Shares dropped 4.1% as investors reacted to disappointing margin compression and a cautious outlook driven by ongoing net charges and declining profitability in the Bombshells segment despite stable revenues.

• Total revenues modestly declined to $70.8 million from $71.5 million, impacted by the closure of 5 Bombshells locations offset partially by new Nightclub venues.
• Nightclub segment revenue increased slightly by $0.6 million, driven by new clubs and a 6.7% rise in higher-margin service revenues; however, segment operating margin fell from 33.8% to 30%.
• Bombshells segment revenues declined $1.2 million with operating losses both on a GAAP (-$0.14 million) and non-GAAP basis (-$0.11 million), reflecting ongoing challenges in the concept’s profitability.
• Pretax income declined by $14 million, heavily impacted by $10.1 million in net charges largely noncash, compared to a $3.2 million net gain a year ago.
• Free cash flow halved to $6.7 million, reflecting increased legal and insurance expenses, while debt rose $20.6 million, increasing leverage and interest costs, underscoring financial headwinds.