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Galaxy Gaming set for record year despite Q3 “challenges”

| By Robert Fletcher
Galaxy Gaming remains confident of posting record results for its 2023 financial year despite a challenging Q3 in which it reported an increased net loss and lower adjusted EBITDA.
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The provider’s Q3 results make for somewhat mixed reading, with revenue at Galaxy Gaming edging up 3.4% to $6.1m (£5.0m/€5.7m).  However, higher costs meant net loss was wider, while adjusted EBITDA for the three months to 30 September was down.

As for wider developments, last week Galaxy Gaming announced Todd Cravens would be stepping down as president and CEO. Incidentally, Cravens’ final day at Galaxy was yesterday (13 November), the day the Q3 results were published.

Matt Reback, previously of AGS, Konami Gaming, Caesars Entertainment and Red Rock Casinos – formerly Station Casinos – is taking over.

Speaking on his last day at the Las Vegas-headquartered group, Cravens said Galaxy remains on track for full-year revenue growth despite the challenges of Q3.

“Despite some challenges in Q3, 2023 is shaping up to be a record year for Galaxy,” Cravens said. “We had a sequential decline in revenue in Q3 principally because sales of perpetual licences were lower in Q3 than in Q1 and Q2.

“We expect that future sales of these perpetual licences will make our quarterly results lumpier than in the past. However, we will continue to pursue these sales as they result in substantial increases to our installed base and offer additional recurring revenue opportunities.

“We’re set up for increased revenue in fiscal 2024.”

Land-based growth offsets digital decline in Q3

Breaking down Q3 at Galaxy Gaming, the GG Core land-based operating segment posted $4.3m in revenue. This was 3.3% higher than last year, driven by the shipment of perpetual right to use gaming systems to a single customer.

In contrast, GG Digital revenue fell 10.0% year-on-year to $1.8m due to renegotiation of a contract with a customer. However, Galaxy Gaming says this decline will only be temporary as the renegotiation is expected to generate higher usage from the customer over the long-term.

As for geographical performance, activity in the Americas drew the most revenue. Some $3.9m was generated in the region, up 25.8%. However, revenue in Europe, the Middle East and Africa dropped 21.4% to $2.2m.

Net loss widens as spending increases

Cost-wise, operating expenses for Q3 climbed 17.4% to $5.4m. The main outgoing for Galaxy Gaming by some way was selling, general and administrative costs at $4.2m.

Other finance-related costs totalled $2.1m, leaving a pre-tax loss of $1.4m, compared to the $853,634 loss posted last year. Galaxy Gaming paid $41,642 in tax but gained $21,493 from foreign currency translation.

As such, Galaxy Gaming ended Q3 with a net loss of $1.4m, almost double the $776,561 loss last year. In addition, adjusted EBITDA declined 37.5% to $1.5m.

Positive picture for Galaxy Gaming in year-to-date

Looking at how Q3 impacted year-to-date performance, revenue in the nine months to 30 September was 20.6% higher at $21.1m. This included $14.8m in GG Core revenue, a rise of 29.3%, and $6.2m from GG Digital, up 3.3%.

Operating costs for the period were 16.1% higher at $15.9m while net other expenses hit $6.3m. This meant a pre-tax loss of $923,801, although this was an improvement on the $1.9m loss last year.

Galaxy Gaming paid $63,894 in tax and gained $12,850 back in foreign currency translation. With this, the provider ended the nine months with a $974,845 loss, shorter than the $2.1m loss in 2022.

In addition, Galaxy Gaming said adjusted EBITDA was 5.4% higher for the period at $7.8m.

What can we expect in Q4?

While outgoing CEO Cravens was positive about full-year prospects, Galaxy Gaming did not specify guidance figures. However, CFO Harry Hagerty did offer an insight into what might be coming in Q4.

For the final quarter of the year, Galaxy Gaming expects revenue to be between $7.0m and $7.5m. Anywhere within this range would be a marked improvement on Q3.

As for adjusted EBITDA, Hagerty says this should be in a range of $2.8m to $3.2m in Q4. This, again, would be higher, perhaps even double, the Q3 figure.

“This forecast assumes no impact to our business from the wars in Ukraine and the Middle East and no economic recession,” Hagerty said. “Finally, the forecast is based on currency exchange rates that we experienced in the third quarter.”

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