EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

 

RCI Reports 1Q22 Results

 

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

 

Highlights 1Q22 vs. 1Q21
   
● Total revenues of $61.8 million vs. $38.4 million
   
● EPS of $1.12 vs. $1.07
   
● Non-GAAP EPS* of $1.10 vs. $0.39
   
● Net cash from operating activities of $16.3 million vs. $6.3 million
   
● Free cash flow* of $15.3 million vs. $5.7 million
   
● Net income of $10.6 million vs. $9.5 million
   
● Adjusted EBITDA* of $18.0 million vs. $8.7 million

 

* See “Non-GAAP Financial Measures” below

 

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

 

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

 

Conference Call Today at 4:30 PM ET

 

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

 

Meet Management Tonight at 6:00 PM ET

 

● Investors are invited to meet management at one of RCI’s top revenue generating clubs
● Rick’s Cabaret New York, 50 W. 33rd Street, New York, NY, between Fifth Avenue and Broadway
● RSVP your contact information to gary.fishman@anreder.com by 5:00 PM ET today

 

1Q22 Segments

 

● Nightclubs: 1Q22 revenues of $46.8 million, operating margin of 40.1%, and income from operations of $18.7 million. This compares to 1Q21 revenues of $25.2 million, operating margin of 33.7%, and income from operations of $8.5 million. Revenues and income from operations increased approximately 86% and 121%, respectively, compared to 1Q21, which was still heavily impacted by government restrictions related to COVID-19. Clubs acquired in October-November 2021 contributed approximately 29% of the increase in revenues and approximately 17% of the increase in operating income. Segment revenues and operating margin also benefited from a 107% year-over-year increase in high-margin service revenues.

 

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● Bombshells: 1Q22 revenues of $14.8 million, operating margin of 19.0%, and income from operations of $2.8 million. This compares to 1Q21 revenues of $13.0 million, operating margin of 20.9%, and income from operations of $2.7 million. The new location in Arlington, TX, which opened early December, contributed approximately 45% of the increase in revenues and set a record for first month revenues for a new Bombshells. Operating margin and income were affected by a little more than two months of pre-opening costs without sales for Arlington.

 

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

 

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

 

Note

 

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

 

Non-GAAP Financial Measures

 

In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the Company and helps management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:

 

● Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) gains or losses on sale of businesses and assets, (c) gains or losses on insurance, and (d) settlement of lawsuits. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.

 

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● Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income attributable to RCIHH common stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) gains or losses on sale of businesses and assets, (c) gains or losses on insurance, (d) unrealized gains or losses on equity securities, (e) settlement of lawsuits, (f) gain on debt extinguishment, and (g) the income tax effect of the above-described adjustments. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 22.3% and 19.1% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 2021 and 2020, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.
   
● Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) unrealized gains or losses on equity securities, (g) settlement of lawsuits, and (h) gain on debt extinguishment. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.
   
● Management also uses non-GAAP cash flow measures such as free cash flow. Free cash flow is derived from net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy.

 

About RCI Hospitality Holdings, Inc. (Nasdaq: RICK) www.rcihospitality.com

 

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

 

Forward-Looking Statements

 

This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the company’s actual results to differ materially from those indicated, including, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the company’s businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) the impact of the COVID-19 pandemic, and (vii) numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. For more detailed discussion of such factors and certain risks and uncertainties, see RCI’s annual report on Form 10-K for the year ended September 30, 2021, as well as its other filings with the U.S. Securities and Exchange Commission. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.

 

Media & Investor Contacts

 

Gary Fishman and Steven Anreder at 212-532-3232 or gary.fishman@anreder.com and steven.anreder@anreder.com

 

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RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

   December 31,   September 30,   December 31, 
   2021   2021   2020 
ASSETS               
Current assets               
Cash and cash equivalents  $17,954   $35,686   $16,967 
Accounts receivable, net   6,012    7,570    5,334 
Current portion of notes receivable   225    220    211 
Inventories   3,530    2,659    2,394 
Prepaid expenses and other current assets   8,245    1,928    5,348 
Assets held for sale   3,113    4,887    - 
Total current assets   39,079    52,950    30,254 
Property and equipment, net   203,878    175,952    180,548 
Operating lease right-of-use assets   35,845    24,308    25,125 
Notes receivable, net of current portion   5,512    2,839    2,965 
Goodwill   54,484    39,379    45,686 
Intangibles, net   125,314    67,824    73,149 
Other assets   1,566    1,367    882 
Total assets  $465,678   $364,619   $358,609 
                
LIABILITIES AND EQUITY               
Current liabilities               
Accounts payable  $5,807   $4,408   $3,601 
Accrued liabilities   18,413    10,403    13,100 
Current portion of debt obligations, net   9,003    6,434    15,685 
Current portion of operating lease liabilities   2,288    1,780    1,658 
Total current liabilities   35,511    23,025    34,044 
Deferred tax liability, net   22,040    19,137    20,390 
Debt, net of current portion and debt discount and issuance costs   152,847    118,734    119,136 
Operating lease liabilities, net of current portion   35,154    24,150    25,017 
Other long-term liabilities   357    350    360 
Total liabilities   245,909    185,396    198,947 
                
Commitments and contingencies               
                
Equity               
Preferred stock   -    -    - 
Common stock   95    90    90 
Additional paid-in capital   80,397    50,040    50,040 
Retained earnings   139,888    129,693    110,080 
Total RCIHH stockholders’ equity   220,380    179,823    160,210 
Noncontrolling interests   (611)   (600)   (548)
Total equity   219,769    179,223    159,662 
Total liabilities and equity  $465,678   $364,619   $358,609 

 

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RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

   For the Three Months Ended December 31, 
   2021   2020 
   Amount   % of
Revenue		   Amount   % of
Revenue		 
Revenues                    
Sales of alcoholic beverages  $26,431    42.7%  $17,360    45.2%
Sales of food and merchandise   10,894    17.6%   8,609    22.4%
Service revenues   20,876    33.8%   10,060    26.2%
Other   3,635    5.9%   2,369    6.2%
Total revenues   61,836    100.0%   38,398    100.0%
Operating expenses                    
Cost of goods sold                    
Alcoholic beverages sold   4,834    18.3%   3,262    18.8%
Food and merchandise sold   3,957    36.3%   2,889    33.6%
Service and other   100    0.4%   53    0.4%
Total cost of goods sold (exclusive of items shown below)   8,891    14.4%   6,204    16.2%
Salaries and wages   16,505    26.7%   11,486    29.9%
Selling, general and administrative   18,486    29.9%   12,152    31.6%
Depreciation and amortization   2,194    3.5%   2,023    5.3%
Other gains, net   (151)   -0.2%   (50)   -0.1%
Total operating expenses   45,925    74.3%   31,815    82.9%
Income from operations   15,911    25.7%   6,583    17.1%
Other income (expenses)                    
Interest expense   (2,604)   -4.2%   (2,434)   -6.3%
Interest income   106    0.2%   60    0.2%
Non-operating gains, net   84    0.1%   4,916    12.8%
Income before income taxes   13,497    21.8%   9,125    23.8%
Income tax expense (benefit)   2,933    4.7%   (384)   -1.0%
Net income   10,564    17.1%   9,509    24.8%
Net loss attributable to noncontrolling interests   11    0.0%   134    0.3%
Net income attributable to RCIHH common shareholders  $10,575    17.1%  $9,643    25.1%
                     
Earnings per share                    
Basic and diluted  $1.12        $1.07      
                     
Weighted average shares outstanding                    
Basic and diluted   9,407,519         9,019,088      
                     
Dividends per share  $0.04        $0.04      

 

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RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP FINANCIAL MEASURES

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

 

   For the Three Months Ended  
   December 31, 
   2021   2020 
Reconciliation of GAAP net income to Adjusted EBITDA          
Net income attributable to RCIHH common stockholders  $10,575   $9,643 
Income tax expense (benefit)   2,933    (384)
Interest expense, net   2,498    2,374 
Settlement of lawsuits   192    152 
Gain on sale of businesses and assets   (342)   (5)
Gain on debt extinguishment   (85)   (4,949)
Unrealized loss on equity securities   1    33 
Gain on insurance   (1)   (197)
Depreciation and amortization   2,194    2,023 
Adjusted EBITDA  $17,965   $8,690 
           
Reconciliation of GAAP net income to non-GAAP net income          
Net income attributable to RCIHH common stockholders  $10,575   $9,643 
Amortization of intangibles   50    79 
Settlement of lawsuits   192    152 
Gain on sale of businesses and assets   (342)   (5)
Gain on debt extinguishment   (85)   (4,949)
Unrealized loss on equity securities   1    33 
Gain on insurance   (1)   (197)
Net income tax effect   (38)   (1,219)
Non-GAAP net income  $10,352   $3,537 
           
Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share          
Diluted shares   9,407,519    9,019,088 
GAAP diluted earnings per share
  $1.12   $1.07 
Amortization of intangibles   0.01    0.01 
Settlement of lawsuits   0.02    0.02 
Gain on sale of businesses and assets   (0.04)   (0.00)
Gain on debt extinguishment   (0.01)   (0.55)
Unrealized loss on equity securities   0.00    0.00 
Gain on insurance   (0.00)   (0.02)
Net income tax effect   (0.00)   (0.14)
Non-GAAP diluted earnings per share  $1.10   $0.39 
           
Reconciliation of GAAP operating income to non-GAAP operating income          
Income from operations  $15,911   $6,583 
Amortization of intangibles   50    79 
Settlement of lawsuits   192    152 
Gain on sale of businesses and assets   (342)   (5)
Gain on insurance   (1)   (197)
Non-GAAP operating income  $15,810   $6,612 
           
Reconciliation of GAAP operating margin to non-GAAP operating margin          
GAAP operating margin   25.7%   17.1%
Amortization of intangibles   0.1%   0.2%
Settlement of lawsuits   0.3%   0.4%
Gain on sale of businesses and assets   -0.6%   0.0%
Gain on insurance   0.0%   -0.5%
Non-GAAP operating margin   25.6%   17.2%
           
Reconciliation of net cash provided by operating activities to free cash flow          
Net cash provided by operating activities  $16,264   $6,274 
Less: Maintenance capital expenditures   998    605 
Free cash flow  $15,266   $5,669 

 

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RCI HOSPITALITY HOLDINGS, INC.

SEGMENT INFORMATION

(in thousands)

 

   For the Three Months Ended  
   December 31, 
   2021   2020 
Revenues          
Nightclubs  $46,781   $25,197 
Bombshells   14,771    13,006 
Other   284    195 
   $61,836   $38,398 
           
Income (loss) from operations          
Nightclubs  $18,736   $8,495 
Bombshells   2,802    2,717 
Other   (43)   (75)
General corporate   (5,584)   (4,554)
   $15,911   $6,583 

 

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RCI HOSPITALITY HOLDINGS, INC.

NON-GAAP SEGMENT INFORMATION

($ in thousands)

 

   For the Three Months Ended December 31, 2021   For the Three Months Ended December 31, 2020 
   Nightclubs   Bombshells   Other   Corporate   Total   Nightclubs   Bombshells   Other   Corporate   Total 
Income (loss) from operations  $18,736   $2,802   $(43)  $(5,584)  $15,911   $8,495   $2,717   $(75)  $(4,554)  $6,583 
Amortization of intangibles   47    3    -    -    50    47    4    28    -    79 
Settlement of lawsuits   177    10    -    5    192    118    34    -    -    152 
Loss (gain) on sale of businesses and assets   45    13    -    (400)   (342)   -    -    -    (5)   (5)
Gain on insurance   (1)   -    -    -    (1)   (197)   -    -    -    (197)
Non-GAAP operating income (loss)  $19,004   $2,828   $(43)  $(5,979)  $15,810   $8,463   $2,755   $(47)  $(4,559)  $6,612 
                                                   
GAAP operating margin   40.1%   19.0%   -15.1%   -9.0%   25.7%   33.7%   20.9%   -38.5%   -11.9%   17.1%
Non-GAAP operating margin   40.6%   19.1%   -15.1%   -9.7%   25.6%   33.6%   21.2%   -24.1%   -11.9%   17.2%

 

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RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

   For the Three Months Ended 
   December 31, 2021   December 31, 2020 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income  $10,564   $9,509 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   2,194    2,023 
Deferred income tax benefit   -    - 
Gain on sale of businesses and assets   (523)   (5)
Gain on debt extinguishment   (83)   (4,920)
Unrealized loss on equity securities   1    33 
Amortization of debt discount and issuance costs   51    51 
Doubtful accounts expense (reversal) on notes receivable
   17    (93)
Noncash lease expense   629    421 
Gain on insurance   -    (250)
Changes in operating assets and liabilities:          
Accounts receivable   1,344    1,433 
Inventories   (445)   (22)
Prepaid expenses, other current assets and other assets   (6,519)   1,125 
Accounts payable, accrued and other liabilities   9,034    (3,031)
Net cash provided by operating activities   16,264    6,274 
CASH FLOWS FROM INVESTING ACTIVITIES          
Proceeds from sale of businesses and assets   803    - 
Proceeds from insurance   185    250 
Proceeds from notes receivable   34    26 
Payments for property and equipment and intangible assets   (9,850)   (1,289)
Acquisition of businesses, net of cash acquired   (39,302)   - 
Net cash used in investing activities   (48,130)   (1,013)
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from debt obligations   17,002    - 
Payments on debt obligations   (2,488)   (1,745)
Purchase of treasury stock   -    (1,794)
Payment of dividends   (380)   (360)
Net cash provided by (used in) financing activities   14,134    (3,899)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (17,732)   1,362 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   35,686    15,605 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $17,954   $16,967 

 

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