Q4 2024 Skillz Inc Earnings Call
Matt: Good afternoon, all. I would like to welcome you all to the Skillz Inc. 2024-4 quarter result call. My name is Matt, and I'll be moderating your call today.
Matt: All lines be muted during the presentation portion of the call from opportunity for questions and answers at the end. If you'd like to ask a question, press star one on your telephone keypad. I'm not the past conference, over to our host, Richard Land from J.C.I.R. to begin. Please go ahead.
Matt: Good afternoon and welcome to the skills fourth quarter earnings conference call. On the call to their Andrew Paradise, skills as co-founder and CEO and Gaetano Franceschi CFL. This afternoon skills issued its 2024 fourth quarter and full year results release, which is available on the company's investor relations website.
Speaker Change: Before I turn the call over to Andrew, please note that some of management's comments today will include forward-looking statements within the meeting of federal securities laws.
Speaker Change: Forward-looking statements, which are usually identified by the use of words such as will, expect, should, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Speaker Change: Therefore, you should exercise caution in interpreting and relying on them. We refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.
Speaker Change: During the call, management will discuss non-GAET measures, which it believes can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
Speaker Change: The reconciliation of these measures, to the most directly comparable Gaet measure, is available in the company's fourth quarter of 2024 earnings release.
Speaker Change: With that, I'll turn the collar over to Andrew for some opening remarks, followed by Gaetano for a discussion of our financial performance before we open the call for questions. Andrew, please go ahead.
Thank you, Richard, and good afternoon.
Speaker Change: Before turning to an update on the operational progress made against our four pillars, including the recently announced $75 million developer accelerator program, I want to review the strides we're making in our fair play initiative in key litigation matters.
Speaker Change: We remain active with our efforts to sound the alarm of the deception we believe some other companies are deploying to two players out of a fair gaming experience. We continue to work to ensure that all gaming companies in this space provide consumers with certainty that they're being matched with real players of similar skill.
Speaker Change: This is to ensure fair competition and is critical so this industry can survive and thrive as real money is on the line.
Speaker Change: Our proprietary platform delivers on this promise of fairness to players.
Speaker Change: We did not believe that's true for some of the biggest players in our space.
Speaker Change: We believe international companies, including ABA games, papyrid gaming and booted games, use bots to the sea players in the United States and international markets, into believing that competing against real human opponents, when in fact, they face predetermined gameplay or bots.
Speaker Change: The manipulation perpetrated by these companies alters match results to their advantage, defrauding American players of billions of harder-in-dollars.
Speaker Change: We continue to pursue aggressive actions to shape our fairness with the industry repaid the urge. We've filed lawsuits to protect our business interests as the use of bots by these companies has harmed our company as well as the interests of our stakeholders.
Speaker Change: The lawsuits we filed against Papaya and Boudou are ongoing in the Southern District of New York. As these lawsuits progress, these international companies will have to answer the U.S. law and the U.S. consumers that potentially defraud it. Of no class action lawsuits have also been filed by consumers against both ABA Games and Papaya Gaming.
Speaker Change: Beyond the lawsuits that have been filed, we continue to take steps to bring this matter to the attention of the legal and regulatory authorities. The level of money being defrauded from individuals is in the billions. We need to continue to bring this fraud to life.
Speaker Change: We will continue to do our part as we advocate for enhanced policies and legislation to strengthen the regulatory oversight of our space. This includes having regulatory authorities take the necessary actions to stop the billions of dollars of fraud stealing the harder and savings of American consumers.
Speaker Change: As the true pioneers and innovators in skill gaming, I'm highly confident that Skillz is capable of competing against any true skill-based gaming provider. That is, any provider that wants to compete on a fair playing field without the deceptive use of bot fraud.
Speaker Change: As a US-based public company, it's our conviction we should do this for the sake of all players which will ultimately benefit skills, our shareholders and more broadly our industry.
Speaker Change: Since we're the leading company that is non-gauge and consumer-bought fraud, the elimination of this practice should dramatically change, ultimately to capture our benefit. Turning
Speaker Change: In the quarter, we continue to work within our four key pillars for returning skills to consistent top line growth and positive adjusted EBITDA. Our efforts to achieve these goals are supported by our strong balance sheet and financial
Speaker Change: for our first pillar in hitting our platforms to improve consumer and developer engagement and retention.
Speaker Change: We've discussed on recent calls, our focus on a new product and constant pipeline. In line with this initiative, we recently announced our accelerator program to drive and deliver the best key innovation and expand the offerings on our platform.
Speaker Change: Our balance sheet provides the flexibility to deploy up to $75 million over the next three years for the accelerator program.
Speaker Change: This program will offer developers working capital, marketing and operational support to create the next generation of games for online and mobile gaming competition. Our goal is to support at least 25 high potential games with flexibility for more and other opportunities that need this vision.
Speaker Change: Since we announced the accelerator program, we've had a strong response from the developer community.
Speaker Change: Charles Secondpillar, Uploading Organization, and Q4, we further scaled our Las Vegas and Baylor-based teams. With stronger and has teams, we're better positioned to continue making consistent strides and optimize our product development, marketing, data, and analytics efforts.
Moving on to our third pillar, our go-to market.
Speaker Change: Paying users to the quarter had some variance with paying now of 110,000 in Q4 compared to 121,000 in Q3. However, we extended February of paying now of 123,000 in T-Mount has grown sequentially for three months in a row from November through February .
Speaker Change: Our focus remains on optimizing CAC and growing LTV. UAS Spend in Q4 consists of recent quarters and continues to be at a lowest level since 2018, that's where we made focus on scaling traffic strategically.
Speaker Change: In Q4, we continue to trend in line with recent system-wide payback periods, achieved through our focus on spending in the best channels.
Speaker Change: As we scale traffic, we'll do so in a manner that strives to keep our system light paid back periods near the timelines we achieved throughout most of 2024.
Speaker Change: I'll conclude my comments through the review of the progress on our fourth pillar, demonstrating a clear path to profitability.
Speaker Change: Throughout 2024 we made steady strides need to achieve our goal of ultimately generating adjusted EBITDA positive.
Speaker Change: Our full year adjusted even our loss, excluding litigation expenses, improved 9% compared to 2023.
Speaker Change: We remain focused on our expense management initiatives while contained in best in our business to generate top-line growth. We've consistently been achieving gradual improvements in our operating cash earn, which combined with our strong balance sheet provides us with a run-away to return our business to sustainable and profitable growth.
Speaker Change: Finally, I'll reiterate that our current valuation gives no way to the combined value of our operating platform and the progress we've made towards achieving our goals for our net cash position for that matter.
Speaker Change: as we execute our turnaround missions, we continue to believe our unique platform can generate significant returns for our shareholders. With that, I'll turn over to Gaetano.
Gaetano Franceschi: Thank you, Andrew, and good afternoon, everyone. Turning to the fourth quarter of financial results, revenue was 20 million, down 17% sequentially, and down 35% year over year.
Gaetano Franceschi: A paid user conversion rate, which is paying now divided by now.
was 14.6% in Q4, up from 14.3% in Q3.
Gaetano Franceschi: with both P now and now lower quarter over quarter. As Andrew indicated, we are seeing a rebound as paying now has grown sequentially for three months from November to February .
Gaetano Franceschi: Excluding all litigation expenses, operating expense was $60 million, a $3 million improvement versus a prior quarter. Research and development expense was $4 million, up 5% year over year, and excluding the impact of stock-based compensation was 16% of Q4 revenue.
Gaetano Franceschi: Sales and marketing expense was 19 million, down 18% year over year, and excluding the impact of stock-based compensation was 86% of Q4 revenue.
Gaetano Franceschi: Q4 UA marketing was $5 million while Q4 engagement marketing was $10 million. General and administrative expense was $21 million, up 11% year-over-year, and excluding the impact of stock-based compensation was 75% of Q4 revenue.
Gaetano Franceschi: Netloss of 26 million compared to a net loss of 16 million in Q4 2023. Adjusted the bit of loss in the fourth quarter was 19 million.
Gaetano Franceschi: Adjusted EBITDA loss for the full year was $60,000,000, compared to the adjusted EBITDA loss of $69,000,000 in 2023.
Gaetano Franceschi: We ended the year with 282 million of cash, comprised of 272 million cash and cash equivalents, and 10 million and restrictive cash. I remind everyone that as part of the last year's settlement of our patent infringement case with object games, we expect to receive 7.5 million from them before the end of this month.
Gaetano Franceschi: This is the first of the four annual payments we received from Abia, which is an addition to the 15 million payment we received the last April .
Gaetano Franceschi: At the end of Q4, we had 129.7 million of total principal due on our standing debt. With our improving cash burn, we have the flexibility to deploy capital to enhance the shareholder value. At this time, we'll turn the call back to the operator for the Q&A session.
Speaker Change: If you'd like to ask a question, please press star followed by one on your telephone keypad. If there's any reason you would like to remove that question, please press star followed by two.
Gaetano Franceschi: Again, to ask a question, press star one. As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking your question. We'll pause you briefly as questions are registered.
Gaetano Franceschi: There are currently no questions registered, so that will conclude the conference call. Thank you for your participation. You may now disconnect your lines.