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Category: Stock Market and RCI Hospitality
Date: 30 September 2019 Stock Price: $20.88 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of RCI Hospitality the owner and operator that runs upscale gentlemen's clubs and restaurants.
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About RCI Hospitality
RCI Hospitality Holdings, Inc. subsidiaries own and operate upscale gentlemen's clubs and restaurants. Other activities include websites and a media division.Founded in 1983, the Rick's Cabaret brand pioneered the creation of elegant gentlemen's clubs featuring beautiful topless dancers and high quality restaurant service. Since going public in 1995, we have transformed into a leading hospitality holding company. Our subsidiaries own and operate over forty establishments under multiple brands throughout the nation. Our name changed to RCI Hospitality Holdings, Inc. in 2014. We are listed on The NASDAQ Global Market under the symbol Rick.
Our subsidiaries have built powerful brand name awareness for their upscale environments and enjoyable adult entertainment. Anna Nicole Smith met her oil billionaire husband while dancing at Rick's Cabaret and many performers have become Penthouse Pets and Playboy Playmates. Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies since 2008. We have been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York. Options in RICK are traded on the Chicago Board of Options Exchange (CBOE).
Our subsidiaries have built powerful brand name awareness for their upscale environments and enjoyable adult entertainment. Anna Nicole Smith met her oil billionaire husband while dancing at Rick's Cabaret and many performers have become Penthouse Pets and Playboy Playmates. Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies since 2008. We have been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York. Options in RICK are traded on the Chicago Board of Options Exchange (CBOE).
Overview of RCI Hospitality's latest earnings report
- Total revenues: $47.027 million (up from $42.634 million for the same quarter of the previous year
- Revenue increased by 10.3% over the last 12 months
- Operating expenses: $37.053 million (up from $33.142 million for the same quarter of the previous year)
- Cost of sales increased by 11.8% over the last 12 months
- Net income: $5.638 million (up from $5.389 million for the same quarter of the previous year)
- Diluted earnings per share: $0.59 (up from $0.55 for the same quarter of the previous year)
- Dividend per share: $0.03
- Dividend yield: 0.57%
- Diluted weighted-average shares outstanding: 9.620 million (down from 9.719 million for the same quarter of the previous year)
- Cash and cash equivalents: $10.956 million
- Cash and cash equivalents per share: $1.13
- Cash and cash equivalents makes up 5.45% of RCI Hospitality's market capital
- Cash and cash equivalents makes up 3.12% of RCI Hospitality's total assets
- Stockholders equity in RCI Hospitality's : $168.906 million
- Stockholders equity per share for RCI Hospitality's : $17.55
- RCI Hospitality's is trading at 1.19 times its stockholders equity per share, which is within the expected range of between 2 and 4 times that most firms tend to trade at.
RCI Hospitality's management commentary on the results and earnings guidance
HOUSTON—September 24, 2019—RCI Hospitality Holdings, Inc. (Nasdaq: RICK) announced it has filed its 2Q19 and 3Q19 10-Qs today and will hold a related conference call at 4:30 PM ET.
"We're pleased to file our second and third quarter 10-Qs, posting the same strong top and bottom line results we had reported when we released preliminary financials,” said Eric Langan, President and CEO. "Strong revenue trends have continued two-thirds of the way through 4Q19. In addition, we are currently marketing $14 million of properties, most of which are non-income producing, of which $6 million is under contract or letter of intent."
"We're pleased to file our second and third quarter 10-Qs, posting the same strong top and bottom line results we had reported when we released preliminary financials,” said Eric Langan, President and CEO. "Strong revenue trends have continued two-thirds of the way through 4Q19. In addition, we are currently marketing $14 million of properties, most of which are non-income producing, of which $6 million is under contract or letter of intent."
- Total Revenues: Total revenues of $47.0 million grew $4.4 million with increases of $1.9 million (+10.8%) in alcoholic beverages, $983K (+6.0%) in service, $871K (+14.1%) in food, and $627K (+25.2%) in other. Revenues increased primarily due to the addition of Rick's Cabarets in Chicago and Pittsburgh in our Nightclubs segment and two new Bombshells in Houston (I-10 and 249).
- Operating Income: Operating income of $10.0 million (21.2% of revenues) increased $482K from $9.5 million (22.3%). Non-GAAP operating income of $10.0 million was level in dollars compared to 3Q18, with margin of 21.2% compared to 23.4%. This primarily reflected greater contribution from Nightclubs offset by reduced contribution from Bombshells and higher corporate overhead due to legal fees associated with the previously-announced internal review.
- Nightclubs Segment: Revenues of $37.9 million increased $2.6 million or 7.5%, with 38 units in both periods. Operating income increased 11.5% to $14.0 million (37.0% of revenues) from $12.6 million (35.7%). On a non-GAAP basis, segment income increased 11.2% to $13.9 million from $12.5 million with margin expanding to 36.6% from 35.4%.
- Bombshells Segment: Revenues of $8.8 million increased $1.6 million or 23.0%, with 8 units compared to 6. Operating income was $686K (7.8% of revenues) compared to $1.4 million (19.5%). This reflected reduced operating leverage due to the previously reported decline in same-store sales as well as expenses without the benefit of corresponding revenues from two locations expected to open in early FY20. While down from 3Q18, same-store sales continued their sequential quarterly improvement in FY19.
- Interest & Taxes: Interest expense of $2.5 million (5.4% of revenues) increased $235K from $2.3 million (5.4%) due to debt related to the Pittsburgh and Chicago club acquisitions, new debt related to Bombshells development, and a lower weighted average interest rate. Income tax expense was level with 3Q18 as the effective tax rate fell to 24.1% from 25.3% with the full effect in FY19 of the federal Tax Cuts and Jobs Act.
- Asset Management: There were two real estate sales: (i) a portion of excess land around newly opened Bombshells I-10 in Houston sold for $1.1 million cash and a $331K pre-tax gain after closing costs with proceeds used in part to pay down $942K in debt on the entire Bombshells I-10 property; and (ii) a small property in Lubbock, TX sold for $350K cash and a $376K loss after closing costs with proceeds used in part to pay down $331K remaining debt on the property. During and subsequent to 3Q19, both excess aircraft were sold for a total of $1.1 million in cash and a small gain after closing costs with proceeds used to pay down $883K in remaining debt on the assets. Also during 3Q19, both the former Club Onyx and Foxy's Cabaret locations in Dallas were leased out.
- Balance Sheet Highlights (June 30, 2019 compared to March 31, 2019): Cash and cash equivalents of $11.0 million increased $2.7 million. Total stockholder's equity of $168.9 million increased $5.0 million due to retained earnings. Total debt of $146.6 million declined $3.2 million.
RCI Hospitality (NASDAQ: RICK) stock price history
The image below, obtained from Google, shows the stock price history of RCI Hospitality (NASDAQ: RICK) over the last 5 years. And it's been a pretty good time for RCI Hospitality (NASDAQ: RICK) . 5 years ago the stock was trading at around $11 a stock and it is currently trading at $20.88 a stock. So over a 5 year period the stock of RCI Hospitality (NASDAQ: RICK) increased by 89.8%. The stock is however trading at closer to its 52 week low than it is to its 52 week high, which is a indication to us that the short term sentiment and momentum of RCI Hospitality (NASDAQ: RICK) is negative.
RCI Hospitality (NASDAQ:RICK) latest stock valuation
So what is RCI Hospitality (NASDAQ: RICK) stock worth based on the release of their latest earnings report? Based on RCI Hospitality (NASDAQ: RICK) earnings report for 3r quarter of their 2019 fiscal year our valuation models provide a target (full value) price for RCI Hospitality at $35.20 a stock. We therefore believe that RCI Hospitality is undervalued.
We usually recommend long term fundamental or value investors buy a company's stock for at least 10% less than our target (full value) price, which for RCI hospitality is $35.20. A good entry point would therefore be at $31.70 or below. And since the stock of RCI hospitality is well below this price we rate RCI Hospitality a buy
We usually recommend long term fundamental or value investors buy a company's stock for at least 10% less than our target (full value) price, which for RCI hospitality is $35.20. A good entry point would therefore be at $31.70 or below. And since the stock of RCI hospitality is well below this price we rate RCI Hospitality a buy