RCI Hospitality Holdings, Inc. · NASDAQ:RICK
RCI Hospitality — Investor Presentation (March 2016)
26 slides from RCI Hospitality's investor presentation, March 2016
Slide 1: The innovator in bar-restaurant-entertainment hospitality
The innovator in bar-restaurant-entertainment hospitality NASDAQ: RICK Investor Presentation March-April 2016 www.rcihospitality.com
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements contained in this presentation regarding RCI Hospitality 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
Slide 3: Overview: Three Parts to Our Presentation
Overview Three Parts to Our Presentation • What do we do • Why it’s a good business • How we are growing EPS and cash flow, buying back shares and now paying a dividend 3
Slide 4: Leader in Gentlemen's Clubs
Leader in Gentlemen’s Clubs Subsidiaries own/operate 38 of the best venues in the US Elegant clubs with restaurants • Powerful brands, quality environments, beautiful entertainers, excellent restaurants • Larger units in major cities High-end, high-energy club for young professionals • Smaller ones
Slide 5: Fast-Growing Bombshells Chain
Fast-Growing Bombshells Chain First Military-Themed Franchise in Sports Bar Segment • Leverages expertise in bars, restaurants and entertainment • Drives traffic through design strategy and attractive Bombshell Girls in uniforms • Large venues (7,500-10,000 sq ft), full bar, scratch kitchen, big fla
Slide 6: The Bar-Restaurant-Entertainment Spectrum
The Bar-Restaurant-Entertainment Spectrum DAVE & BUSTER’S chili’s Key Traffic Driver Entertainment Food RCI Hospitality RCI Hospitality Dave & Buster’s Brinker International 38 clubs featuring beautiful 5 sports bars/restaurants 81 sports bars/restaurants 1,641 casual dining Chili’s dancers/entertai
Slide 7: RCI Advantages: Nationwide Scale
RCI Advantages: Nationwide Scale Industry Makeup • Most clubs individual owner operated RCI’s Advantages • Nationwide scale, resources and operating efficiencies • In business since 1983 • Sophisticated systems, purchasing, best practices, training, and innovation • Ability to maximize management, m
Slide 8: RCI Advantages: Expanded Access to Bank Financing
RCI Advantages: Expanded Access to Bank Financing More Banks Offering RCI Traditional Commercial Loans • Finance real estate acquisitions • Refinance higher rate mortgages RCI’s Advantages • Our real estate is now a major source of collateral • Helps finance growth along with our strong free cash fl
Slide 9: Unit Growth
Unit Growth • 2011-2015: Period of major expansion • 9/30/15 units almost double from 9/30/11 • Took advantage of acquisitions and opportunities to create new clubs 43 Units 2015 Unit Mix Bombshells 5 units 23 Units Clubs 38 units 2011 2015 9
Slide 10: Revenue Growth ($ in millions)
Revenue Growth ($ in millions) 2011-2015: Compound annual growth rate of ~15% $144.7 2015 Segment Mix Bombshells 13% $83.5 Other 2% Clubs (outside Texas) 44% Clubs (in Texas) 41% 2011 2015 10
Slide 11: Revenue Mix ($ in millions)
Revenue Mix ($ in millions) RCI Dave & Buster’s Fiscal 2015 Last 12 Months as of Q3* Entertainment Entertainment Related & Other Related & Other 44% 53% Food & Food & Beverage Beverage 56% 47% * Source: Dave & Buster’s March 2016 Investor Presentation 11
Slide 12: EPS Growth
EPS Growth ($ in millions) 2011-2015 $1.39 • Non-GAAP up 34% Non-GAAP • GAAP up 14% 1Q16 $1.04 Non-GAAP • Non-GAAP of $0.30 • GAAP of $0.25 GAAP FY16 $0.90 • Expect year over year growth GAAP $0.79 2011 2015 12
Slide 13: Strong Free Cash Flow ($ in millions)
Strong Free Cash Flow ($ in millions) Significant Feature of Clubs • High gross margin business (86% in FY15) • Low capex $15-$18 • Inventory turns quickly $14.9 RCI’s FCF Performance • Averaged 16% of revenues 2011-2015 • Defined as operating cash flow less maintenance capex FY16 Target • $15-$18M
Slide 14: Disciplined Capital Allocation: After Tax Yield
Disciplined Capital Allocation Strategy Use FCF to buy back shares Required Return Using FCF 40% 37% to Open / Acquire New Unit At Least 2X Return to Risk • Compelling after tax yield of 33% Adjust vs. Stock Buy Back 17% with shares in $9 range 30% 30% 27% Buy / open new units only if: After Tax Yie
Slide 15: Share Buy Backs & Cash Dividend
Share Buy Backs & Cash Dividend Capital Returned Shares Retired via Buybacks Shares Outstanding (M) via Buybacks ($M) 336,714 10.295 $3.3 $2.3 225,280 9.948 FY15 FY16 to Date as of FY15 FY16 to Date as of 1/31/15 1/31/16 1/31/16 1/31/16 Increased Share Buybacks in FY16 • We have already spent and bo
Slide 16: FY16 Plan to Expand Cash Flow
FY16 Plan to Expand Cash Flow Rent Going Down Reduce Costs (as % of revenues) • Expanded access to bank financing enabling 4.3% us to: Refinance high cost debt at lower interest rates 3.8% 3.6% 3.6% Extend amortizations 3.4% 3.3% Buy properties to reduce occupancy costs 3.1% 2.8% Improve Club
Slide 17: Open New Units with Higher Return Potential
Open New Units with Higher Return Potential 3rd Club in NYC • To open 2nd half of FY16 • Sports themed, first of its kind in Manhattan, near Madison Square Garden • Why returns should be higher 50-50 joint venture with landlord contributing adult license and real estate Management and cost effic
Slide 18: FY17 Preview
FY17 Preview Strong Sports Line Up • NFL “Big Game” in Houston (7 units) • NBA All Star Game in Charlotte (1 club) • Could add $1.5-$2M in incremental, high margin sales Bombshells Expansion • 6th unit to open 1Q17 • Expect to site a 7th unit • Franchise sales anticipated Reduced Debt / Property Sal
Slide 19: Conclusion
Conclusion Investment Opportunity • Growing trend in bar-restaurant-entertainment • Clubs generate strong free cash flow • Implementing plan to grow FCF even more • Can finance growth without raising capital Disciplined Capital Allocation • Buying back significant number of shares • Initiated meanin
Slide 20: Contact Information
Contact Information Corporate Office 10959 Cutten Road Houston, TX 77066 Phone: (281) 397-6730 Investor Relations Gary Fishman Steven Anreder Phone: (212) 532-3232 IR Website www.rcihospitality.com Nasdaq: RICK 20
Slide 21: Appendix
The innovator in bar-restaurant-entertainment hospitality NASDAQ: RICK Investor Presentation Appendix March-April 2016 www.rcihospitality.com
Slide 22: History
History Timeline Total Return March 1999-March 2016 • 1983: Founded by Robert Watters as Rick’s Cabaret International 810% • 1995: NASDAQ Initial Public Offering • 1998: Merged with Eric Langan’s publicly traded company of smaller clubs • 1999: Langan named President and CEO • 2014: Name change refl
Slide 23: Strong Management Team
Strong Management Team Executive Background • President and CEO since 1999 Eric Langan • Involved in nightclub/restaurant business since 1989 Chairman, CEO, President • Acquired his first club at age 21 with proceeds from the sale of his baseball cards • Merged his XTC Cabaret chain with RCI in 1998
Slide 24: Capital Allocation Metrics
Capital Allocation Metrics After Tax Free Cash Flow (FCF) Yield of Buying Back Shares(1) Annual Free Cash Flow (mm) $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 Stock Price $8.00 $9.00 $10.00 $11.00 $12.00 $13.00 FD Shares at 12/31/15 with expected dilution from 10.023 10.023 10.023 10.216 10.216 10.397 conv
Slide 25: Long-Term Debt ($ in millions)
Long-Term Debt ($ in millions) Total of $94.8 at 12/31/15 $20.3 Secured by Subsidiary Stock • Average weighted rate: 10.61% • Secured by three of RICK’s more profitable groups of subsidiaries $6.8 Texas Comptroller Settlement $60.3 Secured by Real Estate • Average weighted rate: 9.58% • Average weig
Slide 26: Calendar
Calendar Date / Time Event* April 12, 2016 2Q16 Club & Restaurant Sales May 10, 2016 2Q16 & 6M16 Financial Results July 12, 2016 3Q16 Club & Restaurant Sales 3Q16 & 9M16 Financial Results August 9, 2016 (tentative) Date might be adjusted around 23rd Annual Gentlemen’s Club EXPO in New Orleans (Augus
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