Third quarter 2022 earnings were $1. 2 million, compared to $2. 1 million in the third quarter of 2021. The $0. 9 million, or 43%, decrease in third quarter 2022 earnings compared to the third quarter of 2021 reflects a $0. 6 million decrease in virtual game sales, due to declining sales volumes. and less favorable prices, and an adjustment outside the $0. 3 million period that corrects for a negligible overstatement of earnings for the quarter ended June 30, 2022.
Third quarter 2022 net loss $8. 5 million, an accrual of $1. 8 million of the third quarter 2021 net loss of $6. 7 million. The net loss accrual is explained by: (i) an accrual of $0. 1 million in sales and marketing expenses; (ii) an accumulation of $0. 8 million in foreign exchange losses; (iii) a minimum of $0. 6 million in gross profit; (iv) an accrual of $0. 1 million in interest expense; and (v) an accrual of $1. 0 million in contingency provisions for claim-like losses. The third-quarter 2022 expense accruals described above were partially offset by: (i) a $0. 4 million reduction in incremental expenses; (ii) a $0. 2 million reduction in other expenses; and (iii) a minimization of $0. 1 million in general and administrative expenses.
Third quarter 2022 adjusted EBITDA loss (1) $6. 5 million, an accrual of $1 million of the third quarter 2021 adjusted EBITDA loss of $5. 5 million. The accrual in adjusted EBITDA loss (1) is basically due to the same points that caused the accumulation in Q3 2022 net loss.
The following table provides a reconciliation between loss and adjusted EBITDA (1) for the third quarter of 2022 and the third quarter of 2021, respectively:
Financial effects for the months ended September 30, 2022
Revenues of $6. 6 million and $6. 9 million for the nine months ended September 30, 2022 (“Q3 YTD 2022”) and 2021 (“Q3 YTD 2021”), respectively, a minimum of $0. 3 million, or 4%, over the prior period. Gaming segment earnings decreased $0. 8 million, or 12%, to $5. 9 million in the third quarter of 2022, from $6. 7 million in the third quarter of 2021, while our segment earnings from esports increased by $0. 5 million in the third quarter of 2022, compared to the third quarter of 2021. The decrease in earnings from our gaming segment is primarily due to a minimum retail profit of $0. 6 million, driven by higher retail value concessions, as well as undercutting mobile and virtual game sales of $0. 8 million caused by undercutting volumes and values. These lows were partially offset by additional earnings of $0. 6 million generated through progression from third-party simulation platforms. The earnings accrual from our Esports segment is due to the accrual of $0. 5 million in sponsorship earnings from our Le Mans Virtual Series event, which concluded its 2021-22 season in January 2022 and began its 2022-23 season in September 2022. 2022, as well as the 24 Hours of Le Mans Live event organized in June 2022.
Net loss for the third quarter of YTD 2022 is $32 million, a cumulative of $5. 3 million, compared to a net loss of $26. 7 million for the third quarter of YTD 2021. The accrual of net loss is due to: (i) an accumulation of $9. 4 million in goodwill and impairment of intangibles; (ii) an accrual of $1. 6 million in progression expenses; (iii) an accrual of $1. 6 million in sales and marketing expenses; (iv) a minimum of $1. 4 million in earnings from an equity approach investment; (v) an accrual of $1. 7 million in foreign exchange losses; (vi) a minimum of $1. 1 million in gross profit; (vii) an accrual of $0. 3 million in interest expense; and (viii) an accrual of $1. 0 million in provisions for contingencies of losses, similar to a judgment. These accruals were offset by a $12. 8 million reduction in general and administrative expenses.
For Q3 YTD 2022, the loss in adjusted EBITDA(1) $18 million, an accrual of $6 million, compared to the loss of $12. 0 million in adjusted EBITDA for Q3 YTD 2021. The accrual in the loss of adjusted EBITDA(1) is basically due to the same points as the accumulation of net loss for the third quarter of 2022, compared to the third quarter of 2021.
The following table provides a reconciliation between loss and adjusted EBITDA (1) for the third quarter of 2022 and the third quarter of 2021:
Cash and liquidity
For the nine months ended September 30, 2022, the Company recorded negative operating cash flow of approximately $16. 9 million. The Company expects to continue to incur significant operating expenses and will therefore want to increase its revenue to achieve profitability and positive cash flow. The Company expects to continue to incur losses in the foreseeable long term as it continues to expand its product portfolio and invest in the progression of new video game titles. As of October 31, 2022, the Company had money and cash equivalents of approximately $1. 8 million. Based on the money and money equivalents that would be held as of October 31, 2022 and the Company’s average money expenditure, we do not have enough money to fund our operations for the remainder of 2022 and any investment will be required to continue our operations and we will want to supplement our available money with more debt and/or fair financing, Money generated from charge control projects and/or additional adjustments to our product roadmap to decrease current capital requirements.
The Company’s long-term capital and liquidity needs come with budgeting to help with the expected costs of operating its business, adding the amounts required to fund current capital, aid the progress and advent of new products, maintain existing game titles, and secure capital expenditures. The Company’s available budget sometimes depends on many factors, adding its ability to effectively expand new customer favorites or enhancements to its existing products, the continued progression and expansion of the Company’s esports platform, and its ability to collaborate with and/or win other corporations or technologies to complement the Company’s product and service offerings.
Lately, the Corporation is seeking more investment through arrangements and maintaining and improving rigorous control of charges. There can be no assurance that the above liquidity resources will provide the Company with sufficient liquidity to meet its ongoing money needs because, among other things, the Company’s liquidity would possibly be affected through a number of factors, adding up to the point of the Company’s sales and expenses, as well as accounts receivable, sales bonuses, prepaid production prices and accrued charges.
Update of the 2022 restructuring programme
To date, the Company has incurred restructuring costs of approximately $0. 1 million as part of its previously announced restructuring program for 2022, which is comprised primarily of severance packages, and expects overall restructuring costs to be within the previously estimated diversity of $0. 1 million to $0. 3 million. By implementing the 2022 restructuring program, the company expects to reduce approximately 20% of its global overhead and achieve approximately $4 million in annual overhead charge discounts through the end of 2023. As a result of the restructuring efforts, the company learned annualized savings of approximately $2. 5 million to date and continues its efforts to achieve discounts on additional charges.
(1) Use of Non-GAAP Financial Measures
Adjusted EBITDA (the “Non-GAAP Measure”) is not a monetary measure as explained in accordance with accepted United States accounting principles (“U. S. GAAP”). See reconciliations of the non-GAAP measure to your directly comparable maximum measure of U. S. GAAP. In the U. S. currency tables above.
Adjusted EBITDA, a measure used through control to compare the Company’s operating performance, is explained as EBITDA, which is net (loss) plus interest (income), depreciation and amortization, depreciation and amortization, less tax advantages (if any), adjusted to exclude: (i) IPO-like expenses; (ii) similar acquisition expenses; (iii) gain attributable to equity investment resulting from the acquisition of an additional interest in Le Mans Esports Series Ltd. ; (iv) share-based reimbursement expenses; (v) impairment of goodwill and intangible assets; (vi) expenses in connection with a claim similar to a judicial proceeding; and (vii) other fees or gains resulting from non-recurring occasions, if any.
The Company uses the non-GAAP measure to manage its business and compare its monetary functionality because adjusted EBITDA eliminates parts that affect the comparison between periods that the Company believes are not representative of its existing primary operating activities. In addition, the control believes that the use of the non-GAAP measure is useful to its investors as it complements investors’ understanding and assessment of the Company’s standardized operating functionality and facilitates comparisons with prior periods and the effects of its competition (who would possibly describe adjusted EBITDA differently).
Non-GAAP measure is not a term identified under US GAAP and is not intended to be an option for income, source of operating income/loss, net source of income (loss) or cash flow or as a measure of liquidity or any other measure of functionality derived in accordance with US GAAP. In addition, the non-GAAP measure is not intended to be a measure of cash flow for management’s discretionary use, as it does not take into account safe money needs, such as interest payments. Arrange tax payments, working capital needs, and debt service needs. . The non-GAAP measure has limitations as an analytical tool, and investors deserve not to consider it in isolation or as a proxy for the effects of the Company as reported under US GAAP. Management compensates for the limitations of using measures non-GAAP monetary measures by using them to supplement the effects of US GAAP using only US GAAP measures. Because not all corporations use the same calculations, the Company’s measurements may not be comparable to the titled measurements of other corporations. Reconciliations of the non-GAAP measure to net loss, its maximum directly comparable monetary measure calculated and presented in accordance with US GAAP, are set forth in the tables above.
Conference Call and Webcast Details
The company will hold a conference call and webcast at 5:00 p. m. -201-689-8560. Attendees can also watch the live webcast on Motorsport Games’ online investor relations page in https://ir. motorsportgames. com “Events. “
About Motorsport Games
Motorsport Games, a Motorsport Network company, is a leading developer, publisher and provider to the esports ecosystem of official motorsports racing series around the world. Combining innovative and engaging video games with an exciting esports festival and content for racing enthusiasts and gamers, Motorsport Games strives to make the joy of racing available to one and all. The company is the officially licensed video game developer and publisher for iconic motorsport series on PC, PlayStation, Xbox, Nintendo Switch and mobile devices, as well as NASCAR, INDYCAR, the 24 Hours of Le Mans and the British Touring Car Championship (“BTCC”). “). , as well as rFactor 2 and KartKraft simulations. rFactor 2 also serves as the official Formula E racing simulation platform, while also powering F1 Arcade through a partnership with Kindred Concepts. Motorsport Games is an award-winning esports team partner for the Le Mans 24 Hours, Formula E, BTCC, the FIA World Rallycross Championship, and the eNASCAR Heat Pro League, among others. Motorsport Games is building a virtual racing ecosystem where each and every product inspires excitement, each and every esports event is an adventure, and each and every story inspires.
Forward-Looking Statements
Certain emails in this press release, convention call, and webcast that are not old facts are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as completed, and Section 21E of the Exchange Act. of 1934, as amfinished, and are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any content in this press release, similar convention announcement, and webcast not be it emails or old fact data would possibly be considered as forwarding. looking for s. Words like ‘continue’, ‘will’, ‘possibly’, ‘may as well just’, ‘deserve’, ‘expect’, ‘expect’, ‘plan’, ‘end’, ‘anticipate’, ‘believe’, ‘estimate’ “, “forecast”, “forward-looking” and similar expressions are used to identify such forecasts. Such prospective emails include, but are not limited to, emails relating to: (i) Motorsport Games’ long-term business, long-term operating effects and/or monetary condition; (ii) the expected long-term effect of new or planned products, features, events or other offers and the timing of the release of such products, features, events and offers, including, without limitation, our expectations relating to the remaining rounds of the Le Mans Virtual Series; (iii) the expected long-term effect of the implementation of control methods and the effect of other finishes in the industry; (iv) our expectation is that we will continue to incur expenses, significant operating losses and incur losses for the foreseeable long term as we continue to grow our product portfolio and invest in the progression of new video game titles; (v) our liquidity and capital needs, including, without limitation, our ability to continue our business, our confidence that we will not have enough money to finance our operations for the remainder of 2022 uncovered in money and money equivalents to be held beginning October 31, 2022 and our average cash spend, our confidence that more financing will be required to continue our operations, and we expect to supplement liquidity with more debt and/or percentage financing, money generated from investment initiatives, charge control, and/or further adjustments to our product roadmap to reduce operating capital requirements, as well as those related to our cash flows and planned uses of money; (vi) our goals and expectations regarding the 2022 restructuring program, adding our expectation that the program will eliminate approximately 20% of our global overhead charges and generate approximately $4 million in total annual charge discounts through the end of 2023; and (vii) our objective to remedy compliance with NASDAQ’s minimum final bid value requirement for continuing board through proceeding with the opposite inventory split. All forward-looking messages involve significant dangers and uncertainties which may also cause actual effects to differ slightly from those expressed or implied through forward-looking messages, many of which are sometimes beyond the control of Motorsport Games and are hard to predict. Examples of such dangers and uncertainties include, but are not limited to: (i) difficulties, delays or performance below expectations in achieving the Company’s expansion plans, objectives and expectations, for example due to decreased recovery expected economic growth and/or the Company’s inability, in whole or in part, to continue to execute its business methods and plans, for example due to less than expected acceptance of new Company game titles, cheats or the inability to the Company to launch its games as planned, the less the better Higher-than-expected game functionality has an effect on visitor uptake and higher-than-expected sales and/or fees and expenses to expand and launch its games, adding , among others, higher than expected hard work rates and, in addition to the established points. set forth in (ii) through (vii) below, the current status of the Company’s monetary condition and its ability to discharge further debt and/or fair financing to meet its liquidity needs, such as an ongoing fear rating on the Company’s audited annual monetary difficulty in discharging new financing on terms appropriate to the Company, if any; (ii) unforeseen hacks, delays or occasions that would possibly have an effect on the timing and scope of new or planned products, features, occasions or other offerings, for example due to hacks or delays in the use of the product progression body of workers in Russia due to the Russian invasion of Ukraine and similar sanctions and/or more restrictive sanctions that make transactions in the region more complicated or expensive and/or complicated and/or delays as a result of any resurgence of the coronavirus pandemic. COVID-19 ongoing and widespread; (iii) lower than expected benefits from the implementation of the Company’s control methods and/or adverse economic, market and geopolitical situations that have a negative effect on industry finishes, such as market curtain adjustments hard work, an extended period or longer than expected an inflationary environment (such as the impact on customer discretionary spending due to significant increases in power and fuel values that have been surging since early 2020), a rate environment higher interest rates, tax increases having an effect on client discretionary processing, and/or quantitative easing affecting higher interest rates having negative effects on client discretionary processing or adverse progressions similar to the Russian invasion of Ukraine; (iv) higher-than-expected negative operating cash flow, which adds up due to higher-than-expected progression fees, higher interest rates and/or higher inflation, or the inability to realize anticipated savings in the restructuring program from 2022; (v) cheating and/or delays in assembling our money and capital requirements, in addition to, without limitation, cheating in discharging financing on commercially appropriate terms for us or at all, such as our failure to pay all or part of any future debt and/or equity financing transactions, as well as any failure to obtain charge discounts, adding, among others, those that we expect to achieve as a component of the 2022 Restructuring Program; (vi) unexpected progressions with respect to the Stock Consolidation, including, without limitation, long-term declines in the value of the Company’s Class A common inventory, whether due to, among other things, the announcement of the split of the opposing inventory , the Company’s ability to make its common Class A inventory more attractive to a broader diversity of institutional and other investors or an ability to increase percentage value by an amount sufficient to meet the minimum value requirement from NASDAQ’s final bid for continuing board; and/or (vii) gimmickry, delays, or our inability to complete the 2022 Restructuring Program, in whole or in part, which may also result in less than expected operating and monetary benefits from such actions, as well as delays in the touch completion of the 2022 Restructuring Program, which may also decrease the benefits derived from such activities; higher than expected restructuring fees and/or bills and/or timely adjustments to such fees and/or bills; and/or lower than expected annualized charge discounts from the 2022 restructuring program and/or adjustments in the timing of achieving those charge discounts, for example, due to a decrease in the money expected to fund those activities and/or an amount higher than expected. rates are expected to meet load relief targets. Factors other than those discussed above may also cause the effects of Motorsport Games to differ greatly from those expected. Other examples of such dangers and uncertainties include, but are not limited to: (i) higher-than-expected delays and expenses similar to the ongoing and widespread COVID-19 pandemic, any resurgence of COVID-19, and Russia’s invasion of Ukraine; (ii) the ability (or inability) of Motorsport Games to own existing licenses and download further licenses and other agreements with various racing series; (iii) Motorsport Games’ ability to effectively manage and integrate any joint venture, business acquisition, solution or technology; (iv) unforeseen operating fees, transaction fees and actual or contingent liabilities; (v) the ability to attract and retain qualified workers and a core body of workers; (vi) the negative effects of building competition; (vii) adjustments in customer behavior, which add up due to general economic problems, such as rising inflation, higher energy values, and higher interest rates; (viii) Motorsport Games’ failure to protect its intellectual property; and/or (ix) local, industrial and general commercial and economic situations. Other items that may also cause actual effects to differ slightly from those expressed or implied through forward-looking statements can be found in Motorsport Games’ filings with the SEC, adding its Annual Report on Form 10-K. for the fiscal year ended. December 31, 2021, its quarterly reports on Form 10-Q filed with the SEC in 2022, and in its subsequent filings with the SEC. Motorsport Games anticipates that upcoming events and progressions will possibly adjust their plans, goals and expectations. Motorsport Games does not assume any obligation, and in particular disclaims any purpose or obligation, to update any forward-looking information, whether as a result of new data, long-term events or otherwise, unless expressly required by law. Forward-looking statements speak only as of the date made and should not be relied upon as representing Motorsport Games’ plans or expectations as of any future date.
Website and Social Media Disclosure
Investors and others note that we disclose vital monetary data to our investors through our online investor relations (ir. motorsportgames. com) page, SEC filings, press releases, calls for public conventions, and webcasts. We use those channels, along with social media and blogging. , to talk to our investors and the public about our business and products. The information we publish on our online pages, social networks and blogs may be considered vital information. Therefore, we inspire investors, media and others interested in our business to review the data we publish on online pages, social networks and blogs, adding the following data (the list of which will be updated periodically on our online investor relations page):
Content from those social media channels does not form part of this press release and will not be incorporated through references in it.
Contacts:
Investors: Investors@motorsportgames. com
Media:
ASTRSK PRmotorsportgames@astrskpr. com
Annex:
The following table provides a comparative summary of the Corporation’s monetary effects for the periods presented:
MOTORSPORT GAMES INC. ET ITS SUBSIDIARIES CONDENSED CONSOLIDATED OPERATING STATEMENTS (UNAUDITED)
NOTE: All percentage knowledge and percentage-based calculations presented in this table have been adjusted to the opposite percentage split of 1:10 ended November 10, 2022 retroactively for the periods submitted.
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