Q1 2024 Skillz Inc Earnings Call
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Elliot: Good afternoon, all. I would like to welcome you all to the Skillz Incorporated 2024 first quarter results call. My name is Elliot, and I'll be your moderator for today's call. If you would like to submit a question during today's event, please press star followed by one on your telephone keypad. And I'd 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
Good afternoon all.
Like to welcome you all to skills to cooperate.
James Leahy: For first quarter results call My name is and I'll be your moderator for today's call.
Elliot: I would like to retrofit a question James today's event. Please press star followed by one on your telephone keypad.
Elliot: I would now like to pass the conference type show host, Jim Leahy from JC I ought to begin <unk>.
James Leahy: Jim. Please go ahead, good afternoon, and welcome to the skill 2024 first quarter earnings conference call on.
James Leahy: Good afternoon, and welcome to the Skillz 2024 First Quarter 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 preliminary unaudited first quarter results, which is available on the company's investor relations website.
James Leahy: On the call today are Andrew Paradise skills, cofounder, and CEO tasty checking co founder and CSO and Kitano Francesca CFO.
James Leahy: Afternoon skill issued its earnings release reporting preliminary unaudited first quarter results, which is available on the company's Investor Relations website.
James Leahy: The company is in the process of completing its unaudited interim financial statements and other disclosures for the fiscal quarter ended March 31st, 2024. Accordingly, we are announcing preliminary results for the first quarter, which are based on currently available information and are subject to revision as management completes its internal review. Our independent registered public accounting firm has not finalized its review of these preliminary financial results. In the event the company determines it will not file its quarterly report on Form 10-Q by the prescribed deadline, it will file an extension on Form 12-B-25 with the Securities and Exchange Commission. In addition, the company is still in the process of completing its financial statements and other disclosures for the fiscal year ending December 31, 2023. We were not able to file or form a 10-K during the requisite extension period.
James Leahy: The company is in the process of completing its unaudited interim financial statements and other disclosures for the fiscal quarter ended March 31, 2024 CT.
James Leahy: Accordingly, we are announcing preliminary results from the first quarter, which are based on currently available information and are subject to revision as management complete this internal review.
James Leahy: Our independent registered public accounting firm has not finalized its review of these preliminary financial results in the event the company determined that it will not file its quarterly report on Form 10-Q by the prescribed deadline that we'll file an extension on form <unk> 25, with the Securities and Exchange Commission.
James Leahy: In addition, the company is still in the process of completing its financial statements and other disclosures for the fiscal year ended December 31 2023.
James Leahy: We're not able to file our Form 10-K during the requisite extension period as a result, we previously announced we received a notice from the NYSE that the company was not in compliance with NYSE listing standards.
James Leahy: As a result, we previously announced we received a notice from NYSE that the company was not in compliance with NYSE listings. The company is working diligently to complete the necessary work to file the Form 10-K as soon as practicable and currently expects to file the Form 10-K within the six-month period granted by the NYSE notice, and intends to take all necessary steps to achieve compliance with applicable NYSE listing standards as soon as practicable.
James Leahy: The company is working diligently to complete the necessary work to file the Form 10-K as soon as practicable and currently expects to file the Form 10-K within the six month period granted by the NYSE and.
James Leahy: And then tends to take all necessary steps to achieve compliance with applicable NYSE listing standards as soon as practical.
James Leahy: Because the results for the quarter and last year are preliminary and still subject to review and audit by our independent registered public accounting firm, actual results may differ from these preliminary financial results and other financial information due to the completion of our internal procedures, final adjustments, and other developments that may arise between now and the time the results are finalized. Before I turn the call over to Andrew, please note that some of management's comments today will include forward-looking statements within the meeting and federal security clause.
James Leahy: Because our results for the quarter and last year are preliminary and subject to review and audit by our independent registered public accounting firm.
James Leahy: Actual results may differ from these preliminary financial results and other financial information due to the completion of our internal procedures final adjustments and other developments that may arise between now and the time the results are finalized.
James Leahy: 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 use of words, such as will expect should or other similar phrases are subject to numerous risks and uncertainties that could cause actual.
James Leahy: 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.
James Leahy: <unk> to differ materially from what we expect.
James Leahy: Therefore, you should exercise caution in interpreting and relying on them.
James Leahy: 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 conditions. During the call, management will discuss non-GET measures that it believes can be useful in evaluating the company's operating performance. However, these measures should not be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP.
James Leahy: 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.
James Leahy: During the call management will discuss non-GAAP measures, which it believes can be useful in evaluating the company's operating performance.
James Leahy: These measures should not be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP.
James Leahy: A reconciliation of these measures to the most directly comparable GAAP measures is available in the company's first quarter 2024 earnings release.
Andrew C. Paradise: The reconciliation of these measures to the most directly comparable gap measures is available in the company's first quarter 2024 earnings call. With that, I'll turn the call over to Andrew for some opening remarks, followed by Gaetano for a discussion of the company's financial performance before we open the call for questions. Before I review the progress we've made on our four strategic pillars, I want to share some comments on the significant strides we're making related to key litigation matters and our Fair Play initiative. As you know, our proprietary platform provides certainty that every player is fairly matched against another real player. That is the foundation of competition and a critical tenet of skill-based gaming.
James Leahy: With that I'll turn the call over to Andrew for some opening remarks, followed by <unk> for a discussion of the company's financial performance before we open the call for questions.
Andrew C. Paradise: Companies such as ABA Games, and we believe Papaya Gaming, do not follow ethical fairness practices and utilize bots to deceive players, often matching their consumers against bots instead of against real opponents. We previously reported that a jury awarded Skillz approximately $43 million in our patent infringement case against ABA Games. Subsequent to this jury award, Big Run Studios entered into a settlement agreement with AVA Games for a total of $80 million, which is almost twice the jury award.
Andrew: Before I review the progress we've made on our four strategic pillars I wanted to share some comments on the significant strides, we're making related to key litigation matters and our fair play initiative.
Andrew C. Paradise: As you know our proprietary platform to provide certainty that every player is fairly matched against another real player.
Andrew C. Paradise: That is the foundation of competition and a critical tenant skill based gaming.
Andrew C. Paradise: Unfortunately.
Andrew C. Paradise: Companies, such as <unk> games, and we believe for power gaming do not follow ethical fairness practices and utilized bots to see players.
Andrew C. Paradise: Often matching consumers against box instead of against real opponents.
Andrew C. Paradise: We previously reported that a jury awarded skills approximately $43 million in our patent infringement case against <unk> subsea.
Andrew C. Paradise: Subsequent to this jury award.
Andrew C. Paradise: Bigger in studios entered into a settlement agreement with EA games for a total of $80 million, which is almost twice the jury award.
Andrew C. Paradise: We received the first cash payment of $50 million for this settlement as of the end of April. Additionally, beginning next year, Skillz will receive $7.5 million in licensing royalty payments annually for four years. Let me be absolutely clear.
Andrew C. Paradise: Received the first cash payment of $50 million for the settlement as of the end of April.
Andrew C. Paradise: Beginning next year scales, we received $7 $5 million for licensing royalty payments annually for four years.
Andrew C. Paradise: Let me be absolutely clear.
Andrew C. Paradise: The settlement does not end our fight to eliminate bots that defraud consumers in our industry. The evidence that came out of the Avia Games trial shows what we believe is a willful pattern of deceit by Avia Games and its executives. ABA teams tried to mask the usage of bots in their internal documents by referring to them as cucumbers and guides. However, the evidence presented in court clearly showed the presence of bots in their code. In fact, the word bots and robots appeared thousands of times in ABIA's documents. More specifically, the evidence revealed different types of bots created to lure players in and keep them playing and paying. Sharp Robot
Andrew C. Paradise: The settlement does not end our fight to eliminate box that the fraud consumers in our industry.
Andrew C. Paradise: The evidence that came out of the Avi games trials shows what we believe is a willful pattern of deceit behaviour games and its executives.
Andrew C. Paradise: <unk> tried to match their usage of box and their internal documents by referring to them as cucumbers and guides.
Andrew C. Paradise: The evidence presented in court clearly showed that the presence of box in their code.
Andrew C. Paradise: In fact, the word box and robots appeared thousands of times and Avs documents.
Andrew C. Paradise: More specifically the evidence revealed different types of box created to lure players in and keep them playing and pain.
Andrew C. Paradise: Sharp robot.
Andrew C. Paradise: Comfort robot.
Andrew C. Paradise: Induction robot.
Andrew C. Paradise: And cash robot.
Andrew C. Paradise: Comfort Robot, induction robot, and CashRobot are just a few of the bot types 8D Games engineered and based on evidence to ensure the match outcome they desire. Evidence further indicates that the so-called shark robot is deployed to take a player's money when the player is winning too much. The Comfort Robot is used to give them a little win to keep them going if they were on a losing streak. The evidence presented at trial shows ABA Games employees knew what they were doing was wrong, internal emails highlighted, and I quote, "On a certain level, it can be said that bad money drives out good money, quote, and that, quote, the Skillz-listed company will not dare to use bots." End quote.
Andrew C. Paradise: Or just a few of the bot type idiot games engineered and based on evidence to ensure the match outcome they desired.
Andrew C. Paradise: Evidenced further indicate that the so called Sharq robot is deployed to take our players money when the players winning too much.
Andrew C. Paradise: Comfort robot is used to give them a little win to keep him telling me if they were on a losing streak.
Andrew C. Paradise: The evidence presented a trial shows EIA games employees knew what they were doing was wrong.
Andrew C. Paradise: Internal e-mails highlighted and I quote.
Andrew C. Paradise: Quote on a certain level it can be said that bad money drives out good money quote.
Andrew C. Paradise: And that quote the skills listed company will not dare to use box quote.
Andrew C. Paradise: And quote.
Andrew C. Paradise: No wonder their stock is down. Avia Games documents show that even the most senior members of Avia Games' finance team were unsure how to attribute revenue coming from these bots. We believe this evidence is damning, and is now part of the public record.
Andrew C. Paradise: No wonder that the stock is down.
Andrew C. Paradise: <unk>.
Andrew C. Paradise: AVX games documents show that even the most senior members of Avid's finance team, we're unsure how to attribute revenue coming from these bots.
Andrew C. Paradise: We believe this evidence is damning.
Andrew C. Paradise: And it's now part of the public record.
Andrew C. Paradise: But perhaps most concerning for our industry, as I address you today, is that Avia Games is still operating as normal in the app stores. They are still using bots right now to take consumers' hard-earned money. AP Games is not the only company we understand is using bots in this way, which is why we will do everything in our power to help stop these dishonest practices. While our settlement is in the interest of our shareholders, the $80 million is just a drop in the bucket in comparison to the magnitude of the fraud we believe is being perpetrated on American consumers daily. Winning this first case was a big milestone for me.
Andrew C. Paradise: But perhaps most concerning for our industry as I address you today as the EBIT teams is still operating as normal in the App stores. They are still using box. This very second to take consumers harder than money.
Andrew C. Paradise: If the game is not the only company we understand is using Boston This way, which is why we will do everything in our power to help stop these dishonest practices.
Andrew C. Paradise: While our supplement is in the interest of our shareholders. The $80 million is just a drop in the bucket in comparison to the magnitude of the fraud. We believe is being perpetrated on American consumers daily.
Speaker Change: What do you mean, its first case was a big milestone.
Andrew C. Paradise: But we're far from done in our fight to uphold fair play and protect consumers from what we believe is fraudulent inducement, misrepresentation, and the outright theft of billions of hard-earned dollars. We're 100% committed to this effort and believe that, in addition to the trial verdict already won and subsequent settlement, We will prevail in similar circumstances in the future while at the same time eliminating bad actors from the gaming industry. In addition to Avia Games, we're in the early stages of the lawsuit we filed in March against Papaya, alleging fraudulent use of bots. We also note that class action lawsuits have already been filed against AVGames and Papaya.
Andrew C. Paradise: But we're far from done in our fight to uphold fair play and protect consumers from what we believe is fraudulent inducement misrepresentation and the outright theft of billions of harder in dollars.
Andrew C. Paradise: We're 100% committed to this effort and believed in addition to the trial verdict already won and subsequent settlement.
Andrew C. Paradise: We will prevail in similar circumstances in the future while at the same time, eliminating bad actors from the gaming industry.
Andrew C. Paradise: In addition to Aviate games, we're in the early stages of the lawsuit we filed in March against the pie alleging fraudulent use of box.
Andrew C. Paradise: We also note the class action lawsuits have already been filed against <unk> games and PAPAYA.
Andrew C. Paradise: We're hopeful that government authorities, if they're listening out there, will take note of Skillz's progress in identifying fraudulent use of bots in this industry and take action to protect consumers. As we uncover proof of fraudulent use of bots at any company in this industry, we intend to initiate additional actions to help protect both our company, our industry, and our consumers. Our goal isn't to reduce competition, but rather to ensure a level playing field where all companies in our industry maintain the same level of commitment to providing a transparent and fair player experience. We will continue to combat the deceptive usage of bots until systemic fraud in our industry is eliminated.
Andrew C. Paradise: We're hopeful that the government authorities, if theyre listening out there we'll.
Andrew C. Paradise: We'll take note skills progress identifying fraudulent use of box in this industry and take action to protect consumers.
Andrew C. Paradise: I think I'll cover proof of fraudulent use of Boston any company in this industry, we intend to initiate additional actions to help protect both our company our industry and our consumers.
Andrew C. Paradise: Our goal has been to reduce competition, but rather to ensure a level playing field, where all the companies in our industry and maintain the same level of commitment to providing a transparent and fair player experience.
Andrew C. Paradise: Skills will continue to come back the deceptive usage of box until systemic fraud in our industry is eliminated.
Andrew C. Paradise: Creating a fairer future in gaming is good for consumers, our industry, as well as for Skillz. Since we're the leading company that doesn't engage in consumer bot fraud, we anticipate the elimination of this practice will dramatically change LTV to CAC to our benefit, which would greatly accelerate the turnaround of our business. It's also important to note that our expectations for achieving positive adjusted EBITDA by late this year are not contingent on our legal activity.
Andrew C. Paradise: Creating a tariff future in gaming is good for consumers.
Andrew C. Paradise: Our industry as well as for skills.
Andrew C. Paradise: Since we're the leading company that doesn't engage in consumer bought fraud, we anticipate the elimination of this practice will dramatically change LTV to CAC card benefit, which will greatly accelerate the turnaround of our business.
Andrew C. Paradise: It's also important to note that our expectations for achieving positive adjusted EBITDA by late this year are not contingent on our legal activities.
Andrew C. Paradise: Our path to achieving this goal is in our control and will be determined by the success of our turnaround initiative. Turning now to the business performance in Q1, progress continues to be made on our four key pillars for returning skills to consistent top-line growth and positive adjustability to DA, enhancing our platform to improve customer and developer engagement retention, and upleveling the organization.
Andrew C. Paradise: Our path to achieving this goal is in our control and it will be determined by the success of our turnaround initiatives.
Andrew C. Paradise: Turning now to the business performance in Q1.
Andrew C. Paradise: Progress continues to be made on our four key pillars for returning skills to consistent top line growth and positive adjusted EBITDA.
Andrew C. Paradise: Enhancing our platform to improve customer and developer engagement retention.
Andrew C. Paradise: Leveling the organization.
Andrew C. Paradise: Go-To-Market Initiative, and Positioning Skills for a Path to Profitability. With that said, we have some near-term challenges in Q1, which masks some of the progress. We know that progress on our turnaround initiatives will take time, and it won't always be linear every quarter, particularly in a period such as Q1, where we implemented several initiatives. That said, our ability to make further progress in improving retention, engagement, monetization, and increasing our audience was not optimized in Q1.
Andrew C. Paradise: Go to market initiatives and positioning skills for our path to profitability.
Andrew C. Paradise: With that said, we had some near term challenges in Q1, which masked some of the progress.
Andrew C. Paradise: We know the progress on our turnaround initiatives will take time and it won't always be linear every quarter, particularly in appearance such as Q1, where we implemented several new initiatives.
Andrew C. Paradise: That said our ability to make further progress in improving retention engagement monetization and increasing our audience was not optimized in Q1.
Andrew C. Paradise: This is evident in our paying users for the quarter, with paying now declining to $121,000 in Q1 2024 from $137,000 in Q4 2023. Well, this rate of sequential decline is significantly less than the sequential rate of decline from Q3 2023 to Q4 2023. We expected to perform better than we did.
Andrew C. Paradise: This is evident in our paying users for the quarter with paying now declining to 121000 in Q1 2024 from 137000 in Q4 2023.
Andrew C. Paradise: While this rate of sequential decline is significantly less than the sequential rate of decline from Q3 2023 to Q4 of 2023, we expect it to perform better than we did.
Andrew C. Paradise: In Q1, we saw issues with new customer onboarding, and while we quickly took several actions, these actions did not fix the onboarding issues enough to benefit our performance in Q1. We continue to address new player onboarding issues and believe that as of late April, we've implemented the necessary changes to improve onboarding of new customers and get us back on track to execute our improvement initiatives. While our fixes to onboarding issues are still in the early stages, the data we have so far indicates our audience decline has slowed. At this time, we do not believe the onboarding issues and our execution in Q1 will stop Skillz from being adjusted to EVA.Positive in Q4 2024.
Andrew C. Paradise: In Q1, we saw issues with new customer Onboarding and while we quickly took several actions. These actions did not fix the onboarding issues not benefit our performance in Q1.
Andrew C. Paradise: We continue to address new player Onboarding issues and believe that as of late April we've implemented the necessary changes to improve onboarding of new customers and get us back on track to execute on our improvement initiatives.
Andrew C. Paradise: While our fixes the onboarding issues are still in the early stages. The data we have so far indicates our audience decline slowed.
Andrew C. Paradise: At this time, we do not believe the onboarding issues and our execution in Q1 will stop skills from being adjusted EBITDA positive in Q4 2024.
Andrew C. Paradise: At the same time, we continue to do a good job with expense management, with Q1 2024 OPEX in line with Q4 2023, excluding Q4 one-time accrual reversal, and adjusted EBITDA loss again improved on a year-over-year basis. Our focus remains on optimizing CAC and growing LTB, and when we feel we're at the right levels for those metrics, our intent is to refocus In Q1, we're trending towards a six-month payback period on our user acquisition spend. We achieved this through both reducing user acquisition spend while also being focused on spending in the best channel.
Andrew C. Paradise: At the same time, we continue to do a good job with expense management with Q1 2024 Opex in line with Q4 2023, excluding Q4 onetime accrual reversals.
Andrew C. Paradise: Our adjusted EBITDA loss again improved on a year over year basis.
Andrew C. Paradise: Our focus remains on optimizing CAC and growing LTV and when we feel we're at the right levels for those metrics our intent is to refocus on scaling traffic.
Andrew C. Paradise: In Q1, we're trending towards six month payback period on our user acquisition spend.
Andrew C. Paradise: We achieved this through both reducing user acquisition spend while also being focused on spending and the best channels.
Andrew C. Paradise: We're beginning to focus on scaling in the areas, where we see good returns.
Andrew C. Paradise: We're beginning to focus on scaling in areas where we see good returns. As we execute our turnaround initiatives, we continue to believe our unique platform can generate significant returns for our shareholders. With that baseline of expectations, as I think about the first of our four key pillars, enhancing our platform to improve customer and developer engagement and retention, the first quarter reflected some ongoing progress despite our uneven execution. A key initiative for this is the new product pipeline we have in place.
Andrew C. Paradise: As we execute on our turnaround initiatives. We continue to believe our unique platform can generate significant returns for our shareholders.
Andrew C. Paradise: With that baseline of expectations as they think about the first of our four key pillars enhancing our platform to improve customer developer engagement and retention the first quarter reflected some ongoing progress despite our uneven execution Ikea.
Andrew C. Paradise: A key initiative for this new product pipeline, we have in place.
Andrew C. Paradise: New updates or features introduced since our 4Q call include Instant Match, which we introduced in Q4 and which we continue to refine to improve performance, including by encouraging players to play in match templates once you're hired. In addition, at GDC, we previewed an exciting new feature which received a strong response, Live Bracket. We believe Live Brackets, which is planned to launch on our games later this year, will be a great retention engagement vehicle to help drive new players to the platform.
Andrew C. Paradise: New updates or features introduced sensor for acute call include instant match, which we introduced in Q4 in which we continue to refine to improve performance, including by encouraging players to play in matched countless once your higher.
Andrew C. Paradise: In addition at GTC, we previewed an exciting new feature which received a strong response live brackets.
Andrew C. Paradise: We believe live brackets, which is planned for launch on our gains later this year will be a great retention engagement vehicle to help drive new players to the platform.
Andrew C. Paradise: We also continue to refine single sign-on, which is improving the early user experience. As we look over the balance of 2024, we intend to build on the momentum in our pipeline of new features. Our best and most active players are our VIPs, and we continue to focus on improving their experience.
Andrew C. Paradise: We also continued to refine single sign on which is improving the early user experience.
Andrew C. Paradise: As you look over the balance of 2024, we intend to build on the momentum and our pipeline of new features.
Andrew C. Paradise: Our best and most active players our Vips and we continue to focus on improving their experience in Q1, we introduced VIP exclusive cash events on two of our most popular games with encouraging participation and we will continue to host these events going forward.
Andrew C. Paradise: In Q1, we introduced VIP-exclusive cash events on two of our most popular games with encouraging participation, and we'll continue to host these events going forward. Overall, our VIP programming initiatives help maintain the revenue of these players from Q4 to Q1, also driving an increase in GLP-AI. We also continued to enhance our LiveOps capabilities, which allowed us to look at trends in real time and initiate offers to drive engagement and monetization. We expect this will be particularly beneficial to our VIP initiative, as a second pillar, of upleveling the organization.
Andrew C. Paradise: Overall, our VIP programming initiatives helped maintain revenue of these players from Q4 to Q1 also driving an increase in <unk>.
Andrew C. Paradise: We also continued to enhance our live ops capabilities, which allowed us to look at trends in real time and initiated offers to drive engagement and monetization.
Andrew C. Paradise: We expect this will be particularly beneficial to our VIP initiatives.
Andrew C. Paradise: For our second pillar up leveling of the organization.
Andrew C. Paradise: In Q1, we continued to optimize our product development, marketing, data, and analyst resources. And, as we discussed in our Q4 call, we strengthened our finance team with the addition of our new CFO, a new controller, and a new head of FP&A. The move into our new Las Vegas headquarters in January continues to foster a greater level of collaboration, accountability, and idea generation. Across the board, I can sense a greater sense of optimism from our team for the goals we want to achieve in the near and long term.
Andrew C. Paradise: In Q1, we continued to optimize our product development marketing data and analytics resources and as we discussed on our Q4 call. We've strengthened our finance team with the addition of our new CFO, a new controller and a new head of that PMA.
Andrew C. Paradise: The move into our new Las Vegas headquarters in January continues to foster a greater level of collaboration accountability and idea generation.
Andrew C. Paradise: Across the board I can sense, a greater sense of optimism from our team for the goals, we want to achieve in the near and long term.
Andrew C. Paradise: Reflecting the benefits of the culture and collaboration we've established by being together in one location, will continue to reduce our reliance and expense on third-party contractors and a remote workforce without work being absorbed by our Las Vegas and Bangalore based teams. Moving on to our third pillar, our go-to mark, U.S. spend in Q1 was consistent with Q4 levels and remains at our lowest level since 2018 and fairly stable approaching a six-month payback.
Andrew C. Paradise: Reflecting the benefits of the culture and collaboration we've established by being together in one location. We will continue to reduce our reliance on expensive third party contractors and remote workforce without work being absorbed by our Las Vegas, and Bangalore based teams.
Andrew C. Paradise: Moving on to our third pillar our go to market.
Andrew C. Paradise: UA spend in Q1 was consistent with Q4 levels and remains at our lowest level since 2018 and fairly stable approaching a six month payback.
Andrew C. Paradise: In Q2, our focus will turn towards scaling spend to facilitate growth as we continue to focus on optimizing UA spend. We continue to spend through ARCE, which provides us with better pricing, pricing transparency, and keeps the margin within the Skillz family. Going forward, we'll continue to focus on spending in the areas that work well for us to drive profitable growth while maintaining our financial discipline on UASpan. We're continuing to focus on incubating games that are difficult for companies engaging in bot fraud to replicate and to deliver a payback period within our return timeline.
Andrew C. Paradise: In Q2, our focus will turn towards scaling spend to facilitate growth as we continue to focus on optimizing UA spend.
Andrew C. Paradise: We continue to spend through <unk>, which provides us with better pricing pricing transparency and keeps the margin within the skills family.
Andrew C. Paradise: Going forward, we will continue to focus on spending in the areas that worked well for us to drive profitable growth, while maintaining our financial discipline on UA spend.
Andrew C. Paradise: We're continuing to focus on incubating games, they are difficult for companies engaging impart fraud to replicate and.
Andrew C. Paradise: To deliver a payback period within our return timeline.
Andrew C. Paradise: The revised share agreements we've discussed previously will continue to open up new opportunities in this area, and we're beginning to seed developers to build games for specific high-value, in-demand genres. We will complement these actions with prioritizing investment user acquisition to scale the user base. Finally, I'll talk a little bit about our fourth pillar, which is demonstrating a clear path to profitability. Despite the onboarding issues I highlighted earlier that impacted Q1 performance, I'm still encouraged by the progress we've achieved to become profitable.
Andrew C. Paradise: The revised share agreements. We've discussed previously we'll continue to open up new opportunities in this area and we are beginning to see developers to build games for specific high value in demand genre.
Andrew C. Paradise: We will complement these actions with prioritizing investment in user acquisition scaled user base.
Andrew C. Paradise: Finally, I'll talk a little bit about our fourth pillar, which is demonstrating a clear path to profitability.
Andrew C. Paradise: Despite the onboarding issues I highlighted earlier, the impacted Q1 performance I'm still encouraged by the progress we've achieved it become profitable we remain optimistic that we're on pace to achieve our goal of generating positive adjusted EBITDA on a run rate basis in Q4 of this year.
Andrew C. Paradise: We remain optimistic that we're on pace to achieve our goal of generating positive adjusted EBITDA on a run rate basis in Q4 this year. Our adjusted EBITDA loss was negative $18 million in Q1 2024, and excluding legal expenses related to lawsuits, adjusted EBITDA was negative $14 million. This compares to negative $21 million in Q1 2023. Operating cash flow in Q1 was negative $4 million. Excluding the increase in accounts payable in Q1, our operating cash flow was negative $14 million, in line with adjusted EBITDA. We ended Q1 with cash and cash equivalents of $301 million. The cash balance as of the end of Q1 does not include the $50 million received in April from ABIA.
Andrew C. Paradise: Our adjusted EBITDA loss was negative $18 million in Q1, 2024, and excluding legal expenses related to lawsuits adjusted EBITDA was negative $14 million.
Andrew C. Paradise: This compares to negative $21 million in Q1 2023.
Andrew C. Paradise: Operating cash flow in Q1 was negative $4 million.
Andrew C. Paradise: Excluding the increasingly accounts payable in Q1, our operating cash flow was negative $14 million in line with adjusted EBITDA.
Andrew C. Paradise: We ended Q1 with cash and cash equivalents of $301 million in cash balance as of the end of Q1 does not include the $50 million received in April from Abi.
Andrew C. Paradise: Given this cash position, our continued improvements, and our monthly operating cash burn, we have a significant runway to return our business to sustainable, profitable growth. I want to reiterate something I highlighted on our Q4 call and that, in our view, our current valuation gives no weight to the value of our operating platform, the progress we've made to date on our turnaround plan, and our trajectory to generate a positive adjusted EBITDA run rate by late this year.
Andrew C. Paradise: Kevin This cash position and our continued improvements in our monthly operating cash burn significant runway to return our business to sustainable profitable growth.
Andrew C. Paradise: I want to reiterate something I highlighted on our Q4 call and then in our view our current valuation gives no weight to the value of our operating platform. The progress we've made to date on our turnaround plan and our trajectory to generate a positive adjusted EBITDA run rate by late this year.
Andrew C. Paradise: In closing, even with the new customer onboarding setback in Q1, we remain cautiously optimistic that our actions undertaken to date are positioning us to return to profitable growth. We know that we still have significant work ahead of us, but we're confident that we're on the right path with the execution against our four strategic pillars. And with that, I'll turn it over to Gaetano. Thank you, Andrew. And good afternoon, everyone.
Andrew C. Paradise: In closing, even with the new customer Onboarding setback in Q1, we remain cautiously optimistic that our actions undertaken to date are positioning us to return to profitable growth.
Gaetano: We know that we still have significant work ahead of us, but we're confident that we're on the right path with the execution against our four strategic pillars.
Gaetano: And with that I'll turn it over to <unk>.
Gaetano Franceschi: First quarter revenue was $25 million, down 43% year over year and down 19% sequentially. Our paid user conversion rate, which is paying now divided by mile, was 14% in Q1, slightly down from 15% in Q4 due to continued focus in the quarter on new user onboarding. As Andrew indicated, we're confident in our ability to continue to maintain our current payback period and begin to invest to grow sequentially.
Gaetano: Thank you Andrew and good afternoon, everyone first quarter revenue was $25 million down 43% year over year and down 19% sequentially. Our paid user conversion rate, which is paying now divided by MAU was 14% in Q1 slightly down from 15% in Q4 due to continued focus in the quarter on new user Onboarding as Andrew indicated.
Gaetano Franceschi: We're confident in our ability to continue to maintain our current payback period and began to invest to grow sequentially.
Gaetano Franceschi: Turning to OPEX, research and development expense was $5 million, down 48% year-over-year. On a gap basis, R&D was 18% of Q1 revenue. Sales and marketing expense was $21 million, down 40% year-over-year, including $2 million of stock-based compensation. On a gap basis, sales and marketing was 83% of Q1 revenue compared to 79% in the year-ago quarter and 75% in Q4. Q1 UA marketing was $5.6 million, a decrease of 33% from Q1 of last year and a 3% decrease quarter over quarter, while Q1 engagement marketing was $8.9 million, down 50% from Q1 of last year and down 34% from Q4.
Gaetano Franceschi: Turning to Opex research and development expense was $5 million down 48% year over year on a GAAP basis, R&D was 18% of Q1 revenue.
Gaetano Franceschi: Sales and marketing expense was $21 million down 40% year over year, including $2 million of stock based compensation.
Gaetano Franceschi: On a GAAP basis sales and marketing was 83% of Q1 revenue compared to 79% in the year ago quarter and 75% in Q4.
Gaetano Franceschi: Q1, UA marketing was $5 6 million a decrease of 33% from Q1 of last year, and a 3% decrease quarter over quarter.
Gaetano Franceschi: While Q1 engagement marketing was $8 9 million down 50% from Q1 of last year and down 34% from Q4.
Gaetano Franceschi: General and Administrative Expense was $23 million, down $5 million, or 18% year-over-year, inclusive of $6.6 million in stock-based compensation. On a gap basis, G&A was 91% of Q1 revenue. The net loss of $27 million compares to a net loss of $36 million in Q1 2023. The adjusted EBITDA loss in the first quarter was $18 million, a 15% improvement year-over-year. The adjusted EBITDA margin was negative 70% in Q1 2024 compared to negative 47% in Q1 2023.
Gaetano Franceschi: General and administrative expense was $23 million down $5 million or 18% year over year inclusive of $6 6 million in stock based compensation on a GAAP basis, DNA was 91% of Q1 revenue.
Gaetano Franceschi: The net loss of $27 million compares to a net loss of $36 million in Q1 2023 the.
Gaetano Franceschi: The adjusted EBITDA loss in the first quarter was $18 million, a 15% improvement year over year.
Gaetano Franceschi: Adjusted EBITDA margin was negative 70% in Q1 2024 compared to negative 47% in Q1 2023, we continue to expect 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 do.
Gaetano Franceschi: We continue to expect 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 year-over-year given the reduction in outstanding debt. We ended the first quarter with $301 million in cash, comprised of $291 million in cash and cash equivalents and $10 million in restricted cash. However, as Andrew noted earlier, this does not include the $50 million received from AVIA at the end of April.
Gaetano Franceschi: <unk> year over year, given the reduction in outstanding debt.
Gaetano Franceschi: We ended the first quarter with $301 million of cash comprised of $291 million in cash and cash equivalents and $10 million in restricted cash.
Gaetano Franceschi: Andrew noted earlier. This does not include the $50 million received from maybe at the end of April at the end of Q1, we had $129 7 million of total outstanding debt with our improving cash burn we have the flexibility to deploy capital to enhance shareholder value.
Gaetano Franceschi: At the end of Q1, we had $129.7 million of total outstanding debt. With our improving cash burn, we have the flexibility to deploy capital to enhance shareholder value. At this time, we'll turn the call over to the operator for the Q&A session. Thank you. If you would like to ask a question, please press 1.
Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.
Gaetano Franceschi: At this time I will turn the call to the operator for the Q&A session.
Operator: Thank you.
Operator: Wanted to ask a question. Please press star followed by one on your telephone keypad.
Operator: If you would like to withdraw your question. Please press star followed by check when.
Operator: When preparing to ask a question. Please ensure your device and mute locally.
Operator: Ladies and gentlemen, this concludes our Q&A and today's conference call.
Operator: Thank you for your participation you may now disconnect your lines.
Operator: [music].