The ONE Group Reports First Quarter 2021 Financial Results

Rhea-AI Summary

The ONE Group Hospitality, Inc. (Nasdaq: STKS) reported a 24% increase in total GAAP revenues for Q1 2021, reaching $50.5 million, up from $40.7 million in Q1 2020. The company achieved a slight net income of $70,000, or $0.00 per share, compared to a net loss of $4.6 million a year prior. Adjusted EBITDA soared by 312% to $6.5 million. Comparable sales surpassed pre-pandemic levels, with a 32.2% increase in April 2021. The company plans to open thirteen new venues by 2022, reflecting confidence in ongoing recovery despite COVID-19 challenges.

Positive

• Total GAAP revenue increased 24% to $50.5 million.
• Adjusted EBITDA rose 312% to $6.5 million.
• Comparable sales increased 32.2% in April 2021.

Negative

• GAAP net income was only slightly positive at $70,000, indicating ongoing challenges.

The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (Nasdaq: STKS) today reported its financial results for the first quarter ended March 31, 2021.

Highlights for the first quarter ended March 31, 2021 compared to the same period last year are as follows:

• Total GAAP revenues increased 24.0% to $50.5 million from $40.7 million.
• GAAP net income attributable to The ONE Group was slightly positive, or $0.00 net income per share ($0.05 adjusted net income per share)****, compared to GAAP net loss of $4.6 million, or $0.16 net loss per share ($0.13 adjusted net loss per share)****. GAAP net income attributable to The ONE Group during the first quarter 2021 included $1.6 million of incremental costs related to COVID-19.
• Adjusted EBITDA** increased 312% to $6.5 million from $1.6 million.

Sales Highlights for the first quarter ended March 31, 2021 and April 2021 compared to the same period in 2019 are as follows:

• Consolidated comparable sales* increased 3.3% for the quarter and 32.2% for the month of April.
• Comparable sales* for STK increased 1.9% for the quarter and 47.4% for the month of April.
• Comparable sales* for Kona Grill increased 4.6% and 18.6% for the month of April.

“The improvement in our comparable sales trend clearly demonstrates that as dining capacity increases and vaccinations are rolled out, guests are eager to join us for in-person VIBE dining experiences. Although there are still many restrictions still imposed on us by local mandates, we have already surpassed 2019 comparable sales in the first quarter, experienced an acceleration in April, and expect continued improvement as restrictions lift and our operational, marketing, and culinary initiatives continue to be effective. We sincerely thank our teammates for ensuring our operational readiness during this recovery period and for properly serving our guests while following strict health and safety protocols. Our team is also effectively managing costs by adhering to the cost-saving measures we implemented last year that are enabling us to deliver record restaurant-level margins. In doing so, we are maximizing our Adjusted EBITDA opportunity relative to the robust growth on our top-line,” said Emanuel “Manny” Hilario, President and CEO of The ONE Group.

*Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-month period. This measure includes total revenue from our owned and managed locations. Two-year comparable sales relates to the comparison of comparable sales for the period of 1/1/2021 through 3/31/2021 to the period of 1/1/2019 through 3/31/2019 and for the period of 4/1/2021 through 4/30/2021 to the period of 4/1/2019 through 4/30/2019. The Company monitors sales growth at its established restaurant base in addition to growth that results from restaurant acquisitions; the Company has presented two-year comparable sales to illustrate how sales at its restaurant base before the COVID-19 pandemic compare to sales as COVID-19 restrictions have eased and the Company has begun to recover lost sales.

** Adjusted EBITDA. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses including incremental costs related to COVID-19, stock-based compensation and certain transactional costs. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Adjusted EBITDA to Net Income in this release.

First Quarter 2021 Financial Results:

Total GAAP revenues increased 24.0% to $50.5 million in the first quarter of 2021 from $40.7 million in the first quarter of 2020.

Total owned restaurant net revenues increased 27.5% to $49.2 million in the first quarter of 2021 from $38.6 million in the first quarter of 2020. The increase in revenue is primarily attributable to strong sales momentum as state and local governments continue to ease seating capacity restrictions in the markets in which the Company operates. Comparable restaurant sales increased 23.5% in the first quarter of 2021.

Management, license and incentive fee revenues were $1.3 million in the first quarter of 2021 compared to $2.2 million in the first quarter of 2020. Management and license fee revenue decreased primarily as a result of temporary closures and limited in-person seating at the Company’s managed locations due to COVID-19 prevention measures.

Restaurant Operating Profit*** was $9.3 million, or 18.8% of company-owned restaurant net revenues, in the first quarter of 2021 compared to $1.9 million, or 5.0% of company-owned restaurant net revenues, in the first quarter of 2020. The 1,380 basis point improvement was primarily driven by the higher sales and strong management of operating costs coupled with menu development and optimization as restaurants re-opened.

GAAP net income attributable to The ONE Group Hospitality, Inc. in the first quarter of 2021 was $70,000, or $0.00 per share, compared to GAAP net loss of $4.6 million, or $0.16 net loss per share, in the first quarter of 2020. First quarter 2021 net income included $1.6 million of incremental costs related to COVID-19.

Adjusted Net Income**** attributable to The ONE Group Hospitality, Inc. in the first quarter of 2021 was $1.6 million, or $0.05 per share, compared to adjusted net loss of $3.6 million, or $0.13 net loss per share, in the first quarter of 2020.

Adjusted EBITDA** increased to $6.5 million in the first quarter of 2021 from $1.6 million in the first quarter of 2020.

As of March 31, 2021, the Company had $28.4 million in cash and cash equivalents, $47.3 million in term loan debt, and $10.7 million available on its revolving credit facility, subject to restrictions.

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

****Adjusted Net Income (Loss). We define Adjusted Net Income as net income before COVID-19 costs, one-time stock based compensation and the income tax effect of the adjustment. Adjusted Net Income has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Adjusted Net Income to Net Income (Loss) in this release.

In-Person Dining Capacity

• January: 41%
• February: 46%
• March: 60%
• April: 65%

2021-2022 Restaurant Development

The Company intends to open thirteen new venues between 2021 and 2022. There are currently three STK restaurants and four managed F&B venues under construction.

Location

Type

FAQ

What were the Q1 2021 revenue results for STKS?

The ONE Group reported Q1 2021 revenues of $50.5 million, a 24% increase from $40.7 million in Q1 2020.

How did STKS perform in terms of adjusted EBITDA?

STKS's adjusted EBITDA for Q1 2021 increased by 312% to $6.5 million.

What is the current status of STKS's comparable sales?

Comparable sales for STKS increased by 3.3% in Q1 2021 and 32.2% for April 2021.

What plans does STKS have for future restaurant openings?

The ONE Group plans to open thirteen new venues between 2021 and 2022.

What was the net income for STKS in Q1 2021?

The ONE Group reported a net income of $70,000, or $0.00 per share, in Q1 2021.