10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13992

RCI HOSPITALITY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Texas	76-0458229
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10737 Cutten Road

Houston, Texas 77066

(Address of principal executive offices) (Zip Code)

(281) 397-6730

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	RICK	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 5, 2023, 9,430,225 shares of the registrant’s common stock were outstanding.

Table of Contents

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking statements may appear throughout this report, including, without limitation, the following sections: Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Important factors that in our view could cause material adverse effects on our financial condition and results of operations include, but are not limited to, the risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the company’s businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) the impact of the COVID-19 pandemic, and (vii) numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

As used herein, the “Company,” “we,” “our,” and similar terms include RCI Hospitality Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.

2

Table of Contents

RCI HOSPITALITY HOLDINGS, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and September 30, 2022	5
	Condensed Consolidated Statements of Income (unaudited) for the three and six months ended March 31, 2023 and 2022	6
	Condensed Consolidated Statements of Changes in Equity (unaudited) for the three and six months ended March 31, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
	Signatures	43

3

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

4

Table of Contents

RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and number of shares)

	March 31, 2023		September 30, 2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	22,784	$	35,980
Accounts receivable, net	6,755		8,510
Current portion of notes receivable	239		230
Inventories	4,571		3,893
Prepaid expenses and other current assets	6,870		1,499
Assets held for sale	—		1,049
Total current assets	41,219		51,161
Property and equipment, net	295,861		224,615
Operating lease right-of-use assets, net	37,244		37,048
Notes receivable, net of current portion	4,569		4,691
Goodwill	84,051		67,767
Intangibles, net	156,331		144,049
Other assets	1,856		1,407
Total assets	$	621,131	$	530,738
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	7,743	$	5,482
Accrued liabilities	20,958		11,328
Current portion of debt obligations, net	21,016		11,896
Current portion of operating lease liabilities	2,951		2,795
Total current liabilities	52,668		31,501
Deferred tax liability, net	30,936		30,562
Debt, net of current portion and debt discount and issuance costs	224,751		190,567
Operating lease liabilities, net of current portion	36,429		36,001
Other long-term liabilities	383		349
Total liabilities	345,167		288,980
Commitments and contingencies (Note 10)
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; 9,430,225 and 9,231,725 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively	94		92
Additional paid-in capital	85,082		67,227
Retained earnings	190,905		173,950
Total RCIHH stockholders’ equity	276,081		241,269
Noncontrolling interests	(117)		489
Total equity	275,964		241,758
Total liabilities and equity	$	621,131	$	530,738

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share and number of share data)

(unaudited)

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Revenues
Sales of alcoholic beverages	$	30,136	$	27,335	$	59,786	$	53,766
Sales of food and merchandise	11,005		11,160		21,352		22,054
Service revenues	25,690		21,501		51,253		42,377
Other	4,686		3,696		9,094		7,331
Total revenues	71,517		63,692		141,485		125,528
Operating expenses
Cost of goods sold
Alcoholic beverages sold	5,365		4,896		10,739		9,730
Food and merchandise sold	3,737		3,840		7,323		7,797
Service and other	16		24		65		124
Total cost of goods sold (exclusive of items shown separately below)	9,118		8,760		18,127		17,651
Salaries and wages	19,428		16,530		38,104		33,035
Selling, general and administrative	22,026		18,437		44,758		36,923
Depreciation and amortization	3,760		2,877		7,067		5,071
Other charges (gains), net	3,758		7		3,104		(144)
Total operating expenses	58,090		46,611		111,160		92,536
Income from operations	13,427		17,081		30,325		32,992
Other income (expenses)
Interest expense	(3,677)		(2,864)		(7,364)		(5,468)
Interest income	90		112		181		218
Non-operating gains, net	—		—		—		84
Income before income taxes	9,840		14,329		23,142		27,826
Income tax expense	2,147		3,356		5,178		6,289
Net income	7,693		10,973		17,964		21,537
Net loss (income) attributable to noncontrolling interests	39		(21)		6		(10)
Net income attributable to RCIHH common shareholders	$	7,732	$	10,952	$	17,970	$	21,527
Earnings per share
Basic and diluted	$	0.83	$	1.15	$	1.94	$	2.28
Weighted average shares used in computing earnings per share
Basic and diluted	9,265,781		9,489,085		9,247,824		9,447,854
Dividends per share	$	0.06	$	0.05	$	0.11	$	0.09

See accompanying notes to unaudited condensed consolidated financial statements.

6

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, 2022	9,231,725	$	92	$	67,227	$	173,950	—	$	—	$	489	$	241,758
Purchase of treasury shares	—	—		—		—		(1,500)	(98)		—		(98)
Canceled treasury shares	(1,500)	—		(98)		—		1,500	98		—		—
Payment of dividends	—	—		—		(462)		—	—		—		(462)
Stock-based compensation	—	—		941		—		—	—		—		941
Share in return of investment by noncontrolling partner	—	—		—		—		—	—		(600)		(600)
Net income	—	—		—		10,238		—	—		33		10,271
Balance at December 31, 2022	9,230,225	92		68,070		183,726		—	—		(78)		251,810
Issuance of common shares for business combination	200,000	2		16,306		—		—	—		—		16,308
Payment of dividends	—	—		—		(553)		—	—		—		(553)
Stock-based compensation	—	—		706		—		—	—		—		706
Net income (loss)	—	—		—		7,732		—	—		(39)		7,693
Balance at March 31, 2023	9,430,225	$	94	$	85,082	$	190,905	—	$	—	$	(117)	$	275,964
Balance at September 30, 2021	8,999,910	$	90	$	50,040	$	129,693	—	$	—	$	(600)	$	179,223
Issuance of common shares for business combination	500,000	5		30,357		—		—	—		—		30,362
Payment of dividends	—	—		—		(380)		—	—		—		(380)
Net income (loss)	—	—		—		10,575		—	—		(11)		10,564
Balance at December 31, 2021	9,499,910	95		80,397		139,888		—	—		(611)		219,769
Purchase of treasury shares	—	—		—		—		(45,643)	(2,845)		—		(2,845)
Canceled treasury shares	(45,643)	(1)		(2,844)		—		45,643	2,845		—		—
Payment of dividends	—	—		—		(474)		—	—		—		(474)
Net income	—	—		—		10,952		—	—		21		10,973
Balance at March 31, 2022	9,454,267	$	94	$	77,553	$	150,366	—	$	—	$	(590)	$	227,423

See accompanying notes to unaudited condensed consolidated financial statements.

7

Table of Contents

RCI HOSPITALITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except number of shares)

(unaudited)

	For the Six Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	17,964	$	21,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,067		5,071
Impairment of assets	662		—
Stock-based compensation	1,647		—
Gain on sale of businesses and assets	(689)		(708)
Unrealized loss on equity securities	—		1
Amortization of debt discount and issuance costs	291		136
Gain on debt extinguishment	—		(83)
Noncash lease expense	1,463		1,238
Gain on insurance	(91)		(321)
Doubtful accounts expense on notes receivable	—		53
Changes in operating assets and liabilities:
Accounts receivable	708		1,065
Inventories	79		(276)
Prepaid expenses, other current and other assets	(5,705)		(5,360)
Accounts payable, accrued and other liabilities	8,288		5,508
Net cash provided by operating activities	31,684		27,861
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of businesses and assets	2,810		2,910
Proceeds from insurance	91		485
Proceeds from notes receivable	113		82
Payments for property and equipment and intangible assets	(20,890)		(13,990)
Acquisition of businesses, net of cash acquired	(30,200)		(39,302)
Net cash used in investing activities	(48,076)		(49,815)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt obligations, including related party proceeds of $0 and $650, respectively	11,595		35,742
Payments on debt obligations	(6,481)		(7,290)
Purchase of treasury stock	(98)		(2,845)
Payment of dividends	(1,015)		(854)
Payment of loan origination costs	(205)		(418)
Share in return of investment by noncontrolling partner	(600)		—
Net cash provided by financing activities	3,196		24,335
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(13,196)		2,381
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	35,980		35,686
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	22,784	$	38,067
CASH PAID DURING PERIOD FOR:
Interest	$	6,874	$	5,064
Income taxes	$	5,605	$	4,008

8

Table of Contents

Noncash investing and financing transactions:
Debt incurred in connection with acquisition of businesses	$	32,405	$	22,200
Debt incurred in connection with purchase of property and equipment	$	5,584	$	2,625
Note receivable from sale of property	$	—	$	2,700
Issuance of shares of common stock for acquisition of businesses:
Number of shares	200,000		500,000
Fair value	$	16,308	$	30,362
Adjustment to operating lease right-of-use assets related to new and renewed leases	$	1,659	$	19,187
Adjustment to operating lease liabilities related to new and renewed leases	$	1,958	$	19,187
Unpaid liabilities on capital expenditures	$	3,045	$	1,201

See accompanying notes to unaudited condensed consolidated financial statements.

9

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 September 30, 2022 consolidated balance sheet data 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, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 14, 2022. 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 six months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023.

We made certain reclassification adjustments to segment disclosures related to prepaid insurance and goodwill. These assets were acquired by the registrant and presented in Corporate segment but mostly benefit subsidiaries belonging to other reportable segments. Prior year disclosures were also made to conform to current year presentation. There is no impact in consolidated total assets, results of operations, and cash flows in all periods presented. See Note 11.

2. Recent Accounting Standards and Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are still evaluating the impact of this ASU but we do not expect it to have a material impact on our consolidated financial statements.

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 of 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 are still evaluating the impact of this ASU 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 are still evaluating the impact of this ASU on our consolidated financial statements.

3. Current Operating Environment

Our fiscal 2020 was the period hardest hit by the COVID-19 pandemic caused by significant reduction in customer traffic in our clubs and restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments. In fiscal 2021, our businesses started to recover from the initial effects of the pandemic when government restrictions eased. Stimulus money also flowed to the economy at that time which prompted increased discretionary spending. In fiscal 2022, several coronavirus variants

10

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

threatened to bring back tight restrictions. Along with the pandemic, geopolitical and macroeconomic events started to affect the U.S. economy in general, with global inflation and supply chain disruption impacting our businesses the most.

Toward the end of fiscal 2022 and continuing to the current fiscal year, geopolitical and macroeconomic events have impacted our operating results and cash flows by causing inflation on wages and other operating expenses. In the event global inflation leads to a major economic downturn, our business operations and cash flow could be significantly affected.

4. Acquisitions and Dispositions

Lubbock Property

On October 10, 2022, the Company purchased real estate in Lubbock, Texas amounting to $3.4 million for a future Bombshells location. The Company paid $1.1 million in cash at closing and obtained bank financing for the $2.3 million remainder (see Note 7). The site includes extra land that will be listed for sale once the Bombshells unit is completed.

Non-Income-Producing Properties

•On October 11, 2022, the Company purchased a hangar in Arcola, Texas amounting to $754,000 in cash.

•On February 6, 2023, in view of the increasing business presence of the Company in the Denver, Colorado area, the Company acquired a non-income-producing corporate property for $458,000 in cash, to be used for office space and employee housing.

Heartbreakers Gentlemen's Club

On October 26, 2022, the Company completed the acquisition of a club in Dickinson, Texas for a total agreed acquisition price of $9.0 million (with a total consideration preliminary fair value of $8.9 million based on certain legal contingencies that existed pre-acquisition). The acquisition included (1) $2.5 million for the adult entertainment business covered in a stock purchase agreement paid fully in cash at closing and (2) $6.5 million for the real estate property covered in a real estate purchase agreement paid $1.5 million in cash at closing and $5.0 million under a 6% 15-year promissory note (see Note 7). In the stock purchase agreement, the Company acquired 100% of the capital stock of the company which owned the adult entertainment business. The acquisition gives the Company its first adult club in the Galveston, Texas area market.

The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of October 26, 2022:

Current assets	$	64
Property and equipment	4,884
Licenses	1,170
Tradename	340
Accrued liability	(95)
Deferred tax liability	(374)
Total net assets acquired	5,989
Goodwill	2,916
Acquisition price fair value	$	8,905

We believe that in this acquisition goodwill represents the existing customer base of the club in the area and the added synergy profitability expansion when we implement the Company's processes into the club. Goodwill, licenses, and tradename will not be amortized but will be tested at least annually for impairment. Approximately $1.5 million of the recognized goodwill will be deductible for tax purposes.

11

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In connection with this acquisition, we incurred approximately $0 and $23,000 in acquisition-related expenses during the three and six months ended March 31, 2023, respectively, which is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until March 31, 2023, the club contributed revenues of $554,000 and $901,000 and income from operations of $103,000 and $160,000 during the three and six months ended March 31, 2023, respectively, which are included in our unaudited condensed consolidated statements of income. The seller has not maintained historical U.S. GAAP financial data and it is impracticable to prepare them, therefore, we could not provide supplemental pro forma information of the combined entities.

Aurora CO Property

On November 8, 2022, the Company purchased real estate in Aurora, Colorado amounting to $850,000 in cash for a future Bombshells location.

Central City CO Casino Property 1

On December 5, 2022, the Company purchased real estate in Central City, Colorado amounting to $2.4 million in cash for the development of a Rick's Cabaret Steakhouse and Casino business.

Mark IV Property

On December 16, 2022, the Company purchased real estate in Fort Worth, Texas amounting to $2.4 million in cash. The property has two buildings, one of which the Company is leasing out to an existing tenant and the other building the Company is remodeling for future adult club operations.

Grange Food Hall

On December 20, 2022, the Company purchased a food hall property in Greenwood Village, Colorado for $5.3 million, including direct transaction costs and net of certain accrued taxes amounting to $102,000. The purchase price was paid $1.9 million in cash at closing and $3.325 million under a 6.67% five-year promissory note (see Note 7). The Company allocated $2.1 million to land, $2.6 million to building improvements, $98,000 to furniture, fixtures and equipment, and $565,000 to in-place leases based on their relative fair values.

Tomball Parkway Property Sale

On December 28, 2022, the Company sold a property classified as held-for-sale with a carrying value of $1.0 million for $1.7 million in cash. The Company used $1.2 million of the proceeds to pay off a loan related to the property.

Central City CO Casino Property 2

On February 6, 2023, the Company purchased real estate in Central City, Colorado amounting to $2.2 million in cash for the development of another casino business.

Bombshells San Antonio

On February 7, 2023, the Company completed the acquisition of a previously franchised Bombshells location in San Antonio, Texas for a total acquisition price of $3.2 million. The transaction was effected through a membership interest purchase agreement under which a subsidiary of the Company purchased 100% of the issued and outstanding membership interests of the target limited liability company that owns and operates the Bombshells location from the six previous owners of the entity (the "Sellers"). At acquisition date, the Sellers were paid $1.2 million in cash and were issued six seller-financed promissory notes totaling $2.0 million (see Note 7). The Company allocated the acquisition price $61,000 to inventory, $2.7 million to property and equipment, and $480,000 to favorable lease intangible and right-of-use assets, net of lease liability.

12

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Baby Dolls-Chicas Locas

On March 16, 2023, the Company and certain of its subsidiaries completed the acquisition of five gentlemen's clubs, five related real estate properties, associated intellectual properties, and certain automated teller machines for a total purchase price of $66.5 million, payable with a total of $25.0 million in cash, a total of $25.5 million in 10-year 7% seller financing promissory notes, and 200,000 restricted shares of common stock based on an $80 per share price, subject to lock-up, leak out restrictions. The cash consideration at closing was partially funded by the $10.0 million line of credit secured by the Company on March 9, 2023 (see Note 7). The five clubs, which are all located in Texas, were purchased through four different asset purchase agreements and one stock purchase agreement, under each of which a newly formed wholly-owned subsidiary of the Company acquired from each club-owning entity all of the tangible and intangible assets and personal property used in the business of that club, except for certain excluded assets. As of the filing of this report, we have not completed our valuation analysis and related calculations in sufficient detail necessary to arrive at the fair values of the net assets acquired and the debt and stock consideration, but we have preliminarily allocated the acquisition price as follows based on negotiated purchase price: $632,000 to current assets, $41.6 million to property and equipment, $11.2 million to identifiable intangibles, $632,000 to accounts payable, and $14.0 million to goodwill.

In connection with this acquisition, we incurred approximately $280,000 and $292,000 in acquisition-related expenses during the three and six months ended March 31, 2023, respectively, which is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until March 31, 2023, the clubs contributed revenues of $1.2 million and $1.2 million and loss from operations of $154,000 and $154,000 during the three and six months ended March 31, 2023, respectively, which are included in our unaudited condensed consolidated statements of income. The following table presents the unaudited pro forma combined results of operations of the Company and the five acquired clubs and related assets as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amount and number of shares):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Pro forma revenues	$	77,292	$	69,256	$	154,424	$	137,029
Pro forma net income attributable to RCIHH common stockholders	$	8,303	$	12,444	$	17,213	$	24,849
Pro forma earnings per share - basic and diluted	$	0.88	$	1.28	$	1.83	$	2.58
Pro forma weighted average shares used in computing earnings per share - basic and diluted	9,430,225		9,689,085		9,430,241		9,647,854

The above unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022. The unaudited pro forma financial information reflects material, nonrecurring adjustments directly attributable to the acquisition including acquisition-related expenses, interest expense, and any related tax effects. Since we do not yet have a final valuation of the assets that we acquired and the liabilities that we assumed, the unaudited pro forma financial information does not include adjustments related to changes in recognized expenses caused by the fair value of assets acquired, such as depreciation and amortization and related tax effects. Pro forma net income and pro forma earnings per share include the impact of acquisition-related expenses and interest expense related to the $10.0 million line-of-credit facility (see Note 7) and the nine seller-financed notes in the acquisition as if they were incurred as of the first day of fiscal 2022. Pro forma weighted average number of common shares outstanding includes the impact of 200,000 shares of our common stock issued as partial consideration for the acquisition.

13

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Revenues

Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 11), are shown below (in thousands):

	Three Months Ended March 31, 2023									Three Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	22,191		$	7,945	$	—	$	30,136	$	18,673		$	8,662	$	—	$	27,335
Sales of food and merchandise	4,823			6,182		—		11,005		4,498			6,662		—		11,160
Service revenues	25,686			4		—		25,690		21,501			—		—		21,501
Other revenues	4,331			184		171		4,686		3,502			9		185		3,696
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
Recognized at a point in time	$	56,577		$	14,274	$	127	$	70,978	$	47,722		$	15,332	$	185	$	63,239
Recognized over time	454		*	41		44		539		452		*	1		—		453
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
	Six Months Ended March 31, 2023									Six Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	44,289		$	15,497	$	—	$	59,786	$	36,840		$	16,926	$	—	$	53,766
Sales of food and merchandise	9,417			11,935		—		21,352		9,087			12,967		—		22,054
Service revenues	51,219			34		—		51,253		42,185			192		—		42,377
Other revenues	8,431			280		383		9,094		6,843			19		469		7,331
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528
Recognized at a point in time	$	112,495		$	27,702	$	338	$	140,535	$	94,066		$	30,102	$	468	$	124,636
Recognized over time	861		*	44		45		950		889		*	2		1		892
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528

* Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606.

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, 2022		Net Consideration Received (Refunded)		Recognized in Revenue		Balance at March 31, 2023
Ad revenue	$	82	$	284	$	(239)	$	127
Expo revenue	8		405		—		413
Franchise fees and other	144		(12)		(44)		88
	$	234	$	677	$	(283)	$	628

14

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 6), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income.

6. Selected Account Information

The components of accounts receivable, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Credit card receivables	$	2,768	$	2,687
Income tax refundable	1,773		2,979
ATM in-transit	1,006		819
Other (net of allowance for doubtful accounts of $85 and $30, respectively)	1,208		2,025
Total accounts receivable, net	$	6,755	$	8,510

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.

The components of prepaid expenses and other current assets are as follows (in thousands):

	March 31, 2023		September 30, 2022
Prepaid insurance	$	4,960	$	191
Prepaid legal	32		61
Prepaid taxes and licenses	689		391
Prepaid rent	150		296
Other	1,039		560
Total prepaid expenses and other current assets	$	6,870	$	1,499

A reconciliation of goodwill as of March 31, 2023 and September 30, 2022, which is substantially all in Nightclubs segment, is as follows (in thousands):

	Gross		Accumulated Impairment		Net
Balance at September 30, 2022	$	88,921	$	21,154	$	67,767
Acquisitions (see Note 4)	16,946		—		16,946
Impairment	—		662		(662)
Balance at March 31, 2023	$	105,867	$	21,816	$	84,051

15

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of intangible assets, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Indefinite-lived:
Licenses	$	105,142	$	103,972
Trademarks	24,659		13,119
Domain names	23		23
Definite-lived:
Licenses	24,780		25,962
Leases acquired in-place	231		117
Noncompete agreements	25		55
Favorable leases	853		78
Software	618		723
Total intangible assets, net	$	156,331	$	144,049

The components of accrued liabilities are as follows (in thousands):

	March 31, 2023		September 30, 2022
Insurance	$	4,694	$	30
Sales and liquor taxes	2,400		2,227
Payroll and related costs	4,171		3,186
Property taxes	1,813		2,618
Interest	698		499
Patron tax	464		467
Unearned revenues	628		234
Lawsuit settlement	3,109		246
Other	2,981		1,821
Total accrued liabilities	$	20,958	$	11,328

16

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of selling, general and administrative expenses are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Taxes and permits	$	2,739	$	2,361	$	5,423	$	4,597
Advertising and marketing	2,731		2,248		5,401		4,631
Supplies and services	2,657		2,175		5,081		4,155
Insurance	2,238		2,481		4,820		4,876
Legal	1,296		898		2,281		1,958
Lease	1,765		1,572		3,527		3,212
Charge card fees	1,683		1,466		3,580		2,797
Utilities	1,353		1,108		2,624		2,043
Security	1,308		1,050		2,472		2,137
Stock-based compensation	706		—		1,647		—
Accounting and professional fees	657		622		2,175		1,968
Repairs and maintenance	1,207		903		2,371		1,628
Other	1,686		1,553		3,356		2,921
Total selling, general and administrative expenses	$	22,026	$	18,437	$	44,758	$	36,923

The components of other charges (gains), net are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Impairment of assets	$	662	$	—	$	662	$	—
Settlement of lawsuits	3,120		385		3,120		577
Loss (gain) on disposal of businesses and assets	3		(58)		(587)		(400)
Gain on insurance	(27)		(320)		(91)		(321)
Other charges (gains), net	$	3,758	$	7	$	3,104	$	(144)

7. Debt

On October 10, 2022, in relation to a real estate purchase (see Note 4), the Company borrowed $2.3 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6% per annum adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. The Company paid approximately $26,000 in debt issuance cost at closing. This promissory note is secured by the purchased real estate property.

On October 26, 2022, in relation to a club acquisition (see Note 4), the Company executed a promissory note for $5.0 million with the seller. The 6% 15-year promissory note is payable in 180 equal monthly payments of $42,193 in principal and interest. This promissory note is secured by the purchased real estate property.

On November 18, 2022, in relation to a real estate purchase on September 12, 2022, the Company borrowed $1.5 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6% per annum to be adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. This promissory note is secured by the purchased real estate property.

17

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On December 20, 2022, the Company executed a promissory note for $3.325 million with a bank lender in relation to a purchase of a food hall property (see Note 4). The 6.67% five-year promissory note is payable in 59 equal monthly installments of $22,805 in principal and interest, with the balance of 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 February 7, 2023, in relation to the acquisition of a franchised Bombshells location in San Antonio, Texas (see Note 4), the Company entered into six separate seller-financing promissory notes totaling $2.0 million. Each of the promissory notes has an interest rate of 7% per annum, has a term of 24 months, and is payable in monthly installments totaling $39,602 of principal and interest for the first 23 months based on a 60-month amortization schedule with the remaining unpaid principal and interest paid at maturity.

On March 9, 2023, the Company closed a $10.0 million line-of-credit facility with a lender bank evidenced by a revolving promissory note, with an initial draw of $10.0 million at closing. The facility has an initial term of 24 months with a variable interest rate equal to the Wall Street Journal prime rate plus 1%. On such date that the principal balance is repaid to an amount less than $5.0 million, the facility's revolver feature is activated where the Company may draw from the remaining availability up to a maximum of $5.0 million. The Company shall also pay a non-usage fee of 0.5% based on the amount by which the average outstanding balance for the prior twelve months was less than $3.0 million or the amount by which the total aggregate advances during the prior twelve months totaled less than $3.0 million. The Company paid $115,000 in debt issuance costs, which is recorded as deferred charges to be amortized on a straight-line basis over 24 months. There are certain financial covenants with which the Company is to be in compliance related to this loan, including a compensating balance requirement of $3.0 million and a minimum tangible net worth requirement of $20.0 million.

On March 16, 2023, in relation to the acquisition of five clubs with associated real estate, automated teller machines, and intellectual property (see Note 4), the Company executed nine secured promissory notes with a total principal amount of $25.5 million. Each of the nine promissory notes have an interest rate of 7% per annum with a term of 10 years, payable in arrears in 120 equal monthly payments of principal and interest amounting to $296,077 per month in the aggregate. The holder of the $5.0 million promissory note related to the real estate properties may call due from the Company a principal payment of $1.0 million once in every calendar year.

Future maturities of long-term debt as of March 31, 2023 are as follows: $21.6 million, $38.0 million, $16.8 million, $12.7 million, $19.6 million and $140.3 million for the twelve months ending March 31, 2023, 2024, 2025, 2026, 2027, and thereafter, respectively. Of the maturity schedule mentioned above, $3.8 million, $25.7 million, $4.8 million, $0, $6.1 million and $71.8 million, respectively, relate to scheduled balloon payments. Unamortized debt discount and issuance costs amounted to $3.2 million and $3.4 million as of March 31, 2023 and September 30, 2022, respectively.

8. 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 to each of six members of management subject to the approval of the 2022 Plan.

Stock-based compensation for the three and six months ended March 31, 2023, which is included in corporate segment selling, general and administrative expenses, amounted to $706,000 and $1.6 million, respectively. No stock-based compensation expense was recognized during the three and six months ended March 31, 2022. As of March 31, 2023, we had unrecognized compensation cost amounting to $5.4 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 2.9 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,

18

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 per share. No stock options were exercised during the three and six months ended March 31, 2023. As of March 31, 2023, 120,000 stock options were vested and exercisable.

For the three and six months ended March 31, 2023, we excluded 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive. There were no stock options outstanding during the three and six months ended March 31, 2022. Aside from the outstanding stock options, there were no other potentially dilutive securities for inclusion in the calculation of diluted earnings per share.

9. Income Taxes

Income tax expense was $2.1 million and $5.2 million during the three and six months ended March 31, 2023, respectively, compared to $3.4 million and $6.3 million during the three and six months ended March 31, 2022, respectively. The effective income tax expense rate was 21.8% and 22.4% for the three and six months ended March 31, 2023, respectively, compared to 23.4% and 22.6% for the three and six months ended March 31, 2022, respectively. 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.

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Federal statutory income tax expense	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	4.0	%	2.9	%	4.0	%	2.9	%
Permanent differences	0.6	%	0.5	%	0.5	%	0.4	%
Tax credits	(3.8)	%	(3.1)	%	(3.2)	%	(2.6)	%
Other	—	%	2.1	%	0.1	%	0.8	%
Total income tax expense	21.8	%	23.4	%	22.4	%	22.6	%

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, 2019 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.

10. Commitments and Contingencies

Legal Matters

Texas Patron Tax

A declaratory judgment action was brought by five operating subsidiaries of the Company to challenge a Texas Comptroller administrative rule related to the $5 per customer Patron Tax Fee assessed against Sexually Oriented Businesses. An administrative rule attempted to expand the fee to cover venues featuring dancers using latex cover as well as traditional nude entertainment. The administrative rule was challenged on both constitutional and statutory grounds. On November 19, 2018, the Court issued an order that a key aspect of the administrative rule is invalid based on it exceeding the scope of the Comptroller’s authority. On March 6, 2020, the U.S. District Court for the Western District of Texas, Austin Division, ruled that the Texas Patron Tax is unconstitutional as it has been applied and enforced by the Comptroller. The State of Texas appealed to the Fifth Circuit Court of Appeals, who affirmed that the Texas Patron Fee is unconstitutional as applied. The State of Texas next sought review from the Supreme Court, but the high court declined to take the case. The lawsuit was sent back to the trial court for post-trial proceedings, which resulted in the award of attorneys' fees to the operating subsidiaries. Pursuant to the rulings, the Texas Patron Fee is unconstitutional as applied to clubs featuring dancers using latex cover.

19

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. The Company and its subsidiaries changed insurance companies on that date.

On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.

On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015 and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer had insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100% of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As previously stated, since October 25, 2013, the Company has obtained general liability coverage from other insurers, which have covered and/or will cover any claims arising from actions after that date. As of March 31, 2023, we have 1 remaining unresolved claim out of the original 71 claims.

Shareholder Derivative Action

On January 21, 2022, Shiva Stein and Kevin McCarty filed a shareholder derivative action in the Southern District of Texas, Houston Division against former director Nourdean Anakar, Yura Barabash, former director Steven L. Jenkins, Eric Langan, Luke Lirot, former CFO Phillip K. Marshall, Elaine J. Martin, Allan Priaulx, and Travis Reese as defendants, as well as against RCI Hospitality Holdings, Inc. as nominal defendant. The action, styled Stein v. Anakar, et al., No. 4:22-mc-00149 (S.D. Tex.), alleges claims for breach of fiduciary duty based on alleged dissemination of inaccurate information and failure to maintain internal controls. These allegations are substantively similar to claims asserted in a prior securities class action that was settled in August of 2022 and a prior derivative action that was dismissed in June of 2021. Plaintiffs do not demand any specific amount of damages, which if awarded would be paid by the individual defendants to the Company. Plaintiffs also seek unspecified changes to the Company’s internal controls. On April 2, 2022, the Company and its current and former officers and directors named in the shareholder derivative complaint filed Motions to Dismiss. On March 31, 2023, the Court denied the Company’s motion, which was based on its rejections of the shareholders’ pre-litigation demands that the Company sue the individual defendants; granted the motion of two current individuals who were not members of the Company’s Board of Directors at the time of the alleged events at issue, Ms. Martin and Mr. Priaulx; and denied the motions of the remaining defendants. RCI intends to vigorously defend its position.

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 suit alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix. The suit alleged that JAI Phoenix was liable under theories of common law dram shop negligence and dram shop negligence per se. After a jury trial proceeded to a verdict in favor of the plaintiffs against both defendants, in April 2017 the Court entered a judgment under which JAI Phoenix’s share of compensatory damages is approximately $1.4 million and its share of punitive damages is $4.0 million. In May 2017, JAI Phoenix filed a motion for judgment as a matter of law or, in the alternative, motion for new trial. The Court denied this motion in August 2017. In September 2017, JAI Phoenix filed a notice of appeal. In June 2018, the matter was heard by the Arizona Court of Appeals. On November 15, 2018 the Court of Appeals vacated the jury’s verdict and remanded the case to the trial court. It is anticipated that a new trial will occur at some point in the future. JAI Phoenix will continue to vigorously defend itself.

20

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As set forth in the risk factors as disclosed in this report, 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.

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.

Settlements of lawsuits for the three and six months ended March 31, 2023 amount to $3.1 million and $3.1 million, respectively, and for the three and six months ended March 31, 2022 amount to approximately $385,000 and $577,000, respectively. As of March 31, 2023 and September 30, 2022, the Company has accrued $3.1 million and $246,000 in accrued liabilities, respectively, related to settlement of lawsuits.

21

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. 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):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Revenues (from external customers)
Nightclubs	$	57,031	$	48,174	$	113,356	$	94,955
Bombshells	14,315		15,333		27,746		30,104
Other	171		185		383		469
	$	71,517	$	63,692	$	141,485	$	125,528
Income (loss) from operations
Nightclubs	$	17,995	$	19,126	$	40,735	$	37,862
Bombshells	1,775		3,468		3,622		6,270
Other	(168)		(34)		(353)		(77)
Corporate	(6,175)		(5,479)		(13,679)		(11,063)
	$	13,427	$	17,081	$	30,325	$	32,992
Depreciation and amortization
Nightclubs	$	2,464	$	2,206	$	4,949	$	3,753
Bombshells	931		454		1,389		883
Other	63		7		126		13
Corporate	302		210		603		422
	$	3,760	$	2,877	$	7,067	$	5,071
Capital expenditures
Nightclubs	$	1,214	$	1,662	$	5,358	$	10,890
Bombshells	5,508		1,901		13,827		2,205
Other	41		359		78		548
Corporate	1,574		218		1,627		347
	$	8,337	$	4,140	$	20,890	$	13,990

22

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	March 31, 2023		September 30, 2022
Total assets
Nightclubs	$	503,697	$	437,096
Bombshells	76,171		62,021
Other	2,751		2,635
Corporate	38,512		28,986
	$	621,131	$	530,738

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2023 amounting to $3.9 million and $31,000, respectively, and for the six months ended March 31, 2023 amounting to $7.6 million and $262,000, respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2023 amounting to $78,000 and $115,000, respectively. Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2022 amounting to $3.3 million and $31,000, and for the six months ended March 31, 2022 amounting to $6.5 million and $199,000, respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2022 amounting to $53,000 and $122,000, respectively. These intercompany revenue amounts are eliminated upon consolidation.

General 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, 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.

As of March 31, 2023, we reclassified $9.4 million of goodwill from Corporate to Nightclubs and $4.7 million of prepaid insurance to $3.7 million in Nightclubs, $961,000 in Bombshells, and $29,000 in Other. As of September 30, 2022, we reclassified $9.0 million of goodwill from Corporate to Nightclubs to conform to current year presentation. See Note 1.

12. 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 March 31, 2023 and September 30, 2022, was $119.1 million and $115.1 million, respectively.

Included in the $17.0 million borrowing on October 12, 2021 are notes borrowed from related parties—one note for $500,000 (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 Nottingham Creations, and previously Sherwood Forest Creations, LLC, both furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Nottingham Creations is owned by a brother of Eric Langan (as was Sherwood Forest). Amounts billed to us for goods and services provided by Nottingham Creations and Sherwood Forest were $188,285 and $188,285 during the three and six months ended March 31, 2023, respectively, and $3,112 and $27,149 during the three and six months ended March 31, 2022, respectively. As of March 31, 2023 and September 30, 2022, we owed Nottingham Creations and Sherwood Forest $110,809 and $92,808, 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 2023 and 2022. A son-in-law of Eric Langan owns a 50% interest in TW Mechanical. Amounts billed by TW Mechanical to the third-party general

23

RCI HOSPITALITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

contractor were $18,000 and $64,000 for the three and six months ended March 31, 2023, respectively, and $3,809 and $3,809 for the three and six months ended March 31, 2022, respectively. Amounts billed directly to the Company were $379 and $379 for the three and six months ended March 31, 2023, respectively, and $3,704 and $84,700 for the three and six months ended March 31, 2022, respectively. As of March 31, 2023 and September 30, 2022, the Company owed TW Mechanical $0 and $9,338, respectively, in unpaid direct billings.

13. Leases

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and six months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023			2022
Operating lease expense – fixed payments	$	1,288	$	1,136	$	2,547		$	2,267
Variable lease expense	359		233		786			567
Short-term and other lease expense (includes $63 and $58 recorded in advertising and marketing for the three months ended March 31, 2023 and 2022, respectively, and $127 and $130 for the six months ended March 31, 2023 and 2022, respectively; and $138 and $107 recorded in repairs and maintenance for the three months ended March 31, 2023 and 2022, respectively, and $265 and $190 for the six months ended March 31, 2023 and 2022, respectively; see Note 6)	319		368		586			698
Sublease income	—		(1)		—			(3)
Total lease expense, net	$	1,966	$	1,736	$	3,919		$	3,529
Other information:
Operating cash outflows from operating leases	$	1,920	$	1,690	$	3,830		$	3,439
Weighted average remaining lease term – operating leases					10.9 years			12.0 years
Weighted average discount rate – operating leases					5.7		%	5.6		%

Future maturities of operating lease liabilities as of March 31, 2023 are as follows (in thousands):

	Principal Payments		Interest Payments		Total Payments
April 2023 - March 2024	$	2,951	$	2,189	$	5,140
April 2024 - March 2025	3,185		2,016		5,201
April 2025 - March 2026	3,460		1,829		5,289
April 2026 - March 2027	3,665		1,626		5,291
April 2027 - March 2028	3,303		1,423		4,726
Thereafter	22,816		5,313		28,129
	$	39,380	$	14,396	$	53,776

24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included in this quarterly report, and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2022.

Overview

RCI Hospitality Holdings, Inc. (“RCIHH”) is a holding company. Through our subsidiaries, we engage in a number of activities in the hospitality and related businesses. All services and management operations are conducted by subsidiaries of RCIHH, including RCI Management Services, Inc.

Through our subsidiaries, as of March 31, 2023, we operated a total of 71 establishments that offer live adult entertainment, including two that are under renovation/remodeling, and/or restaurant and bar operations, including one food hall. We also operated a leading business communications company serving the multi-billion-dollar adult nightclubs industry. We have two principal reportable segments: Nightclubs and Bombshells. We combine operating segments not included in Nightclubs and Bombshells into “Other.” In the context of club and restaurant/sports bar operations, the terms the “Company,” “we,” “our,” “us” and similar terms used in this report refer to subsidiaries of RCIHH. RCIHH was incorporated in the State of Texas in 1994. Our corporate offices are located in Houston, Texas.

Current Operating Environment

Our fiscal 2020 was the period hardest hit by the COVID-19 pandemic causing a significant reduction in customer traffic in our clubs and restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments. In fiscal 2021, our businesses started to recover from the initial effects of the pandemic when government restrictions eased. Stimulus money also flowed to the economy at that time which prompted increased discretionary spending. In fiscal 2022, several coronavirus variants threatened to bring back tight restrictions. Along with the pandemic, geopolitical and macroeconomic events started to affect the U.S. economy in general, with global inflation and supply chain disruptions impacting our businesses.

Toward the end of fiscal 2022 and continuing to the current fiscal year, geopolitical and macroeconomic events have impacted our operating results and cash flows by causing inflation on wages and other operating expenses. In the event global inflation leads to a major economic downturn, our business operations and cash flow could be significantly affected.

Critical Accounting Policies and Estimates

The preparation of the unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 filed with the SEC on December 14, 2022.

During the three and six months ended March 31, 2023, there were no significant changes in our accounting policies and estimates.

Results of Operations

Highlights of the Company's operating results are as follows:

Second Quarter 2023

•Total revenues were $71.5 million compared to $63.7 million during the comparable prior-year quarter, a 12.3% increase (Nightclubs revenue of $57.0 million compared to $48.2 million, a 18.4% increase; and Bombshells revenue of $14.3 million compared to $15.3 million, a 6.6% decrease)

25

•Consolidated same-store sales increased by 0.2% (Nightclubs increased by 3.7% while Bombshells decreased by 12.1%) (refer to the definition of same-store sales in the discussion of revenues below)

•Basic and diluted earnings per share (“EPS”) of $0.83 compared to $1.15 (non-GAAP diluted EPS* of $1.30 compared to $1.19) during the comparable prior-year quarter

•Net cash provided by operating activities of $16.8 million compared to $11.6 million during the comparable prior-year quarter, a 44.8% increase (free cash flow* of $14.8 million compared to $11.1 million, a 33.3% increase)

Year-to-Date 2023

•Total revenues were approximately $141.5 million compared to $125.5 million during the comparable prior-year year-to-date period, a 12.7% increase (Nightclubs revenue of $113.4 million compared to $95.0 million, a 19.4% increase; and Bombshells revenue of $27.7 million compared to $30.1 million, an 7.8% decrease)

•Consolidated same-store sales decreased by 1.2% (Nightclubs increased by 2.6% while Bombshells decreased by 13.0%) (refer to the definition of same-store sales in the discussion of revenues below)

•Basic and diluted EPS of $1.94 compared to $2.28 (non-GAAP diluted EPS of $2.50 compared to $2.29) during the comparable prior-year year-to-date period

•Net cash provided by operating activities of $31.7 million compared to $27.9 million during the comparable prior-year year-to-date period, a 13.7% increase (free cash flow* of $27.8 million compared to $26.3 million, a 5.5% increase)

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

26

The following table summarizes our results of operations as a percentage of revenue:

	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022
Revenues
Sales of alcoholic beverages	42.1	%	42.9	%	42.3	%	42.8	%
Sales of food and merchandise	15.4	%	17.5	%	15.1	%	17.6	%
Service revenues	35.9	%	33.8	%	36.2	%	33.8	%
Other	6.6	%	5.8	%	6.4	%	5.8	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses
Cost of goods sold
Alcoholic beverages sold	17.8	%	17.9	%	18.0	%	18.1	%
Food and merchandise sold	34.0	%	34.4	%	34.3	%	35.4	%
Service and other	0.1	%	0.1	%	0.1	%	0.2	%
Total cost of goods sold (exclusive of items shown separately below)	12.7	%	13.8	%	12.8	%	14.1	%
Salaries and wages	27.2	%	26.0	%	26.9	%	26.3	%
Selling, general and administrative	30.8	%	28.9	%	31.6	%	29.4	%
Depreciation and amortization	5.3	%	4.5	%	5.0	%	4.0	%
Other charges (gains), net	5.3	%	0.0	%	2.2	%	(0.1)	%
Total operating expenses	81.2	%	73.2	%	78.6	%	73.7	%
Income from operations	18.8	%	26.8	%	21.4	%	26.3	%
Other income (expenses)
Interest expense	(5.1)	%	(4.5)	%	(5.2)	%	(4.4)	%
Interest income	0.1	%	0.2	%	0.1	%	0.2	%
Non-operating gains, net	—	%	—	%	—	%	0.1	%
Income before income taxes	13.8	%	22.5	%	16.4	%	22.2	%
Income tax expense	3.0	%	5.3	%	3.7	%	5.0	%
Net income	10.8	%	17.2	%	12.7	%	17.2	%

*Percentages may not foot due to rounding. Percentage of revenue for individual cost of goods sold items pertains to their respective revenue line.

Revenues

Consolidated revenues for the second quarter increased by $7.8 million, or 12.3%, versus the comparable prior-year quarter due primarily to an 11.6% increase in sales from newly acquired clubs and new Bombshells openings. Consolidated revenues for the year-to-date period increased by $16.0 million, or 12.7%, compared to the prior-year year-to-date period mainly due to an increase in sales from newly acquired clubs and new Bombshells openings partially offset by the impact of consolidated same-store sales decline. Consolidated same-store sales increased by 0.2% for the quarter and decreased by 1.2% for the year-to-date period.

We calculate same-store sales by comparing year-over-year revenues from nightclubs and restaurants/sports bars starting in the first full quarter of operations after at least 12 full months for Nightclubs and at least 18 full months for Bombshells. We consider the first six months of operations of a Bombshells unit to be the “honeymoon period” where sales are significantly higher than normal. We exclude from a particular month’s calculation units previously included in the same-store sales base that have closed temporarily until its next full quarter of operations. We also exclude from the same-store sales base units that are being reconcepted or are closed due to renovations or remodels. Acquired units are included in the same-store sales calculation as long as they qualify based on the definition stated above. Revenues outside of our Nightclubs and Bombshells reportable segments are excluded from same-store sales calculation.

27

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

	Three Months Ended March 31, 2023		Mix		Three Months Ended March 31, 2022		Mix		Inc (Dec) $		Inc (Dec) %
Nightclubs
Sales of alcoholic beverages	$	22,191	38.9	%	$	18,673	38.8	%	$	3,518	18.8	%
Sales of food and merchandise	4,823		8.5	%	4,498		9.3	%	325		7.2	%
Service revenues	25,686		45.0	%	21,501		44.6	%	4,185		19.5	%
Other revenues	4,331		7.6	%	3,502		7.3	%	829		23.7	%
	57,031		100.0	%	48,174		100.0	%	8,857		18.4	%
Bombshells
Sales of alcoholic beverages	7,945		55.5	%	8,662		56.5	%	(717)		(8.3)	%
Sales of food and merchandise	6,182		43.2	%	6,662		43.4	%	(480)		(7.2)	%
Service revenues	4		0.0	%	—		—	%	4		100.0	%
Other revenues	184		1.3	%	9		0.1	%	175		1944.4	%
	14,315		100.0	%	15,333		100.0	%	(1,018)		(6.6)	%
Other
Other revenues	171		100.0	%	185		100.0	%	(14)		(7.6)	%
	$	71,517			$	63,692			$	7,825	12.3	%

	Six Months Ended March 31, 2023		Mix		Six Months Ended March 31, 2022		Mix		Inc (Dec) $		Inc (Dec) %
Nightclubs
Sales of alcoholic beverages	$	44,289	39.1	%	$	36,840	38.8	%	$	7,449	20.2	%
Sales of food and merchandise	9,417		8.3	%	9,087		9.6	%	330		3.6	%
Service revenues	51,219		45.2	%	42,185		44.4	%	9,034		21.4	%
Other revenues	8,431		7.4	%	6,843		7.2	%	1,588		23.2	%
	113,356		100.0	%	94,955		100.0	%	18,401		19.4	%
Bombshells
Sales of alcoholic beverages	15,497		55.9	%	16,926		56.2	%	(1,429)		(8.4)	%
Sales of food and merchandise	11,935		43.0	%	12,967		43.1	%	(1,032)		(8.0)	%
Service revenues	34		0.1	%	192		0.6	%	(158)		(82.3)	%
Other revenues	280		1.0	%	19		0.1	%	261		1373.7	%
	27,746		100.0	%	30,104		100.0	%	(2,358)		(7.8)	%
Other
Other revenues	383		100.0	%	469		100.0	%	(86)		(18.3)	%
	$	141,485			$	125,528			$	15,957	12.7	%

Nightclubs revenues increased by 18.4% for the quarter ended March 31, 2023 compared to the prior-year quarter primarily due to the contribution of newly acquired clubs and the impact of the increase in same-store sales. For Nightclubs that were open enough days to qualify for same-store sales (refer to the definition of same-store sales in the preceding paragraph), sales increased by 3.7%. Newly acquired and remodeled clubs contributed a sales increase of $6.9 million to the total Nightclubs revenue increase of $8.9 million. By type of revenue, service revenue increased by 19.5%, alcoholic beverage sales increased by 18.8%, and food, merchandise and other revenue increased by 14.4%.

Bombshells revenues decreased by 6.6%, of which 12.1% was for same-store sales decrease with the offsetting increase caused by one new location and revenue from franchising operations. By type of revenue, food and merchandise sales decreased by 7.2% while alcoholic beverage sales decreased by 8.3%. Management believes that the decrease in total Bombshells revenue was mainly from higher customer spending in the prior year caused by government stimulus money.

28

Operating Expenses

Total operating expenses, as a percent of revenues, increased to 81.2% from 73.2% from last year’s second quarter, with a $11.5 million increase, or 24.6%, which was mainly caused by costs and expenses directly related to higher sales in the current-year quarter, and stock-based compensation, amortization of SOB licenses, settlement of lawsuits and impairment of goodwill in the current quarter. Compared to last year's six-month period, the current six-month period total operating expenses as a percent of revenues increased to 78.6% from 73.7%, with a $18.6 million increase, or 20.1%, due to the same reasons cited above. Significant contributors to the changes in operating expenses are explained below.

Cost of goods sold. Cost of goods sold for the second quarter increased by $358,000, or 4.1%, mainly due to higher sales. As a percent of total revenues, cost of goods sold decreased to 12.7% from 13.8% mainly due to the sales mix increase in service revenue. Service revenue has the highest margin while food and merchandise have the lowest. Nightclubs cost of goods sold increased to 10.4% from 10.8%, while Bombshells cost of goods sold decreased to 22.2% from 23.0%.

Cost of goods sold for the six months increased by $476,000, or 2.7%, mainly due to higher sales. As a percent of total revenues, cost of goods sold decreased to 12.8% from 14.1% mainly due to the sales mix increase in service revenue. Service revenue has the highest margin while food and merchandise have the lowest. Nightclubs cost of goods sold decreased to 10.4% from 11.0%, while Bombshells cost of goods sold decreased to 22.6% from 23.7%.

Salaries and wages. Salaries and wages increased by $2.9 million, or 17.5%, for the second quarter due to increase in personnel from newly acquired clubs and new Bombshells openings, work shifts to accommodate the increase in sales, and the impact of minimum wage increases in certain states and cities. As a percent of total revenues, salaries and wages increased to 27.2% from 26.0% due to wage inflation. Nightclubs increased to 21.4% from 20.4% and Bombshells increased to 26.0% from 23.3%, while corporate was flat at 4.7%.

For the six-month period, salaries and wages increased by $5.1 million, or 15.3%. As a percent of total revenues, consolidated salaries and wages increased to 26.9% from 26.3%. Nightclubs increased to 21.1% from 20.4%, Bombshells increased to 26.3% from 24.0%, and corporate decreased to 4.7% from 4.9%.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by $3.6 million, or 19.5%, primarily due to increased variable expenses related to higher sales during the current-year quarter and stock-based compensation. On a year-to-date period, selling, general and administrative expenses increased by $7.8 million, or 21.2%, due to the same reasons cited above. Dollar amounts in the tables below are in thousands, except percentages.

	For the Three Months Ended March 31, 2023				For the Three Months Ended March 31, 2022				Better (Worse)
	Amount		% of Revenues		Amount		% of Revenues		Amount		%
Taxes and permits	$	2,739	3.8	%	$	2,361	3.7	%	$	(378)	(16.0)	%
Advertising and marketing	2,731		3.8	%	2,248		3.5	%	(483)		(21.5)	%
Supplies and services	2,657		3.7	%	2,175		3.4	%	(482)		(22.2)	%
Insurance	2,238		3.1	%	2,481		3.9	%	243		9.8	%
Legal	1,296		1.8	%	898		1.4	%	(398)		(44.3)	%
Lease	1,765		2.5	%	1,572		2.5	%	(193)		(12.3)	%
Charge card fees	1,683		2.4	%	1,466		2.3	%	(217)		(14.8)	%
Utilities	1,353		1.9	%	1,108		1.7	%	(245)		(22.1)	%
Security	1,308		1.8	%	1,050		1.6	%	(258)		(24.6)	%
Stock-based compensation	706		1.0	%	—		—	%	(706)		(100.0)	%
Accounting and professional fees	657		0.9	%	622		1.0	%	(35)		(5.6)	%
Repairs and maintenance	1,207		1.7	%	903		1.4	%	(304)		(33.7)	%
Other	1,686		2.4	%	1,553		2.4	%	(133)		(8.6)	%
Total selling, general and administrative expenses	$	22,026	30.8	%	$	18,437	28.9	%	$	(3,589)	(19.5)	%

29

	For the Six Months Ended March 31, 2023				For the Six Months Ended March 31, 2022				Better (Worse)
	Amount		% of Revenues		Amount		% of Revenues		Amount		%
Taxes and permits	$	5,423	3.8	%	$	4,597	3.7	%	$	(826)	(18.0)	%
Advertising and marketing	5,401		3.8	%	4,631		3.7	%	(770)		(16.6)	%
Supplies and services	5,081		3.6	%	4,155		3.3	%	(926)		(22.3)	%
Insurance	4,820		3.4	%	4,876		3.9	%	56		1.1	%
Legal	2,281		1.6	%	1,958		1.6	%	(323)		(16.5)	%
Lease	3,527		2.5	%	3,212		2.6	%	(315)		(9.8)	%
Charge card fees	3,580		2.5	%	2,797		2.2	%	(783)		(28.0)	%
Utilities	2,624		1.9	%	2,043		1.6	%	(581)		(28.4)	%
Security	2,472		1.7	%	2,137		1.7	%	(335)		(15.7)	%
Stock-based compensation	1,647		1.2	%	—		—	%	(1,647)		(100.0)	%
Accounting and professional fees	2,175		1.5	%	1,968		1.6	%	(207)		(10.5)	%
Repairs and maintenance	2,371		1.7	%	1,628		1.3	%	(743)		(45.6)	%
Other	3,356		2.4	%	2,921		2.3	%	(435)		(14.9)	%
Total selling, general and administrative expenses	$	44,758	31.6	%	$	36,923	29.4	%	$	(7,835)	(21.2)	%

Depreciation and amortization. Depreciation and amortization increased by $883,000, or 30.7%, during the second quarter and increased by $2.0 million, or 39.4%, during the year-to-date period due to the amortization of SOB licenses from leased clubs.

Other charges (gains), net. Other gains, net for both the second quarter and the year-to-date period increased due to settlement of lawsuits and impairment of goodwill recognized in the current second quarter.

Income (Loss) from Operations

For the three months ended March 31, 2023 and 2022, our consolidated operating margin was 18.8% and 26.8%, respectively, while for the six months ended March 31, 2023 and 2022, our consolidated operating margin was 21.4% and 26.3%, respectively. The main drivers for the decreases in operating margin are stock-based compensation, amortization of SOB licenses, settlement of lawsuits, and impairment of goodwill, which are only present in the current year partially offset by fixed expenses leveraged from higher sales.

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

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Nightclubs	$	17,995	$	19,126	$	40,735	$	37,862
Bombshells	1,775		3,468		3,622		6,270
Other	(168)		(34)		(353)		(77)
Corporate	(6,175)		(5,479)		(13,679)		(11,063)
	$	13,427	$	17,081	$	30,325	$	32,992

Nightclubs operating margin was 31.6% and 39.7% for the three months ended March 31, 2023 and 2022, respectively, while operating margin for Bombshells was 12.4% and 22.6%, respectively. Nightclubs operating margin was 35.9% and 39.9% for the six months ended March 31, 2023 and 2022, respectively, while operating margin for Bombshells was 13.1% and 20.8%, respectively. Nightclubs operating margin decreased due to settlement of lawsuits, amortization of SOB licenses, and impairment of goodwill partially offset by fixed expenses leveraged from higher sales. The decrease in Bombshells operating margin was mainly due to fixed expenses deleveraged from lower sales.

30

Excluding certain items, second quarter 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 34.

	For the Three Months Ended March 31, 2023
	Nightclubs			Bombshells			Other			Corporate			Total
Income (loss) from operations	$	17,995		$	1,775		$	(168)		$	(6,175)		$	13,427
Amortization of intangibles	628			417			60			4			1,109
Settlement of lawsuits	3,117			3			—			—			3,120
Impairment of assets	662			—			—			—			662
Loss (gain) on sale of businesses and assets	(12)			16			—			(1)			3
Gain on insurance	—			—			—			(27)			(27)
Stock-based compensation	—			—			—			706			706
Non-GAAP operating income (loss)	$	22,390		$	2,211		$	(108)		$	(5,493)		$	19,000
GAAP operating margin	31.6		%	12.4		%	(98.2)		%	(8.6)		%	18.8		%
Non-GAAP operating margin	39.3		%	15.4		%	(63.2)		%	(7.7)		%	26.6		%

	For the Three Months Ended March 31, 2022
	Nightclubs			Bombshells			Other			Corporate			Total
Income (loss) from operations	$	19,126		$	3,468		$	(34)		$	(5,479)		$	17,081
Amortization of intangibles	47			1			—			1			49
Settlement of lawsuits	277			—			—			108			385
Loss (gain) on sale of businesses and assets	(125)			4			—			63			(58)
Gain on insurance	(320)			—			—			—			(320)
Non-GAAP operating income (loss)	$	19,005		$	3,473		$	(34)		$	(5,307)		$	17,137
GAAP operating margin	39.7		%	22.6		%	(18.4)		%	(8.6)		%	26.8		%
Non-GAAP operating margin	39.5		%	22.7		%	(18.4)		%	(8.3)		%	26.9		%

31

Excluding certain items, year-to-date period non-GAAP operating income (loss) and non-GAAP operating margin are computed in the tables below (dollars in thousands).

	For the Six Months Ended March 31, 2023
	Nightclubs			Bombshells			Other			Corporate			Total
Income (loss) from operations	$	40,735		$	3,622		$	(353)		$	(13,679)		$	30,325
Amortization of intangibles	1,256			419			121			8			1,804
Settlement of lawsuits	3,117			3			—			—			3,120
Impairment of assets	662			—			—			—			662
Loss (gain) on sale of businesses and assets	(581)			16			—			(22)			(587)
Gain on insurance	(48)			—			—			(43)			(91)
Stock-based compensation	—			—			—			1,647			1,647
Non-GAAP operating income (loss)	$	45,141		$	4,060		$	(232)		$	(12,089)		$	36,880
GAAP operating margin	35.9		%	13.1		%	(92.2)		%	(9.7)		%	21.4		%
Non-GAAP operating margin	39.8		%	14.6		%	(60.6)		%	(8.5)		%	26.1		%

	For the Six Months Ended March 31, 2022
	Nightclubs			Bombshells			Other			Corporate			Total
Income (loss) from operations	$	37,862		$	6,270		$	(77)		$	(11,063)		$	32,992
Amortization of intangibles	94			4			—			1			99
Settlement of lawsuits	454			10			—			113			577
Loss (gain) on sale of businesses and assets	(80)			17			—			(337)			(400)
Gain on insurance	(321)			—			—			—			(321)
Non-GAAP operating income (loss)	$	38,009		$	6,301		$	(77)		$	(11,286)		$	32,947
GAAP operating margin	39.9		%	20.8		%	(16.4)		%	(8.8)		%	26.3		%
Non-GAAP operating margin	40.0		%	20.9		%	(16.4)		%	(9.0)		%	26.2		%

Other Income/Expenses

Interest expense for the second quarter increased by $813,000, or 28.4%, primarily caused by a higher average debt balance mostly from seller-financed promissory notes from this and last years' acquisitions. For the six-month period, interest expense increased by $1.9 million, or 34.7%.

Our total occupancy costs for the second quarter, defined as the sum of operating lease expense and interest expense, were $5.4 million and $4.4 million for the quarters ended March 31, 2023 and 2022, respectively. As a percentage of revenue, total occupancy costs were 7.6% and 7.0% during the quarters ended March 31, 2023 and 2022, respectively, primarily due to the interest from higher average debt balance. For the year-to-date period, total occupancy costs amounted to $10.9 million and $8.7 million, respectively, with a percent of revenue of 7.7% and 6.9%, respectively.

Income Taxes

Income tax expense was $2.1 million and $3.4 million during the three months ended March 31, 2023 and 2022, respectively, and $5.2 million and $6.3 million during the six months ended March 31, 2023 and 2022, respectively. The effective income tax expense rate was 21.8% and 23.4% for the three months ended March 31, 2023 and 2022, respectively, while for the six months ended March 2023 and 2023, 22.4% and 22.6%, respectively. Our effective income

32

tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit, for both years, as presented below.

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Federal statutory income tax expense	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	4.0	%	2.9	%	4.0	%	2.9	%
Permanent differences	0.6	%	0.5	%	0.5	%	0.4	%
Tax credit	(3.8)	%	(3.1)	%	(3.2)	%	(2.6)	%
Other	—	%	2.1	%	0.1	%	0.8	%
Total income tax expense	21.8	%	23.4	%	22.4	%	22.6	%

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because 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. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:

Non-GAAP Operating Income and Non-GAAP Operating Margin. We calculate non-GAAP operating income and non-GAAP operating margin by excluding the following items from income from operations and operating margin: (a) amortization of intangibles, (b) impairment of assets, (c) gains or losses on sale of businesses and assets, (d) gains or losses on insurance, (e) settlement of lawsuits, and (f) stock-based compensation. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations.

Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share. We calculate non-GAAP net income and non-GAAP net income per diluted share by excluding or including certain items to net income attributable to RCIHH common stockholders and diluted earnings per share. 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) unrealized gains or losses on equity securities, (f) settlement of lawsuits, (g) gain on debt extinguishment, (h) stock-based compensation, 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 22.3% and 21.8% effective tax rate of the pre-tax non-GAAP income before taxes for the six months ended March 31, 2023 and 2022, respectively, and the GAAP income tax expense (benefit). We believe that excluding and including such items help management and investors better understand our operating activities.

Adjusted EBITDA. We calculate adjusted EBITDA by excluding the following items from net income attributable to RCIHH common stockholders: (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) unrealized gains or losses on equity securities, (g) impairment of assets, (h) settlement of lawsuits, (i) gain on debt extinguishment, and (j) stock-based compensation. We believe that adjusting for such items helps management and investors better understand our operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for federal, state and local taxes which have considerable variation between domestic jurisdictions. The results are, therefore, without consideration of financing alternatives of capital employed. We use adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.

We also use certain non-GAAP cash flow measures such as free cash flow. See “Liquidity and Capital Resources” section for further discussion.

33

The following tables present our non-GAAP performance measures for the three and six months ended March 31, 2023 and 2022 (in thousands, except per share, number of shares and percentages):

	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022
Reconciliation of GAAP net income to Adjusted EBITDA
Net income attributable to RCIHH common stockholders	$	7,732	$	10,952	$	17,970	$	21,527
Income tax expense	2,147		3,356		5,178		6,289
Interest expense, net	3,587		2,752		7,183		5,250
Settlement of lawsuits	3,120		385		3,120		577
Impairment of assets	662		—		662		—
Loss (gain) on sale of businesses and assets	3		(58)		(587)		(400)
Gain on debt extinguishment	—		—		—		(85)
Unrealized loss on equity securities	—		—		—		1
Gain on insurance	(27)		(320)		(91)		(321)
Stock-based compensation	706		—		1,647		—
Depreciation and amortization	3,760		2,877		7,067		5,071
Adjusted EBITDA	$	21,690	$	19,944	$	42,149	$	37,909
Reconciliation of GAAP net income to non-GAAP net income
Net income attributable to RCIHH common stockholders	$	7,732	$	10,952	$	17,970	$	21,527
Amortization of intangibles	1,109		49		1,804		99
Settlement of lawsuits	3,120		385		3,120		577
Impairment of assets	662		—		662		—
Loss (gain) on sale of businesses and assets	3		(58)		(587)		(400)
Gain on debt extinguishment	—		—		—		(85)
Unrealized loss on equity securities	—		—		—		1
Gain on insurance	(27)		(320)		(91)		(321)
Stock-based compensation	706		—		1,647		—
Net income tax effect	(1,246)		291		(1,446)		253
Non-GAAP net income	$	12,059	$	11,299	$	23,079	$	21,651

34

Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share
Diluted shares	9,265,781			9,489,085			9,247,824			9,447,854
GAAP diluted earnings per share	$	0.83		$	1.15		$	1.94		$	2.28
Amortization of intangibles	0.12			0.01			0.20			0.01
Settlement of lawsuits	0.34			0.04			0.34			0.06
Impairment of assets	0.07			—			0.07			—
Loss (gain) on sale of businesses and assets	0.00			(0.01)			(0.06)			(0.04)
Gain on debt extinguishment	—			—			—			(0.01)
Unrealized loss on equity securities	—			—			—			0.00
Gain on insurance	0.00			(0.03)			(0.01)			(0.03)
Stock-based compensation	0.08			—			0.18			—
Net income tax effect	(0.13)			0.03			(0.16)			0.03
Non-GAAP diluted earnings per share	$	1.30		$	1.19		$	2.50		$	2.29
Reconciliation of GAAP operating income to non-GAAP operating income
Income from operations	$	13,427		$	17,081		$	30,325		$	32,992
Amortization of intangibles	1,109			49			1,804			99
Settlement of lawsuits	3,120			385			3,120			577
Impairment of assets	662			—			662			—
Loss (gain) on sale of businesses and assets	3			(58)			(587)			(400)
Gain on insurance	(27)			(320)			(91)			(321)
Stock-based compensation	706			—			1,647			—
Non-GAAP operating income	$	19,000		$	17,137		$	36,880		$	32,947
Reconciliation of GAAP operating margin to non-GAAP operating margin
Income from operations	18.8		%	26.8		%	21.4		%	26.3		%
Amortization of intangibles	1.6		%	0.1		%	1.3		%	0.1		%
Settlement of lawsuits	4.4		%	0.6		%	2.2		%	0.5		%
Impairment of assets	0.9		%	—		%	0.5		%	—		%
Loss (gain) on sale of businesses and assets	0.0		%	(0.1)		%	(0.4)		%	(0.3)		%
Gain on insurance	0.0		%	(0.5)		%	(0.1)		%	(0.3)		%
Stock-based compensation	1.0		%	—		%	1.2		%	—		%
Non-GAAP operating margin	26.6		%	26.9		%	26.1		%	26.2		%

* Per share amounts and percentages may not foot due to rounding.

** The adjustments to reconcile net income attributable to RCIHH common stockholders to non-GAAP net income exclude the impact of adjustments related to noncontrolling interests, which is immaterial.

35

Liquidity and Capital Resources

At March 31, 2023, our cash and cash equivalents were approximately $22.8 million compared to $36.0 million at September 30, 2022. Because of the large volume of cash we handle, we have very stringent cash controls. As of March 31, 2023, we had negative working capital of $11.4 million compared to working capital of $18.6 million as of September 30, 2022, excluding net assets held for sale amounting to $0 and $1.0 million as of March 31, 2023 and September 30, 2022, respectively. The negative working capital at March 31, 2023 was caused by borrowings, of which a large portion have current maturities, and which were used to fund business acquisitions.

Since the pandemic hard hit fiscal 2020, we have since recovered and have seen a more normal stream of operations in 2021 and 2022. Toward the end of fiscal 2022 and continuing to the current fiscal year, geopolitical and macroeconomic events have impacted our operating results and cash flows by causing inflation on wages and other operating expenses. In the event global inflation leads to a major economic downturn, our business operations and cash flow could be significantly affected. We believe that we can borrow capital if needed but currently we do not have unused credit facilities so there can be no guarantee that additional liquidity will be readily available or available on favorable terms.

We have not recently raised capital through the issuance of equity securities although we have used equity recently in our acquisitions. Instead, we use debt financing to lower our overall cost of capital and increase our return on stockholders’ equity, but we are monitoring our total debt service cost as interest rates continue to increase. We have a history of borrowing funds in private transactions and from sellers in acquisition transactions and have secured traditional bank financing on our new development projects and refinancing of our existing notes payable, but there can be no assurance that any of these financing options would be presently available on favorable terms, if at all. We also have historically utilized these cash flows to invest in property and equipment, adult nightclubs, and restaurants/sports bars.

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

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

	For the Six Months Ended March 31,
	2023		2022
Operating activities	$	31,684	$	27,861
Investing activities	(48,076)		(49,815)
Financing activities	3,196		24,335
Net increase (decrease) in cash and cash equivalents	$	(13,196)	$	2,381

Cash Flows from Operating Activities

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

	For the Six Months Ended March 31,
	2023		2022
Net income	$	17,964	$	21,537
Depreciation and amortization	7,067		5,071
Impairment of assets	662		—
Stock-based compensation	1,647		—
Gain on debt extinguishment	—		(83)
Net change in operating assets and liabilities	3,370		937
Other	974		399
Net cash provided by operating activities	$	31,684	$	27,861

Net cash provided by operating activities increased from year to year primarily due to higher sales and higher income tax refund, partially offset by higher interest expense and income taxes paid.

36

Cash Flows from Investing Activities

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

	For the Six Months Ended March 31,
	2023		2022
Payments for property and equipment and intangible assets	$	(20,890)	$	(13,990)
Acquisition of businesses	(30,200)		(39,302)
Proceeds from sale of businesses and assets	2,810		2,910
Proceeds from insurance	91		485
Proceeds from notes receivable	113		82
Net cash used in investing activities	$	(48,076)	$	(49,815)

Following is a breakdown of our payments for property and equipment and intangible assets for the six months ended March 31, 2023 and 2022 (in thousands):

	For the Six Months Ended March 31,
	2023		2022
New facilities, equipment, and intangible assets	$	17,005	$	12,474
Maintenance capital expenditures	3,885		1,516
Total capital expenditures	$	20,890	$	13,990

The capital expenditures during the six months ended March 31, 2023 and 2022 were composed primarily of real estate and new equipment and furniture purchases for the newly acquired clubs. Maintenance capital expenditures refer mainly to capitalized replacement of productive assets in already existing locations. Variances in capital expenditures are primarily due to the number and timing of new, remodeled, or reconcepted locations under construction.

Cash Flows from Financing Activities

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

	For the Six Months Ended March 31,
	2023		2022
Proceeds from debt obligations	$	11,595	$	35,742
Payments on debt obligations	(6,481)		(7,290)
Purchase of treasury stock	(98)		(2,845)
Payment of dividends	(1,015)		(854)
Payment of loan origination costs	(205)		(418)
Share in return of investment by noncontrolling partner	(600)		—
Net cash provided by financing activities	$	3,196	$	24,335

We purchased 1,500 shares of our common stock at an average price of $65.02 during the six months ended March 31, 2023, while we purchased 45,643 shares of our common stock at an average price of $62.33 during the six months ended March 31, 2022. As of March 31, 2023, we have approximately $18.8 million authorization remaining to purchase additional shares.

Prior to the second quarter of fiscal 2022, we have been paying $0.04 per share in quarterly dividends. From the second quarter of fiscal 2022 until the current quarter, we have paid $0.05 per share, and in the second quarter of fiscal 2023 we paid $0.06 per share in quarterly dividends.

See Note 7 to our unaudited condensed consolidated financial statements for future maturities of our debt obligations. 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, 2023 and 2022.

37

Management also uses certain non-GAAP cash flow measures such as free cash flow. We calculate free cash flow as net cash provided by operating activities less maintenance capital expenditures. We use free cash flow as the baseline for the implementation of our capital allocation strategy.

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

	For the Six Months Ended March 31,
	2023		2022
Net cash provided by operating activities	$	31,684	$	27,861
Less: Maintenance capital expenditures	3,885		1,516
Free cash flow	$	27,799	$	26,345

Our free cash flow for the six-month period increased by 5.5% compared to the comparable prior-year period primarily due to higher sales and higher income tax refund, partially offset by higher interest expense, income taxes paid and higher maintenance capital expenditures from renovations and remodeling of several of our clubs.

We do not include capital expenditures related to new facilities construction, equipment and intangibles assets as a reduction from net cash flow from operating activities to arrive at free cash flow. This is because, based on our capital allocation strategy, acquisitions and development of our own clubs and restaurants are our primary uses of free cash flow.

Other than the ongoing impact of the COVID-19 pandemic, the current geopolitical and macroeconomic events happening globally, and the notes payable financing described above, we are not aware of any event or trend that would adversely impact our liquidity. In our opinion, working capital is not a true indicator of our financial status. Typically, businesses in our industry carry current liabilities in excess of current assets because businesses in our industry receive substantially immediate payment for sales, with nominal receivables, while inventories and other current liabilities normally carry longer payment terms. Vendors and purveyors often remain flexible with payment terms, providing businesses in our industry with opportunities to adjust to short-term business downturns. We consider the primary indicators of financial status to be the long-term trend of revenue growth, the mix of sales revenues, overall cash flow, profitability from operations and the level of long-term debt.

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

	2023		Increase (Decrease)		2022		Increase (Decrease)		2021
Sales of alcoholic beverages	$	59,786	11.2	%	$	53,766	42.9	%	$	37,633
Sales of food and merchandise	21,352		(3.2)	%	22,054		21.5	%	18,147
Service revenues	51,253		20.9	%	42,377		96.5	%	21,562
Other	9,094		24.0	%	7,331		43.3	%	5,115
Total revenues	$	141,485	12.7	%	$	125,528	52.2	%	$	82,457
Net income attributable to RCIHH common stockholders	$	17,970	(16.5)	%	$	21,527	36.8	%	$	15,734
Net cash provided by operating activities	$	31,684	13.7	%	$	27,861	61.6	%	$	17,246
Adjusted EBITDA*	$	42,149	11.2	%	$	37,909	70.2	%	$	22,273
Free cash flow*	$	27,799	5.5	%	$	26,345	79.8	%	$	14,655
Debt (end of period)	$	245,767	38.0	%	$	178,080	34.5	%	$	132,412

*See definition and calculation of Adjusted EBITDA and Free Cash Flow above in the Non-GAAP Financial Measures subsection of Results of Operations.

38

Impact of Inflation

To the extent permitted by competition, we have managed to recover increased costs through price increases and may continue to do so. However, there can be no assurance that we will be able to do so in the future.

Seasonality

Our nightclub operations are affected by seasonal factors. Historically, we have experienced reduced revenues from April through September (our fiscal third and fourth quarters) with the strongest operating results occurring during October through March (our fiscal first and second quarters). Our revenues in certain markets are also affected by sporting events that cause unusual changes in sales from year to year.

Capital Allocation Strategy

Our capital allocation strategy provides us with disciplined guidelines on how we should use our free cash flows; provided however, that we may deviate from this strategy if other strategic rationale warrants. We calculate free cash flow as net cash flows from operating activities minus maintenance capital expenditures. Using the after-tax yield of buying our own stock as baseline, management believes that we are able to make better investment decisions.

Based on our current capital allocation strategy:

•We consider acquiring or developing our own clubs or restaurants that we believe have the potential to provide a minimum cash on cash return of 25%-33%, absent an otherwise strategic rationale;

•We consider disposing of underperforming units to free up capital for more productive use;

•We consider buying back our own stock if the after-tax yield on free cash flow is above 10%;

•We consider paying down our most expensive debt if it makes sense on a tax adjusted basis, or there is an otherwise strategic rationale.

Growth Strategy

We believe that we can continue to grow organically and through careful entry into markets with high growth potential. Our growth strategy includes acquiring existing units, opening new units after market analysis, developing new club concepts that are consistent with our management and marketing skills, franchising our Bombshells brand, and developing and opening our Bombshells concept as our capital and manpower allow.

All twelve of the existing Bombshells as of March 31, 2023 were located in Texas, including the former franchisee location that we acquired in February 2023 (see Note 4 to our unaudited condensed consolidated financial statements). 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.

We continue to evaluate opportunities to acquire new nightclubs and anticipate acquiring new locations that fit our business model as we have done in the past. The acquisition of additional clubs may require us to take on additional debt or issue our common stock, or both. There can be no assurance that we will be able to obtain additional financing on reasonable terms in the future, if at all, should the need arise. An inability to obtain such additional financing could have an adverse effect on our growth strategy.

39

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of March 31, 2023, 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, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that the information required to be filed or submitted with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management of the company with the participation of its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, an evaluation was performed under the supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on their evaluation, they have concluded that our disclosure controls and procedures were not effective as of March 31, 2023. This determination is based on the previously reported material weakness management previously identified in our internal control over financial reporting, as described below. We are in the process of remediating the material weakness in our internal control, as described below. We believe the completion of these processes should remedy our disclosure controls and procedures. We will continue to monitor this issue.

Previously Reported Material Weakness in Internal Control Over Financial Reporting

In our Annual Report for the year ended September 30, 2022, filed with the SEC on December 14, 2022, management concluded that our internal control over financial reporting was not effective as of September 30, 2022. In the evaluation, management identified a material weakness in internal control related to the proper design and implementation of controls over management's review of the Company's accounting for business combinations, specifically related to the identification of and accounting for intangible assets acquired in a business combination.

Remediation Efforts to Address Material Weakness

Management is committed to the remediation of the material weakness described above, as well as the continued improvement of the Company’s internal control over financial reporting. As such, we have added controls to enhance management's review of purchase documents to identify intangible assets acquired and controls to increase the precision of the review of all assumptions used in the intangible asset valuation models. We will also conduct senior management reviews of any and all material estimates that are applied in these instances.

It is our belief that these actions will effectively remediate the existing material weakness.

Changes in Internal Control Over Financial Reporting

Other than as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

40

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

See the “Legal Matters” section within Note 10 of the unaudited condensed consolidated financial statements within this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Item 1A. Risk Factors.

There were no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, except for such risks and uncertainties that may result from the additional disclosure in the “Legal Matters” section within Note 10 of the unaudited condensed consolidated financial statements within this Quarterly Report on Form 10-Q, which information is incorporated herein by reference. The risks described in the Annual Report on Form 10-K and in this Form 10-Q are not the only risks the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company deems to be immaterial, also may have a material adverse impact on the Company’s business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three months ended March 31, 2023, we did not repurchase any shares of our common stock. As of May 5, 2023, we have approximately $18.8 million remaining to purchase additional shares.

41

Item 6. Exhibits.

Exhibit No.	Description
31.1	Certification of Chief Executive Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer of RCI Hospitality Holdings, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer of RCI Hospitality Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RCI HOSPITALITY HOLDINGS, INC.
Date: May 10, 2023	By:	/s/ Eric S. Langan
		Eric S. Langan
		Chief Executive Officer and President
Date: May 10, 2023	By:	/s/ Bradley Chhay
		Bradley Chhay
		Chief Financial Officer and Principal Accounting Officer

43

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Eric S. Langan, Chief Executive Officer and President of RCI Hospitality Holdings, Inc., certify that:

1.I have reviewed this quarterly report on Form 10-Q of RCI Hospitality Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent registered public accounting firm and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023	By:	/s/ Eric S. Langan
		Eric S. Langan
		Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Bradley Chhay, Chief Financial Officer of RCI Hospitality Holdings, Inc., certify that:

1.I have reviewed this quarterly report on Form 10-Q of RCI Hospitality Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent registered public accounting firm and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023	By:	/s/ Bradley Chhay
		Bradley Chhay
		Chief Financial Officer and Principal Accounting Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RCI Hospitality Holdings, Inc. (the “Company”) on Form 10-Q for the fiscal period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, the Chief Executive Officer and the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that based on our knowledge, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of and for the periods covered in the Report.

/s/ Eric S. Langan

Eric S. Langan

Chief Executive Officer

May 10, 2023

/s/ Bradley Chhay

Bradley Chhay

Chief Financial Officer

May 10, 2023

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RCI Hospitality Holdings, Inc. and will be retained by RCI Hospitality Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

XML

Cover - shares	6 Months Ended
	Mar. 31, 2023	May 05, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-13992
Entity Registrant Name	RCI HOSPITALITY HOLDINGS, INC.
Entity Incorporation, State or Country Code	TX
Entity Tax Identification Number	76-0458229
Entity Address, Address Line One	10737 Cutten Road
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77066
City Area Code	(281)
Local Phone Number	397-6730
Title of 12(b) Security	Common stock, $0.01 par value
Trading Symbol	RICK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,430,225
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--09-30
Entity Central Index Key	0000935419

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Sep. 30, 2022
Current assets
Cash and cash equivalents	$ 22,784	$ 35,980
Accounts receivable, net	6,755	8,510
Current portion of notes receivable	239	230
Inventories	4,571	3,893
Prepaid expenses and other current assets	6,870	1,499
Assets held for sale	0	1,049
Total current assets	41,219	51,161
Property and equipment, net	295,861	224,615
Operating lease right-of-use assets, net	37,244	37,048
Notes receivable, net of current portion	4,569	4,691
Goodwill	84,051	67,767
Intangibles, net	156,331	144,049
Other assets	1,856	1,407
Total assets	621,131	530,738
Current liabilities
Accounts payable	7,743	5,482
Accrued liabilities	20,958	11,328
Current portion of debt obligations, net	21,016	11,896
Current portion of operating lease liabilities	2,951	2,795
Total current liabilities	52,668	31,501
Deferred tax liability, net	30,936	30,562
Debt, net of current portion and debt discount and issuance costs	224,751	190,567
Operating lease liabilities, net of current portion	36,429	36,001
Other long-term liabilities	383	349
Total liabilities	345,167	288,980
Commitments and contingencies (Note 10)
Equity
Preferred stock, $0.10 par value per share; 1,000,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.01 par value per share; 20,000,000 shares authorized; 9,430,225 and 9,231,725 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively	94	92
Additional paid-in capital	85,082	67,227
Retained earnings	190,905	173,950
Total RCIHH stockholders’ equity	276,081	241,269
Noncontrolling interests	(117)	489
Total equity	275,964	241,758
Total liabilities and equity	$ 621,131	$ 530,738

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2023	Sep. 30, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value per share (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value per share (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares, issued (in shares)	9,430,225	9,231,725
Common stock, shares outstanding (in shares)	9,430,225	9,231,725

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Revenues
Total revenues	$ 71,517	$ 63,692	$ 141,485	$ 125,528
Cost of goods sold
Total cost of goods sold (exclusive of items shown separately below)	9,118	8,760	18,127	17,651
Salaries and wages	19,428	16,530	38,104	33,035
Selling, general and administrative	22,026	18,437	44,758	36,923
Depreciation and amortization	3,760	2,877	7,067	5,071
Other charges (gains), net	3,758	7	3,104	(144)
Total operating expenses	58,090	46,611	111,160	92,536
Income from operations	13,427	17,081	30,325	32,992
Other income (expenses)
Interest expense	(3,677)	(2,864)	(7,364)	(5,468)
Interest income	90	112	181	218
Non-operating gains, net	0	0	0	84
Income before income taxes	9,840	14,329	23,142	27,826
Income tax expense	2,147	3,356	5,178	6,289
Net income	7,693	10,973	17,964	21,537
Net loss (income) attributable to noncontrolling interests	39	(21)	6	(10)
Net income attributable to RCIHH common shareholders	$ 7,732	$ 10,952	$ 17,970	$ 21,527
Earnings per share
Basic (in dollars per share)	$ 0.83	$ 1.15	$ 1.94	$ 2.28
Diluted (in dollars per share)	$ 0.83	$ 1.15	$ 1.94	$ 2.28
Weighted average shares used in computing earnings per share
Basic (in shares)	9,265,781	9,489,085	9,247,824	9,447,854
Diluted (in shares)	9,265,781	9,489,085	9,247,824	9,447,854
Dividends per share (in dollars per share)	$ 0.06	$ 0.05	$ 0.11	$ 0.09
Sales of alcoholic beverages
Revenues
Total revenues	$ 30,136	$ 27,335	$ 59,786	$ 53,766
Cost of goods sold
Total cost of goods sold (exclusive of items shown separately below)	5,365	4,896	10,739	9,730
Sales of food and merchandise
Revenues
Total revenues	11,005	11,160	21,352	22,054
Cost of goods sold
Total cost of goods sold (exclusive of items shown separately below)	3,737	3,840	7,323	7,797
Service revenues
Revenues
Total revenues	25,690	21,501	51,253	42,377
Other
Revenues
Total revenues	4,686	3,696	9,094	7,331
Service and other
Cost of goods sold
Total cost of goods sold (exclusive of items shown separately below)	$ 16	$ 24	$ 65	$ 124

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Noncontrolling Interests
Common Stock, Beginning balance (in shares) at Sep. 30, 2021		8,999,910
Beginning balance at Sep. 30, 2021	$ 179,223	$ 90	$ 50,040	$ 129,693	$ 0	$ (600)
Treasury Stock, Beginning balance (in shares) at Sep. 30, 2021					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common shares for business combination (in shares)		500,000
Issuance of common shares for business combination	30,362	$ 5	30,357
Payment of dividends	(380)			(380)
Net income (loss)	10,564			10,575		(11)
Common Stock, Ending balance (in shares) at Dec. 31, 2021		9,499,910
Ending balance at Dec. 31, 2021	219,769	$ 95	80,397	139,888	$ 0	(611)
Treasury Stock, Ending balance (in shares) at Dec. 31, 2021					0
Common Stock, Beginning balance (in shares) at Sep. 30, 2021		8,999,910
Beginning balance at Sep. 30, 2021	179,223	$ 90	50,040	129,693	$ 0	(600)
Treasury Stock, Beginning balance (in shares) at Sep. 30, 2021					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	21,537
Common Stock, Ending balance (in shares) at Mar. 31, 2022		9,454,267
Ending balance at Mar. 31, 2022	227,423	$ 94	77,553	150,366	$ 0	(590)
Treasury Stock, Ending balance (in shares) at Mar. 31, 2022					0
Common Stock, Beginning balance (in shares) at Dec. 31, 2021		9,499,910
Beginning balance at Dec. 31, 2021	219,769	$ 95	80,397	139,888	$ 0	(611)
Treasury Stock, Beginning balance (in shares) at Dec. 31, 2021					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Purchase of treasury shares (in shares)					(45,643)
Purchase of treasury shares	(2,845)				$ (2,845)
Canceled treasury shares (in shares)		(45,643)			(45,643)
Canceled treasury shares	0	$ (1)	(2,844)		$ 2,845
Payment of dividends	(474)			(474)
Net income (loss)	10,973			10,952		21
Common Stock, Ending balance (in shares) at Mar. 31, 2022		9,454,267
Ending balance at Mar. 31, 2022	$ 227,423	$ 94	77,553	150,366	$ 0	(590)
Treasury Stock, Ending balance (in shares) at Mar. 31, 2022					0
Common Stock, Beginning balance (in shares) at Sep. 30, 2022	9,231,725	9,231,725
Beginning balance at Sep. 30, 2022	$ 241,758	$ 92	67,227	173,950	$ 0	489
Treasury Stock, Beginning balance (in shares) at Sep. 30, 2022					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Purchase of treasury shares (in shares)					(1,500)
Purchase of treasury shares	(98)				$ (98)
Canceled treasury shares (in shares)		(1,500)			(1,500)
Canceled treasury shares	0		(98)		$ 98
Payment of dividends	(462)			(462)
Stock-based compensation	941		941
Share in return of investment by noncontrolling partner	(600)					(600)
Net income (loss)	10,271			10,238		33
Common Stock, Ending balance (in shares) at Dec. 31, 2022		9,230,225
Ending balance at Dec. 31, 2022	$ 251,810	$ 92	68,070	183,726	$ 0	(78)
Treasury Stock, Ending balance (in shares) at Dec. 31, 2022					0
Common Stock, Beginning balance (in shares) at Sep. 30, 2022	9,231,725	9,231,725
Beginning balance at Sep. 30, 2022	$ 241,758	$ 92	67,227	173,950	$ 0	489
Treasury Stock, Beginning balance (in shares) at Sep. 30, 2022					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 17,964
Common Stock, Ending balance (in shares) at Mar. 31, 2023	9,430,225	9,430,225
Ending balance at Mar. 31, 2023	$ 275,964	$ 94	85,082	190,905	$ 0	(117)
Treasury Stock, Ending balance (in shares) at Mar. 31, 2023					0
Common Stock, Beginning balance (in shares) at Dec. 31, 2022		9,230,225
Beginning balance at Dec. 31, 2022	251,810	$ 92	68,070	183,726	$ 0	(78)
Treasury Stock, Beginning balance (in shares) at Dec. 31, 2022					0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common shares for business combination (in shares)		200,000
Issuance of common shares for business combination	16,308	$ 2	16,306
Payment of dividends	(553)			(553)
Stock-based compensation	706		706
Net income (loss)	$ 7,693			7,732		(39)
Common Stock, Ending balance (in shares) at Mar. 31, 2023	9,430,225	9,430,225
Ending balance at Mar. 31, 2023	$ 275,964	$ 94	$ 85,082	$ 190,905	$ 0	$ (117)
Treasury Stock, Ending balance (in shares) at Mar. 31, 2023					0

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 17,964	$ 21,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,067	5,071
Impairment of assets	662	0
Stock-based compensation	1,647	0
Gain on sale of businesses and assets	(689)	(708)
Unrealized loss on equity securities	0	1
Amortization of debt discount and issuance costs	291	136
Gain on debt extinguishment	0	(83)
Noncash lease expense	1,463	1,238
Gain on insurance	(91)	(321)
Doubtful accounts expense on notes receivable	0	53
Changes in operating assets and liabilities:
Accounts receivable	708	1,065
Inventories	79	(276)
Prepaid expenses, other current and other assets	(5,705)	(5,360)
Accounts payable, accrued and other liabilities	8,288	5,508
Net cash provided by operating activities	31,684	27,861
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of businesses and assets	2,810	2,910
Proceeds from insurance	91	485
Proceeds from notes receivable	113	82
Payments for property and equipment and intangible assets	(20,890)	(13,990)
Acquisition of businesses, net of cash acquired	(30,200)	(39,302)
Net cash used in investing activities	(48,076)	(49,815)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt obligations, including related party proceeds of $0 and $650, respectively	11,595	35,742
Payments on debt obligations	(6,481)	(7,290)
Purchase of treasury stock	(98)	(2,845)
Payment of dividends	(1,015)	(854)
Payment of loan origination costs	(205)	(418)
Share in return of investment by noncontrolling partner	(600)	0
Net cash provided by financing activities	3,196	24,335
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(13,196)	2,381
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	35,980	35,686
CASH AND CASH EQUIVALENTS AT END OF PERIOD	22,784	38,067
CASH PAID DURING PERIOD FOR:
Interest	6,874	5,064
Income taxes	5,605	4,008
Noncash investing and financing transactions:
Debt incurred in connection with acquisition of businesses	32,405	22,200
Debt incurred in connection with purchase of property and equipment	5,584	2,625
Note receivable from sale of property	0	2,700
Issuance of shares of common stock for acquisition of businesses:
Number of shares	200	500
Fair value	16,308	30,362
Adjustment to operating lease right-of-use assets related to new and renewed leases	1,659	19,187
Adjustment to operating lease liabilities related to new and renewed leases	1,958	19,187
Unpaid liabilities on capital expenditures	$ 3,045	$ 1,201

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Cash Flows [Abstract]
Proceeds from related party debt	$ 0	$ 650

XML

Basis of Presentation

6 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

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 September 30, 2022 consolidated balance sheet data 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, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 14, 2022. 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 six months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023.

We made certain reclassification adjustments to segment disclosures related to prepaid insurance and goodwill. These assets were acquired by the registrant and presented in Corporate segment but mostly benefit subsidiaries belonging to other reportable segments. Prior year disclosures were also made to conform to current year presentation. There is no impact in consolidated total assets, results of operations, and cash flows in all periods presented. See Note 11.

XML

Recent Accounting Standards and Pronouncements

6 Months Ended

Mar. 31, 2023

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Standards and Pronouncements

Recent Accounting Standards and Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are still evaluating the impact of this ASU but we do not expect it to have a material impact on our consolidated financial statements.

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 of 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 are still evaluating the impact of this ASU 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 are still evaluating the impact of this ASU on our consolidated financial statements.

XML

Current Operating Environment

6 Months Ended

Mar. 31, 2023

Current Operating Environment [Abstract]

Current Operating Environment

Current Operating Environment Our fiscal 2020 was the period hardest hit by the COVID-19 pandemic caused by significant reduction in customer traffic in our clubs and restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments. In fiscal 2021, our businesses started to recover from the initial effects of the pandemic when government restrictions eased. Stimulus money also flowed to the economy at that time which prompted increased discretionary spending. In fiscal 2022, several coronavirus variants

threatened to bring back tight restrictions. Along with the pandemic, geopolitical and macroeconomic events started to affect the U.S. economy in general, with global inflation and supply chain disruption impacting our businesses the most.

Toward the end of fiscal 2022 and continuing to the current fiscal year, geopolitical and macroeconomic events have impacted our operating results and cash flows by causing inflation on wages and other operating expenses. In the event global inflation leads to a major economic downturn, our business operations and cash flow could be significantly affected.

XML

Acquisitions and Dispositions

6 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

Lubbock Property

On October 10, 2022, the Company purchased real estate in Lubbock, Texas amounting to $3.4 million for a future Bombshells location. The Company paid $1.1 million in cash at closing and obtained bank financing for the $2.3 million remainder (see Note 7). The site includes extra land that will be listed for sale once the Bombshells unit is completed.

Non-Income-Producing Properties

•On October 11, 2022, the Company purchased a hangar in Arcola, Texas amounting to $754,000 in cash.

•On February 6, 2023, in view of the increasing business presence of the Company in the Denver, Colorado area, the Company acquired a non-income-producing corporate property for $458,000 in cash, to be used for office space and employee housing.

Heartbreakers Gentlemen's Club

On October 26, 2022, the Company completed the acquisition of a club in Dickinson, Texas for a total agreed acquisition price of $9.0 million (with a total consideration preliminary fair value of $8.9 million based on certain legal contingencies that existed pre-acquisition). The acquisition included (1) $2.5 million for the adult entertainment business covered in a stock purchase agreement paid fully in cash at closing and (2) $6.5 million for the real estate property covered in a real estate purchase agreement paid $1.5 million in cash at closing and $5.0 million under a 6% 15-year promissory note (see Note 7). In the stock purchase agreement, the Company acquired 100% of the capital stock of the company which owned the adult entertainment business. The acquisition gives the Company its first adult club in the Galveston, Texas area market.

The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of October 26, 2022:

Current assets	$	64
Property and equipment	4,884
Licenses	1,170
Tradename	340
Accrued liability	(95)
Deferred tax liability	(374)
Total net assets acquired	5,989
Goodwill	2,916
Acquisition price fair value	$	8,905

We believe that in this acquisition goodwill represents the existing customer base of the club in the area and the added synergy profitability expansion when we implement the Company's processes into the club. Goodwill, licenses, and tradename will not be amortized but will be tested at least annually for impairment. Approximately $1.5 million of the recognized goodwill will be deductible for tax purposes.

In connection with this acquisition, we incurred approximately $0 and $23,000 in acquisition-related expenses during the three and six months ended March 31, 2023, respectively, which is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until March 31, 2023, the club contributed revenues of $554,000 and $901,000 and income from operations of $103,000 and $160,000 during the three and six months ended March 31, 2023, respectively, which are included in our unaudited condensed consolidated statements of income. The seller has not maintained historical U.S. GAAP financial data and it is impracticable to prepare them, therefore, we could not provide supplemental pro forma information of the combined entities.

Aurora CO Property

On November 8, 2022, the Company purchased real estate in Aurora, Colorado amounting to $850,000 in cash for a future Bombshells location.

Central City CO Casino Property 1

On December 5, 2022, the Company purchased real estate in Central City, Colorado amounting to $2.4 million in cash for the development of a Rick's Cabaret Steakhouse and Casino business.

Mark IV Property

On December 16, 2022, the Company purchased real estate in Fort Worth, Texas amounting to $2.4 million in cash. The property has two buildings, one of which the Company is leasing out to an existing tenant and the other building the Company is remodeling for future adult club operations.

Grange Food Hall

On December 20, 2022, the Company purchased a food hall property in Greenwood Village, Colorado for $5.3 million, including direct transaction costs and net of certain accrued taxes amounting to $102,000. The purchase price was paid $1.9 million in cash at closing and $3.325 million under a 6.67% five-year promissory note (see Note 7). The Company allocated $2.1 million to land, $2.6 million to building improvements, $98,000 to furniture, fixtures and equipment, and $565,000 to in-place leases based on their relative fair values.

Tomball Parkway Property Sale

On December 28, 2022, the Company sold a property classified as held-for-sale with a carrying value of $1.0 million for $1.7 million in cash. The Company used $1.2 million of the proceeds to pay off a loan related to the property.

Central City CO Casino Property 2

On February 6, 2023, the Company purchased real estate in Central City, Colorado amounting to $2.2 million in cash for the development of another casino business.

Bombshells San Antonio

On February 7, 2023, the Company completed the acquisition of a previously franchised Bombshells location in San Antonio, Texas for a total acquisition price of $3.2 million. The transaction was effected through a membership interest purchase agreement under which a subsidiary of the Company purchased 100% of the issued and outstanding membership interests of the target limited liability company that owns and operates the Bombshells location from the six previous owners of the entity (the "Sellers"). At acquisition date, the Sellers were paid $1.2 million in cash and were issued six seller-financed promissory notes totaling $2.0 million (see Note 7). The Company allocated the acquisition price $61,000 to inventory, $2.7 million to property and equipment, and $480,000 to favorable lease intangible and right-of-use assets, net of lease liability.

Baby Dolls-Chicas Locas

On March 16, 2023, the Company and certain of its subsidiaries completed the acquisition of five gentlemen's clubs, five related real estate properties, associated intellectual properties, and certain automated teller machines for a total purchase price of $66.5 million, payable with a total of $25.0 million in cash, a total of $25.5 million in 10-year 7% seller financing promissory notes, and 200,000 restricted shares of common stock based on an $80 per share price, subject to lock-up, leak out restrictions. The cash consideration at closing was partially funded by the $10.0 million line of credit secured by the Company on March 9, 2023 (see Note 7). The five clubs, which are all located in Texas, were purchased through four different asset purchase agreements and one stock purchase agreement, under each of which a newly formed wholly-owned subsidiary of the Company acquired from each club-owning entity all of the tangible and intangible assets and personal property used in the business of that club, except for certain excluded assets. As of the filing of this report, we have not completed our valuation analysis and related calculations in sufficient detail necessary to arrive at the fair values of the net assets acquired and the debt and stock consideration, but we have preliminarily allocated the acquisition price as follows based on negotiated purchase price: $632,000 to current assets, $41.6 million to property and equipment, $11.2 million to identifiable intangibles, $632,000 to accounts payable, and $14.0 million to goodwill.

In connection with this acquisition, we incurred approximately $280,000 and $292,000 in acquisition-related expenses during the three and six months ended March 31, 2023, respectively, which is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income. From the date of acquisition until March 31, 2023, the clubs contributed revenues of $1.2 million and $1.2 million and loss from operations of $154,000 and $154,000 during the three and six months ended March 31, 2023, respectively, which are included in our unaudited condensed consolidated statements of income. The following table presents the unaudited pro forma combined results of operations of the Company and the five acquired clubs and related assets as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amount and number of shares):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Pro forma revenues	$	77,292	$	69,256	$	154,424	$	137,029
Pro forma net income attributable to RCIHH common stockholders	$	8,303	$	12,444	$	17,213	$	24,849
Pro forma earnings per share - basic and diluted	$	0.88	$	1.28	$	1.83	$	2.58
Pro forma weighted average shares used in computing earnings per share - basic and diluted	9,430,225		9,689,085		9,430,241		9,647,854

The above unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022. The unaudited pro forma financial information reflects material, nonrecurring adjustments directly attributable to the acquisition including acquisition-related expenses, interest expense, and any related tax effects. Since we do not yet have a final valuation of the assets that we acquired and the liabilities that we assumed, the unaudited pro forma financial information does not include adjustments related to changes in recognized expenses caused by the fair value of assets acquired, such as depreciation and amortization and related tax effects. Pro forma net income and pro forma earnings per share include the impact of acquisition-related expenses and interest expense related to the $10.0 million line-of-credit facility (see Note 7) and the nine seller-financed notes in the acquisition as if they were incurred as of the first day of fiscal 2022. Pro forma weighted average number of common shares outstanding includes the impact of 200,000 shares of our common stock issued as partial consideration for the acquisition.

XML

Revenues

6 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 11), are shown below (in thousands):

	Three Months Ended March 31, 2023									Three Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	22,191		$	7,945	$	—	$	30,136	$	18,673		$	8,662	$	—	$	27,335
Sales of food and merchandise	4,823			6,182		—		11,005		4,498			6,662		—		11,160
Service revenues	25,686			4		—		25,690		21,501			—		—		21,501
Other revenues	4,331			184		171		4,686		3,502			9		185		3,696
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
Recognized at a point in time	$	56,577		$	14,274	$	127	$	70,978	$	47,722		$	15,332	$	185	$	63,239
Recognized over time	454		*	41		44		539		452		*	1		—		453
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
	Six Months Ended March 31, 2023									Six Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	44,289		$	15,497	$	—	$	59,786	$	36,840		$	16,926	$	—	$	53,766
Sales of food and merchandise	9,417			11,935		—		21,352		9,087			12,967		—		22,054
Service revenues	51,219			34		—		51,253		42,185			192		—		42,377
Other revenues	8,431			280		383		9,094		6,843			19		469		7,331
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528
Recognized at a point in time	$	112,495		$	27,702	$	338	$	140,535	$	94,066		$	30,102	$	468	$	124,636
Recognized over time	861		*	44		45		950		889		*	2		1		892
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528

* Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606.

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, 2022		Net Consideration Received (Refunded)		Recognized in Revenue		Balance at March 31, 2023
Ad revenue	$	82	$	284	$	(239)	$	127
Expo revenue	8		405		—		413
Franchise fees and other	144		(12)		(44)		88
	$	234	$	677	$	(283)	$	628

Contract liabilities with customers are included in accrued liabilities as unearned revenues in our unaudited condensed consolidated balance sheets (see also Note 6), while the revenues associated with these contract liabilities are included in other revenues in our unaudited condensed consolidated statements of income.

XML

Selected Account Information

6 Months Ended

Mar. 31, 2023

Selected Account Information [Abstract]

Selected Account Information

Selected Account Information

The components of accounts receivable, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Credit card receivables	$	2,768	$	2,687
Income tax refundable	1,773		2,979
ATM in-transit	1,006		819
Other (net of allowance for doubtful accounts of $85 and $30, respectively)	1,208		2,025
Total accounts receivable, net	$	6,755	$	8,510

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.

The components of prepaid expenses and other current assets are as follows (in thousands):

	March 31, 2023		September 30, 2022
Prepaid insurance	$	4,960	$	191
Prepaid legal	32		61
Prepaid taxes and licenses	689		391
Prepaid rent	150		296
Other	1,039		560
Total prepaid expenses and other current assets	$	6,870	$	1,499

A reconciliation of goodwill as of March 31, 2023 and September 30, 2022, which is substantially all in Nightclubs segment, is as follows (in thousands):

	Gross		Accumulated Impairment		Net
Balance at September 30, 2022	$	88,921	$	21,154	$	67,767
Acquisitions (see Note 4)	16,946		—		16,946
Impairment	—		662		(662)
Balance at March 31, 2023	$	105,867	$	21,816	$	84,051

The components of intangible assets, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Indefinite-lived:
Licenses	$	105,142	$	103,972
Trademarks	24,659		13,119
Domain names	23		23
Definite-lived:
Licenses	24,780		25,962
Leases acquired in-place	231		117
Noncompete agreements	25		55
Favorable leases	853		78
Software	618		723
Total intangible assets, net	$	156,331	$	144,049

The components of accrued liabilities are as follows (in thousands):

	March 31, 2023		September 30, 2022
Insurance	$	4,694	$	30
Sales and liquor taxes	2,400		2,227
Payroll and related costs	4,171		3,186
Property taxes	1,813		2,618
Interest	698		499
Patron tax	464		467
Unearned revenues	628		234
Lawsuit settlement	3,109		246
Other	2,981		1,821
Total accrued liabilities	$	20,958	$	11,328

The components of selling, general and administrative expenses are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Taxes and permits	$	2,739	$	2,361	$	5,423	$	4,597
Advertising and marketing	2,731		2,248		5,401		4,631
Supplies and services	2,657		2,175		5,081		4,155
Insurance	2,238		2,481		4,820		4,876
Legal	1,296		898		2,281		1,958
Lease	1,765		1,572		3,527		3,212
Charge card fees	1,683		1,466		3,580		2,797
Utilities	1,353		1,108		2,624		2,043
Security	1,308		1,050		2,472		2,137
Stock-based compensation	706		—		1,647		—
Accounting and professional fees	657		622		2,175		1,968
Repairs and maintenance	1,207		903		2,371		1,628
Other	1,686		1,553		3,356		2,921
Total selling, general and administrative expenses	$	22,026	$	18,437	$	44,758	$	36,923

The components of other charges (gains), net are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Impairment of assets	$	662	$	—	$	662	$	—
Settlement of lawsuits	3,120		385		3,120		577
Loss (gain) on disposal of businesses and assets	3		(58)		(587)		(400)
Gain on insurance	(27)		(320)		(91)		(321)
Other charges (gains), net	$	3,758	$	7	$	3,104	$	(144)

XML

Debt

6 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

Debt

On October 10, 2022, in relation to a real estate purchase (see Note 4), the Company borrowed $2.3 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6% per annum adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. The Company paid approximately $26,000 in debt issuance cost at closing. This promissory note is secured by the purchased real estate property.

On October 26, 2022, in relation to a club acquisition (see Note 4), the Company executed a promissory note for $5.0 million with the seller. The 6% 15-year promissory note is payable in 180 equal monthly payments of $42,193 in principal and interest. This promissory note is secured by the purchased real estate property.

On November 18, 2022, in relation to a real estate purchase on September 12, 2022, the Company borrowed $1.5 million from a bank lender. The 18-month promissory note bears an initial interest rate of 6% per annum to be adjusted daily to a rate equal to the Wall Street Journal prime rate plus 0.5% with a floor of 6%. The promissory note is payable in 17 monthly interest-only installments with the full principal and accrued interest payable at maturity. This promissory note is secured by the purchased real estate property.

On December 20, 2022, the Company executed a promissory note for $3.325 million with a bank lender in relation to a purchase of a food hall property (see Note 4). The 6.67% five-year promissory note is payable in 59 equal monthly installments of $22,805 in principal and interest, with the balance of 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 February 7, 2023, in relation to the acquisition of a franchised Bombshells location in San Antonio, Texas (see Note 4), the Company entered into six separate seller-financing promissory notes totaling $2.0 million. Each of the promissory notes has an interest rate of 7% per annum, has a term of 24 months, and is payable in monthly installments totaling $39,602 of principal and interest for the first 23 months based on a 60-month amortization schedule with the remaining unpaid principal and interest paid at maturity.

On March 9, 2023, the Company closed a $10.0 million line-of-credit facility with a lender bank evidenced by a revolving promissory note, with an initial draw of $10.0 million at closing. The facility has an initial term of 24 months with a variable interest rate equal to the Wall Street Journal prime rate plus 1%. On such date that the principal balance is repaid to an amount less than $5.0 million, the facility's revolver feature is activated where the Company may draw from the remaining availability up to a maximum of $5.0 million. The Company shall also pay a non-usage fee of 0.5% based on the amount by which the average outstanding balance for the prior twelve months was less than $3.0 million or the amount by which the total aggregate advances during the prior twelve months totaled less than $3.0 million. The Company paid $115,000 in debt issuance costs, which is recorded as deferred charges to be amortized on a straight-line basis over 24 months. There are certain financial covenants with which the Company is to be in compliance related to this loan, including a compensating balance requirement of $3.0 million and a minimum tangible net worth requirement of $20.0 million.

On March 16, 2023, in relation to the acquisition of five clubs with associated real estate, automated teller machines, and intellectual property (see Note 4), the Company executed nine secured promissory notes with a total principal amount of $25.5 million. Each of the nine promissory notes have an interest rate of 7% per annum with a term of 10 years, payable in arrears in 120 equal monthly payments of principal and interest amounting to $296,077 per month in the aggregate. The holder of the $5.0 million promissory note related to the real estate properties may call due from the Company a principal payment of $1.0 million once in every calendar year.

Future maturities of long-term debt as of March 31, 2023 are as follows: $21.6 million, $38.0 million, $16.8 million, $12.7 million, $19.6 million and $140.3 million for the twelve months ending March 31, 2023, 2024, 2025, 2026, 2027, and thereafter, respectively. Of the maturity schedule mentioned above, $3.8 million, $25.7 million, $4.8 million, $0, $6.1 million and $71.8 million, respectively, relate to scheduled balloon payments. Unamortized debt discount and issuance costs amounted to $3.2 million and $3.4 million as of March 31, 2023 and September 30, 2022, respectively.

XML

Stock-based Compensation

6 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

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 to each of six members of management subject to the approval of the 2022 Plan.

Stock-based compensation for the three and six months ended March 31, 2023, which is included in corporate segment selling, general and administrative expenses, amounted to $706,000 and $1.6 million, respectively. No stock-based compensation expense was recognized during the three and six months ended March 31, 2022. As of March 31, 2023, we had unrecognized compensation cost amounting to $5.4 million related to stock-based compensation awards granted, which is expected to be recognized over a weighted average period of 2.9 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 per share. No stock options were exercised during the three and six months ended March 31, 2023. As of March 31, 2023, 120,000 stock options were vested and exercisable.

For the three and six months ended March 31, 2023, we excluded 300,000 stock options from the calculation of diluted earnings per share because their effect was anti-dilutive. There were no stock options outstanding during the three and six months ended March 31, 2022. Aside from the outstanding stock options, there were no other potentially dilutive securities for inclusion in the calculation of diluted earnings per share.

XML

Income Taxes

6 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense was $2.1 million and $5.2 million during the three and six months ended March 31, 2023, respectively, compared to $3.4 million and $6.3 million during the three and six months ended March 31, 2022, respectively. The effective income tax expense rate was 21.8% and 22.4% for the three and six months ended March 31, 2023, respectively, compared to 23.4% and 22.6% for the three and six months ended March 31, 2022, respectively. 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.

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Federal statutory income tax expense	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	4.0	%	2.9	%	4.0	%	2.9	%
Permanent differences	0.6	%	0.5	%	0.5	%	0.4	%
Tax credits	(3.8)	%	(3.1)	%	(3.2)	%	(2.6)	%
Other	—	%	2.1	%	0.1	%	0.8	%
Total income tax expense	21.8	%	23.4	%	22.4	%	22.6	%

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, 2019 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.

XML

Commitments and Contingencies

6 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Matters

Texas Patron Tax

A declaratory judgment action was brought by five operating subsidiaries of the Company to challenge a Texas Comptroller administrative rule related to the $5 per customer Patron Tax Fee assessed against Sexually Oriented Businesses. An administrative rule attempted to expand the fee to cover venues featuring dancers using latex cover as well as traditional nude entertainment. The administrative rule was challenged on both constitutional and statutory grounds. On November 19, 2018, the Court issued an order that a key aspect of the administrative rule is invalid based on it exceeding the scope of the Comptroller’s authority. On March 6, 2020, the U.S. District Court for the Western District of Texas, Austin Division, ruled that the Texas Patron Tax is unconstitutional as it has been applied and enforced by the Comptroller. The State of Texas appealed to the Fifth Circuit Court of Appeals, who affirmed that the Texas Patron Fee is unconstitutional as applied. The State of Texas next sought review from the Supreme Court, but the high court declined to take the case. The lawsuit was sent back to the trial court for post-trial proceedings, which resulted in the award of attorneys' fees to the operating subsidiaries. Pursuant to the rulings, the Texas Patron Fee is unconstitutional as applied to clubs featuring dancers using latex cover.

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. The Company and its subsidiaries changed insurance companies on that date.

On November 7, 2013, the Court of Chancery of the State of Delaware entered a Rehabilitation and Injunction Order (“Rehabilitation Order”), which declared IIC impaired, insolvent and in an unsafe condition and placed IIC under the supervision of the Insurance Commissioner of the State of Delaware (“Commissioner”) in her capacity as receiver (“Receiver”). The Rehabilitation Order empowered the Commissioner to rehabilitate IIC through a variety of means, including gathering assets and marshaling those assets as necessary. Further, the order stayed or abated pending lawsuits involving IIC as the insurer until May 6, 2014.

On April 10, 2014, the Court of Chancery of the State of Delaware entered a Liquidation and Injunction Order With Bar Date (“Liquidation Order”), which ordered the liquidation of IIC and terminated all insurance policies or contracts of insurance issued by IIC. The Liquidation Order further ordered that all claims against IIC must have been filed with the Receiver before the close of business on January 16, 2015 and that all pending lawsuits involving IIC as the insurer were further stayed or abated until October 7, 2014. As a result, the Company and its subsidiaries no longer had insurance coverage under the liability policy with IIC. The Company has retained counsel to defend against and evaluate these claims and lawsuits. We are funding 100% of the costs of litigation and will seek reimbursement from the bankruptcy receiver. The Company filed the appropriate claims against IIC with the Receiver before the January 16, 2015 deadline and has provided updates as requested; however, there are no assurances of any recovery from these claims. It is unknown at this time what effect this uncertainty will have on the Company. As previously stated, since October 25, 2013, the Company has obtained general liability coverage from other insurers, which have covered and/or will cover any claims arising from actions after that date. As of March 31, 2023, we have 1 remaining unresolved claim out of the original 71 claims.

Shareholder Derivative Action

On January 21, 2022, Shiva Stein and Kevin McCarty filed a shareholder derivative action in the Southern District of Texas, Houston Division against former director Nourdean Anakar, Yura Barabash, former director Steven L. Jenkins, Eric Langan, Luke Lirot, former CFO Phillip K. Marshall, Elaine J. Martin, Allan Priaulx, and Travis Reese as defendants, as well as against RCI Hospitality Holdings, Inc. as nominal defendant. The action, styled Stein v. Anakar, et al., No. 4:22-mc-00149 (S.D. Tex.), alleges claims for breach of fiduciary duty based on alleged dissemination of inaccurate information and failure to maintain internal controls. These allegations are substantively similar to claims asserted in a prior securities class action that was settled in August of 2022 and a prior derivative action that was dismissed in June of 2021. Plaintiffs do not demand any specific amount of damages, which if awarded would be paid by the individual defendants to the Company. Plaintiffs also seek unspecified changes to the Company’s internal controls. On April 2, 2022, the Company and its current and former officers and directors named in the shareholder derivative complaint filed Motions to Dismiss. On March 31, 2023, the Court denied the Company’s motion, which was based on its rejections of the shareholders’ pre-litigation demands that the Company sue the individual defendants; granted the motion of two current individuals who were not members of the Company’s Board of Directors at the time of the alleged events at issue, Ms. Martin and Mr. Priaulx; and denied the motions of the remaining defendants. RCI intends to vigorously defend its position.

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 suit alleged that Mr. Panameno injured Mr. Dupray in a traffic accident after being served alcohol at an establishment operated by JAI Phoenix. The suit alleged that JAI Phoenix was liable under theories of common law dram shop negligence and dram shop negligence per se. After a jury trial proceeded to a verdict in favor of the plaintiffs against both defendants, in April 2017 the Court entered a judgment under which JAI Phoenix’s share of compensatory damages is approximately $1.4 million and its share of punitive damages is $4.0 million. In May 2017, JAI Phoenix filed a motion for judgment as a matter of law or, in the alternative, motion for new trial. The Court denied this motion in August 2017. In September 2017, JAI Phoenix filed a notice of appeal. In June 2018, the matter was heard by the Arizona Court of Appeals. On November 15, 2018 the Court of Appeals vacated the jury’s verdict and remanded the case to the trial court. It is anticipated that a new trial will occur at some point in the future. JAI Phoenix will continue to vigorously defend itself.

As set forth in the risk factors as disclosed in this report, 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.

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.

Settlements of lawsuits for the three and six months ended March 31, 2023 amount to $3.1 million and $3.1 million, respectively, and for the three and six months ended March 31, 2022 amount to approximately $385,000 and $577,000, respectively. As of March 31, 2023 and September 30, 2022, the Company has accrued $3.1 million and $246,000 in accrued liabilities, respectively, related to settlement of lawsuits.

XML

Segment Information

6 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

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):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Revenues (from external customers)
Nightclubs	$	57,031	$	48,174	$	113,356	$	94,955
Bombshells	14,315		15,333		27,746		30,104
Other	171		185		383		469
	$	71,517	$	63,692	$	141,485	$	125,528
Income (loss) from operations
Nightclubs	$	17,995	$	19,126	$	40,735	$	37,862
Bombshells	1,775		3,468		3,622		6,270
Other	(168)		(34)		(353)		(77)
Corporate	(6,175)		(5,479)		(13,679)		(11,063)
	$	13,427	$	17,081	$	30,325	$	32,992
Depreciation and amortization
Nightclubs	$	2,464	$	2,206	$	4,949	$	3,753
Bombshells	931		454		1,389		883
Other	63		7		126		13
Corporate	302		210		603		422
	$	3,760	$	2,877	$	7,067	$	5,071
Capital expenditures
Nightclubs	$	1,214	$	1,662	$	5,358	$	10,890
Bombshells	5,508		1,901		13,827		2,205
Other	41		359		78		548
Corporate	1,574		218		1,627		347
	$	8,337	$	4,140	$	20,890	$	13,990

	March 31, 2023		September 30, 2022
Total assets
Nightclubs	$	503,697	$	437,096
Bombshells	76,171		62,021
Other	2,751		2,635
Corporate	38,512		28,986
	$	621,131	$	530,738

Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2023 amounting to $3.9 million and $31,000, respectively, and for the six months ended March 31, 2023 amounting to $7.6 million and $262,000, respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2023 amounting to $78,000 and $115,000, respectively. Excluded from revenues in the table above are intercompany rental revenues of the Nightclubs and Corporate segments for the three months ended March 31, 2022 amounting to $3.3 million and $31,000, and for the six months ended March 31, 2022 amounting to $6.5 million and $199,000, respectively; and intercompany sales of Robust Energy Drink included in Other segment for the three and six months ended March 31, 2022 amounting to $53,000 and $122,000, respectively. These intercompany revenue amounts are eliminated upon consolidation.

General 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, 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.

As of March 31, 2023, we reclassified $9.4 million of goodwill from Corporate to Nightclubs and $4.7 million of prepaid insurance to $3.7 million in Nightclubs, $961,000 in Bombshells, and $29,000 in Other. As of September 30, 2022, we reclassified $9.0 million of goodwill from Corporate to Nightclubs to conform to current year presentation. See Note 1.

XML

Related Party Transactions

6 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

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 March 31, 2023 and September 30, 2022, was $119.1 million and $115.1 million, respectively.

Included in the $17.0 million borrowing on October 12, 2021 are notes borrowed from related parties—one note for $500,000 (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 Nottingham Creations, and previously Sherwood Forest Creations, LLC, both furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as providing ongoing maintenance. Nottingham Creations is owned by a brother of Eric Langan (as was Sherwood Forest). Amounts billed to us for goods and services provided by Nottingham Creations and Sherwood Forest were $188,285 and $188,285 during the three and six months ended March 31, 2023, respectively, and $3,112 and $27,149 during the three and six months ended March 31, 2022, respectively. As of March 31, 2023 and September 30, 2022, we owed Nottingham Creations and Sherwood Forest $110,809 and $92,808, 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 2023 and 2022. 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 $18,000 and $64,000 for the three and six months ended March 31, 2023, respectively, and $3,809 and $3,809 for the three and six months ended March 31, 2022, respectively. Amounts billed directly to the Company were $379 and $379 for the three and six months ended March 31, 2023, respectively, and $3,704 and $84,700 for the three and six months ended March 31, 2022, respectively. As of March 31, 2023 and September 30, 2022, the Company owed TW Mechanical $0 and $9,338, respectively, in unpaid direct billings.

XML

Leases

6 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and six months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023			2022
Operating lease expense – fixed payments	$	1,288	$	1,136	$	2,547		$	2,267
Variable lease expense	359		233		786			567
Short-term and other lease expense (includes $63 and $58 recorded in advertising and marketing for the three months ended March 31, 2023 and 2022, respectively, and $127 and $130 for the six months ended March 31, 2023 and 2022, respectively; and $138 and $107 recorded in repairs and maintenance for the three months ended March 31, 2023 and 2022, respectively, and $265 and $190 for the six months ended March 31, 2023 and 2022, respectively; see Note 6)	319		368		586			698
Sublease income	—		(1)		—			(3)
Total lease expense, net	$	1,966	$	1,736	$	3,919		$	3,529
Other information:
Operating cash outflows from operating leases	$	1,920	$	1,690	$	3,830		$	3,439
Weighted average remaining lease term – operating leases					10.9 years			12.0 years
Weighted average discount rate – operating leases					5.7		%	5.6		%

Future maturities of operating lease liabilities as of March 31, 2023 are as follows (in thousands):

	Principal Payments		Interest Payments		Total Payments
April 2023 - March 2024	$	2,951	$	2,189	$	5,140
April 2024 - March 2025	3,185		2,016		5,201
April 2025 - March 2026	3,460		1,829		5,289
April 2026 - March 2027	3,665		1,626		5,291
April 2027 - March 2028	3,303		1,423		4,726
Thereafter	22,816		5,313		28,129
	$	39,380	$	14,396	$	53,776

XML

Basis of Presentation (Policies)

6 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe 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 September 30, 2022 consolidated balance sheet data 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, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 14, 2022. 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 six months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023.

Recent Accounting Standards and Pronouncements

Recent Accounting Standards and Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are still evaluating the impact of this ASU but we do not expect it to have a material impact on our consolidated financial statements.

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 of 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 are still evaluating the impact of this ASU 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 are still evaluating the impact of this ASU on our consolidated financial statements.

XML

Acquisitions and Dispositions (Tables)

6 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following is our preliminary allocation of the fair value of the acquisition price (in thousands) as of October 26, 2022:

Current assets	$	64
Property and equipment	4,884
Licenses	1,170
Tradename	340
Accrued liability	(95)
Deferred tax liability	(374)
Total net assets acquired	5,989
Goodwill	2,916
Acquisition price fair value	$	8,905

Schedule of Unaudited Pro Forma Combined Results of Operations

The following table presents the unaudited pro forma combined results of operations of the Company and the five acquired clubs and related assets as though the acquisition occurred at the beginning of fiscal 2022 (in thousands, except per share amount and number of shares):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Pro forma revenues	$	77,292	$	69,256	$	154,424	$	137,029
Pro forma net income attributable to RCIHH common stockholders	$	8,303	$	12,444	$	17,213	$	24,849
Pro forma earnings per share - basic and diluted	$	0.88	$	1.28	$	1.83	$	2.58
Pro forma weighted average shares used in computing earnings per share - basic and diluted	9,430,225		9,689,085		9,430,241		9,647,854

XML

Revenues (Tables)

6 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Segment Revenues

Revenues, as disaggregated by revenue type, timing of recognition, and reportable segment (see also Note 11), are shown below (in thousands):

	Three Months Ended March 31, 2023									Three Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	22,191		$	7,945	$	—	$	30,136	$	18,673		$	8,662	$	—	$	27,335
Sales of food and merchandise	4,823			6,182		—		11,005		4,498			6,662		—		11,160
Service revenues	25,686			4		—		25,690		21,501			—		—		21,501
Other revenues	4,331			184		171		4,686		3,502			9		185		3,696
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
Recognized at a point in time	$	56,577		$	14,274	$	127	$	70,978	$	47,722		$	15,332	$	185	$	63,239
Recognized over time	454		*	41		44		539		452		*	1		—		453
	$	57,031		$	14,315	$	171	$	71,517	$	48,174		$	15,333	$	185	$	63,692
	Six Months Ended March 31, 2023									Six Months Ended March 31, 2022
	Nightclubs			Bombshells		Other		Total		Nightclubs			Bombshells		Other		Total
Sales of alcoholic beverages	$	44,289		$	15,497	$	—	$	59,786	$	36,840		$	16,926	$	—	$	53,766
Sales of food and merchandise	9,417			11,935		—		21,352		9,087			12,967		—		22,054
Service revenues	51,219			34		—		51,253		42,185			192		—		42,377
Other revenues	8,431			280		383		9,094		6,843			19		469		7,331
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528
Recognized at a point in time	$	112,495		$	27,702	$	338	$	140,535	$	94,066		$	30,102	$	468	$	124,636
Recognized over time	861		*	44		45		950		889		*	2		1		892
	$	113,356		$	27,746	$	383	$	141,485	$	94,955		$	30,104	$	469	$	125,528

* Lease revenue (included in Other Revenues) as covered by ASC 842. All other revenues are covered by ASC 606.

Schedule of Reconciliation of Contract Liabilities with Customers

A reconciliation of contract liabilities with customers is presented below (in thousands):

	Balance at September 30, 2022		Net Consideration Received (Refunded)		Recognized in Revenue		Balance at March 31, 2023
Ad revenue	$	82	$	284	$	(239)	$	127
Expo revenue	8		405		—		413
Franchise fees and other	144		(12)		(44)		88
	$	234	$	677	$	(283)	$	628

XML

Selected Account Information (Tables)

6 Months Ended

Mar. 31, 2023

Selected Account Information [Abstract]

Schedule of Accounts Receivable, Net

The components of accounts receivable, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Credit card receivables	$	2,768	$	2,687
Income tax refundable	1,773		2,979
ATM in-transit	1,006		819
Other (net of allowance for doubtful accounts of $85 and $30, respectively)	1,208		2,025
Total accounts receivable, net	$	6,755	$	8,510

Schedule of Components of Prepaid Expenses and Other Current Assets

The components of prepaid expenses and other current assets are as follows (in thousands):

	March 31, 2023		September 30, 2022
Prepaid insurance	$	4,960	$	191
Prepaid legal	32		61
Prepaid taxes and licenses	689		391
Prepaid rent	150		296
Other	1,039		560
Total prepaid expenses and other current assets	$	6,870	$	1,499

Schedule of Reconciliation of Goodwill

A reconciliation of goodwill as of March 31, 2023 and September 30, 2022, which is substantially all in Nightclubs segment, is as follows (in thousands):

	Gross		Accumulated Impairment		Net
Balance at September 30, 2022	$	88,921	$	21,154	$	67,767
Acquisitions (see Note 4)	16,946		—		16,946
Impairment	—		662		(662)
Balance at March 31, 2023	$	105,867	$	21,816	$	84,051

Schedule of Intangible Assets and Goodwill

The components of intangible assets, net are as follows (in thousands):

	March 31, 2023		September 30, 2022
Indefinite-lived:
Licenses	$	105,142	$	103,972
Trademarks	24,659		13,119
Domain names	23		23
Definite-lived:
Licenses	24,780		25,962
Leases acquired in-place	231		117
Noncompete agreements	25		55
Favorable leases	853		78
Software	618		723
Total intangible assets, net	$	156,331	$	144,049

Schedule of Accrued Liabilities

The components of accrued liabilities are as follows (in thousands):

	March 31, 2023		September 30, 2022
Insurance	$	4,694	$	30
Sales and liquor taxes	2,400		2,227
Payroll and related costs	4,171		3,186
Property taxes	1,813		2,618
Interest	698		499
Patron tax	464		467
Unearned revenues	628		234
Lawsuit settlement	3,109		246
Other	2,981		1,821
Total accrued liabilities	$	20,958	$	11,328

Schedule of Selling, General and Administrative Expenses

The components of selling, general and administrative expenses are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Taxes and permits	$	2,739	$	2,361	$	5,423	$	4,597
Advertising and marketing	2,731		2,248		5,401		4,631
Supplies and services	2,657		2,175		5,081		4,155
Insurance	2,238		2,481		4,820		4,876
Legal	1,296		898		2,281		1,958
Lease	1,765		1,572		3,527		3,212
Charge card fees	1,683		1,466		3,580		2,797
Utilities	1,353		1,108		2,624		2,043
Security	1,308		1,050		2,472		2,137
Stock-based compensation	706		—		1,647		—
Accounting and professional fees	657		622		2,175		1,968
Repairs and maintenance	1,207		903		2,371		1,628
Other	1,686		1,553		3,356		2,921
Total selling, general and administrative expenses	$	22,026	$	18,437	$	44,758	$	36,923

Schedule of Components of Other Charges (Gains)

The components of other charges (gains), net are as follows (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Impairment of assets	$	662	$	—	$	662	$	—
Settlement of lawsuits	3,120		385		3,120		577
Loss (gain) on disposal of businesses and assets	3		(58)		(587)		(400)
Gain on insurance	(27)		(320)		(91)		(321)
Other charges (gains), net	$	3,758	$	7	$	3,104	$	(144)

XML

Income Taxes (Tables)

6 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

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.

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Federal statutory income tax expense	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	4.0	%	2.9	%	4.0	%	2.9	%
Permanent differences	0.6	%	0.5	%	0.5	%	0.4	%
Tax credits	(3.8)	%	(3.1)	%	(3.2)	%	(2.6)	%
Other	—	%	2.1	%	0.1	%	0.8	%
Total income tax expense	21.8	%	23.4	%	22.4	%	22.6	%

XML

Segment Information (Tables)

6 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Below is the financial information related to the Company’s segments (in thousands):

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2023		2022		2023		2022
Revenues (from external customers)
Nightclubs	$	57,031	$	48,174	$	113,356	$	94,955
Bombshells	14,315		15,333		27,746		30,104
Other	171		185		383		469
	$	71,517	$	63,692	$	141,485	$	125,528
Income (loss) from operations
Nightclubs	$	17,995	$	19,126	$	40,735	$	37,862
Bombshells	1,775		3,468		3,622		6,270
Other	(168)		(34)		(353)		(77)
Corporate	(6,175)		(5,479)		(13,679)		(11,063)
	$	13,427	$	17,081	$	30,325	$	32,992
Depreciation and amortization
Nightclubs	$	2,464	$	2,206	$	4,949	$	3,753
Bombshells	931		454		1,389		883
Other	63		7		126		13
Corporate	302		210		603		422
	$	3,760	$	2,877	$	7,067	$	5,071
Capital expenditures
Nightclubs	$	1,214	$	1,662	$	5,358	$	10,890
Bombshells	5,508		1,901		13,827		2,205
Other	41		359		78		548
Corporate	1,574		218		1,627		347
	$	8,337	$	4,140	$	20,890	$	13,990

	March 31, 2023		September 30, 2022
Total assets
Nightclubs	$	503,697	$	437,096
Bombshells	76,171		62,021
Other	2,751		2,635
Corporate	38,512		28,986
	$	621,131	$	530,738

XML

Leases (Tables)

6 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Lease Expense

Total lease expense included in selling, general and administrative expenses in our unaudited condensed consolidated statements of income for the three and six months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023			2022
Operating lease expense – fixed payments	$	1,288	$	1,136	$	2,547		$	2,267
Variable lease expense	359		233		786			567
Short-term and other lease expense (includes $63 and $58 recorded in advertising and marketing for the three months ended March 31, 2023 and 2022, respectively, and $127 and $130 for the six months ended March 31, 2023 and 2022, respectively; and $138 and $107 recorded in repairs and maintenance for the three months ended March 31, 2023 and 2022, respectively, and $265 and $190 for the six months ended March 31, 2023 and 2022, respectively; see Note 6)	319		368		586			698
Sublease income	—		(1)		—			(3)
Total lease expense, net	$	1,966	$	1,736	$	3,919		$	3,529
Other information:
Operating cash outflows from operating leases	$	1,920	$	1,690	$	3,830		$	3,439
Weighted average remaining lease term – operating leases					10.9 years			12.0 years
Weighted average discount rate – operating leases					5.7		%	5.6		%

Schedule of Future Maturities of Lease Liabilities

Future maturities of operating lease liabilities as of March 31, 2023 are as follows (in thousands):

	Principal Payments		Interest Payments		Total Payments
April 2023 - March 2024	$	2,951	$	2,189	$	5,140
April 2024 - March 2025	3,185		2,016		5,201
April 2025 - March 2026	3,460		1,829		5,289
April 2026 - March 2027	3,665		1,626		5,291
April 2027 - March 2028	3,303		1,423		4,726
Thereafter	22,816		5,313		28,129
	$	39,380	$	14,396	$	53,776

XML

Acquisitions and Dispositions - Narrative (Details) $ / shares in Units, $ in Thousands														3 Months Ended			6 Months Ended
	Mar. 16, 2023 USD ($) asset_purchase_agreement stock_purchase_agreement note property club $ / shares shares	Mar. 09, 2023 USD ($)	Feb. 07, 2023 USD ($) note seller	Feb. 06, 2023 USD ($)	Dec. 28, 2022 USD ($)	Dec. 20, 2022 USD ($)	Dec. 16, 2022 USD ($) building	Dec. 05, 2022 USD ($)	Nov. 18, 2022 USD ($)	Nov. 08, 2022 USD ($)	Oct. 26, 2022 USD ($)	Oct. 11, 2022 USD ($)	Oct. 10, 2022 USD ($)	Mar. 31, 2023 USD ($) note shares	Mar. 31, 2022 USD ($)	Dec. 31, 2021 shares	Mar. 31, 2023 USD ($) note shares	Mar. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)
Business Acquisition [Line Items]
Total revenues														$ 71,517	$ 63,692		$ 141,485	$ 125,528
Income (loss) from operations														13,427	$ 17,081		30,325	$ 32,992
Property classified as held for sale					$ 1,000
Proceeds from sale of property held-for-sale					1,700
Portion of proceeds from sale of property used to pay off the loan related to the property					$ 1,200
Goodwill														$ 84,051			84,051		$ 67,767
Common Stock
Business Acquisition [Line Items]
Issuance of common shares for business combination (in shares) | shares														200,000		500,000
Notes Payable to Banks
Business Acquisition [Line Items]
Debt instrument, term									18 months				18 months
Debt instrument, face amount									$ 1,500				$ 2,300
Line of Credit | Revolving Credit Facility
Business Acquisition [Line Items]
Debt instrument, term		24 months
Debt instrument, face amount		$ 10,000
Six Seller Financed Promissory Note | Notes Payable to Banks
Business Acquisition [Line Items]
Debt instrument, interest rate, stated percentage			7.00%
Debt instrument, term			24 months
Number of seller-financed notes | note			6
Debt instrument, face amount			$ 2,000
Nine Secured Promissory Notes | Notes Payable to Banks
Business Acquisition [Line Items]
Debt instrument, interest rate, stated percentage	7.00%
Debt instrument, term	10 years
Number of seller-financed notes | note	9
Debt instrument, face amount	$ 25,500
Hangar in Arcola, Texas
Business Acquisition [Line Items]
Business combination, consideration transferred												$ 754
Club In Dickinson, Texas
Business Acquisition [Line Items]
Business combination, consideration transferred											$ 9,000
Preliminary fair value of acquisition											$ 8,900
Percentage of voting interests acquired											100.00%
Recognized goodwill deductible for tax purposes											$ 1,500
Business combination, acquisition related costs														$ 0			23
Total revenues														554			901
Income (loss) from operations														103			160
Property and equipment											4,884
Purchase price allocated to current assets											64
Goodwill											2,916
Club In Dickinson, Texas - Adult Entertainment Business
Business Acquisition [Line Items]
Business combination, consideration transferred											2,500
Payments to acquire businesses											1,500
Club In Dickinson, Texas - Adult Entertainment Business | 6% Fifteen-Year Promissory Note | Notes Payable to Banks
Business Acquisition [Line Items]
Liabilities incurred											$ 5,000
Debt instrument, interest rate, stated percentage											6.00%
Debt instrument, term											15 years
Debt instrument, face amount											$ 5,000
Club In Dickinson, Texas - Real Estate Property
Business Acquisition [Line Items]
Business combination, consideration transferred											$ 6,500
Bombshells Location In San Antonio, Texas
Business Acquisition [Line Items]
Business combination, consideration transferred			3,200
Payments to acquire businesses			$ 1,200
Percentage of voting interests acquired			100.00%
Property and equipment			$ 2,700
Number of sellers | seller			6
Number of seller-financed notes | note			6
Inventory			$ 61
Lease intangible and right-of-use assets, net of lease liability			480
Bombshells Location In San Antonio, Texas | Six Seller Financed Promissory Note | Notes Payable to Banks
Business Acquisition [Line Items]
Debt instrument, face amount			$ 2,000
Baby Dolls-Chicas Locas
Business Acquisition [Line Items]
Business combination, consideration transferred	66,500
Payments to acquire businesses	25,000
Business combination, acquisition related costs														280			292
Total revenues														1,200			1,200
Income (loss) from operations														154			$ 154
Property and equipment	$ 41,600
Number of clubs acquired | club	5
Number of real estate properties acquired | property	5
Business acquisition, share price (in dollars per share) | $ / shares	$ 80
Number of asset purchase agreements | asset_purchase_agreement	4
Number of stock purchase agreements | stock_purchase_agreement	1
Purchase price allocated to current assets	$ 632
Identifiable intangibles	11,200
Accounts payable	632
Goodwill	$ 14,000
Baby Dolls-Chicas Locas | Common Stock
Business Acquisition [Line Items]
Issuance of common shares for business combination (in shares) | shares	200,000
Common stock issued as partial consideration | shares																	200,000
Baby Dolls-Chicas Locas | Line of Credit
Business Acquisition [Line Items]
Debt instrument, face amount		$ 10,000
Baby Dolls-Chicas Locas | Line of Credit | Revolving Credit Facility
Business Acquisition [Line Items]
Debt instrument, face amount														$ 10,000			$ 10,000
Baby Dolls-Chicas Locas | 7% Seller Financing Promissory Notes
Business Acquisition [Line Items]
Consideration transferred, other	$ 25,500
Baby Dolls-Chicas Locas | Nine Secured Promissory Notes | Notes Payable to Banks
Business Acquisition [Line Items]
Number of seller-financed notes | note														9			9
Real Estate in Lubbock, Texas
Business Acquisition [Line Items]
Business combination, consideration transferred													3,400
Payments to acquire businesses													1,100
Consideration transferred, other													$ 2,300
Non-income-producing Corporate Property
Business Acquisition [Line Items]
Payments to acquire businesses				$ 458
Real Estate in Aurora, Colorado
Business Acquisition [Line Items]
Business combination, consideration transferred										$ 850
Real Estate in Central City, Colorado
Business Acquisition [Line Items]
Business combination, consideration transferred								$ 2,400
Real Estate In Fort Worth, Texas
Business Acquisition [Line Items]
Business combination, consideration transferred							$ 2,400
Number of buildings purchased in transaction | building							2
Food Hall Property In Greenwood Village, Colorado
Business Acquisition [Line Items]
Business combination, consideration transferred						$ 5,300
Payments to acquire businesses						1,900
Business combination, acquisition related costs						102
Food Hall Property In Greenwood Village, Colorado | Leases acquired in-place
Business Acquisition [Line Items]
Identifiable intangibles						565
Food Hall Property In Greenwood Village, Colorado | Land
Business Acquisition [Line Items]
Property and equipment						2,100
Food Hall Property In Greenwood Village, Colorado | Building and Building Improvements
Business Acquisition [Line Items]
Property and equipment						2,600
Food Hall Property In Greenwood Village, Colorado | Furniture, Fixtures And Equipment
Business Acquisition [Line Items]
Property and equipment						98
Food Hall Property In Greenwood Village, Colorado | 6.67% Five-Year Promissory Note | Notes Payable to Banks
Business Acquisition [Line Items]
Liabilities incurred						$ 3,325
Debt instrument, interest rate, stated percentage						6.67%
Debt instrument, term						5 years
Debt instrument, face amount						$ 3,325
Central City CO Casino Property 2
Business Acquisition [Line Items]
Payments to acquire businesses				$ 2,200
Baby Dolls-Chicas Locas | 7% Seller Financing Promissory Notes | Notes Payable to Banks
Business Acquisition [Line Items]
Debt instrument, interest rate, stated percentage	7.00%
Debt instrument, term	10 years

XML

Acquisitions and Dispositions - Schedule of Allocation of Fair Value of the Acquisition Price (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Oct. 26, 2022	Sep. 30, 2022
Business Acquisition [Line Items]
Goodwill	$ 84,051		$ 67,767
Club In Dickinson, Texas
Business Acquisition [Line Items]
Current assets		$ 64
Property and equipment		4,884
Accrued liability		(95)
Deferred tax liability		(374)
Total net assets acquired		5,989
Goodwill		2,916
Acquisition price fair value		8,905
Club In Dickinson, Texas | Licenses
Business Acquisition [Line Items]
Indefinite-lived intangible assets		1,170
Club In Dickinson, Texas | Trade Names
Business Acquisition [Line Items]
Indefinite-lived intangible assets		$ 340

XML

Acquisitions and Dispositions - Schedule of Unaudited Pro Forma Combined Results of Operations (Details) - Baby Dolls-Chicas Locas - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Business Acquisition [Line Items]
Pro forma revenues	$ 77,292	$ 69,256	$ 154,424	$ 137,029
Pro forma net income attributable to RCIHH common stockholders	$ 8,303	$ 12,444	$ 17,213	$ 24,849
Pro forma earnings per share – basic (in dollars per share)	$ 0.88	$ 1.28	$ 1.83	$ 2.58
Pro forma earnings per share – diluted (in dollars per share)	$ 0.88	$ 1.28	$ 1.83	$ 2.58
Pro forma weighted average number of common shares outstanding - diluted (in shares)	9,430,225	9,689,085	9,430,241	9,647,854
Pro forma weighted average number of common shares outstanding - basic (in shares)	9,430,225	9,689,085	9,430,241	9,647,854

XML

Revenues - Schedule of Disaggregation of Segment Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Total revenues	$ 71,517	$ 63,692	$ 141,485	$ 125,528
Recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenues	70,978	63,239	140,535	124,636
Recognized over time
Disaggregation of Revenue [Line Items]
Total revenues	539	453	950	892
Sales of alcoholic beverages
Disaggregation of Revenue [Line Items]
Total revenues	30,136	27,335	59,786	53,766
Sales of food and merchandise
Disaggregation of Revenue [Line Items]
Total revenues	11,005	11,160	21,352	22,054
Service revenues
Disaggregation of Revenue [Line Items]
Total revenues	25,690	21,501	51,253	42,377
Other revenues
Disaggregation of Revenue [Line Items]
Total revenues	4,686	3,696	9,094	7,331
Nightclubs
Disaggregation of Revenue [Line Items]
Total revenues	57,031	48,174	113,356	94,955
Nightclubs | Recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenues	56,577	47,722	112,495	94,066
Nightclubs | Recognized over time
Disaggregation of Revenue [Line Items]
Total revenues	454	452	861	889
Nightclubs | Sales of alcoholic beverages
Disaggregation of Revenue [Line Items]
Total revenues	22,191	18,673	44,289	36,840
Nightclubs | Sales of food and merchandise
Disaggregation of Revenue [Line Items]
Total revenues	4,823	4,498	9,417	9,087
Nightclubs | Service revenues
Disaggregation of Revenue [Line Items]
Total revenues	25,686	21,501	51,219	42,185
Nightclubs | Other revenues
Disaggregation of Revenue [Line Items]
Total revenues	4,331	3,502	8,431	6,843
Bombshells
Disaggregation of Revenue [Line Items]
Total revenues	14,315	15,333	27,746	30,104
Bombshells | Recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenues	14,274	15,332	27,702	30,102
Bombshells | Recognized over time
Disaggregation of Revenue [Line Items]
Total revenues	41	1	44	2
Bombshells | Sales of alcoholic beverages
Disaggregation of Revenue [Line Items]
Total revenues	7,945	8,662	15,497	16,926
Bombshells | Sales of food and merchandise
Disaggregation of Revenue [Line Items]
Total revenues	6,182	6,662	11,935	12,967
Bombshells | Service revenues
Disaggregation of Revenue [Line Items]
Total revenues	4	0	34	192
Bombshells | Other revenues
Disaggregation of Revenue [Line Items]
Total revenues	184	9	280	19
Other
Disaggregation of Revenue [Line Items]
Total revenues	171	185	383	469
Other | Recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenues	127	185	338	468
Other | Recognized over time
Disaggregation of Revenue [Line Items]
Total revenues	44	0	45	1
Other | Sales of alcoholic beverages
Disaggregation of Revenue [Line Items]
Total revenues	0	0	0	0
Other | Sales of food and merchandise
Disaggregation of Revenue [Line Items]
Total revenues	0	0	0	0
Other | Service revenues
Disaggregation of Revenue [Line Items]
Total revenues	0	0	0	0
Other | Other revenues
Disaggregation of Revenue [Line Items]
Total revenues	$ 171	$ 185	$ 383	$ 469

XML

Revenues - Schedule of Reconciliation of Contract Liabilities with Customers (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2023 USD ($)
Contract With Customer Liability [Roll Forward]
Contract liabilities with customers, beginning	$ 234
Net Consideration Received (Refunded)	677
Recognized in Revenue	(283)
Contract liabilities with customers, ending	628
Ad revenue
Contract With Customer Liability [Roll Forward]
Contract liabilities with customers, beginning	82
Net Consideration Received (Refunded)	284
Recognized in Revenue	(239)
Contract liabilities with customers, ending	127
Expo revenue
Contract With Customer Liability [Roll Forward]
Contract liabilities with customers, beginning	8
Net Consideration Received (Refunded)	405
Recognized in Revenue	0
Contract liabilities with customers, ending	413
Franchise fees and other
Contract With Customer Liability [Roll Forward]
Contract liabilities with customers, beginning	144
Net Consideration Received (Refunded)	(12)
Recognized in Revenue	(44)
Contract liabilities with customers, ending	$ 88

XML

Selected Account Information - Schedule of Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Sep. 30, 2022
Selected Account Information [Abstract]
Credit card receivables	$ 2,768	$ 2,687
Income tax refundable	1,773	2,979
ATM in-transit	1,006	819
Allowance for doubtful accounts	85	30
Other (net of allowance for doubtful accounts of $85 and $30, respectively)	1,208	2,025
Total accounts receivable, net	$ 6,755	$ 8,510

XML

Selected Account Information - Narrative (Details)	6 Months Ended
	Mar. 31, 2023
Minimum
Financing Receivable, Allowance for Credit Loss [Line Items]
Receivable percentage	6.00%
Notes receivable, term	1 year
Maximum
Financing Receivable, Allowance for Credit Loss [Line Items]
Receivable percentage	9.00%
Notes receivable, term	20 years

XML

Selected Account Information - Components of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Sep. 30, 2022
Selected Account Information [Abstract]
Prepaid insurance	$ 4,960	$ 191
Prepaid legal	32	61
Prepaid taxes and licenses	689	391
Prepaid rent	150	296
Other	1,039	560
Total prepaid expenses and other current assets	$ 6,870	$ 1,499

XML

Selected Account Information - Reconciliation of Goodwill (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill [Roll Forward]
Beginning balance, gross	$ 88,921
Beginning balance, accumulated impairment	21,154
Beginning balance, net	67,767
Acquisitions, gross	16,946
Acquisitions, accumulated impairment	0
Acquisitions, net	16,946
Impairment, gross	0
Impairment, accumulated impairment	662
Impairment, net	(662)
Ending balance, gross	105,867
Ending balance, accumulated impairment	21,816
Ending balance, net	$ 84,051

XML

Selected Account Information - Schedule of Components of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Sep. 30, 2022
Indefinite-lived Intangible Assets [Line Items]
Intangibles, net	$ 156,331	$ 144,049
Licenses
Indefinite-lived Intangible Assets [Line Items]
Definite-lived:	24,780	25,962
Leases acquired in-place
Indefinite-lived Intangible Assets [Line Items]
Definite-lived:	231	117
Noncompete agreements
Indefinite-lived Intangible Assets [Line Items]
Definite-lived:	25	55
Favorable leases
Indefinite-lived Intangible Assets [Line Items]
Definite-lived:	853	78
Software
Indefinite-lived Intangible Assets [Line Items]
Definite-lived:	618	723
Licenses
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived:	105,142	103,972
Trademarks
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived:	24,659	13,119
Domain names
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived:	$ 23	$ 23

XML

Selected Account Information - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Sep. 30, 2022
Selected Account Information [Abstract]
Insurance	$ 4,694	$ 30
Sales and liquor taxes	2,400	2,227
Payroll and related costs	4,171	3,186
Property taxes	1,813	2,618
Interest	698	499
Patron tax	464	467
Unearned revenues	628	234
Lawsuit settlement	3,109	246
Other	2,981	1,821
Total accrued liabilities	$ 20,958	$ 11,328

XML

Selected Account Information - Schedule of Selling, General and Administrative Expenses (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Selected Account Information [Abstract]
Taxes and permits	$ 2,739,000	$ 2,361,000	$ 5,423,000	$ 4,597,000
Advertising and marketing	2,731,000	2,248,000	5,401,000	4,631,000
Supplies and services	2,657,000	2,175,000	5,081,000	4,155,000
Insurance	2,238,000	2,481,000	4,820,000	4,876,000
Legal	1,296,000	898,000	2,281,000	1,958,000
Lease	1,765,000	1,572,000	3,527,000	3,212,000
Charge card fees	1,683,000	1,466,000	3,580,000	2,797,000
Utilities	1,353,000	1,108,000	2,624,000	2,043,000
Security	1,308,000	1,050,000	2,472,000	2,137,000
Stock-based compensation	706,000	0	1,647,000	0
Accounting and professional fees	657,000	622,000	2,175,000	1,968,000
Repairs and maintenance	1,207,000	903,000	2,371,000	1,628,000
Other	1,686,000	1,553,000	3,356,000	2,921,000
Total selling, general and administrative expenses	$ 22,026,000	$ 18,437,000	$ 44,758,000	$ 36,923,000

XML

Selected Account Information - Components of Other Charges (Gains) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Selected Account Information [Abstract]
Impairment of assets	$ 662	$ 0	$ 662	$ 0
Settlement of lawsuits	3,120	385	3,120	577
Loss (gain) on disposal of businesses and assets	3	(58)	(587)	(400)
Gain on insurance	(27)	(320)	(91)	(321)
Other charges (gains), net	$ 3,758	$ 7	$ 3,104	$ (144)

XML

Debt (Details)	Mar. 16, 2023 USD ($) property note monthly_installment	Mar. 09, 2023 USD ($)	Feb. 07, 2023 USD ($) note	Dec. 20, 2022 USD ($) monthly_installment	Nov. 18, 2022 USD ($) monthly_installment	Oct. 26, 2022 USD ($) monthly_installment	Oct. 10, 2022 USD ($) monthly_installment	Mar. 31, 2023 USD ($) note	Sep. 30, 2022 USD ($)
Debt Instrument [Line Items]
Long-term debt, maturity, year one								$ 21,600,000
Long-term debt, maturity, year two								38,000,000
Long-term debt, maturity, year three								16,800,000
Long-term debt, maturity, year four								12,700,000
Long-term debt, maturity, year five								19,600,000
Long-term debt, maturity, after year five								140,300,000
Debt issuance costs, net								3,200,000	$ 3,400,000
Baby Dolls-Chicas Locas
Debt Instrument [Line Items]
Number of real estate properties acquired | property	5
Scheduled Balloon Payments Of Debt
Debt Instrument [Line Items]
Long-term debt, maturity, year one								3,800,000
Long-term debt, maturity, year two								25,700,000
Long-term debt, maturity, year three								4,800,000
Long-term debt, maturity, year four								0
Long-term debt, maturity, year five								6,100,000
Long-term debt, maturity, after year five								$ 71,800,000
Notes Payable to Banks
Debt Instrument [Line Items]
Debt instrument, face amount					$ 1,500,000		$ 2,300,000
Debt instrument, term					18 months		18 months
Number of monthly installments | monthly_installment					17		17
Debt issuance costs							$ 26,000
Notes Payable to Banks | 6% Fifteen-Year Promissory Note | Club In Dickinson, Texas - Adult Entertainment Business
Debt Instrument [Line Items]
Debt instrument, face amount						$ 5,000,000
Debt instrument, term						15 years
Debt instrument, interest rate, stated percentage						6.00%
Number of monthly installments | monthly_installment						180
Debt instrument, periodic payment						$ 42,193
Notes Payable to Banks | 6.67% Five-Year Promissory Note | Food Hall Property In Greenwood Village, Colorado
Debt Instrument [Line Items]
Debt instrument, face amount				$ 3,325,000
Debt instrument, term				5 years
Debt instrument, interest rate, stated percentage				6.67%
Number of monthly installments | monthly_installment				59
Debt instrument, periodic payment, principal				$ 22,805
Notes Payable to Banks | Six Seller Financed Promissory Note
Debt Instrument [Line Items]
Debt instrument, face amount			$ 2,000,000
Debt instrument, term			24 months
Debt instrument, interest rate, stated percentage			7.00%
Debt instrument, periodic payment			$ 39,602,000
Number of seller-financed notes | note			6
Period of principal and interest			23 months
Amortization period of interest			60 months
Notes Payable to Banks | Nine Secured Promissory Notes
Debt Instrument [Line Items]
Debt instrument, face amount	$ 25,500,000
Debt instrument, term	10 years
Debt instrument, interest rate, stated percentage	7.00%
Number of monthly installments | monthly_installment	120
Debt instrument, periodic payment	$ 296,077
Number of seller-financed notes | note	9
Notes Payable to Banks | Nine Secured Promissory Notes | Baby Dolls-Chicas Locas
Debt Instrument [Line Items]
Number of seller-financed notes | note								9
Notes Payable to Banks | Promissory Note Related To Real Estate Properties
Debt Instrument [Line Items]
Debt instrument, face amount	$ 5,000,000
Principal payment	$ 1,000,000
Notes Payable to Banks | Base Rate
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage					6.00%		6.00%
Notes Payable to Banks | Prime Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate					0.50%		0.50%
Notes Payable to Banks | Prime Rate Floor
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate					6.00%		6.00%
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, face amount		$ 10,000,000
Debt instrument, term		24 months
Debt issuance costs		$ 115,000
Letters of credit outstanding, amount		10,000,000
Principal balance threshold for revolver feature		5,000,000
Maximum borrowing capacity		$ 5,000,000
Unused capacity, commitment fee percentage		0.50%
Average outstanding amount, threshold for non-usage fee (less than)		$ 3,000,000
Aggregate advances amount, threshold for non-usage fee (less than)		$ 3,000,000
Debt issuance costs, amortization period		24 months
Compensating balance		$ 3,000,000
Minimum tangible net worth		20,000,000
Line of Credit | Baby Dolls-Chicas Locas
Debt Instrument [Line Items]
Debt instrument, face amount		$ 10,000,000
Line of Credit | Baby Dolls-Chicas Locas | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, face amount								$ 10,000,000
Line of Credit | Prime Rate | Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%

XML

Stock-based Compensation (Details)		3 Months Ended		6 Months Ended
	Feb. 09, 2022 member shares	Mar. 31, 2023 USD ($) shares	Mar. 31, 2022 USD ($)	Mar. 31, 2023 USD ($) $ / shares shares	Mar. 31, 2022 USD ($)	Feb. 07, 2022 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation | $		$ 706,000	$ 0	$ 1,647,000	$ 0
Unrecognized stock based compensation expense, stock options | $		$ 5,400,000		$ 5,400,000
Compensation cost not yet recognized, period for recognition				2 years 10 months 24 days
Vesting period	4 years
Expiration period	5 years
Weighted average grant date fair value (in usd per share) | $ / shares				$ 31.37
Options exercisable (in shares)		120,000		120,000
Share-Based Payment Arrangement, Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dilutive share (in share)		300,000		300,000
Share-Based Payment Arrangement, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Share-Based Payment Arrangement, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Share-Based Payment Arrangement, Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Share-Based Payment Arrangement, Tranche Four
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Share-Based Payment Arrangement, Tranche Five
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
2022 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in period (in shares)	50,000
Number of members of management receiving shares | member	6
2022 Stock Option Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for grant (in shares)						300,000

XML

Income Taxes - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Current income tax expense	$ 2.1	$ 3.4	$ 5.2	$ 6.3
Effective income tax rate	21.80%	23.40%	22.40%	22.60%

XML

Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Federal statutory income tax expense	21.00%	21.00%	21.00%	21.00%
State income taxes, net of federal benefit	4.00%	2.90%	4.00%	2.90%
Permanent differences	0.60%	0.50%	0.50%	0.40%
Tax credits	(3.80%)	(3.10%)	(3.20%)	(2.60%)
Other	0.00%	2.10%	0.10%	0.80%
Total income tax expense	21.80%	23.40%	22.40%	22.60%

XML

Commitments and Contingencies - Tax Patron Tax (Details)	6 Months Ended
	Mar. 31, 2023 USD ($) plaintiff
Commitments and Contingencies Disclosure [Abstract]
Number of plaintiffs | plaintiff	5
Patron tax on monthly basis per customer | $	$ 5

XML

Commitments and Contingencies - Indemnity Insurance Corporation (Details) - Indemnity Insurance Corporation - claim		6 Months Ended
	Apr. 10, 2014	Mar. 31, 2023
Loss Contingencies [Line Items]
Percentage of costs of litigation	100.00%
Number of claims pending		1
Loss contingency, number of claims filed		71

XML

Commitments and Contingencies - Shareholder Derivative Action (Details) - plaintiff		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2023
Loss Contingencies [Line Items]
Number of plaintiffs		5
Shareholder Derivative Action
Loss Contingencies [Line Items]
Number of plaintiffs	2

XML

Commitments and Contingencies - Other (Details) - USD ($) $ in Millions	1 Months Ended
	Mar. 31, 2023	Apr. 30, 2017
Loss Contingencies [Line Items]
Litigation settlement, amount awarded to other party	$ 2.8
Compensatory Damages | JAI Phoenix
Loss Contingencies [Line Items]
Loss contingency, damages sought, value		$ 1.4
Punitive Damages | JAI Phoenix
Loss Contingencies [Line Items]
Loss contingency, damages sought, value		$ 4.0

XML

Commitments and Contingencies - General (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Settlement of lawsuits	$ 3,120	$ 385	$ 3,120	$ 577
Lawsuit settlement	$ 3,100		$ 3,100		$ 246

XML

Segment Information - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2022
Segment Reporting Information [Line Items]
Revenues (from external customers)	$ 71,517	$ 63,692	$ 141,485	$ 125,528
Income (loss) from operations	13,427	17,081	30,325	32,992
Depreciation and amortization	3,760	2,877	7,067	5,071
Capital expenditures	8,337	4,140	20,890	13,990
Total assets	621,131		621,131		$ 530,738
Nightclubs
Segment Reporting Information [Line Items]
Revenues (from external customers)	57,031	48,174	113,356	94,955
Income (loss) from operations	17,995	19,126	40,735	37,862
Depreciation and amortization	2,464	2,206	4,949	3,753
Capital expenditures	1,214	1,662	5,358	10,890
Total assets	503,697		503,697		437,096
Bombshells
Segment Reporting Information [Line Items]
Revenues (from external customers)	14,315	15,333	27,746	30,104
Income (loss) from operations	1,775	3,468	3,622	6,270
Depreciation and amortization	931	454	1,389	883
Capital expenditures	5,508	1,901	13,827	2,205
Total assets	76,171		76,171		62,021
Other
Segment Reporting Information [Line Items]
Revenues (from external customers)	171	185	383	469
Income (loss) from operations	(168)	(34)	(353)	(77)
Depreciation and amortization	63	7	126	13
Capital expenditures	41	359	78	548
Total assets	2,751		2,751		2,635
Corporate
Segment Reporting Information [Line Items]
Income (loss) from operations	(6,175)	(5,479)	(13,679)	(11,063)
Depreciation and amortization	302	210	603	422
Capital expenditures	1,574	$ 218	1,627	$ 347
Total assets	$ 38,512		$ 38,512		$ 28,986

XML

Segment Information - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2022
Segment Reporting Information [Line Items]
Total revenues	$ 71,517	$ 63,692	$ 141,485	$ 125,528
Nightclubs
Segment Reporting Information [Line Items]
Total revenues	57,031	48,174	113,356	94,955
Goodwill transfers			9,400		$ 9,000
Increase (decrease) in prepaid insurance			3,700
Nightclubs | Intercompany Rental Revenue
Segment Reporting Information [Line Items]
Total revenues	3,900	3,300	7,600	6,500
Corporate
Segment Reporting Information [Line Items]
Goodwill transfers			(9,400)		$ (9,000)
Increase (decrease) in prepaid insurance			(4,700)
Corporate | Intercompany Rental Revenue
Segment Reporting Information [Line Items]
Total revenues	31	31	262	199
Bombshells
Segment Reporting Information [Line Items]
Total revenues	14,315	15,333	27,746	30,104
Increase (decrease) in prepaid insurance			961
Other
Segment Reporting Information [Line Items]
Total revenues	171	185	383	469
Increase (decrease) in prepaid insurance			29
Other | Intercompany Sales
Segment Reporting Information [Line Items]
Total revenues	$ 78	$ 53	$ 115	$ 122

XML

Related Party Transactions (Details) - USD ($)		3 Months Ended		6 Months Ended
	Oct. 12, 2021	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022	Sep. 30, 2022
Related Party Transaction [Line Items]
Proceeds from related party debt				$ 0	$ 650,000
Ed Anakar and Nourdean Anakar
Related Party Transaction [Line Items]
Proceeds from related party debt	$ 500,000
Allen Chhay and Bradley Chhay
Related Party Transaction [Line Items]
Proceeds from related party debt	150,000
Sherwood Forest Creations, LLC
Related Party Transaction [Line Items]
Related party transaction, amounts of transaction		$ 188,285	$ 3,112	188,285	27,149
Nottingham Creations and Sherwood Forest Creations LLC
Related Party Transaction [Line Items]
Due to related parties, current		110,809		110,809		$ 92,808
TW Mechanical LLC
Related Party Transaction [Line Items]
Related party transaction, amounts of transaction		379	3,704	379	84,700
Due to related parties, current		$ 0		$ 0		9,338
Related party, ownership percentage		50.00%		50.00%
TW Mechanical LLC | Third-Party General Contractor
Related Party Transaction [Line Items]
Related party transaction, amounts of transaction		$ 18,000	$ 3,809	$ 64,000	$ 3,809
Commercial Bank Indebtedness
Related Party Transaction [Line Items]
Long-term debt		$ 119,100,000		$ 119,100,000		$ 115,100,000
Unsecured Debt
Related Party Transaction [Line Items]
Debt instrument, face amount	$ 17,000,000

XML

Leases - Schedule of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023	Mar. 31, 2022
Property, Plant and Equipment [Line Items]
Operating lease expense – fixed payments	$ 1,288	$ 1,136	$ 2,547	$ 2,267
Variable lease expense	359	233	786	567
Short-term and other lease expense (includes $63 and $58 recorded in advertising and marketing for the three months ended March 31, 2023 and 2022, respectively, and $127 and $130 for the six months ended March 31, 2023 and 2022, respectively; and $138 and $107 recorded in repairs and maintenance for the three months ended March 31, 2023 and 2022, respectively, and $265 and $190 for the six months ended March 31, 2023 and 2022, respectively; see Note 6)	319	368	586	698
Sublease income	0	(1)	0	(3)
Total lease expense, net	1,966	1,736	3,919	3,529
Operating cash outflows from operating leases	$ 1,920	$ 1,690	$ 3,830	$ 3,439
Weighted average remaining lease term – operating leases	10 years 10 months 24 days	12 years	10 years 10 months 24 days	12 years
Weighted average discount rate – operating leases	5.70%	5.60%	5.70%	5.60%
Advertising and marketing	$ 2,731	$ 2,248	$ 5,401	$ 4,631
Repairs and maintenance	1,207	903	2,371	1,628
Equipment
Property, Plant and Equipment [Line Items]
Advertising and marketing	63	58	127	130
Repairs and maintenance	$ 138	$ 107	$ 265	$ 190

XML

Leases - Schedule of Future Maturities of Lease Liabilities (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Lessee, Lease, Description [Line Items]
April 2023 - March 2024	$ 5,140
April 2024 - March 2025	5,201
April 2025 - March 2026	5,289
April 2026 - March 2027	5,291
April 2027 - March 2028	4,726
Thereafter	28,129
Future maturities of lease liabilities	53,776
Principal Payments
Lessee, Lease, Description [Line Items]
April 2023 - March 2024	2,951
April 2024 - March 2025	3,185
April 2025 - March 2026	3,460
April 2026 - March 2027	3,665
April 2027 - March 2028	3,303
Thereafter	22,816
Future maturities of lease liabilities	39,380
Interest Payments
Lessee, Lease, Description [Line Items]
April 2023 - March 2024	2,189
April 2024 - March 2025	2,016
April 2025 - March 2026	1,829
April 2026 - March 2027	1,626
April 2027 - March 2028	1,423
Thereafter	5,313
Future maturities of lease liabilities	$ 14,396