What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-28 compared with 2026-05-07 · 201 added, 70 removed, 293 unchanged (48% of the section changed)

4 unchanged sentences

All services and management operations are conducted by subsidiaries of RCIHH.

Through our subsidiaries, as of December 31, 2025, we operated a total of 68 establishments that offer live adult entertainment and sports bars and restaurants.

Through our subsidiaries, as of March 31, 2026, we operated a total of 67 establishments that offer live adult entertainment and sports bars and restaurants.

We also operated a leading business communications company serving the multi-billion-dollar adult nightclubs industry.

13 unchanged sentences

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on March 19, 2026.

During the three months ended December 31, 2025, there were no significant changes in our accounting policies and estimates.

During the three months ended March 31, 2026, there were no significant changes in our accounting policies and estimates.

Results of Operations

Highlights of the Company's operating results for the quarter ended December 31, 2025, are as follows, with comparisons against the same period of the prior year:

• Total revenues were $70.8 million compared to $71.5 million, a 0.9% decrease (Nightclubs revenue of $62.3 million compared to $61.7 million, a 0.9% increase;

Highlights of the Company's operating results and cash flows are as follows, as compared to the same period of the prior year (all throughout the MD&A, unless stated otherwise):

Second Quarter Ended March 31, 2026

• Total revenues were $68.7 million compared to $65.9 million, a 4.3% increase (Nightclubs revenue of $60.3 million compared to $57.5 million, a 4.8% increase;

and Bombshells revenue of $8.4 million compared to $8.2 million, a 1.6% increase)

• Consolidated same-store sales decreased by 1.9% (Nightclubs decreased by 0.7%, while Bombshells decreased by 11.1%) (refer to the definition of same-store sales in the discussion of revenues below)

• Basic and diluted earnings per share (“EPS”) of $0.04 loss compared to $0.36 income

• Non-GAAP diluted EPS* of $0.78 compared to $0.65

• Net cash provided by operating activities of $9.9 million compared to $8.5 million, a 15.6% increase

• Free cash flow* of $8.4 million compared to $6.9 million, a 21.4% increase

Year-to-Date Period Ended March 31, 2026

• Total revenues were $139.6 million compared to $137.4 million, a 1.6% increase (Nightclubs revenue of $122.6 million compared to $119.3 million, a 2.8% increase;

and Bombshells revenue of $16.7 million compared to $17.8 million, an 6.0% decrease)

• Consolidated same-store sales decreased by 5.0% (Nightclubs decreased by 3.3%, while Bombshells decreased by 16.7%) (refer to the definition of same-store sales in the discussion of revenues below)

• Basic and diluted earnings per share (“EPS”) this quarter of a loss of $0.57 compared to an income of $1.01

• Basic and diluted EPS of $0.63 loss compared to $1.38 income

• Non-GAAP diluted EPS* of $1.52 compared to $1.46

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* Reconciliation and discussion of non-GAAP financial measures are included in the “ Non-GAAP Financial Measures ” section below.

Consolidated revenues for the first quarter decreased by $0.7 million, or 0.9%, versus the comparable prior-year quarter due primarily to the $1.4 million impact of closed locations, partially offset by a $4.8 million increase in sales from new locations and the $5.3 million impact of the decrease in consolidated same-stores sales.

Consolidated revenues for the second quarter increased by $2.8 million, or 4.3%, versus the comparable prior-year quarter due primarily to a $3.4 million increase in sales from new locations and a $1.2 million increase from reformatted/rebranded locations, partially offset by a $1.2 million impact of the decrease in consolidated same-stores sales and a $500,000 impact of closed locations.

Consolidated revenues for the six months increased by $2.2 million, or 1.6%, versus the comparable prior-year six-month period due primarily to a $8.4 million increase in sales from new locations and a $2.3 million increase from reformatted/rebranded locations, partially offset by a $6.5 million impact of the decrease in consolidated same-stores sales and a $1.9 million impact of closed locations.

We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells.

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Segment contribution to total revenues was as follows (in thousands, except percentages):

Three Months Ended December 31, 2025 Mix Three Months Ended December 31, 2024 Mix Inc (Dec) $ Inc (Dec) %

Three Months Ended March 31, 2026 Mix Three Months Ended March 31, 2025 Mix Inc (Dec) $ Inc (Dec) %

Sales of alcoholic beverages $ 24,354 40.4 % $ 24,575 42.7 % $ (221) (0.9) %

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$ 68,722 $ 65,876 $ 2,846 4.3 %

Nightclubs revenues increased by 0.9% during the first quarter compared to the same quarter last year primarily due to the $3.0 million contribution of newly acquired clubs and the $3.5 million impact of the decrease in same-store sales, partially offset by the $256,000 impact of closed clubs.

Six Months Ended March 31, 2026 Mix Six Months Ended March 31, 2025 Mix Inc (Dec) $ Inc (Dec) %

Sales of alcoholic beverages $ 50,149 40.9 % $ 51,610 43.3 % $ (1,461) (2.8) %

Sales of food and merchandise 11,593 9.5 % 11,255 9.4 % 338 3.0 %

Service revenues 51,254 41.8 % 47,048 39.4 % 4,206 8.9 %

Other revenues 9,588 7.8 % 9,352 7.8 % 236 2.5 %

122,584 100.0 % 119,265 100.0 % 3,319 2.8 %

Sales of alcoholic beverages 8,807 52.6 % 9,444 53.0 % (637) (6.7) %

Sales of food and merchandise 7,912 47.3 % 8,262 46.4 % (350) (4.2) %

Service revenues 5 0.0 % 45 0.3 % (40) (88.9) %

Other revenues 16 0.1 % 65 0.4 % (49) (75.4) %

16,740 100.0 % 17,816 100.0 % (1,076) (6.0) %

Other revenues 226 100.0 % 278 100.0 % (52) (18.7) %

$ 139,550 $ 137,359 $ 2,191 1.6 %

Nightclubs revenues increased by 4.8% during the second quarter compared to the same quarter last year primarily due to the $2.4 million contribution of newly acquired clubs and $1.2 million from clubs that have been reformatted and/or rebranded, partially offset by the $358,000 impact of the decrease in same-store sales and the $500,000 impact of closed clubs.

For clubs that were open enough days to qualify as a same-store location (refer to the definition of same-store sales in the preceding paragraph), sales decreased by 0.7%.

By type of revenue, alcoholic beverage sales decreased by 0.9%, food, merchandise and other revenue increased by 3.8%, while service revenues increased by 11.3%.

Bombshells first quarter revenues decreased by 12.6%, of which 21.9% was for same-store sales decline and $1.2 million from recently closed or sold locations, with the offsetting increase caused by sales from a new location.

By type of revenue, food and merchandise sales decreased by 7.8%, while alcoholic beverage sales decreased by 15.7%.

During the six-month period, Nightclubs revenues increased by 2.8% mainly due to the $5.6 million contribution of newly acquired clubs and $2.3 million from clubs that have been reformatted and/or rebranded, partially offset by the $3.8 million impact of the decrease in same-store sales and the $756,000 impact of closed clubs.

By type of revenue, alcoholic beverage sales decreased by 2.8%, food, merchandise and other revenue increased by 2.8%, while service revenues increased by 8.9%.

Bombshells second quarter revenues increased by 1.6% primarily due to sales from a new location, partially offset by the decline in same-store sales.

By type of revenue, food and merchandise sales decreased by 0.3%, while alcoholic beverage sales increased by 4.0%.

During the six-month period, Bombshells revenues decreased by 6.0%.

This was mainly caused by a $2.7 million decrease in same-store sales and a $1.2 million decrease from closed locations, partially offset by a $2.8 million contribution from new locations.

By type of revenue, alcoholic beverage sales decreased by 6.7% while food, merchandise and other decreased by 5.2%.

Operating Expenses

Total operating expenses, as a percent of revenues, increased to 84.4% from 80.5% from last year’s first quarter.

Year-over-year change was a $2.2 million increase, or 3.8%.

Total operating expenses, as a percent of revenues, increased to 94.5% from 87.6% from last year’s second quarter, and increased to 89.4% from 83.9% for the six-month period.

Year-over-year change was a $7.2 million decrease, or 12.5%, for the quarter and a $9.4 million increase, or 8.2%, for the six months.

Significant contributors to the changes in operating expenses are explained below.

Cost of goods sold .

Cost of goods sold for the first quarter decreased by $240,000, or 2.5%, mainly due to lower sales.

As a percent of total revenues, cost of goods sold decreased to 13.0% from 13.3% mainly due to shift in sales mix to higher-margin service revenues.

Nightclubs cost of goods sold during the quarter was flat at 11.5% compared to prior year, while Bombshells cost of goods sold slightly decreased to 23.7% from 23.9%.

Cost of goods sold for the second quarter increased by $394,000, or 4.7%, and increased by $154,000, or 0.9%, for the six-month period mainly due to higher sales.

As a percent of total revenues, cost of goods sold was flat at 12.8% during the quarter and decreased to 12.9% from 13.0% during the six-month period mainly due to shift in sales mix to higher-margin service revenues.

Nightclubs cost of goods sold during the quarter decreased to 11.2% from 11.3% and for the six months decreased to 11.3% from 11.4%.

Bombshells cost of goods sold increased to 24.7% from 22.9% during the quarter and increased to 24.2% from 23.4% during the six months.

Cost of goods sold by segment is as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 6,733 $ 6,512 $ 13,895 $ 13,636

Bombshells 2,064 1,882 4,051 4,174

Other 8 17 100 82

$ 8,805 $ 8,411 $ 18,046 $ 17,892

Salaries and wages .

Salaries and wages increased by $0.9 million, or 4.3%, for the quarter mainly due to last year's club acquisitions.

As a percent of total revenues, salaries and wages increased to 30.3% from 28.8%.

Nightclubs increased to 23.7% from 22.6%, Bombshells increased to 34.3% from 29.3%, while corporate slightly increased to 5.3% from 5.2%.

Salaries and wages increased by $751,000, or 3.7%, for the quarter and increased by $1.6 million, or 4.0%, for the six-month period mainly due to new clubs and Bombshells units.

As a percent of total revenues, salaries and wages decreased to 30.9% from 31.1% for the quarter and increased to 30.6% from 29.9% for the six months.

During the quarter, Nightclubs decreased to 24.2% from 24.5%, Bombshells decreased to 33.7% from 33.9%, while Corporate increased to 5.4% from 5.3%.

During the six-month period, Nightclubs increased to 23.9% from 23.5%, Bombshells increased to 34.0% from 31.4%, and Corporate increased to 5.3% from 5.2%.

Salaries and wages by segment are as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 14,565 $ 14,091 $ 29,307 $ 28,021

Bombshells 2,817 2,791 5,693 5,598

Other 122 135 220 240

Corporate 3,738 3,474 7,465 7,196

$ 21,242 $ 20,491 $ 42,685 $ 41,055

Selling, general, and administrative expenses .

Total selling, general and administrative expenses decreased by $1.5 million, or 5.7%, for the quarter.

Total selling, general, and administrative expenses increased by $297,000, or 1.3%, for the quarter and decreased by $1.2 million, or 2.5%, for the six-month period.

Dollar amounts in the tables below are in thousands, except percentages.

Three Months Ended

December 31, 2025 Three Months Ended

December 31, 2024 Better (Worse)

March 31, 2026 Three Months Ended

March 31, 2025 Better (Worse)

Amount % of Revenues Amount % of Revenues Amount %

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Total selling, general, and administrative expenses $ 23,197 33.8 % $ 22,900 34.8 % $ (297) (1.3) %

Supplies and services increased mainly due to the four new clubs and two Bombshells locations.

Six Months Ended

March 31, 2026 Six Months Ended

March 31, 2025 Better (Worse)

Amount % of Revenues Amount % of Revenues Amount %

Taxes and permits $ 7,216 5.2 % $ 7,246 5.3 % $ 30 0.4 %

Advertising and marketing 5,733 4.1 % 5,563 4.0 % (170) (3.1) %

Supplies and services 5,445 3.9 % 4,956 3.6 % (489) (9.9) %

Insurance 5,225 3.7 % 8,106 5.9 % 2,881 35.5 %

Legal 2,369 1.7 % 2,755 2.0 % 386 14.0 %

Lease 3,241 2.3 % 3,139 2.3 % (102) (3.2) %

Charge card fees 3,923 2.8 % 3,398 2.5 % (525) (15.5) %

Utilities 3,176 2.3 % 2,879 2.1 % (297) (10.3) %

Security 2,178 1.6 % 2,102 1.5 % (76) (3.6) %

Stock-based compensation 589 0.4 % 588 0.4 % (1) (0.2) %

Accounting and professional fees 2,429 1.7 % 2,311 1.7 % (118) (5.1) %

Repairs and maintenance 2,707 1.9 % 2,491 1.8 % (216) (8.7) %

Other 3,670 2.6 % 3,573 2.6 % (97) (2.7) %

Total selling, general, and administrative expenses $ 47,901 34.3 % $ 49,107 35.8 % $ 1,206 2.5 %

Insurance expense decreased due to last year's estimated self-insurance reserve.

Accounting and professional fees increased mainly due to additional audit procedures performed in relation to the delayed year-end filing.

Charge card fees, supplies and services, utilities, and repairs and maintenance increased due to increase in sales.

Selling, general, and administrative expenses by segment are as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 17,240 $ 17,278 $ 35,242 $ 34,946

Bombshells 3,340 3,291 6,553 6,833

Other 69 123 165 226

Corporate 2,548 2,208 5,941 7,102

$ 23,197 $ 22,900 $ 47,901 $ 49,107

Depreciation and amortization .

Depreciation and amortization increased by $618,000, or 17.3%, during the quarter primarily due to additional assets from last year's club acquisitions and newly opened Bombshells.

Depreciation and amortization increased by $241,000, or 6.4%, during the quarter and increased by $859,000, or 11.7%, during the six-month period primarily due to additional assets from last year's club acquisitions and newly opened Bombshells.

Depreciation and amortization by segment are as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 3,395 $ 3,158 $ 6,895 $ 6,129

Bombshells 338 351 753 682

Other 1 2 3 4

Corporate 283 265 553 530

$ 4,017 $ 3,776 $ 8,204 $ 7,345

Impairments and other charges (gains), net .

Impairments and other charges (gains), net changed mainly due the current quarter impairment, the recovery in the current quarter from a previously recorded lawsuit settlement, and the sale of our Bombshells location in Austin, Texas, which was significantly impaired in a prior period, and the insurance recovery for a club razed by fire in last year's first quarter.

Impairments and other charges (gains), net changed mainly due to impairment of assets, the recovery in the current quarter from a previously recorded lawsuit settlement, and the sale of our Bombshells location in Austin, Texas, which was significantly impaired in a prior period, and the insurance recovery for a club razed by fire in last year's first quarter.

By segment, impairment and other charges (gains), net are as follows (in thousands):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 7,584 $ 1,970 $ 7,765 $ 1,148

Bombshells 67 159 96 (1,171)

Other — — — —

Corporate (2) (2) 5 (94)

$ 7,649 $ 2,127 $ 7,866 $ (117)

Income (Loss) from Operations

For the three months ended December 31, 2025, and 2024, our consolidated operating margin was 15.6% and 19.5%, respectively.

For the three and six months ended March 31, 2026, and 2025, our consolidated operating margin was 5.5% and 12.4%, and 10.6% and 16.1%, respectively.

Segment contribution to income (loss) from operations is presented in the table below (in thousands):

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Nightclubs $ 10,758 $ 14,532 $ 29,480 $ 35,385

3 unchanged sentences

$ 3,812 $ 8,171 $ 14,848 $ 22,077

Excluding certain items, the three months ended December 31, 2025, and 2024 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).

Excluding certain items, the three months ended March 31, 2026, and 2025 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).

Refer to the discussion of Non-GAAP Financial Measures on page 31 .

Three Months Ended December 31, 2025

Three Months Ended March 31, 2026

Nightclubs Bombshells Other Corporate Total

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Stock-based compensation — — — 197 197

Loss (gain) on sale of businesses and assets 218 2 — (2) 218

Gain on insurance (46) — — — (46)

Non-GAAP operating income (loss) $ 18,960 $ (200) $ (112) $ (6,370) $ 12,278

GAAP operating margin 17.8 % (3.2) % (127.3) % (9.6) % 5.5 %

Non-GAAP operating margin 31.5 % (2.4) % (127.3) % (9.3) % 17.9 %

Three Months Ended March 31, 2025

Nightclubs Bombshells Other Corporate Total

Income (loss) from operations $ 14,532 $ (245) $ (171) $ (5,945) $ 8,171

Amortization of intangibles 572 1 — 4 577

Impairment of assets

1,780 — — — 1,780

Settlement of lawsuits 97 30 — — 127

Stock-based compensation — — — 118 118

Loss (gain) on sale of businesses and assets 93 129 — (2) 220

Gain on insurance — — — — —

Non-GAAP operating income (loss) $ 17,074 $ (85) $ (171) $ (5,825) $ 10,993

GAAP operating margin 25.3 % (3.0) % (161.3) % (9.0) % 12.4 %

Non-GAAP operating margin 29.7 % (1.0) % (161.3) % (8.8) % 16.7 %

Excluding certain items, the six months ended March 31, 2026, and 2025 non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).

Six Months Ended March 31, 2026

Nightclubs Bombshells Other Corporate Total

Income (loss) from operations $ 29,480 $ (406) $ (262) $ (13,964) $ 14,848

Amortization of intangibles 1,231 — — 4 1,235

Impairment of assets 8,433 — — — 8,433

Settlement of lawsuits, net of recoveries (685) 90 — — (595)

Stock-based compensation — — — 589 589

Loss on sale of businesses and assets 240 6 — 5 251

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Non-GAAP operating margin 31.4 % (1.9) % (115.9) % (9.6) % 17.6 %

Three Months Ended December 31, 2024

Six Months Ended March 31, 2025

Nightclubs Bombshells Other Corporate Total

1 unchanged sentence

Amortization of intangibles 1,146 2 — 9 1,157

Impairment of assets 1,780 — — — 1,780

Settlement of lawsuits 276 30 — — 306

7 unchanged sentences

Interest expense increased by $467,000, or 11.5%, while interest income decreased by $57,000, or 41.0%, during the quarter.

Interest expense increased by $665,000, or 8.1%, while interest income decreased by $137,000, or 43.1%, during the six-month period.

Non-operating gains and losses include premium on stock repurchase and gain on lease termination.

Premium on stock repurchase resulted from the November 2025 block stock buyback.

Gain on lease termination was from a settlement of lease obligation related to a closed Bombshells unit in a prior period.

Our total occupancy costs, which we define as the sum of operating lease expense and interest expense, were $6.0 million and $5.8 million for the quarters ended December 31, 2025, and 2024, respectively.

As a percentage of revenue, total occupancy costs were 8.5% and 8.0% during the quarters ended December 31, 2025, and 2024, respectively.

Income tax expense was $1.5 million and $1.8 million during the three months ended December 31, 2025, and 2024, respectively.

The effective income tax rate was (50.0)% and 16.9% for the three months ended December 31, 2025, and 2024, respectively.

Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both periods, and the pretax loss and the nondeductible premium on stock repurchase in the current quarter.

Our total occupancy costs, which we define as the sum of operating lease expense and interest expense, were $6.1 million and $5.6 million for the quarters ended March 31, 2026, and 2025, respectively.

As a percentage of revenue, total occupancy costs were 8.9% and 8.5% during the quarters ended March 31, 2026, and 2025, respectively.

Total occupancy costs were $12.1 million and $11.3 million for the six months ended March 31, 2026, and 2025, respectively.

As a percentage of revenue, total occupancy costs were 8.7% and 8.3% during the six months ended March 31, 2026, and 2025, respectively.

Income tax was a $398,000 benefit and a $1.1 million expense during the three months ended March 31, 2026, and 2025, respectively.

The effective income tax rate was approximately 64.5% and 25.1% for the three months ended March 31, 2026, and 2025, respectively.

Income tax expense was $1.2 million and $2.9 million during the six months ended March 31, 2026, and 2025, respectively.

The effective income tax rate approximately was 31.0% and 19.2% for the six months ended March 31, 2026, and 2025, respectively.

Our effective income tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, and the impact of the nondeductible premium on stock repurchase on a pretax loss during the current year, particularly a low pretax loss in the current quarter.

Non-GAAP Financial Measures

1 unchanged sentence

Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP.

We monitor non-GAAP financial measures because it describes the operating performance of the Company and helps management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP.

We monitor non-GAAP financial measures because they describe the operating performance of the Company and help management and investors gauge our ability to generate cash flow, excluding (or including) some items that management believes are not representative of the ongoing business operations of the Company, but are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP.

Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:

7 unchanged sentences

(a) amortization of intangibles, (b) impairment of assets, (c) settlement of lawsuits, net of recoveries, (d) gains or losses on sale of businesses and assets, (e) gains or losses on insurance, (f) stock-based compensation, (g) premium on stock repurchase, (h) gains or losses on lease termination, and (i) the income tax effect of the above-described adjustments.

Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at approximately 22.8% and 17.7% effective tax rate of the pre-tax non-GAAP income before taxes for the three months ended December 31, 2025, and 2024, respectively, and the GAAP income tax expense (benefit).

Included in the income tax effect of the above adjustments is the net effect of the non-GAAP provision for income taxes, calculated at approximately 22.3% and 18.1% effective tax rate of the pre-tax non-GAAP income before taxes for the six months ended March 31, 2026, and 2025, respectively, and the GAAP income tax expense (benefit).

We believe that excluding and including such items help management and investors better understand our operating activities.

9 unchanged sentences

See “Liquidity and Capital Resources” section for further discussion.

The following tables present our non-GAAP performance measures for the three months ended December 31, 2025, and 2024 (in thousands, except per share, number of shares, and percentages):

Three Months Ended December 31,

The following tables present our non-GAAP performance measures for the three and six months ended March 31, 2026, and 2025 (in thousands, except per share, number of shares, and percentages):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Reconciliation of GAAP net income (loss) to Adjusted EBITDA

Net income (loss) attributable to RCIHH common stockholders $ (326) $ 3,231 $ (5,060) $ 12,255

$ (4,734) $ 9,024

Income tax expense 1,549 1,847

Income tax expense (benefit) (398) 1,068 1,151 2,915

Interest expense, net 4,433 3,909 8,684 7,882

2 unchanged sentences

Settlement of lawsuits, net of recoveries

207 127 (595) 306

Stock-based compensation 197 118 589 588

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Adjusted EBITDA $ 15,572 $ 14,229 $ 31,319 $ 29,889

Three Months Ended December 31,

Adjusted EBITDA as a percentage of revenues 22.7 % 21.6 % 22.4 % 21.8 %

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Reconciliation of GAAP net income (loss) to non-GAAP net income

Net income (loss) attributable to RCIHH common stockholders $ (326) $ 3,231 $ (5,060) $ 12,255

$ (4,734) $ 9,024

Amortization of intangibles 620 577 1,235 1,157

1 unchanged sentence

Settlement of lawsuits, net of recoveries

207 127 (595) 306

Stock-based compensation 197 118 589 588

5 unchanged sentences

Non-GAAP net income $ 6,065 $ 5,790 $ 12,179 $ 12,951

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Reconciliation of GAAP diluted earnings (loss) per share to non-GAAP diluted earnings per share

1 unchanged sentence

GAAP diluted earnings (loss) per share $ (0.04) $ 0.36 $ (0.63) $ 1.38

$ (0.57) $ 1.01

Amortization of intangibles 0.08 0.07 0.15 0.13

1 unchanged sentence

Settlement of lawsuits, net of recoveries

0.03 0.01 (0.07) 0.03

Stock-based compensation 0.03 0.01 0.07 0.07

5 unchanged sentences

Non-GAAP diluted earnings per share $ 0.78 $ 0.65 $ 1.52 $ 1.46

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Reconciliation of GAAP operating income to non-GAAP operating income

3 unchanged sentences

Settlement of lawsuits, net of recoveries

207 127 (595) 306

Stock-based compensation 197 118 589 588

Loss (gain) on sale of businesses and assets

218 220 251 (1,186)

Gain on insurance (46) — (223) (1,017)

Non-GAAP operating income $ 12,278 $ 10,993 $ 24,538 $ 23,705

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Reconciliation of GAAP operating margin to non-GAAP operating margin

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Liquidity and Capital Resources

At December 31, 2025, our cash and cash equivalents were approximately $28.6 million compared to $33.7 million at September 30, 2025.

At March 31, 2026, our cash and cash equivalents were approximately $26.9 million compared to $33.7 million at September 30, 2025.

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

As of December 31, 2025, we had negative working capital of $26.3 million compared to a negative working capital of $12.1 million as of September 30, 2025.

As of March 31, 2026, we had negative working capital of $32.7 million compared to a negative working capital of $12.1 million as of September 30, 2025.

We believe that we can borrow capital if needed but currently we do not have unused credit facilities so there can be no guarantee that additional liquidity will be readily available or available on favorable terms.

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The following table presents a summary of our cash flows from operating, investing, and financing activities (in thousands):

Three Months Ended December 31,

Six Months Ended March 31,

Operating activities $ 17,697 $ 21,891

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Following are our summarized cash flows from operating activities (in thousands):

Three Months Ended December 31,

Net income $ (4,649) $ 9,065

Six Months Ended March 31,

Net income (loss) $ (4,868) $ 12,259

Depreciation and amortization 8,204 7,345

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Deferred income tax benefit

(2,223) (1,242)

Stock-based compensation 589 588

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Net cash provided by operating activities $ 17,697 $ 21,891

Net cash provided by operating activities was lower in the current quarter by 41.4% primarily due to the lower income from operations, higher income taxes paid, and higher payments to settle lawsuits.

Net cash provided by operating activities was lower in the current six-month period by 19.2% primarily due to the higher vendor payments and higher interest expense paid, partially offset by higher cash collection from sales.

Cash Flows from Investing Activities

Following are our cash flows from investing activities (in thousands):

Three Months Ended December 31,

Six Months Ended March 31,

Payments for property and equipment and intangible assets $ (4,199) $ (8,608)

Acquisition of businesses — (6,000)

Proceeds from sale of businesses and assets 1,675 1,085

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Net cash used in investing activities $ (2,233) $ (12,226)

Following is a breakdown of our payments for property and equipment and intangible assets for the three months ended December 31, 2025, and 2024 (in thousands):

Three Months Ended December 31,

Following is a breakdown of our payments for property and equipment and intangible assets for the six months ended March 31, 2026, and 2025 (in thousands):

Six Months Ended March 31,

New facilities, equipment, and intangible assets $ 1,601 $ 5,721

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Total capital expenditures $ 4,199 $ 8,608

The capital expenditures during the quarter ended December 31, 2025, and 2024 were composed mostly of construction projects in progress.

The capital expenditures during the quarter ended March 31, 2026, and 2025 were composed mostly of construction projects in progress.

Maintenance capital expenditures refer mainly to capitalized replacement of productive assets in already existing locations.

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Following are our cash flows from financing activities (in thousands):

Three Months Ended December 31,

Six Months Ended March 31,

Proceeds from debt obligations $ 2,253 $ 8,396

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Net cash used in financing activities $ (22,283) $ (9,352)

We purchased 74,061 shares of our common stock at an average price of $24.72 during the quarter ended December 31, 2025, while we purchased 66,000 shares of our common stock at an average price of $48.76 during the quarter ended December 31, 2024.

As of December 31, 2025, we have approximately $7.3 million authorization remaining to purchase additional shares.

On April 2, 2026, the board of directors approved a $20.0 million increase in the Company's share repurchase program.

We purchased 177,061 shares of our common stock in the open market at an average price of $24.11 during the six months ended March 31, 2026, while we purchased 122,875 shares of our common stock in the open market at an average price of $49.76 during the six months ended March 31, 2025.

As of March 31, 2026, we have approximately $4.9 million authorization remaining to purchase additional shares.

On April 2, 2026, our board of directors approved a $20.0 million increase in the Company's share repurchase program.

Outside of our open-market stock repurchase program, on November 21, 2025, the Company repurchased in a privately negotiated transaction 821,000 shares of its own common stock from a single stockholder for $30.0 million, paid $8.0 million in cash and $22.0 million under a two-year 12% unsecured promissory note.

We paid $0.07 per share in quarterly dividends during the quarters ended December 31, 2025, and 2024.

We have paid all our debts on time and have not defaulted nor requested forbearance on any of our debts during the quarters ended December 31, 2025, and 2024.

We paid $0.08 per share in quarterly dividends during the quarter ended March 31, 2026, while we paid $0.07 per share in quarterly dividends during each of the quarters ended December 31, 2024, March 31, 2025, and December 31, 2025.

We have paid all our debts on time and have not defaulted nor requested forbearance on any of our debts during the six months ended March 31, 2026, and 2025.

Management also uses certain non-GAAP cash flow measures such as free cash flow.

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Below is a table reconciling free cash flow to its most directly comparable GAAP measure (in thousands):

Three Months Ended December 31,

Six Months Ended March 31,

Net cash provided by operating activities $ 17,697 $ 21,891

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Free cash flow $ 15,099 $ 19,004

As a % of revenue

Our free cash flow for the quarter decreased by 44.6% compared to the comparable prior-year period primarily due to the lower income from operations, higher income taxes paid, and higher payments to settle lawsuits.

Free cash flow as a percentage of revenues

10.8 % 13.8 %

Our free cash flow for the quarter decreased by 20.5% compared to the comparable prior-year period primarily due to the higher vendor payments and higher interest expense paid, partially offset by higher cash collection from sales and lower maintenance capital expenditures.

We do not include capital expenditures related to new facilities construction, equipment and intangible assets as a reduction from net cash flow from operating activities to arrive at free cash flow.

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We continue to monitor the macro environment and will adjust our overall approach to capital allocation as events and trends unfold.

The following table presents a summary of such indicators for the quarters ended December 31 (in thousands, except percentages):

The following table presents a summary of such indicators for the six months ended March 31 (in thousands, except percentages):

2026 Increase

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Net income (loss) attributable to RCIHH common stockholders $ (5,060) (141.3) % $ 12,255 53.2 % $ 8,000

$ (4,734) (152.5) % $ 9,024 24.9 % $ 7,226

Net cash provided by operating activities $ 17,697 (19.2) % $ 21,891 (10.5) % $ 24,469

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Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters).

However, as we have expanded our geographical presence in recent years, October through December (our fiscal first quarter) and April through June (our fiscal third quarter) have become the periods with the strongest operating results.

Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.

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Our growth strategy includes acquiring existing units, opening new units after market analysis, and developing new club concepts that are consistent with our management and marketing skills as our capital and manpower allow.

As of December 31, 2025, ten of the eleven existing Bombshells restaurants were located in Texas, with one location in Denver, Colorado.

As of March 31, 2026, ten of the eleven existing Bombshells restaurants were located in Texas, with one location in Denver, Colorado.

As part of managing our free cash flow to fuel growth, we are evaluating our Bombshells program in view of recent performance trends.

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Quantitative and Qualitative Disclosures About Market Risk.

As of December 31, 2025, there were no material changes to the information provided in Item 7A of the Company’s Annual Report on Form 10-K for fiscal year ended September 30, 2025.

As of March 31, 2026, there were no material changes to the information provided in Item 7A of the Company’s Annual Report on Form 10-K for fiscal year ended September 30, 2025.

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-Q

Item 2. Management’s Discussion and Analysis