Key Points
- GAAP EPS of $1.47 beat the analyst estimate of ($1.20) thanks to a one-time litigation settlement.
- Paying monthly active users of 122,000 is down 74,000 year over year.
- Significant cost reductions in R&D, sales, and marketing, and G&A helped improve operating margins.
Mobile game tournament platform Skillz (SKLZ +53.57%)reported mixed second-quarter earnings on Thursday.
The company posted a GAAP EPS of $1.47, surpassing the analyst estimate of a $1.20 loss thanks to a non-recurring legal settlement. Revenue of $25.3 million missed analyst estimates and was down 37% year over year, indicating ongoing challenges.
While cost management initiatives showed improvements, the company's revenue trend and user engagement remain critical areas of concern.
| Metric | Q2 2024 | Analyst Estimate | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $25.3 million | $26.4 million | $40.2 million | (37%) |
| GAAP EPS (loss) | $1.47 | ($1.20) | ($0.79) | N/A |
| Net income (loss) | $26.0 million | N/A | ($16.7 million) | N/A |
| Adjusted EBITDA (loss) | ($12.6 million) | N/A | ($18.9 million) | N/A |
| PMAUs | 122,000 | N/A | 196,000 | (37.8%) |
| ARPPU | $69.40 | N/A | $68.20 | 1.8% |
Source: Skillz. Note: Analyst consensus estimate provided by FactSet. YOY = Year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization. PMAU = Paying monthly active users. ARPPU = Average revenue per paying monthly active user.
Business Overview
Skillz, known for its competitive tournament platform for mobile games, connects players worldwide who compete for real money prizes. It stands out due to its unique business model and high gross profit margins. Recently, Skillz has focused on driving user engagement and cost management to improve profitability. Key success factors include enhancing platform features and optimizing customer acquisition and retention strategies.
Quarterly Performance Highlights
Skillz management has been focused on cost improvements to stem ongoing losses. R&D expenses of $4.3 million were nearly halved year over year while sales and marketing costs dropped to $20.8 million from $32.7 million in Q2 2023. General and administrative expenses also decreased to $17.2 million from $26.1 million. These initiatives are real efforts to improve operational efficiency.
The GAAP EPS of $1.47 showed significant progress, but it was largely due to a $43 million jury award and subsequent $80 million settlement with AviaGames.
The user base saw some challenges, with Paying Monthly Active Users (PMAUs) down nearly 38% year over year from 196,000 to 122,000. On a positive note, there was a slight sequential increase from 121,000. Average revenue per paying monthly active user (ARPPU) increased to $69.40 from $68.20, indicating improved monetization.
Regulatory and compliance issues persist, with delays in filing critical forms affecting the company's standing with the New York Stock Exchange. This adds uncertainty and potential risk for investors. Skillz's market capitalization now stands at $112 million.
Looking Ahead
Management didn't provide specific guidance for Q3. Management's outlook indicates a focus on turnaround efforts, aiming for positive adjusted EBITDA by late 2024. The strategies include enhancing platform engagement, optimizing resource allocation, and implementing new features like Instant Match and Live Brackets.
Investors should watch for developments in user engagement metrics and top-line growth, as these will be critical for long-term stability. Any updates on regulatory compliance and further cost management measures will also be essential to monitor.
