Work has been crazy. Writing has taken a back seat. But before we jump, let’s take a look at what’s been happening.
Gavin Newsom beat the recall and now we can go back to focusing on actual problems that are facing California: the housing crisis, homelessness, fires, water, and just about everything else under the sun. People like to laugh, but California is it’s own country and I love it here. Lucille Bluth said it best (RIP Jessica Walter).
Double dipping on Governors for this article, the walking lizard humanoid known as Gov. Greg Abbott and Texas law makers ban abortions as early as 6-weeks. Not sure where to start with this one, but it’s fucked up. Texas is a state that preaches freedom and an individual’s rights to choose, but at the same time, wants to control a woman’s body.
Sticking with the theme of shitty people, the trial of Elizabeth Holmes is underway. The Theranos story is a fantastic concoction of greed, Silicon Valley fan boys, pseudo-science, patient harm, and lots of lies.
Elizabeth Holmes shouldn’t be the only person on trial, it should also be the greedy people on her board and the investors that pushed the Theranos product/story without any proof:
Walgreens
George Shultz, former US secretary of state.
Gary Roughead, a retired US Navy admiral.
William Perry, former US secretary of defense.
Sam Nunn, a former US senator.
James Mattis, a retired US Marine Corps general who went on to serve as President Donald Trump's secretary of defense.
Either way, I’m sure some TV streaming company will create a mini-series that everyone will watch.
Some other bits of news:
Cristiano Ronaldo is back home with Manchester United
The South Lake Tahoe fires have cooled
The San Francisco Giants are beautiful and I love them
This week has been rough but this has saved me:
This week we are going to be looking at Galaxy Gaming Inc ($GLXZ). As a reminder: The Rookie wants to own businesses that 1) I like, 2) are growing, 3) generate growing free cash flow, 4) have future optionality, and 5) are led by a great management team. NOTHING HERE IS INVESTMENT ADVICE. DO YOUR OWN HOMEWORK.
Step 1: Do I understand the business?
Galaxy Gaming Inc (GLXZ) is a “global gaming company specializing in the design, development, acquisition, assembly, marketing and licensing of proprietary casino table games and associated technology, platforms and systems for the casino gaming industry.”
Casinos use GLXZ’s proprietary products and services (IP) to enhance their gaming operations and improve their profitability, productivity and security, as well as to offer popular cutting-edge gaming entertainment content and technology to their players.
GLXZ breaks down their Products into 3 categories
Proprietary Table Games: Side Bets and Premium Games. The Side Bets product bolts onto existing games such as ‘pai gow’ to add another layer of betting/complexity for the layers. The Premium Games product are stand alone games owned by GLXZ such as “ Heads Up Hold ’em, High Card Flush, Cajun Stud and Three Card Poker”.
Enhanced Table Systems: Improves the casino’s table games, adds to player appeal, and enhances game security.
iGaming: (Newest product line on GLXZ) was acquisition of 100% of the member interests in Progressive Games Partners
The majority of GLXZ’s top line comes from recurring revenue which is generally a very good thing. One caveat to note is that in 2020, Client A based in Europe accounted for 21.5% of revenue in 2020 and only 6.1% in 2019. It’s great that they’ve grown and expanded within Client A, but it is customer concentration risk and something to keep our eye on.
Some other nuances to keep our eye on related to GLXZ:
Their correlation to the continued COVID19 pandemic. As long as Casinos around the world aren’t able to open at fully capacity this will limit GLXZ ability to continue is growth plans.
GLXZ is highly connected with Government Regulations in the regions they operate in. I don’t see Gambling being restricted and actually, I think Gambling is becoming more and more apart of our day-to-day lives (i.e $PENN, $DKNG, $FUBO, etc). But this will always be a risk for GLXZ.
Verdict: While writing this section I realized GLXZ is out of my wheelhouse. I know nothing about the gambling software industry and I’m not all that interested learning about it.
GLXZ could be a great gaming SaaS business, but I’m not sure I know enough to be comfortable with it. For all I know, GLXZ could be a wonderful company that is well-position in an expanding industry.
And this is where my research into GLXZ stopped. I stopped because it didn’t meet my criteria of 1) liking the business/industry and 2) understanding the market that GLXZ operates in. As Munger and Buffett would say, it is out of my ‘core competencies’.
This is not a reflection on GLXZ. And rather, this is a reflection of me narrowing my focus on what I care about.