RCI Hospitality Holdings, Inc. (RICK) Q2 2024 Gross sales Convention Transcript

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q2 2024 Gross sales Convention April 9, 2024 4:30 PM ET

Firm Individuals

Mark Moran – CEO, Fairness Animal
Eric Langan – President and CEO

Convention Name Individuals

Scott Buck – H.C. Wainwright
Anthony Lebiedzinski – Sidoti & Firm
Robert McGuire – Granite Analysis
Adam Wyden – ADW Capital Administration

Mark Moran

Greetings and welcome to RCI Hospitality Holdings Second Quarter 2Q ‘24 Sales Call. You can find the company’s presentation on RCI’s website, go to the investor relations section, and all of the links are at the top part of that page.

Please turn with me to Slide 2 of our presentation. I’m Mark Moran, CEO of Equity Animal. I’m the host of our call. I’m coming to you from New York City today. Eric Langan, President and CEO of RCI Hospitality Holdings, and CFO, Bradley Chhay are coming to you from Houston today.

Please turn with me to Slide 3. To ask a question, you’ll need to join the X Space with a mobile device. To listen only, you can join the X Space on a personal computer. At this time, all participants are in a listen-only mode. A question-and-answer session will follow. This conference is being recorded. Please turn with me to Slide 4. You may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards.

Now I’m pleased to introduce to you Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.

Eric Langan

Thank you for joining us today. If you please turn to Slide 5. There’s a lot going on in the company right now. We wanted to give you a broad brush update for items that we can talk about now rather than wait until May when we report financial results. First, total sales for Nightclubs and Bombshells were $71.7 million for the second quarter, an increase of 1.3% or $0.9 million year-over-year. Increase in sales from prior year’s acquisitions and new locations more than offset declines in same-store sales and clubs in transition.

Nightclub sales totaled $59 million and an increase of 4.2% or $2.4 million year-over-year. This reflected increases of $7.4 million from acquisitions that are not in same store sales. This has partially offset by declines of 5.7% or $2.9 million in same-store sales and of $2.1 million from clubs that reopened or reformatted or closed during or prior period in the second quarter. Bombshell sales totaled $12.8 million, a decline of 10.4%, $1.5 million year-over-year. This reflected increase of $1.2 million from three locations not in same-store sales, the Cherry Creek Food Hall in Colorado with its Bombshells Kitchen, Bombshells San Antonio, which we acquired last year, and Bombshells Stafford, which opened in November.

The second quarter also reflected declines of 20.5% or $2.7 million in same-store sales. I’d like to note that Bombshells did not start making any of the previously announced management changes and marketing changes along with our cost cutting until around mid-February of 2024. We should see better results in the next quarter. Fiscal 2024 Club & Restaurant Sales by month. Please turn to Slide 6.

Please note that the highest month to-date for both Clubs and Bombshells are in March. And we continue to push forward and use our discounting, marketing, and other tools to hope to see these numbers increase as we continue to move forward. Please turn to Slide 7. During and subsequent to the second quarter, we had a number of positive developments in our nightclub business. Two of our clubs recently opened, the PT’s Centerfold Gents’s Membership in Lubbock, Texas, a brand new BYOB opened on the third week of March and Child Dolls Avaline, a reformatted liquor membership, opened the primary week of April.

Two of our different BYOB areas, one in El Paso and one in Harlingen, are being transformed into Chicas Locas and they’re going to each open with their liquor license — when their liquor licenses are issued. Child Dolls West Fort Value ought to have its building permits very quickly. We’re in last phases there. Scarlett’s Cabaret Denver, which is in Glendale, Colorado, acquired its liquor license to promote and serve alcohol until 4 a.m., whereas most of different Denver space areas have to shut at 2 a.m. We’re engaged on bringing Scarlett’s hybrid nightclub-adult leisure idea to Dallas. We’ll have extra on that in Could. And we have lately signed a letter of intent to buy yet another new membership.

Please flip to Slide 8. We had an necessary growth in our plan to create two casinos in Central Metropolis, Colorado. Our Rick’s Cabaret Steakhouse & On line casino and Bombshells Sports activities On line casino each acquired their 24-hour liquor licenses from the town. We’re considering of probably opening the Cabaret Steakhouse as soon as building is full in late summer season 2024, whereas we await approval of gaming as a substitute of ready for the gaming license.

Bombshells growth. Please flip to Slide 9. The massive replace right here is that our subsequent three areas, Sapphire Bay in Rowlett, Lubbock and Denver are all at a stage of their growth the place they’re anticipated to open by late summer season. Rowlett being our flagship location, positioned in Sapphire Bay in Rowlett, Texas. We put slightly slide there. You too can go to the web site and type of see that growth. I feel that is going to be a really massive location for us.

Please flip to Slide 10. We anticipate the closing in April of a $20 million financial institution mortgage. That is anticipated to be secured by 9 actual property properties appraised at $31.6 million. The mortgage would offer us with further funds for working capital at favorable financial institution charges and phrases. I am additionally happy to report that throughout the second quarter, we repurchased 27,265 widespread shares for an funding of $1.53 million at a mean of $56.12 per share.

Yr-to-date, RCI has bought 65,219 shares for $3.6 million on common. I am sorry, $3.6 million on common of $55.23 per share. We at present have $13 million remaining in our repurchase authorization. This concludes formal remarks, and I need to thank our loyal and devoted groups for his or her laborious work and energy, and all of our shareholders consider and are making this success doable. Now here is Mark.

Query-and-Reply Session

A – Mark Moran

Thanks very a lot Eric. If you need to ask a query, please increase your hand within the X Area. Whenever you end, please mute your microphone to eradicate any background noise. We now have a restricted variety of speaker areas. After your query, we could transfer you to the again of the viewers to unlock area. To begin issues off, we might prefer to take questions from Rick’s analysts after which to a few of its bigger shareholders. First off, we’ll have Scott Buck of H.C. Wainwright. Scott, take it away.

Scott Buck

Hello, guys. Thanks for taking my questions. First one is on Bombshells. Eric, I do know the optics are powerful same-store gross sales down 20% year-over-year. The modifications that you simply made in February, when ought to administration and traders begin to see a few of that acknowledged within the outcomes and have the ability to decide whether or not or not these had been profitable or not?

Eric Langan

I feel you see type of slightly bit in March as you see our two excessive October, December $4.4 million in revenues, after which in fact January and February all the way down to $4.1 million and $3.9 million after which March at $4.7 million. I am hoping this quarter will proceed to see enchancment in that quantity. My private [goal] (ph) proper now’s to get us again to $15 million per quarter or $60 million complete with out the three new shops. And I would like to try this previous to these new shops opening, in order that Bombshells is working in a a lot more healthy place for us.

Scott Buck

I admire that. That is useful. After which on the Central Metropolis properties, it feels like building is occurring type of the schedule that you simply anticipated, however you are still ready on the on line casino license or gaming license. Any replace that you would be able to present us on what to anticipate there by way of timing?

Eric Langan

No earthly concept in any respect. All we’re being advised is that at this level is that the investigation is constant. We’ll see — I do know that I’ve seen the shortest about 15 months, which we’re previous that now. And there is a few licenses on the market I feel have been utilized for between two years and three years. So I do not know what is going on on in Colorado gaming proper now, however positively not fast as we want, in fact. So…

Scott Buck

However no person has leapfrogged you, proper? When it comes to placing in an utility after you and getting a license earlier than you?

Eric Langan

Not that I do know of presently, no. They’ve solely issued one license and it was really a mini on line casino with 74 machines or much less.

Scott Buck

Okay, excellent. That is useful. After which final query for me, simply on the $20 million that you simply’re type of liberating up from the actual property. On the acquisition entrance, do you’ve gotten offers that you’re actively negotiating or is that this simply dry powder for you already know, if the fitting alternative comes alongside?

Eric Langan

Properly, we have now an LOI proper now that we’re engaged on placing into definitive paperwork hopefully after which earlier than Could 9, we’ll have extra info on that for you and hope — possibly even anticipate a time limit on that transaction by then. We’re speaking with different operators proper now. We simply have not come to phrases which might be agreeable for each events presently.

So we proceed to look, having the additional money there may be good for inventory buyback, in addition to new acquisitions ought to they arrive up. And naturally to construct the membership in Fort Value, Texas, that’ll be roughly a couple of $3 million or so outlay for the membership in Fort Value that we hope to open someday in October or November, relying on constructing permits, in fact.

Scott Buck

Nice. That is it for me. Recognize all of the transparency, guys. Thanks.

Eric Langan

Yeah, no drawback.

Mark Moran

Thanks loads Scott. Subsequent up we’ll have Anthony of Sidoti. Anthony, please take it away.

Anthony Lebiedzinski

Are you able to hear me?

Eric Langan

Now I can.

Anthony Lebiedzinski

Okay, thanks. Thanks for taking the query. So are you able to hear me now?

Eric Langan

You are chopping out and in. I can hear you while you ask me if I can hear you, however I can not hear you every other time.

Anthony Lebiedzinski

Okay, so thanks for taking the query. So first, I suppose by way of the enhancements that you’ve got made with the advertising modifications and the price chopping that you’ve got carried out at Bombshells. Are you able to give us possibly a way as to love the month-to-month development of the same-store gross sales? Have you ever seen notable enhancements since you have carried out that? How ought to we take into consideration that?

Eric Langan

We put that on Slide 6 for you, so you possibly can type of see each how the golf equipment and bombshells did, over the past six months of this quarter and income. I feel that April will most likely be rather less than March or round March if we will be profitable at persevering with the rise in enterprise. After which Could must be very sturdy for us and we’ll see how June goes.

June, final 12 months is — when comps simply principally disintegrated. In case you’ll keep in mind, all people European holidays had been sizzling. You realize, I had predicted it will occur the 12 months earlier than and I used to be a 12 months off and I — because it did not occur the 12 months earlier than, I did not suppose it was actually going to occur this previous 12 months in ‘23, but it did actually happen in ‘23. So, we’re going to get some much easier comps come June. Keep in mind that the major acquisition of the Birch clubs, the Baby Dolls in Dallas, the Chicas-Locas brand, will go into same-store sales as well. And they’re a huge part of our increase right now of total revenues. So that will also help nightclub same store sales.

So I think we are going to be in pretty good shape as far as same-store sales on a go-forward basis definitely by June. And hopefully we can do well in April and May and get things back in swing there and try to close this new acquisition as quickly as possible and maybe even pick up some additional ones.

Anthony Lebiedzinski

Got it. And then in the past few calls, you guys have talked about seeing weakness in some of the blue collar locations. Is that still the case? Are you still seeing that divergence between the white collar clubs versus the blue collar locations?

Eric Langan

I think what we’re seeing, and I think we mistaken some of it for blue collar is, I think we’re seeing the middle class that are being squeezed the most. And what I’m, you know — as I’ve been watching and kind of watching [spend] (ph), we’re seeing that the high-end spend is getting more reserved. I think people start to feel like they’re showing off again somewhere to 2009, when everybody started cutting back. I think we’re seeing some of that right now, but I think that middle-class customer is very, very squeezed. And the example of that is, everybody’s making minimum wage, so you’re very low-end blue collar workers.

You’re $7 to $10 an hour-employees that were basically hitting our blue collar clubs once or twice a week. Their pay’s doubled, right? They’ve gone to $15 to $20 an hour now. Of course, some of their costs have increased as well, but they’re not as hurt as that middle class guy who was already making $20 to $25 an hour and instead of getting bumped up to $40 to $50 an hour, he’s been bumped to you know $27 or $29 or you know and so on and so forth, as you move up, the percentage will become less, but their food costs have increased, their energy costs have increased. So — and of course, interest costs have increased. So I think, we’re dealing with some of that right now as well.

But overall, I think right now we just have to continue to push specials on slower days. We are seeing, I’ve said in calls while back that once we really saw it — hitting us the hardest, we would see good weekends and slow Mondays and Wednesdays. We have come upon that our Mondays and Wednesdays are being affected. We’re now doing discounting on those days. You can see some of the Bombshell specials if you’re on X. I tend to post them out quite a bit, our Monday Madness, our Thursday Lingerie Nights, the specials we put in place there. And we’re starting to see traffic count increases from those specials.

So I think overall it’s just a matter of time till you know things kind of stabilize and as we push through our specials, we’re seeing a lot of restaurants closing in Texas, especially right now Houston and Dallas areas. So as that happens, I think the spread of customer base will be in less stores, which should help our stores as well.

Anthony Lebiedzinski

Got it. Okay. So in terms of the specials that are driving the traffic, so are you actually seeing increases in traffic on a year-over-year basis as a result of that or is it just you’re seeing less of a decline?

Eric Langan

I think, we’re seeing less of a decline. I don’t think, we’re seeing the increase yet. I don’t think that happens till June. June has been that customer counts really fell off due to summer vacation that year. And I don’t believe everybody’s going to Europe this year. Based on personal friends and acquaintances that I talked to on a regular basis, you know, I think 70% went to Europe or Caribbean, South America last year. And I think this year has less than 15% of people I talked to saying they’re going anywhere, now we’re staying home this summer. We’re staying home this summer. Is what I’m hearing from a lot of them.

Anthony Lebiedzinski

Understood, okay. Well, thanks and best of luck.

Mark Moran

Thank you very much, Anthony. Hey, Eric, while I’m bringing up Scott, can you please re-add me and the Equity Animal accounts as co-hosts?

Eric Langan

Oh, yeah. Perfect.

Mark Moran

And Rob, No worries. Rob, you’re up. Take it away.

Robert McGuire

Thanks, Mark. Eric, just in terms of — you’re talking more about a cost reduction program. You’ve discussed a little on the last call as well. Can you kind of give us some additional color on that initiatives?

Eric Langan

I’m much more familiar with going on the Bombshell side than I am on the club side, though I know the club’s making changes as well. But I can tell you on the Bombshell side, we’ve gone from having two Sheriff’s deputies on slower nights to either one or going to private security at a much reduced rate. Nights — we’ve had four managers, we’re cutting back down to three managers, we’re basically just running leaner, as well as trying to eliminate any unnecessary marketing or unnecessary expenses, stuff like that.

We’ll see some in March, I think, but obviously we had seven weeks before we really started making a lot of those changes. And then it took us time to implement those changes and get them all in place. So I think, the real cost cutting will be seen in April to June quarter. But we’ll see a little bit of it in this second quarter as well.

Robert McGuire

Thank you for that. And then, you know, with regards to other club owners realizing that they’re not really able to sell at peak 2022 EBITDA, can you expand on what that environment is today? And clearly you made some progress with that LOI, opening the one club or acquiring the one club.

Eric Langan

Yeah, I mean we’ve been talking with this group off and on for about three years. We’ve just, you know, basically said look, this is what we’re paying now. I don’t think anybody else out there is paying more or less. Or — I mean there’s probably some paying the same. I think we just have the better track record, especially with some of the owner finance parts of our transactions. And I think, that at some point, we’re going to see people quit holding now for those high numbers and thinking they’re going to sell based on their 2022 numbers. And that’s been the real problem is everybody thought, well I did so well in ‘22, ’23, is simply an off 12 months and it’ll come again. And I feel persons are realizing that it is not simply coming again as straightforward as they type of thought it will, or positively not as rapidly. It could come again, however it’s not going to come back again as rapidly on this present rate of interest atmosphere. And, in fact, no free authorities cash, like there was in 2021, 2022.

Robert McGuire

Positive. After which shifting gears to AdmireMe, are you able to type of talk about your progress along with your new accomplice and type of what we would see subsequent?

Eric Langan

Yeah. AdmireMe is type of carried out. We’re not spending any cash on it at this level. The brand new accomplice goes to launch the brand new website, we hope on this quarter, April, Could, June quarter. We’re within the strategy of organising the banking relationships for that web site proper now. There are some — there’s some fundamental stuff up proper now that we have been capable of beta-test ourselves internally. We’ll most likely — I am hoping begin as quickly because the banking is up, we’ll begin opening up some public beta testing, in addition to placing just a few of the entertainers on the location.

I can let you know that from the little little bit of appears to be like and what I’ve carried out with the location, I’ve seemed on the website to date, the brand new website’s already higher than our current website. So it was positively a sensible choice to principally reduce that off, we’re attempting to create the wheel and go along with an organization that is bought an identical product on the market proper now that they are reskinning and placing collectively. We’ll personal 75% of it. At this level, we could usher in one other couple of membership operators and provides them a share of possession as nicely simply to develop the location as a result of clearly the larger the location is and the extra creators and stuff we are able to put onto the location and extra advertising we are able to do for the location. I would somewhat have a smaller piece of a much bigger pie than have a complete pie if it is too small. In order that’s type of the place we’re at proper now. Hopefully, Could ninth, I will have some extra info for you Hopefully and get banked — arrange within the subsequent 30 days. After which possibly we are able to arrange some beta testing.

Robert McGuire

Terrific. After which simply final query, are you able to discuss to us in regards to the Scarlett’s hybrid nightclub mannequin and the way that differs out of your different golf equipment and — simply normally?

Eric Langan

Properly, I imply, Scarlett’s is a catered to usually a youthful buyer. It is a later hours membership. We function later hours than regular. Usually, I would say the common age might be nearer to 27 to 30 versus our typical gentleman’s membership the place the common age might be nearer to 40. It is a dance membership, so it is loads like a dance membership. There’s sound and lighting, video, audio gear. It is massively upgraded in comparison with a typical strip membership. There’s locations to face as a result of lots of people do not, they need to stand or you already know, stand, dance round greater than sitting in a chair for a pair hours like a typical gentleman’s membership.

And like I say, I feel it is only a youthful crowd extra of a celebration ambiance and we’re doing very nicely with it. The Denver location is doing very nicely. We simply bought the 4 a.m. liquor on the market, which goes to make an enormous distinction in that market. You realize, I might say, you already know, guys my age, I do not keep out until 4’o clock within the morning fairly often, whereas my, you already know, my son may keep out until 3, 4, 5’o clock within the morning, you already know, three nights every week. So only a totally different occasion vibe than a typical membership can be.

Robert McGuire

Properly, that is it for me. Thanks a lot.

Mark Moran

Thanks very a lot, Rob. Eric, I do not know — I feel you keep out of three, 4 fairly late from what I’ve seen. Subsequent up, we have now Orchid Wealth. Orchid Wealth, please take it away. Hey, Orchid Wealth… Yeah. Properly, then let’s deliver up.

Unidentified Analyst

What number of golf equipment did you guys have open for the previous quarter? What number of will come on within the subsequent three months? After which what number of within the three months after that? What is the quantity trying like?

Mark Moran

Hey, Eric, you are on mute.

Eric Langan

How did that occur? I used to be unmuted, then it muted me. Factor’s going loopy right now. I take into consideration 59 areas open proper now. I feel that is what I keep in mind studying a minute in the past. We solely location that isn’t open proper now apart from the Fort Value — new Fort Value membership which has not even began building is the El Paso membership. We’re ready on the liquor license on that it’s going to reopen.

Lubbock and Abilene each reopened on this quarter. And naturally, the Central Metropolis location, if we determine to open that as only a membership and steakhouse for proper now whereas we await gaming. So there’s principally three extra areas that would open after which in fact one location that will probably be transformed from a BYOB membership in Harlingen, Texas right into a Chicas-Locas location. So that is what’s coming proper now and naturally the brand new acquisition, get that closed — that’ll be added as nicely.

Unidentified Analyst

Nice. Okay. And with any of the brand new acquisitions which might be on the market, clearly, the purpose is these persons are lastly realizing that they can not ask for his or her 5 occasions earnings or regardless of the quantity was from these inflated numbers from a 12 months or so in the past.

Eric Langan

Yeah, I imply, we have now to both use some sort of common or a run charge. So it has been slightly harder as a result of no person knew what their run charge was going to be. Now that ‘23 is over, so we have a ‘22 and a ‘23 comparison. We’re four months into calendar ‘24, three months into it anyway, into the fourth month. So yeah, I think people are starting to get more realistic. And we’ve looked at about five locations in the last — I don’t know, five weeks, six weeks.

We have a couple of other ones we’ve considered LOIs on but can’t get that final, just can’t get everything to work properly for us, whether it’s interest rates or you know the final purchase price, the value for the real estate. There’s different things in each one, but I don’t think that anybody else is buying any of these clubs right now either. So we’re just kind of, you know in a whole pattern, we’re kind of holding this is what we’ll pay for it. This is what it’s worth to us. And if it’s worth more than that to somebody else, then I all means sell to them. And if you think it’s worth more to you than what we can pay, then hold on to it. That’s what you think is best, it’s kind of our outlook on it. I said we’re not in a hurry. We’re patient, investors — we’ll patiently take the acquisition as it comes.

Unidentified Analyst

All right, great. Thanks.

Mark Moran

Fantastic. Thank you for the questions. Next up we have Johnny. Johnny, please take it away. Hey Johnny, I think you’re on mute. Well Johnny is telling me to connect. I’m going to bring Adam Wyden up. Adam, please take it away once you’re ready. It looks like Adam is still connecting, so we’ll give that a second.

Adam Wyden

Can you guys hear me?

Mark Moran

Yes, we can.

Adam Wyden

All right. Great. So a couple questions here. I know that you consummated [merge] (ph), the Birch Club, I think towards the end of March. So is it fair to assume that, you know, I know that Birch is, Eric mentioned that Birch is comping really well, and obviously you’ve got some of those birch clubs getting renovated and coming back online. I mean, is it fair to assume that basically in the second — in the next quarter sequential, so the quarter end of June, you’re going to have what you would call the birch clubs that are comping positively enter into the comp base that would help sort of your strip club comp numbers in the following quarter. Is that a fair assumption? Am I getting the timing right there?

Eric Langan

I believe that’s the case. I know the big effect will be in June, but I think April, May, I mean, we’re only seven days in. So it’s very difficult to really say or eight days in, I guess, counting yesterday.

Adam Wyden

But Birch wasn’t in the same-store sales for the quarter ended March 31st and those clubs are doing what? And those clubs are doing well, correct?

Eric Langan

They’re doing very well. I mean, one of the examples, we’re doing about [275] (ph), we’re doing close to [350] (ph) at that location now. A couple of the other locations are up anywhere from $20,000 to $40,000 a week as well. So, yeah, they’re going to be very good for us as far as comps go. And I think, that we’re getting to the bottom of Miami, I hope. The most of our decline is very regional right now. We have two clubs in New York, which I consider our younger clubs where the 25 to 35 year olds go, which is that big middle class that I was talking about, I think is getting squeezed the most because those two clubs are affected but Rick’s location is doing very well in New York.

Of course, Minnesota is huge on decline even down from 2019 due to you know COVID, the George Floyd thing and just has the crime has just gotten out of control in Minneapolis at the moment. So in the downtown area and it’s you know the people in the suburbs are scared to come downtown which is hurting our business. I think, their convention schedule has been lacking as well because of that. So that’s part of the decline. And then of course, you know, Miami and Florida where in 2022, you know, Tootsies did almost $40 million in revenue versus the highest year ever in 2019 was like $26.8 million. We did $33 million or almost $34 million I think in 2023. So we’ll see where we’re at. We’re declining a little bit off that.

I think we steady out — I think that’s going to steady out at about 10% down at around $30 million a year run rate. It could be a little higher, depending on if crypto stays hot. That can bring some of that back. But I think we’re going to be in that range, that $30 million, $33 million range in Miami now is going to be, I think, a real run rate for Tootsies. And the other clubs are off about the same amount. Scarlett’s maybe not so much, but Chicas which is again, you know, upper blue collar, lower end white collar type location is being affected. But overall I think this should be the bottom.

I think definitely by June, if we do worse this June than last June, then we’re going to have to make really, really make some changes, fundamental changes, not just price cutting or price raising and cost cutting. But I don’t see that happening at all. Like I said, I don’t think everybody’s going on European vacations this year. I don’t think that the bottom is going to fall out in June. I think it’s just going to kind of be — a return to norm for a typical summer for us. I’m excited about getting to that point.

Adam Wyden

Well, and on the nightclubs, it sounds like, if you go back and you look, we’ve had this conversation, I think offline, but I think what you would say is that, you know, look if you look at how the business performed in [2018-2019] (ph), the clubs, I think, you know, peak to trough were down, you know, somewhere between 3% and 5%. And your argument is, is that — well, you know, you were copying off of a higher base. And so I guess what you would say is, you know, if you basically had really big numbers in ‘22, ‘23 you were down, you know, off of that high base. But you know I think is it sort of fair to assume that like, you know, you’re not that, you know, this isn’t a business that, you know, should see additional, you know, comp declines, if anything, I mean, I think you would say that like, you’re putting birch into the comp base in June, which should be positive.

And some of the some of the renovations and remodels and some of the stuff that you’ve done with these clubs, you know, part of your construction phase. I mean, I think that those would enter into the comp base sort of reinvigorated. I mean, if anything, I would think that you would think that there’s probably tailwinds from a comp perspective with birch coming in and sort of the new clubs that are being renovated effectively coming into the comp base. Is that a fair assumption?

Eric Langan

You know, I think April’s going to be our toughest comp, May gets a little easier and June becomes extremely easy. That’s what I think. And, you know, depending on, you know, the next three weeks of April, we’ll tell us a lot. Baseball started back up. The Rangers are doing great, which is helping our Arlington club and Fort Worth area clubs, as well as the bombshells in Arlington.

So there’s just a lot of lots of positive things going on. The Mavericks going to make the playoffs that’ll definitely help the two clubs and the Dallas, Bombshells in that market. We’ve got sports helping us in New York with the Knicks doing well this year. I think we’ve got a lot of right things going for us, and we just got to adjust to the new environment.

Adam Wyden

So this is my last question. Can you, you know, for sort of simplicity standpoint, can you try and summarize what you would classify as the inorganic opportunity going forward? And I’m not, obviously you’ve got this M&A and it’d be nice to talk about that, but we’ve talked a lot about going through the rebuilding or construction phase. Can you talk a little bit about timing? I think you’ve said sort of –.

Eric Langan

I want be done with that construction phase by November. I do not want to be dealing with going into 2025, I don’t want to build anything if I can keep from it. Right, so just — I don’t want to remodel anything.

Adam Wyden

So basically you have your capital plans through November, and then forward-looking cash is going to M&A and buyback. But can you help enumerate for folks how much revenue? Obviously, people can have their own speculation around what margins are and whatnot but I mean sort of give people a sense of the quantum of revenue that will come from assets that are not online right now I mean maybe you can go through, I know you did in the presentation, but it’s sort of hard to follow. I mean, maybe just sort of give people a quantum of how much revenue is in the ground but not turned on yet.

Eric Langan

It’s hard to say, with the three bombshells, if we just do an average opening, they’ll add $18 million in 2025, I think, for the three new stores at $6 million a unit. But I really think that the Rowlett unit could be a $10 million plus unit. And I think $6 million is low for Lubbock. And I think $6 million is going to be low for downtown, Denver. But if you just use those numbers, it’s $18 million. The Baby Dolls in Fort Worth should somewhere between $6 million, $8 million a year could be as high as $10 million. It’s a great location over there. We know what other businesses in that area have done in the past and we had a business in that area in the past as well.

And we know I did, until the freeway construction forced us to sell it during 2017, when I was just selling off any asset that wasn’t — if I could get more money from it, get a higher return from, under our capital allocation strategy. Then what else we got? The new Chicas, those clubs were BYOB clubs doing about $1 million a year in sales. As Chicas, they should do between $3 million and $4 million. So I’d say, they do common $3.5 million, $7 million for the 2 new Chicas. $18 million to $25 million, you are as much as …

Adam Wyden

Harlingen and El Paso.

Eric Langan

Sure, $30 million one thing. Yeah, that is Harlingen and El Paso. You realize, the Central Metropolis location, I’ve no actual concept of what it’ll do. However I feel total, you are most likely further $35 million to $40 million in revenues added to our present run charge, which must be proper round $300 million.

Adam Wyden

And that does not embody the on line casino, and that does not embody the casinos, and it does not embody this M&A goal that you simply principally have underneath LOI plus any future — right.

Eric Langan

Appropriate. Sure. Mainly, someplace between – round $335 million run charge for 2025. All issues keep in equal principally. If we get any little bounce again in same-store gross sales, rapidly we bounce same-store gross sales 4% — 4% of $300 million is one other $12 million we may choose up actual simply. So there may be clearly lots of potentials on the market proper now. And I am simply hoping, like I mentioned, that that is — we discovered the underside on this final quarter, March got here again fairly sturdy. I do know there have been further weekend in that month, some folks will level out, however the further weekend was not the — it was Easter weekend, so it wasn’t like a full-fledged weekend. It was like actually extra like having an additional Tuesday, Wednesday, Thursday within the month, however it’s nonetheless, or possibly Wednesday, Thursday, Friday. However it was nonetheless — it was a powerful month.

General gross sales early within the month had been respectable and solely elevated as soon as the NCAA basketball event began. After which baseball kicked in, the top of the NBA season, common season. These final video games grew to become necessary, particularly to a number of groups in our markets. And we stay up for Denver being within the finals, Dallas. I do not know if the Knicks made the finals or not. I have to look. I don’t even been following that intently. However these groups will, anytime a Sports activities workforce is powerful in considered one of our markets, it helps our gross sales. So it is fairly [gross] (ph).

Adam Wyden

Acquired it. And if building is finished by November, is it truthful to imagine that you’d be energetic on the buyback and the M&A and all that stuff from there? I imply — the place you’re proper now primarily based on all of the stuff that is coming on-line and an affordable margin. Our gross sales numbers are slightly bit greater than yours primarily based on what’s out of fee. However even if you happen to had been simply to take the $350 million in gross sales and take an affordable margin, principally having all the pieces on-line.

Eric Langan

2025 must be a a lot better 12 months for us. We have lots of drag proper now too. We’re carrying 9 properties. We now have ongoing building on all however two of these properties proper now. And the 2 of these properties, building goes to begin higher begin the following two weeks as a result of I need to be carried out with building. You realize, I’ve by no means dealt in a timeframe and I do not know, if anyone else out there may be in building enterprise proper now, however it’s by no means taken me seven months or eight months to get a reworking allow.

I used to have the ability to get a reworking allow in six weeks, not six months. It is very irritating and I feel it is a part of the core drawback with the economic system that is going to be coming. And why I am slightly involved is that small enterprise operators, building, housing begins, all of the stuff are going to be very troublesome, if you cannot get permits to do them. And that is, you already know — it is positively slowing down our progress as a result of, you already know, a few of these areas had been speculated to be opening. They’ll open in June, July, and August. We’re speculated to open in March, April, and Could. And you already know, they’ve all been pushed three months to 4 months. And all of these pushes have been as a result of we have been ready on. You realize, some type of authorities to approve us doing the work.

I made a joke the opposite day. I mentioned, I positive missed the nineties while you, you already know, you simply constructed it. They usually got here in and mentioned, you were not supposed to construct this. And also you requested for forgiveness as a substitute of permission. It was a lot simpler. However, you already know, this present day, you possibly can’t try this, particularly firm our dimension, however so we’re pushing via. We’re getting our permissions, we have now permissions on all however I feel two areas now. Or possibly it is possibly three, I do not suppose the bombshells on line casino properties, constructing permits not accredited.

So we have now three left that we’d like constructing permits on. All the pieces else is within the numerous you already know phases of that building. We’ll begin seeing a few of these accomplished beginning in June and we’ll be open June, July, August, September and I feel hopefully the ultimate the Child Dolls location can get open in October, November on the absolute newest. After which we must be carried out with building for I feel — I will be carried out for no less than a short while you already know six months for positive earlier than I even begin serious about it. After which when you begin serious about it, takes a 12 months to begin. So 18 months earlier than we begin actually constructing something new once more, I feel.

Adam Wyden

So lots of money move buyback in M&A?

Eric Langan

That is the plan. M&A is what we’re . I feel, it’ll warmth up. I imply we’re seeing a warmth up proper now like I mentioned within the final six weeks, we most likely checked out 5 – 6 totally different areas. Some you already know, one — too small for us a pair too expensive proper now however we have made affords. We’re ready for the homeowners to exit and store it. They will store our provide. What we do — the method is that they name us first. We make a proposal. They name all people else and say, hey, we need to promote it for this quantity, which is often greater than our provide. They can not get any bites. After which they arrive again to us and negotiate a good sale worth.

I am hopeful that no less than two extra of our affords will get some traction right here over the following between now and Could. We have — you already know 30 days until earnings come out, so hopefully we’ll have some higher information or some extra information no less than by the ninth of Could.

Adam Wyden

Properly you acquire I suppose between Lau, [Ricchita] (ph), Playmate and Birch you probably did a very good quantity of M&A after which it principally turned off for a year-and-a-half So, you already know it clearly goes and matches and begins however you already know after a match often it will get a begin. So that you guys have proven…

Eric Langan

We must be setting on between $22 million and $25 million in money after we shut this mortgage. We wished to shut by Friday, however we had two survey points that needed to be fastened with the title firm. One of many two was fastened. We’re ready on the ultimate on the opposite, and we’re ready for a zoning affirmation and I consider last sign-off of all of the paperwork by the financial institution itself after which we’ll get that closed fairly fast.

So we should always positively have that mortgage closed by Could 9^, except one thing — unexpected pops up, we should always have that closed by Could ninth. So we’ll have that money setting there. We must always have hopefully definitive paperwork earlier than the earnings name on this present LOI. And possibly we have now one other LOI or two by then as nicely. I do know we’re — the vast majority of my time proper now, I employed any individual full-time to work on these constructing permits and to principally monitor all the building as a result of I’ve simply been fed up with it. And so I feel I employed any individual who can try this for residing principally, it has change into a full.

It was principally a full-time job for me. And I needed to free my time as much as get centered on stuff that was going to be extra helpful for the corporate, particularly with taking up attempting to repair the bombshells and probably nonetheless usher in a accomplice or promote bombshells as nicely. That isn’t off the desk. We’re nonetheless speaking with teams. We really bought a written provide that was ridiculous and we mentioned no to it. So — which I anticipated, you already know, often the underside feeders are available in first. That is what we have seen. We have handled them and now we have a few — I feel, actual patrons or actual companions, doable companions in bombshells for us going ahead. One can be an working accomplice, which we might be very comfortable to and possibly do one thing with if we are able to agree on worth.

The issue with all the pieces proper now’s agreeing on worth. No person needs to promote at their lowest bombshells hit the bottom numbers ever in 2023. We’re not going to promote primarily based on that low worth. We’ll go repair it first, let it get again to a normalized run charge, get among the bills that we added in 2021 and 2022 once we had been doing large numbers, so long as safety and administration and among the buildup that we did, and return ourselves again to a extra regular working deal, get us possibly that quantity is $8 million or $9 million annualized as a substitute of $12 million or $14 million, however it’s positively higher than $4 million or $5 million. And so we have to determine what that quantity is, then we are able to worth it correctly and work with the group to, you already know, to monetize it for shareholders.

Adam Wyden

Yeah, nicely, the good factor about having permits being laborious and price being up is it is tougher to your competitors to construct extra stuff. I imply, like if you happen to have a look at Rowlett in Denver, like, you already know, it is not straightforward for folks to I imply, Denver, there is not any different actual property after which it’ll take a — it would take two years or three years for somebody to construct a Twin Peaks in downtown Denver, construct one in Rowlett. So no less than the areas that you’ve got going up or wouldn’t have any competitors close by. And given what the prices are for debt, for building and allowing, no less than the stuff that you’ve got opening will not have competitors for some time period. So, one of many advantages is that, it is laborious for competitors to come back in if they can not get the financing they usually cannot get the land and it is costly to construct it. So, you already know, possibly –.

Eric Langan

Yeah, there’s pluses and minuses to all of this, you already know. It is simply — it is painful for a short while. After which, you already know, you get to reap the rewards from it, which I feel we’re very near. The tip of June’s not too far-off. So subsequent 10 weeks or 11 weeks, we begin opening areas and pop these areas open one after one other for a couple of 5 month interval and be able to get pleasure from a while, I consider simply working usually.

Adam Wyden

All proper. Properly, I hope you will get some –.

Eric Langan

Get again to what I really like. I really like operations. I really like acquisitions. I’ve all the time hated building, however it gave the impression to be a type of issues the place we simply, you already know — these had been one of the best alternatives on the time we began doing these offers. Rates of interest had been so low-cost and most of our rates of interest are locked for you already know fairly truthful you already know period of time and so we have loads of time to determine all of it out and transfer ahead. And like I mentioned simply maintain you already know what we do purchase again inventory, purchase extra golf equipment and you already know determine what to do with bombshells and launch the brand new web site. So we have loads developing within the subsequent six months.

Adam Wyden

That is it for me, thanks.

Mark Moran

Implausible, thanks a lot Adam. We admire it. Subsequent up and for our final questionnaire, we’ll have [Value Hunter] (ph). Worth Hunter, are you able to please come up?

Unidentified Analyst

Sure. Hello guys. Thanks a lot for taking my query. So simply comply with up once more on the buyback utilizing the numbers that Adam was saying. So let’s name it [$340 million to $350 million] (ph) in top-line They used to get as a $60 million to $75 million yearly free money move. And I simply suppose buybacks actually have not been that sturdy given the place the share worth is. And I perceive all the prices associated with building and all the pieces. However any method to consider it or something that we may do to extend it? That is [indiscernible].

Eric Langan

I imply principally we — you already know in terms of our personal inventory, we have been backside feeders. I will be trustworthy about it. Sure, we most likely purchase it greater than we have been shopping for. We most likely purchased between — I feel we had a excessive of [$57.25] (ph) as a purchase worth for our buyback. We purchased slowly. The inventory’s held up really fairly nicely. I used to be attempting to shut this mortgage earlier in case the inventory dips under [$50] (ph). I want to purchase the remaining shares, get us underneath 9 million shares excellent once more. If the inventory dips that low, we will probably be fairly heavy patrons, I feel, if it goes underneath 50 to purchase again no less than a pair hundred thousand shares, we nonetheless want to purchase. We’ll be setting, I suppose I feel as soon as these mortgage shut, we’re someplace between $42 million and $45 million in money.

We have — Lubbock switching to a financial institution mortgage. Rowlett is already on the financial institution mortgage. We have some cash to place out in Denver nonetheless and in Central Metropolis. However we do not actually have the large quantities of money that had been going out. I feel we had been going most likely round $2.5 to $3 million a month in money going out for building with all the pieces we had occurring. I feel that quantity goes to come back down significantly, particularly come June it would positively come down significantly as a result of these bombshells will hopefully all be working. So that may make a giant distinction.

The one factor we might have left is the on line casino, which must be carried out on the building — it was speculated to be carried out on June thirtieth on the Ricks property on the market in Central Metropolis. So we have that money going out. We simply had large outlays for the air-con and different building stuff on the market, electricians, all that. However most of these outlays are out. I feel there is a couple million on the market, $1 million in Denver downtown, $3 million on the opposite deal. So possibly one other $6 million or so. In order that’s going to actually unlock our money move, whether or not we need to purchase again inventory or make acquisitions.

And with the money we have now available — we have now loads money available. Mainly, we’ll have all the cash we have to do the acquisition that we have at present bought deliberate and all the remainder of the development with out touching any future money flows. So principally, we may pile all future money flows within the inventory buyback if that grew to become obligatory. And that is actually what I have been attempting to line ourselves up with. I actually admire our shareholders’ persistence with us on bombshells. I do know all people’s not extraordinarily comfortable about the best way it is gone. I am not extraordinarily pleased with it myself. However we’re making the modifications. We’re seeing the outcomes of these modifications and hopefully the following quarter will inform a unique story than the final two have for us.

Unidentified Analyst

Eric, only a fast follow-up. Are you able to remark slightly bit extra on the modifications likes, what are they? Are you focusing extra on liquor now versus meals? Are you making it extra of [your] (ph) place? Timing or music, what’s it?

Eric Langan

It is slightly little bit of all the pieces. I feel what actually occurred is the workforce, the present workforce that we had there, or the workforce we had there in February, it bought complacent. It had been really easy for them for 2 years. And we’ve actually – and I used to be busy with Colorado, with the development stuff. Ed’s been busy with the brand new acquisition and getting these golf equipment up and working. That we simply type of left them on autopilot and you already know they weren’t able to be self-driving but. And so we have taken again management round mid-February. We made some fairly important modifications within the first two weeks, or I say the primary two weeks we had been there, final two weeks of February. We have type of been watching these modifications and pushing via that via April.

We’re having one other assembly subsequent week, subsequent Thursday in Houston. Ed’s coming to city. I’ll be right here. We’re bringing in all the regionals and GMs. We’ll have principally a come to Jesus discuss, and doubtless make just a few extra modifications from issues that simply do not get the best way we would like them proper now and we’ll push via that and hopefully see have an excellent report for you on Could ninth and positively on the income numbers in early July.

So that is the plan. We’ll keep it up. We’ll maintain pushing. We have to get this building carried out. We have to get these areas open and you already know get again to acquisitions which is — we have been lots of acquisitions proper now over the past six weeks. So hopefully we’ll see just a few extra.

Mark Moran

Thanks a lot, Worth Hunter. And for our final particular person, we’ll deliver up Johnny Shen. We tried to attach earlier. Let’s examine if it really works this time.

Unidentified Analyst

Yeah, sorry about that Mark.

Mark Moran

Good. Take it away.

Unidentified Analyst

Wonderful. I comfortable, Ayah Fatir to all who rejoice if you happen to’re breaking quick at one of many golf equipment right now I’d discover you I’ve bought a only a fast query really I used to be going to ask about bombshells however that final bit was actually good. I feel that we have type of troughed and issues must be trying good –.

Mark Moran

Yeah, hey Johnny, we are able to’t actually hear something that you simply’re saying. Simply chopping in –. It sounds such as you utterly underneath water. Hey, Johnny, I feel giving the technical difficulties, we’ll finish it now. So wished to thank Eric, Bradley, everybody who got here up and requested questions, on behalf of ourselves, the corporate and our subsidiaries, thanks and have a very good evening. As all the time, please go to considered one of our golf equipment or eating places and have a good time.

Eric Langan

Johnny, if you wish to e-mail myself or Gary, we are able to certainly reply your questions in addition to anyone else.