RCI Hospitality Reports $4.9 Million Net Loss Despite Revenue Growth to $139.6 Million

RCI Hospitality Holdings, Inc. reported a net loss of $4.9 million for the six months ended March 31, 2026, a significant decline from a net income of $12.3 million during the same period in 2025. The company's total revenues increased to $139.6 million, up 1.6% from $137.4 million year-over-year. This growth was primarily driven by a $8.4 million increase in sales from new locations and a $2.3 million increase from reformatted or rebranded locations, although it was partially offset by a $6.5 million decline in same-store sales and a $1.9 million impact from closed locations.

In terms of operational performance, RCI's cash flow from operating activities decreased by 19.2% to $17.7 million compared to $21.9 million in the prior year. The decline was attributed to higher vendor payments and increased interest expenses, despite improved cash collections from sales. The company also reported a free cash flow of $15.1 million, down 20.5% from $19 million in the previous year. The decrease in free cash flow was primarily due to higher vendor payments and interest expenses, although lower maintenance capital expenditures provided some offset.

Strategically, RCI Hospitality has been focusing on its growth strategy, which includes acquiring existing units and opening new locations. As of March 31, 2026, the company operated 67 establishments, including adult nightclubs and Bombshells restaurants. The company has also been active in share repurchases, having repurchased 177,061 shares at an average price of $24.11 during the six months ended March 31, 2026. Additionally, RCI's board approved a $20 million increase in its share repurchase program, reflecting its commitment to returning value to shareholders.

The company faced challenges in its Bombshells segment, which saw a revenue decline of 6% for the six-month period, primarily due to a decrease in same-store sales. In contrast, the Nightclubs segment reported a 2.8% revenue increase, driven by new acquisitions and rebranding efforts. RCI's management is currently evaluating the performance of its Bombshells program in light of recent trends and has one location under construction, with no immediate plans for further expansion.

Looking ahead, RCI Hospitality Holdings aims to generate adequate cash flows from operations over the next 12 months, despite the uncertainties posed by macroeconomic conditions, including inflation. The company is committed to its capital allocation strategy, which prioritizes club acquisitions, share buybacks, and dividends, with a long-term goal of achieving total revenues of $400 million and free cash flow of $75 million by fiscal 2029.