Mobile game developer Skillz (NYSE:SKLZ) fell short of analysts' expectations in Q3 FY2023, with revenue down 39.5% year on year to $36.43 million. Turning to EPS, Skillz made a GAAP loss of $1.57 per share, improving from its loss of $3.80 per share in the same quarter last year.
Is now the time to buy Skillz? Find out by reading the original article on StockStory.
Skillz (SKLZ) Q3 FY2023 Highlights:
- Revenue: $36.43 million vs analyst estimates of $39.8 million (8.5% miss)
- EPS: -$1.57 vs analyst expectations of -$1.52 (3.6% miss)
- Free Cash Flow was -$18.89 million compared to -$26.37 million in the previous quarter
- Gross Margin (GAAP): 89.9%, up from 87.5% in the same quarter last year
- Paying Monthly Active Users (PMAU): 168,000, down 152,000 year on year
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 growth over the last three years has been unremarkable, averaging 9.9% annually. This quarter, Skillz reported a year on year revenue decline of 39.5%, missing analysts' expectations.
Ahead of the earnings results, analysts covering the company were projecting sales to grow 18.2% 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 35.5% annually to 168,000. This is one of the lowest rates of growth in the consumer internet sector.
In Q3, Skillz's monthly active users decreased by 152,000, a 47.5% drop since last year.
Key Takeaways from Skillz's Q3 ResultsAlthough Skillz, which has a market capitalization of $123.6 million, has been burning cash over the last 12 months, its more than $335 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.
We struggled to find many strong positives in these results. Its user base fell and its revenue growth was quite weak. Overall, this was a mediocre quarter for Skillz. The company is down 1.8% on the results and currently trades at $5.6 per share.
The author has no position in any of the stocks mentioned in this report.
