Greetings. Welcome to the Ark Restaurants Q3 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 your host, Ark Secretary Christopher Love. You may begin. Thank you, operator. Good morning and thank you for joining us on our conference call for the Q3 ended July 2nd, 2022. My name is Christopher Love, and I am the Secretary of Ark Restaurants. With me on the call today is Michael Weinstein, our Chairman and CEO, Anthony J. Sirica, our President and Chief Financial Officer, and Vincent Pascal, our Chief Operating Officer. 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 release along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, 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 you 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. Hi, everybody. First I'd like to get Anthony involved to explain the quarter from a financial point of view and our balance sheet. Anthony, please. Yes. You saw the release. We had a very strong quarter. I want to run through the balance sheet real quick. As you saw on the release, our cash was $26.6 million. As of today, it's probably up $1 million from that. Other significant changes on the balance sheet, we did collect our carryback claims during the quarter of $2 million. That process took about a year, but we finally got the refunds from the CARES Act, which enabled us to carryback losses five years instead of three. We have a significant increase in our operating right-of-use assets from the Las Vegas lease extensions of about $24 million, with a corresponding increase in the liability. Our debt is $25 million, which is made up of $23.5 million to the bank, $700,000 seller note from the Blue Moon purchase, and $800,000 of PPP loans. There are two loans remaining outstanding, which we are still working on getting them forgiven. We had a couple of questions from the SBA. As far as the quarter goes, a couple of items of note that in the current quarter, there are one-time adjustments for compensation accruals of about half a million dollars, as well as there are accruals for the Vegas lease extensions of approximately $300,000. Essentially, the accrual for compensation was a one-time accrual for a future payment of compensation. The accrual for the Vegas leases occurred because when we started negotiations with MGM for the extension of our leases, the extensions were going to be as of January 1, 2022. The leases were not signed until the middle of this year. We were not able to accrue because we didn't have signed leases earlier. Our accountants said that would be inappropriate. Once the leases were signed, we had to go back and accrue for those extra rents which were paid recently. Mm-hmm. Um- I'm sorry. Yeah. Go ahead. Just on that note, if you recall from the last conference call, one of the leases was signed. Now, all three of the extensions have been signed. The third one was signed subsequent to the quarter on July 7th or 8th, and that's the one that caused this accrual because we had to accrue back to January 1. Basically, this $800 and some odd thousand dollars of accruals that were really either one time in the case of the compensation accrual and in terms of the Vegas leases didn't really belong in this period. You know, the quarter was stronger than the EBITDA. The $6.2 million in EBITDA if you just broke out the quarter by itself. Anthony, anything else that you want to I think that's the significant item. I think so too. Yeah. We come into the Q4 of our fiscal year with a strong balance sheet to review and go forward with what we think is going on. The quarter was specifically strong with events in Bryant Park, Sequoia. It was very strong with revenues in Las Vegas, Alabama. Florida, you know, starts to dip sort of in May. We saw, you know, some bad comps in relation to the winter period in the Florida full service properties. The fast food and Hard Rock's in Tampa and Hollywood held up very well. What we saw is the equation, if you want, of menu price increases to still we're not able to keep up with the 2021 period with revenues. That means essentially that even though we increased menu prices, our headcounts were dropping. The worst of that was probably in late June and July of the current quarter. What we're seeing now in August is that gap is closing, and we are much closer, and in some cases, revenues are ahead of the similar periods last year. We don't think we're seeing the impact of, quote: "A recession" or the results, headcounts disruption because of gas prices, especially in Florida, because gas prices would have an impact, if you buy into the fact that, you know, our customers are heavily impacted. One of the anomalies here for us is Blue Moon Fish Co., which is our highest priced restaurant, where you have a very well-heeled customer. Those headcounts were down substantially in late June and July. They've sort of come back and were sort of revenue even with the comparable period last year. JB's, on the other hand, which has a lower check average, has been running ahead of last year. Now, this is not in headcounts, this is in revenue. We're still probably behind a little bit in headcounts in J.B.'s and a little bit in Blue Moon. Rustic, which has a very high check average because it's weighted toward, you know, king crab legs and some high-priced items. We were down 20% in revenue. That number is now about 9%-10% down. We're actually seeing our customers come back, despite all this recession fear and so we're very pleased. Alabama is way ahead of last year, both in customer counts and in revenue. We had modest price increases in Alabama. By the way, in terms of price increases, the mantra here is, let's keep our customers, let's not worry about profit margins. We're raising prices where we have really no choice, king crab legs again. For the most part, we're not looking at trying to retain profit margins. We're trying to, you know, or gross margins. We're trying to retain customers. Have a balance, right? Yeah. We're looking at all these restaurants separately. You know, demand is so strong for our products in the Hard Rock's, the two Hard Rock hotels. There, we feel more comfortable raising prices, and we sort of have an umbrella there because we're the least expensive of all the food options in the hotels. But when you look at Rustic, for instance, you know, we used to have a 42%-43% food cost. That's gone up to 52%-53%. We just don't feel comfortable getting, you know, trying to retain the same margins that we've retained. We've been very cautious about raising prices, very aggressive about retaining customers. It seems to be working. Our customers are there. If there was slippage in late June, mid-July, that slippage has seemed to, you know, improve dramatically. If I take a look at these things, you know, zip code by zip code, Vegas, very strong revenues. Alabama, very strong revenues. Florida, seasonal adjustment may be down a little bit, from 2021 in revenues and in headcounts. I would say to you, in the full service restaurants in Florida, we had a bumper year in 2021. The whole pent-up demand idea was certainly, you know, wind at our back last year. It was even more evident in Florida. Yeah. More so in Florida. Sequoia in Washington had a great event quarter in the June quarter. August and September have slowed down. It'll continue to slow down until mid-September. We have a very strong event calendar for Sequoia in Washington for October, November, December. Bryant Park huge event success in the June quarter. Again, slows down right now in August and September, but we're fully booked with events in the December quarter. The one restaurant that we're probably having problems with, although events are starting to come in, is Robert at the Museum of Arts and Design. The Museum of Arts and Design is having its own problems. They have a new director. Attendance has not been good. Office- Publishing office buildings, publishing industry has a lot of office buildings right around there. Those buildings are still way off in terms of occupancy. The publishing industry was a big customer at lunch. Robert is the only disappointment in terms of strength of revenues compared to prior quarters. Again, the event calendar starts to fill up in September. We're very happy with these businesses right now. You know, the efficiency is not there because we're not efficient with menu prices, these costs. That's going to continue for a little while. Labor costs, we are paying a ton of overtime because we can't fill our schedules with new workers. That seems to be changing a little bit in New York. I'm here, you know, I see people walking into our restaurants looking for jobs, which was not the case two, three months ago. Vegas is still having a lot of problems finding employees. Alabama, a little bit. We're paying overtime a lot in Alabama. Florida seems to be getting people now. Washington, D.C., we seem to be all right. For instance, the one restaurant where we can't get enough people to man every shift is Robert. We're closed now Mondays, have been. We're gonna try to get Mondays open, you know, sometime after Labor Day. The business is strong. The balance sheet is strong. We don't see any deterioration that we should be concerned about in the headcounts. I'll mention Meadowlands for a second. Last year, our K-1 in Meadowlands, our share was about $560,000. We don't report that. It's K-1 income. What we do report is the distributions, which was some $200,000. We continue to be profitable with the Meadowlands or I shouldn't say we. The Meadowlands continues to be profitable. Sports betting was impacted somewhat by the, New York State The upstate sports betting in New York, but we still are having very strong results. What is interesting to us is New York seems to be going forward rather quickly with giving licenses for downstate casinos. We think that is the catalyst for New Jersey to approve a northern casino away from Atlantic City. We think the likely location is, you know, the Meadowlands Racetrack. We've become consistently more optimistic about that possibility of having a casino license at the Meadowlands. With that, I hope I've been clear, but please ask questions. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Sandy Mehta with Evaluate Research. Please proceed with your question. Yes. Good morning, Michael and Anthony. Congratulations on a very strong set of results across the board. Thank you. Do you feel like you are benefiting from market share gains or that in some of your locations, competitors have been weakened by the pandemic for the last couple years? Relatedly, what are you seeing in terms of acquisition opportunities? I know you guys are preferred buyers of properties based on how you operate. Are you seeing interest there or pricing that's reasonable for potential deals? Thank you. All right. On the first question, Sandy, I hope you're well, by the way. We don't pay attention to competition. We're not that empirical. There are 25,000 restaurants in New York or used to be. I don't know where we stand vis-a-vis all of them. I'm not, you know, and I would say I have the same attitude in every venue where we're present. I have no clue whether we're picking up market share or not. The second question I can answer. We were looking at a deal that we broke off negotiations when we felt that the May numbers and June numbers of that property weakened substantially and we were concerned, so we broke off negotiations. We had another deal we're actively working on. We think the pricing would be fair. The problem with most deals that we look at is we have to have landlords adjust the leases. The tenants who own the restaurant. If they are leasing a restaurant, generally don't have leases which are totally acceptable to us. If they own the property, then there's not like Rustic or Shuckers or the two in Alabama where we're buying, you know, the land as well as the operation. It's not a problem. We haven't seen one of those in a year or so that would be interesting to us. We're now looking at a property with a long-term lease and, they're meeting today with the landlord, as a matter of fact, to see if they can get the adjustments in lease that we need to go forward. We are seeing stuff. We're picky. You know, we're very conservative. Leases have to meet our criteria. We are seeing, you know, occasionally good acquisition possibilities at fair prices. That's the answer I would give you. Great. Thank you so much. 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. Congratulations. As long-term investors, it's pretty amazing to see how far you've come since the dark days of COVID. Sure. First of all, I just wanna ask, you've had a recent appointment to the board of Jessica Kates, and you've had some insider, fairly substantial insider buying from a Thomas Satterfield. I'm wondering if you can comment on either of those. Jessica, Arthur Stainman retired from the board. Jessica came to us. These are our outside auditors, and they recommended her. I did and had conversations with people she had worked with, and they were stunningly good recommendations. She brings investment banking talent in the food industry. She's also run private equity. Her partner sits on the board of Cheesecake. She's extremely bright, very personable. We've only had one board meeting with her, so you know, she was not very talkative for the first time. She was a good listener, but I think she brings a lot of value to the company. In terms of Thomas Satterfield Jr., all I can say is he's been a gentleman throughout. He has never pushed us in terms of giving him any information which is not public information. He is an ideal partner. He owns some 500 and some odd thousand shares right now. I'm delighted to have somebody take an interest in the company, the way he has, and we don't have that many conversations with him, you know, but we're just delighted that he's a shareholder. For sure. Those are great additions. I just was curious if there was any kind of strategic change as a result of either of these people, you know, becoming more involved, let's say. Look, the strategy of this company is, you know, we got either lucky or we were, you know, in the business at the right time, in the right areas. I mean, if I look at the history of the company, started on the Upper West Side in the 70s, which was dramatically under-restauranted with great gentrification taking place around our restaurants. I think we were good restaurateurs, but I don't think you had to be very good to be successful. I mean, the supply-demand situation was favorable. We moved out of the city and found we can run restaurants outside of the city. First one in Boston. We got lucky with Bryant Park, which nobody else wanted. We got lucky with Vegas, which, you know, even my board disagreed with initially with, "Why are we going to Vegas?" We honed our skills, you know, being able to run big operations away from New York. You know, Vegas, there have been days where we served 25,000 people. Bryant Park, we serve, on really good days, 3,000-4,000 people. Sequoia, you know, is 1,100 seats. Rustic Inn, you know, constantly serving 1,000 people a day plus. We've developed this skill of building, designing, and operating large-scale restaurants which we leased. Then six years ago, somebody came to us with a deal, a broker, for the Rustic Inn, again, a 600 seat restaurant where we could buy the land and be our own landlord. You know, a light bulb went off in our head. It took a long, long time, but a light bulb went off and said, "Why are we leasing stuff, and why are we building stuff when we could buy cash flow at 3-4 x, you know, EBITDA?" Risk and reward ratio of building, you know, is not as good as being able to buy these things. Our plan going forward is essentially to buy cash flow. I don't think you can show me anything in terms of leasing and designing and building a new restaurant that would be as attractive as waiting patiently to see, you know, these softballs that we're getting, you know, a lot of cash flow for very reasonable prices and that to me is a better business. That's the way we're proceeding. No, for sure. Obviously buying the land underneath provides an underpinning and safety element for the long-term versus being subject to inflationary increases from a landlord. Along those lines, do you feel like you have the geographic diversification? Obviously, you've got sort of from, you know, in the winter months, you've got Florida. The rest of the year, you've got, you know, New York and Washington and Vegas. Is there an argument for, I don't know, Texas or the Southwest or the Midwest for that matter, providing a little bit more geographic diversification? Or would you rather stay narrower and deeper in, let's say, Florida and Alabama? The answer to that question is, first of all, when you talk about, you know, the winter months in Florida, they're better, but I don't want for one second for anybody to think that these restaurants don't make money in Florida in the middle of August. They do. They're cash flow positive all year round. If we are in Southern Florida, Dade, Broward County, if we wanted to buy a restaurant in Sarasota, that restaurant is as hard or easy for me to run as a restaurant in Austin, Texas. It just takes a little longer to get to Austin. Diversity is not our goal. Our goal is to find a product that, you know, we could buy at a fair price that has a history of good management, that we not only keep that management, which is extremely important to us, but we have visibility with that restaurant, either through a long-term lease or through ownership. One of the things we've been very fortunate about is that if you look at Rustic's, Shuckers, JB's, Blue Moon, the two restaurants in Alabama, all of those acquisitions, the management has stayed with us, the chefs have stayed with us, the great majority of the staff has stayed with us. I would like to think we're a better employer than the people that sold us those properties, or at least as good, because a couple of them were really good, as employers, but a couple of them were really bad. I think people like working for us. The key is, I don't wanna buy something that's good and, you know, and find that all the key people are saying goodbye, because that's where the knowledge and talent is. You know, that's a major criteria for us, but I don't care where the property is. I mean, obviously, Florida is hot right now, and there's, you know, all kinds of articles about people moving down there. Maybe it's part of a longer term. There's no argument to that. Well, no, I was just gonna say, obviously, there may be a longer-term secular shift in being even deeper in Florida is an argument. I'm just asking whether other markets. I'm not. Go ahead. I'm not smart enough to know that. Right. I'm just asking whether having restaurants in the Midwest. Yeah. Would- You're asking a question that's not important to me. What is important to me, that I buy good cash flow for a reasonable price with good management, and I really don't care where that property is. Fair enough. Thank you. You're welcome. Our next question comes from the line of Jason Walters, a private investor. Please proceed with your question. Sure. Thanks, everybody. Just a quick question, Michael, and I think it's probably implied from what you were just saying, but obviously the company's building a large pile of cash here. You're knocking on the door of $30 million. I assume the primary plan with that money is to look for these acquisitions that you've described the criteria for going forward. Or do you have any other thoughts for the use of that cash? One of the thoughts is maybe pay down some debt, because, you know, we don't get very much for that money by investing in, you know, Treasuries or CDs. We could conceivably pay down some debt. I don't think we're at the point yet where we wanna increase the dividend. We would only pay down the debt if the banks were willing to extend us. Establish a new revolver, yeah. A new revolver, for which we would pay some small fee. Yeah, it's a good question. The acquisitions we have been making in the past do not require. I mean, I think the most expensive one was $10 million in Alabama. They don't require us to have, you know. I mean, with float right now, we have some $30 million in the bank. It, you know, we haven't been active enough to say that we're gonna use that $30 million within, you know, a 12-month period, for instance, or a good part of it. We do have obligations in conjunction with the Vegas leases. Right now, this year, we're gonna spend $1.5 million to redo the kitchens at Gallagher's. We have obligations to sort of dust off the food court, Village Street Eateries. We have a longer-term obligation, 2-3 years out, of spending maybe $4 million or $5 million to spruce up America, conceivably maybe change the concept. We have some opportunities to increase and change the units in the Village Street Eateries at New York-New York. You know, I would say to you the $7, $8, $9 million over the next couple of years that we're gonna be spending just in Vegas now. The argument could be made, well, you know, Vegas alone throws off that kind of cash flow, and therefore, you know, $30 million is gonna be untouched. That's the right argument, by the way. We know we're sitting on too much cash. If we, you know, we should probably be paying down debt. I hope that answers the questions. Yes. Thank you. Yeah. Our next question comes from the line of Jeffrey Kaminsky with JJK Consultants. Please proceed with your question. Hi. Good morning, Michael and team. Again, congratulations on another strong showing. Mike, you touched base briefly on mentioning the dividend in conjunction with the excess cash that you have. What is the reluctance to bring the level of dividend back to where it was pre-pandemic? I have a second question after that. All right. The first answer is our board wants us to move slowly. I should have mentioned also when I'm talking about the $7 million-$8 million we're gonna spend in Vegas, the closer we get to. The reason we want a new revolver, the more optimistic we get about the Meadowlands. We have an exclusive on all food and beverage service in the Meadowlands if it becomes a casino. That's gonna be an expensive proposition, even though our agreement, which is in place, requires a substantial tenant improvement from the landlord. We could still spend many millions of dollars, you know, building 7-8 restaurants and bars and, you know. Then there's the question of dilution. You know, we're looking at a project that's $1 billion in construction. We own slightly less than 8%, fully diluted right now. Obviously, depending upon the equity-to-debt ratio for the Meadowlands, when they go into construction, the question will become, you know, where's our stock? Do we wanna sell equity? You know, how much cash do we have on hand? How much do we wanna be diluted, or are we gonna raise money not to be diluted at all? We have, you know, a use for that. That money will go very quickly if, you know, if the Meadowlands becomes a casino. That sort of plays into this whole thing. The other argument has been, for me, I don't even think we'd get there. I think if there's a casino license, you know, and Hard Rock is the operator, I don't know that they'd really want us to be involved, you know, and you know, may wanna buy out our interest. There's a lot of questions regarding our balance sheet with relation to the future of the Meadowlands. There's a reluctance on the board to move too quickly with increasing the dividend. I think it's important that we look at a new revolver and pay down some debt right now. You know, that's sort of the answer. I'm sorry it's a little vague, but. No, that's fine. You know, you're not going to see a dividend increase beyond what we've done for the next couple of quarters. Yeah. I just think from a board perspective, although this quarter was very strong and, you know, subsequent to the quarter, the numbers look good, you know, we're cautiously optimistic. You know, you see, you watch CNBC. I mean, there's a lot of negative sentiment out there about what's coming. You know, we wanna take measured steps with the dividend. Understand. My second question- Yeah. I'm glad you brought up the Meadowlands, Michael, 'cause that's where I was going. Yeah. Kind of twofold. Sam, who's here, you know, just whispered in my ear what you should really, you know. As opposed to paying more of a dividend, if we have the opportunity to buy more cash flow, you know, the cash should be going to that. Understand. My follow-up then is in the direction of the Meadowlands, which you had mentioned. It's twofold. I agree there's been a you know significant push in terms of gambling in downstate New York. I know the ownership of the New York Mets has been pretty aggressive in priority filing papers and getting lobbyists trying to get something at the Citi Field location. Given your involvement at the Meadowlands, are you privy to any information that you could share that has actually become a catalyst and that in the New Jersey legislature or politicians and lobbyists are actually now gotten kind of a kick in the rear end and they have to move this into gear or is it still all talk? Jeff, I treat anything I hear coming out of the New Jersey legislative body as rumor. I don't pay attention to it. You know. Okay. It's, you know, it's not even that it's gonna become an emotional rollercoaster. I'm not that way. I mean, what happens will happen. We'll be prepared for it. Right. Okay. Whichever way it goes. All right. The last point on the Meadowlands, Michael, you've said before, and you've been very consistent, that you see a likely, you know, should there be gambling there, that you see the likely outcome is that, they don't necessarily want you around as a partner and, you know, you'll negotiate a favorable term, take the money and run, so to speak. Do you see that negotiation would include that you would have the equity interest bought out, but you would maintain running the restaurants at the facility, or basically it would be a buyout and you would basically exit the whole property? My preference would be my preference, you know, this is all in my mind. I have not had any discussions with Jim Allen, who is the CEO of the Hard Rock, with regard to this. It's just guessing on my part from the way they behaved in the past with the development in Hollywood, where they bought out the minority interests. We're restaurateurs. We're in the restaurant business. Obviously, our preference would be to continue running the restaurants. There is a carve-out on exclusivity for a Hard Rock Cafe, so that's not an impediment to them. They can still have a Hard Rock Cafe. We would like the opportunity to be restaurateurs wherever we see dynamics of that would be favorable to us. I would think that that would be very favorable. Got it. That's the only comment. Okay. Thank you, guys, again. Thank you, Jeff. It looks like we have reached the end of the question and answer session. I'll now turn the call back over to Michael Weinstein for closing remarks. Yeah. Thank you for the questions. I appreciate the interest. We'll be back for our fiscal year-end speaking with you, and we look forward to continued good results. Have a nice day. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation. Thank you.