Skillz Inc. (NYSE:SKLZ) ("Skillz" or the "Company"), the leading mobile games platform bringing fair competition to players worldwide, today reported unaudited financial results for the first quarter ended March 31, 2024.

First Quarter Financial Update (Unaudited):

Revenue of $25.2 million.
Gross profit of $21.8 million.
Net loss of $26.7 million.
Adjusted EBITDA¹ of $(17.7) million.
Paying monthly active users (PMAU)² of 121,000.
Average Revenue Per Paying Monthly Active User (ARPPU)³ of $69.8.
Total operating expenses excluding cost of revenue of $48.6 million.

"Execution in the first quarter on our strategic initiatives met with some short-term setbacks, particularly with our new customer onboarding in the period. We have acted quickly to resolve these issues to position Skillz to deliver top-line growth and positive Adjusted EBITDA," said Andrew Paradise, Skillz' CEO. "We continue to improve the payback period on our customer acquisition costs and are now transitioning our efforts toward increasing our spend to facilitate growth in our paying users while maintaining our focus on driving value from our user acquisition spend. We believe these efforts combined with further new feature introductions that drive higher player retention and engagement over the balance of the year will position Skillz to generate positive Adjusted EBITDA on a run-rate basis by late this year."

Gaetano Franceschi, Skillz' CFO, added, "Our focus on managing operating expenses, including focused user acquisition spend to ensure we meet an appropriate payback period, continues to result in year-over-year improvements in our Adjusted EBITDA loss and quarterly operating cash burn. Skillz has a strong balance sheet, including cash and restricted cash of more than $300 million at the end of the first quarter. This provides us with the liquidity and financial flexibility to continue prudently investing in our operational turnaround priorities as we begin to transition toward increasing our spend to drive profitable growth in the near term."

Investor Conference Call

Skillz will host a live conference call at 4:30 p.m. ET today. To access the call, please register using the following link: https://www.netroadshow.com/events/login?show=bbb87db7&confId=63156. After registering, an email will be sent, including dial-in details and a unique conference call access code and PIN required to join the live call. Access to the live audio webcast of the discussion in listen-only mode will also be available at investors.skillz.com

A replay of the webcast will be archived on the Company's investor relations website. An audio replay of the conference call will be available through Thursday, May 16, 2024, and can be accessed by dialing (866) 813-9403 (US) or (929) 458-6194 (international) and entering the passcode 418405.

About Skillz Inc.

Skillz is the leading mobile games platform dedicated to bringing out the best in everyone through competition. The Skillz platform helps developers create multi-million dollar franchises by enabling social competition in their games. Leveraging its patented technology, Skillz hosts billions of casual eSports tournaments for millions of mobile players worldwide, with the goal of building the home of competition for all. Skillz has earned recognition as one of Fast Company's Best Workplaces for Innovators, CNBC's Disruptor 50, Forbes' Next Billion-Dollar Startups, Fast Company's Most Innovative Companies, and the number-one fastest-growing company in America on the Inc. 5000. www.skillz.com

Use of Non-GAAP Financial Measures

In this press release, the Company includes Adjusted EBITDA, which is a non-GAAP performance measure that the Company uses to supplement its results presented in accordance with U.S. GAAP. The Company's management believes Adjusted EBITDA is useful in evaluating its operating performance and is a similar measure reported by publicly-listed U.S. competitors, and regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. By providing this non-GAAP measure, the Company's management intends to provide investors with a meaningful, consistent comparison of the Company's profitability for the periods presented. Non-GAAP operating expense is also included in this press release, which is a non-GAAP financial measure. The Company's management believes non-GAAP operating expenses are useful to investors and analysts as a supplement to its financial information prepared in accordance with GAAP for analyzing operating performance and identifying operating trends in its business. The Company uses non-GAAP operating expenses internally to facilitate period-to-period comparisons and analysis in order to make operating decisions. As required by the rules of the SEC, the Company has provided herein a reconciliation of Adjusted EBITDA and non-GAAP operating expenses to the most directly comparable measures under GAAP. Adjusted EBITDA and non-GAAP operating expense are not intended to be substitutes for any U.S. GAAP financial measures and, as calculated, may not be comparable to other similarly titled financial measures of other companies in other industries or within the same industry.

The Company defines and calculates Adjusted EBITDA as net loss before interest expense, net; (benefit) or provision for income taxes; depreciation and amortization, and other income or expense, net; as further adjusted for stock-based compensation and other special items determined by management, including, but not limited to, change in fair value of common stock warrant liabilities, acquisition-related expenses, impairment charges, loss contingency accruals, restructuring charges and one-time nonrecurring expenses. The Company defines and calculates non-GAAP operating expense as GAAP operating expense adjusted for stock-based compensation, one-time transaction expenses and other special items determined by management, including, but not limited to acquisition-related expenses for transaction costs, certain loss contingency accruals and restructuring charges, as they are not indicative of business operations.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis as it is unable to provide a meaningful calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that would impact the most directly comparable forward-looking U.S. GAAP financial measures that have not yet occurred, are out of the Company's control and/or cannot be reasonably predicted. Forward-looking non-GAAP financial measures provided without the most directly comparable U.S. GAAP financial measures may vary materially from the corresponding U.S. GAAP financial measures.

Preliminary Results, Delayed 10-K and 10-Q Extension

The Company is in the process of completing its unaudited interim financial statements and other disclosures for the fiscal quarter ended March 31, 2024. Accordingly, we are announcing preliminary results for the first quarter, which are based on currently available information and are subject to revision as management completes its internal review. Our independent registered public accounting firm has not finalized its review of these preliminary financial results. Actual results may differ from these preliminary financial results and other financial information due to the completion of our internal procedures, final adjustments and other developments that may arise between now and the time the results are finalized. In the event the Company determines it will not file its Quarterly Report on Form 10-Q by the prescribed deadline, it will file an extension on Form 12b-25 with the Securities and Exchange Commission (the "SEC").

In addition, the Company is still in the process of completing its financial statements and other disclosures for the fiscal year ended December 31, 2023. The Company previously filed a Form 12b-25 with the SEC for an extension of its Annual Report on Form 10-K for the year ended December 31, 2023 (the "Form 10-K") on March 14, 2024, but was unable to file the Form 10-K before the extension deadline. As a result, the Company announced on April 2, 2024, that it had received a notice (the "Notice") from the New York Stock Exchange ("NYSE") that the Company was not in compliance with Section 802.01E of the NYSE Listed Company Manual because of its failure to timely file the Form 10-K. The Notice has no immediate effect on the listing of the Company's common stock on the NYSE. The Notice informed the Company that, under NYSE rules, the Company has six months from March 15, 2024 to regain compliance with the NYSE listing standards by filing the Form 10-K with the SEC. 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. Because our financial statements and other disclosures for the year ended December 31, 2023 are still subject to ongoing management review and our independent registered public accounting firm has not completed its audit of our results for the period, actual results may differ from the preliminary results for our fiscal year ended December 31, 2023 as previously reported, and these differences could impact the preliminary results for the fiscal quarter ended March 31, 2024 included in this press release. For additional details, please refer to the Company's Form 12b-25 filed with the SEC on March 14, 2024 and its Form 8-K filed with the SEC on April 8, 2024.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. The Company's actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements.

These forward-looking statements involve significant risks and uncertainties that could cause the Company's actual results to differ materially from those discussed in the forward-looking statements. Most of these factors are outside of the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to, the ability of Skillz to: effectively compete in the global entertainment and gaming industries; attract and retain successful relationships with the third party developers who develop and update the games hosted on Skillz' platform; drive brand awareness with end users; invest in growth and development of employees; comply with laws, regulations and expectations applicable to its business, including with respect to cybersecurity and corporate governance matters; mitigate the commercial, reputational and regulatory risks to our business; remediate during fiscal year 2024 certain non- fully remediated material weaknesses in our internal controls over financial reporting; and timely file our periodic reports with the SEC, as well as potential changes to our preliminary results that could occur as we finalize our internal review and our independent registered public accounting firm completes its review and audit (as applicable) of such results. Additional factors that may cause such differences include other risks and uncertainties indicated from time to time in the Company's SEC filings, including those under "Risk Factors" therein, which are available on the SEC's website at www.sec.gov. Additional information will be made available in other filings that the Company makes from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that the Company believes to be reasonable as of this date. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

Skillz Inc.
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except for number of shares and per share amounts)

	Three Months Ended March 31,
		2024			2023
Revenue	$	25,235		$	44,383
Costs and expenses:
Cost of revenue		3,451			4,582
Research and development		4,624			8,881
Sales and marketing		20,994			34,918
General and administrative		22,991			28,070
Total costs and expenses		52,060			76,451
Loss from operations		(26,825	)		(32,068	)
Interest income (expense), net		112			(3,494	)
Change in fair value of common stock warrant liabilities		9			(1	)
Other income, net		64			39
Loss before income taxes		(26,640	)		(35,524	)
Provision for income taxes		45			69
Net loss	$	(26,685	)	$	(35,593	)
Net loss per share attributable to common stockholders – basic and diluted	$	(1.45	)	$	(1.70	)
Weighted average common shares outstanding – basic and diluted		18,461,221			20,883,293

Other comprehensive income
Change in unrealized gain on available-for-sale investments, net of tax		6			997
Total other comprehensive income		6			997
Total comprehensive loss	$	(26,679	)	$	(34,596	)

Skillz Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except for number of shares and par value per share amounts)

	March 31,			December 31,
		2024			2023
Assets
Current assets:
Cash and cash equivalents	$	290,601		$	302,028
Restricted cash		10,000			10,000
Accounts receivable, net of allowance for credit losses of $64 and $49 as of March 31, 2024 and December 31, 2023, respectively		5,096			5,942
Prepaid expenses and other current assets		5,916			6,721
Total current assets		311,613			324,691
Property and equipment, net		14,821			14,549
Marketable securities, non-current		447			1,125
Non-marketable equity securities		52,768			52,768
Other non-current assets		2,703			2,692
Total assets	$	382,352		$	395,825
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	11,371		$	1,712
Operating lease liabilities, current		1,257			1,364
Other current liabilities		52,360			50,306
Total current liabilities		64,988			53,382
Operating lease liabilities, non-current		10,250			10,573
Common stock warrant liabilities, non-current		2			11
Long-term debt, net of current portion		124,345			123,935
Other non-current liabilities		698			960
Total liabilities		200,283			188,861
Commitments and contingencies
Stockholders' equity:
Preferred stock $0.0001 par value; 10.0 million shares authorized — 0 issued and outstanding as of March 31, 2024 and December 31, 2023		—			—
Common stock $0.0001 par value; 31.3 million shares authorized; Class A common stock – 25.0 million shares authorized; 18.1 million and 18.1 million shares issued; 14.6 million and 15.8 million outstanding as of March 31, 2024 and December 31, 2023, respectively; Class B common stock – 6.3 million shares authorized; 3.4 million shares issued and outstanding as of March 31, 2024 and December 31, 2023		1			1
Treasury stock at cost, 3.5 million and 2.3 million as of March 31, 2024 and December 31, 2023, respectively		(19,956	)		(13,000	)
Additional paid-in capital		1,206,703			1,197,963
Accumulated other comprehensive loss		(1	)		(7	)
Accumulated deficit		(1,004,678	)		(977,993	)
Total stockholders' equity		182,069			206,964
Total liabilities and stockholders' equity	$	382,352		$	395,825

Skillz Inc.
Consolidated Statement of Cash Flows (Unaudited)
(in thousands)

	Three Months Ended March 31,
		2024			2023
Operating Activities
Net loss	$	(26,685	)	$	(35,593	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		395			626
Stock-based compensation		8,740			10,548
Accretion of unamortized debt discount and amortization of debt issuance costs		410			837
Amortization of premium for marketable securities		—			53
Change in fair value of common stock warrant liabilities		(9	)		1
Changes in operating assets and liabilities:
Accounts receivable, net		846			(2,367	)
Prepaid expenses and other assets		794			(3,276	)
Accounts payable		9,659			2,986
Operating lease right-of-use assets		—			151
Operating lease liabilities		(430	)		(545	)
Other accruals and liabilities		1,884			11,880
Net cash used in operating activities		(4,396	)		(14,699	)
Investing Activities
Purchases of property and equipment, including internal-use software		(515	)		(11,608	)
Purchases of marketable securities		(4	)		—
Proceeds from sales of marketable securities		688			41,729
Proceeds from maturities of marketable securities		—			37,640
Net cash provided by investing activities		169			67,761
Financing Activities
Principal payments on finance leases obligations		(244	)		(282	)
Repurchase of common stock		(6,956	)		—
Net proceeds from exercise of stock options and issuance of common stock		—			33
Net cash used in financing activities		(7,200	)		(249	)
Net change in cash, cash equivalents and restricted cash		(11,427	)		52,813
Cash, cash equivalents and restricted cash – beginning of year		312,028			365,436
Cash, cash equivalents and restricted cash – end of period	$	300,601		$	418,249
Supplemental cash flow data:
Cash paid during the period for:
Interest	$	33		$	63
Taxes	$	—		$	—

Skillz Inc.
Reconciliation of GAAP Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)

	Three Months Ended March 31,
		2024			2023
Net loss	$	(26,685	)	$	(35,593	)
Interest income (expense), net		(112	)		3,494
Stock-based compensation		8,740			10,548
Change in fair value of warrant liability		(9	)		1
Provision for income taxes		45			69
Depreciation and amortization		395			627
Other income, net		(64	)		(39	)
Adjusted EBITDA	$	(17,690	)	$	(20,893	)

Skillz Inc.
Reconciliation of GAAP to Non-GAAP Operating Expenses
(in thousands)

	Three Months Ended March 31,
		2024			2023
Research and development	$	4,624		$	8,881
Less: stock-based compensation		(147	)		(1,206	)
Non-GAAP research and development	$	4,477		$	7,675

Sales and marketing	$	20,994		$	34,918
Less: stock-based compensation		(2,011	)		(1,904	)
Non-GAAP sales and marketing	$	18,983		$	33,014

General and administrative	$	22,991		$	28,070
Less: stock-based compensation		(6,580	)		(7,438	)
Non-GAAP general and administrative	$	16,411		$	20,632

Skillz Inc.
Supplemental Financial Information
(in millions, except ARPU and ARPPU)

	Three Months Ended March 31,
		2024			2023
Gross marketplace volume ("GMV") (000s)⁽¹⁾	$	161,269		$	277,632
Paying monthly active users ("PMAUs") (000s)⁽²⁾		121			214
Monthly active users ("MAUs") (000s)⁽³⁾		860			1,176
Average GMV per paying monthly active user⁽⁴⁾	$	444.3		$	432.4
Average GMV per monthly active user⁽⁵⁾	$	62.5		$	78.7
Average revenue per paying monthly active user ("ARPPU")⁽⁶⁾	$	69.8		$	69.1
Average revenue per monthly active user ("ARPU")⁽⁷⁾	$	9.8		$	12.6
Paying MAU to MAU ratio		14	%		18	%
Average end-user incentives, included as sales and marketing expense, per paying active user⁽⁸⁾	$	24.06		$	27.40
Average end-user incentives, included as sales and marketing expense, per playing active user⁽⁹⁾	$	3.39		$	4.98

(1) "GMV" or "Gross Marketplace Volume" means the total entry fees paid by users for contests hosted on Skillz' platform. Total entry fees include entry fees paid by end-users using cash deposits, prior winnings from end-users' accounts that have not been withdrawn, and end-user incentives used to enter paid entry fee contests.

(2) "Paying Monthly Active Users" or "PMAUs" means the number of end-users who entered into a paid contest hosted on Skillz' platform at least once in a month, averaged over each month in the period.

(3) "Monthly Active Users" or "MAUs" means the number of playing end-users who entered into a paid or free contest hosted on Skillz' platform at least once in a month, averaged over each month in the period.

(4) "Average GMV Per Paying Monthly Active User" means the average GMV in a given month divided by Paying MAUs in that month, averaged over the period.

(5) "Average GMV Per Monthly Active User" means the average GMV in a given month divided by MAUs in that month, averaged over the period.

(6) "Average Revenue Per Paying Monthly Active User" or "ARPPU" means the average revenue in a given month divided by Paying MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.

(7) "Average Revenue Per Monthly Active User" or "ARPU" means the average revenue in a given month divided by MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.

(8) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by PMAUs in that month, averaged over the period.

(9) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by MAUs in that month, averaged over the period.

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Skillz Announces First Quarter 2024 Results