MSGM Q1 2026 Earnings Transcript

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DATE

May 13, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Stephen Hood
• Chief Financial Officer — Stanley Beckley
• Director of Investor Relations — Ben Rossiter-Turner

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TAKEAWAYS

• Revenue -- $4 million, an increase of $2.3 million or 129.3% due to higher sales of Le Mans Ultimate and RaceControl subscriptions.
• Le Mans Ultimate Sales -- Contributed $1.6 million to the revenue increase compared to the same period last year.
• RaceControl Subscription Revenue -- Delivered $0.7 million of the revenue increase, with monthly recurring revenue now exceeding $0.2 million.
• RaceControl Share of Total Revenue -- Accounted for 19% of company revenue, up from 6% in the comparable prior period.
• Player Engagement (Le Mans Ultimate) -- Reached an all-time peak of more than 8.8 thousand concurrent Steam players, up 118% in peak concurrent players, and 169% in average concurrent users year over year.
• Adjusted EBITDA -- $1.5 million, an improvement of $0.9 million from the prior-year period due to higher profitability and increased stock-based compensation.
• Net Income Per Share -- $0.06 per share, down from $0.33 in the comparable prior-year period, with overall net income approximately $0 both periods.
• Cash and Cash Equivalents -- Stood at $5.9 million at quarter-end and $3.8 million at month-end April after a $3.7 million share repurchase.
• Operating Cash Flow -- Averaged approximately $0.5 million per month, primarily from improved profitability and the capitalization of internally developed software.
• Working Capital -- $5.2 million as of quarter-end, compared to $4.2 million at year-end 2025.
• Le Mans Ultimate Version 1.3 Release -- Introduced Circuit de Barcelona-Catalunya, Duqueine LMP2, and Logitech TrueForce support, coinciding with the record player peak.
• Share Repurchase and Governance Actions -- Repurchased 0.9 million class A shares and retired all class B shares with super voting rights, establishing equal voting rights for all shareholders.
• Citibank Revolving Credit Facility -- $3 million facility secured; balance owed was $0 at quarter-end and $1.2 million as of April 30, 2026.
• Console Expansion Progress -- Development of Le Mans Ultimate for PlayStation and Xbox continues as planned, with release timing to be detailed as 2027 approaches.
• F1 Arcade Technology Partnership -- Motorsport Games technology powers all F1 Arcade venues globally, supporting expansion and demonstrating mainstream appeal.

SUMMARY

Motorsport Games (NASDAQ:MSGM) reported revenue growth of 129.3%, attributed to increased sales from Le Mans Ultimate and higher recurring revenue from RaceControl subscriptions. The company executed decisive capital management activities—including a significant share repurchase and the retirement of super voting shares—resulting in improved corporate governance and liquidity. Recurring revenues now represent a larger percentage of the business mix, and the company secured additional funding flexibility through a $3 million Citibank credit line. Development on PlayStation and Xbox versions of Le Mans Ultimate progresses, with further timing details expected as 2027 nears. Management confirmed a shift from financial necessity to operating strength, outlining a vision for a new long-term project leveraging existing technology platforms.

• CEO Stephen Hood said, "We are not yet in a position to share the full detail of what that foundation will support next, but I want to be direct. We have a product roadmap we believe has the potential to drive a very meaningful revenue and profit growth in 2027 and beyond."
• The company reported monthly recurring revenues from RaceControl among "the strongest periods of growth we have seen since launch," positioning it as a high-margin, scalable platform business.
• Beckley stated, "$3.7 million repurchase of its shares from Driven Lifestyle Group LLC on April 22, 2026. Partially offset by cash inflows from operations."
• Stock-based compensation increased year over year, contributing to the improvement in adjusted EBITDA.
• The F1 Arcade partnership utilizes the company’s proprietary simulation technology, confirming mainstream acceptance and broader market reach.

INDUSTRY GLOSSARY

• RaceControl: Motorsport Games' proprietary competition matchmaking and live service platform providing recurring revenue through subscriptions and powering in-game organized racing as well as external esports events.
• Le Mans Ultimate: The company’s flagship racing simulation game based on the World Endurance Championship and 24 Hours of Le Mans.
• F1 Arcade: An international chain of family-friendly racing entertainment venues utilizing Motorsport Games’ simulation software for Formula 1-themed experiences.
• DLC: Downloadable Content, offering game enhancements such as new tracks or cars, supporting sustained engagement and revenue after initial game sales.

Full Conference Call Transcript

Ben Rossiter-Turner: Thank you, and welcome to Motorsport Games First Quarter 26 Earnings Conference Call and Webcast. On today's call is Motorsport Games' Chief Executive Officer, Stephen Hood and Chief Financial Officer, Stanley Beckley. By now, everyone should have access to the company's first quarter 20 earnings press release filed today after market close. This is available on the investor relations section of Motorsport Games website at www.motorsportgames.com. During the course of this call, management may make forward-looking statements within the meaning of US federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially. From those described in these forward-looking statements.

Except as required by law, the company undertakes no obligation to update any forward-looking statements made on this call or to update or alter its forward-looking statements whether as a result of new information, future events or otherwise. Please refer to today's press release and the company's filings with the SEC. including its most recent quarterly report on Form 10 Q for the quarter ended 03/31/2026, a detailed discussion on certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. In today's conference call, we will refer to certain non GAAP financial measures. Such as adjusted EBITDA as we discuss the first quarter 26 financial results.

You will find a reconciliation of these non GAAP measures to their most directly comparable GAAP measures, as well as other related disclosures in the press release issued earlier today. Which is also available on the Investor Relations section of Motorsport Games website at www.motorsportgames.com. And now I would like to turn over the call to Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen?

Stephen Hood: Thank you, Ben. Good afternoon, everyone, and thank you for joining the Motorsport Games first quarter 26 earnings call. We have started 2026 from a position of real financial strength. Revenues of $4 million in Q1 have more than doubled year on year. We have once again generated positive operating income posted significantly improved adjusted EBITDA, and continue to grow our cash position from operations. The ongoing delivery of Le Mans Ultimate or downloadable content or DLC, plus the ever improving monetization of RaceControl are key to those revenues.

The financial independence we have now built driven principally by the consistent commercial success of our primary gaming title, Le Mans Ultimate, and the recurring revenue we are generating through Race Control, is what has given us the ability to act decisively in the early weeks of this quarter. Both for the benefit of all our shareholders and to set the company up for its next stage of growth. I will come back to that shortly. First, on Le Mans Ultimate, player engagement continues to accelerate. On March 30 first, we once again recorded a new all time player peak. More than 8.8 thousand concurrent players on Steam.

This new peak was determined around the release of version 1.3, introducing Circuit de Barcelona-Catalunya, the Duqueine LMP2 race car, and Logitech TrueForce support This growth in player numbers is not a 1-off. We have consistently reported player growth since launch. In the 2025, we had a peak of 4 thousand players and an average of just over 1.3 thousand. Peak concurrent players grew 118% year-over-year. However, the metric we track most closely is average concurrent users, because it strips out the spikes from content releases and shows whether people are actually sticking around. That number grew 169%. The floor is rising not just the ceiling.

Looking ahead to the second quarter, we have an update plan for release in June to coincide with the real world 24 Hours of Le Mans. The highlight of the world endurance championship upon which our game is based. The persistent cadence of meaningful improvements has defined our work over the past 2 years continues, and continues to be funded by the company's own operating performance. I want to take a moment to speak about RaceControl specifically. Because I think it deserves to be understood not just as a feature supporting Le Mans Ultimate, but as a standalone platform business in its own right. RaceControl is our proprietary matchmaking competition and live service platform.

It is the infrastructure layer that powers organized racing for our community. And increasingly for those partners who want to reach that community. Monthly recurring revenues have exceeded $200 thousand and the first 3 months of 2026 have been among the strongest periods of growth we have seen since launch. But what excites us the most is not where RACE control is today. It is how quickly it can add meaningfully to our growth profile as we continue to layer in features and functionality. The road map ahead is substantial. And each addition compounds the platform's value to both our players and our commercial partners. What makes RaceControl particularly attractive from a financial perspective is its margin profile.

As a platform business built on infrastructure, we already own and operate incremental revenue carries significantly more favorable EBITDA contribution than our content business. It is in the truest sense, a high quality revenue stream. Recurring, scalable, and deeply embedded in the daily behavior of our most engaged players. Beyond direct subscription revenue, RaceControl is becoming the activation layer of choice for automotive manufacturers motorsport series, and global consumer brands seeking direct engagement with a highly targeted, highly passionate audience. Our recent collaboration with Genesys, the luxury automotive brand, and WEC newcomer demonstrates what that looks like in practice.

And we are delighted that Logitech, 1 of the world's leading gaming hardware manufacturers, has chosen Race Control as a platform to power the Logitech G Challenge esports series. These are not peripheral partnerships. They are a validation that RaceControl has become an infrastructure that serious organizations want to access. The combination of Le Mans Ultimate's ongoing commercial momentum, RaceControl's growing recurring revenue layer, and our consistent operating profitability provides us with useful flexibility going forward. Progress on bringing the Le Mans Ultimate to PlayStation and Xbox in collaboration with our development partners continues as planned. We are deepening investment in our proprietary simulation technology, which is the long term retention engine for the core of our market.

We are strengthening the team with targeted hires across engineering, platform, and strategic leadership and we are in the formative stages of preparing a new long term project. This new title will leverage everything we have built. From our simulation technology our live service infrastructure, our RaceControl platform, and the community relationships we have cultivated through our popular racing game, Le Mans Ultimate. This is not a speculative greenfield project, but 1 that is being designed to take another giant stride in the company's output with the same accessible discipline that defined our reemergence as a premier rating game developer.

We believe this represents a significant long term value creation opportunity and we look forward to sharing more in due course. On consoles specifically, our exact timing for the release of Le Mans Ultimate may be subject to further development progress. The work undertaken is complex. Realistically, we expect to announce more details on launch as we enter 2027. As we move into the latter stages of the project, and build confidence in our expected launch window. As previously mentioned, we are taking a careful quality first approach and plan to select the best release window rather than deliver out of financial necessity.

Our existing and future player base is very vocal about their desire for a console release for Le Mans Ultimate and we are pleased to confirm that development is progressing well. I would now like to turn to a series of corporate actions we executed in the past few weeks which marked a significant step forward for the company. We repurchased 904 thousand shares of our class a common stock from Driven Lifestyle Group LLC. As part of that transaction, all Class B shares, which had carried a 10x voting advantage were retired. Meaning, every share now holds equal voting power.

Shareholders also approved an expansion of the awards available under our employee equity plan giving us an important tool to incentivize and retain the people driving our growth. Before I hand over to Stanley, I want to step back and reflect on what this moment represents for Motorsport Games. The corporate actions we executed this quarter the repurchase of shares from Driven Lifestyle, the retirement of class b voting rights, the Citibank credit facility are not simply transactional steps. They are a direct reflection of how far this company has come. And I want to take a moment to thank Driven Lifestyle.

They were with us at inception, and their early support was critical in getting Motorsport Games to where we are today. Their decision to retain a minority shareholding in the company is not only a vote of confidence in our future, it was also a pragmatic outcome from our balance sheet. By retaining an equity stake rather than a full cash exit, we were able to achieve the same strategic result in retirement of all class b super voting shares the return of equal voting rights to all shareholders while deploying less cash to do so. These actions also point forward. Our strength in financial position built from operations has given us the ability to act decisively.

We have returned greater ownership and strategic influence to the company, secured additional flexibility through the Citibank facility, and positioned ourselves for the next phase of growth. Everything we have built has been purposeful. The simulation technology, the live service infrastructure, RaceControl, the community, the commercial partnerships, we have been building a foundation, 1 that we continue to advance all whilst demonstrating its value supporting products like Le Mans Ultimate. We are not yet in a position to share the full detail of what that foundation will support next, but I want to be direct. We have a product roadmap we believe has the potential to drive a very meaningful revenue and profit growth in 2027 and beyond.

And we expect to discuss it in detail on our Q3 earnings call. What I can tell you today is that our next stage of growth will not require us to start from scratch It will leverage everything we have already proven. Our technology, our platform, our audience, and our operational discipline. The risk profile of what comes next is fundamentally different from the traditional game development bet because the foundation is already in existence. And generating returns. We look forward to telling you much more. For now, I will hand over to Stanley Beckley, our chief financial officer.

Stanley Beckley: Thank you, Stephen, and good evening, everyone. As with previous earnings calls, I will not be offering any forward looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the 2026. Revenues for the quarter were $4 million up by $2.3 million or 129.3% when compared to the same period in the prior year. The increase in revenues was primarily due to a $1.6 million increase from sales of Le Mans Ultimate and a $700 thousand increase in the RaceControl subscriptions compared to the same prior year period. Monthly current revenues for RaceControl subscriptions now exceed $200 thousand.

Management plans to grow this important revenue stream as we continue to diversify our product mix and work towards our goal of a multi format and multi title video game developer and publisher. Net income for the 2026 and 2025 was approximately $0 respectively. Net income attributable to Class A common stock was $0.06 per share for the 2026 compared to net income per share of $0.33 for the same period in the prior year. We are reporting adjusted EBITDA of $1.5 million for the 2026 compared to $600 thousand for the same period in the prior year.

The improvement in adjusted EBITDA of $900 thousand was primarily due to the same factors driving the previously discussed change in net income for the 2026 when compared to the same period in the prior year. As well as an increase in stock based compensation compared to the prior year period. As it relates to liquidity, as of 03/31/2026, we had cash and cash equivalents of $5.9 million which decreased to $3.8 million as of April 2026. Due to the company's $3.7 million repurchase of its shares from Driven Lifestyle Group LLC on April 22, 2026.

Partially offset by cash inflows from operations Management believes that this share repurchase from Driven Lifestyle will strengthen our corporate governance structure and position the company for its next stage of growth. Whilst underscoring our confidence in our business and liquidity position. During the 3 months ended 03/31/2026. We generated an average positive cash flow from operations of approximately $500 thousand per month. That was primarily due to increased profitability and the capitalization of internally developed software. We currently have no purchase commitment liabilities. Furthermore, our working capital as of 03/31/2026 was $5.2 million versus $4.2 million as of 12/31/2025. Underscoring a much improved balance sheet and liquidity position.

Management remains confident in the company's product roadmap as we work towards porting Le Mans Ultimate to console over the next several months. We also secured a $3 million revolving line of credit from Citibank in February 2026. As of 03/31/2026, there was no amount owed to Citibank under the revolving line of credit. As of 04/30/2026, there was $1.2 million owed to Citibank under this revolving line of credit. Thank you all for your time.

Stephen Hood: And now I will turn the call back to Stephen for closing remarks. In closing, the story of Q1 is a simple 1. Le Mans Ultimate continues to grow. Our financial position continues to strengthen and that strength is now actively translating into action. For our shareholders, that means meaningfully improved governance. The long term health of the business, that means continued investment in our team, our technology, and the opportunities we are now in a position to pursue. We are no longer running Motorsport Games from a position of necessity. We are running it from a position of strength. With options, with conviction, with a clear sense of where we are taking this company.

The future we are building is not just for the next quarter. It is for the next decade. Thank you all for joining us today. I look forward to updating you on our continued progress. I will now hand it back to the operator.

Operator: Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. And our first question today will come from Andrea Soderstrom with Sidoti and Company. Your line is now open. Please go ahead.

Analyst (Alex): Hi, this is Alex on for Andra, Thanks for taking questions. My first question, is on the Le Mans Ultimate version 1.3 that you mentioned. It drew a record 8.8 thousand player peak in March, which is an impressive milestone And I am curious, how has engagement trended since the launch? And could you talk a little bit about what the road map may look like for the remainder of 2026?

Stephen Hood: Hi, Alex. it is Stephen. Thank you for your questions. I think, to be perfectly honest, it is trending upward. We talked specifically not just about the peaks, but actually, the average concurrent, the stickiness of the product. And what we have seen over the history of the product and certainly since 1.3 remains true, is that with more content, and more exposure, we are building a record number of players that are sticking around buying the content and participating. We have seen that ground swell starting to follow the product. We have not proactively really spent marketing dollars in trying to accelerate that. So it is really organic. Growth of those player numbers.

We do have new content packs that are planned for this year. Which will be no surprise to anybody. They have proven very popular every time we add more cars, more track content, and expand the game offering, which is built around Le Mans and World Endurance Championship. By its nature, it is quite singular. We found that we reached new players. So we have an idea and a concept for new track content. That will reach additional markets, because typically, we found we are incredibly strong in Europe, which is no surprise given Le Mans history and its location. And we have dined out very well on that.

But in order to take this game internationally, we are starting to look at additional content that would attract people that are not naturally bought into the Le Mans concept or European content. So we have got more things to reveal in the future, but I am quite excited about I think it will keep climbing.

Analyst (Alex): Great context. Thank you. And you spoke about this in the prepared remarks a little bit, that RaceControl continues to expand as another recurring revenue driver. Could you tell us a little bit about where you see recurring revenue you know, as a percentage of total business going and over the next 12 months or so.

Stanley Beckley: Yes. Hi, Alex. I can take that. So we currently do not, provide forward looking guidance. But I can speak about, how well this control has done. And in Q1 26, for example, it was the biggest share of our revenues. Q1 26 saw us generate RaceControl subscription revenues of 800 thousand. which was 19% of the total revenues of 4 million for the quarter. This is compared to RaceControl subscriptions only accounting for 6% of our revenues in Q1 25. So I can speak too much about where we see it going in terms of specific numbers, but we do expect it to continue growing, as the game becomes more popular. And more units are sold.

But we are getting to the point where our revenue stream is more diversified. With RaceControl subscriptions encompassing a greater share of our total revenues.

Analyst (Alex): Got it. Thanks for sharing. And last 1 from us. Can you talk a little bit about the Formula 1 opportunity, what you are doing there today and how you see it evolving and what sort of pipeline and other related revenue opportunities look like for that?

Stephen Hood: Alex, I guess this 1 is probably for me. Formula 1 opportunity, I think, is always interesting. Formula 1 is a huge multiple world over international markets. it is a no brainer for us to be interested in that space. that is 1 of the reasons why we were, more than happy to provide our technology to power F1 Arcade. So every arcade venue and every activity that they provide around the world, all their facilities, including the new pop up facilities, is powered by technology owned by and operated by Motorsport Games. Technology actually powers Le Mans Ultimate, a later version of that technology anyhow.

So 1 of the reasons we did that was to overcome this concept that our technology as a boutique simulation software developer, which is what we are today, very specialized software company. Can produce something that is accessible for a much larger market. Because people typically think that simulator software is a preserve of, you know, those kids in a bedroom with a with a simulator rig. This is the kind of stuff I have at home. But anybody can walk in off the street and enjoy our technology in an F1 Arcade venue. From grandma to 10-year-old kids to mom, dad, friends, it is a family entertainment experience. How would I buy sim racing software?

That foot in the door, with F1 Arcade, the group behind that, and Liberty who are part of the operation. it is just part of our strategy to build our relationship with Formula 1, demonstrate the viability of the software, the advantage and the power of the software. I mean, bear in mind F1 Arcade chose not to use the official Formula 1 game, but instead chose Motorsport Games software. Software produced by our developer Studio 397. And that is a know, a crucial kind of positive step in building relationship, surfacing the technology, and really enabling our engineers to provide Formula 1 through F1 Arcade cutting edge software.

And whilst there is an exclusive agreement in place with Electronic Arts at the moment, Like any software developer, we would be interested in expanding our offerings in future. F1 Arcade is set to grow. But we are exploring possibilities about what we could support in terms of single seater racing in the future, 1 element of which could be Formula 1. So I think it would be speculation right now. There is not anything definitive. But we would certainly be interested in expanding our offer.

Analyst (Alex): Thank you for all the background. that is all from us.

Operator: Thank you. At this time, there are no further questions in the queue. This will bring us to the end of the Motorsport Games first quarter 26 earnings call. We appreciate your time and participation. You may now disconnect.

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