Greetings. Welcome to RCI Hospitality Holdings Conference Call and Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce Gary Fishman, who handles Investor Relations for RCI.
Thank you. For those of you listening on the phone, you can find our presentation on Please turn to Page 2. I want to remind everybody of our Safe Harbor statement. It's posted at the beginning of conference call presentation. It reminds you that you may hear or see forward looking statements that involve risks and uncertainties.
Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occurred afterwards. Please turn to Page 3. I also direct you to the explanation of non GAAP measurements that we use. Now I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality.
Eric?
Thank you, Gary.
If you please turn to Page 4. Thank you for joining us today. I'm here with our CFO, Bradley Hsieh. After the market closed, we reported our 2nd quarter numbers. Results reflected a continued rebound in financial performance through the COVID pandemic.
We posted strong increases in earnings per share and free cash flow. Nightclubs had their best overall performance since the pandemic began and Bombshell served up another strong quarter. To enable us I'm sorry, this enabled us to keep our teams employed and generated higher levels of free cash flow and profitability. Once again, we thank our loyal customers, Dedicated team members and steadfast investors. We hope these trends continue as the COVID-nineteen situation continues to improve.
As of today, 36 clubs and 10 Bombshells are open. Nightclubs and Bombshells sales exceeded $18,000,000 in April. Restrictive curfews, which have affected many of our northern clubs are beginning to end. Minneapolis, where we have 3 clubs lifted their 11 p. M.
Curfew on Friday. New York, where we have 3 clubs, plans to eliminate the midnight curfew starting May 31. And we hope the curfew in Chicago, where we have 1 club, will be lifted Looking forward, we are working on all fronts to grow free cash flow. I'll talk more about that when I return to the wrap up. Then we'll have our question and answer session.
And now here's Bradley to review the financial data.
Thanks, Eric, and good afternoon to those who tuned into the call. We reported total revenues of $44,100,000 for the 2nd quarter. That's up 9% year over year. This is our 1st year over year quarterly increase Non GAAP EPS was $0.75 compared to $0.47 in the March 2020 quarter. Looking at cash, We had $20,200,000 as of March 31.
2nd quarter net cash from operating activities was $11,000,000 And free cash flow was $9,000,000 That's the 3rd highest in the quarter in the third highest quarter in the company's history. Please turn to Page 5. The Nightclub segment continued to rebound. Revenues of $30,800,000 were up 22.2% from the December quarter and down only 1.8% from the year ago quarter. The sequential increase reflected more locations opened on a more consistent basis and strong demand.
Same store sales increased 3.6% based on clubs that were open and updates to qualify in the March 2021 quarter and the year ago quarter. During the March 2021 quarter, 29 of the 38 clubs were open the full period, 37 were opened by quarter end, 21 were closed for several days in mid February due to the Texas freeze. This compares to the December 2020 quarter when 24 clubs were opened through most of the period and 26 were opened by the quarter end. As you may recall, after a strong performance in January February last All 38 clubs closed in mid March when local and state pandemic restrictions went into effect. While March 2021 quarter sales were a little bit below a year ago, operating income and margins bounced back to pre pandemic levels.
Cost of goods sold was 12.3 percent of segment revenue compared to 11.3% due to lower proportion of service revenues. Other expenses in aggregate also declined. As a result, profitability increased to $10,500,000 from $2,300,000 GAAP operating margin expanded to 34 percent of segment revenues from 7.3%. There was an impairment of $1,400,000 When we moved one property to held for sale in this year's Q2, while the year ago quarter included $8,000,000 worth of COVID related impairments. Thus, on a non GAAP basis, profitability increased by 16.1 percent to $12,000,000 from $10,300,000 Non GAAP operating margin expanded to 38.8% from 32.8%.
This is the segment's best performance since the year ago quarter. Please turn to Page 6. The Bombshell segment generated another Quarter of strong performance due to the continued popularity of the concept. Revenues of $13,100,000 increased 49.2% year over year. Same store sales rose 48.7%.
During the Q2, all 10 Bombshells were opened with the exception of several days due to the Texas freeze. Capacity also increased from 75% to 100% in mid March. This compares to the year ago quarter when the 9 existing Bombshells And a new location, which opened in late January 2020, closed in mid March. 2nd quarter operating income and margin also performed well. Cost of goods sold was 22.8 percent of segment revenue compared to 24.7% due to higher revenue and lower cost of business.
Other expenses in aggregate as a percentage of revenue also declined. As a result, profitability was $3,100,000 an increase of 356.7 percent year over year. GAAP operating margin expanded to 23.9 percent of segment revenues From 7.8 percent. On a non GAAP basis, profitability increased by 240.7 percent to $3,200,000 from $939,000 as non GAAP operating margin expanded to 24.3% from 10.6%. Please turn to Page 7 to review a few remaining items in our Q2 consolidated statement of operations.
Salaries and wages improved to 25.4 percent of revenues compared to 30.2%. However, we believe our normal run rate is approximately 28%. SG and A as a percentage of revenue also improved to 28.6% compared to 35.7%. Both of these cost centers reflected better Nightclubs and Bombshell segment margins, Amortization fell to 4.8% from 5.6%. This reflected the full depreciation of certain real estate and software.
Interest expenses was 3.9% lower year over year. This was due to debt pay downs prior to and during the Q2. There was a non operating gain of $431,000 pretax. This was primarily due to the extinguishment of 1 of our 2 remaining SBA loans. Income taxes were an expense of $1,900,000 compared to a benefit of $1,400,000 Please turn to Page 8.
We ended the quarter with $20,200,000 of cash on hand, a 2 year high. During the Q2, free cash flow continued to recover sequentially to $9,000,000 We have continued to stay free cash flow positive since the pandemic began. As a percentage of revenues, free cash flow also improved sequentially. It was 12% in the Q4 of 2020, 14.8% in the Q1 of this fiscal year and now it's 20.4% this quarter. We use free cash flow as a percentage of revenue to measure how Well, we're doing converting revenue dollars to cash.
Debt declined $2,400,000 from December 30 and $9,000,000 from our year end at September 30. This reflected debt extinguishment and scheduled pay downs. We are now at our lowest debt level in almost 2 years. We continue to be current on all of our debt. At 34,400,000, current liabilities continue to be in the general range for the last 2 years.
Please turn to Page 9 for our debt pie chart. We continue to see decreases in many of the categories since December 30. Secured debt now consists of 65.4 percent of debt secured by real estate, 16.9% listed as seller financing. This is secured by the respective club to which it applies, 6.3% secured by other assets And 1.2% represented by the Texas Comptroller settlement. This is secured by business and assets of the club related to the settlement.
Our unsecured debt consists of 10.1% that is listed as unsecured and 0.1% representing our one remaining SBA loan. Please turn to Page 10 to review our debt manageability. Occupancy costs returned to pre COVID levels in the second quarter. As a percentage of revenue, they were 7.6% compared to 8.6% in the year ago period. This was primarily due to higher sales and a reduction of actual cost to $3,300,000 from $3,500,000 Occupancy costs as a percentage of revenue sprung up in 3Q 'twenty due to COVID.
We have continued to reduce our weighted average interest rate. Over the last 5 years, it has come down from 7.58% in the Q2 of fiscal 2016 to 6.66% in the Q2 of this fiscal year. As we've discussed, one of our strategic initiatives is refinancing our real estate debt. Our objective is to eliminate Our objectives include eliminating $8,200,000 of balloon debt currently coming due over the next 2.5 years, And another objective is reducing our interest expense by $1,800,000 annually. Now let me turn the call back over to Eric.
Thank you.
Thanks Bradley. Please turn to slide 11. We continue to talk to a lot of new investors. So I'd like to review 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. The author, William Thorndike, who I spoke to recently, studied companies that focus on generating cash per share and allocating that cash to generate more cash. We have been applying these strategies since fiscal 2016 with 3 different actions subject of course to whether there is strategic rationale to do otherwise. The first is mergers and acquisitions, specifically buying the right clubs in the right markets. We'd like to buy good solid cash flowing clubs at 3 to 4 times adjusted EBITDA using seller financing and acquire 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 the clubs 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 like to see at least a 25% to 33% cash on cash return. The third is buying back shares. When the yield on free cash flow per share is more than 10%.
During the Q1 ended in December, we purchased and retired approximately 75,000 common shares at a cost of approximately $1,800,000 Please turn to Slide 12. We continue to execute on our capital allocation strategy in order to grow free cash flow. We continue to make progress on our effort to refinance our real estate debt. And our goal is to lower our rate, increase our term and convert some higher interest unsecured debt into real estate debt. Construction is underway at our first planned next 10 Bombshells in Arlington, Texas and our franchisees location in San Antonio.
We are continuing to do due diligence on other potential company owned locations and franchisees. Our goal is to build 10 new subsidiary owned locations over the next 33 months and sign additional franchisees. We are also looking forward to meeting club owners interested in Exploring opportunities at Expo, the industry convention May 23 through May 26 in Miami. With that, let's open the question and answer section. Operator?
Thank you. Our first question comes from Greg Pendy with Sidoti. Please go ahead.
Hey, thanks for taking my questions. My first question, I just want to dig into the salaries and wages. I think you mentioned they came in obviously at 25 0.4%. Obviously, it's a big topic of there might be difficulty finding people to come back to work. So Can you explain why you did so well on that metric in this quarter?
And what the pathway you said normalization expected to kind of get back to 28%, but Can you kind of walk us through, I mean, is that over the next couple of quarters, is it going to creep back up to 28% Or is that immediately and what is the environment right now in salaries and wages and is that likely going to be a headwind going forward?
I think it will be a little headwind going forward. There's a couple of reasons. First, let's start with your first question, why we did so well this quarter. I think we did so well this quarter because we have very loyal employees. Our revenues increased very rapidly And our employees work through it.
We have a lot of staff. We kind of froze revenue or We're reviewing a lot of people, a lot of our employees right now, a lot of our management teams, Corporate staff and whatnot, we're probably a little below market, so we're going to have to step that up. So I would say You're going to see it return increase a little bit over quarter by quarter for the next couple of quarters, maybe 3, depends on how quickly we react and what we need to do. We're also short a little bit of staff in some places right now. So we are trying to hire.
It is very difficult. It's a very difficult employment market right now. But I think that Because of the loyalty of our current employees and willing to put in the extra work, willing to do what needs to be done To make sure the company is successful, that's helping. And it's helping, they're out recruiting for us as well because they know we need staff. So I don't see any long term problems.
I think it's very short term deal. But I think we definitely have to look at unlock our Salary weight, our salary cap that are lock that we've had and we're going to have to look at being competitive in the marketplace Taking care of the employees that have taken care of us for the last 18 months. So that is a process we're going to be going through this quarter, next And that's why when we've seen this, I was speaking with Brad, I said, I think we need to make sure people understand that 25.4% is not going to be the new norm. That it is going to be our typical average for the last 5 years about 28%. I think we'll get back to that.
I think we have to stay at that level in order to be competitive in the marketplace.
Okay, that's helpful. And then just on the New York lifting the caps in Minnesota, just trying to understand, I mean, is that Going
to be
a big positive or are people kind of going to the clubs? Are you kind of getting more business because people know about The midnight curfew. I mean, how should we be thinking about it? How much incremental business is it do you think that's going to drive?
The curpews are killing us. To give you an idea, when the curpews were lifted in other states, We typically do 40% of our business in the last 4 hours of the night. So in New York where we're open till 4 am, You're talking about the full 40 percent is gone. In markets, where we're open or we're open till 2 am, we're We're still getting a little bit of that business, but not the prime business. And the biggest problem we have is that the main cities may be closed down, but they can Go someplace else.
For example, in New York City, we close it at midnight. But if you go across the bridge, you can party till 4 o'clock in the morning. So what happens is the customer that would normally go out at 11:30 at night, they just don't come to our place. They go someplace else. So I think it's going to be very big for us.
To kind of put it in numbers, I think right now, Pittsburgh opened about a month ago to regular hours. Their numbers are returning back to normal and Actually increasing year over year. I think we're going to see that in New York at the end of May. Minneapolis started Friday night. We already seen a huge increase, the best night we've had in ages by just being open normal hours.
I think you're talking between the Minneapolis, New York and Chicago Clubs, somewhere between $600,000 $800,000 a week in revenues. And if you take our $18,000,000 in April, it's about $4,400,000 per week in sales. You can kind of see where we're more than likely headed as we roll through the end of May and into June, July, August, September. So I really think that and even if like we haven't seen a slowdown, I call it consumer exuberance. We're seeing that right now.
They're going to run out of gas at some point, but when, who knows. So far, all we have seen is it continue to increase. It's like the going out and partying and having a good time and just getting out of the house and being around people It's more addictive and more contagious than COVID was. People want to be out now And they want to stay out and they'll spend the money to be out. And like I said, week after week, we're seeing it increase, not decrease right now.
So until that consumer exuberance kind of caps out, I just don't really know. Okay.
And then just one more, if you can just kind of Just real quickly, just trying to understand the margins at Bombshells. Any kind of just conceptual color on average check? Is that something That just kind of ballooned. I'm just trying to get a better sense of the margins there and maybe what was driving that.
I don't think the average checks really ballooned. I just think that pure number of people and the number of hours That we're the number of hours we have busy that we're busy and we have waits have increased. And I think that's a lot of what we're seeing.
Okay. So you think it's traffic driven then versus
It's definitely traffic driven. I've been there a few times. It's traffic driven. I mean there may be some big spenders as well, but the bobshells like the clubs where we get a VIP customer come in and Go upstairs and spend $5,000 on champagne. This is a place you go and you hang out and you have a few drinks.
And If the average ticket is up, it's up 1 drink or 2 drinks. So it's up $6, $8 $10 a ticket or something. It might have something to do with it. But it's really just the number of tickets. It's the pure volume that's driving Bombshells right now.
That's helpful. Thanks a lot.
You bet.
Next question, Yaron Haymar with OneMain Capital. Please go ahead.
Hey, guys. Awesome quarter. I guess I want to follow-up a little bit on the Bombshells commentary. I mean, I'm trying to internalize like how much of it you think is sustainable, all this recent strength. Like once all the local restaurants and bars and whatnot Reopen, which I think a lot of them have already been open in Texas.
I mean, where do you think this eventually levels out? I know it's a hard question, but I don't know if you have a view on that.
They are open in Texas. I think we peaked in The Q4 of last year and the last two quarters have been very consistent at $13,000,000 I think that's where we're at. I've been talking with the management team, been looking at the numbers. Like I said, I've been eating some of the bombshells, kind of see what's going on. I don't I think this is where we're at now.
I think this is the normal for that brand right now. Will it slow down a little bit? I guess when if maybe if people stop eating out as much or something. But right now, For the next, I think, 12, 18, 24 months, I think this is probably the pretty much the range we're going to be at. I don't see any reason for it to slow down from here.
I don't know that we'll do the big quarters that we did In that Q4 of last year, but we did 15 something. But I think 13 is pretty sustainable right now.
Got it. So if you take the April number and you add kind of This $600,000 or so you were talking about for the restrictions lifting in Minnesota, New York and Chicago, I mean, you're looking at a business that's probably run rating $250,000,000 plus of revenue. I mean, if you just annualize it, I know there's some seasonality,
but Well, if you say $5,000,000 a week, I mean, we could be close to $5,000,000 a week. There's some seasonality. I mean, I think $220,000,000 to $230,000,000 is very safe. I think $240,000,000 $250,000,000 is possible. And if you said $260,000,000 I wouldn't say it's out of the question on a forward run rate.
Once everything is open and running, as what we're seeing right now today, and you got to remember, Minneapolis and New York are big VIP spend clubs. That's their service revenue. So all the service revenue you see missing right now, that's where it comes from. So as we see the service revenue spike up in New York and spike up in Minneapolis and Chicago gets back open, That's when I think we'll see some of the margin expansion as well. We're seeing it in Florida.
I was Just looking at Tootsie's numbers, I mean, it's crazy, dollars 879,000 last week. So it's big numbers. It's people are out and they're spending money. I guess it slows down at some point, but if we if everything's open and we're at $5,000,000 a week and it slows down 20%, we're still at $4,000,000 a week, right? Mean, we're still doing some pretty heavy numbers at that point.
And I just don't see it slowing down 20% anytime in the next 12 to 18 months. I mean, maybe that's 2 years from now, but this next year is going to be a huge year for us.
Very confident.
Yes. On that basis, I mean, you guys are doing some massive, massive free I mean, you could be doing $50,000,000 $60,000,000 plus of free cash flow, but maybe even more than that, I mean, if you hit the higher end of those revenue numbers. And if you're generating that much free cash flow, I mean, the club acquisitions you typically acquire use a decent amount of debt to acquire them, you know, seller financing. I mean, if you're generating $50,000,000 or $60,000,000 of free cash flow or even the pre pandemic numbers, which were closer to $40,000,000 But I mean, You could be deploying $75,000,000 $80,000,000 $90,000,000 $100,000,000 potentially in growth CapEx, assuming you're doing Acquisitions and or Bombshells. I mean, how are you going to deploy that much capital?
I mean, so you're trading at a
Multi club acquisitions. That's how we're going to do it. We've got to buy we're going to buy 1 of the big boys or 2 of the big boys, who knows. We're to the point right now where And we may have to pay 5 times, right? I mean, instead of 3 to 5, we go to 5 times.
We go to a couple of the big boys and say, we're going to give you 5 times right now. Are you guys interested? We've never done that. So I can't say they're not interested. I think they're going to be interested.
I think that number is going to be Very, very difficult for someone to resist. We're starting to talk to guys right now. We plan to we have some meetings set up at the end of this month at EXFO And a couple of guys that can't come to EXFO, I'm going to go meet in the 2nd week of June. I've got a couple of meetings I'm working on right now. And we're going to see about it.
I mean, this may be the year that we wrap start wrapping these things up. We've talked about it. We pushed for it. We've gotten really close a couple of times. In 2,008, we really got close there.
When our stock took off and we got that multiple, we could pay a little bit higher prices Without it affecting the model too much, I think that's what probably what we're going to see as we move forward. For the right acquisition only, I mean, our typical acquisition is going to stay in that 3, 4 times range. But for the right acquisition, I think We would be prepared to make a 5 times offer, obviously,
with some terms.
But we're going to see that. You're going to see a much larger and it's going to be more cash, right? It's going to be we're going to start using $20,000,000 $25,000,000 $35,000,000 cash down payments We're going to have the cash to do that.
Yes. And how is the single club M and A pipeline looking? I mean, is Boston back on track? Are there any other big cities with single clubs that you're looking at?
Boston is off now again. It's on off, on off. It's a love hate relationship with the 2 partners up there, I think. I can't figure that out Truly, what their thinking is at this point. Their club is still not even open.
But there's several other single club stuff we're looking at. But my real focus right now and probably through the next 3 months, excuse me, is going to be a large acquisition. We've got to land a pretty large acquisition. But like you said, that's what we need to make the needle move, right? I mean, we're generating ton of cash.
We've got a ton of cash. I have no problem with it sitting on the books and just building up in the bank. It's not a problem for me. I can deal with that Until I find the right acquisition at the right price. But at the same time, We've never had that cash before.
I've talked to guys before in the past and they said, oh, I for me to even think about it, you'd have to have $30,000,000 cash down and we just like, well, we're not going to do that deal. But now we have the cash. So we're going to go out and start looking, Start kicking tires and hopefully maybe somebody is listening on this call and I'll get a call tomorrow One of the big guys that's interested. But we're definitely interested and definitely going to be very aggressive at finding the right large acquisition.
Yes. And on the refi timing, I know it's a high priority for you guys. I mean, how long do you think these things typically take?
Well, once we can get to the terms on the commitment letter, we're 2 terms away negotiating Two different terms in the commitment letter, which I hopefully, I think they're going to committee on Wednesday. Hopefully, that will they'll get those We'll get an agreement on these last two things that we need, which is freedom for large acquisitions without somebody overlooking our shoulder And the debt coverage ratios that allow us to pay dividends, Because we're a dividend company, somewhat, we don't want our dividend to be at any risk at any time. So once those two items are fixed, I think we probably signed the commitment letter the day that the day of approval the day we get kind of the terms that we can agree to. And I think we can close 3 weeks later. So if everything concretes upon on Wednesday, we probably close the 1st week of June, Be my guest.
Okay, awesome.
And then last one for me. On the patron tax in Texas, can you give us the latest on what's going on there? And Right. I forget, are you guys paying that tax today still until it's final resolution is breached
or have you
guys stopped paying it for now?
We are paying under protest. We don't want to build up a big liability on the balance sheet again like we did in the past. So we're paying under protest, Which means we have the right to claim it back if the case is on right now the case is setting at the courts and waiting on a ruling. So we'll just have to sit and wait basically.
And how much is that per quarter per year again?
Oh, gosh, I'd have to go back and look. I really don't. It's Fluctuated so much with COVID because things have been open and closed in times. I just don't know off the top of my head. But if I had to guess, it's Maybe $1,500,000 $2,000,000 a quarter I mean a year?
A year. A year? Yes. $300,000 $400,000 correct. Yes.
About $300,000 a quarter right now is what Barry says. Yes.
All right. That's all for me. Great job, guys. Thank you. Keep it coming.
Thank you. Yes.
Next question, Jonathan Ebony with ADW Capital. Please go ahead.
Hey, Eric. Good job on the quarter. I mean, If I just annualize what you guys are doing in free cash flow, that's more than sell side consensus in 2023. And obviously, doing 60 of free cash would be Double what Southside has looking at 2 years. And can you just help us think about sort of the M and A pipeline?
And I know you spoke about this with your own, but are mom and pops coming to market now with cap gains law changing? And how are you thinking about this year in terms of M and A? You think this is going to be a blockbuster year?
I think the next 12 months are going to be very big. I don't think they'll get a capital gains tax passed prior to The midterm elections. So I think we have a little bit of time, but yes, guys are very interested in figuring out whether if you're planning on selling the next 3 to 5 years, You need to sell this year, so that you can lock your capital gains tax rate in now at these lower rates, if they're going to be raised. I think there's a pretty much consensus on both parties that there will be a raise in the capital gains tax Over certain dollar amount, I mean, maybe but all the deals we're looking at, they're going to have more capital gains than whatever that dollar amount is going to be. We are getting interest.
We are talking to people. And I think We'll have a big year this year with club acquisitions for sure. I'll know a lot more in the next 3 to 4 weeks as we like I said, we're putting it out there now. We're spreading it with the brokers. We're spreading with everybody that we're looking for a very Multi club acquisition and $40,000,000 $30,000,000 down payment doesn't scare us.
If you need a bunch of cash, We're building the cash, we're sitting on the cash, we can get have access to the cash. Come talk to us. So I have talked with you and like I said, I think we'll get more calls Over the next 4 weeks.
Got it. And then just on and on M and A, have any of them expressed interest in Joining the RCI family and taking stock in the company. And then last one for me would be how franchisee franchise Conversations with interested parties are going for Bombshells.
We have 2 people that we're working with on Bombshells right now. I have talked to sub club owners about equity, because now everybody wants the stock. Nobody wants the one that's 15, everybody wants the one that's 70, Which is fine by us, because we wouldn't issue it at 15 and I don't know that we'll issue it at 70 or 60 or whatever. We have to be very comfortable with the deal to use equity still because we still think equity is cheap. We're going to kind of lay out as we move in through May June, I think we're going to get a much better idea with everything open, So that by the July, September quarter, we will have a good idea Hopefully, of at least a 12 month run rate.
I'm getting more and more confident. I kind of thought Bombshells could slow down a little bit. It did after the big quarter, now it's slowed down a little bit. But then We had 2 quarters in a row where we're sitting here at this $13,000,000 run rate. So I thought maybe Texas would slow down Florida would slow down.
They're not slowing down and they're just getting busier. And so I'm getting very confident on the numbers, that the numbers will continue to stay high for this 12 to 18 month period and maybe forever. I just don't know. I don't It's hard to see past that point right now because it's so early, right? It's kind of early in this recovery Whatnot, but we're also seeing inflation kick in.
We're going to have some wage inflation, I think. Chicken has gone up Tremendously, I think we're going to see you're seeing certain shortages, ketchup, mustard shortages. I mean, so when does all this kind of Steady out, get back to a deal where we can project Going forward that and that's the hard part right now is projecting going forward. In the meantime, we can Safely say, I think we've got $52,000,000 to $54,000,000 of revenue for April, May, June in the bag. If we have a huge June, we opened May 31st, we have a huge June in New York.
Typically it's taking 3 weeks from the time when a curfew ends to the build up of business. But New York gave us a 30 day window on when the Caribou so like Minneapolis was completely a surprise. On Wednesday afternoon, they came out and said, starting Friday, you can stay open. So that location will take a little bit of time to build up, right, because The employees didn't know ahead of time. So now we've got to make calls.
We've got to get people in. We've got so those locations typically are taking 3 weeks to get back to what I call ahead of So within 3 weeks, we're out grossing what we were doing in 2019. In New York, I think we can start out June 1, Beating 2019 numbers because we have 30 days to advertise and market to bring the girls back in, to bring the We'll let the customers know, hey, you can party all night again. And so I think the New York numbers will happen very quickly and maybe day 1. So like I said, we've got a few things we've got to kind of work through there.
But if everything hits right, I mean, it could be $55,000,000 $56,000,000 And if you look at the cash flow generation of 20.4% for this quarter, If it's a lot of VIP spend, it could be a little higher than we can maybe the free cash flow generation percentage goes up a little bit, so we generate a little higher free cash flow. But we're definitely on At least short term on free cash flow that we've never seen before. I think we will have record free cash flow This quarter, probably in the July to September quarter, and then we hit our prime season October to May. So Yes, it could be a very good year for the next 12 months, 18 months for sure.
Very exciting. Thank you very much.
Thank you.
Our next question comes from Darren McCammon with Cash Flow Kingdom. Please go ahead.
Hi, guys. Congrats on another strong quarter and really on excellent Capital management and capital allocation for the last few years. You've done a great
and good job here. We just keep following the program. That's the name of the game right now.
Well, I mean, you've got it dialed. And I think if You ever get a chance to thank the author of that book for me too.
You got it.
Okay. So we've talked about free cash flow a lot here, and we're hearing numbers thrown around by other Analyst of $60,000,000 etcetera. Are you prepared at this point to give us some free cash flow guidance?
I mean, like I said, I can tell you what I think for April, May June right now, I'm very confident in the next 3 months. I think it'll carry through July, August, September, and then we hit our prime season. So I mean, You see the percentage this month went to 20.4%. If we continue to get if we continue to increase And a lot of that is service revenues. It's going to increase that $20,400,000 to a higher number On top line revenues to 52% to 54%, if everything goes right, could be a little bit higher.
So you can do the math. I don't really want to give the guidance, but I think those are kind of the ranges that we're looking at right now. And if that carries into the next quarter, then our prime season, we hit October like I said, we hit October Through May is our prime season for us and we continue to see increases. This consumer exuberance continues. I can't tell you where we how high we get.
I just don't know. But we will peak at some point. I think like I said, I think Bombshells peak, the restaurants kind of peaked in basically the 3rd calendar quarter, Our Q4 our fiscal Q4 of last year, but now if this is the new average, we'll take it. You're talking about basically $52,000,000 a year, dollars 5,200,000 per unit on average. Some of our top units are much higher.
Some of the early units aren't doing the big numbers. But as we open up Arlington location, we're going to get another idea. That location should open excuse me, the plan is to open it for the weekend of the 1st Dallas Cowboys home game. Late August, late September, I mean early September. And we're working on a couple of other locations, company owned locations as well.
And we're looking. We're out shopping real estate right now and trying to find the right locations. I'm not in a hurry. People say, oh, you need to hurry, you need to hurry. I'm not going to hurry.
I'm sorry. If you want me to hurry, I apologize. But I'm going to make The right cost. We want the right locations, the right investments, because we can only spend the cash once And we got to get a return on it. It can set in the bank for a month or 2.
It's not going to kill the overall return for having a little cash set in the bank. We're generating cash at a very rapid rate right now. We ended the quarter with over $20,000,000 I think at the end of April, we're close to $24,000,000 I think at this rate, we'll end the quarter at $30,000,000 In cash, if we don't do anything at all with it and if we find the right deals, we'll put it to work. I mean, I think we need to keep about $15,000,000 cash on hand. I don't think we need To keep $18,000,000 or $19,000,000 or $20,000,000 cash anymore.
Business is solid enough right now that I'd Be willing to invest that extra capital instead of having it set for the right deal. And that's just We go from here, right? We just wait every day. We get up, we pound the pavement and we try to find the right deals. And we'll start finding them and we'll start getting them announced And we'll see the cash continue to grow.
Okay. Well, From my point of view, I mean, I guess I'm looking at a minimum of $1 per share in cash flow going forward And seeing that as really the low end of things. It's funny, it used to be the expectation, but now it's looking like the low end
You're talking about per quarter, correct?
Yes, per quarter.
Yes. Okay. Yes. I just want to make sure.
That's 36,000,000 Over a year, which pre COVID used to be our forecast and now it's looking at the low end.
It is I would definitely say that would be the low end after this quarter and the way things are running through early April. Because You remember February was not a good month. January was okay. March was the 1st solid month and then April back right up to it, Right back at that $18,000,000 And now we're bringing New York back online. We're bringing Minneapolis back online.
We're going Chicago online at some point in this quarter, I believe. I don't think they can keep Chicago closed through June 30. I don't know how they keep it closed through May 31, but I'm not a politician, so I don't know what their thinking is up there. But judging by the rest of the country, they're way behind the times. So it will be back open as well.
And those are big revenue generating clubs and very profitable clubs, Especially our New York clubs. So that will continue to add to the numbers. I don't see the current number slipping off for at least the next 3 to 6 months. So if 4.4 is the new normal range for the next 3 to 6 months for the existing stuff, we bring those other clubs online. I think they add $600,000 to $800,000 and maybe there's $200,000 here or $300,000 that I'm off.
I'm off by $500,000 We're still at $4,500,000 $4,600,000 per week, and those are going to generate some pretty decent cash numbers.
Okay. Just this is more comment than anything else, but Texas Roadhouse also just came off of one of its biggest quarters ever. So you're not the only guys that are selling a lot of restaurant food and stuff?
We're actually looking at properties next Two different Texas Roadhouses right now for that exact reason. I've been following them very closely. We've Got a friend that's very high up in Texas Roadhouse and they're doing very great location picks right now as well building for their new stores. So I'm very excited to kind of for one of the locations that we're Putting under contract. Hopefully, I'm supposed to have it back by the end of the day today.
I haven't checked my e mail because we've been busy working on the call, but Should have another property that's very close to them right next door to one of their locations under contract hopefully by the end of the day. So definitely working on it.
Good. Glad to hear that. So along those lines, nice problem to have to be floating in cash. And I know you've talked a lot about what to do with it, but you and I both know there's A very large potential purchase out there hanging, where they use up all this cash and more frankly. I guess any progress or anything to say there?
And would you consider using shares or selling shares To fund a bigger cash chunk to them or anything?
If we need to and at the right price, yes. We're not Look, we're looking for when we do any acquisition or anything we do, we're going to look for the cheapest possible cost of capital that we can find. Obviously, nothing is cheaper than cash we already have on hand. We already have it. It doesn't cost us anything.
We put it to work, we get return. Debt would be next and equity would be our last at this point. Now depending on what the equity does, as the equity moves up in value And we calculate our cash flow multiple. We'll put that against debt And against the cost of debt and whatnot. I don't I'm not excited about issuing $60 or $70 Equity, but if this thing runs to some of the charts, I've talked to different chart guys and they say, oh, it could go to 90, it could go to 130, What are you going to do then?
Well, I'm going to do my calculations and if that's where it's at, then yes, we might heavily consider using equity at those points. But we're going to still be we're only going to issue what we have to issue. I don't think it's Something I'm going to run out and just sell a bunch of equity all of a sudden because the stock price ran up. We want We're going to be very smart about how we do things going forward, especially with our equity.
Understandable. I just put one qualification on there for you from my point of view. You don't get to issue equity when you need it. You get to issue equity when you don't need it, right? When the market loves you is when you issue equity, not when you're out there needing it.
So
Understand. If they love us enough, we'll give them some. How's that?
Okay. Okay. That's what I wanted to hear. So But along those lines, if you had a very major purchase and we know who we're talking about. We're talking about
Equity in a leak uplockout agreement, we would consider, yes, definitely. And we have considered that.
Okay. Are there any talks going on there or have there been?
There are lots of talks right now. We're talking with a lot of people right now. There's a lot of solid groups out there. I want to get large groups. That's the thing.
Right now, we're talking with some smaller operators. I really think now is the time with the tax laws changing, with the equity where it's at, With the cash where it's at and our ability when the refinance is done, our ability to borrow additional funds without Having to use additional cash, monthly cash, we're going to save almost $5,000,000 a year with this new note in equity and interest So we have that money, so we can borrow against that and use that same $5,000,000 to have more money to buy more cash flow with. It's going to make a lot of sense To do a large acquisition and we're working towards that means for sure. I mean, could we do something in the next 30 days? I mean, it's possible.
It could be the next 90 days. I think we'll definitely do something in the next 6 months. Before our I would say before our fiscal year end or definitely in the Q1 of next year, I think we'll have a very sizable acquisition Lock in definitive agreements by that point.
Okay. My goal So as far as other reasons
But I can make it happen, I don't know, but that is my goal for sure.
Okay. So as far as other means of soaking up cash, I agree with you that that's the best choice. I would say that Paying other than a token dividend increase makes no sense to me, not with the other opportunity that you have. And although you should do a token because it just gets you on the growing dividend list. But We're
on the growing we just did one this year. We would The first time we need to look at a dividend increase, I think, would be December or March, I think. We were kind of reviewing that earlier. We've got consecutive dividend growth for going on 5 years now. So yes, another penny here, another penny there, something irrelevant in the overall Cash flow screen, but it keeps us on the screens.
We understand the screening. So it's something we're not ruling it out. We're not looking to do it either at this point As we've got 6, 7 months where we even need to think about it, we don't need a dividend increase until fiscal 2022. So we've got the $0.16 we did in 2021 with the December raise. So we've got a year to think about that.
And then on some of your debt, you've got seller financing And I know you kind of made a deal there and some of those guys don't want you to pay them off early. But are there any that might want you to or might welcome it?
There's only one that we're not paying off early. When we consolidate this debt, everyone will be paid off except for 1 seller note, The note against other assets, the debt against other assets and the Texas Comptroller, everything else will be consolidated into a single loan at that point. About $105,000,000 It was a lot higher than that, but we've been paying it down. So Because we've been working on this a while.
Do you
think that's going to go through?
Well, they're going to committee with our last two comments to the letter on this Wednesday. So, if we can get agreement on the terms with the bank's board, I think we'll move very quickly, 3 weeks, 4 weeks Wednesday? The appraisals are done. Everything's done. All we're working on is final terms.
Okay. Basically, we just have to put it all together. If we can come to agreement on those final terms, if we don't, then we're just going to wait. We've got the We can't do a loan that would tie our hands on a go forward basis. It's just not something we're interested or willing to do.
We're going to have similar terms to what we did on the 2017 loans. If we can get that, which is what we're negotiating right now, Then we will move forward very quickly.
Okay. And then can you talk a little bit more about inflation, not just wage inflation, but Also drinks and supplies, what kind of inflation are you looking at there?
The beauty of right now is we have no menus. Everything is QRS codes. So if our prices are raised, we can raise our menu prices in 15 minutes. But to give you an idea, chicken was $65 for a 45 pound box of chicken wings. It is now $148 and we're told it's going to $158 next week.
So those are the kind of things we're seeing. We got word of ketchup was going to be out. So we ordered a ton of ketchup. So our ketchup inflation will be 0 because We planned ahead of time. But just we're told beef and seafood are getting ready to go up a little bit.
But overall, it's you can see there's not really an effect because our cost of goods have stayed pretty steady. So we've been able to Manage everything properly. And it's just about knowing and reacting fast enough. We were getting ready to print menus Again, and go back to print menus and after a meeting with staff, we just decided that, A, we don't really need them. Everybody has their phone with them and everybody is so used to just phone the menu on their phones now that That may actually be the new norm.
We may never have menus again. It is just easier and then they pull up the thing and you can Advertise whatever special you want. It's a really interesting way of doing it. So We may stay with that. I'm not 100% sure yet, but that's made it very simple for us.
Yes. You could also do a chalkboard For those people that don't have phones or a video display on 1 of the TVs or something like that.
Yes. We're not that doesn't matter. We're good there.
Okay. So what about alcohol inflation?
I haven't really seen much of that. Alcohol is comfortable to say right now. You can't get things. Like there's no Hennessy, But other than that, it's not a big deal. But they'll get there they'll ramp back up.
Everything will be back. I'm not worried about that. The beauty of demand Is it create supply?
Okay. Thanks a lot. That's my last question.
All right. Thanks, Aaron.
Next question, Adam Wilk with Greystone Capital Management. Please go ahead.
Hey, guys. Thanks for taking my questions. I guess the downside of Going toward the end here is that most of my questions were already asked, which is great. A lot of really good discussion on The M and A environment and kind of what you guys are looking to do, which is really where the bulk of my questions are coming. But I guess I can ask, you mentioned something interesting a few minutes ago about putting down like or potentially putting down like a 30 $40,000,000 down payment on a potential acquisition.
Did I hear that correctly? And if so, I mean, are you talking about acquiring like a Is this like a huge deal or huge deals you're looking at potentially? Is that something sort of I
think that would be typically Typically, we put down 30% to 40%. So think of it in those type
of times.
Okay. That was
So I'm looking at I want to do an acquisition that It's enough clubs and enough EBITDA that we would be comfortable to pay in the $80,000,000 to $120,000,000 range Because I think that's what we need. A, number 1, our systems we put in place, ERP system is ready for it, our staff is ready Can easily absorb an acquisition of that size, somewhere between 8 and 15 clubs in a single acquisition. It gives us significant size of growth And it's going to put us in markets we're not in already and that's the real key I think. For the future, we need to we've got to expand our footprint and our pure size. And it will give us by doing some of that large, it gives us economies of scale.
We'll be able to tweak it, pick up another 1 or 2, 3 points, 4 points, 6 points On the deal, which will make it it may look like we paid X amount of dollars for it, but then when we A year later, you'll go, oh, wow, look what they've done, look at the money they saved, look at the cost savings we put in with our national pricing with Taking our staff and put it over more revenue and more locations, we'll get a Much better return on it than originally it looked like at the beginning. And that's what we've seen in Chicago. We re span the numbers on our last few locations. And Pittsburgh was the only location where After a full year of operations, we actually ran on an EBITDA multiple a little less Then we had so for example, we paid 3.45 times and we actually afterwards Worked out to be in only 2.79 times or in Pittsburgh, I can't remember the exact, but it was like Point 2 more, right. So Pittsburgh was the only one that wasn't in our favor.
And we just had some issues up there in the 1st year. I think as we move forward, it will start looking better as well. With a new market, as we get into a new market, sometimes we got a little learning curve with a single location. That's where I want to go in and do these multi club locations where you just buy a whole market. It's going to be much easier and more profitable for us.
Right. Yes, I understand. Thanks. So you mentioned like where the cost savings are coming from, that was helpful or would potentially be coming from. So that was helpful.
And so like when you're looking at different markets, is this just all over the country or you have clusters of places that you like to look? Because I can't aside from like multi Unit acquisitions, I can't imagine there's many single or even 1 or 2 clubs doing the numbers you just said.
These are multi club for sure. Yes, these will be multi club for sure. Or we throw or we could just go out and do 5 or 10 Single club, 5 or 10 single club operators and put the same amount of money to work just $3,000,000 or $4,000,000 at a time, right? I mean, Well, it's a lot of work. It's easier to buy 1 multi operator than it's going to be to go out and try to buy 10 individual clubs.
But we'll do it, we have to. We're looking at both ways. I mean, we're just out there. We're pounding pavement right now. That's what I call it, knocking doors, knocking doors and pounding pavement.
Back in my old days when I was 13 years old going door to door sales. Right. Yes. And I appreciate the way you're
thinking about Sort of spending the money to do these things. I don't know why. I'm very confused why the previous person would ask about or Talk about the need to raise equity. There is absolutely no need unless again, like you mentioned, it's the lowest Cost of capital, that was kind of confusing to me. But I appreciate how you're thinking about that and
Yes, no problem. I think everybody just Once more float, so they want more float, so they can buy more stock, I guess, but without paying more for it, but that's not going to happen. Yes. How do we keep them? We have no I learned all those days back and I made those mistakes in 2,008, 2,009, all the way into 2012 and it's like, you know what, I'm done with that.
Our equity is gold. We have other ways to pay for things. We're going to pay for them. And the equity will just stay valuable, right? I mean, that's the way I look at it.
Yes. I love to hear it.
Thanks. That's it for me. I appreciate it and great Thanks again.
Thank you.
Next question, Doug Weiss with DSW Investment. Please go ahead.
Hey, thanks. I just wanted to ask about Bombshells a little bit more on specifically the expansion. And I wondered if, I mean, obviously, you have a lot on your plate in terms of M and A on the club side, but I was curious if You sort of siloed things enough that the expansion of Bombshells can run independent of that. And If that's the case, I wondered if there was the possibility of accelerating that rollout if things continue to go well.
We're definitely trying to accelerate the Bombshells expansion if we can find the right locations. We were trying to go into Miami very heavily. We have found that it is with all the New Yorkers that have moved To Florida that market is on fire right now. Something goes on the market, we start calling on it. They're getting 50 calls On vacant property down there right now, it's absolutely crazy.
We had 2 locations, 1 got bought out from underneath of us By Chick Fil A, another property condo developer is now looking at buying the entire retail center, tearing it down and building 38 storey condominium project on it. So they want to only give us a 3 year lease and so we're like, we can't do that. So we are having difficulties getting into the Miami market. We do have one property that we're fairly certain that we're not going to have issues with. We're going to get that one done.
We have come back to Texas because, A, we know it, we love it. We've got the Arlington location going in. I am working on a location in West Dallas suburb right now. I don't want to mention it yet because I don't have the signed contract in my email. And but we're getting there.
So and we're looking at another Houston location right now as well. So we're looking at 2 franchisees outside of Texas that we're talking with as well.
What's the thought as far as beginning to look at other markets? I think you've mentioned Las Vegas a couple of years ago and
For Bombshells?
Yes.
Phoenix, we are we've considered the Phoenix market very heavily. That's probably one of the markets we will head to at some point in the future for company owned stores if we don't end up with a franchisee there first. That's Phoenix's we've been talking about going down there in the next few weeks and just kind of We familiarize ourselves and seeing what's available in that marketplace if we don't get something solid in Miami On a couple of the properties we're working on there right now.
Okay. And just a couple of bookkeeping questions. The land for sale, I think this was the Q1 that was came up on the balance sheet. What's that related to?
The contracts that are signed? Yes, those are signed contracts. So we don't move it into asset sale for sale because we'll lease it. The way the GAAP works, If you will lease a property, you can't put in assets held for sale, even though it's for sale or lease. So we have everything basically for sale or lease until the day it's put under contract.
We had 3 properties under contract, one closed Friday. Friday. Yes, one closed Friday. So that leaves 2 we have 2 properties left. 1 is at $3,250,000 We will sell or finance that property.
We're taking a $500,000 down payment. There we're going to do about a $2,000,000 remodel on the property Construction project on the property and they are getting a 5 year balloon note for the 2,750,000 Another property we have under contract at $2,150,000 all cash. They have I think about 30 days left on feasibility And then they have 30 or 40 days to close the transaction.
Okay.
They don't have right to extend the feasibility if they put for a fee For a monthly fee.
Okay. And then just to follow-up on the patron court case. If you were able to Recover some of the retroactively some of your past payments. How many years back are you trying to claim?
I have no earthy idea at this point. Right now, we just want to stop paying it going forward. That's really what we're pushing for. I'll let the lawyer the lawyers will work all the rest of that. Our big motivation is to stop paying it going forward.
Got it. Okay. All right. Thanks. Thank you.
Thank you.
Next question, Adam Wyden with ADW Capital. Please go ahead.
Hey, Eric. Sorry, I'm a little late here, but I won't disappoint. So I mean, look, I'm just doing my the same back of the envelope math That everybody else is doing or perhaps no one's doing. But like I look at these numbers and I say, okay, I can back into New York and These later curfews in Minnesota and I keep coming back to that number I keep throwing out there, which is 100 plus of EBITDA. And When I look at your refinance, that's coming.
I don't know, I was on the early part of the call if you guys were talking about it, but I know it's coming. And I look at the maintenance capital and I look at Kind of the tax loss carry forwards and some of this other stuff and the depreciation from the real estate, I'm getting to free cash flow numbers That are effectively double kind of what our run rate is. And I just I guess my question is, there seems to be a very, very large dichotomy between the cash flow that multiple people are willing to ascribe to something like Bombshells versus the nightclubs. And I guess, I'm just trying to understand what are you guys doing in terms of getting the market to do with some of the parts in that evaluation or getting So it's like coverage or raising money at the subsidiary level because look the performance is remarkable. But I mean We're not anywhere close to being able to use our equity.
And I think part of the big reason why we invested in this company is because Private equity can actually buy these things. And so you've got this capital gains thing coming up and people don't necessarily want to pay 100% tax or maybe they want A little bit of tax on part of their stake, but I mean you are the acquirer of choice in the nightclub business. So look, I guess, I look, everyone says, oh, it's up so much. But I mean, look, I look at it much longer and I look at where we were Pre-seven and all the rest, I mean, the total return hasn't been that great and, you're starting to get institutional sponsorship. I mean, how do you think about the next
I think the reality is we have to do the 1st big acquisition. That's going to get A lot more attention. We're going to continue to put out the cash flow numbers. I think this quarter is kind of a wake up Call like, oh, hey, the cash flow is really coming back, you know, dollars 9,000,000 is a big number, but most of that money was made in March As I think as we move forward and you see April, May, June, we get that quarter out, we get this acquisitions, it's kind of Rolling, we get some definitive documents, we kind of see the terms, we see how we're setting stuff up. I think that's when we're going to wake up Some of these other banks, the problem with investment banking today is they need a deal in order to make it worth their time.
And since we're not really at a point where we're going to sell equity, but I think hopefully there's some investment bankers out there listening to this call and they'll understand that We're relationship guys and you need to build a relationship with us now so that when it's time for us to raise equity, We're interested in using your bank because the banks only want me when I don't need them or when I need them, I mean to raise money. And that's tough Russ, because I'm not going to spit out cheap equity. This is never going to happen. You know, that's why you invest with me, because you talked to me back in the day and you're asking about the equity and I'm not issuing any equity. I'm not, Is this I'm not interested in throwing out cheap equity.
And yes, people think, oh, it's at $70 it's high. But Like you said, when you do the math, it's not. So let's look at it. Let's say that the margin increases from 20.4% this quarter to only 22% And we end up doing $54,000,000 All right. So now we're $11,000,000 plus almost $12,000,000 And free cash flow between $11,000,000 $12,000,000 free cash flow in the next quarter and as we roll forward we get New York open fully, We get a deal and we get to that point where we're at $60,000,000 $60,000,000 in a quarter and the New York is and Chicago and Minnesota is our Service revenues, which is we all know is much more profitable and that margin moves up some more.
Now we can maybe over $15,000,000 plus in free cash flow a quarter. I'm not selling my stock at $70 with $60,000,000 of free cash flow. I mean that's
No, I think the number is higher.
And I know you do. I know you think the number is higher. And you've surprised me because
you've been right more than I
have lately. I just But I get it.
I guess the question is, is like I feel like every business is at an inflection point, right? You've got a growth vehicle and bombshells that people can accept. You've got a government that wants to take all your money, right? You have individuals that are sunsetting and gray tailing and they don't have necessarily children to run their businesses, Right. And why not sell to you participate in the upside?
Because as far as I can tell, like I don't We've talked in the past about the TAM and the market position, but like I don't think it's unreasonable to think, now putting the restaurants aside, but I mean, Look, you know how many strip clubs there are, nightclubs there are in the United States. I mean, if you're at 100 of EBITDA, is there anything stopping you From building a business in nightclubs of $500,000,000 of EBITDA, I mean, look, I don't I think it's very, very fragmented.
There's definitely that much out there to buy. Like I said, it's about convincing these sellers. And we've been With the pain
The bigger you get, the more likely they're going to sell to you because that means that they're selling to somebody who, A, will A good steward of their business. B, they can take equity and flexible capital solutions from you because you're safe, Right. And so the better you get, the more stable you become, the more likely they're going to sell, right? Not to mention that like what is the probability?
We're pitching this now to a couple of And I think, like I said, in the next as I said earlier, you missed on the call, but I think we're probably It could be 30 days, it could be 90 days, but I think definitely within the next 6 months, we're going to land 1, maybe more Of these larger of a larger type acquisition. That's our goal. That's what we're pushing towards. And all the things That you've just mentioned are the reasons these guys are talking to us now and we're able to go talk to them. I couldn't go talk to a guy who needed $30,000,000 or $40,000,000 cash down a year ago Or 2 years ago, even 3 years ago, I couldn't talk to these guys.
I mean, I could talk to them, but I wasn't realistic that I was going to go out Raised $30,000,000 or $40,000,000 I couldn't afford the debt yet. I didn't have the bank financing in place for the existing real estate. We weren't going to issue equity. So I mean we just we weren't in a position to come up with $30,000,000 or $40,000,000 in cash. Now we can have $30,000,000 in cash on our own books by the end of June at the rate we're going.
So we just we're in a position now. This is the first time we've been in a position. Now we're out, knock on the doors.
Well, look, I didn't invest for this to be $100,000,000 EBITDA based. I invest with rockstar CEOs who want to build generational wealth companies. I firmly believe this can be A generational wealth creation opportunity for both yourself and myself. And so the sooner we can get our cost of capital online and the sooner This story becomes pervasive in the marketplace such that we can accelerate the inorganic opportunity, the sooner that becomes A reality for all of us. So look, these are great numbers.
I hope that we place greater emphasis going forward both on the execution and You built the business that we're building because I think you and I and everyone else on this call know what this could be. I think we need other people around the world to know what you're doing So we can make that a viable thing. So congratulations on a great quarter. I think it's a testament to your operational excellence and execution. I'm obviously continuously The markets need to discount what we're building, but haters are going to hate all the way up.
And The sooner you can continue to execute on this stuff. I mean, look, obviously, we have the cost Capital to buy in clubs with real estate at 3x or 4x, 5x EBITDA, but the real mother load is buying businesses with 30x, 40x, 50x of EBITDA at 8x to 10x. And So in order
to do that, you've got
to have the capital. But obviously, we're going to keep punching. And I look forward to the jabs. But I As much as I love the jobs, I like haymakers. So I look forward to us getting to a point where
we can start landing haymakers.
I want to land 1 by the next 6 months. That's the goal. Well, we're going to find a big one in the next 6 months. That's what we've got to get done.
Well, we need haymakers for $500,000 of EBITDA. And to land the Haymaker, we need a real stock. So, look, I'm not going anywhere. I'm your biggest shareholder. I'm always truly impressed Your ability to execute and I look forward to trying to find some more people
Next question, Jason Shearer, Private Investor. Please go ahead.
Hey, guys. I guess, Ben and Cleanup, like everyone else says, a lot of these questions Already answered. The only thing I really have is just pointing out the fact that like as we we're going to have inflationary pressures, that's not even on up for discussion. The question being is, how much is this going to affect your business lines across the board as it is versus the other industries that are out there, no different than the Texas Roadhouse That somebody had brought up in the past because you might be talking about a box of chicken, but that's not really where the money is coming from, is it? I mean, what percentage are we really looking at in terms of like How much is this really alcohol and how much of this is really just service?
Yes. I mean, it's but we do have we have food. We have to be concerned with those Because they creep up and all of a sudden our margins get shrink at 1%, 2%, 3%. The point is we look at all those things. And I think that's what people miss About our company, they think, oh, this is a strip club company or this is that.
And it's not we're a cash flow company, And we watch and monitor anything and everything that we can that affects our cash flow down to a box of chicken wings. But the reality is yes, that's why I say I'm very excited that New York is coming back online. Minneapolis is back online. I can't wait for Chicago to be back online as well and everything up and running back how it was because you can see our service revenue are 20% or 30%, they used to be 40%, 45% of our revenue. And I'm excited for the days when that happens again because that's The margins, when Adam is talking about the margins, you're going to do better margins there, you're going to do better margins there.
That's because he's calculating This service revenue coming in, which has no cost of goods associated with it, we pay some sales tax on it and it's just I always call it the free money because a VIP room cost me I can remodel the entire VIP room for $15,000 $20,000 of new furniture and some carpet. And I've got a brand new room that's going to sit there and generate me 100 of dollars per hour in rentals.
Well, that's great. I'll leave it at that. I mean, the main thing for me is just you guys had another great quarter and it seems like if you can get this big club acquisition and the debt redone, We're all on our way above $100 a share. Thanks a lot for
your time.
All right. Thank you.
Next question, Alex Hardman, Private investor, please go ahead.
Hey, Eric. I just had a quick question on with states taking away Oxy restrictions and things like that getting back up to 100%. And like last quarter, you had mentioned something about like Miami doing 70% on 2% occupancy. I was just wondering, are you seeing the 100 percent occupancy rates come back? Are you seeing the sales growth that you had against 2019 with the lower occupancy rates
I think in the South, we're at 100% occupancy. Texas is back to 100%. I think Florida is back to 100%. And yes, we're seeing big numbers. You see them.
I mean, as you've seen in the last quarter, And as we've said, April over $18,000,000 in revenue in April. We're as the occupancies are going up, the numbers are going up. So I was thinking that maybe when the occupancy went up, the numbers would go down, but that has not happened at all. I've been in the last call I was much more cautious as far as about saying how we're going to do over the next 3 or 4 months. I'm not as cautious now.
I'm very confident in the numbers over the next 3 to 6 months. And I really believe that we're talking 12 to 18 months. But I like to see trends. I like to see patterns and I can see a 2 month trend or 3 month trend. It gives me it starts my thinking, but When I get to a 6 month trend then that's when I start really gaining confidence and that a trend is real and that's why I think the bombshells we've now seen We have 9 months of numbers.
We had a big, big quarter and then we've seen 2 quarters here in a row now which is 6 month period of bombshells In this nice steady $13,000,000 revenue from the 10 stores, I think that's going to be something that we can do very consistently for the time being. Until something changes, I think we're going to be very consistent at Bombshells in that range. I don't have a consistency on the Nightclub range because I just don't have enough data. I'm very confident like I said over the next, I know where we're at through 5, 6 weeks of this quarter. I think those numbers only go up from where we're at in April as we open up more stuff in May June, Our extended hours, I say, less curfews, higher occupancies.
And I think it runs all the way through September with no problem. Then we enter our prime season, I think the numbers could go even higher or maybe this consumer exuberance slows down a little bit and we start seeing a normalized, okay, Now we're going to normalize around here. The growth is going to stop, but we're going to level off and hold steady at X number per week. And we'll have that idea as we go from quarter to quarter and we get more data.
Okay. Yes, I mean, Bombshells, I mean, you said you're comfortable with like the $13,000,000 figure, but the way I mean, if they just went from 75% to 100% in March, it seems like the growth you had in March
We I know that we did a record Saturday with the fight. I got an email from our operations guys saying They didn't break the total sales number figure that they were shooting for, but they still beat they still have the record for Saturday night, which was a Saturday before Mother's Day, Which this weekend should have been a very off weekend for us, but the Canelo fight definitely Make sure that didn't happen because it was a very big fight and very, very profitable for us around the country at the locations where we showed the fight. So I mean, everything is going I get scared sometimes when everything goes too perfect. That's really where we're at right now. Everything is just flowing perfectly right now.
Okay. Appreciate
it. Yes, I guess, it's just getting New York and those laggard cities back up and running and service revenues will follow.
And then and we should continue to see the cash flow increase. That's so we've got to stick with right now and push for.
Yes, appreciate it.
Thank you. Thank you.
Are there any final questions? This is the last chance for questions. Next question comes from Greg Pendy with Sidoti. Please go ahead.
Hey, guys. Just one quick final one. Can you just give us a little bit of guidance On the CapEx, how to think about it. Just it got lean obviously for obvious reasons as you right sized on the downturn. Just is there any kind of pent up spend that will be coming
that maybe It's not really the pent up spend, it's that we're going to be expanding a couple of locations. I would say that typically, I think we've been saying $4,000,000 to $5,000,000 I would probably raise that a little bit in the next 6 months. So let's say, we're going to say $2,000,000 to $2,500,000 I'd probably say we're probably going to spend another Maybe another $1,000,000 over the next 6 months. I know we're expanding Tootsies right now. We're going to add some square footage To the upstairs VIP room, we're going to convert some upstairs offices into more private VIP space There, we're redoing a club in San Antonio and converting 1 of our BYOB clubs into a high end Club in San Antonio.
So there will be some spin there. We had a lot of flood damage. I say flood damage, it's actually ice damage. The ice Froze the pipes, the pipes broke, clubs flooded. So you're going to see some expense there.
Now some of that will be reimbursed through insurance, I think we do maintenance CapEx and insurance comes in on a separate line. I don't so you're going to have a gain on insurance That will offset some of that CapEx, but the way that we do our free cash flow, I don't know how that washes or not, that's a Bradley question, Well, there will be some of that. So that's going to add some expense to maintenance CapEx as well. I think we had 9 locations that were affected At the club side and 2 or 3 of the bombshells that were affected, but I think the bombshells were already fixed and probably expensed in this quarter Where the clubs are more insurance claims and will be there were larger damage some larger damage clubs that will be affected.
Thank you. I would like to turn the floor over to Gary Fishman for closing remarks.
Thank you, Eric and Bradley. On behalf Eric Bradley, the company and all our subsidiaries, thank you and good night. Stay safe, stay healthy and as always, please visit one of our clubs or restaurants. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.