Galaxy Gaming $GLXZ
A small cap gamble?
Note: I don’t currently own any shares of GLXZ
Galaxy Gaming has a market cap of $117 million USD and trades on OTC markets as GLXZ. It is relatively illiquid in its average trading volume so keep that in mind if considering a position. It is headquartered in Las Vegas, NV. It has 36 employees and operates in several regulated end markets.
What They Do
They license proprietary casino games and products such as side bets to both land based casinos and i-gaming operators in regulated markets all over the world. They operate in a fast growing industry that is guarded against new entrants based on regional regulations.
Proprietary Table Games are grouped into two product types referred to as “Side Bets” and “Premium Games.” Side Bets are proprietary features and wagering options typically added to public domain games such as baccarat, pai gow poker, craps and blackjack table games. Examples of our Side Bets include 21+3®, Lucky Ladies® and Bonus Craps™. Examples of our Premium Games include Heads Up Hold ’em®, High Card Flush®, Cajun Stud® and Three Card Poker®. Generally, Premium Games generate higher revenue per table placement than the Side Bet games.
Enhanced Table Systems are electronic enhancements used on casino table games to add to player appeal and to enhance game security. An example in this category is our Bonus Jackpot System (“BJS”), an advanced electronic system installed on gaming tables designed to collect data by detecting player wagers and other game activities. This information is processed and used to improve casino operations by evaluating game play, to improve dealer efficiency and to reward players through the offering of jackpots and other bonusing mechanisms.
Excerpt from Galaxy Gaming 2021 10-K
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Recurring Revenues and High Gross Margins
Revenues to casino platforms in both the i-gaming and table operations mean that basically all revenue is recurring with monthly billing. The cost of goods on the marginal product that is being sold is very low with reported margins being essentially 99%.
EBITDA margins have been around 25-30% over the past 5 years if you ignore the disruption in 2020 from Covid.
Importantly, marginal sales of their products have very little marginal cost and should provide ample cash to the bottom line. This is the key driver for their success - unlocking this operating leverage.
Clouds Clearing - Dispute with the Founder
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