RCI Hospitality Holdings, Inc. Q4 FY2025 earnings call

Bullet points:

• Initiated Back to Basics 5-Year Capital Allocation Plan in 4Q '24, with actions like divesting underperforming Bombshells, acquiring/opening nightclubs, selling underperforming clubs, and buying back shares.
• Capital allocation strategy: Allocate ~40% of free cash flow to club acquisitions and 60% to share buybacks, debt reduction, and dividends. Goal to grow free cash flow per share by 10%-15% annually.
• Focus on core nightclub business, reviewing clubs to increase same-store sales, rebranding/reformatting/divesting underperformers.
• For Bombshells, aim to improve existing locations, target 15% operating margins, return to same-store sales growth, and finish under-development location.

Nightclubs: Fourth quarter revenues totaled $60.9 million, up 0.4%. Operating income was $16.3 million compared to $13 million, and margin was 26.8% of segment revenues compared to 21.5%. Non-GAAP operating income, which excludes other net charges, was $19.1 million compared to $20.5 million. Margin was 31.3% of segment revenues compared to 33.8%. Bombshells: Revenues totaled $9.4 million, a decrease of $2.6 million. There was an operating loss of $1.6 million compared to a loss of $2.6 million. On a non-GAAP basis, which excludes impairments, there was an operating income of $29,000 compared to $649,000.

Bullet points:

• Hoping to file 10-Q relatively soon.
• Plan to use free cash flow for club acquisitions, debt reduction, or share repurchasing.
• Expect to generate more than $250 million of free cash flow and repurchase significant quantity of shares over 5 years, with targets like $400 million in revenue, $75 million in free cash flow, and 7.5 million shares outstanding by fiscal '29.

Bullet points:

• Legal situation in New York: RCI, individuals involved, and 3 clubs have pled not guilty to charges and are defending themselves, with reserves set aside for legal matters.
• Uncertainties related to economic conditions affecting nightclub business, such as impact of airplane travel disruptions and liquor company competitiveness.

Q: When do you think you'll be able to give us a ballpark when you'll be able to file the next quarterly for the first quarter?

A: We want to file as soon as possible, guessing sometime in April as auditors are in prime work season.

Q: Overall feeling on clubs and Bombshells in current environment?

A: Been doing well, March Madness, but some concern with oil prices, but liquor companies getting more competitive helping costs. Also, changes in Bombshells concept showing positive results.

Q: Balance between acquiring clubs, paying down debt, and buying back shares?

A: Using 100% of free cash flow to buy back shares as it's better than acquiring at higher valuation.

Q: Real estate value range?

A: Nonincome-producing assets and underperforming clubs for sale around $30 million, while valuation for Bombshells operations is in $65 million to $85 million range.

Q: Alcohol sales and Bombshells concept change?

A: Nightclub alcohol sales consistent, Bombshells changing concept back to sports bar focus to increase alcohol sales percentage.