Greetings and welcome to 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 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 host of our call today. I'm here in New York City with Eric Langan, President and CEO of RCI Hospitality; and Bradley Chhay, 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 aren't doing so already, it's easy to participate in the call on Twitter Spaces. On Twitter go to @RicksCEO and select the space titled Rick RCI Hospitality Holdings Inc. 1Q '23 Earnings Call. To ask a question, you'll need to join the Twitter Space with a mobile device. To 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 webcasting. With Twitter having glitches today, in the event of a crash we’ll restart the Space, and if that fails, more to the tiling. 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 statement. You may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call, as a result of developments that occur afterwards. Please turn with me to Slide 5. I also direct you, to the explanation of Rick's non-GAAP measurements. I would like to encourage everyone, to retweet and share this date. Finally, I'd like to invite everyone listening in the New York City area to join me and Eric tonight at 7:00 to meet management at Rick's Cabaret, New York, one of RCI's top revenue-generating clubs. Rick's is located at 50, West 33rd Street between Fifth Avenue and Broadway, a little in from Herald Square. If you have an RSVPed, ask for Eric or me at the door where I will be deploying my own capital allocation strategy after 9:00 p.m. Now, I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality. Eric, take it away.

Thank you, Mark. Thanks everyone, for joining us today. Total revenue came in generally as expected with Nightclub 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 $0.16 in non-cash, intangible amortization and stock-based compensation compared to a year ago quarter. Nonetheless, adjusted EBITDA 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 initiative. 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 Chicas Locas clubs in Texas. The Rick's 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 Bradley to review financials.

Thanks, Eric and good afternoon, everybody. Looking at the sum of the major numbers for the quarter, total revenues were $70 million, up 13.2%. GAAP EPS was $1.11, up less than 1%. Non-GAAP EPS was $1.19, up 8.2%. Net cash from operating activities was $14.9 million. That's off 8.4% 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 $13 million, that's off 14.6% because of the change in net cash from operating activities and about $1 million more maintenance CapEx that fell in the first quarter. Adjusted EBITDA was $20.5 million, up 13.9%. And weighted average shares outstanding declined 1.9% year-over-year, due to repurchase over the last year. Please turn to Page 7, to review Nightclub segment. Revenues totaled $56.3 million, up 20.4%. GAAP and non-GAAP operating margin was 40.4%. 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 lease locations. As a result operating income increased 21.4%. Now fiscal year 2022 and first quarter acquisitions added $15.3 million in sales. Same-store sales were up 1.2%. 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 same-store sales. Based on current trends this should result in growth in same-store sales. Please turn to page 8 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. Operating income was $1.8 million. Bombshells Arlington, which opened in December 2021…

Thank you, Bradley. Please turn to Slide 15. We currently have acquisitions and projects in development involving nine clubs. In October, we acquired Heartbreakers in the 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 forward. In late December, we reopened and reformatted a location in San Antonio as the Jaguars Club. The first quarter provided a 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 Dolls and Chicas Locas clubs in Texas. We are awaiting transfer of liquor licenses. The club should contribute $11 million in EBITDA in year one. And once we complete our expansion plans, they should contribute $14 million to $16 million in EBITDA. In December, we announced acquiring club assets in Fort Worth to create another PT show club. The remodeling is underway and the reopening should occur in the second half of fiscal 2023. 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 the state paid us. It is currently under construction and opening is expected in the second half of fiscal 2023. Fiscal 2023 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 2021 acquisition of the 11 clubs. Based on our management and optimization, we increased adjusted EBITDA 24%. That means we paid 4x for the operating assets compared to our original estimate of 5x their pre-COVID-adjusted EBITDA. Please turn to slide 16. We have…

Thank you very much, Eric and Bradley. I want to encourage everyone to retweet and share this Space. And I'd like to give a special shout out to Cynthia Daniels. I was very much enjoying your profile, while Eric was speaking.

If you would like to ask a question, please raise your hand in the Twitter Space, when you are done asking your question please mute your microphone to eliminate any background noise. We have a limited number of speakers Space's. 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. Our five analysts are Scott Buck of H.C. Wainwright, Anthony of Sidoti, Lynn Cole of Water Tower Research, Rob McGuire of Grant Research and Joe Gomes of Noble Capital Markets. First up, we have Scott Buck. Scott, take it away.

Hi, guys. Thank you for taking my questions. First one, Eric, could you talk a little bit about the trends you're seeing in the clubs in January and the first part of February? Still seeing some of the soft pockets in the blue collar clubs, or is that kind of worked itself out?

Yes. I mean I still think there's a little weakness. I was going over everything looking at a four-month trending deal with October, November, December, January. This January total sales were a little over October -- I mean I'm sorry a little over November and December's total revenues. So, I think that's a promising deal. Typically when we see these 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 will be a little shorter and that March I think is going to be the big turnaround for us. Of course we have Super Bowl this week. So this week we'll be abnormally affected by a one-time event for this weekend, especially out in the Phoenix market and -- as well as the two great teams with the Eagles and Kansas City in the Super Bowl, I think that's going to be a help a lot with viewership. It's to help the Bombshells in 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 costs as a pull forward from future quarters or is this in addition to?

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. And this year we had $6 million as our target. So 1.5 per quarter what our maintenance CapEx should be. Now that's an impact to free cash flow. However what we're talking about is repairs and maintenance costs. Those repairs were done in part of the winter storm and all that stuff and some plumbing. We don't anticipate higher than expected repairs and maintenance expense going forward.

Great. Appreciate the additional color.

Yeah.

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 as far as Bombshells, the operating margins there were lower than where we had projected. Can you just talk about kind of what happened there? And then how should we think about segment margins there going forward?

Yes. I think we got a little surprised at 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. 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 some growing pains in that -- in the previous years we've had less competition in the marketplace, because so many places were closed. We were some of the only places open after COVID. We were first to open after COVID, 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 new businesses, new restaurants have moved in and come into the marketplace. And they're going through their honeymoon periods, because they're new. And so everybody rushes to the new place for a while. But I think 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 as those places are no longer than their honeymoon periods. I would also like to remind everybody that same-store sales were still up 3.6% from our pre-COVID 2019 numbers. So overall Bombshells is still on course. We do have some cost -- the Grange Food Hall is in the Bombshells segment because it's a restaurants, we put that in the restaurant segment. So, were some cost there in the first -- last 10 days of December that didn’t really contribute revenue. And I think as the…

Okay. That's good to hear. And then given the choppiness in traffic in both of the blue collar locations and Bombshells, are you guys maybe perhaps rethinking your promotional strategy to do maybe more specials as far as for food or drinks, or like how are you thinking about that?

Yes absolutely. I mean we have been -- we kind of switched 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 and stuff. We did get affected a little bit -- pre-Christmas was pretty decent and it slowed down the week between Christmas and New Year's was a little off but then New Year's was -- New Year's weekend was fantastic for us. So, it's been a strange -- I would say it's been a little strange adjusting to it right? Because this -- I call this a psychological recession in that 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 things are going to get bad, things are going to go 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. But overall I think that by March -- I'm thinking by March out we've adjusted our plans. We're seeing like I said January was better than December and November in total revenues. February the short month we only have 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 if you do an average daily sales, I think February is going to be up from January. And I expect March will put us back on the path and we'll have to see how we run through this summer.

Got it. Thank you very much and best of luck.

Thank you very much Anthony. Next up we are going to have Lynne Collier of 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 in terms of the progress you're making?

Well, yes and no. We're in some negotiations right now. We would try to complete 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 get some color on that which I think will be exciting for us. Overall, we are -- we've done our 3D scans. We're starting all of our layouts. We're going -- we'll be up there Monday after Super Bowl to -- 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'll have the roofing and HVAC systems repairs and 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 1. A lot of that will depend on whether we can get our preliminary approval by June 1 which we should be able to do because that's about six months. And typically it only takes three or four so we may have it much sooner. We've been in licensing I guess going on about December January about 2.5 months. So hopefully based on what we've heard from historic from other operators in the Colorado market is that between four and six months you typically will get your preliminary approval so you can start your casino setup. So if everything goes right we'll be turnkey ready by November 1. And our total cost on that is we're buying most of our machines. We're not going to do a lot of leases or what we call they call participation machines will -- should come in just under $10 million between the remodel the machines, the table games everything else the security systems that type of stuff is what you think including the land and building cost of $2.4 million. So basically I figure we're going to spend about another $6.5 million on build-out and gaming devices and leave us about $1 million bank for start-up.

That sounds great. Thank you so much. I just have another question. It would being in Dallas and the weather has been pretty unfavorable. I know we're only a few days end of February, but can you comment at all on how the weather has impacted the last couple of weeks or so in Texas?

Yes. We 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 our Fuqua 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 your part Texas. You've seen it on the news that's where the tornado actually hit. We just got the tail of it I think or the beginning of it I'm not sure which. But it was pretty bad tornado. It actually ripped a metal the metal top off of our garbage dumpster and it blew out the fence on the roof like the AC units, HVAC or the [indiscernible] system was damaged. 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 fixed. Back the 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 1. I think I remember. It might have 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've been a little better off with those 10 stores and we've gotten those three days from those 10 stores. So..

That's great color. Thank you so much. I just have one final question and that's about Bombshells in Colorado. How many units or restaurants do you anticipate being able to build in the Denver area over the next couple of years?

We have about six site locations -- or 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 a -- I won't call it a turnkey location, but it's pretty close. Everything we're going to do is cosmetic. The current -- the previous operator left everything in the building, so all the kitchen equipment is there. It was a large operation, great location. And hopefully, we'll -- we're in the contract negotiation to get that under contract and close. And I think that if we can get this done in the next week that we could actually have that location open in time for the football season when the Denver Broncos have their first home game. That's going to be our goal is to get that one. So that one could be opened 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 property so we'll have bank financing on the purchase. So it will 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. 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?

Well, $1.2 million in cash and a $2 million note is what I thought I said. So if I misspoke that I'm sorry that is the -- the total purchase price was $3.2 million, which 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 then thank you again, Lynne. Next up we have Rob McGuire of Granite Research in a hold position. Rob, take it 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 closed by February 1. That was my plan. We were prepared and ready to close by February 1. We have a line of credit set up through our 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 Texas Beverage Commission has put an administrative hold on the transfers. So they can't turn their licenses in so ours can be issued. And ours aren't ready yet due to a couple of other issues with the cities, but all of our stuff is now in. It's in processing with the Beverage Commission. We're -- as they say waiting on the government. So hopefully I know the attorneys are working. Probably you'll have more color based on our discussions by February 20. I would love to see us close by March 1, but it could be March 15, it could be March 31. But I do think we will get it closed in this quarter. That's seven weeks. Surely they can resolve issues even dealing with state agencies. The problem is, we have a sense of urgency but they just don't have a sense of urgency. They want to get through the process at their speed and their time. And we'll just be sitting here waiting to go. But everything on our end is ready to go. We're ready to close the transaction. We have -- like I said, they have the money in the bank the line of credit setup. 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 POS in immediately everything on our side that go we're just waiting for those final approvals. So it could be -- I guess, it could be March 1st, it could be March 15th, or it could be March 31st. So I think sometime in that time, they gave me a couple of time deadlines on typical time it takes to do these things. And I think one was March 20 -- or I mean April 20 something March third date and I remember seeing like a March 30th date or something. So sometime in the -- sometime in that plan will get it done. But basically as soon as the licenses are approved, 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're looking at six potential Bombshell area locations. You've 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 look at some properties that are more expensive than Texas, in that market. But there's still a lot of vacant restaurant space out there. Unlike, Texas which opened pretty quickly, they were closed for a much pro-longer period of time. So a lot of what I would call better operators still walked their locations out there. So there's still a lot of land, I think tied up in courts and leases and stuff issues. So we're sorting through all that trying to find the right locations. Obviously, I 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 like 2023 is, the only growth -- we have to grow through acquisitions in this year, because we weren't doing any -- we weren't lining up these things in 2021 and 2022 like -- I'm sorry, 2020 and 2021, like we normally would have because of COVID. And so, the Bombshells, has taken a pause here. But now that we're coming back online and I think some of that has -- not having new growth kind of dulls 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 great things out of the Bombshells brand again. And for brand, we don't have another kind of COVID 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 restaurant division. So I don't think we'll have any problem getting there.

I appreciate that. And then shifting -- staying in Denver but shifting to the Nightclubs. You talked about the substantial improvement in operations from the, 11 Nightclub Acquisition you made, but can you talk about potential for lock them to continue to improve here? And just give us the backdrop on that?

Sure. So the plan is to convert that location into Rick's Cabaret Denver. I know the name has been there for a long time. But with the convention business there and the people that travel from out of the country Chicago, New York and other and Miami other major markets where RCI operates, we think that the Rick's brand will do very, very well there. We've been waiting for approvals for permits in the outside remodel and signed permits on that, which are all starting to come in and we hopefully will have that location converted by April.

Well, that’s it for me. Thank you so much and congratulations on the quarter.

Yes. Thank you, Rob.

Hey. Brad just one clarifying point. The Bombshells San Antonio franchise location. I know Eric said $1.2 million down, $2 million note, five-year and but two-year balloon 7%? Just wanted to put that all out there. Thanks.

Thanks, so much, Bradley and good thing you’re not referring to these five balloon that was recently hovering over. Rob, thank you so much for the question. And I want to encourage everyone to also check out Rob's recent video on misconceptions of the adult entertainment industry. Now before we move into our open Q&A session. I would like to encourage people to raise their hand to be called out, to be able to ask questions. We're going to bring in Joe Gomes as our final equity research analyst up to ask questions. Joe, take it away.

Thanks. Congrats on the quarter. Just wanted to go back to Bombshells for a second. I know we're kind of beating the 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 left so to speak? And even though Bombshells is performing better than pre-COVID, it has been somewhat negative on a same-store sales basis here, I don't know the 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 and foods up for especially for maybe your top 50% of the population your bottom 20 probably getting very squeezed by those things. But there's 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 reports were back to work within one week. Unemployment claims did go up. On as last time hundreds of thousands of people were laid off in a recession and unemployment payments 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 being the Bombshells look, we've expected – we knew we were going to get very hard comps. We knew that as all these new restaurants and all these spaces were being leased and we saw the construction going up that we were going to be effective for a period of time at those locations. We're adjusting our model. We're doing the things we need to do to get Bombshells back to their 18% to 22% margins – excuse me. And I think it's just going to take time. We have to work through it just like – when everything – back in 2008, 2009, when we saw the…

Thanks, Eric. One more for me here. You didn't talk anything at all today about admire me. I was just wondering, maybe give us an update on where that program stands today? Thanks.

Sure. So as of January 1, we have replace our developers. It was a very tough decision. And our developer was a Ukraine-based company. Ukraine is in a war as everyone knows. We tried to stick with that group and they've just been unable to perform and meet the standards and the time lines that we wanted. The new company came in on January 1. They took about six weeks to basically learn all the code, get the code together. They're now making a lot of the -- what we call bug fixes, they're getting the bug fixes fix everything works correctly again. I would suspect that in about three months time, they will get us a viable product. That's our hope. I think, the problem 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 and while they fix that they break something else, because they weren't a coherent team. The new group we have is a very coherent team. They're 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 – I guess, I suspect about three more months, we'll have – maybe next quarterly call we'll have some much better news on that front. But that's a problem with technology but at least we're not billions of dollars in like Meta. We're keeping our cost relatively inexpensive relatively low number for the company on that transaction..

Great. Thanks for the insight Eric. 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 – you look like you got a question do you want to ask anything?

Yeah, I do. Congratulations on the quarter Eric. Great quarter, I want 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 want to know a little bit more about that about what the expansion plans are there.

Sure. Thanks for the question. The main thing we're doing out there right now is creating an entertainment zone. If you're familiar I know Barstool Sports and Penn Gaming have the Ameristar out there great property one of my favorites, but there's no entertainment. There's no night clubs. There's no fun places, I would say other than casinos. You all a gamble if you want to hit the tables you want to hit the spot. That's great out there. If you want to go the outdoors it's great. But as far as nightlife and for younger people, one of the big things when we first started looking up there and almost passed, because I was like well, I mean, this Colorado casinos for since 1990s come on. This is nothing new. 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 a study and I said, well, wait a minute. They had $5 bet. Then they had $100 bet. Now there's no limit. In the trailing 12 months through June 30, 2022 $9 billion went into slot machine in Black Hawk Central City area. The average keep was 8%. It's huge. The amount of money was huge. And so we said well, okay how are we going to differentiate ourselves? I don't get to come just be the same thing. And so we saw let's build a club. Let's build a Rick's Cabaret up here, and let you have nightlife entertainment. Let's turn the music up, and let's draw the 30-year-olds up here, because right now they rarely come up here. As we were going to the clubs, I was talking to all the people in our clubs, especially all the entertainers the wait staff or bar tenders, all this age group that's that 20 to 35-year-old crowd I said "Hey, you all want to go to Central City, I want to go to Black Hawk with me tonight, why? There's no reason to go because there's nothing to do. And so what we want to do is create – take Main Street in the City of Central, and say 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 control the nightlife, so on the street got closed 11:00, it's a residential area. So, all the stuff goes down 11:00. We call everybody into the buildings. We built a couple of nightclubs or turn the music up and I think we can do some unbelievable business up there.

Phenomenal. Thank you so much for that question. Now next up let's bring Adam Wyden up. Adam? And Adam before you go ahead. [Operator Instructions] Adam, I think you are on mute. Q –Unidentified Analyst : Can you hear me?

Yeah. Now we can hear you.

Yeah. Q –Unidentified Analyst: Perfect. All right. You guys -- 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 logistical questions and then talk bigger picture. So on Slide 15, you have a whole thing about club acquisition and development and on Slide 16 Bombshells acquisition development. And as you know in restaurants and sort of club business, when you're doing a lot of remodels and your -- Bradley talked about maintenance CapEx and repair and maintenance, but I suspect a lot of the clubs that you had to shut down, clubs that you had to reformat, the grading or the beer haul, I mean you're 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 2023. I mean do you -- and then on top of that, 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 -- I don't call it onetime, but sort of how much sort of preopening or growth CapEx or sort of onetime stuff that sort of will be reversed in the coming periods? Is that -- we sort of have our arms around sort of $2 million or $3 million 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 onetime cost investment that will manifest itself in revenue in future periods.

Yeah. So 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 there's carrying costs. Like you said there's legal costs, survey costs those types of things. Those are not capitalized. Those are expensed for the most part. And so yes, there's cost. 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 many properties, it starts to add up and it becomes a larger number. And what you're going to see, as we move into the end of 2023 or second half of 2023, definitely I think in the fourth quarter of 2023, you're going to see these -- the early units of Heartbreakers, Jaguar, San Antonio the acquisition or maybe I certainly hopefully closed by March 31. I mean I will be all over if we're not open -- we're not done with this by then, but they should be able to get this work done. Our side is done. We -- like I said we're just waiting on the state of Texas and the seller to work out a couple of issues they have with each other. The Jaguars club in Lubbock which is under construction in the PT sub. All those are taking cash out right now, but that's going to reverse as soon as they open -- as soon as those locations are open and it’s a double source. So let's say we are spending $0.50 million or $1 million a year, and now of sudden you got units to start making between $0.50 million and $2 million each…

Or several smaller units could still happen. We've got about $90 million, right? We're at about $110 million, right? We put the $90 million and $20 million, get you about $110 million. Thinking about $90 million, so 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, I mean, yes, it's -- we've got plenty of time. We're literally four months and nine days into the year, right? So barely over a-third of the year is over and we lined up $110 million investment so far. So to think that we can't line up another $90 million in the next eight months, I guess, I could take a long vacation and miss, but I don't plan on doing that so -- Q – Unidentified Analyst: Yes. Eric, this is helpful. And then, I'm going to have to turn my question sort of out of order, but like I was talking about it with someone that works internally at the firm and isn't an analyst, isn't a stock person, but sometimes it's helpful having sort of non-stock people and they said well -- and in the old days, you got all these guys that are getting older, and they weren't earning any money in the bank and they just went through a global pandemic. Now you're giving them 6% seller finance, and there's actually a cost to their capital is sort of the point that we're making. I mean, you see this in the '80s. You see this in the periods when interest rates go up, smaller guys sort of get squeezed out, there's a cost to their money and you sort of seen consolidation. I mean, do you think the higher interest rates and sort of just going through COVID could actually bring some of these guys and say look, I don't want to go through another downturn. Eric, is going to give me money from my club. He's going to pay me cash, stock, 6% 7% 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 in saying look, 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're getting those calls, we've been getting those calls. COVID kind of got some pretty major players, interested in selling as you know from the Denver acquisition, which was -- has been fantastic for us. I think there's still room. We're still going to have growth. I mean trailing 12 months, 24% increase over their 2019 numbers. And I think that we'll see more increases in trailing 12 months, from today, I think that number is going to be even better. So as we move forward, I certainly think 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, and that's one of the things I wanted to lay out, in this slide, is just how much we've actually been working, right? Because you guys don't see this. Until you announce it and we open. When I buy, a $1 million piece of land or maybe $0.5 piece of land it's not material. I don't put out press releases over 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 mean, I've been talking with a couple of owners and like look they're like I want 4 times or I want 4.5 times and I'm like well you've got a 3 times unit. I'm sorry. I can't pay you 4.5 times for a 3 times unit. If you want to give me some better terms, you want to carry more paper. You want 65% cash down. That raises my cost. I'm going to pay you less. One way or the other, it balances out. Now if you want to take, if you want to…

Well, I'll respond to the 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 preliminary numbers are very similar to 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 run out for $300 a night. I know that based on my observations 60% plus of the people out there are men mostly 30 years to 55 years of age in Black Hawk. Now in Central City it's a much older crowd but I'm going to draw those younger guys to Central City which is -- it's basically everybody says Central City Blackhawk, but it's really one area. It could be one town. It's so close together. And so you don't even know if, they didn't put a sign up you wouldn't know you're leaving one town and entering the other. You would think you're in the downtown district which is the old town and you drive out in your -- in the new part of town is basically how I see it when I'm out there. I don't think the road is 1.5 miles long that connects the downtown -- the old town to the new town. It's a very, very short very close knit little area there. People that work in Blackhawk live in Central City people that live in Central Live and…

Thanks Adam. Appreciate it.

Thank you so much for that question Adam. Phenomenal actually more than one question, plural. Next up we're going to bring Ticker History -- actually let's bring up StockMKTNewz Evan. Evan, please the floor is yours.

Yes, I appreciate you let me get a question here. Fantastic quarter. I'm also a really big fan of the Rick's CEO account, the person hosting the space. So, first of all everyone down below make sure you're following the account. And that's kind of where I want to dig into my question. We're doing this on Twitter Spaces. You're very active on social media. I would love to hear a little bit more about how your use of social media has helped the company, helped the stock? Anything in general, but really how you've seen your use of social media Twitter Space is kind of helping Rick's?

Sure. I'll tell you what it's done. It's been amazing. We've been able to communicate directly with not only end users of our product, investors in our company, potential investors, critics it's -- to me it's so engaging. I just love the immediate feedback. I can post something. I can ask questions. I can do hypotheticals. I can just be goofy if I want to. It's just -- it's a great -- it's just it's a great tool, I would say with Twitter. One of the main things I would say that what has Twitter done for our shareholder base. We started out -- I have to go back and pull the exact numbers, I don't know but it's 6,000 -- between 6,000 and 7,000 shareholders on our name list finish the owners list. And I think now we're getting close to 9,000. I'll get the new list on the 15th of February. We'll kind of see if that trend has continued. I saw institutional ownership dropped from 54% to 42%, and yet our stock was hitting all-time highs. This never happened before, right? When you lose your institutional ownership, your stock crashes. But that didn't happen with RCI. And I can say -- the only thing I can contribute, the only thing we changed was 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 it's going, how it's been going. I throw two parties at the clubs and it's money because 20 30 people show up sometimes. Sometimes four people show up. Sometimes one guy shows up. And me and that guy get to sit down and have a drink together, and talk and I get to hear one-on-one, why did you come here? Why did you do -- what do you like about us versus somebody or other clubs you've been to? I get to get just direct feedback, and to me that's incredible. My direct messages. I follow people. I don't care if your account has a small amount of followers or a large amount of followers. You tell me you're a shareholder and you engage with me, I'm going to follow you, so you can direct message me. I get a lot of direct message. We can talk. And 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. [indiscernible] we're going to get to you next. Great profile picture by the way. But first, let's bring up Orchid Wealth [ph], you're up. The floor is yours.

Hey, guys. Great quarter. I just was going to second Adam's comments. Obviously, with the vast majority of the money constantly coming from the strip clubs, adult clubs a lot of Bombshells talk and focus, I feel like people whoever is listening and wants to focus in on that does not understand the entire story. I'm completely behind this idea about this casino expansion. And like anything else, I have faith in what you're doing, Eric. I really don't have anything to add other than just to congratulate you. I'm happy that you're moving into the space. And from the looks of things and the way you've done things in the past you have my confidence with my shares. So I'm going to just leave it at that. Thanks.

Thank you. I really appreciate that. It means a lot. I mean that's what I said. This is -- that's -- that there is why I'm on Twitter. It's why -- it's been so important. It's why I spend so much time. And I know I've been in Colorado over three days. I don't think I've made two posts in three days. I was looking at my engagement. I said, oh man, I'm way down. But we've been out there. We've had non-stop meetings to give credit to our Vice President Travis Reese. Man, he is engaged in this casino stuff in the laws in every aspect of creating this new concept. So one of the things, he's good at helped the Bombshells and help create that concept and really got it started before we brought a restaurant expert in who basically fixed the concept turned it into what it is today. And Travis has been great at that. Very happy we've been -- 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 spend time with him again. But his engagement in this deal in Colorado has been fantastic. So, I want to throw that out there say thanks to Travis for that too.

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 was 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 brewery is nothing like Robust. Robust is basically a generic product that has a flavor profile very similar to the leading brand, which Mark is drinking right now. That's a no, no in RCI world, now just joking. But seriously it saved us about $20 a case off of the major brand product. We were using about 25,000 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, because we've grown so much. And so it was more of a cost saving deal. We just bought the product at first, but then they were trying to expand the brand. And so we bought into it. Probably shouldn't have done that. I probably wouldn't do it under our capital allocation strategy today the numbers wouldn't make sense, and we probably wouldn't have moved in that direction. But we did. And then we ended up loaning them money that they couldn't pay back and so that we ended up basically 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 slice 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 market that sell by thousands of cases could save so much money with this product. And from a chemical standpoint, it's one molecule different. It's not -- it's very, very, very -- when it's mixed with any type of alcohol whatsoever you can't really tell the tale. I call it the Pepsi Coke challenge. If you remember the old days of the Pepsi and Coke challenges of exactly the same thing. I…

Fantastic, phenomenal answer. As a very hard consumer of energy drinks I cannot tell a difference. Next up we have Hot Girl Capital [ph] and I would just take a moment to encourage everyone to raise your hand if you have a question, because we’re starting to get towards the end of our Q&A segment. Hot Girl Capital. Take it away.

Thanks, Mark and congrats on a great quarter. I'm super curious if you guys are going to do any like celebrity or brand collaborations?

Well, we're talking about that with the casino right now for sure. Definitely what admire me once we get a viable product we will definitely be doing some stuff with some influencers in that regard for sure. Mark and I have been brainstorming a few ideas around our new merchandise store that we're getting ready to launch. So yes, there's definitely going to be opportunities for that. And as we're getting – I'm still relatively a baby on Twitter. I was – my one-year anniversary was the other day and I said, well that was just the day I signed up. That wasn't really my one year in or – my real one year anniversary of sometime in May after I met Mark. And he said, why don't you try doing this and do some of this stuff. And then of course they wrote me a little bread and got me some stuff going. And the more I started this. So I think May is probably really my first one year anniversary. So hopefully, we'll – we can – they keep telling me 10,000 is the magic number I got to get. You have to get to 10,000 cards. You have to get 10000 followers. So hopefully, by May we will be there. I think definitely by November, when we opened the casino up we'll get there. But yes definitely looking at some different ideas with influencers and doing some collabs on certain things to bring people 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 the vision is now moving forward?

I think we laid that out pretty well on Slide 15 and 16 on what we've been doing and how we're doing it. 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 have an expected cash on cash return. I know the construction stuff. I'll be honest, I hate construction. I hate those new things. I'd rather just go out and buy Nightclub-after-Nightclub-after-Nightclub. Unfortunately, it's just not that easy. Someone's saying to me, well, you should just have a whole stream a whole line of clubs line up. I said, well, we kind of do, but you don't have sellers. So they start doing comparisons to Carnation and Waste Management and AutoZone and all these roll-ups. And then, I said, yeah, I have 500. And I already own 50 of them, so there's, about 450 targets. You're talking about acquisitions where they had 45,000 targets. Yes, it's easy to line up two or three acquisitions a month or a quarter when you have 45,000 targets. When you have 450 targets and of those 450 targets there's multiple players, multiple of multi-club operators so you're 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 you've got to have people that are ready to sell. I know a lot of these guys are older and they are thinking about it. The multiples as we started paying four times to five times multiples instead of just three, because we used to -- we were just stuck at just three for a while. So certain locations have probably worked more, until…

Amazing. And with that, let's all get wealthy together. Thank you, Eric and Bradley. For those who joined us late, you can meet management tonight at 7:00 at Rick's Cabaret, New York one of RCI's top revenue-generating clubs. Rick's is located at 50 West 33rd Street, between Fifth at and Broadway, a little in from Harold Square. If you have an RSVPed ask for Eric Langan or me at the door, after 9:00 p.m. however I will be busy implementing my own capital allocation strategy. On behalf of Eric, Bradley, the company, our subsidiaries and my favorite dancer [indiscernible] on Instagram thank you and good night. As always, please visit one of our clubs or restaurants and have fun.