RCI Hospitality Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

Key Takeaways

  • Nightclubs achieved record revenues with year-over-year sales growth and same-store sales rising for the first time since Q2 FY’23.
  • Bombshell segment saw sequential sales gains and margin expansion to 10.8% from 5.9%, marking its best quarter under the new “back to basics” operating model.
  • On a non-GAAP basis, EPS was $1.35 per share, free cash flow reached a year-high of $13.8 million, and adjusted EBITDA hit $20.1 million.
  • The company added $20 million in liquidity, raised its share buyback authorization by $25 million, and repurchased 700,000 shares at a 22% discount—reducing outstanding shares below 9.1 million.
  • RCI unveiled a five-year strategic plan centered on optimizing same-store sales, margin improvement, and deploying approximately $250 million of free cash flow toward dividends, selective M&A, and further buybacks.
AI Generated. May Contain Errors.
Earnings Conference Call
RCI Hospitality Q3 2024
00:00 / 00:00

Transcript Sections

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Mark Moran
CEO at Equity Animal

Greetings, and welcome to RCI Hospitality Holdings third quarter 2024 earnings conference call. You can find the company's presentation on RCI's website. Go to the Investor Relations section. All the necessary links are at the top of the page. Please turn with me to slide 2 of our presentation. I'm Mark Moran, CEO of Equity Animal. I'll be the host of our call. I'm coming to you from the Commonwealth of Virginia. Eric Langan, President and CEO of RCI Hospitality, and CFO Bradley Chhay are in Houston. Please turn with me to slide 3. RCI is making this call exclusively on X Spaces. To ask a question, you will need to join the space with a mobile device. To listen only, you can join the space on a personal computer. At this time, all participants are in a listen-only mode. A question-and-answer session will follow.

Mark Moran
CEO at Equity Animal

This conference call is being recorded. Please turn with me to slide 4. I want to remind everybody of our safe harbor statement. 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. Please turn with me to slide 5. I also direct you to the expla`nation of RCI's non-GAAP financial measures. Now, I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Thank you. If everyone will turn to slide 6, I'd like to thank you for joining us today, and we made a lot of progress during the third quarter. It reflects the first full quarter of our back to basics approach to our business and our capital allocation strategy. Specifically, we are taking aggressive actions to increase revenues, reduce costs, expand margins. We're concentrating our core club business, improving the Bombshells, and buying back shares, all with the goal of increasing free cash flow per share. Yes, we had a lot of impairment that affected our GAAP results in the third quarter, but that was non-cash. The key takeaways are that nightclubs achieved record revenues with year-over-year increase in total sales and the first quarter of year-over-year increase in same-store sales since the second quarter of fiscal 2023. Sales also increased from the last quarter.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Bombshells sales increased sequentially and margins grew from 5.9% last quarter to 10.8% this quarter, reflecting our back to the basics approach starting in February of 2024. Looking at our list of new projects, we have opened, converted, or enhanced seven locations to date this fiscal year, and we are working on opening, reopening, or reformatting seven more as fast and efficiently as possible. As per this effort, we formally withdrew our application for the Colorado casino license to better focus on projects that will provide more immediate results. Looking at our capital allocation strategy, we added $20 million to our war chest through a bank real estate loan. The board of directors authorized increasing the amount available under our share repurchase program by $25 million, and we took advantage of our low stock price during the third and fourth quarters.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

To that end, I'm pleased to announce we have reached our short-term objective of reducing shares outstanding to less than 9 million. Please turn to slide 7. I'm also pleased to announce as part of our share buyback program, we bought back 700,000 shares in the open market, reducing our share count by the same number we used in our big October 2021 and March 2023 acquisitions. As you will see on this slide, we bought back those 700,000 shares at a 22% discount to the average share price used in those transactions. Please turn to slide 8. Over the last few years, we have achieved some major accomplishments. We more than survived COVID. We then managed through the post-COVID bounce. Then we made our 2 biggest acquisitions ever, successfully integrated them, and improved their results.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Now that things have settled down, and given the uncertain economic environment, we want to take a good, hard look at what we should do next to best increase free cash flow per share and return value to our investors. We are now working on a five-year strategic plan. We plan to implement it starting in the fiscal quarter 2025... for fiscal year 2025, and tell you more about it on our next earnings call. Here's a general outline. Right now, we see two pillars to the plan. The first is to continue our back-to-the-basics approach to our business. We want to make sure our locations are running as efficiently and profitably as possible. Our priorities would be to grow same-store sales, improve margins, and rebrand and reformat underperforming locations or sell them. The second pillar is capital allocation.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Assuming no growth, we should have approximately $250 million of free cash flow to deploy. Our priorities would be to target less than 10% of discretionary free cash flow to ensure a stable and modestly growing dividend. Target about 50% of discretionary free cash flow for selective M&A, focusing on base hits and the occasional home run, making sure we capture synergies at the acquired clubs, and to target any excess cash not used in M&A and dividends for regular share buybacks. Now, here's Bradley.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

Thanks, Eric. Please turn to slide 9. The core strength of our business enabled us to generate $76.2 million in revenue in the third quarter. GAAP EPS was a loss of $0.56 per share. This primarily reflected non-cash impairment of $17.9 million in the current quarter. A good portion of that is related to the impairment of right of use and leasehold improvements on several operating leases. Now, on a non-GAAP basis, EPS totaled $1.35. In addition, free cash flow reached a year high of $13.8 million, as did Adjusted EBITDA at $20.1 million. Please turn to slide 10. Nightclub revenues of $62.8 million increased $374,000 year-over-year.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

This primarily reflected same-store sales growth of 1.7%, 2 new and reformatted clubs, and a strong pro sports playoff lineup in May. In turn, this was partially offset by some temporary closings of clubs being reformatted to liquor from BYOB and severe weather in Texas and South Florida. By revenue type, alcoholic beverages increased 4.9%, food, merchandise, and other increased by 5.1%, and service revenue decreased by 5.3%. The differing growth rate primarily reflected a higher alcohol and lower service revenue mix from clubs acquired in the past year and a half. Non-cash impairment of $7.6 million in goodwill, SOB, and leasehold improvement impairments related to 6 clubs.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

GAAP operating income was $13.6 million, compared to $20.4 million, with a margin of 21.7% of revenues, compared to 32.7%. Non-GAAP operating income was $21.9 million, compared to $23.6 million, with a margin of 34.9%, compared to 37.7%. Comparing to the last quarter, revenues increased 5.8%, non-GAAP operating income increased 10.5%, and margin increased to 34.9% from 33.4%. All of these improvements reflected higher sales, including service and reduced costs. Please turn to slide 11. Bombshells' revenues of $13.1 million declined by 8.7%. This primarily reflected reduced same store sales and temporary closings due to severe weather in Texas.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

In turn, this was partially offset by 3 locations not in same store sales: Bombshells San Antonio and Stafford in Texas, and Cherry Creek Food Hall and Brewery in Colorado, with its Bombshells Kitchen. The strong pro sports playoff lineup in May also helped. Non-cash impairment of $10.3 million reflected operating lease, Right of Use, asset impairment, and leasehold improvement impairment related to 5 Bombshells. GAAP operating results were a loss of $8.9 million, compared to an income of $1.7 million, with a margin of negative 67.8% of revenues, compared to 11.8%. Non-GAAP operating income was $1.4 million, compared to $1.8 million, with a margin of 10.8%, compared to 12.8%.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

Now, comparing it to last quarter, however, revenues increased 2.9%, non-GAAP operating income increased 89.3%, and margin increased to 10.8% from 5.9%. These improvements reflect the first full quarter of changes initiated in mid-February 2024. Please turn to slide 12. We've made some progress on reducing corporate expenses. Year-over-year, they were 9.4% of total revenues, compared to 8.1%. But compared to last quarter, they were level at 9.4% on a GAAP basis, and on a non-GAAP basis, they were 8.4%, compared to 8.8%. Please turn to slide 13. This slide puts our operating performance into perspective, looking at the third quarter compared to the second quarter, so you can see how results improved on a non-GAAP basis.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

We also added some data on the number of location day closures for clubs and Bombshells during the third quarter due to severe weather. During the third quarter, we had 1 day closure for clubs and 10 for Bombshells. To date, in the fourth quarter, we've had 10 day closures for clubs and 26 for Bombshells, all in Houston, due to Hurricane Beryl. Please turn to slide 14. We have a couple of slides coming up to this, that discuss free cash flow and Adjusted EBITDA, which are non-GAAP. In advance of that, we wanted to present the closest GAAP equivalent on this slide, which are operating and net income. Please turn to slide 15. We ended the third quarter with cash and cash equivalents of $34.9 million. This included proceeds from our $20 million bank real estate loan.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

During the quarter, we used $9.2 million to buyback shares. As a percentage of revenues, free cash flow was 18%, and Adjusted EBITDA was 26%, both highs year to date. Please turn to slide 16. Debt at June 30 increased by $13.5 million from March 31. This reflected a combination of the new bank loan and scheduled paydown. The weighted average interest rate was 6.74%, only 22 basis points higher than a year ago. Total occupancy costs at 7.9% declined from 8% year over year on a sequential quarter basis. Debt to trailing 12-month Adjusted EBITDA increased to 3.27, primarily due to the new bank loan.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

This should decline over the coming year as sales grow from locations that have come online recently, and from those anticipated to open. Debt maturities continue to remain reasonable and manageable. Subsequent to the quarter, we paid down $1.5 million on the Playmates note and extended the balance 16 months out. The balloon payment at the extended maturity date was adjusted accordingly. The monthly installment payment and principal and interest has remained unchanged. Please turn to Slide 17. We continue to pay down all slices of our debt, with the exception of real estate, because of the new bank loan. As a result, that slice is larger at 61.4%, and all the other slices are proportionately lower, adjusted for their net debt pay downs. Now, let me turn the presentation over back to Eric.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Thanks, Bradley. Please turn to Slide 18. I want to make clear that everything we do is centered around our capital allocation strategy. We employ three different approaches, subject to whether there is compelling rationale to do otherwise: mergers and acquisitions, organic growth, or buyingback shares when our free cash flow per share is more than 10%... the yield on our free cash flow, sorry about that. Please turn to Slide 19.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

With that in mind, we are laser focused on opening the seven reformatted and new clubs, and Bombshells currently under development, rebuilding the Baby Dolls Fort Worth location that burned down in July as fast and efficiently as possible, reviewing all operating units to ensure they meet our financial objectives, selling non-income producing real estate to free up more cash and reduce debt, and using free cash flow to facilitate buyback of more shares and acquisitions of clubs. Please turn to Slide 20. By sticking to our capital allocation strategy since the end of fiscal 2015, we have generated compound annual growth rates of 10.2% for total revenues, 12.1% for Adjusted EBITDA, 17.2% for free cash flow. We have also reduced our fully diluted share count.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

I'd like to special thanks to our loyal and dedicated teams for all their hard work and effort in this past quarter, and for all our shareholders who believe and make our success possible. Now here's Mark.

Mark Moran
CEO at Equity Animal

Thank you, Eric and Bradley. 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 back to the audience to free up space. To start things off, we'd like to take questions from RICK's analysts and then some of its larger shareholders. First off, we have Scott Buck of H.C. Wainwright. Scott, take it away.

Scott Buck
Scott Buck
Managing Director and Senior Technology Analyst at H.C. Wainwright

Hi, good afternoon, guys. Thanks for taking my questions. Nice progress on the Bombshells margins. I'm curious, you know, if we use the baseball analogy of what inning you're in, you know, how far along are we in the restructuring process there, and can we get those margins back to 20%?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

I mean, right now my goal is 15% for sure. I'd like to see us getting back to the deals. I'd probably, on a baseball analogy, say we're in the fifth inning, probably the bottom of the 5th. We're headed into that seventh inning stretch, which I think will be in September, and then, you know, heading towards the finals in October, November, December, where I believe that we'll certainly hit the 15% and maybe better as we open new stores and move into calendar 2025, second quarter of our fiscal year. And then we might get back up to those 20% margins. We just have to see how these new clubs or these new stores do.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

They're all handpicked flagship locations, and I'm very excited about those locations. So we will see. We may also consider, as we move forward, through the end of September, of maybe even taking some underperforming locations, and either selling those locations off, or closing some of those locations as well. And I know a lot of restaurant chains have been doing that. I've been looking at the numbers, on a couple of locations, underperforming locations, and it may just make more sense at this point to eliminate those locations versus continuing to put the efforts in to fix them and taking those efforts and put them on others. We'll come up with those decisions over the next, probably 45-60 days.

Scott Buck
Scott Buck
Managing Director and Senior Technology Analyst at H.C. Wainwright

Great, I appreciate that color. And Eric, I think you were in the Upper Midwest a few weeks back, checking out some clubs. Can you give us an update on what the environment is for M&A, and maybe a reminder of what it is you guys are looking for in a club property?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Sure. We've been getting lots of calls. We went to the Detroit market. It's a market we're not in. There's some very successful clubs in that market. We've been told some of those are for sale. We're actually talking and meeting with some of those owners this weekend, and probably through next week. And hopefully by Expo, we will meet some of... Some of them are coming to the Expo, as well as other club owners we've been talking with. The pipeline has really heated up. People are starting to get more reasonable.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

They're starting to realize that 2022 was a one-time event for the industry, and realizing that going into 2023, 2024, 2025, that you know, a more reasonable number to sell their clubs at versus those high earnings from 2022. And so I'm very optimistic that going forward, over the next 12-24 months, we're gonna see some nice acquisitions coming forward at a closer to 5x multiple, with real estate included.

Scott Buck
Scott Buck
Managing Director and Senior Technology Analyst at H.C. Wainwright

Great. That's helpful. And then I wanna ask about the Colorado properties. I think you're still full go on the steakhouse, but the other properties you have there, what's the timeline to liquidate, or do you have something else in mind?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

We're talking with several people. We may lease those properties, we may sell those properties. I've got several groups... On one particular property, I expect an LOI on that property probably in the next few weeks, if not sooner. The other property, we're talking with several... It's got a tenant in it right now, but there's additional space in there, so we may add additional tenants to that, or we may sell that property if we find the right casino operator to sell that property to. The Rick's Cabaret Steakhouse property, we'll open that property. I'm hoping to make October.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

If we don't make October, it's very difficult to open in full winter up there, so we may push that to a spring opening, and set up for a while, or we may do maybe some temporary, you know, like weekend-only opening or something like that. Haven't really got a full plan, 'cause right now I'm planning to be finished by October, but unfortunately, construction is out of my hands. It's just gonna be whether they can get it done in time for us to do that. But that's currently the plan on that one.

Scott Buck
Scott Buck
Managing Director and Senior Technology Analyst at H.C. Wainwright

Great. That's helpful. And then last question: Bradley, should we see a meaningful decline in interest rates? Are there any opportunities for potential refinancings that could, you know, help with cash flow?

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

As of current right now, you know, you're seeing what I'm seeing as far as the news media. I've spoken to the bank yesterday, and there's nothing immediately in the future for us to refinance or anything like that, but, you know, we're closely watching that, 'cause we've got quite a bit of debt that we're trying to lower our interest rate and debt service on.

Scott Buck
Scott Buck
Managing Director and Senior Technology Analyst at H.C. Wainwright

Great. That's, that's helpful, guys. I appreciate the time. Thank you.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Thank you.

Mark Moran
CEO at Equity Animal

Thanks so much, Scott. Next up, we have Orchard Wealth. Please take it away.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

I think you're muted, Jason.

Analyst

How about now? All right.

Bradley Chhay
Bradley Chhay
CFO at RCI Hospitality Holdings

There you go.

Analyst

Let's talk about, you guys saved $10 million on the share buybacks from the clubs that you purchased, and I'm assuming, you know, I forgot what the old things were, but you, you paid about 5x the earnings for both Colorado and for Chicas Locas, right?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Well, the club purchases were 5x+ the real estate on Colorado, and I believe we were 4x+ the real estate on the Dallas. I call it Dallas, the Burch acquisition. Baby Dolls. Yeah.

Analyst

Right. And then since you guys have taken over those properties, you've seen improvements from what their sales numbers were before, correct?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Yes.

Analyst

Great, Scott. Last name is Buck, B-U-C-K.

Analyst

So, so the idea being is, you guys have been able to up the earnings on the clubs for what you paid, and then what you paid, you guys have been able to get for 22% lower, or if it was a 5, it was, like, a 4.2, in terms of what you paid for it now that you've adjusted the new prices, right? So, so you-

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Well, it was 22% less stock, not the total purchase price.

Analyst

Sure

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

.but, you know, I mean, it depends on how you wanna look at it. If you look at, you know, you split the $10 million, split the Baby,

Analyst

Right

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

...put, take, say you take $5 million less for, you know, so we only paid $83 million for the Colorado acquisition, and we only paid $61 million for the,

Analyst

Right

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

... Baby Dolls acquisition. I mean, you could go and figure out those multiples that way.

Analyst

Sure.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

That's how I would do it.

Analyst

Okay.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

But, yeah, but

Analyst

Yeah

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

... it's still a considerable savings on the overall deal. And the nice thing is on a free cash flow per share basis, you know, there's all those shares are no longer outstanding, yet we have all that new revenue coming in, so.

Analyst

Great. It seems like the majority of the shares you basically took down when the stock broke below, like, $45. 'Cause there's-

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Uh, the-

Analyst

... there was, like, a huge amount of shorts that came into the market in the last, let's say, 5-6 weeks max, where it looks like they, they put on 500,000 shares, bringing the total to 925,000 shares that are outstanding, that are gonna have to buy it back.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Right.

Analyst

So you were the guys buying-

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Over-

Analyst

... those shorts

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

... we, I believe we bought, if you look at the last two months, we probably bought over 50% of the shares. We, like, what, 400,000 one quarter, 133 so far this quarter.

Analyst

Great.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

So we probably bought 250,000 or more of those shares in basically June and July.

Analyst

Okay.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

And a lot of it under... We made some very large purchases when the stock went under 40.

Analyst

Right.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

It wasn't for very long, it was only a few days, but we were buying about the maximum amount of shares I think we could buy a day for a couple of those days when it was under $40, down to $38 and change, I think.

Analyst

Okay.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

And then under 42, I think... I'd say under 42, we bought pretty heavily, and then we've just bought average between, you know, 40 and $42 and $50. We just bought basically a pretty much steady number of shares every day, occasionally bumping it up, because we set a target, an internal target, of being under 9 million shares by August 5th. So we were buying the shares we needed to buy, on basically taking the total number we needed, dividing it by the number of trading days left, and so we were buying 3,000 shares a day, 5,000 shares a day or, you know, if we couldn't get stock, some days we didn't get stock, and I think for a brief period we were buying probably 8,000 shares a day.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

And then got it back to a normalized number and dropped it down again, so.

Analyst

... Okay, and then, my last question would be, you know, obviously this, this Bear Cave dude put out, like, this tweet, and it was a picture of some people standing in front of the clubs or whatever. Can you comment on any of this BS stuff that they were trying to make it seem like you guys were, like, up to no good, you know, with whatever that police thing was about?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

I would refer you to the 10-Q and the disclosures in the 10-Q, and state that I cannot make any comments on an ongoing, any type of ongoing investigations at this time. But there are disclosures in the 10-Q if you wanna see what that is, and you'll see that he was a little off base on a lot of the accusations that he made.

Analyst

Yeah. Yeah, a little bit or a lot a bit. All right, great. I'm just blown away by the fact that you guys were able to save $10 million on the purchase price. That's, like, massive. Thanks again.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Yeah, thank you. I mean, that was very important to me, too.

Mark Moran
CEO at Equity Animal

Fantastic, and with that, this will conclude our earnings call. On behalf of Eric, Brad-

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Wait, you have a hand... You have a hand raised, I think. Check again. If anybody wants to ask questions-

Mark Moran
CEO at Equity Animal

Do we?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

You can... Yeah, I show a request, yes.

Mark Moran
CEO at Equity Animal

Eric, he has zero followers, so if this goes south, it's on you. Liam, take it away. Liam, you're muted, if you'd like to unmute yourself and ask a question.

Mark Moran
CEO at Equity Animal

All right, try, try the next one. We've got a few more, man.

Mark Moran
CEO at Equity Animal

There we go. Perfect, so next up, we are gonna bring... Not sure what that was. Let's bring up Wawaweiwi, Biotech.

Analyst

Can you hear me?

Mark Moran
CEO at Equity Animal

Now we can hear you. Yep, you were muted.

Analyst

Okay, great. Thank you. Thanks for the opportunity. So curious, just cumulatively, how much cash has been invested in the Bombshells business and the casinos?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Well, casino properties and remodel of the Rick's Cabaret, so we'd have to kind of divide it up. There's about $6 million in non-income producing properties, up there, and we'll have about $8 million invested in the Rick's Cabaret and steakhouse that will actually open. We have one of the properties for sale right now for $5 million, and I think we'll get an LOI on it. I don't know if we'll get our full asking price, but I think we'll be very close. So we'll have recouped almost 100% of the non-income producing properties will be almost recouped, other than the one property, but we have a tenant, so it's actually income producing. I shouldn't really say it's non-income producing.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

It is income producing, just not a significant amount. And then when the Rick's opens, I think we'll recoup that investment pretty quickly. And but a lot of that is debt now because we did. When we did the $20 million loan, those three properties are a big portion of the collateral on the $20 million loan, so we actually got our cash back. So to do a true cash on cash, I'll have to have Bradley do a calculation on it. I haven't been that concerned with it, 'cause it wasn't really material in the overall investment from the company right now. As far as Bombshells goes, I mean, I know in June of 2023, we were 140% cash-on-cash returned for Bombshells.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Where we're at today, I haven't run that, I haven't ran that again, recently. But I know we haven't invested 40% of the first 13 stores into these next 3 stores, so we're still probably 100% cash-on-cash or more has been returned to us. We've only invested profits that Bombshells has made in the past into the concept, and we've nowhere near the amount of full profits. So on that basis, you're probably talking from an ROI standpoint, we have really no money invested in the concept. And you know, we made $1.4 million off Bombshells this past quarter.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

If we get back to where I think we need to be, which is about $15 million in revenue and 15% margins, we'll still be making a significant amount of money off Bombshells. Then we can look to take those assets and monetize them in another way, and then re-invest that money back into our adult club businesses.

Analyst

Okay, thank you. I have no more questions.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Thank you.

Mark Moran
CEO at Equity Animal

Hey, Eric, we have an anonymous question submitted, if you'd like to discuss the fire that happened?

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

Okay, sure. We don't know what happened. It was inconclusive results on the fire investigation. That building was completely remodeled in 2023. We believe it was some type of electrical fire, based on where the fire burned through the roof and which walls collapsed first, and, you know, basically the, where the hottest part of the fire was at, it was in that electrical room area. There was no kitchen, real kitchen there. There's no natural gas there, so we, you know, couldn't have been a gas leak or anything. So when you eliminate all those things, the last person that left the building was a cleaning crew at 5:00 A.M. or 4:40 A.M. in the morning, according to the alarm system. You know, it's just one of those freak things.

Eric Langan
Eric Langan
President and CEO at RCI Hospitality Holdings

It's a rough loss for us because it was up to about $80,000 a week in sales. Club was doing very well. It was newly remodeled, so there, you know, it's a tough deal, but we've already started the cleanup. We've hired the architect within three days of the fire and started redesigning the property to be rebuilt in an image of the new Baby Dolls West location that we're building. So we'll be moving along pretty quickly there and get that back open for us.

Mark Moran
CEO at Equity Animal

Fantastic, and with that, on behalf of Eric, Bradley, the company, and our subsidiaries, thank you, and have a good night. As always, please visit one of our clubs or restaurants and have a great time.

Executives
Analysts
    • Mark Moran
      CEO at Equity Animal
    • Scott Buck
      Managing Director and Senior Technology Analyst at H.C. Wainwright
    • Analyst
    • Analyst
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