The ONE Group Hospitality, Inc. (NASDAQ:STKS) Q3 2019 Earnings Conference Call - Final Transcript

Nov 07, 2019 • 04:30 pm ET

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The ONE Group Hospitality, Inc. (NASDAQ:STKS) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings, and welcome to the ONE Group Hospitality's Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now turn the conference over to Tyler Loy. Thank you. You may begin.

Executive
Tyler Loy

Thank you, operator, and good afternoon. Before we begin our formal remarks, we must remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, 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, including projections, reflect our opinions only as of the date of this call. We undertake no obligation to revise or publicly release any revisions to 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 our call, we will refer to certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. 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 and reconciliations to other GAAP measures. For reconciliations of these measures, such as adjusted EBITDA and total food and beverage sales at owned and managed and licensed units to GAAP measures and a discussion of why we consider these measures useful, see our earnings release issued earlier today.

Executive
Manny Hilario

Thank you, Tyler, and good afternoon. We appreciate everyone's continued interest in The ONE Group. We have obviously had a busy few months, so let me summarize the topics I'd like to cover today because I think they reinforce our growth strategy and position us well for long-term growth and value creation.

First, I'll summarize the Kona Grill transaction second, I'll cover our third quarter financial highlights; and third, I'll provide an update on our development and growth. Let's discuss Kona growth. As you know, we completed the accretive transaction of the Kona Grill brand and its assets -- October 4 for $25 million in cash and the assumption of working capital liabilities of approximately $11 million. The transaction was funded with cash on hand and proceeds from a new senior secured credit facility, which consists of a $48 million senior secured term loan and a $12 million revolver from Goldman Sachs.

While many of you may recall Kona Grill, when they were a public reporting company what would not have been transparent is, that in many ways it was almost like 2 distinct portfolios of restaurants. About half of the restaurants were very good and profitable, and about half were unprofitable. All were supported by a fully burdened G&A. To the bankruptcy process, the unprofitable locations were all closed, leaving 24 high-performing domestic restaurants, which now have been added to our