STKS - Earnings call transcript Q3 2020 | The ONE Group Hospitality, Inc.

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Operator

Thank you for standing by. This is the conference operator. Welcome to The ONE Group Third Quarter 2020 Earnings Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. now Officer. conference would Loy, to I Financial Chief Instructions] like over the Tyler [Operator ahead. go Please,

Tyler Loy

Thank you, good operator, and afternoon.

as materially will results These these Before discussion to undertake forward-looking also we operating you to of statements undue impact part that future of of or today to reflect reliance detailed and the that uncertainties me future SEC numerous remind forward-looking to to light begin our recent could expect. should our cause obligation Please future from our These could condition. formal risks statements of of our publicly remarks, We performance or and note for on what our opinion of and not call. not forward-looking them. statements We we any a subject information more are revisions that only the forward-looking these events. this let refer differ you you revise results filings that release include date risks actual guarantees statements. place no in discussion are new financial statements also

During today's financial be which non-GAAP in to call, refer can performance. believe will evaluating our certain useful we measures, we

and these presentation Manny? that, these to of a considered earnings useful, the our measures owned these should GAAP. I'd of at such please licensed prepared and consider With Manny sales over to results the adjusted as to turn issued along and beverage managed other a for measures like today. Hilario. call reconciliations not or release as discussion in measures, and information units why we GAAP with However, see of measures be substitute or with food total isolation in A EBITDA accordance

Manny Hilario

healthy Tyler discuss The Thank performance, you, and the ongoing everyone. each to financials third our you have our the provide and update. would of of reiterate interest Tyler, you in overview good current then appreciate quarter confidence Group remained in in We safe our recovery Today, brands. afternoon our through I since trends last like brief hope a continued will our and walk ONE regarding detail. of greater that quarterly business your future and

repeatedly, have is employees priority. strictly ensuring follow our to Furthermore, we and our we expressed guidelines CDC, local commitment well-being guests continue we And our federal authorities. the of our top from taken the have As and to specific These safety safely restaurant as teams, safety we by been manuals our our dining the to employees to and detail useful further even reopened have location's manuals in operations. protocols. focusing health our employee have each extremely

have we operations for investments the ensure made guests. rooms our Additionally, significant and dining safety our employees day-to-day of our in to

restaurants we nearly As to possible. our They local have capacity XX domestic returned and of to open limited for of for our this state today, are to due subject they teammates XXXX seating XX dining, thank We mandates. every making controlling each do in-person and are of in while this what all best, pleased Overall, challenging very unforgettable exceptional the making third restaurant all quarter. experiences its our delivering the the in market guest to each costs and for environment. with performance best time, an

grew for our XX% year-over-year. income and adjusted revenues operating We EBITDA quarter positive Our the year-over-year. XX% grew delivered

due experiencing management our able by we're while particularly walls. to cost headwinds. within and effective We points basis sales our comparable are to pleased that margins four was expand restaurant-level XXX revenue significantly This

percentage basis revenue as Additionally, we XXX reduced points. our G&A of a by

COVID-XX current are in light of proud of environments. We accomplishments incredibly the these

sales by our encouraged the fourth We throughout continued that ongoing improvement and restaurants into the are across the quarter comparable third quarter.

in comparable X.X% consolidated Grill for sales and with October, having X.X%. comparable STK In improvements, increased and increased of comparable month comparable decreased importantly, consecutive sales Kona sales. sixth positive and XX.X% both September, the marks October month fact, point the In most STK sales

STK volume sales greater comparable $XXX,XXX. than in delivered Our weekly October, average impressive an restaurants

being impressive York restrictions, markets respectively. capacity impacted and Las Vegas, by October New increased an XX.X% Excluding and adversely for XX.X% Miami, mostly our that September comparable and sales

front [whole-night] the delivering center capabilities guest unforgettable brand to exceptional have leveraging We by in our digital experiences, social and guests developing programs, and interact ways. and with and new kept STK media our newsworthy

In to million deploy and e-mails and Friends promote addition, delivery STKs marketing we our campaigns multiple Benefits of are takeout database continue with digital X.X utilizing over to and subscribers, capabilities.

drivers, sales generated focus a new sales. the active of program, certainly October, launching and for timing aggressive has We brand in increase performance September, sustained the craveable Grill, increase Kona sales numerous and our in Kona revived that generated the to and Grill We to capabilities. implemented strategies media bar attribute food the comparable comparable in our X.X% rebounded specifically, out of offerings, activities leverage more launch marketing menus, and new acquisition, our Turning featuring well. including addition we social music, in the X.X% since

better been initiatives execution experience. by Our rational guest have complemented the top line also of

our particularly Kona footprint a advantage, current suburban Lastly, has been environment. the Grill competitive in

in response business. our rooms, also off exceptional seen we to have reopening to a premise job addition doing In team's dining strong continued

invested enabling from our or state-of-the-art to pickup guests technology, in order delivery curbside nine separate have partners. delivery We for

that sales channel. particular elevating takeout in a quarter, long we have this fourth We the plan and the expect albeit drive the to restaurant This In adapted STK because more restrictions. going year-over-year in of environment. batch items lower to events pandemic we have work also our is business towards way menus, transportable

other we supplement, and of to sales. working a As are types holiday drive programs on promotions

launch now Kona the U.S. been Grill have and expect select in STK We testing brunch company-wide and to this program at locations,

season. at we to looking menus our forward locations holiday all executing addition, premium during are the In

doing and the spring two us three for guests in was and delivery in that The very to value also Meat Our a average To guests focus getting that launched steak previously these on well is is both that our of at steak platform possible. [day] proven home. guests restaurants $XX job welcoming e-commerce Market, convenience effective is for in a are an we to has times, a we last are not to great day STK during execution reach translating fantastic VIBE enabling $XX great our day to quality experience. a our manner the steakhouse doing into so delivery strong great dining from Ultimately, has and costs to conclude, and be benefit team certainly reasonable a and our trying back resiliency range P&L.

Tyler. I the to call will Now turn back

Tyler Loy

you, Thank Manny.

discussing before Let the by liquidity current and in quarter cash financials me reviewing start third greater detail. our positions

into changed Notably, improving due amount $XX.X cash generated third cash sales positive in and million recent As to through cash October. of months, on sheet. flow has our materially performance had today. our quarter not XX, equivalents balance in September the And we we throughout and this

facility credit the as our $XX.X end Finally, the started of approximately quarter million. balance of

last in October sales and to Kona XX% we due lower restaurant temporary In restaurants sales was million due from quarter the net XX% XX.X% by quarter from comparable partly terms limited consolidated $XX.X primarily of our last in closures XXXX, year. quarter. The $XX.X driven by to revenues the increased which additional were revenues from offset financial $XX.X COVID-XX. Domestic acquired same same increasing Grill, of which decreased $XX.X from million, operations for increase several million Included the our million quarterly million our for total $XX.X total revenues revenues in of approximately year. GAAP owned is quarter for the

decreased For Grill for STK, decreased Kona comparable sales X.X%. XX.X%. sales And comparable

achieved savings to measures. turning and percentage of in As particularly progress decrease of in and and operating chain point Management, management, and expenses commodity net XX.X% STK. there's sequentially October October. license, foreseeable actively the we commented, due quarter was net restaurant new STK quarter in XXX made in addition cost Manny have a in of synergies labor, strong XX% revenue in third restaurant of cost by third Grill with points XXX the implementing of to food STK On turning locations. locations closures prior limited was both more beginning in quarter of $X.X restaurant increase XXXX. quarter X.X% our result the decreased quarter traction owned third supply quarter third to positive decreased the and third million the X.X% primarily efficient margins is compensation positive to throughout managing of XX.X% driven running for certainly managed basis fee We total, of for current by September, $X.X increased quarter decrease Grill costs. be Kona at the third a third XXX a favorable Kona approximately the be sales million the to improved primarily operations XXXX into XXXX administrative XX.X% pandemic as quarter restaurants and restaurant same and Owned The future. Owned and both as restaurant revenue seating at general and COVID-XX XXXX, costs, prior million to comparable COVID-XX from year. a to the owned restaurant XXXX decreased of subject the basis Kona the points, Grill in total sales model might managing and in X.X% in-person for to compared quarter as year. from the the in the for Consolidated incentive operating basis sales tremendous $X.X Again, the at revenue Grill, XXXX operating This of in points guidelines. plan to menu of Kona temporary XXXX. likely in foreseeable our appreciate of basis, operating and to increase expenses, due $X.X the that stock-based execute level report continue to million the of the since an volatility percentage In future compared increased in including the from by

administrative total to due the total measures to cost was we due of a When quarter $X.X adjusting general in and integration our decrease of the structure third offset in revenue, $X to to to for of basis the administrative were of COVID-XX quarter Kona XXX created adjusted compensation, the the percentage third synergies expenses expenses million revenue. million the and decreased and XXXX. X.X% As and reduce impact points The Grill of implemented stock-based XXXX general of brand.

As quarter a basis in of of adjusted revenue the total to expenses X.X% of XXXX. of X.X% third administrative third percentage quarter revenue XXX and the total revenue, points of XXXX from decreased in general

of share. compared $X.XX was of to The loss million We of in supplies to ONE $XX,XXX third to an our of electrostatic conjunction tax direct in in Kona Grill the the October Income XXXX the Hospitality, of expense or quarter for income XXXX the of quarter third third of XXXX, Group $XXX,XXX of was with acquisition. Hospitality million in the third to for debt in quarter compared the our quarter income third reflecting to net The XXX,XXX quarter net quarter approximately $X.XX XXXX third to the loss of was for and $X.X $X.X $X.X spread sanitation third $XXX,XXX per third $X.X attributable ONE in per million the refinancing compared the in venues, or cost for expense Adjusted XXXX of million quarter, share, costs XXXX. benefit related the attributable tax income COVID-XX Net COVID-XX. interest XXXX equipment, personal to Interest of Inc. composed XX% prevent quarter from protective also net quarter income third EBITDA primarily to of incurred cleaning the regular net of $XXX,XXX increased during XXXX. Group of

a or table in included quarter continuing GAAP adjusted in review. reconciliation earnings the operations We third EBITDA have from the loss of net income to

XXXX due As to normal will reminder, we operation to back all the business pandemic, call to of turn reasonably We the a and market evolving if return to now do, the situations. warranted in financial suspended updates and guidance surrounding therefore I conditions further for Manny. uncertainty cannot last intend however, the March. estimate fully will unprecedented business when by our provide effects the

Manny Hilario

is now our were directly clearly team And successfully a help a our thank working ago. were Thank than us exceptional today. than months for we the all just through the better much are is we related to the conclude, side position navigate to to out other on And you, in and you efforts even intention come few that we To before. of hard are pandemic Tyler. that your time stronger

reflected company. into at exceptional are of us them to dividends We our future. operating The in business success life the efforts restaurant for will our guest every delivery effectively build pay for by experiences to day, every and capability every the They grateful levels delivering of enabled operate guest a every their best that in the long sustainable our time. e-commerce is bringing while mission controlling and market financial takeout to we unforgettable so have in costs all and also to performance,

who at and me Let or ordered by guests delivery, valued our our thanking enjoyed have STK from for Market. conclude steaks restaurants Meat all high-quality have our takeout Kona our Grill STK

you enjoyed serving We have appreciate and support. greatly your

on We us have. I, any also appreciate and the joining are you happy answer may Tyler that questions call everyone today. to Operator?

Operator

[Operator of Mark Markets. the comes from Capital Please Smith line [Lake] Instructions] question go Our first ahead. with Street

Mark Smith

give the guys. I Hey the Any a some as here a impacting that just to you've changes much little ask quarter little can into patio helping bit any seen the during in us we've about you and and business? first, wanted maybe weather bit how that's seen business insights shift QX.

Manny Hilario

since were obviously particularly the Grills Kona for Grills, have Mark, I fantastic patios Kona do beneficial Hey, Manny. the patios. the that all believe it's

So say the the we reasonably patio I that there of the in sales particularly store of our I bit everywhere. patios of would the and - I a for was would start of weather comp going patios. feeling of best was that benefit think less but August a months good roll although was did in business. the think October, one us, wasn't would which warmer best say and little did the I that I the say they drivers October, a positive say September, month would help. Putting from our would But in into be But I

Mark Smith

as talk the October you then into and traffic at versus that we results? comps, the that's all comp throughout about, look quarter, at improvements the And can price comp even Okay. built

Manny Hilario

mean, I about I can talk check.

I traffic say in X% have check check, around Kona I did think Kona Grill on around X% where X% at they the probably October, was STK particularly brand that X% of to was we month. terms some positive would Grill check but in in positives, or and for have

Mark Smith

just then the has And how on perfect. alcohol throughout moved that chains, Okay, an at both one kind of mix odd quarter?

Manny Hilario

think of made bars patios, using in I that our we're Yeah, alcohol the not most with strong. bar our I the we reasonably of our incremental we're have pretty areas think a mix Obviously, seating as restaurants decision using the areas. around was

I has Heaven in it has is So have at Grill really Cocktail overall the But of at reasonably programs well. bars. de-emphasized, is to down think STK. And closing reasons bar resume for you the we what the one of also would been we continue if general held will, the have the frankly well it because would drinking. mix I Hour Margarita allowed dining and Kona dramatically I could is I rooms compared that to And think Specialty little like year-over-year, by but the helped though which we say all actually for evolve the a bit say, Happy been good to it us. not

Mark Smith

bit about one-time that talk the one And just any And during is a call going what anything expect benefit, little mainly see last wouldn't rent outs you just to maybe what we from saw. in perfect. quarter? on forward a rents abatement then me, Okay, or the and

Tyler Loy

of Yeah, the of volumes Mark, is and we as restaurants. so things closed one deals think the this rent accomplished many as the the could Yeah, we percentage as very went as I onset some Tyler? we was from down getting that

went sales kind is, the And a we that you're better there so really as of away. get benefit of through the seeing sales, sequentially, I benefit quarter think volumes, on lower what some really, got but did

with we've I closely worked landlords. hard our and So term, really long think really

works with parties we've for term. everybody both long think arrangements I that crafted

that this quarter, though, anything So I one-time. there's that would call you see think in I don't

Manny Hilario

activity the help in months would from were abatements and where the say the the are that quarter, I June, second those May we where landlords. April, was of got Yeah, most the most mostly the where got one-time for takeout months delivery, doing month we probably we were those

Tyler the of as think based. the with I percentage is rent majority or percentage based landlords described deals just there,

percentage sales the is revenue, lifted, becomes And as margins I neutral of pretty a impact number that the have because the so think as on equal.

think I really the and answer. So that's

into definitely the see the second quarter, closer think third to in I much starting or long term. we're equating So quarter, going the equal what they to rents are

Mark Smith

maybe one and I'll squeeze Okay, in. more

in kind of restraints any there us, about metro restaurants any capacity here to particular do of operations remind thinking New or seen areas, has any big just cases changes Just And weeks? that been York higher? opening that the the couple or you the changes of I'm last your bit maybe at a any you of of last in of couple in kind in move we've as in weeks, the little had

Manny Hilario

a to it's delivery only, Yeah, do couple we're those than and of more are - was in new us take a Kona so there's this in two, of is a ideal major December yet. Chicago. that exactly yet obviously, then which to outdoor of that's We so basically Chicago, not talk And other Grill. it tightening were November El for the ones we what communities, a And - have lot and lot to of gone only, about out dining but we meaningful not seen this, through the Paso in have is. but there's we reality a go environment the but lot a shifting daily different a curfews, meeting, allowed

and However, p.m. with did see curfews again London, enact X Europe, a did see stricter we down we shut one month, in for Milan, off. cut

seen to but overall the performance - company. the to dramatic have we not stuff, the of overall So some

Mark Smith

you. Thank take Well, great. Thank great. you, questions. look taking quarter Okay, for guys, time, some

Manny Hilario

sir. you, Thank

Tyler Loy

Mark. Thanks

Operator

Nicole Sandler. next go [Operator Please Instructions] with ahead. line Piper question the Our comes of Miller from

Nicole Miller

capacity in and a the Hey, by average Manny concept you quarter you. bit little team. Could afternoon. please? Thank about talk Good

Manny Hilario

and I for. the the would say And testing we're and utilization of I allowed I we're some prepared mean, our been of XX% so the limited taken we're restricted extend is, the Meaning at - think to capacity we're that's comments, brunch, more that, that as we that that strategies saw looking on now space I think on we've we've our over Yeah, global what on in hours. trying about if basis, venues.

of to good the restaurants. of increasing capacities So has the some utilization a already business. Kona hours trying by pretty deal we're state of with the Grill lunch

there limitations business. impactful really So are we you have bit where less a little in don't the know, STK lunch than

at XX% really of for that level so I us Where but restaurant, would it obviously in property. limited describe that is a So, our which we're restriction. now flagship XXX overall, and or to around restriction hurts is Vegas,

biggest our we're New XX% only the limiter. probably where And dining that's So York rooms. to use maybe allowed of

Nicole Miller

side, the on restaurant versus like is between a STK a property with front a comp difference managed And in there restaurant? retail a

Manny Hilario

I our significantly of means does October, sense I performed outperformed I mean, that are I of or in something that's in think on I the the markets we're were markets seen we've smaller would pretty obviously, blessed have out I to But traveler, say And will, the tourism. honest the comp. with some in make we it we notice, B not If business come markets. the that everywhere. because busy mean, to saw any the bigger think portfolios, if up And particular, say. actually, lot, be We pretty didn't interesting. that's something of definitely we been with markets you, that would patterns I kind other those activities our and B markets, very

comps and mid-teen. look and prepared fact, comments, it's what about Vegas, As the the think like, of talked in a York I matter New without we our in

same powerful, consider I'd markets. in very what store it's So sales B

Nicole Miller

or how down wasn't a thinking do of mean, very different drill that likewise, I and reallocate restaurant, the reduced, not It's impact people year, bars you the before interesting. sales also finding how then even just guess helpful. the is from comp, in when comp on ways they I'm that typically about prior it's though to hours? those at is I sitting bar and some comp I were comps? And something away the move wondering, think more they're That mean, in around you those with clearly but that's extra into about capacity How but right? nuances? brunch, does positively,

Manny Hilario

call I I we mean, obviously, think what do T-station. way think I question. of, think bars, that very complex And a converted the the with I to you

bars converted, the right So tables, of on T we a we front in shaped. put almost

XX average think XX lost I of location. bar obviously, the to on we dining per And seats gain we capacity about seats. XX

replacing revenue table. what I ended think seats revenue the was doing we So seats higher with for up low

of So of think capacity there the follow help of because to the six-foot restriction. did we in mitigating room, the have less terms impact do - rules having the in with that tables comp in I dining and

the I on quarter So there replacement helped. that is, one chairs. mentioned, do the table. that of than I the is times focused think really I at just that this do it's as think a thing more bar we those has have turnover And ever we

into So at XX restrict, table. enforcement we the went maintenance of minutes

one of mean, tables So we the tables. quarter, of the that during like turning metrics. that were times that I critical And things turning Vegas sure was making restaurants day. that the really a we we five observed the have were one

times. that Saturdays, we we in really Sundays, other days, we that Friday, then have call very did times particularly table. the is sure thing we diligently like make worked at So and And quarter, enforced the even reset the to what in

keep those time those table, two the times people to the from leave down will we to So minutes. they'll tables, try reset below time

we that effectively, have in seats occupied. are that in very So restaurants not worked we sure never making the

some very And from So sure of of all it's, about very, diligent to thorough over, be that thoughtful of have some will Grills, Kona at was we process a had you and the a that do time. fully will, tables making properties. have demand we the turning those the And have those STK. frankly we lot we [group] of and because occupied if

Nicole Miller

you're with And the a whole lot answers, more and those pointed less. I'm clearly, whole lot questions because a appreciate asking doing I

performance, that is take value, If think important the very you which capacity commentary is comp reconcile fantastic. face to I just at just

thank So you.

out You Kona if the see about where and Kona you growth portfolio know, for just you if think I what's of for brought look you into horizon? do kind growth for where the on do and you growth into see pre-pandemic, future, and the maybe STK

Manny Hilario

question. great a That's

one I previous Let headquarters And the to should actually before told question, final add point this thing restaurant which I probably your talked planning just companies me other about daily. differently have is have teams we the you. that we've logistics to with but we out one management a where we do from think the team plan capacity in work

do we companies we are a different have bit we about little the how turn restaurant. logistically have than a So thoughtful restaurant of process most because

So to every plan ever restroom turn. the as present want you the will, how thoughtful, opens a up, to very we if thorough, room dining day before

I that has that times part it helped. of really limited have we do So think core in approach, operational process capacity, our having selected as

forgot the I of related was question was what to? part the other your though. question Now,

Nicole Miller

growth. Unit

Tyler Loy

The go forward growth?

Manny Hilario

Grill. Kona Yeah, mean, I

now think I very successful some just their happening landlords this is, what's have projects are that restaurants I figured that have now. in do and our out anecdotal. But

with approach improvements style. become service has I more and music have people the I made the Kona of changes beverage, have or brand Grill guys you hey, doing at the and that vibrant second, least it's we've in definitely mean, for menus program with changed, something substantial now exciting. noticed a saying, the have change, projects wait landlords, are brand. And changed, the definitely with are It's fun four our five so have existing the

landlords don't ideas. we're it's stated us, answer And So coming asking noticeable. to plan. definitely see is Frankly, have our a to into and that lot and starting providing we of a us

about been much there's in for rise talk projects. Kona really a But don't Grill demand we So it.

STK, who either In management forward the currently or terms XX pipeline us. licensed that the to about want deals, have we with of on move partner and projects are

our pressure to continue So a we're getting lot partners from growing. of

for been restaurants So the we've must certainly pandemic the And during to had properties those do which the in pipeline some come the they And because can our customers we partners to down brand tremendous STK of in been to to open London, and in was actually And property. pipeline and obviously, were what experience have a not long hotel, several see the only it drawing properties, periods just into probably is staying is on we rooms were the were period. in dine, instances. amount Saturday but come our months best pandemic a filling people a night. like we've And time. and including in a overnight able hotel

would for quite a say pipeline a best this in is long seen probably So I development the growth I've perspective, us. time from

Nicole Miller

again, you've lot as thanks team's Well, very a Manny. Thanks know your we're impressed And I details are always, covered important. a but lot. performance. those with

Manny Hilario

Nicole. you, Thank

Operator

have at we no [Operator Instructions] turn And to time. this questions I'll the call back Manny Hilario.

Manny Hilario

Group impressed restaurants. in and team company. Frankly, everyone our I again to One job amazing seeing I the for super thank thankful Cheers. for to an Thank you amazing in in very an would everyone forward for and look the our like interest your team quarter.

The ONE Group Hospitality, Inc. (STKS) 8 Nov 202020 Q3 Earnings call transcript