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RCI Reports 1Q22 Results

Feb 09, 2022 4:05 PM

HOUSTON, Feb. 9, 2022 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the fiscal 2022 first quarter ended December 31, 2021, and filed its Form 10-Q.  

Highlights 1Q22 vs. 1Q21

  • Total revenues of $61.8 million vs. $38.4 million
  • EPS of $1.12 vs. $1.07
  • Non-GAAP EPS* of $1.10 vs. $0.39
  • Net cash from operating activities of $16.3 million vs. $6.3 million
  • Free cash flow* of $15.3 million vs. $5.7 million
  • Net income of $10.6 million vs. $9.5 million
  • Adjusted EBITDA* of $18.0 million vs. $8.7 million

* See "Non-GAAP Financial Measures" below

Eric Langan, President and CEO of RCI Hospitality Holdings, Inc., stated: "We want to thank our teams for delivering yet another strong quarter. Nightclubs and Bombshells continued to perform well. Our 12 recent club acquisitions and new company-owned Bombshells in Arlington, TX also contributed to results for part of the quarter. We didn't experience any noticeable impact until December from Omicron, which, to date, has cycled quickly through our markets.

"Looking ahead, we expect further progress with our recent club acquisitions, our first Bombshells franchise to open in San Antonio, TX, and the soft launch of our AdmireMe.com site. We are actively pursuing new club acquisitions as well as Bombshells company-owned locations and franchisees. Our recently announced $18.7 million bank loan has provided us with additional capital to deploy in line with our capital allocation strategy. We had approximately $32 million cash on hand at the end of January."

Conference Call Today at 4:30 PM ET

  • Live Participant Phone: Toll Free 877-545-0523, International 973-528-0016, Passcode: 203629
  • Live webcast, slides or replay link: https://www.webcaster4.com/Webcast/Page/2209/44464
  • Phone replay: Toll Free 877-481-4010, International 919-882-2331, Passcode: 44464

Meet Management Tonight at 6:00 PM ET

  • Investors are invited to meet management at one of RCI's top revenue generating clubs
  • Rick's Cabaret New York, 50 W. 33rd Street, New York, NY, between Fifth Avenue and Broadway
  • RSVP your contact information to [email protected] by 5:00 PM ET today

1Q22 Segments

  • Nightclubs: 1Q22 revenues of $46.8 million, operating margin of 40.1%, and income from operations of $18.7 million. This compares to 1Q21 revenues of $25.2 million, operating margin of 33.7%, and income from operations of $8.5 million. Revenues and income from operations increased approximately 86% and 121%, respectively, compared to 1Q21, which was still heavily impacted by government restrictions related to COVID-19. Clubs acquired in October-November 2021 contributed approximately 29% of the increase in revenues and approximately 17% of the increase in operating income. Segment revenues and operating margin also benefited from a 107% year-over-year increase in high-margin service revenues.
  • Bombshells: 1Q22 revenues of $14.8 million, operating margin of 19.0%, and income from operations of $2.8 million. This compares to 1Q21 revenues of $13.0 million, operating margin of 20.9%, and income from operations of $2.7 million. The new location in Arlington, TX, which opened early December, contributed approximately 45% of the increase in revenues and set a record for first month revenues for a new Bombshells. Operating margin and income were affected by a little more than two months of pre-opening costs without sales for Arlington.

1Q22 Consolidated (comparisons to 1Q21 and % are of total revenues unless indicated otherwise)

  • Margin improvements in cost of goods sold (14.4% vs. 16.2%), salaries and wages (26.7% vs. 29.9%), and SG&A (29.9% vs. 31.6%) reflected higher Nightclubs sales and margins.
  • Operating margin was 25.7% vs. 17.1%.
  • Interest expense increased $170 thousand primarily due to higher debt related to the October-November acquisitions, but as a percentage of revenues declined to 4.2% from 6.3%.
  • Non-operating gains totaled $84 thousand compared to $4.9 million, reflecting the previously reported 1Q21 debt forgiveness.
  • Income taxes were a $2.9 million expense compared to a benefit of $384 thousand. 1Q21 benefited from a change in the deferred tax asset valuation allowance.
  • Weighted average shares outstanding increased 4.3%, reflecting the partial quarter effect of the shares issued for 11 clubs acquired on October 18, 2021.
  • Debt was $161.9 million at 12/31/21 compared to $125.2 million at 9/30/21. This increase primarily reflected previously reported debt used to finance the October 2021 club acquisitions.

Note

  • As of the release of this report, we do not know the future extent and duration of the impact of COVID-19 on our businesses. We will continually monitor and evaluate our cash flow situation to determine whether any measures need to be instituted.
  • All references to the "company," "we," "our," and similar terms include RCI Hospitality Holdings, Inc., and its subsidiaries, unless the context indicates otherwise.

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) settlement of lawsuits. 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) unrealized gains or losses on equity securities, (e) settlement of lawsuits, (f) gain on debt extinguishment, and (g) 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 22.3% and 19.1% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 2021 and 2020, 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, (f) unrealized gains or losses on equity securities, (g) settlement of lawsuits, and (h) gain on debt extinguishment. 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.
  • Management also uses 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) www.rcihospitality.com

With more than 50 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in gentlemen's clubs and sports bars/restaurants. Clubs in New York City, Chicago, Dallas-Fort Worth, Houston, Miami, Minneapolis, Denver, St. Louis, Charlotte, Pittsburgh, Raleigh, Louisville, and other markets operate under brand names such as Rick's Cabaret, XTC, Club Onyx, Vivid Cabaret, Jaguars Club, Tootsie's Cabaret, and Scarlett's Cabaret. Sports bars/restaurants operate under the brand name Bombshells Restaurant & Bar.

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 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 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, 2021, 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 [email protected] and [email protected]













RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share, number of shares and percentage data)


















For the Three Months Ended December 31,






2021


2020






Amount


% of
Revenue


Amount


% of
Revenue

Revenues










Sales of alcoholic beverages


$          26,431


42.7%


$          17,360


45.2%


Sales of food and merchandise


10,894


17.6%


8,609


22.4%


Service revenues


20,876


33.8%


10,060


26.2%


Other


3,635


5.9%


2,369


6.2%



Total revenues


61,836


100.0%


38,398


100.0%

Operating expenses










Cost of goods sold











Alcoholic beverages sold


4,834


18.3%


3,262


18.8%



Food and merchandise sold


3,957


36.3%


2,889


33.6%



Service and other


100


0.4%


53


0.4%




Total cost of goods sold (exclusive of items shown below)


8,891


14.4%


6,204


16.2%


Salaries and wages


16,505


26.7%


11,486


29.9%


Selling, general and administrative


18,486


29.9%


12,152


31.6%


Depreciation and amortization


2,194


3.5%


2,023


5.3%


Other gains, net


(151)


-0.2%


(50)


-0.1%



Total operating expenses


45,925


74.3%


31,815


82.9%

Income from operations


15,911


25.7%


6,583


17.1%

Other income (expenses)










Interest expense


(2,604)


-4.2%


(2,434)


-6.3%


Interest income


106


0.2%


60


0.2%


Non-operating gains, net


84


0.1%


4,916


12.8%

Income before income taxes


13,497


21.8%


9,125


23.8%

Income tax expense (benefit)


2,933


4.7%


(384)


-1.0%

Net income


10,564


17.1%


9,509


24.8%

Net loss attributable to noncontrolling interests


11


0.0%


134


0.3%

Net income attributable to RCIHH common shareholders


$          10,575


17.1%


$             9,643


25.1%













Earnings per share










Basic and diluted


$               1.12




$               1.07















Weighted average shares outstanding










Basic and diluted


9,407,519




9,019,088















Dividends per share


$               0.04




$               0.04















 






RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES

(in thousands, except per share, number of shares and percentage data)








For the Three Months



Ended December 31,



2021


2020

Reconciliation of GAAP net income to Adjusted EBITDA





Net income attributable to RCIHH common stockholders


$          10,575


$             9,643

Income tax expense (benefit)


2,933


(384)

Interest expense, net


2,498


2,374

Settlement of lawsuits


192


152

Gain on sale of businesses and assets


(342)


(5)

Gain on debt extinguishment


(85)


(4,949)

Unrealized loss on equity securities


1


33

Gain on insurance


(1)


(197)

Depreciation and amortization


2,194


2,023

Adjusted EBITDA


$          17,965


$             8,690






Reconciliation of GAAP net income to non-GAAP net income



Net income attributable to RCIHH common stockholders


$          10,575


$             9,643

Amortization of intangibles


50


79

Settlement of lawsuits


192


152

Gain on sale of businesses and assets


(342)


(5)

Gain on debt extinguishment


(85)


(4,949)

Unrealized loss on equity securities


1


33

Gain on insurance


(1)


(197)

Net income tax effect


(38)


(1,219)

Non-GAAP net income


$          10,352


$             3,537






Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share

Diluted shares


9,407,519


9,019,088

GAAP diluted earnings per share


$               1.12


$               1.07

Amortization of intangibles


0.01


0.01

Settlement of lawsuits


0.02


0.02

Gain on sale of businesses and assets


(0.04)


(0.00)

Gain on debt extinguishment


(0.01)


(0.55)

Unrealized loss on equity securities


0.00


0.00

Gain on insurance


(0.00)


(0.02)

Net income tax effect


(0.00)


(0.14)

Non-GAAP diluted earnings per share


$               1.10


$               0.39






Reconciliation of GAAP operating income to non-GAAP operating income

Income from operations


$          15,911


$             6,583

Amortization of intangibles


50


79

Settlement of lawsuits


192


152

Gain on sale of businesses and assets


(342)


(5)

Gain on insurance


(1)


(197)

Non-GAAP operating income


$          15,810


$             6,612






Reconciliation of GAAP operating margin to non-GAAP operating margin

GAAP operating margin


25.7%


17.1%

Amortization of intangibles


0.1%


0.2%

Settlement of lawsuits


0.3%


0.4%

Gain on sale of businesses and assets


-0.6%


0.0%

Gain on insurance


0.0%


-0.5%

Non-GAAP operating margin


25.6%


17.2%






Reconciliation of net cash provided by operating activities to free cash flow

Net cash provided by operating activities


$          16,264


$             6,274

Less: Maintenance capital expenditures


998


605

Free cash flow


$          15,266


$             5,669






 







RCI HOSPITALITY HOLDINGS, INC.

SEGMENT INFORMATION

(in thousands)










For the Three Months




Ended December 31,




2021


2020

Revenues






Nightclubs


$      46,781


$      25,197


Bombshells


14,771


13,006


Other


284


195




$      61,836


$      38,398







Income (loss) from operations






Nightclubs


$      18,736


$         8,495


Bombshells


2,802


2,717


Other


(43)


(75)


General corporate


(5,584)


(4,554)




$      15,911


$         6,583







 






















RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP SEGMENT INFORMATION

($ in thousands)
























For the Three Months Ended December 31, 2021


For the Three Months Ended December 31, 2020



Nightclubs


Bombshells


Other


Corporate


Total


Nightclubs


Bombshells


Other


Corporate


Total

Income (loss) from operations


$     18,736


$       2,802


$           (43)


$     (5,584)


$     15,911


$       8,495


$       2,717


$           (75)


$     (4,554)


$       6,583

Amortization of intangibles


47


3


-


-


50


47


4


28


-


79

Settlement of lawsuits


177


10


-


5


192


118


34


-


-


152

Loss (gain) on sale of businesses and assets

45


13


-


(400)


(342)


-


-


-


(5)


(5)

Gain on insurance


(1)


-


-


-


(1)


(197)


-


-


-


(197)

Non-GAAP operating income (loss)

$     19,004


$       2,828


$           (43)


$     (5,979)


$     15,810


$       8,463


$       2,755


$           (47)


$     (4,559)


$       6,612






















GAAP operating margin


40.1%


19.0%


-15.1%


-9.0%


25.7%


33.7%


20.9%


-38.5%


-11.9%


17.1%

Non-GAAP operating margin


40.6%


19.1%


-15.1%


-9.7%


25.6%


33.6%


21.2%


-24.1%


-11.9%


17.2%






















 

 








RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)












For the Three Months Ended





December 31, 2021


December 31, 2020

CASH FLOWS FROM OPERATING ACTIVITIES





Net income


$                 10,564


$                   9,509

Adjustments to reconcile net income to net cash





provided by operating activities:






Depreciation and amortization


2,194


2,023


Deferred income tax benefit


-


-


Gain on sale of businesses and assets


(523)


(5)


Gain on debt extinguishment


(83)


(4,920)


Unrealized loss on equity securities


1


33


Amortization of debt discount and issuance costs


51


51


Doubtful accounts expense (reversal) on notes receivable

17


(93)


Noncash lease expense


629


421


Gain on insurance


-


(250)


Changes in operating assets and liabilities:







Accounts receivable


1,344


1,433



Inventories


(445)


(22)



Prepaid expenses, other current assets and other assets

(6,519)


1,125



Accounts payable, accrued and other liabilities


9,034


(3,031)


Net cash provided by operating activities


16,264


6,274

CASH FLOWS FROM INVESTING ACTIVITIES





Proceeds from sale of businesses and assets


803


-

Proceeds from insurance


185


250

Proceeds from notes receivable


34


26

Payments for property and equipment and intangible assets

(9,850)


(1,289)

Acquisition of businesses, net of cash acquired


(39,302)


-


Net cash used in investing activities


(48,130)


(1,013)

CASH FLOWS FROM FINANCING ACTIVITIES





Proceeds from debt obligations


17,002


-

Payments on debt obligations


(2,488)


(1,745)

Purchase of treasury stock


-


(1,794)

Payment of dividends


(380)


(360)


Net cash provided by (used in) financing activities


14,134


(3,899)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(17,732)


1,362

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

35,686


15,605

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$                 17,954


$                 16,967








 

 











RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
















December 31,


September 30,


December 31,






2021


2021


2020

ASSETS







Current assets








Cash and cash equivalents


$                17,954


$                35,686


$                16,967


Accounts receivable, net


6,012


7,570


5,334


Current portion of notes receivable


225


220


211


Inventories


3,530


2,659


2,394


Prepaid expenses and other current assets


8,245


1,928


5,348


Assets held for sale


3,113


4,887


-



Total current assets


39,079


52,950


30,254

Property and equipment, net


203,878


175,952


180,548

Operating lease right-of-use assets


35,845


24,308


25,125

Notes receivable, net of current portion


5,512


2,839


2,965

Goodwill


54,484


39,379


45,686

Intangibles, net


125,314


67,824


73,149

Other assets


1,566


1,367


882




Total assets


$             465,678


$             364,619


$             358,609











LIABILITIES AND EQUITY







Current liabilities








Accounts payable


$                  5,807


$                  4,408


$                  3,601


Accrued liabilities


18,413


10,403


13,100


Current portion of debt obligations, net


9,003


6,434


15,685


Current portion of operating lease liabilities


2,288


1,780


1,658



Total current liabilities


35,511


23,025


34,044

Deferred tax liability, net


22,040


19,137


20,390

Debt, net of current portion and debt discount and issuance costs


152,847


118,734


119,136

Operating lease liabilities, net of current portion


35,154


24,150


25,017

Other long-term liabilities


357


350


360



Total liabilities


245,909


185,396


198,947











Commitments and contingencies

















Equity








Preferred stock


-


-


-


Common stock


95


90


90


Additional paid-in capital


80,397


50,040


50,040


Retained earnings


139,888


129,693


110,080



Total RCIHH stockholders' equity


220,380


179,823


160,210


Noncontrolling interests


(611)


(600)


(548)



Total equity


219,769


179,223


159,662




Total liabilities and equity


$             465,678


$             364,619


$             358,609











 

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SOURCE RCI Hospitality Holdings, Inc.