HOUSTON, Feb. 9, 2017 /PRNewswire/ -- RCI Hospitality
Holdings, Inc. (Nasdaq: RICK) today announced results for the first
fiscal quarter ended December 31,
2016.
1Q17 vs. 1Q16
- Diluted EPS of $0.30 compared to
$0.25, up 20.0%
- Non-GAAP* Diluted EPS of $0.31
compared to $0.30, up 3.3%
- Total revenues of $33.7 million
compared to $33.5 million, up
0.8%
- Net income of $2.9 million
compared to $2.4 million, up
19.1%
- Free Cash Flow (FCF)* of $5.1
million compared to $3.9
million, up 33.1%
Share Buybacks & Cash Dividend
- RCI continued to buy back shares in 1Q17, taking advantage of
its strong FCF to return capital to shareholders
- In 1Q17, RCI acquired 89,685 shares for $1.1 million, reducing shares outstanding to 9.7
million
- Basic and diluted share counts fell 5.1% and 7.7%,
respectively, 1Q17 vs. 1Q16
- As previously announced, RCI's 1Q17 $0.03 dividend was paid December 27, 2016
Conference Call this Afternoon
- A conference call to discuss 1Q17 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
- Click Here for Slides and Webcast:
http://www.investorcalendar.com/event/175571
CEO Comment
"We're pleased with our 1Q17 results," said Eric Langan, President & CEO. "FCF was up
33.1% year over year in 1Q17, keeping us on track to achieve our
initial target of $18 million in
FY17.
"FCF was aided by a 19.1% increase in net income on a 0.8%
increase in total revenues. GAAP EPS was up 20.0% and non-GAAP EPS,
which removes certain items, increased 3.3%.
"Key to our profitability was expanded margins in the
Nightclubs, Bombshells and Other segments, in part due to
previously disclosed 4Q16 dispositions of underperforming clubs, a
restaurant, and our energy drink business.
"While total sales increased slightly, same store sales grew in
RCI's two core segments—Nightclubs at 2.8% and Bombshells
at 9.6%—reflecting the continued momentum that began in the
second half of FY16.
"Nightclubs experienced strong results from units in
Minneapolis with the return of the
Vikings downtown to their new stadium, and from clubs in
New York City and parts of
Texas. Higher margin service
revenues rose 6.6% year over year, the fourth quarter in a row of
improvement.
"Customers continue to be attracted to our Bombshells military
themed restaurant/sports bar concept, with our uniformed Bombshells
Girls and popular local DJs, where you can have a great time and
great food, and hang out with friends or family.
"Occupancy costs, one of our largest fixed expenses, declined as
a percentage of revenues due to the 2Q16 acquisition of the Rick's
Cabaret New York real estate. The effective tax rate declined as
the result of tax planning.
"With our improved profitability, we made some investments that
were expensed in order to build a stronger foundation for future
growth. This included the ongoing transition to our new ERP system,
marketing to support a new club and Bombshells franchising, and
accounting and tax experts to advise in tax planning strategies in
order to minimize our tax liabilities.
"We continued to buy back shares, enabling us to reduce basic
and diluted share counts year over year by 5.1% and 7.7%,
respectively. During and subsequent to the quarter, we paid down
all remaining convertible debt, including the last $400,000 of a seller-financed note, leaving no
more dilutive securities under our current capital structure.
"Our FY17 plan remains the same. Following through with what we
started in FY16, we will continue our approach to capital
allocation, as evidenced by our ongoing share repurchases. First
half sales should continue to benefit from the positive trend
developed in the second half of FY16.
"The second half of FY17 should grow from the planned opening of
three new Bombshells units and the sale of our first franchises.
Margins and FCF generation should expand from our more profitable
portfolio of clubs and restaurants, and reduced interest expense as
a percent of revenues."
1Q17 Analysis (compares 1Q17 to 1Q16, unless otherwise
noted)
Total Revenues
- Total revenues of $33.7 million
increased 0.8% from $33.5
million.
- Higher margin service revenues increased 6.6%, the second
quarter in a row where these revenues have rebounded year over year
and the fourth quarter in a row of improvement.
- Beverage, food and other revenues declined 1.5%, 2.9% and
11.6%, respectively, due to disposition in 4Q16 of under-performing
restaurants, clubs and the energy drink business, as previously
announced.
Operating Income & Margin
- Income from operations increased 10.8% to $6.3 million (18.8% of revenues) compared to
$5.7 million (17.1% of
revenues).
- Gross profit margin increased 102 basis points to 85.5% of
revenues due to the increased proportion of high margin service
revenues and the reduction of lower margin other revenues.
- Total operating expenses declined 169 basis points to 81.2% of
revenues primarily due to the previously mentioned disposition of
under-performing operations.
- Non-GAAP operating income was $6.4
million (19.1% of revenues), down slightly from $6.6 million (19.7% of revenues), reflecting 1Q17
investment spending as mentioned above.
Nightclubs Segment
- Sales increased 3.9% to $29.3
million from $28.2 million,
with 37 units compared to 38.
- Operating income increased 8.3% to $9.2
million (31.5% of sales) compared to $8.5 million (30.2% of sales).
- On a non-GAAP basis, operating income was $9.3 million (31.7% of sales) compared to
$9.0 million (32.1% of sales).
Bombshells Segment
- Sales declined 1.9% to $4.3
million from $4.4 million,
with four units in operation compared to five (the Webster unit closed in 4Q16).
- Operating income increased 31.0% to $0.638 million (14.9% of sales) from $0.487 million (11.1% of sales).
Other Metrics
- Occupancy Costs: Occupancy costs, one of RCI's largest
fixed costs, measured as a combination of rent plus interest
expense, declined to 8.0% of revenues compared to 8.6%. The
reduction reflects significantly lower rent due to the acquisition
of New York City club real estate
in 2Q16.
- Free Cash Flow (FCF): FCF increased due to 31.4%
increase in net cash provided by operating activities of
$5.5 million compared to $4.2 million, partially offset by a 12.3%
increase in maintenance capital expenditures to $0.394 million from $0.351
million. RCI's current FY17 FCF target of $18 million is based on net cash provided by
operating activities of ~$20.5
million less maintenance capital expenditures of
~$2.5 million.
- Balance Sheet (December 31,
2016 compared to September 30,
2016): Cash increased 6.5% to $12.1 million. Total stockholders' equity
increased 1.1% to $131.6 million,
primarily due to net income for 1Q17 partially offset by share
repurchases and dividends.
Meet Management Tonight
Eric Langan, President & CEO,
invites investors to meet management, tour one of the company's top
clubs, and its new Hoops Cabaret & Sports Bar.
- When: Tonight, Thursday, February
9, 6:00 PM to 8:00 PM ET
- Where: Rick's Cabaret New York, at 50 W. 33rd Street,
New York, NY, bet. Fifth Avenue
and Broadway
- RSVP: With your contact information to
gary.fishman@anreder.com
*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 items that management believes are not
representative of the ongoing business operations of the Company,
but are included in 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 exclude from non-GAAP operating income and non-GAAP operating
margin amortization of intangibles, gains or losses on sale of
assets, stock-based compensation, and settlement of lawsuits and
other one-time costs. 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 exclude from non-GAAP net income and non-GAAP net
income per diluted share amortization of intangibles, income tax
expense, gains or losses on sale of assets, stock-based
compensation, and settlement of lawsuits and other one-time costs,
and include the non-GAAP provision for current and deferred income
taxes, calculated as the tax effect at 33% and 35% effective tax
rate of the pre-tax non-GAAP income before taxes for the quarter
ended December 31, 2016 and 2015,
respectively, because we believe that excluding and including such
items help management and investors better understand our operating
activities.
- Adjusted EBITDA. We exclude from adjusted EBITDA
depreciation expense, amortization of intangibles, income tax
expense, interest expense, interest income, gains or losses on sale
of assets, and settlement of lawsuits and other one-time costs
because we believe that adjusting for such items helps management
and investors better understand 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.
- Non-GAAP Cash Flow Measure. We believe our ability to
generate cash from operating activities is one of our fundamental
financial strengths. As a consequence, management also uses certain
non-GAAP cash flow measures such as free cash flows. Free cash flow
is derived from net cash provided by operating activities less
maintenance capital expenditures.
Notes
- Unit counts 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.
About RCI Hospitality Holdings, Inc. (Nasdaq: RICK)
With 41 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, Miami,
Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis and other cities operate under
brand names, such as "Rick's Cabaret," "XTC," "Club Onyx," "Vivid
Cabaret," "Jaguars" and "Tootsie's Cabaret." Sports
bars/restaurants operate under the brand name "Bombshells." 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)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
|
|
|
Ended December
31,
|
|
|
|
|
2016
|
|
2015
|
Revenues
|
|
|
|
|
|
Sales of alcoholic
beverages
|
|
$ 14,375
|
|
$
14,597
|
|
Sales of food and
merchandise
|
4,207
|
|
4,334
|
|
Service
revenues
|
|
13,475
|
|
12,641
|
|
Other
|
|
1,682
|
|
1,903
|
|
|
Total
revenues
|
|
33,739
|
|
33,475
|
Operating
expenses
|
|
|
|
|
|
Cost of goods
sold
|
|
4,881
|
|
5,184
|
|
Salaries and
wages
|
|
9,652
|
|
9,357
|
|
Selling, general and
administrative
|
11,193
|
|
10,860
|
|
Depreciation and
amortization
|
1,618
|
|
1,817
|
|
Other
charges
|
|
62
|
|
540
|
|
|
Total operating
expenses
|
|
27,406
|
|
27,758
|
Income from
operations
|
|
6,333
|
|
5,717
|
Other income
(expenses)
|
|
|
|
|
|
Interest
expense
|
|
(2,015)
|
|
(1,915)
|
|
Interest
income
|
|
37
|
|
4
|
Income before income
taxes
|
|
4,355
|
|
3,806
|
Income
taxes
|
|
1,450
|
|
1,367
|
Net income
|
|
2,905
|
|
2,439
|
Less: Net income
(loss) attributable to noncontrolling interests
|
7
|
|
(113)
|
Net income
attributable to RCIHH common shareholders
|
$
2,898
|
|
$
2,552
|
|
|
|
|
|
|
|
Earnings per share
attributable to RCIHH common shareholders
|
|
Basic
|
|
$
0.30
|
|
$
0.25
|
|
Diluted
|
|
$
0.30
|
|
$
0.25
|
Weighted average
number of common shares outstanding
|
|
Basic
|
|
9,768
|
|
10,296
|
|
Diluted
|
|
9,814
|
|
10,635
|
|
|
|
|
|
|
|
Dividends per
share
|
|
$
0.03
|
|
$
-
|
RCI HOSPITALITY
HOLDINGS, INC.
|
NON-GAAP
FINANCIAL MEASURES*
|
($ in thousands,
except per share data)
|
|
|
|
|
|
For the Three
Months
|
|
Ended December
31,
|
|
2016
|
|
2015
|
Reconciliation of
GAAP net income to Adjusted EBITDA
|
|
|
|
Net income attributable to RCIHH common
shareholders
|
$ 2,898
|
|
$ 2,552
|
Income tax
expense
|
1,450
|
|
1,367
|
Interest expense and
income
|
1,978
|
|
1,911
|
Settlement of
lawsuits and other one-time costs
|
73
|
|
540
|
Gain on sale of
assets
|
(11)
|
|
-
|
Depreciation and
amortization
|
1,618
|
|
1,817
|
Adjusted
EBITDA
|
$ 8,006
|
|
$ 8,187
|
|
|
|
|
Reconciliation of
GAAP net income to non-GAAP net income
|
|
|
|
Net income
attributable to RCIHH common shareholders
|
$ 2,898
|
|
$ 2,552
|
Amortization of
intangibles
|
46
|
|
202
|
Stock-based
compensation
|
-
|
|
120
|
Settlement of
lawsuits and other one-time costs
|
73
|
|
540
|
Income tax
expense
|
1,450
|
|
1,367
|
Gain on sale of
assets
|
(11)
|
|
-
|
Non-GAAP provision
for income taxes
|
(1,470)
|
|
(1,631)
|
Non-GAAP net
income
|
$ 2,986
|
|
$ 3,150
|
|
|
|
|
Reconciliation of
GAAP diluted net income per share to non-GAAP diluted net income
per share
|
|
|
Fully diluted
shares
|
9,814
|
|
10,635
|
Net income
attributable to RCIHH common shareholders
|
$
0.30
|
|
$
0.25
|
Amortization of
intangibles
|
0.00
|
|
0.02
|
Stock-based
compensation
|
-
|
|
0.01
|
Settlement of
lawsuits and other one-time costs
|
0.01
|
|
0.05
|
Income tax
expense
|
0.15
|
|
0.13
|
Gain on sale of
assets
|
(0.00)
|
|
-
|
Non-GAAP provision
for income taxes
|
(0.15)
|
|
(0.16)
|
Non-GAAP diluted net
income per share
|
$
0.31
|
|
$
0.30
|
|
|
|
|
Reconciliation of
GAAP operating income to non-GAAP operating income
|
|
|
|
Income from
operations
|
$ 6,333
|
|
$ 5,717
|
Amortization of
intangibles
|
46
|
|
202
|
Stock-based
compensation
|
-
|
|
120
|
Settlement of
lawsuits and other one-time costs
|
73
|
|
540
|
Gain on sale of
assets
|
(11)
|
|
-
|
Non-GAAP operating
income
|
$ 6,441
|
|
$ 6,579
|
|
|
|
|
Reconciliation of
GAAP operating margin to non-GAAP operating margin
|
|
|
|
Income from
operations
|
18.8%
|
|
17.1%
|
Amortization of
intangibles
|
0.1%
|
|
0.6%
|
Stock-based
compensation
|
0.0%
|
|
0.4%
|
Settlement of
lawsuits and other one-time costs
|
0.2%
|
|
1.6%
|
Gain on sale of
assets
|
-0.0%
|
|
0.0%
|
Non-GAAP operating
margin
|
19.1%
|
|
19.7%
|
|
|
|
|
Reconciliation of
GAAP net cash provided by operating activities to non-GAAP free
cash flow
|
|
|
Net cash provided by
operating activities
|
$ 5,521
|
|
$ 4,202
|
Less: Maintenance
capital expenditures
|
394
|
|
351
|
Free cash
flow
|
$ 5,127
|
|
$ 3,851
|
|
|
|
|
|
* For FY17 periods,
we excluded pre-opening and acquisitions costs, which were
previously included, and have included gain/loss on sale of
controlling interest in subsidiary, which were previously excluded,
in our adjustments for non-GAAP financial performance measures,
since we believe that these are recurring cash operating expenses
that are necessary to operate our business. We have appropriately
included or excluded the same items from prior year comparable
non-GAAP financial performance measures.
|
RCI HOSPITALITY
HOLDINGS, INC.
|
SEGMENT
INFORMATION
|
($ in
thousands)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
|
|
Ended December
31,
|
|
|
|
2016
|
|
2015
|
Revenues
|
|
|
|
|
|
Nightclubs
|
|
$
29,282
|
|
$ 28,170
|
|
Bombshells
|
|
4,295
|
|
4,379
|
|
Other
|
|
162
|
|
926
|
|
|
|
$
33,739
|
|
$ 33,475
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
|
|
Nightclubs
|
|
$
9,216
|
|
$
8,508
|
|
Bombshells
|
|
638
|
|
487
|
|
Other
|
|
(341)
|
|
(648)
|
|
General
corporate
|
|
(3,180)
|
|
(2,630)
|
|
|
|
$
6,333
|
|
$
5,717
|
RCI HOSPITALITY
HOLDINGS, INC.
|
NON-GAAP SEGMENT
INFORMATION
|
($ in
thousands)
|
|
|
|
|
|
|
|
1Q17
|
|
Nightclubs
|
Bombshells
|
Other
|
Corp
|
Total
|
Income (loss) from
operations
|
$
9,216
|
$
638
|
$
(341)
|
$(3,180)
|
$ 6,333
|
Amortization of
intangibles
|
|
|
|
46
|
46
|
Settlement of
lawsuits
|
73
|
|
|
|
73
|
Gain on sale of
assets
|
(11)
|
|
|
|
(11)
|
Non-GAAP operating
income
|
$
9,278
|
$
638
|
$
(341)
|
$(3,134)
|
$ 6,441
|
|
|
|
|
|
|
GAAP operating
margin
|
31.5%
|
14.9%
|
-210.5%
|
|
18.8%
|
Non-GAAP operating
margin
|
31.7%
|
|
|
|
19.1%
|
|
|
|
|
|
|
|
1Q16
|
|
Nightclubs
|
Bombshells
|
Other
|
Corp
|
Total
|
Income (loss) from
operations
|
$
8,508
|
$
487
|
$
(648)
|
$(2,630)
|
$ 5,717
|
Amortization of
intangibles
|
|
|
|
202
|
202
|
Stock-based
compensation
|
|
|
|
120
|
120
|
Settlement of
lawsuits
|
540
|
|
|
|
540
|
Non-GAAP operating
income
|
$
9,048
|
$
487
|
$
(648)
|
$(2,308)
|
$ 6,579
|
|
|
|
|
|
|
GAAP operating
margin
|
30.2%
|
11.1%
|
-70.0%
|
|
17.1%
|
Non-GAAP operating
margin
|
32.1%
|
|
|
|
19.7%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/rci-1q17-eps-increases-to-030-gaap--031-non-gaap-as-fcf-expands-33-300405323.html
SOURCE RCI Hospitality Holdings, Inc.