Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skillz Inc (SKLZ, Financial) reported a sequential increase in paying monthly average users for the first time in 10 quarters, reaching 122,000 in Q2 2024.
- The company achieved a 33% year-over-year improvement in adjusted EBITDA loss, reducing it to $12.6 million in Q2 2024.
- Skillz Inc (SKLZ) has a strong balance sheet with $300.6 million in cash and cash equivalents, providing a runway for sustainable and profitable growth.
- The company is making progress in its Fairplay initiatives and litigation efforts to combat fraudulent practices in the skill-based gaming industry.
- Skillz Inc (SKLZ) continues to optimize its expense management, with Q2 2024 operating expenses excluding cost of sales and NBA games segment declining by $6 million from Q1 2024.
Negative Points
- Skillz Inc (SKLZ) experienced a 37% year-over-year decline in revenue, reporting $25 million in Q2 2024.
- The company has faced delays in filing its Form 10-K for the fiscal year ended December 31, 2023, and its Form 10-Q for the fiscal quarter ended March 31, 2024, resulting in non-compliance with NYSE listing standards.
- Despite some progress, the company acknowledges it will be difficult to achieve its goal of generating a positive adjusted EBITDA run rate by late 2024, now targeting 2025.
- Skillz Inc (SKLZ) continues to face challenges with onboarding new players and launching new product features, impacting its growth trajectory.
- The company is dealing with significant legal expenses related to lawsuits against companies using bots, which affected its adjusted EBITDA.
Q & A Highlights
Q: Great to hear you have the confidence to return and spending more on growth marketing. Can you just walk through what drove that decision and how you're going to measure the effectiveness of that spend?
A: We've been pushing to get to our six-month payback on deployed capital. We are running right about that right now. Our top focus is expanding on the channels where we're running that level of payback and maintaining it. We're targeting a six to eight-month payback period, allowing some fluctuation upwards as we scale budget but being controlled. Nothing like a 12-month payback would be acceptable.
Q: The mobile gaming industry is having a better year this year compared to the last couple. Are you guys seeing that on your own platform and what has the macro mobile industry looking for where you guys sit?
A: We are seeing some level of stabilization in our business. We're focused on scaling our digital marketing and building new features to engage and retain customers. However, the amount of bot fraud in our sector is influencing our performance. We're making progress on combating bot fraud, which we believe will change the landscape for our company in the next couple of quarters.
Q: Can you provide an update on your litigation efforts against companies using bots?
A: We executed a settlement agreement with a big games for $80 million. However, we remain concerned that they have not altered their behavior regarding the use of bots. We filed a lawsuit against Ludo games last month, alleging similar practices. We're committed to uncovering and combating fraudulent practices to preserve the industry's value and protect stakeholders.
Q: What progress have you made on your four key pillars for returning Skillz to consistent top-line growth and positive adjusted EBITDA?
A: We achieved moderate progress in Q2, including an increase in paying monthly average users to 122,000. We made positive strides with expense management, reducing OpEx by $6 million from Q1. We also continued to trend toward a six-month system-wide payback period and made progress on enhancing our platform and up-leveling the organization.
Q: Can you discuss the financial performance for Q2 2024?
A: Second-quarter revenue was $25 million, down 37% year-over-year and flat sequentially. Our adjusted EBITDA loss improved year-over-year, with a net loss of $12.6 million compared to $18.9 million in Q2 2023. Excluding legal expenses related to lawsuits, our adjusted EBITDA loss would have been $9.8 million. We ended Q2 with cash and cash equivalents of $300.6 million.
Q: What are your expectations for achieving a positive adjusted EBITDA run rate?
A: Given the challenges in Q1 and the lack of meaningful progress on launching new products in Q2, we now expect it will be difficult to achieve our goal of generating a positive adjusted EBITDA run rate by late this year. However, we remain optimistic that we can achieve this goal in 2025.
Q: How are you addressing the issue of bot fraud in the industry?
A: We're committed to uncovering and combating fraudulent practices. We believe eliminating bot fraud will dramatically change LTV to CAC to our benefit. We're advocating for enhanced policies and legislation to strengthen regulatory oversight and are hopeful that government authorities will take quick actions to protect consumers.
Q: Can you elaborate on the progress made with your new product pipeline?
A: In Q2, we made limited progress, including further development of our live brackets feature, which received a strong response at GDC. We're now working to refine this feature before its official release later this year. We also continued to see benefits from enhancements to our live ops capabilities and created a VIP conversion program to grow our VIP population.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
