Greetings, and welcome to the Ark Restaurants Third Quarter 2023 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Christopher Love, Secretary for Ark Restaurants. Thank you. You may begin.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the third quarter ended July 1, 2023. My name is Christopher Love, and I am the Secretary of Ark Restaurants. With me on the call today is Michael Weinstein, our Chairman and CEO; Anthony Sirica, our President and Chief Financial Officer; and Vinny Pascal, our Chief Operating Officer. For those of you who have not yet obtained a copy of our press release, it was issued over the Newswires yesterday and is available on our website. To review the full text of that press release, along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, however, I'd like to read the safe harbor statement. I need to remind everyone that part of our discussion this morning will include forward-looking statements and that these statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance, and financial condition. I'll now turn the call over to Mike.

Hi, everybody. Thank you for joining us. I think I want to first hand over everything to Anthony, so we can go over some balance sheet items, and then I'll take the call back and discuss where we are.

Thanks, Michael. The quarter was really quiet with respect to the balance sheet. We ended the quarter with $14 million in cash and $7.7 million in debt. We paid down an additional $6 million of loans early on April 4 due to the high rates we are currently being charged because of the interest rate environment. Our current cash position is approximately the same as it was at the end of the quarter. Other than that, on the balance sheet, there really aren't any significant changes, very quiet. The Board also declared the dividend last week of $0.1875 payable on September 12 to record holders on August 31.

All right. Thank you, Anthony. Obviously, we did not create or generate the EBITDA we did last year for this quarter. There are three components to that: Number one in Las Vegas, our Gallagher's restaurant because of the refurbishing requirements and our new leases required us, we started the refurbishing somewhere in the prior quarter, but we will still close until April 27 in this quarter when it reopened. So that caused us a significant dollar revenue and therefore, some EBITDA cash flow. The second factor is our Florida full-service restaurants. They are just down. Even though the down end revenue of about 10%, 12% on average, if you take all of them, if you’ll beach, followed one by the Sea, Rustic and Shuckers. So those four restaurants, on average, are down about 10%. It's slightly worse with headcounts because we've had some menu price increases, post-pandemic and as we continue those menu price increases, and we're up maybe 4%, 5% in menu prices from the prior quarter in 2022. Given that headcounts are down 13%, 14%. I can tell you from what we're hearing and we speak to people, we are not alone; most full-service Florida restaurants in the southern part of the state are experiencing the same thing. We have no excuses. We think our menus are fairly priced in the environment we're in, and the product is good. I think we were comparing to pent-up demand in the prior year's quarter. That's not visible to us this year. Our Alabama restaurants are doing very well. Our Las Vegas sales have been very strong. The New York sales have been very good, Washington, D.C. So Florida remains the weak spot. Another factor in the EBITDA difference between this year and last year are payrolls. We're able to find people now, but the price points are higher than they've been in the past. We think it's starting to stabilize. We have most positions filled throughout the company. So we're fully staffed. It's just costing us more.

We've had a minimum wage increase in Vegas and Florida.

Yeah. As Anthony is saying, legislative minimum wage increases in Vegas, Florida, and D.C. So we're up against it in terms of labor. Food costs have stabilized. In some cases, we've seen a dive back towards where we used to be. We're managing our food costs very well, I think. And I believe we're managing payroll. When we're fully staffed, we're trying to eliminate all overtime, but prices for labor are just higher. I think that sort of gives you an explanation of the environment we're in. This quarter, so far, we haven't seen any increase in demand in the full-service Florida restaurants. The other restaurants seem to be doing what our expectations are. So Florida remains a big disappointment. I might add that New York, New York, where we do many disciplines. We have fast food court operations. We have full-service restaurants. We have room service. What you see there is a flow into the fast food court. The food court is doing better than the full-service restaurants. On balance, if you looked at that in the prior year, we just think people are not spending as much. New York, New York happens to be a middle-income crowd. That's the demographic. So we think we're seeing people opting for less expensive options. That's probably taking place in our Florida restaurants as well. Check averages are down, and people are carrying fewer entrees. So it's not only fewer people coming to the restaurant; people coming are not spending what they used to spend. It's just the environment we're in. So with that, I'll take the questions.

Thank you. Our first question comes from the line of Paul Johnson, Private Investor. Please proceed with your question.

Yes. Good morning. I just joined the call, so you may have spoken about this already, but can you give us an update on the Meadowlands?

I'm glad to provide an update. Currently, there isn't much happening regarding the state legislature or the governor's position. They share a similar perspective to that of the majority partners in the Meadowlands. We hold the third largest stake in the limited partnership, while Hard Rock and an individual developer in New York hold the majority. The consensus has been that we should avoid pushing for a constitutional referendum to permit gaming outside of Atlantic City until the downstate New York casinos are either licensed or operating. This seems to align with Governor Murphy's stance and the views of key legislators my partners are in contact with. There is a concern that the public will not grasp the significance of a casino for tax revenues in New Jersey until they witness traffic heading to the downstate New York casinos. We don't see a clear opportunity to rally public support, as our polling indicates slight favorability for a referendum if it were submitted to the legislature, but it's certainly not guaranteed. Therefore, we believe that the opening of New York casinos would create pressure beneficial to our efforts. In the meantime...

And what would be...

Pardon?

Sorry, I was just going to ask what would the timing be for that in a perfect world?

In an ideal scenario, New York is expected to issue three downstate casino licenses by the end of this year. We engage with law firms representing various developers in New York to gather insights on the situation. I don't do this regularly, but I reach out to a few partners at these firms every couple of months. The consensus seems to be that Yonkers will receive a license owned by MGM and Genting will secure a license at Aqueduct. There’s another license up for grabs, with the Trump property in the Bronx competing for it, along with several properties in Manhattan, particularly Hudson Yards. Steve Cohen at Shea Stadium is also in the running, but we don't believe he will succeed due to the public parkland designation, which could lead to a lot of legal challenges. Additionally, the Venetian has acquired land in Queens, making it a viable contender. We have some reservations about a casino in Manhattan. Our perspective is that there will be significant litigation. As for the Meadowlands, we are already prepared for the first phase of the casino project and could be operational in as little as 60 days, as all environmental studies are complete and there are no nearby residential areas to contest the project. We also have ample parking. Overall, we believe we are well-positioned for a casino license and are quite optimistic. It ultimately depends on New York following through and issuing these licenses. If MGM receives one for Yonkers and Genting for Aqueduct, they could be operational within months, significantly advancing the legislative timeline in New York. I would anticipate that there is a strong chance legislation will be introduced in the next session, ahead of November.

Got it. Thank you. And then you've got a fair amount of cash on the balance sheet, which is great and you announced the dividend. Is the idea instead of maybe buying back stock, it's kind of liquid, but is the idea that you want to hold on to that cash in case there's an attractive acquisition opportunity?

That has always been our approach. We aim to find something appealing at least once a year. We believe that our cash reserves will be beneficial in the Meadowlands if a license is granted. We also have exclusive rights to all food and beverage offerings if a casino is developed, so we will require cash for that as well. We think we won't encounter much difficulty in securing capital for these projects, but maintaining whatever capital we can on our balance sheet will be advantageous.

I thought you had said in the past that if that all came to pass that it's more likely you'd sell the interest to Hard Rock.

If Hard Rock is a developer with us, I really believe there are two parts to this. First, I want to be in a position where my ownership is not significantly diluted, so having cash on the balance sheet is important. Second, I believe that before the casino opens, Hard Rock would seek to consolidate its position by buying out minority limited partners, even though we hold the third-largest interest at 7%.

7.4%.

So I don't know that I would think it's logical that they would want us out. But I can't guarantee that to myself. So obviously, the statement that cash on our balance sheet helps our position still stands until they come around with an offer. So that's the way we're playing it.

It’s very helpful. Thank you.

Thank you.

Thank you. Our next question comes from the line of Jeffrey Kaminsky with JJK Consultants. Please proceed with your question.

Good morning, guys. Thanks for taking the call. A few questions for you, Mike and team. Approximately $14 million in cash on the balance sheet and approximately $7 million in debt. You said you paid off some debt. Is the current $7 million debt locked in at lower rates or is there some interest rate risk there? And I have a couple of...

They're at the current rates. We considered paying those off, but we were looking at a couple of deals, which didn't pan out. So again, we want to keep that cash to do an acquisition, which we hope will come along soon.

But we also have a credit line available to us beyond all of this.

Okay. With respect to leases, whether it would be Vegas, New York, any developments in terms of any important leases that are up for renewal or extension? Anything to report there?

Our lease in Bryant Park is in effect until May of 2025. The Parks Department in New York will issue a request for proposal regarding that lease. We believe we are in a strong position to secure an extension, having done so twice in the 27 years we have occupied the space. We feel that we are the best fit for this location. While other parties will likely respond to the proposal, we are confident in our prospects.

Okay. And for my last question, regarding Meadowlands, which you just discussed, if everything unfolds on the optimistic timetable we anticipate. Mike, you mentioned that Hard Rock would likely want to consolidate ownership and eliminate minority partners. Do you foresee a scenario where they might buy out your interest while you retain exclusivity for the concessions concerning the Hard Rock Cafe, or would they actually acquire your business entirely?

Yes. Jeff, so yeah. So what I would say to you is this: we had a long talk with the tax experts about 4 years ago, spinning off our interest in the Meadowlands. Why? Because if we sell our interest in the Meadowlands at any point, it is taxable to the company. And then on a dividend, if we were to pay a dividend, it's again taxable to our shareholders. So there's a double tax involved. We were trying to figure out a way to spin it off so that there would be at a low basis because there's no operation there, so that we wouldn't be subject to double taxation, thinking this through to the future and some projection. There is no strong basis where the IRS won't challenge you for spinning this off. So then you look at other possibilities. We're in the restaurant business. We want to keep our restaurants. We would certainly like to operate the restaurants in the casino; we think that would be a terrific opportunity for our shareholders. So how do you go about that? And at the same time, entertain a bid? It's too fuzzy right now. But our interest would be if the price was attractive, figuring out some way to do it and then somehow go back into business as a restaurant company with the properties we presently own. How that could be accomplished? It's not worth thinking about now. But that would be our interest to maintain our restaurants.

Okay. Thanks so much. Thanks for answering the questions.

Thank you.

Thank you. I'm showing no other questions at this time. I'll turn the floor back to Mr. Weinstein for any final comments.

All right. Thank you. We'll speak to you in about three months. I appreciate your interest and look forward to our next conference call. Take care.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.