The ONE Group Hospitality, Inc.

Greetings and welcome to the one group business update call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad as a reminder this conference is being recorded. I would now like to turn this conference over to Mr. Tyler Lloyd. Mr. Lloyd, you may begin.

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. With that, I'd like to turn the call over to Manny Hilario. Manny?

Thank you, Tyler, and hello, everyone. We hope that everyone has stayed safe and healthy during these extraordinary times and appreciate your continued interest in the one group. I would like to offer some brief thoughts on our fourth quarter results, but more importantly, discuss where the business has been since the beginning of the year as that recovery continues to strengthen. Finally, I will discuss our near-term development plans. It was March 15, 2020, when Ohio's governor ordered all restaurants to close their dining rooms and bars and within a week, most states followed suit. It has been a journey since then for our industry and for our company. I'm pleased to launch this conference call by reporting that so far for the first quarter through March 14, 2021, our consolidated comparable sales on a two-year basis have increased a half a percent, albeit we are still limited by many restrictions. We are pleased with the strong momentum and feel hopeful for the future as governmental capacity restrictions have begun to further relax in many of our key markets, California, Nevada, Minnesota, Nashville. For example, starting on March 15, 2021, Las Vegas is changing to 50% capacity. To put it in perspective, without Las Vegas, for the first quarter through March 14, 2021, our consolidated comparable sales on a two-year basis increased 7.1%. As we discussed in our last conference call, we began the fourth quarter with encouraging trends in October as exhibited by positive comparable sales across both SDK and Kona Grill, resulting in a consolidated increase of 4.2% for the month. This was largely a result of us reaching our highest indoor dining capacity since the pandemic began of 51%. However, as dining restrictions were reinstated over the course of the fourth quarter, comparable sales trends naturally softened, resulting in an 18.4% decrease in November and a 26.4% decrease in December at the consolidated level. Additionally, in November and December, we typically have a very large events business across our restaurants. Due to COVID restrictions, we were unable to host large events in the quarter. Still, we were very pleased with our teams for doing such a great job of managing through the decreased dining capacity and comparable sales headwinds while containing costs. It is also worth mentioning that takeout and delivery comprised approximately 15% of sales during the fourth quarter, which has almost tripled compared to the first quarter of 2020. We attribute the success to our investments in technology, which has enabled our guests to order for curbside pickup or delivery from nine separate delivery partners. To help drive takeout sales, we have adapted our menus, particularly SDK, to have more transportable items that work in a takeout environment. This has certainly gone a long way towards elevating this channel, and we are confident that off-premises sale will remain a meaningful and high-margin layer of the business going forward, even as we welcome more and more guests back into the dining rooms. There is no denying that guests are increasingly eager to return to normal life to the extent possible. And for many, that includes visiting full-surface restaurants for a great night out. The vibe dining experience that we offer is particularly attractive to so many people because it's really a differentiated fun and vibrant experience compared to other higher-end steakhouses and upscale casual restaurants. We firmly believe that we are the leader in this highly differentiated category and that our offer goes beyond great food and a unique bar cocktail program. It includes so much more, an exceptional service program complemented by great energy and great ambience that results in an unmatched and unforgettable dining experience. Moving on, one of the biggest cost advantages of our business is our emphasis on digital marketing relative to our peers. We have over 1.3 million people in our Friends with Benefits database, and we'll be enhancing our loyalty program later this year, merging to a new program that we'll be calling the VIVE Society. We also have other digital assets across Facebook, Instagram, and LinkedIn that have enabled us to stay on top of mind with our guests. And we never went dark. Even in the worst of the pandemic, rather, we have always made sure that our guests knew that we were out there and eager to serve them, whether through delivery or takeout or even within our restaurants if possible. Just as an example, we sold a tremendous amount of turkey on Thanksgiving this past year, selling more turkey through takeout and in-person dining than we ever had before. In the bigger picture, this was frankly a result of our commitment to stick true to our core business model of owning the holidays. Looking at Kona Grill specifically, the brand generated an 8.6% increase in comparable sales in October, but trailed off in November and December as capacity restrictions were reinstated. Still, for the full quarter, comparable sales declined only 8%, which exceeded most other followers' casual dining chains. We attribute the relative outperformance at Kona Grill to our strategies implemented since the acquisition. Specifically, our numerous sales drivers, including the launch of focused menus, the addition of food offerings, launching a revived 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 Grills suburban footprint has been a competitive advantage, particularly in the current environment. Now, some additional comments on 2021. We are encouraged that our sales trends have improved since the onset of the new year. Our dining capacity rose to 41% in January, which marked an improvement from December. And correspondingly, our January consolidated comparable sales declined 13.3%. For SDK, comparable sales decreased 23.2%, while at Kona Grill, comparable sales decreased only 1.4%. February was even stronger, with a near 1.1% decrease in consolidated comparable sales and an increase in indoor dining capacity to 46%. SDK decreased 1.7% and Kona Grill decreased 0.3%. And finally, for March, 1st through the 14th, a 24% increase in consolidated comparable sales an increase in indoor dining capacity to over 50%. Clearly, our guests want to dine with us for all the reasons I have already identified and will do so as permitted by law. And when they choose to come into our restaurants, we are providing them with the exceptional and unforgettable experiences that they crave. As we look ahead, our key focus is operation readiness for what we expect will be high volumes of COVID cases continue to decline, the vaccines become more widely available, and restrictions are lifted. Note that we have yet to open our events private dining business, but we'll do so when the time is ready. From a development standpoint, we opened a managed FTK restaurant in Scottsdale, Arizona in January. The restaurant is off to an incredible start, averaging $180,000 in sales volume per week, which is a very encouraging beginning for our newest location. Recall that for restaurants and venues that are managed or licensed, we typically generate management fees based on top-line revenues and incentive fee revenue based on a percentage of the location's net profits. As of today, there are currently four SDKs and three managed F&B other brand restaurants under construction. And between this year and next year, we intend to open 13 new venues. In addition, we are receiving a lot of inbound inquiries from current and prospective partners, and we are carefully evaluating these opportunities on a case-by-case basis. Longer term, we have identified over 75 additional major metropolitan areas across the globe where we could grow our SDK brand to 200 restaurants over the foreseeable future. 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. Now, I'll turn the call back to Tyler.