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

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

Thanks, Eric, and good afternoon to those who tuned in on the call. We reported total revenues of $38.4 million in the first fiscal quarter. That is up 33% sequentially from the prior quarter. GAAP EPS was $1.07, and non-GAAP EPS was $0.39. The difference came from a gain on debt extinguishment and a reversal of prior quarter’s tax allowance. Weighted average shares outstanding went down 3% year-over-year. Looking at cash, we had $70 million at December 31st. First quarter net cash from operating activities was $6.3 million and free cash flow was $5.7 million. Please turn to Page 5. The Nightclub segment continued to rebound sequentially with more locations open on a more consistent basis; revenue totaled $25.2 million. That is down from a year ago, but more importantly, it is up 92% from the prior quarter. 24 clubs were opened through the first quarter and 26 by quarter end. To give you guys some color, our biggest two clubs, which are in the South Florida market, were opened the entire quarter for the first time since the pandemic started. Keep in mind, however, that we still have clubs that are not operating at full capacity or normal operating hours. Even so, clubs that are open are doing well in this environment. On a year-over-year basis, same-store sales were only off by 6.4%. As a result of all this, operating margin at 33.7% and operating income totaled $8.5 million. Bombshells segment, please turn to Page 6. The Bombshells segment turned in another strong performance, and that is without the prior quarter’s benefit of a strong sports lineup and warmer weather. Total sales of $13 million were up 26% year-over-year and 12% on a same-store sales basis. All 10 locations were opened during the quarter and continue to be open today. To give you some color, all 10 performed well, in particular, our newer locations. Mail delivery services also added $380,000 in sales. Operating margin was in line with expectations at 20.9%. As a result, operating profit totaled $2.7 million, up 73% year-over-year. Margin and income benefited from a higher level of sales and more consistent traffic throughout the day as we continue to follow indoor restrictions. We believe that we have built a lot of momentum in the business, and we expect Bombshells will continue to be a strong performer for us, particularly now as the weather starts to get warmer.

Alright. Thanks, Bradley. Now turning to Slide 11. Last fall, we announced plans for Bombshells, the next 10. Our efforts to double the number of company-owned locations over the next three years. We believe the pandemic has created a unique and compelling opportunity, and we have proved the viability of the concept. Bombshells can easily self-fund new units. We can access prime locations not previously available, and in some cases, we can buy or lease them at significantly lower prices. We are pleased to announce we have acquired a great site at a great price in Arlington, Texas. Arlington is a suburb of Dallas that is home to AT&T Stadium and the Dallas Cowboys and just blocks from the Texas Rangers as well. We paid $2.9 million, of which $726,000 in cash and a $2.175 million bank debt at 3.99% fixed for five years with a 20-year amortization. This is the best rate on debt we have ever received. We also are conducting due diligence on three other sites, one in Texas and two in South Florida. In addition, we are actively working on Bombshells, the franchise. In late December, we announced our first franchisee, a well-established local private group that includes franchise restaurants and their holdings. Terms call for their opening of three locations in San Antonio and an option to open three more outside of the city. We are collaborating with them to ensure the success of their first location. News that we have signed our first franchisee has generated a lot of new leads, many of which appear to be well qualified, and we are in the process of building these inquiries. Please turn to Page 12. We have continued to talk to a lot of new investors. So I would like to review our capital allocation strategy. Our goal is to drive shareholder value by increasing free cash flow per share at 10% to 15% on a compounded annual basis. Our strategy is similar to those outlined in the book, The Outsiders; the author William Thorndike studied companies that focus on generating cash flow per share and allocating that cash to generate more cash. We have been applying these strategies since fiscal 2016 with three different actions, subject, of course, to whether there is other strategic rationale. The first is mergers and acquisitions, specifically buying the right clubs in the right markets. We look to buy good, solid cash-flowing clubs at three to four times adjusted EBITDA, using seller financing when acquiring the real estate at market value. Our goal is to generate annual cash-on-cash returns of at least 25% to 33%. Since we can’t always buy clubs when we want, our second strategy is using cash to grow organically, specifically expanding Bombshells to develop critical mass and market awareness to sell franchises. Similar to acquiring clubs, we seek to earn at least 25% to 33% cash-on-cash returns. The third is buying back shares. When the yield on our free cash flow per share is more than 10%. During the pandemic, our plan is to acquire shares using the same formula, but only if cash on hand exceeds approximately $16 million, to provide us with significant reserves. That is $2 million less than we said in our last call, but we are also much more comfortable with our current locations open. Under our buyback strategy, during the first quarter, we purchased about 75,000 shares of our common stock at an average price of $24.03, for a total of about $1.8 million. Please turn to Page 13. To sum up our accomplishments to date, our business is recovering. We have continued to achieve sequential rebounds in nightclubs, produced strong year-over-year performance with Bombshells, and are generating a growing amount of cash. We are increasingly optimistic as more clubs are reopening. We are also executing on our capital allocation strategy on all fronts. We are planning discussions with a lot of club owners at our Expo in May. We are developing the first of our next 10 Bombshells with more on the way, and Bombshells is increasingly being recognized as our sports bar restaurant franchise concept. I would also like to let everybody know that I’m very, very proud and excited for our teams, especially our operations teams. Nightclubs did an unbelievable job this quarter. Thanks to Ed Anakar and Dean Reardon and all of our regional managers for really stepping up, getting locations open and capitalizing on every opportunity to increase our business when we can and to control our costs. I really want to say thanks to all of them for their efforts. And with that, let’s open the call to questions.

Thank you. Our first question comes from Greg Pendy with Sidoti.

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

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

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

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

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

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

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

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

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

Next question comes from Adam Wyden with ADW Capital.

I have been fortunate enough to drive by to Scarlett’s and it looks like standing room only and clearly getting New York back open is critical although I never really underwrote that. But I wanted to kind of build on Greg’s question. You as a little coy, but when we talk about kind of where you were on free cash flow coming out of call it calendar 2019 or First Q 2020 pre-COVID, you guys were running, call it, $60 million of EBITDA and, call it, $40 million of free cash, right? And Bombshells was not doing whatever it was doing. I haven’t looked at it 21% operating margin on 13%, I know you did 30%. And I don’t know if you are allocating corporate against that. But I mean, when I just kind of do back of the envelope math, Bombshells got hit a little bit this quarter, I think, because of closures and all the rest off and on. But I mean, when I kind of think about the business now, I say, okay, Bombshells without the franchises, without the new locations, which you’ll have, I think you’ll do about $60 million of sales and 30% margin. That is $18 million of EBITDA that didn’t exist before in the old paradigm. So if I just kind of take the $60 million you were on before, add $5 million for kind of the legal and accounting, all the garbage from the SEC that isn’t being duplicated, and maybe give yourself credit for the marketing and the billboards, but I don’t think that even does that. So I get to like a number that looks more like 65 plus 18 is 83. And then when I kind of do a 10% stack comp and, I mean, when you look at Australia and what they are doing in terms of restaurants, if you do, call it, 150 of sales in the night clubs, and you have a 10% stack comp, I think I’m doing the math roughly, another $15 million in sales, and that is all to the bottom line. I mean that is 90% margin. So you are looking at a business that is doing close to $100 million of EBITDA. And when you adjust for the refinance, I don’t have my model open, but I think my back of the envelope math is that is like about $8,000 a share of pre cash. It is about $70 million. Right, because you have got the depreciation shield, you have got the corporate tax rate, all the rest. And so I guess my question to you is like, am I doing my math wrong? I mean, is it conceivable that you are doing $100 million EBITDA and, call it, $60 million, $70 million of free cash? And more importantly, right, like that does not give yourself credit for the allocation of the capital. And that is the second part of the stool or third part of this stool, right? You are franchising new Bombshells, you are opening Bombshells. You are buying more Nightclubs. I mean, conceivably, in 2022, if you guys get $100 million on organic and you guys buy in another $25 million EBITDA, this becomes a business that is, call it $125 million, $150 million of EBITDA. I mean look, that to me is a real public company. I mean it feels like we are on the precipice of being a real public company. And I do the math, $150 million of EBITDA, all your debt is property level debt. I mean, I look at Del Frisco’s and all these other - look at Chipotle, 40 times EBITDA, I mean, if you even trade at a modest multiple of 10x, that is a $1.5 billion company. I mean that is several multiples of where we are trading, and that is on 2022 numbers. I mean what am I missing? Why are people shorting the stock here? I know you have had a run, but I mean, at the end of the day, you can’t anchor the stock pricing, you have got to anchor to numbers. I mean, am I doing my math wrong? I mean are we about to become a multibillion-dollar company?

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

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

We are not looking to raise money, Adam. They don’t want to engage with us if we aren’t pursuing a banking business. They are not interested in writing reports on our performance.

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

And we have been.

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

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

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

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

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

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

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

Me, too. Thanks, Adam.

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

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

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

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

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

Those are the ones we are looking for. And the owners that are just tired of it. They are tired of the hassle, they are tired of the calls at 3:00 o’clock in the morning, they are tired of those type of things. Those owners are 60, 70 years old. The problem is they love the cash flow. They are not so much in love with the business anymore. And those are the transactions we are looking for, and we are trying to convince them to - if they take paper, they basically create an annuity for themselves. They can collect payments from us for five years, 10 years, or 20 years. We can structure a deal however they want; they can defer their taxes, there are just a lot of options that we offer them as a publicly traded company. What is crazy is we are starting to get a lot of requests for equity. Hey, let’s do a stock-for-stock deal. Give me some stock and take my club because stock-for-stock deals aren’t taxable, they can sell the stock and it. But I’m just not comfortable even at $46, $48; I think the stock is still cheap. I just don’t see what we are seeing in our numbers and what is open. I mean without getting too much detail, but I mean - is incredible right now, 50% occupancy and we are killing numbers from previous years.

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

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

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

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

Our next question comes from the line of Alex Hardman, a private investor.

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

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

Definitely don’t do that again.

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

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

Me too. Thanks, Alex.

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

Just flipping on to Slide 5. Can you just give us a little bit of color on just the operating margins at the Nightclub segment, how you got them at 33.7? That looks like a pretty big jump. And then also, should that come down in Q2, given the New York reopenings at reduced capacity? Will that actually weigh on it, albeit it will be positive for the top line?

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

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

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

Got it. Thanks.

Our next question is a follow-up from Adam Wyden with ADW Capital. Please go ahead with your question.

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

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

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

We just need to keep everything transparent, continue our efforts, and demonstrate our progress, and we will achieve our goals. Each quarter seems to be improving. I believe this quarter will be no exception. I expect that the first three months of the year will outperform the last three months. For the first time in my experience, January has exceeded December in performance. Our total revenues in January were higher than those in December.

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

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

You are going to be in a strong position. The situation is similar to what we discussed earlier. Other companies are struggling while you have managed to stay afloat. The reality is, when everyone else's ventures face challenges and you've retained yours, you will have the opportunity to thrive. Everyone is looking for what you offer, and you will be ahead. Remember, as Stan Druckenmiller suggested, we are heading towards a 1920s-like scenario with inflation, and consumers will be spending. You will be the only viable option during this period. As a result, your numbers could reach unprecedented levels. The quicker people understand this, the quicker you will align your capital costs and eliminate the competition.

And make it even quicker.

Yes, and make it even quicker.

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

You are going to be in a unique position. The reality is that, as we discussed, while others may struggle, you have managed to stay afloat. When everyone else falters and you still have your resources, you're in a prime position to seize opportunities. My point is that demand is high, and you are ready to meet it. If you consider the insights from Stan Druckenmiller, he suggests we may experience inflation similar to the roaring '20s, where consumer spending increases. In that context, with your unique position, the demand will be exceptional. Numbers like $100, $120, and $150 are within reach, and you could see unprecedented financial success. The sooner people recognize this potential, the quicker you'll align your capital costs and outpace your competitors.

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

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

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

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

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

I believe we are looking at a timeframe between August and November. It’s difficult to predict with these cities. You would assume that with fewer people involved in growth and construction, the process would be faster. However, due to COVID, many are working from home, which has slowed the building permit process to unprecedented levels. Despite the reduced number of applicants, the turnaround seems sluggish. We have submitted the permits in Arlington last week, and the franchisees in San Antonio are expected to file theirs within the next two weeks. Ultimately, the speed of the permit approval will determine our schedule; both projects are basic remodels, and I anticipate construction will take three to five months. If we receive the permits within 60 days rather than 90 or 120 days, that will significantly impact our start date. The unknown is whether we begin construction in two months or four months, and we will open four to five months post-construction start. By the next call, I should have clarity on the permits issued and our construction status, allowing me to provide a more concrete timeline than the current estimate of August to November. I understand that’s a broad range, so I aim to offer a more precise timeframe.

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

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

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

I’m hearing. I mean, obviously, we don’t know. I’m hearing there is a couple of clubs in New York that are not going to reopen. They are repurposing the properties. And so hopefully, we will see. We don’t have a lot of competition in a lot of our markets. Some of our Texas markets, we have competition. I have seen some smaller clubs that have gone away. I noticed that like the Bombshells on 290 has a Hooters right down the street. I noticed the Hooters was all boarded up and had for sale sign on the building. So that location is gone for Hooters, whether they are going to build a new one someplace else or what they are doing, I have no clue, but that is kind of stuff we are seeing; a lot of small restaurants have gone out of business, especially the little mom-and-pop restaurants that just aren’t reopening. Most of the restaurants that are reopening are the big chain restaurants. But I think that will only last for a brief period of time. I’m guessing 12 months to 18 months, we have a nice 12-month to 18-month run. And then I think you will see new entrepreneurs awaken and new places start to open, and competition will start returning to a more normalized deal. But I do think we have a very nice window of opportunity here over the next 12 months to 18 months.

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

I would like to hand the call back to Gary Fishman for closing remarks.

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

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