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Galaxy Gaming Reports Q-2 Financial Results

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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.

Contact:
Gary A. Vecchiarelli
(702) 939-3254

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Source: Galaxy Gaming, Inc.