Q3 2026 RCI Hospitality Holdings Inc Earnings Call

August 6, 2026

Bradley Chhay: Hey, everybody. This is Bradley Chhay. Just give it a couple more minutes, and we'll start the call. Be right back on. Good afternoon. Greetings, welcome to RCI Hospitality Holdings' Q3 conference call. My name is Bradley Chhay. You can find the company's presentation on RCI's website. Go to 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 space on a personal computer. At this time, all participants are on a listen-only mode. 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.

Speaker #1: Chhay. You can find the company's presentation on RCI's website. Go to section. All the links are at the top of the page. Please turn to slide 2 of our presentation.

Speaker #1: this call exclusively on X basis. To ask a question, join the space with the mobile device. To listen only, you can join space on a personal computer. participants are on a listen-only mode.

Speaker #1: computer. At this time, all A Q&A will follow shortly after. This conference is also being recorded. Please turn to page 3. I want to remind everybody of our Safe Harbor statement: you may hear or see forward-looking statements that involve risk and uncertainties.

Bradley Chhay: 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. I'm pleased to introduce Travis. Okay. Thank you, Travis. Turning to slide seven, I'll start with a review of our consolidated results. All comparisons are year-over-year for the quarter, unless otherwise noted. Total revenues were $73.9 million compared to $71.1 million, a 4% increase. Impairments and other charges net were insignificant compared to $2.3 million.

Speaker #1: 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 afterward.

Speaker #1: Please turn to page 4. I also direct you to the explanation of risks on gap financial measures. Please turn to slide 5. Our speakers today are Travis Rees, interim president and CEO, and Albert Molina, interim CFO.

Speaker #1: Now, please, to introduce Travis. Okay. Thank you, Travis. Turning to slide 7. I'll start in the review of our consolidated results. All comparisons are year-over-year for the quarter unless otherwise noted.

Albert Molina: Okay. Thank you, Travis. Turning to slide seven, I'll start with a review of our consolidated results. All comparisons are year-over-year for the quarter, unless otherwise noted. Total revenues were $73.9 million compared to $71.1 million, a 4% increase. Impairments and other charges net were insignificant compared to $2.3 million. Net income attributable to RCIH shareholders was $6.4 million compared to $4.1 million, a 57% increase.

Travis Reese: [Inaudible]

Speaker #1: Total revenues were $73.9 million compared to $71.1 million. A 4% increase. Impairments and other charges net were insignificant compared to $2.3 million. Net income attributable to RCIHH shareholders was $6.4 million, compared to $4.1 million.

Bradley Chhay: Net income attributable to RCIH shareholders was $6.4 million compared to $4.1 million, a 57% increase.

Speaker #1: A 57% increase. Gap EPS was $83, an 80% increase, and non-gap was $90 per share, a 70% increase. Net cash provided by operating activities and free cash flow were $2.5 million and $2.7 million lower, respectively.

Albert Molina: GAAP EPS was $0.83, an 80% increase, and non-GAAP was $0.90 per share, a 17% increase. Net cash provided by operating activities and free cash flow were $2.5 million and $2.7 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. Adjusted EBITDA was $16.9 million, an increase of 10% year over year, and 9% sequentially. Moving to slide eight, I will now cover our results by segment, nightclubs first. Revenues increased by 1% or recorded $63 million. Four newly acquired, opened, and reformatted clubs generated $4 million, and the 52 clubs in same-store sales produced $58.5 million. These more than offset $1.2 million in sales from four clubs closed subsequent to the year ago quarter.

Speaker #1: 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.

Speaker #1: Adjusted EBITDA was $16.9 million, an increase of 10% year-over-year and 9% sequentially. Moving to slide 8, I will now cover our results by segment, nightclubs first.

Speaker #1: Revenues increased by 1% to a record $63 million. Four newly acquired opened and reformatted clubs generated $4 million, and the 52 clubs in same-store sales produced $58.5 million.

Speaker #1: These more than offset $1.2 million in sales from 4 clubs closed subsequent to the year-ago quarter. By revenue type, service increased by 7.6%, food merchandise and other declined by 1.4%, and alcoholic beverages declined by 4.2%.

Albert Molina: By revenue type, service increased by 7.6%, food, merchandise, and other declined by 1.4%, and alcoholic beverages declined by 4.2%. Operating income was $19.6 million compared to $17.9 million, with margin at 31.2% of segment revenues compared to 28.6%. Non-GAAP operating income, which excludes impairment and other net charges, was $20.2 million compared to $20.8 million, with margin at 32.1% of segment revenues compared to 33.3%. On slide nine are the results for the Bombshells segment. Revenues increased by 25.4% to $10.8 million. Three new locations generated $2.6 million, and the nine locations same-store sales produced $8.2 million. By revenue type, alcoholic beverages increased by 33.6%, and food and other increased by 16.6%. Profitability improved substantially as we increased higher margin beverage sales and improved operating leverage across the segment. Operating income was $759,000 compared to $67,000, with margin at 7% of segment revenues compared to 0.8%.

Speaker #1: Operating income was $19.6 million, compared to $17.9 million. With margin at 31.2% of segment revenues compared to 28.6%. Non-gap operating income which excludes impairment and other net charges was $20.2 million.

Speaker #1: Compared to $20.8 million, with margin at 32.1% of segment revenues compared to 33.3%. On slide 9 are the results for the Bombshells segment. Revenues increased by 25.4% to $10.8 million.

Speaker #1: Three new locations generated $2.6 million. And the nine locations same-store sales produced $8.2 million. By revenue type, alcoholic beverages increased by 33.6%, and food and other increased by 16.6%.

Speaker #1: Profitability improved substantially as we increased higher margin beverage sales, and improved operating leverage across the segment. Operating income was $759,000, compared to $67,000 with margin at 7% of segment revenues, compared to $0.8%.

Albert Molina: Non-GAAP operating income was $801,000 compared to $80,000, with margin at 7.4% of segment revenues compared to 0.9%. Moving to slide 10, you will see the summary of our corporate expenses. GAAP operating expenses declined by 19.7%, or $1.8 million, and 16.3%, or $1.4 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 equivalent, which are operating income, net cash provided by operations, and net income. Slide 12, please. We ended the quarter with cash and cash equivalents of $26.4 million, down by less than half a million dollars from 31 March.

Speaker #1: was $801,000, compared to $80,000, with margin at 7.4% of segment revenues compared to $0.9%. Moving to slide 10, you will see the summary of our corporate expenses.

Speaker #1: Gap operating expenses declined by 19.7%, Non-gap operating income or $1.8 million, and $16.3%, or $1.4 million, on a non-gap basis. Both the gap and non-gap declines reflected a year-over-year reduction in insurance expense.

Speaker #1: Please turn to slide 11. We have slides coming up that discuss free cash flow and adjusted EBITDA, which are non-gap. In advance of that, we wanted to present the closest gap equivalents, which are operating income, net cash provided by operations, and net income.

Speaker #1: Slide 12, please. We entered the quarter with cash and cash equivalents of $26.4 million, down by less than half a million dollars from March 31.

Speaker #1: Our strong cash generation during the quarter enabled us to make net paydowns of $8.6 million as well as buyback $1,000,000 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.

Albert Molina: Our strong cash generation during the quarter enabled us to make debt paydowns of $8.6 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. Please turn to slide 13. As I mentioned, debt declined from 31 March, reflecting paydowns across all categories. The weighted average interest rate was 7.05%, which would be considered to be a very good rate for commercial real estate these days. Total occupancy cost of 8.3% declined sequentially. Debt to trailing 12-month adjusted EBITDA was 4.3x. Excluding the Q4 legal accrual, debt to EBITDA was 3.7x. Both are down from the Q2. Debt maturities continue to remain reasonable and manageable, particularly with our plans to sell non-income producing properties. Now, back to Travis.

Speaker #1: Please turn to slide 13. As I mentioned, debt declined from March 31, reflecting paydowns across all categories. The weighted average interest rate was 7.05%, which would be considered a very good rate for commercial real estate these days.

Speaker #1: Total occupancy cost of $8.3% declined sequentially. Debt to trailing 12-month adjusted EBITDA was 4.3 times, excluding the fourth quarter legal accrual, debt to EBITDA was 3.7 times, both are down from the second quarter.

Speaker #1: Debt maturities continued to remain reasonable and manageable, particularly with our plans to sell non-income-producing properties. Now back to Travis.

Eric Langan: Our plans have not changed.

Travis Reese: Our plans have not changed.

Speaker #2: Thank you, Travis and Albert. Eric Langan, RCI's founder and head of M&A. We'll also be on the Q&A. If you would like to ask a question, please raise your hand in the X spaces.

Bradley Chhay: 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 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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, to reflect what was said on this call.

Speaker #2: So I'll start taking questions. I'm going to go ahead and bring in Orchard Wealth. They're on. Make sure you unmute.

Bradley Chhay: I'll start taking questions. I'm going to go ahead and bring in Orchard Wealth. Ron, make sure you unmute. You still there?

Speaker #3: Thanks for being here. I still chose as listener, Bradley. You have to promote him to speaker, please.

Eric Langan: It still shows as listener, Bradley. You have to promote him to speaker, please.

Speaker #2: One second. He's on mute. Orchard Wealth, can you hit unmute?

Bradley Chhay: One second. He's on mute. Orchard Wealth, can you hit unmute?

Speaker #3: He's in listen-only mode.

Eric Langan: He's in listener-only mode.

Speaker #2: He's a speaker now.

Bradley Chhay: He's a speaker now.

Speaker #3: Okay. Okay.

Eric Langan: Okay.

Bradley Chhay: Speaker.

Eric Langan: Okay.

Speaker #2: You just have to unmute.

Bradley Chhay: You just have to unmute.

Speaker #3: All right. It's still showing him as a listener on my screen, guys, so I don't know. Maybe you can promote him again.

Eric Langan: I still show him as a listener on my screen, guys, so I don't know. Maybe we can promote him again?

Speaker #2: I'm going to go ahead and remove him as speaker and bring him back up. Orchard Wealth, if you can hear me, go ahead. You're a speaker now.

Bradley Chhay: I'm going to go ahead and remove him 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. Well.

Speaker #2: Looks like you're off mute too.

Speaker #3: I'm going to try promoting somebody else to see if that works. I see he's still showing listener on my screen still, so let's see if somebody else can be moved to speaker.

Eric Langan: You want to try promoting somebody else to see if that works? He's still showing listener on my screen still. Let's see if somebody else can be moved to speaker.

Speaker #2: Maxwell, Alice, I'm going to go ahead and pull you up. Make sure you unmute your microphone if you have a question.

Bradley Chhay: Maxwell Ellis, I'm going to go ahead and pull you up. Make sure you unmute your microphone if you have a question.

Speaker #4: Can you hear me?

Maxwell Ellis: Can you hear me?

[Analyst]: Can you hear me?

Speaker #2: Yes, we can hear you.

Bradley Chhay: Yes, we can hear you.

Speaker #4: Oh, great.

Maxwell Ellis: Oh, great.

[Analyst]: Oh, great.

Speaker #2: Make sure I'm muted again.

Bradley Chhay: You're on mute again. It's weird.

Speaker #4: All right.

Maxwell Ellis: All right. Anyway.

[Analyst]: All right. Anyway.

Speaker #2: Anyway.

Bradley Chhay: We can hear you loud.

Speaker #4: 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.

Maxwell Ellis: It seems like the call that you guys just did, I've spoken to multiple people, it seems like every 6 seconds you could hear something, and then every 2 or 3 seconds, it would go completely blank. Literally half the call that you guys just did, nobody heard anything. My main concern, Paul, 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-

[Analyst]: It seems like the call that you guys just did, I've spoken to multiple people, it seems like every 6 seconds you could hear something, and then every 2 or 3 seconds, it would go completely blank. Literally half the call that you guys just did, nobody heard anything. My main concern, Paul, 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.

Speaker #4: So literally half the call that you guys just did, nobody heard anything. My main concern is that the call right now is, how long before you guys are paying down debt at the accelerated rate before you can begin buybacks again?

Speaker #4: Because at the current rate and the prices, it's just—

Eric Langan: Yes

Maxwell Ellis: it's just, you know.

Speaker #2: I agree with you. Their prices are extremely favorable for stock buybacks right now. However, I was got a very uncomfortable with a 4.17 debt to EBIT ratio.

Eric Langan: I agree with you. The prices are extremely favorable for stock buybacks right now. However, I got very uncomfortable with a 4.17 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 3 to 6 months. We wanted to kind of line those things out right. We decided to just take a small break from buying back stock. You see, we bought through April. We slowed down in May. In May and June, basically just mainly paid debt. The real story, I know we say 3 months here, but if you look, in the last 6 months, we paid down $16 million worth of debt.

Speaker #2: 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.

Speaker #2: Hopefully in the next three to six months. So we wanted to kind of line those things out right. And so we decided to just take a small break from buying back stock.

Speaker #2: As you see, we bought through April. We slowed down in May, and we basically in 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.

Speaker #2: 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.

Eric Langan: Through the debt schedule, you see we plan to pay another $8 million this quarter. We'll have paid down almost $24 million in this brief period of time. We've got a property sale that should happen in September that will probably pay another $1 million. Our 3-month total should be a reduction of debt of almost $25 million. We just refinanced two things that we'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. We look forward to hopefully I'm hoping we're back in the market around 1 October as we start into the next fiscal year.

Speaker #2: We've got a property sale that should happen in So our three-month total should be a reduction of debt of almost $25 million. We should put our ratio we just refinanced two things that we were going to see coming up in the next quarter where we moved some maturity dates and changed some terms, paid off of some 12% money.

Speaker #2: To lower our 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.

Speaker #2: As we start into the next fiscal year.

Speaker #3: 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.

Maxwell Ellis: Okay. 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? It seems like you started with that one that you were managing, and it's kind of increasing across the footprint.

[Analyst]: Okay. 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? It seems like you started with that one that you were managing, and it's kind of increasing across the footprint.

Speaker #3: 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.

Speaker #2: 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.

Eric Langan: 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. I'm in Colorado on some basic Wi-Fi connection on my cell phone. I don't know. To give you an idea of what we've done is, we went back to our core. We started the concept almost 15 years ago in Dallas, Texas. The idea was to make a fun bar-type atmosphere with sports and girls, and great food, with no nudity, that we could take and expand around the country. I think after COVID, everybody had to become restaurants, and I think that too much of that got into our culture. What we've really done is massively changed the culture of Bombshells. We brought in a new director of operations for Bombshells, who was a club guy.

Speaker #2: And I'm in Colorado, on. Some 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.

Speaker #2: We started the concept almost 15 years ago. In Dallas, Texas. And the idea was to make a fun bar-type atmosphere with sports and girls.

Speaker #2: And great food. With no nudity. That we could take and expand around the country. I think after COVID, everybody had to become restaurants. And I think that too much of that got into our culture.

Speaker #2: So what we've really done is massively changed the culture of Bombshells. I've brought in a new Director of Operations for Bombshells, who was a club guy.

Eric Langan: 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. 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. We were doing some major expansions in 2021 and 2023 with these two large acquisitions, an $88 million acquisition, a $66.5 million acquisition. I think a lot of our focus was on that club growth. The Bombshells kind of slid into a rut. We kept telling them, You need to change this. You need to do that. Of course, the team that we had at the time was very good at restaurant business, but just not the club side.

Speaker #2: 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 of the quality level.

Speaker #2: And just slowly transform the concept back to what it was supposed to be and what it should have probably always been. We were doing some major expansions in '21 and '23 with these two large acquisitions, 88 million dollar acquisition of 66 and a half million dollar acquisition.

Speaker #2: And so, I think a lot of our focus was on that club growth, and we kind of—the Bombshells kind of slid into a rut.

Speaker #2: We kept telling them, "You need to change this. You need to do that." And of course, the team that we had at the time was very good at the restaurant business, but just not the club side.

Speaker #2: To give you an example, of what we've done is we've taken stores that were around 50 food and beverage percent beverage and increasing revenue at the same time.

Eric Langan: 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, increasing revenue at the same time. 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. Come in at 10:30, 11:30, 12:30 at night, and fill those hours back up, which as a restaurant, there was almost no business during those hours. Those hours had slipped off. The previous management was actually trying to tell us that we should close at midnight. Restaurants, that's when we really got the concept of Let's go fix this thing. Let's go turn it back into a bar.

Speaker #2: 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.

Speaker #2: So, come in at 10:30, 11:30, 12:30 at night and fill those hours back up, which, as a restaurant, there was almost no business during those hours.

Speaker #2: Those hours had slipped off, too. The group was actually—the previous management was actually trying to tell us that we should close at midnight.

Speaker #2: So we because restaurants, that's when we really got the concept of, "Let's go fix this thing. Let's go turn it back into the bar.

Speaker #2: Let's take it back to the original core of the concept. And we've done very, very well with that. April same-store sales were negative.

Eric Langan: Let's take it back to the original core of the concept. We've done very, very well with that. April's same-store sales were negative. We took over February, mid-February. I went into a store with another manager, and we started working that one store fixing the things, changing things of the concept. We put back the three stores in March, 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 atmosphere from the very get-go. We're seeing the results in it. I think you'll see improved results again this quarter based on what we've done in July so far. I think once football season starts, it's going to get even better.

Speaker #2: I don't know if you're sure. We took over February, mid-February. I went into a store with another manager. We started working that one store.

Speaker #2: Fixing the things, changing things at the concept. We took that to three stores. In March. And about mid-April, we launched that across the all 11 stores.

Speaker #2: As we prepared to open the store in Rowlet, we made sure that it opened properly with the right party attitude and atmosphere from the very get-go.

Speaker #2: 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.

Speaker #2: 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 and you guys making progress with rebuilding?

[Analyst]: My other thing is, what's the update right now on the Dallas club that burned down and you guys making progress with rebuilding?

Speaker #3: My other thing is, what's the update right now on the Dallas club that burned down and you guys making progress with rebuilding?

Speaker #2: The Forest 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.

Eric Langan: 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 mains 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. I think it's going to be a while before we can start construction there, and once we start construction, it'll be 9 months to build. We have started construction on the Baby Dolls West Fort Worth location on 4 March. That construction is going. They just recently passed, I don't know what you actually call it, but it's basically the rough-ins.

Eric Langan: 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 1 May.

Maxwell Ellis: Okay. 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?

[Analyst]: Okay. 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?

Eric Langan: We have a couple. 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's 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. It's not a lot. It's just a couple small locations. They're in very small markets. We're focusing on our larger markets. Our acquisitions that we're working on are larger market acquisitions that'll be very accretive for us.

Eric Langan: We're taking it very slow, because right now we do believe that buying our own clubs is absolutely the best use for our money.

Maxwell Ellis: Yeah. How many more payments do you have to do to Adam?

[Analyst]: Yeah. How many more payments do you have to do to Adam?

Eric Langan: I think we're down to $15 million or so, $14 million, $15 million. It's $1 million a month, 14, 15 more months.

Maxwell Ellis: Okay. Basically, you pay $1 million to Adam, which at some point will stop, and that will be added back into profits. Then you've been accelerating debt payments of about, what, a half a million per month also? Literally this quarter.

[Analyst]: Okay. Basically, you pay $1 million to Adam, which at some point will stop, and that will be added back into profits. Then you've been accelerating debt payments of about, what, a half a million per month also? Literally this quarter.

Eric Langan: Well, we paid down our line of credit, yeah.

Maxwell Ellis: Yeah.

[Analyst]: Yeah.

Eric Langan: Our line of credit, I think, after August, will be paid down to $100,000. We will not be making additional payments on that anymore. We're going to have to 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 $1 million on the ADW. That'll take 1 month off of that, plus save us the 12% interest over 15 months. 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.

Eric Langan: We're looking to lease some of the properties that haven't been able to sell in the last 6 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. Those are the things we've definitely been working on that non-income producing property. I think that's a lot of value that we can unlock over the next 6 to 12 months, hopefully. The interest rates and the oil prices and the uncertainty with the Iran War is definitely not helping commercial real estate sales. That is part of the issue, I believe. Because like I said, we have a lot of people looking. We're talking to a lot of groups on a bunch of our properties in multiple areas.

Eric Langan: A lot of it is, can they get the financing, can the financing at the right prices and whatnot. That's what we're up against. I'm hoping those headwinds will die down here, especially as we move closer to the election. Right after the first of the year, I look very forward to hopefully seeing that settle down so we can move some more of these properties.

Maxwell Ellis: With the club sales, are they pretty much in line, or is there a hotter area than the other geographically?

[Analyst]: With the club sales, are they pretty much in line, or is there a hotter area than the other geographically?

Eric Langan: What do you mean, the club sales?

Maxwell Ellis: In terms of just the revenues that you guys are bringing in from the club side of the business.

[Analyst]: In terms of just the revenues that you guys are bringing in from the club side of the business.

Eric Langan: Oh. Club revenues.

Maxwell Ellis: Yeah.

[Analyst]: Yeah.

Eric Langan: No, it's pretty spread around the country. One area gets hot, another area slows down a little bit. A lot of it's been sports-based in the last few months. At least seeing with the World Cup and of course, with the Knicks in the NBA finals and winning the NBA finals. That's definitely affected New York and helped New York. The games helped the Bombshells. They helped the clubs in Miami. For those people coming to watch the games and watch the New York Knicks. It probably didn't help us in Chicago because Bulls fans probably aren't Knicks fans, but there's enough Knicks fans in other parts of the country, I think, that it did very well for us.

Eric Langan: Of course, the World Cup. The most matches were in Dallas, right next to the Bombshells in Arlington, and two of our clubs in that area which did very well during those World Cup games. We had games in Houston, we had games in Miami, we had games in New York that all helped contribute to those regional areas. They helped everywhere because people came out to watch the games as well. It's hard to say that anything helped one particular area more than the next. I think that overall, we've had very strong results. Like I said, we're looking very forward to football this year.

Eric Langan: We're putting a lot of promotion and sports stuff in fantasy draft parties as well as come watch the games and game-watching parties and bottle specials during the games to get people to bring larger parties out, which we did very well with during World Cup. We're going to take the success that we've created there and multiply that and push that right into the football season. By October, we're going to be picking up basketball as well, and hockey kicks in. Baseball will heat up here as the Pennant races start. Sports should be very good for us, I think September, October, November, and probably all the way into February.

Maxwell Ellis: Have you noticed anything different with the service side of the clubs? Obviously, it seems like it's picking up. Does that seem like it bottomed a little while ago when you guys were in some sort of a going back to normal?

[Analyst]: Have you noticed anything different with the service side of the clubs? Obviously, it seems like it's picking up. Does that seem like it bottomed a little while ago when you guys were in some sort of a going back to normal?

Eric Langan: Yeah. I think the service revenue declined there for a while. I don't know. There's a lot of macro stuff going on. I think we are focusing on it. We are working on keeping people in our VIP rooms, right? That's where our service revenue is created, is when people go to our VIP rooms. We got to keep the pressure on the floor, keep more people in the building so people want to pay to move up, right? If you're the only person on a 737, you don't care if you're sitting in first class or not, right?

Maxwell Ellis: Yeah.

[Analyst]: Yeah.

Eric Langan: Because there's nobody next to you. If all of a sudden, every seat in the back is full and the front is empty, Can we move up there? That's what we have to do with clubs. I think our guys are doing a fantastic job of creating that pressure by putting more and more people through the door, and really focusing on just overall customer service right now.

Maxwell Ellis: Now, this is kind of a strange question, but maybe not. When it comes to service revenue, is there an age range of the ideal client that are spending the bigger dollars? I can't see it being 21, 22-year-old kids. To me, it would seem like some guy that's in his 30s to 50s, because they're the guys with the money that can drop it.

[Analyst]: Now, this is kind of a strange question, but maybe not. When it comes to service revenue, is there an age range of the ideal client that are spending the bigger dollars? I can't see it being 21, 22-year-old kids. To me, it would seem like some guy that's in his 30s to 50s, because they're the guys with the money that can drop it.

Eric Langan: It strictly depends on the club.

Maxwell Ellis: Yeah.

[Analyst]: Yeah.

Eric Langan: In the format of that club. There's a lot of 20-something tech guys out there that are making good money, right? Getting their first job, and there's a lot of crypto guys out there that are in their 20s. These influencers, right? These media influencers on social media, they make a lot of money, and they will come in and blow some money sometimes. We've got the real estate tycoon who can come in and whips out his platinum credit card and says, Everything's on me. I don't think the age groups are as tight as they were. I know that we have really done a better job, I think, of social media marketing and bringing in, working with some influencers and whatnot, to really bringing in more of that younger crowd that we haven't necessarily had in the past.

Eric Langan: We're doing everything we can do to put butts in seats, basically.

Maxwell Ellis: My last question is, are there a significant amount of women that have been showing up to the clubs, with their husbands or just it's a thing for girls to go to? Because-

[Analyst]: My last question is, are there a significant amount of women that have been showing up to the clubs, with their husbands or just it's a thing for girls to go to? Because-

Eric Langan: Oh, that's been for 10 years now. Yeah, that hasn't really adjusted much. On weekends. Not as many during the week, but on weekends, absolutely, especially Saturdays. Saturdays, we should have a couples night, I think. We do too much other business on Saturdays with bachelor parties, everything else, to kind of really focus on that crowd. We do focus on the customer service for that crowd, for sure.

Maxwell Ellis: Excellent. All right. Thanks, guys.

[Analyst]: Excellent. All right. Thanks, guys.

Eric Langan: Yeah.

Bradley Chhay: If you have a question, please raise your hand, and I'll call you to speak. Just to deal with the technical issues that people have been texting and messaging about, the immediate replay and recording will be posted right afterwards on X Spaces, as well as a posting of the transcript of this call. Sorry for the technical issues.

Q3 2026 RCI Hospitality Holdings Inc Earnings Call

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