Q2 2024 RCI Hospitality Holdings Inc Earnings Call

We continue to add value to our baby dolls Chico's acquisition sales in the first quarter were up 10% on the fourth quarter and have improved every quarter. Since we've owned them. In addition, our margin improvement program resulted in 130 basis point improvement on a sequential quarter basis, and 260% basis points improvement.

The acquisition performance in fiscal 'twenty three.

Eric Scott Langan: Looking at new clubs, the replacement location in Lubbock, Texas, is nearing completion. Due to the success of the Baby Dolls brand, we are converting the Atvalene location to that format, which is awaiting installation of its audio and video systems and furniture delivery. The planned Baby Dolls in West Fort Worth is simply awaiting a building permit to begin construction.

Looking at new clubs the replacement location in Lubbock, Texas is nearing completion due to the success of the baby Dolls brand, we are converting to Abilene location to that format, which is awaiting installation of its audio and video systems and furniture delivery.

The planned baby dolls, and West Fort worth.

Simply awaiting a building permit to begin construction.

Eric Scott Langan: The Chica's Locust brand has also been successful for us, and as a result, we have decided to remodel and convert a BYOB location in Harlingen, Texas, into a Chica Locust, and we are currently awaiting the issuance of the liquor license. Regarding acquisitions, we are evaluating a sizable number of targets. The hardest part we face is coming up with fair value because owners want to be awarded for post-COVID highs during 2021 and 2022, and we are typically by on a two-year historical performance. Please turn to slide 9. We continue to be excited about our Central City Colorado Casinos, Rick's Cabaret Steakhouse Casino, and our Bombshell Sports Casino. In the few weeks since Christmas and New Year's, there have been no new developments with our gaming license.

The Chico's logos brand has also been successful for us and as a result, we have decided to remodel and convert our BYOB locations in Harlingen, Texas and to a cheaper low cost and we are currently awaiting the issuance of the liquor license.

Regarding acquisitions, we are evaluating a sizeable number of targets. The hardest part we face is coming up with fair value because owners want to be rewarded for post COVID-19 highs during 2021 and 2022.

And we are typically buy on a two year historical performance.

If you please turn to slide nine we continue to be excited about our central City, Colorado casinos, Rick's cabaret Steakhouse casino and our Bombshell sports casino.

A few weeks since Christmas and new years, There've been no new developments with our gaming license. Meanwhile, interior construction on the rig casino has been progressing on schedule and we anticipate completion in June of 2024.

Eric Scott Langan: Meanwhile, interior construction on the RIC Casino has been progressing on schedule, and we anticipate completion in June of 2024. We will then await issuance of our gaming license so that we can install, test, and configure the devices and systems in order to open the casino. For the Bombshells Casino, we are awaiting the building permit. We continue to anticipate both casinos opening in fiscal 2024 and that they will represent a significant free cash flow opportunity. In Colorado's most recent fiscal year, Central City slots averaged 131 adjusted gross revenues per day, and nearby Black Hawk does 307, mainly because they run 24-7, as we plan to do. Please turn to slide 10. Admire Me is a service we've been developing to help club entertainers monetize their content and develop stronger relationships with their customers.

We'll then await issuance of our gaming license. So that we can install test and configure the devices and systems in order to open the casino for.

For the Bombshells casino, we are waiting the building permit.

We continue to anticipate both casinos.

To open in fiscal 2024 and that they represent and they will represent a significant free cash flow opportunity.

And Colorado is most recent fiscal year Central Sydney Foss averaged 131, adjusted gross proceeds per day and nearby Blackhawk does 307, mainly because they run 24 seven as we planned to do.

Please turn to slide 10.

I admire me as a service we've been developing to help club entertainers monetize their content and develop stronger relationships with their customers based on the agreement. We recently signed we worked out.

Eric Scott Langan: Based on the agreement that we've recently signed, we will retain 75% ownership, our new partner will own 25%, and the service will be relaunched later in the June quarter under a new name. This partner has an existing internet platform with domestic and international traffic, safety controls, credit card processing, all necessary technology we need at a far less cost than if we did it alone. This includes highly valued live video streaming.

<unk> retained 75% ownership, our new partner will own 25% and the service will be relaunched later in the June quarter under a new name.

This partner has an existing internet platform with domestic and international traffic safety controls credit card processing, all necessary technology, we need at a far less cost than if we did it alone.

This includes highly valued live video streaming. The result is that overnight, we obtained access to a strong technology infrastructure with significant distribution and proven revenue collection and distribute and disbursement capabilities. That's.

Eric Scott Langan: The result is that, overnight, we obtain access to a strong technology infrastructure with significant distribution and proven revenue collection and disbursement capabilities. This will provide club entertainers with even greater potential to make money, and RCI will become the largest publicly traded entity owning a worldwide interactive social media adult platform, with streaming video, both live and prerecorded. Our vision is to create a digital extension of our physical brands, connecting tens of thousands of contractors and workers on the front lines, entertainers and waitresses, etc., and customers who come through our door so they can continue to interact or receive content. We want it to be an easy and seamless way for entertainers and waitresses to monetize their relationships 24 hours a day, seven days a week, 365 days a year. When you walk into the club, the entertainers are on the platform promoting themselves, getting customers to sign up and subscribe to them, and then come back and visit them in the club.

This will provide club entertainers with even greater potential to make money and RCI will become the largest publicly traded entity owning a worldwide interactive social media adult platform.

With streaming video both live and prerecorded.

Our vision is to create a digital extension of our physical brands connecting tens of thousands of contractors and workers on the frontline.

The entertainers and waitresses et cetera, and the customer who come through our door. So that they can continue to interact or receive content. We want it to be an easy and seamless way for entertainers and waitresses to monetize their relationships twenty-first.

Four hours a day seven days, a week 365 days a year.

You walk into the club the entertainers are on the platform promoting themselves getting customers to sign up and subscribe to them and then come back and visit them in the club.

Eric Scott Langan: Please turn to slide 11 to review our Bombshells Development Program. Our newest location, Stafford, a suburb of Houston, opened in mid-November. Construction is continuing on our rollout location, which we plan to open in late June or July of this year. And the Lubbock location construction is well underway, and we plan to open that in the fourth quarter of 24 as well. We are getting ready to begin the remodeling of our downtown Denver location as soon as we receive our building permit. Since this is a simple remodel of an existing restaurant location, it should be a quick turnaround to get this site open.

Please turn to slide 11 to review, our Bombshells development program.

Our newest location Stafford a suburb of Houston opened in mid November construction is continuing on a rollout location.

Which we plan to open in late June or July of this year and our Lubbock location construction is well underway and we plan to open that in the fourth quarter of 2004 as well we are getting ready to begin the remodeling of downtown Denver location as soon as we receive our building permits.

That's the simple remodel an existing restaurant location it should be a quick turnaround to get the site open.

Eric Scott Langan: As for future developments, we have decided to list Aurora, Colorado, type for sale or lease, and to put our second Austin location on hold. Both moves are intended to help us better focus on other opportunities. The Huntsville franchisee is still awaiting his building permit.

As for future development, we have decided to list our Aurora, Colorado.

Tight for sale or lease and to put our second Austin location on home. Both moves are intended to help us better focus on other opportunities. The Huntsville franchisee is still awaiting his building permits.

Bradley Lim Chhay: The bigger issue is Bombshell's performance. After we've seen the results from the quarter, we have made major structural management changes in Bombshell's team, and we are also considering any and all options to improve performance that potentially include seeking an operational partner or selling the business. Now, let Bradley go into more details on our results. Thanks, Eric. Please turn to slide 12 to review our nightclub segment and fourth quarter revenues. Can you guys hear me? He says he can't hear me.

The bigger issue is bombshells performance.

After we've seen the results from the quarter, we have made a major structural management changes in bombshells team and we're also considering any and all options to improve performance that potentially include seeking an operational partner or selling the business now here's Bradley to go into more details on our results.

Bradley: Thanks, Eric Please turn to slide 12 to review our nightclub segment fourth quarter revenues.

Bradley: Can you guys hear me he says he can't hear me.

Bradley Lim Chhay: Please turn to slide 12 to review our nightclub segment. Fourth quarter revenues increased $4.7 million year-over-year. This was primarily due to an $8.9 million increase from acquisitions and a $4 million decline in same-source revenue. By revenue type, alcoholic beverages increased 18.7 percent, food 14.1 percent, and other by 8.2 percent. Meanwhile, service declined 1.6%. The different growth rates reflect higher alcohol and food in the sales mix from the newly acquired Heartbreakers, Baby Dolls, and Chica's Locals Clubs. GAAP operating income was $20.4 million or 33.4% of revenue; non-GAAP operating income was $21 million or 34.3% of revenue.

Okay.

Bradley: Please turn to slide 12 to review our nightclub segment fourth quarter revenues increased $4 $7 million.

Bradley: Year over year. This was primarily due to an $8 $9 million increase from acquisitions and a $4 million decline in same store sales.

Bradley: By revenue type alcoholic beverages increased 18, 7%.

Bradley: 41% and other by eight 2%.

Bradley: Meanwhile, service declined one 6%.

Bradley: The different growth rates reflect the higher alcohol and food in the sales mix from the newly acquired Heartbreakers Baby Dolls, and Chico's locals club.

Bradley: GAAP operating income was $24 million or 33, 4% of revenues non.

Bradley: non-GAAP operating income was $21 million or 34, 3% of revenues margins were affected by a different sales mix from the newly acquired clubs.

Bradley Lim Chhay: Margins were affected by a different sales mix from the newly acquired clubs, lower service revenues, and wage inflation. Please turn to slide 13 to review our bombshell segment. Fourth quarter revenues declined $700,000 a year.

Bradley: Your service revenues and wage inflation.

Bradley: Okay.

Bradley: Please turn to slide 13 to review our Bombshells segment.

Bradley: Fourth quarter revenues declined $700000 year over year.

Bradley Lim Chhay: This primarily reflected a $2.7 million decline in same-source sales and a $2.1 million increase from the newly acquired and new locations. The acquired locations are Bombshells San Antonio and Cherry Creek Food Hall with its Bombshells Kitchen. The new location is Bombshell Stafford, which opened in mid-November. Gap operating income was a profit of $86,000, or 0.7% of revenues, and non-GAAP was a profit of $149,000, or 1.2%.

Bradley: This primarily reflected a $2 7 million or the decline in same store sales and a $2 $1 million increase from the newly acquired and new locations to.

The acquired locations, our bombshells, San Antonio and Cherry pick food Hall with its bombshells kitchen.

Bradley: The new location is bombshells, Stafford, which opened in mid November.

GAAP operating income was a profit of $86000.

Bradley: 7% of revenues and non-GAAP was a profit of $149000 or one 2%.

Bradley Lim Chhay: Please turn to slide 14. The combined operating loss from our other end corporate segments was $400,000 less than that of last year. On an on-gap basis, they were about $100,000. I also wanted to note the effective tax rate for the year was 19.9% compared to 22.8%. The rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit.

Bradley: Yeah.

Please turn to slide 14.

The combined operating loss from our other and corporate segments was $400000 less than that of last year.

Bradley: On a non-GAAP basis, they were about $100000 less.

Bradley: I also wanted to note that effective tax rate for the year was 19, 9% compared to 22, 8%.

Bradley: The rate is affected by state taxes permanent differences tax credits, including the FICA tip credits.

Bradley Lim Chhay: Now, please turn to slide 15. We have a couple of slides coming up that will discuss free cash flow and adjusted EBITDA, which are non-GAAP. And at the back of that, we wanted to present you with the closest GAAP equivalents on this slide, which are operating and netting. Now please turn to slide 16 to look at some of our other key metrics. We ended the quarter with cash and cash equivalents of $21.2 million. During the first quarter, we used $2.1 million to buy back shares.

Bradley: Now please turn to slide 15.

Bradley: We have a couple of slides coming up that will discuss free cash flow and adjusted EBITDA, which are non-GAAP and a basket that we wanted to present you with the closest GAAP equivalent on this slide which are operating and net income.

Bradley: Now please turn to slide 16 to look at some of our other key metrics, we ended the quarter with cash and cash equivalents of $21 $2 million during.

Bradley: During the first quarter, we used $2 $1 million to buy back shares first quarter free cash flow was $12 $7 million or 17% of revenues.

Bradley Lim Chhay: First quarter free cash flow was $12.7 million, or 17% of revenue. Adjusted EBITDA was $17.5 million, or 24% of... Our more recent free cash flow and adjusted EBITDA conversion rates reflect a lower percentage of service revenues in our nightclub district. Now, please turn to slide 17 to review our debt metrics. Debt, as of December 31st, declined $5.8 million from September 30th due to scheduled paydown. The weighted average interest rate was 6.61%, in line with what we have been paying. The total occupancy cost was 8.2%.

Bradley: Adjusted EBITDA was $75 million or 24% of revenues.

Bradley: Our more recent free cash flow and adjusted EBITDA conversion rates reflect the lower percentage of service revenues in our nightclub business.

Bradley: Okay.

Now please turn to slide 17 to review our debt metrics debt as of December 31 declined $5 $8 million from September 30th due to scheduled pay downs.

Bradley: The weighted average interest rate was 661% in line with what we had been paying.

Bradley: Occupancy costs was eight 2% in stepped a little bit from the sequential quarter on a sequential quarter basis, but we are still in our comfort range of 6% to 9%.

Bradley: At two nine times debt to trailing 12 month adjusted EBITDA also inched up just a little bit but continues to be in a comfort zone of less than three.

Bradley Lim Chhay: Inched up a little bit on a sequential quarter basis, but we are still in our comfort range of 69%. At 2.9 times, debt-to-trailing 12-month adjusted EBITDA also inched up just a little bit but continues to be in a comfort zone of less than 3. Please note that both occupancy costs and debt-to-adjusted EBITDA reflect the fact that we are developing a number of projects. As they open and we begin generating revenues and EBITDA, occupancy costs and debt to adjust the EBITDA should decline, while maturities continue to remain reasonable and manageable. We're also in the process of completing a $20 million cash-out bank loan using $30 million of our unencumbered real estate. Please turn to slide 18 for our debt pie chart. We continue to pay down all our slices of our debt. The percentage share of our different pieces of debt remains largely the same as in the fourth quarter.

Bradley: Please note that both occupancy costs and debt to adjusted EBITDA reflect the fact that we are developing a number of projects.

Bradley: As they open and we began and we began generating revenues and EBITDA occupancy costs and debt to adjusted EBITDA should decline.

Debt maturities continue to remain reasonable and manageable.

Bradley: We're also in the process of completing a $20 million cash out bank now using $30 million of our unencumbered real estate.

Bradley: Yeah.

Bradley: Please turn to slide 18 for that Pie chart will continue to pay down all of our slices of our debt.

Bradley: The percentage share of our different pieces of debt remained largely the same as the fourth quarter.

Bradley: Now, let me turn the presentation back to Eric.

Eric: Thanks, Travis Thanks Bradley.

Eric: Alright. Thanks Bradley Please turn to slide 19, before we go into Q&A for our new investors I want you to know that everything we do is centered around our capital allocation strategy, we employ three different approaches.

Eric Scott Langan: Now, let me turn the presentation back to Eric. Thanks, Bradley. Thanks, Bradley. Thanks, Bradley. Please turn to slide 19. Before we go into Q&A for our new investors, I want you to know that everything we do is centered around our capital allocation strategy. We employ three different approaches, subject to whether there is a compelling rationale to do otherwise.

Eric: Vic to weather.

Eric: There is a compelling rationale to do otherwise mergers and acquisitions organic growth and buying back shares when the yield on our free cash flow per share is more than 10%. All of this is being done with the ultimate goal of driving shareholder value by increasing free cash flow per share.

Eric: By at least 10% to 15% on a compound annual basis to see more about this strategy. Please visit our new website at RCI H H Dot com.

Eric Scott Langan: Mergers and acquisitions, organic growth, and buying back shares when the yield on our free cash flow per share is more than 10 percent. All this is being done with the ultimate goal of driving shareholder value by increasing free cash flow per share by at least 10% to 15% on a compound annual basis. To see more about this strategy, please visit our new website at rcihh.com. Please turn to slide 20. By sticking to our capital allocation strategy since the end of fiscal 2015, we have generated compound annual growth rates of 10.2% for revenues, 12.1% for adjusted EBITDA, and 17.2% for free cash flow. We also reduced our fully diluted share count, including shares used for acquisition. But nothing goes up in a straight line.

Eric: Please turn to slide 20.

By sticking to our capital allocation strategy since the end of fiscal 2015, we have generated compound annual growth rates of 10, 2% for revenues 12, 1% for adjusted EBITDA 17, 2% for free cash flow.

Eric: We also reduced our fully diluted share count including shares used for acquisitions.

Eric: But nothing goes up in a straight line. The key point is we have the plans tools resources and expertise to get the job done well make more acquisitions are taken a little longer to get projects up and running the drag will be behind us the doors will open and our numbers will improve we will get our free cash flow and adjusted EBIT margins back to the 20% and 30.

Eric: Percent as we have in the past Unfortunately in the current environment and it's taken us a little longer to open new locations and we haven't.

Eric: But we have dealt with economic downturns before I know that these numbers are a little disappointing to some and they are disappointing to us, but I ask you to have faith in our teams ability as I do that we will reach our future targets. Thank you to our loyal and dedicated team members for all their hard work and effort and all of our shareholders, who believe in make our success possible.

Eric Scott Langan: The key point is that we have the plans, tools, resources, and expertise to get the job done. We'll make more acquisitions. While it takes a little longer to get projects up and running, the drag will be behind us, the doors will open, and our numbers will improve. We will get our free cash flow and adjust the even margins back to the 20% and 30% as we have in the past. Unfortunately, in the current environment, it has taken us a little longer to open new locations, but we have dealt with economic downturns before. I know that these numbers are a little disappointing to some, and they are disappointing to us, but I ask you to have faith in our team's ability, as I do, that we will reach our future targets. Thank you to our loyal and dedicated team members for all their hard work and effort, and all of our shareholders who believe in and make our success possible. Now, here's Mark.

Mark: Now here's mark.

Mark: Thank you very much Eric and Bradley if you'd like to ask a question. Please raise your hand and the X space. When you finish. Please mute your microphone to eliminate any background noise. We only have a limited number of speakers spaces. So after you ask your questions. We may ask you to move to the back of the audience to free up space to start things off.

Mark: I'd like to take questions from analysts and some of its larger shareholders before moving into general Q&A first up we have Anthony of Sidoti and company Anthony Please take it away.

Mark: Hey, Anthony I'm not sure if youre on mute.

Mark: Well Anthony works that out we can can you hear me now.

Yes, we can hear you we think it will stay on ample takeaway sorry about that I have a new phone over here so [laughter] apologies.

None: Apologies for that so anyway.

For taking the questions I do want to get into a little bit more about the same store sales numbers as far as traffic versus average ticket.

Operator: Thank you very much, Eric and Bradley. If you'd like to ask a question, please raise your hand in the X space. When you finish, please mute your microphone to eliminate any background noise.

None: That you've seen and.

None: Also in your January sales release, Eric you talked about.

Operator: We only have a limited number of speaker spots, so after you ask your question, we may ask you to move to the back of the audience to free up space. To start things off, we'd like to take questions from RIC's analysts and some of its larger shareholders before moving into general Q&A. First up, we have Anthony of Sidoti & Company. Anthony, please take it away. Hey Anthony, I'm not sure if you're on mute.

None: So hopefully that I think the quote.

None: It was basically saying that hopefully we've seen the worst of the same store sales declines.

None: Given the uncertain macro conditions. So just wondering if if you think that's still true and I have a couple of other questions as well.

Eric: Yeah sure I mean, the same store sales declines obviously not much has changed.

Eric: From the last call. We got the December numbers December was decent January was starting off. Okay. Then we had the weather issues for a couple of the middle weeks, but finished finished very strongly the first week of February has been a good week for US overall I don't have breakdowns on same store sales for January February because it's just too.

Anthony Chester Lebiedzinski: While Anthony works that out, we can move on to... Can you hear me now? Yeah, we can hear you. We can hear you, so we'll stay on Anthony. Anthony, take it away. Sorry about that. I have a new phone over here, so apologies for that.

Eric Scott Langan: So anyway, thanks for taking the questions. I do want to get into a little bit more about the same store sales numbers as far as traffic versus average ticket that you've seen. And also, in your January sales release, Eric, you talked about, I think the quote was basically saying that hopefully we've seen the worst of the same store sales declines, given the uncertain macro conditions. So just wondering if you think that's still true, and I have a couple of other questions as well.

Eric: Early.

None: For me to have all those numbers yet.

None: Hopefully, we'll get an idea of those soon I think the worst of it is behind us.

Bombshells is still an issue we've had to make some cost changes there and some structural changes in management and how we're operating those locations.

And hopefully we'll start seeing those results are.

None: As we move into.

Eric Scott Langan: Yeah, sure. I mean, same store sales declined. Obviously, not much has changed from the last call. We got the December numbers. December was decent.

None: March Madness, I think March madness, where we're doing a big push for March for March Madness. Some.

None: Some other changes we started today are.

None: With our launch Thursday, so we're going to do.

Eric Scott Langan: January was starting off okay. Then we had weather issues for a couple of the middle weeks, but it finished very strongly. The first week of February has been a good week for us overall. I don't have breakdowns on same-store sales for January and February because it's just too early for me to have all those numbers yet, but hopefully, we'll get an idea of those soon. I think the worst of it is behind us. I mean, bombshells are still an issue.

None: A few more things be a take the bombshells concept make it a little more risky I think kind of a team kind of starting to focus on restaurant operations too much and what we're doing and we've got to get back to our basics.

And in which as you know keeping our alcohol sales that 60.

None: The 60% range of sales those have declined a little bit and I want to get that back to normal and making the place upon again.

Especially in the evening hours. So that's kind of what we're focused on right now got you. Okay. Thanks for that and then I know you recently hired a new assistant of a director of operations for Bombshells, Oh, what has he done so far.

Eric Scott Langan: We've had to make some cost changes there and some structural changes in management and how we're operating those locations. Hopefully, we'll start seeing results as we move into March Madness. I think March Madness, we're doing a big push for March Madness, and some other changes. We started today with our launch rate Thursday, so we're going to do a few more things. Take the bombshell concept and make it a little more risque.

Kind of what what are your plants can you share any specifics as to what are you whats youre doing as far as to get that segment are in better shape.

None: Okay.

None: Yes sure.

None: <unk> done some cost cutting off at the management level taken our regional managers put them back in individual stores, having them focus on individual stores, which allowed us to get rid of some underperforming general managers.

Eric Scott Langan: I think the team kind of started focusing on restaurant operations too much and what we were doing. We've got to get back to our basics, which is keeping our alcohol sales at the 60% range of sales. Those have declined a little bit, and I want to get that back to normal and make the place fun again, especially in the evening hours. That's kind of what we're focused on right now.

None: And not replace our other managers that have left natural left.

The attrition by moving people around than the new Guy has been in training and Houston He's now in Dallas.

None: He'll be working at the Dallas and the Arlington location to get those locations, which are our biggest decliners I'm back in back in shape.

Anthony Chester Lebiedzinski: Okay, thanks for that. I know you recently hired a new assistant director of operations for bombshells. What has he done so far? What are your plans? Can you share any specifics as to what you're doing as far as getting that segment in better shape?

None: Just making sure people are promoting doing the things are due.

None: And really focusing on customer service like I said, and making that making the place making.

Eric Scott Langan: Yeah, sure. We've done some cost cutting at the management level, taking our regional managers and putting them back in individual stores, having them focus on individual stores, which allowed us to get rid of some underperforming general managers and not replace other managers that would naturally leave through attrition by moving people around. The new guy has been in training in Houston. He's now in Dallas.

None: Making the place one again to hang out and I think I said.

None: Earlier that there've been focus on restaurant operations more than more than what I consider the the alcohol sales.

None: Operations and I think that's kind of the key we've made some major changes in music formats. Djs are some of things are just kind of as we went in business storage and our secret shoppers in.

Eric Scott Langan: He'll be working at the Dallas and the Arlington locations to get those locations, which are our biggest decliners, back in shape, just making sure people are promoting, doing the things they do, and really focusing on customer service, like I said, and then making the place fun again to hang out in. I think I said earlier that, you know, they've been focused on restaurant operations more than what I would consider alcohol sales operations. And I think that's kind of the key. We've made some major changes in music formats, DJs, some of the things that just kind of, as we went and visited the stores, sent our secret shoppers in, just found things that we weren't happy with in some of the direction that the current management team had been taking it. And so we're on that. And also, by moving these regionals into direct stores, we'll have a lot more accountability as we move into, you know, the March, April, May months. And we'll see significant changes, or we'll continue to make changes in management there as well. Gotcha, okay?

None: Just found things that are that we weren't happy with on.

None: Some of the direction.

None: <unk> management team has been taking it to and so we're.

None: And then also by moving these are regionals into direct stores.

None: It will have a lot more accountability.

None: As we move into the March April may months.

None: Months, and we will see significant changes or or will you know continue to to.

None: To make changes in management, there as well got you. Okay, and then switching gears you talked about the admire be relaunched it with a new strategic partner how shall we think about this as far as from a financial perspective as far as what.

None: What this could mean to you guys.

None: If you could add any additional color there that'd be great.

Anthony Chester Lebiedzinski: And then switching gears, you talked about the Admire Me relaunch with a new strategic partner. How should we think about this as far as from a financial perspective and as far as what this could mean to you guys? If you could add any additional color, that'd be great.

None: Okay.

None: Hey, Eric.

Eric: Oh, I'm, sorry, yeah I'm sorry.

Eric: Im raising my mute turn itself back on sorry about that.

Eric: Thanks Mark.

Eric: So for the for the new site basically.

Eric Scott Langan: Hey, Eric, are you speaking? I'm sorry. Yeah, I'm sorry. For some reason, my mute turned itself back on.

Eric: Our new partner already has the software up and running on another for theirs for their site. So we're gonna basically white label that software. So we're waiting for the scans to be done right now, which hopefully will be done sometime in April where began early testing and basically full launch this and that next quarter.

Eric Scott Langan: So for the new site, basically. Our new partner already has the software up and running for their site, so we're going to basically white label that software. So we're waiting for the skins to be done right now, which hopefully will be done sometime in April.

Eric Scott Langan: We'll begin early testing and basically fully launch this in the next quarter. It lowers our cost tremendously because we're spending about $40,000 a month on programmers trying to get Admire Me up and running. So basically, it'll cut about a half a million dollars a year from our expenses, which is a part of our overall cut to cut over $2 million a quarter in expenses from our budget right now. And so that'll be a big part of that, and we'll continue to move forward, launching this new site with video streaming, which we didn't have on Admire Me and weren't going to have on Admire Me for So, basically, I think it just moves software light years ahead.

Eric: It lowers our cost tremendously because we were spending about $40000 a month on programmers trying to get at Miami up and running so basically it will kind of about a half a million dollars a year from our expenses.

Eric: <unk>, which is a part of our overall client to cut over $2 million in a quarter in expenses from our from our budget right now.

Eric: And so that'll be a big part of that are and will continue to move forward are launching this new site with video streaming, which we weren't we didn't have an IDE Miami and weren't going to have an M Army for some time and who knows at what cost.

Eric: To get to that so.

I think it just moves the software light years ahead.

Anthony Chester Lebiedzinski: The concept is still the same to get all of our entertainers and wait staff and employees that are interested in creating content to create content and have a means to do so. All right, well, thank you very much. I'll pass it on to others and best of luck. Fantastic. Thank you so much.

Eric: The concept is still the same to get all of our entertainers and and and waste staff and employees that are interested in and creating content to create content and hammer.

Eric: To do so.

None: Alright, well, thank you very much I'll pass it on to others and best of luck.

None: Fantastic. Thank you so much and next up we'll bring Scott Buck of H C. Wainwright, Scott take it away.

Scott Christian Buck: And next up, we'll bring Scott Buck of HC Wainwright on. Scott, take it away. Hey, good afternoon, guys. Thanks for taking my questions. Eric, I'm curious about the licensing.

Scott Christian Buck: Hey, good afternoon, guys. Thanks for taking my questions Eric I'm curious on the the licensing I know you don't have an update for us, but I'm curious.

Eric Scott Langan: I know you don't have an update for us, but I'm curious, at what point do you start to get a little nervous in your ability to get the properties open by year-end, fiscal 24? May, May. We need to have, We need to be on the agenda for approval by May. If we're not on by May, it will be very difficult. It's going to take somewhere between, Oh, probably three and four months, so somewhere between 90 and 120 days to do all the installation testing and get all the certifications we need from gaming to get the final go-live approval. So we really, if we want to open in September, we need to have that approval for the licensing itself no later than the end of May. We have quarterly updates with them. The next update is in about a week from now.

Scott Christian Buck: At what point do you start to get a little nervous in your ability to get the properties opened by year end fiscal 'twenty four.

Scott Christian Buck: Mei Mei Ah, we need to have we need to be on the agenda for approval by May if we're not on by May it will be very difficult.

Scott Christian Buck: It's going to take somewhere between.

Scott Christian Buck: Oh.

Scott Christian Buck: Probably three and four months, so somewhere between 90 and 120 days to do all the install testing.

And get all the certifications, we need from gaming to get the final go live.

Scott Christian Buck: Approval so.

Scott Christian Buck: So we really if we want to open in September we we need to have that approval for the lightning itself. No later than the end of May.

We have quarterly updates with them. Our next update is in about a week from now.

Eric Scott Langan: So once we have that update, hopefully we'll have better information on where they're at in the process. As far as me getting worried, I don't really worry about it overall unless, of course, they start issuing a bunch of licenses to all the other licenses start getting issued to other operators that have applied. I think there are six licenses applied for in Central City right now.

Scott Christian Buck: So once we have that update hopefully we'll have better information.

Scott Christian Buck: On where on where they're at in the process.

As far as me getting worried I don't really worry about overall unless of course, they start issuing a bunch of licenses to the other and have all the other.

Scott Christian Buck: Licenses target initially to other operators that are applied I think theres fixed licenses applied for in Central City right now if all of those were to start getting approved and ours was not getting on the agenda I would be concerned that as of right. Now there is no concern I think it's just the normal flow of operations on the wave the Colorado Department of gaming does their investigations.

Eric Scott Langan: If all those were to start getting approved and ours was not getting on the agenda, I would be concerned. But as of right now, there's no concern. I think it's just the normal flow of operations and the way the Colorado Department of Gaming does its investigation.

None: Understood I appreciate that and I'm curious, what's the remaining capex on those are the two properties.

Scott Christian Buck: I appreciate that. And I'm curious, what's the remaining CapEx on those two properties to get them open?

None: To get them open.

Eric Scott Langan: It really depends on on how we do certain things. So far we're about two and a half million. I believe on my last update that I've gotten, we just signed about a $3 million contract for... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .., all the construction on the RICs which includes some pretty major changes to the overall deal and the HVAC systems are in Denver right now so they will be installed as soon as weather permits and they can get all their ducts in a row because we're replacing the roof at the same time they put the units so basically they're going to pull the existing units off the roof we're going to put all the new curbs and stuff in for the roofing they'll set the units and then re-roof the building so that'll be considerable it should be done I would think no later than the end of March, at this time. So six or seven more weeks, we'll have all new heat in that building and have everything up and running. We think final construction, other than the actual gaming machines, should be completed sometime in January. Hey, Scott, we can't hear you if you have another question. Yeah, sorry about that. Went back on to mute.

None: Well it really depends on how we do certain things so far we're about two and a half million N.

None: I believe on my last update that I've gotten we just signed about a $3 million contract for our.

None: All of construction on the risks are which will which include so some pretty major changes to the overall deal and.

None: In the HVAC systems.

None: <unk> are in Denver right now so they will be installed soon as weather permits and they can get all there.

None: The ducks in a row because were replacing the roof at the same time they put the units so basically they're going to pull the existing units off the roof, we're going to put all the new curves and stuff in for the roofing they'll set the units and then they'll re roofed a building.

None: So that'll be considerable it should be done I would think no later than the end of March ER at this time.

None: Oh.

None: Six or seven more weeks will have all their E E C in that building and have everything up and running.

None: We think final construction other than the actual gaming machine should be completed sometime in June.

None: Yeah.

None: Hey, Scott we can't hear you if you have another question.

Yes, sorry about that I went back on mute.

Scott Christian Buck: Yeah, so on bombshells and the strategic review, you talk about a potential sale or at least exploration. Have you guys hired some outside help to kind of speed that process along? Or, at this point, are you still kind of looking at opportunities internally to do something? We are working with an outside group right now, as well as a few things on our own as well. So, when we say we're exploring everything, I mean we're looking everywhere.

Scott Christian Buck: Yeah, so on bombshells in the strategic review.

Scott Christian Buck: You talk about a potential sale or lease exploration you guys hired some outside help to to kind of speed that process along or at this point are you still looking at opportunities internally to do something.

Scott Christian Buck: Okay.

Scott Christian Buck: We are working with a where the outside group right now.

Scott Christian Buck: As well as a few things on our own as well so when we say we're exploring everything I mean, we're we're we're looking everywhere, we're talking with lots of people are but as far as getting rates as far as far as lifting and whatnot.

Eric Scott Langan: We're talking with lots of people. But as far as listing and whatnot, we haven't gone as far as listing them for sale at this point, because right now, we are really kind of hoping we can find either the right partner, like we did with Admire Me, or, you know, giving our... Making the changes we've done internally and seeing if that is going to make a difference in a quick enough time period for my liking. All right, great. So that's where we're at with it. That's helpful, Eric. And then just last thing quickly, what's the timing look like on the cash out loan?

Scott Christian Buck: We haven't gone as far as listing them for sale at this point because right now we are really kind of what when we can find the either the right partner like we did with admire me or are you know, giving our.

Scott Christian Buck: Making the changes we've done internally and seeing if that.

If that is going to make a difference in a quick enough time period for my liking alright, great date. So those are those are that's where ran with it that's helpful. Eric and then just last thing quickly whats the timing look like on the cash out known and <unk> or are you kind of in conversations with folks already about potential acquisition.

Scott Christian Buck: And are you, you know, kind of in conversations with folks already about potential acquisitions? We're pushing the loan because we have been in talks with several outside operators and would need significant cash down payments. So we're going to just try to get that cash sitting in our books. We've been working on this for about five weeks. We had to get appraisals and environmental studies on a couple of the properties because they weren't current.

Ah, we're pushing along because we have been in talk with several outside operators and would need significant cash down payments. So we're gonna just trying to get that cash sitting in our books. We've been working on this for about five weeks, we had to get appraisals and environmental studies on a couple of the properties because they weren't current.

Eric Scott Langan: That's all updated, and we should be going to the loan committee in the next week or so. Perfect. So I would look for I would look for our hope is to close sometime in either the last week of February or first week of March. That's to close on the loan.

Scott Christian Buck: That's all updated and we should be going to loan committee are in the next week or so perfect. So I would look for I would look for are helping our hope is to close sometime in either the last week of February 1st week of March that's closer to close the loan.

Scott Christian Buck: So hopefully, we can stay on that timeline as long as nothing comes up or nothing comes out of committee that was missed in the vetting. [inaudible] Casinos in Blackhawk have run casinos in Central City both for the past 20 some years, are very knowledgeable, very well known by the Department of Gaming as well as many of the other operators, employees, and whatnot in that Central City Blackhawk area. Great, and I'm sorry, you broke up a little earlier, but can you talk about where you see your budget for the casinos to the point where, what do you believe the budget will be when you complete the casinos? I'm sorry.

Scott Christian Buck: So hopefully we can stay on that timeline or as long as nothing comes up or nothing comes out of committee that Oh that was.

Scott Christian Buck: What was missed in the AR and the vetting.

Scott Christian Buck: Graham.

Scott Christian Buck: He knows and Blackhawk ran a casino in central City boat.

Scott Christian Buck: For the past 20, some years. It was very knowledgeable are very well known by the department of gaming as well as a.

Scott Christian Buck: Many of the other operators are employees and whatnot, Emma and in that Central City box car area.

None: Great and I'm, sorry, you broke up a little earlier, but can you talk about where do you see your budget for the casinos.

None: To the point where <unk>.

None: What do you believe the budget will be when you complete the casinos.

None: I'm, sorry can you repeat that I'm sorry.

Eric Scott Langan: Yes, can you give us an idea of what the budget will look like to complete the casinos? I believe you mentioned that earlier, but you kind of broke up. Okay, sure. The budget for the casinos is probably overall about $20 million for both properties, including the real estate purchases.

Yes can you give us an idea of what the budget will look like but.

None: To complete the casinos I believe you mentioned that earlier, but it was you kind of broke up.

None: Okay sure the budget.

None: The budget for our casinos are is probably overall about $20 million per per for both properties.

None: Including the real estate purchases, we spent about two and a half million AR on the day of the real estate purchase or about another eight so we've got about 10 million more to spend it will depends on how it is.

Eric Scott Langan: We spent about $2.5 million on the deal, and the real estate purchases are about another $8 million. So we've got about $10 million more to spend, but it depends on how we're going to pay for the machines. If we pay all cash for the machines, that would be a very significant amount of money. But it looks like we're going to do There are some terms we can get that are like 12 months, same as cash. We don't have to start making payments until after the machines are installed with some operators.

None: And how we're going to do the machines and.

If we pay all cash for their machines are that would be a very significant.

None: Amount of money, but it looks like we're going to do there are some terms we can get there by 12 months famous cash we don't have to start making payments till after the machines are installed with some operators.

Eric Scott Langan: We can also do rev share, and that will also create some, you know, cash outlay savings for us. We'll still have to pay, but we'd have time to do that. Great, thanks, Eric.

None: We can also do Rev share that will also create some.

None: Cash outlays savings for us was to have to pay that or we'd have time to do that.

Great. Thanks, Eric and then lastly, with regards to the macroeconomic uncertainty that you've been discussing.

Scott Christian Buck: And then, lastly, with regard to the macroeconomic uncertainty that you've been discussing, I take it that, can you just confirm if it's still in the blue collar, how your white collar customers are holding up? And then, kind of in general, what do you think we have to see to move beyond this area or time period of macroeconomic uncertainty? Well, I mean, we have to get rid of uncertainty in the marketplace. You know, it's funny because you read stuff in the media and you hear how great things are in jobs and this and that, but yet, when you go out on Main Street and you start talking with people, they're uncertain. Even the people that are doing very well in their jobs right now are uncertain. Is my job still going to be here three months from now?

None: I take it that could you just confirm if it's still on the blue collar, how your white collar customers are holding up and then kind of in general what do you think we have to see to move beyond this area.

None: Our time period of macroeconomic uncertainty.

None: Yes.

Well I mean, we have to get rid of the uncertainty in the marketplace.

None: It's funny because you read.

None: You know stuff in the media and you hear all how great things are in jobs, and this and that but that when you go out into on main street and you start talking with people.

None: They are uncertain.

None: Even the people that are doing very well in their jobs right now are uncertain as my job. So I'm gonna be here three months from now.

Eric Scott Langan: Am I still going to be doing as well? You know, what are interest rates going to be? And we're seeing that in the customer. You're seeing the customer trade down. So, which is typically recessionary behavior. So, we're definitely seeing customer trade down. We're seeing customers maybe not come as often. So, our Mondays and Wednesdays are becoming slower, and you're going to start seeing us do some, basically, what I call recessionary discounting on other days, which is kind of like dynamic pricing. Only we do it on certain days rather than all the time. So, we're going to see that happen as we keep moving forward. We've already got a lot of these things going into place right now, and until that customer's confidence is back, I think we're going to have to figure out ways to bring that customer in and get that customer to continue to spend money. Thank you. That's it for me.

None: It's still going to be doing as well.

None: You know what our interest rates are going to be.

And we're seeing that in the customer are you're seeing the customer trade down.

None: So which is typically recessionary.

None: Behavior.

None: We're definitely seeing the customer trade down we're seeing the customer.

None: Maybe not come as often so our Mondays and Wednesdays are becoming slower and youre going to start seeing us do some some basically what I call recessionary discounting on other days.

None: <unk>, which has been kind of like dynamic pricing only a weekend or we do it on certain days rather than all the time.

None: So we're going to see that happen.

None: As we're moving forward, we've already got a lot of these things going in into place right now.

None: And you know until that customers' confidence is back I think we're going to have to figure out ways to bring that cash rent and get that customer to <unk> to continue to spend money.

None: Thank you that's it for me. Thanks, so much Rob and we appreciate the question next up we're going to have or Cana wells and I'd like to encourage everyone who has a question to raise their hand, and we'll bring you up to the speaker spot work and wealth taken away Hey, guys let's.

Scott Christian Buck: Thanks so much, Rob. We appreciate the question. Next up, we're going to have Orchid Wealth, and I'd like to encourage everyone who has a question to raise their hand, and we'll bring you up to the speaker spot. Orchid Wealth, take it away.

Orchid Wealth: Hey guys, let's go into the Admire Me 2.0 that you guys are going to be doing. How long have you been dealing with or engaging with this partner that you're bringing on? Oh, sorry, I better unmute myself.

Cana Wells: Let's go into the admire me to point out that you guys are going to be doing how long have you been dealing or engaging with this partner that you're bringing on.

Cana Wells: Oh, sorry incubator in REIT myself, we started talking with.

Eric Scott Langan: We started talking with them at Expo in Vegas in August, and we kind of developed a relationship. We had to get comfortable with each other. We've laid out the foundation of expectations from both sides and done that. We probably signed the agreement about 3 weeks ago, I believe. They've been working on some skinning ideas and how they're going to, what it's going to look like, what the site's going to look like, have registered the domain or purchased the domain, so we have those all ready to go for the new launch. They're very excited. Like I said, we're shooting for basically some testing, which we don't need to do a lot of testing. The software is really just making sure that everything flows properly with the design so that we don't end up with you click on a link on our site and actually end up seeing content or something from their previous website.

Cana Wells: Them at Expo in Vegas in August.

None: And we've kind of developed a relationship we had to get comfortable with each other.

None: We've laid out the foundation of our expectations from both sides.

None: And on that we've we probably signed the agreement about three weeks ago, I believe and they're they've been working on some skinny and ideas and how they're going to what it's going to look like what size going to look like have registered the domains of our purchase a domain. So we have those are all ready to go for the for the new launch.

And Theyre very excited our you know because they were shooting for.

None: Basically some testing of which we don't need to do a lot of testing. The software is really just making sure that everything flows properly with the design. So that we don't end up with.

None: You click on a link and our.

None: On our site and actually end up.

None: <unk> content or something from from their previous website. So it's basically just going to make sure everything's is working properly.

Orchid Wealth: So it's basically just going through to make sure everything is working properly, and then we'll be ready to launch. We'll start at a couple of specific clubs, putting on entertainers from those clubs first, getting everything rolling, and then basically do a full company-wide launch, hopefully by. And then, how long has this partner been in the business of doing this in terms of like, they're going to handle the credit card processing or all that aspect of the business? You're basically supplying the performers or the entertainers? Kind of.

None: And then we'll be ready to launch we'll we'll start.

None: A couple of specific clubs are putting on entertainers.

None: From from those clubs first.

None: Getting everything Roland and then basically do a full a full company wide launch hopefully by bye-bye may or June and then not land. How long is this partner been in the business of doing this in terms of like Theyre going to handle the credit card processing or all that that aspect of the business you are basically supplying the performers for the entertainers.

None: Yeah.

None: A kind of a I mean guess, it's at <unk> through our company. So all we are processing are soft, but we're going to be working with different banks and we worked with with admire me, who they have a much longer and stronger relationships with.

Eric Scott Langan: I mean, yes, it'll still be through our company. So we are processing our stuff, but we're going to be working with different banks than we have worked with with Admire Me, who they have much longer and stronger relationships with, as well as other vendors that they've been using. They've been in the business since the early 2000s. It's funny because we started talking about different people throughout the industry from back when, you know, Rick's had Dancer Dorm back in 1999. And we all kind of knew the same people.

As well as other vendors that they've been doing they've been in the business.

None: Since early two thousands of Backwind I bet. They it's funny because we we started talking about different people throughout in in the industry from back when Rick's had dancer dorm.

None: Back in 99 early two thousands and we all kind of knew the same people and I was kind of find that we are both in the business at the same time back then and didn't really didn't really meet up back then so I'm very optimistic.

Orchid Wealth: And it was kind of funny that we were both in the business at the same time back then and didn't really meet up back then. So, you know, I'm very optimistic and excited to see where the concept will go when it gets the right software. I think we have the right idea. We just didn't have the right medium to basically put the entertainers and the customer base together. And with their software, we're going to be able to do that. And like I said, with full video streaming, that seems to be the big thing these days.

None: Domestic and excited to see where where the concept will go when it has the right software because I think we have the right idea. We just didn't have the right the right medium too.

None: Basically put the entertainers and the customer base together.

None: And with with their software, we're going to be able to do that and we're like I said with both with four video streaming.

None: That seems to be the big the big thing. These days, so I'm very excited about.

Eric Scott Langan: So I'm very excited about where that's going to go. And how many entertainers do you think you're going to be able to at least offer this as an option by being an independent contractor within the firm? How? Well, I mean, in 2023, we had over 25,000 contracted entertainers nationwide. So, I mean, if we could get 5% of them, that'd be $1,250. If we could get 10%, we'd have $2,500 and so on. So, you know, I don't really know. And that doesn't count waitresses or any other front of house staff, whether, you know, there's some bartenders or, you know, door girls, whatnot, that might be interested in being on this site.

None: How many entertainers do you think youre going to be able to at least offer this as an option by being an independent contractor within the firm.

None: Yeah.

Well I mean, we are we have we had.

None: And in 2020 three we had over 25000 contracted entertainers are nationwide. So I mean, if we can get 5% of them that would be 1200, 50, or we can get 10%, we'd have 2500, and so on so I don't really know and that doesn't count waitresses or any other front of house staff whether.

None: As you know, there's some bartenders or no door girls whatnot that might be interested in and and being on the site.

Orchid Wealth: And then, of course, other clubs and outside people as well. So, I think it'll grow relatively quickly. We were doing pretty decent and growing it when we were pushing it. The few times we tried to push it with my army, but as soon as we started putting any people on the site, we ran into bugs and problems that we'd have to stop and hold back and then try to fix the software.

None: And then of course other clubs and outside our people.

None: People as well so I think it will I think it will grow relatively quickly.

We're doing we're doing a pretty decent and grown it when we were pushing it a few times, we tried to push a miami, but as soon as we start putting any people on the site. It would we've rented a bugs and problems that we'd have to stop and hold back and then try to fix the software. The beauty of their software is is up and running and and is already ready to handle <unk>.

Eric Scott Langan: The beauty of their software is that it's up and running, and it's already ready to handle, you know, hundreds and hundreds of people at a time. So, that's going to be a big plus for us. Are any other clubs in the marketplace doing something like this?

None: <unk> and hundreds of of our people at a time so that.

None: That's going to be a big.

None: A big plus for us or any other clubs in the marketplace doing something like this or are you guys going to be at the forefront of this.

Orchid Wealth: Or are you guys going to be at the forefront of something where other clubs that are maybe, you know, competitors or not competitors in other markets would want to join on board and this becomes like, This is the entertainers-only fans, you know, one-stop shop? Because it seems like a lot of this stuff is really about just being first to market. You look right at us trying to do it before. I know how much it costs.

None: Where other clubs that are maybe.

None: Competitors are not competitors in other markets would want to join onboard and this becomes like this is the entertainers only fans you know one stop shop, because it seems like a lot of this stuff is really about just being first to market.

None: Right.

None: With us trying to do it before I know how much it costs and I don't think any of their upper I don't know of any other operators that are trying.

Eric Scott Langan: And I don't think any of their I don't know of any other operators that are in and start trying to wrap these up. I know there's some other sites out there that have tried to tap the entertainer market. But I don't think they have direct contact with the people of the entertainers like we do, as well as some of our competitors. We will be able to offer them incentives for them to put their entertainers on our site, and they'll, you know, earn residual income as well through referral programs.

None: Right now I haven't heard anything and when they start looking at what it costs to try to get there is going to read in too much. So.

None: So I don't think they'll do it is kind of where I got Derek that terms like but we're not going to keep at the rate we're going to get it's been another $3 million trying to get this thing working.

None: And here, we got a guy in a partner who has got everything we can give about 25% of the deal and be light years ahead of where were at and it is about being first to the market. So I didn't want someone else to go in and start trying to you to wrap this up I know there are some other sites out there that are trying to tap the entertainer market.

None: But I don't think they have the direct contact with the people who are the entertainers like we do.

As well as.

None: Some of our competitors, we will be able to offer them.

Incentives for them to put their entertainers on our site.

Orchid Wealth: So the new operator and the new software is going to be incredible. All we have to do is do what we do is get our entertainers on there. You know, basically, we get them to show up, and they provide everything. And then just one last question, I know OnlyFans typically does an 80-20 revenue share with 80% to the entertainers and 20% to the OnlyFans platform. Is yours going to be similar to that? It's exactly the same as you've seen from Admire Me, and we have it set up the same way.

None: And they'll earn residual income.

None: As well so a.

None: Through a referral programs so.

None: The new the new operator.

None: And the new software is going to be incredible all we have to do is do what we do is get our entertainers on there.

None: No basically we get them to show up and they provide everything else.

None: Which is all right and then just one last question is is I know only fans typically doesn't 80 20 revenue share with 80% of the entertainers and 20% too.

None: With only fans a platform is is euro is going to be similar to that.

None: It's exactly the same as <unk> seen from admire me or we haven't set up the same way.

Eric Scott Langan: And we may end up, you know, using part of our 20% as referral fees for a time period. And we may also bring some big influencers over from other sites that are also in the entertainment business, whether in our clubs or other clubs. And we may offer them a little more of the percentage. So there may be we may make a little less than 20% in the beginning, but at some point. You know, those promotions will end. It'll just be marketing dollars, basically. And then we'll revert to the standard method. Well, fantastic.

None: And we may end up using part of our 20%.

None: A S referral piece.

None: For a time period, and we May also bring some big influencers over from.

None: Other sites that are also in the entertainment.

None: And our clubs or other clubs are.

None: And when we may offer them.

None: A little more of the of the percentage. So there may be we may make little lesson, then the 20% at the beginning but at some point.

None: Those promotions will and it'll just be a marketing dollars basically.

None: And then we'll we'll revert to the Andrew welcome.

Orchid Wealth: I mean, I think this venture is obviously something I've been hoping for for years, so good luck with that. And I look forward to the next call. Thank you so much for the question. Next up, we will have Evan Tindell. Evan, please take it away. Hey guys, thanks for taking my call. The way you talked about kind of the same store sales performance in the nightclub segment makes me think that you guys are kind of of the opinion that it's a similar thing. I'm sorry, but this is Bradley.

None: Africa, I mean, I think adventure, obviously, that's been something I've been hoping for for years. So good luck with that and I look forward to the next call.

None: Thank you. Thank you so much for the question next up we will have added two they'll ebb and please take it away.

Added Two: Hey, guys. Thanks for taking my call.

Added Two: Is.

Added Two: The way you talked about kind of the same store sales performance in the nightclubs segment makes me think that.

You guys are kind of the opinion that it's at.

Added Two: Same thing is I'm sorry. This is Bradley can you repeat the question we missed the first part of it.

Evan Tindell: Can you repeat the question? We missed the first part of it. Oh, sorry.

Bradley: Oh, sorry.

Bradley Lim Chhay: I think the first part was just me thanking you for taking the call. Um, but obviously, you guys have talked about the kind of the macro environment at, um, at the clubs. And it makes me think that, uh, you guys are of the opinion that the results at other clubs are kind of similarly negative in terms of same-source sales. So I was just wondering if that's kind of, uh, the poor results at other clubs are kind of increasing the, the inbound offers you guys have in terms of acquisitions or might make the multiples that you guys can pay a little lower given the recent performance. Yeah, I've talked with several other club operators. In fact, I'm going to... with a club operator that is basically between him, And so that's definitely going to be an issue.

None: I think the first part was just me thanking you for taking my call [laughter], but so obviously you guys have talked about the kind of the macro environment.

Bradley: At the clubs and it makes me think that you guys are of the opinion that the results at other clubs are kind of similarly negative in terms of same store sales. So I was just wondering if that's kind of a full.

Bradley: Core resort for results at other clubs are kind of increasing the inbounds.

Bradley: Offers you guys have in terms of acquisitions or might make the multiples that you guys can pay a little lower given the recent performance.

None: Yeah, I've talked with several other club operators.

None: In fact I'm going to.

None: Speaking with along with the club operator that basically between him some of them as partners about 65 clubs around the country, they're very they're all you know.

Eric Scott Langan: But as far as more offers, yeah, we're talking with several acquisition targets. The biggest problem we have is everybody wants to sell based on their 2022 numbers, and you know, don't we all? The reality of it is, there was a lot of free cash out there, and there was a lot of pent-up demand for it. Okay, thanks.

None: Very similar.

None: In time declines on a lot of their declines are even higher than ours.

None: Uh huh.

None: I'm hearing from some people as much as 20 or 30% of certain locations in declines from from their highs and so that's that's definitely going to be an issue.

Evan Tindell: One more question. So there were a couple threads on Twitter about the kind of some of the warnings and the 10 Qs and 10 Ks over the years about internal controls. And I was just wondering, you know, there's one warning about goodwill impairments, and there was one about user access to the IT systems. And I was just wondering if you could kind of address some of those concerns or maybe help explain kind of what those are about for people that don't know or that just might be reading the financials for the first time. Yes, sir. If you notice, they continuously change, right?

None: But as far as more and more offers yet we're talking about we're talking with several acquisition.

None: Targets are the biggest problem. We have is everybody wants to sell based on their 2022 numbers and you know don't we all are the reality of it is is there was a lot of free cash out there and there was a lot of pent up demand that.

None: It doesn't exist today and higher interest rates.

None: And more economic uncertainty and so I can't be buying at a five times multiple of our F.

None: 2022, when we're in 'twenty 'twenty, four and I know that the those numbers aren't repeatable.

None: Okay. Thanks, and then one more question. So there was a couple of threads on Twitter about the kind of some of the learnings and the 10-Qs and 10-Ks over the years about the about internal and internal controls.

Eric Scott Langan: It's like our auditors are continually trying to find some new material weakness every single year. And typically, when they're found, whether by us, whether by our internal third-party independent auditors or by the auditing company or by the auditors themselves, we immediately make changes, adjust, and correct them. But the problem is, in order to get a clean bill of health, you have to be fixed for the entire year. So even if it was one day that something was off, you know, you get a material weakness.

None: And I was just wondering I know, there's one warning about like goodwill impairment and there was one about like user access to the I T systems and I was just wondering.

None: If you could kind of address some of those concerns are really help explain kind of what those are about the people that.

None: That don't know or or is that or just might be reading the financials for the first time.

Eric Scott Langan: So we have to deal with that. You know, I'm hoping, you know, all we can do is keep pushing and keep working and keep fixing things as they say. I will say that none of the weaknesses they've ever found have ever caused a restatement of financials. They've never found any fraud or anything like that.

None: Okay.

None: Yes, sure if you notice they continuously change right. It's like our auditors are continually trying to find some new material weakness every single year.

And typically we when they're when they were found whether by us whether by or are in.

Internal.

None: Third party independent auditors or by the auditing company I'm, sorry by auditors ourselves.

None: We immediately made changes and adjust and correct them, but the problem is in order to get a clean bill of health you have to have be it has to be fixed for the entire year. So even if it was one day that something was off.

Eric Scott Langan: It's just, it's the old saying, it's, "What if?", "What if, what if, what if." And I always use the example of if you have a bank vault in your home and you have a security system in your home and you have all these things to stop somebody from being able to steal a necklace out of your home, but they come up with a way to break into your house, circumvent all of your stuff and still steal the necklace, even though the necklace was never stolen. They turn and say, well, that's a material weakness, And so those are the things we face. And as a growing company, you know, in the beginning, it was software; it was all software. Our software didn't scale. We put an ERP system in. We corrected, you know, the majority of those what-ifs with our IT stuff. I mean, at the end of the day, you have to have somebody in IT that's responsible for monitoring the system, keeping the system up and running, and running the backups. You know, this is a very highly paid employee who has to have that access.

None: You know you get a material weakness so we have to deal with that I'm, hoping you know while we can do is keep pushing and keep working keep fixing things as they say you know I will say that none of the none of those weaknesses they've ever found of ever cause restatement of financials, they've never found any fraud or.

None: Anything like that it's just.

None: As the old saying is what else what if what if what if a man I always use the I always like to use. The example of if you have a bank vault in your home and you have a security system in your home and you have all these things to stop somebody from being able to steal a necklace out of your home and they come up with a way to break into your house circumvent all of your staff and still feel the necklace.

None: Even though the necklace was never stolen they face turn and say well that's a material weakness and so now you've got to fix this new new water and so those are things, we face a and as a growing company.

None: In the beginning it was software is all software our software didn't still we put an ERP system in we corrected our.

None: The majority of those what ifs with our soft I mean at the end of the day you have to have somebody in it that's that's responsible for chegg.

Eric Scott Langan: And just like the company has to have a CEO that has the ability to make certain decisions and whatnot. And so basically, what they said, you know, with our IT stuff, I think it was basically, you know, basically one guy had the power to change and do things and, you know, where was the check system on him? And I think we've resolved all of that now through notifications to certain people if things are changed and whatnot, but, you know, you don't know what you don't know until they come in and say, Oh, this is a, you know, this could happen or this could happen, even though it's never happened. Obviously, once it happens, we've always taken or anything's ever happened. We've always been able But we can't think of every little detail and every little thing constantly that could happen when it's when it does never happen or has never happened, or hasn't even happened to somebody else.

None: For monitoring the system, keeping their system up and alive running the backups.

None: And.

None: That's a very high paid employee who's who has to have that access.

None: And just like the company has to have a CEO.

None: That has the ability to make certain decisions and whatnot.

None: And so basically what they said you know with our with Archie stop I think is basically as you know basically one guy had powers to change and do things and.

None: Where was the check system on him and.

None: I think we can.

None: Resolved all of that now through notifications to certain people, if things are changed and whatnot, but.

None: You know you.

None: You don't know what you don't know until they come in and say Oh. This is this this could happen or this could happen even though it's never happened obviously once it happens we've always taken or anything's ever happen, we've always been able to fix in the justice system.

None: But we can't think of every little detail on every little thing constantly you know that could happen when it when it does never happened in our has never happen or hasnt, even happen to somebody else.

Eric Scott Langan: So those are things we deal with, and we just keep working on them. Okay, thanks, guys. Fantastic. Thank you so much, Evan.

Adam David Wyden: Next up, we have Adam Wyden of ADW Capital. Okay, yeah, I'm here. I'm here.

So those are the things we deal with and we just keep.

None: Working on that okay.

None: Okay. Thanks, guys.

None: Okay.

None: Fantastic. Thank you so much adding next up we have in stereo and Mark talks.

Adam David Wyden: A couple of things. You know, it was encouraging that you wrote in the press release that you thought you'd seen the bottom in the same store sales and think consistent with other people's commentary and sort of live entertainment, Dave and Buster's Bowl, all this stuff. It seems like, you know, that you're doing more promotion and stuff like that. But you know, people are, you know, still willing to spend. Maybe spend differently, but people are still willing to spend. So that's good.

None: Okay.

None: Thank you Eric next up we have Adam Wyden of 80 W capital.

None: Okay.

I'm here I'm here.

Adam David Wyden: Couple of things you know it was encouraging that you wrote in the press release that you thought you have seen the bottom.

Adam David Wyden: And the same store sales and I think consistent with the other people's commentary and sort of live entertainment, Dave and Busters Bull all this up it seems like.

Adam David Wyden: And I guess this is your seasonally weakest quarter anyway. That's like, you know, about 20% of EBITDA, at least historically. So, you know, it sort of gives you a nice baseline of sort of where you are.

Adam David Wyden: Youre doing more promote a and stuff like that but you know people are you know people are still willing to spend maybe spend differently, but people are still willing to spend so.

None: That's good and I guess this is your seasonally weakest quarter anyway, that's like about 20% of EBITDA at least historically, so sort of gives you a nice baseline of sort of where you are but.

Adam David Wyden: But a couple of procedural questions. You mentioned $2 million of costs annualized per quarter. That's roughly $8 million of EBITDA. Is that in bombshells, nightclubs, or corporate?

None: Couple of sort of procedural question, you mentioned $2 million of costs annualized per quarter.

Eric Scott Langan: Can you talk a little bit about where you think that cost is going to come from? Well, I mean, we're doing the COVID sweep, as I call it. When we got closed down for COVID, we had to sit down and go through every single possible expense and where we could waive, what we could get rid of, how we could make changes, where we could make cuts, you know, what non-income producing properties or non-income producing assets we needed to get rid of. So, we're going to sit down.

None: That's roughly $8 million of EBITDA is that in bombshells nightclubs corporate can you talk a little bit about where you think that cost is going to come from.

None: Well I mean, we're doing the COVID-19 sleep as I call. It when we got close down for Covid, we had to sit down and go through every single possible expense.

None: Expense and where we could weigh what we could get rid of how we can make changes where we could play where he can make cuts.

None: What non income producing properties or non income producing assets, we needed to get rid of where we're going to sit down there and we've been doing it but we're going to continue and I mean, theres a lot of <unk>.

Eric Scott Langan: We've been doing it, but we're going to continue. I mean, there are a lot of, you know, 70-some operating subsidiaries, so there are a lot of subsidiaries still to go through. But we've been working on this, you know, basically since we internally had results from the past quarter. So there are going to be a lot of places. A part of it was with Admire Me, making the major change with Admire Me, bringing on a partner there is going to be a significant cost reduction for us going forward. We're looking at all ST&A expenses.

None: 70, some operating subsidiary so theres lot of subsidiary still to go through.

None: But we've been working on this basically since a week, we internally had results a.

None: From the past quarter. So it's going to be a lot of places are part of it was with admire me, making the major change was in Miami, bringing on our.

None: Our partner there is going to be a significant cost reduction for us.

None: Going forward.

None: We're looking at all SG&A expenses, we're looking at all you know club by club.

Adam David Wyden: We're looking at all, you know, club by club, whether it's employees, whether it's security, whether it's basically every little cost and figuring out where we can, where we can make the cuts, just like we had to do back in 2020 when COVID hit. Yeah, well, you guys did an excellent job cutting costs during COVID. So, you know, obviously, you guys have shown that you guys can make margin with lower revenues. So, you know, look, I, you know, another eight to $10 million of cost, if you can do it, would be well, would be well welcomed, you know, from a cash flow perspective as it relates to being able to allocate capital and to share repurchase or, or more clubs.

Whether it's employees, whether it's a security whether it's air.

None: Basically every little caution and figuring out where we can wherever we can make the comps just like we are just like we had to do with backend 2021 yes.

None: Well you guys did an excellent job cutting costs during COVID-19. So obviously.

None: You know you guys have shown that you guys can make margin with lower revenues. So.

None: Look I, another $8 million to $10 million of cost. If you can do it would be well would be well welcomed.

None: From a cash flow perspective, as it relates to being able to allocate capital to share repurchase or or more clubs.

Adam David Wyden: Secondly, you know, obviously, you expect to get the casinos open, but you talked a lot about non-income-producing properties. You've got, I don't know, three or so clubs, I can't keep it all straight that are sort of being remodeled to, you know, being reopened. Those are obviously not, you know, you're not, you know, sort of waiting on the same source deal to come back Do you mind trying to sort of enumerate sort of what you think that is in revenue and potential EBITDA contribution?

None: Secondly, you know obviously you are that you expect to get the casinos open but you talked a lot about non income producing properties, you've got I don't know three or so clubs I can't keep illustrate that don't get sort of being remodeled to.

None: Being reopened those are obviously not you're now sort of waiting on same store sales to come back to your line with trying to sort of a numerator sort of what you think that is in revenue and potential EBITDA contribution I mean, I'm just sort of trying to sort of give people an understanding of you know look if the company does nothing from here same store sales on improved you get the a plus.

Eric Scott Langan: I mean, I'm just sort of trying to sort of give people an understanding of, you know, look, if the company does nothing from here, same-source sales don't improve, you get the eight plus million dollars of EBITDA from cost, and you get another X million dollars of revenue in EBITDA from the clubs reopening. And that sort of gives you a baseline assuming things don't get worse, which you don't think they are, which is sort of not in the numbers today, you know, so you can sort of take the 18, multiply it by five, gets you to 90, you know, if it's 20 percent, and then you add the eight million dollars of cost reduction plus club gives you a sense of what normalized EBITDA is for X casinos. Do you understand where I'm going with this? Yeah, I got you. So, only one is actually a remodel.

Million all of the EBITDA from cost and yet another X million dollars of revenue and EBITDA from the clubs reopening and that sort of gives you a baseline assuming things don't get worse, which you don't think they are what sort of not in the numbers. Today. So you can sort of take the the 18 multiply it by five gets you to 90.

None: If it's 20% and then you add the $8 million of cost reduction plus clubs sort of gives you a sense of what normalized EBITDA is X casinos, yes, Joe I'm going.

Joe: Yeah, I gotcha, so why only.

Joe: Only one is actually a remodel that's the Abilene and we've closed that down and remodel because we were going to get a liquor license then we couldnt get the late hours and so we basically went back to the BYOB for a very short period of time and then once we did that the the city worked with us out there to get us the.

Adam David Wyden: That's the, And we closed that down and remodeled because we were going to get a liquor license, but then we couldn't get the late hours. And so we basically went back to BYOB for a very short period of time. And then once we did that, the city worked with us up there to get us the late hours. So now we have, we're going to be able to sell alcoholic beverages until 2 a.m. So we've rebranded it. Now we have Babydolls, and it is doing so well. We rebranded it to Babydolls.com.

Joe: The late hours. So now we have we're going to be able to sell alcoholic beverages until two a M. So we've re branded that now we have made I was doing so well we rebranded it to a baby dolls.

Eric Scott Langan: It will hopefully open in March. And then, as well as, Love It Club is near completion and should open in March as well. So, we should get six months out of both of those locations. Both of those locations have gone from BYOB clubs to alcohol sales clubs. I'm guessing it should be somewhere around $60,000 to $80,000 a week in sales clubs, so somewhere between $3 million and $4 million annualized revenue, and then use a 40 percent margin rate or 30, 35 percent margin rate wherever we're at here.

Joe: It will open hopefully in March.

And then as well as non Lubbock Carrabba's is near completion and should open as March as well. So we should get six months of both of those locations both of those locations have.

Joe: I've gone from BYOB clubs to alcohol sales clubs should I'm I'm guessing should be somewhere around 60 to 80 80000, a week sales clubs, so somewhere between three and 4 million annualized revenue.

Joe: And then the user a 40% margin rate.

Joe: Our 30, 35% margin rate, where we're at here.

Adam David Wyden: I think both clubs will be able to have VIP areas, so we should have plenty of service revenue at both those locations. The third location will probably not open probably until the first quarter of 2025, so it won't really contribute in 2024, but it is a very large location. It's a building we bought in Fort Worth, Texas, where we bought the property.

Joe: I think both clubs will be able to have VIP area. So we should have plenty of service revenue at both of those locations.

Joe: The third location will not open and probably until the first quarter of 2025.

So it won't really contribute.

Joe: And in 2024, but it is a very large location.

Joe: Location, we had bought in Fort worth, Texas, We bought the property, we're going to revamp and reopening club there.

Eric Scott Langan: We're going to revamp and reopen the club there. We're building the second floor. We're doing a lot of construction. It's about a $3 million rebuild of the building, so part of the building will still be there, but basically, we're tearing down a big portion of the building, tearing off the roof, and putting up all new parking, and whatnot. So it'll be a much bigger deal, but I also think it will contribute at a much larger ratio in that location is probably around $140,000 to $180,000 a week when it reopens, so somewhere between $7 million and $9 million. And I think the margins will be at that larger location, much closer to our 40% typical margins for a club of that size. So just humor me for a minute.

Joe: We're building a second floor, we're doing a lot of serious amount of $3 million.

Joe: Rebuild of the building for that part of the billing will still be there, but we're basically we're tearing down a big portion of the building are tearing off the roof and going up.

Joe: All new all new parking.

And whatnot, so it'll be a very.

Joe: Bigger deal, but I also and I think it will contribute in a much larger ratio in that that location is probably around 140 to 180000 dollar week location.

Joe: When it reopens, so somewhere between seven and $9 million and I think the margins will be at that larger location much closer to our 40% typical margins for our clubs. So just humor me for a minute and maybe even a humor me for a minute.

Adam David Wyden: And maybe even higher. Humor me for a minute. You know, if you say you do, you know, seven for the two little clubs and eight for the big club, but maybe even more, that's like $15 million at a 35%, 40% margin. That's another $6 of EBITDA. And then add another eight for cost reductions, that's like 14, again, on a, you're not going to get it this year, but I'm just saying, you know, sort of on a normalized basis. And if I take your sort of 17, map 18, and I multiply it by five, you know, I'm getting to a number that looks like, you know, around $105 million without the casinos, without M&A, The same store sales don't improve, and all you have to do is, you know, do your COVID sweep, get your clubs open, right? Then, you know, you're looking at something like, you know, $ 105 of EBITDA, not including casinos, not including M&A. I mean, are you sort of following my math?

Joe: You you say you do.

Joe: Seven from the two little clubs in.

Joe: You know for the Big club, but maybe even more that's like $15 million at a 35% to 40% margin and another six of EBITDA and then add another eight for cost reductions. That's slide 14 again on it you're not going to get it this year, but I'm, just saying you know sort of on a normalized basis, if I take your sort of 17 nap 18 in mobile.

Joe: Plant by five you know.

None: <unk> I'm getting to a number that looks like you know around 105 million without the casinos without M&A and without sort of improper new bombshells just to sort of give people a baseline of like assuming you can talk about do nothing on a capital allocation perspective, I'm sort of saying do nothing on an operating basis I E. The same store sales don't improve and all you do.

None: Is there do your Covid sweep get your clubs open right. You know then youre looking at something.

None: 105 of EBITDA, not including casinos, not including M&A I mean are you sort of following that out.

Eric Scott Langan: Yeah, I'm following your math, but yeah, I think you're... We do have to have same source sales bottom out, and we have to have same source sales at, Hey, Eric, you're cutting out? Yeah, you said we have to have same-store sales, and then we lost. Can you hear me now?

None: Okay I'll follow your math, but yeah, I think you're you.

None: We do have to have same store sales bottom out and we have to have same store sales.

None: Hey, Eric Youre cutting out you said, we have to have same store sales and then we lost you.

Eric: Yes, you hear me now yeah.

Adam David Wyden: Okay. I think we have to have things to ourselves, you know, bottom and, and, and, you know, return back to that three to 5% growth. In order to deal, we're going to have to obviously fix the bombshells, you know, get bombshells back to where their margins are headed the right direction, not one percent, but back to their 15 to, you know, 18, 22 percent margins where they need to be at. Then I think your hundred and some million is probably a very good number right now.

Eric: Okay.

Eric: I think we have to have same store sales and a bottoming and returned back about three 5% growth.

Eric: In order to deal we're going to have to obviously a.

Fixed the bombshells for you now get bombshells back to where their margins are you now and in the right direction is not 1%.

Eric: But back to the back of their 15 to 18, 22% margins, where they need to be at a then I think youre 100, and some million is probably a very good number right now I mean, if you yeah.

Eric Scott Langan: I mean, if you figure we're probably $80 million without anything new opening up these two new stores, provided that this was our worst quarter. So it's definitely doable, but there are some things that have to happen, and some things have to go right. I suspect that, like I said, I think March Madness, I think we're, I think we have returned to, you know, basically 2007 to 2019 type seasonality in the business, which means March should be a huge turnaround month. March Madness should be really, really big for us this year.

Eric: You've got a figure where probably.

Eric: $80 million without anything new Albany opened up these two new stores.

Eric: Provided that the that this was our worst quarter.

Eric: Uh huh.

None: I'm sorry, it's a it's definitely doable, but there are some things that have to happen and.

None: And so things have to go right.

None: I suspect that like I said I think March Madness live I think we're I think we returned to them.

None: Basically 2000 17019 type of seasonality in the business, which means March should be a huge turnaround month March.

None: March madness should be really really big for us this year and we should start seeing the.

Adam David Wyden: And we should start seeing, you know, the typical spring fever that we see in March. We do have five weekends in March this year, so while January may seem a little weaker, we had five weekends in January last year, which, you know, that weakness was, and we had some pretty tough weather this year in January, where we had it in February, I think, the previous year. So we'll have to see how that weighs out as we get to the end of February, but I'm very optimistic that this quarter will be much better. Well, what I was trying to do, Eric, what I was trying to do, and I have one last question, is just try to bridge the gap for the audience that, like, this quarter did not, this last quarter is, you know, your seasonally weakest. So if you were to say, hey, it's 20% of EBITDA, and then, by the way, these are all the things we are doing today, right, whether you get I know you like to think about things in years.

None: A typical spring fever.

None: That we see in March AR, and we get we do have five weekends in March this year. So our January may seem a little weaker we had five weekends in January last year.

None: Which which you know that weakness was and we had some pretty tough weather.

None: This year in January where we had in February I think the previous year. So we'll have to see how that weighs out as we get to the end of February but I'm very optimistic this quarter will be much better.

None: Well I was just I was what I was trying to do Eric what I was trying to do and they are one last question is just trying to bridge for the audience that like you did this quarter did not right. This last quarter is your seasonally weaker. So if you were to say hey, it's 20% of EBITDA and then by the way. These are all the things we are doing today right, whether you get a full credit for them for the full year I know you.

None: Like to think about things in years, I think a lot of people in the audience like to think about things sort of on a normalized basis run rate basis, and so when you think about $8 million of annualized cost and then you think about having those clubs open.

Eric Scott Langan: I think a lot of people in the audience like to think about things sort of on a normalized basis, on a run rate basis. And so when you think about $8 million in annualized costs, and then you think about having those clubs open, you know, what does the business look like on a normalized basis, end of the year type thing? That's all I'm saying, that, like, I think everybody understands you're not even going to have the big club open until the end of the quarter, you know, end of the year. I'm just saying, like, all things being equal, if you get the cost cuts and the same store sales due bottom, you know, and you get these clubs open, you know, sort of what does the business look like, right?

None: What does the business look like normalized exiting the year type thing, that's all I'm, saying that like I think everybody understands you're not even have the big club open until the end of the quarter.

None: End of the year, I'm, just saying like all things being equal if you get the cost cuts and the same store sales do bottom you know and you get these clubs open you know sort of what does the business look like right. Obviously, you can get the casinos open to and then that's not in the numbers either right I'm, just trying to sort of.

Eric Scott Langan: Obviously, you can get the casinos open, too, and then that's not in the numbers either, right? So I'm just trying to, you know, sort of, you know, yeah, I mean, from the club standpoint, I mean, the clubs have been very strong. We've had a couple of quarters here where your same store sales have declined a little bit, but, you know, the big part of our same store sales decline has been the bombshells, you know, it's a smaller part of sales, it's been much, That has to stop.

None: Yeah, I mean from the clubs standpoint, I mean, the clubs have been very strong we've had a couple of quarters here, where your same store sales have declined a little bit, but the big part of our same store sales decline as has been the bombshells, even though it's a smaller part of sales it's been a much.

None: Both those are significant when you start you.

None: Looking at our you know 15, 20% sales same store sales declines.

That has to stop we have to we have made some major changes I think we've definitely bottomed at bombshells.

Adam David Wyden: We have to We have made some major changes. I think we've definitely bottomed on bombshells. In fact, I had a big meeting with people today. I said, "It's hard to fall when you're lying down."

None: I think they had a big meeting with U S. S. It's hard to call when you're lying down so take chances take risk let's go.

Eric Scott Langan: So take chances, take risks, let's, you know, let's, let's make the changes. We've started the lingerie Thursdays, we've got some other promotions that we're getting ready to kick off on Monday, Tuesdays, and Wednesdays. The clubs are getting ready to do some big promotions for Tuesdays and Wednesday nights, which have gotten weaker, 10 when we were in the 2009-2010 era, so we're going to be beginning some of that stuff for Tuesdays and Wednesdays here in the next two weeks, and hopefully Can we make $100 million in 2025? I will leave it.

None: But let's make the changes we started the lingerie Thursdays we've got some other promotions or we're getting ready to kick off on on a Monday Tuesdays and Wednesdays are the clubs are getting ready to do some big promotions for Tuesday, and Wednesday nights, which are.

None: Have gotten weaker at the clubs on the clubs for the clubs for us to.

None: To really build those numbers up like we did back in 2000, and then 10, when we Oh two.

None: 2000, 19010 era, so we're going to be beginning some of that copper Tuesdays and Wednesdays here in the next few weeks and hopefully that will bring our Tuesdays and Wednesdays numbers backups. So all in all yes and to get to where we're at yes can we can we do $100 million twenty-five I leave it I don't I don't see why not are you now.

Everything is everything is lined up nothing's really changed.

None: This quarter was a little off west as far as the.

None: The all the projects that we have that are coming online that are basically a sign on EBITDA.

Adam David Wyden: I don't see why not, you know everything is lined up, nothing's really changed this quarter was a little off, but as far as, Right, well, and you also don't have the casinos in this number either. I mean, if you have the casinos open in 25, we should do probably well in excess of 100 million. I mean, those are potentially 40, 50% margin businesses. So, if you have both of those open, I mean, that's gonna be a significant contributor as well. Yeah, you know. I remain very optimistic that we can get those casinos open by September, provided that gaming issues us our licenses. I mean, we're sitting here, you know, basically you're at the will of the state.

None: <unk> cost right now as they opened in March as they open in June July and start contributing.

None: You know, it's a double bang for the Buck on incentive costing us money now theyre, all going to be generating money. So we not only get on a run rate basis, not only the new income and the new revenue. We also lose the drag that that they'd been causing alright, well you also don't have the casinos in this number either I mean, if you have a if you will.

None: The casinos open and twenty-five we should do probably well in excess of 100 million. I mean, those are those are potentially those are 40, and 50% margin businesses. So if you are both of those open I mean, that's going to be a significant contributor as well.

None: Yeah.

I remain very I think that we can that we can get those casinos open by September provided that gaming issues, our licenses I mean, we're setting here.

None: You know basically you're at the the will of the state until and sell the state issues, our licenses theres not a whole lot. We can do we will have the ricks casino ready to go in June.

Eric Scott Langan: Until the state issues our licenses, there's not a whole lot we can do. We will have the Ricks Casino ready to go in June, and I think that construction will probably be completed, provided the building permits come in in the next two weeks. Like we think, for the bombshells, we're very close, going back and forth with the city's third-party company that does all the plan reviews. We're very close on that as well. I think we will get that, hopefully, and that casino should be built and ready to go maybe in June, but probably closer to August. So if we can get the licenses issued in the next three months, we will be good to go. I just don't know where they're at because they just don't tell you anything, right? They tell you if they need something and they tell you when they're going to come visit you and those types of things, but they really don't give you any real feedback on where they're at in the process or when they think the process will be completed.

None: And I think that the construction will probably be completed provided the building permits come in in the next few weeks like we think are for the bombshells were very close.

None: Going back and forth with the.

None: With the city's third party.

None: Company that does all the plan reviews, we're very close on that as well I think we will get that hopefully in that casino should be built and ready to go maybe maybe in June but probably closer to August.

None: So if we can get the licenses issued in the next three months.

None: And I will be good to go I, just don't know where they're at because they.

Just don't tell you anything right. They day tell you if they need something.

None: And they tell you when they're going to come visit you and those types of things, but they really don't give you any real feedback on where they're at in the process or when they think of process will be complete it sounds that you talked about senior management changes at Bombshells. I mean have you had has senior senior leadership. The head of Bombshells is are they still there and I guess.

Adam David Wyden: You talked about senior management changes at Bombshells. I mean, have you seen your senior leadership, the head of Bombshells, are they still there? On the nightclub side, you sort of have a unique management program in that the nightclubs are managed by RCI Management Company, and they've been with you for a long time, and many of the managers sort of participate in the tip pool. It's sort of more of an entrepreneurial culture.

None: You know your strip club or some commentary on the nightclubs side you sort of have a unique you know management program and that you know are the.

None: The nightclubs are managed by RCI management company and they've been with you for a long time and many of the managers sort of participate in the tip pool, it's sort of a more of an entrepreneurial culture. I mean have you consider bringing in someone from like a twin peaks or no-host logos or another business and perhaps structuring.

Adam David Wyden: Have you considered bringing in someone from Twin Peaks or No Host Locos or another business and perhaps structuring a program where someone who knows what good looks like has a revenue share or profit share or some sort of thing so they go up and down with the business? I don't know, but it seems like it's worked really well on the nightclub side, sort of the entrepreneurial culture and sort of the way you sort of manage those. I mean, have you thought about sort of doing something similar on Bombshells where you sort of get an ad or get someone that sort of has a real sort of financial interest in the success of the business and sort of bring someone over from a business that has sort of executed someone? I mean, because I don't think it's that hard.

None: A program, where you know someone who knows what good looks like sort of has a revenue share of profit share or some sort of things. So you know they they go up and down with the business I mean.

None: I don't know, but it seems like it's worked really well on the nightclubs side.

The entrepreneurial culture and sort of the way you sort of manage those I mean have you thought about sort of doing something similar on bombshells, where you sort of you know.

None: <unk> get an Ed or get someone that you know sort of you know has real sort of financial interest in the success of the business you know and for bringing someone over from a business that has sort of executed I mean, because I don't think it's that hard I mean, I think if you look at like.

Eric Scott Langan: I mean, I think if you look at some of the other businesses on the restaurant side, obviously, they've seen some weakness, but they're still sort of holding on to their margin and whatnot, which means that means it's a great opportunity. It doesn't mean, I think, unlike on the nightclub side, where your peers are sort of down 30%, you're sort of eons beyond them; it feels like your peers aren't that down on the restaurant side. So it feels like there's an opportunity with the proper management. I mean, have you sort of sorted through that, and is there anything you can sort of discuss on that front? I mean, because that might make it easier to sell it, or maybe you decide you don't want to sell it if you get someone that can sort of make a 20% margin day in, day out.

None: Some of the other businesses on the restaurant side, I mean, obviously, they've seen some weakness, but their sole sort of holding margin and whatnot, which means that means it's great opportunity. It doesn't mean I think unlike on the nightclubs side, where your peers are sort of down 30% year sort of.

None: E ons beyond them it feels like your peers aren't that down on the restaurant side. So it feels like there's.

None: <unk> with the proper management I mean have you sort of sorted through that and you know is there anything you can sort of you know this.

Discuss on that front, I mean, because that might make it easier to sell it or maybe you decide you don't want to sell what.

None: You get someone that really can sort of do a 20% margin day in day out.

Adam David Wyden: I mean, we are currently, you know, testing all of our options and working through this process. I mean, we basically started the process in December; we made a few changes. We're not happy with those changes. At the end of that quarter, we made additional changes when the results came in. In January, as we started seeing the bombshell results, we started making more changes. We were affected in Texas by weather, freeze days, and then two weeks of rain and flooding.

None: I mean, where we are currently.

None: Testing all of our.

None: Options and working through this process I mean, we basically started the process in December we made a few changes we're not happy with those changes are at the end of at the end of that quarter. We have made additional changes on the results came in.

None: And in January as we started seeing the bombshells resolves, we started making more changes.

None: It was we were affected in Texas by weather Freeze days, and then two weeks of rain and flooding. So there is some there now there's some issues on.

Eric Scott Langan: So there are some, you know, there's some issues with, you know, are the changes we made in early January working or not? We will know that over the next couple of weeks as we go through Super Bowl Sunday. I will tell you that Ed is helping out with the bombshells right now, as I am myself, being involved in monitoring stores, you know, daily, hourly sales and making phone calls and visiting sites and doing the things that we need to do to make sure the changes that we are making are working and that we're seeing immediate results. I think that part of the problem was that the current management team that we had in place in October through December just did not understand the sense of urgency.

None: Are the changes we made in early January working or not we will know that over the next couple of weeks as we go through Super Bowl Sunday.

I will tell you that the AD is helping out.

With bombshells right now as I am myself are being involved in monitoring.

The stores you know dailies our lease.

None: Sales are and making phone calls and visiting sites and doing the things that we need to do to make sure of the changes that we are that we have made are working and that we're seeing immediate results.

None: I I think that part of the problem was is that the.

None: The current management team that we had in place.

In October the December just did not understand the sense of urgency.

Eric Scott Langan: I think they have definitely got the sense of urgency well under control at this time, and they understand that this is not a we're going to wait till March to see results, or we're going to wait till May to get results. No, we are going to see results this week, see results next week, and we're going to see results the week after that. And if the results aren't going in the direction that we want, we will make more changes or, you know. I think the concept is a great idea. The food is great.

None: I think they have definitely got the sense of urgency well Leonard at this time.

None: And they understand that this is not a we're going to wait until March to see results or we're going to wait till may to get results no. We're going to see resolves. This weakness results next week.

None: And we're gonna stay there was also a week after that and if the results aren't going to the direction that we want and we were going to make more changes or are you now.

None: Until we until we get the Formula correct.

None: I think the concept is a great concept of food is great I think we've locked in a couple of places we lack of service and customer service are and I think we've lacked in the focus of the current team has been strictly on the restaurant and not on a bar sales are.

Eric Scott Langan: I think we've lacked in a couple of areas. We've lacked in service and customer service. And I think we've lacked in that the focus of the current team has been strictly on the restaurant and not on the bar sales. And, of course, bar sales are the highest profit margins. And it really showed in this last quarter, where I think the eye was taken off the ball on a few things.

None: And of course, the bar sales are the highest profit margins and that really showed in this last quarter.

None: Where I think the I was taken off the ball on a few things Oh.

Eric Scott Langan: We've asked and told them to make changes. For more information, please visit www.cdc.gov. I say it the easiest way is I'm not being nice about it anymore. I'm not giving up; there is no time. The sense of urgency is today, not tomorrow, not next week, but today. And if they can't get the sense of urgency figured out relatively quickly, like today, then tomorrow, I will be making additional changes until I get the formula right. I've done this many times before.

None: We've asked and answered.

None: And told them to make certain changes to the music formats to the D. J.

None: Some of those changes were not made that we asked for.

None: Those are now being monitored on a daily basis.

None: And you know I am.

None: I'd say the easiest way is I'm not being I'm not being nice about it anymore I'm not giving that there is no time sense of urgency is today not tomorrow not next week, but today and if they can't get the sense of urgency figured out relatively quickly today.

None: Then tomorrow there'll be I will be making additional changes until like two I get the formula right <unk> done. This many times I used to be the turnaround at that's why I got my start in this business and this was buying clubs that were that needed to be turned around our business does it need to be turned around and going in and fixing them and putting the right people in place.

Eric Scott Langan: I used to be the turnaround guy, that's how I got my start in this business, buying clubs that needed to be turned around or businesses that needed to be turned around and going in and fixing them and putting the right people in place. And that's exactly what I'm doing with Bombshells now. Fantastic. Thank you so much for the questions, Adam. We are going to call up one last questioner. Ref, please take it away.

None: And that's exactly what I'm doing with Bombshells now fantastic. Thank you so much for the questions Adam when Youre going to call up one last question a RAF please take it away.

Ref: Hello, can y'all hear me? We can hear it. Yes. Cool. Well, thanks for having me on, Eric. Mark Bradley, big-time supporter and long-time fan of RICS and RCI.

RAF: Hello can you hear me.

RAF: We can hear you well.

RAF: Well, thanks for having me on Eric Mark Bradley Big time supporter longtime mechanic breaks in our C&I, but I have a question for you Eric.

Eric Scott Langan: But I have a question for you, Eric. In two years, what does that ideal quarter look like for you? Oh, in the next two years? I mean, I want to continue to grow our free cash flow at a 33% rate.

RAF: In two years, what does that ideal quarter look like for you.

Oh in the next two years I mean, I want to continue to you know grow our free cash flow are adequate dream right I want to.

Eric Scott Langan: I want to... See the casinos open. I think we need to, within the next two years, I'd like to see us take another major acquisition of 10, 15, 20 clubs in a single stroke so that we're buying out another, what I call a major player in the industry, like we did with the Birch Management acquisition, like we did with the acquisition of BCGH. And of course, we did our first large one in 2012 when we bought out the Jaguars chain. So I'd like to see us take down another major chain in the next two years. I would like to see the casinos, you know; we'll have results of operations from the casinos. So we'll know if we can take the entertainment slash casino model to other markets, whether that's Iowa, Indiana, Mississippi, you know, what other small states.

None: See the casinos open Ah I think we need to buy within the next few years I'd like he has taken another major.

None: The acquisition in a 10 15 20 clubs are in a single stroke. So that we're buying at another what I call a major player in the industry like like we did with it with the Birch management.

None: Acquisition like we did with the acquisition of B C. G H.

None: And of course, we did our first large one with 2012.

When we bought out the Jaguars Shang.

None: So I'd like to see us take down another major chain in the next two years.

None: I I want like to see the casinos in a while we'll have our results of operations from the casinos.

None: So we'll know if we can take.

None: The entertainment slash.

None: <unk> casino.

None: Model to other markets, whether that's Iowa, Indiana, Mississippi.

None: You know what other what other small states.

Eric Scott Langan: What I call regional casino states, and maybe even small regional casinos outside of Las Vegas in the state of Nevada, but not in Vegas itself. So we'll have that and then, obviously, I'd like to see whether the bombshell chain is going to be able to grow into a very large franchisable chain or whether we're going to, you know, look at having private equity take that out of us and take our efforts and energies and put them somewhere else. That's kind of where I see us in two years.

None: Michael Rehaut Casino states and even maybe even small regional casinos are outside of Las Vegas, and the state of Nevada, but not in our in Vegas itself.

None: So we'll have that and then you know obviously I'd like to see.

None: Whether they're bombshells chain is going to be able to grow into a very large franchise, a whole chain or whether we're going to look at are having private equity take that out from us and take our efforts and energies and put them someplace else.

That's kind of where I see is that in two years, yeah. Thank you I really loved that.

Yeah, thank you. I really love that. Fantastic. Thank you so much for that question. And thank you, Eric and Bradley. On behalf of Eric, Bradley, the company, and our subsidiaries, thank you and good night. As always, please visit one of our clubs or restaurants. Say hi to Bridget at the door and have a great evening. Until next time.

Fantastic. Thank you so much for that question and thank you, Eric and Bradley on behalf of Eric Bradley The company and our subsidiaries. Thank you and good night as always please visit one of our clubs or restaurants say hi to brigid at the door and have a great evening until next time.