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Gaming sector “not out of the woods yet”, Galaxy CEO warns


Galaxy Gaming chief executive Todd Cravens warned the gambling industry is still facing headwinds from the novel coronavirus (Covid-19) pandemic, despite the gaming machine supplier posting significant quarter-on-quarter improvement in revenue for Q3.

Revenue for the three months to September 30 fell 66.5% year-on-year to $1.8m. This did represent a 171.4% hike from the second quarter’s $662,477 total, covering a period in which most if not all of Galaxy’s operator partners had their properties shuttered by the pandemic.

The bulk of third quarter revenue came from the US and Carribean, which accounted for $971,147 of the total, down 75.0%. Revenue from Europe, Middle East and Africa, meanwhile, fell 44.1% to $826,686.

Revenue was largely wiped out by operating costs, however, with earnings before interest, tax, depreciation and amortisation (EBITDA) down 98.4% at $35,703.

When other outgoings such as share based compensation, depreciation and amortisation were factored in, Galaxy’s operating loss for the quarter came to $898,303. This marked a significant decline from the prior year’s $762,272 operating profit. 

After non-operating expenses, largely comprising interest expenses and charges related to the redemption of shares issued as part of Galaxy’s acquisition of online supplier Progressive Games Partners (PGP), the supplier posted a pre-tax loss of $1.2m.

Once income taxes of $133,708 were factored in, its net loss for the quarter came to $1.3m, compared to a $580,234 profit in Q3 2019. 

Cravens said the highlight of the quarter was the PGP acquisition, which he said strengthened Galaxy’s position in the “rapidly emerging” online market. 

“In the physical casino segment, we saw a significant improvement over Q2, but it’s clear that the industry is not out of the woods yet,” he added, however. 

“We will continue to support our clients as they adjust to the continuing changes brought on by the pandemic.”

Following the $12.4m PGP deal, which comprised a $10.4m in cash and the remainder issued as shares, the supplier’s cash reserves were reduced to $2.7m.

However, by securing a $4m loan from the Federal Reserve’s Main Street Lending Program, which provides loans for small to medium sized businesses struggling during the pandemic, chief finical officer Harry Hagerty said its liquidity “remains adequate”.

However should there be a resurgence in Covid-19 cases that lead to casinos having to close once again, the supplier admitted that it may have to reassess its obligations, including its ability to pay employee compensation and benefits.