XML 39 R18.htm IDEA: XBRL DOCUMENT v3.25.3
Segment Reporting
 3 Months Ended
Mar. 31, 2025
Segment Reporting [Abstract]  
Segment Reporting 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, including products and services, 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 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 months ended March 31, 2025 and 2024.

Three Months Ended March 31,
20252024
Revenue
Skillz Segment$17,592 $22,417 
Aarki Segment4,439 2,865 
Elimination(134)(47)
Total Revenue$21,897 $25,235 
Segment Adjusted EBITDA
Skillz Segment$(16,283)$(15,691)
Aarki Segment(973)(2,045)
Total Segment Adjusted EBITDA$(17,256)$(17,736)
Items to reconcile Segment Adjusted EBITDA to Net loss:
Interest (expense) income, net
$(1,071)$112 
Stock-based compensation(5,550)(8,740)
Change in fair value of warrant liability— 9 
Provision for income taxes(39)(38)
Depreciation and amortization(167)(395)
Gain from litigation settlement7,500 — 
Other income, net(559)65 
Net loss$(17,142)$(26,723)
The following tables provide summarized information about the Company’s operations used by the CODM by reportable segment for the three months ended March 31, 2025 and 2024, respectively.

Three Months Ended March 31, 2025
Skillz SegmentAarki Segment
Revenue$17,592 $4,439 
Less:
Cost of Revenue1,840 976 
End User Engagement Marketing8,280 
Paid Acquisition Spend3,731 
Headcount expenses7,015 
Consulting fees1,143 
Vendor/Software Expenses3,698 
Legal fees (non-litigation)
526 
Litigation expenses5,655 
Office and operations expense1,626 
Aarki operating expenses4,436 
All other operating expenses
361 
Total Operating Expenses33,875 5,412 
Segment Adjusted EBITDA
$(16,283)$(973)


Three Months Ended March 31, 2024
Skillz SegmentAarki Segment
Revenue$22,417 $2,865 
Less:
Cost of Revenue2,043 858 
End User Engagement Marketing8,886 
Paid Acquisition Spend4,689 
Headcount expenses9,156 
Consulting fees1,497 
Vendor/Software Expenses3,448 
Legal fees (non-litigation)
5,837 
Office and operations expense676 
Aarki operating expenses4,052 
All other operating expenses
1,876 
Total Operating Expenses38,108 4,910 
Segment Adjusted EBITDA
$(15,691)$(2,045)

Transactions Between Segments

Intercompany revenue was $134.0 thousand and $47.0 thousand for the three months ended March 31, 2025 and 2024, respectively.
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 months ended March 31, 2025 and 2024 were not material.

Capital Expenditures

Consolidated capital expenditures were $1.7 million and $0.5 million in the three months ended March 31, 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.