Ark Restaurants Q1 2024 Earnings Call Transcript

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February 13, 2024

There are 3 speakers on the call.

Operator

Greetings and welcome to ARC Restaurants First Quarter 2020 As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Love, Secretary.

Speaker 1

Thank you, Mr. Love. You may begin. Thank you, operator. Good morning and thank you for joining us on our conference call for the Q1 ended December 30, 2023.

Speaker 1

My name is Christopher Love, and I am the Secretary of our Restaurant. With me on the call today is Michael Weinstein, our Chairman and CEO and Vinny Pascal, our COO. For those of you who have not yet obtained a copy of our press release, It was issued over the Newswire 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.

Speaker 1

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 Michael. Thank you.

Speaker 2

Hi, everybody. This quarter was a relatively clean quarter in terms of comparisons. We had no additional restaurants on working for us as compared to last year's Q1 and there were no restaurants that were closed compared to last 1st quarter. So it's relatively clean. Revenues were flat.

Speaker 2

I'm sure you saw the press release. EBITDA was $2,572,000 versus $3,018,000 Our balance sheet remains really Clean $12,000,000 $122,000 in cash. Total debt at the end of twelvethirty was 6,742 The business within having relatively flat sales had shifts. Obviously, some restaurants are up, some are down. We are experiencing through twelvethirty very strong revenues in Las Vegas, But we also have rents that are much higher than they were in the comparative quarter last year.

Speaker 2

The Alabama restaurants are doing well, both in sales and in cash flow. The Florida restaurants are our biggest problem right now, the full service restaurants, which include J. B. Rustic, Blue Moon and Shuckers. There is some weather issues there, but there are always weather issues.

Speaker 2

Volumes are down in those four restaurants roughly 10%. That means 2 things. Our customer counts are down or where they're not down as much as revenues, people are sharing entrees. So we're finding just we're just not making any headway in terms of increasing revenues in those restaurants. Washington DC has been problematic because the city is problematic.

Speaker 2

New York has been very strong in all categories including events. Our biggest problems as a company have nothing to do with customer experience. Food quality is very high. The places are maintained wonderfully. Services, excellent.

Speaker 2

We have no problems with the way our restaurants have functioned. There were 2 types of inflation over last couple of years. One was inflation in the products that we buy, which turn in turn become the meal. That has stabilized and a lot of products actually are starting to come down. So food cost should not be an issue.

Speaker 2

And we are now seeing between the downward movement in prices and us engineering our menus to have better food cost components. We've seen our food costs by and large in very good shape. The other inflation was in labor. That is not coming down. Legislation is underway, especially in Las Vegas right now, but also Florida and also New York to increase minimum wage, and there is no offset that we can garner from that other than to raise menu prices.

Speaker 2

And as I've said repeatedly in the past, we're not raising menu prices. We think our menus represent fair value to the customer. We're still below what others are charging. However, these menu prices up 7% to 10% since the pandemic are still sticker shock. And it seems to me that's in part why our customer counts are down, Yes, as I said, especially in Florida.

Speaker 2

So that's a problem difficult to solve. We need more demand. We are taking certain initiatives to create more demand, but that will take a while to flow through. We're still looking at deals constantly to acquire operating income or find ourselves able to take advantage of locations that have closed where we think we operate at significant revenue levels. So that's really it.

Speaker 2

It's a demand problem right now in Florida. In Vegas, It's a rent problem, but we think the revenues in Vegas are strong enough that We will not be penalized with a higher rent. We think the revenues that are coming our way because we're running a much better operation than in previous years in terms of efficiency. We think we will not be challenged in terms of cash flow there, that will remain pretty stable pre the rent increases. So I'll take questions at this point.

Operator

Thank you. There are no further questions at this time. We have reached the end of question and answer session. I would now like to turn the floor over to Michael Weinstein for closing comments.

Speaker 2

All right. There are 2 other things to address. One is the Meadowlands racetrack. As you know, we have a minority interest in the racetrack and our hope is that we will get a casino license at some point. As I've said in the past, the leverage for New Jersey to approve a casino license in the northern part of the state really is a function of when New York State issues downstate Casino wise, since it's devastating, meaning in Queens or Yonkers or even in Manhattan, There has been delays at the governor's office and the state legislature to issue those license.

Speaker 2

But we think once they do issue those licenses, New Jersey will be very put to move to license Upstate New Jersey, Northern New Jersey Casino. Bryant Park, as you know, our lease becomes due in March of excuse me, May of 2025, there is a request for proposal that was sent out in October of this past year. We put in a proposal. We think it's a very strong proposal. We've been told with Finalists, we have a certain amount of confidence, but it's not subject to our control.

Speaker 2

We've had meetings with Bryant Park to get fully vetted on our proposal. They have not made any decisions as of yet. No one is expected until the latter part of this month or next month. Once we have a decision on that, whether positive or negative, we will send out a press release. Thank you.

Speaker 2

I'll speak to you next quarter.

Operator

Mr. Love, we have one question. Should we go ahead?

Speaker 2

Yes, please.

Operator

Yes, that question has dropped down. Not a problem. We have no more questions at this time. So this concludes

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Key Takeaways

  • ARC reported flat revenues year-over-year with Q1 EBITDA down to $2.57 million from $3.02 million, and no net change in restaurant count versus the prior-year quarter.
  • Segment results were mixed: Las Vegas drove strong sales but faced higher rents, New York and Alabama performed well, while Florida full-service outlets saw a roughly 10% volume decline due to softer demand.
  • Food cost inflation has stabilized and is easing, but labor costs remain elevated as minimum-wage hikes outpace any operational offsets and further menu-price increases are off the table.
  • The balance sheet remains healthy with approximately $12.1 million in cash against $6.7 million in debt, providing solid liquidity for operations and growth opportunities.
  • Management is pursuing strategic opportunities including potential acquisitions, a casino license at its minority-owned Meadowlands racetrack, and a lease renewal decision for the Bryant Park location expected shortly.
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Earnings Conference Call
Ark Restaurants Q1 2024
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