The ONE Group Hospitality(STKS) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record total GAAP revenues of $84.1 million for Q4 2021, an increase of 86.8% from $45 million in Q4 2020 [33] - Adjusted EBITDA for Q4 2021 was $13.3 million, compared to $4.1 million in Q4 2020, reflecting a significant improvement in profitability [42] - Net income attributable to The ONE Group was $5.8 million or $0.17 per share, compared to a net loss of $4.5 million or $0.15 per share in Q4 2020 [41] Business Line Data and Key Metrics Changes - Consolidated restaurant margins improved to 20.4%, up 440 basis points from 16% in Q4 2020, driven by strong sales initiatives and disciplined cost management [10][37] - Comparable sales increased by 49.8% compared to 2019, with STK seeing a 60% increase and Kona Grill a 38.2% increase [34] - Average weekly sales for STK reached $338,000, compared to $215,000 in the same period in 2019, while Kona Grill's average weekly sales were $108,000, up from $78,000 [12] Market Data and Key Metrics Changes - The management license and incentive fee revenues were $4.6 million, a 262% increase from $1.3 million in Q4 2020, attributed to the recovery from the pandemic and new openings [35] - The company added seven new venues in 2021, including three managed F&B units and two managed STKs, contributing to its growth strategy [23] Company Strategy and Development Direction - The company plans to open at least nine new units in 2022, including two company-owned STKs and three company-owned Kona Grills, indicating a robust development pipeline [24] - The focus remains on maintaining a strong employee base to ensure high-quality service and operational excellence, which is seen as a competitive advantage [29][30] - The company is targeting a total addressable market of at least 400 restaurants, with plans for significant growth in both STK and Kona Grill brands [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges in the macro environment but emphasized the positive impact of their brunch and happy hour initiatives on sales [48] - The company is cautious about providing long-term guidance due to macroeconomic uncertainties but remains optimistic about short-term performance [50] - Management highlighted the importance of flexibility in menu management and supply chain to navigate inflationary pressures [53][54] Other Important Information - The company reported $23.6 million in cash and cash equivalents as of December 31, indicating strong liquidity [42] - Direct costs related to COVID-19 during Q4 amounted to approximately $2 million, reflecting ongoing health and safety measures [38] Q&A Session Summary Question: Insights on Q1 revenue momentum - Management noted that brunch and happy hour initiatives have driven incremental interest and sales, contributing to positive performance despite macro challenges [48] Question: Confidence in surpassing previous quarterly numbers - Management expressed positivity about current performance but emphasized a focus on short-term guidance due to macroeconomic uncertainties [50] Question: Thoughts on inflation and pricing strategy - Management highlighted the need for flexibility in menu management and maintaining competitive pricing while being open to necessary price adjustments [53][54] Question: Labor investments and growth pipeline - Management confirmed a healthy pipeline of talent and emphasized the importance of maintaining staffing levels to support growth [56] Question: Management license and incentive fee revenue outlook - Management indicated that growth in this area reflects their growth strategy and expects continued progress as more properties come online [59] Question: Commodity contracts and supply management - Management confirmed short-term contracts for beef and a healthy supply of shellfish, emphasizing flexibility in menu offerings to mitigate supply chain issues [61] Question: Off-premise sales quantification - Management reported that takeout and delivery sales account for 5% to 8% of STK's sales and 13% to 17% for Kona Grill, with brunch expected to grow significantly [64]