Skillz Inc. · NYSE:SKLZ
Skillz — Investor Day (March 2022)
55 slides from Skillz's investor day presentation, Mar 15, 2022
Slide 1: Skillz Investor Day, March 15, 2022
kA skillz _ INVESTOR DAY MARCH 15, 2022
Slide 2: Slide 2
Slide 3: Disclaimer
DISCLAIMER The information contained herein does not purport to be all-inclusive. The data contained herein is derived from various internal and external sources and is based on information available as of the date hereof. No representation is made as to the reasonableness of the assumptions made wi
Slide 4: Today's Agenda
TODAY’S AGENDA TIME (PACIFIC) TOPIC SPEAKER(S) 8:00a – 8:20a Strategic Vision Andrew Paradise, CEO 8:20a – 8:40a Product & Technology Vatsal Bhardwaj, CPO 8:40a – 9:00a Q&A Session #1 Management Team 9:00a – 9:15a Session Break 9:15a – 9:30a Developer Panel George Petro, Play Mechanix Tim O’Neil, Te
Slide 5: Strategic Vision
STRATEGIC VISION ANDREW PARADISE CHIEF EXECUTIVE OFFICER
Slide 6: Building the Competition Layer of the Internet
MARKET GLOBAL USERS (B) MARKET CHAMPION MARKET CAP ($B) Smartphones 3.5 $2,718 Social Networking 3.4 $566 Travel 1.4 $101 Ride Sharing 4.1 $67 Mobile Esports 1.0 $1 Note: Market cap refers to the market champion. Sourced from Yahoo! Finance as of 3/2/22. BUILDING THE COMPETITION LAYER OF THE INTERNE
Slide 7: Mobile Gaming Is the First Target Market
2.8B Mobile Gamers worldwide (2021) 40% Gamers want to compete Source: Newzoo Games Market 2021 report, Udonis, and Frank N. Magid Associates. MOBILE GAMING IS THE FIRST TARGET MARKET $93B21% 79% Mobile Gaming Market (2021) In-App purchaseAds 7
Slide 8: History of Developer Adoption
No access to the user data Limited ability to customize the interface Lack of know-how to build skill games Our network was smaller than every game Developers believed they could build it themselves Regulatory risk HISTORY OF DEVELOPER ADOPTION MORE INHIBITORS IN THE PAST No access to the user data
Slide 9: Solving Developer Pain Points
FUTURE SOLVING DEVELOPER PAIN POINTS DEVELOPER PAIN POINTS SKILLZ SOLUTION POOR MONETIZATION NO PAYMENTS INFRASTRUCTURE LIMITED DATA ANALYTICS MANUALLY INTENSIVE LIVEOPS LIMITED UA EXPERTISE & RESOURCES LIMITED CUSTOMER SUPPORT LIMITED SKILL GAMING EXPERTISE INCREASING COMPETITION FOR GAMER TIME HIG
Slide 10: Expanding Our Lead Over Competitors
ANALYTICS PAYMENTS LIVE OPERATIONS USER ACQUISITION CUSTOMER SUPPORT HOSTING AD NETWORK CONTENT DEVELOPER TOOLS EXIT GAMES CAPABILITY AD NETWORKS GAME DEVELOPERS TECH PLATFORMS EXPANDING OUR LEAD OVER COMPETITORS 10 PERCEIVED PRESENCE STRONG LIMITED NONE
Slide 11: Widening Data and Technology Moat
Billions of annual tournaments Note: Tournaments, Average Daily Tournaments, Data Points and GMV are all LTM data as of December 31, 2021. Player win rate in-band, transactions per second, NPS score, system uptime are all data for Q4’21. 11 WIDENING DATA AND TECHNOLOGY MOAT 2.5B+ TOURNAMENTS Unique
Slide 12: Proven Scalability Without a Top Game, Yet
PROVEN SCALABILITY WITHOUT A TOP 10 GAME, YET PAYING MAU (M) NUMBER OF GAMES >$1M GMV 12 Paying Monthly Active Users (PMAU) is the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period. Gross Marketplace Volum
Slide 13: Building the Content Engine
BUILDING THE CONTENT ENGINE 13 15M+ GAME DEVELOPERS(1) 1M+ GAMES ON THE APP STORE(2) YESTERDAY Build Product TOMORROW Ramp Sales TODAY Build Marketing 1. HIRE TEAM 2. DEVELOPER EDUCATION 3. OPTIMIZE PRODUCT (1) Source: Unity Software Inc. S-1 dated 9/17/20. (2) Source: Business of Apps dated 1/11/22
Slide 14: Why We'll Win
WHY WE’LL WIN $375K COST TO BUILD A GAME(1) $10M COST TO ACQUIRE A GAME(2) $11K COST TO ACQUIRE A DEVELOPER 14 Note: $11k refers to cost of acquiring a developer who has signed and launched a game. (1) Based on the average range of $250k to $500k from Auroch Digital. (2) Based on selected mobile gam
Slide 15: 2022 Plan: Path to Profitability
Increase Marketing Efficiency ⬝ GAAP Revenue grows slower than Revenue after Engagement Marketing (RAEM) ⬝ GAAP Revenue and RAEM grows faster than Marketing ⬝ RAEM grows faster than Revenue ⬝ Adj. EBITDA margin improves THE PLAN THE IMPACT Impactful New Products ⬝ GAAP Revenue and RAEM growing faste
Slide 16: Cloud Gaming: A Potential Game Changer
Revolutionize the playable ad CLOUD GAMING: A POTENTIAL GAME CHANGER Access to new audiences Lower friction to onboard Increase game discovery 16 OUR END GAME Every Gamer, Every Developer and Every Type of Game on Skillz
Slide 17: Product & Technology
PRODUCT & TECHNOLOGY VATSAL BHARDWAJ CHIEF PRODUCT OFFICER
Slide 18: Comprehensive Platform Solution
COMPREHENSIVE PLATFORM SOLUTION 18 Gamer Competition Engine LiveOps System Developer Console Network Data Science Technologies
Slide 19: Core Product Experience: Current vs Future State
CURRENT STATE FUTURE STATE CORE PRODUCT EXPERIENCE 19 Unchanged since launch Poor tournament discovery Slower gameplay access
Slide 20: Phases of Social Gameplay
SOCIAL PHASES OF SOCIAL GAMEPLAY 3. Competition 2. Chat 3. More social gameplay features to come 20 EXAMPLE OF CHAT
Slide 21: Personalization and Data Science
PERSONALIZATION AND DATA SCIENCE ACQUISITION Ad Networks REGISTRATION Sign up/First few games CONVERSIONS Making first Deposit, Segmentation RETENTION Increasing spend, Push notifications, Player Matching 21 Example of Personalized LIMITED TIME OFFER
Slide 22: Real-Time Multiplayer
REAL-TIME MULTIPLAYER SOLO PLAY PRE-SKILLZ ASYNC VS SKILLZ CIRCA 2016 - SOL CUBE TURN BASED SYNC SKILLZ 2020 - POOL PVP SYNC BIG BUCK HUNTER MULTI PLAYER TOMORROW 22 FRAYHEM
Slide 23: Progression
Custom Developer invests into progression with custom integration and developer tools PROGRESSION A B C D Hyper customization Semi-customized Game modes: Templates Tournaments App icons STATIC INTEGRATION 23
Slide 24: Highly Scalable and Reliable Platform
HIGHLY SCALABLE AND RELIABLE PLATFORM 99.95 %+ System Uptime (2021) Transactions Per Sec (2021) 70+ High Performance 24 2.6x
Slide 25: Summary
SUMMARY 25 ⬝ Comprehensive Go-To-Market Platform for game developers ⬝ User Interface Refresh on the core product experience increases LTV and trust ⬝ Social increases user engagement ⬝ Personalization increases user retention ⬝ Real-time Multiplayer Sync broadens the content on our platform and gro
Slide 26: Q&A Session #1
Q&A SESSION #1 skillz
Slide 27: Session Break
SESSION BREAK skillz
Slide 28: Developer Panel
DEVELOPER PANEL GEORGE PETRO OWNER TIM O’NEIL CO-FOUNDER & CEO
Slide 29: Distribution & Content
DISTRIBUTION & CONTENT CASEY CHAFKIN CHIEF REVENUE OFFICER
Slide 30: Large, Diverse Player Audience
LARGE, DIVERSE PLAYER AUDIENCE Source: Income demographics from Axciom survey data of paying users (2018). Gender and Age demographics from Skillz research. Amounts may not total due to rounding. 30
Slide 31: Reaching and Acquiring Users Efficiently
REDUCE DSP FEES Deploy spend across highly programmatic and social channels, in addition to making investments up and across the funnel Grow investments in App-Store-Optimization (ASO), Search Engine Optimization (SEO) and Skillz organic social channels Drive incremental revenue efficiently by acqui
Slide 32: Driving Deeper Engagement on the Platform
Optimize engagement marketing spend by focusing on high return programs, profit-margin accretive channels and player information DRIVING DEEPER ENGAGEMENT ON THE PLATFORM GROW PROPRIETARY COMMUNICATION CHANNELS Investing into Skillz-controlled channels (e.g. Email, Push) to allow for more effective
Slide 33: Building the Brand
Execute brand refresh to ensure a consistent and differentiated architecture, design and positioning while continuing to invest in partnerships to expand our footprint and deliver revenue for partners. BUILDING THE BRAND 33 BRAND REDESIGN BRAND AND IP PARTNERSHIPS
Slide 34: Growing the Developer Ecosystem
BUILD COMMUNITY Marketing To Lift Awareness And Interest In Building With Skillz Optimize both the Managed and Self Serve functions Build Community To Create Demand Education & Insights For Success Tools & Services For More Developer Control GROWING THE DEVELOPER ECOSYSTEM EMPOWER Developers Through
Slide 35: Summary
SUMMARY 35 ⬝ We have a Large and Diverse audience of players ⬝ We are Optimizing UA via Data Science, automation, Aarki spend migration and organic traffic growth ⬝ We are Driving Deeper User Engagement with owned communication channels and more user data ⬝ We are Building our Brand which will enhan
Slide 36: Financial KPIs
FINANCIAL KPIs IAN LEE CHIEF FINANCIAL OFFICER
Slide 37: Where We've Come From
Source: Newzoo (1) pMAU figures are as of Q4 2016 and Q4 2021 respectively. (2) Revenue figures are for FY2016 and FY2021 respectively. WHERE WE’VE COME FROM $37B MOBILE GAMING MARKET SIZE 24K $8M PAYING MAU(1) to TODAY REVENUE(2)5YEARS AGO $93B MOBILE GAMING MARKET SIZE 611K $384M PAYING MAU(1) REV
Slide 38: How We Generate Revenue
Take Rate Incentives in Sales & Marketing Paying Users Average Entry Fee Gross Marketplace Volume Prizes Developer Revenue Share End-user Incentives Reducing Revenue Revenue pMAU ARPPU Average # of Tournaments Engagement Marketing RAEM HOW WE GENERATE REVENUE 38
Slide 39: How the Business Model Works
HOW THE BUSINESS MODEL WORKS Business Model Note: All dollar amounts are illustrative and based on actual take-rate and margin structure and reflect rounding. Adjusted EBITDA is defined as EBITDA before non-recurring items and stock-based compensation (“SBC”). D&A means Depreciation and Amortization
Slide 40: Pursuing Profitable Growth
Adjusted EBITDA Margin % RAEM per Person Note: All $ in millions, except for per person statistics. 2022E based on guidance provided by Company in connection with Q4’21 earnings on 2/23/22. See Appendix for a reconciliation of Adjusted EBITDA Margin % to the most comparable GAAP metric. PURSUING PRO
Slide 41: Drivers of Path to Profitability
Key Drivers Grow User Retention or Engagement Improve UA Efficiency Improve Engagement Marketing Efficiency (1) ROI calculated based on cumulative gross profit after engagement marketing divided by UAC. DRIVERS OF PATH TO PROFITABILITY ROI on UA Marketing(1) 41
Slide 42: Growing User Retention or Engagement
Key Driver is new user features Key Risks include product development and user adoption Key Upsides include new content Historical Quarterly Cohort LTV Note: LTV calculated based on cumulative gross profit after engagement marketing. LTV shown on a per paying user basis. LTV performance is indexed t
Slide 43: Improving User Acquisition Marketing Efficiency
$ in millions 100% 214% IMPROVING USER ACQUISITION MARKETING EFFICIENCY Key Driver is optimizing current traffic sources and growing organic Key Risks include traffic quality from newer sources and media cost inflation Key Upsides include better than expected price elasticity, Aarki performance impr
Slide 44: Improving User Acquisition Marketing Efficiency (Cont'd)
UA C UA Spend IMPROVING USER ACQUISITION MARKETING EFFICIENCY (CONT’D) Example Initiative Targeting “sweet spot” of UAC vs Spend UAC vs UA Spend 44 “Sweet Spot” Of Spend Elasticity
Slide 45: Improving Engagement Marketing Efficiency
$ in millions Key Driver is identifying low return programs Key Risks include uncertain impact on longer-term user behavior Key Upsides include eliminating programs that may have been displacing user deposits IMPROVING ENGAGEMENT MARKETING EFFICIENCY 45
Slide 46: Improving Engagement Marketing Efficiency (Cont'd)
Im pl ie d RO I o n Bo nu s Ca sh Limited Time Trophies 0.4x 4.8x 7.3x 7.9x Note: The example initiatives that are shown indicate the Bonus Cash offered and the Gross Profit after Engagement Marketing delivered within a 7-day period on the Skillz platform for each initiative. 46 IMPROVING ENGAGEMENT
Slide 47: Path to Break Even
PATH TO BREAK EVEN KEY NEAR-TERM DRIVERS ⬝ Greater user acquisition efficiency ⬝ Lower and more effective engagement marketing KEY UPSIDE DRIVERS ⬝ New hit content ⬝ Take rate enhancement ⬝ Brand partnerships ⬝ International expansion ⬝ Cloud gaming ⬝ Access to Google Play store ⬝ LTV growth driven
Slide 48: Summary
SUMMARY 48 ⬝ We are Pioneering a new market ⬝ Profitable and Durable Growth is our focus ⬝ Path to Profitability driven by improving unit economics ⬝ Marketing Efficiency and New Products is our plan ⬝ New Content is Upside to full year 2022 revenue and RAEM guidance ⬝
Slide 49: Q&A Session #2
Q&A SESSION #2 skillz
Slide 50: Closing Remarks
CLOSING REMARKS ANDREW PARADISE CHIEF EXECUTIVE OFFICER
Slide 51: Summary
SUMMARY 51 ⬝ Building the Competition Layer of the Internet is our mission ⬝ We Serve the Massive, Rapidly Growing Market of mobile gaming ⬝ We Make Gaming Better for the Entire Ecosystem with an innovative solution for monetizing games ⬝ Adoption by Game Developers is Still Early with fewer inhibit
Slide 52: Thank You
THANK YOU
Slide 53: Appendix: Reconciliation to Non-GAAP Items
APPENDIX: RECONCILIATION TO NON-GAAP ITEMS ($ IN MILLIONS) 2021 % OF REVENUE 2020 % OF REVENUE 2019 % OF REVENUE Net Loss ($181.4) (47.2%) ($145.5) (63.2%) ($23.6) (19.7%) Interest Expense, net 1.2 0.3% 1.3 0.6% 2.5 2.1% Change in fair value of common stock warrants liabilities (87.9) (22.9%) 23.0 1
Slide 54: Appendix: Reconciliation to Non-GAAP Items
APPENDIX: RECONCILIATION TO NON-GAAP ITEMS Note: The Company defines and calculates RAEM based on the Company’s consolidated revenue less engagement marketing expenses included in sales and marketing expense. The Company’s management believes that RAEM is a useful measure to enable investors to bett
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