Q2 2021 RCI Hospitality Holdings Inc Earnings Call

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Greetings and welcome to RCI Hospitality Holdings conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

And then one should require operator assistance during the conference. Please press Star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce Gary Fishman, who handles investor relations for RCI.

For those of you who are listening on the phone and you can find our presentation on the RCI website click company and Investor information just under the RCI logo that will take you to the company and Investor Info page scroll down and you'll find all the necessary links please turn to page two.

I want to remind everybody of our safe Harbor statement as opposed to at the beginning of our conference call presentation for them.

Our minds here that you may hear or see forward looking statements that involve risks and uncertainties.

Actual results may differ materially from those currently anticipated we disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards.

Now please turn to page three I also direct you to the explanation of non-GAAP measurements that we use non.

I'm pleased to introduce Eric Eric Langan, President and CEO of RCI hospitality Eric.

Okay.

Thank you Gary.

Yep.

If you please turn to page for thank you for joining us today I'm here with our CFO Bradley Shay.

After the market closed we reported our second quarter numbers results reflected a continued rebound and financial performance through the COVID-19 pandemic, we posted strong increases in earnings per share and free cash flow and.

Nightclubs had their best overall performance since the pandemic began and bombshell served up another strong quarter.

To enable us for them.

And hey, this enabled us to keep our teams employed and generated higher levels of free cash flow and profitability. Once again, we thank our loyal customers and dedicated team members and steadfast investors.

We hope these trends continue as the COVID-19 situation continues to improve.

And as of today 36 clubs and 10 Bombshells are open nightclubs and bombshells sales exceeded $18 million and April restrictive curfews whichever effect and many of our northern clubs are beginning to end.

Minneapolis, where we have three clubs lifted there are 11 P. M curve you on Friday.

New York, where we have three clubs plans to eliminate the midnight curfew, starting may 31, and we hope the curb you and Chicago, where we have one club will be lifted sales.

Looking forward.

We are working on all fronts to grow free cash flow and I'll talk more about that when I returned to the wrap up and then we'll have our question and answer session and now Here's Bradley to review the financial data.

Thanks, Eric and good afternoon to those who tuned in to the call. We reported total revenue was up $44 $1 million for the second quarter, that's up 9% year over year. This is our first year over year quarterly increase since the pandemic began and a year ago quarter GAAP EPS was <unk> 60, compared to a year ago loss of 37 cents.

Non-GAAP EPS was <unk> 75 per cent compared to 47 cents and the March 2020 quarter low.

Looking at cash we had $22 million as of March 31st.

Second quarter net cash from operating activities was $11 million.

And free cash flow was $9 million, that's the third highest and the quarters and the third highest quarter and the company's history.

Please turn to page five the nightclubs segment continued to rebound and Rev.

Revenue was up $38 million were up 22, 2% from the December quarter and down only one eight per cent from the year ago quarter.

The sequential increase reflected more locations opened on a more consistent basis and strong demand.

Same store sales increased three 6% based on subs that were open and updates to qualify and the March 'twenty, 'twenty, one quarter and the year ago quarter.

During the March 2021 quarter 29 of the 38 clubs were opened the full period.

37 were opened by quarter and.

21 were closed for several days and mid February due to the Texas freeze.

This compares to the December 2020 quarter when.

24 clubs were opened through most of the period and 26 for open by the quarter and.

As you May recall after a strong performance in January and February last year. All 38 clubs closed in mid March when local and state and pandemic restrictions went into effect.

While March 2021 quarter sales for a little bit below a year ago operating income and margins bounce back to pre pandemic levels.

Cost of goods sold was 12, 3% of segment revenue compared to 11, 3% due to lower proportion of service revenues.

Other expenses and aggregate also declined.

And as a result profitability increased to $10 $5 million from $2 $3 million.

GAAP operating margin expense of 34 per cent of segment revenues from seven 3%.

There was an impairment of $1 $4 million and when we moved to one property to held for sale and this year's second quarter, while the year ago quarter included $8 million worth of COVID-19 related impairments.

Thus on a non-GAAP basis profitability increased by $16, one per cent to $12 million from $10 $3 million.

Non-GAAP operating margin expanded to 38, 8% from 32 eight per cent.

This is the segment best performance since the year ago quarter.

Please turn to page six the bombshells segment generated another quarter of strong performance due to the continued popularity of the concept revenue was up $13 $1 million increased 49 42 per cent year over year.

Same store sales rose 48, 7%.

During the second quarter, all 10 Bombshells were open with the exception of several days due to the Texas free capacity also increased from 75 per cent for 100% and mid March.

This compares to the year ago quarter, when the non existing bombshells and a new location, which opened in late January 2020 closed in mid March.

Second quarter operating income and margins also performed well cost of goods sold was 22 eight per cent of segment revenue compared to 24, 7% due to higher revenue and lower cost of goods and other.

Other expenses in aggregate as a percentage of revenue also declined.

As a result profitability was $3 $1 million and increase of 356, 7% year over year.

GAAP operating margin expanded to 23, 9% of segment revenues from seven eight per cent.

On a non-GAAP basis profitability increased by 247 per cent to $3 $2 million from $939000.

Non-GAAP operating margin expanded to 24 three per cent from 10, 6%.

Please turn to page seven to review a few remaining items and our second quarter consolidated statement of operations.

Salaries and wages improve to 25 four per cent of revenues compared to 32%. However, we believe our normal run rate is approximately 28%.

SG&A as a percentage of revenue also improved to 28% 28, 6% compared to 35, 7%.

Both of these call centers and reflected better nightclubs and bombshells segment margins and cost savings initiatives, and lower audit and legal fees as compared to a year ago quarter.

Depreciation and amortization fell to four eight per cent from five 6%. This reflected the full depreciation of certain real estate and software.

Interest expenses was three 9% lower year over year. This was due to debt pay downs prior to and during the second quarter.

There was a non operating gain of $431000 pretax. This was primarily due to the extinguishment of one of our two remaining SBA loans.

Income taxes were and expense of $1 $9 million compared to a benefit of $1 $4 million.

Please turn to page eight.

We ended the quarter with $22 million of cash on hand, a two year high during the second quarter free cash flow continued to recover sequentially to $9 million. We have continued to stay free cash flow positive since the pandemic began.

As a percentage of revenue is free cash flow also improved sequentially. It was 12% and the fourth quarter of 2000, 2014, 8% and the first quarter of this fiscal year and now it's 24 per cent. This quarter, we used free cash flow as a percentage of revenue to measure how well, we're doing converting revenue to cash.

Debt declined to $4 million from December 30th and $9 million from a year and Thats attempt earlier this reflected debt extinguishment and scheduled pay downs. We are now at our lowest debt level and almost two years, we continue to be current on all of our debt.

At $34 for mammalian current liabilities continue to be the and the general range for the last two years.

Please turn to page nine for our debt Pie chart.

We continue to see decreases and many other categories since December 30th.

Secured debt and now consist of 65, 4% of debt secured by real estate.

16, 9% lifted a seller financing this is secured by the respective club for which it applies.

Six 3% secured by other assets and one 2% represented by the Texas Comptroller settlement. This is secured by business and assets other club related to the settlement.

Our unsecured debt consist of 10, 1% that is listed as unsecured and 0.1% representing our one remaining SBA loan.

Please turn to page 10 and to review our debt Manageability.

Occupancy cost returned to pre COVID-19 levels, and the second quarter as a percentage of revenue they were seven 6% compared to eight 6%.

And the year ago period. This was primarily due to higher sales and a reduction of actual cost to $3 3 million from $3 $5 million.

Occupancy cost as a percentage of revenue sprung up and three Q 'twenty due to COVID-19.

We have continued to reduce our weighted average interest rate over the last five years and has come down from 758% and the second quarter of fiscal 2016 to $6 six 6% and in the second quarter of this fiscal year.

As we've discussed one of our strategic initiatives as refinancing our real estate debt. Our objective is to eliminate our objectives include eliminating $8 $2 million of balloon debt.

Currently coming due over the next two and a half years and another objective is reducing our interest expense by $1 $8 million annually now let me turn the call back over to Eric. Thank you.

Thanks Bradley.

Please turn to slide 11.

We've continued to talk to a lot of new investors. So I'd like to review our capital allocation strategy. Our goal is to drive shareholder value by increasing free cash flow per share, 10% to 15% on a compounded annual basis.

Our strategy is similar to those outlined in the book the outsiders the author William Thorndike, who I spoke to recently studied companies that focus on generating cash per share and allocating that cash to generate more cash.

We have been applying these strategies since fiscal 2016 with three different actions subject of course to whether they're strategic rationale to do otherwise.

First is mergers and acquisitions, specifically buying the right clubs and the right markets we.

And we'd like to buy good solid cash line clubs at three to four times adjusted EBITDA using seller financing and acquire the real estate at market value.

Goal is to generate annual cash on cash returns of at least 25% to 33%.

Since we can't always by the clubs, we want our second strategy is using cash to grow organically, specifically expanding bombshells to develop critical mass and market awareness to sell franchises similar.

Similar to acquire and clubs, we like to see at least a 25% to 33% cash on cash return.

The third is buying back shares when the yield on free cash flow per share is more than 10%. During the first quarter ended in December we purchased and retired approximately 75000 common shares at a cost of approximately $1 8 million.

Please turn to slide 12.

We continue to execute on our capital allocation strategy in order to grow free cash flow.

We continue to make progress on our effort to refinance our real estate debt and our goal is to lower our rate increase our term and convert some higher interest unsecured debt into real estate debt.

Construction is underway at our first planned next and Bombshells, and Arlington, Texas, and our franchisees location and San Antonio.

We are continuing to do due diligence on other potential company owned locations and franchisees.

Our goal is to build 10, new subsidiary owned locations over the next three revenue.

33 months and sign additional franchisees.

We are also looking forward to meeting club owners interested and exploring opportunities at Expo and the industry Convention may 23 through may 26th and Miami.

With that let's open the question and answer section operator.

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And our first question comes from Greg <unk> with Sidoti. Please go ahead.

Hey, Thanks for taking my questions. My first question and I, just wanted to dig into the salaries and wages I think they came in and obviously at $25 four per cent.

Obviously, it's a big topic up you know it might be difficulty finding people to come back to work. So can you explain why you did so well on that metric in this quarter and what the pathway you said normalization expected to kind of get back to 28 per cent, but you know can you kind of walk us through I mean is that over the next couple of quarters and.

Is it going to creep back up to 28 per cent or you know is that immediately and what is the environment right now and salaries and wages and is that likely going to be a headwind going forward.

And I think it'll be a little headwind going forward and there's a couple of reasons first I'll start with your first question and why we did so well this quarter I think we did so well this quarter because we have very loyal employees.

Our revenues increased very rapidly.

And our employees worked through it.

We have a lot of staff, we kind of froze revenue or froze wages when COVID-19 hit.

We're reviewing a lot of people a lot of our employees right now a lot of our management teams.

Corporate staff and whatnot.

We're probably a little below market. So we're gonna have to step that up so I would say youre going to see it return increase a little bit over quarter by quarter for the next couple of quarters, maybe three depends on how quickly we react and and what we need to do.

We're also a short a little bit of staff in some places right now and so we're we're we're are trying to hire it is very difficult, it's very difficult employment market right now, but I think that.

And the loyalty of our current employees.

And and that they're willing to put and the extra work and willing to do what needs to be done.

To make sure the company successful, that's helping and and so.

And there they're out recruiting for us as well because they know they know we need staff. So I don't see any long term problems I think it's very short term.

And the deal.

I think we definitely have to look at unlock our salary wage or salary cap that we're locked that we've had and.

And we're going to have to look and being competitive in the marketplace and taking care of the employees that are taking care of us for the last 18 months.

So that is a process, we're going to be going through this quarter next quarter and that's why when we've seen this.

Speaking with Brad and I said, and I think we need to make sure people understand that $25 for us not gonna be the new norm.

And it is going to be our typical average for the last five years about 28% I think we'll get I think we'll get back and I think we have to stay at that level in order to be competitive.

And the marketplace.

Okay. That's helpful. And then just on the New York, you know lifting the caps and all that.

Just trying to understand I mean is that going to be you know a big positive or you know are.

Are people kind of go into the clubs are you kind of getting more business because people know about the midnight curfew I mean, how should we be thinking about it how much incremental business as it is and that's going to drive.

And the car vs or killing us.

To give you an idea.

When the curfews were lifted in other states.

We typically 40% of our business and the last four hours of the night.

So and New York, where we're open to a for a M and youre talking about for 40% is gone.

And markets.

And where we are open or up until two a M. We're still getting a little bit of that business, but not the prime business and the biggest problem. We have is.

Is that the main cities may be closed down but they can just go someplace else for example, and New York City, we close it.

And at midnight, but if you go across the bridge you can price of four o'clock in the morning. So what happens is a customer that would normally go out at 11 30 at night.

I just don't come to our place. They go someplace else, so and I think it's going to be very big for us.

To kind of put it and numbers I think right now.

And you know Pittsburgh opened about a month ago to regular hours their numbers and returning back to normal and actually increasing year over year I think we're going to see that and New York at the end of May and Minneapolis started Friday night, we already seen a huge increase the best last night, we've had and and ages.

By just being open normal hours I think youre talking between the minute Minneapolis, New York, and Chicago clubs somewhere between 600 and $800000 a week and revenues.

And if you take our $18 million and April it's about $4 $4 million per week and <unk>.

Sales and.

You can kind of see where we're more than likely headed.

And as we roll through the end of May and ended June July August September.

And so I really think that and and even if we.

We haven't seen a slowdown and I call. It consumer exuberance, we're seeing that right now.

They're going to run out of gas at some point, when and who knows.

And so far all we've seen is it continue to increase.

It's like it's like this they're going out and Hardy and and having a good time and just getting out of the house and being around people is more addictive and our.

And more contagious and then COVID-19 was people want to be out now and they want to stay out and spend the money to be out.

And.

Like I say week after week, we're seeing it increase not decrease right now so until that consumer exuberance kind of cap out I, just don't really know.

Okay, and then just one more if you can just kind of just real quickly just trying to understand the margins at bombshells and <unk> and any kind of just conceptual color on average check is that something that just kind of ballooned and I'm just trying to get a better sense of.

The margins, there and maybe what was driving that.

I don't think the average checks really ballooned I, just think that pure number of people and.

And the number of hours.

And that we're the number of hours, we are busy we're busy and we have wait I have increased.

And I think Thats a lot of what we're seeing.

And so you think it's traffic driven and then.

It's definitely traffic Eric I've.

Been there a few times, it's traffic driven I mean, there may be some biggest vendors as well, but you know the bombshells and like the clubs, where we get a VIP customer and come in and you know.

Go upstairs and and spent $5000 on Champagne and this is.

And I was just a place to go and you hang out and you know you have a few drinks and.

If the average ticket is up it's up one drink or to drink. So it's up six $8 $10 and take it or something but it might have something to do with it but it's really just the number of tickets, it's the pure volume.

And that's driving bombshells right now.

That's helpful. Thanks, a lot.

You bet.

Next question your RNA Mark with one main capital. Please go ahead.

Hey, guys awesome quarter.

And that's I want to follow up a little bit on AR and the bombshells commentary.

I mean I'm trying to.

I'm trying to internalize like how much and that you think is sustainable all this recent strength like once all of the local restaurants, and bars and whatnot reopen which I think a lot of and have already been open and and Texas and <unk>.

Where do you think that this eventually levels out and I know, it's a hard question, but I don't know if you have a view on that.

They are open and Texas.

I think we I think we I think we peaked and.

For the fourth quarter of last year, and the last two quarters have been very consistent and $13 million items.

Uh huh.

I think that's where we're at.

I've I've been talking with the management team <unk> been looking at the numbers like I said I've been eating some of the bombshells kind of see what's going on.

Hi.

I think this is where we're at now I think this.

Is the normal for that for that for that brand right now.

Will it slow down a little bit I guess when and if.

Maybe if people stop in and out as much or something but right now for.

The next I think 12 18 24 months I think this is this is probably the pretty much the range, we're going to be at.

Uh huh.

And I don't I don't see any reason for it to slow down from here.

I don't know that we'll do the big the big quarters that we did.

You know and that that fourth quarter of <unk>.

And last year, but we.

And we did 15, something but I think 13 is pretty sustainable right now.

Got it.

Take the April number and you add kind of debt.

600000, or sorry, you were talking about for the restrictions lifting and Minnesota, and New York, and Chicago and Youre looking at a business, it's probably run rating like $250 million cost of revenue I mean, if you just annualize it and I know theres some seasonality.

Right.

<unk> 5 million a week and I mean, we could be close to 5 million a week. There is some seasonality I mean.

I think $2 20 to $2 30 is very safe I think to $42 50 as possible.

And if you said $2 60, I wouldn't say it's out of the question on a forward run rate once everything is open and running.

And what we're seeing right now today.

And you got to remember Minneapolis, and New York are big VIP spend clubs.

And that's their service revenue so the all of the service revenue you see missing right now that's where it comes from.

So as we see the service revenue Spike up and New York, and Spike up and Minneapolis, and Chicago gets back open.

That's one I think we'll see some of the margin expansion as well.

We're seeing it and in Florida.

Okay.

I was just looking at these numbers I mean, it's crazy $879000 last week.

You know so it's.

And it's big numbers is if people are out and they are spending money.

And I guess it slows down at some point, but if we if everything is open and we're at 5 million a week and it slows down 20%, we're still a $4 million a week right I mean, we're still doing some pretty heavy.

And the numbers at that point and I, just don't see it slowing down 20% anytime in the next 12 to 18 months I mean, maybe that's maybe that's two years from now but this next year is going to be.

To be a huge year for us.

And very confident.

And on that basis, I mean, you guys are doing some massive massive free cash flow numbers. I mean, you could be doing 50, and $60 million plus of free cash flow and maybe even more than that and if you hit the higher and of those revenue numbers for and if you're generating that much free cash flow I mean, the club acquisitions, you typically acquire use a decent amount of debt to acquire them and seller financing and then if you.

Generating 50, or 60 million and free cash flow or even a pre pandemic numbers, which were closer to 40, but.

And Brian could be deploying you're going to be deploying and 70, 580, and 90 million per 100 million potentially and.

And growth Capex, assuming youre doing.

<unk> and or and or bombshells.

How are you going to deploy that much capital I mean, so you're trading at a multi multi club acquisitions.

That's how we're going to do it and we've got a buy and we're going to buy one of the Big Boys are two other big boys who knows.

We're at a point right now, where we and we might have to pay five times right. I mean, instead of three to three to five we go to five times. We go to a couple of Big Boys and say, we're going to give you a five times right. Now are you guys interested.

We've never done that so.

And I can't say, they're not interested I think are going to be interested I think that number is gonna be.

Very very difficult for someone to resist.

And we're starting to talk to guys right now we plan to we have some meetings set up at the end of this month and Expo and a couple of guys, who can't come to extra I'm going to go meet and and and and the.

The second week of June I've got a couple of meetings on working on right now.

And we're going to see about it I mean this may be the year that we rapid rapid and these things up and we've talked about it we push for it.

And we've gotten really close a couple of times and 2008, and we really got close there when our stock when our stock took off and we got that Baltimore, he can pay a little bit higher prices.

Without it affecting the model too much I think that's I think that's probably what we're going to see as we move forward. We know we're going to for the right acquisition only when we're at our typical acquisition is going to stay in that three or four times range, but for the right acquisition I think we would be prepared to make a five times offer obviously.

And with some terms.

But.

But we're going to see that you're going to see a much larger and it's going to be more cash rate is going to be.

And we're going to start using $20 $25 million to $35 million cash down payments, because we're going to have the cash to do that.

And how has the single club M&A pipeline looking I mean, and Boston back on track other any other big cities with single clubs there.

Austin is off now again, it's on off on off.

Love hate relationship with two partners up there I think I cant figure that out and truly.

And what they're what they're what they're thinking is at this point theres the clubs and still not even open.

But they're there.

Several other <unk>.

Single club stuff, we're looking at.

But my real focus.

Now right now and probably through the next three months.

Excuse me is going to be a large acquisition we've got to.

We've got to land a pretty large acquisition.

Because like you said, that's what we need to make the needle move right.

We're generating and kind of cash we've got a ton of cash.

I have and I have no problem and Thats sitting on the books and just building up and the bank.

Not a problem for me I can deal with that.

Until I find the right acquisition at the right price.

But at the same time.

We've never had that cash before we I've talked to guys before and the pass and they said Oh.

For me to even think about it you'd have to have $30 million cash down and we've just like well, we're not going to we're not going to do that deal.

But now we have the cash so we're going to go out and start looking.

Start kicking tires.

And and hopefully maybe if somebody's listening this call and I will get a call tomorrow from one of the big guys.

Interested but we're definitely we're definitely interest and definitely going to be very aggressive at finding the right large acquisition.

Yeah and on the refi timing and it is a high priority for you guys. I mean, how long do you think these things typically day.

Well once we get once we can get to the terms on the commitment letter were two for two terms away and negotiating two different.

And two different terms and the and the commitment letter.

Hopefully I think theyre going to committee on Wednesday, hopefully that will.

And they'll get those we'll get on and agreement on these last two things that we need.

Which is freedom for large acquisitions without without somebody overlooking our shoulder.

And and and the debt coverage ratios.

And that allow us to pay dividends.

Because we are a dividend company somewhat we don't want our dividend to be at any risk at any time.

And so once those two items are fixed I think we've probably signed a commitment letter the day that they have approved the day, we get kind of the terms and we can agree to and.

We can close three weeks later so.

And if everything for increased upon a Wednesday.

We probably closed the first week of June be my guess.

Right, Okay, and then last one for me.

On the on the patron tax and taxes can you give us the latest on what's going on there and right I forget or you've got paying that tax today. So until it's finalized Richard for you guys stopped paying and for now we are paying under protest.

We don't want to build up a big liability on the balance sheet again like we like we did in the past that were paying under protest.

We have the right to claim it back if the cases and right now the cases setting that the courts and waiting on a ruling.

And so we'll just have to sit and wait basically.

And how much is that per quarter per year again.

Oh Gosh I would have to go back and look I really don't it's fluctuated so much with COVID-19 because things have been opened and closed and times.

I just don't know off the top my head, but if I had to gas it's a.

Maybe $1 million 5 million a quarter I mean, a year year and year three four and adults.

And about 300000, a quarter right now is what Barry says yeah.

Alright.

That's all for me and great job guys. Thank you could keep a come and thank you.

Okay.

Next question Jonathan.

And with a tw capital. Please go ahead.

Eric and good job on the quarter I mean, if I just annualize what you guys are doing and free cash flow that's more than sell side consensus and 2023, and obviously doing 60 of free cash would be low double what sell side has looking at two years and.

Could you just help us think about sort of the M&A pipeline and I know you've spoken about this with year round, but are mom and pops coming to market and now with.

Cash gains law changing.

And how you're thinking about.

And this year in terms of M&A and you think this is going to be.

Cluster year.

I think the next 12 months are going to be very big.

I don't think they'll get a capital gains tax past prior to <unk>.

The midterm elections, so I think we have a little bit of time, but yes, guys are very interested in.

And figuring out whether if they're if you're planning on selling the next three to five years, you need to you need to sell this year.

So you can lock your capital gains tax rate and now at these lower rates, if theyre going to be raised.

I think there is a pretty much.

Consensus and both parties that there will be a raise and the capital gains tax.

And over a certain dollar amount I mean, maybe you know but.

But all of the deals we're looking at they're going to have more capital gains and whenever that dollar amount is going to be.

We are getting interest we are talking to people.

And.

I think we will.

We will have a big year this year with with club acquisitions for sure.

A lot more in the next three to four weeks as we and you said, we're putting it out there now were spreading and with the brokers were spraying with everybody that we were looking for a very.

Multi club acquisition.

And you know $40 million $30 million down payment doesn't doesn't scare us if you need a bunch of cash.

We're building the cash we're sitting on the cash or can get access to the cash flow.

And you know come talk to us so.

And then.

Aqua for you and like I said, I think we'll get more calls over the next for weeks.

Got it and then just on and.

And on M&A and have any of them expressed interest and joy.

Joining the RCI family and taking stock and the company and then last one for me would be how the franchise. The franchise you know conversations with interested parties are going for bombshells.

We have two people that were working with on Bombshells right now.

And I have talked to sub club owners about about equity because now everybody wants to stock and nobody wants it when it's 15 everybody wants 170.

Which is fine by us.

Because we wouldnt issue and a 15 and I don't know that were issued a 70 or 60 or whatever.

We'd have to be very comfortable with the deal to use equity steel because we still think the equity is cheap.

We're going to kind of lay out as we move and through May and June.

I think we're going to get a much better idea and with everything open.

So that by the July September quarter, we will have a good idea of hopefully or at least a 12 month run rate.

I'm getting more and more confident.

And I kind of thought bombshells could slow down a little bit.

It did after the big quarter now it slowed down a little bit, but then we had two quarters in a row, where we're sitting here at this $13 million run rate. So.

I thought maybe Texas would slow down in Florida, with slowdown and they're not slowing down and they're just getting busier.

And so.

And I'm getting very confident on the numbers.

And that the numbers will continue to stay high for for for this 12 to 18 month period, and and maybe forever I just don't know.

It's hard to see past that point right now.

And because it's so early right, it's kind of early and this recovery.

But we're also seeing inflation kick in where we're going to have some wage inflation I think where we're chip.

Chicken has gone up tremendously I think we're going to see you're seeing certain shortages ketchup and mustard shortages I mean.

So when does all this kind of steady out get back to a deal where.

We can project going forward that and Thats the hard part right now is projecting going forward and.

In the meantime, we can.

We can safely say I think we've got 52 to 54 million and revenue for April May June in the bag.

If we have a huge June we opened may 31st we have a huge June and New York typically has taken three weeks from the time Warner.

And when a curfew and to the buildup of business.

But new York and gave US a 30 day window on when they will <unk>.

Minneapolis was completely at the price.

On Wednesday afternoon, they came out and said starting Friday you can stay open so that location will take a little bit of time to build up right. Because the employees didn't know ahead of time. So now we've got to make calls we've got to get people and we've got.

And so that those locations typically are taking three weeks to get back to what I call ahead of 2019 numbers. So within three weeks. We're we're outgrowing what we were doing and 2019 and New York I think we could start out June one.

Beating 2019 numbers, because we have 30 days advertise and market to bring the girls back and to bring you know without.

The customers know how you can party all night again.

And so I think the New York numbers will happen very quickly.

And I and maybe day one.

So.

Like I said, we got a few things we've got to kind of work through there, but if everything hits right I mean, it could be 55 million $56 million and if you look at the cash flow generation.

24%.

You know for this quarter, if it's a lot of VIP spend it could be a little higher and maybe maybe the free cash flow generation percentage goes up a little bit and we generate a little higher free cash flow, but we're definitely on you.

You know at least short term on free cash flow that we've never seen before where I think we will have record free cash flow this quarter, probably in the July through September quarter, and then we hit our prime season October to May and so yeah.

And yes, it could be it could be a very good year for the next in the next 12 months 18 months for sure.

Very exciting thank you very much.

Okay.

Once again, if you would like to ask a question. Please press star one on your telephone keypad.

Our next question comes from Darren Mccammon with cash flow Kingdom. Please go ahead.

Okay.

Hi, guys congrats on another strong quarter and.

Really an excellent capital management and capital allocation for the last few years.

You've done a great job.

Or we just keep following the program that's the name of the game right now.

Well I mean, you've got a dialogue and I think.

If you ever get a chance. Thank the author of that book for me too.

And you got it.

Okay. So we've talked about free cash flow a lot here.

And we're hearing numbers thrown around by other analysts of $60 million et cetera.

Are you prepared at this point to give us some free cash flow guidance.

I mean like I said I can tell you what I think for for April May and June right now and very confident and the next three months I think it will carry through July August September.

And then we hit our prime season, so I mean.

And you see the percentage of smart went to 24% if we continue to get.

If we continue to increase and a lot of that is service revenues, it's going to it's going to increase that 24 to a higher number.

And on top line revenues to 52 to 54, if everything goes right could be a little bit higher.

So you can do the math.

And I don't really want to give the guidance, but I think those are kind of.

The ranges that we're looking at right now.

And if that carries into the next quarter.

And then our prime season, we hit October like I said, we hit October through through May as our prime season for us.

And we continue to see increases.

And as consumer exuberance continues.

And I can't tell you, where we how high we get I just don't know.

But we will peak at some point.

I think like I said, I think bombshells peak for the restaurants kind of peaked.

Uh huh.

And basically the third calendar quarter or fourth quarter.

Our fiscal fourth quarter of last year.

But now and if this is if this is the new average will take it.

You are talking about basically $52 million a year $5 2 million per unit on average.

Some of our top units are much higher and some of the early units arent arent doing the big numbers.

But as we open up Arlington location, we're going to get another idea that location open.

Excuse me the plan is to open up for the weekend of the first Dallas Cowboys home game.

Late August late September early September.

And we're working on a couple of other locations company owned locations as well.

And were looking were out were out shopping shopping and real estate right now and trying to find.

And the right locations.

I'm not in a hurry.

People say all you need to her you need a very I'm not going to hurry I am sorry, if you want me to hurry I apologize, but I'm going to make the right cost and we want the right locations the right investments.

And because we can always spend the cash once.

And we got to get a return on it.

It can set and the bank for a month or two it's not going and it's not going to kill the overall return for having little cash debt and the bank.

We're generating cash and a very rapid rate.

Now.

We ended the quarter with over $20 million.

I think at the end of April or close to $24 million.

I think at this rate, we'll end the quarter at $30 million and cash if we don't do anything at all with it and if we find the right deals we'll put it to work.

I think we need to keep about $15 million cash on hand, I don't think we need to to keep 18 or 19 or 20 million cash anymore.

Business is solid enough right now that.

And be willing to invest that that extra capital instead of having it set for.

And for the right deal.

And that's as.

And we go from here right. We just wait every day, we get up we pound the pavement and we try to find the right deals.

And we will start finding them and we'll start getting them announced and.

And we will see the cash continue to grow.

Okay well.

From my point of view.

I guess and I'm looking at.

A minimum of $1 per share and cash flow going forward and seeing that is really the low end of things.

It's funny and it used to be the expectation, but now it's looking like the low end and.

Youre talking about base Youre talking about for a quarter correct, yes.

Yes.

Yes, Okay, and I, just want to make sure Thats 36 million over a year, which.

Pre COVID-19 used to be our forecast and [laughter].

And now looking at the low end.

It is debt.

When you say that would be the low and after this quarter and the way things are running through early April because you remember February was not a good month January was Okay March was the first solid month, and then April back right up to it you know.

Back about $18 million and now we're bringing New York back online and we bring and Minneapolis back online, we're going bring Chicago online at some point and this quarter I believe I don't think they can keep Chicago close through June 30, and.

I don't know if we keep a close you may 31st but I'm not a politician and so I don't know what their what their thinking is up there but.

But judging by the rest of the country, they're way behind the times.

So it will be it will be back open as well.

And those are big revenue generating clubs and very profitable clubs.

Especially our New York clubs.

So that will that will continue to add to the numbers I don't see.

I don't see the current numbers slipping off.

For at least the next three to six months.

If for for as the new normal range for the next three to six months for the existing stuff, we bring those other clubs online.

I think they add 600 800000, and then maybe maybe maybe there is 200000 here at 300000, paramorphine him up a half a million bucks.

We're still at $4 5 million for $6 million per week.

And those are going to generate some pretty decent cash numbers.

Okay.

And just this is more comment than anything else, but Texas Roadhouse also just came off of one of its biggest quarters ever. So youre not the only guys that are selling a lot of restaurants and food and stuff.

We're actually looking at properties.

Two different Texas Roadhouse is right now for that exact reason, we've I've been following them very closely.

We.

Got a friend, it's very high up and Texas Roadhouse.

And they are doing very great location picks right now as well building for their new stores.

So I'm very excited.

I'm very excited to kind of for one of the locations.

Net we're putting under contract hopefully I'm supposed to have it back by the end of the day to day I Havent check My E mail, because we've been moving.

Busy working on the call, but should have another property, that's very close to them right next door to one of their locations.

And under contract and hopefully by the end of the day, so definitely working on it.

Good glad to hear that so along those lines.

A nice problem to have to be floating and cash.

And I know you've talked a lot about what to do with it.

You and I and both know there's a very large potential purchase out there hanging.

And are they use up all this cash and more frankly.

Okay.

I guess any progress or anything to say, there and would you consider using shares or selling shares to fund a bigger cash chunk to them or.

We maintain if we need to and are at the right price yes.

Look we're looking for when we do any acquisition or anything we do we're going to look for the cheapest possible cost of capital that we can find.

And obviously nothing is cheaper and the cash we already have on hand, we already have it doesn't cost us anything we put it to work we get returned.

That would be next.

And equity would be our last at this point now depending on what the equity does as the equity moves up and value.

And when we calculate our cash flow multiple.

And we'll put that against debt and against the cost of debt and whatnot.

Sure.

And I don't I'm, not excited about issuing 60 or 70 or <unk>.

Equity, but if this thing runs to some of the charts I've talked to different chart, guys and they say Oh. It could go to 90. If you go to a 130 <unk> what are you going to do them well I am going to do my calculations and if that's worth that then yes, we might.

We might heavily consider using equity at those points.

But we're going to still be we're only going to issue what we have to issue.

I don't I don't think it's.

Something.

Run out and sell a bunch of equity all of a sudden.

Because the stock price ran up we want to.

We're going to be very smart about how we do how we do things.

Going forward, especially with our equity.

Standard <unk>.

And I just put one qualification on there for you from my point of view you don't get to ask.

Issue equity.

And you need it you get to issue equity when you don't need it.

Margaret loves you and when you issue equity not when you're out there and eating it so.

Understood.

And if they love us.

And they love us and that will give them zone.

Okay, Okay, and Thats, what I wanted to hear but along those lines. If you had a very major purchase and.

Okay.

We know who we're talking about we're talking about Asia, and equity equity and equity and a leak of lockout agreement, we would consider yes definitely.

Okay, and we have that we have.

We have considered we have considered debt.

Okay.

Are there any talks going on there or have there been.

And there are lots of talk right now we're talking with a lot of people right now.

And Theres a lot of solid groups out there.

I want to get large groups SaaS the thing right now, where we're talking with some smaller operators.

And I really think now is the time with the tax laws changing with the equity worth that with the cash where it's at and our ability if we when the refinance has done and our ability to borrow additional funds without having to use additional cash monthly cash we're going to save almost $5 million a year.

And with this with this new note and equity and interest costs. So we have that money. So we can borrow against that and use that same $5 million to have more money to buy more cash flow with.

It's going to make a lot of sense to do a lot to do a large acquisition and we're working towards that means for share.

I mean could we do something for next 30 days I mean, it's possible it could be the next 90 days.

And I think we will definitely do something and the next six months before before the before and I'll say before our fiscal year and are definitely and the first quarter of next year I think we'll have a very size.

Sizable acquisition lock.

Locked and definitive agreements and by that point.

Okay.

And my goal as far as other ways, whether I can make it happen I don't know, but that is my goal for share.

Okay. So as far as other means of soaking up cash I agree with you that that's the best choice.

I would say that.

Paying other than a token dividend increase makes no sense to me.

And not what the other opportunity for you al.

And although you should do a token because you just get you on the growing dividend was but we're on the draw and we just did one this year. We would we would the first time, we need to look at a dividend increase I think would be December or or March I think we were kind of reviewing that earlier, but we've got consecutive different growth for going on.

And five years now so in other penny here another penny there some irrelevant and the overall cash flow stream, but it keeps us on the screens, we understand the screening so it's something it's something we were not.

We're not ruling it out we're not looking to do it either for at this point is we've got.

Six seven months, where we even need to think about it.

We don't need a dividend increase until fiscal 2022. So we've got the 16th century, we did in 'twenty one with December race. So we've got we've got a year to we've got a year to think about that.

Okay.

And then on on some of your debt you've got seller financing and I know you've kind of made a deal there and does some of those guys don't want you to pay them off and really.

But are there any that might want you to or might welcome it for it.

And there's only one number and I would think.

That's the only one that we're not paying off and when we consolidate this debt everyone will be paid off except for one seller note.

And the note against other assets the debt against other assets and the Texas Comptroller and everything else will be consolidated into a single loan at that point.

And about 100 and.

$5 million.

It was a lot higher than that and we've been paying it down so.

Because we've been working on and we want that's going to go through.

Well Theyre going to committee with our last and comments to the to the letter on Wednesday on this Wednesday so.

If we can get agreement on the terms with the bank's board I think we'll move very quickly 333 weeks four weeks for Wednesday.

And the appraisals are done everything is done and all were working on its final terms.

Okay.

And then basically just had to put it altogether and we can come to agreement on those final terms and we don't and we're just going to wait and we've got the we cant we cant do alone that would tie our hands on a going forward basis.

It's just not something we're interested are willing to do it we're going to have a similar terms to what we did on the 17 loans.

And if we can get that which is what we're negotiating right now.

And then we will move forward very quickly.

Okay, Okay and.

And then can you talk a little bit more about inflation, not just wage inflation, but also drinks and.

Supply and what kind of inflationary youre looking at there.

And the beauty the beauty right now as we have no menus.

Everything's Trs codes.

So if our prices are raised we can raise our menu price within 15 minutes.

But to give you an idea of chicken with $65 or 45 pound box of chicken wings.

It is now $148 and were told us going to a $158 next week.

So.

Those are the kind of things youre seeing.

We got word a catch up was going to be out. So we ordered a ton of catch up so our catch up and inflation will be zero, because we planned ahead of time.

But just.

Our total beef and seafood are getting ready to go up a little bit.

But overall you can see theres, not really and affect our cost of goods has stayed pretty steady so we've been able to manage everything properly.

And it's just about knowing and reacting fast enough, we were getting ready to Frac menus.

And again and go back a tramp menus and after our meeting with staff, we just decided that and we don't really need them.

Everybody has their fall and with them.

And everybody so used to just fall and the menu on their phones now that that may be that may actually be the new norm. We may never have menus again.

And it's just easier and then they fill up the thing and then you can advertise whatever special you want it it's a really it's a really interesting.

Way of doing it so and we may stay with that.

Not 100% share yet, but that's.

And maybe.

It made it very simple for us.

Yeah, and you could also do a chalkboard for those people that don't have phones.

Or a video display on one of the Tvs or something like that yes.

Yes.

Those are those are remedial and that doesn't matter what you had there.

So okay, so what about alcohol inflation.

I haven't really seen much of that alcohol is controlled study right now you can't get things like Theres, no hennessy, but other than that.

Not a big deal, but they'll get they'll get they'll get there they will ramp back up everything will be back and I'm not worried about that.

The beauty of demand is it creates supply.

Yeah.

Okay.

Thanks, a lot that's my last question Alright.

Alright, Thanks, Dan.

Next question, Adam Wilkes with Greystone Capital Management. Please go ahead.

Hey, guys. Thanks for taking my questions.

Okay.

And I guess, the downside of going going toward the engineers that most of my questions were already asked which is great and give.

A discussion on.

And the M&A environment and kind of what you guys are looking to do.

Which is really where the bulk of my questions were coming but.

I can ask.

You mentioned something interesting a few minutes ago about putting down like potentially putting down like a 30% to $40 million down payment on a potential acquisition did I hear that correctly and if so.

And about acquiring like is.

Is this like a huge deal or huge deals youre looking at potentially is it something sort of and I think that would be typically typically put down 30% to 40%. So think of it and those type of ties and I'm looking at I wanted to do an acquisition that is enough clubs and enough EBITDA.

And that we would be comfortable to pay and the 80% to $120 million range.

Because I think thats, what we need.

A number one our systems, we put in place for ERP systems ready for it our staff is ready for for can easily absorb.

And acquisition of that size.

Somewhere between eight and 15 clubs that are singles and a single acquisition.

It gives us a significant.

Significant size of growth.

And.

And it's going to put us in markets, we're not in already.

And that's the real key I think.

For the future, we need to and we've got to expand our footprint and our pure size.

And then it will give us but by doing so and that large it gives us economies of scale, we will be able to tweak it pick up another one or two or three points for six points.

On the deal.

Which will make it.

It may look like we paid ex amount of dollars for it but then when we a year later and level.

<unk>, Oh, Wow look with a look what they've done and look at the money. They save looking for cost savings, we put and with our national pricing with.

Taking and.

<unk> taken our staff and put it over more revenue and more locations.

We'll get a.

Much better return on it then.

And then originally it looked like at the beginning and.

And that's what we've seen in Chicago, we re ran the numbers.

On our last few locations and Pittsburgh was the only location where.

Sure.

And after after a full year of operations, we actually ran on and EBITDA multiple and a little less.

And then we then we have so for example.

We paid 345 times and we actually afterwards worked out to be and only $2 79 times.

Or and Pittsburgh I can't remember the exact but it was like a.

Two more alright, so Pittsburgh was the only one that wasn't in our favor.

And we just had some issues up there and the first year I think as we move forward. It will it will it will start looking better as well.

For the new markets, we get into new markets, and sometimes we get a little learning curve with a single location.

That's why I want to go in and do these multi club locations, where you just buy a home market.

It's going to be much much easier and more profit for us.

Alright, Yeah, I understand and thanks, So you mentioned like where the cost savings are coming from and that was helpful.

What potentially be coming from so that was helpful. Thanks, and so when youre looking at different markets and it's just all over the country or you have clusters of places that you'd like to look because I cant aside from like multi.

Unit acquisitions, I can't imagine, there's many single or even one or two clubs doing the numbers you just said.

These are multi cloud per share yes. These would be multi club for share or are we through our or we can just go out and do.

Five or 10 single club Biopharma and single club operators and put the same amount of money to work there is three or $4 million at a time right.

And with a lot of work.

And it's easier to buy one multi multi operator, and then it's going to be to go out and try to buy 10 individual clubs, but we will do and and we have and we're looking at both ways and we're just out there where pound and payment right now and that's what I call. It knock on doors knock on doors and pan and payment.

And my old days, when I was 13 years old going door to door sales.

Right, Yeah, and all right I appreciate the way Youre thinking about.

Sort of.

Spending the money to do these things and I don't know why I'm very confused why the previous person would ask about <unk>.

Talk about the need to raise equity there is absolutely no need as much again like you've mentioned, it's the lowest cost of capital that was kind of confusing to me but.

I appreciate how youre thinking about that and.

I think everybody just question once once more flow.

They want more flows and they can buy more stock I guess without paying more for it but that's not going to happen.

And I'm not.

How do we keep from and we have no.

I learned I learned all those days back and made those mistakes and 2008 2009.

And all the way into 2012, and it's like you know what I'm done with that our equity is gold.

And.

We're we have other ways to pay for things were going to pay for them.

Okay, and then the equity will just a valuable right.

So when I look at it yes, I love the here and thanks.

And for me I appreciate it and great job. Thanks again.

<unk>.

Next question Doug.

Doug Weiss with DSW investment. Please go ahead.

Hey, thanks.

Just wanted to ask about bombshells, a little bit more.

Specifically the expansion.

And I wondered if.

I mean, obviously you have a lot and your plate in terms of.

M&A on the club side, but I was curious if.

And you sort of Siloed things enough debt.

The expansion of Bombshells can run independent of that and.

And if that's the case I wondered if there was the possibility of accelerating debt rollout if things continue to go well.

We're definitely trying to accelerate the bombshells expansion.

And we can find the right locations.

We were trying to go into Miami very heavily.

We have found that it is with all the new Yorkers that have moved to Florida that market is on fire right now.

And something goes on the market, we start calling on it and they're getting 50 calls on vacant property down there right now it's absolutely crazy.

We had two locations one got bought out from underneath of us.

And by Chick fillet.

And another property condo developer is now looking at buying the entire retail center tearing it down and building 30, 38 story condominium project on it so they want to only give us a three year lease and so we're like we can't do that.

So we are having difficulties getting into Miami market. We do have one property that we're fairly certain that we're not going to have issues with we're going to get that one done.

We are we have come back to Texas.

Because we know it we love it.

We've got the Arlington location going in and I am working on a location in.

Our west Dallas suburb right now I don't want to mentioned it yet because I don't have the signed contract and my E Mail.

And.

But we're getting there so and we're looking at another Houston location right now as well so.

We're looking at.

Two franchisees out of out of out of.

Outside of Texas that we're talking with as well.

What's the thought as far as beginning to look at other markets and I think you've mentioned Las Vegas for a couple of years ago and.

And for for Bombshells.

Yeah.

Our Phoenix, we are we've considered the Phoenix market very heavily and Thats, probably one of the markets.

We will head to.

And at some point and the future for company owned stores, if we don't end up with a franchisee there first.

Thats Phoenix since we are in fact, we've been talking about going down there.

And the next few weeks and just kind of.

Re familiarize re familiarize ourselves and see and what's available in that marketplace.

If we don't get something solid and Miami are a couple of them.

Properties, we're working on there right now.

Okay and then.

Just couple of book keeping questions.

The land for sale I think this was the first quarter that was came up on the balance sheet.

That relate to.

Okay.

And so.

And those are signed contracts. So we don't moving into assets held for sale, because we will leave it there.

The GAAP works if it if you will.

If you will lease a property you can't put and assets held for sale.

Even though it's for sale or lease.

So we have everything basically per sale or at least until the day, it's put under contract.

We have three properties under contract.

One closed.

Friday Friday, one close Friday, so that leaves two we have two properties left one is at 325 million, we will sell or finance that property.

We are taking a 500000 or down payment.

They are going to do about a $2 million remodel on the property and construction project on the property and they are.

And getting a five year balloon.

For the $2 $75 million.

Another property, we have under contract at $2 5 million all cash.

They have I think about 30 days left from feasibility and then they have a.

30, or 40 days to close the transaction.

Mhm Okay.

And those cap rates to extend the feasibility of a for a fee for a monthly fee.

Okay, and then just a follow up on the patient.

Cortes.

If you were able to.

Recover some of the retroactively from your past payments and how many years back are you trying to claim.

I have no earthly idea at this point right now, we just want to start paying it going forward.

Thats really what were pushing for outlet the lawyer, the lawyers and work all the rest of that.

Our big motivation is to stop paying and going forward.

Got it okay, alright, thanks, Doug.

Yep.

Next question, Adam Wyden with 80 W. Capital. Please go ahead.

Hey, Eric sorry, I'm, a little lag here, but I won't disappoint.

And so.

And I'm just doing the same back of the envelope math that everybody else is doing or perhaps no. One is doing but like I look at these numbers and I say, okay. I can I can back into New York and these later curfews and Minnesota and I keep coming back to that number I keep throwing out there, which is a 100 plus EBITDA and when I look at your <unk>.

Finance.

That's coming I don't know if I I don't know I wasn't nearly protocol for you guys were talking about it but I know, it's coming and I look at the maintenance capital and I look at.

The tax loss carryforwards, and some of this other stuff and the depreciation from the real estate.

And I am.

Getting to free cash flow numbers that are effectively double kind of what our run rate is.

And.

And I just I guess my question is is there seems to be a very very large dichotomy between the cash flow that multiple people are willing to ascribe to something like bombshells versus vs versus the nightclubs and.

I guess I'm just trying to understand what are you guys doing in terms of getting the market too.

And do with some of the parts and that evaluation and are getting different sell side coverage or raising money at the subsidiary level because the performance is remarkable but I mean.

We're not anywhere close to being able to use our equity and I think part of the big reasons why we invested in this company is because you know.

Private equity can't actually buy these things and so you've got this capital gains and then coming up and people don't necessarily want to pay 100% tax for maybe they want to pay a little bit of tax on a part of their stake, but I mean, you are the acquirer of choice and the nightclub business. So you know look I.

Yes.

Look you know everyone says Oh, it's up so much but I mean look I look at it much longer and I look at where we were pre O sub and and and all the rest I mean, the total return of hasn't been that great and youre starting to get institutional sponsorship I mean, how do you think about the next level in terms of research coverage institutional investors cost of capital. So we can.

Celebrate.

You know kind of the the inorganic growth trajectory.

And I think the reality is we have to be the first big acquisition.

That's going to get a lot more attention.

We're going to continue to put out for cash flow numbers. I think this this quarter is kind of a wakeup call like hey, the cash flow is really coming back and a $9 million is a big number.

But most of that money was made in March and.

And I think as we move forward and you see April May June we get that quarter out we get this acquisitions.

Rolling where we get some definitive documents, we kind of see the terms, we see how we're set and stuff.

I think that's when we're going to wake up some of the.

Some of these other banks.

The problem the problem with investment banking today is they need a deal in order to make it worth their time and.

And since we're not really it also and they also and at a point, where we're going to sell equity, but I think total users investment bankers out there and listen to this call and will understand that we're relationship guys and you need to build a relationship with US now so that when it was time for us to raise equity.

Interested and using your bank because the banks only want me when I don't know and I don't need them.

And I need them to raise money and and.

And that's tough for us because I'm not going to spit out cheap equity, it's never going to happen.

Sure Yes.

And that's why you invest because you talked me back and the day and you were asking about the equity and.

And issuing any equity.

And I'm, not interested and thrown out cheap equity and and yes people think Oh, it's at $70 is high.

And like you said when you do the math, it's not so let's let's look let's say that the margin increases from 24% this quarter and only 22% and and we end up doing $54 million.

Alright, So now we're at 11, and plus almost $12 million and and free cash flow between 11, and 12 million free cash flow and the next quarter and as we roll forward.

We get New York opened fully we get and.

And we get to that point, where we're at 60 and $60 million and $60 million and a quarter and the new Yorkers and Chicago and Minnesota as our service revenues, which as we all know is much more profitable and that margin moves up some more now we can maybe were $15 million plus and free cash flow per quarter.

So im not sell my stock at $70 was 60 million and free cash flow.

And I think I don't know.

I think the number's higher so and I know you do I know you think the number is higher and you.

It <unk> surprise me, because you've been right more than I have lately.

But.

And I get it I guess I guess the question is is like I feel like every business is at an inflection point right you've got a grill uncle and bombshells that people can accept you got a government that wants to take all your money right. You have individuals that are sunsetting and great tailing and they don't have necessarily children to run their businesses right and why not why not sell.

For us.

Participate and the upside because as far as I can tell like I don't know we've talked for the past about the Tam and our market position, but like I don't think it's unreasonable to think and I'm, putting the restaurants aside but I mean look you know how and how many strip clubs and there are nightclubs and are in the United States I mean, if youre at a 100 of EBITDA is there anything stopping you from building a business.

And nightclubs and 500 of EBITDA.

I you know look I don't I think it's very very fragmented there's.

And definitely that much out there to buy and I can.

And it's about convincing these sellers and.

We have been.

And we've been paying and what the bigger the more likely they are going to sell to you because that means that they're selling to somebody who AWOL.

<unk> of their business be they can take.

And flexible capital solutions.

And you because you're you're safe right.

For stable right.

Not to mention that like what is the problem. We're pitching this now and we're putting this now to a couple of different people.

And I think like I said and the next as I said, our interest on the call, but I think we're probably could be 30 days it could be 90 days, but I think definitely within the next six months.

And we're going to we're going to land one one may be more of these of these larger of a larger type acquisitions.

That's our goal and that's what we're pushing towards.

And all of the things that you've just mentioned are the reasons. These guys are talking to US now and we're able to talk about I Couldnt go talk to a guy who needed 30 or $40 million cash down a year ago or two years ago.

Even three years ago I Couldnt talk to these guys I mean, I can talk to them, but I wasn't I wasn't realistic and I was going to go out and raise 30 or $40 million.

And I couldnt afford to debt yet I didn't have the bank financing in place for them for the existing real estate.

And we weren't going to issue equity. So I mean, we just we weren't and are positioned to come up with 30 or $40 million and cash and now we can have $30 million and cash on our own books by the end of June at the rate we're going.

No.

We just we're in a position now this is the first time, we've been in a position now where.

After the doors.

Look I didn't I didn't invest for this to be $100 million EBITDA base.

And <unk>.

And with with Rockstar Ceos, who want to build.

Generational wealth companies I firmly believe this can be generational wealth creation opportunity for both yourself and myself and and so you know the sooner we can get our cost of capital online and the sooner.

Story becomes pervasive in the marketplace such that we can accelerate the inorganic opportunities sooner that becomes the sooner that becomes a reality for all of us. So look these are great numbers I hope that we place greater emphasis going forward both on the execution and non you built.

The business that we're building because I think you and I and everyone else on this call know what this could be I think we need other people around the world to know what youre doing so.

So we can we can make that we can make that a viable.

Variable thing so congratulations on a great quarter.

You know I think it's a testament to your operational excellence and execution.

And I'm, obviously continuously frustrated that the markets.

No need to discount what we're building, but you know acres are going to hit all the way up and the sooner you can continue.

You know execute on this stuff I mean look you know obviously, we have the cost of capital Goodbye and club with real estate at three or four or five times EBITDA, but the real mother loaded buying businesses with 30% and 40 and 50 of EBITDA and eight to 10 times and so in order to do that you've got to have the capital but.

We're going to keep punching and I look forward for the jobs, but I I as much as I loved the jobs and I like haymakers. So I look forward to us getting to a point, where we can start landing haymakers.

I want to land one about and in the next six months that's for sure.

We're going to find a big one and the next six months, that's what we've got to get done.

While we need haymakers for 500 of EBITDA and <unk>.

And to haymaker, we need a mill stocks so low.

And I'm not going anywhere on your biggest shareholder.

And I'm always truly impressed that you're at your ability to execute and I look forward to to.

We're trying to find some more people to kind of accelerate the market realization plan, but I'll I'll leave you with that and we will talk more alright alright.

Alright appreciate it thanks Adam.

Next question, Jason share private Investor. Please go ahead.

Hey, guys, I guess, Ben and cleanup like everyone else. So there's a lot of these questions.

Already answered the only thing I really have is just pointing out the fact that like.

As we were going to have inflationary pressures, that's not even up.

Up for discussion and the question being is how much is this going to affect your business lines across the board as it is versus the other industries that are out there and no different than the Texas Roadhouse that somebody had brought up in the past because you know you might be talking about a box of chicken, but that's not really where the money is coming from is it I mean, what percentage are we really looking at in terms of like how much of this really alcohol and.

How much of it is this really just service.

Yes.

But we do have we have food and we have to be concerned with those costs, because they creep up and all of a side and our margins get get shrank, a tier one and 2% to 3%.

The point is we look at all of those things and I.

I think that's what people Miss about our company as they think Oh.

This is a strip club company or this is that and and it's not where our cash flow company and we watch and monitor anything and everything that we can that affects our cash flow down to a box of chicken wings, but the reality is yes.

And that's why I say I am very excited that New York is coming back online and Minneapolis is back online.

And I can't wait for Chicago will be back online as well and everything up and running back how it was because you can see our service revenue or 20% or 30% they used to be 40% to 45% of our revenue.

And I'm excited for the days when that happens again, because that the margins when Adam was talking about the margins youre going to do better margins and I can do better and that's because he's calculating.

This service revenue coming in which has no cost of goods associated with it we pay from sales tax on it.

And it's just.

And we call it the free money.

Because VIP.

And the IP room cost me.

And I can remodel the entire VIP room for 15, and $20000 and new furniture, and some carpet and.

And I've got a branded room thats going to sit there and generate hundreds of dollars per hour and rentals.

Well that's great.

And just I'll leave it at that.

Main thing for me interest you guys had another great quarter and it seems like if you can get this big club acquisition and the debt redone.

We're well on our way of about 100 Bucks a share. Thanks, a lot for your time alright. Thank you.

Next question, Alex Hardman private Investor. Please go ahead.

Eric I just had a quick question on <unk>.

And with the data taken away oxy restrictions and things like that and getting back up to 100%.

And like last quarter, you had mentioned something about like Miami, and 70% and <unk>.

I was just wondering are you seeing the hubs and Aki rates come back are you seeing the sales growth that you had against 2019 with a lower oxy rates.

Maintaining itself or are you getting some diminishing return on that.

And the South we're we're at 100% occupancy.

Texas back for 100% I think Florida is back to a 100%.

And warrant were.

And yes, we're seeing big numbers you see.

And as you've seen and the last quarter.

And.

And as we've said April over $18 million in revenue and in April.

We're as the Occupancies are going up the numbers are going up.

So.

I was I was thinking that maybe you and accuracy went up and numbers will go down but that has not happened at all.

I have been.

And the last call is much more cautious.

And as far as about saying how are we going to do over the next three or four months.

I'm not I'm not as cautious now I'm very confident and the numbers.

Over the next three to six months.

And I really believe that we're looking we're talking 12 to 18 months.

But I like to see trends I would like to see patterns and.

I can see him.

Two months three months ran it gives me and starts my thinking, but when I get to a six month trend and that's when I start really gaining confidence and that trend is real and that's why I think the bombshells. We've now seen night and we have nine months of numbers, we have the big Big quarter, and then we've seen two quarters here and a row now which is a six month period of bombshells.

And this nice steady.

$13 million.

Revenue from the 10 stores.

And I think that.

I think thats going to be something that we can do very consistently for.

For the time being until until something changes I think we're going to be very consistent.

And at Bombshells and that range I don't have a consistency on the nightclub range because I just don't have enough data.

I am very confident like I said over the next.

I know, where we're at through through five or six weeks for this quarter I think those numbers only go up from where we're at.

And April as we open up more stuff in May and June.

And our extended hours I'd say and let you know.

Curfews.

Higher occupancies.

And I think it runs all the way through September with no problem and then we and our prime season, I think the numbers could go even higher or maybe this consumer exuberance slows down a little bit and and we start seeing a normalized okay. Now we're going to normalize around here the growth is going to stop but we're going to level off and and hold steady ex number ex number per.

The week.

And we'll have that ideas, we can like I said as we go from quarter to quarter and we get more data.

Okay.

Bombshells I mean, you had.

You said youre comfortable with like the 13 million and bigger, but you know the way I mean.

And they just went from 75 to 100 debt in March it seems like your.

And the growth you had and March probably covered your losses and February I mean would you be doing like at least a little bit more than 13 million going forward then.

We mined.

I know this question and I know that we did a record I know, we did a record Saturday with the fight.

And I got an email from from from our operations guys and they didn't they didn't they didn't break that the total sales number figure that they were shooting for but they still they still they still had a record for for Saturday night, which was a Saturday before mother's day, which this weekend should've been a very off weekend for us.

But the the Canelo fight definitely.

Make sure that didn't happen because it was a very big fight and very very profitable for us around the country.

At the low cases, where we showed the fight.

So I mean everything is.

And everything is going.

I get scared, sometimes when everything goes goes to FERC.

And really where we're at right now are everything is just flowing perfectly right now.

Yeah.

Okay I appreciate it yeah, just I guess does this gain New York and.

The larger cities.

Back up and running and serve.

This revenue will follow and yes.

Okay.

And then and we should continue to see the cash flow increase.

And so we've got to stick with right now and push for.

And I appreciate it.

Thank you.

Are there any final questions.

Chance for questions.

Hmm.

Yes.

Next question comes from Greg <unk> with Sidoti. Please go ahead.

Just one quick final one can you just give us a little bit of guidance on the Capex how to think about it just it got lean obviously for obvious reasons as you rightsize on the downturn.

Is there any kind of pent up spend debt will be coming.

And maybe it's not really depends on expand its debt, we're going to be expanding a couple of locations.

I would say that typically I think we've been saying four to 5 million.

I would probably raise that a little bit and the next.

Six months.

So, let's say we were going to say two to two to $2 5 million I, probably say were probably going to spend another.

Or maybe another $1 million over the next six months.

And I know, we're expanding <unk> right now.

We're going to add some square footage.

To the upstairs VIP room, we're going to convert some upstairs offices and two.

More and more private.

VIP space.

There.

And we're redoing, our club and San Antonio.

And converting one of our BYOB clubs into our high and liquor club and San Antonio So there'll be some spend there we had a lot of flood damage RSA flow.

Damage and it's actually ice damage the ice froze the pipes the price broke clubs flooded.

And so youre going to see some expense there now some of that will be reimbursed through insurance, but I think we do maintenance Capex and insurance comes in and a separate line I don't think so so youre going to have a gain on insurance that have offset some of that capex, but.

And we do our free cash flow.

Don't know how that washes or not thats, a bradley question, but where there will be some of that so that's going to that's going to add some expense to maintenance capex as well I think we had nine locations that were affected at the club side and two or three of the bombshells that were affected.

But I think the bombshells were already fixed and probably expense and this quarter or the clubs are more insurance claims and will be.

There were larger damaged some larger damage clubs.

That'll be affected.

Okay helpful.

Yes.

Thank you I would like to turn the floor over to Gary Fishman for closing remarks.

Thank you, Eric and Bradley on behalf of Eric Bradley The company and all our subsidiaries. Thank you and Tonight and stay safe stay healthy and as always please visit one of our clubs or restaurants. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Yeah.

Yeah.

Yeah.

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