RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q1 2024 Earnings Call Transcript

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) Q1 2024 Earnings Call Transcript February 8, 2024

RCI Hospitality Holdings, Inc. misses on earnings expectations. Reported EPS is $0.23 EPS, expectations were $0.93. RCI Hospitality Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Mark Moran: Greetings, and welcome to RCI Hospitality Holdings First Quarter 2024 Earnings Conference Call. You can find the company’s presentation on the RCI website. Go to the Investor Relations section and you’ll find all the necessary links 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 today. I’m coming to you from New York. Eric Langan, President and CEO of RCI Hospitality; and CFO, Bradley Chhay are in Houston. Please turn with me to Slide 3. If you aren’t already doing so, it is easy to participate in the call on X Spaces. Log into X, formerly known as Twitter, go to @RicksCEO and select space titled $Rick RCI Hospitality Holdings, Inc.

1Q ’24 Earnings Call. To ask a question, you will need to join the X Space with a mobile device. To listen only, you can join the X space on a personal computer. RCI is also making this call available for listen-only through a traditional landline and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow. This conference call is being recorded. Please turn with me to Slide 4. I want to remind everyone 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 explanation of Rick’s non-GAAP financial measures. Now, I am pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.

Eric Langan: Thank you, Mark, and thanks everyone for joining us today. If you’ll please turn to Slide 6. Our first quarter revenues were in line with what most people were expecting. They totaled $73.9 million, up 5.6% compared to last year. This was primarily due to club acquisitions, which more than offset a consolidated same-store sales decline of 9.8%. The fundamental nightclub business remained solid. We believe nightclub same-store sales reflect the macroeconomic uncertainty everybody is talking about. Margins were lower than what we had been expecting, mainly on Bombshells side of the business. Bradley will go into that in more detail later. EPS was $0.77 per share with non-GAAP at $0.87. Net cash from operating activities and free cash flow held up very well.

They declined only 8% and 3%, respectively. Please turn to Slide 7 for other key takeaways. We are pleased to report that during the quarter and after the quarter, we continue to make progress toward our key initiatives. We have a solid plan to lower costs, increase revenue and return our margins to their target goals. The newest development is an agreement to re-launch AdmireMe with a strategic partner already in the online and mobile adult entertainment business. During the first quarter, we also continued to buy back shares and we remain confident we have access to sufficient cash resources to implement our plans. Please turn to Slide 8 to review Nightclubs development plans. We continue to add value to our Baby Dolls and Chicas acquisition.

See also 15 Best African Countries to Live in as a Woman in 2024 and 15 Blue-Collar Jobs That Pay at Least $75,000 a Year.

Q&A Session

Sales in the first quarter were up 10% from the fourth quarter and have improved every quarter since we’ve owned them. In addition, our margin improvement program resulted in 130% basis point improvement on a sequential quarter basis and 260% basis point improvement versus the acquisition performance in fiscal ’23. Looking at new clubs, the replacement location in Lubbock, Texas, is nearing completion. Due to the success of the Baby Dolls brand, we are converting the Abilene location to that format, which is awaiting installation of its audio and video systems and furniture delivery. The planned Baby Dolls in West Fort Worth is simply awaiting the building permit to begin construction. Chicas Locas brand has also been successful for us and as a result, we have decided to remodel and convert our BYOB locations in Arlington, Texas, into a Chicas Locas, and we are currently awaiting the issuance of the liquor license.

Regarding acquisitions, we are evaluating a sizable number of targets. The hardest part we face is coming up with fair value because owners want to be awarded for post-COVID highs during 2021 and 2022, and we typically buy on a two-year historical performance. You please turn to Slide 9. We continue to be excited about our Central City Colorado casinos, Rick’s Cabaret Steakhouse & Casino and our Bombshells sports casino. In the few weeks since Christmas and New year’s, there have been no new developments with our gaming license. Meanwhile, interior construction on the Rick’s casino has been progressing on schedule and we anticipate completion in June of 2024. We will then await issuance of our gaming license so that we can install, test and configure the devices and systems in order to open the casino.

For the Bombshells casino, we are awaiting the building permit. We continue to anticipate both casinos to open in fiscal 2024 and that they will represent a significant free cash flow opportunity. In Colorado’s most recent fiscal year, Central City slots averaged 131 adjusted gross proceeds per day and nearby Black Hawk does 307, mainly because they run 24/7 as we plan to do. Please turn to Slide 10. AdmireMe is a service we’ve been developing to help club entertainers monetize their content and develop stronger relationships with their customers. Based on the agreement that we’ve recently signed, we worked out we will retain 75% ownership, our new partner will own 25%, and the service will be re-launched later in the June quarter under a new name.

This partner has an existing Internet platform with domestic and international traffic, safety controls, credit card processing, all necessary technology we need at a far less cost than if we did it alone. This includes highly valued live video streaming. The result is that overnight we obtained access to a strong technology infrastructure with significant distribution and proven revenue collection and disbursement capabilities. This will provide club entertainers with even greater potential to make money, and RCI will become the largest publicly traded entity owning a worldwide interactive social media adult platform with streaming video, both live and pre-recorded. Our vision is to create a digital extension of our physical brands, connecting tens of thousands of contractors and workers on the front lines, the entertainers and waitresses, et cetera, and the customer who come through our door so that they can continue to interact or receive content.

We want it to be an easy and seamless way for entertainers and waitresses to monetize their relationships 24 hours a day, seven days a week, 365 days a year. You walk into the club, the entertainers are on the platform promoting themselves, getting customers to sign up and subscribe to them and then come back and visit them in the club. Please turn to Slide 11 to review our Bombshells development program. Our newest location, Stafford, a suburb of Houston, opened in mid-November. Construction is continuing in our Raleigh location, which we plan to open in late June or July of this year, and the Lubbock location construction is well underway and we plan to open that in the fourth quarter of ’24 as well. We are getting ready to begin the remodeling of downtown Denver location as soon as we receive our building permits.

Since this is a simple remodel of an existing restaurant location, it should be a quick turnaround to get this site open. As for future developments, we have decided to list our Aurora, Colorado, site for sale or lease and to put our second Austin location on hold. Both moves are intended to help us better focus on other opportunities. The Huntsville franchisee is still awaiting his building permits. The bigger issue is Bombshells’ performance. After we’ve seen the results from the quarter, we have made major structural management changes in Bombshells team, and we are also considering any and all options to improve performance that potentially includes seeking an operational partner or selling the business. Now here’s Bradley to go into more details on our results.

Bradley Chhay: Thanks, Eric. Please turn to Slide 12 to review our Nightclubs segment. Fourth quarter revenues, can you guys hear me? It says you can hear me. Okay. Please turn to Slide 12 to review our Nightclubs segment. Fourth quarter revenues increased $4.7 million year-over-year. This was primarily due to a $8.9 million increase from acquisitions and a $4 million decline in same-store sales. By revenue type, alcoholic beverages increased 18.7%, food 14.1% and other by 8.2%. Meanwhile, service declined 1.6%. The different growth rates reflected higher alcohol and food in the sales mix from the newly acquired Heartbreakers, Baby Dolls and Chicas-Locas club. GAAP operating income was $20.4 million, or 33.4% of revenues. Non-GAAP operating income was $21 million, or 34.3% of revenues.

Margins were affected by a different sales mix from the newly acquired clubs, lower service revenues and wage inflation. Please turn to Slide 13 to review our Bombshells segment. Fourth quarter revenues declined $700,000 year-over-year. This primarily reflected a $2.7 million decline in same-store sales and a $2.1 million increase from the newly acquired and new locations. The acquired locations are Bombshells San Antonio and Cherry Creek Food Hall with its Bombshells kitchen. The new location is Bombshells Stafford which opened in mid-November. GAAP operating income was a profit of $86,000, or 0.7% of revenues, and non-GAAP was a profit of $149,000, or 1.2%. Please turn to Slide 14. The combined operating loss from our Other and Corporate segments was $400,000 less than that of last year.

On a non-GAAP basis, they were about $100,000 less. I also wanted to note the effective tax rate for the year was 19.9% compared to 22.8%. The rate is affected by state taxes, permanent differences, tax credits including the FICA tip credit. Now please turn to Slide 15. We have a couple of slides coming up that will discuss free cash flow and adjusted EBITDA which are non-GAAP. In advance of that, we wanted to present you with the closest GAAP equivalents on this slide which are operating and net income. Now please turn to Slide 16 to look at some of our other key metrics. We ended the quarter with cash and cash equivalents of $21.2 million. During the first quarter, we used $2.1 million to buy back shares. First quarter free cash flow was $12.7 million or 17% of revenues.

Adjusted EBITDA was $17.5 million, or 24% of revenues. Our more recent free cash flow and adjusted EBITDA conversion rates reflect a lower percentage of service revenues in our Nightclub business. Now please turn to Slide 17 to review our debt metrics. Debt as of December 31st declined $5.8 million from September 30th due to scheduled paydowns. The weighted average interest rate was 6.61% in line with what we have been paying. Total occupancy cost was at 8.2%, inched up a little bit from the sequential quarter — on a sequential quarter basis, but we are still in our comfort range of 6% to 9%. At 2.9 times, debt-to-trailing 12-month adjusted EBITDA also inched up just a little bit, but continues to be in our comfort zone of less than 3. Please note that both occupancy costs and debt-to-adjusted EBITDA reflect the fact that we are developing a number of projects.

As they open and we begin generating revenues and EBITDA, occupancy costs and debt-to-adjusted EBITDA should decline. Debt maturities continue to remain reasonable and manageable. We are also in the process of completing a $20 million cash-out bank loan using $30 million of our unencumbered real estate. Please turn to Slide 18 for our debt pie chart. We continue to pay down all our slices of our debt. The percentage share of our different pieces of debt remained largely the same as the fourth quarter. Now let me turn the presentation back to Eric.

Eric Langan: Thanks, Bradley. Please turn to Slide 19 before we go into Q&A. For our new investors, I want you to know that everything we do is centered around our capital allocation strategy. We employ three different approaches, subject to whether there is a compelling rationale to do otherwise, mergers and acquisitions, organic growth, and buying back shares when the yield on our free cash flow per share is more than 10%. All this is being done with the ultimate goal of driving shareholder value by increasing free cash flow per share by at least 10% to 15% on a compound annual basis. To see more about this strategy, please visit our new website @rcihh.com. 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 revenues, 12.1% for adjusted EBITDA, 17.2% for free cash flow.

We also reduced our fully diluted share count, including shares used for acquisitions. But nothing goes up in a straight line. The key point is, we have the plans, tools, resources and expertise to get the job done. We’ll make more acquisitions. While taking a little longer to get projects up and running, the drag will be behind us, the doors will open and our numbers will improve. We will get our free cash flow and adjusted EBITDA margins back to the 20% and 30% as we have in the past. Unfortunately, in the current environment, it has taken us a little longer to open new locations, but we have dealt with economic downturns before. I know that these numbers are a little disappointing to some and they are disappointing to us, but I ask you to have faith in our team’s ability, as I do, that we will reach our future targets.

Thank you to our loyal and dedicated team members for all their hard work and effort and all of our shareholders who believe and make our success possible. Now, here’s Mark.

A – Mark Moran: Thank you very much, Eric and Bradley. [Operator Instructions] To start things off, we’d like to take questions from Rick’s analysts and some of its larger shareholders before moving into general Q&A. First up, we have Anthony of Sidoti & Company. Anthony, please take it away. Anthony, I’m not sure if you’re on mute. While Anthony works that out, we can move on to.

Anthony Lebiedzinski: Can you hear me now?

Mark Moran: Yes. We can hear you. We can hear you. So, we’ll stay on Anthony. Anthony, take it away.

Anthony Lebiedzinski: Sorry about that. I have a new phone over here, so apologies for that. So, anyway, thanks for taking the questions. I do want to get into little bit more about the same-store sales numbers as far as traffic versus average ticket that you’ve seen. And also, in your January sales release, Eric, you talked about, you know, hopefully that — I think the quote was basically saying that hopefully we’ve seen the worst of the same-store sales declines, you know, given the uncertain macro conditions. So, just wondering if you think that’s still true? And I have a couple of other questions as well.

Eric Langan: Yes, sure. I mean, the same-store sales declines, obviously not much has changed from the last call. We’ve got the December numbers. December was decent. January was starting off okay. Then, we had the weather issues for a couple of the middle weeks, but finished very strongly. The first week of February has been a good week for us overall. I don’t have breakdowns on same-store sales for January, February, because it’s just too early for me to have all those numbers yet. But, hopefully, we’ll get an idea of those soon. I think the worst of it is behind us. I mean, Bombshells is still an issue. We’ve had to make some cost changes there and some structural changes in management and how we’re operating those locations.

And hopefully, we’ll start seeing those results as we move into March Madness. I think, March Madness, we’re doing a big push for March for March Madness. Some other changes. We started today with our launch rate Thursdays. So, we’re going to do a few more things. We take the Bombshells concept, make it a little more risque. I think, kind of — the team kind of started focused on restaurant operations too much and what we’re doing, and we’ve got to get back to our basics, which is, you know, keeping our alcohol sales at, you know, the 60% range of sales. Those have declined a little bit, and I want to get that back to normal and making the place fun again, especially in the evening hours. So that’s kind of what we’re focused on right now.

Anthony Lebiedzinski: Got you. Okay. Thanks for that. And then, I know you recently hired a new assistant of Director of Operations for Bombshells. What has he done so far and kind of what are your plans? Can you share any specifics as to what you’re doing as far as to get that segment in better shape?

Eric Langan: Yes, sure. We’ve done some cost cutting at the management level, taken our regional managers, put them back in individual stores, having them focus on individual stores, which allowed us to get rid of some underperforming general managers and not replace other managers that have left — naturally left through attrition by moving people around. The new guy has been in training in Houston. He’s now in Dallas. He’ll be working at the Dallas and the Arlington location to get those locations, which are our biggest decliners, back in shape. Just making sure people are promoting, doing the things they do, and really focusing on customer service, like I said, and then — and making the place fun again to hang out in. I think I said earlier that, you know, they’ve been focused on restaurant operations more than what I would consider the alcohol sales operations.

And I think that’s kind of the key. We’ve made some major changes in music formats, DJs, some of things have just kind of — as we went and visited the stores, sent our secret shoppers in, just found things that we weren’t happy with on some of the direction that the current management team had been taking it, and so we’re — and then also by moving these regionals into direct stores, we’ll have a lot more accountability as we move into, you know, the March, April, May months, and we’ll see significant changes, or we’ll, you know, continue to make changes in management there as well.

Anthony Lebiedzinski: Got you. Okay. And then, switching gears. You talked about the AdmireMe re-launch with a new strategic partner. You know, how should we think about this as far as — from a financial perspective, as far as, you know, what this could mean to you guys? You know, If you could add any additional color, that’d be great.

Mark Moran: Hi, Eric, are you speaking?

Eric Langan: I’m sorry. Yes, I’m sorry. For some reason, my mute turned itself back on. Sorry about that. Thanks, Mark. So, for the new site, basically, our new partner already has the software up and running on another — for their site. So, we’re going to basically white label that software. So, we’re waiting for the skins to be done right now, which hopefully will be done sometime in April. We’ll begin early testing and basically full launch this in that next quarter. It lowers our cost tremendously because we are spending about $40,000 a month on programmers trying to get AdmireMe up and running. So, basically, it’ll cut about a $0.5 million a year from our expenses, which is a part of our overall cut to cut over $2 million in a quarter in expenses from our budget right now.

And so, that’ll be a big part of that. And we’ll continue to move forward, launching this new site with video streaming, which we weren’t — we didn’t have on AdmireMe and weren’t going to have on AdmireMe for some time and who knows at what cost to get to that. So, basically, I think it just moves the software light years ahead. The concept is still the same, to get all of our entertainers and wait staff and employees that are interested in creating content, to create content and have a means to do so.

Anthony Lebiedzinski: All right. Well, thank you very much. I’ll pass it on to others and best of luck.

Eric Langan: Thanks Anthony.

Mark Moran: Fantastic. Thank you so much. And next up, we’ll bring Scott Buck of H.C. Wainwright. Scott, take it away.

Scott Buck: Hi, good afternoon, guys. Thanks for taking my questions. Eric, I’m curious on the licensing. I know you don’t have an update for us, but I’m curious, at what point do you start to get a little nervous in your ability to get the properties open by year end fiscal ’24?

Eric Langan: May. We need to have — we need to be on the agenda for approval by May. If we’re not on by May, it will be very difficult. It’s going to take somewhere between probably three and four months, so somewhere between 90 and 120 days, to do all the install testing and get all the certifications we need from gaming to get the final go-live approval. So, we really — if we want to open in September, we need to have that approval for the licensing itself no later than the end of May. We have quarterly updates with them. The next update is in about a week from now. So, once we have that update, hopefully, we’ll have better information on where they’re at in the process. As far as me getting worried, I don’t really worry about overall, unless of course they start issuing a bunch of licenses to the other, and if all the other licenses start getting issued to other operators that have applied, I think there’s six licenses applied for in Central City right now.

If all those were to start getting approved and ours was not getting on the agenda, I would be concerned. But as of right now, there’s no concern. I think it’s just the normal flow of operations and the way the Colorado Department of Gaming does their investigations.

Scott Buck: No, understood. I appreciate that. And I’m curious, what’s the remaining CapEx on those — the two properties to get them open?

Eric Langan: It really depends on how we do certain things. So far, we’re about $2.5 million in. I believe, on my last update that I’ve gotten, we just signed about a $3 million contract for all of the construction on the Rick’s, which will — which includes some pretty major changes to the overall deal, and the HVAC systems are in Denver right now. So, they will be installed as soon as weather permits and they can get all their ducks in a row because we’re replacing the roof at the same time they put the units. So, basically, they’re going to pull the existing units off the roof. We’re going to put all the new curbs and stuff in for the roofing. They’ll set the units and then they’ll re-roof the building. So, that’ll be considerable.

It should be done, I would think, no later than the end of March at this time. And so, six or seven more weeks, we’ll have all new heat in that building and have everything up and running. We think final construction other than the actual gaming machine should be completed sometime in June.

Mark Moran: Hi, Scott. We can’t hear you, if you have another question.

Scott Buck: Yes, sorry about that. Went back on mute. Yes, so, on Bombshells and the strategic review, you talk about a potential sale or at least exploration. You guys hired some outside help to kind of speed that process along, or, at this point, are you still kind of looking at opportunities internally to do something?

Eric Langan: We are working with an outside group right now as well as, you know, on a few things on our own as well. So, when we say we’re exploring everything, I mean, we’re looking everywhere, we’re talking with lots of people. But as far as getting ready to — as far as listing and what not, we haven’t gone as far as listing them for sale at this point because, right now, we are really kind of hoping we can find either the right partner like we did with AdmireMe or, you know, giving our — making the changes we’ve done internally and seeing if that is going to make a difference in a quick enough time period for my liking.

Scott Buck: All right, great.

Eric Langan: So, those are — that’s where we’re at with it.

Scott Buck: That’s helpful, Eric. And then just last thing, quickly, what’s the timing look like on the cash-out loan? And are you, you know, kind of in conversations with folks already about potential acquisitions?

Eric Langan: We’re pushing the loan because we have been in talk with several outside operators and would need significant cash-down payments. So, we’re going to just try to get that cash sitting on our books. We’ve been working on this for about five weeks. We had to get appraisals and environmental studies on a couple of the properties because they weren’t current. That’s all updated, and we should be going to loan committee in the next week or so.

Scott Buck: Perfect.

Eric Langan: So, I would look for — our hope is to close sometime either the last week of February, first week of March, to close the loan. So, hopefully, we can stay on that timeline as long as nothing comes up or nothing comes out of committee that was missed in the betting [technical difficulty] ran casinos in Black Hawk, ran casinos in Central City, both, for the past 20 some years, is very knowledgeable, is very well-known by the Department of Gaming as well as many of the other operators, employees and whatnot in that Central City Black Hawk area.

Robert McGuire: Great. And I’m sorry, you broke up a little earlier, but can you talk about what do you see your budget for the casinos, to the point where — what do you believe the budget will be when you complete the casinos?

Eric Langan: I’m sorry. Can you repeat that? I’m sorry.

Robert McGuire: Yes. Can you give us an idea of what the budget will look like to complete the casinos? I believe, you mentioned that earlier, but it was — you kind of broke up.

Eric Langan: Okay. Sure. The budget for the casinos is probably overall about $20 million for both properties, including the real estate purchases. We spent about $2.5 million on the deal, the real estate purchase are about another $8 million. So, we’ve got about $10 million more to spend. But it depends on how we’re going to spend — how we’re going do the machines. If we pay all cash for the machines, that would be a very significant amount of money. But it looks like we’re going to do — there’s some terms we can get that are like 12 months, same as cash. We don’t have to start making payments till after the machines are installed. With some operators, we can also do rev share. That will also create some, you know, cash outlay savings for us. We’ll still have to pay, but we’d have time to do that.

Robert McGuire: Great. Thanks, Eric. And then lastly, with regards to the macro-economic uncertainty that you’ve been discussing, I take it that — can you just confirm if it’s still in the blue collar, how’re your white collar customers are holding up? And then kind of in general, what do you think we have to see to move beyond this area or time period of macro-economic uncertainty?

Eric Langan: Well, I mean, we have to get rid of the uncertainty in the marketplace. You know, it’s funny because you read, you know, stuff in the media and you hear how great things are and jobs and this and that, but that when you go out into — on main street and you start talking with people, they’re uncertain. Even the people that are doing very well in their jobs right now are uncertain. Is my job still going to be here three months from now? Am I still going to be doing as well? You know, what are interest rates going to be? And we’re seeing that in the customer. You’re seeing the customer trade down, so — which is typically recessionary behavior. So, we’re definitely seeing the customer trade down. We’re seeing the customer maybe not come as often.

So, our Mondays and Wednesdays are becoming slower. And you’re going to start seeing us do some, basically what I call recessionary discounting on other days, which is kind of like dynamic pricing on — you know we do it on certain days rather than all the time. So, we’re going to see that happen as we’re moving forward. We’ve already got a lot of these things going into place right now. And, you know, until that customer’s confidence is back, I think we’re going to have to figure out ways to bring that customer in and get that customer to, you know, to continue to spend money.

Robert McGuire: Thank you. That’s it for me.

Mark Moran: Thanks so much Rob. We appreciate the questions. Next up, we’re going to have [Orchid Wealth], and I’d like to encourage everyone who has a question to raise their hand. And we’ll bring you up to the speaker spot. Orchid Wealth, take it away.

Unidentified Analyst: Hi, guys. Let’s go into the AdmireMe 2.0 that you guys are going to be doing. How long have you been dealing or engaging with this partner that you’re bringing on?

Eric Langan: Sorry, I better unmute myself. We started talking with them at Expo in Vegas in August, and we’ve kind of developed a relationship. We had to get comfortable with each other. We’ve laid out the foundation of expectations from both sides and done that. We’ve — we probably signed the agreement about three weeks ago, I believe, and they’ve been working on some skinning ideas and how they’re going to — what it’s going to look like, what the site is going to look like, have registered the domains and purchased the domain. So, we have those all ready to go for the new launch, and they’re very excited. You know, like I said, we’re shooting for basically some testing, which — we don’t need to do a lot of testing. The software is really just making sure that everything flows properly with design, so that we don’t end up with like you click on a link in our — on our site and actually end up, you know, seeing content or something from their previous website.

So, it’s basically just going through and make sure everything is working properly, and then we’ll be ready to launch. We’ll start a couple of specific clubs, putting on entertainers from those clubs first, getting everything rolling, and then basically do a full company-wide launch, hopefully, by May and June.

Unidentified Analyst: And then how long has this partner been in the business of doing this, in terms of like, they’re going to handle the credit card processing or all that aspect of the business, you’re basically supplying the performers or the entertainers?

Eric Langan: Kind of. I mean, yes, it’ll still be through our company. So, it’ll be our processing our stuff, but we’re going to be working with different banks than we work with, with AdmireMe, who they have a much longer and stronger relationships with, as well as other vendors that they’ve been doing. They’ve been in the business since the early 2000s, back when — it’s funny because we started talking about different people throughout the industry from back when Rick’s had dancer dorm back in ’99, early 2000s, and we all kind of knew the same people, and it was kind of funny that we were both in the business at the same time back then and didn’t really meet up back then. So, you know, I’m very optimistic and excited to see where the concept will go when it has the right software, because I think we have the right idea, we just didn’t have the right medium to basically put the entertainers and the customer base together.

And with their software, we’re going to be able to do that. And like I said, with full video streaming, that seems to be the big thing these days. So, very excited about when that’s going to go.

Unidentified Analyst: How many entertainers do you think you’re going to be able to at least offer this as an option by being an independent contractor within the firm? You know, how many..

Eric Langan: Well, I mean, we had — in 2023, we had over 25,000 contracted entertainers nationwide. So, I mean, if we can get 5% of them, that’d be 1,250. If we can get 10%, we’d have 2,500 and so on. So, I don’t really know. And that doesn’t count waitresses or any other front of house staff, whether, you know, there’s some bartenders or, you know, door girls, whatnot, that might be interested in being on this site. And then, of course, other clubs and outside people as well. So, I think, it’ll grow relatively quickly. We were doing pretty decent and growing it when we were pushing it, the few times we tried to push AdmireMe. But as soon as we start putting any people on the site, it would — we would run into bugs and problems that we’d have to stop and hold back and then try to fix the software.

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.

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.

So, if we can get the licenses issued in the next three months, you know, we’ll be good to go. I just don’t know where they’re at because they just don’t tell you anything, right. They tell you if they need something and they tell you when they’re going to come visit you and those types of things. But they really don’t give you any real feedback on where they’re at in the process or when they think the process will be completed.

Adam Wyden: You talked about senior management changes at Bombshells. I mean, have you — you know, has senior leadership, the head of Bombshells, are they still there? And I guess, you know, your strip club, sorry, on the nightclubs side, you sort of have a unique, you know, management program in that, you know, the nightclubs are managed by RCI Management Company and they’ve been with you for a long time. And, you know, many of the managers sort of participate in the tip pool. It’s sort of more of an entrepreneurial culture. I mean, have you considered bringing in someone from like a Twin Peaks or a [No Host Locos] or, you know, another business and perhaps structuring a program where, you know, someone who knows what good looks like, you know, sort of has a revenue share, a profit share or some sort of thing.

So, you know, they go up and down with the business. I mean, you know, I don’t know, but it seems like it’s worked really well on the nightclubs side, you know, sort of the entrepreneurial culture and sort of the way, you know, you sort of manage those. I mean, have you thought about sort of doing something similar on Bombshells? Where you sort of, you know, get on Ed or get someone that, you know, sort of, you know, has real sort of financial interest in the success of the business, you know, and sort of bringing someone over from a business that has, you know, sort of executed. I mean, because I don’t think it’s that hard. I mean, I think, if you look at like some of the other businesses on the restaurant side, I mean, obviously they’ve seen some weakness, but, you know, they’re still sort of holding margin and whatnot, which means that means it’s great opportunity.

It doesn’t mean, unlike on the nightclubs side, where your peers are sort of down 30%, you’re sort of, you know, eons beyond them. It feels like your peers aren’t that down on the restaurant side. So, it feels like, you know, there’s opportunity with the proper management. I mean, have you sort of sorted through that and, you know, is there anything you can sort of, you know, discuss on that front? I mean, because that might make it easier to sell it, or maybe you decide you don’t want to sell it if your — you know, you get someone that really can sort of do a 20% margin day in, day out.

Eric Langan: I mean, we are currently, you know, testing all of our options and working through this process. I mean, we basically started the process in December. We made a few changes. We were not happy with those changes at the end of that quarter. We have made additional changes. When the results came in, in January, as we started seeing the Bombshells results, we started making more changes. It was — we were affected in Texas by weather, freeze days, and then two weeks of rain and flooding. So, there’s some — you know, there’re some issues on, you know, are the changes we made in early January working or not? We will know that over the next couple of weeks as we go through Super Bowl Sunday. I will tell you that Ed is helping out with Bombshells right now, as I am myself being involved in monitoring stores, you know, dailies, hourlies sales, and making phone calls and visiting sites and doing the things that we need to do to make sure the changes that we are — that we’ve made are working and that we’re seeing immediate results.

I think that part of the problem was the current management team that we had in place in October through December just did not understand the sense of urgency. I think they have definitely got the sense of urgency well under at this time, and they understand that this is not a — we’re going to wait till March to see results or we’re going to wait till May to get results. No, we are going to see results this week and to see results next week, and we’re going to see the results the week after that, and if the results aren’t going in the direction that we want, we were going to make more changes, you know, until we get the formula correct. I think the concept is a great concept. The food is great. I think we’ve lacked in a couple of places. We’ve lacked in service and customer service, and I think we’ve lacked in — the focus of the current team has been strictly on the restaurant and not on the bar sales.

And, of course, the bar sales are the highest profit margins. And that really showed in this last quarter, where I think the eye was taken off the ball on a few things. You know, we’ve asked and told them to make certain changes to the music formats, to the DJs, some of those changes were not made that we asked for. Those are now being monitored on a daily basis. And, you know, I’d say the easiest way is I’m not being nice about it anymore. I’m not giving — there is no time, sense of urgency is today, not tomorrow, not next week, but today. And if they can’t get the sense of urgency figured out relatively quickly, like today, then tomorrow, they’ll be — I will be making additional changes until I get the formula right. I’ve done this many times.

I used to be the turnaround, that’s why — my start of this business was buying clubs that were — that needed to be turned around or businesses that need to be turned around and going in and fixing them and putting the right people in place. And that’s exactly what I’m doing with Bombshells now.

Mark Moran: Fantastic. Thank you so much for the questions, Adam. We are going to call up one last question [indiscernible]. Please take away.

Unidentified Analyst: Hello? Can you all hear me?

Mark Moran: We can hear you.

Unidentified Analyst: Yes. Cool. Well, thanks for having me on, Eric, Mark, Bradley, big time supporter, long-time fan of Rick’s and RCI. But I have a question for you, Eric. In two years, what does that ideal quarter look like for you?

Eric Langan: Oh, in the next two years, I mean, I want to continue, you know, to grow our free cash flow at a 10% to 15% rate. I want to see the casinos open. I think we need to — within the next two years, I’d like to see us take another major acquisition in, of, you know, 10,15, 20 clubs in a single stroke, so that we are buying out another, what I call a major player in the industry, like we did with the Birch Management acquisition, like we did with the acquisition of BCGH. And, of course, we did our first large one in 2012 when we bought out the Jaguars chain. So I’d like to see us take down another major chain in the next two years. I would like to see the casinos — you know, we’ll have results of operations from the casinos, so we’ll know if we can take the entertainment/casino model to other markets, whether that’s Iowa, Indiana, Mississippi, you know what other small states, what I call regional casino states, and even, maybe even small regional casinos outside of Las Vegas in the state of Nevada, but not in Vegas itself.

So, we’ll have that, and then, you know, obviously, I’d like to see, you know, whether the Bombshells change is going to be able to grow into a great, large franchisable chain or whether we’re going to, you know, look at having private equity take that out from us and take our efforts and energies and put them someplace else. That’s kind of where I see us at in two years.

Unidentified Analyst: Yes. Thank you. I really love that.

Mark Moran: Fantastic. Thank you so much for that question. And thank you, Eric and Bradley. On behalf of Eric and Bradley, the company and our subsidiaries, thank you and good night. As always, please visit one of our clubs or restaurants, say hi to Bridget at the door, and have a great evening. Until next time.