Ark Restaurants Announces Financial Results for the Third Quarter of 2024

Rhea-AI Summary

Ark Restaurants Corp. (NASDAQ:ARKR) reported financial results for Q3 2024. Total revenues were $50,396,000, down from $51,051,000 in Q3 2023. For the 39-week period, revenues slightly decreased to $140,139,000 from $140,393,000. Company-wide same-store sales decreased 2.3% excluding Gallagher's Steakhouse. EBITDA, as adjusted, for Q3 2024 was $3,375,000, down from $4,663,000 in Q3 2023. Net income for Q3 2024 was $640,000 ($0.18 per share), compared to $3,195,000 ($0.89 per basic share) in Q3 2023. The company recognized impairment charges of $2,500,000 related to its Sequoia property in Washington, D.C. As of June 29, 2024, Ark had a cash balance of $11,467,000 and total outstanding debt of $5,738,000.

Positive

• Gallagher's Steakhouse renovation completed, with revenues increasing to $918,000 from $354,000 in Q3
• Cash balance of $11,467,000 as of June 29, 2024

Negative

• Total revenues decreased by 1.3% in Q3 2024 compared to Q3 2023
• Company-wide same-store sales decreased 2.3% excluding Gallagher's Steakhouse
• EBITDA, as adjusted, declined by 27.6% in Q3 2024 compared to Q3 2023
• Net income for Q3 2024 decreased by 80% compared to Q3 2023
• Impairment charges of $2,500,000 recognized for Sequoia property due to lower-than-expected operating results

Insights

Financial Analyst

Ark Restaurants' Q3 2024 results show concerning trends. Total revenues decreased slightly year-over-year, with Q3 revenues at $50,396,000 vs $51,051,000 in Q3 2023. More alarmingly, same-store sales declined by 2.3%, excluding Gallagher's Steakhouse renovation impact. This suggests underlying weakness in core operations.

The company's profitability has significantly deteriorated. Q3 EBITDA, as adjusted, fell to $3,375,000 from $4,663,000 last year, a 27.6% decrease. Net income plummeted to $640,000 ($0.18 per share) from $3,195,000 ($0.89 per share), partly due to a $2,500,000 impairment charge. These figures indicate substantial margin compression and operational challenges.

The $2,500,000 impairment charge for the Sequoia property in Washington, D.C. is particularly concerning, as it suggests potential long-term issues with this location. Investors should monitor this situation closely, as further impairments could materialize if performance doesn't improve.

Market Research Analyst

The restaurant industry is facing headwinds and Ark Restaurants' results reflect these challenges. The 2.3% same-store sales decline indicates weakening consumer demand, possibly due to inflationary pressures affecting discretionary spending. This trend could persist if economic conditions don't improve.

The company's diversified portfolio, including locations in tourist-heavy areas like Las Vegas, hasn't insulated it from broader market pressures. The substantial drop in EBITDA and net income suggests Ark is struggling to maintain profitability in the face of likely increased costs (labor, food) and softer demand.

The impairment of the Sequoia property is a red flag. It may indicate that Ark's high-end, experience-driven restaurant model is under pressure in certain markets. If this trend continues, it could force a strategic reevaluation of the company's portfolio and concept mix.

NEW YORK--(BUSINESS WIRE)-- Ark Restaurants Corp. (NASDAQ:ARKR) today reported financial results for the third quarter ended June 29, 2024.

Financial Results

Total revenues for the 13 weeks ended June 29, 2024 were $50,396,000 versus $51,051,000 for the 13 weeks ended July 1, 2023 and total revenues for the 39 weeks ended June 29, 2024 were $140,139,000 versus $140,393,000 for the 39 weeks ended July 1, 2023. As required by our lease, Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV was substantially closed for renovation in the prior period from February 5, 2023 through April 27, 2023 (the "Closure Period"). Revenues for the comparable current period to the Closure Period were $3,056,000 as compared to $1,068,000 for the Closure Period, of which $918,000 as compared to $354,000 related to the 13-week periods ended June 29, 2024 and July 1, 2023, respectively.

Excluding Gallagher's Steakhouse, Company-wide same store sales decreased 2.3% for the 13 weeks ended June 29, 2024 as compared to the same period of the prior year.

The Company's EBITDA, as adjusted, for the 13 weeks ended June 29, 2024 was $3,375,000 versus $4,663,000 for the 13 weeks ended July 1, 2023, and excludes non-cash impairment charges in the aggregate amount of $2,500,000 (as explained below) and other items as set out in the table below. Net income attributable to Ark Restaurants Corp. for the 13 weeks ended June 29, 2024, which includes the impairment charges, was $640,000, or $0.18 per basic and diluted share, compared to net income of $3,195,000, or $0.89 and $0.88 per basic and diluted share, respectively, for the 13 weeks ended July 1, 2023. EBITDA is a Non-GAAP Financial Measure. Please see "Non-GAAP Financial Information" at the end of this news release.

The Company's EBITDA, as adjusted, for the 39 weeks ended June 29, 2024 was $5,625,000 versus $8,682,000 for the 39 weeks ended July 1, 2023, and excludes non-cash impairment charges in the aggregate amount of $2,500,000, gains on the forgiveness of Paycheck Protection Program Loans (the "PPP Loan Forgiveness") and adjusted for the other items as set out in the table below. Net income attributable to Ark Restaurants Corp. for the 39 weeks ended June 29, 2024, which includes the impairment charges and PPP Loan Forgiveness, was $561,000, or $0.16 and $0.15 per basic and diluted share, respectively, compared to net income of $4,436,000 (which includes PPP Loan Forgiveness) or $1.23 and $1.22 per basic and diluted share, respectively, for the 39 weeks ended July 1, 2023. EBITDA is a Non-GAAP Financial Measure. Please see "Non-GAAP Financial Information" at the end of this news release.

As of June 29, 2024, the Company had a cash balance of $11,467,000 and total outstanding debt of $5,738,000.

Other Matters

During the 13 weeks ended June 29, 2024, impairment indicators were identified at our Sequoia property located in Washington, D.C. due to lower-than-expected operating results. Accordingly, the Company tested the recoverability of Sequoia's right-of-use and long-lived assets and concluded they were not recoverable. Based on a discounted cash flow analysis, the Company recognized impairment charges of $1,561,000 and $939,000 related to Sequoia's right-of-use and long-lived assets, respectively. Given the inherent uncertainty in projecting results of restaurants, the Company will continue to monitor the recoverability of the remaining carrying value of the assets of Sequoia on an ongoing basis. If expected performance is not realized, further impairment charges may be recognized in future periods, and such charges could be material.

About Ark Restaurants Corp.

Ark Restaurants owns and operates 17 restaurants and bars, 16 fast food concepts and catering operations primarily in New York City, Florida, Washington, DC, Las Vegas, Nevada and the gulf coast of Alabama. Four restaurants are located in New York City, one is located in Washington, DC, five are located in Las Vegas, Nevada, one is located in Atlantic City, New Jersey, four are located on the east coast of Florida and two are located on the Gulf Coast of Alabama. The Las Vegas operations include four restaurants within the New York-New York Hotel & Casino Resort and operation of the hotel's room service, banquet facilities, employee dining room and six food court concepts and one restaurant within the Planet Hollywood Resort and Casino. In Atlantic City, New Jersey, the Company operates a restaurant in the Tropicana Hotel and Casino. The Florida operations include the Rustic Inn in Dania Beach, Shuckers in Jensen Beach, JB’s on the Beach in Deerfield Beach, Blue Moon Fish Company in Lauderdale-by-the-Sea and the operation of four fast food facilities in Tampa and six fast food facilities in Hollywood, each at a Hard Rock Hotel and Casino operated by the Seminole Indian Tribe at these locations. In Alabama, the Company operates two Original Oyster Houses, one in Gulf Shores and one in Spanish Fort.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, this news release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve unknown risks, and uncertainties that may cause the Company's actual results or outcomes to be materially different from those anticipated and discussed herein. Important factors that might cause such differences are discussed in the Company's filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results could differ materially from those anticipated in these forward-looking statements, if new information becomes available in the future.

Non-GAAP Financial Information

This news release includes non-generally accepted accounting principles ("GAAP") performance measures. Although Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") is not a measure of performance or liquidity calculated in accordance with GAAP, the Company believes the use of this non-GAAP financial measure enhances an overall understanding of the Company's past financial performance as well as providing useful information to the investor because of its historical use by the Company as both a performance measure and measure of liquidity, and the use of EBITDA by virtually all companies in the restaurant sector as a measure of both performance and liquidity. However, investors should not consider this measure in isolation or as a substitute for net income (loss), operating income (loss), cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP as it may not necessarily be comparable to similarly titled measure employed by other companies.

ARK RESTAURANTS CORP.

Consolidated Condensed Statements of Income

For the 13- and 39-week periods ended June 29, 2024 and July 1, 2023

(In Thousands, Except per share amounts)

		13 Weeks Ended June 29, 2024				13 Weeks Ended July 1, 2023				39 Weeks Ended June 29, 2024				39 Weeks Ended July 1, 2023
TOTAL REVENUES		$	50,396			$	51,051			$	140,139			$	140,393
COSTS AND EXPENSES:
Food and beverage cost of sales			13,304				13,241				37,512				37,472
Payroll expenses			17,479				17,194				49,969				49,027
Occupancy expenses			6,261				6,151				18,368				17,589
Other operating costs and expenses			6,305				6,274				18,233				17,557
General and administrative expenses			2,690				3,495				9,151				9,655
Depreciation and amortization			1,033				1,059				3,181				3,230
Impairment losses on right-of-use and long-lived assets			2,500				—				2,500				—
Total costs and expenses			49,572				47,414				138,914				134,530
OPERATING INCOME (LOSS)			824				3,637				1,225				5,863
OTHER (INCOME) EXPENSE:
Interest expense, net			138				158				448				745
Other income			—				(26	)			(26	)			(26	)
Gain on forgiveness of PPP Loans			—				—				(285	)			(272	)
Total other (income) expense, net			138				132				137				447
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES			686				3,505				1,088				5,416
Provision for income taxes			(213	)			173				(202	)			306
CONSOLIDATED NET INCOME (LOSS)			899				3,332				1,290				5,110
Net income attributable to non-controlling interests			(259	)			(137	)			(729	)			(674	)
NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP.		$	640			$	3,195			$	561			$	4,436
NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP. PER COMMON SHARE:
Basic		$	0.18			$	0.89			$	0.16			$	1.23
Diluted		$	0.18			$	0.88			$	0.15			$	1.22
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic			3,604				3,601				3,604				3,600
Diluted			3,627				3,641				3,628				3,644
EBITDA Reconciliation:
Income (loss) before provision (benefit) for income taxes		$	686			$	3,505			$	1,088			$	5,416
Depreciation and amortization			1,033				1,059				3,181				3,230
Interest expense, net			138				158				448				745
EBITDA (a)		$	1,857			$	4,722			$	4,717			$	9,391
EBITDA, adjusted:
EBITDA (as defined) (a)		$	1,857			$	4,722			$	4,717			$	9,391
Non-cash stock option activity			(723	)			78				(578	)			237
Impairment losses on right-of-use and long-lived assets			2,500				—				2,500				—
Gain of forgiveness of PPP Loans			—				—				(285	)			(272	)
Net income attributable to non-controlling interests			(259	)			(137	)			(729	)			(674	)
EBITDA, as adjusted		$	3,375			$	4,663			$	5,625			$	8,682

(a)

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.  A reconciliation of EBITDA to the most comparable GAAP financial measure, pre-tax income, is included above.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240812629841/en/

Anthony J. Sirica

(212) 206-8800

ajsirica@arkrestaurants.com

Source: Ark Restaurants Corp.

FAQ

What were Ark Restaurants' (ARKR) total revenues for Q3 2024?

Ark Restaurants' total revenues for Q3 2024 were $50,396,000, compared to $51,051,000 in Q3 2023.

How did Ark Restaurants' (ARKR) same-store sales perform in Q3 2024?

Excluding Gallagher's Steakhouse, Ark Restaurants' company-wide same-store sales decreased 2.3% for Q3 2024 compared to the same period in the previous year.

What was Ark Restaurants' (ARKR) net income for Q3 2024?

Ark Restaurants' net income for Q3 2024 was $640,000, or $0.18 per basic and diluted share.

Did Ark Restaurants (ARKR) report any impairment charges in Q3 2024?

Yes, Ark Restaurants recognized impairment charges of $2,500,000 related to its Sequoia property in Washington, D.C. due to lower-than-expected operating results.