Your meeting will begin shortly. If you need assistance at any time, please press star zero. Any member of our team will be happy to help you. . . . .

and many, many more. . . . . . . . . . . . . . . and the rest of the team. . . . .

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Thank you for your continued patience. Your meeting will begin shortly.

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Please stand by, your meeting is about to begin. Thank you and welcome to the Mortar Sport Games Inc.'s third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. As a reminder, today's conference is being recorded. I would like to now turn the conference over to Stanley Beckley from Motorsport Games. Please go ahead.

Thank you and welcome to Motorsport Games' third quarter 2026 earnings conference call and webcast. On today's call is Motorsport Games' Chief Executive Officer, Stephen Hood, and Chief Financial Officer, Peter Hansen-Chambers. By now, everyone should have access to the company's third quarter 2026 earnings press release filed today after market close. This is available on the Investors Relations section of Motorsport Games' website at 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 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 files with SEC, including its most recent quarterly report on Form 10-Q, where the quarter ended September 30th, 2026, for a detailed discussion of setting up the 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 third quarter 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 Investors Relations section of Motorsport Games' website at motorsportgames.com. and now I'd like to turn the call over to Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen.

Thank you, Stanley, and good afternoon to everyone joining us for the Motorsport Games third quarter 2026 earnings call. This is our seventh consecutive quarter of positive net income. Revenue for the first nine months was 11.3 million, up 52% on last year. Gross margin rose to almost 86% from 80% and adjusted EBITDA for the quarter grew by more than 75% year on year. More revenue with more of each dollar staying in the business. Our CFO, Peter, will later walk through the detail. Le Mans Ultimate and Race Control continue to drive those gains and I will come back to Race Control shortly. I want to pause on a milestone. Le Mans Ultimate has now passed 2 million sales across all channels, more than 520,000 copies of the base game, and as of today, 1.5 million pieces of downloadable content or DLC. DLC is additional paid content. So that is close to three pieces of DLC for every copy of the base game with players coming back to spend again on a game they already own. Congratulations and thank you to the whole Studio 397 team and everyone at Motorsport Games. This is a great result and one we should all be proud of. Every one of those players competing online holds a race controller cam inside a platform that we own and operate. that lets us welcome them more smoothly, speak to them directly, and keep reinvesting in their experience. Race Control is a business in its own right, and it is maturing steadily. The revenue is recurring and predictable, it carries high margins, and it does not rise and fall with game release cycles the way a traditional title does. It keeps players engaged, it lets us earn from our most committed fans, and it channels that income back into the service and into what we build next. Close to 1 in 10 Le Mans Ultimate owners now pays for a subscription, which we believe compares well with a typical subscription conversion rate. Race control is already central to what we offer, and it will form the backbone of our class leading experience for years to come. It has matured well in about two years, yet we are still at the beginning of a very exciting journey. In December, we released our new web portal in racecontrol.gg, owned and run entirely in-house for the first time. It works on mobile, tablet and desktop and lets our players access and engage with our ecosystem without even opening the game. To mark the launch, we will have a celebratory offering for our players and we hope to see a spike in players and subscribers through December and into the first quarter of 2027. Bringing race control fully in-house reflects our belief that we should build a moat around a part of the business that has performed extremely well since its inception. We expect competitors to try to recreate it, but most will look for shortcuts around that investment and understanding needed to deliver a complete platform experience. We have that knowledge. Our platform is operational. It's proven and monetizing well. And anyone trying to copy our success would be starting a long way behind. And crucially, race control is not standing still. We will keep expanding what it offers with new features and more reasons to subscribe. And we are planning new titles that will build on the recurring subscription success it has driven. Our American content packs have been very well received, with Pack 1 delivering the biggest DLC launch day in Le Mans Ultimate's history, and Pack 2 following on schedule in September. American Pack 3 remains on track to release in December, and exciting new content will arrive throughout 2027. We do not plan to stretch Le Mans Ultimate into unrelated racing categories, but there is plenty of room to keep adding content for years to come. Each expansion shows us what attracts players beyond endurance racing, and we plan to use that knowledge in new products aimed at similar and broader audiences in future. Turning to console, we have reached another major milestone with a playable development version of Le Mans Ultimate now running on console, slightly ahead of our December schedule. It is demanding work, but it opens the game to a much larger audience, and what we learn will benefit our future releases. Looking further ahead, The long-term project we had described on our last call is moving. We are working on several fronts, some involving partners and licensing, some building new capability, all pointing towards a larger, more diversified business that is less dependent on any single product or relationship. We have more options than at any point in our recent history, and we are very close to deciding which to accelerate. Lamont Ultimate showed what this team can do. We built that success, and we know how to repeat it. What comes next could go further still, and we will put our effort where it creates the most value for shareholders. We will not announce anything until agreements are signed, but we hope to say more on our next earnings call. All of this belongs to a bigger shift in how we think about the company. In seasons, season one was the startup, and season two, the turnaround, a chapter that is now behind us. This team have achieved great things against the odds. Season three is the leap forward and it is an evolution, not a total reset. We will carry forward everything our people have done well and build on it towards a bigger, brighter future. Every decision I have described today is made with that in mind. And a word on our team before I pass over. Peter Hansen-Chambers has completed his first full quarter as chief financial officer, and it has been a pleasure working with him. My thanks also go to Stanley Beckley and the finance team for this quarter's reporting and to our studio teams for two American content packs and successful Le Mans 24 hour event held in October, which Peter will talk about shortly. And with that, over to Peter.

Thank you, Stephen.

Good evening, everyone.

As on our last call, I won't be giving forward-looking guidance today. Instead, I will walk you through our third quarter and nine-month results and what they tell us about the business. Revenue for the first nine months was $11.3 million, which already exceeds what we delivered in the whole of 2025, with a quarter still to go. Our balance sheet is also in a fundamentally different place from the end of 2024, as I'll come to. That is a result of hard work by a talented and committed team, and it's worth celebrating. However, Stephen and I are very clear. The turnaround is the foundation, not the destination. What matters from here is how we build a business that is less dependent on any single title and that work is already underway. First, the numbers. As I said last quarter, Our results are driven by our release calendar, as well as by real-world motorsport events and normal seasonality, so results won't simply rise in a straight line from one quarter to the next. That remains the right way to look at us. Judge us on the trend over several quarters, which is clearly upwards. On that note, and others. Third quarter revenue was £3.8 million, up 21.8% on the same quarter last year and up 6.7% on the second quarter. For the nine months, revenue was £11.3 million, up 52.3%. The drivers were downloadable content for Le Mans Ultimate and race control subscriptions. Over the nine months, Le Mans Ultimate sales rose 2.8 million, mainly from DLC, and race control subscriptions rose 1.3 million. The US Track Pack is a good example of why we keep investing in content. The US Track Pack 1 launched with version 1.4 on July 28th and delivered the biggest downloadable content launch day in Le Mans Ultimate's history. Pack 2 followed on September 22nd bringing Road Atlanta and Long Beach. It also shows how we work. We stay close to our community, act on their feedback, and keep improving the game. Players' commitment to the game also shows up on our balance sheet. Deferred revenue, meaning cash players have already paid us for content and services we have yet to deliver, reached 1.6 million at the end of September. That is the highest quarter end balance since our IPO and up from 1.1 million a year ago. After the quarter end, we also saw a strong demonstration of our online service. On October the 23rd and 24th, we ran our 24 Hour of Le Mans special event, a live 24 hour race for players around the world entirely on our own race control platform. It put the service to the test and we delivered it successfully with 11,941 concurrent players, a new all-time high for London Ultimate. Stephen has described where Race Control is heading, so let me give you the numbers behind it. Race Control subscription revenue for the first nine months was approximately $2 million, up from approximately $0.7 million a year ago, an increase of 186%. It now represents around 17.3% of our total revenue, nearly double its 9.2% share in the same period last year. And the overall business revenues grew more than 50% over the same period. Based on monthly recurring revenue for October of approximately 282,000, Race Control is now generating approximately 3.4 million in annual recurring revenue, up from approximately 2.9 million when we reported back in August. We ended September with more than 45,000 paid subscribers, up more than 157% year-on-year. And to be clear, All this growth continues to be organic. As Stephen explained, our new web portal on racecontrol.gg goes live in December and is owned and managed entirely in-house. So the revenue share we have paid to our original technology partner falls away. In financial terms, that is a 10% of race control revenue we've been sharing to date, which from then on stays in the business. Bringing the platform fully in-house also gives us more control and brings race control closer to our product teams. Growth is important, but I'm particularly pleased that we are growing efficiently. Gross margin for the third quarter was 88%, up from 80.7% a year ago. and was 85.8% for the first nine months against 79.6% last year. Income from operations for the quarter was 1.2 million, up 52.4% year on year. That is our sixth consecutive quarter of positive operating income. For the nine months, operating income was 2.9 million against 2.7 million. It's worth remembering that last year's figure included 1.6 million of one-off other operating income, mostly from settlements. Excluding that, improvement is substantially greater. Turning to development costs, you will notice the development expense line is lower this quarter. That is not because we have pulled back on the investment, quite the opposite. We capitalized 1.7 million of development over the nine months against 0.7 million last year, reflecting continued investment in Le Mans Ultimate, Race Control and Console. In the third quarter, we also recognized approximately 0.69 million of UK video games tax relief, which reduced reported development expense. that relief incentivizes the development work we do in the UK and we expect to continue claiming it although the timing and amounts will vary the main item below operating income this quarter was a 0.5 million tax provision mainly relating to studio 397 a Dutch subsidiary the result is net income of 0.7 million for the quarter our seventh consecutive profitable quarter Net income attributable to Motorsport Games was 0.3 million for the quarter, or seven cents a share, and 21 cents a share for the nine months. On an adjusted basis, which we believe better reflects the underlying business, adjusted EBITDA for the quarter was 1.8 million. That is up 75.7% year on year, and more than double the 0.8 million we reported in the second quarter. For the nine months ended September 2026, adjusted EBITDA was 4 million, up 99% from the same period last year. Non-GAAP adjusted diluted EPS was 19 cents for the quarter and 51 cents for the nine months against 45 cents last year. Reconciliations between net income and adjusted EBITDA, including one-off professional fees that we've excluded this quarter, are outlined in our press release and earnings materials posted on the investor relations section of our website. The balance sheet is where the progress of the last two years is clearest. We generated 4.1 million of cash from operations in the first nine months of 2026, close to half a million dollars a month versus 2.8 million during the same nine-month period in the prior year. To put that in context, the cash generated by the business from operating activity is this year more than paid from 3.7 million buyback of the Driven Lifestyle shares in the second quarter. We ended September with 5.4 million of cash, 1.3 million more than a year ago, which included 0.9 million of proceeds from the Warren exercise in August. The comparison with where we were at the end of 2024 is striking. Back then, working capital was negative at around minus 2.2 million. Today it is 4.2 million. We owed our suppliers and vendors around 3 million at the end of 2024. Today, accounts payable stand at around 0.4 million. Total stockholders' equity has grown from $1.2 million at the end of 2024 to $8.2 million as of September 30th, 2026. We also have a $3 million revolving credit facility with Citibank running to February 2028, of which $1.2 million is drawn. The capital structure is simpler too. All shares now carry equal voting rights, following the retirement of the Class B shares, and the August warrant exercises reduced the number of warrants outstanding. In short, we are no longer managing for survival. We have a solid financial foundation to invest with intent. So where do we go from here? As Stephen mentioned, we are moving into season three, and the business is well into its strategic initiative to prepare for it. Put simply, this is about shifting from a business shaped by survival to one organized for growth. We are starting where any company should, with purpose. Defining our vision, mission and values, which will guide the big cause ahead of what we build, where we invest and how we structure the business. Through this process, we will build on the strength of our brand, our people, and culture. In addition, we are reviewing our corporate structure to resolve legacy matters so that the group is simpler, more efficient, and ready to scale. The aim is to set a very deliberate course for growth. Season three will also guide how we use our capital. Our stronger balance sheet provides us with the means to act and clarity on our strategy will allow us to move decisively when we see the right opportunities. We will invest where we see scope for clear returns with pace and discipline. We are already actively pursuing partnerships with other opportunities to accelerate the business. Consider what we have achieved this year, largely from a single title, and you can see what a broader portfolio would mean for this business. We will share more as the work progresses. To wrap up the quarter, revenue of 3.8 million, up almost 22%, a gross margin of 88%, adjusted EBITDA of 1.8 million, up almost 76%, and our seventh consecutive quarter of positive net income. Over the nine months, we generated 4.1 million of cash from operations. We ended September with 5.4 million in cash, and we had a record quarter-end balance deferred revenue of 1.6 million. We would encourage you to judge us on the trend, not any single quarter. Thank you. I'll now hand back to Stephen for closing remarks.

To sum up the first nine months, Le Mans Ultimate keeps growing. Race Control has established itself as a genuine platform business that rivals will try to imitate, and our margins and cash are moving in the right direction. That consistency reflects how we run this business. We now enter Season 3 with a strong foundation, real options and a clear ambition, and we look forward to updating you on our next call. Thank you for joining us and for your interest in motorsport games. Operator, back to you.

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, you may press star 2. Once again, that's star one to ask a question. And we'll pause for just a moment to allow everyone a chance to join the queue. And once again, that is star one to ask a question. We'll take our first question from Anya Soderstrom with ZDOTI. Please go ahead, your line is open.

Hi, and thank you for taking my questions and congrats on the nice progress here. I'm curious with the new version of Waste Control coming out in December, what did that mean in terms of revenue contribution and how does that play into your model?

Stephen, thank you for the congratulations. It's been a great quarter for us. Well, we're not giving forward guidance on what it actually means for the new update for Race Control, but I think the important thing is you will have seen the historic growth in Race Control. That growth of Race Control has been almost entirely organic since its inception. It's done phenomenally well for the business and is a major revenue driver now. Obviously, it's paired to the success of Le Mans Ultimate, our current game. The intention is, and I think we've said this in the last couple of earnings, to really start investing in that race control platform. Because it's done so well organically, we want to get closer to that technology, get closer to the platform, and find a way to drive the uptake of race control to a broader percentage of the players that are playing Le Mans Ultimate. So in order to... really get to grips with that and start marketing to the players, adding new features, increasing the uptake because it's been doing so well. We don't want to let that slide. We've decided to start investing into that platform and bring new features and services to it. So I think it's hard to predict exactly how it's going to go, but it's fair to say that we're not letting it slide. We're going to keep pushing that forward. I don't know if, Peter, you want to add anything further to it?

Thanks, Stephen.

Yeah, I think, I mean, Stephen's covered it pretty well. I think it's clearly strategically very important for us. We're not just thinking about where, you know, the role that race control plays today with LMU. The role is, you know, is pretty obvious. But we do think race control will play a big part in the future of our product lineup and we're already sort of considering that, anticipating that. And with that in mind, I think it's smart for us to have the expertise fully in-house. I think we mentioned in the script about bringing the risk control closer to the product teams. I think that helps in terms of the team absorbing sort of learnings that come from managing a service like Race Control, which is a little bit different to selling boxes of games, if you like. And as Steve said, there's a lot of opportunity for us in terms of and so on, improving take-up of the service. And yeah, I think having that in-house is only going to help us sort of become more mindful as we make plans going forward.

Okay, thank you. And then in terms of the gross margin, it was a nice performance there. How sustainable is that and how should we think about the gross margin Is there expansion potential from here as you scale up?

I mean, I think, you know, The gross margin, I guess we've been on a bit of a journey with it, probably in part, well, probably a big part of benefiting from race control because the share that we give away is a lot less on race control. So that helps the mix, that helps the business. And as I say, our plan is to continue to sort of nurture race control and to... continue monetizing that way. At the same time, other distribution is important. Steam still represents a significant piece for us. And as we've mentioned, our intention is to go on console later in 2027. And I guess in terms of how that impacts margin will depend how many units we sell. But, you know, Aaron, we still anticipate that Race Control will continue to sort of help us with that.

I'm talking about the console launch. Are you still on track for that in second half or?

Sorry.

Yeah, I can say that. On the console, yeah, we are still on track for 27. I think I've maintained for quite some time. It is a complex project, and we are going to define that window as we get closer to launch, as we get closer to a public launch. The key milestone for us really, actually, to prove that it is doing phenomenally well is We do have a playable version of that console build now that is available on both PlayStation and Xbox which it will launch on next year and it's a vital milestone actually delivered ahead of time because we're still in November and we were expecting it for December to close out So it's a big win for everybody in the studio and our technology partners, but that is only pushing ahead of schedule, which is very nice to say. We look forward to that console product coming to market next year.

Okay, sounds good. And then in terms of the Formula One Arcade, how many venues are now live and sort of what is the revenue contribution there and what's the potential? And also, has... that open up to other discussions with Liberty Media.

So I believe they have 13 venues around the world. Might have to double check that because it is something that is sort of constantly changing. But they've grown significantly. We are due to sort of have a conversation with them as we come to the end of 2026 regarding sort of future As it stands right now, sorry, just to correct as well, because the deal is not actually with Liberty Media. Liberty, who own Formula One, are an investor in the company. I think the company...

Okay, I'm so sorry. Yeah, please start.

No, no, no. I think the company is Kindred Concepts. But... but yeah, we have a relationship with them and actually, you know, we do have dialogue with Formula One anyway. So it is... It is a relationship that we value. It's a relationship that's worked for us over the last few years. I think in terms of its contribution, it helps. It's not a huge part of our day to day. but we continue to service that under the contract that we have and the contract continues into next year.

Okay, thank you.

That was all from me. Thank you.

And once again, go ahead.

Sorry, I was just going to ask if Steve had anything he wanted to say more about the F1 opportunity.

I think you also covered that well. I was going to say that the Formula 1 dealer I think is, with Kindred Concepts, important to the business. We very pleasantly utilise their technology and understandably given our history, mine indeed with Formula One and of course Peter's, we were both intimately involved in that project many years ago. We're always looking for new opportunities and there is an ongoing conversation there with Kindred about what we can do in the future. I think actually F1 Arcades is probably at the beginning of this journey as to how they could utilize our technology, and we'd like them to use more of that, including platforms like Race Control to reach a wider audience. So I think there are many exciting things to discuss, and that's all I was going to add to the conversation, but I think you summarized it well, Peter.

Thank you.

Thank you. And once again, that is star one if you'd like to ask a question.

I'm showing no additional questions at this time. This will bring us to the end of today's Q&A session and today's Motorsports Games Inc.'s third quarter 2026 earnings call. We appreciate your time and participation. You may now disconnect.