RCI Hospitality Holdings Inc (RICK) 2021 Q2 法說會逐字稿

Greetings. Welcome to RCI Hospitality Holdings conference call and webcast. (Operator Instructions) 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 investor info page, scroll down, and you'll find all the necessary links.

Please turn to Page 2. 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. 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 Chhay. After the market closed, we reported our second 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-19 situation continues to improve.

As of today, 36 clubs and ten Bombshells are open. Nightclubs and Bombshells sales exceeded $18 million in April. Restrictive curfews, which have affected many of our northern clubs are beginning to end. Minneapolis, where we have 3 clubs lifted their 11:00 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 one club will be lifted soon.

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 $44.1 million for the second quarter. That's up 9% year-over-year. This is our first year-over-year quarterly increase since the pandemic began in the year ago quarter.

GAAP EPS was $0.68 compared to a year ago loss of $0.37. Non-GAAP EPS was $0.75 compared to $0.47 in the March 2020 quarter. Looking at cash, we had $20.2 million as of March 31. Second quarter net cash from operating activities was $11 million. And free cash flow was $9 million. That's the third 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 $30.8 million 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 opened enough days to qualify in the March 2021 quarter and the year ago quarter.

During the March 2021 quarter, 29 of the 38 clubs were opened 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 our strong performance in January and February last year, 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% 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 $10.5 million from $2.3 million. GAAP operating margin expanded to 34% of segment revenues from 7.3%. There was an impairment of $1.4 million when we moved one property to held for sale in this year's second quarter, while the year ago quarter included $8 million worth of COVID-related impairments. Thus, on a non-GAAP basis, profitability increased by 16.1% to $12 million from $10.3 million. 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 $13.1 million increased 49.2% year over year. Same-store sales rose 48.7%. During the second quarter, all ten 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.

Second quarter operating income and margins also performed well. Cost of goods sold was 22.8% of segment revenue compared to 24.7% due to higher revenue and lower cost of goods. Other expenses in aggregate, as a percentage of revenue also declined. As a result, profitability was $3.1 million, an increase of 356.7% year-over-year. GAAP operating margin expanded to 23.9% of segment revenues from 7.8%. On a non-GAAP basis, profitability increased by 240.7% to $3.2 million 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 second quarter consolidated statement of operations. Salaries and wages improved to 25.4% of revenues compared to 30.2%. However, we believe our normal run rate is approximately 28%. SG&A as a percentage of revenue also improved to 28% -- 28.6% compared to 35.7%. Both of these cost centers reflected better Nightclubs and Bombshells segment margins, cost savings initiatives and lower audit and legal fees as compared to a year ago quarter.

Depreciation and 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 paydowns prior to and during the second quarter. There was a non-operating gain of $431,000 pretax. This was primarily due to the extinguishment of one of our 2 remaining SBA loans. Income taxes were an expense of $1.9 million compared to a benefit of $1.4 million.

Please turn to Page 8. We ended the quarter with $20.2 million of cash on hand, a 2-year high. During the second quarter, free cash flow continued to recover sequentially to $9 million. 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 fourth quarter of 2020, 14.8% in the first quarter of this fiscal year, and now it's 20.4% this quarter. We used free cash flow as a percentage of revenue to measure how well we're doing converting revenue dollars to cash.

Debt declined $2.4 million from December 30 and $9 million from our year-end at September 30. This reflected debt extinguishment and scheduled paydowns. We are now at our lowest debt level in almost 2 years. We continue to be current on all of our debt. At $34.4 million, 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% of debt secured by real estate, 16.9% listed at 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 misses 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 $3.3 million from $3.5 million. Occupancy costs as a percentage of revenue sprung up in 3Q 2020 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 second quarter of fiscal 2016 to 6.66% in the second quarter 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 $8.2 million of balloon debt currently coming due over the next 2.5 years, and another objective is reducing our interest expense by $1.8 million 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 to 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's strategic rationale to do otherwise. The first is mergers and acquisitions, specifically buying the right clubs in the right markets. We like to buy good, solid cash [flowing] clubs at 3x to 4x 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 first quarter ended in December, we purchased and retired approximately 75,000 common shares at a cost of approximately $1.8 million.

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 ten Bombshells in Arlington, Texas, and our franchisees location in San Antonio. We are continuing to do due diligences on other potential company-owned locations and franchisees. Our goal is to build ten new subsidiary-owned locations over the next -- 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?

(Operator Instructions) Our first question comes from Greg Pendy with Sidoti.

My first question, I just want to dig into the salaries and wages. I think you mentioned they came in obviously at 25.4%. Obviously, it's a big topic of -- it might be difficult 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. And there's a couple of reasons. First, I'll 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 worked through it. We have a lot of staff. We kind of froze revenue -- or froze wages when COVID hit. 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 and 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 a very short-term deal. But I think we definitely have to look at -- unlock our salary, our salary cap or lock that we've had, and we're going to have to look at being competitive in the marketplace and 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 hopefully this quarter, next quarter. 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 is 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 -- do you think that's going to drive?

The curfews are killing us. To give you an idea, when the curfews 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 to 4 A.M., you're talking about the full 40% is going in markets where we're open or we're open to 2 A.M., we're still getting a little bit of that business, but not the prime business. And the biggest problem we have is the main cities may be closed down, but they can just go someplace else.

For example, in New York City, we close at midnight. But if you go across the bridge, you can party until 4:00 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've already seen a huge increase. The best night we've had and ages by just being open normal hours. I think you're talking between the Minneapolis, New York and Chicago clubs, somewhere between $600,000 and $800,000 a week in revenues. And if you take our $18 million in April, it's about $4.4 million 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 going out and partying and having a good time and just getting out of the house and being around people is more addictive and more contagious than COVID was. People want to be out now, and they want to stay out and they 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 exuberant kind of caps out, I just don't really know.

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 check is really ballooned. I just think the pure number of people and the number of hours that were -- 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 traffic. 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 Bombshells isn't like the clubs where we get a VIP customer come in and go upstairs and spend $5,000 on champagne. This is just a place you go when you hang out and you have a few drinks. And if its 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.

Next question, Yaron Naymark with 1 Main Capital.

Awesome quarter. I guess I want to follow up a little bit on the Bombshell's 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 fourth quarter of last year and the last 2 quarters have been very consistent with $13 million. I think that's where we're at. I've been talking with the management team. I've been looking at the numbers. Like I said, I've been eating at 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 fourth quarter 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 the $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 like $250 million plus of revenue. I mean, if you just annualize it, I know there's some seasonality.

But if you say $5 million a week. I mean, we could be close to $5 million a week. There's some seasonality. I mean, I think 220s to 230 is very safe. I think, 240, 250 is possible. And if you said 260, I wouldn't say it's out of the question on a forward run rate. Once everything is open and running -- what we're seeing right now today. And you got to remember, Minneapolis and New York are big VIP spin 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 $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 is open, and we're at $5 million a week and it slows down 20%, we're still at $4 million a week, right? I 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.

On that basis, I mean, you guys are doing some massive, massive free cash flow numbers. I mean, you could be doing $50 million, $60 million plus of free cash flow, maybe even more than that 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, seller financing, I mean, if you're generating $50 million or $60 million of free cash flow or even the pre-pandemic numbers, which were closer to $40 million, but I mean you could be deploying $75 million, $80 million, $90 million, $100 million 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...

Multi Club acquisitions. That's how we're going to do it. We're going to buy -- we're going to buy one of the big boys or 2 of the big boys, who knows. We're at the point right now where -- and we may have to pay 5x, right? I mean, instead of 3x to 5x, we go to 5x. We go to a couple of big boys and say, we're going to give you 5x 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. What we plan to -- we have some meetings set up at the end of this month at Expo. And a couple of guys that can't come to Expo, I'm going to go meet in the second 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 start wrapping these things up. We've talked about it. We pushed for it. We've gotten really close a couple of times. In 2008, we really got close there where our stock ticked up and we got that multiple, where we could pay a little bit higher prices without it affecting the model too much.

I think that's probably what we're going to see as we move forward. We're going to -- for the right acquisition only. I mean we're -- our typical acquisition is going to stay in that 3x, 4x range. But for the right acquisition, I think we would be prepared to make a 5x 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 million, $25 million, $35 million cash down payments because we're going to have the cash to do that.

Yes. And how is the single club M&A pipeline looking? I mean, is Boston back on track? Are there any other big cities or 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 they're thinking is at this point. The club is still not even open. But there are several other single club stuff we're looking at. But my real focus right now and probably through the next 3 months, is going to be a large acquisition. We've got to -- we've got to land a pretty large acquisition. Because like you said, that's what we need to make the needle move, right? I mean we're generating a 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 million 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 if somebody's listening on this call, and I'll get a call tomorrow from 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 the terms on the commitment letter, we're 2 terms away on negotiating 2 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 2 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 2 items are fixed, I think we probably signed the commitment letter the day that the day of approved -- 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 -- upon on Wednesday, we probably close the first week of June, be my guess.

Great. 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 I forget, are you guys paying that tax today still until it's -- final solution is reached 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 -- right now, the case is sitting 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 and times -- I just don't know off the top of my head. But if I had to guess, it's maybe $1.5 million, $2 million a quarter. I mean, a year...

A year.

A year? Yes.

About $300,000, $400,000...

Yes, about $300,000, $400,000 a quarter right now is what Bradley says.

Next question, Jonathan Abenaim, with ADW Capital.

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 million] of free cash would be double what sell side has, looking out 2 years. And can you just help us think about sort of the M&A pipeline? And I know you spoke about this with Yaron, 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&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 in the next 3 to 5 years, you need to sell this year, so 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 it with everybody that we're looking for a very multi-club acquisition and $40 million, $30 million down payment doesn't scare us. If you need a bunch of cash. We're building the cash, we're sitting on the cash, or can get -- have access to the cash, so come talk to us. So I have talked to a few 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&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 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 [some] club owners about equity because now everybody wants to stock. Nobody wants it when it's 15, everybody wants it when it'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're -- we have to be very comfortable with the deal to use equity [still] because we still think the equity is cheap. We're going to kind of lay out as we move in through May and 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 of 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 slowed down a little bit. But then we had 2 quarters in a row where we're sitting here at this $13 million run rate.

So I thought maybe Texas would slow down or 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 we're -- chicken has gone up tremendously. I think we're going to see -- you're seeing certain shortages, ketchup and mustard shortages. I mean -- so when does all this kind of steady out, get back to a deal where we can project going forward. 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 million to $54 million of revenue for April, May, June in the bag. If we have a huge June, we opened May 31, we have a huge June in New York. Typically, it's taking 3 weeks from the time when a curfew ends to the buildup of business. But New York gave us a 30-day window on when the curfew -- 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 that -- those locations typically are taking 3 weeks to get back to what I call ahead of pre-2019 numbers. 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 the market, to bring the girls back in to bring, to bring the -- to 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 million, $56 million. 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. 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 through September quarter. And then we hit our prime season, October to May. So it could be a very good year for the next -- in the next 12 months, 18 months, for sure.

(Operator Instructions) Our next question comes from Darren McCammon with Cash Flow Kingdom.

Congrats on another strong quarter and really on excellent capital management and capital allocation for the last few years. You've done a great a 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, thank the author of that book for me, too. Okay. So we've talked about free cash flow a lot here, and we're hearing numbers thrown around by other analysts of $60 million, etc. 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 and June right now, I'm very confident in the next 3 months. I think it will 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 20.4% to 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 a 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. As I just don't know. But we will peak at some point. I think, like I said, I think Bombshell's peaked, the restaurants kind of peaked. In the -- basically, the third calendar quarter, our fourth quarter, our fiscal fourth quarter of last year.

But now if this is the new average, we'll take it. You're talking about basically $52 million a year, $5.2 million 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 first Dallas Cowboys home game; it will be 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. I think people say, "Oh, you need to hurry, you need to hurry." I'm not going to hurry. I'm sorry, if you want me a hurry, I apologize, but I'm going to make the right calls. We want the right locations, the right investments because we can only spend the cash once, and we've 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 million. I think at the end of April, we were close to $24 million. I think at this rate, we'll end the quarter at $30 million 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 million cash on hand. I don't think we need to keep $18 million or $19 million or $20 million 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. I just want to make sure -- Okay, yes.

$36 million 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've got to remember, February was not a good month. January was okay. March was the first solid month, and then April backed right up to it; back at that $18 million. And now we're bringing New York back online. We're bringing Minneapolis back online. We're going to bring 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 if 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 numbers 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 had $600,000 to $800,000, and maybe there's $200,000 here, 300,000 -- off by $500,000, we're still at $4.5 million, $4.6 million per week, and those are going to generate some pretty decent cash numbers.

Okay. Just -- this is more common 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 to 2 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 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, a 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...

If we need to. 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 the cash we already have on hand. We already have it. It doesn't cost us anything. We put it to work, we get returned. 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, if you 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 to -- 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? The market loves you when you issue equity, not when you're out there needing it. So...

If they love us. They love us enough, we'll give them some, how's that?

Okay. That's what I wanted to here. So -- but along those lines, if you had a very major purchase. And we know who we're talking about. We're talking about [deja vu]...

Equity and a [leak-up] lockout agreement we would consider, yes, definitely. And we have to have -- we have considered. 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, if we -- 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 million a year with this new note in equity and interest costs. So we have that money. So we can borrow against that and use that same $5 million 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, will 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 the -- before our -- I would say before our fiscal year-end or definitely in the first quarter of next year, I think we'll have a very sizable acquisition, locked in definitive agreements by that point.

Okay.

My goal -- Whether 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 opportunities that you have. And although you should do a token because you just get you on the growing dividend list. But I...

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. But we've got consecutive dividend growth for going on 5 years now. So another $0.01 here, another penny there, some -- irrelevant in the overall cash flow stream, 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 before we even need to think about it.

We don't need a dividend increase until fiscal 2022. So we've got the $0.16 that 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 only. 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 one seller note, the note against other assets, the debt against other assets in the Texas comptroller. Everything else will be consolidated into a single loan at that point, about $105 million. It was a lot higher than that, but we've been paying it down. So -- because we've been working on it for a while.

When do you think that's going to go through?

Well, they're going to committee with our last 2 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 -- 3 weeks, 4 weeks from Wednesday. The appraisals are done. Everything is done. All we're working on is final terms.

Okay.

They'll basically 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. It's -- we've got to have similar terms to what we did on the 17 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 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 is going to $158 next week. So those are the kind of things you're seeing.

We got word that ketchup was going to be out. So we ordered a ton of ketchup. So our ketchup inflation will be zero 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, hey, we don't really need them. Everybody has their phone with them. And everybody's so used to just pulling the menu on their phones now that, that may be -- that may actually be the new norm. We may never have menus again. It's 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. 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 one of the TVs or something like that?

Yes. We're not -- those are remedial. That doesn't matter. We're good there.

Okay. So what about alcohol inflation?

I haven't really seen much of that. Alcohol is kind of holding steady 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 creates supply.

Next question, Adam Wilk with Greystone Capital Management.

So 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&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 million to $40 million 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 in the pipeline or...

I think that would be -- typically -- typically put down 30% to 40%. So think of it in those type of terms. I'm looking at -- I want to do an acquisition that is enough clubs and enough EBITDA that we would be comfortable to pay in the $80 million to $120 million range. Because I think that's what we need.

A, number one, our systems we put in place, the ERP system is ready for it, our staff is ready for it -- for -- kind of easily absorb an acquisition of that size, somewhere between 8 and 15 clubs in a single acquisition. It gives us a 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 peer size. And it will give us -- by doing something that large, it gives us economies of scale. We'll be able to tweak it, pick up another one 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, they'll go, you'll go, oh, wow, look what they've done, look at the money they've saved, look at the cost savings we put in with our national pricing with taking our staff and put it over more revenue in more locations, we'll get a much better return on it than originally looked like at the beginning.

And that's what we've seen in Chicago, we reran 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 than we had. So for example, we paid 3.4x, 5x, and we actually afterwards, worked out to be in only 2.79x, or in Pittsburgh, I can't remember the exact, but it was like 0.2 more, right? So Pittsburgh was the only one that wasn't in our favor.

And we just had some issues up there in the first year. I think as we move forward, it will start looking better as well. With a new market for us. 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 -- it's going to be much easier and more profitable for us.

Right. Yes, I understand. So you mentioned like where the cost savings are coming from, that was helpful, or would potentially be coming from. So that was helpful. Thanks. And so like when you're looking at different markets, is this just all over the country or you have clusters or 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. That was...

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 ten single club op -- you know, buy out 5 or ten single club operators and put the same amount of money to work, just $3 million or $4 million at a time, right? I mean that's -- it's a lot of work. It's easier to buy one multi-operator than it's going to be to go out and try to buy ten individual clubs. But we'll do it and 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've 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...

No problem. I think everybody -- -- just wants more float. They want more float so they can buy more stock, I guess, without paying more for it, but that's not going to happen. Not -- not if we keep from -- We have no -- I learned all those days back in -- I made those mistakes in 2008, 2009, and all the way into 2012. And it's like, you know what, I'm done with that. Our equity is gold. We're -- 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.

Next question, Doug Weiss with DSW Investment.

I just wanted to ask about Bombshells a little bit more on the -- specifically the expansion. And I wondered if -- I mean, obviously, you have a lot on your plate in terms of M&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. One got bought out from underneath of us by Chick-fil-A. Another property, a condo developer, is now looking at buying the entire retail center, tearing it down and building a 38-story 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 to get 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 a West Dallas suburb right now. I don't want to mention it yet because I don't have the signed contract in my e-mail.

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, and I think you 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. But that's -- Phoenix is -- in fact, we've been talking about going down there in the next few weeks and just kind of re-familiarize ourselves with it 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 then just a couple of keeping questions. The land for sale, I think this was the first quarter that was -- came up on the balance sheet. What does that related to?

[Contractor] signed. Yes, those are signed contracts. So we don't move it into a -- sale for sale -- because we'll lease it. The way the GAAP works, if you will lease a property, you can't put an asset held for sale, even though it's for sale or lease. So we have everything basically for sale our lease until the day it's put under contract.

We have 3 properties under contract, one closed...

Friday.

Friday. Yes, one closed Friday. So that leaves 2 -- we have 2 properties left. One is at $3.25 million. We will sell or finance for that property. We're taking a $500,000 down payment. There, we're going to do about a $2 million remodel on the property and construction project on the property, and they are getting a 5-year balloon note, for the $2.75 million.

Another property we have under contract at $2.15 million, all cash. They have, I think, about 30 days left on feasibility, and then they have 30 or 40 days to close the transaction. [Both have] right to extend the feasibility if they -- for a fee, for a monthly fee.

Okay. And then just a 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 earthly 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.

Next question, Adam Wyden with ADW Capital.

Sorry I'm a little late here, but I won't disappoint. So I mean, look, I'm just doing my -- the same back to 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 wasn't on the early part of the call if you guys are 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 a sum of the parts evaluation or getting different sell-side 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't 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 to pay a little bit of tax on a 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 all it's up so much. But I mean, look, I look at it much longer, and I look at where we were pre-2007 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 level in terms of research coverage, institutional investors, cost of capital, so we can accelerate kind of the inorganic growth trajectory.

I think the reality is we have to do the first 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, hey, the cash flow is really coming back. $9 million is a big number. But most of that money was made in March. And 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 where 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 for us because I'm not going to spit out cheap equity. It's never going to happen.

Sure. I mean, I guess...

That's why you invest with me, because you talk 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 -- let's say that the margin increases from 20.4% this quarter, only 22%, and we end up doing $54 million, right? So now we're $11 million plus, almost $12 million in free cash flow, between $11 million and $12 million 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 $60 million in a quarter. And the New York is -- and Chicago and Minnesota are service revenues, which is -- we all know, is much more profitable. And that margin moves up some more. Now we maybe were $15 million plus in free cash flow a quarter.

I'm not selling my stock at $70.00 with $60 million of free cash flow. I mean, that's a...

I think the number is higher. So you know...

And I know you do. I know you think the number is higher. And you've surprised me because you've been running it more than I have lately. I just -- but I get it.

I guess the question is, like, I feel like every business is at an inflection point, right? You've got to growth vehicle in Bombshells that people can accept. You've got a government that wants to take all your money, right? You have individuals that are sun-setting and [great tailing]. They don't have necessarily children to run their businesses, right? And why not -- why not sell to you, participate in the upside? Because as far as I can tell, like, I don't know, 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, night clubs 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 night clubs of 500 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 say, it's about convincing these sellers. We've been -- we've been paying...

But the -- but 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 be 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 bigger 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 -- we're pitching this now to a couple of different people. And I think, like I said, in the next -- as I said earlier, you missed it 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 one, maybe more of these larger of a larger type acquisition. And 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 million or $40 million cash down a year ago or 2 years ago, even 3 years ago, I couldn't talk to these guys. I mean, I can talk to them, but I wasn't realistic that I was going to go out and raise $30 million or $40 million. 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 million or $40 million in cash.

Now we can have $30 million in cash on our own books by the end of June, at the rate we're going. So we just -- we're in the position now. This is the first time we've been in the position. Now we're out -- knocking the doors.

Well, look, I didn't invest for this to be a $100 million EBITDA biz. I invest with rock star CEOs who want to build generational wealth companies. I firmly believe this could 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 on 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 frustrated that the markets need to discount what we're building. But haters are going to hit all the way up. And the sooner you can continue to execute on this stuff.

I mean, look, obviously, we have the cost of capital to buy in clubs with real estate at 3x or 4x, 5x EBITDA. But the real mother load is buying businesses with 30 on an 40 and 50 in EBITDA at 8x to 10x. 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 one in the next 6 months. That's the goal. 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 a makers for [$500] of EBITDA and to land a haymaker, we need a real stock. So, look, I'm not going anywhere. I'm your biggest shareholder. I'm always truly impressed at your ability to execute. And I look forward to trying to find some more people to kind of accelerate the market realization plan. But I'll leave you with that, and we'll talk more all right. All right.

Next question, [Jason Scheurer], private investor.

I guess, (inaudible) and clean up like everyone else says a lot of these questions have been 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 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 have food. We have to be concerned with those costs because they creep up and all of a sudden our margins get shrink at 2 -- 1%, 2%, 3%. The point is we look at all those things. And I think that's what people miss about our company is 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 revenues 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 -- you're going to do better -- and 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 costs 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 hundreds of dollars per hour in rentals.

Well, that's great. I guess 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 well on our way above $100 a share.

Next question, [Alex Hardman], private investor.

I just had a quick question on -- with the states taking away occupancy restrictions and things like that, and getting back up to 100%, and like last quarter, you had mentioned something about like Miami, doing 70% percent on occupancy. I was just wondering, are you seeing the 100% occupancy rates come back. Are you seeing the sales growth that you had against 2019 with the lower occupancy rates maintaining itself? Or are you getting some diminishing return on that?

I think in the south, we're at 100% occupancy. Texas is back to 100%. I think Florida is back to 100%. We're -- 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 million 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 accuracy went up, the numbers would go down, but that has not happened at all. I've been -- in the last call, I 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 -- 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, a 3-month trend. It gives me -- it starts my thinking. But when I get to a 6-month trend, 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 the big, big quarter. And then we've seen 2 quarters here in a row now, which is a 6-month period of Bombshells in this nice, steady, $13 million revenue from the ten stores. And I think that's going to be something that we can do very consistently for -- 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 we're at through 5 or 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 and June. Our extended hours, I say, and 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 X number per week. And we'll have that idea, as I said, we go from quarter-to-quarter and we get more data.

Okay. Yes. I mean, on Bombshells, I mean, you said you're comfortable with like the $13 million figure, but the way, I mean, they just point from 75% to 100% in March, it seems like your -- the growth you had in March probably covered your losses in February. I mean, wouldn't you be doing like at least a little bit more than $13 million going forward then?

We might. I know that -- I know we did a record Saturday with the fight. I got an e-mail from our operations guys saying they didn't break the total sales number figure that they were shooting for, but they still -- they still beat -- they still had the record for Saturday night, which was the Saturday before Mother's Day, which this weekend should have been a very off weekend for us. But the Canelo fight definitely made 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 -- 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. I guess it's just New York and those lagger 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 it's what we've got to stick with right now and push for.

Are there any final questions? This is the last chance for questions.

Next question comes from Greg Pendy with Sidoti.

Got 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? Maybe it's...

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 million to $5 million. I would probably raise that a little bit in the next 6 months. So let's say, we were going to say $2 million to $2.5 million, I'd probably say we're probably going to spend another -- maybe another $1 million over the next 6 months. I know we're expanding Tootsie's 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 one of our BYOB clubs into a high-end liquor club in San Antonio. So there will be some spend 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. But I think we do maintenance capex and insurance comes in, in a separate line. I don't -- so you're going to have a gain on insurance that will offset some of that CapEx. But why do we do our free cash flow, I don't know how that washes or not. That's a Bradley question but -- but 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 damaged 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 of 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.