Ark Restaurants Corp (ARKR) reported its Q4 2024 earnings, revealing a challenging period marked by a negative earnings per share (EPS) of -1.24 and revenue of $43.41 million. Despite these results, the stock showed a modest increase of 1.56%, closing at $12.19. The company's performance reflects a mixed landscape, with some promising developments in its restaurant concepts and operational efficiency efforts.
Key Takeaways
- Ark Restaurants ended the year with $10.3 million in cash and $5.2 million in debt.
- The company launched the "Lucky Pig" restaurant concept, aiming for expansion.
- Labor costs are stabilizing, but revenue challenges persist in Florida and Washington D.C.
- Non-cash write-downs totaled $16.5 million over two years, impacting financial results.
- Ark Restaurants holds a 7% equity stake in Meadowlands Racetrack LLC, with potential casino opportunities.
Company Performance
Ark Restaurants faced a challenging quarter, with revenue pressure in key markets like Florida and Washington D.C. However, consistent performance in Alabama and operational improvements offer a silver lining. The launch of the "Lucky Pig" concept in Las Vegas could provide future growth opportunities, despite current financial headwinds.
Financial Highlights
- Revenue: $43.41 million
- Earnings per share: -1.24
- Cash: $10.3 million
- Debt: $5.2 million
- Non-cash write-downs: $16.5 million over two years
Earnings vs. Forecast
Without forecast data provided, it is unclear if Ark Restaurants met, beat, or missed market expectations. The absence of this data limits the analysis of the company's performance relative to investor expectations.
Market Reaction
Despite reporting a negative EPS, Ark Restaurants' stock rose by 1.56%, closing at $12.19. This increase suggests a neutral to slightly positive market sentiment, possibly driven by optimism around new restaurant concepts and operational efficiencies.
Company Outlook
Looking forward, Ark Restaurants plans to expand the "Lucky Pig" concept and is exploring other fast-casual dining options. The company is also keeping an eye on potential casino licensing developments in New Jersey, which could open new revenue streams.
Executive Commentary
CEO Michael Weinstein emphasized the company's focus on quality and service, stating, "We are really aggressive about being in our restaurants and management at the corporate level, about being in our restaurants and making sure quality and service are at our level of expectation." He also highlighted the challenge of rising costs, noting, "We can't go higher even though our costs are going higher."
Q&A
During the earnings call, analysts inquired about the termination of a Tampa food court lease, resulting in a $5.5 million payout. Concerns about stock performance and pricing challenges, particularly with king crab dishes, were also addressed.
Risks and Challenges
- Continued revenue challenges in Florida and Washington D.C. could impact financial performance.
- Payroll increases in Las Vegas may pressure margins.
- Non-cash write-downs and impairments could weigh on investor confidence.
- The competitive restaurant industry and potential market saturation pose ongoing risks.
- Macroeconomic pressures, such as inflation, could affect consumer spending and cost management.
Full transcript - Ark Restaurants Corp (ARKR) Q4 2024:
Conference Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Love, Secretary.
Thank you, sir. You may begin.
Christopher Love, Secretary, Arc Restaurants: Thank you, operator. Good morning and thank you for joining us on our conference call for the Q4 year ended September 28, 2024. My name is Christopher Love and I am the Secretary of Arc Restaurant. With me on the call today is Michael Weinstein, our Chairman and CEO and Anthony Sirica, our CFO. 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.
Anthony Sirica, CFO, Arc Restaurants: Good morning, everyone. You all saw the release. I want to go over a few things on the balance sheet and touch a couple of highlights on the P and L, and then I'll turn it over to Michael. We ended the year with $10,300,000 of cash and $5,200,000 of debt. Our debt, we have one more set of principal payments on February 1.
We just made payments on December 1. And the balance of the debt matures on June 1, which is about 4,400,000 dollars We will we're in current discussions with the bank to extend our credit agreement and term out the rest of that debt over a number of years, whether it be 3 to 5 and renew the capacity of our existing credit line. With respect to the rest of the balance sheet, there really are not a lot of changes other than the normal amortization of our operating lease right of use assets as well as an additional impairment of our goodwill, which I'll talk about in a minute. Other than that, our balance sheet remains stable. Currently, we have approximately the same amount of cash, dollars 10,500,000 to $11,000,000 of cash as of the current date.
On our P and L, we have a few items in there that are unusual one time items. We had the loss on the closure of El Rio Grande, which is discussed in the press release. We made a decision based on the operating results for the last couple of years to close the property where we've tried to negotiate with the landlord for a better lease, but those negotiations have stalled. So that loss includes the write off of a security deposit, 6 months of rent that we would owe, some severance and things of the like, that was $876,000 We had the impairment loss on the Sequoia right of use and long lived assets that was from the Q3. That was based on projections.
We looked at the numbers again at year end. The numbers improved. So we did not take any additional write downs on Sequoia in the 4th quarter. We are monitoring it on a quarter by quarter basis. We also had an additional goodwill impairment of $4,000,000 If you recall, we had a $10,000,000 impairment last year as the Bryant Park situation continues to unfold, as you've read in the press release, we engaged outside third parties to prepare discounted cash flow based on a series of projections we had given them doing a probability weighted analysis.
And at the end of the day, we felt another impairment of $4,000,000 was necessary. One other item that's going on that's not reflected in the financials is that our food court in Tampa, the landlord had come to us a couple of months ago wanting to take it back. They want to put a high stakes slot room where the food court is. We've been negotiations with them, and we feel we made actually a very good deal. We have approximately 4.5 years left on the lease, and they're going to pay us $5,500,000 to vacate the space.
There's really a couple of small costs involved, some legal fees, some severance, but they're going to demolish it and broom clean it. So we would be out of there probably by the end of the year. I think it closed recently over the weekend possibly. So we're now in the process of taking any equipment that we want to the locations. So other than that, I think that's all I have.
I'll turn it over to Michael.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Hi, everybody. So the theme here is reduced sales, just challenging revenue environment and expenses that have not abated in certain cases like insurance premiums, which we spoke
Anthony Sirica, CFO, Arc Restaurants: to
Michael Weinstein, Chairman and CEO, Arc Restaurants: before, increasing. Labor costs are not increasing unless at this point, unless it's legislation, which Las Vegas put through some increases, minimum wage increases that they enacted. But pretty much, labored for the first time in a couple of years seems to have stabilized. We're finding good people at price points that are significantly compatible with what we would expect in each of the markets. We got through the year and the quarter, we still see challenging revenue environments in Florida and in Washington, D.
C. Alabama is good. That's probably our most consistently good performing venue. Las Vegas, revenues are okay, but again, the expenses from payroll enacted payroll increases have even into our margins. New York, our business is decent.
Not very much to say in the way of new business that we're trying to put on our books. We've been looking at a few things. We've had some negotiations. Nothing fruitful has happened. We continue to look.
Meadowlands remains the same story. Until New York pulls the trigger on their downtown casino licenses, I don't think we'll see any activity from New Jersey. So that remains a question as to timing. I think our ability to get a casino license or probability in our venue at the racetrack in Northern New Jersey is probably improving all the time from the point of view of the legislature, seeing that as the easiest solution and best possible location. But again, the legislature is not going to move until something happens.
So that's my story. Take questions at this point.
Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. It appears we have no further questions at this time. No, I'm sorry, we did get a question from Martin Gilbar with MH Gilbar Consulting.
Please proceed with your question.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: Hi, Michael. How are you? Went over to the other side of Florida and enjoyed 2 of your restaurants when I was over in Aventura. And nice little ride to each of them, but it was worth it. They're doing well.
I just want to check-in with you on what the developments were with this, we're trying to understand what it means, Wall Street Journal article recently about SL Green success in New York City in terms of turning around the office situation and that they are almost like it was going to happen for sure. They are going to open a casino in one of their buildings. Is that accurate? And is that the driver that you speak of that will make things happen for the Meadowlands?
Michael Weinstein, Chairman and CEO, Arc Restaurants: So there are 3 downtown licenses available. There are several bidders to get those licenses. 2 of them are downstate, I'm sorry. Downtownstate licenses, meaning Queens, Manhattan, Bronx, Staten Island. So there are 3 available.
2 of them are pretty much spoken for. 1 will go to Aqueduct, which has gaming right now in the form of slot machines and Yonkers Raceway, which also has gaming in the form of slot machines. So you have SL Green trying for 1, you have Hudson (NYSE:HUD) Yards trying for 1, you have Steve Cohn out at Shea Stadium trying for 1, Bally's is out in the Bronx at the old Trump property trying for 1. The question that everybody shakes their head about is, well, each of these licenses is going to cost $500,000,000 to acquire and the amount of revenue, tax revenue on a consistent basis, going to the state would be considerable. So what are they waiting for?
Why don't they pull the trigger? I think one of the reasons is the bidders have tried to make their proposals more attractive as they went along. But they're at the point now where they should decide and it will be the catalyst for Jersey to move. The minute that you see Bergen County and the Northern Counties leaving New Jersey to come to New York and bring their gaming money there. New Jersey is going to find out how much tax revenue they've lost gaming revenue.
Atlantic City has been in declination for decades. What's stopping the state right now from approving a casino in the north, hopefully our location, is a strong lobby in Atlantic City. But that lobby disappears once a casino is approved in Manhattan or the Bronx or Queens. That will disappear. The interesting thing about our Meadowlands location, if you're in Manhattan, it's easier to get to the Meadowlands than it is to get to Aqueduct or Yonkers.
So we think yes, we think a location in Meadowlands is not only keeps New Jersey patrons in place, but it also brings traffic from Manhattan, which New Jersey does not anticipate, but I think will be a reality.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: And who advocates for us on that point? With the partner there is who? Sorry, I just don't remember.
Michael Weinstein, Chairman and CEO, Arc Restaurants: So we have we're of the four partners with we own the least equity. On a fully diluted basis, we own 7% of the equity of the Meadowlands Racetrack LLC. But we do have an exclusive on all the food and beverage in the casino if it happens with a carve out for a Hard Rock Cafe. Our original partner in this and who owns 20% of an entity that owns on a fully diluted basis would be about 10% is Hard Rock Cafe,
Anthony Sirica, CFO, Arc Restaurants: Hard Rock,
Michael Weinstein, Chairman and CEO, Arc Restaurants: which is Seminole Indian Tribe. So what happened is that, that was a very favorable agreement for us, in that Hard Rock also operates in Atlantic City. And the initial legislation when there was an attempt to get a casino in the North 5 years ago was that whoever had the rights to a casino license in the North would have to have an Atlantic City partner, meaning somebody licensed in Atlantic City. So Hard Rock was a good fit for us because they were licensed and that's how they became partner. Hard Rock is now aligned with Steve Kohn at Shea Stadium.
So the we don't know that Kone is going to get it. If they do get it, we don't know what our relationship with Hard Rock would wind up to be. At various points, there's been conversations that if Hard Rock goes to Cone that there would be some sort of compensation to the Meadowlands because of Hard Rock's interest in the other casino in New York. It's really up in the air, but we don't even know if the legislation when new legislation comes forth in New Jersey, whether it's going to require an Atlantic City partner. So there's a lot of stuff that's unanswered in how.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: Fair enough. Yes. No, I just wanted to understand who would be advocating for the site to get that when in fact New York moves. 40 guys in the legislature who are all from Northern New Jersey who are all ready to go with whoever it is that's the leader of the group in the Meadowlands is kind of where I was going.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Yes. Well, believe me, we have lobbyists and we're in touch with the Governor, we're in touch with the President of the Senate in Jersey. I mean, there are conversations taking place to try to educate everybody why our site is the best site.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: Got it. Okay. And just another piece on the financial end. What is it's actually a 2 part. What is the sum of the non cash write downs that we've taken in the last 2 years?
Am I right to say $15,000,000 and these are non cash write downs, right? This is associated with the capital or company market cap being less than book value or something like that?
Michael Weinstein, Chairman and CEO, Arc Restaurants: Correct. It's all has to do with our stock price. A lot of it has to do with our stock price. They've been all non cash write downs. Yes, the goodwill
Jeffrey Kaminski, Analyst, JJK Consultants: was 14. And am I right
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: in the ballpark of $15,000,000
Anthony Sirica, CFO, Arc Restaurants: The goodwill was 14 and the Sequoia assets were 2.5, so 16.5.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: And Sequoia continues to operate, but you've just written down whatever the asset value is because it's got poor results?
Anthony Sirica, CFO, Arc Restaurants: Yes. We had to take an impairment on the fixed assets in the Q3 because of the results. The Q4, the results were what we expected, maybe a little better. So we did not we revisited that analysis. We did not have to take additional write downs.
We will continue to monitor it every quarter and as well as the auditors are looking at it every quarter.
Michael Weinstein, Chairman and CEO, Arc Restaurants: And Sequoia is cash flow positive. I don't want you to think that we're bleeding money there.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: Okay. Okay.
Jeffrey Kaminski, Analyst, JJK Consultants: So and then that
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: was the last question was, so what do we lose? So we're getting $4,500,000 for Tampa, They're $4,500,000 I can't remember the number you say, minus the $900,000 What do we lose on an EBITDA basis on an annual basis that we were getting from that location roughly? We're getting $5,500,000
Michael Weinstein, Chairman and CEO, Arc Restaurants: but some of that belongs to investors. So our net will be probably $3,500,000 to $4,000,000 for us. The property was cash flowing $700,000 plus a few dollars. We had A little over 4 years left. Maybe 4 years, 2 months left on the lease at this point.
So we did well, but on the other hand, we had to buy out some partners to who were more aggressive about what they thought they should be getting. But we'll net out between $3,500,000 $4,000,000 out of it. So that will be added to the cash on our balance sheet.
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: Right, right. Yes, it's an impressive and again, I don't know what the solution is to drive more volume in Florida, but all the customers seemed happy, reasonably busy and superb service and good quality. I mean, certainly, I had never been to one of our restaurants before. I happen to be over there for other reasons business wise and I thought, so that outstanding experience and maybe it's just a question of making sure that more people know how good it is.
Michael Weinstein, Chairman and CEO, Arc Restaurants: So, just to follow-up on that comment. We are really aggressive about being in our restaurants and management at the corporate level, about being in our restaurants and making sure quality and service are at our level of expectation. And I would tell you that without exception, I think we are delivering on product and service and value. One of the problems we have with margins is our reluctance to raise prices. And we don't want to raise prices when demand is soft and demand remains soft.
So we're sort of stuck right now, although in some cases, we're finding places to re in individual restaurants to reengineer payroll, and we've started that program maybe 1.5 months, 2 months ago. So we think there'll be some payroll savings. But in general, we're pretty efficient with payroll. So not a lot, but we're doing everything we can until we have the comfort that we can raise prices or food costs go down. And Russ again, and I had this conversation this morning, we're known for our king crabs.
Pre pandemic, we were charging $75 for a 2 pound order. Now for a 2 pound order, we're charging $135 but the prices of king crabs keep going up every single month. So it's like a race, how much can you charge and at what point do customers get leery about spending money. And I think we can't go higher even though our costs are going higher. Well, I'd never tell you
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: one way or the other, just I'm nothing more than a customer and an investor. So I don't know the details. But I will say there didn't seem to be anybody unhappy. And I'm always amazed at I guess that's the challenge of being in the crab business. It's kind of like being planters, peanuts.
You're tied to a commodity that one product commodity there is really a dominant factor. But at the other restaurants, I'm amazed at the consumer, especially living in Naples, the consumer's ability to accept price increases. I mean, our stuff here is up 50% probably from where it was pre COVID. I'm talking about general line. I mean, everything from
Michael Weinstein, Chairman and CEO, Arc Restaurants: a
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: filet to a piece of grouper, you're talking 50% at least up from COVID.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Yes, I agree. Well, Mitch,
Martin Gilbar, Investor/Analyst, MH Gilbar Consulting: thank you for the further insights and appreciate again what you're doing. I just the New York situation, I don't even want to get into asking questions about that. Good luck with the resource. I think that's the route you got to go. I mean these people are mistreating mistreating a good organization, which is unfortunate.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Thank you very much.
Anthony Sirica, CFO, Arc Restaurants: Thank
Jeffrey Kaminski, Analyst, JJK Consultants: you. Thank you.
Conference Operator: Our next question comes from the line of Jeffrey Kaminski with JJK Consultants. Please proceed with your question.
Jeffrey Kaminski, Analyst, JJK Consultants: Good morning, gentlemen. With respect to lease termination in Hollywood Tampa, can you kind of walk us through it, Anthony, a bit in terms of what the payout will be to ARC? And in the press release, there was also a reference to Hollywood Tampa Investment LLC, which will distribute approximately 35% of the proceeds. Can you tell us who is that 35%? I didn't realize that ARC had outside investors in individual properties.
Michael Weinstein, Chairman and CEO, Arc Restaurants: So, Jeffrey, good morning. What happened is when we did this deal 20 years ago, some 20 years ago, our stock price not that has improved, our investment was going to be $5,000,000 And we had a projection that if we were right, we would make $1,000,000 in Tampa, right? And we're looking at our EBITDA and the multiple of stock trades to EBITDA. And we wanted to do the deal because it was an in with Hard Rock and that helped us doing both Hollywood and Hard Rock turned out to be a great deal for us. But again, we're saying we're putting $5,000,000 in, we're going to get a 20% return and therefore the stock won't move.
We're trading cash and the stock won't do anything. It's trading 5 times EBITDA. So the way to do the deal was to bring in investors, take them, take a give the investors a prep, take a management fee and then split cash flow fifty-fifty at the time with them. So and they put in the whole $5,000,000 So we had overcome the bad equation we have in terms of our multiple on EBITDA. So the investors did very well.
They've been enjoying a 30% return, essentially, and we did well because we had no capital expense.
Anthony Sirica, CFO, Arc Restaurants: And just to further that, when ARC first did this deal, these entities were not consolidated. It was a management deal. And the rule in if you recall, and I don't know, probably 10 years ago, the variable interest entity rules changed. And with those new rules, it was determined that ARC had the controlling financial interest and started consolidating the food courts in Florida. And then at some point, a couple of years after that, we bought out a few couple of the shareholders and that's how ARC's ownership got up to 65%.
It was initially fifty-fifty, now it's 65%. So that entity that you see in the press release, that is the holding company. So underneath that is ARC Tampa LLC, which runs the Tampa Food Court and Arc Hollywood that runs the Hollywood Food Court. So the $5,500,000 will come into Tampa, get upstream to the investment company and then after expenses, 35% will get distributed to the limited partners of Investment
Jeffrey Kaminski, Analyst, JJK Consultants: LLC. Okay, I understand. And just is there are there any other similar relationships within the organization where ARC has taken in outside investors on individual properties? Hollywood.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Yes, Hollywood and El Rio Grande.
Anthony Sirica, CFO, Arc Restaurants: El Rio Grande was 40 years ago?
Michael Weinstein, Chairman and CEO, Arc Restaurants: Yes, we did El Rio Grande in 'eighty four.
Jeffrey Kaminski, Analyst, JJK Consultants: Right. Okay. All right. Fair enough. And then second question with respect to, like you had mentioned now twice in this call, the stock price going back to when you negotiated the Tampa deal and with respect to these write offs, these impairment charges, again, tied into the stock price.
Labor costs are what they are. They may have stabilized, but I don't see them. You may disagree. I don't see them going down considerably. Insurance costs may stabilize, maybe they won't.
But again, I don't see them coming down. So some of these headwinds will exist in the future regardless. Food prices will be volatile, cost of crab, again, volatile. A question I have asked recurring here on these calls as a shareholder, the share price, it's hard to benchmark ARK restaurants against other stocks, but there is a restaurant ETF. There are restaurant and leisure indexes, if you will.
By any benchmark, ARK stock has dramatically underperformed for your peers. So you talked about trying to acquire other properties right now. That doesn't seem to be happening. There was a you introduced to us probably 6 months ago, a new concept, an Asian concept that you're working on 3 months ago. You gave us a progress report.
I asked then if it's successful, what do you expect in terms of revenues and how you can scale it up? I'm just looking for some tidbits here as a shareholder, what's going to drive the stock higher? What are we waiting for? I mean, are you waiting for another acquisition? Are we waiting for the season concept to keep up?
Or do we think we're going to wake up one day and all of a sudden labor costs are going to be down and insurance is going to be down? Give us a little color and guidance as to what we can expect your shareholders.
Michael Weinstein, Chairman and CEO, Arc Restaurants: So two things. First of all, the and you're right. We are looking at various concepts that are not one offs. And Lucky Pig is one of them. And we think we're doing decent business, not great, but good business given the location in New York, New York.
The management of MGM is very happy. We're adding some new product on top of what we have, which was always the idea. So I think we have a good concept there that is expandable. We're just playing with it a little bit now. But it'll be fully it will be fully excuse me, I'm missing a word.
But the concept will be fully done in the next couple of weeks. We're adding the dumping category. And then we're going to see what the returns are on our capital. And I think it's an expandable concept. We're looking at a
Jeffrey Kaminski, Analyst, JJK Consultants: couple of other things. Is it operational now?
Michael Weinstein, Chairman and CEO, Arc Restaurants: Yes, it's been operational for about 3, 4 weeks now. I was out there for the opening. People are curious about it. Our signage was not complete when we opened. It's now complete.
It's a good product. It's something that you now look for other locations to try to see how it does in other venues. It's very hard to translate what we're doing to you can't take the results in New York, New York, which is a casino and say, okay, this thing will do well on a street in Chicago. That's the next move here. We got to put it someplace in New York.
We got to put it someplace in Philadelphia perhaps. We got to find locations and see how it does and what the response would be. So that's the next step with that. We're looking at other things that hopefully we can figure that would be expandable concepts. We're not giving up on buying one offs if the EBITDA and cash flows are strong enough and could be meaningful to the company.
And then the other thing, coloring us all, is what the situation is with Bryant Park. It's sort of it doesn't paralyze us or stop us from doing other things, but that's a decent amount of EBITDA that we don't want to lose that we're fighting for. So that's what we're doing now.
Anthony Sirica, CFO, Arc Restaurants: Well, and a couple of other things we are doing as well is we're looking at our existing businesses, improving them, being more efficient, looking at the payrolls, working on our social media and our marketing to get more people through the doors to improve the existing business that we have. As we look at a couple of other concepts that have come across our desks in the last month or 2, things are more in the line of a lucky pig, fast casual that are replicable as opposed to full service restaurants that cost $2,000,000 $3,000,000 $4,000,000 $5,000,000 to build.
Jeffrey Kaminski, Analyst, JJK Consultants: Okay. Thank you, gentlemen. All right.
Anthony Sirica, CFO, Arc Restaurants: Thank you, Jeff.
Conference Operator: Thank you. Mr. Weinstein, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.
Michael Weinstein, Chairman and CEO, Arc Restaurants: Have a happy holiday, everybody. Thank you. Thank you.
Conference Operator: 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.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.