skillz(US:SKLZ)2021-09-13 20:49Financial Data and Key Metrics Changes - Skillz operates a transaction-based revenue model with an average entry fee of $3 per player per tournament, generating approximately $0.90 of revenue per competition, equating to a 15% take rate [5] - The company reported a gross margin of 95%, indicating potential profitability if growth investments were slowed [17] - The adjusted EBITDA margin before user acquisition costs was 17% in Q2 of the current year, with a long-term target of 30% [17][18] Business Line Data and Key Metrics Changes - Skillz has seen a significant increase in the number of tournaments, powering over 2 billion tournaments annually, which is highly automated [4][5] - The company is focused on diversifying its revenue streams by increasing the number of games and genres available on its platform, moving from a concentration on a few titles to a broader range [20][22] Market Data and Key Metrics Changes - The mobile gaming market has grown significantly, with projections indicating there will be 10 billion smartphones and tablets by 2025, up from 5 billion [8] - Skillz's user acquisition costs have been impacted by changes in the advertising landscape, particularly due to IDFA changes and the pandemic, but are expected to stabilize [59] Company Strategy and Development Direction - Skillz aims to expand beyond mobile gaming into non-gaming applications for competition, such as fitness and education [12] - The recent acquisition of Aarki is intended to enhance data capture and improve user acquisition efficiency, allowing Skillz to participate in 5 trillion auctions monthly [12][46] - The company is investing in synchronous gaming technology through its partnership with Exit Games, which is expected to accelerate entry into more complex gaming genres [60] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges of hiring and retaining talent in a competitive market, which has affected user acquisition efforts [9] - The company is optimistic about its growth trajectory, targeting a significant increase in paying users and improved conversion rates over time [36] - Management believes that the long-term potential of the gaming market justifies current investments in user acquisition despite widening EBITDA losses [15] Other Important Information - Skillz has a strong retention rate among developers, with nearly 100% retention, indicating a successful revenue-sharing model [23] - The company is focused on optimizing its marketing spend, with a significant portion allocated to user acquisition and engagement marketing [29] Q&A Session Summary Question: What has improved and what has been more challenging since starting Skillz? - Management noted the growth of the mobile gaming market and the challenge of hiring talent as significant factors [9] Question: What are the main priorities for the next three to five years? - The focus is on optimizing the value chain, expanding content, and exploring non-gaming applications [12] Question: When do you expect adjusted EBITDA losses to peak? - Management emphasized a focus on profitable user acquisition and improving payback periods, indicating a disciplined approach to growth [16] Question: How do you measure virality in user acquisition? - Virality is measured through both attributed installs and organic growth, with various initiatives to encourage sharing and engagement [33] Question: Can you elaborate on the Trivia Crack partnership? - Management highlighted the significance of the partnership with Trivia Crack, noting its potential impact on revenue growth [26] Question: How do you view the impact of COVID on user acquisition? - Management indicated that while there was a temporary spike in engagement, the mobile gaming market has stabilized post-COVID [52] Question: What is the expected impact of the Aarki acquisition? - The acquisition is expected to lower user acquisition costs and improve conversion rates, with a multi-quarter integration timeline [46]