Executive Summary

Record quarter: Revenue $7.525M (+33% YoY), Adjusted EBITDA $3.218M (+36% YoY), and cash $18.728M; net income turned positive to $0.357M from a $(1.116)M loss YoY .
Guidance raised: FY23 revenue (net of iGaming royalties) lifted to $29–$30M (from $27.5–$28.5M) and Adjusted EBITDA targeted at the high end of prior $13.0–$13.25M range; management expects lower 2H perpetual license sales offset by GOS installations and EZ Baccarat placements .
Strategic catalysts: 10-year content agreement with Evolution (largest customer), exclusive distribution of EZ Baccarat in the U.S., Canada, UK, and online starting September, and first U.S./UK GOS installations post-quarter—all highlighted as drivers of multi-year growth .
Balance sheet and leverage improved: Net leverage 3.4x vs 6.0x covenant; Adjusted EBITDA ($3.2M) exceeded cash interest ($1.9M) in the quarter, supporting eventual refinancing plans when market conditions improve .

What Went Well and What Went Wrong

What Went Well
- Record revenue, Adjusted EBITDA, and cash; net income turned positive YoY .
- Long-duration commercial visibility: “We announced a ten-year agreement with Evolution, cementing the relationship with our largest customer well into future” (CEO Todd Cravens) .
- Product distribution expansion: Exclusive EZ Baccarat distribution in key geographies and online from September; management sees “several million dollars in new revenue” potential .
What Went Wrong
- Mix shift caution: $1.6M in Q2 perpetual license sales to a single GG Core customer (same as Q1) drove headline results; management expects “significantly reduced sales of perpetual licenses in the second half of 2023” .
- Macro/financing: Bank market “less robust” than at the start of the year, delaying refinancing plans despite intent to refinance Fortress loan .
- Ongoing interest expense burden: Cash interest was $1.9M in Q2; although covered by EBITDA, elevated floating-rate costs remain a headwind .

Financial Results

Metric	Q2 2022	Q1 2023	Q2 2023
Revenue ($M)	$5.676	$7.423	$7.525
Adjusted EBITDA ($M)	$2.358	$3.084	$3.218
Net Income ($M)	$(1.116)	$0.111	$0.357
Adjusted EBITDA Margin (%)	41.5% (2.358/5.676)	41.6% (3.084/7.423)	42.8% (3.218/7.525)
Net Income Margin (%)	-19.7% (-1.116/5.676)	1.5% (0.111/7.423)	4.7% (0.357/7.525)

Segment highlights (as disclosed)

GG Core (ex. perpetual license sales): $3.8M in Q2’23 vs $3.7M in Q2’22 .
GG Digital revenue (net): $2.2M in Q2’23 vs $1.9M in Q2’22 .
Perpetual license sales to a single GG Core customer: $1.6M in Q2’23; also $1.3M in Q1’23 (and more expected in Q2 at the time of Q1 release) .

Balance sheet and leverage KPIs

KPI	Q4 2022	Q1 2023	Q2 2023
Cash & Equivalents ($M)	$18.238	$16.386	$18.728
Total Long-term Debt (gross) ($M)	$59.741	$58.841	$58.563
Net Leverage (x)	4.0x (year-end)	3.9x	3.4x

Note on non-GAAP: Adjusted EBITDA excludes interest, taxes, D&A, share-based comp, FX gains/losses, swap FV changes, severance, and litigation-related expenses; definitions provided in the releases .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue (net of iGaming royalties)	FY 2023	$27.5–$28.5M (as of Q1’23)	$29–$30M	Raised
Adjusted EBITDA	FY 2023	$13.0–$13.25M	High end of $13.0–$13.25M	Raised to high end

Context: Management expects “significantly reduced sales of perpetual licenses in the second half of 2023,” offset by increased GOS installations and EZ Baccarat placements; forecast assumes no recession/Ukraine impact and 2Q FX rates .

Earnings Call Themes & Trends

Note: No traditional earnings call transcript found; company invited written questions with responses to be posted Aug 23, 2023 .

Topic	Previous Mentions (Q4 2022)	Previous Mentions (Q1 2023)	Current Period (Q2 2023)	Trend
Platform / Tech (GOS)	First GOS progressives expected to begin in Q2; GOS 2.0 targeted for G2E Oct	GOS approved by testing lab; pursuing jurisdictional approvals	First GOS installations in U.S. and UK post-quarter; “very pleased with the results”	Improving execution and deployment cadence
Macro (FX/Inflation/Interest)	FX and rates were material headwinds; constant-currency framing provided	Leverage covenant headroom; targeting debt refi late 2023	Bank market “less robust”; still intend to refinance; leverage 3.4x vs 6.0x covenant	Rates remain a headwind; refi contingent on markets
Product Performance	New games coming; Triton progressives; online 21+3® Progressive	Record Q1; GG Core/Digital both up YoY (ex. perpetuals)	Exclusive EZ Baccarat distribution; 10-year Evolution agreement	Broader distribution; deeper partner alignment
Revenue Mix	—	~$1.3M perpetual license sales in Q1; more expected in Q2	$1.6M perpetual license sales in Q2; lower expected in 2H	Mix normalizing toward recurring systems/content
Capital Structure	Net leverage 4.0x YE22; interest expense elevated	Net leverage 3.9x; liquidity “strong”	Net leverage 3.4x; EBITDA > cash interest	Gradual de-leveraging continues

Management Commentary

“Q2 2023 was a record quarter for us in revenue, adjusted EBITDA and cash on hand.” — Todd Cravens, President & CEO .
“We announced a ten-year agreement with Evolution… We also announced that, in September, we will become the exclusive distributor for EZ Baccarat… an opportunity that we think can generate several million dollars in new revenue for us.” — Todd Cravens .
“Perpetual license sales to a single GG Core customer were $1.6 million in Q2… Excluding those sales, revenue in GG Core was $3.8 million… In GG Digital, revenue (net) was $2.2 million in Q2 23 as compared to $1.9 million in Q2 22.” — Harry Hagerty, CFO .
“At quarter-end, cash was $18.7 million and our long-term debt was $58.6 million… net leverage… at 3.4x… It remains our intention to refinance our debt, but conditions in the bank market are less robust…” — Harry Hagerty .
“We are increasing our guidance for revenue… to $29–$30 million, and… Adjusted EBITDA to the high end of… $13.0–$13.25 million… We expect significantly reduced sales of perpetual licenses in the second half… offset by increased revenue from our GOS installations… and EZ Baccarat.” — Harry Hagerty .

Q&A Highlights

The company did not hold a standard live Q&A call; instead, investors were invited to submit questions by Aug 16 with management responses to be posted Aug 23, 2023 .
No transcript was available for Q2 2023; therefore, no live Q&A themes or further guidance clarifications can be reported from a call .

Estimates Context

Wall Street consensus (S&P Global) estimates for GLXZ Q2 2023 (EPS and revenue) were unavailable via our S&P Global data feed at this time; as a result, we cannot provide a vs-consensus comparison. We will update if/when estimates become available.
Given the microcap profile and lack of published consensus in the source, investors should triangulate with company-provided guidance and disclosed run-rate dynamics (recurring system revenues vs perpetual license sales) .

Key Takeaways for Investors

Quality beat narrative driven by mix: Strong headline growth was boosted by $1.6M perpetual license sales; underlying recurring revenue engines (GOS, EZ Baccarat, Digital) are positioned to carry 2H as license sales moderate .
Guidance raised on credible catalysts: Exclusive EZ Baccarat distribution, initial GOS deployments, and a 10-year Evolution deal support the higher FY revenue and the high-end Adjusted EBITDA target, despite softer perpetual sales in 2H .
Improving balance sheet resilience: Net leverage down to 3.4x; EBITDA coverage of cash interest demonstrated in Q2—constructive for eventual refinancing when markets normalize .
Watch the mix and cadence into 2H: The shift away from large perpetual deals will test recurring revenue momentum; monitor GOS installation ramp and EZ Baccarat placements as the offset .
Macro rate sensitivity remains: Elevated interest costs and less robust bank markets could delay refinancing and keep interest expense high near term .
Medium-term thesis: Growing digital content, expanded distribution, and platform advantages (GOS) with a deepened Evolution partnership build a multi-year compounding setup as operating leverage improves and financing costs potentially decline .

Additional reference points for context

Q1 2023: Revenue $7.423M, Adjusted EBITDA $3.084M, Net income $0.111M; guidance initially raised to revenue $27.5–$28.5M and Adj. EBITDA $13.0–$13.25M .
Q4 2022: Revenue $5.940M, Adjusted EBITDA $3.153M, Net income $0.055M; constant-currency adjustments and elevated interest expense discussed; YE22 net leverage 4.0x .

Galaxy Gaming, Inc. (GLXZ)·Q2 2023 Earnings Summary