10-K: Skillz Reports 2024 Net Loss Amid Revenue Decline & Legal Battles

Skillz Inc. reported a net loss of $46.8 million in 2024, a 39% revenue decrease, amidst strategic shifts towards profitability and ongoing legal challenges.

Summary

• Reported a net loss of $46.8 million for the fiscal year ended December 31, 2024, an improvement from a $101.4 million net loss in 2023.
• Revenue decreased by 39% to $92.9 million in 2024 from $152.1 million in 2023.
• Monthly Active Users (MAUs) decreased by 22% to 0.8 million in 2024 from 1.0 million in 2023.
• Paying Monthly Active Users (PMAUs) decreased to 118 thousand in 2024 from 179 thousand in 2023.
• Gross Marketplace Volume (GMV) decreased to $608.2 million in 2024 from $963.6 million in 2023.
• Adjusted EBITDA loss improved to $60.8 million in 2024 from $68.8 million in 2023.
• The Skillz segment's revenue decreased by $56.8 million (40.8%) to $82.4 million, while the Aarki segment's revenue decreased by $2.4 million (17.8%) to $10.9 million.
• Received $48.0 million from the AviaGames settlement in 2024, with an additional $7.5 million annually over four years starting March 2025.
• Identified material weaknesses in internal control over financial reporting as of December 31, 2024, leading to an adverse audit opinion.
• Received a notice of default from UMB Bank, N.A. on September 30, 2025, for delayed SEC filings (10-K and 10-Qs).
• Filed suit against Tether on September 1, 2025, for breach of agreements, as Tether is terminating its contracts; Tether accounted for 45% of 2024 revenue.
• Repurchased $19.3 million of Class A common stock in 2024, including $6.9 million from Wildcat Capital Management, LLC and its affiliates at a 35% premium.

Sentiment

Score: 3

Explanation: While net loss and Adjusted EBITDA improved, the significant decline in revenue, MAUs, and GMV, coupled with ongoing litigation, material weaknesses in internal controls, and a debt default notice for late filings, indicates a challenging operational environment and significant risks. The strategic shift to profitability is positive, but the immediate impact is negative on growth metrics.

Positives

• Net loss significantly reduced from $101.4 million in 2023 to $46.8 million in 2024.
• Adjusted EBITDA loss improved from $68.8 million in 2023 to $60.8 million in 2024.
• Successful litigation settlement with AviaGames, resulting in $48.0 million received in 2024 and future annual royalty payments of $7.5 million for four years starting March 2025.
• Strategic focus on driving higher efficiency from marketing investment and prioritizing profitability over top-line expansion.
• The court denied Papaya Gaming's motion for summary judgment against Skillz's bot misuse claims.
• Strong anti-cheat and anti-fraud protections are a critical element of the platform, differentiating from competitors.
• Launched a $75 million Skillz Developer Program in February 2025 to support developers with working capital and operational support.
• Customer support team achieved a high player customer satisfaction score (CSAT) for cash players in 2024.
• Cash and cash equivalents of $271.9 million as of December 31, 2024, providing sufficient liquidity for at least one year.

Negatives

• Revenue decreased by 39% to $92.9 million in 2024.
• Monthly Active Users (MAUs) decreased by 22% and Paying Monthly Active Users (PMAUs) decreased in 2024.
• Average Revenue Per Monthly Active User (ARPU) decreased by 19%.
• Significant reliance on a limited number of games, with Tether's games (Solitaire Cube and 21 Blitz) accounting for 45% of 2024 revenue, and Tether terminating agreements.
• Ongoing litigation with Tether, Papaya Gaming, and Voodoo SAS, alleging false advertising and bot misuse.
• Identified material weaknesses in internal control over financial reporting as of December 31, 2024, leading to an adverse audit opinion.
• Received a notice of default from the senior secured notes trustee due to delayed SEC filings (10-K and 10-Qs).
• Cost of revenue as a percentage of revenue increased to 14% in 2024 from 10% in 2023.
• Significant outflows from share repurchases ($19.3 million in 2024) and legal settlements.
• Former CFO's restricted stock unit and performance awards were forfeited in 2024 due to his departure.
• Loss on termination of operating lease of $0.4 million in 2024.
• Indirect tax liabilities increased to $14.9 million in 2024 from $11.2 million in 2023.
• Credit rating of CCC+ from S&P Global Ratings.

Risks

• Ability to attract and retain end-users cost-effectively.
• Challenges in managing growth effectively.
• Difficulty in achieving profitability given a history of losses.
• Reliance on third-party developer partners, and the risk of them removing games or changing terms (e.g., Tether litigation).
• Concentration of revenue from a limited number of games.
• Reliance on third-party service providers (cloud computing, payment processors, infrastructure).
• Intense competition within the broader entertainment and gaming industries.
• Risks associated with competitors using unethical fairness practices (bots).
• Risks associated with disruptive technologies, including artificial intelligence.
• Subject to evolving U.S. and foreign laws and regulations, including those related to skill-based gaming, consumer protection, data privacy, and taxation.
• Inability to obtain, maintain, protect, or enforce intellectual property rights.
• Risks related to economic downturns and political/market conditions.
• Data breaches or cybersecurity failures.
• Inability to timely and effectively remediate material weaknesses in internal controls over financial reporting.
• Risks related to corporate responsibility and reputation, including restatement of financial statements.
• Potential for delisting from the NYSE if compliance standards are not met.
• Concentration of voting power with the CEO due to dual-class stock structure.
• Indebtedness could adversely affect financial health and business strategy, including restrictive covenants and potential default.
• Reliance on Amazon Web Services (AWS) for infrastructure.
• Use of third-party open-source software could lead to litigation or disclosure requirements.
• Reliance on third-party providers for identity and geolocation validation.
• Challenges and risks associated with international expansion.
• Fluctuations in operating results due to seasonality and other factors.
• Risks from future acquisitions and strategic investments.
• Evolving laws and regulations concerning privacy, information security, data protection, and protection of minors.
• Volatility in the Class A common stock trading price.
• Potential for class action litigation.
• Global climate change and natural disasters.

Future Outlook

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. Our strategy centers on building a portfolio of high-integrity, data-driven digital businesses that extend our existing core technology and platform capabilities. We are focused on launching additional growth initiatives that leverage our proven capability to pioneer new markets. We intend to opportunistically engage in brand marketing to drive broader consumer and developer awareness of our platform. We expect research and development expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future. We expect sales and marketing expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future. We are currently unable to reasonably estimate the quantitative impact, or range of impact, that reductions in UA marketing and engagement marketing will have on forward-looking revenue.

Management Comments

• We were founded on one simple belief: competition holds the power to unleash possibilities in all of us.
• Our Company's 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.
• 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 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 founder and CEO, Andrew Paradise, has a demonstrated history of innovation, including the mobile self-checkout industry and the mobile skill-gaming market. 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.
• We give gamers confidence to transact on our platform by delivering on our values of trust and fairness.
• 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.
• We believe our third-party developer partners are essential to our success and establishing mutually successful relationships with such developers serves the best long-term interests of Skillz and our stockholders.
• Our management believes Adjusted EBITDA is useful in evaluating its operating performance and is a similar measure reported by publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.

Industry Context

The global video game market was estimated at $221.2 billion in 2024 and is projected to grow at a 6.5% CAGR from 2025 to 2033, driven by smartphone accessibility and social features. Mobile game developers face challenges in content discovery and monetization due to market saturation and traditional methods. Skillz aims to improve monetization through its multi-player competition platform. The company highlights that the prevalence of bots in skill-based gaming has distorted digital advertising, increased customer acquisition costs, and eroded player trust, which Skillz is actively combating through litigation. Advancements in artificial intelligence are expected to further intensify competition within the industry.

Comparison to Industry Standards

• 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.
• We believe the evidence we made public at trial showed the competitor [AviaGames] and their executives were using bots to build their business, which we believe deceives players and harms our company's competitive position.
• Our payment infrastructure that, we believe, is reliable and generates up uptime that meets or exceeds industry standards.
• We believe our technology capabilities are industry-leading and have helped to differentiate our product offerings and promote fair play.
• 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.

Management Changes

Corporate Governance

Legal Proceedings

• Former employee litigation: The Court of Appeals affirmed a $6.7 million award in April 2024. The matter is considered resolved as of January 8, 2025, after the former employee abandoned an appeal for additional post-judgment interest.
• Vendor disputes: Settled one dispute for a payment of $2.75 million in March 2025. Settled another license agreement dispute for a payment of $0.5 million in June 2025.
• Termination of operating lease: Paid a lump sum of $14.0 million to the lessor of its former San Francisco headquarters in April 2025, resulting in a $0.4 million loss on termination.
• Skillz v. AviaGames: A federal jury found in favor of Skillz for patent infringement, awarding $42.9 million. The case settled in April 2024 for a total of $80.0 million, with Skillz receiving $48.0 million in 2024 and an additional $7.5 million annually for four years starting March 2025 as royalty payments.
• Skillz v. Tether Litigation: Skillz filed suit on September 1, 2025, against Tether for breach of agreements after Tether issued a notice terminating its contracts. Tether accounted for 45% of Skillz's 2024 revenue. Skillz filed a first amended complaint on October 3, 2025.
• Hanna v. Paradise, et. al.: A class action was filed in March 2024 alleging breaches of fiduciary duties and unjust enrichment related to a March 2021 secondary public offering. The court denied a motion to dismiss on May 29, 2024, and ordered limited discovery. A term sheet to settle for $10 million was executed on March 27, 2025, and approved by the court in September 2025.
• Skillz v. Voodoo SAS et. al.: Skillz filed suit on July 1, 2024, alleging false advertising and unfair business practices related to bot misuse. Motions for preliminary injunction and dismissal are currently pending court decisions.
• Skillz v. Papaya Gaming, Ltd., et al.: Skillz sued in March 2024 for false advertising and unfair business practices (bot misuse). The court denied Papaya's motion to dismiss. Papaya filed amended counterclaims, some of which were dismissed by the court in March 2025. The court denied Papaya's motion for summary judgment against Skillz's claims on October 28, 2025.
• Indirect Tax Liabilities: The Company is currently undergoing an examination in the State of Washington regarding its indirect tax liability.

Related Party Transactions

• Repurchased 979,848 shares of Class A common stock for $6.9 million from Wildcat Capital Management, LLC and its affiliates (who previously held greater than 5% of Class A common stock) at $7.00 per share (a 35% premium to the Company's share price at the time) on December 10, 2024. This transaction was approved by a Special Transactions Committee of independent directors.
• CEO Andrew Paradise and CSO Casey Chafkin received founder option agreements in December 2020.
• CEO Andrew Paradise received a restricted stock unit award in 2022.

Stakeholder Impact

• Shareholders face dilution risk from potential future equity raises and a potential negative impact on stock price due to delisting risk and the CEO's concentrated voting power. The share repurchase program may offer some value.
• Employees are affected by workforce growth and management challenges, the company's ability to attract and retain skilled personnel, management transitions, and the provision of competitive compensation and benefits, including equity awards.
• Customers (end-users) benefit from the company's focus on fair play and anti-bot measures, customer support, and loyalty programs (Ticketz), but may be negatively impacted by game removals (e.g., Tether).
• Developers are offered monetization opportunities and support through the Skillz Developer Program, but are also impacted by litigation outcomes (e.g., AviaGames settlement, Tether dispute).
• Creditors, particularly holders of senior secured notes, face a risk of default due to delayed SEC filings and are subject to restrictive covenants on indebtedness.

Next Steps

• Continue to focus on operations and positioning the business for renewed growth.
• Transition from a period of turnaround to one focused on sustainable growth.
• Launch additional growth initiatives leveraging core technology and platform capabilities.
• Continue to pursue actions to stop dishonest practices by competitors (bot misuse).
• Remediate material weaknesses in internal control over financial reporting during 2025.
• File delayed Quarterly Reports on Form 10-Q for March 31, 2025, and June 30, 2025, as soon as practicable to regain compliance with debt covenants and NYSE listing requirements.
• Continue to defend position in Tether litigation.
• Continue to combat deceptive misuse of bots until systemic fraud in the industry is eliminated.
• Deploy up to $75 million over the next three years through the Skillz Developer Program to support approximately 25 games.
• Opportunistically engage in brand marketing to drive broader consumer and developer awareness.
• 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 tools/systems to streamline and automate internal controls.
• Engage, educate, and train personnel on the importance of documenting and following internal controls.

Key Dates

Recommendation

The company faces substantial headwinds, including a 39% revenue decline and a 22% drop in monthly active users in 2024. The ongoing litigation with Tether, a developer responsible for 45% of 2024 revenue, poses a severe threat to future income. Furthermore, the identification of material weaknesses in internal controls and a notice of default on debt covenants due to delayed SEC filings highlight significant operational and compliance issues. While the AviaGames settlement provides a one-time cash infusion and future royalties, it does not offset the fundamental business contraction and governance concerns. The stock's delisting risk and the CEO's concentrated voting power further add to investor uncertainty. These combined factors indicate a deteriorating business outlook and elevated risk, making a 'sell' recommendation appropriate for a seasoned investor.

Keywords

mobile gaming, skill-based gaming, ad-tech, user acquisition, monetization, SEC filing, 10-K, financial results, litigation, corporate governance, internal controls, cybersecurity, artificial intelligence, developer program, share repurchase, debt, NYSE listing