Skillz Announces Third Quarter and Nine Months Year to Date 2020 Financial Results

 – 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

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.

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