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

Transcription

1 Rick's Cabaret International, Inc. (NASDAQ: RICK) Investor Presentation January 2014

2 January 2014 Investor Presentation Forward Looking Statements Certain 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 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 or on the SEC's internet website at 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. 2

3 January 2014 Investor Presentation Explanation of Non-GAAP Terms Non-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 3

4 January 2014 Investor Presentation Overview Quick Facts Founded 1994 Based in Houston NASDAQ listed 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 Key Statistics (FY ends September 30 th ) 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 , in 10 States Shares Outstanding 9.6 M Shares in Public Float 7.8 M Market Cap at $106 M Enterprise Value at $173 M Stock Performance at vs. year ago 36% 4

5 January 2014 Investor Presentation Overview Investment Thesis Adult 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 Texas Enables us to maximize revenues and profits per unit Complements acquisition of adult clubs Can lease vs. own Better understood by investors 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 5

6 January 2014 Investor Presentation Overview Seasoned Management Team Name Eric S. Langan Phillip K. Marshall Ed Anakar Travis Reese Title Chairman, CEO & President Chief Financial Officer Director of Operations Director, Executive Vice President Years With Rick s Background years industry experience as owner/operator Founder / Director of Adult Club Executives (ACE) 6 Audit Partner, KPMG CFO of CDT Systems, Inc. (CDTN) years hospitality industry management experience 15 IT executive Director of Internet Division 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 6

7 January 2014 Investor Presentation Overview EBITDA Growing Faster than Revenues ($ in millions) Revenues EBITDA $120 $112 $30 $28 $100 $95 $25 $24 $24 $83 $83 $80 $76 $20 $18 $60 $15 $ % CAGR 16.7% CAGR $40 FY09 FY10 FY11 FY12 FY13 $10 FY09 FY10 FY11 FY12 FY13 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 7

8 January 2014 Investor Presentation Overview But Significantly Undervalued vs. Industry Growth & Profitability RICK Leisure Industry (includes Restaurants) Difference Sales - 5 Yr Growth Rate (%) % Gross Margin (TTM) (%) % EBITD Margin (TTM) (%) % Valuation P/E Ratio (TTM) % Price to Sales (TTM) % Price to Free Cash Flow (TTM) % Source: Interactive Data, accessed

9 January 2014 Investor Presentation The Business Operating Strengths Key Factor 1. Efficiencies of scale 2. Multiple brands and formats 3. Las Vegas style cash / credit card security 4. Friendly, entertaining, quality experience 5. Zero tolerance to illegal conduct 6. Critical mass and credibility Comment Buy liquor, food, advertising and other services at increasingly lower unit costs Expands market by reaching wider, more varied types of customers Facilitates clustering Maximizes a license s potential Very low shrinkage Overnight cash register and inventory reconciliation Webcams pointed at every register Encourages regular customer visits Attracts the best managers, staff and entertainers Typically provides first access to deals Ability to use seller financing 9

10 January 2014 Investor Presentation The Business High Gross Margins (FY13) Category Comment % of Revenue Gross Margin Service Cover charges Patron charges Dancers Room rentals 44.0% Approaching 100% 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% 10

11 January 2014 Investor Presentation The Business Multiple Adult Club Brands Rick 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 years African-American professionals Younger and blue-collar patrons years Higher net worth, mature patrons Younger patrons (tourists, college students) Primarily workers in booming Texas energy industry Younger patrons 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 11

12 January 2014 Investor Presentation The Business 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 New Sports Bar/Restaurant Brands Bombshells Restaurant & Bar Military themed Looking for sites near bases Ricky Bobby Sports Saloon 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

13 January 2014 Investor Presentation The Business Geographic Strategy Real Estate Company owns real estate for 85% of its facilities Adult club licenses typically tied to the physical location Minneapolis Indianapolis New York City Philadelphia Charlotte Los Angeles Phoenix Dallas Austin San Antonio Houston (HQ) New Orleans Miami Clustering of adult clubs and restaurants in Texas Select adult clubs in major metro areas, many with big tourist businesses Notes 1. The map above details Rick s locations as of September Shaded areas indicate states the Company maintains clubs 3. New Orleans is a licensed venue 13

14 January 2014 Investor Presentation The Future 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 Units Open at End of Each Fiscal Year 26% CAGR, FY

15 January 2014 Investor Presentation The Future Current Status 42 adult club and bar/restaurant locations 4 in various stages of development 3 under active consideration, not including acquisitions New & Planned Locations Quarter Brand Location 4Q13-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 Bombshells Houston, TX Miami, FL San Diego, CA Key: (R) Restaurant, (AC) Adult Club 15

16 January 2014 Investor Presentation The Future Unlocking Real Estate Value New York Transaction REIT Contract to buy 50 W33 rd 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 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 16

17 January 2014 Investor Presentation The Future Balance Sheet Update ( vs , $ 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 $100 $90 $80 $70 $60 $50 $40 $30 Total Permanent Stockholders Equity $87.6 $97.1 $20 $10 $

18 January 2014 Investor Presentation The Future Big Sports Events 2014 Event Pro Football s Big Game (February) Big East (March) Final Four (April) NHL (Full Season) Location NYC NYC DFW NYC DFW Minneapolis 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 EPS Continued expansion Benefit from recovery strategies at adult clubs Operating efficiencies through improved purchasing on larger base of clubs and restaurants Non-GAAP of ~$1.70 GAAP of ~$

19 January 2014 Investor Presentation Investor Relations Contact Information Principal Corporate Office Cutten Road Houston, TX Phone: (281) Investor Relations Gary Fishman Steven Anreder Phone: (212) IR Website NasdaqGM: RICK 19