Core Insights - RCI Hospitality Holdings, Inc. reported an increase in same-store sales for Nightclubs for the third consecutive quarter, while Bombshells experienced a decline in total sales due to divestitures and closures of underperforming locations [1][2]. Group 1: Financial Performance - Nightclubs total sales reached $61.3 million, reflecting a year-over-year increase of 1.2%, with same-store sales up by 3.7% compared to 1Q24 [1]. - Bombshells total sales were $9.6 million, showing a significant decline of 24.7%, with same-store sales down by 7.5% compared to 1Q24 [1]. - Combined sales for both segments totaled $70.9 million, representing a decrease of 3.3%, while same-store sales increased by 2.3% [1]. Group 2: Operational Changes - The increase in Nightclubs sales was attributed to the rise in same-store sales, the opening of three new and reformatted clubs in Texas, and the absence of a club due to a fire incident in July 2024 [1]. - Bombshells' sales decline was primarily due to the divestiture and closure of five locations during 4Q24 and 1Q25, alongside a full quarter of operations from the Stafford, TX location that opened in mid-November 2023 [2]. Group 3: Company Overview - RCI Hospitality Holdings, Inc. operates more than 60 locations and is recognized as a leading company in the adult nightclubs and sports bars-restaurants sector in the United States [4].

Financial Data and Key Metrics - Fourth quarter nightclub same-store sales increased for the second consecutive quarter, marking the first time since the first half of fiscal 2023 [7] - Total company sales declined due to hurricane and fire-related closures, resulting in lower EPS [7] - Non-GAAP EPS, net cash provided by operating activities, and free cash flow all increased [7] - The company ended fiscal year 2024 with 8.955 million shares outstanding, a reduction of 4.7% year-over-year [7] - Fourth quarter sales declined by $2 million, largely due to hurricane-related closures and the sale of Bombshell San Antonio [18] - Non-GAAP EPS increased by $1.63, net cash provided from operating activities increased by $3.5 million, and free cash flow increased by $2 million, while adjusted EBITDA declined by $2.3 million [18] Business Line Performance - Nightclub revenues declined by $307,000, primarily due to a 2.2% same-store sales growth, 10 closure days at Houston area clubs due to Hurricane Beryl, and other changes to improve the club lineup [19] - Bombshells revenues declined by $1.643 million, primarily due to a 16.2% same-store sales decline, negatively affected by 26 closure days at Houston area locations due to Hurricane Beryl [21] - Corporate expenses increased modestly by $284,000 [22] Market Performance - The company ended the fourth quarter with cash and cash equivalents of $32.4 million [23] - Debt at September 30th declined by $7.2 million from June 30th, reflecting eliminations of Bombshell San Antonio debt, early paydown of $1.5 million of the Playmate note, and other scheduled amortized paydowns [24] - The weighted average interest rate was 6.67%, only 3 basis points higher than a year ago [24] Strategy and Industry Competition - The company has officially launched its Back-to-the-Basics five-year plan, focusing on core nightclub businesses and making new acquisitions [8] - The plan includes divesting underperforming Bombshells locations, closing the Denver food hall, reducing Bombshells-related debt, and discontinuing franchising [8] - The company expects to generate more than $250 million of free cash flow over the next five years, allocating 50% to club acquisition and 50% to share buybacks and dividends [10] - The fiscal 2029 targets include hitting $400 million in revenue, $75 million in free cash flow, and reducing the share count to 7.5 million or less [11] Management Commentary on Operating Environment and Future Outlook - The company is focusing on improving the performance of existing Bombshells locations and finishing the last three units under construction [12] - The company is evaluating every club in its portfolio and will rebrand, reformat, or divest underperforming locations [12] - The company is targeting 15% operating margins for Bombshells with a return to same-store sales growth [12] - The company is planning small dividend increases annually and expects to buy a significant amount of stock if the price is right [13] Other Important Information - The company has seven remaining developments, including Bombshells Denver, Chicas Locas El Paso, Rick's Cabaret in Central City, Bombshells Lubbock, and Bombshells Rowlett [26] - The company is awaiting construction permits for Baby Dolls West Fort Worth and engineering review of plans for Baby Dolls Fort Worth to rebuild the club that burnt down [27] Q&A Session Summary Question: How does the company plan to grow after completing current developments? - The company plans to focus strictly on acquisitions for growth and does not anticipate building anything else in the near future [34] Question: What excites the company about the future of the business model with the new five-year plan? - The company is excited about getting back to its core business, focusing on clubs, and evaluating real estate offerings to determine the best use of capital [37] Question: How is Bitcoin integration looking at the company's locations? - The company is processing Bitcoin at some locations, converting it to US dollars at the point of transaction, and expects to see more Bitcoin transactions with the current high prices [40] Question: What is the M&A environment like for the company? - The company is working on three potential acquisitions and is focusing on smaller acquisitions between $5 million and $15 million purchase price [49] Question: Does the company have insurance for hurricane and fire-related damages? - The company carries insurance for its properties, but payouts depend on the extent of damage and deductibles [56] Question: Will the company consider increasing the dividend under the Back-to-the-Basics plan? - The company plans to continue slowly and gradually raising the dividend annually, with the majority of capital return being done through buybacks [60] Question: What is the purchased real estate value of the closed Bombshells in Denver food hall? - The Denver food hall was purchased for $5.2 million, and the company is marketing the real estate for sale [61] Question: What are the impairments and how do they affect the company? - Impairments are accelerated write-offs of various assets, primarily due to increasing interest rates, and do not affect the company's operations or free cash flow [64][66] Question: Are there plans to open restaurants in Yuma? - The company has no plans to open new restaurants beyond the current developments and will focus on acquiring existing nightclub operations [70] Question: What is the expected CapEx for 2025? - The company expects maintenance CapEx to return to normal levels, forecasting around $6 million for 2025 [86] Question: How does the company view its leverage and debt? - The company aims to keep its debt to EBITDA under three times and is actively working to reduce its debt load [92] Question: What are the current business trends? - November was strong with five weekends, and December started slow but picked up, with the company expecting a strong March Madness [102]

Financial Performance & Targets - RCI Hospitality Holdings aims to generate over $250 million in cumulative Free Cash Flow (FCF) over the next 5 years[24] - The company targets $400 million in revenue and $75 million in FCF by FY29[24] - RCI Hospitality Holdings plans to double FCF per share by FY29[24] - In 4Q24, the company's Non-GAAP EPS was $1.63, and for FY24, it was $4.72[45] - The company's FY24 free cash flow was $48.4 million[45] Capital Allocation & Strategy - RCI Hospitality Holdings has allocated approximately 50% of its FCF for share buybacks and dividends, and approximately 50% for club acquisitions (including debt repayment)[42] - Since FY16, RCI Hospitality Holdings has completed $267 million in club acquisitions (including real estate)[29] - The company increased its share buyback program by $25 million in 4Q24[38] - In FY24, RCI Hospitality Holdings repurchased 442,639 shares for $20.6 million[38] Segment Performance - Nightclubs segment revenues in 4Q24 were $56.6 million[49] - Bombshells segment revenues decreased by $1.7 million in 4Q24 compared to 4Q23[59]

Financial Performance - RCI Hospitality Holdings, Inc. announced sales at nightclubs and restaurants for the fourth fiscal quarter ended September 30, 2024[3] - The press release detailing the financial results was issued on October 8, 2024[3] Company Classification - The company is classified as an emerging growth company under the Securities Act of 1933[2]

Financial Performance - Consolidated revenues for fiscal 2024 were $295.6 million, a slight increase of 0.6% from $293.8 million in fiscal 2023[18]. - Diluted earnings per share for fiscal 2024 decreased to $0.33 from $3.13 in fiscal 2023, reflecting a significant decline[18]. - Nightclubs segment revenue increased by approximately 3.0%, while income from operations decreased by 20.6% compared to the prior year[23]. - Bombshells segment revenue decreased by 9.2%, with income from operations decreasing by 263.7% from the prior year[25]. - Same-store sales for Nightclubs in 2024 were down by 2.1%, while Bombshells experienced a decline of 18.4%[23][25]. - Over the five-year period from fiscal 2019 to fiscal 2024, diluted earnings per share declined at a CAGR of 30.9%[31]. - Net cash provided by operating activities improved at a CAGR of 8.5%, while free cash flow improved at 7.8% CAGR during the same period[31]. Operational Challenges - The company plans to close underperforming locations and has terminated its franchising program[32]. - The company has experienced challenges in hiring and retaining qualified restaurant and club employees, which could adversely affect growth plans and profitability[111]. - The company incurs significant costs due to operating as a public company, which increases legal and financial compliance costs[92]. - The ongoing COVID-19 pandemic and geopolitical tensions may continue to disrupt the company's business operations and financial condition[61]. - The company faces risks related to labor disputes and shortages, which could disrupt operations and increase costs[116]. - The company recorded impairment charges of $38.5 million in 2024, including $8.9 million of goodwill impairment on four clubs and $11.8 million of SOB license impairment on seven clubs[130]. - The company experienced significant disruptions due to the COVID-19 pandemic, impacting operations and leading to increased costs and staffing shortages[123]. Financial Risks and Liabilities - The company may need additional financing if cash generated from operations is insufficient to satisfy working capital and capital expenditure requirements, which could lead to dilution of existing shareholders[74]. - The company may face uninsured liabilities or liabilities exceeding its insurance coverage, which could have a material adverse effect on its financial condition[96]. - The company has discontinued general liability and liquor insurance coverage in several establishments as of October 1, 2024, due to prohibitive costs, and is establishing self-insurance for claims[96]. - The company is currently under investigation by the New York State Attorney General and the Department of Taxation and Finance regarding tax filings and entertainment benefits, which may lead to fines or penalties[102]. Market and Competitive Environment - There is substantial competition in the nightclub entertainment industry, which may affect the company's ability to operate profitably or acquire additional clubs[75]. - The adult entertainment industry is extremely volatile and sensitive to general economic conditions, which could materially affect the company's business[76]. - The company derives a significant portion of its revenues from the sale of alcoholic beverages, and any limitations on permits could materially affect revenues[135]. - Seasonal factors historically lead to reduced revenues from April through September, with stronger results from October through March[144]. - The company is subject to regulatory uncertainties that may affect its ability to operate existing nightclubs or acquire new ones[131]. Corporate Governance and Compliance - As of September 30, 2024, the company concluded that it did not maintain effective internal control over financial reporting, identifying material weaknesses in IT controls, business combination accounting, and impairment assessments[95]. - The company has taken steps to enhance internal controls but faces significant costs and management efforts to remediate identified weaknesses[95]. - The company must continue to meet NASDAQ listing requirements to avoid delisting, which would adversely affect its business[140]. - The board of directors has the authority to issue up to 1,000,000 shares of preferred stock, which could adversely affect the rights of common stockholders[146]. Stock Performance and Shareholder Value - The company’s stock performance has shown a decline from $332.43 on September 30, 2021, to $215.37 on September 30, 2024[192]. - The market price of common stock may decline due to substantial sales or the perception of future sales of common stock[147]. - The trading price of securities has been volatile, influenced by performance, market conditions, and investor perception[148]. - During the three months ended September 30, 2024, the company repurchased a total of 174,790 shares at an average price of $44.85 per share, with a maximum number of shares that may be purchased under the plans totaling 21,035,109[186][187]. Strategic Initiatives - The company aims to leverage its brands and financial strength to enhance competitiveness and accelerate growth[199]. - The company operates upscale adult nightclubs and restaurants/sports bars across multiple states, generating revenues from liquor, food sales, and service revenues[196]. - The company’s same-store sales calculation excludes units closed temporarily for more than 15 days and those undergoing renovations, ensuring accurate year-over-year revenue comparisons[198]. Impairment and Asset Management - The company recorded impairment charges of $12.6 million in 2023 and $1.9 million in 2022, indicating ongoing challenges in asset valuation[130]. - The company impaired six properties for $4.8 million in property and equipment and $5.7 million in operating lease right-of-use assets during the third quarter of 2024[203]. - The company reported a total of $58,000 in impairment for one property and $1.0 million for its operating lease right-of-use asset during the third quarter of 2023[204]. - The company identified four reporting units that were impaired in both 2024 and 2023[209]. Risk Management - The company relies heavily on information technology, and any material failure or breach could adversely impact operations and financial condition[80]. - The company faces risks related to cybersecurity, which could result in loss of revenues, increased costs, and litigation if confidential information is compromised[82]. - The company has developed a risk-based information security program to manage cybersecurity threats[159]. - The Audit Committee oversees the enterprise risk management program, including information security and technology risks[165]. - The company has no recent cybersecurity attacks that materially affected its business strategy or financial condition[164].

Core Insights - The company reported a decline in total revenues for 4Q24, with revenues of $73.2 million compared to $75.3 million in 4Q23, despite an increase in same-store sales for nightclubs [1][2] - Non-GAAP EPS increased to $1.63 in 4Q24 from $1.11 in 4Q23, indicating improved operational performance despite challenges [1][2] - The company plans to implement a "Back-to-Basics" capital allocation strategy focusing on nightclub acquisitions and returning capital to shareholders through buybacks [1][2] Financial Performance - Total revenues for FY24 were $295.6 million, slightly up from $293.8 million in FY23 [1] - Net income attributable to common stockholders decreased to $0.2 million in 4Q24 from $2.2 million in 4Q23, reflecting operational challenges [1][2] - Free cash flow increased to $13.2 million in 4Q24 from $11.1 million in 4Q23, demonstrating improved cash generation [1][2] Segment Analysis - Nightclubs segment revenues were $60.6 million, a slight decrease of 0.5%, with a same-store sales growth of 2.2% impacted by closures due to a hurricane [2] - Bombshells segment revenues declined by 12.1% to $11.9 million, with a significant same-store sales decline of 16.2% due to weather-related closures [2] - The corporate segment expenses increased to $7.1 million, reflecting higher operational costs [2] Capital Allocation Strategy - The company aims to allocate 50% of free cash flow towards nightclub acquisitions and the other 50% towards share buybacks and dividends [1][2] - The financial targets for FY29 include total revenues of $400 million and free cash flow of $75 million, with a goal to reduce shares outstanding to 7.5 million [1][2] Share Repurchase and Debt Management - In 4Q24, the company repurchased 174,790 shares for $7.8 million, reducing the total shares outstanding to 8.955 million [2] - Total debt decreased to $238.2 million as of September 30, 2024, down from $245.4 million at June 30, 2024, primarily due to debt elimination from the sale of Bombshells San Antonio [2]

Core Viewpoint - The article emphasizes the importance of value investing and highlights RCI Hospitality (RICK) as a strong stock opportunity based on its valuation metrics and earnings outlook [1][2][6] Group 1: Value Investing - Value investing is a preferred strategy for identifying strong stocks, utilizing fundamental analysis and traditional valuation metrics to find undervalued stocks [2] - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly focusing on those with high grades in the "Value" category [3] Group 2: RCI Hospitality (RICK) Overview - RCI Hospitality currently holds a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential [4] - The stock has a Forward P/E ratio of 12.36, significantly lower than the industry average of 22.22, suggesting it may be undervalued [4] - RICK's Forward P/E has fluctuated between 8.63 and 61.17 over the past 12 months, with a median of 10.65 [4] - The P/B ratio for RICK is 1.72, which is attractive compared to the industry's average P/B of 4.83, indicating a favorable market value versus book value [5] - Over the past 52 weeks, RICK's P/B has ranged from 1.29 to 2.27, with a median of 1.64 [5] - These valuation metrics suggest that RICK is likely being undervalued, supported by a strong earnings outlook [6]

Core Points - RCI Hospitality Holdings, Inc. announced that Bombshells Restaurant & Bar will offer a free entree for veterans on Veterans Day, November 11, 2024, along with a 20% discount on other items for veterans and their families [1][2] - The offer is valid at Bombshells locations in Houston, Dallas, Austin, and San Antonio, with operating hours from 11 AM to 2 AM [1] - To qualify for the free entree and discount, veterans and active service members must present valid military identification [2] Discounts and Offers - Families accompanying veterans and active service members will also receive a 20% discount on entrees and other items on Veterans Day [2] - The free entree and discount do not apply to alcoholic beverages and are not eligible for rain checks, gift cards, or take-out [2] - On any other day of the year, veterans and active service members can receive a 20% discount on all items, excluding alcoholic beverages [3] Company Overview - Bombshells Restaurant & Bar is a military-themed casual dining chain that emphasizes a sports and fun atmosphere, featuring large interiors, outdoor patios, and a vibrant environment [4] - The restaurant offers a scratch kitchen and a diverse menu for lunch, dinner, and late-night dining [4]

Core Insights - RCI Hospitality Holdings, Inc. (RICK) reported a total sales of $72.1 million for Q4 fiscal 2024, reflecting a 2.6% decrease year over year due to external challenges like Hurricane Beryl [2][4] - The company experienced a decline in same-store sales by 1.1% year over year, primarily impacted by temporary closures at key locations [2][3] Q4 Preliminary Revenue Results - Nightclub sales totaled $60.2 million, down 0.5% year over year, affected by Hurricane Beryl causing 10 closure days at three clubs in Houston [3] - Bombshells restaurant sales were reported at $11.9 million, down 12.2% from the previous year, with same-store sales falling 16.2% year over year due to prolonged closures in Houston [4] Other Updates - RICK repurchased 0.17 million shares of common stock for approximately $7.8 million during Q4, with $21 million remaining in stock repurchase authorization [5] - The company plans to expand with six new clubs and restaurants in fiscal 2025, including the reopening of Baby Dolls Fort Worth [6] Valuation and Investment Opportunity - RICK's stock is trading at a 12-month forward P/E ratio of 10.10, significantly lower than the industry average of 17.84, indicating potential undervaluation [7] - The company's focus on enhancing its portfolio and strategic share repurchases suggests a commitment to maximizing shareholder value, making it an attractive investment opportunity [8] Stock Performance - RICK shares have gained 7.7% over the past three months, compared to a 12.4% rise in the industry [9]

Core Viewpoint - RCI Hospitality Holdings, Inc. (RICK) is experiencing operational improvements and enhanced shareholder value due to its Back to Basics business approach and effective capital allocation strategy [1]. Company Performance - Over the past six months, RICK's shares have decreased by 24.4%, while the Zacks Leisure and Recreation Services industry has grown by 12% [2]. - In the last three months, RICK has shown resilience with a share price increase of 6.2% [2]. - The Bombshells segment's low contributions and softer comparisons are concerning, but RICK has managed to maintain its growth trend [3]. Earnings Estimates - The Zacks Consensus Estimate for RICK's fourth-quarter fiscal 2024 earnings indicates a year-over-year growth of 69.6% [4]. - Earnings estimates for fiscal 2025 suggest a significant growth trend of 495.7% [4]. - The company has a VGM Score of B and a Growth Score of A, indicating strong analyst sentiment and solid fundamentals [4]. Strategic Initiatives - The Back to Basics approach aims to enhance business conditions by focusing on same-store sales, improving margins, and rebranding underperforming locations [6]. - RICK is working on several revenue-generating projects expected to contribute to revenues in late 2024 or early 2025, including the Baby Dolls project and multiple Bombshells locations [7]. Capital Allocation Strategy - RICK plans to allocate approximately $200-$250 million of free cash flow over the next five years, with less than 10% targeted for dividends, about 50% for mergers and acquisitions, and approximately 40% for share buybacks [8]. - The company has already increased its quarterly cash dividend by 16.7% to 7 cents, effective September 30, 2024 [9]. Valuation - RICK is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 10.07, which is lower than the industry average of 17.89, indicating a potentially attractive entry point for investors [10]. - The current discounted valuation may not last long, suggesting a favorable outlook for RICK stock [11].