Despite an increase in sales, Galaxy Gaming's net loss narrows in Q3.

According to Galaxy, the company's online gaming activities grew in the three months leading up to September, with the introduction of a new igaming section in July playing a key role.

But, the total performance was affected by greater expenses and revenue in both its Galaxy Core land-based company and Galaxy Digital online casino subsidiary, which were hit by the strengthening of the US dollar against the euro and the UK pound.

“Exchange rates, interest rates and inflation rates worsened in Q3,” stated Harry Hagerty, chief financial officer of Galaxy. The variable rate that we use to determine our interest expenditure rose by 138 basis points during the quarter as the dollar maintained its appreciation against the euro and the British pound.   

Our current quarter's expenses for professional services are greater than usual, which is a result of our efforts to fortify our financial systems and intellectual property protection, and inflation is still a concern because the majority of our expenses are expressed in US dollars. 

The business is doing well, nevertheless, in spite of everything. With higher cash on hand and slightly lower debt, our balance sheet looked better throughout the quarter, and we easily met the financial covenant requirements of our Fortress credit agreement.

Galaxy Gaming's Earnings Rise
Reviewing the financials for the third quarter reveals that sales were $5.9 million, an increase of 11.3% from $5.3 million in the corresponding quarter a year before. The ongoing recovery for Galaxy's land-based clients during the pandemic, particularly in the UK, contributed to this and online growth, according to the company.

Sales in the Americas increased 4.0% to $2.6m, while sales in Europe, the Middle East, and Africa were 17.9% higher than a year before, totalling $3.3m.

Nevertheless, operational expenditures increased as well, reaching $4.6m, a 12.2% increase. The increase in marketing, general, and administrative expenditures, which jumped 22.2%, was the main cause of this.

Expenses associated with financing amounted to $2.2 million for Galaxy, up 545.6% from $333,293 in the previous year. According to the supplier, $1.9 million in interest expenditures were the main culprit, although the foreign currency exchange loss was also larger compared to Q3 of 2021.

Go down the drain
Consequently, there was a pre-tax loss of $853,634, down from a profit of $853,050 in the same period last year. Galaxy did receive $154,944 in income tax benefit, but after also including a further $77,871 negative foreign currency translation, this left a net loss of $776,561, compared to a $792,520 profit in 2021.

Additionally, EBITDA, which stands for adjusted earnings before interest, taxes, depreciation, and amortisation, fell 4.0% year over year to $2.4m.

However, like Hagerty, Galaxy chief executive and president Todd Cravens was upbeat about the quarter, also noting details of a cost-saving initiative that would result in lower annual spend.

We had a fantastic quarter, even though the US currency kept getting stronger, Cravens stated. “On a constant currency basis, revenue increased by 19% in the quarter and 27% in the first nine months vs the same periods in 2021. Revenue increased sequentially by 6% on a constant currency basis compared to Q2 2022. 

“Finally, at the end of the quarter, in consideration of a $2.0m cash payment, we eliminated the obligation to make contingent consideration payments to the original seller of the intellectual property supporting our Bonus Craps side bet. 

“Based on the run rate in Q3, this should save us around $315,000 on an annual basis and potentially more as Bonus Craps deployments increase.”