Good afternoon, all. I would like to welcome you all to the Skillz Inc. 2023 Fourth Quarter Results Call. My name is Harry, and I'll be your moderator for today's call. I would now like to pass the conference over to your host, Jim Leahy, from JCIR to begin. So Jim, please go ahead.

Good afternoon, and welcome to the Skillz 2023 Fourth Quarter and Full Year Earnings Conference Call. On the call today are Andrew Paradise, Skillz' Co-Founder and CEO; Casey Chafkin, Co-Founder and CSO; and Gaetano Franceschi, CFO. This afternoon, Skillz issued its earnings release reporting the preliminary unaudited fourth quarter and year ended December 31, 2023, results, which is available on the company's Investor Relations website. The company is in the process of completing its financial statements and other disclosures for the fiscal year ended December 31, 2023. As a result, the company will file an extension for the filing of our annual report on Form 10-K for the year ended December 31, 2023. Accordingly, the company is announcing preliminary results for the year, which are based on currently available information and are subject to revision as management completes its internal review. The company's independent registered public accounting firm has not finalized its review of these preliminary financial results or its audit of the financial statements for the year ended December 31, 2023. Actual results may differ from these preliminary financial results and other financial information due to the completion of our internal procedures, the audit of the company's financial statements, final adjustments and other developments that may arise between now and the time the results are finalized. Further disclosure is included in the Form 12b-25 filed with the SEC. The company expects to file its annual report on Form 10-K for the year ended December 31, 2023, by March 29, 2024. Before I turn the call over to Andrew, please note that some of management's comments today will include forward-looking statements within the meaning of 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 it believes 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 the company's fourth quarter 2023 earnings release. With that, I'll turn the call over to Andrew for some opening remarks, followed by Gaetano for a discussion of our financial performance before we open the call for questions.

Thank you, and good afternoon to everyone. Throughout the fourth quarter, we made further progress on the four strategic pillars we laid out last year that we expect will position Skillz to return to generate consistent top line growth and positive cash flow. These four pillars are: first, enhancing our platform to improve customer developer engagement and retention; second, up-leveling our organization; third, improving our go-to-market efficiency; and fourth, demonstrating a clear path to profitability. But before I review the progress we've made on our four strategic pillars, I want to revisit a key topic that we've discussed in our most recent calls, our fair play initiative. We're bringing attention to the disruptive use of bots to defraud players of their hard-earned money. It’s critical to ensure the long-term viability of our industry. We're standing firm on our commitment to eradicate unfair bots, as companies who deploy them are attacking the very essence of fair competition while eroding player trust. With our proprietary platform, every player has ensured fair matchups against real opponents of the same skill level. As part of our patent infringement lawsuit against AviaGames, we uncovered evidence indicating that AviaGames is committing consumer fraud through their deceptive use of bots, which means the games on their platform are rigged against the player. We know there are other companies acting in a similar manner and believe these companies' deceptive use of bots is defrauding consumers of more than $1 billion. Last week, we initiated a lawsuit against Papaya Gaming regarding the fraudulent use of bots. There's now a federal class action lawsuit brought by players against AviaGames related to its use of bots, and we anticipate more lawsuits like these being brought against our competitors for using bots to engage in fraud. It's important to note that these are not small companies. They engage with millions of players and billions of tournaments, and their games are now top ranked in the app stores. In highlighting this issue, we're not trying to reduce competition, but rather ensure that there's a level playing field where all industry players maintain the same level of commitment to fairness and to providing a transparent experience. Since we're the leading company that does not engage in bot fraud, we anticipate that the elimination of this practice would dramatically benefit our customer acquisition costs and lifetime value, which would greatly accelerate the turnaround of our business. As pioneers and leaders, it's our responsibility to lead the charge for a fair future while building trust of players at scale. I mentioned our patent infringement lawsuit against AviaGames. In that case, there's been a very positive development for Skillz. Recently, a jury awarded $42.9 million after finding that AviaGames willfully infringed on our patents. As the jury found, AviaGames acted willfully, our initial damages award may be enhanced to include treble damages and attorney's fees. In addition, there's important evidence introduced in that patent lawsuit, which will be useful in the prosecution of our copyright infringement and false advertising claims against AviaGames. We remain dedicated to fostering fair play across our industry. Along those lines, we continue to enhance our trust and safety teams. We also have an expanding portfolio of advertising content that promotes fair play while, at the same time, educating consumers. It's important to note that our expectation for achieving positive adjusted EBITDA by late this year is not contingent on the favorable outcome of the AviaGames lawsuit or on the eradication of bots by other industry players. Our path to achieving our goal of adjusted positive EBITDA is determined by the continuing success of the turnaround initiatives. So with that, let me turn back to our fourth quarter and first quarter-to-date progress and provide an update on our four pillars before turning over the call to our CFO, Gaetano, for a review of the financials. Improving retention and monetization, along with growing our audience, takes time. While we're making progress, we continue to see an impact on our near-term operating results. Our Q4 results reflect the continued lag in our traffic levels, including from our VITs, as paying monthly active users were 137,000 in Q4 compared to 168,000 in Q3. Importantly, we've significantly slowed the audience decline in January and February and are attracting a more stable audience in March. We believe we've reached a level from which we can grow our paying audience. We're also doing an increasingly better job on expense management as reflected in the 25% decline in operating expenses compared to both the year-ago period and Q3, and the continued improvement in our adjusted EBITDA loss. Our focus has been to improve our unit economics, which we believe we have achieved now in the early part of Q1, and we're now transitioning to growing our audience. We've been focusing on new future launches and improved retention engagement, proactively engaging our customers where they are on the platform in reactivating lapsed users as well as continuing to optimize customer acquisition costs to drive profitable growth. We're getting closer to this inflection point as we are approaching our goal of a 6-month payback, and we're beginning to transition our efforts towards scaling in areas where we see positive returns. A key focus in this regard is our VIP engagement. Our retention and reactivation efforts for this segment account for a large part of our profits. We built a unique platform, and as we prioritize potential engagement improvements alongside healthy user economics, we believe we can generate significant returns for all of our shareholders. Turning to the highlights of our first pillar, enhancing our platform to improve customer and developer engagement retention. Our product team is building on a new feature pipeline, and on our Q3 call, we highlighted the retention, engagement, virality, and monetization uplift generated by the introduction of daily challenges and progressive leads. In Q4, we introduced the Instant Match feature, which offers players immediate results on tournaments as they play via the instant match pop-up, and we're seeing the results in line with expectations. We also released account merge, which allows our players to consolidate multiple accounts across different apps in different games to merge all of their experiences. The purpose of this feature is really to offer a better player experience but also to reduce the number of player support requests. As we look over the balance of 2024, we expect our future lease momentum will continue. To date, in Q1, we've introduced several new features, and we expect to introduce several additional new features by the end of Q2. It's really exciting to see the platform launching meaningful new features for all of our players worldwide. An important part of our ownership to enhance our platform to improve customer engagement retention is our work to improve the experience of our best and most active players, our VIPs. The goal of this program is to increase VIP satisfaction and drive an increase in the number of weekly tournaments played by our VIPs. We're also focusing on reactivating prior VIPs by targeting those that have decreased their play on the platform. We continue to enhance our live operations capabilities, which allow us to look at trend data on the platform in real-time and initiate offers to drive retention and engagement. This should be particularly beneficial to our efforts to improve the VIP experience. Turning to our second pillar, up-leveling our workforce. In the past several months, we brought on several new product development management hires. We've also continued to expand our marketing team as well as our data and analytics resources. We've strengthened our finance team with the addition of Gaetano as our new CFO and the hiring of a new Controller and Head of FP&A. Our move to our new Las Vegas headquarters in late January has reduced our physical footprint and led to an improvement in collaboration, productivity, and accountability across the workforce. Moving on to our third pillar, our go-to-market strategy. We reduced user acquisition in Q4 from Q3, and user acquisition remains at its lowest level since 2018. The payback period for user acquisition in Q4 was sequentially better than prior quarters, and we exited February with a payback period that's approaching our stated goal of six months. As such, we're looking to transition our focus to spending to drive profitable growth while maintaining financial discipline on user acquisition spend. As part of this effort, we're now spending more through Aarki, which provides us with better pricing and better transparency, allowing us to maintain some margin within Skillz. Moreover, in Q4, we launched our highest number of playable games since Q2 of last year, which is also the highest since we started turning around our business. As we discussed in Q2 last year, we relaunched our developer revenue share agreement. This means we now share revenue based on entry fees as opposed to a percentage of profits, which is much easier for our developer partners to understand and monitor in real-time. With this change, we've seen developers, including several of our largest partners, introducing new games for the first time in quite a while; we see developers reengaging and growing the platform. There were over a dozen new games launched on the platform in Q4, and we expect 2 to 3 times that number of games to launch between Q1 and Q2 this year. New game development typically takes 6 to 18 months to develop and scale, so the return profile of these activities will be lagging, but it's absolutely necessary for the future of a healthy platform. Finally, before turning over the call to Gaetano for a review of our Q4 results, I’ll discuss our fourth pillar, which is demonstrating a clear path to profitability. Based on our Q4 performance and the trends to date in Q1, I'm encouraged by the progress we've achieved towards profitability. We remain optimistic that we're on pace to achieve our goal of generating positive adjusted EBITDA on a run rate basis by the end of this year. Our adjusted EBITDA loss continued to improve in Q4 to negative $12 million from negative $18 million in Q3 on $7 million lower revenue. Excluding legal fees for the AviaGames lawsuit, our adjusted EBITDA loss in the quarter was $8 million. In Q4, we continued to improve our cash management as our operating cash burn was negative $12 million compared to negative $18 million in Q3. Given our net cash position of approximately $178 million and the quarter-over-quarter improvement of our operating cash flow, we have significant runway to return our business to sustainable and profitable growth. I also want to highlight that in our view, our current valuation does not appropriately reflect the progress we've made against our plan to improve the business, the trajectory we're on to generate a positive adjusted EBITDA run rate by late this year, and the value of our operating platform. As such, in the second half of last year, we were active in our $65 million share repurchase authorization. We still have over $50 million remaining in our share repurchase authorization program as of the end of December 31, 2023. In closing, while real progress is being made, I hope it's evident we still have a lot of work to do. The Skillz Board, management team, and the entire organization are firmly dedicated to successfully executing our four pillars and creating a strong foundation to create value for our shareholders. And with that, I'll turn it over to Gaetano.

Thank you, Andrew, and good afternoon, everyone. I'm pleased to be with you on the call today following my joining Skillz in early January, and I'm looking forward to speaking with you going forward. For the 2023 fourth quarter, revenue was $29 million, down 38% year-over-year and down 20% sequentially. Our paid user conversion rate, which is paying MAU divided by MAU, was 15% in Q4 and slightly down from 16% in Q3 due to our prioritizing the optimization of our platform over user acquisition in the prior quarter. As Andrew indicated, we are confident in our ability to continue to improve our payback period and begin to invest to grow sequentially. Turning to operating expenses, research and development expense was $3 million, down 54% year-over-year. On a GAAP basis, R&D was 12% of Q4 revenue. Sales and marketing expense was $23 million, down 28% year-over-year, including $2 million of stock-based compensation. On a GAAP basis, sales and marketing was 79% of Q4 revenue compared to 74% in the year-ago quarter and 88% in the prior quarter. General and administrative expense was $22 million, down slightly year-over-year, inclusive of $8 million in stock-based compensation. On a GAAP basis, G&A was 75% of Q4 revenue. Our net loss of $21 million, inclusive of a $3 million impairment charge on goodwill and long-lived assets, compares to a net loss of $144 million in Q4 2022, which included a $117 million impairment charge. Adjusted EBITDA loss in the fourth quarter was $12 million, a 34% improvement quarter-over-quarter. Adjusted EBITDA margin improved from negative 51% in Q3 to negative 42% in Q4. For the 2023 full year period, adjusted EBITDA loss of $70 million improved by $52 million from a loss of $122 million for 2022. Our cost structure will benefit this year from lower costs for items, including legal, audit, and insurance fees, as well as continued prudent management of our cost base. Additionally, interest expense will continue to decline given the reduction in outstanding debt. We ended the fourth quarter with $312 million of cash comprised of $302 million in cash and cash equivalents and $10 million in restricted cash. At the end of 2023, we had approximately $123 million of total outstanding debt. With our improving cash burn rate, we have the flexibility to deploy capital to enhance shareholder value. At this time, we'll turn the call to the operator for the Q&A session.

And for our first question today, we will now take Clark Lampen from BTIG. Clark, your line is open. Please go ahead.

Thanks for taking the questions. I've got two. Maybe first, Andrew. I'll ask for your help sort of bridging the gap on two fronts, and maybe Gaetano can chime in here. But as we think about a $12 million EBITDA loss this quarter tracking towards sort of a positive number a year from now. Can you help us with, I guess, sort of the high-level guardrails, is this going to be mostly revenue driven? Or is there a sort of cost reduction component here? And then as part of the sort of revenue improvements, how much does sort of what's going on with the fair play initiative really play into this? I understand that it’s important, but as you’re sort of working through things with Avia right now, are these sort of monetary penalties? Are you seeing the elimination of sort of harmful practices? Just curious how much that's going to sort of contribute here. Thank you.

Thank you, Clark. Those are great questions. Let me recap for everyone on the call. The first question is about our losses and the frameworks for improvements. The second question focuses on the significance of fair play in achieving cash flow positivity. Gaetano, would you like to start with the EBITDA losses, and then I can discuss fair play?

Yes, thanks, Clark, for the question. We believe our growth will come from sequential user growth along with ongoing improvements in retention and monetization through launches on our platform. We have a comprehensive plan to enhance the platform and our unit economics now that we feel we have stabilized our audience. We don't have significant plans at this moment. Sorry, go ahead, Andrew.

Sorry, we’re not in the same room. I appreciate the opportunity to speak. One of the key topics we've been discussing for several quarters is reducing our paybacks to six months, which would significantly outperform the industry average of 12 to 18 months. We’ve been working on reducing user acquisition costs and enhancing the efficiency of our digital marketing efforts. We’re approaching that six-month target now in Q1. Regardless of whether we can address botting practices across the industry, this is within our control, and we are actively working on it. We don’t need fair play to achieve profitability, nor do we need to eliminate bots to reach our goal of being cash flow positive this year while growing our revenue. That said, it would certainly provide a helpful boost to the business overall. Additionally, the issues emerging with companies like Avia are not solely business-related; they could involve criminal activities as well. These companies target players with services similar to Skillz's multiplayer competition system, where the players aren’t competing against real individuals but rather against bots. For instance, Avia has already faced a federal grand jury subpoena and is currently involved in a class action lawsuit. We have also initiated legal action against Papaya Games for their fraudulent use of bots. As pioneers in this field, these matters are always on my mind. During our IPO, we highlighted our data science efforts aimed at preventing cheating and fraud, ensuring fair play, and developing systems to facilitate player withdrawals of real money funds. Our offering includes a variety of real-world rewards, from T-shirts to jet skis and cars based on players' winnings. It’s much simpler when players aren’t earning through bots. If everyone is engaging with bots, and one of these companies is simply collecting payments, they don’t face the same issues regarding cheating, fraud, payment, and fulfillment that we do. I realize I’m being somewhat lengthy here, but it’s crucial to raise awareness around this. Informing every investor and potential investor about these happenings in the industry helps shape its future. To illustrate the scale of the issue, we estimate that bot-driven fraud has surpassed $1 billion in the U.S., which is quite substantial. This not only affects our player base but also inflates customer acquisition costs across the industry, as our products are often marketed to the same audience. It creates trust problems for players who feel defrauded and may find themselves involved in that ongoing class action lawsuit against one of these firms. Therefore, I can’t emphasize enough how significantly this situation is affecting the industry and the need for us to address over $1 billion in fraud that is growing.

Thank you.

And we have no further questions in the queue today, so I'd like to hand back to Andrew Paradise for any closing remarks.

I just want to thank everyone for joining us today. I know we have historically been fielding just analyst questions. We're going to start to engage much more deeply with our investor audience in the next few quarters as we finish our turnaround. I look forward very much to providing you with an update on our progress as we return Skillz to sustained and profitable growth, and we look forward to speaking with you again when we report our first quarter results. Until then, thank you.

This concludes today’s call. Thank you all for joining. You may now disconnect your lines.