Columbia. Skillz enables cash prizes in all states except for Arkansas, Connecticut, Delaware, Louisiana and South Dakota.
Live Operations Delivering live operations in games is critical to user retention and engagement. Our live operations, or LiveOps, system manages and optimizes user experience across the thousands of games on our platform. We have built a highly automated system to power LiveOps on our platform.
Live Operations Delivering live operations in games is critical to user retention and engagement. Our live operations, or LiveOps, system manages and optimizes user experience across all the games on our platform. We have built a highly automated system to power LiveOps on our platform.
Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SKLZ.” Unless the context requires otherwise, the words “Skillz,” “we,” “Company,” “us” and “our” refer to Skillz Inc. and our wholly-owned subsidiaries. 11 TABLE OF CONTEN T S Available Information Our website is located at www.skillz.com, and our investor relations website is located at http://investors.skillz.com/.
Our Class A common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SKLZ.” Unless the context requires otherwise, the words “Skillz,” “we,” “Company,” “us” and “our” refer to Skillz Inc. and our wholly-owned subsidiaries. Available Information Our website is located at www.skillz.com, and our investor relations website is located at http://investors.skillz.com/.
This data model allows us to deliver effective monetization for the benefit of developers on our platform. 7 TABLE OF CONTEN T S Games on Our Platform We offer a wide range of gaming experiences for users. We enable game genres that can be played: (i) asynchronously; (ii) synchronously; or (iii) turn-based synchronously.
This data model allows us to deliver effective monetization for the benefit of developers on our platform. 8 TABLE OF CONTENTS Games on Our Platform We offer a wide range of gaming experiences for users. We enable game genres that can be played: (i) asynchronously; (ii) synchronously; or (iii) turn-based synchronously.
Aarki enables brands to effectively engage audiences in a privacy-first world by using billions of contextual bidding signals coupled with proprietary machine learning and behavioral models. Aarki works with hundreds of advertisers globally and manages approximately 5 million mobile ad requests per second from over 10 billion devices.
Aarki enables brands to effectively engage audiences in a privacy-first world by using billions of contextual bidding signals coupled with proprietary machine learning and behavioral models. The Company works with advertisers globally and manages millions of mobile ad requests per second from over 10 billion devices.
The introduction of standardized game development platforms and universally known distribution platforms such as the AppStore, Google Play, and Galaxy Store have resulted in a flood of game content to the market. Meanwhile, traditional methods used by game developers to monetize their content (e.g., via Ads or In-Game Purchase) have not kept pace.
The introduction of standardized game development platforms and universally known distribution platforms such as the AppStore, Google Play, and Galaxy Store have resulted in a flood of game content to the market. Meanwhile, traditional methods used by game developers to monetize their content (e.g., via 7 TABLE OF CONTENTS advertisements or in-game purchases) have not kept pace.
As a result, a massive amount of great game content is not being discovered or monetized to its fullest potential. Skillz provides a service to the game developers aimed at improving the monetization of their game content. The monetization service provided by Skillz allows developers to offer multiplayer competition to their end-users which increases end-user retention and engagement.
As a result, we believe that a massive amount of game content is not being discovered or monetized to its fullest potential. Skillz provides a service to the game developers aimed at improving the monetization of their game content. The monetization service provided by Skillz allows developers to offer multi-player competition to their end-users which increases end-user retention and engagement.
In addition to traditional paid advertising channels, we cross-promote our product offerings to our existing user base across our gaming ecosystem using a combination of content, contests and special offers. 8 TABLE OF CONTEN T S We have significant opportunities to extend our marketing channels to offline media and deploy omni-channel marketing strategies to further expand our business.
In addition to promoting our product offerings via traditional paid advertising channels, we cross-promote our product offerings to our existing user base across our gaming ecosystem using a combination of content, contests and offers. We have significant opportunities to extend our marketing channels to offline media and deploy omni-channel marketing strategies to further expand our business.
We are all born with skills and when we are able to apply those skills through competition, we can achieve great things. That is the guiding principle behind why we are building the competition layer of the internet by re-inventing competitive mobile gaming. Our company’s mission is to bring out the best in everyone through competition.
We are all born with skills and when we are able to apply those skills through competition, we can achieve great things. That is the guiding principle behind why we are advancing competitive mobile gaming . Our Company’s mission is to bring out the best in everyone through competition.
We also note that class action lawsuits have already been filed against two of our competitors (AviaGames and Voodoo). We are hopeful that government authorities will take note of Skillz’s progress identifying fraudulent bot use in the industry and take action to protect consumers.
We also note that class action lawsuits have already been filed against two of our competitors (i.e., AviaGames and Papaya Gaming). We are hopeful that government authorities will take note of our progress identifying fraudulent bot use in the industry and take action to protect players.
At Skillz, we believe a team with diverse business and geographic backgrounds leads to greater innovation, performance and engagement, enabling differential business growth. We believe that hiring employees in countries that have significant talent in gaming is important as we continue to make progress in our turnaround.
At Skillz, we believe a team with diverse business and geographic backgrounds leads to greater innovation, performance and engagement, enabling differential business growth. We believe that hiring employees in countries that have significant talent in gaming and advertising technology is important as our business continues to evolve.
As such, we have opened an office in India to attract and retain top gaming talent. 9 TABLE OF CONTEN T S Competitive Compensation and Benefits. Skillz offers industry competitive wages and benefits. We also offer our employees a holistic total rewards package, with premier health and welfare programs for employees and family members.
As such, we have opened an office in India to attract and retain top industry talent with experience in gaming and gaming platforms. Competitive Compensation and Benefits. Skillz offers industry competitive wages and benefits. We also offer our employees a holistic benefits package, with premier health and welfare programs for employees and family members.
Tickets earned through the loyalty rewards and awards programs can be redeemed in our in-app Ticketz Store for various prizes ranging from Skillz-branded apparel to luxury goods and vehicles. Primarily, our users convert Ticketz to bonus cash. Approximately 96% and 94% of Ticketz were converted to bonus cash in 2023 and 2022, respectively.
Tickets earned through the loyalty rewards and awards programs can be redeemed in our in-app Ticketz Store for various prizes ranging from Skillz-branded apparel to luxury goods and vehicles. Primarily, our users convert Ticketz to bonus cash.
An example of a turn-based synchronous game would be a dominoes game in which users take turns in real-time and the winner is determined when the game ends. An example of a synchronous game would be a real-time strategy game where users are making multiple moves simultaneously and then the winner is determined when the game ends.
An example of a synchronous game would be a real-time strategy game where users are making multiple moves simultaneously and then the winner is determined when the game ends.
Additionally, the Company is in the early stages of two lawsuits filed against our competitors, Papaya Gaming (as defined below) and Voodoo (as defined below), alleging that those competitors engaged in false advertising and unfair business practices in connection with their use of bots in mobile games, unbeknownst to customers.
Additionally, the Company made progress with an additional two lawsuits filed against our competitors, Papaya Gaming (as defined below) and Voodoo (as defined below), alleging that those competitors engaged in false advertising and unfair business practices in connection with their misuse of bots in mobile games, unbeknownst to players.
In addition, nearly every employee at Skillz is eligible for equity awards to share in the Company’s financial success. Our Competition We primarily compete with alternative monetization services for mobile game content. This includes platforms that facilitate in-app advertisements and purchases.
In addition, many employees at Skillz may be eligible for equity awards to share in the Company’s financial success. Our Competition We primarily compete with alternative monetization services for mobile game content. This includes platforms that facilitate in-app advertisements and purchases, and other skill based platforms.
At Skillz, we believe that every employee contributes to shaping the future of interactive entertainment. We are a multinational technology company with over 225 employees located in 11 countries as of December 31, 2023 . Our business success is driven in large part by our highly skilled workforce.
At Skillz, we believe that every employee contributes to shaping the future of interactive entertainment. We are a multinational technology company with offices in Las Vegas, San Francisco and Bangalore, India, with 323 employees located across 12 countries as of December 31, 2024 . The success of our business is driven in large part by our highly skilled workforce.
We use paid marketing channels, in combination with compelling offers and exciting games, to achieve our objectives. We optimize our marketing investment across channels in order to generate targeted returns on our marketing spending.
We acquire and engage users primarily through digital ad networks, our game developers and affiliate partners. We use paid marketing channels, in combination with compelling offers and exciting games, to achieve our objectives. We optimize our marketing investment across channels in order to generate targeted returns on our marketing spending.
Gamer Competition Engine Our end-to-end technology platform enables mobile game developers to improve gameplay experiences and drive improved engagement, retention and revenue from their content. Our easy-to-integrate software development kit, or “SDK,” contains over 200 features in a smaller than 16-megabyte package, which allows for seamless over-the-air updates.
Gamer Competition Engine Our end-to-end technology platform enables mobile game developers to improve gameplay experiences and drive engagement, retention and revenue from their content. Our gamer competition engine, the software development kit, (the “SDK”) contains hundreds of features, which allows for seamless over-the-air updates.
We are 100% committed to this effort and believe that in addition to the trial verdict and settlement award won in 2024, we will prevail in similar circumstances in the future while at the same time, eliminating ‘bad actors’ from the gaming industry.
We are committed to this effort and believe that in addition to the trial verdict and settlement award won in 2024, we will prevail in similar circumstances in the future.
With our system, the more users enjoy playing in contests for prizes and the longer they play, the more revenue we generate for developers. We believe this dynamic generates significantly stronger monetization for developers compared to traditional mobile game monetization.
By monetizing user engagement primarily through prizes, we create an alternative for both developers and players of competitive games. With our system, the more gamers enjoy playing in contests for prizes and the longer they play, the more revenue we generate for developers. We believe this dynamic generates significantly stronger monetization for developers compared to traditional mobile game monetization.
Payment Infrastructure We have developed a robust payments infrastructure and have achieved a system uptime of greater than 99.99%. We believe our technology capabilities are critical to building and maintaining trusted relationships with our developers and users. Data Science Our algorithms and machine learning technologies augment all facets of our platform.
Payment Infrastructure Our payments infrastructure that, we believe, is reliable and generates up uptime that meets or exceeds industry standards. We believe our technology capabilities are critical to building and maintaining trusted relationships with our developers and users. Data Science Our algorithms and machine learning technologies augment all facets of our platform.
Games on our platform initially go live with free-to-play capabilities, before applying for prized competitions. We carefully curate which games are enabled for prizes based on a number of criteria, to ensure we provide an enticing competitive mobile gaming experience.
In an effort to provide an enticing mobile gaming experience, we carefully curate which games are enabled for prizes based on a number of criteria, to ensure we provide an enticing competitive mobile gaming experience.
Our Customer Advocacy We provide 24/7 support and trust and safety services to our developers’ end-users. The customer support team responds to all user inquiries including support for game crashes, payment issues, and loyalty program inquiries. For the year ended December 31, 2023 , our customer support team achieved a 95% Player customer satisfaction score (CSAT) for cash players.
The customer support team responds to all user inquiries including support for game crashes, payment issues, and loyalty program inquiries. For the year ended December 31, 2024 , our customer support team achieved a high player customer satisfaction score (CSAT) for cash players. We have a robust VIP program that supports high value players.
Additionally, existing and future laws that permit skill-based gaming may be accompanied in the future by restrictions or taxes that make it less feasible or impractical to operate in these jurisdictions. 10 TABLE OF CONTEN T S It is possible that a number of laws and regulations may be adopted or construed to apply to us that could restrict the online and mobile industries, including with respect to player privacy, taxation, content suitability, copyright, distribution and antitrust.
It is possible that a number of laws and regulations may be adopted or construed to apply to us that could restrict the online and mobile industries, including with respect to player privacy, taxation, content suitability, copyright, distribution and antitrust.
We believe the evidence made public at trial showed the competitor’s use of bots allowed it to engineer the outcome of the matches and directly pocket the consumers’ money.
Instead of being matched with real opponents, as advertised, we believe the evidence showed that players were unknowingly competing against bots. We believe the evidence made public at trial showed the competitor’s use of bots allowed it to engineer the outcome of the matches and directly pocket the players’ money.
Our Intellectual Property Our business relies substantially on the creation, use and protection of intellectual property. We protect our intellectual property by relying on international, federal, state and common law rights. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors.
We protect our intellectual property by relying on international, federal, state and common law rights. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors. We actively seek patent protection covering our inventions and as of December 31, 2024 , we have 91 patents granted and 86 patents pending worldwide.
Key features of our proprietary data science technologies include anti-cheat, anti-fraud, player rating and matching, and segmentation engine. We believe our technology capabilities are industry-leading and have helped to differentiate our product offerings and fuel our growth and promote fair play. Strong anti-cheat and anti-fraud protections are among the most critical elements required to foster a healthy fair-play competitive ecosystem.
Key features of our proprietary data science technologies include anti-cheat, anti-fraud, player rating and matching, and segmentation engine. We believe our technology capabilities are industry-leading and have helped to differentiate our product offerings and promote fair play. High personalization is an integral element to enhancing the gamer experience on our platform.
Our system manages the presentation of tournament formats, frequency of events and merchandising of the Ticketz store, which is our in-game store that allows users to redeem prizes in exchange for tickets earned in gameplay on our platform (“Ticketz”). Ticketz can be redeemed within our loyalty program for prizes or credits to be used towards future paid-entry tournaments.
We run multivariate testing on our system settings to optimize user engagement and retention for games on our platform. Our system manages the presentation of tournament formats, frequency of events and merchandising of the Ticketz store, which is our in-game store that allows users to redeem prizes in exchange for tickets earned in gameplay on our platform (“Ticketz”).
With our highly automated system, we are able to run LiveOps for the games on our platform with what we believe is a fraction of the resourcing required by a typical game developer. We run multivariate testing on our system settings to optimize user engagement and retention for games on our platform.
LiveOps in mobile games on our platform encompasses everything from generating new events to creating new and exciting tournament formats. 6 TABLE OF CONTENTS With our highly automated system, we are able to run LiveOps for the games on our platform with what we believe is a fraction of the resourcing required by a typical game developer.
We have a growing community of developers using our platform to bring their art to the world. Content creation has been democratized in recent years with the introduction of standardized game development and distribution platforms. As of December 31, 2023, we had over 16,000 registered game developers launch game integration on our system.
We have a community of developers using our platform to bring their art to the world. Content creation has been democratized in recent years with the introduction of standardized game development and distribution platforms. Our self-serve platform enables our developer customers to integrate and monitor their game performance through sophisticated dashboards.
Our technology allows us to overlap, concatenate and exclude different behaviors to create new user journeys through game environments. We have identified 65 different behavior sets, which enables us to increase the number of potential unique user journeys exponentially and dynamically adjust for a significantly more personalized experience.
We have identified dozens of different behavior sets, which enables us to increase the number of potential unique user journeys exponentially and dynamically adjust for a significantly more personalized experience. We give gamers confidence to transact on our platform by delivering on our values of trust and fairness.
Winning this first case was a big milestone, but we are far from done in our quest to uphold fair play and protect consumers from what we believe is fraudulent inducement, misrepresentation and the outright theft of billions of hard-earned consumer dollars. We will continue to do everything in our power to help stop those dishonest practices.
Winning this case was a milestone for the Company as we continue our quest to uphold fair play and protect players from what we believe is fraudulent inducement, misrepresentation and the theft of billions of player dollars. We intent to continue to pursue our right to take action to help stop dishonest practices.
Our Distribution Our developers distribute their games through direct app downloads from our websites, as well as third-party platforms, such as the Apple App Store, which traditionally has been the main distribution channel for our developers’ games.
An example of a turn-based synchronous game would be a dominoes game in which users take turns in real-time and the winner is determined when the game ends. 9 TABLE OF CONTENTS Our Distribution Our developers distribute their games through direct app downloads from our websites, as well as third-party platforms, such as the Apple App Store, which traditionally has been the main distribution channel for our developers’ games.
We have developed internal compliance programs in an effort to comply with legal and regulatory requirements for skill-based gaming and with respect to data privacy and security. We use geofencing technology designed to restrict user access to paid entry fee contests to only those jurisdictions where video game contests of skill are permitted.
We use geofencing technology designed to restrict user access to paid entry fee contests to only those jurisdictions where video game contests of skill are permitted.
This includes companies that provide video entertainment, music entertainment, social networking and other forms of leisure entertainment. The large companies in our ecosystem may play multiple roles, given the breadth of their businesses. Examples of these larger companies include Sony, Amazon, Meta, Apple, Alphabet, and Unity. Most of these companies are also our partners.
This includes companies that provide video entertainment, music entertainment, social networking and other forms of leisure entertainment. The large companies in our ecosystem may play multiple roles, given the breadth of their businesses. 11 TABLE OF CONTENTS Our Intellectual Property Our business relies substantially on the creation, use and protection of intellectual property.
As we uncover proof of fraudulent use of bots at any company in this industry we intend to initiate additional actions that help protect both Skillz and consumers. Our goal is not to reduce competition, but rather to ensure that all organizations in our industry maintain the same level of commitment to providing a transparent and fair player experience.
As we uncover proof of fraudulent use of bots at any company in this industry we intend to initiate additional actions that help protect both Skillz and players.
Our “Friends” feature allows players to challenge a friend to a match and broadcasts that player’s affinity for Skillz to their social network. 5 TABLE OF CONTEN T S Developer Console Our intuitive developer dashboard enables our developer partners to rapidly integrate and monitor the performance of their games on our platform.
We developed our “Friends” feature that allows players to invite others to the platform and play to further enhance the player experience. Developer Console Our intuitive developer dashboard enables our developer partners to rapidly integrate and monitor the performance of their games on our platform.
The scope of data privacy laws and regulations worldwide continues to evolve, and we anticipate that the number of data privacy laws and the scope of individual data privacy and protection rights will increase.
The scope of data privacy laws and regulations worldwide continues to evolve, and we anticipate that the number of data privacy laws and the scope of individual data privacy and protection rights will increase. 12 TABLE OF CONTENTS We have developed internal compliance programs in an effort to comply with legal and regulatory requirements for skill-based gaming and with respect to data privacy and security.
Our players enjoy social experiences around our games, by communicating during and after competitions, on topics ranging from sharing gameplay strategies to building healthy rivalries and making personal connections.
Our SDK includes many features that enhance the social experience such as in-game chat, friends, tournaments and leagues which allow players to interact and build relationships, strengthening the Skillz gaming community. Our players enjoy social experiences, by communicating during and after competitions, on topics ranging from sharing gameplay strategies to building healthy rivalries and making personal connections.
The evidence we made public at trial showed the competitor and their executives are using bots to build their business, which we believe deceives consumers and harms our company’s competitive position. Instead of being matched with real opponents, as advertised, the evidence showed that consumers were unknowingly competing against bots.
In 2024, following a jury verdict finding AviaGames willfully infringed one of Skillz’s patents, the Company entered into a settlement. We believe the evidence we made public at trial showed the competitor and their executives were using bots to build their business, which we believe deceives players and harms our company’s competitive position.
Traditional mobile games utilize in-game advertisements or purchases, which we believe creates friction in the user experience, hurting engagement and retention. By monetizing user engagement primarily through prizes, we create a compelling alternative for both developers and users of competitive games.
Our technology platform aligns the interests of developers and gamers with respect to user monetization to reduce potential friction between these parties. Traditional mobile games utilize in-game advertisements or purchases, which we believe creates friction in the user experience, hurting engagement and retention.
Our systems need to continuously evolve to stay ahead of sophisticated attempts to defraud or stack the odds against users. As a component of our proprietary security systems, we use our robust data to analyze and build statistical maps to predict users’ probable next outcome.
As a component of our proprietary security systems, we use our robust data to analyze and build statistical maps to predict users’ probable next outcome. This probability modeling then enables us to statistically detect anomalies, which are escalated for further review and remediation, where needed.
We are creating opportunities for all people to experience an epic win and for game developers to turn their craft into financial success. Our proprietary platform revolutionizes and democratizes the mobile gaming industry by “leveling the playing field” for developers worldwide, enabling us to deliver gaming experiences that our player community trusts and loves.
We believe our platform democratizes the mobile gaming industry by “leveling the playing field” for developers worldwide, enabling us to deliver gaming experiences that our player community can trust. The trust and fairness we foster with our player community is part of the foundation upon which our business is built.
User retention is sensitive to both fair matching and time to match and, therefore, we have invested significantly in technology to optimize these competing objectives. Our SDK includes many social features such as in-game chat, friends, tournaments and leagues which allow players to interact and build relationships, strengthening the Skillz player community.
User retention is sensitive to both fair matching and time to match therefore, we have invested significantly in technology to optimize these competing objectives. Additionally, our multi-player platform includes security layers for gamers, enabling us to securely run free and fair prized-based competitions.
We provide developers of all sizes with a comprehensive technology platform enabling them to compete with the largest and most sophisticated mobile game developers in the world. 6 TABLE OF CONTEN T S Our Developer Community The global video game market size was estimated at $217.1 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 13.4% from 2023 to 2030.
Our Developer Community The global video game market size was estimated at $221.2 billion in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 6.5% from 2025 to 2033. Smartphones have also made video games more accessible, portable, and social.
We give gamers confidence to transact on our platform by delivering on our values of trust and fairness. We enable game developers to focus on what they do best: build great content.
We enable game developers to focus on what they do best: build great content. We provide developers of all sizes with a comprehensive technology platform enabling them to compete with the largest and most sophisticated mobile game developers in the world.
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Unfortunately, we believe there are competitors that do not follow ethical fairness practices and utilize bots to deceive players, often matching their consumers against bots instead of real opponents. In 2024, following a jury verdict finding AviaGames willfully infringed one of Skillz’s patents, the Company entered into a settlement.
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We believe our business model is unique in that we create both opportunities for game developers to turn their craft into financial success and opportunities for players to experience wins through our platform. Our proprietary multi-player platform, a form of social media solution, provides interactive entertainment through competitive game content.
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Skillz will continue to combat the deceptive usage of bots until all systemic fraud in our industry is eliminated. Our Turnaround Efforts To propel Skillz toward sustained top-line growth and positive cash flow, we've established four strategic pillars. First, enhancing our platform to improve consumer and developer engagement and retention. Second, upleveling our organization. Third, improving our go-to-market efficiency.
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Paired with Aarki, our artificial intelligence (AI) advertising technology segment, Skillz operates a closed-loop ecosystem that combines content, audience, and performance into a unified growth engine. Aarki delivers advertising solutions that drive revenue growth for mobile app developers by leveraging billions of contextual bidding signals, proprietary machine learning, and behavioral models to engage audiences in a privacy-first world.
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Our successful execution against the first three pillars then leads to the progress we are making with achieving our fourth key pillar: demonstrating a clear path to profitability with a goal of generating positive Adjusted EBITDA by the end of 2024. 4 TABLE OF CONTEN T S While our progress to-date is encouraging and we remain confident in our ability to continue improving the business, progress takes time to fully achieve our business turnaround objectives.
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As Skillz onboards new developers, Aarki powers game title growth through user acquisition and monetization, continuously enhancing its machine learning engine, which in turn delivers better outcomes for developers and greater efficiency for the Skillz platform.
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Our Segments Skillz Skillz is a leading eSports gaming platform. Its platform enables game developers to monetize their content through multi-player competition.
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Our goal is not to reduce competition, but rather to ensure that all organizations in our industry maintain the same level of commitment as we do provide a transparent and fair player experience. Skillz will continue to combat the deceptive misuse of bots until systemic fraud in our industry is eliminated. For additional information, refer to Note 10.
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By utilizing Skillz’ monetization services, developers can enhance their end-user experiences by enabling them to compete in head-to-head matches, live tournaments, leagues, and charity events while also increasing player retention through referral bonus programs, loyalty perks, on-system achievements, and rewards / prizes. Skillz provides its monetization services to developers via a downloadable software development kit (“SDK”).
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Commitments and Contingencies. 4 TABLE OF CONTENTS Our Focus and Strategy We continue to focus on our operations and positioning our business for renewed growth. We believe that both our platform and advertising businesses are improving in performance, and as a result, we believe we are equipped to transition from a period of turnaround to one focused on sustainable growth.
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The SDK integrates with developers’ existing games. Monetization services include end-user registration, player matching, fraud & fair play monitoring, and settlement for player billings and payouts. Skillz is headquartered in Las Vegas, NV with offices in Los Angeles, CA, Canada, and India. Aarki Aarki is an AI company that delivers advertising solutions to drive revenue growth for mobile app developers.
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Our strategy centers on building a portfolio of high-integrity, data-driven digital businesses that extend our existing core technology and platform capabilities.
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Aarki is headquartered in San Francisco, CA, with offices in Europe, the Middle East and Asia. Our Platform Overview We are re-inventing competitive mobile gaming and thereby expanding the mobile gaming market. Our technology platform aligns the interests of developers and gamers with respect to user monetization, rather than putting them at odds.
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We believe the prevalence of bots in the skills-based gaming ecosystem has caused significant shifts in digital advertising and materially distorted customer-acquisition dynamics, including by significantly increasing customer-acquisition costs and a contraction in effective player retention for companies like Skillz who do not utilize bots to compete in real-money competitions.
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LiveOps in mobile games on our platform encompasses everything from generating new events to creating new and exciting tournament formats in which users can compete in brand and influencer-sponsored events.
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We believe the use of bots in skills-based games by certain of our competitors damaged overall player engagement and trust within the skill-based gaming market, which we continue to spend capital and resources to overcome. We believe Aarki, our advertising technology solution, coupled with our investment in Exit Games, a real-time multiplayer technology provider, provides healthy revenue diversification.
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This probability modeling then enables us to statistically detect anomalies, which are escalated for further review and remediation, where needed. High personalization is an integral element to enhancing the gamer experience on our platform. For example, we invented a technology for creating user segments based on dynamically linking behaviors.
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As these businesses scale and as Skillz continues to execute on its path to profitability, we are focused on launching additional growth initiatives that leverage our proven capability to pioneer new markets. Our founder and CEO, Andrew Paradise, has a demonstrated history of innovation, including the mobile self-checkout industry and the mobile skill-gaming market.
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The market's expansion is attributed to the ongoing trend of online gaming, the emergence of high bandwidth network connectivity, and the continuous demand for 3D games. In addition, an upsurge in the penetration of smartphones has made video games more accessible, portable, and social.
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We believe this entrepreneurial foundation positions Skillz well to identify and create future opportunities at the intersection of technology, gaming, and competition. Our Segments Skillz Our platform enables game developers to monetize their content through multi-player competition by integrating real-money tournaments, virtual prizes, and social competition features directly into their games.
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As of December 31, 2023 over 600 developers had a game on our platform with at least one installed user. Our self-serve platform enables our developer customers to integrate and monitor their game performance through sophisticated dashboards.
Added
The platform provides a managed backend that supports key competitive functionality, including player matching, leaderboards, anti-cheat integrity systems, and payment processing. Our scalable multi-player platform allows for real-world prizes that go beyond one-off competitive implementations and provides for a repeatable, developer-accessible system.
Removed
We leverage software tools, analytics and data science to efficiently acquire, engage and retain users while reinforcing our trusted consumer-facing brand with both end-users and our developer partners. We acquire and engage users primarily through digital ad networks, our game developers and affiliate partners.
Added
In exchange for access to our multi-player platform and monetization services, Skillz and its developers share in the aggregate entry fees paid by end users. Our platform capability highlights include: Monetize Through Competitions : Developers may earn revenue by hosting skill-based competitions where players pay entry fees, and Skillz takes a percentage of the pool.
Removed
We actively seek patent protection covering our inventions and as of December 31, 2023 , we had over 130 patents granted or pending worldwide.
Added
Player Matching : Automatically match players based on skill levels, ensuring fair and engaging gameplay experiences. Cross-Platform Support : The Skillz platform is compatible with Android, iOS, and some Unity-based games, allowing developers to reach a broad audience. Comprehensive Analytics : Developers have access to performance metrics, player insights, and revenue data through the Skillz dashboard.
Added
Focus on Game Development : With Skillz managing tournaments, payments, and player matching, developers can focus on building their games’ core mechanics and experiences. Aarki Aarki is an artificial intelligence (“AI”) company that delivers advertising solutions to drive revenue growth for mobile app developers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGAAP; • the fact that we may be required to pay contingent consideration in excess of the initial fair value, and contingent consideration may become payable at a time when we do not have sufficient cash available to pay such consideration; • under purchase accounting, we may be required to write off deferred revenue which may impair our ability to recognize revenue that would have otherwise been recognizable which may impact our financial performance or that of the acquired company; • risks associated with our expansion into new international markets and doing business internationally, including those described under the risk factor caption “Our strategy to expand internationally will be subject to increased challenges and risks”; • in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; • the need to transition operations, third-party developers and players onto our existing or new platforms and the potential loss of, or harm to, our relationships with employees, third-party developers, players and other suppliers as a result of integration of new businesses; • the implications of our management team balancing levels of oversight over acquired businesses which continue their operations under contingent consideration provisions in acquisition agreements; • our dependence on the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, when conducting due diligence and evaluating the results of such due diligence; and • liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or disputes, cyber and information security vulnerabilities, violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities.
Biggest changeChallenges and risks from such investments and acquisitions include: • negative effects on business initiatives and strategies from the changes and potential disruption that may follow the acquisition; • diversion of our management’s attention; • declining employee morale and retention issues resulting from changes in compensation, or changes in management, reporting relationships, or future prospects; • the need to integrate the operations, systems, technologies, products and personnel of each acquired company, the inefficiencies and lack of control that may result if such integration is delayed or not implemented, and unforeseen difficulties and expenditures that may arise in connection with integration; • the difficulty in determining the appropriate purchase price of acquired companies may lead to the overpayment for certain acquisitions and the potential impairment of intangible assets and goodwill acquired in the acquisitions; • the difficulty in successfully evaluating and utilizing the acquired products, technology or personnel; • the potential incurrence of debt, contingent liabilities, amortization expenses or restructuring charges in connection with any acquisition; • the need to implement controls, procedures and policies appropriate for a larger, U.S.-based public company at companies that prior to acquisition may not have as robust controls, procedures and policies, in particular, with respect to the effectiveness of cyber and information security practices and incident response plans, compliance with privacy and other regulations protecting the rights of developers and users, and compliance with U.S.-based economic policies and sanctions which may not have previously been applicable to the acquired company’s operations; • the difficulty in accurately forecasting and accounting for the financial impact of an acquisition transaction, including accounting charges and integrating and reporting results for acquired companies that have not historically followed GAAP; • the fact that we may be required to pay contingent consideration in excess of the initial fair value, and contingent consideration may become payable at a time when we do not have sufficient cash available to pay such consideration; • under purchase accounting, we may be required to write off deferred revenue which may impair our ability to recognize revenue that would have otherwise been recognizable which may impact our financial performance or that of the acquired company; 29 TABLE OF CONTENTS • risks associated with our expansion into new international markets and doing business internationally, including those described under the risk factor caption “Our strategy to expand internationally will be subject to increased challenges and risks”; • in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; • the need to transition operations, third-party developers and players onto our existing or new platforms and the potential loss of, or harm to, our relationships with employees, third-party developers, players and other suppliers as a result of integration of new businesses; • the implications of our management team balancing levels of oversight over acquired businesses which continue their operations under contingent consideration provisions in acquisition agreements; • our dependence on the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, when conducting due diligence and evaluating the results of such due diligence; and • liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or disputes, cyber and information security vulnerabilities, violations of laws, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities.
Our vendors and other third parties with whom we do business with, such as our developer partners, are also subject to the foregoing risks, and we do not have any control over them.
Our vendors and other third parties with whom we do business, such as our developer partners, are also subject to the foregoing risks, and we do not have any control over them.
There is also a risk that civil and criminal proceedings, including class actions brought by or on behalf of prosecutors or public entities or incumbent providers of entertainment and gaming services, or private individuals, could be initiated against us, Internet service providers, credit card and other payment processors, advertisers and others involved in the skill-based gaming industries.
There is also a risk that civil and criminal proceedings, brought by or on behalf of prosecutors or public entities or incumbent providers of entertainment and gaming services, or private individuals, including class actions, could be initiated against us, Internet service providers, credit card and other payment processors, advertisers and others involved in the skill-based gaming industries.
In the United States, there are numerous federal and state data privacy laws, data breach notification laws and consumer protection laws. For example, the State of California’s passage of the CCPA, which went into effect on January 1, 2020 and created new privacy rights for consumers residing in the state.
In the United States, there are numerous federal and state privacy laws, data breach notification laws, and consumer protection laws. For example, the State of California’s passage of the CCPA, which went into effect on January 1, 2020, created new privacy rights for consumers residing in the state.
However, we cannot guarantee that we have entered into such agreements with each party who has developed intellectual property on our behalf or each party that has or may have had access to our confidential information, know-how and trade secrets and cannot assure you that these agreements will be effective in controlling access to, and use and distribution of, our platform and proprietary information.
However, we cannot guarantee that we have entered into such agreements with each party who has developed intellectual property on our behalf of each party that has or may have had access to our confidential information, know-how and trade secrets and cannot assure you that these agreements will be effective in controlling access to, and use and distribution of, our platform and proprietary information.
Paradise’s equity interest in us may be diluted due to future equity issuances by us or his own actions in selling shares of Class B common stock in each case, which could result in a loss of the “controlled company” exemption under the NYSE listing rules.
Mr. Paradise’s equity interest in us may be diluted due to future equity issuances by us or his own actions in selling shares of Class B common stock in each case, which could result in a loss of the “controlled company” exemption under the NYSE listing rules.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. In addition, we believe that we are not an investment company under Section 3(b)(1) of the Investment Company Act because we are primarily engaged in a non-investment company business.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. In addition, we believe that we are not an investment company under Section 3(b)(1) of the Investment Company Act as we are primarily engaged in a non-investment company business.
In addition, the failure of developers to provide timely and reliable updates to their games could adversely impact our financial condition, results of operations and prospects. We rely on third-party game developers to develop the games that we host on our platform.
In addition, the failure of developers to provide timely and reliable updates to their games could adversely impact our financial condition, results of operations and prospects. We rely significantly on third-party game developers to develop the games that we host on our platform.
In particular, the GDPR includes obligations and restrictions concerning data transparency and consent, the overall rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area ("EEA") or the United Kingdom, security breach notifications and the security and confidentiality of personal data.
In particular, the GDPR includes obligations and restrictions concerning data transparency and consent, the overall rights of individuals to whom the personal international data relates, the transfer of personal data out of the European Economic Area ("EEA") or the United Kingdom, security breach notifications restrictions and the security and confidentiality of personal data.
The credit facility and the indenture governing the senior secured notes include covenants restricting, among other things, our ability to do the following under certain circumstances: • incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; • pay dividends or make other distributions on, or redeem or purchase any equity interests or make other restricted payments; • make certain acquisitions or investments; • create or incur liens; • transfer or sell assets; • incur restrictions on the payment of dividends or other distributions from our restricted subsidiaries; • alter the business that we conduct; • enter into transactions with affiliates; • conduct buy-back or share repurchase programs; and • consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all our assets.
The credit facility and the indenture governing the senior secured notes include covenants restricting, among other things, our ability to do the following under certain circumstances: • incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; • pay dividends or make other distributions on, or redeem or purchase any equity interests or make other restricted payments; • make certain acquisitions or investments; 42 TABLE OF CONTENTS • create or incur liens; • transfer or sell assets; • incur restrictions on the payment of dividends or other distributions from our restricted subsidiaries; • alter the business that we conduct; • enter into transactions with affiliates; • conduct buy-back or share repurchase programs; and • consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all our assets.
We strive to comply with all applicable laws, policies, legal and contractual obligations and certain industry codes of conduct relating to privacy and data protection, to the extent reasonably attainable.
We strive to comply with applicable laws, policies, legal and contractual obligations and certain industry codes of conduct relating to privacy and data protection, to the extent reasonably attainable.
It is possible that a resolution of one or more such proceedings could result in liability, penalties, or sanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, financial condition, results of operations, reputation and prospects.
It is possible that a resolution of one or more such proceedings could result in liability, penalties, or sanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in our business practices, products or technologies, which could in the future materially and adversely affect our business, financial condition, and results of operations.
As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses and other mechanisms cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we do business, the geographical location or segregation of our relevant operations, and could adversely affect our financial results.
As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses and other mechanisms cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it 31 TABLE OF CONTENTS could affect the manner in which we do business, the geographical location or segregation of our relevant operations, and could adversely affect our financial results.
Non-compliance with any such law or regulations could expose us to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business, financial condition, results of operations, growth prospects and reputation.
Non-compliance with any such law or regulations could expose us to claims, proceedings, litigation and investigations by private parties and government authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business, financial condition, results of operations, growth prospects and reputation.
We are subject to a variety of laws in the U.S. and abroad that affect our business, including state and federal laws regarding skill-based gaming, consumer protection, electronic marketing, data protection and privacy, competition, taxation, intellectual property, export and national security, which are continuously evolving and developing.
We are subject to a variety of laws in the U.S. and abroad that affect our business, including state and federal laws regarding skill-based gaming, consumer protection, electronic marketing, data protection and privacy, competition, taxation, intellectual property, artificial intelligence, export and national security, which are continuously evolving and developing.
Any of the foregoing could disrupt and harm our business. In addition, the use of third-party open source software typically exposes us to greater risks than the use of third-party commercial software because open source licensors generally do not provide support, warranties, controls, indemnification or other contractual protections regarding the functionality or origin of the software.
Any of the foregoing could disrupt and harm our business. In addition, the use of third-party open source software typically exposes us to greater risks than the use of third-party commercial software as open source licensors generally do not provide support, warranties, controls, indemnification or other contractual protections regarding the functionality or origin of the software.
We receive debt ratings from the major credit rating agencies in the U.S. Factors that may impact our credit ratings include debt levels, planned asset purchases or sales and near-term and long-term production growth opportunities. Our credit rating as of December 31, 2023 was CCC+ from S&P Global Ratings.
We receive debt ratings from the major credit rating agencies in the U.S. Factors that may impact our credit ratings include debt levels, planned asset purchases or sales and near-term and long-term production growth opportunities. Our credit rating as of December 31, 2024 was CCC+ from S&P Global Ratings.
We only enable games for paid entry-fee contests in states in which skill-based gaming is permitted and not required to be licensed as gambling under applicable state law. As of December 31, 2023, we are permitted to operate skills-based gaming in 45 states and the District of Columbia.
We only enable games for paid entry-fee contests in states in which skill-based gaming is permitted and not required to be licensed as gambling under applicable state law. As of December 31, 2024, we are permitted to operate skills-based gaming in 45 states and the District of Columbia.
For example, many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could impact our tax obligations.
For example, many countries in the European Union, as well as a number of other countries, including India, and organizations such as the Organization for Economic Cooperation and Development, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could impact our tax obligations.
Our indebtedness could have important consequences including: • making it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under our debt instruments, including restrictive covenants, could result in an event of default under the indenture governing our senior secured notes or agreements governing future indebtedness; • increasing our vulnerability to adverse general economic and industry conditions; • limiting our flexibility in planning for, or reacting to, changes in the economy and our industry; • placing us at a competitive disadvantage compared to our competitors with less indebtedness; • making it more difficult to borrow additional funds in the future to fund growth, acquisitions, working capital, capital expenditures and other purposes; and 40 TABLE OF CONTEN T S • potentially requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund our other business needs.
Our indebtedness could have important consequences including: • making it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under our debt instruments, including restrictive covenants, could result in an event of default under the indenture governing our senior secured notes or agreements governing future indebtedness; • increasing our vulnerability to adverse general economic and industry conditions; • limiting our flexibility in planning for, or reacting to, changes in the economy and our industry; • placing us at a competitive disadvantage compared to our competitors with less indebtedness; • making it more difficult to borrow additional funds in the future to fund growth, acquisitions, working capital, capital expenditures and other purposes; and • potentially requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund our other business needs.
Any of the foregoing impacts, individually or in aggregate, may have a material adverse effect on our business, financial position and results of operations. We have identified material weaknesses in our internal control over financial reporting as of December 31, 2022 and December 31, 2023.
Any of the foregoing impacts, individually or in aggregate, may have a material adverse effect on our business, financial position and results of operations. We have identified material weaknesses in our internal control over financial reporting as of December 31, 2023 and December 31, 2024.
Other states, such as Virginia, have also adopted similar privacy laws that became enforceable in 2023, or are considering adopting similar data privacy laws, which may go into effect throughout 2024 and beyond. In addition, laws in all 50 states require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach.
Other states such as Virginia have also adopted similar privacy laws that became enforceable in 2023, or are considering adopting similar data protection laws, which may go into effect throughout 2025 and beyond. In addition, laws in all 50 states require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach.
Most recently, in July 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to the United States.
In July 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to the United States.
Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform.
Use of open source software may also present additional security risks as the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform.
We are involved, and in the future, may become involved, in claims, suits, government investigations, and proceedings arising in the ordinary course of our business, including actions with respect to intellectual property claims, privacy, data protection or law enforcement matters, tax matters, labor and employment claims, commercial and acquisition-related claims and other matters.
We are, and in the future may again become, involved in claims, suits, government investigations, and proceedings with various plaintiffs arising in the ordinary course of our business, including actions with respect to intellectual property claims, privacy, data protection or law enforcement matters, tax matters, labor and employment claims, commercial and acquisition-related claims and other matters.
For example, the GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data.
For example, the GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and added a broad array of requirements for handling personal data.
Any inability or failure to protect our intellectual property could adversely impact our business, results of operations, financial condition, reputation and prospects. Our commercial success also depends in part on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property rights of others.
Any inability or failure to protect our intellectual property could adversely impact our business, results of operations, financial condition, reputation and prospects. 33 TABLE OF CONTENTS Our commercial success also depends in part on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property rights of others.
As a result of these errors and the restatement, we have become subject to a number of additional risks and uncertainties and unanticipated costs for accounting, legal and other fees and expenses.
As a result of these errors and the restatements, we have become subject to a number of additional risks and uncertainties and unanticipated costs for accounting, legal and other fees and expenses.
There is a risk that existing or future laws may be interpreted in a manner that is not consistent with our current practices, and could have an adverse effect on our business, financial condition, results of operations and growth prospects.
There is a risk that existing or future laws may be interpreted in a manner that is not consistent with our current practices, and could have an adverse effect on our business, financial condition, 22 TABLE OF CONTENTS results of operations and growth prospects.
If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain such technology or enter into new agreements on commercially reasonable terms, our ability to develop our platform could be severely limited and our business could be harmed.
If we are unable to obtain or maintain rights to any of this technology as a result of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain such technology or enter into new agreements on commercially reasonable terms, our ability to develop our platform could be severely limited and our business could be harmed.
So long as more than 50% of the voting power for the election of our directors is held by an individual, a group or another company, we will qualify as a “controlled company” within the meaning of the NYSE corporate governance standards. As of December 31, 2023, Mr. Paradise controlled 82% of the voting power of our outstanding capital stock.
So long as more than 50% of the voting power for the election of our directors is held by an individual, a group or another company, we will qualify as a “controlled company” within the meaning of the NYSE corporate governance standards. As of December 31, 2024, Mr. Paradise controlled 84% of the voting power of our outstanding capital stock.
Such claims, suits, government investigations, and proceedings are inherently uncertain and their results cannot be predicted. Regardless of their outcomes, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, and other factors.
Such claims, suits, government investigations, and proceedings are inherently uncertain and their results cannot be predicted. Regardless of their outcomes, such legal proceedings can have an adverse impact on us in light of legal costs, diversion of management and other personnel, and other factors.
In such a case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, our ability to obtain additional financing may be impaired and our stock price may decline as a result.
In such a case, we may be unable to maintain compliance with securities law requirements (and covenants under our debt instruments) regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, our ability to obtain additional financing may be impaired and our stock price may decline as a result.
If companies or governmental entities block or limit such or otherwise adopt policies restricting players from playing the games available on the Skillz platform, our business could be negatively impacted and could lead to the loss or slower growth of players on the Skillz platform. 22 TABLE OF CONTEN T S We primarily rely, and expect to continue to rely, on Amazon Web Services (“AWS”) to deliver our offerings to users on our platform and any failure or disruption of or interference with our use of AWS could adversely affect our business, financial condition, results of operations and prospects.
If companies or governmental entities block or limit such or otherwise adopt policies restricting players from playing the games available on the Skillz platform, our business could be negatively impacted and could lead to the loss or slower growth of players on the Skillz platform. 24 TABLE OF CONTENTS We primarily rely, and expect to continue to rely, on Amazon Web Services (“AWS”) to deliver our offerings to users on our platform and any failure or disruption of or interference with our use of AWS could adversely affect our business, financial condition, results of operations and prospects.
Our business model depends upon the proliferation of mobile devices, the continued compatibility between the games featured on our platform and major mobile gaming operating systems and upon third-party platforms for the distribution of such games.
Our business model heavily depends upon the proliferation of mobile devices, the continued compatibility between the games featured on our platform and major mobile gaming operating systems, web browsers and upon third-party platforms for the distribution of such games.
As a result, we are presently a “controlled company” within the meaning of the NYSE corporate governance standards and will not be subject to the requirements that would otherwise require us to have: (i) a majority of independent directors; (ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors. 38 TABLE OF CONTEN T S Mr.
As a result, we are presently a “controlled company” within the meaning of the NYSE corporate governance standards and will not be subject to the requirements that would otherwise require us to have: (i) a majority of independent directors; (ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.
It is also likely that as our business grows and evolves, particularly if we expand to other countries, we will become subject to laws in additional jurisdictions or other jurisdictions may claim that we are required to comply with their laws. 20 TABLE OF CONTEN T S State and federal laws in the U.S. distinguish between games of skill and games of chance.
It is also likely that as our business grows and evolves, particularly if we expand to other countries, we will become subject to laws in additional jurisdictions or other jurisdictions may claim that we are required to comply with their laws. State and federal laws in the U.S. distinguish generally between games of skill and games of chance.
Paradise owns less than a majority of the outstanding shares of our capital stock. 39 TABLE OF CONTEN T S These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders.
Paradise owns less than a majority of the outstanding shares of our capital stock. These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders.
Compliance with any such legislation may have a material adverse effect on our business, financial condition results of operations and prospects, either as a result of our determination that a jurisdiction should be blocked, or because a local license or approval may be costly for us or our business partners to obtain and/or such licenses or approvals may contain other commercially undesirable conditions. 21 TABLE OF CONTEN T S Changes in tax laws or tax rulings could materially affect our effective tax rates, financial position and results of operations.
Compliance with any such legislation may have a material adverse effect on our business, financial condition results of operations and prospects, either as a result of our determination that a jurisdiction should be blocked, or that a local license or approval may be costly for us or our business partners to obtain and/or such licenses or approvals may contain other commercially undesirable conditions. 23 TABLE OF CONTENTS Changes in tax laws or tax rulings could materially affect our effective tax rates, financial position and results of operations.
Therefore, we have made in the past, and we may make in the future, significant investments or changes to the terms of our relationships with our developer partners that we believe will benefit us in the long term, even if our decision has the potential to negatively impact our operating results in the short term.
Therefore, we have made in the past, and we may make in the future, significant investments (such as the Skillz Developer Accelerator program) or changes to the terms of our relationships with our developer partners that we believe will benefit us in the long-term, even if our decision has the potential to negatively impact our operating results in the short-term.
We expect the number of jurisdictions adopting their own data privacy laws to increase, which will require us to devote additional significant operational resources and incur additional significant expenses and will also increase our exposure to risks of claims by our players that we have not complied with all applicable data privacy laws.
We expect the number of jurisdictions adopting their own data privacy laws to increase, which will require us to devote additional significant operational resources and incur additional significant expenses related to our compliance, monitoring, and control obligations and will also increase our exposure to risks of claims by our players that we have not complied with all applicable data privacy laws.
In addition, our decisions may not result in the long-term benefits that we expect, in which case the success of our platform, business, financial condition or results of operations could be harmed. 14 TABLE OF CONTEN T S Historically, a limited number of games have accounted for a substantial portion of our revenue.
In addition, our decisions may not result in the long-term benefits that we expect, in which case the success of our platform, business, financial condition or results of operations could be harmed. Historically, a limited number of games have accounted for a substantial portion of our revenue.
If any of these events were to occur, our business, financial condition, results of operations and prospects could be materially adversely affected. 25 TABLE OF CONTEN T S Additionally, our payment processors require us to comply with payment card network operating rules, which are set and interpreted by the payment card networks.
If any of these events were to occur, our business, financial condition, results of operations and prospects could be materially adversely affected. Additionally, our payment processors require us to comply with payment card network operating rules, which are set and interpreted by the payment card networks.
Although alternative providers could host our platform on a substantially similar basis, such transition could potentially be disruptive and we could incur significant costs in connection with such transition. 23 TABLE OF CONTEN T S Our use of third-party open source software could negatively affect our ability to offer our products and services through our platform and subject us to possible litigation.
Although alternative providers could host our platform on a substantially similar basis, such transition could potentially be disruptive and we could incur significant costs in connection with such transition. 25 TABLE OF CONTENTS Our use of third-party open source software could negatively affect our ability to offer our products and services through our platform and subject us to possible litigation.
In addition to the market factors noted above and elsewhere in these risk factors, our ability to successfully attract games to our platform and the ability of such games to achieve commercial success will depend on our ability to: • achieve benefits from player acquisition costs; • achieve viral organic growth and gain user interest in our featured games through free or paid channels; • adapt to changing player preferences; • adapt to new technologies and feature sets for mobile and other devices; • attract, retain and motivate talented and experienced third-party game developers to our platform; • partner with mobile platforms and obtain featuring opportunities; • continue to adapt to an increasingly diverse set of mobile devices, including various operating systems and specifications, limited bandwidth, and varying processing power and screen sizes; • achieve and maintain successful end-user engagement; • host games that can build upon or become franchise games; • accurately forecast the timing and expense of our operations, including costs to secure and retain game developers and end-user adoption; • minimize and quickly resolve bugs or outages negatively impacting our platform or games on our platform; and • acquire and successfully integrate high quality mobile game assets, personnel or companies. 15 TABLE OF CONTEN T S These and other uncertainties make it difficult to know whether our platform will succeed in continuing to host successful games and new games and features in accordance with our operating plan.
In addition to the market factors noted above and elsewhere in these risk factors, our ability to successfully attract games to our platform and the ability of such games to achieve commercial success will depend on our ability to: • achieve benefits from player acquisition costs; • achieve viral organic growth and gain user interest in our featured games through free or paid channels; • adapt to changing player preferences; • adapt to new technologies and feature sets for mobile and other devices; • attract, retain and motivate talented and experienced third-party game developers to our platform; • partner with mobile platforms and obtain featuring opportunities; • continue to adapt to an increasingly diverse set of mobile devices, including various operating systems and specifications, limited bandwidth, and varying processing power and screen sizes; • achieve and maintain successful end-user engagement; • host games that can build upon or become franchise games; • accurately forecast the timing and expense of our operations, including costs to secure and retain game developers and end-user adoption; • minimize and quickly resolve bugs or outages negatively impacting our platform or games on our platform; and • acquire and successfully integrate high quality mobile game assets, personnel or companies.
End-user liability as of December 31, 2023 amounted to $6.6 million and is reflected on our balance sheet within other current liabilities. Typically, these funds are returned to end-users if they choose to withdraw them from their account.
End-user liability as of December 31, 2024 amounted to $6.9 million and is reflected in our balance sheet within other current liabilities. Typically, these funds are returned to end-users if they choose to withdraw them from their account.
The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended benefits, which could adversely affect our business, financial condition, results of operations, prospects or reputation. In July 2021, we completed the acquisition of Aarki, Inc.
The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended benefits, which could adversely affect our business, financial condition, results of operations, prospects or reputation.
Further, we may have difficulty accessing the services of banks, credit card issuers and payment processing services providers, which may make it difficult to sell our products and services. We rely on a limited number of third-party payment processors to process deposits and withdrawals made by end-users on our platform.
Further, we may have difficulty accessing the services of banks, credit card issuers and payment processing services providers, which may make it difficult to sell our products and services. We rely on a limited number of third-party payment processors to handle deposits and withdrawals on our platform.
Further, any negative publicity related to any of our third-party partners, including any publicity related to regulatory concerns, could adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation exposure. 24 TABLE OF CONTEN T S We incorporate technology from third parties into our platform.
Further, any negative publicity related to any of our third-party partners, including any publicity related to regulatory concerns, could adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation exposure. 26 TABLE OF CONTENTS We incorporate technology from third parties into our platform.
The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • changes in laws or regulations applicable to our offerings; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new offerings by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • additions or departures of key personnel; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • sales of our Class A common stock; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and • general economic and market conditions.
The market price of our Class A common stock has been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • changes in laws or regulations applicable to our offerings; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new offerings by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • additions or departures of key personnel; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • sales of our Class A common stock; 38 TABLE OF CONTENTS • repurchases of our Class A common stock, including both repurchases as part of publicly announced programs and outside of such programs; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • impact of the recent elections in the United States; and • general economic and global market conditions.
These games, and the related developers, are subject to our standard terms of service, which include, among other things, developer exclusivity for certain periods of time, as modified by negotiated agreements.
These games, and the related developers, have historically been subject to our terms of service, which include, among other things, developer exclusivity for certain periods of time, as modified by negotiated agreements.
As of December 31, 2023, we had an accumulated deficit of $974.5 million. The industry in which we operate is highly competitive, rapidly changing (including changes with respect to advancements in artificial intelligence), and relies heavily on continually introducing compelling content, products and services.
As of December 31, 2024, we had an accumulated deficit of $1,021.3 million. The industry in which we operate is highly competitive, rapidly changing (including changes with respect to advancements in artificial intelligence), and relies heavily on continually introducing compelling content, products and services.
These broad market and industry factors may seriously harm the market price of our Class A common stock, regardless of our operating performance. 37 TABLE OF CONTEN T S Additionally, on August 18, 2023, the Board authorized the Company to repurchase, at any time or from time to time but for a period no longer than one year from the date of authorization, shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate purchase price not to exceed $65.0 million (a) on the New York Stock Exchange (the “NYSE”) or any other national securities exchange on which the Common Stock is then traded, (b) pursuant to a plan effected pursuant to Rule 10b5-1 (a “Rule 10b5-1 Plan”) promulgated under the Exchange Act, and/or (c) pursuant to accelerated share repurchase arrangements, tender offers, privately negotiated transactions or otherwise (the “Share Repurchase Program”).
Additionally, on August 18, 2023, the Board authorized the Company to repurchase, at any time or from time to time but for a period no longer than one year from the date of authorization, shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate purchase price not to exceed $65.0 million (a) on the New York Stock Exchange (the “NYSE”) or any other national securities exchange on which the Common Stock is then traded, (b) pursuant to a plan effected pursuant to Rule 10b5-1 (a “Rule 10b5-1 Plan”) promulgated under the Exchange Act, and/or (c) pursuant to accelerated share repurchase arrangements, tender offers, privately negotiated transactions or otherwise (the “Share Repurchase Program”).
Our strategy to expand internationally will be subject to increased challenges and risks; our growth prospects and market potential will depend on our ability to operate in a number of jurisdictions and if we fail to do so our business, financial condition, results of operations and prospects could be impaired.
Any disruption in our payment processing capabilities could materially adversely affect our business, financial condition, and results of operations Our strategy to expand internationally will be subject to increased challenges and risks; our growth prospects and market potential will depend on our ability to operate in a number of jurisdictions and if we fail to do so our business, financial condition, results of operations and prospects could be impaired.
However, cybersecurity incidents, including breaches, computer malware, computer hacking and insider threats have become more prevalent in our industry, and our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business.
However, cybersecurity incidents, including breaches, computer malware, computer hacking, ransom-related extortion events, system failures, fraud, data loss, and insider threats have become more prevalent in our industry, and our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business.
As discussed in Part II – 9A, ”Controls and Procedures”, of this Annual Report, our management concluded that material weaknesses existed as of December 31, 2023.
As discussed in Part II – 9A, “ Controls and Procedures”, of this Annual Report, our management concluded that material weaknesses existed as of December 31, 2024.
Factors affecting the level of consumer spending for such discretionary items include general economic conditions, and other factors, such as consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer credit, levels of unemployment, tax rates, interest rates, and inflationary pressure.
Further, our games and contests may be considered discretionary items for users. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, and other factors, such as consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer credit, levels of unemployment, tax rates, interest rates, and inflationary pressure.
Prior winnings represented more than 81% of total paid-entry fees for the year ended December 31, 2023.
Prior winnings represented more than 84% of total paid-entry fees for the year ended December 31, 2024.
We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. If we determine that we can no longer calculate any of our key metrics with a sufficient degree of accuracy, and we cannot find an adequate replacement for the metric, our business, financial condition or results of operations may be harmed.
If we determine that we can no longer calculate any of our key metrics with a sufficient degree of accuracy, and we cannot find an adequate replacement for the metric, our business, financial condition or results of operations may be harmed.
These risks include, but are not limited to: • Our ability to attract and retain end-users, and do so in a cost-effective manner; • Our ability to manage our growth effectively; • Our ability to achieve profitability given our history of losses; • Our reliance on our third-party developer partners to continue to offer a competitive experience in existing and new games on our platform; • Risks related to the fact that a limited number of games account for a substantial portion of our revenue; • Our reliance on third-party service providers including cloud computing services, payment processors, and infrastructure service providers, and our ability to manage our relationships with such providers or lose access to such services; • Our ability to maintain our brand and reputation; • The competitiveness of the broader entertainment industry, and the potential that our existing and potential users may be attracted to competing forms of entertainment; • Risk related to a variety of U.S. and foreign laws which our business is subject to, and which are subject to change and could adversely affect our business; • Our ability to obtain, maintain, protect or enforce our intellectual property rights; • Risks related to economic downturns and political and market conditions beyond our control; • Risk related to the occurrence of a data breach or other failure of our cybersecurity; • Failure to properly contain a global pandemic in a timely manner and any related impact on how we and our business partners are operating; • Our ability to timely and effectively remediate the material weaknesses in our internal controls over financial reporting or additional material weaknesses or other deficiencies in the future; and • Our ability to mitigate the commercial, reputational and regulatory risks to our business that may arise as a consequence of our need to restate our financial statements. 12 TABLE OF CONTEN T S Risks Related to Our Business and Industry We identified certain misstatements to our previously issued financial statements and have restated certain of our Consolidated Financial Statements, which has created additional risks and uncertainties that may have a material adverse effect on our business, financial position and results of operations.
These risks include, but are not limited to: • Our ability to attract and retain end-users, and do so in a cost-effective manner; • Our ability to manage our growth effectively; • Our ability to achieve profitability given our history of losses; • Our reliance on our third-party developer partners to continue to offer a competitive experience in existing and new games on our platform; • Risks related to the fact that a limited number of games account for a substantial portion of our revenue; • Our reliance on third-party service providers including cloud computing services, payment processors, and infrastructure service providers, and our ability to manage our relationships with such providers or lose access to such services; • The competitiveness of the broader entertainment industry; • Risks associated with competitors that do not follow ethical fairness practices to grow their businesses. • Risks associated with disruptive technologies, including artificial intelligence; • Risks related to a variety of U.S. and foreign laws which our business is subject to, and which are subject to change and could adversely affect our business; • Our ability to obtain, maintain, protect or enforce our intellectual property rights; • Risks related to economic downturns and political and market conditions beyond our control; • Risks related to the occurrence of a data breach or other failure of our cybersecurity or that of third parties with whom we interact; • Our ability to timely and effectively remediate the material weaknesses in our internal controls over financial reporting or additional material weaknesses or other deficiencies in the future; • Our ability to mitigate the commercial, reputational and regulatory risks to our business that may arise as a consequence of our need to restate our financial statements; and • Risks related to corporate responsibility and reputation. 14 TABLE OF CONTENTS Risks Related to Our Business and Industry We identified certain misstatements to our previously issued financial statements and have restated certain of our Consolidated Financial Statements, which has created additional risks and uncertainties that may have a material adverse effect on our business, financial position and results of operations.
In addition, we do not currently offer our games on all mobile devices. If the mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and Gross Marketplace Volume (“GMV”) and may not achieve the anticipated return on our development efforts.
If the 20 TABLE OF CONTENTS mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and Gross Marketplace Volume (“GMV”) and may not achieve the anticipated return on our development efforts.
For the year ended December 31, 2023, Solitaire Cube and 21 Blitz (each developed by Tether Studios, LLC (“Tether”)) and Blackout Bingo (developed by Big Run Studios Inc. (“Big Run”)) combined accounted for 70% of our revenue. For the year ended December 31, 2023, Tether accounted for 44% of our revenue and Big Run accounted for 36% of our revenue.
For the year ended December 31, 2024, Solitaire Cube and 21 Blitz (each developed by Tether Studios, LLC (“Tether”)) and Blackout Bingo (developed by Big Run Studios Inc. (“Big Run”)) combined accounted for 59% of revenue. For the year ended December 31, 2024, Tether accounted for 45% of our revenue and Big Run accounted for 26% of revenue.
We concluded that these previous periods should be restated to correct (i) an understatement of end-user liability, (ii) reserves for potential indirect tax liabilities, (iii) impairment of long-lived assets, (iv) other adjustments and (v) income tax adjustments related to the aforementioned errors.
We concluded that prior periods should be restated to correct (i) an understatement of end-user liability, (ii) reserves for potential indirect tax liabilities, (iii) impairment of long-lived assets, (iv) stock compensation expense, (v) certain other accrued expenses, (vi) other adjustments and (vii) income tax adjustments related to the aforementioned errors.
Accordingly, our business depends on our ability to promote, enter into and maintain successful commercial relationships with such developers. In general, we rely on our standard terms of service for third-party developers which govern the distribution, operations and fee sharing arrangements for hosting a game on our platform.
Accordingly, our business depends on our ability to promote, enter into and maintain successful commercial relationships with such developers including through the Skillz Developer Accelerator initiative we launched in February 2025. 16 TABLE OF CONTENTS In general, we rely on our standard terms of service for third-party developers which govern the distribution, operations and fee sharing arrangements for hosting a game on our platform.
These proposed rules, depending on how they are finally adopted, as well as other changes the government might implement, could impose significant new burdens on us and our third-party developer partners and service providers, with significant costs and operational impacts, and adversely impact our ability to maintain our platform and operate successfully.
Any new climate-related rules, as well as other changes the government might implement, could impose significant new burdens on us and our third-party developer partners and service providers, with significant costs and operational impacts, and adversely impact our ability to maintain our platform and operate successfully.
Bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts.
Bad actors also engage in illegal activities involving personal information, such as the unauthorized use of another person’s identity, account or payment information and unauthorized acquisition or use of payment details, bank information, and mobile phone numbers and accounts.
We have in the past incurred, and may in the future incur, losses from various types of financial fraud, including use of stolen or fraudulent credit card data, claims of unauthorized payments by a user and attempted payments by users with insufficient funds.
We have incurred, and may in the future incur, losses from fraudulent activities, including unauthorized payments, use of stolen or invalid credit cards, claims of unauthorized payments by a user, attempted payments by users with insufficient funds and other forms of financial fraud.
The tax regimes we are subject to or operate under are unsettled and may be subject to significant change. In the course of our business, there will be many transactions and calculations where the ultimate tax determination is uncertain.
Currently, Skillz is subject to indirect taxation and reporting in approximately 218 domestic and international jurisdictions. The tax regimes we are subject to or operate under are unsettled and may be subject to significant change. In the course of our business, there will be many transactions and calculations where the ultimate tax determination is uncertain.
We may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property rights in certain foreign countries because effective intellectual property protection may not be available to us in every country in which our services are available, and our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States because of the differences in foreign patent, trademark, copyright, and other laws concerning intellectual property and proprietary rights.
We may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property rights in certain foreign countries because effective intellectual property protection may not be available to us in every country in which our services are available, and our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States because of the differences in foreign patent, trademark, copyright, and other laws concerning intellectual property and proprietary rights. 32 TABLE OF CONTENTS We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners.
Additionally, if third parties we work with, such as players, vendors or developers violate applicable laws or our policies, such violations may also put our players’ information at risk and could in turn have an adverse effect on our business, financial condition, results of operations, reputation or prospects. 30 TABLE OF CONTEN T S Failure to obtain, maintain, protect or enforce our intellectual property rights could harm our business, results of operations, financial condition and prospects.
Additionally, if third parties we work with, such as players, vendors or developers violate applicable laws or our policies, such violations may also put our players’ information at risk and could in turn have an adverse effect on our business, financial condition, results of operations, reputation or prospects.
The instruments governing our indebtedness impose certain restrictions on our business, and future such instruments could impose new restrictions on our business. The instruments governing our indebtedness, including the indenture governing our senior secured notes, contain certain covenants imposing restrictions on our business.
The instruments governing our indebtedness, including the indenture governing our senior secured notes, contain certain covenants imposing restrictions on our business.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business, financial condition or results of operations may be harmed.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business, financial condition or results of operations may be harmed. 37 TABLE OF CONTENTS Our investment portfolio and our ability to access cash and cash equivalents may become impaired by deterioration of the financial markets.
Third parties with whom we do not have any formal relationships control the design of mobile devices and operating systems. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones.
Third parties with whom we do not have any formal relationships control the design of mobile devices and operating systems. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones. Network carriers may also impact the ability of users to download apps or access specified content on mobile devices.
The requirements of being a public company, including compliance with the Exchange Act and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), may strain our resources and divert management’s attention, the increases in legal, accounting and compliance expenses may be greater than we anticipate, and there can be no assurance that we will satisfy these obligations.
Such losses could adversely affect our business prospects, results of operations and financial condition. 36 TABLE OF CONTENTS The requirements of being a public company, including compliance with the Exchange Act and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), may strain our resources and divert management’s attention, the increases in legal, accounting and compliance expenses may be greater than we anticipate, and there can be no assurance that we will continue to satisfy these obligations.
Such disruptions have not had a material impact, individually or in the aggregate to date; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with our computer systems and technological infrastructure, or those of third parties, could result in a wide range of negative outcomes, including violations of applicable privacy laws which can result in significant fines, governmental investigations and enforcement actions, legal and financial exposure, contractual liability and damage to our reputation, each of which could materially adversely affect our business, financial condition, results of operations, reputation and prospects. 19 TABLE OF CONTEN T S Additionally, the games offered through our platform may contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch.
Such disruptions have not had a material impact, individually or in the aggregate to date; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with our computer systems and technological infrastructure, or those of third parties, could result in a wide range of negative outcomes, including violations of applicable privacy and other laws which can result in significant fines, governmental investigations and enforcement actions, legal and financial exposure, contractual liability and damage to our reputation, each of which could materially adversely affect our business, financial condition, results of operations, reputation and prospects.
Maintaining and enhancing our brand and reputation also depends largely on our continued ability to provide, through our platform, high-quality, relevant, reliable and trustworthy games developed by our third-party partners, which may require substantial investment, may not be successful, and may contain errors, bugs, flaws, corrupted data, effects and other vulnerabilities that could adversely affect our users’ gaming experience, violate applicable security standards or cause users to stop using our platform, any of which could harm our reputation.
Maintaining and enhancing our brand and reputation also depends on our continued ability to provide high-quality, reliable and trustworthy games on our platform, which may require substantial investment, may not be successful, and may contain errors, bugs, flaws and other vulnerabilities that could adversely affect user experience, violate security standards or cause users to stop using our platform.
Expanding our international focus may subject us to risks that we have not faced before or increase risks that we currently face, including risks associated with: • inability to host certain games in certain foreign countries; • challenges caused by distance, language and cultural differences; • developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets; • competition from local game makers with significant market share in those markets and with a better understanding of player preferences; • utilizing, protecting, defending and enforcing our intellectual property rights; • negotiating agreements with local distribution platforms that are sufficiently economically beneficial to us and protective of our rights; • the inability to extend proprietary rights in our brand, content or technology into new jurisdictions; • implementing alternative payment methods for virtual items in a manner that complies with local laws and practices and protects us from fraud; • compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content and consumer protection (for example, the United Kingdom’s Office of Fair Trading’s 2014 principles relating to in-app purchases in free-to-play games that are directed toward children 16 and under); • compliance with anti-bribery laws, including the Foreign Corrupt Practices Act; • credit risk and higher levels of payment fraud; • currency exchange rate fluctuations; 26 TABLE OF CONTEN T S • protectionist laws and business practices that favor local businesses in some countries; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the U.S. or the foreign jurisdictions in which we operate; • political, economic and social instability; • public health crises, which can result in varying impacts to our employees, players, vendors and commercial partners internationally; • higher costs associated with doing business internationally; • export or import regulations; and • trade and tariff restrictions.
Expanding our international focus may subject us to risks that we have not faced before or increase risks that we currently face, including risks associated with: • inability to host certain games in certain foreign countries; • challenges caused by distance, language and cultural differences; • developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets; • competition from local game makers with significant market share in those markets and with a better understanding of player preferences; • utilizing, protecting, defending and enforcing our intellectual property rights; • the inability to extend proprietary rights in our brand, content or technology into new jurisdictions; • implementing alternative payment methods for virtual items in a manner that complies with local laws and practices and protects us from fraud; • compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content and consumer protection; • compliance with anti-bribery laws, including the Foreign Corrupt Practices Act; • credit risk and higher levels of payment fraud; • currency exchange rate fluctuations; • protectionist laws and business practices that favor local businesses in some countries; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the U.S. or the foreign jurisdictions in which we operate; • political, economic and social instability; • higher costs associated with doing business internationally; • export or import regulations; and • trade and tariff restrictions. 28 TABLE OF CONTENTS If we are unable to manage the complexity of our global operations successfully, our business, financial condition and operating results could be adversely affected.
Acquisitions could result in potential dilutive issuances of equity securities, use of significant cash balances or incurrence of debt (and increased interest expense), contingent liabilities or amortization expenses related to intangible assets or write-offs of goodwill and/or intangible assets, which could adversely affect our financial condition and results of operations and dilute the economic and voting rights of our stockholders.
Acquisitions could result in potential dilutive issuances of equity securities, use of significant cash balances or incurrence of debt (and increased interest expense), contingent liabilities or amortization expenses related to intangible assets or write-offs of goodwill and/or intangible assets, which could adversely affect our financial condition and results of operations and dilute the economic and voting rights of our stockholders. 30 TABLE OF CONTENTS We are subject to laws and regulations concerning privacy, information security, data protection, consumer protection and protection of minors, and these laws and regulations are continually evolving.
Our insurance may not provide adequate levels of coverage against claims. We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure.
We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. We do not maintain “key man” insurance policies on any of our officers or employees.
For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”), which resulted in all funds held at SVB, including our funds held at SVB, being temporarily inaccessible by SVB’s customers. As of December 31, 2023, we had approximately $3.5 million of cash remaining with SVB.
For example, in 2023, Silicon Valley Bank (“SVB”) was placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”), which resulted in all funds held at SVB, including our funds held at SVB, being temporarily inaccessible by SVB’s customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWhile we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. Although our business strategy, results of operations and financial condition have not been materially affected by risks from cybersecurity threats, we cannot provide assurance that they will not be materially affected in the future by such risks or any future material incidents.
Biggest changeWe can provide no assurance that there will not be incidents in the future or that such incidents will not materially affect us, including 43 TABLE OF CONTENTS our business strategy, results of operations, or financial condition.
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ITEM 1C. CYBERSECURITY We have established policies and processes for assessing, identifying, and managing material risk from cybersecurity threats (including those associated with third-party service providers), and have integrated these processes into our overall enterprise risk management systems and processes.
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ITEM 1C. CYBERSECURITY We take a comprehensive approach to cybersecurity risk management. While securing our customers and stakeholders’ data is a top priority, like many companies with a public presence, we are subject to human-targeted and AI-assisted cyberattacks.
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We routinely assess material risks from cybersecurity threats, including taking reasonable steps to detect any potential unauthorized occurrence on or behaviors conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
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Our board of directors (the "Board") and our management are involved in the oversight of our risk management program, of which cybersecurity represents an important component. As described in more detail below, we have established policies, standards, processes and practices designed to assess, identify, and manage material risks from cybersecurity threats.
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Risk Management and Strategy We have implemented policies and processes designed to detect, prevent, and respond to cybersecurity incidents. All these policies are reviewed annually and updated as needed to address emerging risks or gaps in compliance. The Company has not experienced a material cybersecurity incident to date.
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We have devoted significant financial and personnel resources to implement and maintain security measures in an effort to meet regulatory requirements and customer expectations, and we intend to continue to make significant investments in our data and cybersecurity infrastructure.
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If a material cybersecurity breach occurs, the incident will be reviewed to determine whether further escalation is appropriate. Any incident assessed as potentially being or becoming material will immediately be escalated for further assessment and reported to designated members of our executive leadership team and if deemed necessary, the Board of Directors.
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There can be no guarantee that our policies and procedures will be effective, as cyber criminals are becoming more sophisticated and effective every day and increasingly targeting enterprise software companies.
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We plan to consult with outside counsel as appropriate, including on materiality analysis and disclosure matters, and make the final materiality determination regarding disclosure and other compliance decisions. We also plan to keep our independent public accounting firm informed of such incidents as appropriate.
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Although our Risk Factors include further detail about the material cybersecurity risks we face, we believe that risks from prior cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected our business to date.
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For more information on our cybersecurity related risks see Item 1A Risk Factors of this Annual Report on Form 10-K. Governance Role of the Board and Management Our Board of Directors has the ultimate responsibility for oversight of our risk management framework.
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For the year ended December 31, 2024, we are not aware of any material cybersecurity incidents that had a significant impact on our operations or financial condition.
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The Board receives information and periodic updates and actively engages with management with respect to the effectiveness of the Company’s cybersecurity and information security framework, data privacy, and risk management.
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For more information on our cybersecurity related risks see the risk factor entitled “ We rely on information technology (“IT”) and other systems and platforms, and any failures, errors, defects or disruptions in our or our vendors ’ or other partners’ systems or platforms could diminish our brand and reputation, subject us to liability, disrupt our business, affect our ability to scale our technical infrastructure and adversely affect our business, financial condition, operating results and growth prospects” in Part I, Item 1A Risk Factors of this Annual Report on Form 10-K, above.
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In addition, as necessary, the Board of Directors receives reports summarizing threat detection and mitigation plans, audits of internal controls, training and certification, and other cyber priorities and initiatives, as well as timely updates from management on material incidents relating to information systems. 42 TABLE OF CONTEN T S Role of Other Employees Members of the Company’s technology and security team periodically discuss cybersecurity program updates and challenges, to watch for potential threats from both external and internal sources, to monitor compliance in existing or emerging business practices, and to respond to stakeholder inquiries.
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Risk Management and Strategy Our policies, standards, processes and practices designed to assess, identify, and manage material risks from cybersecurity threats are integrated into our overall risk management program.
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This is composed of individuals with over 10 years of software, infrastructure, and security experience. The Company is continuously monitoring trends and stays current with the various cybersecurity threats and related mitigation opportunities.
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These policies, standards, processes, and practices are based on maintaining a security-in-depth methodology as informed by the National Institute of Standards and Technology (“IST”) Cybersecurity Framework, the International Organization for Standardization (“ISO”)/IEC 27001 and other applicable industry standards.
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The Company periodically engages a third-party service provider to perform an external vulnerability scan of the Company’s network to identify known threats and to date no critical vulnerabilities have been identified during these assessments.
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Key controls include: (a) Zero trust network architecture for employee privileged and non-privileged application access (b) Mandatory employee security awareness training and phishing simulations, plus follow-up remedial training if necessary,(c)Periodic third-party network and host vulnerability scans and (d) 24/7 Security Operations Center monitoring all corporate endpoints which escalates to senior engineering resources as necessary for incident response and remediation.
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We also maintain a cyber insurance policy to mitigate financial exposure from any security incidents. Our cybersecurity program in particular focuses on the following key areas: Collaboration Our cybersecurity risks are identified and addressed through a comprehensive, cross-functional approach.
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Key security, risk, and compliance stakeholders meet periodically to develop strategies designed to preserve the confidentiality, integrity and availability of Company and customer information, identify, prevent and mitigate cybersecurity threats, and to attempt to effectively respond to cybersecurity incidents.
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We maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in an informed and timely manner.
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Risk Assessment We conduct a cybersecurity risk assessment at least annually that takes into account information from internal resources (e.g., vulnerability scans, incident reporting), known information security vulnerabilities, and information received from external sources (e.g., reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and consultants).
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Technical Safeguards We periodically assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats. Such safeguards are periodically evaluated and improved as necessary, based on vulnerability assessments, cybersecurity threat intelligence and incident response experience.
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Incident Response and Recovery Planning We have established comprehensive incident response (“IR”) and recovery plans and continue to periodically test and evaluate the effectiveness of those plans. Our IR plan provides our team with strategies for how to respond to incidents appropriately.
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Third-Party Risk Management We have implemented controls designed to identify and mitigate cybersecurity threats associated with our use of third-party service providers. Such providers may be subject to security risk assessments at the time of onboarding, contract renewal, or upon detection of an increase in risk profile, according to our vendor security review process.
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We use a variety of inputs in such risk assessments, including information supplied by providers and third parties. 44 TABLE OF CONTENTS Education and Awareness Our policies require each of our employees to contribute to our data security efforts.
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We periodically remind and reinforce with our employees the importance of handling and protecting customer and employee data, including through annual privacy and security training designed to enhance awareness of how to prevent, detect, report, and respond to cybersecurity threats. We also conduct periodic phishing training and follow-up with remedial testing and training as necessary.
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External Assessments Our cybersecurity policies, standards, processes and practices are periodically assessed by consultants and external auditors. These assessments include a variety of activities including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness.
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For example, in 2022, 2023 and 2024 we conducted independent cyber maturity assessments to review our controls against portions of the NIST Cybersecurity Framework. We also have achieved PCI SAQ-A Compliance every year since 2019. The results of significant assessments are reported to management, the Board and Audit Committee.
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Cybersecurity processes are adjusted, as appropriate, based on the information provided from these assessments. Governance Our Principal Security Engineer (“PSE”) is responsible for the day-to-day assessment and management of our material cybersecurity risks.
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Since November 2021 until May 2025, the Principal Security Engineer (the “PSE-1”) that served in this role had more than 18 years of experience in various information technology, cybersecurity and systems engineering roles.
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PSE-1’s previous experience includes building and leading cybersecurity functions at large enterprises, startups, and research and development centers, as well as leading software teams which were acquired by Fortune 50 enterprises. PSE-1 also had expertise in building and designing secure software, scalable and resilient systems, incident response practices, privacy programs and other critical security disciplines and practice areas.
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The Principal Security Engineer holds a master's degree in physics and systems engineering. Since May 2025, the Company’s Manager of IT (“PSE-2”) has assumed the responsibilities of the Principal Security Engineer role.
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With more than 18 years of experience in information technology and over 12 years in IT management across technology-driven and interactive entertainment organizations, PSE-2 has frequently led both IT operations and cybersecurity initiatives, often as the sole technical lead. Responsibilities have included securing infrastructure, implementing security controls, and supporting secure business operations.
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To ensure robust oversight, we are establishing a Security Council, led by our Principal Security Engineer, that is comprised of senior leaders, including our Chief Executive Officer, Controller, Chief Financial Officer, and Interim General Counsel.
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The Security Council has primary management oversight responsibility for assessing and managing risks related to information security, fraud, vendor oversight, data protection and privacy, and our cybersecurity program, as well as responsibility for management of our information security systems. The Board is responsible for overseeing the Company's enterprise risk. The Security Council reports to the Board on cybersecurity risks.
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In addition to our ongoing ordinary course cybersecurity oversight procedures, we also have a security incident response framework in place. We use this incident response framework as part of the process we employ to keep our management and the Board informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents.
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The framework is a set of coordinated procedures and tasks that our incident response team, under the direction of the Security Council, executes in the event of a cybersecurity incident that is designed to provide timely and accurate information flow, escalation for remediation and consideration of public disclosures, and resolution of cybersecurity incidents.
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Our cybersecurity framework includes periodic compliance assessments with our policies and standards and applicable state and federal statutes and regulations. In addition, we seek to validate compliance with our internal data security controls through the use of security monitoring utilities and internal and external audits.
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We also conduct annual cybersecurity tabletop exercises, with the intent of validating our IR policies and procedures.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices in smaller offices and coworking spaces in major U.S. cities. In connection with our acquisition of Aarki in 2021, we assumed leases for a number of offices and coworking spaces around the world, including data centers in the U.S. and Hong Kong and a workspace in the Philippines for our Aarki segment.
Biggest changeWe also lease offices in smaller buildings and coworking spaces in major cities. In connection with our acquisition of Aarki in 2021, we assumed leases for a number of offices and coworking 45 TABLE OF CONTENTS spaces around the world, including data centers in the U.S. and Hong Kong and a workspace in the Philippines for our Aarki segment.
ITEM 2. PROPERTIES In March 2023, we purchased a new office building in Las Vegas, Nevada, where our principal business operations for in office collaboration of product, operations, and revenue teams are located for our Skillz segment. Effective in February 2024, the building is being utilized as the Company’s headquarters.
ITEM 2. PROPERTIES In March 2023, we purchased a new office building in Las Vegas, Nevada, where our principal business operations for in office collaboration of product, operations, and revenue teams are located for our Skillz segment. Since February 2024, the building has been utilized as the Company’s headquarters.
Added
In August 2025, we commenced a 36 month lease for office space in Bangalore, India for approximately $35.7 thousand per month with escalations of 6% per annum.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeUnregistered Sales of Equity Securities None. 44 TABLE OF CONTEN T S Repurchases The following table provides information about the purchases of our common stock made through the three months ended December 31, 2023: Periods Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(a) October 1, 2023 through 686,960 $ 4.95 686,960 $ 61,598,873 November 1, 2023 through 1,627,948 $ 5.90 1,627,948 $ 52,000,002 December 1, 2023 through — $ — — $ 52,000,002 Total 2,314,908 $ 5.62 2,314,908 (a) In August 2023, our Board of Directors approved a share repurchase authorization for up to $65.0 million of our common stock.
Biggest changeUnregistered Sales of Equity Securities None. 47 TABLE OF CONTENTS Repurchases The following table provides information about the purchases of our common stock made through the three months ended December 31, 2024: Periods Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(b) October 1, 2024 through October 31, 2024 — $ — — $ 41.1 November 1, 2024 through November 30, 2024 192,273 $ 5.35 192,273 $ 40.1 December 1, 2024 through December 31, 2024(a) 1,090,676 $ 6.80 1,090,676 $ 32.6 Total 1,282,949 $ 6.58 1,282,949 (a) Amounts for the period of December 1, 2024 through December 31, 2024 include amounts repurchased pursuant to two Share Repurchase Agreements with Wildcat Capital Management, LLC and Wildcat Partner Holdings, LP (the “Share Repurchase Agreements”).
On June 23, 2023, the Company’s effectuated the one-for twenty reverse stock split of its issued and outstanding shares of Common Stock.
On June 23, 2023, the Company effectuated a one-for twenty reverse stock split of its issued and outstanding shares of Common Stock.
Holders of our Common Stock As of August 15, 2024, there were 234 holders of record of our Class A common stock and one holder of record of our Class B common stock. The number of record holders does not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
Holders of our Common Stock As of November 3, 2025, there were 244 holders of record of our Class A common stock and one holder of record of our Class B common stock. The number of record holders does not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
The share repurchase authorization, which was announced on August 21, 2023, has a term of 12 months and may be suspended or discontinued by our Board of Directors at any time. ITEM 6. [Reserved] 45 TABLE OF CONTENTS
The share repurchase authorization had a term of 12 months and may be suspended or discontinued by our Board of Directors at any time.
Added
Pursuant to the Share Repurchase Agreements, the Company agreed to repurchase 961,532 shares of its Class A Common Stock from Wildcat Partner Holdings, LP at a price of $7.00 per share, for a total purchase price of $6.7 million and 18,316 shares of its Class A Common Stock from Wildcat Capital Management, LLC at a price of $7.00 per share, for a total purchase price of $0.1 million (b) In August 2023, our Board of Directors approved a share repurchase authorization for up to $65.0 million of our common stock.
Added
On December 5, 2024, our Board of Directors reapproved the Company’s share repurchase program, pursuant to which the Company is authorized to purchase up to $41.1 million of its Class A Common Stock remaining under the Company’s legacy repurchase program and extended the expiration date until otherwise suspended, terminated or modified an any time for any reason by the Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reconciles net loss to Adjusted EBITDA for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Net loss $ (101,360) $ (438,875) Interest expense, net 2,852 26,545 Stock-based compensation (1) 43,692 108,202 Change in fair value of common stock warrant liabilities (278) (6,004) Provision (benefit) for income taxes 239 (345) Depreciation and amortization 1,961 17,871 Gain on extinguishment of debt (15,205) (2,553) Other income, net (540) (125) Impairment charges (2) 3,335 168,051 Restructuring charges (3) — 4,830 One-time nonrecurring expenses (4) — 26 Loss contingency accrual (5) (3,524) — Adjusted EBITDA $ (68,828) $ (122,377) (1) For the year ended 2022, amount includes stock-based compensation recognized for the cancellation of the Chief Executive Officers’ award of 805,000 performance share units granted on September 14, 2021 (the “CEO Performance Stock Units”).
Biggest changeWe compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. 58 TABLE OF CONTENTS The following table reconciles net loss to Adjusted EBITDA for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Net loss $ (46,790) $ (101,360) Interest (income) expense, net (298) 2,852 Provision for income taxes 66 239 Depreciation and amortization 1,665 1,961 Stock-based compensation 30,015 43,692 Change in fair value of common stock warrant liabilities (11) (278) Gain on extinguishment of debt — (15,205) Impairment of goodwill and long-lived assets (1) — 3,335 Loss contingency accrual (2) — (3,524) Gain from litigation settlement (3) (46,000) — Other expense (income) 530 (540) Adjusted EBITDA $ (60,823) $ (68,828) (1) For the year ended 2023, amount includes impairment of goodwill and long-lived assets.
See Note 2, Summary of Significant Accounting Policies. Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
Bonus Cash used as entry fees for paid Competitions can include newly issued Bonus Cash and / or Bonus Cash returned to end-users from prior winnings. We recognize the entire cost of Bonus Cash as sales and marketing expenses or a reduction of revenue (as discussed below).
Bonus Cash used as entry fees for paid Competitions can include newly issued Bonus Cash and / or Bonus Cash returned to end-users from prior winnings. We recognize the cost of Bonus Cash as sales and marketing expenses or a reduction of revenue (as discussed below).
After giving effect to the September 1, 2022 and the 2023 open market repurchases of our senior secured notes, as of December 31, 2023, $129.7 million of the senior secured notes remained outstanding. We were in compliance with all covenants applicable to the notes as of December 31, 2023 and 2022.
After giving effect to the September 1, 2022 and the 2023 open market repurchases of our senior secured notes, as of December 31, 2024, $129.7 million of the senior secured notes remained outstanding. We were in compliance with all covenants applicable to our secured notes as of December 31, 2024 and 2023.
When the Company concludes that game developers do not have a valid expectation that an incentive will be offered, Management records the related cost as sales and marketing expense. Management’s assessment is based on an evaluation of all information reasonably available to game developers regarding the Company’s customary business practices, published policies and specific statements.
When the Company concludes that game developers do not have a valid expectation that an incentive will be offered, Management records the related cost as sales and marketing expenses. Management’s assessment is based on an evaluation of all information reasonably available to game developers regarding the Company’s customary business practices, published policies and specific statements.
The game developers earn monthly revenue share from end-users, calculated based on end users’ paid entry fees attributable to their games as a percentage of total entry fees. End-user incentives are not paid for by game developers. In addition, the Company accounts for end-user incentives either as a reduction of revenue or as sales and marketing expense (as noted below).
The game developers earn monthly revenue share from end-users, calculated based on end users’ paid entry fees attributable to their games as a percentage of total entry fees. End-user incentives are not paid for by game developers. In addition, the Company accounts for end-user incentives either as a reduction of revenue or as sales and marketing expenses (as noted below).
(3) ‘End-user incentives’ are based on amounts recorded as a reduction of revenue or sales and marketing expense during the respective period. End-user incentives primarily consist of (i) Bonus Cash, (ii) Ticketz (which can be redeemed for Bonus Cash) and (iii) promotional offers.
(3) ‘End-user incentives’ are based on amounts recorded as a reduction of revenue or sales and marketing expenses during the respective period. End-user incentives primarily consist of (i) Bonus Cash, (ii) Ticketz (which can be redeemed for Bonus Cash) and (iii) promotional offers.
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same manner. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, as all companies may not calculate Adjusted EBITDA in the same manner. In light of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
The Company targets groups of end-users differently, offering specific promotions it believes will best stimulate engagement.
The Company targets groups of end-users differently, offering specific promotions it believes will stimulate engagement.
(2) “Paying Monthly Active Users” or “PMAUs” means the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
(2) “Paying Monthly Active Users” or “PMAUs” represent the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
The notes were sold in a private placement to qualified institutional buyers. Annual interest started to accrue from December 20, 2021 at a stated rate of 10.25% and will be payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2022. The notes mature on December 15, 2026.
The notes were sold in a private placement to qualified institutional buyers. Annual interest started to accrue from December 20, 2021 at a stated rate of 10.25% and is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2022. The notes mature on December 15, 2026.
(8) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by PMAUs in that month, averaged over the period. (9) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by MAUs in that month, averaged over the period.
(8) Amount reflects the average end-user incentives included in sales and marketing expenses in a given month divided by PMAUs in that month, averaged over the period. (9) Amount reflects the average end-user incentives included in sales and marketing expenses in a given month divided by MAUs in that month, averaged over the period.
The following are key elements of our financial model: • The scale, growth and engagement of the users — As we continue to acquire users, our ability to match comparable players, on both skill level and tournament template, in a fair and timely manner improves.
The following are key elements of our financial model: 53 TABLE OF CONTENTS • The scale, growth and engagement of the users — As we continue to acquire users, our ability improves to match comparable players, on both skill level and tournament template, in a fair and timely manner.
The SDK acts as an application programming interface enabling communication of data between Skillz and the game developers, which when integrated with the developer’s game content, facilitates end-user registration into competitions, managing and hosting end-user competition accounts, matching players of similar skill levels, collecting end-user entry fees, distributing end-user prizes, resolving end-user disputes pertaining to their participation in competitions, and running third-party marketing campaigns (collectively, “Monetization Services”).
The SDK acts as an application programming interface enabling communication of data between Skillz and the game developers, which when integrated with the developer’s game content, facilitates end-user registration into competitions, managing and hosting end-user 62 TABLE OF CONTENTS competition accounts, matching players of similar skill levels, collecting end-user entry fees, distributing end-user prizes, resolving end-user disputes pertaining to their participation in competitions, and running marketing campaigns (collectively, “Monetization Services”).
(4) “Average GMV Per Paying Monthly Active User” means the average GMV in a given month divided by Paying MAUs in that month, averaged over the period. (5) “Average GMV Per Monthly Active User” means the average GMV in a given month divided by MAUs in that month, averaged over the period.
(4) “Average GMV Per Paying Monthly Active User” represents the average GMV in a given month divided by Paying MAUs in that month, averaged over the period. (5) “Average GMV Per Monthly Active User” represents the average GMV in a given month divided by MAUs in that month, averaged over the period.
Promotions and incentives recorded as sales and marketing expense are recognized when we incur the related cost. 58 TABLE OF CONTENTS Our primary end-user incentive is Bonus Cash, which is a promotional incentive that cannot be withdrawn and can only be used by end-users to enter paid-entry fee contests.
Promotions and incentives recorded as sales and marketing expenses are recognized when we incur the related cost. 63 TABLE OF CONTENTS Our primary end-user incentive is Bonus Cash, which is a promotional incentive that cannot be withdrawn and can only be used by end-users to enter paid-entry fee contests.
The Company has indirect tax liabilities totaling $11.2 million and $10.9 million as of December 31, 2023 and 2022, respectively, associated with indirect taxes based on currently available information and assumptions that the Company believes are reasonable based on an evaluation of relevant factors.
The Company has indirect tax liabilities totaling $14.9 million and $11.2 million as of December 31, 2024 and 2023, respectively, associated with indirect taxes based on currently available information and assumptions that the Company believes are reasonable based on an evaluation of relevant factors.
The net cash outflows from changes of operating assets and liabilities were primarily the result of decreases in prepaid expense and other current assets of $1.8 million and a decrease in operating lease liabilities of $2.1 million. This was offset by an increase in accounts receivable, net of $1.2 million.
The net cash outflows from changes of operating assets and liabilities were primarily the result of decrease in other accruals and liabilities of $4.3 million, an increase in prepaid expense and other current assets of $1.8 million and a decrease in operating lease liabilities of $2.1 million. This was offset by a decrease in accounts receivable, net of $1.2 million.
The SDK and Skillz monetization services provide the following key benefits to the developers: • Streamlined game and tournament management allowing players to register with the developer to compete in games for prizes while earning Skillz loyalty perks; • Fair play in each tournament via the Skillz suite of fairness tools, including skill-based player matching and fraud monitoring; • Improved end-user retention by rewarding the most loyal players with Ticketz which can be redeemed in the Skillz virtual store and are earned in every match and can be redeemed for prizes or credits to be used towards future paid entry fee tournaments; • Marketing campaigns through main-stream online advertising networks and social media platforms to drive end-user traffic to developers’ games within the Skillz ecosystem; • Systematic calls to end-user action via push notifications to users with game results, promotional offers, and time-sensitive actions; and • Process end-user payments, billings and settlements on behalf of the developer to enable players to connect their preferred payment method to deposit and enter into the game developers’ multi-player competitions for cash prizes.
The SDK and Skillz monetization services provide the following key benefits to the developers: • Streamlined game and tournament management allowing players to register with the developer to compete in games for prizes while earning Skillz loyalty perks; • Fair play in each tournament via the Skillz suite of fairness tools, including skill-based player matching and fraud monitoring; • Improved end-user retention by rewarding the most loyal players with Ticketz which can be redeemed in the Skillz virtual store and are earned in qualifying matches and can be redeemed for prizes or credits to be used towards future paid entry fee tournaments; • Marketing campaigns through main-stream online advertising networks and social media platforms to drive end-user traffic to developers’ games within the Skillz ecosystem; • Systematic calls to end-user action via push notifications to users with game results, promotional offers, and time-sensitive actions; and • Process end-user payments, billings and settlements on behalf of the developer to enable players to connect their preferred payment method to deposit and enter into the game developers’ multi-player competitions for cash prizes. 54 TABLE OF CONTENTS Generally, end-users are required to deposit funds into their Skillz account in order to be eligible to participate in games for prizes.
(3) “Monthly Active Users” or “MAUs” means the number of playing end-users who entered into a paid or free contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
(3) “Monthly Active Users” or “MAUs” represent the number of playing end-users who entered into a paid or free contest hosted on our platform at least once in a month, averaged over each month in the period.
End-User Incentive Programs To drive traffic to the platform, the Company provides promotions and incentives to end-users in various forms. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment.
End-User Incentive Programs To drive traffic to the platform, the Company provides promotions and incentives to end-users in various forms, including Ticketz and Bonus Cash. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment.
(6) “Average Revenue Per Paying Monthly Active User” or “ARPPU” means the average revenue in a given month divided by Paying MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.
(6) “Average Revenue Per Paying Monthly Active User” or “ARPPU” represents the average revenue in a given month divided by Paying MAUs in that month, averaged over the period and does not include a deduction for end-user incentives, which are included in sales and marketing expenses.
(7) “Average Revenue Per Monthly Active User” or “ARPU” means the average revenue in a given month divided by MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.
(7) “Average Revenue Per Monthly Active User” or “ARPU” represents the average revenue in a given month divided by MAUs in that month, averaged over the period and does not include a deduction for end-user incentives, which are included in sales and marketing expenses.
Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities was $71.8 million for the year ended December 31, 2023.
Our operating cash flows are also affected by working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities was $7.1 million for the year ended December 31, 2024.
Over the course of 2022 and 2023, our focus was on driving higher efficiency from our marketing investment by (1) reducing spend on low-return engagement marketing programs, which we expect will result in lower engagement marketing as a percentage of revenue and (2) driving UA efficiency by optimizing spend across networks, and driving higher organic traffic.
Over the course of the fiscal years ending December 31, 2024 and 2023, our focus was on driving higher efficiency from our marketing investment by (1) reducing spend on low-return engagement marketing programs, which we expect will result in lower engagement marketing as a percentage of revenue and (2) driving UA efficiency by optimizing spend across networks, and driving higher organic traffic.
That commission is shared between Skillz and the game developers; however, the game developers’ share is calculated solely based upon entry fees paid by net cash deposits received from end-users, adjusted for certain costs incurred by Skillz to provide monetization services. Costs and Expenses Cost of Revenue Our cost of revenue consists of variable costs.
That commission is shared between Skillz and the game developers; however, the game developers’ share is calculated solely based upon entry fees paid by net cash deposits received from end-users, adjusted for certain costs incurred by Skillz to provide monetization services.
For the year ended December 31, 2023, prior winnings from cash and Bonus Cash were 83% and 17%, respectively. For the year ended December 31, 2022, prior winnings from cash and Bonus Cash were 92% and 8%, respectively. (2) ‘Cash deposits’ represent currency deposits into the end-user’s Skillz account during the respective period.
For the year ended December 31, 2024 , prior winnings from cash and Bonus Cash were 84% and 16%, respectively. For the year ended December 31, 2023, prior winnings from cash and Bonus Cash were 83% and 17%, respectively. (2) ‘Cash deposits’ represent currency deposits into the end-user’s Skillz account during the respective period.
The Company accounts for credits or refunds, which are not recoverable from the game developer, as sales and marketing expenses when incurred. 59 TABLE OF CONTENTS Indirect Tax Liabilities The Company is subject to indirect taxes, including sales and use tax in the United States and value-add tax in certain foreign jurisdictions.
The Company accounts for credits or refunds, which are not recoverable from the game developer, as sales and marketing expenses when incurred. 64 TABLE OF CONTENTS Indirect Tax Liabilities The Company is subject to indirect taxes, including sales and use tax in the United States and value-add tax in certain foreign jurisdictions that require management to make various estimates.
Our key data science technologies drive our player rating and matching, anti-cheat and anti-fraud, and user experience personalization engine. • Our unit economics — Our proprietary and highly scalable software platform produces revenue at a low direct cost (i.e. direct software and server costs), contributing to our gross margins.
Our key data science technologies drive our player rating and matching, anti-cheat and anti-fraud, and user experience personalization engine. • Our unit economics — Our proprietary and highly scalable software platform produces revenue at a low direct cost (i.e. direct software and server costs), contributing to our gross margins. Once acquired, each user cohort contributes to revenue over its life.
Another example of this type of incentive would be the redemption of Ticketz for either Bonus Cash or merchandise. The redemption process is managed by Skillz and redemption amounts can be changed at Skillz discretion. • Marketing promotions accounted for as sales and marketing expense.
Another example of this type of incentive would be the redemption of Ticketz earned via game play for either Bonus Cash or merchandise. The redemption process is managed by Skillz and redemption amounts can be changed at Skillz’ discretion. • Marketing promotions accounted for as sales and marketing expenses.
Engagement marketing is a sales and marketing expense representing rewards and awards that developers do not have a valid expectation of being offered to end-users to engage on the platform.
Trends and Developments Impacting our Business Trends Engagement marketing is a sales and marketing expense representing rewards and awards that developers do not have a valid expectation of being offered to end-users to engage on our platform.
Bonus Cash relates to all Bonus Cash that has been lost during the period (i.e., when the related cost has been incurred by the Company). Refer to Note 2, Summary of Significant Accounting Policies, of our consolidated financial statements for further information. Prizes include cash, Bonus Cash, physical merchandise and items sponsored by third-parties.
Bonus Cash relates to all Bonus Cash that has been lost during the period (i.e., when the related cost has been incurred by the Company). Refer to Note 2, Summary of Significant Accounting Policies, of our consolidated financial statements for further information.
The following table summarizes additional components of GMV, including average GMV per active user and average GMV per paying active user for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 As a percentage of GMV(%) Prior winnings (1) 81 % 81 % Cash deposits (2) 11 % 12 % End-user incentives (3) 8 % 7 % As components of average GMV per paying monthly active user ($) Prior winnings $ 364.1 $ 285.7 Cash deposits $ 52.9 $ 43.2 End-user incentives $ 31.8 $ 25.5 As components of average GMV per monthly active user ($) Prior winnings $ 62.4 $ 52.4 Cash deposits $ 9.1 $ 7.9 End-user incentives $ 5.5 $ 4.7 48 TABLE OF CONTENTS (1) ‘Prior winnings’ include cash and Bonus Cash that are in the end-user’s account as a result of winnings from competitions.
The following table summarizes additional components of GMV, including average GMV per active user and average GMV per paying active user for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 As a percentage of GMV(%) Prior winnings (1) 81 % 81 % Cash deposits (2) 13 % 11 % End-user incentives (3) 6 % 8 % As components of average GMV per paying monthly active user ($) Prior winnings $ 350.0 $ 364.1 Cash deposits $ 54.4 $ 52.9 End-user incentives $ 30.8 $ 31.8 As components of average GMV per monthly active user ($) Prior winnings $ 50.6 $ 62.4 Cash deposits $ 7.9 $ 9.1 End-user incentives $ 4.5 $ 5.5 (1) ‘Prior winnings’ include cash and Bonus Cash that are in the end-user’s account as a result of winnings from competitions.
UA marketing spend during fiscal year 2023 was approximately $29.4 million, as compared to approximately $117.3 million in fiscal year 2022.The reduction in UA marketing and engagement marketing expenses during fiscal year 2022 and 2023 has resulted in a substantial reduction in revenue and is expected to continue to result in a reduction in revenue.
UA marketing spend during fiscal year 2024 was approximately $18.4 million, as compared to approximately $29.4 million in fiscal year 2023. The reduction in UA marketing and engagement marketing expenses in fiscal year ending December 31, 2024 compared to 2023 has resulted in a substantial reduction in revenue and is expected to continue to result in a reduction in revenue.
General and Administrative General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, human resources and other administrative functions, expenses for outside professional services, and an allocation for rent, maintenance and utilities costs which are allocated according to headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation.
General and Administrative General and administrative expenses consist of personnel-related expenses for our corporate, executive, legal, accounting, finance, people operations and other administrative functions, expenses for outside professional services, and an allocation for rent, maintenance and utilities costs, which are allocated based on headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation.
The following table provides a summary of cash flow data (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (71,758) $ (179,597) Net cash provided by investing activities $ 168,301 $ 311,386 Net cash used in financing activities $ (149,951) $ (10,605) Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development, sales and marketing, and general and administrative activities.
The following table provides a summary of cash flow data (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (7,074) $ (71,758) Net cash (used in) provided by investing activities $ (1,377) $ 168,301 Net cash used in financing activities $ (21,654) $ (149,951) Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development, sales and marketing, and general and administrative activities.
Skillz provides developers with a 3SDK that they can download and integrate with their existing games. The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer. Specifically, thes e monetization services include end-user registration services, player matching, fraud and fair play monitoring, and billing and settlement services.
The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer. Specifically, thes e monetization services include end-user registration services, player matching, fraud and fair play monitoring, and billing and settlement services.
As of December 31, 2023, our principal sources of liquidity were our cash and cash equivalents in the amount of $302.0 million, which are primarily invested in money market funds and marketable securities with maturity less than three months, and marketable securities in the amount of $1.1 million. 55 TABLE OF CONTENTS In December 2021, the Company offered $300.0 million in aggregate principal senior secured notes due 2026 in a private offering.
Liquidity and Capital Resources As of December 31, 2024, our principal sources of liquidity were our cash and cash equivalents in the amount of $271.9 million, which are primarily invested in money market funds with maturity less than three months. In December 2021, the Company offered $300.0 million in aggregate principal senior secured notes due 2026 in a private offering.
The net cash provided by investing activities included $57.6 million in proceeds from sales of marketable securities and $126.0 million in proceeds from maturities of marketable securities. 56 TABLE OF CONTENTS Net cash provided by investing activities was $311.4 million for the year ended December 31, 2022.
Net cash provided by investing activities was $168.3 million for the year ended December 31, 2023. The net cash provided by investing activities included $57.6 million in proceeds from sales of marketable securities and $126.0 million in proceeds from maturities of marketable securities.
We also incur costs related to the amortization of intangible assets which include developed technology. Research and Development Research and development expenses consist of software development costs, composed mainly of product and platform development, server and software costs that support research and development activities, and to a lesser extent, allocation of rent, maintenance and utilities costs according to headcount.
We also incur costs related to the amortization of intangible assets related to developed technology directly used to produce the Company's products or services. 55 TABLE OF CONTENTS Research and Development Research and development expenses consist of software development costs, composed mainly of product and platform development, server and software costs that support research and development activities, and to a lesser extent, allocation of rent, maintenance and utilities costs according to headcount.
The notes contain customary covenants restricting our and certain of our subsidiaries’ ability to incur debt, incur liens, make distributions to holders of our stock, make certain transactions with our affiliates, as well as certain financial covenants specified in the indentures.
We used the net proceeds from the offering for general corporate purposes. The notes contain customary covenants restricting our and certain of our subsidiaries’ ability to incur debt, incur liens, make distributions to holders of our stock, make certain transactions with our affiliates, as well as certain financial covenants specified in the indentures.
Forward-Looking Statements The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Skillz Inc. (for purposes of this section, “Skillz,” “we,” “us” and “our”).
Forward-Looking Statements The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Skillz Inc. (the “Company,” “Skillz,” “we,” “us,” “our,” and “its”).
These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. 53 TABLE OF CONTENTS Adjusted EBITDA “Adjusted EBITDA” is defined as net income (loss), excluding interest income (expense), net; change in fair value of common stock warrant liabilities; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net loss from time to time, including, but not limited to impairment charges, loss contingency accruals, restructuring charges and one-time nonrecurring expenses, as they are not indicative of business operations.
Adjusted EBITDA “Adjusted EBITDA” is defined as net income (loss), excluding interest income (expense), net; change in fair value of common stock warrant liabilities; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net loss from time to time, including, but not limited to charges related to impairment of goodwill and long-lived assets, litigation accruals, loss contingency accruals, gains on extinguishment of debt, gains from litigation settlements, restructuring charges and one-time nonrecurring expenses, as they are not indicative of business operations.
Cash Flows from Financing Activities Net cash used in financing activities was $150.0 million for the year ended December 31, 2023, which was primarily due to $13.0 million for the repurchase of common stock and $135.9 million in principal payments on extinguishment of debt.
Net cash used in financing activities was $150.0 million for the year ended December 31, 2023, which was primarily due to $13.0 million for the repurchase of common stock and $135.9 million in principal payments on the extinguishment of debt. 61 TABLE OF CONTENTS Contractual Obligations and Commitments Our material cash requirements include the following contractual and other obligations.
Net cash used in operating activities was $179.6 million for the year ended December 31, 2022.
Net cash used in operating activities was $71.8 million for the year ended December 31, 2023.
The most significant component of our cash used during this period was a net loss of $101.4 million, which included non-cash expenses of $43.7 million related to stock-based compensation and partially offset by the gain on debt extinguishment of $15.2 million related to the open market repurchase of our senior secured notes during the second quarter of 2023, and net cash outflows of $7.0 million from changes in operating assets and liabilities.
Cash used in operating activities during this period comprised of a net loss of $101.4 million, the gain on debt extinguishment of $15.2 million related to the open market repurchase of our senior secured notes during the second quarter of 2023 and net cash outflows of $7.2 million from changes in operating assets and liabilities.
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in Part I, Item 1A, “Risk Factors”. Actual results may differ materially from those contained in any forward-looking statements. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in Part I, including Note Regarding Forward-Looking Statements and Item 1A, “Risk Factors”. Actual results may differ materially from those contained in any forward-looking statements.
Our existing liquidity resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements. Our future cash requirements will depend on many factors, including our rate of revenue growth and the expansion of our sales and marketing activities. We also may invest in or acquire complementary businesses, applications or technologies.
For additional information, see Note 19. Subsequent events. Our existing liquidity resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements. Our future cash requirements will depend on many factors, including our rate of revenue growth and the expansion of our sales and marketing activities.
The Company determined that its customer in the provision of its technology platform and services is the game developer. The Company’s ordinary activities consist of providing game developers services through access to its technology platform using the Skillz SDK.
Revenue from Entry Fees The Company applies the five-step model to achieve the core principle of ASC 606. The Company determined that its customer in the provision of its technology platform and services is the game developer. The Company’s ordinary activities consist of providing game developers services through access to its technology platform using the Skillz SDK.
Results of Operations Consolidated results should be read in conjunction with segment results discussed below and the segment information provided in Note 17, Segment Reporting to our audited consolidated financial statements included in this Form 10-K.
General and administrative expenses also include expenses related to loss contingency accruals for pending legal matters, as applicable. Results of Operations Consolidated results should be read in conjunction with segment results discussed below and the segment information provided in Note 17, Segment Reporting to our audited consolidated financial statements included in this Form 10-K.
Games provided by two developer partners accounted for 80% of the Company’s revenue from Monetization Services for the years ended December 31, 2023 and 2022. Total revenue from entry fees was $139.2 million and $249.1 million for the years ended December 31, 2023 and 2022, respectively.
Games provided by two developer partners accounted for 71% and 73% of the Company’s revenue for the years ended December 31, 2024 and 2023, respectively. Total revenue from entry fees was $80.4 million and $134.5 million for the years ended December 31, 2024 and 2023, respectively.
Aarki Segment Results Segment Revenue of $13.2 million in 2023 decreased $8.8 million, from $22.1 million in 2022 primarily due to lower advertising revenue. Segment Adjusted EBITDA loss of $3.8 million in 2023 decreased $8.1 million from income of $4.3 million in 2022 primarily due to the decline in revenue.
Aarki Segment Results Segment Revenue of $10.9 million in 2024 decreased $2.4 million, from $13.2 million in 2023 primarily due to lower advertising revenue. Segment Adjusted EBITDA loss was $7.6 million in 2024 compared to a loss of $3.8 million in 2023. The change was primarily due to the decline in Segment Revenue.
Long-Term Debt The Company’s long-term debt consists of the 2021 Senior Secured Notes. The total principal amount of $129.7 million, gross of discount and issuance costs, net, is due on December 15, 2026.
The total principal amount of $129.7 million, gross of discount and issuance costs, net, is due on December 15, 2026 (see Note 8 Long-Term Debt for additional information).
Segment Adjusted EBITDA is indicative of operational performance and is monitored by management to evaluate past performance and identify actions required to improve profitability. The segment measurements provided to, and evaluated by, the Chief Operating Decision Maker (“CODM”) are described in Note 17 Segment Reporting to our audited consolidated financial statements included in this Form 10-K.
The segment measurements provided to, and evaluated by, the Chief Operating Decision Maker (“CODM”) are described in Note 17 Segment Reporting to our audited consolidated financial statements included in this Form 10-K.
Overview We operate a marketplace that connects the world through competition, serving both developers and users. Our platform enables fair, fun and competitive gaming experiences and the trust we foster with users is the foundation upon which our community is built.
Our platform enables fair, fun and competitive gaming experiences and the trust we foster with users is the foundation upon which our community is built.
General and Administrative 2023 Compared to 2022 General and administrative costs decreased by $66.4 million, or 41%, to $96.7 million in 2023 from $163.0 million in 2022. The decrease was primarily driven by a $76.8 million decrease in employee related expenses due to a 9% reduction in headcount in general and administrative departments from the restructure in 2022.
General and Administrative General and administrative costs decreased by $17.8 million, or 18%, to $78.9 million in 2024 from $96.7 million in 2023. This was primarily driven by a $9.3 million decrease in employee related expenses due to a reduction in headcount in general and administrative departments.
We believe that non-GAAP financial information, when taken collectively with GAAP financial information, may be helpful to investors in assessing our operating performance.
We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively with GAAP financial information, may be helpful to investors in assessing our operating performance.
Year Ended December 31, 2023 2022 Gross marketplace volume (“GMV”) (000s) (1) $ 963,580 $ 1,642,282 Paying monthly active users (“PMAUs”) (000s) (2) 179 386 Monthly active users (“MAUs”) (000s) (3) 1,045 2,105 Average GMV per paying monthly active user (4) $ 448.8 $ 354.4 Average GMV per monthly active user (5) $ 76.9 $ 65.0 Average revenue per paying monthly active user (“ARPPU”) (6) $ 70.0 $ 59.7 Average revenue per monthly active user (“ARPU”) (7) $ 11.9 $ 11.0 Paying MAU to MAU ratio 17 % 18 % Average end-user incentives, included as sales and marketing expense, per paying active user (8) 30.09 25.33 Average end-user incentives, included as sales and marketing expense, per playing active user (9) 5.15 4.65 (1) “GMV” or “Gross Marketplace Volume” means the total entry fees paid by users for contests hosted on Skillz’s platform.
Accordingly, we believe that they provide helpful supplemental information to investors in evaluating our operating results. 49 TABLE OF CONTENTS Year Ended December 31, 2024 2023 Gross marketplace volume (“GMV”) (000s) (1) $ 608,248 $ 963,580 Paying monthly active users (“PMAUs”) (000s) (2) 118 179 Monthly active users (“MAUs”) (000s) (3) 816 1,045 Average GMV per paying monthly active user (4) $ 429.6 $ 448.8 Average GMV per monthly active user (5) $ 62.1 $ 76.9 Average revenue per paying monthly active user (“ARPPU”) (6) $ 66.6 $ 70.0 Average revenue per monthly active user (“ARPU”) (7) $ 9.6 $ 11.9 Paying MAU to MAU ratio 14 % 17 % Average end-user incentives, included as sales and marketing expense, per paying active user (8) $ 25.94 $ 30.09 Average end-user incentives, included as sales and marketing expenses, per playing active user (9) $ 3.76 $ 5.15 (1) “GMV” or “Gross Marketplace Volume” represents the total entry fees paid by users for contests hosted on Skillz’s platform.
Decreases in engagement marketing could result in lower revenue as paying users no longer receive those end-user incentives, which include Bonus Cash which can only be used to enter into paid contests. 47 TABLE OF CONTENTS User acquisition (“UA”) marketing is a sales and marketing expense to acquire new paying users to the platform.
Engagement marketing may be impacted by end-user incentives, which include Bonus Cash that could only be used to enter into paid contests. 50 TABLE OF CONTENTS User acquisition (“UA”) marketing is a sales and marketing expense to acquire new paying users to our platform.
The Company provides Monetization Services to game developers enabling them to offer competitive games to their end-users. These activities are not distinct from each other as the Company provides an integrated service enabling game developers to provide the competitive game service to the end-users, and as a result, they do not represent separate performance obligations.
These activities are not distinct from each other, as the Company provides an integrated service that allows developers to deliver the complete competitive gaming experience to their end-users, and therefore they do not represent separate performance obligations.
To the extent we reduce engagement marketing spend, we expect to reduce our Bonus Cash end-user incentives in proportion to such overall engagement marketing reduction. Our Financial Model Skillz’s financial model aligns the interests of gamers and developers, driving value for our stockholders.
To the extent we reduce engagement marketing spend, we expect to reduce our Bonus Cash end-user incentives in proportion to such overall engagement marketing reduction.
Sales and marketing expenses also include allocations of rent, maintenance and utilities costs which are allocated according to headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation. We expect sales and marketing expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future.
Personnel related expenses consist of salaries, benefits, and stock-based compensation. We expect research and development expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future.
For the year ended December 31, 2023, the platform had over 1.0 million monthly active users (“MAUs”) and hosted an average of over 2.8 million daily tournaments, including 0.61 million paid entry daily tournaments, offering over $65.1 million in prizes each month.
For the year ended December 31, 2024, the platform had over 816 thousand monthly active users (“MAUs”) and hosted an average of over 1.1 million daily tournaments, including an average of approximately 405 thousand paid entry daily tournaments, offering over $41.2 million in prizes each month. Our technological capabilities provide the tools necessary for developers to compete in the marketplace.
The impairments were driven primarily by one of our investments in non-marketable securities we hold of a privately held company on account of significant concerns related to the private company’s ability to continue as a going concern. During the year ended December 31, 2022 we recorded an impairment of goodwill and long-lived assets of $168.1 million.
The impairment was primarily driven by an investment in non-marketable securities we held of a privately held company on account of significant concerns related to the private company’s ability to continue as a going concern. Gain on Extinguishment of Debt During the year ended December 31, 2024, there was no gain on debt extinguishment.
Segment Adjusted EBITDA loss of $65.0 million in 2023 increased by $61.6 million from a loss of $126.6 million in 2022 due to reduced research and development, sales and marketing and administrative costs, partially offset by lower revenue.
Segment Adjusted EBITDA loss was $53.2 million in 2024 as compared to a loss of $65.0 million in 2023. The change was primarily due to lower Segment Revenue, partially offset by reduced research and development, sales and marketing and administrative costs, together with a gain settlement.
The monetization service provided by Skillz allows developers to offer multi-player competition to their end-users which increases end-user retention and engagement. 49 TABLE OF CONTENTS By utilizing the Skillz monetization services, game developers can enhance the player experience by enabling them to compete in head-to-head matches, live tournaments, leagues, and charity tournaments and increase player retention through referral bonus programs, loyalty perks, on-system achievements and Bonus Cash.
By utilizing the Skillz monetization services, game developers can enhance the player experience by enabling them to compete in head-to-head matches, live tournaments and leagues and increase player retention through referral bonus programs, loyalty perks, on-system achievements and Bonus Cash. Skillz provides developers with a SDK that they can download and integrate with their existing games.
We ingest and analyze over 300 data points from each game play session, enhancing our data-driven algorithms and LiveOps systems. Moreover, we have developed a robust platform enabling fun, fair and meaningful competitive gameplay. Historically, our top games and related developers have accounted for a substantial portion of our revenue earned from the Skillz platform.
Our software development kit (“SDK”) allows developers to monitor, integrate and update their games seamlessly over the air. We ingest and analyze hundreds of data points from each game play session, enhancing our data-driven algorithms and LiveOps systems. Moreover, we have developed a platform enabling fun, fair and meaningful competitive gameplay.
Refer to Note 8, Long-Term Debt, of the notes to the consolidated financial statements for further discussion. Interest expense, net 2023 Compared to 2022 Interest expense, net decreased by $23.7 million, to $2.9 million in 2023 from $26.5 million in 2022.
Refer to Note 8, Long-Term Debt, of the notes to the consolidated financial statements for further discussion. 57 TABLE OF CONTENTS Interest Income (Expense), Net Interest income, net was $0.3 million in 2024 as compared to interest expense, net of $2.9 million in 2023, a net difference of $3.2 million.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Revenue Recognition The Company generates substantially all its revenues through its Skillz segment by providing a service to game developers aimed at improving the monetization of their game content.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition The Company generates substantially all its revenues through its Skillz segment by providing a service to game developers aimed at improving the monetization of their game content.
In 2023, 38% of our salary costs were spent on product development. Our easy-to-integrate SDK contains over 200 features in a less than 16-MB package which allows for over-the-air upgrades. Our intuitive Developer Console dashboard enables our developers to rapidly integrate and monitor the performance of their games.
Our easy-to-integrate SDK contains hundreds of features in a small package which allows for over-the-air upgrades. Our intuitive Developer Console dashboard enables our developers to rapidly integrate and monitor the performance of their games. Our LiveOps system enables us to manage and optimize the user experience across the thousands of games on our platform.
The reduction in user acquisition and engagement marketing spend was driven to prioritize profitability over revenue growth in fiscal 2023. The Company intentionally reduced spend to achieve better user acquisition efficiency and eliminate lower-return engagement marketing programs. ARPU decreased 8% over the same period.
The Company intentionally reduced spend to achieve better user acquisition efficiency and eliminate lower-return engagement marketing programs. ARPU decreased 19% over the same period. Cost of Revenue Cost of revenue decreased by $2.0 million, or 13%, to $13.4 million in 2024 from $15.4 million in 2023.
The decrease was primarily due to a decrease in the Company’s player base as our monthly active users decreased from 2.1 million in 2022 to 1.0 million in 2023. This decrease reflects the decrease of our UA marketing and engagement marketing spend of 75% and 45%, respectively from 2023 to 2022.
This was primarily due to a reduction in the player base as our monthly active users were 0.8 million in 2024, lower by 0.2 million, or 22%, compared to 1.0 million in 2023. This was commensurate with the decreases in UA marketing and engagement marketing spend of 39% and 44% in 2024, respectively.
These metrics are utilized by management and the Board to evaluate the operating performance of the Company and are key factors that directly impact the Company’s revenue, costs and liquidity. Accordingly, we believe that they provide helpful supplemental information to investors in evaluating our operating results.
The following supplemental financial information table summarizes key operating metrics for the years ended December 31, 2024 and 2023. These metrics are utilized by management and the Board to evaluate the operating performance of the Company and are key factors that directly impact the Company’s revenue, costs and liquidity.
This decrease was offset by an increase in legal fees of $7.6 million relating to ongoing legal matters. Impairment of Goodwill and Long-lived Assets During the year ended December 31, 2023 we recorded an impairment of goodwill and long-lived assets of $3.3 million.
Impairment of Goodwill and Long-lived Assets During the year ended December 31, 2024, there was no impairment of goodwill or long-lived assets. During the year ended December 31, 2023, we recorded an impairment of $3.3 million related to goodwill and long-lived assets.
Our LiveOps system enables us to manage and optimize the user experience across the thousands of games on our platform. We collect over 300 data points during each gameplay session to feed our big data assets which augment all elements of our platform.
We collect hundreds of data points during each gameplay session to feed our big data assets which augment all elements of our platform.
The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer.
The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer. The Company recognizes revenue for its services in accordance with the FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).
Change in fair value of common stock warrant liabilities 2023 Compared to 2022 The change in fair value of warrant liabilities decreased by $5.7 million to $0.3 million in 2023 from $6.0 million in 2022. Refer to Note 12, Common Stock Warrants, of the notes to the consolidated financial statements for further discussion.
Refer to Note 12, Common Stock Warrants, of the notes to the consolidated financial statements for further discussion. Other (Expense) Income, Net Other expense, net was $0.5 million in 2024 compared to other income $0.5 million in 2023, a net decrease of $1.0 million.
Contractual Obligations and Commitments Our material cash requirements include the following contractual and other obligations. Leases We have operating lease arrangements for office space, and finance lease agreements for certain network equipment. As of December 31, 2023, we had lease payment obligations of $18.4 million, with $3.6 million payable within 12 months.
Leases We have operating lease arrangements for office space, and finance lease agreements for certain network equipment. As of December 31, 2024, we had lease payment obligations of $15.1 million, with $3.2 million payable within 12 months (see Note 9, Leases for additional information). Long-Term Debt The Company’s long-term debt consists of the 2021 Senior Secured Notes.
The net cash outflows from changes of operating assets and liabilities were primarily the result of decreases in other liabilities of $28.0 million, accounts payable of $17.2 million, and a loss contingency accrual of $4.4 million.
The net cash outflows from changes of operating assets and liabilities were primarily the result of other accruals and liabilities of $7.2 million, accounts payable of $7.0 million, and accounts receivable of $0.8 million, partially offset by prepaid expense and other current assets of $8.7 million and operating lease liabilities of $0.3 million.
Cost of revenue as a percentage of revenue decreased to 10% in 2023 from 11% in 2022. Research and Development 2023 Compared to 2022 Research and development costs decreased by $24.2 million, or 46%, to $28.1 million in 2023 from $52.3 million in 2022.
This was primarily driven by a reduction in customer support personnel and payment processing costs. Cost of revenue as a percentage of revenue increased to 14% in 2024 from 10% in 2023. Research and Development Research and development costs decreased by $11.4 million, or 41%, to $16.7 million in 2024 from $28.1 million in 2023.

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