HOUSTON, Feb. 8, 2024 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the fiscal 2024 first quarter ended December 31, 2023. The company also filed its Form 10-Q today.
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Summary Financials (in millions except EPS)
|
1Q24
|
1Q23
|
|
Total revenues
|
$73.9
|
$70.0
|
|
EPS
|
$0.77
|
$1.11
|
|
Non-GAAP EPS1
|
$0.87
|
$1.19
|
|
Net cash from operating activities
|
$13.6
|
$14.9
|
|
Free cash flow1
|
$12.7
|
$13.0
|
|
Net income attributable to RCIHH common stockholders
|
$7.2
|
$10.2
|
|
Adjusted EBITDA1
|
$17.5
|
$20.5
|
|
Weighted average shares used in computing EPS – basic and diluted
|
9.37
|
9.23
|
1 See "Non-GAAP Financial Measures" below
CEO Comment
Eric Langan, President and CEO, said: "Net cash from operating activities and free cash flow held up well, declining only 8% and 3%, respectively, despite previously reported macro uncertainty that negatively affected same-store sales."
"Nightclubs performed generally in line with expectations. Bombshells did not perform as well. We are in the process of making major structural management changes to the Bombshells team and are considering any and all options to improve performance, including potentially seeking an operational partner or selling the business."
"Separately, we continued to make progress with our growth plans based on opening new casinos, clubs and restaurants; acquiring more clubs; and buying back shares when appropriate. To add to our war chest, we are in the process of completing an approximately $20 million cash-out bank loan, using an estimated $30 million of unencumbered real estate."
Conference Call at 4:30 PM ET Today
1Q24 Results (Comparisons are to the year-ago period unless indicated otherwise)
- Nightclubs segment: Revenues were $61.0 million compared to $56.3 million. The $4.7 million increase primarily reflected the benefit of newly acquired and remodeled clubs, which more than offset the decline in same-store sales.2 By revenue type, alcoholic beverages increased 18.7% and food, merchandise and other increased 11.3%, while service declined 1.6%. The differing growth rates primarily reflected a higher alcohol and lower service sales mix from the newly acquired Baby Dolls-Chicas Locas clubs. Operating income was $20.4 million (33.4% of revenues) compared to $22.7 million (40.4% of revenues). On a Non-GAAP basis, operating income was $21.0 million (34.3% of revenues) compared to $22.8 million (40.4% of revenues). The margin decline primarily reflected lower service revenues, wage inflation, and an increase in the Texas patron tax to $10 from $5.
- Bombshells segment: Revenues were $12.7 million compared to $13.4 million. The $700 thousand decline primarily reflected lower same-store sales, partially offset by increases from FY23 acquisitions not in same-store sales and the opening of a new location.2 Operating income was $86 thousand (0.7% of revenues) compared to $1.8 million (13.8% of revenues). On a Non-GAAP basis, operating income was $149 thousand (1.2% of revenues) compared to $1.8 million (13.8% of revenues). The decline in profitability primarily reflected lower same-store sales.
- Corporate segment: Expenses totaled $7.1 million (9.6% of total revenues) compared to $7.5 million (10.7% of total revenues). On a non-GAAP basis, expenses totaled $6.6 million (9.0% of total revenues) compared to $6.6 million (9.4% of total revenues).
- Interest expense was 5.7% of revenues compared to 5.3%. The increase reflected higher average debt mostly from seller-financed promissory notes related to FY23 acquisitions.
- Effective tax rate was 19.9% and 22.8%. The rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit.
- Weighted average shares outstanding increased 1.5% year over year due to shares used in the 2Q23 Baby Dolls-Chicas Locas acquisition, partially offset by subsequent share buybacks.
- Share repurchases totaled 37,954 common shares for $2.1 million or an average of $54.59 per share, with $14.6 million in remaining stock repurchase authorization at 12/31/23.
- Debt was $234.1 million at 12/31/23 compared to $239.8 million at 9/30/23. The reduction reflected scheduled paydowns.
2 See our January 9, 2024 news release on 1Q24 sales for more details
Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the Company and helps management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:
- Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) gains or losses on sale of businesses and assets, (c) gains or losses on insurance, and (d) stock-based compensation. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.
- Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income attributable to RCIHH common stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) gains or losses on sale of businesses and assets, (c) gains or losses on insurance, (d) stock-based compensation, and (e) the income tax effect of the above-described adjustments. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 19.9% and 22.7% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 2023 and 2022, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.
- Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, and (f) stock-based compensation. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.
- We also use certain non-GAAP cash flow measures such as free cash flow. Free cash flow is derived from net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy.
About RCI Hospitality Holdings, Inc. (Nasdaq: RICK) (X: @RCIHHinc)
With more than 60 locations, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in adult nightclubs and sports bars-restaurants. See all our brands at www.rcihospitality.com.
Forward-Looking Statements
This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the company's actual results to differ materially from those indicated, including, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult entertainment or restaurant business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the company's businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) the impact of the COVID-19 pandemic, and (vii) numerous other factors such as laws governing the operation of adult entertainment or restaurant businesses, competition and dependence on key personnel. For more detailed discussion of such factors and certain risks and uncertainties, see RCI's annual report on Form 10-K for the year ended September 30, 2023, as well as its other filings with the U.S. Securities and Exchange Commission. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.
Media & Investor Contacts
Gary Fishman and Steven Anreder at 212-532-3232 or gary.fishman@anreder.com and steven.anreder@anreder.com
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RCI HOSPITALITY HOLDINGS, INC.
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
(in thousands, except per share, number of shares and percentage data)
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
December 31, 2023
|
|
December 31, 2022
|
|
Amount
|
% of Revenue
|
|
Amount
|
% of Revenue
|
|
Revenues
|
|
|
|
|
|
|
Sales of alcoholic beverages
|
$ 33,316
|
45.1 %
|
|
$ 29,650
|
42.4 %
|
|
Sales of food and merchandise
|
10,802
|
14.6 %
|
|
10,347
|
14.8 %
|
|
Service revenues
|
25,119
|
34.0 %
|
|
25,563
|
36.5 %
|
|
Other
|
4,670
|
6.3 %
|
|
4,408
|
6.3 %
|
|
Total revenues
|
73,907
|
100.0 %
|
|
69,968
|
100.0 %
|
|
Operating expenses
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
Alcoholic beverages sold
|
6,281
|
18.9 %
|
|
5,374
|
18.1 %
|
|
Food and merchandise sold
|
4,038
|
37.4 %
|
|
3,586
|
34.7 %
|
|
Service and other
|
40
|
0.1 %
|
|
49
|
0.2 %
|
|
Total cost of goods sold (exclusive of items shown below)
|
10,359
|
14.0 %
|
|
9,009
|
12.9 %
|
|
Salaries and wages
|
21,332
|
28.9 %
|
|
18,676
|
26.7 %
|
|
Selling, general and administrative
|
25,201
|
34.1 %
|
|
22,732
|
32.5 %
|
|
Depreciation and amortization
|
3,853
|
5.2 %
|
|
3,307
|
4.7 %
|
|
Other charges, net
|
(3)
|
(0.0) %
|
|
(654)
|
(0.9) %
|
|
Total operating expenses
|
60,742
|
82.2 %
|
|
53,070
|
75.8 %
|
|
Income from operations
|
13,165
|
17.8 %
|
|
16,898
|
24.2 %
|
|
Other income (expenses)
|
|
|
|
|
|
|
Interest expense
|
(4,216)
|
(5.7) %
|
|
(3,687)
|
(5.3) %
|
|
Interest income
|
94
|
0.1 %
|
|
91
|
0.1 %
|
|
Income before income taxes
|
9,043
|
12.2 %
|
|
13,302
|
19.0 %
|
|
Income tax expense
|
1,799
|
2.4 %
|
|
3,031
|
4.3 %
|
|
Net income
|
7,244
|
9.8 %
|
|
10,271
|
14.7 %
|
|
Net income attributable to noncontrolling interests
|
(18)
|
(0.0) %
|
|
(33)
|
(0.0) %
|
|
Net income attributable to RCIHH common shareholders
|
$ 7,226
|
9.8 %
|
|
$ 10,238
|
14.6 %
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
Basic and diluted
|
$ 0.77
|
|
|
$ 1.11
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing earnings per share
|
|
|
|
|
|
|
Basic and diluted
|
9,367,151
|
|
|
9,230,258
|
|
|
RCI HOSPITALITY HOLDINGS, INC.
|
|
NON-GAAP FINANCIAL MEASURES
|
|
(in thousands, except per share and percentage data)
|
|
|
|
|
For the Three Months Ended
|
|
December 31, 2023
|
December 31, 2022
|
|
Reconciliation of GAAP net income to Adjusted EBITDA
|
|
|
|
Net income attributable to RCIHH common stockholders
|
$ 7,226
|
$ 10,238
|
|
Income tax expense
|
1,799
|
3,031
|
|
Interest expense, net
|
4,122
|
3,596
|
|
Gain on sale of businesses and assets
|
(3)
|
(590)
|
|
Depreciation and amortization
|
3,853
|
3,307
|
|
Gain on insurance
|
—
|
(64)
|
|
Stock-based compensation
|
470
|
941
|
|
Adjusted EBITDA
|
$ 17,467
|
$ 20,459
|
|
|
|
|
Reconciliation of GAAP net income to non-GAAP net income
|
|
|
|
Net income attributable to RCIHH common stockholders
|
$ 7,226
|
$ 10,238
|
|
Amortization of intangibles
|
659
|
695
|
|
Gain on sale of businesses and assets
|
(3)
|
(590)
|
|
Gain on insurance
|
—
|
(64)
|
|
Stock-based compensation
|
470
|
941
|
|
Net income tax effect
|
(220)
|
(200)
|
|
Non-GAAP net income
|
$ 8,132
|
$ 11,020
|
|
|
|
|
Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share
|
|
|
|
Diluted shares
|
9,367,151
|
9,230,258
|
|
GAAP diluted earnings per share
|
$ 0.77
|
$ 1.11
|
|
Amortization of intangibles
|
0.07
|
0.08
|
|
Gain on sale of businesses and assets
|
0.00
|
(0.06)
|
|
Gain on insurance
|
0.00
|
(0.01)
|
|
Stock-based compensation
|
0.05
|
0.10
|
|
Net income tax effect
|
(0.02)
|
(0.02)
|
|
Non-GAAP diluted earnings per share
|
$ 0.87
|
$ 1.19
|
|
|
|
|
Reconciliation of GAAP operating income to non-GAAP operating income
|
|
|
|
Income from operations
|
$ 13,165
|
$ 16,898
|
|
Amortization of intangibles
|
659
|
695
|
|
Gain on sale of businesses and assets
|
(3)
|
(590)
|
|
Gain on insurance
|
—
|
(64)
|
|
Stock-based compensation
|
470
|
941
|
|
Non-GAAP operating income
|
$ 14,291
|
$ 17,880
|
|
|
|
|
Reconciliation of GAAP operating margin to non-GAAP operating margin
|
|
|
|
Income from operations
|
17.8 %
|
24.2 %
|
|
Amortization of intangibles
|
0.9 %
|
1.0 %
|
|
Gain on sale of businesses and assets
|
(0.0) %
|
(0.8) %
|
|
Gain on insurance
|
0.0 %
|
(0.1) %
|
|
Stock-based compensation
|
0.6 %
|
1.3 %
|
|
Non-GAAP operating margin
|
19.3 %
|
25.6 %
|
|
|
|
|
Reconciliation of net cash provided by operating activities to free cash flow
|
|
|
|
Net cash provided by operating activities
|
$ 13,633
|
$ 14,895
|
|
Less: Maintenance capital expenditures
|
983
|
1,864
|
|
Free cash flow
|
$ 12,650
|
$ 13,031
|
|
RCI HOSPITALITY HOLDINGS, INC.
|
|
SEGMENT INFORMATION
|
|
(in thousands)
|
|
|
|
|
For the Three Months Ended
|
|
December 31, 2023
|
December 31, 2022
|
|
Revenues
|
|
|
|
Nightclubs
|
$ 61,033
|
$ 56,325
|
|
Bombshells
|
12,731
|
13,431
|
|
Other
|
143
|
212
|
|
$ 73,907
|
$ 69,968
|
|
|
|
|
Income (loss) from operations
|
|
|
|
Nightclubs
|
$ 20,369
|
$ 22,740
|
|
Bombshells
|
86
|
1,847
|
|
Other
|
(196)
|
(185)
|
|
Corporate
|
(7,094)
|
(7,504)
|
|
$ 13,165
|
$ 16,898
|
|
|
|
|
RCI HOSPITALITY HOLDINGS, INC.
|
|
NON-GAAP SEGMENT INFORMATION
|
|
($ in thousands)
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2023
|
|
Nightclubs
|
Bombshells
|
Other
|
Corporate
|
Total
|
|
Income (loss) from operations
|
$ 20,369
|
$ 86
|
$ (196)
|
$ (7,094)
|
$ 13,165
|
|
Amortization of intangibles
|
591
|
63
|
—
|
5
|
659
|
|
Gain on sale of businesses and assets
|
(1)
|
—
|
—
|
(2)
|
(3)
|
|
Stock-based compensation
|
—
|
—
|
—
|
470
|
470
|
|
Non-GAAP operating income (loss)
|
$ 20,959
|
$ 149
|
$ (196)
|
$ (6,621)
|
$ 14,291
|
|
|
|
|
|
|
|
GAAP operating margin
|
33.4 %
|
0.7 %
|
(137.1) %
|
(9.6) %
|
17.8 %
|
|
Non-GAAP operating margin
|
34.3 %
|
1.2 %
|
(137.1) %
|
(9.0) %
|
19.3 %
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2022
|
|
Nightclubs
|
Bombshells
|
Other
|
Corporate
|
Total
|
|
Income (loss) from operations
|
$ 22,740
|
$ 1,847
|
$ (185)
|
$ (7,504)
|
$ 16,898
|
|
Amortization of intangibles
|
628
|
2
|
61
|
4
|
695
|
|
Gain on sale of businesses and assets
|
(569)
|
—
|
—
|
(21)
|
(590)
|
|
Gain on insurance
|
(48)
|
—
|
—
|
(16)
|
(64)
|
|
Stock-based compensation
|
—
|
—
|
—
|
941
|
941
|
|
Non-GAAP operating income (loss)
|
$ 22,751
|
$ 1,849
|
$ (124)
|
$ (6,596)
|
$ 17,880
|
|
|
|
|
|
|
|
GAAP operating margin
|
40.4 %
|
13.8 %
|
(87.3) %
|
(10.7) %
|
24.2 %
|
|
Non-GAAP operating margin
|
40.4 %
|
13.8 %
|
(58.5) %
|
(9.4) %
|
25.6 %
|
|
RCI HOSPITALITY HOLDINGS, INC.
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(in thousands)
|
|
|
|
|
For the Three Months Ended
|
|
December 31, 2023
|
December 31, 2022
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net income
|
$ 7,244
|
$ 10,271
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
3,853
|
3,307
|
|
Gain on sale of businesses and assets
|
(3)
|
(686)
|
|
Amortization and writeoff of debt discount and issuance costs
|
163
|
144
|
|
Doubtful accounts expense on notes receivable
|
22
|
—
|
|
Gain on insurance
|
—
|
(64)
|
|
Noncash lease expense
|
762
|
719
|
|
Stock-based compensation expense
|
470
|
941
|
|
Changes in operating assets and liabilities, net of business acquisitions:
|
|
|
|
Accounts receivable
|
1,229
|
1,447
|
|
Inventories
|
(218)
|
(94)
|
|
Prepaid expenses, other current, and other assets
|
(9,029)
|
(7,208)
|
|
Accounts payable, accrued, and other liabilities
|
9,140
|
6,118
|
|
Net cash provided by operating activities
|
13,633
|
14,895
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Proceeds from sale of businesses and assets
|
—
|
2,784
|
|
Proceeds from insurance
|
—
|
64
|
|
Proceeds from notes receivable
|
55
|
55
|
|
Payments for property and equipment and intangible assets
|
(5,135)
|
(12,553)
|
|
Acquisition of businesses, net of cash acquired
|
—
|
(4,000)
|
|
Net cash used in investing activities
|
(5,080)
|
(13,650)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Proceeds from debt obligations
|
701
|
1,500
|
|
Payments on debt obligations
|
(6,352)
|
(3,361)
|
|
Purchase of treasury stock
|
(2,072)
|
(98)
|
|
Payment of dividends
|
(562)
|
(462)
|
|
Payment of loan origination costs
|
(136)
|
(96)
|
|
Share in return of investment by noncontrolling partner
|
—
|
(600)
|
|
Net cash used in financing activities
|
(8,421)
|
(3,117)
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
132
|
(1,872)
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
21,023
|
35,980
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ 21,155
|
$ 34,108
|
|
|
|
|
RCI HOSPITALITY HOLDINGS, INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(in thousands)
|
|
|
|
|
|
December 31, 2023
|
September 30, 2023
|
December 31, 2022
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
$ 21,155
|
$ 21,023
|
$ 34,108
|
|
Accounts receivable, net
|
8,617
|
9,846
|
6,016
|
|
Current portion of notes receivable
|
253
|
249
|
235
|
|
Inventories
|
4,630
|
4,412
|
4,051
|
|
Prepaid expenses and other current assets
|
10,985
|
1,943
|
8,611
|
|
Total current assets
|
45,640
|
37,473
|
53,021
|
|
Property and equipment, net
|
284,398
|
282,705
|
246,536
|
|
Operating lease right-of-use assets, net
|
34,169
|
34,931
|
36,329
|
|
Notes receivable, net of current portion
|
4,362
|
4,443
|
4,631
|
|
Goodwill
|
70,772
|
70,772
|
70,189
|
|
Intangibles, net
|
178,486
|
179,145
|
143,949
|
|
Other assets
|
1,388
|
1,415
|
1,503
|
|
Total assets
|
$ 619,215
|
$ 610,884
|
$ 556,158
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable
|
$ 5,254
|
$ 6,111
|
$ 5,182
|
|
Accrued liabilities
|
26,564
|
16,051
|
18,864
|
|
Current portion of debt obligations, net
|
19,789
|
22,843
|
13,291
|
|
Current portion of operating lease liabilities
|
3,037
|
2,977
|
2,850
|
|
Total current liabilities
|
54,644
|
47,982
|
40,187
|
|
Deferred tax liability, net
|
29,143
|
29,143
|
30,562
|
|
Debt, net of current portion and debt discount and issuance costs
|
214,324
|
216,908
|
197,943
|
|
Operating lease liabilities, net of current portion
|
34,392
|
35,175
|
35,270
|
|
Other long-term liabilities
|
328
|
352
|
386
|
|
Total liabilities
|
332,831
|
329,560
|
304,348
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Preferred stock
|
—
|
—
|
—
|
|
Common stock
|
94
|
94
|
92
|
|
Additional paid-in capital
|
78,815
|
80,437
|
68,070
|
|
Retained earnings
|
207,714
|
201,050
|
183,726
|
|
Total RCIHH stockholders' equity
|
286,623
|
281,581
|
251,888
|
|
Noncontrolling interests
|
(239)
|
(257)
|
(78)
|
|
Total equity
|
286,384
|
281,324
|
251,810
|
|
Total liabilities and equity
|
$ 619,215
|
$ 610,884
|
$ 556,158
|
|
|
|
|
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SOURCE RCI Hospitality Holdings, Inc.
