RCI Hospitality Holdings, Inc.

And welcome to RCI Hospitality Holdings fourth quarter and year end fiscal 2023 earnings call. You can find the company's presentation on RCI's website. Click company and investor information under the RCI logo. That will take you to the company and investor info page. Scroll down and you'll find all the necessary links. Please turn to slide two of our presentation. I'm Mark Moran, CEO of Equity Animals. I'll be the host of our call today. I'm here in New York with Eric Langen, President and CEO of RCI Hospitality. CFO Bradley Shea is coming to us from Houston. Please turn to slide three. If you aren't doing so already, it is easy to participate in the call on Twitter spaces. Go to at Rick's CEO and select a space titled Rick RCI Hospitality Holdings Inc. for Q23 earnings call. To ask a question, you will need to join the Twitter space with a mobile device. To listen only, you can join the Twitter space on a personal computer. RCI is also making this call available for listen only through traditional landline and webcast. At this time, all participants are in a listen only mode. A question and answer session will follow. This conference call is being recorded. Please turn to slide four. I want to remind everybody of our safe harbor statement. You may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. Please turn to slide five. I also direct you to the explanation of RIC's non-GAAP financial measures. Finally, I'd like to invite everyone listening in the New York City area to join Eric and me tonight at 7 o'clock to meet management at Rick's Cabaret New York, one of RCI's top generating clubs. Rick's is located at 50 West 33rd Street between 5th Ave and Broadway, a little in from Herald Square. If you haven't RSVP'd, ask for us at the door. Now, I'm pleased to introduce Eric Langen, President and CEO of RCI Hospitality. Eric, take it away.

Thank you for joining us today.

Please turn to slide six. I think our fourth quarter results are generally in line with what everyone was expecting. We generated revenue of $75.3 million, 5.4% higher than a year ago quarter, mainly because of acquisitions. This has increased more than offset the decline in same store sales of 10.5%. However, margins were negatively impacted as a percentage of sales. Because of the same store sales decline, results were also affected by higher non-cash impairments. As a result, we earned 23 cents per share. But on a non-GAAP basis, we were solidly profitable, earning $1.11 per share. We are operating in a unique and complex macroeconomic environment. In addition, last year's second half saw the highest operating leverage we've had in the past five years. Fiscal 2022 free cash flow also benefited from a $2.2 million tax refund in the third quarter. I am proud of the efforts of our talented and dedicated teams, as well as the strength and resiliency of our business model. In fiscal 2023, our performance same-store sales were up 9% compared to pre-COVID fiscal 2019, with nightclubs up 8.3% and bombshells up 12.6%. We also saw the second highest levels of free cash flow and adjusted EBITDA in the company's history, eclipsed only by the unique dynamics of fiscal 2022. Please turn to slide seven. We are pleased to report that during and subsequent to the quarter, we have made significant progress towards our key growth initiatives. These should begin to produce results in this fiscal year and next. We also implemented some changes to improve operations. Our capital allocation strategy continued to provide strong long-term results. Since its adoption beginning year-end fiscal 2015, free cash flow has increased on a compound annual basis of 17.2%. Subsequent to the fourth quarter, we continued to buy back more shares. We believe we have significant cash resources available to implement our strategies and plans. Please turn to slide eight. I'd like to take a moment to go into more detail on the progress of our three major growth initiatives. First, we continue to be excited about our two Central City Colorado casinos, Rick's Cabaret Steakhouse and Casino, and our Bombshell Sports Casino. We are awaiting the conclusion of the state's gaming licensing process. At the very beginning of this effort, we estimated it would take 12 to 18 months based on past Colorado history. We are still in line with that timetable. All indications indicate the process is proceeding. No other applicant has received a gaming license ahead of us. We are also awaiting liquor licenses for both of the casinos and a building permit for the Bombshells Casino. We have begun to form our organization. We have retained a director of casino operations. He has a deep and long-term experience in the Colorado market. During the first quarter, we received a billing permit for our Ricks Cabaret Steakhouse and Casino. Interior demolition has been completed and construction has begun. Based on all this, we continue to anticipate opening both casinos in fiscal 2024. Using simple math, we believe this represents a significant free cash flow opportunity. Our plans for a total of 400 slot machines and 9 to 12 table games, as well as sports betting, Looking at the slots, they have been averaging 133 adjusted gross proceeds per day in Central City and $307 per day in nearby Blackhawk. Blackhawk is higher mainly because they run on a 24-7 basis, which we plan to do also. We have assembled additional properties on Main Street for further casino development as well.