United States securities and exchange commission logo
June 15, 2022
Andrew Paradise
Chief Executive Officer and Chairman
Skillz Inc.
PO Box 445
San Francisco, CA 94104
Re: Skillz Inc.
Form 10-K for the
Year Ended December 31, 2021
Filed March 1, 2022
Form 10-Q for the
Quarterly Period Ended March 31, 2022
Filed May 6, 2022
Form 8-K Furnished
May 4, 2022
File No. 001-39243
Dear Mr. Paradise:
We have limited our review of your filings to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Year Ended December 31, 2021
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview, page 39
1. Your discussion and
analysis should describe any known trends or uncertainties that are
reasonably likely to
have a material impact on revenues or income from continuing
operations. For
example, we note your disclosures in the February 23, 2022 Form 8-K
regarding the expected
reduced level of engagement marketing spend for 2022 and the
expectation that
migrating more spend to Aarki will result in significant efficiencies in
user acquisition
marketing spend going forward. Please disclose your expectations
regarding engagement
marketing spend and user acquisition costs for 2022 and the
resultant expected
impact on revenues and results of operations. Also, considering the
Andrew Paradise
Skillz Inc.
June 15, 2022
Page 2
significant revenue growth rates for the past three years, explain why
the expected
reduction in engagement marketing expense would result in a
disproportionately greater
reduction in expected revenue for fiscal 2022. Refer to Item
303(b)(2)(ii) of Regulation
S-K.
2. Please revise your discussion of ARPU and ARPPU to clarify that these
measures do not
include end-user incentives that were included in sales and marketing
expense.
Considering the significance of the end user incentives, quantify such
amounts on an
equivalent per user basis for each period presented to provide further
context and balance
to your disclosures. We refer to your response to comment 5 in your
November 17, 2020
letter. In addition, please describe and quantify the extent to which
these metrics are
impacted by end users entering paid competitions with prior winnings
and user
incentives. Refer to Item 303(a) of Regulation S-K and SEC Release No.
33-10751.
3. You disclose that as of December 31, 2021 you had over 10,000
registered game
developers on your platform that have launched a game integration.
Please clarify
whether this represents a cumulative measure of registered game
developers. If so,
disclose the number of game developers that have a live game on your
platform as of the
period end to provide further context for this disclosure as well as
your disclosure
regarding reliance on a small number of game developers.
Our Financial Model, page 40
4. You state on page 39 that you offer over $164 million in prizes each
month. Please tell us
the amount of Gross Marketplace Volume ("GMV") that was paid out in
prizes and revise
to disclose the estimated percentage paid for each period presented,
clarifying whether this
includes cash and luxury goods as well as Bonus Cash returned as
winnings for entries
paid with Bonus Cash. In addition, quantify the extent to which prizes
were sponsored by
third parties, if material. In this regard on page 4 you disclose that
users can compete in
brand sponsored competitions and in Exhibit 99.2 to the February 23,
2022 Form 8-K, you
state that partnering with brands to sponsor prizes was a key
initiative. Lastly, revise to
disclose the amount of GMV for each period presented, similar to your
disclosures in the
Form 8-K noted herein.
Consolidated Financial Statements
Note 9. Commitments and Contingencies, page 88
5. We note your disclosure on page 36 regarding the pending securities
class action lawsuit
filed against Skillz Inc. Please tell us your consideration to include a
discussion of this
matter here. In this regard, if there is a reasonable possibility that a
material loss may
FirstName LastNameAndrew Paradise
have been incurred in relation to this matter, please disclose the
nature of the contingency
Comapany NameSkillz
and an Inc.
estimate of the possible loss or range of loss or a statement
that such an estimate
cannot
June 15, 2022 be made.
Page 2 Refer to ASC 450-20-50-3 and 50-4.
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Andrew Paradise
FirstName
Skillz Inc. LastNameAndrew Paradise
Comapany
June NameSkillz Inc.
15, 2022
June 15,
Page 3 2022 Page 3
FirstName LastName
Form 10-Q for the Quarterly Period Ended March 31, 2022
Management Discussion and Analysis of Financial Condition and Results of
Operations
Revenue, page 30
6. You disclose that the increase in revenues was attributable primarily
to revenue from
Aarki and an increase in live event tournament revenue. Please tell us
the revenue
contribution attributable to each of these factors. Also, explain the
reasons for the
significant decrease in revenue growth rate compared to previous
periods. In this regard,
we note that engagement marketing expense increased as a percentage of
revenues
compared to March 31, 2021. Please revise your disclosures as
necessary to ensure that
you describe the underlying reasons for material changes from
period-to-period, including
offsetting amounts, in both quantitative and qualitative terms. Refer
to Item 303(c) of
Regulation S-K.
Sales and Marketing, page 30
7. In your May 4, 2022 Form 8-K and your Q1 2022 earnings call you
disclose
improvements in user acquisition efficiency. Please tell us and
disclose, in quantified
terms, the impact on user acquisition costs attributable to migrating
more spend to Aarki.
Form 8-K furnished May 4, 2022
Exhibit 99.1, page 1
8. We note that your presentation of the non-GAAP performance measure
called "Revenue
after Engagement Marketing" adjusts GAAP revenues recognized on a
gross basis to
exclude engagement marketing expenses that are primarily comprised of
end user
incentives and thus presents revenue as if its on a net basis. Please
explain to us why you
believe this non-GAAP measure does not substitute individually
tailored revenue
recognition and measurement methods for those of GAAP. Refer to
Question 100.04 of
the Non-GAAP Compliance and Disclosure Interpretations (C&DIs) and
Rule 100(b) of
Regulation G.
9. We note your discussion of adjusted EBITDA in the header of Exhibit
99.1 without a
discussion of net loss with equal or greater prominence. Please revise
in future filings.
Refer to Question 102.10 of the non-GAAP C&DIs.
10. You disclose that improved user acquisition marketing efficiency
enabled you to reduce
spend significantly over the prior quarter. You also state that
eliminated low-return
engagement marketing programs resulted in a meaningful reduction in
engagement
marketing as a percentage of revenue over the prior quarter. However,
we note that both
user acquisition costs and engagement marketing as a percentage of
revenue increased
compared to the quarter ended March 31, 2021. If this disclosure is
based on sequential
fluctuations, please ensure that it is clear what is meant by "prior
quarter."
Andrew Paradise
Skillz Inc.
June 15, 2022
Page 4
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Joyce Sweeney, Senior Staff Accountant at 202-551-3449
or Kathleen
Collins, Accounting Branch Chief at 202-551-3499 with any questions.
Sincerely,
FirstName LastNameAndrew Paradise
Division of
Corporation Finance
Comapany NameSkillz Inc.
Office of Technology
June 15, 2022 Page 4
cc: Steven J. Gavin, Esq.
FirstName LastName