Executive Summary

Q4 2023 delivered record gross revenue of $8.4M (+25% YoY), while net revenue rose to $6.7M (+13% YoY); Adjusted EBITDA declined 10% YoY to $2.83M and the quarter posted a net loss of $(0.82)M versus net income of $0.06M in Q4 2022 .
Management guided FY 2024 to gross revenue of $35.0–$36.5M, net revenue of $29.0–$30.0M, and Adjusted EBITDA of $12.0–$13.0M; the corrected net revenue growth midpoint is 6.1%, not 2.4% as initially stated, a positive adjustment to the outlook .
Q4 dynamics were driven by a full quarter of EZ Baccarat license revenue, ongoing double‑digit iGaming demand, and higher shipping and IP registration costs; renegotiated Evolution royalty rates weighed on gross revenue growth in 2H 2023 .
Balance sheet/liquidity: cash rose to $16.7M at Q4 (from $15.9M at Q3) and long‑term debt (gross) was $58.4M; net leverage stood at 3.7x (covenant ≤6.0x in 2023), stepping down to 5.0x in 2024, with a stated intention to reduce leverage and pursue refinancing .

What Went Well and What Went Wrong

What Went Well

Record gross revenue in Q4 2023: “our gross revenue in Q4 of 2023 was a record at $8.4 million,” with a full quarter of EZ Baccarat license revenue and an expectation that Trend Displays installations completed in Feb 2024 will support both gross and net revenue in 2024 .
Recurring revenue focus and product pipeline: management expects a return to “sustainable growth… relying principally on recurring revenue” from felt products, GOS systems, and iGaming; new EVP of Product to “execute more crisply on product innovation… and efficient product release” .
Online demand remained robust: “double‑digit increase in demand for our games (as measured by the gaming revenue they generate)” and cash increased QoQ to $16.7M in Q4 .

What Went Wrong

Profitability pressures: Adjusted EBITDA down 10% YoY to $2.83M and a net loss of $(0.82)M in Q4 versus Q4 2022 net income of $0.06M; CEO transition and severance were added back for Adjusted EBITDA .
Cost headwinds: higher‑than‑planned shipping expenses to accelerate EZ Baccarat display installs and elevated IP registration expenses to support global expansion .
Pricing/royalty impact: despite double‑digit online demand, gross revenue growth was “affected… as a result of the renegotiation of royalty rates with Evolution in exchange for a long‑term extension,” dampening reported gross in 2H 2023 .
Miss vs prior FY 2023 guidance: Q2 2023 guidance called for net revenue of $29–$30M and Adjusted EBITDA at the high end of $13.0–$13.25M; actual FY 2023 net revenue was $27.8M and Adjusted EBITDA was $10.635M, below guidance .

Financial Results

Consolidated Quarterly Results (YoY)

Metric	Q4 2022	Q4 2023	YoY Change (%)
Gross Revenue ($USD Millions)	$6.7	$8.4	+25%
Net Revenue ($USD Millions)	$5.9	$6.7	+13%
Net Income ($USD Millions)	$0.06	$(0.82)	n/a
Adjusted EBITDA ($USD Millions)	$3.15	$2.83	−10%

Note: EPS for Q4 was not disclosed; FY diluted EPS was −$0.07 .

Segment Disaggregation (Q4)

Segment / Metric	Q4 2022	Q4 2023
Consolidated – Recurring License Revenue ($USD Millions)	$6.5	$8.0
Consolidated – Sale of Perpetual Licenses ($USD Millions)	$0.2	$0.4
Consolidated – Gross Revenue ($USD Millions)	$6.7	$8.4
Consolidated – Royalties Netted ($USD Millions)	$(0.8)	$(1.7)
Consolidated – Net Revenue ($USD Millions)	$5.9	$6.7
GG Core – Recurring License Revenue ($USD Millions)	$3.7	$5.0
GG Core – Sale of Perpetual Licenses ($USD Millions)	$0.2	$0.4
GG Core – Gross Revenue ($USD Millions)	$3.9	$5.4
GG Core – Royalties Netted ($USD Millions)	—	$(0.8)
GG Core – Net Revenue ($USD Millions)	$3.9	$4.6
GG Digital – Recurring License Revenue ($USD Millions)	$2.8	$3.0
GG Digital – Royalties Netted ($USD Millions)	$(0.8)	$(0.9)
GG Digital – Net Revenue ($USD Millions)	$2.0	$2.1

Full-Year Context

Metric	FY 2022	FY 2023
Gross Revenue ($USD Millions)	$25.9	$31.7
Net Revenue ($USD Millions)	$23.4	$27.8
Adjusted EBITDA ($USD Millions)	$10.53	$10.63
Net Loss ($USD Millions)	$(1.77)	$(1.81)
Cash and Cash Equivalents ($USD Millions, year‑end)	$18.24	$16.69
Total Long‑Term Debt (Gross, $USD Millions)	$59.74	$58.43

KPIs (Q4 2023)

KPI	Value
Cash and Equivalents ($USD Millions)	$16.7
Total Long‑Term Debt (Gross, $USD Millions)	$58.431
Stockholders’ Deficit ($USD Millions)	$(18.243)
Net Leverage (Quarter‑end)	3.7x
Royalties Netted vs Gross (Q4, $USD Millions)	$(1.7)
Perpetual License Sales (Q4, $USD Millions)	$0.4
Recurring License Revenue (Q4, $USD Millions)	$8.0

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue Growth (Midpoint)	FY 2024	2.4% (original release)	6.1% (updated)	Raised
Net Revenue ($USD Millions)	FY 2024	$29.0–$30.0	$29.0–$30.0	Maintained
Adjusted EBITDA ($USD Millions)	FY 2024	$12.0–$13.0	$12.0–$13.0	Maintained
Gross Revenue ($USD Millions)	FY 2024	$35.0–$36.5	$35.0–$36.5	Maintained
Royalties Netted ($USD Millions)	FY 2024	$(6.0)–$(6.5)	$(6.0)–$(6.5)	Maintained
Recurring License Revenue ($USD Millions)	FY 2024	$34.0–$35.0	$34.0–$35.0	Maintained
Sale of Perpetual Licenses ($USD Millions)	FY 2024	$1.0–$1.5	$1.0–$1.5	Maintained
Net Revenue ($USD Millions)	FY 2023	$29.0–$30.0 (Q2 guidance)	$27.8 (actual)	Lower
Adjusted EBITDA ($USD Millions)	FY 2023	High end of $13.0–$13.25 (Q2 guidance)	$10.63 (actual)	Lower

Note: No guidance provided for OpEx, OI&E, tax rate, or dividends in these documents; dividend policy indicates no planned dividends and restrictions under Fortress Credit Agreement .

Earnings Call Themes & Trends

No earnings call transcript was available for Q4 2023. Themes compiled from Q2 2023 and Q4 2023 releases and FY 2023 10‑K.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2023)	Trend
EZ Baccarat rollout	Announced 10‑year Evolution deal; exclusive distributor for EZ Baccarat starting Sept; expected “several million” in new revenue	Full quarter of EZ Baccarat license revenue; Trend Displays backlog installs completed Feb 2024, expected to drive gross/net revenue	Strengthening
iGaming demand & Evolution royalties	10‑year agreement with Evolution; record quarter metrics	Double‑digit demand growth; renegotiated royalties with Evolution reduced gross revenue growth in 2H 2023	Demand up; pricing/royalties a headwind
GOS platform deployments	First installations in US/UK after Q2; positive early results	Increased assets deployed at client locations and capex into displays; platform foundation for growth	Building
Cost structure & logistics	Not highlighted in Q2	Higher‑than‑planned shipping; elevated IP registration costs to support global reach	Cost pressure
Leverage/refinancing	Net leverage 3.4x at Q2; intent to refinance amid weaker bank market	Net leverage 3.7x at Q4; covenant steps to 5.0x in 2024; intent to reduce leverage and pursue refinancing	Slightly higher leverage; still compliant
Licensing reach/regulatory	New or expanded licenses in 23 NA jurisdictions and 3 iGaming jurisdictions in 2023 (10‑K)	Continued focus on global market expansion; IP registrations rising	Expansion continues

Management Commentary

Strategy and growth: “We believe… we will return to a sustainable growth model relying principally on recurring revenue… from our robust library of core and premium felt products, our emerging line of GOS products, and our iGaming business in 2024.” Management targets “double‑digit revenue growth rates” via organic initiatives and potential tuck‑in acquisitions .
Product execution: “The addition of Michael Ratner as our EVP of Product will help us execute more crisply on product innovation, new product development, and efficient product release” .
Disclosure enhancements: “We will now be disclosing revenue on a gross and net basis in both verticals, and we will also break out sales of perpetual licenses when they occur” .
Cost and royalty dynamics: higher shipping to accelerate EZ Baccarat displays; elevated IP registration for global reach; online demand strong but “growth in our gross revenue was affected… [by] renegotiation of royalty rates with Evolution” .
Balance sheet stance: “Our cash position increased to $16.7 million… Our loan from Fortress Credit Corp. requires our net leverage not to exceed 6.0x… at the end of Q4 we were at 3.7x, comfortably in compliance… It remains our intention to reduce our net leverage and to pursue refinancing opportunities” .

Q&A Highlights

No Q4 earnings call transcript available. Management invited investor questions via email by April 5, 2024 and committed to post answers by April 12, 2024 .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2023 EPS, revenue, EBITDA was unavailable to us at this time due to data access limitations. As a result, estimate comparisons cannot be provided; investors should anchor revisions to FY 2024 guidance with net revenue midpoint growth at 6.1% and Adjusted EBITDA $12.0–$13.0M .

Key Takeaways for Investors

Q4 showed strong top‑line recovery with record gross revenue and net revenue growth, but profitability lagged due to shipping/IP costs and royalty headwinds; monitor margin normalization as EZ Baccarat displays roll through and renegotiated royalties annualize .
The corrected FY 2024 outlook implies healthier net revenue growth (+6.1% midpoint) and mid‑teens Adjusted EBITDA growth; the change from 2.4% to 6.1% is a material positive for sentiment and potential estimate paths .
FY 2023 missed Q2 guidance targets for net revenue and Adjusted EBITDA, highlighting execution and cost management as focal points in 2024 .
Recurring revenue pivot—reduced reliance on opportunistic perpetual licenses—should improve visibility; disclosure of gross vs net revenue by vertical aids tracking contra‑royalties and mix .
Leverage remains elevated but covenant compliance is comfortable (3.7x vs 6.0x), with intent to refinance as markets permit; expect deleveraging to be a mid‑term objective .
Product catalysts: continued GOS deployments, EZ Baccarat footprint, and content/IP expansion (23 NA license expansions and 3 new iGaming jurisdictions in 2023) support growth vectors .
Near‑term trading lens: watch for investor Q&A postings, any updates to the investor deck, and confirmation that EZ Baccarat display installations translate to net revenue acceleration in early 2024 .

Galaxy Gaming, Inc. (GLXZ)·Q4 2023 Earnings Summary