Ark Restaurants Corp. (NASDAQ:ARKR) Q1 2023 Earnings Call Transcript February 14, 2023

Operator: Greetings, and welcome to the Ark Restaurant's First Quarter 2023 Results Conference Call. 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.

Christopher Love: Thank you, operator. Good morning, and thank you for joining us on our conference call for the 2023 first quarter ended December 31, 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 Sirica, our President and Chief Financial Officer; and Vinny 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.

Michael Weinstein: 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.

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Anthony Sirica: Good morning, everyone. Our balance sheet remains strong. Our cash and CDs is $24.5 million, which the CD is now cash. It matured on January 8. Our total debt at the end of the quarter was $21.6 million. Total equity was $61.1 million. Significant changes were -- 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. So 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 targeting price increases as well as buying 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. But again, as a percentage of sales, it is spot on with the last quarter prior to the pandemic quarter ended December 31, '19. It 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 a COVID abatement deals for Bryant Park. Obviously, the rent expense was artificially low last year. So that was about $300,000 of the increase this year.

The Las Vegas rents went up on 1/1/22. So that's about another $300,000 of increased rent this year over last year, and about 220 of it is insurance premiums which increased. Other operating costs and expenses that's really just inflation related across the board. That's really it on the P&L. So other than that, it was a strong quarter. I'll turn over to Michael.

Michael Weinstein: Thank you, Anthony. So I just want to emphasize that the way we -- of when about signing these Las Vegas leases, we could not -- 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. So we didn't accrue for them. Our accountants were adamant that we should accrue until we had signed deals. So the minimum rents were pushed forward. And 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. So 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.

And so 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 have to 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 we're missing and much of certainly last year and end of 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 the split in Florida. So we're doing well with events in New York and Washington, D.C., the Vegas numbers were very strong, sales were very strong.

Alabama did what we would expect. But Florida and the -- starting after Thanksgiving through the end of the quarter, weekend, 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. So we were not really aggressive in pushing menu prices in Rustic or anywhere else to that matter but customer counts in Rustic dropped dramatically and revenues were down probably 17%, 18% in the quarter in Rustic. And the other restaurants were off 7%, 8%, 9%, 10%. It was also...

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