Skillz Inc.

Good evening. Thank you for attending today's Skills Fourth Quarter 2021 earnings call. My name is Selina, and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the call over to our host, Stephon Gearhart, VP of Finance with Skills. Please go ahead.

Thank you. Good day and welcome to the Skills fourth quarter 2021 earnings conference call. I'll proceed shortly by reading our forward-looking statements and non-GAAP measures, immediately followed by brief introductory remarks and then a question and answer session. Posting the question and answer session today, we have Andrew Paradis, Chief Executive Officer, Casey Chavkin, Chief Revenue Officer, and Ian Lee, Chief Financial Officer of the company. We hope you've had a chance to read our press release and stock letter, which we published earlier today, and both of which are also available on our investor relations website. We have also posted to our website a short video of our CEO discussing our business highlights this quarter. Team of management's comments today will include forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, expect, should, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to the company's SEC filings for more detailed discussion of the risks that could impact future operating results and financial conditions. During the call, management will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our fourth quarter 2021 earnings release. And with that, I'll turn the call over to Andrew for some brief opening remarks.

Thanks, Stephan. Good afternoon, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2021 results. Our key four stockholder letter was published to the investor site earlier this afternoon. And before taking your questions, I'd like to just start by sharing a few thoughts. 2021 was a key building year for the company. We set out these two goals, aggressively growing revenue while also building the critical organizational infrastructure we need for the future growth of the platform. We invested really heavily in marketing to grow and engage our user base and added key leaders and talent across the company. We acquired Archie. It positioned us for our long-term vision of registering every person on earth into the competitive platform skills. Having said that, recently we've spoken with a number of our shareholders and we've been listening to your feedback. We've considered that as we're thinking through and building out our 2022 plan. In 2022, as such, we will transition from our strategy of revenue growth at all costs to increasing profitable growth and efficiency. We intend to use the balance sheet that we've built up to build a long-term profitable high growth company. Our company will have the following financial characteristics by the end of this year, so in Q4 2022. So revenue after engagement marketing, our year-over-year growth rate will be north of 30%. Our adjusted EBITDA margin will be better than negative 30%. And we expect adjusted EBITDA breakeven by the end of 2024 and well within the net cash we have on hand. to accomplish this there are a few things we need to uh we need to do inside the company so let me talk a little bit about the key initiatives to improve ltv and separately customer acquisition costs so three of the measures that are probably the three most important that we'll be engaging in 2022 to drive ltv improvement uh first we're going to eliminate our low return engagement marketing programs that are cannibalizing our profit generation Second, we're going to be rolling out more social features across the platform, such as chat and providing greater personalization for all of our users who play in our games, such as improved leagues and technology around how they socially engage and compete. And then third, it's been about 10 years now for the platform, and we haven't refreshed the user interface of our core game loop. We'll be refreshing the interfaces this year, which we think will have a really nice impact on retention for our users. In terms of customer acquisition cost efficiency, we're going to be optimizing our user acquisition spend across geographies, networks, and really focusing on increasing organic traffic. Second, we're going to be investing in our developer community. We've heard the message loud and clear that we need to continue to increase the quality of the content and the platform. And this will enable us both to reach new audiences as well as deepen our content in genres where we already have penetration. And then finally, we'll be migrating more of our user acquisition spend to ARCHI to capture margin that we're giving away right now to third-party DSPs. We've shared more granular details in our Q4 stockholder letter. But that in that, we really believe that the result of these efforts will be a far stronger business. And perhaps even more importantly, it will position us to continue to efficiently grow the company at an attractive pace at the end of 22 and into 2023 and beyond. It's really important, I think, to pause and think for a moment about where we are in the world of mobile gaming and inside of mobile gaming, competitive mobile gaming. We're still very much in the early innings. When we started 10 years ago, we invented this industry. Mobile gaming as a part of the video game industry, it was really, it was the runt of the industry. Today, it's grown from being the smallest part of gaming to being a $90 billion plus industry inside of video games. It's actually the majority share of all video games. And we had the foresight then to build here for now. We're going to continue to follow Gretzky's advice. We're going to keep skating where the puck's going, not where it's been. Converting gamers and developers from ads and in-game purchases to monetizing through competition, it's a multi-billion revenue opportunity, but it's not going to happen overnight. We're very much focused on this vision of building the competition layer for the internet, on focusing first-time video games, on building game by game, developer by developer, and we remain very much convinced that the thoughtful and sustainable growth of this business is the best path for skills to define this new industry. The path to pioneering the future of competition for the entire world is definitely a long one. It's a huge undertaking that we were contemplating that we talk about with you, but it has the potential to create a trillion dollar opportunity in the long term. It's a hundred year journey that we've been on and we continue to be on now at 10 years in, and that hasn't changed because of this last year, and we don't expect it to change this next year. So for those of you who want to be on this journey with us, my sincere thanks. With that, let me open up here for questions.