RCI Hospitality Holdings, Inc. (RICK) CEO Eric Langan on Q3 2022 Results - Earnings Call Transcript | Seeking Alpha

2022-09-03 01:56:30 By : Mr. Richard Zhang

RCI Hospitality Holdings, Inc. (NASDAQ:RICK ) Q3 2022 Earnings Conference Call August 9, 2022 4:30 PM ET

Mark Moran - Chief Executive Officer, Equity Animal

Eric Langan - President and Chief Executive Officer

Bradley Chhay - Chief Financial Officer

Rob McGuire - Granite Research

Anthony Lebiedzinski - Sidoti & Company

Joshua Zoepfel - Noble Capital Markets

Adam Wyden - ADW Capital

Greetings, and welcome to RCI Hospitality Holdings Third Quarter Earnings Call. You can find RCI's presentation on the company website. Click Company and Investor Information under the RCI logo, that will take you to the company investor info page, scroll down and you'll find all of the necessary links.

Please turn with me to slide two of our presentation. I'm Mark Moran, CEO of Equity Animal, and I'll be the host of our call today. I'm here with Eric Langan, President and CEO of RCI Hospitality; and Bradley Chhay CFO of the company.

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 Dollar Sign RICK 3Q22 earnings call. As a reminder, if you want to ask question, you'll be needing to join Twitter Spaces on a mobile device. If you just want to listen, you can join the Twitter Space on a personal computer. RCI is also making this call available to listeners through a traditional landline and webcasting.

At this time, all participants are in a listen-only mode, a Q&A session will follow. This conference is being recorded.

Now turn with me to slide four. I want to remind everybody of our Safe Harbor statement. It reminds you that you may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards.

Now please turn with me to slide five. I direct you to the explanation of non-GAAP measurements that we use. I'd also like to invite everyone listening in the in the New York City area to join Eric, Bradley and myself tonight at 7 o'clock to meet management at Rick's Cabaret, one of RCI's top revenue generating clubs. Rick is located at 50 West 33rd Street between fifth Ave and Broadway, a little in from Harold Square. If you have an RSVP ask for Eric or me at the door.

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

Thank you, Mark. Thanks for joining us today. The third quarter benefited from higher sales, continued rebound in nightclub service revenues and sequential improvements in Bombshells. Year-over-year, nearly all our key metrics continue to increase on a double-digit basis for both the third quarter and the first nine months. This resulted in particularly strong free cash flow and adjusted EBITDA in the third quarter. Net cash from operating activities and free cash flow were further enhanced by a receipt of a tax refund I've mentioned on previous calls.

We continue to execute on our growth plan and cap allocation strategies. During the third quarter, we continued the buyback shares. We acquired the Playmates Club in South Florida. We also purchased for the 13th company -- purchase property for the 13th company owned Bombshells. To date, in fourth quarter of 2022, we bought a club in Odessa, Texas that we have rebranded it and planned to reopen on August 18th, as well as opening the rebranded Scarlett's Cabaret in San Antonio, Texas, that will also open August 18th. We also bought the well known Cheetah's Club in South Florida, and we continue to take advantage of market conditions to buyback shares.

Now here's Bradley for a review of our financials.

Thanks, Eric and good afternoon to all those listening. All of our comparisons in this call will be to a year ago third quarter, unless otherwise noted. It is important to note that this was the first period since the first quarter of fiscal 2020, that was not affected by COVID restriction.

Looking at the numbers, we generated a record total revenues of $70.7 million, up 22.2%. EPS increased 8% to $1.48. Non-GAAP EPS increased 18% to $1.60. Net cash from operating activities was $18.9 million, an increased of 26.2%. Free cash flow totaled $18 million, which is up 39.1%. Net income attributed to RCI common stockholders was $13.9 million, up 13%. And adjusted EBITDA totaled $24.6 million, which was up 20.6%.

Please turn to page seven. Our Nightclub segment had an excellent third quarter. Revenues totaled $54.7 million and increase of 33.3%. Operating margin was 41.1% and 42.7% non-GAAP. Operating income was $22.5 million GAAP and $23.3 million non-GAAP. Highlights included the $11.8 million in sales from fiscal 2022 acquisitions and 50.8% increase in our higher margin service revenues. On a sequential quarter basis, revenues increased 13.5%. Non-GAAP operating margin expect -- expanded 321 basis points and Non-GAAP operating margin increased 22.7%.

Please turn to page eight. We created this slide to show the strong progress we've made in the Nightclub segment since pre-COVID first quarter of 2020. At 77.3% Nightclub revenues as a percentage of consolidated revenues have returned to just under where they were. At 36% service revenues as a percentage of consolidate data revenues have now slightly exceeded the pre-COVID level. As you can see, Nightclub revenues are closely linked to service revenues. Both of both of these trends reflect the combination of the rebound and growth of existing clubs and the addition of club acquisitions against the growth of Bombshells revenue.

Please turn to page nine. Bombshells also had a great third quarter. As we mentioned in our third quarter sales call, revenues declined 1.8%. That was due to a tough year-over-year comparison against an unusually strong third quarter in fiscal 2021, which by the way, was our record highest revenue quarter for Bombshells ever. That's when Bombshells sells and margins experienced a huge benefit from being one of the few bars and restaurants open in Texas due to state of COVID at that time. Otherwise, Bombshells experienced typical seasonal trends in the third quarter of this year and results were in line with expectations.

I'd like to point out that operating margin came in at 19.4% GAAP and 23.6% non-GAAP. On a sequential quarter basis, revenue increased 3%. GAAP operating margin expanded 94 basis points and non-GAAP operate income increased 7.2%. Overall, we think that we're doing a great [Technical Difficulty] up of managing food and labor inflation.

Now please turn to page 10 to review our consolidated [Technical Difficulty] quarter unless otherwise noted. Cost of good sold improved 13% as compared to 15.3%. Now this improvement reflects the increase of sales mix of high margin service revenues in the Nightclub segment. Salaries and wages were slightly higher at 24.6%. This reflected the addition of employees at acquired units along with new mandate, which increased minimum wage in some of the states in which we operate.

[Technical Difficulty] SG&A totaled 2.1% as compared to a small gain. This year's third quarter reflected [Technical Difficulty] 32% with non-GAAP operating [Technical Difficulty] partially offset by higher sales and lower weighted average interest rates.

Please turn to page 11. Cash and cash equivalents were $37.5 million on June 30th. I'd like to point out that this was after utilizing more than $12 million for share buybacks during the nine months, cash portion of the Playmates acquisition and the down payment for our Bombshells location in Rowlett, Texas.

Free cash flow for the third quarter totaled $18 million or 25.5% of consolidated revenues. This included a $2.2 million tax refund Eric mentioned. However, excluding that free cash flow was 22.4% of consolidated revenues. [Technical Difficulty] that compares favorably to the 6.68% a year ago, and 7.37% five years ago. Our refinancing enables us to smooth out our debt maturity schedule. Our amortization continues in the $7 million to $8 million annual range for the next four years, which is very manageable with our cash flow. And to pay off our loans, periodic refinancing enables us to convert higher rate seller financing and other unsecured financing into lower rate commercial real estate bank debt. We currently have multiple unencumbered properties in our portfolio. Should we need additional capital, we can borrow against them. Our occupancy costs were 6.7% of revenues. This continues to be well within the 6% to 9% range that we averaged when sales weren't dramatically impacted by COVID.

Please turn to page 13 to look at our June 30th debt pie chart. Our debt now consists of 63% secured by real estate, 23.7% of seller financing debts. This is secured by the respective club to which it applies. 4.1% of debt secured by other assets and 9.2% of unsecured debts.

Now let me turn the call over back to Eric and thank you.

Thank you, Bradley. We continue to talk to new investors. So, I'd like review our capital allocation strategy. Our goal is to drive shareholder value by increasing free cash flow per share, 10% to 15% on a compound annual basis. Our strategy is similar to those outlined in the book, The Outsiders by William Thorndike. He studied companies that focused on generating cash flow per share and allocating that cash effectively to generate more cash. We have been applying these strategies since fiscal 2016 with three different actions subject, of course, to weather their strategic rationale to do otherwise.

One is mergers and acquisitions, specifically buying the right clubs in the right markets. We like to buy solid cash flowing clubs at three to five times adjusted EBITDA, using seller financing and acquire real estate at market value. So far this fiscal year, we have deployed $141.8 million in capital, $45.8 million, which was cash, $66 million, which was debt, and $30 million, which was equity to acquire 15 clubs in new and existing markets.

Another strategy is growing organically, specifically expanding Bombshells to develop critical mass, market awareness and sell franchise. To date, this fiscal year, we deployed $6.8 million in capital, $2 million in cash, $4.8 million in new debt to open our 11th location by property for two more locations. The third is under contract. In addition, our first franchisee opened in San Antonio, and we signed our second one for the state of Alabama. Our goal in both M&A and organic growth is to generate annual cash on cash returns of at least 25% to 33%.

Sorry, the third action is buying back shares when the yield on free cash flow per share is more than 10%. As of last Friday, we deployed $14.3 million in cash to buyback 255,962 shares this fiscal year at an average of $55.91.

Please turn to page 15 to review our growth initiatives. We've accomplished so much already. So, I'm going to focus on only the new developments since our second quarter call. In our Nightclub segment, we acquired a club and its asset in Odessa, Texas in July. We plan to reform it into PT show club and open it up on August 18th. We think PTs will fit well with our other two clubs in that part of Texas. We also plan to reopen a reformed at club in San Antonio on August 18th.

Also in July, we acquired the Cheetah Club in Hallandale Beach in South Florida. Cheetah is well known with a very strong following. We believe it fits well with our three other clubs in North Miami-Dade, South Broward County area, which includes Tootsie's Cabaret. These acquisitions are all part of our effort to add $20 million of adjusted EBITDA in fiscal 2023. We have a number of meetings lined up with club owners to talk about acquisitions at our Exotic Dancer Expo conference next week in Las Vegas.

In our Bombshells segment, during the third quarter, we acquire property in Rowlett, Texas for our 13th location. We continue to look for more locations in Dallas, Austin, Florida, and Phoenix. Our first franchisee opened in San Antonio and is continuing to do very well. Our second franchisee is close to finalizing its first site in Huntsville, Alabama, and we continue to be in serious talks with other potential franchise groups.

Regarding capital management. In the fourth quarter, we sold an access parcel in Philadelphia for $6 million in cash. After paying down related debt and expenses, we received approximately $3.5 million in net proceeds. We still have two more pieces of real estate under contract for a combined sales price of approximately $3.5 million.

Turning to page 16. With our new acquisitions, we wanted to give you a better picture of the geographic focus. In third quarter 2022, our regional revenue breakdown was; Texas 41%, including Bombshells, Florida 22.7%, New York 8.6%, Illinois 6.8%, Colorado 6.6%. And the other eight states combined for 14.2%.

Turning to page 17. I'd like to update you on how we are haunting new technology to drive club traffic, and in particular attract the next-generation of customers. Our guest benefits program -- our guest benefits NFT program is in presale mode, payable with a credit card online now. We currently plan to meet at the end of the month. This will be the ultimate party pass with an annual event at Foote's [ph] access to other private parties, VIP experiences, a wide range of other benefits. Response has been very good.

AdmireMe, our new social media platform, we currently plan to fully launch sometime at the end of August or the beginning of September. Similar to OnlyFans, it enables entertainers to post content receive payment from admirers. This will enable entertainers to build an internet business as well as our club business with us.

This ends the formal presentation, a big thanks to all of our teams, Nightclub, Bombshells and especially our corporate teams for all their hard work and dedication. And with that, Mark, let's start taking questions.

Thank you very much, Eric and Bradley. I'd like to take a moment to encourage everyone to retweet this space so we can really get the party going with this Q&A session. If you'd like to ask a question, please raise your hand in the Twitter Space. When you're done asking your question, please then mute your microphone to eliminate any background noise, or we will do it for you. We have a limited number of speaker spaces. So, after you ask your question, we may move you back to the audience to free up space.

To start things off, we like to take questions from Rick's equity research analyst, and then some of its larger shareholders. Our three analysts that are on the call are Rob of Granite Research, Anthony of Sidoti, and then Josh who works for Joe Gomes of Noble. Let's start off with Rob of Granite Research.

Hey, congratulations about the quarter.

Can you discuss the plan for Fort Worth when you think that might be closed and then estimates for opening and if you're going to look Utah and then rebranding the facility.

Sure. We're definitely going to be remodeling, rebranding facility. We're waiting on the plat. It's at the county level. Unfortunately, there's not much we can do to speed the process up. However, we have talked with the owners, they've given us keys. We have the architects in, we're starting to draw remodel plants and get that ready. I suspect, we'll probably open within three months -- of actually closing on the property. I believe the liquor license is in place. The adult entertainment license are already in place. So, basically, it's just a matter of remodel, rebranding, and, of course, getting this plat done so that we can get a title permit from the title policy.

Thank you. And then just shifting gears, can you talk about real estate pricing in this environment? Has it backed off at all? Is it helping you in terms of Bombshells location?

I don't know, there's backed off a lot. We did recently make an offer on a property in Austin, Texas for Bombshells that was accepted yesterday. So, we will -- that we had been looking out for some time, but the price was just was crazy. They finally came down to the price that we had offered and contact with us. So, we're going to do that.

We may end up with a partner or a franchisee at that particular location. I'm not [Technical Difficulty] sure how that's going to go just yet. It's very early. Like I said, we just got it under contract yesterday. We are also looking at multiple other sites at this time.

Great. And then I'll ask one last question then I'll circle back into queue. But can you just discuss the general contractor pricing trends you're seeing? Has it had any impact in terms of building out Bombshells locations, or just in general, what you're seeing in there?

Sure. I have definitely slowed down. We had the original bid that came in on Stafford location. We have done the demo there. We have started no construction. I am making two different GCs [Technical Difficulty] right now. Steel prices come down, lumber price come down, but the biggest problem that we're having are the subs have had so much work and so [Technical Difficulty] demand that they're just demanding crazy prices. And I've said, look, we're just -- were said, we'll wait. [Technical Difficulty] We're going to overspend just to build and try to you meet some [Technical Difficulty] if the ROIs not there, we we'll take our time. We'll build slowly. We'll wait till certain things. Maybe the roofing, roofing will come down and we'll find the right roofer. He'll build it at a price that we are happy with, and we'll throw the roof on. Like we did with the tear out. We actually ended up with a company that came in well under the other bids, because they had some -- they had an open space and wanted the work.

So, we'll wait till they want the work and then build if that's [Technical Difficulty]. What we do and piece mill it together [Technical Difficulty] are very minor on these properties [Technical Difficulty] and not over sometime in mid-September or early October on that location.

The Lubbock location where we have the final zoning hearings, I believe, in early September. I can't remember the exact date, the first 15 days of September. We have worked forward on the plans and so we should be able to apply for billing permits as soon as the zoning. Issues are all resolved. And hopefully, we'll get that one started under construction sometime in December early January. That's the current plan.

Thanks so much, Rob, for the questions. Now, [Technical Difficulty]

[Technical Difficulty] We'll deal with those then. And so far, the cost has been -- but we did have acquisition costs in here, in this quarter, that effect can probably raise the overall G&A a little bit as well. So, we may or may not see more of that, because we actually close on a couple more acquisitions in this quarter and see how that goes, as we progress through time.

Gotcha. Okay. And in terms of the acquisitions, so since you closed the quarter, you announced the Cheetah Gentlemen's Club as well as the Odessa Club. Just can you help us perhaps to think about those as to how we should think about the revenue and EBITDA run rates or contributions from those?

Sure. Cheetah is about $10 million. We expect EBITDA around $4 million. We could see some slight improvements on that. We're just going to have to -- like always, you'll to get a few quarters in to figure out where we're at, but I think that's kind of where we're at right now. The Odessa Club, I'm going to guess, similar to the Rick type location, probably $1.8 million in revenue, which would put us probably around $600,000 a year in EBITDA on that one.

Gotcha. Okay. And then, so just to circle back, as far as the -- you mentioned that, Eric, that you think the worst of the cost pressure is over. So, now that that's kind of behind you. So as far as your operating margins kind of going forward, is -- would it be reasonable to assume sequential improvement in your segment operating margins? I know the business is seasonal, but if you could just kind of speak to that, that'd be great.

I would say not in the next quarter, for sure. I think, our goal is 30% EBITDA and 20% free cash flow on revenues, that's kind of where we're -- that's our targets. I think we can do a little better sometimes. We may do a little under sometimes. But overall, I think we'll -- maybe take over a one-year period, I think we're going to be very close to those numbers. So, this season -- or this quarter, July, August, September is always our seasonal quarter where we turn to a more normality is what I'm seeing. Now that all the COVID restrictions are gone. People are traveling for holidays. So, we're seeing our typical summer slow down versus our prime season, October to May, which to me is very exciting because that tells me if people are going back to a more normal lifestyle, we're going to see nice jumps come October, November, December, and basically running through May.

I think this year -- our first quarter of fiscal 2023 is going to be a record quarter for us. As New York City goes from 45% office occupancy, and people working in the office to 85% in October, November is I believe the trends I've been reading about and hearing, they're respected, which will help our service revenues in New York City even more. I think we're going to see that in other markets as well, as people, like I said, just return to normal life and normal patterns again. So, I'm very, very excited about how that's going to play out for us during our prime season of fiscal 2023.

That's great to hear. Well, thank you and best of luck.

Thanks much for the questions, Anthony. Next up we have Josh of Noble Capital Markets. Josh, take it away.

Hi. Good afternoon, everybody. Thanks for taking my questions.

Hey. So, I just kind of want to start off with some Bombshells. I know that you're talking to a few just franchising groups. Can you talk about just kind of how those talks are progressing as one group kind of further along than others?

Yeah. There's definitely all in different stages. The farthest long group has three sites picked out for us on the way back from Vegas, I'm going to stop in with David Simmons. We're going to fly back from Vegas together, and stop in and they've got three sites picked out. We're going to look at those locations and give them approvals or declines on -- our opinions on those three locations. If we approve a location, we'll probably get into a -- get the contract, the franchisee contract done, all franchise contracts have to be tied to a specific location on the first one before we can create the franchise agreement. So, hopefully, we find one of their three locations we'll be able to approve and get them signed up, which will give us our third franchise. At this time I know the San Antonio group is looking for their second location right now as well. So, hopefully, we'll have some more information as we progress through the quarter on franchisees for Bombshells.

And like I said, we have a few others we're talking, some are vetting process. Some are basically trying to figure out where they want to locate at, and to get us locations for approval. So, we'll just have to see how that plays out over the next couple months. I know that recessionary fears have some people spooked a little bit. I know that interest rate increases are going to be a kind of concern as if interest rates continue to climb. So, we're just take it day by day and just keep working every day towards our goal.

Perfect. It kind of led me to my next question, obviously recessionary fears are out there, least amongst some people, just the general public. And kind of that leads me to question of like, are you seeing a drop in visits to your clubs just due to this economic environment we're in?

I mean, our typical summer slow down. I wouldn't call it drops in visits. I don't think the customer spend has changed hugely at this point. As you can see from the last quarter, through June 30th, at least, our VIP spend has been fantastic. I've talked with the -- to different club managers and our upper management guys. And they say the VIP spend is still fairly strong. The biggest thing we're hearing is that, people are on vacations. And so, that's interfering with their normal flow schedules to the clubs and whatnot, but not in a huge way. And we're just going to have to -- I don't think we're going to really know if the recession's going to cause any problems till October, November, December. And I think any recession hit will be offset or more than offset by people's returning to work and turning to the offices. So, pick up our happy hours, it'll pick up our daytime, lunchtime business. And I think business to us people return to the office. I think business travel will increase again. So, we have certain locations that will benefit from that.

And so, I think overall we'll be in great shape and the rest will make up with acquisitions. So, I don't think we'll see much slippage at all. If we do -- I'm watching Mondays and Wednesdays, like I say, all the time, watching them very closely. I see a weak Monday, one week, and then it's strong the next, or I see a very strong Wednesday, but then it's weak the next, and vice versa on Monday. So, I'm watching the weekends have been strong.

And so, right now, I don't have an answer as to what we're going to see or if we're going to see, or when we're going to see a recessionary effect. But as of right now, I'm very happy with -- or I know that -- I've been on Twitter a lot, and I have seen some entertainers complaining about customer spend on the entertainers. We're not seeing that in our dance dollar sales at our clubs. However, I don't know about the overall spend on dancers if it's paid in cash. So, maybe some of their cash customers are -- have slowed down a little bit. And we don't know about it. But the girls that I talked to have been very happy, they're making money, and we're printing money as you can see from our financials.

Yeah. That's fantastic. And just have one last one before I go back in the queue. I kind of want to give just a update on AdmireMe. Obviously, you guys were having talks at a soft launch last quarter. I just want to hear if there's anything, just related to traffic on it. If it's been going as you guys expected or it's been just surpassing you guys' expectations. Thanks.

No. Right now, it's -- we're not really focused on, we're trying to get it working correctly, and getting -- we've got a couple of bug fixes that are going out right now in the next update. We've finally getting the referral program put together. We thought we could do without a referral program, but we've now realized more we -- the more we learn -- the more we do, the more we learn. The beta was good because it helped us get, like the operational bugs worked out. But as we talked to influencers, as we talked to some of the larger people on OnlyFans -- or entertainers and workers on OnlyFans, we realized some of the things we must have and how we have to set certain things up. Those are almost all programmed in and should be completed by the end of August. And then we'll start our launch, because we'll have all the tools in place to do it right.

It's like a nightclub on the internet. It's a chicken and egg. I can't get the girls, because if I don't have the guys. I can't get the guys, if I don't have the girls. And so, in the nightclub business, we have to get everyone there at the same time. So, we've decided the soft launch -- we're cycle up and operating, but there's been no marketing, no push, because a soft launch will not -- we don't believe in that space. Like a nightclub will not create the traffic we need on either side for the entertainers or for AdmireMe -- for the content providers or the admirers to make it work. So, that's why we're going to do a much harder push sometime probably the first couple weeks of September.

Josh, thanks so much for the question. I know we're all looking forward to seeing the launch of AdmireMe from soft to hard very soon. Next up we have Adam Wyden of ADW Capital.

Yeah. Guys, look, I've been saying [Technical Difficulty] 04 this, like, I think, in the past, Eric, you never really had the balance sheet to support $15 million and $20 million EBITDA transactions. And I think combination of Bombshells, Lowrie, you taking the time and building this kind of free cash flow machine, we've got now the better a year of free cash. You can buy a couple -- if you wanted to, you could buy a few Lowrie a year. I mean, you're obviously slowing down Bombshells growth because the ROIs are not there. I don't like that. I love that. I mean, it's so perfect, right? It shows the flexibility of mind, that the reality is materials costs are up. Inflation is up, labor is up like, why not be a buyer of these clubs at lower multiples. You own the real estate. In fact, these are the best inflation adjusted assets and you're the only owners of them. I mean, I would be -- I think it's amazing that you've transitioned to focusing on clubs again, it shows a flexible mind.

I mean, do you think that we can take this from a hundred to a couple hundred over the next couple years, because the math I'm doing is you guys can support about $50 million of EBITDA, acquisitions through cash flow and balance sheet, until you really start hitting walls. And so, obviously, with the stock, you can do more. But I mean, what's stopping you from ramping things up right now. Like -- and I'm not just talking about 20 a year, I'm talking about 50 a year.

Yeah. I mean, I'm not -- nothing's stopping us other than we have to find the acquisitions, do the deals, do the legal work, the due diligence. I'm talking with lots of owners. We're going to expo this year. We're going to put it out there everywhere. Our goal is to -- I think we can add about $200 million in purchases a year right now for the next three years straight, and still stay under using about 65% of our free cash flow and still keeping our debt to even a ratio under three times. So, I'm very excited about that. If we need to -- if the right deal comes along and we can step it up a little bit and push a little faster, we're going to continue to do that. You are absolutely right. And that our focus is about 95% on clubs and about 5% on Bombshells right now. Because I do think in the next three months that there's going to be some great opportunities for us on the club side, based on some of my conversations with guys right now, with our hire. We paid three times forever, or less for a long time, many years. We're starting to pay four to five times right now for the big guys, for the limited clubs, for the right licenses, in the right markets and buying that market share up. And it has got a lot of guys talking to us right now. And I think we'll bring some of those guys onto our side of the equation soon, rolling up additional thought amounts of EBITDA.

I know we've been saying $20 million increase for 2023. If the talks go well, and everything goes well by our next -- by the end of the quarter, by December, when we do the K, we may have a much higher, larger target based on deals on the pipeline. And I'll let everyone know at that time where I think we're actually going to be at and how that 2023 is going to go. I'll tell you, I pushed my personal goal. I know we're 10% to 15%, we've been doing about 20%. I think 2022 will end it over 30% free cash flow growth. And I think that, right now, 2023 is headed to be another 30%-plus year as well. So, it's very exciting right now.

Well, it should be higher than that, right? I mean, if you're -- if you're not going to get the full, I mean, if you can just do the math, right? Like if you -- right now, you're run rating about a hundred, you'll probably -- I don't know the exact math, you'll probably clear 85 of EBITDA for the full year. I don't know what the free cash flow will be. But if you exit the year at 105 and you buy, call it -- if you buy 30, you're at 135, I mean, you're going to be compounding EBITDA, obviously at a much higher rate than 30 in 2023. And presumably, free cash flow faster, because of, how it's financed and, and all the rest and leveraging what you've got.

And so, again, leveraging corporate overhead and what have you. And so like, it -- I mean, again, like 30% free cash flow growth, would imply a much slower EBITDA growth. I mean, again, I feel like we have the same conversation, every conference call. But it's like, you put up these great numbers, you destroy margins, you generate cash, and we traded the same multiple. I mean, how do you guys think about getting the multiple to a point where you can actually grow more, right? Like you made a comment like, well, $200 million a year, but why not $500 million? I mean, the only thing is the equity, right? So, how do you think about kind of getting to a point where, you can get this thing properly valued.

Well, I think I can take advantage of the tools the market gives me. And so, it's up to you guys on this call. You guys have to decide, if it's worth giving us those tools, paying the price for the stock for the current cash flow and the future generation of cash flow. I think, one of the biggest problems with Rick's, especially through COVID and so is nobody wants to value us on a go forward basis. Everybody wants to value us on a past run basis, and give us no value for the growth. As you always say, they give us no value for the real estate or very little value for the real estate, when that's a huge advantage for us.

If you look at typical restaurant, restaurant stocks out, they're paying 8% to 14% occupancy costs. In other words, the cost of use of their real estate to generate their cash flow, they're paying 8% to 14% for. We are now at 6.7%, one of our all-time lows. So, those are the things that our cap allocation strategy has done for us. We are so focused on our cash on cash returns on creating the value for our shareholders and really keeping all of our costs in line. COVID taught us so much, the systems that Bradley put in place in the corporate office for our accounting systems, give us information and tools in seconds instead of hours or days.

And so, we're able to just monitor these things, watch these things and continuously work to increase that. And I do believe that the market, at some point, is going to recognize. They're going to pay a premium for that future growth instead of just a pass growth. And if not, then we'll just continue. The beauty is, we can do this either way. One way, we're going to do it a lot quicker. And one way it's just going to take longer. So, I guess, it's just -- we're all here for the ride and hopefully we can -- right now I think we're driving like a Toyota Camry and I'd love to be in a Ferrari or Lambo and really drive this thing at a much faster pace or as I know your favorite cars are Porsches, we'll even take a Porsche.

Yeah. Look, it's sort of unfathomable. I mean, when you think about the spaces we did with Edwin and we go back and we look at, the stock is effectively -- with the exception of 2007 and 2008, where the stock went up ahead of Vegas. And you guys used the equity intelligently, but then went and bought back stock, whatever. I mean, there's effectively been -- I mean, with a few select moments in time, the stock has effectively traded five or six times EBITDA for basically the whole time the company's been public. And so, like, you've been able to, and I mean, like maybe you can comment a little bit about Lowrie, but like, you've been able to buy businesses at five or six times, right, and drive it down to four times. And so like in the absence of a currency, you've been able to use the cash on the balance sheet, in your operating abilities to basically make deals work. But it's just incredible where you would be, if -- hey, the stock was trading at 10 times, you bought a business with some percentage of stock and you bought it at five and took it to three. I mean, this business would be $500 million of EBITDA in a heartbeat. And so, like, it's just -- look, I obviously -- in the absence of multiple expansion, right, you can look at the returns and you can say, okay, I'm buying this thing with, I don't know, 105 EBITDA, maybe that's nine -- or $9 a share free cash flow, whatever it is, you're buying this thing at nearly a 20% or whatever at 60 bucks, I guess it'll be a 15%, 16% free cash flow yield. And if you can grow 30% free cash flow, you're still getting a 45% total return without multiple expansion. But I mean, if you can get multiple expansion, I mean the whole machine, like you said, it's a Porsche, not, I mean, this doesn't even Toyota Camry. It's a Pinto.

Well, Adam, let me be honest. I'll be completely honest. We didn't deserve it before 2016. Okay? We were young. I was learning, I had never ran a public company. I was operator of adult nightclubs. Damn good one, I think. But as we moved, as we grew into 2016, things changed for us. We figured out CAPA [ph] case strategy. We figured out the compounding, we figured out ROI. We figured out cash on cash returns. And we became a financial machine that wasn't in the strip club business anymore. We're in the free cash flow business. I'm going to say that a lot.

Now, what I would say to the market is if you want to keep punishing us for pre-2015, then you have that right. But I would ask you to forgive our past sins, look at 2016 on, can't control what COVID did and slowed us down a little bit. But if you look 2016, 2017, 2018, 2019, to go from 2016 forward and start valuing us and take us and compare us to other companies with that type of growth period from 2016 on and say, are we being fairly valued compared to those companies? And I think you'll find we're not being fairly valued as you continuously tell everybody.

But like I said, I think that, part of that is we have to get everybody to understand that there was a transformation of this company after 2016 or starting in 2016. And I've been in some debates on Twitter with various people and tried to explain that when you look at a 30-year run or 20-year run, I am not the guy I was in 2012, 2013, 1999 when I took over the company. We've grown, we have learned, and I think we have executed to a T or even better than we said, we would execute from 2016 on. And I would just ask the market to take a look at that and value the company based on those things. And imagine it began where we're going to take this company over the next three years, the next five years, the next 10 years, and be a part of it.

We're looking for long-term shareholders. We're looking for guys that want to partner with us over the next decade and make lots of money and wealth -- and create lots of wealth. Our interests are align with shareholders. My -- majority of my wealth is in my RICK stock. It took me a long time to learn that the investment bankers that were leading me in my younger days were basically taking advantage of us. They were having us use our equity at super high cost of capital, with the premise that a lot of companies use, well, at least we don't have to pay that back. It's not debt. Guess what? You're always paying it back because you're paying it back with a reduction in free cash flow and you're diluting your existing shareholder base. And I was a big person of …

I think we're ready to go.

Yeah. No, I mean, look, I think, you're comment around 2016 is a good one. I mean, again, I don't have my numbers in front of me. But as I recall, the business was probably on the measure of 12 or 13 of EBITDA. I think, we're certainly in excess of a hundred now. And so, if you think about that, talking about 2017, 2018, 2019 2020 2021, 2022, I mean, in six years, you've more than eight X the business on an EBITDA basis. And more importantly, as you said, on a free cash flow per share basis, it's meaningfully, meaningfully more. And so, yeah, look, I don't think that those types of companies trade at, whatever five or six times free cash flow, 15% yield growing 30 doesn't deserve -- doesn't deserve the thing.

I mean, look, to be perfectly honest, a business growing free cash flow 30% a year, should trade it 30 times free cash flow, not at six times free cash flow. So, look, I would encourage you to continue to find creative ways as you have done in the past, whether it's deals like Lowrie, where you buy them at five or six and you find creative ways to get them down to three. But I mean, look, you've definitely been guilty until proven innocent and I personally know a lot about that. So, look, you got to keep punching them in the face and eventually they're going to bleed, right?

Well, we're going to keep doing what we do.

Keep punching them in the face. Eventually they're going to get a bloody nose. That's what I say.

Exactly. Thank you so much, Adam, for the question. Next, we're going to have Terra [ph] but I just wanted to throw this out there for anyone in the New York City area to stop by and meet management at Rick's Ector. And I want a, uh, special invitation to Terra. Terra, take it away.

Hey guys. I really hope I don't get disconnected. My phone is dying rapidly. But I just wanted to say thank you, number one, for doing this on Twitter Spaces as your platform for your earnings. I think that is a really good marketing decision. As you know, we can interact with you, Eric, the CEO of RICK, which I think is just a really good marketing strategy. And yeah, I'm long on RICK and I'm excited for the future of the company and the things that you guys have touched on here.

I was wondering if you could elaborate a little bit on your future, I guess, endeavors as far as competing with OnlyFans.

Sure. I don't know for as much -- I mean, excuse me -- the original idea was never to compete with OnlyFans. It was more to create a web-based business for our entertainers, so that they could draw customers into our brick-and-mortar, which would that -- the customers meet new girls, which would hopefully they would follow on AdmireMe, which would bring them into our brick-and-mortar business, right? So we get a circular feed there of business. However, I've had a lot of -- I would call influencers OnlyFans, I don't know -- I don't know what the word is for the -- I call them whales in the casino business. So like the whales of OnlyFans, we've had a lot of them say, hey, look, we would like to be on a site, we would like to talk to you about -- having meet and greets for our followers at some of your clubs and do those types of things where we'd have a safe environment where we'd have security and we'd be protected basically if we wanted to do those types of things.

And so, we're talking with some of those girls now, or I say girls -- I should say ladies or women, I think, they're all over 18. And we're very interested and very curious as to, can we create this? Can we make this work, especially in markets like New York, Miami, Denver, Chicago, where a lot of these big influencers seem to live and have reached out to us from. We got to get the site up and running. I think we're [Technical Difficulty] to some very creative stuff as we move forward and porn stars in the industry with some combination of brick-and-mortar performances at some of our nightclubs around the country, as well as through AdmireMe, and different social media deals as well.

So it's going to be a lot of fun. I think, I'm very excited about it. It was kind of a let down because when the Ukrainian war broke out, it put us months behind on this. I really thought we'd have this thing going at a much better pace right now, but all of our programmers were in the Ukraine, and we finally -- they finally got situated in places where they could get back to work and get this project done. And so, we're very happy for them in that regard, and that they're safe -- and like, so we're ready to build this thing. We just -- it's got to be right. We got to be able to -- one of the biggest things that we had, we were having issues with the private sale through instant -- through the private messaging, that is all fixed and up and operating now, which we were told is a very huge part of -- their revenue is selling private videos and private photos and those types of things through DM. So, we're happy to get all that done. You can answer anything, just let know.

That is perfect. Thank you so much, Eric, for answering and answering. So, clear and concise -- concisely. And yeah, like I said, I think, doing what you guys are doing, Mark and yourself, and coming to Twitter where you can interact with shareholders and have this open dialogue in regard to the future of the company is, not only very transparent, but also I think it's just extremely bullish because you're just opening yourself up to that many more potential investors. So, again, I really appreciate it. I appreciate your time. And letting me up to ask a question.

You're welcome and thanks. And I love it because it puts me in a position where I feel like I'm operating the nightclubs again. One of the things I loved about the nightclub business was I threw the party every day. I was talking to people every single day, and as I moved into corporate world, I kind of lost that. And so, Twitter, for me, especially in the last three or four months, and recently it is just gotten so fun. It's so exciting. I get to interact with end users. I get to interact with investors. As you've seen on some of my Twitter feeds, I'll spontaneously go, I'm going to the club tonight, come see me. And it's great, because seven, 10, 15 people show up, we have some drinks, we'll talk and I get direct feedback of exactly where we're at, what we're doing, right, what we're doing wrong. I get to get the ideas. The reason we always -- I think one of the things that made us, -- our company so great is -- we were able to talk -- upper management was involved in the club operations. They still are, just at my level it's been harder. And Twitter's given that back to me. So, I'm very excited about that.

Thank you so much for the question, Terra. We appreciate it. Next up, we're going to bring Eric Roderick [ph] to speak. Eric, take it away.

Hey. Thanks Mark, and thanks Eric for taking my questions today. Just wanted to get some clarity on the Cheetah acquisitions so we can kind of understand exactly how these acquisitions are valued. I know in the press release that you said that you expected $4 million of adjusted EBITDA for the club with $25 million of total purchase price for both the club and the real estate. So that's a bit over a six X multiple. I don't know if the club is being valued at three to five and there's some rent paid to the building, or there's something else going on there, or maybe it's $4 million now, but you expect a higher run rate. But just helping understand the underwriting of that acquisition, would be really helpful.

Sure. So, let me give you the basics. What I looked at is this, we have a 10-year [Technical Difficulty] six promissory note at $15 million. If you take that and divide it out, you get the payments. So, there's [Technical Difficulty]. It's basically a couple [Technical Difficulty] or basically our cash on cash returns going to be about 33%. Maybe it's a little. Maybe it's a little less, depending on how much savings we get. I know we're going to save on their insurance. Their insurance costs were much higher than ours.

We look at a couple other things where we save. We think we can shave a few points off a cost of goods and this and that. So, hopefully, overall, maybe that $4 million becomes $5 million, $4.8 million, something like that. You pay out the two something. Basically we need to make a little over a little over $3.3 million a year to get that 33% return. I think we'll do that. And the rest is just basically -- the rent I always call it managed to own, right? We're going to take owner financing. We're going to pay the owner, 60% of his free cash flow or 40% of his free cash flow. And then we're going to take the rest, give him cash for, and then earn that cash back. And basically less than three years so that we come up with 33%.

And in a worst case scenario, it takes us four years and it's a 25% return. And I'll do deals like that all day long. The six times -- the real estate was a very big portion of this. I don't know if you're familiar with the property. It's 2.2 acres on Hallandale Beach Boulevard, right off of 95, unbelievable access, both to the beach and the freeway. You can't beat it. We bought -- to give you an idea. We bought the Scarlett property across the street. I think Scarlett was only 1.9 acres, and we paid $7 million for that property. So, we didn't really value these things separate. We did it as a global package because the financing that the owner offered was so great for us that we really weren't overly concerned with getting to a multiple, but more of a cash on cash return. So that's how this one particular was low was valued. That's not -- it's rare because we don't normally -- a lot of the owners don't want those -- don't want to carry that much paper or whatnot, but that was fantastic. And agreeing, and he's 82 or 83 years old. I can't remember how old Joe is, he's in his 80s. But for him, he's got a big monthly payment coming every single month guaranteed for the next 10 years. He knows our reputation. He trusts our management team. He knows Ed Anakar, very, very well, Ed and him have -- he talked many times over the last five years and had a good personal relationship. And we're able to harness that, that trust and that -- what we've done in the industry and use that to a great deal for us and a great deal for Joe. So, I just think it was a win-win transaction all the way around.

Okay. Thanks. Appreciate that. That's very helpful. And then, one more question, kind of following up a little bit Adam's comments, but maybe five years ago on these earnings calls, you would talk about how banks -- Rick wasn't at the point where banks would finance it, cost of capital is so much higher. Obviously, you just said that cost of occupancy is low as it's ever been. So RCI eventually got to the point where banks would finance, lowering that cost of capital and obviously making everything that much better. Are there any other -- over the next five years, as you try and get a larger shareholder base, are there other tangible benefits like that, that you see as the company continues to grow and mature?

I think the next is, is our equity. If our equity becomes our cheapest cost of capital, then it's able -- we're able to grow at a much higher rate. We keep these top ROIs, that we're doing at 25%, 30%, cash on cash. The differences they'll go up even higher because we won't be having those huge interest expense payments, if we're able to use the equity. Obviously, we're going to be very cautious. We're not going to -- we don't want to go out and dilute our shareholders anytime. We're not going to take undue risk, just because our capital's cheaper. We're going to treat it just like cash. We're going to treat it just like bank. No, it's just going to be -- we would use equity because that's the cheapest cost of capital to the company.

If you look, we use debt more than cash, because debt typically has been very cheap for us on a relative basis after taxes. And so we're -- we just use the equation. It's all fifth grade, simple math, in my book. I think Adam has really pushed me hard on, on if you had equity, how much faster could you grow? And we've started doing things if our cost of capital right now, which is between, 6% and 12%, drop to 4% or 5%, because we traded at a 20 or 25 multiple. I mean, how great would that look and how would the ROI on that become over time, especially as you compound year after year with that type of capital cost.

Okay. Thanks. Appreciate the answers.

Eric, can I just clarify one thing for a minute? You said 6% to 12% equity cost of capital, but I don't like if your shares are $60 and you're doing $9 share free cash flow that your equity cost of capital would be more like 16%. Now, I agree with you, like in general, if you think about how Warren Buffett values securities, right? He basically values securities as, so what is the in place free cash flow yield, and what is the organic earnings growth, right? And so, in this specific case, you have a 16% free cash flow yield, your earnings growth is probably at least in the -- for now at least 15%, right? Because you're going to grow volumes, you're going to grow price, maybe build some Bombshells? And so in that specific thing, at the very least, right, you should be trading at a 16 multiple or 15 multiple of what your in place free cash flow is, right? That your multiple is equal to your organic free cash flow growth and giving yourself zero credit for M&A or capital allocation.

So if you look See's Candy, for example, Warren Buffett bought it. He said, okay, this is the in place for cash flow. Once it's going to grow organically, it's going to be my return. I mean, so -- I mean, even in a world where you had zero M&A or zero thoughtful capital allocation, like at the very least it should approximate what your organic free cash flow growth is, right? And we know that you can grow 30 to 40 with M&A. So like, I don't know. I agree with you, like a 4% free cash flow yield would be a 25 X multiple free cash flow. And that would be a substantial spread to what you're bought, right? If you're buying assets at five times, EBITDA whatever, call it, after -- you get tax advantages whatever, maybe it's a 16% or 17% free cash flow yield when you factor in the depreciation what have you. But I mean, you're -- I don't -- I'm curious how you're getting to 6% to 12% or is my analysis making sense?

I mean, you're always like 15 steps ahead of me. I have to sit down and write it down and do the math, get back to you. As we were talking the other day, and I told you all my stuff is napkin math. Yeah. I mean, it makes sense. And yes, I understand that. I agree with you that I think we trading much lower, but I think the market's going to have to set, I call it the reward system, right? The market rewards us for performance. So, I don't know what the market wants, reward us with on what kind of multiple basis. Everybody send discount. And the reality is we should get a SIM bonus. Our businesses are modded. Our cash flow is solid year after year after year. It's like we own the only bubblegum machine in town that you can get a fall a bubblegum from.

So we can want to charge a quarter. We charge a quarter. We want to charge $0.35. We charge $0.35. We just can't charge so much that nobody wants to have bubblegum.

And so, I think at some point, that market's going to realize that. As we've talked in the past, I said, we could be 50 clubs. We could be a hundred clubs, we 200 clubs. At some point, like waste management, like other roll up stories, we're going to get a premium. I don't know when that'll be, I hope sooner rather than later, because as I've said, it makes everything faster. And it seems to me like the market -- the industry is ready to be rolled up more now after COVID than ever before history, after doing this since 1989, been -- rolling these things up since 1999. And I just think that, the market's more ready than it's ever been, and the industry's more ready than it's ever been. We just need the tools.

And that's what we're asking for on these calls. That's why we switch to Twitter Spaces. We've asked institutional investors, everybody talks about ESC. I don't need institutional investors. I need 1 million or 2 million of retail investors to go buy 10 shares of stock, go buy 20 shares of stock, 50 shares of stock, help us create the momentum we need, give us the tools. And we'll build this thing and we'll grow with it. And you can become part of our community. You buy our NFT, you can come into our clubs, give them to the discord. Management's made their self accessible. I've made myself accessible. You're never going to guest. You're always going to know exactly where we're at, what we're doing. And as I say many times what you see is what you get. And when things are bad, I'll tell you things are bad. Instead this quarter been a little slower, it's summertime, but that's -- return to normal. And I think that's how we're going to continue to do things forever. And like I said, I think at some point we'll reach the right people. We're not for everyone, not everybody should own our stock, but hopefully you can find the right people that can and will, and will create those long-term holders. That'll build this into a corporation and real company, as you always preach.

Thanks so much for the question, Adam. Next up, we're going to be bringing the blonde broker to the stage. Aaron, take it away.

Hi, guys. Yeah. I just had a quick question. I noticed you mentioned you were going to [Technical Difficulty]

I think that, Mark will do what Mark always does and capture the essence of expo. And one of the things we're really going to work on out there is, we're going to have about 300 plus of RCI employees out there. And so, we're going to be doing some interviews. So, I think, you'll see some -- as we move forward, you're going to see equity will put some of those interviews on spaces, and let you get to know -- some of our top executives around the country. I think one of the things that that's missed in RCI story is that, everybody thinks it's a one man show or it's a couple of guys that are that own this, and we're a company with 3000 plus employees. We have 20,000 plus independent contractors. We're actually very large company, and growing at a very rapid rate. And I want to get that message out there and I want more people behind the scenes exposed to the marketplace, so that people realize just how big and how important and how dedicated our employees are. The number of employees that we have that have been with this company for 20 years, the number of companies, 15 years, 10 years, it's just an amazing number of people.

And I've told Mark and told him, I wanted to ask, how many more years you think you're going to be with this company? What plans do you have to leave? Or what other things do you want to do? And I think everybody's going to be surprised at how much people love the company they work for. And RCI strong is actually -- it's real, it's ingrained in all of us and you're going to get to see part of that. And I think that's some of the stuff that's missing. I think that the empowerment of women that our industry gives, we're going to highlight several of our key female employees around the country from host to club management, to corporate office staff. And we're going to get those -- their stories out there and let you hear it from their own words without any guidance, Mark, it's all raw with Mark. He's going to go in, he's going to ask you crazy stuff. He's going to get you talking. And there's going to be a lot of fun and a lot of jokes in it, but at the same time, you're going to get serious information on the company. And that's what I hope to get at expo this year.

You got to get you out there. You got to come, visit with us. So.

Definitely. Please come to Vegas with us. We're looking forward to it. Now, next question is going to be coming from Howard W. Penney. Howard of Hedgeye, take it away.

Hey, thanks very much. First time I've listened to your call. Thank you for doing it. How big is the opportunity for you a meeting? Like how many clubs are out there that you could roll up over time?

Well, there's about 2200 clubs in the U.S. based on past magazine articles and Barons and Fortune and whatnot. I think 500 area key clubs for us. Right now, we have about 50. So, we're about 10%. I'd like to get us to 200 clubs or about a 40% market share of the clubs, what I call our premier clubs, the ones we're very interested in. At that point, we'd be basically four times the size we are today. Based on our current mark cap, we have a mark cap somewhere between $2 billion and $3 billion, a free cash flow range of $400 million to $500 million. And if our free cash flow is stay, margin stays at 20%, we'd be somewhere between what, $800 million in free cash flow. So, I mean, that would be very, very exciting for us.

How many clubs do you have to look at to get …

I'm sorry. $400 million in free cash flow. Yeah. Oops, I tried to get too much money.

I don't think you can ever have too much. How many clubs do you look at before you like, is it 20? You look at 20 to get one or is it 10 to get one? Like how often? How -- what's that.

No, no, exactly. I'm trying to think of how we've had so many calls lately. We I've got clubs. We haven't even been able to go look at yet. But we're looking at numbers. We're pulling numbers. Basically, we do, we try to get financials first. We look at financials before we even look at properties. If the financials aren't there for us, I'm not looking for clubs that I have to go upgrade and fix, or -- I want to buy cash flow. I'm in the free cash flow business. I want to buy free cash flow. I want a track record of five, 10 years plus. I want to see solid cash flow for the trailing two years. And I just want to acquire it, bring it in, put it into the umbrella, put our synergies in with cost controls and POS and securities, the things we do, brand it or keep the brand depending on how good their current brand is. And then move on to the next one.

I would say we probably look at three or four a week at this point right now, in various ways. And we do pass on a lot of the smaller ones. We pass on clubs that we just aren't competent in the market or in the competitive level of certain markets. But overall, we're pushing very hard. We're building our -- I call we're building our down line up. So, we have several lined up over the next period of years. We're going to be meeting with owners in Vegas. Some guys aren't ready to get out yet, but they're -- they talk about, well, probably in a year or two, I'm 67, by the time I'm 70, I don't want to do this. Or I'm 63. I don't want to do this after 65 or, stuff like that.

So, we're talking with those. We're getting the numbers in and putting the -- just putting some offers out there. We've got some offers out there right now that haven't been accepted yet, but the guys are looking and I'm sure they're shopping and trying to find other buyers that'll pay them more, or not. But eventually they're going to come back to realize that a buyer that'll pay them more is going to give them a whole lot less cash down. They're going to want more financing. Their risk is going to be higher. They may get more pay. They may get more money, but they never collect the money.

With us, they are guaranteed to get their money. We we've been doing this for a long time. We've got an unbelievable track record. Our track record is filed with the Securities and Exchange Commission for since 1995. So you can see our track record and what we've done as far as making all our bank payments. We've never defaulted on loans. We've paid everybody. So, I think that gives us a lot of credibility and guys get there. It takes time. Plus they got -- it's like letting go, your baby. A lot of these guys have been doing this for 30 years and they've been that same club. They've got employees that they care about. They're like their family. And so they don't just want to sell to somebody who's going to come in and fire all their employees. And so it takes time for them to get comfortable that we're not going to come in and just fire everybody. We -- in fact, we're buying your cash flow. We want the same people to operate it because that -- they're the ones that have built that cash flow business. And so, it just takes time to get to that point.

But like I said, I think it's accelerated, we're getting more calls than ever. And the pipeline is great right now. I'll know even more after I get back from Vegas and the weeks following Vegas as we -- I plant the seeds of, hey, this is what we could do, or this is something we're paying a higher multiple now and guys start doing their math and they start coming back with numbers. They start realizing, well, gee, I could live in Florida or I could retire to the islands or I could go to a ranch in Montana and those types of things. And that's what we -- I think that's what really gets their -- the train rolling with certain owners.

Appreciate your time. Thank you.

Thanks so much for the question, Howard. And just noting Eric's doing all this without M&A bankers, because no one knows the business better than this management team. Next up, we are going to have an international caller Mathias from Germany. Please take it away.

Thanks very much. Just -- I might have to apologize maybe for my silly questions because it's the first call of you I'm hearing. But maybe I may ask first, I just don't understand, what's the difference between a nightclub and a Bombshells? Is it simply a kind of brand for a special type of nightclub, or is it a restaurant -- only restaurant and bar? I couldn't understand that. First question.

Second question is, you mentioned that you are able to buy new clubs at three to five times EBITDA. Why is someone selling at that low price? Doesn't really make sense in my eyes. So what's the main reason for sellers to sell. And why do already mention that a little bit in your last answer? Why do they especially sell to you and not make a kind of auction if someone pays more on that? And as you also mentioned that you're buying really lot of new clubs, what about management resource? Is there a natural limit of clubs that is -- that you're able to manage? Let's say $500,000 or something like that. Is there a limit that you think would not be clever to go over, to still keep the margins? Thanks.

Sure. Let's start at the top. So what's the difference between Bombshells and nightclub? Bombshells are a typical restaurant sports bar. They're -- there's no lap dancing, there's no really fraternizing with independent contractors. It's more of a waitress, typical. Waitress more like a [Technical Difficulty] or twin peaks, and more like a -- at the same time, more like a yard house, a darker product called yard house or all dinner, traditional lunch crowd in the daytime, traditional dinner crowd in evening time. The guys that hang out the bar, watch TV, flirt with the girls in the afternoons. And then late night we convert into -- we bring in live DJs, we can crank up the music, it gets loud and we become more of a meet and greet place for 20 to 35 year olds to come, on their way out to the nightclubs, to have a little cheaper drink, maybe grab some food, get into the vibe, get into the mood. And the nice thing is they -- a group of girls come, a group of guys come all of a sudden they're flirting with each other, talking to each other. And the next thing know they never made it to nightclub. They spend all night, drinking and party at Bombshells, which gives us great margins.

The nightclub business, we're a typical strip club, gentleman's club, whatever term, I don't know what the term is in Germany. But basically, we have nudity, top is dancing, or full nude dancing, lap dancing, VIP room, champagne rooms, that type of stuff.

Why do guys sell for three to five times EBITDA? Because private equity and banks do not lend money for the acquisition of adult related businesses, are very few in the United States. Other operators do not have access to capital and the capital structure that RCI has. Because of our large real estate holdings, we're able to borrow money from banks against our real estate, pull out equity, use that equity to buy and pay cash down in large sums, anywhere from $10 million in this last transaction, we paid out, $5 million a transaction up to 30 some million in the Lowrie transaction. And we're able to use $30 million equity in that transaction as well.

And you say, why us? That's the same answer. We have the ability, we have the capital, we have the track record. And what's our limit of managing clubs? Right now, our internal goal, I want to get to 200 clubs. I don't -- I'd like to do it in three years. If it takes five, it takes five. If it takes a little longer, it takes a little longer. I think at that point, we'll -- our systems are in place. We're completely scalable. The amount of management talent -- we bring a lot of our talent up from our existing operations, bring guys up. A lot of times we buy the talent. When we buy the club, it's already well managed, it's already has great cash flows. Why are we going to change anything? We're going to leave that current management place.

We bought Scarlett, the same general manager had been there for 15 years. He's been there since I think 2017 for us. Has no desire to retire. He's doing a great job, prints out cash. So a lot of times we don't make hardly any management changes. So, we just actually grow our team that way. So we grow it organically, or through the -- through bringing people up in our clubs or we do it through acquisitions, where we not only get the club and the land, the property, but we get great employees that have worked in that location for years and years. So, I don't know that there's a limit at this point. I'm sure at some point we might reach that limit, but I think -- I know operators are [indiscernible] own 1100 of them. So, if you put the formulas and you put the systems in place, there is no limit. I don't think.

Thank you. Other companies similar to Rick, for example, non-listed companies with -- which are maybe much bigger.

It's hard to tell the private companies, there's two major private companies, I would say, in the U.S. There's lots of mid-size, as revenue size of Rick's, I don't know, I don't know Dejavu numbers, but Dejavu is a very large chain, and Spearmint Rhino was another, fairly large chain, but they're more west coast, and international than in the markets that we operated in at this time. But I don't know their capital structures. I don't know their access to capital. But I can tell you that both of those companies, when I started in 1999 were much, much larger than us. And we haven't passed them. We have definitely closed in. Probably Dejavu is -- has the most locations. If there's one that's revenue wise, as large as us, that would be them. I don't think Spearmint Rhino anywhere near our revenue size.

Okay. One last question if you allow me. What about mode of the single restaurant, a single nightclub? Isn't it quite easy to get new competitor just down the road. How stable is the restaurant or nightclub business on the long-term for -- concerning a single restaurant or single nightclub? Because in -- as I have impression in Germany, restaurants come and go, and also clubs come and go. Often maybe if for -- as you told the general manager is going to another club, the business sometimes collapses. Is that a real risk concerning the single club, or don't you see that?

In the nightclub -- on our nightclub side, we're adult nightclub. So we have nudity, which requires special licenses, adult entertainment license, especially business licenses, whatever the local government has put in place or states have put in place. Those license are mainly grandfathered. There were major many, many court cases throughout the last 25 years. The existing locations are basically the only locations that can operate now in those markets. If anybody else tries to open, they're basically not allowed in, what I call, economically viable locations, or they have operating restrictions that are much, much different. They can't operate at the same level or same manner that we do. And so that gives us a huge mode in the nightclub business. That's why we own our property. The property is tied -- the license are tied to specific property address or zoning. And so that's why we buy our property in the nightclubs.

As far as the Bombshells, sure. Other people can open Bombshells. There's been a lot of -- there's a lot of other types of sports bars, restaurants, nightclubs that do similar things to Bombshells. But Bombshells, we buy our property for the most part. We're super high traffic, high flow areas. And the population growth in our areas are all strong where we're at right now. It's very expensive to build a Bombshells. It's not a typical small hole in the wall place that is easily to open and compete at the same level.

And I think that we have certain operational advantages with our history of being in the business for so many years, that -- we've fortunate and very strong that all of our locations are profitable. They're all continued to be profitable. And we haven't had any real competition that comes in and affects our revenues. Our oldest location's been there for over 10 years. Most of our locations are going on four to seven years old right now. And we're just starting to expand over the next three years, helping another 18 locations.

So, if you ask me the biggest risk, Bombshells would probably be what I consider the higher risk than the nightclubs, but I still think it's relatively pretty low. Anybody can go knock off Chili's or Olive Garden, or any other major, Texas Roadhouse, any other major Ruth's Chris Steak House, yet they all seem to have their brand, their branding, their concept, and they have their followers that like that brand, are patrons of that brand and support that brand. And I think Bombshells has done and created the same type of atmosphere and we've proven the concept works for over 10 years now.

Thanks. And wish you luck in the next quarters. We will be happy to follow -- following earning calls. Thank you.

Thanks so much. We appreciate it. Now, Eric, one question that was submitted to me by a hot girl capital, is you plan to open a Nashville location, maybe a naughty honky tonk in the future.

Well, Nashville is a very tough market. We actually were working on a partnership club up there and -- sorry we had echo there. And so, we've kind of stayed out of that market. The liquor laws combined with the adult entertainment laws are very different in Nashville. They want to be the -- bachelorette capital of the world. And I don't think they really want all the guys there or something. I don't know. It seems like, they're not very favorable to our industry in that market. But I'm a never say never guy, so we're always looking, we're always trying and hopefully someday we find something that, that makes sense.

Fantastic. Now we just hit 90 minutes, so would love to encourage everyone to retweet and share this to get some more people in here. For our next question, we're going to be going to Caesar. Caesar?

Yeah. Thank you, Mark. I have a question, Eric. Okay. Your tell -- your telling us that you think that the expansion will be three to five years, but that's us based. So when will be the time that you think the management thinks that you can go with Rick Hospitality abroad? I'm talking Europe, Amsterdam, Paris, Milano, Mexico and Latin American country, [indiscernible] Mexico City, when will be the time for Rick Hospitality to go abroad to expand the business abroad.

Yeah. Sure. That's easy. When we run out of opportunity in the U.S., one of the biggest things is we have to learn those markets. We have to learn the legalities, the laws. We have to find legal counsel. We have to -- there's a lot of homework and a lot of legwork to expanding international. Right now, we've done some of that legwork in Canada. We've done some of that legwork in Mexico in the past. So it's not -- and of course, Argentina [Technical Difficulty], even high, it's been a while. Since then we've decided to stay focused in the U.S. When we -- like I said, we run out of growth here and run out expansion plans here, not against international travel, and international markets. I think it would be great to create a conglomerate of that size, and basically a branding that would exceed continents. It's just going to take time. Right now, I think we've got enough. Like I said, the next three to five years, I think we're pretty wrapped up here in the U.S. As we continue to roll up this industry and complete here, then we'll have to pre-look at another markets. Now, Bombshells may expand in some of those markets through franchising, much faster. It's just early in the stage of Bombshells, but we'll see as our expansion grows through franchise.

Okay. Thank you. Thank you for your answer.

Great. Thank you so much for the question. Just want to take a moment to encourage everyone to follow Eric, Equity Animal, and most importantly, Bradley on Twitter. We want to get his follower account into the four digits or else he's not going to be allowed home once he returns to Houston. Next up, let's bring ice to the floor. Ice, you're up.

All right. And thank you for having me. I'll try to make this pretty quick. So my question's kind of about Bombshells. So you've been pretty methodical about growing Bombshells. I'm pretty sure you have like 11 locations over the last 10 years, but right now you really seem to want to be ramping that up with both kind of having franchisees and company owned locations. I know you have to slow down now due to inflation concerns. But I guess what about the concept now makes you really positive about Bombshells? Is it just like the size of the location, the patios facing, your newer location seem to be performing a lot stronger than your older location? So I guess if you could just kind of touch on that, that'd be great. Thank you.

Sure. I -- it took us time to learn. Our first few years were massive learning experiences for us. We didn't understand the demographics of our customer base. We didn't understand a lot of things. Restaurant was new to us. We knew the nightclub business. We know the liquor business very, very well. But the lunch crowd, the dinner crowd, the different day parts of the business. So we brought in an expert, and the big thing's just growing the team, and the support staff. We've grown that so much. Now we opened six clubs or six locations in 18 months in the past from four to 10 locations. The growth was very rapid. We stretched management very thin and we realized we needed to take some time and build up. And right as we were getting to the end of that COVID hit, we're right ready to go, let's go do six more locations and then COVID hit. So, we had to take some break from that.

We are working on six locations. Like I said, we have two bought, one under contract -- well, actually two under contract. We entered the other contract yesterday. It's still very early on that. There's a lot of due diligence to do. It's -- we have time on that one to figure out just in case something doesn't work, but right now they -- the architectures, engineers are working full time to get that location up. We're not too far off on Stafford. We're starting some construction. Like I said, we've got -- the demo is all done. We're going to start putting the restaurant back together, start doing some of the work, but we're waiting for certain things like concrete costs. The steels come down. So we're probably getting the steel order here very soon. The roofing costs are coming down. We found a roofer who's looking for some work.

The biggest part is, like I said, the subs just -- they have so much work that they're -- it's like, oh yeah, I'll do it for you. But that hundred thousand dollars job is going to be 180. Well, when you have 20 contractors or subs telling you it's 80,000 more dollars, you're spending another $1.6 million to bud location, and I'm just not prepared to do that. So we'll wait, we'll take our time. We'll wait till the subs need to work. We'll negotiate down and we'll build them at the cost they're supposed to cost. And maybe pay a little bit more here and there, but not to the tune of additional, basically 70% of cost of what we built for a -- we paid to build the Arlington store.

Like I said, those costs are coming down. We're getting more in line. We're kind of -- I wouldn't say GCN, but we're doing some of the subs search ourselves. And same thing for Rowlett, Texas. We're waiting for building permits there. The bid sets, we'll get those bids out. It's a new construction project. Typically, a new construction project will have a easier job for the GC because you'll end up going with a -- they'll go with a group that will do 90% of the build out the building land, the concrete, all that stuff themselves. So, they tend to -- if they're going to bid it, they're going to tend to give us a very market rate bid versus, oh, I'll do this job if I get paid a lot of money.

So, I think we're on the course of that. We just -- we'll see as the next few months go by. I think September, October, November, we're going to watch inflation and watch commodity costs and -- we'll just -- let's have, see where it goes. If at some point, it doesn't -- like I said, we're sitting on the land, we we've got the land finances. Most of it 4.99%, 5.25%, 5.4% stuff like that. So, we can set on it and wait, pay a little interest to. It's a lot cheaper to pay a little more interest cost than an extra $1.6 million per bill. So that's just kind of where we're at.

All right. Perfect. Thank you so much.

Thanks for the question Ice. Next up, let's bring Johnny Shen [ph] to the floor. Johnny, you're up.

Hey, guys. Thanks for taking it. Good job on the quarter and all that. Yeah, I kind of wanted to go back to the Cheetah deal just because, it's new, it's interesting. It's a decent size. Is it -- would you say, it sounds like you didn't quite say this, Eric, but it sounds like you were kind of saying this was a unique deal that this wasn't exactly that we wouldn't -- it wouldn't be appropriate. Would it be inappropriate to sort of try to model future M&A off to -- closely off this deal? Is that a fair interpretation?

Very fair, is definitely a very unique situation. I'm not saying we won't get more unique situations, but the BCG deal or Lowrie deals, as most people call it, for the Denver Clubs, 11 club acquisition, the Playmates, the Playmates acquisition. If you look at the Playmates acquisition in May. If you go back a few years and look at Scarlett acquisition. Those are more typical acquisitions for us, which basically, be about four times EBITDA for the business plus the real estate, which typically will make the deal at the overall five times deal.

And then we typically will go in, and improve everything by about 20%, which turns around and makes it basically a three X for the club and the one times EBITDA. So we end up taking it from a five times EBITDA deal down to four times. And you'll see us put about, anywhere from 30% to 40% cash down, and finance the rest, or maybe some of them are all cash deals, but we use a third-party financing group. So we get 30% to 40% of our company cash. And then we finance. Or -- even on Scarlett, for example, we borrowed 100% of the money. So the whole -- entire down payment was borrowed from a third-party, or a group of third -- a group of people for a third-party, basically. And so the -- it's almost infinite cash on cash returns, because anything we made over the interest expense on that transaction, was all additional free cash flow for our shareholders.

And it just depends on our leverage at the time. I'm comfortable to three times leverage, the highest leverage ratio I think we've ever been at was 3.14 times trailing 12-month EBITDA to debt ratio. Currently, we have $188 million in debt. We're probably most -- two times probably under two times debt to EBITDA margins right now -- our ratios right now. So, we've got a lot of room to grow through debt. We've got $37.5 million in cash. We're generating a million plus a week in cash, I think right now. So we've got plenty of capital available and it looks like plenty of runway out there with the acquisitions that we're working on.

Obviously, the more cash we have to put down the better the -- and bigger the deals we can do, because if you're making a -- you're making $14 million in cash and I offer you a $20 million down payment where you can wait 16 months, you make the same $20 million, you really got to want to be a seller. But when I can walk in and offer you $40 million cash down, so now you've got almost three years cash in advance and then you're getting big monthly payments every month. The guys are more inclined to do the larger deals and sell me $14 million plus in EBITDA at a single time. So, those are kind of things we're running up against.

The other thing is, our current bank -- the current bank after all the interest rate raises is quoting a 6.39% on five-year interest rate adjustments. And we locked in 10 years at 6% for the entire length of a note on Cheetah. So, like I said, it was a very favorable financing deal for us, and just an overall great deal for us as you'll see on the cash and cash returns, as those numbers come in over the next three years.

Yeah. That's definitely seems likely. On that sort of note, I guess, maybe if you don't want to talk specifically about this, because I'm really curious more generally. When we look at seller notes, I'm guessing Rick -- the company doesn't tend to prepay these. I mean, is prepayment, is that usually something that that's completely off limit based on the structure of the notes? Is there anything that can accelerate payments? Like, so, for example, if this is a -- when you have like retirement seller notes, if it moves into an estate situation, sort of the -- again, what's sort of like the model framework.

No. There's no prepayment penalties. There's no acceleration in any of our seller notes [Technical Difficulty] cost of capital is. Obviously, if I can save four points, sure, I'm going to go to the bank, borrow the money and save four points of interest on $15 million note. Sellers are realizing that, and we're seeing -- as you're seeing in our deals, 6%, 6% notes, 7% notes, because they don't want those notes paid off. These sellers really want to create an annuity for their family. They're older and they want that monthly cash flow that they know, that they're going to be taken care of, their family's going to be taken care of or whatever, as that money comes in every single month over the period of the note.

Okay. That's cool. Yeah. That makes sense. Now, you mentioned having a couple offers out. Obviously, it's reasonable to expect. They're kind of being shop around. You tend to get a good amount of visibility or intel on, when deals don't happen -- obviously when deals don't happen, you end up finding out no matter what, usually who the buyer is. I mean, it doesn't feel like you're mostly dealing in these situations with one off or do you kind of see the same names pop up?

Typically if we don't buy, it does itself. That's what we find. It's like, oh, I need more money than that. And you're not going to pay me more money and no one else is going to pay me more money. So, if you listen to other industry buyers out on the street, you'll hear them complain, oh, RCI pays too much, RCI pays too much, RCI makes fair and good deals. And a lot of in the past, especially in our industry, it's all been about only buying people when they're in forms of desperation. And so you've seen super low prices and that's what guys are used to. But when you have a retiring seller who understands the value of his business, who -- you have to give them a fair price, or why would they sell, as the caller said earlier, why would somebody sell it three to five times EBITDA?

Well, there's multiple reasons. Typically, five times is a very high offer in our industry right now. It's -- I think it's a very fair offer due to the risk and uncertainties of our industry. The stigma of our industry and the fact that there's just no one else that at this point can deliver. And everybody says, why I can't -- why doesn't anybody -- people buy restaurants all the time. They buy nightclubs all the time. Why don't they buy -- the adult entertainment is a very specific and unique management capability that you have to have. There's regulations that people aren't used to. There's all types of situations that you have to deal with, or be aware of, or block you have, cash handling. There's just a lot of complexity to the overall industry. And we have the issues ourselves where, people won't do business with us and they won't lease to us, or they won't -- they don't want to sell property to us, because we're in the adult entertainment business.

So, you got to be willing to deal with those things, as well. Maybe you're -- if you're fairly -- come up with the kind of money and do the deals we're doing, you're talking about fairly wealthy people, maybe they're big in their community. They're big in their church. They're big in their country clubs, and they don't want that stigma of adult entertainment, whereas something, RCI is not only -- we just embraced and moved forward. And we are what we are and we know what we are, but we're trying to change the perception of what the industry is as a whole.

The biggest problem with industry is, as I've learned through, most 25 to 35 year olds, as we've moved into Twitter, as we've moved into the NFT space, their concept of an adult nightclub is Ozark. I don’t know if you watched the Ozarks. But they see the dingy strip club where the -- people are all thugs or gangs or drug dealers. And Rick is the exact polar opposite of that is very -- corporate America very structured, very rural, very -- our cash handling systems are comparable or equal to casinos. And that's -- it's just a different business model. And that age group that hasn't been to the club, that hasn't seen firsthand in our industry, doesn't know any better. And so, that's why we embrace Twitter. And that's why -- our NFT project is about building the future and building that 20 to 35-year-old customer base, and bringing them into our businesses and giving that life experience of the fun and excitement of our industry.

Great. And I'm sorry, just one more. It is back to Cheetah. And it's just kind of -- it just kind of popped into my head when I heard you talking about it earlier, because I remember the press release saying $4 million kind of an expected EBITDA. And then, it sounded like kind of when you were freewheeling, you were starting to use some like synergy add-ons. So, is that $4 million EBITDA figure in the press release? Is that a sort of pre-synergy, pre-operational improvement number? Is that -- like, where is that coming from?

Yeah. That's basically based on existing business as it is at the time we speak.

Okay. So for this, like, are you -- since it's Florida, are you just looking at like last year, are you still doing like kind of a pre-COVID interpolation there?

We kind of do a -- current year, past year and 2019 still right now.

It's kind what we look at. Yeah. We want to see where they were in 2019 versus where they are in the last two years.

Because, I mean, for Florida, it could be that this is actually a banner year for them, right? Because it's Florida or -- yeah, yeah.

Exactly. Which is why we use -- they made more money in 2021 than they're going to make in 2023. 2021 was the banner -- you got to remember the last -- the last checks went out in March of 2020 last big -- stimulus checks went out in March of 2021 and they rocked through September, right? Six months. They last about six months. Everything was kind of blown up. So that's how I'm really excited. Everybody says your comps get hard. The comps were probably harder for July, August, September this year, because nobody's traveled last year. They had the stimulus money. Not a lot of it was left, but some of it was left, but nobody traveled. Nobody went to Europe. Nobody went to Mexico. This year, Europe's complain, everybody's complaining. All the airlines are complaining about all the people flying.

You go to Florida, look at the tourist market in Florida right now. I mean, it's insane where -- like I said, last year, I don't -- I think I went to -- I tell you, I just remember, I went Gulf Shores, Alabama, because it was the only thing open. You couldn't even rent our BRBO last year in Florida. So we ended up in the Gulf Shores, Alabama, which is actually very nice, great white sand beaches, a highly recommended, especially for a family type vacation. You can't beat. It's lower cost and it's really nice. And it's not -- it's in the middle of Florida and Texas.

Yeah. Thanks. I'll tell my wife, I was on the call to figure out where to take her and the kids for vacation.

Okay. Yeah. Thanks. And I just want to say, not -- nothing but you mentioned that kind of how much stimulus would've been left. I mean, I think people are undercounting stimulus because there's a lot of things that weren't officially stimulus that are -- like the student loan repayment, is essentially for a lot of high earners. Like if you're a doctor with student loans, it's not materially different from just getting a check $2000 a month from Fed right now. For us however long that goes. But thank you so much for the answers, that really helps kind of firm up how we're thinking about it. Thanks.

Thanks so much, Johnny. We're going to take questions from two more individuals, but just happy to know I'm taking my ex-wife to Gulf Shores, Alabama, for our next vacation. Next up, we are going to have hot girl capital of BTT long short equity partners. Hot girl, you're up?

Hey, thank you so much. The space has been great. I was just curious, does RCI Hospitality or any of the specific clubs have merchandise for sale?

Yes we do, especially, Tootsie's has big -- it's just different from market to market, but yeah, Tootsie's is probably our biggest marketing club. I think Diamond Denver has some stuff, basically have stuff everywhere. What we probably really need is a strong online presence is something we've never developed. We've always been kind of small, but that's one of the things we should probably look into as we move forward, especially for the Bombshells brand. Bombshells has tons of merchandise. Every store has a big merchandise display case in the front. Whatnot. There are some things you can buy online. Right now, like Rick's hats and different products, through some of our websites. But expanding that and trying to -- I would say we need to be like, Hard Rock Cafe and Planet Hollywood and have a lot of cool little neat things that people could collect and go to all the different clubs and try to collect all the different shot glasses or key chains and stuff like that. So, glad to bring that up, but something I'm going to put on the Vice President's calendar to start putting together and see what it looks like.

Great. Thank you so much.

Looks like we'll be adding that to ZeroTangoTango to do list, capital it's those hard hitting questions that we really appreciate over here. So thank you for that. Last, but certainly not least. We have Dime Square Holdings, Dime Square, you're up.

Hey, thanks Mark. And thanks everyone else for hosting this. Congrats in the quarter and all that. So, I was talking to my friend so analyst and we were wondering maybe why or why not. It would be a good idea for you guys to do sale leaseback when you're doing acquisitions.

We've looked at sale leasebacks in front, but the reality is [Technical Difficulty] I pay higher interest rates. Why lose all of theorization, depreciation just to report higher EPS, but have lower free cash flow per share. To us, it just -- that we're not worried about EPS. We're worried about free cash flow per share, and it's our overall free cash flow. And so that's the reason we've kind of -- we also looked at a REIT in the past, the Real Estate Investment Trust. The problem is our licenses are tied to the real estate. And at any point we lose control of the real estate, we have basically an uninvited partner because every time a lease runs out, the rents go up and they go up more and more based on how much money we make. So, the better we do our job, the more they try to take from us. And so, learn that for or after many, many years in this industry, in fact, we just passed on a really nice acquisition. I would've loved to have, because the owner won't sell us the property. No, I want to keep the property. We told him to a 1031 tax free exchange. We told him everything. But the reality is he wants to be our landlord so that 10 years from now, his family can race the rent on us again. And 20 years after -- 10 years after that, he raised it again. We're just not -- it's just not what we do. We own our real estate, basically for the control of the licensing.

Fantastic question. Thanks to Square Holdings to finish this up. I want to thank everyone for tuning in, and encourage everyone to follow Eric, Bradley ZeroTangoTango and Equity Animal on this. For those who joined us late, we want to say that you can meet up with management and myself tonight at 7 o'clock at Rick's Cabaret, one of RCI's top revenue generating clubs. Rick is located at 50 West 33rd street between fifth Ave and Broadway, a little in from Harold Square. If you have an RSVP yet, ask for Eric Langan or me at the door on behalf of Eric Bradley, who will be offering free complimentary fireball shots, the company, and our subsidiaries.

Thank you. And goodnight. As always, please visit one of our clubs or restaurants. And actually, we are gonna take one more question. Let's bring you up as a speaker. All right. This will be our last one. And once we connect, we'll go from here. What's that?

We can hear. So you can go ahead and start with your question.

Okay. Given that, just want to thank everyone again, encourage everyone to come out to Rick's 50 West 33rd Street tonight. We'll be there. We're heading there … [abrupt end].