Ark Restaurants Corp. (NASDAQ: ARKR) maintained a stable financial position in the first quarter of 2024, as reported in their latest earnings call. The company, which did not experience any changes in the number of operational restaurants compared to the previous year, reported flat revenues and a slight decrease in EBITDA. Despite facing challenges such as higher rents in Las Vegas and lower customer volumes in Florida, the company remains optimistic about its cost management strategies and ongoing operational initiatives.
Key Takeaways
- Revenues remained unchanged year-over-year, with no new restaurant openings or closures affecting the comparison.
- EBITDA for the quarter was $2,572,000, a decrease from $3,018,000 in the same quarter the previous year.
- The balance sheet showed $12,122,000 in cash and total debt of $6,742,000 as of December 30, 2023.
- Las Vegas locations reported strong revenues, while Florida full-service restaurants saw a 10% decrease in volumes.
- Food costs are stabilizing with some product prices decreasing, improving food cost components on the menu.
- Labor costs remain high, with pending legislation to increase the minimum wage in various states.
- The company is actively seeking opportunities to acquire operating income and capitalize on closed locations.
Company Outlook
- Ark Restaurants is focused on creating more demand to address the issue of decreased customer counts, particularly in Florida.
- The company is confident in the revenue strength of its Las Vegas operations to offset the impact of higher rents.
- Ark Restaurants continues to explore acquisition deals to enhance operating income.
Bearish Highlights
- The full-service restaurants in Florida, including JBs, Rustic, Blue Moon, and Shuckers, are currently the company's biggest concern with a notable decline in customer volumes.
- Washington, D.C. locations are facing difficulties due to city-specific issues.
Bullish Highlights
- Strong performance in New York across all restaurant categories.
- Alabama restaurants are performing well in both sales and cash flow.
Misses
- The company has not raised menu prices despite inflation, which may contribute to the decline in customer counts, as customers experience sticker shock with current prices.
Q&A highlights
- There were no questions from participants during the Q&A session of the earnings call.
Ark Restaurants did not provide specific guidance on future earnings or operational strategies during the call. However, the company did mention its minority interest in the Meadowlands Racetrack and the potential for obtaining a casino license in the future, which could significantly impact its financial outlook. Additionally, the outcome of the Bryant Park lease proposal, which is expected to be decided in the coming months, could also influence the company's operations. Ark Restaurants plans to issue a press release once a decision is made regarding the Bryant Park proposal.
InvestingPro Insights
Ark Restaurants Corp. (NASDAQ: ARKR), known for its diverse portfolio of dining establishments, has been navigating a challenging economic landscape. According to real-time data from InvestingPro, the company's market capitalization stands at 53.16 million USD, reflecting its position within the industry. Despite the company's efforts to maintain financial stability, two InvestingPro Tips highlight potential areas of concern:
- Ark Restaurants has been grappling with profitability, as it has not been profitable over the last twelve months. This could be a reflection of the operational challenges and high costs that the company outlined in its earnings call.
- The company is trading at a high EBIT valuation multiple, which suggests that the market may be expecting future earnings growth that the company will need to justify through improved financial performance.
In terms of financial metrics, Ark Restaurants' P/E Ratio (Adjusted) for the last twelve months as of Q1 2024 stands at -8.48, indicating that investors have concerns about the company's earnings. Additionally, the company's revenue growth over the same period has experienced a slight decline of -1.23%, which aligns with the flat revenues reported in the earnings call. However, it's worth noting that the Gross Profit Margin remains relatively healthy at 24.44%, suggesting that the company is able to retain a reasonable portion of its sales as gross profit.
For investors looking for more insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/ARKR, which could provide a deeper analysis of Ark Restaurants' financial health and future prospects. Moreover, users can take advantage of a special offer by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Ark Restaurants Corporation (ARKR) Q1 2024:
Operator: Greetings, and welcome to Ark Restaurants First Quarter 2024 Results Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Love, Secretary. Thank you. Mr. Love, you may begin.
Christopher Love: Thank you, Operator. Good morning, and thank you for joining us on our conference call for the first quarter ended December 30, 2023. 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; and Vinny Pascal, our COO. 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 will 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. Thank you.
Michael Weinstein: Hi everybody. This quarter was a relatively clean quarter in terms of comparisons. We had no additional restaurants on working for us as compared to last year's first quarter. And there were no restaurants that were closed compared to last year's first quarter. So it's relatively clean. Revenues were flat. I'm sure you saw the press release. EBITDA was $2,572,000 versus $3,018,000. Our balance sheet remains really clean, $12,122,000 in cash. Total debt at the end of 12/30 was $6,742,000. The business within having relatively flat sales has shifts, obviously some restaurants are up, some are down. We are experiencing through 12/30 very strong revenues in Las Vegas. But we also have rents that are much higher than they were in the comparative quarter last year. The Alabama restaurants are doing well both in sales and in cash flow. The Florida restaurants are our biggest problem right now, the full-service restaurants, which include JBs, Rustic, Blue Moon, and Shuckers. There is some weather issues there, but there are always weather issues. Volumes are down in those four restaurants roughly 10%. That means two things. Their customer counts are down, or where they're not down as much as revenues, people are sharing entrees, so we're finding just -- we're just not making any headway in terms of increasing revenues in those restaurants. Washington, D.C., has been problematic because the city is problematic. New York has been very strong in all categories including election. Our biggest problems as a company have nothing to do with customer experience. The food quality is very high. The places are maintained wonderfully, services excellent. We have no problems with the way our restaurants are functioning. There were two types of inflation over the last couple of years. One was inflation in the products that we buy, which turn -- in turn become the meal that has stabilized. And a lot of products actually are starting to come down. So food cost should not be an issue. And we are now seeing between the downward movement in prices and us engineering our menus to have better food cost components, we're seeing our food costs, by and large, in very good shape. The other inflation was in labor. That is not coming down. Legislation is underway, especially in Las Vegas right now, but also Florida and also New York, to increase minimum wage. And there is no offset that we can garner from that, other than to raise menu prices. And as I've said repeatedly in the past, we're not raising menu prices. We think our menus represent fair value to the customer. We're still below what others are charging. However, these menu prices up 7% to 10% since the pandemic are still sticker shock. And it seems to me that's in part why our customer counts are down, as I said, especially in Florida. So that's a problem difficult to solve. We need more demand. We are taking certain initiatives to create more demand, but that'll take a while to flow through. We're still looking at deals constantly to acquire operating income or find ourselves able to take advantage of locations that have closed where we think we can operate at significant revenue levels. So that's really it. It's a demand problem right now in Florida and Vegas. It's a rent problem. But we think the revenues in Vegas are strong enough that we will not be penalized with a higher rent. We think the revenues that are coming our way because we're running a much better operation than in previous years in terms of efficiency. We think we will not be challenged in terms of cash flow there, and that will remain pretty stable pre the rent increases. So I'll take questions at this point.
Operator: There are no further questions at this time. We have reached the end of question-and-answer session. I would now like to turn the floor over to Michael Weinstein for closing comments.
Michael Weinstein: All right. There are two other things to address. One is the Meadowlands Racetrack. As you know, we have a minority interest in the racetrack, and our hope is that we will get a casino license at some point. As I've said in the past, the leverage for New Jersey to approve a casino license in the northern part of the state really is a function of when New York State issues downstate casino licenses. Downstate meaning in Queens or Yonkers or even in Manhattan, there have been delays -- at the Governor's office and the state legislature to issue those license, but we think once they do issue those licenses, New Jersey will be very quick to move to license upstate New Jersey, northern New Jersey casino. Bryant Park, as you know, our lease becomes due in March -- excuse me, May of 2025. There is a request for proposal that was sent out in October of this past year. We put in a proposal. We think it's a very strong proposal. We've been told we are finalists. We have a certain amount of confidence, but it's not subject to our control. We've had meetings with Bryant Park to get fully vetted on our proposal. They have not made any decisions as of yet. No one is expected until the latter part of this month or next month. Once we have a decision on that, whether positive or negative, we will send out a press release. Thank you. I'll speak to you next quarter.
Operator: Mr. Love, we have one question. Should we go ahead?
Christopher Love: Yes, please.
Operator: Yes. That questioner has dropped down. Not a problem. We have no more questions at this time. So this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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