RCI HOSPITALITY HOLDINGS, INC.

Niche adult-nightclub/restaurant operator with strong operating cash flow but weak equity returns and control issues.

Strengths

• OCF margin 17.7% (80.6 pct) and operating margin 10.8% (71.4 pct); hard-to-replicate licensed club base
• Net income up 166% (79.2 pct) on large revenue growth

Risks

• ROE 4.1% (42.9 pct) and ROA 1.8% lag despite high operating margins; D/E 0.82 (80 pct), current ratio 0.81
• Material weaknesses in internal controls, regulatory/litigation risk and industry volatility

Notable findings

• Exec changeRecent 8-K item 5.02 8-K ↗
• Weak liquidityCurrent ratio 0.81 (<1)
• Material weakness◦ We have identified material weaknesses in our internal control over financial reporting