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RCI Reports 1Q25 Results, Hosts X Spaces Call at 4:30 PM ET Today

1. 1Q25 revenues decreased to $71.5M, down 3.1% from last year. 2. EPS rose to $1.01, compared to $0.77 in 1Q24. 3. Bombshells revenue dropped by 24.7%, reflecting closures of underperforming locations. 4. Nightclub segment showed slight revenue increase, despite fire-related loss. 5. Share buybacks reduced outstanding shares by 4.8%, supporting EPS growth.

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Why Bullish?

Despite revenue decline, strong EPS growth indicates improved profitability underpins RICK’s valuation.

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Earnings growth and share buybacks are critical in influencing stock price positively for RICK.

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RICK
HOUSTON--(BUSINESS WIRE)--RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the fiscal 2025 first quarter ended December 31, 2024. The Company also filed its Form 10-Q today. Summary Financials (in millions, except EPS) 1Q25 1Q24 Total revenues $71.5 $73.9 EPS $1.01 $0.77 Non-GAAP EPS1 $0.80 $0.87 Other gains, net $(2.2) $0.0 Net cash provided by operating activities $13.3 $13.6 Free cash flow1 $12.1 $12.7 Net income attributable to RCIHH common stockholders $9.0 $7.2 Adjusted EBITDA1 $15.7 $17.5 Weighted average shares used in computing EPS – basic and diluted 8.92 9.37 1 See “Non-GAAP Financial Measures” below. 1Q25 Summary (Comparisons are to the year-ago period unless indicated otherwise) Eric Langan, President and CEO, said: "Nightclubs total and same-store sales increased, while GAAP and non-GAAP segment operating profit were approximately level with last year, despite the absence of a club due to fire in July. Bombshells total sales declined as expected with the sale/closure of underperforming locations, but GAAP and non-GAAP segment operating profit and margin improved. Consolidated net cash provided by operating activities and free cash flow nearly matched year-ago levels, and we continued to make progress with our Back to Basics 5-Year Capital Allocation Plan." Back to Basics 5-Year Capital Allocation Plan (FY25-29) 1Q25: Sale/closure of four underperforming Bombshells segment locations, for a total of five since September 2024. 1Q25: Repurchased 66,000 common shares for $3.2 million ($48.76 average per share), with 8,889,000 shares outstanding at December 31, 2024. 2Q25: Acquired Flight Club, the premier gentlemen's club in the Detroit market ($8.0 million for the club and $3.0 million for the real estate). The location is expected to generate an estimated $2.0 million in annualized EBITDA. 2Q25: Opened an 8,500 square-foot Bombshells in downtown Denver. X Spaces Conference Call at 4:30 PM ET Today Hosted by RCI President and CEO Eric Langan, CFO Bradley Chhay, and Mark Moran of Equity Animal. Call link: https://x.com/i/spaces/1zqKVjQVzjLKB (X log in required). Presentation link: https://www.rcihospitality.com/investor-relations/. To ask questions: Participants must join the X Space using a mobile device. To listen only: Participants can access the X Space from a computer. There will be no other types of telephone or webcast access. 1Q25 Results (Comparisons are to the year-ago period unless indicated otherwise) Nightclubs segment: Revenues of $61.7 million increased by 1.1%. Sales primarily reflected a 3.7% increase in same-store sales, three new and reformatted clubs in Texas, and the absence of Baby Dolls Fort Worth due to fire in July.2 By type of revenue, food, merchandise and other increased by 8.6%; alcoholic beverages increased by 3.0%; and service declined by 3.7%. The quarter included a gain of $1.0 million from additional cash insurance proceeds related to the July fire. Operating income was $20.9 million (33.8% of segment revenues) compared to $20.4 million (33.4%). Non-GAAP operating income, which does not include the gain, was $20.6 million (33.4% of segment revenues) compared to $21.0 million (34.3%). Bombshells segment: Revenues of $9.6 million declined 24.7%. Sales primarily reflected the sale/closure of underperforming locations, a 7.5% decline in SSS, and a full quarter of the Stafford, TX location, which opened in mid-November 2023.2 The quarter included a gain of $1.3 million for a Bombshells that was sold. Operating income was $2.0 million (20.6% of segment revenues) compared to $86,000 (0.7%). Non-GAAP operating income, which does not include the gain, was $642,000 (6.7% of segment revenues) compared to $149,000 (1.2%). Corporate segment: Expenses totaled $8.8 million (12.3% of total revenues) compared to $7.1 million (9.6%). Non-GAAP expenses totaled $8.4 million (11.7% of total revenues) compared to $6.6 million (9.0%). The increase reflected an expense of approximately $1.7 million to establish a self-insurance reserve. Other gains, net of $2.2 million within consolidated operations included the fire insurance proceeds and the gain on sale as discussed in the Nightclubs and Bombshells paragraphs above, respectively. Income tax expense was $1.85 million compared to $1.80 million. The effective tax rate was 16.9% compared to 19.9%. Weighted average shares outstanding of 8.92 million decreased 4.8% due to share buybacks. Debt was $235.5 million at December 31, 2024, compared to $238.2 million at September 30, 2024. The difference primarily reflected scheduled pay downs. 2 See our January 8, 2025, news release on 1Q25 sales for more details. Non-GAAP Financial Measures In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the Company and helps management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows: Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) settlement of lawsuits, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, and (e) stock-based compensation. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations. Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income or loss attributable to RCIHH common stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) settlement of lawsuits, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) stock-based compensation, (f) gains or losses on lease termination, and (g) the income tax effect of the above-described adjustments. Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 17.7% and 19.9% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 2024, and 2023, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities. Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income or loss attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense, (c) net interest expense, (d) settlement of lawsuits, (e) gains or losses on sale of businesses and assets, (f) gains or losses on insurance, (g) stock-based compensation, and (h) gains or losses on lease termination. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs. We also use certain non-GAAP cash flow measures such as free cash flow. Free cash flow is derived from net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy. About RCI Hospitality Holdings, Inc. (Nasdaq: RICK) (X: @RCIHHinc) With more than 60 locations, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country’s leading company in adult nightclubs and sports bars-restaurants. See all our brands at www.rcihospitality.com. Forward-Looking Statements This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the Company's actual results to differ materially from those indicated, including, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult entertainment or restaurant business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the Company's businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, and (vi) numerous other factors such as laws governing the operation of adult entertainment or restaurant businesses, competition and dependence on key personnel. For more detailed discussion of such factors and certain risks and uncertainties, see RCI's annual report on Form 10-K for the year ended September 30, 2024, as well as its other filings with the U.S. Securities and Exchange Commission. The Company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances. RCI HOSPITALITY HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share, number of shares, and percentage data) For the Three Months Ended December 31, 2024 December 31, 2023 Amount % of Revenue Amount % of Revenue Revenues Sales of alcoholic beverages $ 32,188 45.0 % $ 33,316 45.1 % Sales of food and merchandise 10,106 14.1 % 10,802 14.6 % Service revenues 24,181 33.8 % 25,119 34.0 % Other 5,008 7.0 % 4,670 6.3 % Total revenues 71,483 100.0 % 73,907 100.0 % Operating expenses Cost of goods sold Alcoholic beverages sold 5,846 18.2 % 6,281 18.9 % Food and merchandise sold 3,563 35.3 % 4,038 37.4 % Service and other 72 0.2 % 40 0.1 % Total cost of goods sold (exclusive of items shown below) 9,481 13.3 % 10,359 14.0 % Salaries and wages 20,564 28.8 % 21,332 28.9 % Selling, general and administrative 26,207 36.7 % 25,201 34.1 % Depreciation and amortization 3,569 5.0 % 3,853 5.2 % Other gains, net (2,244 ) (3.1 )% (3 ) — % Total operating expenses 57,577 80.5 % 60,742 82.2 % Income from operations 13,906 19.5 % 13,165 17.8 % Other income (expenses) Interest expense (4,152 ) (5.8 )% (4,216 ) (5.7 )% Interest income 179 0.3 % 94 0.1 % Gain on lease termination 979 1.4 % — — % Income before income taxes 10,912 15.3 % 9,043 12.2 % Income tax expense 1,847 2.6 % 1,799 2.4 % Net income 9,065 12.7 % 7,244 9.8 % Net income attributable to noncontrolling interests (41 ) (0.1 )% (18 ) — % Net income attributable to RCIHH common shareholders $ 9,024 12.6 % $ 7,226 9.8 % Earnings per share Basic and diluted $ 1.01 $ 0.77 Weighted average shares used in computing earnings per share Basic and diluted 8,920,774 9,367,151   RCI HOSPITALITY HOLDINGS, INC. SEGMENT INFORMATION (in thousands) For the Three Months Ended December 31, 2024 December 31, 2023 Revenues Nightclubs $ 61,724 $ 61,033 Bombshells 9,587 12,731 Other 172 143 $ 71,483 $ 73,907 Income (loss) from operations Nightclubs $ 20,882 $ 20,369 Bombshells 1,971 86 Other (171 ) (196 ) Corporate (8,776 ) (7,094 ) $ 13,906 $ 13,165   RCI HOSPITALITY HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Three Months Ended December 31, 2024 December 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 9,065 $ 7,244 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,569 3,853 Deferred income tax benefit (389 ) — Gain on sale of businesses and assets (1,463 ) (3 ) Amortization and writeoff of debt discount and issuance costs 63 163 Doubtful accounts expense on notes receivable — 22 Gain on insurance (1,150 ) — Noncash lease expense 658 762 Stock-based compensation 470 470 Changes in operating assets and liabilities, net of business acquisitions: Receivables 2,373 1,229 Inventories (4 ) (218 ) Prepaid expenses, other current, and other assets (598 ) (9,029 ) Accounts payable, accrued, and other liabilities 750 9,140 Net cash provided by operating activities 13,344 13,633 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of businesses and assets 129 — Proceeds from insurance 1,150 — Proceeds from notes receivable 71 55 Payments for property and equipment and intangible assets (5,754 ) (5,135 ) Net cash used in investing activities (4,404 ) (5,080 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt obligations 2,963 701 Payments on debt obligations (5,694 ) (6,352 ) Purchase of treasury stock (3,218 ) (2,072 ) Payment of dividends (623 ) (562 ) Payment of loan origination costs — (136 ) Net cash used in financing activities (6,572 ) (8,421 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 2,368 132 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,350 21,023 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34,718 $ 21,155   RCI HOSPITALITY HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) December 31, 2024 September 30, 2024 ASSETS Current assets Cash and cash equivalents $ 34,718 $ 32,350 Receivables, net 3,519 5,832 Inventories 4,640 4,676 Prepaid expenses and other current assets 4,226 4,427 Total current assets 47,103 47,285 Property and equipment, net 282,621 280,075 Operating lease right-of-use assets, net 25,573 26,231 Notes receivable, net of current portion 4,103 4,174 Goodwill 61,911 61,911 Intangibles, net 162,881 163,461 Other assets 2,026 1,227 Total assets $ 586,218 $ 584,364 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 5,010 $ 5,637 Accrued liabilities 20,514 20,280 Current portion of debt obligations, net 17,788 18,871 Current portion of operating lease liabilities 3,008 3,290 Total current liabilities 46,320 48,078 Deferred tax liability, net 22,304 22,693 Debt, net of current portion and debt discount and issuance costs 217,741 219,326 Operating lease liabilities, net of current portion 27,471 30,759 Other long-term liabilities 3,611 398 Total liabilities 317,447 321,254 Commitments and contingencies Equity Preferred stock — — Common stock 89 90 Additional paid-in capital 58,731 61,511 Retained earnings 210,160 201,759 Total RCIHH stockholders' equity 268,980 263,360 Noncontrolling interests (209 ) (250 ) Total equity 268,771 263,110 Total liabilities and equity $ 586,218 $ 584,364   RCI HOSPITALITY HOLDINGS, INC. NON-GAAP FINANCIAL MEASURES (in thousands, except per share and percentage data) For the Three Months Ended December 31, 2024 December 31, 2023 Reconciliation of GAAP net income to Adjusted EBITDA Net income attributable to RCIHH common stockholders $ 9,024 $ 7,226 Income tax expense (benefit) 1,847 1,799 Interest expense, net 3,973 4,122 Depreciation and amortization 3,569 3,853 Settlement of lawsuits 179 — Gain on sale of businesses and assets (1,406 ) (3 ) Gain on insurance (1,017 ) — Stock-based compensation 470 470 Gain on lease termination (979 ) — Adjusted EBITDA $ 15,660 $ 17,467 Reconciliation of GAAP net income to non-GAAP net income Net income attributable to RCIHH common stockholders $ 9,024 $ 7,226 Amortization of intangibles 580 659 Settlement of lawsuits 179 — Stock-based compensation 470 470 Gain on sale of businesses and assets (1,406 ) (3 ) Gain on insurance (1,017 ) — Gain on lease termination (979 ) — Net income tax effect 310 (220 ) Non-GAAP net income $ 7,161 $ 8,132 Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share Diluted shares 8,920,774 9,367,151 GAAP diluted earnings per share $ 1.01 $ 0.77 Amortization of intangibles 0.07 0.07 Settlement of lawsuits 0.02 0.00 Stock-based compensation 0.05 0.05 Gain on sale of businesses and assets (0.16 ) 0.00 Gain on insurance (0.11 ) 0.00 Gain on lease termination (0.11 ) 0.00 Net income tax effect 0.03 (0.02 ) Non-GAAP diluted earnings per share $ 0.80 $ 0.87   Reconciliation of GAAP operating income to non-GAAP operating income Income from operations $ 13,906 $ 13,165 Amortization of intangibles 580 659 Settlement of lawsuits 179 — Stock-based compensation 470 470 Gain on sale of businesses and assets (1,406 ) (3 ) Gain on insurance (1,017 ) — Non-GAAP operating income $ 12,712 $ 14,291 Reconciliation of GAAP operating margin to non-GAAP operating margin GAAP operating margin 19.5 % 17.8 % Amortization of intangibles 0.8 % 0.9 % Settlement of lawsuits 0.3 % 0.0 % Stock-based compensation 0.7 % 0.6 % Gain on sale of businesses and assets (2.0 )% 0.0 % Gain on insurance (1.4 )% 0.0 % Non-GAAP operating margin 17.8 % 19.3 % Reconciliation of net cash provided by operating activities to free cash flow Net cash provided by operating activities $ 13,344 $ 13,633 Less: Maintenance capital expenditures 1,276 983 Free cash flow $ 12,068 $ 12,650   RCI HOSPITALITY HOLDINGS, INC. NON-GAAP SEGMENT INFORMATION ($ in thousands) For the Three Months Ended December 31, 2024 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 20,882 $ 1,971 $ (171 ) $ (8,776 ) $ 13,906 Amortization of intangibles 574 1 — 5 580 Settlement of lawsuits 179 — — — 179 Stock-based compensation — — — 470 470 Loss (gain) on sale of businesses and assets 16 (1,330 ) — (92 ) (1,406 ) Gain on insurance (1,017 ) — — — (1,017 ) Non-GAAP operating income (loss) $ 20,634 $ 642 $ (171 ) $ (8,393 ) $ 12,712 GAAP operating margin 33.8 % 20.6 % (99.4 )% (12.3 )% 19.5 % Non-GAAP operating margin 33.4 % 6.7 % (99.4 )% (11.7 )% 17.8 % For the Three Months Ended December 31, 2023 Nightclubs Bombshells Other Corporate Total Income (loss) from operations $ 20,369 $ 86 $ (196 ) $ (7,094 ) $ 13,165 Amortization of intangibles 591 63 — 5 659 Stock-based compensation — — — 470 470 Gain on sale of businesses and assets (1 ) — — (2 ) (3 ) Non-GAAP operating income (loss) $ 20,959 $ 149 $ (196 ) $ (6,621 ) $ 14,291 GAAP operating margin 33.4 % 0.7 % (137.1 )% (9.6 )% 17.8 % Non-GAAP operating margin 34.3 % 1.2 % (137.1 )% (9.0 )% 19.3 %

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