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01/11 11:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals: while there are positive aspects like improved traffic trends, franchising efforts, and loyalty program growth, there are concerns over declining same-store sales and cash flow limitations. The Q&A section highlights management's optimism but lacks concrete details, and the market strategy is unclear. Despite potential growth from new venues and conversions, the financial health and guidance appear weak, leading to a neutral sentiment. The stock price is likely to remain stable, with no strong catalysts for significant movement.
Total consolidated GAAP revenues $180.2 million, decreasing 7.1% from $194 million for the same quarter last year. The decrease was primarily due to a 5.9% reduction in consolidated comparable sales and the closure of underperforming restaurants from the prior year period.
Company-owned restaurants' net revenue $177.4 million, which decreased 6.9% from $190.6 million for the prior year quarter. The decrease was primarily due to a 5.9% reduction in consolidated comparable sales and the closure of underperforming restaurants from the prior year period.
Management license, franchise, and incentive fee revenues $2.8 million, decreased from $3.4 million in the prior year. The decrease is attributed to lower management license and incentive fee revenue at managed STK restaurants in North America and reduced franchisee revenues due to exiting 2 license agreements.
Company-owned restaurant's cost of sales as a percentage of net revenue Increased slightly to 21.1% from 20.9%. This was primarily due to sales deleveraging, coupled with higher-than-anticipated inflation in certain commodity costs, partially offset by additional integration synergies from the Benihana acquisition.
Company-owned restaurant operating expenses as a percentage of net revenue Increased 140 basis points to 67.6% from 66.2% in the prior year quarter. This was primarily due to investments in marketing, general cost inflation, and fixed cost deleveraging driven by a decrease in same-store sales.
Restaurant operating profit Decreased to $20.1 million or 11.3% of owned restaurant net revenue compared to $24.5 million or 12.8% in the prior year quarter.
General and administration costs Increased $0.5 million to $13.3 million from $12.8 million in the same quarter prior year, driven by increased marketing expenses. Adjusted general and administrative expenses were $12 million compared to $11.2 million in the third quarter of 2024.
Depreciation and amortization expenses $11.5 million compared to $9.4 million in the prior year quarter. The increase was primarily related to depreciation and amortization of new venues and capital expenditures to maintain and enhance the guest experience in restaurants.
Preopening expenses Approximately $700,000, primarily related to preopening rent for restaurants under development and payroll costs associated with preopening training. Preopening expenses decreased $1.4 million compared to the prior year period.
Operating loss $7.9 million compared to an operating loss of $3.6 million in the third quarter of 2024, mostly impacted by the $3.4 million in noncash loss on impairment.
Interest expense $10.5 million compared to $10.7 million in the prior year quarter.
Provision for income taxes $59.1 million compared to a benefit of $4.9 million in the prior year quarter. The increase is primarily the result of the establishment of a full valuation allowance against deferred tax assets during the third quarter.
Net loss attributable to Wes Hospitality $76.7 million compared to a net loss of $9.3 million in the third quarter of 2024. The 2025 loss was primarily driven by the noncash loss on impairment and the noncash recognition of the valuation allowance.
Net loss available to common shareholders $85.3 million or $2.75 net loss per share, compared to $16.4 million in the third quarter of 2024 or $0.53 net loss per share. The noncash loss on impairment and establishment of the deferred tax asset valuation allowance represent $2.02 of the third quarter 2025 net loss per share.
Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. $10.6 million compared to $14.9 million in the prior year, a decrease of 28.9%.
Cash and cash equivalents and restricted cash $6 million at the end of the quarter.
Available under revolving credit facility $28.7 million, with $5.5 million outstanding on the revolving credit facility.
New premium holiday menu: Focused on Wagyu and premium seafood to align with selective diners.
Menu diversification: Broader culinary options introduced to reduce reliance on seafood and sushi, appealing to more frequent dining occasions.
Friends with Benefits loyalty program: Gained over 200,000 new members in the quarter, reaching 6.5 million total members. Focused on maximizing membership, driving organic sign-ups, and increasing engagement.
Website upgrades: Enhanced mobile-optimized designs for Benihana, STK, Kona Grill, and RA Sushi, increasing traffic and conversion rates.
Benihana redesign success: The redesigned Benihana in San Mateo became the top-performing opening in the brand's history, validating the new format.
Franchise expansion: Opened second Benihana Express in Miami, with more in development. Expanding into nontraditional venues like sports stadiums and airports.
New venue openings: Opened 4 company-owned venues and 1 franchise location year-to-date, with plans for 5-7 new venues in 2025.
Operational flow improvements: Enhanced reservation technology and team training to optimize Benihana table efficiency, reducing table turn times from 120 to 90 minutes.
Cost management initiatives: Implemented protein sourcing adjustments and a temporary hiring freeze to optimize labor structure.
Portfolio optimization: Closed 7 underperforming locations and identified 9 additional conversions to Benihana or STK formats, aiming for $10 million in EBITDA and $100 million in revenue.
Relocations and remodels: Relocated and remodeled venues to unlock strong returns, with examples like Westwood STK and Tampa Bay Kona Grill showing improved margins and sales.
Balance sheet strength: Maintained $45 million in liquidity, reduced discretionary capital expenditures, and authorized a $5 million share repurchase program.
Market Pressures on Core Categories: The company is facing headwinds in its core areas of seafood, sushi, and bar experiences, which are central to its brand.
Economic Sensitivity: The company is diversifying its menu to reduce reliance on categories sensitive to economic fluctuations, indicating challenges in maintaining revenue stability during economic downturns.
Underperforming Locations: Closure of 7 underperforming locations and plans to convert up to 9 additional locations highlight challenges in maintaining profitability across all venues.
Cost Inflation: Higher-than-anticipated inflation in certain commodity costs has increased the cost of sales as a percentage of revenue.
Sales Decrease: A 5.9% reduction in consolidated comparable sales and a 7.1% decrease in total consolidated GAAP revenues compared to the prior year.
Fixed Cost Deleveraging: Fixed cost deleveraging due to a decrease in same-store sales has increased operating expenses as a percentage of revenue.
Impairment Charges: Noncash loss on impairment of $3.4 million related to underperforming restaurants, indicating challenges in asset utilization and profitability.
Deferred Tax Asset Valuation: Establishment of a full valuation allowance against deferred tax assets, resulting in a significant noncash income tax expense.
Franchise and License Revenue Decline: Decrease in management license, franchise, and incentive fee revenues due to exiting license agreements and lower performance in managed locations.
Labor and Hiring Challenges: Temporary hiring freeze to optimize labor structure, which may impact operational efficiency.
Revenue Projections: The company projects total GAAP revenues of between $820 million and $825 million for fiscal year 2025, reflecting anticipated consolidated comparable sales of negative 3% to negative 2%.
Managed Franchise and License Fee Revenues: Expected to be between $14 million and $15 million for fiscal year 2025.
Operating Expenses: Total company-owned operating expenses as a percentage of company-owned restaurant net revenue are projected to be approximately 83.5%.
General and Administrative Costs: Excluding stock-based compensation, total G&A costs are expected to be approximately $46 million.
Adjusted EBITDA: Projected to be between $95 million and $100 million for fiscal year 2025.
Preopening Expenses: Expected to range between $5 million and $6 million.
Effective Income Tax Rate: Projected to be between 1% and 4%, excluding the valuation allowance and items subject to valuation allowance.
Capital Expenditures: Total capital expenditures, net of allowances received from landlords, are expected to be between $45 million and $50 million.
New Venue Openings: The company plans to open 5 to 7 new venues in fiscal year 2025.
Share Repurchase Program: Our Board authorized a $5 million share repurchase program last year, and we view our stock as an attractive investment.
The earnings call reveals mixed signals: while there are positive aspects like improved traffic trends, franchising efforts, and loyalty program growth, there are concerns over declining same-store sales and cash flow limitations. The Q&A section highlights management's optimism but lacks concrete details, and the market strategy is unclear. Despite potential growth from new venues and conversions, the financial health and guidance appear weak, leading to a neutral sentiment. The stock price is likely to remain stable, with no strong catalysts for significant movement.
The earnings call summary reflects strong financial performance with significant revenue and EBITDA growth, driven by strategic initiatives like new venue openings and franchising efforts. The Q&A section highlights proactive measures to address past challenges, strong market strategies, and confident guidance despite economic uncertainties. The company also plans to enhance shareholder returns through strategic capital allocation. Overall, the positive sentiment from effective management strategies and optimistic future guidance outweighs any concerns, suggesting a positive stock price movement.
The earnings call summary presents a positive outlook with strong adjusted EBITDA growth, improved restaurant EBITDA margins, and successful integration of acquisitions. The Q&A section indicates strategic marketing efforts and stable consumer behavior, with a focus on franchising and conservative pricing. Despite increased expenses and a net loss, the optimistic guidance and strategic initiatives, such as the loyalty program and franchising strategy, support a positive sentiment. The absence of specific negative factors and the potential for margin improvement further enhance the positive outlook for the stock price.
Earnings call highlights significant revenue growth and improved EBITDA, driven by strategic acquisitions and cost efficiencies. The optimistic guidance, loyalty program launch, and expansion plans support positive sentiment. While there are concerns about net loss and increased expenses, the Q&A reveals robust consumer trends, stable labor costs, and effective marketing strategies. Despite some uncertainties, such as competitive pressures, the company's strategic focus on growth and shareholder returns suggests a positive stock price movement over the next two weeks.
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