00:03 Welcome to today's Motorsport Games Incorporated Third Quarter twenty twenty one Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-session. 00:14 I'll now turn the call over to your host Ashley DeSimone of ICR. You may begin.

00:20 Thank you, operator. On today's call are Dmitry Kozko, Motorsport Games' Executive Chairman and Chief Executive Officer; Stephen Hood, President; and Jon New, Chief Financial Officer. By now, everyone should have access to the company's third quarter earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com. 00:53 During the course of this call, management may make forward-looking statements within the meaning of the 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 statement made on this call, or to update or alter its forward-looking statements whether as a result of new information, future events, or otherwise. 01:27 Please refer to today's press release and the company's filings with the SEC, including the company's most recent annual report on Form 10-K and the company's quarterly report on Form 10-Q for the period ended September thirty, twenty twenty one for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. 01:54 In today's conference call, we will refer to certain non-GAAP financial measures such as adjusted EBITDA as we discuss the third quarter twenty twenty one financial results. You will find a reconciliation of these non-GAAP measures to our actual GAAP results, as well as other related disclosures in the press release issued earlier today. 02:15 And now, I'd like to turn the call over to Dmitry Kozko, Chief Executive Officer of Motorsport Games. Dmitry?

02:25 Thank you and hello, everyone. My name is Dmitry Kozko, Executive Chairman and Chief Executive Officer of Motorsport Games. It’s a pleasure to discuss our third quarter results with you today, along with Stephen Hood, our President; and Jon New, our Chief Financial Officer. 02:39 Please take a look at our Q3 highlights video and Q3 earnings slides posted on the landing page of our IR website. We share some visuals from our just released NASCAR 21: Ignition game and a glance of the first round of twenty twenty one, twenty twenty two Le Mans Virtual Series Esport events. We opened these quarterly videos and now, our quarterly earnings slide and continue to give you a sense of Motorsport Games progress towards our vision to become the household brand name for racing games and esports. 03:15 I want to say thank you to our new and existing stockholders and racing fans, who have been patiently waiting for the release of our new NASCAR 21 title. The wait is over. We choose to pull forward our normally scheduled quarterly earnings conference call to get you not only our Q3 results but also the information related to the recent launch of our NASCAR 21 title. I'm excited and humbled to say that NASCAR 21: Ignition was launched on October twenty eight. This is a significant milestone for a young company particularly because this is the first title that was built on our proprietary Motorsport Games internal development platform leveraging Unreal Engine and rFactor technologies. There has been a lot of excitement around NASCAR 21: Ignition. 04:06 During the pre-release period, we experienced technical glitches. This is common whenever a new game is launched on a new engine, and I'm pleased to report that due to the flexibility of our new Motorsport…

13:51 Thank you, Dmitry and hello everyone. My name is Stephen Hood, and I’m the President of Motorsport Games. We are happy to bring NASCAR 21: Ignition to an [indiscernible] families, and I would like to echo Dmitry comments. While we're incredibly proud of the work by the development team, we acknowledge there remains certain bugs that must be fixed. The initial day one and second patches have already been incorporated into the game, delivering over three hundred improvements across all areas of the product and our teams are currently working on patch three that will address other outstanding issues. Again, I'd like to give a big thank you to our development team for their continued efforts on NASCAR 21: Ignition. 14:39 As we see the rollout for NASCAR 21: Ignition, and NASCAR Heat Ultimate Edition+ in the Nintendo Switch, I would like to give an update on the continued expansion of our capabilities and how our development teams are scaling to handle multiple franchises. Throughout the development process, we have worked hard to scale our capabilities through our acquisitions of Studio 397 and 704Games, as well as the core team behind the ever impressive KartKraft product. These acquisitions give us strength in technologies and expertise that we will further leverage to elevate our own scalable development platform, the engine room of our product and development efforts. 15:22 The experience of delivering our own product from start to finish is a major highlight for our growing business. Building an all new NASCAR gaming franchise with an all new team, tools and technologies is an important step forward, and one that proves we can deliver own products. 15:41 Next, we plan to improve our pipeline further by integrating the source code of our rFactor 2. Integration of the preferred component since…

17:33 Thank you, Stephen. My name is Jon New and I’m Chief Financial Officer of Motorsport Games. I'd like to welcome you to the third quarter earnings call and I would now like to share a financial overview for the third quarter and year-to-date, September thirty. 17:48 Revenues were two point one million dollars for the third quarter twenty twenty one compared to nine million dollars in the prior year period. The gap between comparisons is primarily attributable to releasing NASCAR Heat 5 in the third quarter of twenty twenty versus releasing NASCAR Ignition 21 in the fourth quarter of twenty one. 18:11 The revenues from NASCAR 21: Ignition game sales will primarily be recognized in the fourth quarter of twenty twenty one and into the first part of twenty twenty two. So this timing difference will come up again and again as we go through this conversation. 18:31 Net loss and net loss per share of Class A common stock were six point six million dollars loss and one point two million dollars gain respectively for the three months ended September thirty, twenty twenty one and twenty twenty. As mentioned, the quarterly comparisons are significantly affected considering the different release stage in NASCAR Heat 5 during Q3 twenty twenty versus NASCAR 21: Ignition that was released in Q4 twenty twenty one. 19:00 Big picture for the third quarter, we exceeded analysts’ consensus expectations on revenues and gross margin for the third quarter of twenty twenty one while our adjusted EBITDA loss was higher than analysts’ expected, and that was primarily due to higher development expenses due to more products in the pipeline and to a lesser extent some higher marketing costs. 19:25 Net loss income was a loss of six point seven million dollars and income two point six…

22:13 [Operator Instructions] Our first question comes from Michael Graham from Canaccord. Please state your question.

22:37 Thank you and good evening guys, and congrats on the big launch. It's an exciting time. Really happy to see the game get out there and it’s also great to see that you had such good momentum on pre-orders up eighteen percent versus your last game was pretty encouraging. I have a couple of questions about the game. One is there was buzz as you mentioned and I'm just wondering, if you saw much returns activity and just maybe you could comment in general about for your overall level of exposure to returns at all? 23:12 And then I wanted to ask Stephen maybe make a comment on now that you have this first game out on the new engine, like how much heavy lifting sort of behind you at this point when it comes to releasing future games. And I'm just wondering if your experience with Ignition has led to any evaluation of sort of the future launch cadence and how you're thinking about that? And then I just have one more after that.

23:40 Thank you Mike for that. I really appreciate it. It's Dmitry. I'll address the first question and then pass it on to Stephen. So as far as the refunds and those are concerned, platforms like Steam, Playstation, Xbox, they do offer different methods of refunds and estimated revenue results for the pre-orders and launch date that we discussed on the call actually includes those refunds accounted for such periods. So without a doubt there some impact on our revenue how much specifically for the quarter will be hard to estimate at this moment, but from what we're seeing so far, the buildup demand for the game is currently still putting us ahead of our last NASCAR Heat 5 release and those are the numbers that we were able to bring to you guys as soon as those estimates became available.

24:39 Thanks, Dmitry. Hi, Michael. Good question. When we’re talking about how much of the heavy lifting is behind us, and it’s very good question. So I've always maintained and I still do that ultimately there's a significant difference in my mind between the opening self-created product in NASCAR Ignition and our subsequent releases, future releases will be built on top of not only the learnings, but the technology provided in Ignition. 25:12 And let's not forget Ignition is now a live product and as live as last week is in the hands of gamers. A live product is already been updated with -- already had over three hundred fixes and improvements pushed into the live product, which is just over a week ago. And breaking ground with that kind of product, which was built from the ground up has gone through multiple iterations of testing, both internally and with first party, the likes of Microsoft and Sony. That’s now in the hands of thousands and thousands of gamers. I think there's a night and day difference between really breaking the seal with your first product which is a huge challenge and we're very proud of reaching this milestone. And where we go from here, because the clock doesn't start over again I think as we set to zero is a continuation. So we're actually standing on the shoulders of Ignition to the future projects. And the way that I'd probably describe it is you can kind of expect a hockey stick trajectory towards product improvement. So subsequent to NASCAR products will be better off over the next two to three years or future product releases are better. 26:22 And then I would suggest that ultimately, we can expect probably significant improvements in out of the gate product stability and quality because of what we attained thus far is my brief summary?

26:36 Yeah. That's great. Very helpful. My next quick one before I go back in the queue guys is just on the guidance for the full year, which implies around thirteen point six dollars or seven million dollars for Q4. Could you just make a high level comment on within that expectation, how much are you expecting to get out of esports and mobile sort of like any high level comments about the weighting between your console games and those other revenue streams?

27:16 Sure, Michael. So, you're right to obviously assess the thirteen point six. We are expecting and projecting internally that about two-thirds of that will be related to the NASCAR 21: Ignition. The rest coming from the NASCAR Heat Ultimate Edition+ for Switch, which we’re super excited about. And our esports and mobile will contribute to this overall number, but the main driver of this quarter revenue is obviously the release of the game.

27:51 Okay. Thanks a lot and congrats again.

27:54 Thank you.

27:58 Our next question comes from Franco Granda from D.A. Davidson. Please state your question.

28:04 Hi everyone. I echo the congratulations on the launch. It's good to see this it’s going finally out there and making waves with the new cycle. And again thanks for letting me ask a couple of questions here. So, I guess for the next several patches for NASCAR 21, how do you feel or how do you think about the balance between, ironing some of the current issues in the game versus potentially adding some features that some of the fan base might think that are missing.

28:38 Hi, Franco. It's Stephen. Good question. I think the landscape for games is as you probably well know is the complex one we release these software products they are inherently very complicated and they cover many areas of kind of gameplay and entertainment product stability, work for particular machines in particular fashion. And it's super, super important for us in order to deliver a stable experience and enables everybody to play wherever they're playing here on the Playstation on Xbox and the PC. Whatever their home Internet setup up is, it gets very complicated once you leave the four walls of not just developers and publishers, but first parties and the most important thing for us is to really ensure that the entertainment experience is as required by gamers today, there's a certain standard where they are expecting to invest in something in play routinely versus how many features that we can add in the future, people and in our minds don't so much care about the features that we'll be added in the future. They want stability and enjoyment in the product that they have today. 29:55 As soon as they attainment, they start clamoring for, right this game is great, and I wish you could add X, Y, Z. And that will be what we consider to be the second phase of NASCAR Ignition’s, lifecycle. Right now it's ensuring everything is as great as it can be, there's still some more work to be done there. And then we shift focus to what features can we add in order to improve the product further and it’s a long term proposition and probably something that Dmitry you could touch to on as well.

30:30 Yeah. Thanks, Stephen. And the only thing I'd like to add which echoes what Stephen was saying is that we have a live product out there. We have a very vocal and passionate community, which we’re super proud of. That's actually helping a shape of what type of things go into improvement in evolution of Ignition of twenty one Ignition and what type of things make it into what the future NASCAR 22 title would be. As we know, NASCAR next year is upgrading to next-gen cars, which is a very exciting content piece. So at the very minimum, there's going to be a big differentiation in terms of the type of content vehicles, et cetera that are in the next version. But having the product in hands of many, many fans now it is helping to influence and shape and help us make better decision is what communities really desire between the two titles and NASCAR 22 is already in development as you would expect.

31:40 No. I appreciate it. Thank you so much for the color here. I guess that you have a game between now and in the end of the year in the Switch title. But I wanted to really touch a little bit on the mobile opportunity and may have missed it, but I'm not sure if you mentioned any updates on the soft launch of the Match three games for mobile? And then if you could update me on where your kind of initiative around NASCAR mobile lies today?

32:11 Hi, Franco, Stephen is here again. So I probably take that. I think touching on the mobile piece. Mobile I think we always maintain is the key part of the kind of future product portfolio, multiple games. It makes sense and my mind of unsurprisingly given the opportunity we have to leverage the assets that we put into the console and PC products. The technology is trickle and the reuse of assets is an advantage for us. Actually, the team that we have in mobile demonstrates some great talent in putting together the NASCAR Switch product that we talked about we are super excited about bringing that to Nintendo Switch platform. But mobile is the core priority. 32:59 And we've already seen that they've been updating the existing Heat mobile title and NASCAR Heat mobile game with another update actually expected this month. So we're keeping that live and keep pushing that. We're also looking to kind of soft launch NASCAR Match three title early next year, in Q1 twenty two, we continue to review plans around the British Touring Car and INDYCAR franchises that we have now board, whether or not that suitable for mobile. 33:30 We've got some ambitious plans around ultimate team concepts probably related to the NASCAR franchise as we think there's a great opportunity there. We can do very well. But the mobile market is quite mature these days. These aren't far and forget products. So we can't over commit to these. We need to get the right ingredients and set up in place so that once we're operating successfully, probably on the NASCAR side, we can more readily kind of a scaling the output to match the opportunity from with these other franchises. So we'll get it right the NASCAR and then I think we can scale further.

34:09 Right. No thank you for that. And I certainly imagine that as you start adding IP through portfolio it'd be if you to put out titles around this IP and it would just not be a NASCAR experience. And then one very last one related to this, are you planning on sticking with unity for the next mobile titles? Are you making this such doing real for the whatever is not in the pipeline yet mobile?

34:38 So the Heat Mobile title remains on Unity. And there's no need for us to kind of reinvent the wheel there. You don't want to do that during the lifetime of a product, but what we do plan to do where appropriate is try to align the technologies. And we want to actually get away from having to worry about the technology. Like our mission is really to build the entertainment experiences and reach as many people as possible. The end user never really cares about the technology we do and then I do as a developer, but really, I'd like to simplify the whole thing. 35:12 And that's one of the things that we've been working incredibly hard on for the last couple of years, so that we can align the tech across the different products and opportunities that we have. So that we have one very experienced team has now shipped a product in NASCAR Ignition, that’s working together with our partners to deliver new targets to the NASCAR to the Nintendo Switch platform. And if we can start to align these products over time with the same technology base probably moving away from Unity where it makes sense to use Unreal, which were spear heading NASCAR Ignition and other titles with that would make allies that much easier and would enable us to be more efficient and effective in the future. But we do it where it makes sense. And right now, we are split somewhat on existing legacy mobile titles using Unity, but the future for us is firmly centered around Unreal.

36:11 All right. I appreciate it. Extremely helpful and congrats again.

36:17 Our next question comes from Mike Hickey from Benchmark Company. Please state your question.

36:23 Hey, Dmitry, Jon and Stephen congrats on your launch. Just a couple of questions. The fear is on the pads it sounds like you've had a view and have been successful here and complaining that you have some of the products any noted sort of an inflection and player response. Obviously at launch I think everyone was pretty critical buzz, and now that you clean that lot of see it shift in your players Stephen again.

36:59 Hi, Mike. Thanks for the question. Absolutely it's a short answer. We are monitoring the community sentiments very, very closely as you would expect us to -- we have as expected, a very robust support ticket to make sure that we're getting back to people and we did see numbers of those support tickets coming in drop significantly after the patch, so called one point two point one out that addressed a lot of the stability things and what that Stephen was mentioning in combined over three hundred different somewhere which even could be considered as feature sets. So because of that community sentiment change to majority positive, and actually we have started to see appreciation and start to see some folks in the community defending those that might have a ill will about the pre-released version of the game to start to defend us and say no, no check out the latest batch it address the concerns you might have. So it's great to see the passion of the community starting to get behind us and starting to recognize the fact that we really truly do care of not just delivering them the product that they expect, but I'll think that a little. So community sentiment has starting to flip both.

38:29 Dmitry, are you looking to have your extended if you work with influencers, or are you looking to maybe adjust the marketing strategy, obviously we will still got the holiday window open here. So it seems factors [Technical Difficulty] performing better.

39:00 Absolutely, our main part of that is to make sure that influencer network that we are tapping into are aware of the patch release and there are installing and able to do updated content and so on. And we've been successful at that. There's definitely some that been vocal in the beginning when they were in a pre-release phase. We're able to even unveil the patch live on YouTube and Facebook and others and it was great to see that reaction. So, yes, absolutely we continue to inform the influencers of everything that's going on and not just them just to the community in general. We want the fans to know that we're putting these things out more importantly, we're hearing them and we're addressing some of their desires so not just stability things, but feature sets and some things that hardcore NASCAR fans really want. We wanted them to know that one way of working on it or two has just been released. So for us, it's influencers and community all together.

40:13 Nice. I think you touched on it Dmitry, but your QA [Technical Difficulty] adjustments. How much is this sort of internal versus external resource, so the QA [Technical Difficulty] against that launch. And then broadly speaking outside of the bugs, is there other areas we concern of quality and we can touch on that as well. And I guess how do you sort of think about bridging the current experience recurring, where it's going to be [Technical Difficulty] for me? Thank you, guys.

41:11 Hi. It’s Stephen. I can probably take that one. Multiple question, so my answer to that is it's I mean these days on such complex products, you do work with internal and external development QA partners and I made reference earlier to wanting to expand that internal capability because as we increase number of franchises and active products that we're working on, we'll need to increase those skill sets and headcount slightly. But we do have a worldwide team that works across the QA process testing the titles. And that is the process that doesn't just happen at the end of titles that happens for the duration, and they do give a great stir, but the QA team are part of the overall team, part of the machine that launches a product. 42:03 And I think most gamers today are very technically savvy. We live in a very connected world and gamers certainly expect any products. Even software in motor vehicles, these days kind of being patched and update and improves over time. And it's kind of part and parcel of the live environment that we live in because everything is interconnected. So it’s easy for us to appreciate the feedback that we do get with NASCAR Ignition because games want the very best out the gate. But I think there also savvy enough to understand that there are issues that people can even read about today, even those that they're not encountering themselves, but years ago would have gone largely unnoticed. So people feed off what the community is saying they feel like they want to be current and I get that. 42:56 Our QA teams in my mind have done a fantastic job trying to steer this product from creation through to delivery. And they have wonderful…

45:59 Thank you, Stephen. That's great. Good luck, guys.

46:03 Thank you.

46:06 At this time, we have no further questions. Would you like to give any closing remarks?

46:21 Sure. Always we'll take the opportunity, just want to thank again. First of all, the community right, which ultimately our fans and who we're going after and we're building and cultivating this. Secondly, obviously, our team who's creating and showcasing this passion of creating amazing and great racing games. I really want to make a dent and racing genre altogether and third in a no particular order, obviously, the folks that are on this call and others that are backing us and believing in this vision, we are here for the long run. We’re putting something together that is really special. We're proud of that foundation. We have released the title of our own build from scratch put together by the components that were not put together before and we released it on the consoles for the masses. That is a foundation that we were looking for and something that gives us a great opportunity to build sort of skyscrapers on top of that is not something we have before. I'm really excited and humbled by team being able to achieve this and just really thankful for the community, our internal team and the investment group of seeing this through and continuing watching our progress. So thank you.

47:58 This concludes today's conference call. Thank you for attending.