The One Group Hospitality Inc (STKS) Reports Mixed Third Quarter 2023 Results Amid Expansion Efforts
Total GAAP revenues increased by 5.3% to $76.9 million in Q3 2023 compared to Q3 2022.
Comparable sales decreased by 3.0% with STK same store sales down 5.5% and Kona Grill same store sales up 1.1%.
GAAP net loss of $3.1 million reported in Q3 2023, a decline from a net income of $0.5 million in Q3 2022.
Adjusted EBITDA decreased by 13.3% to $6.2 million in Q3 2023 from $7.1 million in Q3 2022.
On November 7, 2023, The One Group Hospitality Inc (NASDAQ:STKS) released its financial results for the third quarter ended September 30, 2023. The company, known for its upscale and polished casual dining experiences, reported a revenue increase driven by the opening of new venues. However, this growth was overshadowed by a net loss for the quarter and a decrease in comparable sales.
Financial Performance Overview
The One Group Hospitality Inc (NASDAQ:STKS) saw a 5.3% increase in total GAAP revenues, reaching $76.9 million, thanks to the addition of four owned venues since August 2022. Despite this revenue growth, the company faced a 3.0% decrease in consolidated comparable sales compared to the third quarter of 2022. The decline was more pronounced in STK same store sales, which dropped by 5.5%, while Kona Grill same store sales saw a modest increase of 1.1%. When compared to the pre-pandemic base year of 2019, same store sales for Q3 2023 were up 41.7%, with STK same store sales rising by 61.0%.
Costs and Net Loss
Restaurant Operating Profit remained stable at $9.1 million, but the margin as a percentage of Company-owned restaurant net revenues decreased from 13.1% to 12.3%. The decrease in profit margin was primarily due to higher labor costs, marketing expenses, and general operating cost inflation. General and administrative costs increased by 12.9% to $7.3 million, primarily due to increased stock-based compensation expense and investments in new restaurant openings. Pre-opening expenses also rose to $3.1 million, reflecting the costs associated with new venues.
The company reported a GAAP net loss of $3.1 million, or $0.10 per share, a significant downturn from the GAAP net income of $0.5 million, or $0.01 per share, in the same quarter of the previous year. Adjusted Net Loss was $2.4 million, or $0.08 per share, compared to an Adjusted Net Income of $2.4 million, or $0.07 per share, in Q3 2022. Adjusted EBITDA also saw a decline, decreasing by 13.3% to $6.2 million.
Strategic Growth and Share Repurchase Program
President and CEO Emanuel Manny Hilario highlighted the company's strategic growth, including the opening of new locations and the anticipation of five additional STK venues in the next six months. The company completed a $15.0 million share repurchase program, buying back 2.2 million shares for $14.8 million, which is expected to be accretive to shareholders.
We are laser-focused on cost initiatives to improve restaurant-level margins and leverage our G&A while also delivering exceptional and unforgettable guest experiences to drive top-line momentum as we navigate this challenging environment, said Hilario.
2023 Outlook and Investor Relations
The One Group Hospitality Inc (NASDAQ:STKS) updated its 2023 targets, projecting total GAAP revenues between $335M to $345M and a consolidated Adjusted EBITDA of $40M to $45M. The company plans to open a total of eight new venues in 2023, with six already operational.
Investors and analysts received the opportunity to discuss the results with the CEO and CFO during a conference call and webcast. For further details, interested parties can access the webcast from the Investor Relations tab of The ONE Groups website at www.togrp.com under News / Events.
While The One Group Hospitality Inc (NASDAQ:STKS) faces challenges with cost pressures and a net loss, the company's expansion efforts and strategic initiatives indicate a focus on long-term growth and market positioning. Investors will be watching closely to see how these efforts translate into financial performance in the coming quarters.
Explore the complete 8-K earnings release (here) from The One Group Hospitality Inc for further details.
This article first appeared on GuruFocus.
