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.


            

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