United States securities and exchange commission logo
August 11, 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 June 30, 2022
Filed August 4,
2022
Form 8-K Furnished
August 4, 2022
File No. 001-39243
Dear Mr. Paradise:
We have reviewed your July 19, 2022 response to our comment
letter 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.
Our references to prior comments are to comments in our June 15, 2022
letter.
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. You state in response
to prior comment 2 that you do not "actively" track the extent to
which ARPU and ARPPU
are impacted by end users entering paid competition with prior
winnings and user
incentives. Please tell us whether you generate any information for
estimating the extent
to which end users entering paid competition with prior winnings
and user incentives
impact revenue, ARPU and ARPPU. In this regard, we note that you
provide the approximate
percentage of prior cash winnings and user incentives as a
percentage of paid
entry fees on page 40.
Andrew Paradise
FirstName
Skillz Inc. LastNameAndrew Paradise
Comapany
August 11, NameSkillz
2022 Inc.
August
Page 2 11, 2022 Page 2
FirstName LastName
Our Financial Model, page 40
2. We note your response to prior comment 4. Please separately quantify
the extent to
which prizes are Bonus Cash returned as winnings for entries paid with
Bonus Cash.
Form 10-Q for Quarterly Period Ended June 30, 2022
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 26
3. We note from your response to prior comment 1 that you are unable to
quantify the
expected impact from migrating more spend to Aarki and eliminating low
return
engagement marketing programs as any efficiencies from this program
are not sufficiently
certain. Please confirm that in future filings, you will quantify the
actual impact to both
revenue and revenue growth rates as a result of improved efficiencies
in engagement and
UA marketing spend strategies, as well as the impact on future revenue
and revenue
growth trends when estimable. Also, tell us whether you anticipate
reductions in end user
incentives that are accounted for as a reduction of revenue and if so,
include a discussion
of such plans and the expected impact on your revenue and operations.
4. We note from the August 4, 2022 Form 8-K that you are lowering the
full-year 2022
revenue guidance to $275 million, based on an assumption of engagement
marketing as a
percentage of revenue of approximately 42%. We also note from your
disclosures here
that you plan to reduce spend on low-return engagement programs in
fiscal 2022. Please
revise to clarify the extent to which any reductions in engagement
marketing programs
will be in the form of reduced Bonus Cash and, as applicable, how you
considered that
Bonus Cash could potentially be used to enter multiple future paid
competitions assuming
the end user continues to win and whether you monitor the extent to
which this occurs. In
addition, you state that you intend to drive UA efficiency and reduce
UA marketing
spend. Please revise here to include a quantified discussion regarding
the intended
reductions to both engagement marketing and UA marketing spend. Also,
revise to clarify
what is meant by your reference to "long term" as it relates to
reducing user acquisition
costs.
5. We note that you attribute the decrease in MAUs, paying MAUs and
revenue during the
period ended June 30, 2022 to instances of cheating on the platform
and past product
changes. Please explain further the issues you have experienced with
regard to cheating
and its impact on your operations. Clarify whether these are recent
occurrences and
whether you anticipate these issues to continue in future periods.
Also, describe
the controls you have in place to detect cheating. In this regard, you
state in your Form
10-K that the key features of your proprietary data science
technologies include, in part,
anti-cheat and anti-fraud protections. Lastly, disclose in quantified
terms, if practicable,
the impact of cheating on the decline in revenue for the three and six
months ended June
30, 2022.
Andrew Paradise
Skillz Inc.
August 11, 2022
Page 3
Form 8-K furnished August 3, 2022
Exhibt 99.1, page 1
6. We your response to prior comment 8. Excluding a portion of sales and
marketing
expense related to incentives results in a non-GAAP measures that
substitutes a tailored
accounting principle for that of GAAP. Please revise to remove your
measure of revenue
after engagement marketing expense. Refer to Question 100.04 of the
Non-GAAP
Compliance and Disclosure Interpretations and Rule 100(b) of Regulation
G.
General
7. Please ensure you use a word processing application that supports ASCII
or HTML when
submitting your correspondence in EDGAR. Documents that only contain
images are not
appropriate. Refer to Section 7.3.12 of the Edgar Filing Manual.
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
August 11, 2022 Page 3
cc: Steven J. Gavin, Esq.
FirstName LastName