- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to Motorsport Games Inc.

Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. pleasure to my Godskind. now is to Ken introduce It Thank you, Ken.

begin. may You

Ken Godskind

Motorsport and Relations By filed market third available now, Thank call Games today third Kozko, and the after to quarter Motorsport XXXX section On access www.motorsportgames.com. Chairman, the Games and you, on CFO. Executive call Company’s Motorsport everyone should website welcome to is today’s earnings at XXXX close. Games’ Dmitry is of This interim CEO webcast. Investor quarter earnings have conference press release

or materially discuss discussion we new that results. cause SEC Please refer ended certain of as actual non-GAAP to quarter from in XX, any those such quarter the today’s of as its statements risks will we described for whether adjusted statements. events forward-looking third statements involve statements undertakes expectations or a with the release securities During course from the otherwise. EBITDA differ Company’s Company may those made current this make to forward-looking results implied and these These XXXX In risks to financial within U.S. required and future call, expressed alter forward-looking forward-looking or information, uncertainties call, statements obligation laws. call law, are management made press the update refer to materially conference the to management’s any Except beliefs no today. of the as for in XXXX financial measures based September of that and or on the on statements, could differ the certain update meaning forward-looking and result a detailed actual today’s filings results could by federal to as this cause

issued to Dmitry? directly measures comparable You will the call release over I’d turn most press well these other related to Dmitry. find measures as disclosures today. like GAAP to earlier And the as reconciliation of their non-GAAP now, in a

Dmitry Kozko

everyone, Times be start you, proud racing XXXX are Motorsport joy to in gathered has for and earnings call. to And Thank our resilient call, that the of to say spreading have I’m on we the like to the world QX which the Games, unprecedented. around at here demonstrated passionate I’d joining the team us definitely masses. that of

We it. continue past development. products our enjoy to to and esports are that Company’s that games focused friends months quarter, into. working stay to for busy were This fans and invest we to finalizing on product in we’ve launching prior The bring and experiences priorities want their been

we in example, this game Rivals, XXth, platform announced over game would compared we and to previous October able Switch, time on exciting were year’s the we momentum Switch were Adding budget. happy XXX game to NASCAR release on that and we NASCAR For to from report the stores QX, distribution year’s launch able a our on for to to target add NASCAR I’m that previous to channels on new when Nintendo title.

and enhance run, to game released not existing to our PC, and license due our availability, to for necessary an effort PlayStation the until gaming with Season DLC bugs, as diligently the charge XX: investment NASCAR continue for improving renew this game. the we NASCAR we Ignition a QX, to Ignition increase We of free for is was our XXXX. XXXX XX: Xbox, of In game, Update to believe owners long the throughout Additionally, the engagement experience patch players. NASCAR work our content fans on increase

brands. XXXX We production experience. QX, to Le exciting our racing on stewards and into developing and participants at to is Motorsport good Le And our Games entertainment ride grid rFactor making the series. allowed is work Additionally, value our have four of increased and believe and us started Mans experiences. esports our BTCC we came to shifted all of sure committed an gears INDYCAR these XX front, up for we XXXX deserve. a our being fans We latest XXXX hard we that launched X activities work ramped that try thank racing who also iconic tracks. sponsors fans participants viewership making same title, year NASCAR for It the which the Thank along on team this packed where while to increase here. continue the and the content strides. Series, we’ve Mans time the us Virtual the at to a another our star who the And Hours at thank us this made been have fans for gaming from been for to our the you experience On for In recent big we In at and to the a and gaming them those us. to we those patient QX, BTCC support they been extends deliver commitment in to events. the of bring means exhilarating supporters before. with of are lot

our in five NASCAR for Rivals Now, Games to attended rFactor showcase a two we St. XXXX running X. Louis. Motorsport races, BTCC NASCAR available at competition NASCAR nail content all fans also INDYCAR recently in recent INDYCAR game NASCAR on content events on Indianapolis biting our And game. content showcased to is interactive and eager our

a $X.X or $X.X September marketing QX goal XXXX primarily split and have $X.X causing November lower in operating primarily $X.X months adjustment million To XXXX XXXX we loss million loss our QX The for million. out XXXX in continuing and to XXXX loss increase driven reduce completed of increase administrative EBITDA with were development $X.X to million simulation compliance in were million and due contingency XXXX cost volumes or approximately revenues QX of and to as Revenue take million partially million. increase by announced the that $X.X $X.X achieve digital to million $X.X XXXX I’d $X expected in in efforts good QX in decrease achieving general is XXXX, sales reserves. in a progress X-for-XX well respectively, months game or the We’re loss or are for nine and $X.X annualized by to through compared ended expenses. mobile million The of on nine end expense other in driven the million profit, like $X.X and XX, was lower our partially game increase XXXX. XX% volume now when lower closing million $X.X a same an decreased retail million to Revenues generate months current for $X.X interest $X.X sales period is revenues discuss was million, X% parties. million increase primarily further due reverse caused of million that QX gross requirement million the for of net of net million the Gaming program and lower digital of factors platforms September in we the results for cost compared losses, by million in price increase ended expenses our minimum reductions. revenue reduction for decrease we the revenues in by XX, compared retail $X.X concessions, segment The just by date, million $X which also primarily decrease $X.X NASDAQ’s to decrease to XXXX XXXX. by $X.X listing. approximately months XXXX compared EBITDA cost, additional $X.X made loss in expenses XXXX. Gaming the in to of decrease to by with the was the our revenues prior pleased financial restructuring the and annualized an to The $X.X foreign in ended by revenue million XXth, ended position. decrease liquidity pricing announce overstatement September in $X.X development $X million the and segment sales, loss. of offset to loss $X.X $X.X million the $X.X and $X.X savings regain million expenses, three and when increase of stock In as XXXX, XXXX due million million our adjusted driven pricing. adjusted in by QX for were third $X.X in QX opportunity of offset to net was increases $X.X $X.X for spend, XXXX. net of million June and compared immaterial decrease correcting QX was million September The to lower sales loss and earned to loss million $X.X increase million These currency decreases QX were continuing nine XX% period. XXXX, adjusted million, XX, EBITDA decrease the higher in pricing

ended was $X.X million revenue nine offset our revenues in loss million segment in Esports increase sales ended XXXX. and $X.X nine spend, a currency $X XXXX profit, increase its to lower asset January The in virtual from XXXX of season million gross its commenced ended the and for racing million loss concluded a as million Esports sponsorship million in The to foreign million and Mans gains in XXXX. increase in into a September Our nine months September revenues reserves. increase season administrative driven goodwill increased months was $X.X million which XXXX. increase These Net series higher segment investment, $X.X method by expenditures, development compared impairment, months is by September XX, million in expense, were million $X.X from $XX.X ended XX, September XXXX increases and $X.X for compared a equity decrease $XX general a XXXX interest losses, by the $X.X marketing in the our XX, and to contingency September $X.X in XXXX the in loss of net in for expense. months and a million $X.X Le million due events, XXXX increase XX, intangible nine XXXX in a decrease increase million into increase $XX.X

$X compared as a $XX loss loss the primarily For in XXXX million, million EBITDA net adjusted the to QX year-to-date QX increase by $XX in was XXXX. year-to-date adjusted QX was XXXX, same QX for for when factors The million increase to year-to-date increase compared year-to-date EBITDA driven the XXXX. when loss EBITDA adjusted loss

continue operating to to expect losses. incur significant We

reach grow we our a As need profitability result, revenues will and to to cash flows. positive

titles. foreseeable losses continue and game portfolio we the to incur to invest continue future for of to in expect development product our as develop We new

had and Company operations XXXX, XX, approximately $X.X October remainder to our cash fund of which insufficient we million equivalents, believe the of As XXXX. is of cash current for

equity additional now, Thank to questions. We us capital go to available liquidity our by today. our and you will Operator? initiatives, product the And need requirement. control with debt joining supplement generated cost cash financing, our roadmap additional our changes to working for and to reduce let’s

Operator

Thank Instructions] At will Our sir. of Canaccord. a comes first question with be Jason proceed [Operator we time, session. this question. you, Please line question-and-answer conducting Tilchen the your with from

Jason Tilchen

Thanks. taking Dmitry. question, a I Thanks have few. for the

feedback maybe to start, far, has October first title could the titles the your and you’ve so relative both that so talking the the minute you and in about reception of the to you to related pack week then that. gotten How consumers spend expectations? in from expansion engagement sales Switch week the Just trended trended Switch the following far how released a of

Dmitry Kozko

the Thanks for question. Jason. Thanks,

tracking our as are per expectation. We

mostly of light to or And experience or chance seeing when at experience feedback a towards type of behind We’re they products monitoring were live the got their not the Twitter I NASCAR the actual feedback I hand showcased they that interesting had firsthand other enjoy multiple to emotions anything where up community, users. else, products. eyes events the we their the experience title. to realistically, walls very feedback, ran multiple the Switch track, the competition geared that our pleasure positive from at our a but

uptick could the is pack. seems community, well to an Rivals the I expansion users So, see as well confidently being received playing be game say, an and very the enjoyment. from do in We as

We users content appreciating them NASCAR are do XXXX releasing tracking not that that it. we’ve are for is I some appreciation done Ignition what that actually and it. there with for some game charging the think see for we

Jason Tilchen

That’s the Great. helpful. second just very And situation. current is on one financing

need implies, the mentioned the press You that soon sort cash in to solution burn of of financing of you’ll October rate the here. balance come pretty up the given a release at the end with

stands, to out? just the and update on that’s an expected that give where how you’re options So, evaluating, us currently maybe play

Dmitry Kozko

right absolutely with You’re that.

types couple We’re continuing type existing all in form financing. Those options still of options the of debt available. options to equity with options the There of credit shareholder include different from explore of is financing. There’s main line.

sure, them. are come the of is there’s growth options being But However, ability to to this with continue of right absolutely to we fund. not if to you’re or business. announce to course, are on the something quickly have here we’re be That And up explored. still table. something that’s those not fairly They all to going up support and assumption,

Jason Tilchen

And that here? more fits potential whether product to year? changes would mentioned some title, with to relation the Could other of the And include launching XXXX maybe the decision-making change how comment a that the you next is you NASCAR just in remarks process or you’re Thanks. it on in to franchises planning your roadmap. prepared on in about

Dmitry Kozko

the another of question. of changes is That’s have good any What those optimize in. tools done amount we invest dates delivery haven’t that We products. the we to actually anticipated made

on the type necessary of populated develop so anticipated. processes on inside efficient, content development they that vegetations more being previously and certain implemented, and are do created as that racing are testing games require also much other as have our our we tracks, tools product elements in were game. within not automation focusing more as processes making time to There’s basically, So, our the

get are type the that which of the us those result we’re focused quicker. to on, basically also efficiencies to allow end So,

XXXX still speed them we what is previously do have that bring that our making will well said products to But we However, invest anticipate sure we are delays on currently be polished the market. we not before releases. from

Operator

Noble Kupinski proceed Thank from with Michael question the question. the you. Markets. Capital comes next your And line Please with of

Michael Kupinski

but Thank you. have I Most couple. of my a questions were already addressed,

roadmaps, fact titles, business, in the in are the that companies from terms pinging other and that just seeing the In an at outside point? you offerings such if interest any of this Just are of if as the you gaming wondering iconic ones you well? there that’s of of product in changes other of larger option in other, they have terms options you debt, terms are terms identified equity

Dmitry Kozko

call is Thanks, I in thing of question. players One all are or it the Michael, that suspects for usual that aware industry, larger the us. say could the, let’s

are We particularly they few from cannot But have that if come sort we definitive. there’s I quite had there’s some types say exploring anything definitely explore. form I them. of communications are with would would different options. a which options of of them. some side, proposals say with And their we wouldn’t of

Michael Kupinski

those would And include also agreements? partnership

Dmitry Kozko

Sure.

of and we as iconic you the mentioned, gaming we that with provide stewards partnership agreements with just that because conversations not who explored, have such us are and companies, like partner We having of. distributors liquidity, could additional but potential help us value carry a other explored also would partners brands,

Michael Kupinski

that. limited in would for year. also prospect of of delay cash that strategy, of I about minimizing releases when really beyond? so Dmitry, I would the burn? -- Am point, potential at the the some of product XXXX you wrong terms that alleviate would issues determine more of assume you’re assume this to would kind talking time, And kind about I And and have to you’re that this you

Dmitry Kozko

products. You’re and delivery on the right, focused we’re XXXX of

to would projected the Hence, else on So, towards backseat. we’re come in could And effects our priority effect take a we part working take year, us of all into restructuring everything that a time. not gaming Anything geared future resources that right our the already, efficiencies which we did. release quality would this business. from help already are of it whichever wanted plan It’s participated now experiences on. currently

of towards So, to -- But the we’ll that would do those things I foresee omit explore go continue not things. that products. to delay certain

Michael Kupinski

there aggressive reduce of last say mentioned other let’s burn any actions -- reduce Have about been taken the any the to but you month further or more you has regarding that action taken that? cash recently course, in costs trying are to

Dmitry Kozko

No, executed. plan we restructuring with particular, has anticipated our everything that already not in XXXX been

additional we’ll potentially of further. continue areas cash to explore reduce burn course, to savings Of our

its is departments, and And particular in. Company those currently in on the focused we the in However, expanding position resources. and investing lean development are

So, anything towards product the focus is future are going. all and where better and good of resources product our roadmap the

quite so good those those because until as we the experience but them look We livelihood, so, not at have to quality or in fans So, our reduction right? that’s market. will sacrifice invest, do bring continue gaming to making incentivized bring same our for are and we’re And products time, areas based we possible, would not would product as we company, soon to honestly we that any enjoy. to the

Michael Kupinski

you remind me, this products year, most are this product your XXXX concentrated of at in or roadmap And point? Dmitry, that in can any do being for have additional you

Dmitry Kozko

more are one Heat NASCAR title, release. Quite have fans NASCAR few playing enjoying seen title. the actually X We still product a players are XXXX have franchise We in our themselves. there our still

them not So, why we update. content thought give XXXX

that of So, pack content to we’re to final on still polishes couple them. working deliver

will product has company enjoying. players type recognize our I But in history that’s that’s don’t years one, they old. to think provided be are an our its So, a because essentially of this what we interesting two update

to further increase like some additional give we’d would that them enjoyment. So, content

Michael Kupinski

marketing particular like product, to update the an don’t just that put you muscle base is fan how hope -- is or that that? just this offer out something much you there existing and know I And around would, planning spend to marketing behind that are how much would you

Dmitry Kozko

end our spend until cost the marketing We of the budgeted continue to year.

towards such, experiences. track those spends taking optimizations of more some made to some the have We

chance our not a from get but we only gather on also field users. actual feedback to So, products, the promote

also mentioned together Just those seeing how getting we things are with firsthand very before, soon. sales holiday like those the in I that optimized I enjoy are But and team. we into That’s it. things participating great

marketing of seize we do we holiday So, of not that size the any or want to for our abilities the decrease kind season. planned of could not reduce opportunity that to sort already muscle from we

towards our So, season. as product I’m but concerned, development, focused upcoming in not season as marketing company holiday budgeted we spend of on are are the staying And intact. as an we are far ignoring entire holiday that

Michael Kupinski

not but I answer may be thought to it this you ask I’d able question, Dmitry, anyway. And

of terms then, us might can give your burn cash for terms quarter burn In the the upcoming the you be? cash of thoughts the and what in shortfall

Dmitry Kozko

cards give So, moment. of and think as attached this produce it’s we cost it that into still to to that and so range, it burn to know, game just have are cetera, we distribute as in assume, you or sort But as we physical comes this like QX our game, previously guidance we we normal to our numbers so we does million go published around don’t had et Michael, when monthly is at stated. I fair this, manufacture, $X.X rate which Rivals

So, to to lay between million needle potentially it’s million move I somewhere have $X the for of fair out what that, would cards plus or creation rate. those $X.X could actually game burn on think monthly we assume that

Michael Kupinski

Dmitry you. good the luck. Got Thanks and for color

Dmitry Kozko

Michael. you, Thank

Operator

Benchmark. Hickey the comes question. Please your of from with Mike with next Instructions] [Operator question Our proceed line

Mike Hickey

number you that ‘XX about your some and good wear turnover of had game, and refilling how you had thinking Dmitry, Board. about some here? is many are give Hey, Funding funding as my why afternoon, -- only priority. think Can context for positions? that you occurred you Ken, how on probably just us some taking some routine of so into rebuild getting executive and questions. team Dmitry, your those building terms your sort do next moving in your and of But one your guys. hats. you can Thanks you Obviously, you

Dmitry Kozko

the for Thanks question. Mike

And members the the disagreement resign to stated asked Part raise independent where Company very-dilutive So, as be in shareholder in result to other pretty on directors additional a Board that about as and X-K right, question. potentially to approval the put stockholders, the shareholder such all been. of first, main the based it but proposal Board a require fair a independent the would of on would members, capital. also stock transactions disclosures, were as obviously has much that’s a

that those news. you what recent accepted and in have members have that’s seen a So,

However, to plan and who of we independent able independent members. Part of step was of how with according at to have, provide letter, the Board was NASDAQ days new Board other CFO, do to, -- we in one the to We with recently just that be the composition the two of such obviously to in NASDAQ and on other member three fill member. other our staff invite committee to XX plan as interim of serve members. would us, compliance committee audit course, our a least seats,

So, John CFO with independent we’re Delta conversations of position me New that And capacity down CFO, search when a put was permanent our to for a CFO and from our those go in more be step to John previously, to Board candidates. had because and the role. actively actively having member, interim type

The all liquidity something able more a CFO our liquidity. my to finding the that currently, concerns. to is am exploring from solve switch to as actively, filling I we’re soon gears on I continues is remain absolutely and So office those side And you’re will to role options. Therefore, of address right. focus as -- a available

Mike Hickey

Dmitry. you, Thank

Operator

are this question-and-answer teleconference. that concludes At time, concludes there This questions. also And session. further no the today’s

your disconnect participation, a And at lines this time. have for and day. great thank may you You your

Motorsport Games (MSGM) 19 Nov 222022 Q3 Earnings call transcript