SKLZ - Earnings call transcript Q2 2021

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Operator

We are now live. Stephan please go ahead.

Stefan Gerhard

Good day and welcome to the Skill's Second Quarter 2021 Earnings Conference Call. I will proceed shortly by reading our forward-looking statements and non-GAAP measures immediately followed by question and answer session. Hosting the question and answer session today we have Andrew Paradise, Chief Executive Officer, Casey Chafkin, Chief Revenue Officer, and Scott Henry, Chief Financial Officer of the company. Investor a that read both we are on had and press of you available letter stockholder published our hope chance our to release which We website. Relations earlier today,

CEO posted also a of our We discussing. have to short website video our

Looking subject by use a to cause and that such usually numerous of financial other such actual identified should of the impact discussion condition. could results could company's detailed for will, risks more expect, and are SEC results similar statements, words which that the as phrases filings operating to are uncertainties risks future and

isolation During call be of as our for release. results will with useful in discuss performance. most a management quarter the comparable GAAP the accordance financial prepared our evaluating measures, that, is A in With XXXX company's I'll operating to call, not directly which or GAAP. second can measures the in in should the These Andrew. substitute available over we believe measures earnings measures to non-GAAP these reconciliation turn considered be

Andrew Paradise

Stephan. Good joining our you results. all quarter everyone, today to Thank you, discuss and us second XXXX afternoon, thank for

on investments to our read accelerate setting our stockholder and opportunity that QX made initiatives it which to for With key our long-term details up grow performance. me stage questions. the open we quarter, our platform This all for you've users, an had important content our that, really increase will advance technologies, growth. let contains Hopefully, letter,

Operator

[Operator Instructions].

Graham comes question Michael from Genuity. Canaccord first Our of

go is open. Please lines You ahead.

Michael Graham

I two. wanted ask to

exit great. how can then investment over higher and synchronous again your capability. was on you think maybe the to comment And the games conversion on players is much up The just this time? wanted about is quarter, which you paying player ask Can I that trend first to

on testing about talked had developers this some before the synchronous platform You investment.

might see of for on of be maybe the on sort more development just platform? we gated of can activity that update vector to And just timing if exit? when you So going us whole us? is there that by wondering sort I'm now pipeline about talk Or

Andrew Paradise

Yes. Yes.

let's conversion metric. part, users. parts. to Chief two paying for I'd the about ask responsible So comment this talking in is Thank Revenue the question. to first Casey as refer Probably to that take for his team Officer optimizing Chafkin, you

Casey Chafkin

is question and done this continued in for Michael, studying ways, we've this -- something surveys or market be we've the We've conversion increase believe cut at to is since number Thanks we long the We've this over a to we of able higher. business. looked term the is interest inception. and business different the Casey. XX% actually been should -- that and

leverage me Aarki is the spend. part question, Let of which and Michael, our the acquisition about user comment your on second against

year this million going Aarki I'm for before $XX -- XXXX expect to so contribute sorry, synergies. It's of to I -- We revenue did of the remainder take

Ian Lee

was asking about... think Michael I

Andrew Paradise

Yes, closing sorry. deals, Two both recently.

Michael Graham

a got on. going lot You've

Andrew Paradise

started know. I and paying [indiscernible]. users I we know, about about And conversion, talking I thinking started

Okay.

Exit. about bit Let little me tell you a

on multiplayer about Exit's into and years technology the that genres the now. are advanced server as for love our been reason excited accelerates development. really the fighting as I racing, it's actually that for investment, most first-person has these been building the games, expansion genres So a Exit candidly, most shooter this alliance about incredibly gamer, an and working such I've XX

monetize Exit. a to preferred and technology technology. multiplayer gives alliance the be gaming way platform and positions skill-based So Exit, in using synchronous if publishers us for with it developers us worldwide from partner for the they're exclusivity as it to Exit's interested

for competition. developers the Photon terms Engine. it for will their This Exit's to easier with In integrated make games of will be SDK rapidly integration, our enable

Operator

Brian Our of question Fargo. comes next Fitzgerald from Wells

Brian Fitzgerald

pick made went we He of the to the will trade WestPoint way. the on from I scope off. question by left Aarki Michael where up

kind you some in with question. could doing half you trending during is for the you part you're see bear, perspective of through from a costs brought and if One we've you're been two CAC the how and in second [indiscernible] progressed in CAC, to around the you the year? assets the is the going these helping see So year? do the half how of of of on that what's year, forward tools average and that quantify bringing where quarter specifically what LTV first second the of And that see as do like you for it half that

Andrew Paradise

Sure.

first So dear over to and Casey as CRO. of this his near answer I'll LTV in one that very is to ask activities TAC, terms as actually

Casey Chafkin

user little creative And The in there's come about jump in areas let the talked on staffing as me lowering customer catch good remain and up bit there's earnings letting couple quite which we terms shared is also -- well. But quarterly the terms calls you thanks we in opportunity LTV some a is the see in talking to -- and is those an CPIs improve up of infrastructure, in development one our year talk revenue catch that strong. There part, on terms other Brian, our are also the across industry, that the of is them mind about second our of previously it's other to costs. we've we've and that. again, build, and the LTVs Brian, to something LTVs the the over last piece team think of seen talked curves. a upon. are for that What and Aarki then acquisition the strong up continue remain with Aarki in this working of we've deal. of investment we're of and something steady, few and marketing to half first ones initiatives that but organic we've acquisition question. and about our for to opportunities our that of

I million the the $XX of Arc. our the 'XX. Aarki think transaction. of on migrating several that mentioning of of we the minute our the made to half not we important on will for of for think marketing color one realize know shared a this reasons started I the important we When of deal. it's we Honestly, terms most about quarters company. part spend revenue a impact expect It in why us for really future several ago synergies that's the to take full I of the DSP transaction acquisition. back

portion RT platform. and we're gradually spend going marketing the of quarters. our of terms to to going to DSP plan, In first, our a that's few a take migrate substantial

Second, going by It industry-leading we more performance of enable first-party be rich expect really end-user And chain audiences that's down in to the Arche's the target algorithms to like efficiently from further to way impression LTV. us only that data. to our data level will the the improve the all integrating industry.

Aarki potential we're the deal excited future. the and really So the for about

Operator

from comes of Erickson Brad question RBC Markets. Capital next Our

Bradley Erickson

just have two. I

half new we've for you potential, maybe in games, aside when Aarki drivers We guys look with as things have international Play the are biggest maybe of First, like And moment what half pointing think opportunities, drivers the I at a who Store, that. good about for the set call a happens And target of you you something Google got growth? the covered second kind you then since of incremental the guess sort to kind knows year? follow-up. I it, of as second

Andrew Paradise

you because expectations. much QX maybe When COVID line was 'XX growth bump Well, think year. about a I was the against there of very think with, with we in tough start last to our QX saw QX 'XX, revenue comp

As on in CPIs seeing other we've calls, elevated mentioned definitely we're QX.

mitigate long-term high seeing. mid- CPIs one a And that we've quarter number with you've of so the to those And making the been investments we've obviously, of quite announcement this seen of and been ARC.

we mitigating against see far expect are to so later CPI them do and investments our of year. progressing from this benefits well, All

how would anyone of in predictive terms to level the period, And what And new kind potentially on is nongaming that term beyond Internet. translates much And better centralized applications in to in X-year platform. looking fitness, beyond more you in near the of a big than talked on more drivers very give mobile. value developments India, us, I think period. like at talked we're little which bit future of optimizing say, about. we've like platform think is In think one being from company, That growth LTV, means going think that to about competition can chain the the the really the and the you LTV which the of focusing We end-user the period, on means the joining impression midterm, the that place we really which things Marksman, term, will be even there think in X- like geographies. are down will of certainly industry. Buck the demographics which In we've When the content longer X-year we X-year about. successful X

Bradley Erickson

from Got it. in terms marketing. housekeeping shareholder And item maybe user the a just the follow-up great. acquisition letter That's of then

mentioned engagement spend you that you doing. think I upped the

any of of Is spend half like we thinking some we it in of Sound second into as the clarity would may way revenue. testing great. there talking that be the amount terms reversion doing right some the to see versus there I leverage Just kind year? which in quarter, guess the the to that of implies like about net be head

Andrew Paradise

will you how QX. July how know expectation CPI trending of little And have on QX actually Casey is even to comment what, and CPI and Yes. the what a is bit I rest in for for trend love

Casey Chafkin

good Brad, to Sure. connect.

before seeing to costs, for market investments we're pace we're In to decreasing that flatten other see terms initiatives, result to is things brand industry partnerships, but industry to CPI, dynamics, increases of a our down distribution like pricing of stabilize, expect as later think as whole, be we're making decrease that we in the driven traffic of also actively and going this by a pricing begin that. the ARC, distribution pricing what in We starting year. July pushing that

our allocate inside looking way In plan value. we back bandwidth we dynamically in of our a marketing. QX acquisition as our we investment. customer maintain of the we're the able we in bring we're can that to reducing CPIs. increase drive UA financial for terms for this that pressures, that we of on typically that it is marketing, saw also based -- team a their users right, the most lifetime effective quite And with dollars spend, that the were market. engagement that seeing hit to the came with back to seasonal with QX as you of rising experimentation And we face what result And it's increase what user reduced that, the discipline, in versus result but engagement something and something was that And

as so we'll work. the CPIs business. long-term path chart ones at if And that that do, keep up, but course for very the we we're continue we'll eliminate stay to the and going a the future of ahead, don't look the build we similar as testing experiments We'll

Operator

from next Bazinet Jason Our of question Citi. comes

Jason Bazinet

between on costs one and question Can marketing. ask more that I engagement just toggling user acquisition and

on worse If directionally up it? spending you way think otherwise paying the and both more about users but engagement that be, of be it end to users per and Is see on is right the would right than the paying benefit revenue they you'd sort marketing, user. that would

Andrew Paradise

in incentives is monetization is is pieces running monetization. engagement help area And larger financial which One user the two that but that extending from model. also asking we is and drive second base. growth you're what perhaps paying see the to for nonpaying the experiments which think and users, conversion, driving or user of point, test of conversion engagement to us, moving marketing of marketing your we is the user we're driving I experiments existing focus retention is run in whether

marketing hit MAU engagement to not with does drive it so now or maybe the And more business. directly,

Jason Bazinet

and time, to And in more toggling broadly, user each labor think quarter. finite of dollars use resources we engage terms I we think have acquisition between about and when in marketing really

thinking really long-term we plans. think to want ways against We're our these when how effective So the resources optimize to most about deploy marketing we about activities.

first high acquisition we market acquisition in would discipline spend investment about following the As us, but business, given letter, UAC we'll given in And massive noted in prefer the the a the QX, continue of we really our of when in increased our user you reduced longer-term investments to marketing, user UA quarter. in to ahead more plan we invest than engagement exercise environment. in think the

Jason Bazinet

the Then of Aarki to think Ark. up? UA maybe that's spend could spend this Is about when fully guess is I the when and it? we of sort tick integrated that see way has your moved over sort to right back

Andrew Paradise

be by that market idea. it's certainly entirely that -- wouldn't be crazy think wouldn't dynamics, but driven I a

Operator

next Our from question Stifel. of Crum Drew comes

Andrew Crum

in of progress those? early seen over second that So you that What to thinking take then Buckhunner? improve are terms it? any from expect with on have quarter-to-date observations consecutive contributions see or you we Separately, competitors concern of rather? you the NFL not drivers the meaningful guys Any are several rate what noted year-to-date some the How good half? demonstrated the one impact along in with you've milestones quarters. business. that are lastly, to the would Big about last a the next for challenge And the Andrew, was IDFA for when you've And either the

Andrew Paradise

Okay.

those. and try me Let tackle

think questions. we three So I let's have unpack with that, start and

for So impact. okay, Marksman Honor And half start successful to the one it, about Buck rate we and call big take Marksman why second let's or if with Hunter new the platform. IDFA and is impact NFL buck becoming in asking content big don't three

in when expectation that content, version will sharing content progress the metrics like performance of talking today but want we launching, do not of revenue think about Tetris preparation for BBH. industry. think earlier scale launch. BBH a from out. any to into about hard view balance the of year, launch the that's continuing Buck And whether piece Tetris think soft the with Big the of of one potential you call we're I and for warranting become being Hunter we much new that of very it's to we work know team predictions successful, a current this the with take the the on content mechanics and we why any game, I which optimize hard in launch game really soft significant closely scaling think it we're in certainly When aren't really play Marksman, We to contribution making about launch that not

So that isn't our forecast. into baked

games for in typical revenue yet yet BBH any it's we're including our have that As guidance. not we to scale, from

as and submitted, phase was, that how all with of an down of can be reviewed terms proposals. competition challenge think, would our development the give the these collaborate We on of it officially -- We idea well the content actually in kind influx overall response BBH. you large that piece we we launched if the a then of up of by With to about NFL in the the developers So both I game NFL XX end developers talk And that we we and helpful. of, developer grade hundreds or challenge steep actually the similarly, competition saw are significant semifinalists game with moved for into NFL. with the energized with kicked existing say excitement. to community new proposals and We a really to were is end, partnership challenge. we multiphase interest In of and responded from search as mobile NFL. really Skillz. off I'd we next NFL had the games. The we have excited QX,

a that from So proposals when as to everyone games would we have about NFL of game we or refresh by XX originality a it started there. game submitted. NFL to be I first when about XXXX can see we excited XX the The actually XX to impacting with mobile that, really delighted both building were Skillz of the we that out some winning are talk typically is -- over development. project to want to a game games. ingenuity timing is the kick been proposals. say on And season NFL to it that companies months revenue. kind the minute Both a the platform for to the launch not meaningful color expect for and game IDFA. who's we the what line saw from familiar of and time Casey standpoint, by ahead We've of the were I

Casey Chafkin

Absolutely.

terms So IDFA of of XX.X% early is been slow. relatively still has in iOS relatively rollout the

read the pretty to it's impact of so early it. And

say will would I that impact of IDFA expect continue So neutral. we be to the

cost hand, efficient decreases less advertisers response lower per X install in targeting the likely to as and attribution. On bids their

On well. rates conversion decreases the other as this hand, potentially

Andrew Paradise

was about think And turn you the rate. don't rate. give talk then why take we'll I little -- third a asking take part Ian, to bit about

Ian Lee

you, Andrew. Thank

So is on a couple the of things take rates.

with are to over look take rate multiple there So to time. work could that we use drivers at

brand-sponsored head-to-head prizes, terms can rate And avenues over things our look users ensure different a I of minimizing are of to there are we of while work increase in mix to formats to example, think that with for that examples, with have for two Just brackets. number use, some just users. you we our additional how format we versus there overall, time experiment friction take tournament

So you again, time. are the we that that, over than avenues the year. part give can we're There will at Other Guy many do all no specific take time. latter for of looking rate the that

Andrew Paradise

that I think we all that. three questions covered

I we're there. to move next the We'll good question. true think we're if on

Operator

Instructions]. [Operator

Our Uerkwitz next question comes Jefferies. from Andrew of

Andrew Uerkwitz

Let questions me ask couple a here. of

Dea one, on is First Games.

those talked of they'll CPI timing kind way just to about my there benefits. second the have the simplify on SG&A. like, and related show on quantify a Aarki acquisition, about is question kind talk And up Any look that? to high-level of of impact where as and to that kind You of costs kind you talked benefits what the a broader would they could way then about

the of for out guidance. think on modeling from that to way top year? kind about line it for Any broke this You perspective a

Andrew Paradise

Andrew. question, the for you Thank Sure.

and comment now. as can with much we for about a start can we on exit art little as talking me Let bit

available XXX,XXX about that's is their engine Photon using information. games, teams. community believe developers I already think of developers synchronous the with So one I exit that are publicly multiplayer for thing

we'd developer you the over pretty cross-market So years. imagine, that excited coming to population can the opportunity to be about

early In yet over new seen with of a of almost But massive that influencing I first-person like terms terms would haven't specific modes. the like Hunter successful obviously, gating be we games will talking successfully with But Duty first have they're revenue. a help, platform. crossing big guidance, shooter terms in part about running Buck of results asynchronous content game [indiscernible] We line Call do over it games in into promising on in of them Marksman. versus say

partnership, and shooter certainly, demographic solution exit first to that an person the increased quite first that to audience can steeply see we'll potentially new you we level with and amount integrated So probably, it's deliver bring skills, the the build hard quantify platform. PC to more synchronous And which impact. gamers of console. of and hardcore often a the dominant a They'll male on in

that that's with years not some street or fighting. So FPS, Capcom thinking the on to It's we about just Fighter game on available II. platform. I would fighter fighting ago, publicly Street even love a partnered a see

it important yielding from I and to can genres. incredible be and in And successful about and that block building developers also our next The thing that's then that, platform. take shareholders. audience hopefully, the for that content we risks This platform build will talk amazing is these in be the think would inspiring skills real. for to making

piece. the that's So exit

know near CPI'ss -- dear your talk you ARC, heart. a I In about little to this terms bit and Casey, of is want do to

Casey Chafkin

was revenue the the to sure wasn't P&L. if absolutely. and through park about about Yes, potential the the Aarki or flow to the I CPI and impact question And

Andrew Uerkwitz

updated the broke the side Aarki. out guess out I you guidance, you broke of Well, of revenue kind you --

the the breakout Just without into on curious side a on too if impact CPI? getting SG&A there's deep

Casey Chafkin

Andrew. Thanks, sure. Yes,

there. Just in a points couple of

I mentioned to recap just what So Andrew had earlier. think

roughly from for revenue the assumed the year we $XX contribution So million their Aarki remainder of following of close.

profit and the and P&L, little so on little at helpful its is In helping their OpEx, hopefully been when [indiscernible] of as and kind Aarki R&D walk impact the profitable range terms gross EBITDA a so I specific in following a you also won't is part EBITDA adjusted down sales at line Skillz and of is of margin give their XX% than say largest lower the you your look I by a it marketing adjusted categories give scale OpEx and that’s and at we you company. the you line will the public G&A are historically color

are be, standalone than slightly combining had better would whole. a Skillz use with basis the so of you we contribution would they breakeven some the assumptions those So assumed can you be to them on when

Operator

have Bradley additional Erickson. question We an from

open. is line Please Your go ahead.

Bradley Erickson

more just had one I follow-up.

of little confused language of user some acquisition spend. terms a the in the on here Just

of break out is out all first that if within engagement it there comprised and I marketing. guess You contra the right is so, component as is, within spend is and and UA call possible? that A, revenue? the that like additional can then sales and for -- recorded spend B, if an And you sounds question is us

Ian Lee

Brad, here, well. it's Ian you

So -- specific will marketing. is there in and the between breakdown see user acquisition yes, the a you financials engagement that

broken So are out. those

into our based on a end look see It's a that you is that our is fact developer. user the If differentiation. you there filings,

on marketing valid in And expectation. depending there is they so valid so in of what can on or a some that, revenue breakdown that sales and that contra based expense, between a of considered expectation be if have

of happy detail, incentives filings, contra-revenue in bit is which broken that that's more end-use of we go into context, just and but So it in was to break that all in roughly out quarter a how And QX. the about delineation. you out for our with

Bradley Erickson

is don't yet. Yes, filing it. That's hit Got I quite great. think the

So helpful. that's

Operator

We on have questions lines. no further the

Andrew Paradise

third our results. much, everyone, everyone. We time thank for you you, forward until Okay. update quarter today. on Well, providing then, look when we to your continued thank an our progress And very report

Ian Lee

you. Great. Thank

Operator

call. for joining. This concludes Thank you today's

disconnect may You lines. your now

Skillz (SKLZ) 4 Aug 212021 Q2 Earnings call transcript