Shares of Skillz (SKLZ 2.44%) plunged 20% on Thursday after the mobile gaming company's mounting losses alarmed investors.
Skillz's revenue rose 61% year over year to $108.8 million in the fourth quarter. The gains were driven by a 56% rise in paying monthly active users to 0.6 million and a 3% increase in average revenue per paying user to $59.
However, Skillz was forced to spend heavily to attract and retain those users. The company's sales and marketing expenses surged 95% to $155 million, outpacing its revenue by a startling 42%.
All told, Skillz generated an operating loss of $104 million and a net loss of $99 million, or $0.25 per share. That compares to operating and net losses of $43 million and $67 million, respectively, in the year-ago period. Skillz's net loss per share was also significantly worse than Wall Street's estimates, which called for a per-share loss of $0.15.
Management's forecast for 2022 likely added to investors' concerns. Skillz guided for full-year revenue of $400 million, representing year-over-year growth of only 4%. The company also projected another year of heavy losses, including an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of negative 37%.
Additionally, CEO Andrew Paradise said Skillz would dial back its spending to improve profitability.
"Last year, we made substantial investments in our infrastructure necessary to build the competition layer of the Internet," Paradise said in a press release. "We are now entering a new phase, where we will shift focus to profitable growth through improving marketing efficiency, and deploying fewer but more impactful product features."
Judging by today's decline, investors don't believe the spending cuts will be enough to help Skillz achieve the level of profitability they'd anticipated. They're now far less confident in the struggling-company's growth prospects.