Adam Wyden: Yes, well, you guys did an excellent job cutting costs during COVID. So, you know, obviously, you know, you guys have shown that you guys can make margin with lower revenues. So, you know, look, you know, another $8 million to $10 million of cost, if you can do it, would be well welcomed, you know, from a cash flow perspective as it relates to being able to allocate capital to share repurchase or more clubs. Secondly, you know, obviously, you expect to get the casinos open, but you talked a lot about non-income-producing properties. You’ve got, I don’t know, three or so clubs, I can’t keep it all straight, that are sort of being remodeled to, you know, being reopened. You know, those are obviously not. You know, you’re not sort of waiting on same-store sales to come back.
Do you mind like trying to sort of enumerate sort of what you think that is in revenue and potential EBITDA contribution? I mean, I’m just sort of trying to sort of give people an understanding of, you know, look, if the company does nothing from here, same-store sales don’t improve, you know, you get the $8 plus million of EBITDA from cost, and you get another x million dollars of revenue in EBITDA from the clubs reopening and that sort of gives you a baseline assuming things don’t get worse, which you don’t think they are, you know, what’s sort of not in the numbers today. You know, so, you can sort of take the $18 million, multiply it by 5, gets you to $90 million, you know, if it’s 20%. And then you add the $8 million of cost reduction plus club sort of gives you a sense of what normalized EBITDA is at the casinos.
You understand where I’m going?
Eric Langan: Yes, I got you. So, only one is actually a remodel. That’s the Abilene. And we’d closed that down and remodeled because we were going to get liquor license. Then, we couldn’t get the late hours, and so we basically went back to the BYOB for a very short period of time. And then, once we did that, the city worked with us up there to get us the late hours. So now, we’re going to be able to sell alcoholic beverages till 02:00 a.m. So, we’ve rebranded it — now, we have Baby Dolls doing so well, we rebranded it to Baby Dolls. It will open hopefully in March. And then, as well as the Lubbock club is near completion and should open in March as well. So, we should get six months of both of those locations. Both of those locations have gone from BYOB clubs to alcohol sales clubs.
Should — I’m guessing should be somewhere around 60,000 to 80,000 a week sales clubs. So, somewhere between $3 million and $4 million annualized revenue, you know, and then use a 40% margin rate or 35% margin rate where we’re at here. I think both clubs will be able to have VIP areas, so we should have plenty of service revenue at both those locations. The third location will not open probably until the first quarter of 2025. So, it won’t really contribute in 2024, but it is a very large location. It’s a location we bought in Fort Worth, Texas. We bought the property and we’re going to revamp and reopen club there. We’re building a second floor. We’re doing a lot of construction, about a $3 million rebuild of the building. So, part of the building will still be there.
But basically we’re tearing down a big portion of the building, tearing off the roof and going up, all new parking and whatnot. So, it’ll be a very, you know, much bigger deal. But also, I think, it’ll contribute in a much larger ratio in that location is probably around $140,000 to $180,000 a week location when it reopened, so somewhere between $7 million and $9 million. And I think the margins will be, at that larger location, much closer to our 40% typical margins for a club of that size.
Adam Wyden: So, just humor me for a minute.
Eric Langan: And maybe even higher.
Adam Wyden: So, humor me for a minute. You know, if you say you do, you know, $7 million for the two little clubs and $8 million, you know, for the big club, maybe even more, that’s like $15 million at a 35%, 40% margin. That’s another $6 million of EBITDA. And then, add another $8 million for cost reductions. That’s like $14 million. Again — you’re not going to get it this year. But I’m just saying, you know, sort of on a normalized basis, and if I take your sort of $17.5 million, $18 million, I multiply it by 5, you know, I’m getting to a number that looks like, you know, around $105 million without the casinos, without M&A, and without sort of improving Bombshells, just to sort of give people a baseline of, like, assuming, you know, you talk about do nothing on a capital allocation perspective, I’m sort of saying, do nothing on an operating basis, i.e., the same-store sales don’t improve, and all you do is, you know, do your COVID sweep, get your clubs open, right?
You know, then, you know, you are looking at something like, you know, $105 million of EBITDA, not including casinos, not including M&A. I mean, are you sort of following my math?
Eric Langan: Yes. I’m following your math, but, yes, I think we do have to have same-store sales bottom out, and we have to have same-store sales bottom out and we have to have same store sales.
Mark Moran: Hi, Eric, you’re cutting out.
Adam Wyden: Yes. You said we have to have same-store sales, and then we lost you.
Eric Langan: Can you hear me now?
Adam Wyden: Yes.
Eric Langan: Okay. I think we have to have same-store sales, you know, bottoming and, you know, return back to that 3% to 5% growth in order to deal. We’re going to have to obviously fix the Bombshells, you know, get Bombshells back to where their margins are, you know, headed in the right directions, not 1%, but, you know, back to their 15% to, you know, 18%, 22% margins, where they need to be at. Then, I think, your 100 and some million is probably a very good number. Right now, I mean, if you got to figure we are probably $80 million without anything new opening. You open up these two new stores, provided that this was our worst quarter. So, it’s definitely doable, but there are some things that have to happen and some things have to go right.
I suspect that, like I said, I think March Madness — I think we’re returning to, you know, basically 2017, 2019 type seasonality in the business, which means March should be a huge turnaround month. March Madness should be really big for us this year, and we should start seeing, you know, the typical spring fever that we see in March, and we do have five weekends in March this year. So, while January may seem a little weaker, we had five weekends in January last year, which, you know, that weakness was — and we had some pretty tough weather this year in January, where we had it in February, I think, the previous year. So, we’ll have to see how that weighs out as we get to the end of February. But I’m very optimistic this quarter will be much better than the last quarter.
Adam Wyden: What I was trying to do, Eric. What I was trying to do — and I got one last question, is just try to bridge for the audience that like, you know, this quarter did not — this last quarter is, you know, your seasonally weakest. So, if you were to say, hey, it’s 20% of EBITDA. And then, by the way, these are all the things we are doing today, right? Whether you get a full credit for them, you know, for the full year. I know you would like to think about things in years. I think, a lot of people in the audience like to think about things sort of on a normalized basis, run rate basis. And so, when you think about $8 million of annualized cost, and then you think about having those clubs open, you know, what does the business look like, normalized exiting the year type thing.
That’s all I’m saying that like — I think everybody understands you’ll not even have the big club open till the end of the quarter, you know, end of the year. I’m just saying like all things being equal, if you get the cost cuts and the same-store sales do bottom, you know, and you get these clubs open, you know, sort of what does the business look like, right? Obviously, you can get the casinos open too, and then that’s not in the numbers either, right? I’m just trying to, you know, sort of, you know…
Eric Langan: Yes, I mean, from the club standpoint, I mean, the clubs have been very strong. You know, we’ve had a couple of quarters here where your same-store sales have declined a little bit. But, you know, the big part of our same-store sales decline has been the Bombshells. Even though it’s a smaller part of sales, it’s been a much, you know — those are significant when you start, you know, looking at, you know, 15% to 20% sales — same-store sales declines. That has to stop. We have made some major changes. I think, we’ve definitely bottomed at Bombshells. In fact, I had a big meeting with people today. I said, it’s hard to fall when you’re lying down. So, take chances, take risk, let’s, you know, — let’s make the changes.
We’ve started the lingerie Thursdays. We’ve got some other promotions that we’re getting ready to kick off on Monday, Tuesdays and Wednesdays. The clubs are getting ready to do some big promotions for Tuesdays and Wednesday nights, which have gotten weaker at the clubs — on the clubs — for the clubs for us, to really build those numbers up like we did back in 2010, when we — 2009, 2010 era. So, we’re going to be beginning some of that stuff for Tuesdays and Wednesdays here in the next two weeks, and hopefully, that will bring our Tuesdays and Wednesday numbers back up. So, all in all, yes. And to get to where we’re at, yes. Can we do $100 million at 25% of EBITDA? I don’t see why not. You know, everything is lined up. Nothing’s really changed.
This quarter was a little off. But as far as the — all the projects that we have that are coming online that are basically a drain on EBITDA and a drainer on costs right now. As they open in March, as they open in June, July, and start contributing, you know, it’s a double bang for the buck. Instead of costing us money, now they’re all going to be generating money. So, we not only get on a run rate basis, not only the new income and the new revenue, we also lose the drag that they’d been causing.
Adam Wyden: Right. Well, you also don’t have the casinos in this number either. I mean, you know, if you have the casinos open in 25%, we should do probably well in excess of $100 million. I mean, those are, you know, potentially — those are 40%, 50% margin businesses. So, if you have both of those open, I mean, that’s going to be a significant contributor as well.
Eric Langan: Yes. You know, I remain very, I think that we can get those casinos open by September, provided that gaming issues our licenses. I mean, we’re sitting here, you know, basically you’re at the will of the state. Until the state issues our licenses, there’s not a whole lot we can do. We will have the Rick’s Casino ready to go in June. And I think that the construction will probably be completed provided the building permits come in in the next few weeks, like we think. For the Bombshells, we’re very close, you know, going back and forth with the city’s third-party company that does all the plan reviews. We’re very close on that as well. I think, we will get that, hopefully, and that casino should be built and ready to go maybe in June, but probably closer to August.
