The beauty of their software is it’s up and running and is already ready to handle, you know, hundreds and hundreds of people at a time. So, that’s going to be a big plus for us in pushing…
Unidentified Analyst: Are any other clubs in the marketplace doing something like this? Or are you guys going to be at the forefront of this? Where other clubs that are maybe, you know, competitors or not competitors in other markets would want to join on board and this becomes like, this is the entertainers-only fans, you know, one-stop shop because it seems like a lot of this stuff is really about just being first to market.
Eric Langan: With us trying to do it before, I know how much it costs, and I don’t think any other operator — I don’t know of any other operators that are trying right now. I haven’t heard anything. And when they start looking at what it costs to try to get there, it’s going to be too much. So, I don’t think they’ll do it. That’s kind of where I got to, terms like, look, we’re not going to keep — you know, at the rate we’re going, we’re going to spend another $3 million trying to get this thing working. Here, we’ve got a guy, you know, a partner, who’s got everything. We can give up 25% of the deal and be light years ahead of where we’re at. And it is about being first to the market. So, I didn’t want someone else to go in and start trying to wrap these up.
I know there’s some other sites out there that have tried to tap the entertainer market, but I don’t think they have the direct contact with the people, the entertainers like we do, as well as, you know, some of our competitors, we will be able to offer them incentives for them to put their entertainers on our site, and they’ll, you know, earn residual income as well, so — through, you know, referral programs. The new operator and the new software is going to be incredible. All we have to do is do what we do, is get our entertainers on there. You know, basically, we get them to show up and they provide everything else, which is…
Unidentified Analyst: And then just one last question. I know OnlyFans typically does an 80%-20% revenue share with 80% to the entertainers and 20% to, you know, the OnlyFans platform. Is yours going to be similar to that?
Eric Langan: It’s exactly the same as you’ve seen from AdmireMe. We have it set up the same way. And we may end up, you know, using part of our 20% as referral fees for a time period, and we may also bring some big influencers over from other sites that are also in the entertainment, whether in our clubs or other clubs, and we may offer them a little more of the percentage. So, there may be — we may make little less than the 20% in the beginning, but at some point, you know, those promotions will end. It’ll just be marketing dollars basically and then we’ll revert to the standard…
Unidentified Analyst: Well, fantastic. I mean, I think, this venture, obviously, has been something I’ve been hoping for years. So, good luck with that and look forward to the next call.
Eric Langan: Thank you.
Mark Moran: Thank you so much for the questions. Next up, we will have Evan Tindell. Evan, please take it away.
Evan Tindell: Hi, guys, thanks for taking my call. Is — you know, the way you talked about kind of the same-store sales performance in the Nightclubs segment makes me think that you guys are kind of the opinion that it’s a similar thing that’s happening.
Bradley Chhay: I’m sorry, this is Bradley. Can you repeat the question? We missed the first part of it.
Evan Tindell: Oh, sorry. I think the first part was just me thanking you for taking the call. So, obviously, you guys have talked about kind of the macro-environment at the clubs, and it makes me think that you guys are of the opinion that the results at other clubs are kind of similarly negative in terms of same-store sales. So, I was just wondering if that’s kind of, you know, poor results at other clubs are kind of increasing the inbound offers you guys have in terms of acquisitions or might make the multiples that you guys can pay a little lower given the recent performance.
Bradley Chhay: Yes. I’ve talked with several other club operators. In fact, I’m going to be, this weekend, one-to-one with a club operator that basically, between him and some of his partners, about 65 clubs around the country. They’re all, you know, very similar in declines, a lot of their declines are even higher than ours. You know, I’m hearing from some people as much as 20% and 30% at certain locations in declines from their highs. And so, that is definitely going to be an issue. But as far as more offers, yes, we are talking with several acquisition targets. The biggest problem we have is everybody wants to sell based on their 2023 numbers, and, you know, don’t we all? The reality of it is there was a lot of free cash out there, and there was a lot of pent-up demand that doesn’t exist today, and higher interest rates, more economic uncertainty.
And so, I can’t be buying at a five times multiple of 2022 when we’re in 2024. And I know that, you know, those numbers aren’t repeatable.
Evan Tindell: Okay, thanks. And then one more question. So, there was a couple of threads on Twitter about the — kind of some of the warnings in the 10-Qs and 10-Ks over the years about internal controls. And I was just wondering, I know there’s one warning about like goodwill impairments, and there was one about like user access to the IT systems. And I was just wondering if you could kind of address some of those concerns or maybe help explain kind of what those are about for people that don’t know or that are just might be reading the financials for the first time.
Eric Langan: Yes, sure. If you notice, they continuously change, right? It’s like our auditors are continually trying to find some new material weakness every single year, and typically we — when they’re found, whether by us, whether by our internal third-party independent auditors, or by the auditing company, by auditors ourselves, we immediately make changes and adjust and correct them. But the problem is, in order to get a clean bill of health, you have to be — it has to be fixed for the entire year. So, even if it was one day that something was off, you know, you get a material weakness. So, we have to deal with that. You know, I’m hoping, you know, all we can do is keep pushing and keep working and keep fixing things, as they say.
You know, I will say that none of the weaknesses they’ve ever found have ever caused restatement of financials, they’ve never found any fraud or anything like that. It’s the old saying, it’s what if? What if? What if? What if? And I always use the — I always like to use the example of, if you have a bank vault in your home and you have a security system in your home, and you have all these things to stop somebody from being able to steal a necklace out of your home, and they come up with a way to break into your house, circumvent all of your stuff, and still steal the necklace, even though the necklace was never stolen, they turn and say, well, that’s a material weakness. And so, now you’ve got to fix this new what if. So those are things we face.
And as a growing company, you know, in the beginning, it was software — it was all software. You know, our software didn’t — then, we put an ERP system in. We corrected, you know, the majority of those what ifs with our stuff. I mean, at the end of the day, you have to have somebody in IT that’s responsible for, you know, monitoring the system, keeping the system up and alive, running the backups, and these are — that’s a very high paid employee who has to have that access. And just like the company has to have a CEO that has the ability to make certain decisions and whatnot. And so basically, what they said — you know, with our IT stuff, I think, it’s basically, you know, one guy had powers to change and do things and, you know, where was the check system on him?
And, I think, we’ve resolved all of that now through notifications to certain people if things are changed and whatnot, but, you know, you don’t know what you don’t know until they come in and say, oh, this is — you know, this could happen, or this could happen, even though it’s never happened. Obviously, once it happens, we’ve always taken or anything’s ever happened, we’ve always been able to, you know, fix and adjust the system, but we can’t think of every little detail and every little thing constantly, you know, that could happen when it does never happen or has never happened, or hasn’t even happened to somebody else. So, those are things we deal with and we just keep working on that.
Evan Tindell: Okay, thanks guys.
Mark Moran: Fantastic. Thank you so much, Evan. Next up, we have – thank you, Eric, too. Next up, we have Adam Wyden of ADW Capital.
Adam Wyden: I’m here. A couple of things. You know, it was encouraging that you wrote in the press release that you thought you’ve seen the bottom in the same-store sales and think consistent with other people’s commentary and sort of live entertainment. Dave and Buster’s Bowl, all this stuff. It seems like, you know, that you’re doing more promoting and stuff like that, but, you know, people are still willing to spend, maybe spend differently, but people are still willing to spend. So, that’s good. And, I guess, this is your seasonally weakest quarter anyways. It’s like, you know, about 20% of EBITDA, at least historically. So, you know, it sort of gives you a nice baseline of sort of where you are. But a couple of sort of procedural questions. You mentioned $2 million of cost annualized per quarter. That’s roughly $8 million of EBITDA. Is that in Bombshells, Nightclubs, corporate? Can you talk a little bit about where you think that cost is going to come from?
Eric Langan: Well, I mean, we’re doing the COVID sweep, as I call it. When we got closed down for COVID, we had to sit down and go through every single possible expense and where we could waive, what we could get rid of, how we could make changes, where we could make cuts, you know, what non-income producing properties or non-income producing assets we needed to get rid of. We’re going to sit down. We’ve been doing it, but we’re going to continue. I mean, there’s a lot of, you know, 70 some operating subsidiaries. So, there’s a lot of subsidiaries still to go through. But we’ve been working on this, you know, basically since we internally had results from the past quarter. So, it’s going to be a lot of places. A part of it was with AdmireMe making the major change, with AdmireMe bringing on a partner there is going to be a significant cost reduction for us going forward.
We’re looking at all SG&A expenses, we’re looking at all, you know, club by club, whether it’s, you know, employees, whether it’s security, whether it’s — basically every little cost and figuring out, you know, where we can make the cuts just like we had to do back in 2020 when COVID hit.
