Please ensure Javascript is enabled for purposes of website accessibility

Skillz to Acquire Ad-Tech Company Aarki in $150 Million Deal

By Jon Quast - Jun 2, 2021 at 8:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The deal should help the company attract more users and improve its cost structure.

Mobile gaming platform Skillz (SKLZ 7.34%) is acquiring Aarki, a demand-side advertising company, for $150 million. The deal was announced on Wednesday morning and was followed by a conference call with additional details. Skillz will pay 60% in cash, which equates to $90 million. The remaining 40% will be financed with roughly 4 million shares of Skillz stock. 

The acquisition is expected to close in the third quarter of 2021 and will add to Skillz's revenue. Management will soon release updated financial guidance to reflect this.

A young woman plays a mobile game on a bed.

Image source: Getty Images.

Aarki is expected to generate $30 million in revenue in 2021. So Skillz is acquiring the company at a reasonable forward price-to-sales multiple of five. But the company isn't acquiring Aarki simply because it's reasonably priced. Rather, it believes it can better serve game developers by improving its user-acquisition process. 

Skillz also believes the acquisition can improve its cost structure. The company has spent $164 million in user-acquisition marketing over the past four quarters. But many of its demand-side advertising partners have robust profit margins. By acquiring its own ad-tech company, Skillz hopes to cut out the middle party and make these marketing dollars stretch further.

Finally, Aarki has an international presence, which is something Skillz has set its sights on. For example, the company intends to launch its gaming platform in India before the end of this year. As of the first quarter of 2021, over 90% of Skillz's revenue was generated in the U.S., so it will lean on Aarki's experience internationally as it expands globally in coming years.

Jon Quast owns shares of Skillz Inc. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Skillz Inc. Stock Quote
Skillz Inc.
$1.90 (7.34%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.