Q4 2024 RCI Hospitality Holdings Inc Earnings Call

Thomson Reuters StreetEvents12-17

Participants Eric Langan; Chairman of the Board, President, Chief Executive Officer; RCI Hospitality Holdings Inc Bradley Chhay; Chief Financial Officer; RCI Hospitality Holdings Inc Mark Moran; ...

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Bradley Chhay; Chief Financial Officer; RCI Hospitality Holdings Inc","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"RCI":"罗杰斯通信","RICK":"RCI酒店控股"},"translate_title":"2024年第四季度RCI Hospitality Holdings Inc收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RCI":1,"RICK":1},"content_text":"Participants\nEric Langan; Chairman of the Board, President, Chief Executive Officer; RCI Hospitality Holdings Inc\nBradley Chhay; Chief Financial Officer; RCI Hospitality Holdings Inc\nMark Moran; Moderator; Equity Animal\nGaml Way\nAdam Wyden\nPresentation\nMark Moran\n Greetings and welcome to RCI Hospitality Holdings fourth quarter, 2024 earnings conference call. You can find the company's presentation RCIs website. Go to the Investor Relations section, all the 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 today. I'm coming to you from New York City. Eric Langan, President and CEO of RCI Hospitality; and CFO, Bradley Chhay are in Houston today.Please turn with me to slide 3. RCI is making this call exclusively on X Spaces. (Operator Instructions) And this conference 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 may 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'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric Take it away.\nEric Langan\n Thank you, Mark and thanks for joining us today, everyone. (inaudible) takeaways. All comparisons are year over year, unless otherwise noted. Please turn to slide 6. Fourth quarter, nightclub sales same for sales increased for the second quarter in a row. This was the first time since the first half of fiscal 2023. A total company sales declined due to a hurricane and a fire resulting in lower EPS. However, non-GAAP EPS, net cash provided by operating activities and free cash flow all increased.We ended fiscal year '24 with 8.955 million shares outstanding a reduction of 4.7% year-over-year. Turning to the capital allocation. We have officially launched our back to the basics five year plan. We have already made some considerable progress in implementing this plan, that includes continuing to buy back more shares in the current fiscal quarter -- first quarter of 2025. We also divested four underperforming bombshells location, close the Denver Food Hall, reduced bombshells related debt and discontinued franchising.Please turn to slide 7. RCI has grown significantly since we initiated our capital allocation strategy at the end of fiscal year 2015. Revenue has more than doubled from $135 million to $296 million, CAGR rate of 9%. More importantly, free cash flow has more than tripled from $15 million to $48 million, a CAGR of 14%, while our share count fell by 13%. We are proud of this achievement. Thanks to all of our employees, entertainers and partners who have made this possible. Looking ahead, we plan to build on this progress through our back to the basic strategy.Please turn to slide 8. Operationally, this means focusing on our core nightclub businesses and making new acquisitions. For bombshells, this means improving performance of existing locations and finishing the last three units under construction. Looking at capital allocation, we expect to generate more than $250 million of free cash flow over the next five years.Under our plan, we will allocate 50% of that to club acquisition which includes the repayment of debt, since most of our debt is acquisition related and we will allocate 50% to share buybacks and dividends. Our fiscal 2029 targets call for hitting $400 million in revenue, $75 million in free cash flow and reducing our share count to 7.5 million or less. This would result in a doubling of free cash flow per share from where it is today.Please turn to slide 9. For more details. Nightclubs are a core business. For anyone new to RCI in this call, we love this business because it generates an estimated 35% plus in operating margins. There are high barriers to entry and [claws] produce steady and significant cash flow. Currently, we are evaluating every club in our portfolio and we will rebrand reformat our divest underperforming locations.As for bombshells, our target for the segment is 15% operating margins with a return to same store sales growth. Regarding club acquisitions, our goal is to acquire $6 million of adjusted EBITDA a year focusing on the best clubs buying for base hits and maybe an occasional run. Our target metrics remain the same 3times to 5 times adjusted EBITDA for club, business and farm market value for the real estate.We will continue to finance our deals with a combination of cash on hand, bank financing and seller notes. We will also consider using stock if and when our valuation improves. We will continue to target 100% cash on cash returns within a three to five year period.For the final part of our plan, as opposed to periodically buying shares, we anticipate implementing a program of regular buybacks and flexing up the stock buyback, if the stock is particularly cheap. We expect to buy a significant amount of stock if the price is right, given where our stock is trading in our view of what the business can do over time, we believe this is a great use of capital. We are also planning small dividend increases annually.Please turn to slide 10. Based on our track record, we believe our five player plan is very achievable. Since fiscal 2017, we have completed $267 million of club and related real estate acquisitions. We have stayed disciplined on price. We have improved operations and financial performance consistent with our goals and we have been able to deploy larger amounts of capital as we've grown.We think there's a lot more runway for club acquisitions as illustrated in the pie chart. Although we can't predict the size or timing. We think our goal of acquiring $6 million of EBITDA per year is very achievable on a five year average basis.Please turn to slide 11 here. You can see that the anticipated growth rates of some of our key financial targets are somewhat conservative based on past performance. We also do not anticipate increasing leverage to achieve our goals.Please turn to slide. 12. We have already made considerable progress on our plan in our nightclub business. We have generated two quarters of positive same store sales growth. We are working on three potential acquisitions. In our bombshells business, as I mentioned earlier, we have divested underperforming units. We closed the Denver Food Hall in early December and are marketing that real estate for sale. As we did and we also discontinued franchising. In addition, during the fourth quarter, we increased our share buyback program. We increased our cash dividend by 16.7% and we are continuing to reduce our share count.Please turn to slide 13 for the first look of our updated capital location strategy. This is the path we will take to grow the company to $400 million in revenue, $75 million of free cash flow and continue to reduce our share count.Now, I'd like to turn the presentation over to Bradley to review performance for the fourth quarter.\nBradley Chhay\n Thank you, Eric. Please turn to slide 15. All comparisons are year over year unless otherwise noted. Fourth quarter sales declined $2 million. This was largely due to a hurricane related closures and the sale of bombshells San Antonio in early September. Net income attributed to RCIHH common shareholders declined a similar amount with EPS at $0.03.Looking at some of our other key metrics. Non-GAAP EPS increased by a $1.63. Net cash provided from operating activities increased $3.5 million and free cash flow increased $2 million while adjusted EBITDA declined $2.3 million.Please turn to slide 16. Nightclub revenues declined $307,000. This primarily reflected a 2.2% same store sales growth, 10 closure days at Houston area club due to hurricane barrel in July and some other changes that we're going through to improve our club lineup. Alcoholic beverage sales increased 0.3%. Food, merchandise and other increased 0.9% and service declined 1.7%.The differing growth rates primarily reflected higher alcohol and food and lower service revenues. Impairment and other charges were lowered by $2 million. As a result, operating income was $1 million higher while non-GAAP was $1.1 million lower.Please turn to slide 17. Bombshells' revenues declined $1.643 million. This primarily reflected a 16.2% same store sales decline which was negatively affected by 26 closure days at Houston area locations due to hurricane barrel in July. Impairment and other charges were $3 million higher. This primarily reflected employment, partially offset by a gain from reducing San Antonio related debt. As a result, there was an operating loss of $2.5 million compared to an income of $1.2 million. On a non-GAAP basis, however, operating income was $701,000 compared to $1.4 million.These bombshells and pyramids included locations that were divested and the Denver Food Hall, even though these events occurred in the first quarter of 2025. These divestitures and closings are anticipated to improve the segment's performance. Collectively, these five locations accounted for $14.6 million in sales in fiscal 2024, excluding $10.3 million in impairment and $2.9 million in gain on the sale, they lost a collective $1.1 million.Please turn to slide 18. Corporate expenses increased modestly by $284,000 and a little less on a non-GAAP basis. Please turn to slide 19. 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 the closest GAAP equivalent on this side which are operating income and net cash provided by operations and net income.Please turn to slide 20. We ended the fourth quarter with cash and cash equivalents of $32.4 million. During the quarter, we used $7.8 million to buy back shares. As a percentage of revenues free cash flow was 18% and adjusted EBITDA though it was 24%.Please turn to slide 21. Debt at September 30 declined $7.2 million from June 30. This reflected eliminations of bombshell, San Antonio debt, early pay down of $1.5 million of the playmate notes and other scheduled advertised paydowns. The way the average interest rate was 6.67% only 3 basis points higher than a year ago.Total occupancy cost was 8% and decline is at 8% and declined from 8.1% year-over-year. Debt to trailing 12 month adjusted EBITDA was 3.28 times similar to the third quarter. This should now further decline in fiscal year 2025 as sales grow from locations that have come online and more recently and from those anticipated to open it throughout the year. Debt maturities continue to remain reasonable and manageable.Now, here's Eric.\nEric Langan\n Thank you, Bradley. Please turn to slide 22. We have seven remaining developments. Bombshell, Denver is awaiting final inspections. We are targeting a late January opening in time for professional football championship. Chicas Locas, El Paso is finished and reopening is planned for March 1.We are waiting for new electrical plan signoff at the RICK's cabaret in central city. Then we have about six more weeks of construction, we are targeting April opening to avoid risk of bad weather. Interior construction at Bombshells, Lubbock is well underway and we are targeting an April opening. The framing and stucco work is underway at Bombshells in Rowlett and we are targeting a May opening there. I'd like to note that both Lubbock and Rowlett construction are being financed through current bank loans, construction loans rather than through free cash flow.We are still awaiting construction permits for the Baby Dolls, West Fort Worth and we are awaiting engineering review of our plans for the Baby Dolls, Fort Worth to rebuild our club that marked down.I'd like to say thank you to all of our loyal and dedicated teams for all their hard work and effort and to all of our shareholders who believe and make our success possible.Now, open to Mark for questions and look forward to hearing what you are concerned with.\nQuestion and Answer Session\nMark Moran\n Thank you very much, Eric. Before I continue, I'd like to call Scott Buck. If you could please request to speak.(Operator Instructions)To start things off, we'd like to take questions from Scott Buck if he is available as well as RICK's largest shareholders. So if you're out there, please request to speak and we will add you to the docket.It's not looking like we have Scott in the audience. So I would like to open this up to anyone with questions. (Operator Instructions) There we go. We have D&D Realty. D&D Realty, please take it away.\nEric Langan\n You have to unmute yourself to speak.\n Hi. Can you hear me?\nEric Langan\n Yeah. Now I got you.\n Sorry. So you guys have about six to seven properties that are currently under construction or in development after you work through that pipeline, how do you think about development or opening new clubs organically versus purchasing them nonorganically? Thanks.\nEric Langan\n Probably with very high thoughts of suicide. No, I do not want to do anything else for a long time. We're going to get these open because we've, this was our way of growth outside of acquisition. I think we're going to focus strictly our growth on acquisition and try not to build anything else anytime soon. I definitely don't see us building anything else in '25. And if we don't start to look for stuff in '25 we won't, probably won't build anything in '26. So it'll be a few years before we decide to build anything else I believe. We're going to strictly look at acquisitions for growth from this point on.\nMark Moran\n Thank you very much, D&D Realty. Next up. We have Antonio. My man, how you doing? Please take it away.\n Doing great man, how are you?\nEric Langan\n We are great, good to see you.\n Yeah. My question with all the challenges that you've come -- overcome through 2024 being an interesting year and coming out on top, what got you excited about the future of the business model with the brand new five year plan?\nEric Langan\n I think that, just getting back to our basic core business really being focused on the clubs again, I've been digging through financials, looking at some of the performances, of some of our operations. Trying to figure out, should we rebrand, should we eliminate some of the locations? Really going through real estate offerings and saying, what's the real estate worth as another use? And are we generating enough cash flow out of that unit to justify continuing to operate it as a club or should we sell the real estate and take the money and do something else with it?That was really a big part of our 2017 plan as we really got into the capital occasion strategy originally. And it's just nice getting back to visiting those thoughts again and just kind of seeing where we've come and look at, how much of our real estate value is actually increased. It's kind of crazy looking at some of the properties where you, we bought properties 15 years ago and, we've used them in loans back in '21 but here we are even, just a mere four years later and seeing the value increase, I guess a lot due to inflation a lot just due to some of our high freeway class-A locations. So some of our properties are on.\n Alright. And one last question, I know that some of your locations are taking bitcoin pay with bitcoin hitting 106,000 a day. Like, I mean, how is that looking? Is that something that's being -- is that an interesting perspective of the business model? Because you've been taking it for a while now.\nEric Langan\n I'll have to actually go and look at the Miami, New York clubs and see how much it processing. I don't actually see the bitcoin because we actually convert to US dollars at the point of transaction. So I don't really see. So I have to actually like go look at a special program basically to see how much we're taking in bitcoin. But I will do that and let everyone know. I'll see what I can find out post on Twitter, how that's going for us.I know that bitcoin has been a very integral, especially in Miami and I think we started in New York and Chicago as well. So I suspect that these high prices, we're probably getting more of it.\n Thank you.\nEric Langan\n Yeah, thanks. And if anyone's not following Antonio, he's got a great show on stocks and investing, might want to throw him a follow and see a show on Monday.\nMark Moran\n And I'm thinking that. Yes.\nBradley Chhay\n Mark, Scott Buck is actually on, will you pull him up as a speaker? (inaudible) for some reason?\nMark Moran\n Yeah, he's not showing up on my request, but I'm going to bring up Jacob first and I will try adding Scott while Jacob is speaking. So Jacob, please take it away.\n Hello, you guys hear me?\nMark Moran\n Got you, loud and clear.\n Great. Well, perhaps you mentioned this but I mean, could you give some more color on the like M&A environment. Is like things heating up, like geographically, like where is like the interesting objects? And I remember from a couple of quarters ago that you guys mentioned that you had put out some LOIs, but no deals has yet been occurred. So, just kind of wondering what's happened here like about the climate.\nEric Langan\n Well, we have three that we're working on right now. We're waiting for -- they're all in different various phases of licensing approvals. And so if we get those licensing approvals, then, we'll get those deals closed and announced. We're also talking with other operators out there right now. So our core focus is for growth, is strictly going to be from this point forward, is acquisitions.We'll be kicking a lot more tires and looking a lot harder. At deals, but we will stay within our parameters. And not stretch to get deals done. So, I assume that as we move forward, we'll continue to start seeing some acquisitions. We're going for some -- we have been looking for the larger ones over the past few years, with the $88 million acquisition in '21 and the $66.5 million acquisition in '23.And so now we're starting to look at the some much smaller acquisitions in size. A lot of acquisitions in the, -- that we're looking at right now are probably between $5 million and $15 million purchase price. So they will be a little bit smaller, but we hope to do enough accumulation, to hit our target goal of $6 million per year added and we did our 20% increase and then grow our same store sales a couple points a year and achieve our goal of $400 million revenue and $75 million free cash flow by 2029. So we will -- we'll be monitoring that closely each year.\n Okay. Nice. Yes. So in those clubs that you're currently evaluating, are those still in the same areas that you currently operate in?\nEric Langan\n Some are in different areas, some are in the same, I mean, same states. Obviously the same states make it easier for us. We're licensed in those states, everything is a little bit quicker in those states. We are looking at a couple of new states which is probably reasons taking a little more time on a couple of the ones we're working on right now. So, but hopefully we'll get through those hurdles, relatively quickly after the first of the year and get a deal closed.\n Okay, nice. Thank you.\nEric Langan\n Yeah. Thank you.\nMark Moran\n Thank you very much for that question. We are still working on bringing Scott Buck, up. However, we have DJ HLS, please take it away with your question.DJ HLS. You'll need to unmute yourself to speak. While we're waiting for this to be unmuted. There we go. Take it away, please.\n Yes. Yeah, this a shareholder from Germany. So many of your locations are located in a region where hurricanes accurately hit your operations. Isn't there any insurance which compensates you for those locations hit by a hurricane or fire?\nEric Langan\n I mean, if there's a large enough destruction or close for a long enough period of time. Yes. I believe we have a claim in on Barry for a few of the locations. We also have deductibles that we have to reach first. And so most of that's all being done with the accountants and the insurance adjusters now. So there may be some payout at some point from that hurricane or there may not. I just don't have enough information it. It wasn't, other than the business lost days, there wasn't a lot of damage to our properties other than we just didn't have electricity so we couldn't open.\n Thanks a lot.\nEric Langan\n Yeah, And we do carry insurance on our properties in all those markets. So.\nMark Moran\n Fantastic and great question. (Operator Instructions) Scott. We are currently trying to coordinate. There we go. You just sent some questions. So since we cannot bring Scott Wright -- Scott Buck, excuse me of HC Wainwright.He has messaged me his questions and the first one is Eric, under the back to basics plan, would the company consider increasing the dividend?\nEric Langan\n The dividend is not really a tax efficient use of capital. However, I do like the dividend and many of our shareholders do like getting the dividends, especially a lot of are just starting to do the drip programs. I think with them to buy the stock when they get their dividends. We will continue to, slowly and gradually raise that on an annual basis so that we continue to have a dividend growth and continue to pay our dividend.I think we're nine years of constant dividend payments and constant dividend growth on an annualized basis. So, I see us continuing that least for the next five years, along with the majority of our capital return being done through buyback.\nMark Moran\n Fantastic. And so Scott has an additional question, which is what was the purchased real estate value of the closed bombshells in Denver Food Hall for him to understand potential sale values.\nEric Langan\n $5.2 million for the Denver Food Hall, all of the bombshells that we divested were leased locations and most on their third rent increases, which is why we just decided it wasn't -- they just weren't economically viable to continue to try to operate those.As Bradley pointed out for fiscal '24 those units lost $1.1 million combined. So, we just decided to move forward to get rid of those locations, focused on the core locations that we own the property on. We have one location left that we own the property on, that numbers are increasing because we closed -- the unit that was close to it. So we are seeing a little bit of increase on that. And then if that unit starts meeting the margin requirements that we're going to sit on it, then we'll keep it open and if it does not, then we may divest, that unit at some point and sell that property off as well.I'd have to go look. That was part of a 11.5 acre development. We've actually don't have any money in it because we sold all the additional real estate around it other than the 2.3 acres of property sitting on for way more money than we paid to buy the land and build the building that we built on there. So we are already plus on that property. So we'll just have to see if we can get that turned around or not. Here probably in the next three to six months, we'll make a decision that as well.\nMark Moran\n Fantastic. Thanks so much for that. And before I bring up Gamel Way, Eric, we have a question submitted to me from one of our larger shareholders and he is asking about the impairments and what those specifically are. If you could speak to that.\nEric Langan\n Bradley, you want to handle that?\nBradley Chhay\n No. It's kind of your expertise. The impairments are basically accelerated write-offs of various sets of assets, either intangible assets such as SOB license, Goodwill or FFNE. They stem from basically doing an analysis of the future discounted cash flows against the book value of the assets. So in this current quarter, we had $12.5 million and for the fiscal year, we had $38.5 million.\nMark Moran\n Fantastic.\nEric Langan\n Mark, I'd like to come. And from my understanding, Bradley, correct me. A lot of this is because of interest rates increasing and so the discounted free cash flow rates are increasing. Thus driving down the value of that free cash flow and resulting in these impairments. So they're all noncash and the reality of it is they don't really affect the operations at all or the free cash flow at all.\nBradley Chhay\n Yeah, they don't affect the free cash flow at all. That's correct, Eric.\nMark Moran\n Fantastic. I very much appreciate that. (Operator Instructions)Gaml Way, please take it away.\nGaml Way\n Hey, thanks a lot. Really like your work. Any plans of opening restaurants in Yuma area, Yuma County and Yuma. There's a lot of traffic, it's a $3.5 billion agriculture industry and there's a lot of traffic going on. There's a lot of activity going on. Any plans of expanding beyond Phoenix. Thank you.\nEric Langan\n I mean, we'll buy existing nightclub operations. If we can find them in any market right now in the US. But as far as opening any new restaurants, no. We have no desire at this point, other than the three that we were already well into construction on. I don't have any plans of building additional restaurants at this time.\nMark Moran\n Thanks so much, Eric. (Operator Instructions)Unless Eric or Bradley, there's anything else that you'd like to opine on or promulgate about. We have one request, now. Adam Wyden, please take it away.\nAdam Wyden\n Hey this is Adam Wyden. Did you guys open it up, you guys can hear me.\nEric Langan\n Yeah. I got you.\nAdam Wyden\n Okay. Perfect. I'm sorry I missed the first part of this call. I was on another call. Has that I've got a few questions. Have you guys talked about the non-income producing real estate that you're planning on selling and sort of what you think the value is in terms of cash on the balance sheet and how much the EBITDA is being dragged down, from the property taxes and the operating expenses. Did you guys go into that all?And the assets you're planning on selling and monetizing sort of the framework for how much it's value that's not on the balance sheet and how much EBITDA you could save by monetizing those pieces of real estate.\nEric Langan\n I didn't go into it in this call really. But top of my head, we probably have about, well, now that we've put the grange up for sale, the food hall in Denver up for sale. We have the 14 or 19 acres in Pearland and plus the additional build site next to the bombshells in Pearland. We have one of the central city casino properties that we're going to -- that we've been meeting with some people to try to sell.Probably in the neighborhood of $20 million to $25 million in value. We bought most of that real estate at very good prices. So we don't have anywhere near that in it, but as far as carrying costs, I don't know, off the top of my head, but it's in the hundreds of thousands of dollars, same property taxes, insurance and whatnot. And we are actively pursuing moving a considerable amount of that real estate in 2025.\nAdam Wyden\n Got it. And did you talk about, I don't know if I missed this, but did you guys talk about sort of where you expect bombshells margins to get in 2025, now that you've closed down the three bad ones and you're opening up the good ones, sort of has your expectations around margin generation for bombshells changed in '25 and beyond. I know you're not building anymore. But like, do you sort of have a sense of where you think Bombshell's margins are going to settle out now that you've gotten rid of the three bad ones and got the three new ones open.\nEric Langan\n Yeah. Without the new ones actually open and seeing their progress, I don't have an exact number but we are targeting 15% on the bombshell's margins. And if we can't get there, we will start looking at what else we can do with those units. But the real core right now is returning to the same store sales growth. I think we're going to be very close in this quarter.If not positive in the December quarter, at least down single digits, not just 15%, 16% we've been doing, we've made some changes. At units, we've also eliminated, the stores that were the biggest drags because of the high rents and whatnot and really focused on what we need to do in those locations that we have left, strengthen our management teams. We're able to build our teams up at stores with some good manager and some bad managers.So we're able to basically sort through all those management teams, they build strong teams out of the people that we kept, as we close units. And I'm optimistic. We're definitely moving in the right direction. But the space is a difficult space right now. If you read the papers, the news, there's new restaurants going bankrupt every single day. Everybody's complaining about sales and margins out there except for a few that are just very, very strong and hopefully we can find that magic formula that we had for about the first 10 years, we operated these things and get it back.We're very focused on our late night. We're very focused on our, making it fun, making a party again and increasing our alcohol sales as a percentage of total sales at each location as well. So I think we're well on our way and over the next six months, we'll get a very good idea of if our progress is in our -- and what we've done is working well for us or not. But 15% targets are what we're shooting for right now.\nAdam Wyden\n Yeah. So if I'm -- again, I'm just looking at the deck that you guys put together, which is pretty straightforward. I mean, you guys have a thing, 40% buybacks, 50% acquisitions, dividends less than 10%. So, that's pretty straightforward. Is there -- do you guys have, I mean, I know obviously the comps have been lumpy. There have been periods of time when they're high, periods of time when they're low. You guys seem to be rebounding pretty nicely on the strip clubs. I mean, once, obviously bombshells is going to be smaller. It used to be 14 locations. You close three, then you got the grain. So that gets you down to 10. You got the three new ones, but --\nEric Langan\n And we sold Antonio as well, so.\nAdam Wyden\n Yeah, I know. But it was 14 with the grange and then you went down to 10 and then you got the three new ones opening. So you'll be back to 13, but the composition will be different.\nEric Langan\n 13 or 12, I'm not sure. I think it's 12, Adam.\nAdam Wyden\n I'm confused myself. But you have sort of a -- at that point, as a percentage of sales you're not going to have -- your bombshell is still not going to be a huge percentage of the business. And with the nightclub, comping positively this is and as you do more M&A, nightclubs will be a larger percentage of the business. Do you think you can get back to doing 3% to 5% comps, in the business?I mean you're sort of there now and I can sort of back into it, you're sort of there on nightclubs. Bombshells is going to be flat hopefully, or close to it this year. You'll have the new ones open, hopefully that those can, whatever, a few percent. I mean if the taxes -- of the taxes on tips and sort of what Trump is doing for small, medium sized business, maybe we get a resurgence and as you said, there are a lot of restaurants that are suffering, maybe you get a resurgence there, we get a little bit of a lift at bombshells just from the macro.I mean, do you think it's unrealistic to think you guys can get, like on a total company basis, back to a 3% to 5% comps for the long term. Is that impossible?\nEric Langan\n I mean, it's not impossible. I mean, I'm shooting for a minimum 2% overall growth rate right now. Over this five year plans for our five year plan. I would like to see it much higher and I think if the economy does well, we will do well as well. I just think there's a lot of work on the government side and depending on where the government spending cuts are, if they're US based, it's going to affect things in the US little more drastically.If they're more foreign based and they spend more money in the US, then of course, we would see the opposite here, I think so. I think we're just going to have to wait and see, how that plays out. I'm playing with the cards I'm dealt right now, and dealing with those cards, staying focused on a much more short term window and watching our trends and adjusting very rapidly if we need to adjust, whether it's pricing, whether it's labor, whether it's security costs, just really very focused on our, especially our core business and the bombshells margins, and watching those things, like I said, we've been going through financials every month, very hard and finding places to make cuts or to make improvements.Because there's some places we found as we look through things where, maybe we were leaving some money on the table and we've been able to make some adjustments there and increase revenues in those markets. We've got -- if you look at everything right now with our -- I caught my 2017 eyes, where we're, everything's on the chopping block and we lay it all out and say, okay, what's the best use of capital? How much capital we have tied up in this asset? What's the asset ROI and return on equity? And are we -- can we sell that asset and get higher return on equity by putting the money someplace else or not.We've got about four clubs that we're looking very hard at maybe, maybe fifth one and one bombshells left. So we've got, five -- four, five, maybe six locations. We've made some adjustments, made some changes. We'll see how those go over the next three to six months and then you may see us list those properties for sale or you may see us just surprise me, sell those locations as we were talking with the other private buyers right now on a few smaller -- they're very small locations for us.And that's another thing that I'm very focused on. Is it worth our time, effort and energy to put basically I call it the machine, to put our machine behind a club that's generating $1 million in sales and making $300,000. Is that still the best use of our resources from our people side of the business and our, return on that high enough or could we make more money if we put those resources into a larger location?So there's a lot of things that were really talking about on a basically, pretty much a weekly basis and trying to get to get to everything.\nAdam Wyden\n Did you guys talk about your CapEx and how you like -- is your -- you've been spending a lot on CapEx for the bombshells and the casinos and the renovations. I mean, you would expect in 2025 your maintenance CapEx to go your normal level, right? Like you guys are close to it.\nEric Langan\n We hit about $7.5 million or $7.8 million last year. We did the roof at Tootsies which was a considerable improvement expense and we did multiple entirely new AC packages plus four remodels. So maintenance CapEx was a lot higher last year. I think we'll get back to -- I think we're forecast at $6 million for 2025. And I think we'll come in pretty close to there, maybe even a little under.\nAdam Wyden\n Right? And if we -- and if most of the money has been spent on bombshells, like if I'm just backing into it, the only deviation from $6 million of maintenance capital would probably be M&A right, if I think about CapEx, right? Like you --\nEric Langan\n Yeah, that's total CapEx, not maintenance CapEx. So.\nAdam Wyden\n That's what I'm saying. I'm saying, like if you look at the last few years, you've been spending, you bought the casino real estate, you did this, you did that, you built bombshells. Like, if most of the money has been spent on the bombshells already, at least from what I can tell. Denver is already done. So that's going to be open. Rowlett has mostly been spent. Lubbock, I mean, do you have a lot more capital going out the door for the bombshells or no. They're probably mostly been spent, no.\nEric Langan\n No that, as I said in the call earlier both bombshells, Denver is done. We're getting final inspections. I believe we had inspections all this week. We have two more inspections on Thursday and then I believe the final is scheduled for Friday of this week. Then we have the liquor inspection the following week, hopefully, and that store will be done. So there's not much more money to spend other than startup costs, right? I mean, we always have startups, but the startup costs will be offset by immediate sales in January as we open.\nAdam Wyden\n Yeah. So my --\nEric Langan\n We start -- most of those startup costs will start January 6, and with any luck, we'll be able to open that store somewhere around the 21 or 22 of January. So most of those costs will be offset in that quarter, which will be the second quarter of fiscal '25. The construction for the other two locations are all bank finance now. So there's no actual cash from the company going out on those locations.\nAdam Wyden\n Right. But my point is that like this will be a pretty big step down for CapEx. So you're going to have cash flow next year. If no M&A shows up, I don't know if you talked about M&A but if no M&A shows up, you're going to have a lot of cash to buy back stock at these levels and you bought back in 24. But you also had to do the projects. If you have $25 million of real estate going out the door and the CapEx going down, you guys are going to have a pretty big war chest to buy back stock if there's no M&A right. I mean, if the stock stays here, you're going to be pretty active on the buyback, I would think no.\nEric Langan\n We are active every single day. We don't have a set cap at the month that we're going to stop buying back stock. We did have -- we did get a considerable amount of extra cash. And we paid about $2 million worth of additional debt off including a big portion of some 12% debt that we had.So we have been working on not only buying back our stock on a very regular basis, but also bringing our debt down. I want to get our debt to EBITDA under 3 times under 3x. That's always been our target as a high -- we know we can go to 4 times without stretching too far. But because of all -- most of its real estate related, but we like to keep our total debt load at 3 times -- on a 3 times basis. So --\nAdam Wyden\n You should. You're under 3 times on next year. I mean, again, I don't have to --\nEric Langan\n Yeah. I think so too. What we look at a trailing which was 3.28 times at the end of September 30. So we are definitely working on that.\nAdam Wyden\n Yeah, I mean, as a -- I don't have the September balance sheet in front of me, but as of June, you had [$244 million] of debt, not including leases and [$34 million] in cash.\nEric Langan\n We paid back $7.2 million debt in the quarter and.\nAdam Wyden\n And, you have $34 million and you have [$30 million] how much cash do you have like [$35 million].\nEric Langan\n $32 million and change at the end of the quarter? But yeah, we're probably pretty close to $35 million right now.\nAdam Wyden\n So you got $206 million, right? If I'm doing my math, if you guys have all these assets coming online, the Bloomberg consensus estimate for EBITDA's [$83 million] but I suspect you're going to do a lot more than that. But even just on the consensus number, if I were to take $206 million divided by, what did we say, $238 million less $32 million is $206 million So if I were to take $206 million divided by $83 million this is the Bloomberg number that's 2.5 times 2025.And I think that if you get these other assets up and running and, you're doing some of the things you're doing in terms of cost cuts. And, again, if you can comp positively on the nightclubs, if you do a 4% 5% comp on nightclubs on $250 million in sales, I mean, that's almost all EBITDA, right. I mean, you could -- your EBITDA could be, probably, I mean, it's not unrealistic to think that you could be $100 million of EBITDA next year. It's not impossible.So, I mean, in that scenario, you'd be 2 times, but even if you just did the $83 million that the consensus number is you'd be at 2.5 times. I mean, yeah -- I mean, I don't know, I think it's hard for me to look at the debt like in the context of you have, $25 million or $30 million of real estate. You got these non-income producing assets. It's sort of like, I don't know, I think it's unfair to look at your leverage, because if you sell real estate then that's not making any EBITDA your leverage is going down and if you're not selling the real estate, you would make the assumption that the EBITDA is going to go up.So it's all sort of dynamic, right? If you've got real estate for the casino, for example, the one in central city, let's say that makes $3 million of EBITDA, you've got all the debt on the balance sheet from the casino, but none of the EBITDA, right or whatever, it's not a casino now. Now it's a nightclub, but you get what I'm saying?\nEric Langan\n Of course, I mean, as we open these locations. Yeah, I mean, all the constructions very near completion. So yes, most of the carrying costs for all of these locations that are getting ready to open. I'd say the majority are -- there might be I have to go look at the -- what's left to draw on the bank loans, but there might be $3 million on the bank loans for the two bombshells to draw out. So that go up a little bit more. But yes, all the real estate already owned, all the property taxes are being paid annually. The insurances, all those types of things.So all that revenue is going to, help and all the EBITDA drops in is definitely going to help drop that, from 3.28 times to below 3 times. So I'm not concerned with the debt. I didn't want to -- and that's not what I'm trying to say. I'm saying is, I still like to be within our norms because if a major acquisition comes up and I want to push it so hire, I want to have that room to do so.And if I'm already at a high, then I'm going to have to go, okay, well, maybe we can't make this acquisition because I don't want to push us to, very close to 4 times. But if I go to 3.2 times 3.3 times, 3.5 times because I'm making a major acquisition as we did in March of '23 with the acquisition, I'm not really concerned.\nMark Moran\n Fantastic. Thanks so much Eric and thank you for the questions, Adam. We will circle back if you have any further. Next question comes from another one of our larger shareholders who's asking for an update on [favoritele] Eric.\nEric Langan\n I mean, it's launched, you can go on the site. It's a [favoritele].com. We are adding growth. I think we have, we're still in beta. I believe the last time I talked to everybody about 10 days ago, we had five clubs that we're now being represented on the site with entertainers and other staff members. So I'm hoping we continue to see that increase as we add additional locations. And we get ready to do a full out launch of the site.\nMark Moran\n Wonderful. Now, last question that I have from another shareholder who submitted this, was just to give any color on the current business trends that you're seeing.\nEric Langan\n I mean, November was fantastic. We had five weekends every weekend was strong. I was strong around the holidays, which was surprising. We had two big fights with the Tyson Jake Paul, fight on Friday and then the big UFC fight on Saturday. So that was a great weekend. That third weekend of November.December started off a little slow, with the December 1, being a Sunday. However, the first weekend was very strong. We did decent through the second week, with this past weekend being just a little bit off. Not, not much, a few percentage points from what I guess I would consider, the number I'm looking for, I should say, not necessarily what trends have been, but as trends have been up, through October, November, December, I think we're seeing some pretty decent sales.So hopefully that will continue and, we'll get through the end of December. And, I think, we have a couple of weeks. Second -- last two weeks of January are kind of a weak phase for us and then we go into February, March. March madness is usually the big kickoff. So hopefully we have a really big March madness and of course, we'll have five weekends with five Saturdays and five Sundays and March again. So, it will be interesting as we continue to move forward.\nMark Moran\n Fantastic. Thank you so much for that, Eric. We appreciate everyone joining this call on behalf of Eric Bradley, the company and our subsidiaries. Thank you and have a good night. Please visit one of our clubs or restaurants to celebrate Christmas, Hanukkah, Kwanzaa, the New Year's or just to have fun. 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