Allan Priaulx - IR Eric Langan - President and CEO

David Yamamoto - Montgomery Securities

Welcome to the Third Quarter Conference Call and Webcast for Rick's Cabaret International Inc. Hosting the call today, are Eric Langan, President and CEO of Rick's Cabaret. He is joined by Phillip Marshall, the CFO of the company and by Allan Priaulx, Head of Investor Relations. Following a brief presentation of the third quarter results, Mr. Langan and Mr. Marshall will be happy to take your questions. And now I give you to Allan Priaulx. Please go ahead, sir.

Thank you, Matt. Before we begin today’s call, we need to give you the Safe Harbor statements. In this conference call, you may hear or see forward-looking statements that involve a number of risks and uncertainties that could cause the company’s actual results to differ materially from those indicated in this document or this call, including the risks and uncertainties associated with operating and managing an adult business; the business climates in New York City and elsewhere; the success or lack thereof in launching and building the company's businesses in New York City and elsewhere; the company's ability to identify and secure suitable locations for new nightclubs on acceptable terms, open the anticipated number of new nightclubs on time and within budget; achieve anticipated rates of same-store sales; hire and train additional nightclub personnel and integrate new nightclubs into its operations; unexpected increases in the costs of its sales or employee, pre-opening or other expenses; the economic conditions in the new markets into which the company expands and possible uncertainties in the customer base in these areas; fluctuations in quarterly operating results; the impact of any negative publicity or public attitudes; competitive pressure from other national or regional nightclub chains; risks and uncertainties related to the operational and financial results of our websites, conditions relevant to real estate transactions, and numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. Rick's has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances. For further information please visit www.ricks.com. And now I'm happy to present Eric Langan, our CEO.

Thank you, Allan. We'll begin today with a overview of the presentation. We'll start with reviewing our third quarter '07 results. We're going to discuss the drivers of the increase in our revenues and earnings. The effects of new clubs on our income streams, update our acquisition strategy, review our guidance for '07 and review our outlook for fiscal 2008. To begin the third quarter of 2007 our net income exceeded $1 million, we're up 62% over 2006. Earnings per share or basic share were $0.17 versus $0.13. Our revenue topped $8.4 million which was up 35% over 2006 and our cash flows are up 52% for the nine months to $2.8 million. The main driving factors, of course for the club, over the club operation with a gross income of $8.2 million and net income before tax on the club levels of $1.9 million. The main drivers of this is the Ft. Worth location which exceeded our expectations, we closed at the end of April. So we basically have about 10 weeks in the quarter from that location. The Austin and the San Antonio locations are now improving. We were able to cut some losses in San Antonio, although I changed some expenses and actually increased our revenues a little. The Austin Club is continuing to improve, we had a grand opening in August of the second floor of VIP area and we're hoping to see continued growth there. And of course our New York City location having record months, and we are still continuing to see very strong growth in our New York City location. Same club, same period, sales were up about 10%, which we're very pleased with. We hope to continue that trend. And we have conclusion of date, as we said, Ft. Worth location is contributing from day one to our earnings and revenues. And we're starting construction soon on the second floor of VIP and dining area, which we believe will add additional revenues and earnings from that location The recently announced Philadelphia acquisition is on track and hopefully we will close either in the fourth quarter or early in the first quarter. There we'll be adding additional stake out services and a sports bar that we hope will help increase the revenues of that acquisition. With regards to our acquisition strategy, we are becoming very choosy in the locations that we are seeking now. And we will probably continue with that going into at least through the next fiscal year, and that we are looking to target in major metropolitan areas, but as well as that we are looking for something that will help contribute to our national branding. We strongly believe that we need to continue to build in our national brand so that we can become the brand of our industry. If you go major cities right now, throughout the country and if that comes, about a gentlemen’s clubs which one to go to, where is the best bet. You are going to get well about 30 different answers, and we hope to take that and create a brand, so that when you go to these different markets Rick's is the brand that hear about each and every time. We are going to continue to look at the three to six times our earnings just depending on the potential and, of course, depending on whether the license is grandfathered and the barriers to entry. We are going to plan to continue to use equity and some combination of cash and stock in those acquisitions. We are also looking at revenue entries this from Latin America with our new licensing agreement with Rick's Buenos Aires; the remodeling is underway. We hope to see that club open sometime in September provided the construction is to be done on time. Excuse, me but, but I think that will definitely come in no later than some time in October, November with their opening, but right now they are still on course to open sometimes towards the end of September. Talking on guidance for '07, we are going to continue to standby by our guidance for revenues of $32 million to $34 million with our net income in the $2.6 million to $2.8 million range. However, both acquisitions could impact that guidance. So we have -- probably it's very difficult to close on an acquisition other than the Philadelphia location by the end of September, it is likely we can still incur some cost if we had a major acquisition come up that would then close in a later quarter. Our 2008 outlook for the year is going to continue to be at this point revenues of $48 million to $50 million with net income of about $0.06, our estimates based on our outstanding share count of about $0.85 a share. At the end of this fiscal year when we have our Earnings Call, we'll look at giving revised guidance for '08. I want to touch on just a little bit is that our guidance right now for '08 based on our current revenues and based on the Philadelphia acquisition more than likely only require us to make one or maybe two acquisitions in '08. We feel of course that we could make more acquisitions in that, but that's what we are looking for in guidance right now or in our outlook for '08. And as we enter this prime season, I believe that August and September and actually even early October are the prime times when guys that own clubs, the club owners really look to figure out how they are going to get out of the business, because they are coming after the summer slowdown. And while at Rick's we haven't seen that summer slowdown, I've talked to some competitors who are actually seeing that slowdown and our number of calls on acquisitions has actually been increasing over the last few weeks. So we have a better idea as we enter into October, November what the acquisition outlook will be like. That will end the formal presentation. I'd like to remind everyone that we do have our Due Diligence Ball tonight at the club in New York city at 50 West 33rd are as free admission for anyone that mentioned the Due Diligence Ball and we'll have $7 you call us until 9:00 PM, so I invite everyone to come out. And at this time, we'll open the question-and-answer session, as if anyone has any questions Matt can say how to get in the queue.

(Operator Instruction). First question comes from David Yamamoto, Montgomery Securities. David Yamamoto - Montgomery Securities: Good afternoon. And first I just want to say congratulation on a fantastic quarter.

Thank you. David Yamamoto - Montgomery Securities: Regarding the forward club, you had mentioned that the result early off exceeded your expectations. Were the result could better on both the revenue and the profit line?

Yes. David Yamamoto - Montgomery Securities: Okay.

And for the summer months and actually for the May and June, which isn’t weak are really considered summer months. We've seen no slowdown and actually have year-over-year increases from what we based, on what would be brought the club on. So we are very happy with that. David Yamamoto - Montgomery Securities: Great. And last quarter you had mentioned that the Austin and San Antonio clubs reported an operating loss around $220,000 if I recall correctly. Can you just give us an update as sort of progress of those clubs in Q3 and your thoughts going forward?

Actually, I should have dug into that, I know that the results are much better as you can see from our total earnings. But I didn’t actually get into the actual losses on the Austin location. I know the San Antonio club is very close to breakeven on a cash basis. But I'm not really sure were the Austin club is right now. Probably the Austin club is still a little bit of a drain and I don’t have that exact dollar amount but much less than, than it was in the previous quarter. David Yamamoto - Montgomery Securities: Okay, great. And then lastly we were quite surprised by the strong sales into July, were those increases concentrated with only a few clubs or was it more widespread?.

It was really more widespread, basically what we have seen this year, and I am still in little quandary over myself as we haven't seen a summer slowdown. Typically, around mid-June as school end for end of May, when school ends it depends on what part of the country you are in. We typically see a slowdown in our sales, and this year we have not seen that slowdown and as we've continued into July, as you are seeing from our July numbers we've experienced absolutely no slowdown and so far in August we've seen basically no slowdown. So school starts in most of our markets during the next two weeks and we'll see during that two week period I guess if we are going to experience any slowdown at school starts backup. David Yamamoto - Montgomery Securities: Well, great. Thank you very much and again congratulations.

Thank you.

(Operator Instructions). At this point we have no questions on the queue. I'll turn it back over to our host.

Okay. Well, we'll wait for a few more minutes just on the call if there are any more questions, but in the mean time I just want to remind you about New York City and you have some free times tonight, please come down and do your due diligence on Rick's Cabaret at the club at 50 West 33rd Street. Drinks are unbelievably cheap at $7 a piece for our guests, and you get a chance to see your assets in action.

We do have another question from the queue. This is a follow-up from Mr. David Yamamoto with Montgomery Securities. David Yamamoto - Montgomery Securities: A good opportunity to ask more questions.

Certainly. David Yamamoto - Montgomery Securities: So how have customers responded to the new VIP Suite and Skybox, Skyboxes in your Austin locations?

Its unbelievable. The thing about the Austin locations in that we are working on, we finally got the pictures and I think they should be on our website sometime tomorrow afternoon. And you will actually be able to see the difference in this location. It is just a phenomenal location, Austin. There is nothing to compete with the facility itself. It's a little over 20 some thousand square feet. Its two storey; most of the clubs that are in Austin were built in the late 1980s, early 1990s and they have had very little modernization. And this club is probably one of the nicest club that we own, very modern and really built with the VIP customer in mind. David Yamamoto - Montgomery Securities: Right.

And the response was, I mean, everybody was just, they couldn't believe that something like that existed in Austin, Texas. David Yamamoto - Montgomery Securities: Right. And Eric, you had mentioned a little bit about just seasonality with regards to club owners and them contacting you with the possibility of acquiring them. How would you characterize the acquisition by them right now?

It's very active. There are a lot of people, there are a lot of people shopping whether across their work, but I do believe that there are some very serious sellers out there as well. People looking how to monetize their asset and figure out what their escape route is or their exit strategy is, because, you know, this is not something they want to do forever. David Yamamoto - Montgomery Securities: Right, great. Well, thank you very much.

Thank you.

(Operator Instructions) And gentlemen we have no questions.

All right. Yes, we will end the call and hope we will see everyone down the club.

Thank you very much, Lagan.

Yes.

And once again, this does conclude today’s call. Thank you for joining us and have a great day.