Executive Summary

Q1 FY25 revenue declined 3.3% YoY to $71.5M as Bombshells shrinkage outweighed Nightclubs growth; GAAP EPS rose to $1.01 on lower share count and gains, while non-GAAP EPS fell to $0.80 on higher corporate expense from a self-insurance reserve .
Nightclubs delivered +1.1% revenue growth and +3.7% SSS, and segment GAAP and non-GAAP operating profit held roughly flat YoY; Bombshells revenue fell 24.7% on unit divestitures/closures and -7.5% SSS, but margins improved (GAAP 20.6%, non-GAAP 6.7%) as restructuring progressed .
Free cash flow of $12.1M (17% of revenue) and adjusted EBITDA of $15.7M (22% margin) remained resilient; debt declined sequentially to $235.5M and cash ended at $34.7M .
Management reiterated the “Back to Basics” plan with a shift to 40% of FCF to acquisitions and 60% to buybacks/dividends/debt repayment, a target to acquire ~$6M of EBITDA per year, and a near-term Bombshells margin goal of 15%; FY29 targets remain $400M revenue, $75M FCF, and 7.5M shares .

What Went Well and What Went Wrong

What Went Well
- Nightclubs growth and mix management: Nightclubs revenue rose 1.1% with SSS +3.7%, and GAAP operating margin expanded to 33.8% (non-GAAP 33.4%), aided by pricing and higher food/merch mix (+8.6%) .
- Bombshells margin improvement despite downsizing: GAAP operating margin improved to 20.6% and non-GAAP to 6.7% as underperforming units were sold/closed and Stafford contributed a full quarter .
- Cash generation held up: CFO highlighted FCF at 17% of revenue and adjusted EBITDA at 22% for the quarter; operating cash flow of $13.3M and FCF of $12.1M were near prior-year levels .
What Went Wrong
- Top-line pressure from Bombshells: Segment revenue fell 24.7% with -7.5% SSS and unit pruning, driving consolidated revenue down 3.3% YoY .
- Higher corporate costs: Corporate GAAP expenses increased to $8.8M (12.3% of total revenue) and non-GAAP to $8.4M, reflecting a ~$1.7M self-insurance reserve accrual .
- Service revenue softness: In Nightclubs, service revenue declined 3.7% YoY, partially offset by alcoholic beverages (+3.0%) and food/merch/other (+8.6%) .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$76.2	$73.2	$71.5
GAAP EPS	$(0.56)	$0.03	$1.01
Non-GAAP EPS	$1.35	$1.63	$0.80
Adjusted EBITDA ($M)	$20.1	$17.9	$15.7
Free Cash Flow ($M)	$13.8	$13.2	$12.1
GAAP Operating Margin %	(3.3)%	4.8%	19.5%
Non-GAAP Operating Margin %	22.0%	20.1%	17.8%

Notes: Street consensus (S&P Global) for Q1 FY25 was unavailable at time of analysis due to API limits; therefore, estimate comparisons are not shown (see “Estimates Context”).

Segment performance and margins

Segment	Q3 2024	Q4 2024	Q1 2025
Nightclubs Revenue ($M)	$62.8	$60.6	$61.7
Nightclubs GAAP Op Margin %	21.7%	21.5%	33.8%
Nightclubs Non-GAAP Op Margin %	34.9%	33.8%	33.4%
Bombshells Revenue ($M)	$13.1	$11.9	$9.6
Bombshells GAAP Op Margin %	(67.8)%	(21.1)%	20.6%
Bombshells Non-GAAP Op Margin %	10.8%	5.9%	6.7%

KPIs and balance sheet

KPI	Q1 2025
Nightclubs SSS vs. 1Q24	+3.7%
Bombshells SSS vs. 1Q24	(7.5)%
Combined SSS (clubs+restaurants)	+2.3%
Operating Cash Flow ($M)	$13.3
Free Cash Flow ($M)	$12.1
Adj. EBITDA Margin %	22% (management)
FCF Margin %	17% (management)
Cash & Equivalents ($M)	$34.7
Debt ($M)	$235.5 (12/31/24)
Weighted Avg Shares (M)	8.921
Effective Tax Rate	16.9%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital allocation mix	FY25–FY29	50% acquisitions (incl. debt repayment) / 50% buybacks+dividends	40% acquisitions / 60% buybacks+dividends+debt repayment	Rebalanced toward shareholder returns
Club M&A target	FY25–FY29	—	Acquire ~$6M of adj. EBITDA per year	New
Bombshells operating margin	Near term	—	Target ~15% operating margin	New
FY29 targets	FY29	—	Revenue $400M; FCF $75M; Shares 7.5M	New/affirmed
Dividend	2Q25	—	$0.07 per share (declared Mar 3, 2025)	Ongoing dividend program

No formal quarterly revenue/EPS guidance provided; management emphasized capital allocation priorities and operational targets (especially Bombshells) .

Earnings Call Themes & Trends

Topic	Q3 2024 (8/8/24)	Q4 2024 (12/16/24)	Q1 2025 (2/10/25)	Trend
Back-to-Basics, capital allocation	Reiterated discipline; buybacks <9M shares; pipeline improving	Launched 5-year plan; 50/50 allocation; FY29 targets	Mix rebalanced to 40/60; continued buybacks, debt paydown	Sharpening toward higher shareholder returns
Bombshells restructuring	Non-GAAP margin to 10.8%; impairments; consider divestitures	Divested/closed units; non-GAAP ~5.9%; plan to improve	Revenues down but margins improved (GAAP 20.6%, non-GAAP 6.7%)	Sequential margin repair amid smaller footprint
Nightclubs performance	Record revenue; SSS +1.7%; non-GAAP margin 34.9%	SSS +2.2%; weather closures impacted	SSS +3.7%; mix shift; GAAP margin +	Improving SSS momentum
Weather/closures	Q3 had limited closures; Q4-to-date hurricane closures noted	10 (clubs) and 26 (Bombshells) closure days in Houston	No Q1 closures; Q2-to-date: 14 days (clubs), 7 (Bombshells)	External variability persists
Insurance/self-insurance	—	—	Established ~$1.7M self-insurance reserve (one-time catch-up) not added back to EBITDA	Raises corporate expense baseline; normalization expected
M&A pipeline	Owners more reasonable; target ~5x with real estate	Working on 3 acquisitions	Closed Flight Club Detroit; ~$2M EBITDA annualized	Resuming bolt-ons
Tech initiatives (Favoritely)	—	Discussed progress/launch	Beta phase expanded; strong initial feedback	Scaling rollout
Regulatory/legal	—	—	Dallas late-night change weighed on a club; rebuild timelines	Local rules impact select assets

Management Commentary

“Nightclubs total and same-store sales increased… Bombshells total sales declined as expected… but GAAP and non-GAAP segment operating profit and margin improved.” – Eric Langan, CEO .
“As a percentage of revenues, free cash flow was 17% and adjusted EBITDA was 22%.” – Bradley Chhay, CFO .
“Under our plan, we will allocate 40% to club acquisitions [and] 60% to share buybacks, dividends and debt repayment… grow free cash flow per share by 10%–15% annually.” – Eric Langan .
“Our near-term [Bombshells] target is 15% operating margins and return to same-store sales growth.” – Eric Langan .
“We acquired [Detroit’s] Flight Club… expected to generate an estimated $2.0 million in annualized EBITDA.” – Company release .

Q&A Highlights

Self-insurance reserve: ~$1.7M catch-up as RCI moves to self-insurance; non-cash reserve establishment; not added back to adjusted EBITDA .
Detroit M&A: Flight Club acquired; too early to guide margin uplift given severe winter weather at close; ~$2M annualized EBITDA expected .
Bombshells closures and liabilities: No residual cash outlays expected; one landlord dispute being defended; total reserve ~$4.1M allocated by segment .
Asset monetization: Management targeting $23–$28M of non-income-producing assets for sale/lease to redeploy into higher ROI uses .
Real estate valuation: CEO rough estimate of $250–$280M fair value for real estate (ex-equipment), acknowledging lack of recent appraisals .
Development/opening timelines: Multiple units slated to open/reopen across spring/summer; rebuilds in Fort Worth targeted for Oct/Jan pending permits .
Leverage goals: Aim to take debt/EBITDA below 3x over time while maintaining flexibility for acquisitions .

Estimates Context

S&P Global (Capital IQ) consensus for Q1 FY25 EPS/Revenue was unavailable at time of analysis due to service rate limits. As a result, we cannot quantify beats/misses vs. Street for this quarter. We will update when access is restored.

Key Takeaways for Investors

Core Nightclubs momentum intact: SSS trends improved to +3.7% and segment margins expanded, underscoring pricing power and mix levers despite service softness .
Bombshells resizing is working: Revenue declines are intentional as underperformers are removed; GAAP margins rebounded to 20.6% with non-GAAP positive, supporting a credible path toward the 15% target .
Strong cash engine supports returns: FCF margin at 17% and steady OCF enable buybacks (66k shares repurchased at ~$48.76) while maintaining CapEx and debt amortization .
Capital allocation tilts more shareholder-friendly: Mix now 40%/60% (M&A vs buybacks/dividends/debt), likely supporting continued buybacks at current valuations, while bolt-on M&A resumes (Flight Club) .
Watch weather/regulatory noise: Weather closures and local ordinances (e.g., Dallas late-night) can pressure results episodically, but portfolio and development pipeline provide offsets .
Medium-term setup: FY29 targets (revenue $400M, FCF $75M, shares 7.5M) imply durable compounding if Bombshells margin repairs complete and Nightclubs SSS stay positive .
Near-term catalysts: Integration of Flight Club, openings/reopenings in 2Q–3Q, potential asset monetizations ($23–$28M), and any incremental buyback authorization/execution .

Appendix: Other Q1 FY25-period Releases

1Q25 club & restaurant sales: Nightclubs total sales +1.2% and SSS +3.7%; Bombshells total sales (24.7)% and SSS (7.5)% .
Favoritely.com Beta: Initial rollout positive; expanding to more clubs .
Flight Club acquisition (Detroit): $11M price; ~$2M annualized adjusted EBITDA expected .
Dividend (post-quarter): 37th consecutive quarterly dividend declared at $0.07 per share (2Q25) .

Sources:

Q1 FY25 8-K and press release, including financial statements and segment detail ; press release duplicate .
Q1 FY25 earnings call transcript .
Prior quarters for trend: Q4 FY24 press and call ; Q3 FY24 press and call .
Additional Q1-related press: 1Q25 sales , Favoritely , Flight Club , dividend .

RCI HOSPITALITY HOLDINGS, INC. (RICK)·Q1 2025 Earnings Summary