Exhibit 99.1
RCI Reports 3Q20 Results; Positive Operating Cash Flow During the Quarter
HOUSTON—August 10, 2020—RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the third quarter ended June 30, 2020 and filed its corresponding Form 10-Q. Results are not comparable to prior periods due to the Covid-19 pandemic. In line with government regulations, all locations remained closed in April, a number reopened in May and June, and some of those had to close temporarily before quarter-end.
Key Points
| ● | Total revenues of $14.7 million with $156 thousand in April, $5.7 million in May, and $8.9 million in June. |
| ● | Net loss attributable to common shareholders of $5.5 million or $0.60 per share. |
| ● | Positive operating cash flow. Net cash from operating activities and free cash flow* of $166 thousand. |
| ● | Cash at June 30, 2020 was $14.8 million and accounts receivable were $5.5 million, including a $3.6 million income tax receivable. |
| ● | Bombshells restaurants had record two-month revenues in May-June and quarterly segment operating margin of 22.3% that exceeded our FY20 target. |
| ● | Nightclubs that were able to open performed well considering 3Q20’s operating environment. |
| ● | July revenues totaled $7.6 million. |
| ● | 31 locations open as of today. |
| ● | Approximately half of our team members are back at work after extensive furloughs in March. |
| ● | All open locations follow Covid-19 safety standards for guests and team members, including mandatory mask, social distancing, occupancy and hourly restrictions, as well as closing temporarily for periodic sanitizing. |
| ● | Though our cash flows are not what we anticipated at the start of FY20, the near-term outlook for our business remains strong, and we expect to generate adequate cash flows from operations over the next 12 months. Please see our 10-Q for further discussion. |
Conference Call
A conference call to discuss 3Q20 results, outlook and related matters will be held today at 4:30 PM ET:
| ● | Live Participant Phone Number: Toll Free 877-407-9210, International 201-689-8049 |
| ● | To access the live webcast, slides or replay, visit: https://www.webcaster4.com/Webcast/Page/2209/36059 |
| ● | Phone replay: Toll Free 877-481-4010, International 919-882-2331, Passcode: 36059 |
CEO Comment
Eric Langan, President & CEO, said: “After more than five months, we are more confident in managing how the pandemic is affecting our businesses. By being agile, innovative and acting quickly, we believe we have made the company more resilient.
“We have significantly reduced our cost structure. All payments not deferred were made as required. We have learned how to safely open, close, and reopen locations, and have developed effective ways to serve guests and market our businesses in this new environment. In addition, we have been able to retain our key personnel and rehire many of our valuable team members.
| 1 |
“We have also continued to pursue longer-term strategies. For example, during 3Q20 we sold the second of two excess parcels at Bombshells I-10 in Houston. This significantly reduced our total debt at this location as planned.
“Even with no sales in April, we ended 3Q20 with small but positive operating cash flow, sufficient working capital, and open locations that should provide us with ample staying power. When more locations open, such as our larger Florida and New York units, we believe our new cost structure and marketing should generate noticeably increased cash flow even with Covid-related restrictions.
“Our people have been unbelievable. A special thanks goes out to our team members for making all of this possible.”
As of the release of this report, we do not know the extent and duration of the impact of Covid-19 on our businesses due to the uncertainty about the spread of the virus. Lower sales, as caused by social distancing guidelines, could lead to adverse financial results. However, we will continually monitor and evaluate the situation and will determine any further measures to be instituted, including refinancing several of our debt obligations.
3Q20 Statement of Operations (All comparisons are to 3Q19 unless otherwise noted)
| ● | Consolidated revenues of $14.7 million declined 68.7%. Bombshells segment generated revenues of $4.3 million in May and $4.2 million in June. Nightclubs segment generated revenues of $1.3 million in May and $4.7 million in June. |
| ● | All locations remained closed in April 2020. Following changing regional conditions and government regulations, 11 reopened by May 15, a total of 34 were open by May 31, a total of 40 were open by June 15, and a total of 29 were open at the end of 3Q20. As of today, we have 31 locations open. |
| ● | Cost of goods was 16.2% of revenues compared to 14.2% due to a higher proportion of food sales. |
| ● | Salaries and wages and SGA costs declined 48.9%. This reflected cost-cutting and fewer locations open, partially offset by one month of no open locations and new Covid-related safety costs. |
| ● | Net other charges of $424 thousand compared to a net gain of $172 thousand. 3Q20 reflected $1.0 million in additional Covid-19 impairment and a $608 thousand gain from the sale of real estate, mainly excess property around Bombshells I-10. Most of the $1.9 million sale proceeds paid down related debt. |
| ● | By segment, Bombshells had a $1.9 million operating profit at a 22.3% margin with a higher level of sales and more consistent occupancy while operating in line with indoor restrictions. |
| ● | Nightclubs had a $3.1 million operating loss, which included depreciation of $1.5 million and net charges of $363 thousand (both non-cash). |
| ● | Interest expense was 3.3% lower than a year ago due to debt paydowns prior to and during 3Q20. |
| ● | Income tax was a $1.4 million benefit compared to a $1.8 million expense. |
| ● | Weighted average number of common shares outstanding of 9.1 million declined 5.1% due to repurchases prior to 3Q20. |
June 30, 2020 Balance Sheet (All comparisons are to March 31, 2020 unless otherwise noted)
| ● | Cash and cash equivalents of $14.8 million compared to $9.8 million. |
| ● | Long-term debt of $142.7 million compared to $140.4 million. The increase primarily reflects the addition of a $5.4 million SBA loan partially offset by 3Q20 paydowns of other debt. |
| 2 |
*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, (d) settlement of lawsuits, and (e) impairment of assets. 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) impairment of assets, 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 26.9% and 22.8% effective tax rate of the pre-tax non-GAAP income before taxes for the nine months ended June 30, 2020 and 2019, 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) impairment of assets. 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. |
Note
All references to the “company,” “we,” “our,” and similar terms include RCI Hospitality Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
| 3 |
About RCI Hospitality Holdings, Inc. (Nasdaq: RICK)
With more than 40 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/Ft. Worth, Houston, Miami, Minneapolis, St. Louis, Charlotte, Pittsburgh, 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. Please visit http://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 in this press release, 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) our ability to maintain compliance with the filing requirements of the SEC and the Nasdaq Stock Market, (vii) the impact and uncertainty of the coronavirus pandemic, and (viii) 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, 2019 and its latest Form 10-Q 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]
| 4 |
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and percentage data)
| For the Three Months Ended June 30, | For the Nine Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||
| Amount |
% of
Revenue |
Amount |
% of
Revenue |
Amount |
% of
Revenue |
Amount |
% of
Revenue |
|||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 7,623 | 51.8 | % | $ | 19,570 | 41.6 | % | $ | 45,285 | 43.7 | % | $ | 56,366 | 41.5 | % | ||||||||||||||||
| Sales of food and merchandise | 3,452 | 23.4 | % | 7,046 | 15.0 | % | 17,378 | 16.8 | % | 19,175 | 14.1 | % | ||||||||||||||||||||
| Service revenues | 2,907 | 19.7 | % | 17,299 | 36.8 | % | 34,448 | 33.3 | % | 51,609 | 38.0 | % | ||||||||||||||||||||
| Other | 739 | 5.0 | % | 3,112 | 6.6 | % | 6,430 | 6.2 | % | 8,726 | 6.4 | % | ||||||||||||||||||||
| Total revenues | 14,721 | 100.0 | % | 47,027 | 100.0 | % | 103,541 | 100.0 | % | 135,876 | 100.0 | % | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||||||||||
| Alcoholic beverages sold | 1,245 | 16.3 | % | 4,015 | 20.5 | % | 8,826 | 19.5 | % | 11,541 | 20.5 | % | ||||||||||||||||||||
| Food and merchandise sold | 1,125 | 32.6 | % | 2,565 | 36.4 | % | 5,917 | 34.0 | % | 6,857 | 35.8 | % | ||||||||||||||||||||
| Service and other | 20 | 0.5 | % | 121 | 0.6 | % | 205 | 0.5 | % | 307 | 0.5 | % | ||||||||||||||||||||
| Total cost of goods sold (exclusive of items shown below) | 2,390 | 16.2 | % | 6,701 | 14.2 | % | 14,948 | 14.4 | % | 18,705 | 13.8 | % | ||||||||||||||||||||
| Salaries and wages | 5,421 | 36.8 | % | 13,164 | 28.0 | % | 30,866 | 29.8 | % | 37,168 | 27.4 | % | ||||||||||||||||||||
| Selling, general and administrative | 8,908 | 60.5 | % | 14,895 | 31.7 | % | 39,889 | 38.5 | % | 43,263 | 31.8 | % | ||||||||||||||||||||
| Depreciation and amortization | 2,235 | 15.2 | % | 2,465 | 5.2 | % | 6,696 | 6.5 | % | 6,718 | 4.9 | % | ||||||||||||||||||||
| Other charges (gains), net | 424 | 2.9 | % | (172 | ) | -0.4 | % | 8,588 | 8.3 | % | (2,250 | ) | -1.7 | % | ||||||||||||||||||
| Total operating expenses | 19,378 | 131.6 | % | 37,053 | 78.8 | % | 100,987 | 97.5 | % | 103,604 | 76.2 | % | ||||||||||||||||||||
| Income (loss) from operations | (4,657 | ) | -31.6 | % | 9,974 | 21.2 | % | 2,554 | 2.5 | % | 32,272 | 23.8 | % | |||||||||||||||||||
| Other income (expenses) | ||||||||||||||||||||||||||||||||
| Interest expense | (2,459 | ) | -16.7 | % | (2,543 | ) | -5.4 | % | (7,403 | ) | -7.1 | % | (7,709 | ) | -5.7 | % | ||||||||||||||||
| Interest income | 80 | 0.5 | % | 92 | 0.2 | % | 263 | 0.3 | % | 218 | 0.2 | % | ||||||||||||||||||||
| Unrealized gain (loss) on equity securities | 31 | 0.2 | % | (38 | ) | -0.1 | % | (103 | ) | -0.1 | % | (408 | ) | -0.3 | % | |||||||||||||||||
| Income (loss) before income taxes | (7,005 | ) | -47.6 | % | 7,485 | 15.9 | % | (4,689 | ) | -4.5 | % | 24,373 | 17.9 | % | ||||||||||||||||||
| Income tax expense (benefit) | (1,437 | ) | -9.8 | % | 1,806 | 3.8 | % | (1,262 | ) | -1.2 | % | 5,547 | 4.1 | % | ||||||||||||||||||
| Net income (loss) | (5,568 | ) | -37.8 | % | 5,679 | 12.1 | % | (3,427 | ) | -3.3 | % | 18,826 | 13.9 | % | ||||||||||||||||||
| Net loss (income) attributable to noncontrolling interests | 94 | 0.6 | % | (41 | ) | -0.1 | % | 135 | 0.1 | % | (109 | ) | -0.1 | % | ||||||||||||||||||
| Net income (loss) attributable to RCIHH common shareholders | $ | (5,474 | ) | -37.2 | % | $ | 5,638 | 12.0 | % | $ | (3,292 | ) | -3.2 | % | $ | 18,717 | 13.8 | % | ||||||||||||||
| Earnings (loss) per share | ||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (0.60 | ) | $ | 0.59 | $ | (0.36 | ) | $ | 1.94 | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic and diluted | 9,125 | 9,620 | 9,224 | 9,671 | ||||||||||||||||||||||||||||
| Dividends per share | $ | 0.03 | $ | 0.03 | $ | 0.10 | $ | 0.09 | ||||||||||||||||||||||||
| 5 |
RCI HOSPITALITY HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES
(in thousands, except per share and percentage data)
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Reconciliation of GAAP net income (loss) to Adjusted EBITDA | ||||||||||||||||
| Net income (loss) attributable to RCIHH common shareholders | $ | (5,474 | ) | $ | 5,638 | $ | (3,292 | ) | $ | 18,717 | ||||||
| Income tax expense (benefit) | (1,437 | ) | 1,806 | (1,262 | ) | 5,547 | ||||||||||
| Interest expense, net | 2,379 | 2,451 | 7,140 | 7,491 | ||||||||||||
| Settlement of lawsuits | 50 | - | 74 | 144 | ||||||||||||
| Impairment of assets | 982 | - | 9,192 | - | ||||||||||||
| Gain on sale of businesses and assets | (608 | ) | (265 | ) | (645 | ) | (2,487 | ) | ||||||||
| Unrealized loss (gain) on equity securities | (31 | ) | 38 | 103 | 408 | |||||||||||
| Loss (gain) on insurance | - | 93 | (33 | ) | 93 | |||||||||||
| Depreciation and amortization | 2,235 | 2,465 | 6,696 | 6,718 | ||||||||||||
| Adjusted EBITDA | $ | (1,904 | ) | $ | 12,226 | $ | 17,973 | $ | 36,631 | |||||||
| Reconciliation of GAAP net income (loss) to non-GAAP net income (loss) | ||||||||||||||||
| Net income (loss) attributable to RCIHH common shareholders | $ | (5,474 | ) | $ | 5,638 | $ | (3,292 | ) | $ | 18,717 | ||||||
| Amortization of intangibles | 149 | 165 | 462 | 474 | ||||||||||||
| Settlement of lawsuits | 50 | - | 74 | 144 | ||||||||||||
| Impairment of assets | 982 | - | 9,192 | - | ||||||||||||
| Gain on sale of businesses and assets | (608 | ) | (265 | ) | (645 | ) | (2,487 | ) | ||||||||
| Unrealized loss (gain) on equity securities | (31 | ) | 38 | 103 | 408 | |||||||||||
| Loss (gain) on insurance | - | 93 | (33 | ) | 93 | |||||||||||
| Net income tax effect including rate change | (1,840 | ) | (6 | ) | (2,499 | ) | 327 | |||||||||
| Non-GAAP net income (loss) | $ | (6,772 | ) | $ | 5,663 | $ | 3,362 | $ | 17,676 | |||||||
| Reconciliation of GAAP diluted earnings (loss) per share to non-GAAP diluted earnings (loss) per share | ||||||||||||||||
| Diluted shares | 9,125 | 9,620 | 9,224 | 9,671 | ||||||||||||
| GAAP diluted earnings (loss) per share | $ | (0.60 | ) | $ | 0.59 | $ | (0.36 | ) | $ | 1.94 | ||||||
| Amortization of intangibles | 0.02 | 0.02 | 0.05 | 0.05 | ||||||||||||
| Settlement of lawsuits | 0.01 | - | 0.01 | 0.01 | ||||||||||||
| Impairment of assets | 0.11 | - | 1.00 | - | ||||||||||||
| Gain on sale of businesses and assets | (0.07 | ) | (0.03 | ) | (0.07 | ) | (0.26 | ) | ||||||||
| Unrealized loss on equity securities | (0.00 | ) | 0.00 | 0.01 | 0.04 | |||||||||||
| Loss (gain) on insurance | - | 0.01 | (0.00 | ) | 0.01 | |||||||||||
| Net income tax effect including rate change | (0.20 | ) | (0.00 | ) | (0.27 | ) | 0.03 | |||||||||
| Non-GAAP diluted earnings (loss) per share | $ | (0.74 | ) | $ | 0.59 | $ | 0.36 | $ | 1.83 | |||||||
| Reconciliation of GAAP operating income (loss) to non-GAAP operating income (loss) | ||||||||||||||||
| Income (loss) from operations | $ | (4,657 | ) | $ | 9,974 | $ | 2,554 | $ | 32,272 | |||||||
| Amortization of intangibles | 149 | 165 | 462 | 474 | ||||||||||||
| Settlement of lawsuits | 50 | - | 74 | 144 | ||||||||||||
| Impairment of assets | 982 | - | 9,192 | - | ||||||||||||
| Gain on sale of businesses and assets | (608 | ) | (265 | ) | (645 | ) | (2,487 | ) | ||||||||
| Loss (gain) on insurance | - | 93 | (33 | ) | 93 | |||||||||||
| Non-GAAP operating income | $ | (4,084 | ) | $ | 9,967 | $ | 11,604 | $ | 30,496 | |||||||
| Reconciliation of GAAP operating margin to non-GAAP operating margin | ||||||||||||||||
| GAAP operating margin | -31.6 | % | 21.2 | % | 2.5 | % | 23.8 | % | ||||||||
| Amortization of intangibles | 1.0 | % | 0.4 | % | 0.4 | % | 0.3 | % | ||||||||
| Settlement of lawsuits | 0.3 | % | 0.0 | % | 0.1 | % | 0.1 | % | ||||||||
| Impairment of assets | 6.7 | % | 0.0 | % | 8.9 | % | 0.0 | % | ||||||||
| Gain on sale of businesses and assets | -4.1 | % | -0.6 | % | -0.6 | % | -1.8 | % | ||||||||
| Loss (gain) on insurance | 0.0 | % | 0.2 | % | 0.0 | % | 0.1 | % | ||||||||
| Non-GAAP operating margin | -27.7 | % | 21.2 | % | 11.2 | % | 22.4 | % | ||||||||
| Reconciliation of net cash provided by operating activities to free cash flow | ||||||||||||||||
| Net cash provided by operating activities | $ | 166 | $ | 7,443 | $ | 12,147 | $ | 28,414 | ||||||||
| Less: Maintenance capital expenditures | - | 955 | 2,111 | 2,072 | ||||||||||||
| Free cash flow | $ | 166 | $ | 6,488 | $ | 10,036 | $ | 26,342 | ||||||||
| 6 |
RCI HOSPITALITY HOLDINGS, INC.
SEGMENT INFORMATION
(in thousands)
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||||
| Nightclubs | $ | 6,013 | $ | 37,889 | $ | 75,239 | $ | 112,664 | ||||||||
| Bombshells | 8,531 | 8,755 | 27,684 | 22,295 | ||||||||||||
| Other | 177 | 383 | 618 | 917 | ||||||||||||
| $ | 14,721 | $ | 47,027 | $ | 103,541 | $ | 135,876 | |||||||||
| Income (loss) from operations | ||||||||||||||||
| Nightclubs | $ | (3,088 | ) | $ | 14,034 | $ | 13,002 | $ | 44,499 | |||||||
| Bombshells | 1,903 | 686 | 4,166 | 1,543 | ||||||||||||
| Other | (95 | ) | (111 | ) | (480 | ) | (406 | ) | ||||||||
| General corporate | (3,377 | ) | (4,635 | ) | (14,134 | ) | (13,364 | ) | ||||||||
| $ | (4,657 | ) | $ | 9,974 | $ | 2,554 | $ | 32,272 | ||||||||
| 7 |
RCI HOSPITALITY HOLDINGS, INC.
NON-GAAP SEGMENT INFORMATION
($ in thousands)
| For the Three Months Ended June 30, 2020 | For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | (3,088 | ) | $ | 1,903 | $ | (95 | ) | $ | (3,377 | ) | $ | (4,657 | ) | $ | 14,034 | $ | 686 | $ | (111 | ) | $ | (4,635 | ) | $ | 9,974 | ||||||||||||||
| Amortization of intangibles | 49 | 3 | 96 | - | 148 | - | - | - | 165 | 165 | ||||||||||||||||||||||||||||||
| Settlement of lawsuits | 50 | - | - | - | 50 | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Impairment of assets | 982 | - | - | - | 982 | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | (619 | ) | 16 | - | (4 | ) | (607 | ) | (260 | ) | - | - | (5 | ) | (265 | ) | ||||||||||||||||||||||||
| Loss (gain) on insurance | - | - | - | - | - | 93 | - | - | - | 93 | ||||||||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | (2,626 | ) | $ | 1,922 | $ | 1 | $ | (3,381 | ) | $ | (4,084 | ) | $ | 13,867 | $ | 686 | $ | (111 | ) | $ | (4,475 | ) | $ | 9,967 | |||||||||||||||
| GAAP operating margin | -51.4 | % | 22.3 | % | -53.7 | % | -22.9 | % | -31.6 | % | 37.0 | % | 7.8 | % | -29.0 | % | -9.9 | % | 21.2 | % | ||||||||||||||||||||
| Non-GAAP operating margin | -43.7 | % | 22.5 | % | 0.6 | % | -23.0 | % | -27.7 | % | 36.6 | % | 7.8 | % | -29.0 | % | -9.5 | % | 21.2 | % | ||||||||||||||||||||
| For the Nine Months Ended June 30, 2020 | For the Nine Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | 13,002 | $ | 4,166 | $ | (480 | ) | $ | (14,134 | ) | $ | 2,554 | $ | 44,499 | $ | 1,543 | $ | (406 | ) | $ | (13,364 | ) | $ | 32,272 | ||||||||||||||||
| Amortization of intangibles | 163 | 11 | 287 | - | 461 | - | - | - | 474 | 474 | ||||||||||||||||||||||||||||||
| Settlement of lawsuits | 74 | - | - | - | 74 | 129 | 3 | - | 12 | 144 | ||||||||||||||||||||||||||||||
| Impairment of assets | 8,947 | 245 | - | - | 9,192 | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | (619 | ) | 16 | - | (41 | ) | (644 | ) | (2,412 | ) | 1 | - | (76 | ) | (2,487 | ) | ||||||||||||||||||||||||
| Loss (gain) on insurance | (20 | ) | - | - | (13 | ) | (33 | ) | 93 | - | - | - | 93 | |||||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 21,547 | $ | 4,438 | $ | (193 | ) | $ | (14,188 | ) | $ | 11,604 | $ | 42,309 | $ | 1,547 | $ | (406 | ) | $ | (12,954 | ) | $ | 30,496 | ||||||||||||||||
| GAAP operating margin | 17.3 | % | 15.0 | % | -77.7 | % | -13.7 | % | 2.5 | % | 39.5 | % | 6.9 | % | -44.3 | % | -9.8 | % | 23.8 | % | ||||||||||||||||||||
| Non-GAAP operating margin | 28.6 | % | 16.0 | % | -31.2 | % | -13.7 | % | 11.2 | % | 37.6 | % | 6.9 | % | -44.3 | % | -9.5 | % | 22.4 | % | ||||||||||||||||||||
| 8 |
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
| Net income (loss) | $ | (5,568 | ) | $ | 5,679 | $ | (3,427 | ) | $ | 18,826 | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization | 2,235 | 2,465 | 6,696 | 6,718 | ||||||||||||
| Deferred income tax expense (benefit) | (362 | ) | 106 | (1,517 | ) | 1,237 | ||||||||||
| Gain on sale of businesses and assets | (713 | ) | (507 | ) | (749 | ) | (2,704 | ) | ||||||||
| Impairment of assets | 982 | - | 9,192 | - | ||||||||||||
| Unrealized loss (gain) on equity securities | (31 | ) | 38 | 103 | 408 | |||||||||||
| Amortization of debt discount and issuance costs | 65 | 74 | 194 | 276 | ||||||||||||
| Deferred rent expense | - | 47 | - | 236 | ||||||||||||
| Noncash lease expense | 419 | - | 1,244 | - | ||||||||||||
| Loss (gain) on insurance | - | 93 | (33 | ) | 93 | |||||||||||
| Doubtful accounts expense on notes receivable | 495 | - | 495 | - | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable | (1,970 | ) | 578 | (53 | ) | 2,305 | ||||||||||
| Inventories | 108 | 95 | (29 | ) | (87 | ) | ||||||||||
| Prepaid expenses, other current assets and other assets | 2,102 | 649 | 4,942 | 4,199 | ||||||||||||
| Accounts payable, accrued and other liabilities | 2,404 | (1,874 | ) | (4,911 | ) | (3,093 | ) | |||||||||
| Net cash provided by operating activities | 166 | 7,443 | 12,147 | 28,414 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
| Proceeds from sale of businesses and assets | 1,936 | 2,240 | 2,041 | 5,106 | ||||||||||||
| Proceeds from insurance | - | - | 945 | - | ||||||||||||
| Proceeds from notes receivable | 1,152 | 39 | 1,555 | 107 | ||||||||||||
| Issuance of note receivable | - | - | - | (420 | ) | |||||||||||
| Payments for property and equipment and intangible assets | (242 | ) | (2,999 | ) | (5,565 | ) | (16,901 | ) | ||||||||
| Acquisition of businesses, net of cash acquired | - | - | - | (13,500 | ) | |||||||||||
| Net cash provided by (used in) investing activities | 2,846 | (720 | ) | (1,024 | ) | (25,608 | ) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
| Proceeds from debt obligations | 5,623 | 2,034 | 6,503 | 12,330 | ||||||||||||
| Payments on debt obligations | (3,392 | ) | (5,347 | ) | (7,489 | ) | (18,634 | ) | ||||||||
| Purchase of treasury stock | - | (403 | ) | (8,488 | ) | (2,364 | ) | |||||||||
| Payment of dividends | (273 | ) | (285 | ) | (920 | ) | (867 | ) | ||||||||
| Payment of loan origination costs | - | - | - | (20 | ) | |||||||||||
| Distribution to noncontrolling interests | - | (21 | ) | (31 | ) | (21 | ) | |||||||||
| Net provided by (cash used) in financing activities | 1,958 | (4,022 | ) | (10,425 | ) | (9,576 | ) | |||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 4,970 | 2,701 | 698 | (6,770 | ) | |||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 9,825 | 8,255 | 14,097 | 17,726 | ||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 14,795 | $ | 10,956 | $ | 14,795 | $ | 10,956 | ||||||||
| 9 |
RCI HOSPITALITY HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| June 30, | September 30, | June 30, | ||||||||||
| 2020 | 2019 | 2019 | ||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 14,795 | $ | 14,097 | $ | 10,956 | ||||||
| Accounts receivable, net | 5,529 | 6,289 | 5,001 | |||||||||
| Current portion of notes receivable | 219 | 954 | 1,152 | |||||||||
| Inventories | 2,627 | 2,598 | 2,502 | |||||||||
| Prepaid insurance | 1,415 | 5,446 | 896 | |||||||||
| Other current assets | 1,752 | 2,521 | 2,090 | |||||||||
| Assets held for sale | 2,013 | 2,866 | - | |||||||||
| Total current assets | 28,350 | 34,771 | 22,597 | |||||||||
| Property and equipment, net | 181,960 | 183,956 | 191,493 | |||||||||
| Operating lease right-of-use assets, net | 25,962 | - | - | |||||||||
| Notes receivable, net of current portion | 2,896 | 4,211 | 3,810 | |||||||||
| Goodwill | 47,109 | 53,630 | 55,271 | |||||||||
| Intangibles, net | 73,224 | 75,951 | 76,285 | |||||||||
| Other assets | 873 | 1,118 | 1,422 | |||||||||
| Total assets | $ | 360,374 | $ | 353,637 | $ | 350,878 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable | $ | 3,955 | $ | 3,810 | $ | 2,544 | ||||||
| Accrued liabilities | 10,286 | 14,644 | 9,117 | |||||||||
| Current portion of long-term debt, net | 17,249 | 15,754 | 16,374 | |||||||||
| Current portion of operating lease liabilities | 1,586 | - | - | |||||||||
| Total current liabilities | 33,076 | 34,208 | 28,035 | |||||||||
| Deferred tax liability, net | 20,141 | 21,658 | 22,076 | |||||||||
| Long-term debt, net of current portion and debt discount and issuance costs | 125,487 | 127,774 | 130,205 | |||||||||
| Operating lease liabilities, net of current portion | 25,863 | - | - | |||||||||
| Other long-term liabilities | 372 | 1,696 | 1,656 | |||||||||
| Total liabilities | 204,939 | 185,336 | 181,972 | |||||||||
| Commitments and contingencies | ||||||||||||
| Equity | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Common stock | 91 | 96 | 96 | |||||||||
| Additional paid-in capital | 52,829 | 61,312 | 61,849 | |||||||||
| Retained earnings | 102,837 | 107,049 | 106,976 | |||||||||
| Total RCIHH stockholders’ equity | 155,757 | 168,457 | 168,921 | |||||||||
| Noncontrolling interests | (322 | ) | (156 | ) | (15 | ) | ||||||
| Total equity | 155,435 | 168,301 | 168,906 | |||||||||
| Total liabilities and equity | $ | 360,374 | $ | 353,637 | $ | 350,878 | ||||||
| 10 |