The ONE Group Hospitality, Inc. Q3 FY2025 earnings call

• Menu diversification: New premium holiday menu at Kona Grill, reducing reliance on market-pressured categories.
• Loyalty program: Friends with Benefits has over 6.5 million members, added over 200,000 new members in the quarter.
• Brand website upgrades: Benihana, STK, Kona Grill, and RA Sushi have mobile-optimized designs increasing traffic and conversion rates.
• Benihana redesign success: San Mateo location is top-performing, with learning being implemented system-wide to add Techniaki tables and improve flow.
• Franchise momentum: Second Benihana Express opened in Miami, with more in development; STK franchise pipeline improved.
• Portfolio optimization: Closed 7 underperforming Grill locations, plan to convert up to 9 Grill locations to Benihana or STK by end of 2026.
• Balance sheet strength: ~$45 million liquidity, $5 million share repurchase program authorized, expect to reduce discretionary CapEx.
• Fourth quarter optimism: Historically strongest period, enhanced reservation tech, operational flow, and team training to capitalize on holiday demand; targeting 90-minute table turns at Benihana to increase capacity.

Total consolidated GAAP revenues were $180.2 million, decreasing 7.1% from $194 million in the same quarter last year. Company-owned restaurants' net revenue was $177.4 million, down 6.9% from $190.6 million. Management license, franchise, and incentive fee revenues decreased to $2.8 million from $3.4 million. Company-owned restaurant's cost of sales as a percentage of net revenue increased to 21.1% from 20.9%. Operating expenses as a percentage of net revenue increased to 67.6% from 66.2%. Restaurant operating profit was $20.1 million (11.3% of owned restaurant net revenue) vs. $24.5 million (12.8%) prior year. General and administration costs increased to $13.3 million from $12.8 million. Depreciation and amortization expenses were $11.5 million vs. $9.4 million. Impairment charges totaled $3.4 million on 5 restaurants. Net loss attributable to Wes Hospitality was $76.7 million vs. $9.3 million prior year.

• Project total GAAP revenues between $820 million and $825 million, consolidated comparable sales negative 3% to negative 2%.
• Managed franchise and license fee revenues expected between $14 million and $15 million.
• Company-owned operating expenses as a percentage of net revenue ~83.5%.
• Total G&A excluding stock-based compensation ~$46 million, adjusted EBITDA between $95 million and $100 million.
• Restaurant preopening expenses between $5 million and $6 million.
• Effective income tax rate between 1% and 4% excluding valuation allowance items.
• Capital expenditures net of landlord allowances between $45 million and $50 million.
• Plan to open 5 to 7 new venues.

• Macro forces and geographical pressures affecting traffic and sales.
• Economic factors, end of lease, or restaurant performance leading to potential impairment charges.
• Uncertainties in new restaurant openings due to factors outside company control like macroeconomic conditions, weather, landlord/contractor issues.

Q: Joe Gomes asked about same-store sales growth, traffic improvement, and Benihana franchising.

A: Emanuel Hilario discussed traffic improvement in Q3, California's slight improvement, Benihana's table turn target, and progress on Benihana and STK franchising pipelines.

Q: Anthony Lebiedzinski asked about Las Vegas market and loyalty program details.

A: Emanuel Hilario noted STK in Vegas improving, loyalty program with 6.5 million members, early positive returns but early stage.

Q: Anthony Lebiedzinski asked about Vegas market improvement and loyalty program behavior.

A: STK in Vegas improving, loyalty program members showing frequency increase but early stage.

Q: Mark Smith asked about Benihana comps, impairment, and conversion economics.

A: Benihana same-store sales impacted by pricing and California pressure, majority impairment on Kona Grill, conversion cost ~$1 million, effective lease extension in Scottsdale conversion.

Q: James Sanderson asked about pricing impact, bookings, Benihana store design, and Benihana Express.

A: Pricing impact on fourth-quarter sales, holiday bookings progress, Benihana store design changes in CapEx, Benihana Express with smaller box, lower costs, and high ROI for franchisees.