Exhibit 99.1

 

 

RCI Reports Positive Operating Cash Flow and EPS for 1Q21

 

HOUSTON—February 9, 2021—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, up 33% from 4Q20 and equal to 79% of 1Q20 revenues
Nightclubs segment revenues of $25.2 million with 33.7% operating margin
Bombshells segment revenues of $13.0 million with 20.9% 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

 

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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.

 

1
 

 

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 a 26% increase in sales and a 570 basis point increase in margin to 20.9% 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 a 33.7% 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.

 

2
 

 

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% and 21.8% 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

 

3

 

 

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 Revenue   Amount   % of Revenue 
Revenues                
Sales of alcoholic beverages  $17,360    45.2%  $20,743    42.9%
Sales of food and merchandise   8,609    22.4%   7,447    15.4%
Service revenues   10,060    26.2%   17,193    35.5%
Other   2,369    6.2%   3,011    6.2%
Total revenues   38,398    100.0%   48,394    100.0%
Operating expenses                    
Cost of goods sold                    
Alcoholic beverages sold   3,262    18.8%   4,146    20.0%
Food and merchandise sold   2,863    33.3%   2,553    34.3%
Service and other   79    0.6%   77    0.4%
Total cost of goods sold (exclusive of items shown below)   6,204    16.2%   6,776    14.0%
Salaries and wages   11,486    29.9%   13,223    27.3%
Selling, general and administrative   12,152    31.6%   16,531    34.2%
Depreciation and amortization   2,023    5.3%   2,204    4.6%
Other gains, net   (50)   -0.1%   (26)   -0.1%
Total operating expenses   31,815    82.9%   38,708    80.0%
Income from operations   6,583    17.1%   9,686    20.0%
Other income (expenses)                    
Interest expense   (2,434)   -6.3%   (2,485)   -5.1%
Interest income   60    0.2%   98    0.2%
Non-operating gains (losses), net   4,916    12.8%   (72)   -0.1%
Income before income taxes   9,125    23.8%   7,227    14.9%
Income tax expense (benefit)   (384)   -1.0%   1,593    3.3%
Net income   9,509    24.8%   5,634    11.6%
Net loss attributable to noncontrolling interests   134    0.3%   -    0.0%
Net income attributable to RCIHH common shareholders  $9,643    25.1%  $5,634    11.6%
                     
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      

 

4

 

 

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   17.1%   20.0%
Amortization of intangibles   0.2%   0.3%
Settlement of lawsuits   0.4%   0.0%
Gain on sale of businesses and assets   0.0%   -0.1%
Gain on insurance   -0.5%   0.0%
Non-GAAP operating margin   17.2%   20.3%
           
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 

 

5

 

 

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 

 

6

 

 

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   33.7%   20.9%   -38.5%   -11.9%   17.1%   36.4%   15.2%   -111.9%   -11.3%   20.0%
Non-GAAP operating margin   33.6%   21.2%   -24.1%   -11.9%   17.2%   36.6%   15.2%   -60.5%   -11.3%   20.3%

 

7

 

 

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 

 

8

 

 

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 

 

9

 

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