DENVER- The ONE Group Hospitality, Inc. ('The ONE Group' or the 'Company') (Nasdaq: STKS) today reported its financial results for the fourth quarter and full year ended December 31, 2023.
Highlights for the fourth quarter compared to the same quarter in 2022 are as follows:
Total GAAP revenues increased 1.8% to $89.9 million from $88.3 million;
Comparable sales* decreased 4.3% compared to 2022 and increased 40.1% compared to 2019;
GAAP net income attributable to The ONE Group was $4.6 million, or $0.15 per share ($0.17 adjusted net income per share) ****, compared to GAAP net income of $5.1 million, or $0.15 per share ($0.19 adjusted net income per share) ****
Restaurant Operating Profit*** increased 3.8% to $16.5 million from $15.9 million; and
Adjusted EBITDA** increased 11.3% to $14.5 million from $13.0 million.
Highlights for the full year 2023 compared to 2022 are as follows:
Total GAAP revenues increased 5.1% to $332.8 million from $316.6 million;
Consolidated comparable sales* decreased 2.7% and increased 43.8% compared to 2019;
GAAP net income attributable to The ONE Group was $4.7 million, or $0.15 per share ($0.24 adjusted net income per share)****, compared to GAAP net income of $13.5 million, or $0.40 per share ($0.55 adjusted net income per share)****
Restaurant Operating Profit*** decreased slightly to $50.4 million compared to $50.8 million;
Adjusted EBITDA** was $40.1 million compared to $41.3 million.
'We are pleased with our fourth quarter results, especially our focus to improve restaurant-level margins and leverage our G&A. During the fourth quarter, we increased restaurant operating profit by 40 basis points to 19.3% of Company-owned restaurant net revenues, reduced G&A by 80 basis points to 8.8% of revenue and grew adjusted EBITDA by 11.3%. As we continue our expansion, we should benefit from greater leverage through the best practices and operating efficiencies we have put in place across our organization,' said Emanuel 'Manny' Hilario, President and CEO of The ONE Group.
Hilario continued, '2023 marked a year of robust unit development. We added four new restaurants during the fourth quarter. Importantly, these locations and restaurant locations we opened earlier this year are performing well, bolstering our confidence in the long-term EBITDA and earnings power of our pipeline. In 2024, we plan to open six to eight new restaurants, including one or two managed and licensed restaurants. Earlier today, we opened an STK in Washington DC at the Marriott Grand Marquis and currently have three Company-owned restaurants under construction. Our strong reception in new geographies gives us line of sight towards our total addressable market of 400 venues consisting of 200 STKs globally and 200 Kona Grills domestically.'
*Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-months. This measure includes total revenue from our owned and managed locations. The Company monitors sales growth at its established restaurant base in addition to growth that results from restaurant acquisitions.
**We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses including incremental costs related to COVID-19, stock-based compensation and certain transactional costs. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted EBITDA in this release.
***We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses. Restaurant Operating Profit has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Operating income to Restaurant Operating Profit in this release.
****We define Adjusted Net Income as net income before COVID-19 costs, lease termination expenses, one-time stock-based compensation, non-recurring costs, non-cash rent during the pre-opening period and the income tax effect of any adjustments. Adjusted Net Income has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted Net Income in this release.
Fourth Quarter 2023 Financial Results
Total GAAP revenues increased $1.6 million, or 1.8%, to $89.9 million in the fourth quarter of 2023 from $88.3 million in the fourth quarter of 2022.
Total owned restaurant net revenues increased $1.3 million, or 1.5%, to $85.2 million in the fourth quarter of 2023 from $83.9 million in the fourth quarter of 2022. The increase was primarily attributable to the six Company owned venues opened in 2023.
Consolidated comparable sales* decreased 4.3% compared to the fourth quarter of 2022. STK same store sales decreased 4.6% while Kona Grill same store sales decreased 3.9%. Compared to 2019, our pre-pandemic base year, same store sales for the fourth quarter of 2023 increased 40.1% compared to the fourth quarter of 2019; STK same store sales increased 55.4%, including a 41.3% increase in traffic, while Kona Grill same store sales increased 22.7%.
Management, license and incentive fee revenues increased $0.3 million, or 7.6%, to $4.8 million in the fourth quarter of 2023 from $4.4 million in the fourth quarter of 2022. The increase was primarily driven by increased revenue and profit at our North American managed and license properties and STK Stratford.
Restaurant Operating Profit*** increased $0.6 million or 3.8% to $16.5 million in the fourth quarter of 2023 from $15.9 million in the fourth quarter of 2022. As a percentage of Company-owned restaurant net revenues, operating profit margin increased 40 basis points to 19.3% in the fourth quarter of 2023 from 18.9% in the fourth quarter of 2022. The increase was related to price increases and operational cost reduction initiatives partially offset by increased commodity prices and labor inflation.
General and administrative costs decreased $0.5 million, or 6.5%, to $7.9 million in the fourth quarter of 2023 from $8.5 million in the fourth quarter of 2022. The decrease was attributable to decreases in travel and incentive-based performance compensation expenses. As a percentage of revenues, general and administrative costs were 8.8% compared to 9.6%.
Pre-opening expenses were $2.9 million in the fourth quarter of 2023 compared to $1.7 million in the fourth quarter of 2022. The increase was related to payroll, training, and non-cash pre-open rent for STK Charlotte, Kona Grill Phoenix, STK Boston and STK Salt Lake City, all of which opened in the fourth quarter, and for STK and Kona Grill restaurants currently under development.
GAAP net income attributable to The ONE Group Hospitality, Inc. in the fourth quarter of 2023 was $4.6 million, or $0.15 per share, compared to GAAP net income of $5.1 million, or $0.15 per share, in the fourth quarter of 2022.
Adjusted Net Income**** attributable to The ONE Group Hospitality, Inc. in the fourth quarter of 2023 was $5.3 million, or $0.17 per share, compared to Adjusted Net Income of $6.5 million, or $0.19 per share, in the fourth quarter of 2022.
Adjusted EBITDA** increased $1.5 million, or 11.3%, to $14.5 million in the fourth quarter of 2023 from $13.0 million in the fourth quarter of 2022.
Full Year 2023 Financial Results
Total GAAP revenues increased $16.1 million, or 5.1%, to $332.8 million in 2023 from $316.6 million in 2022.
Total owned restaurant net revenues increased $16.5 million, or 5.5%, to $317.4 million in 2023 from $300.9 million for 2022. The increase was primarily attributable to a full year of sales for two STK restaurants that opened in the second half of 2022, the opening of three STK restaurants in the fourth quarter of 2023 and the opening of three Kona Grill restaurants during 2023.
Consolidated comparable sales* decreased 2.7% compared to 2022. STK same store sales decreased 3.0% while Kona Grill same store sales decreased 2.2%. Compared to 2019, the pre-pandemic base year, consolidated comparable sales increased 43.8%; STK same store sales increased 64.1%, including a 39.1% increase in traffic, while Kona Grill same store sales increased 23.6%.
Management, license and incentive fee revenues decreased $0.4 million, or 2.4%, to $15.4 million in 2023 compared to $15.8 million in 2022. The decrease was primarily attributable to the non-renewal of the management agreement for Radio at the ME London hotel.
Restaurant Operating Profit*** decreased to $50.4 million and represented 15.9% of Company-owned restaurant net revenues in 2023 compared to $50.8 million and 16.9% of Company-owned restaurant net revenues in 2022. The decrease was primarily due to consolidated higher average wage and operating costs which were subject to inflationary pressures during 2023 that affected the restaurant industry.
STK Restaurant operating profit was $38.5 million and represented 20.9% of Company-owned STK restaurant net revenues compared to 21.5% in 2022. Kona Grill operating profit was $12.3 million and represented 9.3% of Company-owned Kona Grill restaurant net revenues compared to 10.8% in 2022.
GAAP net income attributable to The ONE Group Hospitality, Inc. was $4.7 million in 2023, or $0.15 per share, compared to $13.5 million, or $0.40 per share in 2022.
Adjusted Net Income**** attributable to The ONE Group Hospitality, Inc. was $7.8 million in 2023, or $0.24 per share, compared to $18.7 million, or $0.55 per share in 2022.
Adjusted EBITDA** decreased $1.2 million, or 2.9%, to $40.1 million in 2023 from $41.3 million in 2022.
Restaurant Development - STK and Kona Grill Restaurants
The Company opened six new restaurants in 2023:
Owned STK restaurant in Charlotte, North Carolina
Owned STK restaurant in Boston, Massachusetts
Owned STK restaurant in Salt Lake City, Utah
Owned Kona Grill restaurant in Columbus, Ohio
Owned Kona Grill restaurant in Riverton, Utah
Owned Kona Grill restaurant in Phoenix, Arizona
The Company intends to add six to eight new restaurants in 2024, inclusive of one owned STK restaurant in Washington, DC that opened in March 2024.
There are currently three restaurants under construction in the following cities:
Owned STK restaurant in Aventura, Florida
Owned Kona Grill restaurant in Tigard, Oregon
Owned Salt Water Social restaurant in Denver, Colorado
Share Repurchase Program
On September 7, 2022, the Company commenced a share repurchase program for up to $10 million of its outstanding common stock, and subsequently increased authorized repurchases by $5 million. During the years ended December 31, 2023 and 2022, the Company purchased 1.2 million and 1.1 million shares for aggregate consideration of $7.9 million and $7.1 million, respectively. As of December 31, 2023, the Company repurchased 2.3 million shares for $15.0 million under the program. The Company's board has authorized an additional $5 million to this program.
2024 Targets
The Company is providing the following targets for 2024:
Financial Results and Other Select Data
Investors:
ICR
Michelle Michalski or Raphael Gross
(646) 277-1224
Michelle.Michalski@icrinc.com
THE ONE GROUP HOSPITALITY, INC. 
