RCI Hospitality - Q2 2024
May 9, 2024
Transcript
Operator (participant)
Of Rick's non-GAAP financial measures. Finally, I'd like to invite everyone listening in New York City to join Eric and me tonight at 7:00 P.M. to meet management at Rick's Cabaret New York, one of RCI's top revenue-generating clubs. Rick's is located at 50 West 33rd Street between 5th Ave and Broadway, a little in from Herald Square. If you haven't RSVP'ed, ask for us at the door. Now I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.
Eric Langan (President and CEO)
Thank you, Mark, and thanks everyone for joining us today. Please turn to slide 6. Despite the uncertain economy, the core range of our business enabled us to generate $72.3 million in revenue in the Q2 compared to $71.5 million last year. While GAAP EPS of $0.08 primarily reflected non-cash impairment, non-GAAP EPS totaled $0.90 near the high end of analyst expectations. The nightclub segment generated $59.4 million in revenue in 2Q2024, compared with $57 million last year. Separately, the effort begun in mid-February to improve Bombshells segment resulted in steady sales and better margins on a sequential quarter basis. Please turn to slide 7. We also continue to make progress with our new project developments. These efforts are focused on developing new locations and upgrading existing ones to further grow the company.
In doing this, we are committed to following our capital allocation strategy, concentrating on our core nightclub business, evaluating potential acquisitions, and buying back stock. To that end, subsequent to the end of the quarter, we increased our cash position $20 million by closing our planned bank loan. Now here's Bradley to go into more details on our results.
Bradley Chhay (CFO)
Thanks, Eric. Please turn to slide 8 to review our nightclub segment. Q2 revenues increased $2.4 million year-over-year. This was primarily due to a $7.4 million increase from acquisitions, which partially offset declines of $2.9 million in same-store sales and $2.1 million from clubs in transition. By revenue type, alcoholic beverages increased 16.9%, food 10.8%, and other by 4.3%. However, service declined 8.3%. The sales mix reflected higher alcohol and food sales from newly acquired clubs, and same-store sales declined due to lower service revenues. As we mentioned in the Q2 sales call, PT's Centerfolds in Lubbock, a new club, did not open till late in the quarter. Baby Dolls Abilene, a reformatted liquor club, didn't open until early April. A BYOB club in El Paso temporarily closed during the quarter to start reformatting into a Chicas Locas liquor club.
Although we didn't talk about it on the sales call, severe cold and rainy weather in Texas did have an impact in January, as it had for other hospitality companies. We had to partially close or fully close clubs and Bombshells for a number of days during that period. Impairment resulted in operating income of $11 million or $18.6% of revenues compared to $18 million or 31.6%. On a Non-GAAP basis, operating income was $19.8 million or 33.4% of revenues compared to $22.4 million or 39.3%. The Non-GAAP margin decline primarily reflected lower service revenues, higher insurance, an increase in Texas patron tax, and wage inflation. One of the reasons why insurance is higher is because we received a refund in the year-ago quarter. Now please turn to slide 9. The Duncan Burch acquisition has continued to perform well.
We closed on the acquisition in mid-March in 2023 with 4 clubs open. We finished remodeling and opened the fifth club in mid-June 2023. As of fiscal 2024 Q2, revenues have grown 23.9% from a year-ago Q3, which was the first full quarter post-acquisition. An operating margin has expanded 394 basis points. Locations have benefited from increased credit card transactions, reduced management costs, and more effective RCI marketing management purchasing methods, partially offset by the increase in patron tax, which started in September of 2023. Please turn to slide 10 to review our Bombshells segment. Revenues declined $1.5 million year-over-year. This primarily reflected a $2.7 million decline in same-store sales and a $1.2 million increase from acquired or new locations. Operating income was $0.7 million or 5.5% of revenues compared to $1.8 million or 12.4%.
On a non-GAAP basis, operating income was $0.8 million or 5.9% of revenues compared to $2.2 million or 15.4%. The year-over-year decline in profitability primarily reflected lower same-store sales. On a sequential basis, however, revenues were approximately level, and GAAP and operating margin expanded 480 basis points and 470 on a non-GAAP basis. As Eric mentioned earlier, this reflected the effort by upper management to return the brand to its core focus of being a sports bar. This began in mid-February to improve results. Some key changes included replacing management, cost-cutting, and going back to the basics, touching tables, make sure wait staff is attentive, among others. Please turn to slide 11. Corporate expenses totaled $6.8 million, an increase of $0.6 million on a GAAP basis. On a non-GAAP basis, expenses totaled $6.3 million, an increase of $0.8 million.
Both GAAP and non-GAAP results primarily reflected more corporate-level management from the Duncan Burch acquisition, casino pre-opening operations, and accounting and professional services due to the recently acquired clubs and new projects along with the timing of billing. Now on a sequential quarter basis, expenses declined $0.3 million. Please turn to slide 12. This puts together consolidated operating income on a segment basis. Please turn to slide 13. We have a couple of slides coming up that discuss free cash flow and adjusted EBITDA, which on a non-GAAP basis. In advance of that, we wanted to present the closest GAAP equivalents on this slide, which are operating and net income. Please turn to slide 14 to look at some of our other key metrics. We ended the quarter with cash and cash equivalents of $20 million. During the Q2, we used $1.5 million to buy back shares.
Q2 free cash flow was $8.8 million or 12% of revenues. Adjusted EBITDA was $17.2 million or 24% of revenues. Recent free cash flow and adjusted EBITDA conversion rates reflect a combination of lower percentage of service revenue and higher costs. Please turn to slide 15 to review our debt metrics. Debt as of March 31st declined $2.2 million from December 31st due to scheduled paydowns. The weighted average interest rate remained at 6.61%. Total occupancy costs at 8% declined on a sequential quarter basis. At 2.99 times, debt to trailing 12-month adjusted EBITDA inched up just a bit but continues to be in our comfort level of less than 3. Occupancy costs and debt to adjusted EBITDA reflect the fact that we were developing a number of projects. As they open and we begin generating revenue and EBITDA, both metrics should improve.
Debt maturities continue to remain reasonable and manageable. Please turn to slide 16 for our debt pie chart. We continue to pay down all slices of our debt. The percentage share of the different slices remained largely the same as the Q1. As Eric mentioned, subsequent to the quarter, we completed our $20 million cash-out bank loan. Now let me turn the presentation back to Eric.
Eric Langan (President and CEO)
Thank you, Bradley. I want to reiterate or I'm sorry, please turn to slide 17. I want to reiterate that everything we do is centered around our capital allocation strategy. We employ three different approaches subject to whether there is compelling rationale to do otherwise, mainly mergers and acquisitions, organic growth, and buying back shares when the yield on Free Cash Flow per share is more than 10%. Since refocusing myself on Bombshells in mid-February, I am starting to have our teams question everything like we did in 2016. This has caused us to rebrand some club locations, and we are currently evaluating several of our non-income and underperforming assets. We are doing performance reviews throughout our operations to ensure we are getting ROI from our team members and making sure we are rewarding those members appropriately for great performance and fixing or removing others.
We got a little complacent during the post-COVID times when times were easy, and I believe we must return our focus on the basics of our capital allocation strategy. Please turn to slide 18. We continue to make progress with new projects since our April 9th call. We have received our liquor license for XTC Dallas, which is being renamed and repositioned as Dallas Show Club. We received our liquor license for the planned conversion of BYOB Club in Harlingen, Texas, into a Chicas Locas liquor club. This should open this quarter. We also firmed up our plans to open Rick's Cabaret and Steakhouse in Central City without gaming in our Q4. Please turn to slide 19.
By sticking to our capital allocations since the end of fiscal 2015, we have generated compound annual growth rates of 10.2% for total revenues, 12.1% for Adjusted EBITDA, and 17.2% for Free Cash Flow. We also reduced our fully diluted share count even after shares issued for acquisitions. I'd like to say thanks to our local and dedicated teams for all the hard work and efforts, and all our shareholders who believe in us and make our success possible. Now here's Mark to start the Q&A session.
Operator (participant)
Thank you, Eric and Bradley. If you would like to ask a question, please raise your hand in the X Space. When you finish, please mute your microphone to eliminate any background noise. We have a limited number of speaker spaces, so after your question, we may move you to the back of the audience to free up space. To start things off, we'd like to take questions from Rick's analysts and then some of its larger shareholders. First up, we have Scott Buck of H.C. Wainwright. Scott, please take it away.
Scott Buck (Managing Director)
Good afternoon, guys. Thanks for taking my questions. Bradley, apologies if I missed it, but could you give a little color on what the increase in other charges was in the income statement this quarter?
Bradley Chhay (CFO)
You're talking about the impairment. We had an $8 million worth of an impairment charge.
Scott Buck (Managing Director)
Okay. All right. Thanks. Appreciate that. And then just I was hoping we could get a bit of an update on M&A. The call a quarter ago, it sounded like you guys were close to announcing something. I don't remember seeing it. Kind of curious if there's a holdup or if the situation has changed there?
Eric Langan (President and CEO)
Yeah, I'll take that one, Bradley. Basically, we had two LOIs. We have pulled one, and the other one is in kind of a negotiation lock at the moment due to the potential of unknown liabilities and the indemnification clauses that the company would require of the seller. I don't know if it's going to move forward or not at this time. I wouldn't say it's very promising. We are looking at several other acquisitions right now as well, though. And I think eventually these people will figure it out and come back to us because no one's going to buy unknown liabilities from anyone. So they're going to have to figure that out. And unfortunately, the way the licensing works in that particular market, their existing corporation has to be bought in order to keep the license valid. So we'll see as that one goes on.
I am looking at other locations around the country, and I figure at some point here I'd say sellers are getting more reasonable now. We just got to get some of the terms worked out with cash and carry of notes and whatnot. So we'll figure that out shortly.
Scott Buck (Managing Director)
Great. That's helpful, Eric. And second, I was wondering, we're about halfway through the Q2 now, I mean, second calendar quarter anyway. Curious if you could give us a little update on the trends you're seeing. I'm guessing it probably looks fairly similar to the Q1 or the first calendar quarter.
Eric Langan (President and CEO)
Yeah. Well, April beat January, which was very important to me. We now need May to beat March and then our June numbers to beat February so that we can be up sequentially on the quarter. The first week of May was very well. I don't know if you follow sports, but for those that do, you should know that we have four NHL teams and four NBA teams that are all in playoff modes right now. We've had some great games out there, getting a lot of traveling customers from our markets to our markets. For example, in Colorado right now, we have the Dallas Stars playing the Avalanche. So we're getting Colorado fans in Dallas and Dallas fans in Colorado, which is great for us. We have clubs in both markets, as well as the Denver Nuggets and the Timberwolves playing in Colorado and Minnesota.
So our Colorado locations are basically doing very well from both the NHL and the NBA. And so is Dallas because you have the Mavericks in there as well. So the Knicks and the Rangers are both in. So you get hockey and basketball in New York, which has been great for New York as well. And then, of course, we have the Panthers down in Florida. So all in all, very solid sports lineup. Last year, Mother's Day weekend was a very weak weekend, one of the weakest of the quarter. This year, I think we should have a much better Mother's Day weekend because we basically have 4 games that will affect us between hockey and basketball, basically starting tonight all the way through Monday, I believe. So very excited about that.
Scott Buck (Managing Director)
Great. That's helpful. Then last, if there's any update you can give us on timing in Central City, that'd be helpful.
Eric Langan (President and CEO)
Well, timing is just unknown. Other than we're going to do everything we can do to get the club open in this quarter. So we'll have the club and the steakhouse will be open in this quarter. We've gotten some news from gaming where they've requested a very large amount of money to continue our investigation through a third party and gave us a very long timeline from where we are today. I'm currently basically evaluating that timeline with our new refocus on capital allocation, doing a lot of math right now, and calculating whether or not we want to even continue to focus on that at all or take our money and energy and focus instead of casino operations, get focused back on our core business. If so, we would probably divest a property or two of the properties.
Obviously, we'll keep the Rick's location and the steakhouse up there, but we may end up actually withdrawing the gaming license at some point instead of paying all this money for the investigation and waiting the timeline they want. I just don't know yet. When I know, I will get that information out once what decision has been made. But there's just a lot of new information that's come in in the last week or so, and we're evaluating all of that at this time, and we'll have a better understanding where we're going with that as we move forward.
Scott Buck (Managing Director)
All right. I appreciate the transparency there, Eric. Thanks again.
Eric Langan (President and CEO)
Always.
Operator (participant)
Thanks so much, Scott. Next up, we have Anthony of Sidoti. Anthony, please take it away.
Speaker 6
Good afternoon, and thank you for taking the questions. First, as far as the quarter, your services revenue were down a little over 8%. Can you share more details in regards to this decline, and what is your strategy to improve services as a proportion of your revenue mix?
Eric Langan (President and CEO)
I can nail it right on the head for you. About $1.3 million is XTC in Dallas. As some people are aware and some aren't, Dallas passed a new city ordinance. It's in current litigation, forcing us to close the club at 2:00 A.M. That was a major after-hours club, did most of its revenue between the hours of 2:00 A.M. and 5:00 A.M. We have rebranded that to the Dallas Show Club now or in the process of. Our liquor license is in. We have continued operations. I think we were closed one night as we converted from BYOB into liquor. The rest of the conversion will happen as we're open. That's a big part of it. And then the rest is, of course, Miami's service revenues last year were much, much higher than they have been this year. And that's the majority of it.
Obviously, there's little bits here and there. There's success stories in some markets like New York and Minnesota, and there's other clubs that are declining a little, but most of those offset. The major part of it was the XTC Dallas and the Miami clubs.
Speaker 6
Thank you, Eric. And then what were the main factors that drove these sequential margin gains at the Bombshells, and do you think that's sustainable?
Eric Langan (President and CEO)
Well, my goal with Bombshells is to return us to $60 million in revenue with 15% margins, which would put us at about $9 million in operating income on an annualized basis. At this point, we will probably work very hard at strategic options with that asset, whether it's a partnership, whether it's selling the assets outright, whether it's selling part of the assets, or bringing in partners to expand the process at that time once we prove we can return it to those numbers. I think that's a six-month process from now. At least I hope so. I think the 15% margins are maybe doable earlier. The revenue is being a little more difficult because while part of it has been management issues, the other part of it is the economy and people just not spending as much and not drinking as much.
Yes, I believe that we'll have that corrected. I think we've made some major changes. We've definitely lowered our cost. We've changed out a lot of the management teams in certain stores or certain markets. We've been doing some hiring. We still have about three spots that we need to find the right people for, but the people that we're bringing in are motivated and excited to be part of our team. I think that the concept is definitely heading in the right direction so far.
Speaker 6
Excellent. Okay. And then you also have quite a number of projects in the pipeline. So as you're looking to open the Rick's Cabaret and Steakhouse.
Operator (participant)
Hey, Anthony, you're on mute.
Speaker 6
Can you hear me now? Hello?
Eric Langan (President and CEO)
Yeah, I can hear you.
Operator (participant)
Hey, Eric, you're on mute.
Speaker 6
Okay. I don't know.
Eric Langan (President and CEO)
I'm sorry. They muted me too.
Speaker 6
There we go.
Eric Langan (President and CEO)
Now we're both back. We had a speaker who wasn't muted, and I think they muted all instead of just that speaker. We're good now.
Speaker 6
Okay. All right. Sorry about that. I didn't touch my phone.
Eric Langan (President and CEO)
Yeah, it's underneath us.
Speaker 6
Okay. So as I started saying, so you guys have quite a number of projects in the pipeline, but just wanted to focus more on the plans for the Central City location. So you are planning to open the Rick's Cabaret and Steakhouse in 4Q even if there is no gaming. So how should we think about the revenue contribution? What’s that when that’s up and running? And then if you do get gaming there, what could that contribute to revenue if you go ahead? I know there’s uncertainty with that, but just hypothetically speaking, how should we think about that?
Eric Langan (President and CEO)
I have not thought about the gaming at all anymore. My focus is on the club itself. I would like to, I think, the club can open up in the $100,000 per week range, which puts about $5 million annual. We run our 40% margins. We make about $2 million a year out of it. I'm only opening four days a week to start. As we build up our clientele base and our entertainer base in that market and we open seven days a week, I think we can grow that to somewhere between $8 million and $10 million annually at 40% margins. So that's my focus right now. Like I said, with the gaming, I'm weighing a lot of things right now to see what makes sense or doesn't make sense for us as a company.
I can tell you that from what we're being told, we're 18 months to 2 years away at a minimum. There are two other licenses that have been applied for in Central City. They're now crossing the 3-year mark without denial or approval. And so I just like I said, we've got a lot of information that's coming in the last week or so. We're going to weigh that out. And probably within the next 2 weeks, maybe 3 weeks, we will have a plan of action, and we will let everyone know what our plan is there. To me, it's not really relevant or material to earnings this year or next year, obviously, if it's 18 to 2 years away, 18 months to years away. So we're going to focus on what we do know.
What we do know is we can open that club and the steakhouse, and I think we'll do very well in that market with it. And we're going to continue to rebrand some of the Chicas or some of the BYOB locations of the Chicas so that we don't face anything like we did in Dallas in the last 6 months. We're just getting ahead of everything just in case the laws don't change. And we think these underperforming assets and some of the BYOB are underperforming, and they'll do much better under the new branded concept. So that's kind of where our focus is. I think we've got to one thing I'll say about being happy to focus on Bombshells for the last 2.5 months is that it's really brought the team, especially upper management, focus back to what are we really doing?
What is our capital allocation? I don't know. I guess really putting a microscope to the existing assets. And that's why you've seen us change. I mean, we've had four clubs now that we're going to close and rebrand. I think that's going to be a big increase as we move forward to the end of this year. We've got the three Bombshells coming online by the end of this year as well, I believe, as well as sometime in the Q1 of fiscal 2025, I think we can get the Baby Dolls West location open. And then we have no more drag. I mean, to put it simply, we've had so much drag. We've got to get rid of this drag. We've got to get focused on much quicker ROI that we get from acquisitions versus trying to build these new locations.
I mean, yes, I think it was a great theory, and I think it was working, but the systems broke right now because governments just take forever. Building permits taking forever. Inspections take forever. And it's adding six months' time. Well, when interest rates were 4% and 5%, that extra six months didn't cost us very much. Well, now that interest rates are 8.5% and 9.5% for corporate money, it's just the carrying costs become too much. And so we have to reevaluate that. We have to run all these. We have to go back and do all the fifth-grade math over again. And that's what we're in the process of doing. And you'll see us do through the rest of this quarter. And I plan to have everything lined out in the next six months, which gets us everything on track running into fiscal 2025.
Speaker 6
Got it. Okay. And then so as you rebrand some of the clubs, I mean, what's your expectation as to the lift in sales that you will get after you do such a rebranding?
Eric Langan (President and CEO)
Liquor clubs tend to run, obviously, more sales than the BYOB clubs. I'm assuming we can get those high enough that we'll also have better total margins. The margin rate may be about the same, but because the revenues are higher, obviously, the bottom line should be higher. We've ran some models, but we've really only converted one club so far. Of course, the new club that opened in Lubbock. As we do El Paso and Harlingen and the XTC Dallas that's now been converted as of last week, I'll probably be able to give you more color on that as we get into the next call.
Speaker 6
All right. Well, sounds good. Thank you and best of luck.
Operator (participant)
Fantastic. Thank you so much. Next up, we're going to have Rob McGuire of Granite Research. Rob, take it away.
Rob McGuire (Analyst)
Mark, thank you. So Eric, you've discussed what's happening or avoiding what happened in Dallas again. But if you move from a BYOB to a liquor club, do you work with a different set of regulators?
Eric Langan (President and CEO)
Well, you have alcohol. The TABC in Texas becomes a new regulator for you, yes.
Rob McGuire (Analyst)
In general, do you find that that creates an easier environment? Or I'm wondering if you could elaborate a little further about the strategy helping you avoid what's happening with XTC.
Eric Langan (President and CEO)
It's just irrelevant. They've come in with time, place, manner, and decided that all the clubs in Dallas needed to close at 2:00 A.M. if they have an adult entertainment license. I believe it's unconstitutional. If you close me, you need to close every business. So far, the judges disagreed with us. Well, they agreed with us, then they disagreed with us. And so now we're going back and forth with this. The litigation will take too long for us to sit there with that club not making any money. And so we just converted it. And to avoid that in other markets, not every market because some of our BYOB clubs are still very successful, and we'll just take the chance on those. But in what I consider the underperforming markets, when we ran analysis like Harlingen, El Paso, and Abilene, we believe that we will do much better.
These clubs have been around since early 2000s, and some of the areas have changed. The market has changed, and the clubs stayed the same. And so we've gone in and said, "Look, we believe these particular locations will do much better under this new concept that we acquired." Before we acquired the Duncan Burch acquisition, we didn't have this concept. But now that we have this concept, we're able to take it and run its numbers and its demographics against some of our BYOB clubs. And those three particular clubs, especially Harlingen and El Paso and even the XTC in Dallas, I think we do very, very well with this new concept.
Rob McGuire (Analyst)
Thank you. Then with regards to the economic uncertainty, you talked about in the last call how you're starting to discount on Monday and Wednesday nights. Are you seeing an uplift in terms of traffic on that or in general? Could you just comment about what you're seeing that's working in the clubs as you adjust in this environment?
Eric Langan (President and CEO)
Yeah. I mean, running specials are helping for sure. Sports is helping tremendously right now. So that's been a big plus for us in this quarter and last quarter or I mean, this month and last month. We will see how that runs out through June, depending on who makes finals. Obviously, weekends, parties, VIP parties, just getting our teams much more involved and much less complacent, I think, is really helping. As you're trudging along, you don't realize sometimes that you get complacent. We've hired some new managements in the clubs as well as the Bombshells, and we're seeing results from that. So it's a lot of just getting everybody back on track, returning back to the basics. And that's what got me thinking.
As we return to the basics in the restaurants, return to the basics in the clubs, I thought to myself, "Well, are we returning to the basics at a corporate level? And what are the basics of a corporate level?" And I said, "Well, let's go back to 2015 and 2016 when we adopted this capital allocation strategy, and let's reevaluate our assets like it's 2015 again." It was highly successful for us. It worked very, very well. And well, I think we've stayed true to the capital allocation strategy. I think we got a little complacent on existing assets, existing team members. And it was easy. We were making lots of money in 2021 and 2022. 2023 was kind of a wake-up call for us. And as we moved into the last quarter, especially with Bombshells, that kind of became a wake-up call.
Then we've seen some decline in same-store sales at the club levels. I said, "We got to cut this off immediately at the club level. We can't let it go on as long as we did at Bombshells." So that's where we're at today.
Rob McGuire (Analyst)
That's all really helpful. Thank you. That's it for me, Mark.
Operator (participant)
Thank you very much, Rob. I'd like to encourage anyone in the audience with a question to please raise your hand, and we'll bring you up. Next up, we'll have Steve Martin. Steve, please take it away.
Speaker 6
Well, most of my questions have been addressed. What are you seeing from the competition, and do you think you're outperforming the competition on the club side?
Eric Langan (President and CEO)
On the club side and most of our markets where we're number one or number two, we are definitely outperforming our competition. We do have some lower-brand clubs in certain markets that are probably similar to our competition. I talked to other club owners. I think overall, they're seeing 15%-30% declines, probably an average of 20% declines from their peaks in 2021, 2022, and off again down in 2023, and now they're down again in 2024 so far. It's a struggle for the mid-level consumer. The majority of clubs cater to that mid-level consumer. So I think it's just one of those things we're going to work through over the next few months.
It's not that we're, I think, a lot of the misunderstanding because I hear people. It starts reminding me of 2009 when everybody talked about us going out of business when we were still making $6 million. Well, we're still making $60-$50 million, right? It's not like we're not making a ton of money still. We're not going out of business.
It's just we're not making the same type of easy revenue and easy money that we made in 2021 and 2022 when there was just tons of free money and we were the and in 2021, we were some of the only clubs open or only businesses open. In 2022, there was just so much free money left out there. Things tightened up. Interest rates went up. The consumer's being squeezed in multiple places with inflation. We're seeing wage inflation ourselves. And so it's changed, and we've had to adapt to that and change with it.
Speaker 6
Okay. You've put in a lot of cost containment measures. How long do you think that's going to take for those to show through into the earnings?
Eric Langan (President and CEO)
Well, I mean, I think you're seeing some of it right now because our revenues were down, but our Adjusted EBITDA wasn't down as much, I think, on a same-store sales basis. And so I think we're seeing some of that. We made a decision about a week and a half ago as we got to the end of April and said, "We're cutting off all future project costs that are controllable costs." We can't get rid of carrying costs, interest in that, but we're not going to hire any new employees. We're not going to continue to management training or any kind of training through these new concepts until the day they're complete. So when we have a direct opening date, then we'll start all that. Then we'll carry those costs.
But we're not going to have any pre-opening costs that we carry for we think we're going to open in 3 months, but it takes 9. So we end up carrying those costs for 9 months. I said, "We're just going to wait from now on. If it takes us an extra month or 2 to get open it costs me nothing. It costs me very little to have a store sitting there ready to open and not open because they don't have the staff. Then it costs me to carry that staff for 9 or 10 months." And so we've cut all of that type of stuff. I mean, this is all going back to the capital allocation strategy where we're not making any investment till we know exactly what the ROI is on it.
Speaker 6
All right. Thank you.
Eric Langan (President and CEO)
Thanks, Steve.
Operator (participant)
Thank you very much. Next up, we'll have Orgel Wealth. Please take it away. Hey, Orgel Wealth, I think you're on mute still.
Speaker 5
Hey, guys. Just.
Eric Langan (President and CEO)
Hey, Jason. How's it going?
Speaker 5
Good, man. Obviously, the main thing that I'm focusing on right now is just with the environment that you're in, have you noticed any significant impact from people calling you, and are they still holding on to their prices, or are these people open to negotiation?
Eric Langan (President and CEO)
We've been negotiating price pretty well. A lot of it right now has been terms and uncertainty. People have been trying to hold on to their 2021, 2022 deals, but now they've got through 2023. We're into 2024. I think people are starting to wake up to that 2021 and 2022 was kind of a fluke. There was, like I said, just a lot of free money out there, and people were coming out of COVID, and a lot of businesses closed. Things are normalizing. I mean, who would think we'd be thinking normalization five years later?
But that's really where we're at. I mean, it was unprecedented to close so many businesses or close down the country at one time like that and then for such a long period of time when it was supposed to be two weeks. And so I just think there's been a lot of adjustment going on. We're getting back to that normalization. And like I said, I think a lot of—I don't think it's just us. I think a lot of companies, a lot of people got complacent. I was talking with Mark today when I came into his office here in New York City. And I think last time we were here, there were 15 people in this office at most. And most of the time we come over here, there'll be 8 or 9. And I said, "You guys got 35, 45 people in here.
What's going on?" He goes, "Everybody's back to work." And we're seeing that in our numbers in New York City as well at the clubs. So I think, like I said, I think it's just going to return back to normal. And I don't know what that means just yet, but I do know that we'll be staying on top and staying ahead of it instead of playing catch-up like we've done in 2023.
Speaker 5
And my assumption is when I take out the numbers for all of the previous years before the, let's call it, the COVID bump, I kind of feel like you guys are still on trendline from what you were for the previous five years of what you had been doing. And just in terms of overall, just you're growing. You had this it's kind of happening like a heat wave. You sell a lot of ice cream, and you get back to normal temperatures. You're going to sell about a certain historical number of ice cream. I mean, I'm assuming things are along those lines, or are you noticing anything different?
Eric Langan (President and CEO)
Yeah. When we compare to 2018 and 2019, we're in pretty good shape. I mean, you have certain markets. Minnesota was dragging for a while, but I mean, they not only had COVID, you had the George Floyd issue up there. You have major changes in that market that had affected it for a while. But the T-Wolves are breathing life into downtown again. I'm seeing numbers that we hadn't seen in Rick's, Minneapolis, in a long time. The Seville club's doing much better. So I'm optimistic that that market's going to finally turn. New York is turning as people have returned back to the offices.
So I'm very optimistic there. The biggest problem we have is Florida was just incredible, right? I mean, you took Tootsie's who'd never their highest year ever was $26.8 million or $26.6 million in 2018 or 2019. And then in 2022, they did $39.6 million gross. And then I think last year, $35 million and change or $34 million and change. So that's a $5 million change at Tootsie's. It's a big swing on a quarterly basis for same-store sales.
Speaker 5
When it comes to buybacks right now, obviously, you guys have your chart for when you should be aggressive or not. But obviously, with the influx of the cash that you're going to have on the balance sheet and stuff, I mean, because it sounds like you're not in any negotiations or anything close by where you're going to be doing any big deals, at least at the present moment, are you prepared to be aggressive and get back those 130,000 shares that you put out at $80 close to two years ago?
Eric Langan (President and CEO)
I've been thinking in a little more aggressive terms than that. I would like to get us back under nine million shares total outstanding. So I'd like to buy back a little over 300,000 shares at some price here, depending on what the market opportunity is for us. I don't know when I'll start that aggressively. We just closed the loan. We closed the loan on—I can't remember what—last Tuesday? Today's Thursday.
We closed the loan Tuesday, Bradley, or when? The 8-K went out. Whenever the 8-K went out. We closed the loan within the last week. I can tell you that. I thought about getting pretty aggressive. I decided that after talking with our attorneys, that I should wait till after this call, make sure all the relevant data is out there. Now with the casinos kind of in limbo, we'll probably stick to a $4 for at least the next two weeks. We'll probably stick to a more moderate buyback if we start buying back stock. We may not. I don't know. We may buy maximum under Safe Harbor. I can tell you we probably will never buy over a Safe Harbor amount in a single day. We will stick to the SEC Safe Harbor provision for our buybacks.
Speaker 5
What's that number, approximately?
Eric Langan (President and CEO)
25% of the average daily volume. Man, it's been so long since I had to worry about it because we actually hire real we used to use a little local stock broker. Now we actually use an investment bank to do our buybacks. 25% of the average daily volume over a 25-day period or something like that, 30-day period or something, 10 days. I don't know.
Speaker 5
It's like 8,000-10,000 shares is what you could take down?
Eric Langan (President and CEO)
I think it's a little higher than that, but I'd have to, I mean, I can ask him. Yeah, it goes up to 14,000 shares, I think, last time I looked.
Speaker 5
Right. But you have more than enough cash to take back 130,000 shares.
Eric Langan (President and CEO)
I mean, we're sitting on $45 million in cash now that we closed the loan, so. I mean, I could use the whole $20 million to buy back stock if I well, I could use $13 million of it till the board the board would have to approve for me to go over that amount.
But yeah, I mean, we could do that. We'll see what the stock does. I just obviously, when it's super cheap, I get very aggressive. You've seen that before. And when it's at these prices, $100,000 a day or $200,000 a day, I don't consider that too aggressive. I consider that just a nice casual buyback. We'll cost average in and out. And we buy some stock at $48. We buy some stock at $56. It all works out in the wash for us. And over the long run, over a 5-year period, it won't matter. What we bought it for today, it'll be a much better price, and it will be five years from now.
Speaker 5
Well, I mean, you got two deals. You got shares at 80, and you got shares at 60. So anything right now is a return on capital.
Eric Langan (President and CEO)
Yeah, those next 300. Those next 300,000 shares and under $60, we're benefiting, right? I mean, we bought real assets. We bought real estate. We bought cash flow. Both of those acquisitions are performing much better than they were on the price that we bought them at. So I mean, you see the Duncan Burch changes of 23% increased revenues, margins up to 32%. I mean, that's a big change from where we bought it at a year and a half ago or a year ago, right?
Bradley Chhay (CFO)
Yeah, a year ago.
Speaker 5
And then with.
Bradley Chhay (CFO)
Right.
Speaker 5
And then with obviously, over the last number of years here, you guys obviously have a huge amount of real estate portfolio right now. I'm assuming on a lot of these things when you did with the Bombshells, you had ancillary property and stuff. Do you still have parcels and stuff that you can sell off? And what possibly could you sell off in terms of just land or places next to the clubs that doesn't do you any good, it'd be worth selling?
Eric Langan (President and CEO)
On a cost basis?
Speaker 5
On a 1030 winning.
Eric Langan (President and CEO)
On a cost basis, about $4 million on a cost basis. On a market basis, we have one property that we just turned down $9 million for. I believe it's worth.
Speaker 5
What did you pay for that?
Eric Langan (President and CEO)
$2.15 million. About four years ago, maybe. Basically, we have three parcels of land left. The Aurora property that we recently bought for Bombshells that we're not going to develop as Bombshells, that property's up for sale. I expect to have a contract on that, hopefully, in the next two weeks, according to the broker that I'll put on that. Like I said, I turned down $9 million for a property in the Houston, Texas area. It's about 19 acres. I believe the property's worth about $30 a foot if we got prime price for it. But in this market today, probably closer to $14 a foot, which would be around $12-$14 million. I think the price we got offered for it was closer to $10 a foot. If somebody came in at $12 a foot today, I'd probably just take it and walk.
Friday was a fast closing. I talk to that broker pretty regularly. There's a lot of it. It's the largest contiguous piece of land within about a 5-mile radius. On two, we're at an intersection of two major highways. There's a big, giant Bass Pro Shops on the opposite corner. It is a prime piece of real estate today. It wasn't when we bought it because it was zoned in a special-use zone. I petitioned the city about a year, a year and a half ago to rezone that property into basically C1 commercial, which is basically any viable commercial use. So that property, and that's where the value was created, is when we changed the zoning. That property became very valuable.
And as all the other large pieces around us got bought up because we had had originally a plan to develop that property into basically a mini industrial park, light industrial park. And then, of course, I said, "Look, RCI's not really in the development business. Let's just sell this property." And so started shopping it out there to sell it. So we'll get it sold, I think, at some point in the next I'd like to. Well, I mean.
In the next six months, really. Actually, four months now because I'd like to get everything lined up by October 1st, 2024, for our fiscal 2025 and get everything back in line with our capital allocation strategies like we did in 2016 and 2017.
Speaker 5
Okay. I'm assuming anything that you're buying at these current levels is meeting your capital allocation strategy.
Eric Langan (President and CEO)
I think everything we bought, period, has met our capital allocation strategy. I don't think we have anything invested. I think the mistake, if we made any mistake, was estimation of time to open. And so therefore, the carrying costs are increasing. And I still think we'll be within our capital allocation strategy with additional carrying costs on everything except for maybe these casino properties because this timeline is getting crazy. So we've got to weigh that math still. But on everything else, the Bombshells properties, we open 6 months late. Maybe the return on investment is 25% instead of 45%, but I still think the return on investment will be very fine. Cash-on-cash-wise, we'll still be well within the ranges of our capital allocation strategy.
Speaker 5
Well, if you can't buy clubs, buy stock. So. All right. Thanks so much, guys.
Eric Langan (President and CEO)
Yep. Thank you.
Operator (participant)
Thank you very much, Eric and Bradley, as well as to all those who asked questions. For those who joined us late, you can meet management tonight at 7:00 P.M. at Rick's Cabaret New York, one of RCI's top revenue-generating clubs. Rick's is at 50 West 33rd Street between 5th Ave and Broadway, a little in from Herald Square. If you haven't RSVPed, ask for Eric or me at the door. On behalf of Eric, Bradley, the company, and our subsidiaries, thank you and have a good night. As always, please visit one of our clubs or restaurants and have a great time.