The ONE Group Hospitality, Inc.

Greetings, and welcome to the One Group First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. At that time, you may press star 1 on your telephone keypad to ask a question. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tyler Loy. Tyler, you may begin.

Thank you, Operator, and good afternoon. Good afternoon. Before we begin our remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guaranteed for future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainty that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only at 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 FTC 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. The reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales as owned and managed and licensed units to gap 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 hello, everyone. We hope you and your families are staying healthy and safe through these unprecedented times. and we sincerely appreciate everyone's continued interest in the one group. I know that I have said this before, but it certainly bears repeating. I'm so proud of the way our teams overcame the obstacles of this past year and how they are now leading the continued recovery of our business. Our plan today is for me to provide some detail on our recent results and reiterate our optimism for the future. Afterwards, I will discuss our development plans, and finally, turn the call over to Tyler, who will walk you through the quarterly financials in greater detail. First and foremost, I would like to reiterate that although we see light at the end of the tunnel, we are aware and cautious that much uncertainty still remains due to COVID-19. As local restrictions began to ease and capacity increased in our restaurants, we experienced sequential same-store sales improvement throughout the quarter, resulting in an increase of 3.3% compared to 2019, and both brands being positive compared to 2019 for the quarter. Momentum and acceleration continued as we then experienced an even greater improvement in April as indoor dining capacity continued to increase and vaccines became more readily available. Same-store sales increased 32.2% in April, including a 47.4% increase at SDK and an 18.6% increase at Cone of Grill, all compared to 2019. Consumers more than ever, as they become fully vaccinated, are looking for a fun and differentiated social time outside of their homes. And our concepts, featuring vibe dining, are well positioned to deliver. Our teams are effectively delivering on all operational marketing and culinary strategies. The results are truly remarkable, and I couldn't be prouder of our teams. We are also extremely encouraged by our industry-leading restaurant-level margin. As a result of our robust revenue growth and extremely effective cost management within our four walls, we were able to achieve an almost 19% restaurant-level profit for the first quarter, our highest restaurant-level profit in the company's history. We are incredibly pleased with this accomplishment. especially considering that our quarterly performance was still impacted by indoor dining capacity restriction mandates. At STK, we continue to see momentum building in date nights and social events, which has more than replaced the business traveler and corporate private events. A layer of business that we expect will return and further enhance our unit volumes. Additionally, brunch has now become a core business in all our concepts as it allows us to use our capacity and capture the high demand we are seeing on Saturdays and Sundays. In April 2021, our 13 domestic SDKs produced an average weekly sales volume of 261,000. Year-to-date 2021, our 13 domestic SDKs produced an average weekly sales volume of 211,000. To put these numbers in perspective, during the fourth quarter of 2019, Our busiest sales quarter on record, these same 13 STK locations had an average weekly sales volume of 224,000. This speaks volumes to the strength of the brand across the country. We anticipate that the return of the business traveler and corporate private events will be additive as we fill in midweek Monday through Wednesday capacity. Furthermore, the addition of capacity in key markets such as Las Vegas, and New York should further accelerate the sales volume numbers. At Kona Grill, we have instituted several initiatives to drive sustained growth. Specifically, we have launched new menus across the brand, revived the bar and patio programs, including adding more active music, and implemented marketing activities that leverage our social media capabilities. Additionally, we continue to build brunch, which now has been rolled out to all 24 locations, and the feedback we have received from our guests has been tremendously positive. In April 2021, our Kona grills produced an impressive average weekly sales volume of 97,000, a level that we expect that will continue to improve and on track with our objective of having Kona grill to be a 5 million AOV concept. Year to date 2021, our domestic Kona grills produce an average weekly sales volume of 88,000 or approximately 10% more than the AUVs at time of acquisition. Overall, we believe that both brands have recovered extremely well, and we feel optimistic about their opportunities for continued sales growth for the rest of the year. Regarding forthcoming capacity, for example, in a couple of weeks, restaurant indoor capacity will be increasing to 75% in New York City, and guests will be able to sit at the bar and order beverages without ordering food. They will also be lifting the midnight curfew, allowing our New York City restaurants to stay open longer during peak weekend times. Guests will also be able to wait for their table at the bar, and they no longer will have to end their night when their dinner is finished. We're also seeing a sales benefit from our takeout and delivery business, both at SDK and Coneville. Takeout and delivery comprise approximately 13% of sales, during the first quarter, which represents a 155% increase compared to the first quarter last year. We attribute our success to our investments in state-of-the-art technology, execution of our operations and marketing initiatives, which have enabled our guests to order for pickup or delivery from nine separate delivery partners. It is important to note that we are in the early stages of our delivery strategy and we have been actively marketing this high margin additive channel. As a result, over 50% of our delivery transactions are new customers and we look at delivery as a huge opportunity with the goal of converting these guests to long-term loyal customers. We hope these customers remember us when they have a birthday or a special occasion to celebrate at our restaurants because we know how to make the experience truly unique and memorable. There's no denying that our guests are eager to return to exciting nights out with delicious food, and we are doing so in earnest. Our vibe dining experience is also particularly attractive to so many people because it's not only an escape, but it's also vastly superior to the conventional higher-end steakhouse and polished casual experiences. We firmly believe that we are the lead in this highly differentiated category, and what the offer goes beyond great food and unique bar cocktail program to include so much more. An exceptional service program complemented by great energy and great ambience that results in an unmatched and unforgettable dining experience. Now turning our focus to development. In early January, we opened a managed SDK restaurant in Scottsdale, Arizona. The restaurant is off to an incredible start and continues to average over 190,000 in weekly sales. Additionally, on May 1st, we opened our first airport location, an international licensed SDK in the Cabo San Lucas Airport. We are happy to report that the first full week of sales were approximately $150,000, despite this location being off peak season. Our emphasis in bar-centric business positions us well for the airport platform and makes it a natural billboard for the SDK brand. We believe that this will be the first of many future airport locations globally for us. Ultimately, we are incredibly excited to bring Vibe Dining to those traveling to and from Mexico that already experience our SDK brand elsewhere. In addition, last week we opened one managed F&B venue at the London Westminster UK Doubletree, soon to be converted to a Curio Hotel. As of today, there are three additional SDKs and four additional managed FTP venues under construction. And between this year and next year, we intend to open 13 new venues. List includes eight SDKs, three SDK company owned restaurants in Bellevue, Washington, Dallas, Texas, and San Francisco, California. Three SDK managed restaurants, Scottsdale, Arizona, which already opened in January, London, Westminster, UK, and London, Stratford, UK, and two SDK license locations, including Cabo San Lucas Airport, Mexico, which opened in May. Five managed F&Bs, two London, Westminster, one opened in May, and three London, Stratford, UK. Over the longer term, we see our addressable market of 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're 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 to a strong P&L. and we are very hopeful that the trajectory that we're currently on will continue to accelerate in the months ahead. Now I'll turn the call back to Tyler.