Transcript: RCI Hospitality Hldgs Q3 2026 Earnings Conference Call

RCI Hospitality Hldgs (NASDAQ: RICK ) released third-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

4 million. 2%. 8 million, driven by higher-margin beverage sales. RCI paid down $16 million of debt over the past six months and plans to pay down an additional $8 million in the current quarter, with a focus on continuing debt reduction before resuming stock buybacks.

The company is shifting Bombshells back to a bar-centric model, enhancing the atmosphere and increasing beverage sales, which has improved overall performance. Management is optimistic about future growth, citing strong results from sports-related events and plans for expansion, including the rebuilding of certain clubs and sales of non-core properties. Full Transcript Bradley Chhay, Head of Corporate Development Good afternoon. Greetings and welcome to RCI Hospitality Hldgs third quarter conference call.

My name is Bradley Chhay. You can find the company's presentation on RCI's website. Go to the Investor Relations section. All the links are at the top of the page.

Please turn to slide two of our presentation. RCI is making this call exclusively on X Spaces. To ask a question, join the Space with a mobile device. To listen only, you can join the Space on a personal computer.

At this time, all participants are on mute. A Q&A will follow shortly after. This conference is also being recorded. Please turn to page three.

I want to remind everybody of our Safe Harbor statement. You may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards.

Please turn to page four. I also direct you to the explanation of RCI's non-GAAP financial measures. Please turn to slide five. Our speakers today are Travis Reese, Interim President and CEO, and Albert Molina, Interim CFO.

Now I'm pleased to introduce Travis. Albert Molina, Interim CFO Okay, thank you, Travis. Turning to slide 7, I'll start with our view of our consolidated results. All comparisons are year over year for the quarter unless otherwise noted.

1 million, a 4% increase. 3 million. 1 million, a 57% increase. 90 per share, a 17% increase.

7 million lower, respectively. These primarily reflected payments of more outstanding payables compared to prior-year quarter. On a sequential quarter basis, both net cash provided by operating activities and free cash flow were 14% and 26% higher, respectively. 9 million, an increase of 10% year over year and 9% sequentially.

Moving to slide 8, I will now cover our results by segment. Clubs. First, revenues increased by 1% to a record $63 million. 5 million.

2 million in sales from four clubs that closed subsequent to the year-ago quarter. 2%. 2% of segment revenues compared to 28%. 3%.

On slide 9 are the results for the Bombshells segment. 8 million. 2 million. 6%.

8%. 9%. Moving to slide 10, you will see the summary of our corporate expenses. 4 million on a non-GAAP basis.

Both the GAAP and non-GAAP declines reflected a year-over-year reduction in insurance expense. Please turn to slide 11. We have slides coming up that discuss free cash flow and adjusted EBITDA, which are non-GAAP. In advance of that we wanted to present the closest GAAP equivalents, which are operating income, net cash provided by operations, and net income.

Slide 12, please. 4 million, down by less than half a million dollars from March 31. 6 million, as well as buy back $1 million worth of shares. Free cash flow margin was 14%, improving for the second consecutive quarter, and adjusted EBITDA margin was 23%, improving for the third consecutive quarter.

Let's turn to slide 13. As I mentioned, debt declined from March 31st reflecting paydowns across all categories. 05%, which would be considered to be a very good rate for commercial real estate these days. 3% declined sequentially.

7 times. Both are down from the second quarter. Debt maturities continue to remain reasonable and manageable, particularly with our plans to sell non—income-producing properties. Now back to Travis.

Bradley Chhay, Head of Corporate Development Thank you, Travis and Albert. Eric Langan, RCI's founder and head of M&A, will also be on the Q&A. If you would like to ask a question, please raise your hand in the X Spaces. When you finish, mute your microphone to eliminate any background noise.

We have a limited number of speaker spaces. After your question, we may move you back to the audience to free up space. Please understand we cannot discuss the legal situation in New York other than to reiterate the company's statement that RCI, the individuals involved, and the three clubs have pled not guilty to all of the charges and are taking all necessary actions to defend themselves. Furthermore, I've also been told that we've experienced some technical issues, so a transcript will be posted shortly as soon as we're able to reflect what was said on this call.

So I'll start taking questions. I'm going to go ahead and bring in Orchard Wealth. They're on. Make sure you unmute.

One second. He's on mute. So Wells, can you hit unmute? He's a speaker now.

Okay. You just have to unmute. I'm going to go ahead and remove them as speaker and bring him back up. Orchard Wealth, if you can hear me, go ahead.

You're a speaker now. Looks like you're off mute too. I want to try promoting somebody else, see if that works. He's still showing listener on my screen still.

So let's see if somebody else can be moved. The speaker, Maxwell Ellis, I'm going to go ahead and pull you up. Make sure you unmute your microphone. Question.

Maxwell Ellis Can you hear me? Bradley Chhay, Head of Corporate Development Yes, we can hear you. Maxwell Ellis Oh, great. All right.

Anyway, it seems like the call that you guys just did, I've spoken to multiple people. It seems like every six seconds you could hear something and then every two or three seconds it would go completely blank. So literally half the call that you guys just did, nobody heard anything. My main concern right now is how long, before you guys are paying down debt at the accelerated rate, before you can begin buybacks again.

Because at this current rate and the prices, it's just, you know, I agree Travis Reese, Interim President and CEO with you, the prices are extremely favorable for stock buybacks right now. 17 debt to EBITDA ratio. So I wanted to get that knocked down. We also had some very timely payments to be able to pay down a few things to prepare for making some acquisitions here hopefully in the next three to six months.

So we wanted to kind of line those things out, right? And so we decided to take a small break from buying back stock. As you see, we bought through April, we slowed down in May. May and June basically just mainly paid debt.

The real story, I mean, I know we say three months here, but if you look in the last six months, we paid down $16 million worth of debt. And through the debt schedule, you see we plan to pay another $8 million this quarter. So we'll pay down almost $24 million in this brief period of time. We've got a property sale that should happen in November that will probably pay another million.

So our three-month total should be a reduction of debt of almost $25 million, which should put our ratio—We just refinanced two things that you're going to see coming up in the next quarter where we move some maturity dates and change some terms, paid off some 12% money to lower some of our debt service ratios. And we look forward to—hopefully, I'm hoping we're back in the market around the 1st of October as we start into the next fiscal year. Maxwell Ellis Okay, and then it seems like you've had a big turnaround in Bombshells, especially within—I guess it seems like you guys have flipped from being a restaurant back to being a bar that sells food.

What have you specifically done that's been catching on? Because it seems like you started with that one that you were managing and it's kind of increasing across the footprint. Travis Reese, Interim President and CEO Yeah, I'm getting a bunch of messages that people are still not hearing this call. I have not missed a single word of the call, and I'm in Colorado on a basic Wi—Fi connection on my cell phone.

So I don't know. But to give you an idea of what we've done is we went back to our core. You know, we started the concept almost 15 years ago in Dallas, Texas, and the idea was to make a fun, you know, bar-type atmosphere with sports and girls and great food, you know, with no nudity, that we could take and expand around the country. I think after COVID, you know, everybody had to become restaurants, and I think that too much of that got into our culture.

So what we've really done is massively change the culture of Bombshells. I brought in a new director of operations for Bombshells, who was a club guy. He's been in the club business since he was 18 years old. He understands fun.

He understands creating the party, not joining the party. And we've kept enough of the food guys to keep the food at a quality level and just slowly transform the concept back to what it was supposed to be and what it should have probably always been. 5 million acquisition. And so I think a lot of our focus was on that club growth.

And, you know, the Bombshells kind of slid into a rut. " And of course, the team that we had at the time was very good at restaurant business, but just not the club side. To give you an example of what we've done is we've taken stores that were around 50/50 food and beverage to 62% to 64% beverage—and increasing revenue at the same time. So it's not like we're getting rid of the food business or losing the food business.

We're actually generating more food business as well. But we're also making it a fun place to be again, and a fun place to be late night. So come in, you know, at 10:30, 11:30, 12:30 at night, and fill those hours back up, which, you know, as a restaurant, there was almost no business during those hours. Those hours had slipped off to, you know, they were—the group was actually—the previous management was actually trying to tell us that we should close at midnight.

So we—because restaurants, you know, that's when we really got the concept of, go fix this thing. Let's go turn it back into the bar. Let's take it back to the original core of the concept. And we've done very, very well with that.

April's same-store sales were negative. I moved to the store. Mid—February, I went into a store with another manager. We started working that one store, fixing the things, changing things of the concept.

We took that to three stores in March, and about mid—April, we launched that across all 11 stores, as we prepared to open the store in Rowlett and make sure that it opened properly with the right party attitude and atmosphere from the very get—go. And we're seeing the results in it. And I think you'll see improved results again this quarter based on what we've done in July so far. And I think once football season starts, it's going to get even better.

Maxwell Ellis My other thing is, what's the update right now on the Dallas club that burned down? Are you guys making progress with rebuilding? Travis Reese, Interim President and CEO The Fort Worth club? We're still working to replat that property.

We've had some issues with the city. That property was built in the 1970s originally. There's no sewer there, so we're on a septic tank. Of course the laws have changed on septic tanks, so we're working through those processes as well.

So I think it's going to be a while before we can start construction there, and once we start construction, it'll be nine months to build. We have started construction on the Baby Doll's West Fort Worth location on Mark 4. That construction is going—they just recently passed, I don't know what you actually call it, but it's basically the rough—ins. So all the plumbing and stuff that are all underground, all that has been done and they've got permission to start filling that in, and should be working on most of the vertical stuff here soon.

I suspect that location will open around May 1st. Maxwell Ellis Okay. And then in terms of the clubs that you do have, I remember you were giving some stat about how a certain amount of clubs equal 80%, like some Pareto principle between the profitability. Do you guys have any clubs that you think you'll be trimming off and selling real estate on?

Travis Reese, Interim President and CEO We have a couple that we—you know, as you know, we got rid of Harlingen, we got rid of Edinburg, El Paso location. We have a couple of locations that we're in negotiations with to possibly sell those locations. It doesn't mean every location is for sale. For the people that are listening that want to buy every club that we own, you will know when a club is for sale.

We're not marketing—it's going to be a random club here or there, and we'll market it to a broker so that you'll absolutely know that it's for sale when we make that final decision. But it's not a lot, just a couple small locations. They're in very small markets, and we're focusing on our larger markets. Our acquisitions that we're working on are larger—market acquisitions that'll be very, very accretive for us, and we're taking very slow because right now we do believe that buying our own clubs is actually the best use for our money.

So. Maxwell Ellis Yeah, then how many more payments do you have to Adam? Travis Reese, Interim President and CEO I think we're down to $15 million or so. Fourteen, fifteen million.

So it's a million a month. So 14, 15 more months. Maxwell Ellis Okay, so basically you've been paying about—you pay a million dollars to Adam, which at some point will stop and that will be added back into profits. And then you've been accelerating debt payments of about, what, a half a million per month also.

So like literally this— Travis Reese, Interim President and CEO Well, we pay down our line of credit. Yeah, yeah, but our line of credit—I think after August will be paid down to $100,000. So we will not be making additional payments on that anymore. So we're going to have to kind of look and see where we want to put the other money.

I know that we have a property that's supposed to sell in September. If it closes, we'll pay down about $900,000 in bank debt and we'll probably pay a million dollars on the ADW. So that'll take one month off of that, plus save us the 12% interest over 15 months. So we'll get a nice savings off of that and still put a little—not much, but a little bit of cash in the bank on our side as well.

We are in negotiations on multiple other properties. I've been working with brokers. We're accepting cash offers. We're looking to lease some of the properties that haven't been able to sell in the last six months, put a tenant in them, see if we can sell them once we put the tenant in, or just keep it and collect rents if the ROI is good enough.

So those are things—we've definitely been working on that, on income-producing property. So I think that's a lot of value that we can unlock over the next six to twelve months, hopefully.