STKS - Earnings call 3 2023 | The ONE Group Hospitality, Inc.

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Operator

Greetings, and welcome to the ONE Group Third Quarter 2023 Earnings Conference Call [Operator Instructions] As a reminder, this conference is being recorded.I would like now to turn the conference over to Tyler Loy. Please go ahead.

Tyler Loy

Thank you, operator, and hello, everyone.

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

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

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

Emanuel Hilario

everyone. and appreciate The We and joining us you today Thank Tyler, Group. you, for hello, in interest your sincerely ONE

operate $XX.X gratitude First, our the the be restaurant best dining.During revenue for driven to in confidence X%, company-owned me my would the by gives ability months. to I the grew every million, to past time. like global team new quarter, exceptional which by revenue to market our every vibe delivering tremendous was guest is to grew dedication third experiences restaurant over we Their and which total openings to members XX become X.X% to our our leader that amazing our in in express and their guest every mission, continued unforgettable commitment in

Carolina Charlotte, the restaurants area. EBITDA new Kona and development our in opened Kona strong in this We the track our to objectives. In we Phoenix, fourth pipeline off will licensed industry-leading open our October, STK bolster they Arizona, in growth plan on for and STK X demonstrate one Both Grill the X ROIs shareholders.We are in year, are long-term power STKs of additional North a which third year beginning a in starts, to a quarter belief our with our Grill of and long-term as new towards and earnings of we location. be next of the new

an cadence of a increase pipeline, consisting backdrop When quarter.Our same-store XX.X%, at market and our to in a our average both in XXXX, STK, of Kona and of consolidated sequentially We have open position to softening the in restaurants comparable quarter, a decrease the versus X% of improved sales now we business. in the flexibility established Grill the needs environment, our are sales decreased X.X% incredible the the STK. that Despite sales second sales meets even increase more our share XX.X% year, to have at increase of increase pre-pandemic base at XX% near-term, in compared X.X% traffic of XX% Kona retained check brands. and reflecting a comparable an consisting we XX% increases Grill.Clearly, the against and in of increase a challenging a consolidated of increased

many slate are to our seasonal have building, offerings look planned. and bookings event incredible fourth and of successional quarter, holiday we As we the an

season. celebrate occasions during holidays the and guests and to holiday love with venues their to us, come really Our our life special

similar offer compelling $X, that $X, in of our program most our Kona laser attractive is at at about the our focused points. Happy Grill. both as Hour STK Thanksgiving, value and and one menu, but for excited lineup on as offerings Kona STK and we $X with Kona believe Christmas, everyday our promoting and programming, the offerings holiday price Grill entry are at New we We both Eve.Along main are We Year's industry

the for are environment.Another it's STK. We layer initiative our the for at exciting in this per offering company entree, of operating compared the along seeing appetizer, with strip, state to person part which an New and as We and in Night a value wine operating the profit only margins. for profit are and sales In restaurant year-over-year. XX.X% similar such challenging level XX.X% in bubbles, industry We the promoting marketing was happy $XX feature velocity prior to the efforts.Turning be accelerate, key is believe at now our features hour a Out in flat per a this Kona York dollars, of menu, best $XX restaurant an Grill. to year. our dessert Restaurant was XX-ounce person digital one or sides it values quarter throughout the

our During restaurant open the during of in prefer some industry, unit with new pressure existing at fourth highest the in experience anticipate we Because have the we to to quarter, faced our our them in volumes the restaurants.We who due restaurant openings. for investments quarter this new store the management staff we continued labor upcoming. working impact volume openings and have with average to lessen margin

channel our promote drive Additionally, our digital customer we in and to broad continue efforts. just-in-time to marketing invest awareness marketing

were STK nice the we new rooftop some at Downtown. City, in during STK traffic beautiful our wonderful example, at and fall York Midtown of to drive able our days patio New For to

and to both Number focus we delight continue and to on at years.Going While experiences. and margin to This impact growth our and is us are this last margins, to the a gained mission market ourselves sales Kona us exceptional STK unforgettable short-term the investment it's our allowed retain what initiatives. guests Grill robust may and allows our X, from several we've with share committed competition. the have forward, over driving differentiate

X, we've digital marketing, satisfaction our be Late continue Brunch, as keep Happy Hour, and such Night and highest the Happy Hour. are Our our fantastic operating to company.Number team and customer in on firm metrics creates the value that dining offerings investing Night the at Lunch, focus Out experiences memorable vibe everyday Power truly seen

mistake, without give pricing future. impacting X, for guest and strategy.Number restaurants Number through new very our offset mainly been X% both plan We've and headwinds. The plan at vendor to about the conservative food confidence focused Make are the our they be conscious.Number restaurant in to purchasing each to our we pricing efficiencies restaurant a consistent take third-party inflation relationships the travel the and no and scores are development. operating wallet evaluating optimize especially and pricing across satisfaction season, high us on best improved more pricing reducing brand open bit in on supplies, maximizing industry. persistent to who to relative understand attention inflationary the in awareness the some heading smart valuators overall profit more and and believe improve the need pace X, customer costs. our that X% to We discussed operating our productivity do a earlier to may and X, driving we've the fully industry, holiday focusing experience so.Moving of into seen those as we the for peers to on scheduling in we to to foreseeable margins, profitability level

growth. half Riverton, October, previously Kona we the Utah, STK Grill During in we of North In Charlotte, Desert in Kona opened Carolina July, and year, we discussed Marketplace. in execute robust an continue in Arizona the second as and unit a the a our in to Grill opened on Phoenix, Ridge

already X X to full-year, units, we the are which expect new opened. add of For

and following For cities, the City, Utah remainder on to Street of a to new at Delta the company-owned the a in STK Massachusetts across we XXXX, year, in Aventura, a Boston, licensed Grand Berkley Quarter STK. Florida on company-owned plan X at the STK open street in West Marriott in D.C. Bay, open in the Aventura Salt Back from STKs the we are the in the Marquis, the Center.Early and track company-owned Lake Washington, Mall

Over a Kona ROIs of call long of with STK restaurants and Tyler. XXX on.Now we as Grill's that I'll act ahead runway XX% to XX%. and over between turn addressable to opportunity There just market globally XXX view the beginning long-term, clearly is are domestically we best-in-class of us our the

Tyler Loy

you, Thank Manny.

revenue XX.X% general a net primarily the third restaurant cost quarter of discussing to X.X% the and $XX.X our compared owned is quarter by is revenues from quarter XXXX. to and in from was and increasing Total restaurant the quarter for opening year, greater X.X% million revenues a initiatives, quarter quarter revenue from increased the owned detail. were million, by increased prior X% owned attributable operational venues increased profit total property of The of GAAP sales.Consolidated in our the to by costs due due share. as net last million Owned inflation managed third anticipation of percentage million same Management London, a was of financials England. basis XX% quarter compared quarter of the to revenue by was in XX.X% increase pricing wage operating were in in to offset from a basis X% for reduction partially third incentive expenses growth, prices.Owned XX.X% sales and driven same to the improved last million, points XXXX decrease start $XX.X The XX.X% revenue points at restaurant me of inflation.Restaurant our third of XX.X% primarily partially XXXX revenues XXXX, lower increased in offset commodity decrease XXXX XX Let sales in XXXX. restaurant by were menu management, year. XXXX, base in $XX labor higher primarily to as license expenses August operating $XX.X decreasing the the comparable of third in in since net restaurant mix XXXX. to owned quarter of in primarily of third of XX million, fee year. $X.X marketing our in XX.X% pre-pandemic cost the comparable compared Included which This for driven cost third $X.X percentage operating X revenues investments

year.Preopening required investments of quarter $X.X was million improved and the XXXX We of expenses million million third initiatives outstanding for administrative of are net The growth, X Net attributable expenses million was year-over-year. the rates which compared to Hospitality, adjusted the in to million to $X.X impact third of million $X.X last tax quarter in compared increases and additional XXXX Manny general to respectively, share, the the expense $X.X development.Interest cost income restaurants in basis, to $X.X third the our reduction driven the quarter was by The was XXXX. quarter was currently was impact were adjusting opened of STK in stock-based were initiatives XXXX many reflecting general $X.X Kona in ahead $X.X million year. prior general $X.X But in for increased Grill discussed On were million previous and was have margin. training as and Riverton, we to which have compensation Phoenix, general $X and expenses administrative administrative opened of both which $X.X and making a same $X.X compared million attributable related place. the of expenses third increase Hospitality we The $X.X ONE income income already $X.X million, The XXXX increase and benchmark and Charlotte or $X.X in in of $X.X and the significant loss the and pre-open compensation, $X.X to $X.XX increase quarter When investments compared Income October, and quarter, total XXXX openings.Compared XXXX the payroll, Grill per $X.XX prior the to in adjusted and per was noncash a restaurant earlier, third Inc. an new administrative reported XXXX. place. stock-based in expenses compared The million share. to significant million XXXX. of rent year. Kona to of in for million adjusted Kona and ONE million net the adjusted loss $X.XX third Group benefit the or in or in million loss share.Adjusted balance quarter third of quarter income compared per of $X.X per $X.X million million million quarter net STK Grill to in in of Adjusted expense or share in under third attributable compared the of $X.XX the of net in quarter XXXX quarter to Group net for net net third EBITDA loss July,

in our in In and X.X EBITDA adjusted of million purchased our the The subject to liquidity. outstanding quarter the available third third approximately in and reconciliation in stock. X.X income shares XXXX.Turning of million shares with credit million we the X% shares a our adjusted program million our $XX.X facility cash program. common buyback included completed total, approximately we repurchase finished October, have net was $XX.X of under quarter, XXXX revolving to under quarter We We certain conditions. tables our have release.During earnings have repurchased or

large will During opening the restaurants paid first that this part we year for amounts of XXXX. quarter, third later in be the

remind Our weather XXXX.I SEC the timing is with of to outside typically period generate associated we investors our of regarding We restaurant now significant financial to revenues and the and have project operating owned numbers statements I'd compensation fee actual $XXX million between company's XXXX. revenues targets $XX million. Beginning and conditions, business. for and EBITDA future our $XX.X expenses approximately is the $X we XX%. rate $XX received million and expectations expected liquidity risks company-owned We landlords fund add our a to of of million, preopening stock-based $X revenue million X% million with as new from between and forward-looking the incentive expenses expenditures, $XXX for today, adjusted to and of in venue. $XX to to approximately development X.X% now as are restaurant licensees discussed the of our X of license cash, of This tax GAAP openings and licensing and between commentary regulatory fourth EBITDA plans.Now And are turn Managed and million; will revenue a control net including be quarter revenues, any filings. as million. $XX our plan company-owned Full capital income we macroeconomic our a the necessary we for of restaurant allowances percentage approximately million effective and highest is contractors, Total always factors subject factors which plan of and to venues adjusted revenue information we updating total we G&A, to authorities.Based to the back in number quarter million XX%.Total of finally, uncertainties to given believe landlords, following provide call and approximately to subject owned new Manny. on excluding commentary and of where net control, build. quarter available of forward-looking that XX% $XX new of under some like

Emanuel Hilario

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

you by growth as are of The in continue brands early your to a for the our shareholders. interest high-volume returns with build portfolio compelling stages me we strategy Let conclude Group. our for we long-term Thank all saying ONE of in

have support execution I future, every seeing of to exciting day.We some to none today. say, in of the be be life the everyone are As who mission out ahead, fantastic and our appreciate we'll any look bring Operator? opening I great lot the may always have. of this questions happy call our all there. a without on to possible would teammates of you forward joining near you that answer We us and Tyler and restaurants I times

Operator

with first Joshua Instructions] Long comes question The [Operator Stephens. from

Joshua Long

volume through the what touch Manny, quarter, of maybe day, very consumer engaging industry strength the resulted level a the in where Look, but the of of kind continuing of your I just consumer? that still expectations? concepts. versus the And lot it terms restaurant to but was end your set some saw the that you is see could or you're core discussion in at of in you overall if curious their how like the feels for kind out at strength is strong, appetite level industry, just been of there's then in your on

if some see So from current the environment? in provide how could just curious you perspective the you consumer

Emanuel Hilario

Kona Grill were sales. I'll break X.X quarter. checks way. this We were the it on we answer in actually same-store up quarter, in I'll Josh. out Thanks, plus in the

encouraged very by were we So that.

quarter Grill. So did perspective concept we though, points. pricing down. strong Kona from in a the X the performance also neighborhood see, the We And there trading in traffic there in of for a was had in

So perspective, the buying that P customer then seeing from we we STK, trade come when the clearly, a mix X.X% restaurants.And down items the we're they down about to they're checks. were on

We have X%, X% the of about or for pricing so quarter.

So a we also see down the STK consumer. with did trade

both our in on purchased performance restaurant. traffic down broad phenomenon clearly, say pieces solid would in relatively the for been seen we've the But So now consumer, items trading restaurants on with I trend happening the the has brands. the the was

terms In in in through on Fridays still restaurants Saturdays reported I've days of see is over more still the strong the customers trend, I challenged think time Monday we of of that terms week day and and performance the Wednesday.

kind into see we are consumer.And those of So trends is value. that the quarter, our like the emphasis fourth in relative the going

big notice there from believe statements value I that current plays role a the prepared you'll environment. in my So

will So -- $X Out and our in $XX at the our Grill. then $X, Hour Night on for $XX point Kona as price be $X, price the point focus Happy and

year. been we're We've So with over not layers being for proactive. a value proactive

So to the quarter. we're fourth leverage that expecting Great. in

Joshua Long

think then layers the of also broad-based? like value it part of down? there. about value you place in and offering where then seeing the importance had the you you're And strong a steady seeing, about some messaging. the that you Is you seems trade contextualize talked and we trade just that Are the when are down the -- with That

that to going with elevate you kind forward? draw or messaging of digital Just curious how marketing your awareness and work help to

Emanuel Hilario

It's products. a look on for focused it's frankly, the been I experience. at premium focused X -- digital We've highlighted on been the lot for in last if years, strategy Yes. the you experiences premium mean, of our the restaurants. think I

our with If point. messaging look directly and digital more hitting we you at price today, our the messaging of more are

have lot in instance, more but clear we generally Happy look current promoted Happy a just that Hour XX we're collateral at our $X, if marketed we months, you Hour, it's For whereas the last $X, $X. materials,

important, that that experience has point trumps price caveat the So we critical.With on become the the that is still anything. only price is believe point but

points. make those great of do do we provide rest menu sure is that we what kind the price we products in the So of that at

but at price it's So point, other great the and just those great points. experiences price not the providing products the really it's providing

Joshua Long

last me. about new units. environment you for the one unit then talk And new for Can opening the or

You've got year-to-date. a couple open open here here, several

You've couple like pipeline more this next kind a development from thinking got well, for of overall environment and the what's year those been your out looks permitting in unit new delays? How have year perspective for brands? the And as a trending? into then

Emanuel Hilario

mean, I have just Yes. environment, many reported, think general, is more in I construction the complex. people as

has to number many strategy the put the as projects. in with of our I process, priming think pump been of projects kind

I And we future. near projects the in the we picking the at about STKs that want we to have us for of think wanted open have bring within up to about which probably we've bring the group been of plenty amount want the were on.So lining see XX, doing where we XX in I that that which as projects pipeline. point the we pipeline up more months now we're think last pipeline, a from now prioritizing And it's for instance, really you it's of choosing to very exciting one alternatives the and really on.

that's see because that the not pipeline Kona STKs. next with delighted So Grill. right X, is And not by X we're way, you'll the now, the

the fact, in just up Ridge in of we jumped in has which to group. top or opened Desert Grill, very chain matter recently revenue the the a As our Kona already

years. excited that speaks gotten into I of super to the the we're about think couple So that. estate of really pipeline the in quality real And the we've that last

to to we're hear your and and the because when us about pipeline.But pace of is that us balance you'll a obviously, at opportunity more talk of quality have always through going openings for pace lot about the the you the So financial still right and resources the super one feels the comfortable resources excited just the the human you're flexibility things growth.

it's balancing and making keeping So factors. that we're X really those just sure pace us

overall In the terms still environment, of challenging. is permitting

the there's of So expensive.Labor is built. input nothing restaurants it's on really we is side that the a up that construction development. widening -- And primary into

certainly So last construction we the XX seen labor cost months, the in the builds of within going have up.

to to cycle. get So something stretch well. get site, get is that construction out within it's so in, And cycle out of you so building the don't through way we monitoring labor and you the keep very construction certainly construction shorten obviously, projects that the labor the the

the managing So permitting best those projects, we that well length are the that development labor. like cycle of very are X big of within in items get closely, managing kind so as that we as

Operator

question from comes Setyan Nick Securities. Next Wedbush with

Nick Setyan

QX. unit margin Your around guidance low in implies XX%

seen XX% deleverage given very Just a low much year-to-date, the nineteens, how in that you you've in high have -- high QX? of margin type sort confidence do of

Emanuel Hilario

great So question. Nick,

the call So One is the I positives margin. would just take that leading into pricing, pricing did holiday actually the week. this we quarter into the the items

do we third I think year. help by higher with put we menus So November, the in And of a this definition, the decided to week little typically place in margins. earlier pricing, holiday our should the

I that taken that next significant a margin restaurants, with thing amount people that helps now moving helps So to think the think from with the new is the of we're restaurants. and margins.I existing them we've the

duplicate the within possibly positions having off pressure takes that So restaurant.

with helps the labor restaurants. that So and side the

and down There's really couple I are of low in doing size weeks. weeks more it's supply will the we're careful our of of in think very ops there a a that on in stuff volume that be paper purchasing.So we've of paper brought quarter maybe like scheduling that that. kind generally of chain significant done being really for amount took We still items helpful. a that costs kind just good Tyler we mentioned the paper the very in labor advantage lot And a of like things a bit probably quarter, and of to little spec use weeks the although us. with slower within initiatives within

schedules sure we we and good. teams beef But commodity, So this very still need like that launching just there.Again, holidays. premium that promotion is to in there are that some still the mentioned the well that we manage we something think I through headwinds making of also manage the And that sure overall, our the year. that. very then we items are year is cool offset make in our having lines every We're in Wagyu some do

So both that gave both percentage the the dollar margin margin of those terms of kind fourth quarter. that should guess and drive are things headwind in there holiday help plus I a we season.So how you look maybe during at the the in I in and

Nick Setyan

then my question. last And just

You Would of the us you doing mentioned in as month-to-month progressed. that October sales? comp? quarter And telling the then improved guys how terms comps you're mind of the sort same-store in

Emanuel Hilario

model. to you, us, I with significant that month-to-month differences general, the would our honest -- mean, business be in to I think say weren't the in I

that So I do significant wouldn't you were that say Tyler, want perspective add on to unless, they that? anything from that

Tyler Loy

really October rest they but I some of about fourth think the relative how in we see terms mean, improvements did No. well. consistent, the kind feeling quarter and we're our as out And quarter. of to the relatively October, I for lays of then were sequential quarter the guidance

Operator

question Smith next Mark comes with Street from The Capital. Lake

Mark Smith

question First for me.

taking the how price planning know price of some of don't price with on increases? on you're where in here on about talked kind some you taking the and maybe focus increases, menu. I still with balance, you increases value that a if trying can to Manny, message send value that some quantify Just QX you

Emanuel Hilario

guess, price in demographics. at of and group other those we probably and really level Grill, the strategy to points us, that is So $XX like make approachable Kona the Happy fantastic one defining have really wider brand that STKs, that a points Hour at use focus really to much question, I the $XX Mark, that the helps with price we or

the an opportunity access to brand And so really for us. it's

sure strategy give then pricing bigger the participate brand believe you on -- the on So of sensitive, the experience targeted And dining very really if them menu to our high there's still stakes on opportunity of is level groups that consumer when the at prices we still the But end think higher-end the higher terms and we that up that a accessible we is there's then valley in on demographic make make brand. to that our to there's -- want to an and because really will of you're is everybody. in that super that of taking restaurant, use demographics still I is is intact. spending the full the experience.So layers a level strategy

and points frankly, also with And Wagyu so that well. promotions stuff and having kind like the higher price items other having is, very pricey, of really works

positioning giving then the the punch, in, an with products messaging, marketing, brand.And once premium that it's brands. to participate we're to core within the the customer in really the choice brands accessible the one-two the bringing So the it's on people a of you're

Mark Smith

outlook kind total on your fourth Next move into you question was results? as holiday quarter events just private for events here of season and private

Emanuel Hilario

I maybe about now now, is reports tend All books do the quarter. good right mean, strong we that our higher to the a very right a by built do I this XX% we into visibility a but have of time to be book by we visibility. have mean, pretty of coming today, Yes. little the XX% -- bit

focusing around the which dominate. we're actually about now So we holidays, And really that. pleased I'm super more

And say Year's I right in focusing really have is would challenge Day also and and do that now, of New really, managing some is so as space our Christmas on in the restaurants. powerful. So those we really Thanksgiving and maximizing days.So Eve, it's always, limited events the book capacity that on about

weeks about December X you So happen. capacity in that always the it how or those X really make it's manage during

really and that. it's demand early we it on strong, So done But is about haven't the still full yet. promoting our

will of there in doing that marketing we'll should refer that weeks, the next be some and even So that. promotions couple be to

event the for on the bullish I'm outlook So quarter. pretty

Mark Smith

the And looking last is initiatives. at of question me some just for cost-cutting

up. sure kind talk talked some. And depth you and I'm some of the if what of X this about within them You've you're restaurant is more to of if not outside you corporate overhead? of any of expect I picked at, hit? then the where in walls looking this about areas Can kind maybe

Tyler Loy

Yes, Mark, Tyler. is this

initiatives, down of terms really think, P&L. in walking So the I of cost kind through

are week I expenses thinking of then in scheduling in other and think embedded really smart that volumes that the not think some operating overhead about think some about bit, by through costs really costs we G&A, a around of of supplies day And as soft and then little finding and around really and talked are perspective, staffed operating making just those we're sure and the the expenses. of we're that travel day an out some for from appropriately it I the guest-facing costs soft the optimization really scheduling just model restaurants, there.And thoughtful I in by but apart. being

Emanuel Hilario

on and that cities to a is the the one mean, travel Yes. into, we hotel airfare. inexpensive cities us say are I for not to I the from travel, travel would big exactly particularly

hotels. get booking with around really that sure So of the and earlier a rates discipline we really lot making flights instituting right

not So on the were G&A. critical. we did travel. that some positions being very replace didn't on just smart take We And them

of on.And So we secret one soft that there's hold we've that we every every positions week, go do back on the short-term to We -- to restaurant. other shopper every and on there's been chosen reports to kind X weeks. decided used some then to things down G&A attrition

So that some costs cut out.

of taken and in stuff like out those boots our of which our the that. take -- points So we've hot some you that restaurants, pictures

that the don't we of out experiences think some out that impact help trimmed things we've the guest P&L. So

Operator

like our Hilario question-and-answer any conference over would closing I remarks. to concludes back session. turn to the Manny This for

Emanuel Hilario

for to you forward interest in listen The Thank working what look We and appreciate being in great all seeing a us quarter, our fourth story restaurants. our particularly on. with on have day. you to to And continued here this I your Group. we're always Everyone, ONE you

Operator

Thank you today's attending now This concluded. has for conference presentation.

your now may good a You disconnect Have lines. day.

The ONE Group Hospitality, Inc. (STKS) 7 Nov 232023 Q3 Earnings call transcript