RCI Hospitality Holdings, Inc. (RICK) Earnings Call Transcript & Summary

Greetings, and welcome to RCI Hospitality Holdings Second Quarter 2Q '24 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 2 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 3. [Operator Instructions] This conference is being recorded. Please turn with me to Slide 4. 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 5? 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 an 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 an increase of $1.2 million from 3 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 Bombshell 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 of 2024. So we should see better results in the next quarter. Fiscal '24, club and restaurant sales by month. Please turn to Slide 6. 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. 2 of our clubs recently opened a PT Centerfold Gentlemen's Club in Lubbock, Texas; a new BYOB, opened on 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 West 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 8. We had an important development in our plan to create 2 casinos in Central City, Colorado. Our Rick's Cabaret Steakhouse & 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 9. The big update here is that our next relocation, 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, and we put a little slide there, you can also go to the website and kind of see that development. I think that's going to 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 9 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 at an average of $56.12 per share. Year-to-date, RCI has purchased 65,219 shares for $3.6 million on average -- I'm sorry, $3.6 million at an 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 to Mark.

Thank you very much, Eric. [Operator Instructions] First off, we'll have Scott Buck of H.C. Wainwright. Scott, take it away.

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 these were successful or not?

Well, I think you see kind of a little bit in March, as you see our too high October and December $4.4 million in revenues. And then, of course, January and February, down $4.1 million, $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 in total without the 3 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 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 you're being told is that -- at this point is that the investigation is 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 that I think have been applied for between 2 and 3 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 nobody has leapfrogged you, right, in terms of putting in an application after you in getting a license before you?

Not that I know of at this time, no. They've only issued 1 license, and it was actually a mini casino at 74 machines or less.

Okay. Perfect. 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 if the right opportunity comes along?

Well, we have an LOI right now that we're working on putting into definitive documents. Hopefully, before May 9, 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 will 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.

Thanks a lot, Scott. Next up, we'll have Anthony of Sidoti.

Can you hear me?

Now I can.

Can you hear me now?

You're cutting in and out. I can hear you when you ask if I can hear you, but I can't hear you any other time.

Okay. So first, I guess, in terms of the improvements that you have 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 6 for you. So you can kind of see both how the clubs and Bombshells did over the last 6 months of this quarter in revenue. I think that 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 we'll see how June goes. June last year is when comps just basically disintegrated., If you'll remember, everybody, European vacations were hot. I [indiscernible] happen the year before, and I was a year off. And I since didn't have the year before, I didn't think it was really going to happen this past year in '23, but it did, actually happened in '23. So we're going to get some much easier comps come June. Keep in mind that the major acquisition of the Birch clubs, the Baby Dolls in Dallas, the Chicas Locas brand 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 Nightclubs same-store sales. So I think we're going to be in pretty good shape as far as same-store sales on a go-forward basis, definitely by June. And hopefully, we can do well in April and May and get things back into [indiscernible] and try to close this new acquisition as quickly as possible and maybe even pick up some additional ones.

Got it. And then 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 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 -- as I've been watching and kind of watching spin, 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. And the example of that is everybody is making minimum wage, so your very low-end blue-collar workers, your $7 to $10 an hour employees that were basically hitting our blue color clubs once or twice a week, their pays doubled, right? They've gone to $15 to $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 to $25 an hour. And instead of getting bumped up to $40 to $50 an hour, he's been bumped to $27 or $29 and so on and so forth because costs have moved up, the percentage become less. But 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 we just have to continue to push specials on slower days. We are seeing -- I've said in calls a while back that once we saw the -- once we really saw 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. I tend to post them out quite a bit, Monday Madness, our Thursday Lingerie Nights, the specials we put in place there. And we're starting to see traffic count increases from those specials. So I think, overall, it's just a matter of time until 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 the spread of customer base will be in less stores, which should help our stores as well.

Got you. 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 an increase yet. I don't think that happens until June. June has been that customer accounts really fell off due to summer vacations that year. And I don't believe everybody is going to Europe this year. Based on personal friends and acquaintances that I talk to on a regular basis, I think 70% went to Europe or Caribbean, South America last year, and I think this year is less than 15% of people I talk to saying are going anywhere. We're staying in home this summer, we're staying in home this summer is what I'm hearing from a lot of them.

Thank you very much, Anthony. Eric, while I'm bringing up Scott, can you please re-add me and the Equity Animal accounts has closed. 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 on the Bombshells side than I am on the club side, though I know the club is making changes as well. But I can tell you on the Bombshells side. We've gone from having 2 sheriff deputies on slower nights to either 1 or gone to private security at a much reduced rate. Nights, we had 4 managers, we're cutting back down to 3 managers. We're basically just running leaner as well as trying to eliminate any unnecessary marketing or unnecessary expenses, stuff like that. And it's -- we'll see some in March, I think. But obviously, we had 7 weeks before we really started making a lot of those changes and then it took us time to implement those changes and get them all in place. So I think the real cost cutting will be seen in April to June quarter. But we'll see a little bit of it in the second quarter as well.

And then 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 made some progress with that LOI opening -- acquiring the 1 club.

Yes. I mean we've been talking with this group off and on for about 3 years. We've just basically said, look, this is what we're paying now. I don't think anybody else out there is paying more or less. I mean there's probably some paying the same. I think we just have the better track record, especially with some of the owner financed parts of our transactions. And I think that at some point, we're going to see people quit holding out for those high numbers and thinking they're going to sell based on their 2022 numbers. And that's been the real problem is everybody thought, well, I did so well in '22, '23 is just an off year, and it's going to 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 might come back, but it's not going to come back as quickly in this current interest rate environment. And of course, no free government money like there was in '21, '22.

Sure. And then shifting gears to AdmireMe. Can you kind of discuss your progress with your new partner and kind of what we might see next?

Yes. AdmireMe is 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, 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 step up right now that we've been able to beta test ourselves internally. We'll probably -- I'm hoping to 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 a little bit of looks and what I've done with the site and looked at the site so far, the new sites are already better than our existing site. So it was definitely a good choice to basically cut that off, we're trying to create the wheel and go with a company that's got a similar product out there right now that they're reskinning 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 on to the site and more marketing we can do for the site, I'd rather have a small 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 9, I'll have some more information for you hopefully and can get bank 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 the Scarlett's hybrid night club model, kind how that differs from your other clubs and just in general?

Well, I mean, Scarlett's is catered to typically a younger customer. It's a later hours club. We operate later hours than normal. Typically, I'd say the average age is probably closer to 27 to 30 versus our typical gentlemen's club where the average age is probably closer to 40. It's a dance club. So it's a lot like a dance club. There's a sound and lighting video audio equipment. It's hugely upgraded compared to a typical strip club. There's places that stand because a lot of people don't -- they want to stand or dance around more than sitting in the chair for a couple of hours like a typical gentleman's club. And like I said, I think it's just a younger crowd, more of a party atmosphere. And we're doing very well with it. The Denver location where we just got the 4:00 a.m. liquor out there, which is going to make a huge difference in that market. I would say guys in my age, I don't stay out until 4:00 or 5:00 in the morning very often, whereas my son might stay out until 3:00, 4:00, 5:00 in the morning 3 nights a week, so just a different party vibe than our typical club would be.

Thanks very much, Rob. Eric, I don't know. I think you stay out 03:00, 04:00, pretty late from what I've seen. Next up, we have [indiscernible].

How many clubs did you guys have opened for the past quarter? How many will come on in the next 3 months? And then how many in the 3 months after that? What's the number looking like?

Eric, you're on mute?

No, sh** how did that happened? I was unmuted, then it muted me. This thing is going crazy today. I think about 59 locations open right now. I think that's what I remember reading a minute ago. The only location that is not opened 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 decided to open that as just a club and steakhouse for right now while we await gaming. So there's basically 3 more locations that could open and then, of course, 1 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. If that closed, that will be added as well.

Great. Okay. And with any of the new acquisitions that are out there, obviously, the point is these people are finally realizing that they can't ask for their 5x earnings or whatever the number was from these inflated numbers from a year or so ago.

Yes. I mean we have to either use some type of average, but they're a run rate. So it's been a little more difficult because nobody knew what the run rate was going to be. Now the '23 is over, so we have a '22 and '23 comparison. We're 4 months into calendar '24 -- or 3 months into it anyway, into the fourth month. So yes, I think people are starting to get more realistic. And we've looked at about 5 locations in the last, I don't know, 5, 6 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 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 -- in a whole 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 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. That's what you think is best is kind of our outlook on it. 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...

Fantastic. Thank you for the questions. Next up, we have Johnny. Johnny is unable to connect. I'm going to bring Adam Wyden up.

Can you guys hear me?

Yes, we can.

All right. Great. So a couple of questions here. I know that you consummated merge of the Birch Club, I think, towards the end of March. So is it fair to assume that -- I know that Birches -- Eric mentioned that Birch is comping really well. And obviously, you've got some of those Birch Clubs getting renovated and coming back online. I mean, is it fair to assume that basically in the second -- in the next quarter sequential, so the quarter ended June, you're going to 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 7 days in. So it's very difficult to really say of 8 days and, I guess, counting yesterday.

But Birch wasn't in the same-store sales for the quarter ended March 31, and that -- those clubs are doing well, correct?

They're doing very well. I mean one of the examples we're doing about 2 75, we're doing close to 3 50 at that location now. A couple of other locations are up anywhere from $20,000 to $40,000 a week as well. So they're doing -- they're going to be very good for us as far as comps go. And I think that we're getting to the bottom of Miami, I hope. The most of our decline is very regional right now. We have 2 clubs in New York, which 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 it's getting squeezed the most because those 2 clubs are affected, but Rick's location is doing very well in New York. Of course, Minnesota is a huge decline, even down from 2019 due to COVID, the George Floyd thing and just has -- the crime has just gotten out of control in Minneapolis at the moment. So in the Downtown area. And it's -- the people in the suburb are scared to come Downtown, which is hurting our business. I think their convention schedule has been lacking as well because of that. So that's part of the decline. And then, of course, Miami and Florida, where in 2022, Tootsie's did almost $40 million of revenue versus the highest year ever. In '19, it was like $26.8 million. We did $33 million or almost $34 million, I think, in '23. So we'll see where we're at. We're declining a little bit off that. I think we steady out -- I think that's going to 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 can bring some of that back. But I think we're going to be in that range, that $30 million, $33 million range in Miami now. It's going to 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 ], which is, again, upper blue collar, lowering white collar type location is being affected. But overall, I think this should be the bottom. I think definitely by June, if we are do worse this June than last June , then we got -- we're going to have to make -- really make some changes -- fundamental changes, not just price cutting or price raising and cost cutting more. But I don't see that happening at all. I don't think everybody's going on European vacations this year. I don't think that the bottom is going to fall out in June, I think it's just going to kind of be a return to norm for a typical summer for us. So I'm excited about getting to that point.

Well -- and on the Nightclubs, it sounds like -- if you go back and you look, we've had this conversation, I think, off-line. But I think what you would say is that, look, if you look at how the business performed in '08, '09, the clubs, I think peak to trough were down somewhere between 3% and 5%. And your argument is, is that, well, you were comping off of a higher base. And so I guess, what you would say is if you basically had really big numbers in '22; '23, you were down off of that high base, but I think is it sort of fair to assume that like you're not that -- this isn't a business that should see additional 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 renovations and remodels and some of the stuff that you've done with these clubs, part of your construction phase, then I think that those would enter into the comp base sort of reinvigorate it. I mean if anything, I would think that -- you would think that there's probably tailwinds from comp perspective with Birch coming in and sort of the new clubs that are being renovated effectively coming into the comp base. Is that a fair assumption?

I think April is going to be our toughest comp. May get a little easier and June becomes extremely easy. That's what I think. And depending on the next 3 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 -- lots of positive things going on. The Mavericks going to make the playoffs, that will definitely help the 2 clubs and the Dallas, Bombshells in that market. We've got 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 -- and this is my last question. Can you -- for sort of simplicity standpoint, can you try and summarize sort of what you would classify as the inorganic opportunity going forward? And I'm not -- obviously, you've got this M&A, and it would be nice to sort of talk about that. But like we've talked a lot about sort of going through the sort of the rebuilding or construction phase. Can you talk a little bit about timing? I think you've said sort of...

I want to be done with that construction phase by November. I do not want to be dealing with -- going into 2025, I don't want to build anything if I can keep from it. I don't want to remodel anything.

So basically you have your capital plans through November 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 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 -- I know you did in the presentation, but it's sort of hard to follow. I mean maybe to 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?

Yes. I mean it's hard to say with the 3 Bombshells we have, if we just do an average opening, they'll add $18 million in 2025. I think for the 3 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 going to be low for Downtown Denver. But if you just use those numbers, it's $18 million. The Baby Dolls and Fort Worth should somewhere between $6 million, $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 until 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 into our capital allocation strategy. Then what else we got? The new Chicas, those clubs or 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 2 new Chicas, $18 million to $25 million, you're up to...

Harlingen and El Paso.

Yes, $30 million something yes, that's Harlingen and El Paso. The Central City location, I have no real idea of what it's going to do. But I think, overall, you're probably looking at additional $35 million to $40 million in revenues added to our current run rate, which should be right around $300 million.

And that doesn't include the casino -- and it doesn't include the casinos and it doesn't include this M&A target that you basically have under LOI plus any future, correct?

Correct. Basically somewhere between 3 -- 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%. 4% of $300 million is another $12 million we could pick up really easily. So there is obviously a lot of potential out there right now. And I'm just hoping, like I said, that this is -- we found the bottom in this last quarter, March came back pretty strong. I know there were 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's 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, the end of the NBA season, regular season. Those last games became important, especially to several teams in our markets. We look forward to Denver, being in the finals, Dallas. I don't know if the Knicks made the finals or not, I need to look. I don't even -- haven't even been following that closely. But those teams will -- any time a sports team is strong in one of our markets, it helps our sales. So that was good for us.

Got it. And if construction is done by November, is it fair to assume that you would be active on the buyback and the M&A and all that stuff from there? I mean where you are right now based on all the stuff that's coming online and a reasonable margin? I mean our sales numbers are a little bit higher 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, basically having everything online.

'25 should be a much better year for us. You remember, we've got a lot of drag right now too. We're carrying 9 properties. We have ongoing construction on all, but 2 of those properties right now. And the 2 of those properties, construction is going to start -- better start in the next 2 weeks because I wanted to be done with construction. I've never dealt in a time frame, and I don't know if anybody else out there is in construction business right now, but I've -- it's never taken me 7 months or 8 months to get a remodeling permit. I used to be able to get remodeling permit in 6 weeks, not 6 months. And it's very frustrating. And I think it's part of the core problem with the economy that's going to be coming and why I'm a little concerned is that small business operators, construction, housing starts, all this stuff are going to be very difficult if you can't get permits to do them. And that's -- it's definitely slowing down our progress because some of these locations were supposed to be opening. There's going to open in June, July and August were supposed to open in March, April and May. And they've all been pushed 3 to 4 months. And all of those pushes have been because we've been waiting on some form of government to approve us doing the work. I made a joke the other day, I said I sure missed the '90s when you just built it and they came in and said you weren't supposed to build this and you ask for forgiveness instead of permission. It was so much easier. But in this day and age, you can't do that, especially company our size. But -- so we're pushing through, we're getting our permissions. We have permissions on all, but I think 2 locations now or maybe it's -- maybe 3. I don't think the Bombshells Casino properties building permits is not approved. So we have 3 left that we need building permits on. Everything else is in the various phases of that construction. We'll start seeing some of those completed starting in June, and we'll be open in June, July, August, September. And I think, hopefully, the final -- the Baby Dolls location can get 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, 6 months for sure before I even start thinking about it. And then once you started thinking about, it takes a year to start. So 18 months before we start really looking at building anything new, again, I think.

So a lot of cash for buyback and M&A.

That's the plan. M&A is what we're looking at. I think it's going to heat up. I mean we're seeing a heat up right now. Like I said, in the last 6 weeks, we probably looked at 5 or 6 different locations. Some one, too small for us, a couple too pricey right now, but we've made offers. We're waiting for the owners to go out and shop it, they'll shop our offer. What we -- the process is they call us first, we make an offer, they call everybody else and say, hey, we want to sell for this amount, which is usually more than our offer, they can't get any bites and then they come back to us and negotiate a fair sale price. So I'm hopeful that at least 2 more of our offers will get some traction here over the next -- between now and May. We've got 30 days till earnings come out. So hopefully, we'll have some better news or some more news at least by the 9th of May.

Right. Well, you bought, I guess, between [indiscernible] and Playmates and Birch, you did a good amount of M&A and then it basically turned off for 1.5 years. So it obviously goes and fits and starts, but after a fit, usually it gets a start. So you guys have shown...

We should be setting on between $22 million and $25 million in cash after we close this loan. We wanted to close by Friday, we had 2 surveys issues that had to be fixed with the title company. 1 of the 2 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 9. I don't -- unless something unforeseen pops up, we should be -- have that closed by May 9. So we'll have that cash sitting there. We should have hopefully definitive documents before the earnings call on this current LOI. And maybe we have another LOI or 2 by then as well. I know 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 because I've just been fed up with it. And so I think I hired somebody who can do that for 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 taking on trying to fix the Bombshells and possibly still bring in a partner or 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 usually, the bottom feeders come in first, that's what we've seen. We've dealt with them and now we've got a couple of, I think, 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. The problem with everything right now is agreeing on value. Nobody wants to sell at their lowest -- bombshells get the lowest numbers ever in 2023. We're not going to sell based on that low value. We'll go fix it first, let it get back to a normalized run rate, get some of the expenses that we added in '21 and '22 when we were doing huge numbers, as long as security and management and kind of some of the buildup that we did and put -- return ourselves back to a more normal operating deal, get us maybe that number is $8 million or $9 million annualized 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 monetize it for shareholders.

Yes. Well, the nice thing about having permits being hard and cost being up is it harder for your competition to build more stuff. I mean, like if you look at Rowlett in Denver, like it's not easy for people to -- I mean, Denver, there's no other real estate, and it's going to take -- it might take 2 or 3 years for someone to build the Twin Peaks in downtown Denver, 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 won't have competition for some period of time. So one of the benefits is that 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 maybe...

Yes, there are pluses or minus to all of this. It's painful for a little while and you get to reap the rewards from it, which I think we're very close to. The end of June is not too far away. So next 10, 11 weeks, we start opening locations and this half of these locations open one after another for about a 5-month period and be ready to enjoy some time, I think, of just operating normally.

Good. I hope you can get some spike in.

Get back to what I love. I love operations, I love acquisitions. I've always hated construction, but it seemed to be one of those things where we just -- those are the best opportunities at the time we started doing these deals and interest rates were so cheap. And most of our interest rates are locked for pretty fair 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 what we do. Buyback stock, buy more clubs. And figure out what to do with Bombshells and launch the new website. So we've got plenty coming up in the next 6 months.

Fantastic. Thanks so much, Adam. We appreciate it. Next up, and for our last questionnaire, we'll have a [ Value Hunter ].

So just follow-up again on the buyback. Using the numbers that Adam was saying, so let's call it [ $340 million to $350 million ] in top line, that used to get as a $60 million to $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 either or anything that we could do to increase it? That's it.

I mean, basically, we -- when it comes to our own stock, we've been bottom feeders. I'll be honest about it. Yes, we probably buy it higher than we've been buying. We probably bought between, I think, we had a high of $57.25 as a buy price for our buyback. We bought slowly. The stock has held up actually pretty well. I was trying to close this loan earlier in case the stock dips below $50, we'd 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 a couple of hundred thousand shares that we still need to buy. We'll be setting -- I guess, I think once those loan close, we're somewhere between $42 million and $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 [indiscernible] in Central City. But we don't really have the huge amounts of cash that were going out. I think we were going probably around $2.5 million to $3 million a month in cash going out for construction with everything we had going on. I think that number is going to come down considerably, especially come June, it will definitely come down considerably because these Bombshells will, hopefully, all be operating. So that will make a big difference. The only thing we have left is the casino, which should be done at -- the construction is supposed to be done on June 30 on the Rick's property out there in Central City. So we've got that cash going out. We 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 a couple of million out there, $1 million in Denver Downtown, $3 million on the other deal. So maybe another $6 million or so. So that's going to really free up our cash flow, whether we want to 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 line ourselves up with. I really appreciate our shareholders' patience with us on Bombshells. I know everybody is 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 hopefully, in the next quarter, we'll tell a different tale than the last 2 have for us. So...

Eric, just a quick follow-up. Can you comment a little bit more on the changes? Like what are they? Like, are you focusing more on liquor now versus food? Are you making it more of a rosier place, 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 have there or the team we had there in February, they got complacent. It has been so easy for them for 2 years. And we really -- I was busy with Colorado 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 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 2 weeks when I say the last -- first 2 weeks, we were there, last 2 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 going to be here. We're bringing in all of the regionals and GMs. We're going to have basically, 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 9 and definitely have the revenue numbers in early July. So that's the plan. We're going to stick with it. We're going to keep pushing. We've got to get this construction done. We've got to get these locations open and get back to acquisitions, which we've been looking at a lot of acquisitions right now over the last 6 weeks. So hopefully, we'll see a few more.

And for our last person, we're going to bring up [ Johnny Shen ]. We tried to connect earlier.

Excellent. I'm happy [indiscernible] all who celebrate here if you're breaking fast at one of the clubs today, I might find you. I've got a -- just a quick question. I was going to ask about Bombshells but that last bit was really good. [Audio Gap]. I think that we've kind of troughed and things should be looking good [Technical Difficulty] If I remember on the Q1 presentation, you had the free cash flow...

Johnny, you're...

He is cutting in and out.

Johnny, we can't really hear anything that you're saying. It's cutting in and out. Yes, it sounds like you're completely underwater. Johnny, I think given the technical difficulties, we're going to 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.

And Johnny, if you want to e-mail myself or Gary, we can surely answer your questions as well as anybody else. All right.