What is driving the decline in total revenues year‑over‑year and how will it affect future guidance?

What’s behind the revenue drop?

RCI’s 3‑quarter revenue fell 6.6 % YoY ($71.1 m vs $76.2 m) and the nine‑month total is down 6.3 % (‑$13.9 m). The primary driver is a decline in transaction volume and average spend per guest across its adult‑entertainment and hospitality segments. Management’s 10‑Q shows a sharp slowdown in “high‑ticket” revenue streams (e.g., VIP services, private events) that historically drive the bulk of the topline. The dip aligns with broader macro‑headwinds: a tighter discretionary‑spending environment, higher consumer‑price inflation, and lingering state‑level restrictions that have curbed foot traffic at many of the company’s “X‑Spaces” locations. The reduction in impairments (down from $18.3 m to $2.3 m) is a positive one‑off, but it does not offset the core volume shortfall, indicating the revenue decline is real‑world demand weakness rather than an accounting artifact.

Impact on guidance and trading outlook

Because the revenue trend is driven by lower consumer demand, analysts will likely downgrade FY 2025 revenue guidance unless RCI can quickly boost traffic or raise pricing without further volume erosion. The company’s operating cash flow remains solid (‑$13.8 m cash from operations vs $15.8 m prior), suggesting they can sustain near‑term cost‑containment, but the EPS outlook will stay muted (non‑GAAP EPS down 43 % YoY). In the short term, the stock is under pressure – the market sentiment is already negative (‑35). Traders should watch the upcoming earnings call for any new growth initiatives (e.g., expansion into new jurisdictions, digital‑ticketing platforms) or revised revenue forecasts. If management signals a modest rebound (e.g., a 2‑3 % revenue uplift for the next quarter) the stock could find support near current levels. In the absence of a clear upside catalyst, the bias remains short‑to‑neutral, with a watch‑list price target in the lower half of the prior‐year range until guidance clarity is provided.