Motorsport Games(MSGM) - 2025 Q2 - Quarterly Results

Executive Summary & Business Update Motorsport Games achieved significant Q2 2025 growth, driven by "Le Mans Ultimate" performance and strategic initiatives, solidifying its financial position and expanding the Le Mans franchise Q2 2025 Highlights & CEO Commentary Motorsport Games reported significant growth in Q2 2025, driven by the strong performance of 'Le Mans Ultimate' and strategic marketing, now on a more solid financial footing - Q2 2025 was an incredible period of growth, with Le Mans Ultimate achieving record player activity and greatly increased revenues year-over-year due to key features and strong marketing[3] - The company plans to continue this trend with an expansion downloadable content (DLC) for Le Mans Ultimate, including the European Le Mans Series, expected to be delivered by the end of Q3 2025[3] - Motorsport Games is committed to growing the Le Mans franchise and developing new titles to bolster its portfolio and diversify income streams, now operating on a more solid financial footing[3] Financial Performance Overview The company demonstrated robust Q2 2025 financial performance with substantial year-over-year increases across key metrics including revenue, gross profit, net income, and Adjusted EBITDA Second Quarter 2025 Financial Highlights Motorsport Games reported a strong Q2 2025 with significant year-over-year increases in revenue, gross profit, net income, and Adjusted EBITDA, driven by product performance and strategic financial management Revenue and Gross Profit Q2 2025 saw a substantial year-over-year increase in revenue and gross profit, significantly improving the gross profit margin Revenue and Gross Profit (in millions USD) | Metric | Q2 2025 (approx.) | Q2 2024 (approx.) | Change ($) | Change (%) | | :----- | :---------------- | :---------------- | :--------- | :--------- | | Revenue | $2.6 million | $1.9 million | $0.7 million | 37.7% | | Gross Profit | $2.1 million | $1.1 million | $1.0 million | 90.9% | | Gross Profit Margin | 82.4% | 59.0% | 23.4 pp | | Net Income and EPS Net income and EPS attributable to Class A common stock experienced significant year-over-year growth in Q2 2025, bolstered by revenue and other operating income Net Income and EPS (in millions USD, except per share) | Metric | Q2 2025 (approx.) | Q2 2024 (approx.) | Change ($) | Change (%) | | :----- | :---------------- | :---------------- | :--------- | :--------- | | Net Income | $4.2 million | $2.1 million | $2.1 million | 103.0% | | Net Income Attributable to Motorsport Games Inc. | $4.3 million | $2.1 million | $2.2 million | 102.2% | | Net Income Attributable to Class A Common Stock per Share | $0.82 | $0.77 | $0.05 | 6.5% | - The increase in net income was driven by a $0.7 million increase in consolidated revenue and $1.1 million in other operating income, which included $0.8 million from the Wesco Insurance Company settlement and $0.3 million from negotiated vendor invoice discounts[6] Adjusted EBITDA Adjusted EBITDA showed a significant positive turnaround in Q2 2025, primarily due to increased net income and reduced stock-based compensation Adjusted EBITDA (in USD) | Metric | Q2 2025 | Q2 2024 | Change ($) | | :----- | :------ | :------ | :--------- | | Adjusted EBITDA | $3,696,847 | $(532,953) | $4,229,800 | - The improvement in Adjusted EBITDA was primarily due to the same factors driving the change in net income, as well as a decrease in stock-based compensation compared to the prior year period[8] Cash Flow, Liquidity, and Capital Management The company maintained a stable cash position, generated positive operational cash flow in H1 2025, and secured additional funding for working capital and strategic investments Cash Flow and Liquidity As of June 30, 2025, the Company had $2.4 million in cash, increasing to $2.8 million by July 31, 2025, and generated $0.3 million in cash from operations during the first six months of 2025 Cash and Cash Equivalents (in millions USD) | Metric | As of June 30, 2025 | As of July 31, 2025 | | :----- | :------------------ | :------------------ | | Cash and Cash Equivalents | ~$2.4 million | ~$2.8 million | - Generated cash from operations of $0.3 million during the six months ended June 30, 2025, primarily due to $0.8 million from the Wesco Insurance Company settlement and $0.5 million from a settlement agreement with HC2 Holdings 2 Inc[7][10] - The Company expects a net cash outflow from operations for the foreseeable future as it continues to develop its product portfolio and invest in new video game titles[10] - Completed a registered direct offering on July 29, 2024, raising approximately $1.0 million in gross proceeds for working capital and general corporate purposes[12] - Entered into a private placement on April 11, 2025, for approximately $2.5 million in gross proceeds (net $2.35 million) from the issuance of Class A common stock and pre-funded warrants, intended for working capital, general corporate expenses, and strategic initiatives[13] Non-GAAP Financial Measures The company utilizes Adjusted EBITDA as a non-GAAP measure to provide a clearer view of core operating performance by excluding non-recurring and non-cash items Use of Non-GAAP Financial Measures The company uses Adjusted EBITDA, a non-GAAP measure, to assess operating performance by excluding items not representative of its core business, such as interest, depreciation, amortization, and specific gains/losses from settlements and stock-based compensation - Adjusted EBITDA is defined as EBITDA (net income plus interest expense, depreciation, and amortization, less income tax benefit) adjusted to exclude gain from settlement of license liabilities and other agreements, impairment of intangible assets, loss contingency expense, and stock-based compensation expenses[15] - Management uses Adjusted EBITDA to manage the business and evaluate financial performance, as it eliminates items affecting comparability between periods that are not considered representative of core ongoing operating business[16] - Adjusted EBITDA is not a recognized term under U.S. GAAP and should not be considered an alternative to GAAP measures like revenue, net income, or cash flows from operations, nor a measure of liquidity or free cash flows[17] Company Information & Disclosures This section provides an overview of Motorsport Games' business, outlines communication practices, details forward-looking statements, and lists contact information About Motorsport Games Motorsport Games is a racing game developer, publisher, and esports ecosystem provider for official motorsport racing series, holding licenses for iconic events and owning simulation platforms - Motorsport Games is a racing game developer, publisher, and esports ecosystem provider for official motorsport racing series, aiming to create authentically realistic racing games[18] - The company is the officially licensed video game developer and publisher for iconic series including the 24 Hours of Le Mans and FIA World Endurance Championship, recently releasing Le Mans Ultimate Version 1.0[18] - Motorsport Games also owns the industry-leading rFactor 2 and KartKraft simulation platforms and is an award-winning esports partner for the 24 Hours of Le Mans, creating the renowned Le Mans Virtual Series[18] Conference Call and Webcast Details The company will host a conference call and webcast on August 13, 2025, at 5:00 p.m. ET to discuss its financial results, accessible via phone or the investor relations website - A conference call and webcast will be held on August 13, 2025, at 5:00 p.m. ET to discuss financial results, accessible by dialing 1-800-579-2543 or 1-785-424-1789 (Conference ID 'MOTOR') or via the Motorsport Games Investor Relations website[18] Forward-Looking Statements The report contains forward-looking statements regarding the company's future plans, including growth of the Le Mans franchise, new titles, and financial stability, which are subject to significant risks and uncertainties - Forward-looking statements include confidence in solid financial footing, efforts to grow the Le Mans franchise and new titles, planned updates for Le Mans Ultimate, and the need for additional funding to continue operations[20] - Significant risks and uncertainties include difficulties in achieving growth plans, delays in new game features or DLC, failure to improve long-term funding, decreased sales due to asset disposition, and inability to execute business strategies[21] - Other risks include unanticipated events impacting product timing, less than expected benefits from management strategies, negative operating cash flows, difficulties in resolving liquidity issues, and challenges in completing cost reduction initiatives[21] Website and Social Media Disclosure Motorsport Games communicates material financial information to investors via its investor relations website, SEC filings, press releases, conference calls, webcasts, and social media - The company announces material financial information through its investor relations website (ir.motorsportgames.com), SEC filings, press releases, public conference calls, webcasts, social media, and blogs[24] Company Websites and Social Media Channels | Websites | Social Media | | :------------------ | :-------------------- | | motorsportgames.com | Twitter: @msportgames | | | Instagram: msportgames | | | Facebook: Motorsport Games | | | LinkedIn: Motorsport Games | Contacts Contact information for investor relations and media inquiries is provided - Investors can contact Investors@motorsportgames.com[25] - Media can contact PR@motorsportgames.com[25] Appendix: Financial Statements The appendix presents the unaudited condensed consolidated statements of operations, detailing financial results for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations The unaudited condensed consolidated statements of operations provide a detailed breakdown of the company's financial performance for the three and six months ended June 30, 2025, and 2024, covering revenues, cost of revenues, operating expenses, and net income Condensed Consolidated Statements of Operations (in USD) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $2,591,840 | $1,881,653 | $4,350,293 | $4,910,689 | | Cost of revenues | $454,887 | $771,647 | $920,273 | $1,438,274 | | Gross profit | $2,136,953 | $1,110,006 | $3,430,020 | $3,472,415 | | Sales and marketing | $126,307 | $205,549 | $224,008 | $455,935 | | Development | $270,343 | $868,745 | $872,296 | $1,932,102 | | General and administrative | $865,040 | $1,411,826 | $2,033,522 | $3,602,092 | | Depreciation and amortization | $11,697 | $63,138 | $29,823 | $136,862 | | Total operating expenses | $1,273,387 | $2,549,258 | $3,159,649 | $6,126,991 | | Gain from settlement of license liabilities | $- | $3,248,000 | $- | $3,248,000 | | Other operating income | $1,104,497 | $250,000 | $1,604,497 | $250,000 | | Income from operations | $1,968,063 | $2,058,748 | $1,874,868 | $843,424 | | Interest expense | $(4,740) | $(29,746) | $(17,750) | $(60,628) |\ | Other income (loss), net | $2,274,849 | $58,481 | $3,403,667 | $(378,711) | | Net income | $4,238,172 | $2,087,483 | $5,260,785 | $404,085 | | Net income attributable to Motorsport Games Inc. | $4,258,400 | $2,105,928 | $5,299,458 | $440,972 | | Net income attributable to Class A common stock per share: Basic and diluted | $0.82 | $0.77 | $1.26 | $0.16 | | Weighted-average shares of Class A common stock outstanding: Basic and diluted | $5,206,536 | $2,722,728 | $4,195,047 | $2,722,728 |