Galaxy chief credits EZ Baccarat with improved performance

March 25, 2024 4:34 PM
  • David McKee, CDC Gaming Reports
March 25, 2024 4:34 PM
  • David McKee, CDC Gaming Reports
  • United States

Reflecting on Galaxy Gaming’s improved profitability and revenue in the final quarter of 2023, CEO Matt Reback gave his company’s EZ Baccarat game much of the credit. He said Galaxy enjoyed a full quarter of license revenue from the game, even if it was unable to realize the complete installation of EZ Baccarat’s trend displays. Galaxy pays no royalties on the latter.

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Those installations were completed last month. Reback expected them to increase revenue for this year.

After 18 weeks as Galaxy president and CEO, Reback said he was “very excited” about the company’s prospects. He cited the hiring of Executive Vice President of Product Michael Rather as a contributing factor.  The new man, Reback said, “will help us execute more crisply on product innovation, new product development, and efficient product release.”

Reback’s near-term goal is to “develop a strategic plan that will allow us to continue to deliver double-digit revenue growth rates through a combination of organic growth and potential tuck-in acquisitions.”

Galaxy CFO Harry Hagerty allowed that shipping expenses in the fourth quarter were higher than anticipated, due to the imperative of getting EZ Baccarat trend displays out to customers as fast as possible.

“Intellectual-property registration expenses also continued to be higher than historical levels, as we expand the reach of our products into global markets,” Hagerty reported. He added that Galaxy’s online business was still producing double-digit increases in revenue, as well as demand. This was impeded somewhat, however, in the latter months of last year by the need to renegotiate royalty rates with Evolution, a necessity for a new long-term agreement with that studio.

“We reduced the level of our bad-debt reserve as we made collection progress on some slow-moving accounts in the quarter,” Hagerty noted.

He concluded by saying that it remains Galaxy’s intent to keep leverage down and pursue available opportunities to refinance debt. This was motivated by a covenant to Galaxy’s current loan from Fortress Credit, in which Galaxy isn’t allowed to exceed six times cash flow in debt. At present, Galaxy is at 3.7 times, which Hagerty called “comfortably in compliance.”

Update: The day after releasing its fourth-quarter and fiscal-year numbers, Galaxy issued corrections. The primary change was an upward adjustment of guidance on net revenue for 2024, now projected to grow at a rate of 6.1 percent, rather than the previously announced 2.4 percent.

In dollar terms, this means as much as $30 million in net revenue, up from $27.8 million last year. Adjusted cash flow also goes from $10.6 million in 2023 to between $12 million and $13 million, growth of almost 18 percent.

Revenue from licensing agreements is forecast to grow from $28 million to as much as $35 million, up 23%. Sales of perpetual licenses will decline by two-thirds, down to $1 million from $3.7 million last year.

Gross revenue is prognosticated to swell to as much as $36.5 million from $31.7 million, an increase of 13 percent. Royalties netted against gross revenue will slip 60 percent, falling to negative $6.5 million from minus $3.9 million.