RCI Hospitality (RICK) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q3 2024 was $76.2 million, with GAAP EPS at a loss of$ 0.56 per share due to a non-cash impairment of $17.9 million [8] - Non-GAAP EPS was$ 1.35, and free cash flow reached a year-high of $13.8 million, with EBITDA at$ 20.1 million [8] - Nightclubs revenue increased by $374,000 year-over-year to$ 62.8 million, with same-store sales growth of 1.7% [8] - Bombshells revenue declined by 8.7% to $13.1 million, but non-GAAP operating income increased by 89.3% sequentially [10] - Corporate expenses were 9.4% of total revenues year-over-year, consistent with the previous quarter [11] Business Line Performance - Nightclubs achieved record revenues, with alcoholic beverage sales up 4.9%, food and merchandise up 5.1%, and service revenue down 5.3% [9] - Bombshells saw a sequential revenue increase of 2.9%, with margins improving from 5.9% to 10.8% [4][10] - Seven locations were opened, converted, or enhanced during the fiscal year, with seven more in progress [4] Market Performance - Severe weather in Texas and South Florida temporarily impacted club operations, with 10 day closures for Bombshells and 1 for clubs in Q3 [11] - Hurricane Beryl caused 10 day closures for clubs and 26 for Bombshells in Q4 [11] Strategic Direction and Industry Competition - The company is focusing on a "Back to Basics" approach to increase revenues, reduce costs, and expand margins [3] - A five-year strategic plan is being developed, with two pillars: operational efficiency and capital allocation [7] - The company withdrew its Colorado casino license application to focus on projects with more immediate results [4] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about achieving 15% margins for Bombshells, with potential to reach 20% as new stores open [18] - The company is actively pursuing M&A opportunities, with a focus on clubs in the Detroit market [19] - Management is reviewing underperforming locations and may sell or close some to improve overall profitability [18] Other Important Information - The company reduced its share count to less than 9 million through a share buyback program, purchasing 700,000 shares at a 22% discount [5] - A$ 20 million bank real estate loan was secured, and the share repurchase program was increased by $25 million [4] - The company is rebuilding the Baby Dolls Fort Worth location after a fire and is reviewing all operating units to ensure financial objectives are met [15] Q&A Session Question: Progress on Bombshells margins and restructuring timeline - Management aims for 15% margins, with potential to reach 20% as new stores open in 2025 [18] Question: M&A environment and criteria for club properties - The company is exploring opportunities in the Detroit market and expects acquisitions at closer to 5x multiples [19] Question: Colorado properties and liquidation timeline - The company is in discussions to lease or sell Colorado properties, with an LOI expected soon for one property [20] Question: Impact of potential interest rate declines on refinancing opportunities - No immediate refinancing plans, but the company is monitoring interest rates for future opportunities [21] Question: Cumulative cash invested in Bombshells and casinos - Approximately$ 6 million in non-income producing properties and $8 million in the Rick's Cabaret Steakhouse [27] Question: Fire at Baby Dolls Fort Worth location - The fire was likely an electrical issue, and the company is already redesigning the property for reopening [29]