The ONE Group Hospitality, Inc. announced its financial results for the fourth quarter and full year ended December 31, 2016.
Highlights for the fourth quarter ended December 31, 2016 were as follows:
The fourth quarter marked our eleventh consecutive quarter of revenue growth;
Owned unit net revenues increased 7 percent to $18.0 million.
Management and incentive fee revenue increased 35.2 percent to $2.4 million.
Total GAAP revenue increased 9.7 percent to $20.4 million.
Total food and beverage sales at owned and managed units increased 5.6 percent to $44 million.
Adjusted EBITDA was $1.5 million for the quarter compared to $2 million in the prior year fourth quarter.
GAAP net loss attributable to The ONE Group Hospitality, Inc. for the quarter was $16.1 million ($0.64 loss per share) after taking into consideration the full non-cash valuation allowance for deferred tax assets of $12.7 million ($0.51 loss per share), a non-cash tax provision adjustment of $1.2 million ($0.05 loss per share), transaction costs of $788,000 ($0.03 loss per share) and lease termination costs of $433,000 ($0.02 loss per share) compared to GAAP net income of $1.6 million ($0.07 income per share) for the same period last year after taking into consideration a non-cash tax benefit adjustment of $3.6 million ($0.14 income per share), impairment charge of $3.0 million ($0.12 loss per share), derivative income of $2.2 million ($0.09 income per share) and transactions costs of $1.2 million ($0.05 loss per share).
Total food and beverage sales at owned and managed units, a non-GAAP measure, 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. For a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units and a discussion of why we consider it useful, see the financial information accompanying this release.
Jonathan Segal, CEO of The ONE Group says, “2016 was a challenging year for both the restaurant industry and The ONE Group. In this increasingly challenging environment, we undertook a strategic review of our operations and made changes within our business to target success for 2017 and beyond. The internal review we conducted did not just focus on in store performance and costs but also covered G&A, our deal pipeline and the general performance of all stores. As a result we have initiated changes in our restaurant portfolio, increased our marketing efforts, modified our deal pipeline, and right sized our G&A.”
Segal says, “Looking ahead to 2017, I am delighted to say that our increased marketing efforts have paid off and our sales have begun to rebound. We are very pleased with our brands performance at the two new STKs, STK Toronto and STK Denver. Throughout 2017, we will continue to focus our development primarily on management and license deals, which are designed to require a lower capital investment, while producing high margin EBITDA royalty streams. Our development pipeline remains robust with four new international licensed deals schedule to open this year. We believe that we now have the right structure, team and strategies in place to enable us to drive our brand forward and create long term value for all shareholders.”
Fourth Quarter 2016 Financial Results
Total owned unit net revenues increased 7 percent to $18 million in the fourth quarter of 2016 compared to $16.8 million in the fourth quarter of 2015. The increase was primarily due to the opening of the STK in Orlando and was partially offset by a decline in comparable sales from owned units.
Comparable sales from owned STK units decreased 7 percent for the quarter. Comparable sales from owned and managed STK units decreased 6 percent for the quarter. The company believes that the decrease in same store sales was driven by a range of factors, including a decline in tourism in core markets, a reduction in event and business dining as well as the uncertainty surrounding the Presidential election in November.
Management and incentive fee revenues increased 35.2 percent to $2.4 million in the fourth quarter of 2016 compared to $1.8 million in the fourth quarter of 2015. The increase was driven by an increase in management and incentive fees at the ME Hotel in London and Milan as well as the STK in Toronto, which opened at the end of September 2016. This was partially offset by a slight decrease in management and incentive fees at our STK in Las Vegas.
Total food and beverage sales at owned and managed units increased 5.6 percent to $44 million compared to $41.7 million in the fourth quarter of 2015.
Adjusted EBITDA for the fourth quarter of 2016 was $1.5 million compared to adjusted EBITDA of $2.0 million in the fourth quarter of 2015. Adjusted EBITDA for 2016 includes the addback of approximately $12.7 million for establishing a valuation allowance for our deferred tax asset.
Development Update
OWNED STK UNITS
2016 Openings
STK Orlando
2017 Opening
STK Denver
Projected 2017
STK San Diego
MANAGED UNITS
2016 Openings
STK Miami (at the ME Hotel)
ME Miami- Food and Beverage Services
San Diego Rooftop
STK Toronto
LICENSED UNITS
2016 Opening
STK Ibiza
Projected 2017
STK Puerto Rico
STK Beach Puerto Rico
STK Dubai
STK Beach Dubai
STK Doha
