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RCI Hospitality Holdings (RICK) Reports Q4 EPS of $0.31

December 13, 2016 4:14 PM

RCI Hospitality Holdings (NASDAQ: RICK) reported Q4 non-GAAP EPS of $0.31, versus $0.21 reported last year. Revenue for the quarter came in at $33 million, versus $32.8 million reported last year.

Free Cash Flow (FCF)* totaled $3.8 million compared to ($2.1) million.

RCI accelerated its share buyback program in FY16, taking advantage of its strong FCF to return capital to shareholders, investing $7.3 million to buy back 747,081 shares, reducing shares outstanding about 5%.

"We ended FY16 in the best shape we've been in, thanks to the first full year implementation of our disciplined approach to capital allocation," Mr. Langan said.

"We improved our cash generating ability. We restored same store and total sales growth and expanded margins on a non-GAAP basis. Using bank financing at conventional rates, we acquired the Rick's Cabaret New York real estate, which, along with the acquisition of the Tootsie's Cabaret Miami real estate in 4Q15, reduced our cost of occupancy, one of our largest fixed costs. Tootsie's and Rick's New York are our two largest, revenue producing clubs.

"Ultimately, we significantly expanded free cash flow to a record $20.5 million, which included some tax benefits, and established a baseline run rate of about $18 million going forward.

"We undertook the largest annual buyback in our history, reducing shares outstanding by about 5%, to 9.8 million shares. We also paid off $2.8 million in convertible debt in FY16 and 1Q17, eliminating 230,000 possible new shares and 49,000 related warrants expired. On top of that, we initiated a $0.12 per share annual dividend, payable $0.03 per quarter.

"Our cash generation also enabled us to further strengthen our balance sheet. We refinanced $14.2 million at lower average rates, changed 2017 non-realty balloons into an amortizing note that balloons in 2022, and lowered our interest rate going forward. In addition, all of our debt is now amortizing, and we ended the year with $11.3 million in cash, the highest September 30th position in five years.

"To further enhance free cash flow, we implemented new, higher yielding models with the opening of a new nightclub, Hoops Cabaret and Sports Bar in New York, and our plans to build three new Bombshells in Houston. In the fourth quarter, we disposed of all major non-performing businesses, receiving cash and notes, freeing up capital, and turning non-profitable businesses into interest income producing notes.

"During and subsequent to FY16, we made some selective investments to improve our future prospects. We built and moved into our new corporate headquarters, and will be phasing in a new ERP system to create a highly efficient "plug and play" platform, increasing our scalability. We also named highly experienced Shannon Glaser to lead Bombshells franchising. She has already begun introducing us to multi-unit restaurant franchise operators.

"Our FY17 plan is to follow through with what we started in FY16. We will continue our approach to capital allocation, as evidenced by our ongoing share repurchases. First half sales should benefit from the momentum developed in the second half of 2016. The second half should grow as the new Bombshells units open and we begin to sell our first franchises. Margins and FCF generation should benefit from our more profitable portfolio of clubs and restaurants and reduced interest expense as a percent of revenues."

For earnings history and earnings-related data on RCI Hospitality Holdings (RICK) click here.

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