MSGM

Thank you for standing by, and welcome to Motorsport Games Inc.'s Q1 2026 Earnings Call. As a reminder, today's conference is being recorded. I would like to turn the conference over to Ben Rossiter-Turner from Motorsport Games. Please go ahead.

Thank you, and welcome to Motorsport Games' Q1 2026 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 Q1 2026 earnings press release filed today after markets closed. 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 U.S. 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. 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 March 31, 2026, for 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 Q1 2026 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. Now I'd like to turn over the call to Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen?

Thank you, Ben. Good afternoon, everyone, and thank you for joining the Motorsport Games Q1 2026 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 content 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 RaceControl, 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. On Le Mans Ultimate, player engagement continues to accelerate. On March 31st, we once again recorded a new all-time player peak, more than 8,800 concurrent players in Steam. This new peak was determined around the release of version 1.3, introducing Circuit de Barcelona-Catalunya, the Duqueine LMP3 race car, and Logitech TRUEFORCE support. This growth in player numbers is not a one-off.

We have consistently reported player growth since launch. In the Q1 of 2025, we had a peak of 4,000 players and an average of just over 1,300. 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 Q2, we have an update planned 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 that has defined our work over the past two 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 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 $0.2 million, and the first three months of 2026 have been among the strongest periods of growth we have seen since launch.

What excites us the most is not where RaceControl is today, it is how quickly it can add meaningfully to our growth profile as we continue to layer in features and functionality. The roadmap 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 Genesis, the luxury automotive brand and WEC newcomer, demonstrates what that looks like in practice, and we are delighted that Logitech, one of the world's leading gaming hardware manufacturers, has chosen RaceControl as the 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 a useful flexibility going forwards. Progress on bringing 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 one that is being designed to take another giant stride in the company's output with the same accessible discipline that has defined our reemergence as a premier racing 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 remains 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 mark a significant step forward for the company. We repurchased 904,395 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 10-time 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, the retirement of all Class B super voting shares and the return of equal voting rights to all shareholders while deploying less cash to do so. These actions also point forward. Our strength and 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, one 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 a 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'll hand over to Stanley Beckley, our Chief Financial Officer.

Thank you, Stephen, and good evening, everyone. As with previous earnings calls, I won't be offering any forward-looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the Q1 of 2026. Revenues for the quarter were $4.0 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 $0.7 million increase in RaceControl subscriptions compared to the same prior year period. Monthly recurring revenues for RaceControl subscriptions now exceed $0.2 million.

Management plans to grow this important revenue stream as we continue to diversify our product mix and work towards our goal of becoming a multi-format and multi-title video game developer and publisher. Net income for the Q1 of 2026 and 2025 was approximately $1.0 million respectively. Net income attributable to Class A common stock was $0.06 per share for the Q1 of 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 Q1 of 2026, compared to $0.6 million for the same period in the prior year.

The improvement in adjusted EBITDA of $0.9 million was primarily due to the same factors driving the previously discussed change in net income for the Q1 of 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 March 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 three months ended March 31, 2026, we generated an average positive cash flow from operations of approximately $0.5 million per month. That was primarily due to increased profitability and the capitalization for internally developed software. We currently have no purchase commitment liabilities. Furthermore, our working capital as of March 31, 2026, was $5.2 million versus $4.2 million as of December 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 on console over the next several months. We also secured a $3 million revolving line of credit from Citibank in February 2026. As of March 31st, 2026, there was no amount owed to Citibank under the revolving line of credit. As of April 30th, 2026, there was $1.2 million owed to Citibank under this revolving line of credit. Thank you all for your time. Now I will turn the call back to Stephen for closing remarks.

In closing, the story of Q1 is a simple one. 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. For the long-term health of the business, it means continued investment in our team, our technology, and the opportunities we are now in a position to pursue. We are no longer running multiple games from a position of necessity. We are running it from a position of strength, with options, with conviction, and 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'll now hand it back to the operator.

Our first question today will come from Anja Soderstrom with Sidoti & Company.

Hi, this is Alex on for Anja. Thanks for taking questions. My first question is on the Le Mans Ultimate version 1.3 that you mentioned. It drew a record 8,800 player peak in March, which is an impressive milestone. I'm curious, how has engagement trended since the launch? Could you talk a little bit about what the roadmap may look like for the remainder of 2026?

Hi, Alex, it's Stephen. Thank you for your question. To be perfectly honest, it's trending upward. We talked specifically not just about the peaks but actually, the average concurrent users, the stickiness of the product. What we've seen over the history of the product, and certainly since one point three remains true, is that with more content and more exposure, we're building a record number of players that are sticking around, buying the content and participating. We've seen that groundswell starting to follow the product. We haven't proactively really spent marketing dollars in trying to accelerate that, it's 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've 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 is quite singular. We found that we reach new players. We have an idea and a concept for new track content that will reach additional markets. Because typically, we found we're incredibly strong in Europe, which is no surprise given Le Mans history and its location, and we've dined out very well on that. In order to take this game internationally, we're starting to look at additional content that would attract people that aren't naturally bought into the Le Mans concept or European content. We have got more things to reveal in the future, but I'm quite excited about that. It will keep climbing.

Great context. Thank you. 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 as a percentage of total business going and over the next 12 months or so?

Yes. Hi, Alex. I can take that. We currently don't provide forward-looking guidance, but I can speak about how well RaceControl has done. In Q1 2026, for example, it was a bigger share of our revenues. Q1 2026 saw us generating RaceControl subscription revenues of $0.8 million, which was 19% of the total revenues of $4 million for the quarter, compared to RaceControl subscriptions only accounting for 6% of our revenues in Q1 2025. I can't 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. We are getting to the point where revenue stream is more diversified, with RaceControl subscriptions encompassing a greater share of our, of our total revenues.

Got it. Thanks for sharing. Last one from us, can you talk a little bit about the Formula One opportunity? What you're doing there today and how you see it evolving and what pipeline and other related revenue opportunities look like for that?

Hi, Alex. I guess this one was probably for me. The Formula One opportunity is always interesting. Formula One's a huge motorsport the world over, international markets. It's a no-brainer for us to be interested in that space. That's one of the reasons why we were more than happy to provide our technology to power Formula One Arcade. Every arcade venue and every activity that they provide around the world in all their facilities, including the new pop-up facilities, is powered by technology owned by and operated by Motorsport Games. That technology actually powers Le Mans Ultimate, a later version of that technology anyhow.

One of the reasons we did that was to overcome this concept that our technology as a boutique sim racing 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 sim racing software is the preserve of a nerdy kid in a bedroom with a simulator rig. This is the kind of stuff I have at home. 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's a family entertainment experience powered by sim racing software.

That foot in the door, with F1 Arcade, the group behind that, and Liberty, who are part of that operation, is just part of our strategy to build our relationship with Formula One, 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 One game, but instead chose Motorsport Games software produced by our developer Studio 397. That is a crucial kind of positive step in building relationship, surfacing the technology, and really enabling our engineers to provide Formula One through F1 Arcade cutting-edge software.

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 the future. F1 Arcade is set to grow, but we're exploring possibilities about what we could support in terms of single-seater racing in the future, one element of which could be Formula One. It would be speculation right now. There isn't anything definitive, but we'd certainly be interested in expanding our offering.

Thank you for all the background. That is all from us.

Thank you. At this time, there are no further questions in queue. This will bring us to the end of the Motorsport Games Q1 2026 earnings call. We appreciate your time and participation. You may now disconnect.

Thank you for standing by, and welcome to Motorsport Games Inc.'s Fourth Quarter and Full-Year 2025 Earnings Call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Ben Rossiter-Turner from Motorsport Games. Please go ahead.

Thank you and welcome to Motorsport Games Fourth quarterQuarter and Full-Year 2025 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 fourth quarter and full-year 2025 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games website at motorsportgames.com. During the course of this call, management will make certain forward-looking statements, which are any statements that are not historical facts within the meaning of U.S. 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 annual report on Form 10-K for the year ended December 31, 2025, for a detailed discussion of 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 fourth quarter and full-year 2025 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 will also be available on the investor relations section of Motorsport Games website at motorsportgames.com. Now I'd like to turn over the call to Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen.

Thank you, Ben. Good afternoon, everyone. Thanks for joining the Motorsport Games Fourth Quarter and Full-Year 2025 Earnings Call. I'm delighted to report that we've achieved record profitability with 30% year-over-year revenue growth, generated consistent positive quarterly cash flow, and have substantially improved our cash position, which will enable us to accelerate our progress. Despite the challenges experienced across the wider gaming market, we have delivered a significant turnaround and stand before you today in a tremendously healthy state. The last quarter of 2025 saw us generate 95% higher revenues than the same period in the prior year.

At the end of 2025, we had cash and cash equivalents of $5 million, which increased to $6 million as of the end of February 2026. The company generated an average monthly positive cash flow from operations, driven primarily by an increase in profitability. We also secured a revolving line of credit in February 2026. This line of credit is primarily in place on very good terms to ensure we are able to deliver on our multi-platform plans for Le Mans Ultimate without tempering our plan to initiate the build of a new gaming title.

12 months ago, I spoke on this call acknowledging the very real challenges our business faced, limited cash availability, and a company in transition following the strategic sale of our NASCAR license. Today, we are in a fundamentally different position. Le Mans Ultimate has captured the attention of the simulation racing community and validated the strategic decision we made to focus the company around a smaller, more disciplined development team and clear long-term platform strategy. For Motorsport Games, 2025 was the year we proved this model works. During the year, we delivered five major updates to Le Mans Ultimate in February, June, July, September, and December.

This cadence of meaningful improvements is unusual in our racing segment and reflects both the commitment of our development team and the advantages of operating a live service product at pace. In July, the game successfully exited early access. Since then, we have continued to invest aggressively in improving the player experience, expanding content, and strengthening the underlying technology that powers our simulation experience. In September, we introduced the first content from the European Le Mans Series, responding directly to player demand for additional circuits and categories. In December, we released version 1.2, which represented one of the most comprehensive updates to the platform to date.

While new content such as Circuit Paul Ricard and the Ginetta G61 LMP3 race car were important additions, the larger story was the investment we continue to make in our proprietary simulation technology. These technical improvements are the foundation of our approach to building long-term trust and retention in the core of our immediate market. We also made substantial progress in strengthening the competitive integrity of online racing. Version 1.2 introduced Easy Anti-Cheat integration, the launch of our driver badge reputation system, and the first phase of LiveSteward, an automated incident detection system designed to identify unsafe or unsporting driving behavior.

These systems are critical to building a healthy and sustainable online competitive environment, and further demonstrates Motorsport Games intention to improve the experience for not only our core market today, but those players we believe we will reach over time. Alongside this, we introduced team online championships, enabling organized multi-race seasons and Engineer Mode, which allows teammates to manage pit strategy remotely during endurance races. These types of features are intended to deepen engagement and reinforce Le Mans Ultimate's position as a premier endurance racing simulation. It's also important to recognize that over the past year, competitor racing titles have launched into the market.

Some were highly anticipated. We welcome that competition. It pushes the genre forward, and we've seen renewed energy within this market segment. What is particularly encouraging is that despite those launches, Le Mans Ultimate has continued to grow its player base and engagement at an accelerated pace. In other words, we have competed in a very active market environment, and the response from players has demonstrated that our focus on authenticity, technology and community is winning meaningful support. Players are recognizing our passion and celebrate the utility of our chosen content. Average concurrent players in Steam increased from approximately 786 in January 2025 to nearly 3,000 by December that same year, almost a four-fold increase.

I'm pleased to report that momentum has continued into 2026. In January, we recorded an all-time peak of over 8,700 concurrent players with an average player count exceeding 4,200. For a PC-only title, which right now is where Le Mans Ultimate sits, and one that operates within a specialized simulation category, these numbers are strong and compare favorably with many long-established competitors. Importantly, this growth has been entirely organic. We have not invested significantly in marketing during this period. In areas where we do not have dedicated talent and experience, we limit spend.

There will come a time where we push our message to a wider audience, and as such, we're actively recruiting for exceptional marketing talent to join our team and raise awareness of our strong product offering, not least in the run-up to Le Mans Ultimate arriving on gaming consoles. In the meantime, product quality, word-of-mouth advocacy, and a highly engaged community are helping us reach new heights. This brings me to RaceControl, which is rapidly becoming a central pillar of our financial model. RaceControl is our proprietary matchmaking and competitive racing platform that powers the online experience for those products we choose to integrate.

Both rFactor 2 and Le Mans Ultimate benefit from this platform. Beyond enabling online play, it provides an optional subscription layer that allows us to deliver additional services and features to our most dedicated players. This platform has allowed us to transition from a traditional video game business model, where revenue is largely front-loaded around launch, toward a hybrid model combining game sales, DLC content, and recurring subscription revenues. By the end of 2025, RaceControl had over 400,000 registered accounts, more than 26,000 active paying subscribers, and was generating approximately $200,000 in monthly recurring revenue.

Importantly, the first two months of 2026 have been among the strongest monthly recurring revenue growth periods we have seen to date. Many of the features we have introduced, such as team championships, driver badges, LiveSteward, and Engineer Mode, are designed to specifically increase the value of this platform and strengthen subscriber retention. This combination of recurring revenue, active player engagement, and ongoing content expansion creates a much more stable and scalable financial model for the company. Beyond direct player revenue, RaceControl is also becoming a platform that global brands and rights holders want to utilize.

Through RaceControl, we can provide a turnkey competitive infrastructure for online racing events, including matchmaking, scheduling, anti-cheat, broadcasting tools, and official classification. This creates opportunities for automotive manufacturers, motorsport series, and consumer brands to activate directly with highly engaged gaming audiences through our platform. The conversations we are having in this area are encouraging, and we'll share more on these developments in the future. Speaking of the future, we continue to make progress on bringing Le Mans Ultimate to PlayStation and Xbox gaming consoles. Our external development partners are working alongside our internal teams to deliver the first console versions while simultaneously improving the underlying game engine for our existing and very supportive PC player base.

Console represents a significant expansion of the addressable market for Le Mans Ultimate, and we are taking a careful quality first approach as we execute on this opportunity. Finally, with the financial stability we have now achieved, we are beginning to explore the next phase of growth for Motorsport Games. Le Mans Ultimate has demonstrated that our technology, our development approach, and our community engagement strategy can deliver a profitable and sustainable business. We are now evaluating opportunity to extend that model to additional titles in the future.

While it is still early, our goal is clear: to build a portfolio of racing experiences supported by the same technology platform, live service infrastructure, and competitive ecosystem that powers Le Mans Ultimate today. To support that next phase of growth, we have begun strengthening the team with targeted hires across engineering, platform development, and strategic leadership. These additions will help accelerate our ability to expand on the RaceControl platform and support the development of future products. I'm also pleased to welcome Peter Hansen-Chambers to work alongside our management team in a consultancy role as we shape the company's next steps.

Peter was previously co-CEO and CFO of Hutch Games and brings deep experience in building and scaling successful game businesses, having operated with top-tier IP such as Formula 1 and other recognizable licenses in the motorsport space for many years. He has already made a positive contribution towards our forward plans, and we're excited about the perspective and expertise he brings to Motorsport Games and hope to speak more on this in the future. With the foundation now firmly in place and operating as we have planned, we are confident in our ability to continue building momentum through 2026 and beyond.

The turnaround phase is behind us. Now our focus is on scaling the platform we have built. I will now turn the call over to Stanley Beckley, our Chief Financial Officer, to discuss the financial results for the fourth quarter full-year 2025.

Thank you, Stephen, and good evening, everyone. As with previous earnings calls, I won't be offering any forward-looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the fourth quarter and full-year 2025. Revenues for the quarter were $3.8 million, up $1.8 million or 95% when compared to the same period in the prior year. Higher digital game sales from the release of Le Mans Ultimate, our core gaming title, along with higher downloadable content sales, were primary drivers for the increase. Net income for the quarter of 2025 was $800,000, compared to net loss of $2.9 million for the same period in the prior year, an increase of $3.7 million.

Higher revenues, lower cost of goods sold, and operating expenses were key contributors to the increase in net income for the full-year 2025 when compared to the prior year period. Consequently, net income attributable to Class A common stock was $0.15 for the fourth quarter of 2025, compared to a loss per share of $0.89 for the same period in the prior year. We are reporting an adjusted EBITDA of $1.9 million for the fourth quarter of 2025, compared to an adjusted EBITDA loss of $2.5 million for the same period in the prior year.

The reasons for the increase in adjusted EBITDA are the same as those discussed in respect of the change in net income for the period and comparative quarter. For full-year 2025, revenues were $11.3 million, up $2.6 million or 30% when compared to the prior year period, primarily due to a $5.8 million increase in 2025 from sales of our Le Mans Ultimate racing title released in February 2024, particularly DLC sales, which were higher compared to 2024 and $1.2 million from RaceControl, offset by a $4.4 million decrease in revenues in 2025 related to NASCAR, a gaming title the company decided to sell so that we might concentrate our efforts elsewhere.

As a result, we were not selling the NASCAR titles from the start of 2025. Net income was $6.8 million for 2025, compared to net loss of $3.1 million for 2024. Higher revenues, lower cost of goods sold, and operating expenses were key contributors to the increase in net income for the full-year 2025 when compared to the prior year period. Adjusted EBITDA was $7.3 million for the full-year 2025, compared to an adjusted EBITDA loss of $3.9 million for the same period in the prior year, an improvement of $11.2 million.

The increase in adjusted EBITDA was primarily due to the same factors driving the previously discussed change in net income for the full-year 2025 when compared to the prior year period, as well as the reduction in the non-recurring gains being excluded from adjusted EBITDA. Net income attributable to Class A common stock was $1.43 in 2025, compared to a net loss of $0.94 in the prior year. As it relates to liquidity, as of December 31st, 2025, we had cash and cash equivalents of $5 million, which increased to $6 million as of February 28th, 2026.

For the year ended December 31st, 2025, we generated an average positive cash flow from operations of approximately $300,000 per month. That was primarily due to increased profitability, $800,000 from the Wesco Insurance Company settlement in June 2025, and $500,000 from a settlement agreement with HC2 Holdings 2 Inc. in March 2025. We currently have no outstanding debt or purchase commitment liabilities. Furthermore, our working capital as of December 31st, 2025, was $4.2 million versus negative working capital of $2.2 million as of December 31st, 2024, underscoring a much improved balance sheet and liquidity position.

We also secured a $3 million revolving line of credit from Citibank in February 2026. There is currently no balance due to Citibank under the revolving line of credit. Thank you all for your time. Now I will turn the call back to Stephen for closing remarks.

Thank you again, everyone, for joining this call today. If I can summarize all the progress we've delivered over the last 12 months, it would be through the lens of our turnaround. We've had multiple profitable quarters, delivering a strong cash position. We have a scalable model in our RaceControl platform, which is building an audience and paying subscribers at a steady rate. We have architected strong organic demand without significant marketing spend. We are hard at work on bringing our most recent game to the console market and are close to incubating the next product from the company that brought you the evergreen Le Mans Ultimate.

We have moved beyond stabilizing the business. We have demonstrated that our model works, and now our focus is on scaling it. Thank you for joining us today. I will now turn it back to the operator.

Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll take our first question from Anja Soderstrom with Sidoti & Company. Your line is open.

Hi, and thank you for taking my questions, and congratulations on the nice performance. I'm just curious, with the development costs declining year over year, what's the main driver for that?

Yes. Hi, Anja. Thanks for the question. So as we disclosed in our Form 10-K, we capitalized about $1.1 million of development costs. These were costs related to significant upgrades and enhancements to the game. We've released a lot of content to LMU since the game's launch in February of 2024. To date, we've released about seven individual downloadable content packs, including the European Le Mans Series Pack 1 that was released in September, and Pack 2 that was released in December. Pack 3 is scheduled for release later this month.

That's the main reason for the decrease in development cost. We also have in the past couple of years, we've gone through some restructuring. Our payroll costs are also down for developers and contractors.

Is AI any sort of driver to the development costs coming down? Or how are you implementing AI?

Hi, Anja. Very good question. AI is everywhere at the moment. It certainly features in multiple games business. I think a lot of companies are kind of driving forward, trying to figure things out. We're a high-tech software engineering business by nature, and AI has always featured in our development pipelines and in our products. The way that we utilize it at the moment is in a lot of rapid iteration. Like, one of the benefits of Le Mans Ultimate at the moment as a live service is the rate at which we're putting out these updates.

It's a live service that is very much in front of the community, who are welcoming the regular updates, the regular pack updates, the new content coming out, and AI is already forming a part of that development experience. We're obviously not gonna give away our secrets at the moment, but, we're leveraging it, I think, you know, an ever-growing extent. I think it does bring down development costs, but actually, the biggest advantage for us is that we can more readily put out updates that resonate with our players. It's beneficial to us because it enables us to really drive home the creative advantage that we have.

Okay, thank you. Also you mentioned the Le Mans Ultimate for PlayStation and Xbox. It's progressing. Are you still expecting to launch that in late 2026 or early 2027? How meaningful do you think that's gonna be to revenue, and what sort of impact is it gonna have on margins?

All right. I'll take that again, Anja. I think the product is very much on track. We are going to drill down as we get closer to release with an exact release date. I think the key thing that I would like to project at the moment is it's less of a technical challenge for us now because we've been in this business for some time. It's actually about picking the right window for release. What's the most beneficial window for release? Do we pair it with a major motorsport event? What are competitor titles doing? It's very much on track for either early to mid-2027. I think it's gonna have a big impact.

I would say that because I've been in this industry for some time, I've worked on many a console product, and the addressable market is huge. There's actually a real lack of high-end racing simulations available on console, and that's been a traditional problem for many, many years. There are lots of different racing games out there. They're more arcade titles. In order for the average consumer to engage in the kind of simulation experience, the depth of simulation racing experience that we provide, people are having to spend upwards of $2,000, $3,000, $4,000 on a high-end PC, a wheel and the pedals.

That's a major investment that not a lot of people are willing to do for their first-time experience in racing simulation. As soon as you go to console, where you can pick up a console for a few hundred dollars. If you can engage through that medium, which is more readily accessible to most people, and you can experience our titles, it stands to reason that we can hit a much larger audience because the price of entry is dramatically reduced. It may mean that people come into our ecosystem. It may mean that they come into contact with RaceControl in great numbers, and they may wish to step up to the PC product.

But we're going to put out a high-quality product on console, on PlayStation and Xbox, that will be available worldwide, and we're very excited about that. We're not putting out any guidance in terms of, you know, the addressable audience that we expect to reach, but.

Okay. Thank you. Can you hear me? Sounds like it dropped off.

Yes. It looks like Stephen got cut off there, but I think he was just finishing up his thoughts.

Okay. I'm just also curious about the customer acquisition cost and also maybe how you anticipate AI to maybe be sort of a positive for you there, how you can work with AI to become more efficient there.

Sure. As relates to customer acquisition costs, we have invested very little in marketing over the past two years, and our growth has been primarily organic during this time. However, as we seek to get our message out to a wider audience, we're actively looking for suitable marketing talent to join our team. With very little to no marketing spend, there's not much in terms of customer acquisition costs there. The second question about the use of AI, I believe Stephen may have addressed that earlier, but you know, AI, the use of AI is used to some extent in by the development team and with regards to you know, answering customer queries.

Stephen is back, and I think he can get into more details on that. Stephen, are you there?

Yes, I managed to reconnect. Are you talking about AI?

Yes.

Yeah, I mean, leveraging it across the business. I mean, not to replace the creative direction that we have and the expertise, but actually to just bring elements to market faster is the primary use right now. Shortcutting things enables us to really punch above our weight, and that's the important utilization of AI for us. We are a relatively small team by choice right now. We're getting the wheels turning. AI enables us to deliver at far more rapid rate and bring more content and choices to players, which is clearly working for us.

Okay, thank you. You've been driving quite nice revenue growth driven by the Le Mans release. How should we think about continued growth there and profitability, the sustained profitability? You improved the balance sheet and sort of your priorities for cash and capital allocation. Are you expected to remain cash flow positive?

I'll address the latter half of that question first. Our cash flow and our liquidity position is, you know, much stronger, right, over the past year than it has been since our inception. As we disclosed in our Form 10-K that was released, filed after market close today, we generated an average monthly positive cash flow of $300,000 per month in 2025 or $4.1 million cash generated from operations for the entire year compared to an average monthly cash burn of $200,000 or $2.8 million used in 2024. We had a robust cash balance as well of $6 million at the end of February. We recently secured a $3 million revolving line of credit facility from Citibank.

This line of credit facility will be more than sufficient for us to fully port the development of LMU to console. As relates to the revenue mix, you know, our LMU franchise has more than made up for the loss of revenues from the sale of our NASCAR license. In 2025, for example, revenues from our Le Mans franchise consisted of about 78% of our annual revenues, and you know versus 34% the previous year. The mix of our LMU revenues in addition to growing RaceControl subscriptions, which made up 11% of our total revenues in 2025 versus less than 1% in 2024.

Our RaceControl subscription, that platform was launched in December of 2024, has led to a bit more balancing and diversification of our revenue stream, and we expect that to continue to grow into the future.

Okay, thank you. That was all for me.

Thank you.

Thank you. This does conclude the Q&A portion of today's call and also the meeting today. Thank you. We appreciate your time and participation. You may now disconnect.