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MG

Motorsport Games Inc. (MSGM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $2.0M (+13% YoY), but gross margin compressed to 45.8% (from 61.4% YoY) and net loss was $(2.9)M, driven by FX losses and lack of prior-year NASCAR license gain; diluted EPS was $(0.89) versus $0.97 in Q4 2023 .
  • Adjusted EBITDA swung to a $(2.5)M loss from $0.4M in Q4 2023; sequentially, profitability deteriorated versus Q3 2024’s $0.1M adjusted EBITDA .
  • Management launched RaceControl subscriptions in Dec-2024 (first 21 days gross revenue $120k; ~6,000 active subscribers as of the call), and reached 100,000 net unit sales of Le Mans Ultimate in Q4, supporting new monetization vectors .
  • Liquidity remains the principal overhang: cash was $0.9M at 12/31/24 (rose to $1.2M at 2/28/25); management reiterated that cash on hand is insufficient to fund the next 12 months and is actively pursuing financing/strategic alternatives; no forward guidance provided .

What Went Well and What Went Wrong

What Went Well

  • Le Mans Ultimate momentum: “significant uplift to player numbers and consumer sentiment” with LMGT3 content, hosted servers, and subscription launch; 100,000 net unit sales achieved in Q4 2024 .
  • Subscription traction: “out-of-the-gate performed above internal expectations” with $120k gross in the first 21 days and ~6,000 active subscribers, demonstrating recurring revenue potential without paid marketing .
  • Cost discipline and annual improvement: FY 2024 revenue +25.7% YoY to $8.7M; FY net loss improved to $(3.0)M from $(14.3)M; FY adjusted EBITDA loss narrowed to $(3.9)M from $(9.3)M .

What Went Wrong

  • Margin compression and FX headwinds: Q4 gross margin fell to 45.8% (61.4% prior year), and “other expenses” increased by $2.2M primarily due to foreign currency losses, driving the Q4 net loss .
  • Lapped one-time gains: Q4 2023 benefited from a $3.0M gain on NASCAR license sale, absent in Q4 2024, harming YoY comparability .
  • Liquidity risk unabated: company again stated cash is insufficient for 12 months of operations; continued net cash outflows expected as product investment continues; exploring equity/debt, asset sale/licensing, and cost reductions .

Financial Results

Sequential Performance (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD)$1,881,653 $1,802,946 $1,973,827
Gross Profit ($USD)$1,110,006 $1,086,223 $903,074
Gross Margin (%)59.0% 60.2% 45.8%
Net Income (Loss) ($USD)$2,087,483 $(573,025) $(2,879,131)
Diluted EPS ($USD)$0.87 $0.00 $(0.89)
Adjusted EBITDA ($USD)$(196,781) $50,127 $(2,467,713)

Key drivers: Q4 margin compression and FX losses; Q2 benefited from gains on settlements (INDYCAR $2.5M; BARC $0.6M) and asset sale $0.3M .

Year-over-Year (Q4 2023 vs Q4 2024)

MetricQ4 2023Q4 2024
Revenue ($USD)$1,747,318 $1,973,827
Gross Profit ($USD)$1,073,205 $903,074
Gross Margin (%)61.4% 45.8%
Net (Loss) Income ($USD)$2,671,021 $(2,879,131)
Diluted EPS ($USD)$0.97 $(0.89)
Adjusted EBITDA ($USD)$416,651 $(2,467,713)

Why the deterioration: Q4 2023 included a $3.0M NASCAR license gain; Q4 2024 experienced ~$2.2M FX-driven other expense and weaker gross margin .

Estimates Comparison (Q4 2024)

MetricQ4 2024 ActualQ4 2024 Consensus (S&P Global)
Revenue ($USD)$1,973,827 N/A*
Diluted EPS ($USD)$(0.89) N/A*
Adjusted EBITDA ($USD)$(2,467,713) N/A*

Values retrieved from S&P Global*. Coverage appears limited, and consensus was unavailable for Q4 2024.

Segment Mix (Annual)

MetricFY 2023FY 2024
Total Revenue ($USD)$6,909,674 $8,687,462
Gaming % of Total95.8% 100.0%
Esports % of Total4.2% 0.0%

FY 2024 gaming revenue growth driven by ~$3.0M digital game and DLC sales from Le Mans Ultimate; esports declined due to no LMVS event .

KPIs and Liquidity

KPIQ2 2024Q3 2024Q4 2024
Le Mans Ultimate net unit sales——100,000 milestone reached
RaceControl subscription gross revenue (first 21 days)——~$120,000
Active subscribers (as of call date)——~6,000
Cash & Equivalents (period-end)$0.5M (6/30) $0.8M (9/30) $0.9M (12/31)
Cash & Equivalents (subsequent)$1.3M (7/31) $0.5M (10/31) $1.2M (2/28/25)
Avg monthly operating cash burn~$0.2M (6M) ~$0.1M (9M) ~$0.2M FY PR ; ~$0.3M FY call

Note: Management disclosed a discrepancy on FY operating cash burn averages ($0.2M PR vs $0.3M on the call) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q4 2024None providedNone providedMaintained (no guidance)
Gross MarginFY/Q4 2024None providedNone providedMaintained (no guidance)
OpExFY/Q4 2024None providedNone providedMaintained (no guidance)
EPSFY/Q4 2024None providedNone providedMaintained (no guidance)
Liquidity actions2025Exploring financing/strategic alternativesExploring financing/strategic alternativesMaintained

Management reiterated no forward-looking guidance and emphasized ongoing financing/strategic alternatives .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Product updates/DLCFirst paid DLC launched; season pass uptake; console expansion plans accelerated (Q2) LMGT3 content, hosted servers; further updates in Feb 2025; player numbers and sentiment improved Strengthening content cadence and engagement
Subscription monetizationSubscription service “not far” from going online (Q2) Launched Dec 2024; $120k gross in first 21 days; ~6,000 subs; no paid marketing Ramping recurring revenue
Strategic alternatives/financingExploring strategic alternatives; seeking funding; potential console ports (Q2) Active pursuit of equity/debt, asset sales/licensing; conversations with partners/publishers Ongoing; potential catalysts
LiquidityInsufficient cash for 12 months; continued cash outflows (Q2, Q3) Same disclosure; cash $0.9M (12/31); $1.2M (2/28/25) Persistent risk
Legal/regulatoryINDYCAR settlement; BARC settlement gains (Q2) Summary judgment in Innovate litigation in MSGM’s favor Improving legal backdrop
Feature roadmapCo-op mode and save/resume; driver swaps planned Q1 2025 (Q3) Livery creation, driver swaps; large-scale endurance esports to return Execution progressing
FX/macro—FX losses (~$2.2M) increased other expenses in Q4 FX sensitivity highlighted

Management Commentary

  • “2024 was a revitalizing year for the company with improved revenues, reduced cash burn and the release of our new title Le Mans Ultimate in Early Access.” — Stephen Hood, CEO .
  • “The brand-new optional subscription service out-of-the-gate performed above internal expectations, creating a new and valuable revenue stream for the company.” — Stephen Hood .
  • “In the first 21 days of this accounting period, the [subscription] service generated over $120,000 in gross revenues… within touching distance of 6,000 active subscribers… without any spend towards a paid marketing campaign.” — Stephen Hood .
  • “Based on our cash position and the average monthly cash burn, we do not believe there is sufficient cash on hand to fund operations over the next year and… additional funding will be required.” — Stanley Beckley, CFO .
  • “With the right financing, we had the opportunity to grow this business… we are a revitalized boutique entertainment studio poised for the next stage of development and growth.” — Stephen Hood .

Q&A Highlights

  • The call did not provide forward-looking guidance and contained prepared remarks emphasizing liquidity actions and product momentum; no explicit Q&A exchanges were captured in the transcript .
  • Clarifications reiterated that Q4 losses reflected FX remeasurement and lapping the NASCAR license gain in Q4 2023; adjusted EBITDA declined for similar reasons .
  • Management highlighted ongoing discussions with potential publishers/partners, including console port opportunities for Le Mans Ultimate, but did not disclose specifics .

Estimates Context

  • S&P Global consensus for Q4 2024 appears unavailable for EPS and revenue; results are compared to actuals only. Values retrieved from S&P Global*.
  • Given limited coverage, sell-side models may need to reflect: lower Q4 gross margin, FX-driven other expense, subscription scaling, and annual cost reductions evidenced in FY 2024 .

Key Takeaways for Investors

  • Subscription traction is a tangible new revenue stream; scaling subscribers and DLC cadence are the primary near-term levers, especially with no paid marketing to date .
  • Liquidity is the gating risk: management disclosed insufficient cash for 12 months and ongoing cash burn; expect financing events or strategic actions as catalysts (equity/debt, licensing, asset sales) .
  • Q4 margin compression and FX losses are watchpoints; absent one-time gains, profitability normalizes lower versus prior year; monitor operational gross margin improvements in subsequent quarters .
  • Console port discussions could expand TAM materially; any announced publisher partnership or funding tied to ports would be a material narrative positive .
  • Legal resolution (Innovate judgment) reduces uncertainty and may alleviate fee liabilities; modest positive for equity/book positioning .
  • With no guidance, trajectory will be inferred from content roadmap delivery (driver swaps, livery creation), subscription attach/ARPU, and DLC uptake .
  • Short-term: trade around financing headlines and product update drops; medium-term: thesis hinges on sustainable monetization (subs + DLC) and securing runway to pursue console ports and broader distribution .