Motorsport Games (MSGM) 24 Mar 232022 Q4 Earnings call transcript

Thank you for standing by, and welcome to Motorsport Games Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast.

On today's call are Dmitry Kozko, Motorsport Games Executive Chairman and CEO; and Jason Potter, Chief Financial Officer.

I will now hand it over to Ken Godskind of Motorsport Games.

operator. you, Thank should and everyone today to company's the market By year have XXXX quarter full filed earnings fourth close. now, access press after release website Relations This of the available Investor is Motorsport on Games at www.motorsportgames.com. section

these materially forward-looking in uncertainties the as or by results expectations on forward-looking described of its within make Except those involve forward-looking obligation information, and from result required a federal laws. alter beliefs the call new law, otherwise. management statements. based no to forward-looking are future undertakes and U.S. statements to These the and this as or of statements statements, call, to that of or on During the actual statements company course securities may update update whether any differ made events could this cause meaning management's risks current

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

measures we to will today's discuss In call, conference adjusted certain such non-GAAP EBITDA fourth and refer results. full financial financial quarter as the we as year XXXX

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

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

we get Moscow of as country while overall improving led position. to of the get out for between It's to members no help Ukraine wanted in operational call the to a out, the Thank challenges journey. ongoing to our team liquidity continue secret, focus our to tough us war you, been everyone, on joining down us our to following for and shutting us those that on it's one studio and trying that

demonstrated everyone through to making gamers highest by But witness what's experiences to amazing innovative racers, it, continue and to the and is of towards Motorsport fans. all our team sophisticated thrill successful for of creating the as has most quality, we the resilience strive

our and calls, focus where product-driven a thus reducing quality possible we earnings crucial last invest still Since efficiency We're complementary of is few programs. and to sacrificing future on to esport continue our to without games games. costs in continue our the business,

in in various available announced, to we $XX.X than to SX offerings, baby comply in including million proceeds. the were SEC's registration Each us equity the maximize of registered structured these more offerings X As aggregate with recently to shelf order that rules our previously completed statement. gross offerings resulted registered under effective direct amount direct

us to relief with has agreement this all Motorsport into outstanding well reach able balance as of in an of Motorsport believe shareholder, the also personally the to as million our Network, provide with of that debt on our Games We're our exchange Network majority stock. commitment our sheet. I common nearly majority our Motorsport reinforces shareholder shares X

a of at received NASDAQ continued January, end the notice for listing. that Additionally, compliance NASDAQ regained we we from

the able transactions complete capital light these how the in environment. to were of proud recent of I'm we raise economic challenging

to potential our However, further and equity debt of additional company. in improve form we to explore position of the continue the liquidity funding our arrangements financing

in year to our still release XXXX, general. in challenges last and about strides in schedule. XXXX, XXXX able QX Despite experienced of talk Let's our the our we're with we in make product Ignition XXXX release

existing also further in rFactor cars that the quarterly by compatible our within drives new rFactor we X offering for base X platform, NASCAR X revenue exciting to Labs invest refresh us were using the X next-gen provide partners holders much have in installed after by followed consoles. and and that to was base absolutely our our able started gen season drops content NASCAR Aligned NASCAR became And year to industry-leading our rFactor free. a to update in with we're Ignition with the Formula platform. DLC helped XXXX we game. continue this launched make them We year-over-year. beloved done, FX expansion fan the consistent something to we for our test never the launch requested able world London the grow XXXX, X rFactor for the official Ignition came sim NASCAR to at times amazing Center rFactor racing the UI Kindred E, of Arcade in XX: which platform We XX:

our our year these experiences XXXX by Cup leveraging Ignition for by allowing game, and devices. mobile and we simulator game releasing game that was time NASCAR the smart in the brought NOW, selected the Nintendo enjoy NASCAR platform new our NASCAR we Additionally, Rivals, the Switch called XX: the first season. NASCAR GeForce official to we off for KartKraft, franchise TV people karting of Nvidia through to And game NASCAR Series which finished cloud our

We've believe our Today, we in we the help our developed, ability to games. to enhance games gaming further to space meet these on and for expectations our will on focus being recently consult which of NASCAR attracted INDYCAR, expert our fans' and development Le gaming our continue the experiences. Mans advisers

fantastic the will and believe translate we resources require schedule. our into course, being product further these will time into quality delays in invested Of bar franchises, which raising release

believe worth release ultimately However, be when will they we we wait. the will games, these

all to XXXX to platforms NASCAR fans allowing season Xbox, Nintendo major season we as latest PlayStation, the PC, our for year, Switch XXXX and to updates mobile, game bring such enjoy our This excitement. plan

continue in our par with games sure not to features on other to and is believe enough racing had INDYCAR game, efforts, major development to there in we decade. with satisfactory other be year. INDYCAR our a will dedicated this we a The do community And INDYCAR game has out fans INDYCAR to but the INDYCAR For position not game make excited. release over our we want in keep make that we strides a to it community

As lead Games, this the vision, guiding inception the through successful been its providing make the the nurturing to Motorsport it from team and grow resources IPO, scale. company Head in a key of setting honored technology idea, I've necessary to acquisitions

of racing of the and Today, on diverse company most of a Motorsport immersive games. and our Game official a believe some is cutting-edge racing a technology This engaging built and the for we boasting development is what will and team's industry our creating for brand most multi-franchise renowned racing in pursuit the combination world's foundation forward unique portfolio a drive already masses. fuels games

company's September since recently as new I'm Accounting welcome Motorsport also Officer very Network XXXX, CFO. has Motorsport Games Potter Chief and January and, as Treasurer Jason excited Motorsport of been familiar is incredibly he this held as year. in Secretary including with appointed fact, with since our Jason various Games to roles for

and at Further, of to in joining the June PwC's XXXX. the practice September but of XXXX XXXX senior and between manager serve continues director position Officer a audit held an Chief Accounting as network, PricewaterhouseCoopers June national Office the between June Jason a XXXX network, and he of prior to

Financial this year-end QX go financial and Games to to Officer, time, over to I'd XXXX like at hand over results. it Jason And our Chief Potter, Motorsport

to for financial share fourth Thank ended with would results. QX you, some I Dmitry. XX, highlights December quarter year XXXX, like the starting and 'XX

games one million releasing is $X.X 'XX. NASCAR new were primarily us QX compared QX in in The revenues in million or XX% Our $X.X due compared to 'XX to new decrease 'XX. to NASCAR QX $X.X X million game

which $X.X production million royalties in loss cost in losses impairment to reduction improvement $X.X in costs, million development $X.X $X.X expenses, was $X.X losses $X.X for primarily million currency reduction attributable intangible QX Net a reduction $X million respectively, a a a million 'XX, our revenues expense, reduction net million primarily assets of to foreign XX%. were gains. and and or was in and in other The in increase million sales million and decrease and marketing 'XX a due $X.X from of an

are a $X.X accretion and administrative QX Adjusted increase $X.X a million change compared a same the for million million compared increase expense. The 'XX relating in change loss $X.X 'XX. million for adjusted of ongoing QX loss to loss revenues, partially increase 'XX. QX in $X.X in to decrease $X.X discussed expenses interest to 'XX $X.X million EBITDA These EBITDA expenses in was and loss in of QX an the general million offset million in $X.X adjusted previously in net by due EBITDA to primarily a factors was litigation, driving

respectively, 'XX, or to $XX.X to our 'XX year $X.X year a Revenues revenues Turning XX.X%. $X.X $X.X million were results. year of ended December December million for year-over-year 'XX, million $XX.X 'XX. XX.X% to Gaming by the and attention segment the XX, XX, and full compared the million decrease for for million ended ended $XX.X December decreased the or million XX, year

one $X.X sales. revenue release million of in in digital in and driven $X.X resulted game volumes compared in due in primarily to sales XXXX, of decrease 'XX million gaming The game game the which our X and NASCAR retail segment lower sales. mobile primarily by was This lower to in was lower

the by a year $X.X portfolio. experienced higher-than-expected $X.X concessions increased to ended our or partially in $X.X million on were existing XX.X% In December revenues. the and million retail to These platforms 'XX through the ended games December Esports and million XX, by year pricing parties third development of XX, favorable increase million segment 'XX. to for and simulation compared product in addition, we license revenues $X.X pricing offset for in fee revenues million less declines $X.X

revenue September due its Mans' The season 'XX, Le was 'XX It revenue XXXX. started esports from increase segment higher to in sponsorship primarily our virtual series. in

increase increase compared in million assets, $X.X $X.X $X.X in million loss million in XX, ended related in million accretion December reduction litigation, a increase year a development million for investments, was million to in million to a method net from million increase decrease million $X.X ended in year the or increase our a $X.X impairment XX, XX.X%. currency increase expenses, ongoing 'XX, net increase attributable expense, expense foreign $XX.X interest loss in revenues, intangible The a $X.X to equity $X.X relating expenses losses. an 'XX, depreciation increase Our $XX.X million gains life of December primarily a losses million the a a indefinite in was $X.X in for and goodwill to and $X.X

sublease a in in due in were These by administration marketing million decrease compensation million reduction increase by production stock-based expenses a expenses sales costs, expense, a a million lower rental of to million a and primarily and expenses, payroll $X the general which cost royalties driven was $X $X.X income. and lower offset partially in revenues in was primarily $X.X and $X.X which reduction million reduction

Adjusted EBITDA in ended December for discussed. adjusted $X.X to loss of loss for primarily impacting ended XXXX, the EBITDA XXXX, an increase was million year change December by the XX, factors XX, year the increase $XX.X in driven was or million The million loss XX.X%. $XX.X same previously the compared net

the for XX, the year ended $X.XX operations average had we approximately XX, burn from XXXX, For million, ended an cash December from million of December down XXXX. year net $X.X

of As available XXXX. our cash is we remainder fund equivalents the believe million which and have approximately XXXX, XX, of of operations insufficient March for cash to $X.X we

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

turn guidance. providing the I closing At we now would this to call forward back for like remarks. to time, not Dmitry are

their of want Games will racing support company, went fans I thrive given thank I'm time, a to closing, through vision. tough and exciting believe confident for in We world. and delivering amount our but our innovate, that our as continuing times Motorsport the right around shareholders the In to experiences some

and go all you questions. Thank for to let's joining,

Canaccord from with is And Genuity. Instructions] question first [Operator our Jason Tilchen

the it And press after on follow-up recent about, just I'm a million some I first that. is the And today in raises. the was restructuring per guess for capital the XXXX of different materially the I have curious, and Congrats I'm per measures then December? cash month. burn curious cost-cutting following release thing the $X.X about

Jason, this is Jason Potter.

rate obviously burn see on cash March we're that as that around year-to-date we're $X.X to in expect experience the So is the position burn what $X.X drop-off cash we QX, disclosed the million as to with remain XXXX. from We experiencing restructuring continuing and for XX closing come plan for but we some million. XXXX, consistent into a efforts in

any remarks, then the Okay. second the prepared the there restructuring BTCC? will schedule? plans Is there year. the for Great. and Any this extent Dmitry cost-saving the to has color released in released color know greatly additional more on is, game appreciated. question And year impacted measures And be NASCAR won't game would I the that or what be when INDYCAR the mentioned release this the be

question. the for Jason, Thanks,

$X.X from it to effect first the is that cycle impact you have That or were any XX-K, in all, what and of outside million that as cost they savings that said the of just effect did So our full see expenses. we effectively mostly annualized will projected in product last we XXXX, experienced not development development done are savings in of be, The we previously the that the product schedule. cuts implemented already. we on with an of as project the year, launch we

of XXXX bring is platforms NASCAR available at. all to concerned this Now mentioned year, our currently much that for are products the far to that as what the pretty we is look we season as

our far historical playoffs is data be to lot content shows that where to which it for will ready and it with. have to the release part season we the us As released and ready community. to date us that, announce of for when on time we're will as and towards showcase of publicize have definitely a But a the good platforms we that sometime that, bring

segment Great. have curious Ignition could that share color release the your just an of for of the gaming time if expectations if on sort relative any big there's one performed impact that to there's fourth revenue you on more, the XX how or how quarter? update and content Rivals And for

satisfied we're release Ignition to that do title. Rivals with our anything a has So more obviously, with XX than,

the to our that move did and that holders the Ignition XXXX our them the for think behind show the content good was community we full accountability I 'XX releasing invest of the tell into of release them for motive and faith take in free. type also decision to we

of So for something free. to easier course, giving them somebody convert it's when you're

small impacted that So revenue. I to and to ourselves That, a the say cannot of that much standard. into us, apology that gesture investment need hold community from that, an was us a understand we of materially higher back we to sort

penetration, the major very significant platform. we Rivals at territories a not good as installed as Switch have is the far Rivals as Nintendo for concerned, course, of is Now least not, Switch base is where release But the the the Nintendo most is in as consoles.

majority the results plus here So Xbox for the from we to of cannot when sales United come expect PlayStation us similar States.

derived in meet to bring able It and there. additional satisfied course, therefore, be purchase. would did continue our to more value, to expectation community terms they of the But make something trying we to that from sales never of the

Michael next NOBLE with question Kupinski is from Capital Our Markets. Financial

XXXX right the might of being your outside release of here. that next couple making wondering look things A until schedules you're obviously, into there was now, are I slip? year, that delayed pushed If games Jason. kind INDYCAR terms we just in of Congratulations, that of be might other investment at, any that cash INDYCAR

question. you for the Michael, thank

one step to lot clear last would touched we at a product, dedicated on gaming call hasn't an type decade. the a I gaming we want make and game time one. gaming -- since in I to look community seen INDYCAR took think a space really experience point has And that of point over back a a hasn't was products took we especially is the for of experience, in seen that, INDY the really that our a quality right, the deliver, an that changed comes there it in when a serious So

surpassed, expectation. record product that looking for to that Ignition sure is the make INDYCAR show to want so standard the track exceed is want We capability our make community we that that sure And their in their right? we So doesn't with far.

take to ourselves So do that have momentum. it sure we when proper starts essentially higher to that we to a a standard release even game, make

run is supposed long that's in but in elements we even for are seeing there And right an investment allow There up tracks. we them, game and be there's it's So believe moving stage to for into cars, extra the par now the game, proper making certain the run, us, expect. And what a decision, the are it's of though extra for community the we time a right? that not won't off just long understand will that that pay investment to will ultimately, do taking we for us. in --

could we NASCAR to community did about other we talk be continue else dates with community portfolio to Ignition until nowhere dedicated we're a there. the of we as sell launch other titles, understand update off from same is release is that as year to And franchises, But We to game decision lens. official making great as or those exact why close the not want to to confident NASCAR going the and or far own community. on the moving, the hold going on what rest hence, far stakeholders already take gaming our and would we're with that and impress on our deserves at concerned NASCAR be communities, experience some feel to you for as taking the exciting everything shape probably meet insight a previous content an is game starting our release, a or looking continue the experience. absolutely around to expectations that announcements we a as

terms your move as kind in you than cash that's forward, a are was you terms in pursue dropping rate you options that game the that funding of sheet anticipate balance probably that if in normally become at terrific. of would and what this road making investments the burn Obviously, obviously, more what just we making recently, -- in juncture. significant you the investment of you restrictive? off should be not just had rate would the are additional the -- wondering indicates and in that I funding burn how improvement map might But game

experience you're sort the launching view the biggest working experience, is say, that because we're a required lot beginning experiences, the on, So that from game or, most So are the inaugural let's the BTCC titles take a second building Le title let's heaviest you're those is the investment essentially that right? Like a for title, of INDYCAR and these -- of the tracks. the right? Mans

models. You're building the car

necessary the experience, elements why great foundational You're hence, a of right? building that's the stuff see as lot of is of you that, a gaming so reflective burn

When game take we're what will we though started that about development company, that. there, expenses could investing always that's INDYCAR laser-scanning that I a to pretty impress wanted other you areas it slow of every and we about the it and that rates even we where could a accuracy their to for money the down. Even over see say talk the we looked when shifting, will an talking budgets our ratio though track shifting recreating investment. car where of could virtual never steadily, has that And at burn those an as is do outside staying we're spin And takes definitely are time. reducing

course, track as again, tracks recreate the of the So on, or as the time we of you right? won't see we need that build to necessarily the could others, goes complete

metric. from even we after experiences development the fidelity. but view a possible continue bring to certain in some only Until it be So reach of invest highest just there quality gaming then, efficiencies to to standpoint could we

today's time, further teleconference. at no are there this As this concludes questions

your your disconnect may you lines this Thank time. for You at participation.