The ONE Group Hospitality, Inc.

This is the conference operator. Welcome to the One Group third quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press the 1 followed by the 4 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Tyler Lloyd, Chief Financial Officer. Please go ahead.

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 a new 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 of 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. 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?

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 on 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 percent year-over-year. We are particularly pleased that we were able to significantly expand our Russian-level margins by 640 basis points while experiencing comparable sales headwinds. This was due to effective revenue and cost management within our four 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 SDK 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, mostly 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 SDK 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 SDK'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 focus menus, the addition of new craveable food offerings, launching a revised bar and patio 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-level 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 nine separate delivery partners. We have also adapted our menus, particularly SDK, 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 SDK and Conagra locations and now expect to launch this program company-wide in the US. In addition, we are looking forward to executing premium menus at all our locations during the holiday season. Our SDK meat market An e-commerce platform that we launched last spring is also doing well and is enabling us to reach guests in a manner that was previously not possible. The average stake is in the $25 to $30 range, and delivery costs are very reasonable for two- and three-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 proved effective in translating into a strong P&L. Now I will turn the call back to Tyler.