- Third Quarter Revenue of $60 Million, Up 92% Year-over-Year,

Revenue for Year to Date of $162 Million, Up 91% Over Prior Year

- Affirming Full Year Revenue Guidance of $225 Million

SAN FRANCISCO--(BUSINESS WIRE)--Skillz Inc. (“Skillz” or the “Company”), the leading mobile games platform connecting players around the world in fun, fair, and meaningful competition, today announced financial results for the third quarter ended September 30, 2020.


“These are exciting times at Skillz. During the quarter, we achieved an important milestone by entering into a business combination agreement with Flying Eagle Acquisition Corp. (NYSE: FEAC) that positions us to be the first mobile esports platform to go public. We drove revenue growth of 92% year-over-year and are tracking to achieve our full year 2020 revenue guidance,” commented Andrew Paradise, CEO and founder of Skillz.

“Our mission is to make gaming better by providing players with a fair and trusted competitive gaming experience and by enabling game developers to better monetize their content. We believe gaming is the future of entertainment, and in that future anyone can embrace their inner champion. The engagement we see from the players on our platform validates the connection they’re making with the community through competition,” continued Paradise.

Third Quarter Financial Highlights

  • Revenue grew 92% to $60.0 million during the third quarter of 2020, compared with $31.2 million during the comparable quarter in 2019 and the 19th consecutive quarter of sequential revenue growth.
  • Gross profit grew 92% to $56.9 million during the third quarter of 2020, compared with $29.6 million during the comparable quarter in 2019.
  • Gross margin was 95% during the third quarter of 2020, the same as during the comparable quarter in 2019.
  • Contribution grew 177% to $19.1 million during the third quarter of 2020, compared with $6.9 million during the comparable quarter in 2019.
  • Net loss was $(42.9) million during the third quarter of 2020, compared with a net loss of $(5.0) million during the comparable quarter in 2019.
  • Gross Marketplace Volume1 (“GMV”) grew 76% to $411 million during the third quarter of 2020, compared with $234 million during the comparable quarter in 2019.

Nine Month Financial Highlights

  • Revenue grew 91% to $162.4 million during the nine month period of 2020, compared with $85.1 million during the comparable period in 2019.
  • Gross profit grew 89% to $153.6 million during the nine month period of 2020, compared with $81.3 million during the comparable period in 2019.
  • Gross margin was 95% during the nine month period of 2020, the same as during the prior year period.
  • Contribution grew 154% to $53.8 million during the nine month period of 2020, compared with $21.2 million during the comparable period in 2019.
  • Net loss was $(78.5) million during the nine month period of 2020, compared with a net loss of $(14.9) million during the comparable period in 2019.
  • GMV grew 80% to $1,130 million during the nine months of 2020, compared with $627 million during the comparable period in 2019.

Recent Business Highlights

  • Expanded traction of hosted tournament offering, with celebrities including NFL Super Bowl Champion Marshawn Lynch and World Champion Hall of Fame boxer Floyd Mayweather selecting Skillz to power brand-sponsored tournaments.
  • Launched first offline to online branded venue partnership with Bowlero, the owner of the Professional Bowlers Association and world’s largest operator of bowling centers. Bowlero selected the Skillz platform to blend physical and digital experiences for their 28 million annual players and build the future of competitive electronic bowling.
  • Powered mass participatory fundraisers for leading nonprofits through the Skillz Gaming for Good initiative, including events with the American Cancer Society, Comic Relief, and American Red Cross.

Impact of COVID-19

The Company experienced high rates of revenue growth prior to COVID-19. Since the onset of the pandemic, the Company has witnessed continued growth in consumption of digital entertainment by consumers. The ability of the Company’s developer partners and players to leverage the Skillz platform has not been disrupted. The Company transitioned seamlessly to a remote work environment and continues to see strong content from its developer partners.

Business Combination Transaction

On September 1, 2020, Skillz entered into a business combination agreement with Flying Eagle Acquisition Corp (“Flying Eagle”). The business combination is expected to close during the fourth quarter of 2020. Upon closing of the transaction, the combined company intends to change its name to Skillz, Inc. and trade on the NYSE under the ticker symbol “SKLZ”.

About Skillz Inc.

Skillz is the leading mobile games platform that connects players around the world in fun, fair, and meaningful competition. The Skillz marketplace expands the gaming ecosystem, helping developers share their art with the world and build multi-million dollar franchises by enabling social competition in their games. Leveraging its patented technology, Skillz hosts billions of casual esports tournaments for millions of mobile players worldwide and distributes millions in prizes each month. Skillz has earned recognition as one of Fast Company’s Most Innovative Companies, CNBC’s Disruptor 50, Forbes’ Next Billion-Dollar Startups, and the #1 fastest-growing company in America on the Inc. 5000. www.skillz.com

Non-GAAP Financial Measures

In this press release, the Company includes EBITDA, Adjusted EBITDA and Contribution which are non-GAAP performance measures that the Company uses to supplement its results presented in accordance with U.S. GAAP. As required by the rules of the Securities and Exchange Commission (“SEC”), the Company has provided herein a reconciliation of the non-GAAP financial measure contained in this press release to the most directly comparable measure under GAAP. The Company’s management believes EBITDA, Adjusted EBITDA and Contribution are useful in evaluating its operating performance and is similar to measures reported by publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. By providing these non-GAAP measures, the Company’s management intends to provide investors with a meaningful, consistent comparison of the Company’s profitability for the periods presented. EBITDA, Adjusted EBITDA and Contribution are not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

The Company defines and calculates EBITDA as net loss before other non-operating interest expense or income, provision for income taxes, and depreciation and amortization. The Company defines and calculates Adjusted EBITDA as net loss before other non-operating interest expense or income, provision for income taxes, and depreciation and amortization, and further adjusted for stock-based compensation and other special items determined by management, including, but not limited to, fair value adjustments for certain financial liabilities (including derivatives) associated with debt and equity transactions and impairment charges as they are not indicative of business operations. The Company defines and calculates Contribution as Adjusted EBITDA before user acquisition marketing expense.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. The Company’s actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements.

These forward-looking statements involve significant risks and uncertainties that could cause the Company’s actual results to differ materially from those discussed in the forward-looking statements. Most of these factors are outside of the Company’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the ability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and retain its key employees; (2) costs related to the business combination; (3) the inability to obtain or maintain the listing of the Company’s shares on the NYSE; (4) the Company’s ability to execute its business plan and meet its projections; (5) the outcome of any legal proceedings that may be instituted against the Company; (6) the impact of COVID-19 on the Company’s business; (7) the Company’s transition to becoming a public company including the associated expenses and the impact of public financial and other disclosures on its negotiations and arrangements with key counterparties; (8) changes in applicable laws or regulations; (9) general economic, business, and/or competitive factors; and (10) other risks and uncertainties indicated from time to time in the final proxy statement/prospectus relating to the business combination, including those under “Risk Factors” therein, and in the Flying Eagle’s other filings with the SEC, which are available on the SEC’s website at www.sec.gov. Additional information will be made available in other filings that the Company makes from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that the Company believes to be reasonable as of this date. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

Information About the Proposed Business Combination and Where to Find It

In connection with the proposed business combination, Flying Eagle has filed a Registration Statement on Form S-4, including a preliminary proxy statement/prospectus and a definitive proxy statement/prospectus with the SEC. Flying Eagle’s stockholders and other interested persons are advised to read the preliminary proxy statement/prospectus and, when available, the amendments thereto and the definitive proxy statement/prospectus and documents incorporated by reference therein filed in connection with the proposed business combination, as these materials will contain important information about Skillz, Flying Eagle, and the proposed business combination. When available, the definitive proxy statement/prospectus and other relevant materials for the proposed business combination will be mailed to stockholders of Flying Eagle as of the record date established for purposes of determining the stockholders of Flying Eagle entitled to vote on the business combination and related matters. Stockholders will also be able to obtain copies of the preliminary proxy statement/prospectus, the definitive proxy statement/prospectus, and other documents filed with the SEC that will be incorporated by reference therein, without charge, once available, at the SEC’s website at www.sec.gov, or by directing a request to: investors@eagleequityptnrs.com.

Participants in the Solicitation

Flying Eagle and its directors and executive officers may be deemed participants in the solicitation of proxies from Flying Eagle’s stockholders with respect to the business combination. A list of the names of those directors and executive officers and a description of their interests in Flying Eagle will be included in the proxy statement/prospectus for the proposed business combination and be available at www.sec.gov. Additional information regarding the interests of such participants will be contained in the proxy statement/prospectus for the proposed business combination when available.

Skillz and its directors and executive officers may also be deemed to be participants in the solicitation of proxies from the stockholders of Flying Eagle in connection with the proposed business combination. A list of the names of such directors and executive officers and information regarding their interests in the proposed business combination will be included in the proxy statement/prospectus for the proposed business combination.

No Offer or Solicitation

This press release shall not constitute a solicitation of a proxy, consent, or authorization with respect to any securities or in respect of the proposed business combination. This press release shall also not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any states or jurisdictions in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, or an exemption therefrom.


1“GMV” or “Gross Marketplace Volume” means the total entry fees paid by users for contests hosted on Skillz’s platform.

Skillz Inc.

Condensed Statements of Operations

(UNAUDITED)

(in thousands, except share and per share amounts)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2020

 

2019

 

2020

 

2019

 

Revenue

$

59,955

 

 

$

31,175

 

 

$

162,392

 

 

$

85,126

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

3,102

 

 

1,528

 

 

8,806

 

 

3,835

 

Research and development

4,369

 

 

3,349

 

 

13,253

 

 

7,803

 

Sales and marketing

73,187

 

 

29,033

 

 

172,381

 

 

77,942

 

General and administrative

7,861

 

 

4,189

 

 

24,336

 

 

11,991

 

Total costs and expenses

88,519

 

 

38,099

 

 

218,776

 

 

101,571

 

Loss from operations

(28,564

)

 

(6,924

)

 

(56,384

)

 

(16,445)

 

Interest expense, net

(24

)

 

(554

)

 

(1,297

)

 

(2,127)

 

Other income (expense), net

(14,216

)

 

2,442

 

 

(20,749

)

 

3,653

 

Loss before income taxes

(42,804

)

 

(5,036

)

 

(78,430

)

 

(14,919)

 

Provision for income taxes

47

 

 

 

 

100

 

 

 

Net loss

$

(42,851

)

 

$

(5,036

)

 

$

(78,530

)

 

$

(14,919)

 

Remeasurement of redeemable convertible preferred stock

 

(456,446

)

 

 

(43,528

)

 

 

(865,952

)

 

 

(62,519)

 

Deemed dividend related to repurchase of preferred stock

 

(1,153)

 

 

 

 

 

 

 

(1,153)

 

 

 

 

 

Net loss attributable to common stockholders

$

(500,450

)

 

$

(48,564

)

 

$

(945,635

)

 

$

(77,438)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to

common stockholders – basic and diluted

$

(3.08)

 

 

$

(0.35)

 

 

$

(6.64)

 

 

$

(0.58)

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares

outstanding – basic and diluted

 

162,278,037

 

 

 

137,813,154

 

 

 

142,475,767

 

 

 

134,316,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skillz Inc.

Condensed Balance Sheet

(in thousands, except share and per share amounts)

 

September 30,

 

December 31,

 

2020

 

2019

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

56,861

 

 

$

25,628

 

Prepaid expenses and other current assets

9,952

 

 

9,464

 

Total current assets

66,813

 

 

35,092

 

Property and equipment, net

5,569

 

 

3,648

 

Deferred offering costs

13,507

 

 

 

Other long-term assets

992

 

 

116

 

Total assets

$

86,881

 

 

$

38,856

 

Liabilities, redeemable convertible preferred stock and stockholders' deficit

 

 

 

Current liabilities

 

 

 

Accounts payable

$

5,369

 

 

$

2,944

 

Accrued professional fees related to deferred offering costs

 

12,199

 

 

 

 

Other current liabilities

23,029

 

 

7,537

 

Total current liabilities

40,597

 

 

10,481

 

Long-term debt

 

 

9,628

 

Other long-term liabilities

56

 

 

82

 

Total liabilities

40,653

 

 

20,191

 

Commitments and contingencies

 

 

 

Redeemable convertible preferred stock:

 

 

 

 

 

Redeemable convertible preferred stock $0.0001 par value; 21 million shares authorized; Series C preferred stock – 11 million shares authorized and 4 million shares issued and outstanding as of September 30, 2020 and December 31, 2019; Series D preferred stock – 4 million shares authorized, 3 million shares issued and outstanding as of September 30, 2020 and December 31, 2019; Series D-1 preferred stock – 3 million shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019; Series E preferred stock – 3 million shares authorized and 2 million shares issued and outstanding as of September 30, 2020

1,120,724

 

 

156,335

 

Stockholders' deficit:

 

 

 

 

 

Convertible preferred stock $0.0001 par value; 14 million shares authorized; Series A – 6 million shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019; Series A-1 – 2 million shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019; Series B – 6 million shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019

25,354

 

 

25,413

 

Common stock $0.0001 par value; 615 million shares authorized; Class A common stock – 110 million shares authorized; 110 million and 99 million shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively; Class B common stock – 505 million shares authorized; 60 million and 51 million shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

17

 

 

1

 

Additional paid-in capital

 

 

 

Accumulated deficit

(1,099,867

)

 

(163,084

)

Total stockholders’ deficit

(1,074,496)

 

 

(137,670)

 

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit

$

86,881

 

 

$

38,856

 

 

Skillz Inc.

Statements of Cash Flows

(UNAUDITED)

(in thousands)

 

Nine Months Ended September 30,

 

2020

 

2019

Operating Activities

 

 

 

Net loss

$

(78,530

)

 

$

(14,919

)

Adjustment to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

1,092

 

 

455

 

Stock-based compensation

9,565

 

 

969

 

Accretion of unamortized discount and amortization of issuance costs

548

 

 

2,106

 

Fair value adjustment of financial instruments

20,808

 

 

(3,688

)

Impairment charges

3,395

 

 

 

Changes in operating assets and liabilities:

 

 

 

Prepaid expenses and other assets

(3,858

)

 

(1,674

)

Deferred offering costs

(13,507)

 

 

 

Accounts payable

3,078

 

 

(349

)

Accrued professional fees related to deferred offering costs

12,199

 

 

 

Other liabilities

15,466

 

 

5,779

 

Net cash used in operating activities

(29,744

)

 

(11,321

)

Investing Activities

 

 

 

Purchases of property and equipment, including internal-use software

(3,009

)

 

(2,134

)

Net cash used in investing activities

(3,009

)

 

(2,134

)

Financing Activities

 

 

 

Payments for debt issuance costs

(201

)

 

(80

)

Payments under debt agreements

(10,000

)

 

 

Proceeds from issuance of redeemable convertible preferred stock, net

of

issuance costs

76,617

 

 

24,908

 

Proceeds from exercise of stock options and issuance of common stock

673

 

 

135

 

Payments made to repurchase common and preferred stock

(2,450

)

 

 

Payments made to deferred offering costs

(653)

 

 

 

Net cash provided by financing activities

63,986

 

 

24,963

 

Net change in cash, cash equivalents and restricted cash

31,233

 

 

11,508

 

Cash, cash equivalents and restricted cash - beginning of period

28,548

 

 

22,540

 

Cash, cash equivalents and restricted cash - end of period

$

59,781

$

34,048

Skillz Inc.

Reconciliation of GAAP Net loss to Adjusted EBITDA and Contribution

(UNAUDITED)

(in thousands, except share and per share amounts)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2020

 

2019

 

2020

 

2019

 

Net loss

$

(42,851)

 

 

$

(5,036)

 

 

$

(78,530

)

 

$

(14,919)

 

Interest expense, net

24

 

 

554

 

 

1,297

 

 

2,127

 

Provision for income taxes

47

 

 

 

 

100

 

 

 

Depreciation and amortization

458

 

 

183

 

 

1,092

 

 

455

 

EBITDA

(42,322)

 

 

(4,299)

 

 

(76,041)

 

 

(12,337)

 

Stock-based compensation

3,662

 

 

203

 

 

9,565

 

 

969

 

Other non-operating costs
(income)(1)

14,216

 

 

(2,442)

 

 

20,749

 

 

(3,653)

 

Impairment charge(2)

 

 

 

 

3,395

 

 

 

Adjusted EBITDA

(24,444)

 

 

(6,538)

 

 

(42,332)

 

 

(15,021)

 

User Acquisition Marketing

43,589

 

 

13,453

 

 

96,151

 

 

36,178

 

Contribution

19,145

 

 

6,915

 

 

53,819

 

 

21,157

 

  1. For the three months ended September 30, 2020, other non-operating costs (income) include a $15 million adjustment to the fair value of the redeemable convertible Series E preferred stock forward option contract liability. Offset by $0.8 million fair value adjustment of warrants issued to the company. For the three months ended September 30, 2019, other non-operating costs (income) include a $2.4 million remeasurement gain for the bifurcated derivative liability related to the Company’s 2018 Convertible Promissory Notes.

    For the nine months ended September 30, 2020, other non-operating costs (income) include net remeasurement losses of $20.8 million related to fair value adjustments of financial instruments held by the Company, primarily attributable to the redeemable convertible Series E preferred stock forward

    option contract liability. For the nine months ended September 30, 2019, other non-operating costs (income) include a $3.6 million remeasurement gain for the bifurcated derivative liability related to the Company’s 2018 Convertible Promissory Notes.

  2. This represents an impairment charge of a lease deposit and prepayment in connection with a lease agreement related to our new corporate facilities in San Francisco.

Skillz Inc.

Supplemental Financial Information

(UNAUDITED)

(in millions, except ARPU)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2020

 

2019

 

2020

 

2019

 

Monthly active users (“MAUs)(1)

 

2.7

 

 

 

1.7

 

 

 

2.6

 

 

 

1.5

 

Average revenue per user (“ARPU”)(2)

$7.49

 

 

$6.07

 

 

$6.93

 

 

$6.55

 

Gross marketplace volume (“GMV”)(3)

$411

 

 

$234

 

 

$1,130

 

 

$627

 

  1. “Monthly Active Users” or “MAUs” means the number of end-users who entered into a paid or free contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
  2. “Average Revenue Per Monthly Active User” or “ARPU” means the average revenue in a given month divided by MAUs in that month, averaged over the period.
  3. “GMV” or “Gross Marketplace Volume” means the total entry fees paid by users for contests hosted on Skillz’s platform.

Source: Skillz Inc.


Contacts

For Skillz PR: skillz@icrinc.com
For Skillz IR: ir@skillz.com