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Galaxy Gaming Reports Q2 Financial Results

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LAS VEGAS, Aug. 14, 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 and six months ended June 30, 2015.

Financial Highlights

Q-2 2015 vs. Q-2 2014

  • Revenue of $2,683K increased 9% or $220K from $2,463K.
  • Adjusted EBITDA of $842K decreased 15% or $151K from $993K.
  • Pre-tax income of $125K decreased $108K or 46% from $233K.
  • Net income of $72K decreased $37K or 34% from $109K.

Six months 2015 vs. Six months 2014

  • Revenue of $5,267K increased 11% or $540K from $4,727K.
  • Adjusted EBITDA of $1,693K decreased 14% or $274K from $1,967K.
  • Pre-tax income of $241K decreased 50% or $237K from $478K.
  • Net income of $134K decreased 49% or $127K from $261K.

Q-2 2015 vs. Q-1 2015

  • Revenue of $2,683K increased 4% or $99K from $2,584K.
  • Adjusted EBITDA of $842K increased 2% or $13K from $829K.
  • Pre-tax income of $125K increased 8% or $9K from $116K.
  • Net income of $72K increased 14% or $9K from $63K.

Executive Comments

Gary A. Vecchiarelli, Galaxy's CFO commented, "We are pleased that our recurring revenue has increased in the second quarter. Growth continues to be the recurring theme, as we have now increased our recurring revenues 14 of the last 15 quarters. While we have incurred increased legal and regulatory costs recently, I anticipate resolution in both those areas will open up further revenue opportunities for the Company."

"The revenue increases reflect the improvements and strategies we implemented with our sales team who have benefited from the expansion and diversification of our product lines," stated Robert B. Saucier, Galaxy's CEO. "After a sluggish first quarter start, we expect that the changes made and represented in our second quarter results, will continue to produce stronger results going forward. I believe we will once again finish the year with record results, providing increased momentum as we enter 2016."

Mr. Saucier continued, "Those who monitor our balance sheet should recognize our commitment to long-term debt reduction. Cash generated from operations continues to reduce the principal balances of our debt approximately $1 Million each quarter. In summary, the Company is now healthier than ever as a result of increased operational performance combined with an improving balance sheet."

Financial Summary

Revenue. Total revenue for the second quarter increased 9% to $2,682,600, over the same quarter 2014. This increase is primarily due to additional placement of premium games and expansion into new territories. For the six months ended June 30, 2015 compared to the same period 2014, revenues increased 11% to 5,266,695. The increase for the six month period was primarily due to the increased focus on premium games and expansion into new territories. Between the second quarter 2015 and first quarter 2015, total revenues increased 4% to $2,682,600. These increases were due to an increase in activity in the United Kingdom and additional placements of premium and side bet games. The annualized recurring revenue run-rate as of June 30, 2015 is $10,709,536.

Total costs and expenses. Expenses for the second quarter 2015 increased 17% to $2,292,336, over the same quarter 2014. The increase in 2015 is primarily due to increases in selling, general & administrative expenses, driven by increased legal and compliance costs. Our professional and compliance expenses increased significantly due to ongoing litigation with competitors. In that amount, we also recognized increases due to the licensure process with California and Nevada. For the six month period ended June 30, 2015 compared to the same period 2014, total costs and expenses increased 21% to 4,485,925. This increase was also due to the increased legal and regulatory costs, combined with the fact 2015 represents a full six months at our new and larger headquarters location. Total costs and expenses increased in the second quarter 2015 compared to the first quarter 2015 by 5% to $2,292,336. These increases were primarily due to the additional professional and compliance expenses related to litigation and licensure. 

Net income. Net income for the second quarter 2015 was $71,573, which was a decrease of 35% from the same quarter 2014. The decrease was primarily due to the increases in selling, general & administrative expenses. For the six month period ended June 30, 2015 compared to the same period 2014, the net income decreased 48% to $134,432. The primary driver of this decrease was the increases in selling, general & administrative expenses. The net income in the second quarter 2015, increased 14% to $71,573 over the first quarter of 2015. This increase was the result of additional revenues between the quarters. 

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the second quarter 2015 decreased 15% to $841,667, compared to the same quarter 2014. Higher selling, general & administrative expenses contributed to the decrease in Adjusted EBITDA between the periods. For the six month period ended June 30, 2015, Adjusted EBITDA decreased 14% to $1,692,819 compared to the same period ended 2014. This decrease was primarily due to lower net income as a result of the increased selling, general & administrative expenses. Adjusted EBITDA in the second quarter 2015 increased 2% to $841,667 compared to the first quarter in 2015. This increase was due to growth in recurring revenues between the quarters.

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 June 30, December 31,
  2015 2014
Current assets:    
Cash and cash equivalents $247,160 $560,184
Restricted cash 136,321 107,913
Accounts receivables, net allowance for bad debts of $40,000 and $34,887 1,486,678 1,472,743
Prepaid expenses 198,300 80,440
Inventories, net 195,034 232,789
Note receivable – related party, current portion 383,298 383,298
Deferred tax asset 47,691 47,691
Other current assets 70,740 62,584
Total current assets 2,765,222 2,947,642
Property and equipment, net 364,049 382,098
Products leased and held for lease, net 116,314 125,665
Intangible assets, net 14,006,262 14,756,648
Goodwill 1,091,000 1,091,000
Deferred tax assets, net of current portion 159,640 143,614
Other assets, net 43,605 45,416
Total assets $18,546,092 $19,492,083
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $806,035 $518,428
Accrued expenses 530,867 519,166
Income taxes payable 129,612 22,872
Deferred revenue 682,711 647,625
Jackpot liabilities 139,824 111,360
Current portion of capital lease obligations 69,041 66,273
Current portion of long-term debt 3,850,472 3,480,864
Total current liabilities 6,208,562 5,366,588
Deferred rent 57,927 56,242
Capital lease obligations, net of current portion 101,972 137,204
Long-term debt, net of debt discount, net of current portion 10,143,467 12,056,467
Total liabilities 16,511,928 17,616,501
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 39,065,591 and 38,990,591 shares issued and outstanding 39,066 38,991
Additional paid-in capital 2,899,355 2,844,488
Accumulated deficit (845,868 (980,300
Accumulated other comprehensive loss -58,389 (27,597
Total stockholders' equity 2,034,164 1,875,582
Total liabilities and stockholders' equity $18,546,092 $19,492,083
 
GALAXY GAMING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
         
  FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
  June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Revenue:        
Product leases and royalties $2,677,384 $2,461,354 $5,255,696 $4,722,163
Product sales and service 5,216 1,175 10,999 5,177
Total revenue 2,682,600 2,462,529 5,266,695 4,727,340
Costs and expenses:        
Cost of ancillary products and assembled components 23,989 17,620 47,278 36,940
Selling, general and administrative 1,700,503 1,353,796 3,279,579 2,512,454
Research and development 116,441 98,051 269,429 211,387
Depreciation 43,018 28,451 84,311 42,744
Amortization 372,313 389,634 750,386 779,133
Share-based compensation 36,072 67,136 54,942 114,823
Total costs and expenses 2,292,336 1,954,688 4,485,925 3,697,481
         
Income from operations 390,264 507,841 780,770 1,029,859
         
Other income (expense):        
Interest income 5,320 5,827 11,205 11,454
Interest expense (270,865) (280,445) (550,803) (563,682)
Total other expense (265,545) (274,618) (539,598) (552,228)
Income before provision for income taxes 124,719 233,223 241,172 477,631
Provision for income taxes (53,146) (123,846) (106,740) (217,089)
Net income $71,573 $109,377 $134,432 $260,542
         
Basic income per share $0.00 $0.00 $0.00 $0.01
Diluted income per share $0.00 $0.00 $0.00 $0.01
         
Weighted average shares outstanding:        
Basic 39,065,591 38,535,591 39,028,091 38,459,897
Diluted 39,065,591 38,626,603 39,028,508 38,537,558
 
GALAXY GAMING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
     
  FOR THE SIX MONTHS ENDED
  JUNE 30,
  2015 2014
Cash flows from operating activities:    
Net income for the period $134,432 $260,542
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation expense 84,311 42,744
Amortization expense 750,386 779,132
Provision for bad debt expense 40,000
Inventory reserve 47,069
Amortization of debt discount 104,316 104,316
Deferred income tax provision 202,506
Share-based compensation 54,942 114,823
Changes in operating assets and liabilities:    
Increase in restricted cash (28,408) (20,500)
Increase in accounts receivable (51,744) (150,414)
(Increase) decrease in other current assets (8,156) 17,743
Increase in inventory (20,348) (52,079)
Increase in prepaid expenses (117,860) (59,804)
Increase in other long-term assets (40,889)
Increase in accounts payable 286,986 94,346
Increase in accrued expenses 14,837 49,695
Increase in income taxes payable 122,266
Increase in deferred revenue 35,086 70,287
Increase in jackpot liabilities 28,464 23,021
Increase in deferred rent 1,685 52,724
Net cash provided by operating activities 1,558,504 1,407,953
Cash flows from investing activities:    
Acquisition of property and equipment (44,066) (8,791)
Acquisition of intangible assets (35,000)
Net cash used in investing activities (44,066) (43,791)
Cash flows from financing activities:    
Principal payments on capital leases (32,464) (9,352)
Principal payments on notes payable (1,800,231) (1,360,143)
Net cash used in financing activities (1,832,695) (1,369,495)
Effect of exchange rate changes on cash 5,233 1,438
Net decrease in cash and cash equivalents (313,024) (3,895)
Cash and cash equivalents – beginning of period 560,184 438,502
Cash and cash equivalents – end of period $247,160 $434,607
Supplemental cash flow information:    
Cash paid for interest $446,487 $563,682
Inventory transferred to leased assets $11,034 $36,550
Cash paid for income taxes
Supplemental non-cash financing activities information:    
Effect of exchange rate on note payable in foreign currency $152,523 $74,935
Assets acquired by capital leases $243,970
 
GALAXY GAMING, INC.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited)
           
  Three Months Six Months Three Months
   Ended June 30,  Ended June 30, Ended March 31,
  2015 2014 2015 2014 2015
Net income $71,573 $109,377 $134,432 $260,542 $62,859
Interest income (5,320) (5,827) (11,205) (11,454) (5,885)
Interest expense 270,865 280,445 550,803 563,682 279,939
Income tax provision 53,146 123,846 106,740 217,089 53,595
Depreciation 43,018 28,451 84,311 42,744 41,293
Amortization 372,313 389,634 750,386 779,133 378,073
Share based compensation 36,072 67,136 54,942 114,823 18,870
Adjusted EBITDA(1) $841,667 $993,062 $1,692,819 $1,966,559 $828,744

(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.