In their recent third quarter earnings call for 2023, Motorsport Games announced layoffs, studio shutdowns as covered in their press release (quoted below).
Stephen Hood, CEO of Motorsport Games, stated that the company is working towards “future success” with these topics mentioned:
– $3.7M of income to Motorsport Games came from selling the NASCAR license to iRacing.
– $1M conditional income is available, tied to the NASCAR license sale to iRacing.
– Motorsport Games will continue selling it’s existing NASCAR titles through the end of 2024.
– Reduction of satellite studios and staffing is expected to deliver $6.7M in cost savings.
– Motorsport Games Australia (formerly known as Black Delta) closed. Technology retained and looking to move development of the IndyCar title elsewhere in the company.
– BTCC license terminated.
– rFactor 2’s Race Control feature confirmed to be a part of Le Mans Ultimate as well.
– Le Mans Ultimate release date confirmed.
– F1 Arcade second venue announced for UK.
In the questions segment, Motorsport Games stated:
– Still behind in some licensing payments.
– Royalty guarantees, even on unreleased products, will need to be paid.
My understanding of these announcements is that only rFactor 2 and Le Mans Ultimate developer Studio 397 really exists. Motorsport Games itself appears to be a financial and ownership group sitting over Studio 397, the older NASCAR IPs, KartKraft and the IndyCar license. My assumption is that if they can hold onto the IndyCar license it will become a Studio 397 product.
MOTORSPORT GAMES REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS
MIAMI, Nov. 07, 2023 (GLOBE NEWSWIRE) — Motorsport Games Inc. (NASDAQ: MSGM) (“Motorsport Games” or the “Company”) today reported financial results for its third fiscal quarter ended September 30, 2023. The Company has also posted Q3 2023 earnings slides highlighting key milestones that occurred in the period, which are accessible on the Company’s investor relations website. All share data and share-based calculations set forth in this press release have been adjusted to reflect the Company’s 1-for-10 reverse stock split completed on November 10, 2022 on a retroactive basis for the periods presented.
“This quarter has continued to be one of business transformation,” commented Stephen Hood, Chief Executive Officer of Motorsport Games. “We have continued to reduce costs under the previously announced 2022 Restructuring Program with the first signs of forward momentum starting to become apparent. This includes our recent announcement on the strategic sale of our NASCAR®️ license, which we believe improves the business outlook by reducing our financial commitments and allowing the company to focus its limited resources on near-term projects that are anticipated to come to market. We retain the ability to continue selling the NASCAR game back catalog through to the end of 2024 ahead of an anticipated 2025 game by the new developer, which we believe will offer some revenue stability as we aim to bring new products to market, albeit with this revenue expected to decline over time. Additional cost-saving measures have included the recent closure of our Australian development studio, with corresponding global headcount reductions, and the suspension of the development of our previously planned INDYCAR®️ game, to decrease operating expenses whilst also removing projects that are underperforming or are unlikely to generate revenue.”
“Meanwhile, we are excited to confirm the updated release date of our planned Le Mans Ultimate title, as we anticipate releasing the game on February 20, 2024. This simulation title, created by the team behind the renowned rFactor 2, Studio 397, will look to bring together incredible sportscar machinery with unparalleled physics alongside innovative gameplay features, such as the collaborative asynchronous co-op multiplayer mode. Additionally, the game will feature the RaceControl multiplayer service recently released as an open beta into rFactor 2 to great success, exceeding initial player expectations and driving a recognizable uplift in sales of rFactor 2 content.
In closing, Hood added, “We believe the decisions needed to make this business create engaging, well-made games that fans enjoy, and that are profitable, are well underway. With renewed focus on products, production leadership and budgetary controls, we believe we are already seeing positive momentum for the company.”
Third Quarter 2023 Business Update
Showcased content for the planned Le Mans Ultimate game, notably the Peugeot 9X8, building up the audience and user wish lists ahead of a product launch.
Sold the NASCAR gaming license to raise cash, reduce financial obligations and focus development resources on fewer titles. Additionally, the back-catalog of NASCAR titles is retained under a limited license until the end of 2024, allowing the business to retain revenue from this franchise until that time.
Select Financial Highlights for the Three Months Ended September 30, 2023
The Company reported a net loss for the third quarter of 2023 (“2023”) of $3.5 million, or $1.28 per share, compared to a net loss of $8.5 million, or $7.29 per share, for the third quarter of 2022 (“2022”). The Company also reported an Adjusted EBITDA(1) loss for 2023 of $2.4 million, compared to an Adjusted EBITDA(1) loss of $6.5 million for the same period in the prior year.
The $5 million reduction in net loss was primarily the result of the Company reducing its marketing, development, and general and administrative spend by $4.6 million, driven in part by actions taken by the Company as part of its previously announced 2022 Restructuring Program. In addition, revenue for 2023 was $1.7 million compared to $1.2 million for 2022, a $0.5 million, or 38.5%, improvement that positively impacted net loss. The increase in revenue was primarily driven by the release of the NASCAR Heat 5 DLC, Next Gen Car Update, in June 2023.