10-K: Skillz 2025 Annual Report: Revenue Up, Net Loss Widens Amid Legal Battles

Skillz Inc. reports a 13% revenue increase to $104.5 million in 2025, driven by its RZR segment, despite a wider net loss of $70.4 million and ongoing litigation.

Summary

• Total revenue increased by 13% to $104.5 million in 2025 from $92.9 million in 2024.
• The RZR segment's revenue significantly grew by 153% to $26.3 million in 2025 from $10.4 million in 2024, driven by higher advertising technology demand.
• The core Skillz segment's revenue decreased by 5% to $78.2 million in 2025 from $82.4 million in 2024, primarily due to reduced tournament play and lower average entry fees, partially offset by reduced marketing spend.
• Net loss widened by 50% to $70.4 million in 2025 from $46.8 million in 2024.
• Loss from operations increased by 37% to $63.9 million in 2025 from $46.5 million in 2024.
• Adjusted EBITDA improved to a loss of $50.5 million in 2025 from a loss of $60.8 million in 2024.
• Gross Marketplace Volume (GMV) decreased to $541.9 million in 2025 from $608.2 million in 2024.
• Monthly Active Users (MAUs) decreased to 658,000 in 2025 from 816,000 in 2024, while Paying Monthly Active Users (PMAUs) increased to 141,000 from 118,000.
• Cash and cash equivalents decreased to $194.5 million as of December 31, 2025, from $271.9 million in 2024.
• The company has $129.7 million in senior secured notes outstanding, which mature in December 2026.
• Skillz is engaged in significant litigation, including ongoing disputes with Tether Studios, LLC (a developer accounting for 51% of 2025 revenue), Papaya Gaming, and Voodoo SAS regarding alleged bot misuse and contract termination.
• Material weaknesses in internal control over financial reporting persist as of December 31, 2025, with remediation efforts ongoing and expected to complete in fiscal year 2026.
• The company repurchased 1.7 million shares of Class A Common Stock for $9.3 million in 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report due to the significant widening of net loss, substantial decline in cash, and a decrease in core Skillz platform revenue and overall MAUs. While the RZR segment showed strong growth, the ongoing material weaknesses in internal controls and the high-stakes litigation with Tether (a major revenue contributor) present considerable uncertainties and risks.

Positives

• Total revenue increased by 13% year-over-year to $104.5 million.
• RZR segment revenue showed significant growth, increasing by 153% to $26.3 million due to higher advertising technology demand.
• Adjusted EBITDA improved from a loss of $60.8 million in 2024 to a loss of $50.5 million in 2025.
• Successful settlement of the AviaGames litigation in 2024, resulting in a $46.0 million gain, and an additional $7.5 million gain in 2025 from royalty payments.
• Progress in other bot misuse lawsuits against Papaya Gaming and Voodoo SAS, with a motion for summary judgment granted in Skillz's favor against Papaya's counterclaims.
• The company launched a $75 million Skillz Developer Program in February 2025 to support approximately 25 games over three years, providing working capital and operational support.
• Customer support team achieved a high player customer satisfaction score (CSAT) for cash players in 2025.
• Maintained compliance with all covenants applicable to its senior secured notes as of December 31, 2025, after curing a notice of default related to delayed filings.

Negatives

• Net loss widened significantly by 50% to $70.4 million in 2025 from $46.8 million in 2024.
• Loss from operations increased by 37% to $63.9 million in 2025.
• Skillz segment revenue, the core gaming platform, decreased by 5% to $78.2 million, primarily due to reduced tournament play and lower average entry fees.
• Gross Marketplace Volume (GMV) decreased by 11% to $541.9 million in 2025 from $608.2 million in 2024.
• Monthly Active Users (MAUs) decreased by 19% from 816,000 to 658,000.
• Average GMV per Paying Monthly Active User (PMAU) decreased by 25% from $429.6 in 2024 to $319.8 in 2025.
• Cash and cash equivalents declined substantially by 28% to $194.5 million in 2025 from $271.9 million in 2024.
• Net cash used in operating activities increased dramatically from $7.1 million in 2024 to $68.9 million in 2025.
• Interest expense, net, was a loss of $5.8 million in 2025, compared to income of $0.3 million in 2024, primarily due to lower interest rates and investment balances.
• The company continues to operate with material weaknesses in internal control over financial reporting as of December 31, 2025.
• Ongoing litigation with Tether Studios, LLC, including a dispute over contract termination and the potential removal of top games (Solitaire Cube and 21 Blitz) from the platform, which accounted for 51% of revenue in 2025.
• The company paid $14.0 million to terminate the lease for its former San Francisco headquarters in 2025.
• The company's indebtedness of $129.7 million matures in December 2026, requiring significant cash for servicing and repayment.

Risks

• Ability to attract and retain end-users in a cost-effective manner.
• Ability to manage growth effectively.
• Ability to achieve profitability given a history of losses.
• Reliance on third-party developer partners to offer a competitive experience and provide timely updates.
• Risk that a limited number of games account for a substantial portion of revenue (Tether accounted for 51% and Big Run 23% in 2025).
• Reliance on third-party service providers including cloud computing services, payment processors, and infrastructure service providers.
• Intense competition within the broader entertainment and gaming industries.
• Risks associated with competitors that do not follow ethical fairness practices (e.g., using bots).
• Risks associated with disruptive technologies, including artificial intelligence (AI).
• Subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing, and which could subject the company to claims or otherwise harm its business.
• Ability to obtain, maintain, protect, or enforce intellectual property rights.
• Risks related to economic downturns and political and market conditions beyond control.
• Risks related to the occurrence of a data breach or other failure of cybersecurity or that of third parties with whom the company interacts.
• Ability to timely and effectively remediate material weaknesses in internal controls over financial reporting.
• Ability to mitigate commercial, reputational, and regulatory risks to the business that may arise as a consequence of the need to restate financial statements (general risk, no restatement mentioned in this filing).
• Risks related to corporate responsibility and reputation.
• Dependence on the proliferation of mobile devices and continued compatibility between games and major mobile gaming operating systems, web browsers, and third-party platforms for distribution.
• Difficulty and increasing expense in acquiring players, and potential failure to achieve a positive return on user acquisition efforts.
• Risk of users engaging in criminal, inappropriate, or fraudulent activities that seek to exploit the platform and users.
• Companies and governmental agencies may restrict access to platforms, the company's website, mobile applications, or the Internet generally.
• Reliance on assumptions and estimates to calculate certain key metrics, and real or perceived inaccuracies in such metrics may harm reputation.
• Challenges and risks from international expansion, including regulation, currency fluctuations, and political or economic instability in foreign markets.
• Reliance on information technology (IT) and other systems and platforms, and any failures, errors, defects, or disruptions.
• Primary reliance on Amazon Web Services (AWS) to deliver offerings to users.
• Use of third-party open-source software and AI Technologies could negatively affect the ability to offer products and services and subject the company to possible litigation.
• Reliance on third-party providers to validate the identity and identify the location of end-users.
• Reliance on third-party payment processors to process deposits and withdrawals made by end-users on the platform, and difficulty accessing services of banks, credit card issuers, and payment processing services providers.
• Workforce and operations have fluctuated substantially, and inability to effectively manage future expected growth could adversely affect financial performance.
• Dependence on the performance of current and future employees, including certain key employees, and the loss of any key executives or other key employees could harm the business.
• Economic downturns and political and market conditions beyond control could adversely affect the business.
• The requirements of being a public company, including compliance with the Exchange Act and the Sarbanes-Oxley Act of 2002, may strain resources and divert management's attention.
• Changes in tax laws or tax rulings could materially affect effective tax rates, financial position, and results of operations.
• Ongoing litigation and potential future litigation in the operation of the business, with adverse outcomes potentially affecting the business.
• Insurance may not provide adequate levels of coverage against claims.
• Operating history and history of operating losses make it difficult to evaluate current business and prospects.
• Results of operations may fluctuate due to seasonality and other factors, and periodic operating results are not guarantees of future performance.
• Risks from investing in or acquiring other businesses, including miscalculating value or benefits, or inability to successfully integrate.
• Requirement for additional capital to support growth plans or refinance existing indebtedness, which may not be available on acceptable terms, if at all.
• Investment portfolio and ability to access cash and cash equivalents may become impaired by deterioration of financial markets.
• Indebtedness could adversely affect financial health and ability to execute business strategy.
• The trading price of Class A common stock has been, and may continue to be, volatile.
• Inability to remain in compliance with the continued listing standards of the NYSE.
• Controlled company status (CEO Andrew Paradise controls 87% of voting power) limits other stockholders' ability to influence the outcome of important transactions.
• Delaware law and provisions in the Charter and Bylaws could make a takeover proposal more difficult.
• Charter designates specific forums for certain types of actions and proceedings, which could limit stockholders' ability to obtain a favorable judicial forum.

Future Outlook

Skillz expects to transition from a period of turnaround to one focused on sustainable growth, driven by improving performance in both its platform and advertising businesses. The company is focused on expanding RZR into emerging performance channels like connected television and enhancing cross-channel measurement. Skillz intends to continue its efforts to combat bot misuse in the industry and plans to deploy up to $75 million over the next three years through its Developer Program to support game growth. Remediation of material weaknesses in internal control over financial reporting is expected to be completed during fiscal year 2026. However, the company anticipates that reductions in user acquisition marketing expenses will continue to result in lower revenue, though a quantitative impact cannot be reasonably estimated due to various interrelated factors. Skillz does not intend to pay cash dividends in the foreseeable future and expects increased scrutiny and regulation of the industry.

Management Comments

• "Our Companys mission is to bring out the best in everyone through competition."
• "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."
• "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."
• "Winning this case [AviaGames] 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 intend to continue to pursue our right to take action to help stop dishonest practices."
• "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 to 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."
• "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."
• "Our strategy centers on building a portfolio of high-integrity, data-driven digital businesses that extend our existing core technology and platform capabilities."
• "We believe this entrepreneurial foundation positions Skillz well to identify and create future opportunities at the intersection of technology, gaming, and competition."
• "We believe our technology capabilities are industry-leading and have helped to differentiate our product offerings and promote fair play."
• "At Skillz, we believe that every employee contributes to shaping the future of interactive entertainment."
• "We believe that hiring employees in countries that have significant talent in gaming and advertising technology is important as our business continues to evolve."
• "Management, with oversight from the Audit Committee, will continue to work to remediate the Companys material weaknesses, and reinforce the overall design and operating effectiveness of our internal control environment."

Industry Context

StockSavvy.ai notes that Skillz operates in a highly competitive and rapidly evolving mobile gaming and ad-tech industry, facing challenges from both established players and emerging technologies like AI. The company's strong stance against bot misuse, as evidenced by its litigation and settlements, positions it as a proponent of fair play, potentially differentiating it in a market where such practices are perceived to distort competition and player trust. The rebranding of Aarki to RZR and expansion into connected television (CTV) reflect broader industry trends towards diversified advertising channels and AI-driven optimization. However, the decline in core gaming revenue and overall MAUs suggests significant internal challenges in maintaining user engagement amidst this competitive landscape.

Comparison to Industry Standards

• The filing mentions 'competitors that do not follow ethical fairness practices' and 'utilize bots instead of matching their users against real human opponents,' specifically naming AviaGames, Papaya Gaming, and Voodoo SAS. Skillz positions itself as upholding 'fair play' and a 'transparent player experience' in contrast to these competitors, who are alleged to 'engineer the outcome of such matches and make economic gains at the cost of players.'
• Skillz states, 'We believe our technology capabilities are industry-leading and have helped to differentiate our product offerings and promote fair play.'
• StockSavvy.ai notes that while Skillz highlights its commitment to fair play and its proprietary technology as industry-leading, the filing does not provide specific quantitative benchmarks or direct comparisons of its financial or operational metrics (e.g., user acquisition costs, retention rates, profitability) against named competitors like AviaGames, Papaya Gaming, or Voodoo SAS, or broader industry averages. The focus is on qualitative differentiation through ethical practices rather than direct performance comparisons.

Management Changes

Corporate Governance

Legal Proceedings

• **Skillz v. AviaGames**: Settled in April 2024. AviaGames paid Skillz and Big Run $50.0 million (Skillz received $48.0 million) and agreed to pay Skillz an additional $7.5 million annually over four years as royalty payments for patent license, starting March 2025. Skillz recorded a $46.0 million gain in 2024 and $7.5 million in 2025.
• **Skillz v. Tether Litigation**: Skillz received a termination notice from Tether on August 29, 2025, which Skillz believes is invalid and a breach of contract. Skillz filed suit on September 1, 2025, seeking injunctive and declaratory relief. Tether's top two games (Solitaire Cube and 21 Blitz), which accounted for 51% of Skillz's 2025 revenue, are restricted from removal for at least 18 months post-termination. Trial is scheduled for August 25-27, 2026. Skillz filed a second amended complaint on March 3, 2026, adding Aim Games, LLC as an alleged alter ego.
• **Hanna v. Paradise, et al.**: Putative derivative complaint filed in March 2024, alleging breaches of fiduciary duties and unjust enrichment related to a March 2021 secondary public offering. Motion to dismiss heard January 7, 2025. Court issued a ruling on July 3, 2025, converting motion to dismiss to summary judgment and ordering limited discovery.
• **Skillz vs. Voodoo SAS et al.**: Skillz filed suit on July 1, 2024, alleging false advertising and unfair business practices due to Voodoo's alleged use of bots. Skillz's motion for preliminary injunction was denied. Discovery is ongoing.
• **Skillz vs. Papaya Gaming, Ltd., et al.**: Skillz sued Papaya Gaming in March 2024 for false advertising and unfair business practices related to bot deployment. Court denied Papaya's motion to dismiss in June 2024. Court dismissed Papaya's defamation counterclaims and severed intellectual property claims in March 2025. Court denied Papaya's motion for summary judgment on Skillz's claims on October 27, 2025, and granted Skillz's motion for summary judgment on Papaya's remaining counterclaims on November 21, 2025. Trial is scheduled to begin on April 13, 2026.
• **Lien, et al. v. Eagle Equity Partners II, LLC, et al.**: Class action filed October 31, 2022, against former officers and directors of Flying Eagle Acquisition Corp. (Skillz's predecessor SPAC). Skillz is obligated to indemnify legal costs. Settled in principle for $10.0 million on March 27, 2025, with final court approval on September 2, 2025. Skillz funded $10.0 million into an escrow account on July 10, 2025, offset by $9.8 million insurance recovery.
• **Mitchell, et al. v. Skillz Platform Inc.**: Putative class action filed January 21, 2026, alleging violations of California's Unfair Competition Law, negligent misrepresentations, and unjust enrichment related to alleged misrepresentations about bot use, matchmaking fairness, and cash withdrawal ability. Skillz filed a motion to dismiss on March 10, 2026.
• **Vendor Disputes**: One dispute settled in March 2025 for $2.8 million. Another dispute settled in April 2025 for $0.5 million.
• **Termination of Operating Lease**: Settled in April 2025 with a lump sum payment of $14.0 million to the landlord of the former San Francisco headquarters.
• **Former Employee Dispute**: Court of Appeals affirmed a judgment of $6.7 million in April 2024. The matter was considered resolved after the former employee abandoned an appeal on January 8, 2025.
• **Indirect Taxes**: The company is currently undergoing an examination in the State of Washington regarding its indirect tax liability.

Related Party Transactions

• On December 10, 2024, the company repurchased 979,848 shares of its Class A Common Stock from Wildcat Capital Management, LLC and Wildcat Partner Holdings, LP (Wildcat Parties) for $7.00 per share, totaling $6.7 million. The Wildcat Parties owned more than 6% of Class A Common Stock prior to the transaction. This repurchase was at a 35% premium to the company's share price at the time and was approved by a special transactions committee of independent directors.
• The CEO and CSO received Founders Options in December 2020.
• The CEO received a restricted stock unit award and performance award in 2022.

Stakeholder Impact

• **Shareholders**: Face dilution risk from potential future equity raises, have limited influence due to the CEO's concentrated voting power (87%), and are exposed to stock price volatility and potential delisting risk from the NYSE. Ongoing litigation and material weaknesses could negatively impact shareholder value.
• **Employees**: Subject to workforce fluctuations and management transitions. The company's ability to attract and retain talent is critical, with stock-based compensation being part of the benefits package.
• **Customers (End-users)**: Benefit from the company's fair play initiatives and developer programs aimed at improving gaming experiences. However, they are exposed to risks from fraudulent activities on the platform and reliance on third-party payment processors.
• **Developers**: Have opportunities for monetization through the Skillz platform and support from the $75 million Developer Program. They face risks from changes in commercial relationships, as highlighted by the Tether litigation.
• **Creditors**: The company has $129.7 million in senior secured notes maturing in December 2026, requiring significant cash for servicing and repayment. While currently compliant, a past notice of default (now cured) indicates potential risks related to debt covenants.

Next Steps

• Continue to pursue actions to help stop dishonest practices (bot misuse) in the industry.
• Continue to combat the deceptive misuse of bots until systemic fraud in the industry is eliminated.
• Focus on launching additional growth initiatives that leverage core technology and platform capabilities.
• Expand RZR into emerging performance channels such as connected television and enhance cross-channel measurement and optimization capabilities.
• Onboard new developers to RZR to power game title growth through user acquisition and monetization.
• Deploy up to $75 million over the next three years through the Skillz Developer Program to support approximately 25 games.
• Remediate material weaknesses in internal control over financial reporting, with completion expected during fiscal year 2026.
• Continue to enhance and standardize policies and procedures across the company to ensure consistency and performance of internal controls.
• Make strategic investments in qualified personnel, external consultants, and deploy available tools and systems to streamline and automate internal controls.
• Employ, engage, educate, and train personnel on the importance of documenting and following internal controls.
• Trial for Papaya Gaming litigation is scheduled to begin on April 13, 2026.
• Trial for Tether litigation is scheduled for August 25-27, 2026.
• Expects to receive $7.5 million payments from AviaGames settlement in March 2027 and 2028.

Key Dates

Recommendation

The filing reveals a significant deterioration in Skillz's financial health, marked by a widening net loss, substantial cash burn from operations, and a decline in revenue from its core Skillz gaming platform. The decrease in Monthly Active Users (MAUs) and Average GMV per Paying Monthly Active User suggests fundamental challenges in user engagement and monetization. Furthermore, the high-stakes litigation with Tether, a developer responsible for 51% of 2025 revenue, introduces severe uncertainty regarding future revenue streams. Persistent material weaknesses in internal controls and the upcoming maturity of $129.7 million in debt in December 2026 add to the financial instability. While the RZR segment shows growth, it is insufficient to offset the broader operational and financial headwinds. These factors collectively point to significant downside risk for investors.

Keywords

Mobile gaming, Competitive gaming, Skill-based gaming, RZR, Aarki, Performance marketing, Ad tech, User acquisition, Monetization, SEC filing, 10-K, Financial results, Litigation, Corporate governance, Internal controls, AI, Machine learning, Developer program, Stock repurchase