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Galaxy Gaming Reports 2015 Financial Results

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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

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Source: Galaxy Gaming, Inc.