The ONE Group Hospitality(STKS) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $73 million, an increase of 1.6% from $71.9 million in Q3 2021 [19] - Owned restaurant net revenue increased to $69.5 million, up 2.3% from $68 million in the same quarter last year [19] - Adjusted EBITDA for Q3 2022 was $7.1 million, compared to $10 million in Q3 2021 [25] - Net income attributable to the ONE Group was $0.4 million or $0.01 per share, down from $11.6 million or $0.34 per share in Q3 2021 [24] Business Line Data and Key Metrics Changes - STK comparable sales increased by 3.5% compared to Q3 2021, while Kona Grill saw a decrease of 3.6% [20] - STK's average weekly sales were $290,000, while Kona Grill's were $95,000 [6] - Restaurant operating profit at STK was 18.5%, while Kona Grill's was 6.4% [21] Market Data and Key Metrics Changes - Consolidated comparable sales increased by 0.5% for the quarter compared to 2021 [19] - Compared to 2019, consolidated comparable sales increased by 45.6%, with STK up 70.6% and Kona Grill up 22.3% [20] Company Strategy and Development Direction - The company plans to open 7 new units in the second to fourth quarters of 2022, including 3 company-owned STKs and 3 company-owned Kona Grills [15] - The company is focusing on high-volume, high-margin brands with compelling returns, targeting a total addressable market of at least 400 restaurants [17] - The company is confident in its pricing power and plans to implement further price increases in Q4 2022 [12] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures outpaced price increases during Q3, but they expect margins to improve in Q4 due to pricing adjustments [13][49] - The company is optimistic about the upcoming holiday season and sees an increase in corporate event bookings [51] - Management highlighted the strong performance of the new STK San Francisco location, which is exceeding revenue expectations [64] Other Important Information - Hurricane Ian negatively impacted sales, particularly in Florida, which accounts for 14% of the sales base [8][44] - The company repurchased 500,000 shares of common stock during Q3 2022 [26] Q&A Session Summary Question: Insights on Kona Grill's performance - Management indicated that Kona Grill's comparable sales were down 3%, with traffic down 7-8%, but check sizes increased due to higher steak sales [30] Question: Impact on Kona Grill's operating profit - Management attributed margin pressure primarily to inflation and labor costs, with pricing adjustments planned for Q4 [31] Question: Staffing levels in preparation for Q4 - Management confirmed they were fully staffed in Q3 to prepare for the busy Q4 season [35] Question: Real estate opportunities - Management noted significant availability of real estate and a strong pipeline for new openings [37] Question: Corporate event business recovery - Management reported an increase in corporate event bookings, particularly for full venue buyouts, which are profitable [51] Question: Commodity costs and supply chain - Management observed stabilization in labor costs but continued pressure on core commodities like beef and seafood [43][58] Question: Financial outlook for Q4 and beyond - Management expressed optimism about returning to growth in EBITDA in Q4, supported by new store openings and pricing adjustments [66]