RCI Reports 3Q23 Results: Total Revenues $77.1M, GAAP EPS $0.96, Non-GAAP EPS $1.30
Conference Call on X (formerly Twitter) Spaces at 4:30 PM ET Today; Meet Management at 7 PM ET Tonight
HOUSTON—August 9, 2023—RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results and filed its Form 10-Q for the fiscal 2023 third quarter ended June 30, 2023.
| Summary Financials (in millions except EPS) |
3Q23 |
3Q22 |
9M23 |
9M22 |
| Total revenues |
$77.1 |
$70.7 |
$218.5 |
$196.2 |
| EPS |
$0.96 |
$1.48 |
$2.91 |
$3.76 |
| Non-GAAP EPS1 |
$1.30 |
$1.60 |
$3.80 |
$3.89 |
| Net cash from operating activities |
$15.3 |
$18.9 |
$47.0 |
$46.8 |
| Free cash flow1 |
$14.3 |
$18.02 |
$42.1 |
$44.42 |
| Net income attributable to RCIHH common stockholders |
$9.1 |
$13.9 |
$27.1 |
$35.4 |
| Adjusted EBITDA1 |
$22.7 |
$24.6 |
$64.8 |
$62.5 |
| Weighted average shares used in computing EPS – basic and diluted |
9.43 |
9.39 |
9.31 |
9.43 |
1 See “Non-GAAP Financial Measures” below
2 3Q22 and 9M22 free cash flow included receipt of $2.2M tax refund
Eric Langan, President and CEO of RCI Hospitality Holdings, Inc., said: “Third quarter revenues of $77.1 million increased 9.0% year over year, gen
“It should be noted the year-ago quarter, aided by the end of Covid restrictions, had one of the highest levels of operating leverage that we have experienced the last five years which affects direct comparisons to 3Q23. Having said that, we do believe 3Q23 same store sales were held back by the increase in vacation travel, the extreme Texas heat, and economi/c uncertainty.”
“To date in 4Q23, we have repurchased 10,440 common shares for $725,423 or an average of $69.48 each. Currently, we still have $18.0 million in available stock repurchase authorization.”
“Later in 4Q23, we expect to open a new Bombshells in Stafford, TX. In FY24, we plan to relaunch a temporarily closed club and open two new clubs in Fort Worth and in Lubbock, TX. We are working on the launch of three new Bombshells in Lubbock and Rowlett, TX, and downtown Denver. We also hope to open our Rick's Cabaret Steakhouse & Casino and Bombshells Sports Casino, both in Central City, CO, and we will continue to pursue new club acquisitions in FY24.”
Conference Call at 4:30 PM ET Today
Participants need to use X (formerly 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
3Q23 Segments (Comparisons are to 3Q22 unless indicated otherwise)
- Nightclubs: Revenues were $62.4 million, an increase of 14.2%, primarily reflecting an increase from newly acquired and remodeled clubs, partially offset by a same-store sales decline.3 By revenue type, service increased 4.8%, alcoholic beverage 24.1%, and food, merchandise and other 17.7%. The year-over-year changes reflect in part the lower proportion of service revenues in the newly acquired Baby Dolls-Chicas Locas clubs sales mix as compared to Nightclubs average. Operating income was $20.4 million compared to $22.5 million or 32.7% of revenues compared to 41.1%. 3Q23 included higher impairment and amortization of SOB licenses. Non-GAAP operating income was $23.6 million compared to $23.3 million or 37.7% of revenues compared to 42.7%.
- Bombshells: Revenues were $14.4 million, a decline of 8.8%, primarily reflecting a decline in same-store sales, partially offset by an increase from newly acquired and opened units.3 By revenue type, food and merchandise fell 11.8% and alcoholic beverage decreased 7.7%. Operating income was $1.7 million compared to $3.1 million or 11.8% of revenues compared to 19.4%. Non-GAAP operating income was $1.8 million compared to $3.7 million or 12.8% of revenues compared to 23.6%. The change in Bombshells performance mainly reflects higher year-ago guest traffic and customer spending.
3See our July 11, 2023 news release on 3Q23 sales for more details
3Q23 Consolidated (Comparisons are to 3Q22 and % are of total revenues unless indicated otherwise)
- Operating margin was 20.1% compared to 29.0%. On a non-GAAP basis, it was 25.3% compared to 31.2%. The year-over-year difference reflects 3Q22's unusually high operating leverage. Otherwise, 3Q23's non-GAAP operating margin was in line with 1Q23's 25.6% and 2Q23's 26.6%.
- Interest expense was 5.6% compared to 4.3% as a result of higher average debt mostly from seller-financed promissory notes related to FY22-23 acquisitions.
- Weighted average shares outstanding increased 0.4% year over year due to shares used in the 2Q23 Baby Dolls-Chicas Locas acquisition.
- Debt: $243.8 million at 6/30/23 compared to $245.8 million at 3/31/23 primarily due to paydowns.
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, and (f) 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 gains or losses on equity securities, (f) settlement of lawsuits, (g) gain on debt extinguishment, (h) stock-based compensation, and (i) 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 21.6% and 21.6% effective tax rate of the pre-tax non-GAAP income before taxes for the nine months ended June 30, 2023 and 2022, 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 our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.
- We also use certain 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 locations, 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, 2022, 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
