Don't tell the stock market, but there have been some signs that the economy is beginning to slow down. While it's not a broad-based collapse or anything frightening like that, there are some areas experiencing the pinch. Recently, today's Bear of the Day referenced that pinch in its latest earnings report. It's currently a Zacks Rank #5 (Strong Sell) and we are going to investigate the reasons why. I'm talking about RCI Hospitality (RICK) ). RCI Hospitality Holdings, Inc., through its subsidiaries, engages ...

Financial Data and Key Metrics Changes - The company generated $72.3 million in revenue in the second quarter, compared to $71.5 million last year, reflecting a slight increase [44][30] - GAAP EPS was $0.08, primarily impacted by noncash impairment, while non-GAAP EPS totaled $0.90, near the high end of analyst expectations [44][30] - Corporate expenses totaled $6.8 million, an increase of $0.6 million on a GAAP basis, and $6.3 million on a non-GAAP basis, reflecting more corporate-level management from acquisitions and new projects [30][44] Business Line Data and Key Metrics Changes - The nightclub segment generated $59.4 million in revenue in Q2 '24, up from $57 million last year, driven by a $7.4 million increase from acquisitions [44][30] - Bombshells segment revenues declined by $1.5 million, with operating income down to $0.7 million or 5.5% of revenues compared to $1.8 million or 12.4% [30][46] - Adjusted EBITDA was $17.2 million or 24% of revenues, reflecting a combination of lower service revenue and higher costs [30][44] Market Data and Key Metrics Changes - Same-store sales declined by $2.7 million, while new locations contributed an increase of $1.2 million [46][30] - The company noted a significant impact from severe weather in Texas, which affected operations during January [45][30] - The company is seeing a 15% to 30% decline in revenues from competitors, averaging around 20% declines from their peaks in 2021 and 2022 [64][30] Company Strategy and Development Direction - The company aims to return Bombshells to $60 million in revenue with 15% margins, exploring strategic options such as partnerships or asset sales [4][30] - Focus is on capital allocation strategy, emphasizing mergers and acquisitions, organic growth, and stock buybacks when free cash flow yield exceeds 10% [48][30] - The company is rebranding underperforming clubs to improve performance and is committed to evaluating non-income generating assets [48][30] Management Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty and the need to adapt to changing consumer spending habits, noting that people are not spending as much [4][30] - The company is focused on cutting controllable costs and has halted future project costs until a direct opening date is confirmed [10][30] - Management expressed optimism about upcoming sports events boosting traffic and revenue, particularly in markets with active teams [77][30] Other Important Information - The Duncan Burch acquisition has performed well, with revenues growing 23.9% year-over-year and operating margins expanding [29][30] - The company has a cash position of $20 million and used $1.5 million for share buybacks during the second quarter [30][44] - The company is evaluating the potential of divesting certain properties to focus on core business operations [78][30] Q&A Session Summary Question: Can you provide details on the increase in other charges in the income statement this quarter? - The increase was primarily due to an $8 million impairment charge [34] Question: What is the status of M&A activities? - The company is negotiating two letters of intent, with one in a negotiation lock due to potential unknown liabilities [34] Question: What strategies are in place to improve service revenue? - Management is focused on returning to basics, enhancing customer service, and rebranding underperforming locations [85][30] Question: How is the company adapting to economic uncertainty? - The company is implementing cost containment measures and adjusting pricing strategies to attract customers [88][30] Question: What are the expectations for the Central City location? - The company plans to open the Rick's Cabaret Steakhouse in Q4, with potential revenue contributions being evaluated [80][30]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [2Q24 Financial Summary](index=1&type=section&id=2Q24%20Financial%20Summary) Total revenues slightly increased to $72.3 million in 2Q24, though GAAP EPS fell sharply to $0.08 due to a significant non-cash impairment charge 2Q24 Financial Highlights | Metric (in millions except EPS) | 2Q24 | 2Q23 | 6M24 | 6M23 | | :------------------------------ | :--- | :--- | :--- | :--- | | Total revenues | $72.3 | $71.5 | $146.2 | $141.5 | | EPS | $0.08 | $0.83 | $0.85 | $1.94 | | Non-GAAP EPS | $0.90 | $1.30 | $1.76 | $2.50 | | Net income attributable to RCIHH common stockholders | $0.8 | $7.7 | $8.0 | $18.0 | | Adjusted EBITDA | $17.2 | $21.7 | $34.7 | $42.1 | | Net cash from operating activities | $10.8 | $16.8 | $24.5 | $31.7 | | Free cash flow | $8.8 | $14.8 | $21.5 | $27.8 | - GAAP EPS of **$0.08** primarily reflected **$8.0 million** in non-cash impairment charges[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted core business strength, revenue growth despite economic uncertainty, and a continued focus on its capital allocation strategy - Total revenues for 2Q24 were **$72.3 million**, an increase from $71.5 million in the prior year[3](index=3&type=chunk) - The Nightclubs segment generated **$59.4 million** in revenue in 2Q24, up from $57.0 million last year[3](index=3&type=chunk) - Efforts to improve the Bombshells segment resulted in **steady sales and better margins** on a sequential quarter basis[3](index=3&type=chunk) - The company is committed to its capital allocation strategy, focusing on core nightclubs, evaluating potential acquisitions, and buying back stock[3](index=3&type=chunk) - Subsequent to the quarter end, RCI increased its cash position by **$20 million** through a planned bank loan[3](index=3&type=chunk) [Company Overview](index=3&type=section&id=Company%20Overview) [About RCI Hospitality Holdings, Inc.](index=3&type=section&id=About%20RCI%20Hospitality%20Holdings%2C%20Inc.) RCI Hospitality Holdings, Inc. is a leading operator of adult nightclubs and sports bars-restaurants with over 60 locations across the United States - RCI Hospitality Holdings, Inc. operates **more than 60 locations**, making it the country's leading company in adult nightclubs and sports bars-restaurants[10](index=10&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The company's forward-looking statements are subject to numerous risks and uncertainties inherent in its business and operating environment - Forward-looking statements are subject to risks including operating adult entertainment/restaurant businesses, business climates, launch success, cybersecurity, real estate, and COVID-19 impact[11](index=11&type=chunk) [Investor Information](index=1&type=section&id=Investor%20Information) The company provided details for its investor conference call and management meeting held on May 9, 2024 - A conference call and X Spaces event were scheduled for **May 9, 2024**, at 4:30 PM ET, with a management meeting at 7:00 PM ET[4](index=4&type=chunk) - Investors were invited to meet management at Rick's Cabaret New York[4](index=4&type=chunk) - Media and investor contacts are Gary Fishman and Steven Anreder[12](index=12&type=chunk) [Detailed 2Q24 Financial Results](index=2&type=section&id=Detailed%202Q24%20Financial%20Results) [Consolidated Performance](index=2&type=section&id=Consolidated%20Performance) Consolidated revenue saw a slight increase, but operating and net income declined significantly due to a large impairment charge and higher interest expense Consolidated Performance Summary | Metric (in thousands) | 2Q24 Amount | 2Q24 % of Revenue | 2Q23 Amount | 2Q23 % of Revenue | | :-------------------- | :---------- | :---------------- | :---------- | :---------------- | | Total revenues | $72,283 | 100.0% | $71,517 | 100.0% | | Income from operations | $4,657 | 6.4% | $13,427 | 18.8% | | Net income | $749 | 1.0% | $7,693 | 10.8% | | Other charges, net | $8,195 | 11.3% | $3,758 | 5.3% | | Interest expense | $(3,999) | (5.5)% | $(3,677) | (5.1)% | | Effective tax rate | 0.7% | —% | 21.8% | 3.0% | - The effective tax rate decreased significantly to **0.7%** in 2Q24 from 21.8% in 2Q23[7](index=7&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) The Nightclubs segment grew revenue through acquisitions while Bombshells' revenue declined, and corporate expenses rose to support growth initiatives [Nightclubs Segment](index=2&type=section&id=Nightclubs%20Segment) Nightclubs segment revenue increased due to acquisitions, but operating income fell sharply because of an $8.0 million impairment charge Nightclubs Segment Financials | Metric (in millions) | 2Q24 | 2Q23 | | :------------------- | :--- | :--- | | Revenues | $59.4 | $57.0 | | GAAP Operating Income | $11.0 | $18.0 | | GAAP Operating Margin | 18.6% | 31.6% | | Non-GAAP Operating Income | $19.8 | $22.4 | | Non-GAAP Operating Margin | 33.4% | 39.3% | | Impairment | $8.0 | $0.7 | - Revenue increase reflected the benefit of **acquisitions**, which more than offset declines from same-store sales[7](index=7&type=chunk) - Non-GAAP margin decline was primarily due to lower service revenues, wage inflation, and a **doubled Texas patron tax** ($10 per customer)[7](index=7&type=chunk) [Bombshells Segment](index=2&type=section&id=Bombshells%20Segment) The Bombshells segment experienced declines in revenue and profitability, primarily driven by lower same-store sales Bombshells Segment Financials | Metric (in millions) | 2Q24 | 2Q23 | | :------------------- | :--- | :--- | | Revenues | $12.8 | $14.3 | | GAAP Operating Income | $0.7 | $1.8 | | GAAP Operating Margin | 5.5% | 12.4% | | Non-GAAP Operating Income | $0.8 | $2.2 | | Non-GAAP Operating Margin | 5.9% | 15.4% | - Revenue decline reflected **lower same-store sales**, partially offset by increases from FY23 acquisitions and a new location[7](index=7&type=chunk) - The decline in profitability primarily reflected **lower same-store sales**[7](index=7&type=chunk) [Corporate Segment](index=2&type=section&id=Corporate%20Segment) Corporate expenses increased to support recently acquired clubs and new projects, rising as a percentage of total revenues Corporate Segment Expenses | Metric (in millions) | 2Q24 | 2Q23 | | :------------------- | :--- | :--- | | GAAP Expenses | $6.8 | $6.2 | | GAAP % of Total Revenues | 9.4% | 8.6% | | Non-GAAP Expenses | $6.3 | $5.5 | | Non-GAAP % of Total Revenues | 8.8% | 7.7% | - The expense increase primarily reflected more corporate level management, accounting, and professional services due to **recently acquired clubs and new projects**[7](index=7&type=chunk) [Other Financial Metrics](index=2&type=section&id=Other%20Financial%20Metrics) Weighted average shares outstanding increased slightly, while the company continued its share repurchase program and reduced total debt - Weighted average shares outstanding **increased 0.9%** year over year, influenced by shares used in an acquisition, partially offset by subsequent share buybacks[7](index=7&type=chunk) Share Repurchase Activity | Metric | 2Q24 | 6M24 | | :-------------------- | :--- | :--- | | Shares Repurchased | 27,265 | 65,219 | | Value of Repurchases | $1.5M | $3.6M | | Average Price per Share | $56.12 | $55.23 | | Remaining Authorization | $13.0M (as of March 31, 2024) | | Debt Position | Metric | March 31, 2024 | December 31, 2023 | | :----- | :------------- | :---------------- | | Debt | $231.9M | $234.1M | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) [Explanation of Non-GAAP Measures](index=2&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company utilizes Non-GAAP measures like Adjusted EBITDA and Free Cash Flow to offer a clearer view of its core operational performance - Non-GAAP financial measures are used to clarify and enhance understanding of past performance and future prospects by excluding or including amounts not representative of ongoing business operations[6](index=6&type=chunk) - Non-GAAP Operating Income and Margin exclude amortization of intangibles, impairment of assets, settlement of lawsuits, gains/losses on sale of businesses/assets, gains/losses on insurance, and stock-based compensation[8](index=8&type=chunk) - Adjusted EBITDA excludes depreciation and amortization, impairment of assets, income tax expense (benefit), net interest expense, settlement of lawsuits, gains/losses on sale of businesses/assets, gains/losses on insurance, and stock-based compensation[12](index=12&type=chunk) - Free cash flow is derived from net cash provided by operating activities less maintenance capital expenditures and serves as the baseline for capital allocation strategy[12](index=12&type=chunk) [Non-GAAP Reconciliations](index=8&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations from GAAP to Non-GAAP metrics, quantifying adjustments for items like asset impairments and amortization [Adjusted EBITDA Reconciliation](index=8&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA decreased to $17.2 million in 2Q24 from $21.7 million in 2Q23, with a major adjustment for an $8.0 million asset impairment Reconciliation of Net Income to Adjusted EBITDA | Metric (in thousands) | 2Q24 | 2Q23 | 6M24 | 6M23 | | :-------------------- | :--- | :--- | :--- | :--- | | Net income attributable to RCIHH common stockholders | $774 | $7,732 | $8,000 | $17,970 | | Impairment of assets | $8,033 | $662 | $8,033 | $662 | | Interest expense, net | $3,903 | $3,587 | $8,025 | $7,183 | | Adjusted EBITDA | $17,232 | $21,690 | $34,699 | $42,149 | [Non-GAAP Net Income & EPS Reconciliation](index=8&type=section&id=Non-GAAP%20Net%20Income%20%26%20EPS%20Reconciliation) Non-GAAP diluted EPS was $0.90 in 2Q24, down from $1.30 in the prior year, primarily reflecting adjustments for impairment charges Reconciliation of GAAP to Non-GAAP Net Income & EPS | Metric (in thousands except EPS) | 2Q24 | 2Q23 | 6M24 | 6M23 | | :------------------------------- | :--- | :--- | :--- | :--- | | GAAP diluted earnings per share | $0.08 | $0.83 | $0.85 | $1.94 | | Impairment of assets (per share) | $0.86 | $0.07 | $0.86 | $0.07 | | Non-GAAP diluted earnings per share | $0.90 | $1.30 | $1.76 | $2.50 | | Non-GAAP net income | $8,379 | $12,059 | $16,511 | $23,079 | [Non-GAAP Operating Income & Margin Reconciliation](index=8&type=section&id=Non-GAAP%20Operating%20Income%20%26%20Margin%20Reconciliation) Non-GAAP operating income fell to $14.0 million in 2Q24, with the operating margin contracting to 19.3% from 26.6% in 2Q23 Reconciliation of GAAP to Non-GAAP Operating Income | Metric | 2Q24 | 2Q23 | 6M24 | 6M23 | | :-------------------------------- | :--- | :--- | :--- | :--- | | Income from operations (GAAP) | $4,657 | $13,427 | $17,822 | $30,325 | | Impairment of assets | $8,033 | $662 | $8,033 | $662 | | Non-GAAP operating income | $13,963 | $19,000 | $28,254 | $36,880 | | GAAP operating margin | 6.4% | 18.8% | 12.2% | 21.4% | | Non-GAAP operating margin | 19.3% | 26.6% | 19.3% | 26.1% | [Free Cash Flow Reconciliation](index=10&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free cash flow decreased to $8.8 million in 2Q24 from $14.8 million in the prior-year quarter, driven by lower operating cash flow Reconciliation of Net Cash from Operations to Free Cash Flow | Metric (in thousands) | 2Q24 | 2Q23 | 6M24 | 6M23 | | :-------------------- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $10,836 | $16,789 | $24,469 | $31,684 | | Less: Maintenance capital expenditures | $2,011 | $2,021 | $2,994 | $3,885 | | Free cash flow | $8,825 | $14,768 | $21,475 | $27,799 | [Non-GAAP Segment Information](index=12&type=section&id=Non-GAAP%20Segment%20Information) Non-GAAP operating margins declined for both the Nightclubs and Bombshells segments compared to the prior-year quarter 2Q24 Non-GAAP Segment Performance | Segment (2Q24, in thousands) | Non-GAAP Operating Income | Non-GAAP Operating Margin | | :--------------------------- | :------------------------ | :------------------------ | | Nightclubs | $19,817 | 33.4% | | Bombshells | $750 | 5.9% | | Corporate | $(6,327) | (8.8)% | 2Q23 Non-GAAP Segment Performance | Segment (2Q23, in thousands) | Non-GAAP Operating Income | Non-GAAP Operating Margin | | :--------------------------- | :------------------------ | :------------------------ | | Nightclubs | $22,390 | 39.3% | | Bombshells | $2,211 | 15.4% | | Corporate | $(5,493) | (7.7)% | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The income statement reflects a slight revenue increase but a substantial drop in net income for 2Q24 compared to 2Q23 Income Statement Highlights | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 6 Months Ended Mar 31, 2024 | 6 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $72,283 | $71,517 | $146,190 | $141,485 | | Income from operations | $4,657 | $13,427 | $17,822 | $30,325 | | Net income | $749 | $7,693 | $7,993 | $17,964 | | Basic and diluted EPS | $0.08 | $0.83 | $0.85 | $1.94 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows a stable asset base and a slight reduction in total liabilities as of March 31, 2024, compared to fiscal year-end 2023 Balance Sheet Highlights | Metric (in thousands) | March 31, 2024 | September 30, 2023 | March 31, 2023 | | :-------------------- | :------------- | :----------------- | :------------- | | Total assets | $609,893 | $610,884 | $621,131 | | Total liabilities | $324,394 | $329,560 | $345,167 | | Total RCIHH stockholders' equity | $285,763 | $281,581 | $276,081 | | Cash and cash equivalents | $19,973 | $21,023 | $22,784 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations decreased year-over-year, contributing to a net decrease in cash for the first six months of FY24 Cash Flow Highlights | Metric (in thousands) | 3 Months Ended Mar 31, 2024 | 3 Months Ended Mar 31, 2023 | 6 Months Ended Mar 31, 2024 | 6 Months Ended Mar 31, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $10,836 | $16,789 | $24,469 | $31,684 | | Net cash used in investing activities | $(7,606) | $(34,426) | $(12,686) | $(48,076) | | Net cash provided by (used in) financing activities | $(4,412) | $6,313 | $(12,833) | $3,196 | | Net decrease in cash and cash equivalents | $(1,182) | $(11,324) | $(1,050) | $(13,196) |

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q2 and H1 2024 and 2023, including balance sheets, income, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$609,893** | **$610,884** | | Cash and cash equivalents | $19,973 | $21,023 | | Total current assets | $42,032 | $37,473 | | Goodwill | $67,862 | $70,772 | | **Total Liabilities** | **$324,394** | **$329,560** | | Current portion of debt obligations | $25,072 | $22,843 | | Debt, net of current portion | $206,853 | $216,908 | | **Total Equity** | **$285,499** | **$281,324** | Condensed Consolidated Statements of Income Highlights (in thousands, except EPS) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $72,283 | $71,517 | $146,190 | $141,485 | | Income from Operations | $4,657 | $13,427 | $17,822 | $30,325 | | Net Income Attributable to RCIHH | $774 | $7,732 | $8,000 | $17,970 | | Basic and Diluted EPS | $0.08 | $0.83 | $0.85 | $1.94 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,469 | $31,684 | | Net cash used in investing activities | $(12,686) | $(48,076) | | Net cash provided by (used in) financing activities | $(12,833) | $3,196 | | **Net Decrease in Cash** | **$(1,050)** | **$(13,196)** | - During the quarter ended March 31, 2024, the company recorded asset impairments totaling **$8.0 million**, including **$4.4 million** in SOB license impairment, **$2.9 million** in goodwill impairment, and **$0.7 million** in tradename impairment[47](index=47&type=chunk) - Subsequent to the quarter end, on April 30, 2024, the company entered into a new **$20.0 million** term loan for additional working capital with a 10-year term and an initial interest rate of **8.25%**[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 fiscal 2024 financial results, highlighting revenue changes, increased operating expenses, and liquidity status [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q2 2024 revenues increased 1.1% YoY to **$72.3 million**, driven by acquisitions but offset by same-store sales declines, impacting profitability Q2 FY2024 Performance Highlights vs. Q2 FY2023 | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $72.3M | $71.5M | +1.1% | | Nightclubs Revenue | $59.4M | $57.0M | +4.1% | | Bombshells Revenue | $12.8M | $14.3M | -10.8% | | Consolidated Same-Store Sales | -8.6% | N/A | N/A | | Basic and Diluted EPS | $0.08 | $0.83 | -90.4% | | Non-GAAP Diluted EPS | $0.90 | $1.30 | -30.8% | - For the six months ended March 31, 2024, consolidated revenues increased **3.3%** YoY, driven by a **$19.6 million** increase from new clubs and openings, but partially offset by a **$12.3 million** negative impact from declining same-store sales[96](index=96&type=chunk) - Total operating expenses as a percentage of revenue increased to **93.6%** in Q2 2024 from **81.2%** in Q2 2023, primarily due to higher costs, wage inflation, and significant asset impairment charges of **$8.0 million**[103](index=103&type=chunk)[47](index=47&type=chunk) Segment Operating Income (in thousands) | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Nightclubs | $11,021 | $17,995 | $31,390 | $40,735 | | Bombshells | $699 | $1,775 | $785 | $3,622 | | **Total Income from Operations** | **$4,657** | **$13,427** | **$17,822** | **$30,325** | [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP metrics such as Adjusted EBITDA and Non-GAAP Net Income to provide a clearer view of core operational performance Reconciliation of GAAP Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to RCIHH | $774 | $7,732 | $8,000 | $17,970 | | Adjustments (Taxes, Interest, D&A, etc.) | $16,458 | $13,958 | $26,699 | $24,179 | | **Adjusted EBITDA** | **$17,232** | **$21,690** | **$34,699** | **$42,149** | Reconciliation of GAAP to Non-GAAP Diluted EPS | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | GAAP diluted EPS | $0.08 | $0.83 | $0.85 | $1.94 | | Adjustments (per share) | $0.82 | $0.47 | $0.91 | $0.56 | | **Non-GAAP diluted EPS** | **$0.90** | **$1.30** | **$1.76** | **$2.50** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2024, the company held **$20.0 million** in cash and had negative working capital, with net cash from operations decreasing - Cash and cash equivalents stood at **$20.0 million** as of March 31, 2024, compared to **$21.0 million** at September 30, 2023, with the company having negative working capital of **$14.4 million**[127](index=127&type=chunk) Free Cash Flow Reconciliation (in thousands) | Metric | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,469 | $31,684 | | Less: Maintenance capital expenditures | $2,994 | $3,885 | | **Free cash flow** | **$21,475** | **$27,799** | - During the six months ended March 31, 2024, the company repurchased **65,219** shares of its common stock for **$3.6 million** at an average price of **$55.23** per share[132](index=132&type=chunk) [Capital Allocation Strategy](index=38&type=section&id=Capital%20Allocation%20Strategy) The company's capital allocation strategy uses free cash flow to guide investment decisions, prioritizing acquisitions, stock repurchases, and debt reduction - The company's capital allocation strategy prioritizes investments based on specific return thresholds and market conditions: acquire/develop clubs/restaurants with a **25%-33%** minimum cash-on-cash return, buy back stock if the after-tax free cash flow yield is above **10%**, dispose of underperforming units, and pay down expensive debt when strategically advantageous[144](index=144&type=chunk) - The growth strategy includes acquiring existing nightclubs and developing the Bombshells restaurant concept to diversify operations, as these units do not require difficult-to-obtain SOB licenses[142](index=142&type=chunk)[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes to the market risk disclosures from its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 - There were no material changes to the information regarding market risk from the company's last Annual Report on Form 10-K[145](index=145&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to material weaknesses in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2024[147](index=147&type=chunk) - The ineffectiveness is due to previously reported material weaknesses in internal controls related to: (1) accounting for business combinations, (2) impairment of goodwill and other assets, and (3) ineffective IT general controls (ITGCs)[148](index=148&type=chunk) - Remediation efforts are underway, including enhancing management review precision, engaging third-party consultants for valuation, and strengthening IT controls, with completion expected by the end of fiscal 2024[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the 'Legal Matters' discussion from Note 9 of the financial statements, detailing ongoing litigation - The company is involved in several legal matters, detailed in Note 9 of the financial statements, including a challenge to the Texas Patron Tax, issues from the 2014 liquidation of its former insurer IIC, and a shareholder derivative action that has an agreement in principle to settle[156](index=156&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) [Risk Factors](index=41&type=section&id=Item1A.%20Risk%20Factors) The company reports no material changes to the risk factors disclosed in its most recent Annual Report on Form 10-K, other than potential risks from legal proceedings - There were no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023[157](index=157&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity for the three months ended March 31, 2024, with **27,265** shares repurchased Share Repurchase Activity (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | — | — | | February 2024 | 13,712 | $56.65 | | March 2024 | 13,553 | $55.59 | | **Total** | **27,265** | **$56.12** | [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, primarily including CEO and CFO certifications and financial statements in Inline XBRL - Filed exhibits include CEO and CFO certifications (Rule 13a-14(1) and Section 906 of Sarbanes-Oxley) and financial data in Inline XBRL format[160](index=160&type=chunk)

Financial Data and Key Metrics Changes - First quarter revenues totaled $73.9 million, up 5.6% compared to last year, primarily due to club acquisitions, despite a consolidated same-store sales decline of 9.8% [3][74] - EPS was $0.77 per share with non-GAAP at $0.87, while net cash from operating activities and free cash flow declined only 8% and 3%, respectively [74][87] - The effective tax rate for the year was 19.9%, down from 22.8% [9] Business Line Data and Key Metrics Changes - By revenue type, alcoholic beverages increased by 18.7%, food by 14.1%, and other by 8.2%, while service revenues declined by 1.6% [8] - The combined operating loss from Other and Corporate segments was $400,000 less than last year, with non-GAAP figures about $100,000 less [9] - Bombshells segment revenues declined by $700,000 year-over-year, reflecting a $2.7 million decline in same-store sales [86] Market Data and Key Metrics Changes - The nightclub business remains solid, but same-store sales reflect macroeconomic uncertainty, with declines noted across the industry [74][61] - Central City slots averaged 131 adjusted gross proceeds per day, while nearby Black Hawk averaged 307, indicating potential revenue opportunities for the casinos [76] Company Strategy and Development Direction - The company aims to create a digital extension of its physical brands, allowing entertainers to monetize their relationships continuously [6] - A capital allocation strategy focuses on mergers and acquisitions, organic growth, and share buybacks when free cash flow yield exceeds 10% [12] - Major structural management changes have been made in the Bombshells team, with options being considered to improve performance, including seeking an operational partner or selling the business [84] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the same-store sales declines is behind them, with expectations for improvement during March Madness [93] - The company is facing macroeconomic uncertainty, affecting customer confidence and spending [52][27] - Management remains confident in their ability to reach future targets despite current disappointing numbers [90] Other Important Information - The company is evaluating a number of acquisition targets but faces challenges in determining fair value due to owners wanting to be compensated based on post-COVID highs [82] - The company has made significant progress in its cost-cutting initiatives, aiming to reduce expenses by over $2 million in the current quarter [97] Q&A Session All Questions and Answers Question: What is the status of the licensing for the casinos? - Management is not worried unless other licenses are issued to competitors, indicating a normal flow of operations [100][152] Question: Can you discuss the budget for the casinos? - The overall budget for both properties is about $20 million, with approximately $10 million remaining to spend [131] Question: How is the new strategic partner for AdmireMe expected to impact costs? - The new partnership is expected to cut costs by about $0.5 million annually, contributing to overall expense reductions [97] Question: What are the plans for Bombshells to improve performance? - A new Director of Operations has been hired to focus on customer service and promote a fun atmosphere, with structural changes being implemented [94]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 RCI HOSPITALITY HOLDINGS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Texas 76-0458229 (I.R.S. Employer Identification No.) 10737 Cutten Road FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ...

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q4 2023 Earnings Conference Call December 14, 2023 4:30 PM ET Company Participants Mark Moran - Chief Executive Officer, Equity Animal Eric Langan - Chairman, President and Chief Executive Officer Bradley Chhay - Chief Financial Officer Conference Call Participants Scott Buck - H.C. Wainwright Anthony Lebiedzinski - Sidoti & Company Robert McGuire - Granite Research Adam Wyden - ADW Capital Management Mark Moran Greetings and welcome to RCI Hospitality Holdings ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2023 o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number: 001-13992 RCI HOSPITALITY HOLDINGS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Texas 76-045 ...

Building a portfolio of well-managed, high cash-flowing nightclubs and restaurants Today's Speakers Bradley Chhay Chief Financial Officer RCI Hospitality Holdings, Inc. @BradleyChhay 2 • Go To: @RicksCEO on X: https://x.com/RicksCEO • Select this X Space: https://x.com/i/spaces/1kvJpmbgaWmxE • Note: You can also use traditional phone and webcast for listen-only access – see our earnings news release for details NASDAQ: RICK | 3Q23 Conference Call | August 9, 2023 | www.rcihospitality.com | @RCIHHinc Eric La ...

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q3 2023 Earnings Conference Call August 9, 2023 4:30 PM ET Company Participants Mark Moran - Chief Executive Officer, Equity Animal Eric Langan - Chairman, President and Chief Executive Officer Bradley Chhay - Chief Financial Officer Conference Call Participants Scott Buck - H.C. Wainwright & Co., LLC Anthony Lebiedzinski - Sidoti & Company, LLC. Lynne Collier - Water Tower Research Robert McGuire - Granite Research Joseph Gomes - Noble Capital Markets Mark Moran ...