Looks like we can go ahead and get this started. Greetings, and welcome to RCI Hospitality Holdings second quarter 2Q 2024 sales call. You can find the company's presentation on RCI's website. Go to the Investor Relations section, and all of the links are at the top part of that page. Please turn with me to slide two of our presentation. I'm Mark Moran, CEO of Equity Animal. I'm the host of our call. I'm coming to you from New York City today. Eric Langan, President and CEO of RCI Hospitality Holdings, and CFO Bradley Chhay are coming to you from Houston today. Please turn with me to slide three. To ask a question, you'll need to join the X space with a mobile device. To listen only, you can join the X space on a personal computer. At this time, all participants are in a listen-only mode.
A question and answer session will follow. This conference is being recorded. Please turn with me to slide four. You may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. Now, I'm pleased to introduce to you Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.
Thank you for joining us today. Can you please turn to slide five? There's a lot going on in the company right now. We wanted to give you a broad brush update, for items that we can talk about now, rather than wait until May, when we report financial results. First, total sales for nightclubs and Bombshells were $71.7 million for the second quarter, an increase of 1.3%, or $0.9 million year-over-year. Increase in sales from prior year's acquisitions and new locations more than offset declines in same-store sales and clubs in transition. Nightclub sales totaled $59 million, an increase of 4.2% or $2.4 million year-over-year. This reflected increase of $7.4 million from acquisitions that are not in same-store sales.
This was partially offset by declines of 5.7% or $2.9 million in same-store sales, and of $2.1 million from clubs that reopened or reformatted or closed during the prior period in the second quarter. Bombshells sales totaled $12.8 million, a decline of 10.4%, $1.5 million year-over-year. This reflected increase of $1.2 million from three locations, not in same-store sales: the Cherry Creek Food Hall in Colorado, with its Bombshells Kitchen, Bombshells San Antonio, which we acquired last year, and Bombshells Stafford, which opened in November. The second quarter also reflected declines of 20.5%, or $2.7 million in same-store sales.
I'd like to note that Bombshells did not start making any of the previously announced management changes and marketing changes, along with our cost cutting, until around mid-February 2024. We should see better results in the next quarter. Fiscal 2024 club and restaurant sales by month. Please turn to slide six. Please note that the highest month to date for both clubs and Bombshells are in March, and we continue to push forward and use our discounting, marketing, and other tools to hope to see these numbers increase as we continue to move forward. Please turn to slide 7. During and subsequent to the second quarter, we had a number of positive developments in our nightclub business. two of our clubs recently opened, the PT's Centerfold Gentlemen's Club in Lubbock, Texas.
A new BYOB opened in the third week of March, and Baby Dolls Abilene, a reformatted liquor club, opened in the first week of April. Two of our other BYOB locations, one in El Paso and one in Harlingen, are being converted into Chicas Locas, and they will both open with their liquor license when their liquor licenses are issued. Baby Dolls Fort Worth should have its construction permits very soon. We're in final stages there. Scarlett's Cabaret Denver, which is in Glendale, Colorado, received its liquor license to sell and serve alcohol till 4:00 A.M., while most of other Denver area locations have to close at 2:00 A.M. We are working on bringing Scarlett's hybrid nightclub, adult entertainment concept to Dallas. We'll have more on that in May, and we've recently signed a letter of intent to purchase one more new club. Please turn to slide eight.
We had an important development in our plan to create two casinos in Central City, Colorado. Our Rick's Cabaret Steakhouse and Casino and Bombshells Sports Casino both received their 24-hour liquor licenses from the city. We're thinking of possibly opening the Cabaret Steakhouse once construction is complete in late summer 2024, while we await approval of gaming instead of waiting for the gaming license. Bombshells development, please turn to slide nine. The big update here is that our next three locations, Sapphire Bay in Rowlett, Lubbock, and Denver, are all at a stage in their development where they are expected to open by late summer. Rowlett being our flagship location, located in Sapphire Bay in Rowlett, Texas. We put a little slide there. You can also go to the website and kind of see that development.
I think that's gonna be a very big location for us. Please turn to slide 10. We anticipate the closing in April of a $20 million bank loan. This is expected to be secured by nine real estate properties, appraised at $31.6 million. The loan would provide us with additional funds for working capital at favorable bank rates and terms. I'm also pleased to report that during the second quarter, we repurchased 27,265 common shares for an investment of $1.53 million or an average of $56.12 per share. Year to date, RCI has purchased 65,219 shares for $3.6 million on average $3.6 million, average of $55.23 per share.
We currently have $13 million remaining in our repurchase authorization. This concludes formal remarks, and I want to thank our loyal and dedicated teams for their hard work and effort, and all of our shareholders believe and are making this success possible. Now here's Mark.
Thank you very much, Eric. If you would like to ask a question, please raise your hand in the X space. When you finish, please mute your microphone to eliminate any background noise. We have a limited number of speaker spaces. After your question, we may move you to the back of the audience to free up space. To start things off, we'd like to take questions from Rick's analysts and then to some of its larger shareholders. First off, we'll have Scott Buck of H.C. Wainwright. Scott, take it away.
Hi, guys. Thanks for taking my questions. First one is on Bombshells. Eric, I know the optics are tough, looking at same-store sales down 20% year-over-year. The changes that you made in February, when should management and investors start to see some of that recognized in the results and be able to determine whether or not, you know, these were successful or not?
Well, I think you see kind of a little bit in March, as you see, you know, our two high October and December, $4.4 million in revenues. And then of course, January and February down to $4.1 million and $3.9 million, and then March at $4.7 million. I'm hoping this quarter we'll continue to see improvement in that number. My personal goal right now is to get us back to $15 million per quarter, or $60 million total without the three new stores. And I'd like to do that prior to those new stores opening so that Bombshells is operating in a much healthier place for us.
I appreciate that. That's helpful. And then on the Central City properties, it sounds like construction is going on kind of, you know, the schedule that you anticipated, but you're still waiting on the casino license or gaming license. Any update that you can provide us on what to expect there in terms of timing?
No earthly idea at all. All we are being told at this point is that you know the investigation's continuing. We'll see. I know that I've seen the shortest about 15 months, which we're past that now. And there's a couple of licenses out there I think have been applied for between two to three years. So I don't know what's going on in Colorado gaming right now, but definitely not quick as we would like, of course, so...
But-
Uh-
Nobody, nobody has leapfrogged you, right? In terms of putting in an application after you and getting a license before you.
Not that I know of at this time, no. They've only issued one license, and it's actually a mini casino with 74 machines or less.
Okay, perfect.
Yeah.
That's helpful. And then last question for me, just on the $20 million that you're kind of freeing up from the real estate. On the acquisition front, do you have deals that you are actively negotiating, or is this just dry powder for, you know, if the right opportunity comes along?
Well, we have an LOI right now that we're working on putting into definitive documents. Hopefully, and then before May 9th, we'll have more information on that for you, and maybe even an anticipated closing date on that transaction by then. We are talking with other operators right now. We've just haven't come to terms that are agreeable for both parties at this time. So, we continue to look, having the extra cash there is good for stock buyback as well as new acquisitions should they come up.
And of course, to build the club in Fort Worth, Texas, that'll be approximately about a $3 million or so outlay for the club in Fort Worth that we hope to open sometime in October or November, depending on building permits, of course.
Great. That's it for me. Appreciate all the transparency, guys. Thank you.
Yeah, no problem.
Thanks a lot, Scott. Next up, we'll have Anthony of Sidoti. Anthony, please take it away.
Can you hear me?
Now I can.
Okay, thank you. Okay, yeah, yeah.
I can.
Thanks for taking the question. Can you hear me now?
You're cutting in and out. I can hear you when you ask me if I can hear you, but I can't hear you any other time.
Okay. So, thanks for taking the question. So first, I guess in terms of the improvements that you've made with the marketing changes and the cost cutting that you've done at Bombshells, can you give us maybe a sense as to like the monthly progression of the same-store sales? Have you seen notable improvements since you've done that? How should we think about that?
We put that on slide six for you, so you can kind of see both how the clubs and and Bombshells did over the last six months of this quarter in revenue. You know, I think that, you know, April will probably be a little less than March or around March, if we can be successful at continuing the increase in business. And then May should be very strong for us, and, you know, we'll see how June goes. June last year is when comps just basically disintegrated. If you'll remember, everybody, European vacations were hot, you know, I had predicted it would happen the year before, and I was a year off, and I...
Since it didn't happen the year before, I didn't think it was really gonna happen this past year in 2023, but it did actually happen in 2023. So, we're going against much easier comps come June. Keep in mind that the major acquisition of the Birch Clubs, the Baby Dolls in Dallas, the Chicas Locas, Sobran will go into same-store sales as well. And they're a huge part of our increase right now of total revenues. So, that will also help nightclub same-store sales. So I think we're gonna be in pretty good shape, as far as same-store sales on a go-forward basis, definitely by June.
Hopefully we can do well in April and May, and get things back into swing there, and try to close this new acquisition as quickly as possible, and maybe even pick up some additional ones.
Got it. And then, you know, in the past few calls, you guys have talked about seeing weakness in some of the blue-collar locations. Is that still the case? Are you still seeing that divergence between the white-collar clubs versus the blue-collar locations?
I think what we're seeing, and I think we've mistaken some of it for blue-collar, is I think we're seeing the middle class that are being squeezed the most. And what I'm... You know, as I've been watching and kind of watching spend, we're seeing that the high-end spend is getting more reserved. I think people start to feel like they're showing off again, similar to 2009, when everybody started cutting back. I think we're seeing some of that right now, but I think that middle-class customer is very, very squeezed.
An example of that is, you know, everybody was making minimum wage, so your very low-end blue-collar workers, your $7-$10 an hour employees that were, you know, basically hitting our, our blue-collar clubs once or twice a week, their pay's doubled, right? They've gone, they've gone to $15-$20 an hour now. Of course, some of their costs have increased as well, but they're not as hurt as that middle-class guy who was already making $20-$25 an hour, and instead of getting bumped up to $40-$50 an hour, he's been bumped to, you know, $27 or $29 or, you know, you know, and, and so on and so forth. As, 'cause you move up, the percentage become less, but yet their food costs have increased, their energy costs have increased, so...
And of course, interest costs have increased. So I think we're dealing with some of that right now, as well. But overall, I think, right-
Got it.
We just have to continue-
Mm-hmm
... to push, you know, push specials, on slower days. We are seeing... You know, I've said in calls a while back that once we really saw it hitting us the hardest, we would see good weekends and slow Mondays and Wednesdays. We have come upon that. Our Mondays and Wednesdays are being affected. We're now doing discounting on those days. You can see some of the Bombshells specials, if you're on X. You know, I tend to post them out quite a bit, our Monday Madness, our Thursday Lingerie Nights, the specials we've put in place there. And we're starting to, you know, see traffic count increases, from those specials.
So I think overall it's just a matter of time till, you know, things kind of stabilize and as we push through our specials. We're seeing a lot of restaurants closing in Texas especially right now, Houston and Dallas areas. So as that happens, I think, you know, the spread of customer base will be in less stores, which should help our stores as well.
Gotcha. Okay, and so in terms of the specials that are driving the traffic, so are you actually seeing increases in traffic on a year-over-year basis as a result of that? Or is it just you're seeing less of a decline?
I think we're seeing less of a decline. I don't think we're seeing the increase yet. I don't think that happens till June. June is when the customer counts really fell off, due to summer vacation that year, and I don't believe everybody's going to Europe this year. Based on, you know, personal, friends and acquaintances that I talk to on a regular basis, you know, I think 70% went to Europe or, you know, Caribbean, South America last year, and I think this year is less than 15% of people I talked to saying they're going anywhere. "Oh, we're staying home this summer. We're staying home this summer," is what I'm hearing from a lot of them.
Understood. Okay, well, thanks, and best of luck.
Yep.
Thank you very much, Anthony. Hey, Eric, while I'm bringing up Scott, can you please re-add me and the Equity Animal accounts as co-hosts?
Oh, yeah. Sorry,
Perfect. And Rob-
Didn't see you got dropped.
No worries. Rob, you're up. Take it away.
Thanks, Mark. Eric, just in terms of... You're talking more about a cost reduction program. You discussed a little on the last call as well. Can you kind of give us some additional color on that initiatives?
I'm much more familiar with it on the Bombshell side than I am on the club side, though I know the club's making changes as well. But I can tell you on the Bombshell side, we've gone from, you know, having two sheriff's deputies on slower nights, to either one or going to private security, at a much reduced rate. You know, nights we had four managers, we're cutting back down to three managers. We're basically just running leaner, as well as, trying to eliminate any, you know, unnecessary marketing or unnecessary expenses. You know, stuff like that. And it's, it's, I...
We'll see some in March, I think, but obviously we, you know, we had seven weeks before we really started making a lot of those changes. And then it took us, you know, time to implement those changes and get them all in place. So I think the real cost-cutting will be seen in April, the April to June quarter. But we'll see a little bit of it in this second quarter as well.
Well, thank you for that. And then, you know, with regards to other club owners realizing that they're not really able to sell at peak 2022 EBITDA, can you expand on what that environment is today? And clearly you've made some progress with that LOI, opening the one club or acquiring the one club.
Yeah, I mean, we've been talking with this group off and on for about three years. We've just, you know, basically said, "Look, this is what we're paying now." I don't think anybody else out there is paying more, or less, or I mean, there's probably some paying the same. I think we just have the better track record, especially with some of the owner finance parts of our transactions. And I think that, you know, at some point we're going to see people quit holding out for those high numbers and thinking they're gonna sell based on their 2022 numbers. And that was... That's been the real problem, is everybody thought, "You know, well, I did so well in 2022.
'23 is just an off year, and it's gonna come back." And I think people are realizing that it's not just coming back as easy as they kind of thought it would, or definitely not as quickly. It may come back, but it's not gonna come back as quickly in this current interest rate environment. And, of course, no free government money like there was in 2021, 2022.
Sure. Then shifting gears to Admire Me, can you kind of discuss your progress with your new partner and kind of what we might see next?
Yeah, Admire Me's kind of done. We're not spending any money on it at this point. The new partner is going to launch the new site, we hope, in this quarter, May, June quarter. We are in the process of setting up the banking relationships for that website right now. There are some... There's some basic stuff up right now that we've been able to beta test ourselves internally. We'll probably, I'm hoping, start, as soon as the banking is up, we'll start opening up some public beta testing as well as putting a few of the entertainers on the site.
I can tell you that, from the little bit of looks and what I've done with the site, I've looked at the site so far, the new site's already better than our existing site. So, it was definitely a good choice to basically cut that off, with trying to create the wheel, and go with a company that's got a similar product out there right now that they're re-skinning and putting together. We'll own 75% of it, at this point. We may bring in another couple of club operators and give them a percentage of ownership as well, just to grow the site.
Because, obviously, the bigger the site is and the more creators and stuff we can put onto the site and more marketing we can do for the site, you know, I'd rather have a smaller piece of a bigger pie than have a whole pie that's too small. So that's kind of where we're at right now. Hopefully, May 9th, I'll have some more information for you. Hopefully I can get banking set up in the next 30 days, and then maybe we can set up some beta testing.
Terrific. And then just last question, can you talk to us about Scarlett's hybrid nightclub model, and kind of what's... how that differs from your other clubs and just in general?
Well, I mean, Scarlett's is a... It caters to typically a younger customer. It's later, it's a later hours club. We operate later hours than normal. You know, typically, I'd say the average age is probably closer to, you know, 27 to 30 versus, you know, our typical gentleman's club where, you know, the average age is probably closer to 40. It's, it's a dance club, so it's a lot like a dance club. There's sound and lighting, video, audio equipment is hugely upgraded compared to a typical strip club. There's places to stand, 'cause a lot of people don't. They want to stand or, you know, stand, dance around more than sitting in a chair for a couple hours like the typical gentleman's club.
Like I say, I think it's just a younger crowd, more of a party atmosphere. And we're doing very well with it. The Denver location is doing very well. We just got the 4:00 A.M. liquor out there, which is gonna make a huge difference in that market. You know, I would say, you know, guys my age, I don't stay out till 4:00 A.M. in the morning very often. Whereas my, you know, my son might stay out until 3:00 A.M., 4:00 A.M., 5:00 A.M. o'clock in the morning, you know, three nights a week. So, just a different party vibe than a typical club would be.
Well, that's it for me.
Yeah.
Thank you so much.
Thanks very much, Rob. Eric, I don't know. I think you stay out 3:00 A.M., 4:00 A.M., pretty late from what I've seen. Next up, we have Orchid Wealth. Orchid Wealth, please take it away. Hey, Orchid Wealth, I need you-
I think you're muted.
Yeah. Well, then let's bring up-
Oh, here he is.
There we go.
There he is.
Perfect.
All right, how many clubs did you guys have open for the past quarter? How many will come on in the next three months, and then how many in the three months after that? What's the number looking like?
Hey, Eric, you're on mute.
Oh, shoot! How'd that happen? I was unmuted, then it muted me. This thing's going crazy today. I think at about 59 locations open right now. I think that's what I remember, research reading a minute ago. Only location that is not open right now, other than the Fort Worth, new Fort Worth club, which has not even started construction, is the El Paso club. We're waiting on the liquor license on that. It will reopen. Lubbock and Abilene both reopened in this quarter. And of course, the Central City location, if we decide to open that as just a club and steakhouse for right now, while we await gaming.
So there's basically three more locations that could open, and then, of course, so one location that will be converted from a BYOB club in Harlingen, Texas, into a Chicas Locas location. So that's what's coming right now, and of course, the new acquisition. Get that closed, that'll be added as well.
Great. Okay, and, with any of the new acquisitions that are out there, obviously, the, the point is, these people are finally realizing that they can't ask for their five times earnings or whatever the number was from these inflated numbers from a year or so ago.
Yeah, I mean, we have to either use some type of average, but they... or a run rate, so it's been a little more difficult because nobody knew what their run rate was going to be. Now that 2023 is over, so we have a 2022 and a 2023 comparison. We're four months into calendar 2024, or, you know, three months into it anyway, into the fourth month. So yeah, I think people are starting to get more realistic. And we've looked at about five locations in the last, I don't know, five-six weeks. We have a couple of other ones we've considered LOIs on, but can't get that final...
Just can't get everything to work properly for us, whether it's interest rates or, you know, the final purchase price, the value for the real estate. There's different things in each one. But I don't think that anybody else is buying any of these clubs right now either. So, we're just kind of, you know, in a hold pattern. We're kind of holding. This is what we'll pay for it. This is what it's worth to us. And if it's worth more than that to somebody else, then by all means, sell to them. And if you think it's worth more to you than what we can pay, then hold on to it.
If that's what you think is best, it's kind of our outlook on it. Like I said, we're not in a hurry. We're patient investors. We're patient, we'll patiently take the acquisition as it comes, so.
All right, great. Thanks.
Yep.
Fantastic. Thank you for the questions. Next up, we have Johnny. Johnny, please take it away. Hey, Johnny, I think you're on mute. While Johnny is attempting to connect, I'm gonna bring Adam Wyden up. Adam, please take it away once you're ready. Looks like Adam is still connecting, so we'll give that a second.
Hey, can you guys hear me?
Yes, we can.
All right, great. So couple questions here. I know that you consummated merch, the Birch Club, I think, towards the end of March. So is it fair to assume that, you know, I know the Birches, Eric mentioned that Birch is comping really well, and obviously, you've got some, you know, some of those Birch clubs getting renovated and coming back online. I mean, is it fair to assume that, basically in the next quarter sequential, so the quarter end of June, you're gonna have what you would call the Birch clubs that are comping positively enter into the comp base that would help sort of your strip club comp numbers in the following quarter? Is that a fair assumption? Am I getting the timing right there?
I believe that's the case. I know the big effect will be in June, but I think April, May, I mean, we're only seven days in, so it's very difficult to really say, or eight days in, I guess, counting yesterday.
But Birch wasn't in the same-store sales for the quarter end in March 31st, and that-
It was not.
... those clubs are doing what? Those clubs are doing well, correct?
They're doing very well. I mean, one of the examples, we're doing about $275. We're doing close to $350 at that location now. A couple of the other locations are up anywhere from $20,000-$40,000 a week as well. So yeah, they're doing. They're gonna be very good for us as far as comps go. And I think that, you know, we're getting to the bottom of Miami, I hope. The most of our decline is very regional right now. We have two clubs in New York, which I, you know, I consider our younger clubs, where the 25- to 35-year-olds go, which is that big middle class that I was talking about, I think is getting squeezed the most because those two clubs are affected.
But Rick's location is doing very well in New York. Of course, Minnesota is huge on decline, even down from 2019 due to, you know, COVID, the George Floyd thing, and just crime has just gotten out of control in Minneapolis at the moment, so in the downtown area. And it's, you know, the people in the suburbs are scared to come downtown, which is hurting our business. I think their convention schedule's been lacking as well because of that, so that's part of the decline. And then, of course, you know, Miami and Florida, where in 2022, you know, Tootsie's did almost $40 million of revenue, versus the highest year ever, in 2019, was like $26.8 million.
We did $33 million or almost $34 million, I think, in 2023, so we'll see where we're at. We declined a little bit off that. I think we steady out, I think that's gonna steady out at about 10% down at around $30 million a year run rate. It could be a little higher, depending on if crypto stays hot, that could bring some of that back. But I think we're gonna be in that range, that $30-$33 million range in Miami now is gonna be, I think, a real run rate for Tootsie's, and the other clubs are off about the same amount. Scarlett's maybe not so much, but Cheetah's, which is again, you know, upper blue-collar, lower-end white-collar-type location is being affected.
But overall, I think this should be the bottom. I think definitely by June, if we do worse this June than last June, then we've got—we're gonna have to make really, really make some changes, fundamental changes, not just not just price-cutting or price-raising and cost-cutting. Well, but I don't see that happening at all. But I don't... Like I said, I don't think everybody's going on European vacations this year. I don't think that the bottom's gonna fall out in June. I think it's just gonna kind of be a return to norm for a typical summer for us.
Right, and-
I'm excited about getting to that point.
Well, and on the nightclubs, it sounds like, you know, if you go back and you look... You know, we've had this conversation, I think, offline, but I think what you would say is that, you know, look, if you look at how the business performed in 2008, 2009, the clubs, I think, you know, peak to trough were down, you know, somewhere between 3%-5%, and your argument is that, well, you know, you were comping off of a higher base. So I guess what you would say is, you know, if you basically had really big numbers in 2022, 2023, you were down, you know, off of that high base. But, you know, I think is it sort of fair to assume that, like, you know, you're not that, you know...
This isn't a business that, you know, should see, you know, additional, you know, comp declines. If anything, I mean, I think you would say that, like, you're putting Birch into the comp base in June, which should be positive, and some of the, some of the renovations and remodels and some of the stuff that you've done with these co- these clubs, you know, part of your construction phase, I mean, I think that those would enter into the comp base sort of reinvigorated. I mean, if anything, I would think that you would think that there's probably tailwinds from the, from a comp perspective with Birch coming in and sort of the new clubs that are being renovated effectively coming into the comp base. Is that, is that a fair assumption?
You know, I think April's gonna be our toughest comp. May gets a little easier, and June becomes extremely easy. That's what I think. You know, depending on you know the next three weeks of April will tell us a lot. Baseball started back up. The Rangers are doing great, which is helping our Arlington club and Fort Worth area clubs, as well as the Bombshells in Arlington. So there's just a lot of positive things going on. You know, the Mavericks are gonna make the playoffs. That'll definitely help, you know, the two clubs and the Dallas Bombshells in that market. You know, we've got you know sports helping us in New York with the Knicks doing well this year.
I think we've got a lot of right things going for us, and we just got to adjust to the new environment.
So, this is my last question: Can you, you know, for, you know, sort of simplicity standpoint, can you try and summarize sort of what you would quote, "classify as the inorganic opportunity going forward?" And I'm not... You know, obviously, you've got this M&A, and it'd be nice to sort of talk about that, but like, you know, we've talked a lot about sort of going through the rebuilding or construction phase, you know. Can you talk a little bit about, you know, timing? You know, I think you've said, you know, sort of-
I wanna be done with that construction phase by November. I do not want to be dealing with... Going into 2025, I don't wanna build anything if I can keep from it.
Right. So just-
I don't even wanna remodel anything in 2025.
So basically-
Uh
... you have your capital plans through November, you know, and then sort of forward-looking cash is going to M&A and buyback. But can you sort of help enumerate for folks, like, sort of, you know, how much revenue? I mean, obviously, people can have their own sort of speculation around what margins are and whatnot, but, I mean, sort of give people a sense of the quantum of revenue that will come from assets that are not online right now. I mean, maybe you can go through... You know, I know you did in the presentation, but it's, it's sort of hard to follow. I mean, maybe just sort of give people a quantum of sort of how much revenue is sort of in the ground, but not sort of turned on yet.
Yeah, I mean, it's hard to say with the three Bombshells we have. If we just do an average opening, you know, they'll add $18 million in 2025, I think, for the three new stores at $6 million a unit. But I really think that the Rowlett unit could be a $10 million-plus unit, and I think $6 million is low for Lubbock, and I think $6 million is gonna be low for downtown Denver. But if you just use those numbers, it's $18 million. You know, the Baby Dolls in Fort Worth should somewhere between, you know, $6-$8 million a year, could be as high as $10 million. It's a great location over there.
We know what other businesses in that area have done in the past, and we had a business in that area in the past as well. And we know it did, you know, till the freeway construction forced us to sell it during 2017, when I was just selling off any asset that wasn't if I could get more money from and get a higher return from under our capital allocation strategy. Then what else we got? The new Chicas, you know, those clubs were BYOB clubs doing about $1 million a year in sales. As Chicas, they should do between $3 million and $4 million. So let's say they do average $3.5 million, $7 million for the two new Chicas. Yeah, $18 million-$25 million, you're up to.
Harlingen and El Paso
... yes, 30-something. Yeah, that's Harlingen, El Paso. You know, the Central City location, I have no, no real idea of what it's gonna do, but I think overall, you're probably looking at additional $35-$40 million in revenues added to, you know, our current run rate, which should be right around $300 million. So-
And that doesn't include the casino, and that doesn't include the casinos, and it doesn't include-
Right
...this M&A target that you basically have under LOI.
It doesn't
...plus, plus any future M&A, correct?
Or anything else. Correct. Yes.
So-
Well, you know, basically somewhere between thre, around $335 million run rate for 2025, all things staying equal, basically. If we get any little bounce back in same-store sales, all of a sudden we bounce same-store sales 4%. You know, 4% of $300 million is another $12 million we could pick up real easily. So there is, you know, obviously a lot of a lot of potential out there right now. And I'm just hoping, like I said, that, you know, this is, this, this, this... That we found the bottom in this last quarter. March came back pretty strong. I know there was an extra weekend in that month, some people will point out, but the extra weekend was not the...
It was Easter weekend, so it wasn't like a full-fledged weekend. It was like, really more like having an extra Tuesday, Wednesday, Thursday in the month. But it's still... Or maybe Wednesday, Thursday, Friday. But it was still, it was a strong month. Overall sales early in the month were decent, and only increased once the NCAA basketball tournament started, and then baseball kicked in, you know, the end of the NBA season, regular season, those last games became important, especially to several teams in our markets. And we look forward to, you know, Denver being in the finals, you know, Dallas. I don't know if the Knicks made the finals or not. I'd, I need to look. I don't even...
I haven't even been following that closely, but, but those teams will... You know, anytime, anytime a sports team is strong in one of our markets, it helps our sales, so it's always good for us.
Got it. And if construction is done by November, is it fair to assume that, you know, you would be active on the, on the buyback and, and all that stuff from there? I mean, this-
We-
... I mean, at where you are right now, based on all the stuff that's coming online and a reasonable margin, I mean, our, our sales numbers are a little bit higher than, than yours, based on what's, like, out of commission. But, I mean, even if you were just to take the $350 million in sales and take a reasonable margin, I mean, you know, basically having everything online, I mean-
25 should be a much better year for us. You gotta remember, we've got a lot of drag right now, too. I mean, we're carrying nine properties. We have ongoing construction on all but two of those properties right now, and the two of those properties, construction's gonna start, better start in the next two weeks, 'cause I want to be done with construction. You know, I've never dealt in a timeframe, and I don't know if anybody else out there is in construction business right now, but it's never taken me seven months or eight months to get a remodeling permit. I used to be able to get a remodeling permit in six weeks, not six months.
And it's very frustrating, and I think it's, you know, it's part of the core problem with the economy that's going to be coming, and why I, you know, why I'm a little concerned is that small business operators, construction, housing starts, all this stuff are gonna be very difficult if you can't get permits to do them. And that's, you know, it's definitely slowing down our progress because, you know, some of these locations we're supposed to be opening that are gonna open in June, July, and August were supposed to open in March, April, and May. And, you know, they've all been pushed three to four months, and all of those pushes have been because we've been waiting on, you know, some form of government to approve us doing the work.
I made a joke the other day. I said, "I sure miss the '90s when you, you know, you just built it, and they came in and said, 'You weren't supposed to build this,' and you asked for forgiveness instead of permission." It was so much easier. But, you know, in this day and age, you can't do that, especially a company our size. But, so we're pushing through, we're getting our permissions. We have permissions on all but, I think two locations now, or maybe three. I don't think... The Bombshells casino property, building permit's not approved. So we have three left that we need building permits on. Everything else is in various, you know, phases of that construction.
We'll start seeing some of those completed starting in June, and we'll be open June, July, August, September, and I think, hopefully, the final, the Baby Dolls location, Pam, could open in October, November at the absolute latest. And then we should be done with construction for... I think I'll be done for at least a little while, you know, six months for sure, before I even start thinking about it. And then once you start thinking about it, it takes a year to start. So 18 months before we start really looking at, at building anything new again, I think.
A lot of cash for buyback and M&A?
That's the plan. M&A is, M&A is what we're looking at. I think it's going to heat up. I mean, we're seeing it heat up right now. Like I said, in the last six weeks, we've probably looked at five or six different locations. Some, you know, one too small for us, a couple too pricey right now, but, we've made offers. We're, we're waiting for the owners to, you know, to go out and shop it. They'll shop our offer. What we do, the, the process is, they call us first, we make an offer, they call everybody else and say, "Hey, we want to sell it for this amount," which is usually more than our offer. They can't get any bites, and then they come back to us and, and, and negotiate a, you know, a fair, a fair sale price.
So, I'm hopeful that at least two more of our offers will get some traction here over the next between now and May. We've got, you know, 30 days till earnings come out, so hopefully we'll have some better news or some more news, at least by the ninth of May.
Right. Well, you bought, I guess, between Lowrie, Cheetah, Playmate, and Birch, you did a good amount of M&A, and then it basically turned off for a year and a half. So, you know, it obviously goes in fits and starts, but, you know, after a fit, usually it gets a start. So you guys have shown you can-
We should be sitting on between $22 million and $25 million in cash after we close this loan. We wanted to close by Friday, but we had two survey issues that had to be fixed with the title company. One of the two is fixed. We're waiting on the final on the other, and we're waiting for a confirmation, zoning confirmation, and I believe final sign-off of all the documents by the bank itself, and then we'll get that closed pretty quick. So we should definitely have that loan closed by May 9th. I don't... unless something unforeseen pops up, we should have that closed by May 9th. So we'll have that cash sitting there.
We should have hopefully definitive documents before the earnings call on this current LOI, and, and, and, and maybe we have another LOI or two by then as well. That, that's where the majority of my time right now. I hired somebody full-time to work on these building permits and to basically monitor all of the construction, 'cause I've just been fed up with it. And so I think I hired somebody who can do that for a living, basically. It has become a full...
It was basically a full-time job for me, and I had to free my time up to get focused on stuff that was going to be more beneficial for the company, especially with, you know, taking on trying to, you know, fix the Bombshells and possibly, you know, still bring in a partner to sell Bombshells as well. That is not off the table. We are still talking with groups. We actually got a written offer that was ridiculous, and we said no to it, so, which I expected. You know, usually the bottom feeders come in first, and that's what we've seen.
We've dealt with them, and now we've got a couple of, I think, real, real buyers or real partners, possible partners in Bombshells for us going forward. One would be an operating partner, which we'd be very happy to maybe do something with, if we can agree on value. You know, the problem, the problem with everything right now is agreeing on value. Nobody wants to sell at their, you know, lowest. You know, Bombshells hit the lowest numbers ever in 2023. We're not gonna sell based on that low value.
We'll go fix it first, let it, you know, let it get back to a normalized run rate, get some of the expenses that we added in 2021 and 2022 when we were doing huge numbers, as Bombshells security and management, and, you know, some of the buildup that we did, and return ourselves back to a more normal operating deal. Get us, you know, maybe that number is $8 million or $9 million annualized instead of, instead of $12 million or $14 million, but it's definitely better than $4 million or $5 million. And so we've got to figure out what that number is, then we can value it properly and work with the group to, you know, to monetize it for shareholders.
Yeah, well, the nice thing about having permits being hard and costs being up is it's harder for your competition to build more stuff. I mean, like, if you look at Rowlett-
It is
... and Denver, like, you know, it's not easy for people to... I mean, Denver, there's no other real estate, and then it's gonna take a, you know, it might take two or three years for someone to build a Twin Peaks in downtown Denver or build one in Rowlett. So at least the locations that you have going up are, do not have any competition nearby, and given what the costs are for debt, for construction, and permitting, at least the stuff that you have opening, you know, won't have competition for some period of time. So, you know, the, one of the benefits is that, you know, it's hard for competition to come in if they can't get the financing, and they can't get the land, and it's expensive to build it. So, you know, maybe,
Yeah, there's pluses and minus to all of this, so, you know. It's just, it's painful for a little while, and then, you know, you get to reap the rewards from it, which I think we're very close to. You know, the end of June's not too far away. So next, you know, 10, 11 weeks, we start opening locations, and pop these locations open one after another for about a five month period and be ready to enjoy some time, I think, of just operating normally.
Good. All right, well, I hope you can get some stock in.
Get back, get back to what I love. You know, I love, I love operations. You know, I love, I love acquisitions. I've always hated construction, but it seemed to be one of those things where we just... You know, those were the best opportunities at the time we started doing these deals. Interest rates were so cheap, and most of our interest rates are locked for, you know, pretty, pretty fair, you know, amount of time, and so we've got plenty of time to figure it all out and move forward and, like I said, just keep keeping what we do, buy back stock, buy more clubs, and you know, figure out what we're doing with Bombshells and launch the new website. So-
Sure
... got plenty, plenty coming up in the next, next six months.
That's it for me. Thank you.
Yeah.
Fantastic. Thanks so much, Adam. We appreciate it. Next up, for our last questioner, we'll have Value Hunter. Value Hunter, can you please come up?
Yes. Hi, guys. Thank you so much for taking my question. So just follow up again on the buyback, using the numbers that Adam was saying. So let's call it $340-$350 million in top line. We... That used to get us $60-$75 million yearly free cash flow, and I just think buybacks really haven't been that strong given where the share price is, and I understand all the costs related with construction and everything, but any way to think about it or anything that we could do to increase it? That's it. Thank you.
I mean, basically, we, you know, when it comes to our own stock, we've been bottom feeders. I'll be honest about it. Yes, we probably buy it higher, higher than we've been buying. We've probably bought between, I think we had a high of $57.25, as a buy price for our buyback. We bought slowly. The stock's held up actually pretty well. I was trying to close this loan earlier, in case the stock dips, you know, below $50. I would like to buy the remaining shares, get us under 9 million shares outstanding again.
If the stock dips that low, we'll be pretty heavy buyers, I think, if it goes under 50, to buy back at least 200,000 shares we still need to buy. We'll be setting... Like I said, I think once this loan closes, we're somewhere between $42-$45 million in cash. We've... Lubbock is switching to a bank loan. Rowlett is already on the bank loan. We've got some money to put out in Denver, still, and in Central City. But we don't really have the huge amounts of cash that were going out. You know, I think we were going probably around $2.5-$3 million a month in cash going out for construction with everything we had going on.
I think that number's gonna come down considerably, especially come June, it'll definitely come down considerably because these Bombshells will hopefully all be operating. So that will make a big difference. The only thing we'd have left is the casino, which should be done at the—the construction is supposed to be done on June 30th on the Rick's property out there in Central City. So we've got that cash going out. We've just had huge outlays for the air conditioning and other construction stuff out there, electricians, all that. But most of those outlays are out. I think there's, you know, there's a couple million out there, $1 million in Denver downtown, $3 million on the other deal, so maybe another $6 million or so.
So that's gonna really free up our cash flow, whether we wanna buy back stock or make acquisitions. And with the cash we have on hand, we have plenty cash on hand. Basically, we'll have all the money we need to do the acquisition that we've currently got planned and all the rest of the construction without touching any future cash flows. So basically, we could pile all future cash flows in the stock buyback if that became necessary. And that's really what I've been trying to, you know, line ourselves up with. I really appreciate our shareholders' patience with us on Bombshells. I know everybody's not extremely happy about the way it's gone. I'm not extremely happy with it myself, but we are making the changes.
We are seeing the results of those changes, and hoping the next quarter will tell a different tale than the last two have for us, so.
Eric, just a quick follow-up. Can you comment a little bit more on the changes? Like, what, what are they? Like, are you focusing more on liquor now versus food? Are you making it more of a rowdier place?
I think what happened-
Timing or music, what is it?
It's a little bit of everything. I think what really happened is the team, the current team that we had there or the team we had there in February, got complacent. You know, it had been so easy for them for two years. And we really... And I was busy with Colorado, with, you know, with the construction stuff. Ed's been busy with the new acquisition, and getting those clubs up and running, that we just kind of left them on autopilot, and, you know, they weren't ready to be self-driving yet. And so we've taken back control around mid-February. We made some pretty significant changes in the first two weeks of... or when I say the last, first two weeks we were there, last two weeks of February.
We've kind of been watching those changes and pushing through that through April. We're having another meeting next week, next Thursday in Houston. Ed's coming to town. I'm gonna be here. We're bringing in all of the regionals and GMs. We're gonna have, basically, a come to Jesus talk and probably make a few more changes from things that just aren't getting the way we want them right now. And we'll push through that and hopefully see, have a very good report for you on May 9th, and definitely at the revenue numbers in early July. So that's the plan. We're gonna stick to it. We're gonna keep pushing. We've got to get this construction done.
We've got to get these locations open, and you know, get back to acquisitions, which you know, we've been looking at a lot of acquisitions right now over the last six weeks. So hopefully we'll see a few more.
Thank you so much, Value Hunter. And for our last person, we're gonna bring up Johnny Shen. We tried to connect earlier. Let's see if it works this time.
Yeah, sorry about that, man. All my-
Perfect. Yep. Take it away.
Excellent. Happy Eid al-Fitr to all who celebrate. If you're breaking fast at one of the clubs today, I might find you. I've got just a quick question. Actually, I was gonna ask about Bombshells, but that last bit was really good. I think that we've kind of troughed and things should be looking good in the club. If I remember on the Q1 presentation, you had the free cash-
Hey, hey, Johnny, you're, you're cutting out.
He cut out on my side. Did y'all hear him? Okay.
Yeah. Hey, hey, Johnny, we can't really hear anything that you're saying. It's cutting in and out.
I, uh,
Yeah, it sounds like a computer underwater.
Sounds like your internet just not working.
Yeah.
Yeah.
So I
Audio-
Yeah. Hey, hey, Johnny, I think given the technical difficulties, we're, we're gonna end it now. So wanted to thank Eric, Bradley, everyone who came up and asked questions. On behalf of ourselves, the company, and our subsidiaries, thank you, and have a good night. As always, please visit one of our clubs or restaurants, and have a great time.
Yep. Johnny, if you want to email myself or Gary, we can get you the answers to your questions, as well as anybody else. All right. Thank you, everybody, for with us tonight. Appreciate it.
Thanks so much-