Gary Fishman – Investor Relations Eric Langan – Chairman, President and Chief Executive Officer Phillip Marshall – Chief Financial Officer

Steven Martin – Slater Capital Management LLC Michael Mork – Mork Capital Management

Greetings and welcome to the RCI Hospitality Holdings Inc., formerly Rick's Cabaret International Inc. Third Quarter 2014 Earnings Conference Call and webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It's my pleasure to introduce Gary Fishman, Investor Relations for RCI. Thank you, sir. You may begin.

Thank you. Please turn to Slide 2. Thank you, everybody, I just wanted to remind you that our Safe Harbor statement is posted at the beginning of our conference call presentation. It reminds you that you may hear or see forward-looking statements that involve a number of risks and uncertainties. I urge you to read it. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments which occur afterwards. And please turn to Slide 3. I also urge you to read the explanation of non-GAAP and adjusted EBITDA measurements that we use and that we are including in our presentation and news release. Finally, I’d like to invite everyone in the New York City area to join us at Rick's Cabaret, New York tonight at 6 o' clock to get a firsthand look at one of our flagship clubs. Rick's Cabaret, New York is located at 50 West 33 Street, between Fifth and Broadway. If you have an RSVP, ask for me name at the door. Now here is Eric Langan, President and CEO of RCI Hospitality.

Thank you, Gary. Thank you for joining us today. We've got a lot to discuss. If you'll please turn to Slide 4, number one, welcome to our first earnings conference call for RCI Hospitality Holdings Incorporated, our new corporate name. RCI Hospitality reflects how far we've come since we first began as a publically traded company in 1995. Back then we had just one adult club and modest revenues. Today, we have 39 adult clubs and are well on our way towards owning and operating 10 sports bars and restaurants. We have in all 15 major brands and formats with operations across the country. Changing our name represents a significant step. It marks our company's transformation into a profitable and growth oriented player in the hospitality field, and one focused on solid niche market with what we believe is a highly promising future. As for the quarter, we are pleased to report that our core performance increased nicely year-over-year. Revenues reached a new record, core operating margin was up and we continue to generate a healthy amount of cash. Let me provide a little perspective on these results. Our second quarter of this year was a turnaround quarter. We significantly increased our level of revenues, core operating margin and cash flow. The recent third quarter on the other hand was a clean-up quarter. We took advantage of our higher level of performance to resolve a number of outstanding issues, particularly on the legal front. Based on our results year-to-date we are comfortable reaffirming our fiscal 2014 guidance for revenues, GAAP and non-GAAP EPS. In addition, we have spent some time reviewing and updating our capital allocation strategy to achieve maximum benefits for our shareholders of our strong and growing cash flow. We are focused on using excess cash to produce the best possible returns on investment for shareholders versus the top line, which has been our major concentration in recent years. One result was that starting in the fourth quarter we have began open market share buyback, utilizing our board authorized $10 million repurchase program, the bulk of which remains to be used. Please turn to Slide 5. Here is how we look at our performance for this quarter. On a GAAP basis we earn $0.07 per share. That includes $0.29 it cost us to settle five legal cases as we previously disclosed. GAAP EPS also includes $0.02 from the loss on the sale of property. Adding those items back to our GAAP EPS totals $0.30 per share that represents a 31% year-over-year increase. Our operating margin was 8.7%. When you do the same calculation you will see our core operating margin was 19.4%, about 10 basis points increase over the year-ago quarter. Our non-GAAP EPS and adjusted EBITDA calculation formulas already exclude the $0.21 from the legal settlements but not the other costs. If you exclude that, non-GAAP EPS was $0.37 or 11% increase year-over-year and adjusted core EBITDA was $8.1 million or 16% year-over-year increase. For the rest of the presentation we will use numbers for the quarter we'll be referring to our core performance numbers. Please turn to Slide 6. As noted, we incurred legal settlements costing $3.2 million. This covers two injury claims, two tax issues, and one copyright case. We believe these settlements represent good use of funds. They have significantly reduced legal distractions and represents sound business decisions. We continue to work on other legal and tax cases to resolve them as expeditionaly as possible. Please turn to slide 7. Total revenues reached a record $33.3 million. This continues to mark improvement we have been seeing over the $28 million average revenue range we experienced since Q1 2013 through the first quarter of this fiscal year. The first quarter of fiscal 2013 was when we began benefitting from the multi-club Jaguars acquisition. We especially pleased that the third-quarter revenues increased 1.4% subsequently – sequentially, I mean, historically we have a decline in this quarter from the seasonally large second quarter. During the third quarter new adult clubs and sports bars/restaurants added $3.7 million year-over-year. This largely reflects the full quarter of revenues from Vivid Cabaret, New York in Manhattan and the new Bombshells sports bars/restaurants in Webster, Texas. This also includes a small amount of initial revenue from the late June opening of the Bombshells in Austin. Same-store sales of $28.9 million increased 5.1% year-over-year with nearly all major brands showing improvement. In particular, sales at adults clubs open more than one year continue reflect the success of our post-recession strategy of increasing patronage from bigger tickets high margin customers. Turning to Slide 8. Looking at operating margins compared to a year-ago period we saw increased leverage in some areas. Salary and wages combined with stock-based compensation fell to 21.7% of revenues from 23.7% in a year-ago quarter. Cost of goods sold declined to 12.9% from 13%. And other costs were 7.8% down from 8.2%. However, we did see some increase in costs in other areas. Legal and professional fees increased to 3.6% from 2.8% due to the higher level of activity related to certain losses and a large number of legal settlements in the quarter as we previously discussed. Insurance costs increased to 3% from 2% due to the company's growth and industry factors. These costs should decline based on early close we are receiving for the New Year as new markets are opening as more companies are writing for the industry, now that indemnity is out. Looking at some other areas that are of interest we also saw increase in preopening costs. They totaled $306,000 compared to only $185,000 a year ago. These costs are spread among a variety of expense categories. They are also – they are up year-over-year due to increased activity in opening new restaurants in the third quarter. We also saw a slight increase in rent and interest combined which is how we major cost of occupancy. That was 10.1% of revenues versus 9.6%. The third quarter reflects the addition of Vivid Cabaret, New York and the Webster and Austin Bombshells. It also reflects the previously discussed increase in the New York cabaret, Rick's Cabaret rents. Turning to Slide 9. As a result the core generating – the core cash generating power of the company as reflected by adjusted EBITDA was $8.1 million for the third quarter, this compares to $6.9 million in the year-ago quarter. Over the last two quarters adjusted EBITDA has average close to $9 million. That's a 21% increase on the average over the prior five quarters. Please turn to slide 10. To review some balance sheet highlights for the quarter, we reduced debt by $2.3 million of which $1.6 million was paid off in cash and $750,000 were conversion into stocks. Our debt paid down also included $900,000 on the Tootsie's related notes which at 14% rate is our most expensive interest item. We now have only $2.8 million remaining on the Tootsie's debt. Shareholder equity at the quarter end hit a record $109.3 million, up from $105.3 million at March 31. This primarily reflects the exercise of options, total assets were approximately level. Turning to Slide 11. As you can see, we have three more units that should come online in the fourth quarter. We have one gentlemen's club in active development, Rick's Cabaret in Odessa, which we're very excited about and has received all necessary permits and approvals and is planned to open this month. As I mentioned in the last call, Odessa is the capital of fracking in Texas and has been ranked as the countries second fastest growing metropolitan area and personal income for the past three years. Once it is up and running, we anticipate Rick's Odessa will be one of our top clubs. As for acquisitions, we have decided not to proceed with the previously announced acquisition of Club O just out of Chicago. And as for the restaurants, we are looking at opening two more Bombshells in the fourth quarter, one in South Houston and one is Spring Texas suburb just North of Houston. Please turn to Slide 12. Looking at our sports bar and restaurant business, we have four units opened, Bombshells-Austin opened in late June and has been doing very well. It’s a great location off of popular highway surrounded by shopping malls and high-tech company campuses. On the slide in this photo of the new location is a day that some servicemen paid us a visit. You will also have – we also have two Bombshells – two other Bombshells once we opened in late January – one we opened in late January in Webster and the one in Southwest Houston – suburb of Southwest Houston and the regional one in Dallas. And then we have the Pole Position in Fort Worth, the new brand we developed to replace the Ricky Bobby's brand named near the Texas Motor Speedway. As I mentioned, we plan to open two more Bombshells in the fourth quarter that will give us a total of six sports bars and restaurant, after that we will be directing our efforts on sighting and planning the next four Bombshells locations. Turning to Slide 13. Based on our performance year-to-date, the expectations of the fourth quarter, we are maintaining our most recent guidance, revenues of about $130 million, which would be up 16% year-over-year, GAAP EPS of $1.10, which would be up 15%, and non-GAAP EPS of $1.60, which would be up more than 14%. Turning to Slide 14, as many of you would like a detailed discussion of the status of the REIT and its funding, what piece of real estate we would sell and for how much and when. But because this is a legal process, it would be inappropriate for me to comment in detail on these subjects. We can tell you that the company is moving forward expeditionaly. As I have mentioned on previous calls, whenever possible, we'd like to own the real estate for our adult clubs, because – that because local ordinance often required the license to be physically tied to the location. Owning as much real estate, however, makes our income statement and balance sheet with very different from other restaurants and bar chain. To solve this problem, we've worked at the development of this independent private REIT, the benefits will include a favorable liquidity event for RICK. Our RCI is becoming more of an operating company with a significantly higher return on equity and a much more comparable profile compared to other publicly traded restaurant and bar chains. Turning to Slide 15, as I mentioned earlier, we have spent some time reviewing and updating our capital allocation strategy. To give you some perspective, over the last three years, we have focused on growing the top line. With recession we have the lower prices, so we used cash to finance acquisitions and development of new adult clubs and restaurants, both help offset lower recessionary pricing strategy. But now with a stronger economy, we have been able to increase our prices for food and beverages and other categories, while costs are up with their – inevitably impact on performance, we are also generating substantial cash. Going forward, we need to make sure that we are redeploying this cash to ensure maximum returns. This means, we are focused on its best use without necessarily being led to anyone approach. We are also focused on the bottom line, not necessarily the top line. Specifically, while our target has been 20% revenue growth, organically and through acquisitions, a more reasonable target going forward will be 15% to 20%. As a first step in implementing this strategy, we have been buying back stock, which at our current level, we believe provides one of the best and most risk free uses of our cash. Also, we have begun to review underperforming assets looking for anything that is not generating sufficient cash. At present, there are no assets that we plan to buy. And once we finish opening the two pending Bombshells and Rick's Odessa, we anticipate a period of lower pre-opening costs. We used cash on third quarter results certain lawsuits to eliminate the uncertainty and potential future use of cash in connection with these matters. We also have used cash to expedite debt pay downs. So based on our analysis, that isn’t necessarily the best use of our cash. On the last quarter's call, we asked for opinions about our dividend. Institutional investors were very clear in their opinion that dividends were not tax efficient and not the best use of our cash. I will look forward to talking to you more about all this during the question-and-answer session. Turning to Slide 16, I want to use this slide to call RCI Hospitality story together. We have been and making – and are making solid progress to further strengthen our company. We have come through the recession as a larger, more diverse enterprise. As I mentioned earlier today, we have 39 adult clubs now. In addition, we are well on our way to the 10 sports bars/restaurants capable of generating significant added revenue and strong franchise potential. Altogether, we have 15 major brands in format that we operate across the country. The company has a new name that reflects our broader scope, but also remembers our roots. We are well along to establishing a REIT to unlock the real estate value. It will also help us – it will also help make our financial profile similar to other hospitality companies. Down the road, it could open a new business opportunity for managing real estate of other adult club owners. We also see using cash to maximize return to shareholders. Finally, we have began reviewing all operations to ensure maximum cash generation. I look forward to reporting you on the new ways we are reducing costs and bringing more down to the bottom line. With that, we'll open the line for questions. Operator?

Thank you. Now, we'll be conducting a question-and-answer session. (Operator Instructions) Our first question today is coming from Steven Martin from Slater. Please proceed with your question. Steven Martin – Slater Capital Management LLC: Hi, guys.

Hey, Steve, how are you doing? Steven Martin – Slater Capital Management LLC: Good, good. Your legal expenses, what amount of the current quarter would you guess is more non-recurring in nature and related to all the settlements?

Oh, gosh, good question. Probably the extra 0.8% or so that would get us back down to that. I want to keep it under 3%, and I know it went a little over this quarter, but we did have several attorneys working on multiple things to clear all this stuff up. So one more quarter of high legal if we work on the couple of issues that we still have out there. Steven Martin – Slater Capital Management LLC: And I assume the legal expenses on the REIT are in there as well?

Some, yes. Steven Martin – Slater Capital Management LLC: Okay. Can you update us on the Texas Pole facts?

Right now the attorneys are filing the appeal and, basically, we're just in hurry up and a wait mode, and that’s basically all we know at this time. I think there's another meeting next week, where I'll be meeting with some of the attorneys and other club owners to see if we can try to figure out something to move this thing forward. Steven Martin – Slater Capital Management LLC: Okay. And can you comment on how the – now that some of the Bombshells have been opened for a while, can you comment on how they have been doing?

Yes, the first two locations, the Dallas location is still about the same as it’s been for the last couple of quarters, so it’s holding. Webster peak had a slight decline and now we're starting to build back up there a little bit. And the Austin location, which I consider an A-location, I think the first two locations are more of a B restaurant area, whether or not surrounded by lots of other restaurants and shopping, where the Austin location is definitely an A-location, surrounded by restaurants, shopping and whatnot, and it’s doing way better than we anticipated or either of the other two locations have done. The Spring location and the South Houston location are both I think A-type locations as well, where we have other major restaurant brands basically in the same parking lot or directly across the street from us. So, I think that's going to help draw a lot more dinners to those locations. Steven Martin – Slater Capital Management LLC: All right, thank you very much.

Yes.

(Operator Instructions) Our next question today is coming from Mike Mork from Mork Capital Management. Please proceed with your question. Michael Mork – Mork Capital Management: Yes, my question regards, you just add the one line there, decided not to proceed with the acquisition of Club O. That was going to be a pretty big acquisition for you guys. What caused you not to go ahead with that?

As we got farther into the due diligence process and some of the licensing issues with the city, the grandfathered license not necessarily as safe as we anticipated in the beginning; we just decided that we couldn't pay $11 million for it. Michael Mork – Mork Capital Management: Okay. And then we're in your fourth quarter right now, so investors are going to start looking at your following year. And you more or less indicated this revenue growth looks like about 15%, you'd be buying back stock, you won't have some of the problems with insurance, et cetera. If you have the 20% increase in your EPS that would indicate about $2 for the New Year, does that sound reasonable?

Yes, it sounds reasonable. We haven't really gone into it a whole lot this time. I wanted to try to get – we've got a couple of issues that I want to try to get through. I would guess that hopefully with the annual report we'll be able to issue guidance for 2015, if not sooner. Michael Mork – Mork Capital Management: Okay. Sounds good. Thank you.

You bet.

(Operator Instructions) Our next question today is coming from Bob Rand [ph] a private investor. Please proceed with your question.

Yes, I have a few just short questions. First of all, can you comment at this point in terms of how much stock is already been purchased in this quarter?

No, we only can report that in the quarterly reports or annual reports.

Okay. And as far as the REIT is concerned, has an investment bank have been retained to help, start raising funds or how is that…?

We're talking with several right now. We're still waiting on the final offering memorandum documents to be done and once we get those put together then we will – we hired a consultant on it, but we haven't actually decided whether we're going to use an investment bank or we're going to try to raise some of the money ourselves at this point.

And got it, and do you have a sense in terms of timing when you would like that done?

Right, now we wait on attorneys and appraisals and just little things that are out of – really out of our control. I'm hoping that by year-end we'll have a much better update and some progress on this.

Sorry is that…

We're working on it for a long time, I know and – but still we actually got the plan and now that we've structured the entity, did all the tax work and now we're working on the offering memorandum, so.

Sorry, we got fiscal year-end or calendar year-end?

Calendar year-end.

Okay. And finally, can you give us a sense of how we're tracking so far in terms of this quarter, in terms of same store sales?

Yeah, July was in line with the quarter – the previous quarter that we're in – that we just reported. I believe we were going to be able to – we got some pricing increases. We're having decent customer counts. We're very happy with the way our business is going right now. So, I don't see any reason – as we move into the prime season I'm hoping to get into mid-September – as we get about mid-September through March or May it nearly runs pretty good. So I'm very excited about the numbers going forward based on where we're at in this month.

Right, so you think so far we're good. Have you continued to see little turnaround in Club Onyx?

Yes, Philadelphia is doing very well. Charlotte is doing well. Houston is doing okay. The Dallas location, we're still working on, but we've made some more changes there in the last few weeks and I think it's even going to get better there as well. I mean it's better but it's – we think it will get a lot better with some of those concepts that we're working on right now.

And last one is, have you seen – I know last quarter you talked about how you're working on LA and I was wondering how you've – what you're seeing there?

LA is doing okay. It's not the homerun that we thought it would be, so we're little disappointed with that but like I said, we're working on the new concept. As we move into this quarter, we're going to be looking at underperforming assets. We may sell some of them. We may disclose some of the location if we're not happy with the results that we're getting out of them. But we're really. We've been focused too much on the top-line and not enough on the bottom-line and so we've been what I call carrying little bit of dead-weight. We're going to work on eliminating some of that dead-weight as we move forward.

Okay. Great. Thank you.

Thank you. Our next question today is coming from Steven Martin from Slater. Please proceed with your question. Steven Martin – Slater Capital Management LLC: Yes, housekeeping detail. Phil, can you comment on what the actual shares outstanding were at the end of the quarter and then obviously on the 10-Q it says that there were 10.138 million at the end of July. So something increased the share count?

Yes, we had a conversion from debt. Steven Martin – Slater Capital Management LLC: Okay. And any – were your options exercised as well?

Not in July, all those finished. Well, we issued some shares – those didn't actually go in, never mind, no – yes, we had no more options in exercised.

All the options expired July 2 and I think they were all exercised or exchanged that way before then.

Yes. Steven Martin – Slater Capital Management LLC: So, the difference between the end of the quarter and the 10.138 was conversion of debt less whatever shares you bought back.

Correct. Steven Martin – Slater Capital Management LLC: Okay. Thank you.

Thank you. (Operator Instructions) Our next question today is coming from Als Harman [ph], a Private Investor. Please proceed with your question.

Hello. I was wondering if you could discuss anything about structure like how – is Rick's going to receive a management feedback, or is it just going to be LT – limited liability of distributions that you will get back for managing the assets of the real estate?

No, we will actually – we'll have a subsidiary that will be the management company for the REIT and we will be paid a management fee.

Okay. And is that going to be like a percentage or too early to tell?

The structures all being worked out with the lawyers right now. We have to be very, very careful on control issues, you can't – no one can control – you can't have a voting group that controls 50%, there is all types of rules for REITs for the tax status, so all that’s being worked out right now.

Okay. And then on New York City lawsuit, is that something you're looking to settle, or is that something you can pretty much fight on until you – towards the end or…

I mean, I never say never on settling something, but selling our reasonable and something we consider reasonable versus the fight at this point, we just don’t know, we have some motion for summary judgment that are out there right now that just come back with any day could be against us, could be for us, we just don’t know. I think, right now there is too many moving parts to really consider selling the case at this point, it’s maybe something that we go all the way to U.S. Supreme Court on i.e., we just don’t know at this point.

And on that one is – most of the legal expenses (inaudible) things like that, does it mean – does it feels actually costs lot to go forward, or is it just – is mostly cost?

It’s New York, it’s never cheap, but…

Of course, yes.

I mean, yes, relatively speaking compared to what we spent on discovery and depositions, and that. Yes, I think we're through the major cost of it, obviously, there is lots of motions that had to be filed and oral argument those types of things, which do cost – which do cost money, but nothing compared to doing 20 depositions in a month.

Okay. I appreciate it. Thank you.

Thank you. (Operator Instructions) Our next question is coming from (inaudible). Please proceed with your question.

Hey, Eric. Just curious about the kind of change in the – change of pace in terms of you guys focusing on the bottom line. I'm curious what kind of conversations you’ve had and what you’ve been seeing out in the market that has kind of turned the direction a little bit there?

Well, I think a lot has to do with – we're just not being rewarded, the stocks not being rewarded for the growth, the top line growth. We met with some group that showed us, hey, this is your cash on cash, your free cash flow return based on your current stock price with the growth that you are discussing and talking about, it's cheaper or it’s more cash efficient for you to buy back your stock than it is to pay 14% debt down because your free cash flow returns, exceeds 14% below a certain stock price. And so, we started looking at it, and we started doing the math on it, and we had always calculated similarly, but we had been taken into tax consequences fully. And when you fully take the tax consequences into it, it’s pretty eye opening that how cheap our stock is relative to our debt right now.

Okay. And then any type of target amounts in terms of returning cash to shareholders on your percent of sale?

It’s a free cash flow generated per share is how we're doing the math on it.

Okay.

You take our free cash flow generated per share and do it on an annualized percentage basis against the stock price is how you do the calculation. And basically, it’s over 14%, and under I think it's $11.38 or something. So, basically, up to about $11.80, we can buy back our stock and earn more. But specifically, I think, we're going to continue to buy back our stock probably up to $15 a share at this point based on the math that we were looking at.

Okay. Thank you.

Thank you. (Operator Instructions) We've reached the end of our question-and-answer session. I would like to turn the call back over to management for any further or closing comments.

Yes, this is Gary. Thank you, Eric. I want to remind everybody again that we do have a due diligence event at Rick's Cabaret, New York from 6 'o clock to 8 'o clock tonight. That’s at 50 West 33rd Street between Fifth Avenue Broadway. If you have an RSVP already ask from me at the door. Later this month, the company will be at the Gentlemen's Club Expo & Tradeshow at the Mandalay Bay Resort and Casino in Las Vegas, and we look forward to reporting our fiscal fourth quarter sales in October and then our year-end results in December. Thank you, everybody, and good night, and have a good summer.

Thank you. That does conclude this evening's conference call. Thank you for your participation today. You may disconnect your lines at this time and have a wonderful day.