Q2 2022 Ark Restaurants Corp Earnings Call

Greetings and welcome to Ark restaurants second quarter 2022 results conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Chris Love Secretary for Arc.

Restaurants thinking you may begin.

Operator, good morning, and thank you for joining us on our conference call for the second quarter ended April <unk> 2022, My name is Christopher Love.

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.

Those of you who have not yet.

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 PDP.

Restaurants dot com.

Before we begin.

It can be safe Harbor.

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 upon them.

We refer everyone to our filings with Securities and Exchange Commission for a more detailed discussion of the risks that may have direct bearing on our operating results performance and financial condition.

Ill turn the call over to Mike.

Hi, everybody before I.

We view the business I think it's a good idea of that.

Use our balance sheet. Thanks, Michael Yeah, we had a great quarter as everyone saw in the press release better than we expected our balance sheet at the end of the second quarter remains really strong we have close to $19 million of cash.

We've collected since the end of the quarter our carried back claims on our accounts receivable on our carrier tax carry back so that was $2.1 billion in <unk>.

Subsequent to the end of the quarter.

All of our long lived and intangible assets we've reviewed for impairment.

We don't have any indicators of impairment.

Our debt is down to $28 5 million from $32 six at year end.

We had $1 1 million of forgiveness of PPP loans in the quarter, which as we saw on the P&L.

The $28 $5 million of that $2 6 million as remaining PPP loans.

Of which we expect.

One 7% to be forgiven at approximately 900000.

When you get forgiveness decisions based on the paperwork that we submitted.

So other than that there's not a lot of changes on the balance sheet. It remains strong.

Other than the fact that we did really well.

A pretty uneventful quarter as far as.

Unusual transactions, so I'll turn it over to Michael.

Thanks Anthony.

If empty gave you the $90 million cash figure, which was at the end of the quarter.

Presently today, we have approximately $28 million cash on our balance sheet.

And that is all.

For flow, let's before Columbia.

So.

Our net debt is pretty much zero at this point.

Business in general.

During the quarter.

The business.

It was surprisingly strong in Las Vegas and Florida.

More than we had projected.

What you should know about this quarter, which I think is interesting is that New York City and soon.

Sequoia in Washington D C.

<unk> lost a combined $1 4 million during the quarter. So the fact that.

We were profitable.

Despite the poor performance of the two northeast.

Locations, New York City in Sequoia.

Just shows the inherent strengths that we witnessed in Las Vegas, Alabama and Florida.

The main points that I think we want to talk about is the dividend calculation.

We've resumed our dividend.

Which you saw in the announcement basically.

Extended our projection to the end of fiscal 2023, which is September 2023, and said if.

Things go according to what we are projecting this is the amount of cash that will have on our balance sheet.

After paying debt after an acquisition.

That were.

Yeah.

Projecting we may do.

The.

Payment of debt payment of taxes paid and adventures and.

We decided that conservatively we can.

Resume our dividend payments and still not encroach on anything so we wanted to do in terms of expanding the business.

Sure.

The Meadowlands.

We've become.

With what New York City is doing in terms of.

Yes.

Downstate casinos, we become constantly more confident.

Yeah.

Within the next two to three years, we will have a casino license at the Meadowlands.

There are conversations going on that makes us feel that we're on the right path to getting that.

So.

We're looking forward to that possibility.

Leases that New York, New York Hotel and casino.

Which can't come due.

At the end of this year.

We have signed there are three major leases in the hotels between the hotel and US we have signed and New York New York has executed one of those leases. We have signed and are waiting for New York, New York to execute a second lease.

All of these leases required to reach to sign off on it so there's some.

Some period of time from the time, we execute until the time, we get all the parties to sign on the lease that's what's happening with the American lease we signed it.

We expect to get that back and execute informed by New York, New York over the next couple of days.

Actually last night, we just got the third week.

We view.

Which we haven't had time to review yet, but so too.

One leases completely executed.

Well the lease is about to be executed.

And we have the paperwork on the Thursday, so were.

Sure.

Certainly feeling that.

Those leases are are essentially complete and gives us a lot of runway to continue our operations within New York, New York casinos.

Area by area just to repeat Vegas is extremely strong.

We'll see.

I've been watching carefully.

Comments by retailers in general about what's happening to their business.

With interest rates going up in a recession protected.

<unk>.

On the consumer's balance sheet groceries across the more gas prices, we're not seeing that in our location in Vegas.

We're certainly not seeing it in New York with.

Which I'll get to in a second.

And we werent seeing it.

In Florida, or Alabama at as of <unk>.

Last week.

Last week May have been one of the best weeks. This company ever had in terms of sales.

We are beginning to see a seasonal falloff in.

In Florida.

At our full service locations, we are not seeing that at the two hard rock locations, where we do fast food.

We're seeing a dramatic pickup in New York, and Washington D C and in part driven by a very strong event calendar, which is.

But in May and June .

To give you a for instance.

Ryan Park, which was struggling throughout the.

The early part of this year to do two to 300000 a week.

That's our facilities and Bryan talked at 800000 last week.

A lot of that driven by events and we have a calendar that has full to the end of June .

So quite is seeing the same thing a lot of events.

There.

Calendar, so we expect the momentum.

Cash flow and earnings to continue to the June quarter, we should have an extremely strong June quarter.

So with that.

I hope I covered the high points. Please.

Would you have any questions.

Let's go.

Okay.

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Our first question is from Sandy Mehta with <unk>.

Evaluate research. Please proceed yes.

Good morning, and congratulations on a strong revenue quarter.

You talked a little bit about a possible acquisition now that your balance sheet has strengthened considerably are you still able to see deals at three or four times cash flow and.

What size acquisition.

May you contemplate thank you.

Yes.

Andy Thank you.

So.

The balance sheet is strong enough to do anything that we think we could absorb.

<unk>.

Okay.

The answer is we are seeing deals.

There.

They don't come across the desk every week, maybe every three or four months, we see something that's worthwhile looking at.

The.

The minimum threshold.

As we.

We don't want to do anything with the cash flow generated by operations is less than $1 million.

They have to be well established restaurants.

We've been we've been very fortunate here, our acquisitions of rustic Sequoia Jbs gloomy the two oyster houses in Alabama.

Management is the same as the day, we bought it.

We've had very little.

It's not none of our key employees have left other than <unk>.

For retirement purposes, but all in all the key people have remained with us.

We're looking at deals where we can expect that same result, where.

Key management will stay.

Yeah.

Seriously looking right now at one possibility.

And yes, it will come at three four times.

Operating profit.

There are others that we look at that are little more expensive than that I don't think we want to reach.

Beyond three or four times and.

Dennis.

I think they are available.

We are unique I believe in that if you're a seller.

And you have a good property and you go locally.

You're likely to find a buyer who will put down a third and then give you notes over eight years.

We spend the dollars.

Format that restaurants are sold under.

If you.

If you are.

Standing there is an independent to big brands.

Much better balance sheets, and we do don't want it because it doesn't extend the brand unless say purely brand is worth.

Multiply.

But where there is.

With our balance sheet, we've paid all cash.

We're not interested whether or not we think we can expand the brand.

We're only interested in your cash flow in and trying to make you more efficient.

Once we acquire so.

That's our business now quite honestly.

And so far we've been successful at that business.

Yeah.

Great. Thank you so much.

My pleasure.

Our next question is from Jeffrey Kaminsky with.

J a K consulting them. Please proceed.

Good morning, Michael and team congratulations on another strong quarter I'm, Mike on last.

Last quarter in some conversations.

That we've had there you would discuss the pressures in terms of cost of Oh food.

And inflation, we all see the headlines and narrow that twice.

Prices are still growing up so I'm sure that continues to impact performance in pricing because the restaurants.

Maybe you can discuss that a little bit, but secondarily one thing.

I'm unclear on is the labor situation I know that you folks in the hole for the hospitality industry, probably more than just the hospitality industries are facing.

Facing labor shortages.

Difficulty finding servers and bus bodies and the like.

Could you talk about that a little bit as well thanks.

So sometimes.

The results are good I feel that the business is managing us rather than us managing the business, we're dealing with chaos all the time.

But it's sort of unpredictable in terms of.

Food costs or other services that we buy which one is going up the most.

Next week.

<unk>.

We've had lots of discussions about <unk>.

Crab legs here.

We stopped the million dollars worth of key crab legs for a rustic inn.

I'm repeating myself.

We made a purchase that we thought was the same purchase that we were looking at costs that had more than doubled over a year. It looks like they will go and hire they did go higher and then all of a sudden they drop.

So.

Not that we're stuck with an inventory that we've overpaid for it but.

It's just unpredictable.

This is no stability in these markets with prices so.

In that regard with deadly with chaos or cost of goods is definitely up.

Most of our restaurants.

I can get a mother's day.

Prices go up right before mother's day or Valentine's day because.

This seems to be some element of galaxy sulfate.

But my managers.