Q1 2024 Motorsport Games Inc Earnings Call

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Thank you for standing by and welcome to Motorsports, Inc. First quarter 'twenty 'twenty four earnings call. As a reminder, today's conference is being recorded.

Operator: Thank you for standing by. And welcome to Motorsports Games, Inc.'s First Quarter 2024 Earnings Call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Ben Rossiter-Turner from Motorsport Games. Please go ahead. Thank you.

Operator: Now I'd like to turn the conference over to Ben Bressler, Terry Turner from Motor Sport Games. Please go ahead.

Ben Rossiter: Thank you, and welcome to Motorsport Games' first quarter 2024 earnings conference call and webcast. On today's call is Motorsport Games Chief Executive Officer Stephen Hood and Interim Chief Financial Officer Stanley Beckley. By now, everyone should have access to the company's first quarter 2024 earnings press release filed today after the market closed. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com.

Ben Rossiter: And welcome to <unk> first quarter 2024 earnings conference call and webcast.

Stephen Hood: On today's call is Mexico games, Chief Executive Officer, Stephen Hoge, and interim Chief Financial Officer has done exactly.

Ben Rossiter: By now everyone should have access to the company's first quarter 2024 press release filed today after market place.

Ben Rossiter: This is available on the Investor Relations section of Batesville games Web site at Www Dot Nike spoke Gamestop com.

Ben Rossiter: During the course of this call, management may make forward-looking statements within the meaning of U.S. federal security 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 statement made on this call or to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Ben Rossiter: During the course of this call management may make forward looking statements within the meaning of U S Federal Securities laws.

Ben Rossiter: These statements are based on management's current expectations and beliefs and involve risks and uncertainties of course actual results could differ materially from those described in these forward looking statements.

Ben Rossiter: Except as required by law.

Ben Rossiter: We undertake no obligation to update any forward looking statement made on this call alternate things or alter its forward looking statements whether as a result, you've mentioned future events or otherwise.

Ben Rossiter: Please refer to today's press release and company filings with the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended March 31, 2024, for a detailed discussion on certain risks that could cause actual results to differ from those expressed or implied in any forward-looking statement made today. In today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA, as we discuss the first quarter 2024 financial results.

Ben Rossiter: These research days.

Ben Rossiter: Press release and company's filings with the SEC.

Ben Rossiter: Including its most recent quarterly report on Form 10-Q for the quarter ended March. Thank you Paul Thank you Paul.

Ben Rossiter: Decent discussion on certain risks that could cause actual results to differ materially.

Ben Rossiter: Fast or implied in any forward looking statements made today.

Ben Rossiter: In today's conference call, we were assessing certain non-GAAP financial measures such as adjusted EBITDA.

Ben Rossiter: The first quarter <unk> financial results you.

Ben Rossiter: You will find a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures as well as other related disclosures in the press release issued earlier today. And now I'd like to turn over the call to Stephen Hood, Chief Executive Officer of Motorsport Games.

Ben Rossiter: You will find a reconciliation of these non-GAAP measures.

Ben Rossiter: The comparable GAAP measures as well as other relationships that exist in the press release issued earlier.

Ben Rossiter: Great.

Stephen Hood: And now I'd like to turn into Cogs.

Stephen Hood: Chief Executive Officer.

Stephen Hood: Okay Stephen.

Stephen Hood: Thank you everyone for joining this conference call today. I'm very pleased to be here and to talk to you about our achievements in Q1 2024. During the last call, I spoke about the release of Le Mans Ultimate in February, but we can now share greater insight into the financial and business impact of this important product release. Thanks to the tireless work of the team at Studio 397 and with the help of our partners at the ACO, the organization behind the 24 Hours of Le Mans, I'm pleased to announce that Public Reception 2 and that the sales of the game exceeded our business forecast.

Stephen Hood: Thank you everyone for joining this conference call today.

Stephen Hood: I'm very pleased to be here and talk to you about al Cheeseman in Q1 'twenty to 'twenty four.

Stephen Hood: During the last call I spoke about the release of the ultimate in February, but we can now share greater insight into the financial and business impact of this important product release.

Stephen Hood: Thanks to the tightest work with the team at <unk>.

Stephen Hood: And with the help with our partners that the ACO the organization behind the 24 hours of Lamont.

Stephen Hood: I'm pleased to announce the public reception to the sales of the game exceeded our business forecast.

Stephen Hood: Given the turnaround time from project start to release was less than 12 months, we can be very happy with the initial positive results for our first internally developed game launch since the difficult release of our NASCAR Ignition title over two years ago. A great deal has changed throughout the company since my return in April of last year, and I'm incredibly proud of the energy and determination of everyone within the business, pulling together to deliver and continue the expansion of this great game. We have proven we have what it takes to bring a quality product to market and to great reception.

Stephen Hood: Given the turnaround time from project start to release was less than 12 months.

Stephen Hood: We can be very happy with the initial positive results to our first internally developed game launch it's the difficult really to that next cognition tussle over two years ago.

Stephen Hood: A great deal has changed throughout the company since my return in April of last year, and I'm incredibly proud of the energy and determination of everyone within the business, putting together to deliver and continue expansion is quite good.

Stephen Hood: We have proven we have what it takes to bring a quality product to market with a greater section.

Stephen Hood: Much of this is down to a deep understanding of the technology employed to deliver Le Mans Ultimate, technology we own, as well as the vibrancy and determination across the organization to do what we are laser focused on, delivering innovative entertainment. This was an important milestone for our business and sets us up for the future. Le Mans Ultimate is based on a licensed series, featuring desirable racing pedigree sports cars. The series is undergoing a timely renaissance with incredible manufacturer entries into the real world sport.

Stephen Hood: Much of this is dance with deep understanding of technology employed skilled labor law.

Stephen Hood: Among the ultimate technology, we own as well as the vibrancy and determination across the organization to do what we are laser focused on.

Stephen Hood: Delivering innovative entertainment.

Stephen Hood: This was an important milestone for our business.

Stephen Hood: In the future.

Stephen Hood: Lamont Ultimate is based on a license.

Stephen Hood: Featuring desirable racing pedigree sports car series under Gary timely Renaissance with incredible manufacturer entries into the real World Sport.

Stephen Hood: Automotive giants such as Ferrari, Porsche, and Cadillac are all competing at the top end of the sport, all of whom have been incredibly supportive during the creation of this game. It is our belief that this game now offers the potential springboard from which to launch future downloadable content or DLC, as well as the development of a console port with the right partner to address what we know to be a much larger gaming audience for the title. With the right focus and ongoing development, we believe we could have a valuable gaming franchise ahead of us. One that leverages the technology, the services, and know-how we have within our business.

Stephen Hood: Automotive Giants, such as Ferrari, Porsche and Cadillac and competing at the top end of the sports all of whom have been incredibly supportive during the creation of this game it.

Stephen Hood: It is our belief that this game now offers the potential springboard.

Stephen Hood: Which to launch future downloadable content or DLC as well as development of a console port with the right partner to address what we know to be a much larger catering orders for the title.

Stephen Hood: With the right focus and ongoing development. We believe we could have a valuable gaming franchise ahead of us.

Stephen Hood: One that Leverages, the technology services and Knowhow, we have within our business.

Stephen Hood: Development of Le Mans Ultimate continues at a pace; we're crafting a game into a unique and exciting proposition for a wide range of players. In June this year, the month of the fabled 24 hours of Le Mans race, we anticipate a unique marketing window will be further amplified by the visibility the ACO is expected to provide. With racing fans around the world watching the Greatest Endurance event, we expect our game will be featured throughout the week-long Festival of Race. At the same time, we plan to update the game with a free update that blurs the line between solo and online play.

Stephen Hood: Development of Lamont ultimately continues to pace.

Stephen Hood: Crafting a game into a unique and exciting proposition so wide range of players in.

Stephen Hood: In June this year the market the fabled 24 hours of Lamont rate, we anticipate a unique marketing window will be further amplified by the visibility the acos are expected to provide.

Stephen Hood: With racing fans around the world watching the great you've seen guarantee then we expect al game will feature throughout the week Long Festival live racing.

Stephen Hood: At the same time, we plan to update the game with a scrip uptake.

Stephen Hood: Blurs the line between solo and online play.

Stephen Hood: In a world of near infinite choice and countless apps, games, and entertainment services vying for consumer attention, we intend to update Le Mans Ultimate with a cooperative feature not typically found within racing games. Our co-op feature is designed to enable up to three friends, as many drivers as there are per team in the real-life Le Mans, to play through chapters of a race, taking turns to drive the car in an ever-evolving story against AI teams.

Stephen Hood: In a world of infinite choice and countless apps games and entertainment vying for consumer attention.

Stephen Hood: We intend to update them on long Tonight.

Stephen Hood: Or what party feature not typically found within racing game.

Stephen Hood: Our core features designed to enable up to three friends as many drive visits they're all putting them in real life. The mom to play two chapters of our rate taking tends to drive the car in an ever evolving story against AI teams.

Stephen Hood: We believe this feature will enable a wider section of racing gamers to enjoy the unique entertainment of endurance racing without the burden of being online at the same time as their friends. We all have busy lives, and Le Mans Ultimate will fit into that so that you can play when you want and still be part of the conversation with friends. Additionally, we're investigating and developing a number of concepts to enhance our ecosystem through the use of AI or artificial intelligence. Well, the technology sector is awash with stories of cost-saving opportunities through the use of AI. We already run an efficient operation.

Stephen Hood: We believe this feature will enable a wide section of racing games to enjoy the unique entertainment and jewelry.

Stephen Hood: Without the burden being online at the same time frame.

Stephen Hood: We all have busy lives and Lamont ultimate well fits into that so that you can play when we want and still be part of a conversation with a friend.

Stephen Hood: Additionally, we are investigating and developing a number of concepts to enhance our ecosystem through the use of AI or artificial intelligence.

Stephen Hood: And as such, we have been exploring how AI might benefit both storytelling and representation of the people within the sport we recreate. Today, the games industry uses basic AI parameters and decision making to drive cars around a track and avoid obstacles. But we are working on bringing the virtual drivers up to a whole new level of realism. AI drivers have the skills and dynamic decision-making abilities that will bring players closer to real life than ever before; players will find themselves more immersed in the story that runs deep through motorsport, and they will find themselves subject to virtual media attention curated and reported on by AI reporters and commentators. All of this will be enhanced by our ecosystem, which puts as much focus on the pre- and post-race as the race itself.

Stephen Hood: Well, it's the technology sector is awash with stories of cost saving opportunities through the use of AI, we already run an efficient operation and as such we have been exploring how AI might benefit the storytelling and representation of the people within the sport we recreate.

Stephen Hood: Today, the games industry uses basic parameters and decision, making to drive calls around the track and avoid obstacles.

Stephen Hood: But we are working on bringing central drive that's up to a whole new level of religion.

Stephen Hood: <unk> is complete with skills and dynamic decision, making ability that will bring players closer to real life.

Stephen Hood: Before.

Stephen Hood: Players will find themselves more in asking the story that runs deep through amongst school and they will find themselves subject to virtual media attention Uhm reported on by I reported in condensate.

Stephen Hood: All of this will be enhanced by our ecosystem, which puts as much focused on the pre and post race.

Stephen Hood: So.

Stephen Hood: Much of our future development of complementary services and entertainment is built around our vision for accessible yet highly realistic racing experiences. Experiences that can be enjoyed with friends, where players feel part of the racing story. We also plan to introduce new content for the game, where the current game contains the tracks and cars from the prior season, the centenary of Le Mans last year. We know from our player base that they want to see the game updated to include the changes for this season.

Stephen Hood: Much of our feature development of complementary services team is built around our vision for accessible yet highly realistic racing statements.

Stephen Hood: Is that can be enjoyed with brands like play is so powerful.

Stephen Hood: Sorry.

Stephen Hood: We also plan to introduce new content, where the current game contains the tracks and calls from a prior season. The centenary of demand last year, we announced MA plan they want to see the game.

Stephen Hood: So we think the changes to the seat.

Stephen Hood: We plan on releasing a steady flow of content through the second part of this year. The initial piece of this new content will be free, as will other select items, as a thank you to the community that has given us great support through the purchase of our game during Early Access.

Stephen Hood: We plan on releasing a steady flow of content to the second part of this year.

Stephen Hood: The initial piece of this new content will be free as well as a select box.

Stephen Hood: It keeps the community that has given us great support to touch sale gains during early access.

Stephen Hood: We expect premium paid content will then be made available shortly thereafter, which we believe will offset the cost of ongoing development and broaden the appeal and uniqueness of our officially licensed timeslot. Furthermore, we are bringing a subscription service to both R Factor II and Le Mans Ultimate products, leveraging our race control platform which has over 100,000 registered users all playing within our ecosystem. A gradual ramp-up of subscriptions is expected as we build the value proposition for players looking to get even more entertainment out of this exciting experience.

Stephen Hood: We expect premium paid content will then be made available shortly thereafter, which we believe will offset the cost of ongoing development and broaden the appeal and uniqueness or issued likely council.

Stephen Hood: Furthermore, we are paying a subscription service to both <unk>, two and the mono products.

Stephen Hood: Leveraging our rights control platform, which has got about 100000 registered users playing within our ecosystem.

Stephen Hood: A gradual ramp of subscriptions is expected as we build the value proposition players looking to get even more containment outlook that's exactly true.

Stephen Hood: Although we believe a free component of the online race control offering will continue, it is up to us to convince players of the value presented by a subscription service. With the games, technologies, online service, and our plans for Le Mans Virtual, one of the biggest racing e-sports events in the world, we believe we finally have the pieces in place to soon derive greater revenues from complementary services built around our core games.

Stephen Hood: Although we believe the free component of the online waste control offering will continue it is up to us to convince players of the value presented client subscription service with.

Stephen Hood: With the games technologies online service and our clients are among virtual one of the biggest racing esports events in the World. We believe we finally have the pieces in place to see derive greater refuge from complimentary sense, it's built around our core game.

Stephen Hood: Aside from the success of our recent game release, we continue to make progress towards business efficiency and an improvement of our balance sheet. We recently announced the settlement of the previous license dispute and liability with BARC, TOCA Ltd, the exclusive promoter of the BTCC, which is the British Touring Car Championship, for a significantly reduced figure. We have also entered into a new licensing deal with them, which we expect will lead to further releases of official BTCC downloadable content for R Factor 2.

Stephen Hood: Aside from the success of our recent Ganguly.

Stephen Hood: We continue to make progress towards business efficiency, and an improvement of our balance sheet.

Stephen Hood: We recently announced the settlement of the previous license dispute liability with D. A L. C. T O C. A total limited exclusive promote shows the D. T C, which is the British truing cockpit quite.

Stephen Hood: <unk> significantly reduced figure.

Stephen Hood: We also entered into a new licensing deal with them, which we expect will lead to further releases like tissue P. T SEC downloadable content for off attitude.

Stephen Hood: This deal is beneficial to both parties, and we are grateful to our partners at the British Touring Car Championship, whom we are pleased to be working with again. This was a positive step, one of many undertaken over the last several months.

Stephen Hood: This deal is beneficial to both Barclays and we are grateful to our partners as it will just shrink auction to chip and we are pleased to be working with again. This was a positive step one of many undertaken over the last couple of months.

Stephen Hood: Additionally, last week we sold the assets relating to Traction, our previous motorsport and racing games community content platform, to a third party for $250,000 in total consideration. I previously announced we had closed this outlet in Q3 2023, and the failure of this asset brings yet more focus for the company on creating high-quality racing games along with additional working capital. We retain the right to use the channels for future Le Mans virtual esports events to ensure that they receive the reach they deserve when the award-winning competition returns.

Stephen Hood: Additionally, last week, we sold the assets related to traction our previous much sports and racing games community content platform to a third party because $250000 in total consideration.

Stephen Hood: Our previously announced we had close to Q3 2023 and the sale of this asset brings it more focus for the company on creating high quality racing games, along with additional working capital.

Stephen Hood: We retained the rights to use the channels with each of them among virtual esports events to ensure that they received the beach. They decide when the award winning competition is intense.

Stephen Hood: Yeah.

Stephen Hood: In the past, I've made a number of references to what we believe to be a somewhat fragmented timbering landscape, where established game developers bring products to market which are then kept current and made more accessible by smaller, oftentimes amateur, teams with additional content and services, from new cars to tracks, learning aids, news and discussion platforms, promoting a sense of community and even car setups, the latter enabling players to focus on driving and less We are now gearing up to provide access to our ecosystem and games through official partnerships, integrating suppliers of services and content.

Stephen Hood: In the past.

Stephen Hood: Made a number of references to what we believe to be a somewhat fragmented landscape.

Stephen Hood: Atmos game developers bring products to market, which are being kept current and made more accessible by smaller oftentimes and teams with additional content and services.

Stephen Hood: Some new cost attracts learning aid news and discussion platforms promoting a sense of community and even costs eclipse the latter enabling players to focus on driving and less so on the engineering element of motor sport.

Stephen Hood: We are now gearing up to provide access to our ecosystem and gains to official partnerships integrating suppliers that says it's taken content, we ourselves do not intend to talk about resources to building.

Stephen Hood: We ourselves do not intend to divert resources to building. This should provide a cleaner, more accessible environment for customers and bring additional revenue into reach. But perhaps more importantly, it will enable us to elevate the experience across our games. Just recently, we signed Cast Up Specialist, Coach Dave Academy, as a preferred supplier of alternative setups for Le Mans Ultimate, offered directly from within the game.

Stephen Hood: This should provide a cleanup more accessible environment for customers and bring additional revenue to reach.

Stephen Hood: Perhaps more importantly, it will need loves to elevate the experience across all games.

Stephen Hood: Just recently, we signed cockpit up, especially coach days Academy as a preferred supplier who tend to spend among ultimate.

Stephen Hood: Directly from within the game we.

Stanley Beckley: We expect other service providers to come on board once this partnership is fully rolled out in the summer. These partnerships could provide another source of revenue for the business and elevate our ecosystem to be best in class, where innovators within our space join forces with Motorsport Games and Studio 397 to make sim racing stronger tomorrow. In time, we would expect to bring online a marketplace for new content and services that are considered non-competitive, rather than additive to our own business objectives.

Stephen Hood: We expect other service providers to come on board once its pump shipped it's fully rolled out in the summer.

Stanley Beckley: These partnerships could provide another source of revenue split thickness and elevate our ecosystem to be best in class.

Stanley Beckley: Wait interfaces with enhanced space joined forces much sport games that she gave Kevin to make simulation stronger tomorrow.

Stanley Beckley: In time, we would expect to bring online a marketplace for new content.

Stanley Beckley: I'll consider noncompetitive rather attitude.

Stanley Beckley: Business objectives.

Stanley Beckley: In the year since I returned to the company, to a business which at times struggled with identity and purpose, we have made tremendous progress. We have strategically repositioned the company around chosen IP and our best development team, enhanced focus, eradicated unnecessary spending, and put in place cost control measures, all whilst resolving certain outstanding liabilities relating to our prior license. We have launched a successful game, a partnership with F1 Arcade and Kindred Concepts that results in recurring licensed revenue for our technology and expertise. We believe we have several potential near-term revenue opportunities that are additive to our core focus, which we anticipate coming online over the course of 2024.

Stanley Beckley: EMEA returned to the company, so a business, which at times struggling with identity and purpose. We have made tremendous progress we have strategically repositioned the company around chosen.

Stanley Beckley: And our best development team enhanced focus eradicated unnecessary spending and put in place cost control measures all walks to resolving certain outstanding liabilities relating to a prior licenses.

Stanley Beckley: We have launched a successful game.

Stanley Beckley: The ship with Athlon arcade and kindred concepts that we don't see recurring license revenue for our technology and expertise and believe we have several potential near term revenue opportunities that are additive to our core focus, which we anticipate coming online over the course of 2024.

Stanley Beckley: It has not been easy, but it has been rewarding for us all, and we feel there is more to come. Our goal is to be a developer and publisher of highly innovative experiences, all connected to and enhanced by our ecosystem, at the heart of which is the rapidly growing race control service. Now, I would like to invite Stanley Beckley, our Interim Chief Financial Officer, to talk about the financial results for the first quarter of 2024.

Stanley Beckley: It has not been easy, but it has been rewarding for us.

Stanley Beckley: We feel there is more to come our goal is to be a developer and publisher of highly integrated experiences all connected to and in homes.

Stanley Beckley: Our ecosystem.

Stanley Beckley: Part of which is the rapidly growing voice control service.

Stanley Beckley: Now I would like to invite Beckley, our interim Chief financial Officer to talk about the financial results for the first quarter of 2024.

Stanley Beckley: Thank you, Stephen, and good evening, everyone. As with previous earnings calls, I won't be offering any forward-looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the first quarter of 2024. Revenues for the quarter were $3 million, up by 1.3 million or 75.2% when compared to the same period in the prior year. Digital game sales were the primary driver for this improvement, primarily as a result of the release of Le Mans Ultimate on PC in February 2024. This was further driven by an increase in revenues earned through the development of simulation platforms for third parties.

Stanley Beckley: Yeah.

Stanley Beckley: Thank you Steven and good evening everyone.

Stanley Beckley: As with previous earnings calls I want to be awfully any forward looking guidance to be in.

Stanley Beckley: The net loss for the quarter was $1.7 million, an improvement of $3.6 million when compared to the same period in the prior year. The decrease in net loss was primarily driven by high gross profit and low operating expenses required to develop and release additional new games. Consequently, EPS for the quarter was negative 0.60 compared to negative 2.33 for the same period in the prior year. We are reporting an adjusted EBITDA loss of $0.4 million for the first quarter of 2024 compared to an adjusted EBITDA loss of $4.3 million for the same period in the prior year.

Stephen Hood: Ted I'll focus can provide an update on our financial results and highlights from the first quarter of two.

Stanley Beckley: 2024.

Stanley Beckley: So revenues for the quarter with $3 million.

Stanley Beckley: By $1 3 million or 75, 2% when compared to the same period in the prior year.

Stanley Beckley: Hi, digital game sales were primary drivers for this increase.

Stanley Beckley: Mainly as a result of the beliefs of ultimate game PC to February 2024.

Stanley Beckley: This was further driven by an increase in revenues earned through the development of simulation platforms.

Stanley Beckley: For third parties.

Stanley Beckley: Net loss for the quarter was $1 7 million.

Stanley Beckley: <unk> of $3 6 million when compared to the same period in the prior year.

Stanley Beckley: The decrease in net loss was primarily driven by higher gross profit and lower operating expenses required to develop and release additional new games.

Stanley Beckley: Consequently, EPS for the quarter was negative 0.60 compared to negative two points to each week for the same period prior year.

Stanley Beckley: Yeah.

Stanley Beckley: We are reporting an adjusted EBITDA loss of <unk> 4 million for the first quarter of 2024.

Stanley Beckley: <unk> adjusted EBITDA loss of $4 2 million for the same period in the prior year.

Stanley Beckley: The improvements in adjusted EBITDA losses are the same as those discussed in respect of the change in net income for the period and comparative quarter, as well as a decrease in stock-based compensation compared to the prior year period.

Stanley Beckley: The improvement in adjusted EBITDA loss the seamless those these costs in respect of the change in net income for the period and comparative quarter as well as a decrease in stock based compensation compared to the prior year period.

Stanley Beckley: As it relates to liquidity, this continues to be a key area of focus for the company. Net cash used by operations for the three months ended March 31st, 2024 was approximately $0.8 million, representing an average monthly net cash burn from operations of $0.3 million, down $1.6 million when compared to the average monthly cash burn of $1.9 million for the three months ended March 31st, 2023. As of March 31, 2024, the company had cash and cash equivalents of $1.3 million, which we believe is insufficient to fund our operations over the next year and that additional funding would be required in order to continue operations.

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 three months ended March 31, 2024 was approximately <unk> million representing.

Stanley Beckley: Representing an average monthly net cash burn from operations of <unk> 3 million.

Stanley Beckley: Down $1 6 million when compared to the average monthly cash burn of $1 9 million for the three months ended March 31st 2023.

Stanley Beckley: As of March 31st 2024, the company had cash and cash equivalents of $1 2 million, which we believe is sufficient to fund our accretion over the next year and that additional funding will be required in order to continue operations.

Stanley Beckley: In order to address this liquidity shortfall, we are actively exploring several options, including, but not limited to, additional funding in the form of potential equity and or debt financing arrangements or similar transactions; strategic alternatives for our business, including, but not limited to, the sale or licensing of our assets, in addition to the recent sale of a NASCAR license and traction, and further cost reduction and restructuring initiatives. Thank you all for your time. And now, I will turn the call back to Stephen for his closing remarks. Thank you.

Stanley Beckley: In order to address this included the shortfall we are actively exploring several options, including but not limited to <unk>.

Stephen Hood: <unk> funding.

Stanley Beckley: Potential equity and debt financing arrangements similar transactions.

Stanley Beckley: Strategic alternatives for our business, including but not limited to the licensing of our assets.

Stanley Beckley: The recent sales of our NASCAR license interaction.

Stanley Beckley: Further cost reduction and restructuring initiatives.

Stephen Hood: Thank you all for your time and now I will turn the call back to Steven for closing remarks.

Stephen Hood: Thank you, Stanley, and thank you to those joining us today. We've worked hard over the last 12 months, and the result is an upturn in our Q1 results. We still have some way to go, but I would hope you'd agree we've turned the page and have positive momentum. We're excited about the remainder of this year, and in particular, the upcoming Le Mans event in June. Thank you.

Stephen Hood: Thank you Stanley and thank you to those joining us today, we've worked hard over the last 12 months and the result is an upturn in our Q1 results we.

Stephen Hood: We still have some way to go but I would hope you would agree we've turned the page and have positive momentum.

Stephen Hood: We're excited about the remainder of this year and in particular the upcoming in the money then in June.

Stephen Hood: Keith.

Operator: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.

Stephen Hood: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star to once again that is star. One if you would like to ask a question. We will take our first question from Jason <unk> with Canaccord. Your line is open.

Operator: Once again, that is star and one if you would like to ask a question. We will take our first question from Jason Tilchen with Conachord. Your line is open.

Jason Ross Tilchen: Great. Thanks for taking the question and congrats on the strong launch for Le Mans Ultimate. I think one question I had on the remarks you gave there, in terms of the console opportunity, I'm curious, what does that sort of look like? Where is that on the priority list? Do you currently have the capabilities in-house to sort of develop the console version of this game and what the timeline may look like for eventually getting that launch done?

Jason Ross Tilchen: Great. Thanks for taking my question and congrats on the strong launch for Lemont is ultimate.

Jason Ross Tilchen: I think one question I had on the remarks, you gave there.

Jason Ross Tilchen: In terms of the console opportunity I'm curious.

Jason Ross Tilchen: What does that sort of look like where is that on the priority list do you currently have the capabilities in house.

Jason Ross Tilchen: Sort of develop the console version of this game and what the timeline may look like.

Jason Ross Tilchen: For eventually getting that launched.

Stephen Hood: Hi Jason, it's Stephen. Very good question. I think one of the things that should be clear in my remarks from earlier are the intent to focus, and the development team that we have internally right now in Studio 397 have been the wonderful team that have managed to develop Le Mans Alternate in what I consider to be record time and to a really kind of high quality level and that as much of that has come down to the focus that we have Blavishly demanded of everybody in the business and I think the near-term opportunity around console development is something that I don't think we have to bring internal in its entirety.

Speaker Change: Hi, Jason and it stays in a very good question.

Stephen Hood: I think one of the things that should be clear and my remarks earlier on the intent to focus and the development team that we have internally right now and she has been uncertain. That's been wonderful team that manage to develop pneumonia Tonight and what articulates a feedback all the time and to really kind of a high quality level.

Stephen Hood: As much of that has come down to the focus that we have claims.

Stephen Hood: Clay visually demanded of everybody in the business.

Stephen Hood: I think the near term opportunity around console development is something that I.

Stephen Hood: I don't think we have to bring in tunnel in its entirety. What are we would intend to do and certainly one of the things that we've been discussing with external potential partners is.

Stephen Hood: What I would intend to do, and certainly one of the things that we've been discussing with potential external partners, is leveraging some of the resources and the technical know-how that we have internally but ensuring the heavy lifting is done externally. There are many, many partners that we can go to in our space right now where they have the ability to bring these products across to console. I don't want the expense of managing the entire thing internally. I think we do it cost-effectively and professionally by relying on and utilizing other partners in the industry space, if that gives you some color to... I'll teach you a question.

Stephen Hood: Leveraging some of the resource and the technical Knowhow that we have internally, but ensure the hibbett has done externally. There are many many partners that we can can't can't go too you know states right now where.

Stephen Hood: It has the ability to bring these products across two console.

Stephen Hood: I don't want the expense of managing the entire thing internally I think we'd do it cost effectively professionally by relying on and utilizing other partners in the industry space.

Stephen Hood: Is that give you some color too.

Speaker Change: So to your question.

Stephen Hood: Yeah, absolutely, that makes sense. And another thing you touched on in your prepared remarks was the opportunity around subscriptions. I was hoping you could maybe dive a little bit more into sort of the differences between what sort of is offered in the free race control currently and what sort of a subscription would look like, how you sort of view that opportunity both within Le Mans Ultimate and then, obviously, from a broader perspective as well.

Speaker Change: Yeah, absolutely that makes sense.

Stephen Hood: And another thing you touched on in the prepared remarks with the opportunity around subscriptions and I was hoping you could maybe dive a little bit more into sort of the differences.

Stephen Hood: Between what sort of is offered in the free risk control currently and what sort of a subscription would look like.

Stephen Hood: You sort of view that opportunity both within the lines. The ultimate and then sort of obviously from a broader perspective as well.

Stephen Hood: Yeah, sure. One of the commitments we've made to the community that is playing Le Mans on Smoke right now is that we've been very price conscious. I think we've come out of the gates with a very attractive product at a very attractive price point, and that's done wonders for us and certainly built positive community sentiment. One of the things that we're intent on doing is still providing a free gateway into the title. We are very confident in the experience and the entertainment value of Le Mans Ultimate. It doesn't make any sense for us to put a brick-like paywall in front of users.

Speaker Change: Yeah sure I mean, one of the commitments we make to the.

Stephen Hood: At community that all playing lamons smoke right now is.

Stephen Hood: Are you seeing price conscious I think we've come out of the gate with a very attractive product at a very attractive price point and that's done wonders for us and certainly feel positive community sentiment one of the things that we intend on doing is still providing a great gateway into the cycle. We are very confident in the experienced entertainment value of it.

Stephen Hood: I'm on Altamont it doesn't make any sense for us to put bricks kind of paywall. We're in front of US we know that if we start experiencing the manav that want to come back to some more what we're trying to do is ensure that that value proposition is really attractive to users that want to get even more entertainment value from the product I'm wondering it seems that we're trying to do is.

Stephen Hood: We know that if they start experiencing Le Mans Ultimate, they want to come back for more. What we're trying to do is ensure that that value proposition is really attractive to users that want to get even more entertainment value out of the product. And one of the things that we're trying to do is encourage groups of players to compete and participate together. That is really important in the racing space, where most of the time only one person can win and friends become enemies.

Stephen Hood: Encourage groups of players to compete and participate together that is really important in the racing space, where most of the time only.

Stephen Hood: Only one person can win.

Stephen Hood: And trends become enemies were encouraging groups different play online.

Stephen Hood: We're encouraging groups of friends to play online, which is very common in our young popular console and PC games today, but not really in the racing space. We're trying to change that. So one of the upsells is, if you decide to take one of these subscription tiers and you're willing to participate in this kind of recurring opportunity, we are going to amplify the sense of being part of a team. You may have heard me referencing some of the AI systems that we're looking to employ that tell a story around your participation in the race.

Stephen Hood: Which is very common in a young.

Stephen Hood: Popular console and PC games today, but not really in the racing Stakes and were trying to correct that the one of the up sells it.

Stephen Hood: If you decides to take one of these subscription tiers and you're willing to participate in this kind of a recurring opportunity we.

Stephen Hood: We are going to amplify the sense of being part of a team you will have heard me referencing some of the AI systems that were looking to employ that tell a story around your participation in the rates. These things will become available to us if one of the people in the group decides to subscribe. So we're looking at the bigger.

Stephen Hood: These things will become available to you if one of the people in the group decides to subscribe. So we're looking at the bigger resource and bigger pocket of a group rather than necessarily individuals. So we're looking at very innovative ways of trying to make the subscription a must-have for people that really want to get more from this experience. But we are not making it a requirement to participate and contribute online, if that makes sense.

Stephen Hood: Resourcing pick a pocket of a group rather than necessarily individuals. So we're looking at very innovative ways of trying to make the subscription a must have for people that really want to get more from this experience, but we are not making it a requirement to participate and contribute online if that makes sense.

Stanley Beckley: Yep, absolutely, that's very helpful. And then one last question I had is, in terms of the overall cost savings, obviously, we saw a significant year over year improvement in the net EBITDA loss. I'm just curious, sort of, in terms of obviously, the 2022 restructuring and then some of the moves you made in the second half of last year, just sort of in terms of the full impact of those savings relative to what we saw in Q1, is there sort of more further improvement in terms of cost savings from here? Or have we sort of reached a point where the moves that have already been made are now sort of fully reflected in the financial performance?

Speaker Change: Yes, absolutely that's very helpful. And then one last question I had is in terms of the overall cost savings.

Stanley Beckley: We saw significant year over year improvement on the net.

Stanley Beckley: And that EBITDA loss I'm, just curious sort of in terms of obviously the 2022 restructuring and then some of them loose you made in the second half of last year, just sort of in terms of the full impact of those savings relative to what we saw in Q1 is there sort of more further improvement in terms of cost savings from here or are we sort of reached a point where that the.

Stanley Beckley: It moves that have already been made are now sort of fully reflected in the financial performance.

Stanley Beckley: Yes, I'll take this one, Stanley. So, you know, the 2022 restructuring program that you mentioned. I think by the end of 2023, we would have fully realized the benefits of that. As we disclosed in our Form 10-K, we had restructurings that impacted Australian development studios and some UK employees as well in Q4 of 2023. I think at this point, you know, from Q1, we're down to a monthly operating cash burn of about $300,000, significantly lower than Q1 of last year.

Speaker Change: Yes, I think Thats what Stanley.

Stanley Beckley: So the 2022 restructuring program that you mentioned I think.

Stanley Beckley: By the end of 2023, we had fully realized the benefits of that.

Stanley Beckley: As we disclosed in our Form 10-K, we had.

Stanley Beckley: Two items that impacted.

Stanley Beckley: Australia Development studios, and even some Utica employees as well in Q4.

Stanley Beckley: Fall of 2023.

Speaker Change: I think at this point.

Stanley Beckley: For Q1 were down too.

Stanley Beckley: Lastly, operating cash burn of about $300000.

Stanley Beckley: Significantly lower than Q1 of last year.

Speaker Change: I think at this point, we've sort of fully realized that.

Stanley Beckley: I think at this point, we've sort of fully realized the benefits of the restructuring program, but we still continue to look at other ways where we can, you know, reduce our current expenses where it makes sense to do so, and it's feasible without harming the business.

Stanley Beckley: Great.

Stanley Beckley: With talks on corn program, but we still continue to see.

Stanley Beckley: Look at all the ways, where we can.

Stanley Beckley: <unk> expenses, where it makes sense to do so feasible without that Cummins goodness.

Stanley Beckley: Yeah.

Jason Ross Tilchen: Great. Thank you very much for taking the questions.

Speaker Change: Great. Thank you very much for taking the questions.

Jason Ross Tilchen: Okay.

Michael A. Kupinski: Thank you. We'll take our next question from Michael Kupinski with Noble Capital Markets. Your line is open.

Jason Ross Tilchen: Thank you we'll take our next question from Michael <unk> Co Pinsky with noble capital markets. Your line is open.

Michael A. Kupinski: Thank you, and congratulations on your quarter and your release. Stephen, I was wondering if you could review the roadmap again for the release of games, DLCs, and the subscription service in particular? Like, what would be, what quarters would you be able to kind of identify when those will be available?

Michael A. Kupinski: Thank you and congratulations on your quarter.

Michael A. Kupinski: In your release, Steve, but I was wondering if you can review for me the roadmap again for the release of games D. L. CS and the subscription service in particular.

Michael A. Kupinski: Like what would be what.

Michael A. Kupinski: Quarters would you be able to kind of identify windows will be available.

Stephen Hood: The real key is when the first piece of content arrives, and we're looking to coincide that with the Le Mans event in June. So next month is not far away at all.

Stephen Hood: Well the real key is is when necessity.

Stephen Hood: Pizza continuing to rise and we're looking to coincide with.

Stephen Hood: But that, for us, is the next stepping stone in the progress and the roadmap of the Le Mans Ultimate experience. As you've heard me reference, it has the 2023 season content in there. Understandably, our audience is saying, well, we're watching the 24 season now.

Stephen Hood: With the money than June so.

Stephen Hood: Next month, it's not far off.

Stephen Hood: Weigh in too but that for us if the next stepping stone in our progress and the roadmap of the monarchy that experience, where you've heard me reference. It has the 2023 season content and understandably our audience is saying.

Stephen Hood: The 24 season now we want to put out to be as current as possible, especially has been causing manufacturers coming to school drive changes and whatnot that people are looking to be reflected.

Stephen Hood: We want the product to be as current as possible, especially as there are new cars and manufacturers coming into the sport, driver changes, and whatnot that people are looking to see reflected. The calendar and the circuits and whatnot. So the first piece of content comes online in June, and pretty much every two or three months, we're looking to launch additional content, ideally in packs. So there may be a new car arriving in June.

Stephen Hood: The calendar on the circuits and whatnot. So the first piece of content comes online in June.

Stephen Hood: So pretty much.

Stephen Hood: Maybe two or three months, we're looking to launch additional content ideally in packs.

Stephen Hood: There may be new car rising in June after that we're looking at new circuits and then we start to update the content to make it more current CD 24 season with the different categories of cost that are online.

Stephen Hood: After that, we're looking at new circuits. And then we start to update the content to make it more current to the 24 season with the different categories of cars that are online. So for us, um it's really about trying to conclude this year and ensure that by the end of 24 we have the entirety of the 2024 calendar the circuit and the cars incorporated in the product so that really gives us six months to be rolling this out and we think um there's no great urgency in that um because we have the entirety of the 23 season if not as if we came out as a very very thin game with very limited content there's an enormous amount of content in there in terms of the tracks and the cars and the variety on offer for established players and new people coming in over time but uh June is when it really starts so um we're about five weeks away from the start

Stephen Hood: Ross.

Stephen Hood: It's really about trying to conclude this year and ensure that by the end of 'twenty four we have the entirety of the 2020 for calendar <unk>.

Stephen Hood: It has the calls and coal prices in the product so that really gives us six months to be rolling this out and we think.

Stephen Hood: There's no great urgency in that.

Stephen Hood:

Stephen Hood: Because we have the entirety of the 23, so it's not as if we came out with very very couldn't game with very limited content. There's an enormous amount of content and then in terms of the tracks and causing the variety on offer for established players and new people coming in.

Stephen Hood: Gotcha. And when do you anticipate the subscription service to be launched?

Stephen Hood: Okay.

Stephen Hood: But June is when it really starts so we're about five weeks away from the stockpile.

Speaker Change: Got you and when do you anticipate the subscription service to be launched.

Stephen Hood: The subscription service, I think, is a case of... Post Le Mans. We're starting to talk about it now.

Speaker Change: Subscription service.

Stephen Hood:

Stephen Hood: It tends to be a very sensitive subject in the racing space for some odd reason. For us, this is not really kind of pushing the audience to spend unnecessarily. We know that as we own the ecosystem, and we poured enormous resources into building this ecosystem, so that we have the game, we have the online funnel for race control, and we have the services and the features being plugged into that ecosystem experience so that you and your friends can really feel as though you're a part of a story.

Speaker Change: Postal a mom with.

Stephen Hood: Starting to talk about it now it tends to be a very sensitive subject and the rates in space for some odd reason.

Stephen Hood: For us this is not really kind of pushing the yard is to spend unnecessarily. We note that as we enter the ecosystem and report enormous resources into building. This ecosystem. So that we have to gain we have the online farmland and voice control and we have the services and the features being plugged into that.

Stephen Hood: Ecosystem experience, so that you and your friends can really feel as though you are a part of a story you feel like with Ctrip.

Stephen Hood: You feel like you're superstars in this. Those features do come at a cheap price, and we're looking for players to invest in this journey with us. So the subscription is probably all being well coming online around July or August this year.

Stephen Hood: Those features.

Stephen Hood: Do you come in.

Stephen Hood: And we're looking for places to invest and Nextgen with us.

Stephen Hood: Subscription is probably all being well coming online around July August this year.

Michael A. Kupinski: Gotcha, and then I know there generally is a bell curve to sales. I was just wondering, can you give us a sense of how long the tail has been for the sale of Le Mans into the second quarter?

Speaker Change: Gotcha, and then I know there generally is a bell curve to sales I was just wondering can you give us a sense of how long the tail has been for the several months into the second quarter.

Stephen Hood: Well look, Le Mans, we knew that out of the gate as an early access title, we'd have, you know, originally we thought it would be a hard sell, you know, an early access title, not an existing franchise, based on a sport that hasn't had a video game in place for many, many years, but actually, out of the gate, it just stormed away; it was superb for us. Now we're expecting and understand that those sales dip as we're heading to Le Mans, so we see that as the next peak.

Speaker Change: Oh, the moms, we knew that out of the gate.

Stephen Hood: At this time, so we'd have a.

Stephen Hood: Originally we thought it would be a hard sell.

Stephen Hood: And that excess title.

Stephen Hood: Not an existing franchise base.

Stephen Hood: Based on a sports that hasn't had a video game.

Stephen Hood: For many many years, but actually out of the gate as it just stormed away. It was superb for US now, we're expecting and understand that those sales that as we're heading to the mall. So we see that being that the next peak.

Stephen Hood: Out of the gate, it drops off over time because we haven't been updating the product with new content, but what we have been doing is updating fixes and improvements and occasionally new features. That really ramps up next month, so we expect the next spike, and that's going to be critical for us in terms of marketing visibility, the player update, the numbers coming into the product, and the general vibe around that experience at Le Mans is going to be enormously beneficial to us.

Stephen Hood: Out of the eight.

Stephen Hood: It drops off over time, because we haven't been injecting the product with new content, but what we have been doing is injecting six season improvements and occasionally new features that really ramps up next month. So we expect the next spike and that's going to be critical for us in terms of marketing visibility the player update the numbers coming into the.

Stephen Hood: And the general right around that experience at the mom is going to be enormously beneficial to last week.

Michael A. Kupinski: And then my final question, do racing games offer themselves to modifications by user content creators? I was just wondering if mods are an opportunity for you.

Stephen Hood: And then my final question due do racing games offered themselves to modifications by user content creators I was just wondering if mods are an opportunity for you.

Michael A. Kupinski: Right.

Stephen Hood: Yeah, yeah, good question. Mods in the racing space, for some titles, you can consider them to be the lifeblood of titles, but typically, they're titles that have been left dormant for a while by the original developers, i.e., they move on to the next shiny thing, and they need the privacy of getting the loan.

Speaker Change: Yeah, Yeah. Good question Martin racing space.

Stephen Hood: For some time, so you can consider it to be the lifeblood of toxins, but typically that's been.

Stephen Hood: And for a while about leveraging developers they moved onto the next shiny thing and I'm fairly pricey.

Stephen Hood: Users tend to fill that gap, and there are a lot of talented people out there that make amazing content for legacy titles. Because we're so new, there really isn't any mod content from the Monultimate, and that's not a path that we're proactively trying to encourage. Primarily because it's new, but also, you've got to understand we have the R Factor 2 platform in our portfolio that has a lot of user-generated content, much of which gets sold through the Steam store or free modifications available elsewhere. And that's fertile ground.

Stephen Hood: <unk> uses tendency to fill that gap and there are a lot of talented people out there that make amazing content for legacy titles, because with our new there really isn't any I'm not content phenomenon.

Stephen Hood: Not a path that we're proactively trying to encourage primarily because its new but also you've got to understand we have to be off attitude platform in our portfolio that has a lot of user generated content much of which gets sold.

Stephen Hood: The same store free modifications available elsewhere.

Stephen Hood: It's got a long history of this. Le Mans Ultimate is built to be much cleaner. And I talked about the ecosystem, but really, it's about the experience being much cleaner and fresher for users. In rFactor 2, which has been around for a long, long time, the quality can vary massively, massively in terms of the user-generated content, and some content is probably way past its sell-by date for some users. But Le Mans Ultimate is the shiny new thing.

Stephen Hood: That's a third solid ground, it's got a long history of this Lamont ultimate is built to be much cleaner.

Stephen Hood: And I talked about the ecosystem, but really it's about the experience being much cleaner than a fresh big users because.

Stephen Hood: And off attitude, that's been around for a long long time, the quality can vary massively massively in terms of the user generated content.

Stephen Hood: Probably right plus itself by data center users.

Stephen Hood: All of a sudden that isn't shiny new thing.

Stephen Hood: That has a far higher kind of standard, and we're really selling that as a premium product, and that experience has to be first class, and that means we curate that content, and all of that content right now comes from within the Motorsport Games team.

Stephen Hood: A higher kind of standard and we're really setting that as a premium product and that experience has to be fast rate and that means we curate that content and all of that content right now comes from within multiple games team.

Michael A. Kupinski: Gotcha. Well, good luck. Thank you.

Stephen Hood: Gotcha.

Speaker Change: Well good luck. Thank you.

Speaker Change: Thank you.

Operator: We have no further questions in the queue at this time. I will turn the program back over to Mr. Hood for any additional remarks.

Speaker Change: We have no further questions in the queue at this time I will turn the program back over to Mr. Hood for any additional remarks.

Stephen Hood: Thank you. I'd just like to close by offering my thanks to everybody attending this call. It's much appreciated. We are feeling very positive about this Q1. We do see it as a stepping stone, and I'd like to thank you all again for your time.

Stephen Hood: Thank you I'd just like to close by.

Stephen Hood: My Thanks, everybody attending this call. It's much appreciated we are feeling very positive about that.

Stephen Hood: We do see it as a stepping stone and.

Stephen Hood: Thank you again for your time.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.

Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at anytime and have a wonderful day.

Operator: [inaudible]

Operator: [music].

Operator:

Operator:

Operator: Uh huh.

Operator: [music].

Speaker Change: Got it.

Operator: [music].

Operator: Hum.