Q1 2025 Motorsport Games Inc Earnings Call

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Operator: Thank you for standing by and welcome to Motorsport Games Incorporated's first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. As a reminder, today's conference is being recorded.

Speaker Change: Thank you for standing by and welcome to Motor Sport Games Incorporated's first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.

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.

Speaker Change: To turn the conference over to Ben Rossiter Turner from Motor Sport Games. Please go ahead.

Ben Rossiter-Turner: Thank you and welcome to Motorsport Games first quarter 2025 earnings conference call and webcast. On today's call is Motorsport Games Chief Executive Officer Stephen Hood and Chief Financial Officer Stanley Beckley.

Speaker Change: Thank you and welcome to Mexico Games first quarter 2025 earnings conference call and webcast.

Speaker Change: On today's call is makes bookings Chief Executive Officer, Stephen Hoge, and Chief Financial Officer standing back to me.

Ben Rossiter-Turner: By now, everyone should have access to the company's first quarter 2025 earnings 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 U.S. federal securities laws. These statements are based on management's current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Except as required by law, the company undertakes no obligation to update any forward-looking 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: By now everyone should have access to the company's first quarter 2025 earnings press release filed today after market close.

Speaker Change: This is available on the Investor Relations section at Batesville game's website at Www Dot Metropole Gamestop com during.

Speaker Change: 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 or beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.

Speaker Change: Except as required by law the company undertakes no obligation to update any forward looking statements made on this call, which 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 company's findings with the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended March 31, 2025, for a detailed discussion of certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Speaker Change: Please refer to today's press release, and the company's filings with the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended March 31, 25 for a detailed discussion of certain risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.

Ben Rossiter-Turner: In today's conference call, we will refer to certain non-GAAP financial measures, such as adjusted EBITDA, as we discussed the first quarter 2025 financial results.

Speaker Change: In today's conference call, we will refer to certain non-GAAP financial measures such as adjusted EBITDA as we discuss the first quarter change 25 financial results.

Stephen Hood: 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 over the call to Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen? Thank you everyone for joining this conference call today. I am pleased to address you today with our company's outlook in a much-improved state. I have previously mentioned that the company was not short of suitors following the public sharing of the message we were considering strategic alternatives.

You will find a reconciliation of these non-GAAP measures today, Mr. Any comparable GAAP measures as well as other relates to display says in the press release issued yesterday, which is also available on the Investor Relations section of Batesville, Kansas website at Www Dot makes foot Gamestop com and.

Speaker Change: And now I'd like to turn over the call to Steven <unk>, Chief Executive Officer, Ben spoke games Steven.

Speaker Change: Thank you everyone for joining this conference call today.

Speaker Change: I am pleased to address you today without company's outlook and a much improved state.

Speaker Change: Previously you mentioned that the company was not short of speeches following the public sharing the message we were considering strategic alternatives. This along with the hard work undertaken by management to reduce costs and liabilities cleaned with the positive progress in sales and platinum elite access gain plum on ultimate.

Stephen Hood: This, along with the hard work undertaken by management to reduce costs and liabilities, twinned with the positive progress in sales and player numbers for our early access game, Le Mans Ultimate, meant that the company became a realistic and enticing proposition for investment. As a result of this, we recently announced on April 15th a $2.5 million investment into our resurgent business, led by virtual reality headset manufacturers Pimax. This investment, coupled with the expectation of continued sales performance of our titles, has given our business significant additional breathing room as we further develop our products and continue to assess and act upon the future potential of our company.

Speaker Change: The company became a really sticky and enticing proposition for investment.

Speaker Change: As a result of this we recently announced on April 15th a cheap with $5 million investment into our research business led by virtual reality headset manufacturers panics.

This investment coupled with the expectation of continued sound performance of our titles has given our business significant additional breathing room as we further develop our products and continue to assess and act upon the future potential of our company. Thus.

Stephen Hood: Thus far, it also appears to have helped increase confidence in the business on the market, with shares trading more than 2.5 times higher than the period prior to the announcement of the investment. Net revenues from our Le Mans Ultimate Racing title were 0.4 million higher in Q1 2025 versus the same prior year period despite Q1 2024 being the release quarter for the game which is a positively surprising result. Although total revenues for Q1 2025 were lower than the same period in the prior year, primarily due to the reduction in the back catalogue of games we have available following the sale of the NASCAR licence, It is pleasing to be growing new revenue growth through the Le Mans franchise, but also through our race control subscription platform.

Speaker Change: Thus far it also appears to have helped increase confidence in the business on the market with shares trading more than two five times higher than the period prior to the announcement of the investment.

Speaker Change: Net revenues from our ultimate racing title were <unk> 4 million higher in Q1 2025. This is the same prior year period. Despite to Q1 2024 being released quarter for the game, which is positively surprising result.

Speaker Change: Although total revenues for Q1, 2025 or lower than the same period in the prior year, primarily due to the reduction in the back catalog games, we have available following the sale of the NASCAR license it.

Speaker Change: It is pleasing to be growing new revenue growth through the Lamont franchise, but also through our race control subscription platform.

Stephen Hood: Race control was and is a major component of our mission to build owned infrastructure around our gaming titles so that we can elevate the customer experience. Our cash flow from operations has also improved, as evidenced by the average positive cash flow from our operations of approximately $0.1 million per month generated by the company during the three months ended March 31, 2025. Future updates for the Le Mans Ultimate game are planned for release soon. On 10th June we will be bringing Teams and Driver Swap functionality, allowing players to share a car in a live environment. This is a technical challenge but one we are excited to approach, particularly as it ties into our race control matchmaking and service platform, allowing us to take on these challenges with more confidence and ownership than our competitors.

Speaker Change: Grace control was and is a major component of ambition to build an infrastructure around our gaming titles.

Speaker Change: We can elevate the customer experience.

Speaker Change: Cash flow from operations has also improved as evidenced by the average positive cash flow from our operations approximately 0.1 billion per month generated by the company. During the three months ended March 31 2025.

Speaker Change: Future updates for Dell among the ultimate game plan for really soon.

Speaker Change: On <unk>, we will be great teams and drive a swap functionality, allowing clients to share a car in a live environment. This is a technical challenge, but one we are excited to approach, particularly as it ties into Outrace control matchmaking service platform, allowing us to take on these challenges with more confidence and ownership.

Speaker Change: Now competitors.

Stephen Hood: Additionally we'll be adding the final pack of the 2024 season pass which has been a great revenue driver for this title. Following this, we have an exciting roadmap designed in collaboration with our partners at Automobile Clubs de l'Ouest. the ACO, the organiser of the 24 Hours of Le Mans endurance race planned to be announced after our June release which we confidently believe will excite the Games fanbase. the business continues to assess new ways of expanding the Le Mans Ultimate audience. It can be expected that the game will be moving from its early access phase into a version 1.0 or full release this year, with more details coming soon.

Speaker Change: Additionally, we'll be adding the final path of the 'twenty 'twenty four season pass, which has been a great revenue driver for this title.

Speaker Change: Following this we have an exciting roadmap designed in collaboration with our partners at T. Mobile clubs day Lewis the ACO. The organizer of the 24 hours of pneumonia insurance rates tend to be announced after our June release, which we confidently believe will explain gains fan base there.

Speaker Change: Business continues to assess new ways of expanding the Lamont ultimate audience. It can be expected that the game will be moving from early access phase into a version 1.0 or fully released this year with more details coming soon.

Stephen Hood: This would be an important milestone and would unlock new sales and marketing tactics that we can employ. Additionally, we have made comment that we are exploring console opportunities by bringing Le Mans Ultimate to PlayStation and Xbox gaming consoles. As we approach version 1.0, the ability to scope this work more accurately becomes possible.

This would be an important milestone and would unlock new sales and marketing tactics that we can employ.

Speaker Change: Additionally, we have made comments that we are exploring console opportunities by bringing Lamont ultimate to Playstation and Xbox gaming consoles.

Speaker Change: As we approach version 1.0, the ability to scale. This work more actual it becomes possible.

Stephen Hood: This work continues at pace with discussions underway with multiple potential porting and publishing collaborators, and we hope to have something to announce soon.

Speaker Change: What continues at pace with discussions underway with multiple potential posting and publishing collaborators and we hope to have something to announce soon.

Stephen Hood: Development and publishing video games is not our only source of income. Although in recent years our esports event output has fallen whilst we concentrated on developing the Le Mans Ultimate title, we still intend to revisit the award-winning 24 hours of Le Mans Virtual, which historically brought great attention to our games alongside sponsorship revenue. Our relationship with Kindred Concepts, also known as F1 Arcade, is also still live. We license our F1 to their venues, with the fees growing alongside their expansion. There is additional potential for development work to enhance their in-venue experiences as well.

Speaker Change: Development and publishing video games is not hourly source of income although in recent years, our esports event output has fallen whilst we concentrated on developing the Lamont ultimate is going to we still intend to revisit the award winning 24 hours of Le Monde virtual which historically bought great attention to our games alongside <unk>.

Speaker Change: Sponsorship revenue.

Speaker Change: Our relationship with Kindred concepts also known as F. One arcade is also still lives we license our software to their venues with the fees growing alongside their expansion.

Speaker Change: There is additional potential for development work to enhance stay in venue experiences as well as the.

Stephen Hood: As the business reviews its progress, we believe we are now ready for the next stage of growth. We believe the racing game market is underserved in terms of quality and choice. And now, as the successful developers behind one of the defining PC racing simulators in Le Mans Ultimate, we are exploring new opportunities to expand our portfolio, to diversify and generate new revenue streams which have the potential to excite motorsport and sim racing fans.

Speaker Change: The business we view this progress we believe we are now ready for the next stage of growth.

Speaker Change: We believe the racing game market is underserved in terms of quality and choice and now as the successful developers behind one of the defining PC racing simulators in the amount of ultimate.

Speaker Change: We are exploring new opportunities to expand our portfolio to diversify and generate new revenue streams, which have the potential to excite motor sports and racing fans.

Stanley Beckley: Now I would like to invite Stanley Beckley, our Chief Financial Officer, to talk about the financial results for the first quarter of 2025. Thank you, Stephen, and good evening, everyone.

Speaker Change: Now I.

Speaker Change: I would like to invite Stanley Beckley, our Chief financial Officer to talk about the financial results for the first quarter of 2025.

Stanley Beckley: Thank you Steven and good evening everyone.

Stanley Beckley: As with previous earnings calls, I won't be offering any forward-looking guidance. Instead, I will focus on providing an update on our financial results and highlights from the first quarter of 2025. Revenues for the quarter were $1.8 million, down by $1.3 million, or 41.9% when compared to the same period in the prior year. The decrease in revenues was primarily due to a 1.5 million decrease in NASCAR-related revenues in 2025, a gaming title we are no longer authorized to sell starting in 2025. A 0.2 million decrease in our R Factor 2 title, offset by a 0.4 million increase in 2025 from sales of Le Mans Ultimate compared to 2024.

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

Stanley Beckley: Instead, I will focus and provide an update on our financial results and highlights.

Stanley Beckley: First quarter of 2025.

Stanley Beckley: Revenues for the quarter were $1 8 million.

Stanley Beckley: Down by $1 3 million or 41, 9% when compared to the same period in the prior year.

Stanley Beckley: The decrease in revenues was primarily due to <unk> 5 million decrease in mascot related revenues in 2025.

Stanley Beckley: Gimme title, we are no longer authorized to sell starting in 2025.

Stanley Beckley: 0.2 million decrease in our factory to title.

Stanley Beckley: But to your point $4 million decrease in 2025, some sales of Lamont ultimate compared to 2024.

Stanley Beckley: Net income for the quarter was $1.0 million compared to a net loss of $1.7 million for the same period in the prior year, an improvement of $2.7 million. The increase in net income is driven by an increase in other operating income of $0.5 million, which represents the amount to be reimbursed to the company for legal fees pursuant to the Innovate Settlement Agreement entered on March 27, 2025. A $1.7 million reduction in total operating expenses. primarily related to headcount reductions in Q4 2024 and a $0.2 million gain from the settlement agreement entered into with Luminous on February 20, 2025.

Stanley Beckley: Net income for the quarter was one 1 billion.

Stanley Beckley: Compared to a net loss of $1 7 million for the same period in the prior year and.

An improvement of $2 7 million.

The increase in net income is driven by an increase in other operating income was <unk> 5 million, which represents about 2 billion burst of the company for legal fees.

Stanley Beckley: The <unk> settlement agreement entered in March 2007 to 2025.

Stanley Beckley: One 7 million reduction in total operating expenses.

Stanley Beckley: Mainly related to headcount reductions in Q4 2024.

Stanley Beckley: 0.2 million gain from the settlement agreement entered into with luminous on February 22025.

Stanley Beckley: Net income attributable to Class A common stock was $0.33 per share for the first quarter of 2025, compared to a net loss of $0.61 for the same period in the prior year. We are reporting adjusted EBITDA of $0.6 million for the first quarter of 2025 compared to an adjusted EBITDA loss of $1.0 million for the same period in the prior year. The improvement in adjusted EBITDA of $1.6 million was primarily due to the same factors driving the previously discussed change in net income for the first quarter of 2025, when compared to the same period in the prior year, as well as a decrease in stock-based compensation compared to the prior year period.

Stanley Beckley: Net income attributable to class a common stock.

Stanley Beckley: <unk> per share for the first quarter of 2025.

Compared to a net loss of <unk> six one.

Stanley Beckley: <unk> in the prior year.

Stanley Beckley: We are reporting adjusted EBITDA of <unk> 6 million for the first quarter of 2025.

Stanley Beckley: <unk> adjusted EBITDA loss of one 1 billion for the same period in the prior year.

Stanley Beckley: The improvement in adjusted EBITDA of $1 6 million was primarily due to the same factors driving the previously discussed change net income for the first quarter of 2025, when compared to the same period in the prior year.

Stanley Beckley: As well as a decrease in stock based compensation.

Stanley Beckley: <unk> to the prior year period.

Stanley Beckley: As relates to liquidity, this continues to be a key area of focus for the company. As of March 31, 2025, we had cash and cash equivalents of $1.1 million, which increased to $3.1 million on April 30, 2025, after taking into account the proceeds from the private split. The increase in cash-in-cash equivalence was primarily due to $2.35 million in net proceeds from a private placement of our Class A common stock and issuance of a pre-funded warrant which closed on April 11th, 2025.

Stanley Beckley: As it relates to liquidity.

Stanley Beckley: This continues to be key areas of focus for the company.

Stanley Beckley: As of March 31, 2025, we had cash and cash equivalents of $1 1 million, which increased to $3 1 million.

Stanley Beckley: At April 32025, after taking into account the proceeds from the private placement.

Stanley Beckley: The increase in cash and cash equivalents was primarily due to 235 million in net proceeds from our private placement of our class a common stock.

Stanley Beckley: Issuance of a pre funded warrant is closed.

Stanley Beckley: On April 11th 2025.

Stanley Beckley: The only three months ended March 31, 2025. The company generated an average positive cash from operations approximately $0.1 million per month. And while it has taken and continues to take measures to reduce its costs, the company expects to have a net cash outflow from operations for the foreseeable future as it continues to develop its product portfolio and invest in developing new video game titles. In order to address this liquidity shortfall, we continue to explore several options, including, but not limited to, additional funding in the form of potential equity and debt financing arrangements or similar transactions.

Stanley Beckley: During the three months ended March 31 2025.

Stanley Beckley: The company generated an average positive cash.

Stanley Beckley: <unk>.

Stanley Beckley: Approximately <unk> 1 million per month.

Stanley Beckley: While it has taken continues to take measures to reduce its costs.

Stanley Beckley: <unk> expects to have a net cash outflow from operations for the foreseeable future to.

Stanley Beckley: Continues to develop its quite a portfolio and invest in developing new video game titles.

Stanley Beckley: In order to address this liquidity shortfall.

Stanley Beckley: We continue to explore several options, including but not limited to.

Stanley Beckley: Additional funding in the form of potential equity and debt financing arrangements similar transactions.

Stanley Beckley: Strategic alternatives for our business, including but not limited to the sale or licensing of our assets, in addition to past sales of a NASCAR license and traction. and further cost reduction to the restructuring initiative.

Stanley Beckley: <unk> alternatives for our business, including but not limited to the sale or licensing of our assets. In addition to <unk> sales of our NASCAR license and traction.

Stanley Beckley: And for the cost reduction and restructuring initiatives.

Stanley Beckley: Thank you all for your time.

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

Stephen Hood: And now I will turn the call back to Stephen for closing remarks. Thank you again for everyone joining this call today. We are incredibly pleased to have hit this major milestone in receiving our latest investment and remain confident that with our expertise and experiences, there will be opportunities to grow this business in the coming years, and we are on the right path to success.

Stanley Beckley: Thank you again for everyone. Joining this call today, we are incredibly pleased to have hit this major milestone in receiving our latest investment and remain confident that with our expertise and the experience is there will be opportunities to grow this business in the coming years and we are on the right path to success.

Operator: I'll now pass it back to the operator.

Stanley Beckley: I'll now pass it back to the operator.

Operator: Thank you and this concludes today's program. We thank you for your participation. You may disconnect at any time.

Stanley Beckley: Thank you and this concludes today's program. We thank you for your participation you may disconnect at any time.

Stanley Beckley: [music].