Q1 2023 RCI Hospitality Holdings Inc Earnings Call

Nice to see some familiar faces out in the crowd, we have Tyler Morin of Barstool sports Bradley's Shea, who may be having a few things data the afternoon I'm looking at him on zoom in Houston as he settles into his massage chair.

Great to see Dean out there, Gary We love you Gary.

Official money raccoon.

Have a great audience for this earnings call that we're going to go ahead and kick off in about a minute.

Great to see Rob Mcgwire out there in the pole position as one of the top equity research analysts that we will be calling on today.

We just had 100 people so.

We are going to go ahead and kick this off greetings and welcome to the RCI Hospitality Holdings first quarter fiscal 2023 earnings call. You can find rci's presentation on the company's website click company and Investor information under the RCI logo that will take you to the company and Investor information.

Asian page scroll down and you'll find all the necessary links.

Please turn with me to slide two of our presentation.

I'm Mark Moran CEO of equity animal I will be the outcome of our call today I'm here in New York City, with Eric Langan, President and CEO of RCI hospitality and Bradley Shea CFO , who is in Houston home of one of my favorite clubs club Onyx managed by Josh Brooks.

Please turn with me to slide three.

If you weren't doing so already it's easy to participate in the call on Twitter spaces on Twitter go to App, Rick's Ito and select the space titled Rick RCI Hospitality Holdings, Inc. One to 23 earnings call.

To ask a question you will need to join the Twitter space with a mobile device.

Oh listen only you can join the Twitter space on a personal computer.

RCI is also making this call available for listen only through traditional landline and webcast.

With Twitter, having glitches today in the event of a crash, we will restart the space and if that fails move to the dialing.

A question and answer session will follow and this conference is being recorded.

Please turn with me to slide four.

I want to remind everyone of our safe Harbor statements you may hear or see forward looking statements involve risks and uncertainties.

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

Please turn with me to slide five.

I also direct you to the explanation of Ricks non-GAAP measurements.

I'd like to encourage everyone to re tweak and shared this space.

Finally, I'd like to invite everyone listening in the New York City area to join me and Eric Tonight at seven o'clock to meet management at Rick's Cabaret, New York one of RCI top revenue generating clubs Rick's is located 50 West 30, <unk> Street between fifth Avenue and Broadway a little in for.

Harold Square.

If you have an RSVP ask for Eric or me at the door, where I'll be deploying my own capital allocation strategy. After 90 M <unk>.

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

Thank you Martin and thanks, everyone for joining us today.

Total revenue came in generally as expected with nightclubs segment, having another great performance this offset difficult bombshells comparisons.

GAAP EPS and net cash from operating activities and non-GAAP EPS and free cash flow were affected by repairs and maintenance capex that occurred in the first quarter.

GAAP EPS also included 16 fans and noncash into.

Intangible amortization and stock based compensation compared to a year ago quarter.

Nonetheless, adjusted EBIT was up 13, 9% year over year, and we ended the quarter with $34 $1 million in cash that was after making a number of club and restaurant and real estate acquisitions.

Probably the most important thing that happened in the quarter is that we got off to a terrific start with our big three year growth initiatives. The goal is to continue our mission of growing free cash flow and EBITDA of a higher revenue base.

Now we have we now have numerous acquisitions and projects and development highlights include our pending acquisition of a group of five baby dolls, and Chico low cost clubs in Texas.

The Ricks cabaret Steakhouse casino in Central City, Colorado.

In addition, we have an even stronger lineup of new bombshells locations in three states in Alabama, Colorado and Texas.

I'll be back to tell you more and answer questions now here's graduate to review financials.

Thanks, Eric and good afternoon everybody.

Looking at the some of the major numbers for the quarter total revenues were $70 million up 13, 2%.

GAAP EPS was $1 11.

Less than 1% non.

non-GAAP EPS was $1 <unk> up eight 2%.

Net cash from operating activities was $14 $9 million.

Of eight 4% from last year, mainly because we paid down more liabilities on our books in the first quarter compared to a year ago.

Free cash flow was $30 million.

That's up 14, 6% because of the change in net cash from operating activities and about $1 million more maintenance capex, probably in the first quarter.

Adjusted EBITDA was $25 million up 13, 9%.

And weighted average shares outstanding declined one 9% year over year due to repurchase over the last year.

Please turn to page seven to review nightclubs segment.

Revenues totaled $56 $3 million up 24%.

GAAP and non-GAAP operating margin was 44%.

That reflected increased operating leverage from higher sales in particular higher margin service revenues, which increased 23, 4%.

This was partially offset by increased amortization of club licenses at leased locations as.

As a result operating income increased 21, 4%.

Fiscal year, 2022, and first quarter acquisitions added $15 $3 million in sales.

Same store sales were up one 2%.

This reflected strong contribution and growth from our white collar clubs, mainly New York, Illinois, and Florida, partially offset by some softness in our blue collar clubs.

In the second quarter. The 11 clubs, we acquired in October 2021 will fall into the same store sales base.

Based on current trends. This should result in growth in same store sales.

Please turn to page eight to review the Bombshells segment with me.

Revenues totaled $13 $4 million compared to $14 $8 million last year operating margin was 13, 8%, primarily reflecting reduced operating leverage.

<unk> income was $1 $8 million.

Bombshells, Arlington, which opened in December 2021 added $1 $3 million themselves.

Same store sales were down compared to last year when the channel is experiencing very favorable local economic environment.

And the combination of government stimulus people returning to work and a little competition.

<unk> compared to pre Covid first quarter of fiscal 'twenty. Our December quarter same store sales were up three 6%.

Yes.

Please turn to page nine to review our consolidated statement of operations.

All comps as a percentage of revenue and compared to a year ago quarter unless otherwise noted.

Cost of goods sold continued at 12, 9%.

This reflected the increased higher margin service revenues and the sales mix.

Salaries and wages were approximately level at 26, 7%.

Now SBA was 32, 5% this reflected $900000 of noncash stock based compensation and 400000 lawyers all repairs.

Now if we exclude these two items SBA would have been 29, 5% compared to a year ago quarter, which was 29, 9%.

Expenses associated with these newly acquired are reopened locations will subside as a percentage of revenues at their self built.

Noncash stock based compensation is an ongoing item.

While we have repair expenses every quarter, they're not typically as large as they were in this quarter.

Depreciation and Amortizations were four 7%.

This reflected an increase in depreciable assets from newly acquired and constructed units. It also included increased noncash amortization of licenses from the clubs at leased locations.

Operating margin was 24, 2% and 25, 6% non-GAAP the same as last year.

Interest expense was five 3% versus four 2%.

This reflected higher debt from our club and bombshells side acquisitions over the course of the year.

Okay.

Now please turn on page 10, we ended the quarter.

With cash and cash equivalents of $34 $1 million.

Free cash flow with 19% of revenues and adjusted EBITDA was 29%, that's a little below our target of 20% and 30% respectively.

Please turn to page 11 to review our debt metrics net.

Net of loan cost that was $211 2 million at December 31.

It's an increase of $8 $7 million from September 30.

This increase primarily reflected financing used in the acquisition of Heartbreakers deal kind of Dickinson, Texas, The Denver, Food Hall, and Atlanta, Lubbock, Texas for our bombshells locations.

Our weighted average interest rate continued at 635%. This compares to $6 662, 6% a year ago and 673% five years ago.

Our amortization continues to be within the ninth time, many of our annual range, which is very manageable with our cash flow.

Now please turn to page 12 to review some of our other debt related metrics.

Ratio of debt to adjusted EBITDA was $2 four as of December 31.

While below our Max comfort level below 30% three <unk>.

Occupancy costs were seven 8% of revenues this.

This continued to be well within the 6% to 9% range, we've arranged with average when sales weren't dramatically affected by Covid.

Please turn to page 13 to look at our December 31 that Pie chart.

Our debt now consists of 61, 9% secured by real estate.

25, 2% secured by seller finance debt.

Third by respective clubs into which the real estate at a price too.

9% of the debt secured by other assets.

An 8% secured by.

This unsecured debt.

Please turn to page 14.

Now we continue to talk to new investors, so I'd like to take a moment to review our capital allocation strategy.

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

Our strategy is similar to those outlined in the book the outsiders by Wham Thorndike.

We have been applying these strategies since fiscal 2016 with three different actions subject to whether your strategic rationale to do otherwise.

The first one is M&A.

Specifically buying the right clubs in the right markets.

We'd like to buy solid cash flowing clubs at three to five times adjusted EBITDA and will use seller financing and acquired real estate at market value.

Another strategy has grown organically, specifically expanding pump cells to develop critical mass market awareness and sell franchises.

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

Third action is buying back shares when the yield on free cash flow per share is more than 10%.

Now, let me turn the call over back to Eric to review, our big three year growth initiatives.

Thank you Bradley.

Please turn to slide 15.

We currently have acquisitions and projects in development involving nine clubs.

In October we acquired Heartbreakers into Galveston area at the end of January we reopened the day shift we plan to finish the clubs remodel in February and that should help increase its contribution.

In late December we reopened and Reformatted a location in San Antonio as the Jaguars club first quarter provided little contribution, but we expect it will be bigger contributor going forward.

In mid December we announced definitive agreements to acquire a group of five baby doll LNG Columbus clubs in Texas, we are awaiting transfer of liquor licenses and club should contribute $11 million in EBITDA in year, one and once we complete our expansion plans they should contribute to $14 million to $16 million in EBITDA.

In December we announced acquiring club assets in Fort worth to create another Pizza show club remodeling is underway and the reopening should occur in the second half of fiscal 'twenty three.

Last year, we had to close our Jaguars club in Lubbock, Texas because of an intimate domain issue.

We acquired another location with the money to state pay that it is currently under construction and opening is expected in the second half of fiscal 2023.

Fiscal 'twenty three will also benefit from a full year of the 15 club acquisitions and three club and club related restaurant openings, we made last year.

I'd like to highlight the value we added in our Big October 22021 acquisition of the 11 clubs.

Just on our management and optimization, we increased adjusted EBIT of 24% that means we paid four times for their for the operating assets compared to our original estimate of five times their pre COVID-19 adjusted EBITDA.

Please turn to slide 16.

We have nine locations in the process of acquisition or development.

In late December we acquired the Denver area Food Hall, where currently remodeling of installing the bombshells kitchen that.

That is expected to be completed by the end of February and an increased contribution in March.

Sure.

Earlier this week we.

We bought out our San Antonio franchisee for $12 million cash and $2 million in debt. This is one of the best performing bombshells.

Construction is continuing at our Stafford location in the greater Houston area.

Building permits have been approved for a rollout location in the greater Dallas market. We are currently reviewing construction bids.

And Lubbock, we're awaiting a building permit for our location.

Our second location in Austin, Texas is now pending site review.

We have an LOI for a location in downtown Denver with an existing building that will work very well for bombshells, and we estimate it will take about $1 million or less and work to get it open.

Our Huntsville, Alabama franchisee is awaiting his building permits and annexation of his land into the city of Huntsville.

Regarding our other Denver location in Aurora, our plans our plans are in process with the city.

If you'll turn to slide 17.

In December we announced acquiring a 30000 square foot building in downtown Central City.

Only $2 $4 million for our Ricks cabaret Steakhouse in casino we.

We have applied for our Master Casino license and are moving full steam ahead on this.

Turning to slide 18.

This slide compiles all of our capital allocation to date for this fiscal year, including some shares we repurchased in the first quarter and the major acquisition we have pending.

Altogether, we are looking at allocating about $93 $2 million. So far this fiscal year and I estimate approximately $20 million in additional capital expenditures will be used to build the improvements for these properties that are still in development for <unk> and the property still in development for last year.

As I've said, our goal is to allocate about $200 million on average per year over the next three years.

Please turn to slide 19 for an update on our geographic focus.

In the first quarter 2023, our regional revenue breakdown, West, Texas, 38%, including Bombshells.

Florida, 25%, New York, 9%, a little higher than fourth quarter 'twenty to <unk>.

<unk> in Colorado, each at 7% and the other eight states combined for 14% of revenue. This demonstrates our geographic diversity, our exposure to growth States, like Texas, Florida, and Colorado, and how we develop business clusters in key areas.

I want to say, thank you to all of our loyal and dedicated teams for all their hard work and effort. We can't do it without you now here is mark.

Thank you very much Eric and Bradley I want to encourage everyone to re tweet and share this space and I'd like to give a special shout out to Cynthia Daniels is very much enjoying your profile well Eric was speaking if.

If you would like to ask a question. Please raise your hand in the Twitter space when Youre done asking your question. Please mute your microphone to eliminate any background noise. We have a limited number of speaker spaces. After your question. We may move you back to the audience to free up space to start things off we'd like to take questions.

From Rick's analysts and then some of its largest shareholders are five analysts are Scott Buck of HC Wainwright.

<unk> of Sidoti Lynn Cali water Tower Research ROM Mcguire of Grant research and Joe Gomes of Noble capital markets first up we have Scott Bok, Scott take it away.

Hi, guys. Thank you for taking my questions first one Eric could you talk a little bit about the trends youre seeing in the club in January and the first part of February .

Some of that growth pockets in the blue collar clubs or is that kind of work itself out.

Yes, I mean, I still think theres a little weakness.

I was going over everything looking at.

Four months trending deal with October November December January is January .

Total sales were a little over October and Army Im sorry, a little over November and December .

Total revenues. So I think that's a promising deal typically when we see any slowdowns they affect us for about six months.

I think the slowdown started in November based on what I'm seeing so I'm, hoping that it'll be a little shorter than that March I think is going to be the big turnaround for us of course, we have Super Bowl. This week. So this week will be.

Abnormally affected by a one one time event.

For this weekend, they especially out in Phoenix market.

And as well as the.

The two great teams with the Eagles and Kansas City.

Well I think thats going to be.

Help a lot with viewership.

And so it would help the bombshells.

And Texas as well I think.

Great. That's helpful and my second question Bradley should we think about these higher than anticipated repair and maintenance cost of the pull forward from future quarters or is this in addition to <unk>.

Now last year was the same thing we had $4 $5 million in maintenance Capex I wanted to clarify something so last year, we had that in this year, we had $6 million as our targets of one five quarters, what our maintenance capex should be that's an impact to free cash flow. However, what we're talking about is repairs and maintenance costs.

Those repairs were done part of the winter storm and all of that stuff and some plumbing, we don't anticipate higher than expected repairs and maintenance expense going forward.

Great I appreciate I appreciate the additional color it's tough right now.

Thank you very much Scott next up we're going to have Anthony Anthony take it away.

Good afternoon, and thank you for taking the questions.

So.

Far as bombshells, the operating margins there were lower than what we had projected.

Projected can you just talk about what kind of what happened there and then how should we think about segment margins there going forward.

Yes, I think we just.

Got a little surprised.

Some of the weakness in late October I mean late November and December .

The margins I think will return to a more normal mean of 18% to 22%.

As we move forward.

Yes.

The Houston market was extremely weak the Houston, Texas did not contribute anything at all this year.

Which hurts a little bit.

In that marketplace.

Overall I think that.

Bombshells has gone through a little bit of a of.

Some growing pains in that.

Yes.

In the previous years, we had.

Less competition in the marketplace because so many places we're close we were some of the only place open Africa, but we were first open Africa and there was a lot of vacant buildings and I think over the last year and especially in the Houston and Dallas market. Those vacant buildings have been reopened in new new businesses, new restaurants have moved in and come into the marketplace.

And they're going through their honeymoon periods, because theyre, new until everybody rushes to the new place for a while.

But I think over over the next few months, we're going to start seeing some of that return back to normal where the customers kind of float around a little more than they were at those places are no longer in their honeymoon periods.

Excuse me.

To remind everybody that.

Same store sales were still up three 6% from our pre Covid 2019 numbers. So overall bombshells.

Still on course.

We do have some.

Cost.

The Grange Food Hall is in the Bombshells segment, because it's a restaurants, we put them in the restaurant segment.

So there were some some costs there in the first last 10 days of December .

That didn't really contribute revenue and I think as the grains were doing the remodel the new Tvs or in.

The games are in the actual bombshells kitchen construction starts next Tuesday should be finished by Friday or Saturday and we hope to have that open by the first of March and so we'll have a lot more contribution.

From the range this year.

And this quarter.

As well as.

For March and then of course going forward, but we also have the on February 1st.

We took over operations from our franchisee.

They lost their operating partner and the investment partners.

Decided they wanted to sell the location and rather than trying to go through the whole franchising process and finding somebody we just discuss them selling us the location.

We financed that location with $1 $2 million cash down on a $2 million.

<unk> five year seller note.

Very manageable note for us with that location, averaging sales of about 120000, a week. It was about a six month or unit. So I don't think we could've even built building in it for for that.

For that cost.

Great pricing, where it is.

Sad that we lose a franchisee were really helpful. On the franchisee model at some point in the future.

Maybe your Huntsville will be the guy who is successful.

But at the same time, we pick up a fantastic location for ourselves.

Okay. That's good to hear and then.

Given the chop.

Choppiness in traffic in both of the Blue collar locations on Bombshells are you guys, maybe perhaps rethinking your promotional strategy to do maybe more specials as far as for further thanks.

How are you thinking about that.

Yeah, absolutely I mean, we have been we kind of switch modes.

In early December we don't want to get too crazy about it in December because we did have a lot of preplanned parties and Christmas Party in stocks we.

We did get affected.

A little bit.

Pre pre Christmas was pretty decent going to slow down the week between Christmas and new years was a little off but the new years was new year's weekend with fantastic for us so it.

It's been a strange I will say, it's been a little strange.

Adjusting to it right because I call this a psychological recession.

There's plenty of jobs people can go out and earn money and make money very easily right now.

It's just it's psychological everybody keeps saying Oh things are going to get bad things are going to get bad and people are seeing prices a little higher.

And so I think there's still a little sticker shock.

On certain items and certain prices out there.

Overall, I think that by March I'm thinking by March it's going to lean out we've adjusted our plans.

We're seeing like I said January was better than December and November .

In total revenues.

February to short Montgomery of 28 days, So we don't get those extra three days. So we'll see how February comes in but I think on a per week basis or could you do an average daily sales I think February is going to be up from January .

And I expect Marshall will put us back on the path.

We'll have to see how it works through the summer.

Got it thank you very much and best of luck.

Okay.

Thank you very much Anthony Anthony.

Next up we are going to have lane Collier, a water tower research.

Thank you very much Eric I wanted to ask you do you have any other color that you can provide on the casino.

The progress Youre, making.

Well.

Yes.

We're in some negotiations right now we've tried to complete.

Uh huh.

With a with a national partner, that's not quite done yet, but we're working on that process hopefully by.

The next by next week, we'll give some color on that.

Which I think will be exciting for us.

Overall, we are we done our <unk> scans were starting all of us.

Layouts, we're going we'll be up there Monday after Super Bowl too with some of our operational team, we're going to actually do floor layouts and flow patterns.

For the location to get to the architect I suspect and hope that we will have the roofing and eight eight HVAC systems.

<unk> replacements started in April and hopefully completed by the end of April .

My personal goal is to have the casino turnkey ready to open by November 1st.

A lot of that will depend on whether we can get our preliminary approval by June 1st, which we should be able to do because thats about six months.

And typically it only takes three of course, we may have as much sooner.

We've been in licensing.

I guess going on about CV December JM about two five months. So hopefully based on what we've what we hear from historic from other operators in the Colorado market is that.

Between four and six months you typically will get your preliminary.

Preliminary approval. So you can start your casino setup. So if everything goes right, we will be turnkey ready by November one.

And our total cost on that.

We were buying most of our machines were not going to do a lot of leases or.

Uh huh.

Or what we call the call participation machines.

Will should come in just under $10 million between the remodel.

The machines the table gains everything else the security systems that type of stuff, so everything, including the land and building costs of $2 4 million.

Basically I figure, we're going to spend about another.

$6 5 million.

On build out and.

Gaming devices.

And leaves us about $1 million bank for startup.

That sounds great. Thank you so much I just have another question.

Being in Dallas, and the weather's been pretty unfavorable I know, we're only a few days and February but can you comment at all on how the weather impacted the last couple of weeks or so.

<unk> yeah.

<unk> had 10 locations that were closed for two days.

Six of those locations were closed for a third day, we also had a tornado that hit.

There are few quay location in South Houston.

It was closed for a couple of days.

While we got the some of the repairs done and there was no electricity on that part of town down there Youre Deer Park, Texas, you've seen it on the news Thats, where the tornado actually hit we just got the tail of it I think at the beginning of it I'm not sure which.

Uh huh.

But it wasn't it was it was pretty pretty bad tornado it actually ripped a metal to metal top off of our garbage dumpster and blow out the.

Vince on those on a group like the ACI units.

<unk> or the <unk> system.

Was damage that we had to get that repaired.

We have insurance so we'll worry about the insurance part of it later right now we're just getting everything they've got it back on the same store closed for about two days. So there were some minor stuff, but most of that I think there was two days in January and then February 1st I think.

I remember, Greg I might've been all three days at the end of January So our January numbers, which I said were better than November and December were affected by those 10 stores.

Closings as well so I think we would have been a little better off with those 10 stores. We've got now three days from those same stores. So.

Okay.

That's great color. Thank you. So much I gave you one final question about bombshells in Colorado.

Given at your restaurants, do you anticipate being able to build in the Denver area over the next couple of years.

We have about six site locations are assessed thanks, Alex and area locations.

That we're looking into.

Right now we have the one in Aurora, we have a downtown Denver location very close to.

The Convention center.

That I think will be just an unbelievable location and it's.

I won't call it a turnkey locations, but it's pretty close everything we're going to do is cosmetic.

The current the previous operator left everything in the building to all the kitchen equipment there.

As a large operation.

Great location and hopefully will.

We are in the contract negotiation to get that get that under contract and close and I think that.

If we can get this done.

And the next week.

We could actually have that location open in time for the football season.

When when when the Denver Broncos have their first home.

<unk> home game that that's going to be our goal is to get that one so that one can be open very quickly and very inexpensive total cost of probably less than $1 million on the build out and we have bank financing on the purchase we're buying the properties who have bank financing on the purchased salt.

It'll be a super fast cash on cash return as well for us So I'm excited about that location.

That's great. Thanks, so much I think I'm good for now congratulations on another great quarter and thanks again for taking.

My question.

Thank you I appreciate it.

Thank you so much Lynne and Eric I, just wanted to give you a second to clarify something because I believe that you might have said the San Antonio Bombshells franchise was acquired for $12 million versus the $1 2 million.

Oh, well $1 2 million in cash and a $2 million note. That's what I thought I said, so if I misspoke that im sorry that is the total purchase price was $3 2 million.

Like I said is less than we could probably build that location for.

And it's $1 2 million in cash.

$2 million on a five year promissory note.

Phenomenal. Thank you so much Eric and thank you again land next up we have Rob Mcguire of granite research in the pole position, Rob take it away and get away.

Nice quarter guys.

Can you give us an update on perhaps when baby dolls could close and anything unusual going on with those alcohol licenses or any color around that yes.

I really thought we'd close by February one that was my plan, we were prepared and ready to close by February one we.

We have a line of credit setup through our bank bank ready to draw down on as soon as we need it.

To close the transaction.

What's going on right now is they had a couple of outstanding issues.

And so the textile Hot beverage Commission has put any administrative hold on the transfers.

So they can turn their licenses and to ours can be issued.

And ours ours arent ready yet due to a couple of <unk>.

Are there issues with.

With the cities, but all of our staff is now and it's in processing with the types of all beverage Commission.

As they say waiting on the government.

So hopefully I know the attorneys are working properly.

Probably you'll have more club more color based on.

Our discussions by February 20th.

I would love to see us close by March one, but it could be March 15th that could be March 31.

I do think we will get it closed in this quarter.

That's seven weeks surely they can resolve issues.

Yeah.

Even even even dealing with.

State agencies.

Now the problem is we have a sense of urgency, but they just don't have a sense of urgency they want to get through.

They want to get through the process at their speed and their time and.

Well, we'll just be standing here waiting.

To go but everything on our end is ready to go we're ready to close the transaction.

We haven't like I said, they have the money in the bank line of credit set up well and we're good to go so our teams are ready.

We've already preordered, all the Pos equipment. So we can.

Excuse me.

So we'll have the pls glimmer and immediately.

So everything on our side to go we're just waiting for those final approvals.

Could be could be I guess, it could be March versus March 15th or be March 31, So that I think some time.

And that time May give me a couple of time deadlines on iPhone.

Typical.

The time it takes to do these things and I think one was.

March 'twenty April 20, something March 3rd date, and I remember seeing like a march 13th date or something so.

Sometimes those sometime in that plan, we'll get it done but basically as soon as we the license or proved I think we'll probably try to close the next day or the day after.

Thank you and then just turning to Denver can you talk about you are looking at six potential Bombshell area locations. You have got two under your belt and you've been able to acquire that land for less than what we've seen in Texas do you expect that trend to continue with the other four locations.

If you expand or continue to expand there.

I think so I mean, we've looked at some properties that are more expensive than Texas.

In that market.

There's still a lot of our vacant restaurant space out there.

Unlike.

Texas, which opened pretty pretty quickly.

Yes.

They were closed for a much prolonged period of time, so a lot of.

What I would call better operators still walked their locations out there.

So theres still a lot of land I think tied up in courts and leases and stuff.

Issues. So we're sorting through all of that trying to find the right locations. Obviously have seven on my plate right now so I'm not in a hurry.

We are lined up for 2024.

I think one of the problems I think what people don't realize for 23 years.

The only grow we have to grow through acquisitions in this year, because we werent doing any.

Uh huh.

We weren't lining up these things in 'twenty, one and 'twenty two.

Like our I'm, sorry in 2020, one like we normally would because of Covid and so.

Bombshells has taken a pause here, but now that we're coming back online.

Some of that has to be not having new growth.

Kind of does the excitement for the brand a little bit as well.

So that could have some effect on us.

As we move forward, but I think as we start as we get to the end of this year and we start opening up new locations again, and we energize our management teams.

With upward mobility, I think we're going to see some some great. Some great things out of the Bombshells brand again and.

Provided we don't have another kind of COVID-19 shutdown or anything like that ever again.

I think that brand will be very very well over the next three years as part of our plan to get us to that 30, plus units and get us to 50 million plus EBITDA out of our out of our restaurant Division.

I don't think well have any problem getting them.

I appreciate that and then shifting just staying in Denver, but shifting to the nightclubs you talk about the substantial improvement in operations from 11 nightclub acquisition you made but can you talk about potential for love for him to continue to improve here and just give us the backdrop on that.

Sure. So the plan is to convert that location into the into Ricks cabaret Denver.

<unk>.

I know the level have name has been there for a long time, but.

The convention business, there and the people that travel from out of the country, Chicago, New York and other and Miami other major markets.

RCI operates we think that the <unk> brand will do very very well there.

We've been waiting for approvals for permits in the outside.

The remodel and then signed permits on that which are all starting to come in and we hope we will have that location that converted by April .

Okay.

Yeah.

So thats it for me. Thank you so much and congratulations on the quarter Yeah. Thank you Rob.

Hey, Thanks, Brad just one clarifying.

Clarifying point, the bombshells, San Antonio franchisee location, I know, Eric said $1 $2 million down $2 million note five year and with two year balloon, 7% just wanted to put that all out there. Thanks.

Thanks, So much Bradley and good thing you are not referring to the spy balloon that was recently hovering over.

Rob. Thank you so much for the questions and I would encourage everyone to also checkout Rob's recent video on misconceptions of the adult entertainment industry now before we move in to our open Q&A session I'd like to encourage people to raise their hand to be called up to be able to ask questions, we're going to bring.

In Joe goes as our final equity research analysts to ask questions Joe take it away.

Thanks, and congrats on the quarter.

Just wanted to go back to Bombshells for a second I know, we're kind of beating a dead horse here, but.

Maybe Eric can you give us a little more color and detail as to how the San Antonio operator kind of God.

Lapped so to speak.

And even though bombshells is performing better than pre COVID-19. It has been somewhat negative on a same store sales basis here I don't know last four quarters or so how is that impacting your efforts to attract additional franchisees.

Yes, sure I mean, right now with the current economy.

We're not getting a lot of franchise calls because it's a $6 million plus investment and people are I guess at the psychological I call. It a psychological recession, where people nothing's really changed for them other than maybe the gas on foods that for especially for your maybe your top 50% of the population in your bottom 20 years, probably getting very squeezed by those things.

<unk>.

But.

But theres plenty of jobs for especially in the.

Even with the Tech layoffs, if you read the reports most people are laid off in the Tech report were back to work within one week unemployment claims didn't go up.

Last time hundreds of thousands of people were laid off in a recession and unemployment claims went down.

So there's plenty of jobs and so.

When I say psychological I mean people are expecting things to get worse and so therefore, they are changing habits.

And those changing of habits are what we have to adjust our business model too.

I think we're doing a fantastic job of that.

As far as beating the Bombshells horse Luke.

We've expected.

Anyway, we're going to get very hard comps, we knew that as all these new restaurants in all these spaces were being leased and we saw the construction going up that we were going to be affected for a period of time.

At those at those locations.

We're adjusting our model.

<unk>.

Doing the things we need to do.

To get to get bombshells back to their 18% to 22% margins.

Excuse me.

And I think it's just it's just going to take it's just going to take time, we have to work through it just like when.

When everything back in 2000 18009, when we when we saw the our earnings dropped to eight cents per share.

On the 20 <unk>.

And that was the first time, we experienced anything like that.

So we had to adjust our models it took us a little longer I think this time, we've adjusted our models very quickly.

Instead of globally because of the information systems Bradley's put in place for US we're able to do this on a regional and club by club basis.

And that's why we know that the recession and they are actually a recession the slowdown whatever whatever whatever this period or in the <unk>.

Consumer the consumer trying to decide whether you want to spend their money.

As they have in the past or or or.

Okay slows down.

Has been to the point, where its affected certain clubs and not other clubs and so instead of switching the model at all of our clubs across the country. Like we did in 2008 2009, we're able to target specific locations and make those adjustments and youll see the clubs. We're still positive our cards are still comping positive.

Although the bombshells is a little different market and it's not as geographically diversified as the clubs are at.

All taxes space, mainly Houston, where the majority of our locations are in Houston, Texas, and so like I said, we were affected were.

We're affected by sports, because where sports bar so when the Texans are.

Winning three games in a year and one of them was shouldnt have been won.

Because they lost first round draft choice.

Those are the kinds of things that.

We respected the bombshells market a little bit.

As we move into March we're going to have.

March madness, the sweet 16th in Houston, Texas This year at NRG Stadium.

That's going to be a huge event for us first of April .

So I think going forward, we're looking at we're looking at a easier comps because now we're comping against.

A period, where we had a bunch of new locations for other businesses opening in honeymoon.

Against very strong comps.

I guess I, just like to remind everybody that the bombshells segment, while our margins are a little off right now we were making some adjustments to get those back in line.

But our overall revenues are still up three 6% on a same store sales basis from 2019 free Coke.

So overall the brand is still a solid today as it was in 2019, maybe not as strong as it is when you are the only one selling liquor in town, but still very strong overall, we've just got to get like I said some of the costs in line.

It's very difficult we don't know your beef prices change daily your chicken prices J&J earlier.

Your labor costs have had.

Creek.

That is loosening.

I think our like chicken has come way down and costs now, but it may go back up with with all these the AG shortages and whatnot.

Having chicken shortages at some point.

So we're going to watch those things, we got to adjust to them.

And keep our prices in line and keep things working in the right direction.

Thanks for that Eric one more for me here.

You didn't talk anything at all today about admire me I was just wondering maybe you give some update on where that program stands today. Thanks.

Sure. So as of January one we have replaced our developers.

It was a very tough decision and our developer was the Ukraine based company.

Yeah.

<unk> is in a war as everyone knows.

We try to stick with that with that group and.

They've just been unable to perform in and meet our standards standards.

Timelines that we what we wanted.

The New company came in on January one.

They took about six weeks to basically learn all the code get the code together. They are now making a lot of the what we call bug fixes the getting the bug fixes.

Thanks, So everything works correctly again.

I would suspect that in about three months.

They will get us a viable product and thats, our thats our hope.

I think the problem with the with the with all the bugs and things that just weren't working properly.

We were just spending money trying to get.

We pay them to fix something that while they fix that may break something else because they werent a coherent team.

The new the new group, we have a very coherent team there.

They are working very well together, we've seen some major improvements in.

The site as far as the things that didn't work are all fixed.

I would like I said I spoke about three more months, we'll we'll have maybe next quarterly call. We'll have some much better news on that front, but.

That's primary technology, but at least we're not billions of dollars in like meta we're keeping our costs are relatively inexpensive.

Relatively low number.

For the company on that on that transaction.

Great. Thanks for the answer, but congrats again on the quarter.

Thank you.

Thank you so much for the questions Joe we actually just got interrupted by a few individuals who walked into the office, we have large Tyler Moore and Dave Portnoy of Barstool sports.

Thanks for coming guys. Tyler do you are you looked like you got a question to ask do you want to ask anything yes, I do a congratulations on the quarter are good quarter I wanted to talk a little bit about what you guys are doing out in Colorado. It seems like you're spending quite a bit to get into the gaming space.

I just wanted to know a little bit more about that about what what the expansion plans are there.

Okay.

Sure.

Thanks for the question.

The main thing were doing out there right now is creating entertainment zone.

If you if you remember I know barstool sports and Penn gaming have the Amira star out there great property.

One of my favorites.

But theres no entertainment.

Aye.

No Theres no nightclubs theres no.

Fun places I would say other than casino, if you're going to if you only want to Gamble. If you wanted to get the tables you won't hit the spot that's great out there.

To grow the outdoors, it's great, but as far as nightlife and for younger people one of the big things. When we first started looking at bear in almost past.

Because I was like Wow, I mean, Colorado casinos for since 19 nineties come on this is nothing new why why would I go to this market and try to do something that nobody has been able to work for 30 years.

And so I started study and I said, well wait a minute. They had five dollar bets and they had 100 or better wait now theres no limit.

Trailing 12 months through June 32022, $9 billion went into slot machines, and Blackhawk Central City area.

The average keep was 8%.

As huge amount of money that was huge and so we said well okay. How are we going to differentiate ourselves I don't know compared to just be the same thing and so we saw less plus builder club, let's let's build of Ricks cabaret up here unless you have nightlife entertainment, let's turn the music up unless raw the 30.

Year olds up here because right now.

They rarely come up here.

As we go into the clubs I was talking to other people in our clubs, especially all the entertainers waitstaff our marketers.

All of this age group that that 20 to 35 year old crowds. They hate Yamanaka subsidiary I wont go into Blackrock with me Tonight.

Hi.

Yes, there is no reason to go because it has nothing to do and so we want to do is create.

<unk> main street.

And then city of Central and Fay.

Let's do some music festivals, let's do street festivals, they already have some but.

What do we do all the stuff and in the meantime, if we can.

Troll the nightlife is though on the streets vessels. It got close to 11 o'clock in the residential area. So all the stuff closed at 11 o'clock, we poll everybody into the buildings, we bought a couple of nightclubs or.

And turning to music App and I think we can do some some unbelievable business up there.

Phenomenal. Thank you so much for that question now next up let's bring Adam Wyden, Adam and Adam before you go I just like to encourage everyone to raise their hands at the other questions. So we can bring you up as a speaker.

Adam I think you're on mute can you hear me.

And now we can hear you perfect alright. Thank you guys you guys are.

This presentation had a lot of good disclosure that you didn't have in the past. So I just want to go through some.

Sort of a logistical questions then talk bigger picture.

On Slide 15, you have a whole thing about club acquisition and development.

Slide 16, Bombshells acquisition development and you know as you know in restaurants, and sort of club business when youre doing a lot of remodels.

Bradley talked about maintenance capex of repair and maintenance, but I suspect a lot of the clubs that you had to shut down clubs that you had to reformat, the grange or where the beer haul I mean youre running a lot you were running a lot of stuff through the P&L that is going to be a cost center that will be a profit center as you roll in 323 I mean.

And then on top of that you know you have all the legal and transaction work associated with baby dolls, and whatever you're doing on the casino front and.

Can you try and sort of give us a sense of sort of how much sort of you know a I'll call. It one time, but sort of how much sort of pre opening or growth capex or sort of one time stuff that sort of will be reversed in the coming periods is that we sort of have our arms around sort of two or 3 million of EBITDA is that sort of a good place to start in terms of.

Sort of.

Not recurring sort of inflation hit, but more just sort of one time cost investment that will manifest itself in revenue in future periods.

Yes, so ill make it real simple okay other than the San Antonio franchisee location.

Every one of these properties involve real estate that we now own and so we purchased that real estate ahead of time, so theres carrying cost or like you said theres legal costs on a survey costs those types of things those are not capitalize those are those are expense.

For the most part.

And so yes, there is cost but you also have interest carrying expense right. So now these things are carrying interest and so we're having it's not a lot of expense, but when you look at this as many properties that starts to add up and it becomes a larger number and what youre going to see as we move into the end of 'twenty three and second half of 'twenty three I definitely I think in the fourth quarter of 'twenty, three youre going to see.

The early units Heartbreakers Jaguars.

San Antonio the acquisition for <unk>.

It certainly helped me close by March 31.

I mean that will be all over lawyers, if we're not opening we're not and we're not done with this way then they should be able to get this work done.

Our site is done like I said, we're just waiting on the state of Texas.

The seller to work out.

A couple of issues they have with each other.

The Jaguars club in Lubbock, which is under construction on the PD club.

All of those are taking cash out right now, but that's going to reverse as soon as they open alright as soon as those locations open and it's a double source. So let's say, we've been spending half a million or a $1 million a year and now all of a sudden you got unit to start making between half a million and $2 million each unit here.

All of a sudden you're going to see those big swings right. So if you're if you were losing happened and you're making millions of $1 $5 swing.

And the EBITDA and so we're going to see those things come to fruition I think in March or Youre going to see the a couple of the locations really pick up the Denver Food Hall definitely we will have an unbelievable March I know heartbreakers is setup with the Grand opening.

And in the end of February .

So it really lead us into March as well with the new day shift to open in the construction. The VIP room construction upstairs is about 85% complete I know they were doing sounded light.

Last week, when I was down there.

So that's all being done.

It should be done pretty quick.

I was just at the Denver, who food Hall on Monday, all the new Tvs are and we have a 220 inch screen up.

A bunch of 90 inch televisions all around the place it looks unbelievable.

Third to what it was before everyone. There is very excited businesses up.

<unk> I think January of this year over January last year sales were up about 42%.

But that's still not.

Not where it needs to be yet and it's because.

We lost the largest.

The largest sales over 30% of their sales were the single booth that moved out.

We're bombshells is moving into.

And so in that location reopens in March that is going to be big for that so you have a lot of income coming in Stafford location right now.

Is targeted for 24, they were a little ahead on construction. So hopefully maybe get that maybe we get that one a little early which would be nice for changing Marshalls construction, usually runs a month or two over.

So I'll be excited if they get done early.

Close on the rollout, we finally worked everything out with the developer.

Uh huh.

Because our bids were extremely high because.

They had us doing a bunch of work with the developer had put in the roads and stuff like that they were not are the city may has put them on the plans and so everybody thought we had to build those with the best developers cardiac. We finally got that worked out so that construction should start soon.

The club in Lubbock construction has started the club and Fort worth construction has started.

Waiting permits.

So the Lubbock is probably a few months from starting construction in Huntsville is only a few months from starting construction. So there is going to be a lot of a lot of stuff that's going.

Going out but the main thing is we've spent all these brands right. We pay the architects we paid for the building permits we paper for a lot of this allowed the stuff is in our costs. So that will get much better as we move as we move forward, Okay perfect moving moving to I got two more and then I've got a kind of a more qualitative one on slide 18.

<unk> added this fiscal year 'twenty three capital allocation of the $93 million and that includes baby dolls and buyback at heartbreaker in this or that and I know youre going to put more money in the casino, but you sort of committed to doing $200 million a year now obviously invest another I think you said another $20 million on top.

Baby doll or Lowry I mean, do you still think that you can get another sort of large sized acquisition at least announced this year or even closed another big deal or another couple of mediums.

Either 200 or several smaller units could still happen.

We've got about $90 million were down about 110.

90 out of 'twenty to give you about 100, Jim thinking about $90 million, though we want to get invested this year.

We're talking with several operators.

And yes, I definitely think last year, we closed.

The Cheetah club in May we closed another club in August with Playmates. So yeah. We've got plenty of time, where we're literally four months of nine days into the year right, though barely barely over a third of the year as is.

Is over and we wind up $110 million investment so far so to think that we can't line up another $90 million.

And the next eight months.

I guess I could take a long vacation and Miss but I don't plan on doing that so yeah. That's helpful. And then I'm going to have a tour of my question sort of out of order, but like.

Talking about it with someone that works internally.

The firm and.

It isn't a is it a analysts isn't the stock personally sometimes it's helpful. You know having sort of non stop people and they said well you know and in the old days you got all these guys are getting older.

And they werent, earning any money in the bank and they just went through a global pandemic now youre, giving them, 6% seller finance and you know there is actually a cost to their capital is sort of the point that we're making I mean, you see this in the eighties, you've seen it in periods, where interest rates go up.

Smaller guys sort of get squeezed out theres, a cost to their money and you sort of see consolidation I mean, do you think the higher interest rates and sort of just going through COVID-19 actually bring some of these guys and say look you know I don't want to go through another downturn, Eric is going to give me money for my club is going to pay me cash stock you know 6%.

7% all on a mortgage I mean don't you think that like this environment, where capital has a cost might actually bring some sort of older guys and saying look in.

I'm going to use this as an opportunity to sell because interest rates could go back down in theory. I mean, do you think that this environment sort of lends itself to consolidation and people coming to you and say I'm finally ready to sell.

I mean, I think we are getting those calls right.

Then getting those calls.

Covid COVID-19 kind of.

Got some pretty major players.

Interested in selling.

As you know from from the Denver acquisition, which was has been fantastic for us.

I think there's still room, we're still gonna have growth trailing 12 months.

The 4% increase over their 2019 numbers and I think that we'll see.

You know more increases trail.

Trailing 12 months from today, I think that number is going to be even better.

So as we move forward.

I certainly think there is plenty of there's plenty of opportunity out there for us.

I am being a little pickier.

Because I've got so much on our plate right now I mean, thats one of the things I wanted to lay out.

And in the slides is just how much we've actually been working right. Because you guys don't see this until you we announced that we opened.

When I buy a $1 million Atlanta, or maybe half of that piece of land, it's not material I don't I don't put out press releases already.

These small things, but we have a lot on our plate right now.

We're ready for more on the right of the right kind of deals.

I've been talking with a couple of owners like look there.

I want four times, four five times and I might well you've got a three times unit I'm sorry.

Can't pay you for five times worth four three times unit.

If you want to give me some better terms you want to carry more paper you want you want 65% cash down.

That raises my cost I'm going to pay us one way or the other work balances out now if you want to take that.

Want to take the finance portion of what I am willing to pay for your free cash flow and carry the paper sure I'll be happy to give you that.

You carry more paper I'll give you another point of interest, but you don't take any of my cash roaming triangle in there and generate generate the income from their particular location to pay for it then yes, I'm willing to give them a little better multiple but when they increase my risk factor I'm in a market that I am.

It's not a major market or I'm not.

Comparable.

With the market.

I'm going to pay less for it and.

We are talking about guys.

I said, well I don't want to sell my club to anybody else like that what you're really saying is nobody else wants to buy your club for this price.

And I can't wait for that price either this is the price that we'll pay call me when you're ready and I guarantee you one day, we'll get that call.

We're probably.

Pain.

It's not that we're paying the top price because people offer them more money, but we are paying with his reputation we're paying with we've never missed a payment and 30 years. We made every payment to a seller we've ever promise to make we made every payment through COVID-19.

290% of our seller finance note and the only ones, we didnt pay more because they said Hey don't pay me I know you guys are stopping right now don't pay me you guys had been good to me.

Take take three months of payments and just affirm what will work. It out later and so we were able to do those types of things, but and so that's what we're that's why we are the preferred.

Buyer.

Because they know theyre going to get paid people offer them more money, but they want less cash down they want.

We offer them.

Higher interest rates, but they're never going to get their money. They also know that when we take over their club, we're not going to run their club into the ground, we're going to we're going to remodel we're going to build it if they ever did get it back from us it would be in better shape than it was the day. They gave it to us whereas they started these other if they sell somebody else who is carrying so much paper in their carolina they may be struggling.

And.

And as they go and they may not not only they're not paid the payments, but they're going to run their clubs into the ground as well.

And so.

That's what we're using.

As our past reputation in how we do business.

And then they can call any owner if you if theres an owner out there listening or looking to sell their club I mean, you can call anybody we bought products from no. One that I know will say a bad thing or has ever set a bad thing about us on how we do business on how we treat you and how we work with you through through anything that comes up.

Yeah no.

I definitely and the other thing that we've sort of gotten in our researches like you know there's there's basically one large strategic who is not really active in consolidation anymore. Deja Vu Perry you know and so there really isn't anyone who has the balance sheet to sort of facilitate transactions like baby dolls, or BCG age or what have you I mean.

You are really the only guy out there that can sort of.

Do it right that has the ability to close and get property level mortgages and fund the cash down payment.

Don't think a lot of people have $30 million of cash for $25 million in cash to buy at $10 million to $15 million EBITDA asset. So it's.

I worry less about competing for the asset and more about sellers sort of wanting to sell to you in and having a cost of their capital, but yeah. No look I think.

We still got a long way to go on the M&A.

And then the other part is back to the casino I think you've been a little bit cagey about this and so you know again and so true to Adam Wyden Formula we've done our own sort of diligence and.

I know a guy that you know operate slot machines down here operates Racine O N E.

And I sort of do the math on 30000 square feet in the number of slots and I can sort of back into it. If you guys are going to spend $10 million and most of that is it sort of slot gaming youre not participating.

Again, again, I don't know what Youre doing with your online gaming and sports betting, but I suspect that's part of the equation as well I mean, you know you know there are scenarios.

<unk> were 30000 square foot casino could generate you know in the tens of millions of EBITDA I mean, I know, it's sort of early in the evolution, but I think it would be helpful. Because I think again I don't look I I'm annoyed that wed spoke this much about bombshells.

<unk> doubled the EBIT that all bombshells is doing I mean, one quick and transaction. It was $15 million would be the pro forma versus $8 million of EBIT out of Bombshells I mean, the fact that we spent the first hour on the call is just absolutely abhorrent, but separately.

If I say sort of separately I sort of look at you know a lot of guys are like while he's doing this casino it's out of his bailiwick and we don't think about it at all we've seen the renderings and we say look this is a cabaret you've got a you know it's sort of like the old western sort of cabaret burlesque casino I think it just so so sort of on brand.

But I think even more importantly, I think it's important for you to come out there and I know, it's early are an entrepreneur and so am I, but I think you know when youre, making an investment in a casino for $10 million of cash again in the Grand scheme of your market cap and your balance of 35 out of cash I mean, it could go to zero, but you know when we do the math, we sort of seeing the range of outcomes of like low end.

The range Youre, making like 10 million of EBITDA like high end of the range could be making as much as 25 or 30, and I think it's super important that like you know you sort of you know.

And I'm not trying to put words in your mouth, but I think it's important for us as the investor community to understand that like Youre not at your in the no brainer business. When you buy a strip clubs with real estate of four times EBITDA, that's a no brainer and that Youre getting into this because a you know it it's sort of like it is a strip club itself. Its a strip club steakhouse casino and be the returns are so good.

You cannot do it so I just wanted to sort of lay that out and give you an opportunity respond.

Well I'll respond the easiest way without saying anything I.

Don't invest my money unless I think I can get a minimum of 25% to 33% return on an average risk investment.

I would consider this a high risk investment right I'm going into a new market I'm building something from scratch and if I didn't think that I could get the returns in the 50% to 100% range I wouldn't even be looking at this.

Our our preliminary numbers are very similar.

The model you laid out.

I don't know what I don't know.

I know how many people are out there I know, there's 5000 plus hotel rooms, I know on the weekends those rooms ran out for $300 a night.

I know that.

Based on my observations, 60% plus.

Of the people out there are men.

Mostly 30 to 55 years of age.

In Black Hawk now in central city at the much older crowd, but I'm going to draw those younger guys.

<unk> Central City, which is it's basically everybody says centricity Blackhawk, but it's really one area it could be one town. It so close together and so you don't even know what they can put a sign up you wouldn't know youre, leaving one town in entering the other you would think you are in the downtown district, which is the old town and you drive out and you're in the new part of.

New part of town.

It's basically how how I see it when I'm out there.

Don't make the money I don't think the road the mile and a half long.

That connects the downtown the old town to the new town, it's a very very short very close knit.

Little area there.

You know people that work in Black Hawk live in Central City people that live in central start living Blackrock may work in Central City.

It's really just one area out there Blackhawk central city.

And the difference I think is.

Uh huh.

The betting laws changed in September of 'twenty. One you know one of the things I think people say well you know, Colorado casinos for 30 years, So youre not going to go out there and make any big changes or do anything thats kind of how are you going to do any different than all these other operators.

And like I said the difference is that the rules changed.

And.

People have been slow to realize these rule changes and also I think I have been going to city council meetings in central City.

Since July .

And I think we've got a very progressive mayor and very Progressive City Council now thats, becoming more business friendly I think in the past.

In the past they've had a much more protectionist.

City Council that was more concerned with keeping central city the way it is.

Even to the detriment of economic growth and I think that the.

There is a balance and I think this new city Council and the mayor have a.

Rate plan for balanced to bring new business and at the same time preserved what central City is and it's a great town I posts and videos on my Twitter you can do it or you can go to the city of Central's website and look at the videos of the town and it's like it's a great old town, that's got the oldest opera.

And in the country when Theyre since the eight hundreds.

It's just a it's an amazing amazing little area, but one of the things is there just no night life with no entertainment. So we're going to be the only thing to do after 11 o'clock at night.

And I'm very excited about it.

You've run casino numbers, if I put 300 people in the building.

Every day 500 to 701000 people on the weekend.

What the numbers are going to be.

Yes, I mean look.

Again, I don't know what Youre doing as it relates to your online gaming or sports betting, but I suspect if you're working with a national partner.

Youre getting a deal thats sort of minimum guarantee in some capacity and again I don't know, but if youre getting a minimum guarantee on your sort of sports betting or online gambling I suspect that in some ways is probably covering a lot of your sort of upfront investment for the thing altogether. So again, I I sort of like don't know the exact.

But I suspect that between your online gaming and sports betting if youre working with a national partner, you'll have some sort of minimum guarantee that will cover.

Some part of your investment hopefully all of it so again I I.

I sort of look back and I say to myself you know I don't know why we spent two hours are now we're talking about bombshells with.

Casino nightclubs trunk club thing can be 25 to 30 of EBITDA could be doing four times the amount of EBIT that all our bombshells in doing so and and.

And not to mentioned baby dolls alone at maturity is 15 million of EBITDA doubled that one acquisition is double the amount of bombshells, So look I I.

Obviously hope that Youll bombshells margins go up but I think the major takeaway for us at all this is that if you do the casino and it does well it's triple the amount of EBIT. The bombshells. If you do one more baby dolls, it's double the amount of EBIT as bombshells, yet somehow the entire sell side analyst community spent the first of all we're talking about bombshells. So.

Look it's.

It's exciting it's exciting this casino and.

You know, obviously, we'd love to see more baby dolls.

That's it for me thank you.

Thanks, Adam appreciate Ya.

Yeah.

Thanks, so much for that question, Adam phenomenal actually more than one question plural neck.

Next up we're going to bring it ticker history.

Actually let's bring up stock market news Evan Evan please the floor is yours.

Yeah I appreciate you letting me get a question here fantastic quarter and also a really big fan of the rich E Mail account the person hosting space. The first of all everyone down below to make sure you're following the account and that's kind of where I wanted to dig into my question. We're doing this on Twitter spaces, you were very active on social media I would love to.

To hear a little bit more about how your use of social media has.

The company helped the stock anything in general, but really and how you've seen your use of social media Twitter spaces kind of helping risks.

Sure I'll tell you what it's not it's been amazing we've been able to communicate directly.

With not only and users of our product.

Investors in our company.

Potential investors critics.

It's it's to me, it's so engaging I just love the I love the immediate feedback I can post something I can ask questions I can and do hypotheticals.

I can just be group, if I want to say, it's just a it's a it's a great. It's a great. It's a great tool I would say with Twitter one of the main things I would say that what is Twitter done for our shareholder base.

We started out I'd have to go back and pull the exact number that number.

6000 between 6007 thousand.

Shareholders on our on our Navy finished over list honors list and I think now we're getting close to 9000 I get the new list on the 15th of February we'll kind of see if that trend has continued.

Got it.

I saw institutional ownership dropped from 54% or 42%.

Yet our stock hitting all time highs.

This has never happened before right when you lose your institutional ownership of your stock crashes.

That didn't happen.

RCI and I can say the only thing I can contribute the only thing we changed.

We went on Twitter, we hired equity animal to get our story out to the people.

Directly right.

And that's what's changed.

And like I said I can't be more excited about how our how it's going how it's how it's been going.

You know I throw impromptu parties at the clubs and it's money cause 2030 people show up sometimes sometimes for people show up sometimes one guy shows up EMEA that guy can sit down and have a drink together in and talk and I get to hear one on one.

Why did you come here why did you do that.

What do you like about us versus somebody else other clubs you've been too.

I get to get just direct feedback.

And to me that's a that's incredible.

My direct messages.

Followed people.

Don't care, if you count has.

Small amount of her followers are a large amount of orders and you tell me you are a shareholder and you engage with me I'm going to call. You. So you can direct message me I get a lot of direct message we can talk.

Like I said, it's just direct feedback you can't get that any place else.

Thanks, so much for that question Evan Eric we appreciate the kind words.

From a capital we're going to get to the next great profile picture by the way, but first let's bring up.

Working well.

We're off the floor is yours, hey, guys great quarter, I, just was going to second Adam's comments, obviously with them.

Vast majority of the money constantly coming from the strip clubs adult clubs.

A lot of bombshells talk and focus.

I feel like people are whoever's listening and wants to focus in on that does not understand the entire story.

I'm completely in.

Behind this idea about this casino expansion.

And like anything else you know I have faith in what Youre doing Eric.

I really don't have any openings add other than its just to congratulate you I'm happy that you're moving into this space.

And from the looks of things and the way you've done things in the past I have my confidence with my shares so I'm going to just leave it at that thanks.

Thank you I really appreciate that.

A lot I mean, that's.

That's why I said this is <unk>.

That there is why I'm on Twitter.

It's why it's.

Vince So important that's why spend so much time and I know I've been in Colorado for three days I don't think Ive made two posts in three days.

I was looking at my engagement the old man I'm way down.

We've been out there we've had we had nonstop meetings.

To give credit to our vice President Travis Reese.

Man he is engaged in this.

Casino staff and the laws in every aspect of creating this new concept. So one of the things. He is godaddy helped the bombshells and help create that concept and really.

Got it started before before we brought our restaurant expert in who basic.

Basically fixed concept turned it into what it is today.

And travelers has been great at that.

Very very happy we went.

I don't think in the last three years, we've spent as much time together on a day to day basis that we have in the last six months.

So it's nice to be able to.

Get to spend time with him again.

But his engagement and this deal.

And Colorado has been fantastic, so I want to throw that out there to say thank you Charles for the opportunity.

Fantastic. Thank you so much for the question now in that same vein, Eric I'm going to ask you. A question that was submitted to me anonymously.

This individual is curious about the plans of the brewery and is it similar to robust in terms of vision robust for those who don't know is the energy drink also.

Actually let's answer that one first and then we'll move into the second question.

Yes, no the breweries nothing like robust.

Robust as it is basically a generic product that has a.

Flavor profile very similar to the leading brand.

Which market is drinking right now.

That's a no no in RCI world.

Now just joking, but seriously.

It saved us.

About $20 a case.

Offer than major brand product we were using.

About 25000 cases, a year at the time I think now I don't even know what the numbers are it's much higher than that today.

We have grown so much.

And so it was more of a cost saving deal.

We've just bought the product at first but then they they were trying to expand the brand and so we bought into it.

<unk>.

Probably shouldn't have done that probably wouldn't do it under our capital allocation strategy today, the numbers would make sense and we probably wouldn't have moved in that direction, but.

What we did.

And then we ended up loaning them money that they couldnt payback and so the we ended up basically buying the buying them out and taken over the brand.

Since then we've done very well with it.

We've expanded some of our distributors, but the main thing is just like our own clubs.

And we're working with others to say look you're paying all this money you could be saving especially big operators.

In this energy great market that fell.

Thousands of cases.

Could save so much money with this product in.

From a from a chemical standpoint, its one molecule differently, it's not a it's very very very.

When it is mixed with any type of alcohol whatsoever. You can't you can't really tell it takes like I call. It the Pepsi and Coke Challenge. If you remember the old days of the Pepsi and Coke challenges of exactly the same thing I can point to different classes, you can drink them tell me, which ones, where it's just very difficult to do.

I will say that the hardcore drinkers can tell the difference, but the casual drinker specialty put back in it you can't tell the difference so.

So.

That's kind of that but with the but the breweries more.

This was kind of a one off thing where we were buying this building and.

It was a great property, we're going to close it down and turn it into a bombshells.

And as we did more site inspection, we started looking at how it operated in with that and we looked at them they are actually making money and not much but there you know.

But it was profitable.

But when we started going through the financials, we asked for the financials right well wait a minute why we just keep this business open give us finance and we start look at their financial we thought well we can cut this we could change that and we can we can make this thing this thing could actually have better margins than our bombshells, because we get all the alcohol, but we don't have to have the food. We don't have to have a labor cost because all of that rent it out so we.

Basically paid for the space and they provide all the food product, which is our lowest margin in our bombshells, but we get all of the alcohol, we get all of the sports stuff and we can make our own beer, which cost us even less of the kegs instead of paying 120 Bucks a keg, we'd get kegs for 30 bucks or something that's breaking them ourselves.

How we got started on that.

That and it is evolving.

It remains to be seen we may we may develop this into a concept, but we may decide to build more of a if the returns are right on it like you said, it's early and it's a way for us to get our bombshells enter the Denver market right away.

If we can start training staff will have our cooks ready though.

While our training at the food Hall, when we get ready to open up the bombshells were building out there.

Fantastic the nominal answer as a.

Very hard to consumer of energy drinks I cannot tell the difference.

Next up we have hot girl capital and I would just take a moment to encourage everyone to raise your hand, if you have a question because we were starting to get towards the end of our Q&A segment Hydro capital taken away.

Thanks, Mark and congrats on a great quarter.

Super curious if you guys are gonna do any like celebrity or brand collaborations.

Well, we're talking about that with the casino right now for sure.

Definitely with admire me once we get a viable product we will definitely be doing some some stuff with some influencers in that regard for sure.

Mark and I have been brainstorming a few ideas.

Around our.

Our new merchandize store that we're getting ready to launch.

So yes, there is definitely going be opportunities for that and as we're getting.

Yes, I'm still I'm still relatively a baby on Twitter you know all of us.

My one year anniversary with the other day and I said well that was just the day I signed up that wasn't really Mike one year entered my real one year anniversary of sometime in May after after I met Mark and.

I guess I wanted to try to go and they have to do some of this up and then of course, they wrote me a little thread and got me step volumes and.

The more I started though so I think may may is probably really my first one year anniversary. So hopefully, we'll we can now they they.

They keep telling me 10, thousands of magic number I got to get that you have to get to $10000 $10000. So hopefully.

By May we will be there I think definitely by November when we open the casino up.

We will get there, but yes definitely looking at some.

Some different ideas with with Influencers and.

And doing some collabs on certain <unk>.

Certain things to bring people in not only into our clubs or restaurants, but also into the casinos as we move forward.

Fantastic Great question and Great answer Eric now I'm going to ask the last question of today, Eric The last earnings call. It ended with you talking about your vision for Empire building and I wanted to ask what your update is on that and what.

Division is now moving forward.

I think we laid that out pretty well in slides 15, and 16 on what we've been doing and how we're doing it.

Uh huh.

So.

Have you looked at that.

I think.

We have to continue to basically do what we do.

And that is used fifth grade math to make sure that as we make these investments.

That we haven't expected cash on cash return.

I know the construction stuff.

I'll be honest I hate construction hating those new things I'd, rather just go out and buy.

Nightclub F&I club after nightclubs.

Unfortunately, it's just not that easy.

500, and I already owned 50 of them. So there is about 450 targets youre talking about acquisitions, where they had 45000 target yes, it's easy to line up two or three acquisitions, a month or a quarter. When you have 45000 targets.

When you have 450 targets and of those 150 targets, there's multiple <unk> multiple of multi club operators. So you really probably talking about less than 100 individuals that I have to do deals with so it does take a considerable amount of time.

And then you've got to have people that are ready to.

To sell I know a lot of these guys are older and they are they are thinking about it the multiples as we started paying for four to five times multiples instead of just three because we use.

It's just reap our whacks at certain locations that probably work more and so we started off in that and we started getting better acquisitions.

I think we're going to continue to see that it's just it takes time, we're gonna buy no buyer you every year.

Some will be single club summary, multi clubs.

But I'm very confident in.

In our three year plan here.

To really roll this up to the next level.

And grow from $100 million in EBITDA to $250 million in EBITDA.

At four times $600 million of four times.

It would be a 150 million additional EBITDA.

No I don't I think.

If somebody says that shooting for the moon, Okay, well shoot for the Moon and I I only get into the stratosphere. So I only get to $175 million or 200 million is still significantly over a three year period exceeding our 10% to 15% growth target and so as long as I can do that I'm going to be very excited very happy and hopefully our shareholders will be and I'll say it.

Again, I say at every every every call I say it on Twitter all the time, we're not for everyone. We're not looking for a momentum investors, we're not looking for guidance at <unk>.

What we do next quarter or the quarter. After we're looking for long term guys, we're going to be with us for three years, let us let us let us execute our plan and let's all get wealthy together.

Amazing and with that let's all get wealthy together.

Eric and Bradley for those who joined US late you can meet management Tonight at seven o'clock at Rick's Cabaret, New York One of RCI is top revenue generating clubs Rick's is located at 50 West 30, <unk> Street between fifth Avenue and Broadway a little interim Herald square, if you have an RSVP ask for.

Eric lining or me at the door after nine P. M. However, I'll be busy implementing my own capital allocation strategy on behalf of Eric Bradley The company, our subsidiaries and my favorite Tootsie dancer fierce Aphrodite seven on Instagram. Thank you and good night as always please visit one of our clubs or restaurants.

And have fun.