The ONE Group Hospitality(US:STKS)2021-11-06 19:40Financial Data and Key Metrics Changes - The company reported record-setting revenue of nearly $72 million in total GAAP revenue for Q3 2021, reflecting an 81.6% increase from $39.6 million in the same quarter last year [31] - Adjusted EBITDA reached over $10 million for the quarter, bringing year-to-date adjusted EBITDA to $29.4 million [9][45] - Net income attributable to The ONE Group was $11.7 million or $0.34 per share, compared to a net loss of $0.9 million in Q3 2020 [43] Business Line Data and Key Metrics Changes - U.S. average weekly sales for STK were $285,000, up from $184,000 in the same period in 2019, while Kona Grill saw average weekly sales of $99,000 compared to $78,000 in 2019 [9] - Consolidated comparable sales increased 44.7% compared to 2019, with STK up 63.8% and Kona Grill up 26.9% [10][33] - Restaurant operating profit increased to 17.1% for the quarter compared to 16.6% in the prior year [39] Market Data and Key Metrics Changes - The company experienced strong sales momentum across all dayparts, particularly on Sundays due to the brunch offering [12][16] - October saw consolidated comparable sales increase by 59.2%, with STK up 73.7% and Kona Grill up 42.9% compared to 2019 [11] Company Strategy and Development Direction - The company plans to open 13 new STK and F&B venues between 2021 and 2022, with 7 new venues already opened in 2021 [18][19] - The company is focusing on a robust development pipeline, including a target of 3 to 5 new Kona Grill locations per year starting in 2022 [23] - The company aims for a total addressable market of at least 200 STK restaurants globally and 200 Kona Grills domestically, with much of the growth being asset-light [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued sales growth for the remainder of the year and beyond, citing strong demand for events and restaurant buyouts [18][62] - The company has successfully managed labor shortages and inflationary pressures, maintaining over 100% staffing levels going into the busy fourth quarter [25][26] - Management highlighted the importance of employee retention and training to ensure high service levels during peak demand periods [28][66] Other Important Information - The company amended its credit facility, resulting in lower interest rates and extended maturity dates, saving $2.5 million in cash interest expense annually [46][47] - The company has entered into an agreement with REEF kitchens to open delivery-only venues, which could expand significantly in the future [22][111] Q&A Session Summary Question: Can you provide details on October's STK and Kona Grill comparable sales? - Average weekly sales for STK were $323,000 and for Kona Grill, about $100,000, with comparable sales for October at 59.2% over 2019 for STK and 43% for Kona Grill [54][56] Question: What factors contributed to the sales acceleration in October? - The acceleration was attributed to effective promotions and a strong push in takeout and delivery marketing, leading to increased restaurant visits [60][62] Question: How did labor costs impact restaurant-level margins in Q3? - The company increased its hourly employee base by over 300, which involved significant training costs, impacting margins but positioning for a busy Q4 [66][68] Question: What is the outlook for the events business in Q4 compared to 2019? - The company is seeing superior demand for premium events and expects a strong performance in the events business, potentially exceeding 2019 levels [80][82] Question: How does the company plan to allocate future free cash flow? - The company is considering options such as M&A, accelerating growth, dividends, and stock buybacks, with a focus on maximizing shareholder returns [96]