Skillz (SKLZ) Q3 2025 Earnings Call Transcript

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Date

Thursday, November 6, 2025, at 8:30 a.m. ET

Call participants

• Founder & Chief Executive Officer — Andrew C. Paradise
• Chief Financial Officer — Gaetano Franceschi
• IR Contact — Joseph N. Jaffoni

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Risks

• The company is not in compliance with NYSE listing standards due to delays in filing its annual and quarterly SEC reports, which may affect ongoing listing status.
• There are open litigation risks due to ongoing legal disputes with Papaya, Voodoo Games, and Tether regarding alleged bot fraud and platform agreements.

Takeaways

• GAAP revenue -- $27 million in revenue, up 9% quarter over quarter and 11% year over year for the fiscal quarter ended Sept. 30, 2025, attributed to ARPU momentum and platform stability.
• Paying monthly active users (MAU) -- 155,000 paying MAU, up 6% quarter over quarter and 28% year over year, linked to higher conversion rates and deeper monetization.
• Adjusted EBITDA loss -- $12 million adjusted EBITDA loss, decreasing 3% quarter over quarter but increasing 15% year over year.
• Net loss -- Net loss of $17 million, improving 17% year over year.
• Research & development expenses -- $5 million, up 15% year over year due to continued investment in the competition platform and Arky.
• Sales & marketing expenses -- $17 million, down 10% year over year from user acquisition and engagement optimization.
• General & administrative expenses -- $17 million, down 4% year over year.
• Cash balance -- $213 million, including $1 million in restricted cash as of the end of the fiscal quarter, with total debt principal of $129.7 million.
• Developer Accelerator Program -- The first owned and operated title, Solitaire Skillz, was launched through the $75 million program, with additional games to be unveiled at the March 2026 Game Developer Conference.
• Arky ad tech growth -- Arky net revenue grew over 100% year over year, with new AI-driven product launches across iOS and Android platforms sustaining momentum.
• Fair play litigation -- CEO Paradise said, "Judge Code in the Southern District of New York denied Papaya's motion for summary judgment as to Skillz Inc.'s claims against Papaya," allowing the company's claims to proceed to trial.
• Tether Games agreement -- CEO Paradise stated, "two of Tether's games, Solitaire Cube and 21 Blitz, will remain on our platform for a period of up to eighteen months following termination," with Skillz retaining an option to host paid competitions during that time.
• Operational efficiency -- The company highlighted ongoing improvements in operational efficiency and team expansion, especially with the opening of an India office.
• Guidance on SEC filings -- The company expects to file its outstanding 10-K and 10-Q reports by December 17, 2025, within the NYSE extension period.

Summary

Skillz (NYSE:SKLZ) management provided preliminary financial results for the fiscal quarter ended Sept. 30, 2025, citing ongoing delays in completing SEC filings and a pending compliance issue with NYSE listing standards. Arky's ad tech business achieved net revenue growth of over 100% year over year, bolstered by recent AI-driven product launches. CEO Paradise confirmed progress in legal actions against competitors for alleged bot fraud, with the Papaya litigation advancing to trial following recent court decisions. The company implemented new platform initiatives, including the first title developed with third-party developers through its $75 million Developer Accelerator Program, with further titles planned for showcase in early 2026. Management stated that operational improvements, expansion in India, and strategic go-to-market focus are foundational to progressing toward profitability.

• Franceschi stated that "Sales and marketing expenses of $17 million decreased 10% year over year."
• CEO Paradise emphasized the role of ARPU and deeper monetization as primary drivers of paying MAU growth, while noting a deliberate reduction in total MAU in favor of engagement quality.
• Management signaled sustained advancements in AI and machine learning for Arky, with an explicit aim to increase addressable market and improve advertiser ROI.
• No explicit revenue or cost guidance for future periods was provided; all outlook language focused on operational objectives and developing compliance or litigation milestones.

Industry glossary

• ARPU: Average Revenue Per User, a key monetization metric in gaming and tech platforms.
• Paying MAU: Monthly Active Users who make one or more payments on the platform within the month.
• Developer Accelerator Program: Skillz's initiative providing resources and support to independent game developers to launch games on its platform.
• Arky: Skillz’s proprietary advertising technology business focused on AI-powered marketing solutions.
• Fair Play Initiative: Skillz's commitment and legal action to maintain platform integrity against fraudulent practices such as bot usage in games.

Full Conference Call Transcript

Joseph N. Jaffoni: This morning, Skillz Inc. issued its 2025 third quarter earnings release, which is available on the company's Investor Relations website. The company is in the process of completing its unaudited interim financial statements and other disclosures for the third quarter ended 09/30/2025. Accordingly, we are announcing preliminary results for the third quarter, which are based on currently available information and are subject to revision. Actual results may differ from these preliminary financial results and other financial information as final adjustments and developments may arise between now and the time the results are finalized.

In the event the company determines it will not file its quarterly report on Form 10-Q by the prescribed deadline, it will file an extension on Form 12b-25 with the Securities and Exchange Commission, which may include further disclosure. The company is also completing the financial statements and other disclosures for the annual report on Form 10-K for the year ended 12/31/2024, and its quarterly reports on Form 10-Q for the three months ended 03/31/2025 and the three months ended 06/30/2025. We were unable to file our annual report on Form 10-K for the year ended 12/31/2024, and we previously announced we received a notice from the NYSE that the company was not in compliance with its listing standards.

The company is working diligently to complete the necessary work to file the Form 10-K as well as the quarterly reports on Form 10-Q for the three months ended 03/31/2025, the three and six months ended 06/30/2025, as soon as practicable. The company expects to file the Form 10-K and Form 10-Q by 12/17/2025, which is within the extension period provided to us by the New York Stock Exchange following our request for an additional extension period beyond the initial six-month period granted by the notice. Additionally, the company intends to take the necessary steps to achieve compliance with the applicable New York Stock Exchange listing standards as soon as possible.

Before I turn the call over to Founder and Chief Executive Officer of Skillz Inc., Andrew C. Paradise, please note that management's comments today may include forward-looking statements within the meaning of federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, expect, should, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to the company's Securities and Exchange Commission filings for a more detailed discussion of the risks that could impact future operating results and financial condition.

During the call, management will discuss non-GAAP financial measures, which it believes can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with generally accepted accounting principles. The reconciliation of these measures to the most directly comparable GAAP measures is available in the company's third quarter 2025 earnings release. With that, I will turn the call over to Andrew for some opening remarks followed by a review of the financial performance from the Chief Financial Officer of Skillz Inc., Gaetano Franceschi, before we open the call for questions. Andrew?

Andrew C. Paradise: Thank you, Joseph N. Jaffoni, and good morning, everyone. I will begin today's call with a review of the key Q3 quarterly results, which reflect the meaningful progress underway across Skillz Inc. and Arky. Q3 GAAP revenue of $27 million grew 9% quarter over quarter, 11% year over year, supported by continued ARPU momentum and stability of the competition platform. Adjusted EBITDA loss of $12 million decreased 3% quarter over quarter and grew 15% year over year. Paying MAU of 155,000 grew 6% quarter over quarter and 28% year over year, driven by higher player conversion rates and deeper monetization.

We delivered quarterly sequential growth in what's typically a softer seasonal period marked by higher digital traffic costs and competition for consumer attention during the fall sports season. Taking a look at our four business pillars, beginning with the first pillar, enhancing the platform for player and developer engagement. In the quarter, we launched an owned and operated title, Solitaire Skillz, which is showing early promise. The game serves as a testing ground for new features that we rolled out platform-wide. Importantly, Solitaire Skillz was developed in conjunction with third-party developers and represents the first title to come to market through our $75 million Developer Accelerator Program.

This program continues to attract strong developer interest with additional titles in development that are expected to be showcased at the Game Developer Conference in March 2026. Some of these upcoming games will incorporate new technology that we believe will further energize the developer community. Switching to Arky, the momentum from our ad tech business continued this quarter with accelerating revenue growth supported by new AI-driven product launches across the iOS and Android operating systems. Building on data models introduced last quarter, Arky launched on iOS, enabling privacy-forward performance marketing.

These new offerings are already driving measurable scale and efficiency, and we will continue to invest in Arky's machine and deep learning capabilities to expand its addressable market and improve returns on spend for advertisers. Regarding our second pillar, up-leveling our organization, our gains in operational efficiency across both the competition platform and Arky businesses continue to improve, allowing us to more effectively leverage our people and resources. We continue to strengthen our global team, particularly with the expansion of our new India office, where we are hosting today's call. As it relates to our third pillar, go-to-market strategy and monetization, our focus remains on acquiring and retaining quality paying players while driving efficient monetization.

Paying MAU improved again this quarter, reflecting stronger conversion amongst our existing player base while total MAU declined modestly. This reflects our emphasis on engagement quality over volume. We continue to optimize customer acquisition costs and improve marketing supported by product-level enhancements that strengthen monetization and retention. Together, these initiatives reinforce our go-to-market discipline, positioning the business for profitable scaling once we expand traffic more broadly. For our fourth pillar, path to profitability, Arky's business continues to expand its advertiser base and improve yield, with net revenue up more than 100% year over year and improving margins. With improvements in the competition platform together with the ad tech business momentum, we continue to make progress on our path to profitability.

Turning to an update on our fair play initiative.

Andrew C. Paradise: As discussed in previous calls, protecting players and preserving fair competition is core to our values. We continue to pursue litigation against Papaya and Voodoo Games for their alleged use of bots, a practice we believe undermines consumer trust and harms the entire industry. We remain firm in our position as both the Papaya and Voodoo matters move through the litigation process. On 10/28/2025, Judge Code in the Southern District of New York denied Papaya's motion for summary judgment as to Skillz Inc.'s claims against Papaya. The court also denied Papaya's motion to exclude Skillz Inc.'s survey and damages experts. I encourage you to read Judge Coates' now public decision in detail.

While other motions are still pending before the court, the court's confirmation that Skillz Inc.'s claims against Papaya will proceed to a trial is a major step forward in our fair play initiative. Separately, I would also like to address our dispute with Tether. As we disclosed in our 8-K filing, two of Tether's games, Solitaire Cube and 21 Blitz, will remain on our platform for a period of up to eighteen months following termination. During the post-termination period, Skillz Inc. has the option, but not the obligation, to host paid competitions for these games on the company's platform.

In our view, the alleged bot fraud from our competitors not only affects our players but also how our developer partners are able to monetize and generate revenue in our ecosystem. We appreciate the developers who have stood by us and weathered the issues caused by companies, in our view, engaged in bot fraud. With that being said, we remain committed to protecting the industry that we pioneered, and we anticipate our efforts to clean up the industry to be ultimately reflected in our financial performance. In closing, a key takeaway from today is that we are encouraged by the progress across both of our businesses.

By combining our strengths in gaming and AI-driven ad tech, we are building a powerful foundation that can extend beyond gaming into adjacent verticals such as e-commerce, interactive entertainment, and retail media, where performance marketing and content converge. The combination of a scaled competitive gaming platform and an AI-powered advertising technology solution uniquely positions Skillz Inc. and Arky to capture long-term growth opportunities and, in doing so, enhance value for our shareholders. With that, I will hand it over to our Chief Financial Officer, Gaetano Franceschi, for the financial review.

Gaetano Franceschi: Thank you, Andrew. Our third quarter results demonstrate the benefits of disciplined execution and structural improvements across both Skillz Inc. and Arky, producing stronger fundamentals and a clear trajectory toward profitability. GAAP revenue was $27 million, up from $25 million in Q2 2025 and $24 million in Q3 2024, representing 9% growth quarter over quarter and 11% year over year. Q3 paying MAU was 155,000, up from 146,000 in Q2 2025 and 121,000 in Q3 2024, representing 6% growth quarter over quarter and 28% year over year. On costs, R&D expenses of $5 million increased 15% year over year, reflecting ongoing investment in our competition platform and Arky.

Sales and marketing expenses of $17 million decreased 10% year over year, reflecting ongoing optimization of our user acquisition and engagement spend. G&A expenses of $17 million decreased 4% year over year, reflecting continued focus on expenses. Q3 net loss of $17 million improved 17% year over year. Q3 adjusted EBITDA loss was $12 million, down from a loss of $11 million in Q2 2025 and up from a loss of $14 million in Q3 2024, representing a 3% decrease quarter over quarter and 15% increase year over year. Our balance sheet remains healthy, and we continue to manage capital prudently as we progress toward sustained profitability.

We ended Q3 with $213 million in cash, including $1 million of restricted cash and $129.7 million of total debt principal outstanding. With continued execution and operational focus, we expect Skillz Inc. to deliver meaningful long-term value for our shareholders as we execute with focus and discipline. Operator, we are now ready to open the line for questions.

Operator: Ladies and gentlemen, this concludes our Q&A and today's conference call. We would like to thank you for your participation. You may now disconnect your lines.

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