Q1 2022 Motorsport Games Inc Earnings Call

May 16, 2022

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Greetings and welcome to Motor Sports Games incorporated first quarter 2022 earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press <unk>.

the presentation. Greetings and welcome to Motorsports Games Incorporated first quarter 2022 earnings call during the presentation. All participants will be in a listen only mode. Afterwards we will conduct a question and answer session. At that time. If you have

One followed by the poor on your telephone.

If at any time during the conference you need to reach an operator, Please press star zero.

If at any time during the conference you need to reach an operator, please press star zero. As a reminder, today's conference is being recorded. I would like to turn the conference over to Jake Pisano.

As a reminder, today's conference is being recorded.

I'd like to turn the conference over to Jack Mcdonald from ICR. Please go ahead.

Thank you for the welcome to Motorsport games first quarter 2022 earnings conference call and webcast I M. Jake because that of vice president of ICR.

Thank you for welcome to Motorsport Games first quarter, 2022 earnings conference call and webcast. I am Jake Pizano, vice-

On today's call, but Dimitri Costco Motorsport games, executive Chairman, and CEO , and John <unk>, Chief Financial Officer.

On today's call, we're Dimitri Kosko, Motorsport Games Executive Chairman and CEO , and John New, Chief Financial Advisor.

By now everyone should have access to the company's first quarter 2022 earnings press release filed today after market close.

By now, every one should have access to the company's first quarter 2022 earnings press release file today after more

This is available on the Investor Relations section of Motorsport gains website at Www Dot Motorsport games Dot com.

This is available on the investor relations section of Motorsport Games website at www.mortarsportgames.com.

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

During the course of this call, management may make forward-looking statements within the meaning of the U.S. federal securities law.

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.

Except 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.

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

Please refer to today's press release, and the company's filings with the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended March 31 2022.

Please refer to today's press release and the company's filing with the SEC, including its most recent quarterly report on form 10Q for the quarter and in March 31st, 2022, for a detailed discussion of a certain of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

A detailed discussion of certain 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 first quarter 2022 financial results you will find a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures as well as other related disclosures in the press release issued earlier today.

today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA as we discuss the first quarter 2022 financial results.

You will find a reconciliation of these non-gaft financial measures to their most directly comparable GAAP measures , as well as other related disclosures. In the press room.

And now I'd like to turn the call over to Dmitry, Costco, Chief Executive Officer of Motor Sport games Dmitry.

And now I'd like to turn the call over to Dimitri Costco, Chief Executive Officer of Motorsport Games. Dimitri?

Thank you and Hello, everyone I'd like to start today with an update on our product roadmap as we continue to be a steward of great long term licenses that allow us to make exciting games and facilitate esports for some of the world's most captive fan basis, using the motorsport games engine and studio.

Thank you and hello everyone. I'd like to start today with an update on our product roadmap as we continue to be a steward of great long-term licenses that allow us to make exciting games and facilitate esports for some of the world's most captive fan bases using the Motorsport Games Engine and Studio.

With regards to our NASCAR franchise, a few weeks ago, we publish a community update that included a revised NASCAR product roadmap. That's update included information about our continued improvements to the NASCAR twenty-one ignition. That's we're planning as well as the road ahead for the remainder of 2022 and beyond.

With regards to our NASCAR franchise a few weeks ago, we published a community update that included a revised NASCAR product roadmap. That's update included information about our continued improvements to the NASCAR 21 ignition that we're planning as well as the road ahead for the remainder of 2022 and beyond.

Our community update were now targeting the release of patch one five points of your 0.0.

In a community update, we're now targeting the release of patch 1.5.0.0, which will introduce NASCAR 21 ignition on Xbox Series XNS and PlayStation 5 next month. We're working closely with Microsoft and Sony who are in full support of our timeline for this release.

Which will introduce NASCAR twenty-one ignition on Xbox series X and S and Playstation five next month, we're working closely with Microsoft and Sony core in full support of our timeline for this release.

We continue to listen to our fans and value their constructive feedback about our products. We understand that there are still improvements that need to be made to our NASCAR franchise title in order for us to deliver on the excitement of the sport.

We're working with our partners at NASCAR and will bring the NASCAR 2022 season expansion, you'll see for Xbox Playstation Mtc due out in September 2022.

We're working with our partners at NASCAR and we'll bring the NASCAR 2022 season expansion DLC for Xbox, PlayStation and PC due out in September 2022.

The season expansion will include a full 2022 cup series team roster. The 2022 Cup series regular season schedule update a UI and in res HUD fan of Tech will support anymore.

The season extension will include a full 2022 CUP Series Team roster, the 2022 CUP Series regular season schedule, update a UI, and in RaceHud, Phantotec will support and more.

The reason, we're delivering a NASCAR season expansion as opposed to a new game title is because delivering great Gamer first experience is paramount to us.

The reason we're delivering a NASCAR season expansion as opposed to a new game title is because delivering great gamer first experiences paramount to us.

And if we're going to reset the expectation of what the NASCAR title should be we will need more time to work on that title.

And if we're going to reset the expectation of what the NASCAR title should be, we will need more time to work on that type.

It will not be enough time to accomplish that in 2022, and we already have the main team working on the 2023 title.

that will not be enough time to accomplish that in 2022. And we already have the main team working on a 2023 title.

Nonetheless fans will still want to enjoy that 'twenty 'twenty. Two next gen cars, and we will bring that content to users SDLP with some additional features around September of this year.

Nonetheless, fans will still want to enjoy the 2022 NEX Gen cars and we will bring that content to users as DLC with some additional features around September of this year.

Because we do not plan to charge full game price for the 2022 season expansion, we expect the NASCAR console revenues to suffer in 2020 two as a result, however was surely believe that our investment in further developing a great gaming experience is critical for the long run.

Because we did not plan to charge full game price for the 2022 season expansion, we expect enough for our console revenues to stop for in 2022 as a result. However, we strongly believe that our investment and further developing a great gaming experience is critical for the long run.

And as you'll hear John to talk about our Q1 financial results later on this call our strategy to diversify our revenue sources is starting to show in our results.

And as you'll hear John talk about our Q1 financial results laid on this call, our strategy to diversify our revenue sources is starting to show in our results.

Additionally, in the fall we plan to introduce a brand new NASCAR twenty-two title for the Nintendo switch platform.

Additionally, in the fall, we plan to introduce a brand new NASCAR 22 title for the Nintendo Switch Plot.

Then you unimproved NASCAR switch title will include updated visuals and new features.

Then you will improve NASCAR switch title will include updated visuals and new features.

We'll be releasing additional details as we approach the game launch in the fall 2022.

We'll be releasing additional details as we approach the game launch in a fall 2020.

We saw great product reviews for 2021 NASCAR switch title and look forward to continuing to expand our fan demographics and the widely popular Nintendo switch platform for the years to come.

We saw great product reviews for our 2021 NASCAR switch title and look forward to continuing to expand our fan demographics in the widely popular Nintendo Switch platform for the years to come.

As we look beyond 2022 and into 2023, we're committed to improving the quality of all our games and experiences for all of our current and future fans with valued our continued relationship with bask, our Indy car BTC and demand and appreciate their support.

As we look beyond 2022 and into 2023, we're committed to improving the quality of all our games and experiences for all of our current and future fans. We've valued our continued relationship with NASCAR, IndyCar, BTC and LeMonde, and appreciate their support.

We currently expect 2023 will bring fully revamped NASCAR title.

'twenty 'twenty three NASCAR game will utilize the work done by the amazing teams that develop the car crafts and there are a factor too while still utilizing the unreal engine.

2023 NASCAR game will utilize the work done by the amazing teams that developed the carcraft and the R factor tool While still utilizing the unreal ed

By moving to a season expansion update for 2022 more time is allocated to the development team to work on the NASCAR 2023 to include their improvements and new features with a goal of releasing earlier in the year than previous titles.

By moving to a season expansion update for 2022, more time is allocated to the development team to work on the NASCAR 2023, to include the improvements and new features with the goal of releasing earlier in the year than previous titles.

We're currently targeting the release date of mid 2023 for the updated console title.

Additionally, in 2023, we're expecting to bring an official N D card games to the market and.

Additionally, in 2023, we're expecting to bring an official IndyCar game to the market.

And besides the new official NASCAR in Indy car games in 2023, we're also anticipate the launch of our Lamont videogame, helping fans celebrate the 100 year anniversary of the iconic 24 hour Lamont with the virtual interactive experience that the games provide.

And besides the new official NASCAR and Indie car games in 2023, we also anticipate the launch of our Lamont video game, helping fans celebrate the 100 year anniversary of Diaconic 24 hour Lamont with a virtual interactive experience that the games provide.

Later this month, we plan to provide additional news when our B T. C. C game will be expected to launch.

Later this month, we plan to provide additional news when our BTCC game will be expected to launch.

During Q1 of this year, we launched a full release of our car crap game for P. C, which continues to receive positive user feedback.

During Q1 of this year, we launched a full release of our car crab game for PC, which continues to receive positive user feedback.

And we're currently working on bringing this exciting and realistic carding experience to one of the main consoles. This year. So stay tuned for our update on which console will choose.

And we're currently working on bringing this exciting and realistic carding experience to one of the main consoles this year. So stay tuned for our update on which console we will choose.

Our factor too is finally, starting to get the spotlight. It deserves during Q1, we released the highly requested UI UX update and switched to a predictable content release schedule, which user seems to enjoy based on the feedback we're monitoring on socials.

Our Factor 2 is finally starting to get the spotlight it deserves. During Q1, we released a highly requested UIUX update and switched to a predictable content release schedule, which users seem to enjoy based on the feedback we're monitoring on social.

We look forward to bringing more quality of life improvements into our factor too with the help of real world drivers and our fans.

We look forward to bringing more quality of life improvements to our factor two with the help of real world drivers and our fans.

I'd like to provide a quick update on our studio development resource as we continue to work on the scheduled games.

I'd like to provide a quick update on our studio development resource as we continue to work on these scheduled games.

We're currently firing on all cylinders and continue to hire more talent into the studios worldwide as we grow our internal development capabilities and expand our external development partner relationships.

We're currently firing on all cylinders and continue to hire more talent into the studio's worldwide as we grow on internal development capabilities and expand our external development partner relations.

Our mobile game pipeline continues to be an opportunity zone for us, but our current focus is on applying our resources to our main console products as they are the core games that generate more revenue for us now.

Our mobile game pipeline continues to be an opportunity zone for us. But our current focus is on applying our resources to our main consul products as they are the core games that generate most revenue for us.

We're currently planning on building on top of these console releases in the future by potentially leveraging the console content in the future of mobile game titles.

We currently plan on building on top of these console releases in the future by potentially leveraging the console content in the future mobile game titles.

As we continue to invest in the growth of our development teams with time, we expect to allocate more resources to mobile to increase our mobile game production, but for now our focus remains on console and PC for these exclusive licenses.

As we continue to invest in the growth of our development teams, with time we expect to allocate more resources to mobile to increase our mobile game production. But for now, our focus remains on console and PC for these exclusive licenses.

Let's touch on our esports as we mentioned in our previous earnings call. We're extremely proud of our 2021 into 2020 to 24 hour Lamont virtual serious that finished off in Q1 of this year.

As we mentioned in our previous earnings call, we're truly proud of our 2021 into 2022, 24 hour Lamont virtual series that finished off in Q1 of this.

And as you got sport helped US track over 81 million fans were exposed to this past seasons five races.

And as YouGov Sport helped us track, over 81 million fans were exposed to this past season's five races.

It was a great feeling last week, our team accepted the 2021 sport Technology Award for best use of esports by sports brand and we're looking forward to announcing the details of our 2022 into 2023 Lamont virtual serious soon and continuing to build upon this momentum with our order for.

It was a great feeling last week, our team accepted the 2021 Sport Technology Award for best use of eSports by SportsBrand. And we're looking forward to announcing the details of our 2022 into 2023, Lamont Virtual Series soon, and continuing to build on this momentum with our other franchise.

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Lastly, I want to provide an update on our liquidity as.

Lastly, I want to provide an update on our liquidity. As we continue to explore multiple funding options to resolve our going concern qualification, we have been looking at various ways to continue core product development while pausing certain endeavors to extend our runways.

As we continue to explore multiple funding options to resolve our going concern qualification we have been looking at various ways to continue core product development, while pausing certain endeavors to extend our runway.

As indicated in our recent 10-K and reiterated in our first quarter 10-Q, there's doubt about our ability to continue as a going concern.

As indicated in our recent 10-K and reiterated in our first quarter 10-Q, there's doubt about ability to continue as a going concern. As of today, we have approximately $9 million of available cash on hand. This amount reflects the recent payment of $1 million that we made to Luminous as part of our agreed deferred payment schedule of the remaining $3.2 that we have an obligation to pay in connection to our acquisition of Studio 397.

As of today, we have approximately $9 million of available cash on hand.

This amount reflects the recent payment of $1 million that we made to luminous as part of our agreed deferred payment schedule of the remaining three point too that we have an obligation to pay in connection to our acquisition of studio 397.

We are still debt free and are actively exploring options to assure that we have the capital we need to execute on the product roadmap I just laid out.

We're still debt-free and are actively exploring options to assure that we have the capital we need to execute on the product roadmap I just laid out.

Our main priorities to continue producing revenue generating products and reach profitability effectively resolving our liquidity issue.

our main priorities to continue producing revenue-generating products and reach profitability, effectively resolving our liquidity issue.

We have three solutions and will likely end up with some combination of these three.

We have three solutions and we'll likely end up with some combination of these three.

Our options include raising debt or equity however, given the current market conditions and recent massive selloff in the tech sector.

Our options include raising debtor equity. However, given the current market conditions and recent massive sell-offs in the tech sector, this could possibly be feasible option only once we begin to see some stability in the market.

This could possibly be feasible option only once we begin to see some stability in the market.

We're also pursuing additional opportunities to reduce near term spend.

We're also pursuing additional opportunities to reduce near-term spend.

Currently our revised roadmap reflects current cost structure initiatives.

Currently, our revised roadmap reflects current costs structure initiatives.

Additionally, beringer any unforeseeable events, there are additional levers, we could pull including potentially delaying some product releases to follow our cash generating catalyst events like launching major franchise console games.

Additionally, bearing any infreseeable events, there are additional levers we could pull, including potentially delaying some product releases to follow our cast-generating catalyst events like launching major franchise console games.

Sequencing releases based on our cash generating opportunities could be an additional option towards self sustained profitability.

Sequencing releases based on our cash generating opportunities could be an additional option towards self-sustained profitability.

This is the least favorite option as it means launching some of the franchises later, leaving US less time under are still long term licenses to monetize and be good stewards of such licenses and our partner relations.

This is the least favored option, as it means launching some of the franchises later, leaving us less time under our still long-term licenses to monetize and be good-student of such licenses in our partner relations.

Additionally, we're also exploring various new business development opportunities. Since we are the only studio that holds these type of world class IP racing game licenses, it's possible to lever it seems licenses and bring in additional studio partners that would build alternative games and profit share with us.

Additionally, we're also exploring various new business development opportunities. Since we are the only studio that holds these type of world-class IP racing game licenses, it's possible to leverage these licenses and bring in additional studio partners that would build alternative games and profit share with us.

As you can see we're exploring all options and laying them out on a table I'm fortunate to have a industry veteran surrounding me as we leverage each other's experience and knowledge to make the best decision for current circumstances, and we're hoping to solidify this plan in the coming months.

As you can see, we're exploring all options and laying them out on a table. I'm fortunate to have industry veterans around me as we leverage each other's experience and knowledge to make the best decision for current circumstances. And we're hoping to solidify this plan in a coming months. With that, let me hand it over to...

With that let me hand, it over to John to review our financials.

Thank you Dmitry.

I would like to share a summary financial highlights for the first quarter of 2022.

I would like to share some recent financial highlights for the first quarter of 2022.

Revenues for Q1, 2022, or $3 3 million as compared to two and a half million for Q1 2021.

Revenues for Q1 2022 or 3.3 million.

a pair of two and a half million for Q1 2021.

0.8 million or 34% year over year increase reflects additional gaming sales of <unk> 5 million in Q1 2022, primarily from our factor too, which contributed 16% of our total Q1 2022 revenue <unk>.

the 0.8 million or 34% year-over-year increase. Reflex additional gaming sales.

$1.5 million in Q1 2022, primarily from our factor two, which contributed 16% of our total Q1 2022 revenue.

Additionally, Q1, 2022 esports revenue increased zero point $3 million, primarily from the 24 hour Blancmange event held in January .

Additionally, Q-1 2020 II eSports revenue increased 0.3 million, primarily from the 24 hour of Le Mans event, how did January ?

These sports revenues were 11% of our total Q1 2022 revenues.

eSports revenues were 11% of our total Q1 2022 revenue.

Our business plan to increase and diversify our revenue stream is beginning to drive improved top line financial performance.

Our business plan to increase and diversify our revenue stream is beginning to drive improved top-line finance.

Q1, 2022, net loss was $16 million as compared to Q1 2021 net loss of $14 1 million. The 1.9 million decrease in net loss was primarily due to $11 3 million decrease in general and administrative expenses.

Q1 2022 net loss was $16 million as compared to Q1 2021 net loss of $14.1.

The 1.9 million decrease in net loss was primarily due to 11.3 million decrease in general in the administrative expenses offset by 9.3 million of write downs for goodwill and intangible assets.

Offset by $9 3 million of write downs for goodwill and intangible assets.

The downward revisions of goodwill and intangible assets considers our current market capitalization and revisions to our product roadmap made during the first quarter of 2022, resulting in changes to the scope and timing of product releases and related development expenses as dmitry.

The downward revisions of Goodwill and Intangible Assets considers our current market capitalization and revisions to our product roadmap made during the first quarter of 2022. Resulting in changes to the scope and timing of product releases and related development expenses as Dimitri talked about.

Talked about.

Q1, 2022, adjusted EBITDA loss was $5 6 million as compared to Q1 2021, adjusted EBITDA loss of $2 8 million.

Q1 2022 adjusted EBITDA loss was 5.6 million as compared to Q1 2021 adjusted EBITDA loss of 2.8 million.

The $2 7 million increase in adjusted EBIT loss was primarily due to $1 4 million reduction in EBITDA and $1 3 million reduction in add backs when compared to Q1 2021, where we had an IPO with our IPO stock compensation add backs.

The 2.7 million increase in adjusted EBITDA loss was primarily due to 1.4 million reduction in EBITDA and 1.3 million reduction in addbacks when compared to Q1 2021, where we had an IPO with our IPO stock compensation ad.

We expect to continue to incur operating losses for the foreseeable future as we continue to incur expenses to develop new game franchises.

We expect to continue to encourage operating losses for the foreseeable future. As we continue to encourage expenses to develop a new game branch.

Our liquidity plan remains the same as year end and the company's existing cash on hand will be sufficient to fund. Its current operations for the next 12 months Dmitri has outlined the steps we are taking to provide for our liquidity requirements going forward.

Our liquidity plan remains the same as year end, and the companies who fixed it in cash on hand will be insufficient to fund its current operations for the next 12 months.

Demetri has outlined the steps we are taking to provide for our liquidity requirements going forward.

From an operating perspective as Dmitry, we know that our priority is rolling out fun, well performing revenue generating games.

From an operating perspective, as Dimitri noted, our priority is rolling out fun, well performing, revenue generating.

As we continue to address our projected liquidity requirements.

We continue to address our projected liquidity requirements. Thank you for joining us today, and now let's go to questions.

Thank you for joining us today and now let's go to questions operator.

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And one moment please for the first question.

My first question's from the line of Michael Graham with Canaccord. Please proceed with your question.

questions from the line of Michael Graham with Canacord. Please proceed with your questions.

Thank you Hey, guys. Thanks, Thanks for the for all the detail in the call and for the posting of the other day.

Thank you, hey guys, thanks for all the detail in the call and for the posting the other day. I wanted to just ask a couple, the first one was, and you may have said this and it might have just slipped by me, but once we do roll around to Ignition 23 or NASCAR 23,

I wanted to just ask a couple the first one was you may have said this and it might've just slipped by me, but once we do roll around too.

Ignition 23 year NASCAR 'twenty three.

You have an update for us on sort of like.

You have an update for us on sort of like, when during the year you might expect to see that and you know, how you're thinking about the longer term cadence of the NASCAR releases, you know, during the calendar year. And then I have another one as well, think.

During the year, you might expect to see that and.

You know how youre thinking about the longer term cadence of the NASCAR releases during the calendar year.

And then I have another one as well thanks.

Hi, Michael Thanks for the question Dmitry.

Michael, thanks for the questions, Demetri. We mentioned briefly on the call that we are looking to potentially release NASCAR 2023 title in mid-2023.

We mentioned briefly on the call that we are looking to potentially release NASCAR 2023 title in mid 2023.

As we talked about in some of our previous calls our goal is to try to align the title releases.

As we talked about in some of our previous calls, our goal is to try to align the title releases as close as we can to the actual race season of that franchise.

So as we can to the actual race season.

All of that franchise NASCAR historically starts around February time, so it's fair to assume with years to come during this long term license relationship that we have is that we'll continue to keep walking that.

NASCAR historically starts around February time.

So it's fair to assume with years to come during this long-term license relationship that we have, is that we'll continue to keep walking that.

Release schedule closer and closer to the actual NASCAR season starts but for 2023, we're targeting.

release schedule closer and closer to the actual NASCAR season start.

But for 2023, we're targeting mid-year, so sometime around summer, and we'll look forward to actually posting what that release date would be, sometime in the near future.

Mid year, so sometime around summer.

And we'll look forward to actually posting what that release states would be sometime in the near future.

Okay sounds good. Thanks, Dmitry and then yes, I think I just wanted to ask as you outlined some of your liquidity options.

Okay, sounds good. Thanks to me, Trey. And then the other thing I just wanted to ask is, you know, you outlined some of your liquidity options.

You know, just wondering, you know, when you say like, raise debt or equity, if you can, you know, maybe go one layer deeper and just mention some of your, some of your options, what some of your options might be. And also, you know, you mentioned the ability to reduce expenses and I just wanted to maybe ask if you could, you know, go a layer deeper on that as well in terms of like, you know, what's the magnitude of things that you think you could do along those lines?

Just wondering you know when you when you say like raise debt or equity. If you can maybe go one layer deeper than just mentioned some of your some of your options with some of your options might be and also.

You mentioned the ability to reduce expenses and I just wanted to maybe ask if you could go a layer deeper on that as well in terms of like whats the magnitude of things that you think you could do along those lines.

Sure. So as we are continuing to work on four franchises simultaneously plus our car crafts product plus our factor product, we have projected internally to continue to increase development resources to.

Sure. So as we continue to work on four franchises simultaneously, plus our car craft product, plus our factor product, we have projected internally to continue to increase development resources to sort of make sure that we keep our foot on the gas of developing and potentially launching all of those products as fast as we can.

To sort of make sure that we keep our foot on the gas all developing and potentially launching all of those products as fast as we can the goal is to release them as we can that way we have the longest possible runway during the existing licenses to monetize on that.

So when we talk about.

So when we talked about potentially reducing the expense height on it, we could just, I'm going to simplify it's role role, flow role, those expansion of the development. But of course, that would mean that some of our future title releases could be delayed as a result of that.

Potentially reducing.

The expense side on it we could just I'm.

I'm going to simplify its role ROHL slow roll those are expansion of the development, but of course that would mean that some of our future title releases could be delayed as a result of that.

It's not something we want to do we want to continue to put up put our foot on the gas and higher as we need to continue to expand our internal and external resources. So we can launch these franchises as soon as possible.

It's not something we want to do. We want to continue to put our foot on the gas and hire as we need, continue to expand our internal and external resources. So we could launch these franchises as soon as possible. But if need be, we will then start to not expand the internal resource as quickly. And that will come with a potential delay in a product program.

But if need be we will then start to not extend our internal resource as quickly and that will come with a potential delay in our product roadmap.

Okay. Thanks for those answers Dmitry I appreciate it I'll get back in line here. Thanks.

Okay, thanks for those answers to me. I appreciate it. I'll get back in line here. Thanks.

Thank you.

And as a reminder to register for a question press. The one followed by the four on your telephone keypad right now.

And as a reminder to register for a question, Pesco 1, followed by the 4 on your telephone keypad right now.

The next question is from the line Michael Kaplinsky with Noble capital markets. Please proceed with your question.

The next question is from the line of Michael Kinsky with Noble Capital Markets. Please proceed with your question.

Thank you and thanks for taking the questions.

Thank you, and thanks for taking the questions. So, Dmitry, you mentioned about the adding resources and the development, and I was just wondering if this is an increase in the number of employees for in development, or is this, I just wanted to know in terms of how stable right now the employee is, given the disruptions that you had earlier, particularly in Russia. And so if you can just give us some thoughts on

So dmitry you mentioned about the adding resources and development and I was just wondering if this is an increase in the number of employees or in development or is this I just wanted to know in terms of how stable right now the employee is given the disruptions that you had earlier.

Particularly in in Russia.

Russia, and so if you can just give us.

Some thoughts on why.

Whether or not you're actually adding personnel or just shifting personnel at this point.

whether or not you're actually adding personnel or just shifting personnel at this point.

Thank you Michael for the question, we are expanding our internal resources that includes all our studios worldwide.

Thank you Michael for the question. We are expanding our internal resources. That includes all our studios worldwide. As you might recall on our previous earning call, we talked about how we revamped our quality control department and what we're doing in terms of just increasing the quality of the type of games that we publish.

As you might recall on our previous earnings call, we talked about how we revamped our quality control department.

And what we're doing in terms of just increasing the quality of the type of games that we publish.

Therefore that does require us to staff up more and that goes across all departments right, we need more ARCUS, we need more senior programmers.

Therefore, that does require us to staff up more. And that goes across all the parts.

We need more artists, we need more senior programmers, we especially need QA folks.

We especially need QA folks.

Our total number from Q4 end of the.

So our total number from Q4 and the quarter to the Q1 that we just reported on has increased in terms of head count. It's not necessary shifting from one to another. It's just staffing up wherever there's great talent.

Quarter. So the Q1 that we just reported on has increased in terms of head count.

It's not necessarily a shifting from one to another.

As just staffing up wherever there's great talent.

And two other part of your question our development.

And to other part of your question, our development talent that is in Russia continues to operate as usual. We don't experience any material interruptions right now. Of course, geopolitical situation could change in a year or in a future, and will continue to be adjoct. But right now, everybody's had now focusing on the four product releases that we're all working on.

Talent that is in Russia continues to operate as usual, we don't experience any material interruptions right now.

Of course geopolitical situation could.

Could change in a year or in the future and.

And we will continue to be agile, but right now everybody is heads down focusing on the core product releases that were all working on.

Great Thanks for that color.

Great. And thanks for that color. And in particular, can you then give us some thoughts about the burn rate as you go into this quarter? I don't know if that, you know, given the fact that you are adding some staff. I'm just curious where, where do you think that the burn rate goes from here?

In particular can you then give us some thoughts about the burn rate as you go into this quarter.

I don't know if that you know given the fact that you are adding some staff I'm, just curious where where do you think that the burn rate goes from here.

Hey, this is John .

Hey, this is a jot new in afternoon. So our burn rate has been fairly consistent and we're looking to keep it that way or take it down.

Afternoon, So our burn rate has been fairly consistent.

We're looking to keep it that way or take it down.

As we move forward.

Gotcha.

Gotcha. And then it sees it operating cash well from the squirter. Go ahead, sorry. Okay, I'm sorry, didn't mean interrupt. And then in terms of just general trends, in terms of, you know, we're looking at the prospect of maybe the US maybe going to recession, who knows with this inflation and everything else going on.

Operating cash flow. This quarter go ahead, sorry, Okay, I'm, sorry, I didn't mean to interrupt.

And then in terms of just the general trends.

In terms of.

We're looking at the prospect of maybe the U S.

Going to recession, who knows with this inflation and everything else going on.

Can you just kind of give me a sense of how you believe that the game industry. The gaming industry overall, what would be affected by an.

Can you just kind of give me a sense of how you believe that the game industry, the gaming industry overall would be affected by an economic downturn. I know that in the past economic downturns, we've seen the gaming industry do quite well. I'm just wondering if you continue to believe that overall the gaming industry will do as well if we were to go into an economic downturn.

Economic downturn I know that in the past economic downturns, we've seen the gaming industry do quite well I'm. Just wondering if you continue to believe that overall the gaming industry will do as well.

We were to go into an economic downturn.

Michael This would be possibly a personal opinion of mine, but I do believe when there is.

My position would be possibly a personal opinion of mine, but I do believe when there is

These unfavorable events that happened around us.

sort of these unbearable events that happen around us. Folks do turn to an alternative type of entertainment, right? They might not go out as much, they might stay home, and might still need that interactive experience that keeps them entertained. So I could assume that they would be more in front of a television, perhaps, and in front of their gaming experiences.

Folks do churn to an alternative type of entertainment right. They might not go out as much they might stay home and might still need that the interactive experience that keeps them entertained so I could assume that they would be more in front of a television perhaps and in front of their.

Gaming experience.

Experiences. So we do foresee that should something like this happen.

So we do foresee that the should something like this happen, that a great affordable options like our racing games could be a very good entertainment source for folks around the world.

<unk>, a great affordable options like our racing games.

Could be a very good entertainment.

So our support folks around the world So.

We don't get to that point.

Hopefully we don't get to that point, but if we do, we believe that that could potentially even be good for our business.

If we do we believe that that could potentially wouldn't be good for our business.

So I tend to agree with you Dmitry, that's all I have thank you.

God, I tend to agree with you to be free. That's all I have. Thank you.

And as a reminder to register for a question press. The one followed by the four on your telephone keypad right now.

And as a reminder to register for a question, press the one followed by the four on your telephone keypad right now.

And I'll now turn the conference back to you Dmitry for closing remarks.

and I'll now turn the conference back to Dvntree for closing remarks.

Thank you very much and thank you all for joining us and continuing to follow our story Q.

Thank you very much and thank you all for joining us and continue to follow a story. Q1 of this year has been a special period of time for us where you could see reflected in our earnings release sort of the notable milestones that we achieved.

Q1 of this year has been a special.

Period of time for Us where you could see reflected in our earnings release.

Sort of the notable milestones that we achieved but probably the one point to highlight is that we are finally, starting to see diversity in our revenue streams. We're finally, starting to see that our other products. Besides once attached to our NASCAR franchise are starting to also.

But probably the one point to highlight is that we are finally starting to see diversity in our revenue streams. We're finally starting to see that our other products, besides ones attached to our NASCAR franchise, are starting to also be visible on our map.

The visible on our map. So it is important momentum for us. It is something that we continue to focus on and continue to execute on our vision to really bring the thrill of motorsport to the masses.

So it is important momentum for us. It is something that we continue to focus on and continue to execute on our vision to really bring the thrill of motorsport to the masses. So thank you very much.

So thank you very much again for joining us.

That does conclude today's conference call. We thank you for your participation and ask that you. Please disconnect your line.

That does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line.

Okay.

Couldn't even imagine she had fought heavily.

Uh huh.

[music].

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