The ONE Group Hospitality, Inc. and Kona Grill Acquisition, LLC, its wholly owned subsidiary, announced KGA has completed the purchase of substantially all the assets of Kona Grill, Inc. and its affiliated entities. Kona Grill is expected to add $100 million in annual revenue, and to be immediately accretive to Consolidated Adjusted EBITDA. The ONE Group also increased its 2019 financial targets to account for the acquisition.
“We are pleased to complete the acquisition of Kona Grill and welcome 2,000 new team members and associates to The ONE Group family. We have added an excellent brand to our restaurant portfolio, with 24 high performing domestic restaurants and one international franchised restaurant located in attractive markets. Over the next twelve months, we intend to integrate Kona Grill by leveraging our corporate infrastructure, our bar-business knowledge and unique VIBE dining program, to elevate the brand experience and drive improved top line performance to create long-term shareholder value,” says Emanuel “Manny” Hilario, president and CEO of The ONE Group.
“We currently anticipate Kona Grill contributing approximately $23 to $24 million in revenue and over $1 million in Adjusted EBITDA to our consolidated results in the fourth quarter of 2019. We expect Kona Grill to be immediately accretive to Consolidated Adjusted EBITDA, to add approximately $100 million in annualized food and beverage sales and to be accretive to earnings per diluted share once fully integrated. Most importantly, our preliminary 2020 expectation is to deliver significant growth by generating between $23 and $25 million in Consolidated Adjusted EBITDA,” Hilario adds.
The ONE Group acquired 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 ONE Group expects the integration of Kona Grill to be completed within about 12 months. 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 Specialty Lending Group, L.P.
The company updated the following targets for 2019 to account for the contribution from Kona Grill’s domestic restaurants and one international franchise for the balance of the fiscal year:
Total GAAP revenues between $118 million and $120 million, up from $95 million and $97 million;
Total food and beverage sales at all our owned and managed units of between $213 million to $223 million, up from $190 million and $200 million;
Consolidated Adjusted EBITDA between $14 million and $14.5 million, up from $13 million, representing approximately 33% to 38% growth compared to our 2018 Consolidated Adjusted EBITDA;
Total G&A excluding stock-based compensation and integration expenses of approximately $9 million, from $8 million;
The company has not reconciled guidance for Consolidated Adjusted EBITDA to the corresponding GAAP financial measure because it does not provide guidance for the various reconciling items. It is unable to provide guidance for these reconciling items because it 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.