What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-19 compared with 2024-12-16 · 82 added, 67 removed, 573 unchanged (21% of the section changed)

10 unchanged sentences

These nightclubs are in Houston, Austin, San Antonio, Dallas, Fort Worth, Beaumont, Longview, Harlingen, Edinburg, Tye, Lubbock, Round Rock, El Paso and Odessa, Texas;

Denver, Colorado;

Central City and Denver, Colorado;

Charlotte and Raleigh, North Carolina;

2 unchanged sentences

Miami Gardens, Pembroke Park and Miami, Florida;

Pittsburgh, Pennsylvania;

Pittsburgh and Allentown, Pennsylvania;

Phoenix, Arizona;

2 unchanged sentences

Indianapolis, Indiana;

and Washington Park, Kappa, Sauget and Chicago, Illinois.

Washington Park, Kappa, Sauget and Chicago, Illinois;

Inkster, Michigan;

and West Columbia, South Carolina.

No sexual contact is permitted at any of our locations.

1 unchanged sentence

We also own and lease to third parties real properties that are adjacent to (or used to be locations of) our clubs.

Bombshells Our wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Austin, Spring, Pearland, Tomball, Katy, Arlington, and Stafford, Texas under the brand name Bombshells Restaurant & Bar.

Bombshells also operates a food hall in Denver, Colorado.

Bombshells Our wholly-owned subsidiaries own and operate restaurants and sports bars in Houston, Dallas, Pearland, Tomball, Katy, Arlington, Stafford, and Lubbock, Texas, and Denver, Colorado, under the brand name Bombshells Restaurant & Bar.

Other Our wholly-owned subsidiaries own a media division (“Media Group”), including the leading trade magazine serving the multibillion-dollar adult nightclubs industry and the adult retail products industry.

6 unchanged sentences

Our fiscal year-end is September 30.

Upon initial adoption of ASU 2023-07 for the annual reporting period ended September 30, 2025 (see Note 2 to our consolidated financial statements), certain previously reported segment information have changed.

There were no changes in consolidated amounts.

Segment-related discussions and analyses in the MD&A relate to amounts exclusive of intersegment items.

Same-Store Sales.

26 unchanged sentences

Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated.

During fourth quarter of 2025, we impaired one property for $1.6 million in property and equipment.

During the third quarter of 2024, we impaired six properties for $4.8 million in property and equipment and $5.7 million in operating lease right-of-use assets.

3 unchanged sentences

During the fourth quarter of 2023, we also recognized software impairments amounting to $814,000 related to two venture projects.

During the third quarter of 2022, we impaired two properties for a total of $1.0 million one due to eminent domain by the state of Texas and the other due to underperformance.

Key assumptions and estimates used in long-lived asset impairment testing, the most significant of which is our estimated future cash flows, may produce materially different amounts of fair value, which could significantly impact our results of operations.

10 unchanged sentences

We recognize goodwill impairment in the amount that the carrying value of the reporting unit exceeds the fair value of the reporting unit, not to exceed the amount of goodwill allocated to the reporting unit, based on the results of our Step 1 analysis.

For the year ended September 30, 2025, we did not impair goodwill.

For the year ended September 30, 2024, we identified four reporting units that were impaired and recognized a total goodwill impairment of $8.9 million.

For the year ended September 30, 2023, we identified four reporting units that were impaired and recognized a total goodwill impairment of $4.2 million.

For the year ended September 30, 2022, we identified one reporting unit that was impaired and recognized a goodwill impairment loss of $566,000.

For indefinite- and definite-lived intangibles, specifically SOB licenses, we determine fair value by estimating the multiperiod excess earnings of the asset with key assumptions being similar to those used in the goodwill impairment valuation model.

We recorded impairment charges for SOB licenses amounting to $11.8 million in 2024 related to seven clubs, $6.5 million in 2023 related to eight clubs, and $293,000 in 2022 related to one club.

We recorded impairment charges for SOB licenses amounting to $3.8 million in 2025 related to six clubs, $11.8 million in 2024 related to seven clubs, and $6.5 million in 2023 related to eight clubs.

For indefinite-lived tradename, we determine fair value by using the relief from royalty method.

The fair value is then compared to the carrying value and an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset.

We recorded impairment charges for tradenames amounting to $693,000 in 2024 related to one club, $0 in 2023, and $0 in 2022.

We recorded impairment charges for tradenames amounting to $0 in 2025, $693,000 in 2024 related to one club, and $0 in 2023.

Business Combinations

27 unchanged sentences

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.

In fiscal 2025, the Company self-insured 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 including legal costs 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.

OPERATIONS REVIEW

19 unchanged sentences

GAAP measures.

The following common size tables present a comparison of our results of operations as a percentage of total revenues for the three most recently completed fiscal years:

The following common size income statements present a comparison of our consolidated results of operations as a percentage of total revenues for the three most recently completed fiscal years:

2025 2024 2023

24 unchanged sentences

† Percentages may not foot due to rounding in this and in all of the succeeding tables presenting percentages in this report.

They represent their corresponding dollar values divided by the base.

Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line.

28 unchanged sentences

* Not meaningful.

Consolidated revenues increased by $1.8 million, or 0.6%, from 2023 to 2024 due mainly from recently acquired clubs and a newly opened Bombshells, partially offset by a decrease in same-store sales and a sales decrease from locations that were closed or rebranded in 2024.

From 2022 to 2023, consolidated revenues increased by $26.2 million, or 9.8%, due mainly to newly acquired locations, partially offset by a decrease in same-store sales and a sales decrease from locations closed in 2023.

Consolidated revenues decreased by $16.2 million, or 5.5%, from 2024 to 2025 due mainly from closed units and the decrease in same-store sales, partially offset by sales from new units.

From 2023 to 2024, consolidated revenues increased by $1.8 million, or 0.6%, due mainly from recently acquired clubs and a newly opened Bombshells, partially offset by a decrease in same-store sales and a sales decrease from locations that were closed or rebranded in 2024.

Segment contribution to total revenues was as follows (dollar amounts in thousands):

13 unchanged sentences

Nightclubs segment revenues.

Nightclubs revenues increased by 3.0% from 2023 to 2024 and by 14.8% from 2022 to 2023, as explained below.

Nightclubs revenues decreased by 0.6% from 2024 to 2025 and increased by 3.0% from 2023 to 2024, as detailed below.

2024 2024 vs.

1 unchanged sentence

(2.0) % (2.0) %

Newly acquired units 7.6 % 18.4 %

Closed units (1.3) % (1.4) %

Other 0.2 % (1.3) %

Net Nightclubs revenue increase 3.0 % 14.8 %

Net Nightclubs revenue increase (decrease)

(0.6) % 3.0 %

Nightclubs segment sales mix for the three fiscal years, below:

5 unchanged sentences

100.0 % 100.0 % 100.0 %

The 2025 new units include three clubs, one of which was acquired in January 2025 and the other two in April 2025 (with one of the two transactions that did not close until June 2025 due to permitting delay).

There were no new club acquisitions in 2024.

The 2023 new units include six clubs, one of which was acquired in October 2022 and five acquired in March 2023.

The 2022 new units include fifteen clubs, of which eleven were acquired in October 2021, one acquired in November 2021, one acquired in May 2022, and two acquired in July 2022.

See Note 16 to our consolidated financial statements for more information on our club acquisitions.

No new clubs were acquired in 2024.

Included in other revenues of the Nightclubs segment is real estate rental revenue amounting to $1.7 million in 2025, $1.7 million in 2024, and $1.8 million in 2023.

Bombshells segment revenues.

Bombshells revenues decreased by 9.2% from 2023 to 2024 and decreased by 7.0% from 2022 to 2023, as explained below.

Bombshells revenues decreased by 29.2% from 2024 to 2025 and decreased by 9.2% from 2023 to 2024, as detailed below.

2024 2024 vs.

5 unchanged sentences

Net Bombshells revenue decrease (29.2) % (9.2) %

With underperforming Bombshells closed or sold, we expect same-store sales to improve going forward.

Bombshells segment sales mix for the three fiscal years is as follows:

4 unchanged sentences

100.0 % 100.0 % 100.0 %

Bombshells Arlington was opened in the first quarter of 2022.

Bombshells San Antonio was acquired from our franchisee in the second quarter of 2023.

1 unchanged sentence

We opened Bombshells Stafford in the first quarter of 2024 and sold Bombshells San Antonio in the fourth quarter of 2024.

During the first quarter of 2025, we closed two Bombshells locations in Houston, Texas, sold one Bombshells location in Austin, Texas, and also closed the food hall in Greenwood Village, Colorado.

We opened one Bombshells location in Denver, Colorado, during the second quarter of 2025 and opened one Bombshells location in Lubbock, Texas, during the fourth quarter of 2025.

Other segment revenues.

1 unchanged sentence

Drink Robust sales were $129,000, $131,000, and $145,000 in fiscal 2025, 2024, and 2023, respectively, which exclude intercompany sales to Nightclubs and Bombshells units amounting to $260,000, $270,000, and $254,000 in fiscal 2025, 2024, and 2023, respectively.

Media business revenues were $1.0 million, $1.1 million, and $1.2 million in fiscal 2024, 2023, and 2022, respectively.

Media business revenues were $991,000, $1.0 million, and $1.1 million in fiscal 2025, 2024, and 2023, respectively.

Operating Expenses

8 unchanged sentences

Salaries and wages .

Consolidated salaries and wages increased by $4.7 million, or 5.9%, from 2023 to 2024 and increased by $11.1 million, or 16.1%, from 2022 to 2023.

The dollar increases are mostly from newly acquired or constructed locations.

Consolidated salaries and wages decreased by $512,000, or 0.6%, from 2024 to 2025 and increased by $4.7 million, or 5.9%, from 2023 to 2024.

The dollar changes are mostly from newly acquired or constructed and closed locations.

As a percentage of revenues, consolidated salaries and wages were 29.9%, 28.5%, and 27.1% in 2025, 2024, and 2023, respectively, mainly due to sales trend and the impact of fixed salaries on change in sales.

14 unchanged sentences

29.9 % 28.5 % 27.1 %

Bombshells and Other segment salaries and wages decreased in 2024 but as a percentage of revenue they increased due to their decrease in revenue.

Bombshells segment salaries and wages decreased in 2025 and 2024 but as a percentage of revenue it increased due to decrease in revenue.

Selling, general and administrative expenses .

34 unchanged sentences

Bombshells expenses increased as a percentage of segment revenue due to lower sales.

Taxes and permits increased mainly due to the increase in the Texas patron tax.

Insurance expense increased due to additional clubs and restaurants, with additional impact from insurance premium refunds received in 2023.

Taxes and permits increased from 2023 to 2024 mainly due to the increase in the Texas patron tax but decreased from 2024 to 2025 due to closed locations.

Insurance expense increased due to the estimated self-insurance for general liability and liquor liability.

Any unallocated self-insurance reserve remains in Corporate segment.

Legal expenses increased due mainly to the increase in ongoing cases, particularly the New York indictment.

Depreciation and amortization .

Depreciation and amortization increased by $244,000, or 1.6%, from 2023 to 2024 and increased by $2.8 million, or 22.3%, from 2022 to 2023.

The increase from 2022 to 2023 was mainly from newly acquired clubs, while the smaller increase from 2023 to 2024 was mainly caused by a decrease in the amortization of intangibles due to previous impairment.

Depreciation and amortization decreased by $317,000, or 2.1%, from 2024 to 2025 and increased by $244,000, or 1.6%, from 2023 to 2024.

The increase from 2023 to 2024 was mainly caused by a decrease in the amortization of intangibles due to previous impairment, while the decrease from 2024 to 2025 was mainly caused by closed locations.

Impairments and other charges, net .

7 unchanged sentences

The significant variances in impairments and other charges, net are discussed below:

During 2025, we recorded aggregate impairment charges amounting to $5.3 million related to SOB licenses of six clubs ($3.8 million) and property and equipment of one food hall ($1.6 million).

During 2024, we recorded aggregate impairment charges amounting to $38.5 million related to goodwill of four clubs ($8.9 million), SOB licenses of seven clubs ($11.8 million), operating lease right-of-use assets of five Bombshells locations ($6.5 million), tradename of one club ($693,000), property and equipment of four clubs and nine Bombshells locations ($10.6 million).

During 2023, we recorded aggregate impairment charges amounting to $12.6 million related to goodwill of four clubs ($4.2 million), SOB licenses of eight clubs ($6.5 million), operating lease right-of-use asset and property and equipment of a closed club ($1.1 million), and software of two investment projects ($814,000).

During 2022, we recorded aggregate impairment charges amounting to $1.9 million related to goodwill of one club ($566,000), SOB license of one club ($293,000), and property and equipment of one club and one Bombshells unit ($1.0 million).

In 2025, we settled a consolidated class action lawsuit in Illinois for the alleged collection of customer fingerprints for $2.95 million, consisting of $1.25 million in cash and $1.7 million in VIP cards.

In 2023, we recognized settlements with the New York Department of Labor amounting to $3.1 million related to the assessment by the New York Department of Labor for state unemployment insurance.

In 2022, we settled several cases including the image infringement lawsuit and the securities class actions part of which was paid by insurance.

See Note 11 to our consolidated financial statements.

Going forward, settlements might be more volatile and higher in value due to self-insurance.

Refer to dispositions in Note 16 to our consolidated financial statement for details on gains or losses on sale of businesses and assets.

In relation to insurance claims and recoveries, we recognized a $77,000 gain in 2023 and $463,000 gain in 2022 mainly related to a fire in one of our clubs in Washington Park, Illinois, toward the end of fiscal 2018 and a hurricane that damaged one of our clubs in Sulphur, Louisiana, in August 2020.

The rest of the claims for the Sulphur club were received in 2022.

In relation to insurance claims and recoveries, we recognized a $77,000 gain in 2023.

Gains related to insurance recoveries are recognized when the contingencies related to the insurance claims have been resolved, which may be in a subsequent reporting period.

We also partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during the fourth quarter of 2024.

We also partially recovered and recognized a $327,000 gain related to a fire in one of our clubs in Fort Worth, Texas, during 2024 and $2.3 million in 2025.

See Note 15 to our consolidated financial statements.

46 unchanged sentences

Other Income/Expenses

Interest expense increased by approximately $753,000 from 2023 to 2024 and by approximately $4.0 million from 2022 to 2023.

Interest expense decreased by approximately $327,000 from 2024 to 2025 and increased by approximately $753,000 from 2023 to 2024.

The decrease in interest expense in 2025 was primarily caused by a lower average year-over-year debt balance.

The increase in interest expense was primarily caused by the significantly higher average debt balance from borrowings to finance our acquisitions in 2023 and the additional interest expense from construction loans in 2024 related to build-out projects.

6 unchanged sentences

Total occupancy cost 8.1 % 8.0 % 7.9 %

Income tax was approximately a $410,000 benefit in 2024, a $6.8 million expense in 2023, and a $14.1 million expense in 2022.

Income tax was approximately a $4.6 million expense in 2025, $410,000 benefit in 2024, and a $6.8 million expense in 2023.

Our effective income tax rate was 29.8% in 2025, (15.7)% in 2024, and 19.0% in 2023.

3 unchanged sentences

State income taxes, net of federal benefit 10.2 % 8.0 % 3.3 %

Permanent differences 18.7 % 1.7 % 0.2 %

Change in tax rates (4.2) % (0.7) % 1.5 %

Nontaxable or nondeductible items

Goodwill impairment — % 7.8 % 0.8 %

Section 162(m) excess compensation 1.3 % 6.5 % 0.5 %

Meals and entertainment 0.6 % 3.8 % 0.3 %

Loss (gain) on sale of subsidiary stock 0.8 % — % — %

Other nontaxable or nondeductible items 0.1 % 0.5 % 0.1 %

Change in valuation allowance 0.6 % 1.8 % — %

Tax credits (87.8) % (5.9) % (3.0) %

FICA tip credit (10.4) % (63.3) % (4.9) %

Work Opportunity Tax credits (1.2) % (24.5) % (1.0) %

Expiration of capital loss carryforwards 3.0 % — % — %

Stock-based compensation forfeiture 1.3 % — % — %

Return-to-provision and prior-period adjustments 1.9 % 22.7 % (1.0) %

Other 0.5 % — % — %

14 unchanged sentences

Adjustment items are:

(a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) gain on debt extinguishment, (g) stock-based compensation, (h) the income tax effect of the above-described adjustments, and (i) change in deferred tax asset valuation allowance.

Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 0.0%, 20.6%, and 22.8% effective tax rate of the pre-tax non-GAAP income before taxes for 2024, 2023, and 2022, respectively, and the GAAP income tax expense.

(a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, (f) gain on lease termination, (g) stock-based compensation, (h) the income tax effect of the above-described adjustments, and (i) change in deferred tax asset valuation allowance.

Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at 22.7%, 0.0%, and 20.6% effective tax rate of the non-GAAP income before taxes for 2025, 2024, and 2023, 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.

1 unchanged sentence

We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders:

(a) depreciation and amortization, (b) income tax expense, (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) impairment of assets, (g) settlement of lawsuits, (h) gain on debt extinguishment, and (i) stock-based compensation.

(a) depreciation and amortization, (b) income tax expense (benefit), (c) net interest expense, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) impairment of assets, (g) settlement of lawsuits, (h) gain on lease termination, and (i) stock-based compensation.

We believe that adjusting for such items helps management and investors better understand our operating activities.

15 unchanged sentences

Depreciation and amortization 15,078 15,395 15,151

Gain on debt extinguishment — — (138)

Gain on insurance (2,358) (327) (77)

Gain on lease termination (979) — —

Stock-based compensation 1,373 1,882 2,588

6 unchanged sentences

Gain on sale of businesses and assets (982) (2,140) (682)

Gain on debt extinguishment — — (138)

Gain on insurance (2,358) (327) (77)

Gain on lease termination (979) — —

Stock-based compensation 1,373 1,882 2,588

10 unchanged sentences

Gain on sale of businesses and assets (0.11) (0.23) (0.07)

Gain on debt extinguishment — — (0.01)

Gain on insurance (0.27) (0.04) (0.01)

Gain on lease termination (0.11) — —

Stock-based compensation 0.16 0.20 0.28

23 unchanged sentences

At September 30, 2025, our cash and cash equivalents were $33.7 million as compared to $32.4 million at September 30, 2024.

Because of the large volume of cash we handle, we have very stringent cash controls.

As of September 30, 2024, we had negative working capital of $793,000 compared to a negative working capital of $10.5 million as of September 30, 2023.

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.

Due to the large volume of cash that we handle, we have very stringent cash controls.

As of September 30, 2025, and 2024, we had negative working capital balances.

We believe that we can borrow capital if needed but there can be no guarantee that additional liquidity will be readily available or available on favorable terms although we have unused credit facilities as of September 30, 2025.

We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions.

3 unchanged sentences

We also have historically utilized these cash flows to invest in property and equipment, adult nightclubs, and restaurants/sports bars.

During 2022, we acquired fifteen clubs at an aggregate acquisition date fair value of $132.6 million, of which $55.3 million was in cash, $49.0 million in debt (with an acquisition date fair value of $47.4 million) and $30.0 million in equity (500,000 shares of our common stock with an acquisition date fair value of $29.9 million, discounted for lack of marketability due to the lock-up period).

During 2023, we acquired six clubs at an aggregate acquisition date fair value of $72.3 million, of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and $16.0 million in equity (200,000 shares of our common stock with an acquisition date fair value of $12.8 million, discounted for lack of marketability due to the lock-up period).

We did not have any business acquisition in 2024.

During 2025, we acquired three clubs at an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt (with the same acquisition date fair value).

We expect to generate adequate cash flows from operations for the next 12 months from the issuance of this report.

12 unchanged sentences

Depreciation and amortization 15,078 15,395 15,151

Deferred tax expense (benefit) (6,450) (1,781) 3,080

Deferred tax benefit (1,004) (6,450) (1,781)

Stock-based compensation expense 1,373 1,882 2,588

Impairment of assets 5,340 38,517 12,629

Gain on debt extinguishment — — (83)

Net change in operating assets and liabilities 17,594 2,671 (1,203)

1 unchanged sentence

Net cash provided by operating activities $ 49,418 $ 55,884 $ 59,130

Net cash flows from operating activities decreased from 2022 to 2023 and from 2023 to 2024 mainly due to the lower same-store sales and the higher interest expense paid, partially offset by the lower income taxes paid.

Net cash flows from operating activities decreased from 2023 to 2024 and from 2024 to 2025 mainly due to the lower same-store sales, partially offset by the lower income taxes paid.

In the next five years, we expect interest payments on our debts to range from $15.0 million in the early years to $8.0 million annually in the latter years for debts we owe as of September 30, 2025.

9 unchanged sentences

Net cash used in investing activities $ (24,041) $ (21,015) $ (64,824)

In 2025, we acquired three clubs for a combined sum of $21.0 million (with an aggregate acquisition date fair value of the same amount), of which $13.0 million was in cash and $8.0 million in debt (with an acquisition date fair value of the same amount).

In 2023, we acquired six clubs for a combined sum of $75.5 million (with an aggregate acquisition date fair value of $72.3 million), of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity (with an acquisition date fair value of $12.8 million).

We also acquired several real estate properties for club and Bombshells sites totaling $19.7 million, and invested $7.5 million for future casino locations.

In 2022, we acquired fifteen clubs for a combined sum of $134.2 million (with an aggregate acquisition date fair value of $132.6 million), of which $55.3 million was in cash, $49.0 million in debt (with an acquisition date fair value of $47.4 million), and 500,000 shares of our common stock in equity (with an acquisition date fair value of $29.9 million).

We also purchased an aircraft and six real estate properties, of which, four are for future Bombshells locations, one for a club that we were leasing, and another to replace a club location which was taken by eminent domain.

Also in 2022, we received payment for four real estate properties.

We did not receive payment for the eminent domain property mentioned above until November 2022.

As of September 30, 2024, 2023, and 2022, we had $14.0 million, $7.7 million, and $1.5 million in construction-in-progress related mostly to Bombshells units that are opening in subsequent fiscal years.

As of September 30, 2025, 2024, and 2023, we had $7.9 million, $15.0 million, and $7.7 million in construction-in-progress related mostly to Bombshells units that open in subsequent periods.

See Note 16 to our consolidated financial statements for details of our acquisition and disposition activities.

15 unchanged sentences

Distribution to noncontrolling interests — — (600)

Net cash provided by (used in) financing activities $ (23,542) $ (9,263) $ 3,582

Net cash used in financing activities $ (24,018) $ (23,542) $ (9,263)

See Note 9 to our consolidated financial statements for a detailed discussion of our debt obligations, including the future maturities of our debt obligations in the next five years and thereafter.

1 unchanged sentence

We paid quarterly dividends of $0.05 per share in the first quarter of 2023.

In the second quarter of 2022 through the first quarter of 2023, we increased our quarterly dividends to $0.05 per share.

Then starting in the second quarter of 2023 through the third quarter of 2024, we increased our quarterly dividends to $0.06 per share.

We paid $0.07 per share in the fourth quarter of 2024.

In the second quarter of 2023 through the third quarter of 2024, we increased our quarterly dividends to $0.06 per share.

Then starting in the fourth quarter of 2024 through the first quarter of 2026, we increased our quarterly dividends to $0.07 per share.

In the second quarter of 2026, we increased our quarterly dividends to $0.08 per share.

We expect annual dividend payments of $2.5 million in 2026 based on our current quarterly dividend rate.

9 unchanged sentences

As a % of revenue 16.2 % 16.4 % 18.1 %

We do not include total capital expenditures as a reduction from net cash flow from operating activities to arrive at free cash flow.

We only include maintenance capital expenditures 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.

23 unchanged sentences

During fiscal years 2025, 2024, and 2023, we paid for treasury stock amounting to $11.9 million, $20.6 million, and $2.2 million, representing 270,939 shares, 442,639 shares, and 34,086 shares, respectively.

On each of May 24, 2022 and July 9, 2024, the board of directors approved a $25.0 million increase in the Company's share repurchase program.

We have approximately $21.0 million remaining to purchase additional shares as of September 30, 2024.

On July 9, 2024, the board of directors approved a $25.0 million increase in the Company's share repurchase program.

We have approximately $9.2 million remaining authorization to purchase additional shares as of September 30, 2025.

On November 21, 2025, the Company repurchased 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 unsecured promissory note.

For additional details regarding our board approved share repurchase plans, please refer to Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

9 unchanged sentences

We also strive to enter into businesses that complement our own, such as gaming, if they can enhance shareholder value.

Our growth strategy is to diversify our operations with these units which do not require SOB licenses, which are sometimes difficult to obtain.

While we are searching for adult nightclubs to acquire, we are able to also search for restaurant/sports bar locations that are consistent with our income targets.

In fiscal 2022, we acquired fifteen clubs with an aggregate acquisition date fair value of $132.6 million, of which $55.3 million in cash, $49.0 million in debt (with an acquisition date fair value of $47.4 million), and 500,000 shares of our common stock in equity.

We also opened a new Bombshells location in Arlington, Texas in December 2021 and our first franchised location in San Antonio, Texas opened in June 2022.

In fiscal 2023, we acquired six clubs with an aggregate acquisition date fair value of $72.3 million, of which $29.0 million was in cash, $30.5 million in debt (with an acquisition date fair value of $30.4 million), and 200,000 shares of our common stock in equity.

In fiscal 2024, we did not have any club business acquisitions but opened a new Bombshells location in Stafford, Texas in November 2023.

In fiscal 2025, we acquired three clubs with an aggregate acquisition date fair value of $21.0 million, of which $13.0 million was in cash and $8.0 million in debt.

See Note 16 to our consolidated financial statements.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis