Q2 2024 RCI Hospitality Holdings Inc Earnings Call

Thank you for standing by today's call will begin momentarily once again, thank you for standing by today's call will begin momentarily.

Again, thank you for standing by ladies and gentlemen, today's call will begin shortly once again. Please standby today's call will begin shortly.

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Mark Moran: of Rick's Non-GAAP Financial Measures. Finally, I'd like to invite everyone listening in New York City to join Eric and me tonight at seven o'clock to meet management at Rick's Cabaret New York, one of RCI's top revenue-generating clubs. Rick's is located at 50 West 33rd Street between Fifth Avenue and Broadway, a little away from Herald Square. If you have an RSVP, ask for us at the door. Now I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, please take it away.

Finally, I'd like to invite everyone with me in New York City to join Eric and meet Tonight at seven o'clock to meet management at Rick's Cabaret, New York one of RCI top revenue generating clubs Rick's is located at 50 West 30, <unk> Street between fifth Avenue Broadway Overland from Herald Square, if you haven't.

Mark Moran: RSV paid ads for us at the door now I'm pleased to introduce Eric Langan, President and CEO of RCI hospitality, Eric take it away.

Eric Scott Langan: Thank you, Mark, and thanks, everyone, for joining us today. Please turn to slide six. Despite the uncertain economy, the core strength of our business enabled us to generate $72.3 million in revenue in the second quarter compared to $71.5 million last year. While GAAP EPS of $0.08 primarily reflected non-cash impairment, non-GAAP EPS totaled $0.90, near the high end of analysts' expectations. The nightclub segment generated $59.4 million in revenue in 2Q24, paired with $57 million last year. Separately, the effort begun in mid-February to improve the bombshell segment resulted in steady sales and better margins on a sequential quarter basis. Please turn to slide 7.

Eric Scott Langan: Thank you Mark and thanks, everyone for joining us today.

Eric Scott Langan: Please turn to slide six.

Eric Scott Langan: Despite the uncertain economy, and a core strength of our business enabled us to generate $72 $3 million in revenue in the second quarter compared to $71 $5 million last year.

Eric Scott Langan: GAAP EPS of eight primarily reflecting noncash impairment non-GAAP EPS totaled 90 cents.

Eric Scott Langan: High end of analysts expectations.

Eric Scott Langan: Our nightclub segment generated $59 $4 million in revenue until Q2 encore.

Eric Scott Langan: Compared with $57 million last year.

Eric Scott Langan: Separately.

Eric Scott Langan: Effort began in mid February timeframe Bombshells segment.

Eric Scott Langan: And a steady sales and better margins on a sequential quarter basis.

Eric Scott Langan: Please turn to slide seven.

Eric Scott Langan: We also continue to make progress with our new project developments. These efforts are focused on developing new locations and upgrading existing ones to further grow the company. In doing this, we are committed to following our capital allocation strategy, concentrating on our core nightclub business, evaluating potential acquisitions, and buying back stock. To that end, subsequent to the, at the end of the quarter, we increased our cash position by $20 million by closing our plan bank. Now, Bradley will go into more details on our results.

Eric Scott Langan: We also continued to make progress with our named project development. These efforts are focused on developing new locations and upgrading existing wants to further grow the company.

Eric Scott Langan: In doing this we are committed to following our cap allocation strategy concentrating on our core nightclub business evaluating potential acquisitions and buying back stock.

Eric Scott Langan: To that end subsequent to that.

Eric Scott Langan: We ended the quarter, we increased our cash position $20 million by closing a plant bank.

Eric Scott Langan: Now here's Bradley to go into more details on our results.

Bradley Lim Chhay: Thanks, Eric. Please turn to slide 8 to review our nightclub site. Second quarter revenues increased $2.4 million year over year. This was primarily due to a $7.4 million increase from acquisitions, which partially offset declines of $2.9 million in same-source sales and $2.1 million from clubs in transition. By revenue type, alcoholic beverages increased 16.9 percent, food 10.8%, and other by 4.3%.

Bradley: Thanks, Eric Please turn to slide eight to review our nightclub segment.

Bradley Lim Chhay: Second quarter revenues increased $2 $4 million year over year. This was primarily due to a $7 $4 million increase from acquisition.

Bradley Lim Chhay: Which partially offset declines of $2 $9 million and same store sales and to put $1 million from clubs in transition.

Bradley Lim Chhay: By revenue type.

Bradley Lim Chhay: Alcoholic beverages increased 16, 9%.

Bradley Lim Chhay: 10, 8% and other by four 3%.

Bradley Lim Chhay: However service declined eight 3%.

Bradley Lim Chhay: The sales mix reflected higher alcohol and food sales from newly acquired clubs.

Bradley Lim Chhay: Same store sales declined due to lower service revenues.

Bradley Lim Chhay: However, service declined 8.3%. The sales mix reflected higher alcohol and food sales from newly acquired stores, and same-store sales declined due to lower service revenue. As we mentioned in the second quarter sales call, P.T.'s Centerfolds and Lubbock, a new club, did not open until late in the quarter. Baby Dolls Abilene, a reformatted liquor club, didn't open until early April. A BYOB club in El Paso temporarily closed during the quarter to start reformatting into a Chica's Locos liquor club. Although we didn't talk about it in the cells,

Bradley Lim Chhay: As we mentioned in the second quarter sales call P. T Senate votes in Lubbock, a new club did not open until late in the quarter Baby Dolls, Abilene, a reformatted liquid club didn't open until early April.

Bradley Lim Chhay: Ah BYOB clock and El Paso temporarily closed during the quarter to start reformatted into a chico's local liquid club.

Bradley Lim Chhay: Although we didn't talk about on the sales call severe cold and rainy weather in Texas did have an impact in January.

Bradley Lim Chhay: Severe cold and rainy weather in Texas did have an impact in January, as it had for other hospitality companies. We had to partially close, partially or fully close clubs and bombshells for a number of days during that period. The impairment resulted in operating income of $11 million, or 18.6% of revenues compared to $18 million, or 31.6%. On a NAVGAP basis, operating income was $19.8 million, or 33.4% of revenues, compared to $22.4 million or $39.8 million.

Bradley Lim Chhay: As it had for other hospitality companies.

Bradley Lim Chhay: We had to partially off partially close.

Bradley Lim Chhay: Partially or fully closed clubs and bombshells for number of days during that period.

Bradley Lim Chhay: Impairment resulted in operating income of $11 million.

Bradley Lim Chhay: Or 18, 6% of revenues compared to $18 million or 31, 6%.

Bradley Lim Chhay: On a non-GAAP basis operating income was $88 million or 33, 4% of revenues compared to $22 $4 million or <unk> 39, 3%.

Bradley Lim Chhay: The non-gap margin decline primarily reflected lower service revenues, higher insurance, an increase in Texas patron tax, and wage inflation. One of the reasons why insurance is higher is because we received a refund in the year-ago quarter. Now please turn to slide 9. The Duncan Birch acquisition has continued to perform well.

Bradley Lim Chhay: The non-GAAP margin decline, primarily reflected lower so perhaps revenues higher insurance and increase in the Texas patron tax and wage inflation.

Bradley Lim Chhay: One of the reasons why insurance is higher is because we received a refund in the year ago quarter.

Bradley Lim Chhay: Now please turn to slide nine.

Bradley Lim Chhay: The Dunkin Perks acquisition has continued to perform well we closed on the acquisition in mid March in 2023 with four clubs open we finished remodeling and opened a fifth club in mid June 2023.

Bradley Lim Chhay: We closed on the acquisition in mid-March 2023 with four clubs open. We finished remodeling and opened the fifth club in mid-June 2023. As of fiscal 24's second quarter, revenues have grown 23.9% from a year ago third quarter, which was the first full quarter post-acquisition, and Operating Margin has expanded 394 basis points. Locations have benefited from increased credit card transactions, reduced management costs, and more effective RCI marketing management purchasing methods, partially offset by the increase in patron tax, which started in September of 2023. Please turn to slide 10 to review our bombshell segment.

Bradley Lim Chhay: As of fiscal 'twenty, four second quarter revenues have grown 23, 9% from a year ago third quarter, which was the first full quarter post acquisition.

Bradley Lim Chhay: And operating margin has expanded 394 basis points.

Bradley Lim Chhay: Locations have benefited from increased credit card transactions reduced management costs and more effective RCI getting management purchasing methods, partially offset by the increase the patron tax.

Bradley Lim Chhay: We started in September of 2023.

Bradley Lim Chhay: Please turn to slide 10 to review our Bombshells segment.

Bradley Lim Chhay: Revenues declined $1.5 million year-over-year. This primarily reflected a $2.7 million decline in same-store sales and a $1.2 million increase from acquired or new locations. Operating income was $0.7 million, or 5.5% of revenues, compared to $1.8 million, or 12.4%. On a non-GAAP basis, operating income was $0.8 million, or 5.9% of revenues, compared to $2.2 million, or 15.4%. The year-over-year decline in profitability primarily reflected lower same-store sales.

Bradley Lim Chhay: Revenues declined $1.5 million year over year. This primarily reflected a $2 $7 million decline in same store sales and a $1 $2 million increase from acquired or new locations.

Bradley Lim Chhay: Operating income was zero point $7 million or five 5% of revenues compared to $1.8 million or 12, 4%.

Bradley Lim Chhay: On a non-GAAP basis operating income was <unk> eight.

Bradley Lim Chhay: $8 million or five 9% of revenues compared to $2 2 million or 54%.

Bradley Lim Chhay: The year over year decline in profitability, primarily reflected lower same store sales.

Eric Scott Langan: On a sequential basis, however, revenues were approximately level, and the gap in operating margin expanded 480 basis points and 470 on a non-gap basis. As Eric mentioned earlier, this reflected the effort by upper management to return the brand to its core focus of being a sports bar, which began in mid-February to improve results. Some key changes included replacing management.

Bradley Lim Chhay: On a sequential basis, however, revenues were approximately level and GAAP operating margin expanded 480 basis points and 470 on a non-GAAP basis.

Eric Scott Langan: As Eric mentioned earlier this reflected the effort by upper management to return the brand to its core focus on being a sports bar.

Eric Scott Langan: Began in mid February to improve results.

Eric Scott Langan: Some key changes include replacing management.

Bradley Lim Chhay: Cost Cutting and going back to the basics, touching tables, making sure waitstaff is attentive, among others. Please turn to slide 11. Corporate expenses totaled $6.8 million, an increase of $0.6 million on a gap basis; on a non-GAAP basis, expenses totaled $6.3 million, an increase of $0.8 million. Both GAAP and non-GAAP results primarily reflected more corporate level management from the Duncan Birch Acquisition, Casino Pre-Opening Operations, and Accounting and Professional Services due to the recently acquired clubs and new projects along with the timing of billing. Now, on a sequential quarter basis, expenses declined $0.3 million; please turn to slide 12. This shows consolidated operating income by segment. Please turn to slide 13.

Eric Scott Langan: Cost cutting and going back to the basics touching tables make sure wait staff as attentive among others.

Bradley Lim Chhay: Please turn to slide 11.

Bradley Lim Chhay: Corporate expenses totaled $6 $8 million, an increase of <unk>.

Bradley Lim Chhay: $6 million on a GAAP basis.

Bradley Lim Chhay: On non-GAAP basis expenses totaled $6 $3 million, an increase of $8 million.

Bradley Lim Chhay: Both GAAP and non-GAAP results, primarily reflected more corporate level management from the Dunkin' branch acquisition Casino Preopening operations and accounting are professional services due to the recently acquired clubs.

Bradley Lim Chhay: And new projects, along with the timing of billing.

Bradley Lim Chhay: On a sequential quarter basis expenses declined $3 million.

Bradley Lim Chhay: Please turn to slide 12.

Bradley Lim Chhay: This puts together consolidated operating income on a segment basis.

Bradley Lim Chhay: Yeah.

Bradley Lim Chhay: Please turn to slide 13.

Bradley Lim Chhay: We have a couple of slides coming up that discuss free cash flow and adjusted EBITDA, which is on a non-GAAP basis. And at the back of that, we wanted to present the closest gap equivalent on this slide, which is operating and netting. Please turn to slide 14 to look at some of our other key metrics. We ended the quarter with cash-in-cash equivalents of $20 million. During the second quarter, we used $1.5 million to buy back shares.

Bradley Lim Chhay: We have a couple of slides coming up that discuss free cash flow and adjusted EBITDA, which on a non-GAAP basis in the back of that we wanted to present the closest GAAP equivalent on this slide which our operating and net income.

Bradley Lim Chhay: Okay.

Bradley Lim Chhay: Please turn to slide 14 to look at some of our other key metrics we.

Bradley Lim Chhay: We ended the quarter with cash and cash equivalents of $20 million during the second quarter, we used $1 $5 million to buy back shares.

Bradley Lim Chhay: Second quarter free cash flow was $8.8 million or 12% of revenue; adjusted EBITDA was $17.2 million or 24% of revenue. Recent free cash flow and adjusted EBITDA conversion rates reflect the combination of a lower percentage of service revenue and higher costs. Please turn to slide 15 to review our debt metrics. Debt as of March 31st declined $2.2 million from December 31st due to scheduled paydown. The weighted average interest rate remained at 6.61%.

Bradley Lim Chhay: Second quarter free cash flow was $8 $8 million or 12% of revenues.

Bradley Lim Chhay: Adjusted EBITDA was $72 million or 24% of revenues.

Bradley Lim Chhay: Free cash flow and adjusted EBITDA conversion rates reflect the combination of lower percentage of service revenue and higher costs.

Bradley Lim Chhay: Please turn to slide 15 to review our debt metrics.

Bradley Lim Chhay: Debt as of March 31 declined $2 $2 million from December 31, due to scheduled pay downs.

Bradley Lim Chhay: <unk> average interest rate remained at $6 six 1%.

Bradley Lim Chhay: Total occupancy costs, at an 8% decline on the sequential quarter, had 2.99 times debt-to-trailing 12-month adjusted EBITDA, inched up just a bit but continues to be in our comfort level of less than three. Occupancy costs and debt-to-adjusted EBITDA reflect the fact that we were developing a number of projects. As they open and we begin generating revenue and EBITDA, both metrics should improve, and maturities should continue to remain reasonable and manageable. Please turn to slide 16 for our debt pie chart; we continue to pay down all slices of our debt.

Bradley Lim Chhay: Total occupancy costs at 8% decline on a sequential quarter basis.

Bradley Lim Chhay: At $2 99 times debt to trailing 12 month, adjusted EBITDA inched up just a bit but continues to be in a comfort level of less than three.

Bradley Lim Chhay: Occupancy costs and debt to adjusted EBITDA reflect the fact that we were developing a number of projects as they open and we began generating revenue and EBITDA both metrics should improve.

Bradley Lim Chhay: Debt maturities continue to remain reasonable and manageable.

Bradley Lim Chhay: Please turn to slide 16 for our debt Pie chart.

Bradley Lim Chhay: We continue to pay down all slices of our debt.

Bradley Lim Chhay: The percentage share of the difference slices remains largely the same as the first quarter. As Eric mentioned, subsequent to the quarter, we completed our $20 million cash out bank. Now, let me turn the presentation back to Eric.

Bradley Lim Chhay: The percentage share of the difference license remained largely the same as the first quarter.

Bradley Lim Chhay: As Eric mentioned subsequent to the quarter, we completed our $20 million cash out bank loan.

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

Eric: Thank you Bradley.

Eric Scott Langan: I want to reiterate, or I'm sorry, please turn the slides. I want to reiterate that everything we do is centered around our cap allocation strategy. We employ three different approaches, subject to whether there is compelling rationale to do otherwise, mainly mergers and acquisitions, organic growth, and buying back shares when the yield on free cash flow per share is more than 10%. Since refocusing myself on bombshells in mid-February, I am starting to have our teams question everything like we did in 2016.

Eric: I want to reiterate I'm, sorry, first turn to slide 17, I want to reiterate that everything we do is centered around our capital allocation strategy. We employ three different approaches subject to whether there is compelling rationale to do otherwise.

Eric Scott Langan: Mainly mergers and acquisitions organic growth and buying back shares when the yield on free cash flow per share is more than 10%.

Eric Scott Langan: Since refocusing myself on bombshells in mid February I am starting to have our teams question everything like we did in 2016.

Eric Scott Langan: This has caused us to rebrand some club locations, and we are currently evaluating several of our non-income and underperforming assets. We are doing performance reviews throughout our operations to ensure we are getting ROI from our team members and making sure we are awarding those members appropriately for great performance and fixing or removing others. We got a little complacent during the post-COVID times when times were easy, and I believe we must return our focus to the basics of our capital allocation strategy. Please turn to slide 8.

Eric Scott Langan: This has caused us to rebrand some club locations and we are currently evaluating several who are non income and underperforming assets.

Eric Scott Langan: We are doing performance reviews throughout our operations to ensure we are getting ROI from our team members and making sure. We are awarding those members are probably for great performance and fixing our removing others.

Eric Scott Langan: We got a little complacent drink post Covid times when times are easy and I believe we must return our focus on the basics of our capital allocation strategy.

Eric Scott Langan: Please turn to slide 18.

Eric Scott Langan: Okay.

Eric Scott Langan: We continue to make progress with new projects since our April 9th call. We've received our liquor license for XTC Dallas, which is being renamed and repositioned as Dallas Show Club. We received our liquor license for the planned conversion of the BYLB Club in Harlingen, Texas, into a Chica Locos Liquor Club, which should open this quarter. We also firmed up our plans to open Rick's Cabaret and Steakhouse in Central City without gaming in our fourth quarter.

Eric Scott Langan: We continue to make progress with new projects since our April 9th call.

Eric Scott Langan: We have received our liquor license for FCC, Dallas, which has been renamed and reposition as Dallas Show Club.

Eric Scott Langan: We received our liquor license from the planned conversion of BYOB club in Harlingen, Texas, Intuit Chico Lucas Liquor club. This should open this quarter.

Eric Scott Langan: We also find up our plans to open ricks cabaret in steakhouse in central city, without gaining and our fourth quarter.

Eric Scott Langan: Please turn to slide 19. By sticking to our cap allocation since the end of fiscal 2015, we have generated compound annual growth rates of 10.2% for total revenue. 12.1% for adjusted EBITDA and 17.2% for free cash flow. We also reduced our fully diluted share count even after shares were issued for acquisition. I'd like to say thanks to our local and dedicated teams for all their hard work and efforts and all our shareholders who believe in us and make our success possible. Now, Mark, will start the Q&A session.

Eric Scott Langan: Please turn to slide 19.

Eric Scott Langan: By sticking to our cap allocation since the end of fiscal 2015, we have generated compound annual growth rate of 10.2% with total revenue 12, 1% for adjusted EBITDA and 17, 2% for free cash flow. We also reduced our fully diluted share count even after shares issued for acquisitions.

Eric Scott Langan: I'd like to say, thanks to our local and dedicated teams for all their hard work and efforts and all our shareholders, who believe in us and make our success possible now here's mark to start the Q&A session.

Mark Moran: Thank you, 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. We have a limited number of speaker spaces, so after your question, we may move you to the back of the audience to free up space. To start things off, we'd like to take questions from Rick's analysts and then some of its larger shareholders. First up, we have Scott Buck of H.C. Wainwright. Scott, please take it away.

Mark Moran: Thank you Eric and Bradley.

Scott Christian Buck: You'd like to ask a question. Please raise your hand in the <unk> space.

Mark Moran: When you finish please mute your microphone to eliminate any background noise. We have a limited number of speakers spaces. So after your question, we may move us back to the audience to free up space.

Scott Christian Buck: To start things off we'd like to take questions from Rick's analyst and then some of its largest shareholders.

Mark Moran: First up we have Scott Buck of H C. Wainwright Scott please take it away.

Scott Christian Buck: Good afternoon, guys. Thanks for taking my questions. Bradley, apologies if I missed it, but could you give a little color on what the increase in other charges was in the income statement this quarter?

Scott Christian Buck: Hi, Good afternoon, guys. Thanks for taking my questions.

Scott Christian Buck: Bradley apologies if I missed it.

Scott Christian Buck: But could you give a little color on what the.

Scott Christian Buck: The increase in other charges was an income statement this quarter.

Bradley Lim Chhay: You're talking about impairment charges. We had an $8 million worth of impairment charge.

Scott Christian Buck: You're talking about the impairment, we had an $8 million worth of impairment charge.

Scott Christian Buck: Okay, all right, thanks. I appreciate that.

Bradley Lim Chhay: Okay, alright. Thanks, I appreciate that and then just I was hoping we could get.

Scott Christian Buck: And then just, I was hoping we could get... A bit of an update on M&A. On the call a quarter ago, it sounded like you guys were close to announcing something. I don't remember seeing it. Kind of curious whether there's a holdup or if the situation has changed there.

Scott Christian Buck: A bit of an update on M&A the call a quarter ago. It sounded like you guys were we're close to announcing something I don't remember seeing it.

Scott Christian Buck: Kind of curious what if theres, a holdup or if that if the situation has changed there.

Eric Scott Langan: Yeah, I'll take that one, Bradley. Basically, we had two LOIs, and we pulled one, and the other one is in, kind of a negotiation lock at the moment due to the potential of unknown liabilities and the indemnification clauses that the company would require of the seller. I don't know if that's going to move forward or not at this time. I wouldn't say it's very promising.

Speaker Change: Yeah, I'll take that Brad.

Eric Scott Langan: Basically we have we had.

Eric Scott Langan: Two L O I's behalf.

Eric Scott Langan: Hold one and the other one is in.

Eric Scott Langan: Kind of a negotiation lock at the moment.

Eric Scott Langan: Due to.

Eric Scott Langan: The potential unknown liabilities.

Eric Scott Langan: And then Jim application causes that the company would require of the seller.

Eric Scott Langan: I don't know if that's going to move forward or not at this time.

Eric Scott Langan: I wouldn't say, it's very promising.

Eric Scott Langan: We are looking at several other acquisitions right now as well, though, and I think eventually, these people will figure it out and come back to us because no one's going to buy unknown liabilities from anyone. So they're going to have to figure that out. And unfortunately, the way the licensing works in that particular market, their existing corporation has to be bought in order to keep the license valid. So we'll see if that one goes on. I am looking at other locations around the country.

Eric Scott Langan: We are looking at several other acquisitions right now as well now.

Eric Scott Langan: And I think eventually these people will figure it out and come back to us because.

Eric Scott Langan: No one's going to buy unknown liabilities from from anyone.

Eric Scott Langan: So they're gonna have to figure that out and unfortunately, the way the licensing works in that in that particular market.

Eric Scott Langan: There are existing Corporation asked me bought in order to keep license out so.

Eric Scott Langan: So we will see if that one goes on.

Eric Scott Langan: And looking at other locations around the country and I figure at some point here.

Eric Scott Langan: And I figure, you know, at some point here, I'd say sellers are getting more reasonable now. We just gotta get some of the terms worked out with cash and carry of notes and whatnot. So we'll figure that out shortly.

Eric Scott Langan: I say sellers are getting more reasonable now we just kind of get some of the terms.

Eric Scott Langan: With cash and carry of notes in.

Eric Scott Langan: So we'll figure that out shortly.

Scott Christian Buck: Great. That's very helpful, Eric.

Speaker Change: Great. That's helpful. Eric and then second I was wondering you know we're about halfway through the second quarter now.

Scott Christian Buck: In calendar quarter anyway.

Speaker Change: Curious if you could give us a little update on the trends youre seeing I'm guessing it probably looks fairly similar to the first quarter or the first calendar quarter.

Eric Scott Langan: And second, I was wondering, you know, we're about halfway through the second quarter now, I mean, second calendar quarter anyway. Curious if you could give us a little update on the trends you're seeing. I'm guessing it probably looks, you know, fairly similar to the first quarter or the first calendar quarter.

Eric: Yeah, well April D January which is which is was very important to me.

Speaker Change: We now need Mark.

Eric Scott Langan: May to beat March and then our June numbers to be February so that we can be up sequentially on the quarter.

Eric Scott Langan: April beat January, which was very important to me. We now need May to beat March, and then our June numbers to beat February so that we can be up sequentially on the quarter. The first week of May went very well.

Eric Scott Langan: The first week of <unk>.

Eric Scott Langan: <unk> is very well.

Eric Scott Langan: I don't know if the fall sports, but for those that do that you should know that we have for NHL teams and for NBA teams that are all in playoffs modes right. Now we've had some great games out there being a lot of traveling customers from our markets to our markets.

Eric Scott Langan: I don't know if you follow sports, but for those that do, you should know that we have four NHL teams and four NBA teams that are all in playoff mode right now. We've had some great games out there, and there are a lot of traveling customers from our markets to our markets. For example, in Colorado right now, we have the Dallas Stars playing the Avalanche, so we're getting Colorado fans in Dallas and Dallas Stars fans in Colorado, which is great for us.

Eric Scott Langan: For example, in Colorado right now.

Eric Scott Langan: We have the Dallas stars playing the avalanche so.

Eric Scott Langan: We're getting Colorado fans in Dallas, and Dallas fans in Colorado, which is great for US we have clubs in both markets.

Eric Scott Langan: We have clubs in both markets, as well as the Denver Nuggets and the Timberwolves playing in Colorado and Minnesota. So our Colorado locations are basically doing very well in both the NHL and the NBA, and so is Dallas because you have the Mavericks in there as well. The Knicks and the Rangers are both in, so you get hockey and basketball in New York, which has been great for New York as well.

Eric Scott Langan: As well as the Denver Nuggets in the timber wolves.

Eric Scott Langan: And in Colorado, and Minnesota itself.

Eric Scott Langan: Colorado locations are are basically doing very well from both the.

Eric Scott Langan: NHL and the M B, a and so is the Dallas because you have the Mavericks in there as well so.

Eric Scott Langan: And then, of course, we have the Panthers down in Florida. So, all in all, a very solid sports lineup. Last year, Mother's Day weekend was a very weak weekend, one of the weakest of the quarter. This year, I think we should have a much better Mother's Day weekend because you basically have four games that will affect you between hockey and basketball, basically starting tonight all the way through Monday, I believe. I am very excited about that.

Eric Scott Langan: The mix in the Rangers or both and so you get hockey and basketball in New York, which has been great for New York as well and then of course, we have the Panthers down in Florida. So all in all very solid our sports lineup.

Eric Scott Langan: Your mother's day weekend was very week weekend.

Eric Scott Langan: One of the weakest of the of the quarter.

Eric Scott Langan: This year I think we should have much much better mother's day weekend, because we basically have four games that will affect us between hockey and basketball.

Eric Scott Langan: Pace be starting Tonight, all the way through our through Monday I believe so.

Eric Scott Langan: Think about that.

Scott Christian Buck: Great, that's helpful. And then last, if there's any update you can give us on the timing in Central City, that would be helpful.

Speaker Change: Great. That's helpful. And then lastly, if there's any update you can give us on timing and in central city that'd be helpful.

Speaker Change: The timing is just unknown other than we're going to we're going to do everything we can do to get that the club opened in this quarter.

Eric Scott Langan: Well, timing is just unknown other than I. We're gonna do everything we can to get the club open in this quarter. So we'll have the club, and the steakhouse will be open in this quarter.

Eric Scott Langan: And the steakhouse will be opening this quarter.

Eric Scott Langan: We've gotten some news from gaming, where they've requested a very large amount of money to continue our investigation through a third party and gave us a very long timeline from where we are today. And I'm currently basically evaluating that timeline with our new refocus on capital allocation. I'm doing a lot of math right now and calculating whether or not we want to even continue to focus on that at all, or take our money and energy and focus, instead of casino operations, on getting back to our core business.

Eric Scott Langan: I've gotten some news from gaming, where they've requested a very large amount of money and continue our investigation to a third party.

Eric Scott Langan: And gave us a very long timeline from where we are today.

Eric Scott Langan: And I'm currently basically evaluating that timeline with our new refocus on cap allocation are doing a lot of math right now and in calculating whether or not we.

Eric Scott Langan: Want to even continue to focus on that at all or take our money and energy and focus.

Eric Scott Langan: Instead of casino operations get back is backed by a core business.

Eric Scott Langan: If so, we would probably divest a property or two of the properties; obviously, we'll keep the Ricks location and the steakhouse up there, but we may end up actually withdrawing the gaming license at some point, instead of paying all this money for the investigation and waiting the timeline they want. I just don't know yet. And I know I will get that information out once a decision has been made, but there's just a lot of new information that's come in in the last week or so. And we're evaluating all that at this time, and we'll have a better understanding of where we're going with that as we move forward. I appreciate the transparency there. Thanks again.

Eric Scott Langan: If so we would probably deep diverse a property or two of the properties. Obviously, we'll keep the ricks location in the steakhouse.

Eric Scott Langan: Up there, but we may end up with actually withdrawing the gaming license at some point instead of paying all this money for the investigation and waiting the timeline. They want I just don't know yet.

Eric Scott Langan: When I know I will we will get that information out once a decision has been made.

Eric Scott Langan: But there's just a lot of new information has come in in the last week or so and we're evaluating all of that at this time and we will we'll have a better understanding of where we're going with that.

Eric Scott Langan: As we move forward.

Eric Scott Langan: Alright, I appreciate the transparency there. Thanks, thanks again.

Eric Scott Langan: Always.

Anthony Chester Lebiedzinski: Thanks so much, Scott. Next up, we have Anthony of Sidoti. Anthony, please take it away.

Speaker Change: Thanks, So much Scott next up we have Anthony of Sidoti Anthony Please take it away.

Anthony Chester Lebiedzinski: Good afternoon, and thank you for taking the questions. So first, as far as the quarter is concerned, your services revenue was down a little over 8%. Can you share more details in regards to this decline and what is your strategy to improve the services? proportion of your revenue mix?

Anthony: Good afternoon, and thank you for taking the questions. So.

Anthony Chester Lebiedzinski: So first as far as the quarter.

Anthony Chester Lebiedzinski: Your services revenue were down little over 8% can you share more details in regards to this decline and what is your strategy to improve services.

Anthony Chester Lebiedzinski: Portion of your revenue mix.

Eric Scott Langan: I can, I can nail it right on the head for you. About 1.3 million dollars is XTC in Dallas. As some people are aware and some aren't, Dallas passed a New City Ordinance, it's in current litigation, forcing us to close the club at 2 o'clock. That was a major after-hours club, made most of its revenue between the hours of 2 and 5 a.m. We have rebranded that to the Dallas Show Club now, or are in the process of doing so. Our liquor license is in, and we have continued operations. I think we were closed one night as we converted from BYOB to liquor. The rest of the conversion will happen when we're open.

Speaker Change: I can't I can nail right on the head for you about one $3 million of ex DC and Dallas.

Eric Scott Langan: As some people are aware and some aren't.

Eric Scott Langan: Dallas passengers to the ordinates.

Eric Scott Langan: And current litigation, forcing us to close the club at two o'clock that was a major after hours club did most of its revenue between the hours of two and five a M.

Eric Scott Langan: We have rebranded that to the Dallas show club now are.

Eric Scott Langan: Are in the process that were liquor license and we are we have continued operations I think we will close one night as we converted from BYOB into liquor.

Anthony Chester Lebiedzinski: That's a big part of it. And then the rest is, of course, Miami's service revenues last year were much, much higher than they have been this year. And that's the majority of it. Obviously, there are little bits here and there. There are success stories in some markets like New York and Minnesota, and there are other clubs that are declining a little bit. Most of those offsets, the major part of it was the SEC Dallas and the Miami clubs.

Eric Scott Langan: The rest of the conversion will happen as we're open.

Anthony Chester Lebiedzinski: A big part of it and then the rest is of course, a Miami service revenues last year were much much higher than they have been this year.

Anthony Chester Lebiedzinski: And that's the majority of it I was obviously, there's little bits here and there there are success stories in some markets like New York, and Minnesota and Theres. Other other clubs that are declining a little bit muscle has offset the major part of it was the FCC Dallas.

Anthony Chester Lebiedzinski: And the and then in the Miami clubs.

Eric Scott Langan: Thank you, Eric. And then what were the main factors that drove the sequential margin gains at the bombshells? And do you think that's sustainable?

Speaker Change: Thank you, Eric and then where we.

Eric Scott Langan: The main factors that drove the sequential margin gains at the Bombshells and do you think thats sustainable.

Eric Scott Langan: Well, my goal with Bombshells is to return us to $60 million in revenue with 15% margins, which would put us about $9 million in operating income on an annualized basis. At this point, we will probably work very hard at strategic options with that asset, whether it's a partnership, whether it's selling the assets outright, whether it's selling part of the asset, or bringing in partners to expand the process at that time once we prove we can return it to those numbers. I think that's a six-month process from now on. At least I hope so.

Speaker Change: Well, Michael with Bombshells is to return up to $60 million of revenue with 15% margins, which would put us about $9 million in operating income.

Eric Scott Langan: On an annualized basis at this point we will.

Eric Scott Langan: Probably work very hard.

Eric Scott Langan: At our strategic options with that asset whether it's a partnership whether it's sell.

Eric Scott Langan: Selling the assets outright whether its selling part of the assets.

Eric Scott Langan: Or bringing in partners to expand the process at that time once we prove we can return to return it to those numbers.

Eric Scott Langan: I think that's a six month process from now.

Anthony Chester Lebiedzinski: I think the 15% margins are maybe doable earlier. The revenue is a little more difficult because while part of it has been management issues, the other part of it is the economy and people just not spending as much and not drinking as much. Yes, I believe that you know we will have that corrected. I think we've made some major changes. We've definitely lowered our costs. We've changed out a lot of the management teams in certain clubs or certain stores or certain markets, and we've been doing some hiring.

Eric Scott Langan: At least I hope so I think the 15% margins or maybe may be doable earlier.

Anthony Chester Lebiedzinski: The revenues being a little more difficult because while part of it.

Anthony Chester Lebiedzinski: It has been management issues.

Anthony Chester Lebiedzinski: The other part of it is is the economy and.

Anthony Chester Lebiedzinski: And people just not spending as much on not drinking as much.

Anthony Chester Lebiedzinski: Yes, I believe that.

Anthony Chester Lebiedzinski: We will have that.

Anthony Chester Lebiedzinski: I think we've made some major changes we've lowered our cost.

Anthony Chester Lebiedzinski: We've changed out a lot of the management teams in certain cloud or certain stores in certain markets.

Anthony Chester Lebiedzinski: And.

Anthony Chester Lebiedzinski: We've been doing some hiring.

Anthony Chester Lebiedzinski: We still have about three spots that we need to find the right people for, but the people that we're bringing in are motivated and excited to be part of our team. And I think that the concept is definitely heading in the right direction so far. Okay, and then. You also have quite a number of projects.

Anthony Chester Lebiedzinski: We still have about three spots that.

Anthony Chester Lebiedzinski: That we need to find the right people for but the people that we're bringing in are our motivation.

Anthony Chester Lebiedzinski: <unk> and excited to be part of our team.

Anthony Chester Lebiedzinski: And I think that the concept of tappin heading the right direction.

Anthony Chester Lebiedzinski: That's it. Okay, and then you also have quite a number of projects in the pipeline, so as you're looking to open the Ricks Cabaret and State...

Speaker Change: Thanks, Chris.

Speaker Change: Gotcha, Okay and then.

Anthony Chester Lebiedzinski: You also.

Anthony Chester Lebiedzinski: Having quite a number of projects in the pipeline so as youre looking to open them.

Anthony Chester Lebiedzinski: Rick's cabaret in stake.

Anthony Chester Lebiedzinski: Yes.

Anthony Chester Lebiedzinski: Hey, Anthony, you're on mute. Can you hear me?

Anthony Chester Lebiedzinski: Hey, Anthony you're on mute.

Anthony: Can you hear me now.

Anthony Chester Lebiedzinski: Hello.

Eric Scott Langan: Hey Eric, you're on mute? Okay, I'm sorry, they muted me.

Anthony Chester Lebiedzinski: Yes.

Anthony: Hey, Eric.

Anthony: I don't know sorry, they needed me too.

Eric Scott Langan: Thank you. I think they muted everyone instead of just that speaker.

Speaker Change: Yeah, Okay, sorry about that we had a smart speaker, who wasn't muted late I think they needed all instead of just a speaker.

Eric Scott Langan: Okay. All right. Sorry about that. I didn't touch my phone.

Speaker Change: Alright, sorry about that.

Eric Scott Langan: My phone and that will be done.

Anthony Chester Lebiedzinski: Okay. So, as I started saying, you guys have quite a number of projects in the pipeline, but I just wanted to focus more on the plans for the central city location. So, you are planning to open Rick's Cabaret and Steakhouse in 4Q, even if there is no gaming. So, how should we think about the revenue contribution? Is that up and running? And then, if you do get gaming there, how could that contribute to revenue if you go ahead? I know there is uncertainty about that, but just hypothetically speaking, how should we think about that? I have no idea.

Eric Scott Langan: Okay. So as though as I started saying so you guys have a quite number of projects in the pipeline, but it's.

Anthony Chester Lebiedzinski: Just wanted to focus more on the plans for the Central City location. So you are planning to open the ricks cabaret steakhouse in for Q, even if there is no gaming so how should we think about the revenue contribution once that that's up and running.

Anthony Chester Lebiedzinski: And then if you do get gaming there what could that contribute to revenue. If you go ahead I know, there's uncertainty with that but just just hypothetically speaking how should we think about that I have not thought about the gaming at all anymore. My focus is on the club itself.

Eric Scott Langan: I have not thought about gaming at all anymore. My focus is on the club itself. I would like to, I think the club can open up in the $100,000 per week range. We run our 40% margins, and we make about $2 million a year out of it. I'm only opening four days a week to start.

Eric Scott Langan: I would like to.

Eric Scott Langan: I think the club can open up in the $100000 per week range.

Eric Scott Langan: It was about 5 million annual run a 40% margins will make about $2 million a year out of it I'm.

Eric Scott Langan: I'm only opening four days late start as we build up our clientele base and our entertainer base.

Eric Scott Langan: As we build up our clientele base and our entertainer base in that market, and we open seven days a week, I think we can grow that to somewhere between $8 and $10 million annually at 40% margins. So that's my focus right now. Like I said, with the gaming, I'm weighing a lot of things right now to see what makes sense or doesn't make sense for us as a company. I can tell you that from what we're being told, we're 18 months to two years away at a minimum. There are two other licenses that have been applied for in Central City.

Eric Scott Langan: In that market and we opened seven days a week I think we can grow that to somewhere between eight and $10 million annually at the at 40% margins.

Eric Scott Langan: So.

Eric Scott Langan: That's my focus right now Mike.

Eric Scott Langan: Like I said with the gaming I'm weighing a lot of things right now to see what makes sense or it doesn't make sense for us as a company.

Eric Scott Langan: I can tell you that from what we're being told we're.

Eric Scott Langan: We're 18 months to two years away at a minimum.

Eric Scott Langan: There are two other licenses.

Eric Scott Langan: There had been applied for and central stay there now crossing the three year, mark, but without denial or approval.

Eric Scott Langan: They're now crossing the three-year mark without denial or approval. And so, like I said, we've got a lot of information that's coming out in the last week or so. We're gonna weigh that out, and probably within the next two weeks, maybe three weeks, we will have a plan of action, and we will let everyone know what our plan is there. To me, it's not really relevant or material to earnings this year or next year, obviously, if it's 18 to two years away.

Eric Scott Langan: And so I just like I said, we've got a lot of information is coming in the last week or so.

Eric Scott Langan: Going to weigh that out and probably within the next so two weeks.

Eric Scott Langan: Maybe three weeks, we will we will have a plan of action and we will let everyone know what our plan is there.

Eric Scott Langan: It can.

Eric Scott Langan: To me, it's not really relevant or material to.

Eric Scott Langan: To earnings this year and next year, obviously, if it's 18 to two years away 80 months or years away. So we're going to focus on what we do know what we do know is we can open that club.

Eric Scott Langan: 18 months to two years away, so we're going to focus on what we do know. What we do know is that we can open that club and the steakhouse, and I think we'll do very well in that market with it. And we're going to continue to rebrand some of the chicas or some of the BYOB locations in the chicas so that we don't face anything like we did in Dallas in the last six months. We're just getting ahead of everything just in case the laws don't change.

Eric Scott Langan: And in the Steakhouse, I think we'll do very well in that market with it.

Eric Scott Langan: And we're going to continue to rebrand some of the cheapest.

Eric Scott Langan: Some of the BYOB locations in the Chico's.

Eric Scott Langan: So that we don't.

Eric Scott Langan: Face anything like we did in Dallas.

Eric Scott Langan: In the last six months.

Eric Scott Langan: Just getting ahead of everything just in case the loss don't change and we think these underperforming assets.

Eric Scott Langan: And we think these underperforming assets in some of the BYOB are underperforming, and they'll do much better under the new branded concept. That's kind of where our focus is. I think we've got to, one thing I'll say about being having to focus on bombshells for the last two and a half months is that it's really brought the team, especially the upper management focus back to, you know, what are we really doing? What is our CapCock supposed to say?

Eric Scott Langan: And some of them are underperforming and that that will be much better under the new branded concept. So.

Eric Scott Langan: That's kind of where our focus is I think we've got that.

Eric Scott Langan: One thing I'll say about.

Eric Scott Langan: Being having to focus on bombshells.

Eric Scott Langan: For the last two and a half months I is that it's really.

Eric Scott Langan: Brought the team, especially upper management.

Eric Scott Langan: <unk> back to what are we really doing what is our cap occupation.

Eric Scott Langan: You know, I don't, I don't know, I guess really putting a microscope on the existing assets. And that's why you've seen us change. I mean, we've had four clubs now that we're going to close and rebrand. I think that's going to be, you know, a big increase as we move forward to the end of this year. We've got the three bombshells coming online by the end of this year as well, I believe, as well as sometime in the first quarter of fiscal 25, I think we can get the Baby Dolls West location open.

Speaker Change: You know I don't I don't know I guess.

Eric Scott Langan: Really putting microscope to to the existing assets.

Eric Scott Langan: And that's why you've seen us change I mean, we've had four clubs now that we're going to close and rebrand.

Eric Scott Langan: I think that's going to be big increase as we move forward through the end of this year, we've got three bombshells coming online.

Eric Scott Langan: By the end of this year as well I believe.

Eric Scott Langan: As well as.

Eric Scott Langan: Sometime in the first quarter of.

Eric Scott Langan: Fiscal 'twenty five I think we can get the baby dolls West location open and then we have no more drag.

Eric Scott Langan: And then we have no more drag. I mean, to put it simply, we've had so much drag. We've got to get rid of this drag. We've got to get focused on the much quicker ROI that we get from acquisitions versus trying to build these new locations. I mean, yes, I think it's a great theory, and I think it was working, but the system's broken right now because governments just take forever, building permits take forever, inspections take forever, and it's adding six months to the time. Well, when interest rates were 4% and 5%, that extra six months didn't cost us very much. Well, now the interest rates are 8.5%, and 9.5% for corporate money. It's just the carrying costs that have become too much.

Eric Scott Langan: I mean to put assembly, we had so much drag we've got to get rid of this drag we gotta get focused on on much quicker.

Eric Scott Langan: Roy that we get from acquisitions versus trying to build these new locations I mean, yes. It was.

Eric Scott Langan: I think it's a great theory, and I think it was working by the system's broke right now because governments just take forever building permits taking forever inspections take forever and <unk>.

Eric Scott Langan: Adding six months time, well when interest rates were 4% and 5%.

Eric Scott Langan: After six months and cost us very much now the interest rates are eight 5% nine 5%.

Eric Scott Langan: For corporate money.

Eric Scott Langan: It's just that the carrying cost become too much and so we have to reevaluate that we have to run all these we have to go back into auto grade math over again.

Eric Scott Langan: And so we have to reevaluate that. We have to run all these, you know, we have to go back and do all the fifth grade math over. And that's what we're in the process of doing. And you'll see us through the rest of this quarter. And I plan to have everything lined out in the next six months, which gets us everything on track running into fiscal 2025.

Eric Scott Langan: And that's what we're in the process of doing.

Eric Scott Langan: And you'll see us do through through the rest of this quarter and I plan to have everything lined out in the next six months, which gets us off everything on track brining into throughout fiscal 2025.

Anthony Chester Lebiedzinski: Got it. Okay. And then, you know, as you rebrand some of the clubs, I mean, what's your expectation as to the lift and sail that you will get after you do such a rebranding?

Speaker Change: Got it Okay and then so as you rebrand some of the clubs I mean.

Anthony Chester Lebiedzinski: What's your expectations as to the <unk>.

Anthony Chester Lebiedzinski: <unk> sales that you you will get after you do such a rebranding.

Eric Scott Langan: Liquor clubs tend to run, some liquor clubs tend to run, you know, obviously more sales than the BYOB clubs. I'm assuming we can get those high enough that we'll also have better total margins. The margin rate may be about the same, but because the revenues are higher, obviously, the bottom line should be higher. We've run some models, but we've really only converted one club so far, and of course, the new club that opened, I love it. As we do El Paso and Harlingen and the FCC Dallas that's now been converted as of last week, I'll probably be able to give you more color on that as we get into the next call.

Anthony Chester Lebiedzinski: Ah lunar clubs tend to run some liquor clubs tend to run obviously more sales on the BYOB clubs.

Eric Scott Langan: I I I I.

Eric Scott Langan: Assuming.

Eric Scott Langan: We can get those high enough that we'll also have better total margins.

Eric Scott Langan: The margin rate may be about the same but because the revenues are higher obviously the bottom line should be higher.

Eric Scott Langan: We ran some we ran some models, but we.

Eric Scott Langan: We've really only converted one club so far so and then of course nickel I would open it love it as we as we do El Paso, and Harlingen and the FCC Dallas, that's now been converted as of last week.

Eric Scott Langan: I'll, probably be able to give you more color on that as we get into the next call.

Anthony Chester Lebiedzinski: All right, well, sounds good. Thank you, and best of luck.

Speaker Change: Alright, well sounds good thank you and best of luck.

Robert Miles McGuire: Fantastic. Thank you so much. Next up, we're going to have Rob McGuire of Granite Research. Rob, take it away.

Anthony Chester Lebiedzinski: Fantastic. Thank you. So much next up we're going to have Rob Maguire of granite research Rob take it away.

Robert Miles McGuire: Mark, thank you. So, Eric, you discussed what's happening or avoiding what happened in Dallas again, but if you, If you move from a BYOB to a liquor club, do you work with a different set of loop regulators?

Robert Miles McGuire: Got it thank you.

Robert Miles McGuire: So Eric Bob.

Robert Miles McGuire: Can you just discuss whats happening or avoiding what happened in Dallas again, but if.

Robert Miles McGuire: If you did.

Robert Miles McGuire: If you move from a BYOB two of liquor club.

Robert Miles McGuire: Do you work with the different settled with regulators.

Eric Scott Langan: While you have alcohol, the TABC in Texas becomes a new regulator for you, yes.

Robert Miles McGuire: While you have alcohol the TWC in Texas.

Eric Scott Langan: Becomes a new regulator for yes.

Robert Miles McGuire: In general, do you find that that creates an easier environment? I'm wondering if you could elaborate a little further about the strategy helping you avoid what's happening with XTC. It's just.

Eric Scott Langan: In general do you find that that creates an easier environment or you just I'm wondering if you could elaborate a little further about.

Robert Miles McGuire: This strategy, helping you avoid what happening with FCC.

Eric Scott Langan: It's just irrelevant. You know, they came in with time, place, manner and decided that, you know, all the clubs in Dallas needed to close at two o'clock if they had an adult entertainment license. I believe it's unconstitutional.

Robert Miles McGuire: It's just irrelevant.

Robert Miles McGuire: You know they come in with time place manner and decided that all the clubs in Dallas needed to close at two o'clock, if they have an adult entertainment license.

Eric Scott Langan: I believe it's unconstitutional. It would be close me you need to close every business. So.

Eric Scott Langan: If you close me, you need to close every business. So far, the judges have disagreed with us, or they have agreed with us, then they have disagreed with us, and so now we're going back and forth with this. The litigation will take too long for us to sit there with that club not making any money, and so we just converted it. And to avoid that in other markets, not every market, because some of our BYB clubs are still very successful, and we'll just take the chance on those.

Eric Scott Langan: So far the judges disagreed with us or they they agreed with US then they disagreed with us and so now we're going back and forth with this the litigation will take too long for us to set their backlog not making any money and so we just converted it.

Eric Scott Langan: And to avoid that and other markets not every market because some of our VR because theyre still very successful.

Eric Scott Langan: And well just take the chance on those but.

Eric Scott Langan: In what I consider the underperforming markets, when we ran analysis like Harlingen, El Paso, and Abilene, as we believe that we will do much better, you know, these clubs have been around for a long time, you know, early 2000s. And, you know, some of the areas have changed, the market has changed, and the clubs stayed the same. And so we've gone into what we believe these particular locations will do much better under this new concept that we acquired.

Eric Scott Langan: And what I consider the underperforming markets, while he ran analysis, Mike Harlingen El Paso.

Eric Scott Langan: In Abilene as we believe that we will do much better.

Eric Scott Langan: These clubs have been around since.

Eric Scott Langan: Early two thousands and some some of the areas have changed the market has changed and the clubs stay the same and so we've gone in and said what we believe these particular locations will do much better under this new concept that we acquired.

Eric Scott Langan: You know, before we acquired Duncan Burks, we didn't have this concept. But now that we have this concept, we're able to take it and run its numbers and its demographics, and, again, against some of our BYOB clubs and those three particular clubs, especially Harlingen and El Paso, and even the FCC in Dallas, I think we will do very, very well with this new concept.

Eric Scott Langan: You know before we acquired the Duncan Burns acquisition, we didn't have a concept, but now we have this concept, we're able to take it and run its numbers and its demographics and against some of our BYOB clubs and those three particular clubs, especially harlingen and El Paso and even the FCC in Dallas I think we do very very well with this new console.

Eric Scott Langan: And then, with regard to the economic uncertainty, you talked about on the last call how you're starting to discount on Monday and Wednesday nights. Are you seeing an uplift in terms of traffic on that? Or, in general, could you just comment on what you're seeing that's working in the clubs as you adjust in this environment?

Eric Scott Langan: Thank you and then with regards to the economic uncertainty.

Eric Scott Langan: Talk about in our last call how youre starting to discount on Monday, or Wednesday nights are you seeing an uplift in terms of traffic all matter or in general could you just comment about what you're seeing that's working in the clubs that you adjusted in this environment.

Eric Scott Langan: Yeah, I mean running specials is helping for sure. Sports is helping tremendously right now. So that's been a big plus for us this quarter and last quarter. I mean this month and last month. We will see how that runs out through June, depending on who makes finals.

Speaker Change: Yes, I mean running specials are helping for sure.

Eric Scott Langan: Sports is helping tremendously right now.

Eric Scott Langan: So that's been a big plus for us in this quarter and last quarter Army This month and last month.

Eric Scott Langan: We will we will see how that runs out for June, but they know who makes finals.

Eric Scott Langan: Obviously, weekends, parties, PIP parties, just getting our teams much more involved and much less complacent, I think it is really helping. You know, as you're trudging along, you don't realize sometimes that, you know, you get complacent. We've hired some new management in the clubs as well as a as well as the bombshells, and we're seeing results from that. So it's a lot of just getting everybody back on track, returning to the basics.

Eric Scott Langan: Obviously, we dance parties VIP parties, just getting our teams much more involved.

Eric Scott Langan: And much less complacent I think this is really helping.

Eric Scott Langan: When issue as you were tracking along you don't realize.

Eric Scott Langan: Sometimes that.

Eric Scott Langan: That you know you get complacent.

Eric Scott Langan: We've hired some new management and the clubs as well as.

Eric Scott Langan: As well as the bombshells and we're seeing results from that so there's a lot of just getting everybody back on track returning back to the basics and that's what got me thinking and athletes are returned to the basics on the restaurant's return over basics in the clubs.

Eric Scott Langan: And that's what got me thinking, you know, as we return to the basics in restaurants, return to the basics in clubs. I thought to myself, well, are we returning to the basics at a corporate level? And what are the basics at a corporate level?

Eric Scott Langan: To myself well are we returning to the basics on a corporate level and what are the basics and the corporate level and I said well, let's let's go back to 2015 and 16, when we are back with its capital allocation strategy unless reevaluate our assets like as 2015 again.

Eric Scott Langan: And I said, well, let's go back to 2015 and 16, when we adopted this capital allocation strategy, and let's reevaluate our assets like it's 2015. It was highly successful for us. It worked very, very well. And while I think we've stayed true to the capital allocation strategy, I think we got a little complacent with existing assets, and existing team members. And it was easy.

Eric Scott Langan: It was highly successful for us it worked very very well and well I think we've stayed true to the capital allocation strategy.

Eric Scott Langan: I think we got a little complacent on existing assets existing team members.

Eric Scott Langan: It was easy we were making lots of money in 'twenty, one and 'twenty two 'twenty three was kind of a wakeup call for us and as we moved into the last quarter, especially with bombshells. It kind of became a wake up call and then we've seen some decline in same store sales at the club level and I say.

Eric Scott Langan: We were making lots of money at 21 and 22. 23 was kind of a wake-up call for us. And as we moved into the last quarter, especially with the bombshells, that kind of became a wake-up call, and then we've seen some decline in same-store sales at the club level. And I said, we have got to cut this off immediately at the club level. We can't let it go on as long as we did at Bombshells. And so that's where we are today.

Eric Scott Langan: We got to cut this off immediately at.

Eric Scott Langan: At the club level, we cant we cant let it go on as long as we did at Bombshells.

Eric Scott Langan: And so that's where we're at today.

Robert Miles McGuire: But that's all really helpful. Thank you. That's it for me, Mark. Thank you very much, Rob. I'd like to encourage anyone in the audience with a question.

Speaker Change: But that's all really helpful. Thank you that's it for me market.

Mark Moran: Thank you very much, Rob. I'd like to encourage anyone in the audience with a question to please raise their hand, and we'll bring you up. Next up, we have Steve Martin. Steve, please take it away.

Speaker Change: Thank you very much Rob I would like to encourage anyone in the audience with a question to please raise your hand, and we'll bring you up next up we'll have Steve Martin Steve Please take it away.

Steve Martin: Most of my questions have been addressed.

Mark Moran:

Steve Martin: What are you seeing from the competition and do you think you're outperforming the competition on the club side.

Steve Martin: On the club side, in most of our markets, where we're number one or number two, we are definitely outperforming our competition. We do have some lower-brand clubs in certain markets that are probably similar to our competition. I talked to other club owners.

Mark Moran: On the club side in most of our markets, where we're number one or number two we are definitely outperforming our competition are we do have some lower brand our clubs and in certain markets.

Steve Martin: No.

Steve Martin: Similar to our competition.

Steve Martin: I talked to other club owners I think overall, we're seeing 15% to 30% declines probably an average of 20% declines from there on their peaks in 'twenty one 'twenty two.

Eric Scott Langan: I think overall, they're seeing 15 to 30 percent declines, probably an average of 20 percent declines from their peaks in 21, 22, and off again, down in 23, and now they're down again. It's a struggle for the mid-level consumer, and the majority of clubs cater to that mid-level consumer. [inaudible] So I think it's just one of those things we're going to work through over the next few months

Eric Scott Langan: And off again down in 'twenty, three and now they're down again in 'twenty four so far.

Eric Scott Langan: It's a struggle for the for the mid level consumer the majority of clubs cater to that mid level consumer.

Eric Scott Langan: So I think it's just one of those things are we're going to work through over the next few months and it's not that we're.

Eric Scott Langan: And it's not that we're. I think a lot of the misunderstanding is because I hear people like, "they know," and it starts reminding me of 2009 when everybody talked about us going out of business when we were still making $6 million. Well, we're still making $60, $50 million, right? It's not like we're not making a ton of money still. We're not going out of business. It's just we're not making the same type of easy revenue and easy money that we made in 21 and 22, when there was just tons of free money. And we were the only ones, and in 21, we were some of the only clubs open, or only businesses open. In 22, there was just so much free money left out there.

Eric Scott Langan: I think a lot of the misunderstanding because I hear people.

Eric Scott Langan: I Express reminds me of 2009, when everybody talks about is going out of business. When we were still making $6 million, what we're still making $60 million to $50 million right. It's not like we're not making a ton of money still.

Eric Scott Langan: We're not going out of business. It's just we're not making the same type of easy revenue and easy money that we made in 'twenty. One 'twenty two when there was just tons of free money and we were the land and then 'twenty, one where some of the only clubs open our only business is open in 'twenty. Two there was just so much free money left out there.

Eric Scott Langan: Thanks tightened up interest rates went up and consumers being squeezed in multiple pace with inflation.

Steve Martin: Things tightened up, interest rates went up, and consumers were squeezed in multiple places by inflation. We're seeing wage inflation ourselves. And so it's changed, and we've had to adapt to that and change with it.

Steve Martin: We're seeing wage inflation ourselves.

Steve Martin: And so it's changed and we've have too.

Steve Martin: To that and change with it.

Eric Scott Langan: Okay, and you've put in a lot of cost containment measures. How long do you think that's going to take for those to show through in earnings? Well, I mean, I think you've seen some of it right now, because our revenues were down. But even Justin wasn't down as much, I think, on a same-for-sales basis.

Steve Martin: Okay and.

Eric Scott Langan: You've put in a lot of cost containment measures how long do you think that's going to take a take for those two showed store weighted to the earnings.

Eric Scott Langan: Well I mean, I think you've seen some of it right now because our revenues were down.

Eric Scott Langan: And I think we're seeing some of that. We made a decision about a week and a half ago, as we got to the end of April, and said, we're cutting off all future project costs that are controllable costs. We can't get rid of carrying costs and just from that, but we're not going to hire any new employees. We're not going to continue management training or any kind of training for these new concepts until the day they're complete.

Eric Scott Langan: But our EBITDA adjusted he wasn't down as much.

Eric Scott Langan: I think on.

Eric Scott Langan: On a same store sales basis.

Eric Scott Langan: And I think so I think we're seeing some of that we made the made a decision about a week and a half ago as we got to the end of April and said Ah.

Eric Scott Langan: We're cutting off all all future project costs that are controllable costs.

Eric Scott Langan: You can't get rid of carrying costs interest in that but we're not going to hire any new employees, we're not going to continue to management training or any kind of training for these new three of these new contracts until the day. They are complete so we have a direct opening date then we'll start all of that NIM will carry those costs, but we're not gonna have any preopening cost will be carry birch.

Eric Scott Langan: So, when we have a direct opening date, then we'll start all that, and then we'll carry those costs, but we're not going to have any pre-opening costs that we carry for. We think we're going to open in 3 months, but it takes 9. So, we end up carrying those costs for 9 months. I said, "We're just going to wait from now on if it takes us an extra month or 2 to get open.

Eric Scott Langan: We're going to open in three months when it takes nine so we ended up carrying those costs for nine months.

Eric Scott Langan: It cost me nothing, or it cost me very little to have a store set up, and they're ready to open, and they don't open because they don't have the staff. Then it cost me to carry that staff for 9 or 10 months. And so we've cut all that type of stuff. I mean, this is all going back to the cap allocation strategy where we're not making any investment till we know exactly what the ROI is.

Eric Scott Langan: We're just going to wait from now on if it takes us an extra month or two to get open.

Eric Scott Langan: It costs me nothing economy, very that'll have a store setting there up ready to open and not opened because I don't have the staff and a coffee to carry that staff for nine or 10 months and so we've cut all of that type of stuff. I mean, this is all going back to the cap Haustration strategy, where we're not making any investments. So we know exactly what the ROI is on it.

Speaker Change: Alright, thank you.

Speaker Change: Thanks, Steve.

Steve Martin: Thank you very much. Next up we'll have Orchid Well. Please take it away. Hey, Orchid Wealth, I think you're still on mute.

Speaker Change: Thank you very much next up will have orchid well please take it away.

Orchid Well: Hey, Oregon wealth, I think you're on mute still hey.

Orchid Well: Hey, guys.

Orchid Well: Just having a girl.

Orchid Wealth: Good, man. Obviously, the main thing that I'm focusing on right now is just the environment that you're in. Have you noticed any significant impact from people calling you? Are they still holding on to their prices, or are these people open to negotiation?

Steve Martin: Kevin.

Orchid Well: Obviously, you know the main thing that I'm focusing on right now is just.

Orchid Wealth: With.

Orchid Well: The environment that you're in.

Orchid Wealth: Have you noticed any significant impacts.

Orchid Wealth: From people, calling you and are they still holding onto their prices or these people open to negotiation.

Eric Scott Langan: We've been negotiating the price pretty well. A lot of it right now has been terms, and uncertainty. And people have been trying to hold on to their 21, 22 deals, but now they've gone through 23, and we're into 24, and I think people are starting to wake up to the fact that 21 and 22 were kind of a fluke. There was, like I said, just a lot of free money out there, and people are coming out of COVID, and a lot of businesses are closed.

Orchid Well: We've been negotiating price pretty well.

Eric Scott Langan: A lot of it right now it has been terms.

Eric Scott Langan: Uh huh.

Eric Scott Langan: And and and uncertainty.

Eric Scott Langan: And people have been trying to hold onto their 'twenty, one 'twenty two deals, but now they've got 323 rent in 'twenty four and I think people are starting to wake up to that 'twenty, one and 'twenty. Two was kind of a please there was like I said, there's a lot of free money out there and people are coming out of Covid and.

Eric Scott Langan: A lot of it is a close things are normalizing I mean, who would think we'd be thinking normalization five years later, but that's really where we're at I mean was it was unprecedented it closed. So many businesses are closed down the country at one time like that.

Eric Scott Langan: Things are normalizing. I mean, who would think we'd be thinking of normalization five years later, but that's really where we're at. I mean, it was unprecedented to close so many businesses or close down the country at one time like that, and then for such a long period of time when it was supposed to be two weeks.

Eric Scott Langan: And then for such a long period of time when it was supposed to be two weeks and so I just think theres been a lot of a lot of adjustment going on we're getting back to that normalization.

Eric Scott Langan: And so I just think there's been a lot of adjustment going on; we're getting back to that normalization. And like I said, I think a lot of people, I don't think it's just us. I think a lot of companies and a lot of people have become complacent. I was talking with Mark today when I came into his office here in New York City. And I think last time we were here, there were 15 people in this office at most.

Eric Scott Langan: And like I said I think a lot of I don't think it's just us I think a lot of companies a lot of people got complacent I was I was talking with Mark today with I came into the offer his office here in New York City, and I think last time, we were here there were 15 people in this office at most and most time, we come over here there'll be eight or nine asset you guys got a 35 45.

Eric Scott Langan: And most of the time we come over here, there'll be eight or nine. And I said, you guys got 35, 45 people in here. What's going on? He says, everybody's back to work, you know? And we're seeing that in our numbers in New York City as well with the clubs. You know, I think, like I said, I think it's just going to return to normal. And I don't know what that means just yet, but I do know that we'll be, you know, staying on top of it and staying ahead of it instead of playing catch up like we did in 2023.

Eric Scott Langan: People hear what's going on he goes right back to work.

Eric Scott Langan: And we're seeing that in our numbers in New York City as well as the clubs so.

Eric Scott Langan: I think I can say I think it was getting returned back to normal.

Eric Scott Langan: And.

Eric Scott Langan: I don't know what that means just yet, but I do know that will be.

Eric Scott Langan: Staying on top of it and stay ahead of it instead of playing catch up like we've done in.

Orchid Wealth: And my assumption is, when I take out the numbers for all of the years, previous years, before the, let's call it, the COVID bump, I kind of feel like you guys are still on trend from what you were for the previous five years. And just in terms of overall, just you're growing, you know, you have this like, it's like kind of having a heat wave.

Eric Scott Langan: 2023.

Eric Scott Langan: And my assumption is and I will take up the numbers for all of the years previous years before the let's call. It the Covid bump.

Orchid Wealth: I kind of feel like you guys are still on trend line from what you were for the previous five years of what you had been doing.

Orchid Wealth: And just in terms of overall, just you're growing and you had this like what kind of analytical heatwave you sell a lot of ice cream you get back to normal temperatures youre going to sell about a certain historical number of ice cream.

Orchid Wealth: You sell a lot of ice cream, and when it gets back to normal temperatures, you're gonna sell about a certain historical amount of ice cream. I mean, I'm assuming things are along those lines, or are you noticing anything different? Yeah.

Orchid Wealth: I'm, assuming things are along those lines or are you noticing anything different when we compare to 18 and 19, where we're in pretty good shape.

Eric Scott Langan: Yeah, when we compare to 18 and 19, we're in pretty good shape. I mean, you have certain markets. Minnesota was dragging for a while, but I mean, they not only had COVID, you had, you know, the George Floyd issue up there. You had, you know, major changes in that market that affected it for a while. But the T-Wolves are breathing life into downtown again. I'm seeing numbers that we haven't seen in Ricks, Minneapolis, for a long time.

Eric Scott Langan: I mean, you have certain markets, Minnesota was dragging for a while but I mean, they not only had COVID-19 you had the joy Floyd issue up there you have.

Eric Scott Langan: Major changes on that market and that had an effect in it for a while.

Eric Scott Langan: The T was her breathing life into downtown again.

Eric Scott Langan: I'm seeing numbers that we haven't seen and Rick Minneapolis in a long time.

Eric Scott Langan: The Seville Club's doing much better, so I'm, you know, I'm optimistic that that market is going to finally turn. New York is turning as people have returned back to their offices. So I'm very optimistic there that, you know, the biggest problem we have is Florida was just incredible, right? When you took these who'd never, their highest year ever was 26.8 million or $26.6 million in 18 or 19. And then, in, you know, 2022, they did $39.6 million gross, uh, so and then I think last year was 35 and change or 34 and change, so that's a five million dollar change at the 50s, so it's a big swing on a, you know, quarterly basis for the same

Eric Scott Langan: The Seville club is doing much better.

Eric Scott Langan: So.

Eric Scott Langan: I'm optimistic that that market is going to finally turn New York is turning.

Eric Scott Langan: As people have returned back.

Eric Scott Langan: To the offices.

Eric Scott Langan: So I'm very optimistic there that you know the biggest problem. We have is Florida was just incredible right. When you talk to us he who'd never their highest year ever with $26 8 million or $26 $6 million and in 18 and 19 and then Anne.

Eric Scott Langan: Now 2022, they did $39 $6 million gross.

Eric Scott Langan: So and then I think last year 35, and change is there anything changed.

Eric Scott Langan: You know, that's a $5 million change a trippy, there's a big swing on a quarterly.

Eric Scott Langan: Quarterly basis for same store sales.

Orchid Wealth: When it comes to buybacks, right? Obviously, you guys have your chart for when you should be aggressive or not. But obviously, with the influx of the cash that you're going to have on the balance sheet and stuff, I mean, because it sounds like you're not in any negotiations or anything close to where you're going to be doing any big deals, at least at the present moment. Are you prepared to be aggressive and get back those 130,000 shares that you put out at $80 close to two years ago?

Eric Scott Langan: When it comes to buybacks right now obviously you guys have your chart for <unk>.

Orchid Wealth: When when you should be aggressive or not but obviously with.

Orchid Wealth: The influx of event of the cash that youre going to have on the balance sheet and stuff.

Orchid Wealth: I mean, because it sounds like here you are not in any negotiations or anything close by where you're going to be doing any big deals that at least at the present moment or are you are you prepared to be aggressive and get back. Those 130000 130000 shares that you put out at 80 Bucks.

Orchid Wealth: Close to two years ago.

Eric Scott Langan: I'm thinking in a little more aggressive terms than that. I would like to get us back under 9 million shares total outstanding. So I'd like to buy back a little over 300,000 shares at some price here, depending on what the market opportunity is for us. Uh, you know, I don't know when I started that address. We just closed the loan. We closed the loan on. Bradley, can you remind us what's due us today? Today's Thursday.

Orchid Wealth: I I'm thinking a little more aggressive terms on that I would like to get us back on our 9 million shares total outstanding so I'd like to buyback little over 300000 shares.

Eric Scott Langan: At some price here, depending what the market market opportunities for us.

Bradley: You know.

Eric Scott Langan: I don't know when I, what aren't that aggressively Jennie O closed alone we closed alone on.

Eric Scott Langan: Ravi can remind would pass towards today.

Bradley Lim Chhay: We close on Tuesday, Bradley? Or when the AK goes out? Whenever the AK goes out.

Bradley: Today's Thursday, because lung Tuesday, or Wednesday may 8-K went out whenever the 8-K went out.

Eric Scott Langan: We closed loans in the last week, I can tell you that. I thought about... You know, getting pretty aggressive. I decided, after talking with our attorneys, that I should wait until after this call to make sure all, you know, all the relevant data is out there. Now, with the casinos kind of in limbo, we'll probably stick to a, for at least the next two weeks, we'll probably stick to a more moderate buyback. But if we, if we start buying back stock, we may not. I don't know.

Bradley Lim Chhay: Because one of them the last week I can tell you that I thought about.

Eric Scott Langan: You know getting pretty aggressive I decided that after talking with our attorneys that I should wait till after this call make sure all of you know all the relevant data is out there.

Eric Scott Langan: Now with the casinos kind of in Limbo, we'll probably stick to a for at least the next two weeks, we'll probably stick to a more moderate buyback. If we if we start buying back stock. We may not I don't know are we made by maximum under Safe Harbor I can tell you, we probably will never buy overstock safe Harbor amount in a single day, we will stick to the.

Eric Scott Langan: We may buy maximum under the safe harbor. I can tell you we probably will never buy over a safe harbor amount in a single day. We will stick to the SEC safe harbor provision for our buyback.

Eric Scott Langan: SEC safe Harbor provision for our buybacks.

Orchid Wealth: And what's that number? What's that number?

Eric Scott Langan: And what's the what's that number approximately 25% of the average daily volume managed and so long as if I had to worry about it because we actually buy a real we used to use a little local stockbroker now we actually use an investment bank to do our buybacks.

Eric Scott Langan: Approximately 25% of the average daily volume. Man, it's been so long since I had to worry about it because we actually, by a real we used to use a little local stockbroker. Now we actually use an investment bank to do our buybacks.

Eric Scott Langan: 25% of the average daily volume.

Orchid Wealth: 5 day period or something like that.

Eric Scott Langan: Over a 25 day period, so I'll say it like that 30 day period, or some 10 days I don't know.

Eric Scott Langan: [inaudible] Looks like 8,000 to 10,000 shares is what you could take down. Uh, I think it's a little higher than that, but I'd have to get the numbers, I mean, I can ask them. Yeah, it comes up to 14,000 shares, I think, last time I looked.

Orchid Wealth: It looks like eight to 10000 shares as where you could take a I think it's a little higher than that but I'd have to get there.

Eric Scott Langan: Maybe I can ask I mean, it goes up to 14000 shares I think last time I looked at.

Orchid Wealth: But you have more than enough cash to take back $130,000. I mean, we're sitting on $45 million in cash now that we have closed the loan. I mean, I could use the whole 20 million to buy back stock if I, well, I could use 13 of it so the board the board would have proof for me to go over that amount, but yeah, I mean, we could do that. Uh, we'll see what the stock does. Obviously, when it's super cheap, I get very aggressive. You've seen that before.

Eric Scott Langan: Right, but you have more than enough cash to take back 130000 timing, we're sitting on $45 million of cash out because the law.

Orchid Wealth: I mean, I could use the whole $20 million buyback stock as well can you start team of it until the board and the board was approved for me to go over that amount, but yes, I mean, we could do that.

Orchid Wealth: We'll see what the stock does I guess.

Orchid Wealth: Obviously, when a super cheap I get very aggressive we have seen that before.

Orchid Wealth: And when it's not.

Eric Scott Langan: And when it's not at these prices, you know, $100,000 a day or 200,000 a day, I don't consider that too aggressive. I consider that just a nice casual buyback will cost average, in and out, and we buy some stock at 48, we buy some stock at 56. It all works out in the wash for us and, in the long run, over a five-year period at Walton, with what we bought it for today, it'll be a monster price, and it will be five years.

Orchid Wealth: At these prices and $100000 a day or 200000, a day is I don't see that too aggressive.

Eric Scott Langan: I consider that just a nice casual buyback will cost average in and out and we bought some stock of 48 by some stocking effects.

Eric Scott Langan: It all works out in the wash for us over the long run or over five year period, it won't matter.

Eric Scott Langan: We bought a portfolio it'll be for pricing and it will be five years from now.

Orchid Wealth: Well, I mean, you got two deals; you got 80, you got shares at 80, and you got shares at 60. So anything right now is a return on capital. Those next 300,000 shares and under 60, we're benefiting, right? I mean, we bought real assets, we bought real estate, we bought cash flow. Both of those acquisitions are performing much better than they were based on the price that we paid for them. So, I mean, you see the Duncan Burch, you know, changes of 23% increased revenues, and margins up to 32%. That's a big change from where we bought it.

Eric Scott Langan: Well I mean, you've got two deals you've got 80, you've got shares at 18 got shares of 60, so anything right now.

Orchid Wealth: Is that doesn't that return on capital if necessary in a thousand shares and under 60, we're benefiting right I mean, we bought real assets.

Orchid Wealth: Real estate, we bought casual both of those acquisitions are performing much better than they were based on a price that we bought them. All so you.

Orchid Wealth: You mean, you see the Duncan Bruce.

Orchid Wealth: No changes of 23% increase revenues margins up 32% I mean.

Orchid Wealth: That's a big change from where we bought it at a.

Orchid Wealth: A year and a half ago.

Eric Scott Langan: or a year ago, right? Yeah, a year ago.

Orchid Wealth: A year ago, right now and then what Brian.

Orchid Wealth: And then obviously, over the last number of years here, you guys obviously have a huge amount of real estate portfolio right now. I'm assuming, you know, like on a lot of these things when you did with the bombshells, you had ancillary property and stuff. Do you still have parcels and stuff that you can sell off?

Eric Scott Langan: And then with like obviously over the last number of years here you guys. Obviously have a huge amount of real estate portfolio right now.

Orchid Wealth: I'm, assuming you know like on a lot of these things when you did with the Bombshells you had ancillary property and stuff that you still have parcels and stuff that you can sell off and like what possibly could you sell off in terms of just land or replaces next to the clubs that could.

Eric Scott Langan: And like, what possibly could you sell off in terms of just land or places next to the clubs that could, you know, that it doesn't do you any good, it'd be worth selling? On a cost basis? For 1030 quid?

Eric Scott Langan: It doesn't do you any good it would be worth selling on our cost base and 31 and on a cost basis about four $4 million on a cost basis on a market basis Bryan.

Eric Scott Langan: On a cost base is about $4 million? Yeah, on a market basis. We have one property that we just turned down $9 million for. I believe it's worth, and what did you pay for the $2.15 million? uh about four years ago maybe uh we we've got basically got three parcels of land left uh the aurora property that we recently bought for bombshells that we're not going to develop as bombshells that property's up for sale i expect to have a contract on that hopefully in the next two weeks according to the broker that i put on that uh i guess i turned down nine million for a property in uh the houston texas area it's about 19 acres i believe the property is worth about 30 a foot uh if we got you know prime price for it but in this market today uh probably closer to 14 a foot which would be around 12 14 million dollars uh i know i think the price we got offered for it was closer to 10 a foot uh, If somebody came in at $12 a foot today, I'd probably just take it and walk. Friday was a fast closing.

Eric Scott Langan: We have one property that we just turned down $9 million or.

Eric Scott Langan: Uh huh.

Eric Scott Langan: I believe it's worth and what did you pay for that $2, one 5 million.

Eric Scott Langan: About.

Eric Scott Langan: Four years ago, maybe.

Eric Scott Langan: We've got basically a three parcels of land left.

Eric Scott Langan: The Aurora property that we recently bought for Bombshells that were not going to develop as bombshells that properties up for sale I expect to have a contract on that hopefully in the next two weeks. According to the broker to that I'll put on that.

Eric Scott Langan: Uh huh.

Eric Scott Langan: I guess I turn now 9 million for property and.

Eric Scott Langan: The Houston, Texas area is about 19 acres I believe the properties worth about $30 a foot if.

Eric Scott Langan: If we got prime price for it but in this market today.

Eric Scott Langan: Probably closer to $14, a foot, which would be around $12 million to $14 million.

Eric Scott Langan: I know I think the price we got offered a bar it was closer to $10 a foot.

Eric Scott Langan: Uh huh.

Eric Scott Langan: If somebody came in at $12 a foot today I'll, probably just take it in la.

Eric Scott Langan: Friday was a fast closing.

Eric Scott Langan: I talk to that broker pretty regularly. It's the largest vacant piece of land within about a five-mile radius on an intersection of two major highways. There's a big, giant Bass Pro Shop on the opposite corner. It is a prime piece of real estate today. It wasn't when we bought it because it was zoned in a special use zone. I petitioned the city about a year and a half ago to rezone that property into basically C1 Commercial, which is basically any viable business.

Eric Scott Langan: I talked about broker pretty regulators a lot of it is the largest piece of land.

Eric Scott Langan: So probably that's where the value was created was when we changed the zoning. That probably became very valuable and if all the other large pieces around us got bought up because we had a plan to develop that property into a mini-Industrial Park, Light Industrial Park. And then, of course, I said, look, you know, RCI is not really in the development business. Let's just sell this property. And so I started shopping it around out there to sell it. So, we'll get it sold, I think, at some point in the next few months. I'd like to sell everything in the next six months.

Eric Scott Langan: With antibody five mile radius.

Eric Scott Langan: Our team we're at an intersection of two major highways, there's a big giant bass pro shop on the opposite corner.

Orchid Wealth: Okay, and I'm assuming that anything that you're buying at these current levels is meeting your capital allocation strategy.

Orchid Wealth: It is a it is a prime piece of real estate today.

Orchid Wealth: Wasn't when we bought it because it was zone or in a special especially you sell <unk>.

Orchid Wealth: I petition the city are about a year, a year and a half ago to re selling that property and to basically see one commercial.

Orchid Wealth: Basically any any any viable commercial use.

Orchid Wealth: So that probably that's where the value is created is when we change the zoning that property became very valuable and if all of the other large pieces around has got bought up because we had originally.

Orchid Wealth: Land to develop that property.

Orchid Wealth: Into a.

Orchid Wealth: Basically a mini.

Orchid Wealth: Industrial Park Light Industrial Park.

Orchid Wealth: And then of course I got.

Orchid Wealth: Rcs are early in the development business left to sell this property.

Orchid Wealth: Sorry to shopping at out there and sell it.

Orchid Wealth: Well, we'll get it sold I think at some point.

Orchid Wealth: And the next I by 12, six months really I'd like to get everything I'd like to really aren't actually four months now because I'd like to get everything lined up by October one 2020, 'twenty 'twenty or 'twenty 'twenty four for our fiscal 2025 and get everything back in line of our capital strategies like we did in 2016 and 17.

Orchid Wealth: Okay, and I'm, assuming anything that you are buying at these current levels is meeting your capital allocation strategy.

Eric Scott Langan: I think everything we've bought, period, has met our capital obligations. I don't think we have anything invested.

Speaker Change: I think everything we bought period has met our capital allocation strategy.

Eric Scott Langan: I think the mistake, if we made any mistake, was the estimation of time to open. And so, therefore, the carrying costs are increasing. And, you know, I think we'll still be, I still think we'll be within our capital outlay strategy with additional carrying costs on everything except for maybe these casino properties because this timeline is getting, you know, crazy. So we've got to weigh that math still. But on everything else, the bombshell properties, even if we open six months late, maybe the return on investment will be 25% instead of 45%, but I still think that the return on investment will be very fine. You know, cash on cash wise will still be well within the ranges of our capital allocations.

Eric Scott Langan: I don't think we have anything <unk> I think the mistake, we made any mistake.

Eric Scott Langan: Estimation of time to open and so therefore, the carrying costs are increasing and.

Eric Scott Langan: I think I think we'll still be I think.

Eric Scott Langan: I would think would be within our cap our case strategy with additional carrying costs.

Eric Scott Langan: On everything except for maybe these casino properties because this timeline is getting.

Eric Scott Langan: Crazy.

Eric Scott Langan: So we've got to weigh that mass deal, but on everything else. The bombshells properties Union and we hope to make some I think maybe that maybe the return on investment is 25% instead of 45%, let I still think that the return on investment will be.

Eric Scott Langan: Very fine you know cash on cash wisely suite still fall within.

Eric Scott Langan: The ranges of our capital allocation strategy.

Orchid Wealth: Well, if you can't buy clubs, buy stocks. All right, thanks so much, guys.

Speaker Change: But you can't buy clubs by stock so alright, thanks, so much guys.

Orchid Wealth: <unk>.

Mark Moran: Thank you very much, Eric and Bradley, as well as all those who asked questions. For those who joined us late, you can meet management tonight at seven o'clock at Ricks Cabaret New York, one of RCI's top revenue-generating clubs. Ricks is at 50 West 33rd Street between 5th Avenue and Broadway, a little away from Herald Square. If you have an RSVP, ask for Eric or me at the door. On behalf of Eric, Bradley, the company, and our subsidiaries, thank you and have a good night. As always, please visit one of our clubs or restaurants and have a great time.

Speaker Change: Thank you very much Eric and Bradley as well as to all those who asked questions for those who joined US late you can meet management Tonight at seven o'clock at Rick's Cabaret, New York one of RCI. Its top revenue generating clubs Rick is at 50 West 30, <unk> Street between fifth Avenue.

Mark Moran: Broadway a little later from Herald square.

Mark Moran: If you have an RSVP ask for Eric or me at the door on behalf of Eric Bradley The company and our subsidiaries. Thank you and have a good night as always please visit one of our clubs or restaurants and have a great time.

Mark Moran: Yeah.