STKS ONE Group Hospitality Inc

Completed Acquisition of Benihana and RA Sushi in May

Increased Revenue to $172.5 Million or 107%

The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (Nasdaq: STKS) today reported its financial results for the second quarter ended June 30, 2024.

Highlights for the second quarter 2024 compared to the same quarter in 2023 are as follows (the prior year quarter excludes any contribution from the recent acquisition of Benihana, which closed in May 2024):

• Total GAAP revenues increased 106.8% to $172.5 million from $83.4 million;
• Comparable sales* decreased 7.0%;
• GAAP net loss available to common stockholders was $11.5 million, or $0.36 net loss per share ($0.08 adjusted net income per share) ****, compared to GAAP net income available to common stockholders of $0.6 million, or $0.02 net income per share ($0.06 adjusted net income per share) ****
• Restaurant Operating Profit*** increased 151.3% to $30.0 million from $11.9 million;
• Restaurant Operating Profit Margin*** increased 280 basis points to 17.7% from 14.9%; and
• Adjusted EBITDA** increased 180.6% to $23.9 million from $8.5 million.

"We are pleased to be building lasting relationships with our guests through unforgettable VIBE dining experiences while generating industry leading AUVs. Notably, the cost-saving initiatives we put in place last year coupled with our strong new restaurant performance drove restaurant level profit and restaurant level margin to increase at Kona Grill and stay relatively flat at STK, despite the challenging same store sales environment.”

“In May, we completed our acquisition of the Benihana and RA Sushi brands and welcomed nearly 6,500 new teammates. We have since begun integrating them into our Company and have already started realizing synergies in G&A, purchasing and operations. To date, we have realized approximately $9 million in G&A synergies since the closing and over the next two years, we expect to achieve another $11 million in G&A, supply chain and other operational synergies for a total of $20 million in annual synergies as we leverage our larger scale, combine our expertise, and enhance our capabilities to develop a best-in-class supply chain across our now-expanded portfolio.”

Hilario concluded, “We have a strong pipeline for unit growth in 2024 and beyond. We recently opened a RA Sushi in Plantation, Florida that is off to a strong start and there are another six to nine additional new venues that should open this year. Our expansion story points to significant opportunity ahead.”

*Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 24-months. This measure includes total revenue from our owned and managed locations. The Company monitors sales growth at its established restaurant base in addition to growth that results from restaurant acquisitions and new restaurant openings.

**We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses, stock-based compensation, transaction and exit costs and transition and integration expenses. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted EBITDA in this release.

***We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses. Restaurant Operating Profit has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Operating income to Restaurant Operating Profit in this release.

****We define Adjusted Net Income / (Loss) to Common Stockholders as net income / (loss) to common stockholders before transaction and exit expenses, transition and integration expenses, non-cash rent during the pre-opening period, other non-recurring costs and the income tax effect of any adjustments. Adjusted Net Income / (Loss) to Common Stockholders has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net (Loss) / Income to Common Stockholders to Adjusted Net Income / (Loss) to Common Stockholders in this release.

Acquisition of Benihana Inc. Owner

On May 1, 2024, the Company announced it had completed its previously announced acquisition of Safflower Holdings Corp., the owner of Benihana Inc. (“Benihana”), for $365 million in cash. The transaction was financed with a portion of a new $390 million term loan and revolving credit facility and $160 million in preferred equity primarily issued to an affiliate of Hill Path Capital LP.

Restaurant Development

The Company intends to open eight to eleven new venues in 2024 consisting of three to four STKs, two to three Kona Grills, one to two Benihanas, one Salt Water Social and one RA Sushi.

In March 2024, the Company opened an STK restaurant in Washington, DC and in July 2024, the Company opened a RA Sushi in Plantation, Florida.

There are currently two Company-owned STK restaurants, one Company-owned Kona Grill restaurant, one Company-owned Salt Water Social restaurant and one Company-owned Benihana restaurant under construction in the following cities:

• Owned STK restaurant in Aventura, Florida
• Owned Kona Grill restaurant in Tigard, Oregon
• Owned Salt Water Social restaurant in Denver, Colorado
• Owned STK restaurant in Topanga, California
• Owned Benihana restaurant in San Mateo, California

Share Repurchase Program

In March 2024, the Company’s Board of Directors authorized a $5 million share repurchase program. During the second quarter of 2024, the Company spent $0.9 million for the repurchases of 0.2 million shares.

2024 Targets

The Company is reaffirming its 2024 targets, which are inclusive of the acquisition of Benihana.

Financial Results and Other Select Data

US$s in millions

 

2024 Guidance

1/1/2024-12/31/2024

Total GAAP revenues

$700 to $740

Managed, license, franchise and incentive fee revenues

 

$17 to $19

Total owned operating expenses as a percentage of owned restaurant net revenue

 

Approx. 83.0%

Consolidated Total G&A excluding stock-based compensation

 

Approx. $40

Consolidated Adjusted EBITDA

$95 to $100

Consolidated Restaurant pre-opening expenses

 

$7 to $9

Consolidated Effective income tax rate

 

5% to 10%

Consolidated Total capital expenditures, net of allowances received by landlords

$50 to $60

Consolidated Number of new system-wide venues

 

Eight to Eleven

Guidance Analysis

US$s in millions

2023 (1)

2023 Pro Forma (2)

Guidance

Growth %

The ONE Group Pre-acquisition

$40.1

$40.1

$45

12.2%

Benihana Pre-acquisition

$61.0

$41.0

$50 to $55

22.0% to 34.1%

Consolidated

$101.1

$81.1

$95 to $100

17.1% to 23.3%

(1)

$61 million is the latest full fiscal year for Benihana, adjusted for full bonus payout as of 3/31/2024

(2)

Benihana is adjusted for eight months of The ONE Group ownership (May through December)

Conference Call and Webcast

Emanuel “Manny” Hilario, President and Chief Executive Officer, and Tyler Loy, Chief Financial Officer, will host a conference call and webcast today at 4:30 PM Eastern Time.

The conference call can be accessed live over the phone by dialing 412-542-4186. A replay will be available after the call and can be accessed by dialing 412-317-6671; the passcode is 10190088. The replay will be available until Tuesday, August 20, 2024.

The webcast can be accessed from the Investor Relations tab of The ONE Group’s website at www.togrp.com under “News / Events.”

About The ONE Group

The ONE Group Hospitality, Inc. (Nasdaq: STKS) is an international restaurant company that develops and operates upscale and polished casual, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both in the U.S. and internationally. The ONE Group’s focus is to be the global leader in Vibe Dining, and its primary restaurant brands and operations are:

• STK, a modern twist on the American steakhouse concept with restaurants in major metropolitan cities in the U.S., Europe, and the Middle East, featuring premium steaks, seafood, and specialty cocktails in an energetic upscale atmosphere.
• Benihana, a leading operator of highly differentiated experiential brands that owns the only national teppanyaki brand in the US. The Company also franchises Benihanas in the U.S., Caribbean, Central America, and South America.
• Kona Grill, a polished casual, bar-centric grill concept with restaurants in the U.S., featuring American favorites, award-winning sushi, and specialty cocktails in an upscale casual atmosphere.
• RA Sushi, a Japanese cuisine concept that offers a fun-filled, bar-forward, upbeat, and vibrant dining atmosphere with restaurants in the U.S. anchored by creative sushi, inventive drinks, and outstanding service.
• ONE Hospitality, The ONE Group’s food and beverage hospitality services business, develops, manages, and operates premier restaurants and turnkey food and beverage services within high-end hotels and casinos currently operating venues in the U.S. and Europe.

Additional information about The ONE Group can be found at www.togrp.com.

Cautionary Statement on Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, including with respect to the impact of the Safflower Holdings acquisition, restaurant openings and 2024 financial targets. Forward-looking statements may be identified by the use of words such as “target,” “intend,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new or acquired restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4)factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; and (8) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q.

Investors are referred to the most recent reports filed with the Securities and Exchange Commission by The ONE Group Hospitality, Inc. Investors are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

 

THE ONE GROUP HOSPITALITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except earnings per share and related share information)

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant net revenue

 

$

169,021

 

 

$

79,923

 

 

$

250,529

 

 

$

158,502

 

Management, license, franchise and incentive fee revenue

 

 

3,473

 

 

 

3,470

 

 

 

6,960

 

 

 

7,447

 

Total revenues

 

 

172,494

 

 

 

83,393

 

 

 

257,489

 

 

 

165,949

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant cost of sales

 

 

35,877

 

 

 

19,215

 

 

 

54,591

 

 

 

38,070

 

Owned restaurant operating expenses

 

 

103,192

 

 

 

48,784

 

 

 

152,830

 

 

 

95,611

 

Total owned operating expenses

 

 

139,069

 

 

 

67,999

 

 

 

207,421

 

 

 

133,681

 

General and administrative (including stock-based compensation of $1,495, $1,234, $2,853 and $2,554 for the three and six months ended June 30, 2024 and 2023, respectively)

 

 

10,622

 

 

 

8,039

 

 

 

18,156

 

 

 

15,523

 

Depreciation and amortization

 

 

8,025

 

 

 

3,506

 

 

 

13,285

 

 

 

7,162

 

Transaction and exit costs

 

 

6,826

 

 

 

—

 

 

 

8,349

 

 

 

—

 

Transition and integration expenses

 

 

3,794

 

 

 

—

 

 

 

3,794

 

 

 

—

 

Pre-opening expenses

 

 

2,504

 

 

 

1,609

 

 

 

5,418

 

 

 

2,908

 

Other expenses

 

 

—

 

 

 

195

 

 

 

32

 

 

 

352

 

Total costs and expenses

 

 

170,840

 

 

 

81,348

 

 

 

256,455

 

 

 

159,626

 

Operating income

 

 

1,654

 

 

 

2,045

 

 

 

1,034

 

 

 

6,323

 

Other expenses, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 

7,865

 

 

 

1,642

 

 

 

9,943

 

 

 

3,429

 

Loss on early debt extinguishment

 

 

4,149

 

 

 

—

 

 

 

4,149

 

 

 

—

 

Total other expenses, net

 

 

12,014

 

 

 

1,642

 

 

 

14,092

 

 

 

3,429

 

(Loss) income before provision for income taxes

 

 

(10,360

)

 

 

403

 

 

 

(13,058

)

 

 

2,894

 

(Benefit) provision for income taxes

 

 

(3,268

)

 

 

(13

)

 

 

(3,536

)

 

 

148

 

Net (loss) income

 

 

(7,092

)

 

 

416

 

 

 

(9,522

)

 

 

2,746

 

Less: net loss attributable to noncontrolling interest

 

 

(163

)

 

 

(152

)

 

 

(524

)

 

 

(428

)

Net (loss) income attributable to The ONE Group Hospitality, Inc.

 

$

(6,929

)

 

$

568

 

 

$

(8,998

)

 

$

3,174

 

Series A Preferred Stock paid-in-kind dividend and accretion

 

 

(4,538

)

 

 

—

 

 

 

(4,538

)

 

 

—

 

Net (loss) income available to common stockholders

 

$

(11,467

)

 

$

568

 

 

$

(13,536

)

 

$

3,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.36

)

 

$

0.02

 

 

$

(0.43

)

 

$

0.10

 

Diluted

 

$

(0.36

)

 

$

0.02

 

 

$

(0.43

)

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,424,938

 

 

 

31,782,783

 

 

 

31,376,951

 

 

 

31,730,299

 

Diluted

 

 

31,424,938

 

 

 

32,673,457

 

 

 

31,376,951

 

 

 

32,779,821

 

The following table sets forth certain statements of operations data as a percentage of total revenues for the periods indicated. Certain percentage amounts may not sum to total due to rounding.

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

Owned restaurant net revenue

 

98.0

%

 

95.8

%

 

97.3

%

 

95.5

%

Management, license, franchise and incentive fee revenue

 

2.0

%

 

4.2

%

 

2.7

%

 

4.5

%

Total revenues

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Cost and expenses:

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

Owned restaurant cost of sales (1)

 

21.2

%

 

24.0

%

 

21.8

%

 

24.0

%

Owned restaurant operating expenses (1)

 

61.1

%

 

61.0

%

 

61.0

%

 

60.3

%

Total owned operating expenses (1)

 

82.3

%

 

85.1

%

 

82.8

%

 

84.3

%

General and administrative (including stock-based compensation of 0.9%, 1.5%, 1.1%, and 1.5%, for the three and six months ended June 30, 2024 and 2023, respectively)

 

6.2

%

 

9.6

%

 

7.1

%

 

9.4

%

Depreciation and amortization

 

4.7

%

 

4.2

%

 

5.2

%

 

4.3

%

Transaction and exit costs

 

4.0

%

 

—

%

 

3.2

%

 

—

%

Transition and integration expenses

 

2.2

%

 

—

%

 

1.5

%

 

—

%

Pre-opening expenses

 

1.5

%

 

1.9

%

 

2.1

%

 

1.8

%

Other expenses

 

—

%

 

0.2

%

 

—

%

 

0.2

%

Total costs and expenses

 

99.0

%

 

97.5

%

 

99.6

%

 

96.2

%

Operating income

 

1.0

%

 

2.5

%

 

0.4

%

 

3.8

%

Other expenses, net:

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

4.6

%

 

2.0

%

 

3.9

%

 

2.1

%

Loss on early debt extinguishment

 

2.4

%

 

—

%

 

1.6

%

 

—

%

Total other expenses, net

 

7.0

%

 

2.0

%

 

5.5

%

 

2.1

%

(Loss) income before provision for income taxes

 

(6.0

)%

 

0.5

%

 

(5.1

)%

 

1.7

%

(Benefit) provision for income taxes

 

(1.9

)%

 

—

%

 

(1.4

)%

 

0.1

%

Net (loss) income

 

(4.1

)%

 

0.5

%

 

(3.7

)%

 

1.7

%

Less: net loss attributable to noncontrolling interest

 

(0.1

)%

 

(0.2

)%

 

(0.2

)%

 

(0.3

)%

Net (loss) income attributable to The ONE Group Hospitality, Inc.

 

(4.0

)%

 

0.7

%

 

(3.5

)%

 

1.9

%

__________________________________

(1)

These expenses are being shown as a percentage of owned restaurant net revenue.

 

THE ONE GROUP HOSPITALITY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

 

 

 

June 30,

 

December 31,

 

 

2024

 

 

2023

 

ASSETS

 

(Unaudited)

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,247

 

 

$

21,047

 

Credit card receivable

 

 

10,979

 

 

 

7,234

 

Restricted cash and cash equivalents

 

 

552

 

 

 

—

 

Accounts receivable

 

 

9,287

 

 

 

10,030

 

Inventory

 

 

9,164

 

 

 

6,184

 

Other current assets

 

 

4,849

 

 

 

1,809

 

Due from related parties

 

 

376

 

 

 

376

 

Total current assets

 

 

67,454

 

 

 

46,680

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

271,160

 

 

 

95,075

 

Property and equipment, net

 

 

260,385

 

 

 

139,908

 

Goodwill

 

 

145,162

 

 

 

—

 

Intangibles, net

 

 

146,193

 

 

 

15,306

 

Deferred tax assets, net

 

 

45,236

 

 

 

14,757

 

Other assets

 

 

8,639

 

 

 

4,636

 

Security deposits

 

 

1,635

 

 

 

883

 

Total assets

 

$

945,864

 

 

$

317,245

 

 

 

 

 

 

 

 

LIABILITIES, SERIES A PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

26,723

 

 

$

19,089

 

Accrued expenses

 

 

52,474

 

 

 

28,333

 

Current portion of operating lease liabilities

 

 

16,523

 

 

 

6,897

 

Deferred gift card revenue and other

 

 

6,715

 

 

 

2,077

 

Current portion of long-term debt

 

 

3,500

 

 

 

1,500

 

Other current liabilities

 

 

559

 

 

 

266

 

Total current liabilities

 

 

106,494

 

 

 

58,162

 

 

 

 

 

 

 

 

Long-term debt, net of current portion, unamortized discount and debt issuance costs

 

 

330,861

 

 

 

70,410

 

Operating lease liabilities, net of current portion

 

 

294,171

 

 

 

120,481

 

Other long-term liabilities

 

 

5,116

 

 

 

832

 

Total liabilities

 

 

736,642

 

 

 

249,885

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock, $0.0001 par value, 160,000 shares authorized; 160,000 issued and outstanding at June 30, 2024 and 0 issued and outstanding at December 31, 2023

 

 

143,481

 

 

 

—

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 75,000,000 shares authorized; 33,765,978 issued and 31,297,200 outstanding at June 30, 2024 and 33,560,428 issued and 31,283,975 outstanding at December 31, 2023

 

 

3

 

 

 

3

 

Preferred stock, other than Series A preferred stock, $0.0001 par value, 9,840,000 shares authorized; no shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

 

—

 

 

 

—

 

Treasury stock, at cost, 2,468,778 shares at June 30, 2024 and 2,276,453 shares at December 31, 2023

 

 

(15,939

)

 

 

(15,051

)

Additional paid-in capital

 

 

71,656

 

 

 

58,270

 

Retained earnings

 

 

15,348

 

 

 

28,884

 

Accumulated other comprehensive loss

 

 

(2,987

)

 

 

(2,930

)

Total stockholders’ equity

 

 

68,081

 

 

 

69,176

 

Noncontrolling interests

 

 

(2,340

)

 

 

(1,816

)

Total stockholder's equity

 

 

65,741

 

 

 

67,360

 

Total liabilities, Series A preferred stock and stockholders' equity

 

$

945,864

 

 

$

317,245

 

Reconciliation of Non-GAAP Measures

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). In this press release, we also make references to the following non-GAAP financial measures: total food and beverage sales at owned and managed units, Adjusted EBITDA, Restaurant Operating Profit and Adjusted Net Income (Loss).

Total food and beverage sales at owned and managed units. Total food and beverage sales at owned and managed units represents our total revenue from our owned operations as well as the revenue reported to us with respect to sales at our managed locations, where we earn management and incentive fees at these locations. We believe that this measure represents a useful internal measure of performance as it identifies total sales associated with our brands and hospitality services that we provide. Accordingly, we include this non-GAAP measure so that investors can review financial data that management uses in evaluating performance, and we believe that it will assist the investment community in assessing performance of restaurants and other services we operate, whether or not the operation is owned by us. However, because this measure is not determined in accordance with GAAP, it is susceptible to varying calculations and not all companies calculate these measures in the same manner. As a result, this measure as presented may not be directly comparable to a similarly titled measure presented by other companies. This non-GAAP measure is presented as supplemental information and not as an alternative to any GAAP measurements. The following table includes a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units (in thousands):

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

2023

 

2024

 

2023

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Owned restaurant net revenue (1)

 

$

169,021

 

$

79,923

 

$

250,529

 

$

158,502

Management, license, franchise and incentive fee revenue

 

 

3,473

 

 

3,470

 

 

6,960

 

 

7,447

GAAP revenues

 

$

172,494

 

$

83,393

 

$

247,489

 

$

165,949

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage sales from managed units (1)

 

 

32,090

 

 

30,001

 

 

60,194

 

 

60,703

 

 

 

 

 

 

 

 

 

 

 

 

 

Total food and beverage sales at owned and managed units

 

$

201,111

 

$

109,924

 

$

310,723

 

$

219,205

______________________

(1)

Components of total food and beverage sales at owned and managed units.

The following table presents the elements of the quarterly and annual Same Store Sales measure for 2023 and 2024:

 

 

 

 

 

 

 

 

 

2023 vs. 2022

 

2024 vs. 2023

 

Q1

Q2

Q3

Q4

YTD

 

Q1

Q2

US STK Owned Restaurants

1.0%

(10.1)%

(7.8)%

(6.5)%

(6.0)%

 

(6.0)%

(11.9)%

US STK Managed Restaurants

15.4%

2.5%

0.7%

0.7%

4.9%

 

(8.6)%

(7.4)%

US STK Total Restaurants

5.3%

(6.8)%

(5.5)%

(4.6)%

(3.0)%

 

(6.8)%

(10.6)%

Benihana Total Restaurants

 

 

 

 

 

 

 

(1.0)%

Kona Grill Total Restaurants

(4.3%)

(1.5)%

1.1%

(3.9)%

(2.2)%

 

(9.7)%

(14.0)%

RA Sushi Total Restaurants

 

 

 

 

 

 

 

(10.3)%

Combined Same Store Sales

1.6%

(4.7)%

(3.0)%

(4.3)%

(2.7)%

 

(7.9)%

(7.0)%

Adjusted EBITDA. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses, stock-based compensation, certain transactional and exit costs and transition and integration expenses. Not all the aforementioned items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of terms based on our historical activity. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP.

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net (loss) income attributable to The ONE Group Hospitality, Inc.

 

$

(6,929

)

 

$

568

 

 

$

(8,998

)

 

$

3,174

 

Net loss attributable to noncontrolling interest

 

 

(163

)

 

 

(152

)

 

 

(524

)

 

 

(428

)

Net (loss) income

 

 

(7,092

)

 

 

416

 

 

 

(9,522

)

 

 

2,746

 

Interest expense, net

 

 

7,865

 

 

 

1,642

 

 

 

9,943

 

 

 

3,429

 

(Benefit) provision for income taxes

 

 

(3,268

)

 

 

(13

)

 

 

(3,536

)

 

 

148

 

Depreciation and amortization

 

 

8,025

 

 

 

3,506

 

 

 

13,285

 

 

 

7,162

 

EBITDA

 

 

5,530

 

 

 

5,551

 

 

 

10,170

 

 

 

13,485

 

Pre-opening expenses

 

 

2,504

 

 

 

1,609

 

 

 

5,418

 

 

 

2,908

 

Stock-based compensation

 

 

1,495

 

 

 

1,234

 

 

 

2,853

 

 

 

2,554

 

Transaction and exit costs

 

 

6,826

 

 

 

—

 

 

 

8,349

 

 

 

—

 

Transition and integration expenses

 

 

3,794

 

 

 

—

 

 

 

3,794

 

 

 

—

 

Non-cash rent expense (1)

 

 

(429

)

 

 

(123

)

 

 

(691

)

 

 

(154

)

Loss on early debt extinguishment

 

 

4,149

 

 

 

—

 

 

 

4,149

 

 

 

—

 

Other expenses

 

 

—

 

 

 

195

 

 

 

32

 

 

 

352

 

Adjusted EBITDA

 

 

23,869

 

 

 

8,466

 

 

 

34,074

 

 

 

19,145

 

Adjusted EBITDA attributable to noncontrolling interest

 

 

(71

)

 

 

(65

)

 

 

(333

)

 

 

(254

)

Adjusted EBITDA attributable to The ONE Group Hospitality, Inc.

 

$

23,940

 

 

$

8,532

 

 

$

34,407

 

 

$

19,400

 

_______________________________

(1)

Non-cash rent expense is included in owned restaurant operating expenses and general and administrative expense on the consolidated statements of operations and comprehensive income.

Restaurant Operating Profit. We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses.

We believe Restaurant Operating Profit is an important component of financial results because: (i) it is a widely used metric within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance, and (ii) we use Restaurant Operating Profit as a key metric to evaluate our restaurant financial performance compared to our competitors. We use these metrics to facilitate a comparison of our operating performance on a consistent basis from period to period, to analyze the factors and trends affecting our business and to evaluate the performance of our restaurants.

The following table presents a reconciliation of Operating income to Restaurant Operating Profit for the period indicated (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Operating income as reported

 

$

1,654

 

 

$

2,045

 

 

$

1,034

 

 

$

6,323

 

Management, license and incentive fee revenue

 

 

(3,473

)

 

 

(3,470

)

 

 

(6,960

)

 

 

(7,447

)

General and administrative

 

 

10,622

 

 

 

8,039

 

 

 

18,156

 

 

 

15,523

 

Depreciation and amortization

 

 

8,025

 

 

 

3,506

 

 

 

13,285

 

 

 

7,162

 

Transaction and exit costs

 

 

6,826

 

 

 

—

 

 

 

8,349

 

 

 

—

 

Transition and integration expenses

 

 

3,794

 

 

 

—

 

 

 

3,794

 

 

 

—

 

Pre-opening expenses

 

 

2,504

 

 

 

1,609

 

 

 

5,418

 

 

 

2,908

 

Other expenses

 

 

—

 

 

 

195

 

 

 

32

 

 

 

352

 

Restaurant Operating Profit

 

$

29,952

 

 

$

11,924

 

 

$

43,108

 

 

$

24,821

 

Restaurant Operating Profit as a percentage of owned restaurant net revenue

 

 

17.7

%

 

 

14.9

%

 

 

17.2

%

 

 

15.7

%

Restaurant Operating Profit by brand is as follows (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

STK restaurant operating profit (Company owned)

 

$

9,114

 

 

$

8,463

 

 

$

20,221

 

 

$

18,854

 

STK restaurant operating profit (Company owned) as a percentage of STK revenue (Company owned)

 

 

18.3

%

 

 

18.6

%

 

 

20.0

%

 

 

20.2

%

Benihana restaurant operating profit (Company owned)

 

$

16,734

 

 

$

—

 

 

$

16,734

 

 

$

—

 

Benihana restaurant operating profit (Company owned) as a percentage of Benihana revenue (Company owned)

 

 

21.4

%

 

 

—

 

 

 

21.4

%

 

 

—

 

Core Kona Grill restaurant operating profit

 

$

3,308

 

 

$

3,296

 

 

$

5,625

 

 

$

5,628

 

Core Kona Grill restaurant operating profit as a percentage of Core Kona Grill revenue

 

 

12.1

%

 

 

11.0

%

 

 

10.3

%

 

 

9.9

%

Non-core Kona Grill restaurant operating profit

 

$

(171

)

 

$

98

 

 

$

(427

)

 

$

267

 

Non-core Kona Grill restaurant operating profit as a percentage of Non-core Kona Grill revenue

 

 

(5.2

)%

 

 

2.3

%

 

 

(6.7

)%

 

 

3.3

%

Core RA Sushi restaurant operating profit

 

 

1,034

 

 

 

—

 

 

 

1,034

 

 

 

—

 

Core RA Sushi restaurant operating profit as a percentage of Core RA Sushi revenue

 

 

11.1

%

 

 

—

 

 

 

11.1

%

 

 

—

 

Non-core RA Sushi restaurant operating profit

 

 

(71

)

 

 

—

 

 

 

(71

)

 

 

—

 

Non-core RA Sushi restaurant operating profit as a percentage of Non-core RA Sushi revenue

 

 

(5.3

)%

 

 

—

 

 

 

(5.3

)%

 

 

—

 

__________________

(1)

Non-core restaurants are restaurants in which the Company is strategically evaluating through lease negotiations, rebranding, or closure.

Adjusted Net Income. We define Adjusted Net Income as net income before transaction and exit costs, transition and integration expenses, lease termination expenses, one-time stock-based compensation, non-recurring costs, non-cash rent during the pre-opening period and the income tax effect of any adjustments.

We believe that Adjusted Net Income is an appropriate measure of operating performance, as it provides a clear picture of our operating results by eliminating certain one-time expenses that are not reflective of the underlying business performance. Adjusted Net Income is included in this press release because it is a key metric used by management, and we believe that it provides useful information facilitating performance comparisons from period to period. Adjusted Net Income has limitations as an analytical tool and our calculation thereof may not be comparable to that reported by other companies; accordingly, you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net (loss) income available to common stockholders as reported

 

$

(11,467

)

 

$

568

 

 

$

(13,536

)

 

$

3,174

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Transaction and exit costs

 

 

6,826

 

 

 

—

 

 

 

8,349

 

 

 

—

 

Transition and integration expenses

 

 

3,794

 

 

 

—

 

 

 

3,794

 

 

 

—

 

Loss on early debt extinguishment

 

 

4,149

 

 

 

—

 

 

 

4,149

 

 

 

—

 

Non-cash pre-opening expenses(1)

 

 

367

 

 

 

1,122

 

 

 

708

 

 

 

1,548

 

Other expenses

 

 

—

 

 

 

195

 

 

 

32

 

 

 

352

 

Adjusted net income before income taxes

 

 

3,669

 

 

 

1,885

 

 

 

3,496

 

 

 

5,074

 

Income tax effect on adjustments(2)

 

 

(879

)

 

 

(81

)

 

 

(1,277

)

 

 

(119

)

Adjusted net income available to common stockholders as reported

 

$

2,790

 

 

$

1,804

 

 

$

2,219

 

 

$

4,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share: Basic

 

$

0.09

 

 

$

0.06

 

 

$

0.07

 

 

$

0.16

 

Adjusted net income per share: Diluted

 

$

0.08

 

 

$

0.06

 

 

$

0.07

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing basic income per share

 

 

31,424,938

 

 

 

31,782,783

 

 

 

31,376,951

 

 

 

31,730,299

 

Shares used in computing diluted income per share

 

 

33,104,542

 

 

 

32,673,457

 

 

 

33,398,219

 

 

 

32,779,821

 

________________________________

(1)

Non-cash pre-opening expenses relate to non-cash rent expense during the pre-opening period.

(2)

Reflects the tax expense associated with the adjustments for the three and six months ended June 30, 2024, and June 30, 2023. The Company uses its estimated normalized annual tax rate.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240806038805/en/

Investors: ICR Michelle Michalski or Raphael Gross (646) 277-1224 Michelle.Michalski@icrinc.com

Media: ICR Seth Grugle (646) 277-1272 seth.grugle@icrinc.com