Last night, Motorsport Games held its earnings call going over Q2 of 2023. With limited cash and equity as well as poor cash flow, the company is setting up measures to survive until 2024.
Setting aside the conspiracy theories and disappointment of fans surrounding the NASCAR, IndyCar and BTCC licences, Motorsport Games appeared to be making a promising resurgence in recent months.
In June, the company announced Le Mans Ultimate, a much-anticipated simulator. Throughout the past 12 months, rFactor 2 has received several popular content drops. Finally, major changes to the company’s structure included the return of a promising CEO, Stephen Hood. Whilst clearly not yet on a path one would deem a triumph, it is obvious that improvements are there.
Last night, Motorsport Games held its latest Earnings Call guiding investors through its financial position in Q2 of 2023. Well, the results certainly don’t reflect what one would expect from a less controversial financial quarter. Here are the details.
Struggling to end 2023
The investors’ call opens up as one would expect. The team goes over the many highlights of the past three months. These include the release of many DLC packs for both NASCAR Heat 5 and rFactor 2. Sponsorship of the Formula E Accelerate Esports championship also contributed. One key positive was the announcement of Le Mans Ultimate.
However, things soon turn sour with reports of a drop in profit compared to Q2 of last year. Indeed, whilst last year’s gross profit – or revenue – for the three-month period ending on 30 June came to $1,152,830, this year’s figure sits below $875,000.
Things got worse however as operational costs for running the company mean that Motorsport Games recorded a net loss of $8,171,024 in Q2. The bad news peaked when the call mentioned that the company, as of 30 June, holds just $2 million in “cash and cash equivalents.” Furthermore, that figure drops to just $1.4 million as of 31 July 2023.
These figures led the company’s financial report to state that “the Company does not believe it has sufficient cash on hand to fund its operations for the remainder of fiscal year 2023.” Yes, that’s right. Motorsport Games is seemingly struggling to continue its current operations ongoing until the end of the year.
Selling licences?
But Motorsport Games is already planning to release its Le Mans Ultimate game in December of this year. So clearly, this is bad news for the sim racing community. Indeed, losing a developer is always going to be a sad moment.
But do not fear. During the call, MSG’s team did outline a few key strategies in the hopes of surviving 2023. Indeed, reaching the release of LMU will surely be enough to keep the company afloat. The title should bring in plenty of cash both through sales and additional content potential. So what are these aforementioned strategies?
First of all, the report mentions “additional funding in the form of potential equity and/or debt financing arrangements.” Obviously, these are the standard mortgaging and loan solutions many companies come up with in situations akin to this.
However, the company also states it is looking into “the sale or licensing of the Company’s assets.” Unlike mortgaging assets, this would involve Motorsport Games losing access to assets it sells. One rumour that emerged last week was the sale of its exclusive NASCAR licence.
Indeed, for over a year, the motorsport series has reportedly been frustrated by its gaming situation. Could Motorsport Games give up the NASCAR licence to the likes of EA or iRacing in order to stay afloat and release a successful FIA WEC title instead?
Stephen Hood and his team were keen to point out to their investors that the success of these plans are far from guaranteed. Indeed, the company is clearly in need of a lot of money to survive until the end of the year at its current expense rate. All we can do is hope they make it and we can all enjoy Le Mans Ultimate upon its release.
What do you make of the Motorsport Games Q2 Earnings Call? Tell us on Twitter at @OverTake_gg or in the comments down below!
