RCI HOSPITALITY HOLDINGS, INC. 10-Q

Item 1. Financial Statements. RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended June 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 16,319 $ 2,773 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,237 11,638 Impairment of assets 1,780 25,964 Deferred income tax benefit ( 2,200 ) ( 6,419 ) Stock-based compensation 980 1,412 Loss (gain) on sale of businesses and assets ( 1,226 ) 116 Amortization of debt discount and issuance costs 420 462 Noncash lease expense 2,002 2,318 Gain on insurance ( 1,879 ) — Doubtful accounts expense on notes receivable 27 22 Changes in operating assets and liabilities, net of business acquisitions: Receivables 1,271 3,052 Inventories 90 ( 212 ) Prepaid expenses, other current, and other assets 400 ( 3,484 ) Accounts payable, accrued, and other liabilities 6,463 2,591 Net cash provided by operating activities 35,684 40,233 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of businesses and assets 1,086 1,950 Proceeds from insurance 1,893 — Proceeds from notes receivable 223 179 Payments for property and equipment and intangible assets ( 12,289 ) ( 19,219 ) Acquisition of businesses, net of cash acquired ( 13,000 ) — Net cash used in investing activities ( 22,087 ) ( 17,090 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt obligations 9,175 22,657 Payments on debt obligations ( 14,431 ) ( 17,137 ) Purchase of treasury stock ( 9,158 ) ( 12,775 ) Payment of dividends ( 1,856 ) ( 1,674 ) Payment of loan origination costs ( 80 ) ( 290 ) Net cash used in financing activities ( 16,350 ) ( 9,219 ) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 2,753 ) 13,924 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 32,350 21,023 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 29,597 $ 34,947 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share and number of share data) (unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2025 2024 2025 2024 Revenues Sales of alcoholic beverages $ 30,780 $ 34,442 $ 91,834 $ 100,665 Sales of food and merchandise 10,037 11,736 29,554 33,606 Service revenues 25,169 25,268 72,262 73,951 Other 5,159 4,734 14,854 14,148 Total revenues 71,145 76,180 208,504 222,370 Operating expenses Cost of goods sold Alcoholic beverages sold 5,580 6,273 16,630 18,445 Food and merchandise sold 3,519 4,197 10,264 12,228 Service and other 36 36 133 111 Total cost of goods sold (exclusive of items shown separately below) 9,135 10,506 27,027 30,784 Salaries and wages 20,916 20,992 61,971 63,299 Selling, general and administrative 26,140 25,057 75,247 74,911 Depreciation and amortization 3,892 3,901 11,237 11,638 Impairments and other charges, net 2,349 18,260 2,232 26,452 Total operating expenses 62,432 78,716 177,714 207,084 Income (loss) from operations 8,713 ( 2,536 ) 30,790 15,286 Other income (expenses) Interest expense ( 4,032 ) ( 4,240 ) ( 12,232 ) ( 12,455 ) Interest income 117 130 435 320 Gain on lease termination and other ( 5 ) — 974 — Income (loss) before income taxes 4,793 ( 6,646 ) 19,967 3,151 Income tax expense (benefit) 733 ( 1,426 ) 3,648 378 Net income (loss) 4,060 ( 5,220 ) 16,319 2,773 Net income attributable to noncontrolling interests ( 2 ) ( 13 ) ( 6 ) ( 6 ) Net income (loss) attributable to RCIHH common stockholders $ 4,058 $ ( 5,233 ) $ 16,313 $ 2,767 Earnings (loss) per share Basic and diluted $ 0.46 $ ( 0.56 ) $ 1.84 $ 0.30 Weighted average shares used in computing earnings (loss) per share Basic and diluted 8,793,809 9,278,921 8,859,028 9,332,249 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands, except number of shares) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Noncontrolling Interests Total Equity Number of Shares Amount Number of Shares Amount Balance at September 30, 2024 8,955,000 $ 90 $ 61,511 $ 201,759 — $ — $ ( 250 ) $ 263,110 Purchase of treasury shares — — — — ( 66,000 ) ( 3,218 ) — ( 3,218 ) Canceled treasury shares ( 66,000 ) ( 1 ) ( 3,217 ) — 66,000 3,218 — — Excise tax on stock repurchases — — ( 33 ) — — — — ( 33 ) Payment of dividends ($ 0.07 per share) — — — ( 623 ) — — — ( 623 ) Stock-based compensation — — 470 — — — — 470 Net income — — — 9,024 — — 41 9,065 Balance at December 31, 2024 8,889,000 89 58,731 210,160 — — ( 209 ) 268,771 Purchase of treasury shares — — — — ( 56,875 ) ( 2,896 ) — ( 2,896 ) Canceled treasury shares ( 56,875 ) ( 1 ) ( 2,895 ) — 56,875 2,896 — — Excise tax on stock repurchases — — ( 29 ) — — — — ( 29 ) Payment of dividends ($ 0.07 per share) — — — ( 619 ) — — — ( 619 ) Stock-based compensation — — 118 — — — — 118 Net income (loss) — — — 3,231 — — ( 37 ) 3,194 Balance at March 31, 2025 8,832,125 88 55,925 212,772 — — ( 246 ) 268,539 Purchase of treasury shares — — — — ( 75,325 ) ( 3,044 ) — ( 3,044 ) Canceled treasury shares ( 75,325 ) ( 1 ) ( 3,043 ) — 75,325 3,044 — — Excise tax on stock repurchases — — ( 30 ) — — — — ( 30 ) Payment of dividends ($ 0.07 per share) — — — ( 614 ) — — — ( 614 ) Stock-based compensation — — 392 — — — — 392 Net income — — — 4,058 — — 2 4,060 Balance at June 30, 2025 8,756,800 $ 87 $ 53,244 $ 216,216 — $ — $ ( 244 ) $ 269,303 Balance at September 30, 2023 9,397,639 $ 94 $ 80,437 $ 201,050 — $ — $ ( 257 ) $ 281,324 Purchase of treasury shares — — — — ( 37,954 ) ( 2,072 ) — ( 2,072 ) Canceled treasury shares ( 37,954 ) — ( 2,072 ) — 37,954 2,072 — — Excise tax on stock repurchases — — ( 20 ) — — — — ( 20 ) Payment of dividends ($ 0.06 per share) — — — ( 562 ) — — — ( 562 ) Stock-based compensation — — 470 — — — — 470 Net income — — — 7,226 — — 18 7,244 Balance at December 31, 2023 9,359,685 94 78,815 207,714 — — ( 239 ) 286,384 Purchase of treasury shares — — — — ( 27,265 ) ( 1,530 ) — ( 1,530 ) Canceled treasury shares ( 27,265 ) ( 1 ) ( 1,529 ) — 27,265 1,530 — — Excise tax on stock repurchases — — ( 15 ) — — — — ( 15 ) Payment of dividends ($ 0.06 per share) — — — ( 560 ) — — — ( 560 ) Stock-based compensation — — 471 — — — — 471 Net income (loss) — — — 774 — — ( 25 ) 749 Balance at March 31, 2024 9,332,420 93 77,742 207,928 — $ — ( 264 ) 285,499 Purchase of treasury shares — — — — ( 202,630 ) ( 9,173 ) — ( 9,173 ) Canceled treasury shares ( 202,630 ) ( 2 ) ( 9,171 ) — 202,630 9,173 — — Excise tax on stock repurchases — — ( 92 ) — — — — ( 92 ) Payment of dividends ($ 0.06 per share) — — — ( 552 ) — — — ( 552 ) Stock-based compensation — — 471 — — — — 471 Net income (loss) — — — ( 5,233 ) — — 13 ( 5,220 ) Balance at June 30, 2024 9,129,790 $ 91 $ 68,950 $ 202,143 — $ — $ ( 251 ) $ 270,933 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents RCI HOSPITALITY HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value and number of shares) June 30, 2025 September 30, 2024 (unaudited) ASSETS Current assets Cash and cash equivalents $ 29,347 $ 32,350 Receivables, net 4,606 5,832 Inventories 4,746 4,676 Prepaid expenses and other current assets 3,214 4,427 Assets held for sale 3,394 — Total current assets 45,307 47,285 Property and equipment, net 282,246 280,075 Operating lease right-of-use assets, net 26,641 26,231 Notes receivable, net of current portion 3,939 4,174 Goodwill 70,236 61,911 Intangibles, net 166,942 163,461 Other assets 2,101 1,227 Total assets $ 597,412 $ 584,364 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 5,406 $ 5,637 Accrued liabilities 21,764 20,280 Current portion of debt obligations, net 18,623 18,871 Current portion of operating lease liabilities 3,249 3,290 Total current liabilities 49,042 48,078 Deferred tax liability, net 20,493 22,693 Debt, net of current portion and debt discount and issuance costs 222,638 219,326 Operating lease liabilities, net of current portion 28,171 30,759 Other long-term liabilities 7,765 398 Total liabilities 328,109 321,254 Commitments and contingencies ( Note 9 ) Equity Preferred stock, $ 0.10 par value per share; 1,000,000 shares authorized; none issued and outstanding — — Common stock, $ 0.01 par value per share; 20,000,000 shares authorized; 8,756,800 and 8,955,000 shares issued and outstanding as of June 30, 2025, and September 30, 2024, respectively 87 90 Additional paid-in capital 53,244 61,511 Retained earnings 216,216 201,759 Total RCIHH stockholders’ equity 269,547 263,360 Noncontrolling interests ( 244 ) ( 250 ) Total equity 269,303 263,110 Total liabilities and equity $ 597,412 $ 584,364 See accompanying notes to unaudited condensed consolidated financial statements. 7 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of RCI Hospitality Holdings, Inc. (the “Company,” “RCIHH,” “we,” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The consolidated balance sheet data as of September 30, 2024, were derived from audited financial statements but do not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended September 30, 2024, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 16, 2024. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended June 30, 2025, are not necessarily indicative of the results that may be expected for the year ending September 30, 2025. 2. Recent Accounting Standards and Pronouncements In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions . The amendments in this ASU clarify that an entity should measure the fair value of an equity security subject to contractual sale restriction the same way it measures an identical equity security that is not subject to such a restriction. The FASB said the contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not affect its fair value. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2022-03 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements. In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. The ASU requires all companies to amortize leasehold improvements associated with common control leases over the asset's useful life to the common control group regardless of the lease term. It also allows private and certain not-for-profit entities to use the written terms and conditions of an agreement to account for common control leases without further assessing the legal enforceability of those terms. The guidance is effective for all entities in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. We adopted ASU 2023-01 on October 1, 2024. Our adoption of this ASU did not have a significant impact on our consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement , which addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The objectives of the ASU are to (1) provide decision-useful information to investors and other allocators of capital in a joint venture's financial statements and (2) reduce diversity in practice. The FASB decided to require a joint venture to apply a new basis of accounting upon formation that will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments of this ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. early adoptions is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively. We adopted the provisions of ASU 2023-05 on October 1, 2024, and will apply them on future joint ventures. 8 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2. Recent Accounting Standards and Pronouncements — continued In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. The ASU applies to all public entities that are required to report segment information in accordance with ASC 280, and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are evaluating the impact of this ASU on our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Under the ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The amendments of the ASU are effective for public business entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for annual financial statements that have not been issued or made available for issuance. We are enhancing our income tax reporting system to be able to capture the required disclosures of this ASU. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which expands disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated statements of income in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, as clarified by ASU 2025-01, with early adoption permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of this guidance on our financial statement disclosures. 9 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Revenues Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 4 ), are shown below (in thousands): Three Months Ended June 30, 2025 Three Months Ended June 30, 2024 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 26,338 $ 4,442 $ — $ 30,780 $ 27,413 $ 7,029 $ — $ 34,442 Sales of food and merchandise 5,914 4,123 — 10,037 5,904 5,832 — 11,736 Service revenues 25,166 3 — 25,169 25,103 165 — 25,268 Other revenues 4,918 41 200 5,159 4,403 113 218 4,734 $ 62,336 $ 8,609 $ 200 $ 71,145 $ 62,823 $ 13,139 $ 218 $ 76,180 Recognized at a point in time $ 61,524 $ 8,573 $ 200 $ 70,297 $ 62,411 $ 13,137 $ 218 $ 75,766 Recognized over time 812 * 36 — 848 412 * 2 — 414 $ 62,336 $ 8,609 $ 200 $ 71,145 $ 62,823 $ 13,139 $ 218 $ 76,180 Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024 Nightclubs Bombshells Other Total Nightclubs Bombshells Other Total Sales of alcoholic beverages $ 77,948 $ 13,886 $ — $ 91,834 $ 79,595 $ 21,070 $ — $ 100,665 Sales of food and merchandise 17,169 12,385 — 29,554 16,490 17,116 — 33,606 Service revenues 72,214 48 — 72,262 73,784 167 — 73,951 Other revenues 14,270 106 478 14,854 13,359 288 501 14,148 $ 181,601 $ 26,425 $ 478 $ 208,504 $ 183,228 $ 38,641 $ 501 $ 222,370 Recognized at a point in time $ 179,964 $ 26,387 $ 478 $ 206,829 $ 181,960 $ 38,637 $ 501 $ 221,098 Recognized over time 1,637 * 38 — 1,675 1,268 * 4 — 1,272 $ 181,601 $ 26,425 $ 478 $ 208,504 $ 183,228 $ 38,641 $ 501 $ 222,370 * Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606. 10 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Revenues — continued The Company does not have contract assets with customers. The Company’s unconditional right to consideration for goods and services transferred to the customer is included in accounts receivable, net in our unaudited condensed consolidated balance sheet. A reconciliation of contract liabilities with customers is presented below (in thousands): Balance at September 30, 2024 Net Consideration Received Recognized in Revenue Balance at June 30, 2025 Ad revenue $ 31 $ 344 $ ( 297 ) $ 78 Expo revenue 1 342 — 343 Franchise fees and other 67 372 ( 409 ) 30 $ 99 $ 1,058 $ ( 706 ) $ 451 Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 5 ), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income. Certain VIP cards to be issued as part of a settlement agreement (see Note 9 ) will be reclassified to unearned revenues upon issuance of the VIP cards. 11 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information The Company owns and operates adult nightclubs and Bombshells Restaurants and Bars. The Company has identified such segments based on management responsibility and the nature of the Company’s products, services, and costs. There are no major distinctions in geographical areas served as all operations are in the United States. The Company measures segment profit (loss) as income (loss) from operations. Segment assets are those assets controlled by each reportable segment. The Other category below includes our media and energy drink divisions that are not significant to the unaudited condensed consolidated financial statements. Below is the financial information related to the Company’s segments (in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2025 2024 2025 2024 Revenues (from external customers) Nightclubs $ 62,336 $ 62,823 $ 181,601 $ 183,228 Bombshells 8,609 13,139 26,425 38,641 Other 200 218 478 501 $ 71,145 $ 76,180 $ 208,504 $ 222,370 Income (loss) from operations Nightclubs $ 17,761 $ 13,640 $ 53,246 $ 45,030 Bombshells 87 ( 8,914 ) 1,831 ( 8,129 ) Other ( 441 ) ( 108 ) ( 1,292 ) ( 581 ) Corporate ( 8,694 ) ( 7,154 ) ( 22,995 ) ( 21,034 ) $ 8,713 $ ( 2,536 ) $ 30,790 $ 15,286 Depreciation and amortization Nightclubs $ 3,311 $ 2,996 $ 9,440 $ 8,828 Bombshells 302 615 961 1,908 Other 13 3 40 7 Corporate 266 287 796 895 $ 3,892 $ 3,901 $ 11,237 $ 11,638 Capital expenditures Nightclubs $ 1,972 $ 2,424 $ 4,218 $ 6,655 Bombshells 1,278 1,684 6,924 5,127 Other 325 2,288 762 5,991 Corporate 106 21 385 1,446 $ 3,681 $ 6,417 $ 12,289 $ 19,219 12 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Segment Information — continued June 30, 2025 September 30, 2024 Total assets Nightclubs $ 477,731 $ 454,892 Bombshells 77,071 79,091 Other 9,407 14,197 Corporate 33,203 36,184 $ 597,412 $ 584,364 Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended June 30, 2025, amounting to $ 4.9 million, $ 45,000 , and $ 0 , respectively, and for the nine months ended June 30, 2025, amounting to $ 14.5 million, $ 90,000 , and $ 385,000 , respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and nine months ended June 30, 2025, amounting to $ 58,000 and $ 195,000 , respectively. Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs, Other, and Corporate segments for the three months ended June 30, 2024, amounting to $ 4.7 million, $ 0 , and $ 21,000 , respectively, and for the nine months ended June 30, 2024, amounting to $ 13.8 million, $ 0 , and $ 269,000 , respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and nine months ended June 30, 2024, amounting to $ 66,000 and $ 194,000 , respectively. These intercompany revenue amounts are eliminated upon consolidation. Corporate expenses include corporate salaries, health insurance and social security taxes for officers, legal, accounting and information technology employees, corporate taxes and insurance, legal and accounting fees, unallocated self-insurance reserve, depreciation and other corporate costs such as automobile and travel costs. Management considers these to be non-allocable costs for segment purposes. Certain real estate assets previously wholly assigned to Bombshells have been subdivided and allocated to other future development or investment projects. Accordingly, those asset costs have been transferred out of the Bombshells segment. 5. Selected Account Information The components of receivables, net are as follows (in thousands): June 30, 2025 September 30, 2024 Credit card receivables $ 2,010 $ 2,056 Income tax refundable 479 2,017 ATM in-transit 839 877 Insurance claims receivable 30 — Current portion of notes receivable 314 269 Other (net of allowance for doubtful accounts of $ 67 and $ 42 , respectively) 934 613 Total receivables, net $ 4,606 $ 5,832 Notes receivable consist primarily of secured promissory notes executed between the Company and various buyers of our businesses and assets with interest rates ranging from 6 % to 9 % per annum and having original terms ranging from 1 to 20 years. 13 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Selected Account Information — continued The components of prepaid expenses and other current assets are as follows (in thousands): June 30, 2025 September 30, 2024 Prepaid insurance $ 1,012 $ 2,792 Prepaid legal 190 177 Prepaid taxes and licenses 742 522 Prepaid rent 421 322 Other 849 614 Total prepaid expenses and other current assets $ 3,214 $ 4,427 The components of accrued liabilities are as follows (in thousands): June 30, 2025 September 30, 2024 Insurance $ 37 $ 2,390 Sales and liquor taxes 2,215 2,440 Payroll and related costs 4,662 4,676 Property taxes 2,432 3,347 Interest 553 568 Patron tax 893 1,024 Unearned revenues 451 99 Lawsuit settlement 5,248 1,985 Construction in progress — 1,012 Estimated self-insurance liability 1,982 — Other 3,291 2,739 Total accrued liabilities $ 21,764 $ 20,280 The components of other long-term liabilities are as follows (in thousands): June 30, 2025 September 30, 2024 Estimated self-insurance liability $ 7,439 $ — Other 326 398 Total other long-term liabilities $ 7,765 $ 398 In fiscal 2025, the Company started self-insuring a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements. See also tables of accrued liabilities (above) and selling, general and administrative expenses (below). 14 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Selected Account Information — continued The components of selling, general and administrative expenses are as follows (in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2025 2024 2025 2024 Taxes and permits $ 3,418 $ 4,575 $ 10,664 $ 12,584 Advertising and marketing 2,974 3,072 8,537 9,539 Supplies and services 2,503 2,642 7,459 8,073 Insurance 5,389 3,183 13,495 9,763 Legal 1,383 1,034 4,138 2,883 Lease 1,607 1,793 4,746 5,402 Charge card fees 1,791 1,798 5,189 5,212 Utilities 1,320 1,467 4,199 4,414 Security 1,019 1,178 3,121 3,876 Stock-based compensation 392 471 980 1,412 Accounting and professional fees 1,259 910 3,570 3,232 Repairs and maintenance 1,221 1,154 3,712 3,367 Other 1,864 1,780 5,437 5,154 Total selling, general and administrative expenses $ 26,140 $ 25,057 $ 75,247 $ 74,911 The components of impairments and other charges, net are as follows (in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2025 2024 2025 2024 Impairment of assets $ — $ 17,931 $ 1,780 $ 25,964 Settlement of lawsuits 3,281 141 3,587 308 Loss (gain) on sale of businesses and assets 202 188 ( 984 ) 180 Gain on insurance ( 1,134 ) — ( 2,151 ) — Total impairments and other charges, net $ 2,349 $ 18,260 $ 2,232 $ 26,452 During the second quarter ended March 31, 2025, we recorded $ 1.8 million in SOB license impairment related to four clubs. During the second quarter ended March 31, 2024, we recorded $ 4.4 million in SOB license impairment related to four clubs, $ 2.9 million in goodwill impairment related to two clubs, and $ 693,000 in tradename impairment related to one club. During the third quarter ended June 30, 2024, we recorded $ 6.0 million in goodwill impairment related to four clubs, $ 5.7 million in operating lease right-of-use asset impairment related to five Bombshells restaurants, $ 1.4 million in SOB license impairment related to two clubs, and $ 4.8 million in property and equipment impairment related to one club and five restaurants. During the third quarter ended June 30, 2025, we recorded $ 2.95 million for a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act. See Note 9 . During the first quarter ended December 31, 2024, we sold Bombshells Austin for a gain of $ 1.3 million. See Note 13 . During the first quarter ended December 31, 2024, we received insurance recovery amounting to $ 1.15 million for a club razed by fire in a prior period. 15 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. Debt On November 26, 2024, the Company converted a bank loan secured on October 10, 2022 to purchase real property into a construction loan with the same bank lender. The old loan had a remaining principal balance of $ 2.4 million. The new construction loan has maximum principal limit of $ 6.3 million and has a term of 204 months. The loan bears an interest rate of 6.99 % per annum for the first five years after which it will adjust annually to a new rate equal to the then-current Wall Street Journal Prime Rate plus 0.25 % per annum, with a floor of 6.99 % per annum. The loan is payable interest-only during the first 24 months, then payable for the next 36 months in equal installments of $ 60,162 in principal and interest, after which will be payable based on the adjusted interest rate for the next 143 months, with the remaining principal and accrued interest payable at maturity. There are certain financial covenants with which the Company is to be in compliance related to this loan. On January 21, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a promissory note for $ 5.0 million with the seller. The 8 % promissory note is payable in 59 monthly installments of $ 67,718 in principal and interest, with the balance of principal and accrued interest payable at maturity. On February 26, 2025, the Company extended its line-of-credit facility with a lender bank for a maximum availability of $ 5.0 million to mature on March 9, 2027. All other terms and conditions in the original line-of-credit remain unchanged. On April 7, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a seller-financed promissory note for $ 2.5 million bearing an interest of 7 % per annum. The promissory note matures in five years and is payable in equal monthly installments of $ 49,503 in principal and interest. On June 7, 2025, in relation to a club acquisition (see Note 13 ), the Company executed a seller-financed promissory note for $ 500,000 bearing an interest of 7 % per annum. The promissory note matures in five years and is payable in equal monthly installments of $ 9,901 in principal and interest. Future maturities of debt obligations as of June 30, 2025, are as follows (in thousands): Regular Amortization Balloon Payments Total Payments July 2025 - June 2026 $ 19,117 $ — $ 19,117 July 2026 - June 2027 16,008 15,676 31,684 July 2027 - June 2028 16,458 11,207 27,665 July 2028 - June 2029 16,927 — 16,927 July 2029 - June 2030 15,481 2,524 18,005 Thereafter 45,187 85,213 130,400 $ 129,178 $ 114,620 $ 243,798 7. Stock-based Compensation On February 7, 2022, our board of directors approved the 2022 Stock Option Plan (the “2022 Plan”). The board’s adoption of the 2022 Plan was approved by the shareholders during the annual stockholders' meeting on August 23, 2022. The 2022 Plan provides that the maximum aggregate number of shares of common stock underlying options that may be granted under the 2022 Plan is 300,000 . The options granted under the 2022 Plan may be either incentive stock options or non-qualified options. The 2022 Plan is administered by the compensation committee of the board of directors. The compensation committee has the exclusive power to select individuals to receive grants, to establish the terms of the options granted to each participant, provided that all options granted shall be granted at an exercise price not less than the fair market value of the common stock covered by the option on the grant date, and to make all determinations necessary or advisable under the 2022 Plan. On February 9, 2022, the board of directors approved a grant of 50,000 stock options each to six members of management subject to the approval of the 2022 Plan. 16 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Stock-based Compensation — continued Stock-based compensation, which is included in corporate segment selling, general and administrative expenses amounted to $ 392,000 and $ 980,000 during the three and nine months ended June 30, 2025, respectively, and $ 471,000 and $ 1.4 million during the three and nine months ended June 30, 2024, respectively. As of June 30, 2025, we had unrecognized compensation cost amounting to $ 981,000 related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 0.6 years. The February 9, 2022 stock options vest over four years with the first 20 % having vested on the approval of the 2022 Plan at the 2022 annual stockholders' meeting on August 23, 2022, and 20 % vesting on February 9 of each year thereafter, provided however that the options will be subject to earlier vesting under certain events set forth in the Plan, including without limitation a change in control. All of the options will expire, if not exercised, at the end of five years . The weighted average grant-date fair value of the stock options was $ 31.37 . The following table summarizes information about stock option activity during the nine months ended June 30, 2025, under the 2022 Plan: Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at September 30, 2024 300,000 Granted — Exercised — Forfeited ( 50,000 ) $ 100.00 Outstanding at June 30, 2025 250,000 $ 100.00 1.6 $ — Exercisable at June 30, 2025 200,000 $ 100.00 1.6 $ — For the three and nine months ended June 30, 2025, and 2024, we excluded the impact of 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive. Aside from the outstanding stock options, there were no other potentially dilutive securities for inclusion in the calculation of diluted earnings per share. 8. Income Taxes Income taxes were an expense of $ 733,000 and $ 3.6 million during the three and nine months ended June 30, 2025, respectively, and a benefit of $ 1.4 million and an expense of $ 378,000 during the three and nine months ended June 30, 2024, respectively. The effective income tax rate was 15.3 % and 18.3 % for the three and nine months ended June 30, 2025, respectively, and 21.5 % and 12.0 % for the three and nine months ended June 30, 2024, respectively. The disproportionate tax rates during the nine months ended June 30, 2024, were caused by the decrease in the then-expected annual effective tax rate. Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, as presented below (dollars in thousands). Three Months Ended June 30, 2025 Three Months Ended June 30, 2024 Amount % Amount % Federal statutory income tax expense (benefit) $ 1,006 21.0 % $ ( 1,395 ) 21.0 % State income taxes, net of federal benefit 145 3.0 % ( 214 ) 3.2 % Permanent differences 83 1.7 % 22 ( 0.3 ) % Tax credits ( 509 ) ( 10.6 ) % 152 ( 2.3 ) % Other 8 0.2 % 9 ( 0.1 ) % Total income tax expense (benefit) $ 733 15.3 % $ ( 1,426 ) 21.5 % 17 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 8. Income Taxes — continued Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024 Amount % Amount % Federal statutory income tax expense $ 4,193 21.0 % $ 662 21.0 % State income taxes, net of federal benefit 561 2.8 % 135 4.3 % Permanent differences 210 1.1 % 100 3.2 % Tax credits ( 1,488 ) ( 7.5 ) % ( 528 ) ( 16.8 ) % Other 172 0.9 % 9 0.3 % Total income tax expense $ 3,648 18.3 % $ 378 12.0 % The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. Fiscal year ended September 30, 2022, and subsequent years remain open to federal tax examination. The Company ordinarily goes through various federal and state reviews and examinations for various tax matters. On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" (the "Act") and commonly referred to as the One Big Beautiful Bill Act. Among other things, the Act extends certain expiring, and in some cases expired, provisions of the 2017 Tax Cuts and Jobs Act. The Act also adjusted a number of provisions affecting businesses that were subject to sunsets, phase-outs, or phase-ins that would have taken effect in the absence of action by Congress or that have already taken effect. The Company has reviewed the changes from the Act and determined that any impact would be immaterial. 9. Commitments and Contingencies Legal Matters Indemnity Insurance Corporation As previously reported, the Company and its subsidiaries were insured under a liability policy issued by Indemnity Insurance Corporation, RRG (“IIC”) through October 25, 2013. On that date, the Company transitioned to a new insurance provider and has since obtained general liability coverage from other insurers to cover claims arising from actions occurring after October 25, 2013. On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (the “Rehabilitation Order”) declaring IIC impaired, insolvent, and in an unsafe financial condition. The Court placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (the “Commissioner”), as receiver. The Rehabilitation Order authorized the Commissioner to rehabilitate IIC by, among other things, gathering and marshaling assets. The order also stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014. On April 10, 2014, the Court entered a Liquidation and Injunction Order With Bar Date (the “Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies issued by IIC. The Liquidation Order established a claims bar date of January 16, 2015, and further stayed or abated pending lawsuits involving IIC through October 7, 2014. As a result of this order, the Company no longer had insurance coverage under the IIC policy for any claims. The Company retained counsel to defend and evaluate affected claims and lawsuits and has funded 100 % of the associated litigation costs. The Company timely filed claims with the Receiver and has continued to provide information and updates as requested; however, there is no assurance that any recovery will be received from the IIC estate. The ultimate financial impact of this uncertainty remains unknown. 18 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies — continued As of June 30, 2025, only 1 claim remains unresolved out of the original 71 claims associated with IIC. The sole remaining matter is the Dupray case, as described below, involving a traffic accident allegedly caused by a third party after being served alcohol at a JAI Phoenix location. The Company continues to vigorously defend this matter and pursue all available rights to potential reimbursement through the IIC liquidation process. Other On June 23, 2014, Mark H. Dupray and Ashlee Dupray filed a lawsuit against Pedro Antonio Panameno and our subsidiary, JAI Dining Services (Phoenix), Inc. (“JAI Phoenix”), in the Superior Court of Arizona for Maricopa County. The complaint alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix and asserted claims against JAI Phoenix under theories of common law dram shop negligence and dram shop negligence per se. Following a jury trial, in April 2017 the court entered judgment in favor of the plaintiffs and awarded compensatory and punitive damages, allocating approximately $ 1.4 million in compensatory damages and $ 4.0 million in punitive damages to JAI Phoenix. JAI Phoenix filed post-trial motions, which were denied in August 2017, and subsequently filed a notice of appeal in September 2017. In June 2018, the Arizona Court of Appeals heard the matter and, on November 15, 2018, issued a decision vacating the jury’s verdict and remanding the case for a new trial. The retrial was held in June 2025. The jury found Mr. Panameno 94 % responsible and JAI Phoenix 6 % responsible. The jury awarded total damages of $ 5.1 million and punitive damages of $ 125,000 . Based on the jury’s allocation of fault, JAI Phoenix is responsible for $ 332,884 of the total award. Under applicable law, plaintiffs retain the right to appeal; however, it is not known at this time whether an appeal will be filed, but if an appeal is filed, the Company will vigorously defend. The adult entertainment industry standard is to classify adult entertainers as independent contractors, not employees. While we take steps to ensure that our adult entertainers are deemed independent contractors, from time to time, we are named in lawsuits related to the alleged misclassification of entertainers. Claims are brought under both federal and where applicable, state law. Based on the industry standard, the manner in which the independent contractor entertainers are treated at the clubs, and the entertainer license agreements governing the entertainer’s work at the clubs, the Company believes that these lawsuits are without merit. Lawsuits are handled by attorneys with an expertise in the relevant law and are defended vigorously. In March 2023, the New York State Department of Labor assessed a final judgment against one of our subsidiaries in a state unemployment tax matter for the years 2009-2022. The assessment of $ 2.8 million, which was recorded by the Company during the quarter ended March 31, 2023, was issued in final notice by the NY DOL after several appeals were denied by the Supreme Court of the State of New York, Appellate Division, Third Department. In September 2023, the NY DOL assessed another of our subsidiaries for approximately $ 280,000 on the same matter for the period January 2015 through June 2022. We recorded this latter assessment during the fiscal year ended September 30, 2023. On or about May 29, 2024, search warrants were executed on the Company’s corporate headquarters in Houston, Texas, three separate clubs in New York, New York, and for the mobile phone of three individuals (including two executive officers and a non-executive corporate employee) by the New York State Attorney General (“NY AG”) and the New York State Department of Taxation and Finance (“NY DTF”). On June 7, 2024, the Company received a subpoena from the NY AG requesting documents and other information with respect to certain clubs in New York and Florida. The investigation appears to be related to the Company’s New York State tax filings, audits thereof, and entertainment benefits provided to a former NY DTF employee. On or about July 2, 2025, the Company received a second subpoena from the NY AG requesting additional documents and information related to the same issues. The Company is cooperating with the NY AG and its investigation. As a result of this investigation, a non-executive corporate employee was placed on administrative leave during the pendency of an internal review process. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the investigation. 19 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Commitments and Contingencies — continued On or about May 20, 2025, the Company received a subpoena from the U.S. Securities and Exchange Commission ("SEC") seeking certain documents and information related to the NY AG investigation and NY DTF issues. The Company is cooperating with the SEC and its investigation. It is not possible at this time to determine whether the Company will incur (or to reasonably estimate the amount of) any fines, penalties, or liabilities in connection with the SEC investigation. On April 14, 2025, the Company's subsidiaries, RCI Management Services, Inc., Pooh Bah Enterprises, Inc., and RCI Dining Services (Harvey), Inc. (collectively, "Defendants") entered into a class action settlement agreement to resolve claims under the Illinois Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seg., arising from the alleged collection of customer fingerprints at Rick's Cabaret in Chicago and Scarlett's Cabaret in Washington Park, Illinois. The settlement resolves two consolidated cases: Rapp et al. v. RCI Management Services, Inc. et al. , Case No. 22LA0884 (St, Clair County, Illinois) and Loera v. Pooh Bah Enterprises, Inc. , Case No. 2021CH04759 (Cook County, Illinois). Under the terms of the agreement, and without admitting any liability, Defendants will provide a settlement fund valued at approximately $ 2.95 million, consisting of $ 1.25 million in cash and $ 1.7 million in VIP cards. The settlement includes payments to class members submitting valid claims, attorneys' fees of up to 40 % of the fund, incentive awards to named plaintiffs, and administrative costs. Any unclaimed funds remaining after payment of valid claims, fees, and costs will revert to the Defendants. The Company denies all allegations of wrongdoing. The settlement remains subject to final court approval. General In the regular course of business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state, and local environmental, labor, health and safety laws and regulations. We assess the probability that we could incur liability in connection with certain of these lawsuits. Our assessments are made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not an admission of any liability on the part of the Company or any of its subsidiaries. In certain cases that are in the early stages and in light of the uncertainties surrounding them, we do not currently possess sufficient information to determine a range of reasonably possible liability. In matters where there is insurance coverage, in the event we incur any liability, we believe it is unlikely we would incur losses in connection with these claims in excess of our insurance coverage. The Company recorded lawsuit settlements incurred amounting to $ 3.3 million and $ 3.6 million for the three and nine months ended June 30, 2025, respectively, and $ 141,000 and $ 308,000 for the three and nine months ended June 30, 2024, respectively. As of June 30, 2025, and September 30, 2024, the Company has accrued $ 5.2 million and $ 2.0 million, respectively, related to settlement of lawsuits, which is included in accrued liabilities in our unaudited condensed consolidated balance sheets. Self-insurance Liability In fiscal 2025, the Company started self-insuring a significant portion of expected losses under its general liability and liquor insurance programs due to increasingly prohibitive costs of such coverage from third-party insurers. The Company continues to purchase insurance for workers' compensation, property, auto, and business interruption, as well as the minimum insurance coverage where it is required by law for licensing requirements. We record a liability for unresolved claims and for an estimate of incurred but not reported claims based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic conditions, the frequency and severity of claims development history, and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. We recorded estimated self-insurance expense amounting to $ 4.0 million and $ 9.4 million during the three and nine months ended June 30, 2025. As of June 30, 2025, the Company has self-insurance liability amounting to $ 9.4 million. 20 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 10. Related Party Transactions Presently, our Chairman and President, Eric Langan, personally guarantees all of the commercial bank indebtedness of the Company. Mr. Langan receives no compensation or other direct financial benefit for any of the guarantees. The balance of our commercial bank indebtedness, net of debt discount and issuance costs, as of June 30, 2025, and September 30, 2024, was $ 136.9 million and $ 135.3 million, respectively. Included in the debt balance as of June 30, 2025, and September 30, 2024, are notes borrowed from related parties—one note for $ 500,000 (from Ed Anakar, an employee of the Company and brother of our former director Nourdean Anakar) and another note for $ 150,000 (from a brother of Company CFO, Bradley Chhay) in which the terms of the notes are the same as the rest of the lender group. We used the services of Tall Oak Custom Furniture, and previously Nottingham Creations, both furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Tall Oak Custom Furniture is owned by a brother of Eric Langan (as was Nottingham Creations). Amounts billed to us for goods and services provided by Tall Oak Custom Furniture and Nottingham Creations were $ 12,344 and $ 19,098 during the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 344,798 during the three and nine months ended June 30, 2024, respectively. As of June 30, 2025, and September 30, 2024, we owed Tall Oak Custom Furniture and Nottingham Creations $ 3,312 and $ 18,700 , respectively, in unpaid billings. TW Mechanical LLC provided plumbing and HVAC services to both a third-party general contractor providing construction services to the Company, as well as directly to the Company during fiscal 2025 and 2024. A son-in-law of Eric Langan owns a 50 % interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general contractor were $ 0 and $ 0 for the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 0 for the three and nine months ended June 30, 2024, respectively. Amounts billed directly to the Company were $ 455 and $ 1,856 for the three and nine months ended June 30, 2025, respectively, and $ 0 and $ 3,160 for the three and nine months ended June 30, 2024, respectively. As of June 30, 2025, and September 30, 2024, the Company owed TW Mechanical $ 0 and $ 0 , respectively, in unpaid direct billings. 11. Leases Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and nine months ended June 30, 2025, and 2024 is as follows (dollars in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2025 2024 2025 2024 Operating lease expense – fixed payments $ 1,078 $ 1,292 $ 3,266 $ 3,876 Variable lease expense 435 412 1,194 1,273 Short-term and other lease expense (includes $ 103 and $ 117 recorded in advertising and marketing for the three months ended June 30, 2025, and 2024, respectively, and $ 294 and $ 342 for the nine months ended June 30, 2025, and 2024, respectively; and $ 140 and $ 159 recorded in repairs and maintenance for the three months ended June 30, 2025, and 2024, respectively, and $ 415 and $ 447 for the nine months ended June 30, 2025, and 2024, respectively; see Note 5 ) 337 365 995 1,042 Sublease income — — — — Total lease expense, net $ 1,850 $ 2,069 $ 5,455 $ 6,191 Other information: Operating cash outflows from operating leases $ 1,916 $ 2,036 $ 5,695 $ 6,085 Weighted average remaining lease term – operating leases 9.1 years 10.1 years Weighted average discount rate – operating leases 5.8 % 5.8 % 21 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 11. Leases — continued Future maturities of operating lease liabilities as of June 30, 2025, are as follows (in thousands): Principal Payments Interest Payments Total Payments July 2025 - June 2026 $ 3,249 $ 1,661 $ 4,910 July 2026 - June 2027 3,370 1,466 4,836 July 2027 - June 2028 2,865 1,281 4,146 July 2028 - June 2029 2,851 1,112 3,963 July 2029 - June 2030 2,535 947 3,482 Thereafter 16,550 2,685 19,235 $ 31,420 $ 9,152 $ 40,572 12. Supplemental Disclosure of Cash Flow Information The following table sets forth certain cash and noncash activities (in thousands), as follows: Nine Months Ended June 30, 2025 2024 Cash paid for interest, net of amounts capitalized $ 11,827 $ 12,015 Cash paid for income taxes $ 4,361 $ 3,861 Restricted cash, included in other assets (at end of period) $ 250 $ — Noncash investing and financing transactions: Debt incurred in connection with acquisition of businesses $ 8,000 $ — Note receivable from sale of businesses and assets $ 60 $ — Unpaid excise tax on stock repurchases $ 91 $ 127 Unpaid liabilities on capital expenditures $ 1,005 $ 524 Restricted cash pertains to the minimum capitalization held by our captive insurance subsidiary, as required by state insurance regulations. Subsequent to the balance sheet date through August 8, 2025, we repurchased 36,339 shares of our common stock at an average price of $ 38.09 per share. 13. Acquisitions and Dispositions Sale of Bombshells Austin On November 14, 2024, the Company sold Bombshells Austin for $ 70,000 in cash and $ 60,000 in a 6 % 12-month promissory note. The Company recognized a $ 1.3 million gain on the sale. Flight Club On January 21, 2025, the Company completed the acquisition of a club in the Detroit, Michigan, market for a total agreed acquisition price of $ 11.0 million, consisting of $ 3.0 million in cash and $ 5.0 million in a seller-financed 8.0 % promissory note (see Note 6 ) for the club, and $ 3.0 million in cash for the associated real estate. 22 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 13. Acquisitions and Dispositions — continued The preliminary fair value of the consideration is as follows (in thousands): Cash $ 6,000 Note payable 5,000 Total fair value of consideration $ 11,000 We recognized the assets and liabilities for this acquisition based on our estimates of their acquisition date fair values in our Nightclubs reportable segment. We have not finalized our valuation of the tangible and identifiable intangible assets acquired in this transaction. As of the release of this report, the fair value of the acquired tangible and identifiable intangible assets are provisional pending the completion of the final valuations for those assets. Based on the allocation of the preliminary fair value of the acquisition price and subject to any working capital adjustments, the amount of goodwill is estimated at $ 613,000 . Goodwill represents the excess of the acquisition price fair value over the fair values of the tangible and identifiable intangible assets acquired, which is essentially the forward earnings potential of the acquired club and our entry into a new market. Goodwill will not be amortized but will be tested at least annually for impairment. Approximately $ 613,000 of the recognized goodwill will be deductible for income tax purposes. The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of January 21, 2025: Current assets $ 73 Property and equipment 3,305 Licenses 5,928 Tradename 1,081 Total net assets acquired 10,387 Goodwill 613 Total fair value of net assets acquired $ 11,000 Licenses and tradename will not be amortized but will be tested at least annually for impairment. In connection with this acquisition, we incurred approximately $ 0 and $ 141,000 in acquisition-related expenses during the three and nine months ended June 30, 2025, respectively, which are included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until June 30, 2025, the acquired club contributed the following, which are included in our unaudited condensed consolidated statements of income (in thousands): Three Months Ended June 30, 2025 Nine Months Ended June 30, 2025 Revenues $ 1,149 $ 1,830 Income from operations $ 414 $ 598 We have not yet received the fiscal 2024 financial statements from the seller, therefore, we could not provide supplemental pro forma information for the combined entities. Sale of Aurora CO Property On March 31, 2025, the Company sold a real estate property in Aurora, Colorado, for $ 825,000 . The Company recognized a loss of $ 153,000 on the sale, net of closing costs. 23 Table of Contents RCI HOSPITALITY HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 13. Acquisitions and Dispositions — continued Platinum West and Platinum Plus On April 7, 2025, the Company completed the acquisition of a club in West Columbia, South Carolina, for a total purchase price of $ 8.0 million, consisting of $ 3.75 million cash and $ 2.5 million in a seller-financed 7 % promissory note (see Note 6 ) for the club, and $ 1.75 million cash for the associated real estate. On June 13, 2025, the Company completed the acquisition of a club in Allentown, Pennsylvania, for a total purchase price of $ 2.0 million, consisting of $ 1.5 million cash and $ 500,000 in seller-financed 7 % promissory note (see Note 6 ). The Allentown club transaction was completed several weeks after the West Columbia club due to delays in the issuance of licenses. As of the filing of this report, we have not completed our valuation and do not have estimates of fair value for the acquired assets and any assumed liability, if any. In connection with this combined acquisition, we incurred approximately $ 52,000 and $ 103,000 in acquisition-related expenses during the three and nine months ended June 30, 2025, respectively, which are included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until June 30, 2025, the acquired clubs contributed the following, which are included in our unaudited condensed consolidated statements of income (in thousands): Three Months Ended June 30, 2025 Nine Months Ended June 30, 2025 Revenues $ 1,116 $ 1,116 Income from operations $ 397 $ 394 We have not yet received the fiscal 2024 financial statements from the seller, therefore, we could not provide supplemental pro forma information for the combined entities. 24 Table of Contents