LAS VEGAS, May 16, 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 months ended March 31, 2016.
Financial Highlights
Q-1 2016 vs. Q-1 2015
- Revenue of $2,984K increased 15% or $400K from $2,584K.
- Adjusted EBITDA of $1,231K increased 49% or $402K from $829K.
- Pre-tax gain of $536K increased 362% or $420K from $116K.
- Net income of $379K increased 502% or $316K from $63K.
Q-1 2016 vs. Q-4 2015
- Revenue of $2,984K increased 2% or $54K from $2,930K.
- Adjusted EBITDA of $1,231K increased 75% or $528K from $703K.
- Pre-tax gain of $536K increased $550K from loss of $14K.
- Net income of $379K increased $445K from loss of $66K.
Executive Comments
Gary A. Vecchiarelli, Galaxy’s CFO commented, “2016 started with increases across the board. We have now increased our recurring revenues 17 of the last 18 quarters. Our EBITDA has also improved significantly, with a one-two punch of an increase in our recurring revenues and a decrease in our operating expenses.”
Robert B. Saucier, Galaxy’s CEO added, “It's always encouraging to start the year on such a high note. While the numbers speak for themselves, it is important to comprehend that throughout 2015 and early 2016, we were engaged in time consuming and expensive litigation. As previously reported, we prevailed in the litigation, which we are in the final stages of winding up. Accordingly, we are now able to focus on more productive things, such as growing our core business. Our results prove that our products are gaining solid market acceptance and as a result, we continue to increase placements. These increases combined with the reduction of operating expenses permit us to aggressively pay down our long-term debt.”
Financial Summary
Revenue. Total revenue for the first quarter 2016 increased 15% to $2,984,099, over the same quarter 2015. This increase is primarily due to additional placement of premium games and expansion into new territories. Between the first quarter 2016 and fourth quarter 2015, total revenues increased 2% to $2,984,099. This increase was recognized in all categories of products, with premium games netting the largest gains. The annualized recurring revenue run-rate as of March 31, 2016 is $11,927,280.
Total costs and expenses. Expenses for the first quarter 2016 remained relatively consistent with a decrease less than 1% to $2,189,730, when compared to the same quarter 2015. The total costs and expenses in the first quarter 2016 decreased 19% to $2,189,730 compared to the fourth quarter 2015. This decrease was primarily due to legal costs decreasing as litigation commenced formal proceedings in the fourth quarter 2015.
Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the first quarter 2016 increased 49% to $1,230,814, compared to the same quarter 2015. Lower selling, general & administrative expenses contributed to the increase in Adjusted EBITDA between the periods. Adjusted EBITDA in the first quarter 2016 increased 75% to $1,230,814 compared to the fourth quarter in 2015. This increase was primarily driven by the combination of an increase in 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 first quarter 2016 was $379,367, which was an increase of 502% 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 $379,367 in the first quarter reversed a net loss recognized in fourth quarter of 2015. This reversal 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 (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 | March 31, 2016 | December 31, 2015 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,077,985 | $ | 570,623 | ||||
| Restricted cash | 46,815 | 97,859 | ||||||
| Accounts receivables, net allowance for bad debts of $31,000 and $30,944 | 1,750,430 | 1,828,669 | ||||||
| Prepaid expenses | 56,177 | 106,338 | ||||||
| Inventories, net | 456,385 | 411,700 | ||||||
| Deferred tax asset | 10,477 | 43,017 | ||||||
| Other current assets | — | 2,489 | ||||||
| Total current assets | 3,398,269 | 3,060,695 | ||||||
| Property and equipment, net | 278,012 | 298,877 | ||||||
| Products leased and held for lease, net | 133,275 | 134,485 | ||||||
| Intangible assets, net | 12,889,324 | 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 | $ | 17,831,673 | $ | 17,971,048 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,310,608 | $ | 1,421,848 | ||||
| Accrued expenses | 880,018 | 823,964 | ||||||
| Income taxes payable | 305,123 | 170,331 | ||||||
| Deferred revenue | 813,983 | 717,690 | ||||||
| Jackpot liabilities | 84.201 | 106,671 | ||||||
| Capital lease obligations, current portion | 49,366 | 59,196 | ||||||
| Long-term debt, current portion | 4,565,293 | 4,648,120 | ||||||
| Deferred rent, current portion | 8,382 | 6,197 | ||||||
| Total current liabilities | 8,016,974 | 7,954,017 | ||||||
| Deferred rent, net of current portion | 50,001 | 52,643 | ||||||
| Capital lease obligations, net of current portion | 70,397 | 78,008 | ||||||
| Long-term debt, net of debt discount, net of current portion | 6,824,638 | 7,436,171 | ||||||
| Total liabilities | 14,962,010 | 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 | 2,984,312 | 2,963,841 | ||||||
| Accumulated deficit | (413,079 | ) | (792,446 | ) | ||||
| Accumulated other comprehensive income | 259,114 | 239,598 | ||||||
| Total stockholders’ equity | 2,869,663 | 2,450,209 | ||||||
| Total liabilities and stockholders’ equity | $ | 17,831,673 | $ | 17,971,048 | ||||
| GALAXY GAMING, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||
| FOR THE THREE MONTHS ENDED March 31, | |||||||||
| 2016 | 2015 | ||||||||
| Revenue: | |||||||||
| Product leases and royalties | $ | 2,981,820 | $ | 2,578,310 | |||||
| Product sales and service | 2,279 | 5,783 | |||||||
| Total revenue | 2,984,099 | 2,584,093 | |||||||
| Costs and expenses: | |||||||||
| Cost of ancillary products and assembled components | 21,640 | 23,289 | |||||||
| Selling, general and administrative | 1,652,303 | 1,579,073 | |||||||
| Research and development | 79,342 | 152,987 | |||||||
| Depreciation | 43,662 | 41,293 | |||||||
| Amortization | 372,312 | 378,073 | |||||||
| Share-based compensation | 20,471 | 18,870 | |||||||
| Total costs and expenses | 2,189,730 | 2,193,585 | |||||||
| Income from operations | 794,369 | 390,508 | |||||||
| Other income (expense): | |||||||||
| Interest income | 56 | 5,885 | |||||||
| Interest expense | (258,195 | ) | (279,939 | ) | |||||
| Total other expense | (258,139 | ) | (274,054 | ) | |||||
| Income before provision for income taxes | 536,230 | 116,454 | |||||||
| Provision for income taxes | (156,863 | ) | (53,595 | ) | |||||
| Net income | $ | 379,367 | $ | 62,859 | |||||
| Basic earnings per share | $ | 0.01 | $ | 0.00 | |||||
| Diluted earnings per share | $ | 0.01 | $ | 0.00 | |||||
| Weighted average shares outstanding: | |||||||||
| Basic | 39,351,147 | 38,990,591 | |||||||
| Diluted | 39,455,591 | 39,015,591 | |||||||
| GALAXY GAMING, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||||
| FOR THE THREE MONTHS ENDED March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income for the period | $ | 379,367 | $ | 62,859 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Depreciation expense | 43,662 | 41,293 | ||||||||
| Amortization expense | 372,312 | 378,073 | ||||||||
| Amortization of debt discount | 52,158 | 52,158 | ||||||||
| Deferred income tax provision | 156,863 | 53,595 | ||||||||
| Share-based compensation | 20,471 | 18,870 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Decrease (increase) in restricted cash | 51,044 | (7,839 | ) | |||||||
| Decrease in accounts receivable | 76,900 | 13,125 | ||||||||
| Decrease (increase) in other current assets | 2,489 | (6,155 | ) | |||||||
| (Increase) decrease in inventory | (54,958 | ) | 3,487 | |||||||
| Decrease (increase) in prepaid expenses | 50,161 | (6,171 | ) | |||||||
| (Decrease) increase in accounts payable | (111,065 | ) | 8,491 | |||||||
| Increase in income taxes payable | 134.792 | — | ||||||||
| Increase (decrease) in accrued expenses | 56,598 | (56,799 | ) | |||||||
| Increase in deferred revenue | 96,293 | 3,279 | ||||||||
| (Decrease) increase in jackpot liabilities | (22,470 | ) | 14,988 | |||||||
| (Decrease) increase in deferred rent | (457 | ) | 1,758 | |||||||
| Net cash provided by operating activities | 1,304,160 | 575,012 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Acquisition of property and equipment | (11,314 | ) | (7,895 | ) | ||||||
| Net cash used in investing activities | (11,314 | ) | (7,895 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Principal payments on capital leases | (17,441 | ) | (16,085 | ) | ||||||
| Principal payments on notes payable | (766,081 | ) | (841,203 | ) | ||||||
| Net cash used in financing activities | (783,522 | ) | (857,288 | ) | ||||||
| Effect of exchange rate changes on cash | (1,962 | ) | (9,380 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | 507,362 | (299,551 | ) | |||||||
| Cash and cash equivalents – beginning of period | 570,623 | 560,184 | ||||||||
| Cash and cash equivalents – end of period | $ | 1,077,985 | $ | 260,633 | ||||||
| Supplemental cash flow information: | ||||||||||
| Cash paid for interest | $ | 185,718 | $ | 279,939 | ||||||
| Inventory transferred to leased assets | $ | 10,273 | $ | — | ||||||
| Cash paid for income taxes | $ | 5,000 | $ | — | ||||||
| Supplemental non-cash financing activities information: | ||||||||||
| Effect of exchange rate on note payable in foreign currency | $ | 19,663 | $ | 288,601 | ||||||
| GALAXY GAMING, INC. RECONCILIATION TO ADJUSTED EBITDA (Unaudited) | |||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended December 31, | ||||||||||||||||||||||
| 2016 | 2015 | 2015 | |||||||||||||||||||||
| Net income | $ | 379,367 | $ | 62,859 | $ | (66,284 | ) | ||||||||||||||||
| Interest income | (56 | ) | (5,885 | ) | (48 | ) | |||||||||||||||||
| Interest expense | 258,195 | 279,939 | 248,026 | ||||||||||||||||||||
| Income tax provision | 156,863 | 53,595 | 51,829 | ||||||||||||||||||||
| Depreciation | 43,662 | 41,293 | 49,934 | ||||||||||||||||||||
| Amortization | 372,312 | 378,073 | 372,313 | ||||||||||||||||||||
| Share based compensation | 20,471 | 18,870 | 46,826 | ||||||||||||||||||||
| Adjusted EBITDA(1) | $ | 1,230,814 | $ | 828,744 | $ | 702,596 | |||||||||||||||||
(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.