Skillz Inc. (NYSE: SKLZ) (“Skillz” or the “Company”), the
leading mobile games platform bringing fair competition to players
worldwide, today reported financial results for the third quarter
ended September 30, 2023.
2023 Third Quarter and Recent Financial Highlights:
- Revenue of $36.4 million
- Gross profit of $32.7 million
- Net loss of $(33.5) million
- Adjusted EBITDA1 of $(18.5) million
- Paying monthly active users (PMAU)2 of 168,000
- Average Revenue Per Paying Monthly Active User (ARPPU)3 of
$72.3
- Total operating expenses of $64.1 million
- Cash, cash equivalents, restricted cash, and marketable
securities of $339.9 million as of September 30, 2023
- Total outstanding debt of $129.7 million as of September 30,
2023
1 Adjusted EBITDA is a non-GAAP financial
measure metric; for a reconciliation of each non-GAAP measure
against its most comparable GAAP metric, please see the section
titled “Use of Non-GAAP Financial Measures” in this press
release.
2 “Paying Monthly Active Users” or “PMAUs”
means the number of end-users who entered into a paid contest
hosted on Skillz’ platform at least once in a month, averaged over
each month in the period.
3 “Average Revenue Per Paying Monthly
Active User” or “ARPPU” means the average revenue in a given month
divided by PMAUs in that month, averaged over the period and does
not include a deduction for end-user incentives that are included
in sales and marketing expense.
“We continue to make progress on our initiatives to improve the
business, though our third quarter results highlight the fact that
the Company still needs to improve its execution to be positioned
to deliver consistent top line growth and positive cash flow,” said
Andrew Paradise, Skillz’ CEO. “Our unit economics are demonstrating
improvement due in part to the introduction of new features that
increase player engagement and monetization. Notwithstanding this
progress, our traffic continues to hinder our operating
performance. Given our return to attractive user economics, we will
now begin to transition toward scaling the business. We expect our
continued progress will position us to generate quarterly
sequential profitable revenue growth beginning next year and to
achieve positive Adjusted EBITDA on a run rate basis in the fourth
quarter of 2024.”
Jason Roswig, President and CFO, added, “The third quarter
performance clearly demonstrates our prudent management of the
business as reflected in the improvement of our operating expenses.
This, alongside our strong cash position at quarter end of
approximately $339.9 million, provides us with the flexibility to
deploy capital across value enhancing initiatives including the
development and introduction of new product features on a
consistent basis.”
Investor Conference Call
Skillz will host a live conference call at 4:30 p.m. ET today.
To access the call, please register using the following link:
Skillz Third Quarter 2023 Earnings Call. After registering, an
email will be sent, including dial-in details and a unique
conference call access code and PIN required to join the live call.
Access to the live audio webcast of the discussion in listen-only
mode will also be available at investors.skillz.com
A replay of the webcast will be archived on the Company’s
investor relations website. An audio replay of the conference call
will be available through Wednesday, November 15, 2023, and can be
accessed by dialing (866) 813-9403 (US) or 204 525 0658
(international) and entering the passcode 610378.
About Skillz Inc.
Skillz is the leading mobile games platform dedicated to
bringing out the best in everyone through competition. The Skillz
platform helps developers create multi-million dollar franchises by
enabling social competition in their games. Leveraging its patented
technology, Skillz hosts billions of casual eSports tournaments for
millions of mobile players worldwide, with the goal of building the
home of competition for all. Skillz has earned recognition as one
of Fast Company’s Best Workplaces for Innovators, CNBC’s Disruptor
50, Forbes’ Next Billion-Dollar Startups, Fast Company’s Most
Innovative Companies, and the number-one fastest-growing company in
America on the Inc. 5000. www.skillz.com
Use of Non-GAAP Financial Measures
In this press release, the Company includes Adjusted EBITDA,
which is a non-GAAP performance measure that the Company uses to
supplement its results presented in accordance with U.S. GAAP. The
Company’s management believes Adjusted EBITDA is useful in
evaluating its operating performance and is a similar measure
reported by publicly-listed U.S. competitors, and regularly used by
security analysts, institutional investors, and other interested
parties in analyzing operating performance and prospects. By
providing this non-GAAP measure, the Company’s management intends
to provide investors with a meaningful, consistent comparison of
the Company’s profitability for the periods presented. Non-GAAP
operating expense is also included in this press release, which is
a non-GAAP financial measure. The Company’s management believes
non-GAAP operating expense is useful to investors and analysts as a
supplement to its financial information prepared in accordance with
GAAP for analyzing operating performance and identifying operating
trends in its business. The Company uses non-GAAP operating expense
internally to facilitate period-to-period comparisons and analysis
in order to make operating decisions. As required by the rules of
the SEC, the Company has provided herein a reconciliation of
Adjusted EBITDA and non-GAAP operating expense to the most directly
comparable measures under GAAP. Adjusted EBITDA and non-GAAP
operating expense are not intended to be substitutes for any U.S.
GAAP financial measures and, as calculated, may not be comparable
to other similarly titled financial measures of other companies in
other industries or within the same industry.
The Company defines and calculates Adjusted EBITDA as net loss
before interest expense, net; (benefit) or provision for income
taxes; depreciation and amortization, and other income or expense,
net; as further adjusted for stock-based compensation and other
special items determined by management, including, but not limited
to, change in fair value of common stock warrant liabilities,
acquisition-related expenses, impairment charges, loss contingency
accruals, restructuring charges and one-time nonrecurring expenses.
The Company defines and calculates non-GAAP operating expense as
GAAP operating expense adjusted for stock-based compensation,
one-time transaction expenses and other special items determined by
management, including, but not limited to acquisition-related
expenses for transactions costs, certain loss contingency accruals
and restructuring charges, as they are not indicative of business
operations.
The Company does not provide a reconciliation for non-GAAP
estimates on a forward-looking basis as it is unable to provide a
meaningful calculation or estimation of reconciling items and the
information is not available without unreasonable effort. This is
due to the inherent difficulty of forecasting the timing or amount
of various items that would impact the most directly comparable
forward-looking U.S. GAAP financial measures that have not yet
occurred, are out of the Company’s control and/or cannot be
reasonably predicted. Forward-looking non-GAAP financial measures
provided without the most directly comparable U.S. GAAP financial
measures may vary materially from the corresponding U.S. GAAP
financial measures.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the “safe harbor” provisions of the United States
Private Securities Litigation Reform Act of 1995. The Company’s
actual results may differ from its expectations, estimates, and
projections and, consequently, you should not rely on these
forward-looking statements as predictions of future events. Words
such as “expect,” “estimate,” “project,” “budget,” “forecast,”
“anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,”
“believes,” “predicts,” “potential,” “continue,” and similar
expressions (or the negative versions of such words or expressions)
are intended to identify such forward-looking statements.
These forward-looking statements involve significant risks and
uncertainties that could cause the Company’s actual results to
differ materially from those discussed in the forward-looking
statements. Most of these factors are outside of the Company’s
control and are difficult to predict. Factors that may cause such
differences include, but are not limited to: our ability to attract
and retain end-users, and do so in a cost-effective manner; a
failure to manage our growth effectively; our inability to achieve
profitability; our reliance on our third-party developer partners
to continue to offer a competitive experience in existing and new
games on our platform; our reliance on a limited number of games
for a substantial portion of our revenue; our reliance on
third-party service providers including cloud computing services,
payment processors, and infrastructure service providers, and our
ability to manage our relationships with such providers; our
ability to maintain our brand and reputation; competition in the
broader entertainment industry; our ability obtain, maintain,
protect or enforce our intellectual property rights; economic
downturns and political and market conditions beyond our control;
the occurrence of a data breach or other failure of our
cybersecurity; our failure to timely and effectively remediate the
material weaknesses in our internal controls over financial
reporting or additional material weaknesses or other deficiencies
in the future; our failure to mitigate the commercial, reputational
and regulatory risks to our business that may arise as a
consequence of our need to restate our financial statements1; as
well as other risks and uncertainties indicated from time to time
in the Company’s SEC filings, including those under “Risk Factors”
therein, which are available on the SEC’s website at www.sec.gov.
Additional information will be made available in other filings that
the Company makes from time to time with the SEC. In addition, any
forward-looking statements contained in this press release are
based on assumptions that the Company believes to be reasonable as
of this date. The Company undertakes no obligation to update any
forward-looking statements to reflect events or circumstances after
the date of this press release or to reflect new information or the
occurrence of unanticipated events, except as required by law.
Skillz Inc.
Consolidated Statements of
Operations and Comprehensive Loss
(in thousands, except for number
of shares and per share amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenue
$
36,427
$
59,216
$
120,975
$
222,837
Costs and expenses:
Cost of revenue
3,693
7,599
11,923
25,802
Research and development
7,852
7,937
24,757
44,840
Sales and marketing
31,925
51,480
99,510
242,556
General and administrative
24,389
20,936
78,080
140,540
Impairment of intangible assets and other
charges
—
51,230
455
51,230
Total costs and expenses
67,859
139,182
214,725
504,968
Loss from operations
(31,432
)
(79,966
)
(93,750
)
(282,131
)
Gain on extinguishment of debt
—
2,553
15,205
2,553
Interest expense, net
(2,279
)
(6,360
)
(7,486
)
(22,113
)
Change in fair value of common stock
warrant liabilities
127
(80
)
278
5,405
Other income, net
48
508
98
398
Loss before income taxes
(33,536
)
(83,345
)
(85,655
)
(295,888
)
Provision for (benefit from) income
taxes
9
(120
)
193
(488
)
Net loss
$
(33,545
)
$
(83,225
)
$
(85,848
)
$
(295,400
)
Net loss per share attributable to common
stockholders:
Basic and diluted
$
(1.57
)
$
(4.02
)
$
(4.05
)
$
(14.48
)
Weighted average shares outstanding:
Basic and diluted
21,305,470
20,691,704
21,175,797
20,396,317
Other comprehensive income (loss):
Change in unrealized loss on
available-for-sale investments, net of tax
135
139
1,526
(2,484
)
Total other comprehensive income
(loss):
135
139
1,526
(2,484
)
Total comprehensive loss
$
(33,410
)
$
(83,086
)
$
(84,322
)
$
(297,884
)
Skillz Inc.
Consolidated Balance
Sheets
(in thousands, except for number
of shares and par value per share amounts)
September 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
330,158
$
362,516
Marketable securities, current
4,800
127,268
Accounts receivable, net
9,265
7,177
Prepaid expenses and other current
assets
6,275
4,722
Total current assets
350,498
501,683
Non-current assets:
Property, plant and equipment, net
13,812
2,991
Operating lease right-of-use assets,
net
—
472
Marketable securities, non-current
2,058
56,728
Non-marketable equity securities
55,649
55,649
Restricted cash as other long-term
assets
2,920
2,920
Other long-term assets
3,182
852
Total non-current assets
77,621
119,612
Total assets
$
428,119
$
621,295
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
2,395
$
1,696
Operating lease liabilities, current
1,469
2,133
Other current liabilities
60,934
45,666
Total current liabilities
64,798
49,495
Non-current liabilities:
Operating lease liabilities,
non-current
10,874
11,942
Common stock warrant liabilities,
non-current
11
289
Long-term debt, non-current
123,535
272,781
Other long-term liabilities
1,167
8,387
Total non-current liabilities
135,587
293,399
Total liabilities
200,385
342,894
Stockholders’ equity:
Preferred stock $0.0001 par value; 10
million shares authorized — 0 issued and outstanding as of
September 30, 2023 and December 31, 2022
—
—
Common stock $0.0001 par value; 31 million
shares authorized; Class A common stock – 25 million shares
authorized; 18 million and 18 million shares issued and outstanding
as of September 30, 2023 and December 31, 2022, respectively; Class
B common stock – 6 million shares authorized; 3 million shares
issued and outstanding as of September 30, 2023 and December 31,
2022
41
41
Additional paid-in capital
1,186,686
1,153,031
Accumulated other comprehensive loss
(37
)
(1,563
)
Accumulated deficit
(958,956
)
(873,108
)
Total stockholders’ equity
227,734
278,401
Total liabilities and stockholders'
equity
$
428,119
$
621,295
Skillz Inc.
Consolidated Statement of Cash
Flows
(in thousands)
Nine Months Ended September
30,
2023
2022
Operating Activities
Net loss
$
(85,848
)
$
(295,400
)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
1,858
15,705
Stock-based compensation
33,610
97,368
Gain on extinguishment of debt
(15,205
)
(2,553
)
Accretion of unamortized debt discount and
amortization of debt issuance costs
1,815
2,930
Amortization of premium (accretion of
discount) for marketable securities
839
2,819
Deferred income taxes
—
(481
)
Change in fair value of common stock
warrant liabilities
(278
)
(5,405
)
Impairment charges
455
51,230
Noncash operating lease costs
17
1,145
Changes in operating assets and
liabilities:
Accounts receivable, net
(2,088
)
4,597
Prepaid expenses and other assets
(1,883
)
(2,247
)
Accounts payable
699
(14,020
)
Loss contingency accrual
—
(4,605
)
Operating lease liabilities
(1,732
)
(895
)
Other accruals and liabilities
8,255
(16,972
)
Net cash used in operating
activities
(59,486
)
(166,784
)
Investing Activities
Purchases of property and equipment,
including internal-use software
(12,081
)
(1,957
)
Investment in loan receivable
(2,000
)
—
Purchases of marketable securities
—
(432,873
)
Proceeds from maturities of marketable
securities
121,226
485,565
Proceeds from sales of marketable
securities
56,599
125,306
Net cash provided by investing
activities
163,744
176,041
Financing Activities
Principal payments on finance leases
obligations
(807
)
(2,044
)
Payments for debt issuance costs
—
(2,005
)
Payments for extinguishment of debt
(135,855
)
(7,540
)
Net proceeds from exercise of stock
options and issuance of common stock
46
852
Net cash used in financing
activities
(136,616
)
(10,737
)
Net change in cash, cash equivalents and
restricted cash
(32,358
)
(1,480
)
Cash, cash equivalents and restricted
cash – beginning of year
365,436
244,252
Cash, cash equivalents and restricted
cash – end of period
$
333,078
$
242,772
Supplemental cash flow data:
Cash paid during the period for:
Interest
$
12,261
$
15,420
Taxes
$
200
$
—
Skillz Inc.
Reconciliation of GAAP Net
Loss to Adjusted EBITDA
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net loss
$
(33,545
)
$
(83,225
)
$
(85,848
)
$
(295,400
)
Interest expense, net
2,279
6,360
7,486
22,113
Stock-based compensation(1)
12,440
6,058
33,610
97,368
Change in fair value of common stock
warrant liabilities
(127
)
80
(278
)
(5,405
)
Provision for (benefit from) income
taxes
9
(120
)
193
(488
)
Depreciation and amortization
486
4,587
1,858
15,705
Gain on extinguishment of debt
—
(2,553
)
(15,205
)
(2,553
)
Other income, net
(48
)
(508
)
(98
)
(398
)
Impairment charges(2)
—
51,230
455
51,230
Restructuring charges(3)
—
1,897
—
4,830
One-time nonrecurring expenses(4)
—
—
—
26
Adjusted EBITDA
$
(18,506
)
$
(16,194
)
$
(57,827
)
$
(112,972
)
(1)
For the three and nine months ended
September 30, 2022, amount includes stock-based compensation
recognized for the cancellation of the Chief Executive Officers’
award of 805,977 performance share units granted on September 14,
2021 (the “CEO Performance Stock Units”).
(2)
For the three and nine months ended
September 30, 2022, amount includes intangible asset impairment
charges related to developed technology and customer relationships
for our Aarki acquisition.
(3)
For the three and nine months ended
September 30, 2022, amount includes restructuring charges related
to employee termination benefits.
(4)
For the nine months ended September 30,
2022, amounts represent one-time nonrecurring expenses related to
IPO bonuses for certain employees, net of amounts forfeited by
terminated employees.
Skillz Inc.
Reconciliation of GAAP to
Non-GAAP Operating Expenses
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Research and development (1)
7,852
7,936
24,757
44,840
Less: stock-based compensation(7)
1,415
(2,088
)
3,581
3,063
Less: restructuring charges(6)
—
1,075
2,052
Non-GAAP research and development
$
6,437
$
8,949
$
21,176
$
39,725
Sales and marketing (2)
33,960
51,480
101,545
242,556
Less: stock-based compensation
2,482
2,125
6,478
6,579
Less: restructuring charges(6)
—
160
1,066
Non-GAAP sales and marketing
$
31,478
$
49,195
$
95,067
$
234,911
General and administrative (3)
24,389
20,936
78,080
140,540
Less: stock-based compensation(4)
8,543
6,022
23,552
87,726
Less: one-time nonrecurring
expenses(5)
—
—
26
Less: restructuring charges(6)
—
662
1,712
Non-GAAP general and administrative
$
15,846
$
14,252
$
54,528
$
51,076
(1)
Research and development expenses for the
three and nine months ended September 30, 2022 are different from
previously reported amounts as they have been adjusted to reflect a
net decrease of $0.7 million associated with corrections to
previously reported amounts.
(2)
Sales and marketing expenses for the three
and nine months ended September 30, 2022 are different from
previously reported amounts as they have been adjusted to reflect a
net increase of $.3 million associated with corrections to
previously reported amounts.
(3)
General and administrative expenses for
the three and nine months ended September 30, 2022 are different
from previously reported amounts as they have been adjusted to
reflect a net increase of $0.8 million associated with corrections
to previously reported amounts.
(4)
For the nine months ended September 30,
2022, amount includes stock-based compensation recognized for the
cancellation of the Chief Executive Officers’ award of 805,977
performance share units granted on September 14, 2021 (the “CEO
Performance Stock Units”).
(5)
For the nine months ended September 30,
2022, amounts represent one-time nonrecurring expenses related to
IPO bonuses for certain employees, net of amounts forfeited by
terminated employees.
(6)
For the three and nine months ended
September 30, 2022, amount includes restructuring charges related
to employee termination benefits.
(7)
For the three months ended September 30,
2022, amount includes stock compensation credits recognized for the
forfeitures of the CPO and other restricted stock units.
Skillz Inc.
Supplemental Financial
Information
(in millions, except ARPU and
ARPPU)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Gross marketplace volume (“GMV”)
(000s)(1)
$
241,146
$
360,364
$
774,007
$
1,344,707
Paying monthly active users (“PMAUs”)
(000s)(2)
168
320
193
437
Monthly active users (“MAUs”)
(000s)(3)
1,038
1,665
1,094
2,376
Average GMV per paying monthly active
user(4)
$
478.8
$
375.6
$
446.2
$
342.1
Average GMV per monthly active user(5)
$
77.5
$
72.1
$
78.6
$
62.9
Average revenue per paying monthly active
user (“ARPPU”)(6)
$
72.3
$
62.8
$
69.9
$
58.5
Average revenue per monthly active user
(“ARPU”)(7)
$
11.7
$
12.1
$
12.3
$
10.9
Paying MAU to MAU ratio
16
%
19
%
18
%
19
%
Average end-user incentives, included as
sales and marketing expense, per paying active user(8)
$
33.57
$
24.83
$
29.76
$
24.51
Average end-user incentives, included as
sales and marketing expense, per playing active user(9)
$
5.43
$
4.77
$
5.24
$
4.50
(1)
“GMV” or “Gross Marketplace Volume” means
the total entry fees paid by users for contests hosted on Skillz’s
platform. Total entry fees include entry fees paid by end-users
using cash deposits, prior winnings from end-users’ accounts that
have not been withdrawn, and end-user incentives used to enter paid
entry fee contests.
(2)
“Paying Monthly Active Users” or “PMAUs”
means the number of end-users who entered into a paid contest
hosted on Skillz’s platform at least once in a month, averaged over
each month in the period.
(3)
“Monthly Active Users” or “MAUs” means the
number of playing end-users who entered into a paid or free contest
hosted on Skillz’s platform at least once in a month, averaged over
each month in the period.
(4)
“Average GMV Per Paying Monthly Active
User” means the average GMV in a given month divided by Paying MAUs
in that month, averaged over the period.
(5)
“Average GMV Per Monthly Active User”
means the average GMV in a given month divided by MAUs in that
month, averaged over the period.
(6)
“Average Revenue Per Paying Monthly Active
User” or “ARPPU” means the average revenue in a given month divided
by Paying MAUs in that month, averaged over the period and does not
include a deduction for end-user incentives that are included in
sales and marketing expense.
(7)
“Average Revenue Per Monthly Active User”
or “ARPU” means the average revenue in a given month divided by
MAUs in that month, averaged over the period and does not include a
deduction for end-user incentives that are included in sales and
marketing expense.
(8)
Amount reflects the average end-user
incentives included in sales and marketing expense in a given month
divided by PMAUs in that month, averaged over the period.
(9)
Amount reflects the average end-user
incentives included in sales and marketing expense in a given month
divided by MAUs in that month, averaged over the period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108531573/en/
Investors: ir@skillz.com
or
James Leahy, Richard Land JCIR (212) 835-8500 or sklz@jcir.com
Media: press@skillz.com
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