The One Group Hospitality Inc (STKS) Reports Mixed Fourth Quarter and Full Year 2023 Results
Revenue: Fourth quarter GAAP revenues increased by 1.8% to $89.9 million; full year revenues up 5.1% to $332.8 million.
Net Income: GAAP net income for Q4 decreased to $4.6 million; full year net income down to $4.7 million from $13.5 million in 2022.
Adjusted EBITDA: Q4 Adjusted EBITDA rose by 11.3% to $14.5 million; full year Adjusted EBITDA decreased by 2.9% to $40.1 million.
Same-Store Sales: Consolidated comparable sales decreased by 4.3% in Q4; full year consolidated comparable sales down 2.7%.
Restaurant Openings: Opened six new restaurants in 2023, with plans to open six to eight more in 2024.
Share Repurchase: The company repurchased 2.3 million shares for $15.0 million; board authorized an additional $5 million for the program.
2024 Targets: The company provides revenue guidance of $360M to $380M and Adjusted EBITDA of approximately $45M for 2024.
On March 14, 2024, The One Group Hospitality Inc (NASDAQ:STKS) released its fourth quarter and full year 2023 financial results through an 8-K filing. The company, known for developing and operating upscale restaurants and lounges, reported a slight increase in revenue for both the quarter and the full year, while facing a decline in net income and mixed results in Adjusted EBITDA.
The One Group Hospitality Inc operates primarily in the domestic market through segments including STK, Kona Grill, ONE Hospitality, and Corporate. The company's focus on restaurant-level margins and general and administrative (G&A) leverage has resulted in a 40 basis point improvement in restaurant operating profit margin to 19.3% of company-owned restaurant net revenues and an 80 basis point reduction in G&A to 8.8% of revenue for the fourth quarter.
Performance and Challenges
Despite the revenue growth, The One Group Hospitality Inc faced challenges in the fourth quarter, with consolidated comparable sales decreasing by 4.3% compared to the same period in 2022. The decrease in same-store sales was attributed to a decline in both STK and Kona Grill brands, with STK same-store sales decreasing by 4.6% and Kona Grill by 3.9%. However, when compared to the pre-pandemic base year of 2019, same-store sales for the fourth quarter of 2023 increased significantly, indicating a strong recovery trajectory.
Adjusted EBITDA for the fourth quarter showed an increase of 11.3% to $14.5 million, reflecting the company's ability to grow earnings despite the decrease in same-store sales. However, the full year Adjusted EBITDA saw a decrease of 2.9% to $40.1 million, highlighting the ongoing challenges in maintaining profitability over a longer period.
Financial Achievements and Importance
The company's financial achievements in the fourth quarter, including the increase in restaurant operating profit and the reduction in G&A expenses, are significant as they demonstrate The One Group Hospitality Inc's ability to optimize operations and control costs in a competitive restaurant industry. These improvements are particularly important as they contribute to the bottom line and enhance shareholder value.
The company's aggressive expansion strategy, marked by the opening of new restaurants, is also a key financial achievement. The addition of four new restaurants in the fourth quarter and plans to open six to eight more in 2024 reflect the company's confidence in its long-term EBITDA and earnings power. This expansion is crucial for sustaining growth and increasing market share in the upscale dining segment.
Financial Tables and Analysis
The financial results for the fourth quarter and full year 2023 show that The One Group Hospitality Inc is navigating a complex market environment. The company's ability to increase revenue and manage costs effectively is commendable, but the decline in net income and mixed Adjusted EBITDA results indicate that there are still areas that require attention. The decrease in same-store sales is a concern that the company will need to address to ensure long-term success.
The share repurchase program, which saw the company buying back shares worth $15.0 million, underscores the management's belief in the company's intrinsic value and commitment to returning value to shareholders. The additional $5 million authorized for the program further emphasizes this commitment.
Looking ahead, The One Group Hospitality Inc's targets for 2024 suggest a positive outlook, with expected total GAAP revenues of $360M to $380M and an Adjusted EBITDA of approximately $45M. These targets, along with the planned restaurant openings, indicate a strategic focus on growth and profitability.
Investors and potential GuruFocus.com members interested in the restaurant industry and upscale dining segment will find The One Group Hospitality Inc's financial results to be a mix of positive developments and areas for improvement. The company's strategic initiatives and financial discipline will be key factors to watch in the coming year.
For more detailed information, you can access the full earnings report and financial statements on the SEC website or by visiting The One Group Hospitality Inc's investor relations page.
Explore the complete 8-K earnings release (here) from The One Group Hospitality Inc for further details.
This article first appeared on GuruFocus.
