RCI Reports 4Q22 Results: Total Revenues $71.4M, GAAP EPS $1.15, Non-GAAP EPS $1.45
Twitter Spaces Conference Call at 4:30 PM ET Today; Meet Management at 7 PM ET Tonight
HOUSTON—December 14, 2022—RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results and filed its Form 10-K for the fiscal 2022 fourth quarter and year ended September 30, 2022.
| Summary Financials |
4Q22 |
Change Y0Y |
FY22 |
Change YoY |
| Total Revenues |
$71.4M |
29.9% |
$267.6M |
37.1% |
| EPS |
$1.15 |
342.3% |
$4.91 |
45.7% |
| Non-GAAP EPS* |
$1.45 |
-8.2% |
$5.38 |
31.9% |
| Net Cash from Operating Activities |
$17.8M |
81.7% |
$64.5M |
53.6% |
| Free Cash Flow* |
$14.5M |
71.6% |
$58.9M |
63.3% |
| Net Income Attributable to RCIHH Common Stockholders |
$10.6M |
361.4% |
$46.0M |
51.8% |
| Adjusted EBITDA* |
$24.2 |
37.8% |
$86.7M |
44.0% |
| Basic & Diluted Shares |
9.3M |
2.8% |
9.4M |
4.2% |
* See “Non-GAAP Financial Measures” below.
| Status FY23 Share Buybacks |
Repurchased Shares |
Cash Used for Repurchase |
Average Price Per Share |
| 1Q23 to Date as of 12/9/22** |
1,500 |
$97,530 |
$65.02 |
** Remaining stock purchase authorization of $18.8 million.
Eric Langan, President and CEO of RCI Hospitality Holdings, Inc., said: “We had a great FY22 and look forward to a strong FY23. Our nightclub business should see the full year benefit of the 15 acquisitions and two reopenings in FY22; the addition of the FY23 acquisition of Heartbreakers and the pending acquisition of the Baby Dolls and Chicas Locas chains; and other possible acquisitions under consideration. We'll also be developing our exciting new Rick's Cabaret Steakhouse & Casino in Central City, CO. The focus of our Bombshells business will be creating a strong lineup of new company-owned and franchised units in Texas, Alabama, and Colorado that should start opening in FY24. As always, thanks to our loyal and dedicated teams for all their hard work and effort.”
Conference Call at 4:30 PM ET Today
Participants need to use Twitter Spaces on their mobile phones to ask questions during the Q&A
Meet Management at 7:00 PM ET Tonight
- Investors are invited to Meet Management at one of RCI's top revenue generating clubs
- Rick's Cabaret New York, 50 W 33rd St, New York, NY 10001
- RSVP your contact information to gary.fishman@anreder.com by 5:00 PM ET today
4Q22 Segments
- Nightclubs: Revenues of $56.6 million, operating margin of 39.7% (41.6% non-GAAP), and operating income of $22.5 million ($23.6 million non-GAAP). The fourth quarter of FY22 was the second period since 1Q20 not affected by COVID. The 15 new club acquisitions in FY22 contributed sales of $14.9 million, high-margin service revenues increased 53.6% year-over-year, and same-store sales increased.
- Bombshells: Revenues of $14.0 million, operating margin of 15.5%, and operating income of $2.2 million. The company-owned Arlington, TX, location (opened December 2021) contributed $1.4 million in sales, and same-store sales declined.1 The first full quarter of the franchise-owned San Antonio location (opened late June 2022) contributed more than $0.1 million in royalties and incurred $0.3 million in start-up expenses as per the franchising agreement. Excluding these costs, segment operating margin would have been approximately 18%.
4Q22 Consolidated (Comparisons are to 4Q21 and % are of total revenues unless indicated otherwise)
- Cost of goods sold: 12.9% vs. 14.9% due to the increased mix of higher-margin service revenues of 36.5% vs. 31.0%.
- Salaries and wages: Approximately level at 25.3% vs. 25.6%.
- SG&A: 31.3% vs. 27.6%. 4Q22 included increased expenses related to newly acquired and reopened locations. SG&A also included $2.4 million non-cash stock-based compensation related to previously announced $100 per share options granted to a limited number of top executives and management team members. Excluding stock-based compensation, 4Q22 SG&A would have been approximately 28%.
- Depreciation and amortization: 6.7% vs. 3.7%. 4Q22 reflected non-cash amortization of intangible assets on newly acquired leased locations.
- Other charges and gains: The Nightclubs segment included a $1.7 million gain on sales of a business and assets in 4Q22 compared to $11.9 million impairment in 4Q21.
- Operating margin: 25.2% vs. 6.6% (30.0% vs. 28.4% non-GAAP).
- Interest expense: 4.8% vs. 5.3% reflecting higher sales partially offset by higher debt from club and Bombshells site acquisitions over the course of the year.
- Income tax: $4.0 million expense compared to $1.6 million benefit. The FY22 effective tax rate was 23.4% vs. 11.7%.
- Weighted average shares outstanding: Increased 2.8% due to shares issued for clubs acquired in October 2021, partially offset by subsequent share repurchases.
- Debt: $202.5 million at 9/30/22 compared to $188.0 million at 6/30/22. The increase primarily reflected seller financing used in the July 2022 Cheetah acquisition.
Note
The novel coronavirus (COVID-19) pandemic has disrupted and may continue to disrupt our business, which has and could continue to materially affect our operations, financial condition, and results of operations for an extended period of time. 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) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) costs and charges related to debt refinancing, and (g) stock-based compensation. 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) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) unrealized loss on equity securities, (f) settlement of lawsuits, (g) gain on debt extinguishment, (h) costs and charges related to debt refinancing, (i) stock-based compensation, (j) the income tax effect of the above-described adjustments, and (k) change in deferred tax asset valuation allowance. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 22.8%, 13.5%, and 26.0% effective tax rate of the pre-tax non-GAAP income before taxes for the 2022, 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) impairment of assets, (h) settlement of lawsuits, (i) gain on debt extinguishment, and (j) stock-based compensation. 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 the unleveraged performance return on our investments. Adjusted EBITDA multiple is also used as a 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) (Twitter: @RCIHHinc)
With more than 60 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in adult nightclubs and sports bars/restaurants. See all our brands at 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, including, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult entertainment or restaurant 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 or restaurant 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
