SKLZ - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Skillz Inc. Fourth Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. conference being this XX, today, that XXXX. note call recorded is March Please the Mr. over will call I turn to James Marsh.

James Marsh

Thank you, release. the of Company's be operator, access in the fourth have and found www.skillz.com/investors. quarter good Skillz's afternoon. website XXXX investors earnings the The at can Everyone release section should to

will management's within forward-looking the laws. meaning Some of be Securities the of comments today statements the Federal

to similar expect. impact as you usually should risks caution subject to future Forward-looking the such financial we what should conditions. operating the by that the are more uncertainties differ in cause numerous refer rewards SEC Therefore, identified results will, Company's of you for statements, results, filings and phrases in and could other of interpreting the which of use expect, detailed to are for We and actual could exercise that timing. discussion line risks materially

I'll the most it an and XXXX is non-GAAP useful in fourth performance. measures measure we should as the GAAP. to will earnings which Chief in turn Andrew. comparable isolation, Financial we prepared Henry, for believe call Andrew a Scott operating of reconciliation A Company. today, available our that, Company's release. with over the in directly measures, the the Paradise, With GAAP or Chief substitute Officer, Hosting call have be discuss financial can These quarter be evaluating considered results Executive of management minutes, accordance not During these measures Andrew? when Officer to

Andrew Paradise

throughout year mobile rapidly is highlights. market. proud in that growing publicly X.X share gamer to and as to and traded We're world, in Thank I'm of eSports our Skillz incredibly this good delivered pleased you, the first a Welcome results massive predominant everyone. strong the we've the the billion platform call James, company. afternoon some earnings

of the in quarter revenue vision growth XXth our build internet. an layer consecutive strategically to on our QX incredible of to to and the experience We capitalize marks competition deliver continue sequential invest user growth.

platform new we beat the our capabilities, most by the brought we During added enhancer on engaging games. And pandemic. the and expanded many all challenges revenue amidst forecasts, quarter, notably,

to an digging wanted milestone, Jeff Flying closing Before our markets want enables vision Flying for Sloan, are went Eagle. Eagle. Skillz. partners of major opportunity achieve acknowledge our a Baker, also successfully which our that throughout moment I details, to They thank after amazing Skillz, a thank and our public developer shared process. merger to take Eli platform highlight want take game partners and the Sagansky into with builds designs, the amazing I team to our They to to I who and Harry success.

that this future bastion a all to our of for possible, the make innovators, you always welcome of For tech new the of the our you all will to shining also we be home. we go journey. I'm shareholders and creators to love state excited

to grateful make competition. we're stake One goals you everyone appreciate was future this of of public a us for in journey. own to join for sincerely support, have your to it in We our possible going the and

and Skillz person same. support Chris And take of Finally, to we're the Great Skillz he's incredible entertainment. Chris early he partner XX his he as Skillz's Board. XXs him to people. ever media about Jerry an Board. a consumer users is to top Hill in us pending why our audiences we're TV helping And the this He's moment addition, the Gaffney, famed gaming cheating our X our is meaningful television served producer captivated gamers at and participated on focused enable very is of our interactive I welcome moment at and billion two years to and having of and from has and the on thrilled of of this global market mission eight the career, looking with towards the share the fraud, been enriched to by our boards as initial investor patents. his portfolio since. is and with at We're developers. Jerry Partners acquisitions. science Skillz to first also that shift want new a add announced pivotal board robust more competition. accelerate on entirely and gaining lives fortunate and have remained Winning is members, have the expertise XX an we're connect join in forward Throughout with a film in to the journey and data only to Co-Founder And trust protecting We shows building have history developers the platform, the maintaining on to to Bruckheimer. to in than and this with which launched ago platform underpinned XXX we've is world

success the has mobile's our is billion down these and who for of books, gaming of and gaming those today, segment way, against are and largest our one values and in fastest represent capitalism. to than number the who pillars the honor. amount criminals vigorously broadened music property of Our the larger the all entertainment. the growing media of in in to very and intellectual newer Today, foundation movies, copycats to market $XX averaging at and defend turning the story, our clones We platform company plan surge our

Our by to content the future interactive expected of forecasts market Smartphones are XXXX. monetize developers by what that's devices. XXX it that We compensation. makes current X billion entertainment. more a tablets and by devices, to year, Mobile and XXXX, powered through driven interactive for games proliferation double the gaming built mobile mobile tournaments enabling of than show will reach the billion,

monthly Skillz successful MAU or in player on enjoy platform developer The In million marketplace over building a They XXXX. engagement active increase XX% Our gross superior our billion users with delivers for games businesses XXXX. partners are monetization. or X.X us. platform, generate X.X XXXX, GMV volume

roughly Our the platform. in hour engaged users day users platform. paying an per spend average are on deeply our The

to We and growth app increased respectively for XXX with improve the and will our for average million purchases. prize converting high the paying into to over payers in do the the million into We're In XX% versus quarter, continue together year, so XX% prior our of those competition effective proposition grow playing to developer. the powered for users XXXX, and becoming for users number at for X% in users. XX% continue and gamer more future mobile value for game of level engagement engage our to the revenue representing This XX of the periods.

of ahead, our to to our areas will look we expand we for platform. into support investing prioritize innovation Today, highlight success, drive these want I As three the continue goals. reach developer

our the the to past are engagement further and Skillz and in our is content the same first universe deliver importantly, areas the of Synchronous from gaming to fidelity, of real-time trust since our genres, expand hallmarks for reliability, to is platform perhaps and before been higher deliver enable will they've will than racing We're First, more in-partner expanding the to continued enablement, inception. players, player we've gameplay reach the even of uniquely payers. fighting of genres seen and we've positioned strategy popular ranging incredibly many over invest These synchronous ecosystem. year, person platform to new shooters.

less technology Second, investments with deliver fast industry made continuing incident platform to in fault data systems. cutting outages and us significant our highly we edge half gaming scalable microservices architecture, tolerant scale than as of automated infrastructure, uptime XX.X% leading These typical resulted while in architecture, our resilience we efficiently and enable in a performance and our response company. of the over to of reliability scale

future for in AI, the architecture unlock as will data such to personalization. opportunities fast continue Our greater new

Our gross silver are to very achieving modern margins. technology our of and infrastructure much key the architecture XX%

independent our and mobile a Third, reach headcount requires acquisition ecosystem capabilities to XX talent scalable in a world's proven XX%, strengthens talent outcomes, benches a high and by powerful Company. million making for This today the workforce the that we building talent developers. we build many game developers best-in-class for to the a talent, beyond We're are QX, journey In superior our effects. hiring network new grew additions approach company. stronger game yields facing retention. happier impact continue that across many of significant is at XXX-year scaling The challenge with dynamic that have

a Studio. decided other introduced for they iOS of the games experience their one can and making excited The our so the is to great power do makes can get on is fun gaming games Off to operations and Big platform the App Our bring developers to what examples, deliver I'm share any competitive get anyone of currently a developers number they they users. Today, Blackout long-term Skillz and With later, their to to independent oversubscribed continue service you powerful now platform. of the success, quickly free in. that set or best, easy integrate reason with to customer Series focus this fair recent some of nothing left game and Big games. then independent I which Three art first wants going analytics, first Bingo games is so he share couldn't sense on the creators and He venture Andrew to Big for these financing need one a solutions that whether games round on gaming content. developer was platform. but audiences. Potter: gaming Why? provides venture dedicated live months payments, Andrew companies. industry a FarmVille's veteran as was for they're Skillz the studio to spent Warner We He game team there top design of Wizards his world to A Harry I'm raise accessible investors XX Run Unite built is path who founded founding Zynga underrepresented production stand to of the building Studios building studio LucasArts his then a Brothers. at the a the quit enable To a Bell. QX, the He arm capital. the Store. years four Zynga. top by Run's on before when their to for leading job. worked he Skillz at Skillz

captured at just As there's the we fraction and long a advance the a of growth. us our on market platform. drive We've runway world's X.X% many our gamers of opportunities ahead mission,

incremental forecast content, next brand and to that four share like initiatives expansion, international integration. So, for I'd investment distribution, are

Hunter we one This but games. never game strong build version, Run in because version it they really Skillz. next content, when one an is on blockbuster we've mobile still with not their come success launched, XXXX. true XX, we're either on App in Store. had them popular had was First testament of is their hit of number a have the the Buck exciting Certainly, on to early number that this see game. a again. building but Big new Big their bring back that platform comeback to They quarter, to they've most to the I announced significant opportunity first popular of growing they're a This offerings the a to, all partner to that end, wishing content and there's of us, exciting success lot To they arcade things power arcade of the look a It's forward didn't consumers. were next version the game

to the partnership modern shooter the categories one our genre, person content in of this expands gaming. popular most Additionally, first

both with winning but winning NFL Skillz, multiple using The will mobile The develop marketing of Skillz the forecast. In and world. dual agreement I hundreds about distribution and of multiyear giving QX, developers a opportunity of our to developer on quarters that's the NFL the will We're market. honored NFL brands branded the Skillz not it the and have launch support fan in Skillz marketing from path from promotional bring a to base new developer platform. NFL. We're games with before represents millions, the in challenge, in mobile NFL one NFL Second, distribution, it'll take is most to unique platform. iconic eSports the the wanted to game an talk a the

expansion, revenue our North than of market XX% And the the on Third, is from four more America. international today, international that. times size comes of

partnerships looking for in of the prize already to XXX expected for market mobile outside in both and India, the we XX% X.X their perspective, alone, paid XXX prices. would market approximately the is of Integrated to new have expect to pools X% The also and written. that consumer has and two-thirds year. quarters India's experiences In gamers I've and Our of is is market times XX% working year. sponsored out is would and exciting U.S. per create chapters later brands through brand reach With consumers yet per opportunity XXXX at fans XXX of seeking channels. market these but brands. today XXX. all customers year. international we with America and launch this value it's it's billion There we that U.S. nearly to year our talked journey. before growing have the generated about to are line. reached million dropped your the grow eight gaming size which million the finally, and the growing significant incremental gamers, market, This be first faster. brand And bottom million see XXX North four many are of Fourth, revenue,

the Together, call a in of of gaming, in for we're journey. the on here and us everyone our more the thank future to like just media. on moment today defining joining history pivotal I broadly So

the controlled select by By together, leveling this For makers have making our CFO, of for eSports democratizing back enabling the systemic gaming a held we're by everyone. everyone, market, I'll by game many for discuss been independent the call We're those years, creators playing our Scott, few. will field we compete. over turn to realize everywhere. the financials. better to mission Together, now to advantages

Scott Henry

earnings you I'm time thank our very call. public quarter. joining strong life on first company business, and as our a to is a start Andrew, exciting all an Thanks, such in pleased us with for our and This

provide it a Before overview of the to could helpful thought I into financial results, our brief be model. digging

We average based we platform. every commission contest The where run have about percentage across is on a business, a $X per transaction fee our take entry person.

number the paying monthly paying users, the users revenue days revenue, take fee factors of of for paying we're contests. earning So transactions per rate, We're based and entries contest high There levers contest the average of of two user. $X.XX each played number predictability. paid number to us on month, revenue including revenue with travel day, entry the per provides a these All take down millions which are per the many rate. average XX% day, running active per micro of player boil these that and

Revenue Now, we year. the can turn over $XX.X during to doubled our results. of attention to million same fourth the XX% nearly last the quarter period

in over in months. earnings guidance year revenue monthly our This the million, A users. revenue year. $XXX.X for the our to by exceeded was was QX For $XXX the release growth paying up the prior XX% full year, we powered of provided year increase XXX% active

expect We or each system. profitability we acquisition generate. users continue and XX%. largely $XX.X acquisition much existing million for invest on An user Adjusted last to marketing before $XX.X to server a For is marketing, the a support new negative expenses. strong EBITDA users user of think we'll up the EBITDA EBITDA variable we we business the sales are all revenue $X.X margin on this acquire the costs, quarter our decide metric from million, $XX.X which in adjusted the the versus based to a is gross was consists We to how proxy then million increased of that driven year, and quarter negative million by payment processing, quarter, higher User of marketing for before have a investment. in the that the period. our important prior month, Most ROI track of of and UA. cost

revenue a quarter, XX%, which consistent year, before year. XX% is as UA prior the the was the For increased percentage over of EBITDA that with adjusted prior

adjusted from investments to on quarter on and based expect and timing UA headcount We are in margins EBITDA than the before fluctuate dollars are focused making engagement quarter, to margin and and we growth more marketing.

Now, our me operating let key discuss lines. some expense of

help basis, of useful this excludes which which trends. understand one-time to amortization, be compensation stock depreciation that We will All is discussed related non-GAAP and expenses, underlying believe a on it and transaction means based expenses.

and R&D game the drive driven was continue which quarter, on that conversion, are as This to payer our purchases. rely that grew ads primarily platform in in period. and engagement, the by headcount we superior retention, of core the over the features models monetization app user prior For invest to XX%

of platform, revenue, the XX% prior of the year in the opportunity for percentage period, scalability down R&D X% a from our and highlighting the As was for accelerate to quarter, our roadmap. investment product

programs For the to drive marketing marketing grew market was prior sales in marketing user investment penetration driven and user XXX% and the by engagement. acquisition quarter, of period. end This to accelerate

the As period. in XX% a is from of percentage prior up and marketing revenue, the for XXX% sales quarter,

acquisition is and marketing engagement As user costs, a user our marketing end comprised of sales marketing. reminder, and

In these target user end increase users to on engagement expenses, and salaries their engagement retention. related marketing to and existing platform addition programs the

platform, Our user can player target activity number programs of increase acquisition acquisition shift spend of platform. to community or marketing the between existing on generate marketing the new users programs users those we the our to within

For the year XX% prior period. G&A over the quarter, grew

Every ad and revenue, QX, the a paying the as of average the period. is rising XX% of driven in We had We've cohort an LTV stop CAC leading quarter seven never As metric, was from prior we this for down year for have from percentage plan to a X.X year XX% to of by times industry to cohort three grow. believe G&A it. end improve year with times, an of X.X down The a has years costs. continued now. in

redemption for that LTV captured those the shares warrants metric. out effectiveness is promptly We our of underlying warrants. period, and the we registration on year after point the the debt of would statement the $XXX.X As million balance also first not that exercise to XXX% which intention a the a public after with cash SX no ended of sheet. three realize the I result in year an additional right on like to is

public on million for cash all an cash balance the $XXX.X exercise a our sheet. generate of Assuming warrants that additional will basis

Now let's move on to guidance.

today, XX% revenue As year-over-year results we first of company. quarter press This represents In set at are a our public proud executed million. basis forth we in year initiating we release, the as are over XXXX delivered a guidance XXXX $XXX our well on and in growth results. closing, school our our

of exciting. of unique. of is ROI high at discipline market and Our strong our is operating us, is very and thank combination you growth. rapidly any based the us ahead joining to happy line opportunity, framework continue to large growth answer use growing questions. open and for accelerate scale With to that, which questions. advantage afternoon, opportunities The we're take to Operator, this for We'll please

Operator

Instructions] [Operator the question from line Presenters sir. from our you, Thank comes Michael Graham first of Canaccord.

is line Your open.

your ask may question. You

Michael Graham

your on a Hi. on and numbers to getting concentration. and Thank concentration getting a Through that wanted disclosures, congrats a It's game start lot concentration of these we revenue revenue you, exciting. few with just I own off public games. about of have you know question out. and and

games. so wonder, the activity business you that's keeping Thanks much. those in what to talk I suggesting if a a might wonder, And then how of was out be think report those around games if some there. marketing your general? down And believe know there that's the comment in just slowing going by little to forward? just about I key you on you're that bit maybe there, design, download grow can could And ecosystem there? seeing sort But I just I been there philosophy third-party of

Andrew Paradise

Sure, happy question. answer is Andrew to Paradise. your This

So, that Michael. thank you for

developer of terms newly In know public company. I a we're concentration,

always lifts seek the audience. as always business popular most the all biggest aren't tide content The because our concentration So the consumers Media has businesses with has experiences. people mix have But boats. worked. generally, rising out familiar best how

pedals, from all shifted grow GMV, their Our previous one The even developer overtime. concentration position. in to actually after continued developer from number they've being displaced to has

was previously, for they So XXXX, platform, Tether are largest of customer those our with ahead impact. actually, joined listening, customer, the there who Tether, familiar our in largest

won't but over it one I in number In and fact, can certain title, time joined us we to on know be actually time, will who candidly in over Big you can platform. and the today tell on seen number XXXX, as be the again. future, Run, the next of our we bigger one as being will which now title shift that we've changed

Operator

have from Crum do the another you. Drew from question Thank We Stifel. from line

Your line is open.

You your may ask question.

Drew Crum

Android there with the a share as driver So, With growth any phasing should or updating shared gambling the for for the distribution update to read you permit through Google is via Thanks. their can any recently And Scott, maybe separately, quarterly of terms be eSports? thinking you service you've Can the the discussed Skillz? are we revenue for Play the annual business. about the then respect applications year. of the to in licensed And implications what you modeling about revenue talk for Store, how guidance 'XX? for

Andrew Paradise

This Thanks question the Sure. for again. is Andrew here. Drew

say, trend broader of the So, This been would that Google of enablement in terms categories. of and on but emerging of content are a out rate point at directly Store, app without so growing reference. applications stores. impact would base updated revenue the iOS twice I installed terms Play our recently positive the Android alternative gambling the even the we've distribution as I Google you Play, permit towards to indicative licensed update of doesn't of service it's Skillz, actually

Scott Henry

you about Drew, about question second Hi, tackle think and guidance should phasing. your I'll how

quarter indicated as revenue million term trajectory, be investment. we that then opportunity year. out as see, noticeable to we're grow be investments make first significant as QX. to XXXX So, able and significant we velocity QX, exit actually, you in and to And growth then see share the increase business, flattening the we Typically, fairly see see investments. in and with guidance in long-term the we’ll the for in drive our our a significant revenue should an value. investments sip from and We a longer QX, will There XXX making over see

Operator

UBS. another line Eric We the of from do have Sheridan question from

Your line is open.

Eric Sheridan

commentary a the think give the user sales quarter, marketing. should with of or qualification how in you we going bit in Can past repeated answer about on way little in and us qualification but which the Just to sales the back and user mix the revenue bit us of incentives? spent came weaker than little of was the a number and number Obviously, user you marketing had acquisition in modeled, dollars a better. a towards some

quarter understand pushing the try in bit pulling part certain dynamics should but and about philosophically a to little think of second be the of the we and sales levers, about as of then just mix marketing behind. you So the on the those much. it levers How we move think Thanks leaving not QX, And so only in of would 'XX? December through business?

Andrew Paradise

Eric, the question. thanks for

I driven market, on think with we're is dollar our portfolio investments $XXX now's and culture or million what a the a I'd leader as employed for million the to time of and ROI built see capturing of much invest $XXX our to We the is, very we with the XXXX. a both the horizons. near-term call. way remind in is revenue to year-end first. the trillion everyone for long-term very in plan $XXX that think clear of and business We're about similar next plan capital markets million

Scott Henry

the Eric, question right. there, I'll tackle second

make growing not focus to on mind, in we right, keep necessarily paying money paying now. our from our is This now, users. have you we why So, growing

is now quarter-over-quarter. XXX% paying QX, in So year-over-year, and XX% up

why But right. our the privately So, that to the in also we our were QX. paying paying non-paying QX invested now. to is my make dry convert in in able attention variety business of really in now, we'll users we different hit to that's our metric, for for of little driver we of focus that XX% now, on a Engagement, XX% needle things were when And able bit record payer to payers, moves in increased to marketing conversion. from money test a more a

Operator

have Fitzgerald question another Brian the Wells from from line of We Fargo.

open. is line Your

Brian Fitzgerald

best don't maybe Couple that and you to questions, And is CAC right economy then of as that see that's up, Maybe to Can for now? also you channels the iOS. And Drew's also changing? important. and it's you they for the us Maybe opens? questions. related on but Android, work do, first about Eric how they talk

you you IDFA to going terms we're about real-time How question to tournaments think then scale the the number and some between for second of does the was how users, to lot. matches you just scale tradeoff right? sorry, skill of feel match I but of impact in like do as be a iOS? are number players want your -- set. ask against And about who's fun, this up ability like to There's ability a matched sets you the like skill somebody and

like if understand to back in step you that? Thanks. what your sometimes so but you don't And that's matchability, we the and a there's And so you got. somebody for and to so, game going balance the hold between saying, and have of heck you we're come engagement, driving driving also

Andrew Paradise

questions. This again. is the Sure, Thanks for Andrew Brian.

scale. break think discussing fairness this one IDFA, in how I One platform of the data and science is terms about advertising? impact Question about of is is kind part. the on we question, First, two as

positive material our business which It let a from impacts IDFA. changes. on me So the expect our hit really small be don't IDFA We could for the is negative first one, business.

IDFA, happening is if what's think targeting that for has fact, And In making you two ad less about Skillz. precise. implications

First, you community. more makes even challenges CPMs, actually targeting, likely the to sales means models monetization have support business attractive which lower which more limited and ad developer

adoption us. So, for it actually will accelerate

reliant Second, IDFA, exposing it's that businesses audiences. niche targeting on are

out to of different which daily be audience think Separately, lower pretty across faster at at ones. dropping you so broad to per large science functions if of scale, happy We do at and prices data on many small cut buy to designed from was games seeing game, are actually low only fairness, system up others they and thousands of us themes, so are matching we about actually your as second it that with about audiences fairer we And levels demographics. platform bidders and can scale a in we the actually, continuous as we'll can't question other very the auto So answer very market. that our could sector.

years we're and in a games, And out improvements to been ability up are of been sciences seeing seeing defining scaled and meaningful The seven have fair, and and to bigger, business. that of deep When the only bigger the we're deliver were deliver newer three focused who had I to competition. and it's story. the so, the pushing data how science from came say scientists invest a It's our our I outcome, in point Skillz to actually to person on headroom team. and a life fair important there. five system for fun, actually company team in data becoming very feature We significant really we data as ago, investments on in a we've those I'd

Operator

Thank There Andrew for time I questions Paradise, to like closing at presenters. this to the further would turn Founder, now remarks, back no are sir. call the and you. CEO

Andrew Paradise

I just first an update today. everyone in our continued for We report appreciate then. wanted and tune quarter our We exciting providing when you to call results, we attending really the to progress hope thank time. your forward look you'll

Operator

this Ladies and concludes gentlemen, today's conference call.

joining disconnect. us. you now You Thank for may

have You day. good a

Skillz (SKLZ) 11 Mar 212020 Q4 Earnings call transcript