The ONE Group Hospitality(STKS) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2019, total GAAP revenues were $22.8 million, representing a 16.7% increase from the same quarter last year [15] - Same store sales at owned and managed STK restaurants rose 8.6%, contributing to a two-year comp of 15.9% [6][15] - Adjusted EBITDA for Q1 2019 was $2.7 million, a 50% increase over the prior year [24] Business Line Data and Key Metrics Changes - Owned restaurant net revenue increased approximately 18.2% to $17.8 million compared to $15.1 million in Q1 2018, driven by a 10.4% increase in same store sales [16] - Management, license, and incentive fee revenues increased approximately 10.1% to $2.7 million, attributed to new licensed locations and improved performance at existing sites [17] - Owned food, beverage, and other net revenues increased 13.4% to $2.3 million, primarily due to the Super Bowl event held in January 2019 [18] Market Data and Key Metrics Changes - The company opened one international licensed STK in Doha and a company-owned STK in Nashville during Q1 2019, with plans for additional openings in the second half of the year [12][13] - The company expects to open two to four additional STK restaurants in 2019, including locations in Puerto Rico and Guadalajara, Mexico [13] Company Strategy and Development Direction - The company focuses on four key strategic initiatives: driving same store sales, improving operational efficiency, reducing G&A at the corporate level, and focusing on asset-light growth [7][10][11][12] - The company aims to leverage its brand strength to expand both domestically and internationally, targeting a global market for at least 200 locations [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum from 2018 continuing into 2019, with expectations for total GAAP revenues between $93 million and $95 million for the year [28] - The company anticipates same store sales growth of approximately 3% to 4% for the year, despite strong comparisons from 2018 [28] Other Important Information - General and administrative expenses decreased to $2.7 million, or 11.6% of total revenues, with expectations to reduce G&A to less than 10% of GAAP revenue annually [20][21] - The company reported a net income of $854,000 for Q1 2019, compared to $231,000 in the prior year [24] Q&A Session Summary Question: Upcoming events at locations - Management confirmed active participation in events, including those related to the ESPYs and movie premieres at their L.A. restaurant [34] Question: Performance of international locations - Management expressed satisfaction with the performance of international locations, particularly Doha, which exceeded expectations [36] Question: Specific targets for food and beverage locations - Management indicated that they are confident in the upcoming food and beverage locations, particularly in Florence, Italy, which is under construction [37] Question: Management team adequacy - Management affirmed confidence in their team, highlighting strong operational capabilities and training initiatives [38] Question: Preopening expenses and EBITDA - Preopening expenses for Nashville were excluded from the adjusted EBITDA calculation [42] Question: License deal expectations - Management expects an average annual revenue of $5 million for license deals, with a minimum profit of $250,000 [43] Question: G&A reduction expectations - Management indicated that G&A is expected to decrease both as a percentage of revenue and in absolute dollars due to improved productivity [44] Question: Capacity for future growth - Management stated that they can support approximately four to five new restaurants per additional headcount in G&A [46] Question: Financial impact of F&B deals - Management outlined that F&B-managed sites could generate significant profit shares, potentially reaching $300,000 to $500,000 [47]