Ark Restaurants Corp Q1 FY2025 Earnings Call

Greetings, and welcome to the Ark Restaurants First Quarter 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Love, Secretary for Ark Restaurants. Thank you, sir. You may begin.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the first quarter ended December 28, 2024. 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 CFO; and Jennifer Jordan, our co-COO. 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 Anthony, our CFO.

Good morning, everyone. A couple of items related to the income statement, I just wanted to make sure I clarified for everyone. As we had discussed on last quarter's call, the Tampa Food Court, we were bought out of by the landlord. We closed the operation on December 15. We received the buyout payment on December 19 of $5.5 million. So, that's included in our cash balances at quarter-end. Of that amount, approximately $1.9 million will be distributed to the minority partners of that business, and that will happen within the next couple of weeks. Included in our P&L is a gain of $5.2 million related to that transaction. In addition, we had some residual losses related to the closure of Rio Grande of $146,000, which again we had discussed last quarter's call. That was closed on January 3 permanently, and we're in the process of vacating the space. With respect to the balance sheet, our cash balance is $13.1 million at the end of the quarter. As I said, $1.9 million of that is spoken for, and is owed to the minority shareholders of the Tampa operation. Our debt is $4.7 million. We didn't have any further issues with our goodwill or right of use assets or long-lived assets this quarter. We're currently working on a new banking agreement. Our current facility expires on May 31. Obviously, the Bryant Park situation is causing some delays in that process a little bit. Michael will talk about that. And there are some minor decreases in the right of use assets and the related lease liabilities for the removal of Tampa and Rio upon closure. Other than that, the balance sheet remains very stable. That's all that I have. I'll turn it over to Michael.

Hi, everyone. We are experiencing inflated expenses, particularly in payroll and insurance premiums, but we are committed to keeping our prices stable, believing it will pay off in the long run. We anticipate that demand will eventually rebound. Sales performances are strong in Alabama and decent in Las Vegas. The properties in New York, especially Bryant Park and Robert, are doing well with events. While the a la carte business is somewhat soft, it is not significantly so. Demand in Washington, DC, continues to be a challenge, and in Florida, our performance is greatly impacted by the weather; when conditions are favorable, we are seeing considerable improvement compared to last year, likely due to pent-up demand from previous bad weather. Regarding EBITDA for our restaurants, we're focusing on enhancing efficiency, which involves re-evaluating schedules, payrolls, and personnel as we adapt to current demand levels. This ongoing effort should start reflecting positively in our operating profits in this quarter and the next. Our management teams in Las Vegas and Sequoia are excelling. We signed a new lease in Las Vegas a couple of years ago, and we're beginning to see revenue growth, although we need to increase our business by about 10% to 12% to cover the new rent. We're also achieving better payroll efficiency compared to last year. Sequoia, however, is still struggling with demand, a situation we know is widespread. Our new manager there has extensive experience and is expected to help boost demand. Overall, our margins have tightened, and we're working on improving them by increasing payroll efficiency and driving revenue. In terms of our two significant opportunities, Meadowlands and Bryant Park, we believe we're positioned well for a casino license in North Jersey, although progress in New Jersey depends on New York State issuing licenses for downstate casinos first. Once those licenses are awarded, we expect quick operational readiness due to existing facilities. The third license will take longer due to competition among several developers, but we think progress in New York will prompt New Jersey to act, as Atlantic City has been underperforming. We're optimistic that New York licenses will be granted later this year, which could lead to a referendum for casino gaming in the North. As for Bryant Park, while the Bryant Park Corporation has expressed intentions to work with another party, we haven't finalized any deals. The agreement needs approval from the Parks Department and the New York Public Library. We've engaged a team of experts and believe we still have a good chance of managing that facility. The process may take months, but we think there are flaws in the current request for proposals, especially since the prospective operator has limited hospitality experience and has submitted a lower minimum rent proposal. We are exploring options to sway the situation back in our favor. I’m now open to any questions you may have.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Jeffrey Kaminski with JJK Consulting. Please proceed with your question.

Good morning, everyone.

Hey, Jeff.

Hi, Anthony. Regarding Bryant Park and the process, I assume you discovered the lease and the other party through some type of public hearing or meeting. My question is, are there more of these events scheduled, and can the public attend? As a shareholder, I have a vested interest in what happens to Bryant Park, as do other Ark shareholders. What is preventing us, as members of the public and New York residents, from attending such a hearing?

There's nothing stopping you from attending public sessions. The community board session is open to the public. The announcement regarding the selection of Bryant Park Corporation was made during a community board subcommittee meeting, specifically the parks and recreation subcommittee. It was a public forum where there was significant discussion about the process and the affordability of the chosen restaurateur. We offer reasonable pricing, and we believe that the selection of Seaport Entertainment Group and their proposed licensing agreement with Jean-Georges does not reflect well on affordability for the public. There was extensive discussion on that topic. However, the community board’s role is advisory. Any necessary approvals to finalize a deal with an operator must come from the City Parks Department and the Public Library, and they have not yet proposed any change in operators to those organizations. So please proceed.

Are comments from the public welcome? Are these folks between shareholders and some of your employees?

You're breaking up.

I'm sorry. I've asked...

We had 25 employees at the community board meeting. We have 250 employees at Bryant Park Corporation who are in danger of losing their jobs. Literally, 40% of those employees have been with us for 25 years or more. So, that constituency is also important in this process.

Right. And were any of them able to speak at the meeting? And if I attended the next meeting as a shareholder, would I have an opportunity to make a statement or...

You would have a minute to two minutes to speak.

Okay. Thank you.

You're welcome.

Our next question comes from the line of a private investor. Please proceed with your question.

Hey, Michael. How are you?

Good, Ravi. Thank you.

I had a question. Moving forward as you guys think down the road six months, 12 months, just wanted to get a sense of how you guys are thinking about the capital allocation on dividends or buybacks, or if you guys have any other ideas outside of the strategic acquisitions that you're looking for down South?

So, that's a complicated question because it really depends upon the outcome of Bryant Park certainly with regard to dividends. Right now, without the cash flow that would be attendant to an operation at Bryant Park, we would not be in a position to pay dividends. That also is a question regarding buybacks. I think that same thought process is applicable. I don't think we're going to be aggressively buying stock unless we know what's going on with Bryant Park, number one, as a company. There may be people we're aligned with who may want to take an interest in the stock, but without Bryant Park, it's very hard to make these decisions. In terms of expanding the business, we have some nice opportunities we think that don’t require a tremendous amount of capital or where we would have partnerships with other organizations that are important parts of the process to establish some new operations. So, we're looking at that. It's sort of paralyzing in one respect for our balance sheet and income statement to have this issue with Bryant Park. But on the other hand, we're actively engaged and trying to find areas where we can expand sensibly. Hope that answers your question.

Got it. Yeah, that does. That's helpful there. So, we'll see how Bryant Park shakes out, and good luck with that. I hope it falls in your guys' favor.

Thank you.

Mr. Weinstein, it seems we have no more questions at this time. I will now hand it back to you for your closing comments.

All right. Thank you all for your interest, and we'll see you next quarter.

Thank you. Bye-bye.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.