Executive Summary

Mixed quarter: revenue fell 8.9% YoY to $65.9M on weather disruptions and Bombshells divestitures, but GAAP EPS rose to $0.36 on sharply lower impairments; non-GAAP EPS declined to $0.65 on softer same-store sales and Bombshells pre-opening costs .
Nightclubs resilient: segment OpInc margin expanded to 25.4% (from 18.6%) on lower impairments despite -3.5% SSS and absence of Baby Dolls Fort Worth; Bombshells revenue fell 35.6%, producing a small operating loss, near breakeven on non-GAAP .
Cash generation moderated: FCF $6.9M vs $8.8M LY, net cash from ops $8.5M; debt rose to $241.5M with Flight Club financing; leverage at 3.56x TTM adj. EBITDA, expected to improve as sales rebound and new assets ramp .
Outlook/Narrative: “Back to Basics” plan continues (club acquisitions, divest underperformers, buybacks); management reiterated FY29 targets ($400M revenue, $75M FCF, 7.5M shares) and “modest annual dividend increases.” QTD commentary points to weather normalization, new club contributions, and Bombshells cost actions as near-term catalysts .

What Went Well and What Went Wrong

What Went Well
- Nightclubs margin expansion: GAAP OpInc rose to $14.6M with 25.4% margin on lower impairments; non-GAAP OpInc $17.1M (29.8% margin) despite softer sales .
- Capital allocation progress: closed Flight Club (Detroit), acquired Platinum West (SC in 3Q25), opened Bombshells Denver, rebranded Chicas Locas El Paso; repurchased 56,875 shares for $2.9M ($50.92 avg) .
- Clear strategy reaffirmed: “Back to Basics” 5-year plan prioritizing nightclub acquisitions, buybacks, dividends; long-term targets reiterated; “flex up” buybacks when valuation attractive .
- Management quote: “During and subsequent to 2Q25, we continued to make progress with our Back to Basics 5-Year Capital Allocation Plan, acquiring clubs, completing projects, and buying back shares.”
What Went Wrong
- Weather and comps: 18 locations closed 1–2 days; management estimates ~$5.6M lost sales over ~~8 weeks (~~$3M EBITDA impact), pressuring same-store sales and profitability .
- Bombshells drag: revenue -35.6% YoY; GAAP operating loss (-$0.23M) with pre-opening costs at Denver; non-GAAP near breakeven (-$0.07M) .
- Mix headwinds: Nightclubs alcoholic beverages -5.3%, service -2.9% with lower VIP/bottle spend; consumers trading down to drinks-by-the-glass .

Financial Results

Summary metrics (oldest → newest)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$72.283	$71.483	$65.876
GAAP EPS ($)	$0.08	$1.01	$0.36
Non-GAAP EPS ($)	$0.90	$0.80	$0.65
Adjusted EBITDA ($M)	$17.232	$15.660	$14.229
GAAP Operating Margin (%)	6.4%	19.5%	12.4%
Non-GAAP Operating Margin (%)	19.3%	17.8%	16.7%
Net Cash from Ops ($M)	$10.836	$13.344	$8.547
Free Cash Flow ($M)	$8.825	$12.068	$6.936

Segment revenues (oldest → newest)

Segment Revenues ($M)	Q2 2024	Q1 2025	Q2 2025
Nightclubs	$59.372	$61.724	$57.541
Bombshells	$12.771	$9.587	$8.229
Other	$0.140	$0.172	$0.106
Total	$72.283	$71.483	$65.876

Segment operating income (oldest → newest)

Segment OpInc ($M)	Q2 2024	Q1 2025	Q2 2025
Nightclubs	$11.021	$20.882	$14.603
Bombshells	$0.699	$1.971	-$0.227
Other	-$0.277	-$0.171	-$0.680
Corporate	-$6.786	-$8.776	-$5.525
Total	$4.657	$13.906	$8.171

KPI highlights

KPI	Q2 2024	Q2 2025
Nightclubs SSS YoY	—	-3.5%
Bombshells SSS YoY	—	-13.4%
Combined SSS YoY	—	-4.7%
Locations with closures	—	18 closed 1–2 days
Weighted Avg Shares (M)	9.35	8.86
Share Repurchases	—	56,875 shares; $2.9M; $50.92 avg
Debt ($M)	—	$241.5 at 3/31/25
Effective Tax Rate	0.7%	25.1%
Cash & Equivalents ($M)	—	$32.663
Leverage (Debt/TTM Adj. EBITDA)	—	3.56x

Notes: Management also cited a non-cash insurance accrual of ~$1.3M in Q2 that burdens EBITDA; Q1 had a larger ~$5M accrual as they established the captive program .

Guidance Changes

RCI does not provide formal quarterly guidance. Management reiterated long-term targets and capital allocation framework.

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2029 target	$400M (announced Dec-2024)	$400M reiterated	Maintained
Free Cash Flow	FY2029 target	$75M	$75M reiterated	Maintained
Shares Outstanding	FY2029 target	7.5M	7.5M reiterated	Maintained
Capital Allocation Mix	FY25–29	Focus on nightclub M&A, buybacks/dividends	Reiterated; “flex up” buybacks if undervalued	Maintained
Dividend Policy	Ongoing	Increased 16.7% in Sep-2024; aim for modest annual increases [115 omitted for brevity]	“Anticipate modest annual dividend increases”	Maintained

No quantitative revenue, margin, OpEx, OI&E, or tax-rate guidance was issued for Q3/FY25 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Weather/Operational Disruptions	4Q24 hurricane; fire at Baby Dolls FW; SSS positive but closures hurt sales	Severe winter weather; 18 locations closed 1–2 days; estimated ~$5.6M sales and ~$3M EBITDA impact	Headwind easing into spring; normalization expected
Nightclubs Demand/Mix	Q1: Nightclubs SSS +3.7%; bottle/VIP spend mixed	Nightclubs SSS -3.5%; VIP/bottle down; drinks shifting to by-the-glass	Mixed; volume steady, spend softer
Bombshells Turnaround	4Q24 divestitures; margins pressured by closures	-35.6% revenue; pre-opening Denver; mgmt replacing leadership, cutting costs; aiming for 15% Op margin over time	Active restructuring; near-term drag
M&A Pipeline/Returns	Capital Allocation Plan launched (focus on clubs)	Closed Flight Club; Platinum West in 3Q; targeting 3–5x adj. EBITDA, 3–5 yr 100% cash-on-cash	Building; disciplined pricing
Financing Costs	—	Seller/bank financing ~6–7% rates	Manageable
Legal/Regulatory	—	Reinforced anti-human trafficking initiatives (COAST), low incidence in adult nightclubs	Stable
Technology/Platforms	—	Favoritely.com out of beta; adding clubs/entertainers	Early progress
Regional Trends	—	Knicks playoff tailwind in NYC; Miami softer; Detroit (Flight Club) on plan after initial transition	Mixed by market

Management Commentary

Strategy reaffirmed: “Our plan calls for allocating free cash flow…40% to club acquisitions and 60% to share buybacks, debt reduction and dividends…goal of growing FCF/share 10–15% annually…FY’29 targets: $400M revenue, $75M FCF, 7.5M shares” .
Operating focus: “Reviewing every club to increase same-store sales…rebrand, reformat or divest underperformers…acquire an average of $6M of adjusted EBITDA per year at 3–5x” .
Quarter drivers (CEO): “Revenues primarily reflect the sale/divestiture of five underperforming Bombshells…severe weather…partially offset by improving trends in March…Profitability primarily reflects lower SSS, lower costs from the sale/divestiture…lower impairments” .

Q&A Highlights

Financing environment: Seller and bank financing both ~6–7% currently .
Weather impact quantified: ~$700K/week sales drag over ~~8 weeks (~~$5.6M sales, ~$3M EBITDA) during Jan–Feb; expects normalization in Apr–Jun .
M&A contributions/pipeline: Flight Club tracking to ~$2M annualized EBITDA; Platinum West to contribute from Q3; disciplined on 2022 “peak” valuation anchoring .
Bombshells actions: Leadership change, cost cuts, Denver and Lubbock openings to remove drag; evaluating property sales; potential strategic alternatives if attractive offers arise .
Regulatory posture: Reiterated anti-human trafficking leadership and training; no new risks identified from “Project 2025” references; clubs not in pornography business .

Estimates Context

Current quarter (Q2 2025): No active S&P Global consensus for revenue or EPS; EBITDA recorded as actual ($14.188M). Coverage is thin for RICK, and estimate depth was zero in 2Q25, limiting beat/miss analysis [Values retrieved from S&P Global].
Historical context:
- Q1 2025 revenue: $71.483M vs $71.117M consensus*; EPS: $1.01 vs $0.52 consensus*; EBITDA: $15.231M actual vs $14.980M consensus* [Values retrieved from S&P Global].
- Q4 2024 revenue: $73.234M vs $72.982M consensus*; EPS estimate* $0.37 (actual GAAP $0.03; Non-GAAP $1.63); EBITDA actual $37.290M (non-GAAP adjustments elevated) vs $13.916M consensus* [Values retrieved from S&P Global].

Note: An asterisk denotes S&P Global data where consensus/estimate series lacked document citations; values marked with * are “Values retrieved from S&P Global.”

Key Takeaways for Investors

Nightclubs remain the engine; margins improved on lower impairments even with negative SSS, suggesting underlying cost discipline and acquisition framework intact .
Near-term comp recovery plausible as weather normalizes and new/reformatted clubs contribute; management expects leverage to decline with sales rebound and ramping assets .
Bombshells still a drag but under active remediation (leadership, cost resets, footprint rationalization); expect choppiness through openings/ramp, with medium-term optionality (improve, shrink, or monetize) .
Capital allocation remains shareholder-friendly (buybacks, modest dividend growth) and M&A criteria disciplined (3–5x adj. EBITDA, FMV real estate), which should accrete FCF/share over time if executed .
Mix/VIP spend is the swing factor; watch bottle service/VIP trends and macro uncertainty among small business customers for reads on service revenue recovery .
Key monitors into Q3: weekly sales cadence (~$5.7–$5.9M goal cited by CEO), Bombshells Lubbock and Rick’s Cabaret Central City openings, Detroit/Platinum West ramp, and insurance accrual normalization .

Sources:

Q2 2025 8-K Results and Press Release (May 12, 2025): revenues, EPS, segment performance, cash flow, balance sheet, non-GAAP reconciliations .
Q2 2025 Earnings Call Transcript (May 12, 2025): weather impact, financing costs, leverage, M&A pipeline, Bombshells actions, long-term plan reiteration .
Q2 2025 Sales Release (Apr 8, 2025): closures, SSS detail (combined -4.7%), segment sales .
Prior quarters: Q1 2025 8-K (Feb 10, 2025) ; Q4 2024 8-K (Dec 16, 2024) .
Estimates: S&P Global (thin coverage), see Estimates Context section for asterisked entries [Values retrieved from S&P Global].

RCI HOSPITALITY HOLDINGS, INC. (RICK)·Q2 2025 Earnings Summary