RCI Hospitality Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 11 speakers on the call.

Operator

Greetings, and welcome to RCI Hospitality Holdings Second Quarter Fiscal 2023 Earnings Call. You can find RCI's presentation on the company's website. Click Company and Investor Information under the RCI logo. That will take you to the company and investor info page. Scroll down and you'll find all the necessary links.

Operator

Please turn with me to Slide 2 of our presentation. I'm Mark Moran, CEO of Equity Animal. I'll be the host of our call today. I'm here in New York City with Eric Langan, President and CEO of RCI Hospitality and Bradley, the human calculator Shay, the Chief Financial Officer. Please turn with me to Slide 3.

Operator

If you aren't doing so already, it is easy to participate in the call on Twitter Spaces. On Twitter, go to rickceo and select the space titled $RIC, RCI Hospitality Holdings Inc. 2Q 'twenty three earnings call. Apologies for the technical Difficulties here? We good?

Operator

Looks like we're back at it. To ask a question, you will need to join the Twitter space with a mobile device. To listen only, you can join the Twitter space on a personal computer. RCI is also making this call available for listen only through traditional landline and

Speaker 1

Webcast.

Operator

This conference is being recorded. Please turn with me to Slide 4. I want to remind everybody of our Safe Harbor statement. You may hear or see forward looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated.

Operator

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 5. I'd also direct you to the explanation of Rick's non GAAP measurements. Finally, I'd like to invite everyone listening in the New York City area to join Eric, Bradley and me tonight at 7 o'clock to meet management at Rick's Cabaret New York, one of RCI's top revenue generating clubs. Rick's is located at 50 West 33rd between 5th Avenue and Broadway, a little in from Herald Square.

Operator

If you have an RSVP, ask for me or Eric at the door. Now I'm pleased to introduce Eric Langan, President and CEO of RCI Italia, take it away.

Speaker 2

Thanks, Mark. Thanks everyone for joining us today. Please turn to Page 6 for today's news. We moved ahead on a number of fronts in the Q2. Revenue grew to $71,500,000 That's an increase of 12.3% year over year, reflecting both same store sales and acquisitions.

Speaker 2

Free cash flow was $14,800,000 up 33%. Adjusted EBITDA was $21,700,000 up 8.8%. We look forward to optimizing their contributions. On a sequential quarter basis, our Bombshells turnaround program has started to produce results. We also advanced many of our projects involving Club acquisitions, new club developments, the Rick's Cabaret Steakhouse and Casino in Colorado and new Bombshells locations.

Speaker 2

I'll be back to tell you more and answer questions later. Here's Bradley to review the financials.

Speaker 1

Thanks, Eric, and good afternoon, everybody. Looking at some of the other major numbers in the quarter. EPS was $0.83 This reflected some non recurring items. On a non GAAP basis, EPS was $1.30 up 9.2 percent year over year. On our non cash from operating activities was $16,800,000 up 44.8%.

Speaker 1

We had 9,300,000 weighted average shares outstanding. That's down 2.4% year over year due to prior period repurchases. The 200,000 shares issued as part of the Baby Doll's Chica acquisition had minor impact. That's because they were issued late in the quarter. Now moving on to the income statement.

Speaker 1

Please turn to Page 8 to review the Nightclub segment. Revenues totaled $57,000,000 up 18.4 percent year over year. That was driven by $6,900,000 from acquisitions and newly remodeled clubs and 3.7% same store sales growth. Operating margin was 31.6% and 39.3% non GAAP. GAAP operating margin included primarily a legal settlement expense and an impairment.

Speaker 1

Compared to the Q1 of fiscal 2023, Revenues increased 23% driven primarily by acquisitions, while non GAAP operating margin declined 1.1 percentage points. That reflected the fact that we had 2 weeks of the Baby Dolls and Chico Locust acquisition, which did not allow enough time for optimization. Please turn to Page 9 to review the Bombshell segment. I only have three things to say here. Number 1, results improved sequentially.

Speaker 1

Revenues increased 6.6%, driven mainly by the acquisition of Bombshell San Antonio and the Grange Food Hall with its new Bombshells Kitchen. Non GAAP operating margin expanded 1.6 percentage points. All this reflects initial progress from our turnaround program. Number 2, while operating margin target remains 18% to 21%, the segment's performance at 15.4% non GAAP We're right in the middle of many well known publicly traded restaurant chains that have recently reported the results. And lastly, number 3, the segment was profitable, generating $1,800,000 GAAP and $2,200,000 non GAAP.

Speaker 1

Please turn to Page 10 with me to review our consolidated statement of operations. Note that all comps are as a percentage of revenues. Cost of goods sold declined year over year, reflecting increased service revenues. Salaries and wages were higher year over year and quarter over quarter. This was due to minimum wage increases in many states where we have clubs on January 1.

Speaker 1

It also reflects the higher labor costs at newly acquired clubs. SG and A was higher year over year, but declined quarter over quarter. Year over year reflected newer acquisitions that are not fully optimized and quarter over quarter reflected the absence of year end audit expenses. Depreciation and amortization were higher year over year and quarter over quarter. The Q2 of 2023 included a one time accelerated amortization of Grange Food Stall Leases.

Speaker 1

Other charges and gains reflected $3,100,000 in legal settlement expense and $662,000 of non cash impairment. Operating margin was lower year over year and quarter over quarter, but on a non GAAP basis was approximately level With the year ago quarter and expanded 1 percentage basis point from the Q1, interest expense was higher year over year, but quarter over quarter. 2nd quarter of 2023 included initial cost of new debt and mid Please turn to Page 11. Keep in mind that this was after paying $18,400,000 For the cash portion of acquisitions, free cash flow was 20.6 percent of revenues and adjusted EBITDA was 30.3%. Both increased sequentially are in line with our 20% 30% targets, respectively, as a percentage of revenue.

Speaker 1

To wrap up our discussion of the income statement, please turn to Page 12 for an update of our geographic focus. In the Q2 of 2023, our regional revenue breakdown was Texas at 41%, Florida at 25%, New York, Colorado and Illinois are 8%, 7% and 6%, respectively, and other 8 states combined for 13%. This demonstrates our geographic diversification, our exposure to growth states like Texas, Florida, Colorado and how we develop our business clusters in key areas. Turning to Net of loan costs, debt $45,800,000 as of March 31. That's an increase of $35,000,000 from December 31.

Speaker 1

The increase primarily reflected financing for the 5 Club Baby Dolls Chica Locals acquisition, primarily offset by scheduled paydowns of other debt. Our weighted average interest rate was 6.52%. This compares to 6.14 percent a year ago and 6.6% 5 years ago. Excluding balloons, our amortization schedule is now in the $12,000,000 to $15,700,000 annual range, which is very manageable with our higher level of debt our cash flow higher level of cash flow. Please turn to Page 15 to review some of our other debt related metrics.

Speaker 1

Please note that this reflects our new debt related to Baby Doll's Chicas Locust acquisition, but only 2 weeks of contribution. Occupancy cost was 7.6% of revenues. This continued to be well within the 6% to 9% range We've averaged when sales went dramatically impacted by COVID. Now please turn to Page 16 to look at our March 31st debt pie chart. Our debt now consists of 54.9% secured by real estate, 30.4% Seller financing secured by respective clubs and or the real estate to which it applies to 6.6% of unsecured debt, 4.1% of debt secured by other assets and lastly, 4% that relates to new bank line of credit was used in the Baby Dolls Chica Locust acquisition that was also secured.

Speaker 1

Now let me turn the call over back to Eric.

Speaker 2

Thank you, Bradley. For this quarter, we added a third section to our presentation. We call it our take and are using it to explain underlying thinking to where we are going. I want to remind everybody of our Safe Harbor statement. You may hear or see forward looking statements that involve risks and uncertainties.

Speaker 2

Actual results may differ materially from those currently anticipated. We disclaim any obligation to update the information disclosed in this call as a result of developments that occur afterwards. Please turn to Slide 18. Everything we do is about our capital allocation strategy, which is similar to those outlined in the book, The Outsiders by William Thorndyke. 1st and foremost, the goal of our strategy is to drive shareholder value by increasing free cash flow per share by at least 10% to 15% on a compound annual basis.

Speaker 2

We have been implementing this strategy since the end of fiscal 2015 with 3 different actions subject to whether there is 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 3x to 5x adjusted EBITDA using seller financing and acquire the real estate at market value. Another strategy is growing organically, specifically expanding Bombshells to develop critical mass, market awareness and sell franchise. Our goal in both M and A and organic growth is to generate annual cash on cash returns of at least 25% to 33%.

Speaker 2

The 3rd action is buying back shares when yield on flow per share is more than 10%. As a result of these efforts, we have exceeded our primary goal. Through the end of fiscal 2022, we have increased free cash flow by 22% on a compound annual basis, while reducing shares by 1.5% on a compound annual basis. Please turn to Slide 19. So what is the current point between whether we should buy shares or invest in buying or opening new locations.

Speaker 2

Using a possible range of $68,000,000 to $78,000,000 for fiscal 2024 against 9.4 3,000,000 shares, the 10% yield point for buying back shares comes in at $72 to $83 per share, subject to whether we can make better investments. Please turn to Slide 20. Let's take a look at our most recent club acquisition. We used $15,000,000 in cash, dollars 16,000,000 in stock and $35,500,000 in debt to acquire 5 Baby Doll and Chica Locust clubs and their real estate. We estimate the acquisition will generate $11,000,000 in adjusted EBITDA in the 1st full year after closing.

Speaker 2

After that, with remodeling and some expansions, We estimate it will generate $14,000,000 to $16,000,000 in adjusted EBITDA. We assume conservatively we go from $11,000,000 in year 1 to midpoint $13 in year 2 $15,000,000 in year 3. That total $39,000,000 would represent an If you turn to Page 21, let's take a look at our planned Rick's Cabaret Steakhouse and Casino in Central City, Colorado. We bought the building in real estate for only $2,400,000 We anticipate it will take us about $8,000,000 to complete, which would include 200 slot machines. Including the casino, a similar size RCI Club generated between $8,000,000 $10,000,000 in revenue.

Speaker 2

Spot machines at existing Central City casinos averaged $129 per day. That's another $9,400,000 in annual revenue. So the combined estimated revenue of $18,400,000 had a 40% average club margin, which generates $7,400,000 operating profit. Let's assume conservatively that we only do $3,700,000 in year 1 And in year 2, we billed to $7,400,000 That's a total of $11,100,000 That would represent an average Annual cash on cash return of more than 50 percent on the $10,400,000 invested. Keep in mind, this does not include any table games or sports betting revenue.

Speaker 2

Please turn to Slide 22 I'm sorry, Slide 23. We also believe we have the opportunity to add even more locations. For example, it took 28 years for the company to go from one location to 21 locations. In the following 7 years, we added 19 more. And in the next 5.5 years, we added another 6 to total 56 clubs, which represent only a small portion of the market we want to consolidate.

Speaker 2

As our company expands in size, we believe we can continue to potentially accelerate our rate of growth. This is due to a variety of factors, including increased economies of scale, enhanced market penetration and greater access to resources. With a larger company footprint, we may be better positioned to capitalize on opportunities, we continue to grow as a company, we can potentially experience faster rates of growth and achieve greater levels of success. Turning to Page Slide number 23, sorry. We believe we have the cash to do this.

Speaker 2

Let's take a let's look at what In the Q2, at December 31, we had $34,100,000 We made an acquisition of $7,100,000 in net new cash or we made an additional $7,100,000 in net new cash And we used $18,400,000 in cash, primarily for the Baby Dolls Chica Locust acquisition ending the quarter That's $21,700,000 in debt maturities, gives us with a range of $46,000,000 to $56,000,000 in projected cash available to use for future investments. Turning to Slide 24. We also have shares we can use to finance acquisitions provided we continue to do it carefully, judiciously and in an accretive manner. To that end, we believe we have demonstrated a strong tracker. Since the implementation of our capital allocation strategy, we have acquired more than 2,000,000 shares at an average price of $19.55 per share.

Speaker 2

We have issued 700,000 Shares at an average price of $65.71 to provide $46,000,000 of capital for acquisitions. From our viewpoint, we use shares that we bought at an average of $19.55 and sold them for $65.71 or a 2 30 5 percent cash on cash return. To sum up, we have a long list of investment opportunities with the potential to generate significantly compelling returns when combined with our strong, Before we go into the Q and A, we announced we'll be holding our 30th anniversary Gentlemen's Club Expo Convention, August 20 through 23rd at the Perris Hotel in Las Vegas. For more information, go to the website listed on the slide. Thank you to our loyal and dedicated teams for all their hard work and effort.

Speaker 2

We can't do it without Now here's Mark to start the Q and A.

Operator

Thank you, Eric and Bradley. Before we move on, I'd like to Thank you, Eric and Bradley. Before we move on, I'd like to congratulate you both on the 1 year anniversary of our first Twitter Spaces, the first ever earnings call on Twitter Spaces. If anyone would like to ask a question, Please raise your hand in the Twitter space. When you finish your question, please mute your microphone to eliminate any background noise.

Operator

We have a limited number of speaker spaces. And after your question, we may move you back to the audience to free up space. Before we start things off, I'd like to give a special shout out to Kellen Currie, a listener in the audience and former Equity Research Analyst at JPMorgan, who will be challenging George Santos next year for New York's 3rd Congressional District. Thank you for joining us. Let's go ahead and start this show.

Operator

We'd like to take questions from Rick's Equity Research Analysts and some of its largest shareholders first. To begin, we'll have Scott Buck of H. C. Wainwright. Scott, please take it away.

Speaker 3

Good afternoon. Thank you, Mark. Eric, I'm curious, can you give us an update on where you are in terms of licensing for gaming For the Central City, Colorado location?

Speaker 2

Typically, their time is going to take 12 months. We filed at the end of November of 2022. So we're hoping to hear something Soon. Typically, you'll get some type of preliminary deal, which allows us to then set up the casino. I'm hoping that we see that in August, September, it could be as late as October.

Speaker 2

Gaming in Colorado, it's been a very slow process, not just for us, but for All new licensees, I think there are I believe there are 7 or 8 licenses that are now applied for in the State of Colorado. Some are much older due to various reasons on funding of the casino, things like that. I think as a publicly traded company, our funding will be super easy to explain its cash from the bank accounts. So I don't think we're going to have any issues when we reach that point. It's just getting to that point.

Speaker 2

I know that There's been some shuffling at higher levels in the Colorado Gaming Department. And so hopefully, The new people that are coming in are going to hopefully speed this process up a little bit. We would like to definitely like to see our license By the end of the year, we'd like to do our grand opening as a New Year's Eve party. But I think worst case, we could be looking as late as March. So it's a very until they contact you, there's not really much we can do, just sit and wait.

Speaker 3

Understood and thank you for that. And I'm just curious if you could give us kind of an update on what you're seeing in the clubs just given the Current environment, I know in the past couple of quarters

Speaker 1

there had been some weakness in a few of

Speaker 3

the blue collar clubs, but you were kind of more than making up for that in some of the higher end So any kind of update there on

Speaker 1

the business would be great.

Speaker 2

Yes. I mean, I think right now it's just inconsistencies. I don't see real trends forming up or down. I don't see I think we're just seeing kind of more of the same. We have location that gets down a little bit.

Speaker 2

We make some adjustments. It goes up. And then we have another location that's down a little bit. We make some adjustments and it goes up. So it's just a constant right now.

Speaker 2

It's like a shell game. We're just kind of moving parts around and moving pieces around and just overall shooting for A set number each week and if we're hitting that number, we're looking like I said, we're looking for the weak spots and the strong spots and we focus on those and Everybody else is just kind of in water right now. Overall though, revenues have been strong as you explained in this quarter. I don't believe that we've acquired enough new stuff. I don't think we'll see any decline in revenues.

Speaker 2

The question now is can we continue to keep the growth rates at double digit growth rates? We are looking at other club acquisitions right now That will help that hopefully by the time we get into the Q4 or definitely through 2024 And everything is really we've been priming the pump here, so to speak, for 2024. And I think you'll see a lot of activity as we move into 2024.

Speaker 3

Great. Appreciate that. And then just last one on the acquisition front. First, congrats on the deal closed earlier this year. What are you seeing in terms of pricing when you talk to folks?

Speaker 3

Any changes there or are people Kind of holding that.

Speaker 2

I mean, it's always been 3 to 5 times. I mean, we basically set the market. Other operators that are trying to expand don't have the capital or the cash typically that we are able to pull into a transaction. They definitely I think we just stick to the plan right now. It's all about the adjusted EBITDA.

Speaker 2

If we see trends, if their numbers are trending down, then we'll run a forecast based on those round trend numbers and make an offer According to that, numbers are trending up and we'll make an offer according to that. So we just kind of watch Where everyone is at and what we're seeing in our markets and their markets and it's been Pretty basic math these days for us. I mean nothing's going to really change much. Super. Well, appreciate the additional time guys.

Speaker 3

Thank you.

Operator

Thank you very much, Scott. And to further highlight your question on spend, I'd like to add that my spend at Rick's Establishments has stayed consistent. Next up, we're going to bring Anthony of Sidoti and Company.

Speaker 4

Yes. Good afternoon. Thank you for taking the So just a follow-up, Eric, you mentioned that you're making some adjustments to some of the clubs that have Your phrase intermittent softness that you've had. So just can you just talk about some of the adjustments that you've been making? And Just wondering, are these generally the same clubs in Boxlight 1st quarter?

Speaker 2

Hey, Anthony, I'm not sure

Operator

if that's you in the background, but could you repeat the question?

Speaker 4

That was not my that was not me in the background. So I'll repeat the So, yes, so Eric, just wanted to follow-up about the adjustments that you said you're making in some of the clubs that you've seen some Softness, can you just expand on that as to what you're doing? And then just in terms of the What's the common theme, I guess, as far as the clubs that you have seen some softness last few quarters?

Speaker 2

Yes, sure. I mean, basically what we will do is increase social media, make sure That our to put people into the clubs. We may run some bottle service specials On slower nights, we may basically just do whatever we need to do to create a better value for the customers and guests that are visiting the location and doing things to put more people through the door, Whether that's social media, whether that's on-site promotion, we had huge crews out at the Nuggets game last night. So I'm sorry, Miami game, I think it was the day before. But you get the idea.

Speaker 2

It's just it's more promotional. We become more promotional. We become more proactive on things. And then, like I said, we watch or If our main floor is not full, we try to fill it up and if VIP is empty, we'll try to run some specials of VIP, we may do more shot specials, we may do, like I said, more social media Promotions and specials. So just things to put people through the door.

Speaker 2

That's how we fix it.

Speaker 4

Understood. Yes, thanks for that color. And then Just in terms of the Q2 here, you also cited higher labor costs at the newly acquired clubs. Do you expect to bring those costs down as a percentage of revenue now that you've had a few weeks already under the belt?

Speaker 2

Yes, certainly. I mean, obviously, when we first take stuff over, they're a little heavy. We put some extra labor in there as well. So we've become a little heavy on labor. We sort through it and move people around.

Speaker 2

We if there's deadweight, we have to get rid of the deadweight to get the numbers where they need to be. Typically, it's a 3 month to 6 month process like Denver. Denver was took a lot longer. I think This location, because it's in Texas, will be much faster for us.

Speaker 4

Got you. Okay. And then it was good to see Bombshell's Margins up sequentially. Do you still expect that longer term you can get to your target range of 18% to 22% segment margins for that piece of the business?

Speaker 2

Absolutely. We didn't raise we were reviewing prices through most of March. We raised most of the prices we needed to raise at the end of the March period. So you didn't see any of those price increases in that quarter. You'll see the prices increases effect of the price increases in April, May June.

Speaker 2

And well, the fights have been good. We had a couple of really big fights in April and the 1st week of May. We've got NBA playoffs have been fantastic, some unbelievably close games that are bringing people out. James Harden playing in Philadelphia. There's still a lot of James Harden fans in Houston.

Speaker 2

So that's bringing people out to Bombshells in Houston to watch games. And I wasn't disappointed. It's been like I said, it's been a great series. And I think next series is going to be even better, which I think will bring more people out and then we get through the playoffs. Then I guess we're just relying on baseball for a while and then football season will start back up.

Speaker 2

Same, Drew.

Operator

We have the WADA too, Eric.

Speaker 1

Got it.

Speaker 4

All right. Well, thank you and best of luck.

Operator

Thank you so much, Anthony. Next up, we have Lynn Collier of Water Tower Research. Lynn, please take it away.

Speaker 5

Thank you and congratulations. It was a great quarter. Congratulations again. I had a couple of questions around your incredible Growth opportunity in Central City. The first question is, is there some reasons that Central City cannot be as built out As Blackhawk, in other words, is there some sort of zoning issue that prevents it from being as big as Blackhawk from a Gaming perspective, number 1.

Speaker 5

And then number 2, what do you envision for Central City looking out over the next 2 or 3, 4 years?

Speaker 2

Sorry, I couldn't get my mic to come off. I know you were just up there. I wish I'd have been able to meet with you While you're up there, I just couldn't make the timing work for my schedule. There's no reason Central City can't build like Blackhawk other than the historic district, it won't happen, but there is other gaming areas down the gulps and whatnot where they can build some larger hotels like the Z Casino, there in Central City, I think it's a 400 and some room hotel with about close to 700 gaming devices. And that whole area, I think, could be developed at some point in the future.

Speaker 2

I think the biggest changes is Blackhawk had a much more Business friendly leadership in the city and basically grew their town faster. I think what's changed as well is the gaming laws changed in September of 2021, which is now allowing Blackhawk, I mean now in Central City to grow. If you look, there's, I think 7 Our 8 licenses applied for in the State of Colorado, all but one is in Central City. So Central City is the next growth Area for gaming in Colorado. Central City has so much charm.

Speaker 2

They have so much more and In terms of entertainment, art, opera, then Blackhawk. So I think over time, You're going to see and I really don't look at it as 2 competing cities, because the reality of it is they're 0.9 miles away from each other. And does the Strip and Downtown Las Vegas really compete with each other or is it just they each have their customer base, their They're going to be a great example of how they cater to the clientele. I think that Central City Blackhawk will be used in that regard is that they'll share some customers, Of course, sometimes you'll go to Blackhawk and sometimes you'll go to Central City. But I think the reality is most people on most visits will end up in both towns at one point or another Because they're just so close.

Speaker 2

And as they grow together, as that gulches develop and Blackhawk develops up Towards Central City and they develop into each other, it's just going to seem like 1 giant gaming area. And that's what I see over the next maybe 3, 5, 10 years And that market up there?

Speaker 5

That sounds great. Thank you. And I think they're only like a mile or 2 miles apart, right? Blackhawk and Central City?

Speaker 2

I'm sorry, you broke up. Yes, they're only a mile or 2 miles. Oh! Yes, they're 0.9 miles. They're not even a mile apart.

Speaker 2

City center to city center is 0.9 miles.

Speaker 5

Okay. Okay, great. I just have one follow-up question. You talked about Bombshells and the new initiatives that you have that are resonating With the consumer, you talked about pricing, but what other things are you doing from an initiative perspective regarding Bombshells?

Speaker 1

Excuse me?

Operator

Hey, Lynn. We were having some technical difficulties on our end. Would you be able to repeat that question again for Eric? Yes.

Speaker 5

I wanted to ask you about the initiatives that you have implemented at Bombshells. They seem to be really resonating and I know part of it Pricing, but what other initiatives have you put into place at Bombshells in the last 2 to 3 months?

Speaker 2

Well, the pricing was at the end of the quarter, so none of the result is from pricing. A lot of it is just we always call it or I always call it getting back to the basics. Teams get lazy or teams get complacent. And so we have to remind them to get back on the basics. That's getting back on social media, Getting the girls on TikTok, getting the girls on Instagram, getting out there and taking the girls to promotion events, whether it's a Basketball game or going to hit all the automotive car lots and buying all the car dealers in and salesmen in and stuff like that.

Speaker 2

Just getting out there, getting seen and getting our name out there so that people come into the business. And then Of course, once they're in the store, providing the best customer service we can provide, making sure that managers are touching tables and Making sure the guest experience is the best that it can be so that not only do we have Happy guests, but we get returning guests, because that's how you build and that's how you build the margins. Of course, upselling drinks and upselling Appetizers and desserts all help with margins. And so it's just basically Getting everybody doing the things they're supposed to be doing anyway that I just feel that when your numbers when your margin slip, it's typically Because of those types of things that just kind of slipped by a little bit or people let go a little bit, maybe They didn't go to this game or they didn't go to that game because they were too busy or they thought they were too busy. And just making people understand that we're never too busy.

Speaker 2

We must continue to promote. We

Speaker 5

Thank you so much. And after going out to Colorado, I am just amazed at what you've accomplished and you really have a true home run and congratulations. That's all for me, but I appreciate the time.

Operator

Thank you so much, Lynn, for those great questions. Next up, we're going to bring Rob Maguire of Granite Research. Rob, please take it away.

Speaker 6

Congratulations on the quarter. Just have a couple of questions here. First off, On Bombshells, can you get the Bombshells margins back to 18% if the Arlington on ramp, off ramp has not yet reopened?

Speaker 2

I mean, I believe we can.

Speaker 6

Okay, great. And since the price increases went into effect this quarter, can you just give us an idea of how those have been going?

Speaker 2

I don't it's too early. I don't have the numbers from that period yet.

Speaker 6

All right. Can you just talk about where cash is today? I might have missed that earlier. And What you intend to do? Just where your cash is today in general?

Speaker 2

I think $22,800,000 is what we ended the quarter with And we haven't disclosed anything after that publicly. But it's increasing.

Speaker 6

Very good. And then, if you could just look at the wages, they're A little higher in terms of wages as a percentage of overall revenues. Is that something we can expect going forward? Do you think that corrects that towards the mean With the price increases you've been putting on?

Speaker 2

I mean, I think we will continue to be in that 20% 25% range, I think is what we try to normally shoot for, Give or take a couple of points. I don't really worry about 1 quarter Simply because you can have a bunch of overtime, you can have a lot of little things that affect 1 quarter. If we start seeing a trend up on a longer term basis, then We'll have to be much more concerned about it, but right now it's very small amount of money anyway.

Speaker 6

Okay. I appreciate that. And then lastly, just Can you talk a little bit about the softness in the night clubs? Has the trend of the softness really being limited to blue collar evolved or is Continue to be kind of contained in that segment as you kind of look at the business for the last, I don't know, 6 to 9 months?

Speaker 2

In the past, yes, it's been pretty based on the blue collar. It's hard to say with April because this April we had Easter This year, but last year Easter was in March. And so the only weakness was the week of Easter weekend and Good Friday. And of course, the Monday after Easter, this was a little weak. And so I don't know if the softness was just because of that 1 week period or If we're if there's softness, there's no trends.

Speaker 2

Like I said earlier, I'm just not seeing any trend in weakness or any trend in strength either way. And so we'll continue to watch. As long as we're doing our total weekly numbers, we'll monitor the best locations, we'll monitor the weakest locations and We'll try to fix the weakest locations and try to make sure that our focus at the high locations continues and they continue to build and do the big numbers.

Speaker 6

Great. Thank you so much for your time.

Operator

Thank you so much, Rob. I appreciate it. And that softness around As a former altar boy, I attended church that weekend rather than go to Tootsies. Next up, we have Joe Gomes of Noble Capital Markets. Joe, please take it away.

Speaker 7

Congrats on the quarter and thanks for taking my questions.

Speaker 2

Sure, Joe. How's it going?

Speaker 7

Good. So again, service revenues continue to perform nicely. Just Wondering, in your mind, Eric, is that something that you think can just continue? Or do you think that at some point in time they start to level out?

Speaker 2

I mean, they're going to find a top at some point, but I think they're going to continue to be in these ranges. I think The highest peak of the business, we were doing 42% or 43% service revenue margins. So we're still below those peaks, But we do have more bombshells nowadays than we had back then. So I think there's just Ongoing trend, we'll just keep watching and as certain markets do better With the higher service revenues like New York, we can see service revenues increase. But I mean, the reality is they're going to fluctuate.

Speaker 2

I mean, For example, Miami this weekend was insane. Formula 1 racing, UFC, which was big UFC boxing or fights and then You had the big boxing event. So it was there was a lot of things driving traffic. When there's that much traffic on the floor, course, that drives VIP because customers want to be not bumped into or get away when they want their private areas, which drastically increases our service revenue. So it really, I think, just depends as we move forward how many events And those types of things, if we have a bunch of events in a quarter, you'll see higher service revenues.

Speaker 2

If all of a sudden, there's not a bunch of events in a quarter, we could see a little bit lower service revenues. But like I said, overall, I'm much more concerned with monitoring our total revenue and our total revenue numbers. We're beating our internal Goals for April and through May so far, so I'm very happy to see those numbers being beaten. I thought they were pretty optimistic numbers to begin with. And the fact that there's club goals, we set goals at the clubs and the fact They're beating those numbers.

Speaker 2

I'm excited about. We are going against some major comps. Like I said, April last year had no Easter. So we did have a very strong April last year. I think April was our strongest month of the year last year actually.

Speaker 2

And I want to try to figure out why I know it can't just be Easter. There must have been some major sporting events and some other things in that month as well. But we started out the 1st week of May with a very, very strong week, like I said, F1 and the NBA games have been fantastic for us. There's a lot of positive. I mean, you've got Phoenix, you've got Miami, you've got New York, you've got Denver, All teams that definitely help our revenues right now in the playoffs.

Speaker 2

We can't lose in the Miami, New York game because either one of those are great. I think we're leaning towards Denver. We have more clubs in Denver than we do in Phoenix. So I'd love to see Denver advance and because I think that will be more revenue for us. So we're watching those games close.

Speaker 2

And like I said with James Harden, A lot of Houston fans for James Harden still. And so I think that if the Sixers continue to advance, that will help our business as well. So we've got 3 of the 4 series are great for us.

Speaker 7

Excellent. Now I think at the end of the Q1, you had talked about, I think reopening the Galveston Heartbreakers and the Jaguars in San Antonio, just wondering how they were performing the past couple of months?

Speaker 2

Sure. Both are continuing to see improvements. Heartbreakers has had a couple of record weeks, so we're very excited that that location is continuing to get better and better for us. The real thing now is to get the Baby Dolls in Fort Worth reopened, which should open by mid June, I think, at the latest. We probably could have opened But we earlier, but we decided we wanted to do things right.

Speaker 2

And so there were some electrical issues and Heating and air conditioning issues, there just wasn't enough power to the building. So we had to add additional power to the building, which added about 4 to 6 weeks To the process, but we just there's no sense in opening in June or July or August having huge Problems because we can't call the building. So that's all being worked on right now. We've also got our Lubbock Jaguar's location is under construction. They've got steel up there, closing the building, the parking lot's bored.

Speaker 2

So that location will come online soon, as well as the Penn Ups location that we bought in Fort Worth, Texas That will start construction probably in the next 90 days on that property. I have 3 more clubs coming up.

Speaker 7

Great. And then one more for me, if I may. I know you had that $200,000,000 goal of investment For the each year of the next couple of years, I think the end of the first Quarter, we were around $110,000,000 You still confident you'll be able to get that other, let's call it, dollars 90,000,000 invested or the remainder of this fiscal year?

Speaker 2

I mean, we're certainly going to try, We've got to find the right deals. We've got a lot of construction going on. We're getting we're in the process of 4 bank loans right now For different various constructions and properties. So hopefully those will all come through. We're getting rates between, I think, 6 0.8%, 7.25%.

Speaker 2

So rates are not horrible yet. So we're going to try to lock in what we can lock in and get these Other construction projects going. Some of the construction projects we're doing in cash like the Jaguars in Longview, I mean in Lubbock is all cash. Our Stafford location, we basically paid all cash for construction there. So We've got multiple properties that we could turn around and cash out of at some point here in the next 6 months if rates Settle back down as Fed stops and then the rates come back down and we start seeing a 6% rate again, I would look for us To a refi or cash out, I should say, of probably around $20,000,000 to $25,000,000 which give us a Nice chunk of cash going forward, which will make it easier to hit that $200,000,000 mark.

Speaker 2

Right now, I'm not seeing anything That stays in our way from us making those investments other than we must find the right deals. I'm not doing deals to do deals. I'm only doing deals that they Meet our requirements and we can get the cash on cash returns that I see versus buying back our stock.

Operator

Thank you so much, Joe, for those questions. Before we bring up our next questionnaire, I'd like to encourage everyone to retweet and share this space. If you have a question to ask, please raise your hand and we will bring you up as a speaker. Next up, we have the deep value provocateur, Orchid Well. The mic is all yours.

Operator

Hey, Orchid Wealth, you're going to have to unmute yourself to ask the question.

Speaker 8

Got it. All right. Good quarter. My big thing that I wanted to get some clarity on is you guys obviously keep acquiring the real estate And these prime areas, Texas, Florida and so for Colorado, do you have any idea what the underlying Property values that you've been buying have accumulated by like I mean if I'm in where Took these used to be, how much In those respective counties, is commercial property going up year after year, which you don't record on your balance sheet as those properties move up?

Speaker 2

Well, we're not allowed to take step up basis. We have to use cost basis accounting under GAAP. But I would guess In certain markets, I mean, we've turned down some pretty there's always people are trying to buy your properties, right? I don't know if you guys anybody knows property knows, Your phone rings off the hook, I want to buy your house, I want to buy this, I want to we get those calls on a regular basis. We've gotten some offers.

Speaker 2

I mean, we bought Tootsie's property, I can't remember what year it was, 2015 maybe for $15,000,000 I've got an unwritten offer verbal over the phone, would I take $24,000,000 for it? Of course, I laughed. I was like, well, if you add a 0, We can sit down and talk. We own the club. We thought you could just move that tenant.

Speaker 2

So no, we are that tenant. So Look, I mean, I don't know. I think there's somewhere I think we have about $250,000,000 plus in real estate last time I did everything. We have 100 on the sheet, I think about 120 some 1,000,000 in real estate debt. Was that Slide 14?

Speaker 2

So, the thing is I just keep looking at the

Speaker 8

fact that your borrowing costs On this real estate that you've had over the years, it seems to be growing at least equal to what you're paying out in interest on these properties?

Speaker 2

Probably easily. We were only you got to remember, our weighted interest rate now on Our real estate is only 5.41 percent. I mean, our overall is 6.52%, but our real estate debt financed much cheaper, About a point cheaper, right? A little over a point cheaper. So that's highly possible.

Speaker 2

And you got to remember a lot of this real estate that we bought, we've done some pretty major improvements to the properties as well. So That never hurts with the value.

Speaker 8

And then about what percentage of the entire business do you own real estate and what percentage is leased?

Speaker 2

Bradley and I just did this the other day, 85% 15% or 83% 17% about 15% to 17% leased. And that's because of the the only reason we have so much leased now is because of the restaurants and the Lowry acquisition. So I think it's pretty close to $85,000,000 $15,000,000 I believe. Now we've gotten all the new locations that We're getting ready to open that we're building like Rowlett, Lubbock, Austin, Texas, Aurora, Colorado, Downtown Denver, Colorado, all those locations are owned. So as more locations open, the percentage of owned properties are going to go up Versus leased properties.

Speaker 2

We haven't added any leased properties recently. Not that we won't. I mean, we find the right location and they just got the Right. Term lease and the leases price is right. I mean, if we can lease it cheaper, then we can buy it, then we may tend to lease.

Speaker 2

But It just really depends on how much capital we have to put into the location

Speaker 8

as well. At the new casino location, When that goes in, you're going to have a steakhouse and you will have a club in there. Are there any other clubs in that area?

Speaker 2

Okay. I got it at the new casino location, but I didn't get the rest.

Speaker 1

I'm sorry.

Speaker 8

At the new casino location, you're going to put in a steakhouse And you're also going to have a club of some sort. Are there any other clubs within that area?

Speaker 2

The 5 clubs we own, which are about average of about 45 minutes away.

Speaker 8

Okay. So the idea being is, if somebody is on a vacation and I've got a bunch of guys and we all head up there And we're looking for something. You are the only game in town when it comes to that

Speaker 1

or hopefully.

Speaker 2

How about the only game in town for you to eat after 11 pm at night up there other than 20 fourseven Monarch? This town is it's amazing to me because it's literally the it's a gaming town. All you can do is gamble. There's not I mean, if you can fish in the summer, there's some things to do. But in the winter, their numbers die down.

Speaker 2

You've got the opera, you've got a lot of art, Galleries and stuff in Central City, but for Blackhawk, other than the new distillery area that they're opening, I just don't know a lot. The casinos, I mean, they barely have lounge acts. I saw some ads for this Summer, they're bringing in some lounge acts. I was like, wow, finally a lounge, a live band of some kind, something. There's just Literally, there's no entertainment in that marketplace right now.

Speaker 2

That's what was so exciting to me. I was like, we can take Central City and turn it into the Fremont Street of Vegas with all the entertainment and the Strip is 0.9 miles away and has 0 entertainment. So come 11 o'clock at night, midnight, you're on a table and you're not doing very good, you're not feeling it, Like, I got to get out of here. You got 2 choices. You drive back to Denver or you go to bed in your hotel room.

Speaker 2

Nothing else to do out there. I'm going to give you a 3rd option. Well, hey, let's go see the girls at Rick's or as we continue to look at properties out there and do other things, We may build a nightclub out there of some kind. There's other things to create an entertainment zone For the thousands of people, especially Thursday, Friday Saturday that are out there that are gaming and just If you're winning, you want to stop and go do something else. If you're losing, you want to stop and do something else, right?

Speaker 2

So I just want to give them those other options. But I think and if you want to game still, you still can, which I think will be a big part of our deals. You may come to the casino to gamble and end up seeing an entertainer and ending up in VIP. You may come to see the entertainers, end up in VIP and then decide, hey, let's go play blackjack for a while. So I think there's just going to be a lot of synergies Between the two businesses, I know it hasn't been tried before and I know I'm going to have a learning curve.

Speaker 2

But the beauty of it is both businesses are so profitable that I'm still going to be paid very, very well while I'm working through my learning curve. And that's what I see in our analysis. We said, look, the 1st year, let's say we only Half the money, we only do $3,500,000 and it takes us that full year to learn and get to the point where the 2nd year we earned the 7,500,000 We're still a 50% cash on cash return on this investment. So to me, it's just a super easy I haven't seen anything that's excited me like this since 2004 when I bought Rick's Cabaret on 33rd Street, and that was a better company deal at that time and we did $6,700,000 of revenue the year before and we paid $7,600,000 for a single club and then within 4 days of owning it, I tore it down. There was nothing left but 3 brick walls.

Speaker 2

And then we spent $3,800,000 rebuilding it, which was Unbelievable amount of money for us at that time, but that's what created the RCI We've seen today. I think this property for a very small investment of $10,000,000 has a chance of Taking this company to a whole different level than where it is today.

Speaker 8

When on a different pivot, when you take over clubs Over the history of, let's say, the last 5 years or so, when you take over the business, what's like the RIC's premium that you guys are able to squeeze out on average from what they were doing numbers wise to what you think like in a year, year and a half of you being there, you can get it up to? Is it like 15% improvement or 20% improvement?

Speaker 2

Typically about 20%. I think we're 17.4% on the trailing 12 months Through December 31, I don't know if Bradley ran it in March. We did. I didn't see the report, but I know through December 31, I think we were up Or maybe that was through March 31. We were up 17% or 18%.

Speaker 2

So, yes, I think 20% is a Pretty good number for us. We tend to increase revenues and EBITDA by about 20%. So when you're purchasing the clubs for 3 to 5 times, It's 3

Speaker 8

to 5 times their numbers, but then you come in and you're finding another 20% on top of that, which obviously lowers your acquisition costs, But you don't realize that until a few years later.

Speaker 2

Yes, typically. I mean, typically that's what we're seeing. Sometimes we see it in the 1st year, sometimes we see it right away. Mean, look at Sysys. When we bought Sysys in 2007, we bought $18,800,000 in revenue on and they were doing $8,800,000 in EBITDA.

Speaker 2

We paid $25,000,000 for it. In the 1st year, we did $23,800,000 in revenue and $11,400,000 in EBITDA. So sometimes it's immediate, sometimes it takes like Denver probably would have been Pretty immediate had we not been coming out of COVID and there was employees to hire and we didn't lose so much of the management staff because They had just not really recovered from reopening from COVID. They only been open 4 weeks in Denver. We bought at some of the other clubs have been open a little bit longer, but I mean they were all in they were in markets that all opened late in COVID.

Speaker 2

So There was a lot of issues we had to work through, so it took us almost 6 months to realize and see the gain there.

Speaker 8

One last question. When you showed us the universe of the 2,200 total clubs that are out there give or take, What percentage of them are owners that have, let's say, 4 or more clubs? I mean like it's all the individual owners, but I mean like when you go to the industry, I've gone to a couple of these events. I seem to run into people that these people own like 6, 4, 5, sometimes there's a bunch of ones and twos. But it seems a lot of the participants at these club events are usually the guys that own multiple clubs.

Speaker 2

Yes. At the expo, it's A lot of multi club owners and I think it's anywhere from 2 to 25 that these guys own. Of course, you've got a couple of big boys that own Lots of clubs like us. There's not very many of those. I think one actually I think only one other Club owner early owns the same number, more probably more clubs than we do.

Speaker 2

Most of them are smaller, Between 4 10 clubs a day, I would say, is an average. And you've got a few, like I said, they're probably in the up to about 25 range. So there's plenty of people out there for us to purchase from as we go through. There's a lot of one offs that we can do throughout time. The key is running them.

Speaker 2

So we just made a major acquisition and I laugh, I say people are worried about Bombshells One single location in the last acquisition does more annual EBITDA than All the bombshells combined. So it's like why don't we focus on the important stuff, which to me, which is the clubs and Everything else is just bonus for us, bonus ways for us to Come up with the money, build additional free cash flow and put money to work while we're waiting for the NextClub acquisition because we have to put management teams in, we have to run. So our Director of Operations for RCI Management Services is in Dallas right now. He's working on getting the new club open. He's Putting the teams together, putting our POS systems in, getting our culture ingrained in the acquisition and the clubs that we acquired, And that takes time.

Speaker 2

I mean, it's a 3 to 6 month process. So people say, well, can you go buy something else? I could probably go buy something else right now, But why stretch our management team? Our pace of how we've done it has increased over time because our ability to manage them has increased over time. And as our ability to manage and absorb more acquisitions increases, we'll buy more.

Speaker 2

We'll make more acquisitions. But in the meantime, it's nice to have a couple of other things to put our cash flow into and keep the Keep the machine running. Great. Thanks.

Operator

And thank you so much for those questions. Before we bring up our next person to ask a question, I'd like to give a shout out to DKNY. My man, if you come by the shareholder reception tonight, I will teach you how to purchase sunglasses that aren't from the women's section. We also have a dunk tank waiting for you as well as Bradley Shay, America's favorite CFO, to do an arm wrestle challenge and if you lose, you will become a shareholder of RCI Hospitality Holdings. Next up, we're going to bring Adam Wyden, the largest individual shareholder of RCI Hospitality Holdings, Inc, up.

Operator

Adam, Please take it away.

Speaker 9

Can you hear me, everyone?

Speaker 1

Hello? Hello.

Operator

How are we doing?

Speaker 2

Okay, perfect.

Speaker 9

So, sorry, I'm a little late. I had another earnings call, and I know these go on for a while, but so you'll have to catch me up. But I'm just reading through the deck a second time. On the St. Helix Casino, you guys talked about Conservatively taking 2 years to get from 3.7% to 7.4%.

Speaker 9

Have you guys sort of quantified, I know your slot revenue participation is very is less than half of Blackhawk, which is really conservative. So I mean if you could match Blackhawk, Got you. That's a lot more EBITDA, it's probably another 4. But have you sort of talked a little bit about like what the table games? I know there's also supposed to be a steakhouse there.

Speaker 9

You're talking about digital sports betting, but also potentially in house sports betting. I mean, it'd be nice to sort of You sort of given a bare bones estimate of what the revenue and EBITDA contribution, but I mean it might be helpful to sort of give the other layers. And obviously, it's a new business for you, so you're not going to guide to it, but it might be helpful to sort of outline the sort of other buckets and how big they could be?

Speaker 2

Well, you've outlined the buckets. I'm not making any guess on any of those other revenue sources At this time, because I just don't know. I think the steakhouse is actually part of the club revenue. The only thing you really have that we didn't include is table games, which we have no clue on at this point. We've got some preliminary Numbers, you can go to the Colorado Department of Gaming's website.

Speaker 2

You can download every casino's numbers. You can download Combine casino's numbers, you can download it by city. So you guys can go look at all those things yourselves and put together models. I am not sharing my models at I think it's way too premature for that for us. And as far as the sports betting goes, I mean, we know that the Online sports games sell or I say sell, but basically, a partner with an online sports betting Group will partner with a casino and those range anywhere from about $7,500,000 to $10,000,000 Over 10 years on a contract on a revenue share basis with minimum payments.

Speaker 2

So We are not including any of that at this time. We don't have a signed contract at this time with any other group. We have been talking with groups, Negotiating with groups and I think that within 30 days after our license is issued, we will have a full time partner. Probably the date of license issue, we'll have And so that will be immediate income as well, but I don't want to speculate on where we're going to be or what that revenue is going to be at this time. I don't need to.

Speaker 2

I mean, I just showed you that if I make 0 off of all those other things, I make 50% a year for 2 years. And that's anticipating that I am going to be so behind the learning curve that I'm only going to do 50% of the revenue in the 1st year That we anticipate that well, it's not even that we anticipate, it's that the other operations do. So, I don't Yes, I think it's a conservative number. I don't need to go out on a limb. I don't need to say we're going to make $20,000,000 or $1,000,000 or anything else to justify the investment.

Speaker 2

I wouldn't even be trying to justify the investment, but I have a lot of Calls and a lot of people saying, why are you doing this? And I wanted to put out there why we're doing it. This is our take. This is our math. This is the way We see it happening.

Speaker 2

And if we can make 50% cash on cash returns, I mean, there's not too many investments I'm not going to invest in When I have the certainty of an investment like this and the backup with table games and with online sports betting And actual sportsbook on the premises as well. I mean, we didn't include any sports betting that I can make my 50% returns That easily.

Speaker 9

That was sort of my point that you beat the crap out of the numbers, it's still a 50% cash on cash. Those are the best types of investments where everything goes to hell in a hand basket and you make 50%. I was just trying to lay out the other buckets So they understand that if you execute on this like you've done on other things,

Speaker 1

there's a

Speaker 9

lot of upside. But that's helpful. What else? Have you

Speaker 2

I mean, if you I'll give you a little color on spots. For example, Central City is $129 a day. I think the Blackhawk average is about 100 and something a day.

Speaker 1

And if you

Speaker 2

take your top casinos over there, they're running over 400 and something a day. So, if we can come in somewhere between 129 300 In the middle of that zone, you're talking about 1,000,000 more dollars. So I think there's a lot of uniqueness to our project. And I believe that with our properties in Denver, we will be able to market our properties around the country. We'll be able to market a lot of packages to not only our employees and entertainers and our guests of our existing Clubs around the country, but they'll bring friends and this will become a Very unique market, I think, for us.

Speaker 9

Got it. I don't know if anyone has asked about sort of M and A. I know You've got your digesting Burch and you did Lowry. Have you talked have you commented at all about sort of these little clubs that sort of Renovating and repurposing and so the ramp up of those or any of the other sort of smaller M and A opportunity and what that looks like?

Speaker 2

Yes. We've talked about the 3 properties that we have in various stages of construction right now that will probably all be open in 2024. And we talked about I forgot what slide number it is now, but we've talked about the free cash flow generation on Slide 23 that how much cash we'll have, We're still looking to invest $200,000,000 a year. We're showing where this cash is going to come from. We talked about the bank loans that we're still be able to get on our real estate.

Speaker 2

We have about $20,000,000 $25,000,000 in cash out that we can do if interest rates drop back to their 6%, we'll probably Immediately cash those real estate out on new real estate loans. So I mean all the places are in place. We just have to continue to do what we do. Right. Yes.

Speaker 9

And I noticed that you updated your buyback slide for different fiscal year 'twenty four ranges of free cash flow. Obviously, these are on the consensus Numbers I suspect not where you think you are, but sort of gives people a sort of a band of outcomes in terms of where the buyback is. And Looking forward to hopefully seeing some of that as well. But I'll hop back into the queue and if

Speaker 1

I have more questions, I'll raise my hand.

Speaker 2

All right. Thanks, Adam. And I'll let Mark take over again.

Speaker 1

Thanks. I'm going to answer this question. And next, I'm going to bring stagflation, who has the best, I'll open it up to Twitter. Please take it away.

Speaker 10

Thank you, Mark, and congratulations to Eric Bradley and the RCI team for a great quarter. As a frequent customer, I wanted to ask you guys the following question. What's the I think

Speaker 2

you have to turn up your mute there to ask question.

Speaker 10

Is it better now?

Speaker 2

Can you guys hear me?

Speaker 10

I wanted to ask the following question, which is what systems do you guys have in place to ensure club

Speaker 2

We just put our systems in. We put our culture in. If you follow Dean Reardon or Reardon Dean, whatever Dean's handle is on Twitter. That's our Vice President of Operations. He's post all the parties how he takes the teams to lunches and dinners and Post the DJ meeting the other day where we had a big MMA star as a surprise speaker on the call.

Speaker 2

I mean, Those are the things we do. We build our culture, and our culture keeps everything else in line, because people want to be a part of it.

Speaker 1

Thank you.

Speaker 2

Seems like Twitter is having some difficulties, guys. We're sorry, we're working on it here, but hopefully you can hear me.

Operator

Now I have a question that was submitted anonymously. And so I'd like to encourage anyone who has Questions, who is listening, who would like to ask them that you can go to the form at the top of this space And type them in, they'll be relayed to me or you can DM me. This question is, Eric, what is the go to market strategy for You guys to expand into sports betting in an already crowded sports book app market. What is the main product differentiation?

Speaker 2

Well, the beauty for us is, it's not our product. We're being paid a minimum fee to use our license in the state of Colorado. You got to remember, sports betting may be credited in certain markets. In other markets, it's not as crowded because you have to have a license in that state in order to take bets in that state. And currently in the state of Colorado, there are only 31 possibilities.

Speaker 2

And I believe maybe 20 1 or 24, I can't remember the number, but I'm sure you can find it on the Colorado Gaming Department's website On how many of those licenses have actually are using what they call a skin. They call it skinning it. So they scan it with their things. So like when you bet on, say, bet on sports, Penn Gaming's deal, you're actually betting through the Ameristar Casino in Black Hawk, Colorado. You're on their license.

Speaker 2

Everything is dumped their license through the skin of Pet On Sports. So that kind of gives you an idea. There's still plenty of Can you talk about all those gaming companies? Well, all those gaming companies aren't licensed in the state of Colorado and anyone that aren't licensed should reach out to us because We have 2 skins at this point that should be available sometime around the 1st year. So in fact, I'm going to go to a gaming convention tomorrow afternoon and market those skins as well.

Operator

And with that, we are going to be concluding our Q and A session. So thank you so much, Eric and Bradley, on this 1 year anniversary of the first ever earnings call on Twitter Spaces. For those who joined us late, you can meet management tonight at 7 at Rick's Cabaret New York, 1 of RCI's top revenue generating clubs and also where DKNY, our favorite troll, will be participating in an arm wrestling battle with Bradley Shea and will become a shareholder tonight. Rick's is located at 50 West 33rd Street between 5th Avenue and Broadway, a little in from Herald Square. Also the exact crime scene of where I spent $20 in ATM fees last night?

Speaker 2

I can get it three times, Mark.

Operator

Okay. It was $30,000,000 It was $30,000,000 All right, Eric. Rick? Rick, if you haven't RSVP ed already, you can ask for Eric Langan or me at the door. After 9 p.

Operator

M, however, I will be busy implementing my own capital allocation strategy. And I'm going to pass off to Eric to say one more thing, but on behalf of all of us at the company and our subsidiaries, Thank you so much. Now Eric with the last word.

Speaker 2

Yes. I just want to thank a shout out to Antonio Brown who brought the Camels and the Goats Houston to visit with me for a couple of days, and thank you thank them personally for inviting me to their barbecue at their meet and greet. It was a great event. I had so much fun. And I look forward to next Here's meet and greet of the Camels in Denver, where I plan to host you guys again.

Speaker 2

And hopefully, we can set up some other Companies for you guys

Operator

to visit while you're out there, so you're not just learning about us. Thanks again for inviting me and sharing your time with And hey, Eric, one last thing is you said you hadn't been this excited since 2004 about the Central City opportunity, but I was just as Excited when I saw Marissa Gladden and Nancy Landon's video earlier today. So I very much look forward to meeting you ladies in Dallas or Miami.

Speaker 2

We met them in Miami. They were with us at I didn't meet them. I didn't meet them. You didn't. I did.

Speaker 2

Yes. Great. We had a great time. We partied at Carlos, I think about 4 in the morning. So, yes, definitely enjoyed the visit with them and look forward to Hosting them again next time I'm in Miami or they make it to Dallas, I'll try to make it up there as well.

Speaker 2

And with that, thank everyone for your time today. Look forward to another great quarter as we move forward and hope to talk to everyone again soon.

Powered by Quartr
Earnings Conference Call
RCI Hospitality Q2 2023
00:00 / 00:00