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ONE Group Hospitality, Inc. (STKS)·Q1 2021 Earnings Summary

Executive Summary

  • Q1 2021 revenue rose 24.0% year over year to $50.5M; GAAP EPS was $0.00 and Adjusted EBITDA reached $6.5M, the second-highest in company history, with restaurant operating profit margin at a record 18.8% .
  • Two-year comparable sales improved: consolidated +3.3% vs 2019 for Q1; April accelerated to +32.2% (STK +47.4%, Kona Grill +18.6%), pointing to strong reopening momentum and throughput gains .
  • Margin outperformance driven by disciplined cost control (COGS 24.4%; operating expenses 56.8% of owned restaurant net revenue), labor management, menu optimization, and a relentless focus on table turns; management emphasized margin sustainability as volumes stay elevated .
  • Liquidity strengthened with $28.4M cash and $10.7M revolver availability; guidance remains suspended, but business updates post-quarter show Q2-to-date two-year comps +35.2% with average domestic indoor capacity ~82%—a positive near-term catalyst as capacity constraints ease .

What Went Well and What Went Wrong

What Went Well

  • Record restaurant-level margin: “Restaurant operating profit was 18.8% for the quarter, a record high,” supported by lower COGS via purchasing synergies and operating expense discipline .
  • Demand and mix: STK date nights, social events, and expanded brunch drove utilization of weekend dayparts; April domestic STK weekly sales averaged $261K, exceeding Q4’19 levels despite remaining restrictions .
  • Digital/off-premise: Takeout/delivery significantly expanded year over year, with over half of delivery transactions from new customers, creating a pipeline to convert into dine-in loyalty .

What Went Wrong

  • Managed fee revenue pressure: Management/license/incentive fees fell to $1.3M (from $2.2M LY) due to international closures and seating limits; recovery hinges on Europe reopening (London, Italy) .
  • Input inflation risk: Seafood (crab, lobster) price volatility and labor availability pressures acknowledged; beef is price-locked through year-end, partially mitigating commodity risk .
  • Disclosure discrepancy: Prepared remarks cited takeout/delivery at ~30% of Q1 sales, while Q&A referenced ~13%—investors should note the inconsistency and seek clarifications in future disclosures .

Financial Results

MetricQ3 2020Q4 2020Q1 2021
Total GAAP Revenues ($USD Millions)$39.6 $45.0 $50.5
GAAP Diluted EPS ($USD)-$0.03 -$0.15 $0.00
Restaurant Operating Profit Margin (%)16.6% 16.0% 18.8%
Adjusted EBITDA ($USD Millions)$4.7 $4.1 $6.5

Segment/Revenue Composition

MetricQ3 2020Q4 2020Q1 2021
Owned Restaurant Net Revenues ($USD Millions)$37.8 $43.7 $49.2
Management/License/Incentive Fees ($USD Millions)$1.7 $1.3 $1.3

KPIs and Operating Metrics

KPIQ4 2019Q1 2021 (YTD)April 2021
STK Domestic Avg Weekly Sales ($USD)$224,000 (12 units) $211,000 (13 domestic STKs) $261,000
Kona Grill Avg Weekly Sales ($USD)—$88,000 $97,000
Consolidated Comparable Sales vs 2019 (%)—+3.3% (Q1) +32.2%
STK Comparable Sales vs 2019 (%)—+1.9% (Q1) +47.4%
Kona Grill Comparable Sales vs 2019 (%)—+4.6% (Q1) +18.6%
Takeout/Delivery Mix (% of Sales)—~30% (prepared) “Just about” 13% (Q&A)
COGS (% of Owned Restaurant Net Revenue)—24.4% (Q1) —
Operating Expenses (% of Owned Restaurant Net Revenue)—56.8% (Q1) —
Liquidity—Cash $28.4M; Revolver availability $10.7M —
May 2021 Domestic Indoor Dining Capacity (%)——82% (Q2-to-date)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company financial guidance (revenue, margins, EPS)FY 2021Suspended (since March 2020) Still suspended; provide business updates as warranted Maintained suspension

Earnings Call Themes & Trends

TopicQ3 2020 (Prior-2)Q4 2020 (Prior-1)Q1 2021 (Current)Trend
Capacity & demandPositive comps in Oct; suburban Kona strength; bars converted to seating; heavy focus on turns/reset times Capacity improved in Jan–Mar; two-year comps +0.5% YTD through 3/14; Vegas/NY constraints; takeout ~50% in Q4 April comps surged; demand outpaces supply on peak nights; late-night seating leveraged Improving with reopenings
Margin disciplineRestaurant-level margin +640 bps YoY; COGS 24%, OpEx 59.4% Restaurant operating profit 16.0% Record 18.8%; margins expected to remain strong with higher volumes Sustained improvement
Off-premiseTech stack enabled 9 delivery partners; STK menu adapted; strong off-premise Takeout/delivery ~50% of Q4 revenue Q1 prepared ~30% of sales; >50% of delivery transactions are new customers Normalizing but strategic
Commodity & laborFavorable food costs Q3; synergies Staffing monitored amid extended benefits; retention improving Beef locked through year-end; seafood volatile; labor availability managed proactively Manageable risks
Brunch & daypartsTesting brunch company-wide Emphasis on operational readiness for high volumes Brunch now core across both concepts; holiday alignment (Easter/Mother’s Day) Strategic growth lever
Managed/license feesLower due to closures Still depressed Expected to rebound as Europe reopens; Cabo/Scottsdale adders Rebound ahead
Development pipeline4 STKs & 3 managed F&B under construction; vision to 200 STKs Emphasis on asset-light; strong partner demand Opened managed STK Scottsdale; Cabo airport licensed; multiple UK venues; targeting 13 new venues across ‘21–’22 Accelerating

Management Commentary

  • “Restaurant operating profit was 18.8% for the quarter, a record high… despite limited indoor dining capacity” (Tyler Loy) .
  • “Consumers… are looking for a fun and differentiated social time… our concepts featuring vibe dining are well positioned” (Manny Hilario) .
  • “April 2021 our 13 domestic STKs produced an average weekly sales volume of $261,000… exceeding Q4 2019” (Manny Hilario) .
  • “Over 50% of our delivery transactions are new customers… we look at delivery as a huge opportunity with a goal of converting these guests to long-term loyal customers” (Manny Hilario) .
  • “Beef pricing locked in… until the end of the year… seafood saw fluctuations; we lock pricing to protect longer term” (Manny Hilario) .
  • “As London and Italy open up, we will see management & license fees going up dramatically… and it flows down to the bottom line” (Manny Hilario) .

Q&A Highlights

  • Margin durability: Management expects margins to remain strong as volumes stay elevated; sees no layers of costs to add back, while monitoring commodity and labor pressures .
  • Cost inflation: Beef locked through year-end; seafood/crab/lobster had volatility; proactive forward buys and pricing locks; labor availability monitored with wage management .
  • Throughput vs check: Focus remains on table turns (STK ~90 minutes; Kona ~75 minutes). As capacity expands, late-night seating targeted to optimize liquor mix without compromising turns .
  • Capacity ramp: Vegas to ~80%; NYC to 75%; patios a major lever for Kona; strong holiday/brunch demand; group events returning Monday–Wednesday .
  • Managed fees rebound: Europe reopening plus Puerto Rico, Scottsdale, Cabo contributions expected to lift fees materially and improve adjusted EBITDA margins .

Estimates Context

  • S&P Global Wall Street consensus for Q1 2021 EPS and revenue was unavailable at time of retrieval; investors should anchor future comparisons to S&P Global once accessible. Given actuals, the company delivered GAAP EPS of $0.00 and Adjusted EPS of $0.05 alongside strong restaurant-level margins and accelerating comps, likely supportive of upward revisions to near-term margin expectations .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company financial guidanceFY 2021Suspended since March 2020 Still suspended; periodic business updates only Maintained suspension

Key Takeaways for Investors

  • Margin trajectory is the core story: record 18.8% restaurant-level margin with visibility to sustain as volumes remain high and beef locked through year-end; watch seafood and labor for incremental pressure .
  • Throughput-driven playbook: Elevated weekly sales and table-turn discipline across peak dayparts, plus brunch expansion, support continued revenue density without materially relying on bar seating .
  • Off-premise as acquisition funnel: With >50% of delivery orders from new customers, off-premise functions as an efficient customer acquisition channel to convert into dine-in occasions (birthdays/holidays) .
  • Fee revenue upside: As Europe reopens, management/license fees should normalize and flow through at high incremental margins, enhancing EBITDA mix .
  • Development optionality: Asset-light managed/licensed growth (airport, hotels, UK venues) accelerates footprint with favorable capital intensity, amplifying earnings durability into reopening .
  • Near-term trading catalyst: Q2-to-date two-year comps +35.2% with average ~82% indoor capacity suggests further sequential momentum; monitor capacity changes in NYC/Vegas and the return of group events .
  • Diligence item: Clarify the discrepancy in takeout/delivery mix (30% vs ~13%) and ensure consistent disclosures for mix dynamics; understanding true mix is key for margin modeling .

Additional Relevant Press Release (Momentum Post-Q1)

  • As of May 31, 2021, two-year comparable sales increased 35.2% consolidated (STK +49.2%, Kona +22.0%); average domestic indoor dining capacity ~82% for May—supporting continued acceleration into Q2 .