Q1 2022 RCI Hospitality Holdings Inc Earnings Call

Okay.

Speaker 1: Greetings and welcome to RCI Hospitality Holdings Conference Call and Web

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.

Speaker 1: All participants are in a listen-only mode. A question and answer session will follow the formal presentation of the recording.

Speaker 1: If you have a question or a comment, you would do so by entering star 1 on your touch tone phone.

If you have a question or comment you would do so by entering star one on your Touchtone phone pricing start to will remove you from the queue.

Speaker 1: As a reminder, this conference is being recorded. It is now my pleasure to introduce Gary Fishman, who handles investor relations for RCS.

As a reminder, this conference is being recorded it is now my pleasure to introduce Gary Fishman, who handles investor relations for RCI.

Speaker 2: Thank you Jen. For those of you listening on the phone, you can find our presentation on the RCI website. Click company and investor information under the RCI logo that will take you to the company and investor information page. Scroll down and you'll find the necessary links.

Thank you John for those of you listening on the phone you can find our presentation on the RCI website click company and Investor information under the RCI logo that will take you to the company and Investor information page scroll down and you find the necessary links.

Please turn to page two.

Speaker 2: I want to remind everybody of our Safe Harbor statement. It is posted at the beginning of our conference call presentation.

I want to remind everybody of our safe Harbor statement is posted at the beginning of our conference call presentation.

Speaker 2: It reminds you 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 afterward. Wherever you are polling, it's likely that Powers and va-a- MUSIC

It reminds you that you may hear or see forward looking statements that involve risks and uncertainties.

<unk> 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 afterward.

Let's turn to page three.

Speaker 2: I also direct you to the explanation of non-GAAP measurements that we use.

I also direct you to the explanation of non-GAAP measurements that we use.

Speaker 2: And I'd like to invite everyone listening in the New York City area to join us tonight at six o'clock to meet management at Rick's Cabaret, New York, Manhattan's number one gentleman's club.

And I'd like to invite everyone listening in the New York City area to join US Tonight at six o'clock to meet management at Rick's Cabaret, New York Manhattan's number one gentleman this club.

Speaker 2: You can also tour his sister club, hoops, cabaret and sports bar next door.

Can also tour its sister club hoops cabaret and sports bar next door bricks.

Speaker 2: Rix is located at 50 West 33rd Street between Fifth Avenue and Broadway around the corner from the Empire State Building. If you haven't RSVP, desk for Eric Langdon or me at the door, and now I'm pleased to introduce Eric Langdon, President and CEO of RCI Hospital.

<unk> is located at 50 West 30, <unk> Street between fifth Avenue and Broadway around the corner from the Empire State building.

If you Havent RSVP, Ed ask for Eric Langan.

Me at the door.

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

Speaker 3: Thank you, Deery. Thank you for joining us today. I'm here with our CFO , Bradley Shea, and after the market closed, we reported our first quarter results.

Thank you Derek Thank you for joining us today I'm here with our CFO Bradley Shay and after the market close reported our first quarter results.

Speaker 3: We want to thank our teams for delivering another strong quarter. Nightclubs and bombshells continue to perform well.

We want to thank our teams for delivering another strong quarter nightclubs and bombshells continued to perform well.

Speaker 3: All 12 recent club acquisitions and our new company on bombshells and Arlington test also contribute to results for part of the quarter.

All 12 recent club acquisitions, and our new company owned Bombshells in Arlington, Texas also contributed to results for part of the quarter.

Speaker 3: We didn't experience any noticeable impact until December from the Omnicrom virus. To date, it has psyched quickly through our mark.

We didn't experience any noticeable impact until December from the Omnicom virus.

Date cycle quickly through our markets.

Speaker 3: We are continuing to execute on all aspects of our growth plan for fiscal 2022. We expect to achieve further progress with our recent club acquisitions. Our first bombshells franchisee should open in San Antonio this quarter or early in next quarter, and our admiralme website should do a soft launch during the same time frame.

We are continuing to execute on all aspects of our growth plan for fiscal 2022, we expect to achieve further progress with our recent club acquisition. Our first bombshells franchisees should open in San Antonio this quarter or early in next quarter.

Our environment website to do a soft launch during the same timeframe.

Speaker 3: We are actively pursuing new club acquisitions as well as Bomgell's company on locations and new franchisees.

We are actively pursuing new club acquisitions as well as Bombshells company owned locations and new franchisees, helping.

Speaker 3: Helping us implement our CAP allocation strategy is our recently announced bank loan. Now here is Bradley to review the financials. Thanks Eric. And good.

Helping us helping us implement our capital allocation strategy is our recently announced bank loan now here's Bradley to review the financials.

Thanks, Eric.

And good afternoon to all those listening.

Speaker 4: All of our comparisons in this call will be to a year ago first quarter unless otherwise noted.

All of our comparisons in this call will be to a year ago first quarter unless otherwise noted.

Speaker 4: We generated total revenues of 61.8 million dollars.

We generated total revenues of $61 $8 million that is up 61% year over year and up 28% compared to the pre pandemic first quarter in fiscal 2020.

Speaker 4: That is up 61% year over year and up 28% compared to the pre pandemic first quarter and physical 20.

Speaker 4: Gap EPS totaled $1.12 with non-Gap EPS at $1.10.

GAAP EPS totaled $1 12.

With non-GAAP EPS at $1 10.

In the year ago quarter, we reported GAAP EPS of $1 seven.

Speaker 4: In the year ago quarter, we reported gap EPS of $1.7.

Speaker 4: That included a $4.9 million pre-tax gain equal to 55 cents per share from the debt extinguishment of our PPP.

That included a $4 $9 million pre tax gain equal to 55 per share from the debt extinguishment of our PPP loan.

Speaker 4: including that in other standard items, non-GAP EPS was 39 cents a year.

Excluding that and other standard items non-GAAP EPS was <unk> 39, a year ago.

Speaker 4: Net cash from operating activities was $16.3 million, an increase of 159 per...

Net cash from operating activities was $16 3 million an increase of 159%.

Speaker 4: Free cashflow totaled $15.3 million, which was up 169%. Net income increased 11.1%.

Free cash flow totaled $15 $3 million, which was up 169%.

Net income increased 11, 1% to $10 6 million.

Speaker 4: Now on a non-gap basis, that income was up 193% and adjusted EBITDA increased 107% to $18 million.

Now on a non-GAAP basis, net income was up 193% and adjusted EBITDA increased 107% to $18 million.

Please turn to page five.

Speaker 4: nightclubs, segment revenues, the operating margin, and income from operations were all up significantly from the year-go quarter.

Nightclubs segment revenues, the operating margin and income from operations.

Up significantly from the year ago quarter.

Speaker 4: Revenues grew 86% year over year to $46.8 million.

Revenues grew 86% year over year to $46 8 million.

Speaker 4: Operating margin was 40.1% compared to 33.7% and the income from operations increased 121.

Operating margin was 41% compared to 33, 7%.

The income from operations increased 121% to $18 $7 million.

Speaker 4: This includes the benefit of our recent addition of 11 clubs sent to acquisition in mid-October, and another club acquired by the United States.

This includes the benefit of our recent addition of 11 clubs since the acquisition in mid October and another clubs acquired in early November .

Speaker 4: of the increase in revenues and approximately 17% of the increase in operating.

<unk> contributed approximately 29% of the increase in revenues and approximately 17% of the increase in operating income.

Speaker 4: The segment also reflects strong performance from all of our other clubs, which were still heavily impacted by government-related COVID restrictions in the year-go quarter.

This segment also reflects strong performance from all of our other clubs, which was still heavily impacted by government related COVID-19 restrictions in the year ago quarter.

Speaker 4: Same store sales were up 31% compared to the year go quarter and up 8% compared to first quarter two years ago.

Same store sales were up 31% compared to the year ago quarter, and up 8% compared to first quarter two years ago.

Speaker 4: Revenues and operating margins also benefited from 107 percent year over year increase in high margin service revenues.

Revenues and operating margin also benefited from a 107% year over year increase in high margin service revenue.

Speaker 4: This primarily reflected the success of our Northern clubs as they continue to rebuild their VIP bus.

This primarily reflected the success of our northern clubs as they continue to rebuild their VIP business.

Speaker 4: As we've explained, the acquisitions are working progress. Our plan is to continue to improve staffing, service, revenues, and margins as we move through the year.

As we've explained acquisitions are work in progress our plan is to continue to improve staffing service revenues and margins as we move through the year.

Now if you would please turn to page six.

Speaker 4: FOM shells had another solid quarter, with revenues of $14.8 million, operating margin of 19% and income from operations.

Bombshells had another solid quarter with revenues of $14 8 million.

Operating margin of 19%.

And income from operations of $2 8 million.

Speaker 4: This compares to the first quarter 21 revenues of $13 million operating margin of 20.9%.

This compares to the first quarter 'twenty, one revenues of $13 million.

Operating margin of 29% and.

Speaker 4: and income from operations of 2.1, 2.7 million.

And income from operations of $2 127 million.

Speaker 4: The 14% increase in revenues reflects the benefit of our new bombshells in Arlington, Texas, since it's opening to great success in early December . Arlington.

The 14% increase in revenues reflects the benefit of our new bombshells in Arlington, Texas.

Its opening to great success in early December .

Arlington and set a record for its first month of revenues.

Speaker 4: for new bombshells and contributed approximately 45% of the revenue.

For our new Bombshells and contributed approximately 45% of the revenue increase.

The quarter also reflect strong performance from our 10 other bombshells same.

Speaker 4: The quarter also reflects strong performance from our 10 other bombs.

Speaker 4: Same store sales were all 8% compared to a year-go quarter and up 21% compared to the first quarter two years ago.

Same store sales were up 8% compared to a year ago quarter and up 21% compared to the first quarter of two years ago.

Speaker 4: Operating margin and income were affected by more than two months of pre-opening costs without any cells for earnings.

Operating margin and income were effected by more than two months of preopening costs with that.

Any cells for Arlington.

Speaker 4: Overall, we believe we've done a great job at managing the impact of food and labor inflation.

Overall, we believe we have done a great job of managing the impact of food and labor inflation.

Speaker 4: As a result, operating margin state within the target range of 18 to 22%.

As a result operating margin stayed within the target range of 18% to 22%.

Speaker 4: Going forward, operating margins should benefit from full quarters of Bonshell Arlington without the effects of these pre-opens.

Going forward operating margins should benefit from full quarters of bombshells Arlington without the effects of these pre opening costs.

Speaker 4: Now please turn on page 7 to review items in our first quarter consolidated statement of

Now please turn to page seven to review items in our first quarter consolidated statement of operations.

Speaker 4: improvements in the margins of cost of good sold, salaries and wages, and S-GNA are all attributed to higher nightclub revenues and margins during the quarter. As well as some of our continuing COVID error state costs.

Improvements in the margins of cost of goods sold salaries and wages and SG&A are all attributed to higher nightclub revenues and margins during the quarter as well as some of our continuing Covid era <unk> cost savings.

Speaker 4: As a result, GAAP operating margin was 25.7% compared to 70.1%.

As a result, GAAP operating margin was 25, 7%.

Back to 17, 1%.

Speaker 4: Interest expense also declined as a percentage of revenue, although the dollar expense was slightly higher due to debt associated with the acquisition of the 12 clubs in October and

Interest expense also declined as a percentage of revenue, although the dollar expense was slightly higher due to the debt associated with the acquisition of the 12 clubs in October and November .

Non operating gains were significantly lower than a year ago quarter, which benefited from the debt forgiveness.

Speaker 4: Not operating games were significantly lower than a year-go quarter, which benefited from the death forgiveness.

Please turn to page eight.

Speaker 4: On December 30th, we acquired Scarlet Cabaret Miami real estate for $7 million.

On December 30, we acquired Scarlet cabaret, Miami real estate for $7 million of cash.

Speaker 4: This left us with the cash balance of $18 million as of December 31st.

This left us with a cash balance of $18 million as of December 31.

Speaker 4: With the $90 million bank loan that we close in January , we ended the month of January with approximately $32 million in cash.

With a $90 million bank loan that we closed in January we ended the month of January was approximately $32 million in cash now.

Speaker 4: Now we exclude the purchase of the scarlet property. We would have had a cash balance of approximately $39 million.

Now if we exclude the purchase of the <unk> property, we would have had a cash balance of approximately $39 million.

The Scottish property was not was not part of the general Bank loan. So at some point, we will finance it and get a good portion of our cash out.

Speaker 4: The smartest property was not part of the January bank loan. So at some point, we will finance it and get a good portion of our cash.

Speaker 4: Precast low from my first quarter increase by 169% compared to a year ago.

Free cash flow from our first quarter increased by 169% compared to a year ago.

Speaker 4: This was primarily due to strong increase in net cash from operating activities, partially outset by a small increase in maintenance catbacks. A just-

This was primarily due to the strong increase in net cash from operating activities parse.

Partially offset by a small increase in maintenance capex.

Adjusted EBITDA increased 107%.

Speaker 4: Now as a percentage of revenue, free cash flow increased to 25% from 50% in the year go quarter.

Now as a percentage of revenue free cash flow increased to 25% from 50% in the year ago quarter.

Speaker 4: just a liberal increased to 29% from 23%.

Adjusted EBITDA increased to 29% from 23%.

Speaker 4: Now if you would please turn a page 9 to review our debt and debt manageable.

Now if you would please turn to page nine to review our debt and debt Manageability.

Speaker 4: That net of loan costs was $162 million as of December 31st and increased of $37 million.

Debt net of loan costs was $162 million as of December 31, an increase of $37 million.

Speaker 4: increased primarily reflected previously reported debt used to finance the October 2021 club acquisitions. We continue to

This increase primarily reflected the previously reported debt used to finance the October 2021 club acquisitions.

We continue to reduce our weighted average interest rates.

Speaker 4: Our first quarter rate was 6.26%, 51 basis points lower than a year.

Our first quarter rate was six 6%.

<unk>, one basis points lower than a year ago.

Speaker 4: This was primarily due to the refinancing and pay down a power rate.

This was primarily due to the refinancing and pay down of higher rate debt.

Speaker 4: Our rate is almost 100 basis points down for five years.

Our rate is almost 100 basis points down from five years ago.

Speaker 4: Our periodic refinancing, like the one we did in September , enables us to convert higher rate seller financing and other unsecured financing using club acquisitions into lower rate commercial.

Our periodic refinancing like the one we been at September enables us to convert higher rate seller financing and other unsecured financing using club acquisitions into lower rate commercial real estate bank debt.

Speaker 4: Our refinancing also enables us to smooth out our debt maturity.

Our refinancings also.

Enables us to smooth out our debt maturity schedule.

Speaker 4: Now as you can see our amortization averages about $7 million a year for the next five years, which is very manageable with our cash flow.

And as you can see our amortization averages about $7 million a year for the next five years, which is very manageable with our cash flow.

Occupancy costs were six 9% of revenues.

Speaker 4: well within our range of 6 to 9 percent, that we've averaged when cells more dramatically impacted by COVID.

This is well within our range of 6% to 9% that we.

And we've averaged when cells wont dramatically impacted by Covid.

Please turn to page 10 to look at our top 30 that Pie chart.

Speaker 4: 31. Are secured that not consist of 62.5% of debt secured by real estate. This will be a little higher in the second quarter of 2022 as a result of the January refinancing

Hello, everyone.

Our secured debt now consists of 62, 5% of debt secured by real estate. This will be a little higher in the second quarter of 'twenty to 2022 as a result of the January refinancing.

Speaker 4: 21.6% listed as seller financing. This is secured by a respective clubs to which it applies. And lastly, 4.9%

21, 6% lifted a seller financing this is secured by our respective clubs to which it applies.

And lastly, four 9% secured by other assets.

Speaker 4: Our unsecured debt consists of 10.8% of our debt, which is comparable to our 6.30, 2021 balance.

Our unsecured debt consists of 10, 8% of our debt, which is comparable to our 632021 balance sheet.

Speaker 4: As I mentioned on our last call, we have reached the end of our SBA loan through forgiveness and our left with a small amount of repayment. We are nearing the end of our Texas Comptroller settlement as well. Now let me turn on call back over to Eric. Thank you.

As I mentioned on our last call. We have reached the end of our SBA loan forgiveness.

We are left with a small amount of repayments. We are nearing the end of our Texas Comptroller settlement as well.

Now, let me turn call back over to Eric Thank you.

Thanks Bradley.

Please turn to slide 11.

Speaker 3: We're continuing to talk to new investors. This is the result of our meetings through the ICR and Cedodi conferences in January , the Nobles Capital Markets Initiation Coverage. So I'd like to review our cap.

We're continuing to talk to new investors. This is a result of our meetings through the ICR and Sidoti Conference in January .

Noble's capital market's initiation coverage.

So I'd like to review our capital allocation strategy.

Speaker 3: Our goal is to drive shareholder value by increasing free cash flow for a share 10 to 15% on a compound and annual base.

Our goal is to drive shareholder value by increasing free cash flow per share, 10% to 15% on a compounded annual basis.

Speaker 3: Our strategy is somewhere to those outlined in the book, The Outtiders by William Thorndy.

Our strategy of somewhere to those outlined in the book the outsiders by William Thorndike.

Speaker 3: Studying companies that focus on generating cash per share and allocating that cash effectively to generate more cash.

Steady companies that focus on generating cash per share and allocating that cash effectively to generate more cash.

Speaker 3: We have been applying those strategies since fiscal 2016 with three different actions, subject of course, to whether they're a strategic rationale to do otherwise.

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

Speaker 3: One is mergers and acquisitions, specifically buying the right clubs in the right mark.

<unk> is mergers and acquisitions, specifically buying the right clubs in the right markets, we'd like to buy good solid cash flowing clubs at a 3% to five times adjusted EBITDA using to our financing and acquire the real estate at market value.

Speaker 3: We like to buy good, solid cash flowing clubs at a three to five times adjusted evita. Using solar financing and acquire the real estate of market value. Another strategy is using cash to grow organically, specifically expanding bombshells to develop critical mass market awareness in sale franchises.

Another strategy is using cash to grow organically, specifically expanding bombshells to develop critical mass market awareness.

And sell franchises.

Speaker 3: Our goal in both M&A and organic growth is to generate annual cash run cash returns of at least 25 to 33 percent.

Our goal in both M&A and organic growth is to generate annual cash on cash returns of at least 25% to 33%.

Speaker 3: The third action is buying back shares when the yield of our free cash flow per share is more than 10%.

The third action is buying back shares when the yield on our of our free cash flow per share is more than 10%.

Please turn to slide 12.

Speaker 3: Regarding nightclubs, we are making important progress with the clubs we acquired in the first quarter. As I mentioned on the last call, this is a COVID rebuilding effort. And as this materialized, we expect to see improving revenue and margin run rate. We anticipate reopening our rebuilt and rebranded club in Louisiana this quarter and our remodel and rebranded club in San Antonio next quarter. Step by step, admire me as coming to fruition.

Regarding nightclubs, we're making important progress with the clubs we acquired in the first quarter as I mentioned on the last call. This is a COVID-19 rebuilding effort and add this materialize, we expect to see improving revenue and margin run rate.

We anticipate reopening our.

Our rebuilt can rebranded club in Louisiana, this quarter, and our remodel and rebrand equivalent San Antonio next quarter.

<unk> step in Miami is coming to fruition.

Speaker 3: The mobile friendly site is scheduled for a soft launch later this quarter or early next.

Mobile friendly site is scheduled for a soft launch later this quarter or early next week.

Speaker 3: We are continuing to talk with club owners about acquiring their businesses as part of our recent investor presentation. We said our current target is to buy clubs that can add about $20 million and adjust it EBITDA in fiscal 2023.

We are continuing to talk with club owners about acquiring their businesses as part of our recent investor presentation, We said there.

We set our current target is to buy clubs that can add about $20 million and adjusted EBITDA in fiscal 2023.

Speaker 3: Regarding bombshell, our new company own location in Arlington is doing very well. As Bradley mentioned, it's set a record in December for the first month revenues for a new bombshell.

Regarding bombshells, our new company owned location in Arlington is doing very well as Bradley mentioned et cetera record in December for the first month revenues for our new bombshells.

Speaker 3: We are under contract to purchase land for two new bomb shells, one in Sapphire Bay, in Dallas, in the Dallas market, and another in Stafford in the Houston market.

We are under contract to purchase land for two new Bombshells, one in Sapphire Bay in Dallas in the Dallas market and another in Stafford in the Houston market.

Speaker 3: We couldn't get a necessary specific use permit for another location in the Dallas area that we were looking at.

We couldnt get unnecessary specific use permit for another location in the Dallas area that we were looking at.

Speaker 3: And so we're looking at other sites. We continue to talk to brokers in the North, South, and West Florida, as well as the Phoenix Market for more company-owned locations. Our first franchisee store should be open in San Antonio by the end of this quarter or the first part of next. And we continue to talk to other potential franchisees.

And so we're looking at other sites, we continue to talk to brokers in the north South and West Florida.

As well as the Phoenix market for more company owned locations. Our first franchisee stores should be opened in San Antonio by the end of this quarter or the first part of next and we continue to talk to other potential franchisees.

Speaker 3: Regarding capital management, as Bradley mentioned, we acquired Scarlet's property for $7 million in cash. This is something we've planned to do.

Regarding capital management, I, probably mentioned, we acquired <unk> property for $7 million in cash.

This is something we had planned to do.

Speaker 3: Our 18.7 million dollar bank loan provides us with more resource to implement our capital allocation strategy and we still have two access properties under

$18 $7 million Bank loan provides us with more resource to implement our capital allocation strategy and we still have to access properties.

Under contract for sale.

Speaker 3: This is the formal presentation. A big thank you to all our teams, the night clubs, bombshells, and corporate for all your hard work and dedication. And with that, we'll open the line for questions.

This ends the formal presentation a big thank you to all our teams nightclubs and bombshells and corporate for all your hard work and dedication and with that we'll open the line for questions.

Speaker 1: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please indicate so by pressing Thar 1, pressing star 2 or removing from the key.

Thank you ladies and gentlemen, the floor is now opened for questions. If you have any questions or comments. Please indicate so by pressing star one pressing star to where we're moving from the Q should your question be answered and lastly, we're posing your questions. Please pick up your handset listening on speaker phone to provide optimal sound quality.

Speaker 1: Please pick up your hand-sided listening on speakerphone to provide optimum sound quality. Please hold while we hold for questions.

Please hold while we poll for questions.

And the first question is coming from Joe Gomes from Noble capital. Your line is live.

Good evening can you hear me.

Yes.

Great.

Speaker 5: Actually quarter guys, just a quick question first here on the acquired nightclub. You know, looks that I'm doing a math real quick on the back of the envelope that for the...

Excellent quarter guys.

Quick question first here on the acquired night clubs.

It looks at doing the math real quick on the back of the envelope that.

Speaker 5: weeks that you had acquired them, they were generating a little over 6 million of revenue. Is that kind of where you were expecting better worse? You know, maybe just give us a little more color or detail about how the integration of the acquired clubs is progressed.

We ask that you had acquired them they were generating a little over $6 million of revenue.

Is that kind of where you are we're expecting better worse.

Maybe you can just give us a little more color detail.

About how the integration of the acquired clubs is progressing.

Speaker 3: Sure, I mean we knew it was gonna be a challenge. They were short staffed. They weren't open full hours yet when we took over on October 18th.

Sure I mean, we knew it was going to be a challenge.

They were short staffed.

They weren't open for hours yet when we took over on October 18th.

Speaker 3: So we knew there was going to be some issue issues there. As we brought some people in from around the country from our other clubs, we were able to fill some spaces, get some stuff going, start building momentum.

So we know theres going to be some issue issues. There as we brought some people in from around the country from our other clubs, we were able to fill some spaces get some stuff going start building momentum.

Speaker 3: We did have an issue with some of the existing staff that were very corporate and they were not used to that. So we had some turnover in existing staff as well.

We did have an issue with some of the existing staff.

We're very corporate then they were not used to that so we had some turnover in existing staff as well.

Speaker 3: So that added to the compound to the problem then by late December .

So that added to the compounded the problem then by late December going into early January we had COVID-19 hit certain locations.

Speaker 3: Going in early January , we had COVID hit certain locations through our

Throughout the country and so we've been dealing with that but as of now I'm very excited about going forward.

Speaker 3: and so we've been dealing with that but as of now I'm very excited about you know going forward the numbers are getting better and better

The numbers are getting better and better at the locations.

Speaker 3: at the locations. Some of the locations are exceeding the 2019 numbers.

Some of the locations are exceeding.

2019 numbers.

Speaker 3: and some are still, you know, about 60%. So we'll continue to push and grow on those locations, get the right things in. We have to remodel the CAPX done. So we're waiting, most of that is done. Now we expect that the majority...

And some are still at about 60%. So we will continue to push and grow on those locations get the right things and we have to remodeling the capex done so.

So we're waiting and most of that is done now.

Suspect that the majority.

Speaker 3: If not 100% of that will be done by March 1st. There will only be one major project left that we haven't started yet, and we're still working on approval through the landlord. It's one of the rental properties, but we want to change that property to a rich cabaret.

Not 100% of that will be done by by March one.

Only be one major project left that we haven't started yet we're still working on approvals through the landlord. It's one of the rental properties, but we want to change that property to our ricks cabaret.

Speaker 3: and remodel and make it look more like our New York City storefront.

And remodel and make it look more like our New York City storefront.

Speaker 3: in downtown Denver. So hopefully that will get done here as well in the next few months.

In downtown Denver, So hopefully that will get done here as.

As well in the next few months.

Speaker 3: It's right across the street from the convention center so it should be a really great look and definitely help increase that property.

And it's right across street from the Convention center, so it should be a really great look.

And definitely help increase that property.

Speaker 3: revenues and income. But overall, we're very excited about the growth potential still at the existing clubs that we just purchased. And I think that as far as our schedule is going, we're on schedule. We think it could take from somewhere between March and May to get these locations back to 110%, which is where we want to see them.

Revenues and income but overall.

We're very excited about.

About the growth potential still at the existing clubs that we just purchased.

And I think that is.

As far as our schedule is gone we're on schedule.

We think it could take from beat somewhere between March and May to get to get these locations back to 100, 100, 110%, which is where we want to CMS.

Speaker 3: Other than that, everything else has been great with those looks.

Other than that.

Everything else has been great with those locations.

Speaker 5: Thanks for the color. And obviously, you know,

Okay. Thanks, Thanks for the color.

Obviously.

Awesome.

Speaker 5: Contribution is quarter from the service revenues, you know, partly as you mentioned the Northern clubs, you know, getting back to the VIP business.

<unk> contribution this quarter from the service revenues, partly as you mentioned the northern clubs getting back the VIP business.

Speaker 5: You know, do you think there's much more upside in that or is that kind of played out in terms of the people are back to the full extent? We won't see that type of growth going forward.

Do you think theres much more upside in that or is that kind of.

Played out in terms of the people are back to.

The full extent and we won't see that type of growth going forward.

Speaker 3: I think we're going to see more growth in that. You're going to see it return more to the mean. Service revenues used to be over 40% of our...

I think we're going to see more growth in that youre going to see it return more to the mean.

Service revenue used to be over 40% of our.

Speaker 3: of our revenues, I think we're still down the 20s right now. So I think there's considerable bandwidth there. A lot of it can have to do with weather as the weather gets nicer. I think March, April , May, it's going to be one of our strongest periods. I know March is part of the second quarter and April may be part of third quarter, but I still think those three months as a whole are going to be very, very strong for the company. And we're going to get a very good sense of what we're going to be looking like on a go-forward basis. As some of our prime time, I think that just...

Our revenues I think were still down in the Twenty's right now so I think there's considerable bandwidth there.

Lot of it could have to do with weather.

The weather gets nicer I think March April may is going to be one of our strongest periods I know.

March is part of the second quarter in April and May will be part of third quarter, but I still think those three months as a whole are going to be very very strong for the company and we're going to get a very good sense of what we're going to be looking like on a go forward basis as at some of our prime time.

That.

Speaker 3: Hopefully this last wave of COVID-19 on me crime will be kind of gone. Hopefully there's nothing new that comes out.

Hopefully this last wave of Covid with Omnicom will be kind of gone, hoping theres nothing new that comes out.

Speaker 3: It seems to be weakening so it should just hopefully go away as they're saying.

It seems to be weakening so it should just hopefully go away as they are saying.

Speaker 3: And that's going to give it a very, very strong. We've got a great sports lineup coming with March Madness coming up and some of the other fans baseball we started back up in April , which would be great for us, basketball season, be coming to an...

And thats going to give us a very very strong we've got a great sports lineup coming with March madness, coming up and some of the other Vance baseball. We started back up in April which will be great for us basketball season will be coming to them.

Speaker 3: you know to a prime spot uh... and i'm just a i think it's very exciting time for us three of those three months and hopefully the weather

A prime spot.

I'm, just I think a very exciting time.

For us during those three months and hopefully the weather.

Speaker 3: Get a little better. You know this big storm lastly called across the Northeast freezing down all into Texas and

It gets a little better you know Theres, a big storm last week all across.

Northeast freezing down all the way into Texas.

Speaker 3: and some freezing rain and snow actually in the Dallas market again.

And some freezing rain and snow actually in the Dallas market again.

Speaker 3: I'm going to go inside. So last year it hit us in the second and third week of February , which is our prime time this time. It's in our first week of February . So I'm hoping that it'll kind of blow past and we'll get a nice six week run as we run into the last six weeks of this quarter, the last two weeks of February and then the four weeks in March. So maybe even seven weeks, nice seven week run.

<unk>.

Clinical insight so last year it hit us in the second and third week of February which start primetime. This time hitting our first week of February so I'm, hoping that will kind of blow past and we will get a 96 week run as we run in the last six weeks of this quarter. The last two weeks of February and then four weeks in March So maybe even seven week 97 week run.

Speaker 3: So at this quarters, it's still good. January was still a very solid quarter for us. I was thinking we would come in closer to 22 million, we're a little over 20 million in sales.

So this quarter is still good.

<unk> was still a very solid quarter for us.

Was thinking we would come in closer to $22 million were a little over $20 million in sales.

Speaker 3: for January so that will be, you know, still better than we did in October . So this quarter is still ahead of last quarter on a going forward run rate for first quarter, second quarter. And we'll just have to see like that, how these next nine weeks play out.

For January so that will be.

Still better than we did in October . So this quarter is still ahead of last quarter on a on a going forward run rate.

Our first quarter second quarter, and we'll just have to see like I said, how these how these next nine weeks play out.

Hopefully very strong for us.

Speaker 5: Right, right. And speaking of sporting events, I know when you get a, you know, some of, you know, a super bowl in a location, it can really have a nice off kick. And I know that the form of one race is coming into Miami in April . Outside of that, if any other big one time events like that, that you see that will be coming this year towards where any of your club locations are.

Right right.

Sporting events I know when you get it.

A super Bowl in a location it can really have a nice uptick and I know the formula one race is coming into Miami.

In April outside of that if any other big onetime events like that that you see that will be.

Coming this year towards where any Youre club locations are.

Speaker 3: I mean, I think there's some big like Bitcoin and NFT conferences that are coming to some of our areas. We're in the process of accepting Bitcoin at our locations, some of our locations, which I think will help. It's dramatically starting in Miami with the big Bitcoin conference coming up there in April . We're hoping to have that in place by then.

I mean, I think there is.

There are some.

Big like Bitcoin.

And.

And our T conferences that are coming some of our areas.

We are in the process of accepting bitcoin at our locations some of our locations, which I think will help dramatically starting in Miami with the Big Bitcoin conference coming up there in April and we're hoping to have that in place by then.

Speaker 3: You know, we're working on some other cool things, like a helicopter landing pad at Toces in Miami, because we've had several requests from...

We're working on some other cool things like a helicopter landing pad tutsis in Miami, because we've had several requests from.

Speaker 3: Some big VIPs, they want to land their helicopter at the club. We're like, well, we can work that out, I think. So we're in the process of doing stuff like that. I mean, that location is just phenomenal right now. The numbers is still running record numbers that we never even dreamed of free COVID that we could do the volume of that club is doing now. The race is going to be...

Some some big Vips they want to land their helicopter at the collateral like well, we can work that out I think so we're in the process of doing stuff like that.

I mean that locations just phenomenal right now the numbers, it's doing well.

We're still running record numbers that we.

We never even dreamed up pre COVID-19 that we could do that do the volume at that club is doing now the race is going to be.

Speaker 3: incredible for us, I think. It brings a lot of big money in to the area. Formula 1 is very sweet. We know from Austin, which our clubs are still 60 to 70 miles from the track and we still get business in Austin Texas when Formula 1 is there. So I think I'm not 100% sure shouldn't have a track, but I know it's just blocks. The track's literally blocks from Tuthy there. So it should be a really big draw for us.

Incredible for Us I think.

It brings a lot of big money in.

The area of Formula one is because we know from Austin, which our clubs are still 60% to 70 miles from the track and we still get business and in Austin, Texas, One formula one's there. So this I think.

I'm not 100% of the track, but I know, it's just blocks attracts literally blocks from.

From a tootsie there so it should be a really big draw for us.

Speaker 5: as well. One more if I may and then I'll get back in queue. I was just, you're talking about a soft launch of the Admire Me site in the second quarter, maybe, maybe early third quarter. What kind of metrics are you looking for in the soft launch?

As well.

One more if I may and then I'll get back in queue.

You are talking about a soft launch of the admire <unk> site.

Second quarter, maybe maybe early third quarter.

What kind of metrics are you looking for in the soft launch.

Speaker 3: I want to get a thousand girls or creators on the site. That is our initial goal.

I wanted to get a thousand girls.

<unk>.

On the site that is our that is our initial goal to put a 1000 creators new creators on the site.

Speaker 3: We put a thousand new creators on the site from our clubs and our partners clubs. So combined, there's about...

From from our clubs and our partners clubs.

Combined there is about.

Sure.

Speaker 3: 70, about 70 some clubs around the country that are going to be involved in the initial launch.

70, so about 70, some clubs around the country that are going to be involved in the initial launch.

Speaker 3: Hopefully we'll add other clubs as time goes on through our acquisitions through their expansion and through maybe partnerships with the

Hopefully, we'll add other clubs as time goes on.

Through our acquisitions through through their expansion and through maybe partnerships with.

Speaker 3: with other club owners as well to continue to build the site. But I think our first metric has to be...

With other club owners as well to.

To continue to build the site, but I think our first metric has to be.

Speaker 3: hitting the goal of 1000 creators. At 1000 creators I think that it has enough momentum on its own that we can just let it build.

Hitting the goal of 1000 creators.

At 1000 creators I think that it has enough.

Momentum on its own that we can just let it build.

Speaker 3: or a film from there with, you know, then we can convert to a more of a promotion mode where we're really trying to bring in more customers and guess for those creators. And then of course, then we'll need more creators and then we'll need more customers. And, you know, just the chicken and egg effect and just balance and build and balance and build. Try not to let either get ahead of this, that's where we have too many customers and not enough creators or too many creators and not enough customers.

On its own from there with then we can convert to more of a promotion mode, where we're really trying to bring in more customers.

And guests for those creators.

And then of course, then we'll need more creators and then we'll need more customers.

The chicken and egg effect, and just balancing build and balanced and bill.

Try not to let either get ahead of this house, where we have too many customers and not enough creators are too many creators and not enough not enough customers.

Speaker 3: I think that's the delicate balance for us. So I think we'll have a really good handle on that. How that's looking by the may call. That's my personal...

I think thats the delicate balance for us. So I think we'll have a really good handle on that.

How thats looking by the May call.

This is my personal.

Thoughts on that.

Speaker 5: Okay, great. Thanks. Thanks for all that Eric. Appreciate again. Great quarter. I'll let someone else ask some questions. Thank you. All right. Thank you. Once again, if there are any remaining questions or comments.

Okay, great. Thanks, Thanks for all that Eric appreciate again, great quarter I'll, let someone else ask some questions. Thank you alright. Thank you.

Once again, if there are any remaining questions or comments. Please press star one on your Touchtone phone.

The next question is coming from Anthony.

Pinsky from Sidoti.

Anthony Your line is live.

Speaker 1: Thank you and good afternoon and thank you for taking the questions. It's certainly a very impressive start to the fiscal year even with some headwinds with an Omicron. Eric, is there any way you can perhaps take a shot at the estimating what the impact of Omicron was for sale?

Thank you and good afternoon. Thank you for taking the questions certainly very impressive start to the fiscal year, even with some headwinds.

Eric is there any way you can perhaps take a shot at estimating what the impact of the crime was.

Sales for the quarter.

Speaker 3: For the quarter's difficult, but I would say it probably...

For the quarter is difficult, but I would say it probably.

Speaker 3: Probably affected us about 10% in December , in January probably about the same. I don't think we'll see any effect in February from it. I think February is kind of, it's kind of ran its course in our markets for the most part. At least our major markets. Texas was, Texas is kind of done now. I mean, it, it, it,

Probably affected us around 10% in December .

In January probably about the same.

I don't think we will see any effect in February from it I think February I think it's kind of it's kind of ran its course in our markets for the most part at least our major markets, Texas was Texas is kind of done now.

Yes.

Speaker 3: wiped out our corporate office. We were very skeleton staff getting this queue finished up, and we were actually a little worried about it at a couple of points. Like, are we gonna be able to get all this work done? Because every other day somebody else was, oh, I'm positive I can't come in now. So, you know, Bradley, I'm gonna be able to get all this work done.

Wiped out our corporate office.

We were very skeleton staff getting this SKU finished up and we were actually a little worried about it at a couple of points.

We are going to be able to get all of this work done because.

Every other day somebody else was on positive I can't come in now.

So.

<unk> did a great job of.

Speaker 3: of getting that all handled and take care of and went through the COVID himself. So he knows. I mean, they all was just, luckily it was very short. Most of them were sick, yeah, out for two to three weeks total with all the, and that's with all the precautionary hold times. They weren't really sick for more than about five days or so, but we did a 10 day hold before the, most of this was before they changed it to a five day. So we're making them 10 days, getting negative tests, all that type of stuff before we let people back in our offices. We go, we go now.

Of getting that all handled and take care of and went through the Covid himself. So he knows I mean, they all will just luckily it was very short most of them.

Yes for two to three weeks total with all the and that's with all the precautionary hold times, they werent really sick, where more than about five days or so, but we did a 10 day hold before that most of this was before they change to a five day. So we're making them 10 days get negative tests all of that type of stuff.

Before we let people back in our offices.

Because we couldn't afford to keep losing people.

Speaker 3: especially the key people that were there. We had people coming in at night to avoid each other. Whatever we had to do to get this close out done for the quarter and get the queue out on time.

<unk>.

Especially the key people that were that were there we have people coming in at night to avoid each other whenever we had to do to get this to get this closeout done for the <unk>.

For the quarter and get to Q out on time.

Speaker 1: Gotcha. Okay. Well, I'm glad that everyone is healthy now. It sounds like a minute to put off. We're going to be able to finish up.

Got you, Okay, well I'm glad that everyone is healthy now it sounds like in the corporate office and you guys were able to finish up the 10-Q and so on so.

Speaker 1: So looking forward here, as far as the segment operating margin, so obviously, the bomb shells did take into account some of the pre-opening expenses for the New Orleans 10 location. So is it safe to assume that sequentially, you should see better operating margins there, and if you want to just comment on night clubs as to how we should think about the segment, the off margin there.

So looking forward here.

Far as the segment operating margins. So obviously, the bombshells thats taken into account some of the Preopening expenses.

Arlington location. So is it safe to assume that sequentially you should see better operating margins there and if you want to just comment on nightclubs as to how we should think about the segment the op margin.

Speaker 3: yeah i mean the nightclub there i i think work what kind of maximum nightclub i i i would think but i i think i don't know as the service revenue continues to grow uh... and to see this doing the numbers it's doing uh... if the Denver market really picks up for us as uh... you know the guys are saying they expect a two between march you know for the month of march

Yes, I mean, the nightclubs there I think we're we're kind of maximum on the nightclubs I would think but then again I don't know is the service revenue continues to grow.

And <unk> is doing the numbers it's doing for.

The Denver market really picks up for us as well.

The guys are saying they expect it to between March for the month of March.

Speaker 3: We could see a little bit better there as far as the bombshells I think we're going to stay in that 18 to 22 and maybe you know occasionally we're going to have some big events that that blow us up to that 24 26% margin rate, but if we say 18 to 22% I'm going to be very very happy with with bombshells segment in that in that range

We could see a little bit better there as far as the bombshells I think we're going to stay in the 18 to 22 and maybe occasionally we're going to have some big events that blow us up to that 24, 26% margin rate, but if we say 18% to 22% I'm going to be very very happy with bombshells segment in that in that range.

Speaker 3: as a very very good healthy range for for bombshell has been our target it for for many years that was the target to get to and if we can stay in that range i'm not going to be unhappy uh... obviously i love that you know the new locations running thirty percent plus uh... it's nice that helps expand the margin for the so couple the underperforming

That's a very very good healthy range for for Bombshells has been our targeted for many years.

That was the target to get to and if we can stay in that range I'm not going to be unhappy.

Obviously I love the new location is running 30% plus.

Nice that helps expand the margin for the couple of the underperforming.

Speaker 3: you know, very older locations that we did. Before we really had the demographic markets figured out, the way we do today.

Very older locations that we did before we really had the demographic markets figured out the way we do today.

Speaker 3: But, and as we add more of those locations, those first two locations or cell three locations that we're underperforming, we'll have less and less weight on the brand as well.

And as we add more of those.

Those locations those first two locations or so three locations that were underperforming.

We will have less and less weight on the brand as well.

Speaker 3: But I don't see any issues with that, you know, staying in the 18 to 20% at this point. We've been able to pass on costs. I've talked to some of the guys management there. We are labor issues that we were having. We're kind of through those most for the most part. I mean, obviously everyone is having.

But I don't I don't see any issues with that staying in the 18% to 22% at this point, we've been able to pass on cost.

I've talked to.

Some of the guys management there.

Our labor issues that we were having were kind of through those most for the most part I mean, obviously everyone is having.

Speaker 3: you know some short-term effect but uh... it was really tough when when on the crom came through you know we're already short and then you'll send your missing people uh... you know you miss and cook for your missing management your missing bartenders uh... i think that all had a little bit of effect uh... summoned the number and and and and some some of that effect will see in January but uh... i think march will more than make up for

Some short term effect, but.

It was really tough when omnicom came through we were already short and then you have a sudden you're missing people.

You're missing cooks, you're missing management Youre missing bar tenders.

I think that all had a little bit of effect.

Some in December and some some of that effect, we will see in January .

But I.

I think March will more than make up for.

Speaker 3: what January did. Our January is going to be, our March is going to be much, much stronger I think than our December was. And we already know that January beat the October . So it's really, you know, we'll see how February does against November and then we'll have a really good idea of where we're going. And then that will give us our, you know, April through September kind of run rates and we'll kind of get an idea. I think how close will be between 260 and 280 in total revenues, which start goal. And then we add, you know,

But January did our January is going to be I mean, our margin is going to be much much stronger I think in our December was and we already know that January beat the October so it's really we'll.

See how February does against November and then we'll have a really good idea.

Where we're going and then that will give us our April April through September kind of run rates and we'll kind of get an idea I think how close will be between $2 60, and $2 80 in total revenues, which is our goal.

And then as we add.

Speaker 3: I think new projects and new clubs through acquisition as we get through the later part of that year, you know, we'll have to see how all that plays into the numbers as well.

I think new projects.

And new clubs through acquisition.

As we get through the later part of that year.

We'll have to see how all that plays into the numbers as well.

Speaker 1: Gotcha. Okay. That's great to hear. And then the general corporate expense was a bit higher than what we estimated here. Just wondering if there were any notable, maybe not, I don't know if it's not recurring, but any sort of item that obviously if you were integrating the expenses, I'm sorry, the acquisitions, just wondering if there was anything meaningful to call out there. And then just how should we think about the quarterly run rate for corporate expenses going forward?

Got you, Okay, that's great to hear and then.

The general corporate expense was higher than what we estimated here just wondering if there were any notable.

Maybe not.

I don't know if thats nonrecurring, but the.

You sort of items had obviously as you were integrating the expenses.

Sorry, the acquisitions just wondering if there was anything meaningful to call out there and then just how should we think about the quarterly run rate for corporate expenses going forward.

Speaker 4: Yeah, that quarter, especially our first quarter, is always impacted by the UN audit, which requires a lot of internal control work, a lot of UN thoughts work, and you couple that with the due diligence work, as well as any third party work for the acquisitions of the 12 clubs. So you're gonna see it ramp up a little bit.

Yes that quarter, especially our first quarter is always impacted by the year end audit, which requires a lot of internal control work a lot of year end Sox work and you couple that with the due diligence work as well as any third party work for the acquisitions of the 12 clubs.

So youre going to see it ramp up a little bit higher there.

Speaker 4: On a normalised rate, I'm seeing about $4.5 million for that segment. On a normalised one rate. OK.

On a normalized rate I'm, saying about $4 $5 million for that segment on a on a normalized run rate.

Got it okay.

Thank you and best of luck.

Yes. Thank you.

Speaker 1: And again, if there are any remaining questions or comments, please indicate so by pressing star one on your touch tone phone.

Once again, if there are any remaining questions or comments. Please indicate so by pressing star one on your Touchtone phone. The next question is coming from Adam Wyden from EDW capital. Your line is live.

Speaker 6: Hey Eric, congratulations on a great quarter. This is my favorite time of the year. I only get to do this four times a year. So I won't let all of our listeners...

Eric Congratulations on a great quarter.

My my favorite time of the year I only get to do this four times a year, so I won't I won't let all of our listeners.

Speaker 6: You know, not get a show, but, um, you know, look, obviously, you know, you've made

Not get a show but.

Look obviously you've made.

Speaker 6: some real progress in terms of

Some real progress in terms of.

Speaker 6: you know, improving your cost of capital relative to what it was. Now, that was a very low bar. You were trading at, you know, one point, you know, I don't know some stupid number. I mean, I remember that there were people shorting this doctor in COVID and...

Improving your cost of capital relative to what it was now that was a very low bar you were trading at one point and I don't know some stupid number I mean, I remember that there were people shorting the stock during Covid and it was $8 a share and we were like this thing's going to do $10 a share of free cash flow I mean.

Speaker 6: It was $8 a share and we were like, if things were going to do $10 a share, if we cash, well, I mean...

Speaker 6: You know, look, you obviously are trading still at a big discount.

Look you obviously are trading still at a big discount to the rest of the restaurant and hospitality space.

Speaker 6: to the rest of the restaurant and hospitality space. I think it might be helpful for the new people to talk about your history with bomb shells and the fact that you had tinker with it a little bit and perhaps give people a sense of the cadence in terms of your store opening schedule beyond 22. When I look at the business today, I say, well, you've got 12 locations. You know, they're doing six or seven million bucks.

I think it might be helpful.

The new people to kind of talk about your history with bombshells and kind of the fact that you had to tinker with it a little bit and perhaps give people.

A sense of the cadence in terms of your store opening schedule beyond 'twenty two I mean.

I look at the business today.

I say well you know you've got 12 locations, they're doing six or 7 million Bucks.

Speaker 6: you know, call it $75, $80 million. You say 22% margins, you know, when you give credit for the real estate, right? You're booking real estate through that. It's really more like 30% margins because you've got like 7% of sales on real estate. So you basically got a business that's like 25 million of EBIT, you know, or whatever, between 20, 25 million of EBIT. I mean, if that was floated publicly, that would be worth more than the entire market cap. Now, of course, that's a sub-scale public company, but, but, but, but, but, but, but, I mean, that's worth a billion dollars.

<unk>.

So call it $75 million to $80 million, you say, 22% margins.

When you when you give credit for the real estate right Youre booking real estate through that it's really more like 30% margins because you've got like 7% of sales on real estate. So you basically got a business that's like $25 million of EBIT.

Or whatever between 2000 25 million of EBIT that was floated publicly that would be worth more than the entire market cap now of course, that's a subscale public company, but Bob but I mean, that's worth $1 billion and so my question is.

Speaker 6: And so my question is, you know, you've basically built this really.

Basically built this really.

Speaker 6: amazing Brandon mom shells it took you some tinkering to fix it you're you know how many you know can you walk people through you know kind of you know what you think the unit cadence is you know over the kind of the intermediate term and you know what you think that could be because you know obviously the strength clubs are hard for some people to invest in and you know we can agree to disagree on that but but I mean I think it'd be interesting for people to really understand that that the long term growth potential of the restaurant up.

Basically Brandon Bombshells. It took just some tinkering to fix it.

How many.

Can you walk people through.

Kind of what you think the unit cadence is over the kind of the intermediate term and.

You think that could be because obviously the strip clubs are hard for some people to invest in and we can agree to disagree on that but but I think it would be interesting for people to really understand the long term growth potential of the restaurant opportunity.

Speaker 3: Well, the idea is for 2023 to open a store every two months. And by the end of 2023, be to the point where we're actually opening a store every eight weeks and possibly even every six weeks. And by the end of 2024, going into 25, if our franchising picks up the way we think it's going to, we're talking with people now, we're getting more and more questions, we're getting more solid.

Well the idea is for 2023 to open we'll open a store every two months and by the end of 2023 B to the point, where we're actually Oh.

Opening a store every every eight weeks.

And possibly even every six weeks.

By the end of 'twenty four going into 'twenty five.

If our franchising picks up the way, we think it's going to we're talking with people now we're getting more and more questions were getting more solid.

Speaker 3: interest from qualified people. We've always had the interest. It's just getting qualified people interested. But we're seeing that now, so we're talking with them. I would like to see in 2025 us, you know, being able to open 12 or 16 locations a year by 2025 with two separate opening teams. So you get two separate opening teams that could do a unit every six weeks or every eight weeks.

Interest from from qualified people, we've always had the interest its just getting qualified people.

Interested but we're seeing that now so we're talking with them.

I would like to see in 2025.

I'm going to open 12 or 16 locations.

A year by 2025 with two separate opening teams. So you get two separate opening teams that can do a unit every six weeks or every eight weeks.

Speaker 3: So really you do probably like a unit every 14 weeks between the opening tears

So really you do probably like every 14 weeks between the opening teams.

Speaker 3: Okay, so let's do some math for the second problem. Well, and maybe I can have three opening things. I don't know.

Okay.

Let's do some math product that can from 10 12, and maybe we have to have three opening things I don't know so let's do let's just a math of all the idiots that are shorting the stock after hours because these guys I mean, I don't know maybe they don't have COVID-19 as Mark has KOB. It's over maybe there may be there, they're doing drugs or bitcoins or something but but this is the back of the envelope math I'm doing you can tell me and the rest of it.

Speaker 6: So let's do some math for all the idiots that are shorting the stock after hours because these guys, I mean, I don't know, maybe they don't have COVID any more, because COVID's over, maybe they're doing drugs or big coins or something. But this is the back of the envelope math I'm doing. And you tell me in the rest of the viewers, if I'm on some other stuff, you know, okay, so you got six stores in 2023, right? And you're talking calendar 23, correct?

The rest of the dealers.

I'm on some other stuff.

Okay. So you've got six you've got six stores in 2023, right and you're talking calendar 'twenty three correct.

Yes calendar, yes, alright, so the newer stores are running higher <unk>, because you've got the geographies right.

Speaker 6: All right, so, you know, the newer stores are running higher AUVs because you've got the geographies, right? And, you know, all these new stores, I mean, some of your new stores are doing close to 10 million. But let's just, let's say, let's say, the, you know, make the map simple and say, six stores gets you $40 million of sales, totally ramped. You know, and maybe it's more than...

All of these new stores I mean, some of your new stores are doing close to 10 million, but let's just let's say, let's say that.

I'll make the math simple and say six stores gets you a $40 million.

<unk> fully ramped and maybe it's more than that at a 30% operating margin with the real estate income that's $12 million of EBITDA organic right just for Bob shelves fully funded off of organic rate and then when you think about the following year. If you do one every six weeks or 50% growth.

Speaker 6: at a 30% operating margin with the real estate income, that's $12 million of EBITDA, organ.

Speaker 6: Right, just from bombshells, fully funded off the organic, right? And then when you think about the following year, if you do, you know, one every six weeks, that's 50% growth, that'd be another $18 million of EBITDA, the following.

That'd be another $18 million of EBITDA. The following year. So you think you can grow your bombshells cadence can basically grow 50% every year. So 12 18 or a couple of years I don't know we can do it every year, but for the next two to three possibly yes.

Speaker 6: So you think you can grow your bombshells cadence can basically grow 50% every year. So 12, 18. For a couple of years, I don't know we can do it every year, but for the next two to three, possible, yes. That's, that's the length. Okay, so what I'm saying is you've got a business that's 20 of EBITDA that can be 32, that can be 32 the following year in 50 the year after that. I mean, this is gonna be a meaningful part of the operation. Now that precludes you growing on the nightclub side, you, you in it.

Okay. So what I'm, saying is you've got a business. That's 20 of EBITDA that'll be that can be 32% that can be 32, the following year and 50 the year after that.

This is going to be a meaningful part of the operations now that precludes you're growing on the nightclubs side, but.

Speaker 6: It is your intent, I guess.

It is your intent I guess in the near term to build a $50 million EBITDA business out of Bombshells and and I think that's the bombshells has to be taken seriously $50 million.

Speaker 3: in the near term to build a fifty million dollar e-beta business out of bombshells and and i think that's what i'm so fast to be to be taken seriously fifty million is that is that is the magic number that's when that's when we have the option that the side of bombshells could be a stand alone

The magic number that's when that's when we have the option of two sided bonds. So it could be a stand alone.

Speaker 3: entity or if bombshells, you know, continues to fit into RCI the way it currently the current setup is or you know even looking at You know an acquire that would be willing to pay us, you know the big money for this fast growth

Entity or if bombshells.

To fit into into RCI.

The way it currently the current setup is or.

Even looking at.

On acquire that would be willing to pay us.

Big money for this fast growth.

Speaker 3: restaurant chain. So there's a lot of questions that open up to us when we get when we hit that when we get that number

Restaurant chain, so theres a lot of options that opened up to us when we hit when we hit that when we hit that number so.

Speaker 6: So we know Hooters is up for sale and they've got that stupid wings concept. They're pups and around. Who knows if they're going anywhere. I mean, Hooters is on the down.

So we know motors is up for sale and they've got that but wings concept.

But who knows if they're going and where I mean.

Good news is on the down I mean could this be I mean could this be 100 locations et cetera, I mean, the math I'm doing is if we can get to 100 locations at some point at $7 million a box right, which is that crazy. If you think about Buffalo Wild wings and whatnot.

Speaker 6: I mean, could this be, I mean, in the, could this be 100 locations at seven, I mean, the math I'm doing is, if we can get to 100 locations at some point, at seven million a box, right? Which isn't that crazy if you think about a bottle of wild wings or whatnot, you know, that you're talking about.

Speaker 3: seven hundred million dollars at a thirty percent operating margin including real estate That's two hundred million if you're six and a half you're close I mean you know if it's six and a half a box So you need a couple extra you need a few extra stores. So I I mean yeah, I think that's that's not an issue Now that we're looking at Florida. We're looking there. Oh no, I don't think a hundred locations is is is difficult at all 100 locations is a two hundred million dollars

Talked about $700 million at a 30% operating margin, including real estate, that's $200 million.

Six and a half year close I mean, six and a half a box. So you need a couple of extra.

Extra stores.

Yes, I think that's not an issue 100 bonds now that we're looking at Florida. We are looking at Arizona I don't think a 100 locations is difficult at all.

So a 100 locations is a $200 million EBITDA business.

Yeah.

So well.

Speaker 6: Well, right, because we're doing 20 on 12 or 10, right? So 20 to 25. So if we get to 100, that means it's a $200 million profit business.

Alright, because we're doing 20 on 12 or 10 right. So Brian .

Five years, so if we get to 100 that means it's a $200 million profit business.

Speaker 3: Yeah, it's going to be very a few questions that they can't ignore those points.

Okay.

It's going to be very significant effort that I can't we can't ignore those points.

Speaker 6: Well, you know, the interesting thing is, you know, you look at Bitcoin. Bitcoin went from three cents to one thousand. Every thought it was high and it went to 50,000, right? I saw, I don't know if you've ever studied, you know, restoration hardware and what Gary Friedman did. Have you thought about doing, you know, a massive tender offer or, I mean, because remember, like,

The interesting thing is when you look at Bitcoin Bitcoin went from three to 1000 every thought it was high and went to 50000 right I saw I don't know if you've ever studied restoration hardware and what Gary Friedman did have you thought about doing.

A massive tender offer.

Because remember.

Speaker 6: Or the you're you're generating so much cash flow now. Have you thought about, you know, maybe, you know, doing like a big share repurchase or something to, I mean, because I mean, look, I don't like to quote Donald Trump, but you know, when he said he wanted to go washing, he wanted to drain the swamp. I mean, we got a swamp here and we got to drain it because there's all these guys splashing around. I mean, if we're not going to get our cost to capital and we're going to grow like this, have you thought about doing something more aggressive on the capital allocation front? I mean, this is absolutely insane.

You're you're generating so much cash flow now have you thought about maybe.

Doing like a big share repurchase or something I mean, because I mean look I don't like to quote Donald Trump.

<unk> said you wanted to Washington wanted drained the swamp I mean, we got swap here and we got to drain it because theres. All these guys sloshing around I mean, if we're not going to get our cost of capital and we're going to grow like this have you thought about doing something more aggressive on the capital allocation front I mean this is absolutely in saying this but I mean, we were.

Speaker 3: I mean, we were getting prepared as stock was down to 67 again. We were prepared to start buying stock again. The last few days it ran up over $10 a share. I mean, we're watching it. When it gets into our buy range, we will be buying stock. It just hasn't hit our buy range.

We're getting we're getting prepared stock was down down to 67 again.

We were prepared to start buying stock again.

In the last few days it ran up over $10 a share I mean, we're watching it and when it gets into our <unk> range, we will be buying stock. It just hasnt hit our by range.

Speaker 3: of 65 because and I'm not saying that's our that's our that's when we at that point We're going to buy stock because it just makes sense even though

Ah 65, because and I'm not saying that's our that's our that's why we at that point, we're going to buy stock because it just makes sense, even though we have enough cash on hand, now again to do the deals that we're working on.

Speaker 3: We have enough cash on hand now again to do the deals that we're working on. So the cash regenerator on each week basis, we don't need to just continue to build it up. We have enough, we have enough in the Warchs S to do the things we have on our plate right now, at least through May or June . As we develop and get farther into some of the acquisitions, that could change, but that's where we're at today.

So the cash we generate on each week basis, we don't need to just continue to build it up we have enough we have enough in the war chest to do the things we have on our plate right now.

At least through at least through May or June .

As we develop and get farther into some of the acquisitions that could change, but that's where we're at today.

Speaker 3: And we're generating cash, our cash balances keep going up.

And we're generating cash and our cash our cash balances keep going up.

Speaker 3: This quarter, I think the second quarter, the cash flow, will be a little less, we're gonna pay significant income taxes this quarter where we had a nice credit in the last quarter, so we didn't have to pay as much in tax. So maybe our 18 million cash flow this quarter ends up only being 16 on the same.

This this quarter I think the second quarter, the cash flow will be a little less we're going to pay it but we're going to pay significant income taxes this quarter, where we had a nice.

In the last quarters, we didn't have to pay as much impact so maybe our $18 million in cash flow. This quarter. We ended up only being 16 on a same same revenue, but we could offer the $2 million more in revenue 3 million more in revenue and bring it right back up.

Speaker 3: same revenue but we could also do 2 million more and revenue 3 million more and revenue and bring it right back up. So I mean because look at that go. The fourth quarter was a C's is kind of not your seasonally strong. It kind of brings me to your second question.

Because looking at that quarter.

Quarter, the fourth quarter was a CS is kind of not your seasonally strongest which kind of brings me to your second question.

Speaker 6: You know, if you think about $240 million of sales in the fourth quarter, and then obviously had pre-opening costs and some other stuff that was burdening the margin.

You think about $240 million of sales in the.

In the fourth quarter, and then you obviously you had preopening costs and some other stuff that was burdening the margins as you said.

Speaker 6: As you said, you know, when I think about this business, I say, okay, you did 72 million of EBITDA effectively annualized in that quarter, right? Now you didn't have a full quarter from Lowry, obviously didn't get the synergies, obviously had pre-opening costs. So maybe, you know, you back that out and maybe you get back up to 75 to 80 million, right? Plus or minus.

I think about this business I say, okay, you did $72 million of EBITDA effectively annualized in that quarter right that you didn't have a full quarter from while we obviously didn't get the synergies. Obviously you had preopening costs. So maybe maybe you back that out and maybe you get back up to $75 million to $80 million right.

Or minus and then when you layer on the next $40 million in sales from the return of New York Lowry getting fixed and carnival, continuing getting to where you want to be in terms of youre looking at another at least on the nightclubs youre getting huge incremental margins right bombshells less but most of the return on growth is going to be from nightclub.

Speaker 6: And then when you layer on the next 40 million in sales from the return of New York, Lauri getting fixed.

Speaker 6: and you know kind of you know continuing getting to where you want to be in terms of you know you're looking at you know another at least I mean on the nightclubs you're getting huge incremental margins right you know bombshells less but most of the return on growth is going to be from nightclubs anyways so when you think about the extra 40 million on clubs like his bombshells are basically where they are they they've been they've been they've been running hard the whole way so you say another 40 million you know if that's

Anyway. So when you think about the extra $40 million in clubs like as Bombshells are basically where they are they've been they've been.

<unk> been running hard the whole way, so you'd say another $40 million.

Speaker 6: You know, I don't know, it could be as much as 80% incremental, but let's just be conservative and say 60. That's another 25 of EBITDA. I mean, this business will be, you know, in excess, assuming no additional M&A, we're gonna be well in excess of $100 million of EBITDA exiting calendar 22. I mean, I would think by middle of this year,

If thats.

I don't know it could be as much as 80% incremental but let's just be conservative and say 60. That's another 25 of EBITDA I mean, this business will be.

In excess assuming no additional M&A, we're going to be well in excess of $100 million of EBITDA exiting calendar 'twenty two I mean, I would think by middle of this year.

Speaker 3: We're well in excess of $100 million of one-rate EBITDA. Right? I mean, that's how it all went on a forward. We're going to be close to that. I think right now we're looking at probably, I was thinking we're going to be close to 82. I think we got hit for a couple million in this quarter. I think we're going to get a hit in a couple million January for every March.

We are well in excess of $100 million of run rate EBITDA right.

On a forward, we're going to be close to that I think right now we're looking at probably I would think we're going to be close to 82, I think we got hit for a couple of million in this quarter I think we're going to get a couple of million dollars January February March.

Speaker 3: or just well January really is when we got hit about two million in December about two million in January

I was just well January really is when we got hit about $2 million in December about 2 million in January .

Speaker 3: you know call it 60 or 80% of the number of margins. So that's like a million in EBITDA in each of those. So we're missing about two, we're out 82. So maybe we're at 80, maybe we're 78. So we're somewhere between 78 and 82 right now.

Call, It 60, or 80% incremental margins, so that's like a $1 million in EBITDA.

And each of those so we're missing about two we were at 82, so maybe we're at 80% or 78, so we're somewhere between 78 to 82 right now.

Speaker 3: on a run rate type basis, but I just really don't know for sure until we can see what March does. We need to see what a real clean month in, you know, we shouldn't have much weather effects, we should have, you know, we've got the March madness going, we've got the spring.

On a run rate basis, but I, just really don't know for sure until we can see what March does and we need to see what a real clean month.

We shouldnt have much weather effects, we should have we got the March madness gone we've got the.

The spring fever type stuff, that's when we're going to really see I think the demand for for our product.

Speaker 3: fever type stuff on that's what we're going to really see i think the demand for

Speaker 3: for our product and for the clubs and this people going out more uh... the on the cron scare will be over and you know hopefully the whole COVID-19 scares over we get back to uh... to more normalize the

And for the clubs and just people going out more.

Omnicom scare will be over.

Hopefully the whole COVID-19 scares over and we can get back to more normalized.

Speaker 3: normalize operation also also on the loud refund. I mean you lost you had a huge amount of employee turnover. I mean that's there's going to be huge jump up on utilization and oh I think in December I mean I think my March yes my March you know like our Denver market I'm saying I'm saying for sure book by the middle of the year I don't care about January February right? I'm thinking by the end of it so I said March April May is going to be huge for us because then and that's when we're going to be able to see by May we're going to know exactly.

Normalized operations also also on the Lowry front I mean, you lost you had a huge amount of employee employee turnover I mean, that's.

There is going to be a huge jump up on Utilizations and I think in December .

By March yes by March.

Our Denver market, what im saying.

I'd say for sure look by the middle of the year I don't care about January February right, because youre right at the end of May I am thinking by the end of it. So I said March April may is going to be huge for us. Because then that's when we're going to be able to see by May we're going to know exactly.

Speaker 3: you know what what I think it's gonna look like for the next 12 months that's we're gonna get a really good feel of okay hey look up not we're in 80 or not we're at 110 I mean we're gonna know that I think in the next three months that's when we're gonna see that come to fruition

What I think it's going to look like for the next 12 months, we're going to get a really good feel of okay. We're at 80 or not we're at 110 I mean, we're going to know that I think in the next three months, that's when we're going to see that come to fruition.

Speaker 6: Well, you know me, I'm pretty consistent. I've been pretty good at modeling. I think my yes is by the end of May or early June , you'll be in excess of 100 of EBITDA. That's where I'm at. I think you'll be 100 to 1-ass.

You know me I'm pretty I'm pretty I'm pretty consistent.

I've been pretty good at modeling I think my guess is by the end of May early June youll be in excess of 100 of EBITDA.

Rob that I think there'll be 100 to one hand.

Speaker 3: I've done everything I can do to meet your numbers every time. And even when I thought they were crazy and we keep doing them. So I hope you're right. And it's definitely a high possibility, a probability, that that's where we'll be at. And we're definitely going to keep working for that.

I've done everything I can do to beat your numbers every time and even when I thought they were crazy and we keep doing them. So I hope you're right.

It's definitely a high possibility or probability that that's where we'll be at and we're definitely going to keep working for that.

Speaker 6: Okay, let me, let me sit here. So we did bomb shells. We talked about that. That was helpful. We talked about the bridge on the sales. Okay, can you talk about that $20 million of inorganic M&A? You know, obviously, you know, obviously Lowry, you know, was kind of a shot across the bow. Right? I mean, for those of you that haven't been on this call, you know, you buying Lowry was basically...

Okay. Let me, let me shift gears. So we did bombshells, we talked about that that was helpful. We talked about the bridge on the sales. Okay. Can you talk about that $20 million of inorganic M&A, obviously, obviously low re with kind of a shot across the bow right I mean for those of you that haven't been on this call.

You buy low was basically I mean, I wouldn't say it was as crazy as David Tepper by John Core Zions House after John quarters, I blew up all his money in the Hamptons, but I mean by low re I mean, you had a lawsuit with him in a way you bought the <unk> stock I mean, this was really a coup for you. This is an asset you've been you've been at for <unk>.

Speaker 6: i mean you know i wouldn't say it was as crazy as you know david tepper buying John korezine's house after John korezine blew up all his money in the hamptons but i mean buying lowry i mean

Speaker 6: you had a lawsuit with him in O.A. You bought the VCGH stock. I mean, this was really a coup for you. This is an asset you've been at for 15 years. I mean, you got Lowry.

<unk> years.

You've got low re.

Speaker 6: great metropolitan market, you're gonna get the 20 EBITDA on that. You know, other large owners obviously see that a sophisticated owner was willing to sell to you. I mean, how do you think about these large multi-club, multi-MSO acquisitions and how do you think about, you know, because now you're at scale, right? I mean, you know, a lot, as you said, the last time you had your Hura in 2008 where you actually had some equity.

Great Metropolitan market Youre going to get the 20 EBITA that other large owners, obviously see that are sophisticated owner was willing to sell to you.

How do you think about these large multi cloud multi MSR acquisitions and how do you think about because now you're at scale right.

As you said the last time you had your hula.

2008, where you actually had some equity equity cap you were only about 20 of EBITDA, but but now you are far more diversified business geographically.

Speaker 6: equity cap, you know, you're only about 20 of EBITDA, but now you're far more diversified business geographically, you know, we're you're you're at $100 million at EBITDA, pro forma for Lowry.

You're at $100 billion EBITDA pro forma for loudly.

Speaker 3: I mean, how do you think about taking on, you know, taking on another Lowria year? You know, just one big deal or two-minute deals. Well, we'd love to do it. I mean, we're talking with some guys out there that have the ability to bring it not 12 clubs, but four clubs, six clubs, three clubs, you know, deals that we're working on right now. We may have to close two deals to bring in the same type of starting over with another.

How do you think about.

Taken on.

Take it on another allow re a year just one big deal or two deals and we would love to do it and we're talking with some guys out there that have the ability.

Brands not 12, but.

Four clubs six clubs three clubs.

So we're working on right now.

We may have to close two deals to bring in the same type of.

Speaker 3: of even as we did with the Lowry transaction, but but they're out there and we're working on and there's some pretty decent one off that we're working on right now as well. Yeah, I remember you were working on Boston 4,000,000 in a single acquisition.

I'll leave it as we did with the Larry transaction, but.

But they're out there and we're working on and there are some pretty decent one offs that were working on right now as well.

Great.

You were working on Basel 4 million $5 million in a single acquisition right.

Speaker 3: Right, Boston was a was a was a big club. I mean, that's physical, but that was a four or five or six million dollar ebit. The deal. I mean, I think that would have been very, very big on fourth. I know it was just, you know, COVID just killed that deal. What happened? The owner got desperate and then they filled the real estate and we're not interested in the club without the real estate.

Boston was.

Big Club, I mean that physical but that was a four or five or $6 million EBITDA deal. I mean, you think that would've been a very very big one for us.

It was just COVID-19 just killed that deal with what happened in the owner's got desperate and when they sold the real estate and we're not interested in a club without the real estate.

Speaker 6: So you think you think, I mean, you think you could, you think you could do.

You Shouldnt be so you think you think I mean.

Do you think you could you think you could do.

Speaker 6: you know, two, I mean, look, look at, I mean, you can do the math on Tutsu's and Scarlet. I mean, those, those assets right now, you know, I don't know what Tutsu's is. Tutsu's could be 20 EBITDA. I mean, you know, 25, I mean, those are big, I mean, those are unique assets, right? I don't know if, I mean, could there be another, could there be another Tutsu's in the United States that's not in Vegas? That would be, I mean, there are other clubs out there. I recently found out, I recently found a club that's another Scarlet's at least, you know, another Rick New York that we're, that we're, that we're talking with the owners on, I'm going to go take a look at it and I was very surprised.

Two I mean look look at I mean, you can do the math until season's carloads.

Those assets right now I don't know what <unk> 20.

<unk> EBITDA 25, I mean, those are big I mean, those are unique assets right I don't know if I mean could there be another could there be another tool to use in the United States. That's not in Vegas that would be I mean are there other.

We recently found out I recently found a club that's another scarlets at least.

Another Rick's New York.

We're talking with owners on.

Gotta go take a look at it and I was very surprised I didn't.

Speaker 3: The problem with the private clubs you don't know what their numbers are until you get under NDA and they actually really give them to you.

The private clubs you don't know what their numbers are until you get under NDA and they actually really give them to you.

Speaker 3: And you get tax returns and you go through and go wow you guys are doing that those kind of numbers and nothing that had no idea

And you get tax returns and you go through and go Wow you guys are doing those kind of numbers.

Speaker 3: uh... and so those are things we're finding right now uh... and you know i'll stay on the call all the you know the owners out there that might be listening work very interested in and in larger acquisitions that the law that takes us just as much energy and effort to

I had no idea.

And so yes.

Those are the things, we're finding right now.

And I'll stay on the call at all all the owners out there that might be listening that we're very interested in larger acquisitions. It.

It takes us just as much energy and effort to.

Speaker 6: to buy one club as it takes to buy 12 clubs. I mean our team. And I'll send a message to all the club boners themselves, which is I can personally attest to the fact that Eric Langan is a super talented capital allocator. And any club boners should look at Troy Lowry and look really, really hard because.

To buy one club as it takes to buy 12 clubs I mean, our team.

I'll send the message to all of the club owners themselves, which is <unk>.

Firstly, a testament to the fact that Eric Langan as a super talented capital allocator and any.

Any any club owners to look at Troy Lowry and look really really hard because the stock still trading at a very low multiple and there is going to be a time hopefully in the next two to five years, but we're going to trade at a multiple instructive of our ability to allocate capital and grow because look the reality is is that a business of this scale.

The guys at noble put out an interesting report I mean, theres 2200 clubs in the United States. We only have 49, so we're 2% penetrated I mean, it's just math right. There's another there are another 90% clubs you telling me there isn't another tootsies out there theres got to be and so look you know.

Speaker 6: And so look, it's an incredible opportunity. Because of the VSG and private equity and this and that, we are the only game in town. And I am convinced that at some point, we are going to trade at a multiple instructive of our ability to allocate capital and growth. So look, I encourage you to keep hitting these investor days and getting in front of people and keep doing the great work. And we'll go from there.

Speaker 6: So look, it's an incredible opportunity. I mean, because of the ESG and private equity and this and that, we are the only game in town. And I am convinced that at some point, we are going to trade at a multiple instructive of our ability to allocate capital and growth. So.

It's an incredible opportunity I mean, because of ESG in private equity and this and that we are the only game in town.

I am convinced that at some point, we are going to trade at a multiple instructive of our ability to allocate capital and growth. So.

Speaker 6: Look, I encourage you to keep hitting these, investor days and getting in front of people and keep doing the great work. And we'll go from there. Oh, like, oh, last thing. Can you talk a little bit about the financial metrics of admire me? I mean, I almost forgot about this. If you have 1,000 people, have you guys done any work on, if the average girl is 10 bucks a month?

Look I incur.

Encourage you to keep hitting these.

Investor days and getting in front of people and keep doing the keep doing the great work and.

And we'll go from there.

Last thing can you talk a little bit about the financial metrics are admired me I mean, I almost forgot about that so if you are a thousand people have you guys done any work on the average girl is 10 Bucks a month.

Speaker 6: You know, like, you know, have you thought about kind of penciling the paper? I know you guys get like, you know, some revenue share of the subscriptions, but I mean, I

Have you thought about kind of penciling the paper I know you guys get like.

Some revenue share of the subscriptions, but I mean.

Speaker 3: the average girls are you know are gonna be much lower number i think with because of the fact that you can come see the girls and girls going to be working through the clubs to to increase their their presence on the internet through the clubs and bring something i think the average girl you know maybe it's two hundred maybe it's two thousand that we i don't know uh... but if it's two hundred and i get a thousand girls on their own suddenly i'm doing my

The average growth.

Are going to be a much lower number I think with because of the fact that you can kind of see the growth and the growth going to be working through the clubs.

Increased.

Their presence on the internet through the clubs and bring traction I think the average barrel maybe its 200, maybe 2000 I don't know.

But if it's 200 and I get 1000 girls on they're all of a sudden I'm doing my my 200000, a month or $2 4 million a year to kick off and if I can get that done in the first 60 to 90 days and Thats my ramp up.

Speaker 3: my two hundred thousand a month or two point four millennia to kick off and if I can get that done in the first sixty to ninety days and and that's my ramp up I'm starting that's where I started out of my ramp up and the next thing you know I have ten thousand girls on there uh... you know I think that

Starting out on my ramp up and the next thing I have 10000 girls on there.

I think that it's going to be a very very powerful and significant Cyprus is going to increase our brick and mortar.

Speaker 3: it's gonna be a very very powerful and significant fight for us what is going to increase our brick and mortar I think frequency because you know a lot of guys are in temmaboo a lot of really pretty girls that work for us and you know guys get intimidated uh... but they can find them on the internet they can chat with them uh... you know message back and forth maybe get a little more comfortable uh... and then be able to come into the club back i was talking to the guy that i think of men are really shy

I think frequency because.

A lot of guys are and Tim we have a lot of really pretty girls that work for us and you guys get intimidated.

You can find them on the internet they can chat with them.

Message back and forth, maybe get a little more comfortable.

And then be able to come into the club in fact, I was talking with a guy and I think it's been I'm really shy I said well you want me to go get that Graeme talked when we talked before we haven't come over to the table no no no don't bring it over to Don bring over now Mike Okay.

Speaker 3: Well, you want me to go get that girl talk to you know when we go talk to her for you have her come over to the table Oh, no, no, no, don't bring her over. Don't bring over it. No. I'm like okay. So you know he wanted to you know

So he wanted to.

Speaker 3: But if I could get to know her first, I don't want to know more about her first. I said, well, that's what admire me is all about. As you'll be able to do that. And so it kind of gave me a little bit of a...

But even if I could get to know her first I don't want I wanted to know more about it first I said well that's what <unk> is all about.

As youll be able to do that and so it kind of gave me a little bit of a.

Speaker 3: you know, insight to, to see in it work, you know.

Yeah.

Insight too.

C N at work.

Speaker 3: So I think that I think it's going to work very, very well. We just got to get it up and get it running. And we're very close. The credit card processing should go to live on the side here in the next week or so. Everything's approved. We're just working out all the APIs and all the security with a security company and all that right now. So that should all be up and operating here in the next, say, week to two weeks. And probably we'll do some.

So I think that.

I think it's going to work very very well, we just got to get it up and get it running and we're very close.

The credit card processing should go live on the side here in the next week or so everything's approved or we're just working out all the Apis and all the security.

With a security company.

And all of that right now so that should all be up and operating here in the next week to two weeks and <unk>.

Probably we'll do some.

Speaker 3: testing of it and do very soft launch within two weeks of that i think so by the by the by the tenth of march or fifteen to march will definitely have of of basically a beta site running where we're allowing uh... customers in will have to be passed where protected will be a invite only uh... where the girls that are were loading on the site and can invite their customers in the first one's on the site uh... and then once that's running smoothly will uh... will open to the general public

Quick.

Testing of it and.

Do very soft launch within two weeks of that I think so.

The 10th of March or 15th of March will definitely.

Or basically a beta site running.

Where we're allowing customers in it'll be password protected will be invite only.

Where the girls that are we're loading onto the site can invite their customers and that'll be the first one is on the site.

And then once that's running smoothly, we'll open it to the general public.

Speaker 6: Good stuff Eric. Keep fighting the good fight and we appreciate the hard work. Yep. Thank you.

Good stuff there keep fighting the good fight and we appreciate the hard work.

Yes, Thank you Ed.

Are there any final questions. This is the last chance for questions. Once again Thats star one if you have a question or comment.

Speaker 1: the last chance for questions. Once again, that's star one if you have a question.

Speaker 2: John , this is Gary. We got a couple questions that have been emailed while we're waiting to see whether anybody else has any questions.

John This is Gary we've got a couple of questions that have been emailed, while we're waiting to see where they or anybody else has any questions.

Speaker 2: Eric, what's the significance of the $7 million acquisition of Scarlet's Cabaret Miami property? It's a question from Jonathan Hollander of Chesapeake Advisory.

Eric what's the significance of the $7 million acquisition of Scarlets Cabaret Miami property.

It's a question from Jonathan Hollander of Chesapeake Advisory.

Speaker 3: Sure, that's 8% cap rate based on the rent at the time of closing. The rent goes up by CPI every year, so we just had a 6% increase in January . That would have effected in January . If you consider a 3%

Sure.

That's 8% cap rate.

Based on the rent at the time of closing.

The rent goes up by CPI every year. So we just had a 6% increase.

In January that would have been affecting the January .

If you consider at 3%.

Speaker 3: If you just consider a 3% CPI over the next 10 years, it becomes a 10.74% cap rate.

If you consider a 3% CPI over the next 10 years it becomes a 10, 74% cap rate.

Speaker 3: on what the rents would be. And, you know, we own the property. So now we control our destiny at that location forever. There was, you know, 30 years left on the lease that we weren't in real risk. The originally they wanted $9.5 million for that property. We told them we'll wait. We'll stick with the lease. Last year they came down to $8. This year they came down to $7. And we couldn't turn down $7. You know, with an 8% cap rate.

On what the rents would be.

We own the property. So now we control our destiny at that location forever.

There was 30 years left on the lease that we werent in a real risk.

The originally they wanted $9 $5 million for that property.

We told them, we'll wait we'll stick with the lease.

Last year, they came down to eight this year they came down to seven and we Couldnt turn down 7%.

8% cap rate.

Speaker 3: Almost 11% return over the next 10 years on that property. We couldn't turn it down. We had to buy it.

Almost 11% return over the next 10 years on that property, we Couldnt, we couldnt turn it down we had to buy.

Speaker 3: We believe their property will praise for about $7.8 million or $7.9 million. So it's worth probably about 10% more than we paid in cash. The main reason we need discounts so quickly is we literally close that deal in two days.

We believe their property appraised for about $7 8 million or $7 $9 million.

So it's worth probably about 10% more than we paid in cash.

The main reason need discount. So quickly is we literally closed that deal in two days.

Speaker 3: and then escrowed part of the money until we got, you know.

And then escrow part of the money until we got.

Speaker 3: actual title clearance that worked out very well. That deal is completely closed now. We have full title insurance.

<unk>.

Actual title clearance so it worked out very well.

That deal was completely closed now and we have full title insurance and everything else. So.

Speaker 3: everything else. But it's a significant pickup for us in that, you know, it.

But it's a significant pick up for us in that.

Speaker 3: feeds very well into what we pay for the real estate norm.

He's very well into.

To what we pay for the real estate normally.

Speaker 2: Great, thanks. And one last one from Antonis Prutopapas in his family office for our high margin service revenue. Is there a story behind that pop or just the reopening? What was the driver mostly cover charges, executive rooms, etc.?

Great. Thanks, and one last one from Antonis put a purpose this family office.

For our high margin service revenue is there a story behind that pop or just the reopening what was the driver mostly covered charges executive rooms et cetera.

Speaker 3: It was mainly New York being back open full time and and customers coming back in and we saw that through October and November and then by you know probably the second week of December as Omni-Krom hit in New York very hard especially in our staff and

It was mainly New York being back open full time.

And customers coming back in.

And we saw that through October and November .

And then buy.

Probably the second week of December as Omnicom hit New York, very hard, especially in our staff and.

Speaker 3: And we started to see that decline a little bit again. Through about the second week of January , and since the second week of January , we're now starting to see that revenue back into the club again.

And that we started to see that decline a little bit again.

About the second week of January and since the second week of January we are now starting to see that.

That revenue back into the club again.

Speaker 3: in New York, also Minnesota did very well through November and December . They had to slow down, I think in December , early January , similar to Texas, where the virus.

In New York also Minnesota did very well.

Through November and December .

They had a slowdown I think in December early January similar to Texas.

The virus.

Speaker 3: Hit those markets. Those markets are now recovering. We have had some weather issues this first week of February , but...

Hit those markets those markets are now recovering.

We have had some weather issues. This first week of February but.

Speaker 3: I'm very optimistic on, you know, between, we have a bottle reservations system that we use, and I've looked at some of the numbers there, those numbers are getting better for reservations going through the end of February .

I'm very optimistic on would be between we have a bottle reservation system.

That we use and look at some of the numbers. There those numbers are getting better for reservation is going through the end of February .

Speaker 3: So I think we're going to see that service revenue bounce back and get back on course where it was through October and November and actually in March, I think we're going to see all that exceed. I think service revenues will grow to over 30% of revenues again in a short period of time. You

So I think we're going to see that that service revenue bounce back and get back on course to where it was.

Through October November and actually in March I think we're going to see all of that exceed I think service revenues.

Will grow to over 30% of revenues again.

In a short period of time.

Especially in the Denver comes online.

Speaker 2: You know, we just got another question from Steve Martin has the competitive landscape changed in New York City, post-COVID.

We just got another question.

Steve Martin as the competitive landscape changed in New York City Post Covid.

Speaker 3: gotten better for us, you know, two major 10,000 were equipped in Rio.

Gotten better for us to.

Two major 10000 square foot gloved and reopened.

Speaker 3: the executive club on 49th and the scores on 28th Street did not reopen. So that's 20,000 square feet of adult space that basically went away in New York City. But that's probably good because I think, you know,

The executive equivalent and 49th in the scores on 28th Street did not reopen so that's 20000 square feet of adult space that basically went away in New York City.

But that's probably good because I think.

Speaker 3: Half of our hedge funds managers and stuff, I'll move to Florida.

Half of our hedge fund managers and stuff all over Florida.

Speaker 3: So, to do this is doing very well in New York, New York Smith and a few customers. But it's nice when they come back to visit, when they come back to work in the city, they're here for, you know, typically three to four days and we're seeing them for two to three days at the club. So it's working out very well for us in that regard. And that's what I think we need to see as the weather gets better and the ice and snow.

So Turkey is doing very well in New York, New York Smith from few customers, but its nice when they when they come back to visit when they come back to work in the city.

They are here for typically three to four days and we're seeing them for two to three days of the clubs. So it's working out very well for us in that regard and Thats why I think we need to see.

<unk>.

As the weather gets better in the ice and snow.

Speaker 3: We get past that in the next few weeks. I know the groundhog saw a shadow, so we're supposed to see a little more winter here. But I think by March we're gonna be in great, great shape.

We get past that in the next few weeks I know the groundhog saw a shadow so.

We're supposed to see a little more winter here.

But I think by March we're going to be in great shape.

Okay. Thanks, Eric.

Speaker 2: John , it looks like we have no more questions and we're almost hitting an hour so one of them I read up.

<unk>.

John It looks like we have no more questioners and we're almost hitting an hour. So why don't I read a wrap up.

Speaker 2: So thank you, Eric and Bradley, for those of you who joined us late. You can meet management tonight at Rick's Cabaret, New York starting at six o'clock at 50 West 33rd between Fifth and Broadway. If you have an RSVP to ask for Eric or me at the door.

So thank you Eric and Bradley for those of you who joined US late you can meet management Tonight at Rick's Cabaret in New York, starting at six o'clock at 50, West 30, <unk> between fifth and Broadway if you Havent RSVP, Ed ask for Eric or me at the door.

Speaker 2: We'd like to welcome Noble Capital Markets, which is now following our CI along with Savodian Company. We'll be at Noble Small Cap Conference in Hollywood, Florida, April 19th through the 21st.

I'd like to welcome Noble capital markets, which is now following RCI along with Sidoti <unk> company will be a novel small cap conference in Hollywood, Florida April 19th through the 20 <unk>.

Speaker 2: On behalf of Eric Bradley, the company in our subsidiaries, thank you and good night. Stay safe, stay healthy and as always, please visit one of our clubs or restaurants.

On behalf of Eric Bradley the company and our subsidiaries. Thank you and good night stay safe stay healthy and as always please visit one of our clubs or restaurants.

Thank you thank you ladies and gentlemen.

Speaker 1: This does conclude today's comments call. You may disconnect your phone lines at this time and have a wonderful day.

Does conclude today's conference call you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.