Ark Restaurants Corp.

Greetings and welcome to ARC Restaurants' fourth quarter and year-end 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 the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Love, Secretary for ARC Restaurants. Thank you. You may begin.

Thank you, operator. Good morning and thank you for joining us on our conference call for the fourth quarter and fiscal year ended October 2nd, 2021. My name is Christopher Love and I am the secretary of our restaurant. With me on the call today is Michael Weinstein, our chairman and CEO, and Anthony Sirica, our chief financial officer. For those of you who have not obtained a copy of our press release, it was issued over the news wires yesterday and it's 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.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 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.

Thank you for joining us today and happy holidays to you all. The quarter was a very satisfying quarter. There are just a few comments I'd like to make regarding it by venue. Las Vegas was particularly strong. It compared very well to 2019. We were up. One of the two problems that we are having across the board is disruption in pricing, meaning inflation at the wholesale level, and our inability to secure full staffing at all our restaurants. What is interesting, even though cost of goods are going up, we've been able to... Reengineer some of our menus and what we offer. So the price increases passed on to customers, with the exception of where we're serving shellfish, has not been that severe. In Las Vegas, we always thought we were somewhat underpriced. We work primarily in New York, New York. Hotel and Casino, which is a mid-priced casino hotel, and we were not as aggressive because of that marketing demographic that we thought we were hitting. We were able to raise prices very easily there, so part of the increase compared to 2019 is not only headcounts, but it's also price increases. With regard to our payroll there, Payroll is up per head, but because we're always about 50 people short out of 600 that we employ there, our payrolls have remained steady to down in terms of whole dollars when compared to 2019. So the advantage we have there is our payroll is more productive and efficient at a lower cost, although we would like to have more people, but for just better service, but that has probably offset whatever increased wholesale costs have been to us. So Las Vegas has worked out very well throughout the quarter. The same could be said about Florida. The productivity in Florida as a function of payroll has been exceptional. The costs have been up a little bit there, especially again in shellfish. I cite two examples consistently. At Rustic, where one out of every four people seem to order king crabs, that product has more than doubled in the last six months. I think we were, about six, seven months ago, we were paying $23 a pound. We served a two-pound cluster of That price went as high as $53 a pound. The product has not been available. We're now carrying about $2.3 million in inventory in various shellfish, mostly king crabs, but also Dungeness crab and snow crabs. That's a crab house. People come for that product. We want to be able to serve them what they want, but our food costs at Rustic In relation to the quarter, I'm just trying to give you a feel. Our product cost as a percentage of sales has gone from 43% to 57%. We're still profitable at Rustic. Our demographic cannot pay more than what we're charging. We've raised King Crab Lakes from $75 to $95 to $115 to $125. over the last seven months as the price increased. Right now, a customer at Rustic is paying $125 for something that costs us $109 to put on the plate. So we're more concerned with the revenues and keeping our customers than we are with the profitability of a particular product. But at Rustic, one out of four people order that product. Again, we're profitable, but those profits have been eroded on considerably. The rest of Florida is doing extremely well. I also cite what's happened to Conch Products, which we use at Shucker's in north of Palm Beach. That product, 40 pounds, six weeks ago used to cost us $40. A week and a half ago, it was $125 for the case, so threefold increase. It's now back down to, excuse me, it used to cost $300. It became $1,250, and it's now down to $750. What we're seeing in shellfish, all crabs, we think the price has peaked. It's starting to come down a little bit. That'll be helpful in future quarters. But this relatively strong December quarter we had was carried by extraordinary results in Las Vegas, the non-crab restaurants in Florida, a very good performance in Sequoia and Washington, D.C., and again in New York we're still hampered by office buildings that are only 30% occupied, fewer events in terms of revenue streams and a lack of tourism. Our customer base at Bryan Park and Roberts especially requires a robust Office Occupancy, Event Business, and Tourism Business. And that has not been there. So these results are quite remarkable given the handicaps I just outlined for you. We're very, very pleased. New York, this last week and a half, you could sort of see the results of Omicron. We're having a very good December quarter, but I can tell you that the last week or so, in terms of events occurring in New York, they're under-occupied. People paid us for 350 people for an event and 175 show up. So I don't quite know... What the Future Will Hold for the March quarter, but the December quarter has been very strong. Meadowlands. What I can say is that 50% of all sports betting in the state of New Jersey is done at the Meadowlands. 40% of it is online. 40% of the online betting is captured by the Meadowlands websites. 50% on-premise betting is captured by the Meadowlands. We did well over a half a billion dollars in betting there, sports betting. The hold has been better than we had thought. Originally we thought it would be FanDuel told us, who's our partner, it would be about 5%. It's a little bit over 6%. After everything is said and done, it's projected to the calendar year December, the Meadowlands would have a positive EBITDA of $15 million. That means two things to us. Number one, we're going to get our first distributions because we own about 7 point something percent fully diluted. The distributions will be the equivalent of what we would pay in taxes. So it's not going to be a million dollars. It'll be a couple hundred thousand dollars this year. But it'll be the first distributions we've received. The second thing that's important about this thing being cash flow positive is there's not going to be any capital calls. So we're in good shape on the Meadowlands in terms of The current business, whether or not it becomes a casino, we have thoughts. It's anybody's guess as to when that might occur, if it does occur, but it's certainly not going to occur until downstate casinos in New York City get licenses, and that's presently scheduled for late 2023. If that is advanced forward, we may get some action by the New Jersey Legislature to progress forward the consideration of a casino license in the northern part of the state, particularly the Meadowlands. I hope that gives you a little bit of flavor of what's going on. I'm happy to take questions right now.