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. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Gary Fishman, who handles Investor Relations for RCI.

Thank you. For those of you listening to this call on the phone, you can find our presentation on the RCI website, click Company and investor information just under the RCI logo. That will take you to the Company and investor Info page, scroll down a little and you will find all the necessary links for this call. Please turn to Slide 2. I want to remind everybody of our Safe Harbor Statement, it is posted at the beginning of our conference call presentation. It reminds you that you may hear receive Forward-Looking Statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. Please turn to Slide 3. I also direct you to the explanation of non-GAAP measurements that we use. And now I’m pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric.

Thank you for joining us today. I’m here with our CFO, Bradley Chhay. After the market closed today, we reported our first quarter results for the period ended December 31st. The Company and Nightclubs generated their best performance since the pandemic began. We also continue to produce strong Bombshells results. This enabled us to keep our teams employed generate free cash flow, build cash and achieve operating and net profitability on a GAAP and non-GAAP basis. Once again, we thank our loyal customers, dedicated team members and steadfast investors. Looking ahead, we are continuing to work on all fronts to grow free cash flow, beginning with our Nightclub segment. We are evaluating a number of potential acquisitions and looking for that right fit. With Bombshells, we recently acquired a great site in the Dallas area and are conducting due diligence on three more locations. We are also closely collaborating with our initial franchisee on their first location in San Antonio and talking to additional parties in search of potential franchisees for other areas. We are awaiting results of appraisals as part of our effort to refinance the majority of our debt into a long-term real estate backed loan in an effort to lower overall interest rates, reduced principal reduction payments and eliminate all short-term balloons. Our outlook is more positive than on our last call. State and local governments seem to be a little more comfortable with letting people go back to restaurants. The holiday COVID wave is subsiding and vaccinations are increasing. We are happy to have opened our Chicago and other Illinois clubs this past weekend and are excited about reopening New York City on the 12th. While there are occupancy and time restrictions at many locations, it is nice to have our teams back to work. And here is Bradley to review the financials, and then I will return to wrap up with a question-and-answer session.

Thanks, Eric, and good afternoon to those who tuned in on the call. We reported total revenues of $38.4 million the first fiscal quarter. That is up 33% sequentially from the prior quarter. GAAP EPS was $1.07, and non-GAAP EPS was $0.39. The difference came from a gain on debt extinguishment and reversal of prior quarter’s tax allowance. Weighted average shares outstanding went down 3% year-over-year. Looking at cash, we had $70 million at December 31st. First quarter net cash from operating activities was $6.3 million and free cash flow was $5.7 million. Please turn to Page 5. The Nightclub segment continued to rebound sequentially with more locations open on a more consistent basis, revenue totaled $25.2 million. That is down from a year ago, but more importantly, it is up 92% from the prior quarter. 24 clubs were opened through the first quarter and 26 by quarter end. To give you guys some color, our biggest two clubs, which are in the South Florida market, were opened the entire quarter for the first time since the pandemic started. Keep in mind, however, that we still have clubs that are not operating at full capacity or normal operating hours. Even so, clubs that are open are doing well in this environment. On a year-over-year basis, same-store sales were only off by 6.4%. As a result of all this, operating margin at 33.7% and operating income totaled $8.5 million. Bombshells segment, please turn to Page 6. The Bombshells segment turned in another strong performance, and that is without the prior quarter’s benefit of a strong sports lineup and warmer weather. Total sales of $13 million were up 26% year-over-year and 12% on a same-store sales basis. All 10 locations were opened during the quarter and continues to be open today. To…

Alright. Thanks, Bradley. Now turning to Slide 11. Last fall, we announced plans for Bombshells, the next 10. Our efforts to double the number of company-owned locations over the next three-years. We believe the pandemic has created a unique and compelling opportunity, and we have proved the viability of the concept. Bombshells can easily self-fund new units. We can access prime locations not previously available, and in some cases, we can buy or lease them at significantly lower prices. We are pleased to announce we have acquired a great site at a great price in Arlington, Texas. Arlington is a suburb of Dallas that is the home to AT&T Stadium and the Dallas Cowboys and just blocks from the Texas Rangers also. We paid $2.9 million of which $726,000 in cash and a $2.175 million bank debt at 3.99% fixed for five-years with a 20-year amortization. This is the best rate on debt we have ever received. We also are conducting due diligence on three other sites, one in Texas and two in South Florida. In addition, we are actively working on Bombshells, the franchise. In late December, we announced our first franchisee, a well-established local private group that includes franchise restaurants and their holdings. Terms call for their opening of three locations in San Antonio and an option to open three more outside of the city. We are collaborating with them to ensure the success of their first location. News that we have signed our first franchisee has generated a lot of new leads, many appear to be well qualified, and we are in the process of building these inquiries. Please turn to Page 12. We have continued to talk to a lot of new investors. So I would like to review our capital allocation strategy. Our goal is…

Thank you. [Operator Instructions] Our first question comes from the line of Greg Pendy with Sidoti.

Just on New York reopening on the 12th, is that all three locations in New York? And then are there any restrictions that are notable that you are aware of that we should be thinking about just in terms of how much you can ramp up from the reopening?

Yes. We are opening with the same restrictions we opened with last time, of course, last time we were only open for about three or four weeks. Hopefully, this time with the current track record and that will stay open, still have to close it by midnight. So we won’t see full operations. I’m going to give you an idea around the country, we have some places where we have occupancy restrictions, but we don’t have hour restrictions. Some places have our restrictions, but not so much occupancy restrictions. That is just social distancing restrictions. Some have both. I believe we are starting to see some of those restrictions lessen. I think we will continue to see that as we get through March, April. And I’m hoping that by the end of May that the majority of the restrictions should be lifted. It is hard to tell, obviously, because it is very political still and different politicians in different states have different - people advising them on when to open and how to open and whatnot. And unfortunately, there is no straightforward science to it. So I think everybody just kind of guessing, and we just have to deal with that.

Got it. And then last earnings call, when you mentioned the refinancing, I believe you put out maybe a $5 million run rate once it took place. Rates have moved up a little. So maybe should we be thinking a little bit lower than that or are you guys still kind of comfortable with that number?

I mean, I think we are probably between 5% and 5.5%. We haven’t locked yet, because we don’t have appraisal, so we don’t have the full packages to present to their board yet. I’m guessing, I think they have appraisal are due back by the 12th or the 16th, I can’t remember. I can’t remember on the top of my head here. But basically, by the middle of February, we will have all the appraisals in. They have been waiting for our Q. They had to have this quarter’s financials to show that we are getting better and better each quarter, which, of course, we have. So that won’t be an issue. So I believe that all things right now, we are probably looking at a closing on the loan between mid-May and the end - or I mean, mid-March and the end of March. And so therefore, we are going to see what rates are doing at that time.

Got it. And then, I guess, pre-COVID, your expenses SG&A were raising, you are raising I believe, for some legal and audit expenses to roll off. But I guess, throughout the pandemic, you did a good job rationalizing your expenses to the lower revenue run rate. Is there anything you think that could stick as we try and think like what is the normalized sort of SG&A run rate. Can it be a little bit better than pre-COVID or should we be thinking back to those levels?

I think we are going to be better than pre-COVID. We are definitely not going to pick up all of the legal and accounting expenses that we had prior. I think that a lot of other things, we have really gotten big on negotiating national contracts and lowering cost every way we can. We have cut marketing. I think our marketing was down about $1.2 million. Basically, we have eliminated billboards. We have eliminated radio advertising and really moved more towards social media, I think that trend will continue with us. And I think that will help keep our costs down at least for a while. I mean at some point, as competition opens and continues and new places start reopening again. We will have to evaluate as we go. But for the time being, at least, I think the next 12 to 18-months, I think we are going to be in a very great location, a very great spot. And hopefully, we can keep that between the 30% and 32%, which is where I think it is at the over the last few years.

Great. And then just one final one. You put out the bar for 10 new Bombshells locations in 36-months, if you can find the right locations. And then you gave us a little bit of color on the Dallas site. What is your hurdle rate? I know you guys look at real estate pretty closely. I’m under the assumption that there is a lot of places that might be attractively priced, but is location making it a little bit scarce out there? Kind of what are you seeing in the environment as you kind of look at the real estate for these 10 locations?

What we are seeing is the prime a locations that we are wanting aren’t for sale, they are for lease, especially in the Florida market. In Florida, we are working on one lease now. We have just turned in an LOI on another property. They have accepted the concept. We are waiting for them now to counter our offer. So hopefully, that one may move a little quicker. And then we have the other property. We are waiting the developer bought 33.8 acres. We are buying two acres out of that site, and we are just waiting for them to replant the land right now. That should be completed, hopefully, in the next three or four weeks, and we have already got the bank financing lined up for that property. So we will get that property close, get our plans turned into the city, get our billing permits and get started on that one as well. So basically, right now with what we are looking at, two lease locations and three owned locations where we will own the property. The other property in Dallas, we have a variance hearing coming up in the next couple of weeks. In Florida, we have a variance hearing in March. So everything is moving forward. An average, it will get quicker as we start getting building permits and building plans, we will start having a better idea of opening dates. Unfortunately, we can’t control that process right now, especially with COVID in these cities and how quickly they move to get our building permits issued. But once these building permits are issued, then it becomes more in our control through our general contractor to get everything moving pretty quickly.

Great. That is very helpful. Thanks a lot guys.

[Operator Instructions] Next question comes from the line of Adam Wyden with ADW Capital. .

I have been fortunate enough to drive by to Scarlett’s and it looks like standing room only and clearly getting New York back open is critical although I never really underwrote that. But I wanted to kind of build on Greg’s question. You as a little coy, but when we talk about kind of where you were on free cash flow, coming out of call it calendar 2019 or First Q 2020 pre-COVID, you guys were running, call it, $60 million of EBITDA and, call it, $40 million of free cash, right? And Bombshells was not doing whatever it was doing. I haven’t looked at it 21% operating margin on 13%, I know you did 30%. And I don’t know if you are allocating corporate against that. But I mean, when I just kind of do back of the envelope math, and Bombshells got hit a little bit this quarter, I think, because of closures and all the rest off and on. But I mean, when I kind of think about the business now, I say, okay, Bombshells without the franchises, without the new locations, which you’ll have, I think you’ll do about $60 million of sales and 30% margin. That is $18 million of EBITDA that didn’t exist before in the old paradigm. So if I just kind of take the $60 million you were on before, add $5 million for kind of the legal and accounting, all the garbage from the SEC that isn’t being duplicated and maybe give yourself credit for the marketing and the billboards, but I don’t think that even does that. So I get to like a number that looks more like 65 plus 18 is 83. And then when I kind of do a 10% stack comp and, I mean, when you look…

I mean I think we are on the crest of that ledge there, so to speak. I think as we open everything up and we are fully open, and we have no restrictions, which I’m hoping to see, hopefully, June or July 1, we get July, July, August, September, maybe our first real quarter of everything open, everything and being able to operate, what I call pre-COVID normal, maybe we will still have math on, but I think we will at least be over 25% and 50% occupancies. We will be open till 4:00 in the morning like we are supposed to be or 6:00 in the morning like we are supposed to be, be able to do the things that we do. I mean I think we are probably on a run rate of $50 million to $55 million a quarter, it would be $200 million, $220 million in revenues. So you can do the math on the margins from there, which is basically what you have done you are not - if you are ahead of us, you are not far ahead of us. And if we see the increase in other locations like we are seeing in Texas, like we are seeing in Florida right now, you might be being conservative. It is hard to know for sure. Yes, I’m as optimistic as you are, if that is what you are asking me.

Well, I look at the Street number in Bloomberg. Now I get it, there is one analyst here, but why is there only one analyst? If this thing is $100 million EBITDA company, why do we have Dana Telsy form Telsy Advisor group, why don’t we have? Who is who have consumers? I mean, people say Nightclubs and normal -.

Because we are not looking to raise money, Adam. They don’t want to do -- if we are not getting a banking business. They don’t want to write reports on us.

Well, that is fine, and I appreciate that we shouldn’t raise any money. I mean a $46 a share or whatever it is, we shouldn’t be raising money, especially if we are going to do $8 a share of free cash flow, we should be buying back shares. I mean the irony is, is that -.

And we have been.

This is 160 stock. So I guess my question to you is, like, here you are sweating in the desert, delivering God’s work, and people are spitting in your face. And we have got 600,000 shares short, right. Like how do you see us converging to the right cost of capital? Because when I see us at the right cost of capital, and we are trading at a yield substantially lower than what we are buying, then the flywheel accelerates. I mean there are big assets out there. I mean everybody who follows this industry knows that Tony Lowery at BCGH, he I did a private in OE. There is another guy I found out about in Canada, who’s huge. There is another guy that we have talked about in Minnesota. I mean, there are some big players out there. And the reality is, is that private equity isn’t buying them, and you have the right cost of capital on a basis of 150 right, let’s say you get 100 million to 150 million of EBITDA, right. And you are trading at the right multiple, I mean, you can be buying companies that are doing at 20, 30, 40 or 50 of EBITDA, and then this becomes a real company. I mean, I see a path to hundreds of millions of dollars of EBITDA. I think the only thing that is getting in our way right now is cost of capital, and I’m just curious how you are thinking about that?

I mean I think we are on the verge of where the casinos were. We are in the final phase, I call it the acceptance phase. We are pushing into that phase right now, but we are still at the very beginning of it. If you look at - what do they say, the first 10% takes the longest time, then the next 40 it happens real - happens in about half of that time. And then that last 50% happens overnight. So right now, we are on the verge of, I think, reaching right towards the end of that 10% and hope would go from 10% to that 50% acceptance level much, much quicker. So we just got to performing. We just got to keep performing. Adam, that is the name of the game. We got to keep performing. We got to keep putting out these numbers. We got to keep generation on the cash because, no matter what, at the end of the day, no matter what everybody thinks, what anybody says about the business or the company, the cash can’t be denied. And if we are generating that type of cash, and we are putting that cash back to work at 25% to 33% returns, then our 10% to 15% annual growth rate is going to be dwarfed, right, where going to a water at -.

If you look at your Bombshells’ returns, you are doing much better on an ROIC basis than 25 to 30. I mean, look, if you just start doing Bombshells and lease locations, your return on invested capital is 60%. And remember, if you do a franchise Bombshells, you are not out of any capital that is infinite return on invested capital. So when I look at your metrics -.

I agree. That is why we have moved in those directions.

Yes. Yes. No, when I look at the metrics of your kind of incremental capital opportunities, they are fucking incredible. So I mean, look, I’m so excited about what you have built. You should really be proud, and I’m not padding you on the back, and you shouldn’t be padding on your back, but it is just - it feels like the performance is so good, it shouldn’t be ignored anymore. So look, I’m happy to be the largest shareholder in this company. I think you are building a multibillion-dollar company and look, I really look forward to seeing the growth. And look, obviously, you don’t want to go out and raise capital, and we live that and we are not going to do that again. But I would say, on the margin, I think more exposure through additional research analysts and all the rest. I mean, look, I think this is an opportunity that is still very much misunderstood by the public. And I will say that the sooner you get your cost of capital in line, the sooner we start enjoying the vicious cycle that is the public capital markets. I mean the only reason why a company would be public is to have access to capital, and you have never had access to capital. So look call me a blind optimist, but I believe that if you turn over enough rocks and get in front of the right sell-side guys or buy side guys, you will get that cost of capital, and this will not just be a $1 billion company, it will be a multibillion-dollar company.

From your mouth to God’s ears, I hope so. We are pushing for it. We just got our cheapest loan ever at 3.99%. Once we get our appraisals back, we will close this loan with Centennial on our Refi, which will free up $4.9 million in cash, saving us over $1.8 million in interest expense a year. I mean that is just bigger or bigger than we did when we did our $80 million loan and had the savings in 2017 that really started this run. It is just everything is coming together, everything just reinforces the previous move and then the next move. And so it is actually getting easier and easier to make the maneuvers we need to make, to find the properties we need close the transactions. We have got the prototype store down. So they are getting easier to build and cheaper to build for us. And I think as we continue to move forward, the returns are going to be better and better.

Great. Well, look, I’m very, very pleased with the performance, and I look forward to fighting the good fight.

Me, too. Thanks Adam.

[Operator Instructions]

Eric this is Gary. I received a question on the email. Somebody was asking among people that have franchise - multiunit franchise operators. What parts of the country are they interested in, is it the southern area or is it all over?

I mean we have talked to people from all over the country right now is just finding the right qualified people is our biggest concern right now. Yes. So I mean, it hasn’t been very - geographically, it has been very scattered as to where people are calling about.

Our next question comes from the line of [Peter Cyrus] (Ph), a private investor.

I wanted to ask - and I would just say I’m glad actual you know 160. Thank you, Adam. I want to ask about the club business. With all the clubs that have been closed for such a long period of time, are you seeing really motivated sellers at lower prices than you have seen before or not?

Not really. The big guys are surviving in their way. They know what their businesses work. They know what their license is worth. A lot of the big guys own their real estate, so they are not in those situations. We have gotten calls from I would call small to mid-sized clubs where they are very behind on their rent and their landlord is trying to throw them out, stuff like that. And we have been talking with them and trying to figure out if something makes sense. But we are looking for right now, I mean, we are still being a little picky. We are swinging for the fences. We want to do the big type acquisitions like carless in Miami, Rick’s in Chicago, Rick in Pittsburgh, the Boston type transactions. Those are the transactions we are looking for. Those are the clubs we love. They are the clubs we know just I call them ATM machines. All we do is plug them in and just collect our cash. So overtime we to -.

Okay. So it is not the small places that you could pick up on the sheet. It is the big places that also generate cash?

Those are the ones we are looking for. And the owners that are just tired of it. You are tired of the hassle, you are tired of the call at 3:00 o’clock in the morning, you are tired, those type of things. Those owners are 60, 70 years old. The problem is they love the cash flow. They are not so much in love with the business anymore. And those are the transactions we are looking for and we are trying to convince them to - if they take paper, they basically create an annuity for themselves, they can collect payments from us for five-years, 10-years, 20-years. We can structure a deal however they want, they can defer their tax, they can for their taxes, there is just a lot of options that we offer them as a publicly traded company. What is crazy is we are starting to get a lot of requests for equity. Hey, let’s do a stock-for-stock deal. Give me some stock and take my club because stock or stock deals aren’t taxable, they can sell the stock and it. But I’m just not comfortable even at $46, $48, I think the stock is still cheap. I just don’t see - with what we are seeing in our numbers with what is open. I mean without getting too much detail, but I mean - is incredible right now, 50% occupancy and killing numbers from previous years. Scarlett, in Miami, oh my, gosh 70% year-over-year numbers, I mean, with 50% occupancy. Let me open it up and pack it out again and let me see what I can do. And that is why I said, when Adam starts talking about, hey, you are going to do this. Are you going to do that? It is not crazy if New York opens to those types of print, Chicago is opening as we - the problem is we don’t know in Chicago, we don’t know in New York because we are not open at night. We are only going to we are closing at 10 o’clock. We are closing at 11:00 o’clock or close at 12:00 o’clock at night. When we are open our normal hours, I think those clubs are going to do unbelievable numbers.

So I just want to go back - one second. I want to go back what Adam spoke about cost of capital. Are you ruling out an acquisition that would include some equity -.

We are not ruling it out. No. We are definitely not ruling that out. What we would value our paper at in that acquisition would have to be negotiated. So in other words, if you took paper and you are going to roll your club in or whatever, and you said, look, I know your stock trading for 46 a day, but I will give you some of the upside because I’m going to roll in an acquisition. I will take stock at for $54 a share or $56 a share. And we will just have to price the whole deal in. I don’t know what the number is at this point, because we are not that far along on any of these transactions yet, but there will be and we are getting people that are asking for equity now. So we will look at it. We will consider it. But it has got to make sense. We are not going to make the mistakes of 2008. We are not going to make those mistakes again. We are going to make sure that everything - we will have lockup and leak out agreement. We will have - I mean, if we give up equity, it is going to be a very tight control a way that they are going to orderly put that stock into the market at some day in the future. Because for us, it is about long-term shareholder value, and we are not going to do anything that could possibly jeopardize that.

Great. Well thanks and congratulations for managing through this pandemic the way you have.

Thank you. Our team has been unbelievable, and I really appreciate them all. We have been great.

[Operator Instructions] Our next question comes from the line of [Alex Hardman] (Ph), a Private investor.

Eric, this is Alex. I had a quick two questions around the capital allocation strategy. One, I mean, first off, it is been a while since I ever had to think about this, but I mean, finally, the stock price is up there and above your free cash flow a 10% level. I was wondering on the on the bottom side, I mean, have you guys looked at possibly - you pretty much are assuming a 10% to 15% growth rate. Have you thought about pumping that threshold up to like assuming a 5% growth rate over five-years at your threshold for buybacks instead of just using current free cash flow? And then on the top side, you guys have like a hardened pass like we are definitely not going to do equity deals below a certain threshold, maybe like the cost of after-tax debt or something like that?

For sure. I mean we just brought money at 3.99%. Our cash flow yield on our equity is nowhere near 3.99% yet. So I mean, we definitely have cheaper capital than equity at this point. Even with the big loan, if it is 5%, 5.5%, the after-tax yield on that is still pretty low. The stock would have to be another $20 higher to be anywhere near that. And that is kind of basing on 2019 numbers. We are going to get through 2021, but I think we are going to exit 2021 at a much, much higher free cash flow run rate than we were in 2019. That is a definite. We have more Bombshells open. I think the clubs are going to be performing better. And the Bombshells are performing better. A lot of places are not reopening. I mean it is sad, but COVID put a lot of businesses out we also have the benefit of the tax deductibility of meals and entertainment now at 100%. So that is going to make a big difference in spending as we go forward for the next two years. There is just a lot of pluses that make me say, I’m going to hold this equity really, really close to the best, not in then a hurry to go out and I mean I have had two investment bankers that have already called me trying to get me to do converts at $60, trying to get me to - hey, would I sell equity at an 8% discount to the current price, market price, no, I won’t, it s not going to happen.

Definitely don’t do that again.

No. I would say we have been there, done that, got the blooding T shirt. We are going to continue with the plan. It is been working very, very well for five-years for us. Are we excited about stock price? Sure. We get excited is like everybody else. But I always tell over my friends because I get friends coming, wow, you made so much on you made so much in say, hey, it is monopoly money. Okay. I can’t do anything with it. It just looks good stacked up under my side of the Board. But it is really kind of an afterthought to the business. We really are focused on the business side of things. We are focused on generating more and more free cash flow every year and doing the right deals, just finding the right deals, doing the way it does, we are not in a hurry forum. If we had 10 of them tomorrow, and they were all right, yes, we would do 10 deals tomorrow. If we don’t find a deal in the next six-months, that is right, we won’t do a deal in the next six-months. I mean that is just the reality of it. We are not started for deals, but we are not scared of them either. If the right stuff comes along, we are going to make moves. And there is stuff coming up. I mean we are kicking a lot of tires right now. Looking to a lot of windows. And I’m seeing a lot of stuff that I like. Now the used car lot, we are digging under the hood, right. We are doing the inspections. We are checking things out, and we are going to I think we are going to start having quite a few possibilities as we progress through the next few months. And it is going to be a very exciting summer for us.

Sounds good. I mean, I’m looking forward to it.

Me too. Thanks Alex.

Our next question is a follow-up question from the line of Greg Pendy with Sidoti. Please proceed with your question.

Just flipping on to Slide 5. Can you just give us a little bit of color on just the operating margins at the Nightclub segment, how you got them kind of at 33 7, that looks like a pretty big job. And then also, should that come down in 2Q, given the New York reopenings at reduced capacity, will that actually weigh on it, albeit it will be positive for the top line?

Well, I will say one thing I weigh on anything because get member, he’s paying all the expenses now. We have kept our general managers on payroll through all of this other key personnel in certain locations, we have kept on payroll. Continue to pay them. Some of them since March of last year. We have paid our rents. We have paid our property taxes, our insurance our electric bills and gas bills and water bills. So when a location reopens, I have to have Bradley verify for me, but I don’t believe we have had locations that have opened that we have kept open for more than three weeks, if they are not generating more cash than they were costing closed. So basically, everything that is closed is an anchor. And as soon as it opens, it is wind in the sales. So it is all a plus. I think that is what’s helped keep the margin so high. And just keeping our costs down. I mean, our guys are watching costs like they have never watched cost before. And they have always watched costs very well. We are questioning every dollar spent through this COVID process. We were forced to. And the beauty is it teaches you a really, really good lesson in that when you have to struggle and scrutinize everything, as the cash flow starts coming back in, once you have created that habit, it is a hard half to break. So we keep questioning if this bill goes up or that bill goes up or this item, they are charging us more for why. Why are you raising our prices? Why are you doing these things? Everything is questioned now. And I think that is just going to be part of our internal culture at this point. So I don’t think we will get a lot of creep. Obviously, as things get better and better, every business has a creep at it. But if it is one point, it is one thing, but I don’t think you are going to see that - on the you are going to see us back on those high numbers, I mean, of cost, we are going to keep those down. And every time something else opens, I think we are just going to do better at this point.

Got it. And then just any color, how is attendance looking for the expo?

I don’t know yet. I haven’t talked to Don, who is the President of Ed Publications and manages the expo and runs everything. I haven’t talked to him about - I know that it was not looking good for the Vegas, which is why we ended up canceling and moving it to Miami in May. And so I have talked to club owners, so I know a lot of guys are coming. I don’t know what kind of - I don’t know if they are going to come themselves, if they are going to bring a bunch of people with them. That, I just don’t know yet. We probably won’t have more color on that. I think this year, most people plan expo, I think this year, everybody is going to do it last minute. I think everybody’s going in a wait and see mode, okay, what’s it going to be like, how is COVID going to be affecting it? What do the numbers look like? Am I going to be vaccinated by then, those types of things are going to have a lot of effect on Expo turnout. But I do have several meetings in May. With some groups that I have been looking to talk to. And we have all agreed we will meet at Expo in May. So I know those people will be there. So I think we are going to get about an average or above-average turnout is what I think will happen.

Got it. Thanks.

[Operator Instructions] Our next question is a follow-up question from the line of Adam Wyden with ADW Capital. Please proceed with your question.

Yes. Eric, do me a favor, can you stop taking questions from your guy, Alex Hardman? I mean I think the guy’s got COVID or he’s got on hallucinogens because I don’t know what math he is doing to have a free cash flow yield lower than 10%. I just bridged you to $8 a share of free cash flow, that doesn’t include any new Bombshells openings or any incremental M&A. I think it is highly likely that your free cash flow is higher than $8 a share, and last time I checked the stock was $46 less. So if I open up my TI 83 and I do [8 divided by 46], it is about a 17% free cash flow yield. So I don’t know what he is smoking. Look, I think what you said, and which was right, is that there is a high probability that that number is actually higher than that because what will happen is that everybody will come out of their house. And you are seeing what toot season, all these guys are doing with 50% occupancy. I mean how do we know that EBITDA is not $150 million organically because all these things are comping up it sixty. And remember, you have 100% incremental margin on the Nightclub once you get over faced cost because remember, you can just take the cover fee from $50 to $100 and discharge and make people do $2,000 minimums in New York. I mean, I think you talked about it. I mean, remember what they even think made a movie about it with JLO in 2007 Lehman Brothers. I mean there were strippers in New York, making $1 million a year. I mean, look, they made a fucking movie about this. I mean I believe that when we get out of this thing, you are going to see with capacity restraints taking down, you can see that my $100 million of EBITDA is predicated on a 10% stack comp. What if it is 50%? What if it is 100? I mean the problem with this is you get people idiots on the conference call, basically saying you are trading at lower than a 10% free cash flow yield. I mean I literally want to hang up the phone and jump out my window.

He is looking at 2019. I mean, he is just looking at 2019. And I think he is just looking at 2019, he is looking trailing. We are looking forward. And I think we got -.

Last time, the stock market looks forward. Remember, you had Bombshells making no profit, okay? We know that Bombshells are making a ton of profit. Guess what share count is lower. Interest expense is lower, G&A and marketing is lower. You don’t have the SEC, you don’t have the accounting. I mean, it is like saying, Google made $1 a share two years ago, and now it is making $10. You want to do the dollar share, you want to do $10. I mean it is literally, I want to hang up the phone, I’m so angry. Maybe that is the opportunity, and maybe that is why the stock is still trading at 47. But I think the better answer is that we need to get people to actually peel back the onion and do math. I mean I went to work in Columbia business school, but this is fifth grade math, okay? You don’t have to go to more in the Columbia business to do the math, right? You have fixed costs, you own the real estate, you have really, really high incrementals on the Nightclubs, right? Franchises or 100% margin, right? Like it is not rocket science.

We just got to keep it everything open, keep doing it, keep showing it, and we are going to get there. Each quarter seems to be getting better and better. I don’t think this quarter is going to be any different. I think January, February, March is going to be better than October, November, December. For the first time, and I think I look -- I would only go back seven-years when I went looked, and I didn’t find one single January that ever beat a December. This was the first time ever that at January beat December. Our total revenues in January were higher than our total revenues in December.

It is not logical, Eric. I mean, the reality is -.

I know. I understand it as we get more things open, more people are getting comfortable, and the spend is going up. That is what we are really seeing. But if look our service revenue are still down, our service revenues are still down 40%. So when those service revenues come back, that is that late night VIP spend that we are not getting because we are closing at 10:00 o’clock. We are closing at 11:00 o’clock. That is 95% margin money that we are about 92% margin money that we are missing. Imagine doing 40% more revenues with 92% margins on it. That is when the nightclubs are going to be really cranking. And I think we are there by May. I’m not 100% positive today that May is - but I project out on what I have seen and how I have watched things over the last due to this COVID crisis or whatever we have suffered through, that is when I see the restrictions the majority of these restrictions being lifted as we get through the end of May. And if it is the end of July, it is the end of July, I mean, another 60 days isn’t going to be the end of the world. They are slowly being relifted, right? So we are getting incremental growth, incremental growth, incremental growth, sequential quarter-over-quarter growth through COVID, and I think we are looking at 12, 18-month run of this. I can’t see three-years out right now because I don’t know what the world would look like then, right? I mean it is too hard to gauge exactly we are going to be. But even if we even if we grow like that for 18-months and then we have a 12-month or 18-month decline in 3% or 4%, 5%, who cares? We are going to be an astronomical numbers compared to where we are today, and our stock price is dirt cheap. In our free cash flow, like you said, the free cash flow you are looking at for 2019 is chump change compared to where we are going to be by the end of 2022.

You are going to be double. And the reality is this is like the - we talked about. We talked about [indiscernible], right? Like all the other ships are crashed in of the dock. You stayed alive, and look, I’m just telling you, you stayed alive. And the reality is that when the reality is when everybody else has their both crash and you got your boat, well, you are going to catch all the and so my point is everybody wants shrimp, and you are going to have it. Because remember, if you listen to stand Drunken Miller, you are saying it is going to be like the [waring] (Ph) 20s, there is going to be inflation, people are going to spend money. So you are going into that could identify like the war in 20s, and you are the only borrow but and everybody wants to [indiscernible]. So I mean, look, 100, 120, 150, you are going to be doing numbers that you have never seen before. And all I’m saying is, the sooner you are able to get people to recognize that, the sooner you will be able to get your cost of capital, right, to take out your competition -.

And make it even quicker.

Yes, and make it even quicker.

Maybe it is self fulfilling right, self fulfilling. As we do better, doing better, gets easier. As our cost of capital goes down, it gets easier and easier to do better.

And you can take advantage of the opportunity, right? I mean, a guy that you would normally pay six times EBITDA for. If your stock is not there, you’ll tell them, hey, my stock is cheap I will pay you 3.5 times EBITDA. The same thing is saying, hey, I will pay you lower on your EBITDA, right, if you want equity, fine, I normally pay you six, I will pay you four, I will pay you 3.5. I mean it doesn’t mean you have to - there is all these different ways around it that is my point.

Exactly. At the end of the day, it is going to boil down to free cash flow for share generation and making sure the deal is accretive to that. And as long as every deal is accretive to our free cash flow per share, the structure is secondary to that principle of generating additional free cash flow per share from every deal.

So let me ask question, why do you think that we have these bonehead investors on this conference call like this guy, Alex Hardman. I mean the guys shouldn’t be allowed on the call. I mean, at some point, I can’t be the only person on the conference call doing math. We have to have other people map and we will stay here forever. I mean that is the reality.

Everybody values their way. I mean, I understand that, we just have to keep educating and keep showing and keep increasing the free cash flow, that is the name of the game. Eventually, their math will catch up with ours. In the meantime, you got in at the right time, right? I mean -.

[Indiscernible].

[Indiscernible] better than other people who were not doing the math right.

It is a better investment of 48 coming out of COVID than it was when I was buying it at 20 and 10 and 15 and -.

Certainly a lot less risk. Yes, there is a lot less things that can go wrong today than there were in May and June and July when you were buying, that is for sure. We are on the back side of it.

I would argue that like in May, June and July, it wasn’t clear on how the economy was going to rebound. Now I think it is abundant there to me that we are going to be the very 20s. Bubblegum shrimp is open for business. You have got all your votes. Everybody else’s cracking to the shore. And you have got your nets open, and hopefully, you get your cost of capital. So you are not just catching shrimp, but you are buying other people’s boats, right? You got to catch your own shrimp, and then you got to buy other people close, right? That is what we got to do.

Yes. For sure, if they get their boats working, the hardest part right now is a lot of their boats working. So they get their boats working again.

Good. Alright. I’m done. I don’t have any other. I hope we have no more Alex Hardman on the call. I hope that everybody should go to sleep.

Alright. Well, I got to go soon. So I appreciate the call. Thanks Adam.

Our next question comes from the line of Steve Martin with Slater. Please proceed with your question.

Hey guys congratulations. I have some more, one gain question. What do you think the timing is on the next couple of Bombshells getting open?

I think we are looking at sometime between August and November. It is really hard to tell these cities are - you would think they would be -- with not very many people doing growth and building right now, that they would be very quick on turning stuff. But with COVID, I think they are not in the offices. They are working from home. So I think the building permit process is as slow as it is ever been. Even though there is not as many people trying to get the permits, I think there is just they are just slow turning them. But I think we have got the permits in Arlington. They have been filed last week. I believe the San Antonio franchisees filing his permits in the next two weeks. So basically, it is really going to depend on how quickly they are turned, how quickly we get the building permits, both are basic remodels. So I believe the construction time on both will be three to five months. So if we get the permits turn in the next 60-days instead of 90-days or 120-days, I mean, that is the real unknown. Are we going to start building two-months, we are going start billing to four- months. And we will be open four to five-months after we start building. The good news is by the next call, I should know what permits have been issued, where we are at in the construction phase. And I would be able to give you a better time line than August and November. I mean, that is a four-month time line. I understand that. And so hopefully, I will be able to get you a much better window.

Another mundane question. You had some prior sale, both real estate and buildings? Where do you stand on those?

Well, we have a couple of contracts that I’m expecting in. We have been negotiating on hopefully, we will get some earnest money contracts signed soon and get those processes started. I have got a group that is looking at two properties in Dallas that we that we have leased to third-parties that they are not thinking about buying from us. So we may go ahead and sell those. They were looking for a 1031 tax-free exchange. And I mean, we would rather have the capital right now to do other things with than the return we are making on those leases. We have a property that they have just bought an option on - group bought an option on to close sometime between August and November. So we will see what they do. They are paying us $10,000 a month to basically keep the property off the market while they decide if they are going to buy it or not. We have got, like I said a lot target, we just signed the lease, I signed today, the tenant should sign tomorrow. We should have the tenants on that lease on the property behind the Bombshells on 59. We got a group that is taking the entire building of the 12,400 square foot shopping center we built there. They are going to rent the entire center. So that is a very favorable lease for us. We are excited about that. And they are an operator that only operates until 7:00 p.m. at night. So that will leave all the parking for the entire shopping center for Bombshells at night, like we wanted. So that is a win-win for us. I’m excited. We are getting - I think that the business world is waking up again. The political climates changed. The uncertainty is gone. We know - what do you say, they say, the devil, we know, and we will know that devil for the next four years, and businesses are planning accordingly. And people are growing. Again, especially in Texas, Florida, I’m hoping that as the northern markets awaken they will see very similar growth patterns that we are seeing here.

Alright. One last question. You talked a little bit about some of the northern markets. What is the - what do you see in the competition in terms of - are a lot of never open again in New York as an example?

I’m hearing. I mean, obviously, we don’t know. I’m hearing there is a couple of clubs in New York that are not going to reopen. They are repurposing the properties. And so hopefully, we will see. We don’t have a lot of competition in a lot of our markets. Some of our Texas markets, we have competition. I have seen some smaller clubs that have gone away. I noticed that like the Bombshells on 290 has a Hooters right down the street. I noticed the Hooters was all boarded up and had for sale sign on the building. So that location is gone for Hooters, whether they are going to build a new one someplace else or what they are doing. I don’t have any clue, but that is kind of stuff we are seeing a lot of small restaurants have gone out of business, especially the little mom pop restaurants that just aren’t reopening. Most of the restaurants that are reopening are the big chain restaurants. But I think that will only last for a brief period of time. And I’m guessing 12-months to 18-months, we have a nice 12-months to 18-month run. And then I think you will see new entrepreneurs awaken and new places start to open and competition will start returning to a more normalized deal. But I do think we have a very nice window of opportunity here over the next 12-months to 18-months.

Thanks a lot and I appreciate the stock at this price. So though I don’t quite have the target -.

[Operator Instructions] I would like to hand the call back to Gary Fishman for closing remarks.

Thank you, everybody. And thank you, Eric, and Bradley. And on behalf of the Company, thank you for listening, and good night. Stay safe, stay healthy. And as always, please visit one of our clubs or the restaurants. Thank you.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.