SKLZ Partners w/ NFL

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SKLZ announced a partnership with the NFL this morning. Sounds like they will collaborate on an NFL mobile game on the SKLZ platform. I believe this is a big win for SKLZ. As the article mentions, this will introduce millions of NFL fans to the SKLZ platform. One of the criticisms of SKLZ has been the lack of more engaging titles, and with this announcement, I believe management is moving in the right direction of offering more popular content.

NFL and Skillz Sign Multi-Year Gaming Agreement
(http://www.digitaljournal.com/pr/4964050)

SAN FRANCISCO–(Business Wire)–The National Football League (NFL) is teaming up with Skillz (NYSE: SKLZ), the leading platform for fair, fun, and meaningful competition, to crowdsource a future mobile esport. As part of the agreement, the two sports organizations will host a global game developer challenge. Competing developers will have the opportunity to develop an NFL-themed mobile game. The game will be powered by the Skillz esports platform and will have joint marketing support from both the NFL and Skillz. The combination of the NFL brand and the Skillz platform will set the stage for the future of electronic sports competition.
Working with Skillz enables the NFL to reach the next generation of football fans where they live – on mobile – while driving the convergence of traditional and online sports. For Skillz, this agreement will introduce hundreds of millions of NFL fans to the leading esports platform.

“The NFL is an iconic brand that is synonymous with American sports, and Skillz is thrilled to help power their esports competitions on mobile,” said Andrew Paradise, CEO and founder of Skillz.

“Mobile gaming continues to be an important platform to reach and engage new and existing fans,” said Rachel Hoagland, VP of Gaming & Esports at the NFL. “Our agreement with Skillz provides access to a trusted platform and a highly engaged player base, making Skillz an ideal partner long term.”

The developer challenge will launch in the second quarter of 2021 and will be open to all genres except for 11 v 11 simulated games. For more information on the upcoming developer challenge and implementing mobile gaming competitions, visit www.skillz.com or email NFLChallenge@skillz.com.

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JJaws, thanks for posting this to the board.

SKLZ has been on my watchlist for some time, and I have to give rmtzp credit for starting a wonderful discussion on this stock earlier in December.

https://discussion.fool.com/skillz-sklz-34700727.aspx?sort=whole…

The most compelling bear theses from the thread, in my opinion, were the following:
(1) The standard of games on the platform (“great growth with bad games, what happens with good games?” - AThinkingFool)
(2) The lack of MAU (monthly active user growth) from Q1/Q2 to Q3 (2.6m to 2.7m)
(3) Apple taking a 30% cut from in-app purchases (they currently do not take a cut)
(4) As gambling is legalized, it could inhibit SKLZ current niche as a skill-based platform.

First and foremost, I believe this partnership with the NFL will take time to materialize and will probably not move the needle for a quarter or two. However, I believe this partnership has the potential to overcome the first two negative points raised above.

…Working with Skillz enables the NFL to reach the next generation of football fans where they live – on mobile – while driving the convergence of traditional and online sports. For Skillz, this agreement will introduce hundreds of millions of NFL fans to the leading esports platform.

If Skillz can capture even a small portion of NFL fans, that can help drive MAU numbers up from it’s current userbase. It also have the compounding affect or helping their profitability, as sales and marketing expenses grew considerably in 2020 (Net loss of $43M in Q3 compared to a net loss of $5M Q32019). It will also help legitimize their game catalog with the developer challenge and driving more developers to the app can only benefit Skillz in the long-term.

Speaking of long-term… “Our agreement with Skillz provides access to a trusted platform and a highly engaged player base, making Skillz an ideal partner long term.” While there is no language by either companies, what if there’s a world where NFL’s fantasy football challenges are routed through the Skillz app? This is speculation more than anything, but there is a world where what starts as a mobile gaming partnership could develop into something more.

I believe there are a lot of “what if’s” at this point in time, but I think this is a company to keep an eye on. I am okay owning a company that has 90% YoY revenue growth with 95% gross margins, and they seem to be making the correct moves to fight against the bear theses.

-Redeemed
Long SKLZ 2.5%

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They’re not just partnering with the NFL:

Play Mechanix Partners with Skillz to Bring Mobile Competition to Legendary First-Person Shooter Big Buck Hunter

https://www.businesswire.com/news/home/20210128005171/en/Pla…

With over 46,000 arcade machines sold to bars and restaurants across the world, Big Buck Hunter is one of the best selling arcade shooters of all time. The new Skillz-powered edition of the classic game will be available to both existing fans and the world’s 2.7 billion mobile gamers.

"Big Buck Hunter has been a cultural icon for 20 years,” said Andrew Paradise, CEO and founder of Skillz. “We’re proud to enable top game developers like Play Mechanix to put content into the palms of players’ hands – anyone, anywhere, anytime.”

Continued…

Dominic
long SKLZ

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For Skillz, this agreement will introduce hundreds of millions of NFL fans to the leading esports platform. – Redeemed

Seems to me to be hyperbole. I have nothing against the NFL, but I think you’d be hard pressed to find so many NFL fans on the entire planet… let alone ones who might be interested in esports.

Dial back by 10X and I suspect you’re in the ballpark, so to speak.

Rob
Rule Breaker Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Up front I will say I am not a big NFL fan and only watch a few games a year. So often I don’t realize the popularity of the NFL. My wife worked in the business side of the retail industry and often commented on the amount of revenue that NFL themed products generated - and planned accordingly.

In the spirit of analyzing stocks based on data and not hyperbole, I’d like to point out:

  • Approximately 50% of Americans identify themselves as NFL fans – that is approx. 160M people
  • More conservative 2019 estimates put the Active NFL fans in the US at around 116M
  • NFL is popular worldwide - est number of active fans: Mexico–23M; Brazil–20M; Canada–7M; South Korea/Germany/UK–6M each; etc
    So yes, I think it can be stated that there are hundreds of millions of NFL fans.

Then there is $’s that these fans spend:

  • In 2018, NFL generated $14.4B of revenue - more if include unlicensed merch, cost of watch parties at home, etc
  • The NFL has the higher average attendance per game of 66.4K people per game
  • The Super Bowl is one of the largest sports viewing event in the world with 99.9M viewers last year
  • The Super Bowl alone generates over $10Billion in consumer spending each year and $150M in betting in Nevada alone
    Meaning? NFL fans spend money, bet on games, and like to experience the sport.

Similar concept with Duck Hunter – A game I have played maybe 5 times in my life, but I have friends that swear by the game. It is one of the largest revenue generating arcade games of all time with a dedicated following.

The key message I get from this is that Skillz is seeking out partnerships with “top of game” players that drive consumer spending in order to maximize the reach of their solutions and potential revenues.

These partnerships will take time to play out so the results won’t be seen for a while, but I think the numbers support some level of optimism here.

To counter my optimism, I am a slightly bothers by the new issuing of up to 38.6M shares and 5M warrants – an 11% dilution.

I opened a 1% starter position in SKLZ late Dec (up 101% as of today) and did a small add of another 10% today with the 4% pullback.

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Thank you for the additional information on the Buck Hunter partnership and the breakdown of what a partnership with the NFL actually means in terms of fan numbers/consumer spending.

To add some counterpoints to our optimism, I did want to add Bear’s perspective from his last portfolio update…

Stocks I’ve sold

I went ahead and parted ways with SKLZ. They were up 30%+ when I cut the last shares loose, and their 38% run up in January seems silly to me, as it is anyone’s guess how their plan will actually play out. The market cap is around $10 billion now, and meanwhile I just don’t have any level of confidence that they’ll spawn games and competitions any more complex than their current bingo/solitaire type inventory, where players can win or lose money based on…skill??? Yawn.

The stock has runup quite a bit with the NFL partnership deal announcement, but the stock was running up even before then (ARK started buying shares which served as a catalyst) without any fundamental information change about the company. I could see this being a slow burner over the next quarter until these partnerships start materializing and with the market cap now at $14.84B, it will probably pull back before starting the ascent again.

My current mindset with this company summarized: I am invested in a company with amazing gross margins and has had sequential revenue growth for 19 quarters in a row. In theory, it has infinite scalability like our SaaS companies and does not need to develop & sell a product like other gaming companies. It also still has the stickiness of a SaaS company since these games are developed around integrating with the Skillz app. I did not invest originally because, like Bear stated above, I failed to see how they could upgrade their game inventory/MAU’s. These partnerships alleviate this concern for me. My conviction does not match the other oft-mentioned companies on this board but I wouldn’t be surprised if it out-gained my larger positions.

Cheers to all who make this board such a trove of information. I am thankful to now officially be a part of this community.
-Redeemed

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