All,
I just finished reading the transcript for SKLZ Q4 2020 earnings release so I figured I would share a few takeaways. I have kept my position small at ~4% waiting for this earnings release and I have to say, I came away rethinking my investment. The CEO Andrew Paradise and CFO Scott Henry seemed reserved and less than transparent; just my opinion and maybe it was a function of being their first conference call.
The Good
- Revenue increased 95% YoY from $34.7 to $67.7 million
- ARPU (Average Revenue Per User) increased YoY 60.8% from $5.86 to $9.42 and increased QoQ 26% from $7.49 to $9.42. For comparison, last year’s QoQ increase from Q3 to Q4 was -3% from $6.07 to $5.86.
- Deal with the NFL and Big Buck Hunter to created brand-related games on the Skillz platform. Although some bad mixed in there is that the NFL developer competition starts Q2 and will be at least a year before a completed game comes to the platform.
The Bad
- MAU (Monthly Active Users) decreased QoQ 11% from 2.7 to 2.4 million. I can’t quite make any sense out of the MAU numbers from 2020. they jumped big time from Q4 2019 to Q1 2020, prior to any lockdown, and then remained mostly flat for the rest of the year.
- UA (User Acquisition Marketing) as a percentage of revenue increased YoY from 47% to 60%. I didn’t get any color from the earnings call about how long it takes for UA to affect revenue but this seems like a large jump in expenditures for a flatline/decrease in MAU, although I have to bring back up that they did realize an increase in revenue and ARPU.
- I believe UA is included in S&M so this is partially redundant but it should be mentioned. Non-GAAP S&M was $76.4 million, which is 113% of revenue! Last year this number was 96%. This is huge. I know they mentioned they want to Blitzkrieg the market in order to capture share in this budding industry but man oh man.
- This is a nitpick but I noticed a good many errors in the press release. One example, in their table at the bottom with non-GAAP measures, their footnotes 2 & 3 in the table don’t match the actual footnotes. Details matter.
- They only gave annual guidance. Someone asked a question about that and the answer was pretty much that they usually see a big spike in Q1 and then flatlining in Q2, Q3, and Q4. This didn’t stick out to me in the numbers but regardless, why not provide quarterly guidance?
All-in-all I don’t get a warm and fuzzy from this company. I think they have an interesting idea which could grow and there is no denying that the mobile gaming market is growing like mad, but this is quickly transitioning from a company that is currently growing and executing to a company that I hope will be growing and executing in the future. For me, when a company is in that position, I strongly re-evaluate whether I should be an investor. Would love input from others here on the board.
-Junomean2
Long SKLZ ~4%