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ONE Group Hospitality, Inc. (STKS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered record revenue of $221.9M (+146.7% YoY) and Adjusted EBITDA of $30.3M (+147.6% YoY), with consolidated comps improving sequentially to -4.3% (best quarter of 2024), led by positive STK transactions and improved Benihana trends .
  • Mix and scale effects (Benihana/RA Sushi) compressed cost of sales to 20.4% (-250 bps YoY), but higher operating expenses (61.2% of owned revenue) and sharply higher interest expense kept GAAP diluted EPS at -$0.18; adjusted EPS was -$0.03 .
  • Management issued 2025 targets: revenue $835–$870M, Adjusted EBITDA $95–$115M, owned operating costs 82.2%–83.5% of owned revenue, and Q1 revenue $200–$205M; focus remains on $20M synergy capture by YE 2026 and asset-light growth (managed/licensed STK, franchised Benihana) .
  • Strategic drivers: synergy realization (G&A, supply chain), disciplined pricing/value (Happy Hour, $69 STK/$39 other brands set menus), and selective development (5–7 2025 openings), with ample liquidity ($38.1M cash/CC receivables, $33.6M revolver availability) .

What Went Well and What Went Wrong

  • What Went Well

    • Strong top-line and EBITDA growth with sequential comp improvement; CEO: “best comparable sales of the year, positive transactions at STK, and improved sales performance at Benihana” .
    • Margin mix benefits: cost of sales down to 20.4% (Benihana/RA favorable mix) and Benihana restaurant-level margin improved ~300 bps YoY in Q4; “22.6% for Benihana… improved approximately 300 basis points” .
    • Synergies and operating leverage: adjusted G&A improved to 5.2% of revenue in Q4, and company reiterates at least $20M annual synergies by YE 2026 from admin elimination, supply chain, and cost management .

  • What Went Wrong

    • Comparable sales remained negative (-4.3% consolidated) despite sequential improvement, reflecting ongoing traffic/mix headwinds in grills and broader macro pressures .
    • Operating expenses rose to 61.2% of owned revenue (+340 bps YoY), with overall restaurant operating profit margin down 90 bps to 18.4%; fixed cost inflation partially offset mitigation efforts .
    • Interest burden elevated (Q4 interest expense $10.5M vs. $1.9M YoY) post-acquisition financing, leading to GAAP diluted EPS of -$0.18 despite operating gains .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($M)$172.5 $194.0 $221.9
GAAP Diluted EPS ($)-0.36 -0.52 -0.18
Adjusted EPS ($)0.08 -0.30 -0.03
Restaurant Operating Profit Margin (%)17.7% 13.2% 18.4%
Owned Restaurant Cost of Sales (% owned revenue)21.2% 20.9% 20.4%
Consolidated Comparable Sales (%)-7.0% -8.8% -4.3%

Q4 YoY highlights (vs. Q4 2023):

MetricQ4 2023Q4 2024YoY
Total Revenues ($M)$89.9 $221.9 +146.7%
Operating Income ($M)$4.9 $12.8 +158.9%
GAAP Diluted EPS ($)0.15 -0.18 n/m
Adjusted EBITDA ($M)$12.2 $30.3 +147.6%

Segment/brand restaurant-level profitability:

Brand (Company-owned)Q3 2024 ROP ($M)Q3 2024 ROP Margin (%)Q4 2024 ROP ($M)Q4 2024 ROP Margin (%)
STK$6.55 14.6% $11.34 19.2%
Benihana$17.71 17.0% $25.16 21.8%
Grill Concepts$1.60 4.4% $2.91 11.6%

KPIs (comparable sales by brand)

KPIQ3 2024 YoYQ4 2024 YoY
STK Total Restaurants-11.1% -6.9%
Benihana Owned Restaurants-4.2% -0.2%
Grill Concepts Owned Restaurants-17.0% -11.7%
Combined Same Store Sales-8.8% -4.3%

Balance sheet and liquidity (Q4):

  • Cash + short-term credit card receivables: $38.1M; Revolver availability: $33.6M; no financial covenants; cash & equivalents $27.6M on balance sheet .
  • Long-term debt (net of current): $328.1M; Series A preferred stock outstanding $158.1M .

Non-GAAP definition change: starting Q3 2024, pre-opening expenses are no longer excluded from Adjusted EBITDA .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Total GAAP Revenues ($M)Q1 2025—$200–$205 New
Consolidated Comparable Sales (%)Q1 2025—-4% to -3% New
Managed/License/Franchise Fees ($M)Q1 2025—$3.5–$4.0 New
Total Owned Operating Expenses (% owned net revenue)Q1 2025—~83.0% New
Total G&A ex-SBC ($M)Q1 2025—~11 New
Adjusted EBITDA ($M)Q1 2025—$24–$26 New
Pre-opening Expenses ($M)Q1 2025—$1.5–$2.0 New
Total GAAP Revenues ($M)FY 2025—$835–$870 New
Consolidated Comparable Sales (%)FY 2025—-3% to +1% New
Managed/License/Franchise Fees ($M)FY 2025—$15–$16 New
Total Owned Operating Expenses (% owned net revenue)FY 2025—83.5%–82.2% New
Total G&A ex-SBC ($M)FY 2025—~47 New
Adjusted EBITDA ($M)FY 2025—$95–$115 New
Pre-opening Expenses ($M)FY 2025—$7–$8 New
Effective Tax Rate (%)FY 2025—~7.5% New
Net Capex ($M, net of allowances)FY 2025—$45–$50 New
System-wide new venues (count)FY 2025—5–7 New
Consolidated Comparable SalesQ4 2024-4% to -8% (Q3 update) -4.3% actual Met (better end)

Note: Current guidance repeated on the call with same ranges .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Cost synergies ($20M target)Achieved ~$9M G&A run-rate synergies by Q2; targeting $20M across G&A, purchasing, ops; early uplift to margins . Q3: nearing $19M run-rate synergies; Benihana margins improved .Reiterates at least $20M annual synergies by YE 2026; admin elimination, supply chain and cost control cited as drivers .Consistent execution; extended timeline specificity to YE 2026; synergy benefits reflected in margins.
Comps/trafficQ2: STK comps -10.6% with mix-driven pressure; Kona/RA pressured; Benihana -1% . Q3: consolidated -8.8%; STK traffic -4.7% .Q4 comps -4.3% (best in 2024); STK transactions positive; expecting sequential improvement into 2025 .Sequential improvement; STK traffic inflecting; cautious but constructive.
Pricing/value & loyaltyEmphasis on value: $3/$6/$9 Happy Hour; $69 STK/$39 others set menus; loyalty program in development . Q3: continued value focus and loyalty rollout plans .Maintains value strategy; loyalty launch planned in 2025 with personalized milestone rewards .Value focus sustained; loyalty ramping as incremental driver.
Supply chain/commodities/tariffsQ2: benign low-to-mid single-digit inflation; beef favorability emerging . Q3: supply chain synergies highlighted .No material 2025 equipment/tariff constraints expected; beef/seafood outlook “pretty well set,” complexity manageable with stronger supply chain .Stable commodity outlook near term; execution confidence.
Development cadence & asset-lightQ2: 8–11 2024 venues; long-term 3–5 per brand; asset-light ambition (managed/licensed STK, franchised Benihana) . Q3: 6 openings by YE; increasing managed/licensed/airport/casino opportunities .2025 plan: 5–7 venues; near-term pipeline: Benihana San Mateo, STK Los Angeles (relocation), STK Topanga, Kona Seattle; growing franchising interest for Benihana .Balanced owned plus asset-light acceleration; identifiable near-term openings.
Portfolio optimizationQ3: closed 4 RA Sushi (overlap with Kona) to improve Grill margins .No planned closures currently; continue to evaluate; priority on positive cash flow and real estate quality .Ongoing discipline; optimization largely front-loaded.
Margin trajectoryQ2: consolidated ROP margin 17.7% . Q3: 13.2% with seasonal/mix drag but improving Benihana margins .Q4 ROP margin 18.4%; target further gains as traffic returns and synergies flow through .Recovery with mix and execution; outlook constructive for 2025.

Management Commentary

  • “Adjusted EBITDA growth exceeded top-line growth, showcasing our capability to achieve greater profitability through the elimination of duplicate administrative costs, supply chain synergies, and tight cost management… By year-end 2026, we intend to capture $20 million in total savings” — CEO Manny Hilario .
  • “We are determined to create great memories… We do this through our focus on three strategic pillars: operations, culinary and marketing… positive transactions at STK… improved sales performance at Benihana” — CEO .
  • “We finished the year with over $71 million in liquid resources… Under the current conditions, our term loan does not have a financial covenant” — CFO Tyler Loy .
  • “We plan to open 5 to 7 company-owned restaurants [in 2025] and will balance with asset-light growth of managed and licensed STK and Kona Grills and franchised Benihanas” — CEO .
  • “Company-owned restaurant cost of sales… decreased 250 basis points to 20.4%… primarily due to the addition and strong performance of Benihana and RA Sushi” — CFO .

Q&A Highlights

  • Same-store sales trajectory: Management anticipates sequential improvement from Q4 into 2025 with Q1 comps of -4% to -3%; STK traffic positive in Q4 and Benihana initiatives driving transactions .
  • Development cadence/equipment: Three near-term openings (Benihana San Mateo; STK Topanga; STK Westwood relocation), with Kona Seattle later; equipment availability for 2025 largely secured .
  • Commodities/tariffs: No significant adverse impact expected near term; beef and frozen seafood outlook favorable; supply chain team/process can navigate complexity .
  • Pricing/consumer behavior: Cautious on pricing; seeing guests opt for Happy Hour/alternative dayparts and shareables, especially in steakhouse; value architecture retained .
  • Construction costs: New unit gross build costs high-$600s to $700 per square foot; tenant improvements approx. $150 per square foot (mid-$500s after TI); focus on cost engineering .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not available at time of analysis due to request limits. Consequently, we cannot present vs-consensus beats/misses for this quarter. Values would typically be retrieved from S&P Global; unavailable in this instance.

Key Takeaways for Investors

  • Mix-led margin tailwinds are tangible: Benihana/RA Sushi lifted cost-of-sales efficiency and brand-level margins, with consolidated ROP margin rebounding to 18.4% in Q4; as comps improve, additional flow-through is likely .
  • Sequential comp recovery is underway (Q4 best of year; Q1 guide better than Q4), supported by STK positive transactions and Benihana throughput/weekday initiatives; watch loyalty rollout as an incremental driver in 2025 .
  • Elevated financing costs remain the key GAAP EPS drag (Q4 interest expense $10.5M); deleveraging hinges on sustained Adjusted EBITDA delivery and disciplined capex (FY25 capex $45–$50M net) .
  • 2025 guide frames a higher base ($835–$870M revenue; $95–$115M Adjusted EBITDA) with owned cost structure improving toward ~82%–83.5% of owned revenue; execution on synergy capture to YE 2026 is a central thesis element .
  • Development risk appears managed (near-term openings identified; equipment largely arranged), and asset-light channels (managed/licensed STK, Benihana franchising, airports/casinos) diversify growth with lower capital intensity .
  • Portfolio discipline continues (no closures planned but ongoing evaluation), with Grill Concepts’ margin repair and real estate optimization a lever for blended profitability .
  • Non-GAAP changes (no longer excluding pre-opening from Adjusted EBITDA since Q3) modestly lower reported Adjusted EBITDA vs. prior definition but increase transparency; interpret YoY comparisons accordingly .
All figures are from company press releases and earnings call transcripts with citations as indicated.