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

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

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 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. 2

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 www.ricksinvestor.com. 3

January 2014 Investor Presentation – Overview Investor Snapshot Quick Facts • Nation’s leading hospitality company in adult gentlemen’s clubs and sports bars/restaurants • Founded 1994 • Based in Houston • Customers: Focus on friendly, entertaining, quality experience • NASDAQ listed • 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 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% 4

January 2014 Investor Presentation – Overview Investment Thesis Adult Clubs Bar/Restaurants • Consolidation and growth of a classic • Leverages core expertise and infrastructure American form of entertainment into a  Enables us to maximize revenues and national, professionally managed chain profits per unit   $2 B revenue, fragmented industry (3,800- Complements acquisition of adult clubs 4,000 clubs)  Can lease vs. own  Limited number of licenses, typically tied to  Better understood by investors real estate Texas  We are the primary exit strategy for sellers • 76% of units, generating 50% of adult club  Clubs typically generate higher margins and and sports bar/restaurant revenues (1Q14) cash flow than traditional bar/restaurants  Enables us to fuel growth  Benefiting from strong job and population  Industry awareness similar to gaming in the growth 1980s  In-migration of corporate offices and revitalization of domestic energy industry 5

January 2014 Investor Presentation – Overview Seasoned Management Team Years Name Title Background With Rick’s Eric S. Langan Chairman, CEO & 15 • 20+ years industry experience as President owner/operator • Founder / Director of Adult Club Executives (ACE) Chief Financial 6 • Audit Partner, KPMG Phillip K. Marshall Officer • CFO of CDT Systems, Inc. (CDTN) Ed Anakar Director of 13 • 20+ years hospitality industry Operations management experience Travis Reese Director, 15 • IT executive Executive Vice • Director of Internet Division President • 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

January 2014 Investor Presentation – Overview EBITDA Growing Faster than Revenues ($ in millions) Revenues EBITDA $120 $30 $112 $28 $100 $25 $95 $24 $24 $83 $83 $80 $76 $20 $18 $15 $60 $15 10.3% CAGR 16.7% CAGR $40 $10 FY09 FY10 FY11 FY12 FY13 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

January 2014 Investor Presentation – Overview But Significantly Undervalued vs. Industry Leisure Industry RICK Difference (includes Restaurants) 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% Source: Interactive Data, accessed 01-16-14 8

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

January 2014 Investor Presentation – The Business High Gross Margins (FY13) Category Comment % of Revenue Gross Margin Service • Cover charges 44.0% Approaching • Patron charges 100% • Dancers • Room rentals Alcohol • Liquor 40.6% 78.5% • Beer • Wine Food & • Food 9.3% 54.0% • Non-alcoholic drinks Merchandise • Merchandise • Cigars, cigarettes Other • Internet and media revenue 6.1% 95.4% • ATM commissions • Valet income • Video games / vending 100% 86.7% 10