Update: RCI Hospitality Earnings - No More Club O

Aug.12.14 | About: RCI Hospitality (RICK)


RCI Hospitality reported 30 cents of adjusted GAAP EPS for the third quarter of 2014.

This does not change my opinion on the stock.

I recommended the stock 2 weeks ago, so it is too early to tell whether I am right on the prediction.

RCI Hospitality (NASDAQ:RICK) reported adjusted GAAP earnings of 30 cents in Q3 2014 compared to 23 cents in the same quarter last year. This 30 cents excludes 21 cents of legal fees and 2 cents of a loss from the sale of property. The unadjusted GAAP earnings per share was 7 cents. Non-GAAP earnings excluding the loss on the sale of property was 37 cents compared to 36 cents last quarter. Revenues increased from $28.3 million last year to $33.3 million this year. Same store sales increased 5.1% with almost all major brands showing growth. Operating margins were 19.4% compared to 19.3% last year. The company reaffirmed its guidance of $130 million in revenues and $1.10 in GAAP EPS.

The company plans on opening 2 more Bombshells in the fourth quarter. The company is making progress on the REIT. Surprisingly, RCI decided to not go through with the $11.06 million acquisition of Club O. Going into the fourth quarter the company has $10 million in share repurchase authorization. The CEO stated that the company would be repurchasing shares up to the price of $15 per share.

In my article "Does Sex Sell? Rick's Cabaret Is A Buy" I recommended buying the stock and I maintain my recommendation after this report. The thing that surprised me about this report was the canceling of the acquisition of Club O. Although this could have been a big revenue generator in the future, it is a positive that the company decided to hold back on it after their due diligence showed that the deal wasn't worth it to shareholders. The same store sales numbers and the early results from the Bombshells restaurants make me very positive on the stock. The resolution of the legal issues also was a positive. The new focus on the bottom line will mean that costs will be cut which means better profitability in the future. The formation of the REIT will be a positive, so progress on that front was good news as well. Hopefully after the company reaches its goal of having 10 Bombshells it will find locations to make a higher goal for restaurant openings in the future.

Disclosure: The author is long RICK. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.