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Galaxy Gaming Reports Q3 Financial Results

Globe Newswire

LAS VEGAS, Nov. 16, 2015 (GLOBE NEWSWIRE) -- Galaxy Gaming, Inc. (OTC:GLXZ), the world's largest independent developer, manufacturer and distributor of casino table games and enhanced systems, announced today its results for the three and nine months ended September 30, 2015.

Financial Highlights

Q-3 2015 vs. Q-3 2014

  • Revenue of $2,755K increased 9% or $238K from $2,517K.
  • Adjusted EBITDA of $894K decreased 3% or $27K from $921K.
  • Pre-tax income of $213K increased 4% or $9K from $204K.
  • Net income of $120K increased 38% or $33K from $87K.

Nine months 2015 vs. Nine months 2014

  • Revenue of $8,022K increased 11% or $777K from $7,245K.
  • Adjusted EBITDA of $2,584K decreased 11% or $310K from $2,894K.
  • Pre-tax income of $474K decreased 31% or $208K from $682K.
  • Net income of $254K decreased 27% or $94K from $348K.

Q-3 2015 vs. Q-2 2015

  • Revenue of $2,755K increased 3% or $72K from $2,683K.
  • Adjusted EBITDA of $894K increased 5% or $45K from $849K.
  • Pre-tax income of $213K increased 62% or $81K from $132K.
  • Net income of $120K increased 67% or $48K from $72K.

Executive Comments

Gary A. Vecchiarelli, Galaxy’s CFO commented, "I am happy to announce the third quarter represents yet another period of incremental growth for Galaxy Gaming.  In the past 4 years, or 16 quarters, we have been able to achieve growth to our recurring revenues 15 times.  Our business model has tremendous operating leverage, which is highlighted by the fact that approximately 70 cents of every new dollar in revenue between Q2 and Q3 of this year went to the bottom line.”  Mr. Vecchiarelli added, “Our operating expenses are up significantly over the prior year primarily due to increased legal and regulatory costs.  However, we see these expenses decreasing as events wind down in the coming quarters.”

Robert B. Saucier, Galaxy’s CEO added, “The continued roll-out of our expanding product line is resulting in increases in market share and revenues.  As our newer products gain a foundation of market acceptance in casinos, we believe they will serve to further propel our momentum and support our objective of increasing future recurring revenues.”

Financial Summary

Revenue.  Total revenue for the third quarter increased 9% to $2,754,848, over the same quarter 2014.  This increase is primarily due to additional placement of premium games and expansion into new territories.  For the nine months ended September 30, 2015 compared to the same period 2014, revenues increased 11% to $8,021,541.  The increase for the nine month period was primarily due to the increased focus on premium games and expansion into new territories.  Between the third quarter 2015 and second quarter 2015, total revenues increased 3% to $2,754,848.  These increases were due to an increase in activity in the United Kingdom and additional placements of premium and side bet games.  The annualized recurring revenue run-rate as of September 30, 2015 is $10,991,096.

Total costs and expenses.  Expenses for the third quarter 2015 increased 12% to $2,295,563, over the same quarter 2014.  The increase in 2015 is primarily due to increases in selling, general & administrative expenses, driven by increased legal and compliance costs.  Our professional expenses increased significantly due to ongoing litigation with competitors.  We also recognized increases in regulatory and compliance fees due to the licensure process with California and Nevada.  For the nine month period ended September 30, 2015 compared to the same period 2014, total costs and expenses increased 18% to $6,761,866.  This increase was also due to the increased legal and regulatory costs, combined with the fact 2015 represents a full nine months at our new and larger headquarters location. Total costs and expenses remained relatively flat in the third quarter 2015 compared to the second quarter 2015.   

Net income.  Net income for the third quarter 2015 was $119,706, which was an increase of 38% from the same quarter 2014.  The increase was primarily due to the increases in our recurring revenues.  For the nine month period ended September 30, 2015 compared to the same period 2014, the net income decreased 27% to $254,138.  The primary driver of this decrease was the increases in selling, general & administrative expenses.  The net income in the third quarter 2015, increased 67% to $119,707 compared to the second quarter of 2015.  This increase was the result of revenue growth between the recent quarters. 

Adjusted EBITDA.  Adjusted EBITDA, a non-GAAP financial measure (described below), for the third quarter 2015 decreased 3% to $894,112, compared to the same quarter 2014.  Higher selling, general & administrative expenses contributed to the decrease in Adjusted EBITDA between the periods.  For the nine month period ended September 30, 2015, Adjusted EBITDA decreased 11% to $2,584,141 compared to the same period ended 2014.  This decrease was primarily due to lower net income as a result of the increased selling, general & administrative expenses.  Adjusted EBITDA in the third quarter 2015 increased 5% to $894,112 compared to the second quarter in 2015.  This increase was primarily driven by the growth in recurring revenues between the recent quarters.

Use of Non-GAAP Measures

Galaxy Gaming, Inc. (the “Company”) prepares its consolidated financial statements in accordance with United States generally accepted accounting principles ( "GAAP").  In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used.  In addition to adjusting net income (loss) from continuing operations to exclude taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes noncash charges, certain non-recurring charges and share-based compensation expense.  EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP.  However, Adjusted EBITDA is used internally in planning and evaluating the Company's operating performance.  Accordingly, management believes that disclosure of this metric offers investors, bankers and other stakeholders an additional view of the Company's operations that, when coupled with the GAAP results, provides a more complete understanding of the Company's financial results.

Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in operating activities as a measure of operating results or of liquidity.  It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating the Company's performance.  A reconciliation of GAAP net loss from continuing operations to Adjusted EBITDA is included in the accompanying financial schedules.

About Galaxy Gaming

Headquartered in Las Vegas, Nevada, Galaxy Gaming ( develops, manufactures and distributes innovative proprietary table games, state-of-the-art electronic wagering platforms and enhanced bonusing systems to land-based, riverboat, cruise ships and online casinos worldwide.  Through its iGaming partner Games Marketing Ltd., Galaxy Gaming licenses its proprietary table games to the online gaming industry.  The Company is also expanding its global presence through its partnership with WPT Enterprises, Inc., owner of the World Poker Tour.  Galaxy’s games can be played online at  Connect with Galaxy on Facebook, YouTube and Twitter.

This press release may contain "forward looking" statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created thereby.  Forward looking statements are subject to change and involve risks and uncertainties that could significantly affect future results, including those risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.  Although the Company believes any expectations expressed in any forward looking statements are reasonable, future results may differ materially from those expressed in any forward looking statements.  The Company undertakes no obligation to update the information in this press release except as required by law and represents that the information speaks only as of today's date.


ASSETS September 30,
  December 31,
Current assets:        
Cash and cash equivalents $103,031  $560,184 
Restricted cash  98,521   107,913 
Accounts receivables, net allowance for bad debts of $40,000 and $34,887  1,628,543   1,472,743 
Prepaid expenses  145,978   80,440 
Inventories, net  271,645   232,789 
Note receivable – related party, current portion     383,298 
Deferred tax asset  47,691   47,691 
Other current assets  270   62,584 
Total current assets  2,295,679   2,947,642 
Property and equipment, net  332,882   382,098 
Products leased and held for lease, net  134,215   125,665 
Intangible assets, net  13,633,949   14,756,648 
Goodwill  1,091,000   1,091,000 
Deferred tax assets, net of current portion  96,564   143,614 
Other assets, net  42,699   45,416 
Total assets $17,626,988  $19,492,083 
Current liabilities:        
Accounts payable $1,014,800  $518,428 
Accrued expenses  541,659   519,166 
Income taxes payable  222,671   22,872 
Deferred revenue  712,852   647,625 
Jackpot liabilities  105,064   111,360 
Current portion of capital lease obligations  68,785   66,273 
Current portion of long-term debt  4,003,899   3,480,864 
Total current liabilities  6,669,730   5,366,588 
Deferred rent  55,285   56,242 
Capital lease obligations, net of current portion  85,506   137,204 
Long-term debt, net of debt discount, net of current portion  8,524,495   12,056,467 
Total liabilities  15,335,016   17,616,501 
Commitments and Contingencies         
Stockholders’ equity        
Preferred stock, 10,000,000 shares, $.001 par value preferred stock authorized; 0 shares issued and outstanding      
Common stock, 65,000,000 shares authorized; $.001 par value 39,065,591 and 38,990,591 shares issued and outstanding  39,066   38,991 
Additional paid-in capital  2,917,264   2,844,488 
Accumulated deficit  (726,162)  (980,300)
Accumulated other comprehensive income (loss)  61,804   (27,597)
Total stockholders’ equity  2,291,972   1,875,582 
Total liabilities and stockholders’ equity $17,626,988  $19,492,083 


  September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
  Product leases and royalties $  2,747,774  $  2,516,376  $  8,003,469  $  7,238,539 
  Product sales and service  7,074   1,008   18,073   6,185 
     Total revenue  2,754,848   2,517,384   8,021,542   7,244,724 
Costs and expenses:        
  Cost of ancillary products and assembled components  22,890   19,362   70,168   56,302 
  Selling, general and administrative  1,736,024   1,450,403   4,995,984   3,956,855 
  Research and development  101,822   126,300   371,251   337,687 
  Depreciation  44,605   29,704   128,916   72,450 
  Amortization  372,313   391,249   1,122,698   1,170,381 
  Share-based compensation  17,909   30,554   72,850   151,378 
     Total costs and expenses  2,295,563   2,047,572   6,761,867   5,745,053 
Income from operations  459,285   469,812   1,259,675   1,499,671 
Other income (expense):        
  Interest income  2,084   5,387   13,288   16,841 
  Interest expense  (248,604)  (271,275)  (799,407)  (834,957)
     Total other expense  (246,520)  (265,888)  (786,119)  (818,116)
Income before provision for income taxes  212,765   203,924   473,556   681,555 
Provision for income taxes  (93,059)  (116,495)  (219,418)  (333,584)
Net income $  119,706  $   87,429  $   254,138  $  347,971 
Basic income per share $  0.00  $   0.00  $  0.01  $  0.01 
Diluted income per share $  0.00  $  0.00  $  0.01  $  0.01 
Weighted average shares outstanding:        
  Basic  39,040,775   38,560,591   39,040,775   38,493,955 
  Diluted  39,079,102   38,574,447   39,079,102   38,772,448 


  2015  2014 
Cash flows from operating activities:        
Net income for the period $254,138  $347,971 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation expense  128,916   72,450 
Amortization expense  1,122,698   1,170,381 
Provision for bad debt expense  40,000    
Inventory reserve  47,069    
Amortization of debt discount  156,474   156,474 
Deferred income tax provision  219,418   333,584 
Share-based compensation  72,850   151,378 
Changes in operating assets and liabilities:        
Increase in restricted cash  9,392   149,712 
Increase in accounts receivable  (197,139)  (159,478)
Decrease in other current assets  62,314   15,691 
Increase in inventory  (125,820)  (80,678)
Increase in prepaid expenses  (65,538)  (19,374)
Increase in other long-term assets     (41,794)
Increase in accounts payable  495,891   129,885 
Increase in accrued expenses  23,037   22,582 
Increase in deferred revenue  65,227   97,324 
Decrease in jackpot liabilities  (6,296)  (147,043)
(Decrease) increase in deferred rent  (957)  54,477 
Net cash provided by operating activities  2,301,674   2,253,542 
Cash flows from investing activities:        
Acquisition of property and equipment  (44,980)  (31,343)
Acquisition of intangible assets     (35,000)
Net cash used in investing activities  (44,980)  (66,343)
Cash flows from financing activities:        
Principal payments on capital leases  (49,186)  (24,753)
Principal payments on notes payable  (2,662,699)  (2,199,935)
Net cash used in financing activities  (2,711,885)  (2,224,688)
Effect of exchange rate changes on cash  (1,962)  (6,461)
Net decrease in cash and cash equivalents  (475,153)  (43,950)
Cash and cash equivalents – beginning of period  560,184   438,502 
Cash and cash equivalents – end of period $103,031  $394,552 
Supplemental cash flow information:        
Cash paid for interest $800,830  $678,483 
Inventory transferred to leased assets $39,896  $71,203 
Cash paid for income taxes $  $ 
Supplemental non-cash financing activities information:        
Effect of exchange rate on note payable in foreign currency $119,414  $190,180 
Assets acquired by capital leases $  $243,970 



  Three Months
 Ended September 30,
 Nine Months
Ended September 30,
 Three Months
Ended June 30,
   2015   2014   2015   2014   2015 
Net income $  119,706  $   87,429  $  254,138  $  347,971  $  71,573 
Interest income  (2,084)  (5,387)  (13,289)  (16,841)  (5,320)
Interest expense  248,604   271,275   799,408   834,957   270,865 
Income tax provision  93,059    116,495    219,418    333,584    60,018  
Depreciation  44,605    29,704    128,916    72,448    43,018  
Amortization  372,313    391,249    1,122,699    1,170,382    372,313  
Share based compensation  17,909    30,554    72,851    151,378    36,072  
     Adjusted EBITDA(1) $  894,112  $  921,319  $  2,584,141   $  2,893,879  $  848,539 

(1) Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, taxes, depreciation, amortization, share-based compensation, and non-cash charges.  Adjusted EBITDA does not purport to represent net earnings or net cash used in operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements or as indicators of the Company's performance.  The Company's definition of Adjusted EBITDA may not be comparable with similarly titled measures used by other companies.

Gary A. Vecchiarelli(702) 939-3254

Source:Galaxy Gaming, Inc.