Q2 2024 Motorsport Games Inc Earnings Call

August 9, 2024

Music Music Music Music Music Music Music Music Music

Operator: Thank you for standing by, and welcome to Motorsport Games, Inc.'s 2nd Quarter 2024 Earnings Call. At this time, all lines are in listen-only mode. If at any time during this call you require immediate assistance, please press star zero for the operator. As a reminder, today's conference is being recorded. I would like to turn the conference over to Ben Rossiter-Turner from Motorsport Games, please go ahead.

Operator: Thank you for standing by, and welcome to Motorsport Games, Inc.'s 2nd Quarter 2024 Earnings Call. At this time, all lines are in listen-only mode.

Speaker Change: Thank you for standing by and welcome to Mothersport Games, Inc. 2nd Quarter 2024 Earnings Call. At this time, all lines are in listen-only mode. If at any time during this call you require immediate assistance, please press star zero for the operator.

Operator: If at any time during this call you require immediate assistance, please press star zero for the operator. As a reminder, today's conference is being recorded. I would like to turn the conference over to Ben Rossiter-Turner from Motorsport Games. Please go ahead.

Speaker Change: As a reminder, today's conference is being recorded. I would like to turn the conference over to Ben Rossiter-Turner from Motorsport Games. Please go ahead.

Ben Rossiter-Turner: Thank you, and welcome to Motorsport Games' second quarter 2024 earnings conference call and webcast. On today's call is Motorsport Games Chief Executive Officer Stephen Hood and Chief Financial Officer Stanley Beckley. Why now? Everyone should have access to the company's second quarter 2024 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com. During the course of this call, management may make forward-looking statements within the meaning of U.S. federal security laws.

Speaker Change: Thank you and welcome to Motorsport Games second quarter 2024 earnings conference call and webcast.

Speaker Change: On today's call is Motorsport Games Chief Executive Officer Stephen Hood and Chief Financial Officer Stanley Beckley.

Ben Rossiter-Turner: Why now? Everyone should have access to the company's second quarter 2024 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com. 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.

Speaker Change: By now, everyone should have access to the company's second quarter 2024 earnings press release filed today after market close. This is available on the investor relations section of Multiple Games' website at www.multiplegames.com.

Ben Rossiter-Turner: 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 four different 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.

Speaker Change: 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.

Ben Rossiter-Turner: Unless 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. Please refer to today's press release and the company's SEC filings, including its most recent quarterly report on Form 10-Q for the quarter ended June 30, 2024, for a detailed discussion on certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Speaker Change: 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-Turner: Please refer to today's press release and the company's SEC filings, including its most recent quarterly report on Form 10-Q for the quarter ended June 30, 2024, for a detailed discussion on certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. In today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA, as we discuss the second quarter 2024 financial results.

Speaker Change: Please refer to today's press release and the company's findings of the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended June 30, 2024, for a detailed discussion on certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Ben Rossiter-Turner: In today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA, as we discuss the second quarter 2024 financial results. You will find a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, as well as other related disclosures, in the press release issued earlier today, which is also available on the Vesta Relations section of Motorsport Games' website, www.motorsportgames.com. And now I'd like to turn the call over to Stephen Hood, Chief Executive Officer of Motorsport Games.

Speaker Change: In today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA, as we discuss the second quarter 2024 financial results.

Speaker Change: You will find a reconciliation of these non-GAP measures to their most directly comparable GAP measures as well as other related disclosures in the press release issued earlier today which is also available on the Best of Relations section of Multiple Games' website at www.multiplegames.com

Ben Rossiter-Turner: You will find a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, as well as other related disclosures in the press release issued earlier today, which is also available on the Vesta Relations section of Motorsport Games' website, www.motorsportgames.com. Now, I'd like to turn the call over to Stephen Hood, Chief Executive Officer of Motorsport Games.

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

Stephen Hood: Thank you everyone for joining this conference call today. Once again, it has been a productive and busy period at Motorsport Games since the launch of our latest release, Le Mans Ultimate, in February this year. This game very much remains our top focus, and we're pleased to have delivered one major update, four patches, and 19 hotfixes since launch in order to bring additional features and improvements to the title for our players.

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

Stephen Hood: Once again, it has been a productive and busy period at Motorsport Games in the course of following the launch of our latest release, Le Mans Ultimate, in February this year.

Stephen Hood: This game very much remains our top focus and we're pleased to have delivered one major update, four patches and 19 hotfixes since launch phase in order to bring additional features and improvements to the title for our players.

Stephen Hood: Our passionate development team at Studio 397 has been working tirelessly to ensure that the momentum we gained did not go to waste, and that the community supports the game through the early access process. We are delighted with the ongoing positive reception to our continued development of the title, and this positivity has shone through in a new revenue stream launched just recently. On July 23rd, we launched the first paid-for downloadable content pack, or DLC, for the game, and despite Le Mans Ultimate still operating within its Early Access phase, the reception for this new content has been encouraging.

Stephen Hood: Our passionate development team at Studio 397 have been working tirelessly to ensure that the momentum we gained did not go to waste and that the community supports the gain through the early access process.

Stephen Hood: We are delighted with the ongoing positive reception to our continued development of the title and this positivity has shone through in a new revenue stream launched just recently.

Stephen Hood: On July 23rd, we launched the first paid-for downloadable content pack, or DLC, for the game, and despite Le Mans Ultimate still operating within its Early Access phase, the update for this new content has been encouraging.

Stephen Hood: It is now clear there is a very core, passionate fan base growing around this project, with players eager for more content and more features. From VR, to collaborative co-op game modes, and more, we are pushing ahead to deliver these enhancements as soon as possible. This has been underlined in our players' purchasing choice. Alongside the single DLC pack, we released a Season Pass. This Season Pass provides the ability to effectively pre-purchase four packs, which includes the one we released two weeks ago, with the remainder expected in the following three quarters for a discount worth around 25% of the final price.

Stephen Hood: It is now clear there is a very core, passionate fanbase growing around this project, with players eager for more content and more features. In VR, to collaborative co-op game modes and more, we are pushing ahead to deliver these enhancements as soon as possible.

Stephen Hood: Alongside the single DLC pack, we released a Season Pass. This Season Pass provides the ability to effectively pre-purchase four packs, which included the one we released two weeks ago, with the remainder expected in the following three quarters for a discount worth around 25% of the final price. We're delighted to relay that almost half of all purchases were in favor of the larger, more expensive season pass. This, of course, helps to further fund the development of the game they are clearly heavily invested in.

Stephen Hood: This has been underlined about our players' purchasing choice. Alongside the single DLC pack, we released a Season Pass. This Season Pass provides the ability to effectively pre-purchase four packs, which included the one we released two weeks ago, with a remainder expected in the following three quarters for a discount worth around 25% of the final price.

Stephen Hood: We're delighted to relay that almost half of all purchases were in favor of the larger, more expensive season pass. This, of course, helps the further development of the game they are clearly heavily invested in. We had anticipated the season pass to account for 5-10% of purchases, whereas in reality, as of today, it accounts for around 46% of purchases. In terms of the overall sales of this DLC content, I'm happy to report that already around 13% of Longmont Ultimate users have purchased this content, once again underlining the community sentiment surrounding the product. All of this has been achieved with no paid marketing budget.

Stephen Hood: We're delighted to relay that almost half of all purchases were in favour of the larger, more expensive Season Pass.

Stephen Hood: This of course helps to further fund development of the game they are clearly heavily invested in. We had anticipated the season pass to account for 5-10% of purchases, whereas in reality, as of today, it counts for around 46% of purchases.

Stephen Hood: We had anticipated the season pass to account for 5-10% of purchases, whereas in reality, as of today, it accounts for around 46% of purchases. In terms of the overall sales of this DLC content, I'm happy to report that already around 13% of Longmont Ultimate users have purchased this content, once again underlining the community sentiment surrounding the product. All of this has been achieved with no paid marketing budget.

Stephen Hood: In terms of the overall sales of this DLC content, I'm happy to report that already around 13% of Le Mans Ultimate users have purchased this content, once again underlining the community sentiment surrounding the product.

Stephen Hood: Thus far, we've predominantly relied on our own internal messaging efforts, supporting materials on social media platforms, and good old-fashioned word of mouth. It shows that quality gain through quality content has a place in today's market and suggests that we can attain much more with a product still in its infancy. I maintain that this has all of the necessary ingredients of a strong racing franchise. With continued product refinements, we are convinced that the time will soon come to add fuel to our sales efforts, reaching new fans and expanding our unit sales.

Stephen Hood: Thus far, we've predominantly relied on our own internal messaging efforts, supporting materials on social media platforms, and good old-fashioned word of mouth. It shows that quality games with quality content have a place in today's market and suggests that we can attain much more with a product still in its infancy. I maintain that this has all of the necessary ingredients of a strong racing franchise. With continued product refinements, we are convinced that the time will soon come to add fuel to our sales efforts, reaching new fans and expanding our unit sales.

Stephen Hood: All of this has been achieved with no paid marketing budget. Thus far, we've predominantly relied on our own internal messaging efforts, supporting materials on social media platforms, a good old-fashioned word of mouth.

Stephen Hood: It shows the quality gain with quality content has a place in today's market and suggests that we can attain much more with a product still in its infancy.

Stephen Hood: I maintain this has all of the necessary ingredients of a strong racing franchise. With continued product refinements, we are convinced that the time will soon come to add fuel to our sales efforts, reaching new fans and expanding our unit sales.

Stephen Hood: To this end, we continue to explore how we might expand the platforms upon which Le Mans Ultimate is available and playable. During its early access period, the game has exceeded our internal projections, and this success has resulted in us making the decision to accelerate our mission to make this game available on more formats, including Sony PlayStation and Microsoft Xbox game consoles. As part of our initiatives to increase revenue and support our development, you may previously have heard me speak about the potential for a subscription service to come online, and we are now not far from bringing this online.

Stephen Hood: To this end, we continue to explore how we might expand the platforms from which Lemmon Ultimate is available and playable.

Stephen Hood: During its early access period, the game has exceeded our internal projections and this success has resulted in us making the decision to accelerate our mission to make this game available on more formats, including Sony PlayStation and Microsoft Xbox games consoles.

Stephen Hood: As part of our initiatives to increase revenue and support our development, you may previously have heard me speak about potential for a subscription service to come online and we are now not far from bringing this online. With this we will be looking to add new and innovative features to the title.

Stephen Hood: With this, we will be looking to add new and innovative features to the title. This subscription service will not be mandatory for our players, but we are confident that the passionate fan base will be excited to jump into what we will have to offer here. This will be the third revenue stream after core game sales and DLC. Our plan was always to deliver on three fronts.

Stephen Hood: With this, we will be looking to add new and innovative features to the title. This subscription service will not be mandatory for our players, but we are confident that the passionate Fanbrace community will be excited to jump into what we will have to offer here.

Stephen Hood: This subscription service will not be mandatory for our players, but we are confident that the passionate fanbase will be excited to jump into what we will have to offer here.

Stephen Hood: This will be the third revenue stream after core game sales and DLC. Our plan was always to deliver on three fronts. And as promised, the first two are operational, with the third expected to arrive shortly. Away from Le Mans' ultimate efforts, we still have a close and productive relationship with kindred concepts around the F1RK project, an experience that continues to provide revenue and opportunity, particularly as they continue to expand now at three venues in the US and UK.

Stephen Hood: This will be the third revenue stream after core game sales and DLC. Our plan was always to deliver on three fronts, and as promised, the first two are operational, with the third expected to arrive shortly.

Stephen Hood: And as promised, the first two are operational, with the third expected to arrive shortly. Away from Le Mans Ultimate, we still have a close and productive relationship with Kindred Concepts around the F1RK project, an experience that continues to provide revenue and opportunity, particularly as they continue to expand now at three venues in the US and UK. We are being recognized as the technology suppliers for this experience and have been approached by other players in the space, those interested in utilizing our technology that has been shown to be a market leader in providing solutions for event centers. We hope to capitalize on this opportunity.

Speaker Change: Away from Le Mans ultimate efforts, we still have a close and productive relationship with Kindred Concepts around the F1 Arcade project, an experience that continues to provide revenue and opportunity, particularly as they continue to expand now at three venues in the US and UK.

Stephen Hood: We are being recognized as the technology suppliers for this experience and have been approached by other players in the space, those interested in utilising our technology that has been shown to be a market leader in providing solutions for event centers. We hope to capitalise on this opportunity. Additionally, we have undertaken efforts to improve our balance sheet and short-term cash needs, which includes the settlement agreement we reached with IndyCar LLC, resulting in a $2.9 million liability reduction.

Speaker Change: We are being recognized as the technology suppliers for this experience and have been approached by other players in the space, those interested in utilizing our technology that has been shown to be a market leader in providing solutions for event centers and hope to capitalize on this opportunity.

Stephen Hood: Additionally, we have undertaken efforts to improve our balance sheet and short-term cash needs, which includes the settlement agreement we reached with IndyCar LLC, resulting in a $2.9 million liability reduction. We also recently consummated a Registered Direct Offering, or RDO, raising around $1 million in gross proceeds that we expect to use to fund our business and operations and development, whilst we continue to explore all available revenue and investment avenues to deliver upon the evident promise that this company and its products hold.

Speaker Change: Additionally, we have undertaken efforts to improve our balance sheet and short-term cash needs, which includes the settlement agreement we reached with IndyCar LLC, resulting in a $2.9 million liability reduction.

Stephen Hood: We also recently consummated a Registered Direct Offering, or RDO, raising around $1 million in gross proceeds that we expect to use to fund our business and operations and development, whilst we continue to explore all available revenue and investment avenues to deliver upon the evident promise that this company and its products hold. With a streamlined business, disentanglement from historic challenges, successful spending controls, and a reinvigorated development operation, producing arguably one of the market's most exciting racing titles for some years, we're delivering what I promised on my return last year.

Speaker Change: We also recently consummated a Registered Direct Offering, or RDO, raising around $1 million in gross proceeds that we expect to use to fund our business and operations and development whilst we continue to explore all available revenue and investment avenues to deliver upon the evident promise that this company and its products have.

Stephen Hood: With a streamlined business, disentanglement from historic challenges, successful spending controls, and a reinvigorated development operation, producing arguably one of the market's most exciting racing titles for some years, we're delivering what I promised on my return last year. Nevertheless, our current product portfolio needs time and investment to flourish. And as such, we are exploring strategic alternatives. Now, I would like to invite Stanley Beckley, our Chief Financial Officer, to talk about the financial results for the second quarter of 2024. Thank you, Stephen, and good evening, everyone.

Speaker Change: With a streamlined business, disentanglement from historic challenges, successful spending controls and a reinvigorated development operation, producing arguably one of the market's most exciting racing titles for some years, we're delivering what I promised on my return last year.

Stephen Hood: Nevertheless, our current product portfolio needs time and investment to flourish. And as such, we are exploring strategic alternatives. Now, I would like to invite Stanley Beckley, our Chief Financial Officer, to talk about the financial results for the second quarter of 2024. Thank you, Stephen.

Speaker Change: Nevertheless, our current product portfolio needs time and investment to flourish and as such, we are exploring strategic alternatives.

Speaker Change: Now, I would like to invite Stanley Beckley, our Chief Financial Officer, to talk about the financial results for the second 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 second quarter of 2024. Revenues for the quarter were $1.9 million, up by 0.2 million or 8.2% when compared to the same period in the prior year. The increase in use was primarily due to higher digital game sales from the release of Le Mans Ultimate on PC in February 2024.

Stanley Beckley: 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 second quarter of 2024. Revenues for the quarter were $1.9 million, up by 0.2 million or 8.2% when compared to the same period in the prior year. The increase in gaming use was primarily due to higher digital game sales from the release of Le Mans Ultimate on PC in February 2024.

Stanley Beckley: Net income for the quarter was $2.1 million, compared to a net loss of $8.2 million for the same period in the prior year, an improvement of $10.3 million. The increase in net income is driven by a $6.9 million reduction in operating expenses related to headcount reductions, lower general and administrative expenses, and no impairment of intangible assets recorded during the three months ended June 30, 2024 compared to the same period in the prior year.

Stanley Beckley: The increase in net income is also due to the recognition of a $2.5 million gain stemming from the Settlement and License Agreement with Indica LLC, executed on May 17, 2024, and a gain of $0.6 million related to the Settlement Agreement with Bark Toke Limited, the exclusive promoter of the British Towing Car Championship, signed on April 12, 2024. Furthermore, the company recorded a $0.3 million gain from the sale on April 26, 2024 to Traxxion GT Limited of non-core assets.

Stanley Beckley: The increase in net income is also due to the commission of a $2.5 million gain stemming from the settlement and license agreement with Indica LLC, executed on May 17, 2024, and a gain of $0.6 million related to the settlement agreement with BARC Tokyo Limited, the exclusive promoter of the British Towing Car Championship, signed on April 12, 2024. Furthermore, the company recorded a $0.3 million gain on the sale on April 26, 2024 to Traction GT Limited, Non-Car Assembly.

Stanley Beckley: Revenues for the quarter were $1.9 million, up by 0.2 million, or 8.2 percent, when compared to the same period in the prior year.

Stanley Beckley: The increase in gaming use was primarily due to higher digital game sales from the release of Le Mans Ultimate on PC in February 2024.

Stanley Beckley: Net income for the quarter was $2.1 million, compared to a net loss of $8.2 million for the same period in the prior year, an improvement of $10.3 million.

Stanley Beckley: The increase in net income is driven by a $6.9 million reduction in operating expenses related to headcount reductions.

Stanley Beckley: Lower general and administrative expenses and no impairment of intangible assets recorded during the three months ended June 30, 2024, compared to the same period in the prior year.

Stanley Beckley: The increase in net income is also due to the recognition of a $2.5 million gain stemming from the Settlement and License Agreement with Indica LLC.

Stanley Beckley: executed on May 17th, 2024.

Stanley Beckley: and a gain of $0.6 million related to the settlement agreement with Barclay Toker Ltd, the exclusive promoter of the British Towing Car Championship, signed on April 12, 2024.

Stanley Beckley: Furthermore, the company recorded a $0.3 million gain from the sale on April 26, 2024 to Traction GT Ltd., a non-core asset.

Stanley Beckley: Net income attributable to Class A common stock was $0.87 per share for the second quarter of 2024 compared to a net loss of $3.04 for the same period in the prior year. We are reporting an adjusted EBITDA loss of $0.2 million for the second quarter of 2024 compared to an adjusted EBITDA loss of $2.7 million for the same period in the prior year. The improvements in adjusted EBITDA are the same as those discussed in respect of the change in net income for the period in the comparative quarter, as well as the decrease in stock-based compensation compared to the prior year period. As we listen equitably, this continues to be a key area of focus for the country.

Stanley Beckley: Net income attributable to Class A common stock was $0.87 per share for the second quarter of 2024, compared to a net loss of 3.04 for the same period in the prior year. We are reporting an adjusted EBITDA loss of $0.2 million for the second quarter of 2024 compared to an adjusted EBITDA loss of $2.7 million for the same period in the prior year. The improvements in adjusted EBITDA are the same as those discussed in respect of the change in net income. Payout and Comparative Quarter, as well as a decrease in stock-based compensation compared to the prior year period, have to be listed by the accreditees. This continues to be a key area of focus for the country.

Stanley Beckley: Net income attributable to Class A common stock was $0.87 per share for the second quarter of 2024, compared to a net loss of $3.04 for the same period in the prior year.

Stanley Beckley: We are reporting an adjusted EBITDA loss of $0.2 million for the second quarter of 2024 compared to an adjusted EBITDA loss of $2.7 million for the same period in the prior year.

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

Stanley Beckley: As we list them equitably, this continues to be a key area of focus for the company.

Stanley Beckley: Net cash used in operations for the six months ended June 30, 2024 was approximately $1.4 million, representing an average monthly net cash burn from operations of $0.2 million, down $1.2 million when compared to the average monthly cash burn of $1.5 million for the six months ended June 30, 2023. As of June 30, 2024, the company had cash and cash equivalents of $0.5 million, which had increased to $1.3 million as of July 31, 2024.

Stanley Beckley: Net cash used in operations for the six months ended June 30, 2024 was approximately $1.4 million, representing an average monthly net cash burn in home operations of 0.2 million, down $1.2 million when compared to the average monthly cash run of $1.5 million for the six-month end of June 30, 2023. As of June 30, 2024, the company had cash and cash equivalents of $0.5 million, which had increased to $1.3 million as of July 31, 2024.

Stanley Beckley: Net cash used in operations for the six months ended June 30, 2024 was approximately $1.4 million.

Stanley Beckley: representing an average monthly net cash burn from operations of $0.2 million, down $1.2 million when compared to the average monthly cash burn of $1.5 million for the six months ended June 30, 2023.

Stanley Beckley: As of June 30, 2024, the company had cash and cash equivalents of $0.5 million, which had increased to $1.3 million as of July 31, 2024.

Stanley Beckley: The increase in cash and cash equivalents was primarily due to $0.9 million in net proceeds received from a registered direct offering transaction that closed on July 29, 2024. Based on our cash position and the average monthly cash earned, we do not believe there is sufficient cash in hand to fund company operations over the next year and that additional funding will be required in order to continue operations. 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 for 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 our 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 Thank you Stanley, and thank you to

Stanley Beckley: The increase in cash and cash equivalents was primarily due to $0.9 million in net proceeds received from a registered direct offering transaction that closed on July 29, 2024. However, based on our cash position and the average monthly cash earned, we do not believe there is sufficient cash on hand to fund company operations over the next year and that additional funding will be required in order to continue operations. 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 for 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 our NASCAR license and traction, for their cost reduction and restructuring initiatives.

Stanley Beckley: The increase in cash-in-cash equivalence was primarily due to $0.9 million in net proceeds received from a registered direct offering transaction that closed on July 29, 2024.

Speaker Change: Based on our cash position and the average monthly cash burn, we do not believe there is sufficient cash on hand to fund company operations over the next year and that additional funding will be required in order to continue operations.

Speaker Change: 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 in your transactions.

Speaker Change: Strategic alternatives for our business, including, but not limited to, the sale or licensing of our assets, in addition to the recent sales of our NASCAR license and traction, and further cost reduction and restructuring initiatives.

Stephen Hood: Thank you all for your time, and now I will turn the call back to Stephen for his closing remarks. Thank you, Stanley, and thank you to those joining us today. We continue to work hard on our newest title, Le Mans Ultimate, including the services and content related to maximizing the opportunity here. We're very pleased with how this has been received by our players, so much so that we can now accelerate plans to bring it to additional formats and reach a larger audience. Thank you for your time today. Ladies and gentlemen, this concludes our conference call for today.

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

Stephen Hood: Thank you, Stanley, and thank you to those joining us today. We continue to work hard on our newest title, Le Mans Ultimate, including the services and content related to maximizing the opportunity here. We're very pleased with how this has been received by our players, so much so that we can now accelerate plans to bring it to additional formats and reach a larger audience. Thank you for your time today.

Stephen Hood: We're very pleased with how this has been received by our players, so much so that we can now accelerate plans to bring it to additional formats and reach a larger audience. Thank you for your time today.

Operator: Ladies and gentlemen,

Stephen Hood: [inaudible]

Operator: Thank you for standing by and welcome to Motorsport Games, Inc.

Operator: 2nd quarter, 2024 Erning School. At this time, all lines are in lesson only mode.

Operator: If at any time during this fall you require immediate assistance, please press star 0 for the operator. As a reminder, today's conference is being recorded.

Ben Rossiter Turner: I would like to turn the conference over to Ben Rossiter Turner from Motorsport Games. Please go ahead. Thank you and welcome to Motorsport Games, 2nd quarter, 2024 Erning's conference called a webcast.

Ben Rossiter Turner: On today's call is Motorsport Games, Chief Executive Officer, Stephen Hood and Chief Financial Officer, Stanley Beckley. By now everyone should have access to the company's 2nd quarter, 2024 Erning's press release filed today after market closed. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com. During the course of this call, management may make forward-looking statements within the meaning of US 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.

Ben Rossiter Turner: Except it's required by law, the company undertakes no application 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. Please refer to today's press release and the company's findings of the SEC, including its most recent courtly report on form 10Q for the quarter ended June 30, 2024, for a detailed discussion on certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Ben Rossiter Turner: In today's conference call, we will refer to certain non-gap financial measures, such as adjusted EBITDA, as we discussed the 2nd quarter 2024 financial results. You will find a reconciliation of these non-gap measures to their most directly comparable gap measures, as well as other related disclosures in the press release issued earlier today, which is also available on the Vestor Relations section of Medical Games' website at www.modescoregames.com.

Stephen Hood: And now, I'd like to turn the call over to Stephen Hood, Chief Executive Officer of Medical Games. Stephen, thank you everyone for joining this conference call today. Once again, it has been a productive and busy period at Medical Games in the course of following the launch of our latest release, Lamanne Ultimate, in February this year. This game very much remains our top focus, and we're pleased to have delivered one major update, four patches, and 19 hot fixes since launch phase, in order to bring additional features and improvements to the title for our players.

Stephen Hood: Our passionate development team at Studio 397 have been working tirelessly to ensure that the momentum we gained did not go to waste, and that the community supports the game through the early access process. We are delighted with the ongoing positive reception to our continued development of the title, and this positivity has shone through the new revenue stream launched just recently. On July 23rd, we launched the first paid four downloadable content pack, or DLC, for the game, and despite Lamanne Ultimate still operating within this early access phase, the update for this new content has been encouraging.

Stephen Hood: It is now clear there is a very core passionate and based growing around this project with players eager for more content and more features. In VR to collaborative co-op gay modes and more, we are pushing ahead to deliver the enhancements as soon as possible. We released two weeks ago with a remainder expected in the following three quarters for a discount worth around 25% of the final price. We are delighted to relay that almost half of all purchases were in favour of the larger more expensive season pass.

Stephen Hood: This of course helps the further fund development of the game they are keenly heavily invested in. We had anticipated the season pass account for 5-10% of purchases, whereas in reality as of today it counts for around 46% of purchases. In terms of the overall sales of this DLC content, I am happy to report that already around 13% of the long-mom ultimate users have purchased this content once again underlining the community sentiment surrounding the product.

Stephen Hood: All of this has been achieved with no paid marketing budget, thus far with predominantly relied on our own internal messaging efforts, supporting materials and social media platforms, a good old fashioned word of mouth. It shows the quality game with quality content has a place in today's market and suggests that we can attain much more with the product still in its infancy. I maintain this has all of the necessary ingredients of a strong racing franchise.

Stephen Hood: With continued product refinements, we are convinced that the time will soon come to add fuel to our sales efforts, reaching new fans and expanding our unit sales. To this end, we continue to explore how we might expand the platforms upon which the mom ultimate is available and playable. During its early access period, the game has exceeded our internal projections, and the success has resulted in us making the decision to accelerate our mission to make this game available on more formats, including stone PlayStation and Microsoft Xbox Games consoles.

Stephen Hood: As part of our initiatives to increase revenue support, our development may previously have heard me speak about potential for a subscription service to come online, and we are now not far from bringing this online. With this, we will be looking to add new and innovative features to the title. This subscription service will not be mandatory for our players, but we are confident that the passionate fanbase will be excited to jump into what we will have to offer here.

Stephen Hood: This will be the third revenue stream up to core game sales and DLC. Our plan was always to deliver on three fronts, and as promised, the first two are operational, with the third expected to arrive shortly.

Stephen Hood: Away from the monolotimate efforts, we still have a close and productive relationship, the Kindred Concepts, around the F1 arcade project. An experience that continues to provide revenue and opportunity, particularly as they continue to expand now at three venues in the US and UK. We are being recognised as the technology suppliers for this experience and have been approached by other players in the space. Those interested in utilising our technology that has been shown to be a market leader in providing solutions for events centres, and hope to capitalise on this opportunity.

Stephen Hood: Additionally, we have undertaken efforts to improve our balance sheet and short-term cash needs, which includes settlement agreement where you reached with Indicare LLC, resulting in on $2.9 million liability reduction. We also recently consummated a registered direct offering or order raising around $1 million in gross proceeds that we expect to use to fund our business and operations and development whilst we continue to explore all available revenue investment avenues to deliver upon the evident promise that this company and its products have.

Stephen Hood: With a streamlined business, this entanglement from historic challenges, successful spending controls and a reinvigorated development operation, producing arguably one of the markets' most exciting racing titles for some years, we're delivering what I promised on my return last year.

Stephen Hood: Nevertheless, our current product portfolio needs time and investment to flourish, and as such we are exploring strategic alternatives.

Stanley Beckley: Now, I would like to invite Stanley Beckley, our chief financial officer, to talk about the financial results for the second quarter of 2024. Thank you, Stephen, and good evening, everyone. As with previous earnings calls, I want to be offering any foreign looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the second quarter of 2024. We have an $9 million off by 0.2 million or 8.2 percent when compared to the same period in the prior year.

Stanley Beckley: The increase in the news was primarily due to higher digital gain sales from the release of Le Mans Ultimate on PC in February 2024. Net income for the quarter was 2.1 million, compared to a net loss of 8.2 million for the same period in the prior year, an improvement of 10.3 million. The increase in net income is driven by a $6.9 million dollar reduction in operating expenses related to head count reductions.

Stanley Beckley: The lower general and administrative expenses are no impairment of intangible assets recorded during the three months and June 30, 2024, compared to the same period in the prior year. The increase in net income is also due to the commission of a $2.5 million dollar gain stemming from settlement and licensing agreement with Indika LLC executed on May 17th, 2024, and a gain of 0.6 million related to the settlement agreement with Bach took limited the exclusive promoter of the British toll and card championship signed on April 12th, 2024.

Stanley Beckley: Furthermore, the company required a $0.3 million dollar gain from the sale on April 26th, 2024 to traction GG limited non-core asset. Net income attributable to class A common stock was 0.87 per share for the second quarter of 2024, compared to a net loss of 3.04 for the same period in the prior year. We are reporting an adjusted EBITDA loss of 0.2 million for the second quarter of 2024, compared to an adjusted EBITDA loss of 2.7 million for the same period in the prior year.

Stanley Beckley: The improvements in adjusted EBITDA are the same as those discussed in the spectrum of the change in net income of the period and comparative quarter, as well as the decrease in stock based compensation compared to the prior year period. As realistic liquidity, this continues to be a key area of focus for the country. Net cash used in operations for the six months ended June 30, 2024, with approximately 1.4 million, the presenting an average monthly net cash fund from operations of 0.2 million, down 1.2 million when compared to the average monthly cash fund of 1.5 million for the six months ended June 30, 2023.

Stanley Beckley: As of June 30, 2024, the company had cash and cash equivalent of 0.5 million, which had increased to 1.3 million as of July 31, 2024. The increase in cash and cash equivalent was primarily due to 0.9 million in net policy received from a registered direct offering transaction that closed on July 29, 2024. Based on a cash position and the average monthly cash fund, we do not believe there is sufficient cash and hand fund company operations 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 a debt finance and arrangements for new transactions. Strategic alternatives for our business, including but not limited to the sale or licensing of our assets in addition to the recent sales of our national items and transactions. Further cost reduction and structural initiatives.

Stanley Beckley: Thank you all for your time and now I will turn the car back to Steven for closing remarks.

Stephen Hood: Thank you Stanley and thank you to those joining us today. We continue to work hard on our newest title, Ramon Ultimate, including the services and content related to maximizing the opportunity here. We are very pleased with how much has been received by our players so much so that we can now accelerate plans to bring it to additional formats and reach a larger audience.

Stephen Hood: Thank you for your time today.

Operator: Ladies and gentlemen, these concludes your conference call for today. We thank you for participating and ask that you please disconnect your line. Thank you for your time today.

Q2 2024 Motorsport Games Inc Earnings Call

Request a DemoDemo

MSGM

Motorsport Games

Earnings