Greetings, welcome to Ark Restaurants 1st quarter 2023 results conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Christopher Love. Secretary, thank you. You may begin. Thank you, operator. Good morning, and thank you for joining us on our conference call for the 2023 1st quarter ended December 31st, 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 Sarica, our President and Chief Financial Officer, and Vinnie 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 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 Michael. Hi, everybody. Happy Valentine's Day. First I want to have Anthony explain where we stand in terms of our balance sheet and the comparison with December of 2021, that quarter, compared to the current December 2022 quarter. Anthony, could you do the honors? Yes, sure. Good morning, everyone. Our balance sheet remains strong. Our cash in CDs is $24.5 million, which the CD is now cash. It matured on January eighth. Our total debt at the end of the quarter was $21.6 billion. Total equity was $61.1 million. Significant changes were, you know, we had a $4 million decrease in accruals that related to the utilization of catering deposits from the year-end amount because of all the parties held in December and the payment of bonuses and the payment of the FICA taxes that were deferred because of the CARES Act. There was a number of accruals that were paid for in the quarter, so that came down, along with the cash balance from the end of the year. On the P&L, a couple of things I wanted to point out. On the food and beverage sales, as a percentage of sales, we came down from the prior year quarter. We're now in line with just about where we were pre-pandemic. We've done a good job of, you know, targeting price increases as well as buying, you know, smartly. Payroll, obviously, you see a big increase there in payroll. You see the news record unemployment. It's still a challenge. We feel like we're getting it under control. Again, as a percentage of sales, it is spot on with the last quarter prior to the pandemic. The quarter ended December 31st, 2019, was the same percentage, 34.8% sales. On the occupancy expenses, we're up about $900,000 from the same quarter last year. That's the result of primarily of three factors. Last year, we recorded the COVID abatement deals for Bryant Park, which obviously, the rent expense was artificially low last year. That was about $300,000 of the increase this year. Las Vegas rents went up on 1/1/2022, so that's about another $300,000 of increased rent this year over last year. About $220,000 of it is insurance premiums, which increased. Other operating costs and expenses, that's, you know, really just inflation related across the board. That's really it on the P&L. Other than that, you know, it was a strong quarter. I'll turn it over to Michael. Thank you, Anthony. I just want to emphasize that the way we went about signing these Las Vegas leases, the rents would, the new minimum rents took effect in January of 2022. However, we could not book those new minimum rents until we had signed leases. We didn't accrue for them. Our accountants were adamant that we shouldn't accrue until we had signed deals. The minimum rents were pushed forward. In the December quarter, we expensed more in minimum rents than the actual minimum rents would be for that quarter because we had this delay until we could book them. The if I were looking at the quarter, and roughly $4 million last year, $600,000 of that and $3 million this year. $600,000 of that decrease, $300,000 was because of the accounting for the rent that we did not have to pay, the reduced rent on our deal with Bryant Park. We had a decrease in the rent in the December 2021 period, and there was an increase of about $300,000 due to the Las Vegas deals in the 2022 period. I think Anthony probably explained it better than I did, but I thought I'd explain. All in all, our business for the quarter was very strong in Vegas, Alabama, and New York. New York benefited dramatically from events that were missing in much of certainly last year and into December 2021 quarter. We also benefited somewhat from weather. There's been no snow in New York. The temperatures have been, with the exception of Christmas Day and a couple of days on either side of that, the temperatures have been unusually favorable for us. We did have this blip in Florida. We're doing well with events in New York and Washington, D.C. The Vegas numbers were very strong. The sales were very strong. Alabama did what we would expect. Florida in the starting after Thanksgiving through the end of the quarter weakened. Part of that is, again, this problem with Rustic that we've been having because our costs went up, our menu prices went up. We were still running 50% costs, trying to hold on to customer counts. We were not really aggressive in pushing menu prices in Rustic or anywhere else to that matter. Customer counts in Rustic dropped dramatically. You know, revenues down, was down probably 17%-18% in the quarter in Rustic. The other restaurants were off 7%, 8%, 9%, 10%. January- It was. Yeah. Sorry. Go ahead. It was very, very cold in Florida from the 23rd to the 29th. It was like 30 degrees- Yes. -down there. That doesn't help. In January, we've seen a significant reversal of that, and our restaurants are significantly ahead in January in Florida than they were in the same January period last year. I don't know what that blip was, but we're very confident that our businesses in Florida are very, very strong. Restaurants like Shuckers, somewhat because of menu increases, but also increased headcounts, are running 20% ahead of last year in January. Blue Moon is running ahead. We've added about 50 seats at Blue Moon as we got permission from the Army Corps of Engineers and the city to extend the dock that goes into the Intracoastal Waterway. We added about 50 seats there, and we're in season, and they're being utilized. JB's is doing very well. We had a record week last week at the Hard Rock, where we do fast food. Our normal week there is, you know, maybe $175,000, $180,000. We've hit $200,000 a couple of times. Last week, we did $220,000. Campus seems to be strong. Everything I hear about the demographics at Tempe is favoring us. New York, because the weather has been mild, January, we had a great business in New York and Washington, D.C. The big problem for us in this March quarter is not revenue, it's we're closing Gallagher's at New York-New York for renovation, which is part of our lease negotiations. We expect that renovation to take about 10 weeks. It started this past Monday, last Monday, I think, the sixth or whenever that was. It'll last until the end of March. We're trying to hasten that. We were able, out of some 300 seats, to cordon off 60 seats in a private dining room that's still serving Gallagher's menu. Gallagher's is a restaurant that can do $350,000-$400,000 in a week, especially when there are conventions in town. My expectation is that we'll be missing some $2 million in sales in the March quarter in Gallagher's. We've always had this policy, when we close something for renovation, it's not the employee's fault, it's, you know, management's fault for making that deal, in this case, with MGM. We are paying salaries, a certain percentage of their salaries, so that our employees are not harmed. This is gonna be a hit to our income for March. What we are building, in terms of the renovation, I think is a far more attractive restaurant. It's a re-restaurant that's very much in demand. It has become more so with the activity in MGM's Park and the T-Mobile, you know, arena with the Vegas Golden Knights hockey team and concerts just being outside our door. MGM has also in New York, New York, put in the new Cirque du Soleil show, which is doing well and it's well-reviewed. I think we're benefiting from that throughout all our restaurants and fast food operations in New York, New York. Gallagher's is at the front door of the of the theater, and we should benefit from that. This renovation, I think, is gonna be significant for us in revenue improvement. Other than that, our business, quite honestly, is pretty strong across the board. Our numbers are somewhat whipsawed based upon what happens with food prices, but that seems to be stabilizing. We have hired the right people in the right positions. We're paying a little bit more, but I don't think we're suffering in terms of finding the right people. Most of our positions are filled. Labor is gonna be. The cost of labor is gonna continually be a problem, but not finding the right people is which was difficult for us for a couple of years, seems to ease dramatically. I think that should give you a flavor for what's going on. I'd like to address the Meadowlands, which is pretty much the same quarter to quarter. We think we have a very good chance of getting a casino license for the Meadowlands. We think the catalyst for that is the downtown or downstate casino licenses that are gonna be issued by the State of New York for areas in and around Manhattan. The Meadowlands is six minutes from Manhattan, on a good traffic day, 20 minutes, 30 minutes by bus or train. I don't think Jersey will respond anything but favorably to having a casino license in the north once the State starts to move forward with issuing these licenses. Atlantic City, which has been killed anyway, over the years, will be further hurt. The State of New Jersey will be missing a lot of revenue. I don't think they want their citizens going across into Manhattan to gamble. I think that that's the key transition point for us when there'll be serious discussions about having a license. Meadowlands is all, you know, is an area that has no residential. It's environmentally approved for a casino already. We don't think there'll be any lawsuits. The racetrack is already built to hold, you know, the first phase of the casino. I think we can expect that this will be very favorably looked upon. With that, you know, any questions, I'm happy to answer them. Thank you. We will now be opening the line for questions. 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. One moment please while we poll for your question. No questions. Our first question comes from the line of Roger Lipton with Lipton Financial Services. Please proceed with your question. Hi. Good morning, Michael. Good summary as usual. Just one quick question. I was a little confused on whether the rent situation which you talked about catching up in Vegas and where else was it? I forget now. Whether it was $300 or $600 in total. The $300 in Las Vegas. The other... They're just confusing whether it was 3 plus 3 or... Yeah. 6 plus 3. No, it's 3 plus 3. The 3 in the December 2021 quarter was a reduction of rent because we signed or finalized an agreement and signed an agreement with the Bryant Park landlord, which we always knew we had, you know, that deferment of rent that became just a forgiveness of rent. Right. That was signed in that December 2021 quarter. The $300,000 became a deduction from our regular rent payments. Right. it sort of skewed the December 2021 quarter, by $300,000 of increased income. Right. Okay, that's fine. Thank you very much. I'd like to point out that, you know, the Vegas leases, the minimum rent that we're paying now, we pay percentage rent. Once we get to a revenue level where the base rent is a certain percentage of revenue, we start to pay percentage rent. It's a break point and a natural break point. The minimum rent becomes a moot point, where we're basically on a percentage rent at that point, and the annual rent will be based upon what the percentage is. Our percentage rent is slightly higher than it was in the old lease. What we pay in America and Gonzalez, and it's 1%, at Broadway Burger, it's 1%. It's actually reduced a little bit. We think, you know, we're a percentage rent payer. We don't think the basic minimum rent will affect our profitability at all in Vegas. I hope that helps. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Paul Johnson. Please proceed with your question. Yes, good morning. just on the Meadowlands, can you give just your best guess, it can be a wild guess, in terms of the possible timing? I realize it's forces beyond our control, including government officials and all that. What, what would be your best guess if you had to make one? I think you gotta differ a little bit from my partners. We're the third largest shareholder. A developer named Jeff Gural in New York is the largest shareholder. Hard Rock is a 20% shareholder. I guess on a fully diluted basis, we're 7.8% of the casino. I wanna remind. Seven point Yeah. I wanna remind everybody that we have exclusivity on all the food and beverage if the casino's built with the exception of a carve-out for a Hard Rock Cafe. My partners strongly believe that it's not the issuance of downstate licenses that will be the tipping point to get New Jersey moving, but really to have casinos open in New York and in Jersey to see what that's doing to Atlantic City. I take the attitude that once they this whole thing will go into motion once they start to issue licenses. If they issue a license in Manhattan, and there are several groups, Related being one of them, and Hard Rock being another one, by the way, interested in casino licenses within the Manhattan area, not in Queens and not in, you know, Long Island. I would think that would be enough to get New Jersey moving. I think we're a year away from that. Then it has to be a referendum to change the state constitution to allow for a casino in outside of Atlantic City. I think, you know, we're two years away. That's, that's what I think. That's helpful. Thank you. What is, like, the governor's position or the senator's position? Has there been any conversation among the higher level politicians? Murphy has always been in favor of it, from what I'm told. I think he's had some direct conversations where he has said that. The legislature, I think is more inclined, positively than they have been in the past, because the new legislative body from the last election, I think is better for us, if I look at the key people, who would move the legislation forward. I think the situation has improved, but it's still very speculative, you know, so. Understood. Thank you. Mm-hmm. Can you give us an update on any possible acquisitions? Are we correct in sort of thinking that the acquisitions that you'd like to make are gonna be more and more in the southeast and the Gulf states, or has that just been the recent trend? I'd like to say one more thing about the Meadowlands, just so you get an idea of why we think we're in such a strong position. The Meadowlands does more sports betting than all the Atlantic City casinos put together. I think it's either the first or second best sports betting site in the country. There would be an inclination, I think, given that traffic and the amount of betting that's already taking place at the Meadowlands, that would be the favorite site for a casino in the north. In answer to your other question, we're constantly looking. We happen to have two very smart business brokers in Florida who show us deals. Recently, we've been looking at 4 deals. We look, and we go visit, and we kick the tires, and we have our criteria. You know, 2 of those deals we're very much focused on them. No documentation has been signed for either one. I would expect we would do 1 of them in the next 2 or 3 months, maybe both of them. You know, I have a high hope and feeling that we'll get to terms, fair terms for us and the seller on 1 of these deals. We're always looking. The Southeast is very attractive to us for a series of reasons. Number 1, it's business friendly. New York is not business friendly. I'd never build another restaurant in New York. The amount of business we can do in Florida equals anything that we can do up here, given the size of the sites and where they're located. The rent sure is substantially less. The legislators are more favorably inclined than New York is to pass business laws that don't add additional expenses to operators. Yes, we're focused more on Florida and the Southeast than the Northeast. Thank you. you know, I guess, you know, part of as long-term investors, I mean, you guys have done a great job, certainly. The acquisitions you've done have been at super multiple, super low. you know, the challenge with having sort of a decentralized restaurant base that doesn't have sort of a common brand, is that, as you noted in your 10-K, I think your terminology was something like, you know, fixed costs don't decrease proportionally with sales. you know, the hard thing is how do you ever get to much higher levels of EBITDA, leaving aside the Meadowlands opportunity, unless you just have a lot more restaurants to spread over that fixed cost base? It's certainly a fair question. If you just look at the stock price over time, it hasn't moved very much. We have been a dividend payer, and we paid a couple of special dividends along the way. The We're very aware of your comment. I guess, you know, if I go way back, and I'm going 25 years back, When we did the Las Vegas deal, you know, all of a sudden we were doing, in those dollars, $35 million-$40 million in one location. We said, "That's the model we wanna replicate." We wanna find those locations where we could put in a lot of different concepts and have the economics of one general manager, one executive chef over 7, 8, 10 operations in one site. That never worked for us. We were never able to find the site. We came close twice. We were very close pre-pandemic. Pandemic shut down that idea. We were looking at a site in the Midwest and the developer and us just decided during the pandemic not to go forward. That was always the idea. What happened is, when we bought Rustic, you know, Rustic was doing a million and a half dollars. For seven and a half million dollars, we bought the million and a half, but we also bought the land underneath it. We thought it was a mispriced restaurant back then, and we thought we could improve the million and a half. The economics of doing a sale-leaseback were, you know, usually favorable. I mean, if somebody, you know, it didn't make a difference to the cap, but I'll use, you know, if we were gonna pay somebody $1 million, for, you know, on a sale-leaseback, if we're gonna pay $1 million in rent, we thought we can get, you know, $12 million for something that we paid, you know, seven and a half million dollars for and still have an operation doing $500,000. By the way, that operation grew from doing a million and a half cash flow pre-pandemic, to $3.4 million. You know, and every restaurant that we acquired in Florida where we had the land, or in Alabama, those dynamics were working. Now they're working less with a 6% interest rate, you know, today than they were when interest rates were 2% or less, I guess. We were looking to build. At that point, you know, our eyes opened up and we said, "Hey, let's try to buy the real estate." You can't do that in New York, but you certainly can do it in the locations we were looking at in Florida and Alabama. Those are the primary situations we look at. Now in Blue Moon, we couldn't buy the real estate, but we bought an operation that was making $1 million a year for $2.7 million, and we negotiated a 26-year lease, a new 26-year lease with the landlord. 26 years is not quite the same as owning it, but it's pretty close. Those are the situations we're looking at. They're one-offs. We're not gonna look at anything that earns less than $1 million. That's sort of the jumping-off point. We've seen a few things that do much better than that. Haven't been successful coming to the economic terms that we wanna dictate to ourselves. They're out there. I think that's the way we're gonna grow. Obviously, we have great hopes for the Meadowlands, and that would sort of follow this idea of what we did at New York-New York. If the Meadowlands became a casino, I'm sure there are 8-10 restaurants in there, a few bars and, you know, that could be a $50 million-$60 million business for us. You know, we have a balance sheet that's, you know, from my point of view, under-leveraged, and we also have credit lines beyond that. We're prepared to do, you know, a bigger deal if one came along. We just haven't found one with the right economics. We're sort of growing, you know, marginally with one-offs. That should be the expectation, honestly, until we show you that we could do something bigger than that. I appreciate that. Thank you for that color. Thank you. Our next question comes from the line of Mo Chaouat with RMR Capital Partners. Please proceed with your questions. Hey, Michael. Great call as usual. All of my, most of my questions were answered, you know, thoroughly. I just had a question about, you know, the operating lease liabilities. I just want some color. In terms of leases that you guys have signed, are there any corporate guarantees associated with them? Like, what portion do you expect that, you know, you would own if you had to shut down a restaurant? Or is that unique to each location? We don't cross-guarantee anything here. There are no corporate guarantees on anything we do here. Excellent. That was nice and easy. Thank you. Well, I think there might be one or two out there, Michael. Like what, Anthony? I don't recall any. Isn't Robert guaranteed by Ark? No. I think there's 1 or 2, but I'm not sure which ones. I mean, we can follow up with you know, offline, Mo. Yeah. I don't recall anything. I trust Michael's memory better than my own, so... I'll check it for you. Thanks so much, guys, and great call. Our next question comes from the line of Jeffrey Kaminsky with JJK Consultants. Please proceed with your question. Good morning, guys. Good morning, Michael. Another great quarter. Just a follow-up to a comment you made, regarding share price and dividends. I think you said in the financial recap earlier that, numbers are back to pre-pandemic 2019 quarters. Obviously the dividend was eliminated during the pandemic for obvious reasons, and stock prices been relatively flat but had some of the volatility, during the pandemic. Obviously, there were some constraints. That said, given the current state of finances, and also, you know, the interest rate environment being what it is, you know, as shareholders, we kinda got spoiled. Even if the stock didn't do anything, we got paid to wait via what was a better dividend than we're getting now. Is there any discussion or consideration about taking the dividend back to pre-pandemic levels or perhaps some sort of special dividend, you know, as shareholders remain patient waiting for the next move? Thank you. Jeff, how are you? Jeff, every board meeting, we discuss the dividend. As our balance sheet has been bolstered by two things, the business has been doing better, obviously, and we're not finding ways to spend our capital or our cash on the balance sheet fast enough, we discuss it. Look, my interest here, honestly, I, you know, I'm fortunate. My family has assets away, you know, significant assets away from this business. My goal has always been to protect my shareholders. Maybe I've been a little bit too conservative along the way. Maybe there were deals we should have done, where we should have been more aggressive about bidding for them. Maybe leases that we should have signed that required a guarantee that I didn't wanna put the company on the line for. The goal here has been to protect the shareholders. We've never had, you know, a lot of debt. We've never been in a position where we couldn't service the debt that we did have. That conservative nature is sort of shared by most of my board members. We have a couple of board members that would be more aggressive than with the dividend, than the majority right now. It is up for discussion. Every quarter we discuss it. I think as we get further away from the pandemic, the likelihood is that we will revisit the dividend and then there may be an increase. Right now, you know, we like the cash position we're in, and we like our balance sheet. Got it. Thank you, guys. You're welcome. Thank you. Our next question has come from the line of Roger Lipton with Lipton Financial Services. Please proceed with your question. Yeah. Mike, apropos of that, with capital allocation, I was gonna ask, I will ask, what will be the timing of your CapEx in Las Vegas? How much will you spend, and when? This year, our obligation to MGM, we have essentially 3 leases out there, all of which there are 3 leases, and there are also letter agreements. The letter agreements sort of cover, you know, the banquet business, the room service, pool service, the employee dining room. None of those things need renovations. The 3 main leases are for the Village Streets, which is sort of like a fast food area, America, which is, you know, their 24-hour restaurant that we have. Right. Gallagher's. The obligation this year for Gallagher's, is certainly under $2 million. You know, probably a million and a half dollars, but we're just in the process, and we don't know if there's gonna be, you know, cost overruns. We think, you know, Sam and Jennifer, who are the key players, along with the local people in Vegas, but the key players here, have really gone over those numbers, with Linda Klaus, who's our facilities manager and oversees construction as well. The likelihood is to me, a million and a half dollars in CapEx. Please remember, beyond that, we're paying people who work for us there at, you know, 70% of their salaries even though they're not working. We're utilizing them for other things, where we can. You know, there's a staff there that's being paid. If you included that, I guess that number goes to $2 million, you know, with the payroll. We don't have any obligation for the rest of this year other than to give them a plan for the Village Streets. I don't think the Village Streets will be very expensive. Maybe $2 million. There are, I think, 8 outlets in the Village Streets, and we're considering building one more. Maybe a couple million dollars. Would that be close, Sam? Yeah. Sam's shaking his head yes. He's smarter about this than I am. Figure $2 million. Then America comes up, you know, in 2025. America's doing great. I mean, we've had 11% compounded growth there last year from the, you know, from the previous year. We're running ahead this year. I don't know that we'll ever have to do America. It's basically New York-New York and MGM's call. They've taken a wait and see attitude because the restaurant's doing really, really well. You know, certainly the CapEx in Vegas is not a factor when you... I think you're trying to look toward the dividend and see if that would be impactful on the dividend. We're not concerned about that when we make a decision about the dividend. Mike, can I just real quick. That sounds like $4 million combined maybe, including the payroll. That's lower than the numbers you had thrown out previously, if I recall correctly. Yeah. Well, the total obligation was seven and a half million dollars. The majority of that was gonna be spent in America. Okay. Well, that's good news then. Okay. Thanks very much. You're welcome. Thank you. There are no further questions at this time. I would now like to hand the call back over to Michael Weinstein for any closing comments. All right. I hope I was clear. It's Valentine's Day. Happy Valentine's, everybody. We'll see you at the next quarter call. Take care. Bye. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.