Skillz Inc. (SKLZ) Q2 2025 Earnings Call Transcript

Skillz (NYSE:SKLZ) reported preliminary Q2 2025 results, with revenue reaching $27 million (up 22% sequentially excluding one-time adjustments) and paying MAU increasing 18% sequentially to 146,000, marking a seven-quarter high. Adjusted EBITDA loss improved to $10 million, signaling progress towards profitability. Operational highlights include platform enhancements, a $75 million developer program, and accelerating revenue growth from its Aarki ad tech unit. Concurrently, the company disclosed its inability to file its 2024 10-K, resulting in a NYSE non-compliance notice, though it anticipates filing within the granted grace period, and continues litigation against Papaya and Voodoo games over alleged bot use, with a court recently ordering Papaya to unseal admissions of historical bot use.

Analysis

Skillz Inc. reported preliminary Q2 2025 results indicating a potential operational turnaround, yet these improvements are significantly overshadowed by critical governance and financial reporting failures. On the positive side, the company demonstrated sequential momentum with revenue growing 22% to $27 million, excluding one-time adjustments, and Paying Monthly Active Users (PMAUs) increasing 18% to a seven-quarter high of 146,000. This user growth was achieved with improved marketing efficiency, as user acquisition spend declined. The adjusted EBITDA loss narrowed to $10 million from $16 million in the prior quarter, supported by growth in the core platform and its Aarki ad-tech unit. However, these operational gains are tempered by the company's disclosure that it has not yet filed its 2024 annual report on Form 10-K, resulting in a non-compliance notice from the NYSE. The announced Q2 results are preliminary and subject to revision, casting uncertainty on their reliability. While the ongoing litigation against competitors like Papaya shows a tangible positive development with a court order compelling admissions of bot usage, the immediate and severe risk stems from the unresolved financial reporting and potential for delisting.

Key Decisions for Investors

• Investors must prioritize monitoring the company's ability to file its overdue 2024 10-K and finalize its Q2 2025 10-Q within the NYSE grace period, as failure to comply presents a material delisting risk.
• While the 18% sequential growth in paying MAUs and narrowing EBITDA loss signal a potential operational turnaround, these preliminary figures should be treated with extreme caution until finalized and audited financials are available.
• Consider the ongoing litigation against competitors as a potential long-term catalyst; a favorable outcome that curtails bot usage in the industry could significantly strengthen Skillz's competitive position.
• Given the $239 million cash balance against a reported adjusted quarterly operating cash burn of $8 million, the company appears to have a sufficient runway, but this is contingent on the accuracy of the preliminary financials and the absence of further unforeseen expenses.