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spk01: 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.
spk05: 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?
spk02: 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.
spk05: Thank you, Manny. Let me start by discussing our current cash and liquidity positions before reviewing the first quarter financials in greater detail. As of March 31st, we have $28.4 million in cash and cash equivalents on our balance sheet, and this amount has not changed materially through today. Notably, we generated positive cash flow throughout the first quarter. Finally, availability on our revolving credit facility as of the end of the quarter stood at approximately 10.7 million. In terms of our quarterly financials, total GAAP revenues were 50.5 million, increasing 24% from 40.7 million for the same quarter last year. Included in our total revenues for the quarter is our owned restaurant net revenues of 49.2 million which increased approximately 27.5% from $38.6 million for the same quarter last year. The increase in revenue is primarily attributable to strong sales momentum as state and local governments continue to ease seating capacity restrictions in the markets in which we operate. Domestic consolidated comparable sales increased 3.3% for the quarter compared to 2019. For SDK, comparable sales increased 1.9% and 4.6% for Kona Grill. As Manny commented, sales sequentially accelerated throughout the quarter for both SDK and Kona Grill. As cities began to reopen, consolidated and comparable sales for April increased 32.2% compared to 2019, including a 47.4% increase at SDK and an 18.6% increase at Kona Grill. Management, license, and incentive fee revenues were $1.3 million in the first quarter of 2021 compared to $2.2 million in the first quarter of 2020. This change is primarily the result of temporary closures due to COVID-19 and limited in-person seating and managed locations. Owned restaurant cost of sales as a percentage of owned restaurant net revenue increased 180 basis points to 24.4% in the first quarter of 2021 from 26.2% in the first quarter of 2020, primarily due to purchasing synergies across the company and strong menu management. Owned restaurant operating expenses as a percentage of owned restaurant net revenue improved approximately 1,200 basis points to 56.8% in the first quarter of 2021, or 68.7% in the first quarter of 2020. The decrease was driven by attraction in actively managing operating costs, particularly managing restaurant labor and implementing operating cost savings measures. Restaurant operating profit was 18.8% for the quarter, a record high for the company, and this was despite limited indoor dining capacity throughout the quarter. Again, we have made tremendous progress in running more efficient operations since the beginning of COVID-19 pandemic and plan to continue to execute the current operating model into the foreseeable future. On a total reported basis, general and administrative expenses, including stock-based compensation for the first quarter of 2020 was $5.2 million compared to $3.4 million in the prior year and includes 1 million of stock-based compensation, a number driven by certain grants due to a substantial increase in our stock price during the quarter. We consider approximately half a million to be one time in nature. When adjusting for stock-based compensation, adjusted general and administrative expenses were 4.2 million in the first quarter of 2021 and 3.1 million in the first quarter of 2020. As a percentage of revenues, adjusted general and administrative expenses for 8.2% of total revenue in the first quarter of 2021 compared to 7.5% of total revenue in the first quarter of 2020. We incurred approximately 1.6 million of direct costs related to COVID-19 during the first quarter, composed primarily of costs for regular electrostatic cleaning revenues, personal protective equipment, and sanitation supplies to prevent the spread of COVID-19. This compares to 1.3 million of similar costs last year. Interest expense net of interest income was $1.2 million in the quarter of 2021 and the first quarter of 2020, respectively. Income tax benefit was $0.3 million for the first quarter of 2020 compared to an income tax benefit of $0.7 million for the first quarter of 2021. The current year income tax benefit was driven by discrete items related to stock-based compensation. Net income attributable to the one-group hospitality Inc. was $70,000 or 0 cents net income per share, compared to net loss of 4.6 million in the first quarter of 2020, or 16 cents net loss per share. When adjusting for COVID-19 expenses and one-time stock-based compensation, adjusted net income was 1.6 million, or 5 cents net income per share, compared to adjusted net loss of 3.6 million in the first quarter of 2020, or 13 cents net loss per share. Adjusted EBITDA for the first quarter attributable to the One Group Hospitality Inc. was $6.5 million in the first quarter of 2021 compared to $1.6 million in the first quarter of 2020. This marks the second highest adjusted EBITDA quarter in the company's history. We have included a reconciliation of adjusted EBITDA and adjusted net income and loss, a gap net income and loss, in the table in our first quarter earnings relief. As a reminder, Due to these unprecedented market conditions and certainty surrounding the effects of the pandemic, we cannot reasonably estimate when our business will return fully to normal operations and therefore suspended all financial guidance last March. We do, however, intend to provide further business updates if warranted by this evolving situation. I will now turn the call back to Manny.
spk02: Thank you, Tyler, and thank you all for your time today. Let me conclude by saying I'm very encouraged with our results to date. and our prospects for this year and beyond. Above all, I am grateful for all our teammates who bring our mission to life every day to be the best restaurants in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest, every time. I also want to thank our guests that have stuck with us over this past year and are coming back to our restaurants for the first time in a long while and enjoying the vibe dining experience they have been craving. We appreciate everyone joining us today on the call. Tyler and I are happy to answer any questions that you may have. Operator.
spk01: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from the line of Joshua Long with Piper Sandler. Please proceed with your question.
spk03: Great. Thank you for taking my question, and thank you for the update today. Exciting to hear about the acceleration in sales here in the April period, and then also when paired against the strong margin management in 1Q. And so just wanted to see if you'd be able to talk about how you're thinking about margins on a go-forward basis, noting that you've got really strong revenue levels, but just curious if there are costs that need to be layered back in as some of these jurisdictions start pulling back some of those restrictions and maybe things start going back to normal a bit more. That $18.8 that you delivered in the first quarter restaurant level margin, if that's something that you'd expect to carry forward into 2Q and going forward. Thank you.
spk02: Thanks for the question, Josh. This is Manny. I'll start and then if Tyler has additional comments, he'll add some color to it. But as I said earlier on the call, you know, our volumes in April are about 261,000 averaged for the 13 domestic SDKs. And I also mentioned that there were for the year to date about 211. So my expectation is that going forward as we keep revenues in that higher level range, will continue to do extremely well from a margin perspective. So I have no expectations that margins will go back. Obviously, there is some pressures in the environment relative to commodities and labor, and we're aware of those. But there's no particular layers of costs that we will have to put back in the P&L. I just want to also make a correction here. During my statements, I did say that We had 13 domestic SDKs at the end of 2019. We actually only had 12, so I just want to make sure everybody knew that. So our 224 was for 12, not 13. But anyhow, overall, I do believe that the margin for the company for the rest of this year looks very, very good. Tyler, anything you want to add? No.
spk03: Great. Could you touch on what you're seeing there in the cost of inflation side? Obviously, we've heard that beef has been seeing some pressure. I'm just curious if you have been seeing that as well, to what extent, and then how the other line items in the basket across both SDK and Kona are faring with any sort of either locks or other programs you have in place to mitigate some of those costs.
spk02: Yeah, so for beef, we do have pricing issues. you know, locked in. Obviously, if the pressure gets to be extremely, we do like to work with our partners, but right now we are locked in, and so we don't anticipate anything material there. Obviously, seafood, we did see some seafood, particularly on crab, where we did have some up and down, you know, pricing throughout the quarter. We do buy some of the crabs, so we did make some buys to help that out over time. We also saw some fluctuation in lobster. So that has been fluctuations, and at any time that we feel that there's opportunities, we will do some future buys just to make sure that we don't, I shouldn't say buys, but we lock into pricing to make sure that we do get protection in the longer term. So again, I think that there's, obviously we have seen ups and downs in a lot of the commodity lines, none of which has been material for us. As you can see on our COGS line, we had a very good COGS in the quarter, although things were going up and down throughout the quarter. Obviously, the one that we're monitoring the most is labor. There is a lot of noise in the labor market relative to the availability of labor. I think generally the teams have done a very good job of retaining talent, and I think we've managed around that. And we've also been very proactive in terms of making sure that we manage wage. so that we don't get surprised by it all over. So overall, yeah, there's some pressure, but I think we're doing all the right things relative to managing the P&L, doing buys, locking in prices, and managing labor.
spk03: Great. Thank you for that. For how long do you have that beef pricing locked in? Until the end of this year.
spk02: Until the end of the year.
spk03: Got it. Thank you for that. And my last one was during some of the downturn periods, you and your team shifted to being really efficient with managing table turns and just driving efficiency and sales on a square foot basis in the store level at the restaurant level. How do you balance that going forward as we start shifting back to something more normalized where you know, the guests can linger a little bit longer. You can maybe focus on some check building activities with an extra drink or maybe dessert comes back in. How do you balance that efficiency with also kind of things returning back to normal at the store level going forward?
spk02: I mean, so far, you know, what we've seen is that, you know, the demand still outpaces the supply on capacity. And so no question that turnover of tables is still our number one strategy. And it's not only just turning over the tables, but it's truly making sure that the experience is stellar within the right amount of time. I do think that as capacity becomes more available, we probably will work more on the end of night day part. So think of 11 o'clock plus dining, where we'll probably take a little bit more time on working on on the liquor mix. So I think that's probably going to be the next logical step will be to work on the late night seating, which frankly, we've extended a lot of our restaurants past midnight and we've seen a tremendous amount of success there. So probably that will be the next layer of working on check. Our check has been tremendously healthy, so we really haven't seen any erosion because of liquor, but that's still an opportunity. But, you know, right now, to be very honest about it, our number one objective still is turning tables over, particularly on the weekends, which now is Thursday, Friday, Saturday, and Sunday for us, which is the four-day block of days.
spk03: Great. Thank you.
spk01: Thank you. Our next question comes from the line of Mark Smith with Lake Street Capital Markets. Please proceed with your question.
spk00: Hi, guys. Thanks for taking questions. First off, can I just confirm, Manny, did you say takeout and delivery mix 13% in the quarter?
spk02: Just about. That's right.
spk00: Just about. Okay. And if we looked at brunch, has that been a needle mover? If we looked at that as a percent of sales, is that helping in kind of everything that you've added to the restaurants over the last 12 months?
spk02: Yeah, I mean, it's a lever. I mean, I think particularly, as you saw in my earlier comments, particularly as I work at Saturdays and Sundays, I think that, and first of all, I invite everybody to go try the program. The food is outstanding. I think the culinary team has done a great job of, in my opinion, creating what's one of the most craveable, Instagrammable menus to really stand out, because there is brunch, and then there's really brunch that people will remember. So we've been working on that later category, so I think we've been building it up. I think as we entered April, we really started seeing the impact of that day part. And the thing that I like about brunch is that, as you may recall, holidays is a critical element of our marketing strategy. So brunch is a natural lever within the holiday strategy. So we've seen the power of that this year in Easter, and we saw it again in Mother's Day. So we were very excited about the potential of that day part going forward. So expect big things coming out of it. And as we continue to build that day part, obviously we're still very early on it. And I think that as more people experience it, we'll get more repeat business. So I see that as a very attractive new layer of business because historically nothing happened really in our SDKs between 10 a.m. and 4 o'clock on a Saturday and Sunday. So that's a huge amount of captured capacity now that we can turn into revenue. So stay tuned. You'll see us doing a lot of marketing around that. You've probably seen in our digital marketing that our team has been very aggressive in terms of creating the impression about that day part. And by the way, we've done brunch with Vibe in mind, so it's not just coming in and getting brunch food, but you'll see the DJs in our locations. You'll see a lot more energy and a lot more emphasis in making sure that we have a killer drink program that really complements what I believe to be an amazing food offering for brunch.
spk00: Okay. And you brought up Mother's Day. Can you talk about capacity in May, kind of system-wide, and where that has moved to?
spk02: Well, I think capacity is improving. I think the big ones was Vegas is finally, I think, up to 80% now in capacity. We're going to see New York coming up to 75%. So those markets, you know, are coming up. And then the thing that's very exciting about those markets is we ran a branch – And I can tell you that I am very bullish in what that day park will mean for some of these markets like New York and Vegas. We have found out that there's a tremendous amount of demand for that. So we believe that, again, I think that layer will be there. And frankly, I think from a platform and layer of business, we're starting to see demand coming into the business for corporate group dining and group events. So that will be kind of the next layer of business here that the team is working on. And frankly, our appetite for those events now is Monday through Wednesday, maybe Thursday. Friday, Saturday, and Sunday, we got so much momentum on the a la carte business that that business is not a priority for us. So I guess that's a good problem to have that we can say that we're really limiting our business travel business development around Monday through Wednesday, which we brought the team back. We're starting to have some of our sales and events managers coming back, and I think we'll bulk up the resources and assets behind that business. And frankly, the phones are now starting to ring. I think as vaccines get out into the public, we kind of see almost a direct connection and correlation for group events as vaccination levels go up. So I guess we feel very good about where we stand right now. And I think as capacity keeps coming on, I think we'll continue to see us building into what I think are pretty impressive AUVs. I'm estimated at about 260 a week. And Kona Grills in the hundreds and starting to pick up. So I feel very good about how the units are executing all these programs that we put in place. It's always good to see it translating with store level margins. We saw that in the quarter that our store level margins are very high level. Keep in mind that historically the first quarter is not one of our best seasonal quarters. If I even frame further the margin performance in the seasonality of the business, I got to be very delighted with the margins that we did in the first quarter.
spk00: That makes sense. You know, looking at Q1, was there any weather events that had a big negative impact? I'm thinking primarily about Kona Grills in Texas. And then similarly, looking at capacity, you know, patio, maybe how much space have you added year over year in patios and how is that business trending right now?
spk02: I'm a good restaurant guy and a horrible weather guy, but I do think that we did have some times within the quarter where we did have challenges with As a matter of fact, I think we had a whole week of Kona Grill in Texas that was impacted by it. Obviously, weather is weather. We did have lots of patios, rooftops, everything else. But our real focus is fishing where the fish is running. So we tend to kind of not let that become a real big call to action internally. But we did have weather events. I mean, there were markets like that. We were also operating out of tents. in some of our markets like Woodbridge and Troy, Michigan, which we're happy not to be intense all the time anymore. But clearly, once the weather got below the 30 degree, we did see some impact in some of these markets because of weather. But again, overall, we did have warm days and we did have cold days. We had dry days and wet days. And overall, I'm sure somebody does track what the net But I wouldn't say weather was a significant enough item for us to really talk about it from an analytical perspective.
spk00: And on the patio business, any commentary on kind of what you've been able to increase year over year in patio business?
spk02: Yeah, I'm excited. So last year really was going to be the first year that we were going to, you know, if you will, maximize patio. Unfortunately, because of COVID, we really weren't able to do that because we were limited both in capacity and social distancing in the majority of our patios. Frankly, on Fridays, Saturdays, and Sundays, our patio are very difficult to get into. As a matter of fact, one of the big complaints I get from guests is, I want to get into your patio and operate a corner grill. I can never get in it. So I would say that we probably have demands that way over exceed supply on patio for corner grill right now are a challenge internally. As I said earlier, it's turned, so we do have to work on our table turns on the patio. It's always difficult to get people out of patio seats because once people sit down and have those drinks and great food in the patio, it's always a little bit more difficult to turn the table. But again, that's a high-class problem to have. We will have to define and really execute our table turns at the patio. So I'm super excited about to see what happens this year because hopefully this year, There will be less limitations, so there will be an opportunity here for us to really see what the power of the patios should be. Looking at our AUV for Kona Grill at $100,000 in April, I would say that going into patio season in May, June, July, August, and September, we have a tremendous opportunity to really make lots of revenues out of the patios.
spk00: Okay. And the last one for me is just, you know, as we look at real estate opportunities as you guys are beginning to develop and build and open new restaurants, you know, any commentary or insight into what you're seeing around real estate opportunities? And then second with that, you know, any construction delays as we look at permitting or issues that you're continuing to have or those issues starting to lighten up with some reopening opportunities?
spk02: Yeah, I mean, I would say on development, I think probably the thing that, looking back, worked well for us is we didn't stop development, although we were challenged, you know, very challenged, because remember, we went all the way down to 87 employees in April of last year. Although we were very challenged back then, we did keep our development activities wide open, and frankly, one of the reasons that we're doing these restaurant deals that we're doing now is we got incredible deals in some incredible geographies. And so there was a window of time there where the real estate market was wide open. I think during the very uncertain days of COVID, there were lots of things that were in the market. I would say it's tightened up a bit. I don't see the same quality of deals coming up, I would say, the last four or five weeks. So I would say that As things cleared out a little bit, I think landlords are a lot more wait and see mindset. I've seen that happen. Frankly, construction is a little bit different now because some of the stuff that you need to build is not easily available as it used to be. It does require lots of more precision on your project management to deal with things like a lot of construction products are petroleum byproducts. which are not on market. So we've had to adjust our calendars on the construction. But I would say that all in all, I think we're very pleased with the pace of our construction. Our next restaurant that we'll be opening is Bellevue. And frankly, that restaurant is pretty much, based on my walkthrough that I did today, it looks very, very good. And then the next one up after that will be SDK. Westminster and in London, and I think that one is also very, very good shape. So I would say that you know things have moved. Obviously you know permitting is a little different because some of the offices don't have live people in it, so you just have to adjust your project managed to deal with those annoyances. But all in all, I would say that we've moved very well.
spk00: OK, excellent thank you guys. Thank you Mark.
spk01: Thank you. Our next question comes from the line of David Kanin with Kanin Wealth Management. Please proceed with your question.
spk04: Good afternoon, gentlemen. Congratulations. Great job to you and your team.
spk02: Thank you, sir.
spk04: You're welcome. So a few questions. During the prepared remarks, you gave a number. for total locations that you think you can get to in the future. Could you just reiterate what that number is and then the time frame?
spk02: I mean, so it's 200 is kind of our addressable. And by the way, that's just SDK. And so we're not talking about all the other opportunities because we frankly have never really laid out a number for Corner Grill. I think as now the revenues start breaking the 100,000 AUVs, now there's a whole new dialogue that we also need to evaluate that. But just on SDKs, we really believe that the number is big. I mean, think about Cabo St. Lucas Airport. It's probably one of the smaller airports that we probably can get into. And right off the chute, we're at 150,000 a week in AUV. And frankly, as a matter of fact, after this call, I'll be heading out to really work with the team now on turns because that restaurant is ready to come on a turn opportunity for us in turning tables in the airport. So I think if you start letting in there the airport and then the streets, opportunities are huge, tremendous amount of markets that I'm looking at right now, Minneapolis, Boston, Washington, D.C. So there's a tremendous amount of white space right now, even domestic, not to mention the international opportunities that will be coming up because the restaurants that we're building right now in Stratford and Westminster come with two significantly large hotel operators that in aggregate have over 1,000 hotels. So we do plan to hopefully earn the trust of these operators to be able to build more restaurants with them in their property. So I think not just the domestic white space, but just the more recent relationships that we've entered in the hotel side, that's going to really open up a tremendous amount of real estate. These hotel partners have restaurants in Asia, Africa, Europe, South America, North America, not to mention that our partner in Cabo San Lucas' areas, which is one of the largest airport operators in the world, and they do a very good job of operating higher-end restaurants. So I think that relationship alone, based on the early results of Cabo San Lucas, is going to yield lots of locations. We'll get to 200. I can tell you it will be three years. It will be five years, but we are accelerating. I've got to tell you that right now one of the things that you can probably see from our pipeline is that we feel that there's a huge opportunity when you have a brand like SDK that can do $250,000 plus AUVs. There's not a lot of Russian concepts out there that can do that. As a matter of fact, I can't really think of one that can say that, on the average, do that. So we do think that the demand for that product will be significant. And then from a mall operations, having a Kona grill that can blow through $100,000 a week is a massive asset for mall development or just any kind of location in the U.S. So I think the future is bright for SDK, and I think that there is also a future developing year for Kona grill Not to mention the other things that we've done, for instance, in Westminster, the F&B location we opened is very cool. So we also have other cool things in the pipeline that I think will even make growth more meaningful in the hotel side. So lots of really good development stuff going on.
spk04: Okay. And I know that. throughout the quarter and even in April, in-person dining capacity was still hamstrung. I think in April, you were up to 65%. I don't know if you have this data, but could you potentially call out the difference in markets that were 100% capacity, what the comp looked like, the same store sales increase in April at a market that was 100% in-person dining capacity versus one that was at, you know, limited capacity.
spk02: I mean, you know, I can give you, you know, an example of, you know, for instance, Atlanta is one of the markets where we're more relaxed on restrictions relative to anywhere else in the country. And the same store sales for that restaurant relative to 19 is 100% plus. So, you know, if you wanted to look for one restaurant of what we can do when we're full barrel, capacity ish, because there's still some social distancing limitations that we have to go through and other stuff. But I think in the aggregate, I think that's probably a good proxy for a market where once we get those type of capacity lifting, we can do very well. I think the Kona grills in Texas have done very, very well. And then obviously Miami, South Beach, which has had no I guess it's one of the more relaxed markets. We also have done incredible comps in the 100% plus range. So I think as capacity becomes available, I think we're very well positioned to take advantage of it. I think one of the reasons why our numbers are what they are is, as you know, we're very optimistic. We read what's happening in the restaurants, and our number one objective is to maximize Revenue is where we can do it, so stay tuned.
spk04: Okay. So in a relaxed market like South Beach, the last time I was there, I noticed, though, there was still no seating at the bar. Has that changed? And I would think that when people could sit at the bar, you'd probably catch some incremental sales there. Is that factored in, or is that still yet to be yielded in the future?
spk02: You know, that's still yet to be determined, and I'm not so sure that, you know, so I like the bar after 10 o'clock. I'm not a big fan, you know, of bar per se before 10. Obviously, I think there's a magic that people see in the bar business because, you know, it's a much better margin business than usually food. But the way we run our food costs and everything else in our business, you know, trading food and liquor is not exactly – as beneficial as you probably would see in other brands. So, again, we'll play that by ear. As the bars open up, we'll test and we'll see how to utilize them to maximize revenues.
spk04: Okay. And then just one more.
spk02: I think the more important strategy right now is really table turns. You know, as the capacity becomes available, is not to really relax on the table turns and make sure that you stay focused on keeping table turns where they are.
spk04: Okay. And then I think EBITDA was like 13% revenues, you know, which is impressive. But I noticed that management fees and royalties or license fees were down year over year. When do you think that, you know, returns to normal or exceeds it? In what timeframe? Do you expect an improvement here in Q2? And then with that incrementality, because, you know, there's a lot of leverage on that, can you, you know, where do you see EBITDA margins as a percent of revenue ultimately getting up to in the future as you start to recoup that, you know, those management and license fees and things kind of start to normalize?
spk02: Great. So without providing guidance because we didn't do it, I can give you directionally that we'll see an improvement in management license fees. As Europe opens up, so we do know that actually next week London is opening up and we're starting to see – so that will be the next big lever to help the management license line. We also – Italy is also starting to relax and open up. So as London and Italy open up, we will see M&L or management license fees going up dramatically. and probably closer to historical levels. Also remember that we now have Puerto Rico SDK, which has been a very good restaurant for us. We also now have Scottsdale, which is also a very good restaurant for us. And we also have now Cabo St. Lucas, which is a licensed site that will drive a substantial amount, if you do the math, at 5% on $150 a week. That's $7,500 a week just in license fees. So the outlook for M&L is very good. starting in about a week or so when we start reopening Europe back up.
spk04: Okay, that's all I have.
spk02: What's the margin outlook on that? Very good, because as you know, all that flows down to the bottom line, so we should see a dramatic lift on the 13% adjusted EBITDA line.
spk04: Yep. Okay. Well, great job, guys. Sounds like the best is yet to come. I'm a very happy shareholder. Been in it for I think almost four years now. So keep up the great work. I look forward to next quarter.
spk02: Thank you.
spk01: Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to Manny Hilario for his closing comments.
spk02: All right. Well, first of all, I want to thank the one group team who has been phenomenal, and I appreciate the incredible work work done by all teams in the restaurants and in the offices and everywhere globally. So I appreciate everybody's commitment to us. And last but not least, we obviously appreciate all of your interest on the one group. And I look forward to running into all of you out in our restaurants. So be well, be safe, and see you in one of our restaurants. Thank you.
spk01: Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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