Q3 2023 Motorsport Games Inc Earnings Call

[music].

Good day and welcome to the Motor Sport Games, Inc. Third quarter 2023 earnings Conference call all participants will be in a listen only mode.

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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on I touched on phone to withdraw your question. Please press Star then two please note. This event is being recorded.

I'd now like to turn the conference over to.

Is that across the dark toner Vice President. Please go ahead.

Thank you and welcome to the Mexico Gaming third quarter 2023 earnings conference call and webcast.

On today's call is multiple games, Chief Executive Officer, Stephen Hoge, and Chief Financial Officer, Jason Pasta.

By now everyone should have access to the company's third quarter 2023 earnings press release today after market right.

This is available on the Investor Relations section of its website at Www Dot Batesville games Stockholm.

During the course of this call management may make forward looking statements within the meaning of U S 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.

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.

Please refer to today's press release, and the company's filings with the SEC.

His most recent quarterly report on Form 10-Q for the quarter ended September eight 2023.

For a detailed discussion of certain 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 such non-GAAP financial measures such as adjusted EBITDA.

The third quarter 2023 financial results.

You will find a reconciliation of these non-GAAP measures that most directly comparable GAAP measures.

The other relates to disclosures in the press release issued earlier.

Okay.

And now I'd like to turn it over the course, Steven Hudson, Chief Executive Officer, Sarah can I spoke and Steven.

Thank you to all participants joining this conference call today.

This past quarter has been a continuation of the incredible effort to steer our business the future success.

This work undertaken by the board and senior leadership team at stumps does it live a recognizable tangible results and I'm very happy to walk you through the positive achievements, we have accomplished thus far.

I would first like to announce family back to me is our interim Chief Financial Officer effective November eight 2023.

Sandy will pick up the reins from Jason Pasta continues the exemplary work to drive positive change for our business.

And these incredibly detail orientated individuals with unflinching financial discipline that aligns perfectly with no need to leave no stone unturned in building this business into something we know it can become.

And he is a fantastic addition to our team and he is the energy and enthusiasm we will maintain our momentum.

My sincere thanks to Jason who is alongside me today on this call, but he's expertise guidance and support through the restructuring period over the last several months.

Jason has committed to assisting the leadership team as and when needed.

Celebrating the on boarding Stanley and providing valuable knowledge over the next few weeks or months I'm very excited about this next phase and we are adjacent to the ethics, providing this launch pad.

Now please allow me to bring you up to speed on the results.

He announced comprehensive assessment of the company's position and projects.

The signs of the NASCAR license in early October generated net cash proceeds of $3 7 million to the company at closing.

Plus an additional $1 million and deferred consideration payable.

Payable over the next 15 months subject to the satisfaction of certain conditions.

This sale significantly reduces our financial obligations associated with our NASCAR license and allows us to focus both financial and development resources on near term projects that are anticipated to come to market.

Additionally, the company executed a limited license, which affords the company the ability to continue selling our masco came back has flowed through to the end of 2024.

This means we have another five courses of revenue from mismatch Gaslog. We believe this will provide some stability to our operational cash cycles over the next 15 months, although we anticipate the amount of revenues to be generated by existing NASCAR products to decline over time.

A key principle of our assessment was the need to streamline our operations, reducing satellite Tvs, while simplifying our structure.

What was built during the Covid period is less sufficient today.

This streamlining initially began under the previously announced 2022 restructuring program.

The 2022 restructuring program was originally estimated to deliver approximately $4 million total annualized cost reductions by the end of 2023.

But to further action. This is now estimated to be significantly higher at approximately $6 7 million as of September 32023.

The last week, we've taken further cost reduction and restructuring initiatives closing out Australia and studio, which was slated to produce unplanned Indiana title.

We retained all technology NSS full feature utilization and we are currently identifying opportunities to resume to color.

Elsewhere within the business with great Italian besides and cost control.

Additionally, our media website traction don't G. G has been seemingly close to done.

The booming revenues versus cost we retained the site audience and highly respected brand.

Kind of action Christmas alongside elements of the business already indicating towards prospects.

Additionally, we recently announced that the lessons so about P. T. C license is terminated L. P. T C licensee effective as of November 2023.

We will continue to evaluate our corporate structure to be ongoing and changing landscape as that business is in the process of being pivoted.

In October we released the first version of Reis control is publicly available opt in beta.

Technology previously we thought two under the code named competition system is powered and improved multi play service today for our racing game off attitude and tomorrow and our plant them on the ultimate Okay.

We have considered saving this service to launch alongside Ala Moana Ultimate toxin opted to soft launch now off attitude and benefit from the learnings.

The major push with the arrival of the moment.

Feedback has been overwhelmingly positive beaten all expectations and is expected to continue going from strength to strength as the pizza program becomes available to all players later this week.

Within a short period of a limited release rates control quickly broke out early registration projections, reaching 10000 registered users and the same.

Is that we have almost 15000 users and expect closer to 25000 by the end of 2023.

We know this number compares favorably to somewhat spin, but services, reaching them outright and growth.

Account registrations mean lithium unless we can do like that.

I'm happy to say that we are already witnessing additional content films for all attitude, reaching a 60% compared to the month prior.

Although still early we are optimistic and believing that our approach to providing accessible high quality interconnect. It serves as an entertainment within this segment will pay dividends.

We are building for the players first not the cameras, we are making something that can sustain itself and grow.

On the subject of pneumonia ultimate how nice planned product release I am pleased to tell you that we can confirm yet they just really stay off its finally anticipated racer from Chile 397, our veteran racing team.

We anticipate releasing the game on February 20th 'twenty 'twenty four with further details of faithful in due course.

We are pleased to see the positive attention for 'twenty trials, Lamont and what insurance championship game utilizing the state of the art highly regarded physics engine behind young attitude stimulation with some of the most recognizable vehicles in sports car memory.

That's why fidelity upgrades racing game designed for a real treat.

The passion coming into the project is second to none and we look forward to releasing the product in an ideal window in the run up to the new season.

With the World Endurance championship heading into a wonderful period, which is many grades of the automated world can be sending to compete from Ferrari Porsche and Lamborghini Cadillac and BMW. We were on the wave of an exciting season and believe this will serve families into this segment, particularly well.

Send making headway in our planning for how we take this collaborative team based concept not usually founding racing games, so a much wider mainstream audience.

Players will be able to enjoy the story of insurance rates.

We continue to that.

Additionally, I am pleased to say have continued partnership with kindred concepts and the equinox project that utilizes the off to two technology is continuing to grow.

They will shortly open a second venue in the United Kingdom with Boston in United States expected to come online in 2024.

Being the chosen platform to demonstrate the high Tech entertainment to be found with a formula one is a testament to our ongoing investment in <unk> I said, the whole move off attitude and the planned ma'am on the ultimate thought too.

This period of reorganization since my return earlier in the year, it's starting to demonstrate positive results. Our focus is to deliver a sustainable profitable high growth business.

Under performing business units and projects have been closed a new sense of optimism continues to emerge as we continue to foster a sense of purpose throughout the organization.

Since joining the company as CEO, we've been able to significantly reduce costs execution to say look the NASCAR license all floating a significant portion of our NASCAR financial obligations. The retaining of our NASCAR broadcast look through 2020 school more than doubling our projections. The uses of our new online service race control.

And today announcing an updated release date for our plan to among the ultimate product.

We are pleased with the progress we continue to work diligently to drive the business forward.

Yeah.

But Jason Porter, Chief Financial Officer of multiple games to speak on the financial results for the third quarter 2022.

Thank you Steven and good evening everyone.

As with previous earning calls I won't be offering any forward looking guidance today, instead I will focus on providing an update on our results and highlights from the third quarter 'twenty right.

Revenues were $1 7 million.

So a quick five minute.

Eight 5% when compared to the same period in the prior year.

Okay, and the deals themselves, but the primary drivers for the increase.

And in part by the release of Glasscock Cod Nextgen.

T O C June 'twenty, 'twenty, three which were partially offset by reduction in esports revenue due to the timing of the commencement of the 'twenty three 'twenty call them on spectral series season compared to 'twenty two 'twenty three season, which commenced in September 2022.

Net loss for the quarter was $3 million, a decrease of $5 million when compared to the same period of the car yet.

The change in net loss was probably.

Driven by corporate 6 million reduction marketing Department, and general and administrative expenses as well as to Zurich like 5 million increase in revenue previously discussed.

EPS for the quarter this negative $1 28, compared with negative $7 29.

I'm period in the prior year.

The reduction of that spend was in part driven by actions taken under the company's 2022 receptors.

It just helps us a lot of either had costs by approximately $6 7 million on an annualized basis as of September 32020, correct exceeding our target 4 million in annualized savings by the end of 'twenty 'twenty correct.

You see savings achieved through changes in headcount, reducing such expenditures and improvements in our internal processes.

We are reporting an adjusted EBITDA loss of $2 4 million last quarter of 2023 compared to an adjusted EBITDA loss of $6 5 million for the same period right yeah yeah.

In fragrance in the adjusted EBITDA loss in the same as I just discussed with respect to the changes in net loss for the parents and congrats on quarter.

On a year to date basis revenues were $5 2 million down $1 4 million when compared to the same period in the prior year, primarily due to lower digital mobile and retail game sales driven by lower volumes yourselves or less favorable pricing.

Net loss was $17 million compared to 32 million for the same period in the prior year.

Yeah today, adjusted EBITDA loss was $9 4 million down from 18 million for the same period last year.

Cash asset impairment losses at 4 million $9 4 million to the nine months ended September 30, 2023 2022 respectively.

A significant portion of the difference between net loss adjusted EBITDA loss.

Erez.

P S loss state paid $6 60, compared to $26 61, the same periods in the prior year.

Moving on to liquidity. This continues to be a key area of focus for the company.

It turns out that 2023, that's passed fantastic weapon.

$2 million down from 2 million to other gene that's a tricky right.

Net cash used in operations for the nine months ended September 32023 was approximately $10 1 million, representing an average monthly net cash burn from operations of $1 1 billion down 5 million when compared to the average monthly cash burn of $1 6 billion.

And some thoughts you want to touch.

You too.

As of October 31, 'twenty, 'twenty, three cash and cash equivalence position increased <unk> 2 million $3 2 million following the last column, which.

Most recently.

On the operations.

At the end of Q1, 'twenty 'twenty four and that additional funding will be required in order to continue operations.

No such adjustments liquidity shortfall, we are actively exploring several options, including but not limited to one additional funding in the form of potential equity and debt financing arrangements for similar transactions.

Oh pilot, those hot business, including but not limited to the sale or licensing of assets.

So the recent sale of the NASCAR license.

A lot of the cost reduction and restructuring initiatives.

Thank you all for your time and now I'll turn the call back to Steven placing remarks.

In closing I, thank our shareholders for their time and support.

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

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.

Your question has to be not just and you would like to withdraw your question. Please press Star then two.

Finally, we'll pause momentarily to assemble our roster.

Our first question comes from Michael Kaplinsky with Noble capital markets. Please go ahead.

Thank you and thanks for taking the question a quick one.

Was wondering if you can just kind of tell.

Tell us or it is the company current on all of its obligations on on its existing licensees licenses and so forth and I was just wondering if he can add a little color on and I'm sorry for joining a little late if there's if you've already discussed this on your British toward car.

License and what maybe the.

What were the reasons behind behind that can you.

Just give us an update on that.

Hi, Michael.

So I'll answer the desktop and then maybe just to give you an update on BTG tmall.

In respect to.

Obligations and being powered as disclosed in our Form 10-Q, which assuming you have not yet had a chance.

Uh huh.

We have disclosed.

And some of the payments in respect to the BTC license.

And so those are some.

Yes.

Okay.

That was one of the drivers.

Behind the domination come from BTC This week.

And in New York.

Yeah.

Go ahead.

I'm sorry, Jason did you have a view on additional kind of yeah.

And so I was just wondering in terms of the additional.

Cash that you have currently that you have enough cash to kind of make those payments.

Payments hole in terms of the other licenses or or is that a part of the funding that youll be needing.

So I mean.

The amendment to the BTC typically it's 4 million subject to the terminations.

Just as a result of a combination this week and that's disclosed in our Form 10-K.

But yeah.

Looking to engage in conversations with D. T cell not quite specific claim we'll get some clarity as to what one last time.

Yeah.

From a financing perspective as a whole we look at you know what I touched on is bad and that's come down tremendously.

Let's see.

Five quarters and it sounds like we're happy with the cash.

Spanish heading directionally.

You should see us about 4 million average bumps into Q3, which reaches interests that have been placed in a hole.

And so let's.

Obviously banks have all of that in my mind.

We think they might be and what additional funding will need and that covers operating costs.

My name residual payments required on that.

Purchase commitments.

Gotcha and I'm sorry, if this was covered in the 10-Q, but what other licenses are you.

Behind on and are there is there a risk at this point are you in.

Give us a gauge of how those maybe negotiations are going with those license or license fees.

That's okay. So I mean so.

The remaining kind of two primary licenses with the current amount of license and then the car license.

Presently behind on payments on the <unk> arrangements, but obviously they've come with minimum royalty guarantees in our payment schedules.

But those people have to to to look to hedge them in the future in coming months.

Gotcha, and I and I know that you went through a tremendous reorganization and consolidation are there further expenses that you can cut at this point or are you now at the base level, where you feel you need to be.

Yeah, I mean I think.

Sure.

It hasn't been easy for us.

Some tough decisions around.

So you have to make some.

Some changes from the restructuring side of things and.

Try and reduce some of the other that's a more sustainable level, we've tried to do that.

As much as income but of course, we'll continue to review our cost base and we'll always look for opportunities to juice, you say behind that matches.

The organization is today and so this is something we'll continuously look.

To improve upon and make sure we're efficient as possible.

Alright, that's all I have good luck to you guys.

Yeah.

Alright, then this concludes our conference and thank you for attending today's presentation you may all now.

Please go ahead.