Q2 2020 Ark Restaurants Corp Earnings Call

Greetings and welcome to the Ark restaurants second quarter 2020 results conference call.

Hi, all participants are no listen only mode. A brief question answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded it's now my pleasure to introduce your host Sonal shop General Counsel. Thank you you may begin.

Thank you operator, good afternoon, and thank you for joining us on our conference call for the second fiscal quarter ended March 22020. My name is Sonal shop, and I'm General Counsel Ark restaurants with me on the call today, It's Michael Weinstein, our chairman and CEO Vinny Pascal.

Chief operating officer, and ask Mr., WRECO, our Chief Financial Officer.

<unk> for those of you have yet to obtain 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 her home page at Www Dot Ark restaurants Dot 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 afternoon will include forward looking statements 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 Exchange Commission for more detailed discussion of the risks that may have a.

Correct bearing on our operating results performance and financial condition.

I'll now turn the call over to Michael.

Hi, everybody I assume you've all seen.

The earnings release, So let me try to explain our business right now what or whatever we reported in the past is essentially.

I'm not useful [laughter] or other than to say that properties, we had where were prior to the pandemic doing very well. We thought we would have a $16 million EBITDA for the year. The way we were going these properties was strong properties there'll be strong again.

And at some point Bart.

Given that pandemic close everywhere, we've been slowly opening where we were allowed to open and Fortunately the first places we opened where in the South Florida in Alabama.

We initially opened six restaurants in a short period of time about five weeks ago, I guess and and those restaurants are doing quite well.

There are obviously down from you'd because of social distance scene and a 50% capacities there their volumes are down from.

The same time last year, however, because of a in some cases limiting menus and certainly in every case.

Reconfiguring payroll and schedules.

There are operating more efficiently and in some cases, the cash flow coming from the restaurants is the same is in the in the prior period last year.

So those six restaurants were very solid right from the beginning.

I if there were early losses in any restaurants they were minor.

But as of last.

Class Caf Caf reports Oh on those six restaurants, which just last week. They were all profitable about 10 days ago, We open Las Vegas.

The first week of we essentially broke even with cash flow, we haven't seen last week's PML, yet, but I anticipate that there would be some.

Positive cash flow from that so those southern restaurants in Las Vegas had been.

Better than we anticipated when when we.

Opened them up I mean, there that was fear.

In the opinion him up we had no idea how they would do we opened Washington or a few days ago a week in Sequoia, We haven't opened in Union station yet.

Where it's too early to tell how that's doing we have the advantage of having a lot of outdoor seats. I think we have 307 outdoor seats. After social distancing I think as of the next couple of days, we'll be able to also allowed by the city to sit people inside.

Don't know, how that's going to do.

We opened Bryant Park, a yesterday in New York, We opened del Rio Grande.

Today in New York, both of those have out side seats were only allowed to sit outside in New York.

Clients and Robert the Museum of Art and design will not open until we're well Clyde once were allowed to open inside Loken, Robert wont open until probably mid September because the museum that were in his close and museums in New York are gonna be last phase and probably not any museums are going to open.

Until sometime in September so we have this staged opening that.

So far is going well.

Before we count New York again, we have no idea.

What's going to happen in New York at we just have no way to validate or anything to say that this is fraught with potential peril.

Isn't understatement, obviously were open.

The K slows in Washington in the excuse me in Florida, Alabama and in Las Vegas are climbing I know this every intent upon government to keep these places open.

But if we have cases.

In our restaurants, and and you know and it becomes obvious that were endangering.

Our employees or our customers by remaining open we're probably you know going to be faced with a decision that I see every business in the United States face what.

Do you close.

Do you close until you can get everybody tested so that you have only people who tested negative in the restaurants, we can control the atmosphere in the restaurants, we can control for the most part our employees and and certainly following CDC guidelines plus.

Yes, we're doing more than that what we can't control is where our customers have been.

And where our employees have been when they're not working we sent out notices to all our employees that.

No that their responsibility to be considered to their fellow employees into their customers and where mask and you know practice social distancing avoid crowds when they're not in the restaurants to improve the odds, but obviously surely you are a very cognizant that <unk>.

This is.

Not the.

Not not there is no assurance that we can keep virus out of our restaurants.

But right now, it's all going well.

We did take P.P.P. money or for our restaurants.

<unk>.

It was it was cheap money to take honestly I I thought when we went into this that we would have a enough money to see us through it I P. P P money.

The P.P.P. money was very helpful. One of the things we face in terms of.

The negative is places like Sequoia Bryant Park, Robert or to a lot of events, while we're not doing events right now and we had $4 million on deposit for Christmas events, and we're trying to reschedule people and encourage them to keep the deposits for another date.

With somewhat successful, but there are deposits flowing out of here as well so.

You know our cash flow or.

Our our cash on hand.

In part was bolstered by the float of deposits and by the float have been in business, where customers pay as the days. They get served and we pay bills 15 to 30 days later.

Those those two advantages disappeared the minute we closed down.

So the P.P.P. money was of a great assistance.

Yes, that's about all I have to say right now I'm happy to take questions.

Thank you at this time, we will be having a question and answer session.

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One moment, please while we pull for your questions.

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Our first questions come from the line of Anthony share right is that please proceed with your questions.

Hi, Good afternoon, I can you comment a little bit about how well customers are following the protocols and wary mass because I've I've had hear stories here in New York that customers come in they wear them. After they take them off and then they start walking around all over the place in the restaurant I know it's difficult for you to enforce.

But how have you seem to customer.

Terms of complying with what they should be doing went once they're in the restaurant art. So.

I, you know where.

Personally when not traveling to Florida, or Alabama worse, Las Vegas right now.

So we're relying on our general managers, obviously in the hard rock casinos and in New York, New York Hotel and Casino.

We're not in control of that the casinos are in control of it right. When you get into our restaurants, a we're in control and we're enforcing it obviously people can drink worried with mascot, but but for the most part we've we're being told by our managers that most t.

People are wearing masks a in Florida that you have a big problem in general with what's going on in Miami, We're not in Miami were in Broward County.

Palm Beach County is reckless. We're told 100 problems. We have is our restaurant Jbs, India fuel Beach has a restaurant next to it.

We're not allowing people to sit as the bar, where we're following all the guideline social spacing you know.

The restaurant Nexstar has a bar that's for people deep you know nobody's wearing masks.

There's no social distancing and that puts us in jeopardy, because they the their properties about saw property its it so.

We're trying to enforce everything.

It's awkward to go to a customer.

And you know tell them what proper behavior is but we're doing it. We're also doing something that most reassurance untold and not doing when when you come to our restaurants, you have to give us your contact number. So in case, we have an incident on a particular you know we can go back to the date you you know you eight there and.

Contact all of those people and say you know we've had an incident here.

You should be tested so where we're being very careful unfortunately, other people or not and I know in Miami now is there a they've been closing places.

We're we're guidelines and not being followed but the problem. This those restaurants opened two days later, so it's it's difficult it's difficult, but I think in our places we are.

Having a lot of success.

Good.

It's good to hear the ticking down with the numbers a great idea. That's an excellent idea and I think everybody should do that because that that's one of the best ways. We can battle. This thing is once we identified we can identify who <unk> been in contact with people who had the virus and then we can trace it through I know I know in New York City. We've had very good success doing that and then the mayor was.

The other day.

But when they do other things, which is a nuance because you learn every day.

We will now queries in our staff does anybody having immunology problem.

You know, we don't want them working we don't want them endangered and you know so what hat. What's happened here is staff was on unemployment, we bring them back we find out that somebody has an immunology problem. We don't want them tourists themselves. So nobody should have the I can you know because of the economics of their life to make the does.

Decision that they have to go to work with in immunology problem, because they need to make a limit. So we're going to subsidize those people you know until they can get back on unemployment. It you just got to be so aware of of again the nuances of the situation.

It's hard.

No I I totally understand that and you and you are in the minority in terms of enforcing and everything else or whatever in terms of even in the initial phases here in New York the stories that I've heard from different people or whatever or just revolting I mean that just people don't care and it just walk around the take off their mass and if a tremendous stress on the restaurant owners.

Yeah, I'd have to fight with your customer or what do you what are you going to do.

At the difficult situation now on the cash flow side I know you don't know whats going happen in New York and everything else do you think you have enough cash to maintain yourself. Another six months another year, assuming things stay Oh, yeah, let's say to some degree of slight negative cash flow you know, we can't et cetera. So I'm.

I'm going to make a statement that would.

You have to take it at a at a period in time as of a you know as of this state as the state alright, and it could change dramatically alright, we have enough cash flow coming added restaurants that have been operating five or six weeks to cover our corporate overhead.

Fantastic right, Okay and that does not include P.P.P. money [laughter], alright that can that can change rapidly you know depending upon what happens with the pandemic. We we are at risk, but I don't want to sound like we have good guys. The top four people.

Or.

ER.

Anthony you may chime in but I think the top four people at our.

Well the top five top Bob at at the corporate office, where we're salaried and bonuses $3 million last year right that number went down to $220000. The minute we closed.

Nobody in our business was allowed to make more than $50000 a year.

I mean, we cut everybody and and every manager I mean, we have managers like pull Gordon in Las Vegas, who makes a lot of money. He went down to $50000. Every manager we don't have a manager in our network that doesn't make less than 100, and some you know 100 in and if.

Traction everybody went down to $50000 everybody else went down by 50%. So we were able to crush corporate overhead until we could get this these restaurants open now we brought everybody back up to.

What Anthony 65, 70%, 65% yeah.

Except me, all right [laughter], I'm less than 65%, but but the ER the restaurants.

Our the minute they turn cash flow positive, which was immediately in the south a we brought everybody up from 70% gradually to where they're at 100% of the salary. So these cash flows are real in the sense that did not being subsidized by people subsidizing us right. So.

So we're we're operating as if there was not a pandemic in terms of you know.

The economics of the salaries as the people in the and the restaurants. So these cash flows are real and you know we had room to move them back down again, because we were quite honestly very fortunate in that the culture as a company and the managers who have been with US every one of these managers for the most.

<unk>, except for the recent acquisitions and last three or four years, where with US. The 911. They were with this in 2008. This is the third time. This subsidizing the life of the business by taking salary cuts they know that their their life.

You know, it's tied to the success of this company.

And the end the way they lives are going to get better you know always is to bet on the company and and by betting on the company. They got to subsidize it they're all prepared to do it we did not here one tepe not one and then it's a matter of fact, if we didn't do it they wouldn't volunteer to do it that's that's great.

That's great.

During the minority and it's great to hear in its great to be a shareholder and you're approaching it from from the chair shareholder perspective, which which which is wonderful I commend you. Thank you.

You are very much richer my questions.

Yes.

As a reminder, if he would like to ask the question. Please press star one on your telephone keypad.

There are no further questions at this time I would like to turn the floor back over to management for any closing comments.

Well. Thank you for all attending this.

Uh huh.

We'll keep you advise so far things are going well again, the there is there a risk out there.

I don't know how to a assess them, obviously, but so far we're doing well and.

I wish you all.

Oh, well and stay healthy and will speak to in three months. Thank you.

This concludes todays teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.