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RCI HOSPITALITY HOLDINGS, INC. (RICK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue of $71.1M fell 6.6% YoY but rose 8.0% QoQ; GAAP EPS improved to $0.46 from $(0.56) YoY and from $0.36 QoQ; Adjusted EBITDA increased sequentially to $15.3M while remaining below last year’s $20.1M .
  • Nightclubs were resilient (revenue -0.8% YoY; GAAP operating margin 28.5% vs 21.7% last year), while Bombshells remained weak (revenue -34.5% YoY; modest $87K operating profit) as portfolio pruning continued .
  • Free cash flow strengthened to $13.3M and FCF margin improved from 11% in Q2 to 19% in Q3, aided by lower capex and mix; management emphasized continued progress on the five-year “Back to Basics” capital allocation plan and active share repurchases (75,325 shares for $3.0M) .
  • No formal quantitative guidance; management highlighted catalysts: captive insurance formation to normalize non-cash actuarial reserves, potential monetization options for Bombshells real estate/operations at attractive values, and continued nightclub M&A at 3–5x adjusted EBITDA multiples .

What Went Well and What Went Wrong

What Went Well

  • Nightclubs profitability improved YoY on GAAP: operating income rose to $17.8M (28.5% margin) from $13.6M (21.7%), reflecting much lower “other net charges,” despite -3.7% SSS and the Fort Worth fire impact; non-GAAP nightclubs operating margin was 33.2% (down YoY but improving sequentially) .
  • Sequential improvement across the P&L: revenue +8% QoQ to $71.1M, Adjusted EBITDA rose to $15.3M, and free cash flow grew to $13.3M; CFO: “free cash flow margin increased from 11% in the second quarter to 19% in the third” .
  • Capital allocation execution: two club acquisitions closed, a new Rick’s Cabaret & Steakhouse opened, and 75,325 shares were repurchased; CEO: “We continued to make solid progress with our Back to Basics 5-Year Capital Allocation Plan” .

What Went Wrong

  • Consolidated trends remain below last year: revenue -6.6% YoY to $71.1M, Adjusted EBITDA $15.3M vs $20.1M, and non-GAAP EPS $0.77 vs $1.35, reflecting Bombshells declines and higher non-cash insurance reserves .
  • Bombshells softness persisted: revenue -34.5% YoY to $8.6M; SSS -13.5%; non-GAAP operating income $0.1M (1.2% margin), impacted by divestitures and pre-opening costs .
  • Leverage optics ticked up: “debt to trailing twelve month adjusted EBITDA was 3.82x compared to 3.56x in the preceding quarter,” as acquisitions closed ahead of EBITDA contribution; average weighted interest rate was 6.68% .

Financial Results

Consolidated headline metrics (vs prior year and prior quarter)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$76.18 $65.88 $71.15
GAAP EPS ($)$(0.56) $0.36 $0.46
Non-GAAP EPS ($)$1.35 $0.65 $0.77
Adjusted EBITDA ($M)$20.08 $14.23 $15.34
GAAP Operating Margin (%)(3.3)% 12.4% 12.2%
Non-GAAP Operating Margin (%)22.0% 16.7% 16.9%
Net Income ($M)$(5.23) $3.23 $4.06
Free Cash Flow ($M)$13.78 $6.94 $13.34
  • YoY change (Q3’25 vs Q3’24): Revenue -6.6%; GAAP EPS +$1.02; Non-GAAP EPS -$0.58; Adj. EBITDA -$4.74M; GAAP Op Margin +15.5pp; Non-GAAP Op Margin -5.1pp; Net Income +$9.29M; FCF -$0.44M.
  • QoQ change (Q3’25 vs Q2’25): Revenue +8.0%; GAAP EPS +$0.10; Non-GAAP EPS +$0.12; Adj. EBITDA +$1.11M; GAAP Op Margin -0.2pp; Non-GAAP Op Margin +0.2pp; Net Income +$0.83M; FCF +$6.40M.
    (Changes derived from cited figures above.)

Segment revenue and operating income (YoY)

SegmentRevenue Q3 2024 ($M)Revenue Q3 2025 ($M)Op Income Q3 2024 ($M)Op Income Q3 2025 ($M)
Nightclubs$62.82 $62.34 $13.64 $17.76
Bombshells$13.14 $8.61 $(8.91) $0.09
Other$0.22 $0.20 $(0.11) $(0.44)
Corporate——$(7.15) $(8.69)

KPIs and mix

KPIQ3 2025YoY
Nightclubs SSS-3.7% —
Bombshells SSS-13.5% —
Club & Restaurant Combined Sales ($M)$70.5 -6.7%
Nightclubs mix: Alcoholic beverages-3.9% vs Q3’24
Nightclubs mix: Service+0.3% vs Q3’24
Nightclubs mix: Food/merch/other+5.1% vs Q3’24

Balance sheet/other:

  • Debt $241.3M at 6/30/25 (vs $241.5M at 3/31/25) .
  • Weighted average shares outstanding 8.79M, down 5.2% YoY on buybacks .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal revenue/EPS/EBITDA guidanceFY25/Q4-Q1Not providedNot providedMaintained no formal guidance
Capital allocation frameworkFY25–FY2940% FCF to club M&A; 60% to buybacks/debt/dividendsReiterated; target 3–5x EBITDA for clubs; goal to double FCF/share over planMaintained
Dividend cadenceOngoing“Consecutive quarterly dividends” (prior disclosures)Expect “modest annual dividend increases”Qualitative positive
Insurance programNear termSelf-insurance with actuarial reservesWorking to launch captive; would convert to premiumsStructural change pending

Note: The company did not issue quantitative revenue/margin/EPS guidance in Q3 2025 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025 and Q1 2025)Current Period (Q3 2025)Trend
Self-insurance reserves/captiveQ1: ~$1.7M corporate expense to establish reserve . Q2: Corp expenses lower YoY; reserve impacts discussed .YTD actuarial reserve ~$9.4M; pursuing captive; estimate normalization post-captive .Intensifying focus; near-term headwind, medium-term normalization.
Capital allocation/share repurchaseQ1: 66k shares repurchased ($3.2M) . Q2: 56,875 shares ($2.9M) .Q3: 75,325 shares ($3.0M); continued M&A/openings .Accelerating buybacks and deployment.
Bombshells portfolio actionsQ1: Sold/closed underperformers; profit improved . Q2: Further divestitures; pre-opening drag .Q3: Sequential sales/margin improvement; Lubbock opened post-quarter; exploring strategic alternatives including potential sale as a package at attractive values .Cleanup largely complete; options evaluation ongoing.
Nightclubs M&A pipelineQ1: Acquired Flight Club Detroit . Q2: Acquired Platinum West; rebrands .Q3: Acquired Platinum Plus; continued pipeline; target 3–5x EBITDA; evaluating divestiture of non-core clubs .Active; disciplined multiples; portfolio optimization.
Macro/tariffs/tax billQ2: Severe winter weather impacted SSS .Q3: “Tariff and tax bill related economic uncertainty” cited; service revenue modestly up .Mixed macro; some service demand recovery.

Management Commentary

  • CEO: “We continued to make solid progress with our Back to Basics 5-Year Capital Allocation Plan. Nightclubs revenues were nearly level despite tariff and tax bill related economic uncertainty… Consolidated profitability benefited from the absence of impairment charges” .
  • CFO: “Free cash flow margin increased from 11% in the second quarter to 19% in the third… adjusted EBITDA remained approximately level at 22% for each of the first three quarters this fiscal year” .
  • CFO: “Debt to trailing twelve month adjusted EBITDA was 3.82x compared to 3.56x in the preceding quarter… average weighted interest rate of 6.68%” .
  • CEO on acquisitions: “Our goal is to acquire… about $6M of adjusted EBITDA per year… at three to five times adjusted EBITDA for the club and fair market value for the real estate” .
  • CEO on Bombshells strategic options: “We are not interested in sale leasebacks… we would put together a package of the operating businesses and the real estate for the right price” .

Q&A Highlights

  • Self-insurance/captive: Actuarial reserve YTD ~$9.4M; management aims to stand up a captive (hoped around October/YE timing) to replace volatile non-cash accruals with premiums; could later “sell the book” of 2025 claims to release excess reserves .
  • Real estate monetization: CEO indicated Bombshells package would be considered around ~$85M (real estate appraises ~$65–67M; debt ~$35M; would weigh against buyback/M&A uses) .
  • Pre-opening/startup costs: Roughly $400–$500k per unit in the quarter (training, staffing, hotels) .
  • Lubbock ramp: Early performance “fantastic,” averaging $190–200k/week; implies strong margins if sustained .
  • Portfolio optimization: Evaluating sale of underperforming/non-core clubs to redeploy into higher-ROI markets or buy back stock .

Estimates Context

  • S&P Global consensus for quarterly Revenue, EPS, and EBITDA was unavailable for RCI Hospitality for this quarter; as a result, we cannot assess vs-consensus beats/misses. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential recovery with improving FCF: Revenue, Adjusted EBITDA, and free cash flow strengthened QoQ; FCF margin returned to 19% as capital intensity normalized .
  • Nightclubs remain the core earnings engine: GAAP margins expanded YoY and sequentially improved, with acquisitions and rebrands helping offset SSS softness and the Fort Worth fire gap .
  • Bombshells is now right-sized; optionality rising: Portfolio pruning largely complete, Lubbock ramping, and credible sale/monetization paths exist that could fund buybacks/M&A at high returns .
  • Watch insurance accounting normalization: Captive formation could reduce non-cash actuarial reserve volatility, improving reported EBITDA optics versus FCF reality .
  • Leverage manageable but elevated on TTM math: 3.82x TTM Adj. EBITDA reflects timing of acquisitions; EBITDA contributions and new units should improve ratios if trends hold .
  • Capital allocation on track: Continued buybacks and disciplined 3–5x EBITDA club deals support the multi-year plan to grow FCF/share; share count down 5.2% YoY on buybacks .
  • Near-term trading setup: Potential catalysts include captive launch/clarity on reserves, Bombshells transaction updates, further club acquisitions, and continued sequential margin/FCF improvements .