What happened
Skillz (SKLZ -2.09%) stock is seeing big gains in Monday's trading. The gaming specialist's share price was up 18.3% as of 10:30 a.m. ET, according to data from S&P Global Market Intelligence.
Skillz published a press release this morning announcing that its board had authorized a $65 million buyback program for its Class A common stock. The company's board has also given the green light for management to explore buying back up to $65 million worth of outstanding debt notes.
So what
The company's recent buyback authorization signals that that its board likely believes its stock is undervalued. The authorization sets the stage for some significant stock repurchases in the near future and could help to establish a near-term floor for its share price.
Meanwhile, opening the door to buy back outstanding debt notes shows Skillz is interested in reducing interest expenses. The senior secured notes come due in 2026 and are yielding 10.25%. Buying them back presents a way for the company to cut down on interest payments. It also signals that the company is feeling stronger about its financial footing and may have better sources of funding.
Now what
Skillz stock has struggled over the last year. Even with today's pop, the company's share price is down roughly 73% over the last 12 months.
In the second-quarter report that it published at the beginning of this month, the company posted revenue of $40.2 million -- down from $71.8 million in the prior-year quarter. While the company's net loss narrowed from $62.6 million to $22 million, its gross profit declined from $62.8 million to $36.5 million.
On the other hand, the company did reduce its outstanding debt by $159.8 million in the quarter to bring the figure to $129.7 million. It looks like the company is leaning toward continuing to pay down debt in order to reduce interest expenses.
With a cash-and-marketable securities position totaling $361.4 million at the end of last quarter, Skillz has the flexibility to make moves along those lines. But the company will still need to find ways to reenergize growth and improve margins if it's going to be viable over the long term.
