Galaxy Gaming Reports 2015 Financial Results
LAS VEGAS, March 30, 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 twelve months ended December 31, 2015.
Financial Highlights
Q-4 2015 vs. Q-4 2014
- Revenue of $2,930K increased 13% or $330K from $2,600K.
- Adjusted EBITDA of $703K decreased 18% or $158K from $861K.
- Pre-tax loss of $15K decreased 97% or $505K from $520K.
- Net loss of $66K decreased 80% or $260K from $326K.
Twelve months 2015 vs. Twelve months 2014
- Revenue of $10,952K increased 11% or $1,107K from $9,845K.
- Adjusted EBITDA of $3,267K decreased 13% or $488K from $3,755K.
- Pre-tax income of $439K increased 171% or $277K from $162K.
- Net income of $188K increased 755% or $166K from $22K.
Q-4 2015 vs. Q-3 2015
- Revenue of $2,930K increased 6% or $175K from $2,755K.
- Adjusted EBITDA of $703K decreased 21% or $191K from $894K.
- Pre-tax loss of $15K decreased $228K from profit of $213K.
- Net loss of $66K decreased $186K from profit of $120K.
Executive Comments
Gary A. Vecchiarelli, Galaxy’s CFO commented, "2015 represents another year of growth, with 11% revenue growth compared to 2014. Additionally, our recurring revenues have seen an increase for 16 of the last 17 quarters and is up 6% alone between Q3 and Q4 of 2015. This is a testament to the strength of our recurring revenue base and the continued demand for our legacy and new products.” Mr. Vecchiarelli added, “We recognized material increases in operating expenses, primarily due to litigation, but we expect our expenses to normalize now that the litigation has been finalized.”
Robert B. Saucier, Galaxy’s CEO added, “Near the end of 2014, we predicted 2015 would likely be a transformative year for our company and we expected to continue to obtain solid double-digit revenue growth. We did not anticipate the litigation filed against us by two competitors in December 2014, nor the significant costs and diversions associated with protecting our interests. While we believed it was important for us to defend the Company against these threats, which we ultimately prevailed, we experienced a slight detour of our anticipated results for 2015."
Mr. Saucier continued, “However, despite the distraction of the litigation, we continued the expansion of our geographical footprint, increased share in certain markets, grew our recurring revenues (11%), maintained our high margins (99%), increased our net profit (755%) and paid down our debt over $4 million. As a result, we are now financially healthier than ever. Going forward, we will continue to focus on building our reputation and position in the industry as a reliable table game provider.”
Conference Call
The Company will host an investor conference call to discuss its financial and operating results.
When: Thursday, March 31st at 1:30pm Pacific Time (4:30pm Eastern)
US/Canada: (888) 556-4997
International: (719) 325-2495
Conference ID: 5449895
Web Presentation: http://ir.galaxygaming.com/
Financial Summary
Revenue. Total revenue for the fourth quarter 2015 increased 13% to $2,930,129, over the same quarter 2014. This increase is primarily due to additional placement of premium games and expansion into new territories. For the twelve months ended December 31, 2015 compared to the same period 2014, revenues increased 11% to $10,951,670. The increase for the twelve month period was primarily due to the increased focus on premium games and expansion into new territories. Between the fourth quarter 2015 and third quarter 2015, total revenues increased 6% to $2,930,129. This increase was recognized in all categories of products, with premium games netting the largest gains. The annualized recurring revenue run-rate as of December 31, 2015 is $11,894,304.
Total costs and expenses. Expenses for the fourth quarter 2015 decreased 6% to $2,696,606, over the same quarter 2014. The decrease in 2015 is primarily due to the fact that in the fourth quarter 2014 we recognized an impairment charge of $528,233. Additionally, in 2015 our selling, general & administrative expenses have increased 29% to $7,133,681 driven by significant legal costs due to litigation with competitors. We also recognized increases in regulatory and compliance fees due to the licensure process with California and Nevada, which are classified as selling, general & administrative expense. For the twelve month period ended December 31, 2015 compared to the same period 2014, total costs and expenses increased 10% to $9,478,090. This increase was also due to the increased legal and regulatory costs recognized throughout the year. The total costs and expenses in the fourth quarter increased 17% to $2,696,606 compared to the third quarter. This increase was primarily due to legal costs as litigation commenced formal proceedings in the fourth quarter.
Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure (described below), for the fourth quarter 2015 decreased 18% to $702,596, compared to the same quarter 2014. Higher selling, general & administrative expenses contributed to the decrease in Adjusted EBITDA between the periods. For the twelve month period ended December 31, 2015, Adjusted EBITDA decreased 13% to $3,267,119 compared to the same period ended 2014. This decrease was primarily due to increased selling, general & administrative expenses driven by legal costs related to the litigation. Adjusted EBITDA in the fourth quarter 2015 decreased 21% to $702,596 compared to the third quarter in 2015. This decrease was primarily driven by the increased selling, general & administrative expenses driven by legal costs related to the litigation.
Net income. Net loss for the fourth quarter 2015 was $66,284, decreased 80% from the same quarter 2014. The decrease was primarily due to the increases in our recurring revenues and lower costs and expenses. For the twelve month period ended December 31, 2015 compared to the same period 2014, the net income increased 755% to $187,854. The primary driver of this increase was increased recurring revenues. The net loss in the fourth quarter 2015, decreased 155% to $66,284 from net income in third quarter of 2015. This decrease was the result of increased selling, general & administrative expenses which primarily relates to the litigation.
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) | ||||||||
| December 31, | ||||||||
| ASSETS | 2015 | 2014 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 570,623 | $ | 560,184 | ||||
| Restricted cash | 97,859 | 107,913 | ||||||
| Accounts receivables, net allowance for bad debts of $30,944 and $34,887 | 1,828,669 | 1,472,743 | ||||||
| Prepaid expenses | 106,338 | 80,440 | ||||||
| Inventory | 411,700 | 232,789 | ||||||
| Note receivable – related party, current portion | — | 383,298 | ||||||
| Deferred tax asset | 43,017 | 47,691 | ||||||
| Other current assets | 2,489 | 62,584 | ||||||
| Total current assets | 3,060,695 | 2,947,642 | ||||||
| Property and equipment, net | 298,877 | 382,098 | ||||||
| Products leased and held for lease, net | 134,485 | 125,665 | ||||||
| Intangible assets, net | 13,261,636 | 14,756,648 | ||||||
| Goodwill | 1,091,000 | 1,091,000 | ||||||
| Deferred tax assets, net of current portion | 82,562 | 143,614 | ||||||
| Other assets, net | 41,793 | 45,416 | ||||||
| Total assets | $ | 17,971,048 | $ | 19,492,083 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,421,848 | $ | 518,428 | ||||
| Accrued expenses | 823,964 | 519,166 | ||||||
| Income taxes payable | 170,331 | 22,872 | ||||||
| Deferred revenue | 717,690 | 647,625 | ||||||
| Jackpot liabilities | 106,671 | 111,360 | ||||||
| Capital lease obligations, current portion | 59,196 | 66,273 | ||||||
| Long-term debt, current portion | 4,648,120 | 3,480,864 | ||||||
| Deferred rent, current portion | 6,197 | — | ||||||
| Total current liabilities | 7,954,017 | 5,366,588 | ||||||
| Deferred rent | 52,643 | 56,242 | ||||||
| Capital lease obligations, net of current portion | 78,008 | 137,204 | ||||||
| Long-term debt, net of debt discount, net of current portion | 7,436,171 | 12,056,467 | ||||||
| Total liabilities | 15,520,839 | 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; 39,215,591 and 38,990,591 shares issued and outstanding at December 31, 2015 and 2014, respectively | 39,216 | 38,991 | ||||||
| Additional paid-in capital | 2,963,841 | 2,844,488 | ||||||
| Accumulated deficit | (792,446 | ) | (980,300 | ) | ||||
| Accumulated other comprehensive income (loss) | 239,598 | (27,597 | ) | |||||
| Total stockholders’ equity | 2,450,209 | 1,875,582 | ||||||
| Total liabilities and stockholders’ equity | $ | 17,971,048 | $ | 19,492,083 | ||||
| GALAXY GAMING, INC. | |||||||||
| STATEMENTS OF OPERATIONS | |||||||||
| (Unaudited) | |||||||||
| Year Ended December 31, | |||||||||
| 2015 | 2014 | ||||||||
| Revenue: | |||||||||
| Product leases and royalties | $ | 10,915,410 | $ | 9,835,345 | |||||
| Product sales and service | 36,260 | 9,763 | |||||||
| Total revenue | 10,951,670 | 9,845,108 | |||||||
| Costs and expenses: | |||||||||
| Cost of ancillary products and assembled components | 95,930 | 80,525 | |||||||
| Selling, general and administrative | 7,133,681 | 5,537,165 | |||||||
| Research and development | 454,940 | 472,567 | |||||||
| Depreciation | 178,850 | 109,809 | |||||||
| Amortization | 1,495,012 | 1,561,631 | |||||||
| Share-based compensation | 119,677 | 323,759 | |||||||
| Impairment of intangible assets | — | 528,233 | |||||||
| Total costs and expenses | 9,478,090 | 8,613,689 | |||||||
| Income from operations | 1,473,580 | 1,231,419 | |||||||
| Other income (expenses): | |||||||||
| Interest income | 13,337 | 23,478 | |||||||
| Interest expense | (1,047,434 | ) | (1,093,264 | ) | |||||
| Total other expense | (1,034,097 | ) | (1,069,786 | ) | |||||
| Income before provision for income taxes | 439,483 | 161,633 | |||||||
| Provision for income taxes | (251,629 | ) | (139,745 | ) | |||||
| Net income | $ | 187,854 | $ | 21,888 | |||||
| Basic earnings per share | $ | 0.00 | $ | 0.00 | |||||
| Diluted earnings per share | $ | 0.00 | $ | 0.00 | |||||
| Weighted average number of shares outstanding: | |||||||||
| Basic | 39,066,415 | 38,513,084 | |||||||
| Diluted | 39,123,489 | 38,517,594 | |||||||
| GALAXY GAMING, INC. | ||||||||
| STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income for the year | $ | 187,854 | $ | 21,888 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation expense | 178,850 | 109,809 | ||||||
| Amortization expense | 1,495,012 | 1,561,631 | ||||||
| Provision for bad debts | 33,907 | — | ||||||
| Inventory reserve | 54,696 | — | ||||||
| Amortization of debt discount | 208,632 | 208,632 | ||||||
| Provision for income taxes | 251,629 | 139,745 | ||||||
| Share-based compensation | 119,677 | 323,759 | ||||||
| Impairment of intangible assets | — | 528,233 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in restricted cash | 10,054 | 136,503 | ||||||
| Increase in accounts receivable | (389,833 | ) | (199,455 | ) | ||||
| Decrease (increase) in other current assets | 60,095 | (12,074 | ) | |||||
| Increase in inventory | (288,795 | ) | (11,373 | ) | ||||
| Increase in prepaid expenses | (25,898 | ) | (45,467 | ) | ||||
| Increase in other long-term assets | — | (41,794 | ) | |||||
| Increase in accounts payable | 903,420 | 276,727 | ||||||
| Increase in accrued expenses | 304,798 | 198,209 | ||||||
| Increase (decrease) in income taxes payable | 109,015 | (11,783 | ) | |||||
| Increase in deferred revenue | 70,065 | 120,703 | ||||||
| Decrease in jackpot liabilities | (4,689 | ) | (135,162 | ) | ||||
| Increase in deferred rent | 2,598 | 56,242 | ||||||
| Net cash provided by operating activities | 3,281,087 | 3,224,973 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | (45,638 | ) | (76,716 | ) | ||||
| Acquisition of intangible assets | — | (35,000 | ) | |||||
| Net cash used in investing activities | (45,638 | ) | (111,716 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Principal payments on capital leases | (66,273 | ) | (40,223 | ) | ||||
| Principal payments on notes payable | (3,147,459 | ) | (2,937,709 | ) | ||||
| Net cash used in financing activities | (3,213,732 | ) | (2,977,932 | ) | ||||
| Effect of exchange rate changes on cash | (11,278 | ) | (13,643 | ) | ||||
| Net increase in cash and cash equivalents | 10,439 | 121,682 | ||||||
| Cash and cash equivalents – beginning of year | 560,184 | 438,502 | ||||||
| Cash and cash equivalents – end of year | $ | 570,623 | $ | 560,184 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | 1,036,288 | $ | 880,947 | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Supplemental non-cash financing activities information: | ||||||||
| Assets acquired under capital leases | $ | — | $ | 243,700 | ||||
| Assets acquired under note payable | $ | — | $ | 86,634 | ||||
| Inventory transferred to leased assets | $ | 55,188 | $ | 76,064 | ||||
| Offsetting of related party note receivable and note payable | $ | 383,298 | $ | — | ||||
| Effect of exchange rate on note payable in foreign currency | $ | 131,014 | $ | 396,083 | ||||
| GALAXY GAMING, INC. | |||||||||||||
| RECONCILIATION TO ADJUSTED EBITDA | |||||||||||||
| (Unaudited) | |||||||||||||
| Years Ended December 31, | |||||||||||||
| 2015 | 2014 | ||||||||||||
| Net income | $ | 187,854 | $ | 21,888 | |||||||||
| Interest income | (13,337 | ) | (23,478 | ) | |||||||||
| Interest expense | 1,047,434 | 1,093,264 | |||||||||||
| Income tax provision | 251,629 | 139,745 | |||||||||||
| Depreciation | 178,850 | 109,809 | |||||||||||
| Amortization | 1,495,012 | 1,561,631 | |||||||||||
| Share based compensation | 119,677 | 323,759 | |||||||||||
| Impairment of intangible assets | — | 528,233 | |||||||||||
| Adjusted EBITDA(1) | $ | 3,267,119 | $ | 3,754,851 | |||||||||
(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
Released March 30, 2016