RCI Hospitality (RICK) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides the official filing details for the quarterly report, including the reporting period and company status Filing Details This document is a Quarterly Report on Form 10-Q for RCI Hospitality Holdings, Inc., covering the quarterly period ended March 31, 2025. The company is an accelerated filer and is not a shell company - The filing is a Quarterly Report on Form 10-Q for the period ended March 31, 2025[2] - RCI Hospitality Holdings, Inc. is an accelerated filer[3] - As of May 9, 2025, 8,798,250 shares of common stock were outstanding[3] Note About Forward-Looking Statements This section cautions readers about forward-looking statements, outlining inherent risks and the company's limited obligation to update them Forward-Looking Statements Disclaimer This report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. Key risk factors include operating an adult business, business climates, success of new ventures, cybersecurity, real estate conditions, and regulatory environments. The company does not undertake to revise or publicly release results of any revision to these statements, except as required by law - The report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995[5] - Factors that could cause material adverse effects include risks associated with operating an adult business, business climates in operating cities, success in launching businesses, cybersecurity, real estate conditions, and laws governing adult entertainment businesses[5] - The Company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law[5] PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial performance Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for RCI Hospitality Holdings, Inc., including cash flows, income, changes in equity, and balance sheets, along with detailed notes explaining the basis of presentation, recent accounting standards, revenue disaggregation, segment information, selected account details, debt, stock-based compensation, income taxes, commitments, contingencies, related party transactions, leases, supplemental cash flow disclosures, and acquisitions/dispositions Condensed Consolidated Statements of Cash Flows - Net cash provided by operating activities decreased by 10.5% from $24,469 thousand in 2024 to $21,891 thousand in 2025 for the six months ended March 31[12] - Cash and cash equivalents increased by $313 thousand to $32,663 thousand for the six months ended March 31, 2025, compared to a decrease of $1,050 thousand in the prior year[12] Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended March 31, 2025 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $21,891 | $24,469 | | Net cash used in investing activities | $(12,226) | $(12,686) | | Net cash used in financing activities | $(9,352) | $(12,833) | | Net increase (decrease) in cash and cash equivalents | $313 | $(1,050) | | Cash and cash equivalents at end of period | $32,663 | $19,973 | Condensed Consolidated Statements of Income - Total revenues decreased by 8.9% for the three months ended March 31, 2025, and by 6.0% for the six months ended March 31, 2025, compared to the prior year periods[14] - Net income attributable to RCIHH common stockholders significantly increased to $3,231 thousand (EPS $0.36) for the three months ended March 31, 2025, from $774 thousand (EPS $0.08) in the prior year[14] Condensed Consolidated Statements of Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2025 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total revenues | $65,876 | $72,283 | $137,359 | $146,190 | | Income from operations | $8,171 | $4,657 | $22,077 | $17,822 | | Net income attributable to RCIHH common stockholders | $3,231 | $774 | $12,255 | $8,000 | | Basic and diluted EPS | $0.36 | $0.08 | $1.38 | $0.85 | Condensed Consolidated Statements of Changes in Equity - Total RCIHH stockholders' equity increased to $268,785 thousand as of March 31, 2025, from $263,360 thousand as of September 30, 2024[16] - The number of common shares outstanding decreased due to treasury stock purchases and cancellations[16] Condensed Consolidated Statements of Changes in Equity | Metric | March 31, 2025 (in thousands) | September 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total RCIHH stockholders' equity | $268,785 | $263,360 | | Common stock shares outstanding | 8,832,125 | 8,955,000 | | Retained earnings | $212,772 | $201,759 | Condensed Consolidated Balance Sheets - Total assets increased to $589,756 thousand as of March 31, 2025, from $584,364 thousand as of September 30, 2024[19] - Total current liabilities slightly decreased from $48,078 thousand to $46,623 thousand, while total liabilities remained relatively stable[19] Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (in thousands) | September 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total assets | $589,756 | $584,364 | | Total current assets | $45,553 | $47,285 | | Total liabilities | $321,217 | $321,254 | | Total equity | $268,539 | $263,110 | Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[21] - Operating results for the six months ended March 31, 2025, are not necessarily indicative of the full fiscal year results[21] 2. Recent Accounting Standards and Pronouncements - The Company adopted ASU 2022-03 (Fair Value Measurement) and ASU 2023-01 (Leases) on October 1, 2024, with no significant impact on financial statements[22][23] - ASU 2023-05 (Business Combinations—Joint Venture Formations) was adopted on October 1, 2024, and will apply to future joint ventures[24] - The Company is evaluating the impact of ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), and ASU 2024-03 (Expense Disaggregation Disclosures) on its financial statements[26][27][28] 3. Revenues - Contract liabilities with customers, included in accrued liabilities as unearned revenues, increased from $99 thousand at September 30, 2024, to $425 thousand at March 31, 2025[33] Revenues by Segment and Type (Three Months Ended March 31) | Revenue Type | Nightclubs 2025 ($K) | Nightclubs 2024 ($K) | Bombshells 2025 ($K) | Bombshells 2024 ($K) | Total 2025 ($K) | Total 2024 ($K) | | :----------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :-------------- | :-------------- | | Alcoholic beverages | 24,575 | 25,946 | 4,291 | 6,961 | 28,866 | 32,907 | | Food and merchandise | 5,519 | 5,346 | 3,892 | 5,722 | 9,411 | 11,068 | | Service revenues | 22,870 | 23,562 | 42 | 2 | 22,912 | 23,564 | | Other revenues | 4,577 | 4,518 | 4 | 86 | 4,687 | 4,744 | | Total Revenues | 57,541 | 59,372 | 8,229 | 12,771 | 65,876 | 72,283 | Revenues by Segment and Type (Six Months Ended March 31) | Revenue Type | Nightclubs 2025 ($K) | Nightclubs 2024 ($K) | Bombshells 2025 ($K) | Bombshells 2024 ($K) | Total 2025 ($K) | Total 2024 ($K) | | :----------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :-------------- | :-------------- | | Alcoholic beverages | 51,610 | 52,182 | 9,444 | 14,041 | 61,054 | 66,223 | | Food and merchandise | 11,255 | 10,586 | 8,262 | 11,284 | 19,517 | 21,870 | | Service revenues | 47,048 | 48,681 | 45 | 2 | 47,093 | 48,683 | | Other revenues | 9,352 | 8,956 | 65 | 175 | 9,695 | 9,414 | | Total Revenues | 119,265 | 120,405 | 17,816 | 25,502 | 137,359 | 146,190 | 4. Segment Information - The Company operates two principal reportable segments: Nightclubs and Bombshells Restaurants and Bars, with all operations in the United States[36] - Nightclubs segment assets increased to $462,985 thousand at March 31, 2025, from $454,892 thousand at September 30, 2024, while Bombshells assets decreased[39] Segment Revenues (Six Months Ended March 31) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :---------- | :------------------ | :------------------ | | Nightclubs | $119,265 | $120,405 | | Bombshells | $17,816 | $25,502 | | Other | $278 | $283 | | Total | $137,359 | $146,190 | Segment Income (Loss) from Operations (Six Months Ended March 31) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :---------- | :------------------ | :------------------ | | Nightclubs | $35,485 | $31,390 | | Bombshells | $1,744 | $785 | | Other | $(851) | $(473) | | Corporate | $(14,301) | $(13,880) | | Total | $22,077 | $17,822 | 5. Selected Account Information - Total selling, general and administrative expenses decreased by $1.8 million (7.1%) for the quarter and $747 thousand (1.5%) for the six-month period[46] - Impairment of assets for the three months ended March 31, 2025, was $1.78 million, significantly lower than $8.033 million in the prior year, primarily due to SOB license impairment[46] - The Company recorded a $1.3 million gain on the sale of Bombshells Austin and received $1.15 million in insurance recovery during the quarter ended December 31, 2024[47] Receivables, Net (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :-------------------------- | :------------- | :----------------- | | Credit card receivables | $1,957 | $2,056 | | Income tax refundable | — | $2,017 | | Current portion of notes receivable | $325 | $269 | | Total receivables, net | $4,174 | $5,832 | Accrued Liabilities (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :-------------------------- | :------------- | :----------------- | | Insurance | $861 | $2,390 | | Payroll and related costs | $4,772 | $4,676 | | Property taxes | $1,870 | $3,347 | | Unearned revenues | $425 | $99 | | Estimated self-insurance liability | $1,119 | — | | Total accrued liabilities | $18,161 | $20,280 | 6. Debt - A bank loan of $2.4 million was converted into a $6.3 million construction loan on November 26, 2024, with a 6.99% interest rate for the first five years[49] - A $5.0 million promissory note at 8% interest was executed on January 21, 2025, for a club acquisition[50] Future Maturities of Debt Obligations as of March 31, 2025 (in thousands) | Period | Regular Amortization | Balloon Payments | Total Payments | | :------------------------ | :------------------- | :--------------- | :------------- | | April 2025 - March 2026 | $15,841 | $4,400 | $20,241 | | April 2026 - March 2027 | $15,049 | $11,376 | $26,425 | | April 2027 - March 2028 | $15,551 | $8,556 | $24,107 | | April 2028 - March 2029 | $15,938 | $2,651 | $18,589 | | April 2029 - March 2030 | $14,865 | $2,524 | $17,389 | | Thereafter | $52,013 | $85,365 | $137,378 | | Total | $129,257 | $114,872 | $244,129 | 7. Stock-based Compensation - Stock-based compensation expense was $118 thousand for the three months and $588 thousand for the six months ended March 31, 2025, a decrease from the prior year[53] - As of March 31, 2025, unrecognized compensation cost was $1.4 million, expected to be recognized over a weighted average period of 0.9 years[53] Stock Option Activity (Six Months Ended March 31, 2025) | Metric | Number of Shares | Weighted-Average Exercise Price | | :-------------------------- | :--------------- | :------------------------------ | | Outstanding at September 30, 2024 | 300,000 | - | | Forfeited | (20,000) | $100.00 | | Outstanding at March 31, 2025 | 280,000 | $100.00 | | Exercisable at March 31, 2025 | 230,000 | $100.00 | 8. Income Taxes - The effective income tax rate for the three months ended March 31, 2025, was 25.1%, significantly higher than 0.7% in the prior year due to higher pre-tax income[57][58] Income Tax Expense and Effective Rate (Three Months Ended March 31) | Metric | 2025 Amount ($K) | 2025 % | 2024 Amount ($K) | 2024 % | | :----------------------------------- | :--------------- | :----- | :--------------- | :----- | | Total income tax expense | $1,068 | 25.1% | $5 | 0.7% | Income Tax Expense and Effective Rate (Six Months Ended March 31) | Metric | 2025 Amount ($K) | 2025 % | 2024 Amount ($K) | 2024 % | | :----------------------------------- | :--------------- | :----- | :--------------- | :----- | | Total income tax expense | $2,915 | 19.2% | $1,804 | 18.4% | 9. Commitments and Contingencies - The Company has one remaining unresolved claim out of 71 original claims related to a liability policy with Indemnity Insurance Corporation (IIC), which was liquidated in 2014[63] - A new trial is set for June 2025 for a dram shop negligence lawsuit against JAI Phoenix, with a prior judgment against JAI Phoenix for approximately $1.4 million in compensatory damages and $4.0 million in punitive damages[65] - The New York State Department of Labor assessed final judgments totaling approximately $3.08 million against two subsidiaries for state unemployment tax matters[67] - The Company is cooperating with an investigation by the NY AG and NY DTF related to New York State tax filings and possible entertainment benefits provided to NY DTF personnel, with potential fines or liabilities currently indeterminable[68] - In fiscal 2025, the Company began self-insuring a significant portion of general liability and liquor insurance programs due to prohibitive costs, recording an estimated self-insurance expense of $1.4 million for the quarter ended March 31, 2025[73][74] 10. Related Party Transactions - Chairman and President, Eric Langan, personally guarantees all commercial bank indebtedness of the Company, amounting to $137.3 million as of March 31, 2025[75] - The Company has notes borrowed from related parties totaling $650,000, with terms consistent with other lenders[76] - Amounts billed by Nottingham Creations (owned by Eric Langan's brother) for goods and services decreased significantly to $3,974 for the three months ended March 31, 2025, from $202,700 in the prior year[77] - Amounts billed directly to the Company by TW Mechanical LLC (50% owned by Eric Langan's son-in-law) for plumbing and HVAC services were $681 for the three months ended March 31, 2025[79] 11. Leases - Operating cash outflows from operating leases were $1,821 thousand for the three months and $3,779 thousand for the six months ended March 31, 2025[80] - The weighted average remaining lease term for operating leases was 9.3 years as of March 31, 2025, with a weighted average discount rate of 5.7%[80] Total Lease Expense, Net (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease expense – fixed payments | $1,079 | $1,292 | $2,188 | $2,584 | | Variable lease expense | $364 | $411 | $759 | $861 | | Short-term and other lease expense | $316 | $347 | $658 | $677 | | Total lease expense, net | $1,759 | $2,050 | $3,605 | $4,122 | 12. Supplemental Disclosure of Cash Flow Information - Subsequent to March 31, 2025, through May 9, 2025, the Company repurchased 33,875 shares of common stock at an average price of $39.80 per share[82] Supplemental Cash Flow Information (Six Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Cash paid for interest, net | $7,890 | $7,877 | | Cash paid for income taxes | $1,619 | $2,510 | | Debt incurred in connection with acquisition of businesses | $5,000 | — | | Unpaid liabilities on capital expenditures | $1,170 | $1,244 | 13. Acquisitions and Dispositions - The Company sold Bombshells Austin on November 14, 2024, for $70,000 cash and a $60,000 promissory note, recognizing a $1.3 million gain[83] - On January 21, 2025, the Company acquired 'Flight Club' in Detroit for $11.0 million, consisting of $6.0 million cash and a $5.0 million seller-financed promissory note, resulting in an estimated goodwill of $613,000[84] - The acquired Flight Club contributed $681 thousand in revenues and $184 thousand in income from operations from acquisition date to March 31, 2025[87] - On April 7, 2025, the Company acquired 'Platinum West' in West Columbia, South Carolina, for $8.0 million, comprising $5.5 million cash and a $2.5 million seller-financed promissory note[89] Preliminary Allocation of Flight Club Acquisition Price (in thousands) | Asset | Fair Value | | :-------------------------- | :--------- | | Current assets | $73 | | Property and equipment | $3,305 | | Licenses | $5,928 | | Tradename | $1,081 | | Total net assets acquired | $10,387 | | Goodwill | $613 | | Total fair value of net assets acquired | $11,000 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance indicators, revenue and expense trends by segment, non-GAAP financial measures, liquidity, capital resources, and strategic initiatives. It also discusses critical accounting policies, the impact of inflation, and seasonality Overview - RCI Hospitality Holdings, Inc. operates 67 adult entertainment establishments and Bombshells Restaurants and Bars through its subsidiaries as of March 31, 2025[92] - The Company's two principal reportable segments are Nightclubs and Bombshells, with other operations grouped into 'Other'[92] Critical Accounting Policies and Estimates - The Company began self-insuring a significant portion of general liability and liquor insurance programs in fiscal 2025 due to increasing costs, which is a new critical accounting estimate[95] - The estimated self-insurance liability is based on assumptions regarding economic conditions, claims frequency/severity, and settlement practices[96] Results of Operations Revenues - Consolidated revenues decreased by 8.9% for the second quarter and 6.0% for the six-month period, primarily due to closed locations and a decline in consolidated same-store sales[101][102] - Consolidated same-store sales decreased by 4.7% for the quarter (Nightclubs -3.5%, Bombshells -13.4%) and 1.2% for the six-month period (Nightclubs flat, Bombshells -10.4%)[104] - Nightclubs revenues decreased by 3.1% for the quarter and 0.9% for the six-month period, while Bombshells revenues decreased by 35.6% for the quarter and 30.1% for the six-month period, mainly due to closed/sold locations and same-store sales decline[104][105][106][107][108] Consolidated Revenue Performance | Period | Total Revenues (2025) | Total Revenues (2024) | Change % | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Three Months Ended March 31 | $65.9 million | $72.3 million | -8.9% | | Six Months Ended March 31 | $137.4 million | $146.2 million | -6.0% | Operating Expenses - Total operating expenses decreased by $9.9 million (14.7%) for the second quarter and $13.1 million (10.2%) for the six-month period[109] - Cost of goods sold decreased by 15.2% for the quarter and 11.8% for the six-month period, mainly due to lower sales, and as a percent of total revenues, decreased to 12.8% from 13.7% for the quarter[110] - Salaries and wages decreased by 2.3% for the quarter and 3.0% for the six-month period due to closed locations, but increased as a percent of total revenues due to lower sales[111] - Selling, general and administrative expenses decreased by 7.1% for the quarter and 1.5% for the six-month period, primarily from closed/sold Bombshells locations and lower variable expenses, but insurance and legal expenses increased[113][114] - Depreciation and amortization decreased by 2.8% for the quarter and 5.1% for the six-month period, mainly due to closed locations[115] - Impairment and other charges (gains), net, changed significantly due to the sale of Bombshells Austin, insurance recovery, and decreased asset impairment compared to the prior year[116] Income (Loss) from Operations - Consolidated operating margin increased to 12.4% for the three months ended March 31, 2025 (from 6.4% in 2024), and to 16.1% for the six months ended March 31, 2025 (from 12.2% in 2024)[118] - Nightclubs' GAAP operating margin for the six months ended March 31, 2025, was 29.8%, while Bombshells' was 9.8%[122] Income (Loss) from Operations by Segment (Six Months Ended March 31) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :---------- | :------------------ | :------------------ | | Nightclubs | $35,485 | $31,390 | | Bombshells | $1,744 | $785 | | Other | $(851) | $(473) | | Corporate | $(14,301) | $(13,880) | | Total | $22,077 | $17,822 | Other Income/Expenses - Interest expense increased by $49 thousand (1.2%) for the second quarter, while interest income increased by $43 thousand (44.8%)[123] - Total occupancy costs (operating lease expense + interest expense) decreased in dollar amounts but increased as a percentage of revenue due to lower sales[124] Income Taxes - Income tax expense increased due to higher pretax income in the current quarter and six-month period[125][126] Income Tax Expense and Effective Rate (Six Months Ended March 31) | Metric | 2025 Amount ($K) | 2025 % | 2024 Amount ($K) | 2024 % | | :----------------------------------- | :--------------- | :----- | :--------------- | :----- | | Total income tax expense | $2,915 | 19.2% | $1,804 | 18.4% | Non-GAAP Financial Measures - Management uses non-GAAP financial measures like Non-GAAP Operating Income, Non-GAAP Net Income, and Adjusted EBITDA to clarify and enhance understanding of performance by excluding items not representative of ongoing business operations[127][128][130] - Adjusted EBITDA decreased by 17.4% for the three months and 13.9% for the six months ended March 31, 2025, compared to the prior year[131] - Non-GAAP diluted EPS decreased to $0.65 for the three months and $1.46 for the six months ended March 31, 2025, from $0.90 and $1.76 respectively in the prior year[132] Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended March 31 | $14,229 | $17,232 | | Six Months Ended March 31 | $29,889 | $34,699 | Non-GAAP Diluted Earnings Per Share | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended March 31 | $0.65 | $0.90 | | Six Months Ended March 31 | $1.46 | $1.76 | Liquidity and Capital Resources - Cash and cash equivalents were $32.7 million at March 31, 2025, compared to $32.4 million at September 30, 2024[134] - The Company had negative working capital of $1.1 million at March 31, 2025, compared to $793 thousand at September 30, 2024[134] - Net cash provided by operating activities decreased by 10.5% to $21.9 million for the six months ended March 31, 2025, primarily due to lower conversion of revenues to cash[137][138] - Net cash used in investing activities was $12.2 million for the six months ended March 31, 2025, including $6.0 million for business acquisitions and $8.6 million for property, equipment, and intangible assets[140] - Net cash used in financing activities decreased to $9.4 million for the six months ended March 31, 2025, from $12.8 million in the prior year, driven by increased proceeds from debt obligations and lower treasury stock purchases[143] - Free cash flow decreased by 11.5% to $19.0 million for the six months ended March 31, 2025, compared to the prior year[145] Free Cash Flow (in thousands) | Metric | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $21,891 | $24,469 | | Less: Maintenance capital expenditures | $2,887 | $2,994 | | Free cash flow | $19,004 | $21,475 | Impact of Inflation - The Company has managed to recover increased costs through price increases to the extent permitted by competition[150] Seasonality - Nightclub operations are seasonal, with reduced revenues from April through September (fiscal Q3 and Q4) and strongest results from October through March (fiscal Q1 and Q2)[151] Capital Allocation Strategy - The capital allocation strategy prioritizes acquiring or developing clubs/restaurants with a minimum 25%-33% cash-on-cash return, disposing of underperforming units, buying back stock if after-tax yield on free cash flow is above 10%, and paying down expensive debt[152][156] - Growth strategy includes organic growth, acquiring existing units, opening new units, and developing new club concepts, with a focus on diversifying operations with Bombshells units that do not require SOB licenses[153][154][155] Item 3. Quantitative and Qualitative Disclosures about Market Risk There were no material changes to the Company's market risk disclosures from its Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - No material changes to market risk information were reported as of March 31, 2025, compared to the Annual Report on Form 10-K for fiscal year ended September 30, 2024[157] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2025, due to previously reported material weaknesses in internal control over financial reporting. These weaknesses relate to IT general controls, accounting for business combinations, and impairment assessments. Remediation efforts are underway, but full remediation is not yet complete - Disclosure controls and procedures were not effective as of March 31, 2025, due to identified material weaknesses in internal control over financial reporting[159] - Material weaknesses include ineffective design and operation of IT general controls (program change management, user access, vendor management), controls over accounting for business combinations, and controls over impairment assessments[160] - Remediation efforts include strengthening review and documentation for user access, defining IT change management policies, enhancing accounting system audit logs, and evaluating options for third-party SOC reports[163] - Management intends to remediate these material weaknesses prior to the end of fiscal 2025, but some initiatives, like addressing the lack of available SOC reports, are currently unfeasible[165] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, exhibits, and official signatures for the quarterly report Item 1. Legal Proceedings This section incorporates by reference the legal matters discussed in Note 9 of the unaudited condensed consolidated financial statements, which detail ongoing lawsuits and investigations - Legal proceedings information is incorporated by reference from Note 9 of the financial statements[167] Item 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K, except for those arising from the additional disclosures in the 'Legal Matters' and 'Self-insurance Liability' sections of Note 9 - No material changes to risk factors were reported, except for those related to 'Legal Matters' and 'Self-insurance Liability' sections within Note 9[168] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company repurchased 56,875 shares of common stock during the three months ended March 31, 2025, at an average price of $50.92 per share, with approximately $14.9 million remaining authorization for future repurchases - As of March 31, 2025, approximately $14.9 million authorization remained for additional share repurchases[169] Share Repurchase Activity (Three Months Ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------ | :----------------------------- | :--------------------------- | | January 1-31, 2025 | 17,750 | $55.26 | | February 1-28, 2025 | 18,125 | $52.32 | | March 1-31, 2025 | 21,000 | $46.03 | | Total | 56,875 | $50.92 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and financial information formatted in Inline XBRL - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32) and financial information in Inline XBRL format (101, 104)[171] Signatures The report is duly signed by Eric S. Langan, Chief Executive Officer and President, and Bradley Chhay, Chief Financial Officer and Principal Accounting Officer, on May 12, 2025 - The report was signed by Eric S. Langan (CEO and President) and Bradley Chhay (CFO and Principal Accounting Officer) on May 12, 2025[176]