Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased 107% to $172.5 million due to the acquisition of Benihana and RA Sushi.
- Achieved approximately $9 million in G&A synergies, with a target of $20 million annually over the next two years.
- Restaurant operating margin improved to 17.7% for the quarter.
- Adjusted EBITDA increased to $23.9 million, keeping the company on track to achieve its full-year target of $95 million to $100 million.
- Strong pipeline for unit growth with plans to open 8 to 11 new venues in 2024.
Negative Points
- Comparable sales decreased by 1% for Benihana, 10.6% for STK, 14% for Kona Grill, and 10.3% for RA Sushi.
- Net loss available to common stockholders was $11.5 million, compared to a net income of $0.6 million in the same quarter last year.
- Interest expense increased to $7.9 million from $1.6 million in the prior year.
- Pre-opening expenses rose to $2.5 million from $1.6 million in the previous year.
- Challenging consumer environment impacting same-store sales and overall restaurant performance.
Q & A Highlights
Q: Manny, could you detail the expectations for the legacy STK portfolio versus the new Benihana as we work into the back half of the year and the consumer demand for each concept?
A: Benihana is doing well with same-store sales down only 1%. We are integrating reservation systems and rolling out premium offerings like Wagyu. Benihana, which is over 55% of our same-store sales, shows strong momentum, especially on weekends. STK, more urban, saw a 10% decline in same-store sales, mainly due to product trade-down. Kona Grill and RA Sushi face challenges due to their niche markets and industry exposure.
Q: Do you have any sense for if there's additional CapEx needed across the Benihana restaurant base?
A: Benihana's facilities are well-maintained, thanks to a robust facilities program. While some restaurants are aged, they are clean and functional. We plan to elevate the look and feel of new Benihanas but don't foresee immediate large-scale refreshes. We did emphasize air conditioning maintenance due to a warm summer.
Q: Can you give us more insight into the non-core Kona Grills and RA Sushi units?
A: We have three Kona Grills and three RA Sushi units in close proximity, creating overlap. Additionally, some Kona Grills have poor real estate and high rent. We are negotiating with landlords for better terms and support. These non-core units are defined by their overlap and real estate challenges.
Q: Can you provide more insight into customer behavior at STK and Kona Grill?
A: STK saw a 10% decline in same-store sales, with 7.5% due to product trade-down. Traffic remains stable, but check sizes are smaller. Benihana, which is 55% of our same-store sales, shows strong weekend demand. Kona Grill and RA Sushi face challenges due to industry exposure and niche markets. We are focusing on loyalty programs and marketing to address these issues.
Q: Can you explain the managed, licensed, and franchised business performance and expectations for the second half?
A: We are focusing on the Benihana franchise business and supporting franchisees with marketing. Our license program with stadiums and grocery products will also receive more attention. Seasonal factors, like the performance of our licensed store in Scottsdale, will boost fourth-quarter results. We are committed to growing our asset-light business.
Q: Could you provide the comp breakdown at Kona Grill, including pricing and mix?
A: Kona Grill's same-store sales were down 14%, with checks down 19% and average check up 5%. Trends were consistent throughout the quarter.
Q: What were the commodity and labor inflation rates in Q2, and what are the expectations for the second half?
A: Labor inflation was in the low single digits, consistent with the industry, and commodity inflation was in the low to mid-single digits. We expect similar trends in the second half, with some favorability in beef prices recently.
Q: Can you clarify the impact of the warrant registration on shares outstanding and proceeds?
A: There are two types of warrants: penny warrants and market warrants. Penny warrants will result in issuing 1.9 million shares, while market warrants will provide cash proceeds of approximately $10 million. The share count has been reduced through share repurchases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
