ARKR Stock Up Despite Q2 Earnings Decline, Legal Costs Dampen Results

Core Viewpoint - Ark Restaurants Corp. reported a net loss of $9.3 million for the second quarter of fiscal 2025, significantly impacted by non-cash items such as goodwill impairment and deferred tax asset valuation allowance, despite a modest improvement in same-store sales [3][7]. Financial Performance - Total revenues for the second quarter were $39.7 million, down 5.9% from $42.3 million in the same period last year. Excluding revenues from closed locations, the decline was only 1.1% [2]. - The company reported a net loss of $9.3 million, or $(2.57) per share, compared to a net loss of $1.4 million, or $(0.40) per share, in the prior year [3]. - Adjusted EBITDA was a loss of $0.7 million, worsening from a loss of $0.3 million in the previous year [3]. Cost Management - Food and beverage costs decreased by 5.4% to $11.5 million, while payroll expenses fell by 7.1% to $14.4 million. However, general and administrative expenses rose by 5.8% to $3.3 million [4]. - Operating loss increased to $4.6 million from a $1.2 million loss in the prior-year quarter, primarily due to impairments and legal costs [4]. Balance Sheet - As of March 29, 2025, the company reported $11.1 million in cash and $4.3 million in total debt, with plans to refinance the debt under a new facility with increased capacity of $15–$20 million [5]. Segment Performance - Las Vegas operations showed marked improvement, with better weekly cash flows. Florida restaurants reported revenue gains, while Alabama operations remained stable [6]. - The Washington, D.C. location showed signs of improvement following management changes [6]. Management Insights - The CFO attributed the significant losses to non-operational headwinds, including a $3.4 million goodwill impairment and a $4.8 million valuation allowance on deferred tax assets [7]. - Legal and consultancy fees related to lease disputes amounted to approximately $650,000, which negatively impacted EBITDA [8]. Revenue Challenges - The absence of revenues from El Rio Grande and the Tampa Food Court contributed to the overall revenue decline [9][10]. - The company is facing uncertainty regarding its Bryant Park properties, which accounted for approximately 15% of total revenues for the six-month period [11]. Future Developments - No new acquisitions or divestitures were announced, but management is evaluating new opportunities and expressed optimism about potential deals in the coming months [12].