Earnings Call Transcript - RICK Q2 2024

Operator, Operator

Now I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, to take it away.

Eric Langan, CEO

Thank you, Mark, and thanks, everyone, for joining us today. Please turn to Slide 6. Despite the uncertain economy, the core strength of our business enabled us to generate $72.3 million in revenue in the second quarter compared to $71.5 million last year. While GAAP EPS of $0.08 primarily reflected noncash impairment, non-GAAP EPS totaled $0.90 near the high end of analyst expectations. The nightclub segment generated $59.4 million in revenue in 2Q '24 compared with $57 million last year. Separately, the effort began in mid-February to improve Bombshells segment, resulting 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 by $20 million by closing our planned bank loan. Now here is Bradley to go into more details on our results.

Bradley Chhay, CFO

Thanks, Eric. Please turn to Slide 8 to review our Nightclubs segment. Second quarter 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% and 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 second quarter sales call, PT's Centerfold in Lubbock, a new club, did not open until late in the quarter. Baby Dolls Abilene, our 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 partially closed clubs and Bombshells for a number of days during that period. Impairment resulted in operating income of $11 million or $18.6 million of revenues compared to $8 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 costs, and increases 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 2023 with four clubs open. We finished remodeling and opened the fifth club in mid-June 2023. As of fiscal '24 second quarter, revenues have grown 23.9% from a year ago third quarter, which was the first full quarter post acquisition, and operating margin has expanded 394 basis points. Locations have benefited from increased credit card transactions, reduced management costs, and more effective RCI marketing management and purchasing methods, partially offset by the increase in patron tax, which started in September 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 on 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, ensuring the wait staff is attentive and so on. 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 preopening 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 consolidates 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 on a non-GAAP basis. And at that, we wanted to present the closest GAAP equivalent 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 second quarter, we used $1.5 million to buy back shares. Second quarter 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 the combination of lower service revenue percentage and higher costs. Please turn to Slide 15 to review our debt metrics. Debt as of March 31 declined $2.2 million from December 31 due to scheduled paydowns. The weighted average interest rate remained at 6.61%. Total occupancy costs declined by 8% on a sequential quarter basis. At 2.99x debt-to-trailing 12-month adjusted EBITDA inched up 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 are 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 difference license remains largely the same as the first quarter. As Eric mentioned, subsequent to the quarter, we completed our $20 million bank loan. Now let me turn the presentation back to Eric.

Eric Langan, CEO

Thank you, Bradley. 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 unless there is a strong reason to do otherwise: primarily mergers and acquisitions, organic growth, and share buybacks when the yield on free cash flow per share exceeds 10%. Since refocusing on Bombshells in mid-February, I have encouraged our teams to scrutinize everything as we did in 2016. This has led us to rebrand certain club locations and evaluate several of our non-income generating and underperforming assets. We are conducting performance reviews across our operations to ensure we are achieving returns on our team members and ensuring that top performers are rewarded appropriately while addressing weaker performances. We had become somewhat complacent during the post-COVID period when conditions were easier, and I believe we must return our focus to the fundamentals of our capital allocation strategy. Please turn to Slide 18. We continue to make progress with new projects since our April 9 call. We have received our liquor license for XTC Dallas, which is being renamed and repositioned as Dallas Show Club. We also obtained our liquor license for the planned conversion of a BYOB club in Harlingen, Texas into a Chicas Locas Liquor club, which is expected to open this quarter. Additionally, we have solidified our plans to open Rick's Cabaret Steakhouse in Central City without impacting our fourth quarter. Please turn to Slide 19. By adhering to our capital allocation strategy since the end of fiscal 2015, we have achieved compound annual growth rates of 10.2% for total revenues, 12.1% for adjusted EBITDA, and 17.2% for free cash flow. We have also reduced our fully diluted share count, even after issuing shares for acquisitions. I would like to thank our local and dedicated teams for their hard work and all our shareholders who believe in us and make our success possible. Now here's Mark to start the Q&A session.

Operator, Operator

Thank you, Eric and Bradley. To start things off, we'd like to take questions from Rick's analysts and then some of its largest shareholders. First up, we have Scott Buck of HC Wainwright.

Scott Buck, Analyst

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 $8 million worth of impairment charge.

Scott Buck, Analyst

I appreciate that. I was hoping we could get an update on M&A. A quarter ago, it seemed like you were close to announcing something, but I didn't see any news about it. I'm curious if there's a delay or if the situation has changed.

Eric Langan, CEO

Yes, I'll take that, Bradley. Basically, we had two LOIs. We have told one, and the other one is in 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 that'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 is going to buy known 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 if that one goes through. I'm looking at other locations around the country. I think 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, Analyst

Great. That's helpful, Eric. And second, I was wondering, we're about halfway through the second quarter 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 first quarter or the first calendar quarter?

Eric Langan, CEO

Yes. Well, April January, which was very important to me, we now need a 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 got some great games out there, bringing 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 doing very well from both the NHL and the NBA. And so is Dallas because we have the Mavericks as well. So the mix and the ranges are both in. So we 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, we have a very solid sports lineup. Last year, Mother's Day weekend was one of the weakest weekends of the quarter. This year, I think we should have a much better Mother's Day weekend because we basically have four games that will affect us between hockey and basketball basically starting tonight all the way through Monday, I believe. So I'm very excited about that.

Scott Buck, Analyst

Great. That's helpful. And then last, if there's any update you can give us on timing in Central City, that would be helpful.

Eric Langan, CEO

Well, timing is just unknown. Other than we're going to do everything we can to get the club open in this quarter. So we'll have the club and the steakhouse opened in this quarter. I'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 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 redirect it back onto 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, we'll get that information out, that's when a decision has been made. But there's just a lot of new information that's coming in in the last week or so, and we're evaluating all of that at this time, and we'll have a better understanding of where we're going with that as we move forward.

Scott Buck, Analyst

I appreciate the transparency there.

Operator, Operator

Next up, we have Anthony of Sidoti.

Anthony Lebiedzinski, Analyst

So first, as far as the quarter, your services revenue were down a little over 8%. Can you share more details regarding this decline? And what is your strategy to improve services as a proportion of your revenue mix?

Eric Langan, CEO

I can provide you with a clear explanation. We experienced approximately $1.3 million in revenue from XTC in Dallas. As many know, Dallas enacted new city ordinances that are currently in litigation, which requires us to shut down the club at 2:00 AM. This club used to generate a significant portion of its revenue between 2 and 5 AM. We are in the process of rebranding it to the Dallas Show Club and are working on our liquor license. We will need to close for one night while we transition from BYOB to liquor sales, and the rest of the conversion will take place while we remain open. This is a significant aspect of our operations. Additionally, Miami's service revenues last year were significantly higher than they are this year, which accounts for most of the decline. There are some positive developments in markets like New York and Minnesota, but we also have some clubs experiencing declines. However, the primary reasons for the overall decline are the XTC Dallas and Miami clubs.

Anthony Lebiedzinski, Analyst

And then what were the main factors that drove the sequential margin gains at Bombshells? And do you think that's sustainable?

Eric Langan, CEO

Well, my goal with Bombshells is to return us to $60 million of revenue with 15% margins, which would put us 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 6-month process from now, at least I hope so. I think the 15% margins are maybe doable earlier. The revenues being a little more difficult because while part of it has been management issues, the other part of it is the economy and people are just not spending as much and not drinking as much. Yes, I believe that we will have that corrected. I think we've made some major changes. We've lowered our costs. We've changed out a lot of the management teams in certain clubs or certain stores in certain markets. And 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. And I think the concept is definitely heading in the right direction.

Anthony Lebiedzinski, Analyst

Okay. And then you also have a number of projects in the pipeline. So as you're looking to open the Rick's Cabaret and Steak...

Operator, Operator

Anthony, you're on mute.

Anthony Lebiedzinski, Analyst

Okay. So as I started saying, you guys have quite a number of projects in the pipeline, but I just wanted to focus more on the plans for the Central City location. So you are planning to open the Rick's Cabaret Steakhouse in 4Q, even if there is no gaming. So how should we think about the revenue contribution once 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 is uncertainty with that, but just hypothetically speaking, how should we think about that?

Eric Langan, CEO

I have completely shifted my focus away from gaming and am concentrating on the club. I believe that the club can generate around $100,000 per week, which translates to approximately $5 million annually. With our margins at 40%, that means we would earn about $2 million per year. Initially, we'll open four days a week as we develop our customer and entertainer base, and when we transition to seven days a week, I anticipate we could increase our annual revenue to between $8 million and $10 million at similar margins. That's where my attention lies at this moment. Regarding gaming, I'm considering several factors to determine what makes sense for our company. As of now, we expect it may take 18 months to 2 years at a minimum before anything happens. There are two other licenses applied for in Central City that have been pending for over three years without any resolution. In the past week, we have received a significant amount of information, which we will evaluate. I expect that within the next two to three weeks, we will announce our plan going forward. Currently, the gaming aspect isn't materially relevant to this year's or next year's earnings since we're looking at a timeline of 18 months to two years. Therefore, we are focusing on what we can control, which is the opening of the club and the steakhouse. I believe we will perform well in that market, and we will continue to rebrand some of our BYOB locations into Chicas to avoid the issues we faced in Dallas over the last six months. We are proactively addressing potential challenges due to legal uncertainties. We believe that some of the underperforming BYOB locations will thrive under the new brand. That's where our efforts are centered right now. Over the past 2.5 months, focusing on Bombshells has allowed our team, particularly upper management, to re-evaluate our objectives and capital allocation strategy, putting scrutiny on our existing assets. This has led to the closure and rebranding of four clubs, which we believe will significantly enhance our performance moving into the end of this year. We expect to open three new Bombshells by the end of this year, and also aim to have the West location of Baby Dolls operational. We are looking to eliminate inefficiencies and concentrate on quicker returns on investment from acquisitions rather than the lengthy process of building new locations. While this strategy appeared sound, it is currently hampered by governmental delays with building permits and inspections, which add approximately six months to our timeline. Given the rise in interest rates, the carrying costs have become prohibitively high. Thus, we need to reassess our approach and revisit the calculations to ensure they align with current conditions. We are in the middle of this reevaluation process, and you will see the results of these efforts over the coming quarter. I plan to have everything organized within the next six months to ensure we are back on track as we enter fiscal 2025.

Anthony Lebiedzinski, Analyst

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, CEO

Some liquor clubs tend to achieve higher sales in BYOB settings. I believe we can elevate those sales enough to improve total margins. While the margin rate might remain similar, the increased revenues will likely enhance our bottom line. We've created some models but have only converted one club so far. As we continue with the rebranding in El Paso, Harlingen, and the recently converted FCC Dallas, I expect to provide more insight during our next call.

Operator, Operator

Next up, we're going to have Rob McGuire of Granite Research.

Robert McGuire, Analyst

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 the different total regulators?

Eric Langan, CEO

Well, you have alcohol, and the TBC in Texas becomes a new regulator for, yes.

Robert McGuire, Analyst

In general, do you find that creates an easier environment? I'm wondering if you could elaborate a little further about the strategy helping you avoid what happened with XTC.

Eric Langan, CEO

It's just irrelevant. They decided that all the clubs in Dallas should close at 2:00 if they have an adult entertainment license, which I believe is unconstitutional. If you're closing us, you need to close every business. So far, the judge has either disagreed or agreed with us, and now we're going back and forth. The litigation will take too long for us to operate the club while it's not making any money. So we converted it, and to prevent this from happening in other markets—not every market, since some BYOB clubs are still successful—we're willing to take risks with those. However, in what I consider underperforming markets like Harlingen, El Paso, and Abilene, we believe we will perform much better with this new concept that we acquired before the Duncan Burch acquisition. We didn't have this concept prior, but now we can analyze its numbers and demographics alongside our BYOB clubs in those three locations, particularly Harlingen and El Paso, and even the XTC in Dallas. I believe we will do very well with this new concept.

Robert McGuire, Analyst

And 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, CEO

Yes, running specials is definitely helping. Sports is also making a significant impact for us right now, which has been a major advantage this quarter and the previous month. We will see how things unfold through June based on who makes the finals. We're ending parties, hosting PIP parties, and involving our teams much more to prevent complacency, which can creep in without realizing it. We've brought in new management for the clubs and Bombshells, and we’re seeing positive results from that. A lot of it is about getting everyone back on track and returning to basics. This got me thinking about whether we are also going back to basics at the corporate level and what those basics are. I reflected on our capital allocation strategy from 2015 and '16, which was very successful for us, and decided to reevaluate our assets like it's 2015 again. We've generally adhered to our capital allocation strategy, but I think we became a bit complacent regarding existing assets and team members, especially since we were making a lot of money in '21 and '22. However, '23 served as a wake-up call, particularly with Bombshells, and we have noticed a decline in same-store sales at the club levels. We need to address this immediately at the club level and can't prolong it like we did with Bombshells. That’s our current situation.

Operator, Operator

Next up, we'll have Steve Martin.

Steven Martin, Analyst

So 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, CEO

On the club side, in most of our markets where we hold the top two positions, we are certainly outperforming our competitors. However, there are some lower-tier clubs in certain areas that are likely comparable to our competition. Conversations with other club owners reveal that we are witnessing declines ranging from 15% to 30%, averaging around 20% from their peak performance in 2021 and 2022, with further drops in 2023 and ongoing into 2024. The mid-level consumer is facing challenges, and since the majority of clubs target that demographic, this is a situation we will need to navigate over the coming months. Often, people misunderstand our financial state; particularly during the discussions in 2009, despite still making $6 million, rumors circulated about us going out of business. Currently, we are generating between $50 million to $60 million, so we are still profitable. We are not on the verge of closing down, but we are not experiencing the same level of effortless revenue that we did in 2021 and 2022, when financial conditions were favorable and we were among the few clubs operational. In 2021, we had an advantage as many clubs were shut down, and there was an abundance of free money available. Now, with tightening financial conditions, rising interest rates, and consumer pressures from inflation, we've encountered wage inflation as well. This situation has necessitated changes and adaptations on our part.

Steven Martin, Analyst

Okay. And 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, CEO

I believe you can see some of it now because while our revenues have declined, our adjusted EBITDA hasn't decreased as much on a same-store sales basis. We made a decision about a week and a half ago to halt all controllable future project costs. Although we still have to cover carrying cost interest, we're not hiring new employees or continuing management or new concept training until we have a confirmed opening date. Once we know when a store will open, we will begin incurring those costs. We won't carry any preopening costs if we expect to open in three months but it actually takes nine. It’s more cost-effective for us to have a store ready to open without staff than to maintain that staff for nine or ten months. So we've eliminated those expenses. This aligns with our capital strain strategy where we won't invest until we have a clear understanding of the expected return on investment.

Operator, Operator

Next up, we'll have Orchid Wealth. Orchid Wealth, I think you're on mute still.

Unknown Analyst, Analyst

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, CEO

We've been doing well in negotiating prices. Much of the current situation revolves around terms and uncertainty. Many are still clinging to their deals from 2021 and 2022, but as we move into 2023 and 2024, it's clear that those past years were somewhat of an anomaly. There was an abundance of free money during that time, and as businesses come out of the impacts of COVID and many have closed, we're seeing a return to normalcy. It's surprising to think we're discussing normalization five years later, but that's the reality. The widespread shutdown of businesses across the country was unprecedented, and the duration was supposed to be just two weeks. There has definitely been a lot of adjustment happening as we move back to a more normalized state. Additionally, I believe this isn't just our issue; many companies and individuals have become complacent. I spoke with Mark today when I visited his office in New York City. Last time we were here, the office had at most 15 people, and during our visits, it was usually 8 or 9. Today, I noticed there were 35 to 45 people present. Everyone is back at work, and we're observing this trend in our numbers in New York City and the clubs as well. I believe this return to normal will happen, though I'm not exactly sure what that will entail. However, I am confident that we will remain on top of the situation and proactive, rather than trying to catch up as we have in 2023.

Unknown Analyst, Analyst

My assumption is that when I adjust the figures for the previous years before the COVID boost, it seems like you are still following the trend line from the past five years of performance. Regarding overall growth, it's similar to how a heat wave leads to increased ice cream sales, and when temperatures normalize, sales revert to typical historical levels. I'm curious if things are aligning with that expectation or if you've observed something different.

Eric Langan, CEO

Yes. When we look back at 2018 and 2019, our position is quite strong. There have been specific markets where performance lagged. Minnesota faced challenges not only from COVID but also from the George Floyd incident, which significantly impacted the region for a period. However, the T-W initiative is revitalizing downtown, and I'm noticing improvements in numbers in Minneapolis that we haven't seen in quite some time. The Savill club is also performing better. I remain hopeful that this market is on the verge of recovery. New York is experiencing a turnaround as more people return to their offices, and I feel optimistic about that as well. Our major challenge has been Florida, which once showed exceptional performance. The highest gross revenue in 2018 or 2019 was $26.6 million to $26.8 million, while in 2022 it soared to $39.6 million. Last year, figures were a bit lower at around $35 million. The $5 million fluctuation in quarterly same-store sales is significant.

Unknown Analyst, Analyst

Regarding buybacks, you have your criteria for when to be aggressive. With the increase in cash on the balance sheet, it seems you're not currently engaging in negotiations for any major deals. Are you ready to be assertive and return to the 130,000 shares you released at $80 nearly two years ago?

Eric Langan, CEO

I have been considering more aggressive terms regarding our share buyback. My goal is to reduce the total outstanding shares to under 9 million. I would like to repurchase over 300,000 shares, depending on market conditions. I'm uncertain about the timing, as we recently closed a loan, and I had initially planned to act more decisively. After consulting with our attorneys, I decided to wait until after this call to ensure all relevant information is disclosed. Given the current uncertainty with the casinos, we will likely adopt a more moderate approach to buybacks over the next two weeks. While we may remain within safe harbor limits, I can assure you that we will never exceed that amount in a single day, as we will adhere to the SEC's safe harbor provisions for our buybacks.

Unknown Analyst, Analyst

And what's that number approximately?

Eric Langan, CEO

25% of the average daily volume management so long as I had to worry about it because we actually we used to use a little local stock broker. Now we actually use an investment bank to do our buybacks.

Unknown Analyst, Analyst

It's like 8,000 to 10,000 shares is what you could take to.

Eric Langan, CEO

I think it's a little higher than that, but I'd have to look into it. It comes up to 14,000 shares, I believe, based on my last check.

Unknown Analyst, Analyst

Right. But you have more than enough cash to take back $130,000.

Eric Langan, CEO

We're currently allocating $45 million in cash to close the loan. The entire $20 million has been used for stock buybacks. I can utilize 13 million of it, as the Board has authorized me to exceed that limit. We will monitor the stock's performance. When prices are exceptionally low, I tend to be very proactive. We've experienced that previously. At current rates, buying back $100,000 or $200,000 a day is not overly aggressive; it's a regular buyback to average the costs. We have purchased stock at $48 and $56, and it balances out for us over time. In the long run, over a five-year span, the specific prices at which we buy will not be significant in the future.

Unknown Analyst, Analyst

You have two deals: shares at 80 and shares at 60. So anything right now is a net return on cash.

Eric Langan, CEO

We're looking at the next 300,000 shares. Under 60, we're benefiting. We invested in real assets, specifically real estate and cash flow, both of which are performing much better than their initial purchase prices. For example, the changes in Duncan Burch have led to a 23% increase in revenues, with margins rising to 32%. This marks a significant improvement compared to where we bought in 1.5 years ago, or even a year ago.

Unknown Analyst, Analyst

Over the past few years, you have built a substantial real estate portfolio. I'm curious if, similar to your work with Bombshells, you still have additional properties that you could sell off. What potential parcels or land next to the clubs could be sold that aren't beneficial to you anymore?

Eric Langan, CEO

On a cost basis, about $4 million. On a market basis, we recently turned down an offer of $9 million for one property, which I believe is worth that amount.

Unknown Analyst, Analyst

And what did you pay for that?

Eric Langan, CEO

We've got three parcels of land left. The Aurora property that we recently acquired for Bombshells is now up for sale, and I expect to have a contract on that hopefully in the next two weeks, according to the broker. I turned down $9 million for our property in the Houston area, which is about 19 acres. I believe the property is worth approximately $30 a foot if we received the prime price for it, but in today’s market, it’s probably closer to $14 a foot, translating to around $12 million to $14 million. The offer we received was closer to $10 a foot. If someone came in at $12 a foot today, I'd likely accept it since a fast closing would be ideal. This property is the largest contiguous piece of land within about a five-mile radius at an intersection of two major highways, across from a large Bass Pro shop, making it a prime piece of real estate. When we acquired it, the zoning limited its potential. About a year or a year and a half ago, I petitioned the city to rezone it to C1 commercial, which allows for various commercial uses. The value increased once we changed the zoning. Our initial plan was to develop it into a mini light industrial park, but considering that RCI isn't focused on development, we decided to sell the property instead. I believe we will successfully sell it within the next six months, ideally lining everything up by October 1, 2024, to align with our fiscal 2025 strategy, similar to what we achieved in 2016 and 2017.

Unknown Analyst, Analyst

Okay. And I'm assuming anything that you're buying at these current levels is meeting your capital allocation strategy?

Eric Langan, CEO

I think everything we bought period is meeting our capital allocation strategy. I don't think we have anything invested. I think some mistake, if we made any mistake, was estimation of time to open. And so therefore, the carrying costs are increasing. And I think we'll still be I think we'll be within our capital case strategy with additional carrying costs on everything except for maybe these casino ropes because this timeline is getting crazy. So we've got to weigh that math still. But on everything else, the Bombshells properties, unit, we hope six months, 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 fall within the ranges of our capital allocation strategy.

Unknown Analyst, Analyst

We can't buy clubs by stock.

Operator, Operator

Thank you very much, Eric, and Bradley, as well as all those who ask questions. For those who joined us late, you can meet management tonight at 7:00 at Rick's Cabaret New York, one of RCI's top revenue-generating clubs. Rick's is at 50 West 33rd Street between Fifth Avenue and Broadway, a little in from Herald Square. If you have an RSVP'd, 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.