RCI Reports 1Q19 Results and Files 10-Q

Actualizado el 11 de febrero, 2019 - 22.05hs.

RCI Reports 1Q19 Results and Files 10-Q

PR Newswire

HOUSTON, Feb. 11, 2019 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the Fiscal 2019 first quarter ended December 31, 2018 and the filing of its 10-Q.

RCI Hospitality Holdings Corporate Logo (PRNewsFoto/RCI Hospitality Holdings, Inc.) (PRNewsfoto/RCI Hospitality Holdings, Inc.)

1Q19 vs. 1Q18

  • Diluted EPS of $0.65 compared to $1.47
  • Diluted Non-GAAP* EPS of $0.61 compared to $0.53
  • 1Q19 GAAP results included $1.2 million pre-tax gain on the sale of three non-income producing assets and $447K pre-tax non-operating loss reflecting the implementation of a new accounting standard
  • 1Q18 GAAP results included $9.7 million deferred tax credit due to the new tax law and $827K in interest expense for debt issuance costs write-off and prepayment penalties related to a bank refinancing
  • Free cash flow (FCF) totaled $11.1 million based on net cash provided by operating activities of $11.5 million, less maintenance capital expenditures of $0.4 million
  • Total revenues of $44.0 million compared to $41.2 million on 46 and 45 units, respectively

Other News

  • RCI reactivated its share buyback program in line with its capital allocation strategy, acquiring 28,211 shares from October 2018 to January 2019 for $660,000, or an average price of $23.39
  • A subsidiary sold another non-income producing asset for an estimated $383K pre-tax gain in late January

Conference Call Today at 4:30 PM ET

  • A conference call to discuss 1Q19 results, outlook and related matters will be held today at 4:30 PM ET
  • Live Participant Dial In: Toll Free at 877-407-9210 and International at 201-689-8049
  • To access the live webcast, slides or replay, visit: https://www.investornetwork.com/event/presentation/42936  
  • Phone replay: Toll Free at 877-481-4010 and International at 919-882-2331 (Passcode: 42936)

CEO Comment

"We generated strong first quarter results," said Eric Langan, President & CEO. "Total revenues increased 6.8% year over year, led by our Nightclubs segment, with increases of 4.3% in same-store sales, 7.1% in total revenues, and only a partial quarter contribution from newly acquired clubs in Chicago and Pittsburgh.

"Non-GAAP operating income increased 9.9% as operating margin expanded 64 basis points due to increased operating leverage from higher revenues, in particular, higher service revenues, which were up 9.1%. This was despite legal, advertising and marketing costs related to the acquisitions of new clubs. Accordingly, non-GAAP EPS increased 15.1% to $0.61 and free cash flow increased 47.0% to $11.1 million.

"In line with our capital allocation strategy, during and subsequent to 1Q19 we reinitiated our buyback program, acquiring 28,211 shares in the open market, and sold four non-income producing assets for approximately $3.3 million.

"We look forward to the balance of the year. Our FY19 plan calls for:

  • Continuing to integrate our new clubs in Chicago and Pittsburgh
  • Opening three more Bombshells Restaurant & Bars in the Houston area
  • Improving Bombshells same-store sales
  • Selling excess land developed around several of the new Bombshells
  • Further reducing costs, and
  • Continuing our capital allocation strategy as it applies to buybacks."

Asset Management

  • 1Q19: Subsidiaries sold the former Club Onyx Philadelphia business, the company's former office in Houston, and a small parcel in San Antonio for a total of $1.9 million, consisting of $1.2 million in cash and $625K in a 9%, 10-year note receivable, for a pre-tax gain of $1.2 million. Most of the cash proceeds were used to pay down $945K in bank debt on the real estate sold.
  • January 2019: A subsidiary sold an excess parking lot near the site of the former Club Onyx Dallas for $1.4 million, consisting of $250K in cash and $1.15 million in an 8%, 3-year note receivable, for an estimated preliminary pre-tax gain of approximately $383K, after closing costs.

1Q19 REVIEW (All comparisons to year ago periods unless otherwise noted)

  • Total Revenues: Total revenues of $44.0 million rose $2.8 million. By revenue line, growth reflected increases of $1.4 million (+9.1%) in service, $505K (+2.8%) in alcoholic beverages, $481K (+21.8%) in other, and $383K (+7.2%) in food. The other increase reflected the continued revitalization of Drink Robust.
  • Operating Income: Operating income increased 21.8% to $11.1 million (25.3% of revenues) from $9.1 million (22.2%). Expenses increased $819K, but as a percent of revenues, declined 310 basis points to 74.7%. Most of the dollar increase reflected the addition of two nightclubs and legal, advertising and marketing costs related to their acquisition. This was partially offset by net gains of $1.1 million primarily from the sale of non-income producing assets. On a non-GAAP basis, which excludes such gains as well as other items in both periods, operating income increased 9.9% to $10.2 million compared to $9.3 million, and operating margin expanded to 23.1% compared to 22.5%.
  • Nightclubs Segment: Revenues of $37.7 million increased 7.1%, with 39 units compared to 40. Same-store sales increased 4.3%. New clubs added approximately $1.9 million from acquisitions. Operating income increased 15.1% to $15.4 million (40.8% of revenues) from $13.4 million (38.0%). Operating income included the gain on sale of the former Club Onyx Philadelphia business. On a non-GAAP basis, operating income increased 6.6% to $14.3 million from $13.4 million, with operating margin approximately level at 37.8% compared to 38.0%.
  • Bombshells Segment: Revenues of $6.0 million increased 3.2%, with 7 units compared to 5. New units added approximately $1.4 million from Houston area locations opened in April 2018 (Pearland) and December 19th (I-10). This more than offset the previously reported decline in comparable same-store sales of 20.5%, which reflected in part tough year-over-year comparisons to business generated in October 2017 when the Houston Astros won the pro baseball championship. As a result of reduced operating leverage, segment income was $119K (2.0% of revenues) compared to $891K (15.3%).
  • Other Metrics
    • Adjusted EBITDA of $12.0 million increased 8.4% compared to $11.1 million.
    • Occupancy Costs (rent and interest expense as a percentage of total revenues) were 8.0% compared to 7.7%. 1Q19 reflects higher debt raised in advance of two club acquisitions and multiple Bombshells units under construction. 1Q18 excludes $827K in interest expense related to a bank refinancing.
    • ASU 2016-01, a newly adopted accounting guidance, required classification to current income of the change in market value of equity securities starting the quarter ended December 31, 2018. This resulted in the $447K loss in non-operating gains/losses.
    • Effective Tax Rate was an expense of 22.0% compared to a benefit of 134.3%. 1Q18 included $9.7 million deferred tax credit due to the new tax law.
    • Cash and Cash Equivalents were $9.4 million at December 31, 2018 compared to $17.7 million at September 30, 2018. The September position included proceeds from debt used to finance the acquisitions in November of clubs in Chicago and Pittsburgh and related real estate.
    • Long-Term Debt of $153.1 million at December 31, 2018 increased $12.5 million from $140.6 million at September 30, 2018. The increase was primarily due to $12.0 million in seller-financing used to close the Chicago and Pittsburgh acquisitions.
    • RCI's FY19 FCF Target of $26 million is based on estimated net cash provided by operating activities of approximately $29 million, less projected maintenance capex of approximately $3 million.

*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: amortization of intangibles, gains or losses on sale of assets, gain on insurance, and 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 shareholders and diluted earnings per share. Excluded items are: amortization of intangibles, costs and charges related to debt refinancing, income tax expense (benefit), gains or losses on sale of assets, gain on insurance, and settlement of lawsuits. Included item is the non-GAAP provision for current and deferred income taxes, calculated at 22.2% and 26.5% effective tax rate of the pre-tax non-GAAP income before taxes for the quarter ended December 31, 2018 and 2017, respectively. 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 shareholders: depreciation expense, amortization of intangibles, income tax expense (benefit), net interest expense, gains or losses on sale of assets, gain on insurance, and settlement of lawsuits. 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.

Notes

  • Unit counts above are at period end.
  • All references to the "company," "we," "our," and similar terms include RCI Hospitality Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
  • Planned opening dates are subject to change due to weather, which could affect construction schedules, and scheduling of final municipal inspections.

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, 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 the risks and uncertainties associated with operating and managing an adult business, the business climates in cities where it operates, the success or lack thereof in launching and building the company's businesses, risks and uncertainties related to cybersecurity, conditions relevant to real estate transactions, and numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.













RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)



















For the Three Months Ended December 31,






2018


2017






Amount


% of
Revenue


Amount


% of
Revenue

Revenues










Sales of alcoholic beverages


$  18,310


41.6%


$  17,805


43.2%


Sales of food and merchandise


5,690


12.9%


5,307


12.9%


Service revenues


17,331


39.4%


15,889


38.6%


Other


2,692


6.1%


2,211


5.4%



Total revenues


44,023


100.0%


41,212


100.0%

Operating expenses










Cost of goods sold











Alcoholic beverages sold


3,736


20.4%


3,755


21.1%



Food and merchandise sold


1,984


34.9%


2,094


39.5%



Service and other


92


0.5%


36


0.2%




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


5,812


13.2%


5,885


14.3%


Salaries and wages


12,096


27.5%


11,377


27.6%


Selling, general and administrative


14,027


31.9%


12,812


31.1%


Depreciation and amortization


2,053


4.7%


1,909


4.6%


Other charges (gains), net


(1,097)


-2.5%


89


0.2%



Total operating expenses


32,891


74.7%


32,072


77.8%

Income from operations


11,132


25.3%


9,140


22.2%

Other income (expenses)










Interest expense


(2,521)


-5.7%


(3,079)


-7.5%


Interest income


51


0.1%


67


0.2%


Non-operating loss


(447)


-1.0%


-


0.0%

Income before income taxes


8,215


18.7%


6,128


14.9%

Income tax expense (benefit)


1,811


4.1%


(8,227)


-20.0%

Net income


6,404


14.5%


14,355


34.8%

Net income attributable to noncontrolling interests


(60)


-0.1%


(44)


-0.1%

Net income attributable to RCIHH common shareholders


$    6,344


14.4%


$  14,311


34.7%













Earnings per share










Basic


$      0.65




$      1.47




Diluted


$      0.65




$      1.47



Weighted average shares outstanding










Basic


9,713




9,719




Diluted


9,713




9,719















Dividends per share


$      0.03




$      0.03



 

RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES

(in thousands, except per share and percentage data)








For the Three Months



Ended December 31,



2018


2017

Reconciliation of GAAP net income to Adjusted EBITDA





Net income attributable to RCIHH common shareholders


$    6,344


$  14,311

Income tax expense (benefit)


1,811


(8,227)

Interest expense, net


2,470


3,012

Settlement of lawsuits


60


27

Loss (gain) on sale of assets


(1,157)


82

Unrealized loss on equity securities


447


-

Gain on insurance


-


(20)

Depreciation and amortization


2,053


1,909

Adjusted EBITDA


$  12,028


$  11,094






Reconciliation of GAAP net income to non-GAAP net income





Net income attributable to RCIHH common shareholders


$    6,344


$  14,311

Amortization of intangibles


156


48

Income tax expense (benefit)


1,811


(8,227)

Settlement of lawsuits


60


27

Loss (gain) on sale of assets


(1,157)


82

Unrealized loss on equity securities


447


-

Gain on insurance


-


(20)

Costs and charges related to debt refinancing


-


827

Non-GAAP income tax expense


(1,701)


(1,868)

Non-GAAP net income


$    5,960


$    5,180






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




Diluted shares


9,713


9,719

GAAP diluted earnings per share


$      0.65


$      1.47

Amortization of intangibles


0.02


0.00

Income tax expense (benefit)


0.19


(0.85)

Settlement of lawsuits


0.01


0.00

Loss (gain) on sale of assets


(0.12)


0.01

Unrealized loss on equity securities


0.05


-

Gain on insurance


-


(0.00)

Costs and charges related to debt refinancing


-


0.09

Non-GAAP income tax expense


(0.18)


(0.19)

Non-GAAP diluted earnings per share


$      0.61


$      0.53






Reconciliation of GAAP operating income to non-GAAP operating income





Income from operations


$  11,132


$    9,140

Amortization of intangibles


156


48

Settlement of lawsuits


60


27

Loss (gain) on sale of assets


(1,157)


82

Gain on insurance


-


(20)

Non-GAAP operating income


$  10,191


$    9,277






Reconciliation of GAAP operating margin to non-GAAP operating margin





GAAP operating margin


25.3%


22.2%

Amortization of intangibles


0.4%


0.1%

Settlement of lawsuits


0.1%


0.1%

Loss (gain) on sale of assets


-2.6%


0.2%

Gain on insurance


0.0%


0.0%

Non-GAAP operating margin


23.1%


22.5%






Reconciliation of GAAP net cash provided by operating activities to non-GAAP free cash flow



Net cash provided by operating activities


$  11,452


$    8,145

Less: Maintenance capital expenditures


376


608

Free cash flow


$  11,076


$    7,537

 

RCI HOSPITALITY HOLDINGS, INC.

SEGMENT INFORMATION

(in thousands)










For the Three Months




Ended December 31,




2018


2017

Revenues






Nightclubs


$  37,728


$  35,218


Bombshells


6,013


5,828


Other


282


166




$  44,023


$  41,212







Income (loss) from operations






Nightclubs


$  15,387


$  13,371


Bombshells


119


891


Other


(119)


(137)


General corporate


(4,255)


(4,985)




$  11,132


$    9,140

 

RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP SEGMENT INFORMATION

($ in thousands)
























For the Three Months Ended December 31, 2018


For the Three Months Ended December 31, 2017



Nightclubs


Bombshells


Other


Corporate


Total


Nightclubs


Bombshells


Other


Corporate


Total

Income from operations (loss)


$  15,387


$        119


$ (119)


$ (4,255)


$  11,132


$  13,371


$        891


$ (137)


$ (4,985)


$  9,140

Amortization of intangibles


-


-


-


156


156


-


-


-


48


48

Settlement of lawsuits


45


3


-


12


60


27


-


-


-


27

Loss (gain) on sale of assets


(1,152)


-


(5)


-


(1,157)


-


-


-


82


82

Gain on insurance


-


-


-


-


-


-


-


-


(20)


(20)

Non-GAAP operating income (loss)


$  14,280


$        122


$ (124)


$ (4,087)


$  10,191


$  13,398


$        891


$ (137)


$ (4,875)


$  9,277






















GAAP operating margin


40.8%


2.0%


-42.2%


-9.7%


25.3%


38.0%


15.3%


-82.5%


-12.1%


22.2%

Non-GAAP operating margin


37.8%


2.0%


-44.0%


-9.3%


23.1%


38.0%


15.3%


-82.5%


-11.8%


22.5%

 

RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)














December 31,


September 30,






2018


2018

ASSETS





Current assets






Cash and cash equivalents


$        9,387


$       17,726


Accounts receivable, net


5,583


7,320


Inventories


2,578


2,353


Prepaid insurance


3,603


4,910


Other current assets


1,560


1,591


Assets held for sale


2,356


2,902



Total current assets


25,067


36,802

Property and equipment, net


187,502


172,403

Notes receivable


3,467


2,874

Goodwill


54,731


43,591

Intangibles, net


77,289


71,532

Other assets


1,466


2,530




Total assets


$    349,522


$     329,732









LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities






Accounts payable


$        2,357


$         2,825


Accrued liabilities


11,940


11,973


Current portion of long-term debt


14,898


19,047



Total current liabilities


29,195


33,845

Deferred tax liability, net


21,473


19,552

Long-term debt, net of current portion


138,197


121,580

Other long-term liabilities


1,567


1,423



Total liabilities


190,432


176,400









Commitments and contingencies













Stockholders' equity






Preferred stock


-


-


Common stock


97


97


Additional paid-in capital


63,857


64,212


Retained earnings


95,179


88,906


Accumulated other comprehensive income


-


220



Total RCIHH stockholders' equity


159,133


153,435


Noncontrolling interests


(43)


(103)



Total stockholders' equity


159,090


153,332




Total liabilities and stockholders' equity


$    349,522


$     329,732

Media & Investor Contacts

Gary Fishman and Steven Anreder at 212-532-3232 or [email protected] and [email protected]

 

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SOURCE RCI Hospitality Holdings, Inc.

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