RCI Hospitality Holdings Inc (RICK) 2021 Q3 法說會逐字稿

Greetings, and welcome to the RCI Hospitality Holdings Conference Call and Webcast. (Operator Instructions). 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 the RCI website. Click Company and Investor Information just under the RCI logo, that will take you to the Company and Investor Information page, scroll down and you'll find all the necessary links.

Now please turn to Page 2 of our presentation. I want to remind everybody of our safe harbor statement. It's posted at the beginning of our 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 occur afterwards.

Please turn to Page 3. I also direct you to the explanation of non-GAAP measurements that we use. Lastly, I'd like to invite everyone listening in the New York City area to join us tonight at 7:00 to meet management at Rick's Cabaret, New York, Manhattan's #1 gentlemen's club. You can also tour its sister club, Hoops Cabaret and Sports Bar next door. Rick's is located at 50 West 33rd Street between 5th Avenue and Broadway, around the corner from the Empire State Building.

If you haven't RSVPed, ask for Eric Langan or me at the door. Now I'm pleased to introduce Eric Langan, President and CEO of RCI Hospitality.

All right. Thanks, Gary. Everyone, please turn to Page 4. Thanks for joining us today. I'm here with our CFO, Bradley Chhay. After the market closed, we reported our third quarter numbers. We had an outstanding performance. We reported record total revenues based on Nightclub and Bombshell segment revenues. We also reported record free cash flow, strong earnings per share and a high cash balance.

As always, we thank our loyal customers, dedicated team members and steadfast investors for their support. We are working to continue with -- continue these trends in the future. Currently, 36 of our clubs and all 10 of our Bombshells are open. We are also continuing to work on all fronts on our growth initiatives. Last week, we announced a major agreement to acquire 11 clubs in 6 states and the 6 related real estate properties. We are now in the process of closing and preparing to integrate these new units. Brad and I will talk more about growth later. And here's Bradley to review the financials.

Thanks, Eric, and good afternoon to all those who tuned into the call. We reported total revenues of $57.9 million for the third quarter. Bang, that is up tremendously from a year ago quarter, but also 31% from the second quarter of the current fiscal year and 23% from the pre-pandemic third quarter 2 years ago in 2019. Consolidated operating margin was 32%. EPS was $1.37 compared to a year ago loss of $0.60, and we had $29.1 million in cash and equivalents at June 30. Net cash from operating activities was $50 million and free cash flow was a record $13 million, the highest quarter in the company's history even after we paid roughly $4 million in income taxes.

Please turn to Page 5. Nightclub revenues -- Nightclub segment revenues, operating margin and operating income were all up significantly year-over-year. The increases reflect the fact that we had 36 clubs opened the whole quarter compared to the June 2020 quarter, when we were closed in April and with a limited number of locations that began to reopen in May and June with restrictions.

As a result, third quarter revenues this year rose to $41 million. Operating margin expanded to 44.7% and operating income increased to $18.4 million. Looking at the results from the second to the third quarters of this current year, revenue rose 33%, operating margin expanded an additional 10.7 percentage points and operating income increased 75%. We believe this reflected, 36 clubs were opened the whole quarter versus 29 in the second quarter. The elimination of restrictions on our northern clubs by the beginning of June, a 46.5% increase in the higher-margin service revenue, primarily from our northern clubs, the ongoing return of our loyal customer base and overall general consumer confidence.

Please turn to Page 6, Bombshell segment. Similar to the Nightclubs, Bombshell segment revenues, operating margin and operating income were all up significantly year-over-year. The increase reflects the fact that we had 10 locations opened the whole quarter compared to the June 2020 quarter when all Bombshells were closed in April and began to reopen in May with restrictions.

As a result, third quarter revenues this year rose to $16.1 million. Operating margin expanded to 27.4% and operating income increased to $4.4 million. Looking at the results from the second to the third quarters of this current year, revenues rose 22.4%, operating margin expanded an additional 3.5 percentage points and operating income increased 40.2%. We believe this reflected 3 things: greater brand recognition in our markets, more sporting events that attracted guests and overall consumer confidence.

Please turn to Page 7 to review these items and our third quarter consolidated statement of operations. Note that we elected to showcase the change from 2019 as opposed to 2020, since 2020 was an atypical year due to COVID. Cost of sales increased slightly due to the change in sales mix, particularly a higher sales mix coming from the Bombshells segment and a lower proportion of service revenues within the Nightclub segment. Major line items such as salaries and wages, SG&A and depreciation and amortization all improved as a percentage of sales compared to the third quarter in 2019. This primarily reflected much higher sales and reduced accounting and legal expenses. Interest expense decreased slightly primarily due to lower debt balances.

And lastly, income taxes as a percentage of sales were higher due to the significant increase in pretax income or income before taxes. The effective tax rate was similar in both periods.

Please turn to Page 8. We included this slide to highlight our record-setting quarter. In total, during the third quarter, we achieved a record level in 18 of our 13 key performance indicators. These are marked by the green cells. They are revenues on a consolidated basis and for our revenues for our Nightclub segment and revenues for our Bombshells segment, income from operations on a consolidated basis and for our Nightclub segment and third, non-GAAP EPS net cash provided by operating activities and free cash flow.

Please note that we've included a much bigger matrix of these metrics for the third quarter of 2020 and 2019 on Slide 17 towards the end of this presentation.

Please turn to Page 9. We ended the quarter with $29.1 million of cash on hand, almost twice as much as we did in the December 2019 quarter before the pandemic began. During the third quarter, free cash flow continued to grow sequentially to $13 million. As a percentage of sales, free cash flow also improved sequentially. Our free cash flow to sales ratio was 12% in the fourth quarter of last fiscal year, 14.8% in the first quarter of this fiscal year, 20.4% in the second quarter and 22 -- 22.4% in the third quarter.

We use free cash flow as a percentage of sales to measure how well we're doing at converting sales dollars to cash. Debt declined $4.8 million from March 31 this year. This reflected scheduled paydowns and a $2 million paydown related to a sold property. We are now at our lowest debt level in almost 2 years. As for current liabilities, at $32.1 million, the current liability continues to be in the general range for the last 2 years.

Please turn to Page 10 for our debt pie chart. Our secured debt now consists of 65.1% of debt secured by the real estate, 17.2% listed at seller financing. This is secured by the respective club to which it applies. 6.4% secured by other assets. And lastly, less than 1% is represented by the Texas Comptroller Settlement. This is secured by the businesses and assets and related to the settlement. The total dollar amount is $1.1 million roughly. Our unsecured debt consists of 10.3% that is listed as unsecured and 0.1% represented by our one remaining SBA loan of $124,000.

Please turn to Page 11 to review debt manageability. Occupancy costs continue to trend in the right direction. As a percentage of revenue, there were -- they were 5.7% in the third quarter compared to 23.6% in the year ago quarter and 7.5% in the third quarter of 2019. This is primarily due to higher sales in the current quarter. We have continued to reduce our weighted average interest rate. Over the last 5 years, it has come down from 7.53% in the third quarter of fiscal 2016 to 6.68% in the third quarter of this current fiscal year.

Our weighted average interest rate is 2 basis points higher than in the second quarter of this year, primarily due to the fact of the debt paydown in the third quarter that was lower rate interest -- lower rate real estate debt. As we've discussed, one of our strategic initiatives is refinancing our debt. We continue to work with our banks to refinance higher interest rate debt and increase the length of our amortization.

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

Thank you, Bradley. If everyone will turn to Page 12. We continue to talk to 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, by William Thorndike. He study companies that focused on generating cash per share and allocating that cash effectively to generate more cash.

We've been applying these strategies since fiscal 2016 with 3 different actions, subject, of course, to whether there is other strategic rationale to do otherwise. One is mergers and acquisitions, specifically buying the right clubs in the right markets. We like to buy good solid cash flowing clubs at 3 to 5x adjusted EBITDA using seller financing and acquire the real estate at market value. Another strategy is to use cash to grow organically, specifically expanding our successful Bombshells concept to develop critical mass, market awareness and sell franchises. Our goal in 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 our shares when the yield on free cash flow per share is more than 10%. During the first quarter ended in December, we had purchased and retired approximately 75,000 shares at a cost of $1.8 million.

Please turn to Slide 13. To further our M&A strategy, last week, we announced definitive agreements to acquire 11 clubs in 6 states. The collective acquisition will be our largest and is anticipated to be accretive in year 1. The locations expand our geographic footprint. They provide us with a major position in Denver with 5 clubs. They expand our position in the St. Louis market with 2 additional clubs, and they provide entry into 4 new markets: Indianapolis, Louisville, Raleigh and Portland, Maine.

All the clubs are open and are well established, proven cash generators. Pre-pandemic in 2019, they did a combined $40 million in revenue and $14 million in adjusted EBITDA. We're paying $57 million for the clubs, $13 million for the intellectual property. That results in a valuation of 5x the club's 2019 adjusted EBITDA. We are also paying $18 million for the 6 related real estate properties. Payment will be in the form of $30 million in restricted stock, valued at $60 per share, $26 million in cash, a good portion of which is likely to be borrowed, $21.2 million and 6% seller financing and $10.8 million and 5.25% real estate commercial bank loan that we are working on.

Multiple closing dates are anticipated. Based on our past successes, we believe our seasoned management team will be able to integrate the clubs using our time-tested industry best practices. And as I said in our news release, this is exactly the type of sizable transaction we were looking for. We believe the quality of the club's licenses and locations enhance the value of the collective acquisition to us.

Please turn to Slide 14. There are 2 developments we want to tell you about. The first is AdmireMe, a new social media platform we plan to launch that enables creators to post content and receive payment from their admires. It is comparable to OnlyFans, and we are looking to formally launch in the next fiscal year. The second is we have a number of properties for sale and under development. We have 3 properties under contract for sale in the Dallas-Fort Worth and Austin areas. The total sales price is approximately $7 million. We're also working on other real estate land/property developments.

Please turn to Page 15. We are continuing to execute on our growth initiatives. We continue to make progress on our efforts to refinance our real estate debt. We are just waiting on 3 surveys and a few final title commitments and zoning letters on the 46 properties that will be collateral on this loan. We are hopeful we will be able to close this loan relatively soon.

Construction is underway as at the first planned The Next 10 Bombshells in Arlington, Texas and our franchise location -- and in our first franchise location in San Antonio. We are continuing to find other potential Bombshells locations. We are currently in negotiations on several other properties in Dallas and Austin markets. Our goal is to build 10 new locations over the next 30 months. We also want to sign additional franchises and are in negotiations with several groups. Lastly, we continue to talk to other club owners interested in exploring opportunities with us, and we look forward to telling you about some of the single -- about some of our single club acquisitions soon.

I will speak -- management and accounting and especially our employees at all the clubs and restaurants from our kitchen staff, to our bartenders and waiter staff and especially entertainment reform, all of you are what make our company one of the best hospitality companies in the business, and our great investors who are sticking with us as we continue to grow into a much larger and professionally ran publicly traded company, especially those that have been with us through all the growing pains and continue to believe in our incredible team. I truly believe the best is yet to come. And with that, let's open the line to questions. Operator?

(Operator Instructions) It looks like your first question is coming from Adam Wyden from ADW Capital.

Guys. Congratulations on the great quarter. And congratulations on getting [Lowrie]. I think I may have mentioned to you, I remember when Troy took this company private many years ago coming out of the recession. And I remember, it was actually my first -- it was my first kind of foray into the adult entertainment industry, and I was always fascinated by the unit economics. So I'm glad you guys were able to finally find a way to do business together. He's obviously built a wonderful business and you've built a wonderful business. And it's great when 2 professionally managed organizations can get together and drive economic value. So that's super exciting.

And obviously, we saw that you issued shares at $60. And obviously, the transaction is very accretive. We have it at like 4 to 4.5x EBITDA pro forma. So obviously, that can make sense. But I guess my bigger issue is, I think there is a little bit of a prevailing sentiment that these numbers are not sustainable and that there are more clubs to buy and that you aren't going to open up more Bombshells and somehow this, call it, $110 million of EBITDA that you're doing now, is going to like get cut in half or something. Now obviously, we're in unchartered territory. We don't know whether some of this stuff comes down a little bit.

But I mean -- Can you speak to kind of what you think -- how you think about valuation and how you think about getting your cost of capital right? Because obviously, as you continue to kind of do these multi-club acquisitions, you're going to want to have that equity in your arsenal. So can you talk a little bit about how you see business going today? And how -- why you are confident this company -- I mean, you made a comment on the conference call, you said, "Look, we want to be a real public company, we've gone through the growing pains." I mean, what gives you the confidence that this company is going to trade with the normal cost of capital? Clearly, you put all the systems in place and it looks and smells like a public company, and it just doesn't have that public company cost of capital. And I think your ability to grow will largely be augmented by the fact if you have it. So I mean, just curious kind of how you think about that from here?

Well, I mean, I think we did a very large acquisition. We paid top (inaudible) we're getting some top locations. Remember, VCG used to have 20 locations. These are the ones they have left, the 11 they have left, because they've sold off the locations that were underperforming to service debt or get rid of debt and do the things they needed to do to focus on their top locations.

So when we come in, we're buying some of their top locations, top cash generating, which was important to us. So instead of paying, typically, we've been paying 3 and 4x on our recent deals. This is a 5x transaction. But it had the size for us, and we were able to use some equity. I think that if you look at our valuation, our valuation, we're getting a little premium. We're paying them 5. I think we're trading probably closer to 6 on our trailing basis. So we will also get upside from when we take over some of their clubs with our synergies and some of the things, I think, we'll be able to do to improve results at those locations. And I think at the end of the day, this is going to look much closer to a 4x. A year from now, we'll look back and go, "oh, we only paid 4x" for the EBITDA that we picked up. So that's my thoughts on it.

As far as how we're becoming a real public company, I think we're out of the crazy days of trading. We've -- I think, we've gotten through the shorts. I think we've gotten through the growing pains and audit issues now with Friedman with us for this year and then moving forward from 2018 to 2019. Our corporate office staff is in the best shape it's been in. We're ready to grow. Our ERP system is -- we'll (inaudible) enough, we won't even realize, it. There won't be any stress on the system at all. We'll barely even notice that there's more clubs the way that the Bradley set things up in the office. And as far as our management team goes, I mean we've attracted some of the best in the business. Everybody is calling us right now (inaudible) the workforce though.

Let me ask you a question -- I'm sorry to interrupt you. But I mean if you think about how your lenders are financing you, you're able to buy real estate effectively financing in it, depending on the property anywhere from 3% to 5%. Now realistically, these real estate assets have operating businesses in adult entertainment. So to the extent that you're able to collect rent from yourself, you're basically -- the lender is effectively saying, we're lending you money to buy real estate that's lending to an adult entertainment. So like by that stretch of the imagination, if the debt investor is smart enough to say, "okay, this is the quality of the cash flows." Why do you think the equity investors are not able to underwrite to a similar cost of capital? I mean all they're doing effectively is buying these operating businesses with the real estate, right? I mean if the debt is going to trade at 5%, why shouldn't we trade at 5%? Am I thinking it the right way?

I think they're having a hard time understanding, like you said, people think this is a fluke or they think it's -- but I'm telling you our July was better than our June. We're continuing to see improvements. Our northern clubs in July had great deal. New York is still off a little bit. Chicago hit almost an all-time high. The Minneapolis market is strengthening. So I think we're off in the south of 2, 3 points, which is typical summer decline, nothing -- there's no slowdown from COVID, there's no slowdown from people spending. And I think the reason why is -- I just don't think that other operators have the employees, they have the staff. I mean we've retained almost 86% of our management staff. We've retained almost 60% of our total staff from 2019. In an industry that's normal. If we didn't have COVID, we have all about those same percentage of retention because that's...

So let me ask you a question. So let's say you get [Lowrie] done and you get your synergies and you get the listing, you basically did 20.4% in the quarter and you didn't have everything open. If I do the incremental economics, I feel like I'm a broken record. I feel like I've been saying this since even before COVID. But if I kind of run the numbers out, you're probably running at 90-plus before Lowrie . So then you kind of run Lowrie through the machine and you're basically another $20 million of EBITDA. Obviously, you get the refinance, you'll save money on free cash flow.

But I mean, if you think about it, starting calendar 2022, you're looking at a business that's run rating about $110 million of EBITDA. I mean, do you see a path to getting into $500 million? I mean, I guess, at $110 million, it's kind of like, okay, it's public. But at $500 million, it's kind of like a corporation. I mean -- is it your plans to build a corporation because, to me, you put all the building blocks, you put all the systems in place, you're not really getting the public company cost of capital. I mean, is it your -- I mean is it your goal or intent, I mean, to really build this thing into a multi-hundred million dollar cash flow business?

Yes, I mean, I think this acquisition shows that we can do that. right? We -- our goal is to grow at a 10% to 15% clip compounded. So average...

That's organic. But that's organic without deal...

No, that's our total -- we want free cash flow per share growth. So do 15% free cash share growth, when you're doing $1, you need $1.15 next year. But when you're doing $100 million, you need $115 million next year. You got it...

Okay. But you guys -- I mean, look, you've historically been growing 15% to 20% without...

Over 20%, over 20% pre-COVID. We were just over 20%.

You've been compounding free cash flow. I mean, look, [Lowrie] effectively is the first big deal you've done in a long time. I mean, I know you bought Tootsie’s and Scarlett’s Cabaret as well...

(inaudible) as well, yes...

Yes. That's what I'm just saying you guys have basically been cagring without the acquisition. So presumably, with Bombshells and acquisitions, this 15% to 20% is going to prove conservative, right? I mean that's your baseline, but I mean you can double, triple that?

That's our minimum -- that's our minimum goal. That's our -- you know what they say, I'm the promise over-delivered. That's what we try to do. But if I tell you 20% due '19, everybody wants to cut my head off. But I'll stick with my 10% to 15% growth, we're going to keep pushing it, and then I keep doing 20 and everybody is happy.

I just -- I don't see any snags in the plan, at least not in the foreseeable future. People are getting vaccinated, things are getting back to normal. Yes, there's new scare here and there, but I mean we're not really seeing any results from the people that are vaccinated are not scared. They're not -- I don't know if they should be or shouldn't be, but they're not worried about coming out for the clubs or dying or even worried about getting COVID, for the most part, from the people that I see every day and talk to every day. We're ready to live our lives. That's what we're seeing in our clubs. That's what we're seeing in our restaurants. I think we'll continue to see that for the foreseeable future, unless something major changes, that's unforeseen. But based on all the foreseeable data that I have, we're going to continue to build and continue to grow.

Great. Well, look, obviously, we own 10% of the company, plus or minus. We're obviously on board. I mean I would not have taken a position in this company if I didn't think that the combination of the acquisition strategy with the night clubs, the organic growth strategy and franchising at Bombshells. And now obviously, this is what we were playing for is -- obviously, if there's something that comes out, this AdmireMe, which you guys haven't talked much about, but I mean, obviously, we've seen the conflagration that is OnlyFans, and by definition, you have all of your adult entertainers. If they can have another venue to go and can work it, and not to mention, it also serves as lead generation, marketing for your -- in-person, there's an enormous amount of synergies between AdmireMe and your kind of traditional nightclub business. So obviously, unlocking that value and intangible value you have in your enterprise, I think, is super exciting.

So look, I am still of the belief that this is a $500 million EBITDA business, could be $8 billion, $9 billion, $10 billion of market cap. So look, I'm -- look, it's -- Rome was not built in a day. But obviously, you guys are taking the right steps to build the corporation. So hopefully, we don't have other people on the conference call asking super questions about liquidity, when our cash flow doubled through COVID and we bought stuff.

I think we're going to get there. We've just got to just stay the course and just keep pushing away on it.

All right. I'm going to hop off the call. If someone else jumps in and ask something stupid, I'll be back.

Okay. Your next question is coming from Jason Scheurer from Orchard Health.

I just want to say I'm blown away by the numbers that you guys just posted on the Board. I didn't expect anything that high. Congratulations. Absolutely, took my breath away. A couple of quick things. First of all, debt restructuring, what do you think the time frame is going to be on this?

Well, we've been working on it. Unfortunately, we added a bunch of out-of-state deals, the title companies have all been overwhelmed and they're very slow. I mean we turn this over to (inaudible). On June 3, we've got our first title commitments back 2 weeks ago. We're down to 3 survey requests, which if they had told us in June we needed it, we have already had them done. But like I said, we just started finding out about the stuff about 2 weeks ago. There was actually 5 surveys. We've got 2 of them completed, we've got 3 to go, should be wrapped up here soon. My -- I'm hoping to close by the end of August, worst case, the second week of September. First week would be hard because of Labor Day. So I guess, we'd get into the second week of September. But definitely before the end of this quarter, I'd like to get this $104 million refi done.

Okay. The other question is with the new clubs that you guys are making the acquisition on, of the employee mix that you have in independent contractors, can you give us an idea of what that is, W-2 to 1099?

I have no idea. I mean, we could run it. But I mean -- We have a lot of entertainers. Some are employees in certain markets, some are not depends on the markets and states and whatnot. So I mean, I'd probably -- if I had to guess, I'd say we probably have in a given period, pre-COVID, 10,000-plus contract entertainers. Today, I don't know what the number is. I know...

I think he's asking about 11 clubs or is there any employee model?

Is that right?

Yes, that's right.

I don't know. I haven't dug that deep into it. I haven't dug that deep into the 11 clubs. I think that based on the markets they are in, no, I'd say they're all independent contracts.

Okay. Next question being, this is going to be 11 clubs that you guys are going to start to chew through here. How long do you think this process would probably take to get them on to the...

Which, which, I don't understand the...

Well, the 11 close the transaction or -- Yes, I mean like how long do you think it will be?...

We can start closing the first deals. First deals could close as early as, I'd say, mid-September, maybe a little earlier. There's 7 clubs that licensing will be very, very quick on. There's 1 state that could take up to 90 days. So it could be -- we could be looking at this August or November to close on the final transaction. So I'm going to guess it's going to be a series of transactions starting sometime in September and running through November to close all 11 -- to close on all 11 properties.

I got it. So our January, February, March will still all be on the books probably?

I think they'll all be on the books in the next quarter -- in our first quarter of '22, maybe not for the whole quarter, but in that quarter for sure.

Okay. And then with such a purchase like this in the integration, do you guys think you could handle another big purchase or other club purchases if somebody came along in the...

Sure. We're picking up some great management with this. I mean they're doing $40 million in revenue. I don't think -- we don't buy businesses because we want to go in and change all the management out. We go in and buy them because they already have strong management and they're already making strong cash flow. We want to come in and take our systems, teach their management to put in our best practices, put in our POS systems, bring our cost control systems in, lower their cost of operating and increase the EBITDA from $14 million to, say, $17 million. That's our goal, not to -- and you can't do that if we're rebuilding management teams at every location, that's not going to happen. So we need current management team. That's why we buy strong management teams.

Okay. Can you tell me a little bit about the AdmireMe? How long have you guys like have this concept out? Or how long has it been in the works?

Well, we had -- for several months, we had people contacting us, wanting to invest in their -- invest with them, do stuff with them. We kind of looked at the process and one of the groups that we talked to was pretty near and had a very similar concept to what we wanted, which is basically see a girl on the Internet and come and meet her, in real life, at the clubs or meet her in the clubs, but be able to learn more about her or talk more on the Internet basically. And so we think it's just a nice integration. And the other thing is I look at some of these other websites. And other than like the big stars that are -- I call them the circuit stars that are coming around and hitting all the clubs and have big volumes, you know those people are real. I just think there's a lot of -- a lot of, I don't know, material, right?

And so I wanted something that's -- it's much realer for the customer. And like I said, it takes the fancy world and the real world and it gives you a safe place to meet in, and the girls can continue to build their business at the club level and the club girls can build an Internet business as well. It's kind of a cross between the Internet and the brick-and-mortar businesses that I think will -- I think we'll do very well with. It's a very inexpensive, relatively inexpensive venture for us. We're going to own about 65% of it. A lot of the setup and program was done. We're going to be hopefully launching beta here in the next quarter and hopefully launch full life sometime in early 2022, and we'll see how it goes.

One of the things that we can add value with is to these big circuit stars that we can -- we're going to own 50-some clubs around the country where we can go -- we'll give you 20 weeks of featuring to our top influencers on our website, which is something other people can't do for the big -- for the girls and the big stars to draw more of them in. So I think we just have a lot of synergies that made sense as we started talking about it and looking at it and saying, yes, this is -- this can make a lot of sense.

And I think our -- our total investment from now to go live is probably under $1 million currently. I think we've invested about $25,000 in programming and making some changes, but these are changes we wanted to the website to integrate our ideas. And like I said, we'll start the beta testing. We're in the process of getting the credit card processing to go live here soon. And once we reach those milestones, the rest is just put it out there and see what happens.

Okay. The next question is coming from [Jared McCammon] (sic) Darren McCammon from Cash Flow Kingdom.

It's Darren.

I was going to say, I think it's Darren.

Cash on hand, what are you comfortable with, given COVID Delta going forward for cash on hand?

I mean we're keeping $15 million, $20 million cash on hand, more than likely. I mean, we're sitting $29 million at the end of the period. I think we're a little over $30 million something now, $32 million maybe or so, $33 million, I have to go back and look. When it gets that high, though, I don't have to look at it every day, like I get used to. I'm too busy out trying to invest it. We've got access to debt financing still. Our debt is at a 2-year low. Even with this new acquisition because of the equity component on it, the EBITDA we're going to add is our EBITDA -- our debt-to-EBITA ratio actually, I think, dropped even with this transaction. So I'm not overly concerned. Like I said, $20 million, $25 million is probably too much, so $15 million, $20 million right now. we're generating over $1 million a week in cash.

Okay. Great. I'm going to reiterate the same question as the previous guy. I'm sorry, my system is going in and out. Are you still there?

Yes, I'm here. I'm sorry, I didn't hear what you were saying, though, something about the question from the last guy or something?

Yes. I'm just going to reiterate kind of the same question. Given that this is a pretty big purchase for you, I'm kind of wondering how long do you need for integration before you can really consider buying another big purchase?

We consider another big purchase today. You got to remember, we started this acquisition, we started working on this acquisition in November. So it's taken 8 months to get where we are today to get the definitive documents. So if I start today on another acquisition, and even if it goes fast and it only takes 4 or 5 months to get the definitive documents with the larger acquisition, it's going to take time. There's a lot of due diligence process you have to go through and whatnot. So by the time I'm to the definitive documents, we'll have this one integrated. This is going to -- this acquisition is going to integrate in the first quarter, maybe a little bit of extra work in the second quarter, 6 months, 6 months as things fully integrated, we won't even -- it will be like it was we -- like it was ours the whole time.

Our systems are that basically transferable now. Everything is just plug-and-play, plug-and-play, plug and play. I mean it's just a matter of training the current management teams to use our systems. In a pilot's terms, it's a difference to training. We're going to upgrade -- we're going to upgrade their software and their systems, and we're going to teach them how to use it. it's basically still all the same stuff. It's just -- I think our systems are better for our cash control handling, better for inventory controls, better for costs and tracking costs and then our national buying power lowers costs. So I think those are -- that's the value we add. And so when we buy these things and we integrate them in, I think it's a 3- to 6-month period tops.

Okay. Thanks for the additional color. You know what that's all the questions I really have. I'd just like to say a great quarter, and I really like the purchase too. I think it's a fantastic purchase. So...

Yes. I mean I'm very excited about the new locations. The Denver market is a fantastic market, unbelievable growth in Denver right now. I think we'll build to go out there and do some great things in that market. In the other markets, some of the -- they're the only -- it's the only club in the State of Maine, the Raleigh, North Carolina Capital City, just a great location as well. I think we'll do well there. Louisville is going to be a good market for us. We're excited about the management team there, and Indianapolis as well. So I mean when you put it all together, it's going to be a good acquisition for us for sure.

And I think it lays out the path for other big owners to go, I can do this. This seller wanted equity. He wouldn't -- we've had a hard time doing deals in the past because we just couldn't get them enough equity because he wants to avoid the taxes with the stock, doing stock transfers and stuff. So it's about creating a tax benefit for the seller as well as an upside for RCI and our shareholders.

Makes sense to me. I think it also opens up other big purchases. So I think it's a great deal. Congratulations.

The next question is coming from [Craig Pendy] from (inaudible).

Just wanted to shift over to Bombshells, first. Before you've learned more and more about this concept over time, and I get that, but I think in the past, and this was well over a year ago, you put out this 19% to 22% segment level margins. And just kind of given what you've learned, can you kind of -- any comfort on saying, even as things normalize, the higher end to that is more sustainable? And then also, when you're talking to franchisees, I mean, I'm assuming they're looking at probably using the concept, they're probably going to go the lease route versus owning the real estate. That's just my assumption. But I mean, how are they thinking about it? And kind of how are you framing it given the fact that the numbers are kind of all over the place right now.

I mean we're looking at both. As far as what are the Bombshells numbers, I just knew that because of all the free operating costs and preopening costs. And we were -- you remember, we were basing everything on $5 million units. Our new units are closer to $7 million units or higher so we have to rethink the margins on those higher units. So as we expand, I guess, it just depends on if we're opening more $5 million units, we have a couple of 3.5 million units, $4 million units. So we're -- at the end of the day, it's going to depend on the mix of units and whether we're highly successful in picking $7 million units, right? I mean that's the real key right now. You've got to find the right locations.

I've looked at a lot of properties that I'm very comfortable, we would do $4.5 million to $5 million. It'll cost me the same amount of money to build a $4.5 million, $5 million unit cost to build $7 million units. So we're very focused on the demographics and the traffic needs of building these stores that will do $140,000 a week in sales. That's our focus right now. So that's what's changed. That's why the margins have gone from 22% to 27%.

Can it -- is it sustainable? I don't see why not. I mean maybe it's 25% or 24%. That's a sustainable number over the long haul if the sales mix changes for some reason. But you can remember, Bombshells is now going on, opened in May of '20 during the pandemic with restrictions, did unbelievable numbers. And we all kept saying, "Oh, can I do this? How long can you do this or how I can do this work?" Well, I don't know, we're going on 18 months now. I mean we're still doing the numbers. So I don't see a reason for a big drop off in the numbers at this point. I think that the brand is, especially in the Houston market, is an unbelievable brand in that market as name recognition. I mean, anywhere I go people know Bombshells in that town now. And that was kind of the idea when we built, we said, look, we're going to focus on one market, we're going to own that market, and then we're going to take the concept of other places. I think we've done that.

And when people talk about, well, it's Bombshells, anybody could build it, sure. Anybody with $6 million can go out and build a store. The problem is how many people are going out and building restaurants to be on a competitive nature at that price range. And if they don't spend the money, they don't have what Bombshells has because that's what it costs to build our concept and to do the things the way we do them. So I think we have -- while we don't have the mode of the adult clubs, I still think we have a cash mode, it costs people money, a considerable amount of money, and they're going to have to go and invent their concept. They're going to spend that kind of money and invent their concept. And so I think we've been very successful in our niche of what we do with Bombshells.

As we expanded into the Dallas–Fort Worth market, we're looking to expand in Austin as well. And we're still working in Florida. It's just -- everybody in New York moved to Florida, and the prices went crazy. And I'm sorry, I just can't pay $80 a foot to lease a building. Even if I think it's going to do $200,000 a week in sales, at the end of the day, the rent starts becoming 9%, 10%, 11% of revenues, and it's like, no, I can't, I can't do that. We'll just go stick with the model that we know and we know it works. And if those prices come back down to reality at some point. At $60, I think we can make it work. Maybe even -- we were looking in the high 40s in that market when we were -- when we first got down there, and we were getting LOIs out and we were getting close on negotiations. And I'm not kidding you, it literally seems like within a 2-week period, the prices went up 50%. They went from 40 to 60 and then from 60 to 80 probably within a month of that time. And it's like, okay, let's just go back to Texas right now.

We're looking in Arizona real hard right now. And really, we're talking with franchisees that know their markets and know the demographics and we're able to teach them what kind of demographics they need, and we're running all the traps and I think we'll sign up more franchisees here in the near future as well. And that's really we love that model, too.

The next question is coming from Peter Siris, he's a private investor.

Well, I'm very disappointed that you made me pull out 12-year-old spreadsheets.

I didn't make you do it. But yes, it's been a long time since they were public. I know you -- I know you guys were pretty big and instrumental in building their public company. So unfortunately, it's not the same company that it was when we tried to buy it in 2012. But the reality is I think we're getting to cherry pick it now.

And with what that -- and I just wanted to make a comment because I know all these clubs very well. With what -- I agree with you, completely when you said it's going to be 4, not 5. When I'm looking over my bottle and seeing what leverage is there, and you have a whole bunch of really strong clubs, Denver market and some of these other markets, they have good clubs, it should be very good.

The question I wanted to ask is when I look at similar kinds of industries, and a good example would be the automobile dealer industry. And I'll tell you why I'm saying it's a similar thing. You have a lot of the independents, a few small -- you have 5 or 6 in the automobile industry, public companies in your industry of one. You now have discussions of potentially new taxes coming that will make it less attractive if they pass for people to pass these kind of assets onto their ears. So one of the things I'm seeing in the automobile dealer industry is lots of deals. And I am thinking that there has to be a lot of people in your industry who are calling you on a daily basis saying, "I want to make the same kind of deal you made with Troy." am I wrong?

We're getting calls, yes. I don't know if I'm taking them every day, but they're probably making them every day. We're getting a lot of e-mails, texts. We're talking with brokers. We're -- obviously, we want to get this one in. We're lining them up, so to speak. Down the road, "hey, let me call you in 2 weeks, let me call you 3 weeks type deal." We're talking with people. We're -- We're looking at some of the -- I'll call it cherry pick some of the one-offs, stuff that's easy for us to operate close to our existing clubs, something like that's very appealing to us, or if we can find a deal where you can buy a home market, like we did with Denver, and St. Louis basically. Of the big clubs, we now own 3 of the 4. That's appealing to us. To get that type of market presence makes things a lot easier for us. As far as we don't have to deal with, what I call rogue operators, doing crazy things that get -- put the industry in a bad light or cause problems with local officials and stuff. We're not perfect in every market, but in most of them, we try to be.

But going back to where Adam started, and I hope I'm not asking a stupid question, just going to get Adam on my case. But it looks to me that you could have the opportunity now using a combination of equity and debt. In -- I'm leaving out Bombshells, but in the gentleman's club segment to grow significantly faster than people are thinking, is that a reasonable point?

Yes, absolutely. If we get the stock multiple and we can start getting the arbitrage, you remember in 2008, I did 11 acquisitions in 2008, and it's because we had $25 stock. In that stock, the equipment of $25 stock in 2008 would be like $175 today, right? So yes, the stock was that. Yes, we will absolutely move much quicker. The ability is out there if the cost of capital becomes cheap enough. At that point, I think our cost of capital was like 3% or 2% or something like that, using our equity. So there's times when equity makes a lot of sense for us.

This deal, it was borderline for me. Here's the way I looked at the equity. I said, well, look, the stock -- we do this big deal. The stock runs up, okay, everybody comes out ahead, everybody's winner. Stock stays at $60. We look at it as a 5-year interest-free loan. And we buy that 500,000 shares back at 100,000 shares a year for the next 5 years, and the stock comes back, we're back down to 9 million shares, whatever. So there was no downside in issuing equity here. I don't know that there's a lot of upside, we'll find out, right? I mean the market is going to tell us over the next 3 months, I think, what it thinks of these deals we integrated in as the numbers start coming out. I think we'll know by February for sure. And then we can decide either it was a home run for us or the market isn't rewarding us for it. And okay, well, then we'll just -- we'll buy the shares back and it's interest free debt.

Well, my guess is it's going to be a home run and congratulations.

Yes, I mean it would certainly hope so. I mean, we would love the ability to have the capital and be able to use our equity and have that equity arbitrage going forward. We'll still have some solid financing in deals. We'll still have some cash components in the deals. But if we could use a little bit of equity to sweeten it up for the sellers, I think it's sweetens for the sellers. I mean, I know Troy is very excited. He thinks that like -- the combined companies are going to be worth a whole lot more than the 2 of us were separate and that his $60 stock will trade much higher. But I think -- actually, when I talked to him, he really wants to be a long-term shareholder with us and grow with us. You got enough cash in the deal to take care of the things he wants to do. And the debt is going to give them a monthly cash flow and the equity component is his long term create wealth plan. So hopefully, he becomes our -- basically, the poster boy for everybody going forward saying, "Look, guys, this is how you do it."

I think you will. Thank you.

The next question is coming from Douglas Weiss from ESW Investment.

Nice quarter. Let's see a couple of questions. So on kind of thinking about these larger deals, how many of these large club groups are there theoretically that you could over the next 5 years would theoretically be fit your...

When you put it on a time frame, it's hard to say how quickly guys will come around and want to sell. But I mean there's multiple of them -- one second. Sorry, I had to sneeze. But there's multiple deals out there to be had. There's definitely lots of operators we'd love to buy or merge or whatever. Someone we'd love to have join our team and grow the company with us. I think it's going to be an evolution. I think a lot of it's -- we're going to know over the next 3 years. We're going to see a lot of it. We're going to -- now that we're in the -- we're back in the driver seat of what we're able to do. And if the equity continues to respond favorably and we start getting the value for what we're doing and for the cash flow that we're generating, I think you're going to see more people join us. That's my honest opinion on it.

Yes. And you've been really careful, I think, about which markets geographically and legally you've entered. I mean what, how many states are there that sort of work for you from a legal end...

Well, I think all of them could work for us if the operators in those states, who know the state, who know how to operate there, are willing to stay on with us at least until we figure it out with them, right? I mean California is a scary state for me. We went out there once and it was a little more intense out there, I would say. And in regulatory, it takes months to do anything. We're not used to that. We have much more business-friendly environments and majority of the markets that we operate in. But at the same time, I mean, we're doing business in Illinois. We're doing business in New York, where it takes longer to get things done. But we just keep pushing forward and get it done.

So I'm not afraid of any market, especially as we continue to grow and we get the size, but I don't want to buy lawsuits either. It's -- that's not fun. It's not fun for me. I hate lawsuit, I to hate being in the court, I'd rather just run my businesses. And so we're looking for very business-friendly environments where we can do what we do, grandfathered lock in locations.

And of course, we all love living a competition. We don't have -- the problem is we have limited competition in our exact industry, but our industry still competes with multiple other facets of entertainment, rock concerts, sporting events. While some are complementary, some are also competitive. They -- people only have so much money to spend, and they choose where they're going to spend their money. So we have those competitive issues as well.

Can you just remind me what the 2 clubs that are closed are currently and whether those are going to reopen?

Sure. One is in San Antonio, Texas. We have, I believe, reached a settlement with San Antonio. We're waiting for the actual settlement papers. We had a lawsuit with them. We believe they closed our club illegally during COVID, that we had the right to be open, they said we didn't. It was a big mess. We've been in court battles where we've won, we've lost, we've gone back and forth. At the end of the day, we're closed, and I want to be open. So we've structured a deal that I think is a win-win for us and the city. I'm hoping that, that gets done, that club could be open as early as October under a new format, a new name. And the other one is the one that got hit by the hurricane in Lake Charles, it's actually in Sulphur, Louisiana, but it's Lake Charles area right by the casinos. And I mean, the hurricane basically took the building out. We've been in the process of rebuilding that building. We're probably 4 to 6 weeks from reopening that location as well. So...

Are those kind of $1 million dollar (inaudible).

Let's see, XTC San Antonio was probably about $600,000 in profit a year. Sulphur, I don't know off the top of my head, but probably in that same $500,000, $600,000 range. So the 2 of them together, $1.2 million, call it $1.2 million for easy numbers purposes.

Okay. Then on the operating margin on clubs that I think were the highest you've ever had in the mid-40s. Is that...

I think, it is the second highest. I think there was a quarter in '18 the higher margins. I believe Bradley can -- it's on Bradley's chart, I'm on a Page 7.

Yes, I got it, December of '18. Is that sustainable?

I mean, we're not seeing a slowdown in July. I'm like you guys, I don't know. I don't see it dropping off overnight. I think if it drops, it will be one of those gradual 3%, 5%. But typically, in our industry, we run solid up for 6 quarters or 8 quarters, and then we have a 3 or 4 quarter decline, then we go back and beat the numbers again, right? If you go back all the way to 1995, you can kind of trace that pattern where -- and a lot of it has to do with our size back then, and a lot of had to do with sporting events. Was there a Super Bowl 1 year in one of our cities and not the next. The thing of it now is with $57 million of Super Bowl that brings in an extra $1 million a week at a single club, affects that club, but it doesn't change the whole company like it used to. We're just getting large enough now that the seasonality of it, the big sporting events don't affect the overall numbers like they used to.

So I think we're just going to have to just keep moving forward. We're all going to have to monitor it. As of right now, we're not seeing much slip. In the South, we're seeing our typical summer slowdown of 2% or 3% at some of the clubs. But overall, the northern clubs are up 20%, 40%, 60%. So it's where we're -- it's coming a zero-sum game. If we're losing here, we're gaining there. Unless the overall economy changes or something that changes basically people have it, I don't see us slowing down right now. I think we've gained market share coming out of COVID because we were prepared.

Our management teams, our upper management staff, Ed and Dean did an unbelievable job, our regional managers, with their general managers, keeping their general managers with their local teams just did a great job of getting everybody back to work, we worked as hard as we could. Our #1 focus when we started reopening, it wasn't making money, it was getting our staff back to work because people weren't paying their bills. Let's get our staff back to work, let's get everybody taken care of, then we'll figure out how to make money, right? We just kind of double locked out. We got all of our staff back to work and everybody started making money, even with these 25% occupancies and 50% occupancies. It just -- we went out and what we -- we always say do the right thing, we tell our guys do the right thing.

We want to do the right thing by our guys, get our clubs open, get their guys back to work. How much business we can have? Who knows? We'll make do with what business we have, and we'll figure how to make money with the business that we get. And all of a sudden, we had more -- have lines out the door everywhere, like, "woe, where all these people come from?"

Right.

But we've been excited about it. And we hate seeing people wait in line. We want to give people in the building because we're not making money from one standing out lines. We want to get them in, we want them to get to have a good time, and it's not fun standing in line. We've all had to go places and stand in line. So I think our staff has just done a fantastic job of meeting those needs and turning that into revenues you've seen. I mean this quarter is -- if you ask me, people say, "Well, how can you do, how did you do it?" Well, I say, all I did was put my people back to work, my people, our staff, our company staff that went out there and did what needed to be done to basically put the dollars in the cash register and keep the customers happy, keep the customers coming back.

I think as long as we're continuing to meet our customers' needs and keep our customers happy and they continue to feel that we create value, entertainment value for them, they're going to continue to come spend money in our businesses. So I don't know why we would slow down right now, unless our staff quits doing their jobs. And I don't -- I mean, I talk to them every day, everybody is happy, everybody's been pretty static about things we're doing.

We're having a convention in New Orleans next week. We're bringing about 200 of our staff members from around the country to do seminars. We have 2 days of seminars and training that we're going to be doing. And I will look so forward to it. I know every club I've been traveling around the country talking to guys and everybody is excited about coming to New Orleans and basically seeing everybody again. And it's been a long time. We have our convention every August normally in Vegas, but the expo was in May this year in Miami, and we -- we were doing -- we were too busy opening new stuff, opening clubs back up. We couldn't -- we didn't really take our staff, so we decided to wait till August and just do our own 2-day seminar.

Well, great. Well, congrats again, and talk to you soon.

(Operator Instructions) The next question is coming from Steven Martin from Slater.

I got on a little late. So if I'm asking a question you've already answered, just tell me. Your corporate overhead, you're going to add 11 clubs and another Bombshells in the near future. What is -- how is that going to affect your corporate overhead and your ability to leverage?

(inaudible) are auditing costs a little bit. But as far as internally, we've already -- we've kind of known since we signed the LOI. We've already -- we've had the corporate office staff already in-house, already training, already working for us. Bradley can answer. I don't think we really have a need for more staff based on this acquisition in our ERP system, we basically -- once our ERP system became fully integrated, we actually are overstaffed. But people work for us, we don't want to let them go, we continue to build. And we know we're going to buy more stuff, build more stuff. And so we kept everybody on and now they're going to have more work.

So you're saying that you can grow for a while and not add a whole lot of staff?

Yes. I mean we may need a new AP person at some point. We may have to add another revenue account. Basically, you're talking about $60,000 year employees. You add 1 here, 1 there as we continue to add more locations. But I think as far as upper staff, upper management, I mean we may add regional management, but most of that -- those clubs have already anyway as we buy them. So it's not it's not really new added expense. We're going to -- the incremental margin increase from one of these acquisitions, that's what we bring to the table, is the efficiencies and the cost savings.

Got it. Will the added volume of the new clubs change anything with respect to alcohol costs or food costs or insurance, et cetera?

If it does, it will lower it. I mean we're going to -- we will use our cost savings on international buying accounts from Coca-Cola from some of our large liquor and beer distributors where we can. Some markets, you have to buy local, you have no choice, but some markets, those savings get passed on. So that's all part of our due diligence process is working through all that. I know Ed is our Director of -- alcoholic services, has been working on marketing, has been working with some of our providers to discuss what they can do and can't do in certain markets for us, and we'll continue to work on that.

All right. Well, congratulations on a super quarter.

The next question is coming from Adam Wyden from ADW.

I knew I'd have to step in one last time. I know last few conference calls, I usually have to get a second in. So I don't know who that guy, Steve, was that you were having a dialogue with. I mean, look, I actually agree with him on one part and I vehemently disagree with another part, which is I definitely agree that the prognosis for cap gains, and estate taxes as such that people are trying to settle their estate. So I definitely think there's going to be a universe of guys who want to sell their business to you.

But the flip side of that is, for all intents and purposes, most people: a, don't have the shared services and infrastructure to operate 1 and 2 clubs. And so they're not -- private equity is: a, maybe doesn't want the ESG component to it; or b, can (inaudible) on the platform. I mean there aren't really -- it's almost like these guys want to sell it and they should be less price conscious because the reality is if their capital gains are going to go from 24 to 50 to ordinary income, then the multiple of today's earnings can be substantially lower. So I actually think it puts you in a better part from a negotiating perspective. The place where I do disagree with Steve or whatever his name was, is cost of capital.

I mean obviously, I think your analogy on Troy was a good one, right? I mean you paid $88 million, of which $30 million was equity, right? So if you think about it, $55 million or $58 million in debt. And like you said, if for whatever reason, you don't get your cost of capital and the stock is still sitting at whatever 6x EBITDA, you could buy back 500,000 shares relatively easily 100,000. It's basically a 0 interest loan. I love that analogy.

I think maybe what Steve was getting at and what I'm concerned about is I think that there -- I don't know, we may have talked in the past about that guy in Michigan, who's got a huge business. I think there are some larger businesses than Troy. And in order to acquire those you're not going to be able to finance them with all that debt and stock and it's the numbers are going to be larger. I mean larger businesses require higher multiples and by definition, you're going to need more capital to begin with. And so look, I do agree with Steve. I think the opportunity for buying these smaller clubs is ripe.

And I actually think you have an enormous amount of negotiating leverage relative to the alternative because no one -- because really, no one else can buy these things, except for you. I mean I just -- I don't care what anyone says. You guys are the only people that can really buy it and pay the price and integrate them and whatnot. But I am a little concerned that we still after all this time, I've not gotten our cost of capital. I mean, you made a comment about 2008. We went back and looked, I mean, I think you guys were trading at 30 or 40x EBITDA. So in the event that you were trading at the multiple you're trading in 2008, I think the stock -- we did the math is about $350 million, not $175 million, but maybe at $175 million, you're at 20x EBITDA. So maybe you can start thinking about more equity at those prices? I would be somewhat concerned about using substantial equity at these levels unless either: a, you were buying assets at 2x EBITDA, which I find farfetched, or we don't get a huge move upward.

I mean, I understand, Troy, it was kind of -- it was kind of a deal killer not to have it. And obviously, as a percentage of the transaction, I mean, it was only 1/3 equity, plus or minus. But I do think that the next 12 months, 24 months are going to be very, very instrumental and critical to the company getting its right cost of capital. I mean someone, actually someone who owns the stock said to me once, told me a story. He said that the stock market is like a relay race, right? And so people like me bought shares under the auspices that this company is not going to go out of business and it's worth a lot more. And we took risk relative to the perception.

I think now, clearly, you guys have performed during COVID and built a growth enterprise, promoted Bradley, did many things that we thought were kind of in tune with being a public company. And I think it's important that investors that might demand lower returns, but have more sensitive risk profile can get comfortable that this company's cost of capital is substantially lower -- higher, lower, how you want to define it than what it is now. And so -- the only thing that I would leave you with is, I think it's very, very critical over the next 12 to 24 months that, a, you're hyper-attuned to your capital position. Obviously, you've got some cash, stock stays around here, obviously, you know what to do. You're paying back debt...

That's the easy part.

What?

I said that's the easy part, buying back our stock is easy part. That's the part of my job.

Yes. But we got -- we do got to find a way. I mean these conference calls are just Adam, Eric, Steve. It's the same cast of characters, right? I mean we got to get guys like Fidelity and T. Rowe Price and these large firms to know that Rick is one of these companies that consistently deliver results. I mean if you think about it, your algorithm, your growth algorithm basically fits the profile of most of these large kind of clubbing institutional asset managers, yet, it's the same people talking on the conference call.

So my advice to you is, I mean, 90% of the time continue to do what you're doing, but I think part of your strategy going forward is to kind of continue to go elephant hunting. And so I'd love to see you guys get it to a point where you've got that cost of capital in your arsenal. And maybe next conference call, we have someone real on it. But obviously, wildly impressive results. Bombshells was a kind of knockout success. That was your brainchild. I have no reason to believe that AdmireMe can't follow suit. So at some point, people are going to have to value these assets. They hopefully perform 9 years old. So thank you again for the time, and I'll be done.

All right.

This is the final call for questions. (Operator Instructions) Okay. We have no remaining questions in queue. I'd now like to turn the call back to Gary Fishman for closing remarks.

Thank you, operator, and thank you, Eric and Bradley. For those who joined us late, you can meet management tonight at Rick's Cabaret, New York from 7:00 to 9:00 at 50 West 33rd Street, between 5th and Broadway. If you have an RSVP, ask for Eric or me at the door. The next event on our calendar is our participation on Thursday, August 19 at a Sidoti and Company Virtual Investor Conference. We'll be doing virtual one-on-ones. Our presentation is at 12:15 p.m. Eastern Time. Registration is free for professional and retail investors. We'll issue a news release with the details.

On behalf of Eric Bradley, the company and our subsidiaries, thank you. Good night, stay safe, stay healthy. And as always, please visit one of our clubs or restaurants.

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