The ONE Group Hospitality, Inc. Q1 FY2025 earnings call

• Highlights: First quarter revenues, comparable sales, and adjusted EBITDA reached or exceeded guided ranges. Revenues increased nearly 150% to $211 million. Comparable sales improved, with Benihana positive and STK having 4.1% transaction growth. Restaurant-level EBITDA was 16.4%.
• Strategic priorities:
  • Driving sales: Focus on value-driven offerings, happy hour menus, midweek dining experiences, culinary innovation, and improving throughput. Leveraging digital marketing and Friends with Benefits rewards program.
  • Integrating Benihana: Realized synergies from streamlined operations, workforce efficiency, and centralized purchasing, with expected annual synergies of at least $20 million in 2026.
  • Growth phase: Opened new Benihana and STK restaurants. Plan to open 5-7 new venues in 2025. Pursuing franchising and asset-like expansion.
  • Balance sheet: Finished the quarter with $34.1 million in cash and $33.6 million available under revolving credit facility, with term loan having no financial covenant.

Total consolidated GAAP revenues for the first quarter of 2025 were $211.1 million, a 148.4% increase from $85 million in the same quarter of the previous year. Company-owned restaurant net revenue was $207.4 million, up 154.5% from $81.5 million, driven by contributions from Benihana and RA Sushi and new restaurant openings. Managed license and incentive fee revenues increased 7% to $3.7 million. Company-owned restaurant cost of sales as a percentage of net revenue decreased to 20.8% from 23% due to integration synergies. Restaurant EBITDA was 16.4%, with Benihana at 20.1% and STK at 17.7%. Adjusted EBITDA was $25.2 million, a 233% increase from the prior quarter.

• Q2 2025: Projected total GAAP revenues between $205 and $210 million, consolidated comparable sales minus 5.5% to minus 4%, managed franchise and licensee revenues $3-4 million, company-owned operating expenses as % of net revenue ~83%, adjusted EBITDA $23-25 million, pre-opening expenses $1.5-2 million, and 1-2 new venues.
• 2025: Projected total GAAP revenues $835-870 million, consolidated comparable sales minus 3% to plus 1%, managed franchise and licensee revenues $15-16 million, company-owned operating expenses as % of net revenue 83.5%-82.2%, adjusted EBITDA $95-115 million, pre-opening expenses $7-8 million, effective income tax rate ~7.5%, capital expenditures $45-50 million, and 5-7 new venues.

• Risks associated with forward-looking statements, including actual results differing from expectations. Macroeconomic conditions, weather, landlord/contractor/regulatory factors can impact new restaurant openings. Consumer behavior changes due to economic environment and external factors like tariffs.

Q: How did consumer behavior during the quarter impact higher-end vs. other consumers?

A: Higher-end consumers held up better, attributed to strategic brand performance. Growth side remains challenged.

Q: Talk about same-store sales cadence in Q1 and trends in Q2?

A: February was more challenged, March performed well. Second quarter affected by weather, convention schedules, and environmental ups/downs.

Q: Any changes from competitors in promotions and discounting?

A: Casual brands heavy on TV, we focus on grassroots marketing and loyalty programs.

Q: Update on franchising efforts?

A: Updated infrastructure, increased awareness, working on development deals with interested parties.

Q: Impact of Easter calendar shift on sales?

A: Easter had slight impact, not a major holiday for the company.

Q: Balance of company-owned vs. franchised stores for Benihana's 400-unit target?

A: Internally targeting ~50% balance between franchise and company-owned stores for Benihana.

Q: STK margin expectation and Benihana's financials?

A: STK margin seasonally higher in Q2 and Q4. Benihana average domestic volume ~$6.5 million, hard costs ~$400-500 per square foot for a 7,000 sq ft box.