Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included in this quarterly report, and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2025.
Overview
RCI Hospitality Holdings, Inc. is a holding company that, through its subsidiaries, engages in businesses that offer live adult entertainment and/or high-quality sports bar and dining experiences to its guests. All services and management operations are conducted by subsidiaries of RCIHH.
Through our subsidiaries, as of June 30, 2026, we operated a total of 68 establishments that offer live adult entertainment and sports bars and restaurants. We also operated a leading business communications company serving the multi-billion-dollar adult nightclubs industry. We have two principal reportable segments: Nightclubs and Bombshells. We combine operating segments not included in Nightclubs and Bombshells into "Other." In the context of club and restaurant/sports bar operations, the terms the "Company," "we," "our," "us" and similar terms used in this report refer to subsidiaries of RCIHH. RCIHH was incorporated in the State of Texas in 1994. Our corporate offices are located in Houston, Texas.
Upon initial adoption of ASU 2023-07 for the annual reporting period ended September 30, 2025, certain previously reported segment information have changed. There were no changes in consolidated financial information. Segment-related discussions and analyses in the MD&A relate to amounts exclusive of intersegment items.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management's historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
For a description of the accounting policies that, in management's opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on March 19, 2026.
During the three months ended June 30, 2026, there were no significant changes in our accounting policies and estimates.
Results of Operations
Highlights of the Company's operating results and cash flows are as follows, as compared to the same period of the prior year (all throughout the MD&A, unless stated otherwise):
Three Months Ended June 30, 2026
•Total revenues were $73.9 million compared to $71.1 million, a 3.9% increase (Nightclubs revenue of $63.0 million compared to $62.3 million, a 1.0% increase; and Bombshells revenue of $10.8 million compared to $8.6 million, a 25.4% increase)
•Consolidated same-store sales decreased by 0.2% (Nightclubs decreased by 0.8%, while Bombshells increased by 4.7%) (refer to the definition of same-store sales in the discussion of revenues below)
•Basic and diluted earnings per share ("EPS") of $0.83 compared to $0.46
•Non-GAAP diluted EPS* of $0.90 compared to $0.77
•Net cash provided by operating activities of $11.3 million compared to $13.8 million, an 18.2% decrease
•Free cash flow* of $10.6 million compared to $13.3 million, a 20.2% decrease
Nine Months Ended June 30, 2026
•Total revenues were $213.5 million compared to $208.5 million, a 2.4% increase (Nightclubs revenue of $185.6 million compared to $181.6 million, a 2.2% increase; and Bombshells revenue of $27.5 million compared to $26.4 million, a 4.2% increase)
•Consolidated same-store sales decreased by 3.4% (Nightclubs decreased by 2.5%, while Bombshells decreased by 9.7%)
•Basic and diluted EPS of $0.16 compared to $1.84
•Non-GAAP diluted EPS* of $2.41 compared to $2.23
•Net cash provided by operating activities of $29.0 million compared to $35.7 million, an 18.8% decrease
•Free cash flow* of $25.7 million compared to $32.3 million, a 20.4% decrease
* Reconciliation and discussion of non-GAAP financial measures are included in the "Non-GAAP Financial Measures" section below.
Revenues
Consolidated revenues for the third quarter increased by $2.8 million, or 3.9%, versus the comparable prior-year quarter due primarily to a $2.8 million increase in sales from new locations and a $1.4 million increase from reformatted/rebranded locations, partially offset by a $121,000 impact of the decrease in consolidated same-stores sales and a $1.2 million impact of closed locations.
Consolidated revenues for the nine months increased by $5.0 million, or 2.4%, versus the comparable prior-year nine-month period due primarily to a $11.2 million increase in sales from new locations and a $3.7 million increase from reformatted/rebranded locations, partially offset by a $6.6 million impact of the decrease in consolidated same-stores sales and a $3.2 million impact of closed locations.
We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells. We consider the first six months of operations of a Bombshells unit to be the "honeymoon period" where sales are higher than normal. We exclude from a particular month's calculation units previously included in the same-store sales base that have closed temporarily until its next full quarter of operations. We also exclude from the same-store sales base units that are being reconcepted or are closed due to renovations or remodels. Acquired units are included in the same-store sales calculation as long as they qualify based on the definition stated above. Revenues outside of our Nightclubs and Bombshells reportable segments are excluded from same-store sales calculation.
Segment contribution to total revenues was as follows (in thousands, except percentages):
| Three Months Ended June 30, 2026 | Mix | Three Months Ended June 30, 2025 | Mix | Inc (Dec) $ | Inc (Dec) % | ||||||||||||||||||||||||||||||
| Nightclubs | |||||||||||||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 25,224 | 40.1 | % | $ | 26,338 | 42.3 | % | $ | (1,114) | (4.2) | % | |||||||||||||||||||||||
| Sales of food and merchandise | 5,897 | 9.4 | % | 5,914 | 9.5 | % | (17) | (0.3) | % | ||||||||||||||||||||||||||
| Service revenues | 27,076 | 43.0 | % | 25,166 | 40.4 | % | 1,910 | 7.6 | % | ||||||||||||||||||||||||||
| Other revenues | 4,784 | 7.6 | % | 4,918 | 7.9 | % | (134) | (2.7) | % | ||||||||||||||||||||||||||
| 62,981 | 100.0 | % | 62,336 | 100.0 | % | 645 | 1.0 | % | |||||||||||||||||||||||||||
| Bombshells | |||||||||||||||||||||||||||||||||||
| Sales of alcoholic beverages | 5,935 | 55.0 | % | 4,442 | 51.6 | % | 1,493 | 33.6 | % | ||||||||||||||||||||||||||
| Sales of food and merchandise | 4,793 | 44.4 | % | 4,123 | 47.9 | % | 670 | 16.3 | % | ||||||||||||||||||||||||||
| Service revenues | 3 | 0.0 | % | 3 | 0.0 | % | - | - | % | ||||||||||||||||||||||||||
| Other revenues | 62 | 0.6 | % | 41 | 0.5 | % | 21 | 51.2 | % | ||||||||||||||||||||||||||
| 10,793 | 100.0 | % | 8,609 | 100.0 | % | 2,184 | 25.4 | % | |||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Other revenues | 165 | 100.0 | % | 200 | 100.0 | % | (35) | (17.5) | % | ||||||||||||||||||||||||||
| $ | 73,939 | $ | 71,145 | $ | 2,794 | 3.9 | % | ||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2026 | Mix | Nine Months Ended June 30, 2025 | Mix | Inc (Dec) $ | Inc (Dec) % | ||||||||||||||||||||||||||||||
| Nightclubs | |||||||||||||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 75,373 | 40.6 | % | $ | 77,948 | 42.9 | % | $ | (2,575) | (3.3) | % | |||||||||||||||||||||||
| Sales of food and merchandise | 17,490 | 9.4 | % | 17,169 | 9.5 | % | 321 | 1.9 | % | ||||||||||||||||||||||||||
| Service revenues | 78,330 | 42.2 | % | 72,214 | 39.8 | % | 6,116 | 8.5 | % | ||||||||||||||||||||||||||
| Other revenues | 14,372 | 7.7 | % | 14,270 | 7.9 | % | 102 | 0.7 | % | ||||||||||||||||||||||||||
| 185,565 | 100.0 | % | 181,601 | 100.0 | % | 3,964 | 2.2 | % | |||||||||||||||||||||||||||
| Bombshells | |||||||||||||||||||||||||||||||||||
| Sales of alcoholic beverages | 14,742 | 53.5 | % | 13,886 | 52.5 | % | 856 | 6.2 | % | ||||||||||||||||||||||||||
| Sales of food and merchandise | 12,705 | 46.1 | % | 12,385 | 46.9 | % | 320 | 2.6 | % | ||||||||||||||||||||||||||
| Service revenues | 8 | 0.0 | % | 48 | 0.2 | % | (40) | (83.3) | % | ||||||||||||||||||||||||||
| Other revenues | 78 | 0.3 | % | 106 | 0.4 | % | (28) | (26.4) | % | ||||||||||||||||||||||||||
| 27,533 | 100.0 | % | 26,425 | 100.0 | % | 1,108 | 4.2 | % | |||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Other revenues | 391 | 100.0 | % | 478 | 100.0 | % | (87) | (18.2) | % | ||||||||||||||||||||||||||
| $ | 213,489 | $ | 208,504 | $ | 4,985 | 2.4 | % | ||||||||||||||||||||||||||||
Nightclubs revenues increased by 1.0% during the third quarter compared to the same quarter last year primarily due to the $950,000 contribution of newly acquired clubs and $1.4 million from clubs that have been reformatted and/or rebranded, partially offset by the $493,000 impact of the decrease in same-store sales and the $1.2 million impact of closed clubs. For clubs that were open enough days to qualify as a same-store location, sales decreased by 0.8%. By type of revenue, alcoholic beverage sales decreased by 4.2%, food, merchandise and other revenue decreased by 1.4%, while service revenues increased by 7.6%.
During the nine-month period, Nightclubs revenues increased by 2.2% mainly due to the $6.5 million contribution of newly acquired clubs and $3.7 million from clubs that have been reformatted and/or rebranded, partially offset by the $4.3 million impact of the decrease in same-store sales and the $2.0 million impact of closed clubs. By type of revenue, alcoholic beverage sales decreased by 3.3%, food, merchandise and other revenue increased by 1.3%, while service revenues increased by 8.5%.
Bombshells third quarter revenues increased by 25.4% primarily due to the increase in same-store sales and sales from a new location. By type of revenue, food and merchandise sales increased by 16.3%, while alcoholic beverage sales increased by 33.6%.
During the nine-month period, Bombshells revenues increased by 4.2%. This was mainly caused by a $2.3 million decrease in same-store sales and a $1.2 million decrease from closed locations, partially offset by a $4.6 million contribution from new locations. By type of revenue, alcoholic beverage sales increased by 6.2% while food, merchandise and other increased by 2.0%.
Operating Expenses
Total operating expenses, as a percent of revenues, decreased to 82.5% from 87.8% from last year's third quarter, and increased to 87.0% from 85.2% for the nine-month period. Year-over-year change was a $1.5 million decrease, or 2.3%, for the quarter and an $8.0 million increase, or 4.5%, for the nine months. Significant contributors to the changes in operating expenses are explained below.
Cost of goods sold. Cost of goods sold for the third quarter increased by $548,000, or 6.0%, and increased by $702,000, or 2.6%, for the nine-month period mainly due to higher sales. As a percent of total revenues, cost of goods sold was increased to 13.1% from 12.8% during the quarter and was flat at 13.0% during the nine-month period. Nightclubs cost of goods sold during the quarter decreased to 11.2% from 11.3% and for the nine months decreased to 11.3% from 11.4%. Bombshells cost of goods sold increased to 24.1% from 23.7% during the quarter and increased to 24.2% from 23.5% during the nine months.
Cost of goods sold by segment is as follows (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | 7,043 | $ | 7,071 | $ | 20,938 | $ | 20,707 | |||||||||||||||
| Bombshells | 2,604 | 2,037 | 6,655 | 6,211 | |||||||||||||||||||
| Other | 36 | 27 | 136 | 109 | |||||||||||||||||||
| $ | 9,683 | $ | 9,135 | $ | 27,729 | $ | 27,027 | ||||||||||||||||
Salaries and wages. Salaries and wages increased by $944,000, or 4.5%, for the quarter and increased by $2.6 million, or 4.2%, for the nine-month period mainly due to new clubs and Bombshells units. As a percent of total revenues, salaries and wages increased to 29.6% from 29.4% for the quarter and increased to 30.2% from 29.7% for the nine months. During the quarter, Nightclubs increased to 23.3% from 22.9%, Bombshells decreased to 30.5% from 33.2%, while Corporate was flat at 5.1%. During the nine-month period, Nightclubs increased to 23.7% from 23.3%, Bombshells increased to 32.6% from 32.0%, and Corporate increased to 5.3% from 5.2%.
Salaries and wages by segment are as follows (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | 14,651 | $ | 14,276 | $ | 43,958 | $ | 42,297 | |||||||||||||||
| Bombshells | 3,291 | 2,860 | 8,984 | 8,458 | |||||||||||||||||||
| Other | 127 | 136 | 347 | 376 | |||||||||||||||||||
| Corporate | 3,791 | 3,644 | 11,256 | 10,840 | |||||||||||||||||||
| $ | 21,860 | $ | 20,916 | $ | 64,545 | $ | 61,971 | ||||||||||||||||
Selling, general, and administrative expenses. Total selling, general, and administrative expenses decreased by $768,000, or 2.9%, for the quarter and decreased by $2.0 million, or 2.6%, for the nine-month period. Dollar amounts in the tables below are in thousands.
| Three Months Ended June 30, 2026 |
Three Months Ended June 30, 2025 | Better (Worse) | |||||||||||||||||||||||||||||||||
| Amount | % of Revenues | Amount | % of Revenues | Amount | % | ||||||||||||||||||||||||||||||
| Taxes and permits | $ | 3,832 | 5.2 | % | $ | 3,418 | 4.8 | % | $ | (414) | (12.1) | % | |||||||||||||||||||||||
| Advertising and marketing | 2,905 | 3.9 | % | 2,974 | 4.2 | % | 69 | 2.3 | % | ||||||||||||||||||||||||||
| Supplies and services | 2,889 | 3.9 | % | 2,503 | 3.5 | % | (386) | (15.4) | % | ||||||||||||||||||||||||||
| Insurance | 2,594 | 3.5 | % | 5,389 | 7.6 | % | 2,795 | 51.9 | % | ||||||||||||||||||||||||||
| Legal | 1,734 | 2.3 | % | 1,383 | 1.9 | % | (351) | (25.4) | % | ||||||||||||||||||||||||||
| Lease | 1,652 | 2.2 | % | 1,607 | 2.3 | % | (45) | (2.8) | % | ||||||||||||||||||||||||||
| Charge card fees | 2,103 | 2.8 | % | 1,791 | 2.5 | % | (312) | (17.4) | % | ||||||||||||||||||||||||||
| Utilities | 1,581 | 2.1 | % | 1,320 | 1.9 | % | (261) | (19.8) | % | ||||||||||||||||||||||||||
| Security | 1,060 | 1.4 | % | 1,019 | 1.4 | % | (41) | (4.0) | % | ||||||||||||||||||||||||||
| Stock-based compensation | - | - | % | 392 | 0.6 | % | 392 | 100.0 | % | ||||||||||||||||||||||||||
| Accounting and professional fees | 1,467 | 2.0 | % | 1,259 | 1.8 | % | (208) | (16.5) | % | ||||||||||||||||||||||||||
| Repairs and maintenance | 1,338 | 1.8 | % | 1,221 | 1.7 | % | (117) | (9.6) | % | ||||||||||||||||||||||||||
| Other | 2,217 | 3.0 | % | 1,864 | 2.6 | % | (353) | (18.9) | % | ||||||||||||||||||||||||||
| Total selling, general, and administrative expenses | $ | 25,372 | 34.3 | % | $ | 26,140 | 36.7 | % | $ | 768 | 2.9 | % | |||||||||||||||||||||||
|
Nine Months Ended June 30, 2026 |
Nine Months Ended June 30, 2025 | Better (Worse) | |||||||||||||||||||||||||||||||||
| Amount | % of Revenues | Amount | % of Revenues | Amount | % | ||||||||||||||||||||||||||||||
| Taxes and permits | $ | 11,048 | 5.2 | % | $ | 10,664 | 5.1 | % | $ | (384) | (3.6) | % | |||||||||||||||||||||||
| Advertising and marketing | 8,638 | 4.0 | % | 8,537 | 4.1 | % | (101) | (1.2) | % | ||||||||||||||||||||||||||
| Supplies and services | 8,334 | 3.9 | % | 7,459 | 3.6 | % | (875) | (11.7) | % | ||||||||||||||||||||||||||
| Insurance | 7,819 | 3.7 | % | 13,495 | 6.5 | % | 5,676 | 42.1 | % | ||||||||||||||||||||||||||
| Legal | 4,103 | 1.9 | % | 4,138 | 2.0 | % | 35 | 0.8 | % | ||||||||||||||||||||||||||
| Lease | 4,893 | 2.3 | % | 4,746 | 2.3 | % | (147) | (3.1) | % | ||||||||||||||||||||||||||
| Charge card fees | 6,026 | 2.8 | % | 5,189 | 2.5 | % | (837) | (16.1) | % | ||||||||||||||||||||||||||
| Utilities | 4,757 | 2.2 | % | 4,199 | 2.0 | % | (558) | (13.3) | % | ||||||||||||||||||||||||||
| Security | 3,238 | 1.5 | % | 3,121 | 1.5 | % | (117) | (3.7) | % | ||||||||||||||||||||||||||
| Stock-based compensation | 589 | 0.3 | % | 980 | 0.5 | % | 391 | 39.9 | % | ||||||||||||||||||||||||||
| Accounting and professional fees | 3,896 | 1.8 | % | 3,570 | 1.7 | % | (326) | (9.1) | % | ||||||||||||||||||||||||||
| Repairs and maintenance | 4,045 | 1.9 | % | 3,712 | 1.8 | % | (333) | (9.0) | % | ||||||||||||||||||||||||||
| Other | 5,887 | 2.8 | % | 5,437 | 2.6 | % | (450) | (8.3) | % | ||||||||||||||||||||||||||
| Total selling, general, and administrative expenses | $ | 73,273 | 34.3 | % | $ | 75,247 | 36.1 | % | $ | 1,974 | 2.6 | % | |||||||||||||||||||||||
Insurance expense decreased due to last year's estimated self-insurance reserve. Taxes and permits, charge card fees, supplies and services, utilities, and repairs and maintenance increased due to the increase in sales. Stock-based compensation decreased due to the completion of the expense recognition of the 2022 stock options in February 2026.
Selling, general, and administrative expenses by segment are as follows (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | 18,290 | $ | 17,481 | $ | 53,532 | $ | 52,427 | |||||||||||||||
| Bombshells | 3,751 | 3,319 | 10,304 | 10,152 | |||||||||||||||||||
| Other | 84 | 106 | 249 | 332 | |||||||||||||||||||
| Corporate | 3,247 | 5,234 | 9,188 | 12,336 | |||||||||||||||||||
| $ | 25,372 | $ | 26,140 | $ | 73,273 | $ | 75,247 | ||||||||||||||||
Depreciation and amortization. Depreciation and amortization increased by $138,000, or 3.5%, during the quarter and increased by $997,000, or 8.9%, during the nine-month period primarily due to additional assets from last year's club acquisitions and newly opened Bombshells.
Depreciation and amortization by segment are as follows (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | 3,393 | $ | 3,311 | $ | 10,288 | $ | 9,440 | |||||||||||||||
| Bombshells | 346 | 314 | 1,099 | 996 | |||||||||||||||||||
| Other | 1 | 1 | 4 | 5 | |||||||||||||||||||
| Corporate | 290 | 266 | 843 | 796 | |||||||||||||||||||
| $ | 4,030 | $ | 3,892 | $ | 12,234 | $ | 11,237 | ||||||||||||||||
Impairments and other charges, net. Impairments and other charges, net changed mainly due to current-year increased impairment of assets, lower lawsuit settlements in the current year, and the sale of our Bombshells location in Austin, Texas, which was significantly impaired in a prior period, and the insurance recovery for a club razed by fire in last year's first quarter.
By segment, impairment and other charges, net are as follows (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | (31) | $ | 2,338 | $ | 7,734 | $ | 3,486 | |||||||||||||||
| Bombshells | 42 | 12 | 138 | (1,159) | |||||||||||||||||||
| Other | - | - | - | - | |||||||||||||||||||
| Corporate | 15 | (1) | 20 | (95) | |||||||||||||||||||
| $ | 26 | $ | 2,349 | $ | 7,892 | $ | 2,232 | ||||||||||||||||
Income (Loss) from Operations
For the three and nine months ended June 30, 2026, and 2025, our consolidated operating margin was 17.5% and 12.2%, and 13.0% and 14.8%, respectively. Segment contribution to income (loss) from operations is presented in the table below (in thousands):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Nightclubs | $ | 19,635 | $ | 17,859 | $ | 49,115 | $ | 53,244 | |||||||||||||||
| Bombshells | 759 | 67 | 353 | 1,767 | |||||||||||||||||||
| Other | (83) | (70) | (345) | (344) | |||||||||||||||||||
| Corporate | (7,343) | (9,143) | (21,307) | (23,877) | |||||||||||||||||||
| $ | 12,968 | $ | 8,713 | $ | 27,816 | $ | 30,790 | ||||||||||||||||
Excluding certain items, the three months ended June 30, 2026, and 2025 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands). Refer to the discussion ofNon-GAAP Financial Measures on page31.
| Three Months Ended June 30, 2026 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 19,635 | $ | 759 | $ | (83) | $ | (7,343) | $ | 12,968 | |||||||||||||||||||
| Amortization of intangibles | 617 | - | - | 1 | 618 | ||||||||||||||||||||||||
| Settlement of lawsuits, net of recoveries | 67 | 25 | - | - | 92 | ||||||||||||||||||||||||
| Loss on sale of businesses and assets | 7 | 17 | - | 17 | 41 | ||||||||||||||||||||||||
| Gain on insurance | (105) | - | - | (2) | (107) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 20,221 | $ | 801 | $ | (83) | $ | (7,327) | $ | 13,612 | |||||||||||||||||||
| GAAP operating margin | 31.2 | % | 7.0 | % | (50.3) | % | (9.9) | % | 17.5 | % | |||||||||||||||||||
| Non-GAAP operating margin | 32.1 | % | 7.4 | % | (50.3) | % | (9.9) | % | 18.4 | % | |||||||||||||||||||
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 17,859 | $ | 67 | $ | (70) | $ | (9,143) | $ | 8,713 | |||||||||||||||||||
| Amortization of intangibles | 572 | 1 | - | 3 | 576 | ||||||||||||||||||||||||
| Settlement of lawsuits | 3,281 | - | - | - | 3,281 | ||||||||||||||||||||||||
| Stock-based compensation | - | - | - | 392 | 392 | ||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 191 | 12 | - | (1) | 202 | ||||||||||||||||||||||||
| Gain on insurance | (1,134) | - | - | - | (1,134) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 20,769 | $ | 80 | $ | (70) | $ | (8,749) | $ | 12,030 | |||||||||||||||||||
| GAAP operating margin | 28.6 | % | 0.8 | % | (35.0) | % | (12.9) | % | 12.2 | % | |||||||||||||||||||
| Non-GAAP operating margin | 33.3 | % | 0.9 | % | (35.0) | % | (12.3) | % | 16.9 | % | |||||||||||||||||||
Excluding certain items, the nine months ended June 30, 2026, and 2025 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).
| Nine Months Ended June 30, 2026 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 49,115 | $ | 353 | $ | (345) | $ | (21,307) | $ | 27,816 | |||||||||||||||||||
| Amortization of intangibles | 1,848 | - | - | 5 | 1,853 | ||||||||||||||||||||||||
| Impairment of assets | 8,433 | - | - | - | 8,433 | ||||||||||||||||||||||||
| Settlement of lawsuits, net of recoveries | (618) | 115 | - | - | (503) | ||||||||||||||||||||||||
| Stock-based compensation | - | - | - | 589 | 589 | ||||||||||||||||||||||||
| Loss on sale of businesses and assets | 247 | 23 | - | 22 | 292 | ||||||||||||||||||||||||
| Gain on insurance | (328) | - | - | (2) | (330) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 58,697 | $ | 491 | $ | (345) | $ | (20,693) | $ | 38,150 | |||||||||||||||||||
| GAAP operating margin | 26.5 | % | 1.3 | % | (88.2) | % | (10.0) | % | 13.0 | % | |||||||||||||||||||
| Non-GAAP operating margin | 31.6 | % | 1.8 | % | (88.2) | % | (9.7) | % | 17.9 | % | |||||||||||||||||||
| Nine Months Ended June 30, 2025 | |||||||||||||||||||||||||||||
| Nightclubs | Bombshells | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) from operations | $ | 53,244 | $ | 1,767 | $ | (344) | $ | (23,877) | $ | 30,790 | |||||||||||||||||||
| Amortization of intangibles | 1,718 | 3 | - | 12 | 1,733 | ||||||||||||||||||||||||
| Impairment of assets | 1,780 | - | - | - | 1,780 | ||||||||||||||||||||||||
| Settlement of lawsuits | 3,557 | 30 | - | - | 3,587 | ||||||||||||||||||||||||
| Stock-based compensation | - | - | - | 980 | 980 | ||||||||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 300 | (1,189) | - | (95) | (984) | ||||||||||||||||||||||||
| Gain on insurance | (2,151) | - | - | - | (2,151) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | 58,448 | $ | 611 | $ | (344) | $ | (22,980) | $ | 35,735 | |||||||||||||||||||
| GAAP operating margin | 29.3 | % | 6.7 | % | (72.0) | % | (11.5) | % | 14.8 | % | |||||||||||||||||||
| Non-GAAP operating margin | 32.2 | % | 2.3 | % | (72.0) | % | (11.0) | % | 17.1 | % | |||||||||||||||||||
Other Income/Expenses
Interest expense increased by $422,000, or 10.5%, while interest income decreased by $31,000, or 26.5%, during the quarter. Interest expense increased by $1.1 million, or 8.9%, while interest income decreased by $168,000, or 38.6%, during the nine-month period. Non-operating gains and losses include premium on stock repurchase and gain on lease termination. Premium on stock repurchase resulted from the November 2025 block stock buyback. Gain on lease termination was from a settlement of lease obligation related to a closed Bombshells unit in a prior period.
Our total occupancy costs, which we define as the sum of operating lease expense and interest expense, were $6.1 million and $5.6 million for the quarters ended June 30, 2026, and 2025, respectively. As a percentage of revenue, total occupancy costs were 8.3% and 7.9% during the quarters ended June 30, 2026, and 2025, respectively. Total occupancy costs were $18.2 million and $17.0 million for the nine months ended June 30, 2026, and 2025, respectively. As a percentage of revenue, total occupancy costs were 8.5% and 8.1% during the nine months ended June 30, 2026, and 2025, respectively.
Income Taxes
Income tax expense was $2.1 million and $733,000 during the three months ended June 30, 2026, and 2025, respectively. The effective income tax rate was approximately 24.7% and 15.3% for the three months ended June 30, 2026, and 2025, respectively. Income tax expense was $3.3 million and $3.6 million during the nine months ended June 30, 2026, and 2025, respectively. The effective income tax rate approximately was 66.8% and 18.3% for the nine months ended June 30, 2026, and 2025, respectively. Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, and the impact of the nondeductible premium on stock repurchase during the current year.
Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because they describe the operating performance of the Company and help management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:
Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) impairment of assets, (c) settlement of lawsuits, net of recoveries, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, and (f) stock-based compensation. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.
Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income or loss attributable to RCIHH common stockholders and diluted earnings per share. Adjustment items are: (a) amortization of intangibles, (b) impairment of assets, (c) settlement of lawsuits, net of recoveries, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) stock-based compensation, (g) premium on stock repurchase, (h) gains or losses on lease termination, and (i) the income tax effect of the above-described adjustments. Included in the net income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at approximately 23.2% and 17.4% effective tax rate of the pre-tax non-GAAP income for the nine months ended June 30, 2026, and 2025, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.
Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income or loss attributable to RCIHH common stockholders: (a) depreciation and amortization, (b) income tax expense, (c) net interest expense, (d) impairment of assets, (e) settlement of lawsuits, net of recoveries, (f) gains or losses on sale of businesses and assets, (g) gains or losses on insurance, (h) stock-based compensation, (i) premium on stock repurchase, and (j) gains or losses on lease termination. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.
We also use certain non-GAAP cash flow measures such as free cash flow. See "Liquidity and Capital Resources" section for further discussion.
The following tables present our non-GAAP performance measures for the three and nine months ended June 30, 2026, and 2025 (in thousands, except per share, number of shares, and percentages):
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Reconciliation of GAAP net income to Adjusted EBITDA | |||||||||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 6,351 | $ | 4,058 | $ | 1,291 | $ | 16,313 | |||||||||||||||
| Income tax expense | 2,130 | 733 | 3,281 | 3,648 | |||||||||||||||||||
| Interest expense, net | 4,368 | 3,915 | 13,052 | 11,797 | |||||||||||||||||||
| Depreciation and amortization | 4,030 | 3,892 | 12,234 | 11,237 | |||||||||||||||||||
| Impairment of assets | - | - | 8,433 | 1,780 | |||||||||||||||||||
Settlement of lawsuits, net of recoveries | 92 | 3,281 | (503) | 3,587 | |||||||||||||||||||
| Stock-based compensation | - | 392 | 589 | 980 | |||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 41 | 202 | 292 | (984) | |||||||||||||||||||
| Gain on insurance | (107) | (1,134) | (330) | (2,151) | |||||||||||||||||||
| Premium on stock repurchase | - | - | 9,885 | - | |||||||||||||||||||
| Gain on lease termination | - | - | - | (979) | |||||||||||||||||||
| Adjusted EBITDA | $ | 16,905 | $ | 15,339 | $ | 48,224 | $ | 45,228 | |||||||||||||||
| Adjusted EBITDA as a percentage of revenues | 22.9 | % | 21.6 | % | 22.6 | % | 21.7 | % | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Reconciliation of GAAP net income to non-GAAP net income | |||||||||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 6,351 | $ | 4,058 | $ | 1,291 | $ | 16,313 | |||||||||||||||
| Amortization of intangibles | 618 | 576 | 1,853 | 1,733 | |||||||||||||||||||
| Impairment of assets | - | - | 8,433 | 1,780 | |||||||||||||||||||
Settlement of lawsuits, net of recoveries | 92 | 3,281 | (503) | 3,587 | |||||||||||||||||||
| Stock-based compensation | - | 392 | 589 | 980 | |||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 41 | 202 | 292 | (984) | |||||||||||||||||||
| Gain on insurance | (107) | (1,134) | (330) | (2,151) | |||||||||||||||||||
| Premium on stock repurchase | - | - | 9,885 | - | |||||||||||||||||||
| Gain on lease termination | - | - | - | (979) | |||||||||||||||||||
| Net income tax effect | (130) | (562) | (2,466) | (515) | |||||||||||||||||||
| Non-GAAP net income | $ | 6,865 | $ | 6,813 | $ | 19,044 | $ | 19,764 | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share | |||||||||||||||||||||||
| Diluted shares | 7,653,000 | 8,793,809 | 7,898,831 | 8,859,028 | |||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.83 | $ | 0.46 | $ | 0.16 | $ | 1.84 | |||||||||||||||
| Amortization of intangibles | 0.08 | 0.07 | 0.23 | 0.20 | |||||||||||||||||||
| Impairment of assets | - | - | 1.07 | 0.20 | |||||||||||||||||||
Settlement of lawsuits, net of recoveries | 0.01 | 0.37 | (0.06) | 0.40 | |||||||||||||||||||
| Stock-based compensation | - | 0.04 | 0.07 | 0.11 | |||||||||||||||||||
| Loss (gain) on sale of businesses and assets | 0.01 | 0.02 | 0.04 | (0.11) | |||||||||||||||||||
| Gain on insurance | (0.01) | (0.13) | (0.04) | (0.24) | |||||||||||||||||||
| Premium on stock repurchase | - | - | 1.25 | - | |||||||||||||||||||
| Gain on lease termination | - | - | - | (0.11) | |||||||||||||||||||
| Net income tax effect | (0.02) | (0.06) | (0.31) | (0.06) | |||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.90 | $ | 0.77 | $ | 2.41 | $ | 2.23 | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Reconciliation of GAAP operating income to non-GAAP operating income | |||||||||||||||||||||||
| Income from operations | $ | 12,968 | $ | 8,713 | $ | 27,816 | $ | 30,790 | |||||||||||||||
| Amortization of intangibles | 618 | 576 | 1,853 | 1,733 | |||||||||||||||||||
| Impairment of assets | - | - | 8,433 | 1,780 | |||||||||||||||||||
Settlement of lawsuits, net of recoveries | 92 | 3,281 | (503) | 3,587 | |||||||||||||||||||
| Stock-based compensation | - | 392 | 589 | 980 | |||||||||||||||||||
Loss (gain) on sale of businesses and assets | 41 | 202 | 292 | (984) | |||||||||||||||||||
| Gain on insurance | (107) | (1,134) | (330) | (2,151) | |||||||||||||||||||
| Non-GAAP operating income | $ | 13,612 | $ | 12,030 | $ | 38,150 | $ | 35,735 | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Reconciliation of GAAP operating margin to non-GAAP operating margin | |||||||||||||||||||||||
| Income from operations | 17.5 | % | 12.2 | % | 13.0 | % | 14.8 | % | |||||||||||||||
| Amortization of intangibles | 0.8 | % | 0.8 | % | 0.9 | % | 0.8 | % | |||||||||||||||
| Impairment of assets | - | % | - | % | 4.0 | % | 0.9 | % | |||||||||||||||
Settlement of lawsuits, net of recoveries | 0.1 | % | 4.6 | % | (0.2) | % | 1.7 | % | |||||||||||||||
| Stock-based compensation | - | % | 0.6 | % | 0.3 | % | 0.5 | % | |||||||||||||||
Loss (gain) on sale of businesses and assets | 0.1 | % | 0.3 | % | 0.1 | % | (0.5) | % | |||||||||||||||
| Gain on insurance | (0.1) | % | (1.6) | % | (0.2) | % | (1.0) | % | |||||||||||||||
| Non-GAAP operating income | 18.4 | % | 16.9 | % | 17.9 | % | 17.1 | % | |||||||||||||||
* Per share amounts and percentages may not foot due to rounding.
** The adjustments to reconcile net income attributable to RCIHH common stockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial.
Liquidity and Capital Resources
At June 30, 2026, our cash and cash equivalents were approximately $26.4 million compared to $33.7 million at September 30, 2025. Because of the large volume of cash we handle, we have very stringent cash controls. As of June 30, 2026, we had negative working capital of $30.4 million compared to a negative working capital of $12.1 million as of September 30, 2025. We believe that we can borrow capital if needed but currently we do not have unused credit facilities so there can be no guarantee that additional liquidity will be readily available or available on favorable terms.
We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions. Instead, we use debt financing to lower our overall cost of capital and increase our return on stockholders' equity. We have a history of borrowing funds in private transactions and from sellers in acquisition transactions and have secured traditional bank financing on our new development projects and refinancing of our existing notes payable. There can be no assurance though that any of these financing options would be presently available on favorable terms, if at all. We also have historically utilized these cash flows to invest in property and equipment, adult nightclubs, and restaurants/sports bars.
We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.
The following table presents a summary of our cash flows from operating, investing, and financing activities (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating activities | $ | 28,975 | $ | 35,684 | |||||||
| Investing activities | (3,587) | (22,087) | |||||||||
| Financing activities | (32,693) | (16,350) | |||||||||
| Net decrease in cash and cash equivalents | $ | (7,305) | $ | (2,753) | |||||||
Cash Flows from Operating Activities
Following are our summarized cash flows from operating activities (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net income | $ | 1,633 | $ | 16,319 | |||||||
| Depreciation and amortization | 12,234 | 11,237 | |||||||||
| Impairment of assets | 8,433 | 1,780 | |||||||||
Deferred income tax benefit | (2,223) | (2,200) | |||||||||
| Stock-based compensation | 589 | 980 | |||||||||
| Premium on stock repurchase | 9,885 | - | |||||||||
| Net change in operating assets and liabilities | (4,173) | 8,224 | |||||||||
| Other | 2,597 | (656) | |||||||||
| Net cash provided by operating activities | $ | 28,975 | $ | 35,684 | |||||||
Net cash provided by operating activities was lower in the current nine-month period by 18.8% primarily due to the higher vendor payments and higher interest expense paid, partially offset by higher cash collection from sales and lower income tax payments.
Cash Flows from Investing Activities
Following are our cash flows from investing activities (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Payments for property and equipment and intangible assets | $ | (5,724) | $ | (12,289) | |||||||
| Acquisition of businesses | - | (13,000) | |||||||||
| Proceeds from sale of businesses and assets | 1,676 | 1,086 | |||||||||
| Proceeds from insurance | 291 | 1,893 | |||||||||
| Proceeds from notes receivable | 170 | 223 | |||||||||
| Net cash used in investing activities | $ | (3,587) | $ | (22,087) | |||||||
Following is a breakdown of our payments for property and equipment and intangible assets for the nine months ended June 30, 2026, and 2025 (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| New facilities, equipment, and intangible assets | $ | 2,486 | $ | 8,948 | |||||||
| Maintenance capital expenditures | 3,238 | 3,341 | |||||||||
| Total capital expenditures | $ | 5,724 | $ | 12,289 | |||||||
The capital expenditures during the quarter ended June 30, 2026, and 2025 were composed mostly of construction projects in progress. Maintenance capital expenditures refer mainly to capitalized replacement of productive assets in already existing locations. Variances in capital expenditures are primarily due to the number and timing of new, remodeled, or reconcepted locations under construction.
Cash Flows from Financing Activities
Following are our cash flows from financing activities (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Proceeds from debt obligations | $ | 2,453 | $ | 9,175 | |||||||
| Payments on debt obligations | (21,745) | (14,431) | |||||||||
| Payment of loan origination costs | (27) | (80) | |||||||||
| Purchase of treasury stock | (13,295) | (9,158) | |||||||||
| Payment of dividends | (1,773) | (1,856) | |||||||||
| Investment from noncontrolling partner | 1,800 | - | |||||||||
| Payments to noncontrolling interests | (106) | - | |||||||||
| Net cash used in financing activities | $ | (32,693) | $ | (16,350) | |||||||
We purchased 218,561 shares of our common stock in the open market at an average price of $24.23 during the nine months ended June 30, 2026, while we purchased 198,200 shares of our common stock in the open market at an average price of $46.21 during the nine months ended June 30, 2025. As of June 30, 2026, we have approximately $23.9 million authorization remaining to purchase additional shares. On April 2, 2026, our board of directors approved a $20.0 million increase in the Company's share repurchase program. Outside of our open-market stock repurchase program, on November 21, 2025, the Company repurchased in a privately negotiated transaction 821,000 shares of its own common stock from a single stockholder for $30.0 million, paid $8.0 million in cash and $22.0 million under a two-year 12% unsecured promissory note.
We paid $0.08 per share in quarterly dividends during the second and third of fiscal 2026, while we paid $0.07 per share in quarterly dividends during each of the quarters from the first quarter of fiscal 2025 to the first quarter of fiscal 2026.
We have paid all our debts on time and have not defaulted nor requested forbearance on any of our debts during the nine months ended June 30, 2026, and 2025.
Management also uses certain non-GAAP cash flow measures such as free cash flow. We calculate free cash flow as net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy.
Below is a table reconciling free cash flow to its most directly comparable GAAP measure (in thousands):
| Nine Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 28,975 | $ | 35,684 | |||||||
| Less: Maintenance capital expenditures | 3,238 | 3,341 | |||||||||
| Free cash flow | $ | 25,737 | $ | 32,343 | |||||||
Free cash flow as a percentage of revenues | 12.1 | % | 15.5 | % | |||||||
Our free cash flow for the nine-month period decreased by 20.4% compared to the comparable prior-year period primarily due to the higher vendor payments and higher interest expense paid, partially offset by higher cash collection from sales, lower income tax payments, and lower maintenance capital expenditures.
We do not include capital expenditures related to new facilities construction, equipment and intangible assets as a reduction from net cash flow from operating activities to arrive at free cash flow. This is because, based on our capital allocation strategy, acquisitions and development of our own clubs and restaurants are our primary uses of free cash flow.
Other than the impact of uncertainties caused by the current macro environment, including commodity and labor inflation, and our contractual debt and lease obligations, we are not aware of any event or trend that would adversely impact our liquidity. In our opinion, working capital is not a true indicator of our financial status. Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms. Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business downturns. We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt. We continue to monitor the macro environment and will adjust our overall approach to capital allocation as events and trends unfold.
The following table presents a summary of such indicators for the nine months ended June 30 (in thousands, except percentages):
| 2026 |
Increase (Decrease) | 2025 |
Increase (Decrease) | 2024 | |||||||||||||||||||||||||
| Sales of alcoholic beverages | $ | 90,115 | (1.9) | % | $ | 91,834 | (8.8) | % | $ | 100,665 | |||||||||||||||||||
| Sales of food and merchandise | 30,195 | 2.2 | % | 29,554 | (12.1) | % | 33,606 | ||||||||||||||||||||||
| Service revenues | 78,338 | 8.4 | % | 72,262 | (2.3) | % | 73,951 | ||||||||||||||||||||||
| Other | 14,841 | (0.1) | % | 14,854 | 5.0 | % | 14,148 | ||||||||||||||||||||||
| Total revenues | $ | 213,489 | 2.4 | % | $ | 208,504 | (6.2) | % | $ | 222,370 | |||||||||||||||||||
| Net income attributable to RCIHH common stockholders | $ | 1,291 | (92.1) | % | $ | 16,313 | 489.6 | % | $ | 2,767 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 28,975 | (18.8) | % | $ | 35,684 | (11.3) | % | $ | 40,233 | |||||||||||||||||||
| Adjusted EBITDA* | $ | 48,224 | 6.6 | % | $ | 45,228 | (17.4) | % | $ | 54,782 | |||||||||||||||||||
| Free cash flow* | $ | 25,737 | (20.4) | % | $ | 32,343 | (8.3) | % | $ | 35,253 | |||||||||||||||||||
| Debt (end of period) | $ | 240,085 | (0.5) | % | $ | 241,261 | (1.7) | % | $ | 245,400 | |||||||||||||||||||
*See definition and calculation of Adjusted EBITDA and Free Cash Flow above in the Non-GAAP Financial Measures subsection of Results of Operations.
Impact of Inflation
To the extent permitted by competition, we have managed to recover increased costs through price increases and may continue to do so. However, there can be no assurance that we will be able to do so in the future.
Seasonality
Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters). However, as we have expanded our geographical presence in recent years, October through December (our fiscal first quarter) and April through June (our fiscal third quarter) have become the periods with the strongest operating results. Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.
Capital Allocation Strategy
Our overall objective is to create value for our shareholders by developing and operating profitable businesses in the hospitality and related space. We strive to achieve that by providing an attractive price-value entertainment, dining experience, and top-notch service; by attracting and retaining quality personnel; and by focusing on unit-level operating performance.
In December 2024, we launched our five-year Back-to-Basics strategy where we focus on improving performance of existing clubs and Bombshells units to fuel our capital allocation priorities. For the allocation of our free cash flow, we currently divide it among club acquisitions (investing), share buybacks (financing), and dividends (financing). Our goals by the end of fiscal 2029 are to achieve:
•Total revenues of $400 million
•Free cash flow of $75 million
•Shares outstanding of 7.5 million
Growth Strategy
We believe that we can continue to grow organically and through careful entry into markets with high growth potential. Our growth strategy includes acquiring existing units, opening new units after market analysis, and developing new club concepts that are consistent with our management and marketing skills as our capital and manpower allow.
As of June 30, 2026, eleven of the twelve existing Bombshells restaurants were located in Texas, with one location in Denver, Colorado. As part of managing our free cash flow to fuel growth, we are evaluating our Bombshells program in view of recent performance trends. We opened one Bombshells location in Rowlett, Texas, in June 2026 and we do not plan to add anymore locations.
We continue to evaluate opportunities to acquire new nightclubs and anticipate acquiring new locations that fit our business model as we have done in the past. The acquisition of additional clubs may require us to take on additional debt or issue our common stock, or both. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise. An inability to obtain such additional financing could have an adverse effect on our growth strategy.