RCI Hospitality Holdings, Inc. (formerly Rick’s Cabaret International, Inc.)

 Transcript
August 9, 2012 - 4:30 PM Eastern
3rd Quarter 2012 Earnings Conference Call and Webcast
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Transcript of

 

Transcript of

Rick’s Cabaret International (RICK)

3rd Quarter 2012 Earnings Conference Call and Webcast

August 9, 2012

 

 


Participants

Eric S. Langan, President and Chief Executive Officer

Phillip Marshall, Chief Financial Officer

Allan Priaulx, Corporate Communications and Investor Relations Officer

 

Presentation

 

Operator

Greetings and welcome to the Rick’s Cabaret International 3rd Quarter 2012 Earnings Conference Call and Webcast.  At this time all participants are in a listen-only mode.  A question-and-answer session will follow the formal presentation.  If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.  As a reminder, this conference is being recorded.

 

It is now my pleasure to introduce your host, Allan Priaulx.  Thank you, Mr. Priaulx, you may begin.

 

Allan Priaulx – Rick’s Cabaret International – Corporate Communications and Investor Relations Officer

Thanks, Doug.  Good afternoon, everyone.  I am Allan Priaulx, the Investor Relations Officer for Rick’s Cabaret and I want like to welcome you to our Third Quarter 2012 Conference Call and Webcast.

 

In a moment, I’ll turn the call over to Eric Langan and to Phil Marshall, our CFO, who will present the results from the quarter that ended June 30, 2012 and then we will answer any questions you might have.

 

Before we begin, I need to call your attention to our Safe Harbor statement which is included on slide 2 of our PowerPoint presentation.  That’s available also on our website at www.ricksinvestor.com and at precisionIR.com.  Please take a good look at the statement as this conference call may contain forward-looking information within the meaning of Section 21E of the Securities Exchange Act of 1934.

 

In addition, I’d like you to note adjusted EBITDA is a term you will hear during this call and, for your convenience, we have included a definition of adjusted EBITDA in our PowerPoint presentation.

 

Finally, I’d like to remind you that Rick’s Cabaret files reports and other documents with the SEC and all of them are available on our IR website.  Again, that’s www.ricksinvestor.com.  A transcript of this call will be available later this week at www.ricksinvestor.com.

 

For those of you in the New York area, please come to our popular Due Diligence Ball at Rick’s Cabaret tonight at 50 West 33rd Street from 6 p.m. until 8 p.m.  We hope you will come to the club and meet Eric and myself.  Perform you own due diligence on Rick’s Cabaret, you’ll have a great time.

 

And, now, I’ll turn the call over to Eric Langan and Phil Marshall.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Thank you, Allan.  We will begin the conference call with an overview.  We are doing a summary of our third quarter, talking about the chief drivers for the quarter, discussing the new acquisition announcements and joint venture that we’re entering into.  We will talk about the outlook for the remainder of 2012 and then end the call with a question-and-answer session to answer any questions that you may have.

 

Quick snapshot of the third quarter.  Total revenue rose 15% to $23.9 million versus $20.8 million in the third quarter last year.  Same store sales rose 5% to a total of $21.3 million for the quarter.  Third quarter 2012 income from continuing operations without our legal settlement and loss on sale of assets would have been $2.2 million versus the $2.5 million in the third quarter and we will discuss later in the call what those one-time charges were.  Adjusted EBITDA for the quarter $5.7 million without the legal settlement and the loss on the sale of assets versus $6 million last year.  Third quarter 2012 expenses include one-time cost of a $200,000 settlement of a lawsuit and loss on the sale of assets of $332,000 and we also had some very high legal expenses for the quarter that we will discuss later on as well.  Exclusive of the legal settlement and the asset sale, operating margins were 19.1% versus 21.1% in the previous quarter.  The majority of that decrease is from the increased legal fees and then other minor costs.

 

Nine months snapshot.  Revenue rose 15% for the first nine months in line with this quarter to $71.4 million versus $62 million in 2011.  Cash flow from operations for the first nine months was $14.1 million versus $13.8 million.  So while our earnings have not been as consistent, our cash flows definitely have.  A lot of it has to do with the GAAP accounting.  EPS for the first nine months is $0.63 versus $0.59 year over year.

 

We had strong growth at our biggest club in Miami.  Tootsie’s had an actually fantastic quarter.  We hope to see that strength carry on through the remainder of the year.  The Rick’s Cabaret at the DFW Airport is continuing to build.  We got the liquor license there in February; as most of you know and we’re seeing consistent build every single month since February.  Club Onyx in Philly and Charlotte are both resuming growth and the Onyx concept in those markets is starting to do very well again.

 

Our debt update.  To give you a current update, we have $43.5 million of debt of which $27.5 million is real estate related.  We reduced that by $3.6 million in the quarter ended June 30, 2012.  The Jaguars transaction will add $32 million in total debt, $10 million of which will be for real estate, and we believe to be more than covered by the added cash flow, which we base the payments on at about a 60% of the EBITDA number versus the $7 million that we are going to take in.

 

Impact of the Jaguars deal.  The Jaguars transaction will add 11 clubs to our existing 24.  It should add immediately $15 million in revenue and $7 million in adjusted EBITDA.  We have two additional locations that will be opened.  One will be opened at closing of the liquor license and all permits are already approved for the club.  They were in the process of opening it.  We asked them to go ahead and hold off until we close on the transaction so we can open it originally under Rick’s Cabaret.  These should be quickly integrated as most of them are in Texas.  Ten of the locations are in Texas and one is in Phoenix, Arizona.  We have strong management strength and experiences in Texas and these locations should be very easy to manage from our DFW base.

 

Exploring new concepts.  Another thing that we are looking at right now  -- because we have such great cash flow and our cash has been building up on our balance sheet -- we’ve had a lot of calls from investors to put that cash to work.  So we started looking at what I consider the “breastaurant” category, which are basically a Hooters-type, Twin Peaks, Kilt and Tilt. There are several concepts going around right now.  We are going to look at opening two concept restaurants in the Dallas-Fort Worth market as well as some other night club concepts that aren’t necessarily adult entertainment related and don’t require adult entertainment license.  We plan to invest up to $4 million of our cash in the next two years into these locations, including building from the ground up for one of these locations on some property the company already owns.  We also will start to look for acquisition candidates in this “breastaurant” niche as we increase our expertise and ability to operate these locations.  We’re bringing on some new management talents that have experience with this concept and we will look forward to introducing you to that management team as time progresses.

 

Our forward growth strategy.  We are going to focus on the integration of the Jaguars clubs.  We are going to continue our emphasis on organic growth and cash generation.  We believe free cash flow is the most important measure of how successful we’re operating our businesses.  We are going to continue to explore acquisitions that are accretive to profit and shareholder value.  The Los Angeles joint venture will be operated by our joint venture partner.  They have 19 other locations around the country and one existing location in LA at this time.  The new location will have full liquor and topless entertainment and it will be one of the only locations that serves liquor in LA County that’s not located in the downtown LA area.  We are going to look for joint venture partners with the right groups to enter markets that we don’t currently serve or that we believe that a joint venture will give us strength in that market.

 

Our outlook for the rest of the year and going forward is going to be focused on generating positive cash flow.  Our goal for the next three years will be to achieve a 30% growth rate.  And while we’ve had trouble in the past achieving this growth rate due to the fact the acquisitions are sometimes unable to be closed when we think – and we invested in those acquisitions -- we believe that with the “breastaurant” concept and the nightclub concepts that we’re looking at that we will be able to easily achieve that goal by branching into those markets and opening up new locations in those markets if we are unable to find the proper acquisitions.

 

We are also going to be reviewing the best use of our $60 million plus in real estate that we currently own to maximize income potential. And  that includes billboard leases with billboard companies, developing any other property that’s undeveloped as we are with one of our “breastaurant” concepts where we own four acres of raw land that’s actually an overflow parking lot for one of our nightclubs.  By building a restaurant there, we’ll still be able to use the parking for overflow parking for our nightclub and generate additional revenue from that property.

 

We remain highly confident in our management and our business model on a go-forward basis and we will really be focused on growth over the next three years.  We believe that things are turning around.  The economy is steady enough for us to take these risks and move forward and our cash flow is strong enough that we’re not concerned with any of that.  Our debt is very manageable.  So on a go-forward basis, we’re ready to resume our growth patterns.

 

At this time, that will end the formal presentation of the call.  Now, we will take any questions that anyone may have at this time.

 

Operator

Thank you.  Ladies and gentlemen, at this time, we will be conducting a question-and-answer session.  If you’d like to ask a question, you may press *1 on your telephone keypad.  A confirmation tone will indicate your line is in the question queue.  You may press *2, if you’d like to remove your question from the queue.  For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * key.

 

Our first question comes from the line of Eric Beder from Brean Murray.  Please proceed with your questions.

 

Eric Beder – Brean Murray, Carret & Co.

Good afternoon and congratulations on the deal and the solid quarter.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Thank you.  We had a lot of extra legal expense in this quarter with the acquisition.  We’ve been working on this acquisition for several months. And I really wanted to try to wrap up all, what I call non-insured lawsuits -- basically any lawsuits the company is paying for in this quarter.  The discovery on the New York case is now complete and so we think the expenses in that New York case will go down a little bit.  On a go-forward basis, we’ve got some summary judgment motions and some other stuff and then we will just be awaiting trial.  So those fees should go down.  So we’re really trying to get any non-insured lawsuits under control.  We’ve settled one of the text messaging cases in this quarter. And the other class action text messaging case is being submitted to the judge by the end of this month for approval and it will be settled on similar terms to the one we settled which is pretty negligible from a cash point or expense point for the company.

 

Eric Beder – Brean Murray, Carret & Co.

Okay.  So this acquisition, when is it supposed to close?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, we plan to close sometime between August 31st and the end of September.  We’re going to do everything in our power to close on August 31st.  We want to open the new Lubbock location on that day, on August 31st, and I believe that most of the clubs, we should have all the license and everything back on the majority of the transactions.  We may have to close on a huge portion of the transaction and actually close certain parts of it into an escrow, so to speak, to get it all done if we don’t have a permit back and then we may get the permit back two or three days later and then we will close than part of it until the entire acquisition is closed.

 

Eric Beder – Brean Murray, Carret & Co.

So we should expect the $15 million and $7 million to be basically in next year’s fiscal?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

I believe so.  I mean we may get a month of or part of it in September but, yeah, the majority of it will definitely be closed.  The entire transaction should definitely be closed by September 30th.

 

Eric Beder – Brean Murray, Carret & Co.

Okay.  If I look at this – where are the opportunities when you look at these clubs because, obviously, you already have many clubs in these areas to get further synergies in terms of liquor and other things to drive these numbers even higher?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

We planned that.  What we also planned as well is the two new locations where basically the big bonus and the transactions that in the two markets, Lubbock and Odessa, the Jaguars clubs are the only clubs operating and they’re BYOB clubs.  By putting liquor licenses in the other two buildings that they have and opening those up as liquor clubs, we believe it will be two different customer bases.  We’ll share a small percentage -- maybe 20% or 30% of the customer base will be shared -- but basically we’re serving another market and additional revenue and EBITDA from those two new clubs.  It’ll increase from $15 million to what we hope somewhere between $19 million and $20 million and the EBITDA from $7 million to as much as $9 million.

 

Eric Beder – Brean Murray, Carret & Co.

Okay.  How is the New York Club doing?

 


Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

New York Club is doing fantastic.  Nice numbers in New York.  In fact, I was at the club last night.  It was very, very busy last night.  It’s been very strong.  Our major clubs are doing very well.  Some of our smaller market clubs are having their July-August slowdown which is typical.  However, we are staying steady with our same-store sales growth of about 5%.

 

Eric Beder – Brean Murray, Carret & Co.

When you look at the comp, is it a function of the high rollers coming in?  Is it a function of bread and butter?  Or is it everything working out very well?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Actually it’s more volume these days.  In the summertime, we’ve noticed that some of the bigger spenders are slowing down or I think our same-store sales growth would be even higher.   We are seeing a more of a return to a more typical summer environment last year and, of course, this year which the two previous years we didn’t really see the slowdown in the summer because the economy was kind of crazy.  People were not really following patterns, but it appears to me, especially this year, that we’re seeing that typical summer pattern of business and I think in the long run that’s going to be a really good thing because what happens, we slow down a little in the summer. And then around then around mid September, business really starts to pick up and then we shoot right through May.

 

Eric Beder – Brean Murray, Carret & Co.

I think this is your first Phoenix club.  Is that a market you want to expand in or is that just part of the deal?  How do you think about that market and let’s do LA, too, because you’re doing the joint venture there.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Right.  We’ve always wanted to get to the West Coast.  We’ve got East Coast locations.  We’ve always wanted to the get to the West Coast.  We want to become more nationwide so as business travelers travel, they know our brands, they know our locations, and I think both these locations are stepping in that direction.

 

Eric Beder – Brean Murray, Carret & Co.

I know you probably can’t talk about this, but the wrongful death lawsuit, how should we think about that?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

We have no comment on that at this time other than to say that we do carry insurance and the insurance company is currently waiting for us to be served.  We have not been served yet.  We are waiting for service and then we will turn it over to the insurance company and their lawyers and they will do what they do.

 

Eric Beder – Brean Murray, Carret & Co.

Okay.  Great.  Congratulations.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Thank you.

 

Operator

Our next question comes from the line of David Mau from Montgomery Street Research.  Please proceed with your questions.

 

David Mau – Montgomery Street Research

Hi, Eric and Phil.  Congratulations on the acquisition.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Thank you, sir.

 

David Mau – Montgomery Street Research

I have a couple of qualitative questions about the new concepts.  I’m curious as to is there anything out there today that you’re looking to directly compete against?  I mean is this going to be mainly like Hooter’s style of operation or –?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, we try to consider it more of an upscale Hooter’s type location.  Our menu will be a little different, of course, than Hooter’s.  We are not just going to be chicken wings and beer.  We are going to have full service bars in these locations.  We’re going to use the times when most restaurants have downtime, from 10 to 2 a.m. since your liquor license allows you to serve liquor up to 2 a.m.  Trying to serve food to people at 1 or 2 o’clock in the morning does not make a lot sense so we are doing outdoor patio-type concepts.  We’re going to bring in live bands from 10 p.m. to 2 a.m. and basically be more of a nightclub bar-type deal in the evening time as well as a restaurant from lunch time on.  So we will get our full service liquor license service hours from basically 10:30 to 11 o’clock in the morning all the way through 2 a.m. at these locations.

 

David Mau – Montgomery Street Research

Okay.  As I understand, you’re planning to open four of these types of operations, too, in the Dallas-Fort Worth area –?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

We are going to open two immediately.  We hope to have the first location in Dallas, opened sometime in October.  We’re waiting for building permits to come back.  Once the building permits come back in then we’ll have a more definite timeframe when this location will open.  Our total investment in that location is going to be about a $0.5 million because we already own the building through the Silver City acquisition.  The other location we hope to open in January could be as late as March or sometimes between January and March.  It is a ground up construction.  We are building the building.  We are developing and designing the entire concept for that particular location and that is something that we hope – as we create to success there and put together the plan for it, that we will be able to maybe franchise those types of locations in the future.

 

David Mau – Montgomery Street Research

Okay.  And the other two that you are talking about, is that a different concept?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, the one concept, we’re probably not going to really even try till next summer.  We want to get the Bombshells location opened and going and then the stuff that’s right next to that. We’ll start working on that concept, which is basically just a nightclub concept; and then we have another concept that we’re doing in downtown Fort Worth that is going to be basically a restaurant nightclub concept, not the outdoor patio-type concept, but an actual indoor nightclub concept.  We’ll bring live DJs in and more of a tapas restaurant.  There will a lot of appetizers, tapas, stuff like that that we will be basically for happy hour and running into the nightclub into the evening.

 

David Mau – Montgomery Street Research

Okay.  Very good.  And then I have some questions about the new Los Angeles joint venture.  I’m wondering: what are your expectations out there, if you can talk about them?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Yeah.  I mean – I’ve talked with Jerry (Westlund) a lot on the deal.  We believe the location probably will do around $50,000 a week or about $3 million a year.  Our investment in the location currently is about $600,000.  If does a $3 million, $50,000 a week, we should probably, with a 50% ownership in the building and the business, we will probably make our money back cash-on-cash return of 100%, in about 12 to 18 months.  This depends on the ramp-up period.  If the ramp-up period is immediate, we are going to do some grand opening stuff.  Obviously, we are going to bring some girls from some of our clubs out.  He is going to bring girls from some of his clubs out.  So we have a pool now, with the Jaguars acquisition, of about 54 locations around the country to pull girls from when we open a new location and let girls know that a new location is opening.  So the grand opening should be bigger and they should be much easier to start.  The ramp-up period should be lower and that’s why I think we’ll get our return much quicker.

 

David Mau – Montgomery Street Research

You haven’t talked about the location yet, have you?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

The actual location in LA, no.  All we have announced so far is it is in LA County and we want to wait until we have basically every permit and everything, all constructions completed, all inspections done, before we announce the location so that we don’t run into any political problems or anything like that.  We want to be ready to go day one and then we will let everybody know where is at and what’s going on, but it’s a fantastic, very high traffic location.

 

David Mau – Montgomery Street Research

Yes.  I mean, LA is a very crowded area, of course.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Yes, it is.

 

David Mau – Montgomery Street Research

So I’m curious as to what are the things that may draw people.  Is it near the airport, for instance, or is it near where the ballpark, the new Staples Center is?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Yeah.  I’m sorry, David.  Based on our agreements with our partners there, we’re not allowed to really discuss that location as far as the location of the location.

 

David Mau – Montgomery Street Research

Okay.  Well, very good.  I appreciate what you’ve given me so far.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

No problem.

 

David Mau – Montgomery Street Research

That should do it for me.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

All right.  Thank you very much.  Talk to you soon.

 

David Mau – Montgomery Street Research

Thank you.

 

Operator

Ladies and gentleman, as a reminder it is *1 to ask a question.

 

Our next question comes from the line of David Kazorowski (ph), a private investor.  Please proceed with your questions.

 

David Kazorowski (ph) – Private Investor

Hi, folks.  Thanks for taking my question.  Good job on the quarter.  As far the new concepts that you’re talking about, do you think there is opportunity for cross-branding along with your Rick’s core product?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, with the Bombshells, obviously, we’re building a Silver City building.  It is kind of hard to explain Silver City’s property, but it’s an L-shaped building and the long part of the L runs down the freeway.  So in the front corner, at the top of the L basically, is where we’re going to put the Bombshells’ location. And the Silver City Cabaret is actually in the L in the back of the building, not actually facing the freeway but facing towards Carpenter Freeway because we’re kind of a little V right there between the two freeways and we have about six acres there that we own.  And so what we’re hoping is the Bombshells will draw lots of people in and, basically, in the men’s restroom, we’ll be able to advertise the Silver City location, of course, and any of our other Rick’s location that we want to advertise as well as on the bottom of all the receipts, we’ll print out a little deal on the bottom receipts that lets everyone know with their receipts – if they present the receipt at the door, they can get free cover charge at Silver City.  So we think we’ll be able to do a lot of cross-promotion in that sense as well as marketing in the parking lot with free passes and different things.  It really depends on – a lot of these restaurants that become very family-oriented and family-friendly and we intend to follow that same model.  So while we want to cross promote our other clubs, we at the same time do not want to offend any potential customers.  So it would be a delicate balance that we’ll have to figure out as we progress and, of course, the live bands – once we get the ladies and, of course, the live bands, well, we can have promotions in between the band sets and whatnot of the clubs and maybe ran some ads and some high-end classy ads on the televisions that basically promote our other locations.

 

David Kazorowski (ph) – Private Investor

Okay.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, definitely there’ll be some cross promotion and then we can advertise.  The thing is a lot of the gentleman’s clubs, we can’t advertise on certain radio stations and in certain markets and on certain billboards.  However, the restaurant concepts, we’ll be able to advertise in all of those venues and so we can draw people to the property through those other marketing venues that we can’t actually reach, and then turn around and teach that customer that there are other locations there as well.  So there’ll definitely some positives from that standpoint.

 

David Kazorowski (ph) – Private Investor

Okay.  That sounds good.  And as far as looking into the new concepts and also you mentioned earlier in the call about expansion nationwide, would you say that those are two different agendas that you’re looking at?  Or do you think you’d be doing them together?  Or what’s your overall strategy in terms of that?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

I think our overall strategy is 30% growth and we’re going to be focusing and concentrating on 30% growth.  We want to grow this company at a growth rate of at least 30% on a go-forward basis for the next three years so that basically, we take it from just the under $100 million we’re at today to close to $250 million by the end of 2015.  And so we are going to be very focused on that and in that sense, if we can find adult clubs that we can operate because we love the margins and what we do, we’re going to do those locations first and when we can’t find locations or when the opportunity arises – and the cash is there -- we’re going to continue to look for what I call very high traffic and select “breastaurant”-type locations because everyone knows that in the restaurant business it’s location, location, location; 90% of your success is from the traffic you have and then, of course, your food and service have be to be great as well, but we just consider that a given with the Rick’s format that we’re going to carry over into those restaurants.  So it’s really about the location and so as we find the proper location, the right location, high traffic locations, that’s what we’re going to be looking for.

 

David Kaczorowski (ph) – Private Investor

Okay.  And can you get into a little bit more detail about the financing on the Jaguars deal?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Sure.  I mean it’s seller financing.  So basically what we did is we looked at the cash flow from the businesses and we worked out a deal where we put up some cash down so we have some skin in the game and the seller is basically keeping about 60% of its cash flow for the next 12 years.  That’s how that works out right now and then our kiss or bonus in the deal, as I like to call it, I call it a kiss on the deal, is that we have two locations that aren’t generating any EBITDA at this point that are our bonus on the deal.  So we open those locations up there.  They are very successful; and that’s our added bonus on the transaction but, basically, we’re going to operate these clubs and keep 40% of the EBITDA for the next 12 years and let him keep 60% of it and after we do that for 12 years, we get to keep 100%.

 

David Kaczorowski (ph) – Private Investor

All right.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

And that includes, of course, buying all the real estate since the real estate is included in that total payment number.

 

David Kaczorowski (ph) – Private Investor

Right.  Okay.  Great.  Thank you.

 

Operator

Our next question comes from the line of Heshy Dubrowski (ph), a private investor.  Please proceed with your questions.

 

Heshy Dubrowski (ph) – Private Investor

Hi.  Thanks for taking my questions.  It’s very basic and very simple.  With all the uncertainties going forward in the economy whether it’s a fiscal cliff, taxes, election, basically, your company, high-end clubs, which is a novelty, not a necessity and you sound very confident on this call, how are you so confident that consumer confidence will be strong over the next quarter at least for me, for example, to stay and many other investors to stay in this company?  You’ve had a great quarter this past quarter but there is so many more uncertainties coming forward in the next quarter, so where does this confidence come from because people don’t go out and pay especially at the high-end nightclubs when their cash flow is hurting?

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

Well, if you look at our quarter, you’ll see that our percentage of alcoholic beverage sales increased as a percentage of total revenues, which means our higher end clubs are still doing very, very well.  We have raised some prices over the last six months slowly in certain markets and they stuck.  We’ve been able to keep those price increases and not had any real decline or any problems or complaints from customers.  So we can always discount again.  And we’ve learned in 2008 and 2009, mainly 2009, that when the economy gets really bad, we only do bad for a short period of time because we are able to switch modes from catering to the high-end customer to catering to the masses.  I think we’ve learned that very well and we’ve learned at this point to cater not to only the masses but to cater to the high-end customer at the same time, which is why we’ve seen very steady cash flow.  If you look at our cash flow year over year, I think it was $5.5 million year over year in both quarters.  We’ve run very steady on cash flow.  Our cash flow for this year has actually increased to $14.1 million so we’ve had more cash flow this year than last year.

 

Heshy Dubrowski (ph) – Private Investor

And you’re confident that the growth like you mentioned to the previous investor, 30% will continue even with – because I believe, as an economist going forward, the next three months – the next quarter will be even harder for customer confidence because of all the uncertainties are coming more now than it was before and you’re still confident of 30% growth.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

We tend to be that.  I mean we tend to slow down in this next quarter -- the June-July-August quarter.  I mean the quarter ended June 30th is a little slower than the quarter before.  This next quarter is our slowest quarter of the year typically and then October-November-December is the good quarter.  We start to increase again and have a big quarter, and then January-February-March is our blowout quarter and then we slow down a little bit– but we’re still, year over year, in our same-store sales up 5% for the nine months.

 

Heshy Dubrowski (ph) – Private Investor

Okay.  So final question.  Do you see it’s possible that you might raise your view if things either continue to go strong or just stay the way it is now, a low ball, or maybe possible raise your view?

 


Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

I mean, obviously, the better the economy does, the better we’ll do.  Our margins would increase more as the economy does better if we can keep the masses in our clubs, which we’re doing very well at, and we keep the big spenders in our clubs at the same time.  That’s, of course, always going to make the most amount of money.  You know high-end spenders.

 

Heshy Dubrowski (ph) – Private Investor

Thank you very much.

 

Operator

There are no further time questions in the queue.  I’d like to hand the call back over to management for closing comments.

 

Eric S. Langan – Rick’s Cabaret International – President and Chief Executive Officer

All right.  We’d like to thank everybody for being on the call tonight and we invite you to come down to the club.  We will be there from 6 p.m. to 8 p.m. this evening and you can talk to anyone and let you do some due diligence at the club.  All right?  And I’ll turn the call to Allan and see if there are any other questions.

 

Allan Priaulx – Rick’s Cabaret International – Corporate Communications and Investor Relations Officer

Thank you very much and everyone knows how to reach me if you need me for any further questions at IR at ricks.com and thank you all for attending this conference call.

 

Operator

Ladies and gentlemen, this does conclude today’s conference call and webcast.  You may disconnect your lines at this time and have a wonderful day.


 
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