The ONE Group Hospitality, Inc. Q2 FY2025 earnings call

Key Highlights

• Acknowledged the dedication of over 10,000 teammates. Achieved 20% top-line growth, adjusted EBITDA of $23.4 million, and positive same-store sales at Benihana and traffic at STK.

Strategic Priorities

• Drive same-store sales growth: Focus on operational excellence, culinary innovation, and marketing. Implemented value-focused programming and enhanced reservation systems. Launched Friends with Benefits loyalty program.
• Asset-light growth: Balanced company-owned development with franchising. Opened Benihana Express in Miami and discussed high-quality relocations. Anticipate franchise licensed and managed locations to represent over 60% of the footprint.
• Optimize grill portfolio: Closed 5 underperforming grill locations, focusing on resetting the portfolio and enhancing marketing.
• Maintain balance sheet flexibility: Strong liquidity with ~$50 million in liquidity, prioritizing cash flow generation and cost discipline.
• Benihana integration: Progressing ahead of schedule, realizing $20 million in synergies by year-end 2026, leveraging operations, culinary, and marketing for growth.

The ONE Group saw strong top-line growth of 20% in the second quarter. Benihana contributed significantly, with positive same-store sales and successful integration of the acquisition. STK delivered industry-leading unit economics, generating approximately $11 million in annual revenues with 20% plus restaurant level margins. Grill Concepts closed 5 noncore units due to lease expirations and real estate issues, focusing on resetting the portfolio. Company-owned restaurant net revenues increased 20.6% from the prior year quarter, driven by the Benihana acquisition and new openings. Adjusted EBITDA was $23.4 million, highlighting operational efficiency.

Third Quarter 2025

• Projected total GAAP revenues between $190 million and $195 million, adjusted EBITDA between $15 million and $18 million.

Fiscal Year 2025

• Projected total GAAP revenues between $835 million and $870 million, adjusted EBITDA between $95 million and $115 million.
• Plan to open 5 to 7 new venues, with total capital expenditures net of landlord allowances between $45 million and $50 million.

• Macro-economic uncertainties impacting consumer spending and dining habits.
• Intense competition in the casual dining segment affecting marketing effectiveness and traffic.
• Short-term challenges in the grill segment due to movie business impact, seafood consumption trends, and proliferation of low-cost sushi competitors.

Q: Brian Mullan of Piper Sandler asks about Benihana's same-store sales comparison and initiatives to drive top line.

A: Last year's Benihana issues included HVAC problems, this year lapping those and focusing on new prototype learnings, pre-opening marketing, and new restaurant design.

Q: Brian Mullan asks about STK's traffic management.

A: Emphasizes value propositions, Happy Hour, and balancing value with premium products to retain market share.

Q: Mark Smith of Lake Street Capital asks about Grill closures.

A: Closures were of noncore units at lease end, resetting the portfolio and focusing on menu innovation and marketing.

Q: Joseph Gomes of NOBLE Capital asks about Benihana franchising.

A: Progress on infrastructure and San Mateo prototype, interest from existing franchisees in full-size restaurants.

Q: Jim Sanderson of Northcoast Research asks about back half same-store sales.

A: Focus on event business, turn times at Benihana, and loyalty program momentum.

Q: Roger Lipton of Lipton Financial asks about Seattle Benihana.

A: Plans to open a flagship Benihana in Seattle by year-end, reallocating from Kona Grill due to strong revenue potential.