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Galaxy Gaming Reports Q-2 Financial Results

LAS VEGAS, Aug. 15, 2016 (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 six months ended June 30, 2016.

Financial Highlights

Q-2 2016 vs. Q-2 2015

  • Revenue of $3,064K increased 14%
  • Adjusted EBITDA of $1,311K increased 56%
  • Pre-tax gain of $609K increased 387%
  • Net income of $378K increased 427%

Q-2 2016 vs. Q-1 2016

  • Revenue of $3,064K increased 3%
  • Adjusted EBITDA of $1,311K increased 6%
  • Pre-tax gain of $609K increased 14%
  • Net income of $378K decreased less than 1%

6 Months 2016 vs. 6 Months 2015

  • Revenue of $6,048K increased 15%
  • Adjusted EBITDA of $2,541K increased 50%
  • Pre-tax gain of $1,145K increased 375%
  • Net income of $757K increased 463%

Executive Comments

Robert B. Saucier, Galaxy’s CEO stated, “The seeds for growth we previously sowed are now being harvested. As evidenced by this record-breaking quarter, our core business continues to build, thus enhancing our ultra-high margin recurring revenue stream. This performance allows us to continue to pay down our long-term debt whilst reinvesting for further growth. At this halfway point, we remain convinced that 2016 will be our best year ever.

Mr. Saucier continued, “It is also evident from these numbers that our business model is extremely scalable. For example, the 15% increase in year-to-date revenues resulted in a 463% increase in net income. Another way to look at it is that of the $781K additional revenue realized in the first half of 2016, 80% of those dollars dropped to the bottom line.”

Financial Summary

Revenue. Total revenue for the second quarter 2016 increased 14% to $3,064,171, over the same quarter 2015. This increase is primarily due to additional placement of premium games and expansion into new territories. Between the second quarter 2016 and first quarter 2016, total revenues increased 3% to $3,064,171. This increase was recognized in all categories of products, with premium games netting the largest gains. The annualized recurring revenue run-rate as of June 30, 2016 is approximately $12,256,684.

Total costs and expenses. Expenses for the second quarter 2016 decreased 4% to $2,200,459, when compared to the same quarter 2015. The decrease is primarily due to lower legal and professional expenses. The total costs and expenses in the second quarter 2016 increased less than 1% to $2,220,459 compared to the first quarter 2016, primarily driven by increases in research & development costs.

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the second quarter 2016 increased 56% to $1,310,515, compared to the same quarter 2015. Increased gross revenues and lower selling, general & administrative expenses contributed to the increase in Adjusted EBITDA between the periods. Adjusted EBITDA in the second quarter 2016 increased 6% to $1,310,515 compared to the first quarter in 2016. This increase was also driven by the combination of an increase in gross revenues and a decrease in selling, general & administrative expenses. The decrease in selling, general & administrative expenses was primarily driven by lower legal costs attributed to litigation.

Net income. Net income for the second quarter 2016 was $377,527, which was an increase of 427% from the same quarter 2015. The increase was primarily due to the increases in our recurring revenues and lower costs and expenses. The net income of $377,527 in the second quarter decreased less than 1% compared to the first quarter 2016. This increase was the combined result of increased revenues and decreases in selling, general & administrative expenses, for reasons previously mentioned.

Semi-Annual 2016 Financial Results Teleconference and Webcast

Galaxy Gaming, Inc. will host an investor teleconference and webcast to discuss its financial results for the quarter and six months ended June 30, 2016. Details for the call, which is scheduled to include a web presentation, are as follows:

When: Tuesday, August 30th at 1:00pm Pacific Time (4:00pm Eastern)
US/Canada: (877) 627-6582
International: (719) 325-4886
Passcode: 9838092
Web Presentation: http://ir.galaxygaming.com

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 (galaxygaming.com) 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 FeelTheRush.com. 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.

GALAXY GAMING, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS June 30,
2016
December 31,
2015
Current assets:
Cash and cash equivalents $642,738 $570,623
Restricted cash 71,073 97,859
Accounts receivables, net allowance for bad debts of $31,000 and $30,944 1,754,598 1,828,669
Prepaid expenses 97,182 106,338
Inventories, net 504,267 411,700
Deferred tax asset 43,017
Other current assets 2,161 2,489
Total current assets 3,072,019 3,060,695
Property and equipment, net 263,231 298,877
Products leased and held for lease, net 155,405 134,485
Intangible assets, net 12,517,011 13,261,636
Goodwill 1,091,000 1,091,000
Deferred tax assets, net of current portion 82,562
Other assets, net 41,793 41,793
Total assets $17,140,459 $17,971,048
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $1,181,215 $1,421,848
Accrued expenses 1,158,864 823,964
Income taxes payable 519,781 170,331
Deferred revenue 851,859 717,690
Jackpot liabilities 90,073 106,671
Deferred tax liability 75,358
Capital lease obligations, current portion 39,270 59,196
Long-term debt, current portion 3,998,548 4,648,120
Deferred rent, current portion 10,568 6,197
Total current liabilities 7,925,536 7,954,017
Deferred rent, net of current portion 47,359 52,643
Capital lease obligations, net of current portion 62,701 78,008
Long-term debt, net of debt discount, net of current portion 5,676,863 7,436,171
Total liabilities 13,712,459 15,520,839
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 39,315,591 and 39,215,591
shares issued and outstanding
39,316 39,216
Additional paid-in capital 3,013,772 2,963,841
Accumulated deficit (35,552) (792,446)
Accumulated other comprehensive income 410,464 239,598
Total stockholders’ equity 3,428,000 2,450,209
Total liabilities and stockholders’ equity $17,140,459 $17,971,048


GALAXY GAMING, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
June 30, June 30,
2016 2015 2016 2015
Revenue:
Product leases and royalties $ 3,057,172 $ 2,677,384 $ 6,038,991 $ 5,255,696
Product sales and service 6,999 5,216 9,279 10,999
Total revenue 3,064,171 2,682,600 6,048,270 5,266,695
Costs and expenses:
Cost of ancillary products and assembled components 29,672 23,989 51,312 47,278
Selling, general and administrative 1,622,105 1,700,503 3,274,304 3,279,579
Research and development 101,879 116,441 181,221 269,429
Depreciation 45,032 43,018 88,696 84,311
Amortization 372,312 372,313 744,625 750,386
Share-based compensation 29,459 36,072 49,931 54,942
Total costs and expenses 2,200,459 2,292,336 4,390,089 4,485,925
Income from operations 863,712 390,264 1,658,181 780,770
Other income (expense):
Interest income 90 5,320 146 11,205
Interest expense (255,218) (270,865) (513,413) (550,803)
Total other expense (255,128) (265,545) (513,267) (539,598)
Income before provision for income taxes 608,584 124,719 1,144,914 241,172
Provision for income taxes (231,057) (53,146) (388,020) (106,740)
Net income $ 377,527 $ 71,573 $ 756,894 $ 134,432
Basic income per share $ 0.01 $ 0.00 $ 0.02 $ 0.00
Diluted income per share $ 0.01 $ 0.00 $ 0.02 $ 0.00
Weighted average shares outstanding:
Basic 39,315,591 39,065,591 39,383,369 39,028,091
Diluted 39,465,676 39,065,591 39,565,633 39,028,508


GALAXY GAMING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS
ENDED
June 30,
2016 2015
Cash flows from operating activities:
Net income for the period $756,894 $134,432
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 88,696 84,311
Amortization expense 744,625 750,386
Provision for bad debt expense 40,000
Inventory reserve 47,069
Amortization of debt discount 104,316 104,316
Deferred income tax provision 388,020 202,506
Share-based compensation 49,931 54,942
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash 26,786 (28,408)
Decrease (increase) in accounts receivable 71,287 (51,744)
Decrease (increase) in other current assets 328 (8,156)
Increase in inventory (137,704) (20,348)
Decrease (increase) in prepaid expenses 9,156 (117,860)
(Decrease) increase in accounts payable (241,190) 286,986
Increase in income taxes payable 349,450
Increase in accrued expenses 327,090 14,837
Increase in deferred revenue 134,169 35,086
(Decrease) increase in jackpot liabilities (16,598) 28,464
(Decrease) increase in deferred rent (913) 1,685
Net cash provided by operating activities 2,654,343 1,558,504
Cash flows from investing activities:
Acquisition of property and equipment (28,832) (44,066)
Net cash used in investing activities (28,832) (44,066)
Cash flows from financing activities:
Principal payments on capital leases (35,233) (32,464)
Principal payments on notes payable (2,488,778) (1,800,231)
Net cash used in financing activities (2,524,011) (1,832,695)
Effect of exchange rate changes on cash (29,385) 5,233
Net increase (decrease) in cash and cash equivalents 72,115 (313,024)
Cash and cash equivalents – beginning of period 570,623 560,184
Cash and cash equivalents – end of period $642,738 $247,160
Supplemental cash flow information:
Cash paid for interest $530,660 $446,487
Inventory transferred to leased assets $45,137 $11,034
Cash paid for income taxes $20,000 $
Supplemental non-cash financing activities information:
Effect of exchange rate on note payable in foreign currency $24,318 $152,523


GALAXY GAMING, INC.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited)
Three Months Ended Six Months Ended Three Months Ended
June 30,
June 30,
March 31,
2016 2015 2016 2015 2016
Net income $377,527 $71,573 $756,894 $134,432 $379,367
Interest income (90) (5,320) (146) (11,205) (56)
Interest expense 255,218 270,865 513,413 550,803 258,195
Income tax provision 231,057 53,146 388,020 106,740 156,863
Depreciation 45,032 43,018 88,696 84,311 43,662
Amortization 372,312 372,313 744,625 750,386 372,312
Share based compensation 29,459 36,072 49,931 54,942 20,471
Adjusted EBITDA(1) $1,310,515 $841,667 $2,541,433 $1,670,409 $1,230,814

(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.

Contact: Gary A. Vecchiarelli (702) 939-3254

Source:Galaxy Gaming, Inc.