Q3 2021 Motorsport Games Inc Earnings Call

Thank you operator on today's call are Dmitry, Costco Motor Sport game, Executive Chairman and Chief Executive Officer.

Stephen Hood, President and John <unk> Chief financial.

Officer.

By now everyone should have access to the Companys third quarter earnings press release.

Today after market close.

This is available on the Investor Relations section of Motor Sports games as web site.

At Www Dot motor sport games Dot com.

During the course of this call management may make forward looking statements within the meaning of the federal Securities laws.

These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.

As required by law the company undertakes no obligation to update any forward looking statements made on this call or to update or alter its forward looking statements, whether as a result of new information future events or otherwise.

Please refer to today's press release, and the company's filings with the SEC, including the company's most recent annual report on Form 10-K, and the Companys quarterly report on Form 10-Q for the period ended September 32021 for a detailed discussion of the risks that could cause actual results to.

Differ materially from those expressed or implied in any forward looking statements made today.

And today's conference call, we will refer to certain non-GAAP financial measures such as adjusted EBITDA as we discuss the third quarter of 2021 financial results.

Related to the recent launch of our <unk> 'twenty one type.

I am excited and humbled to say that NASCAR 'twenty. One admission was launched on October 28.

This was a significant milestone for our young company, particularly because this was the first title that was built on our proprietary motorsport games internal development platform, leveraging unreal engine and our factor technologies.

There has been a lot of excitement around NASCAR 'twenty one admission.

During the pre release period, we're experiencing technical glitches.

This is common whenever a new game launched on the new engine and I am pleased to report that due to the flexibility of our new motor Sport games engine and the hard work of the internal development team, we were able to release patch updates very quickly.

In fact for the Playstation and PC platform, we're able to get the patch out to users early in the morning also official October pointing it clearly in the U S and the Xbox users within 45 hours. After the U S released guests that have opened Nascars Martinsville race weekend, where the.

Game in fact was featured asset E NASCAR village for fans to play on site.

We think our community for your patience understanding and ongoing support.

The work is not over though and it is our commitment to continue to update the game patches as we learn more and implement feedback we are receiving.

The game is the newest installment in the officially licensed NASCAR gaming franchise and is available physically or digitally for Sony Playstation four Microsoft Xbox one and PC through this team's growth.

The console versions.

Free upgrade path for the Sony Playstation Pie.

And Microsoft Xbox Series X there.

With free downloadable upgrades available for those users.

This year seeing pumps complete with new update in addition, built upon the foundation of the previous iteration of our NASCAR driver.

About 21 admission and racing games in general.

We shared that passion and have been Katherine community feedback.

We're actively working on addressing this feedback received from our community and pull up to our necks legal at just slides soon.

Dressed quality of life and feature requests.

We are pleased to see all the passion of feedback pouring across all of our social channel in particularly we stay transparent with our community and and partners and most importantly showcase that we deliver on our promises and that will truly care.

Shortly after the launch an implementation of the patches for all platforms, we saw positive community Center Nintendo appreciation.

Building our gains for the future and we believe it's important for us to invest in our community.

The launch of NASCAR 41 admission to the example of a primary growth strategy, which is to create great racing games.

That we could scale by expanding our portfolio of brands and some multiple franchises with multiple game each paired with a dedicated esport offerings.

Starting with our National partnership we have specially announce we will be launching the first ever NASCAR title for Nintendo switch platform.

This is the first time, we are expanding put a nintendo switch.

And are excited to invite a whole new audience of gamers of fans.

Our fans have long way that put an intangible switch version of NASCAR and we're excited to give them affordable version.

All such came.

NASCAR, Keith Ultimate edition, plus foreign intend to switch a targeted to launch from November 19.

Orders currently lives across retail and digital stores.

Seven orders for this product.

Any exceeded our initials internal projections and we'll be ready to hit the shelves in time for this holiday season.

NASCAR to seek ultimate edition plus for Nintendo switch includes everything sound and NASCAR six Fargo interposition for console blood.

Plus the 2021, thus far.

Series cars rosters and primary pain.

Panic, IP and effective user engagement with our fans will help us get there.

We have officially launched the expanded <unk> 2021 'twenty two Lamont virtual series in the third quarter of 2021.

The first two rounds have been completed and sustained growth for the fan and we are anticipating a spectacular grand finale, again, 4% to 20 wrong Lamont virtual has a long and televised events from the 22 August 4th International show on January 15, 2016.

In 2022.

We're incredibly proud of the level of the participants from famous drivers World class teams manufacturers and partners.

We welcome Cross-match surpass our official hardware partner.

<unk> as our official timepiece button.

Total energy as artificial energy projects.

Goodyear as our official fire partner Leggett techniques as artificial engineering partner and our brand is our official blockchain partner for this 2021 22 Lamont peripheral tissue.

Official events like this continue to bring awareness to our product offering such as our <unk> two and the rest of the March 14th.

This year, we plan to announce more official annual esport events and leverage our community platform traction of RTG as it continues to grow in audience and engagement.

We continue to focus on developing and bringing new capabilities to our community through traction that will allow fans on France to compete against each other ranks amongst others and develop our virtual racing careers.

Lastly, I would like to formally welcome Peter Moore to our board of Directors. Peter is no stranger to the gaming industry and brings over 30 years of gaming or entertainment and consumer industry experience.

Formerly COO and of electronic Arts and ahead of Th Sports and currently serves as our senior Vice President and General manager of Sports and live entertainment at United Technologies.

We're excited to have him on board to give us the opportunity to leverage his career experience as we continue to grow from a single franchise company for multi franchise company in a racing game show.

Now Steven is going to say a few additional words about our product development.

Thank you.

Thank you Dmitry Hello, everyone.

I'm as Stephen Hood President.

Yes.

We are happy to bring Nasco 2200 patients you might expect on families now I would like to include Dmitry as comments.

Credibly proud of the work by the developer seats, we acknowledge that it remains certain folks that must be fixed.

The initial day, one second patches have already been incorporated into the game delivering over 300 improvements across all areas of the product.

I think she is unreal engine product to harness a more efficient product development pipeline, which will serve to level up.

Going forwards.

These are the familiar growth steps all software developers trade.

The difference is that we are doing at <unk>.

Faster rate typically found within organic game development.

We are progressing along that road map as expected.

As im tools and technologies unfolds, so Marcel QA testing.

Scaling from one project to multiple franchises requires additional expertise and as guardians of products stability and quality. It makes sense to ensure this department has the resources necessary to play a major part in improving our output going forwards.

Accommodating the growth of products is crucial to our ability to increase the number of product releases, while simultaneously increasing product quality.

With increasingly complex software products user generated content integrated services and the accretion of the motorsport focused ecosystem.

We're going to be testing at a much larger scale than ever before.

We are laser focused on where we are going and I believe more than ever that we have the right people technologies and tools to position ourselves in the front of the pack.

Now, let me hand over to John used to give a review of our third quarter financial results.

Thank you Steven.

My name is John Newland, Chief Financial Officer of Motorsport games.

Like to welcome you to the third quarter earnings call and I will now like to share our financial overview.

Third quarter and year to date September 30th.

Revenues were $2 1 million for the third quarter.

2021, compared to $9 million in the prior year period. The gap between comparisons is primarily attributable to releasing NASCAR heat five in the third quarter of 2020.

First is releasing NASCAR ignition 21 in the fourth quarter of 'twenty one.

Our revenues from NASCAR 'twenty, one ignition game sales will primarily be recognized in the fourth quarter of 2021 and into the first part of 2022.

This timing difference will come up again and again as we go through this conversation.

Net loss and net loss per share of class a common stock were $6 6 million.

Loss and $1 $2 million gain respectively for the three months ended September 32021 and 2020.

The three months ended September 30th 2021, as compared to an adjusted EBITDA gain a 3 million for the three months ended September 30th 2020.

For the nine months ended September 30th 2021, and 2020 total revenues were $6.9 million and 16.1 million respectively.

Again, you are seeing 9.2 million decrease in revenues driven by the timing of our NASCAR game releases I've discussed above for.

For the nine months ended September 30th 2021 revenues from our gaming check like decreased by $9.4 million, 57% to $6 7 million from 15.8 million for.

For the nine months ended September 30th 2020.

Net loss or income attributable to motor sport gauging was a loss of $26.2 million in income of zero point $9 million, respectively for the nine months ended September 30th 2021 and 2020.

Adjusted EBITDA loss was $12 million for the nine months ended September 30th 2021, as compared to an adjusted EBITDA gain of three 3 million for the nine months ended September 30th 2020.

Could you at this point when it comes to release in future games and I'm just wondering if.

Your experience with admission.

That has led to any.

Valuation of sort of the future launch cadence and how you're thinking about that and then I just have one more after that thanks.

Thank you Mike.

For that but I really appreciate is Dimitri I'll address the first question and then pass it on to Steven So as far as Ah refunds and those are concerns platforms like steam Playstation Xbox They do offer different methods of refunds.

And the estimated revenue Ah results for the preorders on launch date that we discussed on the call actually includes those refunds accounted for such period, so without a doubt there's some impact on our revenues how much specifically for the quarter will be hard to estimate at this moment, but.

From what we're seeing so far the buildup demand for the game is currently still putting US ahead of our loss NASCAR keep high release and those are the numbers that we were able to bring to you guys as soon as those estimates became available.

Within that expectation how much are you expecting to get it out of the sports in mobile.

Sort of like any high level comments about the waiting between your console games and those other two revenue streams.

Oh sure Michael So you're.

You're right too obviously assess the 13.6.

We are expecting in projecting internally that about two thirds of that will be related to the NASCAR 21 ignition.

The rest coming from the NASCAR keep the ultimate cost for switch, which was super excited about I N. R E sports and mobile will contribute to this overall number of but the main driver of this quarter revenue is obviously the release of the game.

Okay. Thanks, a lot and congrats again.

Okay.

Our next question Contra Franco ground Nathan D. Davidson. Please state your question.

Hi, everyone I Gotta, congratulations from the lunch cause it's getting assistance I can finally out there and making making waves in the in the news cycle.

And again, thanks for a couple of questions here.

So I guess for the next several patches for now subscribe to any one how do you feel or how do you think about the balance between irony.

Ignition and what type of things make it into what the future NASCAR 22 titles would be as we know NASCAR next year is upgrading to Nextgen cars, which is a very exciting content piece. So at the very minimum theres going to be a big differentiation in terms of.

The type of content.

Vehicles et cetera that are in the next version.

But having the product hands of many many fans now it is helping to influence and shape and help us make better decisions.

What communities really desiring between the two titles and NASCAR 'twenty two is already in development as you would expect.

Alright I appreciate it. Thanks. Thank you so much for like for the color here.

I guess.

You know that you have.

Between now and the end of the year and the search title, but I wanted to touch a little bit on the mobile opportunity.

I may have missed it but I'm not sure. If you mentioned any updates on the soft launch of the match three game for mobile and then if you could update me on.

What are your kind of initiative around NASCAR mobile device today.

Okay.

So if you can give me I can probably take that.

Yes, I think touching on the mobile piece.

Yes.

<unk> I think we've always maintained is a key part of the kind of future product portfolio move Spokane makes sense in my mind, it's kind of surprising given.

The change that we have to leverage the assets that we put into the console and PC products.

Technology trickle in the reuse of assets.

An advantage for us.

We can more readily kind of the scale the output to match the opportunities. He found with these other franchises. So we will get it right. The NASCAR and then I think we can scale further.

Ryan Thank you for that.

I don't imagine that as you know.

Start, adding IP portfolio it would be.

<unk> put our titles around this IP and it would just not be a NASCAR experience.

And then one very last one related to this.

Hey, Joe how are you planning on sticking with unity for for the next mobile titles are you, making to such unreal for whatever it is not in the pipeline yet.

Okay.

So the hemo box also remains on the unity and.

There is no need for us to kind of reinvent the wheel, where you don't want to do that during the lifetime of a product.

We do plan to do where appropriate is try to align the technologies.

We want to actually get away from from.

Having to worry about the technology. Our mission is really to build the entertainment experiences and reach as many people as possible.

The end use it never really cares about the <unk>, we do and I do as a developer, but really I would like to simplify the whole thing.

And that's one of the things that we've been working incredibly hard on for the last couple of years. So that we can align the tech across the different products and opportunities that we have so that we have.

One very experienced team that has now shipped product in NASCAR recognition, that's working together with our partners to deliver new title to NASCAR to the Nintendo switch platform and if we can start to align these products over time with the same technology base, probably moving away from the entity where it make.

Since to use on real which with.

Spearheading NASCAR ignition and other titles with that would make our lives that much easier and within the last two would it be more efficient and effective in the future, but we do do it where it makes sense and right now we are split somewhat.

Existing legacy mobile titles engine unity, but the future for us is firmly centered around unreal.

Alright, I appreciate it extremely helpful and congrats again.

Our next question comes from Mike Hickey from Benchmark Company. Please state your question.

Hey, Dmitry.

Johns team alone from broker congrats on here.

The launch just a couple of questions here with time.

With the trials in Canada.

It depends I was gonna say no no check out the latest patch. It address the you know the concerns you might have so it's great to see the passion of the community starting to get behind us and starting to recognize the fact that <unk> really truly do care of not just delivering them the product that they expect but.

Hoping that a little so community sent him and is starting to football.

Dmitri <unk> are you looking to.

Standard.

Influencer R U P. Two maybe a congestion marketing strategy obviously.

Holidays.

Stephen I can probably take that one.

<unk>.

Multiple questions. So my answer to that is yes.

These days in such complex products, you do work with internal and external.

Development QA partners made reference earlier to wanting to expand our internal capability because as we increase the number of franchises and active products that we're working on will we need to.

Increased those skill sets and head count slightly.

But.

We did have a worldwide team that works across the QA process testing the titles and that is that process. It doesn't just happen at the end of titles that happens for the duration and they do give a great sphere.

But the QA team.

Part of the overall team part of the machine launches a product and I think.

Most games today are very technically savvy, we live in a very connected world.

And.

Game is certainly expect any products even software in.

Challenge is always one of balance like what is the state of the opening product versus the.

[noise] timeliness of and frequency in the measure improvement that you can roll into software wants his life and in the hands of players and I think when it comes to improving that gap in the meta critic.

We are understandably bye bye <unk>.

Parties, including the community engagements directly compared to French.

Franchises that have a long history that in.

In case forgeries on one particular format is redo the showpiece for.

The Microsoft Xbox.

And that's great and that's a huge advantage for those guys and we don't have that we're going as wide as possible, because we making games for games and for racing fans and they can be on the P. C that can be on the Playstation of which there are now different formats on the Xbox of which there are different formats. It makes it inherently more complex.

But it's not a challenge that I want us to shy away from and.

And breaking the seal as such said earlier is is all important in terms of improving that product. So as long as we're able to keep stepping forwards.

What we're living through right now and what we're improving with NASCAR ignition with the help of the community and I think ultimately we will win the hearts and minds of games.

We are still the new Kid on the block.

There is a great deal of promise and NASCAR ignition and we're rapidly improving that product and I think people will recognize that and then each and every release not just.

Subsequent yearly sports releases, but the patches will improve the product and I think ultimately switched.

Switch not cast on the Metacritic school and there's no reason why we can't keep driving the op and.

Eventually compete against the Titans, though have the advantage of operating on just one platform.

Two milkshakes kovach price.

Thank you.

At this time, we have no further questions.

Would you like to give any closing remarks.

Sure I'll always will take the opportunity I just wanna. Thank again.

First of all the community right, which will ultimately our our fans and cool we're going after an animal.

Building in a call today during this secondly, obviously our team who's creating a showcasing his passion upgrading amazing and great racing games, I really want to make a dance and the racing genre altogether and pardon in no particular order obvious.

<unk> the the folks that are on this call and others that are backing us and believing in this vision. We are here for the long run we're putting something together that is really special we're proud of that foundation. We have released the title of our own build from scratch or what to.

<unk> by the components that were not put together before and were released it on the console for the masses that it's a foundation that we were looking for and something that gives us a great opportunity to build sort of skyscrapers on top.

That is not something we have before I'm really.

Excited and humbled by I came being able to change this and just really thankful for the community our internal team an investment group of seeing this through and continuing watching our progress. So thank you.

This concludes today's conference call. Thank you for attending.

The House has ended this call goodbye.