On August 1, 2024, Skillz Inc (SKLZ, Financial) released its 8-K filing detailing the financial results for the second quarter ended June 30, 2024. Skillz Inc, a mobile game development company, is engaged in re-inventing competitive mobile gaming and expanding the mobile gaming market.
Performance Overview
Skillz Inc reported revenue of $25.3 million for Q2 2024, falling short of the analyst estimate of $26.63 million. However, the company posted a net income of $26.0 million, significantly outperforming the estimated net income of -$1.35 million. This marks a notable turnaround from the net loss of $16.7 million in the same quarter last year.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenue | $25.3 million | $40.2 million |
| Gross Profit | $21.9 million | Not Provided |
| Net Income | $26.0 million | $(16.7) million |
| Adjusted EBITDA | $(12.6) million | $(18.9) million |
| Paying Monthly Active Users (PMAU) | 122,000 | 196,000 |
| Average Revenue Per Paying Monthly Active User (ARPPU) | $69.4 | $68.2 |
Financial Achievements and Challenges
Skillz Inc's gross profit for the quarter stood at $21.9 million, reflecting a strong margin despite the revenue shortfall. The company also reported a significant reduction in operating expenses, with total operating expenses excluding the cost of revenue amounting to $3.6 million. This disciplined cost management contributed to the improved net income.
However, the company continues to face challenges in user growth, with Paying Monthly Active Users (PMAU) declining to 122,000 from 196,000 in the same quarter last year. Despite this, the Average Revenue Per Paying Monthly Active User (ARPPU) increased slightly to $69.4, indicating higher monetization of the existing user base.
Commentary from Management
“Skillz’ second quarter results mark continued progress against our strategic initiatives to position the Company to deliver consistent revenue growth and positive cash flow,” said Andrew Paradise, Skillz’ CEO. “Progress in the second quarter includes our first quarterly sequential increase in Paying Monthly Average Users (pMAU) in ten quarters. During the quarter we also extended the pattern of the last several quarters of customer acquisition systemwide paybacks trending towards six months.”
Gaetano Franceschi, Skillz CFO, added, “The second quarter performance demonstrates our disciplined management of the business as reflected in the year-over-year declines in R&D, SG&A and G&A costs. Combined with the further optimization of our user acquisition spend, our fiscal discipline helped drive year over year and quarterly sequential improvements in our Adjusted EBITDA loss and quarterly operating cash burn.”
Income Statement Highlights
Skillz Inc reported a total revenue of $25.3 million for Q2 2024, a decrease from $40.2 million in Q2 2023. The cost of revenue was $3.3 million, leading to a gross profit of $21.9 million. Operating expenses saw a significant reduction, with research and development costs at $4.3 million, sales and marketing expenses at $20.8 million, and general and administrative expenses at $17.2 million. The company also recorded a gain from litigation settlement amounting to $46.0 million.
Balance Sheet and Cash Flow
As of June 30, 2024, Skillz Inc reported cash and cash equivalents of $316.4 million, up from $302.0 million at the end of 2023. The company’s total assets stood at $402.9 million, with total liabilities at $187.6 million. The strong balance sheet provides significant flexibility for future investments and strategic initiatives.
In terms of cash flow, Skillz Inc generated $23.4 million from operating activities, a significant improvement from the cash used in operating activities of $41.1 million in the same period last year. The company also reported net cash provided by investing activities of $2.2 million and net cash used in financing activities of $11.2 million.
Conclusion
Skillz Inc's Q2 2024 results highlight the company's ongoing efforts to streamline operations and improve profitability. While revenue fell short of expectations, the significant net income and disciplined cost management are positive indicators for the company's future performance. However, the decline in Paying Monthly Active Users remains a challenge that Skillz Inc will need to address to sustain long-term growth.
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Explore the complete 8-K earnings release (here) from Skillz Inc for further details.
