The ONE Group Hospitality(STKS) - 2022 Q1 - Quarterly Report

PART I – Financial Information Financial Statements The unaudited condensed consolidated financial statements for Q1 2022 show total assets of $236.6 million, net income of $3.7 million, and cash of $28.6 million - The company operates and licenses 59 venues as of March 31, 2022, including 22 STK restaurants, 24 Kona Grills, and 13 other F&B venues, with STK and Kona Grill as primary brands[19][20] - COVID-19 related expenses were $2.3 million for Q1 2022, primarily for sanitation, supplies, and safety measures, with all restaurants currently open for in-person dining[21] Condensed Consolidated Balance Sheet (in thousands) | Account | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $44,800 | $42,927 | | Total Assets | $236,574 | $229,835 | | Total Current Liabilities | $42,836 | $42,264 | | Total Liabilities | $172,055 | $169,310 | | Total Stockholders' Equity | $65,577 | $61,434 | | Total Liabilities and Equity | $236,574 | $229,835 | Condensed Consolidated Statement of Operations (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $74,181 | $50,482 | | Owned restaurant net revenue | $70,516 | $49,168 | | Management, license and incentive fee revenue | $3,665 | $1,314 | | Operating Income | $4,202 | $857 | | Net Income Attributable to The One Group | $3,670 | $70 | | Diluted Net Income Per Share | $0.11 | $0.00 | Condensed Consolidated Statement of Cash Flows (in thousands) | Activity | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,823 | $6,986 | | Net cash used in investing activities | ($4,450) | ($2,615) | | Net cash used in financing activities | ($253) | ($304) | | Net increase in cash and cash equivalents | $5,030 | $4,050 | | Cash and cash equivalents, end of period | $28,644 | $28,435 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q1 2022 financial performance, driven by 46.9% revenue growth and 45.1% same-store sales increase, with Adjusted EBITDA reaching $10.8 million and ongoing growth strategies - The company's growth strategy focuses on expanding STK and Kona Grill restaurants, pursuing new F&B hospitality projects, increasing same-store sales, and potential acquisitions, with plans to open at least nine new venues in 2022[81][85] Q1 2022 vs Q1 2021 Performance Highlights | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $74.2M | $50.5M | +46.9% | | Same-Store Sales (YoY) | +45.1% | N/A | N/A | | - STK SSS | +66.5% | N/A | N/A | | - Kona Grill SSS | +21.9% | N/A | N/A | | Operating Income | $4.2M | $0.9M | +$3.3M | | Restaurant Operating Profit | $13.0M | $9.3M | +40.8% | Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $3,521 | ($60) | | EBITDA | $6,917 | $3,556 | | Adjusted EBITDA | $10,678 | $6,446 | | Adjusted EBITDA attributable to The ONE Group | $10,756 | $6,499 | - As of March 31, 2022, the company had $28.6 million in cash and cash equivalents and $24.6 million in long-term debt, with $10.6 million available on its revolving credit facility[110] - Capital expenditures in Q1 2022 totaled $4.5 million, comprising $1.7 million for new restaurant construction (STK and Kona Grill) and $2.8 million for existing restaurants and technology initiatives[111][124] Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' the company is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' the company is not required to provide quantitative and qualitative disclosures about market risk[127] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to two material weaknesses in internal control over financial reporting, with ongoing remediation efforts - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2022[129] - The ineffectiveness stems from two material weaknesses in internal control over financial reporting previously identified in the 2021 Form 10-K, which did not result in a material misstatement[129] - Remediation efforts to address the material weaknesses are ongoing, and the weaknesses cannot be considered remediated until controls have operated effectively for a sufficient period[130][131] PART II – Other Information Legal Proceedings The company is subject to various legal claims common in the hospitality industry, with management believing their ultimate resolution will not materially adversely affect financial position or results - The company is subject to claims common to the restaurant industry, such as those regarding compliance with labor laws and regulations[133] - Management does not believe the ultimate resolution of current legal matters will have a material adverse effect on the company's consolidated financial statements[133][135] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors as disclosed in the Form 10-K for the year ended December 31, 2021[136] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[137] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents and required CEO and CFO certifications - The report includes required exhibits such as CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and Inline XBRL data files[138]