Skillz (SKLZ -0.45%) reported first-quarter 2022 financial results after the markets closed on Wednesday, May 4. The mobile-gaming company invested aggressively in sales and marketing, leading to massive losses on the bottom line. 

Shareholders know too well that this is a recurring theme from Skillz. The skills-based, video-game maker has been operating under this strategy -- but with limited success -- for several quarters. Management noted it would decrease marketing investments to a limited degree in 2022. Let's look closer at Skillz's Q1 2022 earnings. 

A person gaming.

Image source: Getty Images.

Even with aggressive marketing, it's still losing customers

In the first quarter, which ended March 31, Skillz reported revenue of $93.4 million. That was up 12% from the same quarter the year prior. Revenue growth is slowing for the gaming company that thrived at the pandemic's onset. As economies are reopening, Skillz is finding it difficult to sustain engagement.

It ended the quarter with 570,000 paying monthly active users. That was up from 470,000 at the same time last year, but lower than the 610,000 it boasted at the end of the previous quarter. The quarter-over-quarter decline is especially troubling considering the vast sums that Skillz is spending to draw users.

In the quarter ended in March, Skillz spent $117 million on sales and marketing expenses. In other words, it spent 125% of its revenue during this period. As was mentioned earlier, this is not a new feature for Skillz, which spent 115% of revenue on sales and marketing the same quarter the year prior. So even though management told investors it would be decreasing sales and marketing investment in 2022, it has so far increased spending both absolutely and in relation to revenue.

In management's defense, it was more specific when discussing marketing investments. The company disaggregates the spending between user acquisition and user engagement. For 2022, it said it would lower engagement revenue as a percentage of revenue. For user acquisition, it said it would decrease spending in total dollars.

Chart showing decline in Skillz' operating income since mid-2020.

SKLZ Operating Income (Quarterly) data by YCharts

Unfortunately for shareholders, regardless of how Skillz frames the picture, it is incurring massive losses on the bottom line. Its net loss increased to $148 million in Q1, up from $53.6 million a year earlier.

Skillz stock is cheaper than it's ever been 

The market has not been kind to Skillz. The stock is down a whopping 95% off the highs it reached in January 2021. Management is not entirely to blame for the sell-off; growth stocks in general have been out of favor in the marketplace and can be blamed for some of the fall. Nevertheless, management can also take some responsibility for maintaining aggressive spending on sales and marketing, leading to massive losses on the bottom line

Chart showing Skillz' PS ratio falling since early 2021.

SKLZ PS Ratio data by YCharts

The stock is trading at a price-to-sales ratio of 2.1, the lowest in its young history as a public company. Still, only the most risk-seeking investors should seek to catch this falling knife.