Earnings call transcript: Ark Restaurants Q1 2025 faces lease uncertainty

Ark Restaurants Corp (NASDAQ: ARKR) recently held its earnings call for the first quarter of 2025, where the company discussed its current financial challenges and strategic focus. According to InvestingPro data, the company reported revenue of $183.5 million in the last twelve months, with an EBITDA of $7.2 million. The stock remains stable, trading at $12.69, near its InvestingPro Fair Value, despite showing high price volatility in recent months. The company’s financial health score is rated as "FAIR" by InvestingPro analysts.

Key Takeaways

• Ark Restaurants is actively seeking efficiency improvements, particularly in payroll management.
• The potential loss of the Bryant Park operation poses a significant challenge, affecting 250 employees.
• The company is exploring casino licensing opportunities in New Jersey, with a focus on potential developments at Meadowlands.
• Dividend and stock buyback decisions are pending the outcome of the Bryant Park lease situation.

Company Performance

Ark Restaurants is currently navigating a challenging financial landscape, with InvestingPro data showing short-term obligations exceeding liquid assets and a concerning current ratio of 0.63. The company has emphasized the need to improve operational efficiency, particularly in payroll, to bolster its margins, which currently stand at 23.7% gross profit margin. Despite these challenges, Ark Restaurants is positioning itself as an experienced operator in the hospitality sector, with a strategic focus on potential casino developments.

Financial Highlights

• Margins have been squeezed, prompting efforts to enhance efficiency.
• The company is actively attempting to drive revenue amidst operational constraints.
• Specific earnings and revenue figures were not disclosed during the call.

Outlook & Guidance

Ark Restaurants is exploring expansion opportunities with minimal capital requirements and seeking partnerships for new operations. The company is awaiting New York State’s decision on downstate casino licenses, expected later this year, which could significantly impact its strategic direction.

Executive Commentary

"We’re trying to pick the margins up by being more efficient in payroll," a senior executive stated, highlighting the company’s focus on operational efficiency. Another executive commented on the Bryant Park lease issue, saying, "It’s sort of paralyzing in one respect for our balance sheet and income statement to have this issue with Bryant Park."

Risks and Challenges

• The potential loss of the Bryant Park operation, affecting 250 employees, poses a significant risk.
• The competitive landscape for casino licenses in New Jersey adds uncertainty to Ark Restaurants’ expansion plans.
• Market dynamics in real estate and hospitality remain under scrutiny, impacting the company’s strategic decisions.

Ark Restaurants continues to face significant challenges, particularly with its Bryant Park property, which is crucial to its operational strategy. The company’s focus on efficiency and potential casino developments will be key factors in its future performance. Despite current challenges, the company maintains a significant dividend yield of 5.91%, though investors should note that the company was not profitable over the last twelve months. For comprehensive analysis and real-time updates, consider accessing the full suite of financial tools and expert insights available on InvestingPro.

Full transcript - Ark Restaurants Corp (ARKR) Q1 2025:

Conference Operator: have your name, please? And your company?

And which conference you’re looking for? Okay. I’ll bring you right there. Hold on.

Senior Executive/Management: Helpful in increasing demand, so we’ll wait and see on that. All in all, we’re just margins have been squeezed. We’re trying to pick the margins up by being more efficient in payroll, hopefully driving some more revenue. The easy one to talk about of the two elephants in the room, Meadowlands and Bryant Park. Meadowlands, again, we think we’re the most likely site for gaining a casino license in the North Of New Jersey, but New Jersey will not move until New York State starts to issue licenses for downstate casinos, meaning Manhattan or Queens or The Bronx.

2 of those licenses, if there we suspect will be issued to Aqueduct and to Yonkers. We believe that once they’re issued, it will take a matter of months for those to become fully operational casinos because the facilities are already built. For the third license and there are several developers vying for those, that will take some time. But we think the implementation of casino licenses at Yonkers and Aqueduct will force Jersey to make a decision that they have to do something in the North Atlantic City has been dying for years. And I think this would really be a death knell and Jersey will wake up and issue a license in the North.

We suspect that New York State will issue licenses sometime later this year. So we also expect that that will generate a referendum to allow that it’s a referendum voted on by the public to allow for casino gaming in the North. So that’s the mail winners. Bryant Park, if we follow the headlines, the Bryant Park Corporation has said they want to go forward with somebody other than us. That deal has not been signed yet.

It requires a positive okay from the POTS department in New York Public Library. We’ve

Shareholder/Analyst: hired

Senior Executive/Management: a whole team of experts and we feel that we have a decent chance of retaining the operation of that facility. It will take months to know, but we really believe we’re still in the game. We think the whole request for proposal process was flawed. And the thing that we don’t understand is that the new license to operate would be issued to a company that has limited hospitality experience. We’ve been hugely successful and their minimum rent proposal is $1,000,000,000 less than us.

So, it just doesn’t sound like it’s a logical business arrangement and we’re looking into it. And hopefully, we will see something that starts to move us back into our direction. So, with that, any questions, I’m happy to answer.

Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Jeffrey Kaminski with JJK Consulting. Please proceed with your question.

Shareholder/Analyst: Good morning, everyone. This is hi, Anthony. With respect to Bryant Park and the process, I guess you folks found out about the lease and the other party through, if I’m reading the hearings properly, through some sort of public hearing or public meeting. So my question is, are they more of these scheduled and can the public actually attend? And then as a shareholder, I have a vested interest in what happens to client park as do other shareholders of work.

What’s preventing us as a member of the public and a New York resident from attending such a year?

Senior Executive/Management: There’s nothing preventing you to go to public sessions. The community board session is a public session. The announcement of his of the Bryan Park Corporation’s election was made at a subcommittee of the Community Board meeting, it’s this Parks and Recreation Subcommittee at the Community Board and it was a public forum. There was a lot of robust conversation about it regarding the process and regarding the affordability of the selection of the new restaurant tour, we’re reasonably priced. We don’t think the selection of Seacort Entertainment Group and their licensing agreement, proposed licensing agreement with John George speaks well of affordability to the public.

So there was a large discussion about that. But the Community Board’s advisory position in this, The sign off they need to get a deal done with any operator has to come from the City of Commerce Department and from the Public Library. And they have not even proposed a change in operators to either one of those two organizations. Go ahead.

Shareholder/Analyst: Our comments from the public, welcome at at the at the end of the week. I’m sorry. I I said We had we

Senior Executive/Management: had we had 25 employees at the community board meeting. We have 250 employees at the Bryant Park Corporation who are in danger of losing their jobs. Literally, 40% of those employees have been with us for twenty five years or more. So that constituency is also important in this process.

Shareholder/Analyst: Right. And were any of them able to speak at the meeting and if I attended the next meeting as a shareholder, would I have an opportunity to make a statement or

Senior Executive/Management: You would have a minute to two minutes to speak.

Shareholder/Analyst: Okay. Thank you.

Senior Executive/Management: You’re welcome.

Conference Operator: Our next question comes from the line of Ravi Desai, a private investor. Please proceed with your question.

Shareholder/Analyst: Hey, Michael. How are you?

Senior Executive/Management: Good, Ravi. Thank you.

Shareholder/Analyst: I had a question. Moving forward as you guys think down the road, six months, twelve months, just wanted to get a sense of how you guys are thinking about the capital allocation on dividends or buybacks or if you guys have any other ideas outside of the strategic acquisitions that you’re looking for down south? So

Senior Executive/Management: that’s a complicated question because it really depends upon the outcome of Bryant Park, certainly with regard to dividends. The right now without the cash flow that would be attending to operation at Bryant Park, we would not see a payer of dividends. That also is a question regarding buybacks. I think that same thought process is applicable. I don’t think we’re going to be aggressively buying stock unless we know what’s going on with Brian Park number one, as a company.

There may be people we’re aligned with, who may want to take an interest in the stock. But without Brian Park, it’s very hard to make these decisions. In terms of expanding the business, we have some nice opportunities we think that don’t require tremendous amount of capital or where we would have partnerships with other organizations that see us as an important part of the process to establish some new operations. So, we’re looking at that. It’s sort of paralyzing in one respect for our balance sheet and income statement to have this issue with Ryan Park.

But on the other hand, we’re actively engaged and trying to find areas where we can expand sensibly. Hope that answers your question.

Shareholder/Analyst: Yes, that’s helpful there. So we’ll see how the Bryant Park shakes out and good luck with that. I think it I hope it holds in your guys’ favor.

Senior Executive/Management: Thank you.

Conference Operator: It appears we have no further questions at this time. I’d like to turn the floor back over to you for closing comments.

Senior Executive/Management: All right. Thank you all for your interest and we’ll see you next quarter. Thank you. Bye bye.

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.

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