Q4 2023 Motorsport Games Inc Earnings Call
Thank you for standing by and welcome to Motor Sport Games, Inc. Fourth quarter and full year 2000, what is the earnings call.
At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you were quite needed assistance. Please press star zero for operator.
Just a reminder, today's conference is being recorded I would now like to turn the conference over to Bend Rochester journey from water Sports games. Please go ahead.
Ben Rossiter: Thank you and welcome to the next four games fourth quarter and full year 2023 earnings conference call and webcast.
Ben Rossiter: On today's call is Mexico games, Chief Executive Officer, Stephen Hoge, and interim Chief Financial Officer Stanley Beckley.
None: By now everyone should have access to the company's fourth quarter and full year 2023 earnings press release filed today after market close.
None: This is available on the Investor Relations section of Mexico games, its website at Www dot niche sports games Dot com.
None: During the course of this call management may make forward looking statements within the meaning of the U S Federal Securities laws.
None: 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.
Sept 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 result of new information future events or otherwise.
None: Please refer to today's press release, and the company's filings with the SEC, including its most recent annual report on Form 10-K for the year ended December 31, 2023 for a detailed discussion of certain risks that could cause actual results to differ materially from those expressed or implied in any.
None: Forward looking statements made today.
None: In today's conference call, we will refer to certain non-GAAP financial measures such as adjusted EBITDA as we discuss the fourth quarter and full year 2023 financial results.
None: You will find a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures as well as other related disclosures in our press release issued today.
None: And now I'd like to turn days equal to Steven hedged Chief Executive Officer, Mexico Games Steven.
Steven: Thank you everyone for joining this conference call today.
Steven: Q4, 2023, we continue to reduce spend and increase efficiencies across the business.
Steven: Carefully monitoring expenses working diligently towards Al Q1, 2020 full game release Lamama alternatives.
Steven: This would be now second internally developed title and something we intend to correct as the master bedroom suite.
Steven: The folding of other projects and assets was designed to focus our effort around the kind of game experience. We believe will set us on the right path.
Steven: Releasing innovative games designed to foster a large player bites are engaging to squeak in quarter community.
Steven: As we focused on the development of the model. So that we came to the understanding that this form of <unk> 60 to our vision for the future we see driving landscape.
Steven: Good sport games is all about player participation and not simply the doggy dog world of traditional racing games.
The one plant can be cramped the winner and we're friends become enemies.
Steven: We believe in building unacceptable highly question ecosystem, which puts community and most importantly teams at the heart of the experience.
Steven: Look at many of the bumpy popular games in the market today, and you will see they spend today have experienced around team play.
This is starkly absent in almost all racing experiences.
Steven: In pneumonia ultimate teams comprised three giant has taken tends to drive that home and insurance rates.
Steven: This title is out springboard division, we have been working towards for the last several months, which we believe sticking with clients a turning point in the recent history of the company. We are finally seeing the result of decisions getting much in many months prior and now delivering better than expected results not least because recent really sit down the game.
Steven: Among ultimately.
Steven: This has been especially pleasing given the challenges encountered by the business and the tough decisions, we've made to try and turn the ship around.
Steven: Real signs of positivity have been encouraging, but we recognize that we have some way to go to deliver on what we believe the business to be capable of.
Steven: The positive reception to our recent release has given us a real sense of satisfaction and provides us with a valuable seconds time it seem.
Steven: To be resonating with our customers within the first 36 hours of release on February 20, early access online AD lamond the ultimate sold as many units because we had projected for the AP 10 days, it's gone on to continually set appropriate expectations and we have revised internal forecast sales numbers to account for the higher than expected uptake.
Had anticipated with a strong tailwind selling 18000 copies in the clean 10 days.
Steven: In reality the reception was so strong that we sold more than 55000 copies. Our development team continues to push out fixes and updates to continually improve the product, which has resonated well with downloading. These green shoots are the result of an enormous effort droughts and prior to Q4 2023.
Steven: We're now pushing ahead with continued development of the tightrope throughout the remainder of this year.
Steven: Plan to bring exciting new content and features to the Lamont also may experience as well as complementary services, which we anticipate will GE cost provide additional revenue streams.
Steven: Grace control, how online service, providing multiply a functionality to all affected and know them on the ultimate game launched five months ago.
Steven: We continues to play an important role in the ecosystem. We are building around our product and is now broken through more than 100000 account registration up from 15000. The last time I reported on this call.
Steven: Reis control clients regular activity with our games to our future strategy around community and complementary services.
Steven: Enabling compensation around that gaming experiences even when a user is not playing games is important and to this end price control is expected to sit and have a more friendly interface, making accessible from any web browser.
Steven: With rates control users will be able to learn more about the games tips and tricks to get advice from the experiences become a burst effect should drive and move.
Steven: In time, our plan is to have users to be able to manage their account and experience from this site using any mainstream connected device desktop laptop tablet and phone.
Steven: Bringing those pumps made all factor too so successful across the needs of the landmark project has proven instrumental in landing the core gameplay experience.
Steven: We don't think to this technology now call as the basis for an engine, we own and expect to leverage existing and any new licensing opportunities as well as in time your titles.
Our licensing agreement with kindred concepts the panel the F. One arcade experience using our <unk> technology is one such area type of opportunity.
Steven: We are proactively exploring new ideas that may be a benefit to Mike spoke games.
F. One arcade rolled back to the U S. Boston later this month of April and we had been supporting this expansion to ensure our technology is experiencing the most positive way the focus for the year ahead is to continue building the positive momentum around our recent gain relates with new update additional services through greater control downloadable content.
Steven: And to tap into the highly valuable marketing opportunities.
Steven: For example, the actual 24 ounce of Lamont rates takes place in June.
Steven: We believe this will be another opportunity for increased visibility and sales, while among ultimate game as well as the perfect launch pad for anticipated reveal around the future of Lamont venture savings one of the world's most recent esports events over the last few years.
Steven: Now I would like to invite Stanley Beckley, our interim Chief financial Officer to talk about the financial results for the fourth quarter and full year 2023.
Stanley Beckley: Thank you Steven and good evening everyone.
Stanley Beckley: As with previous earnings calls I won't be off in any forward guidance today instead.
Instead, I will focus on providing an update on our financial results and highlights from the fourth quarter and full year 2023 revenues for the quarter were $1 7 billion down by $2 1 million or 53, 7% when compared to the same period in the prior year.
Stanley Beckley: Lower digital and weaker game sales with primary drivers for the decrease.
Stanley Beckley: And he's also know Nascar's games being released in fiscal year 2023.
Stanley Beckley: This decrease was partially offset by decreases to sales allowances as a result of lower game sales.
Stanley Beckley: Increases to downloadable content DLC.
Stanley Beckley: Typically related to the NASCAR heat size mix Gen updates DLC that was released in June 2023.
Net income for the quarter was $2 7 billion.
Stanley Beckley: An increase of seven 5 million when compared to the same period in the prior year.
Stanley Beckley: The increase in net income was primarily driven by lower cost of revenues and operating expenses required to develop and release additional new games.
Stanley Beckley: As well as a 3 million gain from the sale of the NASCAR licensed <unk> in October 2023.
Consequently, EPS for this quarter was 135.
Stanley Beckley: <unk> to negative $1 seven for the same period in the prior year.
Okay.
Stanley Beckley: The reduction in overhead spend was impact driven by actions taken under the company's 2022 restructuring program, which has helped us lower overhead costs.
Stanley Beckley: By approximately $6 7 million on an annualized basis as of December 31, 2023, exceeding our target of $4 million annualized savings by the end of 2023 <unk>.
These savings were achieved through changes in global head count.
Stanley Beckley: Have you seen setting overhead expenditures and improvement of internal processes.
Stanley Beckley: In addition to the 2022 restructuring program.
Stanley Beckley: On October 29, 2023, the company announced a father and his top two business due to its ongoing liquidity constraints.
Stanley Beckley: Now Smith confirmed the closure of the company's Australian development studio and resulted in a reduction of the company's workforce.
Stanley Beckley: Approximately 40 employees, the majority of whom were based in Australia, and the United Kingdom.
Stanley Beckley: Resenting approximately 40% of the company's global workforce.
Stanley Beckley: The company recorded restructuring expenses of approximately.
Stanley Beckley: 0.5 million related to the workforce reduction, primarily consisting of severance and redundancy costs in the fourth quarter of fiscal year 2023.
Stanley Beckley: We are reporting an adjusted EBITDA gain of zero point $5 million for the fourth quarter of 2023.
Stanley Beckley: <unk> adjusted EBITDA loss of $3 2 million for the same period in the prior year.
The improvements in adjusted EBITDA gain at the same as those discussed in this paper.
Stanley Beckley: The change in net income for the period and comparative quarter.
Stanley Beckley: Okay.
Stanley Beckley: Our full year 2023.
Revenues were $6 9 million down $3 4 million when compared to the prior year period.
Stanley Beckley: Mainly due to lower digital mobile and we could be in sales driven by lower volumes of sales as a result of known NASCAR games being released in fiscal year 2023.
Stanley Beckley: Net loss was $14 3 million for 2023 compared to $36 8 million for 2022.
Stanley Beckley: Adjusted EBITDA loss was $8 9 million for 2023.
Stanley Beckley: The improvement from the $21 2 million loss for 2022.
Stanley Beckley: Non cash asset impairment losses of 4 million and $9 6 million for 2023, and 2022, respectively accounted for a significant portion of the difference between net loss and adjusted EBITDA for the respective periods.
Stanley Beckley: Well as the $3 million gain on sale of the NASCAR license in October 2023.
Stanley Beckley: EPS loss of <unk> 2023 was five points or six compared to an EPS loss of 37 2022.
Stanley Beckley: As it relates to liquidity. This continues to be a key area of focus for the company.
Stanley Beckley: Net cash used in operations for the 12 months ended December 31, 2023 was approximately $12 9 million, representing an average monthly net cash burn from operations of $1 1 million.
Stanley Beckley: Down 0.5 million when compared to the average monthly cash burn of $1 6 million for the year ended December 31 2022.
Stanley Beckley: As of December 31, 2023, the company had cash and cash equivalents of one 7 million.
Stanley Beckley: Which decreased to $1 3 million as of March 29, 2024, which we believe is insufficient to fund operations over the next year and that additional funding will be required in order to continue operations.
In order to address this liquidity shortfall.
Stanley Beckley: <unk> actively exploring several options, including but not limited to.
Stanley Beckley: Additional funding in the form of potential equity and debt financing arrangement of similar transactions.
Strategic alternative swap business, including but not limited to the sale or licensing of our assets. In addition to the recent sale of our NASCAR license.
And further cost reduction and restructuring initiatives.
Stanley Beckley: Thank you all for your time and now I will turn the call back to Steven for closing remarks.
Steven: Thank you Stanley and thank you to those joining us today.
Steven: If there was anything to take away from what I expect today I'd like you to note that we felt like a games company again with.
Steven: The recent release of Lamont also much to a very receptive market. We're doing what we know best and I look forward to speaking further about this on our next call to discuss Q1 2024 results.
None: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad.
None: April comp technology with quest questions will be taken in the order received.
None: Should you wish to cancel your request. Please press star followed by the two if you're using a speaker phone. Please lift the handset before pressing mep's one woman. Please first question.
None: Your first question comes from the line of Jason <unk> from Canaccord Genuity. Please go ahead.
Jason: Great. Thanks for taking the question and congrats on the strong momentum surrounding the launch game release.
Jason: One thing I'm curious about maybe you could talk a little about how you marketed the game what channels performed really well it helps sort of demand outpaced expectations and you mentioned.
Jason: The upcoming race in June and how you plan to sort of.
None: The rate is around that maybe if there's anything else you can share around those plants, while there would be greatly appreciate it. Thanks.
None: Hi, Jason it's Stephen here.
Stephen Hood: Thank you for the question and good question.
Stephen Hoge: Hmm.
Stephen: We will very interested as to what the reception would be like for long title.
Stephen: Bearing in mind that hadn't been.
Stephen: Lamont gain for many years I think has about 20 years now so we're going to be treading new ground.
Stephen: And through the duration of the development projects ramped towards <unk> 23.
Stephen: We did sense that there was a very positive.
You can see the news around Lamont ultimate without us.
Stephen: Pretty much spending a dime on marketing.
Stephen: We knew that the rule kind of understanding and the willingness and the engagement from the community existed for this kind of title.
Stephen: And we think that's tallied, particularly well with.
Stephen: The new manufacturers coming back into the World of insurance Championship, which is built around Lamont and we've been surfing or wait. So you have seems like corroborating critically well lamborghini coming back into the space capacity with Porsche BMW right now so the world's big manufacturers or narrowing or maybe kind of.
Stephen: <unk> Clos and <unk>.
We've seen a huge upswell in interest in this championship and we assess that weight without really spending any money.
We've taken a more.
Stephen: Once the direct approach to engaging with the community would like to turn the page with the perception of much smaller games, which historically certainly through 2022 and most of 'twenty three it wasn't particularly strong.
Stephen: Instead of just trying to spend.
Stephen: Spend the dollars and.
Pushed the marketing message out there we've been very open and transparent with the kidney you will see and that seems to have done incredibly well. So we haven't been pushing typical marketing channels, but we've been engaging directly with consumers.
Stephen: Social platforms like discord.
Stephen: X and Facebook and this direct communication with.
The Ah.
Community and now consumers have Lamont ultimate has gone down incredibly well nothing because also shown a very different sites for the company that has meant that our consumers again discuss the delivery is much more games to a great extent sell them.
Stephen: It's been a lot of guerrilla marketing tactics and.
Stephen: We managed to pull that one off.
None: So really helpful corporate view.
None: One follow up but just in terms of the liquidity position and where everything stands today I know you guys laid out some of the potential options in the prepared remarks, but just wondering with the release of the game now behind you and some additional revenue coming in from that just wondering that bad at all that's changed the.
None: The strategy around.
None: Your cash position going forward.
None: Yes, hi.
None: And I can handle that.
None: So in the Grand scheme of things it hasn't.
None: Goodness out off the need to get more funding.
None: It helps a bit.
None: But the game has been released.
None: Just under a month and a half now.
None:
None: And.
None: We have some some relief there.
None: In short term in nature.
Dosing.
None: And you alluded to this in our 10-K that still does not leave.
None: We leave us the need.
None: They need to go out from a funding and to look at both.
None: <unk>.
Financing options.
None: We mentioned specifically.
Specifically no one of our footnotes in the 10-K.
None: So in the guidance from the banks, some short term relief, but.
None: I think we still under liquidity crunch, we still by managing expenses and that cash.
As much as we can.
None: For reference we had actually disclosed about 10-K $107 million cash on hand as of the end.
None: End of December.
None: And as of Friday, we had about $1 3 billion.
None: So the cash position has declined but.
None: I don't think it's completely turned around the fortunes of the company.
None: But it does look promising that Steven.
None: Steven alluded to.
None: It relates to the initial reception we received.
None: From the release of the game.
None: Great. Thank you very much.
None: If I can Jason if I can just add to that as well.
None: So you are asking about the marketing effort around the mall and the upcoming release in June.
None: It's very true that we see various peaks throughout the year being related to the calendar of the word insurance championship and in particular, the ammonia in June and we expect to do particularly well in terms of visibility. In addition to establishing those periods and the key thing to takeaway is that.
None: With Lamont.
None: Slow months out so we have a joint venture with <unk> the group behind Lamont to theirs.
None: A joint interest in trying to raise the awareness of the game.
None: Gain additional visibility and certainty with the immediate uptake to the product, which has taken us all by surprise.
None: The site.
None: The ACO and Lamont have been supporting us with additional appetizing on track and we have a great presence in the months.
None: There are some real benefits to this joint venture, which I think will.
None: Suddenly add fuel to the fire in terms of marketing visibility, which we intend to capitalize upon.
None: Great very helpful. Thanks, a lot.
Thank you and your next question comes from the line of Michael Konwinski from Noble capital markets. Please go ahead.
Thank you thanks for taking my questions.
Michael A. Kupinski: So I know if I was wondering if you can just give me an update on <unk>.
Michael A. Kupinski: I know that you went through this significant reduction of employee head count and closing some offices. What's left at this point, what do you have and where where are those offices located.
Michael A. Kupinski: Hi, Michael It's David Good question.
David: Let me throughout 'twenty, three as you're well aware, we were trying to refocus and reposition the business and one of the key takeaways for US was trying to.
Pick a path and follow it.
David: That meant trying to concentrate our efforts surround the long cycle, which we think is a springboard for the kinds of products and experiences that they intend to launch in future.
David: This concept of.
David: Racing games being built around community season team play rather than just individuals on their own dropping as fast as they can we believe in this being almost a festival of speed and enjoyment of racing and eventually driving and the focus was built tiny around.
David: <unk> hundred nine.
David: That was our peak SGD 307, our intently on development team.
We brought a much closer into multiple games and rallied around that operation. So that we could provide them with the infrastructure and the expertise that they needed to deliver what we knew they were capable of which is delivering great racing experiences using the technology become a factor and <unk>.
David: The engine that we own and that scaling back meant removing other operations that were working on other projects such as and detailed project, which was built almost entirely out of.
David: Australia and studios.
David:
Throughout 'twenty three we also closed our Russian office in Moscow folded all of those operations back. So that we can just concentrate on delivering a high quality product for us. It was a no brainer to deliver great games again.
David: And we needed to scale that back not only to save cost, but actually to give us the focus to concentrate on what is quality means so much more games and I think the amount of ultimate as a.
David: Great showcase of that strategy.
David: So.
David: Our employees now based in the U K R. R.
David: Is that correct.
None: Office now.
None: Okay.
None: Europe and the U K. These days as we have said Europe and UK after the split.
There are a lot closer to home to where I am with my accent in the UK.
None: Literally supporting team.
None: And the financial operation is still in the U S.
None: So we are at $24 seven companies still but although the development efforts and the marketing effort is UK and Europe.
None: Got you and in terms of just thinking about Lamont and bringing it to the next level.
None: I know that tournament.
The esport element of that is kind of important how do you.
None: How are you.
None: Plan to focus our tournament play and really kind of bringing the next level.
None: <unk> to the developing a community like that.
None: Where do you think you are and how.
Your plans are to develop that.
None: Great question Michael.
None: A lot of people ask us.
None: The route to success is to make more titles trust is not there.
None: That multiple games is really around building community and activity around the racing games in the driving experiences that we didn't launch they have to go hand in hand, you'll hear me talking a lot about building an ecosystem and that's quite simply because in this day and age.
None: Our client base expects to find events and tournaments and competitions daily activities and reasons to engage with the product online not just driving as a solar experience from the comfort of their home, but being connected in today's age means being part of a community.
None: That's why I'm very very excited about the race control platform that we have built on our own technology. This is the funnel to people playing our racing games with office. This is the funnel to becoming part of a team to rejoicing in the joy of driving.
None: Racing games and being part of a team having activities that is already in full flight with over 100000 people now subscribed to the system of rates control.
None: That means we have the community in one hand and.
None: And we have the game experience and the other one off this is based on our technology.
None: That obviously is incredibly powerful this is really the springboard for where we need to go at Lemont is only in something called early access right now which is industry speak for.
None: Almost being on the outside that's released to the public we've got a long way to go with the product facility and a very strong place because it's built off technology and a product that we had previously and I'll. Thank the team that we know what we're doing here.
None: The community now we've got to find ways to really bring those together and capitalize on it and one big springboard could be at the moment when we start talking about one of the world's biggest esports events.
None: Long virtual coming back and for US. This is not about trying prize money out there to attract the top 1% of professional esports players.
None: That is yesterday's needs, what we really care about is 99% of the player base.
None: One who aren't necessarily trying to be the fastest but want to be part of the community want to imagine fantasy of being a racing driver won't contribute to something and wanted to have fun and entertainment online that's very different from what people are typically running racing and sports previously and we think we're in a great great place to common stock.
None: This year.
That answer probably answers a portion of its next question. If you were flushed with cash.
None: Let's see the benchmark what would be the roadmap that an investor would expect from the company to then deliver profitability and move towards a growth platform.
None: There's many different pumps and I think we have to be quite flexible based on where we are today.
None: We're exploring many different.
None: Parks' forward different avenues different opportunities that come to the door and certainly the number of people coming to us offering opportunities <unk> has increased as we've managed to launch a new project, that's gone down, particularly well we've gone through the restructuring period of 'twenty, three which has been difficult for us all but that is.
None: Intended to set us on the right path and that is to make great products I think the important thing for US right now is to drive home that advantage around loan.
None: We really cant take our foot off the gas, it's gone down very well.
None: That's very positive reception the numbers are very good.
None: Now we have to drive home the product quality is many more things that we need to incorporate that and we can see a lot of people are still sitting on the fence as to fill up by and now I shall I buy and later with many more things that we need to do with it in terms of providing content and opportunities.
None: Essentially subscriptions to the race control service as well.
None: That's up and running and we've really got the wheel spinning around our ecosystem I think the further step will be something we're quite excited about which is utilizing the technology from Lamont ultimately in a new gaming experience, which is built around driving.
None: That's certainly one opportunity that we have in front of us, but on adamant that we have to get.
None: The near term.
None: Opportunities solidified and working properly before we expand.
None: We've made a mistake in the past and we're doing things correct now.
None: Without giving too much away I think we've got plenty of ideas.
None: You wanted to write that blank check Michael.
Michael: All right Steve. Thank you that's all I have today is.
None: Good luck. Thank you.
None: Thank you once again should you have a question. Please press Star then the number one on your telephone keypad.
None: There are no further question at this time. Please proceed.
None: There are no further question at this time.
None: Please proceed.
None: Okay I thought he was.
None: To close it closes out but I.
None: Thank you all for joining.
None: Appreciate your time.
None: Operator, I think we can close this out now.
None: Thank you that concludes your conference for today. Thank you all for participating you may all disconnect.
Thank you.
Okay.
None: [music].