RCI Reports Positive Operating Cash Flow and EPS for 1Q21
RCI Hospitality Holdings, Inc. (Nasdaq: RICK) reported its fiscal 2021 Q1 results, revealing a GAAP EPS of $1.07 and non-GAAP EPS of $0.39. The results include a $4.9 million pre-tax gain from debt extinguishment. Total revenues reached $38.4 million, a 33% increase from Q4 2020, and 79% of Q1 2020 revenues. Nightclubs generated $25.2 million with a 33.7% operating margin, while Bombshells reported $13.0 million with a 20.9% margin. As of December 31, 2020, cash and cash equivalents stood at $17.0 million. The company remains optimistic about reopening clubs and potential acquisitions.
- GAAP EPS of $1.07 and non-GAAP EPS of $0.39.
- Total revenues of $38.4 million, up 33% from the previous quarter.
- Nightclubs segment generating $25.2 million, with a 33.7% operating margin.
- Bombshells segment increased revenue by 25.0% to $13.0 million with improved margins.
- Total revenues declined 20.7% compared to Q1 2020.
- Salaries and wages increased to 29.9% of revenues, affecting profitability.
HOUSTON, Feb. 9, 2021 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the fiscal 2021 first quarter ended December 31, 2020 and filed its Form 10-Q. Results are not comparable to year-ago periods due to the COVID-19 pandemic, which has caused state and local governments to restrict the opening, occupancy, and operating hours of locations in different ways, at different times.
1Q21 Highlights
- GAAP EPS of
$1.07 and non-GAAP EPS of$0.39 - GAAP results included
$4.9 million pre-tax gain from debt extinguishment and a$384,000 tax benefit - Weighted average shares outstanding declined
3.3% year-over-year $17.0 million cash and cash equivalents at December 31, 2020- Net cash from operating activities of
$6.3 million and free cash flow* of$5.7 million - Total revenues of
$38.4 million , up33% from 4Q20 and equal to79% of 1Q20 revenues - Nightclubs segment revenues of
$25.2 million with33.7% operating margin - Bombshells segment revenues of
$13.0 million with20.9% operating margin
Eric Langan, President & CEO, said: "1Q21 saw the best overall company and Nightclubs performance since the pandemic began in our March 2020 quarter, as well as continued strong Bombshells results. This enabled us to keep our teams employed, generate free cash flow, build cash, and achieve operating and net profitability on a GAAP and non-GAAP basis. Once again, we thank our loyal customers, dedicated team members, and steadfast investors.
"Looking ahead, we're encouraged more clubs have been allowed to reopen and hope this trend continues as the COVID-19 vaccines are rolled out. As of today, 31 clubs and all 10 Bombshells are open. We're also evaluating potential club acquisitions. To expand Bombshells, we recently acquired a great site in the Dallas area and are conducting due diligence on three more. In addition, we are closely collaborating with our initial franchisee on their first location and continue to speak with potential new franchisees. As part of the effort to refinance our real estate debt at better terms, we are awaiting results of appraisals."
Conference Call Today at 4:30 PM ET
- Live Participant Phone Number: Toll Free 877-407-9210, International 201-689-8049
- Access the live webcast, slides or replay here: https://www.webcaster4.com/Webcast/Page/2209/39831
- Phone replay: Toll Free 877-481-4010, International 919-882-2331, Passcode: 39831
1Q21 Statement of Operations (All comparisons are to 1Q20)
- Consolidated revenues of
$38.4 million compared to$48.4 million . By segment, Bombshells generated$13.0 million compared to$10.4 million , and Nightclubs generated$25.2 million compared to$37.9 million . - During 1Q21, 24 clubs were open the full quarter and 26 by period end, and all 10 Bombshells were open the full quarter. During 1Q20, 38 clubs were open, and the ninth Bombshells opened October 2019.
- Cost of goods sold was
16.2% vs.14.0% of revenues due to the change in sales mix from a higher proportion of food and a lower proportion of service revenues. - Salaries and wages were
29.9% vs.27.3% of revenues, reflecting the impact of fixed salaries on lower sales. - SG&A was
31.6% vs.34.2% of revenues due to cost-savings initiatives and lower variable expenses due to lower sales, partially offset by fixed expenses. - Income from operations was
$6.6 million (17.1% of revenues) vs.$9.7 million (20.0% of revenues). - Bombshells segment profitability increased
73% to$2.7 million on a26% increase in sales and a 570 basis point increase in margin to20.9% of segment revenues. Results reflected higher sales, more consistent traffic while operating in line with indoor restrictions, and greater operating leverage. - Nightclubs segment generated
$8.5 million in operating income with a33.7% operating margin. This is the segment's best performance since the 2Q20 quarter, when the pandemic was declared March 13, 2020. - Non-operating gains of
$4.9 million pre-tax from debt extinguishment of forgiven loans. - Tax benefit of
$384,000 caused primarily by reversal of the tax valuation allowance and the impact of the loan forgiveness.
December 31, 2020 Balance Sheet (All comparisons are to September 30, 2020)
- Cash and cash equivalents of
$17.0 million compared to$15.6 million . - Debt of
$134.8 million compared to$141.4 million , reflecting debt extinguishment and regular paydowns.
Note
- As of the release of this report, we do not know the future extent and duration of the COVID-19 pandemic on our businesses. Lower sales caused by social distancing guidelines could lead to adverse financial results. We are continually monitoring and evaluating the situation and will determine any further measures to be instituted, which could include refinancing several of our debt obligations.
- 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
19.1% and21.8% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 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) 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)
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) 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, 2020 as well as its other filings with the U.S. Securities and Exchange Commission. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.
Media & Investor Contacts
Gary Fishman and Steven Anreder at 212-532-3232 or gary.fishman@anreder.com and steven.anreder@anreder.com
RCI HOSPITALITY HOLDINGS, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
(in thousands, except per share and percentage data) | |||||||||||
For the Three Months Ended December 31, | |||||||||||
2020 | 2019 | ||||||||||
Amount | % of | Amount | % of | ||||||||
Revenues | |||||||||||
Sales of alcoholic beverages | $ 17,360 | $ 20,743 | |||||||||
Sales of food and merchandise | 8,609 | 7,447 | |||||||||
Service revenues | 10,060 | 17,193 | |||||||||
Other | 2,369 | 3,011 | |||||||||
Total revenues | 38,398 | 48,394 | |||||||||
Operating expenses | |||||||||||
Cost of goods sold | |||||||||||
Alcoholic beverages sold | 3,262 | 4,146 | |||||||||
Food and merchandise sold | 2,863 | 2,553 | |||||||||
Service and other | 79 | 77 | |||||||||
Total cost of goods sold (exclusive of items shown below) | 6,204 | 6,776 | |||||||||
Salaries and wages | 11,486 | 13,223 | |||||||||
Selling, general and administrative | 12,152 | 16,531 | |||||||||
Depreciation and amortization | 2,023 | 2,204 | |||||||||
Other gains, net | (50) | - | (26) | - | |||||||
Total operating expenses | 31,815 | 38,708 | |||||||||
Income from operations | 6,583 | 9,686 | |||||||||
Other income (expenses) | |||||||||||
Interest expense | (2,434) | - | (2,485) | - | |||||||
Interest income | 60 | 98 | |||||||||
Non-operating gains (losses), net | 4,916 | (72) | - | ||||||||
Income before income taxes | 9,125 | 7,227 | |||||||||
Income tax expense (benefit) | (384) | - | 1,593 | ||||||||
Net income | 9,509 | 5,634 | |||||||||
Net loss attributable to noncontrolling interests | 134 | - | |||||||||
Net income attributable to RCIHH common shareholders | $ 9,643 | $ 5,634 | |||||||||
Earnings per share | |||||||||||
Basic and diluted | $ 1.07 | $ 0.60 | |||||||||
Weighted average shares outstanding | |||||||||||
Basic and diluted | 9,019 | 9,322 | |||||||||
Dividends per share | $ 0.04 | $ 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, | ||||
2020 | 2019 | |||
Reconciliation of GAAP net income to Adjusted EBITDA | ||||
Net income attributable to RCIHH common stockholders | $ 9,643 | $ 5,634 | ||
Income tax expense (benefit) | (384) | 1,593 | ||
Interest expense, net | 2,374 | 2,387 | ||
Settlement of lawsuits | 152 | 24 | ||
Gain on sale of businesses and assets | (5) | (30) | ||
Gain on debt extinguishment | (4,949) | - | ||
Unrealized loss on equity securities | 33 | 72 | ||
Gain on insurance | (197) | (20) | ||
Depreciation and amortization | 2,023 | 2,204 | ||
Adjusted EBITDA | $ 8,690 | $ 11,864 | ||
Reconciliation of GAAP net income to non-GAAP net income | ||||
Net income attributable to RCIHH common stockholders | $ 9,643 | $ 5,634 | ||
Amortization of intangibles | 79 | 156 | ||
Settlement of lawsuits | 152 | 24 | ||
Gain on sale of businesses and assets | (5) | (30) | ||
Gain on debt extinguishment | (4,949) | - | ||
Unrealized loss on equity securities | 33 | 72 | ||
Gain on insurance | (197) | (20) | ||
Net income tax effect | (1,219) | (26) | ||
Non-GAAP net income | $ 3,537 | $ 5,810 | ||
Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share | ||||
Diluted shares | 9,019 | 9,322 | ||
GAAP diluted earnings per share | $ 1.07 | $ 0.60 | ||
Amortization of intangibles | 0.01 | 0.02 | ||
Settlement of lawsuits | 0.02 | 0.00 | ||
Gain on sale of businesses and assets | (0.00) | (0.00) | ||
Gain on debt extinguishment | (0.55) | - | ||
Unrealized loss on equity securities | 0.00 | 0.01 | ||
Gain on insurance | (0.02) | (0.00) | ||
Net income tax effect | (0.14) | (0.00) | ||
Non-GAAP diluted earnings per share | $ 0.39 | $ 0.62 | ||
Reconciliation of GAAP operating income to non-GAAP operating income | ||||
Income from operations | $ 6,583 | $ 9,686 | ||
Amortization of intangibles | 79 | 156 | ||
Settlement of lawsuits | 152 | 24 | ||
Gain on sale of businesses and assets | (5) | (30) | ||
Gain on insurance | (197) | (20) | ||
Non-GAAP operating income | $ 6,612 | $ 9,816 | ||
Reconciliation of GAAP operating margin to non-GAAP operating margin | ||||
GAAP operating margin | ||||
Amortization of intangibles | ||||
Settlement of lawsuits | ||||
Gain on sale of businesses and assets | - | |||
Gain on insurance | - | |||
Non-GAAP operating margin | ||||
Reconciliation of net cash provided by operating activities to free cash flow | ||||
Net cash provided by operating activities | $ 6,274 | $ 10,273 | ||
Less: Maintenance capital expenditures | 605 | 1,021 | ||
Free cash flow | $ 5,669 | $ 9,252 | ||
RCI HOSPITALITY HOLDINGS, INC. | |||||
SEGMENT INFORMATION | |||||
(in thousands) | |||||
For the Three Months | |||||
Ended December 31, | |||||
2020 | 2019 | ||||
Revenues | |||||
Nightclubs | $ 25,197 | $ 37,859 | |||
Bombshells | 13,006 | 10,350 | |||
Other | 195 | 185 | |||
$ 38,398 | $ 48,394 | ||||
Income (loss) from operations | |||||
Nightclubs | $ 8,495 | $ 13,776 | |||
Bombshells | 2,717 | 1,573 | |||
Other | (75) | (207) | |||
General corporate | (4,554) | (5,456) | |||
$ 6,583 | $ 9,686 | ||||
RCI HOSPITALITY HOLDINGS, INC. | ||||||||||||||||||||
NON-GAAP SEGMENT INFORMATION | ||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||
For the Three Months Ended December 31, 2020 | For the Three Months Ended December 31, 2019 | |||||||||||||||||||
Nightclubs | Bombshells | Other | Corporate | Total | Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||
Income (loss) from operations | $ 8,495 | $ 2,717 | $ (75) | $ (4,554) | $ 6,583 | $ 13,776 | $ 1,573 | $ (207) | $ (5,456) | $ 9,686 | ||||||||||
Amortization of intangibles | 47 | 4 | 28 | - | 79 | 57 | 4 | 95 | - | 156 | ||||||||||
Settlement of lawsuits | 118 | 34 | - | - | 152 | 24 | - | - | - | 24 | ||||||||||
Gain on sale of businesses and assets | - | - | - | (5) | (5) | 3 | - | - | (33) | (30) | ||||||||||
Gain on insurance | (197) | - | - | - | (197) | (20) | - | - | - | (20) | ||||||||||
Non-GAAP operating income (loss) | $ 8,463 | $ 2,755 | $ (47) | $ (4,559) | $ 6,612 | $ 13,840 | $ 1,577 | $ (112) | $ (5,489) | $ 9,816 | ||||||||||
GAAP operating margin | - | - | - | - | ||||||||||||||||
Non-GAAP operating margin | - | - | - | - | ||||||||||||||||
RCI HOSPITALITY HOLDINGS, INC. | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(in thousands) | ||||||
For the Three Months Ended | ||||||
December 31, 2020 | December 31, 2019 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net income | $ 9,509 | $ 5,634 | ||||
Adjustments to reconcile net income to net cash | ||||||
provided by operating activities: | ||||||
Depreciation and amortization | 2,023 | 2,204 | ||||
Deferred income tax benefit | - | (150) | ||||
Gain on sale of businesses and assets | (5) | (30) | ||||
Gain on debt extinguishment | (4,920) | - | ||||
Unrealized loss on equity securities | 33 | 72 | ||||
Amortization of debt discount and issuance costs | 51 | 61 | ||||
Doubtful accounts reversal on notes receivable | (93) | - | ||||
Noncash lease expense | 421 | 329 | ||||
Gain on insurance | (250) | (20) | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | 1,433 | 2,345 | ||||
Inventories | (22) | (141) | ||||
Prepaid expenses, other current assets and other assets | 1,125 | 1,565 | ||||
Accounts payable, accrued and other liabilities | (3,031) | (1,596) | ||||
Net cash provided by operating activities | 6,274 | 10,273 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
Proceeds from sale of businesses and assets | - | 51 | ||||
Proceeds from insurance | 250 | 932 | ||||
Proceeds from notes receivable | 26 | 357 | ||||
Payments for property and equipment and intangible assets | (1,289) | (4,058) | ||||
Net cash used in investing activities | (1,013) | (2,718) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
Proceeds from debt obligations | - | 318 | ||||
Payments on debt obligations | (1,745) | (2,081) | ||||
Purchase of treasury stock | (1,794) | (6,441) | ||||
Payment of dividends | (360) | (279) | ||||
Distribution to noncontrolling interests | - | (10) | ||||
Net cash used in financing activities | (3,899) | (8,493) | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,362 | (938) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 15,605 | 14,097 | ||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 16,967 | $ 13,159 | ||||
RCI HOSPITALITY HOLDINGS, INC. | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(in thousands) | |||||||||
December 31, | September 30, | December 31, | |||||||
2020 | 2020 | 2019 | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ 16,967 | $ 15,605 | $ 13,159 | ||||||
Accounts receivable, net | 5,334 | 6,767 | 4,250 | ||||||
Current portion of notes receivable | 211 | 201 | 659 | ||||||
Inventories | 2,394 | 2,372 | 2,739 | ||||||
Prepaid expenses and other current assets | 5,348 | 6,488 | 6,386 | ||||||
Assets held for sale | - | - | 4,825 | ||||||
Total current assets | 30,254 | 31,433 | 32,018 | ||||||
Property and equipment, net | 180,548 | 181,383 | 183,657 | ||||||
Operating lease right-of-use assets | 25,125 | 25,546 | 26,981 | ||||||
Notes receivable, net of current portion | 2,965 | 2,908 | 4,149 | ||||||
Goodwill | 45,686 | 45,686 | 53,630 | ||||||
Intangibles, net | 73,149 | 73,077 | 75,795 | ||||||
Other assets | 882 | 900 | 1,062 | ||||||
Total assets | $ 358,609 | $ 360,933 | $ 377,292 | ||||||
LIABILITIES AND EQUITY | |||||||||
Current liabilities | |||||||||
Accounts payable | $ 3,601 | $ 4,799 | $ 3,202 | ||||||
Accrued liabilities | 13,100 | 14,573 | 13,759 | ||||||
Current portion of debt obligations, net | 15,685 | 16,304 | 14,898 | ||||||
Current portion of operating lease liabilities | 1,658 | 1,628 | 1,521 | ||||||
Total current liabilities | 34,044 | 37,304 | 33,380 | ||||||
Deferred tax liability, net | 20,390 | 20,390 | 21,508 | ||||||
Debt, net of current portion and debt discount and issuance costs | 119,136 | 125,131 | 126,928 | ||||||
Operating lease liabilities, net of current portion | 25,017 | 25,439 | 26,745 | ||||||
Other long-term liabilities | 360 | 362 | 407 | ||||||
Total liabilities | 198,947 | 208,626 | 208,968 | ||||||
Commitments and contingencies | |||||||||
Equity | |||||||||
Preferred stock | - | - | - | ||||||
Common stock | 90 | 91 | 93 | ||||||
Additional paid-in capital | 50,040 | 51,833 | 54,874 | ||||||
Retained earnings | 110,080 | 100,797 | 113,523 | ||||||
Total RCIHH stockholders' equity | 160,210 | 152,721 | 168,490 | ||||||
Noncontrolling interests | (548) | (414) | (166) | ||||||
Total equity | 159,662 | 152,307 | 168,324 | ||||||
Total liabilities and equity | $ 358,609 | $ 360,933 | $ 377,292 | ||||||
View original content to download multimedia:http://www.prnewswire.com/news-releases/rci-reports-positive-operating-cash-flow-and-eps-for-1q21-301225290.html
SOURCE RCI Hospitality Holdings, Inc.
FAQ
What are the financial highlights from RICK's Q1 2021 results?
How did the pandemic affect RCI Hospitality's Q1 2021 revenues?
What is the operating income for RICK's nightclub segment in Q1 2021?
What is the cash position of RICK as of December 31, 2020?
What are RICK's plans for business expansion following Q1 2021?
