The ONE Group Hospitality, Inc. (“The ONE Group”) (NASDAQ:STKS),
today announced its financial results for the third quarter ended
September 30, 2016.
Highlights for the third quarter ended September 30, 2016
were as follows:
- The third quarter marked our tenth
consecutive quarter of double digit revenue growth;
- Owned unit net revenues increased 22.6%
to $16.3 million;
- Management and incentive fee revenue
increased 6.3% to $2.1 million;
- Total GAAP revenue increased 20.5% to
$18.4 million;
- Total food and beverage sales at owned
and managed units* increased 9.0% to $39.6 million;
- GAAP net income attributable to The ONE
Group Hospitality, Inc. for the quarter was $1.5 million or $0.06
per share for the quarter compared to GAAP net loss of $2.0 million
or $(0.08) per share for the same period last year;
- Adjusted EBITDA was $824,000 compared
to $823,000 for the same period last year.**
*Total food and beverage sales at owned and managed units, a
non-GAAP measure, represents our total revenue from our owned
operations as well as the revenue reported to us with respect to
sales at our managed locations, where we earn management and
incentive fees at these locations. For a reconciliation of our GAAP
revenue to total food and beverage sales at our owned and managed
units and a discussion of why we consider it useful, see the
financial information accompanying this release.
** Adjusted EBITDA, a non-GAAP measure, represents net income
before interest expense, provision for income taxes, depreciation
and amortization, non-cash impairment loss, deferred rent,
pre-opening expenses, non-recurring gains and losses, stock based
compensation and losses from discontinued operations (and certain
transactional costs, in the case of the third quarter 2016). For a
reconciliation of adjusted EBITDA to the most directly comparable
financial measure presented in accordance with GAAP and a
discussion of why we consider it useful, see the financial
information accompanying this release.
Jonathan Segal, CEO of The ONE Group noted, “As a result of the
near-term challenging restaurant landscape and tourism decline in
our core markets as well as the unstable political climate, our
third quarter results fell short of our expectations. Despite this
challenging environment, we believe that the demand for our brand
remains strong. Over the long-term, our growth strategy continues
to focus on management and license deals, which require a lower
capital investment, while producing high margin EBITDA royalty
stream.”
Segal continued, “During the third quarter we opened two managed
STK restaurants, including our second STK in Miami with our
partner, the ME Hotel Group and our first STK in Toronto, Canada.
We also opened a rooftop restaurant at the Andaz Hotel in San
Diego. Additionally, we opened our first licensed STK in the
holiday island of Ibiza. Looking towards the next three to six
months, we expect to open company-owned STK Restaurants in Denver
and San Diego.”
Third Quarter 2016 Financial Results
Total owned unit net revenues increased 22.6% to $16.3 million
in the third quarter of 2016 compared to $13.3 million in the third
quarter of 2015. The increase was primarily due to the opening of
STKs in Orlando and Chicago.
Comparable sales from owned STK units decreased 9.2% for the
quarter. Comparable sales from owned and managed STK units
decreased 4.2% for the quarter. The decrease in same store sales
was driven by a decline in the private events business coupled with
a decline in tourism in our core markets.
Management and incentive fee revenues increased 6.3% to $2.1
million in the third quarter of 2016 compared to $1.9 million in
the third quarter of 2015. The increase was driven by an increase
in management and incentive fees at our STK in Las Vegas as well as
the opening of STK Ibiza and STK Miami at the ME Hotel and was
partially offset by a decline in revenue and in the currency
exchange rates versus the same period a year ago from our UK
operations.
Total food and beverage sales at owned and managed units
increased 9.0% to $39.6 million compared to $36.3 million in the
third quarter of 2015.
Adjusted EBITDA for the third quarter of 2016 was $824,000
compared to adjusted EBITDA of $823,000 in the third quarter of
2015. Adjusted EBITDA for 2016 includes the addback of
approximately $505,000 of transaction costs relating to a review of
strategic alternatives which is described in more detail below.
Net income attributable to The ONE Group Hospitality, Inc. was
$1.5 million compared to a net loss of $2.0 million in the third
quarter of 2015.
Adjusted net income for the quarter was $2.3 million, or $0.09
per share, compared to adjusted net loss of $2.0 million, or
($0.08) per share, in the third quarter of 2015. Adjusted net
income for 2016 includes the addback of approximately $505,000 of
transaction costs which relating to a review of strategic
alternatives is described in more detail below.***
Review of Strategic Alternatives
As a result of being approached by third parties regarding our
interest in potential strategic transactions, our Board of
Directors has authorized the Company to explore possible strategic
alternatives to enhance stockholder value. The Company has engaged
Stifel to act as its financial advisor. There is no set timetable
for the strategic review process. There can be no assurance that
this process will result in any specific action or change in
current strategy. The Company does not expect to comment further or
update the market with any further information on the process
unless and until its Board of Directors has approved a specific
action or it otherwise concludes its review of strategic
alternatives.
*** Adjusted net income, a non-GAAP measure, represents net
income before loss from discontinued operations, non-recurring
gains and losses, non-cash impairment losses and stock based
compensation. For a reconciliation of adjusted net income to the
most directly comparable financial measure presented in accordance
with GAAP and a discussion of why we consider it useful, see the
financial information accompanying this release.
Conference Call
The Company will host a conference call to discuss third quarter
2016 financial results today at 5:00 PM Eastern Time. Hosting the
call will be Jonathan Segal, Chief Executive Officer, and Sam
Goldfinger, Chief Financial Officer.
The conference call can be accessed live over the phone by
dialing 877-407-3982 or for international callers by dialing
201-493-6780. A replay will be available after the call and can be
accessed by dialing 877-870-5176 or for international callers by
dialing 858-384-5517; the passcode is 13647290. The replay will be
available until December 10, 2016.
About The ONE Group
The ONE Group (NASDAQ:STKS) is a global hospitality company that
develops and operates upscale, high-energy restaurants and lounges
and provides hospitality management services for hotels, casinos
and other high-end venues both nationally and internationally. The
ONE Group’s primary restaurant brand is STK, a modern twist on the
American steakhouse concept with locations in major metropolitan
cities throughout the U.S. and Europe. ONE Hospitality, The ONE
Group’s food and beverage hospitality services business, provides
the development, management and operations for premier restaurants
and turn-key food and beverage services within high-end hotels and
casinos. Additional information about The ONE Group can be found at
www.togrp.com.
Cautionary Statement on Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the “safe harbor” provisions of the United States
Private Securities Litigation Reform Act of 1995. For example, the
statements related to the exploration of strategic alternatives and
the potential results therefrom are forward-looking.
Forward-looking statements may be identified by the use of words
such as “anticipate”, “believe”, “expect”, “estimate”, “plan”,
“outlook”, and “project” and other similar expressions that predict
or indicate future events or trends or that are not statements of
historical matters. A number of factors could cause actual results
or outcomes to differ materially from those indicated by such
forward-looking statements, including but not limited to, (1) our
ability to open new restaurants and food and beverage locations in
current and additional markets, grow and manage growth profitably,
maintain relationships with suppliers and obtain adequate supply of
products and retain our key employees; (2) factors beyond our
control that affect the number and timing of new restaurant
openings, including weather conditions and factors under the
control of landlords, contractors and regulatory and/or licensing
authorities; (3) in the case of our strategic review, our ability
to identify and consummate a strategic transaction more enhancing
of long-term stockholder value than continuing to execute our
current strategy; (4) changes in applicable laws or regulations;
(5) the possibility that the Company may be adversely affected by
other economic, business, and/or competitive factors; and (6) other
risks and uncertainties indicated from time to time in our filings
with the SEC, including our Annual Report on Form 10-K filed on
March 30, 2016.
Investors are referred to the most recent reports filed with the
SEC by The ONE Group Hospitality, Inc. Investors are cautioned not
to place undue reliance upon any forward-looking statements, which
speak only as of the date made, and we undertake no obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events, or otherwise.
Results of Operations (in thousands, except share and per share
data)
The following table sets forth certain
statements of operations and comprehensive income data for the
periods indicated:
For the Three Months Ended September
30, For the Nine Months Ended September 30,
2016 2015
2016 2015
Revenues: Owned unit net revenues $ 16,317.6 $
13,314.5 $ 45,980.3 $ 35,818.7 Management and incentive fee revenue
2,062.0 1,939.4 6,020.0
6,112.6 Total revenue 18,379.6 15,253.9 52,000.3
41,931.3 Cost and expenses: Owned operating expenses: Food
and beverage costs 4,119.7 3,346.8 11,427.2 9,082.2 Unit operating
expenses 10,795.6 8,800.8 29,663.4 23,694.4 General and
administrative, net 2,634.6 2,642.7 8,178.8 7,777.1 Depreciation
and amortization 758.3 630.2 1,828.4 1,620.0 Management and royalty
fees - 0.3 - 47.0 Pre-opening expenses 2,035.5 1,634.2 4,481.1
4,399.2 Transaction costs 505.0 405.8 505.0 506.1 Equity in income
of investee companies (178.3 ) (205.3 ) (492.1 ) (728.5 )
Derivative income - (1,139.0 ) (100.0 ) (3,917.0 ) Interest expense
(income), net of interest income 79.8 1.2 277.3 (4.0 ) Other
expense (income), net (2.0 ) 102.4
127.0 (402.3 ) Total cost and expenses
20,748.2 16,220.1 55,896.1
42,074.2 Loss from continuing operations
before (2,368.6 ) (966.2 ) (3,895.8 ) (142.9 ) provision (benefit)
for income taxes Provision (benefit) for income taxes
(4,047.0 ) 922.4 (3,567.3 ) (5,619.5 )
Income (loss) from continuing operations 1,678.4 (1,888.6 )
(328.5 ) 5,476.6
Income from discontinued operations, net
of taxes
2.9 62.5 1.3 23.9
Net income (loss) 1,681.3 (1,826.1 ) (327.2 ) 5,500.5
Less: net income attributable to noncontrolling interest
200.4 189.7 212.2 217.0
Net income (loss) attributable to THE ONE GROUP $
1,480.9 $ (2,015.8 ) $ (539.4 ) $ 5,283.5 Amounts
attributable to THE ONE GROUP: Income (loss) from continuing
operations $ 1,478.0 $ (2,078.3 ) $ (540.7 ) $ 5,259.6
Income from discontinued operations, net
of taxes
2.9 62.5 1.3 23.9
Net income (loss) attributable to THE ONE GROUP $ 1,480.9
$ (2,015.8 ) $ (539.4 ) $ 5,283.5 Net income
(loss) attributable to THE ONE GROUP $ 1,480.9 $ (2,015.8 ) $
(539.4 ) $ 5,283.5 Other comprehensive loss Currency translation
adjustment (132.2 ) (30.9 ) (150.6 )
(261.7 ) Comprehensive (loss) income $ 1,348.7 $
(2,046.7 ) $ (690.0 ) $ 5,021.8 Net income (loss) per
share attributable to THE ONE GROUP $ 0.06 $ (0.08 ) $ (0.02
) $ 0.21 Shares outstanding - basic and diluted
25,022,749 24,972,515 25,087,341
24,956,177
CONSOLIDATED BALANCE SHEET
(in thousands)
Sep 30, December 31,
2016 2015
(unaudited)
Assets
Current assets: Cash and cash equivalents $ 1,791.3 $ 1,841.9
Accounts receivable, net 4,558.5 4,063.5 Inventory 1,162.9 1,152.1
Other current assets 2,283.9 3,559.0 Due from related parties, net
732.7 1,232.4 Total current assets
10,529.3 11,848.9 Property & equipment, net 35,716.5
27,952.3 Investments 3,133.7 2,910.3 Deferred tax assets 13,839.4
10,093.7 Other assets 1,008.6 691.6 Security deposits
2,484.2 2,444.5 Total assets $ 66,711.7
$ 55,941.3
Liabilities and
Stockholders’ Equity
Current liabilities: Cash overdraft $ 404.5 $ 973.8 Long term debt,
current portion 3,149.6 2,680.1 Accounts payable 3,581.7 2,396.6
Accrued expenses 5,274.6 4,635.6 Derivative liability - 100.0
Deferred revenue 662.2 204.0 Total
current liabilities 13,072.6 10,990.1 Long term debt, net of
current portion 12,031.2 9,956.6 Deferred license revenue,
long-term 1,197.1 1,099.6 Deferred rent payable 16,445.3
14,290.0 Total liabilities 42,746.2 36,336.3
Stockholders’ equity 24,687.0 20,285.7 Noncontrolling
interest (721.5 ) (680.7 ) Total stockholders’ equity
including noncontrolling interest 23,965.5
19,605.0 Total Liabilities and Stockholders’
Equity $ 66,711.7 $ 55,941.3
Reconciliation of Non-GAAP Measures
We prepare our financial statements in accordance with generally
accepted accounting principles (GAAP). In this press release, we
also make references to the following non-GAAP financial measures:
total food and beverage sales at owned and managed units, adjusted
net income and adjusted EBITDA.
Total food and beverage sales at owned and managed units. Total
food and beverage sales at owned and managed units represents our
total revenue from our owned operations as well as the revenue
reported to us with respect to sales at our managed locations,
where we earn management and incentive fees at these locations. We
believe that this measure represents a useful internal measure of
performance as it identifies total sales associated with our brands
and hospitality services that we provide. We believe that this
measure also represents a useful internal measure of performance.
Accordingly, we include this non-GAAP measure so that investors can
review financial data that management uses in evaluating
performance, and we believe that it will assist the investment
community in assessing performance of restaurants and other
services we operate, whether or not the operation is owned by us.
However, because this measure is not determined in accordance with
GAAP, it is susceptible to varying calculations and not all
companies calculate these measures in the same manner. As a result,
this measure as presented may not be directly comparable to a
similarly titled measure presented by other companies. This
non-GAAP measure is presented as supplemental information and not
as an alternative to any GAAP measurements. The following table
includes a reconciliation of our GAAP revenue to total food and
beverage sales at our owned and managed units (in thousands):
For the Three Months Ended September
30, For the Nine Months Ended September
30, 2016 2015
2016 2015
(unaudited) (unaudited) (unaudited)
(unaudited) Owned Unit Net Revenues (a) $ 16,317.6 $
13,314.5 $ 45,980.3 $ 35,818.7 Management and Incentive Fee Revenue
2,062.0 1,939.4 6,020.0
6,112.6 GAAP Revenues 18,379.6
15,253.9 52,000.3 41,931.3
Food and Beverage Sales from Managed Units (a)
23,292.9 23,013.4 67,221.3
67,171.9
Total Food and Beverage sales at
Owned and Managed Units $ 39,610.5
$ 36,327.9 $ 113,201.6
$ 102,990.6
(a) Components of Total Food &
Beverage Sales at Owned and Managed Units
Adjusted EBITDA. We define adjusted EBITDA as net income before
interest expense, provision for income taxes, depreciation and
amortization, non-cash impairment loss, deferred rent, pre-opening
expenses, non-recurring gains and losses and losses from
discontinued operations (and certain transactional costs, in the
case of the third quarter 2016). 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.
We believe that adjusted EBITDA is an appropriate measure of
operating performance, as it provides a clear picture of our
operating results by eliminating certain non-cash expenses that are
not reflective of the underlying business performance. We use this
metric to facilitate a comparison of our operating performance on a
consistent basis from period to period and to analyze the factors
and trends affecting our business as well as evaluate the
performance of our units. Adjusted EBITDA has limitations as an
analytical tool and our calculation thereof may not be comparable
to that reported by other companies; accordingly, you should not
consider it in isolation or as a substitute for analysis of our
results as reported under GAAP. Adjusted EBITDA is included in this
press release because it is a key metric used by management.
Additionally, adjusted EBITDA is frequently used by analysts,
investors and other interested parties to evaluate companies in our
industry. We use adjusted EBITDA, alongside other GAAP measures
such as net income (loss), to measure profitability, as a key
profitability target in our annual and other budgets, and to
compare our performance against that of peer companies. We believe
that adjusted EBITDA provides useful information facilitating
operating performance comparisons from period to period.
The following table presents a reconciliation of net income to
adjusted EBITDA for the periods indicated (in thousands):
For the Three
Months Ended September 30, For the Nine Months Ended
September 30,
2016
2015
2016
2015
(unaudited) (unaudited) (unaudited)
(unaudited)
ADJUSTED
EBITDA:
Net income (loss) attributable to THE ONE GROUP $ 1,480.9 $
(2,015.8 ) $ (539.4 ) $ 5,283.5 Net income attributable to
noncontrolling interest 200.4 189.7
212.2 217.0 Net income (loss) 1,681.3
(1,826.1 ) (327.2 ) 5,500.5 Interest expense (income), net of
interest income 79.8 1.2 277.3 (4.0 ) Provision (benefit) for
income taxes (4,047.0 ) 922.4 (3,567.3 ) (5,619.5 ) Depreciation
and amortization 758.3 630.2 1,828.4 1,620.0 Deferred rent (1)
(276.4 ) 414.9 (407.5 ) 575.3 Pre-opening expenses 2,035.5 1,634.2
4,481.1 4,399.2 Transaction costs 505.0 405.8 505.0 506.1
Income from discontinued operations
(2.9 ) (62.5 ) (1.3 ) (23.9 ) Derivative income - (1,139.0 ) (100.0
) (3,917.0 ) Stock based compensation 343.5 162.5 723.4 666.9
ADJUSTED EBITDA 1,077.1 1,143.6
3,411.9 3,703.6 Non-controlling ADJUSTED EBITDA 253.5
320.6 426.8 488.3
THE ONE GROUP ADJUSTED EBITDA $ 823.6 $ 823.0
$ 2,985.1 $ 3,215.3
(1) Deferred rent is included in occupancy
expense on the statement of operations and comprehensive
income.
Adjusted Net Income. We define adjusted net income as net income
before loss from discontinued operations, non-recurring gains and
losses, non-cash impairment losses, and stock based compensation.
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. Adjusted net
income has limitations as an analytical tool and our calculation
thereof may not be comparable to that reported by other companies;
accordingly, you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP.
We believe that adjusted net income provides a clear picture of
our operating results by eliminating certain non-cash expenses that
are not reflective of the underlying business performance. We use
this metric to facilitate a comparison of our operating performance
on a consistent basis from period to period and to analyze the
factors and trends affecting our business.
The following table presents a reconciliation of net income to
adjusted net income for the periods indicated (in thousands, except
share and per share data):
For the Three Months Ended September
30,
For the Nine Months Ended September
30,
2016
2015
2016
2015
(unaudited)
(unaudited)
(unaudited)
(unaudited)
ADJUSTED NET
INCOME:
Net income (loss) attributable to THE ONE GROUP $ 1,480.9 $
(2,015.8 ) $ (539.4 ) $ 5,283.5 Net income attributable to
noncontrolling interest 200.4 189.7
212.2 217.0 Net income (loss) 1,681.3
(1,826.1 ) (327.2 ) 5,500.5 Transaction costs 505.0 405.8 505.0
506.1
Income from discontinued operations
(2.9 ) (62.5 ) (1.3 ) (23.9 ) Derivative income - (1,139.0 ) (100.0
) (3,917.0 ) Stock based compensation 343.5 162.5 723.4 666.9
Reversal of deferred tax allowance 636.4
- (5,545.2 )
Adjusted net income (loss)
2,526.9 (1,822.9 ) 799.9 (2,812.6 )
Non-controlling interest on adjusted net
income
200.4 189.7 212.2
217.0
THE ONE GROUP adjusted net income
(loss)
$ 2,326.5 $ (2,012.6 ) $ 587.7 $ (3,029.6 )
Adjusted net income (loss) per share -
Basic and diluted
$ 0.09 $ (0.08 ) $ 0.02 $ (0.12 ) Shares outstanding
- basic and diluted 25,022,749 24,972,515
25,087,341 24,956,177
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version on businesswire.com: http://www.businesswire.com/news/home/20161114006530/en/
Investors:ICRMichelle Michalski, 646-277-1224
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