RCI Reports 3Q24 Results; X Spaces Call at 4:30 PM ET Today

HOUSTON – August 8, 2024 – RCI Hospitality Holdings, Inc. (Nasdaq: RICK) today reported results for the fiscal 2024 third quarter ended June 30, 2024. The company also filed its Form 10-Q today.

Summary financials (in millions, except EPS and shares):

Metric	3Q24	3Q23	9M24	9M23
Total revenues	$76.2	$77.1	$222.4	$218.5
EPS	$(0.56)	$0.96	$0.30	$2.91
Non-GAAP EPS	$1.35	$1.30	$3.11	$3.80
Other charges, net	$18.3	$2.6	$26.5	$5.7
Net cash from operations	$15.8	$15.3	$40.2	$47.0
Free cash flow	$13.8	$14.3	$35.3	$42.1
Net income (loss) to RCIHH	$(5.2)	$9.1	$2.8	$27.1
Adjusted EBITDA	$20.1	$22.7	$54.8	$64.8
Weighted avg shares (millions)	9.28	9.43	9.33	9.31

In 3Q24, RCI repurchased 202,630 common shares for $9.2 million (average $45.27 per share). As of August 5, 2024, RCI repurchased an additional 133,244 common shares for $6.0 million (average $44.86 per share), resulting in 8,996,546 shares of common stock outstanding and $22.9 million in remaining purchase authorization.

Eric Langan, President and CEO, commented: “The third quarter reflected the first full quarter of our Back to Basics approach to business and our Capital Allocation Strategy. We are taking aggressive action to increase revenues, reduce costs, and expand margins, concentrating on our club business and buying back stock, all with the goal of increasing free cash flow per share.

“Nightclubs achieved record revenues, increasing year over year, on a same-store basis, and from last quarter. While operating margin was negatively impacted by non-cash impairments, it increased sequentially on a non-GAAP basis.

“Bombshells revenues are now up two quarters in a row. While operating margin was similarly affected by non-cash impairments, it expanded sequentially on a non-GAAP basis. These improvements reflected the new marketing and cost cutting moves implemented mid-February.

“Finally, I’m pleased to report that as of last week we have reached our short-term buyback objective of reducing shares outstanding to less than 9 million. As part of that effort, we bought back a total of 700,000 shares in the open market since February 2022, reducing our share count by the same number used in our big October 2021 and March 2023 acquisitions, and we did it at a 22% discount to the average share price used in those transactions.

“Looking ahead, we are laser focused on opening our reformatted and new clubs and Bombshells currently under development; rebuilding Baby Dolls Fort Worth as quickly and efficiently as possible; reviewing all operating units to ensure they meet our financial objectives; selling non-income producing real estate to free up more cash and/or reduce debt; and using our cash flow to facilitate the buyback of more shares and acquisition of clubs.”

X-Spaces Conference Call at 4:30 PM ET Today

Hosted by RCI President & CEO Eric Langan, CFO Bradley Chhay, and Mark Moran of Equity Animal

Call link: https://x.com/RicksCEO/status/1821258346877612301 (X log in required)

Presentation link: https://www.rcihospitality.com/investor-relations/

• To ask questions during Q&A: 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

3Q24 Results

(Comparisons are to the year-ago period unless indicated otherwise)

Nightclubs segment

Revenues of $62.8 million increased by 0.6%, primarily reflecting 1.7% same-store sales growth and two new and reformatted clubs, partially offset by the temporary closing of clubs being reformatted to liquor from BYOB and severe weather in Texas and South Florida. By type of revenue, alcoholic beverages increased by 4.9%; food, merchandise and other increased by 5.1%; and service decreased by 5.3%. The differing growth rates primarily reflected a higher alcohol and lower service sales mix from clubs acquired over the past year and a half.

Non-cash impairment totaled $7.6 million compared to $2.6 million, resulting in operating income and margin of $13.6 million and 21.7% of revenues compared to $20.4 million and 32.7%, respectively. Non-GAAP operating income and margin was $21.9 million and 34.9% of revenues compared to $23.6 million and 37.7%, respectively.

Compared to last quarter, revenues increased by 5.8%, and operating margin was 21.7% compared to 18.6%. On a non-GAAP basis, operating margin was 34.9% compared to 33.4%. The non-GAAP margin increase reflected higher sales, including service, and reduced costs.

Bombshells segment

Revenues of $13.1 million declined 8.7%, primarily reflecting a 16.2% decline in SSS and temporary closings due to severe weather in Texas, partially offset by three locations not in SSS (Bombshells in San Antonio and Stafford in Texas and Cherry Creek Food Hall & Brewery in Greenwood Village, CO, with its Bombshells Kitchen).

Non-cash impairment totaled $10.3 million, resulting in an operating loss and margin of $8.9 million and (67.8)% of revenues compared to income of $1.7 million and 11.8%, respectively. Non-GAAP operating income and margin was $1.4 million and 10.8% of revenues compared to $1.8 million and 12.8%, respectively. The decline in profitability primarily reflected lower SSS.

Compared to last quarter, revenues increased 2.9%, and operating margin was (67.8)% of revenues compared to 5.5%. On a non-GAAP basis, operating margin was 10.8% compared to 5.9%. The revenue and non-GAAP margin increases reflect the first full quarter of changes initiated mid-February 2024.

Corporate segment

Expenses totaled $7.2 million or 9.4% of total revenues compared to $6.3 million and 8.1%, respectively. Non-GAAP expenses totaled $6.4 million or 8.4% of total revenues compared to $5.8 million or 7.5%, respectively. The expense increase primarily reflected additional corporate level management, accounting and professional services due to recently acquired clubs, and new projects. Compared to 2Q24, expenses increased 5.4% and expense margin was flat at 9.4%, and on a non-GAAP basis, 8.4% compared to 8.8%.

Other charges

Included $7.6 million in goodwill, SOB and leasehold improvements impairment related to six clubs and $10.3 million in operating lease right-of-use asset and leasehold improvements impairment related to five Bombshells.

Income taxes

Were a benefit of $1.4 million compared to an expense of $2.3 million. The effective income tax rate was 21.5% compared to 20.1%.

Weighted average shares outstanding

Of 9.28 million decreased 1.6% due to share buybacks partially offset by shares issued in the 2Q23 Baby Dolls-Chicas Locas acquisition.

Debt

Was $245.4 million at June 30, 2024 compared to $231.9 million at March 31, 2024. The increase reflected a previously announced $20 million bank loan, partially offset by scheduled pay downs.

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, (vi) the impact of the COVID-19 pandemic, and (vii) 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, 2023, 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.

About RCI Hospitality Holdings, Inc. (Nasdaq: RICK) (Twitter: @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.

Media & Investor Contacts

Gary Fishman and Michael Wichman at 212-883-0655 or gary.fishman@anreder.com and michael.wichman@anreder.com