The ONE Group Hospitality(STKS) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial & Operational Highlights The company reports strong revenue growth from the Benihana acquisition and outlines synergy and growth initiatives Q2 2024 Financial Performance Summary Revenue doubled post-acquisition, but comparable sales declined, resulting in a GAAP net loss Q2 2024 Key Financial Metrics vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total GAAP Revenues | $172.5 million | $83.4 million | +106.8% | | Comparable Sales | -7.0% | N/A | N/A | | GAAP Net (Loss)/Income | ($11.5 million) | $0.6 million | - | | GAAP Net (Loss)/Income per Share | ($0.36) | $0.02 | - | | Adjusted Net Income per Share | $0.08 | $0.06 | +33.3% | | Restaurant Operating Profit | $30.0 million | $11.9 million | +151.3% | | Restaurant Operating Profit Margin | 17.7% | 14.9% | +280 bps | | Adjusted EBITDA | $23.9 million | $8.5 million | +180.6% | Management Commentary and Strategic Initiatives Management is focused on integrating Benihana, realizing cost synergies, and pursuing new venue growth - Completed the acquisition of Benihana and RA Sushi brands in May, adding nearly 6,500 new teammates[2] - The company has realized approximately $9 million in G&A synergies and anticipates a total of $20 million in annual synergies over the next two years[2] - A strong pipeline for unit growth is in place, with six to nine new venues expected to open in 2024[2] Business Development and Outlook The company details the Benihana acquisition, its development pipeline, and reaffirms 2024 financial targets Acquisition of Benihana Inc. The company completed the $365 million cash acquisition of Benihana, financed by new debt and preferred equity - The acquisition of Safflower Holdings Corp (owner of Benihana) was completed on May 1, 2024, for a total of $365 million in cash[5] - Financing for the acquisition included a new $390 million term loan and credit facility, and $160 million in preferred equity[5] Restaurant Development and Share Repurchase The company plans eight to eleven new venues for 2024 and repurchased $0.9 million of its shares in Q2 - The company plans to open 8 to 11 new venues in 2024, comprising 3-4 STKs, 2-3 Kona Grills, 1-2 Benihanas, one Salt Water Social, and one RA Sushi[6] - During Q2 2024, the company repurchased 0.2 million shares for $0.9 million as part of its $5 million share repurchase program[6] 2024 Financial Targets The company reaffirms its 2024 guidance, projecting up to $740M in revenue and $100M in Adjusted EBITDA 2024 Full-Year Guidance | Metric | 2024 Guidance (US$ in millions) | | :--- | :--- | | Total GAAP revenues | $700 to $740 | | Consolidated Adjusted EBITDA | $95 to $100 | | Consolidated Total G&A (excl. stock-based comp) | Approx. $40 | | Consolidated Total capital expenditures, net | $50 to $60 | | Number of new system-wide venues | Eight to Eleven | Consolidated Adjusted EBITDA Growth Analysis | Entity | 2023 Pro Forma (millions) | 2024 Guidance (millions) | Growth % | | :--- | :--- | :--- | :--- | | The ONE Group Pre-acquisition | $40.1 | $45 | 12.2% | | Benihana Pre-acquisition | $41.0 | $50 to $55 | 22.0% to 34.1% | | Consolidated | $81.1 | $95 to $100 | 17.1% to 23.3% | Consolidated Financial Statements The company presents financial statements reflecting the significant impact of the Benihana acquisition Consolidated Statements of Operations Q2 2024 saw higher revenues but a net loss of $11.5 million due to significant acquisition-related costs Consolidated Statements of Operations (in thousands) | Line Item | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenues | $172,494 | $83,393 | | Total Costs and Expenses | $170,840 | $81,348 | | Operating Income | $1,654 | $2,045 | | Transaction and Integration Expenses | $10,620 | $0 | | Net (Loss) Income | ($7,092) | $416 | | Net (Loss) Income to Common Stockholders | ($11,467) | $568 | - Owned restaurant cost of sales as a percentage of owned restaurant net revenue improved to 21.2% in Q2 2024 from 24.0% in Q2 2023[16] - Transaction and transition/integration costs related to the acquisition amounted to 6.2% of total revenues for Q2 2024[16] Consolidated Balance Sheets Total assets and liabilities grew substantially post-acquisition, driven by goodwill, intangibles, and new debt Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $945,864 | $317,245 | | Cash and cash equivalents | $32,247 | $21,047 | | Goodwill | $145,162 | $0 | | Intangibles, net | $146,193 | $15,306 | | Total Liabilities | $736,642 | $249,885 | | Long-term debt, net | $330,861 | $70,410 | | Total Stockholders' Equity | $65,741 | $67,360 | Reconciliation of Non-GAAP Measures This section reconciles key non-GAAP metrics like same-store sales, Adjusted EBITDA, and Adjusted Net Income Same Store Sales Analysis Combined same-store sales declined by 7.0% in Q2 2024, with decreases observed across all company brands Q2 2024 vs. Q2 2023 Same Store Sales | Brand | Q2 2024 vs Q2 2023 | | :--- | :--- | | US STK Total Restaurants | (10.6)% | | Benihana Total Restaurants | (1.0)% | | Kona Grill Total Restaurants | (14.0)% | | RA Sushi Total Restaurants | (10.3)% | | Combined Same Store Sales | (7.0)% | Reconciliation of Net Income to Adjusted EBITDA Adjusted EBITDA rose to $23.9 million after adjusting for significant acquisition and integration costs Adjusted EBITDA Reconciliation (in thousands) | Line Item | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net (Loss) Income | ($7,092) | $416 | | Depreciation & Amortization | $8,025 | $3,506 | | Transaction and exit costs | $6,826 | $0 | | Transition and integration expenses | $3,794 | $0 | | Loss on early debt extinguishment | $4,149 | $0 | | Adjusted EBITDA | $23,869 | $8,466 | Reconciliation of Operating Income to Restaurant Operating Profit Restaurant Operating Profit increased to $30.0 million, with the new Benihana brand being the top contributor Restaurant Operating Profit by Brand - Q2 2024 (in thousands) | Brand | Restaurant Operating Profit | Profit as % of Brand Revenue | | :--- | :--- | :--- | | Benihana (Company owned) | $16,734 | 21.4% | | STK (Company owned) | $9,114 | 18.3% | | Core Kona Grill | $3,308 | 12.1% | | Core RA Sushi | $1,034 | 11.1% | | Total | $29,952 | 17.7% | Reconciliation of Net Income to Adjusted Net Income Adjusted net income was $2.8 million after excluding after-tax impacts of acquisition-related expenses Adjusted Net Income Reconciliation (in thousands, except per share data) | Line Item | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net (Loss) Income to Common Stockholders | ($11,467) | $568 | | Adjustments (Transaction, Integration, etc.) | $15,136 | $1,317 | | Adjusted Net Income to Common Stockholders | $2,790 | $1,804 | | Adjusted Diluted EPS | $0.08 | $0.06 |