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 second quarter
ended June 30, 2023.
2023 Second Quarter Financial Highlights:
- Revenue of $40.2 million compared to $71.8 million in Q2
2022
- Gross profit of $36.5 million compared to $62.8 million in Q2
2022
- Net loss of $(22.0) million compared to $(62.6) million in Q2
2022
- Adjusted EBITDA1 of $(20.2) million compared to $(34.0) million
in Q2 2022
- Paying monthly active users (PMAU)2 of 200,000 compared to
420,000 in Q2 2022
- Average Revenue Per Paying Monthly Active User (ARPPU)3 of
$68.18 compared to $56.79 in Q2 2022
- Total operating expenses of $72.1 million compared $118.9
million in Q2 2022
- Cash, cash equivalents, and marketable securities of $361.4
million as of June 30, 2023
- Reduced outstanding debt by $159.8 million resulting in total
outstanding debt as of June 30, 2023 of $129.7 million
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 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.
“The second quarter was a productive period for Skillz marked by
further progress against our strategic initiatives with a focus on
developing an array of new product features that will increase
consumer engagement and retention. Additionally, we've focused on
optimizing our user acquisition strategy to enhance developer
success and attract new content onto the platform,” said Andrew
Paradise, Skillz’ CEO. “Importantly, in June we rolled out an
exciting new feature which offers daily challenges on our two
highest revenue producing games as part of a robust 18-month new
product pipeline which will support timely new feature
introductions going forward. We expect the regular introduction of
new features will be a key driver of user retention, engagement and
monetization. We also made notable progress throughout the second
quarter in continuing to improve user acquisition spend and are
confident we are on track towards achieving our optimized goal of a
six-month payback period.”
Jason Roswig, President and CFO, added, “Our prudent management
of the business resulted in a quarterly cash burn rate in Q2 of
approximately $14.6 million with our June 30 cash position
(including marketable securities) of approximately $361.4 million.
As a result, we have the flexibility to invest in new product
features for our platform that will drive increased scale in our
business and attractive top-line and cash flow growth. At the same
time, our solid balance sheet and capital structure provides us
with significant optionality to deploy resources to enhance
shareholder value. In this regard, during the second quarter, we
opportunistically re-purchased $159.8 million in outstanding debt
at a discount resulting in total debt as of June 30, 2023 of $129.7
million.”
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 Second 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 is available at investors.skillz.com.
An audio replay of the conference call will be available through
Wednesday, August 9, 2023, and can be accessed by dialing 1 (866)
813-9403 (US) or +44 204 525 0658 (international) and entering the
passcode 307086. A replay of the webcast will be archived on the
Company’s investor relations website.
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
$
40,166
$
71,757
$
84,549
$
163,621
Costs and expenses:
Cost of revenue
3,650
9,003
8,232
18,203
Research and development
8,966
18,253
17,847
36,903
Sales and marketing
33,085
73,731
68,003
191,076
General and administrative
30,098
26,881
58,168
119,604
Total costs and expenses
75,799
127,868
152,250
365,786
Loss from operations
(35,633
)
(56,111
)
(67,701
)
(202,165
)
Gain on extinguishment of debt
15,205
—
15,205
—
Interest expense, net
(1,712
)
(7,596
)
(5,207
)
(15,753
)
Change in fair value of common stock
warrant liabilities
152
1,023
151
5,485
Other income (expense), net
11
(82
)
50
(109
)
Loss before income taxes
(21,977
)
(62,766
)
(57,502
)
(212,542
)
Provision (benefit) from income taxes
10
(155
)
79
(367
)
Net loss
$
(21,987
)
$
(62,611
)
$
(57,581
)
$
(212,175
)
Net loss per share attributable to common
stockholders:
Basic and diluted
$
(1.05
)
$
(3.07
)
$
(2.75
)
$
(10.48
)
Weighted average shares outstanding:
Basic and diluted
20,990,780
20,407,887
20,939,723
20,246,176
Other comprehensive income (loss):
Change in unrealized loss on
available-for-sale investments, net of tax
394
(577
)
1,391
(2,623
)
Total other comprehensive income
(loss):
394
(577
)
1,391
(2,623
)
Total comprehensive loss
$
(21,593
)
$
(63,188
)
$
(56,190
)
$
(214,798
)
Skillz Inc.
Consolidated Balance
Sheets
(in thousands, except for number
of shares and par value per share amounts)
June 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
324,779
$
362,516
Marketable securities, current
27,319
127,268
Accounts receivable, net
9,658
7,177
Prepaid expenses and other current
assets
6,038
4,722
Total current assets
367,794
501,683
Non-current assets:
Property, plant and equipment, net
13,437
2,991
Operating lease right-of-use assets,
net
164
472
Marketable securities, non-current
6,097
56,728
Non-marketable equity securities
55,649
55,649
Restricted cash as other long-term
assets
3,176
2,920
Other long-term assets
1,072
852
Total non-current assets
$
79,595
$
119,612
Total assets
$
447,389
$
621,295
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
4,195
$
1,696
Operating lease liabilities, current
1,786
2,133
Other current liabilities
58,339
45,666
Total current liabilities
64,320
49,495
Non-current liabilities:
Operating lease liabilities,
non-current
11,174
11,942
Common stock warrant liabilities,
non-current
138
289
Long-term debt, non-current
123,148
272,781
Other long-term liabilities
1,138
8,387
Total non-current liabilities
135,598
293,399
Total liabilities
199,918
342,894
Stockholders’ equity:
Preferred stock $0.0001 par value; 10.0
million shares authorized — 0 issued and outstanding as of June 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 June 30, 2023 and December 31, 2022, respectively; Class B
common stock – 6 million shares authorized; 3 million shares issued
and outstanding as of June 30, 2023 and December 31, 2022
41
41
Additional paid-in capital
1,178,290
1,153,031
Accumulated other comprehensive loss
(172
)
(1,563
)
Accumulated deficit
(930,688
)
(873,108
)
Total stockholders’ equity
247,471
278,401
Total liabilities and stockholders'
equity
$
447,389
$
621,295
Skillz Inc.
Consolidated Statement of Cash
Flows
(in thousands)
Six Months Ended June
30,
2023
2022
Operating Activities
Net loss
$
(57,581
)
$
(212,175
)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
1,372
11,384
Stock-based compensation
25,192
91,310
Gain on extinguishment of debt
(15,205
)
—
Accretion of unamortized debt discount and
amortization of debt issuance costs
1,428
2,016
Amortization of premium (accretion of
discount) for marketable securities
591
2,781
Deferred income taxes
—
(481
)
Change in fair value of common stock
warrant liabilities
(151
)
(5,485
)
Impairment charges
455
—
Changes in operating assets and
liabilities:
Accounts receivable, net
(2,481
)
2,530
Prepaid expenses and other assets
(1,792
)
(5,076
)
Operating lease right-of-use assets,
net
308
1,197
Accounts payable
2,499
(17,223
)
Operating lease liabilities
(1,115
)
(1,087
)
Other accruals and liabilities
5,423
(14,705
)
Net cash used in operating
activities
(41,057
)
(145,014
)
Investing Activities
Purchases of property and equipment,
including internal-use software
(11,622
)
(346
)
Purchases of marketable securities
—
(327,504
)
Proceeds from maturities of marketable
securities
98,903
325,078
Proceeds from sales of marketable
securities
52,477
79,084
Net cash provided by investing
activities
139,758
76,312
Financing Activities
Principal payments on finance leases
obligations
(394
)
(1,495
)
Payments for debt issuance costs
—
(1,998
)
Payments for extinguishment of debt
(135,855
)
—
Net proceeds from exercise of stock
options and issuance of common stock
67
852
Net cash used in financing
activities
(136,182
)
(2,641
)
Net change in cash, cash equivalents and
restricted cash
(37,481
)
(71,343
)
Cash, cash equivalents and restricted
cash – beginning of year
365,436
244,252
Cash, cash equivalents and restricted
cash – end of period
$
327,955
$
172,909
Supplemental cash flow data:
Cash paid during the period for:
Interest
$
12,211
$
15,097
Noncash investing and financing
activities:
Deferred offering costs and issuance costs
in accounts payable and accrued liabilities
$
—
$
(7
)
Skillz Inc.
Reconciliation of GAAP Net
Loss to Adjusted EBITDA
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net loss
$
(21,987
)
$
(62,611
)
$
(57,581
)
$
(212,175
)
Interest expense, net
1,712
7,596
5,207
15,753
Stock-based compensation(1)
14,644
13,431
25,192
91,310
Change in fair value of common stock
warrant liabilities
(152
)
(1,023
)
(151
)
(5,485
)
Provision (benefit) from income taxes
10
(155
)
79
(367
)
Depreciation and amortization
745
5,846
1,372
11,384
Gain on extinguishment of debt
(15,205
)
—
(15,205
)
—
Other income (expense), net
(11
)
82
(50
)
109
Restructuring charges(2)
—
2,933
—
2,933
One-time nonrecurring expenses(3)
—
(93
)
—
26
Adjusted EBITDA
$
(20,244
)
$
(33,994
)
$
(41,137
)
$
(96,512
)
(1)
For the three and six months ended June
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 six months ended June
30, 2022, amount includes restructuring charges related to employee
termination benefits.
(3)
For the three and six months ended June
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Research and development (1)
8,966
18,253
17,847
36,903
Less: stock-based compensation
545
2,863
1,751
5,151
Non-GAAP research and development
$
8,421
$
15,390
$
16,096
$
31,752
Sales and marketing (2)
33,085
73,731
68,003
191,076
Less: stock-based compensation
2,509
1,561
4,413
4,454
Non-GAAP sales and marketing
$
30,576
$
72,170
$
63,590
$
186,622
General and administrative (3)
30,098
26,881
58,168
119,604
Less: stock-based compensation(4)
11,590
9,007
19,028
81,705
Less: one-time nonrecurring
expenses(5)
—
93
—
(26
)
Non-GAAP general and administrative
$
18,508
$
17,781
$
39,140
$
37,925
(1) Research and development expenses for
the three and six months ended June 30, 2022 are different from
previously reported amounts as they have been adjusted to reflect a
net decrease of $0.3 million associated with corrections to
previously reported amounts.
(2) Sales and marketing expenses for the
three and six months ended June 30, 2022 are different from
previously reported amounts as they have been adjusted to reflect a
net increase of $6 million associated with corrections to
previously reported amounts.
(3) General and administrative expenses
for the three and six months ended June 30, 2022 are different from
previously reported amounts as they have been adjusted to reflect a
net increase of $0.1 million associated with corrections to
previously reported amounts.
(4) For the six months ended June 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 six months ended June 30,
2022, amounts represent one-time nonrecurring expenses related to
IPO bonuses for certain employees, net of amounts forfeited by
terminated employees.
Skillz Inc.
Supplemental Financial
Information
(in millions, except ARPU and
ARPPU)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Gross marketplace volume (“GMV”)
(000s)(1)
$
255,229
$
432,209
$
532,861
$
984,343
Paying monthly active users (“PMAUs”)
(000s)(2)
196
421
205
495
Monthly active users (“MAUs”)
(000s)(3)
1,068
2,234
1,122
2,732
Average GMV per paying monthly active
user(4)
$
433.3
$
342.1
$
865.6
$
662.7
Average GMV per monthly active user(5)
$
79.7
$
64.5
$
158.3
$
120.1
Average revenue per paying monthly active
user (“ARPPU”)(6)
$
68.2
$
56.8
$
68.7
$
55.3
Average revenue per monthly active user
(“ARPU”)(7)
$
12.5
$
10.7
$
12.6
$
10.1
Paying MAU to MAU ratio
18
%
19
%
18
%
18
%
Average end-user incentives, included as
sales and marketing expense, per paying active user(8)
$
29.08
$
24.88
$
23.38
$
23.38
Average end-user incentives, included as
sales and marketing expense, per playing active user(9)
$
5.35
$
4.69
$
10.32
$
4.24
(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/20230802556235/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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