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Why Skillz Stock Dropped After Earnings

By Rich Smith – Aug 4, 2021 at 12:13PM

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Sales edge out expectations, but losses triple in Q2.

What happened

Shares of mobile games platform Skillz (SKLZ -6.46%) are down 6.4% as of 11:30 a.m. EDT today, after the company missed earnings badly in its quarterly report released after market close yesterday.

Its second-quarter 2021 earnings weren't expected to be fantastic; analysts were looking for a $0.10-per-share loss. But the scale of the company's actual loss seems to have dismayed investors. Instead of $0.10 per share, Skillz lost more than twice that -- $0.21 per share.  

White arrow declining sharply atop a stock tickertape display bathed in red.

Image source: Getty Images.

So what

On the plus side, Skillz reported $89.5 million in sales for the quarter, more than the $88.2 million analysts had predicted and more than a 50% improvement over last year's Q2. The company, which went public in 2020 via a special purpose acquisition company (SPAC), also maintained last year's impressive 95% gross profit margin.  

Unfortunately, Skillz's costs rose even faster than its revenue -- up a coincidental 95%. With costs growing nearly twice as fast as sales, the company ended up not shrinking but tripling its quarterly generally accepted accounting principles (GAAP) loss per share, to $0.21.

Now what

The news isn't all bad. Skillz also updated its revenue guidance for the year to include sales from its recent acquisition of marketing platform Aarki. Incorporating that revenue stream, Skillz says it now expects to do $389 million in business this year -- ahead of Wall Street's predicted $376 million.

Whether the company can turn even this larger revenue haul into a profit this year, however, will depend entirely upon whether it can get its costs under control.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Skillz Inc. Stock Quote
Skillz Inc.
$0.89 (-6.46%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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