RICK - Earnings call transcript Q1 2020 | RCI Hospitality Holdings, Inc.

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Operator

Greetings, and welcome to RCI Hospitality Holdings conference call and webcast. At this time all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [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 Fishman

you. Thank

under Investor you our call website, presentation to and down and scroll where Information our of you will go the find click the page, to you this call slides. That Investor a find links see the logo. can on just listening those you on webcast this phone, necessary info for and Company or will will For take RCI to the Company the the little all RCI you could you

I that Now to call please at Safe to it update to I result see as you turn results the to Slide and those Statements may of It you posted presentation. occur remind from materially Harbor developments risks X. call want it. differ you disclosed anticipated. read is We conference our everybody any involve currently that a or in this that of our reminds may uncertainties. beginning of disclaim Actual hear statement Forward-Looking information obligation urge afterwards.

please explanation to Slide presentation Please the you and to in we non-GAAP release. are measurements also that news And direct to X. use X. our I Slide and turn of included turn

four of will versions GAAP and in comparable today's are tables that we charts using Here be presentation.

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

Eric Langan

Marshall; us Thanks with Controller, our and Phil Chhay. I'm Bradley for CFO today. joining our here

and have our again, and our filed our Before we worked current quarter get auditors staff to weeks like us with start, hours first new our bring would the thank long last I for to two filings. they XX-Q

EPS excess as sale late had we $X.X $X.XX today's revenues compared $X.XX, including the reported for million February. year expected on is in year-over-year. filed news. the to to Slide assets. our to net market turn GAAP gains of quarter during X.X% Please close, up in After that ago $XX.X million was total We pre-tax do X, we XX-Q the

EPS $XX.X discuss was was that, basis The that grow. will to XX.X%, non-GAAP trends, expect hit of XX% a the to Bombshells we margin the up but $X.XX. to continue year-over-year. only million rebounded star than $X.XX I other On revenues and compared based on our performance more Quarterly to segment show segment. Not

Nightclubs an maintain their strong have clubs. largest in great week second calendar. calendar we up contribution period, sales we Thanksgiving markets had previously where less to the part holiday also due reported. to our has unusual We sports important Performance despite as one of during in Christmas picked quarter some a

Corridor Northeast acquisition on-track. continues Our

allocation flow. in million with year-over-year, million We X% we million capital $X.X rate. with still used in buy back that the free quarter cash. $XX outstanding weighted strategy, more than quarter first XXX,XXX million average our shares in shares to reduced cash excess we generated ended Regarding in-line in our That the $X.X and cash run is current $XX

in excess million subsequent in further to the flexibility approximately contract near-term approximately we when we $X.X eliminated balloon And sell properties enhanced to $XX.X and sales. This under cash when close with million lease million During properties retain increase will to flexibility. we and debt our remaining financial market be first on $X excess quarter, our value. for in

cash buyback the and available, authorization a million, increased million X.X%. first we increased we also quarter, our dividends total us $XX.X After annual of by given $XX our

segment our a results. Please year. quarter were first to last Nightclub level sales similar operating review X turn to Slide on for

mentioned or Pittsburgh, and in holiday quarter as for acquired Chicago November of clubs one of part new sales Two which and Rick's less quarter of first Cabree fiscal earlier, two XXXX. weeks XXXX closed The clubs I we in included were week. the

the full this growth a performance, quarter. five same-store half second count restaurants. October the our new of XX% the from more numbers than opened for sales units in and in had sales great first to which three reflected record Bombshells Bombshells Katy,

million. reflects amount Most million the non-core reopening small Katy down year-ago $X.X operating was from margin and Bombshells for profit of quarter. were Bombshells due to the for weeks a year-ago relatively quarter. in on revenue improved quarter. profits both Bombshells XX operating of jumped several Nightclubs' $X.X That that on $X.X for to gains costs assets full and million despite business in sale the

overtime expenses million filing. expenses to our was This XX-K audit, legal higher. $X.X were due related Corporate higher primarily to and

As they On made basis stock from last a year, a was would $XXX,XXX was up share non-GAAP only operating which for our on our indicated I call. be last per off buybacks. had basis, in profit through

Please review trends. Slide to sales X, our margin turn to and

due revenue hit increase largely offset record to a the quarter The contribution higher new in Bombshells. corporate segment's expenses. First

can with begin is same-store Looking ahead, new total operating see margin to margin to grow all improve. to you open continue segment our should expected and continued in Bombshells sales. improvement units

larger in New Houston with sporting our Pro about the college the I'm expand March. in York should Florida, and both near Championship February tournament and South big open clubs Nightclub the in all basketball Basketball Weekend events Chicago, clubs. in talking Football segment in Pro margin in

half I as as related legal overtime. should with and reduced in revenues mentioned corporate previous decline And percentage the have overhead on fees auditing a calls, of second and

XX% we more average continue is slide our titled Bombshells units this turn the Slide over This Taking In Bombshells million, new it quarter first approximately to year. All are-titled Last per to totaled Happening. unit to call do very segment. Shape. review the well. Bombshells call have revenue was $X.XX Please we year for Turnaround than X, up Turnaround which

That annualized elimination $XX of margins locations especially expand, And as to gives should sales should million. XX of with in sales million increased generate cost preopening the $XX grow as all of all confidence us February.

range. in to continues target XX% XX% internal Our to be the

developed. Bombshells, sell we to expect properties lease generate newer our the increases traffic our some around property store of those out, in As as additional access we are

six a short Bombshells we locations time and our teams of our our and new want we are on ROI stores waiting selected after such up build currently We any to evaluate new in to amount haven't opening investments. management

of segment. call weeks during the and any to but have the Q&A. Slide happy this answer have Nightclubs to questions ago, few most this be covered turn X I may you I call our will in review to already Please

turn on you XX cash If can were a higher please Also, would quarter to is our year-ago. The what to to capital out is flow. slide. this maintenance key this point review discussed will expenditures of significantly that free versus noticeable effect have Slide also like most cash have a thing This I generation. on I

our Pro Football Championship stepped in quarter. anticipation the that is why spending South reason of clubs The we up Florida this at our

mentioned last As Bombshells also we our I call in in Dallas. the and expanded remodeled and

these expect have We payoffs. investments significant to

capital based We we would Please today, slide don't allocation turn have on per reiterate be from on shares weeks are We ago. to $XX this to Slide updates we our share. continue any where back to like XX that would two buying to comfortable strategy. review to just up

we Slide a in turn achieved started review since allocation the on strategy capital grown units our Revenues XX% increase progress XX Please with based have to about have X% going fiscal performing case building increase larger locations, in XX% or the to our we of out reflects XXXX. locations in acquiring organically revenue better of strategy in at generating Bombshells, revenue That and four per it unit. weeding and locations. average growing

XXX% price on we we this increase in business, to free base we In have shown ability have flow, years, over have cash slide. spent same to our to time, the about dollars This last a free of generated With million share. convert the cash close we five an billion into per X%. as have flow dollars. average reduced total common previous acquire revenue XXXX At more of X.X shares for reflects outstanding $XX.X shares

Long-term net paid million asset review from year-ago. new sales scheduled of amortization, loan Slide our XXth long-term as associated a reflects Please development XX of costs $XX.X September of $X.X debt Bombshells. new million result debt with turn and That debt from debt. to debt to and the our certain a fell

on million as are new standard in-line notation debt, our XXst. liabilities, regarding had our with of totaled last this December These liabilities, a lease them slide I on to added $XX.X not as call. operating the referred accounting they We

continues for at manageability, Please a turn which good. look Slide XX to look to debt our

and increase debt repayment. for quarter, million We balloon eliminated earlier, payments. this we of non-reality cash $XX.X I our subsequent first financial to flexibility during needs to large the As by did near-term mentioned any eliminating

converted During already We is not chart due of moved May year the incorporated in totaling quarter. the we on XX notes. million balloons this that million is $X.X chart our two this $X yet. in maturities bar to in year That quarter, reflected XXXX, the fiscal bar slide. Subsequent in the to

come will out time non-reality and out next the balloon chart, XXXX. non-reality $X.X million fiscal of you see come in $X XXXX balloons in So million will of fiscal this

adjusted debt and ratio EBITDA revenues reduced first other trailing which EBITDA. at the long-term opened That debt that the of our increased from largely to month continued Looking during fall. Katy to largely revenue is including of fell debt Bombshells, matrix, cost affects location, due XX occupancy the to to X.X% And stable quarter.

turn conclude please To XX. to Slide

focus running maximum for same, the cash our free forward, remains Going business flow. the

corridor Looking at ensuring acquisition Nightclubs, our that operations, acquisitions, finalize opportunities our to any integrating our fit and and improve parameters. priorities Northeast are continuing

guiding success continue units. and Regarding are margins sales to new and grow Bombshells, priorities all locations they are to our older same-store ensure and

our to In we would close pending terms like of asset management, of opportunities. all

flow per and have we to the right share, strength a clubs internal least XX% XX% the the and in cash focused through be right to at back of continue course, of growth. free financial combination grow We shares, finding buying to markets,

we are XXXX pre-fiscal to our of have Now forward filed on-time. with resuming and falling our that our track look filings we XX-Q, record up-to-date always

Operator.

Let's start with Q&A. the

aspect I I'm when but if that legal say all business, to you limited about appreciate happy I'm certain to comes in matters. understand would always, what talk the As it I can of

Operator

Thank you.

a Marco question. with the Our Please will from comes Markets. be We proceed your line session. with conducting answer of Capital first [Operator Stonegate question and now question instructions] Rodriguez

Marco Rodriguez

guys to you Can Hey are quantify will? guys the questions. you you wanted Real in the extra my costs, expecting excessive, for quick, just how costs that QX. circle be to taking much thanks on you expecting are accounting if

Eric Langan

are have dollars the yet hundred quarter don't the in obviously, because of will we I paid be this But audit. in for still the XXXX mean, auditing thousand several the I queue. numbers fees

Marco Rodriguez

identified I Right, a a QX million you about half excessive. that was in think so

XXX to in So, maybe another QX? XXX

Eric Langan

said, ago, just have don't we it like January think be all even. I could of we mean from is the - higher, the that case I the two too don't It yet, from I filed all the we early, the have from just get period in gotten Possibly. to - even auditors bills little weeks

Marco Rodriguez

quarters? couple if the just of pre-opening and some relates able costs to help here Bombshells, as with in the quantify opened Understood. you last ones understand might be wondered And associated then you it just to the us

Eric Langan

Sure, we mean well management, a has our average for XX to four about average to carry go have store managers, process I manager six had through an training months.

managers, almost been half a a all So, excessive we additional these have an now amount we knew for because we and stores. were carrying opening year

- had other just have we and managers staff cooks managers average. had staff, we our opening stores we So, training, in higher excuse run are me, so kitchen we than a the in have little training knew

teams with month And training store. actually lot actually at additional is our store course, in have the we is of of open a There the pre-opening, associated the first costs opening our stores. teams, when opening training are a

Marco Rodriguez

come question, some last in of and cities. pretty to a and with a here has obviously one in all locations major big Got difficult of U.S., the news a your Corona unknown. Virus, the it. forefront the And lot The kind here, kind of

any Just then early change guys very but in of still were your the sort it patterns you have days, thinking know I that. And wondering at is of how seen kind are places? you traffic about

Eric Langan

seeing are We now. nothing right

our after I in Our for isn't out some quarantines. now obviously case haven't guess time. up of fantastic. about they in I numbers the Like are more those far weeks get at I are markets so reading of this seen virus mean, just said, people any locked cruise we right ship going effect two any

officials do health the what So at follow we advice we basically and need do. it time the the will to monitor and of

Marco Rodriguez

a your appreciate Thanks I it. guys. lot, Got time.

Operator

next [Operator Scheurer Please Jason Our Instructions] comes proceed from with Orchard question. the with question of line Wealth. your

Jason Scheurer

you, for bit little question you if on Hey a the stock Quick more reiterate can buybacks. guys. just

volume you $XX buybacks the can for And approximately you So do? of are daily And how can have as saying available that? much when got million you today. the commence you doing of average basically,

Eric Langan

Harbor, we we which I Well, block transactions do us. mean, buy exempt within or Safe

So now, we deals. follow right we current. those Basically are

the three information as we So typically stock any long rules today. can within that purchase Is have material, are for as days don't inside from we us.

Jason Scheurer

are numbers Okay, that are not in those numbers you properties year, that from free your of and looking cash the these including sale are the flow then you for outstanding.

Eric Langan

Correct.

Jason Scheurer

Okay.

at anything, like throughout the So point know, you it $X be at looking surprise if a some million could year.’

Langan A - Eric

you definitely be is the on profit assets sales. got sales Well, remember, will have move yes, that on the all costs those there as the we not sales, year. of those on We some to do through but upside

Jason Scheurer

itself. subsequent the are that XX% I or something. to making Bombshells putting be location at sure club every at actually, about by your are restaurants guess like love to properties, come a complimentary you average your the do property with an you find just When I for looking that may by selling that the goes obviously, some property, up are the buy what there, idea those Because point up that time we itself, businesses you you

Eric Langan

I mean, varied. is it

basically hopefully we three foot. close under in piece $X is closed the I weeks three for bought scheduled the have We a on we developments. We these - that property are contract, about of property. completely under originally the just last had think done One to next of

and foot about into in of bringing thing. those $X a types put and costs, retention We developmental utilities

we we just property, under had into after property. a $XX foot contracted have our we store So the the built

the think under I foot second at a and a lot, we first got we have The contract $XX sold $XX foot. one

had there, build more significant and we develop obviously as So value places there.

for one the we property is almost piece originally, amount bought what property frontage paid the other have considerable piece. double which we we of The for sold a got property,

at a paid additional an for have back sale. got XX% will over we there about the piece We contract on what under the we for And property. have piece

to right is land was months. going to conservative we still and have about cheap amount up [pair] those XX do construction for And of be have there contract so been - still road of to we it really it going XX not a the we we about yet, knew have but that of either a lot there. hold be the has the we to time was we down And on far. have sale. bought probably listed (Ph) both land going knew properties We It

well. in the complete, months on think there six as to I construction So next that activity will that we see starts property down as

Jason Scheurer

guys. great. Well you thank Awesome. Alright. much is That very

Operator

proceed Wyden next [Operator line Instructions] comes ADW with the with question. question your Our from Adam of Capital. Please

Adam Wyden

last is here. question a just This on the follow-up

out cash I it just quantify held take XX but over quite estate I will estate a you have real of and cash capacity held actual today you kind So your flow to real can that not months you free in in is can guess that try for under cash. on sale months, profit call is like you not that but sale. maybe and some the how make much next of XX some estate sales real mean for be expect some development to then profit

Eric Langan

it, it sold if obviously everything, property, don't I but and we price we because worth minimum I million additional sold million all really another is $XX.X got Yes, million would and or million an I XX consider if things when will of of know what say, we cash debt asset close, million mean, hard $XX to so. probably to in kind or our six we four in on eliminate

Adam Wyden

$X another are million you value? above what saying is so carrying Okay, the

Eric Langan

this the the the some carrying debt. level value, Well, on we don't we put but cash some value. above Bombshells - Remember know of built problems, debt the but property. I down about of yes,

the we property to say have we So note to million the there of $X.X pay go XXX% the sell against way proceeds a for We, net the written, the loan land. loan. excess what is the off and let's is happen is, on

the Bombshells the is to Even though $X is still off. itself, have the way we note worth million pay by written,

we as what two do and of year old. will this December become is, November, Now come Chicago Pittsburgh years

be XXXX do all location where like take did probably where then XX% Eliminate out to in Bombshells from other pull we the large a loan-to-value will We into of note, equity, pay on there. refinance a location XX% will year some properties, refinance Chicago, out in our of these Pittsburgh, again, will able a big ratio. in existing we that do and we a XX real and or probably long-term estate loans

Adam Wyden

loans interest outstanding. you higher XX Obviously have the that unsecured the Right something. or million

be will and You able of get -. to Refi out that more basically kind

Eric Langan

-. Right, of similar. XXXX. we kind and existing did up of into we in then note real one Very whole into turn the and with estate, turn estate real it that And one have will bunch note made come a - against them like

Adam Wyden

Perfect.

Let me something ask else.

million So you authorized buy $XX guys back. about on the have

flow, but think free back in will right? burdened your some level of with But your kind costs Boston. kind be run forma As kind money cash that the accounting of forward about pro than guess these which cash back get flow accounting, I do terms think getting the for buying higher, of out anything doing kind when we your of in your is half, probably closing I by mean, excess XX, free stock? I and and for about mean run you kind of in mean, Boston should rate I Your through. of rate materially is you legal of else of other kind how you on

I kind do I guys you opportunity. almost is mean like stock is publishing this will buying the guess is, rate a back just do I like almost end year probably of my I run the -. doing anything more you at XX here. corona how than back it a wonderful filings you the mean, stock think at about bucks can mean, your mean, to of are your on flow went and than I XX I this now can guess cash free mean, gift, think you seems virus you and in some right? on more level, XX philosophical I other closer XX. question be

Eric Langan

As We the stock started We with all cash one the you less quarter million $X.X bought all have back. the else. million when flow of is did. we stock that up the bought quarter, with ended everything $X.X regenerated seen back we million worth than paid debt we the and last all with cash in of and

stock buying continues quarter, will the out we the and I'm sure. it, move if there in off As into to sell next be we this week,

if wants buy market to continue going to I discount the assets, mean continue to So back. our are we to them

Adam Wyden

all So, that is X% I assume to at this theory kind execute million X% Safe XX could XX I in mean that within Harbor next or in you it equal. week is all that fair of I stock the you guys the mean guidelines blocks, to against things and volume whatever bucks being in of quarter in of mean, could, next

Eric Langan

have to Obviously, to $X we have cash million $XX million in to operate. about,

not we yes, look available. In become last investor. on it if quarter, for into So, blocks to would are hand the available, If are aggressive, major short situation bought a come that ourselves definitely became on where going But we single going operations. blocks available, I depend cash at we we extremely them. two be would we a from to blocks mean get had we those are

next million few years. over of We eliminated balloons have the now worth $XX.X

out of smaller dealing balloons now. are with We a we there couple got still, have

pay push property We will estate those off be we move will sale. off or as paid The those going real are the try forward. to decide with to balloons whether we

really about not I'm So, those. worried

own depending or a we do have great to basically to we prices, continues now flexibility right allow to slowdown. do position we us mean, market in are aggressive. we where the allows get these our buy the what on I whatever want will do. the do to expensive, us will whatever market we assets to very If to they need be we at If more

XX% we of of financing us a than are obviously, buying that are that other right the XX% I growth, to fully through stuff get going whole lot doing now. think see are to back I to continue to we I they debt unless But we grow but continue stock. priced, do most And mean, will doing that. business don't

we cash flow, stock, several about first these in a up and service today I are on extra even right we have think properties, into to million we the service, as the million of now pick cash that the are in we in other going free we debt - debt up probably debt after cash. now sitting without $XXX,XXX closed properties additional week pick think $X.X right are dollars service on we can to the $XXX,XXX after I put few

right not us. is So, now cash problem for a

going for of just to is continue available shares what find we whether it matter be. can the be and a So, prices sale to

Adam Wyden

a about little than bit last lot Got of it. performed openings the a why Can you and think Bombshells previous the three talk better they you four ones?

Eric Langan

XX learned have floor plan identical. a are lot, have stores, they we Sure, cutter all so almost we now cookie opening got a

that demographics, important. very our traffic flows the the learned locations, And very, bought we what have have and restaurant Class locations, A locations high good We locations. we very learned traffic were is

continue location. a think to it as amount - things or within build build location, I the to A whether the Class B Class the same I store, company in main a look we

say were store. learned locations we we where would what to I really which wise patterns before weren't as today, $XXX,XXX traffic week, growing, So we a as and do have we we a need are really week as $XXX,XXX

to back million So doing, locations $X.X build go have I are store. lot pass week does that looked doing million it to a are for $X towards $X a are $X we $XX,XXX same $X costs $XX,XXX so million. that to but million me at they on one amount of of million stores, probably the money you that

right the now. these hold higher find are to really Build right that we So, will stores these trying numbers. out do and locations

Adam Wyden

I you - of Bombshells people true power probably the people this and of And, a XX. will I step it. of year, with I kind of of grown of exiting be this legal less this was committed from the year mean taking more any to thing years forward, $X you back kind I year, to ago less year looking terms gazillion have kind you and or showing showing EBITDA Bombshells accounting. run of next to mean building and earnings rating a maybe guys whatever in Got kind mean it clean mean less new million -I you not think close

you you strip EBITDA. think move a XX mean mean, where the are do club there order cost to rest kind do how big of out all of I are lot in do there, just not How but market about next you kind do of about deals? to getting chains get that more of the buying a of from I you I get mean, XXX next than the you more are prerequisite. to the I what your financials had but to that you smaller to they kind and think think you and are needs mean, stock, to transformational obviously, use capital your going to level to of these deals? was see to cost it a able level?

you up? Do times XX, more But for I be where with the to shenanigans can mean were all financial to the that stock XX it those that back performance trading you up in get types numbers the flow. the I to cash you mean, there financial do do able order use get XX, I transformational XX, will deals. guys at of are and you levels you have think back will confidence able you confidence have to if in be that

Eric Langan

you show the I'm capital to a Slide I that of to mean, there why I kind taking to put to show XX one kind are progress year XX going of time. going strategy. at are it allocation we we Slide XX is sorry, keep is of Slide or What the in do

We XX% to rate are free growing to XX% market consistency. is the recognize the compounding eventually of at have going a cash And flow. keep, to to going

what then that stocks a the to have their especially to get continue going for sell market left prove a over, we few is shareholders that seen will we won't the there over to happen recognize of consistency, us to once think long going expansion, be is period or I ourselves multiple consistency. time the and with been that have as is

And so anybody part kind is this up it. going of else it. to the pay is own that reality of that of for I to wants to have mean,

Adam Wyden

I back and will in look queue. the jump to well, forward buyback. Alright, Alright, I the

Eric Langan

thanks. Alright,

Operator

Our next Weiss question Investments. with proceed comes the from with Douglas questions. line your of Please DSW

Douglas Weiss

a bit questions congrats but this Thanks, quarter. on is could more, had MNA been the on have pricing Most and asked, a a guess how you I of seen little good at deals the have whether I talk little point? about many you interesting

Eric Langan

of where things. is some right easy it just we Price now. most, You at those every it seeing week. But and is issue with are not are ones of it of know, taking types we the new do on pricing, a lot it but is to has

acquisition; We done. ready get are that want have got this we to to getting close. big We

them a needs team accounting couple a give Our breather, at of least weeks.

back spring of get work let them relax will them through to couple in April. for we a So break, weeks

a stuff at text new new message We looking calls stuff. country bit every and is stuff getting all new There are of right e-mails, quite now. I'm over from week people, the

been that it move we have which kind next. do what finding really want So next. internally just acquisitions have these one for is to some our of at on fits Like, best plate. we what really That we us on discussing of is about

Douglas Weiss

interested existing or - into? looking would you are better, is to there you advantages in markets expanding in or it think are expanding you are Do new markets be there other

Eric Langan

staff is new a picking good for market, That sports way us. in were the that but both close for most a going for easier out obviously We that I both. market are market shares new us up for is That close, that Pittsburgh very entering markets market and new best to works also are want acquisitions we an to or - market. existing us. have why mean, we are we existing that something Chicago another is part, is

So we looking those are at now. types the right are acquisitions of

as range Trying price probably that easy. million price in $XX that to It million to range. stay Something is $XX well.

Douglas Weiss

Right.

far consultant have controls that to brought a implemented As at as point your done recommendations work remedy process? in their know issues is that or accountants, you work and this help, internal were you in of I is an Would still accounting you outside say or kind that cited.

Eric Langan

fast place, out were had grow. we got been we in as doing four constantly keep is the of rules up. biggest have system we and mean, of fast I and Well couldn't The that we grow systems XXXX to our in hadn't weaknesses. grew constantly material ERP evolving, the accounting we and it are so we make and we grew problem are it XXXX, right. three, system, of five our Because but so sure in put just the process our evolving

accounting but out our that larger know. don't go get larger and have from of problem so all checked we material numbers converted is we as And through learning process. don't any one and we of every were you time to know as what And, biggest learn our to to financials system to changes there the you have any you you had financials, our no another, material while restatements or

system ERP incredible. The is new

and I think new every can quarter. and something We very do better with is that continuing better it reports. are And it grow find gets it scalable. we get to

But has triple double from know revenues stretch now, what even we don't size will software in at won't out. numbers, is know thing this to in in go high are we find where have before to get - size, So this we any even it. I it won't hopefully problems. the how or offer someday the nice the

Douglas Weiss

and quite down Right. clubs the come or Houston impact you in Oil the and as as bit in seen Bombshells your have have a either any in prices far attendance?

Eric Langan

Nothing, small watching through sure. a by locations January, Longview and Texas, real that February March. in club have Longview, is for Were very prices see we have really effect, If few Odessa are affected only we that is any oil anyway.

is affected, if small. market know know mean, it I wouldn't You even it never would the know we is too -

clubs there, out profitable for The Odessa two us. big market is a large market very us, very clubs for

in very slowdown year last and in I was think some on seeing definitely it year that are we the we is $XX a I and market $XXs basis, mean that watch still for is it watch we year-over-year club so profitable will and but see, And this us. oil

markets, they all of really have disposable oil market gas not our that more are or people the is income. really affected other affected, if think because anything I cheaper get so by real Houston prices any helped, at are

Douglas Weiss

be I And year. helpful Do out rest sounds generally anything the Right. last looking but for thoughts sporting then it any calendars of you on said guess comps I the like guess there? might you have would question. the

Eric Langan

to Yes, I for be mean this January really some going quarter remarks nice comps.

our I think suitable were a compos Atlanta. weaker year last with in little

from So, Star huge NBA from is year this got that. us. get a push this We Game All big we big for push a didn't The year. that

So, I'm hoping be that turn to the solid is backlog going for too. fantastic us

really big move big, will - watch We forward. weekend. fight was had we a last And as the big we So, great. weekend fight the

Douglas Weiss

you to Talk quarter. next thanks. Okay. well

Eric Langan

Alright. Thank you.

Operator

Investor. of proceed Our next Private your [Darren McCammon] (Ph), line the a question. question from comes with Please

Unidentified Analyst

Hi answered. guys. Few been are them of already

but already can hear think again. maybe it I I this, answered you partially

X.X a much million of about non-reoccurring out increase one-time? in detail SG&A had cost You you could that was how

Eric Langan

is But been is lot been it we for two, break has XX out, be a able accounting the AM of be this differences staff looking a we it yes the honest mean January. lot know of and Probably, about mean, it have mean, will too I we a of at quarter legal, not, accounting, entire to be see because really and down. busy to is know. it and not. what everything - the in X with going everything you, the able I as costs costs. not overtime. don't PM to has next our office are been month of done, reality getting the lot to I In come to days a it is I I really week almost it of six or

stuff XXX,XXX is a legal itself getting accounting XX-Ks probably of it to related between says Bradley the just million done by just and the So, and yes. that that

Unidentified Analyst

is that Okay, helpful.

about adds it share to . so a up Okay $X.XXX

to going get pretty So, by Actually would a I'm breakdown, XXX that thing if a at you rate your are all for so million. ask million itself. $XX same your I maybe flow, Why offline up ago, using are stock couple when about asked $XX adds is helpful to a on but which appreciate weeks little million it, run more cash $XX I the to I you I free could million buybacks?

Eric Langan

Well quarter. you got to remember million we this $X did

quarter of bit. a usually have down quarter fourth in the is the little don't we typically. So kind numbers third those And

February goes. close January see some that pretty $XX I run-rate. it. quarter we are million But March much still maybe will how think we And to adjustment this Let's actual to have pretty

is expenses we of we and will share So millions mean, all to a right second where, to It these the comfortable I half now. added we with the just tell are hard. will tell wherever at.$XX that lot year are hard just have see. with number most the

Unidentified Analyst

enough. Fair

look after quarter which didn't again the at in second you So it March is your

basically. quarter

Eric Langan

May. our We put in results should second quarter out

hopefully we are have things a May. So looking better at where and we better in are have a idea of how

Unidentified Analyst

Okay.

Eric Langan

will run-rate our is If point. you increasing we that at let know

Unidentified Analyst

just will I confused say comment. guys QX, you every QX QX. Okay. get I a time

guys quarter easier December keep September it to of. quarter, since quarter is You use December track quarter, March

Eric Langan

quarter. but know is the I this then confused. get And I December

will come March the quarter will and So in out which May. results

of will these first to line. gone. have the We How in better idea is have months a starting how concert six get

results no in That think will hopefully. think think I exciting tale. will come costs will out we Definitely should for business will have outside quarter an talks, be out the be the those other tell be that which in ordinary August. Because And us I real I June quarter real quarter

Unidentified Analyst

August some will about May modeling before in timeframe also? ROI talked that think Bombshells? doing You You or have you

Eric Langan

It is possible.

on They to compared see centered years. lot guys thumbs two are how foot We do will a around last to they these do. their be the for had going to have what

good will some like. of us. So idea us a looking Give what for is build maybe that of model is it a they

a actual as pieces. we with added I new cash these on stores especially the see all outlays selling definitely want to property off purchases these and start whatnot,

bunch a going of on get It we returns the cash is be back. stores. interesting see the to cash cash So on to our

Unidentified Analyst

kind of us the with and without. property those sales extent share both to models to with going some are You

Eric Langan

it was good. great bad. that is the it spent. I end tell them that more But reason is the if format into what we If if and know done it will can't mean see what we a get can It put all the of it I out is, certain. I cash at we be returns. I day, can the is show, makes it sense,

I as to than anticipated lot think is a I going better these out be think we we sell have properties.

and highly we which out a And stores is coming climb stead XXX,XXX these to stores very are at XXX and Those are at. XXX,XXX about after XXX in the under period At the and on XXX, new XXX,XXX rate, hold even sales. that profitable. going stores started then we $X.X $X and a they and are unit down from so seven to to are million million half numbers week just And be to year then opening XXX over. million hold new up, we strong bounce in those XXX,XXX stores. These are stores honeymoon what week,

Unidentified Analyst

of see, suspect to business you with show is worst see it whatever kind of true, market's better the is but thing Bombshells why you is give to true the is I what the kind is. something going I than that to I is basically know, I the think assume market always but same they them it unless want That to would concrete. like suspect a

Eric Langan

here up to every think got I and evaluate these see. starting nuance is later. as with is open. it didn't let's have we down just little Everything and that And are let's we sit them to we get the where to that, new stores built think them with importantly itself just certainly bogged going we accounting more show I stuff built, time get will catch

into Like we fiscal going I this seeing get get quarter of said, this In to June and numbers. are start those year. into September, the end you

hitting XX% That to are going think we our I start have goal. is our we margins. when XX% margins, to

you I XX got of margins million out a sudden in XX% and we if Bombshell XX million and XX% to million these to XX% playing all earnings. or mean, in in sales, stores obviously come in at nine XX do revenues margins

I going think to quick. pay pretty that for show is themselves they

Unidentified Analyst

Yes.

there the it built have on something MNA So to do to tend half your into to previous purchases of towards you the just of coincidence that front, question, just that year. most Is that is addendum noticed an happen? calendar the latter I the tends or

Eric Langan

dying. business and sell Then you they This down clubs August then to August. back slowed is March in greatest is No, you “this and like, summer October in in of up their one oh” “oh, we in world.” going where those in know, school everybody businesses the to of course are are hit, the starts wants you all the

is lowest You see I back history, even our our quarter four numbers quarter numbers. our you go revenue our fourth fourth quarter. mean our is if to

know, is of so, you guys every start I happens it thinking, get should that business” year. when “Oh, And this out

getting closed. November between They it and a start really serious guys the so do the really do And close all make about it, summer, around. get by the We Speakers] August, typically. all and we about diligence, starts September [Multiple the to wants deal, Nobody coming clubs get serious selling paperwork, their February, time in due

Unidentified Analyst

that all guys. That is I is got. interesting. Okay Thanks

Eric Langan

Thanks lot. Alright. a

Operator

proceed Schwerin question next Please Our line your from Boyle. question. comes of with the with Dan Boyle

Dan Boyle

Hi appreciate want period. Eric, compliment first. on have to through this yourself I challenging how you you somewhat handled that. We

the Secondly or sorts how of these actually are competitive deals? just works. bidders is acquisition many that a question Are for Miami, how like on there clubs of out sort the it other there Boston,

Eric Langan

The putting these cash million with to that in and would the if people you mean, we our buyer. trick look sure down coming I up markets acquisition, $XX is I mean, cash. to I'm are love whatnot. is there be next there other the out at

money from still the that but million cash. in seller bank, a borrowing is are we Now getting $XX

cash is as he million concerned, $XX the getting seller note. million is far carrying $X as is county. He a So

do. $XX there to like ours are of a up payments, able guys $XX think other pull all the cash that $X with I don't have out lot million, where million, been to buyers million down there that

definitely happy, and not the a track and paid helps the helps have the more actually making buy of, only reputation on I get now in transaction. record think we reputation I taking think our sellers are closing be sellers but which to that clubs. great just are And closing our to think all they I transactions deal, of Second, the actually of which they us able note

Dan Boyle

you net When - kind that you for the you acquisitions. do the out of EBITDA the U.S. put

Is rental netting as observation? that a on expense. of out, of rental am that a net understand sort sort are of correct it that I thought You expenses, I

Eric Langan

and what about real adjusted their revenues say earnings let's or cap do we and we estate $X odd the use buy million, some of we estate We what point value, EBITDA, the revenue million, would the we an that the for earnings take then is out XXX,XXX. and take Yes. rate, call is appraised real X% seven

purchase multiple business. of We take that $X.X the would price that of million, XXX pay three which million, of given that a about give EBITDA times three $X.X off for an us adjusted we us

three So, real the times for EBITDA buy adjusted that. we then the to pay addition And estate in business. we

you X.XX you paying have piece at to are value. are it. a want of getting estate sure times people forget $X that if you to or out are that deal we I But to real six million you we seen and want XX paying overall oh if has people an are look real want there buying - are times, five paying do So, million saying estate, for real we

down we those at take that to estate mortgages that money able as And and pay money it out deal. and again we re-borrow reinvest X.X% as own the go in next pay because that and we X%, real down, are again we

a XXX% better us. basically a and bit XXX%, bit think are Such as is better for I deal financing. we little each so And little

in three -. not in the million a single of using dollars the cash they is EBITDA up and new dollar are own So, its reality picking company of

Dan Boyle

hard your work. for Thanks

Eric Langan

Alright. Thank you.

Operator

next line with comes with Our proceed Yaron question. the Please Capital. question Naymark One Main from of your

Yaron Naymark

legal, starting free asked XX think Hey I using there. mean, as I looking on look to XX your at It you the looks to free XX-ish in year, this looks that run thinking call to but are with is locations, expenses expenses, accounting have like few charges costs it associated training the comfortably which starting Bombshells sounds you million basically Bombshells just you those you another the this quarter. run we closer take guys, and pre-opening the about current just other puts number rating like it We point, rate, that someone point, bucks. have million cash is cash but sounds the burdened year else guess, by I your me from lot million and flow. a strong at is it new if flow. previous understand like million I congrats of - opening the a a that pre guess are

money down midway expense in earmark. year until you down of sell have this guess the interest elevated strong associated CapEx that you locations going paying are so those Bowl, sounds of asset well you sales up Bombshells is through I on the Miami as it you this Eastern because Your are locations full the When Super new the debt you that have spent QX the year. to like corridor year, next anticipation with open to North the go acquisition, year, and didn't benefits as of maintenance you

comfortable are more that rating? this higher if mean that talking or you reason don't are talking I assuming any thinking the you million you Is than or that think at that $XX-ish the you are any for decently run-rate a just look more entering won't than - I So, be $XX there M&A don't $XX Bombshells do that any run-rate million run to higher million year. open about, year next about

Eric Langan

lot run not if rate that giving I agree, higher the lot than one-time a in were should is be XXXX into carry yes, of run-rate is $XX XXXX. definitely rate stuff a would the is we XXXX XXXX the, run XXXX there over million of There is.

harder really is XXXX in million. forward $XX going be run-rate our definitely going than to So

Yaron Naymark

M&A incremental. that And then of be top and then would any on

will year, into year. next if a be So you M&A correct? at run-rate going be are to you then of that And thoughts do going this incremental

Eric Langan

a XX% to ideas right. we Correct. at that grow And that cliff, the XX%

So that annual that rate. that acquisitions XX% a run-rate growth increase we enough need XX% to to at we do

Yaron Naymark

Got it.

Okay, or four think were bigger off you XXXX, do do and think I if the if possible of double-digit or pay hit then you are three in times wouldn't able are you paying to you to XX months where for know you I back pay by potentially price. selling just EBITDA more, or accelerate do started if think and are you times for stuff it six times to stock. that M&A will XX multiple before three little four are to were stock willing willing is you guys issuing or to you M&A buy to five I if mean EBITDA help able XX at of necessarily. mean accelerate I trading ago, were times bit this and get a got if are that, you don't XX at to if you guys times. to to you guys Instead all little able a it pay stock you to stuff XX, selling deals either mean, I

Eric Langan

know. equity wouldn't don't But one, cash to have if my want my be my Number on to use up. Anytime a use hurt. to didn't if we are whether stock, more to use bit Well have building to deals we willing it we going didn't the not, pay cash will more I buy little are table. I or back I stock, to

trading with bought now. stock I at million back because a $XX right $X.X if the So stock was

books, deal $XX $X much where I use my owner not be debt and sitting of could a And that so get or million million, $X $XX $XX I the or was larger $X million but financing still And a you much can million larger do worth bank using a cash on million worth equity, in the doing $XX company cash right. million million of transactions, transaction. I

down come [Multiple the deals to cash. We up to I at there. are are there out out there They to going is require with just some trading of more value. I our the going amount call cash a mean, Speakers] in want said, on operators. a So, I are they cash They a is acquisitions. like $XX going million fair down. million definitely there of equity benefits market to $XX want multi-club million $XX They want larger $XX are to considerable million

down. So close cash to XX% XX%

we In we get those of And meantime, were we will there. I And getting, we are so type the at. the looking found one-off think things nice some are some, acquisitions. basically

growth buying The rate. rates. are grow We continuing get only next are is club continue have at to I when one the XX% me do lined acquisitions that time. I right up, at so to in for to we can now a XX% growth And concern our

flow free and flow that are free more cash doubling we five I want run years I that growth take six or and it created. five every think see have Slide ignore five the want to compounding Then every to doubling in continue years, to growing that XX, opportunity to out five want going, And continue I so. years can or the keep market to we rates years. where is I we cash cannot

the Now work. have price share to rewording start

Yaron Naymark

at $XX a as up sellers follow that I XX EBITDA more to down so guess payment? you equity bigger times put need there where think to be But stock cash accept Okay. the do to you all or would say willing acquisitions are is, was you time down million your if those even

Eric Langan

now X%, now. our is make the XX% don't going at up a to we'd that. benefit down I borrowing doesn't equity have is right it is used money get using I and sense, I'm to have especially equity. XX of there, get we tax want problem now. most They mean, think and Yes. get We equity The at form XX% our capital a X.X% math we we problem the are expensive because back for I on years.

the true my cost So capital. was on X.XX%

And debt me real would issue can XX% X%. equity. these its why or using cost that equity I use me cost XX% a right is now that then want I when So

So, is XX said, you like cash were at it flow. trading but we times

of capital because the right return. all look just sense will it capital us might we make math. at, of fit out cheapest gives will beauty and we is when cost it the can of what highest sudden math. it that a is, the the more is and figured do all we we use Now We The

Yaron Naymark

Alright. Thanks guys.

Operator

Our up is Capital. Please your Wyden next with follow the question Adam of question. with line a question ADW from proceed

Adam Wyden

Yes.

mean, I It a Just think, CEO I get and a totally hey it math like I to is yield. on ears. Yaron’s question, follow-up great. says, when is like X% with That debt XX%, terms - in is music a but money, my tax of your

Yaron structure certain what I'm investors there relates in don't might to is of in, getting what to getting see as it a amount think like like I that companies terms balance accessible leverage. be is see they perhaps of optimal capital at a - to

you even it amount the you at to gross do debt can there So there, as or transactions limit - the there mean to to though amount borrow relates is of a or can is X% I X%, net debt EBITDA. of

I but can question you the get can like, the and cost maybe is, XX its X%. on of EBITDA the I maybe I that capital, equity your math do times So probably right, think if have I question is haven't done

XX the and in XX%, wouldn't If you deleveraging. a X%, XX%, and equity XX%, or a buy times yield were to buy trade things assets EBITDA pre-tax CapEx that roughly if since have faster opportunity so X% for you avail actually yield you to because you after the at you it to tax, have XX a could is able would wait no

not question is say, to you give don't pretax club? you know million a the to it guess raise bank of XX% allow to, seller, more have go the I for but X% buy are equity tax, big XY importantly, X% as access You and $XX a done you and buy if equity you your up ever to billing I you on or something whatever, I to that books and the said, have and could wait right? at know, this, that kind would Z you if after So cash, Hey, if to goes, could and and want

Eric Langan

to our make when can to we in equity it lot cost. sense. find are right the We we it would adverse equity, issuing equity, of we and to point only where of not equity, is a adverse are a cheaper the XXXX, are equity it, did it we we XXXX with for familiar issuing acquisition, course, at very if And can use gets high us use

are When are and a large a $XX $XX transaction, X% we going million spread. it is a doing yield, - number. then on you mean, of sense. or I million are to to acquisitions, XX% or Because we whole lot look do that scale we makes acquisition are lot yes, if even at able spread we the if that it is pretty of a a And XX% big you to super we cost, a times close XX% there. getting getting equity XX five said at at still minus like are

Adam Wyden

larger, is there more get as I'm multiple you presumably, and - the So, diversity. sure

more worth a diverse a XX business worth than XXX You a and are than XX. mean more I million is is $XX a geographically, more

So, for of have the you multiple. bigger a get, better the capital you justification cost more and

So, those it in would many plus now? mean, States just the right many, in. how how, taking million are EBITDA a is this and I club your how interested the States. step fragmented thing that change how whole back, is chains many XX think there exist dollar of you be I large United how United you in do mean,

Eric Langan

of off people. of owned to mean by XXX would are I those clubs think but probably is we I'm probably XXX clubs own, top XX my of head, them that XXX there know out than I less the like several don't

significant definitely we serious So, there about we it. acquisition some out there get got targets cash. when But to the is have

Adam Wyden

to got You cash? have

Eric Langan

us. good doors, with we on on, cash doors Yes, go it of I can the do available knock kind any a can't on to We doesn’t that to consummate we door a different that seller. if have transaction start knock knock on knocking the we

really know seller is time I really really many I large are don't it in in. we So, to interested would the be so talk not there, a haven’t the think to operators too that close very because very, I position, out just transaction.

Adam Wyden

can So, at answer. is XX that again, we the out EBITDA practice got to you figure trading how times

Eric Langan

answer. but Yes, is that Consistency. the

got have We stay consistent. to

Adam Wyden

for Good. Alright. Well me. that is it Thank you.

Eric Langan

Yes. Thank you.

Operator

to final there in questions? this There it is hand for I the back are closing to like questions. further time. This Are any for queue no the would last at questions remarks. chance management

Gary Fishman

operator with everybody thank thank and So, you, called tonight. questions in you Eric. thank And you, to their who

a appendix. supplemental We few our have in included slides

in York Spring on XXth presenting March be We Conference. at also and Sidotti meeting will investors with the New

been On the our as a restaurants. Eric, our visit If let like hold e-mail a that please tonight. you or you. me night with decided me. yet. in Thank of to also New We and have hasn't you management just subsidiaries, management, And Cabaret company please clubs are of behalf and York, always, Rick's know, thank that calling a investor, to listening at very would one us one-on-one professional in meeting for much might

Operator

this your today's and you conclude Ladies teleconference. does gentlemen, participation. Thank for

day. may your lines disconnect You And this a have wonderful time. at

RCI Hospitality (RICK) 2 Mar 202020 Q1 Earnings call transcript