SEC Form 10-Q filed by Skillz Inc.

12/11/25 5:22:06 PM ET

$SKLZ

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TABLE OF CONTENTS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to______

Commission file number: 001-39243

SKILLZ INC.

(Exact name of registrant as specified in its charter)

Delaware

84-4478274

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6625 Badura Ave

Las Vegas, Nevada

89118

(Address of principal executive offices)

(Zip Code)

(415) 762-0511

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	SKLZ	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 5, 2025, the registrant had outstanding 11,678,067 shares of Class A common stock and 3,430,063 shares of Class B common stock.

TABLE OF CONTENTS

SKILLZ INC.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			37

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			39
Item 6. Exhibits			40
Signatures			41

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SKILLZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except for number of shares and par value per share amounts)


	September 30,		December 31,
	2025		2024
Assets
Current assets:
Cash and cash equivalents	$	211,801	$	271,923
Restricted cash	—		9,000

Accounts receivable, net of allowance for credit losses of $257 and $273 as of September 30, 2025 and December 31, 2024, respectively	14,264		4,890
Prepaid expenses and other current assets	7,052		17,342
Total current assets	233,117		303,155
Property and equipment, net	20,249		16,282
Operating lease right-of-use assets, net	1,196		308

Non-marketable equity securities	52,768		52,768
Restricted cash, non-current	1,000		1,000

Other non-current assets	915		755
Total assets	$	309,245	$	374,268
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,992	$	9,799

Operating lease liabilities, current	454		1,544

Other current liabilities	45,498		54,564
Total current liabilities	53,944		65,907
Operating lease liabilities, non-current	743		9,338

Long-term debt, net	127,083		125,654
Other non-current liabilities	299		333
Total liabilities	182,069		201,232
Commitments and contingencies (Note 8)
Stockholders’ equity:

Common stock $0.0001 par value; 31.3 million shares authorized; Class A common stock – 25.0 million shares authorized; 18.7 million and 18.7 million shares issued; 11.9 million and 13.3 million outstanding as of September 30, 2025 and December 31, 2024, respectively; Class B common stock – 6.3 million shares authorized; 3.4 million shares issued and outstanding as of September 30, 2025 and December 31, 2024	1		1
Additional paid-in capital	1,241,011		1,226,642

Accumulated deficit	(1,073,764)		(1,021,258)
Treasury stock at cost, $6.8 million and $5.4 million as of September 30, 2025 and December 31, 2024, respectively	(40,072)		(32,349)
Total stockholders’ equity	127,176		173,036
Total liabilities and stockholders’ equity	$	309,245	$	374,268

See accompanying Notes to the Condensed Consolidated Financial Statements.

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SKILLZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except for number of shares and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Revenue	$	27,374	$	24,564	$	74,485	$	75,094
Costs and expenses:
Cost of revenue	3,355		3,373		9,539		10,171
Research and development	5,444		4,742		15,102		13,638
Sales and marketing	17,368		19,294		51,804		61,138
General and administrative	17,479		18,147		53,269		58,419
Gain from litigation settlement	—		—		(7,500)		(46,000)

Total costs and expenses	43,646		45,556		122,214		97,366
Loss from operations	(16,272)		(20,992)		(47,729)		(22,272)

Interest (expense) income, net	(1,560)		242		(3,952)		688
Change in fair value of common stock warrant liabilities	—		—		—		11
Other income (expense), net	430		(333)		(766)		(78)
Loss before income taxes	(17,402)		(21,083)		(52,447)		(21,651)
Provision for income taxes	40		32		59		142
Net loss	$	(17,442)	$	(21,115)	$	(52,506)	$	(21,793)
Loss per share:
Basic	$	(1.14)	$	(1.20)	$	(3.35)	$	(1.22)
Diluted	$	(1.14)	$	(1.20)	$	(3.35)	$	(1.22)
Weighted average shares outstanding:
Basic	15,308,114		17,531,790		15,692,623		17,928,062
Diluted	15,308,114		17,531,790		15,692,623		17,928,062

Other comprehensive income:
Change in unrealized gain on available-for-sale investments, net of tax	—		—		—		7
Total other comprehensive income	—		—		—		7
Total comprehensive loss	$	(17,442)	$	(21,115)	$	(52,506)	$	(21,786)

See accompanying Notes to the Condensed Consolidated Financial Statements.

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SKILLZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except for number of shares)


	Common stock		Treasury Stock			Additional paid-in capital			Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
		Shares	Amount		Shares			Amount
Balance at December 31, 2023		19,183,046	$	1	2,314,908	$	(13,000)		$	1,197,963	$	(7)	$	(974,468)	$	210,489
Issuance of common stock upon release of restricted stock units		64,020	—		—	—			—		—		—		—
Issuance of common stock upon exercise of stock options		566	—		—	—			—		—		—		—
Shares withheld related to net share settlement		(229)	—		—	—			—		—		—		—
Shares repurchased by the Company and held as treasury stock		(1,209,549)	—		1,209,549	(6,956)			—		—		—		(6,956)
Other comprehensive income		—	—		—	—			—		6		—		6
Stock-based compensation		—	—		—	—			8,740		—		—		8,740
Net loss		—	—		—	—			—		—		(26,723)		(26,723)
Balance at March 31, 2024		18,037,854	$	1	3,524,457	(19,956)			$	1,206,703	$	(1)	$	(1,001,191)	$	185,556

Shares repurchased by the Company and held as treasury stock		(589,721)	—		589,721	(3,814)			—		—		—		(3,814)
Stock issued under employee stock purchase plan		1,195	—		—	—			7		—		—		7
Other comprehensive income		—	—		—	—					1		—		1
Stock-based compensation		—	—		—	—			7,433		—		—		7,433
Net income		—	—		—	—			—		—		26,045		26,045
Balance at June 30, 2024		17,449,328	$	1	4,114,178	$	(23,770)		$	1,214,143	—		$	(975,146)	$	215,228
Issuance of common stock upon release of restricted stock units		628,458	—		—	—			—		—		—		—
Issuance of common stock upon exercise of stock options		1,235	—		—	—			—		—		—		—
Shares withheld related to net share settlement		(191,241)	—		—	—			(1,236)		—		—		(1,236)
Shares repurchased by the Company and held as treasury stock		(19,291)	—		19,291	(135)			—		—		—		(135)

Stock-based compensation		—	—		—	—			6,721		—		—		6,721
Net loss		—	—		—	—			—		—		(21,115)		(21,115)
Balance at September 30, 2024		17,868,489	$	1	4,133,469	$	(23,905)		$	1,219,628	$	—	$	(996,261)	$	199,463

Balance at December 31, 2024		16,736,904	$	1	5,416,418	$	(32,349)		$	1,226,642	$	—	$	(1,021,258)	$	173,036

Shares repurchased by the Company and held as treasury stock		(845,564)	—		845,564	(4,732)			—		—		—		(4,732)

Stock-based compensation		—	—		—	—			5,646		—		—		5,646
Net loss		—	—		—	—			—		—		(17,142)		(17,142)
Balance at March 31, 2025		15,891,340	$	1	6,261,982	$	(37,081)		$	1,232,288	$	—	$	(1,038,400)	$	156,808

Shares repurchased by the Company and held as treasury stock		(585,524)	—		585,524	(2,976)			—		—		—		(2,976)

Stock issued under employee stock purchase plan		4,411	—		—	—			24		—		—		24

Stock-based compensation		—	—		—	—			4,409		—		—		4,409

Net loss		—	—		—	—			—		—		(17,922)		(17,922)
Balance at June 30, 2025		15,310,227	$	1	6,847,506	$	(40,057)		$	1,236,721	—		$	(1,056,322)	$	140,343

Shares repurchased by the Company and held as treasury shares		(2,134)	—		2,134	(15)			—		—		—		(15)


Stock-based compensation		—	—		—	—			4,290		—		0		4,290


Net loss		—	—		—	—			—		—		(17,442)		(17,442)
Balance at September 30, 2025		15,308,093	$	1	6,849,640	$	(40,072)		$	1,241,011	$	—	$	(1,073,764)	$	127,176

See accompanying Notes to the Condensed Consolidated Financial Statements.

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SKILLZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended September 30,
	2025		2024
Operating Activities
Net loss	$	(52,506)	$	(21,793)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	585		1,188
Stock-based compensation	14,181		22,894

Accretion of unamortized debt discount and amortization of debt issuance costs	1,429		1,269



Change in fair value of common stock warrant liabilities	—		(11)

Changes in operating assets and liabilities:
Accounts receivable, net	(9,374)		670
Prepaid expenses and other assets	10,130		3,588
Accounts payable	(1,807)		6,954


Operating lease liabilities	(10,573)		(1,062)
Other accruals and liabilities	(8,297)		(1,274)
Net cash (used in) provided by operating activities	(56,232)		12,423
Investing Activities
Purchases of property and equipment	(2,108)		(1,302)
Capitalization of software development costs	(2,615)		(15)

Purchases of marketable securities	—		(5)
Proceeds from sales of marketable securities	—		1,137


Net cash used in investing activities	(4,723)		(185)
Financing Activities
Principal payments on finance leases obligations	(444)		(682)


Repurchase of common stock	(7,723)		(10,905)
Payments to cover taxes upon exercise of stock options and issuance of common stock	—		(1,236)




Net cash used in financing activities	(8,167)		(12,823)
Net change in cash, cash equivalents and restricted cash	(69,122)		(585)
Cash, cash equivalents and restricted cash – beginning of year	281,923		312,028
Cash, cash equivalents and restricted cash – end of period	$	212,801	$	311,443
Supplemental cash flow data:
Cash paid during the period for:
Interest	$	6,691	$	6,726
Taxes	$	53	$	183
Noncash investing and financing activities:
Purchases of property and equipment included in accounts payable	$	109	$	246
Stock-based compensation capitalized in software development costs	$	167	$	—

See accompanying Notes to the Condensed Consolidated Financial Statements.

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

1. Description of the Business and Basis of Presentation

Business

Skillz (the “Company,” “Skillz” or “We”) generates revenue from our two reportable operating segments, Skillz and Aarki.

The Skillz segment operates a competitive multi-player platform, driving the future of entertainment by accelerating the convergence of video games, real world prizes, and media. The Company’s principal activities are to develop and support a proprietary online-hosted technology platform that creates a multi-player system inside of game developer’s games (“Competitions”) to end-players worldwide.

Aarki (“Aarki”) is a subsidiary of the Company and is an artificial intelligence company that delivers advertising solutions to drive revenue growth for mobile app developers. 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 advertisers globally and manages ad requests on mobile devices.

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The Company believes the disclosures made are adequate to make the information presented not misleading. The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and one subsidiary for which there is an immaterial noncontrolling interest at September 30, 2025. All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of the Company’s management, necessary for the fair presentation of the results of operations for the interim periods. Operating results for the nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Reclassifications

Certain prior year amounts have been reclassified or changed to conform to the current-year presentation. Such reclassifications had no impact on previously reported net income.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the amounts reported in these condensed consolidated financial statements and the accompanying notes. Estimates are used in several areas including, but not limited to, end-user incentives, including Bonus Cash and Ticketz accrual, indirect tax liabilities, the fair value of non-marketable securities, and the impairment of long-lived assets. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. The actual results may materially differ from these estimates.

Revenue Recognition

The Company recognizes revenue for its services in accordance with the FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). For additional information, see Note 3, Revenue.

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

Cost of Revenue

Cost of revenue primarily consists of third-party payment processing fees, server costs, amortization of developed technology, personnel expenses, direct software costs, amortization of internal use software, hosting expenses, and allocation of shared facility and other costs.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash, commercial paper, money market funds and U.S. government agency securities with maturities of three months or less when purchased.

Restricted cash of $1.0 million at September 30, 2025 was primarily associated with the cash required to be held by our financial institution. Restricted cash of $10.0 million at December 31, 2024 was primarily associated with the letter of credit for the Company’s former headquarters in San Francisco and cash required to be held by our financial institution.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets at September 30, 2025 and December 31, 2024 that sum to the total of these items reported in the condensed consolidated statements of cash flows for the nine months ended September 30, 2025:


	September 30,		December 31,
	2025		2024
Cash	$	11,693	$	19,975
Money market funds	200,108		251,948
Restricted cash classified as a current asset	—		9,000
Restricted cash classified as a non-current asset	1,000		1,000
Cash, cash equivalents and restricted cash	$	212,801	$	281,923

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash, cash equivalents, restricted cash, and marketable securities. Although the Company deposits its cash with multiple established financial institutions, the deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company limits the amount of credit exposure to any one issuer and monitors the financial condition of the financial institutions on a regular basis. At September 30, 2025, the Company had cash balances on deposit with various financial institutions that in the aggregate exceeded the federally insured limits in the amount of $209.9 million.

Accounts Receivable, Net

Accounts receivable, net, represents amounts recorded for programmatic media campaigns, net of an allowance for credit losses from our advertising revenue customers of our Aarki segment. The allowance for credit losses is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when there are specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The Company’s provision and write-offs, net of recoveries for credit losses were not material in the three and nine months ended September 30, 2025 and

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

2024. The allowance for credit losses were $257.0 thousand and $273.0 thousand at September 30, 2025 and December 31, 2024, respectively.

Two customers of Aarki individually represented 10% or more of total accounts receivables as of September 30, 2025. The individual receivable balance of these customers were between 21% and 23% of the accounts receivable balance. Four customers of Aarki accounted for 10% or more of total accounts receivables as of December 31, 2024 and were between 10% and 18% of the accounts receivable balance.

Long-Lived Assets

Long-lived assets primarily consist of property and equipment with estimable useful lives subject to depreciation and amortization.

The Company owns its office building in Las Vegas, Nevada that serves as its headquarters with costs allocated to building and land components. The building is depreciated on a straight-line basis over its estimated useful life of 39 years and the land is not subject to depreciation.

Advertising and Promotional Expense

Advertising and promotional expenses are included in sales and marketing expenses within the condensed consolidated statements of operations and comprehensive loss and are expensed when incurred. Advertising expenses, excluding marketing promotions related to the Company’s end-user incentive programs, were $4.4 million and $4.5 million for the three months ended September 30, 2025 and 2024, respectively, and $13.2 million and $15.0 million for the nine months ended September 30, 2025 and 2024, respectively.

User Acquisition

User acquisition (“UA”) marketing costs to acquire new paying users to the platform are presented in sales and marketing expenses in the consolidated statements of operations and comprehensive loss. UA marketing costs were $4.3 million and $4.7 million for the three months ended September 30, 2025 and 2024, respectively, and $12.4 million and $14.5 million for the nine months ended September 30, 2025 and 2024, respectively.

Interest (Expense) Income, Net

Interest (expense) income, net, consisted of the following for the three and nine months ended September 30, 2025 and 2024.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Interest expense	$	(3,815)	$	(3,771)	$	(11,416)	$	(11,320)
Interest income	2,255		4,013		7,464		12,008
Interest (expense) income, net	$	(1,560)	$	242	$	(3,952)	$	688

Indirect Tax Liabilities

The Company is subject to indirect taxes such as sales and use tax in the United States and value-added tax in certain foreign jurisdictions, respectively. Indirect tax liabilities are adjusted considering changing facts and circumstances, such as the closing of a tax examination, further interpretation of existing tax law, or new tax law. The Company recognizes changes to its estimate if it is estimable and probable that its position would not be sustainable upon examination by taxing authorities. Although management believes the Company’s recorded liabilities are reasonable, no assurance can be given that the final tax outcomes of these matters will not be different from that which its liabilities are based on. To the extent that final tax outcomes of these matters are different than the amounts recorded, such differences could have a material impact on the Company’s condensed consolidated financial statements as the Company records related tax reserves as a reduction in revenue, and

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

penalties and interest in general and administrative expenses. The Company recorded indirect tax liabilities of $14.6 million and $14.9 million at September 30, 2025 and December 31, 2024, respectively. See Note 8, Commitments and Contingencies.

401(k) Plan

The Company has a 401(k) Plan that qualifies as a deferred salary arrangement under Section 401 of the Internal Revenue Code. Under the 401(k) Plan, participating employees may defer a portion of their pretax earnings and receive a matching employer contribution of up to 3% of compensation not to exceed the maximum amount allowable. for the three months ended September 30, 2025 and 2024, respectively, the Company recognized an expense under this plan of $0.1 million and $0.1 million and for the nine months ended September 30, 2025 and 2024, respectively, the Company recognized an expense under this plan of $0.6 million and $0.3 million.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In November 2024, FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” and an issued amendment ASU 2025-01 in January 2025 that clarified the effective date. The new standard requires public entities to disclose disaggregated information about certain costs and expenses in the notes to their financial statements in both annual and interim filings. ASU 2024-03 is effective for financial statements issued for annual reporting periods beginning after December 15, 2026, with early adoption permitted and can be applied either prospectively or retrospectively. The Company is evaluating the disclosure requirements related to the new standard.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The update provides an optional practical expedient for estimating expected credit losses on current accounts receivable and contract assets arising from transactions under ASC 606. Under this expedient, entities may assume that current conditions at the balance sheet date remain unchanged over the remaining life of these assets. This ASU is effective with the Company’s 2026 reporting period and will be applied prospectively. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements or disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update modernizes the recognition and disclosure framework for internal-use software costs by eliminating the previous “development stage” model and introducing a more judgment based approach. Under the amended guidance, entities are required to begin capitalizing software costs when both of the following criteria are met: (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform its intended function. ASU 2025-06 is effective with the Company’s 2027 reporting period, with early adoption permitted. This ASU may be applied prospectively, retrospectively, or using a modified transition approach. The Company is currently evaluating the impact of this update on its financial statements and disclosures.

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

3. Revenue

The following tables present the Company’s revenues, disaggregated by offering, geographical region, and reportable segment for the three and nine months ended September 30, 2025 and 2024. Revenue by geographical region is based on the location where the game developer or advertising customer is headquartered. Revenue is recognized net of any taxes from customers (e.g. sales and other indirect taxes), which are subsequently remitted to governmental entities. For more information on revenues presented by reportable segment, see Note 12, Segment Reporting.


	Three Months Ended September 30, 2025
	Skillz		Aarki		Elimination		Consolidated
Revenue From Customers:
Entry Fee Revenue	$	20,200	$	—	$	—	$	20,200
Advertising Revenue	—		6,939		—		6,939

Other Revenue:
Maintenance Fee Revenue	235		—		—		235
Total Revenue	$	20,435	$	6,939	$	—	$	27,374

United States	$	19,066	$	1,764	$	—	$	20,830
Other Countries	1,369		5,175		—		6,544
Total Revenue	$	20,435	$	6,939	$	—	$	27,374


	Three Months Ended September 30, 2024
	Skillz		Aarki		Elimination		Consolidated
Revenue From Customers:
Entry Fee Revenue	$	20,909	$	—	$	—	$	20,909
Advertising Revenue	—		3,111		(21)		3,090

Other Revenue:
Maintenance Fee Revenue	565		—		—		565
Total Revenue	$	21,474	$	3,111	$	(21)	$	24,564

United States	$	19,950	$	943	$	(21)	$	20,872
Other Countries	1,524		2,168		—		3,692
Total Revenue	$	21,474	$	3,111	$	(21)	$	24,564

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)


	Nine Months Ended September 30, 2025
	Skillz		Aarki		Elimination		Consolidated
Revenue From Customers:
Entry Fee Revenue	$	56,406	$	—	$	—	$	56,406
Advertising Revenue	—		17,295		(202)		17,093

Other Revenue:
Maintenance Fee Revenue	986		—		—		986
Total Revenue	$	57,392	$	17,295	$	(202)	$	74,485

United States	$	53,426	$	5,018	$	(202)	$	58,242
Other Countries	3,966		12,277		—		16,243
Total Revenue	$	57,392	$	17,295	$	(202)	$	74,485


	Nine Months Ended September 30, 2024
	Skillz		Aarki		Elimination		Consolidated
Revenue From Customers:
Entry Fee Revenue	$	64,841	$	—	$	—	$	64,841
Advertising Revenue	—		8,533		(68)		8,465

Other Revenue:
Maintenance Fee Revenue	1,788		—		—		1,788
Total Revenue	$	66,629	$	8,533	$	(68)	$	75,094

United States	$	62,829	$	2,195	$	(68)	$	64,956
Other Countries	3,800		6,338		—		10,138
Total Revenue	$	66,629	$	8,533	$	(68)	$	75,094

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

Revenues from Entry Fees

The Company generates substantially all its revenues through its competition-based Skillz segment by providing a service to game developers for monetization of their game content. The monetization service provided by Skillz allows developers to offer multi-player competition to their end-users for the purpose of end-user retention and engagement. Skillz provides developers with a software development kit (“SDK”) 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.

Games provided by three developer partners accounted for 66% and 69% of the Company’s consolidated revenue for three and nine months ended September 30, 2025, respectively. Games provided by three developer partners accounted for 78% and 79% of the Company’s consolidated revenue for three and nine months ended September 30, 2024, respectively.

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. Promotions and incentives, which are consideration payable to customers, are recognized as a reduction of revenue at the later of when revenue is recognized or when the Company pays or promises to pay the incentive. Promotions and incentives recorded as sales and marketing expenses are recognized when we incur the related cost.

For the three and nine months ended September 30, 2025, the Company recognized a reduction of revenue of $0.5 million and $5.3 million, respectively, related to these end-user incentives. For the three and nine months ended September 30, 2024, the Company recognized a reduction of revenue of $3.2 million and $9.3 million, respectively, related to these end-user incentives.

For the three and nine months ended September 30, 2025, the Company recognized sales and marketing expense of $8.6 million and $26.2 million, respectively, related to these end-user incentives. For the three and nine months ended September 30, 2024, the Company recognized sales and marketing expense of $10.0 million and $28.4 million, respectively, related to these end-user incentives.

From time to time, the Company issues credits or refunds to end-users that are dissatisfied by the level of service provided by the game developer. There is no contractual obligation for the Company to refund such end-users nor is there a valid expectation by game developers for the Company to issue such credits or refunds to end-users on their behalf. The Company accounts for credits or refunds, which are not recoverable from the game developer, as sales and marketing expenses when incurred.

Advertising Revenue

The Company offers a technology platform (i.e. demand side platform, “DSP”) to source available advertising space from its network of vendors / suppliers (aka, advertising exchange partners / publishers), which uses a real-time auction process. The revenue from advertising is recognized over time based on the number of impressions as the performance obligation is satisfied. The Company considers itself the agent of its customer(s). This is due to the Company’s involvement in programmatically placing and sourcing advertisements on behalf of customers via a network of third party publishers. The Company does not, at any time, take ownership of advertising inventory being sourced and placed. Via the DSP, if the Company wins the auction and an impression is served, the customer’s advertisement is displayed on the publisher / supplier’s mobile application.

For performance obligations related to advertising revenue, customers are extended 30 day payment terms from completion of each month’s insertion order and no advertising revenue customers accounted for more than 5% of the Company’s revenue in either of three and nine months ended September 30, 2025 and 2024, respectively.

The Company recognizes an asset for incremental costs of obtaining a contract with the customer as long as Management expects to recover these costs. Incremental costs are those that would have not been incurred if the contract did not exist. Examples of incremental costs often capitalized are sales commissions whereas examples of costs that would not be included are internal employee salaries, standard benefits, travel costs, and other / general legal costs. Sales commissions are the only

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

incremental contract costs the Company incurs and are paid based on collected revenue based on the recipient’s assigned accounts. As commissions are typically satisfied within one year after an executed contract, the Company applies the practical expedient under ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers.

Maintenance Fee Revenue

When a player becomes inactive on the platform by not participating in a tournament for six consecutive months, the Company will impose a monthly maintenance fee. This fee is charged to the player and recognized as revenue by the Company beginning in the seventh month of inactivity.

4. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of September 30, 2025 and December 31, 2024:


	September 30,		December 31,
	2025		2024
Credit card processing reserve	$	1,000	$	1,000
Prepaid expenses	4,949		5,949
Other current assets	1,103		10,393
Prepaid expenses and other current assets	$	7,052	$	17,342

Property and Equipment, net

Property and equipment consisted of the following as of September 30, 2025 and December 31, 2024:


	September 30,		December 31,
	2025		2024
Land	$	980	$	980
Building	12,793		12,590
Capitalized internal-use software	9,605		9,128
Computer equipment and servers	2,756		1,797
Furniture and fixtures	378		363
Leasehold improvements	122		122
Construction in progress	5,399		2,507

Total property and equipment	32,033		27,487
Accumulated depreciation and amortization	(11,784)		(11,205)
Property and equipment, net	$	20,249	$	16,282

Property and equipment, net by geography was as follows:


	September 30,		December 31,
	2025		2024
United States	$	19,855	$	15,909
Other countries	394		373
Total	$	20,249	$	16,282

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

Other Current Liabilities

Other current liabilities consisted of the following as of September 30, 2025 and December 31, 2024:


	September 30,		December 31,
	2025		2024
Indirect tax liabilities	$	14,606	$	14,932
End-user liability, net	6,657		6,900
Accrued publisher fees	5,934		2,527
Accrued compensation	4,964		2,592
Accrued operating expenses	3,751		7,933
Accrued interest expenses	3,877		554
Accrued legal expenses	3,085		15,244
Accrued sales and marketing expenses	1,324		1,832
Accrued developer revenue share	879		862
Short-term lease obligations	20		464
Other	401		724
Other current liabilities	$	45,498	$	54,564

Leases

In August 2025, the Company commenced an operating lease for office space in Bangalore, India. The following table provides information associated with this lease included in the condensed consolidated financial statements at September 30, 2025:


Right of use asset at inception of lease	$	1,067
Right of use asset at September 30, 2025	$	1,017
Operating lease costs	$	71
Remaining lease term (in years)	2.8
Weighted average discount rate	11.5		%
Future minimum lease payments	$	1,235
Cash paid for operating lease	$	44


Minimum payments of lease by year
2025 (remainder of year)	$	93
2026	423
2027	449
2028	270
	1,235
Less imputed interest	(191)
Present value of lease obligation	1,044
Present value of current lease obligation	(301)
Present value of long term lease obligation	$	743

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

5. Fair Value Measurements

As of September 30, 2025 and December 31, 2024, the recorded values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of the instruments.

Cash and money market funds are classified within Level 1 of the fair value hierarchy. Highly liquid investments such as commercial papers and corporate bonds are classified within Level 2 of the fair value hierarchy.

Assets measured at fair value on a recurring basis consisted of the following as of September 30, 2025 and December 31, 2024:


	Fair Value Measurements as of September 30, 2025
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	200,108	$	—	$	—	$	200,108







Total assets	$	200,108	$	—	$	—	$	200,108


	Fair Value Measurements as of December 31, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	251,948	$	—	$	—	$	251,948







Total assets	$	251,948	$	—	$	—	$	251,948

6. Investments

Investments

The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as non-current marketable securities. Dividend and interest income are recognized when earned.

Non-marketable equity securities are investments in privately held companies without readily determinable fair values. We have accounted for these investments using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded as its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. The carrying value of the Company’s investments without readily determinable fair values was $52.8 million as of September 30, 2025 and December 31, 2024, and was classified within “Non-marketable equity securities” in the condensed consolidated balance sheets.

The Company did not record any other adjustments to the carrying value of its non-marketable equity securities accounted for under the measurement alternative and did not recognize any gains or losses related to the sale of non-marketable equity securities in the nine months ended September 30, 2025 and 2024.

Investment Components

Investments consisted of the following as of September 30, 2025 and December 31, 2024:

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)


	As of September 30, 2025
	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities - Current		Marketable Securities - Non-current



Money market funds	$	200,108	$	—	$	—	$	200,108	$	200,108	$	—	$	—


Total investments	$	200,108	$	—	$	—	$	200,108	$	200,108	$	—	$	—


	As of December 31, 2024
	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities - Current		Marketable Securities - Non-current



Money market funds	$	251,948	$	—	$	—	$	251,948	$	251,948	$	—	$	—


Total investments	$	251,948	$	—	$	—	$	251,948	$	251,948	$	—	$	—

7. Long-Term Debt

Long-term debt consisted of the following as of September 30, 2025 and December 31, 2024:


	September 30,		December 31,
	2025		2024
2021 Senior Secured Notes	$	129,671	$	129,671

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)


Unamortized discount and issuance costs	(2,588)		(4,017)
Long-term debt, net	$	127,083	$	125,654

2021 Senior Secured Notes

On December 20, 2021, the Company entered into $300 million of 10.25% secured notes (the “2021 Senior Secured Notes”) in a private placement to certain institutional buyers. The 2021 Senior Secured Notes are guaranteed by the Company’s domestic restricted subsidiaries. The interest is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2022. At issuance, the effective interest rate on the 2021 Senior Secured Notes was 12.14%, and maturity will be on December 15, 2026, unless repurchased or redeemed earlier.

On April 13, 2023, the Company repurchased approximately $159.8 million of its senior secured notes. In connection with the repurchase, the Company’s recognized a gain on extinguishment of $15.2 million on the condensed consolidated statements of operations and comprehensive loss. The gain primarily reflected the payment discounts as the notes were redeemed for total consideration below the par value of the notes as well as the write-off of unamortized debt issuance costs and discounts.

After giving effect to the 2023 and other previous open market repurchases, as of September 30, 2025 and December 31, 2024, $129.7 million of the 2021 Senior Secured Notes remained outstanding and the effective interest rate was 12.09%.

The 2021 Senior Secured Notes contain customary covenants restricting the Company’s ability to incur debt, incur liens, make distributions to stockholders, make certain transactions with the Company’s affiliates, together with other financial covenants and public filings of the Company’s financial statements.

As of December 11, 2025, we were not in compliance with certain covenants under the indenture governing the 2021 Senior Secured Notes. In light of the delays in the filing of the Company’s annual financial statements on Form 10-K for the year ended December 31, 2024 and the interim financial statements on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, on September 30, 2025, the Company received a notice of default (the “Notice of Default”) from UMB Bank, N.A., as trustee (the “Trustee”) under that certain Indenture, dated as of December 20, 2021, between the Company, each of the guarantors party thereto and the Trustee (“Indenture”), pertaining to the Company’s outstanding 2021 Senior Secured Notes. The Notice of Default provided that the Company was not in compliance under the terms of the Indenture as a result of the Company’s failure to timely provide the required quarterly and annual reports within the time periods required under the Exchange Act. Pursuant to the terms of the Indenture, the receipt of the Notice of Default will not result in an Event of Default (as such term is defined under the Indenture) unless the Company remains out of compliance with this reporting covenant for 120 days following receipt of the Notice of Default. Pursuant to the Indenture, the Company will be deemed to regain compliance with these reporting covenants if it provides all applicable delayed filings within 120 days of receipt of the Notice of Default. The filing of the Annual Report on Form 10-K on November 6, 2025 and the filing of the quarterly reports ending March 31, 2025 and June 30, 2025 constituted, and the filing of this quarterly report for the quarter ending September 30, 2025 will constitute, compliance with the reporting covenant under the Indenture and will complete the necessary steps in order to regain compliance with the terms of the Indenture.

Voluntary prepayments are permitted in whole, or in part, in minimum amounts as set forth in the Indenture Agreement governing the 2021 Senior Secured Notes, with prior notice, and with a prepayment premium of 3.417% on, or during, the twelve-month period that began on December 15, 2024. Voluntary prepayments made on, or during, the twelve-month period beginning December 15, 2025 are not subject to a prepayment premium.

Debt issuance costs incurred in connection with the 2021 Senior Secured Notes are capitalized and amortized to interest expense over the five-year term using the straight-line method, which approximates the effective interest method. Debt issuance costs are included as contra-liabilities in long-term debt. The 2021 Senior Secured Notes are classified as Level 2 financial instruments and the Company determined the fair value of the notes was $130.0 million as of September 30, 2025 based on secondary market quotes.

Amortization of debt issuance costs and accretion of debt discounts included in interest expense totaled $1.4 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively.

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SKILLZ INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

The following table outlines maturities of the principle related to the Company’s long-term debt as of September 30, 2025:


	Amount
2025	$	—
2026	129,671
Total	$	129,671

8. Commitments and Contingencies

Legal Matters

The Company is a party to certain claims, suits, and proceedings which arise in the ordinary course and conduct of its business and has certain unresolved claims pending, the outcomes of which are not determinable at this time. The Company records a liability when it believes that it is probable that a loss will be incurred and the amount can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the possible loss or range of loss. In the Company’s opinion, resolution of pending matters, other than as disclosed herein, is not expected to have a material adverse impact on the results of operations, cash flows, or the Company’s financial position, as of September 30, 2025. Given the unpredictable nature of legal proceedings, there is a reasonable possibility that an unfavorable resolution of one or more such proceedings could in the future materially affect the results of operations, cash flows, or financial position in a particular period. However, based on the information known by the Company, except as set forth herein, any such amount is either immaterial or it is not possible to provide an estimated range of any such possible loss. The Company records legal fee expenses associated with such matters when the relevant services are provided.

Former Employee

On May 15, 2019, a former employee of the Company filed a suit against the Company in the San Francisco Superior Court in California for claims including breach of contract, retaliation and wrongful termination. The case was tried in August and September 2021. The jury found in favor of the former employee and rendered a verdict against the Company for $11.6 million in compensatory damages, and the Company recorded a loss contingency accrual of $7.1 million and corresponding general and administrative expenses in such amount in the third quarter of 2021. In April 2022, the judge in the case determined, in light of the Company’s post-verdict motions, that the instructions given to the jury at trial were defective. Accordingly, the judge ordered a new trial on damages or, alternatively, permitted the plaintiff to accept a reduced verdict in the amount of $4.4 million, which the plaintiff subsequently levied from the Company’s bank account. On May 25, 2022, the Company filed an appeal from the judgment seeking, in part, entry of judgment in the Company's favor notwithstanding the verdict. The plaintiff accepted the reduced verdict, and filed an appeal from the judgment on June 7, 2022, seeking in part, to reinstate the jury's original verdict (or an award less than the original verdict but greater than the $4.4 million final judgment) and challenge the trial court’s conclusion that stock options are not “wages,” which was the basis for dismissing his wrongful termination and retaliation claims. Skillz filed its response and reply brief on July 7, 2023. On April 8, 2024, the Court of Appeals issued its decision, affirming the judgment of $4.4 million, with an additional $2.3 million for a total award of $6.7 million. The Court of Appeals also affirmed the dismissal of the wrongful termination and retaliation claims, holding that stock options are not wages. The Court of Appeal’s decision became final, non-appealable and enforceable on May 20, 2024.

On October 11, 2024, the Court issued preliminary legal rulings on post-judgment interest and ordered parties to meet and confer to determine whether an agreement could be reached. The Company and former employee agreed that post-judgment interest of $733 thousand was owed, but the Company objected to any additional amounts as requested by the former employee. On November 21, 2024, the Court adopted the amount of interest owed and denied additional amounts of post-judgment interest that the former employee claimed. On December 9, 2024, the former employee filed a Notice of Appeal challenging the Court’s denial of a substantial amount of post-judgment interest in excess of $733 thousand. On January 8, 2025, the former employee filed an Abandonment of Appeal, thereby terminating the appeal. The Company considers this matter resolved.

Vendor Disputes

Between November 2022 and March 2023, the Company and a vendor entered into several agreements in which the vendor would perform defined professional services. Of the $7.2 million in invoices from the vendor, the Company paid $3.2 million

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

and claimed that the vendor expanded the scope of work without authorization, over billed for its services, performed poorly and unilaterally refused to perform certain agreed upon deliverables. The vendor, in turn, claimed it received proper authorization for the work it performed, completed its contracted-for tasks and that the Company breached the agreements and failed to pay outstanding invoices. The vendor sought $4.0 million in damages, plus interest, attorney fees and costs of litigation. The Company sought counterclaims from the vendors for breach of contract, breach of implied covenant of good faith and fair dealing, and fraudulent inducement and sought approximately $15 million in damages, plus interest, attorney fees and costs of litigation. In March 2025, the vendor and the Company settled the dispute. In exchange for mutual releases of all claims, the Company paid the vendor $2.75 million.

In April 2022, the Company and a vendor entered an agreement to license certain rights to develop vendor branded mobile games. In consideration, the Company agreed to pay the vendor certain monetary amounts over three years and the vendor, in turn, would use good faith efforts to promote the games. In December 2024, the vendor filed a complaint in Nevada seeking damages of $1.3 million for breach of contract, failure to pay royalties and unjust enrichment. In April 2025, the Company and the vendor agreed to mediate the matter that resulted in a settlement where the Company agreed to pay the vendor $533 thousand in June 2025, which represented the past due balances for year one and year two of the agreement that were fully accrued as of December 31, 2024.

Skillz v. AviaGames

On February 9, 2024, a federal jury in San Jose, California issued a verdict in favor of Skillz in a patent infringement action Skillz brought against a privately-held mobile gaming company, AviaGames, on April 5, 2021 (“Patent Case”). The jury found in favor of Skillz on all issues, determining AviaGames willfully infringed Skillz’s U.S. Patent No. 9,649,564, entitled “Peer-to-Peer Wagering Platform” (the “‘564 patent”) and awarding Plaintiff Skillz Platform Inc. (“Skillz”) its full damages request of $42.9 million. After the jury verdict issued, Skillz requested certain post-trial relief, including that the Court permanently enjoin AviaGames from continuing to infringe the ‘564 patent, award Skillz its attorneys’ fees due to the exceptional nature of the case, and treble the damages awarded by the jury. In addition, Skillz, along with game developer Big Run Studios, Inc. (“Big Run”), brought a separate case against AviaGames for false advertising, copyright infringement, and violations of California’s state unfair competition law in federal court in San Francisco, California (“Unfair Competition Case”). On April 13, 2024, Skillz, Big Run, and AviaGames entered into a settlement agreement with respect to both the Patent Case and Unfair Competition Case pending against AviaGames (the “Litigation Settlement”). In exchange for dismissal of both actions and other settlement terms, AviaGames agreed to pay Skillz and Big Run a total of $80.0 million. On April 12, 2024, the Company and Big Run Studio entered into a Side Letter Agreement providing that a portion of the AviaGames settlement funds allocated to Big Run Studio be utilized to repay the outstanding principal and accrued interest under the Loan and Security Agreement totaling $2.0 million. See Note 4, Balance Sheet Components.

During the year ended December 31, 2024, Skillz and Big Run collectively received $50.0 million from AviaGames pursuant to the settlement agreement. Of the $50.0 million received, Skillz received $48.0 million, $2.0 million of which was for settlement of the amount outstanding under the Loan and Security Agreement with Big Run. Of the $4.0 million allocated to Big Run under the Side Letter Agreement, Big Run received $2.0 million net of the settlement of the Loan and Security Agreement. Beginning in March of 2025, AviaGames is required to pay Skillz an additional $7.5 million annually over a four-year period as royalty payments for AviaGames’ license of the ’564 patent and its patent family; no portion of these payments are due to Big Run.

During the year ended December 31, 2024, the Company recorded a gain from Litigation settlement netting to $46 million consisting of the gross payment of $48.0 million less the $2.0 million received for satisfaction and settlement of the Loan and Security Agreement. The Company recorded the $7.5 million payments received in March 2025 and the amounts to be received in March 2026, 2027 and 2028 as a gain upon receipt of each payment.

Skillz v. Tether Litigation

On August 29, 2025, the Company received a notice (“Notice”) from Tether indicating that Tether is terminating all of its various agreements, as amended, with the Company (the “Tether Agreements”), including the Company’s Developer Terms and Conditions of Service, as amended, effective as of September 1, 2025. The Company believes the termination notice to be invalid and in breach of Tether’s obligations under the Tether Agreements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

Following receipt of the Notice, on September 1, 2025, the Company filed suit in the Court of Chancery of the State of Delaware, seeking injunctive and declaratory relief in relation to Tether’s breach of the Tether Agreements. On October 3, 2025, the Company filed a first amended complaint in the Court of Chancery of the State of Delaware alleging additional breaches of contract. On October 10, 2025, Tether filed counterclaims against Skillz, alleging: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) accounting; (4) unjust enrichment; (5) false designation of origin, false association, and/or unfair competition; and (6) violation of deceptive trade practice at, 6 Del. C. Section 2532. Tether alleges its damages exceed $1 million. On November 13, 2025, Skillz moved to dismiss the majority of Tether’s counterclaims. Skillz motion to dismiss is set for hearing on January 23, 2026. A trial has been scheduled for Skillz’s affirmative claims against Tether and Tether’s counterclaims in August 2026 (See Note 14, Subsequent Events).

Hanna v. Paradise, et. al.

In March 2024, an alleged stockholder filed a putative derivative complaint, Hanna v. Paradise, et al., No. 2024-0228-KSJM, in the Delaware Court of Chancery, purportedly on behalf of Skillz Inc. (“Skillz”) against certain of Skillz’s current and former officers, directors, and certain stockholders. The complaint alleges breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, and unjust enrichment arising out of Skillz’s March 2021 underwritten secondary public offering. The complaint asserts that certain of the director and officer defendants breached fiduciary duties to Skillz by allegedly inappropriately selling stock as part of the public offering while in possession of material, non-public information, that the stockholder defendants aided and abetted these alleged breaches of fiduciary duties, and that all defendants were unjustly enriched by their sales in the public offering. The complaint seeks unspecified damages and restitution for Skillz from the defendants and the payment of costs and attorneys’ fees. Defendants moved to dismiss the complaint on June 6, 2024. Plaintiffs responded by voluntarily dismissing 55 of the stockholder defendants but opposing the motion as to all remaining defendants. Briefing on the motion to dismiss was completed at the end of August 2024. The Court heard oral arguments on the motion to dismiss on January 7, 2025. On July 3, 2025, the Court issued a ruling converting defendants’ motion to dismiss on demand futility grounds to a motion for summary judgment and ordered limited discovery on the independence of a former Skillz director. The Court stayed consideration of defendants’ other dismissal arguments given its ultimate ruling on the demand futility issue could moot these other dismissal arguments. Further briefing in support of summary judgment on demand futility grounds is expected, but no schedule is currently in place for such briefing.

Skillz vs. Voodoo SAS et. al.

On July 1, 2024, Skillz filed suit against Voodoo SAS and two affiliate entities, Esport Newco SAS and Esport Newco US Corp. (collectively, “Voodoo”) in the United States District Court for the Southern District of New York. In its Complaint, Skillz asserts violations of the Lanham Act's prohibition of false advertising and New York's General Business Law § 349 based on, inter alia, Skillz’s allegations that Voodoo advertises its mobile games offered through the “Blitz Win Cash” application as “fair,” “skill-based,” and for “real players only” when in reality Voodoo is fixing the outcome of its tournaments through the use of computer algorithms or “bots.” On August 22, 2024, Skillz brought a motion for a preliminary injunction, and on September 18, 2024, Voodoo moved to dismiss the complaint or, in the alternative, to strike certain allegations. Skillz’s and Voodoo’s motions were both mooted when Skillz amended its complaint on October 2, 2024. On October 8, 2024, Skillz renewed its motion for a preliminary injunction and expedited discovery based on the amended complaint, and Voodoo moved to dismiss the amended complaint on October 16, 2024. The preliminary injunction motion and motion to dismiss are both fully briefed and awaiting decisions by the court.

Skillz vs. Papaya Gaming, Ltd., et al.

In March 2024, Skillz sued Papaya Gaming, Ltd. and Papaya Gaming, Inc. (collectively, “Papaya”) in the United States District Court for the Southern District of New York alleging false advertising under the Lanham Act and unfair business practices in connection with Papaya’s marketing of its mobile games as “fair” and “skill-based” despite Papaya’s deployment of algorithmic competitors (“bots”) in its games that win cash prizes for Papaya’s benefit. In June 2024, the Court denied Papaya’s motion to dismiss Skillz’s complaint in its entirety. In September 2024, Papaya filed amended counterclaims against Skillz alleging that Skillz also engaged in false advertising and unfair business practices for purportedly allowing bots in games on Skillz’s platform, defamation for Skillz’s alleged involvement in a non-profit organization that collected and published data related to customer complaints to state attorney generals related to Papaya’s and other companies’ alleged fraudulent bot use, and purported trademark and copyright infringement of design elements of certain games, among other things. In March 2025,

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

the Court dismissed Papaya’s defamation counterclaims and severed Papaya’s intellectual property claims. Following the Court’s rulings, Papaya voluntarily dismissed its intellectual claims against Skillz. The parties have completed discovery and have submitted to the Court summary judgment filings and motions to exclude various experts. The parties are awaiting the Court’s rulings (See Note 14, Subsequent Events) .

Lien, et al. v. Eagle Equity Partners II, LLC, et al.

On October 31, 2022, a class action was filed, Darcy Lien v. Eagle Equity Partners II, LLC, et al., Case No. 2022-0972-PAF, in the Delaware Court of Chancery against Eagle Equity Partners II, LLC and certain of the former officers and directors (the “Individual D&O Defendants”) of Flying Eagle Acquisition Corp. (“Flying Eagle”). This litigation does not name Skillz or any of Skillz’s current directors in their capacity as such. Plaintiffs allege that the Individual D&O Defendants (i) failed to exercise proper due diligence and process in connection with Flying Eagle’s transaction with Skillz and (ii) made misleading statements in Form S-4 filed with the U.S. Securities & Exchange Commission in connection with the transaction. Defendants filed their initial motion to dismiss on February 17, 2023. Plaintiffs then filed an amended complaint on April 12, 2023. Defendant’s motion to dismiss the amended complaint was filed on June 2, 2023. Plaintiff’s opposition was filed July 17, 2023, and defendant’s reply was filed August 21, 2023. Oral argument was held on the motion to dismiss on January 5, 2024, and on May 29, 2024 the court denied Defendants’ motion to dismiss. In November 2024, Skillz filed suit against its insurance carrier for D&O insurance coverage and on January 17, 2025, the insurance carrier agreed to pay a total of $9.8 million to the Company in connection with this matter’s settlement agreement. Of those funds, $1.3 million was received in the quarter ending March 31, 2025 and was used to pay for defense costs. During the quarter ended June 30, 2025, Skillz received the remaining $8.5 million. Following certain discovery, on March 27, 2025, the parties executed a term sheet to settle the action in principle for $10.0 million, subject to completing settlement documentation and obtaining court approval. On May 19, 2025, the parties executed a settlement stipulation, subject to Court approval. As the successor to Flying Eagle, Skillz is obligated to indemnify and pay legal costs of the Individual D&O Defendants of Flying Eagle in their capacities as such in connection with this action and, as such recorded an expense of $10.0 million, offset by the insurance proceeds of $9.8 million, which is reflected in general and administrative expenses for the year ended December 31, 2024.

Termination of Operating Lease

In May 2019, the Company leased its former headquarters with a landlord (the “Landlord”). From February 2024 to April 2025, the Landlord served demand letters and notices of default on the Company asserting that the Company failed to pay the lease obligations. In April 2025, the Company and the Landlord executed a settlement dismissing with prejudice the dispute and fully resolving the matter. In exchange for mutual releases, the Company paid the Landlord a lump sum payment of $14.0 million to settle its operating lease liability. The Company recorded a loss on termination of the operating lease of $0.4 million representing the difference between the settlement amount and the carrying value of the lease obligation which was recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

Indirect Taxes

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 has indirect tax liabilities totaling $14.6 million and $14.9 million as of September 30, 2025 and December 31, 2024, 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. Indirect tax liabilities are adjusted considering changing facts and circumstances, such as the closing of a tax examination, further interpretation of existing tax law, or new tax law. We recognize changes to our estimate if it is estimable and probable that our position would not be sustainable upon examination by taxing authorities. Although management believes our recorded liabilities are reasonable, no assurance can be given that the final tax outcomes of these matters will not be different from that which our liabilities are based on. The Company’s application of the revenue code for indirect taxes in certain jurisdictions, including those within the United States, may be challenged by taxing authorities in those jurisdictions. The Company is in the process of filing self-disclosure returns in unregistered jurisdictions. Any associated assessments may result in additional tax liabilities. The Company does not currently anticipate that any such assessments will result in a material increase in the liabilities (see Note 2, Summary of Significant Accounting Policies).

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(Unaudited, amounts in tables are in thousands, unless otherwise noted)

The Company is currently undergoing an examination in the State of Washington regarding its indirect tax liability.

9. Share Repurchase Program

On August 18, 2023, the Board authorized a share repurchase program (the “Share Repurchase Program”) pursuant to which the Company was authorized 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 up to an aggregate purchase price of $65.0 million. Such purchases may be made on the New York Stock Exchange or any other national securities exchange on which the common stock is then traded. The Share Repurchase Program is pursuant to a plan pursuant to Rule 10b5-1 promulgated under the Exchange Act and/or pursuant to accelerated share repurchase arrangements, tender offers, privately negotiated transactions or otherwise. On December 5, 2024, the Board reapproved the Share Repurchase Program and extended the expiration date until otherwise suspended, terminated or modified at any time for any reason by the Board.

In the nine months ended September 30, 2025 and 2024, the Company repurchased 1.4 million and 1.8 million shares at a weighted average price of $5.39 and $5.99 per share for an aggregate value of $7.7 million and $10.8 million, respectively under the Share Repurchase Program.

10. Stock-Based Compensation

The following table summarizes stock-based compensation expense recognized for the three and nine months ended September 30, 2025 and 2024:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cost of revenue	$	—	$	4	$	3	$	7
Research and development	50		322		549		651
Sales and marketing	656		1,086		2,529		4,885
General and administrative	3,560		5,309		11,100		17,351
Total stock-based compensation expense	$	4,266	$	6,721	$	14,181	$	22,894

For the three and nine months ended September 30, 2025, $24.0 thousand and $166.6 thousand of stock-based compensation expense was capitalized as internally developed software and included in property and equipment, net. For the three and nine months ended September 30, 2024, no stock-based compensation expense was capitalized as internally developed software.

Stock Options and Restricted Stock Units

Stock option and RSU activity during the nine months ended September 30, 2025 is as follows (in thousands, except for share, per share, and contractual term data):

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(Unaudited, amounts in tables are in thousands, unless otherwise noted)


	Options Outstanding						Restricted Stock Outstanding
	Number of Shares Available for Issuance Under the Plan	Number of Shares Outstanding Under the Plan	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value	Number of Plan shares outstanding	Weighted-Average Grant Date Fair Value per share
Balance at December 31, 2024	3,325,575	681,729	$	312.44	5.96	30	1,769,947	$	10.52
Additional shares authorized	665,342	—	—
Granted	(463,187)	—	—				219,526	6.74
Exercised/Vested	—	—	—				(33)	—
Cancelled/Forfeited/Expired	145,464	(498)	23.02				(144,966)	7.12
Additional Shares Authorized and Balance Reconciliation Adjustments	(1,733,190)	—	—				—	—
Balance at September 30, 2025	1,940,004	681,231	$	312.65	5.21	24	1,844,474	$	9.89

As of September 30, 2025, there were approximately 1.9 million shares of common stock available for future grants.

11. Income Taxes

The Company’s provision for income taxes was $40.0 thousand and $32.0 thousand for the three months ended September 30, 2025 and 2024, respectively, which represented an effective tax rate of negative 0.23% and 0.15% for the respective periods. The Company's provision for income taxes was $59.0 thousand and $142.0 thousand to continuing operations for the nine months ended September 30, 2025 and 2024, respectively, which represented an effective tax rate of negative 0.11% and 0.66%, respectively. The effective tax rates were less than the federal statutory rate of 21% primarily due to book losses, state taxes and equity award activities, mostly offset by a full valuation allowance on our deferred tax assets for the three and nine months ended September 30, 2025 and 2024, respectively.

On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA” or the “Act”) was signed into law, enacting significant changes to U.S. federal tax regulations. In accordance with Accounting Standards Codification 740 (“ASC 740”), Income Taxes, the effects of new tax legislation are required to be recognized in the period of enactment, which for the Company is the quarter ended September 30, 2025. The total net impact of the tax law changes on the income tax provision for the three and nine months ended September 30, 2025, was not material. A discrete adjustment of approximately $866 thousand was made to the existing deferred tax assets and deferred tax liability that were fully offset by an adjustment to the valuation allowance on our deferred tax assets. OBBBA adjustments impacting these deferred balances relate to the restoration of bonus depreciation for qualifying assets and the inclusion of Section 174A which allows taxpayers to fully expense domestic research expenditures.

12. Segment Reporting

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group (the “CODM”). Our CODM consists of the Chief Executive Officer who allocates resources and measures profitability based on our operating segments, which are managed and reviewed separately, as each represents products and services that can be sold separately to our customers. The CODM does not review information regarding total assets on a reportable segment basis. Effective in the fourth quarter of 2023, the Company had two operating and reporting segments.

A description of the Company’s two reportable segments, as determined by our CODM, is as follows:

Skillz

Skillz is a leading eSports gaming platform. Its platform enables game developers to monetize their content through multi-player competition. By utilizing Skillz’ monetization services, developers can enhance their end-user experiences by enabling them to compete in head-to-head matches, live tournaments, and leagues while also increasing player retention through referral bonus programs, loyalty perks, on-system achievements, and rewards / prizes. Skillz provides its monetization services to

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

developers via a downloadable SDK. 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 an office in Bangalore, India and presence in San Francisco, CA.

Aarki

Aarki is an Artificial Intelligence (“AI”) company that delivers advertising solutions to drive revenue growth for mobile app developers. 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 millions of mobile ad requests per second from over 10 billion devices. Aarki is headquartered in San Francisco, CA, with offices in Europe, the Middle East and Asia. The Company’s CODM received discrete Aarki financial information on a regular basis for purposes of evaluating its operating performance and allocating resources beginning in the fourth quarter of 2023. Effective in the fourth quarter 2023, Aarki met the definition of an operating segment as defined in ASC 280, Segment Reporting (“ASC 280”).

The Company’s corporate operations primarily support Skillz and are included in the results for the Skillz segment. Likewise, Aarki largely has its own corporate operations, which are included in the Aarki segment.

For the Skillz Segment, end user engagement marketing represents the cost of incentives provided to end users such as Bonus Cash and Ticketz. Paid acquisition spend represents amounts paid to third parties to promote the Skillz platform. Headcount expenses include salaries, bonuses, contractors, travel, and burden such as employer taxes, benefits and insurance. Consulting fees represent expenses paid for professional fees. Vendor/Software expenses represent fees paid for the Company’s annual audit and tax advisors, software and server costs and third party technical support. Legal fees (non-litigation) represents legal expenses that relate to contract negotiations, securities law, compliance and lawsuits that do not relate to the Company’s lawsuits against AviaGames, Papaya (see Note 8. Commitments and Contingencies) and a third competitor. Litigation expenses include legal expenses incurred where the Company is pursuing damages against AviaGames and Papaya (see Note 8 Commitments and Contingencies) and a third competitor for unfair business practices and their use of ‘bots’. Office and operations expenses represent rent and building maintenance. Other segment items include marketing expenses which, in turn, consists mostly affiliate marketing, state and corporate fees, fines and penalties and trade shows. For both the Skillz and Aarki segments, stock-based compensation expenses are not included in operating expenses.

For the Aarki Segment, operating expenses include all operating expenses such as headcount, marketing, software, professional fees such as legal, audit and tax compliance and rent.

The CODM evaluates the performance of the Company’s segments based on Segment Revenue and Segment Adjusted EBITDA. Segment Adjusted EBITDA is indicative of operational performance and is monitored by the CODM to evaluate past performance and identify actions required to improve profitability. The CODM does not review information regarding total assets on a reportable segment basis.

The following tables provide summarized information about the Company’s operations by reportable segment and a reconciliation of Segment Adjusted EBITDA to net loss in the three and nine months ended September 30, 2025 and 2024.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Revenue
Skillz Segment	$	20,435	$	21,474	$	57,392	$	66,629
Aarki Segment	6,939		3,111		17,295		8,533
Elimination	—		(21)		(202)		(68)
Total Revenue	$	27,374	$	24,564	$	74,485	$	75,094

Segment Adjusted EBITDA
Skillz Segment	$	(12,098)	$	(12,261)	$	(39,743)	$	(38,256)
Aarki Segment	316		(1,621)		(720)		(5,934)
Total Segment Adjusted EBITDA	$	(11,782)	$	(13,882)	$	(40,463)	$	(44,190)

Items to reconcile Segment Adjusted EBITDA to Net loss:
Interest (expense) income, net	$	(1,560)	$	242	$	(3,952)	$	688
Stock-based compensation	(4,266)		(6,721)		(14,181)		(22,894)
Change in fair value of warrant liability	—		—		—		11
Provision for income taxes	(40)		(32)		(59)		(142)
Depreciation and amortization	(224)		(389)		(585)		(1,188)

Gain from litigation settlement	—		—		7,500		46,000
Other income (expense), net	430		(333)		(766)		(78)





Net loss	$	(17,442)	$	(21,115)	$	(52,506)	$	(21,793)

The following tables provide summarized information about the Company’s operations used by the CODM by reportable segment for the three and nine months ended September 30, 2025 and 2024, respectively.

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(Unaudited, amounts in tables are in thousands, unless otherwise noted)


	Three Months Ended September 30, 2025				Nine Months Ended September 30, 2025
	Skillz Segment		Aarki Segment		Skillz Segment		Aarki Segment
Revenue	$	20,435	$	6,939	$	57,392	$	17,295
Less:
Cost of Revenue	2,079		1,206		6,218		3,321
End User Engagement Marketing	8,568				24,948
Paid Acquisition Spend	4,156				11,235
Headcount expenses	6,914				21,051
Consulting fees	1,560				4,140
Vendor/Software Expenses	2,496				8,785
Legal fees (non-litigation)	578				1,624
Litigation expenses	4,393				14,570
Office and operations expense	1,075				1,075
Aarki operating expenses			5,417				14,694
Other segment items	714				3,489
Total Operating Expenses	32,533		6,623		97,135		18,015
Segment Adjusted EBITDA	$	(12,098)	$	316	$	(39,743)	$	(720)


	Three Months Ended September 30, 2024				Nine Months Ended September 30, 2024
	Skillz Segment		Aarki Segment		Skillz Segment		Aarki Segment
Revenue	$	21,474	$	3,111	$	66,629	$	8,533
Less:
Cost of Revenue	1,936		1,010		5,921		2,861
End User Engagement Marketing	10,198				29,644
Paid Acquisition Spend	3,813				12,093
Headcount expenses	7,358				23,679
Consulting fees	1,437				4,194
Vendor/Software Expenses	3,825				10,572
Legal fees (non-litigation)	38				6,541
Litigation expenses	3,478				6,187
Office and operations expense	1,532				5,414
Aarki operating expenses			3,722				$	11,606
Other segment items	120				640
Total Operating Expenses	33,735		4,732		104,885		14,467
Segment Adjusted EBITDA	$	(12,261)	$	(1,621)	$	(38,256)	$	(5,934)

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

Transactions Between Segments

Intercompany revenue was $21.0 thousand for the three months ended September 30 2024 and $202.0 thousand and $68.0 thousand for the nine months ended September 30, 2025 and 2024, respectively. There was no intercompany revenue for the three months ended September 30, 2025.

Aarki and Skillz are party to an agreement whereby Aarki will reimburse Skillz for shared services on a monthly basis. The amount paid for the three and nine months ended September 30, 2025 and 2024 were not material.

Capital Expenditures

Consolidated capital expenditures were $4.7 million and $1.3 million in the nine months ended September 30, 2025 and 2024, respectively. Capital expenditures in 2025 consisted primarily of costs related capitalized costs to develop internal-use software by the Skillz segment. Capital expenditures in 2024 consisted primarily of property and equipment by the Skillz segment.

13. Loss Per Share

The Company computes loss per share of the Class A common stock and Class B common stock using the two-class method required for participating securities. Basic and diluted loss per share are the same for each class of common stock as they are entitled to the same liquidation and dividend rights. The effect of potentially dilutive common shares is reflected in diluted loss per share by application of the treasury stock method. The following table sets forth the computation of basic and diluted loss per Class A common stock and Class B common stock (in thousands, except for share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Numerator:
Net loss	$	(17,442)	$	(21,115)	$	(52,506)	$	(21,793)
Denominator:
Weighted average shares outstanding - basic and diluted	15,308,114		17,531,790		15,692,623		17,928,062
Loss per share, basic and diluted	$	(1.14)	$	(1.20)	$	(3.35)	$	(1.22)

The following outstanding common stock equivalents were considered antidilutive, and therefore, excluded from the computation of diluted loss per share attributable to common stockholders for the periods presented (share numbers are not in thousands).


	As of September 30,
	2025	2024
Common stock warrants	226,786	226,786
Common stock options	681,231	673,421
Performance stock units	18,724	1,001,476
Restricted stock units	1,844,474	128,058
Total	2,771,215	2,029,741

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in tables are in thousands, unless otherwise noted)

14. Subsequent Events

For the purpose of the condensed consolidated financial statements as of September 30, 2025, the Company evaluated subsequent events for recognition and measurement purposes as of the filing date. Except as described elsewhere in these condensed consolidated financial statements, the Company has concluded that no events or transactions have occurred that require disclosure except as follows:

Skillz v. Papaya Litigation

On October 28, 2025, the Judge denied Papaya’s motion for summary judgment as to Skillz’s claims against Papaya. The Court also denied Papaya’s motion to exclude Skillz’s survey and damages experts. On November 24, 2025, the Court granted Skillz’s motion for summary judgment on Papaya’s remaining counterclaims and unclean hands defense. The court’s rulings on certain motions related to the admissibility of expert testimony remain pending (see Note 8, Commitments and Contingencies).

Hanna v. Paradise, et. al.

On July 3, 2025, the Court issued a ruling converting defendants’ motion to dismiss on demand futility grounds to a motion for summary judgment and ordered limited discovery on the independence of a former Skillz director. The Court stayed consideration of defendants’ other dismissal arguments given its ultimate ruling on the demand futility issue could moot these other dismissal arguments. Further briefing in support of summary judgment on demand futility grounds is expected, but no schedule is currently in place for such briefing (see Note 8, Commitments and Contingencies).

Skillz v. Tether Litigation

On October 3, 2025, the Company filed a first amended complaint in the Court of Chancery of the State of Delaware alleging additional breaches of contract. On October 10, 2025, Tether filed counterclaims against Skillz, alleging: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) accounting; (4) unjust enrichment; (5) false designation of origin, false association, and/or unfair competition; and (6) violation of deceptive trade practice at, 6 Del. C. Section 2532. Tether alleges its damages exceed $1 million. On November 13, 2025, Skillz moved to dismiss the majority of Tether’s counterclaims. Skillz motion to dismiss is set for hearing on January 23, 2026. A trial has been scheduled for Skillz’s affirmative claims against Tether and Tether’s counterclaims in August 2026. (see Note 8, Commitments and Contingencies).

Purchase of Treasury Stock

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”). On December 5, 2024, the Board reapproved the Share Repurchase Program and extended the expiration date until otherwise suspended, terminated or modified at any time for any reason by the Board.

Subsequent to September 30, 2025 through December 5, 2025, the Company has repurchased 0.2 million shares of its common stock under the Share Repurchase Program (see Note 9, Share Repurchase Program) at an average price of $5.78 per share for a total cost (including commission) of $1.2 million.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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”). MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”), and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about Skillz and our industry that involve numerous risks and uncertainties, including, but not limited to, those described in Part I, Item IA, “Risk Factors” in our Annual Report and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. All statements other than statements of historical facts contained, including statements regarding guidance, our future results of operations or financial condition, business strategy and plans, user growth and engagement, product initiatives, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “going to,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. We caution you that the foregoing may not include all of the forward-looking statements made.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. 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. The inclusion of forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.

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 technological capabilities provide the tools necessary for developers to compete in the marketplace. 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.

The Company offers a technology platform (i.e. demand side platform, “DSP”) to source available advertising space from its network of vendors and suppliers, which uses a real-time auction process. The revenue from advertising is recognized over time based on the number of impressions as the performance obligation is satisfied. The Company considers itself the agent of its customer(s). This is due to the Company’s involvement in programmatically placing and sourcing advertisements on behalf of customers via a network of third party publishers. The Company does not, at any time, take ownership of advertising inventory being sourced and placed. Via the DSP, if the Company wins the auction and an impression is served, the customer’s advertisement is displayed on the publisher or supplier’s mobile application.

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. Engagement marketing may be impacted by end-user incentives, which include Bonus Cash that could only be used to enter into paid contests.

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User acquisition (“UA”) marketing is a sales and marketing expense to acquire new paying users to our platform. UA marketing spend for the nine months ended September 30, 2025 was approximately $12.4 million, as compared to approximately $14.1 million in the nine months ended September 30, 2024. The reduction in UA marketing and engagement marketing expenses in fiscal year ending December 31, 2024 and the first nine months of 2025 compared to prior periods has resulted in a substantial reduction in revenue and is expected to continue to result in a reduction in revenue.

Developments

Tether Litigation

As previously disclosed, on August 29, 2025, we received a Notice from Tether indicating that Tether is terminating all of its various agreements with us, including our terms or services, effective as of September 1, 2025. Tether’s Notice provides that Tether is terminating the Tether Agreements for convenience, while also asserting grounds for termination for cause (effective September 28, 2025) in the event its termination for convenience is not held as effective by a competent tribunal. We believe the termination notice to be invalid and in breach of Tether’s obligations under the Tether Agreements.

Certain of the Tether Agreements restrict the removal of Tether’s top two games, Solitaire Cube and 21 Blitz, from the Company’s platform for at least 18 months following termination. During the post-termination period, Skillz has the option, but not the obligation, to host paid competitions for such games on the platform. For the year ended December 31, 2024, Tether accounted for 45% of our revenue. If we are unable to negotiate new terms with Tether or, as applicable with other developers, or if any new terms are less favorable to us, or if our litigation against Tether is unsuccessful, and these games were to be removed from our platform and we are unable to identify and market suitable replacements, there may be a material adverse effect on our business and results of operations.

Following receipt of the Notice, on September 1, 2025, we filed suit in the Court of Chancery of the State of Delaware, seeking injunctive and declaratory relief in relation to Tether’s breach of the Tether Agreements. The Company is also disputing Tether’s allegations with respect to the grounds for termination of the Tether Agreements for cause. We intend to defend our position, but can provide no assurances regarding the outcome of the claim and the impact it may have on our business. The removal of Solitaire Cube and 21 Blitz contrary to the terms set forth in the agreements and/or before Skillz can provide a suitable replacement to such games may cause a material adverse effect on our platform business and results of operations.

Extension for Continued Listing on the New York Stock Exchange

On April 2, 2025, we received a notice from the NYSE indicating that we are not in compliance with the NYSE’s continued listing requirements under the timely filing criteria outlined in Section 802.01E of the NYSE Listed Company Manual as a result of our failure to timely file our Annual Report on Form 10-K for the year ended December 31, 2024. The NYSE informed us that, under the NYSE’s rules, we had six months to file our Annual Report on Form 10-K with the U.S. Securities and Exchange Commission (the “SEC”) and that the NYSE will continue to list our shares on the NYSE provided that we regain compliance with Section 802.01E within the initial six-month cure period.

We presented a compliance plan to the NYSE in September 2025 to request an additional extension period for continued listing of our Class A common stock on the NYSE (the “Additional Cure Period”) in order for us to complete and file our Annual Report on Form 10-K, and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2025 and June 30, 2025, and any subsequent delinquent SEC quarterly filings (the Quarterly Reports on Form 10-Q together with our Annual Report on Form 10-K, collectively, the “Delayed Filings”), and regain compliance with the NYSE’s continued listing requirements. We worked diligently to file our Annual Report on Form 10-K for the year ended December 31, 2024 on November 6, 2025, the quarterly reports for the quarters ended March 31, 2025 and June 30, 2025 on December 11, 2025 and this filing of the quarterly report for the quarter ended September 30, 2025, which constitute compliance with NYSE’s continued listing requirements and completes the necessary steps in order to regain compliance with the NYSE.

On September 25, 2025, the NYSE granted our request for an Additional Cure Period and agreed to provide us with an extension to continue our listing on the NYSE through December 17, 2025, subject to ongoing reassessment by the NYSE and provided that we become current with our SEC filings by such date.

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Papaya Litigation

On October 28, 2025, the court denied Papaya’s motion for summary judgment as to Skillz’s claims against Papaya. The Court also denied Papaya’s motion to exclude Skillz’s consumer and damages experts. On November 24, 2025, the Court granted Skillz’s motion for summary judgment on Papaya’s remaining counterclaims and unclean hands defense. The court’s rulings on certain motions related to the admissibility of expert testimony remain pending (see Note 8, Commitments and Contingencies).

Items Impacting Comparability of Results of Operations and Financial Condition

Our condensed consolidated financial statements included in this report reflect the following additional items impacting the comparability of results of operations and financial condition:

•A vendor and the Company settled a dispute March 2025. In exchange for mutual releases of all claims, the Company paid the vendor $2.75 million in March 2025, $2.75 million of which has been accrued for in fiscal year 2024.

•A vendor and the Company agreed to mediate a dispute that resulted in a settlement where the Company agreed to pay the vendor $533 thousand in June 2025, which represented the past due balances for year one and year two of the agreement that were fully accrued as of December 31, 2024.

•The Company and a lessor of its former headquarters in San Francisco mutually agreed to terminate a lease. In exchange for the mutual releases, the Company paid the lessor a lump sum payment of $14.0 million in April 2025. The loss on termination of the operating lease of $0.4 million represented the difference between the settlement amount and the carrying value of the lease obligation and was recorded during the fiscal year 2024.

•A federal jury in San Jose, California issued a verdict in favor of Skillz in a patent infringement action Skillz brought against a privately-held mobile gaming company, AviaGames (“Patent Case”). Skillz, Big Run, and AviaGames entered into a settlement agreement with respect to both the Patent Case and Unfair Competition Case pending against AviaGames (the “Litigation Settlement”). In exchange for dismissal of both actions and other settlement terms, AviaGames agreed to pay Skillz and Big Run a total of $80.0 million. The Company and Big Run Studio entered into a Side Letter Agreement providing that a portion of the AviaGames settlement funds allocated to Big Run Studio be utilized to repay the outstanding principal and accrued interest under the Loan and Security Agreement totaling $2.0 million (see Note 4, Balance Sheet Components). The Company and Big Run collectively received $50.0 million from AviaGames pursuant to the settlement agreement. Of the $50.0 million received, Skillz received $48.0 million, $2.0 million of which was for settlement of the amount outstanding under the Loan and Security Agreement with Big Run. Beginning in March of 2025, AviaGames is required to pay Skillz an additional $7.5 million annually over a four-year period as royalty payments for AviaGames’ license of the applicable patent and its patent family; no portion of these payments are due to Big Run (see Note 4, Balance Sheet Components and Note 8, Commitments and Contingencies). During the year ended December 31, 2024, the Company recorded a gain from the Litigation Settlement netting $46.0 million consisting of the gross payment of $48.0 million less the $2.0 million received for satisfaction and settlement of the Loan and Security Agreement. The Company recorded the $7.5 million payment received in March 2025 and will record the $7.5 million to be received in March 2026, 2027 and 2028 as a gain upon receipt of each payment.

•In connection with the Company’s De-SPAC litigation, Skillz filed suit against its insurance carrier for D&O insurance coverage and on January 17, 2025, the insurance carrier agreed to contribute a total of $9.8 million to the Company in connection with this matter’s settlement agreement. Of those funds, $1.3 million was received in the quarter ending March 31, 2025 and was used to pay defense costs. During the quarter ended June 30, 2025, Skillz received the remaining $8.5 million. The parties involved with the De-SPAC litigation executed a term sheet to settle the action in principle for $10.0 million, subject to completing settlement documentation and obtaining court approval. As the successor to Flying Eagle, the defendant in the De-SPAC litigation, Skillz is obligated to indemnify and pay legal costs of the Individual D&O Defendants of Flying Eagle in their capacities as such in connection with this action and, as such recorded an expense of $10.0 million, offset by the insurance proceeds of $9.8 million, which is reflected in general and administrative expenses for the year ended December 31, 2024. The Company recorded the insurance recovery proceeds as an offset to general and administrative expenses for the year ended December 31, 2024.

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Operating Segments

We generate revenue from our two reportable segments, Skillz and Aarki. Refer to Note 12, Segment Reporting, of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion.

Skillz (the “Company” or “Skillz”) operates a competitive multi-player platform, driving the future of entertainment by accelerating the convergence of video games, real world prizes, and media. The Company’s principal activities are to develop and support a proprietary online-hosted technology platform that creates a multi-player system inside of game developer’s games (“Competitions”) to end-players worldwide.

Results of Operations

Comparison for the three months ended September 30, 2025 and 2024.


	Three Months Ended September 30,				2025 to 2024 Change
	2025		2024		Increase/(Decrease)
					Amount		Percentage
Revenue	$	27,374	$	24,564	$	2,810	11	%
Costs and expenses:
Cost of revenue	3,355		3,373		(18)		(1)	%
Research and development	5,444		4,742		702		15	%
Sales and marketing	17,368		19,294		(1,926)		(10)	%
General and administrative	17,479		18,147		(668)		(4)	%


Total costs and expenses	43,646		45,556		(1,910)		(4)	%
Loss from operations	(16,272)		(20,992)		4,720		22	%

Interest (expense) income, net	(1,560)		242		(1,802)		(745)	%

Other income (expense), net	430		(333)		763		229	%
Loss before income taxes	(17,402)		(21,083)		3,681		17	%
Provision for income taxes	40		32		8		25	%
Net loss	$	(17,442)	$	(21,115)	$	3,673	17	%

Revenue

Revenue increased by $2.8 million, or 11%, to $27.4 million in the three months ended September 30, 2025 from $24.6 million in the three months ended September 30, 2024. This was primarily due to higher advertising revenue of $3.8 million generated by our Aarki segment, partially offset by lower tournament services and other revenue of $1.0 million from our Skillz segment.

Cost of Revenue

Cost of revenue was relatively consistent for the three months ended September 30, 2025 and 2024.

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Research and Development

Research and development costs increased by $0.7 million, or 15%, to $5.4 million in the three months ended September 30, 2025 from $4.7 million in the three months ended September 30, 2024. This was primarily driven by a $1.0 million increase in research and development employee related costs, partially offset by lower server and software license expenses of $0.3 million from our Skillz segment.

Sales and Marketing

Sales and marketing costs decreased by $1.9 million, or 10%, to $17.4 million in the three months ended September 30, 2025 from $19.3 million in the three months ended September 30, 2024. This was primarily driven by lower marketing expenses of $1.8 million and a reduction in employee related costs of $0.3 million from our Skillz segment.

General and Administrative

General and administrative costs decreased by $0.6 million, or 3%, to $17.5 million in the three months ended September 30, 2025 from $18.1 million in the three months ended September 30, 2024. This was primarily driven by lower professional fees of $0.6 million from our Skillz segment.

Interest (expense) income, net

Interest expense was $1.6 million for the three months ended September 30, 2025 compared to interest income of $0.2 million for the three months ended September 30, 2024. This was primarily related to lower interest income earned as the Company held less interest bearing investments in the three months ended September 30, 2025 compared to the prior year period from our Skillz segment.

Provision for income taxes

The provision for income taxes increased by $8.0 thousand to $40.0 thousand in the three months ended September 30, 2025, from $32.0 thousand in the three months ended September 30, 2024. This was primarily due to a book loss, state taxes and equity award activities, mostly offset by a full valuation allowance on our deferred tax assets.

On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA” or the “Act”) was signed into law, enacting significant changes to U.S. federal tax regulations. In accordance with Accounting Standards Codification 740 (“ASC 740”), Income Taxes, the effects of new tax legislation are required to be recognized in the period of enactment, which for the Company, a calendar-year entity, is the quarter ended September 30, 2025. The total net impact of the tax law changes on the income tax provision for the three and nine months ended September 30, 2025, was not material. A discrete adjustment of approximately $866 thousand was made to the existing deferred tax assets and deferred tax liability that were fully offset by an adjustment to the valuation allowance on our deferred tax assets. OBBBA adjustments impacting these deferred balances relate to the restoration of bonus depreciation for qualifying assets and the inclusion of Section 174A which allows taxpayers to fully expense domestic research expenditures.

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Results of Operations

Comparison for the nine months ended September 30, 2025 and 2024.


	Nine Months Ended September 30,				2025 to 2024 Change
	2025		2024		Increase/(Decrease)
					Amount		Percentage
Revenue	$	74,485	$	75,094	$	(609)	(1)	%
Costs and expenses:
Cost of revenue	9,539		10,171		(632)		(6)	%
Research and development	15,102		13,638		1,464		11	%
Sales and marketing	51,804		61,138		(9,334)		(15)	%
General and administrative	53,269		58,419		(5,150)		(9)	%
Gain from litigation settlement	(7,500)		(46,000)		38,500		(84)	%

Total costs and expenses	122,214		97,366		24,848		26	%
Loss from operations	(47,729)		(22,272)		(25,457)		114	%

Interest (expense) income, net	(3,952)		688		(4,640)		(674)	%
Change in fair value of common stock warrant liabilities	—		11		(11)		(100)	%
Other income (expense), net	(766)		(78)		(688)		882	%
Loss before income taxes	(52,447)		(21,651)		(30,796)		142	%
Provision for income taxes	59		142		(83)		(58)	%
Net loss	$	(52,506)	$	(21,793)	$	(30,713)	141	%

Revenue

Revenue decreased by $0.6 million, or 1%, to $74.5 million in the nine months ended September 30, 2025 from $75.1 million in the nine months ended September 30, 2024. This was primarily due to lower tournament, services and other revenue of $9.5 million from our Skillz segment, mostly offset by higher advertising revenue of $8.9 million generated from our Aarki segment.

Cost of Revenue

Cost of revenue decreased by $0.6 million, or 6%, to $9.5 million for the nine months ended September 30, 2025 from $10.2 million in the nine months ended September 30, 2024. This was primarily due to a reduction of customer support personnel costs of $0.8 million, partially offset by server and other costs of $0.2 million from our Skillz segment.

Research and Development

Research and development costs increased by $1.5 million, or 11%, to $15.1 million in the nine months ended September 30, 2025 from $13.6 million in the nine months ended September 30, 2024. This was primarily associated with higher research and development employee related costs of $2.4 million, partially offset by lower server and software license expenses of $0.4 million and professional fees and facilities allocation of $0.4 million, respectively from our Skillz segment.

Sales and Marketing

Sales and marketing costs decreased by $9.3 million, or 15%, to $51.8 million in the nine months ended September 30, 2025 from $61.1 million in the nine months ended September 30, 2024. This was primarily driven by lower marketing expenses of $6.3 million, employee related expenses of $2.4 million, software, facilities, professional fees and other expenses of $0.7 million from our Skillz segment.

General and Administrative

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General and administrative costs decreased by $5.2 million, or 9%, to $53.3 million in the nine months ended September 30, 2025 from $58.4 million in the nine months ended September 30, 2024. This was primarily related to lower employee related costs of $6.3 million and marketing related expenses of $0.5 million, partially offset by higher other general and administrative expenses of $1.6 million from our Skillz segment.

Gain from litigation settlement

The gain from litigation settlement of $7.5 million and $46.0 million for the nine months ended September 30, 2025 and 2024, respectively, was related to the litigation settlement with AviaGames from our Skillz segment. Refer to Note 8, Commitments and Contingencies, of the notes to the condensed consolidated financial statements for further discussion.

Interest (expense) income, net

Interest expense was $4.0 million for the nine months ended September 30, 2025 compared to interest income of $0.7 million for the nine months ended September 30, 2024. This was primarily due to lower interest income earned as the Company held less interest bearing investments in the nine months ended September 30, 2025 compared to the prior year period from our Skillz segment.

Provision for income taxes

Provision for income taxes decreased by $83.0 thousand to $59.0 thousand in the nine months ended September 30, 2025, from $142.0 thousand in the nine months ended September 30, 2024. This was primarily due to a book loss, state taxes and equity award activities, mostly offset by a full valuation allowance on our deferred tax assets.

On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA” or the “Act”) was signed into law, enacting significant changes to U.S. federal tax regulations. In accordance with Accounting Standards Codification 740 (“ASC 740”), Income Taxes, the effects of new tax legislation are required to be recognized in the period of enactment, which for the Company, is the quarter ended September 30, 2025. The total net impact of the tax law changes on the income tax provision for the three and nine months ended September 30, 2025, was not material. A discrete adjustment of approximately $866 thousand was made to the existing deferred tax assets and deferred tax liability that were fully offset by an adjustment to the valuation allowance on our deferred tax assets. OBBBA adjustments impacting these deferred balances relate to the restoration of bonus depreciation for qualifying assets and the inclusion of 174A which allows taxpayers to fully expense domestic research expenditures.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from the sales of capital stock. As of September 30, 2025, our principal sources of liquidity were our cash, cash equivalents and restricted cash in the amount of $212.8 million, which are primarily invested in money market funds and marketable securities with maturities of less than three months.

In December 2021, the Company offered $300 million in aggregate principal senior secured notes due 2026 in a private offering. 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 will mature on December 15, 2026. 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. After giving effect to the 2023 and other previous open market repurchases of our senior secured notes, as of September 30, 2025, $129.7 million of the senior secured notes remained outstanding.

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Other than as described below with respect to the Company’s noncompliance with certain reporting covenants under the indenture governing its senior secured notes, the Company has complied with debt covenant requirements that could have a material impact on debt classification in the event of non-compliance. In light of delays in the filing of our annual financial statements on our Form 10-K and the interim financial statements on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, the Company fell out of compliance with the reporting covenants under the indenture governing its senior secured notes that require the Company provide to the trustee and holders of the senior secured notes all quarterly and annual reports required to be filed with the SEC within the time periods specified under the Exchange Act. As such, on September 30, 2025, the Company received a notice of default from the trustee of the senior secured notes. The filing of the Company’s Annual Report on Form 10-K of November 6, 2025, the quarterly reports for the quarters ending March 31, 2025 and June 30, 2025 and this quarterly report for the quarter ending September 30, 2025 helped the Company restore compliance with this requirement and completes the necessary steps in order to regain compliance with the terms of the indenture governing the Company’s senior secured notes.

Our existing liquidity resources are sufficient to continue operating activities for at least one year past the issuance date of the condensed 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.

The following table provides a summary of cash flow data (in thousands):


	Nine Months Ended September 30,
		2025		2024
Net cash (used in) provided by operating activities		$	(56,232)	$	12,423
Net cash used in investing activities		$	(4,723)	$	(185)
Net cash used in financing activities		$	(8,167)	$	(12,823)

Net Cash (Used In) Provided By 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. 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 of $56.2 million for the nine months ended September 30, 2025 primarily reflected a net loss of $52.5 million, non-cash expenses of $14.2 million related to stock-based compensation, and net cash inflows of $19.9 million from changes in operating assets and liabilities from our Skillz and Aarki segments. During the nine months ended September 30, 2025, $7.5 million was received from the litigation settlement with AviaGames from our Skillz segment.

Net Cash Used In Investing Activities

Net cash used in investing activities of $4.7 million, for the nine months ended September 30, 2025, was primarily driven by capitalization of software development costs of $2.6 million and purchases of property and equipment of $2.1 million, respectively from our Skillz segment.

Net Cash Used In Financing Activities

Net cash used in financing activities was $8.2 million for nine months ended September 30, 2025, consisting primarily of the repurchase of common stock from our Skillz segment.

Contractual Obligations and Commitments

Our material cash requirements include the following contractual and other obligations.

Leases

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We have operating lease arrangements for office space, and finance lease agreements for certain network equipment. As of September 30, 2025, we had lease payment obligations of $1.3 million, of which $0.4 million is payable within 12 months.

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 of $2.6 million, is due on December 15, 2026.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

See critical accounting policies and estimates in our Annual Report as there have been no material changes.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our condensed 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Company is not required to provide the information called for by this Item.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (“SEC”) rules and forms.

Based on the evaluation of our disclosure controls and procedures, our management has concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Notwithstanding the material weaknesses, management has concluded that our condensed consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in this Form 10-Q, in conformity with GAAP.

Material Weaknesses

As previously disclosed in our management’s report on internal control over financial reporting within the Annual Report

we identified material weaknesses in our internal control over financial reporting with respect to the following:

1.Risk assessment: The Company did not design an effective risk assessment process based on the criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”). As a result, the Company did not appropriately reassess and adequately design and implement controls over financial reporting, including with respect to identification and review of disclosures and monitoring controls, and with respect to providing the appropriate evidence of review of reconciliations, budgets, and key elements of the financial close process.

2.Information technology general controls (“ITGCs”): ITGCs in the areas of access and program change management over information technology (“IT”) systems that support the Company’s financial reporting processes were not designed or operating effectively. Specifically, the Company did not maintain sufficient: (a) user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; (b) program change management controls to ensure that IT program and data changes affecting financial information technology applications and underlying records are identified, tested, authorized, and implemented appropriately; and (c) program operations controls. As a result, the Company’s related IT dependent manual and application controls that rely upon the affected ITGCs, or information coming from IT systems with affected ITGCs were also deemed ineffective.

3.Internal control over financial reporting: Controls related to properly evaluating accounting processes were not adequately designed, implemented or operating effectively including the lack of sufficient documentation or evidence retained to demonstrate management’s review over several financial statement areas, as it relates to the Company’s reconciliations, budgets, and key elements of the financial reporting process. Additionally, there was an inadequate review of complex accounting assumptions, together with a lack of qualified accounting personnel employed during the year.

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Material Weakness Remediation Efforts

Management, with oversight from the Audit Committee, will continue toward remediation of material weaknesses and reinforce the overall design and capability of our internal control environment. The following has been planned for implementation in management’s ongoing efforts to remediate the identified material weaknesses:

•Management will continue to enhance and standardize policies and procedures across the Company to ensure consistency and performance of internal controls;

•Management will continue to make strategic investments in qualified personnel, external consultants, and together with deploying available tools and systems to streamline and automate the execution and documentation of internal controls throughout the Company; and

•Management will continue to engage, educate and train personnel, including external consultants, throughout the Company on the importance of documenting and following internal controls.

Changes in Internal Control over Financial Reporting

Except as noted above, there was no change in our internal control over financial reporting during the third quarter of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. An internal controls system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. In light of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate due to changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note 8, “Commitments and Contingencies,” and Note 14, “Subsequent Events” in this Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchases

The following table provides information about the purchases of our common stock made through the three months ended September 30, 2025:


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)
July 1, 2025 through July 31, 2025	2,134	$	6.82	2,134	$	24.6
August 1, 2025 through August 31, 2025	—	—		—	$	24.6
September 1, 2025 through September 30, 2025	—	—		—	$	24.6
Total	2,134	$	6.82	2,134

(a) In August 2023, our Board of Directors approved a share repurchase authorization for up to $65.0 million of our common stock. The share repurchase authorization had a term of 12 months and was permitted to be suspended or discontinued by our Board of Directors at any time. On December 5, 2024, our Board of Directors re-approved 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 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the fiscal quarter ended September 30, 2025, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

TABLE OF CONTENTS

ITEM 6. EXHIBITS

Exhibit No.

Exhibit Description

Form

Exhibit

Filing Date

31.1*

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1#

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2#

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH**

Inline XBRL Taxonomy Extension Schema Document

101.CAL**

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**

Inline XBRL Definition Linkbase Document

101.LAB**

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith.

**Submitted electronically with the report.

# Furnished, not filed.

TABLE OF CONTENTS

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SKILLZ INC.

	By:	/s/ Gaetano Franceschi
Date: December 11, 2025	Name:	Gaetano Franceschi
	Title:	Chief Financial Officer

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10/12/2022	$0.65	Neutral → Sell	BTIG Research
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