Q4 2021 Ark Restaurants Corp Earnings Call
Our product cost.
As a percentage of sales has gone from 43% to 57%.
We're still profitable at rustic or demographic cannot pay more than what we're charging we've raised king crab legs from $75 to $95 to $115 per $125 over the last seven months as the price increase.
Right now customer at rustic is paying $125 for something that quest is $109 to put on the plate.
So.
Where we are.
We're more concerned with the revenues and keeping our customers and we are with the profitability of a particular product, but at rustic one out of four people order that product and.
Again were profitable but.
Those profits.
<unk>.
It wrote it on considerably.
The rest of the Florida is doing extremely well.
I also cite what's happened to contra products, which we use.
Shutters.
North Palm Beach.
That product 40 pounds six weeks ago used to cost is $40.
But we can have ago was $125 for the case.
So three folding christy's.
It's now back down to excuse me.
It used to cost $300, it became $250 and it's now down to $750.
We've seen.
And shell fish oil credits.
We think the prices peaked that starting to come down a little bit.
That'll be helpful in future quarters, but its relatively strong December quarter, we had.
Was carried by that.
Extraordinary results in Las Vegas, the non crab restaurants and.
And Florida, a very good performance in Sequoia in Washington D C and again in New York, We're still hampered by office buildings that are only 30% occupied.
Fewer events in terms of revenue.
Streams and.
A lack of tourism.
Our.
Our customer base at Bryant Park, and Robert especially.
Requires a road that robust.
Office occupancy event business and tourism business and that has not been there. So these results.
Are quite remarkable given the handicap side just.
Outline for you.
Okay.
Very very pleased.
In New York.
This last week and a half if you could sort of see the results of <unk>.
We're having a very good December quarter.
But I can tell you that.
The last.
Last week or so.
In terms of events occurring in New York, there under occupied people.
Paid us for 350 people for an event at 175 show up.
So.
I don't quite know.
What the future will hold for the March quarter.
The December quarter has been very strong.
Metal Lance.
We.
But what I can say is that 50% of all sports betting in the state of New Jersey is done at the Meadowlands for 40% of.
It is online.
Yeah.
Excuse me, 40% of the online bedding is captured by the Meadowlands websites, 50% on premise spending is captured by them in Atlanta.
<unk>.
Oh, we did well over a half a billion dollars and betting.
They are in sports betting.
The hold has been better than we had thought originally we thought it would be tangible towards us foods, our partner would be about 5%, it's it's a little bit over 6%.
After everything is said and done.
Jackson to the calendar year December the Meadowlands would have a positive EBITDA of $15 million.
What that means two things to us.
Number one we're going together first distributions because.
Not we.
Only about seven point something percent fully diluted.
The distributions would be the equivalent to what we would pay in taxes, so its not going to be.
So it will be couple of hundred thousand dollars this year, but it'll be the first distributions we've received.
The second thing that's important about.
This thing being cash flow positive is not going to be any capital calls.
So we're in good shape on the Meadowlands.
In terms of the current business, whether or not it becomes a casino we have thought so.
Yes.
It's anybody's guess as to when that.
That might occur if it does occur, but it's certainly not going to occur until.
Downstate casinos in New York City.
Get licenses and that's presently scheduled late 2023.
If that is advance forward.
We may get some action by the New York, and New Jersey Legislature too.
Progress forward.
Consideration of casino license in the northern part of the state, particularly the Meadowlands.
I hope that gives you a little bit of flavor, what's going on.
Happy to take questions right now.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
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Our first question comes from the line of Roger Lipton with Lipton Financial services. Please proceed with your question.
Yes, good morning, Michael.
Hey, Roger.
What can you tell us about the Las Vegas lease negotiations.
Going very well.
There were a little bit behind schedule in terms of.
When we thought we would get a.
Leases in hand.
Documents.
But.
As far as we're concerned here.
All the economic issues have been.
Agreed upon.
So we think.
Sadly.
Far down the road.
Terms of.
Keeping the present.
Operations going for an extended period of time.
But we haven't received documentation yet and.
I would be pretty confident that's coming but we just haven't received anything yet. So we have we've had nothing to review.
As to whether or not <unk>.
That's about the economic issues and other issues are confirmed by a document.
And <unk>.
You mentioned of course, the omicron effect here in New York.
Have you felt anything at all and yet unless Vegas, Florida, or Alabama as far as the omicron the latest well.
So it's not only us.
I mean I.
We're sort of pay attention to our own business and we don't.
You don't make phone calls around how.
Now other people are dealing with the problems.
But this whole period.
March of.
2020 going forward, we've had constant cases in these restaurants everywhere.
Some of them, we've had to close down for periods of 10 days until we could get a crew together it was not.
Not.
Not.
Showing any signs of positive.
Tests.
So it's been difficult right now we have some cases in Florida, we have some cases in New York we have.
There's always cases in Las Vegas, we have 600 employees, who are working in a facility that has 2500 employees.
It's it's just difficult.
I don't know.
And we have recent cases, so and problem is we don't know whether those tests like everybody else are showing signs of OMA crown or delta.
But.
But so far we've been able to isolate people.
We.
[laughter] E on top of it.
So.
I would say a 95% of the cases people feel sick at home and they don't come in and they get tested.
To protect.
Hello employees customers and keep the restaurants opened so that's what's going on but but to solve the crop.
In New York City is awful right now.
And.
Yeah.
Okay.
Certainly.
The revenues in December will be strong because the events that we had in Bryant Park and Robert went on.
At full price.
Because again somebody schedules for 350 people.
They paid us the 350 people. They expect 350 people when they have an event and they are lucky to have 50% of those people show up so in terms of profitability and maintaining the revenue. We thought we had projected that we're getting that.
But theres no question that there's a deterioration in the number of customers walking into these restaurants, right now everywhere everywhere, including Florida, and Alabama in Vegas.
Oh, no not Florida non Alabama.
Vegas, not yet alright, okay.
Got it.
Washington D C as quiet without a question in New York and without a question.
Our biggest problem right now in New York, and Washington D C. Although I havent checked with Washington lately.
We had very robust reservations for new year's Eve and the number of cancellations coming across is significant right.
Alright, really significant right right right.
Our financials I mean.
In the northeast. This this is a slow time anyway, we're going into the slow season, so right right all micron.
Starts.
Expanding throughout the Tri State area were slow to begin with in January and February So it's not a bad time for this to happen.
As far as we're all watching the same news maybe this thing will play itself out quickly.
Yes.
You know great job under the circumstances and happy new year.
Thank you Roger useful.
Our next question comes from the line of Jason Walters Private Investor. Please proceed with your question.
Hi, Michael.
About the company's current cash position and your thoughts on capital allocation going forward. Thank you.
Yeah, So Anthony can answer that in more detail.
Anthony why don't you talk about the balance sheet I'll talk about capital allocation sure currently we have.
Slightly $24 million of cash before float.
Well, it's generally three to 4 million our debt.
<unk> is.
Bank is $25 8 million currently it was 27 at year end, we made principal payments.
But first our PPP loans.
The press release subsequent $4 million of the two.
Forgiven.
We expect another.
$3 million to be forgiven.
The net balance of unforgiving malls, approximately $1 7 million.
Okay.
Those will be paid over the course of 10 months. The reason we were not able to.
Get all of that money forgiven was because we couldn't spend the money within the 24 week hovered periods, because the restaurants in New York, but it primarily relates to the New York restaurants weren't open.
Last summer they didn't open until the end of June we got the money in early May.
I did see there is something and I don't know if for two public companies, but I believe Gary Naylor introduced a bill to extend that covered periods before these loan amounts could be forgiven for that exact reason I don't know if that's geared just towards small businesses or not but.
We'll stay on top of that so the balance sheet is very strong.
And.
Okay.
Far as capital allocation.
I just wanted to make a comment that right now we also have a receivable from the government was about $3 million.
From the IRS.
When you include that.
Yeah.
Cash and receivable.
It exceeds our long term debt.
Hi, a few bucks.
Capital allocation.
We're gonna have.
Vegas leases are.
Executed, we're going to have to spend some money in vegas over the next well.
<unk> for 18 months.
My guess is that's going to be.
5% to $7 million.
Maybe a little bit more but not at sort of what I think.
Mt is.
Uh huh.
We would have spent that money anyway.
It's not it's not necessarily a requirement to leases.
We would have spent that money anyway.
If we had it.
Our current leases.
Yes.
Yeah.
Longer term the.
The reason we won one spent the money was didn't spend the money was once expensive. If we knew we were going to be out of that.
But there's just some shifts.
We have to do and new kitchen equipment, we have to buy it.
And just a whole bunch of.
Postpone maintenance issue.
So.
Beyond that.
At the other restaurants, probably keeping.
<unk> is another million and a half dollars or $2 million.
So.
My guess is you know that.
We have commitments of somewhere between seven and $9 million over the next 12 to 18 months.
Keeping the facilities fresh.
We are not seeing any.
In terms of.
Of the 10 <unk>.
Additions.
That we like right now.
Alright.
We had focused a little bit on Florida, because we haven't been affected.
Brokers down there because it's more of an investment banker and understands what we're looking for.
But since this has been so strong.
In the Florida market and other markets that we really don't see anything.
You want to own.
Prices have been offered I'm sure that's unchanged a little bit now.
Yes.
The idea of building unless it's an extremely.
There's a lot of opinion imprudent money.
Something that we're just not it's just doing it.
So that gives.
It gives you a flavor there are two exceptions to this.
And so that's.
Let's get the beginning.
Of.
Okay.
Of exploring these two situations.
One is the GM of art design in New York, who we have Robert right now we have Robert on the ninth floor.
Have a seventh floor.
It would have been.
It's sort of like it's only 1400 square feet, we use at the museum uses we make money with it.
But but it's an awkward space. So just wondering what's the impact.
Have you seen them has a new executive director and.
Where we have been robust in the past that as.
As we trade the seventh floor for the 10th.
3300 feet of usable that rider.
At your event space in our language a compliment restaurant.
And as always been rebuffed.
Hence encouraged us to go ahead.
And.
Present.
With what they consider an opportunity sort of close the museum and ourselves. So we're working on a project.
And the early design phases of it.
The museum hasn't approved it yet.
They want to see something with how the space is going to be used in.
But with the essential elements kitchen storage.
Office and bar.
Right.
That's a project that we're very much interested in.
Pre COVID-19, we had a lot of them fulfill demand.
And the 10th floor up to the museum of Art and design overlook Central Park.
I think.
Substantial substantial.
To increase for us.
Ability the other thing that.
We're looking at it as a.
Jb's on the beach.
A 200%.
Doing $12 million.
Got it.
The man.
And we're looking to build that closes at the restaurant.
Our bar lounge and outdoor bar.
And.
We've gone to the E P.
The City Council.
Proposed what was what.
Zane.
Sure.
To the council they have passed on it past positively meaning they they've said what we're looking to build is buildable as of right.
They'll have some input once we get further along in the design.
Each one of these two projects.
Cost is probably $2 million to $3 million.
But we would be expanding facilities, where we know the demand exists.
And we're excited about both of them Theres, a small third project at Blue Moon Fish company.
Which is on the intercoastal.
And.
Fort Lauderdale by the sea.
We now have a deck.
That goes into the.
The waterway.
That sits about 50 people.
We have.
Almost all the approvals necessary to expand that deck.
Another 12 feet into the waterway.
That would give us another 60 or 70 seats.
So waiting for city Council approval on that but we haven't proved from the Army Corps of engineers for four different entities that we needed approval from.
So its not like were idle with trying to you know the best thing we could do is expand the facilities, where we know we have demand and.
We have institutions essentially with great locations.
We can add seats and hopefully significant revenue.
So all of those projects are.
Probably things we can complete in the next 18 to 24 months.
Uh huh.
And we're working on it.
So I hope that gives you an answer.
Yes. Thank you.
You're very welcome.
Our next question comes from the line of Paul Johnson, a private Investor. Please proceed with your question.
Yes, good morning.
You guys have done an amazing job since the pandemic and I. Appreciate also the candor about the difficult.
Situations out there so just wanted to understand.
Yeah.
Obviously.
You guys don't want to be doing this forever.
You spoke in the past about sort of strategic alternatives.
And it's it's difficult given.
The sort of very diverse.
Restaurant map that you have it seems like it's becoming more of a Florida story. These days, but maybe new York will come back.
Vegas is doing better I guess the question is is there anything can be done in terms of monetizing the meadowlands.
Asset or is it more.
As youre thinking that its premature until till things develop there in terms of a casino and in a larger sense.
Does it make sense to sort of.
The company or find someone to help ensure the company or are you kind of doing that on an ongoing basis anyway with your ear to the ground.
So let me deal with the last part first.
They're not shopping the company at all.
Obviously.
Yes, as you know.
More personal as it's as opposed to objected research.
We think we're undervalued.
We don't we don't.
Right.
But.
A 30% shareholder here, maybe more with my family.
We think theres a lot of good work that we can do.
Due over the next few years.
In terms of creating.
Creating.
A larger EBITDA.
Although that's been stalled for a while.
Because of Covid.
The machinations that we were going through pre COVID-19 in terms of trying to find or identify a better path forward I think we identified that pets as we started to buy the land under these restaurants and.
I'm going to repeat something I've said in the other phone calls would be a little long winded here I apologize.
But if you wanted to monetize assets.
We bought for instance, the rustic and $7 $5 million when it was earning EMEA and $5.
And we bought not only the operation, but the land underneath it the land underneath it I think it was appraised at roughly $4 million.
Just pre Covid, we were making three and a half million dollars.
Sale leaseback on that depending upon how much we wanted to.
Assigned to ramp, but if you've signed $10 million.
And.
With interest rates, where they were or.
Continue to be although I suspect that'll change.
That a corporate guarantee we thought we could get something on the order of $12 million.
Sale leaseback and and B.
Be paying $1 million in rent and still making two and a half million dollars. So we have that situation.
In.
And all four of the locations that we own the land two in Alabama.
<unk> and rustic where we think there is.
30 $40 million on the table, depending upon how much rent we would pay of the EBITDA with generating the operating profits we generate from those restaurants. So there is.
Value, that's not showing up on the balance sheet number one.
Number two.
In terms of the Meadowlands.
What I think happens if the Meadowlands gets a casino license first of all we have a rider for the right of first refusal.
Sure.
On all of the restaurants.
Meadowlands.
The deal on how much it would cost to build out is a little murky because the documents that.
Were executed at the time said it would be similar to the deals we have.
In Las Vegas swell in Las Vegas, we had a great deal of tenant improvement money and the rents were very very cheap.
So I think there'll be in negotiation on that.
If that goes forward with the restaurants, we also own 7% of.
New Meadowlands, LLC, which is the entity that would be running the casino.
In conjunction with Hardrock, who is a 20% owner.
And made their investment based upon the fact that they would be the operator.
Honestly, what I think happened to see if there is a casino license issued I think it takes about five minutes for hard rock to come to us and say okay.
How much do you want for your position.
So.
I think it is premature on the Meadowlands I don't know, who we would sell it to honestly.
I don't think anybody wants to be a minority shareholder and.
And that although there is.
It's.
I think the bet on whether it becomes a casino or not and it's improving.
I don't know how to price that.
The other reason we have difficulty honestly, if we were inclined to shop. The company is how to put a value on that 70% and the exclusive.
Right of first refusal on all the restaurants in the Meadowlands.
Aye.
Yeah.
If somebody wanted to come to us with a stupid price I guess.
Listen we have to listen because we Havent board of directors that would listen in.
To try to benefit our shareholders, but we haven't heard a stupid price yet.
Besides that totally.
Go ahead.
No I was going to say that totally makes sense and and it's better to be patient with the meadowlands.
So given that going back to the general management of the company are you are you grooming people to eventually take over your job as a young management coming in.
So the answer is.
I think we have.
Some very capable people here.
Who could continue.
Anthony sitting in this room with me.
Anthony is more than a CFO.
He has skills well beyond that.
And there are a couple of people I think who could be with Anthony we continue what we're presently doing.
Adam My own ego.
Always thought and we've interviewed people over the years.
And as a matter of fact, we.
<unk>.
We hired one of them fired them a few years back.
There there is.
What we do is different than most public restaurant companies.
Don't have a brand.
If we had a brand I've always argued that we do big very dwell.
Yeah Yeah.
We've had days Inn in New York, New York, and I'm serious I'm not.
Making up the number where we serve 25000 people.
Hum.
Rustic has days, where it serves 3000 people.
Bryant Park.
I always used to stick out my chest when people said, how does it work I said well at five or six on a spring day.
There are 1100 seats of which about maybe 100 or occupied at five after six all of 1100 are occupied and they all want to be out of it by 715, and we get them out of it by 715, because there are another webinar. Good waiting. So we do think very very well at a quality and price point, which I think is.
As good as anybody else in this industry.
And we do it without a branch so.
Would I like to have had a brand I made or a less time, when maybe I should've made a right turn many years ago was when I started doing restaurants within two or three blocks of each other on the upper west side.
And that's sort of became what we did.
But but the difficulty of bringing somebody in here who doesn't understand this.
Not only the culture of the company, which you may or may not agree with.
But but the.
How does smell a deal.
How to look at something where you're saying, Hey, So 100 C suite, we aint interested show US something seven 809 hundred seats, we're really happy to see that deal and we could pull it off so.
That person if they exist outside and honestly, we haven't advertised for that purpose, but we met people along the way that person really exist in our company.
There are a few of them.
I think we will just be fine.
I'm not looking to retire yet.
So that's where we are.
That's actually great news.
We appreciate your long term thinking and management and so totally understand but it's good to know that you have a game plan in place as well.
Thank you.
Okay.
Our next question comes from the line of Jeffrey Kaminsky with JK consulting. Please proceed with your question.
Hi, Mike Congratulations on a great quarter, and a very challenging environment.
A couple of other questions that I had were actually addressed.
Prior but just a follow up.
Regards to the government PPP loan program.
Some of the moneys as I understand it or for giving us a grand and some are due for repayment.
Is that number not been set yet and there is the performance of the properties or have a role in determining what is forgiven versus what you need to pay back.
So the number the numbers set so we had $15 1 million of PPP loans that we had obtained.
That money has to be spent within 24 weeks of of the of the.
The incoming wire.
For the most part properties outside of New York, we were able to spend the money and the 24 weeks and the loans had been forgiven, there's six or seven smaller loans that are now at the SBA waiting for forgiveness.
SBA seems really backed up but I think it has to do with the second draw loans are now all applying for.
Forgiveness as well so of the $15 1 million.
Based on the applications that I have submitted and we've already received back $1 7 million was not forgiven or will not be forgiven.
Cause for instance, Bryant Park.
Brian Park reopened at the end of June of last summer and it wasn't outdoor only and then it was 25% indoors after labor day and the money has to be spent by October 15th.
And the money that you obtained from the program was based on your payroll for 2019.
Two and a half times your monthly payroll, but we werent anywhere near that monthly payroll in the summer of 'twenty through October <unk>.
<unk> at the end of June so, we could not and Youre limited to.
60%.
Your spend has has to be 60% on payroll. So you basically how much payroll money did I spend divided by six caps on my forgiveness for an operation like that and that happened at Robert as well.
Couple of other places and that's why we have the $1 $7 million has nothing to do with.
The profitability of the operation or any defect or anything of the applications. We submitted we just they didn't really think ahead with that 24, we covered period when it came to.
Markets like New York, where we stayed close for extended periods. Yes. We also have this is a situation that Robert with the museum was closed and we are on the ninth floor museums and open until October we got our money in May or April and we never were able to spend any of it. So all of that money is going back to the SBA.
This alone.
The other thing I want to point out is that we only got the first tranche of PPP enough money.
Private companies got two shots.
Of PPP money, but public companies were restricted because you know the abuse of some public companies.
In the second tranche stake.
<unk> eliminated the ability of public companies to get the second second round. So we didn't get the advantage of that we did get some employee retention money.
And a couple of the restaurants, but that was not significant in relation to the $15 million right. Okay and just so just a follow up to capital Michael you had mentioned that.
Uh huh.
The opportunity at the moment, certainly in Florida, and some of the southern states to acquire another property.
Given the robust level of business. This isn't there yet, but if that property should come a long beach, Florida, Alabama or somewhere else or do you feel like you're in a position right now from a capital point of view, if you'd be able to at least.
Yes, well first of all with net positive in terms of cash in the bank and receivables from the IRS.
Vis vis <unk>.
Long term debt.
Our working capital.
Shell is stupid in terms of you know.
How restaurants, usually run.
We're in great shape with every ratio.
Our banks have signaled to us that if we need more money, they're there they're certainly happy to consider it I think that's not a difficult task, but we have enough cash on hand to make a couple of good acquisitions given the type of properties we usually.
We look at.
I'm not worried capital is not a concern Jeff it's the it's the operation that we would look for one of the one of the interesting things.
And this.
This is.
Probably more work than intelligence or research.
And rustic shockers, the two Alabama properties.
Jb's on the beach aluminum fish company, we're talking six acquisitions, where management has stayed and performed so well for us.
We've had no no.
Desertions, who keep people Cui.
Quite the opposite.
The happier they tell me and I believe them that happier in our hands than they are in their prior one chance and the reason for that is you know institutional owners of those properties. They werent part of a corporate structure.
We're pulling all the cash flow out.
The lifestyle and these managers, we're getting calls all the time from purveyors when youre going to pay me when you're going out and they couldn't make repeat significant repair I didnt they didnt make repairs.
There were problems that we have refrigerators that were 18 years old.
They were keeping together with Scotch tape and we go in there and we make facilities brand new essentially in terms of equipment and repairs and they never got a call from a purveyor.
Because we pay every bill was the 10 to 14 days.
<unk>.
That's always been the case here when we were in the financial position to do it we don't want our purveyors.
Go around with our product.
We've been we've always.
Had been very quick payers, because we are our purveyors to know that.
Yes.
Yeah.
The positive cash flow and if they screw around with us and they lose us.
They're losing a primary client.
During 911, I always tell the story and I apologize for repeating it during 911 in New York, So three or four weeks after that we had purveyors, who would deliver a product in the morning and pick up the check into our office afternoon, because they they were all bill.
Leaving their customers.
But provide them with the.
Cash flow from their deliveries and they were all bleeding the royal scam and we were there.
Hey, Thanks, Hey, we received.
Some money for outlets you Guy we kept in the business.
Tommy.
We went through a very similar process also bandwidth.
We want the same thing with coach.
Yeah. So.
So.
We're in great financial shape, just great financial shape.
Just two quick questions.
Again, congratulations on a solid quarter and a happy.
Happy and healthy holiday and new year to everybody.
Yes, Thanks a lot.
Thank you.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Alright.
Thank you happy holidays, everybody will see what.
What.
On the crime does talk [laughter].
In the March quarter.
I think youll be very pleased with the December quarter, I know, you'll be pleased with the quarter.
But march quarter could get kind of crazy again and.
But we're here.
We're not in the office frequently.
We happen to be for the call, but if any one.
Has any questions.
My cell phone number is 6463 to two 990 764 to six three to two 997.
I'm, usually pretty responsive and can answer call every in the same day I get it.
Again happy holidays. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Hey, Joe.
Alright.