Saturday, May 23, 2015 1:17:47 PM
Non-GAAP EPS of $0.50 Up 11% Year over Year
PR Newswire
RCI Hospitality Holdings, Inc.
May 11, 2015 4:05 PM
HOUSTON, May 11, 2015 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (RICK) today announced results for the fiscal 2015 second quarter ended March 31, 2015.
.RCI HOSPITALITY HOLDINGS INC
2Q15 Highlights
•GAAP EPS of ($0.28) includes an accrual for the previously announced NY FLSA legal settlement.
•Non-GAAP EPS* diluted of $0.50 increased 11.1% from $0.45 in 2Q14. Non-GAAP EPS excludes the accrual as well as other items from both periods for comparability.
•Record total revenues of $37.4 million grew 13.8% year over year.
•$1.9 million spent buying back shares in the open market in the first half of Fiscal 2015.
•Company on track for a strong FY15.
Conference Call
A conference call to discuss these results, outlook and related matters will be held today, May 11, 2015, at 4:30 PM ET:
•Live Participant Dial In (Toll Free): 877-737-7051
•Live Participant Dial In (International): 201-689-8878
•Webcast URL: http://www.investorcalendar.com/IC/CEPage.asp?ID=173981
Meet Management
Eric Langan, President and CEO, invites investors for a "Due Diligence Ball" to meet, talk and tour one of RCI's top revenue generating clubs.
•When: Monday, May 11, 2015, 6:00 PM to 8:00 PM ET
•Where: Rick's Cabaret New York, at 50 W. 33rd Street, between Fifth Avenue and Broadway
•RSVP: With your contact information to gary.fishman@anreder.com
CEO Comment
"RCI performed well in 2Q15," said Mr. Langan. "We achieved record revenues and strong year over year growth in non-GAAP EPS and adjusted EBITDA, which reflects our cash generating power.
"Our performance was especially favorable since 2Q15 was affected by bad weather, especially in the Dallas-Fort Worth area, where we operate 11 clubs. We also had tough comparisons to 2Q14, when we benefitted from the big football championship in the New York City area, where we have two top clubs.
"Core profitability in nightclubs expanded due to higher revenues and margin improvement. With more units and increased revenues, our Bombshells restaurant/bar segment also added positively to results.
"We repurchased more stock in the open market, reflecting confidence in our favorable outlook, combined with the market's undervaluation of our shares. We will continue to focus cash flow on buying back shares. At current levels, our own assets represent a highly attractive return.
"We are on track for a strong Fiscal 2015. Year to date, total revenues are up 18.6%, adjusted EBITDA 22.7%, and non-GAAP EPS 23.1%.
"We look forward to a solid third quarter. Many units benefitted from our showing the recent Mayweather-Pacquiao 'Fight of the Century'. Warm weather in Texas should further enhance Bombshells' patio business."
2Q15 Analysis (all comparisons to 2Q14 unless otherwise noted)
Total Revenues
•Total revenues of $37.4 million compared to $32.9 million.
•45 units (40 adult clubs and nightclubs and 5 restaurants) versus 43 (41 adult clubs and nightclubs and 2 restaurants).
•Same store sales increased 2.1%.
•Units opened less than a year added $4.4 million. This included new adult clubs – Rick's Cabaret in Odessa, TX and the recently acquired Down in Texas Saloon in Austin, TX – and new Bombshells in Austin, Spring and Houston, TX.
Operating Margin & Costs (as % of revenues)
•GAAP operating margin was (7.0%), reflecting the previously mentioned accrual, compared to 22.7%.
•Non-GAAP operating margin, which excludes the accrual and certain other non-operating items from both periods for more meaningful analysis, was 24.9% compared to 26.9%.
•Non-GAAP operating margin reflects the growth of the Bombshells segment, whose margins, while growing, are less than that of the nightclub segment. This was partially offset by the elimination of under-performing adult clubs.
•The accrual of $10.3 million pre-tax, or ($0.65) per share net of tax, represents the company's best estimate at this time of the total cost of the settlement, announced April 1, 2015, in its New York federal wage and hour class action case.
Adjusted EBITDA
•RCI's cash generating power, as reflected by adjusted EBITDA*, amounted to $10.2 million, up 10.8% from $9.2 million in the year ago quarter.
Business Segments (all comparisons to 2Q14 unless otherwise noted)
Nightclubs
•Includes the company's 38 adult clubs and two bar/nightclubs, compared to a total of 41 in the year ago quarter.
•Sales increased 2.4%, to $31.9 million from $31.2 million.
•Operating income was $114,000 compared to $9.6 million.
•Excluding the previously mentioned accrual, operating income increased 8.0% to $10.4 million and operating margin expanded to 32.6% from 30.9%.
•In May, RCI subsidiaries acquired The Seville Club, a popular gentlemen's club in Minneapolis known for its famous downtown location, as previously announced. Total consideration of $8.5 million consisted of $4.5 million for the assets of the club business and $4.0 million for its historic building.
Bombshells
•Includes the company's five Bombshells, all in Texas, compared to two in the year ago quarter.
•Sales increased nearly 3.5 times, to $4.8 million from $1.4 million.
•Operating income was $571,000 compared to a loss of $12,000.
•Operating margin expanded to 11.9% of revenues from (0.9%) and is expected to increase as revenues continue to build and training costs subside.
•A sixth Bombshells is planned for the Willowbrook area of northwest Houston. Management is identifying additional locations.
Balance Sheet (March 31, 2015 compared to December 31, 2014)
•Assets increased 4.1% to $260.5 million and long term debt increased 2.4% to $71.5 million. The increases primarily reflected the acquisition of the Down in Texas Saloon of Austin and related real estate.
•Total permanent stockholders' equity declined 2.8% to $120.8 million, primarily reflecting the NY FLSA accrual partially offset by core profits.
Stock Buy Backs
•The Board of Directors increased its stock repurchase authorization to $10.0 million in May 2014.
•During 2Q15, RCI purchased 82,811 shares of common in the open market for an aggregate cost of $840,340, leaving $7.0 million of remaining authorization.
•During the six months ended March 31, 2015, RCI purchased 192,427 shares at a cost of $1.9 million.
*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 some recurring charges that 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, patron taxes, pre-opening costs, gains and losses from asset sales, stock-based compensation charges, litigation and other one-time legal settlements, gain on contractual debt reduction and acquisition 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 Basic Share and per Diluted Share. We exclude from non-GAAP net income and non-GAAP net income per diluted share and per basic share amortization of intangibles, patron taxes, pre-opening costs, income tax expense, impairment charges, gains and losses from asset sales, stock-based compensation, litigation and other one-time legal settlements, gain on contractual debt reduction and acquisition costs, and include the Non-GAAP provision for income taxes, calculated as the tax-effect at 35% effective tax rate of the pre-tax non-GAAP income before taxes less stock-based compensation, because we believe that excluding such measures helps management and investors better understand our operating activities.
•Adjusted EBITDA. We exclude from earnings before interest, taxes, depreciation and amortization (EBITDA) depreciation expense, amortization of intangibles, income tax, interest expense, interest income, gains and losses from asset sales, acquisition costs, litigation and other one-time legal settlements, gain on contractual debt reduction and impairment charges 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. Also, we exclude interest cost in our calculation of Adjusted EBITDA. 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.
Full Financial Tables
RCI's Form 10Q for the fiscal second quarter ended Mach 31, 2015 with full financial tables can be found on the company's corporate site at http://www.rcihospitality.com.
About RCI Hospitality Holdings, Inc. (RICK)
With 46 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in adult gentlemen clubs and restaurant/bars. Adult clubs in New York City, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, Indianapolis and other cities operate under brand names, such as "Rick's Cabaret," "XTC," "Club Onyx," "Vivid Cabaret," "Jaguars" and "Tootsie's Cabaret." Restaurant/bars operate under the brand name "Bombshells." Please visit http://www.rcihospitality.com/
RCI Hospitality in 2015 is celebrating the 20th anniversary of its IPO – two decades of innovation in the adult club segment of the hospitality industry.
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 the operational and financial results of our Web sites, 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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS
FOR THE SIX MONTHS
ENDED MARCH 31,
ENDED MARCH 31,
2015
2014
2015
2014
(in thousands, except per share data)
(UNAUDITED)
(UNAUDITED)
Revenues:
Sales of alcoholic beverages
$
15,576
$
12,985
$
30,815
$
24,674
Sales of food and merchandise
5,241
3,979
10,466
7,402
Service revenues
14,559
14,347
28,783
27,077
Other
2,034
1,559
3,833
3,140
Total revenues
37,410
32,870
73,897
62,293
Operating expenses:
Cost of goods sold
5,381
4,041
10,492
7,788
Salaries and wages
8,115
6,854
16,147
13,431
Stock compensation
120
151
240
154
Other general and administrative:
Taxes and permits
5,709
5,142
11,102
9,557
Charge card fees
544
449
1,091
877
Rent
1,184
1,156
2,325
2,384
Legal and professional
1,064
426
2,023
1,214
Advertising and marketing
1,312
1,406
2,679
2,691
Insurance
801
972
1,621
1,771
Utilities
708
646
1,442
1,241
Depreciation and amortization
1,886
1,513
3,531
2,906
(Gain) loss on sale of property
(18)
(86)
(18)
(86)
Impairment of assets
-
-
1,358
-
Settlement of lawsuits and other one-time costs
10,303
150
10,550
270
Other
2,917
2,591
5,790
5,022
Total operating expenses
40,026
25,411
70,373
49,220
Operating income (loss)
(2,616)
7,459
3,524
13,073
Other income (expense):
Interest income
26
35
39
112
Interest expense
(1,783)
(1,924)
(3,402)
(3,936)
Gain from original investment in Drink Robust, Inc.
-
-
577
-
Income (loss) before income taxes
(4,373)
5,570
738
9,249
Income taxes (benefit)
(1,265)
1,922
581
3,245
Net income (loss)
(3,108)
3,648
157
6,004
Less: net (income) loss attributable to noncontrolling interests
267
74
362
121
Net income (loss) attributable to RCI Hospitality Holdings, Inc.
$
(2,841)
$
3,722
$
519
$
6,125
Basic earnings (loss) per share attributable to RCIHH shareholders:
Net income
$
(0.28)
$
0.39
$
0.05
$
0.64
Diluted earnings (loss) per share attributable to RCIHH shareholders:
Net income
$
(0.28)
$
0.37
$
0.05
$
0.62
Weighted average number of common shares outstanding:
Basic
10,275
9,661
10,269
9,604
Diluted
10,275
10,853
10,273
10,763
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
For the Three Months
For the Six Months
Ended March 31,
Ended March 31,
(in thousands, except per share data)
2015
2014
2015
2014
Reconciliation of GAAP net income to
Adjusted EBITDA
GAAP net income (loss)
($2,841)
$3,722
$519
$6,125
Income tax expense
(1,265)
1,922
362
3,245
Interest expense and income and gain on Drink Robust investment
1,783
1,924
3,402
3,936
Litigation and other one-time legal settlements
10,303
150
10,550
270
Preopening costs
268
-
328
-
Acquisition costs
95
-
178
-
Impairment of assets
-
-
1,358
-
Depreciation and amortization
1,886
1,513
3,531
2,906
Adjusted EBITDA
$10,229
$9,231
$20,228
$16,482
Reconcilation of GAAP net income (loss) to
non-GAAP net income
GAAP net income (loss)
($2,841)
$3,722
$519
$6,125
Patron tax
805
866
1,567
1,605
Amortization of intangibles
336
82
579
171
Gain on Drink Robust investment
-
-
(577)
-
Stock-based compensation
120
151
240
154
Litigation and other one-time settlements
10,303
150
10,550
270
Pre-opening costs
268
122
328
416
Income tax expense
(1,265)
1,922
362
3,245
Acquisition costs
95
18
178
18
Impairment of assets
-
-
1,358
-
Non-GAAP provision for income taxes
(2,695)
(2,409)
(5,202)
(4,148)
Non-GAAP net income
$5,126
$4,624
$9,902
$7,857
Reconciliation of GAAP diluted net income
per share to non-GAAP diluted net income per share
Fully diluted shares
10,275
10,853
10,273
10,763
GAAP net income
($0.28)
$0.37
$0.05
$0.62
Patron tax
0.08
0.08
0.15
0.15
Amortization of intangibles
0.03
0.01
0.06
0.02
Gain on Drink Robust investment
-
-
(0.06)
-
Stock-based compensation
0.01
0.01
0.02
0.01
Litigation and other one-time settlements
1.00
0.01
1.03
0.03
Pre-opening costs
0.03
0.01
0.03
0.04
Income tax expense
(0.12)
0.18
0.04
0.30
Acquisition costs
0.01
0.00
0.02
0.00
Impairment of assets
-
-
0.13
-
Non-GAAP provision for income taxes
(0.26)
(0.22)
(0.51)
(0.39)
Non-GAAP diluted net income per share
$0.50
$0.45
$0.96
$0.78
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
For the Three Months
For the Six Months
Ended March 31,
Ended March 31,
(in thousands, except per share data)
2015
2014
2015
2014
Reconciliation of GAAP operating income to
non-GAAP operating income
GAAP operating income (loss)
($2,616)
$7,459
$3,524
$13,073
Patron tax
805
866
1,567
1,605
Amortization of intangibles
336
82
579
171
Stock-based compensation
120
151
240
154
Impairment of assets
-
-
-
-
Litigation and other one-time settlements
10,303
150
10,550
270
Pre-opening costs
268
122
328
416
Acquisition costs
95
18
178
18
Non-GAAP operating income
$9,311
$8,848
$16,966
$15,707
Reconciliation of GAAP operating margin to
non-GAAP operating margin
GAAP operating income
-7.0%
22.7%
4.8%
21.0%
Patron tax
2.2%
2.6%
2.1%
2.6%
Amortization of intangibles
0.9%
0.2%
0.8%
0.3%
Stock-based compensation
0.3%
0.5%
0.3%
0.2%
Impairment of assets
0.0%
0.0%
0.0%
0.0%
Litigation and other one-time settlements
27.5%
0.5%
14.3%
0.4%
Pre-opening costs
0.7%
0.4%
0.4%
0.7%
Acquisition costs
0.3%
0.1%
0.2%
0.0%
Non-GAAP operating margin
24.9%
26.9%
23.0%
25.2%
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
For the Three Months
For the Six Months
Ended March 31,
Ended March 31,
(in thousands)
2015
2014
2015
2014
Business segment sales:
Nightclubs
$
31,933
$
31,196
$
62,995
$
59,550
Bombshells
4,813
1,379
9,721
2,083
Other
664
295
1181
660
$
37,410
$
32,870
$
73,897
$
62,293
Business segment operating income (loss):
Nightclubs*
$
114
$
9,644
$
8,671
$
17,618
Bombshells
571
(12)
1,111
(317)
Other
(797)
(87)
(1,344)
(257)
General corporate
(2,504)
(2,086)
(4,914)
(3,971)
$
(2,616)
$
7,459
$
3,524
$
13,073
* Nightclubs operating income for the three and six months ended 3/31/15 includes accrual of $10,303 for the settlement of a lawsuit, and for the six months ended 3/31/15 also includes impairment of assets of $1,358. Excluding these items, nightclubs operating income for the three months ended 3/31/15 would have been $10,417 and for the six months ended 3/31/15 would have been $20,332.
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