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. Andrew?

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 org; 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 fraud players of their hard-earned money. And 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 to 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 to fraud of consumers of more than $1 billion. Last week, we initiated a lawsuit against Papaya Gaming in regards to 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…

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 OpEx. 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. [Audit Starts] 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. 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 cost 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.

[Operator Instructions] And for our first question today, we will go for the line of Clark Lampen of BTIG. Clark, your line is now 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 the 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.

Thanks, Clark. Great question. So maybe -- sorry -- anyways -- thank you, Clark. Those are great question. So maybe I'll just recap for everyone on the call. First question is thinking about our losses and what the guardrails are for improvements. And the second question is really thinking about how important it's fair play overall to getting to cash flow positive. Gaetano, do you want to first hit the EBITDA losses and then I can talk a little bit about fair play?

Yes, sure. Thanks, Clark, for the question. The way we're kind of thinking about this is that, for us, the growth is going to come through sequential user growth as well as continued retention and monetization improvements through launches in our platform. We have a large slate of activities that we want to do to improve the platform, improve our unit economics now that we've kind of flattened -- we think we've kind of flattened on our audience. We don't have large plans for -- go ahead -- sorry go ahead, Andrew.

Sorry, we're not in the same room. Maybe I can chime in. And I think one of the things, Clark, that we're really -- we've been talking about for several quarters is getting our paybacks down to six months, which would be probably about 2 to 3x better than the industry average of 12 to 18 months. So we've been cutting user acquisition. We've been focusing on really getting very efficient in all of our digital marketing. And we're approaching that 6-month level now in Q1. So regardless of whether or not we can change the boding [ph] practices throughout the industry. That's something we can control and something that we're working on. So we don't need fair play to drive profitability, and we don't need to stop bots to get to our goal of cash flow positive this year and to grow our revenue from here out. It certainly would be a very helpful tailwind to the business overall. And I'd say even beyond that, the things that are going on with companies like Avia, it's not just business related, it's also potentially criminal. These are companies where they're marketing to players that they're running a similar service to Skillz a multiplayer competition system where the people that are actually paying these companies when they go to play, they're -- instead of playing real people, they're playing against bots. And Avia, for example, it's already been publicly announced that they've received a federal grand jury subpoena. They are also in a cloud action lawsuit now that's been filed. And it's also, I think, out there, we filed in the last two weeks against the Popeye Games for their fraudulent use of bots. We are -- as the inventors of the space, it's one of these things that I really…

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.

Well 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.