Q1 2025 Skillz Inc Earnings Call
Today are Andrew Paradise skills, as co founder and CEO and Gate tunnel Francesca <unk> CFO.
Afternoon skills issued its 2025 first quarter release.
Available on the Companys Investor Relations website.
The company is in the process of completing its unaudited interim financial statements and other disclosures for the fiscal quarter ended March 31 2025.
Accordingly, we are announcing preliminary results for the first quarter, which are based on currently available information and are subject to revision.
Actual results may differ from these preliminary financial results and other financial information as final adjustments and developments may arise between now and the time the results are finalized in.
In the event the company determined it will not file its quarterly report on Form 10-Q by their prescribed deadline, we will file with the Securities and Exchange Commission and extension on form <unk> 25, which may include further disclosure.
The company is also completing the financial statements and other disclosures for the year ended December 31 2024.
We were unable to file the Form 10-K during the requisite extension period.
We previously announced we received a notice from the NYSE that company was not in compliance with its listing standards. The company is working diligently to complete the necessary work to file the Form 10-K as soon as practicable and currently expects to file the Form 10-K within the six month period granted by the NYSE notice and intends to.
Take all necessary steps to achieve compliance with applicable NYSE listing standards as soon as practicable.
Before I turn the call over to Andrew. Please note that managements comments today may include forward looking statements within the meaning of federal Securities laws.
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.
Therefore, you should exercise caution in interpreting and relying on them. We refer you to the company's SEC filings for more detailed discussion of the risks that could impact future operating results and financial condition.
During the call management will discuss non-GAAP financial 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.
Reconciliation of these measures to the most directly comparable GAAP measure is available in the company's first quarter 2025 earnings release with that I'll turn the call over to Andrew for some opening remarks, followed by gate tunnel for a discussion of our financial performance before we open the call for questions Andrew.
Andrew: Thank you Richard and good afternoon before turning to an update on the operational progress made against our four pillars I wanted to first update you on our carefully initiative related litigation.
Andrew: As we've discussed on previous calls these matters are central to protecting consumers and the integrity of their industry.
Andrew: We remain active with their efforts to sound the alarm that all come into this space must provide consumers with certainty that they are being matched with real players as we've highlighted for over a year. This is an industry wide issue.
Andrew: Our proprietary popcorn strides to deliver on this promise of fairness players.
Andrew: Billions of dollars are at stake in the long term health of our industry depends on building Trust.
Andrew: We believe international companies such as ADR gains.
Andrew: Gaming and video games have used or are using box to the seed players around the world. As a result, we believe players are being tricked into playing against fostering DJ and predetermined gameplay.
Andrew: We also believe our business has been harmed by these actions.
Andrew: To protect our business interests as well as the interest of our stakeholders, we've filed lawsuits against the pylon vudu.
Andrew: These lawsuits are ongoing in the Southern District Court of New York and as these cases progress is international companies will have to answer under U S law.
Andrew: Regarding our litigation with supplier discovery is ongoing continues to be subject to a protective order. However, the following factors public which comes through a recent unsealed ruling.
Andrew: The presiding judge in this case noted as documented in their ruling and I quote.
Andrew: In recent depositions, none of put highest individual deposition witnesses denies the historic answer bot.
Andrew: And they all have started their fifth amendment rights against self incrimination, rather than testifying to any potentially disputed facts and quote.
Andrew: I also remind you that the class action lawsuits have been filed by consumers against both avian PAPAYA.
Andrew: In light of the allegations that information revealed in our litigation thus far we encourage authorities to take all necessary actions to stop what we believe amounts to billions of dollars of fraud targeting U S consumers.
Andrew: As a U S based public company and the pioneer of this space, we're committed to leveling the playing field, we're confident in our ability to compete against any legitimate skill based gaming provider that operates fairly and transparently.
Andrew: Our goal is to protect players support a healthy industry and stem the tide of what we view as billions of dollars being stolen by bad actors in this industry, which we believe will benefit our shareholders now.
Andrew: Now turning to the Q1 performance.
Andrew: In the quarter, we continue to work within our four key pillars to return 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 position.
Andrew: For our first pillar enhancing our platform to improve consumer and developer engagement retention.
Andrew: We have discussed on recent calls our focus on the new product and content pipeline in February we launched our accelerator program to drive innovation skills can access the best games and expand our offerings.
Andrew: The accelerator program is focused on identifying the next generation of skill based mobile games by expanding beyond casual skill games and pushing into new genres are attempting to broaden the scope of competitive gaming.
Andrew: Our balance sheet provides the flexibility to deploy up to $75 million over the next three years to support at least 25 high potential gains.
Andrew: <unk> had a strong response from developers to date with many compelling partners in the pipeline.
Andrew: As we continue to evaluate games through our accelerator program, we're prioritizing both new genres as well as fresh takes an established genre for skill based gaming.
Andrew: So it's become very clear to US is there is a tremendous level of creativity in the industry.
Andrew: Momentum around this initiative helped make the recent game developer conference one of our most successful to date in terms of the developer engagement.
Andrew: For our second pillar up leveling the organization in Q1, we continued to scale and optimize our Las Vegas, and Bangalore based teams with stronger in house teams, we're better positioned to continue making consistent strides in optimizing our product development marketing and analytics efforts.
Andrew: Moving on to our third pillar our go to market.
Andrew: We had positive improvement in paying users for the quarter paying miu. Our monthly active users for Q1 was 123000 compared to 110000 in Q4 2020 for.
Andrew: The growth in <unk> was primarily driven by marketing to our lapsed users, which is cost effective to reengage.
Andrew: However, we anticipate their spend to ramp over time, and we continue to prioritize increasing player spend through new features and new offerings.
Andrew: We also continue to prioritize optimizing CAC and growing LTV.
Andrew: <unk> spend in Q1 was consistent with recent quarters, we remain focused on scaling traffic strategically.
Andrew: Lastly on the progress on the fourth pillar, demonstrating a clear path to profitability in.
Andrew: In Q1, we continued to make steady strides needed to achieve our goal of ultimately generating positive adjusted EBITDA.
Andrew: We remain focused on managing expenses, while continuing to invest in our business to generate top line growth.
Andrew: We have achieved gradual improvements in our operating cash burn, which combined with our strong balance sheet provides us with the runway to return our business to sustainable and profitable growth.
Andrew: I'll conclude my comments and reiterate that our current valuation gives no weight to the combined value of our operating platform and the progress we've made towards achieving our goals.
Andrew: Our net cash position.
Andrew: As we execute on our turnaround initiatives. We continue to believe our unique platform can generate significant returns for our shareholders.
Speaker Change: And with that I'll turn it over to <unk>.
Speaker Change: Thank you Andrew and good afternoon, everyone.
Speaker Change: Turning to the first quarter financial results revenue was $22 million up 21% sequentially and down 11% year over year <unk>.
Speaker Change: Excluding a $1 6 million life to date incentive adjustment in Q4 revenue grew 12% sequentially. Our paid user conversion rate, which is paying now divided by MAU was 16, 2% in Q1 up from 14, 6% in Q4, 2024, with both <unk> and mol higher quarter over.
Speaker Change: Quarter.
Research and development expense was $5 million up 4% year over year sales and marketing expense was $19 million down 9% year over year Q1, UA marketing was $4 million, while Q1 engagement marketing was $9 million.
Speaker Change: General and administrative expense was $16 million down 29% year over year and excluding the impact of stock based compensation was $12 million net loss of $15 million compares to a net loss of $27 million in prior year.
Speaker Change: Adjusted EBITDA loss in the first quarter was $50 million compared to an adjusted EBITDA loss of $90 million in Q4 2024.
Speaker Change: We ended the first quarter with 264 million of cash comprised of $254 million in cash and cash equivalents and $10 million in restricted cash our cash position as of March 31 includes the $7 5 million payment. We received from other games as part of last year's settlement of a patent infringement case with us.
Speaker Change: This was the first of the four annual payments, we will receive from RVO, which is in addition to the 50 million payment. We received last April at the end of Q1, we had $129 7 million of total principal due on our outstanding debt with our improving cash burn we have the flexibility to deploy capital to enhance shareholder value at this time.
Speaker Change: I will turn the call back to the operator for the Q&A session.
Speaker Change: Thank you.
Speaker Change: We will now begin the Q&A session. Thank you.
Speaker Change: I'd like to ask a question. Please press star one.
Speaker Change: Pat.
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Speaker Change: Susan Sholtis shortly is it mutates lately.
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Speaker Change: I just want to ask a question.
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Speaker Change: Okay.
Speaker Change: Mccann, we have my questions participants that is now the <unk> session.
Speaker Change: Today's call.
Thank you for joining everyone. You may now disconnect your lines.
Speaker Change: [music].