Galaxy Gaming Reports Q4 and Full Year 2022 Financial Results


LAS VEGAS, March 31, 2023 (GLOBE NEWSWIRE) -- Galaxy Gaming, Inc. (OTCQB: GLXZ), a developer and distributor of casino table games and enhanced systems for land-based casinos and iGaming content, announced today its financial results for the quarter and year ended December 31, 2022.

Financial Highlights

Q4 2022 vs. Q4 2021

  • Revenue increased 5% to $5,940K
    • +14% to $6,453K at constant currency
  • Adjusted EBITDA increased 30% to $3,153K
    • Q4 2022 benefited from one-time payroll tax benefit of $575k (net)
  • Net income declined from $598K to $55K

Full Year 2022 vs. Full Year 2021

  • Revenue increased 17% to $23,442K
    • +23% to $24,632 at constant currency
  • Adjusted EBITDA increased 21% to $10,534K
  • Net loss of $(1,733)K vs. net income of $2,112K

Balance Sheet Changes (vs. December 31, 2021)

  • Cash increased 14% to $18,238K
  • Total long-term debt1 (gross) decreased to $59,741K from $60,500K
  • Stockholders’ deficit increased to $(17,885)K from $(17,286)K

1 Includes current portion.

Executive Comments

“In spite of the headwinds from exchange rates, interest rates and inflation rates, we had a solid quarter and ended 2022 on a good trajectory,” said Todd Cravens, Galaxy’s President and CEO.   “At constant currency, revenues for both the quarter and the year would have been new records for Galaxy. We enter the current year with several new games coming to market, and we will be installing the first of our Galaxy Operating System (“GoS”) progressives beginning in Q2.   We expect double-digit revenue increases in our online business in 2023, and expect revenue growth in the GG Core business to accelerate over the course of the year as GoS systems get installed, along with new content. We are working on upgrades and enhancements to GoS and expect to present GoS 2.0 at G2E in October.”

“Some adjustments need to be made to our reported numbers to make them more comparable to the respective 2021 figures,” said Harry Hagerty, Galaxy’s CFO. “For the quarter, using last year’s exchange rates adds $512K to revenue. Our Adjusted EBITDA in the quarter benefitted from $575K in ERTC credits, which should be removed for comparability. Applying both adjustments results in pro forma revenue of $6,453K (+14%) and pro forma EBITDA of $3,090K (+43%). For the year, using last year’s exchange rates adds $1,189K to revenue, and Adjusted EBITDA benefitted from the same $575K ERTC credit. Applying both adjustments results in pro forma revenue of $24,632K and pro forma EBITDA of $11,149K.

“The currency comparisons impacted in the GG Digital operating segment more than the GG Core segment. For the quarter, revenue in GG Core was $3,944K ($4,036 in constant currency) vs. $3,951k in Q4 2021. In GG Digital, we had revenues of $1,996 in Q4 2022 ($2,416 in constant currency) vs. $1,719 in Q4 2021.   For the year, revenue in GG Core was $15,399K ($15,685K in constant currency) vs. $13,556k in 2021. In GG Digital, we had revenues of $8,043 in 2022 ($8,946 in constant currency) vs. $6,428in 2021.

“We are very comfortably in compliance with the Net Leverage covenant in our credit agreement with Fortress. Our Net Leverage was 4.0x at year-end vs. a maximum allowable of 8.0x (stepping down to 6.0x in 2023). The interest we pay on the term loan has increased sharply as short-term benchmarks increased over the last three quarters of 2022. We expect interest expense to be close to $9.0 million in 2023 based on a benchmark rate of 5.0% for the remainder of the year. We expect to generate Adjusted EBITDA in excess of interest expense and amortization in 2023, and we will also maintain significant cash balances in order to allow us to pay the interest and amortization if business trends deteriorate. We hope to be able to refinance the Fortress debt in Q4 2022 when the prepayment penalty lapses.

“For 2023, we are forecasting revenue in a range of $26-$27 million and Adjusted EBITDA in a range of $12-13 million. This forecast assumes exchange rates that existed in Q4 2022 and is based on economic conditions as they existed at the beginning of 2023.

“We have not repurchased any common stock under the authorization we received in November and will not be able to do any repurchases until after the current blackout period expires after the filing of our Q1 10-Q on May 15, 2023.”

The company is releasing an investor deck with its earnings this quarter. Investors are encouraged to send questions to management at investors@galaxygaming.com by Monday, April 3rd. Management will record their answers to investor questions and give more detail to the investor deck. The recording should be posted on or around April 7th.

Forward-Looking Statements
This press release contains, and oral statements made from time to time by our representatives may contain, forward-looking statements based on management's current expectations and projections, which are intended to qualify for the safe harbor of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements identified by words such as "believe," "will," "may," "might," "likely," "expect," "anticipates," "intends," "plans," "seeks," "estimates," "believes," "continues," "projects" and similar references to future periods, or by the inclusion of forecasts or projections.  All forward-looking statements are based on current expectations and projections of future events.

These forward-looking statements reflect the current views, models, and assumptions of Galaxy Gaming, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in Galaxy Gaming's performance to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, the ability of Galaxy Gaming to enter and maintain strategic alliances, product placements or installations, in land based casinos or grow its iGaming business, garner new market share, secure licenses in new jurisdictions or maintain existing licenses, successfully develop or acquire and sell proprietary products, comply with regulations, have its games approved by relevant jurisdictions, and other factors. All forward-looking statements made herein are expressly qualified in their entirety by these cautionary statements and there can be no assurance that the actual results, events, or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. Galaxy Gaming expressly disclaims any obligation to update or revise any forward-looking statements, whether because of new information, future events or otherwise.

About Galaxy Gaming

Headquartered in Las Vegas, Nevada, Galaxy Gaming (galaxygaming.com) develops and distributes innovative proprietary table games, state-of-the-art electronic wagering platforms and enhanced bonusing systems to land-based, riverboat, and cruise ship and casinos worldwide. In addition, through its wholly owned subsidiary, Progressive Games Partners LLC, Galaxy licenses proprietary table games content to the online gaming industry. Connect with Galaxy on Facebook, YouTube   and Twitter.

Non-GAAP Financial Information

Adjusted EBITDA includes adjustments to net loss/income to exclude interest, taxes, depreciation, amortization, share based compensation, gain/loss on extinguishment of debt, foreign currency exchange gains/losses, change in estimated fair value of interest rate swap liability and severance and other expenses related to litigation. Adjusted EBITDA is not a measure of performance defined in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). However, Adjusted EBITDA is used by management to evaluate our operating performance. Management believes that disclosure of Adjusted EBITDA allows investors, regulators, and other stakeholders to view of our operations in the way management does. Adjusted EBITDA should not be considered as an alternative to net income or to net cash provided by operating activities as a measure of operating results or of liquidity. Finally, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

Revenue at constant currency is a non-GAAP measure. We calculate constant currency revenue by applying the exchange rates realized in the year-ago period to the revenue earned in the respective foreign currencies in the current period. We believe that providing constant currency revenue allows readers to better understand the underlying growth of our businesses by removing the effect of exchange rate changes. In calculating EBITDA pro forma for constant currency, we do not adjust the exchange rates for expenses in current periods as the majority of our expenses are denominated in US dollars.

Contact:  
   
Media: Phylicia Middleton (702) 936-5216
Investors: Harry Hagerty (702) 938-1740


   Years ended December 31,
Adjusted EBITDA Reconciliation:  2022   2021 
Net (loss) income  $(1,773,189) $2,111,812 
Interest expense   7,411,224    1,505,386 
Share redemption consideration       682,469 
Interest income   (71,223)  (2,048)
Depreciation and amortization   2,761,359    2,858,991 
Share-based compensation   1,278,068    1,532,455 
Foreign currency exchange loss (gain)   290,394    64,879 
Change in fair value of interest
rate swap liability
       (66,009)
Provision (benefit) for income taxes   208,887    48,637 
Other non-recurring income   5,709     
Severance expense   28,477    12,596 
Special project expense (benefit) - Triangulum   (86,959)  487,712 
Special project expense - Other   481,737    (503,050)
Adjusted EBITDA  $10,534,484   $8,733,830 
   Three Months Ended December 31,
Adjusted EBITDA Reconciliation: 2022 2021 
Net (loss) income $55,105 $      623,384 
Interest expense 2,129,902 1,054,912 
Share redemption consideration  96,023 
Interest income (48,057)(886)
Depreciation and amortization 571,570 698,774 
Share-based compensation 323,518 324,807 
Foreign currency exchange loss (gain) (199,647)33,478 
Provision (benefit) for income taxes 310,828 41,637 
Other non-recurring income (12,546)(25,000)
Special project expense (benefit) - Triangulum  74,688 
Special project expense - Other 21,833 (490,676)
Adjusted EBITDA $3,152,505 $2,431,141 


Currency Reconciliation - Q4 2022 vs Q4 2021
             
 Consolidated
 Q4 2022 Q4 2022 Pro Forma Q4 2021 Change
  RealizedActual  RealizedPro Forma Actual Q4 2022Q4 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Q4 2021Q4 2021
 CurrencyQ4 2022Revenue CurrencyQ4 2021Revenue Revenue ActualActual
EUR1,687,114$0.94$1,587,722 1,687,114$1.17$1,977,536 $1,337,799 19%48%
GBP£628,843$1.16$729,663 £628,843$1.35$852,003 $1,072,517 -32%-21%
USD$3,623,137$1.00$3,623,137 $3,623,137$1.00$3,623,137 $3,259,935 11%11%
   $5,940,522   $6,452,676 $5,670,251 5%14%
             
 GG Core
 Q4 2022 Q4 2022 Pro Forma Q4 2021 Change
  RealizedActual  RealizedPro Forma Actual Q4 2022Q4 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Q4 2021Q4 2021
 CurrencyQ4 2022Revenue CurrencyQ4 2021Revenue Revenue ActualActual
EUR72,177$1.01$72,679 72,177$1.16$83,804 $38,942 87%115%
GBP£444,102$1.17$519,775 £444,102$1.35$599,786 $863,242 -40%-31%
USD$3,352,260$1.00$3,352,260 $3,352,260$1.00$3,352,260 $3,049,111 10%10%
   $3,944,714   $4,035,850 $3,951,295 -0%2%
             
 GG Digital
 Q4 2022 Q4 2022 Pro Forma Q4 2021 Change
  RealizedActual  RealizedPro Forma Actual Q4 2022Q4 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Q4 2021Q4 2021
 CurrencyQ4 2022Revenue CurrencyQ4 2021Revenue Revenue ActualActual
EUR1,614,937$0.94$1,515,042 1,614,937$1.17$1,893,731 $1,298,857 17%46%
GBP£184,741$1.14$209,888 £184,741$1.37$252,217 $209,275 0%21%
USD$270,877$1.00$270,877 $270,877$1.00$270,877 $210,824 28%28%
   $1,995,809   $2,416,826 $1,718,956 16%41%
             
Note: Some numbers may not foot due to rounding.
Currency Reconciliation - Full Year 2022 vs Full Year 2021
             
 Consolidated
 Full Year 2022 Full Year 2022 Pro Forma Full Year 2021 Change
  RealizedActual  RealizedPro Forma Actual Full Year 2022Full Year 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Full Year 2021Full Year 2021
 CurrencyFull Year 2022Revenue CurrencyFull Year 2021Revenue Revenue ActualActual
EUR6,206,166$1.06$6,591,971 6,206,166$1.20$7,447,074 $4,828,354 37%54%
GBP£2,633,850$1.24$3,272,999 £2,633,850$1.37$3,607,206 $2,383,968 37%51%
USD$13,577,335$1.00$13,577,335 $13,577,335$1.00$13,577,335 $12,772,055 6%6%
   $23,442,307   $24,631,615 $19,984,378 17%23%
             
 GG Core
 Full Year 2022 Full Year 2022 Pro Forma Full Year 2021 Change
  RealizedActual  RealizedPro Forma Actual Full Year 2022Full Year 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Full Year 2021Full Year 2021
 CurrencyFull Year 2022Revenue CurrencyFull Year 2021Revenue Revenue ActualActual
EUR208,821$1.04$217,927 208,821$1.18$247,149 $106,012 106%133%
GBP£2,017,035$1.24$2,498,050 £2,017,035$1.37$2,755,204 $1,641,463 52%68%
USD$12,683,081$1.00$12,683,081 $12,683,081$1.00$12,683,081 $11,808,961 7%7%
   $15,399,060   $15,685,435 $13,556,436 14%16%
             
 GG Digital
 Full Year 2022 Full Year 2022 Pro Forma Full Year 2021 Change
  RealizedActual  RealizedPro Forma Actual Full Year 2022Full Year 2022
 Revenue inExchangeReporting Revenue inExchangeReporting Reporting Actual vs.Pro Forma vs.
 LocalRateCurrency LocalRateCurrency Currency Full Year 2021Full Year 2021
 CurrencyFull Year 2022Revenue CurrencyFull Year 2021Revenue Revenue ActualActual
EUR5,997,345$1.06$6,374,044 5,997,345$1.20$7,199,924 $4,722,343 35%52%
GBP£616,815$1.26$774,950 £616,815$1.38$852,002 $742,505 4%15%
USD$894,254$1.00$894,254 $894,254$1.00$894,254 $963,095 -7%-7%
   $8,043,248   $8,946,180 $6,427,943 25%39%
             
Note: Some numbers may not foot due to rounding.

 

Reconciliation of Reported to Pro Forma Revenue and EBITDA
     
     
  Q4  Full Year
   2022   2022 
Reported Revenue $5,940,525  $23,442,307 
Currency Adjustment  512,151   1,189,308 
Pro Forma Revenue $6,452,676  $24,631,615 
     
Reported EBITDA $3,153,000  $10,534,484 
plus: Currency Adjustment  512,151   1,189,308 
minus: ERTC Credit  (574,979)  (574,979)
Pro Forma EBITDA $3,090,172  $11,148,813