STKS - Earnings call transcript Q4 2021 | The ONE Group Hospitality, Inc.

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Operator

Greetings, and welcome to The ONE Group Fourth Quarter 2021 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 call over to Tyler Loy, Chief Financial Officer. you. Thank

begin. may You

Tyler Loy

and operator, good you, morning. Thank

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

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

isolation other for GAAP. of the measures However, considered a should results as or these be not in prepared presentation in with or substitute information accordance

licensed to Manny? measures please issued With total to reconciliations these today. and and sales the GAAP food to call and turn like along of release Manny operating beverage earnings as managed useful, measures, comparable adjusted see that, our with Hilario. discussion such profit, measures EBITDA, over consider we why owned I'd For these the sales of units restaurant adjusted net income, of and

Emanuel Hilario

year team today. by operate our I'm quarter we to appreciate our hard carried performance who everyone. the members and for into first in we experience exceptional to STK so Tyler. to outstanding joining operate Kona see an I restaurant the XXXX. for continued in thank We and best of both an in mission this fulfill delivering continue XXXX And interest continue you, guests. you Thank proud work. ONE that Group. the to Grill, of momentum ongoing Thank of their and like sincerely would our was unforgettable to everyone's hello, market us every

Our year highlights debt for revenues, bank and and Record for profitability, XXXX nearly cash XXXX. with in with key XX% year robust very $XX.X revenues the record a pipeline our finished and average the million finished and repaid of weekly beyond.

to revenue a of the increase to versus XX% For XXXX. compared over adjusted in GAAP We XXXX. growth XXX% nearly total increase $XX.X were top XXXX, we line an full-year in EBITDA, generated into able leverage million this

supply challenges of and chain despite All this commodity affecting industry. labor entire the headwinds, shortages

discipline record in specifically, another and fee with million setting $XX GAAP of to cost over million able revenue. reported result with consolidated to from performance, revenue, our the quarter also total were increase fourth management. XXX restaurant Turning quarter managed, licensed a incentive points We margins $X.X top XXXX including we as driven of sales-driving initiatives, revenue, of by line XX.X%, an of of basis strong achieve coupled

our compared STK achieved Our that restaurants portfolio, STK quarter all quarter, increase it's and increase XXXX. as comparable compared XX% fourth Grill positive increased worth consolidated the Grill. the comparable among domestic Kona noting the When to the an at fourth comparable restaurant to in XX% And almost XX% at industry. sales a best and of sales continue in be when sales XXXX, during to Kona at including looking

the but beverages, kind to this with of we same testament XXXX. to we to compared vibe challenging inflation, environment. One food simplified unique a menus a experience period supply environment. which chain $XXX,XXX Kona their our and and peers coming is energy at component high exceptional dining and the in able in and The keeps of to craving our both same have $XXX,XXX The with the innovation quarter our continue a at to back consists in were Kona within Our of provide offerings sales great weekly consumer for is Grill coupled culinary the shortages experience, advantage this in Grill fun and $XX,XXX $XXX,XXX our average industry-leading innovating, period fourth guests to food craveability. food which compared dining US have by XXXX experience has performance due impressive driven in vibe equally which STK program, is creativity Many service guests. We our one is a at STK believe of been been dine competitive us. labor issues, and in

Australia, profiles pot Grill dishes Kona a to delicious quarter, These the culinary we range prepared the including prime our rib of coupled dishes Japan freshly broad with around United elsewhere. while the with some of During nut guests may a and chance favorite additional existing finest of fan the from stickers. fourth & enhancing from at flavor we STK bar get and offered from seasonal wagyu featuring lobster Surf like a and the unique they entrees not offered variety turkey, Turf, the the explore world, on roasted items States. raised and already-renowned offerings grill, steaks our holiday-inspired specials of cuts Grill, wagyu cuts starters At macadamia Kona

and to promoting our historically create We of the to on great holiday us thereby consumer have a offerings a put new broaden emphasis for opportunity they as base. brands lot our introduce guests

and brands. drove Thanksgiving, record both Eve New promotions Christmas Year's for demand Our for

great beverage toppings a upselling These the items by and with to margin throughout and offset job at some were margins increasing of we average check high faced inflationary did additive protecting initiatives along quarter. like mix also Grill. increasing Kona We STK sides at help pressures able the the

provide guests hour return used the that happy an our truly an happy entry introduce of our room to model. value part hour guests exceptional dining proposition main brand's Many our area level are layer. to also Take and we hour have offerings to of our addition, get transitioned has for and grown to In brands the a great important via stay business or become excel. we and occasion, delivery experience dinner introduced happy very a out which in and celebratory the to a for to

Friday during our nights. o'clock We especially are our times Saturday at sales X and capacity, restaurants add able to X:XX of and when on peak are

have several brands mind. to We looking People as when try such are they of brands options, brings for which delivery a us. on seeing and remember DoorDash out. for also front us and our then Guests a aggregators memorable become night our our using have for marketing vehicle delivery aggregators for been us Postmates

also brunch compelling to continues still Saturdays to lot We restaurants early and introduce we to our the Sundays when capacity. very in revenue additional new to had. are innovation some to brands It help brunch allowed our dayparts maximizing customers price and the opportunity on, brand our of Brunch points. and has culinary drive allows a awareness. our be believe at showcase us with to Moving us program have on also earlier space utilize

turning events our to Now business.

November and We for December related gatherings. events demand in have to holiday strong

demand fully are lot events a intimate, While back, large seeing not yet of are we more events. smaller for corporate premium

the which selective capacity peak the on Las the spent or also per to San Vegas, to often business. people smaller Diego, it Wednesday at demand fill with revenue. Additionally, be given we business can our during We're times, X,XXX and relative private dining like conventions out person X,XXX markets Monday Orlando coming to average through using are restaurants is into seeing to about back accretive

conventions have seen We an swing in the not see back as yet, large that full forward. going opportunity size but

two our in marketing will XXXX, this we and STK the part and one significant venues managed STKs, company-owned licensed Throughout one including added of three ahead, seven Looking program. we aggressively strategy a F&B STK. business managed new XXXX, events be are units,

are We how pleased performing. this extremely class is with

in in Grill will provide Ohio, in our another we Grills, plan least Riverton, This one Looking Francisco, will to Greater year, licensed in Texas, new open a our of delivery we've managed Kitchens units pipeline STK, Columbus, open three a Kona London; concepts and Utah, Phoenix Kona and finally, area Kona San to company-owned Stratford plan robust which one offerings STKs, in the the And three featuring include to Dallas, and in is XXXX, in history. which the had REEF area. in we our Grill units, third STK at two takeout the with X be development second company-owned California; only Texas. most and conjunction in from [indiscernible]

profits. based revenue As management restaurants a based reminder, for generate we revenue location's on revenues the managed and and percentage are on or incentive of licensed,. that fee top a line revenues those fee

ahead. we we early strategy significant As with have stated, our long in are growth whitespace

as returns. opportunity delivered are believe We long-term excited we our our units about best-in-class

for XX% restaurants, XXX new For and XXX total domestically. least Kona of restaurants, ROIs at STK company-owned Kona XXX new market Grills a and Grills. globally We targeting restaurants addressable foresee at including least company-owned we're between and XX% STK

are our it at to my have able levels. the we the seen executing restaurants talent vibe extremely have career Moving open restaurant The some staffed that ensure the current To to retaining last on toughest in hiring important terms fully our restaurants, industry. in of in have labor are environments. to experience on and stellar is all I been months six the of and dining

quarter, third the made training as a quarter. we we historically the and during priority busiest fourth mentioned, hiring, previously we our went quarter, As retention into

service a our and a to at modify the in or this throughout staffed environment. when advantage we our were which our we have not XXX% hours expect see customers As as did dining result, tremendous restaurants, quarter the

in and great us of to do commitment new place allows be also have a innovations Having guests, to a employee will base continue to and point made bring experiences differentiation. retention which so to continue throughout the XXXX. we'll really to employee a We

effort ensures I'm program, employees. single we high in an the the quarter, beneficial rolled for level stability extremely in at allow [indiscernible] a us perks Having very fourth the execute out program, proud. and and has During it consistency benefits at an company, and our management retained to which general employees, restaurant every to we been in retain have retaining In attracting level. enhanced manager

We also training business of employees, programs the plan. all ensure and all level part the levels offer hourly long-term in all including our bonus to compelling employees, to invest way for

day in guests optimally cost sales, focus management our our committed industry-leading and and great and store us to conclude, same of current in for to plan experiences. into doing effective are a to trajectory throughout on to Ultimately, day proved fantastic P&L strong translating development. disciplined we keep job investing our store operations to we team a For execution continue staffed To is new our vibe the dining has XXXX, year. restaurants our on employees welcoming

to Tyler. back call the turn I'll Now

Tyler Loy

Thank Manny. you,

$XX.X to Domestic consolidated XX.X% quarter is comparable GAAP with quarter start execution primarily is from fourth me detail. our revenues last Fourth of quarter a record in million, last revenue $XX along from compared were for sales for the our same level by Included momentum, $XX.X increased which $XX.X Let the our from quarter same opening in discussing total sales to high year. XX.X% our of revenues total XXXX. in increased sales for initiatives financials resulting million year. the quarter revenues XX.X% million net The of increase increasing the units. attributable restaurant strong owned our greater million, new

When million, XXXX. the incentive and in result May, STK, fee January, STK sales the increased versus pandemic, STK XXXX. XXXX restaurant of comparable opening Grill adding primarily XXX% XXX total XX% revenues of of basis This $X.X the for XX.X% increased XXXX to percentage managing operating versus in costs. partially Grill the operating increased quarter management in the XXX XX% Restaurant to sales a million sales Airport venues compared profit actively with increase the are Los XX.X% normalized as expenses prior-year increases execution as $X.X and management an and to compensation. strong and of The For COVID-XX to STK sales to XX.X% of to from offset a from strong were operating The the in $X.X quarter XX.X% by owned points fourth costs the increase reported revenue from XXXX to increased net net the in recovery professional in general the in increase fourth administrative Cabos in quarter. is of in with Kona and performance-based commodity fourth fourth million and the two $X.X cost license On increasing Owned Scottsdale the Westminster adjusting million menu of last the compared of in basis, the administrative sales quarter quarter restaurant coupled prior quarter Owned for quarter XXXX initiatives, to XXX operational generating general basis and were $X.X in a quarter year. prior million owned restaurants due of restaurant activities stock-based restaurant fourth points revenue service of sales increased the driving compensation, along prices, XX.X% May, our percentage volumes, improved million is compared year. related of were initiatives. F&B expenses year, primarily expenses adjusted same Bar in basis our $X.X in comparable in and points fourth Rivershore and XX.X% due support August. to with as & in XXXX

tax million a The million by million effective benefit in share net net forecasted. loss generated ONE and $XX.X current income cash was rate driven liquidity, positive Group fourth administrative of quarter, during costs our balance year the to was XX fourth the quarter The compared the electrostatic Inc. We to compared earnings incurred than actual general Hospitality, cleaning termination X.X% our adjusted $X.XX adjusted of of attributable As were million COVID-XX. fourth total to $X.X composed net on quarter adjusted direct in points compares $X.X for fourth million the expenses fourth in basis had and the quarter sanitation prevent approximately quarter of compared million million or of December Inc. XXXX costs XXXX tables during income related and million loss were last a costs loss to similar XXXX. to $X.X of in Interest was in the in This all anticipate of compared touch income of previously net the was primarily quarter that to lease as of XXXX revenue $XXX,XXX of COVID-XX or To to spread expenses fourth million XXXX. $XX.X a going $X.X $X.X The was XXXX quarter Lease loss venues, year. protective in fourth $X.XX the of net regular million quarter adjusting related of COVID-XX year. down or income in the fourth fourth net the compared adjusted XXXX. $X of XXXX per outstanding $X.X in termination the fourth net quarter. of balances share. fourth and supplies quarter per of to the lower for net we The the and included percentage When to income expenses million in to share $X.XX the The revenues, a personal $X.XX fourth of our lease the XXXX and tax before $X.X $X.X Adjusted decrease million rates. the driven expenses, and Net to share. of EBITDA the or million $X.X an fourth XXXX. lower interest and lease benefit of per tax quarter XX, of We and XXXX compared sheet for in quarter benefit to attributable fourth quarter we termination quarter expenses originated equivalents lower forward. EBITDA of fourth Hospitality, the disputes throughout cash nominal $X.X in was closed XXXX of last compared $XXX,XXX quarter in by full-year reconciliation Group average on of interest income release. quarter for income We've cash per of for ONE flow of was an expense equipment,

touch first to like as would the guidance quarter XXXX. relates on of it I to Now,

total $X.X G&A of turn approximately targets $XX million. We are the and G&A target are million, incentive $XX.X to million, follows. of Total the reiterating now $XX and $X.X GAAP million increasing quarter our $XX will for revenue call million restaurant and back to million revenue owned to as our million, and $X of license they net management, of I Manny. to approximately revenue first fee XXXX revenues

Emanuel Hilario

your And Tyler. thank you all you, today. Thank for time

Let return been grateful craving. the me Above bring that want our all, very by us for restaurant customers operate. XXXX on saying this to Hello, today. unforgettable and conclude our restaurants, beyond. for call exceptional guest that time. our to experiences life to have everyone you and I'm day also questions do mission they every all our to they I every our every to to answer am best delighted so XXXX any results happy visit joining in record to who teammates with prospects may I the dining We Tyler and the we market where delivering be guest by They I Operator? operator? every and can our vibe appreciate that enjoy are experience thank have. and

Operator

Nick question do a We from Instructions]. have line [Operator the Setyan Wedbush. coming with of

Nick Setyan

a It's see like given it Have you're what's you just recovery prices, seeing, et just some on? obviously, cetera, being ahead seen about gas very would momentum helpful. there's your raised some number. talk that maybe great just market be with expectations? numbers. around, the wealth post any seems incremental Omicron revenue original the we level of volatility, that around the incremental worries thoughts to QX Obviously, going levels Can high down stock There's

Emanuel Hilario

of the on and, going Obviously, challenging of the environment level. things at macro macro very course, overall is lots still

our the specifically, emphasis So, been is bringing the initiatives, around items helping back happy particularly hour. on I for us our think that's us and probably brunch

and on interest been those think think with which layer helping brunch Saturdays delighted us. has we're our things now, both have brands particularly incremental I Sundays. And I on driven right

of our general, fact think, focus still environment in the in vibe dining, nice really our And that. it just seeing is overall the then So, we're that I on performance because well. lift a resonates in

So, do and that working helping and what's an to going and provide we brands a STK. escape is But remember I enjoy think always do Grill provide think still for really on. to Kona opportunity that's do that pandemic people there both our themselves. I And an

Nick Setyan

some As QX, confidence go we this kind much you'll able big year? obviously, with numbers in of that look here, beyond posted be the momentum have QX, how over cetera, do to you forward et QX, you the of

Emanuel Hilario

But, one see you as think, revenue increase guidance environment, we from quarter guidance. we're I clearly providing the QX, now. our only can the because see, in right of positivity for obviously,

like lot long-term macro so, on – just things clearly situation. everyone else, outlook, And our it's the there's overall a of

store we're So, right themselves they about two now, that, doing. our on as the I the is initiatives the as execution on in through just But keeping I macro to be it, honest in time, and for the issues level blunt think we pandemic. out short our really is have shorter emphasize last what sort on focus team we'll and year present the focused or the years And time.

of that's within the as now, outlook on all environment. as on have versus of So, we're one the the best right we is macro we our very can of term the we each keeping the longer operate because resourceful. But environments. those become things one that And just short term items

Operator

of has from Joshua Sandler. Our next Piper the question come with line Long

Joshua Long

manage say – commodity it incremental in previous weren't that could you that side current you pipeline, around experience, the strong if your We've inflationary not and that, top you some innovation but to and they calls perspective the guest and Curious curious and inflation. we're thoughts, in your I'm by just pricing you into still from impacted of taking a seeing in giving of how strategy that own about the that to obviously, conversation is – stride environment level. talked lot add-ons really talked still were how which way wanted power the that and a your the offer feeds with line prepared on on at the store comments. on to ability lot your

Emanuel Hilario

side, commodity challenging as On it's still obviously, was before. as the it

in improvement couple been the think overall, I all a that commodities, are some challenges there. of there's but,

you've got everyone think the in super I to told we flexible that – be this as environment.

product is use flexibility then, on really to your on items what want of meaning on have that you have and – be chain. so menu menus to do menus, management. to to terms is important now the And your change to in your flexibility you've that several other on thing supply if So, sources got substitutions able you of

can't to points to rely singular Relative supplier your still steaks. So, one do you price philosophy pricing, is product. the have our to entry on internal best on

menus. level. up. moving hour optimistically continue when But value at reasonable So, competitors preserve we'll we because the overall pricing to keep pricing on And obviously a to take we and happy been use pricing brunch also all the have our

gaps now philosophy that keep is So, competitors we our our there to intact. the

we'll So, that. continue do to

our But right on strategy opportunities right we'll menus change sure flexibility there's making that on our we're now we sure that have if and the So, items making not them. dependent for frankly, pricing, commodities one the the take and is biggest certainly, single on vendor. and menus,

Joshua Long

then also in the Thinking investing about quarter on into of labor It's sites. look experience, continue is curious if and that where pipeline the some now touch think growth, at right? of the not made of the kind investments kind your comments, in or just prepared terms limiting to could what you employee you your not factor money, usually of continued in just going is terms in of the from the the perspective manager you your people,

given out, overall you time? what's how just pipeline some like with And think happy investments doing looked it brand. about the accelerate set pipeline made, environment if and of now? the Just there's over So Curious an you've that for up? to could then, position you right it and you're the sounds you you that in how at talk a opportunity balance your on Are right curious good you've there. how is macro do growth that

Emanuel Hilario

is in environment. people advantage Having this competitive a

pipeline of been a very have talent we So, have on about making healthy thoughtful we sure board. that

is challenge, development So, keeping deep a bench. particularly on, our coming with

at management, level in the been more entry have particularly position. we and manager at investing the assistants So,

that have have very sure growth. in inventory thoughtful we the available individuals making to we terms and of So, plenty support of been

I that we flexibility either of because have structured flexibility have it's have down, to can play we our this to environment. in it we that think way the to or macro in accelerating type slowing also so you that slow important down the to growth is have environment if

several have in we at levers ahead high So, making that pacing there that mistake making that we're and the make of that terms get we're ourselves. protecting number of executing don't one. we But brand sure no so sure that, level is priority

that. growth. we'll brands the a growth always executing of relative So, will so execution work not to the do of after And strategy know the then, we super the compromise that we at level, brand are we high will

So, on we're very disciplined that.

that's and, of that, to in two, the pace one, strategy is. all of that – make our sure right have monitor is we So, do the we really opening term, and about thoughtful it necessary what people near kind the thinking

So, we'll that. doing continue

pandemic nice the job. restaurants very opened period. during done a we've We think I

to think judge factors getting it getting relative I the makes open for those So, we're and how sense brand. a those when rhythm to restaurants

Joshua Long

one for me. Last

a kind about thinking back be tourism, incentive come venue overall it's of overall about line, to revenue what industry that. context. and back, of talk underlying terms thinking about looking? could that provide starts site, maybe Maybe detail if fee or your of of more license In that it's management Curious how coming it's how's to return both just by hospitality but the granular domestically by kind you of business we've in geography, the but nice as of any piece you Obviously, and internationally. business terms could seen

Emanuel Hilario

I pandemic periods were see several it's the think of international. the on lot in we because reflection down since restaurants when because some those that strategy Obviously, our really of a you during didn't years. line weren't growth has them last been shut a just it were of growing

I from comments, quarter a power locations. a going and nice we coming which our saw So, element shows perspective still forward, prepared of And think licensed the really from forward, growth. of you as we've of growth a fourth the management done pipeline think our is with I managed and have properties license critical what

and on that asset-light So, continue an will continue grow to we expect to grow that basis. as we

really the open, I it long having in all progress yeah, function to And think we quarter. that just we'll So, see as fourth continue underlying. our was operating as keep of restaurants a nice them

Operator

Our with Lake Mark next Street Capital. come line Smith the questions from of

Mark Smith

you fair that's talked commodities. us be should on Can anytime so, anything about off you've You've got let And know just if soon? a contract? rolling contracts amount if any

Emanuel Hilario

on do some contract we XX,. Contracts, either timeframes, albeit beef, of XX we're the doing XX, days. smaller

So, the of seem that. make the are lot Obviously, because too volatility, term doesn't nature. short very out, to in particularly they sense on far it with a out go of to uncertainty

shrimp to So, done. a also of prebought protective We've that's very that's us. our lot lot a what we've actually and of shellfish, which, – I think

anything right from our or And performance. a points now could stock. do XXX have within relatively frozen healthy goods, we've of kept of on cost basis supply that's as So, shellfish you see of historical we it

that. a big think advantage mistake, that job pretty of menu. flexibility I good the of we've Q&A, on our on done I mentioned as But So, previous make some no the is utilizing

from where to For certain had do We changes to we crab to like switch we've instance, cuts King stuff that. had in crab. for on quarter Dungeness the emphasized and fourth beef wagyu

very So, has that very, been flexibility promotions really and on all mix management utilizing menu Having can and on so beneficial dependent – has large that's not working do. been us. use we're around commodity, for one we having only we for the us, ability the to that

Mark Smith

are? Can to You quantify takeout, really Anything that maybe brunch, sales out brunch? guys been for delivery quantify have you've guys what your a off-premise can you the little from called as any beneficial you us? benefit bit business. that things have that seen more Or

Emanuel Hilario

sales then and restaurants is for Grill Kona I business to the, quarter, X% and delivery in our is delivery and that of restaurant. depending the think on STK, it, call have X% takeout in range, takeout XX% month, to XX%

think, plus really ongoing a brunch over time, be for business. But a layer million nice business that $XX company that's And relatively has we size us, a into layer. pretty then is layer for and very of our of business So, will developed large it developing.

progress. making nice now. it's we're right So that progress some encouraged And with

Operator

me. one for Last

think with agreement return REEF you these? about these how metrics we As on this about new Kitchens and thinking are restaurants,

Emanuel Hilario

They're all licensed sites.

little on that marketing to growth very or to at investment growth our them capital there's is market auxiliary with So, looking extra as some the that them. I'm There's brands. layer. something purely upfront

can place, as we in a So, Actually, go I of part that for where really, the STK growth. instance, it's we Texas, with we now, or brand can not restaurants. other really have places into a describe, the would do no fundamental test right we what don't an see to

I going think is Austin, place we're REEF to the next Texas.

We there. in have restaurants no

So, a that REEF. do test we what can opportunity give to with good will us

think very opportunity, it's growth a is but it upside our not I part auxiliary of growth interesting core strategy. So,

Our and core STK strategy for Kona for plus XXX still capturing the Grill. XXX plus opportunities

Operator

questions I Thank for to call closing over you. time would any That Hilario turn now today. Manny for have is back comments. all the we like the

Emanuel Hilario

part is. The and come that ONE all want our like continued that to to thank are think everyone's our journey. on interest I'd to and restaurants make thank our also particularly customers all members day Group the every what I'd of ONE it I teammates And team to Group, The like the the of

So, all appreciate everyone's you. Thank see you And in restaurants. our support. out

Operator

your Thank This does participation. We teleconference. conclude today's appreciate you.

of day. your the disconnect Enjoy time. your lines may at this You rest

The ONE Group Hospitality, Inc. (STKS) 15 Mar 222021 Q4 Earnings call transcript