Ark Restaurants - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 delivered $43.72M revenue and $(0.96) diluted EPS, down year over year primarily on Bryant Park litigation costs (~$0.8M), Washington D.C. demand weakness, and a $4.70M impairment at Sequoia; adjusted EBITDA was $1.79M.
• Same-store sales ex-closed units fell 7.4% in the quarter, with Bryant Park event business negatively impacted by landlord dispute publicity; Las Vegas cash flow improved despite broader Strip softness.
• Balance sheet remains resilient: cash $12.33M and debt $3.86M at quarter-end; credit facility maturity extended to June 1, 2028, with covenants revised and net income covenant removed.
• No formal forward guidance; management focus centers on litigating to retain Bryant Park leases, mitigating D.C. softness, and opportunistic growth; Q3 call featured no Q&A, keeping catalysts concentrated on legal outcomes and operating execution.

What Went Well and What Went Wrong

What Went Well

• Las Vegas operations increased cash flow despite Strip softness; Robert (NYC) and Rustic Inn (FL) performing better than last year, with “the rest of our portfolio restaurants continue to meet expectations”.
• Liquidity/financing de-risked: credit facility extended to 2028; minimum net worth covenant raised; net income covenant removed, preserving flexibility.
• Adjusted EBITDA remained positive at $1.79M despite headwinds; cash held at $12.33M provides support for growth initiatives.

What Went Wrong

• Bryant Park litigation drove ~$0.8M expense and damaged catering/a la carte demand, causing SSS to decline 7.4% in Q3; management cites “negative publicity” impact.
• Sequoia (Washington D.C.) saw additional $4.70M impairment as future cash flow projections no longer support carrying values; D.C. market demand described as difficult.
• Year-over-year revenue fell to $43.72M vs $50.40M, and net income swung to $(3.45)M vs $0.64M, reflecting litigation costs and impairments, plus removal of Tampa Food Court and El Rio Grande revenue contributions.

Transcript

Speaker 1

Greetings and welcome to the Ark Restaurants third quarter 2025 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone 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, Christopher Love, Secretary. Thank you. You may begin.

Speaker 2

Thank you, Operator. Good morning and thank you for joining us on our conference call for the third quarter ended June 28, 2025. 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 Anthony Sirica, our President and CFO. For those of you who have not yet obtained a copy of our press release, it was issued over the news wires 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 call is 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 Anthony. Thank you.

Speaker 0

Good morning, everyone. Before Michael gets into the results of operations, I wanted to highlight a few things on the balance sheet. Our cash is $12 million at quarter end. Our debt was $3.9 million. We did extend our credit agreement during the quarter through 6/1/2028, with $20 million of capacity. With that, the balloon notes on the three notes that we had outstanding were extended on the same payment terms that we were paying. Two of those will run off in about four or five more quarterly payments, and the third one, there'll be another balloon payment in June 2028. The other big item of note on the balance sheet, which you saw in the release, was we had an additional impairment of Sequoia's leasehold improvements and right-of-use assets in the amount of $4.7 million, as stated in the release, as a result of the cash flow analysis.

Other than that, the balance sheet remains strong. I'll hand it over to Michael.

Speaker 3

Hi everybody. I tried to address where we were in the opening paragraph of the earnings release. The individual restaurants are, for the most part, doing very, very well. Las Vegas has been strong in terms of its cash flow despite a remarkable slowdown in the visitors to New York-New York, Las Vegas trip. Robert in New York continues to do above our expectations, as does Rustic in Fort Lauderdale. The rest of the restaurants are performing as we expect it to perform. This is despite what we consider, you know, in various areas of the country where we operate, a diminution of demand in line with what a lot of restaurants are seeing. It's, you know, Florida, we're told by purveyors and other restaurateurs, they're all 15 to 20%.

You know, that's maybe a number which is exaggerated, but without a question, headcounts and visitorships to these restaurants are down. I think under the environment that we're in, I think we're doing quite well with the restaurants. Obviously, we're not doing well with Sequoia or Bryant Park, for two different reasons. Sequoia in Washington, D.C., we're in Washington Harbor, the complex known as Washington Harbor. All the restaurants in Washington Harbor, and I think most of the restaurants in Washington, D.C., are suffering from an environment that's just people don't want to be out. Also, the event business in Sequoia, which is a large facility that has 1,100 seats, that business has dried up considerably, I think, given the environment in Washington, D.C. In terms of Bryant Park, we're in a litigation. We're at the very beginning of it.

We're just starting discovery, and this is probably a two or three-year process to see the litigation through. We're very committed to the belief that we should be the operator there, and we're going to stay the course because we think our claims are justified. With that, the only other thing going on, which is the casino license possibilities for Meadowlands, we think we're getting closer for a referendum by New Jersey legislature to permit gaming in the northern part of the state. We think the trigger for that will be when New York State announces the three licenses that they're going to be obligated to give to downstate casinos in New York. Yonkers, Aqueduct will probably be two, and there'll be a third selected.

We believe that that will be the linchpin for New Jersey to move aggressively toward countering that with a casino in the north, and we think we're in the best position to get a casino license. With that, questions.

Speaker 1

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker 0

No questions.

Speaker 1

There are no questions at this time. I'd like to turn the floor back over to Michael Weinstein for closing comments.

Speaker 3

Thank you all for phoning in, and we'll see you next quarter.

Speaker 0

Thank you.

Speaker 1

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.