The ONE Group Hospitality, Inc.

Greetings and welcome to the One Group First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host. Nicole Thum, 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 of 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 matters 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, restaurant operating profit, comparable sales, annual adjusted operating income, and total food and beverage sales at company-owned, managed, licensed, and franchised units to GAAP measures, along with a 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, Nicole, and good afternoon, everyone. I appreciate you joining us today. I want to start where I always do, by thanking our teammates. Every day, our teams across every brand and market show up focused on creating memorable experiences for our guests. These days consistency is more important than ever and I appreciate all that they do in executing with excellence and upholding the vibe dining experience that defines our brands. Today I will begin with an overview of our first quarter performance and then I will walk you through our progress with respect to our strategic priorities before turning it over to Nicole for the financial details. We are excited about our continued momentum Our operational performance is resulting in strong financial results. Total GAAP revenues grew year over year, and comparable sales are sequentially better than the previous quarter. Own restaurant cost of sales improved to 19.4% from 20.8% in the prior year quarter. Operating income increased 30%. Adjusted EBITDA increased 12.1%. And capital expenditures, net of tenant improvement allowances, reduced 23% year-over-year as we prioritize capital-efficient growth and free cash flow generation. Total gap revenues for the first quarter were $213 million, an increase from $211 million in the same quarter last year. First quarter consolidated comparable sales were relatively flat at negative 0.3%. representing a continuation of the positive momentum we experienced exiting the fourth quarter. For clarity, consolidated comparable sales are reported on the same number of days year over year. Looking at each brand, US SDK total comparable sales reported another positive quarter at 1.4%. Benihana comparable sales were flat, reflecting stable demand for the brand, and our growth concept comparable sales, while down 4.9%, represented the strongest quarterly performance since early 2023, and growth transactions were positive for the quarter. Each segment continues to improve from the previous quarter. What is most notable, particularly in a period of elevated inflation, is the strength of our margin performance, a direct result of the hard work we have been doing across our supply chain. including, most importantly, beef sourcing. Restaurant operating profit increased 11% to 40 million, while restaurant operating profit margins expanded 100 basis points to 19%. The margin improvement was driven by 140 basis point reduction in food and beverage costs, reflecting manual optimization integration synergies and supply chain efficiencies. We also achieved a 40 basis point improvement in restaurant operating expenses as a percentage of restaurant revenues. SDK delivered particularly strong results with restaurant operating profit margins expanding 280 basis points to 21%, while Benihana margins improved 130 basis points to 21%. Adjusted EBITDA grew 12% to $29 million, The improvement was driven by cost management discipline, our contracted beef pricing, continued Benihana integration synergies, and the benefit of portfolio optimization actions. The key point I want to make is that these results are execution driven. We are not dependent on macroeconomic recovery or shifts in consumer sentiment, but would certainly welcome them. Over the past 18 months, we have implemented a series of strategic initiatives operational improvements at Benihana, the barbell strategy at SDK, portfolio optimization across the grill concepts, and rigorous cost management. It's those initiatives that are driving our successful performance. Now, let me update you on our four strategic priorities. Priority one, accelerating comparable sales through execution. Our first strategic priority is accelerating comparable sales through discipline execution. I want to highlight that Valentine's Day 2026 was a record-breaking day for our portfolio. Easter was also strong across our brands, while sales up high single digits compared to last year. These results are a testament to both the operational capabilities we have built and the strength of our brands as a celebration destination. As we look ahead, we are gearing up for what we expect to be a strong Mother's Day and graduation season. Both occasions are critically important to us, and our teams are focused on delivering exceptional guest experiences during these high-volume periods. Through the first five weeks of the second quarter, the company has positive comparable sales and transactions. Momentum has continued through all of our brands with SDK and Benihana so far delivering positive comparable sales and the grills sequentially improving. We have made operational improvements to position the brands for a strong spring and summer and are seeing encouraging trends as Happy Hour has been a real driver and is working well, while lunch traffic is also returning. Our Friends with Benefits loyalty program continues to gain momentum. Since launching last year, we added over 8,000 new organic members into the program per week. Newly enrolled guests continue to show strong repeat participation, and we are seeing loyalty members spend more per visit compared to non-loyalty guests. We will be actively targeting our Friends with Benefits members for Mother's Day and graduation celebrations, leveraging personalized outreach to drive traffic during these occasions. We continue to focus on growing membership driving organic signups and increasing engagement within the program to strengthen brand connection and repeat visits. We are driving growth through seasonal innovation, launching new food and beverage menus four times a year across all brands. This keeps our offerings fresh, differentiates us from competitors, and generates strong engagement on social media. We are expanding our off-premises business with a focus on curbside operations. Highlights includes burgers and sides, which continue to drive strong takeout and delivery volume across all brands, and Benihana and Ra Sushi's fried rice burritos for takeout and delivery, which have performed well. Priority two, capital efficient growth with discipline expansion. Next, our second priority is capital efficient growth. We currently have two company-owned SDK restaurants and one company-owned Benihana restaurant under construction, an SDK in Phoenix, Arizona, a relocation of SDK downtown in New York City, and a Benihana in Seattle, Washington. We intend to open six to ten new venues in 2026 as we prioritize locations requiring $1.5 million or less in net capital investment to open. Capital expenditures net of TI allowances was 23% lower at $10 million in the first quarter compared to the year-ago period. Of this amount, $6.5 million was related to new restaurant construction, with the remainder supporting existing restaurants. This reduction reflects our disciplined approach to capital allocation as we focus on high-return, capital-efficient growth. On the franchise side, our 10-unit California Benihana and Benihana Express development agreement continues to progress, and our commitment for a franchise Benihana and a licensed Benihana Express in the Florida Keys remains on track. The Benihana Express format continues to generate strong franchise interest as it delivers the Benihana food experience without the techniaki tables, making it more labor-efficient and more appealing from a cost-of-entry perspective for potential franchisees. In January, we completed the relocation of Arcona Grill in San Antonio, Texas, to a smaller footprint location. And in February, we converted a franchise Benihana in Monterey, California, to a company-owned restaurant to accommodate a long-term franchise partner who wish to retire. Both are tracking in line with our expectations. Priority three, portfolio optimization to improve returns. Our third priority is a portfolio optimization to improve returns, and we have made significant progress improving the quality and returns of our portfolio. As we discussed last quarter, we are converting grow locations to higher-performing SDKs and Benihana's. In 2025, we exit six raw sushi and corner grill locations, and in January of 2026, we exit one additional raw sushi location that did not fit our conversion criteria. The remaining grill locations are healthy, profitable restaurants in quality real estate, and we expect them to generate approximately $10 million in restaurant-level EBITDA and over $100 million in revenue. Five grow locations closed on January 5, 2026 for conversion to either Benihana or SDK. Instructions in progress with all five expected to reopen by the end of 2026. Each conversion is expected to cost between $1 million and $1.5 million and to be EBITDA accretive. As a reminder, our first conversion, the Rasushi to FTK in Scottsdale, Arizona, is currently operating at a run rate of approximately $7 million in end sales, delivering an increase of over $4 million in sales and a return on investment of approximately four times. This validates our conversion strategy and gives us confidence in the pipeline. As we have said before, we will continue to evaluate the portfolio as leases expire. We have approximately one to two grow leases that come up each year as part of the natural end of cycle process, and we'll make decisions on a case-by-case basis. Priority four, maintaining balance sheet strength and flexibility. Our fourth priority for 2026 is conserving cash and optimizing the balance sheet. We are significantly reducing discretionary capital expenditures, targeting company-owned development to projects requiring, on average, $1.5 million or less in build-up costs. We are also working through our existing lease pipeline rather than adding new commitments. This discipline gives us flexibility in an uncertain environment and position us to invest selectively in the highest return opportunities. We finished the quarter with $6.6 million in cash and cash equivalents and restricted cash. We have $33.7 million available under our revolving credit facility. Under current conditions, our term loan does not have a financial covenant. Cash flow from operation was a strong $22 million compared to $9 million in the prior quarter. This improvement was primarily attributable to increased net income and collections on holiday credit card receivables. We also reduced our debt with $2 million in repayments under the credit agreement and $7 million in repayments on the revolving facility, bringing our revolving facility balance to zero. As we discussed on our previous call, we expect to generate free cash flow in 2026, that reduction and creating shareholder value remain a top priority. Before I turn it over to Nicole for the financial details, I want to reiterate the items that I have outlined today are fundamentally execution driven and within our direct control. We are focused on strategic initiatives that position us to deliver results regardless of broader economic trends. With that, I will turn the call over to Nicole.