Earnings call transcript Q3 2022

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Operator

Thank you for joining us today for Skillz Third Quarter 2022 Earnings Call. I will now turn the call over to [indiscernible] to cover the safe harbor. Taylor?

Unidentified Company Representative

Good afternoon, and welcome to the Skillz third quarter 2022 earnings conference call. With me today are Andrew Paradise, Skillz Chief Executive Officer; Casey Chafkin, Chief Revenue Officer; and Jason Roswig, President and Chief Financial Officer. results Investor earlier Relations financial available and full our on website. our were today published are Note,

Before I will turn securities note within that the meaning laws. call over of the management's to our comments the today of include statements some forward-looking federal Andrew, please

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

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

turn some Andrew over call opening remarks. brief Andrew? I'll to that, With the for

Andrew Paradise

turn touch before right on Jason we time Roswig, thank for call to and I'll you on bottom over us. reaccelerate the open numbers, organization. transition the quickly Skillz the President the the Q&A. touch of to new size Clearly, call in is our CFO, and Today, our up to growth I'll we the the afternoon for Good as you Then line. initiatives quarter joining upon and update and improve

platform we internal adjusted engagement both quarter-over-quarter, of better good to environment period progress our reduced continued our macro as mobile while to and quarter. I challenges march through EBITDA in revenue quarter, that the organizational by well Conversely, for We improving last the referenced payback as the profitability. impacted made and gaming be retention. by some product During XX%

business made align difficult outcomes. the changes to our strategic many also within organization better We desired talent with

fix. defined that across the to no those cannot growth and to place can address can there's the path in and is control. quick control reaccelerating plan So we The have company. identified we a things We've now well

are key us and durable long-term pillars We four on return focused to enable to to profitability. growth

Our back XX target. who first to pillar in crucial taken the our I've changes and improve most to rollouts. of of engagement We're back a the new dug retention. Filippov, Vassily to Director is course rigorous product our make split the of the has were platform. helm enhancing introduced months I'm the rolling already on and gaming and customer recently, platform organization, closely cloud a perspective, at product contributions Meta, and with that is disciplined CTO, Engineering working our to prior foundation From of returning at unsuccessfully testing and are some product product over developer

the right look as that native have for concept present cloud a experience We're testing shows onboarding game-streaming our a full an offer forward experiences Android comparable to currently we to ensure players AB game. will technology to iOS launch. we Our provide or can we new

of continue our sizes, launches to launched always the of and Our the Trophies processes. and is or developer scale plan, to more Clearly, help very UFC, to the support new including Chase the tools these from and NFL who success Mobile. better Sweepstakes, to and successful and and core looking In their time developers days our on leverage constituents. we partners our new of with live including will we ways proceeding we our streaming on launches, all brand favorable their our to ahead we are developers for ops can early user and platform market support are as redesigns games. and results live while partners key improve content Cube improve to provide tools infrastructure Blitz quarter, success, bring experiences We're limited

second up-leveling our organization. is pillar Our

it's commits that time this the embraces transition, every each our and of reigniting vision Skillz to employee crucial During potential. and

During quarter, managed reduced organization the and this ensure the further performance alignment. headcount we to

Our headcount on through was what of little now deliberate year at more decisions stands a than ago and a structure. it half thoughtful

So players, team of on existing shareholders. is capable and were fully our returning value difficult. developers these The focused changes and to

and to to efficiently Vassily, To key we that the we've as given that complexity built innovation only swiftly mentioned, the end, which, some we've the carefully adding the the upon. must ahead, Skillz the of company our work across this restore challenges the person. identified. our during including essential new success began hires of who just really return to was quarter, that fix understands and we the to path I in culture office. talent quarter, The that magnitude added be team also lockstep, can In a in It's to happen we're

team are quarter. also in and RT hires next the We restructuring there compelling expect important some to announce the and

as experienced building decisions we're added Advisers; make operators Seth SL the advisers we've strong a Board and Manager we company that new members, Additionally, Schorr, the two and seasoned These gaming experienced requires. Portfolio Henry Hoffman, tough an will be executive. at key

customer driving reducing engagement pillar By our spend. go-to-market, is through becoming roadshow. our and traffic channels, that discounts period growth, and the in payback we through our we we're profitable can granular on end-user UA more efficient believe were discussed owned monetization third return to communication improving six increasing months that Our we focused our where organic user acquisition IPO spend on not

XX% LTV which past days, of improving reduced early opposed part to on period, quarter saving alone. quarter acquisition most grown The of this already LTV their from exciting CAC purely unacceptably over had this the as the were we've payback long, improving ratio it's costs. is by improvements Though to

we've reengage quarters, recent working we seen better to in early We signs than are where cohorts new performing and are hard are seeing churn. cohorts prior that the much the

a straightforward, we reducing on pillar profitability. to a cover expenses Our the can while Jason return I'll single to justify efficiency continue every demonstrating toward steering spend its so item we'll eye line growth. details, and focused potential We're is productivity. the to you with of towards path looking but are clear numbers do return, an fourth at see in let and that to

have In our the $X.X war billion meantime, return a as in navigate we over to we growth. chest

through competition today public. that first Our gains bringing us mission the in went as patents our when out skill those best of of the we versus chance everyone true fair hold did of differentiate they and

potential monetize their players enable to games improve mission reinvigorated are compete our with allowing their our of while to We thriving the the and a to to and skills ecosystem. opportunity developers in

team. We work clearer have a and the vision much of lots united ahead, but

tackle challenges energized these are ahead. We to

We Jason? summarize our Jason look going you the with And forward. the on to updating to progress that, financials. I’ll forward over to call turn

Jason Roswig

Andrew. you, Thank

my face. As Skillz. many this is first call many Blackstone, joined early know, aware earnings in of I hurdles you the the team of from we with well August

months Skillz joined. make I’ve only on a focused people three in, with seen and reasons The processes. are the first and the I quarter I What my team validates Now, implementing in of restructuring and we it sleeves and address lay pillars are out. all opportunity our it to ahead untapped rolling the to enormous is to time take happen. four some and It will up

communicate to reconsider how not quarter a this investors. as shareholder with do we opted we letter So we

numbers open incentives. million, and call XX% was and pullbacks by Revenue your of as Instead, down planned I’ll paying MAU declines year-over-year quickly the sequentially, and we’ll XX% advertising cover for the down questions. and driven result in $XX.X a

year paying XX% period, year-over-year our a is percentage which rate, our marketing marketing was $XX.X of $XX.X MAU, down conversion quarter. million, down consistent payer down and a decrease was MAU Engagement with million, two XX%, Our than divided and sequentially. higher prior year-over-year XX% prior UA quarter-over-quarter. XX% and by XX% was points

of includes offset in was down Research XX% due by million to This departures. million charges compensation year-over-year. and development credit $X million, employee $X.X $X.X stock-based restructuring

a basis, points points down was percentage up On year-over-year percentage of four R&D XX% quarter-over-quarter. and non-GAAP revenue, four

Sales down was year-over-year. million marketing XX% $X.X in stock-based of compensation million, and This $XX.X restructuring $X.X includes and charges. million

of and points sales a On revenue, points down percentage down XX% and XX was XX marketing basis, percentage quarter-over-quarter. non-GAAP year-over-year

year-over-year. charges. General restructuring $X.X and million XX% $X.X stock-based million, and down compensation $XX.X This of administrative includes in was million

On a a six by was G&A percentage up flat. the of basis, On was of G&A primarily of sequential driven organizational year-over-year, restructure. revenue, points XX% non-GAAP as revenue basis, a percent

relationships. negative down million, the impairment developed and of $XXX.X our and million or impairment was technology income $XX.X to $XX.X down customer due sequentially year-over-year asset charges related million Net of to XX% intangible

as up adjusted in XXXX, $XX.X and was XX% as sequentially. EBITDA QX engage spend, million, by was the in decreases primarily year-over-year XX% restructuring. driven This negative marketing In UA well and

$XX.X assets, items, adjustments million million of the million EBITDA impact or Adjusted charges. non-cash were $XX.X from other restructuring QX of which and of of impairment intangible for excludes million from $X.X from XXXX non-recurring $XX.X

sequential Adjusted EBITDA adjusted was by of percentage up basis, margin XX%, a XX points. increased EBITDA XX margin negative percentage year-over-year. points On

We do the expect to before raise not capital business to additional even. break bringing

our strategy plus aggressively of billion as an front even the market we is invest capture to break to in EBITDA get use run even to Our break then and us. XXX capital to opportunity

securities We ended million outstanding the discussed third against initiatives to runway of and cash, providing with Andrew of debt above. equivalents million $XXX.X us execute and long cash a the $XXX marketable quarter with

Turning of maintaining revenue XXXX full now year guidance, guidance are we million. to $XXX

approximately of engage of XX%. revised of marketing assumes percentage guidance Our a as revenue

$XX of to For to million expect million next in range $XX the UA marketing, quarter. we spend

achieve expect We XX%. approximately adjusted EBITDA of XXXX full a to margin negative

watershed to again be return progress forward to to Andrew team look the said, in part updating shareholder this Skillz time. value. you of during as our look I’m once going you forward as excited And

questions. we’ll that, With take Operator? your

Operator

Tilchen Our Thank line sir. the Canaccord Jason from comes Genuity. question Instructions] with you, first [Operator of

Your now line open. is

Jason Tilchen

the you've talked rehauling a great. would in that progress different press And simply if see And the versus maybe how that you much expanding strategy. different the about, some that talked could is just reducing touch Maybe you could release, spend minute wondering In the you been if of using the messaging, channels. on you for question. just of that's Thanks spend about be taking strategy Thanks. go-to-market I marketing on inefficient was the that that.

Andrew Paradise

a is Andrew. Thanks, question. Jason. This That's great

over So, as we've been dialing more it quarter-over-quarter we're these spend migrating on pretty overall, our reduced Aarki. to substantially We've of accelerating back really acquisitions.

time. not share new I'm you terms this Casey, commentary want sure in we that anything to at to channels, do add In of want

Casey Chafkin

big this the The operations Thank is question. overall. is of efficiency Casey. improving you just for us the Jason, our focus for

to continue there's continued a decreasing costs. our we acquisition And and increase so versus lifetime about what our we in shift doing that on is progress customer in the things And that customer last quarter. talked we're value think both opportunity radical

Jason Tilchen

just in and on follow-up. messaging Or big part put from anything last that you from shareholder wondering guys the And engagement if was then on this The and the that earnings shift press absence the one around Okay, calls two had that the release signal great of of that marketing anything you just the And quick after could a revenue metric? share does quarters, time the particular? away that was be would letters. greatly I'm appreciated. in potential out

Andrew Paradise

question, little specifically we Yes. That's only SEC. a by great metric to that the Jason. I'm bit instructed because a were discontinue And struggling

be So, not – we're to metric. reporting that we are using not going

EBITDA it to of the You million, still right think in profitable you revenue $XX think calculate is much we growth improved context way million. of adjusted When yourself. in and $XX our look changes But revenue can declined revenue considering over business. the while at quarter-over-quarter, about engagement by still it marketing the think about actually the pretty the

structure any are in in for revenue all revenue changes make opposed revenue the our about year. can P&L want we earlier costs, that talked $X.XX profitable and And to our trade top growing of just revenue EBITDA, to really at so in of time line we really as focused overall building around it's And $X the we the trade. as

Jason Tilchen

thank you. Great,

Operator

you your for question. Thank

next from of one the comes Lampen line questions Clark line Our with BTIG. of

is Your open. line now

Clark Lampen

of you the got wanted bit taking thanks the a the Hi, mentioned one about could for I little see to I've for floor Andrew, if engagement that for Andrew earlier. got you one more talk question. Jason. pillar and I've

conservatism? very Or to You make I sure Thank up? based for in in what And some measure Or else? more think driving is upon CAC. about what year-to-date, saw that that's Is understand Could would you I the maybe you XQ? Jason, drove losses reiterated step something guys reported imply spend are in a guidance of there we you LTV improvement year, a talked or bigger doing maybe in relative quarter. planned which, what bit EBITDA fourth you then, I that? to more What, you. a seeing that's now that I are down sequential you've little guess, on just nature the there wanted guys of sort to heavier improvements on quickly. drill maybe seasonal build there of some

Andrew Paradise

Awesome. driving up maybe I'll question, This the is Andrew, we're first about engagement. Thanks and just how for a little talk Clark. retention and go bit and

quite there features we're So are on, the redesign. whether that a things number – it's leagues, around chat, working of

how we our players better and games as been the about computing results. events to live ops can engage thinking really we've So limited scale game Meta or strong launching continue doing time that seeing really around

one a results part just believe say holistically, our in person team I'd returning collaborate that great in having think of to is the really I things business. our we big of

double-digit initiatives to the percentage to think really about LTV we're in the I range. leaded for product quarter-over-quarter improve continue excited potential

how personal and also Solitaire to moving so time A/B as games that looking important cloud-based also helping distributing role understand an we cloud cloud the app well actually we as that advanced environment to to in XX a And more first environment, play like testing, that's to so app QX, can ahead web, announced are computer, you on even experience, think we teams versions, initiatives are by Cube, installed we for the initiative gaming gaming us or in in web, future. releasing of onboarding card players that mobile QX from We actually in with plan. modify great devices announced We Blitz, extreme, an computers. our like like the other really going connect at back

drive that little a it's exactly retention engagement little changes improvements you from little product example hard are triggered can each everything entry lot win because the the quarter, LTV and just, introducing you I one quite to different for compounding But player the it's quarter ideas a a But kind I develop and push in around that the like the of many so of compounding. the just actually behavior. on-system say by it's to notifications new and It’s exciting LTV in can't improve time grown to returning where I'd me. into to a I in that lot look I numbers things very certain product of quarter an opportunities ideas I number of improve event it's we've of so of give and first compounded a just which – in, one quarters. an And for system. of see sweepstakes types And a

Jason your to over talk a hand bit me little Let question. to second about

Jason Roswig

want quarter year Andrew. going that ensure have Great. that as we maintain hit want I to reiterated. that conservative our we fourth to but of we of are it. year, Thanks, And also we to all, the for that, will as Clark, full are of confident ensure the to now it. say we a the very position I question. first fully to we meet hit to strong say part be we thanks optionality expect guidance previously would expectations would as that we for

hit we’re intend So fully that I say would on simply and it. we’re fully track to

Clark Lampen

That’s I sort Great. right the If I weave more helpful. guess, one bigger picture of operating could in maybe environment now. just, around

of think sort have the chance of and throughout I persists spending reflected whether that that of engagement around sort sort into Is a Is that’s of think or mobile XXXX? player is you activity not there guidance the year that in earnings we’re and sort something in been ecosystem. of throughout seen? been sequential that guys some you a team terms persistent so seeing in far there’s discussion degradation

Andrew Paradise

standpoint retention – And something question, experiments our but isn’t until seeing monetization I we’re and engagement and kind that lot great business. a that period cohorts quarter of XX prior think marketing no, as that’s We just into forecasts, months overall cohort really this cohorts a a up a player well built weaker period. that a at that advertising think our we scaled to Clark. of last as I between when cohorts post level. definitely definitely, those engagement aggressively building That’s as From on are

very I want you shown. they’ve think unarguably always Jason, to characteristics that? what to showing similar add do to

Jason Roswig

say I the of Andrew stepping very impact would exciting Clark, a seeing And for the Yes, into just is lot I us. think that, we’re it’s product. back

So our that product positive quarter I think of sort the as continue by go optimistic first very we are we’re we into improvement to next see year, business enhancements. to

Clark Lampen

lot. a Thanks

Andrew Paradise

questions. the for Thanks

Operator

your Thank questions, sir. you for

comes questions line of Brian Fitzgerald of with line next Our Wells from Fargo.

line now Your is open.

Unidentified Analyst

Yes, Michael [indiscernible]. this is

utilization seeing what curious in are data. Aarki of guys terms of Just you

there ATT you’re customers then as been curious it or any as post-integration? plays Aarki integrate to spend Thanks. Has pullback or savings also And Our seeing less extent that out. on leaning internally. and more what you attrition leverage of cost

Andrew Paradise

– question, That’s had I Thanks quarter. to and dear think our near with Michael. to for the that’s the very we especially heart, report this impairment

painful So space. many revenue considering, frankly the the I close acquiring acquisitions paid to on we superior revenue a that is were bit Aarki multiples the multiple think in

of In days. terms the still between Skillz competition early Aarki business and it’s integration

gives the auction know, but We LTV trillion way user a behaving? user Aarki situation auction through to how final month are the participating doesn’t where way certainly understanding the that, operates as platform. very buying Skillz where all and from integrating all on the games a as us end payment a integrating data unique that you level at DSP looking auctions flow level users and live view X It on own, are approximately a is the a from

the last the XX answer we in issues terms of two in months. slowly. that, is said a the the integrating businesses because careful had very Michael, and I And operational moving all being of we’re of that, Having lot think

protect top on that as more Casey, a carefully bit and of all comment clean recently the taking maybe Jason he’s us. then business might very or an like we approach build of managing operational up the are We most business of core really it for while we Aarki issues. our ensuring to Casey been

Casey Chafkin

Sure, question. Michael., the Thanks for

down sure And is on it potential. speaks whole an are synergies modest, challenges I we there on underlying into our you that to pipeline stock to of think data Andrew industry in integrated true still. The the traded of the I companies as the are order are Aarki business platform in typically ad XX%. we publicly that, – for making took tech in that that went think I the And that asset of that the XX% us business think the spot its the that recognizes a itself. impairment hit of see strength advertising which it’s with for basis, on comparatively which is first can that the acquired that prices and very acquisition terms absolutely there. still very, But we the early

Unidentified Analyst

Awesome. Thank guys. you

Operator

you sir. more Thank [Operator for questions, questions Instructions] are no registered. your There

like the I the to back team remarks. So would for conference any management pass closing to over

Andrew Paradise

Andrew. today analyst engaging. to thank I the want and just for the coverage This for is

all We’ll meeting to New for of We’re business look seeing opportunity a then as discuss as forward despite to than all thanks of participating. in XXXX CEO, everyone despite the ahead QX the Until full more months. to these results. say I are feel with the you year the and macro Year really last we have excited and ever the I about where invigorated XX our in us. breakage to

Operator

you call. today’s for your conclude participation. will Thank we that, with And

now disconnect lines. your may You

Skillz (SKLZ) 2 Nov 222022 Q3 Earnings call transcript