Galaxy Gaming, a Las Vegas-based casino table games and systems developer, manufacturer, and distributor, this month reached a settlement in its lawsuit with company founder Robert Saucier and his Triangulum Partners and posted third-quarter net income, reversing a year earlier loss. Cash flow and revenue hit records.
In a 10-Q statement filed Nov. 15 with the Securities and Exchange Commission, Galaxy said its net income was $792,520, or 4 cents per share, for the three months ended Sept. 30, reversing a net loss of $1.3 million, or 7 cents per share, a year earlier.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that excludes one-time costs, surged to $2.5 million from $36,000.
Revenue more than quadrupled to $5.3 million from $1.2 million.
In the statement, Galaxy Chief Financial Officer Harry Hagerty said a brick-and-mortar business recovery and online strength boosted Galaxy’s liquidity, a trend he hoped would continue into the new year.
CEO Todd Cravens, meanwhile, noted that Galaxy’s third-quarter surges came with “a meaningful portion” of United Kingdom land-based customers closed due to the pandemic. “We expect our land-based business to continue to recover from the COVID closures and for our online business to continue to grow in both Europe and North America,” Cravens said.
Perhaps bigger than the earnings was the same-day news that Galaxy and founder Robert Saucier has settled a legal dispute that had gone on for more than two years.
On Nov. 7, Galaxy said it will pay Triangulum and Saucier $39.1 million, plus interest accrued at 2% annually, from May 6, 2021, through Dec. 31, the deadline to complete fundraising and pay settlements.
Galaxy said it and Triangulum will stay litigation, pending the settlement’s payment, and that Saucier and Triangulum won’t compete with Galaxy for five years from the funds’ payment date.
On Nov, 15, Galaxy said it entered a term-loan credit agreement with Fortress Credit Corp. and will use the proceeds partly to pay its settlement with Triangulum Partners and Saucier.
The loan, which has a final maturity of Nov. 15, 2026, requires amortization payments of $150,000 per quarter and includes an annual sweep of 50% of excess cash flow.
Macquarie Capital advised Galaxy Gaming in the financing.
Galaxy board Chairman Mark Lipparelli called the settlement “significant.”
“Our board believes this is an appropriate settlement of the litigation between us and Mr. Saucier and his entity,” he said. “Further, we are pleased to see steady progress in the company’s results as our casino and online gaming partners emerge from the shutdowns associated with the COVID pandemic.”
On May 7, 2019, Galaxy redeemed all 23.3 million shares of common stock held by Triangulum Partners, a company Saucier controls. Before the redemption, Saucier was Galaxy’s majority shareholder.
Saucier, who founded Galaxy in 2000, left the company in November 2018 without explanation. He resigned as Galaxy’s chairman and CEO in September 2017 after the Nevada Gaming Control Board had nearly denied his application for a license to distribute new games in Nevada. Saucier had also previously raised doubts with gaming regulators in California, Oregon, and Washington.
Saucier sued Galaxy on Oct. 18, 2019, alleging that his shares of the company had been wrongfully redeemed and arguing that Galaxy Gaming was obligated to pay him year-end bonuses despite his resignation. Galaxy disputed the claims in court.
The Nevada Gaming Commission in August 2020 voted 3-2 to reject Saucier’s motion to withdraw previous licensing plans; the Nevada Gaming Control Board had unanimously recommended a denial of Saucier’s request.
Las Vegas Review-Journal columnist Richard Velotta reported that 137 former licensees had had licensing requests denied and that such denials served as scarlet-letter-style badges of shame.
Galaxy shares fell 6 cents, or 1.45% Tuesday to close at $4.08 on the Over-The-Counter Bulletin Board. The share price has more than doubled in 2021.
Follow Matthew Crowley on Twitter @copyjockey.
