investor presentation (pdf version) - rick's cabaret international, inc

Rick's Cabaret International, Inc. (NASDAQ: RICK)Investor PresentationJanuary 2014

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Forward Looking StatementsCertain statements contained in this presentation regarding Rick's Cabaret future operating results or performance or business plans or prospects and any other statements not constituting historical fact are "forward-looking statements" subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, the words "believe," "expect," "anticipate," "intent," "would," "will," "planned," "estimated," "potential," "goal," "outlook," and similar expressions, as they relate to the company or its management have been used to identify such forward-looking statements.

All forward-looking statements reflect only current beliefs and assumptions with respect to future business plans, prospects, decisions and results, and are based on information currently available to the company.

Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause the company‘s actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by, these statements.

Such risks, uncertainties and contingencies include, but are not limited to, risks and uncertainties associated with (i) operating and managing an adult business, (ii) the business climates in cities where the company operates, (iii) the success or lack thereof in launching and building the company’s businesses, (iv) the operational and financial results of the company's adult nightclubs, (v) conditions relevant to real estate transactions, (vi) the loss of key personnel, (vii) laws governing the operation of adult entertainment businesses, and (viii) the inability to open and operate our restaurants at a profit.

Additional factors that could cause the company’s results to differ materially from those described in the forward-looking statements are described in forms filed with the SEC from time to time and available at www.ricksinvestor.com or on the SEC's internet website at www.sec.gov.

Unless required by law, Rick's Cabaret does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

January 2014 Investor Presentation

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Explanation of Non-GAAP TermsNon-GAAP Net Income and Non-GAAP Net Income per Diluted Share (referred to as “Non-GAAP EPS” herein). We exclude from GAAP net income and GAAP net income per diluted share amortization of intangibles, patron taxes, income tax expense, impairment charges, gains and losses from asset sales, stock-based compensation, litigation, loss from discontinued operations, and other one-time legal settlements and acquisition costs, and include the Non-GAAP provision for income taxes, calculated as the tax effect at 35% effective tax rate of the pre-tax non-GAAP income before taxes less stock-based compensation, because we believe that excluding such measures helps management and investors better understand our operating activities.

Adjusted EBITDA. We exclude from GAAP net income depreciation expense, amortization of intangibles, income tax, interest expense, interest income, gains and losses from asset sales, acquisition costs, litigation and other one-time legal settlements and impairment charges because we believe that adjusting for such items helps management and investors better understand operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for Federal, state and local taxes which have considerable variation between domestic jurisdictions. Also, we exclude interest cost in our calculation of Adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use Adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.

Our Form 10-K for the year ended September 30, 2013 and our press release dated December 16, 2013 contain additional details relative to the non-GAAP financial measures and are posted on our website at www.ricksinvestor.com.

January 2014 Investor Presentation

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Investor Snapshot• Nation’s leading hospitality company in adult gentlemen’s clubs and

sports bars/restaurants

• Customers: Focus on friendly, entertaining, quality experience

• Shareholders: Focus revenue growth and cash generation

January 2014 Investor Presentation – Overview

Key Statistics (FY ends September 30th) Amount

FY13 Total Revenue $112.2 M, up 18%

FY13 Adjusted EBITDA $28.1 M, up 18%

FY13 Fully diluted income from continuing operations $0.98 per share, up 23%

Units at 1-16-14 42, in 10 States

Shares Outstanding 9.6 M

Shares in Public Float 7.8 M

Market Cap at 1-16-14 $106 M

Enterprise Value at 1-16-14 $173 M

Stock Performance at 1-16-14 vs. year ago 36%

Quick Facts• Founded 1994

• Based in Houston

• NASDAQ listed

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Investment ThesisAdult Clubs

• Consolidation and growth of a classic American form of entertainment into a national, professionally managed chain

$2 B revenue, fragmented industry (3,800-4,000 clubs)

Limited number of licenses, typically tied to real estate

We are the primary exit strategy for sellers Clubs typically generate higher margins and

cash flow than traditional bar/restaurants Enables us to fuel growth Industry awareness similar to gaming in the

1980s

Bar/Restaurants

• Leverages core expertise and infrastructure

Enables us to maximize revenues and profits per unit

Complements acquisition of adult clubs Can lease vs. own Better understood by investors

Texas• 76% of units, generating 50% of adult club

and sports bar/restaurant revenues (1Q14)

Benefiting from strong job and population growth

In-migration of corporate offices and revitalization of domestic energy industry


• Demonstrated ability to consummate and integrate acquisitions successfully

• 2008 to date, this team has opened or acquired 32 units

• Management and Directors own 15% of shares outstanding

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Seasoned Management TeamName Title Years

With Rick’s Background

Eric S. Langan Chairman, CEO & President

15 • 20+ years industry experience as owner/operator

• Founder / Director of Adult Club Executives (ACE)

Phillip K. Marshall Chief Financial Officer

6 • Audit Partner, KPMG• CFO of CDT Systems, Inc. (CDTN)

Ed Anakar Director of Operations

13 • 20+ years hospitality industry management experience

Travis Reese Director, Executive Vice President

15 • IT executive• Director of Internet Division


EBITDA Growing Faster than Revenues ($ in millions)

$15

$18

$24 $24

$28

$10

$15

$20

$25

$30

FY09 FY10 FY11 FY12 FY13

EBITDA

16.7% CAGR

$76

$83 $83

$95

$112

$40

$60

$80

$100

$120

FY09 FY10 FY11 FY12 FY13

Revenues

10.3% CAGR

• Generates cash for acquisitions and bar/restaurant development

• Permits accelerated payoff of higher priced debt

• Allows buy-back of common stock when price is right


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But Significantly Undervalued vs. Industry

Source: Interactive Data, accessed 01-16-14


RICK Leisure Industry (includes Restaurants) Difference

Growth & Profitability

Sales - 5 Yr Growth Rate (%) 11.6 4.3 172%

Gross Margin (TTM) (%) 87.5 36.5 140%

EBITD Margin (TTM) (%) 33.3 21.2 57%

Valuation

P/E Ratio (TTM) 11.6 22.9 -49%

Price to Sales (TTM) 1.0 2.2 -59%

Price to Free Cash Flow (TTM) 15.9 93.0 -83%

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Operating StrengthsKey Factor Comment

1. Efficiencies of scale • Buy liquor, food, advertising and other services at increasingly lower unit costs

2. Multiple brands and formats

• Expands market by reaching wider, more varied types of customers

• Facilitates “clustering”• Maximizes a license’s potential

3. Las Vegas style cash / credit card security

• Very low shrinkage• Overnight cash register and inventory

reconciliation• Webcams pointed at every register

4. Friendly, entertaining, quality experience • Encourages regular customer visits

5. Zero tolerance to illegal conduct • Attracts the best managers, staff and entertainers

6. Critical mass and credibility • Typically provides first access to deals• Ability to use seller financing

January 2014 Investor Presentation – The Business

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High Gross Margins (FY13)

Category Comment % of Revenue Gross Margin

Service • Cover charges• Patron charges• Dancers • Room rentals

44.0% Approaching100%

Alcohol • Liquor• Beer• Wine

40.6% 78.5%

Food & Merchandise

• Food• Non-alcoholic drinks• Merchandise• Cigars, cigarettes

9.3% 54.0%

Other • Internet and media revenue• ATM commissions• Valet income• Video games / vending

6.1% 95.4%

100% 86.7%


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Multiple Adult Club BrandsRick’s Cabaret Club Onyx XTC and

Temptations Tootsies Jaguars Vivid

• Flagship brand• High-end clubs

with restaurants

• Upscale nightclubs

• Casual atmosphere

• BYOB clubs

• Unique facility• 74,000 sq. ft.• Four clubs in one

• Lively clubs • Our newest• Leverages

leading brand in adult video

• High energy party atmosphere

• Higher net worth, mature patrons

• 35-55 years

• African-American professionals

• Younger and blue-collar patrons

• 18-35 years

• Higher net worth, mature patrons

• Younger patrons (tourists, college students)

• Primarily workers in booming Texas energy industry

• Younger patrons• 18-35 years

11 Units• Texas (7)• Minneapolis (2)• NYC • Indianapolis

4 Units• Texas (2)• Charlotte • Philadelphia

9 Units• Texas (8)• Sulphur, LA

1 Unit• Miami, FL

10 Units• Texas (9)• Phoenix

2 Units• Los Angeles • NYC


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New Sports Bar/Restaurant BrandsBombshells

Restaurant & BarRicky Bobby

Sports Saloon

• Military themed• Looking for sites near bases

• Motorsports themed• Looking for sites where NASCAR is popular

• Great food• Big TVs for sports• Live entertainment• Large outdoor patios

• Attracts lunch crowd• Family friendly during dining hours• Fun atmosphere for younger singles and couples later hours

• #1 Opened in Dallas in March 2013 • #1 Opened in Fort Worth in July 2013

Restaurant Model• $1.2 M start up costs

• $3 M annual revenues

• 15-25% operating margins

• Multiple locations in a single market

• Lease vs. own


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• Clustering of adult clubs and restaurants in Texas

• Select adult clubs in major metro areas, many with big tourist businesses

Notes1. The map above details Rick’s locations as of September 2013 2. Shaded areas indicate states the Company maintains clubs3. New Orleans is a licensed venue

New York City

Minneapolis

Indianapolis

New Orleans

Austin

Houston(HQ)San Antonio

Miami

Charlotte

Philadelphia

Dallas

PhoenixLos Angeles

Geographic StrategyReal Estate• Company owns real

estate for 85% of its facilities

• Adult club licenses typically tied to the physical location


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79

10

1416

18

22

34

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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Creating Company/Shareholder Value• Maximize existing club licenses and

properties

• Acquire new adult clubs

Continue to look at several targets

Not indiscriminate buyers

500 clubs in our target market

• Roll out our restaurant concepts

Initial target: 10 open or in development by 12/31/14

• Pay down higher priced debt

• Unlock real estate value

January 2014 Investor Presentation – The Future

Units Open at End of Each Fiscal Year26% CAGR, FY2003-2013

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New & Planned LocationsQuarter Brand Location4Q13-Opened Temptations (AC) Beaumont, TX

4Q13-Opened Vivid Cabaret (AC) Los Angeles, CA

1Q14-Opened Jaguars (AC) Houston, TX

1Q14-Acquired Black Orchid (AC) Dallas, TX

2Q14-Just Opened Vivid Cabaret (AC) New York, NY

2Q14-Opens January Bombshells #2 (R) Webster, TX

Planned for FY14 Rick’s Cabaret (AC) Odessa, TX

Planned for FY14 Bombshells #3 (R) Austin, TX

Planned for FY14 Bombshells #4 (R) Beaumont, TX

Considering BombshellsHouston, TXMiami, FLSan Diego, CA

Key: (R) Restaurant, (AC) Adult Club

Current Status• 42 adult club and

bar/restaurant locations

• 4 in various stages of development

• 3 under active consideration, not including acquisitions


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Unlocking Real Estate Value

• New York Transaction Contract to buy 50 W33rd Street location for $10M over next 5 years

Sold residential air rights to third party for $8 M, enabling us to reduce monthly lease to $100K for next 5 years vs. $180K

• REIT• Intend to form privately-held REIT or similar investment vehicle

• Rick’s will hold a minority equity interest

• Rick subsidiary will manage the REIT’s asset portfolio


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Balance Sheet Update (9-30-13 vs. 9-30-12, $ in millions)

• Cash: Nearly doubled to $10.7• LT Debt: $78.6

$38.7 real estate debt

$29.2 sub level debt from acquisitions

$7.2 parent company level debt

• Current portion of LT Debt: $8.8 Paying off ~$2 per quarter

• Tootsies Debt: $5.3 Our most expensive debt

Paying down as fast as possible

$87.6

$97.1

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

9-30-12 9-30-13

Total Permanent Stockholders’ Equity


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FY14 Guidance• Revenues

Continuing to target 20% to 30% annual growth

Growth from existing clubs and restaurants, and ones expected to open in 2014

Potential upside from major sporting events

• Operating Margin Continued expansion

Benefit from recovery strategies at adult clubs

Operating efficiencies through improved purchasing on larger base of clubs and restaurants

• EPS Non-GAAP of ~$1.70

GAAP of ~$1.20


Event LocationPro Football’s Big Game (February)

NYC

Big East (March) NYC

Final Four (April) DFW

NHL (FullSeason)

NYCDFWMinneapolis

Big Sports Events 2014

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Principal Corporate Office10959 Cutten RoadHouston, TX 77066Phone: (281) 397-6730

Investor RelationsGary FishmanSteven AnrederPhone: (212) 532-3232

IR Websitewww.ricksinvestor.com NasdaqGM: RICK

Contact Information

January 2014 Investor Presentation – Investor Relations

investor presentation (pdf version) - rick's cabaret international, inc

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