Motorsport Games Reports 41.9% Revenue Decline, Achieves Net Income Turnaround in Q1 2025

Motorsport Games Inc. reported a significant decline in financial performance for the first quarter of 2025, with revenues totaling $1.76 million, down 41.9% from $3.03 million in the same period of 2024. The decrease was primarily attributed to the loss of NASCAR-related revenues, which accounted for a substantial portion of the company's income prior to the sale of its NASCAR license to iRacing.com in October 2023. The company also experienced a decrease in sales from its rFactor 2 title, although this was partially offset by a $0.4 million increase in revenue from the newly released Le Mans Ultimate game.

Despite the drop in revenue, Motorsport Games achieved a net income of $1.02 million for the quarter, a notable improvement compared to a net loss of $1.68 million in the prior year. This turnaround was aided by other operating income of $0.5 million from a settlement agreement related to legal fees. The company’s gross profit margin remained relatively high at 73.5%, although it decreased from 78.0% in the previous year, reflecting the impact of lower revenues.

Operationally, Motorsport Games has made significant changes to its cost structure, reducing total operating expenses by 47.3% to $1.89 million from $3.58 million in the previous year. This reduction was driven by cuts in sales and marketing, development, and general administrative expenses, as the company continues to streamline operations in response to its financial challenges. The workforce was also reduced by approximately 38% in late 2024, which contributed to lower payroll costs.

As of March 31, 2025, the company reported an accumulated deficit of $90.7 million and a working capital deficit of $1.9 million. However, cash and cash equivalents increased to $1.05 million, bolstered by $2.35 million in net proceeds from a private placement of Class A common stock completed in April 2025. The company anticipates ongoing cash outflows as it invests in product development and seeks to stabilize its financial position. Motorsport Games is actively exploring additional funding options, including potential equity and debt financing, to address its liquidity needs.

Looking ahead, Motorsport Games faces substantial uncertainty regarding its ability to continue as a going concern. The company has indicated that it may need to further adjust its product roadmap and continue cost-cutting measures to manage cash burn. The management has expressed that while they are pursuing various strategic alternatives, including asset sales and restructuring, there are no guarantees of success in securing the necessary funding or achieving operational stability.