Bob Stewart – President and Chief Financial Officer Michael Weinstein – Chairman and Chief Executive Officer.

Bruce Geller – DGHM Jeffrey Kaminski – JJK Consulting.

Greetings, and welcome to the Ark Restaurants Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Bob Stewart, President and CFO. Thank you. You may begin..

Thank you, operator. Good morning and thank you for joining us on our conference call for the second fiscal quarter ended March 31, 2018. With me on the call today is Michael Weinstein, our Chairman and CEO; and Vinny Pascal, our Chief Operating Officer.

For those of you who have not yet obtained a copy of our press release, it was issued over the Newswire 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 afternoon 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..

a substantial increase in our a la carte business. Once we catch up with the event business, I think we’ll be nicely ahead of what we did in 2016. So things seem to be going well there. We’re very happy with the service and the product. The place looks amazing from a design point of view. Atlantic City was down a little bit.

It’s not a big driver of profits here, the same with Boston. We would like to be up, but we’re down. I think in Boston, that’s somewhat weather-related. In Florida, what happened with the new bridge going to Rustic Inn is what we hoped would happen. We’re up 11.4% for the quarter. The bridge came in, in late December.

So we had a full quarter where you did not have a detour to get to the restaurant. As we said all along, we thought we were shy last year about $700,000 in the last two years on an annual basis because of the detour. It seems that we’re recapturing that. Shuckers was about flat. So generally, we had strength in Florida.

Las Vegas, we’re seeing some substantial increases. We’re up 7.7% in the quarter. That’s almost a $1 million increase. The other good news in Las Vegas is that we’re more efficient. Our payroll percentages and cost of goods are down in – because of some structural changes we made with management about six or seven months ago.

It all seems to be working very well. Alabama, we’re down slightly for the year. For the March quarter, that’s a little bit worrisome. That – we’re certainly addressing it. But every drivers for profitability, Alabama’s the only thing that is a little bit behind in terms of our projections. Everything else is pretty great here.

Last week, just as an aside, we had a spectacular week in Sequoia. When we look at it, we were up about $90,000 in a la carte sales. It seems to be working. Again, it’s hard to project what’s going on with the weather this year as opposed to in 2016. We were comparing against at this point, but people seem to be liking it.

I would be remiss not to talk about Meadowlands. As most of you know, yesterday, the Supreme Court handed down a decision favoring New Jersey’s effort to have sports betting in the state. Sports betting then will be restricted to racetracks in Atlantic City.

That, in the short term, once we choose a partner who will handle sports betting for us, we’ll probably use any cash flow concerns out of the Meadowlands, so we should be cash flow positive. Since we made the investment, we’ve been ponying up some working capital every year to take care of cash flow deficits.

Not a lot, but this would put us over the top. Well, I think Meadowlands now becomes self-sustaining.

What is more interesting to me, because the storyline should be, “Well, we’ve got horseracing, we’ve got sports betting, isn’t time to get a fully licensed casino?” The state is desperate for money, and the racetrack is a natural place to put a casino and license Meadowlands for focusing on gaming.

What was more interesting to me in the last week or so is that MGM bought Yonkers racetrack. You now have MGM, which operates Borgata in New Jersey, which is the highest-revenue casino in Atlantic City, and you have Caesars operating in Chaska, Pennsylvania.

So the argument of these casinos in Atlantic City casino is to say, “No, we don’t want gaming in the north because that will destroy our revenue base in Atlantic City.” Well, why are you going to Pennsylvania, and why are you going to New York and competing directly with Atlantic City? You’re talking against yourself.

I think this makes it much easier for the legislature to say these guys who are running the casinos in Atlantic City are not acting in the best interest of Atlantic City, but competing with the state of New Jersey because they see the full Atlantic City continuing.

And the only way to compete effectively as a state in terms of casino revenues is to put a casino in the northern part of the state.

We think this is sports – sports betting is a step, but we think more importantly is the outside influence politically of these moves by Caesars and MGM that make it easy for the legislators to address the concerns that Atlantic City has about revenue loss. So we’re sort of excited about the prospects.

I don’t know how to rate it, but it all just got a little bit better for us. So that’s an overview. I think we’re doing fine. We still like our projection of $14 billion EBITDA plus. Doesn’t seem to be anything standing in the way of that. Nothing will be done in terms of the referendum this year on the casino in the Meadowlands.

Hopefully, you sort of can mock up your position from little bit by what just happened this past week. I’ll take questions..

Thank you. [Operator Instructions] Our first question is from Bruce Geller from DGHM. Please go ahead..

Hi, good morning, gentlemen. I’m trying to reconcile the reported comp of 2.4% with some of the very positive numbers you gave, especially in some of your bigger properties. Bryant Park, Rustic were up double digits. Sequoia was up 8%. Vegas was up substantially.

I’m trying to reconcile why the overall comp was only up 2%? And then also with some of those comps in your key restaurants, how come more operating income did not fall to the bottom line? Or how come more income did not fall down to that line?.

All right, two things. First of all, the 8% of the – in Sequoia is not included in the 2.4% comps. The comping against 2016 for purposes of explaining where Sequoia is, but it’s not in the comp from 2018 compared to 2017 because we weren’t open in 2017. All right. So that number is not in the 2.4%. Otherwise, the 2.4% would be somewhat higher.

The second thing is that there are some balance here, but they’re not drivers of – not big drivers of profitability. So we – I could mention them to you. But in Planet Hollywood, we’re down basically $100,000. If I go to this quickly, Clyde’s in New York is down $140,000.

We’ve had some issues with Clyde’s, mostly in events where we’ve been down substantially in events at Clyde’s. Thunder Grill in D.C. is down $129,000. Because last year we had operating [indiscernible] Cafe at a Thunder Grill. And – they – the sales were combined for the Grill. We lost that lease last year. So there are some downs.

And Atlantic City is down $100,000. But again, we don’t see these as the major drivers of our profitability, even though we want them obviously to improve than we’re working on improving them. In terms of the EBITDA number, last year, we had two gains, operating profits in Jupiter and in Canyon Road.

Both of those situations where – we had sold Jupiter. But the developer who bought Jupiter asked us to keep it open until May, and he didn’t charge us any rent. So we took advantage of that situation, and we made some money during the season, January, February and March. Even though we had sold it and get to run it without paying any.

So May, roughly $100,000 there. And same number in Canyon Road last year. We didn’t want to operate Canyon Road any longer. It was great to be even to losing a little bit of money. Made a deal with the landlord until we transferred the ownership to another person – and enter that operated so the store wasn’t closed paying any rent.

So we wound up making $100,000 there. So there’s about $200,000 of EBITDA. And last year’s numbers were really just short-term deals that had nothing to do – are going forward with the profits. So I hope that explains it a little bit..

Yes. And it sound like you’re still comfortable with your annual EBITDA guidance of $14 plus billion.

Now that we’re about halfway through the third quarter, is there any anecdotal guidance you can give there to – on a year-over-year basis to provide some comfort with that?.

Just that our business is up. We had a bang-up week last week. Last week, which is not include Mother’s Day by the way, so weekends on Saturday, but I think we were up something like 20% in sales last week compared to the same week last year because everything’s started to happen. Sequoia started getting a little bit good weather.

Bryant Park started to get a little bit good weather, and note – we’re not straining here in New York. So even though we are not straining five to six week days in a row together we probably had three or four good days last week.

Like my manager in Sequoia, I keep saying I’m going to go nuts with them anytime some calling on the day, what’s going on, what’s going on. We did over $300,000 last week. We only had two or three good days and he saying to me, listen, every day at 7:00 clock, it’s been raining. He says the bar would’ve done another $25,000.

The bar would have done another $15,000, it’s not exaggerating. So if we, we just get normal weather once for a straight week, I think we would be seeing numbers here that we haven’t seen before..

Great. Thanks. I’ll let someone else ask the question..

[Operator Instructions] Our next question comes from Jeffrey Kaminski from JJK Consulting. Please go ahead..

Good morning, gentlemen. A question regarding the gaming license and now what will like be a sports book in the Meadowlands. You had mentioned something about finding a partner.

Could you elaborate on that? And what does that mean? Do you need to get a bank to help partner you up? And once found, what you see the timeline that the Meadowlands would be like an active sports book in generating revenue?.

I spoke to Jeff Gural who’s the major partner in the LLC and the general partner. He says – first of all, we’re not experts in this area at all, although Jeffrey runs some casinos in the northern part of New York state, the small casinos. But – so yes, he has some operating expense.

And although Hard Rock is also our partner and as a contract with the Meadowlands LLC – with the new Meadowlands at LLC to operate casino if the casino comes there. We are restaurateurs. We have an exclusive on eight to nine restaurants while we have inclusive on all food and beverage.

If there’s a casino there, with the exception of a carve out for a Hard Rock Cafe, if Hard Rock wants to put a Hard Rock Cafe in. And we have a minority interest in the LLC. So we’re not in the position – certainly not in a position to dictate what Gural and Hard Rock will decide.

But in the conversation with Jeffrey last night, he says he has seven proposals that have come in, which was, for the last two months. This decision seems to be one that everybody thought would be the decision.

And though he has people that runs sports books seriously giving him presentations of why they should go and why he should go – become their partner in this endeavor. I don’t know how long it’s going to take New Jersey to issue the rules under which sports betting can take place, but we think it will be pretty quick.

And Jeffrey thinks we’ll be in business in the next four, five months. But again, we don’t – we look at this as a stepping stone to getting a casino license. For this investment to be meaningful to us, there has to be a casino there. Sports betting, even if it’s profitable, the distributions to us will not be anything significant.

We have undiluted – we have about 11% interest in this thing. Obviously, if there’s going to be major casino built there, we have to find money to stay at that level, or we’re going to get diluted by 50%. So this only becomes meaningful for us if there’s a casino license. The sports betting is in the short-term.

It’s nice to be cash flow profitable with – we’re positive with our investment and not to be receiving capital pools once each year. I think that accomplishes this. It certainly satisfies our outside orders on the value of our investment. But I can’t emphasize enough that it’s not meaningful unless there’s a casino license there.

I hope that answers your question..

Okay. Thank you..

Thank you. This concludes the question-and-answer session. I’d like to turn the floor back over to management for any closing comments..

Thank you very much. I look forward to seeing you next quarter..

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