Galaxy Gaming felt the second-quarter coronavirus pain along with the rest of the casino industry, posting a loss and steep drops in cash flow and revenue. But the company saw hope as its $12.4 million acquisition of Progressive Games Partners closed this month.
In a 10-Q filing this month with the Securities and Exchange Commission, Galaxy, a Las Vegas-based casino table games and systems developer, manufacturer and distributor, said its net loss was $2.2 million, or 12 cents per share, for the three months ended June 30, reversing year-earlier income of $1.1 million, or 4 cents per share.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, fell to a negative $1.4 million from positive $2.4 million. The company said the adjusted EBITDA figure excludes about $480,000 in legal and other expenses related to litigation with Triangulum Partners LLC.
On May 7, 2019, Galaxy redeemed all 23.3 million shares of common stock held by Triangulum Partners, a company controlled by founder and former CEO Robert Saucier.
Before the redemption, Saucier was Galaxy’s majority shareholder. Saucier, who founded Galaxy in 2000, left the company in November 2018.
Galaxy’s second-quarter revenue fell 87.7% to $663,972 from $5.4 million.
In a statement, Galaxy said it worked to mitigate the damage during the infection curve-flattening shutdown by drawing down $1 million on its credit revolver March 12 and landing an unsecured Paycheck Protection Program loan. An April 8-K filed with the SEC shows the loan amounted to $835,300.
Galaxy said the second quarter’s fiscal crunch will “negatively affect” its ability to meet one or more of the financial covenants in its bank debt. Nevada State Bank has agreed to forbear enforcing some of the covenants through the 2021’s first quarter, the company said.
Galaxy said March 17 that it would suspend billing to customers that were forced to shutter during the state-government-mandated mandated COVID-19 hiatuses.
Therefore, Galaxy made no games revenue from casino customers. However, online gaming customers who licensed Galaxy games kept operating, generating revenue for Galaxy.
“We earned revenue from them during the crisis and expect to continue to do so,” the company said in the filing, “but potentially at levels that may be lower than we previously received.”
In the statement, Galaxy CEO Todd Cravens said his company tried to make the most of the fallow period, developing new games and technologies it hopes to introduce later this year.
“Our online gaming business continued to perform well,” he said.
On Feb. 25, Galaxy Gaming agreed to pay $12.4 million for Progressive Gaming Partners; $6.4 million to $10.4 million of the payment will be in cash; with the balance will be paid in newly issued shares of the Galaxy common stock valued at $1.91 per share. The deal closed last week.
Progressive Gaming Partners owns the exclusive online rights to a suite of proprietary casino table games, including Galaxy’s
Cravens said the Progressive Gaming Partners deal will let Galaxy work more closely with its internet gaming clients and boost Galaxy’s earnings per share.
Galaxy Gaming shares fell about a penny Friday to close at $1.28 per share in over-the-counter trading. The share price has fallen 39.8 percent in 2020.
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