RCI Hospitality Holdings, Inc. · NASDAQ:RICK
RCI Hospitality — Sidoti Spring 2017 Emerging Growth Conference
20 slides from RCI Hospitality's conference presentation, Mar 29, 2017
Slide 1: The Innovator in Bar-Restaurant-Entertainment Themed Hospitality
The Innovator in Bar-Restaurant-Entertainment Themed Hospitality NASDAQ: RICK Sidoti Spring 2017 Emerging Growth Conference March 29, 2017 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: Non-GAAP Financial Measures
Non-GAAP Financial Measures In addition to our financial information presented in accordance with GAAP, management uses certain non-GAAP financial measures, within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a
Slide 4: Investment Overview
Investment Overview • Leader in gentlemen's clubs and sports bars/restaurants The Business • High gross margins and strong cash flow • Capital allocation strategy provides disciplined guidelines on using our FCF • Revenues: Grew 17x to $135M (FY16) over last 18 years Financial • Free Cash Flow: Brea
Slide 5: History
History • 1983: Founded by Robert Watters as Rick’s Cabaret International • 1995: NASDAQ Initial Public Offering • 1998: Merged with Eric Langan’s publicly traded company of smaller clubs • 1999: Langan named President and CEO • 2014: Changed corporate name to reflect transformation to hospitality c
Slide 6: Entertainment Driving Traffic
Entertainment Driving Traffic Key Driver* Entertainment Food DAVE & BUSTER’S chili’s RCI Hospitality RCI Hospitality Dave & Buster’s Brinker International 36 clubs featuring beautiful 7 sports bars/restaurants 92 sports bars/restaurants 1,658 casual dining Chili’s dancers/entertainers open/in develo
Slide 7: Leader in Gentlemen's Clubs
Leader in Gentlemen’s Clubs Subsidiaries own/operate 36 venues throughout the US Elegant clubs with • Powerful brands attract different market segments restaurants • Quality environments, beautiful entertainers, excellent restaurants High-end, high-energy club • Larger units in big cities, smaller o
Slide 8: Fast-Growing Bombshells Chain
Fast-Growing Bombshells Chain First Military-Themed Franchise in Sports Bar Segment • Leverages expertise in bars, restaurants and entertainment • Drives traffic through design strategy and attractive Bombshells Girls in uniforms • Large venues (8,000 sq. ft.+2,400 sq. ft. patio), full bar, scratch
Slide 9: Business Advantages
Business Advantages • Most clubs in the industry are individual owner operated Competitive • They have little access to bank or private equity financing Edge • Sophisticated systems, purchasing, best practices and training Nationwide • Ability to maximize management, marketing and profitability Scal
Slide 10: Financial Advantages
Financial Advantages Significant Feature of Our Business (FY16 data) Free Cash Flow ($M)* • High gross profit margin business (85%) • Fast inventory turnover (9.4x) • Low maintenance capex ($2.5M) $20.5 $18.0 Strong FCF Generation $14.9 • Averaged 16% of revenues FY11-16 • Defined as operating cash
Slide 11: Disciplined Capital Allocation Strategy
Disciplined Capital Allocation Strategy 20% 1. Buy / open new units or expand Return Using FCF to Buy Back Shares existing ones only if: – We can achieve target cash on cash return of 25-33% or more After Tax Yield 15% 14.2% o Target intended to provide superior risk 13.2% adjusted return vs. buying
Slide 12: 1Q17: Good Start to New Year
1Q17: Good Start to New Year Comparisons to year ago periods unless otherwise noted • GAAP: $0.30 vs. $0.25 – Up 20% EPS • Non-GAAP*: $0.31 vs. $0.30 – Up 3.3% • $5.1M vs. $3.9M – up 33.1% Free Cash • On track with initial FY17 target Flow* • Total up 0.8%, reflecting disposition of underperformers
Slide 13: Sales Growing (year over year)
Sales Growing (year over year) Same Store Sales 3.6% Club & Restaurant Sales 1.3% 1.8% 0.7% 0.1% 0.1% -0.7% Club & Restaurant Sales include all Service, Beverage and Food sales, but only -1.9% some of Other -6.3% -2.3% 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 Total Corporate Revenues 1Q17 C
Slide 14: Margins Expanding
Margins Expanding Highlights Gross Profit Margin • Gross profit margin expanding with 85.5% rebound in service revenues 85.3% • 1Q17 non-GAAP operating margin reflects 84.8% – Improved performance 84.5% 84.4% – Offset by expensed investments to build a stronger foundation for future growth o Transit
Slide 15: Good Trends in Cash
Good Trends in Cash Free Cash Flow Free Cash Flow ($M)* Cash ($M) • Up 33.1% YoY $12.1 • Reflects increased net income and focus $11.3 on generating cash Cash • Up 6.5% from 9/30/16 • Reflects strong sales/operations $5.1 • Large, but routine tax payments in 2Q17 Sale of Non-Income Producing Propert
Slide 16: Buybacks & Elimination of Dilutive Securities
Buybacks & Elimination of Dilutive Securities Shares Outstanding (M) Shares Average Quarter Total ($M) Bought Price 10.3 1Q16 282,762 $9.88 $2.8 9.9 2Q16 218,140 $8.76 1.9 9.7 3Q16 106,093 $10.14 1.1 4Q16 140,086 $10.92 1.5 1Q17 89,685 $12.28 1.1 Total 836,766 $10.05 $8.4 12/31/14 12/31/15 12/31/16
Slide 17: Long-Term Debt
Long-Term Debt ($ in millions, as of 12/31/16) Total of $106.4* Average Weighted Rate: 7.25% $20.0 Secured by Subsidiary Stock (19%) • Average weighted rate: 10.73% • Secured by three of the company’s more profitable groups of subsidiaries $76.7 Secured by Real Estate (72%) • Average weighted rate:
Slide 18: Conclusion
Conclusion Investment Opportunity • Growing trend in bar-restaurant-entertainment • Clubs generate strong free cash flow • Substantial resources to finance growth Disciplined Capital Allocation • FY16: Significant share buyback, dividend initiation, elimination of dilutive securities • FY16-17: New
Slide 19: FCF and Share Count
FCF and Share Count $23.3 Free Cash Flow (TTM)* ($M) $21.8 $20.5 $20.5 $18.7 $18.2 $14.9 $14.6 $13.8 $12.5 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 11.01 Capital allocation strategy started going into FY16 Diluted Share Count (M) 10.93 10.71 10.64 10.36 10.28 10.22 10.05 9.84 9.81 4Q14 1Q15
Slide 20: Contact Information
Contact Information Corporate Office 10737 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
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