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RCI Hospitality Holdings Inc. (NASDAQ:RICK) reported second-quarter 2025 results on May 12, showing a revenue decline but improved earnings per share as the company continues to execute its strategic repositioning through divestitures of underperforming locations and targeted acquisitions.
Executive Summary
Total (EPA:TTEF) revenues for Q2 2025 fell to $65.9 million, down 8.9% from $72.3 million in the same period last year. Despite the revenue decline, GAAP earnings per share improved to $0.36, compared to $0.08 in Q2 2024, representing a 350% increase. Non-GAAP EPS, however, decreased to $0.65 from $0.90 in the prior-year quarter.
As shown in the following comprehensive financial summary, the company’s performance reflects its strategic shifts:
"The key revenue driver primarily reflected the sale/divestiture of five underperforming Bombshells segment locations and effect of severe January-February weather on same-store sales, partially offset by improving trends in March," the company stated in its presentation.
Segment Performance
The Nightclubs segment, which remains RCI’s core business, reported revenues of $57.5 million in Q2 2025, a 3.1% decrease from the same period last year. Same-store sales declined 3.5%, with lower service revenues partially offset by increases in food, merchandise, and other revenue.
The following chart illustrates the Nightclubs segment performance over recent quarters:
The Bombshells segment experienced a more significant decline, with revenues falling 35.6% to $8.2 million in Q2 2025. This substantial decrease primarily resulted from the strategic divestiture of five underperforming locations between Q4 2024 and Q1 2025, reducing the total location count from 14 to 10.
The impact of these divestitures on the Bombshells segment is clearly visible in the following chart:
Strategic Acquisitions and Development
Despite the revenue challenges, RCI Hospitality continued its strategic growth through acquisitions. During Q2 2025, the company acquired Flight Club, described as a "premier gentlemen’s club in Detroit," for $8.0 million plus $3.0 million for the real estate. Additionally, after the quarter ended, RCI acquired Platinum West, "the only upscale adult nightclub in central part of South Carolina," for $6.25 million plus $1.75 million for the real estate.
The company also expanded its footprint by opening new locations, including a Bombshells in Denver, Colorado, and a Chicas Locas in El Paso, Texas. Several additional development projects are underway, as detailed in the company’s development update:
Financial Position and Capital Allocation
RCI Hospitality maintained strong cash flow generation despite the revenue decline. Free cash flow for Q2 2025 was $6.9 million, compared to $8.8 million in the prior-year period, representing 10.5% of total revenues. Adjusted EBITDA came in at $14.2 million or 21.5% of revenues.
The following chart illustrates the company’s cash, free cash flow, and adjusted EBITDA trends:
The company’s debt stood at $241.5 million as of March 31, 2025, with a weighted average interest rate of 6.67%. The debt structure is predominantly secured by real estate (62.5% of total debt), providing stability to the company’s financial position.
RCI Hospitality continued its share repurchase program, buying back 56,875 common shares for $2.9 million during Q2 2025. For the first six months of fiscal 2025, the company repurchased a total of 122,875 shares at an average price of $49.76. The outstanding share count stood at 8.8 million as of March 31, 2025.
Five-Year Strategic Plan
A key highlight of the presentation was RCI Hospitality’s five-year strategic plan, which outlines ambitious growth targets through FY2029. The company aims to double free cash flow per share by FY2029, targeting $400 million in revenue, $75 million in free cash flow, and reducing outstanding shares to 7.5 million.
The company’s capital allocation strategy allocates 40% of free cash flow to club acquisitions and 60% to share buybacks, debt reduction, and dividends, with the overall goal of growing FCF per share by 10-15% annually.
The following slide details the company’s five-year plan:
"We expect to generate $250M+ of cumulative FCF over the next 5 years," the company stated, highlighting its confidence in long-term cash generation despite current headwinds.
Forward-Looking Statements
RCI Hospitality’s management remains focused on its core operations while pursuing strategic growth opportunities. For the Nightclubs segment, the emphasis is on core business operations and new acquisitions, while the Bombshells segment strategy centers on improving performance and completing units currently under development.
The after-hours market reaction was positive, with the stock rising 4.68% to $45.42 following the earnings release, suggesting investors are focusing on the company’s improved profitability and long-term strategy rather than the short-term revenue decline.
As RCI Hospitality continues to execute its strategic plan, investors will be watching whether the company can maintain its improved profitability while returning to revenue growth in upcoming quarters, particularly as it integrates new acquisitions and benefits from the divestiture of underperforming locations.
Full presentation:
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