Introduce SkillZ (SKLZ)

I’m taking a small position (3%) on Skillz.

Here are some financial numbers to begin with:
YoY Revenue growth in the last three earning calls: 89.87%, 89.87%, and 92.32%

2019    27.0  27.0  31.2  34.7
2020    51.2  51.2  60.0

They have a very high gross margin: ~95%

What is Skillz?
They provide a platform for mobile games. Currently, there are two popular ways of making money in mobile games (if not selling a paid app): Ads or Purchase-in-App. The former destroys the experience and the latter makes the game less fun as one player can easily “cheat” by spending tons of $$.

Skillz has a different idea – competition. I remembered when I was a kid there’s a game call street fighter. The game is so fun in a way that two players played against each other and if you win, you stay in the game and the loser has to put another quarter to challenge you. It’s a similar (but a bit different concept). The Skillz invite both players to put a small “virtual coin” (which are essential $$). So basically two players both put 1 dollar on the table and the winner takes the money and Skillz takes a cut. Today they probably took a cut of 15%.

Note that they don’t make games. They provide a platform for two players to “duel” in a game and this makes the game so much fun. Of course, cheating can be a problem but generally speaking that a platform can create a system to forfeit all the “coins” you owned if you cheat. Also, if the amount for a duel is nominal, it makes a lot of fun. I can recall why I played street fighter all day long as I enjoy winning when the other player needs to put a quarter into the machine. If I can collect 20c from a quarter, I will even play longer I guess :slight_smile:

I’m taking a position because of the revenue growth and the high-profit margin. They seem to be the only platform that powers this business model so they have a moat as the first mover. Note that they allow you to convert virtual coins back to CASH. Building such a platform for the game developer requires another team and it makes sense to just use a service like Skillz (APIs/Services).

I think they find a niche market that if a game is based on “skills” not “probability,” in many states they are allowed to do so – otherwise, it’s a gamble. If you are worried about this, check their post:…

Currently, they are worth only 10B and if they can continue 90%+ growth with a 95% margin, I am positive about their future.

So what’s the catch?

  • Most of their games (customers) today are kinds of lame. Or at least, not super popular. It’s very difficult to create a mobile game that goes viral. Luckily they don’t need to build games themselves and as long as they can eventually find a super-popular game to partner with, their revenue will skyrocket.
  • Company like EA Sports can certainly create a similar business model to compete with them.
  • It’s hard to predict the growth of mobile gaming growth in general after the pandemic.

I took some small position so I will pay attention to them. If anyone is interested in digging deeper, please chime in your research.

This is their latest presentation:


Check out this recent thread…

post tenebras lux
For not in my bow do I trust, nor can my sword save me.


Thanks for the sharing. It seems the thread contains enough good info. Let
's pay attention to their next earning call.

Hi Pikatrain,

I opened up a position in early January too.

I find the revenue growth and margins very compelling as well as positioning themselves as a dominant platform in the mobile gaming space.

Potential risks for me are the quality of games, user growth and Apple deciding to take a cut. Ones to monitor closely.

They have some potentially very big catalysts coming up too with international expansion (India is a big one) and Android potentially opening up for downloads which would be rocket fuel.

Someone I follow on Twitter, Septum Insights, has posted this deep analysis which I found very helpful in understanding them further:…

Hope that helps.


I haven’t looked in to this myself but a quick google search returns an eSports platform. The platform described in this post sounds like online gaming. 2 people put some money down and one of them wins most of the pot. This is exactly what online poker sites do. Seems like this would come with very high regulatory and liability risk factors. I assume they are leaning on some regulatory approvals as an eSports company to offer this. If so, a company like EA Games isn’t going near it, so at least you wouldn’t likely have to worry about competition from that sort of source.