The ONE Group Hospitality, Inc.

Greetings and welcome to the one group fourth quarter and full year 2024 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. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. To ask a question, you may press star, then one on a touchtone phone. And to withdraw your question, please press star and then two. As a reminder, this event is being recorded. I would now like to turn the conference over to Tyler Loy. Please go ahead.

Thank you, Operator, and hello, everyone. 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, considering 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 condition. During today's call, we will discuss 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. For reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales at company-owned, managed, licensed, and franchised 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 would like to turn the call over to Manny Hilario.

Thank you, Tyler, and hello, everyone. Thank you all for joining us today and for your continued interest in the one group. I would like to begin this call by recognizing our amazing team members, their unwavering commitment to our mission, creating great guest experiences by operating the best restaurant in every market we're in by delivering exceptional and unforgettable guest experiences to every guest every time is what gives me confidence that we can realize our vision of becoming the global leader in vibe dining. 2024 marked a transformative year for us with the strategic acquisition of Benihana and Rasushi last spring. This milestone event expanded our portfolio of vibe dining venues and enabled us to achieve scale that would have taken us years to build organically. The acquisition also drove significant operational efficiencies, yielding significant run rate synergies during 2024. The savings came from streamlining restaurant operations and support functions eliminating redundant costs, and leveraging our enhanced scale to secure more favorable supplier contracts. Looking ahead, we are targeting a total of $20 million in total cost savings by year-end 2026. Our annual financial performance certainly reflected the transformational change at our company. Full year revenue increased over 100% to $672 million, and adjusted EBITDA increased almost 130% to $75.2 million. Both metrics obviously represent significant growth from the prior year, but also came in at the higher end of our 2024 guidance ranges. Now, let us share highlights from our recent fourth quarter. First, we increased revenues by almost 150% to a record $222 million. We had our best consolidated comparable sales of the year, including positive transactions at SDK and improved sales performance at Benihana due to our initiatives. The momentum seen in the fourth quarter has carried into the first quarter, and we anticipate another quarter of sequential improvement in comparable sales. In addition, we increased our adjusted EBITDA by almost 150% to $30.3 million, led by strong restaurant-level margins of 16.4%. Next, we opened three restaurants, including two company-owned units and one managed location, end of the year with six new restaurants. And finally, we had over $71 million in liquid resources at the year-end between cash on hand short-term credit card receivables, and revolver availability, which is currently undrawn. Looking ahead, let us review our priorities. First, driving sales across all brands by executing our strategic pillars. As I referenced earlier, we are determined to create great memories for our guests by operating the best restaurants across all our markets and delivering exceptional and unforgettable experiences to every guest every time. We do this through our focus on three strategic pillars, operations, culinary, and marketing. While traffic generation across the industry remains challenging, we were encouraged by the positive transactions at SDK during the fourth quarter. Our focus is on maintaining guest frequency and brand engagement during this period. And when the economic conditions improve, we expect these guests to return to traditional dining patterns. Our menu strategy balances accessibility with innovation. We offer complete dinner and beverage packages at $69 for SDK and $39 for all other brands and maintain strategic entry price points. For instance, like $50 premium steaks at SDK and $39 bistro options at Benihana. We also refresh our offerings four to five times annually with new seasonal items. The stool strategy of approachable pricing and regular menu innovation helps maintain guest engagement and loyalty, which is particularly important in today's promotion-driven environment. On culinary innovation, we launched a successful Wagyu program at Benihana as a premium offering with significant potential for further menu innovation ahead. We also launched a new drink menu with three new margaritas. Moving on to marketing, we are prioritizing local store outreach within a four-block radius of each restaurant, building strong relationships with local businesses, concierge, and hotels to drive traffic across our portfolio of brands. Evolving our digital engagement and assets is critical across all our brands. We maintain active communication with our guests across digital platforms, consistently sharing fresh, compelling content, that showcases our innovation and keeps guests connected to our brands through their mobile devices. At Benihana, we have updated our digital channels to showcase the brand as more than just a special location destination, highlighting our quality ingredients and everyday dining appeal. Obviously, Benihana does well with celebrations, birthdays, and anniversaries. But one of our biggest learnings so far is that promotions and product innovation also bring people into our restaurants. And so there's tremendous opportunity to build frequency beyond milestone events and turn people into regular Monday through Thursday customers of the brand. On a related note, this year we plan to launch a new customer loyalty program across all our brands with a special emphasis on celebrating birthdays and rewarding our guests' milestone moments with personalized offerings. This is another strategy in how we show appreciation to our guests and represents a key step forward in our retention efforts because our underlying goal is to convert those who dine with us once or twice annually into more frequent visitors. Our second key priority is the successful integration of Benihana delivering on our cost initiatives. Our post acquisition integration efforts have delivered strong results this year. We have achieved significant synergies through streamlined operations at both the restaurant and support center levels. These savings came from consolidating contracts and eliminating redundant costs. Key areas of optimization include workforce efficiency, professional services consolidation, unified insurance coverage, centralized purchasing, and streamlined supply chain management. We expect to fully realize these benefits over the next 12 months. Looking ahead, we have identified additional opportunities for operational efficiency and expect to achieve annual synergies of at least $20 million from the acquisition. Our company's larger scale and strength of supply chain team have helped us negotiate better prices from our suppliers across all our brands. We take pride in constantly pushing ourselves to maintain the most competitive cost structure in the industry. This focus on cost efficiency combined with our commitment to delivering great customer experience means that as we gain more traffic, we will be able to increase our profit margins. Notably, we're not overly dependent on any single product across any of our brands and therefore are able to manage our product mix to keep the cost structure in line and manage through companies' fluctuations. And finally, as part of our integration process, we have applied our core strengths to enhance both Benihua and Rasushi. By sharing our expertise in operations, marketing, and culinary innovation, we are boosting sales and performance at both restaurant brands. This includes improvements in supply chain management, reservation systems, digital marketing strategies, and menu development. We have also streamlined our back office operations by implementing unified systems for HR, payroll, financial reporting, and employee training across all of our restaurants. Third, we are focused on our next phase of growth, balancing company-owned development and asset-like growth. We ended 2024 with six new restaurants, opening three units in the last 70 days of the year. In October, we opened an SDK in Aventura, Florida, our third SDK in the state of Florida. In November, we opened our new concept, Southwater Social, within the Cherry Creek neighborhood of Denver, Colorado. And in November, we opened a managed SDK in the Embassy Suites, Niagara Falls Hotel, on the Canadian side of the falls. Throughout 2025, we plan to open five to seven company-owned restaurants and will balance this with asset-like growth of managed and licensed SDK and Kuna grills and franchise Benihana's. In March, we'll open a company-owned Benihana in San Mateo, California at the Bridge Point Shopping Center, one of the premier power centers in the Bay Area. Next, we'll open a company-owned SDK in Los Angeles, California in Westwood Village. This is a relocation of the existing SDK in the W Hotel. We also plan to open a company-owned SDK restaurant in the Westfield Topanga Shopping Center, located in the heart of California's San Fernando Valley. The new Topanga location will extend our presence in the greater Los Angeles area. Also under construction is the Kona Grill on Lake Union in Seattle, Washington. We are still in the early stages of our growth story with significant expansion potential across our portfolio. Looking ahead, we envision Benihana growing to 400 locations while SDK has a clear path to 200 restaurants and provide us with an exceptional return on investment. making one of the most profitable expansion models in the restaurant industry, and naturally positions SDK as our priority for development. We're also accelerating our franchising strategy for Benihana. We have discovered strong interest from franchisees looking to diversify their portfolios with an established upscale casual dining brand. In response, we have enhanced our franchising infrastructure, and we are currently negotiating numerous development agreements. These franchising initiatives will be instrumental in driving Benihana's expansion. Turning to our growth concepts, we'll be highly selective on growth opportunities for Conegro and Ra Sushi, depending on the circumstances. The demand for our concepts in non-traditional venues continues to grow. We are seeing significant opportunities in airports with both SDK and Benihana Express. Hotels are actively seeking to refresh their food and beverage programs post-COVID, while casinos represent another exciting channel building on our existing successful locations. We are also exploring retail opportunities for Benihana. Lastly, our fourth key priority is balance sheet flexibility and returning value to our shareholders through share repurchases. We finished the quarter with over $71 million in liquid resources when combining our cash on hand, short-term credit card receivables, and the availability under the revolving credit facility, which remains undrawn. Under the current conditions, our total loan is not subject to a financial governance. During 2024, we returned approximately $3.2 million to shareholders through share repurchases, and we will continue to evaluate optimistic share repurchases under our board authorized program. We are laser focused on our balance sheet and our prioritizing cash flow generation, balance sheet flexibility, and maximizing shareholder returns. As you can tell, we have been busy building a path to $5 billion in system-wide sales. Our operating cash flow generation, complying with our discipline pipeline of new locations, proven unit economics, and asset-like strategies provide us with multiple avenues for growth. We're excited for the future and will remain focused on executing our strategy and creating long-term shareholder value. I will now turn the call over to Tyler.