RCI Hospitality 2025 Q2 Earnings Net Income Climbs 326.4%

RCI Hospitality (RICK) reported its fiscal 2025 Q2 earnings on May 12th, 2025. RCI Hospitality's earnings for the second quarter of fiscal 2025 were marked by significant growth in net income, which surged 326.4% compared to the same period in 2024. Despite a drop in total revenue, the company exceeded analysts’ expectations for earnings per share (EPS), showcasing robust profitability. The company's guidance remains in line with previous forecasts, maintaining a bullish outlook for continued growth over the next five years.

Revenue

RCI Hospitality's total revenue for Q2 2025 dropped by 8.9% to $65.88 million compared to the previous year. The breakdown of revenue shows that sales of alcoholic beverages brought in $28.87 million, while food and merchandise sales contributed $9.41 million. Service revenues amounted to $22.91 million, with an additional $4.69 million classified under other revenues. This decline was primarily attributed to strategic divestitures and adverse weather conditions impacting sales.

Earnings/Net Income

RCI Hospitality's EPS experienced a dramatic increase of 350.0%, rising to $0.36 in Q2 2025 from $0.08 in Q2 2024. The company's net income also saw a significant boost, reaching $3.19 million, up from $749,000 in the previous year. This performance reflects strong earnings growth within the company.

Post-Earnings Price Action Review

The strategy of purchasing RCI Hospitality shares after a revenue increase and holding them for 30 days has proven successful over the past five years, yielding an annualized compound return of 12.5%. This strategy outperformed the SPY ETF's 9.5% return, highlighting RCI's strong post-earnings momentum. RCI's stock demonstrated notable short-term performance following revenue increases, which is crucial for strategies involving short holding periods. The strategy's consistent returns over five years indicate RCI's stable business performance and market confidence in its prospects. However, potential risks such as market volatility and changes in RCI's business outlook should be considered. Overall, this backtest confirms the viability of the strategy, offering attractive returns, but investors should remain cautious of potential risks when executing this strategy.

CEO Commentary

Eric Langan, President and CEO of RCI Hospitality, emphasized that revenue was affected by the divestiture of underperforming Bombshells locations and severe weather impacting same-store sales in early 2025. He noted improvements in sales starting in March and maintained an optimistic outlook on their "Back to Basics" capital allocation plan, which includes acquisitions and rebranding efforts.

Guidance

RCI Hospitality projects generating over $250 million in free cash flow over the next five years, with a target of $400 million in revenue and $75 million in free cash flow by fiscal 2029. The CEO expects a 10% to 15% annual growth in free cash flow per share and plans to continue share buybacks, aiming to reduce shares outstanding to around 7.5 million by 2029.

Additional News

In recent weeks, RCI Hospitality has focused on strategic acquisitions as part of its growth strategy. The company acquired Platinum West, an upscale adult nightclub in South Carolina, for $6.25 million plus an additional $1.75 million for the real estate. This acquisition aligns with their "Back to Basics" capital allocation plan, which emphasizes expanding their presence in the upscale nightclub sector. Additionally, RCI Hospitality repurchased 56,875 common shares for $2.9 million, reflecting their ongoing commitment to shareholder value through buybacks. These moves underscore RCI's strategic focus on growth and operational efficiency in a challenging market environment.