Mobile game developer Skillz (NYSE:SKLZ) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 11.2% year on year to $22.41 million. Its GAAP loss of $0.92 per share was 16.4% above analysts’ consensus estimates.
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Skillz (SKLZ) Q1 CY2025 Highlights:
- Revenue: $22.41 million vs analyst estimates of $20.75 million (11.2% year-on-year decline, 8% beat)
- EPS (GAAP): -$0.92 vs analyst estimates of -$1.10 (16.4% beat)
- Adjusted EBITDA: -$15.06 million vs analyst estimates of -$15.95 million (-67.2% margin, 5.6% beat)
- Operating Margin: -59.2%, up from -106% in the same quarter last year
- Paying Monthly Active Users: 124,000, up 3,000 year on year
- Market Capitalization: $98.74 million
StockStory’s Take
Skillz's first quarter results were shaped by ongoing efforts to strengthen its platform and defend its position in the skill-based mobile gaming industry. CEO Andrew Paradise opened the call by emphasizing the importance of the company's litigation against competitors accused of unfair practices, which management believes have negatively impacted Skillz's performance. The company highlighted operational improvements, including the launch of its Accelerator program aimed at increasing developer engagement and expanding its portfolio of skill-based games. CFO Gaetano Franceschi noted that year-over-year declines in revenue were partially offset by sequential growth and improved user conversion rates, driven by targeted marketing to lapsed users and disciplined expense management.
Looking ahead, Skillz’s management is focused on advancing its four strategic pillars, with particular emphasis on expanding its game offerings and improving player engagement. Paradise stated, "Momentum around our Accelerator program helped make the recent Game Developer Conference one of our most successful to date in terms of developer engagement." The company expects to deploy up to $75 million over the next three years to support at least 25 new high-potential games, aiming to broaden its appeal beyond casual genres. Management also reiterated its intent to achieve positive adjusted EBITDA, with Franceschi highlighting that improving cash burn and a strong balance sheet provide flexibility for continued investment. However, the company acknowledged ongoing risks related to industry litigation and competitive pressures.
Key Insights from Management’s Remarks
Skillz’s first quarter was influenced by ongoing legal disputes, targeted marketing to reengage users, and investments in new game development. Management pointed to both external pressures and internal changes as drivers of recent performance.
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Industry litigation and fair play: Management devoted significant attention to ongoing lawsuits against international competitors Papaya and Voodoo, alleging the use of bots to create unfair gameplay environments. Paradise asserted that these practices have undermined player trust and directly harmed Skillz's business, positioning the litigation as critical to both industry integrity and the company’s own prospects.
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Accelerator program launch: The introduction of the Accelerator program was central to management’s strategy for reinvigorating developer engagement and expanding the portfolio of skill-based games. The program is designed to support at least 25 new games from a mix of genres, with Paradise describing strong developer interest and plans to deploy up to $75 million over three years.
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Operational restructuring: Management discussed scaling and optimizing its teams in Las Vegas and Bangalore, which they believe will improve efficiency across product development, marketing, and analytics. These initiatives are intended to support long-term platform enhancements and operational consistency.
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Paying user growth via reengagement: The increase in paying monthly active users was attributed to cost-effective marketing campaigns targeting lapsed users. Management expects that spend from these reengaged players will increase over time, supporting both top-line growth and improved customer lifetime value metrics.
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Expense discipline and cash management: Franceschi highlighted lower general and administrative costs and improvements in cash burn, aided by a $7.5 million settlement payment from AviaGames. Management indicated that a strong cash balance and ongoing cost management provide runway for continued investment and turnaround initiatives.
Drivers of Future Performance
Skillz’s outlook centers on broadening its game library, driving user engagement, and navigating ongoing legal and industry headwinds.
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Expansion into new game genres: Management is prioritizing the Accelerator program to diversify Skillz’s content library, aiming to attract a wider audience by moving beyond traditional casual games. The company expects new game launches to drive higher engagement and potentially increase paying user conversion rates over time.
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Path to profitability: Management reiterated its goal of achieving positive adjusted EBITDA, focusing on both revenue growth and expense control. Franceschi noted that improving operating cash burn and disciplined marketing spend will be essential to reaching sustainable profitability.
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Litigation and industry risks: Ongoing legal disputes with competitors continue to represent a significant external risk. Management believes that resolving these issues in Skillz’s favor could enhance the company’s position in the industry, but acknowledged that uncertainty remains around the timing and outcome of litigation.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be monitoring (1) progress in the development and release of new games under the Accelerator program, (2) trends in paying user growth and user engagement metrics, and (3) updates on the resolution or advancement of key legal disputes with international competitors. Additionally, we will track whether continued expense discipline translates into sustained improvements in operating margins and cash burn.
Skillz currently trades at a forward price-to-gross profit ratio of 1.2×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).
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