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Mobile game developer Skillz (NYSE:SKLZ) fell short of analysts' expectations in Q2 CY2024, with revenue down 37% year on year to $25.3 million. It made a GAAP profit of $1.44 per share, improving from its loss of $0.79 per share in the same quarter last year.
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Skillz (SKLZ) Q2 CY2024 Highlights:
- Revenue: $25.3 million vs analyst estimates of $26.43 million (4.3% miss)
- EPS: $1.44 vs analyst estimates of -$1.20 (outperformance came from a one-time litigation settlement)
- Gross Margin (GAAP): 86.8%, down from 90.9% in the same quarter last year
- Free Cash Flow of $27.41 million is up from -$4.92 million in the previous quarter
- Paying Monthly Active Users: 122,000, down 74,000 year on year
- Market Capitalization: $116.1 million
Taking a new twist at video gaming, Skillz (NYSE:SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.
Video GamingSince videogames were invented in the 1970s, they have gradually taken more share of entertainment time. Ubiquitous mobile devices have powered a surge in “snackable” games that can be played on the go. Over time, games have developed more social engagement features where friends can play games together over the internet. The business models of games publishers have become less volatile due to digitization of distribution, in game monetization, and like Hollywood, an increasing dependence on surefire hit franchises. Covid driven lockdowns accelerated adoption and usage of videogames – a trend that has not slowed.
Sales GrowthSkillz's revenue has been declining over the last three years, dropping on average by 19.2% annually. This quarter, Skillz reported a year on year revenue decline of 37%, missing analysts' expectations.
Ahead of the earnings results, analysts were projecting sales to grow 0.3% over the next 12 months.
Usage Growth As a video gaming company, Skillz generates revenue growth by expanding both the number of people playing its games as well as how much each of those players spends on (or in) their games.
Skillz has been struggling to grow its monthly active users, a key performance metric for the company. Over the last two years, its users have declined 48.1% annually to 122,000. This is one of the lowest rates of growth in the consumer internet sector.
In Q2, Skillz's monthly active users decreased by 74,000, a 37.8% drop since last year.
Revenue Per UserAverage revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Skillz because it measures how much revenue each user generates, which is a function of how much paying users spend on its games.
Skillz's ARPU growth has been strong over the last two years, averaging 9.8%. Although its monthly active users have shrunk during this time, the company's ability to successfully increase prices demonstrates its platform's enduring value for existing users. This quarter, ARPU grew 1.8% year on year to $69.40 per user.
Key Takeaways from Skillz's Q2 Results We struggled to find many positives in these results as its revenue and number of users missed analysts' estimates. Overall, this quarter could have been better. The stock remained flat at $6.32 immediately following the results.
