Executive Summary / Key Takeaways

• Galaxy Gaming ($GLXZ) is poised for a transformative acquisition by Evolution Malta Holding Limited , with the transaction expected to close by the end of calendar year 2025, offering shareholders $3.20 per share in cash.
• The company is demonstrating robust growth in its Digital (online gaming) segment, with recurring license revenue increasing 12.40% for both the three and nine months ended September 30, 2025, driven by content expansion and brand recognition.
• A significant debt refinancing in January 2025 has substantially reduced interest expenses, contributing to a marked improvement in net income/loss for the recent periods.
• Strategic intellectual property (IP) licensing, exemplified by the new Hasbro agreement for iconic game titles, underpins Galaxy Gaming's competitive differentiation and future content pipeline.
• While the land-based Core Revenue segment faces headwinds from casino closures and timing of perpetual license sales, the company's proprietary technology, like the GOS progressive gaming system, is providing some offset.

The Shifting Sands of Gaming: Galaxy Gaming's Strategic Play

The global casino market, a dynamic arena valued at an estimated $310.8 billion in 2024, is projected to surge to $561.9 billion by 2033, demonstrating a robust compound annual growth rate (CAGR) of 6.8% over the forecast period. This expansive market is increasingly bifurcated, with a high-frequency digital frontier, where crypto casinos alone processed $26 billion in wagers in Q1 2025, coexisting with a land-based sector that is reinventing itself as a comprehensive entertainment destination. Within this evolving landscape, Galaxy Gaming, Inc. ($GLXZ), founded in 2006, has carved out a specialized niche as a global gaming company focused on the design, development, acquisition, assembly, marketing, and licensing of proprietary casino table games, side bets, and associated technology, platforms, and systems for both land-based and iGaming industries.

Galaxy Gaming's overarching strategy revolves around leveraging its intellectual property, developing innovative technology, forging strategic partnerships, and, most significantly, a pending acquisition that promises to reshape its future. The company's historical journey, marked by continuous product development and strategic financial adjustments, has culminated in a pivotal moment: the planned merger with Evolution Malta Holding Limited . This transaction, announced in July 2024 and approved by Galaxy Gaming stockholders in November 2024, is anticipated to close by the end of calendar year 2025, subject to regulatory approvals. Upon completion, Galaxy Gaming will become a privately held subsidiary of Evolution, with shareholders receiving $3.20 per share in cash. This strategic move positions Galaxy Gaming within a larger, globally dominant iGaming ecosystem, offering a clear exit and valuation for current shareholders.

Technological Edge and Innovation Fueling Growth

Galaxy Gaming's competitive moat is significantly strengthened by its proprietary technology and a consistent focus on innovation. The company specializes in creating casino table games, side bets, and the underlying technology, platforms, and systems that enhance casino operations, boost profitability, and deliver cutting-edge entertainment to players. These proprietary products are designed to offer superior engagement and operational efficiency for casino operators.

A key technological differentiator is the company's new GOS progressive gaming system, which launched earlier in 2025. This system is already contributing to revenue, partially offsetting declines in other core revenue streams. The strategic intent behind such developments is to maintain a competitive edge by providing advanced solutions that directly impact casino productivity and player experience. Furthermore, Galaxy Gaming's investment in internally developed software, reflected in its research and development expenses, underscores a commitment to ongoing innovation crucial for long-term relevance in a technology-driven industry.

Beyond its in-house developments, Galaxy Gaming strategically expands its content library through valuable intellectual property agreements. A notable example is the multi-year licensing agreement with Hasbro, Inc. (HAS), announced in July 2025. This partnership will enable Galaxy Gaming to develop and distribute casino table games based on iconic titles such as MONOPOLY, YAHTZEE, and BATTLESHIP. The "so what" for investors is clear: leveraging globally recognized brands significantly enhances player appeal, expands market reach, and diversifies the company's content offerings, potentially leading to increased licensing fees and stronger brand recognition in a highly competitive market.

Competitive Landscape and Strategic Positioning

Galaxy Gaming operates in a competitive environment alongside larger, more diversified players such as International Game Technology (IGT), Light & Wonder (SGMS), Aristocrat Leisure Limited (ALL), and PlayAGS, Inc. (AGS). While these competitors offer comprehensive portfolios spanning slots, systems, and interactive solutions, Galaxy Gaming has carved out a distinct niche through its specialized focus on proprietary table games and associated technology.

Galaxy Gaming's strength lies in its ability to offer tailored solutions and innovative side bets that enhance the traditional table game experience. For instance, its high gross profit margin of 97.11% (TTM) suggests a highly efficient and valuable licensing model for its intellectual property, significantly higher than IGT's 46% and Light & Wonder's 71% gross profit margins. This indicates that once developed, the cost of licensing Galaxy Gaming's proprietary games is relatively low, driving strong unit economics. However, Galaxy Gaming's smaller operational scale and a TTM net profit margin of -13.59%, compared to IGT's 14% and Light & Wonder's 11%, highlight other cost pressures or the impact of its smaller revenue base.

The company's regulatory licenses and unique distribution channels provide a crucial competitive advantage, granting access to global markets and fostering exclusive partnerships. This helps Galaxy Gaming differentiate itself from the broader reach of larger rivals by focusing on specific market segments. However, its smaller scale can lead to higher customer acquisition costs and potential technological gaps in broader digital integration, which could result in longer development cycles for new online features. The dependence on key casino operators, with Client A in Europe representing 19.20% of nine-month 2025 revenue and Client B in North America 3.30%, also presents a concentration risk. Despite these challenges, Galaxy Gaming strategically positions itself by emphasizing specialized product performance and leveraging its intellectual property to maintain its market standing.

Financial Performance and Operational Momentum

Galaxy Gaming's recent financial performance reflects a company in transition, demonstrating both areas of growth and strategic adjustments. For the three months ended September 30, 2025, total revenue decreased by 4.20% year-over-year to $7.33 million. Similarly, for the nine months ended September 30, 2025, total revenue declined by 6.30% to $22.64 million.

A deeper look reveals divergent trends within its segments. The Core Revenue (land-based gaming) segment experienced a modest decline in recurring license revenue, down 0.30% in Q3 2025 to $5.19 million and 1.60% for the nine months to $15.62 million. This was primarily attributed to casino closures and reduced revenue from licensed third-party intellectual property, partially offset by the positive impact of new GOS progressive gaming system placements. Perpetual license sales of progressive gaming systems saw a significant decrease, falling 90.30% in Q3 2025 to $68,714 and 72.40% for the nine months to $830,255, primarily due to the timing of customer purchases.

In contrast, the Digital Revenue (online gaming) segment demonstrated robust growth. Gross digital revenues increased by 12.40% for both the three and nine months ended September 30, 2025, reaching $3.95 million and $11.80 million, respectively. This favorable increase is a direct result of the ongoing expansion of digital content onto new customer sites and the continued success of offering competitive products with strong brand recognition. Net of royalties, digital revenues grew 11.50% in Q3 2025 to $2.81 million and 9.70% for the nine months to $8.41 million.

Operational efficiency improvements have also been notable. Selling, general, and administrative (SG&A) expenses decreased by 35.80% in Q3 2025, a $2.24 million reduction, and by 15.70% for the nine months, a $2.33 million reduction. This significant decrease was primarily driven by a reduction in legal expenses associated with the Evolution acquisition.

Strategic Financial Management and Liquidity

A pivotal financial event for Galaxy Gaming was the refinancing of its debt in January 2025. The company entered into a new credit agreement with BMO Bank N.A. (BMO), replacing its previous Fortress Credit Agreement. This involved borrowing $45.00 million under a new senior secured term loan to repay the outstanding Fortress debt. This strategic move led to a substantial reduction in interest expenses, which decreased by 62% in Q3 2025 ($1.42 million reduction) and 59.50% for the nine months ($4.08 million reduction). While the refinancing resulted in a $2.97 million loss on extinguishment of debt for the nine months ended September 30, 2025, the long-term benefits of reduced interest rates and a lower principal balance are significant.

The impact of these financial maneuvers is evident in the company's profitability. Galaxy Gaming reported a net income of $1.04 million for the three months ended September 30, 2025, a substantial improvement from a net loss of approximately $2.20 million in the prior-year period. For the nine months, the net loss narrowed significantly to $31,786, compared to a net loss of approximately $1.75 million in the same period last year. Adjusted EBITDA for Q3 2025 increased to $3.24 million from $3.06 million in the prior year.

In terms of liquidity, cash and cash equivalents stood at $3.33 million as of September 30, 2025, down from $18.12 million at December 31, 2024, primarily due to the cash used in the debt refinancing. Despite this, operating activities provided $5.47 million in cash for the nine months ended September 30, 2025, an increase from $3.03 million in the comparable prior-year period, driven by the smaller net loss and favorable changes in operating assets and liabilities. Management believes the company possesses sufficient liquidity to fund its operations and meet financing obligations for at least the next 12 months.

The Path Forward: Evolution Merger and Outlook

The most defining aspect of Galaxy Gaming's immediate future is its impending acquisition by Evolution Malta Holding Limited . This transaction, which will see Galaxy Gaming become a wholly-owned subsidiary of Evolution, is a definitive event for shareholders, who are set to receive $3.20 per share in cash. The merger's outside date was automatically extended to January 18, 2026, as of October 18, 2025, with all conditions satisfied or waived except for gaming regulatory approvals. Galaxy Gaming anticipates regulatory consideration in December 2025, with the closing of the transaction expected prior to the end of calendar year 2025, subject to these approvals.

This acquisition represents a strategic alignment with a global leader in the iGaming sector, offering Galaxy Gaming's proprietary content a potentially broader distribution network and enhanced development resources. The outlook for Galaxy Gaming, therefore, is largely tied to the successful and timely completion of this merger. Post-acquisition, the company's shares will no longer be publicly listed, marking a transition from a standalone public entity to an integrated component of a larger gaming conglomerate.

Key Risks and Considerations

While the Evolution merger presents a clear path for shareholder value, several risks and considerations remain. The primary risk revolves around the timely completion of the merger, particularly the receipt of necessary gaming regulatory approvals. Any unforeseen delays or complications in securing these approvals could impact the anticipated closing timeline. Furthermore, during the pendency of the merger, restrictions may limit Galaxy Gaming's ability to pursue certain business opportunities or strategic transactions, potentially affecting its operational flexibility.

The company has also faced stockholder litigation concerning the merger agreement disclosures, alleging that the definitive proxy statement was incomplete or misleading. While Galaxy Gaming denies these allegations and has voluntarily supplemented disclosures to address claims, such legal proceedings can incur significant costs and divert management attention. Finally, ongoing applications for new or enhanced licenses in various jurisdictions may lead to increased legal and regulatory expenses, which, if substantial, could necessitate postponing growth initiatives or investments.

Conclusion

Galaxy Gaming stands at a pivotal juncture, with its future inextricably linked to the impending acquisition by Evolution Malta Holding Limited (EVO). The investment thesis for $GLXZ is fundamentally anchored in the $3.20 per share cash offer from Evolution, providing a clear and tangible return for shareholders. Underlying this definitive event is a business demonstrating strategic resilience and growth in key areas. The robust expansion of its Digital (online gaming) segment, driven by effective content expansion and brand recognition, highlights the company's adaptability to evolving market dynamics. Concurrently, the successful debt refinancing has significantly de-risked the financial structure, leading to a notable improvement in profitability.

Galaxy Gaming's proprietary technology and strategic intellectual property licensing, including the high-profile Hasbro agreement, underscore its competitive differentiation in the specialized table games market. While the land-based segment faces some challenges, the company's innovative product pipeline, such as the GOS progressive gaming system, continues to contribute to its value proposition. As the company awaits the final regulatory clearances for its merger, the narrative for Galaxy Gaming is one of a focused enterprise delivering specialized value, now poised to integrate into a larger, globally dominant iGaming platform, thereby securing its strategic future and delivering a definitive return to its investors.