Skillz Inc.

Good afternoon. Thank you for attending today's Skills First Quarter 2022 earnings call. My name is Hannah and I will be your moderator for today's call. 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 1 on your telephone keypad. I would now like to pass the conference over to our host, Stefan Gerhard, VP of Finance. Please go ahead.

Good day, and welcome to the Skills First Quarter 2022 Earnings Conference Call. I'll proceed shortly by reading our forward-looking statements and non-GAAP measures, immediately followed by a brief introductory remark, and then a question-and-answer session. Hosting the question-and-answer session today, we have Andrew Paradise, Chief Executive Officer, Casey Chafkin, 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 stockholder 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. Some 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 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 a more detailed discussion of the risks that could impact future operating results and financial condition. 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. Reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 2022 earnings release. With that, I'll turn the call over to Andrew for some brief opening remarks.

Thank you, Stephan. Good afternoon, everyone, and thank you for joining us today to discuss our first quarter 2022 results. Our Q1 stockholder letter was just published through our investor site this afternoon. I highly encourage everyone to take a look at it when they have time. Before we begin taking questions, I'd like to share a few thoughts. This quarter, we commenced our transition to profitable growth, and that really required a significant change for 2021 plans. Change isn't easy. I think we all wish it would be a lot faster. As the largest shareholder of skills, I'm certainly not satisfied with the current financial results. However, we made significant progress this quarter towards our goals for the 2022 year. And as a reminder, our plan is to exit 2022 with a year-over-year revenue after engagement marketing growth rate above 30%, while moving our adjusted EBITDA margin to be better than negative 30%. We still have a lot more work ahead of us, but we're targeting to reach break-even as a business by the end of 2024. So to that end, let me give you a quick recap of our Q1 financial results. Revenue is up 12% over the prior year period to $93 million. Paying monthly active users was up 22% over the prior year period to 569,000 users. Revenue after engagement marketing was up 8% over the prior year period to $51 million. And adjusted EBITDA improved by $17 million over last quarter, which was Q4 2021. As we discussed last quarter, we remain focused on improving marketing efficiency this year. And we made some progress in Q1. We improved UA marketing efficiency, which enabled us to significantly reduce spend while maintaining revenue after engagement marketing. And we eliminated low return engagement marketing programs, which resulted in a meaningful reduction in engagement marketing as a percentage of overall revenue. Overall Q1 results were generally in line with our expectations as we've been moving from our 2021 strategy to our 2022 strategy. And additionally in Q1, we were able to unveil some of the product innovations that we've been investing in for quite some time, which is an important step towards building a more balanced growth profile. We launched a private beta of our cloud gaming product. This is a technology that will unlock a larger player audience for us and a better onboarding experience. It gives us access for the first time as well to computer users through web-based games. There are about 1 billion deployed computers out there that we'll be able to access with our cloud-based gaming product. We also rolled out chat system-wide, which will drive deeper user engagement. Beyond on the consumer side, on the developer side, we continue to invest in our developers and their content to diversify the range of games on our platform. We saw for GDC record level interest from the game developers at the Game Developers Conference, or GDC, which I think was very exciting, especially considering that attendance in GDC was down significantly from the prior conference prior to COVID. We also, this quarter, signed a multi-year partnership with UFC, the world's premier mixed martial arts organization, to create a branded mobile game. And we selected finalists for the NFL and Skills Game Developer Challenge, where these NFL-inspired game creations are now moving into the soft launch phase on our platform. While we definitely can't control the stock price, we can control and be committed to building revenue and increasing profitable growth. And we'll continue to do this through higher marketing efficiency, more social features, improving our core product experience, improving it, greater personalization on the platform, building more features for our developers to be able to monetize their art, and increasing the investment in our developer community through education and insights. We've shared all of this in more detail in our Q1 stockholder letter, which is published to our website, and I hope you'll get a chance to read. the future of interactive entertainment is incredibly bright it's a massive and fast growing opportunity that we're still in the early innings of and as such we'll continue with our 2022 plans to pursue profitable growth while investing in building technologies that excite our consumers and delight our developers when we first set on the path to build this business 10 years ago we started building this creative and innovative platform that builds a better experience for players and better monetization for developers. So for those of you who want to be on the journey with us, my sincere gratitude for the belief and support, even when things haven't been easy. So with that said, let's open up for questions.

Certainly, if you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Jason Tilton with Canaccord Genuity. Please proceed.

Yeah, thanks for taking the question. At the analyst day, you detailed the ambitions around cloud-based gaming and some of the potential there. And you obviously talked about it again in the shareholder letter with the beta testing that's being done. I'm just curious if you could share anything about engagement from users on Android versus iOS during this testing. And then do you have any sense of the magnitude of the potential contribution that Android could have over time to the overall user base as more users are able to sort of get around the Google Play App Store and access your games?

I'm sure that's a great question, Jason. Thank you. So the way we, first on cloud gaming, we're in private beta testing on three games. So it's really... so early to be talking about user behavior. So we're just starting to collect data. But we certainly continue to believe that this can both increase LTV and lower UAC for our business. Separately, I can comment a little bit on the Android opportunity. If you think about our core market, which is the US market, we're over 95% payer are US-based for us. When we look at that market, About 60% of all the smartphones in the US are Android. And about 2 thirds of those are Androids with a comparable experience to the experience we deliver on iOS. And so you can sort of size the magnitude of what it would mean to have meaningful Android distribution from that. Casey, do you have anything you'd like to add about distribution?

Yeah, thanks, Andrew. When we look at the cloud gaming opportunity, it's both the domestic opportunity, which we're pursuing right now, as well as the global opportunity, and certainly sizing the Android footprint on a global basis. It's roughly 70% of the market. And so while we are early in private beta testing on the cloud product, very excited about the upside, both inside the United States on Android, but also globally. And that doesn't even include the web market.

The final thing I'd add, beyond even what Casey said, is that the other piece of cloud is that it will really clean up sharing. If you think about right now, most video games that are popular, they actually have a pretty big viral coefficient, if not go fully viral. And with our current platform, without really having a great service offering via Google Play and on Android, we really damage our viral coefficient. So one of the things that's exciting about cloud, if you think about the sharing opportunity, if I'll just pick on Casey as an iOS user, if he shares to Andrew on his on my Android device, it's literally going to be sharing the game via a single text link. And that link, when I tap it on my Android, will instantly launch the game and enable me to play with Casey. And so it's a very different user experience that I think has a lot of reasons to have merit. But having said that, we just want to caution everyone that we don't have data yet to share on cloud. Great. Thanks a lot.

Thank you, Mr. Tilton. The next question is from the line of Jason Bazinet with Citi. Please proceed.

I just had two questions. As you guys focus more on efficient marketing spend, can you help us think through how you think that impacts paying users and ARPU? And in second, I think you guys mentioned that some of these cost saves didn't kick in for the full quarter. It was just sort of a partial quarter. So can you just elaborate on that if it continues into the second quarter as well? Thanks.

I was having a little bit of trouble hearing you. I think the first question was efficiency on marketing spend and how it impacts paying monthly actives in our people?

Correct. Yep.

Okay. Okay. Um, I think probably Casey, you're, you're the best person to talk about that as you control user acquisition inside the business.

Absolutely. And Jason, thanks for the question. When you think about sequential reductions in marketing spend, we see an initial reduction in the paying MAU on the system. So if you look at this quarter in particular, we cut our user acquisition spend by 30%. Our paying MAU was only down by 7%. And that's because the product itself is quite sticky and we continue to see more efficiencies as we cut that spend. And so as we sequentially reduce marketing spend, you see an initial reduction in paying now, then it'll level off and then it'll continue to grow based on the long-term retention of the system. In terms of the average revenue per paying user on system, most of the users on system today are mature users, and so reductions in marketing spend don't have a very large impact on that number at a system level, though we would expect to continue buying higher and higher quality users as we reduce marketing spend. Does that answer your question? Yeah.

It does. So then when we look at that R2 decline that we saw year over year, that's really more of sort of COVID lockdown sort of comps as opposed to linked to the marketing efforts.

Q1 certainly, when stimulus checks were issued globally, I think increased discretionary income in the market and had a positive effect on our business.

Okay, and then my second question was just on the cost saves. I think you said those kicked in during the quarter maybe, not for the full quarter. Is that true?

Ian, do you want to comment a little bit on the impact for Q2 on cost savings?

Sure. Just on that first – hi, Jason, how are you? It's Ian. So just on that first part, yes, so we kind of – sorry, can you hear me okay, Jason? Yeah, yeah. Sorry about that. So we did reduce user acquisition and engagement marketing across the quarter. So we did certainly exit at a lower rate in March relative to January. But, yes, that kind of kicked in. I think as Casey discussed at the end of yesterday, kind of as we got into the middle part of the quarter. So then, again, during the course of the quarter, we saw more of that, if not for the fall, in January. Okay. As we get into Q2, I'd say for user acquisition, we certainly continue to look at an ROI-based approach. We've got a lot of work that we're doing there in terms of how we can use our products to reduce user acquisition costs but also grow the lifetime value of our user base. So I think when we look at user acquisition for Q2, you know, obviously without getting to specific guidance, but I think right now a rough estimate for what we think UA might be is somewhere between the $25 to $35 million range for user acquisition investment in Q2. Similarly, on the engagement marketing side, we spend a lot of time looking at how we could be more focused on optimizing the spend there. In Q1, we really focused on reduction of engagement marketing as a percentage of revenue by eliminating lower-term programs. So in Q1, we captured a lot of that low-hanging fruit, if you will. As we get into Q2, we're going to continue running deeper tests to take the looms we've had beyond just those low-hanging fruit to see where else we can further optimize the programs, I think more so in the latter half of the year in Q3 and Q4. So my expectation is that engagement marketing as a percentage of revenue will be probably relatively flat in Q2, again, relative to Q1, again, as a percentage of revenue.

Thank you very much.

That's right, Ian, and maybe just to summarize that, I'd expect continued sequential decreases in marketing as a percentage of revenue quarter over quarter as we continue to get more efficient with the business.

Thank you.

Thank you, Mr. Bazinet. The next question is from the line of Brad Erickson with RBC Capital Markets. Please proceed.

Hi, thanks. First, just with regard to the cash burns and the balance sheet with where you're at today, maybe talk about how you balance product development and marketing spend to try and hopefully reduce those burns. And at some level, just wonder, do you speed up or slow down product development as you look to mitigate those burns? And then I have a follow-up.

Sure. Great question, Brad. I think the – Approach we're taking is being very thoughtful about what are our short, mid, and long-term product development returns, and then running a milestone-based approach as we tranche investment into each of those different investments. So very short-term investments we're making. We'll be rolling out. by the end of this quarter a new core loop for the player experience. So you'll see pretty significant user interface changes around the core experience for players. I would put that in that short-term bucket of investment in return. If you think about something that was originally a long-range investment for us and now is coming to yield, cloud-based gaming is something that we actually have been investing in for multiple years, although we only unveiled it last quarter. And I would argue that, you know, our expectations for something like cloud, where it's a longer-range investment in dollar, you know, size of a dollar figure, that we expect even more returns than something short-term like CoreLoop. Ian, do you have anything you'd like to add? No, I think you captured it well.

Got it. Thanks. And then maybe just a follow-up. Andrew, remind us on some of the other categories you've talked about in the past, and particularly the ones that you think can drive payer growth and hopefully better retention over the next year or two, just any categories that you're really excited about on the horizon.

Well, I think we're all excited about sports as a burgeoning category on the platform because it primarily speaks to a male and younger demographic. And so it will allow us to attract player types that are not the majority of players today on platforms. When you think about something like Puzzle or Card, you're typically getting a more women demo and a bit older. And so we're pretty excited about sports generally. I think specific sports titles, you know, I'm very focused on the numbers as I think it's, you know, We're in soft launch now at the NFL games, having the UFC signed and focusing on getting a great game built with the UFC. I'm certainly a UFC fan. So at least from a personal standpoint, I'm excited about content that I'll really enjoy playing on platforms. And all this is yielding, is helping us yield content. from our photon investment last year. If you remember the $50 million investment exit games, photon is a really important technology for us as we move into these like synchronous sports or fighting games.

Guys, that's helpful. Thank you.

Thank you, Mr Erickson. The next question is from the line of Clark Lampin with BTIG. Please proceed.

Thanks a lot. Good evening. Two for me, please. Maybe first, Andrew, I'll follow up on your comments on UFC. Could we maybe go a layer deeper with UFC and the NFL also, if it's relevant? What specifically do developers that are building on the skills platform have at their disposal in terms of you know, IP or, you know, are there sort of exclusive, you know, elements of the relationship in any way? And I suspect I know the answer to this already, but the possible you might be willing to be a little bit more specific on the timing for launches. Is it possible that we could see gains in the first half of next year? And my second question is for Ian. The stock comp figure that we saw in Q1, could you help us think about what a sort of good underlying benefit you know, SBC dollar figure or expense ratio would be for 2Q onward over the course of the year. Thanks a lot.

Great. Yeah, so let's talk first about the deals with GFC and AFL, and probably Casey would be best to talk about them and see his teams actually do the partnerships.

Absolutely. Really excited about both partnerships. Absolutely. The typical licensing model in mobile gaming for game developers often requires a very large upfront payment or minimum guarantee from the game developers to large, well-known brands like the NFL or UFC. And the result of that is you get very little development innovation in the content that comes from that because so few developers have access to the content. And so with respect to the partnerships on skills, There are two big things that the developers are getting. The first is access to the IP and the right to build games inside the category without paying those upfronts and minimum guarantees. And that creates both more interest and more developers building content and also increases innovation because it enables developers to take more risks. The second thing that developers get is marketing support and lowered marketing costs, and that comes both from access to the marks and marketing assets that each of those brands possess, as well as marketing support from the entities themselves for the games when we go to hard launch. In terms of timing, I know everyone's really excited to hear about new hit games. We're really excited about new hit games too. The interesting thing about our platform is that as the games are getting more complex on the platform and developers are increasing the investment that they're making into those games, the typical soft launch period gets longer as the game developers are spending more time fine-tuning and optimizing the core loop and experiential factors inside the games. And so what we're seeing is a growing number of those kind of soft launch games that we're excited about. And I think we have said that the current timeline, and we're still on that timeline, is to declare an NFL, a winner of the NFL competition right around the kickoff for next year's season.

And Ian, do you want to hit the stock-based comp question?

Sure. I will. Thanks, Andrew. So, Clark, just on the stock-based comp, so the total number which you saw for Q1 of about $78 million, that includes about $65 million, which is a one-time related expense due to the cancellation of a CEO-related performance stock unit. So if you were to exclude that $65 million at one-time stock-based comp charge in Q1, that would give you closer to what would be the quarterly run rate, if you will.

I mean, I love a little credit for canceling my own comp. I recommended to the board to cancel my comp given company performance. I think no one in our team is excited about where we are right now. And I think everyone in our team is very focused on getting the path built to a great future business. The pain of moving off of 2021 strategy to 2022 is not insignificant. It's cultural and it's a big shift, but we're moving as fast as we possibly can to benefit all of our shareholders, of which I am one as well.

Thank you, Mr. Lampin. The next question is from the line of Brian Fitzgerald with Wells Fargo. Please proceed.

Thanks, guys. I had a couple questions around ARCI. First one being, are you seeing more mobile publishers lean into ARCI given impact from ATT? Not to you guys, but they don't have enough data to target, and so they're leaning into ARCI. kind of the scaled data of, of our key. That's the first one. And then I have two more.

Sure. Um, Casey, do you want to chat a little bit about our key and how we're, I guess I, there are a couple of things to talk about there. One is, uh, removing spend over and, uh, and then I think also talking about, uh, the post IDFA world and data.

Sure. Happy to provide a little bit of guidance there, Brian. We don't report on Archie as a separate business unit, though we continue to be really excited about the business prospects for Archie and its opportunity both to enable skills to offer a complete service offering to developers around both monetization and acquisition, but also the synergies that exist between our business and the Archie business particularly with respect to both our media spend and our ability to potentially enhance Sparky's targeting abilities with first-party data. And so we haven't shared... exactly how much spend uh and when we're planning to move to uh to rp um though we do plan to migrate a significant portion of our own spend to our owned and operated dsp rp this year uh and we expect to see continued growth in that business unit uh both based on the kind of tracking landscape that exists but also the strong product that that company has uh

Got it. And then the other one was just around, I don't know if you're seeing kind of concerted efforts to take kind of supply path optimization. Maybe you don't see it on the mobile side of things, but take supply path optimization techniques and kind of wean out some of the waste or noise in the middle of the ecosystem to drive more value really into the DSP. So away from you guys seeing efficiencies, but do you see people kind of narrowing the amount of DSPs they work with to kind of more focus the channel and then therefore deliver more value out of the process?

I don't think we see that, but defer to Casey if there's anything I'm unaware of. I think generally we see customers, including when we're buying off of DSPs, we're looking for best value per dollar spent, and it's very much like a dollar-based ROAS approach. Casey, do you have comments?

Yeah, I was just going to add, certainly machine-learning-based businesses are definitely have synergies that come with scale. And so buyers will exercise those synergies where possible. But what we've also seen is that the buyers, as Andrew pointed out, are just as we are, are really geared towards efficiency of the dollar and are going to go with the provider that gives them the best return on ad spend. And that often isn't necessarily from a winner-take-all spend profile.

Yep. Okay. Thanks. Appreciate it, guys. Yeah. I wish.

Yeah. No problem. The last thing I just commented is we haven't seen on any DSP, including ours, machine learning able to build enough of a market lead to create that kind of winner-take-all profile.

Got it. Understood.

Thank you, Mr. Fitzgerald. The next question is a question from the line of Drew Crum with Stateful. Please proceed.

Okay, thanks. Hey, guys. Good afternoon. So you added to your headcount during 2021. Is the 15% increase in employee salaries been anniversaried, or is that something that should continue over the course of the year? In other words, are you planning to add more intellectual capital? And, you know, we've heard the labor market's been pretty tight. What has been your recent experience in terms of employee turnover? Are you finding it's been more difficult to retain employees or just not seeing any issues with your company? Thanks.

Well, the 15% increase was one time really recognizing proactively the level of inflation. that our employee base is experiencing and moving proactively ahead of that. So it's very much a one-time increase, and it's in our Q1 run rate. In terms of regrettable attrition, we haven't seen a huge uptick in that, but it is something we're laser-focused on. Regrettable attrition is, I think, one of the measures of the health of a good business, and we're very cautious about that. It's something that we look at on a weekly and monthly basis. And I would add, I mean, generally our understanding of the market right now is that the labor market for our type of business is very tight. We have a unique market position. There are very few companies in the world that have a B2B2C business where the B2B piece is the developer community. And the B2C piece owns a consumer login with payment credentials. And I think for employees in the technology space and the tech platform space, that uniqueness combined with the upside potential for our company, it's actually, if anything, I'd say been some of the best hiring we've seen in the last few months. Happy to add more color. It's helpful. Thank you, Drew.

Thank you, Mr. Crump. The next question is a follow-up question from the line of Clark Lampin with BTIG. Please proceed.

Thanks a lot. I just wanted to go back to Jason's question earlier and maybe sort of in asking the follow-up, you know, display a great deal of ignorance along the way, but I think if I heard and sort of understood what Casey was saying about in the short run the focus being trying to really dial in on the most valuable, maybe more mature cohorts on the system, improving their experience, and then most likely monetization also. is the future sort of next leg that encompasses player growth, I guess, beyond that expected to be mostly a function of kind of unlocking greater efficiencies with a smaller, you know, dollar marketing budget? Or I think I missed, you know, sort of another component of the latter part as it pertains to, you know, sort of driving future user growth on top of better monetizing, you know, those existing higher value cohorts and wanted to circle back on that topic. Appreciate the commentary. Thanks.

No, that's a great question. I think this year we're very focused on driving efficiency, so profitable revenue growth and bringing our overall adjusted EBITDA within range of going cash flow positive. I think we've been messaging repeatedly that we intend to be breakeven as a total business by the end of 2024. And so this year it's very much been a focus of getting our business in position to make that possible. I think in terms of marketing and user growth, I'll turn it over to Casey to talk a little bit about how we're working against both UA and engagement marketing.

Thanks, Andrew. I think, Clark, the way to think about it is the first thing that we're doing is reducing the inefficient spend in both our user acquisition and engagement marketing. And once that inefficient spend is eliminated, there's a short run. It's not zero efficiency, it's just inefficiency. And so there's a short-term, ostensibly, kink in the growth curve that comes from that. After you cut that inefficient spend, we think about continuing to grow profitably the revenue base of the business and the user base of the business through three things. One is the continued profitable investment in those effective marketing channels and direct-to-consumer advertising. The second is continuing to drive high-quality content to the platform and increasing the number of developers who are marketing that content rather than skills marketing that content for them. And the third thing is continuing to invest in products that both increase our LTV, but also drive growth and reduce friction in the distribution of the product. So think, you know, when Andrew mentioned a couple of those investments, CoreLoop being something that helps drive an improved on-system player experience. which increases LTV, cloud gaming being an example of an investment that reduces friction in the discovery of the product itself and viral coefficient, which accelerates growth on top of the existing marketing investments that we're making.

Makes sense. Thanks for taking the follow-up.

Thank you, Mr. Lampin. There are no additional questions waiting at this time, so I will turn the call back over to Stefan Gerhard,

Great. At this point, we'll pose some of the questions that we collected from investors through our state technologies portal. The first question is going to be for Andrew. Andrew, are we looking to make games that will provide rewards in cryptocurrencies and NFTs?

We're definitely aware that the crypto community is now marketing pay-to-earn at a pretty frenetic pace. It's one of the bigger themes at GDC or the Game Developer Conference this year. To be honest, in some ways we found it very flattering because skills is the original pay-to-earn. uh business um but generally when we're looking at crypto for payments uh and nfts for prizes and thinking about how that's that is or is not gaining traction uh in the broader uh player community we're looking at for our developers and how to implement it and it is it's something that um has been considered uh and deprecated from uh from your term roadmap uh now for gosh, I want to say almost 10 years since we first mined Bitcoin with our servers in 2012. So, you know, I don't think we want to message to anyone out there that you'll see a meaningful crypto business from us in the near term, other than that we're continuing to investigate this and seeing, you know, where does hype meet reality and what we can deliver for our developers.

Great. Thank you, Andrew. Next question is for Casey. Are you partnering with any large developers to increase the content on the platform or the audiences that you can reach?

Thanks. Thanks, Stefan. What we've seen over the life of the business and continue to see now is that both the size of the developers that we're partnering with and the complexity of the content that they're building on the platform continue to increase. As a business, if you imagine in the early days, the service offering of the product was best suited to smaller companies because we had just started building it, and as we build both the network effect of the system, the optimizations that come from large data and player matching, anti-cheating and fraud, as well as just the aggregate feature set. We're seeing that the size of customer that we're able to attract and do business with continues to increase, and the sophistication of the experiences that they build continue to increase. And so we've announced a couple of those. If you think about IP holders like BigFuckHunter, or Trivia Crack, which is the maker, or Eater Max, I'm sorry, the maker of the largest trivia game in the world, Trivia Crack. You can see in the proof point some of those developers starting to join the ecosystem, and you should continue to see that trend just as we have over the past few years.

Great, thank you. Next question, this one is for Ian. Ian, when can we expect more news and direction regarding growth and profitability.

Well, thanks, Stefan. So I think, you know, just to recap some of the guidance we gave for the full year last quarter. So, again, the full year revenue guidance was $400 million, and the full year for 2022 revenue after engagement marketing guidance was for $245 million. And then, again, just to recap what I think Andrew mentioned a little earlier, we expect to – uh exit q4 of this year with um the target revenue after engagement marketing growth rate of above 30 percent and a adjusted even a EBITDA margin of better than negative 30 percent uh just a little bit more color on some of the the trends we expect for the rest of the year or at least the next quarter so i think we'd say on the top line revenue growth rate um given the continued optimization we're looking to do on engagement marketing i expect the um growth rate in Q2 probably to be a little lower than Q1. And then on the revenue after engagement marketing growth rates, probably looking to see that stabilize and improve during the year as we optimize around user acquisition marketing and also just to see more impact on the product initiatives that we talked about earlier in the call. So I expect more of those product initiatives to have probably a large impact on revenue after engagement marketing towards the end of the year as we kind of roll out those features to more users on the system. Thank you.

Great. And since I've already got you, I'll get the next one to you as well, which is for Ian. Is skill thinking about buying back stock given current prices?

Thanks again, Stefan. So, look, we're always going to evaluate all the alternatives we have to how we use and allocate our capital. So, you know, we have the view that today we can generate a much higher return for our shareholders by investing in our business. So, you know, building better products, better platforms for our users and developers. better content and the right people than through things potentially like a stock buyback today. So we continue to look at all the alternatives and we'll continue to do what we think is the best and highest use of the capital that would generate long-term returns for all of our shareholders.

Yeah, maybe I'd just add, Ian, I think it's unlikely that we're going to be pursuing a stock buyback in the near future.

Makes sense. Next question. This one is for Andrew. Again, talking about sort of future gaming. Are you coming up with any new games that would go with the metaverse?

We started talking about building the competition layer for the internet several years ago, and I think a lot of people are now talking about the metaverse in the past 12 months. You know, We believe that competition can be abstracted from all other digital activities on the internet into one centralized platform, and that we can make that experience by abstracting competition into one place. We can make competition in the digital world better, fairer, purer, and of course, higher retaining and higher monetizing than by building it in individual instances all over the internet. um mobile gaming is really just the beginning for us and so when we think about um things like the metaverse i i would to some extent put in a similar bucket as crypto a lot of people talking about it not yet uh a lot of users actually demonstrating user behavior um and so you know i think the last number i saw were like about 15 million oculus's now shipped you know, 15 million Oculuses or, you know, four plus billion smartphones and tablets. I think we're actually coming up at five billion smartphones and tablets now. So, you know, we're really focused on building software for platforms where there are really large-scale adoption. And I'd say after smartphone and tablet, we, you know, I think we've talked a bit about cloud now, but I'll say it one more time, there's still a billion personal computers out there. One billion personal computers. It's a massive number, and I think that opportunity is not to be taken lightly. I think it's a huge opportunity, especially for our power users, because if you think about the 1% player on skills, they play four hours a day plus on platform. And getting a better form factor for those power users, well, at the very least, we're not invested in or are profiting from chiropractor visits. So for all the users who are playing four hours on their smartphone, I think they're going to have a better ergonomic solution coming soon.

Next one, Arthur, for you. What steps are you taking to open up cash-based competition in more states within the United States?

Sure. So when we started the business, we were very conservative. We said, look, we're only going to enable jurisdictions where there's clear law that states explicitly that we can operate. We refer to it as whitelisted jurisdiction. jurisdictions. We're going to stay away from anything that's gray and certainly anything that's black. Gray being things where it's not necessarily clear whether or not skills and skill-based competition in video games would be permissible. Having said that, so we started in 36 states 10 years ago. We've had five states clarify their laws favorably since then. So Vermont, New Jersey, Iowa, Illinois, and Maryland So certainly the trend has been very positive. And we plan to continue to invest in building relationships and educating decision makers on the opportunity to explicitly enable video games for skill-based competition in the remaining jurisdictions. You know, the 41 states that we now have enabled covers just about 90% of the U.S. population. So certainly I think it's not just about that remaining 10% that we could capture and have that growth added to our business. I also think it goes back to a theme I was talking about earlier with cloud, which is sharing and virality in content is really important. And if you tell your friend, hey, try out this game, and they're in South Carolina right now or Connecticut, and they can't and they can't play, I think it's a pretty disappointing experience. So I think, you know, I think the most important piece beyond even the 10% growth is getting that ubiquity of experience for all consumers out there. And it's something we're very committed to.

Great. And that brings us to our final question. Andrew, this one is also for you. What future features, games, and or partnerships do you plan on pursuing in efforts to generate more revenue?

Well, I'll talk about the ones that we've shared so far because new product launches that are certainly coming up for H2, but I don't want to get in trouble with our PR folks on pre-announcing some of these things. But we talked about chat, and I think thinking along the lines of social and that experience of enabling more ways for players to connect with each other and around the content on the platform, certainly near and dear to us. Continuing to invest in and innovate on competition formats and leagues, I think it gives... opportunity to every game on the platform to have a greater level of personalization for each player. It's not necessarily meaningful if you're 47,000th place in a league. And I think getting technology so that you can have local leagues and leagues with friends, but having more relevant types of match-ups and formats within your own community is really important. We're streamlining the process for building sophisticated multiplayer games through the partnership we did with Exegames Photon Engine. It's now a relatively smooth process to deploy a game using both the Photon engine and the skills platform, and that's going to enable a lot more content to come to market in things like racing and fighting and shooting, which are all genres near and dear to my heart. The more content that makes it to market by reducing friction of that developer experience, the more likely we are to see hits in those genres. When you think about developers investing their time on the platform to get to market, the easier we can make it to get to market, the more likely we are to have a hit game in a given genre. Also, as those games are getting live, we've actually built a progression system last year that we've been rolling out to the developer community, which enables developers to better customize the player experience and to enable users to to have a increasing sense of ownership and progress as they play each game on the platform. And that goes hand in hand with something we're rolling out to not full footprint, but it'll be live on App Store and at least our test game Diamond Strike this quarter, which is the new core product experience, which will give developers more freedom through their design of their games. It'll also give the platform generally, I'd say, a much more modern look. It'll improve the user experience. So pretty excited about that coming to market by end of quarter. And I'll leave it at that.

Great. Andrew, that was the last question that we had. So turning back over to you.

Okay. Well, thank you all again for dialing in and spending your time to hear about skills business today. We're looking forward to providing an update on our continued progress when we report our Q2 results. And I am excited to get back to building with the team. So thank you again for all the time.

That concludes today's call. Thank you for your participation. You may now disconnect your lines.