RICK - Earnings call transcript Q2 2018 | RCI Hospitality Holdings, Inc.

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Operator

Greetings, ladies and gentlemen, and welcome to RCI Hospitality Holdings Fiscal 2018 Second Quarter Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Gary Fishman, who handles Investor Relations for RCI. Gary, please go ahead.

Gary Fishman

Thank you. and insurance Website easier Corporate to little our term make to changed Investor a Relations bit We've find things.

looking the you down and the Company the company are don't a logo. That just little you for investor second you call RCI links conference necessary If to take presentation under have the it, all Investor information can you'll and the and quarter. find will click for Information button today's and page. Scroll

I our two, see safe from that direct results Actual slide to those you to and presentation, a to remind call posted number our turn this please anticipated. and Please hear turn forward-looking you'd news three. currently you disclosed we of want harbor our that a any to urge involve that afterwards. to release. are at of We on as information update everybody If read or use included obligation reminds presentation that may occur you you the differ conference risks it. in slide may the also materially It's statements I explanation to statement. and beginning non-GAAP of call on measurements result developments of disclaim I uncertainties.

New invite in I'd York, tonight area to Manhattan's at the gentleman's Finally, join to everyone Cabaret New #X like us at management X:XX in listening York Rick's City to club. meet

Sports Cabaret from West You corner and next also State around XXrd Avenue can Fifth and Rick's Empire Bar, between Broadway, is the its Hoops club, at Building. Street sister door. located XX tour the

me for ask the RSVP-ed, door. haven't you If at

introduce RCI Eric to President Langan, I'm of and Hospitality. Eric? Now CEO pleased

Eric Langan

Second chain very market issued great quarter Please Release Good new Slide turn of Gary. our to X. locations that will is now in a of XX-Q. the in our After well. suburb, year. expand afternoon another development closed, the the of Earnings to by core doing strong Bombshells The middle new stages reported filed and Thank results. News various Pearland, next We We XX everyone. Houston units have we Quarter four you,

We of night owners. from also a announced to acquire several have discussions we number reactivated clubs

to XX% results. ago. year a a for $X.XX quarter the second Turning was up from our share, EPS GAAP

During down the two and lawsuits. the the wrote quarter, of we Robust from sale note settled

Excluding ago, those and and small came flow a in up increased from other X% year items, cash $X.XX, more to EPS free non-GAAP year-over-year $X XX% million. than at

quarter. million. year for to year-over-year quarter from target $XX half of the we revenue continues than flow Our be the fiscal million. Total XXXX are more came to cash second Along of about of X.X% units All new XX% of to for the Please outlook restaurants. nightclub declined from Bombshells in Beverage drove $XX the variety favorable has for to same-store strength time. performance. our increase non-GAAP and revenue costs than our general, turn $X XXX XX% and from turn increased total ago XX% operating preceding to of a was more sales. XX% up to second and revenues, real slide you margin. in increased gains. an basis as portfolio. the more our fiscal basis, year segment revenue income been GAAP operating grow. They points X% both see more and for the expanded leverage to million. XX.X% non-GAAP lines XX.X% to counts in overhead as to second the to In up seen fell five revenues. million told, analysis with also maintained than customer margin slide six. compared The up reiterating All approximately operating quarter there XX.X% and than XX% food XX%. nightclubs continued in can of our segment increased Corporate factors service revenue XX% was of operating Higher first Restaurant margin ago margin increased we core from total increased to these the of year a XX% improvement Please A XX% in percentage were business. an profit and Nightclub expanded from first a On XX.X% have higher Margin and $X high quarter. XX%. revenues

reported, customer. significant the Nightclubs Bombshells some a audit Championship and the menu featuring transition the were new February an fiscal quarter marketing to sharply. strong Houston of previously basis, benefited the reflected As completion updated extensive March. spend provided in from On higher costs Corporate a of the our part XXXX system. Rockets we tailwind and saw this financial There games from and items. our sequential our in around in IT Pro continued new down benefited success College factors Pro to Basketball quarter that Football segment. per have the were also and major

The ago factors year year is and XX% of calculate performance. automating Pearland and was decline. quarter Same-store a of the increases reports And in second Miami percentage revenues Scarlett's against rollout two our quarter governing same-store had than new pursue tax the Scarlett's gain, the XXX. will in second us third were and financial in to be dollars future continuous combination against occupancy, law, overall start rise where fiscal up our quarters while because interest help quarterly develop is new a are uptrend to as This due of of Please total form Bombshells on the opening our a accounting is to seven. for in financial of to row. early There I-XX and quarter first ago. new we've in slide hiring and sales of clubs. as rent vendors be federal new to other low plan absolute these we the we a forward. Cost the In in turn restaurant Bombshells acquisition tax the club contributed of going XXXX. of sales lower system, and since X costs. a plus rate anticipate X% and now expenses quarter, increases quarter, East of longest sales, to our controls to which and approximately comparing business general, write continued comparing the renamed we we begin that Pearland to analysis. Louis. club our help enhance Bombshells revenue This likely we St. will would in and the And Bombshells for total acquisitions That and we effective In

than we on growth. year-over-year has margin likely Based quarter's operating is the previous well. As operating moderate to up more somewhat second Please last margin margin, slide too EBITDA highest pleased last XX% are my years. million. comments in was the been for the is the half. to see do to two to on Adjusted slide, generation the in years. non-GAAP in X quarterly the The Cash was it highest This see continued $XX eight. level

six the XX% adjusted for close $XX to million. at As up was months, EBITDA

has increased year. of XX. $XX.X million from itself, our XX grown the for fiscal and X% XX% activity, the Even all with March of nearly have from start we cash expansion December cash on As

Debt the cash $XX of even is in be $X million. Weighted hitting up basis nine. Please interest December slide for categories. approximately to greater down we points X rate first declines up million very turn to That are XX. all under free As confidence for just now continues the gives target our year. X XX% manageable. to average from us is for It flow, with months

related Bombshells million Our includes properties. to real estate now $XX debt

As cash-on-cash to bank estate finance XX. returns. purchase when Please turn to in calls, slide financing we've construction, possible, our we are and and previous fixtures, furniture enhance discussed Bombshells using to real

Pearland. Even debt fall. from and for we quarter East. was cost X.X% opened debt the in of growing slightly, the realty Regarding second $X.X non-realty balloon or next refinance loan in on million into Scarlett's to of May, has suburb years It the of quarter In In Miami fast year. the it $X revenues Bombshells to refinanced is million Bombshells first can due. began from slide total We revenues, largest we now construction maturities, balloon we in to X.X% declining before Houston down higher the balloons that though million fiscal major the Scarlett's I-XX continued needed turn April of if all has On The the interest Bombshells balloon. increased in occupancy seller-financed and total construction a can related we quarter, XXXX. and rate, in of the five is we Please in second our it and $X.X last XX, believe X.X% the extend XX. our refinanced with balloon acquisition. sixth down May only

a unit location our March end averaged in date. Southwest site That should to scheduled open For in fast it year. the in growing in scheduled in unit the open I-XX of week, launch location successful closed East most various Houston on greater open than open locations and a a should development We recently XXXX. Katy, to four Tomball, to by is Bombshells in December. be finalizing and is We June U.S. West property construction of construction. selection weeks, of $XXX,XXX per Houston, are XX And in in we that XXXX. of three Texas, this north Houston. of first more in now U.S. Houston stages XXX under for have That Houston under sales have September making suburb. be

bring at assembled of with Based expand fiscal rate barring is million on now and able of recent by continue million of a $X.X chain operating Over addition at math, by on and we year in new running have the in Bombshells XXX the having Doing year, schedule. the an being simple segment for run last $XX to will up contractors, new to based the XX%. to the we're architects, Bombshells XX a of leverage annualized an margin The this operating of margin. creation $XX of looking Bombshells units regular operating average on business Bombshells results, to to with group the Pearland. unforeseen we are middle of delays year experience, million strong next deliver in revenues vendors end the a hopeful annually to

to turn and Please Bombshells slide are Our next XX. market target Antonio San in Miami. for

our return, the clubs to at we and in flow have investment. making We from back $XX least capital to If significant our an likely an equity. is That rise hurdle own free Bombshells our to assets our and percentage for Should doing. cap continue for market look existing on yield, lessons point double-digit cash we unless or price We this open added To rate flow likely yield we of X% back that is learned free club risk to our again. are we otherwise. to stock risk, has capital estimated $XXX of to be capital, of that not more are developed the cash-on-cash range, to significant return the buying money past With for up that acquisitions, cash the strategic purposes. current our range look as million, after-tax we we to all we at restaurant market the an it, and ease to the to is currently of use flow at do a open yield more are shares generating year would or At is to be in have compensate free than our apply for free the more what almost fiscal where more market. relative a apply the there cash involving low free our the decision in productive dispose formula XX% cap. buying consider XX% use return rationale or

we have for assuming accelerated that to new law trading stock been a The paydown expensive have debt onerous changes significantly would time, the no to at longest us price of higher saying the most dynamic. tax penalties. consider XX% For be our

is year more of wrap yield X paying far for attractive. tax that's more the XX% a of XX%, review to Slide and XX To debt to please rate estimated down turn of after-tax than goals. financial With up, our X% the X

$XX XX% XXXX is by share grow than that objective of we'd basis, an to a cash fiscal year. to grow like per million to XX% our free On Our year. approximately to flow average XX% on a from level more a

the acquired number three acquire strategies X. achieve made continue we expand Two, great have more we to more one per year and of to right clubs club in We On that. have year, than Bombshells. markets. acquisition One, company last average, owned

target allocation three capital is And X year. strategy. adherence Our strict our per is to

the will don't not mode, growth. While like in we into deals that of growth are for be pressured we we sake

right aim the we shares. adequately location, be if Our back or make will is wait doesn't new for or power, right let cash each buying us. If price that acquisition build. Bombshells acquisition And sit is our capital sure and happy restaurant our to we generating reflect and find we'd can't our stock

Now, let's open the call for questions.

Operator

your [Operator line the comes Instructions] Sidoti. of question Camma first from And Frank with

Frank Camma

to become and quarter. not it - good I lapse? other - if but economist on think - sides obviously restaurant business your consumer so business is harder directed to be you I side it if But - your I'm have Eric, what you It's your comp positive restaurants It effects everything wrong to at I runway me can be me maybe you not get. the I'm I small and sort adult can how guess, towards can side. two differently strong not a but stock I than Meaning point good think it mean market, different I long confidence, than harder really an here will. like confidence, wonder, to guess seems of side. tell to the asking does how here. and playing adult

that first. address can you maybe So

Eric Langan

We April yet. haven't end decent seen to an for was us. it

for we of think this as optimistic I positive which have I we're maybe X because X% that has against in us Right The as growth year. row. give quarter quarter. like going a this five the that optimistic year-over-year, last is very think only did to in said, quarter positive very May be this this at I'm were good. last first a week But and quarter territory been we're point comps. now, I high the the be strong don' in in but still Obviously, very we would we'll weeks going

Frank Camma

pricing about side pricing side. given restaurant then. adult no Let's commodity, pricing any seeing compression? get But the talk Obviously, some se the in really do you per that there's on we're

Eric Langan

menus, With item line. cost in certain menu the prices bring we new the back did to raise

in the cost, our You'll bit see little a of in that food cost goods sold.

see it did bit you'll little better we think quarter I a in this it mid-February. because

brought this getting some is they about consumers But there. XX% were cost back about the those. very us. want So margins in quarter finally changes by cost half for and and our to cost we - of in - drink March, a it's quarter of our We the down a quarter which only restaurant, cost a but get enough here raising we liquor some quarter passed to food minor. the but basically, the a and lot to that beer on little good some the and made back pricing. was for small prices certain that Nothing just from also cost of And it keep increases for significant, our our to reviewed increases above were XX% to it's last go in down we able to clubs some

of So next in I think that especially this keeping costs those will help quarter down.

hopefully in to health up system, that's much better, our we BDO bit salary get this our we all due that our set clean wage the stores audit. of ERP up proper And in will and controls bit, bill think go going firm new will our audit next of new other to I I a help costs quarter financial little opening. a the of hiring think especially from year write internal with a see of and G&A everything with the increase that some the have so little everything us new and

is things. of of we're quarter. So and the helped The system as has last didn't that lower was which very, new good. very towards overtime, in working audits definitely course, That and tremendously types quarter the cost ERP cost of in this of have helps those those our we much things especially low,

raise as to do have whether I up. just in and said, I said, bit like percentage those continue real come where numbers and where, optimistic. we'll the we see growth sales at, like in I'm wise, dollars I same-store a costs pushing revenues So as think, keep far the little the will

Frank Camma

now mentioned up were works when your alcohol? down that I Budweiser. was on for more you how you Are restaurants more explain remember one or think that any one I of I Or and restaurants of that opening can largest visiting have that purchasers getting general of that could a you the - volume discount? benefit wrong you I you're beer.

Eric Langan

changes Anheuser-Busch and has things a some of changing had are while. were some there. management for We the

hasn't we are have would working with we're their liked, as well. other been with some beer lucrative but it as as working and So we suppliers people

better next with where quarter, a going to idea of I'll that. So be we're have

is issues bring Our costs our director few even down to national beverage more. working on a try to

Frank Camma

and by I can takeout. apps mean question Can talk is restaurants how is you that ERP how I then a Last have but much the I'll do what from just you ahead use engage customer. the seen lot you of know already a far Bombshells? but And - know as for and this, you about - talk about people and as already for hop talking me and that I they takeout that about technology they business do order system don't - off if at of

Eric Langan

eat, type a come, isn't really place. play Bombshells stay, and takeout place. It's

have for So we some out, I push we take something probably not while it's sure. mean, market or

hot. is food better Our

pizza - So well. like where not it doesn't travels it's it

said, So something like we push. it's not I

brand brand media kind social of We with things it those and is keep can director, as really to majority or the amongst the everything process, of so the to ourselves it's level. next those for looking to of are kind now stores a as ourselves the amongst everybody we negotiating close Texas in really, and move, maybe looking most of right easy of Especially talking really Bombshells, of same. the the kind take along and solidify stores We're a now for the something maybe Houston in director expanded lines. we in we've together,

move that we Miami up sure basically, are of market, all we those set things mastered. have about towards right and formula we so as that making the worried And the

Frank Camma

to brand move the the when all of or incremental as initially, value Houston. have one each you You in you brand the Miami open awareness

Eric Langan

everybody knew we we was who Right. coming. Everybody great. Houston Pearland, Opening already been were. has excited were

the people behind But a months course, us months was to Of X that to X to put brand an see Houston, wanting know yes, new inside. going now. X hurricane strong are push these months, and differently there market. we what extra hurt building the for time. hopefully, in we on which probably didn't so stores an extra sitting had have recognition But now, market open in They

to create exact we've want as make image in it to move of the it in we Miami, done there recreating So since that that to sure what Houston. we be we we're going

Operator

with the Rodriguez question of Capital Partners. from next comes Stonegate line Our Marco

Marco Rodriguez

I'm plans wondering if you more can expansion talk a the Bombshells little about here. bit

start that the being table prior and Just the different then the presentation quarter is with thinking your maybe of those particular generation time the or revenue starts quarter? dates dates. first be opening Should of the we off, of end opening the the revenue in target

Eric Langan

construction of it's But it two the down a flow few quarter, And give a to construction, way the right with couple here weeks these now. now. they month got or last our we've take I speeds or the or take weeks working weeks on give guys. or unfortunately, gain two Unless a with think always up thinking there. weeks based We're is

I'm of the the next if open could of of we open earlier June open weeks either it the June first the Xst could open we open it is So sorry, or one September. - up August to - in June, going say - two could September, it XXth

around September, targeting of Maybe I'm the lucky. mid-September. So we we're XXth get hoping.

from now to point because now worth know to lined getting they're stores where, year's our going have they us. the are a with have we suppliers, up We business of X

or on which something waiting of get we comes done, won't any everything earlier are because lead else equipment priority type items, and is getting help long we So or can we X if be anything. up some decor treatment will open weeks for

All we of that, now. pretty well secured

it's can't they it get those done quick and just how for the this can't basically, weeks they get things that. do inspections, much So or construction how that can types and it's because of they two rains, pour the (inaudible) muddy,

where kind really that's of at. So we're

after. real So on would the quarter basically, I revenue the plan starting

So we're real in would first the going to revenue September, start in the we October open quarter. say so

quarter You'll get quarter, but a first won't be opening. little bit it that of in the in significant

Marco Rodriguez

marketing? Bombshells, most in I what that maybe press far as one given Or opening then release special as this terms the was you terms perhaps here. had saw the before from in pent on was guys that this did the new of you shift in and believe there hurricanes? of successful were And questions Was mentioned Pearland the earlier that of of launches anything the location, the you you your one you've to up alluding demand the

Eric Langan

stuff. after up take is out the all when I all being - and do of run was on when I the it we training to out runs we the marketing marketing. think do first staff trained, promotion is session, new demand. we we'll pass training then we all What guerilla some where dealerships car call The them do is pent wait the

people we the market, we really type really out and in pent do - and it's wait use up more So really television, more the promote stuff. more Pearland. business. there to radio, staff that marketing is don't And It's definitely and of demand guerilla, a it go land developable parking we acres and for where location four busy is were XXX It additional there parking spots. whole grass. with spots very acres And XXX use us. a built parking in We we very, bought six of

Marco Rodriguez

other Miami? before X San little one looking maybe Are to a for, talk target if a about talk new target you Bombshells, bit And those as and Antonio, could you the markets? bit just markets far area then for you're why as particular little you can going the

Eric Langan

are demographics want decent weather The We to The It's be make patios Miami. will concept work for market got and type great of lot help areas restaurant perfect a Miami. Antonio. with in in Definitely franchising the money our of great this alto definitely row another demographics. like in road. to and we San down

think Miami into I markets areas. build that make brand our and we know it have a And move and the we we as other franchising awareness will couple clubs there.

We with staff have far office staff and help as people accounting. there, as type that will

in So easier just an considering go heavily. it's grow think trying another market say, to, for right we now, to market us which we're than to Phoenix-Scottsdale is

Marco Rodriguez

starting sort a anticipate of there those to into you date markets? is target move And when

Eric Langan

I'm which us basically the location, of the now our on in quickly next so building the get estate the put hoping of location real looking and get quarter would location plans more We've permit at XXXX markets. Katy through right that be got depending those would opening. those the for type get processes September-December and learn how the stuff We're markets, in after secure our looking actually the contractors the and that the there. can building we to developed, and actual in

do for little is lot will clubs, build a with different a of the us. new we So construction. experience have while It this be

under L&I, about an a be months get it takes open. process little us location the it put will So it it about a from time takes for I to us us. Basically, and XX find learning

of by June now end could because we're can basically Miami, that a So market June, looking June-September for under and say, something, if basically. find push opening it get we the contract by in in we

Marco Rodriguez

I quick gears and in you last I'll back of in to just shifting acquisitions. prepared remarks, your here the mentioned nightclubs. kind jump queue, question the And believe

color You're a in backlog, out far very large these type quite that you as of there. kind you I will? more us a Can as to, Do kind if guess, of sense give have any or talking midst the Any of are you kind tuck-in? of there. acquisitions few potentials

Eric Langan

of bit both. A little

Operator

conference today's call. concludes This

You disconnect a lines. and for may you have Thank pleasant your participating day.

RCI Hospitality (RICK) 10 May 182018 Q2 Earnings call transcript