8-K: The ONE Group Reports Strong Q4 and Full Year 2024 Financial Results, Fueled by Benihana Acquisition

The ONE Group Hospitality, Inc. announces significant revenue growth for Q4 and full year 2024, driven by the acquisition of Benihana Inc., despite a decrease in comparable sales.

Summary

• The ONE Group Hospitality, Inc. reported its financial results for the fourth quarter and full year ended December 31, 2024.
• Total GAAP revenues increased by 146.7% to $221.9 million in Q4 2024 compared to $89.9 million in Q4 2023.
• Consolidated comparable sales decreased by 4.3% in Q4 2024.
• Operating income increased by 158.9% to $12.8 million in Q4 2024 from $4.9 million in Q4 2023, including $3.7 million in transition, transaction, and integration expenses.
• Restaurant Operating Profit increased by 143.7% to $40.1 million in Q4 2024 from $16.5 million in Q4 2023.
• GAAP net loss available to common stockholders was $5.4 million, or $0.18 net loss per share ($0.03 adjusted net loss per share) in Q4 2024.
• Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. increased by 147.6% to $30.3 million in Q4 2024 from $12.2 million in Q4 2023.
• For the full year 2024, total GAAP revenues increased by 102.3% to $673.3 million from $332.8 million in 2023.
• Consolidated comparable sales decreased by 6.8% for the full year 2024.
• Operating income increased by 15.9% to $10.8 million for the full year 2024 from $9.3 million in 2023, including $23.0 million in transition, transaction, and integration expenses.
• Restaurant Operating Profit increased by 115% to $108.3 million for the full year 2024 from $50.4 million in 2023.
• GAAP net loss available to common stockholders was $35.0 million, or $1.12 net loss per share ($0.28 adjusted net loss per share) for the full year 2024.
• Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. increased by 129.3% to $75.2 million for the full year 2024 from $32.8 million in 2023.
• The company plans to open five to seven venues in 2025, starting with an owned Benihana in San Mateo, California in March 2025.
• The company held $38.1 million in cash and short-term credit card receivables as of December 31, 2024, and had $33.6 million available under its revolving credit facility.
• The Board of Directors authorized a $5 million share repurchase program in March 2024, but there was no share repurchase activity during the fourth quarter of 2024.
• For 2025, the company expects total GAAP revenues of $835 to $870 million and consolidated Adjusted EBITDA of $95 to $115 million.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong revenue and EBITDA growth driven by acquisitions, but tempered by negative comparable sales and net losses. The company's future outlook and cost-saving initiatives provide some optimism.

Positives

• Significant revenue growth driven by the acquisition of Benihana Inc.
• Substantial increase in Adjusted EBITDA, indicating improved profitability.
• Plans to open five to seven new venues in 2025, suggesting continued expansion.
• Focus on cost management and capturing synergies to further enhance profitability.
• Strong cash position and available credit facility provide financial flexibility.

Negatives

• Consolidated comparable sales decreased by 4.3% in Q4 2024 and 6.8% for the full year 2024.
• GAAP net loss available to common stockholders was $5.4 million in Q4 2024 and $35.0 million for the full year 2024, although adjusted net loss per share was lower.
• Operating income includes significant transition, transaction, and integration expenses related to the Benihana acquisition.

Risks

• The company's ability to integrate new or acquired restaurants into its operations without disruptions.
• The company's ability to capture anticipated synergies from acquisitions.
• Factors beyond the company's control that affect the number and timing of new restaurant openings.
• Changes in applicable laws or regulations.
• Economic, business, and/or competitive factors that may adversely affect The ONE Group.
• The impact of actual and potential changes in immigration policies and the imposition of tariffs, including increases in food prices and inflation and potential labor shortages.

Future Outlook

The company anticipates total GAAP revenues between $835 and $870 million and consolidated Adjusted EBITDA between $95 and $115 million for 2025. They plan to open five to seven new venues in 2025, focusing on owned, managed, and licensed restaurants to prioritize cash flow generation and maximize shareholder returns.

Management Comments

• Emanuel Manny Hilario, President and CEO of The ONE Group, stated that annual revenue and adjusted EBITDA reached the higher end of their guided ranges.
• Hilario noted that adjusted EBITDA growth exceeded top-line growth, showcasing the company's capability to achieve greater profitability through cost management and synergies.
• Hilario concluded that the company intends to capture $20 million in total savings across administrative costs, supply chain synergies, and cost management by year-end 2026.
• Hilario mentioned the company will open five to seven venues this year, beginning with an owned Benihana in San Mateo, California this month.
• Hilario stated that their development plans consist of opening owned, managed, and licensed restaurants and they believe this combination enables them to prioritize operating / free cash flow generation, promotes balance sheet flexibility, and maximizes shareholder returns.

Industry Context

The ONE Group's focus on vibe dining and expansion through acquisitions and new venue openings aligns with the broader trend in the restaurant industry of creating unique and experiential dining experiences. The company's emphasis on cost management and synergies reflects the increasing pressure on restaurant operators to improve profitability in a competitive market.

Comparison to Industry Standards

• Comparing The ONE Group's performance to industry peers like Darden Restaurants (DRI) or Texas Roadhouse (TXRH) shows that while revenue growth is strong due to acquisitions, comparable sales are lagging, indicating potential challenges in organic growth.
• The adjusted EBITDA margins, while improving, need to be benchmarked against industry leaders to assess long-term sustainability and efficiency.
• The company's expansion strategy of owned, managed, and licensed restaurants is similar to that of companies like Bloomin' Brands (BLMN), which utilizes franchising to expand its reach while minimizing capital expenditure.

Stakeholder Impact

• Shareholders may experience mixed results due to strong revenue growth but negative comparable sales and net losses.
• Employees may benefit from the company's expansion plans and cost-saving initiatives.
• Customers may experience new dining options with the opening of new venues.
• Suppliers may see increased demand due to the company's growth.
• Creditors may be reassured by the company's strong cash position and available credit facility.

Next Steps

• Opening of an owned Benihana in San Mateo, California in March 2025.
• Opening five to seven new venues in 2025.
• Capturing $20 million in total savings across administrative costs, supply chain synergies, and cost management by year-end 2026.

Key Dates