Skillz : Quarterly Earnings Document

August 04, 2021 at 06:36 pm EDT

Corrected Transcript

03-Aug-2021

Skillz, Inc. (SKLZ)

Q2 2021 Earnings Call

	Total Pages: 12
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Skillz, Inc. (SKLZ)	Corrected Transcript
Q2 2021 Earnings Call	03-Aug-2021

CORPORATE PARTICIPANTS

Stefan Gerhard	Casey Chafkin
Vice President-Finance, Skillz, Inc.	Chief Revenue Officer, Co-Founder & Director, Skillz, Inc.
Andrew C. Paradise	Ian Lee
Founder, Chief Executive Officer & Director, Skillz, Inc.	Chief Financial Officer, Skillz, Inc.

......................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Michael Graham	Jason Boisvert Bazinet
Analyst, Canaccord Genuity LLC	Analyst, Citigroup Global Markets, Inc.
Brian Fitzgerald	Drew Crum
Analyst, Wells Fargo Securities LLC	Analyst, Stifel, Nicolaus & Co., Inc.
Brad Erickson	Andrew Uerkwitz
Analyst, RBC Capital Markets LLC	Analyst, Jefferies LLC

MANAGEMENT DISCUSSION SECTION

Stefan Gerhard

Vice President-Finance, Skillz, Inc.

Good day and welcome to the Skillz Second Quarter 2021 Earnings Conference Call. I will proceed shortly by reading our forward-looking statements and non-GAAP measures immediately followed by a question-and-answer session.

Hosting the question-and-answer session today, we have Andrew Paradise, Chief Executive Officer; Casey Chafkin, Chief Revenue Officer; and Ian Lee, Chief Financial Officer of the company. We hope you had a chance to read our press release and stockholder letter that we published earlier today, both of which are also available on our Investor Relations website. We've also posted to our website a short video of our CEO discussing our business highlights for this quarter.

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

During the call, management will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our second quarter 2021 earnings release.

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Skillz, Inc. (SKLZ)	Corrected Transcript
Q2 2021 Earnings Call	03-Aug-2021

With that, I'll turn the call over to Andrew.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

Thank you, Stefan. Good afternoon, everyone. And thank you all for joining us today to discuss our second quarter 2021 results. This quarter we made important investments that'll accelerate key initiatives to grow our users, increase our content, and advance our platform technologies, really setting the stage for long-term growth. Hopefully, you've all had an opportunity to read our stockholder letter which contains details on our Q2 performance.

With that, let me open it up for questions.

QUESTION AND ANSWER SECTION

Operator: [Operator Instructions] Our first question comes from Michael Graham of Canaccord Genuity. Your line is open. Please go ahead.

Michael Graham

Analyst, Canaccord Genuity LLC

Thank you. Thanks for taking the question. I want to ask two. The first is on your conversion to paying players was up again this quarter which is great. Just maybe comment on how much higher you think that can trend over time?

And then I wanted to ask about the Exit Games investment and the synchronous player capability. You had talked about some developers testing synchronous on the platform before this investment. So I'm just wondering if you can update us on sort of timing of when we might see more activity there on the platform. And is that development pipeline now going to be sort of gated by Exit or just maybe talk about that whole vector for us?

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

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

Casey Chafkin

Chief Revenue Officer, Co-Founder & Director, Skillz, Inc.

Michael, this is Casey. Thanks for the question and continued interest in the business. We actually think we have a lot of upside in continuing to increase our conversion rate from playing to paying. We've actually - this is something we've been studying since the business' inception. We've done - we've looked at market surveys and cut this number a number of different ways and we believe that we should be able to increase conversion over the long term to 40% or higher.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

	3
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Skillz, Inc. (SKLZ)	Corrected Transcript
Q2 2021 Earnings Call	03-Aug-2021

And let me comment on the second part of your question, Michael, which is about Aarki and the leverage against our user acquisition spend. We expect Aarki this year to contribute $13 million of revenue for the remainder of 2021 before synergies. It's going to take - I'm sorry did I [indiscernible] (00:04:58)...

Casey Chafkin

Chief Revenue Officer, Co-Founder & Director, Skillz, Inc.

I think Michael was asking about Exit.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

Exit, yeah. Sorry. Two deals, both closing recently.

Michael Graham

Analyst, Canaccord Genuity LLC

You got a lot going on, I know.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

I know. I know. And you started talking about paying users in conversion, I started thinking about Aarki. Okay, let me tell you a little bit about Exit. So the reason for the Exit investment, it's an alliance that really accelerates our expansion into genres such as racing, fighting and first-person shooter games. Candidly, these are the genres that I love most as a gamer and I've been incredibly excited about this development.

Exit's actually been working on building the most advanced multiplayer server technology for about 15 years now. So the alliance with Exit, it gives us platform exclusivity for Exit's technology. It positions us to be the preferred partner for publishers and developers worldwide if they're interested in using skill-based gaming as a way to monetize and multiplayer synchronous technology from Exit.

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

Michael Graham

Analyst, Canaccord Genuity LLC

Okay. Thanks a lot for the color.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

Of course. Thanks, Michael.

Operator: Our next question comes from Brian Fitzgerald of Wells Fargo. Your line is open. Please go ahead.

Brian Fitzgerald

Analyst, Wells Fargo Securities LLC

Thanks. I will pick up on the Aarki question from where Michael left off. He went to a training school for West Point with me, by the way. So a two-part question. One is on the average LTV for CAC. What's that been trending like as we've kind of progressed through the first half of the year, where you see it during the second half the year?

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Skillz, Inc. (SKLZ)	Corrected Transcript
Q2 2021 Earnings Call	03-Aug-2021

And how do you see that going forward with some of these tools and assets that you've brought and you're bringing to bear, specifically around if you could quantify how Aarki is helping in costs in the quarter and what you see that doing for you from a CAC perspective in the second half of the year?

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

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

Casey Chafkin

Chief Revenue Officer, Co-Founder & Director, Skillz, Inc.

Brian, good to talk to you again. And thanks for the question. What we've seen for the first half of the year is that our LTVs remain strong and steady. And we've previously shared some of those LTV curves, but we continue to see our LTVs remain quite strong. CPIs are up across the industry and this is something we've talked about over the last couple of quarterly earnings calls. And it's something that we think there's an opportunity to improve upon.

Aarki is one piece of that. There are also other initiatives that we're working on in terms of lowering our customer acquisition costs. A few of them that come to mind and ones that we've talked about in terms of staffing the team and letting our marketing investment catch-up in terms of the infrastructure, catch-up with our revenue build, but there's also opportunities in creative development, organic user acquisition and in other areas as well.

Andrew C. Paradise

Founder, Chief Executive Officer & Director, Skillz, Inc.

And then, let me jump in on the second part, Brian, which is talking a little bit about the Aarki deal. I think it's a really important one for the future of our company. I started mentioning a minute ago that we expect $13 million of revenue for the back-half of 2021. Honestly, that's not the most important part of the transaction. When we think about the Aarki deal, I know we shared color on several of the reasons on why we made this acquisition. It will take several quarters for us to realize the full impact of the transaction synergies in terms of migrating our DSP marketing spend to Aarki.

In terms of our plan, first, we're going to gradually migrate a substantial portion of our DSP marketing spend to the Aarki platform, and that's going to take a few quarters. Second, we expect to further improve the industry-leading performance of Aarki's algorithms by integrating our rich first data - first party data. And that's going to enable us to more efficiently target audiences from the impression level all the way down to end user LTV. It will really be the only data chain like that in the industry. So we're really excited about the Aarki deal and the potential for the future.

Brian Fitzgerald

Analyst, Wells Fargo Securities LLC

Awesome. Thanks, Andrew. Thanks, Casey.

Operator: Our next question comes from Brad Erickson of RBC Capital Markets. Your line is open. Please go ahead.

Brad Erickson

Analyst, RBC Capital Markets LLC

	5
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Skillz Inc. published this content on 04 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2021 22:35:07 UTC.

Real-time Estimate Cboe BZX Other stock markets 01:56:50 2024-04-26 pm EDT			5-day change	1st Jan Change
6.2 ^USD	-0.48%		+2.65%	-0.48%

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Magmic, in Collaboration with UFC and Skillz, Announce the Release of Their Newest Mobile Game, UFC Fight Card Rummy	Apr. 25	CI
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