RCI Hospitality (US:RICK)2024-02-09 03:36Financial Data and Key Metrics Changes - First quarter revenues totaled $73.9 million, up 5.6% compared to last year, primarily due to club acquisitions, despite a consolidated same-store sales decline of 9.8% [3][74] - EPS was $0.77 per share with non-GAAP at $0.87, while net cash from operating activities and free cash flow declined only 8% and 3%, respectively [74][87] - The effective tax rate for the year was 19.9%, down from 22.8% [9] Business Line Data and Key Metrics Changes - By revenue type, alcoholic beverages increased by 18.7%, food by 14.1%, and other by 8.2%, while service revenues declined by 1.6% [8] - The combined operating loss from Other and Corporate segments was $400,000 less than last year, with non-GAAP figures about $100,000 less [9] - Bombshells segment revenues declined by $700,000 year-over-year, reflecting a $2.7 million decline in same-store sales [86] Market Data and Key Metrics Changes - The nightclub business remains solid, but same-store sales reflect macroeconomic uncertainty, with declines noted across the industry [74][61] - Central City slots averaged 131 adjusted gross proceeds per day, while nearby Black Hawk averaged 307, indicating potential revenue opportunities for the casinos [76] Company Strategy and Development Direction - The company aims to create a digital extension of its physical brands, allowing entertainers to monetize their relationships continuously [6] - A capital allocation strategy focuses on mergers and acquisitions, organic growth, and share buybacks when free cash flow yield exceeds 10% [12] - Major structural management changes have been made in the Bombshells team, with options being considered to improve performance, including seeking an operational partner or selling the business [84] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the same-store sales declines is behind them, with expectations for improvement during March Madness [93] - The company is facing macroeconomic uncertainty, affecting customer confidence and spending [52][27] - Management remains confident in their ability to reach future targets despite current disappointing numbers [90] Other Important Information - The company is evaluating a number of acquisition targets but faces challenges in determining fair value due to owners wanting to be compensated based on post-COVID highs [82] - The company has made significant progress in its cost-cutting initiatives, aiming to reduce expenses by over $2 million in the current quarter [97] Q&A Session All Questions and Answers Question: What is the status of the licensing for the casinos? - Management is not worried unless other licenses are issued to competitors, indicating a normal flow of operations [100][152] Question: Can you discuss the budget for the casinos? - The overall budget for both properties is about $20 million, with approximately $10 million remaining to spend [131] Question: How is the new strategic partner for AdmireMe expected to impact costs? - The new partnership is expected to cut costs by about $0.5 million annually, contributing to overall expense reductions [97] Question: What are the plans for Bombshells to improve performance? - A new Director of Operations has been hired to focus on customer service and promote a fun atmosphere, with structural changes being implemented [94]