Motorsport Games Inc. MSGM reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Moreover, the top line decreased while the bottom line expanded on a year-over-year basis.

The decline was due to a lower volume of digital and mobile games sales and unfavorable pricing scenario. Also, lower revenues earned through the development of third-party simulation platforms and esports sponsorships added to the downtrend. The company’s result was also affected by increased impairment losses and interest expenses, which were partially offset by reduced marketing, development and general & administrative expenses.

Following the results, shares of MSGM declined 3.02% in the after-hours trading session on Aug 21. Investors' sentiments might have been hurt since the company stated that it does not have sufficient liquidity to fund its operations for the remaining part of 2023. This statement is based on the available cash in hand and an average monthly net cash burn of approximately $1.5 million in the first six months of 2023.

Earnings and Revenues

In the quarter under review, adjusted loss per share of $1.54 was narrower than the Zacks Consensus Estimate of adjusted loss per share of $1.86. In the prior-year quarter, the company reported adjusted loss of $6.30 per share.

Total revenues of $1.7 million surpassed the consensus estimate of $1.5 million by 13.3%. However, the top line decreased 15% on a year-over-year basis.

Motorsport Games Inc. Price, Consensus and EPS Surprise

Motorsport Games Inc. price-consensus-eps-surprise-chart | Motorsport Games Inc. Quote

Adjusted EBITDA amounted to a loss of $2.7 million compared with the loss of $6 million reported in the prior-year quarter.

Operating Highlights

During second-quarter 2023, the company’s total operating costs and expenses were $9.5 million, up 21.8% year over year. General and administrative, as well as development expenses, declined 3% to $3.2 million and 33.3% to $1.8 million, respectively year over year. Also, sales and marketing expenses notably reduced 73.3% to $0.4 million from the prior-year quarter.

The quarter’s gross profit margin came at 50.2%, down 720 basis points from the prior-year quarter’s reported value of 57.4%.

Balance Sheet

As of Jun 30, Motorsport Games had cash on hand of $2 million compared with $1 million as of 2022 end. During the second quarter of 2023, the company’s accounts payable were $0.9 million compared with $2.4 million at 2022 end.  

For the first six months of 2023, the company’s net cash used in operating activities was $8.9 million compared with $12 million reported in the prior-year quarter.