Ark Restaurants Corp.

Greetings and welcome to Arc Restaurant's second quarter 2021 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 today's conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Sonal Shah, General Counsel. Thank you. You may begin.

My name is Sol, and I'm General Counsel of Arc Restaurant. With me on the call today are our Chairman and CEO. For those of you who have not yet obtained a copy of our press release, it was issued over the wires yesterday and is available on our website. To review the full text of that press release, along with associated financial tables, please go to our homepage at www.arcrestaurants.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 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 of all, I want to point out that Anthony Sirica, our CFO, is not on the call today. He is ill, not with COVID. It is not anything serious. Thank you very much. to have had the cooperation of all our employees during a very, very difficult time. These restaurants have been up and running for some time now, but during the shutdown and for a few months into the beginnings of reopening, most of our key employees had given up anywhere from 50% to 90% of their base pay. to remain with us, and that was a big help in enabling us to get these operations open quickly, get them running smoothly. We are, as many companies are complaining, trying to find good people to work. There is a shortage right now, but we are operating at, you know, very, very good smooth levels, and we Thank you for joining us. of $495,000. That means we removed from the EBITDA some $4 million plus of loan forgiveness. So this is truly an operating number. It has nothing to do with the PPPs. So it was negative $4.95 for the quarter. But in the quarter, we had two other adjustments, which we cannot include in the EBDOT. But we increased our vacation pay accrual $500,000 after discussions with our outside auditors. That's a non-cash item, but shows as a non-cash expense. Thank you for joining us. Somewhere between $1.1 million and $1.2 million of additional non-cash expenses. If they were to add it back to EBITDA as an adjusted number, we would have been positive some $600,000 to $650,000 in cash flow for the quarter. What we experienced during the quarter was a very bad January, very bad February. Somewhere toward the middle of the third quarter, Week in February we started to see a huge pickup in revenue in Las Vegas, Alabama, and Florida. Those restaurants continue to do extremely well. Florida usually It's too early to tell, but we're sort of confident that we're not going to see the usual slowdown that's typical for southern Florida. There seems to be a lot more activity the first few days post-Mother's Day. So we're very excited about that. We're doing well when the weather's good in Sequoia and Washington, D.C. We have 600 outdoor seats. We've been under restrictions of 25% of indoor seating in Washington, D.C. That will probably go away in the next couple of weeks. We've also been under severe restrictions in New York and Washington, D.C. in what we're allowed to do in events. Events are very important to us at Robert in New York, Bryan Park, and Sequoia. We are seeing demand for events in Washington, D.C., and as the restrictions are relaxed, we think we'll see significant return of event volume. But We're doing well in Sequoia when the weather's nice. The weather's nice right now, so we're seeing some good cash flow numbers. New York is still a problem for us. Bryan Park sits in the middle of the city. There's 6 million square feet of office buildings facing us. The last survey done, they're only 9% occupied. There's very little tourism. There is... No Theater District, all of which Brian Park relies on heavily. So our volumes there have literally been during the early January, February, before the weather got nice, those volumes were probably 10% of what we usually do. To give you an example, this past week, with the weather being somewhat nice on certain days... We did $200,000. That compares to a $600,000 week last year. So those volumes are severely bad. Robert, at the top of the Museum of Art and Design, is also suffering. We're on the ninth floor. The museum has had scant visitorship. It relies on tourism to the extent we rely on events there. There have been none. It's a 150-seat restaurant with social distancing. When we had 25% occupancy allowance, we had 35 seats. So both Robert and Brian Park have suffered. Real Grand in New York is doing well. It has outdoor seating. Clyde's is not doing well. So New York remains the problem for us, but our cash flows, given the unexpected strong revenues in Florida, Las Vegas, and Washington now, are growing. Really taking up the slack that would have been strong cash flows from New York. Our office G&A is down during the pandemic. We let go of certain positions. We're operating more efficiently on a payroll basis. We also have a better lease market. Thank you for joining us. continue to extend upwards, I think cash flows and margins will be much better. We are seeing a price inflation and certain commodities we use. To our surprise, where we had thought we had no elasticity, especially at Rustic Inn where shellfish prices have gone literally up 20%, We've been able to raise prices and get customer acceptance. Rustic is seeing record weeks every week. Some of that has to do with price increase, which has been accepted, but it also has to do with what's going on in southern Florida and pent-up demand. We've put price increases into about half of our restaurants. We're seeing no pushback whatsoever. So that's the situation. We expect a very strong third quarter. You know, it remains to be seen how the lifting of COVID restrictions influence our event business. But if our event business starts to come through, I think we'll do much, much better in New York. And that's our situation. On a balance sheet basis, we've – As the press release indicated, we've converted some $4 million of the $15 million in PPP money that we applied and received. So far, about $4 million of that has been granted. When we're all done, about $13 million will be forgiven. Our balance sheet right now looks like about if all $13 million is forgiven, Our balance sheet will probably have net debt at that time of something like $7 to $8.5 million net debt, meaning long-term debt, less cash. That's the best position we've been in in a long time. The cash flows are very strong at this point, as they should be during this period of With that, let me take questions and see if I could be helpful.