Galaxy Gaming Reports Q1 Financial Results

Las Vegas, Nevada, UNITED STATES


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.


        

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