Greetings, welcome to The ONE Group Q1 2023 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. If you'd like to join the question queue, you can press star then one. If you'd like to remove yourself from the question queue, press star then two. Please also note this event is being recorded. Now I would like to turn the conference over to Tyler Loy. 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 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. 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 in owned and managed and licensed 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'd like to turn the call over to Manny Hilario. Thank you, Tyler, and hello, everyone. We sincerely appreciate you joining us today and for your interest in The ONE Group. Let me begin by thanking all of our team members for their hard work providing world-class operations as we build a strong portfolio of restaurants with industry-leading return on invested capital. Key highlights for the Q1 include total revenues growth of over 11% to $82.6 million, with a 1.6% increase in comparable sales. Best-in-class STK restaurant level margins of 22.1% and an increase in year-over-year adjusted EBITDA, despite continued headwinds in inflation on a year-over-year basis. Consolidated cost of goods sold of 24%, driven by menu innovation and mix management, a flexible supply chain, and executing our margin and sales-driving initiatives such as toppings, sides, and beverage. Our newest STK venues continue to significantly outperform our investment model and on average should have less than a one-year payback. Finally, we finished the quarter with $48.7 million in cash, which allow us to be flexible in returning value to our shareholders, including funding our rapidly expanding and robust pipeline of future restaurants. Our focus on strong operational execution, culinary innovation, and Vibe Dining continues to resonate with our guests. We are on plan with our growth strategy. This quarter, we continue to see strength in our weekend and special occasion business, as well as strengthening demand for private events as more and more people return to offices around the country. This also coincides with the strength in our Happy Hour program at both brands, particularly with our $3, $6, and $9 price points, which we believe are some of the most compelling values in the industry. Importantly, our teams are converting the energy created by our Happy Hour guests into an active and vibrant dinner business. The continued strength in our underlying business, along with the performance of our new restaurants, gives us tremendous confidence in the revenue and profit power of our development pipeline. Despite a challenging construction environment, we have established an incredible pipeline of high-quality real estate development and plan to open 8 to 12 new venues this year. Importantly, we have an established platform for scalable and long-term revenue and profit growth. We kicked off the year with the opening of a newly redesigned Kona Grill in Columbus, Ohio, in the Easton Town Center in January. This new unit performed above the system average and above our Kona Grill investment model for the quarter. We are encouraged by the start of this new restaurant and are looking forward to the patio season in Ohio. We also opened a new rooftop at the STK in Scottsdale in February. This is the fourth domestic STK rooftop in our portfolio and a great addition to our already strong Scottsdale location. The remainder of the year, we plan to open 2-4 additional Kona Grills in the following cities: Riverton, Utah, Desert Ridge, Arizona, Henderson, Nevada, and Tigard, Oregon. 3-5 new company-owned STKs in the following cities: Charlotte, North Carolina, Boston, Massachusetts, Washington, D.C., Aventura, Florida, and Salt Lake City, Utah. Finally, we plan to open one managed or licensed STK. As we have long stated, our growth story has just begun. We foresee a total addressable market of at least 400 restaurants, including 200 STK restaurants globally and at least 200 Kona Grill domestically. To conclude, our team is doing a fantastic job by focusing on operations and day-to-day execution. We are executing our plan of strengthening our existing business and building our development pipeline to powerfully grow revenue and EBITDA to build significant and sustainable shareholder value over the long term. Now I'll turn the call over to Tyler. Thank you, Manny. Let me start by discussing our Q1 financials in greater detail before reiterating our full year guidance. Total GAAP revenues were $82.6 million, increasing 11.3% from $74.2 million for the same quarter last year. Included in our total revenue is our own restaurant net revenue of $78.6 million, which increased 11.4% from $7.5 million for the same quarter last year. The increase in revenue is primarily attributable to the opening of STK San Francisco in August of 2022, the opening of STK Dallas in November of 2022, and the opening of Kona Grill Columbus in January of 2023. Domestic consolidated comparable sales increased 1.6% for the quarter compared to 2022. As a reminder, we are lacking consolidated comparable sales of over 45% in the Q1 of 2022 versus the Q1 of 2021. Management license and incentive revenues were $4 million, increasing 8.5% from $3.7 million in the Q1 of 2023. This increase was primarily attributable to strong performance at our STK restaurants in North America, along with the opening of STK Stratford in November of 2022. Owned restaurant cost of sales as a percentage of owned restaurant net revenue decreased 170 basis points to 24% in the Q1 of 2023, compared to 25.7% in the prior year, primarily due to menu mix management, pricing, and operational cost reduction initiatives. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 380 basis points to 59.6% in the Q1 of 2023 from 55.8% in the Q1 of 2022, primarily due to consolidated average wage increases and operating expense inflation. This was partially offset by single-digit pricing taken in the back half of last year. The increase in owned operating expenses as a percentage of owned restaurant net revenue should normalize beginning in the Q2 as we begin to lap wage and operating cost inflation in the prior year. We believe that we have additional pricing power for both brands as we compare our prices to those of our competitors. Restaurant operating profit decreased 210 basis points to 16.4% for the Q1 of 2023, compared to 18.5% in the Q1 of 2022. Restaurant operating profit at STK was a robust 22.1%, and Kona Grill operating profit was 8.1% for the quarter. As a reminder, the Q1 is typically a seasonally low revenue quarter for our restaurants, which is why we are comfortable reiterating our total owned operating cost guidance for the year. On a total reported basis, general and administrative expenses were $7.5 million, compared to $6.9 million in the prior year. The increase was attributable to increased stock-based compensation expense. When adjusting for stock-based compensation, adjusted general and administrative expenses were $6.2 million in the Q1 of 2023 and $6 million in the same quarter last year. Pre-opening expenses were $1.3 million compared to $0.3 million in the prior year. This increase was primarily related to payroll, training, and cash and non-cash pre-opening rent for Kona Grill Columbus, which opened in January of 2023, and other venues that are currently under construction. Interest expense was $1.8 million in the Q1 of 2023, compared to $0.5 million in the Q1 of 2022. The increase was driven by increases in our outstanding balance and benchmark rates year-over-year. Income tax expense was flat at $0.2 million in the Q1 of 2023 and for the Q1 of 2022. Net income attributable to The ONE Group Hospitality, Inc. was $2.6 million or $0.08 net income per share, compared to a net income of $3.7 million in the Q1 of 2022 or $0.11 net income per share. adjusted net income was $3.2 million or $0.10 adjusted net income per share. adjusted EBITDA for the Q1 attributable to The ONE Group Hospitality, Inc. was $10.9 million compared to $10.8 million in the Q1 of 2022. We have included a reconciliation of adjusted EBITDA, adjusted net income, and adjusted net income per share in the tables in our Q1 2023 earnings release. During the Q1 of 2023, we repurchased approximately 0.1 million shares of our common stock. In total, we have purchased 1.2 million shares or approximately 4% of our outstanding shares. In addition, our board has authorized an additional $5 million in share repurchases. We have approximately $7.1 million in share repurchases. We will continue to use discretion in determining the conditions under which shares may be repurchased from time to time, if at all. I'd like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We, as always, remind our investors the actual numbers and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including weather conditions and factors under control of landlords, contractors, licensees, and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we are reiterating the following financial targets for 2023. Beginning with revenues, we project our total GAAP revenues to be between $360 million-$380 million, including managed license incentive fee revenues between $17 million-$17.5 million. Total owned operating expenses as a percentage of owned restaurant net revenue of 82.5%-82%. Total G&A, excluding stock-based compensation of approximately $27 million-$29 million. adjusted EBITDA of $50 million-$54 million, which represents an approximate 21%-31% increase compared to 2022. Restaurant pre-opening expenses between $5.5 million and $6.5 million, and an effective income tax rate of between 5% and 10%. Total capital expenditures net of allowances received from landlords of approximately 2% of company-owned revenue and approximately $3 million-$3.5 million for new company-owned venue. Finally, we plan to open 8 to 12 new venues in 2023, including one managed or licensed STK. I will now turn the call back to Manny. Thank you, Tyler, and thank you all for your time today. Let me conclude by saying we are in the early stages of our long-term growth strategy as we continue to build a portfolio of high volume brands with compelling returns for our shareholders. Above all, I am grateful to all of our teammates who bring our mission to life every day to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time. I also would like to thank our customers that visit and continue to return to our restaurants so they can enjoy the highly differentiated Vibe Dining experiences they have been craving. We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator? Thank you. We will now begin the question and answer session. To ask a question, you can press star then one on your telephone keypad. If you're using a speakerphone, you may need to pick up your handset before pressing any keys. To withdraw yourself from the question queue, please press star then two. We will pause momentarily to assemble the roster. The first question comes from Joshua Long with Stephens. Please go ahead. Hi, this is Tyler on for Josh. Congrats on another great quarter and thanks so much for taking my question here. Can you walk us through the price and traffic components for the quarter, please? Tyler, on the average for both brands, we're looking at a +6 on price and a +2 to +3 on mix and then the differences on traffic. Okay, great. Can you give us an update on how trends are running in April? Yeah. Tyler, this is Tyler. You know, relative to the Q2 of the balance of the year, I mean, we reiterated our guidance. I think we feel very comfortable with, where we are through the Q2. Okay. Sounds great. Just one more question here. The management license deals, you know, kind of took a pause during COVID, you know, as we emerge out the pandemic, I'm sure a lot of hotels are, you know, wanting to bring in new attractions. I was gonna see if you could just talk a little bit about the appetite that you're seeing for these types of deals? Yes, Tyler, this is Manny. You're correct. The coming out of COVID, appetite has gone up. Pipeline has really picked up steam. We have a significant amount of relationships with people that we are now exploring relative to new properties. As we added on our guidance, we do have one coming in this year. I think the outlook for the future is very bright on license and management and getting back to our asset-light growth strategy. Okay, great. That's all for me. Thanks. Next question comes from Nick Setyan with Wedbush. Please go ahead. Thank you. Can you just give us an update on the unit economics of the Columbus Kona Grill? Like, is it meeting your, you know, expectation with regard to the newer prototype? Yeah, Nick, yes, this is Manny again. Relative to the new units, I think we mentioned in our prepared statements we're above our system average on volume for that store. We're greater than 5.2 in AUV in that unit, so we're super excited about that. We achieved that without having the patio open, which is I think something that I mentioned in my comments is that the patio is adding 40-50 seats to that property, which will allow us to take advantage of the mall traffic and presence on Fridays and Saturdays. We're really super excited about the revenue potential. Then, as we expect the, functionality, because of the new layout of the, of the restaurant is very efficient, we're able to operate now our sushi bars most of the time with only one person on the bar. I think in the, in the long term, that's gonna be a significant impact to labor and the margin profile of the Kona Grill brand. Within sort of the total consolidated, you know, margin guidance, you know, where do you think Kona comes in for the year? I think If I think of the Kona Grill margin, I think obviously, as Tyler mentioned earlier, the is, you know, seasonality is it's one of the slower quarters for the brand and in the Q1. Particularly coming out of the holiday season into the January month in malls. We're dealing with that, as kind of a factor, impacting the margin on, in the shorter term. Then, this Q1 is the, if I will, the last quarter where we're lapping significant inflation, on labor 'cause, you know, we start feeling it mostly on the Q2, last year on labor. I think that we have a positive, you know, a positive momentum on labor because we're finishing the lap on the wage, which was significant for us. We do have an internal team, and we're significantly focusing on initiatives relative to operating expenses. We're looking at everything from our paper supplies to usage to relooking at all our contracts and negotiating that. Looking at productivity of labor, applying some of our learnings from Columbus back to some of the other, you know, legacy units. I would say that the combination of all those elements will put, you know, I believe that we will have much higher margins on Kona Grill year-over-year. As Tyler mentioned earlier, we did provide overall guidance for that, which is basically the inverse of the operating costs. All in all, I feel pretty good about the progress, and I'm specifically excited about the possibilities with the new model that we just developed in Columbus. I guess just with both brands, you know, where do you see the pressure in terms of transactions? Was it, you know, did it get worse as the quarter progressed? You know, anything jump out at you in terms of, you know, weekdays versus weekends, evenings versus lunch? Any color would be very helpful. Yeah. I mean, I think as we've reported previously, I think the weekday business is softer, particularly on the suburban markets. The weekend business is super robust. I would say Friday and Saturday, I think that we're seeing very positive trends. As a matter of fact, our number one initiative right now on the weekend is to really take advantage of the 6:30 P.M. to 8:30 P.M. traffic, which is significant. We like that, but we certainly have seen, you know, a little bit of a different pattern on the weekdays. It seems like the weekend becomes the makeup for those levels of patterns. In terms of P-Mix, you know, interesting enough at STK, where we just launched our new version of the Wagyu promotion, unbelievably, we ran out of the product in a majority of our STK. For the higher end, I think there's a tremendous appetite for the premium products. At the Kona Grill brand, I would say that you do see a shift not to less items, but perhaps people going more to, you know, the what we call lighter fare on the menu. We do see a little bit of people changing from maybe main entrees to sandwiches and other stuff. I would say in the overall, I mean, the impact has really been mostly for us on the weekday to weekend. On the STK side, we have seen the business traveler and the impact of offices, we see that being positive, and we saw a positive move on the business-related business. Obviously, you heard me speak about $3, $6, $9, which is the best value point in our opinion. Obviously, it's an opinion, but relative to consumer offerings. We feel really good about that. So that's kinda like the majority of the trends that we have seen with both brands. Hopefully that's useful. Yeah. Thank you very much. The next question comes from Mark Smith with Lake Street. Please go ahead. Hi, guys. First question I wanted to ask was just looking at the comp at Kona Grill. You know, is this just a function of the macro environment, the consumer being a little more squeezed, or was there anything else that happened here in the quarter? For instance, you know, weather that maybe slowed some patio sales. Anything that you can give us for more info on that Kona comp. I mean, I'd say overall, and Tyler always says that you don't get credit for those type of things, but we did have a significant positive, you know, performance last year on the Q1. We were one of the very earlier rebounders on the casual space. Basically the baseline that we're going up against is significant. If I look at the same store recovery for Kona Grill, we came up to shoot super strong. I mean, we were one of the better rebounders in the industry. I think that as you look at the one year, you probably get less of an impressive number than when you do at the two years. When you look at the overall 2-year lap and a number that we posted in Kona Grill is very impressive. Our AUVs are in the $5.2 million range now if you look at the trailing 12 month. It's really difficult to be super critical of the Kona Grill brand where we've moved the AUVs from $4 million to $5.2 million. Verily, I mean, if you take the COVID period out, we've only really operated that brand in about 18 months of really more normalized operations. I would say, moving your AUVs over 30% on 18 months of operations, signifies that we have a pretty good handle on managing the revenue base. Okay, that's fair. As we look through restaurant operating expenses, I know, Tyler, you called out, you know, labor, still inflationary pressure, you know, and you took some price last year. Walking through, is there any other kind of puts and takes anywhere where you're seeing easing or any things that are particularly difficult in that line at the restaurant level that's putting pressure on margin? Yeah, Mark, I think, you know, as we discussed in our prepared comments, the 1st quarter is really kind of the last quarter that we're gonna see kind of that significant inflation as it kind of ramped up in the 2nd quarter and then through the back half of last year. I think we're seeing, you know, significant wage inflation on a year-over-year basis. Then, you know, anything related to wages, we're also seeing inflation as well, whether that be, you know, other operating expenses such as R&M. Anything that takes people, I think we're seeing that. I think across that kind of operating expense line on a year-over-year basis for the Q1, I think we're still seeing kind of, you know, high single-digit%, low double-digit% inflation across all of the operating, you know, outside of cost of goods. And there is cost of goods inflation as well, but in that other operating expense line. Yeah, I would just add a couple, maybe snippets to that. I think Tyler mentioned that our COGS now is 24% and, you know, and we came down from 25.7% last year, which I think that's significant. I think there's very few restaurant companies that have achieved actually a lower number on COGS and probably the highest inflationary markets yet. That really tells you that our COGS line and the way that we manage the day-to-day of COGS is very good for the business. Otherwise we wouldn't been able to achieve significant decreases. I think as Tyler mentioned is the big challenge in our business model is that, you know, like it or not, we were a fully staffed restaurant company with employees. We chose to not cut service, not cut the guest experience, in the past. We did have plenty of employees, so we were blessed to have a full workforce in all our restaurants. As Tyler mentioned earlier, a majority of the labor inflation pressure that we got was in wage. So we worked through that in the second, third, Q4 last year. And I think as I mentioned earlier in one of my responses is, the Q1 this year is kind of the last quarter where we have significant pressure on that. As I look at our ability to continue working on the P&L, I think the future is bright relative to the indicators that I just went through. Okay, great. Just in that same vein, any real change or can you speak to alcohol sales at both chains and kind of how those have been trending? Yeah, fantastic question. You know, during the COVID period and coming out of COVID, you know, we de-emphasized a little bit our, if you will, focus on selling liquor and wine just because we wanted to take advantage of the table space and turning the tables over. Time at table was important to us. I think now, we are putting a lot more added emphasis on the per check, particularly, you know, with extra, you know, with the wine bottle service and everything else. I think, you know, now that we're in more normal operating days if you will, from a service perspective, I do expect our liquor incidents to go up. That's really our history. I think we've gone from being extremely good at the bar to kind of like relaxing it a little bit, for exchange of table turns, and now we're getting back to more normalized, aggressive practices of selling more at the table. Excellent. Thank you. Thank you, Mark. The next question comes from Roger Lipton with Lipton Financial. Please go ahead. Hi, Tyler. Hi, Manny. You provide a lot of information. Thank you for taking my question. I was gonna ask you about Kona in the Q1 and the negative comp and the margin. Yeah, but you referred to emphasis you and your team have put on finding some operating efficiencies. How long do you think it'll take to begin to see some margin improvement? Can it gonna begin to happen in the Q2? Is it gonna take a little longer? I mean, I... Hi, Roger, this is Manny again. I think relative to timing on it, I think we'll see well, I would say that we would see lots of it coming off on the Q2 because of the wage lap. I do think that third and Q4 are really the quarters that we would see the more significant impact. I also think that Columbus coming more online will also help lift the profile of the margin of the brand. And again, we have several new units that we're adding that will also do that. I think over time, with the addition of those units, I think that we still believe that Kona Grill is one of the most attractive economic models in casual with high volumes greater than, you know, $5.5 million-$6 million and 17%+ type of margins. Again, I think 2023 will be the year of really building, rebuilding that back up, lapping through the labor. Then again, next year, as we continue to add units at the pace that we are, we will obviously improve significantly the margins on the brand. Reminding, I think that for the new Kona Grills, we think 17%-20% margins is kind of where we will be at. I think the overall of that will really help the brand. Well, okay. In terms of openings, what's the near-term schedule for the next few months, in each? Yeah. So another very good question. I think I tell everyone when they ask me about timing, I say You know, look at our development plan for the year and expect that we will open them all October first. Obviously, I know that's kind of just a modeling answer, but I would say right now we do have, you know, 3 to 4 restaurants that will be coming with regularity out of the chute. We have made significant impact in Riverton and Charlotte. As Riverton is a Kona Grill, then Charlotte STK will be coming right after that. Desert Ridge, Kona Grill, and Washington, D.C., STK. We do have a very nice lineup of restaurants coming here back-to-backs. Just so that everybody is safe on the, on modeling, I would say October first. As we spoke, as we talked about this before, obviously still the big unknown in today's environment with construction is the permitting process has become very interesting in terms of how we get the permitting through and get through that cycle. Other than that, the restaurant pipeline looks phenomenal and we look forward to start getting these things up and running in the next couple weeks. Do you think your pre-opening was obviously much higher this year than last because you're opening quite a few stores. That sounds like that's gonna kinda continue to run at that level for the balance of the year with the opening program you've got. Yeah. I would plan that for this year just because we're getting scale and gaining scale on that. I think as we get out to future years, we will bring down our pre-opening. For this year, it's safe to assume the levels that we've been running and we've been talking about. The big reason is that there's a learning curve that comes with getting pre-opening teams ready to go. I think that our teams are going through that process right now. I think in the longer term, I think we will be super efficient at opening these new units. That's how I would think about it. For just to be, proper and safe in anything that you do right now, I would assume existing type of levels on pre-opening. Okay. Thanks very much. Thank you, Roger. The next question is a follow-up from Joshua Long with Stephens. Please go ahead. Hey, guys. Tyler on for Joshua Long one more time. The interest expense came in a little higher than we expected this quarter. Just gonna see if that $1.8 was a good run rate to kinda model going forward. Yeah, Tyler. I think, you know, as you know, we saw term SOFR increase just throughout the quarter and from the end of last year. I think, yeah, that $1.7 million-$1.8 million is a fine run rate to use. Perfect. I appreciate it, guys. Yeah. Thank you, Tyler. If you'd like to join the question queue plus press Star then one. We have a question from Jake Patterson with TALANTA Investment Group. Please go ahead. Hey, guys. Thanks for taking the question. I was just curious. I don't know if I missed this, do you guys have average weekly sales for STK and Kona for the quarter? Hi, Jake. This, this is Tyler. You know, let's just do... We can do a follow-up on that. We don't have them just- Okay. Yeah. Just roughly. If we actually post them on our investor decks usually, when we do our posting, so that's typically where we find them. We haven't done our investor deck yet for the quarter, but that's typically where we put any of these in. Okay, cool. I guess to, are there any trends or anything in the brunch traffic that you noticed that was maybe different from past couple quarters, or is that kinda steady? Yeah, I mean, I think brunch as a category in general, there's a lot more people going to the brunch category. I think for us, we're so early on capturing that day part that we haven't seen anything one way or the other, nor have we seen any economic impact per se on the brunch day part. We still look at our lunch, brunch day part as a huge opportunity for both brands. We have a very good offering on product on both brands. Frankly, the focus with brunch this year is to continue to evolve and bring some innovation to the menu on brunch. Other than that, we're happy with it and we'll continue to grow it. Gotcha. I guess the last one for me, anything to call out on, foods like beef costs or fish or anything like that? Yeah, I mean, I think beef, you know, and this is pretty well published. I think beef is, you know, has picked up, spiked up a little bit recently, but we're still running through some of our contracted pricing, so we haven't really seen anything significant base relative to a couple of weeks or months ago. As a matter of fact, as I mentioned earlier, our cost of goods is the best it's probably ever been. I think historically we set 24-25 range for COGS, and we're at 24 for the quarter. You know, we did achieve the low end of our historical range on COGS. I think, our focus on COGS, at least internally, is to continue managing the mix, looking at items that, you know, bring in items into the menu that help you with the overall value and COGS for the brand. Just being very thoughtful about, you know, you know, things like we're sides and butters and some of the initiatives that we have that help with the overall pro-profitability profile of our menu. Gotcha. Cool. All right, well, thanks for answering the questions, and good luck going forward. Thank you, sir. This concludes our question and answer session. I'll turn the conference back over to Manny Hilario for any closing remarks. Thank you. Thank you all for your interest on The ONE Group today. As I always do in my concluding comments, none of this would be possible without the fantastic support of our teammates, who bring our mission of great execution to life every day. For that, thank you. My final reach out to you is I'll be out in the restaurants, so I look forward to seeing you all in the restaurants. Everybody, have a great day. Thank you. The conference is now concluded. Thank you again for attending today's presentation. You may now disconnect.