Q4 2025 RCI Hospitality Holdings Inc Earnings Call

March 19, 2026

Earnings Conference call. My name is brought to check you.

You can find the company's presentation.

Okay.

Sure.

Importantly, we filed our 10-K today announced our fourth quarter and year end results.

All comparisons are year over year, unless otherwise noted.

Travis Reese: Non-cash legal accrual, increased income taxes, and lower impairments. We also continue to make progress with our back to basics five-year capital allocation plan. Since we initiated the plan in 2024, we divested of 4 Bombshells and leased locations, acquired 3 nightclubs, opened 4 new clubs and a Bombshells, attracted outside investment in 1 nightclub, sold 2 small underperforming clubs, and continued to buy back shares. As of 13 March, we've reduced the share count to approximately 7.7 million, about 14% lower than at year-end 30 September 2024. Now here's Albert to review our performance in more detail.

And lower impairments.

We also continue to make progress with our back to basics by your capital allocation plans.

Since we initiated the plan and for Q4, we divested of four bombshells and leased locations.

Our quad three clubs opened four new clubs bombshells attract.

Attracted outside investment one nightclub.

So to run small underperforming clubs and continuing to buy back shares.

As of March 13th we've reduced the share count to approximately $7 7 million about 14% lower than at year end September 30 of 2024 now here's Albert to review our performance in more detail.

Albert Molina: Thanks, Travis. Turning to slide 7. I'll start with the review of our Q4 results. All comparisons are year-over-year for the quarter unless otherwise noted. Total revenues were $70.9 million compared to $73.2 million. A difference of $2.3 million primarily reflected 5 fewer Bombshells-related locations, partially offset by new nightclub locations. Corporate expenses totaled $15.4 million compared to $7.1 million. The difference of approximately $8.3 million primarily reflected the establishment of a legal reserve. Impairments and other charges were $3.7 million compared to $10.1 million, a difference of $6.4 million. Income tax was a $1 million expense compared to a $0.8 million benefit.

Thanks Travis.

Turning to slide seven I'll start there.

Fourth quarter results.

All comparisons are year over year for the Parker unless otherwise noted.

Total revenues for worth $29 million compared to 70.

73 went to them.

A difference of $3 million primarily reflected.

Peter we're bumped shields from a patient.

Barton upset my new ninth location.

Corporate expenses.

$15 $4 million compared to $7 $1 million.

And different approximately eight $3 million, primarily reflected establishment alcohol legal reserve.

Impairments and other charges or cheaper than a million.

Compared to $1 million a difference of $6.

$4 million.

Income tax was the 1 billion dollar expense.

8 million dollar benefits.

Albert Molina: Net income attributable to RCIHH common shareholders was a loss of $5.5 million compared to a profit of $244,000. Loss per share was $0.63 compared to a positive EPS of $0.03. While net cash provided by operating activities was $13.7 million compared to $15.7 million. Free cash flow was virtually level at $13.1 million due to the lower maintenance CapEx in the current quarter. Adjusted EBITDA was $7.4 million compared to $17.9 million. Non-GAAP loss per share was $0.12 compared to a profit of $1.63. Moving to slide 8. I will now cover our Q4 results by segment, beginning with nightclubs. Again, all comparisons are year-over-year for the quarter unless otherwise noted.

Net income attributable to our C I H H common shareholders.

The loss of $505 million compared to a profit of $244000.

The loss per share.

63 cents compared to a positive EPS accretion.

While net cash provided by operating activities.

$7 million compared 15.

$15 $7 million free.

Free cash flow was virtually level of $31 million due to lower maintenance capex in the current quarter.

Adjusted EBITDA.

$7.4 million as compared to $17 $9 million.

non-GAAP loss per share was something comparable.

Off at $5 63.

Moving to slide eight.

Look out for our fourth quarter results by segment.

Beginning with nightclubs.

Again, all comparisons are year over year for the quarter unless otherwise noted.

Albert Molina: Revenues totaled $60.9 million, up 0.4%. Key factors included contributions from 4 new clubs acquired or opened in Q2 and Q3 and sales from 2 smaller rebranded and/or reformatted Texas clubs not in same-store sales base. This was partially offset by the decline in same-store sales and reduced sales from closing Dallas Showclub in Q4 of 2025 for reformatting and from Baby Dolls Fort Worth due to the fire. By revenue type, food, merchandise, and others increased 4.3%. Service increased 1.5%, and LBW declined 2%. I'd like to point out that some clubs stood out, such as Rick's Cabaret in Fort Worth, one of the star locations of the Landlord TV series, Hoops Cabaret and Sports Bar in New York City, Rick's Cabaret in Pittsburgh, and Jaguars Club in Phoenix.

Revenues totaled $69 million up points.

<unk>, 4%.

These factors included contributions from.

Four new clubs acquired or opened in the second and third quarters.

That's from two smaller who brand and our reform at Texas clubs.

Not in same store sales base.

This was partially offset by declining sales and reduced sales from closing Dallas show clubs in the fourth quarter was 25.

One thing and from maybe at all due to the fire.

Yeah.

By revenue diet.

Merchandising either increased four 3%.

Service increased one 5% and elevate that would've declined 2%.

I'd like to point out that some clubs stood out such as Rick Scott Berry in Fort worth.

One of the style of patients of the lands on T V series.

Rick's cabaret and sports bar in New York City.

Rick's cabaret in Pittsburgh, and Douglas club in Phoenix.

Albert Molina: Other net charges totaled $2.1 million compared to $6.9 million. This primarily reflected impairments in both periods. Operating income was $16.3 million compared to $13 million, and margin was 26.8% of segment revenues compared to 21.5%. Non-GAAP operating income, which excludes other net charges, was $19.1 million compared to $20.5 million. Margin was 31.3% of segment revenues compared to 33.8%. On slide nine are the results of the Bombshells segment. Revenues totaled $9.4 million, a decrease of $2.6 million. Key factors included fewer locations and the decline in same-store sales. This was partially offset by the opening of new locations in Denver, Colorado in January 2025 and Lubbock, Texas in early July 2025.

Other net charges totaling $2 $1 million compared to $6 $9 million.

These primarily reflect impairments in both periods.

Operating income was $16 $3 million compared to $13 million.

And margin was 26, 8% of segment revenues compared to 21, 5%.

non-GAAP operating income, which excludes Arden net charges was $19.1 million compared to $25 million.

Marty when it was 31, 3% up segment revenues compared to 33, 8%.

On slide nine and their thoughts on the Bombshells segment.

Revenues totaled $9 $4 million, a decrease of $2.6 million.

Key factors included fewer locations and the decline in same store sales.

This was partially offset by the opening new locations in Denver, Colorado in January of 'twenty five in Lubbock, Texas in early July 25.

Albert Molina: Other net charges totaled $1.6 million compared to $3.2 million, which primarily reflected impairments in both periods. There was an operating loss of $1.6 million compared to a loss of $2.6 million. On a non-GAAP basis, which excludes impairments, there was an operating income of $29,000 compared to $649,000. I'd like to point out that our main focus for Bombshells is profitability, not sales. While same-store sales are down, profitability is improving. Moving to slide 10, you will see a summary of our corporate expenses. As I mentioned, GAAP expenses totaled $15.4 million, with non-GAAP slightly less. Both reflected the non-cash legal accrual. GAAP corporate expense margin was 21.8% of revenue. Excluding legal accrual, it was about 9%. Please turn to slide 11.

Doesn't that charges totaled $1 $6 million.

$3 $2 million, which mainly reflected the impairment in both periods.

There was an operating loss of $1 $6 million compared to a loss of up to $6 million.

Yeah.

On a non-GAAP basis, which excludes impairment there was an upgrade to income of $29000.

$649000.

I'd like to point out that our main focus for bombshells profitability not sales.

First thing I'll start down profitability is improving.

Moving to slide 10, you will see a summary of our corporate expenses.

As I mentioned GAAP expenses totaled $15 $4 million with non-GAAP slightly less.

Both are affected the noncash legal accrual.

GAAP corporate expense margin expanded one eight of revenue.

Excluding legal accrual well it was about 9%.

Please turn to slide 11.

Albert Molina: We have slides coming up that discuss free cash flow and adjusted EBITDA, which are non-GAAP. In advance of that, we wanted to present the closest GAAP equivalence, which are operating income, net cash provided by operations, and net income. Slide 12, please. We ended the Q4 with cash and cash equivalents of $33.7 million, up $4.4 million from 30 June. During the quarter, we used $2.7 million to buy back shares. Free cash flow continued in the $13 million range for the second quarter in a row. As a percentage of revenues, free cash flow margin was 18%, virtually level with the year-ago quarter. The adjusted EBITDA margin was 10% of revenues. Excluding legal accrual, it was about 23%. Turn to Slide 13.

We have slides coming up the discuss free cash flow and adjusted EBITDA.

Certain non-GAAP.

In advance of that'd be wanted to percent that gets us GAAP equivalents, which are operating in.

Net cash provided by operations and net income.

Slide 12 please.

We ended the fourth third gotcha, gotcha equivalents of $33 $7 million.

Up $4.4 million from doing 30th.

During department, we used $2 $7 billion to buy back shares.

Free cash flow continued in the third doesn't mean, there's not a range for the second quarter in a row.

As a percentage of revenue stream cash flow margins north of 80% virtually level the year ago quarter.

Adjusted EBITDA margin was 10% of revenues.

Excluding legal accrual.

22%.

Turning to slide 13.

Albert Molina: Debt declined $5.5 million from 30 June, primarily reflecting scheduled pay downs. We continued to control the rate paid on our debt with weighted average interest rate of 6.64% compared to 6.67% in the year-ago quarter. Total occupancy cost was 8.1% of revenues, virtually the same as a year ago. Debt to trailing twelve months adjusted EBITDA was 4.48x, mainly reflecting the impact of the Q4 legal accrual. Excluding that, it was about 3.83x. Debt maturities continue to remain reasonable and manageable, particularly in our plans to sell non-income-producing properties. Note that Q1 of fiscal 2026 will include $22 million in two-year seller financing note from the ADW transaction. Now back to Travis.

The combined $5 5 million from June 30, primarily reflecting.

Pay down.

We continue to control the rate paid on our debt with a weighted average interest rate of $6 64 per cent compared to $6, 67% in the year ago quarter.

The occupancy cost was eight 1% of revenues, but it's really the same as a year ago.

That's a trailing 12 month adjusted EBITDA.

More importantly, 48 X, mainly reflecting the impact of the fourth quarter legal accrual.

But excluding that it was about 380 tracks.

Net maturities in theater remain reasonable and manageable, particularly in our plants. So non income producing property.

Note that the first quarter of fiscal 2006, when you include $22 million.

Your seller financing.

The 80 MW satisfaction.

Now back to Travis.

Travis Reese: Thank you, Albert. Please turn to slides 14 and 15 to review our capital allocation strategy and five-year plan. Our plan remains the same. We allocate approximately 40% of free cash flow to club acquisitions and 60% to share buybacks, debt reduction, and dividends. Our goal is to grow free cash flow per share by 10% to 15% annually. Operationally, we're focusing on our core nightclub business. We review every club regularly to increase same-store sales. Underperformers will be rebranded, reformatted, or divested. We're currently generating about 70% of our income from 20% of our clubs, so there's significant opportunity to optimize our portfolio. Divesting underperformers will help us increase margins, and we can use sale proceeds to repurchase stock, acquire higher quality locations, or reduce debt.

Thank you Albert.

Turning to slides 14, and 15 to review our capital allocation strategy and five year plan.

Our plan remains the same we allocated approximately 40% of free cash flow to club acquisitions, 60% to share buybacks debt reduction dividends.

Our goal is to grow free cash flow per share by 10% to 15% annually.

Operationally, we're focusing on our core nightclub business review every club regularly to increase same store sales underperformers will be rebranded Reformatted investor.

We're currently generating about 70% of our income from 20% of our clubs so there's significant opportunity to optimize our portfolio.

Does that any underperformers will help us increase margins can you sale proceeds to repurchase stock car higher quality locations and reduced debt.

Travis Reese: Our goal is to add an average of about $6 million of adjusted EBITDA each year through acquisitions. We want to target strong clubs with an occasional strong group of clubs. Acquisition target metrics remain three to five times adjusted EBITDA for clubs, fair market value for real estate, and 100% cash on cash return in three to five years. Purchases may use bank financing, cash, or seller notes. We may also use stock when our valuation improves. For Bombshells, we aim to improve existing locations, target 15% operating margins, and return to same-store sales growth. We plan to finish the one location still under development. We'd like to sell the chain as a whole, but the market isn't right at the moment. Finally, we'll continue buying back stock, flexing up when prices look undervalued, and increasing dividends modestly.

Our goal is to add an average of about $6 billion of adjusted EBITDA each year through acquisitions.

We want to target strong clubs when an occasional strong group of clubs.

Acquisition target metrics remain three to five times adjusted EBITDAR for clubs fair market value for real estate and 100% cash on cash return in three to five years.

Purchases may use bank financing cash or seller notes.

We may also use stock winter evaluation proofs.

Bombshells, we aim to improve existing locations targeted 15% operating margins and return to same store growth.

We plan to finish the one location still under development, we'd like to sell the chain as a whole, but the market is it right at the moment.

Finally, we will continue buying back stock flexing up when prices look undervalued and increasing dividends modestly.

Travis Reese: Over the 5 years, we plan to generate more than $250 million of free cash flow and repurchase a significant quantity of shares. By fiscal 29, our targets are $400 million in revenue, $75 million in free cash flow, and 7.5 million shares outstanding. This would double free cash flow per share to about $10 versus fiscal 24. Please turn to slide 16 for an update on our progress. Some of these we've already reported. Divesting or closing underperforming Bombshells locations, acquiring 3 nightclubs, opening 2 new Bombshells and 2 new nightclubs, outside investment in Rick's Cabaret Austin, and selling a club in Harlingen, Texas. To date, in fiscal 26, we sold a club in Edinburg, Texas for $1.1 million, recognizing a small loss in paying down debt.

The five years, we plan to generate more than $250 million.

Free cash flow and repurchased a significant quantity of shares.

Fiscal 'twenty nine target of $400 million revenue $75 million to free cash flow and seven 5 million shares outstanding This would double free cash flow per share, it's about $10 or so fiscal 'twenty four.

Yeah.

Please turn to slide 16 for an update on our progress.

Some of these we've already reported.

Divesting or closing underperforming bombshells locations barring screen at clubs opening two bombshells because he knew nightclubs.

Investment in Ricks cabaret Austin.

Selling and club and Harlingen, Texas.

To date in fiscal 'twenty, six we hold a club in Edinburg, Texas for $1 $1 million, recognizing a small loss paying down debt.

Travis Reese: Excluding the ADW transaction, we bought back approximately 153,000 shares in the open market since fiscal 2025 year-end through 13 March 2026. Currently, we're marketing 3 small non-performing clubs and their real estate. They have a combined estimated value of $7.5 million and associated debt of $3 million. We're also marketing 8 non-income producing properties. This group has a combined estimated value of $24.2 million and associated debt of $13.2 million. We're working to finish or build 3 more locations in the Greater Dallas area, including a Bombshells in Rowlett, a new Baby Dolls in West Fort Worth, and a rebuilt Baby Dolls Fort Worth. Please turn to slide 17 to review our long-term performance.

Excluding the DW transactions.

We bought back approximately 153000 shares in open market since fiscal two five year end through March changed for 2026.

Currently, we're making three small and high performing clubs in our real estate and a combined estimated value of $7 million and associated debt of $3 billion. We're also marketing.

<unk> properties is groups combined estimated value of $24 2 million and associated debt $13 $2 million.

We're going to finish or build three more locations in the greater Dallas area, including our bombshells.

The new Dawson.

And our rebuilt maybe Dallas Fort worth.

Please turn to slide 17 to review our long term performance.

Travis Reese: Since we implemented our capital allocation strategy at the end of fiscal 2015, we believe we've generated above average performance for a mature, publicly traded company. Standout is free cash flow compounding annually at about 11.8%, combined with buybacks that have reduced shares outstanding by approximately 1.6% on a compound annual basis.

Since we implemented our capital allocation strategy at the end of fiscal <unk>. We believe we've generated above average performance for mature public traded company.

Standouts free cash flow compounding annually at about 11.8 spend combined with buybacks have reduced shares outstanding by approximately 1.6% compound annual basis.

Eric Langan: Now that we filed our 10-K, we hope to file our 10-Q relatively soon. Our agenda this year is continuing with our capital allocation plan, improving club and restaurant operations, selling excess real estate and underperforming locations, and deploying our cash to acquire additional clubs, reduce debt, or repurchase shares. I'd like to thank our dedicated team members for their efforts and hard work and all of our shareholders who believe in us and make our success possible. Now back to Bradley.

Travis Reese: Now that we filed our 10-K, we hope to file our 10-Q relatively soon. Our agenda this year is continuing with our capital allocation plan, improving club and restaurant operations, selling excess real estate and underperforming locations, and deploying our cash to acquire additional clubs, reduce debt, or repurchase shares. I'd like to thank our dedicated team members for their efforts and hard work and all of our shareholders who believe in us and make our success possible. Now back to Bradley.

Now I'm the founder.

We hope to file our 10-Q relatively soon.

This year, we're continuing with our capital allocation plan, putting club and restaurant operations.

Excess real estate underperforming locations and deploying our cash to acquire additional clubs reduce debt repurchase shares.

I'd like to thank our dedicated team members for their efforts and hard work and all of our shareholders, who believe in us and mirror success possible now come back rapidly.

Yeah.

Bradley Chhay: Thank you, Travis and Albert. If you would like to ask a question, please raise your hand in the X space. When you are finished, mute your microphone to eliminate background noise. We have a limited number of speaker spaces. After your question, we may move you back to the audience to free up space. Eric Langan, RCI's founder and head of M&A, will also be available on the Q&A. Please understand that we cannot discuss the legal situation in New York other than to reiterate that the company's statement that RCI, the individuals involved, and the three clubs have pled not guilty to all of the charges, are taking all necessary actions to defend themselves against the charges. On behalf of Travis, Albert, and Eric, the company, and our subsidiaries, thank you. Good night. Oh, sorry.

Thank you Travis Albert.

I would like to ask a question. Please raise your hand and expertise and your fish your microphone to eliminate paranoid.

We have a limited number of speakers basis.

For your question, we may move back.

Audience to free up space.

Eric Langan, RCI founder and head of M&A will also be available on the Q&A.

Understand that we cannot discuss the situation in New York.

To reiterate the company's statement that RCI, Dan Joseph bulb at three clubs peptide not guilty to olive charges.

Are taking all necessary actions to defend themselves against it.

On behalf of travelers Albert and Eric accompany our subsidiaries. Thank you.

I'm sorry.

Eric Langan: We might wanna do some Q&A first before you tell everybody good night, Bradley.

We might wonder if a Q&A first before you Oh.

Bradley Chhay: Right, exactly. Hold on. I'm bringing on Orchard Wealth as a speaker. You'll have to unmute your microphone.

Right exactly.

Yeah.

Bring it on speaker.

After me on mute my phone.

[Analyst] (Orchard Wealth): Hey, guys. How are you? Hey, obviously it's been a long time since I spoke with you guys. Question for you guys is, when do you think you'll be able to give us a ballpark when you'll be able to file the next quarterly for Q1?

Hey, guys how are you.

This is going to walk us through what are you guys.

Question for you guys. When do you think you'll be able to give us a ballpark and youll file next quarterly.

For the first quarter.

Eric Langan: We wanna file as soon as possible. We were obviously waiting on auditors. They're in their prime season. If you have a 12/31 year-end, their 75-day and 90-day filers are all coming up right now, so they're in their prime work season. I'm gonna guess sometime in April we will hopefully file the 10-Q, based on their availability. I think most of our work is done, but you know, we have to get their work done as well.

We wanted to file as soon as possible.

We're obviously waiting on the auditors then their price season, because this is there a 12 31 year end.

75 day, and 90 day buyout are all coming up right now so they're in a primary season, so I'm going to guess sometime in April we will hopefully file the <unk>.

<unk>.

Based on their availability.

Most of our work is done.

We have to get their work done as well.

[Analyst] (Orchard Wealth): Okay. For April, we've got the first quarter numbers will come out, plus the sales numbers for the second quarter will be announced at some point during the month.

So for April we've got the.

First quarter numbers will count plus the sales number for the second quarter will be announced at some point during the month.

Eric Langan: Yes. That should be the case. We hope.

Yes that should be that should be the case.

[Analyst] (Orchard Wealth): Right.

Eric Langan: I mean, obviously, I can't, you know, guarantee-

But I can't guarantee that you will be fine, but yes.

[Analyst] (Orchard Wealth): No, no, I mean, it's

Eric Langan: when the Q will be filed. Yes, I believe at this point that that's a good outline. We'll definitely get the sales numbers out, though.

Eric Langan: When the Q will be filed. Yes, I believe at this point that that's a good outline. We'll definitely get the sales numbers out, though.

I believe at this point that that's.

That's good.

Currently give precise numbers out there.

[Analyst] (Orchard Wealth): Okay. Your overall feeling in the space right now with just the environment as it is right now, you know, what's your feel or your read on the clubs, and on Bombshells?

They were overall feeling in the face right now with.

The environment as it is right now.

What's your feel for your read on the clubs and bombshells.

Eric Langan: I mean, we've been doing very well. March Madness starts up today, so there's some games going on. We've had a pretty solid January and February so far. You know, obviously last quarter, we only did $70.3 million revenue, I believe, and we were drastically affected by the 42-day close down. The close down is starting to hurt us now, though. Yes, you know, if you've read in the papers and stuff that the airplane travel, so you have a lot of business travelers. But at the same time, some business travelers are getting stuck in cities, and they're ending up at our clubs because they're stuck overnight because their planes or flights got canceled. They can't get through security in time.

We've been doing very well I'm, Mark madness startup today, so theres games going on.

We had a pretty solid January and February.

So far at least.

Obviously the last order.

We think this 73.

3 million revenue I believe.

We are definitely affected by the 42, they closed down that goes down is starting to hurt right now though.

No you've read in the papers the airplanes, but also a lot of business travelers.

At the same time, some business travelers are getting stuck in season clean up in our clubs because they're stuck at home.

Our westcott camera they can't get their screen time, so it's kind of a.

Eric Langan: It's kind of unknown how that's going to play out if this continues long term. Hopefully, our government will become functional again at some period and get these TSA agents paid and back to work. Overall, it's been good. You know, there might be a little concern with oil prices, but you know, oil is great for a lot of our markets, especially in Texas. That's kind of, I think, almost a zero-sum game for us. Not gonna change a lot in that regard. We are seeing prices come down on some food items and whatnot. The liquor companies are getting more competitive because less people are drinking, so they're getting more competitive. That's always good for our business and our costs.

How that's going to play out if theres continued long term, while we are comfortable.

Functional again, it somebody reads and get these.

These TSA agents aid.

To work, but overall, it's been good.

There might be a little concerned with the oil prices.

Great for a lot of our markets, especially in Texas. So that's kind of I think close to zero sum game for us not going to change a lot.

In that regard.

But we are seeing prices come down.

Food items in and whatnot the liquor companies are getting more competitive because people are dropping so.

Getting more competitive thats always good for our business or our costs.

Costs.

Eric Langan: As you see, our costs fell down to, like, 13.1%, I think, cost of goods for this past quarter. I'm hoping we'll continue to see that as we move into the next six months. Because this data is a little bit old, but it has continued.

As you said our costs drop downs of 13, 1% cost of goods.

This past quarter and I am hopeful we will continue to see that.

As we move into the next six months because it does take a little bit low but.

Okay.

Daniel.

[Analyst] (Orchard Wealth): Okay. The auditors made you guys do some minor impairments, and then obviously have a large set aside in reserves for this legal thing.

Okay, and then the Oscars major minor impairments and then obviously you have a large.

A sudden reserves for legal thing.

Sure.

Eric Langan: If you want, give me a second.

I'd like to hear me say that.

[Analyst] (Orchard Wealth): Yeah.

Eric Langan: I'd like to talk about the reserves because the reserves have drastically affected numbers for this quarter. I'd like to keep everybody's focus. If you remember, we always say focus, our focus needs to be on free cash flow, because we think that's the best metric for how we're performing. Our free cash flow is $45.4 million approximately. Legal reserve is about $9 million. I would like to remind everybody also, we had no insurance last year, so we had to do all these reserves for insurance, which we don't normally do. Normally insurance costs us about $5.5 million a year. We reserved $9.5 million for last year. Total reserves in 2025 were $18.5 million.

I talked about reserves, because the reserve drastically affected numbers for this quarter.

And I think everybody's focus if you remember we've always said our focus needs to be free cash flow because we think that's the best metric for our performance and our free cash flow was $45 4 million approximately.

We can refer was about 9 million, but I remind everybody. We had no insurance last year. So we have to do all these reserves for insurance, but really don't normally do.

Finally insurance cost us about $5 $5 million a year.

We reserve $95 million or.

Last year, total reserves, and 125 or $18 $5 million.

So.

Eric Langan: You know, compared to costs last year, probably about $5.5 million for the previous year. $5.5 million for the insurance, for the GL and liquor liability insurances. There's a significant room there. If these reserves aren't used, you know, we will see those, we'll see that add back in future quarters as well. If they are expensed, then, you know, if expenses do come out, then they're already reserved for, so they won't negatively affect forward-looking earnings.

Compared to last year by about $5 $5 million on a previous year.

$5 5 million for the insurance for the GNL in Ah and why.

Liability insurance.

Ah Theres significant room there.

These reserve reviews.

We will see those.

You will see the add back in future quarters as well so that they are expense then.

<unk> reserved before they went effect.

They won't negatively affect our foregoing.

So.

[Analyst] (Orchard Wealth): Okay. The idea basically is the reserves that you put aside to in this quarter. We're not probably gonna see any sort of, or at least it doesn't look like we'll see any surprises that will come in 2026. That's kind of in the background now.

The idea to basically the reserve that you put up slide two.

In this quarter.

We're not probably see sort of or at least it doesn't look like we will see any surprises that will come into 2026, so it kind of in the background now.

Eric Langan: I think so. I mean, I don't know. $9 million legal reserve is a huge number to me. That's the estimates that everybody gave us, and I think that's, you know, go through trial and everything. You know, I don't disagree with the number. I think it's strong. Like you said, it will eliminate any possible, I think any possible surprises in legal expenses or insurance costs for 2025 in the future.

So I mean.

I don't know 9 million reserve legal reserves, a huge number to me.

But that's that's that we.

We estimate that everybody cases, and I think that's.

The free trial and everything so.

Yes.

With the number I think so.

It's strong.

But like you said it would eliminate any any possible I think impossible surprises and legal expenses are.

Reinsurance costs for 2025 in the future.

Bradley Chhay: Okay, great. Thank you.

[Analyst] (Orchard Wealth): Okay, great. Thank you.

Thank you.

Eric Langan: Yeah.

Okay.

Bradley Chhay: All right. Next up, we're gonna take Maxwell Ellis, participant at 84 path 65. Make sure you unmute your microphone. You should be on a speaker now, Maxwell. You just have to unmute.

Alright.

Next well Alice.

At April at 65.

Microphone.

You shouldn't be on speaker I'm actually just have it on mute.

Maxwell Ellis: First off, I'd like to say I think we're all wishing you guys the best of luck in your trial case. I think we're all crossing our fingers and rooting for you. Got two questions. The first one is on the capital allocation strategy. Just given where the current share price is, how do you guys balance between acquiring clubs, paying down debt, and buying back shares given, you know, in today's environment, I think buying back shares might make a little bit more sense than acquiring clubs or paying down debt.

First off I'd like to say I think we're all wishing you guys. The best of luck in your truck.

And our fingers in written form.

Two questions. The first one is on the capital allocation strategy.

Just given where the current share prices that does balance between acquiring clubs paying down debt and buying back shares give them.

In today's environment, I think buying back shares might make a little bit more.

Accordingly.

But.

Eric Langan: Well, as you can see from Albert's announcement that since the end of the fiscal year, we've bought another 153,000 shares, in addition to buying back 820,000 shares, in the ADW Capital transaction. We're using 100% of our free cash flow to buy back our shares because why set aside 40% to make club acquisitions at a higher valuation than we can buy back our existing, is kinda my philosophy on it. We are pouring our cash into the stock buyback, you know, when it's down here at these levels. Anything under what we paid ADW Capital, I think we just buy stock.

As you can see from average announcement since the end of the fiscal year, We've got another 153000 shares.

In addition to buying back 820000 shares.

In the AWS capital transaction.

We're using 100% of our free cash flow to buyback our shares.

Set aside 40% to make club acquisitions at a higher <unk>.

And then we can buy back our own existing.

It's kind of my philosophy on.

So we are pouring our cash and stock buyback.

When it was down here at these levels or anything under when we pay the AWP I think maybe just ballpark.

Eric Langan: We think that's, you know, we had a fairness opinion done on the ADW Capital transaction and, you know, so that's a fair value for the company. Why would we go out and buy other stuff? We'll just use all of our cash we can to buy back stock.

Yeah.

Sure.

We had a fairness opinion download E.

W Caddo transaction.

And.

Fair value for the company and why or why would we brought in by other stuff. We just use all of our cash Kansas to buy back stock.

Maxwell Ellis: Fantastic. That is exactly what I was hoping you'd say. I'm using all my cash to buy stock too, so I think we're in the same boat.

This is exactly what I've spoken saying I'm using all my asked if I started so I think we're in the same.

Eric Langan: I think in the long run, we're both gonna come out way ahead, so.

I think in the long run for both going to come out way ahead. So second question.

Maxwell Ellis: Second question. Last earnings call, I believe, some figures were discussed in between, call it $65 to 85 million of real estate value. I know you guys have had a couple press releases on the real estate transactions. Is the total number to think about still in the $65 to 85 million dollar range, or is it, hey, this year it's gonna be closer to like $32 to 34 million?

Last earnings call I believe.

Some of you guys were discussing between call it $65 million to $85 million of real estate value. I know you guys have had a couple of press releases.

On the real estate transactions as the total number to think about still in the $65 million to $85 million range or that hey, this year, it's going to be closer to like $32 million to $34 million.

Eric Langan: Well, I think you're confusing the non-income producing assets with the Bombshells sales. We have somewhere between, I think it was in there. They listed $24 million left in real estate and about $7 million in underperforming clubs that we have for sale. Call that $30 million on the round side. The $65 to 85 million is the valuation for the entirety of the Bombshells operations real estate that we've been shopping with certain private equity groups in that range.

I think you're confusing Doe non ocwen and non producing assets with the bombshells sales.

We have between.

I think it was in their domestic 24 million left in real estate and about $7 million and the underperforming clubs that we have for sale so call that $30 million on a round sorry, 55% to 85 millions of evaluation for the entirety of the bombshells operations real estate.

That we're that we've been dropping.

With certain private equity groups.

Maxwell Ellis: Gotcha.

Eric Langan: In that $65 to 85 million range, yeah.

<unk> hundred $85 million range here.

Maxwell Ellis: That really helps. I really appreciate it. You know, thank you, guys, and best of luck.

That's really helpful. I really appreciate it.

Thank you guys.

Eric Langan: Yeah, thank you.

Best of luck. Thank you.

Bradley Chhay: Mrs. Bradley, if you would like to speak, raise your hand and I'll pull you up. Give it a few seconds. We got nobody else. Eric, do you wanna say anything in closing?

This is broadly if you would like to speak raise your hand, and I'll call you up.

You can review the segments.

Yes.

Yes, nobody else, Eric do you want to say anything in closing.

Eric Langan: Yeah, I just have one final thing. I'd just like to bring up that the, you know, if you look at our nightclub mix, it's been fairly consistent between alcohol sales. I know there's been a lot of articles out there that people aren't drinking anymore. I would beg to differ with those things. They may be spending less on alcohol, but they are still fairly consistent at our clubs in alcohol between 40% and 43%. Alcohol sales with the about 17, 18% for food and other, and service revenue is in the 40, 42% range as well. So, I'm not too worried. I've been getting a lot of questions and calls recently about, you know, are people drinking because of all the media.

Yes.

One final thing.

Okay.

If you look our nightclub mix has been very consistent.

Alcohol sales I know theres been a lot of articles out there that people are drinking anymore.

I would defer to those things so maybe spending less on alcohol.

But they are still fairly consistent at our clubs.

Between 40 and 43%.

Alcohol sales with the about 17, 18%.

Our food and service revenues in the $4 42 per cent range as well.

<unk>.

I'm not too worried.

Can you give me a lot of questions on calls.

Recently about.

Our people drink and I would be very good because of all the media.

Eric Langan: I would add that we've also added mocktails. We've added a lot of specialty, not as high alcohol content, like one-third alcohol content drinks and stuff like that to our menus, and to some of the clubs. We're doing very well in that regards with it. Also, on the Bombshells, we've made some major changes January, February, March, and I think you're gonna see some of those results as we get the May financials out. Definitely in the April, May, June, after we open Rowlett, which will be a flagship location for us. We continue to.

But I would add that we've also added marked tails.

We've added FTE.

S T E.

Non modest high alcohol kind of like one third alcohol content drinks and stuff like that to our menus.

Some of the clubs and Oh, we went very well.

In that regard.

With it so also on the Bombshells. We've made some major changes January February March and I think you're going to see some of those three calls because we may finance was out definitely being in the April may June.

<unk> would be a flagship location for us and we see too.

Eric Langan: I call it a conversion because for about the last 3 years, the Bombshells management team really turned Bombshells from a sports bar and restaurant into a restaurant that had a sports bar in it. Our concept now is going back to its roots, where we are a sports bar that has good food, not a restaurant that has a mediocre sports bar. With that focus, we're seeing our percent of alcohol sales increase in Bombshells back to where it used to be, around 60 to 65%, up from, I think this year was 52%. I think we're gonna see that continue to increase. My internal goal is to get that to at least a 60/40 split, and the ultimate goal will be to be a 65/35 for Bombshells.

I call the convert because.

For about.

For years, our Bombshells Marriott team released.

Bombshells from a sports bar.

And restaurant into a restaurant.

That had a sports bar in it.

And our concept now going back to as rates, where we are a sports bar that have good food not a restaurant that has a sports bar.

And with that focus working.

Our percent of alcohol sales.

Increase in bombshells, where it used to be around $60 to 65%.

Upfront I think this year was 52%.

And so I think we're going to see that continue to increase.

My internal goal to get back to at least a 60 40 split.

My goal will be the 65 35.

For for Bombshells at that point that they become very highly profitable again.

Eric Langan: At that point, they become very highly profitable again. As I've studied and got into this, especially as we started looking to sell the overall concept, the biggest change in net incomes and in operating feel and then times of sales, so going into the POS data, is that we've really lost our bar business. That's what we do best. We're in the bar business. We're gonna be back focused on that. That focus started in mid-January, and we're seeing some pretty good results at the two locations that we started this, kind of the change the concept in. As of the first week of March, we're now pushing all of those changes across the entire chain.

As I've studied and got into this is we as we started looking for yourself the overall concept.

The biggest change in net income and an operating skills and then times of sales those points to the PFS data is that we've really lost our our bar business and so that's what we bought.

And the bar business.

And so we're gonna be back focused on that.

Our focus argument in mid January and we're seeing some pretty results.

At the two locations. We we started this kind of change the concept yet.

As of.

The first week of March we're now pushing all of those changes across the entire are across the entire game. So I'm very hopeful that when we put put some numbers out and we talked in may.

Eric Langan: I'm very hopeful that when we put some numbers out and we talk in May that gonna have some pretty good news for everybody on that front. That's all I got, Brad.

There's some pretty good news for everybody Matt Brown.

Thanks, Brian.

Bradley Chhay: On behalf of Travis, Albert, and Eric, the company and our subsidiaries, thank you and good night. Please visit one of our clubs or restaurants and have a great time. Thank you so much.

On behalf of Travis.

And our subsidiaries. Thank you Goodnight.

Please visit one of our clubs or restaurants and have a great time.

Thank you so much.

Yes.

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