RCI Hospitality Holdings Inc (RICK) 2013 Q3 法說會逐字稿

Greetings, and welcome to the Rick's Cabaret International third-quarter 2013 earnings conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Alan Priaulx (multiple speakers) --

Priaulx.

-- Priaulx, who is with Rick's Cabaret.

Thank you, Bob. I just want to remind everybody that our Safe Harbor statement is posted at the beginning of our PowerPoint presentation. It reminds you that you may hear or see forward-looking statements that involve a number of risks and uncertainties. I won't go into the entire statement on this call, but I do urge you to read it, as well is the explanation of non-GAAP and adjusted EBITDA measurements that we use, and that are included at the bottom of our PowerPoint.

I'd also like to remind you that our press release and the 10-Q are posted on our website, www.ricksinvestor.com, as is the presentation itself. Finally I'd like to invite everyone in the New York City area to stop by Rick's Cabaret tonight at 50 W. 33rd Street between Fifth Avenue and Broadway, for our due diligence ball. It's a great opportunity to visit with Eric Langan, to get a first time -- firsthand behind-the-scenes look at our flagship club.

And now it's my pleasure to present to you our President and CEO, Eric Langan. Eric?

Thank you for taking your time today. Begin the conference call with an overview. I'm going to talk about the Q3 '13 financial results, the debt updates and cash flow; talk about our new project status, where we are with those projects and what we're doing; review our shareholder value strategies; industry rollup and diversification update, kind of let you know where the industry is as a whole; how we think we stand in the rollup of the industry; and talk about our diversification and why we're working on that. Talk about the pain of the last four years for the Company and our shareholders, and how that's behind us, and how we're looking forward to the remainder of 2013 and 2014. And then we'll end the call with a question-and-answer session.

Starting with 2013, $28.3 million in the third quarter. Total consolidated revenue up 18.3% from the previous year. Strength in our Jaguars acquisition and the Bombshells of Dallas, we are very happy with. Both of those are doing very well. And our New York and Minneapolis markets both performed very well in this quarter.

Income from operations, GAAP number $5.7 million, non-GAAP $7 million, with adjusted EBITDA of $6.9 million. Our GAAP net income of $0.23 per share was affected by -- impacted by $540,000 in one-time unusual expenses and settlements of lawsuits. Those one-time or unusual expenses are mainly the startup costs from any location that's not still open. And once we open a location, we're going to take them out of there, and actually that will just be into the startup costs of opening that location. And then the settlement of two lawsuits that were pending that we are very happy to get rid of, basically, cost defense settlements on those.

Non-GAAP net income, $0.35 per share. GAAP operating margins, 20% versus 16%, so we're starting to see the operating margins increase. Cash flow from operations, $14.2 million for the nine months, and we've invested $9.1 million cash in property equipment and businesses in this nine months. Our debt update, $76.5 million in total long-term debt, of which $39.5 million is real estate-related debt. $28.7 million is subsidiary level debt from club acquisitions. This is the -- the collateral in these loans are basically the businesses that we acquired. The parent company level debt is at $8.3 million. Our current portion of long-term debt, $7.8 million, which means we're paying off approximately -- or pretty close to $2 million a quarter on our long-term debt. And our pre-interest expense, $1.9 million or 6.6% of revenues, is well within our level of what we want to keep that at.

Accelerated paydown of high interest debt, $1 million in the first nine months on the Tootsie's debt, which now stands at $6.06 million. And we're going to continue to work on accelerating the paying down of that debt as quickly as possible since it's our highest interest rate debt.

Update on new projects, we now have 37 locations open with six more in the works; several more under consideration. The Ricky Bobby Sports Saloon in Fort Worth opened successfully two weeks ago, exceeding over $80,000 in sales the first week and over $90,000 in sales last week. We expect that location to continue to grow. The Bombshells in Dallas continues to exceed our expectations, averaging over 65,000 weekend sales now and still growing. This is the off-season for the sports bar market, and so we really expect every move forward, as football starts up next week with full preseason games. And then, as we move in later into the season with basketball and hockey as well, especially in the Dallas market where the Stars and Mavericks play right down the street from our location, we expect to see that location do even better.

We currently have a building under contract in Beaumont, Texas to do a Bombshells in. We're also moving forward in the Rick's Cabaret in Houston, which we closed due to the fact that we weren't really making any money at that location. The operating losses there were continuing to not -- to increase, and so we decided to close that location. And we're looking at the possibility of putting in a new Jaguars on that site.

Our Vivid Cabaret in L.A., we're waiting for the final license approval. We had a little soft opening deal for a day, and now we're waiting for our final license approval for our business license. We did a little showcase there. And that location, it should open -- formally open some time in Q4. And we are on schedule with the construction at the New York location -- Vivid location, which should open in the first quarter of 2014 as well. The Temptations Beaumont location is another location we have going, which is scheduled to open August 15. It should open on time. Our permits are in place there for us to open that location. We are currently waiting for the liquor license approval, but we're going to open without the liquor license at first as a BYOB. And then when the liquor license is issued, we will convert the concept to full liquor.

The Rick's Cabaret Odessa is scheduled to open in the first quarter 2014. We have about approximately 4 weeks left on the construction up there, according to the contractors. And we look forward to getting that location open as soon as possible. It will be a full liquor with kitchen, and we suspect it will do very, very well in the location. It is up there in the Odessa market, which is really booming right now with the oil industry.

Under consideration right now, we have a Bombshells location in Houston that we are currently doing some research on, and a Bombshells in Austin that we are currently working on as well. And we are also looking at several other acquisition targets in the adult club market that we hope to put together, and be able to announce in the near future, continuing to keep our growth at our 20% to 30% range that we're focused on.

Focusing on our shareholder value, we're focusing on higher profit customers. I mean our same-store sales maybe decline a little because we're not just trying to fill seats like we were doing through the recession, and now we're looking for customers that we can actually make money off of. So, while our same-store sales may decrease a little at certain clubs, we're going to see better margins going forward, as we do less discounting.

We've completed our original $5 million stock buyback purchasing 756,087 shares at an average price of $6.61, and we're now into our new $3 million buyback, which has $2.45 million remaining in it.

We're continuing to explore ways to increase the value or use the locked-up value of our real estate, including the exploration of a REIT. After talking with several banks that specialize in REIT formations and REITs, we realize that we are probably a little too small still to do a REIT on our own. So we're talking with several other club owners. And we'll be out at the Expo here on the 20th through the 22nd with the Gentlemen's Club Owners Expo, talking with other club owners, just starting exploring the possibility of maybe having several club operators putting our real estate together, and forming a REIT as a way to pull cash out to -- for the Company to continue expansion, as well as looking at leveraging those real estate assets.

One of the most exciting developments recently is a new bank loan that we were able to achieve at prime plus 1.5 with a 6.25% floor on some real estate that we just purchased or just refinanced in Austin, Texas. And we're talking with that bank and a few others about possibly lowering some of our other interest rates on existing real estate, as well as setting up a possible line of credit to expand our restaurant operations. And we're very excited that the banking seems to be coming back. This is the first real bank loan we've been able to do since 2008 during those acquisitions, so we're very happy with that.

We're also looking at possible lease -- sale-leasebacks with options to repurchase our property at a later time, which, provided we can get decent interest rates on, would give us the benefit of unlocking some of that cash for expansion.

One of the other things we're going to be working on very hard is presenting the Company at investor conferences. We've already booked several conferences between September and December. We are looking to get into a couple more, and hopefully, get out there and at least once a month or twice a month, and tell our story and promote our Company.

Going forward with the presentation, the Rick's Then and Now slide, really kind of want to tell you how we got to where we are. But we've learned from our mistakes that the Vegas acquisition, well, at the time, seemed like a great acquisition; was a very large acquisition, single club, which put a lot of risk on a single property, similar to what we did in Miami. And, of course, Miami, we were very successful with it. And in Vegas, we were not as successful with it. And the risks of failure on those large acquisitions, I think, outweighs the gains.

And we've kind of stayed away from those and gone to more multi-club acquisitions like the Jaguars. So if we have a single property that has a problem, we still have that acquisition spread out over many other cities and clubs. The acquisition issues with closing the acquisitions on time, when we think we're going to have a certain acquisition, similar to the VCG acquisition. And so we really look at smoothing that growth out, so that we can have this nice steady growth. So we don't have 40% growth in one quarter and 10% growth in the next quarter, and 3% growth in the next quarter and 35% growth in the next quarter. Trying to stay a nice steady sort of growth pattern.

And that's why we like the sports bar restaurant live music venues. And that's why we think they make sense, is because we can go, okay, these venues are going to do $3 million to $5 million, so our profit margins 15% to 25%, depending on the volume. And okay, we can go and open three in this market and two in that market, and guarantee percentages of growth and revenue growth, and earnings growth. So we're really looking at those as well as to complement, not to replace, the acquisition of other adult -- existing adult clubs throughout the country.

Why owning our real estate is so important. In the adult market, the licenses go with the properties. There is zoning. They can't be moved. They can't be switched. The nice thing about the sports bar restaurant live music venues are we can actually lease buildings, because if our landlord comes in and jacks up our rent, are those things we can always move down the street or in another part of town, and that which we can't do with the adult.

We are especially excited about our 50 W. 33rd Street location. And that location creates -- generates a lot of revenue for us and a lot of net income for us. We've been going through a lot of changes on this deal. It's kind of evolved as we've come along. And we have looked at purchasing the entire property, including the air rights for $23 million. It's kind of evolved. We had a group that made an offer to purchase 10 SARs from us, which is basically two-thirds of the air rights, which are the residential air rights, to move to an adjacent property for $8 million, which would mean we would get our building and still have a 5 SAR, and still build 20,000 square feet of commercial space there for $15 million.

And we've gone to the landlord and we had some financing set up. The landlord decided that he would beat that financing and owner-finance for us. So we talked to him. Then we decided, after talking to the tax attorneys, there were other issues, and that he would do a lease modification with a right to purchase the property at any time during the lease, when we could cash him out for -- saving him some tax dollars until we actually cashed the property out.

But now it looks like we're going to buy and sell the air rights in one transaction, and buy our property in another transaction by entering into a lease modification until such time as we buy our property for the remaining $10 million after funding $13 million cash at the closing on the air rights. So, it's a very complicated transaction. There's a lot of taxes in New York that we have to be aware of and look for, that we don't see in other states when you're sell and transfer real estate. So, we've got the experts who are working on that for us and keeping us out of any trouble on that, and making sure that we maximize our price that we are paying. And the landlord is working, of course, to maximize his profits on selling us that property.

If you look at our forward growth strategy, we've achieved 18% growth so far this year. I think that, as we continue to grow with Ricky Bobby's opening and some of the other clubs we have opening, that we are on target to achieve our 20% to 30% growth target that we're looking for. Continue to expand these non-adult concepts with the Bombshells looking for additional locations. And now, as we move forward, and Ricky Bobby just as it continues -- the Ricky Bobby Sports Saloon continues to grow, and we continue to deal with and develop that format as well.

They're pretty much not -- they're similar but they're really noncompeting deals, because they basically cater to different types of a customer base. So very similar to our Rick's Cabarets and our cabaret concept that we've gotten very good at doing.

Also, continuing to acquire existing clubs on favorable terms. We're not just looking to go out and acquire anything just to acquire stuff. We want to make sure that our return on cash is good. We want to make sure that we're not getting ourselves into a lease where we're going to have our rent jacked up off in the future. We want to try to buy our properties when we can.

We believe there are 500 clubs in that acquisition universe, and basically, we own less than 50 of them right now. So, we believe there's a huge, huge growth potential to continue to grow in that market as well. And I think that, as we continue to grow with the real estate, hopefully, we're going to be able to use more bank financing for the real estate, which will lower our cash out-of-pocket costs on the real estate, which hurts our overall return on investment. Because the return on the real estate is much lower than the return on the actual operating company.

Looking at our outlook for 2013 and '14, we're in the prime season on a roll with our 20% to 30% growth target in sight. Our earnings are increasing, our revenues are increasing. And as we enter October, November, December, which is typically the beginning of our prime season going forward, and then hitting January, February, March -- last year, the Super Bowl, the last quarter, we had a little downturn, mainly because of hockey was not going on; the Super Bowl wasn't in one of our cities.

Well, next year, the hockey season should be on course and fine. The Madison Square Garden can be open so it won't affect New York as much in the following year. And we're going to have the Super Bowl in New York City, which we think will be great for us. We'll have the new Vivid open. We do believe that the Vivid and the Rick's are complementary concepts, and not competing concepts. Very similar to our Rick's Cabaret and our Cabaret North in the Fort Worth and Dallas markets; the downtown Cabaret and the Rick's Cabaret in Minneapolis, which are both complementing each other and both doing very, very well with their demographics. And we think we can duplicate that in New York City as well.

We're also going to continue to reduce our high risk debt, again working with the bank. So I think that's going to help the bank financing. Should hopefully help as we move forward. And we're getting to the point where we're starting to generate tons and tons of cash. As we open these locations, we're very -- we're starting to get farther and farther along in the construction, so the cash outlays that we've been having go out in L.A. and New York at the Ricky Bobby's and at -- and the Bombshells, those cash outlays are going to slow down as -- and as they actually start generating revenue, we're going to see kind of a double turnaround on that of our actual cash.

And we're also continuing to explore, as I said, the best use of our real estate holdings. I do think that as we move into 2014, we're going to find a way to unlock that hidden value of all that equity we have in the real estate, either through some type of REIT, through some type of sale-leaseback program, or through bank financing where we were able to go in and borrow money against our wholly-owned and free-and-clear property, pulling cash for expansion.

So, it's our vision of '14. I think the Company will continue to grow. I'm very excited about the prospects of our growth going forward. We're talking with several operators on a couple of multi-club acquisitions, which would add several clubs at one time. You know, as our stock starts to perform, we may have another way to raise capital through equity. So there's lots of forms of -- and ways for us to fund this growth. And obviously, we're going to use whatever works best and is the least dilutive to our shareholder base.

This brings me to a very important thing that I think needs to be said, is that I own a very large portion of the Company, but not in terms of 50% or anything, but my 12.4% -- but that is still over 90% of my personal net worth. And my personal net worth is basically tied to the success of Rick's and what Rick's does. I've continued to buy stock. I've never been a net seller of Rick's stock. And I will continue to buy additional stock, because I believe it's the best investment I can make, especially at the current price levels.

With that said, I'd like to take a question-and-answer session at this time.

(Operator Instructions). Eric Beder, Brean Capital.

In terms of restaurants, you're now expanding Bombshells. What should we think about as the endgame for the restaurants group? And can they do the returns that you get from a regular nightclub?

Well, I think the main thing everyone has to realize is these are not typical restaurants. We're running 50/50 liquor; actually Ricky Bobby's is running even a little higher than 50/50 liquor. So we're really a bar. But what I like looking at is we're a theme sports bar with a restaurant that converts into a live music venue when the sports ends. And so we're basically a destination location and an entertainment place, where people come to entertain and hang out, and not just come in and grab dinner and go home.

Okay.

And then I think the endgame -- I mean, we've got lots of options today. We can keep growing it and growing it ourselves, so we can grow internally. At some point, we prove the concept, we lay it out and we franchise. We can start doing partners. At some point, we may build it to a certain point, and maybe somebody buys it from us, giving us a big influx of cash to grow our adult business. I mean I think we just have lots and lots of positives with it.

As far as the margins go, base it on the layout, on a $300,000 -- approximately $300,000 -- $3 million a year location to $3.5 million a year location, we think that we can get the margins around 20% -- excuse me, that's a little lower than, say, some of the strip clubs, especially the higher-end -- excuse me, high-volume strip clubs, but it's right in line with a basic club. So, I think we can grow it pretty successfully.

Okay. And in terms of the clubs, is there a geographic area you're looking for in acquisitions? Or is this really just kind of the best deal that fits in with your criteria?

Well, you know, if we do multi-club, obviously, we'd like some clustering in the acquisition, which would probably put us in -- which is typically how operators operate. They open up in general areas. So that could get us into some new areas. The Jaguars acquisition, while it was in Texas, was in the same state, was still in some fairly different geographic areas that we didn't operate in. So we were very happy with that. And then plus it got us a location out in Phoenix, so that helped.

So we're really looking at that, as well as single acquisitions that are complementary to our existing operations, which makes it very easy for us to operate, and of course, save money by cross-marketing and purchasing powers.

Okay. And finally, you've hired some new people, taken on some expense for that, kind of. What should we expect those people to do that they haven't done before in terms of the beverage people and some restaurant people?

Yes, well, with the beverage people or the beverage guy that we've hired in and got on, he's been setting up national accounts for us, national marketing stuff, which is lowering our cost of goods sold by getting us the same price in every market, and getting us discounted price or discounted prices for product placement in multiple markets and volume discounts. Because when you track multiple locations and all the buying that we're doing, we become a much larger purchaser. And we're able to shrink those prices down as well.

And then, of course, with energy drink companies, we've been able to work out some deals with an energy drink company that's lowered our costs on energy products. Same thing we're doing now with food. As we expand the restaurants, some of the products we sell at all of our Rick's locations, so we're able to get discounts on specific items or products as we grow. And I think we'll continue to see more and more of that as we get larger and larger. And that's really what his job is about.

On the restaurant side, and we brought in a guy that worked at -- for Planet Hollywood for several years, who's done multiple club start -- or multiple restaurant startups. And he's starting to help launch these restaurants, help us find the new locations, and do kind of the things that have been his expertise.

We understand the adult club business and we understand the liquor side and the bar side of it. He is really helping us to learn and understand and develop our systems for our food service. And it's made a drastic difference. When he came onboard, the Bombshells location was doing about $35,000 a week, and now it's consistently doing $65,000. I think during the NBA playoffs, we had a couple of $80,000 weeks. And it's very exciting, the quality has gotten better. The reviews and the amount of positive customer response has gone up drastically since he's been onboard.

Great, thank you and good luck.

Thank you.

(Operator Instructions). Igor Novgorodtsev, Lares Capital.

Thank you for taking my questions. Pretty nice quarter. (multiple speakers) Congratulations. A couple of questions. Can you just tell me -- I know you have a couple of lawsuits and you have several outstandings. Can you just tell me which lawsuits you have settled and what is still outstanding?

Sure. We settled a claim that was in excess of our insurance coverage due to -- from 2009. We'd had several claims around the country under that policy, under our assault and battery policy, which has a $1 million limit. So we settled a claim there that cost us about $160,000 in addition to what the insurance company policy had left on it. And we figured that was the easiest way to discard that claim and move forward, kind of finishing out our 2009 claims that we had possible uninsured claims on. So that was nice to move forward from that year.

And then we also settled the lawsuit with the landlord in Las Vegas on the Las Vegas property. When we closed the Las Vegas property, you know he made claims that we owed him several million dollars in rents and whatnot. And that case was preparing to go to trial in Nevada. We were going to have some pretty hefty trial expenses in discovery and whatnot. And so we were able to work out a settlement that got rid of that claim as well.

So the minimum wage issue, which was filed in New York, is still outstanding, right?

Yes. The minimum -- well, it's actually whether their employees are independent contractors is really what's at stake there. We're working on that now and we had oral arguments. There's most for summary judgment and then the -- basically we're basically waiting on the court. So we're kind of in a hurry-up-and-wait mode to kind of see what all the different issues are going to be, that are going to be facts of law that we have to do and whatnot. And then we'll go from there.

I still think there -- it will probably be another year-plus before we really know what's going on. We'll probably get some summary judgment rulings here in the next few months that will kind of give us an idea of what the judge is leaning towards, what he's thinking and whatnot. And then, of course, we'll see if we believe it's still a class or not, whether we should move for a class decertification on the case, based on what the judge does, and those types of things. So there's still a lot of open issues. So really nothing's really changed at this point. We're still kind of in a wait mode.

Okay. I guess on the positive side of a lawsuit, I know that you were in the lawsuit with the state of Texas about a different [fee front] tax, and you actually were thinking that you could actually win the case. Is there any -- was there any movement on that?

There has been no movement at all. We thought we were going to get something, an agreement worked out with the other side and pass some legislation in this last legislative session. Of course, the Texas legislature is now recessed and won't meet again for two years. So we'll probably get some type of court ruling that will either be appealed or moved forward in that time period. So right now I guess kind of basically at the mercy of the courts, waiting for the courts -- the appeals court to make some decisions in that case as well. So it's kind of a hurry-up-and-wait. And in the meantime, we continue to expense the patron tax but we're continuing not to pay that patron tax.

I'm just curious, assuming the worst case scenario you lose the case, would there be additional charges, interest charges or penalties applied in addition to what you accrued?

You know, no one really knows how that's all going to work at this point. We basically got an agreement to stay the collection. We filed the reports, we are filing the forms. And I guess what's really going to happen more than likely is, there if the judge makes a ruling, I would assume that, at some point during the appeals process, that everyone will reach some type of settlement, is my guess on this deal.

Whether -- I mean, obviously if they win the tax, they don't want to close all the businesses down because they all go bankrupt because they can't pay what they owed in the past. They want to start collecting the money. I would assume they'll work out some type of payment plan or some type of settlement on a go-forward basis. You know, we don't consider that a super high risk at this point, because we just believe that under Texas law, even though the judge tried to make some changes, and there's a lot of precedent case law that really says that the legislator has to make those changes, not the judiciary section of the government.

And so, I guess we're just basically going to have to sit and wait. I wish we had more information on it, but we really don't know. (multiple speakers) I don't think anybody really -- even the lawyers aren't really 100% sure. It's kind of new stuff. So, as it moves through the courts, you know the reality of it is, we'll probably know in about three to five years.

Okay. And my last question, sort of on the sunny state of things, you're opening or you just have launched Vivid Cabaret in Los Angeles, and you're opening one in New York. Obviously, it will take a few months to see how well the concept is working out. But I'm just curious, I mean, Vivid obviously being the more recognized brand, if this Cabaret concept works out, do you plan to have any other greenfield developments of Vivid Cabarets or renaming any of your existings to remodel your new -- the existing Cabaret into Vivid Cabaret? I mean, what needs to be (multiple speakers) --?

I mean, we've had discussions. Right now, we want to see -- we want to open, we want to see what happens. We want to see the response. We want to see how their marketing plan works. They've got lots of Internet access that are on cable television. They have cable television stations there; have serious radio stations. So we just want to kind of see how it all works, how it promotes, how many people they bring through the doors of the clubs, and how the Vivid girls' performance is at the clubs, how those -- how they draw customers in.

And as we move forward, if the relationship is working, absolutely. We would love to continue to expand that concept and grow it. It's -- like I said, it's not exactly a competing with Rick's Cabaret concept. It's a little different concept. It's more of a party, it's more of a nightclub concept with entertainers. Where Rick's is more of the raw gentlemen's club concept. So I think that as we move forward, we're going to be very happy with the relationship, and I think that Vivid will too. We've gotten along with them for many, many years, and it's a relationship that goes back; we've talked about other things together and done some other things here and there together. And I think that this is going to be a very successful concept for both of us.

Great. And you don't disclose how much you're paying Vivid for using their name, do you?

Actually, we have a nondisclosure as to not disclose that at this time. Obviously, once we are operating and the revenues are going, it's going to be kind of pretty easy to figure out.

All right, great. Thank you very much.

Yes, thank you.

David Mau, Belmont Acquisitions.

Hi, Eric, how are you? Congratulations. (multiple speakers) I just had a quick question for you. You know you obviously have gotten past the last four years of some restructuring. Have you thought about forward guidance at this point and how that might help the investing public look at you guys, in terms of the organic growth versus what you are doing in the acquisitions?

Yes, certainly. I mean, we were working at guidance, trying to put some guidance into this deal. We decided that it was just a little premature. We want to kind of move a little bit later in this quarter. But before the quarter-end or year-end for our fiscal year end, we expect to get back into the guidance -- back to a guidance model for 2014. And you know, I suspect some time before September 30, we will get that guidance out to the public.

Because we want to kind of let everybody know what our plans are going forward. We think it's going to be much easier and more predictable, like I said, with the ability to open up restaurant concepts, if an acquisition falls through. So we'll have a nice steady growth and we'll know, if we get a surprise acquisition, it will be a surprise up instead of, in the past, where we've had, oh, we thought this acquisition was going to close but it didn't, and surprised in the wrong direction. So -- but yes, I think we'll definitely be back to some type of guidance model before the end of the quarter.

Very good. And a second follow-up question. You have Ricky Bobby's just opening. Bombshells is a new concept. At what point do you expect those businesses to be, let's say, a significant portion of your business on a per-club basis as well as an overall revenue basis?

Well, I mean, it seems like the -- it looks like these concepts are going to be in line with what we expect, somewhere between $3 million and $5 million in annualized revenues. So, I mean as you look, I mean, we've -- obviously, we've said we're looking at three new Bombshells locations right now. One we actually have the building under contract on an owner-financed deal, which was an old restaurant nightclub.

So as we move forward, we are finding some restaurants that -- where the past owners weren't successful because they opened the wrong type of food service or something in an area, but it had a great location. We're starting to find those types of locations and looking at those right now. Much cheaper convert for us. Right? The kitchen is already built. The bathrooms are pretty much already built. So everything we're going to do is basically cosmetic.

So it's -- instead of having to spend $1 million to $3 million, like we did with the Bombshells refurb, which had never been a restaurant before, or the Ricky Bobby's which we built from the ground up, we believe we can do these in the $500,000 -- $600,000 range in total startup costs. We are currently looking at two prices like that right now, one in Austin, one in Houston. We're going to continue to look, of course, in the Dallas-Fort Worth market, expand the brand in that market as well. But we've got some pretty serious leads on specific pieces of property in the Austin and the Houston market that we're working.

So to answer your question, I think probably, say we open two to three more -- say we open three more by March of '14. We continue to grow, continue to look and find as we move into October, have three or four more lined up, and it could be $15 million to $20 million worth of revenue pretty quickly by the end of fiscal 2014.

Very good. Appreciate it. And once again, congratulations, and great talking to you.

Yes, thanks, David. Appreciate it.

Ladies and gentlemen (Operator Instructions). [David Spire, Nidder Capital].

So, you know from the look of it, your numbers are pretty great, actually. And obviously, you guys seem to be doing a fine job managing the business. I mean, looking at it I think over the last five years, your revenue has gone from almost $30 million annually to over $100 million. Earnings at the same time $3 million to over $10 million annually. And but I think it's at the point where it's pretty clear your shareholders are going to want a piece of the action, you know what I mean?

Yes.

And more or less, if you look at even EBITDA over the last two years, you've generated close to $60 million in total EBITDA in just two years, at the same time your market cap remains under $100 million. And I think you said yourself you're buying the stock today personally because you feel it's the best investment around. So, I'm just curious as to why not boost share buybacks or paydown debt instead of more or less acquisitions?

Well, I think that's one of the nicest things that we're getting to, is we're getting to the point where we're going to be able to do both. In fact, we have. If you look, we've returned $1.5 million last year; and the first nine months of this year, we returned almost $1.5 million in our stock buyback program, in addition to paying an additional $600,000 in debt reduction just on the Miami debt. Forget the fact we've also paid off a couple of other loans early, paid back the $8 million convertible debenture that we had done in 2009. That's all completely paid off and gone.

So I think you're seeing -- you're starting to see some of that, in that we're taking some of our extra cash and going, okay, we are growing here, and we've got enough money to do all this growth. We've got access to capital where we can borrow the capital cheaper than the return on the growth. So, let's figure out how to best use this other cash and increase our earnings per share. (multiple speakers) Because I think at the end of the day, the stock is going to come back to a mean. It's going to trade at some type of multiple based on the earnings per share, the cash flow and our growth, and our rate of growth.

More or less what I was referring to, is if you look at the acquisitions so far, they've been great, and obviously, you can see by the numbers, if you were to put a run rate numbers on your current earnings power, you're looking at something that should be north of a $200 million company. And more or less -- so what I'm more referring to right now is that, okay, the acquisitions have been great, so if we are looking at use of capital, the focus, if what I hear you're saying is true, the focus really should be on shareholder value rather than acquisitions at this point. Just because at the run rate you're going, you're going to be generating enough cash, where you know the cash should be going back into the business and not into further business.

Well, but then we've just -- I mean, if you look, we just recently gotten to this point.

Yes (multiple speakers) -- I understand exactly it's more like (multiple speakers) --

Yes, okay. I understand what you're saying, sorry/

More or less I'm congratulating you and saying now it seems as if you're at a solid run rate. And at this point, shareholder buybacks or anything, as I say, you are heavily invested in the Company as well. The best return would be buy back your stock or do whatever you could just to bring the value out of the business. Because I think if that's done, we'll all be a lot wealthier in a given time. Because I think, as I said, this is a $200 million company and it's not trading as it is.

If you trade -- if you look at us in traded compared to other restaurant, sports bar, whatever you want to -- whatever entertainment companies, you can kind of pick a whole menage of different types of business that are similar but not the same -- because there's really nothing that's exactly the same as us -- but if you just take and cover up the names. Cover up the names of them. Don't even look at what the name is. Cover up our names, cover up all their names, and just put the financials down side-by-side, side-by-side, side-by-side. Look at the rent expenses that they are carrying, look at their debt expenses that they carry. Most of them don't carry a lot of debt because look at their rent expense. Their rent expense runs 9%, 10%, 11% of revenues. Where, you took our rent and debt together, we're at 8% -- 8%-something.

Take just the numbers and compare them side by side, and then look at the market caps, and look at the EBITDA numbers, and you'll see we're the cheapest -- we're going to be the cheapest thing on the table. I don't think you can -- I don't think you're going to find anything that trades at the multiples on a go-forward base that we are trading on.

And that's one of the things as we work and move into giving guidance, that we really want to lay out to investors. And we think we're going to get out and tell our story for the next four months very hard, very strong, and then continue to build and work those relationships with the institutional investors. It was hard because we had a lot of relationships with institutional investors, but then the institutional investor market just got slaughtered after 2009 and in 2010. And all those relationships we had developed and worked, it's not that we had any problem with those relationships. It's that those businesses themselves had huge problems and cash calls, and we were a pretty good winner for them, so a lot of our stock was sold and (multiple speakers) --.

I understand. What I really want to congratulate you on the business, and more or less saying I just hope that translates into a higher stock price. And I just would like to see that be the focus. Because all in all, we can make $10 million, [$15 million] in a year, but if investors don't see any of that money after a few years, it becomes a problem. So again (multiple speakers) --

As the largest shareholder of the Company, I promise I want to see the stock price up. I'd rather not have to buy -- I don't -- it's not that I want to buy any more. I'd love to diversify some of my holdings, and own other and make other investments, but it's hard to do that when I -- like I said, I lay out financials of other companies and go, gee, I can buy this -- buy my own company much better multiples.

Understood. So, I'll end it with this -- understood that when you look at other acquisitions, take a look at your Company, and you'll see that's probably the best thing to buy around. So, that's more or less where I'll leave it. But again, thank you very much and congratulations.

All right. Thank you.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

All right. Thank you.

Well, thank you, everybody, for participating in our conference call. Again, any of you who are -- who is in the New York City area tonight, please stop by Rick's Cabaret. Meet Eric and get a quick tour of the club, and a really in-depth look at how we operate. We do appreciate your calling. And as always, if you have any further questions, please address them to IR at ricks.com. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.