Q1 2026 RCI Hospitality Holdings Inc Earnings Call

May 7, 2026

Speaker #1: Testing, testing. Can you hear me?

Speaker #2: Yes.

Speaker #1: Test, test. You're loud and clear.

Speaker #3: Hey, can you hear me?

Speaker #1: You're loud and clear.

Speaker #3: Travis, can you guys hear me?

Speaker #2: Yes.

Speaker #3: Yes, you're loud and clear, Bradley.

Speaker #4: Good afternoon, everyone. This is Bradley Chay. I'm just going to give it a minute or two, and I'll be back on.

Speaker #5: Greetings, and welcome to RCI Hospitality Holdings' first quarter conference call. My name is Bradley Chay. You can find the company's presentation on RCI's website.

Speaker #5: Go to the Investor Relations section. All the links are on the top of the page. Please turn the slide 2 of our presentation. Our speakers today are Travis Reese, interim president and CEO, and Albert Molina, interim CFO.

Speaker #5: Please turn the slide 3. RCI is making this call exclusively on X basis to ask a question joined the space with a mobile device.

Speaker #5: To listen only, you can join the space on a personal computer. At this time, all participants are on a listen-only mode. A Q&A session will follow.

Speaker #5: This conference is also being recorded. Now, please turn the page 4. I want to remind everyone of our Safe Harbor statement. You may hear or see Ford looking statements that involve risk and uncertainties.

Speaker #5: Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards.

Speaker #5: Please turn to page 5. I also direct you to the explanation of Rick's non-GAAP financial measures. Now, I'm pleased to introduce Travis Reese, interim president and CEO.

Speaker #6: Thanks, Brad, and thanks, everyone, for joining us. Please turn to slide 6. I'm pleased to report we've filed our 10-Q today and announced our results for the first quarter ended December 31st.

Speaker #6: All comparisons are year over year, unless otherwise noted. Nightclubs revenues were stable. Contributions from newer venues offset the same store performance and the closure of underperforming locations.

Speaker #6: Of note, higher margin club service revenues increased 6.7% year over year. This was despite consumer uncertainty as a result of the US government shutdown in October and November.

Speaker #6: Similarly, newer bombshells offset most of the segment's same-store sales decline, with most of the Delta and total sales due to the year-ago divestiture or closure of five underperforming locations.

Speaker #6: The decline in net income primarily reflects pre-tax operating and non-operating items. Most of which were non-cash. We had 10.1 million dollars in net charges in the first quarter and 3.2 million dollars in net gains a year ago.

Speaker #6: We also continued to move ahead with our back-to-basics five-year capital allocation plan. We've made some initial progress improving nightclub sales and margins and our concept revitalized the bombshells in Houston is working well.

Speaker #6: Year to date, we've bought back more than one million shares. Now, here's Albert to review our performance in more detail.

Speaker #5: Thank you, Travis. Turning to slide 7. I'll start with a review of our consolidated results. All comparisons are year over year for the quarter, unless otherwise noted.

Speaker #5: Total revenues were 70.8 million dollars compared to 71.5 million dollars. The difference of 0.7 million dollars primarily reflected five newer bombshells-related locations partially offset by new nightclub locations.

Speaker #5: Pre-tax income decreased by 14 million dollars, most of that can be attributed to impairments amounting to 1.2 million dollars this quarter versus non-last year.

Speaker #5: Combined gain on sale of businesses and assets and gain on insurance last year amounting to 2.4 million dollars. The first quarter also included a non-operating charge of 9.9 million dollars compared to a non-operating gain of 1 million dollars last year.

Speaker #5: GAAP loss per share was 67 cents compared to earnings of a dollar and one cent. Non-GAAP, it was a profit of 74 cents per share compared to 8 cents.

Speaker #5: Net cash provided by operating activities was 7.8 million dollars compared to 13.3 million dollars. This was largely due to the actual payments of bills from calendar year-end such as legal fees, increased fees related to delayed filings, and insurance costs.

Speaker #5: As a result, free cash flow was 6.7 million dollars compared to 12.1 million dollars. Adjusted EBITDA was 11 at 15.7 million dollars. Moving to slide 8, I will now cover our results by segment, beginning with nightclubs.

Speaker #5: All comparisons are again year over year for the quarter, unless otherwise noted. Revenues totaled 62.3 million dollars, up 0.6 million dollars. This reflected 4.9 million dollars from five newly acquired and reopened clubs.

Speaker #5: 56.9 million dollars from 52 same-store clubs and contributions from two small Texas clubs closed during the quarter. By revenue type, service increased by 6.7%.

Speaker #5: Food and merchandise increased by 1.8%, and LBW declined by 4.6%. I'd like to point out that some clubs stood out, such as Maybe Dawes Aveline, BT Show Club Indianapolis, Rick's Cabaret Minneapolis, Coops Sports Bar and Cabaret in New York City, and Jaguars Club in Phoenix.

Speaker #5: Other net charges totaled 181,000 dollars compared to gains of 822,000 dollars. Operating income was 18.7 million dollars compared to 20.9 million dollars. Margin was 30% of segment revenues versus 33.8%.

Speaker #5: Non-GAAP operating income, which excludes other net charges and gains, was 19.5 million dollars. Compared to 20.6 million dollars. Margin was 31.3% of segment revenue versus 33.4%.

Speaker #5: On slide 9, are the results for bombshell segment. Revenues totaled 8.4 million dollars, a decrease of 1.2 million dollars. This reflected 1.8 million dollars from two newly opened locations.

Speaker #5: 6.6 million dollars from nine same-store locations and the absence of 1.2 million dollars in a year-ago quarter from underperforming locations that were divested or closed.

Speaker #5: There were no meaningful net charges in the first quarter compared to the year-ago quarter. Which included gains of 1.3 million dollars. There was an operating loss of 139,000 dollars versus income of 1.9 million dollars.

Speaker #5: On a non-GAAP basis, this which excludes impairments and gains, there was an operating loss of 110,000 dollars versus income of 616,000 dollars. Moving to slide 10, you will see a summary of our corporate expenses.

Speaker #5: Expenses totaled 7.4 million dollars compared to 8.8 million dollars, or 10.4% of total revenues compared to 12.3%. Most of the year-over-year change reflected lower insurance costs, partially offset by higher accounting and professional fees in the current year due to delayed filing of our annual report and year-end audit.

Speaker #5: Non-GAAP expenses totaled 7 million dollars compared to 8.4 million dollars, or 9.9% of total revenues compared to 11.8%. Please turn to slide 11. We have slides coming up to discuss free cash flow and adjusted EBITDA.

Speaker #5: These are non-GAAP. In advance of that, we want 2%, the closest GAAP equivalent, which are operating income, net cash provided by operations, and net income.

Speaker #5: Slide 12, please. We ended the quarter with cash and cash equivalents of 28.6 million dollars. Down 5.1 million from September 30. During the quarter, we used 9.8 million dollars to buy back shares.

Speaker #5: Free cash flow was 6.7 million dollars, or 9% of revenues. Adjusted EBITDA was 15.7 million dollars, and returned to 22% of revenues. From the 10% level of Q4 of 2025, when we had the 9 million dollar legal accrual.

Travis: 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 2024. Please turn to slide 16 for an update on our progress. We made some initial progress improving nightclubs and sales margins. Total sales picked up from Q1 2026 to Q2 2026, with sequential improvement in same-store sales. We're also working to optimize newly acquired and open locations in order to expand margins. As we discussed on our last call, we've gone back to Bombshells roots at a test location, focusing on being a great sports bar with great food. Goal is to drive higher margin alcohol sales. First successful implementation was at Bombshells 59 in Houston. Sales increased 3.6% in Q2, making it the best performing same-store location.

Travis Reese: 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 2024. Please turn to slide 16 for an update on our progress. We made some initial progress improving nightclubs and sales margins. Total sales picked up from Q1 2026 to Q2 2026, with sequential improvement in same-store sales. We're also working to optimize newly acquired and open locations in order to expand margins. As we discussed on our last call, we've gone back to Bombshells roots at a test location, focusing on being a great sports bar with great food. Goal is to drive higher margin alcohol sales. First successful implementation was at Bombshells 59 in Houston. Sales increased 3.6% in Q2, making it the best performing same-store location.

Speaker #1: Revenue, $75 million in free cash flow, and $7.5 million in shares outstanding. This would double free cash flow per share to about $10 versus fiscal '24.

Speaker #1: Please tie into slide 16 for an update on our progress. We made some initial progress improving nightclubs and sales margins. Total sales picked up from one Q26 to two Q26, with sequential improvement in same-store sales.

Speaker #5: Turn to slide 13. Debt increased 20.6 million dollars from September 30, primarily reflecting 22 million dollars in seller financing from the ADW transaction. Partially offset by debt paydowns.

Speaker #1: We're also working to optimize newly acquired and opened locations in order to expand margins. As we discussed in our last call, we've gone back to bombshell's roots at a test location, focusing on being a great sports bar with great food.

Speaker #5: As a result, the weighted average interest rate was 7.16% compared to 6.65% in the year-ago quarter. And total occupancy cost was 8.5% of revenues compared to 8%.

Speaker #1: The goal is to drive higher margin alcohol sales. The first successful implementation was at bombshell's 59 in Houston. Sales increased 3.6% in the second quarter, making it the best performing same-store location.

Speaker #5: Debt to trailing 12-month adjusted EBITDA was 4.86, reflecting the ADW debt combined with the fourth-quarter legal accrual. If we take out the fourth-quarter legal accrual, debt to EBITDA is 4.16X.

Speaker #1: We've begun rolling out the concept to other locations. As Albert mentioned, first quarter free cash flow was negatively impacted by paying off year-end legal fees, increased fees related to delayed filings, and insurance costs.

Travis: We've begun rolling out the concept to other locations. As Albert mentioned, Q1 free cash flow was negatively impacted by paying off year-end legal fees, increased fees related to delayed filings, and insurance costs. To help improve cash flow, we're working to drive down SG&A expenses. Regarding share buybacks, since we began our 5-year plan in Q1 2025, we've reduced shares outstanding by 14.6%. Earlier this month, we increased the amount available under the repurchase program by $20 million. As we discussed last month, we're also in the process of marketing $31.7 million in small clubs and real estate, which have associated debt of about $16.2 million collectively. Converting this to cash and reducing debt will significantly improve our capitalization.

Travis Reese: We've begun rolling out the concept to other locations. As Albert mentioned, Q1 free cash flow was negatively impacted by paying off year-end legal fees, increased fees related to delayed filings, and insurance costs. To help improve cash flow, we're working to drive down SG&A expenses. Regarding share buybacks, since we began our five-year plan in Q1 2025, we've reduced shares outstanding by 14.6%. Earlier this month, we increased the amount available under the repurchase program by $20 million. As we discussed last month, we're also in the process of marketing $31.7 million in small clubs and real estate, which have associated debt of about $16.2 million collectively. Converting this to cash and reducing debt will significantly improve our capitalization.

Speaker #1: To help improve cash flow, we're working to drive down SG&A expenses. Regarding share buybacks, since we began our five-year plan in the first quarter of 2025, we've reduced shares outstanding by 14.6%.

Speaker #5: Debt maturities continue to remain reasonable and manageable. Particularly with our plans to sell non-income-producing properties. Now back to Travis.

Speaker #1: Earlier this month, we increased the amount available under the refurbish program by $20 million. As we discussed last month, we're also in the process of marketing $31.7 million in small clubs and real estate.

Speaker #2: Thanks, 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.

Speaker #1: We have associated debt of about $16.2 million collectively. Converting this to cash and reducing debt will significantly capitalization. I'd like to thank all of our loyal and dedicated team members for all their hard work and efforts and all of our shareholders who believe and make our success possible.

Speaker #2: Our goal is to grow free cash flow per share by 10 to 15 percent annually. Operationally, we're focusing on our core nightclub business. We review every club regularly to increase same-store sales.

Travis: I'd like to thank all of our loyal and dedicated team members for all their hard work and efforts, and all of our shareholders who believe and make our success possible. Back to Bradley.

Travis Reese: I'd like to thank all of our loyal and dedicated team members for all their hard work and efforts, and all of our shareholders who believe and make our success possible. Back to Bradley.

Speaker #1: I'm back to Bradley.

Speaker #2: 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.

Speaker #2: Thank you, Travis and Albert. Eric Langan, RCI's founder and head of mergers and acquisitions, will also be available for on the Q&A. If you would like to ask a question, please raise your hand in the X space.

Bradley Chhay: Thank you, Travis and Albert. Eric Langan, RCI's founder and head of mergers and acquisitions, will also be available for on the Q&A. If you would like to ask a question, please raise your hand in the X Spaces. When you finish, mute your microphone to eliminate background noise, please. We have a limited number of speaker spaces. After your question, we may move you to the back of the audience to free up space. Please understand we cannot discuss the legal situation in New York other than to reiterate that the company's statement is that RCI, the individuals involved, and the three clubs have pled not guilty to all the charges and are taking all necessary actions to defend against themselves. I'm gonna bring up Orchard Wealth. You have to unmute your microphone.

Bradley Chhay: Thank you, Travis and Albert. Eric Langan, RCI's Founder and Head of Mergers and Acquisitions, will also be available for on the Q&A. If you would like to ask a question, please raise your hand in the X Spaces. When you finish, mute your microphone to eliminate background noise, please. We have a limited number of speaker spaces. After your question, we may move you to the back of the audience to free up space. Please understand we cannot discuss the legal situation in New York other than to reiterate that the company's statement is that RCI, the individuals involved, and the three clubs have pled not guilty to all the charges and are taking all necessary actions to defend against themselves. I'm gonna bring up Orchard Wealth. You have to unmute your microphone.

Speaker #2: Divesting underperformers will help us increase margins, and we can use sale proceeds to repurchase stock, acquire higher-quality locations, or reduce debt. Our goal is to add an average of about $6 million of adjusted EBITDA each year through acquisitions.

Speaker #2: When you finish, mute your microphone to eliminate background noise, please. We have a limited number of speaker spaces. After your question, we may move you to the back of the audience to free up space.

Speaker #2: Please understand we cannot discuss the legal situation in New York other than to reiterate that the company's statement is that RCI, the individuals involved, and the three clubs have pled not guilty to all the charges and are taking all necessary actions to defend against themselves.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: I'm going to bring up Orchard Wealth. You have to unmute your microphone.

Speaker #3: Hello?

Speaker #2: 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.

Speaker #4: Hey there.

Jason: Hello.

[Analyst] (Orchard Wealth): Hello.

Speaker #3: Hey, how's it going?

Speaker #4: this is Jason. I just got a couple quick questions. First one being, with the current expenses behind you, do you think there's any more legal expenses that are going to come up that you haven't set money aside for?

Eric Langan: Hey there.

Jason: Hey, how's it going? This is Jason. I just got a couple quick questions. One being, with the current expenses behind you, do you think there's any more legal expenses that are gonna come up that you haven't set money aside for?

[Analyst] (Orchard Wealth): Hey, how's it going? This is Jason. I just got a couple quick questions. One being, with the current expenses behind you, do you think there's any more legal expenses that are gonna come up that you haven't set money aside for?

Speaker #2: Over the five years, we plan to generate more than $250 million of free cash flow and repurchase a significant quantity of shares. By fiscal 29 year-end, our targets are $400 million in revenue, $75 million in free cash flow, and $7.5 million shares outstanding.

Speaker #3: we never know. because it's a fluid situation. But, I think we've definitely set aside plenty of money for the next, you know, 12 months for sure.

Speaker #2: 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.

Eric Langan: I mean, obviously we never know, because it's a fluid situation. I think we've definitely set aside plenty of money for the next, you know, 12 months for sure. The money we set aside was actually over the estimate of what this case would cost from our attorneys when we began. It's going to be a little strange because if you look at this time, our EBITDA is hit, you know, by all of these reserves. As we move forward, we're going to be paying with no cash going out. Now we're going to be paying cash out while our EBITDA should increase. It's going to be a little strange trying to figure out how everything's going.

Speaker #2: We've made some initial progress improving nightclubs and sales margins. Total sales picked up from one Q26 to two Q26, with sequential improvement in same-store sales.

Speaker #3: the money we set aside was actually over the estimate of what this case would cost from our attorneys. when we began, it's going to be a little strange because if you look at this time, our EBIT has hit by all of these reserves and as we move forward, we're going to be paying with no cash going out.

Speaker #2: We're also working to optimize newly acquired and opened locations in order to expand margins. As we discussed in our last call, we've gone back to bombshell's roots at a test location, focusing on being a great sports bar with great food.

Speaker #2: The goal is to drive higher margin alcohol sales. The first successful implementation was at bombshell's 59 in Houston. Sales increased 3.6% in the second quarter, making it the best-performing same-store location.

Speaker #3: Now we're going to be paying cash out. What our EBIT should increase. so it's going to be a little strange to try to figure out how everything's going.

Speaker #3: So I've kind of gone back to just kind of watching our cash, how much cash we have, and what are we doing with it.

Speaker #2: We've begun rolling out the concept to other locations. As Albert mentioned, first quarter free cash flow was negatively impacted by paying off year-end legal fees, increased fees related to delayed filings, and insurance costs.

Eric Langan: I've kind of gone back to just kind of watching our cash, how much cash we have, and what are we doing with it. You know, if you look at this is actually an old quarter, right? This is ended through 31 December. You know, we ended September quarter with $33.6 million in cash, I believe. We ended this quarter at $28.7. We paid $9 million to ADW, between the $8 million down payment and $1 million. We bought $1.8 million worth of stock, I believe. We also paid down our line of credit. We paid a massive amount of our AP, as you'll see with the reduction of AP and legal. We're still sitting at that $28 million.

Speaker #3: You know, if you look at this, this is actually an old quarter, right? This is end of December 31st. So we ended September quarter with 33.6 million in cash, I believe.

Speaker #2: To help improve cash flow, we're working to drive down SG&A expenses. Regarding share buybacks, since we began our five-year plan in the first quarter of 2025, we've reduced shares outstanding by 14.6%.

Speaker #3: We ended this quarter at $28.7 million. We paid $9 million to ADW—$8 million as a down payment and $1 million. We bought $1.8 million worth of stock, I believe.

Speaker #3: We also paid down our line of credit. We paid a massive amount of our AP, as you'll see with the reduction of AP. And legal, and we're still setting at that $28 million.

Speaker #2: Earlier this month, we increased the amount available under the repurchase program by $20 million. As we discussed last month, we're also in the process of marketing $31.7 million in small clubs and real estate.

Speaker #2: Which have associated debt of about 16.2 million dollars collectively. Converting this to cash and reducing debt will significantly improve our capitalization. I'd like to thank all of our loyal and dedicated team members for all their hard work and efforts and all of our shareholders who believe and make our success possible.

Speaker #3: So the cash generation is fantastic from the club side and the bombshell's are actually starting to come back now. I'm hoping that we get this March 31st quarter out as quickly current.

Eric Langan: The cash generation is fantastic from the club side and the Bombshells are actually starting to come back now. I'm hoping that we get this March 31st quarter out as quickly as possible as well, we'll be back to current and, you know, everyone will have a really good idea of how things are looking for us currently.

Speaker #3: And everyone will have a really good idea of how things are looking for us currently.

Speaker #2: And back to Bradley.

Speaker #1: Thank you, Travis and Albert. Eric Langen, RCI's founder and head of mergers and acquisitions, will also be available for on the Q&A. If you would like to ask a question, please raise your hand in the X space.

Speaker #2: Given the unencumbered real estate that you guys are going to be selling off, do you have any estimation that if you sold the entire bulk of it off after paying all the debts and the obligations to ADL, how much you would be left with in cash that you could use for buybacks?

Jason: Given the unencumbered real estate that you guys are gonna be selling off, do you have any estimation that if you sold the entire bulk of it off after paying all the debts and the obligations to ADW, how much you would be left with in cash that you could use for buybacks?

[Analyst] (Orchard Wealth): Given the unencumbered real estate that you guys are gonna be selling off, do you have any estimation that if you sold the entire bulk of it off after paying all the debts and the obligations to ADW, how much you would be left with in cash that you could use for buybacks?

Speaker #1: When you finish, mute your microphone to eliminate background noise, please. We have a limited number of speakers' spaces. After your question, we may move you to the back of the audience to free up space.

Speaker #3: Well, if you figure we're asking $31 million and say we get a 10% discount, which puts us at about $28 million, take 5% of that, about, what's that, $700,000 to pay the fees.

Eric Langan: Well, if you figure we're asking $31 million and say we get a 10% discount, which puts us at about $28 million, take 5% of that, about, what's that? $700,000 to pay the fees. No, that's not right. I'm sorry. Fees, $2.8, be $1.4. We lose another $1 million or so in fees. They pay off the $16 million in debt. You're left with about $10 or $11 million. ADW, we pay 50% of that to ADW to get rid of that 12% debt. We'd be left with like $5 million, between $5 million and five and a half million dollars, maybe $6 million in cash left over if we sold everything.

Eric Langan: Well, if you figure we're asking $31 million and say we get a 10% discount, which puts us at about $28 million, take 5% of that, about, what's that? $700,000 to pay the fees. No, that's not right. I'm sorry. Fees, $2.8, be $1.4. We lose another $1 million or so in fees. They pay off the $16 million in debt. You're left with about $10 or $11 million. ADW, we pay 50% of that to ADW to get rid of that 12% debt. We'd be left with like $5 million, between $5 million and $5.5 million, maybe $6 million in cash left over if we sold everything.

Speaker #1: Please understand we cannot discuss the legal situation in New York other than to reiterate that the company's statement is that RCI, the individuals involved, and the three clubs have pled not guilty to all the charges and are taking all necessary actions to defend against themselves.

Speaker #3: No, that's not right. I'm sorry. Maybe $1.4 million. So we lose another million or so in fees. We pay off the $16 million in debt.

Speaker #3: You're left with about $10 or $11 million. ADW, we pay 50% of that to ADW to get rid of that 12% debt. So we've left like between 5 and 5 and a half, maybe $6 million in cash left over.

Speaker #1: I'm going to bring up Orchard Wealth. You have to unmute your microphone.

Speaker #3: Hello?

Speaker #2: Hey there.

Speaker #3: If we sold everything, yeah. But what we really do is we eliminate a massive amount of carrying costs in $16 million with interest expense, annually, property taxes, utilities, maintenance on these properties, things like that.

Speaker #3: Hey, how's it going? This is Jason. I just got a couple of quick questions. First, one being, with the current expenses behind you, do you think there's any more legal expenses that are going to come up that you haven't set money aside for?

Jason: Right.

[Analyst] (Orchard Wealth): Right.

Eric Langan: What we really do is we eliminate a massive amount of carrying costs in $16 million of interest expense annually, property taxes, utilities, you know, maintenance on these properties, things like that. That's the, that's where the real benefit comes in the long term to eliminate these properties that aren't producing income for us and, you know, bring that capital back in, redeploy that capital by drastically lowering our debt, right? You know, the $16 million would go down, the $5 million to Adam would go down. You know, you'd eliminate $21 million worth of debt plus on this with this transaction.

Speaker #2: I mean, obviously, we never know. Because it's a fluid situation. But I think we've definitely set aside plenty of money for the next 12 months for sure.

Speaker #3: So that's where the real benefit comes. In the long term, it's to eliminate these properties that aren't producing income for us and bring that capital back in, redeploy that capital.

Speaker #3: By drastically lowering our debt, right? Because the $16 million would go down, the $5 million to Adam would go down. So you eliminate $21 million worth of debt plus on this with these transactions.

Speaker #2: The money we set aside was actually over the estimate of what this case would cost from our attorneys. When we began, it's going to be a little strange because if you look at this time, our EBITDA has hit by all of these reserves, and as we move forward, we're going to be paying with no cash going out.

Speaker #2: So you'd be getting a—so you'd be getting a multiplier effect, that just every time you pay down a dollar, you're getting much more than just paying down the amount.

Jason: You'd be getting a multiplier effect that just every time you pay down $1, you're getting much more than just paying down the amount.

Speaker #3: Yes, exactly. Because you get rid of the debt and you get rid of the carrying costs for the non-incumbent property, property taxes, insurance, those types of things.

[Analyst] (Orchard Wealth): You'd be getting a multiplier effect that just every time you pay down $1, you're getting much more than just paying down the amount.

Speaker #2: Now we're going to be paying cash out. What our EBITDA should increase. So it's going to be a little strange to try to figure out how everything's going.

Eric Langan: Yes, exactly.

Eric Langan: Yes, exactly. Because you get rid of the debt and you get rid of the carrying costs, for the non-income producing property taxes, insurance, those types of things.

Speaker #2: Okay. And then one quick question. This is before I go. The accountants made you write down this difference between the agreed-to price with ADL, ADM.

Jason: Um-

Eric Langan: Because you get rid of the debt and you get rid of the carrying costs, for the non-income producing property taxes, insurance, those types of things.

Speaker #2: So I've kind of gone back to just kind of watching our cash, how much cash we have, and what are we doing with it.

Jason: Okay. Then one quick question, this is both before I go. You know, the accountants made you write down this difference between the agreed to price with ADW, and you had to take a hit on that. Had the stock gone up, you couldn't have claimed that as earnings, right?

[Analyst] (Orchard Wealth): Okay. Then one quick question, this is both before I go. You know, the accountants made you write down this difference between the agreed to price with ADW, and you had to take a hit on that. Had the stock gone up, you couldn't have claimed that as earnings, right? It only went one way. They could hit you for $9 million, but if it had gone to $50 a share by the time you closed, you couldn't claim it as a gain. Is that right?

Speaker #2: And you had to take a hit on that. But had the stock gone up, you couldn't have claimed that as earnings, right? So it only went one way.

Speaker #2: If you look at this, this is actually an old quarter, right? This is end of December 31st. So we ended September quarter with 33.6 million in cash, I believe.

Speaker #2: You could hit you for $9 million dollars, but if it had gone to $50 a share by the time you closed, you couldn't claim it as a gain.

Speaker #2: We ended this quarter at 28.7. We paid $9 million to ADW between the $8 million down payment and the million dollars. We bought $1.8 million worth of stock, I believe.

Jason: It only went one way. They could hit you for $9 million, but if it had gone to $50 a share by the time you closed, you couldn't claim it as a gain. Is that right?

Speaker #2: Is that right?

Speaker #3: Correct. Welcome to gap accounting. I mean, this is just a gap. It's a gap rule. And I always say the same thing happened to us during COVID, right?

Speaker #2: We also paid down our line of credit. We paid a massive amount of our AP, as you'll see with the reduction of AP. And legal, and we're still setting at that $28 million.

Eric Langan: Correct. You know, welcome to GAAP accounting. I mean, it's just a GAAP, it's a GAAP rule. You know, obviously the same thing happened to us during COVID, right? You know, some of the, some of the states like New York didn't let us open right away, so we had 12 months where we were, you know, massively reduced hours of operation, which reduced our EBITDA, which, you know, when they plug into their formula for impairments, caused us to impair Rick's New York by $9, 8 point some odd million dollars or something. You know, we wrote that down to like I think we wrote it down to like $6.9 million. Rick's New York made more money than that last year, right?

Speaker #3: Some of the states like New York didn't let us open right away. So we had 12 months where we were massively reduced hours of operation was reduced our EBITDA, which when they plug into their formula for impairments, caused us to impair Rich New York by 8 point some odd million dollars or something.

Speaker #2: So the cash generation is fantastic. From the club side and the bombshells, are actually starting to come back now. I'm hoping that we get this March 31st quarter out as quickly as possible as well.

Speaker #3: We wrote that down to like I think we wrote it down to like 6.9 million New York made more money than that last year, right?

Speaker #2: So we'll be back to current. And everyone will have a really good idea of how things are looking for us currently.

Speaker #3: So this gap accounting is you guys have heard me call it voodoo accounting many times. But we follow the rules. We do what we're supposed to do.

Speaker #1: Given the unencumbered real estate that you guys are going to be selling off, do you have any estimation that if you sold the entire bulk of it off after paying all the debts and the obligations to ADL, how much you would be left with in cash that you could use for buybacks?

Eric Langan: You know, it, this GAAP accounting is, you know, you guys have heard me call it voodoo accounting many times. We follow the rules. We do what we're supposed to do, that's how they wanted to book. We booked it that way. You know, we'll just move on. It's non-cash. We don't focus on non-cash expenses as too much. There's no sense. You know, we just follow the rules, book it, write it, move on. We own a lot of real estate, we're generating cash, and that's what's important to us and buying back our stock.

Speaker #3: And that's how they wanted to book. We booked it that way. We'll just move on. It's non-cash. We don't focus on non-cash expenses too much.

Bradley Chhay: You know, it, this GAAP accounting is, you know, you guys have heard me call it voodoo accounting many times. We follow the rules. We do what we're supposed to do, that's how they wanted to book. We booked it that way. You know, we'll just move on. It's non-cash. We don't focus on non-cash expenses as too much. There's no sense. You know, we just follow the rules, book it, write it, move on. We own a lot of real estate, we're generating cash, and that's what's important to us and buying back our stock.

Speaker #2: Well, if you figure we're asking $31 million and say we get a 10% discount, which puts us at about $28 million. Take 5% of that, about what's that?

Speaker #3: There's no sense in we just follow the rules, book it, write it, move on. We own. Real estate and we're generating cash and that's what's important to us.

Speaker #3: And buying back our stock.

Speaker #2: Okay. And this is filed. You're all caught up with NASDAQ and stuff like that. But the question is, do you think it's going to be much longer before you get the next quarter filed also?

Speaker #2: $700,000 to pay the fees. No, that's not right. I'm sorry. The 2.8, maybe 1.4. So we lose another million or so. And fees, they pay off the $16 million in debt.

Jason: Okay. This is filed, you're all caught up with Nasdaq and stuff like that. The question is, do you think it's gonna be much longer before you get the next quarter filed also?

[Analyst] (Orchard Wealth): Okay. This is filed, you're all caught up with Nasdaq and stuff like that. The question is, do you think it's gonna be much longer before you get the next quarter filed also?

Speaker #3: I hope not. We will be current. We will more than likely extension on March 11th to give us five more days. So I think it gives us to the 16th or something.

Eric Langan: I hope not. We will be current. We will more than likely, you know, file the 12b-25 for an extension on 11 March to give us 5 more days. I think it gives us to the 16th or something like that.

Speaker #2: You're left with about $10 or $11 million. ADW, we pay 50% of that to ADW to get rid of that 12% debt. So we've left like between 5 and 5 and a half, maybe $6 million in cash left over.

Speaker #2: May 11th.

Speaker #3: Yeah, May 11th. So we get to the 16th. So that'll make us current till the 16th. And then if we can get filed by the 16th, great.

Speaker #3: If we can't, then we will be late again. But at least all the timers started over. And we'll be and it's a queue. So it'll be pretty quick.

Jason: May eleventh.

[Analyst] (Orchard Wealth): May eleventh.

Eric Langan: Yeah, 11 May till the we get to the 16th. That'll make us current till the 16th, and then if we can get filed by the 16th, great. If we can't, then we will be late again, but at least all the timers started over, and we'll be, you know, it's a queue, so it'll be pretty quick.

Speaker #2: If we sold everything, yeah. But what we really do is we eliminate a massive amount of carrying costs in $16 million with interest expense, annually, property taxes, utilities, maintenance on these properties, things like that.

Speaker #2: All right. Well, good job, guys. Thanks a lot.

Speaker #3: Thank ank you.

Speaker #2: Thank you. I'm going to bring up Jose Carlos. Jose Carlos, you have to unmute your mic.

Jason: All right.

[Analyst] (Orchard Wealth): All right.

Eric Langan: Yeah.

Jason: Well, good job, guys. Thanks a lot.

[Analyst] (Orchard Wealth): Well, good job, guys. Thanks a lot.

Speaker #4: Yes. Hi. Can you hear me, guys?

Speaker #3: Yes, we can hear you.

Speaker #2: So that's where the real benefit comes. In the long term, is to eliminate these properties that aren't producing income for us and bring that capital back in, redeploy that capital.

Eric Langan: Thank you.

Bradley Chhay: Thank you. I'm gonna bring up Jose Carlos. Jose Carlos, you have to unmute your microphone.

Speaker #4: Oh, thank you. Yes, two quick questions. In the last conference call, you said that, especially among young people, they are pretty much giving up on alcohol, or you have to reduce, and you have to create new mocktails and create lower-alcohol cocktails.

José Carlos: Yes. Hi. Can you hear me, guys?

[Analyst]: Yes. Hi. Can you hear me, guys?

Eric Langan: Yes, we can hear you.

José Carlos: Thank you. Just two quick questions. Last, in the last conference call, you said that especially among young people, they are pretty much giving up on alcohol, or you have to reduce, and you have to create new mocktails and create lower alcohol cocktails. I'm wondering if this is something that you see, both in pop sales and clubs. How is it, just to get an idea, how does it affect your marketing? Thank you.

[Analyst]: Thank you. Just two quick questions. Last, in the last conference call, you said that especially among young people, they are pretty much giving up on alcohol, or you have to reduce, and you have to create new mocktails and create lower alcohol cocktails. I'm wondering if this is something that you see, both in pop sales and clubs. How is it, just to get an idea, how does it affect your marketing? Thank you.

Speaker #2: By drastically lowering our debt, right? Because the $16 million would go down, the $5 million to Adam would go down. So you eliminate $21 million worth of debt plus on this with these transactions.

Speaker #4: I'm wondering if this is something that you see both in pub sales and clubs. And what's how is it just to get an idea how does it affect the marketing?

Speaker #1: So you'd be getting a so you'd be getting a multiplier effect that just every time you pay down a dollar, you're getting much more than just paying down the amount.

Speaker #4: Thank you.

Speaker #3: I mean, I think it helps. I think it's helping revenues in both places. There's still the mocktails, of course, are considered a non-alcoholic beverage.

Speaker #2: Yes, exactly. Because you get rid of the debt and you get rid of the carrying costs for the non-incumbent property, property taxes, insurance, those types of things.

Speaker #1: Okay. And then one quick question. This is before I go. The accountants made you write down this difference between the agreed-to price with ADL, ADM.

Speaker #3: So it'll go into the non-alcoholic beverage categories. But all of your other stuff will go into alcohol sales exactly the same. So what we hope to do is see a little bit of reduced cost.

Eric Langan: I mean, I think it helps. I think it's helping, you know, revenues in both places. You know, there's still the mocktails of course, are considered a non-alcoholic beverage, so it'll go into the non-alcoholic beverage categories. All of your other stuff will go into alcohol sales exactly the same. What we hope to do is see a little bit of reduced costs. A lot of those have fruitier drinks or they're canned drinks, which may actually increase our cost a little bit. I think overall it'll all, it'll all work out.

Speaker #1: And you had to take a hit on that. But had the stock gone up, you couldn't have claimed that as earnings, right? So it only went one way.

Speaker #3: A lot of those have fruitier drinks or they're canned drinks. Which may actually increase our cost a little bit. But I think overall, it'll all work out.

Speaker #1: You could hit you for $9 million dollars, but if it had gone to $50 a share by the time you closed, you couldn't claim it as a gain.

Speaker #3: And while there's definitely a segment of the population that is cutting back or reducing their alcohol intakes, there's still a very large portion of the population that is out having fun, drinking, and partying like we always have.

Speaker #1: Is that right?

Speaker #2: Correct. Welcome to gap accounting. I mean, this is just a gap. It's a gap rule. And I always say the same thing happened to us during COVID, right?

Eric Langan: you know, and while there's definitely a segment of population that is cutting back or reducing their alcohol intakes, there's still a very large portion of the population that is out having fun, drinking and partying like we always have. We will continue to monitor it. We'll continue to do what we need to do to stay in front of any of any changes as best we can and continue to generate cash. you know, at the end of the day, we'll look at the cash flow and see how that goes and that's how we'll, you know, decide if we're doing things right or not, right?

Speaker #2: Some of the states like New York, didn't let us open right away. So we had 12 months where we were massively reduced hours of operation was reduced our EBITDA which when they plug into their formula for impairments, caused us to impair rich New York by 8 point some odd million dollars or something.

Speaker #3: So we will continue to monitor it. We'll continue to do what we need to do to stay in front of any changes. As best we can.

Speaker #3: And continue to generate cash with at the end of the day, we'll look at the cash flow and see how that goes. And that's how we'll decide if we're doing things right or not, right?

Speaker #2: We wrote that down to like I think we wrote it down to like 6.9 million dollars. Rich New York made more money than that last year, right?

Speaker #4: Thank you very much.

Speaker #3: Yeah, thank you.

Speaker #2: So this gap accounting is you guys have heard me call it voodoo accounting many times. But we follow the rules. We do what we're supposed to do.

José Carlos: Thank you very much.

[Analyst]: Thank you very much.

Speaker #2: And that's how they wanted to book. We booked it that way. We'll just move on. It's non-cash. We don't focus on non-cash expenses too much.

Eric Langan: Yeah. Thank you.

Bradley Chhay: If you would like to speak or ask.

Speaker #2: There's no sense in we just follow the rules, book it, write it, move on. We own a lot of our real estate and we're generating cash.

Speaker #2: And that's what's important to us. And buying back our stock, so.

Speaker #1: Okay. And then one other thing. Since this is filed, you're all caught up with NASDAQ and stuff like that. But the question is, do you think it's going to be much longer before you get the next quarter filed also?

Speaker #2: I hope not. We will be current. We will more than likely file the 12/25 for an extension on March 11th to give us five more days.

Speaker #2: So I think it gives us to the 16th or something.

Speaker #1: May 11th.

Speaker #2: Yeah, May 11th. So we get to the 16th. So that'll make us current till the 16th. And then if we can get filed by the 16th, great.

Speaker #2: And if we can't, then we will be late again. But at least all the timers started over. And we'll be and it's a queue.

Speaker #2: So it'll be pretty quick.

Speaker #1: All right. Well, good job, guys. Thanks a lot.

Speaker #2: Thank you.

Speaker #1: Thank you. I'm going to bring up Jose Carlos. Jose Carlos, you have to unmute your microphone.

Speaker #3: Yes. Hi. Could you hear me, guys?

Speaker #2: Yes, we can hear you.

Speaker #3: Oh, thank you. Yes, two quick questions. In the last conference call, you said that especially among young people, they are pretty much giving up on alcohol or you have to reduce and you have to.

Speaker #3: Create new mocktails and create lower alcohol cocktails. I'm wondering if this is something that you see both in pub sales and clubs. And what's how is it just to get an idea how does it affect the marketing?

Speaker #3: Thank you.

Speaker #2: I mean, I think it helps. I think it's helping revenues in both places. There's still the mocktails, of course, are considered a non-alcoholic beverage.

Speaker #2: So it'll go into the non-alcoholic beverage categories. But all of your other stuff will go into alcohol sales, exactly the same. So what we hope to do is see a little bit of reduced cost.

Speaker #2: A lot of those have fruitier drinks or they're canned drinks. Which may actually increase our cost a little bit. But I think overall, it'll all work out.

Speaker #2: And while there's definitely a segment of the population that is cutting back or. Or reducing their alcohol intakes, there's still a very large portion of the population that is out having fun, drinking, and partying like we always have.

Speaker #2: So we will continue to monitor it. We'll continue to do what we need to do to stay in front of any changes. As best we can.

Speaker #2: And continue to generate cash with at the end of the day, we'll look at the cash flow and see how that goes. And that's how we'll decide if we're doing things right or not, right?

Speaker #3: Thank you very much.

Speaker #2: Yeah, thank you.

Speaker #1: If you would like to speak or ask a question, please raise your hand and I'll call on you. I'm going to bring up Maxwell next.

Speaker #1: Maxwell, unmute your microphone and take it away.

Speaker #4: Thank you. A lot of my questions have already been asked, but I do want to say good to see you guys making progress on same-store sales across both nightclubs and bombshells.

Speaker #4: And the one question I do have is any commentary you can provide on the SEBL in Minneapolis?

Speaker #2: The tenant quit paying rent and we're in the process of evicting the tenant. And hopefully, we'll get a new tenant at some point in the future.

Speaker #4: Wonderful. Well, again, keep up the great work. I appreciate it. Thank you.

Speaker #2: Yeah, thank you.

Speaker #1: I'm going to make another request for any other questions. If not, I'll close it out in about 10 seconds. On that note, on behalf of Travis, Albert, and Eric, the company, and our subsidiaries, thank you and have a good night.