NASDAQ:STKS ONE Group Hospitality Q1 2023 Earnings Report $2.92 +0.04 (+1.39%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$2.92 0.00 (0.00%) As of 04/25/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast ONE Group Hospitality EPS ResultsActual EPS$0.10Consensus EPS $0.14Beat/MissMissed by -$0.04One Year Ago EPSN/AONE Group Hospitality Revenue ResultsActual Revenue$82.56 millionExpected Revenue$82.79 millionBeat/MissMissed by -$230.00 thousandYoY Revenue GrowthN/AONE Group Hospitality Announcement DetailsQuarterQ1 2023Date5/4/2023TimeN/AConference Call DateThursday, May 4, 2023Conference Call Time4:30PM ETUpcoming EarningsONE Group Hospitality's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by ONE Group Hospitality Q1 2023 Earnings Call TranscriptProvided by QuartrMay 4, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:01Greetings, and welcome to The ONE Group First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Please also note this event is being recorded. And now, I would like to turn the conference over to Tyler Loy. Speaker 100:00:33Thank you, operator, and hello, everyone. Before we begin our formal remarks, Let me remind you that part of our discussion today will include forward looking statements. These forward looking statements are not guarantees of future performance and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward looking statements reflect our opinion only as of the date of this call. Speaker 100:01:04We undertake no obligation to revise or publicly release Any revisions of these forward looking statements in light of new information or future events, we refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During today's call, we will discuss certain non GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales In total food and beverage sales and owned and managed and licensed units to GAAP measures, along with the discussion of why we consider these measures useful, Please see our earnings release issued today. With that, I'd like to turn the call over to Manny Hilario. Speaker 200:02:04Thank you, Tyler, Hello, everyone. We sincerely appreciate you joining us today and for your interest in The ONE Group. Let me begin by thanking all of our team members for their hard work, providing world class operations as we build a strong portfolio of restaurants with industry leading return on invested capital. Key highlights for the Q1 include total revenues growth of over 11% to 82,600,000 with a 1.6% increase in comparable sales, best in class STK rational level margins of 22.1% and an increase in year over year adjusted EBITDA despite continued headwinds in inflation on a year over year basis. Consolidated cost of goods sold of 24%, driven by menu innovation and mix management, a flexible supply chain and executing our margin and sales driving initiatives such as toppings, sides and beverage. Speaker 200:03:06Our newest STK venues continue to significantly outperform our investment model And an average should have less than a 1 year payback. And finally, we finished the quarter with $48,700,000 in cash, which allow us to be flexible in returning value to our shareholders, including funding our rapidly expanding and robust pipeline of future restaurants. Our focus on strong operational execution, culinary innovation and VIBE dining continues to resonate with our guests and we are on plan with our growth strategy. This quarter, we continue to see strength in our weekend and special occasion business, as well as strengthening demand for private events as more and more people return to offices around the country. This also coincides with the strength in our happy hour program at both brands, particularly with our $3, $6 $9 price points, which we believe are some of the most compelling values in the industry. Speaker 200:04:07Importantly, our teams are converting the energy created by our happy hour Guest into an active and vibrant dinner business. The continued strength in our underlying business along with the performance of our new restaurants gives us tremendous confidence in the revenue and profit power of our development pipeline. Despite a challenging construction environment, We have established an incredible pipeline of high quality real estate development and plan to open 8 to 12 new venues this year. Importantly, we have an established platform for scalable and long term revenue and profit growth. We kicked off the year with the opening of a newly redesigned Konig Royal in Columbus, Ohio in the Eastern Town Center in January. Speaker 200:04:56This new unit performed above the system average and above our Kona Grill investment model for the quarter. We are encouraged by the start of this new restaurant and are looking forward to the patio season in Ohio. We also opened a new rooftop at the STK in Scottsdale in February. This is the 4th domestic STK rooftop in our portfolio and a great addition to our already strong Scottsdale location. For the remainder of the year, we plan to open 2 to 4 additional Puna Coroz in the following cities: Riverton, Utah Desert Ridge, Arizona Henderson, Nevada and Target, Oregon and 3 to 5 new company owned SDKs in the following cities: Charlotte, North Carolina, Boston, Massachusetts, Washington DC, Aventura, Florida and South Lake City, Utah. Speaker 200:05:49And finally, we plan to open 1 managed or licensed SDK. As we have long stated, our growth story has just begun. We foresee a total addressable market of at least 400 restaurants, including 200 STK restaurants globally and at least 200 Kona Grills domestically. To conclude, our team is doing a fantastic and building our development pipeline to powerfully grow revenue and EBITDA to build significant and sustainable shareholder value over the long term. Now, I'll turn the call over to Tyler. Speaker 100:06:33Thank you, Manny. Let me start by discussing our Q1 financials in greater detail before reiterating our full year guidance. Total GAAP revenues were $82,600,000 increasing 11.3% from $74,200,000 for the same quarter last year. Included in our total revenues is our owned restaurant net revenues of $78,600,000 which increased 11.4 percent from $7,500,000 for the same quarter last year. The increase in revenue is primarily attributable to the opening of STK San Francisco in August of 2022, The opening of STK Dallas in November of 2022 and the opening of Kona Grill Columbus in January of 2023. Speaker 100:07:17Domestic consolidated comparable sales increased 1.6% for the quarter compared to 2022. As a reminder, we are lapping consolidated comparable sales over 45% in the Q1 of 2022 versus the Q1 of 2021. Management license and incentive fee revenues were 4,000,000 increasing 8.5% from $3,700,000 in the Q1 of 2023. This increase was primarily attributable to strong performance Our STK restaurants in North America, along with the opening of STK Stratford in November of 2022. Owned restaurant cost of sales as a percentage of owned restaurant net revenue decreased 170 basis points to 24% in the Q1 of 2023 compared to 25.7% in the prior year, primarily due to menu mix management, Pricing and operational cost reduction initiatives. Speaker 100:08:14Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 380 basis points to 59.6 percent in the Q1 of 2023 from 55.8% in the Q1 of 2022, primarily due to consolidated average wage increases and operating expense inflation. This was partially offset by single digit pricing taken in the back of last year. The increase in owned operating expenses as a percentage of owned restaurant net revenue should normalize beginning in the second quarter as we begin to lap wage and operating cost inflation in the prior year. We believe that we have additional pricing power for both brands as we compare our prices to those of our competitors. Restaurant operating profit decreased 210 basis points to 16.4% for the Q1 of 2023 Compared to 18.5% in the Q1 of 2022, restaurant operating profit at STK was a robust 22 point 1% and Kona Grill operating profit was 8.1% for the quarter. Speaker 100:09:18As a reminder, the Q1 is typically a seasonally low revenue quarter for our restaurants, which is why we are comfortable reiterating our total owned operating cost guidance for the year. On a total reported basis, general and administrative expenses $7,500,000 compared to $6,900,000 in the prior year. The increase was attributable to increased stock based compensation expense. When adjusting for stock based compensation, adjusted general and administrative expenses were $6,200,000 in the Q1 of 2023 and $6,000,000 in the same quarter last year. Pre opening expenses were $1,300,000 compared to $300,000 in the prior year. Speaker 100:09:57This increase was primarily related to payroll, training and cash and non cash preopening rent for Kona Grill Columbus, which opened in January of 2020 3 and other venues that are currently under construction. Interest expense was $1,800,000 in the Q1 of 2023 compared to $500,000 in the Q1 of 2022. The increase was driven by increases in our outstanding balance and benchmark rates year over year. Income tax expense was flat at $200,000 in the Q1 of 2023 and for the Q1 of 2022. Net income attributable to The ONE Group Hospitality Inc. Speaker 100:10:37Was $2,600,000 or $0.08 net income per share Compared to a net income of $3,700,000 in the Q1 of 2022 or $0.11 net income per share, Adjusted net income was $3,200,000 or $0.10 adjusted net income per share. Adjusted EBITDA for the Q1 attributable to The ONE Group Cost of Autoli Inc. Was $10,900,000 compared to $10,800,000 in the Q1 of 2022. We have included a reconciliation of adjusted EBITDA, Adjusted net income and adjusted net income per share in the tables in our Q1 2023 earnings release. During the Q1 of 2023, we repurchased approximately 100,000 shares of our common stock. Speaker 100:11:23And in total, we have purchased 1,200,000 shares or approximately 4% of our outstanding shares. In addition, our Board has authorized An additional $5,000,000 in share repurchases, so we have approximately $7,100,000 in share repurchases. We will continue to use discretion in determining the conditions under which shares may be repurchased from time to time, if at all. Now I'd like to provide some forward looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward looking statements as discussed in our SEC filings. Speaker 100:11:58We as always remind our investors the actual numbers and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including weather conditions and factors under control of landlords, contractors, licensees and regulatory and licensing authorities. Based on the information available now and the expectations as of today, We are reiterating the following financial targets for 2023. Beginning with revenues, we project our total GAAP revenues to be between 360 $380,000,000 including managed license incentive fee revenues between $17,000,000 $17,500,000 Total owned operating expenses as a percentage of owned restaurant net revenue of 82.5% to 82%. Total G and A excluding stock based compensation of approximately $27,000,000 to 29,000,000 Adjusted EBITDA of $50,000,000 to $54,000,000 which represents an approximate 21% to 31% increase compared to 2022 Restaurant preopening expenses between $5,500,000 $6,500,000 and an effective income tax rate of between 5% 10%. Total capital expenditures net of allowances received from landlords of approximately 2% of company owned revenue and approximately $3,000,000 to 3,500,000 new company owned venue. Speaker 100:13:22And finally, we plan to open 8 to 12 new venues in 2023, including 1 managed or licensed STK. I will now turn the call back to Manny. Speaker 200:13:33Thank you, Tyler, and thank you all for your time today. Let me conclude by saying we're in the early stages of our long term growth strategy as we continue to build a portfolio of high volume brands with compelling returns for our shareholders. Above all, I am grateful to all of our teammates who bring our mission to life every day to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time. I also would like to thank Customers that visit and continue to return to our restaurants so they can enjoy the highly differentiated VIBE dining experiences they have been craving. Speaker 200:14:17We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator? Operator00:14:28Thank you. We will now begin the question and answer session. And the first question comes from Joshua Long with Stephens. Please go ahead. Speaker 300:15:08Hi. This is Tyler on for Josh. Congrats on another great quarter and thanks so much for taking my question here. Can you walk us through the pricing and traffic components for the quarter, please? Speaker 200:15:23So Tyler, on the average for both brands, we're looking at a Plus 6% on price and a plus 2% to 3% on mix and then the differences on traffic. Speaker 300:15:36Okay, great. And can you give us an update on how trends are running in April? Speaker 100:15:42Yes, Tyler, this is Tyler. So relative to the Q2, the balance of the year, I mean, we reiterated our guidance. I think we feel very comfortable with Where we are through the Q2. Speaker 300:15:56Okay. Sounds great. And then just one more question here. So the management license deals Kind of took a pause during COVID, but as we emerge out of the pandemic, I'm sure a lot of hotels are wanting to bring in new attractions. So I Speaker 200:16:10was going to see if you could just talk Speaker 100:16:11a little bit about the appetite that you're seeing for these types of deals? Speaker 200:16:16Yes, Tyler. This is Manny. So you're correct. The coming out of COVID, appetite has gone up, pipeline has really picked up steam. We have a significant amount of relationships with people that we are now exploring relative to new properties. Speaker 200:16:33And As we added on our guidance, we do have one coming in this year. So I think the outlook for the future is Very bright on license and management and getting back to our asset light growth strategy. Speaker 300:16:50Okay, great. That's all for me. Thanks. Operator00:16:58Next question comes from Nick Setyan with Wedbush. Please go ahead. Speaker 400:17:05Thank you. Can you just give us an update on the unit economics of the Columbus Kona? Like is it meeting your expectation with regard to the newer prototype? Speaker 200:17:17Yes, Nick. Yes, this is Manny again. Relative to the new units, I think we mentioned in our prepared statements, we're above our system average on volume for that store. So we're Greater than 5.2 in AUV in that unit. So we're super excited about that. Speaker 200:17:35And then we achieved that without having the patio opened, which is I think something that I mentioned in my comments is that the patio is adding 40 to 50 seats to that property, which will allow us to Take advantage of the mall traffic and presence on Fridays Saturdays. So we're really super excited about the revenue potential. And then As we expect, the functionality because of the new layout of the restaurant is very efficient. So we're able to operate now our sushi bars most of the time with only one person on the bar. So I think in the long term that's going to be Significant impact to labor and the margin profile of the ConAgro brand. Speaker 400:18:22And within sort of the total consolidated margin guidance, Where do you think Kona comes in for the year? Speaker 200:18:33Well, I think if I think of the Kona growth margin, I think Obviously, as Tyler mentioned earlier, the seasonality is it's one of the slower So we're dealing with that as kind of a factor impacting the margin in the shorter term. And then this Q1 is, If I will, the last quarter where we're lapping significant inflation on labor because we started feeling it mostly on the second quarter last On labor, so I think that we have a positive momentum on labor because we were finishing lap on the wage, which was significant for us. And then we do have an internal team and we're significantly focusing On initiatives relative to operating expenses, we're looking at everything from our paper supplies to usage to We're looking at all our contracts and negotiating that and also looking at productivity of labor, applying some of our Some of our learnings from Columbus back to some of the other legacy units. So I would say that the combination Of all those elements, we'll put I believe that we will have much higher margins on the growth year over year. As Tyler mentioned earlier, we did provide overall guidance for that, which is basically the inverse of the operating costs. Speaker 200:20:13But All in all, I feel pretty good about the progress and I'm specifically excited about the possibilities with the new model that we just Speaker 400:20:26And then I guess just with both brands, where do you see The pressure in terms of transactions, was it did it get worse as the quarter progressed? Anything jump out at you in terms of Weekdays versus weekends, evening versus lunch, any color would be very helpful. Speaker 200:20:49Yes. I mean, I think as we've reported previously, I think the weekday business is softer, particularly on the suburban markets. And then the weekend business It's super robust. So I would say Friday Saturday, I think that we're seeing very positive trends. As a matter of fact, our One initiative right now on the weekend is to really take advantage of the 630 to 8:30 traffic, which is significant. Speaker 200:21:20So we like that, but we certainly have seen a little bit of a different pattern on the weekends, but it seems like the weekend becomes the makeup for In terms of PMICs, interesting enough at STK where we just launched Our new version of the YGOO promotion and unbelievably we ran out of the product in a majority of our Okay. So for the higher end, I think there's a tremendous appetite for the premium products at the Kona Grill brand. I would say that you do see a Shift, not to less items, but perhaps people going more The what we call lighter fare on the menu. So we do see a little bit of people changing from maybe main entrees Just sandwiches and other stuff. But I would say in the overall, I mean The impact has really been mostly for us on that on the weekday to weekend. Speaker 200:22:24And then on the STK side, we have seen the business Tabular and the impact of offices, we see that being positive and we saw a positive move on the business related business. And then obviously you heard me speak about 369, which is the best Value point in my opinion, obviously it's an opinion relative to consumer offerings. So we feel really good about that. And then So that's kind of like the majority of the trends that we have seen with both brands. Hopefully that's useful. Speaker 500:23:05Yes. Thank you very much. Operator00:23:12The next question comes from Mark Smith with Lake Street. Please go ahead. Speaker 600:23:18Hi, guys. First question I wanted to ask was just looking at the comp at Kona Grill. Is this just a function of the macro environment, the Consumer being a little more squeezed or is there anything else that happened here in the quarter, for instance, weather that maybe slowed some patio Sales, anything that you can give us for more info on that, on that comp? Speaker 200:23:44I mean, I'd say overall and Tyler says that you don't get credit for those types of things, but we did have a significant positive performance last year on the first So we were one of the very earlier rebounders on the casual space. So if you look at our numbers and basically the baseline They were going up against its significant. So if I look at the same store recovery for Kona Grill, we came up to Super strong. I mean, we were one of the better rebounders in the industry. So I think that as you look at the 1 year, you probably Get less of an impressive number than when you do at the 2 years, but when you look at the overall 2 year lap and a number that we posted in the Conan O'Grill, it's very impressive. Speaker 200:24:28And our AUVs are in the $5,200,000 range now if you look at the trailing 12 months. So it's really difficult to be Super critical of the Kona Grill brand where we've moved the UVs from $4,000,000 to 5,200,000 And Verily, I mean, if you take the COVID period out, we've only really operated that brand in about 18 months of really more normalized operations. So I would say Moving your AUVs over 30% on 18 months of operations signifies that we have a pretty good handle on managing the revenue base. Okay. Speaker 600:25:05That's fair. As we look through restaurant operating expenses, I know Tyler you called out Your labor is still inflationary pressure and you took some price last year, but walking through is there any other kind of puts and Takes anywhere where you're seeing easing or any things that are particularly difficult in that line at the restaurant level that's putting pressure on margin? Speaker 100:25:31Yes, Mark. I think, as we discussed in our prepared comments, the Q1 is really Kind of the last quarter that we're going to see kind of that significant inflation as it kind of ramped up in the second quarter and then through the back half of last year. So I think we're seeing significant wage inflation on a year over year basis. And then anything related to wages, we're also Seeing inflation as well, whether that be other operating expenses such as R and M, anything that takes people, I think we're seeing That and so I think across that kind of operating expense line on a year over year basis for the Q1, I think we're Still seeing kind of high single digit, low double digit inflation across all of the operating Outside of cost of goods and there is cost of goods inflation as well, but in that other operating expense line. Speaker 200:26:31Yes, I would just add a couple maybe snippets I think Tyler mentioned that our COGS now is 24% and we came down from 25.7% last year, which I think that's significant. I think there's very few restaurant companies that have achieved actually a lower number on COGS And probably the highest inflationary markets yet. So that really tells you that our COGS line and the way that we manage The day to day of COGS is very good for the business. Otherwise, we wouldn't have been able to achieve significant decreases. I think as Tyler mentioned is the big challenge in our business model is that, like it or not, we were a fully staffed Russian company with employees. Speaker 200:27:16So we chose to not cut service, not cut the guest experience in the past. And so we did have plenty of employees. So we were blessed to have a full workforce in all our restaurants. And then as Tyler mentioned earlier, A majority of the labor inflation pressure that we got was in wage. So we've worked through that in the second, third, Q4 Last year and I think as I mentioned earlier in one of my responses, the Q1 of this year is kind of the last quarter Well, we have significant pressure on that. Speaker 200:27:51So as I look at our ability to continue working on the P and L, I think the future is bright relative to the indicators that I just went through. Speaker 600:28:01Okay, great. Just in that same vein, any real change or can you speak to Alcohol sales, have both changed and kind of how those have been trending? Speaker 200:28:12Yes, fantastic question. So during the COVID period and coming out COVID, we deemphasized a little bit our if we will focus on selling liquor and wine just because we wanted to take advantage of the table space and turning the tables over. So time at table was important to us. I think now We are putting a lot more added emphasis on the Per Check, particularly with extra with the wine bottle service and So I think now that we're in more normal operating days, if you will, from a service perspective, I do expect I'll look for incidents to go up. So that's really our history. Speaker 200:28:54I think we've gone from being extremely good at the bar to kind of like relaxing a little bit for exchange of table turns and now we're getting back to more normalized aggressive practices of selling more at the table. Operator00:29:18The next question comes from Roger Lipton with Lipton Financial. Please go ahead. Speaker 700:29:23Yes. Hi, Tyler. Hi, Manny. You provide a lot of information. Thank you. Speaker 700:29:27And thank you for taking my question. I was going to ask That's Kona in the Q1 and the negative comp and the margin. But you referred to Emphasis you and your team have put on finding some operating efficiencies. How long do you think it will take to begin to see Some margin improvement. Can it begin to happen in the second quarter? Speaker 700:29:50It's going to take a little longer. Speaker 200:29:54Hi, Roger. This is Meny again. I think relative Timing on, I think we'll see a well, I would say that we would see lots of it coming off on the second quarter because of The wage lap, but I do think that 3rd and 4th quarter are really the quarters that we would see the more significant impact. I also think that Columbus Coming more online will also help lift the profile of the margin of the brand. And then and again, we have Several new units that we're adding that will also do that. Speaker 200:30:28So I think over time with the addition of those units, I think that We still believe that Kona Grove is one of the most attractive economic models in casual with high volumes greater than $5,500,000 $6,000,000 17% plus type of margins. But again, I think 2023 will be the year of really rebuilding that back up, lapping through the labor. And then again, next year as we continue to add units At the pace that we are, we will obviously improve significantly the margins on the brand. Reminding, I think that for the new Kona growth, we think 17% to 20% margin is kind of where we will be at. So I think the overall that Well, it really helps the brand. Speaker 700:31:18Well, okay. What in terms of openings, What's the near term schedule in the next few months in each quarter? Speaker 200:31:27Yes. So another very good question. I think I tell everyone when they It's kind of just a modeling answer, but I would say right now we do have 3 to 4 restaurants that will be coming With regularity out of the chute, we have made significant impact in Riverton and Charlotte. Riverton is a Kona Grill and Charlotte STK will be coming right after that and then Desert Ridge, Kona Grill and Washington D. C. Speaker 200:32:06STK. So we do have a very nice lineup of restaurants coming here back to backs, but So just so that everybody is safe on modeling, I always say October 1 and as we've spoke, as we've Talked about this before. Obviously, still the big unknown in today's environment with construction is the permitting process has become very In terms of how we get the permitting through and get through that cycle. But other than that, the restaurant pipeline looks Phenomenal and we look forward to start getting these things up and running in the next couple of weeks. Speaker 700:32:43Do you think you're preopening preopening was obviously Much higher this year than last because you're opening quite a few stores. That sounds like that's going to kind of continue to run at that level for the balance of the year with the Speaker 200:32:59Yes, I would plan that for this year just because we're getting scale and getting scale on that. I think As we get out to future years, we will bring down our pre opening. But for this year, it's safe to assume the levels that We've been running and we've been talking about it. And the big reason is that there's a learning curve that comes with getting pre opening teams ready to go. So I think that our teams are going through that process right now. Speaker 200:33:24But I think in the longer term, I think we will be superficial at opening these new units. And so that's how I would think about it. But for just to be proper and safe in anything that you do right now, I would assume existing type of levels on preopening. Operator00:33:48The next question is a follow-up from Joshua Long with Stephens. Please go ahead. Speaker 300:33:54Hey, guys. It's Tyler on for Josh one more time. So the interest expense came in a little higher than we expected this quarter. Just Just going to see if that 1.8 was a good run rate to kind of model going forward? Speaker 100:34:06Yes, Tyler. So I think, As you know, we saw term sulfur increase just throughout the quarter and from the end of last year. So I think, yes, that $1,700,000 to $1,800,000 is a fine run rate to use. Speaker 300:34:25Perfect. I appreciate it, guys. Speaker 200:34:28Thank you, Tyler. Operator00:34:38We have a question from Jake Patterson with Toulanta Investment Group. Please go ahead. Speaker 500:34:45Hey guys, thanks for taking the question. I was just curious, I don't know if I missed this, but do you guys have average weekly sales for Speaker 100:35:00Hi, Jake. This is Tyler. Let's just do we can do a follow-up on that. We don't have them Speaker 200:35:09Yes. We actually post them on our investor decks usually when we do our posting. So that's typically where we find it. We haven't done our Investor deck yet for the quarter, but that's typically what we put the AUVs in. Speaker 500:35:22Okay, cool. And then Speaker 600:35:23I guess to Are there Speaker 500:35:26any trends or anything in the brunch traffic that you noticed that was maybe different from past couple of quarters or is that kind of I mean, I Speaker 200:35:36think brunch as a category in general, there's a lot more People going to the brunch category, but I think for us, we're so early on capturing that daypart that we haven't seen anything One way or the other, no, have we seen any economic impact per se on the brunch stay part. So we still look at our lunch Brunch State Park is a huge opportunity for both brands. We have a very good offering on product on both brands. And frankly, the focus with brunch this year is to continue to evolve and bring some innovation to the menu on brunch. But other than that, we're happy with it and we'll continue to grow it. Speaker 500:36:23Got you. And I guess last one for me, anything to call out on Foods like beef costs or fish or anything like that? Speaker 200:36:32Yes. I mean, I think beef, this pretty well published. I think beef has picked up spiked up a little bit recently, but we're still running Some of our contracted pricing, so we haven't really seen anything significant relative to a couple of weeks or months ago. As a matter of fact, as I mentioned earlier, our cost Good is the best it's probably ever been. I think historically we set 24% to 25% range for COGS and we're at 24% for the quarter. Speaker 200:37:03So we did achieve the low end of our historical range on COGS. So I think our focus on COGS, at least internally, Just to continue managing the mix, looking at items that bring in items into the menu that help you with the overall Value and COGS for the brand and just being very thoughtful about things like sides and butters and some of the initiatives that we have that help with the overall profitability profile of our menu. Speaker 500:37:39Got you. Cool. All right. Well, thanks for answering these questions and good luck going forward. Operator00:37:46Okay, sir. This concludes our question and answer session. I'll turn the conference back over to Manny Elaria for any closing remarks. Speaker 200:37:59Thank you, and thank you all for your interest on The ONE Group today. As I always do in my concluding comments, None of this would be possible without the fantastic support of our teammates who bring our mission of great execution Life every day. So for that, thank you. And my final reach out to you is I'll be out in the restaurants. I look forward to seeing you all in the restaurants. Speaker 200:38:27Everybody have a great day. Thank you. Operator00:38:33The conference has now concluded. Thank you again for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallONE Group Hospitality Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) ONE Group Hospitality Earnings HeadlinesEquities Analysts Issue Forecasts for STKS Q1 EarningsApril 26 at 1:17 AM | americanbankingnews.comNoble Financial Reaffirms Their Buy Rating on The ONE Group Hospitality (STKS)April 24 at 9:38 PM | markets.businessinsider.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.April 26, 2025 | Paradigm Press (Ad)One Group Hospitality initiated with an Outperform at Noble CapitalApril 24 at 4:36 PM | finance.yahoo.comHere's What To Make Of ONE Group Hospitality's (NASDAQ:STKS) Decelerating Rates Of ReturnApril 18, 2025 | finance.yahoo.comOne Group Hospitality initiated with a Buy at NorthcoastApril 13, 2025 | markets.businessinsider.comSee More ONE Group Hospitality Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ONE Group Hospitality? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ONE Group Hospitality and other key companies, straight to your email. Email Address About ONE Group HospitalityONE Group Hospitality (NASDAQ:STKS), a restaurant company, develops, owns, operates, manages, and licenses restaurants and lounges worldwide. It operates through STK, Kona Grill, and ONE Hospitality segments. The company also provides turn-key food and beverage services for hospitality venues, including hotels, casinos, and other locations. Its hospitality food and beverage solutions include developing, managing, and operating restaurants, bars, rooftops, pools, banqueting, catering, private dining rooms, room service, and mini bars; and offers hospitality advisory and consulting services. The company operates restaurants primarily under the STK and Kona Grill brands. The ONE Group Hospitality, Inc. was founded in 2004 and is based in Denver, Colorado.View ONE Group Hospitality ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 8 speakers on the call. Operator00:00:01Greetings, and welcome to The ONE Group First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Please also note this event is being recorded. And now, I would like to turn the conference over to Tyler Loy. Speaker 100:00:33Thank you, operator, and hello, everyone. Before we begin our formal remarks, Let me remind you that part of our discussion today will include forward looking statements. These forward looking statements are not guarantees of future performance and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward looking statements reflect our opinion only as of the date of this call. Speaker 100:01:04We undertake no obligation to revise or publicly release Any revisions of these forward looking statements in light of new information or future events, we refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During today's call, we will discuss certain non GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales In total food and beverage sales and owned and managed and licensed units to GAAP measures, along with the discussion of why we consider these measures useful, Please see our earnings release issued today. With that, I'd like to turn the call over to Manny Hilario. Speaker 200:02:04Thank you, Tyler, Hello, everyone. We sincerely appreciate you joining us today and for your interest in The ONE Group. Let me begin by thanking all of our team members for their hard work, providing world class operations as we build a strong portfolio of restaurants with industry leading return on invested capital. Key highlights for the Q1 include total revenues growth of over 11% to 82,600,000 with a 1.6% increase in comparable sales, best in class STK rational level margins of 22.1% and an increase in year over year adjusted EBITDA despite continued headwinds in inflation on a year over year basis. Consolidated cost of goods sold of 24%, driven by menu innovation and mix management, a flexible supply chain and executing our margin and sales driving initiatives such as toppings, sides and beverage. Speaker 200:03:06Our newest STK venues continue to significantly outperform our investment model And an average should have less than a 1 year payback. And finally, we finished the quarter with $48,700,000 in cash, which allow us to be flexible in returning value to our shareholders, including funding our rapidly expanding and robust pipeline of future restaurants. Our focus on strong operational execution, culinary innovation and VIBE dining continues to resonate with our guests and we are on plan with our growth strategy. This quarter, we continue to see strength in our weekend and special occasion business, as well as strengthening demand for private events as more and more people return to offices around the country. This also coincides with the strength in our happy hour program at both brands, particularly with our $3, $6 $9 price points, which we believe are some of the most compelling values in the industry. Speaker 200:04:07Importantly, our teams are converting the energy created by our happy hour Guest into an active and vibrant dinner business. The continued strength in our underlying business along with the performance of our new restaurants gives us tremendous confidence in the revenue and profit power of our development pipeline. Despite a challenging construction environment, We have established an incredible pipeline of high quality real estate development and plan to open 8 to 12 new venues this year. Importantly, we have an established platform for scalable and long term revenue and profit growth. We kicked off the year with the opening of a newly redesigned Konig Royal in Columbus, Ohio in the Eastern Town Center in January. Speaker 200:04:56This new unit performed above the system average and above our Kona Grill investment model for the quarter. We are encouraged by the start of this new restaurant and are looking forward to the patio season in Ohio. We also opened a new rooftop at the STK in Scottsdale in February. This is the 4th domestic STK rooftop in our portfolio and a great addition to our already strong Scottsdale location. For the remainder of the year, we plan to open 2 to 4 additional Puna Coroz in the following cities: Riverton, Utah Desert Ridge, Arizona Henderson, Nevada and Target, Oregon and 3 to 5 new company owned SDKs in the following cities: Charlotte, North Carolina, Boston, Massachusetts, Washington DC, Aventura, Florida and South Lake City, Utah. Speaker 200:05:49And finally, we plan to open 1 managed or licensed SDK. As we have long stated, our growth story has just begun. We foresee a total addressable market of at least 400 restaurants, including 200 STK restaurants globally and at least 200 Kona Grills domestically. To conclude, our team is doing a fantastic and building our development pipeline to powerfully grow revenue and EBITDA to build significant and sustainable shareholder value over the long term. Now, I'll turn the call over to Tyler. Speaker 100:06:33Thank you, Manny. Let me start by discussing our Q1 financials in greater detail before reiterating our full year guidance. Total GAAP revenues were $82,600,000 increasing 11.3% from $74,200,000 for the same quarter last year. Included in our total revenues is our owned restaurant net revenues of $78,600,000 which increased 11.4 percent from $7,500,000 for the same quarter last year. The increase in revenue is primarily attributable to the opening of STK San Francisco in August of 2022, The opening of STK Dallas in November of 2022 and the opening of Kona Grill Columbus in January of 2023. Speaker 100:07:17Domestic consolidated comparable sales increased 1.6% for the quarter compared to 2022. As a reminder, we are lapping consolidated comparable sales over 45% in the Q1 of 2022 versus the Q1 of 2021. Management license and incentive fee revenues were 4,000,000 increasing 8.5% from $3,700,000 in the Q1 of 2023. This increase was primarily attributable to strong performance Our STK restaurants in North America, along with the opening of STK Stratford in November of 2022. Owned restaurant cost of sales as a percentage of owned restaurant net revenue decreased 170 basis points to 24% in the Q1 of 2023 compared to 25.7% in the prior year, primarily due to menu mix management, Pricing and operational cost reduction initiatives. Speaker 100:08:14Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 380 basis points to 59.6 percent in the Q1 of 2023 from 55.8% in the Q1 of 2022, primarily due to consolidated average wage increases and operating expense inflation. This was partially offset by single digit pricing taken in the back of last year. The increase in owned operating expenses as a percentage of owned restaurant net revenue should normalize beginning in the second quarter as we begin to lap wage and operating cost inflation in the prior year. We believe that we have additional pricing power for both brands as we compare our prices to those of our competitors. Restaurant operating profit decreased 210 basis points to 16.4% for the Q1 of 2023 Compared to 18.5% in the Q1 of 2022, restaurant operating profit at STK was a robust 22 point 1% and Kona Grill operating profit was 8.1% for the quarter. Speaker 100:09:18As a reminder, the Q1 is typically a seasonally low revenue quarter for our restaurants, which is why we are comfortable reiterating our total owned operating cost guidance for the year. On a total reported basis, general and administrative expenses $7,500,000 compared to $6,900,000 in the prior year. The increase was attributable to increased stock based compensation expense. When adjusting for stock based compensation, adjusted general and administrative expenses were $6,200,000 in the Q1 of 2023 and $6,000,000 in the same quarter last year. Pre opening expenses were $1,300,000 compared to $300,000 in the prior year. Speaker 100:09:57This increase was primarily related to payroll, training and cash and non cash preopening rent for Kona Grill Columbus, which opened in January of 2020 3 and other venues that are currently under construction. Interest expense was $1,800,000 in the Q1 of 2023 compared to $500,000 in the Q1 of 2022. The increase was driven by increases in our outstanding balance and benchmark rates year over year. Income tax expense was flat at $200,000 in the Q1 of 2023 and for the Q1 of 2022. Net income attributable to The ONE Group Hospitality Inc. Speaker 100:10:37Was $2,600,000 or $0.08 net income per share Compared to a net income of $3,700,000 in the Q1 of 2022 or $0.11 net income per share, Adjusted net income was $3,200,000 or $0.10 adjusted net income per share. Adjusted EBITDA for the Q1 attributable to The ONE Group Cost of Autoli Inc. Was $10,900,000 compared to $10,800,000 in the Q1 of 2022. We have included a reconciliation of adjusted EBITDA, Adjusted net income and adjusted net income per share in the tables in our Q1 2023 earnings release. During the Q1 of 2023, we repurchased approximately 100,000 shares of our common stock. Speaker 100:11:23And in total, we have purchased 1,200,000 shares or approximately 4% of our outstanding shares. In addition, our Board has authorized An additional $5,000,000 in share repurchases, so we have approximately $7,100,000 in share repurchases. We will continue to use discretion in determining the conditions under which shares may be repurchased from time to time, if at all. Now I'd like to provide some forward looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward looking statements as discussed in our SEC filings. Speaker 100:11:58We as always remind our investors the actual numbers and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including weather conditions and factors under control of landlords, contractors, licensees and regulatory and licensing authorities. Based on the information available now and the expectations as of today, We are reiterating the following financial targets for 2023. Beginning with revenues, we project our total GAAP revenues to be between 360 $380,000,000 including managed license incentive fee revenues between $17,000,000 $17,500,000 Total owned operating expenses as a percentage of owned restaurant net revenue of 82.5% to 82%. Total G and A excluding stock based compensation of approximately $27,000,000 to 29,000,000 Adjusted EBITDA of $50,000,000 to $54,000,000 which represents an approximate 21% to 31% increase compared to 2022 Restaurant preopening expenses between $5,500,000 $6,500,000 and an effective income tax rate of between 5% 10%. Total capital expenditures net of allowances received from landlords of approximately 2% of company owned revenue and approximately $3,000,000 to 3,500,000 new company owned venue. Speaker 100:13:22And finally, we plan to open 8 to 12 new venues in 2023, including 1 managed or licensed STK. I will now turn the call back to Manny. Speaker 200:13:33Thank you, Tyler, and thank you all for your time today. Let me conclude by saying we're in the early stages of our long term growth strategy as we continue to build a portfolio of high volume brands with compelling returns for our shareholders. Above all, I am grateful to all of our teammates who bring our mission to life every day to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time. I also would like to thank Customers that visit and continue to return to our restaurants so they can enjoy the highly differentiated VIBE dining experiences they have been craving. Speaker 200:14:17We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator? Operator00:14:28Thank you. We will now begin the question and answer session. And the first question comes from Joshua Long with Stephens. Please go ahead. Speaker 300:15:08Hi. This is Tyler on for Josh. Congrats on another great quarter and thanks so much for taking my question here. Can you walk us through the pricing and traffic components for the quarter, please? Speaker 200:15:23So Tyler, on the average for both brands, we're looking at a Plus 6% on price and a plus 2% to 3% on mix and then the differences on traffic. Speaker 300:15:36Okay, great. And can you give us an update on how trends are running in April? Speaker 100:15:42Yes, Tyler, this is Tyler. So relative to the Q2, the balance of the year, I mean, we reiterated our guidance. I think we feel very comfortable with Where we are through the Q2. Speaker 300:15:56Okay. Sounds great. And then just one more question here. So the management license deals Kind of took a pause during COVID, but as we emerge out of the pandemic, I'm sure a lot of hotels are wanting to bring in new attractions. So I Speaker 200:16:10was going to see if you could just talk Speaker 100:16:11a little bit about the appetite that you're seeing for these types of deals? Speaker 200:16:16Yes, Tyler. This is Manny. So you're correct. The coming out of COVID, appetite has gone up, pipeline has really picked up steam. We have a significant amount of relationships with people that we are now exploring relative to new properties. Speaker 200:16:33And As we added on our guidance, we do have one coming in this year. So I think the outlook for the future is Very bright on license and management and getting back to our asset light growth strategy. Speaker 300:16:50Okay, great. That's all for me. Thanks. Operator00:16:58Next question comes from Nick Setyan with Wedbush. Please go ahead. Speaker 400:17:05Thank you. Can you just give us an update on the unit economics of the Columbus Kona? Like is it meeting your expectation with regard to the newer prototype? Speaker 200:17:17Yes, Nick. Yes, this is Manny again. Relative to the new units, I think we mentioned in our prepared statements, we're above our system average on volume for that store. So we're Greater than 5.2 in AUV in that unit. So we're super excited about that. Speaker 200:17:35And then we achieved that without having the patio opened, which is I think something that I mentioned in my comments is that the patio is adding 40 to 50 seats to that property, which will allow us to Take advantage of the mall traffic and presence on Fridays Saturdays. So we're really super excited about the revenue potential. And then As we expect, the functionality because of the new layout of the restaurant is very efficient. So we're able to operate now our sushi bars most of the time with only one person on the bar. So I think in the long term that's going to be Significant impact to labor and the margin profile of the ConAgro brand. Speaker 400:18:22And within sort of the total consolidated margin guidance, Where do you think Kona comes in for the year? Speaker 200:18:33Well, I think if I think of the Kona growth margin, I think Obviously, as Tyler mentioned earlier, the seasonality is it's one of the slower So we're dealing with that as kind of a factor impacting the margin in the shorter term. And then this Q1 is, If I will, the last quarter where we're lapping significant inflation on labor because we started feeling it mostly on the second quarter last On labor, so I think that we have a positive momentum on labor because we were finishing lap on the wage, which was significant for us. And then we do have an internal team and we're significantly focusing On initiatives relative to operating expenses, we're looking at everything from our paper supplies to usage to We're looking at all our contracts and negotiating that and also looking at productivity of labor, applying some of our Some of our learnings from Columbus back to some of the other legacy units. So I would say that the combination Of all those elements, we'll put I believe that we will have much higher margins on the growth year over year. As Tyler mentioned earlier, we did provide overall guidance for that, which is basically the inverse of the operating costs. Speaker 200:20:13But All in all, I feel pretty good about the progress and I'm specifically excited about the possibilities with the new model that we just Speaker 400:20:26And then I guess just with both brands, where do you see The pressure in terms of transactions, was it did it get worse as the quarter progressed? Anything jump out at you in terms of Weekdays versus weekends, evening versus lunch, any color would be very helpful. Speaker 200:20:49Yes. I mean, I think as we've reported previously, I think the weekday business is softer, particularly on the suburban markets. And then the weekend business It's super robust. So I would say Friday Saturday, I think that we're seeing very positive trends. As a matter of fact, our One initiative right now on the weekend is to really take advantage of the 630 to 8:30 traffic, which is significant. Speaker 200:21:20So we like that, but we certainly have seen a little bit of a different pattern on the weekends, but it seems like the weekend becomes the makeup for In terms of PMICs, interesting enough at STK where we just launched Our new version of the YGOO promotion and unbelievably we ran out of the product in a majority of our Okay. So for the higher end, I think there's a tremendous appetite for the premium products at the Kona Grill brand. I would say that you do see a Shift, not to less items, but perhaps people going more The what we call lighter fare on the menu. So we do see a little bit of people changing from maybe main entrees Just sandwiches and other stuff. But I would say in the overall, I mean The impact has really been mostly for us on that on the weekday to weekend. Speaker 200:22:24And then on the STK side, we have seen the business Tabular and the impact of offices, we see that being positive and we saw a positive move on the business related business. And then obviously you heard me speak about 369, which is the best Value point in my opinion, obviously it's an opinion relative to consumer offerings. So we feel really good about that. And then So that's kind of like the majority of the trends that we have seen with both brands. Hopefully that's useful. Speaker 500:23:05Yes. Thank you very much. Operator00:23:12The next question comes from Mark Smith with Lake Street. Please go ahead. Speaker 600:23:18Hi, guys. First question I wanted to ask was just looking at the comp at Kona Grill. Is this just a function of the macro environment, the Consumer being a little more squeezed or is there anything else that happened here in the quarter, for instance, weather that maybe slowed some patio Sales, anything that you can give us for more info on that, on that comp? Speaker 200:23:44I mean, I'd say overall and Tyler says that you don't get credit for those types of things, but we did have a significant positive performance last year on the first So we were one of the very earlier rebounders on the casual space. So if you look at our numbers and basically the baseline They were going up against its significant. So if I look at the same store recovery for Kona Grill, we came up to Super strong. I mean, we were one of the better rebounders in the industry. So I think that as you look at the 1 year, you probably Get less of an impressive number than when you do at the 2 years, but when you look at the overall 2 year lap and a number that we posted in the Conan O'Grill, it's very impressive. Speaker 200:24:28And our AUVs are in the $5,200,000 range now if you look at the trailing 12 months. So it's really difficult to be Super critical of the Kona Grill brand where we've moved the UVs from $4,000,000 to 5,200,000 And Verily, I mean, if you take the COVID period out, we've only really operated that brand in about 18 months of really more normalized operations. So I would say Moving your AUVs over 30% on 18 months of operations signifies that we have a pretty good handle on managing the revenue base. Okay. Speaker 600:25:05That's fair. As we look through restaurant operating expenses, I know Tyler you called out Your labor is still inflationary pressure and you took some price last year, but walking through is there any other kind of puts and Takes anywhere where you're seeing easing or any things that are particularly difficult in that line at the restaurant level that's putting pressure on margin? Speaker 100:25:31Yes, Mark. I think, as we discussed in our prepared comments, the Q1 is really Kind of the last quarter that we're going to see kind of that significant inflation as it kind of ramped up in the second quarter and then through the back half of last year. So I think we're seeing significant wage inflation on a year over year basis. And then anything related to wages, we're also Seeing inflation as well, whether that be other operating expenses such as R and M, anything that takes people, I think we're seeing That and so I think across that kind of operating expense line on a year over year basis for the Q1, I think we're Still seeing kind of high single digit, low double digit inflation across all of the operating Outside of cost of goods and there is cost of goods inflation as well, but in that other operating expense line. Speaker 200:26:31Yes, I would just add a couple maybe snippets I think Tyler mentioned that our COGS now is 24% and we came down from 25.7% last year, which I think that's significant. I think there's very few restaurant companies that have achieved actually a lower number on COGS And probably the highest inflationary markets yet. So that really tells you that our COGS line and the way that we manage The day to day of COGS is very good for the business. Otherwise, we wouldn't have been able to achieve significant decreases. I think as Tyler mentioned is the big challenge in our business model is that, like it or not, we were a fully staffed Russian company with employees. Speaker 200:27:16So we chose to not cut service, not cut the guest experience in the past. And so we did have plenty of employees. So we were blessed to have a full workforce in all our restaurants. And then as Tyler mentioned earlier, A majority of the labor inflation pressure that we got was in wage. So we've worked through that in the second, third, Q4 Last year and I think as I mentioned earlier in one of my responses, the Q1 of this year is kind of the last quarter Well, we have significant pressure on that. Speaker 200:27:51So as I look at our ability to continue working on the P and L, I think the future is bright relative to the indicators that I just went through. Speaker 600:28:01Okay, great. Just in that same vein, any real change or can you speak to Alcohol sales, have both changed and kind of how those have been trending? Speaker 200:28:12Yes, fantastic question. So during the COVID period and coming out COVID, we deemphasized a little bit our if we will focus on selling liquor and wine just because we wanted to take advantage of the table space and turning the tables over. So time at table was important to us. I think now We are putting a lot more added emphasis on the Per Check, particularly with extra with the wine bottle service and So I think now that we're in more normal operating days, if you will, from a service perspective, I do expect I'll look for incidents to go up. So that's really our history. Speaker 200:28:54I think we've gone from being extremely good at the bar to kind of like relaxing a little bit for exchange of table turns and now we're getting back to more normalized aggressive practices of selling more at the table. Operator00:29:18The next question comes from Roger Lipton with Lipton Financial. Please go ahead. Speaker 700:29:23Yes. Hi, Tyler. Hi, Manny. You provide a lot of information. Thank you. Speaker 700:29:27And thank you for taking my question. I was going to ask That's Kona in the Q1 and the negative comp and the margin. But you referred to Emphasis you and your team have put on finding some operating efficiencies. How long do you think it will take to begin to see Some margin improvement. Can it begin to happen in the second quarter? Speaker 700:29:50It's going to take a little longer. Speaker 200:29:54Hi, Roger. This is Meny again. I think relative Timing on, I think we'll see a well, I would say that we would see lots of it coming off on the second quarter because of The wage lap, but I do think that 3rd and 4th quarter are really the quarters that we would see the more significant impact. I also think that Columbus Coming more online will also help lift the profile of the margin of the brand. And then and again, we have Several new units that we're adding that will also do that. Speaker 200:30:28So I think over time with the addition of those units, I think that We still believe that Kona Grove is one of the most attractive economic models in casual with high volumes greater than $5,500,000 $6,000,000 17% plus type of margins. But again, I think 2023 will be the year of really rebuilding that back up, lapping through the labor. And then again, next year as we continue to add units At the pace that we are, we will obviously improve significantly the margins on the brand. Reminding, I think that for the new Kona growth, we think 17% to 20% margin is kind of where we will be at. So I think the overall that Well, it really helps the brand. Speaker 700:31:18Well, okay. What in terms of openings, What's the near term schedule in the next few months in each quarter? Speaker 200:31:27Yes. So another very good question. I think I tell everyone when they It's kind of just a modeling answer, but I would say right now we do have 3 to 4 restaurants that will be coming With regularity out of the chute, we have made significant impact in Riverton and Charlotte. Riverton is a Kona Grill and Charlotte STK will be coming right after that and then Desert Ridge, Kona Grill and Washington D. C. Speaker 200:32:06STK. So we do have a very nice lineup of restaurants coming here back to backs, but So just so that everybody is safe on modeling, I always say October 1 and as we've spoke, as we've Talked about this before. Obviously, still the big unknown in today's environment with construction is the permitting process has become very In terms of how we get the permitting through and get through that cycle. But other than that, the restaurant pipeline looks Phenomenal and we look forward to start getting these things up and running in the next couple of weeks. Speaker 700:32:43Do you think you're preopening preopening was obviously Much higher this year than last because you're opening quite a few stores. That sounds like that's going to kind of continue to run at that level for the balance of the year with the Speaker 200:32:59Yes, I would plan that for this year just because we're getting scale and getting scale on that. I think As we get out to future years, we will bring down our pre opening. But for this year, it's safe to assume the levels that We've been running and we've been talking about it. And the big reason is that there's a learning curve that comes with getting pre opening teams ready to go. So I think that our teams are going through that process right now. Speaker 200:33:24But I think in the longer term, I think we will be superficial at opening these new units. And so that's how I would think about it. But for just to be proper and safe in anything that you do right now, I would assume existing type of levels on preopening. Operator00:33:48The next question is a follow-up from Joshua Long with Stephens. Please go ahead. Speaker 300:33:54Hey, guys. It's Tyler on for Josh one more time. So the interest expense came in a little higher than we expected this quarter. Just Just going to see if that 1.8 was a good run rate to kind of model going forward? Speaker 100:34:06Yes, Tyler. So I think, As you know, we saw term sulfur increase just throughout the quarter and from the end of last year. So I think, yes, that $1,700,000 to $1,800,000 is a fine run rate to use. Speaker 300:34:25Perfect. I appreciate it, guys. Speaker 200:34:28Thank you, Tyler. Operator00:34:38We have a question from Jake Patterson with Toulanta Investment Group. Please go ahead. Speaker 500:34:45Hey guys, thanks for taking the question. I was just curious, I don't know if I missed this, but do you guys have average weekly sales for Speaker 100:35:00Hi, Jake. This is Tyler. Let's just do we can do a follow-up on that. We don't have them Speaker 200:35:09Yes. We actually post them on our investor decks usually when we do our posting. So that's typically where we find it. We haven't done our Investor deck yet for the quarter, but that's typically what we put the AUVs in. Speaker 500:35:22Okay, cool. And then Speaker 600:35:23I guess to Are there Speaker 500:35:26any trends or anything in the brunch traffic that you noticed that was maybe different from past couple of quarters or is that kind of I mean, I Speaker 200:35:36think brunch as a category in general, there's a lot more People going to the brunch category, but I think for us, we're so early on capturing that daypart that we haven't seen anything One way or the other, no, have we seen any economic impact per se on the brunch stay part. So we still look at our lunch Brunch State Park is a huge opportunity for both brands. We have a very good offering on product on both brands. And frankly, the focus with brunch this year is to continue to evolve and bring some innovation to the menu on brunch. But other than that, we're happy with it and we'll continue to grow it. Speaker 500:36:23Got you. And I guess last one for me, anything to call out on Foods like beef costs or fish or anything like that? Speaker 200:36:32Yes. I mean, I think beef, this pretty well published. I think beef has picked up spiked up a little bit recently, but we're still running Some of our contracted pricing, so we haven't really seen anything significant relative to a couple of weeks or months ago. As a matter of fact, as I mentioned earlier, our cost Good is the best it's probably ever been. I think historically we set 24% to 25% range for COGS and we're at 24% for the quarter. Speaker 200:37:03So we did achieve the low end of our historical range on COGS. So I think our focus on COGS, at least internally, Just to continue managing the mix, looking at items that bring in items into the menu that help you with the overall Value and COGS for the brand and just being very thoughtful about things like sides and butters and some of the initiatives that we have that help with the overall profitability profile of our menu. Speaker 500:37:39Got you. Cool. All right. Well, thanks for answering these questions and good luck going forward. Operator00:37:46Okay, sir. This concludes our question and answer session. I'll turn the conference back over to Manny Elaria for any closing remarks. Speaker 200:37:59Thank you, and thank you all for your interest on The ONE Group today. As I always do in my concluding comments, None of this would be possible without the fantastic support of our teammates who bring our mission of great execution Life every day. So for that, thank you. And my final reach out to you is I'll be out in the restaurants. I look forward to seeing you all in the restaurants. Speaker 200:38:27Everybody have a great day. Thank you. Operator00:38:33The conference has now concluded. Thank you again for attending today's presentation. You may now disconnect.Read morePowered by