Skillz Inc.

Thank you for your patience, ladies and gentlemen. The Skills First Quarter 2023 conference call will begin shortly. Please remain on the line. Good afternoon. Welcome to SKIL's first quarter 2023 conference call. I will now turn the call over to Susan Swanson for opening remarks. Please go ahead.

Good afternoon, and welcome to the SKIL's first quarter earnings conference call. With me today are Andrew Paradise, SKIL's CEO, Casey Chapkin, CSO, and Jason Roswich, President and CFO. Note, our full financial results will be published tomorrow and will be available in our investor relations website. Before I turn the call over to Andrew, please note that some of our management's comments today will include forward-facing statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of 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 these companies' 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 we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation of these measures in the most directly comparable GAAP measures is available in our first quarter of 2020 free earnings release. With that, I'll turn the call over to Andrew for some brief opening remarks before we open the call for questions. Andrew?

Thank you, Susan, and to all of you for joining the call. In the first quarter, we continue to make progress on the four strategic pillars that we laid out last year while we continue to navigate difficult demand and macro environments. We're cautiously optimistic about the progress we're making and also want to be honest with our shareholders and ourselves that we're in the middle of tremendous change. and it'd be premature to say we're out of the woods. To briefly review the quarter before I turn the call to Jason, let me begin with the first pillar, enhancing our platform to improve customer and developer engagement and retention. Our product team continues to grow and mature, and we're seeing positive changes in terms of the rigor and discipline, and perhaps most importantly, our customer stickiness and engagement, as seen in our payback improvements. To this end, to name a few of the product initiatives we achieved over the quarter, we launched and scaled new limited time challenges, which have driven improvements in paying user behavior. We also launched a new play screen user interface, resulting in positive trends in pro tournaments engagement, as well as pro retention. For developers, we rolled out the Skills Discord server to enhance community support. We updated the SDK release process to provide greater clarity to all releases, including OTA. And we added site instrumentation to enhance usage insights inside of our developer console. This brings me to our second pillar, up-leveling our organization. We made a lot of progress in reshaping the organization to fuel growth and innovation. We're really excited to welcome Ellie Ryu, our new controller and global head of accounting, She's joining our staff and has already made a significant impact in upgrading our accounting team's talent. It has been challenging, to be sure, and in some cases, we've found that we don't have the right talent to get us through the hurdles ahead and back to the growth we believe we can achieve. In these cases, we're taking quick action to ensure the organization is not further taxed and that we can place the right people into the right roles. A majority of the skills employees that joined last fall are now fully up to speed, which is really exciting to report, and it's gratifying to see. As you'd expect, it's making a huge difference in the morale and productivity of our team. We're continuing to add more key hires and multiple experienced engineering directors to support our product initiatives, along with two new experienced board members, amongst others that I won't name now for the sake of brevity. We still have some hiring to do to round out our organization, but we're feeling good about the changes we've made and the future of the team. Third, let me talk about our pillar of improving our go-to-market. In the quarter, our payback period continued to improve and our user acquisition cost was the lowest it's been since 2020, reinforcing that our strategic focus is working. As such, we began scaling marketing. We are ensuring optimal ROI. and a continued improvement in payback. This improvement in payback has been significant over the last three quarters, and we have line of sight to get payback back to best in class of six months or less within the next three quarters. Having said that, PMAU, or Paying Monthly Active Users, continues to decline quarter over quarter, as we've reported. In terms of our developer community, Our team focused their energy in the first quarter on preparing for a transition to our new developer revenue share model. As planned, the new model launched at the beginning of May, and we'll provide more details during our second quarter earnings call about the impact of that on our business. We believe this is the first part of meaningful steps forward to building our relations with the developer community. That said, we're very excited about the opportunity for existing developers to increase their revenue share by driving more traffic to the platform. Last but not least, our fourth pillar, demonstrating a clear path to profitability. I'll let Jason talk more about our numbers, but we'll share that we continue to make progress here and intend to continue progressing through 2023. As we thoughtfully consider each and every investment with the goal of adjusted EBITDA positive by the end of 2024. As expected, our losses in the first quarter were greater than Q4. Historically, we've always increased spend in our business in Q1 over Q4. However, I do want to note two specific variances that we do not anticipate will occur in future quarters. Specifically, we spent $3.2 million on operational consulting services for turning around our business, and we spent $3 million for accounting advisory services in preparation of our 10-K filing. We anticipate being able to handle these functions in-house going forward. Finally, we recorded 2.8 million more for our bonus accruals in Q1 compared to Q4, as we didn't achieve our bonus targets for 2022. In short, there are many reasons to be cautiously optimistic within our company about what's happening. However, we need to acknowledge that there's still a lot of work ahead of us. We have to remain cautiously optimistic about our direction. to keep putting one foot in front of another as we make the changes that are necessary to drive the achievements we want to see in the future of our business. We're intensely focused on the four pillars that I've named, and we are committed to returning shareholder value over the long term. We'll continue to be transparent with you to build shareholder trust. And with that, I'll turn the call over to Jason to discuss our numbers.