Good afternoon, ladies and gentlemen. Greetings, and welcome to RCI Hospitality Holdings Second Quarter Earnings Call. The first-ever earnings call by a publicly-traded company hosted on the Twitter Spaces platform. You can find today's presentation pinned to the top of this space's page. Now please turn with me to slide number 2 of our presentation. I'm Mark Moran, Head of Business Development and Operations at Litquidity, a Wall Street Communications and Media firm. I'll be the host of our call today. I'm here with Eric Langan, President and CEO of RCI Hospitality; and Bradley Chhay, CFO of the company. Now please turn to slide 3. If you aren't doing so already, it's easy to participate on this Twitter Space. On Twitter search @RicksCEO and click the pinned Tweets. We want to remind you that if you would like to ask a question through Twitter Spaces, you will need to be joining the Twitter Space with a mobile device. In addition to Twitter Spaces, RCI is making this call available through traditional landline and webcasting. At this time, all participants are in a listen-only mode and question-and-answer session will follow the formal presentation. With this being the first-ever earnings call on Spaces we're going to be doing this a bit differently. For our Q&A portion we'll start off with equity research analysts and selected shareholders then move into a fireside chat format for all to have the opportunity to participate. Be sure to re-share this and engage. Now please turn with me to page 4. I want to remind everybody of our safe harbor statement. It is posted at the beginning of this presentation and it reminds you that you may hear or see forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those currently anticipated and we disclaim any obligation to update information disclosed in this call as a result of developments that occur after the call. Now please turn with me to slide 5. I also direct to you an explanation of non-GAAP measurements that we use. As a reminder this conference is being recorded. And I also like to invite everyone listening in the South Florida area to join Eric and me tonight at 8 o'clock to meet management at Tootsie's Cabaret in Miami, one of the top adult clubs in the country and RCI's top revenue-generating club. Tootsie's is located at 150 Northwest 183rd Street if you have an RSVP just ask for Eric or me at the door. Now it's my pleasure and my privilege to introduce Eric Langan, President and CEO of RCI Hospitality.

Thank you, Mark, and thanks for joining us today everyone. We had an outstanding quarter across the board. Nearly all of our key metrics were up double digits year-over-year for the second quarter and the first half. Nightclubs and Bombshells continued to perform well, which includes our 12 recent club acquisitions and our new company-owned Bombshells in Arlington, Texas. High-margin service revenues continue to rebound especially in our New York market and favorable trends are continuing. Total revenues in April exceeded March. We are also executing well on our growth plan. In Nightclubs we made one acquisition and we have a second under contract. For Bombshells, we acquired real estate for another company-owned location and we have two other locations under contract. Our first franchisee is very close to opening. Their first location in San Antonio and we've announced a second franchisee with plans to open their first location in Huntsville, Alabama. And our efforts to harness new technologies to drive club traffic are all moving ahead as planned. We have also continued to take advantage of market conditions to buy back shares. And now here's Bradley to review the financials for the quarter.

Thanks, Eric, and good afternoon to all those listening. All of our comparisons in this call will be to the year-ago second quarter unless otherwise noted. The second quarter marks the second anniversary since COVID hit in March of 2020. With that in mind, I'm pleased to report we generated record revenues of $63.7 million, up 44.6% year-over-year. Omicron affected the first four to six weeks of the quarter. We estimate it reduced revenue by close to $2 million. Since then sales have been strong and even growing stronger. Nonetheless, EPS increased 69.1% to $1.15. Non-GAAP EPS was $1.19, up 58%. Net cash from operating activities was $11.6 million, an increase of 5.7%. Free cash flow totaled $11.1 million, which was up 23.3%. Net income attributed to RCI Hospitality Holdings was $11 million, up 79.8%. And lastly, adjusted EBITDA totaled $19.9 million, which is up 46.8%. Please turn to page 7. The second quarter Nightclubs segment revenues, operating margin and income from operations were all up significantly from a year ago quarter once again. Revenues totaled $48.2 million and grew 56.5% year-over-year. Operating margin was 39.7% up from 34% last year. Net income attributed to RCI Hospitality Holdings was $11 million, up 79.8%. And lastly, adjusted EBITDA totaled $19.9 million, which is up 46.8%. Please turn to Page 8. Bombshells also had a good second quarter. Revenues totaled $15.3 million that's up 16.7% year-over-year.

Hello. This is Joe Gomes. Can you hear me?

Hey, Joe. Loud.

Perfect. So this Twitter stuff is actually working, fantastic. Great quarter. Thanks for taking the questions. So the first one I wanted to jump in with is you mentioned the club acquisitions one in South Florida and one in Fort Worth under contract. Can you provide any details about, the cost or the multiples that you're paying what do you expect them to add to the top-line? And you had that goal of adding $20 million of EBITDA how far along would they to get you to that goal? So they are my first one. I had a couple of follow-ups.

Certainly. The South Florida acquisition we announced last Friday involves a purchase for $16 million, which includes the real estate. We estimate this will contribute approximately $3 million in EBITDA, valued at around $13 million, translating to just over four times the value, plus the real estate valued at $3 million. Regarding the Fort Worth location, the previous owner has passed away, leading to the closure of the club, while his family is now looking to sell the property and licenses. Our intention is to buy primarily based on the real estate value and undertake a full remodel of the site. Additionally, we are in discussions with other operators across the country for potential acquisitions, including a significant opportunity expected to generate around $8 million in EBITDA through a multi-club acquisition. We are currently at various stages of reviewing financials and conducting due diligence. I believe that by the end of fiscal 2023, we will successfully meet our goal of adding $20 million without much difficulty. I'll now take your next question.

Thank you, Eric. All of our comparisons in this call will be to the year-ago second quarter unless otherwise noted. The second quarter marks the second anniversary since COVID hit in March of 2020. With that in mind, I'm pleased to report we generated record revenues of $63.7 million, up 44.6% year-over-year. Omicron affected the first four to six weeks of the quarter. We estimate it reduced revenue by close to $2 million. Since then sales have been strong and even growing stronger. Nonetheless, EPS increased 69.1% to $1.15. Non-GAAP EPS was $1.19, up 58%. Net cash from operating activities was $11.6 million, an increase of 5.7%. Free cash flow totaled $11.1 million, which was up 23.3%. Net income attributed to RCI Hospitality Holdings was $11 million, up 79.8%. And lastly, adjusted EBITDA totaled $19.9 million, which is up 46.8%. Please turn to Page 8. Bombshells also had a good second quarter. Revenues totaled $15.3 million that's up 16.7% year-over-year. Operating margin was 22.6% compared to 23.9%. Revenues grew $2.2 million year-over-year. 85% of that came from Bombshells Arlington, which opened up in early December.

All right. Thank you, Bradley. Now please turn to Page 13 of the presentation. We are continually talking to new investors and have several on this Twitter Spaces, so I'd like to go over our capital allocation strategy. Our goal is to drive shareholder value by increasing free cash flow per share 10% to 15% on a compounded annual basis. Our strategy is similar to those outlined in the book The Outsiders by William Thorndike. He studied companies that focused on generating cash flow per share and allocating that cash effectively to generate more cash. We have been applying these strategies since fiscal 2016 with three different actions subject of course to weather their strategic rationale to do otherwise. One as mergers and acquisitions, specifically buying the right clubs in the right markets. We like to buy good solid cash flowing clubs at three times to five times adjusted EBITDA. We use a combination of cash, seller financing and acquire the real estate at market value. Another strategy is using cash to grow organically, specifically expanding Bombshells to develop critical mass, market awareness and sell franchises. Our goal in both M&A and organic growth is to generate annual cash on cash returns of at least 25% to 33%. The third action is buying back shares of our stock when the yield on free cash flow per share is more than 10%. For fiscal 2022, as of last Friday, we bought back 83,343 shares for a total of $5.3 million or an average price of $62.37.