DENVER- The ONE Group Hospitality, Inc. ('The ONE Group' or the 'Company') (Nasdaq: STKS) today reported its financial results for the third quarter ended September 30, 2023.
Highlights for the third quarter compared to the same quarter in 2022 are as follows:
Total GAAP revenues increased 5.3% to $76.9 million from $73.0 million;
Consolidated comparable sales* decreased 3.0% and increased 41.7% compared to 2019;
GAAP net loss attributable to The ONE Group was $3.1 million, or $0.10 per share ($0.08 adjusted net loss per share)****, compared to GAAP net income of $0.5 million, or $0.01 per share ($0.07 adjusted net income per share)****
Restaurant Operating Profit*** was $9.1 million in both quarters; and
Adjusted EBITDA** was $6.2 million compared to $7.1 million.
'Over the last 120 days, we have made significant progress on our long-term growth strategy and opened Kona Grill Riverton, STK Charlotte and Kona Grill Phoenix, all of which are off to strong starts. In addition, we anticipate opening five additional STK locations within the next six months, positioning us to capture great returns on already deployed capital for these locations. We are laser-focused on cost initiatives to improve restaurant-level margins and leverage our G&A while also delivering exceptional and unforgettable guest experiences to drive top-line momentum as we navigate this challenging environment. Our comparable sales and traffic results are significantly outperforming the industry when compared to the 2019 pre-pandemic base levels and our industry leading average unit volumes across both STK and Kona Grill provide us with great confidence in our long-term investment model,' said Emanuel 'Manny' Hilario, President and CEO of The ONE Group.
Hilario continued, 'We finished the quarter with over $22.0 million in cash, and we are entering our peak sales quarter for the year. We have deployed much of the capital for our upcoming pipeline and completed our $15.0 million share repurchase program, which we anticipate being accretive to our shareholders as we continue to execute on our strategies. We expect to self-fund and execute our growth plan for 2024 and beyond, and over the long term, we see a total addressable market of 400 total venues including 200 STKs globally and 200 Kona Grills domestically with best-in-class ROIs between 40% and 50%.'
*Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-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.
**We define Adjusted EBITDA as net (loss) 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 including incremental costs related to COVID-19, stock-based compensation and certain transactional costs. 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 (Loss) 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 (loss) income to Restaurant Operating Profit in this release.
****We define Adjusted Net (Loss) Income as net (loss) income before COVID-19 costs, 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. Adjusted Net (Loss) Income 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 Adjusted Net (Loss) Income in this release.
Third Quarter 2023 Financial Results
Total GAAP revenues increased $3.9 million, or 5.3%, to $76.9 million in the third quarter of 2023 from $73.0 million in the third quarter of 2022.
Total owned restaurant net revenues increased $4.2 million, or 6.0%, to $73.7 million in the third quarter of 2023 from $69.5 million in the third quarter of 2022. The increase was primarily attributable to the four owned venues opened since August 2022.
Consolidated comparable sales* decreased 3.0% compared to the third quarter of 2022. STK same store sales decreased 5.5% while Kona Grill same store sales increased 1.1%. Compared to 2019, our pre-pandemic base year, same store sales for the third quarter of 2023 increased 41.7% compared to the third quarter of 2019; STK same store sales increased 61.0%, which consisted of a 40.0% increase in traffic and a 21.0% increase in average check, while Kona Grill same store sales increased 23.7%.
Management, license and incentive fee revenues decreased $0.3 million, or 8.6%, to $3.2 million in the third quarter of 2023 from $3.5 million in the third quarter of 2022. The decrease was primarily driven by decreased revenues at a managed property in London, England attributable to the non-renewal of certain F&B hospitality services by the hotel.
Restaurant Operating Profit*** held at $9.1 million in both quarters but represented 12.3% of Company-owned restaurant net revenues in the third quarter of 2023 compared to 13.1% of Company-owned restaurant net revenues in the third quarter of 2022. The decrease in profit margin was primarily due to higher labor costs driven by wage inflation and investments in anticipation of growth, increased marketing expenses and general operating cost inflation.
General and administrative costs increased $0.8 million, or 12.9%, to $7.3 million in the third quarter of 2023 from $6.4 million in the third quarter of 2022. The increase was attributable to increased stock-based compensation expense and additional investments required ahead of new restaurant openings. As a percentage of revenues, general and administrative costs were 9.5% compared to 8.8%.
Pre-opening expenses were $3.1 million in the third quarter of 2023 compared to $2.7 million in the third quarter of 2022. The increase was related to payroll, training, and non-cash pre-open rent for Kona Grill Riverton which opened in July 2023, for STK Charlotte and Kona Grill Phoenix, which both opened in October 2023, and for STK and Kona Grill restaurants currently under development.
GAAP net loss attributable to The ONE Group Hospitality, Inc. in the third quarter of 2023 was $3.1 million, or $0.10 per share, compared to GAAP net income of $0.5 million, or $0.01 per share, in the third quarter of 2022.
Adjusted Net Loss**** attributable to The ONE Group Hospitality, Inc. in the third quarter of 2023 was $2.4 million, or $0.08 per share, compared to Adjusted Net Income of $2.4 million, or $0.07 per share, in the third quarter of 2022.
Adjusted EBITDA** decreased $0.9 million, or 13.3%, to $6.2 million in the third quarter of 2023 from $7.1 million in the third quarter of 2022.
Restaurant Development
The Company intends to add eight new venues in 2023, of which six venues have opened thus far:
Owned Kona Grill restaurant in Columbus, Ohio
Owned Kona Grill restaurant in Riverton, Utah
Owned STK restaurant in Charlotte, North Carolina
Owned Kona restaurant in (Desert Ridge) Phoenix, Arizona
Two Bao Yum venues through a licensing agreement with Reef Kitchens
There are currently three Company-owned STK restaurants under construction in the following cities:
Owned STK restaurant in Boston, Massachusetts
Owned STK restaurant in Salt Lake City, Utah
Owned STK restaurant in Washington, D.C.
Completion of Share Repurchase Program
On September 7, 2022, the Company commenced a share repurchase program for up to $10 million of its outstanding common stock, and subsequently increased authorized repurchases by $5 million. During the quarter ended September 30, 2023, the Company purchased 0.5 million shares for aggregate consideration of $3.5 million. As of September 30, 2023, the Company had repurchased 2.2 million shares for $14.8 million under the program. The Company completed its repurchase program in October 2023.
2023 Targets
The Company is updating the following targets for 2023:
Financial Results and Other Select Data
https://ir.togrp.com/press-releases/detail/516/the-one-group-reports-third-quarter-2023-financial-results
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
Source: The ONE Group Hospitality, Inc.
Released November 7, 2023
THE ONE GROUP HOSPITALITY, INC. 
