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Edited Transcript of STKS.OQ earnings conference call or presentation 5-Nov-20 9:30pm GMT

·28 min read

Q3 2020 One Group Hospitality Inc Earnings Call NEW YORK Nov 7, 2020 (Thomson StreetEvents) -- Edited Transcript of One Group Hospitality Inc earnings conference call or presentation Thursday, November 5, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Emanuel P. N. Hilario The ONE Group Hospitality, Inc. - President, CEO & Director * Tyler Loy The ONE Group Hospitality, Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * Mark Eric Smith Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst * Nicole Miller Regan Piper Sandler & Co., Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by. This is the conference operator. Welcome to the One Group Third Quarter 2020 Earnings Conference Call. (Operator Instructions) The conference is being recorded. (Operator Instructions) I would now like to turn the conference over to Tyler Loy, Chief Financial Officer. Please go ahead. -------------------------------------------------------------------------------- Tyler Loy, The ONE Group Hospitality, Inc. - CFO [2] -------------------------------------------------------------------------------- Thank you, operator, and good afternoon. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only as the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements in light of new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During today's call, we will refer to certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA and total food and beverage sales at owned and managed and licensed units, to GAAP measures, along with the discussion of why we consider these measures useful, please see our earnings release issued today. With that, I'd like to turn the call over to Manny Hilario. Manny? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Tyler, and good afternoon, everyone. We appreciate your continued interest in the ONE Group and hope that each of you have remained safe and healthy since our last business update. Today, I would like to provide a brief overview of our third quarter performance, discuss current trends regarding our ongoing recovery and reiterate our confidence in the future of our brands. Tyler will then walk you through the quarterly financials in greater detail. As we have expressed repeatedly, ensuring the well-being of our employees and guests is our top priority, and we continue to strictly follow all guidelines from the CDC, federal and local authorities. Furthermore, we have taken our commitment to safety even further by focusing our employees and our detailed employee manuals specific to each location's health and safety protocols. These manuals have been extremely useful to our teams as we have safely reopened restaurant dining operations. Additionally, we have made significant investments in our day-to-day operations to ensure the safety of our dining rooms for our employees and guests. As of today, 34 of 36 of our domestic restaurants are open for in-person dining, subject to limited seating capacity due to state and local mandates. We thank our nearly 3,000 teammates for making this all possible. They have returned to what they do best, making each restaurant the best in its market by delivering exceptional and unforgettable experiences to each guest every time, all while controlling costs in this very challenging environment. Overall, we are pleased with our performance for the third quarter. Our revenues grew 79% year-over-year. We delivered positive operating income for the quarter, and our adjusted EBITDA grew 77% year-over-year. We are particularly pleased that we're able to significantly expand our restaurant-level margins by 640 basis points while experiencing comparable sales headwinds. This was due to effective revenue and cost management within our 4 walls. Additionally, we reduced our G&A as a percentage of revenue by 200 basis points. We are incredibly proud of these accomplishments in light of the current COVID-19 environment. We are encouraged by the ongoing comparable sales improvement across our restaurants that continued throughout the third quarter and into the fourth quarter. In fact, October marks the sixth consecutive month of improvements. And most importantly, consolidated comparable sales increased 4.2% for the month, with both STK and Kona Grill having positive comparable sales. In September, STK comparable sales decreased 10.4%, and in October, comparable sales increased 0.3%. Our comparable STK restaurants in October delivered an impressive average weekly sales volume greater than $215,000. Excluding our markets most adversely impacted by capacity restrictions, that being Las Vegas, New York and Miami, comparable sales for September and October increased an impressive 14.6% and 17.9%, respectively. We have kept the STK brand front and center by delivering exceptional and unforgettable guest experiences, developing newsworthy culinary programs and leveraging our social media and digital capabilities to interact with our guests in new ways. In addition, we are utilizing STK's Friends with Benefits database of over 1.5 million subscribers to deploy multiple emails and digital marketing campaigns and continue to promote our takeout and delivery capabilities. Turning now to Kona Grill. The brand has certainly rebounded well. We generated a 2.3% increase in comparable sales in September, and in October, we generated an 8.6% increase in comparable sales. We attribute the performance for Kona Grill to our strategies implemented since the acquisition, specifically our numerous sales drivers, including the launch of new focused menus, the addition of new craveable food offerings, launching a revised bar and dining program, featuring more active music and aggressive and sustained marketing activities that leverage our social media capabilities. Our top line initiatives have also been complemented by better restaurant execution of the guest experience. Lastly, our Kona Grill suburban footprint has been a competitive advantage, particularly in the current environment. In addition to our teams doing an exceptional job in reopening dining rooms, we have also seen a strong continued response to off-premise business. We have invested in state-of-the-art technology enabling our guests to order for curbside pickup or delivery from 9 separate delivery partners. We have also adapted our menus, particularly at STK, to have more transportable items that work in the takeout environment. This is going a long way towards elevating this channel. In the fourth quarter, we plan to drive event business, albeit we expect lower year-over-year sales because of the pandemic and restaurant capacity restrictions. As a supplement, we are working on other types of programs and promotions to drive holiday sales. We have been testing brunch at select STK and Kona Grill locations and now expect to launch this program company-wide in the U.S. In addition, we are looking forward to executing premium menus at all our locations during the holiday season. Our STK Meat Market, an e-commerce platform that we launched last spring, is also doing well, and it is enabling us to reach guests in a manner that was previously not possible. The average steak is in the $25 to $30 range, and delivery costs are very reasonable for 2- and 3-day delivery so that guests benefit from both the great value and great convenience of getting a steakhouse-quality steak at home. To conclude, our team has certainly proven our resiliency during these trying times, and we are doing a fantastic job welcoming guests back into our restaurants for a great vibe dining experience. Ultimately, our focus on day-to-day execution has stood effective in translating into a strong P&L. Now I will turn the call back to Tyler. -------------------------------------------------------------------------------- Tyler Loy, The ONE Group Hospitality, Inc. - CFO [4] -------------------------------------------------------------------------------- Thank you, Manny. Let me start by discussing our current cash and liquidity positions before reviewing the third quarter financials in greater detail. As of September 30, we had $26.6 million in cash and cash equivalents on our balance sheet, and this amount has not changed materially through today. Notably, due to our improving sales performance in recent months, we generated positive cash flow throughout the third quarter and into October. Finally, our credit facility balance as of the end of the quarter stood at approximately $47.5 million. In terms of our quarterly financials, total GAAP revenues were $39.6 million, increasing 79% from $22.1 million from the same quarter of last year. Included in our total revenues for the quarter is our owned restaurant net revenues of $37.8 million, which increased approximately 97% from $19.2 million for the same quarter last year. The increase was primarily driven by $22.8 million in additional sales from Kona Grill, which we acquired in October 2019, partly offset by lower revenues due to temporary closures and limited operations of several restaurants due to COVID-19. Domestic consolidated comparable sales decreased 15.6% for the quarter. For STK, comparable sales decreased 24.2%, and for Kona Grill, comparable sales decreased 7.3%. As Manny commented, sales sequentially improved throughout the quarter for both STK and Kona Grill, with Kona Grill turning positive in September and both STK and Kona Grill turning positive in October. Consolidated comparable sales for October increased 4.2%, an 8.6% increase at Kona Grill and a 0.3% increase at STK. We certainly appreciate that there's likely to be volatility for the foreseeable future as locations might be subject to new guidelines. Management, license and incentive fee revenues decreased to $1.7 million in the third quarter of 2020 from $2.9 million in the third quarter of 2019. This decrease is primarily the result of temporary closures due to COVID-19 and the limited in-person seating at managed locations. Owned restaurant cost of sales as a percentage of owned restaurant net revenue decreased 170 basis points to 24% in the third quarter of 2020 from 25.7% in the third quarter of 2019 primarily due to strong menu management, supply chain synergies achieved by the addition of restaurants and favorable food commodity costs. Owned restaurant operating expenses as a percentage of owned restaurant net revenue decreased approximately 470 basis points to 59.4% in the third quarter of 2020 from 64.1% in the third quarter of 2019. The decrease was driven by our traction in actively managing operating costs, particularly managing restaurant labor and implementing operating cost savings measures. Again, we have made tremendous progress in running more efficient operations since the beginning of the COVID-19 pandemic and plan to continue to execute the current operating model into the foreseeable future. In total, our restaurant-level margin increased by 640 basis points compared to the same quarter in the prior year. On a total reported basis, general and administrative expenses, including stock-based compensation, for the third quarter of 2020 was $3.4 million compared to $2.4 million in the prior year. As a percentage of total revenue, general and administrative expenses decreased 200 basis points to 8.6% of total revenue. This decrease was due to measures we implemented to reduce our cost structure to offset the impact of COVID-19 and the synergies created due to the integration of the Kona Grill brand. When adjusting for stock-based compensation, adjusted general and administrative expenses were $2.9 million in the third quarter of 2020 and $2 million in the third quarter of 2019. As a percentage of revenue, adjusted general and administrative expenses decreased 180 basis points to 7.3% of total revenue in the third quarter of 2020 from 9.1% of total revenue in the third quarter of 2019. We also incurred approximately $1.7 million of direct costs related to COVID-19 during the third quarter, composed primarily of costs for regular electrostatic cleaning of our venues, personal protective equipment and sanitation supplies to prevent the spread of COVID-19. Interest expense, net of interest income, was $1.3 million in the third quarter of 2020 compared to $230,000 in the third quarter of 2019, reflecting our debt refinancing in October of 2019 in conjunction with the Kona Grill acquisition. Income tax benefit was $350,000 for the third quarter of 2020 compared to an income tax expense of $76,000 for the third quarter of 2019. Net loss attributable to The One Group Hospitality, Inc. was $875,000 or $0.03 net loss per share compared to net income of $460,000 in the third quarter of 2019 or $0.02 net income per share. Adjusted EBITDA for the third quarter attributable to The One Group Hospitality increased 77% to $4.7 million in the third quarter of 2020 from $2.6 million in the third quarter of 2019. We have included a reconciliation of adjusted EBITDA to GAAP net loss or income from continuing operations in the tables in the third quarter earnings release. As a reminder, due to these unprecedented market conditions and uncertainties surrounding the effects of the pandemic, we cannot reasonably estimate when our business will return fully to normal operations and therefore, suspended all financial guidance for 2020 last March. We do, however, intend to provide further business updates if warranted by the development situation. I will now turn the call back to Manny. -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Thank you, Tyler, and thank you all for your time today. To conclude, we are clearly in a much better position now than we were just a few months ago, and that is directly related to the efforts of our exceptional team that are working hard to help us successfully navigate through the pandemic, and our intention is to come out on the other side even stronger than we were before. We are so grateful to them for bringing our mission to life every day: operating the best restaurant in every market that we operate in by delivering exceptional and unforgettable guest experiences to every guest every time. They have also enabled us to build a sustainable takeout/delivery and e-commerce capability while effectively controlling costs at all levels of the company. The success of their efforts is reflected in our financial performance and will pay dividends for our business long into the future. Let me conclude by thanking all our valued guests who have enjoyed STK and Kona Grill at our restaurants or takeout/delivery or have ordered our high-quality steaks from our STK Meat Market. We have greatly enjoyed serving you and appreciate your support. We also appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Mark Smith with Land Street Capital Markets (sic) [Lake Street Capital Markets]. -------------------------------------------------------------------------------- Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [2] -------------------------------------------------------------------------------- I wanted to ask first just a little bit about the patio business during the quarter and maybe any changes that you've seen as we've seen some weather shift a little bit here into Q4. Any insights you can give us on how much that's impacting and helping the business? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Mark, it's Manny. I do believe that the patios were obviously beneficial, particularly for the Kona Grill since all the Kona Grills have fantastic patios. So I would say that was one of the positive drivers of the business, particularly in the warmer months of, call it, August and September. I think going into October, I think they start putting a little bit less of a role on that. But I would say we did benefit from the patios, but our best constant -- comp store sales was in October, which wasn't -- I wouldn't say that would be the best patio month for us, although the weather was reasonably good everywhere. But I would say that the patios did help. -------------------------------------------------------------------------------- Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. And then as we look at the October comps and even the comp improvements throughout the quarter, can you talk at all about price versus traffic that's built into that comp results? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- I mean I can talk about check. I think in terms of check, I would say, check was around 2% to 3% for the STK brand. And Kona Grill was around probably 4% to 5% on check, but we did have some positive -- particularly at Kona Grill in October, we did have positive traffic in that month. -------------------------------------------------------------------------------- Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [6] -------------------------------------------------------------------------------- Okay. Perfect. And then just an odd one on alcohol mix at both chains. How has that kind of moved throughout the quarter? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. I think -- with the patios, I think our mix of alcohol was pretty reasonably strong. Obviously, we are not using our bars. We have made a decision that, in most of our restaurants, we're using the areas around the bar as incremental seating areas. So we really have deemphasized, if you will, the bar drinking. But I think generally, overall, it has held reasonably well. And I think one of the reasons that it has held well is because of programs like Margarita Heaven at the Kona Grill, and we continue to evolve the specialty cocktail at STK. And we also allowed for happy hour to resume in the dinning rooms, which has actually, frankly, been good for us. I would say -- year-over-year though, I would say the mix is a little bit down, but not dramatically compared to what it could have been by closing all the bars. -------------------------------------------------------------------------------- Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [8] -------------------------------------------------------------------------------- Okay. Perfect. And then the last one for me, just talk a little bit about rent abatement and what we saw. And mainly, just any call-outs on anything that maybe is a onetime benefit or what you wouldn't expect to see going forward in rents during the quarter? -------------------------------------------------------------------------------- Tyler Loy, The ONE Group Hospitality, Inc. - CFO [9] -------------------------------------------------------------------------------- Yes. Mark, this is Tyler. Yes. So I think one of the things that we accomplished from the very onset was getting as many percentage rent deals as we could as the volumes went down and we closed some of the restaurants. And so I think what you're seeing is on some of the lower sales volumes, we did get a benefit there. But as sales got better sequentially through the quarter, that benefit really kind of went away. So I think long term -- we've worked really hard and really closely with our landlords. I think we've crafted arrangements with everybody that works for both parties long term. So I don't think there's anything that you see in this quarter that I would call onetime. -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- Yes. I would say that the onetime activity was mostly in the second quarter, where we got most abatements for the month of April, May and June. Those were the months where we were doing takeout/delivery. Those are probably the months where we got the most help from landlords. I think as Tyler just described there, the majority of the deals we've done with landlords is percentage-based rent -- percentage based. And so as sales have lifted, I think the impact on the margins is neutral because as a percentage of revenue, the number becomes pretty equal. So I think that's really the answer. So definitely, second quarter going into the third quarter, I think we're starting to see the rents equal -- equating much closer to what they are in the long term. -------------------------------------------------------------------------------- Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [11] -------------------------------------------------------------------------------- Okay. And maybe I'll squeeze one more in. Just remind us -- has there been any changes in kind of opening or capacity restraints just in the last couple of weeks as we've seen cases maybe move a little bit higher? And I'm thinking in particular about New York or any of the big metro areas. Any changes in the operations that you kind of have to do at any of your restaurants here in the last couple of weeks? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [12] -------------------------------------------------------------------------------- Yes. So a couple -- so the ones that are more meaningful to us were: El Paso was going to takeout/delivery only, and that's a Kona Grill. And then in Chicago, we're allowed to do outdoor dining only, which it's not exactly ideal for November and December in Chicago. And -- but other than those 2, we -- obviously, there's a lot of talk about new curfews. But here's what the reality of this environment is. We basically have a daily meeting. We go through this. There's a lot of different shifting in a lot of the communities, but we have not yet seen a major tightening yet. However, in Europe, we did see London shut down again for 1 month. And we did see Milan enact stricter curfews with a 6:00 p.m. cutoff. So we have seen some stuff, but not dramatic to the overall performance of the company. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from the line of Nicole Miller with Piper Sandler. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [14] -------------------------------------------------------------------------------- Could you talk a little bit about average capacity by concept in the quarter, please? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Yes. I mean, I think in the -- when I look at on a global basis, I would say that we're at about 50% allowed capacity in our venues, meaning that that's what we're limited and restricted for. I think as you saw in our prepared comments, some of the strategies that we've taken on is we've been testing brunch. So we're trying to extend the utilization of the space over more hours, so we're trying to deal with the stated capacities by increasing some of the utilization hours of the restaurants. Kona Grill already has a pretty good lunch business. So the limitations there are a little bit less impactful than in an STK, where we don't really have lunch business. So -- but overall, I will describe it as a 50% level of restriction. Where that restriction really hurts us for now is obviously Vegas, which is our flagship restaurant, and we are limited to around 150 or so in that property. So that's probably our biggest limiter. And maybe New York where we're only allowed to use 25% of the dining rooms. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [16] -------------------------------------------------------------------------------- And on the STK side, is there a difference in comp between like a restaurant with a retail front versus a managed property restaurant? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- I mean to be honest with you, I think we were pretty flexed back in October. I mean we're pretty busy everywhere. We didn't notice any particular, if you will, patterns, although I would say, if I have to come up with something that we saw in the portfolio, actually, I think our B markets, meaning smaller markets, outperformed the bigger markets. And that's been kind of something that would seem very interesting. And obviously, it does make sense because the business traveler and some of the other activities are not in those markets or tourism. But I definitely would say that our B markets outperformed significantly on the comp. As a matter of fact, in our prepared comments, we talked about what the comps look like without New York and Vegas. I think it's in the mid-teens. So it's a very powerful same-store sales in what I would consider B markets. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [18] -------------------------------------------------------------------------------- That is helpful. That's very interesting. And then just finding different ways to drill down on the comp. I'm thinking about how you reallocate or move people around away from those bars into sitting in the restaurant, even though capacity is reduced. How does that impact comps? I mean clearly positively, but wondering where they not a comp before when they're at the bar. And likewise, with brunch, extra hours, I guess -- I mean that's typically more sales and comp, but it's also something that wasn't in the prior year, right? How do you think about some of those nuances? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- I mean, I think the way I think of -- obviously, a very complex question. I do think that with the bars, we converted into what we call T stations. So we converted -- we put tables right in front of the bars almost on a T shape. I think we gain, on the average, 16 seats of dining capacity per location. And then obviously, we lost about 20 to 25 bar seats. So I think what we ended up doing was replacing low-revenue seats with higher-revenue seats with a table. So I do think that did help with the comp in terms of mitigating the impact of having less tables in the dining room because we have to follow the 6-foot rules in there and capacity restrictions. So I do think that the bar has helped, and as I mentioned there, it's really just a replacement of those chairs. I do think that the one thing that we focused more in this quarter than we ever have is turnover times at the table. So we went into a strict maintenance and enforcement of 90 minutes at the tables. That was one of the critical metrics and one of the things that we really observed during the quarter, making sure that we were turning the tables. I mean we have restaurants like Vegas that we're turning tables 5 times a day. So we did really have to make sure that we enforced times. And then the other thing that we worked very diligently in the quarter, particularly in days like Fridays, Saturdays and even Sundays, is what we call reset times at the tables. So from the time people leave the table, the time that we'll reset those tables, we tried to keep those times down below 2 minutes. So we work very effectively in making sure that we never have seats in the restaurants that are not occupied. So we do have a very, if you will, thorough and diligent process of making sure that we have tables fully occupied all the time. And that was STK and Kona Grill because, frankly, in some of the Kona Grills, we really have to be very thoughtful about turning those over because we had a lot of demand in some of those properties. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [20] -------------------------------------------------------------------------------- And I'm asking those questions, and I appreciate the pointed answers, because, clearly, you're doing a whole lot more with a whole lot less. If you just take capacity at face value, I think that commentary is very important to reconcile the comp performance, which is just fantastic. If I think about pre pandemic, you brought Kona into the portfolio for growth. And maybe if you just look out into the future, where do you see growth for STK? And where do you see growth for Kona? And kind of what's on the horizon? -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- That's a great question. Let me just add one final point to your previous question, which I probably should have told you, and I think we've talked about this before. But the one thing that we do differently from other companies is we actually have a logistics planning team in the headquarters where we work with the restaurant management teams to plan out capacity daily. So we do have a little bit of a different process than most restaurant companies because we actually are logistically thoughtful about how we turn the restaurants. So every day before the restaurant ever opens up, we present a very thoughtful, thorough, if you will, plan as to how we want those dining rooms to turn. So I do think that in times, we have limited capacity, having effected that process as part of our core operational approach, it really has helped. Now your other part of the question was related to? Forgot what the question was, Tyler. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [22] -------------------------------------------------------------------------------- Just unit growth. -------------------------------------------------------------------------------- Tyler Loy, The ONE Group Hospitality, Inc. - CFO [23] -------------------------------------------------------------------------------- Go-forward growth. -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- Yes. I mean it's going to grow. I think what's happening now -- this is just anecdotal, but I do have some landlords that have figured out that our restaurants are very successful in their projects now. And so I have existing landlords at least at 4 or 5 of our projects for Kona Grill who are now saying, "Hey, wait a second, you guys are definitely doing something with the brand." I mean people have noticed that the brand has become fun, and it's exciting. It's more vibrant. We've changed the menus. We've changed the music program. We've changed the approach with the beverage. We've definitely made substantial changes and improvements in service styles, so it's definitely noticeable. And we're starting to see a lot of landlords coming into us and asking us and providing ideas. Frankly, our stated answer to that is we don't have a plan. So we don't really talk much about it, but there has been a rise in demand for Kona Grill projects. In terms of STK, we currently have about 10 projects on the pipeline that are either license or management deals, and the partners want to move forward with them. So we are getting a lot of pressure from our partners to continue growing. So the pipeline is probably the best, best pipeline we had in a long time. And obviously, our partners have been to our restaurants during the pandemic period in some instances, and they can certainly see what we've been able to do in those properties, including properties like London, which is in a hotel, and it was open for several months in the pandemic period. And we were drawing a tremendous amount of customers into the property, and not only just to come and dine, but we're actually filling hotel rooms because people were staying overnight to come down and experience the STK brand on a Saturday night. So I would say from a growth/development perspective, this is probably the best pipeline I've seen in quite a long time for us. -------------------------------------------------------------------------------- Nicole Miller Regan, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [25] -------------------------------------------------------------------------------- Manny, I know you covered a lot, but those details are important. And as always, we're very impressed with your team's performance. -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [26] -------------------------------------------------------------------------------- Thank you, Nicole. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- (Operator Instructions) And we have no questions at this time. I'll turn the call back to you, Manny Hilario. -------------------------------------------------------------------------------- Emanuel P. N. Hilario, The ONE Group Hospitality, Inc. - President, CEO & Director [28] -------------------------------------------------------------------------------- Thank you, everyone, for your interest in our company. I would like to again thank The ONE Group team for an amazing job in the quarter. Frankly, super impressed and very thankful for an amazing team. And I look forward to seeing everyone in our restaurants. Cheers.