Kona Grill Reports Fourth Quarter and Fiscal 2017 Results
March 22 2018 - 4:05PM
Kona Grill, Inc. (NASDAQ:KONA), an American grill and sushi bar,
reported financial results for the fourth quarter and year ended
December 31, 2017.
Fourth Quarter 2017 Key Items Compared to Fourth Quarter
2016
- Revenues decreased 2.5% to $42.5 million.
- Same-store sales decreased 6.5%, including an estimated 0.5%
impact from the temporary closure of our Puerto Rico restaurant as
a result of Hurricane Maria.
- Restaurant operating profit*, a non-GAAP measure, improved to
$4.8 million or 11.4% as a percentage of revenues compared to $4.7
million or 10.7% as a percentage of revenues.
- Net loss of $12.4 million, or ($1.23) per share compared to net
loss of $16.6 million, or ($1.58) per share in 2016,
- Non-cash asset impairment charges for three restaurants of $9.3
million, or $0.92 per share compared to non-cash asset impairment
charges of $12.5 million or $1.19 per share for five
restaurants.
Fiscal 2017 Key Items Compared to Fiscal
2016
- Revenues increased 5.6% to $179.1 million.
- Same-store sales decreased 5.9%, including an estimated 0.4%
impact from Hurricanes Harvey, Irma and Maria.
- Restaurant operating profit*, a non-GAAP measure, was $19.1
million or 10.7% as a percentage of revenues compared to $23.7
million or 14.0% as a percentage of revenues.
- Net loss of $23.4 million, or ($2.32) per share, including $9.3
million or $0.92 per share in asset impairment charges compared to
net loss of $21.6 million, or ($2.00) per share, including $12.5
million or $1.15 per share in asset impairment charges in
2016.
- Opened one domestic restaurant in Scottsdale, Arizona and
franchise partners opened three international restaurants in Dubai,
Vaughan (Toronto) and Monterrey compared to eight domestic openings
in 2016.
* For a reconciliation of restaurant operating
profit to the most directly comparable financial measures presented
in accordance with GAAP and a discussion of why the Company
considers them useful, see the financial information accompanying
this release.
“We continue to battle for market share in this
challenging industry environment. The environment remains difficult
with everyone fighting to drive traffic amidst a changing consumer
environment. We have many initiatives in place to make Kona Grill
the destination of choice for guests. These initiatives are framed
around our mission to make every experience exceptional for our
guests,” said Berke Bakay, President and CEO of Kona Grill.
“To lead the turnaround, we hired Jim Kuhn as
our chief operating officer in December. In Jim’s first three
months with us, he has brought a renewed focus on service,
hospitality and cleanliness and has re-energized our company with
his relentless pursuit of elevating all aspects of restaurant
operations. We are evaluating what we do and who we use to provide
products and services in order to generate cost-savings and
efficiencies within our restaurants. We are starting to see the
benefits of these initiatives in our 2018 operating margins,” he
continued.
“We recently amended our credit facility to
among other things, provide relief on our financial covenants to
allow time for the many initiatives to take effect. We continue to
evaluate our underperforming restaurants and have discussions with
our landlords regarding rent abatement or strategic alternatives
for certain restaurants. We estimate that the eight restaurants
that we have taken impairment charges for over the past two years
had a 360 basis point negative impact on our four-wall margins for
the fourth quarter of 2017,” he continued.
“We currently have three international units
open as our partners in the UAE and Canada opened the first
restaurant in their respective countries during the fourth quarter.
We are excited about the potential to grow our brand through
franchising and continue to engage in discussions with potential
partners in several countries,” he concluded.
Conference CallKona Grill will
hold a conference call today at 5:00 p.m. Eastern time to discuss
its financial results for the fourth quarter ended December 31,
2017. The Company’s President and CEO Berke Bakay and CFO Christi
Hing will host the call, followed by a question and answer
session.
The conference call will be broadcast over the
internet via the investors section of the Company’s website at
www.konagrill.com. Additionally, investors may dial 1-323-794-2094
to participate in the call.
About Kona GrillKona Grill
features a global menu of contemporary American favorites,
award-winning sushi, and specialty cocktails in an upscale casual
atmosphere. Kona Grill owns and operates 46 restaurants, guided by
a passion for quality food and exceptional service. Restaurants are
located in 23 states and Puerto Rico: Alabama (Huntsville); Arizona
(Chandler, Gilbert, Phoenix, Scottsdale (2)); California (Irvine);
Colorado (Denver); Connecticut (Stamford); Florida (Miami, Tampa,
Sarasota, Winter Park); Georgia (Alpharetta); Hawaii (Honolulu);
Illinois (Lincolnshire, Oak Brook); Indiana (Carmel); Idaho
(Boise); Louisiana (Baton Rouge); Maryland (Baltimore); Michigan
(Troy); Minnesota (Eden Prairie, Minnetonka); Missouri (Kansas
City); Nebraska (Omaha); New Jersey (Woodbridge); Nevada (Las
Vegas(2)); Ohio (Cincinnati, Columbus); Puerto Rico (San Juan);
Tennessee (Franklin); Texas (Austin, Dallas, El Paso, Friendswood,
Fort Worth, Houston, Plano, San Antonio(2), The Woodlands);
Virginia (Arlington, Fairfax, Richmond). Additionally, Kona Grill
has three restaurants that operate under a franchise agreement in
Dubai, United Arab Emirates; Vaughan, Canada and Monterrey, Mexico.
For more information, visit www.konagrill.com.
Forward-Looking
StatementsVarious remarks we make about future
expectations, plans, and prospects for the Company constitute
forward-looking statements for purposes of the Safe Harbor
provisions under the Private Securities Litigation Reform Act of
1995. Forward-looking statements include statements regarding our
expectations, beliefs, intentions, plans, objectives, goals,
strategies, future events, or performance and underlying
assumptions and other statements that are not purely historical.
These statements relate to our future financial performance and
development plans, including but not limited to those relating to
our sales trends, projected earnings, expenses, and capital
expenditures for 2018, expectations of new store openings as well
as international franchise development in 2018 and beyond and
availability of capital. We have attempted to identify these
statements by using forward-looking terminology such as “may,”
“will,” “anticipates,” “expects,” “believes,” “intends,” “should,”
or comparable terms. All forward-looking statements included in
this press release are based on information available to us on the
date of this release and we assume no obligation to update these
forward-looking statements for any reason. These statements are
subject to risks and uncertainties that could cause actual results
to differ materially from those described in the statements.
Investors are referred to the full discussion of risks and
uncertainties associated with forward-looking statements and the
discussion of risk factors contained in the company's filings with
the Securities and Exchange Commission.
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KONA GRILL, INC. |
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CONDENSED CONSOLIDATED BALANCE
SHEETS |
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(In thousands) |
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December 31, |
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December 31, |
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2017 |
|
2016 |
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Assets |
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Cash and
cash equivalents |
$ |
5,042 |
|
$ |
3,476 |
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Other current
assets |
|
4,002 |
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|
5,256 |
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Other assets |
|
1,116 |
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|
1,383 |
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Property and equipment,
net |
|
81,639 |
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|
98,268 |
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Total
assets |
$ |
91,799 |
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$ |
108,383 |
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Liabilities and Stockholders' Equity |
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Current
liabilities |
$ |
16,603 |
|
$ |
19,277 |
|
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Long-term debt |
|
36,921 |
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|
25,921 |
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Deferred
rent and other long-term liabilities |
|
32,612 |
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|
31,610 |
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Stockholders' equity |
|
5,663 |
|
|
31,575 |
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Total
liabilities and stockholders' equity |
$ |
91,799 |
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$ |
108,383 |
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KONA GRILL, INC. |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS |
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(In thousands, except per share amounts) |
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
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2017 |
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2016 |
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2017 |
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2016 |
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(Unaudited) |
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Revenue |
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$ |
42,489 |
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$ |
43,592 |
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$ |
179,081 |
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$ |
169,523 |
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Costs
and expenses: |
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Cost of
sales |
|
|
11,086 |
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|
11,998 |
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|
48,673 |
|
|
|
45,314 |
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Labor |
|
|
15,606 |
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|
16,425 |
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|
65,778 |
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|
62,027 |
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Occupancy |
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|
4,167 |
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|
3,748 |
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|
16,602 |
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|
13,754 |
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Restaurant operating expenses |
|
|
6,787 |
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|
|
6,767 |
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|
28,929 |
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|
24,740 |
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General
and administrative |
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|
3,440 |
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|
3,292 |
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|
13,453 |
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|
13,272 |
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Preopening expense |
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|
6 |
|
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|
1,090 |
|
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|
816 |
|
|
|
4,533 |
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Depreciation and amortization |
|
|
3,906 |
|
|
|
4,083 |
|
|
|
15,183 |
|
|
|
14,421 |
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Asset
impairment charge |
|
|
9,311 |
|
|
|
12,454 |
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|
9,341 |
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|
12,454 |
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Lease
termination and exit costs |
|
|
- |
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|
- |
|
|
|
1,392 |
|
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|
- |
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Total
costs and expenses |
|
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54,309 |
|
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|
59,857 |
|
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|
200,167 |
|
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|
190,515 |
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Loss from
operations |
|
|
(11,820 |
) |
|
|
(16,265 |
) |
|
|
(21,086 |
) |
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|
(20,992 |
) |
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Write-off of deferred financing costs |
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|
- |
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- |
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|
472 |
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- |
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Interest
expense, net |
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|
570 |
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|
308 |
|
|
|
1,784 |
|
|
|
571 |
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Loss
before income taxes |
|
|
(12,390 |
) |
|
|
(16,573 |
) |
|
|
(23,342 |
) |
|
|
(21,563 |
) |
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Income tax expense |
|
|
19 |
|
|
|
10 |
|
|
|
90 |
|
|
|
66 |
|
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Net
loss |
|
$ |
(12,409 |
) |
|
$ |
(16,583 |
) |
|
$ |
(23,432 |
) |
|
$ |
(21,629 |
) |
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Net loss per
share: |
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Basic and
diluted |
|
$ |
(1.23 |
) |
|
$ |
(1.58 |
) |
|
$ |
(2.32 |
) |
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$ |
(2.00 |
) |
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Weighted
average shares outstanding: |
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Basic and
diluted |
|
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10,105 |
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|
10,474 |
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|
10,121 |
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|
10,791 |
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Comprehensive loss |
|
$ |
(12,409 |
) |
|
$ |
(16,583 |
) |
|
$ |
(23,432 |
) |
|
$ |
(21,629 |
) |
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KONA GRILL, INC. |
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NON-GAAP RECONCILIATIONS |
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(In thousands) |
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(Unaudited) |
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We prepare our financial statements in accordance with U.S.
GAAP. Within our press release, we make reference to non-GAAP
EBITDA and Restaurant Operating Profit. Restaurant Operating Profit
is defined as revenue minus cost of sales, labor, occupancy and
restaurant operating expenses. Restaurant Operating profit does not
include general and administrative expenses, depreciation and
amortization, asset impairment charge or preopening expenses. We
believe Restaurant Operating Profit is an important component of
financial results because: (i) it is a widely used metric within
the restaurant industry to evaluate restaurant-level productivity,
efficiency, and performance; and (ii) we use Restaurant Operating
Profit as a key metric to evaluate our restaurant financial
performance compared to that of our competitors. EBITDA and
Adjusted EBITDA. EBITDA is defined as net income (loss) plus the
sum of interest, taxes, depreciation and amortization. Adjusted
EBITDA is defined as EBITDA plus unusual or non-recurring items,
such as impairment, lease termination and exit costs and write-off
of deferred financing costs. EBITDA and Adjusted EBITDA are
presented because: (i) we believe it is a useful measure for
investors to assess the operating performance of our business; (ii)
we believe that investors will find these measures useful in
assessing our ability to service or incur indebtedness; and (iii)
we use EBITDA and Adjusted EBITDA internally as a benchmark to
evaluate our operating performance and compare our performance to
that of our competitors. |
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
|
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|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Net
loss |
$ |
(12,409 |
) |
|
$ |
(16,583 |
) |
|
|
$ |
(23,432 |
) |
|
$ |
(21,629 |
) |
|
|
Income
tax expense |
|
19 |
|
|
|
10 |
|
|
|
|
90 |
|
|
|
66 |
|
|
|
Interest
expense, net |
|
570 |
|
|
|
308 |
|
|
|
|
1,784 |
|
|
|
571 |
|
|
|
Depreciation and amortization |
|
3,906 |
|
|
|
4,083 |
|
|
|
|
15,183 |
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|
|
14,421 |
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EBITDA |
|
(7,914 |
) |
|
|
(12,182 |
) |
|
|
|
(6,375 |
) |
|
|
(6,571 |
) |
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|
Asset
impairment charge |
|
9,311 |
|
|
|
12,454 |
|
|
|
|
9,341 |
|
|
|
12,454 |
|
|
|
Lease
termination and exit costs |
|
- |
|
|
|
- |
|
|
|
|
1,392 |
|
|
|
- |
|
|
|
Write-off
of deferred financing costs |
|
- |
|
|
|
- |
|
|
|
|
472 |
|
|
|
- |
|
|
|
Adjusted EBITDA |
$ |
1,397 |
|
|
$ |
272 |
|
|
|
$ |
4,830 |
|
|
$ |
5,883 |
|
|
|
General
and administrative |
|
3,440 |
|
|
|
3,292 |
|
|
|
|
13,453 |
|
|
|
13,272 |
|
|
|
Preopening Expense |
|
6 |
|
|
|
1,090 |
|
|
|
|
816 |
|
|
|
4,533 |
|
|
|
Restaurant operating
profit |
$ |
4,843 |
|
|
$ |
4,654 |
|
|
|
$ |
19,099 |
|
|
$ |
23,688 |
|
|
|
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|
|
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|
|
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|
Restaurant operating
profit margin (A) |
|
11.4 |
% |
|
|
10.7 |
% |
|
|
|
10.7 |
% |
|
|
14.0 |
% |
|
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(A) Restaurant operating profit margin is calculated as
restaurant operating profit divided by restaurant sales |
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KONA GRILL, INC. |
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Selected Supplemental Operating
Information |
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Same-store sales percentage change* |
-6.5 |
% |
|
-4.1 |
% |
|
|
-5.9 |
% |
|
0.5 |
% |
|
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|
|
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|
|
|
|
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|
|
Company-owned
restaurants opened during the period |
- |
|
|
3 |
|
|
|
1 |
|
|
8 |
|
|
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|
Company-owned
restaurants opened at the end of the period |
46 |
|
|
45 |
|
|
|
46 |
|
|
45 |
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International franchise
restaurants opened during the period |
2 |
|
|
- |
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3 |
|
|
- |
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Kona Grill Investor Relations Contact:Kona
Grill, Inc.Christi Hing, Chief Financial Officer(480)
922-8100investorrelations@konagrill.com