Galaxy Gaming, Inc. (GLXZ) stock intrinsic value fair value estimate & owner earnings analysis

Galaxy Gaming licenses casino table games. Casinos, cruise ships and card rooms lease its proprietary games (Lucky Ladies, Bonus Craps, EZ Baccarat, Heads Up Hold'em and others), electronic table enhancements and progressive jackpot systems, and online casino operators license its game content. 2025 revenue was $30.9M: $19.2M from land-based casinos (core) and $11.7M from online content (digital, net of royalties). About 55% of revenue came from the Americas and 45% from Europe, Middle East and Africa. Its two largest clients, both in Europe, were 18.8% and 11.6% of 2025 revenue. What changed: on July 21, 2026 Evolution ended its agreement to acquire Galaxy for $3.20 per share in cash, because two gaming regulatory approvals were still outstanding when the July 17, 2026 deadline passed. Evolution owes Galaxy a $5.2M termination fee. We now value Galaxy as a stand-alone company. This also replaces our earlier estimate, which assumed 6% annual growth and an 11% discount rate. We now credit no growth that is not already secured, discount every company at a flat 6%, and subtract debt after valuing the business. How we measured earnings: we use the cash the business generates before paying its lenders, meaning operating cash flow, minus swings in working capital, minus stock compensation, minus maintenance capital spending, plus cash interest paid. Capital spending is mainly software development and equipment placed at casinos (net of equipment whose title passes to perpetual-license customers), $2.8M in 2025. We treated spending in proportion to revenue growth as growth spending and left it out, and we excluded the $6.4M 2020 acquisition and a $2.0M 2022 intellectual-property purchase. A $3.0M non-cash loss on the January 2025 debt refinancing is added back, as is $2.2M of intangible amortisation. Because those intangibles wear out, we carry that decay in the fade after year 10 and in the bear case rather than by cutting today's earnings. This business cash flow was $6.8M in 2021, $7.5M in 2022, $7.2M in 2023, $8.2M in 2024 and $8.7M in 2025. We start from the 2021 to 2025 median, $7.46M a year (about $0.29 per share), which is below the last two years. 2020 ($0.8M, casino shutdowns) and earlier years are excluded: before 2021 capital spending was under $0.2M a year, and in 2019 debt rose from $10M to $48M while the share count fell, so those years describe a differently financed business. Growth check: business cash flow grew 6.6% in 2025 ($8.2M to $8.7M); the base case assumes 0% in year one, starting at the $7.46M level, so it does not rely on any reversal. Debt: a $45M BMO term loan in January 2025 replaced a Fortress loan that cost LIBOR plus 7.75%. About $38.3M of principal (our estimate from the June 30, 2026 balance) is outstanding at roughly 7.2%. Repayments are scheduled at $2.4M in 2026 and $3.4M in 2027, and the remaining balance of about $34M is due January 6, 2028. The loan carries covenants on debt to EBITDA, fixed-charge coverage, minimum EBITDA and a cap on capital spending. Net debt is the $38.3M, less $2.8M of cash above a $2.0M operating reserve (cash was $4.8M at June 30, 2026), less the termination fee after an assumed 21% tax ($4.1M), plus $0.6M for interest above 6% until maturity: about $32.0M in the base and bull cases. Base case: business cash flow stays flat at $7.46M for ten years, then fades 5% a year because we can name nothing that carries it past then. Evidence for flat: recurring core revenue fell only 0.4% in 2025 despite North American casino closures, and total revenue rebounded from $10.2M in 2020 to $20.0M in 2021 and $30.9M in 2025. Left out: online growth (net digital revenue rose 22.8% in 2024 and 13.2% in 2025) because it depends on new markets and clients not yet secured, placements of the new progressive system, and any recovery of perpetual license sales, which fell 66% to $1.2M in 2025. The business is worth $90.9M, owes $32.0M, leaving $58.9M, or $2.25 per share. Bull case: the business starts at its 2025 level of $8.73M and online content keeps adding about $1.0M of revenue a year for five years (less than the $1.9M and $1.4M added in 2024 and 2025) at about 60% flow-through, lifting cash flow by $0.6M a year to $11.7M, held flat to year 10, then fading 5% a year. The business is worth $137.5M, owes $32.0M, leaving $105.6M, or $4.04 per share. Bear case: capital spending stays at the first-half 2026 pace ($2.1M in six months against $1.2M a year earlier), cutting cash flow to $6.5M for two years. From 2028 the largest online client (18.8% of revenue) halves its business with Galaxy, removing about $2.9M of revenue and $2.3M of cash flow, leaving $4.2M a year, then the same 5% fade. The January 2028 refinancing of about $34M happens at roughly 10% rather than 7.2%, adding about $5.3M of cost over five years; interest of about $3.4M is still covered by $4.2M of cash flow. The business is worth $55.4M, owes $37.3M, leaving $18.1M, or $0.69 per share. We tried to break the flat assumption. First-half 2026 revenue was $15.6M, up 1.9%, but capital spending rose 81%, which we treat as timing until more periods confirm it; the bear case shows what happens if it persists. The starting level is below 2024 and 2025 results, so it does not depend on a peak year. The $3.20 offer was above our base value, but an acquirer can pay for savings and control that a passive shareholder does not receive, and the offer has lapsed. We could not read the full text of the second-quarter 2026 report, so June 30, 2026 debt and cash come from its reported figures, and the termination details come from the company's July 2026 announcements. What would make this wrong: a loss or repricing of either large European client, a covenant breach or difficult refinancing before January 2028, or casino closures that cut recurring core revenue faster than the 0.4% seen in 2025.