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.
