Earnings call transcript Q1 2023

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Operator

Thank you for standing by, and welcome to Motorsport Games Inc.’s First Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, today’s conference is being recorded.

I’d like to turn the conference over to Ken Godskind from Motorsport Games. ahead. go Please

Ken Godskind

welcome conference and Games quarter first Thank and to webcast. earnings call XXXX you, Motorsport

On is By section Investor and quarter market Chief at have today’s close. Stephen website to of XXXX Financial Officer, call access available filed www.motorsportgames.com. Officer, Motorsport Motorsport earnings Games’ This press Games Jason today company’s is Relations Potter. the now, release should Executive everyone first Chief after Hood the on

the may the on the those meaning actual of from beliefs described materially within call, and forward-looking During cause These management’s based that to risks uncertainties and of management federal are make in laws. course expectations securities and these US involve differ statements. results could statements this statements current forward-looking

by update future the otherwise. obligation its this law, made on forward-looking no undertakes result any information, events a or as statements of required to or to call company new statements, or Except update alter forward-looking as whether

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

we today’s the first refer we measures financial to as will adjusted conference EBITDA discuss call, such quarter In certain non-GAAP as financial results. XXXX

the to release these measures other of a their directly in will You well reconciliation today. issued measures press non-GAAP as comparable most find related disclosures earlier GAAP as

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

Stephen Hood

a my like have always of the head-on energy the I've call you, of question of to after Having business tackle formation into Thank to months around opportunity. the you put Games, departure. a like my in for today. Motorsport I'd believed lot some the joining first to return everyone,

came and the the on of features, that the could my right delivery in return attain to be availability, quality this I success and When point improved focus opportunity approached and service potential about heavy was can and company entertainment the we products, I reviewed realization a direction. believe I with

a only belief for about apparent for entire has if be we about the we can can Motorsport the the are across team change return, hope my business a been weeks it most Games catalyst what In firm what business. decisive. am and be to of are since my in few games energized fortunes achieved and deliver I the for united

in requirements, to rapid of necessary products in opening infrastructure development. is the I need first innovation period is background tactical This I market. to game that progress. and but the review, also deliver understand My to compete this understand we and one reorganization space,

when Executive April markedly to no the Chief of This My XXth, I with and role stone business position on refactoring review when Officer. the business, effectiveness. medium increased long-term short authority provides leave the unturned to necessary me of assumed the

Florida of As architect have decision manner. but and headcount close development resources a studios manage minor it Vince leadership to a micro we result, and full Orlando, our in more the Georgia. to made the us in two support effective in importantly, and a allows results and This my more team, reduction,

forced multi-site during the pandemic. New was the distractions physical studios we during somewhat cut release apparent at which deliver upon out growth least period, business will our refactor, rapid an while initial our COVID

culture am and development locations, as sense down. such, team this out of double a top we're our that across visibility optimism the known on togetherness of greater And across the of generate of a instilling and all organization. Focus improved Now down we I should period, extends from talent activities.

Ignition, have inevitable we I those does on turn products, our a the I I've give corner of who has believe like Master not journey. delivery. may been going this that the team have consumer to us our title right from with afar, understandably by that when the are questioned hurt to Indeed, how those products seen capability reaction who and

been legacy next-gen progressively platforms closer Heat we deploying the such In well-regarded season franchise enjoy. have our XXXX towards as We NASCAR for fans the season coming resources product the to it competes the days, update will to currency. bringing with for cars

titles, working whilst future We games. plans to development support around existing the maintain review a of are NASCAR progressing, on also further for with franchise

I've we Le Endurance INDYCAR, intend championship understand primary evolving competition Championship, like, that an includes become our our which to amplifies games and plans British future. system, of opportunities revolve franchise seen enough Touring to which return with like eventually strategy service Mans, my important in innovative piece long-tail Car since opportunities around World our the the our

future further by be has The company. development, yet to that showcase the

us our Australia in move INDYCAR is very acquisition allows a single area development in the by to after together this studio, of Our Development an planned team well, and I seat KartKraft XXXX. rating, know

is see got hope I play day, personally the to since playing video into into rewarding games long-term that. how It this have beginning fruition the come see to especially around title, I to way to of back is light

single design, gaming. we With the and could right highest become believe support INDYCAR seat marketing, the

impressed lettings will releases, is the product games road prior on and much our for I good are come taking progress our INDYCAR of we our still into Rate future but there at do our account next to strategy. believe the are overnight, not partners to delivered at review. away upcoming

capability of push into technology is on, provide around believe, additional developing with this which development the must technology importance We entertainment. will leasing on upon current we move can We stability delivery longer-term opportunity titles. efforts. equal focused the us the game of designed from is our of our platform the improve from Of to and and

segment. of the components together allows invariably promoted to are of opportunity popular and and exists days, decades, best racing X of Think prevents genre are top-tier the working us objectives. our an The titles, Mans Le feel achieve for rating. competitiveness that title has the ultra sense frame of any you utilize planned rFactor believe these rapid find it a teams simulation to game Our that very to growth aligned we of in I

and Mans third-party as racing revolves move teamwork. begins around fitting the formal Le our our Endurance rFactor strategy. competition the therefore support to indeed, is thanks useful long-planned style community game, with you release as into a of release our see content period into growth X quarterly It that team well simulation Championship World system platform the the which

insight of alongside the team gather in with which racing Mans Le flow this From will valuable there, the consumer turn ahead into genre. we concept upcoming within of provide game, us release, valuable a wider feedback should

forward projects our to Le and the provide company. differently our aforementioned can hobby. how must think their Mans our racing competition We development NASCAR, Beyond expect enjoy with will valuable the game tomorrow of step system a consider IndyCar, of in and

intend core and Our we to them and customer win impress. audience, is back

do genre competitors, experiences in entertainment instead access We that makes their by what of follow our but that know special. to produce so we the ability us of more an benefit wonderful will that and require overall varied providing slipstream do this enjoy not to ecosystem will

months the about to have oxygen they make and might I'm given successful. can decisiveness, I ensure and and order period these than to will XX months we next across the will Motorsport will greater one bringing that on company, to relish. to to In be I opportunities are decisions prior tomorrow, team today. require The a difficult In we deliver be operational for defining I say the some imagined my to Games, focus that, projects ahead further areas, return. are XX these need

At this to our time, financial it hand I'd Officer Motorsport over XXXX results. Financial go over Games, to Jason like Potter, Chief to QX

Jason Potter

good you, evening, Thank Stephen, and everyone.

Unless calls, the forward-looking Instead, guidance I on XXXX. focus an comparative and any to offering won't highlights earning results QX discussed and be quarter today. on relate I period first update stated of otherwise, from previous results in XXXX will all QX the our financial providing XXXX. As

Our compared in same $X.X million when reduction to year. XX% prior million, a or of were QX XXXX the revenues period the $X.X

majorly stable primarily release two XXXX, and ongoing due retail XXXX to the impacted sales. volume segment product gaming in digital pricing which one $X.X of compared our to our of accounted the only in million physical console sales negatively existing has portfolio and Our for in decrease,

in QX XXXX for revenues an segment improvement We $XX reporting compared consistent esports were loss impairment QX to Program. in Restructuring million XXXX, and no losses a from the $X.X compared recorded year-over-year actions million we million in XXXX primarily to whereas The QX million $X.X marketing remaining result quarter, our $X.X Our was Net losses $X.X driven million announced external previously costs taken impairment of of million. the XXXX. in benefited lower QX for $XX.X by $X.X under net QX in payroll loss reduction million reduced current XXXX was as of spend in XXXX.

$X.X XXXX are annualized the certain changes have approximately the were discipline Restructuring we Under XXXX. processes. expenditures by the our in to of million by of improve our Program, on and efforts result spending our costs overhead and more an savings variable in basis reducing of levered These QX end driven internal as headcount overhead and

financial weaknesses Speaking XX, internal XX-K we control for filed most our December previously our in SEC disclosed of the our reporting XXXX. material recently have including year over filings, ended internal processes, Form in

remediated and are three two actions material previously these conclude a taken have deficiencies been XX, of identified the as of XXXX. March have We weaknesses number to remediate pleased of to

take conclude We consider period operated to material the operates which testing when steps we remediate we a in through effectively weakness, controls that necessary place, will for remediated continue time, these intended. only and sufficient controls will the of as are to remaining applicable

to for QX Returning fiscal results XXXX. our

$XX.XX period respect million XXXX negative for year. adjusted the EBITDA loss QX in EPS prior in period to Consequently, a change an We for loss adjusted $X.X reporting quarter. adjusted the the same an EBITDA are same in of $X.X compared with EBITDA QX discussed to loss XXXX. of comparative compared the Improvements $X.XX of million as with for through negative net the was loss

a to key continues be Liquidity focus.

compared cash million, XXXX, XXXX, primarily driven in million which three XX, of XXXX. direct of February cash, As increase was a December equivalents registered offerings we XX, had an March by $X.X of completed $X.X and when to

average million December in approximately month, an of Net increase representing $X.X $X.X a when the for cash net burn $X.X to compared flow during year operations was of cash used XX, million QX cash $X.X ended a the XXXX. XXXX million monthly of million,

cash, of insufficient reduced which cash fund to is As our XXXX, of we equipment remainder the for XXXX. operations to $X.X million April our by million, was position and believe XX, $X.X

well We will cost financing liquidity equity additional as need to supplement ongoing as control with our debt initiatives. available and/or

for Thank time. I to your you the Stephen will closing back remarks. all call now, And turn for

Stephen Hood

our to In of closing, are believe I leadership resolution encouragement very the challenges. believe company. as I can them. liquidity shareholders promise, for all given that I in and I of would support can situation, There from their our address we company. the the deliver like to the time formation With assume thank We of and on

today, and you joining now Thank let's questions. for go us Operator? to

Operator

Thank you.

We Jason ahead. will Canaccord Our the Instructions] first begin question-and-answer session. [Operator Tilchen Genuity. question at comes go from Please now

Jason Tilchen

Stephen question over the taking for CEO. Thanks and Great. congrats on taking

I the or monetization that you just I'm follow-up. the prepared a think talking have you other thing that are game new the of maybe curious existing have titles in ways still referenced you that can Thanks. some And new I improve in spend the could already about, a about of then you portfolio one remarks while -- minute progress? either

Stephen Hood

Jason. Sure. Hi,

question. very So, interesting

of review So monetization for points the of one me key business. is the of

things which go-to gaming a by that, the component together. stitched is the news right mean, keen properties media like becomes reports ensure which player on is site I'm actually. appropriately touch hub for across lot parts kind the of parts and audience, of right that Traxion.GG, of the one now, I to certainly that the So is a we great the now, the And have organization, we that core very have to breaking do news

rebranded this We system will competition through its that have release. some point, goes be at upcoming formal when it

gaming Car, Le license, Endurance we includes have have Touring which World British INDYCAR. the Championship, Mans, NASCAR, We

to monetizing How Traditionally, they in purchase individually offering. actually order the actually other games What you experience? is could those these unique able in would elements or tracks instead or things at just content so add have are that stitch overall entertainment together, that I'm cars of components DLC we do offerings. to together, monetize terms of looking of

the area company particular it it's been And and is And I come me? of on work to game back different into of injecting to I've I've And focus instead somewhat have entertainment that of products. across DLC that question returning. offerings fresh of together for a teams the I've pumping reception we as how back a we of forward, been in traditional that monetize by approach understand since move perspective overall the encouraged offering, the to very into the need the just departments order think, effectiveness and

So some team very this. the reality. doing And a are in way there's make The of working have it what over suspect to energizing pieces I the I we'll a there. think that. to And few weeks, is component next better interesting order on think I'm I answers

Jason Tilchen

Great. helpful. That's really

the In terms of about half the the rate sort in sort of then run of cash the of was April and implied maybe the that. in burn way firm cash million per was of $X.X described, first quarter month

on following happened capital? can in April, there just or of expect I'm cash has you. on Is in there when So up you any anything terms of in declined curious, raise terms was you Thank what the to of additional share burn updates anything sort that. and one-time

Jason Potter

it's Thanks the Jason. Jason, Hi, question. for

kind we I accumulated, as we in working our in that we the that capital the following some some position of down of towards to And saw see closely that had a we end the been of back of think accumulated, on managed of managing. did what payments those we of the is were some AP in IDOs very positions QX. of QX accrued up February, catch kind catch-up terms we've we bringing bit of position able

see million point, drop-off why on XXXX restructuring in where first this of of kind in. start we've play we bit so kind the annualized some with we then come program that's of produced around some an to position that up year, of that of burn and in we ahead benefits the where months kicking into basis we see at And X.X and caught a April, a the value higher three of the see

we'll see some continue think on forward. go of benefit to I So a that

kicking overall have cash Obviously, we in we'll commitments a royalty continue the things to of in, periods. the reduction should to see hopefully quite a some lumpiness, see when start bit we little in burn but future

QX we end financing of that we to don't In continue Right line beyond we of try at incremental to existing announce both of in efforts, longer-term end place ATM continue anything financing. place debt equity credit we at terms kind have explore the of that to the of now, and like to put explore we the facility the of QX. But that otherwise, opportunities solve and kind equity got issue. do in other liquidity and

Jason Tilchen

that you helpful. maybe in changes very that last me. share being changes one this on line planned was Great. scheduled That's of And India to one that and that share for for car next game terms we of launches sort sort any Anything time mid line year first? for to about can can time front? the Any things the of

Stephen Hood

at I'll take plan present. one, changes No Tristan. this

task my they shore And shift right up opportunity those my the I is my background. clear It's what focus that. challenges well. simply multiple years I've I'm XX about done very games. games know arrival product development, I passionate and for on that windows product the are is publicly think succeed. to now because given ensure for with a release thing, projects it's important with And there's probably but I stated of the based the in also currently to appreciate associated at the now. very

of decisive as we to as in the development result. terms our We've don't and progress efficiency. far operational giants toe are that the more the count. in But out I giants industry. toe mean terms a never in are tried bold much and we become long on in head the think with of we space make go of I and as to think And decision-making and I savings some the of more we in necessarily can to I cash mean comparison decision-making, that efficient, can some the nimble

that deliver project, our weeds marketing the and leadership the I to within of the the myself getting is deadlines others in ensuring all best the think meet the of into of product that how development and requires of to the and with products. team, pieces order time utilizing it's around that the we available harmony, ensure hand-in-hand have that sometimes best possible to working PR component development and machine showcase well is to development, them working upcoming ensuring department the in their versed testing are in the infrastructure the ability, about

I we I'm is a that don't there there. make This think in where been and efficiencies that's the are idle spending of lot my time. position always can

lot of a that deliver that The in to in the available we're So not is and ensuring always guns wisely. change we to time taking but projects, these spending development excitement intending question, clock am the answer great going to time windows the seats. adds of your I but release use to that

Jason Tilchen

Thanks That's lot. a Great. very helpful.

Operator

Thank you.

Capital Your Michael next comes from question Noble ahead. Markets. Kupinski at Please go

Michael Kupinski

Most good and already second couple for you those this, are just development for? me the me, of you clarify just was you that that they burn if of just where wondering consolidated -- and you have but the alluded have where micro the of in responsible evening. have you can run offices reflective mentioned? me you you through a cash could was for offices to, kind for quarter then And closing may the savings said been but for just if company? you in my of I Thank how the answered, could from the What those drop-off games the what the And of questions some that. of material of was

Jason Potter

Stephen I then development think efforts. consolidation terms Yeah. of portion I'll really regards micro it, I'll the offices, they in Jason. hand pick Michael. were closing is operations the This But us. for very up the bow the small the to of and to over Thank in of you, of cash

like with not I a be it but near have certainly it's where terms wouldn't to those of There significant things the have we're you that that, very on costs material it slight and impact associated hole. closing -- and term from impact the the not kind a So burn expect offices. a expecting overall to pickup have in cash will cash severance a on

Michael Kupinski

you. Got

Stephen Hood

Stephen Hi, it's here. Michael,

in able trying Just office incredibly the the based I locations, Europe it, think and Silverstone, being thanks center known to that quickly key There's the we're in UK the talent around, call our on an locations. talent into, they're them pool in I studios to to racetrack. tap strong by

lot a UK, at in a with Certainly, And given zones, our of that on to that the talent acquisition European us conducive of time region, And Studio here. particular to recruit project. harmony they're made we particular a a in ago, of time working particular a fantastic a network lot developers those Europe. time hasn't across in some experienced in XXX least

also the of Australia. lot is centered out around a a remnants UK centered particularly talent that is operation in grow. operation because And title, that, of wonderful been to in the of the running there, team, we European to and Black our in the see our Melbourne operation, Delta that That has operation So, acquired lot Australia which is IndyCar it's of produced second talent. KartKraft, particular,

and the trying those operations much easier we ensure my individuals to return, of just talent since that of right growth that been caliber to impressed of certainly, that's so available And the center there. development get to And known this monitor development, rate concept the progress locations. it's have attached of we I've and with

of long I the at from a we large pay is and that Games' in will rather beginning run. one departure perhaps started Motorsport think That the journey how dividends

Australia. it's right Europe really, So, and across now

Michael Kupinski

is the was I of Networks company of debt open? or sense. Since there makes for quarter. it there were does line still no? that lot that -- a into in a was still I that Motorsport line credit with tap swap equity moving wondering, have parts there, the Completely but could know a

Jason Potter

whether been But actually we'll mean, terminated. substantial Yes, XX-Q, receive I under there, doubt Michael. Form we the have still it Hi, line in about disclosed facility. hasn't funds the that as we is so

the considering that cash I not on equivalents purely about flow kind focusing of liquidity we cash position. that's And our when have we're in I'm our -- on So, cash and talk and why hand. liquidity,

Michael Kupinski

you. Got

Okay. you. That’s all Thank I have.

Operator

would Thank you. our remarks. question-and-answer for to call closing you. does I turn session. That back like conclude Thank the

Stephen Hood

just challenge, at to like everybody together. stages of indeed, Thank great today. thank you particularly feel Motorsport over I do back various I all the Thank energized. to pleased we're the forward with much. you and am proud and think to you. and conversations Thank the and I more on up We're call would things I incredibly at coming hopefully Games. be I you. one-to-one months to these look able conversations And years. very for

Operator

you today. participating. for Thank concludes you. That Thank our conference for

may You disconnect. now

Motorsport Games (MSGM) 11 May 232023 Q1 Earnings call transcript