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The ONE Group Hospitality, Inc. Reports Third Quarter 2019 Results

November 7, 2019

DENVER--(BUSINESS WIRE)--Nov 7, 2019--

The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (Nasdaq: STKS) today reported its financial results for the third quarter ended September 30, 2019. The Company also updated its previously announced financial targets for 2019 and issued financial targets for 2020, both inclusive of the acquisition of Kona Grill, which was completed on October 4, 2019.

Highlights for the third quarter ended September 30, 2019 compared to the same period last year were as follows:

*Same store sales represents total US food and beverage sales at owned and managed STK units opened for at least a full 18-month period. Revenues from locations where we do not directly control the event sales force (The W Hotel, Westwood, CA and our locations in Europe) are excluded from this measure.

**We define Adjusted EBITDA as net income (loss) before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses, stock-based compensation, results from discontinued operations and certain transactional costs. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Adjusted EBITDA to Net Income (loss) in this release.

Emanuel “Manny” Hilario, President and CEO of The ONE Group, stated, “Same store sales growth accelerated to 9.3% against a formidable comparison of 6.9% from the same period last year, reflecting the popularity of our unique VIBE dining program and continued ability to expand our market share within the upscale dining segment. We also increased overall profitability by controlling restaurant-level operating and corporate expenses, resulting in 30% growth in Adjusted EBITDA.”

Mr. Hilario continued, “We recently opened an STK restaurant at the Condado Vanderbilt Hotel in San Juan, Puerto Rico and a new restaurant brand, ANGEL Roofbar & Dining, at the Hotel Calimala in Florence, Italy. We have one additional STK restaurant slated to open, in Scottsdale, Arizona, by year-end. In 2020, we intend to accelerate our development and currently project six to eight openings, consisting of five to six STK restaurants and one to two food and beverage venues.”

Mr. Hilario added, “Last month, The One Group marked a milestone event by acquiring Kona Grill, an excellent brand with 24 high performing domestic restaurants. We foresee a meaningful opportunity at Kona Grill to embed elements of our bar-business knowledge and unique VIBE dining program, improve its operating margins through efficiencies and scale, and leverage its G&A as part of our corporate infrastructure. These efforts will serve to define the brand’s next chapter by elevating the Kona Grill guest experience while driving better top and bottom line performance. In doing so, we can create long-term value for our shareholders.”

Mr. Hilario concluded, “Our updated 2019 outlook reflects Kona Grill contributing approximately $23 million to $24 million in revenues and additive to Adjusted EBITDA to our consolidated fourth quarter 2019. For 2020, we expect up to 78% growth in our total GAAP revenues, including approximately $100 million in sales from Kona Grill, and expect to generate between $23 million and $25 million in Consolidated Adjusted EBITDA, representing up to 80% growth compared to this year.”

Kona Grill Transaction

On October 4, 2019, the Company completed the purchase of substantially all the assets of Kona Grill, Inc. and its affiliated entities, consisting of 24 Kona Grill domestic restaurants and franchise rights for one international location, for $25 million in cash and the assumption of working capital liabilities of approximately $11 million. The transaction was funded with cash on hand and the proceeds from a new senior secured credit facility, which consists of a $48 million senior secured term loan and a $12 million revolver from Goldman Sachs Bank USA.

Third Quarter 2019 Financial Results

Total GAAP revenues increased 10.5% to $22.1 million in the third quarter of 2019 from $20.0 million in the third quarter of 2018. The increase was primarily driven by growth in same store sales coupled with the opening of STK Nashville in March 2019. Domestic same store sales at STK restaurants increased 9.3% lapping a 6.9% increase from the prior year, both indicative of the continued strong performance of the STK brand.

Total owned restaurant net revenues increased 11.8% to $17.1 million in the third quarter of 2019 compared to $15.3 million in the third quarter of 2018. The increase was due to the growth in same store sales coupled with the opening of STK Nashville in March 2019.

Management, license and incentive fee revenues increased 7.4% to $2.9 million in the third quarter of 2019 from $2.7 million in the third quarter of 2018. The increase was primarily due to increased sales within our existing international, managed locations in the United Kingdom and Italy, which was partially offset by the negative currency effects of a weaker British Pound and Euro. The increase was also driven by new STK licensed locations that opened in the third quarter of 2018 and in 2019, including in Mexico City, Dubai, and Doha. This increase was partially offset by the loss of management fee revenue from the One 29 Park, LLC management agreement, which terminated on September 30, 2018.

GAAP net income attributable to The ONE Group Hospitality, Inc. in the third quarter of 2019 was $460,000, or $0.02 net income per share, compared to GAAP net loss of $305,000, or $0.01 net loss per share, in the third quarter of 2018.

Adjusted EBITDA** increased 30.0% to $2.6 million in the third quarter of 2019 from $2.0 million in the third quarter of 2018.

Development Update

 

Location

Type

Opening Date

STK Doha

International Licensed

January 2019

STK Nashville

Domestic Company-Owned

March 2019

STK San Juan

Domestic Licensed

October 2019

ANGEL Roofbar & Dining, Florence, Italy

International Food & Beverage

October 2019

STK Scottsdale

Domestic Managed

Expected December 2019

2019 Targets

We are updating our 2019 targets, which account for the contribution from Kona Grill for the balance of the fiscal year:

2020 Targets

Our targets for 2020 are as follows:

We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure are not available without unreasonable effort.

Conference Call and Webcast

Emanuel “Manny” Hilario, President and CEO, and Tyler Loy, Chief Financial Officer, will host a conference call and webcast to discuss third quarter 2019 financial results today at 4:30 PM Eastern Time.

The conference call can be accessed live over the phone by dialing 1-201-493-6780. The replay will be available after the call and can be accessed by dialing 1-412-317-6671; the passcode is 13695075. The replay will be available until November 21, 2019.

The webcast can also be accessed from the Investor Relations tab of the Company’s website at www.togrp.com under “News / Events”.

About The ONE Group

The ONE Group Hospitality, Inc. (NASDAQ: STKS) is a global hospitality company that develops and operates upscale and polished casual, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both nationally and internationally. The ONE Group’s focus is to be the global leader in Vibe Dining, and its primary restaurant brands are STK, a modern twist on the American steakhouse concept with 20 restaurants in major metropolitan cities in the U.S., Europe and the Middle East. In October 2019, The ONE Group purchased Kona Grill, a polished casual, bar-centric brand featuring American favorites, award-winning sushi, and specialty cocktails in an upscale casual atmosphere. Kona Grill consists of 24 restaurants guided by a passion for quality food and exceptional service, and operates one restaurant under a franchise agreement in Dubai, United Arab Emirates. ONE Hospitality, The ONE Group’s food and beverage hospitality services business, develops, manages and operates premier restaurants and turn-key food and beverage services within high-end hotels and casinos. Additional information about The ONE Group can be found at www.togrp.com.

Cautionary Statement on Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include our expectations regarding 2019 and 2020 financial results, the revenue the acquired Kona Grill restaurants will generate, the accretion to earnings and Consolidated Adjusted EBITDA that will result from the acquisition, savings to aggregate G&A, and the benefits of integrating the Kona Grill restaurants into our operations. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to, (1) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain our key employees; (2) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (3) in the case of our strategic review of operations, our ability to successfully improve performance and cost, realize the benefits of our marketing efforts, and achieve improved results as we focus on developing new management and license deals; (4) changes in applicable laws or regulations; (5) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; (6) our ability to efficiently integrate Kona Grill restaurants, and our ability to improve performance and cost at the restaurants and to realize synergies; and (7) other risks and uncertainties indicated from time to time in our filings with the SEC, including our Annual Report on Form 10-K filed for the year ended December 31, 2018.

Investors are referred to the most recent reports filed with the SEC by The ONE Group Hospitality, Inc. Investors are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands, except earnings per share and related share information)

The following table sets forth certain statements of operations data for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant net revenues

 

$

17,120

 

$

15,312

 

$

53,749

 

$

45,908

Owned food, beverage and other net revenues

 

 

2,065

 

 

1,960

 

 

6,472

 

 

6,048

Total owned revenue

 

 

19,185

 

 

17,272

 

 

60,221

 

 

51,956

Management, license and incentive fee revenue

 

 

2,921

 

 

2,688

 

 

8,260

 

 

7,832

Total revenues

 

 

22,106

 

 

19,960

 

 

68,481

 

 

59,788

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurants:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant cost of sales

 

 

4,472

 

 

4,050

 

 

14,109

 

 

12,121

Owned restaurant operating expenses

 

 

10,783

 

 

9,779

 

 

33,554

 

 

28,556

Total owned restaurant expenses

 

 

15,255

 

 

13,829

 

 

47,663

 

 

40,677

Owned food, beverage and other expenses

 

 

1,971

 

 

2,068

 

 

6,455

 

 

5,782

Total owned operating expenses

 

 

17,226

 

 

15,897

 

 

54,118

 

 

46,459

General and administrative (including stock-based compensation of $338, $337, $975 and $1,005 for the three and nine months ended September 30, 2019 and 2018 respectively)

 

 

2,352

 

 

2,266

 

 

7,706

 

 

7,937

Depreciation and amortization

 

 

1,103

 

 

896

 

 

3,049

 

 

2,575

Lease termination expenses

 

 

252

 

 

78

 

 

393

 

 

168

Pre-opening expenses

 

 

 

 

449

 

 

545

 

 

1,330

Transaction costs

 

 

358

 

 

 

 

510

 

 

Equity in income of investee companies

 

 

 

 

 

 

 

 

(111)

Other expense (income), net

 

 

40

 

 

38

 

 

(226)

 

 

(139)

Total costs and expenses

 

 

21,331

 

 

19,624

 

 

66,095

 

 

58,219

Operating income

 

 

775

 

 

336

 

 

2,386

 

 

1,569

Other expenses, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 

230

 

 

294

 

 

717

 

 

902

Loss on early debt extinguishment

 

 

 

 

 

 

437

 

 

Total other expenses, net

 

 

230

 

 

294

 

 

1,154

 

 

902

Income before provision for income taxes

 

 

545

 

 

42

 

 

1,232

 

 

667

Provision for income taxes

 

 

76

 

 

251

 

 

157

 

 

445

Net income (loss)

 

 

469

 

 

(209)

 

 

1,075

 

 

222

Less: net income attributable to noncontrolling interest

 

 

9

 

 

96

 

 

83

 

 

116

Net income (loss) attributable to The ONE Group Hospitality, Inc.

 

$

460

 

$

(305)

 

$

992

 

$

106

Currency translation loss

 

 

(40)

 

 

(170)

 

 

(329)

 

 

(104)

Comprehensive income (loss)

 

$

420

 

$

(475)

 

$

663

 

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to The ONE Group Hospitality, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

$

0.02

 

$

(0.01)

 

$

0.03

 

$

0.00

Diluted net income (loss) per share

 

$

0.02

 

$

(0.01)

 

$

0.03

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing basic earnings per share

 

 

28,537,477

 

 

27,751,632

 

 

28,429,074

 

 

27,437,269

Shares used in computing diluted earnings per share

 

 

29,901,144

 

 

27,751,632

 

 

29,642,926

 

 

27,499,645

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands, except earnings per share and related share information)

The following table sets forth certain statements of operations data as a percentage of total revenues for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Owned restaurant net revenues

 

77.4 %

 

76.7 %

 

78.5 %

 

76.8 %

Owned food, beverage and other net revenues

 

9.3 %

 

9.8 %

 

9.5 %

 

10.1 %

Total owned revenue

 

86.8 %

 

86.5 %

 

87.9 %

 

86.9 %

Management, license and incentive fee revenue

 

13.2 %

 

13.5 %

 

12.1 %

 

13.1 %

Total revenues

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

Cost and expenses:

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

Owned restaurants:

 

 

 

 

 

 

 

 

Owned restaurant cost of sales (1)

 

26.1 %

 

26.4 %

 

26.2 %

 

26.4 %

Owned restaurant operating expenses (1)

 

63.0 %

 

63.9 %

 

62.4 %

 

62.2 %

Total owned restaurant expenses (1)

 

89.1 %

 

90.3 %

 

88.7 %

 

88.6 %

Owned food, beverage and other expenses (2)

 

95.5 %

 

105.5 %

 

99.7 %

 

95.6 %

Total owned operating expenses (3)

 

89.8 %

 

92.0 %

 

89.9 %

 

89.4 %

General and administrative (including stock-based compensation of 1.5%, 1.7%, 1.4% and 1.7% for the three and nine months ended September 30, 2019 and 2018 respectively)

 

10.6 %

 

11.4 %

 

11.3 %

 

13.3 %

Depreciation and amortization

 

5.0 %

 

4.5 %

 

4.5 %

 

4.3 %

Lease termination expenses

 

1.1 %

 

0.4 %

 

0.6 %

 

0.3 %

Pre-opening expenses

 

0.0 %

 

2.2 %

 

0.8 %

 

2.2 %

Transaction costs

 

1.6 %

 

—%

 

0.7 %

 

—%

Equity in income of investee companies

 

—%

 

—%

 

—%

 

(0.2)%

Other expense (income), net

 

0.2 %

 

0.2 %

 

(0.3)%

 

(0.2)%

Total costs and expenses

 

96.5 %

 

98.3 %

 

96.5 %

 

97.4 %

Operating income

 

3.5 %

 

1.7 %

 

3.5 %

 

2.6 %

Other expenses, net:

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

1.0 %

 

1.5 %

 

1.0 %

 

1.5 %

Loss on early debt extinguishment

 

—%

 

—%

 

0.6 %

 

—%

Total other expenses, net

 

1.0 %

 

1.5 %

 

1.7 %

 

1.5 %

Income before provision for income taxes

 

2.5 %

 

0.2 %

 

1.8 %

 

1.1 %

Provision for income taxes

 

0.3 %

 

1.3 %

 

0.2 %

 

0.7 %

Net income (loss)

 

2.1 %

 

(1.0)%

 

1.6 %

 

0.4 %

Less: net income attributable to noncontrolling interest

 

0.0 %

 

0.5 %

 

0.1 %

 

0.2 %

Net income (loss) attributable to The ONE Group Hospitality, Inc.

 

2.1 %

 

(1.5)%

 

1.4 %

 

0.2 %

________________________________________

(1) These expenses are being shown as a percentage of owned restaurant net revenues.

(2) These expenses are being shown as a percentage of owned food, beverage and other net revenues.

(3) These expenses are being shown as a percentage of total owned revenue.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)

 

 

 

 

 

 

 

 

 

(Unaudited),

 

 

 

 

September 30,

 

December 31,

 

 

2019

 

2018

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,046

 

$

1,592

Accounts receivable

 

 

6,083

 

 

7,029

Inventory

 

 

1,602

 

 

1,404

Other current assets

 

 

1,802

 

 

1,471

Due from related parties, net

 

 

336

 

 

45

Total current assets

 

 

11,869

 

 

11,541

 

 

 

 

 

 

 

Property and equipment, net

 

 

39,996

 

 

39,347

Operating lease right-of-use assets

 

 

39,751

 

 

Investments

 

 

2,684

 

 

2,684

Deferred tax assets, net

 

 

11

 

 

38

Other assets

 

 

362

 

 

349

Security deposits

 

 

747

 

 

2,020

Total assets

 

$

95,420

 

$

55,979

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,934

 

$

5,408

Accrued expenses

 

 

4,302

 

 

8,093

Deferred license revenue

 

 

191

 

 

171

Deferred gift card revenue and other

 

 

599

 

 

947

Current portion of operating lease liabilities

 

 

2,488

 

 

Current portion of long-term debt

 

 

1,076

 

 

3,201

Total current liabilities

 

 

13,590

 

 

17,820

 

 

 

 

 

 

 

Deferred license revenue, long-term

 

 

951

 

 

1,008

Due to related parties, long-term

 

 

 

 

1,197

Operating lease liabilities, net of current portion

 

 

54,775

 

 

Deferred rent and tenant improvement allowances

 

 

 

 

16,774

Long-term debt, net of current portion

 

 

12,255

 

 

7,118

Total liabilities

 

 

81,571

 

 

43,917

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 75,000,000 shares authorized; 28,577,487 and 28,313,017 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

3

 

 

3

Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

 

 

Additional paid-in capital

 

 

44,584

 

 

43,543

Accumulated deficit

 

 

(27,730)

 

 

(28,722)

Accumulated other comprehensive loss

 

 

(2,639)

 

 

(2,310)

Total stockholders’ equity

 

 

14,218

 

 

12,514

Noncontrolling interests

 

 

(369)

 

 

(452)

Total equity

 

 

13,849

 

 

12,062

Total liabilities and equity

 

$

95,420

 

$

55,979

Reconciliation of Non-GAAP Measures

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). In this press release, we also make references to the following non-GAAP financial measures: total food and beverage sales at owned and managed units and adjusted EBITDA.

Total food and beverage sales at owned and managed units. Total food and beverage sales at owned and managed units represents our total revenue from our owned operations as well as the revenue reported to us with respect to sales at our managed locations, where we earn management and incentive fees at these locations. We believe that this measure represents a useful internal measure of performance as it identifies total sales associated with our brands and hospitality services that we provide. We believe that this measure also represents a useful internal measure of performance. Accordingly, we include this non-GAAP measure so that investors can review financial data that management uses in evaluating performance, and we believe that it will assist the investment community in assessing performance of restaurants and other services we operate, whether or not the operation is owned by us. However, because this measure is not determined in accordance with GAAP, it is susceptible to varying calculations and not all companies calculate these measures in the same manner. As a result, this measure as presented may not be directly comparable to a similarly titled measure presented by other companies. This non-GAAP measure is presented as supplemental information and not as an alternative to any GAAP measurements. The following table includes a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Owned restaurant net revenues (1)

 

$

17,120

 

$

15,312

 

$

53,749

 

$

45,908

Owned food, beverage and other net revenues (1)

 

 

2,065

 

 

1,960

 

 

6,472

 

 

6,048

Total owned revenue

 

 

19,185

 

 

17,272

 

 

60,221

 

 

51,956

Management, license and incentive fee revenue

 

 

2,921

 

 

2,688

 

 

8,260

 

 

7,832

GAAP revenues

 

 

22,106

 

 

19,960

 

 

68,481

 

 

59,788

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage sales from management units (1)

 

$

26,821

 

$

26,220

 

$

78,452

 

$

75,039

 

 

 

 

 

 

 

 

 

 

 

 

 

Total food and beverage sales at owned and managed units

 

$

46,006

 

$

43,492

 

$

138,673

 

$

126,995

________________________________________

(1) Components of total food and beverage sales at owned and managed units.

The following table presents the elements of the quarterly Same Store Sales measure for Fiscal 2017, Fiscal 2018, Q1 2019, Q2 2019 and Q3 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

2018

 

2019

 

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

Q3

US Owned STK Restaurants

 

(1.8%)

 

1.2%

 

(0.9%)

 

5.8%

 

8.7%

 

6.2%

 

7.7%

 

14.9%

 

10.4%

 

7.8%

 

8.1%

US Managed STK Restaurants

 

8.3%

 

2.5%

 

6.5%

 

6.6%

 

4.9%

 

10.1%

 

5.4%

 

15.6%

 

5.0%

 

3.6%

 

12.2%

US Total STK Restaurants

 

2.6%

 

1.7%

 

1.9%

 

6.0%

 

7.3%

 

7.5%

 

6.9%

 

15.0%

 

8.6%

 

6.4%

 

9.3%

Adjusted EBITDA. We define adjusted EBITDA as net loss before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, deferred rent, pre-opening expenses, non-recurring gains and losses, stock-based compensation, losses from discontinued operations and certain transactional costs. Not all the aforementioned items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of terms based on our historical activity. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP.

We believe that adjusted EBITDA is an appropriate measure of operating performance, as it provides a clear picture of our operating results by eliminating certain non-cash expenses that are not reflective of the underlying business performance. We use this metric to facilitate a comparison of our operating performance on a consistent basis from period to period and to analyze the factors and trends affecting our business as well as evaluate the performance of our units. Adjusted EBITDA has limitations as an analytical tool and our calculation thereof may not be comparable to that reported by other companies; accordingly, you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA is included in this press release because it is a key metric used by management. Additionally, adjusted EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use adjusted EBITDA, alongside other GAAP measures such as net income (loss), to measure profitability, as a key profitability target in our annual and other budgets, and to compare our performance against that of peer companies. We believe that adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period.

The following table presents a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Net income (loss) attributable to The ONE Group Hospitality, Inc.

 

$

460

 

$

(305)

 

$

992

 

$

106

Net income attributable to noncontrolling interest

 

 

9

 

 

96

 

 

83

 

 

116

Net income (loss)

 

 

469

 

 

(209)

 

 

1,075

 

 

222

Interest expense, net of interest income

 

 

230

 

 

294

 

 

717

 

 

902

Provision for income taxes

 

 

76

 

 

251

 

 

157

 

 

445

Depreciation and amortization

 

 

1,103

 

 

896

 

 

3,049

 

 

2,575

EBITDA

 

 

1,878

 

 

1,232

 

 

4,998

 

 

4,144

Non-cash rent expense (1)

 

 

3

 

 

(52)

 

 

(86)

 

 

(141)

Pre-opening expenses

 

 

 

 

449

 

 

545

 

 

1,330

Lease termination expense (2)

 

 

252

 

 

78

 

 

393

 

 

168

Loss on debt extinguishment

 

 

 

 

 

 

437

 

 

Transaction costs (3)

 

 

358

 

 

 

 

510

 

 

Stock-based compensation

 

 

338

 

 

337

 

 

975

 

 

1,005

Other nonrecurring charges

 

 

 

 

145

 

 

 

 

145

Adjusted EBITDA

 

 

2,829

 

 

2,189

 

 

7,772

 

 

6,651

Adjusted EBITDA attributable to noncontrolling interest

 

 

192

 

 

153

 

 

361

 

 

317

Adjusted EBITDA attributable to The ONE Group Hospitality, Inc.

 

$

2,637

 

$

2,036

 

$

7,411

 

$

6,334

________________________________________

(1) Non-cash rent expense is included in owned restaurant operating expenses and general and administrative expense on the statement of operations and comprehensive income.

(2) Lease termination expense are costs associated with closed, abandoned and disputed locations or leases.

(3) Transaction costs relate to costs incurred with the Kona Grill acquisition and internal costs associated with capital raising activities, most recently the Bank of America Credit Agreement, the Goldman Sachs Credit Agreement, and costs associated with the preparation of the Form S-8.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191107006061/en/

CONTACT: Media:

Kate Ottavio Kent, ICR

Kate.OttavioKent@icrinc.com

203-682-8276Investors:

Raphael Gross, ICR

Raphael.Gross@icrinc.com

203-682-8253

KEYWORD: COLORADO UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: RETAIL RESTAURANT/BAR LODGING DESTINATIONS TRAVEL FOOD/BEVERAGE

SOURCE: The ONE Group Hospitality, Inc.

Copyright Business Wire 2019.

PUB: 11/07/2019 04:05 PM/DISC: 11/07/2019 04:06 PM

http://www.businesswire.com/news/home/20191107006061/en