RCI Hospitality (US:RICK)2021-05-11 07:45Financial Data and Key Metrics Changes - Total revenues for Q2 2021 were $44.1 million, up 9% year-over-year, marking the first year-over-year quarterly increase since the pandemic began [10] - GAAP EPS was $0.68, compared to a loss of $0.37 in the same quarter last year, while non-GAAP EPS was $0.75, up from $0.47 [11] - Free cash flow reached $9 million, the third highest in the company's history [11] - Cash on hand at the end of the quarter was $20.2 million, a two-year high [23] Business Line Data and Key Metrics Changes - Nightclubs segment revenues were $30.8 million, up 22.2% from the previous quarter and down only 1.8% year-over-year [12] - Same-store sales for nightclubs increased by 3.6% [13] - Bombshells segment generated $13.1 million in revenue, a 49.2% increase year-over-year, with same-store sales rising 48.7% [17] Market Data and Key Metrics Changes - Nightclubs and Bombshells sales exceeded $18 million in April [8] - The company noted that restrictive curfews in northern clubs are beginning to end, which is expected to positively impact sales [8] Company Strategy and Development Direction - The company aims to drive shareholder value by increasing free cash flow per share by 10% to 15% annually [30] - Strategies include mergers and acquisitions, organic growth of Bombshells, and share buybacks when free cash flow yield exceeds 10% [33][35] - The company is focused on refinancing real estate debt to lower interest expenses and extend terms [28][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued recovery as COVID-19 restrictions ease, with expectations of increased revenues from lifted curfews [42] - The company anticipates a strong year ahead, with potential revenues reaching $250 million or more if current trends continue [54][55] - Management noted that consumer demand remains high, with a significant increase in spending observed [43] Other Important Information - The company has been proactive in managing costs, with salaries and wages improving to 25.4% of revenues from 30.2% [21] - Debt has decreased significantly, reflecting both extinguishment and scheduled paydowns, reaching the lowest level in almost two years [25] Q&A Session Summary Question: What factors contributed to the improvement in salaries and wages? - Management attributed the success to loyal employees and increased revenues, but acknowledged that salaries may need to rise to remain competitive in the market [40] Question: How significant will the lifting of curfews be for business? - Management indicated that lifting curfews could lead to a substantial increase in revenues, estimating potential gains of $60,000 to $800,000 per week across key markets [42] Question: What is the outlook for Bombshells' performance? - Management believes that Bombshells' current performance is sustainable, projecting revenues around $13 million for the foreseeable future [53] Question: How does the company plan to deploy potential free cash flow? - The company plans to pursue multi-club acquisitions and is open to paying higher multiples for the right opportunities [57][58] Question: What is the status of the M&A pipeline? - Management expects a busy year for acquisitions, with many club owners interested in selling before potential capital gains tax increases [70]