Q3 2024 Motorsport Games Inc Earnings Call

Operator: Please stand by. Your program is about to begin. If you need assistance during your conference today, please press star zero. Thank you for standing by and welcome to the Motorsport Game Inc.

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Thank you for standing by and welcome to the Motor Sport game Inc's third quarter 2024 earnings call.

Operator: third quarter 2024 earnings call.

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You may withdraw yourself from the queue by pressing star two.

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 Motor Game Sports. excuse me, Motorsport Games. Please go ahead.

Speaker Change: I'd like to turn the conference over to Ben Rosset or Turner from Motor games Sports.

Speaker Change: New order stop games. Please go ahead.

Ben Rossiter-Turner: Thank you and welcome to Motorsport Games third 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. By now, everyone should have access to the company's third quarter 2024 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games' website 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: And welcome to Mexico Games third quarter, 2024 earnings conference call and webcast.

Speaker Change: On today's call and as Mexico Games, Chief Executive Officer, Steven <unk>, Chief Financial Officer Stanley Betsy.

Speaker Change: By now everyone should have access to the company's third quarter 'twenty 'twenty four earnings press release filed today after market place.

This is available on the Investor relations sections, and Macy's full games. This website at Www Dot veteran spoke Gamestop com.

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

Speaker Change: 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 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. These refer to today's press release and the company's filings with the SEC, including its most recent quarterly report, Form 10-Q, for the quarter ended September 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 third quarter 2024 financial results.

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.

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

Speaker Change: Including its most recent quarterly reports Form 10-Q quarter ended September 32024.

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

Ben Rossiter-Turner: 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 Investor Relations section of Motorsport Games' website at www.motorsportgames.com And now I'd like to turn the call over to Stephen Hood, Chief Executive Officer of Motorsport Games.

Speaker Change: 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.

Speaker Change: And upon the Investor Relations section at Batesville games. This website at Www Dot Batesville Gamestop com.

And now I'd like to turn the call over to Steven Hudson, Chief Executive Officer of Batesville games Steven.

Stephen Hood: Stephen? Thank you everyone for joining this conference call today. Since our last conference call, work has diligently continued at Motorsport Games and our development team at Studio 397 to deliver improved player experiences against the backdrop of ongoing cost optimisation. We continue to drive gain revenues whilst reducing expenditure. As announced last month, the company undertook further headcount reductions aimed at reducing cash expenditure and streamlining operations.

Steven Hudson: Thank you everyone for joining this conference call today.

Steven Hudson: Since our last conference call work as diligently continue that Mike spoke games and our development team at <unk> seven to deliver improved client experience is against the backdrop of ongoing cost optimization.

Steven Hudson: We continue to drive gain revenues Boston UGC expenditure.

Steven Hudson: As announced last month, the company undertook the head count reductions aimed at reducing cash expenditure and streamlining operations.

Stephen Hood: This was a necessary move to maintain our steadfast commitment to right-sizing the entire operation so that we can emerge stronger and ultimately prepared for success. A reduction in personnel has not meant a reduction in productivity or progress, however. We believe we have struck the right balance between cost-saving and the retaining of key staff and vital knowledge. The team we have today are more than capable of carrying this company into a new phase with continued product and technology growth, which will serve our customers, shareholders and clients.

Steven Hudson: This was a necessary move to maintain a steadfast commitment to right sizing the entire operation. So that we can emerge stronger on ultimately prepared for success.

Steven Hudson: A reduction in personnel has not been a reduction in productivity all progress how's that week.

Steven Hudson: We believe we have struck the right balance between cost saving and retaining of key staff in bikes and knowledge.

Steven Hudson: Team, we have today I'm more than capable of carrying this company into a new phase with continued product and technology, which will serve our customers shareholders and clients.

Stephen Hood: In September, Le Mans Ultimate received its biggest update so far with large free feature updates alongside the second of our 2024 downloadable content or DLC pack. An innovative co-op mode that I've spoken about regularly was delivered, offering a unique opportunity for racers to play together with friends at a pace that suits them in a play-by-mail game style and powered by our online platform Race Control. This feature is not available in any other product on the market and something that we are particularly proud of and expect to make use of in partnership with some of our clients also seeking further opportunities for improved customer retention.

Steven Hudson: In September the amount of ultimate received its biggest update so far with large premium feature updates alongside the second about 'twenty 'twenty four with downloadable content with DLC packs.

And if I could just caught my eye spoken about regulators delivered offers a unique opportunity for races to play together with friends at a pace that suits them and they play by mouth Gamestop and powered by our online platform race control. This feature is not available in any other product on the market and something that we are particularly proud of and expect to make use of them.

Steven Hudson: Partnership with some of our clients, mostly seeking further opportunities for improved customer retention.

Stephen Hood: Players now have the opportunity to play one chapter of a story at a time of their choosing, which can only be of benefit in today's hectic world where time to play is at a premium. Whilst the underlying technology that powers our simulation online platform and games is incredibly strong, we realise the deployment of our experiences must be to the benefit of a wide range of gamers.

Steven Hudson: Players now have the opportunity to play one chapter of the story at a time of their choosing which can only be a benefit in today's world. We're trying to play is at a premium.

What's the underlying technology that powers, our stimulation online platform engages incredibly strong we realized the deployment of AD experiences must be to the benefit of a wide range of squamous.

Stephen Hood: F1 Arcade, powered by our technology, is a more recent example of high-end simulation technology being very much proven as pick-up-and-play. Additionally, we delivered a feature that players have been asking for since day one. The ability to save a race and resume it in a race weekend game mode. As a simulation built to represent the 24 Hours of Le Mans and the FIA World Endurance Championship, our product must be able to allow users to complete technically challenging endurance races in a way that suits them. And both this save and load feature and a co-op game mode fulfill this requirement.

Steven Hudson: One arcade powered by our technology is a more recent example of high end simulation technology being very much could've been a pick up in play.

Additionally, we delivered a feature that clients have been asking for since day, one the ability to save a race <unk> connect race weekend.

Steven Hudson: Is this stimulation to represent the 24 hours of pneumonia and EFI, a royalty journey championship and put up must be able to allow us to complete technically challenging endurance races in a way that suits them.

Steven Hudson: And both of this.

Steven Hudson: And load feature and a core gain mode fulfill this requirement.

Stephen Hood: Next up we're on the path to deliver real-time driver swaps in the new year expected in Q1 2025 which will continue to take our product to a new level. Players will be able to team up with friends and play in real-time races, sharing the car and in turn experiencing shared moments that will further broaden the appeal of our newest game. Pac-2 of our 2024 season pass for Le Mans Ultimate completed the hypercar grid for players with the Isotta, Proscini and the Alpina LMDH, both with great support from the manufacturers. We expect our subsequent packs to generate greater interest as we bring the ever-popular GT3 series cars to the game.

Steven Hudson: Next time, we're on the path to deliver real time drive the swaps and the new year in Q1, 2025, which will continue to take out put out to a new level.

Steven Hudson: Players will be able to team up with friends I'm, playing realtime races sharing the call and in 10 experiencing shared moments that will further broaden the appeal of our new escape.

Steven Hudson: Back to about 2020 for season pass for the Mono Tonight completed the highest called grid suppliers with the shelter Cassini and the Alpine M. D H, both with great support from the manufacturers.

Steven Hudson: We expect to have subsequent packs to generate greater interests as we bring the ever popular G. T. Three series cost of the game.

Stephen Hood: Data from another of our products, R-Factor II, historically shows these are by far our most popular vehicle class, and we're eager to see this translated to Le Mans Ultimate, as we continue to bring the product up to date to match the real world offering and changes in the sport.

Steven Hudson: From another of our products off after two historically shows these are by far our most popular vehicle class and were eager to see this translate into Lamont. Okay. As we continue to bring the product up to date to match the real world offering and changes in the sport.

Stephen Hood: Part of this major update is an extension to our race control platform to enable new features and services as part of an optional subscription service. We made a commitment to expand the overall offering and subscription plans are part of that. We are conscious, however, of the never ending stream of subscription services out there and intend for our offering to provide major value across our two pillar titles, R Factor 2 and The Monultimate. with every new game tapping into this to deliver unbeatable value. This service should go live next month and become a useful revenue stream.

Steven Hudson: Part of this major update is an extension to our race control platform to enable new features and services as part of an optional subscription service.

Steven Hudson: We made a commitment to expand the overall offering and subscription plans are a part of that.

Steven Hudson: We are conscious however of the never ending stream of subscription services outlet I think 10 for our offerings to provide major value across how to pillar tussles off attitude and ultimate.

Steven Hudson: With every new game tapping into this to deliver unbeatable value. This service should go live next month and become a useful revenue stream.

Stephen Hood: I must also make mention of our partnership with Kindred Concepts, the creator and operators of the hugely successful F1 Arcade. They recently expanded to a fourth venue, the latest in Washington, D.C. This is a partnership that enables us to demonstrate the appeal of our game and technology, and we're hopeful of exploring more of what we can do together next year. With every new venue opened, more players get to experience our racing simulation. We receive additional per seat license revenue from Kindred Concepts, and we position our technology as the pinnacle of single seat racing.

Steven Hudson: I must also make mention of a partnership with kindred concepts crazy and operators of the hugely successful F. One okay.

Steven Hudson: They recently expanded to a fourth venue relationships being Washington D C.

This is a partnership that enables us to demonstrate the appeal of Alka and technology and we're hopeful of exploring more of what we can do together next year with every new venue openings more players get to experience. Our racing simulation. We received additional testing license revenue from kindred concepts and we position our technology at the pinnacle of single seat pricing.

Stephen Hood: As I hope you will have understood, I am upbeat about the potential future of this company, studio and its technology. Our announcement regarding strategic alternatives came about because the board and I believe with the right financing, we will have the opportunity to grow this business quickly and sustainably. In the 18 months since I returned to this business, with the mandate to steer a new course, we have made enormous progress, reducing debt, reducing cash spend and at the same time building, launching and cultivating an iconic product in Le Mans Ultimate.

Steven Hudson: As I hope you will have understood.

Steven Hudson: A piece of that central feature of this company she is and its technology.

The announcement regarding strategic alternatives came about because of the board and I believe with the right financing we will have the opportunity to grow this business quickly and sustainably in the 18 months since I'll return to this business with a mandate to steer new course, we have made enormous progress reducing debt reducing cash spend.

Steven Hudson: And at the same time building launching and cultivating an iconic product isn't among ultimate.

Stanley Beckley: Now I would like to invite Stanley Beckley, our Chief Financial Officer, to talk about the financial results for the third quarter of 2024. Thank you, Stephen, and good evening, everyone.

Speaker Change: Now I would like to invite <unk>, our chief financial Officer to talk about the financial results does that third quarter of 2024.

Speaker Change: Thank you Steven and good evening everyone.

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 third quarter of 2024. Revenues for the quarter were $1.8 million, up by $0.1 million or 6.4% when compared to the same period in the prior year. The increase in revenues was primarily due to higher digital game sales from the release of Le Mans Ultimate on PC in February 2024. Net loss for the quarter was $0.6 million, compared to a net loss of $3.5 million for the same period in the prior year, an improvement of $2.9 million.

Speaker Change: Actually Steve is an earnings call I want to be off in any forward looking guidance today instead.

Speaker Change: Instead, I'll focus on providing an update on our financial results and highlights from the third quarter of 2024.

Speaker Change: Revenues for the quarter were $1 8 million.

Speaker Change: <unk> dollars 1 million or six 4% when compared to the same period in the prior year.

Speaker Change: The increase in revenues was primarily due to higher digital game sales from the release of the Bon Aqua.

Speaker Change: Alternates on PC in February 2024.

Speaker Change: Net loss for the quarter was <unk> 6 million.

Speaker Change: Compared to a net loss of $3 5 million for the same period in the prior year.

Improvement of $2 9 billion.

Stanley Beckley: The decrease in net loss is driven by $1.4 million in other income, which is primarily comprised of foreign currency gains incurred emerging transactions denominated in a currency other than U.S. dollars. Net loss also decreased due to a $0.5 million reduction in operating expenses related to headcount reductions and lower general and administrative expenses during the three months ended September 30, 2024, compared to the same prior year period, as well as a $0.2 million improvement in gross profit. Net income attributable to plus a common stock was 0.0 per share for the third quarter of 2024 compared to a net loss of 1.31 for the same period in the prior year.

Speaker Change: The decrease in net loss is driven by $1 4 million in other income, which is primarily comprised of foreign currency gains incurred.

Speaker Change: Any transactions denominated in the currency other than U S dollars.

Speaker Change: Net loss also decreased due to one single point 5 million reduction in operating expenses related to headcount reductions and lower general and administrative expenses. During the three months ended September 32024.

Speaker Change: So this entire period.

Speaker Change: Well I think <unk> 2 million improvement in gross profit.

Speaker Change: Net income attributable to class a common stock was zero point and see what the share of it.

Speaker Change: Third quarter of 2024 compared to a net loss of 1.31 for the same period prior year.

Stanley Beckley: We are reporting adjusted EBITDA of $0.1 million for the third quarter of 2024 compared to an adjusted EBITDA loss of $2.5 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 and comparative quarter, as well as a decrease in stock-based compensation compared to the prior year period.

Speaker Change: We are reporting adjusted EBITDA of $1 million for the third quarter of 2020 compared to an adjusted EBITDA loss of $2 5 million for the same periods in the prior year.

Speaker Change: The improvement in adjusted EBITDA.

Speaker Change: I suppose this cost in respect of the change in net income for the period and comparative quarter.

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 in operations for the nine months ended September 3rd, 2024 was approximately 0.7 million. representing an average monthly net cash burn from operations of $0.1 million down $1.0 million when compared to the average monthly cash burn of $1.1 million for the nine months ended September 30, 2019. As of September 30, 2024, the company had cash and cash equivalents of $0.8 million, which had decreased to $0.5 million as of October 31, 2024.

Speaker Change: As it relates to liquidity. This continues to be a key area of focus for the company.

Speaker Change: Net cash used in operations for the nine months ended September 32024 was approximately 0.7 million.

Speaker Change: Average monthly net cash burn from operations of <unk> dollars 1 billion.

Speaker Change: One 2 million when compared to the average monthly cash burn of $1 $1 billion for the nine months ended September 32015.

Speaker Change: As of September 32024, the company had cash and cash equivalents of <unk> 8 million, which have decreased to <unk> 5 million I spoke to the 31st 2024.

Stanley Beckley: Based on our cash position and 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. 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 sale of our NASCAR license and traction.

Speaker Change: Based on our cash position and average monthly cash burn.

We do not believe the sufficient cash on hand to fund the company accretion over the next year.

Speaker Change: And that additional funding will be inquired audits 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 debt financing arrangements.

Speaker Change: Actions Stu.

Speaker Change: Strategic alternatives for our business, including but not limited to the sale of our licensing of our assets. In addition to just pull up my NASCAR licensed subtraction.

Stanley Beckley: and further cost reduction and restructuring initiatives.

Speaker Change: And for the cost reduction and restructuring initiatives.

Stephen Hood: Thank you all for your time, and now I will turn the call back to Stephen for closing remarks. Thank you, Stanley, and thank you to everyone joining us today. If I could leave you with one lasting thought, it's this. We've shown that a united and focused team of passionate, talented individuals can defy the odds and transform our organization into the forward-thinking games company we were always meant to be. I am confident that together, we will empower our people to lead us into a successful future, delivering entertainment experiences that could genuinely disrupt the racing and driving segment within which we operate.

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

Steven Hudson: Thank you Stanley and thank you to everyone joining us today.

Steven Hudson: If I could leave you with one last week talks is this.

Steven Hudson: Shouldn't that unites you didn't focus team of passionate talented individuals can be five yields and transform our organization into the fold as thinking games company, we've always meant to date.

I am confident that together, we will empower our people to lead us into a successful future delivering entertainment experiences that can genuinely disruptive racing and driving segment within which we operate.

Stephen Hood: We have perhaps the best technology, amazing people, a growing ecosystem with our race control platform, which incidentally passed a 100,000 user registration mark just this week. We are working as hard as possible. Thank you all for your time and attention, I deeply appreciate it.

Steven Hudson: Perhaps the best technology Amazing people, a growing ecosystem without race control platform, which incidentally passed a 100000 user registration Mark just this week we.

Steven Hudson: We're working as hard as possible.

You all for your time and attention I deeply appreciate it.

Stephen Hood: Thank you.

Operator: We will now be fielding questions today.

Speaker Change: Thank you we will now be fielding questions today, I would now like to turn the conference back to Mr. Steven Hood for any additional or closing remarks.

Stephen Hood: I would now like to turn the conference back to Mr. Stephen Hood for any additional or closing remarks. Thank you. I would just like to say thank you for the attention that we received this evening. It is much appreciated. Thank you all for your time.

Steven Hood: Thank you I would just like to say.

Steven Hood: Thank you for the attention they received.

Steven Hood: Good evening is much appreciated.

Steven Hood: You all for your time.

Operator: This does conclude today's call. We thank you for your participation. You may disconnect at any time.

Speaker Change: This does conclude today's call. We thank you for your participation you may disconnect at anytime.

Speaker Change: [music].