Motorsport Games Reports Fourth Quarter & Full Year 2023 Financial Results
MIAMI, April 01, 2024 (GLOBE NEWSWIRE) -- Motorsport Games Inc. (NASDAQ: MSGM) ("Motorsport Games" or the "Company") today reported financial results for its fourth quarter and fiscal year ended December 31, 2023. The Company has also posted the fourth quarter and fiscal year-end 2023 earnings slides highlighting key milestones that occurred in the period, which are accessible on the Company's investor relations website.
"2023 was a year of repositioning. Reducing costs, headcount and projects allowed us to focus on what we know best, making innovative games. Having determined the correct direction for the company, we put our energy into Le Mans Ultimate, an innovative team-based racing title from our internal team, Studio 397. All efforts were redirected to make this a success, and as part of the delivery, we set about reestablishing ourselves in the eyes of players." Stephen Hood, President and Chief Executive Officer of Motorsport Games commented. "This reworking of what had become a complex business, was at times a difficult process. But the renewed energy on display from our tightly knit team became our guiding light."
"This past year marks a significant milestone in the rebuilding of the company" continued Hood. "With a strong sense of direction and energy, we became a games company again, ready to deliver through 2024."
Fourth Quarter 2023 and Subsequent Business Update
-- Expense reductions under the previously announced 2022 Restructuring
Program has yielded savings of $6.7 million as of the end of 2023
-- Closed Motorsport Games Australia to centralise development efforts and
reduce cost
-- Released Le Mans Ultimate into Early Access in February 2024, the
official game of the FIA World Endurance Championship and the 24 Hours of
Le Mans to positive community reception with initial sales above internal
forecasted levels
Financial Results for the Three Months Ended December 31, 2023
Revenue for the fourth quarter of 2023 was $1.7 million compared to $3.8 million for the same period in the prior year, a reduction of $2.1 million, or 53.7%. Gross profit was $1.1 million compared to $2.3 million for the same period in the prior year, a decrease of $1.2 million, while gross profit margin marginally increased to 61.4% from 60.6%.
Net income for the fourth quarter of 2023 was $2.7 million, or $1.35 per share, compared to a net loss of $4.8 million, or $4.17 per share, for the same period in the prior year, an improvement of $7.5 million, or $5.52 per share. Lower cost of revenues and operating expenses required to develop and release additional new games in the fourth quarter of 2023 contributed to the increase in net income, as well as a $3.0 million gain from the sale of the NASCAR license to iRacing in October 2023.
Adjusted EBITDA gain((1) for the fourth quarter of 2023 was $0.5 million, compared to an Adjusted EBITDA loss(1) of $3.2 million for the same period in the prior year. The change in Adjusted EBITDA gain((1) of $3.7 million was primarily due to the same factors driving the previously discussed change in net income for the fourth quarter of 2023 when compared to the same period in the prior year.
The following table provides a reconciliation from net income (loss) to Adjusted EBITDA gain(loss)((1) for the fourth quarter of 2023 and 2022, respectively:
Three Months Ended Three Months Ended
December 31, 2023 December 31, 2022
-------------------- --------------------
Net Income (Loss) $ 2,671,021 $ (4,849,023)
Interest expense, net 98,929 509,993
Depreciation and
Amortization 602,800 490,377
---------------- ----------------
EBITDA 3,372,750 (3,848,653)
Acquisition related
expenses 66,224 161,010
Loss contingency
expenses - 425,000
Impairment of goodwill
and intangible assets - 188,378
Gain on sale of NASCAR
License (3,037,341) -
Stock-based
compensation 81,242 (105,792)
---------------- ----------------
Adjusted EBITDA $ 482,875 $ (3,180,057)
================ ================
Financial Results for the Year Ended December 31, 2023
Revenue for the full year 2023 was $6.9 million compared to $10.3 million for the prior year period, a reduction of $3.4 million, or 33.1%. Gaming segment revenues were $6.6 million for the full year 2023, compared to $9.1 million for the prior year period, a reduction of $2.5 million, or 27.6%. Esports segment revenues were $0.3 million for the full year 2023 compared to $1.2 million for the prior year period, a reduction of $0.9 million, or 75.4%. Consolidated gross profit was $3.3 million for the full year 2023 compared to $5.4 million for the prior year period, a decrease of $2.1 million, while gross profit margin decreased to 47.6% from 52.0%.
Net loss for the full year 2023 was $14.3 million, or $5.06 per share, compared to a net loss of $36.8 million, or $30.73 per share, for the same period in the prior year, an improvement of $22.5 million, or $25.66 per share. Lower cost of goods sold, operating expenses, and impairment losses, as well as the gain on the sale of the NASCAR license, were key contributors to the decrease in net loss for the full year 2023 when compared to the prior year period, partially offset by a reduction in revenue.
Adjusted EBITDA loss((1) was $8.9 million for the full year 2023, compared to Adjusted EBITDA loss(1) of $21.2 million for the same period in prior year, an improvement of $12.3 million, or 58.0%. The decrease in Adjusted EBITDA loss((1) was primarily due to the same factors driving the previously discussed change in net loss for the full year 2023 when compared to the prior year period.
The following table provides a reconciliation from net loss to Adjusted EBITDA loss((1) for the fiscal years ended December 31, 2023 and 2022, respectively:
Twelve Months Ended Twelve Months Ended
December 31, 2023 December 31, 2022
--------------------- -----------------------
Net Loss $ (14,323,185) $ (36,840,454)
Interest expense, net 772,989 1,148,204
Depreciation and
Amortization 2,115,430 2,062,551
----------------- ----------------
EBITDA (11,434,766) (33,629,699)
Acquisition related
expenses 387,532 718,611
Loss contingency
expenses 232,359 1,425,000
Impairment of goodwill
and intangible
assets 4,004,627 9,616,748
Gain on sale of NASCAR
License (3,037,341) -
Stock-based
compensation 957,302 714,523
----------------- ----------------
Adjusted EBITDA $ (8,890,288) (21,154,817)
================= ================
Cash Flow and Liquidity
As of December 31, 2023, the Company had cash and cash equivalents of approximately $1.7 million. During the year ended December 31, 2023, the Company had negative cash flows from operations of approximately $12.9 million, representing an average monthly net cash burn from operations of approximately $1.1 million. While it has taken measures to reduce its costs, the Company expects to continue to have a net cash outflow from operations for the foreseeable future as it continues to develop its product portfolio and invest in developing new video game titles.
As of April 1, 2024, the Company's cash and cash equivalents has decreased to $1.3million. Based on this cash and cash equivalents position, and the Company's average cash burn, the Company does not believe it has sufficient cash on hand to fund its operations for the remainder of 2024 and that additional funding will be required in order to continue operations. In order to address its liquidity short fall, the Company is actively exploring several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions; ii) other strategic alternatives for its business, including, but not limited to, the sale or licensing of the Company's assets in addition to its recent sale of its NASCAR license; and iii) further cost reduction and restructuring initiatives.
There can be no assurances that the Company will be able to secure additional liquidity through the means referenced above, nor can there be any assurances that the Company can sufficiently reduce costs and restructure its business to sufficiently lower its cash burn to sustainable levels and therefore meet its ongoing cash requirements. Further, other factors can impact the Company's liquidity position, including, but not limited to, the Company's level of sales and expenditures, as well as accounts receivable, sales allowances, prepaid manufacturing expenses and accrued expenses. For additional information regarding the Company's liquidity, see the Company's Annual Report on Form 10-K for the year ended December 31, 2023 to be filed with the Securities and Exchange Commission (the "SEC").
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