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Galaxy Gaming Reports Q1 Financial Results

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LAS VEGAS, May 15, 2015 (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, 2015.

Financial Highlights

Q-1 2015 vs. Q-1 2014

  • Revenue of $2,584K increased 14% or $319K from $2,265K.
  • Adjusted EBITDA of $829K decreased 15% or $150K from $979K.
  • Pre-tax income of $116K decreased $128K or 52% from $244K.
  • Net income of $63K decreased $88K or 58% from $151K.

Q-1 2015 vs. Q-4 2014

  • Revenue of $2,584K decreased 1% or $16K from $2,600K.
  • Adjusted EBITDA of $829K decreased 4% or $38K from $867K.
  • Pre-tax income of $116K reversed $636K from a loss of ($520K).
  • Net income of $63K reversed $389K from a loss of ($326K).

Executive Comments

Gary A. Vecchiarelli, Galaxy's CFO stated, "The first quarter has historically been the period we see the lowest revenue growth rates of the year. While several factors contributed to our first decrease of recurring revenues in the last three years, we are not concerned it will have impact on future quarters. Our adjusted EBITDA and fundamentals of the business remains strong and we expect a strong 2015."

"Clearly, our first quarter results do not match the high standards and expectations we have set for ourselves," commented Robert B. Saucier, Galaxy's CEO. "However, we do not consider this a setback, as a number of great developments did occur in the quarter which provide us with optimism that indeed 2015 will be another record year for Galaxy. We are totally focused on obtaining that goal."

Financial Summary

Revenue. Total revenue for the first quarter increased 14% to $2,584,093, over the same quarter 2014. This increase is primarily due to additional placement of premium games and expansion into new territories. Between the first quarter 2015 and fourth quarter 2014, total revenues decreased 1%. The decrease was due to several ancillary factors including, but not limited to lower utilization of products in the United Kingdom, unfavorable foreign exchange rates and a realignment of the sales team operations. The annualized recurring revenue run-rate as of March 31, 2015 is $10,313,240.

Total costs and expenses. Expenses for the first quarter 2015 increased 26% to $2,193,585, over the same quarter 2014. The increase in 2015 is primarily due to increases in selling, general & administrative expenses, which was due to several reasons. Foremost, compensation and related expenses increased due to salaries, wages and payroll taxes related to expanded staff. Our professional and compliance expenses increased significantly due to ongoing litigation with competitors. Office related expenses increased due to the moving our corporate headquarters in April 2014, which is four times larger than our previous location.  Total costs and expenses decreased in the first quarter 2015 compared to the fourth quarter 2014 by 26%. This decrease is due to the fact that in the fourth quarter, we recognized a non-cash impairment of intangible assets and increases in share-based compensation due to a year end stock bonus granted to certain employees.

Net income. Net income for the first quarter 2015 was $62,859, which was a decrease of 58% from the same quarter 2014. The decrease was primarily due to the increases in selling, general & administrative expenses. The net income in the first quarter 2015, was reversed from a net loss of $326,083 in the fourth quarter of 2014. This increase was primarily driven by the fact that the fourth quarter recognized a non-cash impairment of intangible assets and increases in share-based compensation due to a year end stock bonus granted to certain employees.

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the first quarter 2015 decreased 15% to $828,744, compared to the first quarter 2014. Higher selling, general & administrative expenses contributed to the decrease in Adjusted EBITDA between the periods. Between the first quarter 2015 and fourth quarter 2014, Adjusted EBITDA decreased 4%, due to increased selling, general & administrative expenses.

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.
BALANCE SHEETS
(Unaudited) 
 
 
ASSETS March 31,
2015
December 31,
2014
Current assets:  
 
 
 
Cash and cash equivalents $260,633 $560,184
Restricted cash 115,752 107,913
Accounts receivables, net allowance for bad debts of $34,887 and $34,887 1,456,296 1,472,743
Prepaid expenses 86,611 80,440
Inventory 229,302 232,789
Note receivable – related party, current portion 383,298 383,298
Deferred tax asset 47,691 47,691
Other current assets 68,739 62,584
Total current assets 2,648,322 2,947,642
Property and equipment, net 359,849 382,098
Products leased and held for lease, net 115,421 125,665
Intangible assets, net 14,378,575 14,756,648
Goodwill 1,091,000 1,091,000
Deferred tax assets, net of current portion 47,848 143,614
Other assets, net 44,511 45,416
Total assets $18,685,526 $19,492,083
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:  
 
 
 
Accounts payable $526,452 $518,428
Accrued expenses 462,218 519,166
Income taxes payable 76,467 22,872
Deferred revenue 650,904 647,625
Jackpot liabilities 126,348 111,360
Current portion of capital lease obligations 67,629 66,273
Current portion of long-term debt 3,578,394 3,480,864
Total current liabilities 5,488,412 5,366,588
Deferred rent 58,000 56,242
Capital lease obligations, net of current portion 119,763 137,204
Long-term debt, net of debt discount, net of current portion 10,881,291 12,056,467
Total liabilities 16,547,466 17,616,501
Commitments and Contingencies (See Note 12)    
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 38,990,591 and 38,990,591 shares issued and outstanding 38,991 38,991
Additional paid-in capital 2,863,358 2,844,488
Accumulated deficit (917,441) (980,300)
Accumulated other comprehensive income (loss) 153,152 (27,597)
Total stockholders' equity 2,138,060 1,875,582
Total liabilities and stockholders' equity $18,685,526 $19,492,083

 

GALAXY GAMING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
 
  FOR THE THREE MONTHS
  ENDED
  March 31, 2015
 (Unaudited)
 March 31, 2014
 (Unaudited)
Revenue:    
Product leases and royalties $ 2,578,310 $ 2,260,809
Product sales and service 5,783 4,002
Total revenue 2,584,093 2,264,811
Costs and expenses:    
Cost of ancillary products and assembled components 23,289 19,320
Selling, general and administrative 1,579,073 1,152,657
Research and development 152,987 113,336
Depreciation 41,293 14,293
Amortization 378,073 389,499
Share-based compensation 18,870 53,688
Total costs and expenses 2,193,585 1,742,793
Income from operations 390,508 522,018
Other income (expense):    
Interest income 5,885 5,627
Interest expense (279,939) (283,237)
Total other expense (274,054) (277,610)
Income before provision for income taxes 116,454 244,408
Provision for income taxes (53,595) (93,243)
Net income $ 62,859 $ 151,165
Basic income per share $ 0.00 $ 0.00
Diluted income per share $ 0.00 $ 0.00
Weighted average shares outstanding:    
Basic 38,990,591 38,380,816
Diluted 39,015,591 38,409,600
 
GALAXY GAMING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
 
  FOR THE THREE MONTHS ENDED
MARCH 31,
  2015 2014
Cash flows from operating activities:    
Net income for the period $ 62,859 $ 151,165
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation expense 41,293 14,293
Amortization expense 378,073 389,499
Amortization of debt discount 52,158 52,158
Deferred income tax provision 53,595 93,243
Share-based compensation 18,870 53,688
Changes in operating assets and liabilities:    
Increase in restricted cash (7,839) (9,039)
Decrease (increase) in accounts receivable 13,125 (51,081)
(Increase) decrease in other current assets (6,155) 13,284
Decrease (increase) in inventory 3,487 (36,929)
Increase in prepaid expenses (6,171) (94,198)
Increase in other long-term assets (18,794)
Increase in accounts payable 8,491 50,547
(Decrease) increase in accrued expenses (56,799) 7,359
Increase in deferred revenue 3,279 27,933
Increase in jackpot liabilities 14,988 10,590
Increase in deferred rent 1,758
Net cash provided by operating activities 575,012 653,718
Cash flows from investing activities:    
Acquisition of property and equipment (7,895) (10,619)
Net cash used in investing activities (7,895) (10,619)
Cash flows from financing activities:    
Principal payments on capital leases (16,085)
Principal payments on notes payable (841,203) (723,347)
Net cash used in financing activities (857,288) (723,347)
Effect of exchange rate changes on cash (9,380) 4,646
Net decrease in cash and cash equivalents (299,551) (75,602)
Cash and cash equivalents – beginning of period 560,184 438,502
Cash and cash equivalents – end of period $ 260,633 $ 362,900
Supplemental cash flow information:    
Cash paid for interest $ 279,939 $ 283,237
Cash paid for income taxes $ — $ —
Supplemental non-cash financing activities information:    
Inventory transferred to leased assets $ — $ 36,550
Effect of exchange rate on note payable in foreign currency $ 288,601 $ 75,710
     
 
GALAXY GAMING, INC.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited)
 
  Three Months Ended
March 31,
Three Months Ended
December 31,
  2015 2014 2014
Net income (loss) $ 62,859 $ 151,165 $  (326,083)
Interest income (5,885) (5,627) (6,637)
Interest expense 279,939 283,237 258,307
Income tax provision (benefit) 53,595  93,243  (193,839) 
Depreciation 41,293  14,293  37,361 
Amortization 378,073  389,499  391,249 
Share based compensation 18,870  53,688  178,382 
Impairment of intangible assets --   --   528,233
Adjusted EBITDA(1) $ 828,744 $ 979,498 $  866,973

(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

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Source: Galaxy Gaming, Inc.