S&P puts Skillz on watch

S&P said it placed Skillz Inc.’s ratings, including its B- senior secured notes rating, on CreditWatch with negative implications.

“Skillz's 2022 revenue guidance is materially lower than we previously expected, and it is unclear how the company will be able to achieve breakeven profitability by 2024 with lower growth. The company increased its total revenue by 67% in 2021 to $384 million, which was roughly in-line with our expectations. However, Skillz's guidance for 2022 calls for only $400 million of total revenue or a roughly 4% rise. This is materially lower than our initial expectation for a 45% improvement when we assigned our B- issuer credit rating in December 2021,” S&P said in a press release.

Considering the revised guidance, S&P said it sees Skillz’s 2022 cash burn to be roughly the same or potentially higher than in 2021 because the interest expense from its December 2021 notes issuance will offset an improvement in EBITDA margin.

“We expect to resolve the CreditWatch in the next 30 days after we meet with management to obtain more information regarding its revised marketing and growth strategies and assess its ability to achieve break-even EBITDA by 2024 while maintaining sufficient liquidity to fund its interim free operating cash flow (FOCF) deficits,” the agency said.

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