Galaxy Gaming Reports Q-3 Financial Results

LAS VEGAS, Nov. 14, 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 nine months ended September 30, 2016.

Financial Highlights

Q-3 2016 vs. Q-3 2015

  • Revenue of $3,192K increased 16%
  • Adjusted EBITDA of $1,499K increased 68%
  • Pre-tax income of $1,424K increased 569%
  • Net income of $821K increased 586%

Q-3 2016 vs. Q-2 2016

  • Revenue of $3,192K increased 4%
  • Adjusted EBITDA of $1,499K increased 14%
  • Pre-tax income of $1,424K increased 134%
  • Net income of $821K increased 117%

9 Months 2016 vs. 9 Months 2015

  • Revenue of $9,240K increased 15%
  • Adjusted EBITDA of $4,041K increased 58%
  • Pre-tax income of $2,569K increased 466%
  • Net income of $1,578K increased 521%

Executive Comments

Gary A. Vecchiarelli, Galaxy’s CFO commented, “We are very pleased with our continued progress in the third quarter. Our top and bottom lines continue to grow as this quarter represents another record breaking period for our Company.” Mr. Vecchiarelli added, “We also finished the quarter with almost $2 million in cash. The refinancing transaction has changed the financial profile of our Company and provided us with the working capital and flexibility we need to expand rapidly.”

The Company’s CEO Robert B. Saucier added, “When reporting our results, it’s always a pleasure to simply say, ‘the numbers speak for themselves.’ But beyond our Company’s fiscal performance, what excites me most are the investments we are making to stimulate a compelling future. The majority of our increased cash flow is being re-invested to develop new innovative products and to escalate our sales and marketing activities. These considerable investments should beneficially increase revenues, profits and cash flow commencing in 2017 and continuing into at least 2018.”

Financial Summary

Revenue. Total revenue for the third quarter 2016 increased 16% to $3,191,969, over the same quarter 2015. This increase is primarily due to additional placement of premium games and expansion into new territories. Between the third quarter 2016 and second quarter 2016, total revenues increased 4% to $3,191,969. This increase was recognized in all categories of products, with premium games netting the largest gains. The annualized recurring revenue run-rate as of September 30, 2016 is $12,767,876.

Total costs and expenses. Expenses for the third quarter 2016 decreased 6% to $2,153,371, when compared to the same quarter 2015. The decrease is primarily due to decreased legal and professional fees. The total costs and expenses in the third quarter 2016 decreased 2% to $2,153,371 compared to the second quarter 2016, primarily driven by decreased legal and professional fees.

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the third quarter 2016 increased 68% to $1,499,213, 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 third quarter 2016 increased 14% to $1,499,213 compared to the second 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 third quarter 2016 was $820,972, which was an increase of 586% 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 $820,972 in the third quarter increased 117% compared to the second quarter 2016. This increase was the combined result of increased revenues and decreases in selling, general & administrative expenses, for reasons previously mentioned.

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 $1,823,657 $570,623
Restricted cash 87,850 97,859
Accounts receivables, net allowance for bad debts of $27,190 and $30,944 1,937,343 1,828,669
Inventory 484,442 411,700
Deferred tax asset 43,017
Prepaid expense and other 99,905 108,827
Total current assets 4,433,197 3,060,695
Property and equipment, net 244,896 298,877
Products leased and held for lease, net 204,467 134,485
Goodwill and other intangible assets, net 13,235,698 14,352,636
Deferred tax assets, net 82,562
Other assets, net 299,918 41,793
Total assets $18,418,176 $17,971,048
Current liabilities:
Accounts payable $563,445 $1,421,848
Accrued expenses 976,834 823,964
Income taxes payable 1,106,600 170,331
Deferred revenue 870,628 717,690
Jackpot liabilities 91,602 106,671
Deferred tax liability 75,358
Deferred rent, current portion 12,753 6,197
Current portion of long-term debt and capital lease obligations 909,009 4,707,316
Total current liabilities 4,606,229 7,954,017
Deferred rent, net 42,532 52,643
Capital lease obligations, net of current portion 54,898 78,008
Warrant liability 806,698
Long-term debt, net 9,028,235 7,436,171
Total liabilities 14,538,592 15,520,839
Commitments and Contingencies
Stockholders’ equity
Preferred stock, 10,000,000 shares authorized, $.001 par value;
0 shares issued and outstanding, respectively
Common stock, 65,000,000 shares authorized; $.001 par value;
39,315,591 and 39,215,591 shares issued and outstanding, respectively
39,316 39,216
Additional paid-in capital 3,054,847 2,963,841
Accumulated earnings (deficit) 785,421 (792,446)
Accumulated other comprehensive income 239,598
Total stockholders’ equity 3,879,584 2,450,209
Total liabilities and stockholders’ equity $18,418,176 $17,971,048

September 30,
September 30,
2016 2015 2016 2015
Product leases and royalties $3,190,823 $2,747,774 $9,229,815 $8,003,469
Product sales and service 1,146 7,074 10,425 18,073
Total revenue 3,191,969 2,754,848 9,240,240 8,021,542
Costs and expenses:
Cost of ancillary products and assembled components 26,763 22,890 78,075 70,168
Selling, general and administrative 1,576,480 1,736,024 4,850,785 4,995,984
Research and development 89,513 101,822 270,734 371,251
Depreciation and amortization 419,540 416,918 1,252,860 1,251,614
Share-based compensation 41,075 17,909 91,006 72,850
Total costs and expenses 2,153,371 2,295,563 6,543,460 6,761,867
Income from operations 1,038,598 459,285 2,696,780 1,259,675
Other income (expense):
Settlement income 697,214 697,214
Interest expense (227,632) (248,604) (741,045) (799,407)
Loss on extinguishment of debt (87,578) (87,578)
Change in estimated fair value of warrant liability 2,933 2,933
Interest income 56 2,084 202 13,288
Total other income (expense) 384,993 (246,520) (128,274) (786,119)
Income before provision for income taxes 1,423,591 212,765 2,568,506 473,556
Provision for income taxes (602,619) (93,059) (990,639) (219,418)
Net income $820,972 $119,706 $1,577,867 $254,138
Net income per share, basic and diluted $0.02 $0.00 $0.04 $0.01
Weighted-average shares outstanding:
Basic 39,315,591 39,040,775 39,372,944 39,040,775
Diluted 39,465,676 39,079,102 39,559,494 39,079,102

September 30,
2016 2015
Cash flows from operating activities:
Net income $1,577,867 $254,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,252,860 1,251,614
Amortization of debt issuance costs and debt discount 136,710 156,474
Provision for bad debt expense 40,000
Inventory reserve 47,069
Loss on extinguishment of debt 87,578
Change in estimated fair value of warrant liability (2,933)
Deferred income tax provision 54,370 219,418
Share-based compensation 91,006 72,850
Changes in operating assets and liabilities:
Decrease in restricted cash 10,009 9,392
Increase in accounts receivable (107,969) (197,139)
Decrease in other current assets 43,017 62,314
Increase in inventory (181,319) (125,820)
Decrease (increase) in prepaid expenses and other current assets 6,608 (65,538)
(Decrease) increase in accounts payable (858,954) 495,891
Increase in income taxes payable 936,269
Increase in accrued expenses 141,841 23,037
Increase in deferred revenue 152,938 65,227
Decrease in jackpot liabilities (15,069) (6,296)
Decrease in deferred rent (3,555) (957)
Net cash provided by operating activities 3,321,274 2,301,674
Cash flows from investing activities:
Acquisition of property and equipment (43,345) (44,980)
Cash flows from financing activities:
Proceeds received from long-term debt 932,126
Principal payments on capital lease obligations (51,698) (49,186)
Principal payments on long-term debt (2,873,437) (2,662,699)
Net cash used in financing activities (1,993,009) (2,711,885)
Effect of exchange rate changes on cash (31,886) (1,962)
Net increase (decrease) in cash and cash equivalents 1,253,034 (457,153)
Cash and cash equivalents – beginning of period 570,623 560,184
Cash and cash equivalents – end of period $1,823,657 $103,031
Supplemental cash flow information:
Cash paid for interest $753,250 $800,830
Inventory transferred to leased assets $108,577 $39,896
Cash paid for income taxes $35,000 $
Supplemental non-cash financing activities information:
Effect of exchange rate on long-term debt payable in foreign currency $336,485 $119,414
Issuance of warrants in conjunction with term loan $809,631 $
Points paid on term loan $262,500 $

Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
June 30,
2016 2015 2016 2015 2016
Net income $820,972 $119,706 $1,577,867 $254,138 $377,527
Interest income (56) (2,084) (202) (13,288) (90)
Interest expense 227,632 248,604 741,045 799,407 255,218
Income tax provision 602,619 93,059 990,639 219,418 231,057
Depreciation and amortization 419,540 416,918 1,252,860 1,251,614 417,344
Share based compensation 41,075 17,909 91,006 72,850 29,459
Loss on extinguishment of debt 87,578 87,578
Change in estimated fair value of warrant liability (2,933) (2,933)
Gain on settlement (697,214) (697,214)
Adjusted EBITDA(1) $1,499,213 $894,112 $4,040,646 $2,584,139 $1,310,515

(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.