RCI Hospitality (RICK) - 2025 Q1 - Quarterly Report

Financial Performance - Total revenues for the three months ended December 31, 2024, were $71,483,000, a decrease of 3.2% from$ 73,907,000 in the same period of 2023[14] - Net income for the three months ended December 31, 2024, was $9,065,000, representing an increase of 25.3% compared to$ 7,244,000 in the prior year[14] - Earnings per share for the three months ended December 31, 2024, were $1.01, up from$ 0.77 in the same period of 2023, reflecting a 31.2% increase[14] - Nightclubs segment revenues increased to $61.724 million in Q4 2024 from$ 61.033 million in Q4 2023, while Bombshells segment revenues decreased to $9.587 million from$ 12.731 million[35] - Income from operations for the Nightclubs segment was $20.882 million in Q4 2024, compared to$ 20.369 million in Q4 2023, indicating a growth of 2.5%[35] - Consolidated revenues for the first quarter decreased by $2.4 million, or 3.3%, primarily due to the$ 4.4 million impact of closed locations[85] - Nightclubs revenue increased by 1.1% to $61.7 million, driven by a$ 2.1 million increase in same-store sales, partially offset by a $1.8 million impact from closed clubs[88] - Bombshells revenue decreased by 24.7% to$ 9.6 million, with a 7.5% decline in same-store sales and $2.6 million from recently closed locations[89] - Basic and diluted earnings per share (EPS) for the quarter were$ 1.01, compared to $0.77 in the prior-year quarter[87] - For the three months ended December 31, 2024, the consolidated operating margin improved to 19.5% from 17.8% in the same period of 2023[97] Cash and Assets - Cash and cash equivalents increased to$ 34,718,000 as of December 31, 2024, from $32,350,000 at the end of September 2024, marking a 7.3% increase[12] - Total assets as of December 31, 2024, were$ 586,218,000, up from $584,364,000 as of September 30, 2024, indicating a growth of 0.3%[12] - The company reported a net receivables balance of$ 3.519 million as of December 31, 2024, down from $5.832 million as of September 30, 2024[40] - The company’s retained earnings increased to$ 210,160,000 as of December 31, 2024, from $201,759,000 at the end of September 2024, reflecting a growth of 4.9%[12] - Free cash flow for Q4 2024 was$ 12.068 million, a decrease of 4.6% from $12.650 million in Q4 2023[117] Expenses and Liabilities - Operating expenses for the three months ended December 31, 2024, totaled$ 57,577,000, down from $60,742,000 in the same period of 2023, a decrease of 5.3%[14] - Total liabilities decreased to$ 317,447,000 as of December 31, 2024, from $321,254,000 as of September 30, 2024, a reduction of 1.2%[12] - Selling, general and administrative expenses rose from$ 25,201,000 for the three months ended December 31, 2023, to $26,207,000 for the same period in 2024, an increase of approximately 4.0%[44] - Total accrued liabilities increased from$ 20,280,000 as of September 30, 2024, to $20,514,000 as of December 31, 2024, an increase of approximately 1.2%[42] - Depreciation and amortization expenses for the three months ended December 31, 2024, were$ 3.569 million, compared to $3.853 million in the same period of 2023[35] Tax and Legal Matters - The effective income tax rate decreased from 19.9% in 2023 to 16.9% in 2024, reflecting a reduction in tax burden[45] - The company recorded a lawsuit settlement of$ 179,000 for the three months ended December 31, 2024, compared to $0 in the same period of 2023[61] - The company recorded an assessment of$ 2.8 million from the New York State Department of Labor for state unemployment tax matters for the years 2009-2022[57] Strategic Initiatives - The company completed the acquisition of a club in Detroit for a total purchase price of $11.0 million, including$ 3.0 million in cash and a seller-financed note[72] - The growth strategy includes opening new units and acquiring existing units in high growth potential markets, with a new Bombshells location opened in Denver, Colorado, in January 2025[125] - The company is evaluating opportunities to acquire new nightclubs and anticipates acquiring locations that fit its business model, potentially requiring additional debt or stock issuance[126] - The company aims for a minimum cash on cash return of 25%-33% for new club or restaurant acquisitions, absent strategic rationale[126] - The company is considering disposing of underperforming units to free up capital for more productive uses[126] Internal Controls and Compliance - The company identified material weaknesses in internal control over financial reporting as of September 30, 2024, related to IT general controls and management review controls[130] - Remediation efforts are underway to address the identified material weaknesses, with expected completion prior to the end of fiscal 2025[134] - The company will engage third-party consultants to assist in the valuation and accounting for intangible assets acquired in business combinations[131] - The company maintains disclosure controls and procedures designed to ensure timely and accurate reporting to the SEC[128]