Q1 2021 One Group Hospitality Inc Earnings Call
Greetings and welcome to the one group first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A brief question answer session will follow the formal presentation at that time and my press Star one on your telephone keypad you asked the question as.
As a reminder of this conference is being recorded I would now like to turn the conference over to Tyler Loy Tyler you may begin.
Thank you operator and good afternoon.
And we've got our remarks, I remind you of that part of our discussion today.
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 opinions only as of date of this call. We undertake no obligation to revise or publicly release any revisions of the 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 finance.
The condition.
During today's call, we'll refer to certain non-GAAP financial measures, what 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 a reconciliation.
<unk> of these measures such as adjusted EBITDA and adjusted net income restaurant operating profit comparable sales and total food and beverage sales of owned and managed and licensed units. The 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 many of them.
Manny.
Thank you Tyler and Hello, everyone and we hope you and your families are staying healthy and safe through these unprecedented times and this is Charlie appreciate everyone's continued interest in the one group.
I know that I have said this before but it certainly bears repeating I'm. So proud of the way our teams overcame the obstacles of this past year and how they are now meeting the continued recovery of our business.
Our plants of days from me to provide some detail on our recent results and reiterate our optimism for the future.
Afterwards, I will discuss our development plans and finally turn the call over to Tyler who will walk you through the quarterly financials in greater detail.
First and foremost I would like to reiterate that although we see light at the end of the channel we are aware and conscious of that much uncertainty still remains due to COVID-19.
As local restrictions began to ease and capacity increase in our restaurants, we experienced sequential same store sales improvement throughout the quarter, resulting in an increase of three three per cent compared to 2019, and both brands being positive compared to 2019 for the quarter.
The momentum acceleration continues we then experienced and even greater improvement in April and indoor dining capacity continued to increase and vaccines became more readily available.
Same store sales increased 32, 2% and April including a 47, 4% increase net SDK and and 18, 6% interest at Kona Grill, all compared to 2019.
Consumers more than ever as they become fully vaccinated and looking for fun and differentiated social time outside of their homes and our concept featuring vibe dining are well positioned to deliver.
Our teams are effectively delivering on all of operational marketing and culinary strategies and.
Results are truly remarkable and I couldnt be prouder of our teams.
We are also extremely encouraged by interest you leading restaurant level margin as a result of our robust revenue growth and extremely effective cost management within our four walls, we were able to achieve and almost 19% restaurant level profit for the fourth quarter, our highest rush and level of profit and the Companys history.
We're incredibly pleased with this accomplishment, especially considering the quarterly performance was still impacted by indoor dining capacity restriction and mandates and.
T. K, we continue to see momentum building and date nights and social events, which has more than replaced the business traveler and corporate private events a layer of business that we expect the return and further enhanced our unit volumes and.
Additionally, brush has now become a core business and all of our concepts as it allows us to use our capacity and capture the high demand we are seeing on Saturdays and Sundays.
And April 2021, one.
The <unk> domestic Sdk's produced an average weekly sales volume of 261000.
Year to date, 2021 and 13th domestic Sdk's produced an average weekly sales volume of 211000 to put these numbers in perspective during the fourth quarter of 2019, our busiest sales quarter on record these things <unk> SDK and locations and an average weekly sales volume of.
224000.
Speaks volumes to the strength of the brand across the country, we anticipate that the return of the business traveler and corporate and private events will be additive as we still in the mid week Monday through Wednesday capacity for.
For the more the addition of catastrophe and key markets, such as Las Vegas, and New York should further accelerate the sales volume numbers.
At kind of where we have instituted several initiatives to drive sustained growth and specifically we have launched new managed across the brand revived the bar and patio programs, including adding more active music and implemented the marketing activities that will average our social media capabilities and.
Additionally, we continue to build brunch, which now has been rolled out to all 24 locations and the feedback we have received from our guests has been tremendously positive.
And April 2021 our Kona Grill's produced and impressive average weekly sales volume of 97000 of levels that we expect the will continue to improve and on track with our objective of having kona grill to be of $5 million and you'll see concept year to date 2021, our domestic Kona grill and produced an average weighted.
The sales volume of 88000, or approximately 10% more and the <unk> at time of acquisition.
Overall, we believe that both brands and recovered extremely well and we feel optimistic about the opportunities for continued sales growth for the rest of the year.
Regarding the forthcoming capacity for example, and a couple of weeks restaurant and our capacity will be increasing to 75% and New York City and guests will be able to set up the bar and all of the beverages without ordering food.
And we'll also be lifting the midnight the curfew, allowing her and New York City restaurants to stay open longer during the peak week and times guests will also be able to wait for the table at the bar and they no longer will have to and their night when their dinner is finished.
We're also seeing of sales benefit from our takeout and delivery business, both at SDK and Kona Grill chicken.
Take out and delivery comprised of approximately 13% of sales during the first quarter, which represents a 155% increase compared to the first quarter last year.
We attribute our success to our investments and state of the art technology execution of our operations and the marketing initiatives, which have enabled our guests to order for curbside pickup or delivery from nine separate delivery partners.
And it's important to note, though we are in the early stages of our delivery strategy and we have been actively marketing the high margin additives channel.
As the results over 50% of our delivery transactions are new customers and we look at delivery as a huge opportunity with the goal of converting these gas to long term loyal customers.
We hope these customers remember us one they have a birthday or a special location for subway and our restaurants, because we know how to make the experience true unique and memorable.
There's no denying that our guests are eager to return to exciting nights out with delicious food and we are doing so and Ernest R. Vibe dining experience and also particularly attractive and so many people forget is because it's not only the escape and he's also vastly superior to the conventional IRA and steakhouse and polished casual.
Variances.
We firmly believe that we are of the lead and this highly differentiated category and what the.
The offer of goes beyond great food and the unique bar cocktail program to include so much more and exceptional service program complemented by great energy and great ambiance that results in and unmatched and unforgettable dining experience.
Now turning our focus of the development in early January we opened a managed SDK Russian and Scottsdale, Arizona.
Restaurants, after and incredible start and continues to average over 190000 and weekly sales.
Additionally on May one we opened our first airport location and international licensee SDK and the Cabo San Lucas Airport.
Happy to report at the first full week of sales were approximately $150000. Despite dislocation of being off peak season.
Our emphasis and bar centric business and position us well for the airport platform and makes it a natural Billboard for the SDK Brian.
We believe that this will be the first of many future airport locations globally for US ultimately we are incredibly excited to bring vibe dining and those traveling to and from Mexico.
Already experienced our SDK brand elsewhere.
In addition last week the opened one managed F&B value at the London, Westminster UK Doubletree soon to be converted two of purity of hotel.
As of today, the three additional Sdk's and four additional managed F&B venues under construction and between this year and next year, we intend to open 13, new venues list includes eight sdk's three.
<unk> SDK company, one of the restaurants, and Bellevue, Washington, Dallas, Texas, and San Francisco, California.
Three SDK managed restaurant stopped so, Arizona, which already opened in January and London, Westminster U K and London strapped for the U K and two <unk> dislocation, including Cabo San Lucas Airport, Mexico, which opened in May.
Five minutes F&B is to London, Westminster one opened in May.
And three London, Stratford U K.
Over the longer term, we see our addressable market of 75 additional major metropolitan areas across the globe, where we could grow our SDK ramp to 200 restaurants over the foreseeable future.
To conclude our team has certainly proven and our resiliency. During these trying times and we're doing a fantastic job welcome and gas back into our restaurants for a great vibe dining experience.
And our focus on day to day execution has proved effective in translating to a strong P&L and we are variable full that's the trajectory that we're currently on and we'll continue to accelerate in the months ahead.
Now I'll turn the call back to Tyler.
Thank you Manny let me start by discussing our current cash and liquidity position before reviewing the fourth quarter financials in greater detail.
As of March 31, we had $28 4 million and cash and cash equivalents on our balance sheet and this amount has not changed materially through today, notably we generated positive cash flow throughout the first quarter.
Finally availability on our revolving credit facility as of the end of the quarter sort of approximately $10 $7 million.
In terms of our quarterly financials total GAAP revenues were $50 5 million, increasing 24% from $40 7 million from the same quarter last year.
Included in our total revenue for the quarter is our owned restaurant net revenues of $49 2 million, which increased approximately 27, 5% from $38 6 million from the same quarter last year the.
The increase and revenue is primarily attributable to strong sales momentum of state and local governments continue to eat and capacity restrictions and the markets and which we operate.
Domestic consolidated comparable sales increased three three per cent for the quarter compared to 2019.
And for SDK comparable sales increased one 9% at four 6% per Kona Grill as Manny commented the sales sequentially accelerated throughout the quarter for both the SDK and kind of girl.
The series began to reopen consolidated comparable sales of our April increased 32, 2% compared to 2019, and importantly, 47, 4% increase of the CK and and 18, 6% increase at Kona Grill.
Management license and incentive fee revenues were $1 3 million and the first quarter of 2021 compared to $2 2 million and the first quarter of 2020.
This change is primarily the result of temporary closures due to COVID-19, and the limited in person and ceiling and managed locations.
One restaurant cost of sales as a percentage of one restaurant and net revenue improved 180 basis points to 24, 4% and the first quarter of 2021 from the 26, 2% and the first quarter of 2020, primarily due to purchasing synergies across the company and strong menu management.
One restaurant operating expenses as a percentage of one restaurant net revenue improved approximately 200 basis point. The 56, 8% from the first quarter of 2021 of 68, 7% and the first quarter of 2020. The decrease was driven by our traction and actively managing the operating cost, particularly managing the restaurant labor and <unk>.
Implementing operating cost savings measures.
Restaurant operating profit of 18, 8% per the quarter a record high for the company and this was despite limited and door dining capacity throughout the quarter.
Again, we have made tremendous progress and running more efficient operations since the beginning of the COVID-19 pandemic and.
And to continue to execute the current operating model into the foreseeable future.
On the total reported basis general and administrative expenses, including stock based compensation for the first quarter of 2020 was $5 2 million compared to $3 4 million and the prior year and includes $1 million of stock based compensation, a number of driven by certain grant that the due to a substantial increase of our stock price and during the quarter.
We consider approximately half of million to be onetime in nature.
And when adjusting for stock based compensation adjusted general and administrative expenses of $4 2 million and the first quarter of 2021, and $3 1 million and the first quarter of 2020.
As a percentage of revenues adjusted general and administrative expenses were eight 2% of total revenue and the first quarter of 2021 compared to seven 5% of total revenue and the first quarter of 2020.
We incurred approximately $1 6 million of direct costs related to COVID-19, and during the first quarter simple.
And primarily of costs of regular electrostatic cleaning of our venues personal protective equipment and sanitation supplies to prevent the spread of COVID-19, and this compares to $1 3 million of similar thoughts of last year.
Interest expense net of interest income was $1 2 million in quarter of 2021, and the first quarter of 2020, respectively.
Income tax benefit was Europe, one 3 million for the first quarter of 2020 compared to income tax benefit of Europe, one 7 million for the first quarter of 2021.
The current year income tax benefit was driven by discrete items related to stock based compensation.
Net income attributable to the one group Hospitality, Inc was 70000.
One zero cents net income per share compared to net loss of $4 6 million and the first quarter of 2020 or 16 net loss per share when.
And when adjusting for COVID-19 expenses and onetime stock based compensation. Adjusted net income was $1 6 million of <unk> net income per share compared to adjusted net loss of $3 6 million from the first quarter of 2020, our 13th <unk> net loss per share adjusts.
Adjusted EBITDA for the first quarter attributable to the one group Hospitality, Inc was $6 5 million and the first quarter of 2021 compared to $1 6 million and the first quarter of 2020 the.
This marks the second highest adjusted EBITDA quarter, and the company's history we.
And we've included a reconciliation of adjusted EBITDA and adjusted net income of one of the GAAP net income and loss and the tables of our first quarter earnings release.
As a reminder, due to these unprecedented market conditions uncertainty surrounding the effects of the pandemic, we cannot reasonably estimate when our business will return and folded of normal operations and therefore suspended all financial guidance. The last March and we do however, and tend to provide further business updates as warranted by the evolving situation I will now.
I'll turn the call back the Manny.
Thank you the Tyler and thank you all for your time today, let me conclude by saying I'm very encouraged with our results to date and our prospects for this year and beyond above.
Above all I am grateful for all of our teammates who bring our mission to life every day to be the best restaurants, and every market where we operate.
And do this by delivering exceptional and unforgettable guest experiences to every guest every time.
I also want to thank our guests they have stuck with us over the past year and are coming back to our restaurants for the first time and a long while and enjoying the vibe dine experience they have been crazy.
I appreciate everyone joining us today on the call.
So on and are happy to answer any questions that you may have operator.
Thank you, ladies and gentlemen, if you'd like to ask the question. Please press star one on your telephone keypad and confirmation tone will indicate your line is the question queue. You May press star two if you'd like to read one of your questions from the Q.
The participants using speaker equipment and may be necessary to pick up the handset before pressing on the Starkey one.
On the appraisal we poll for questions.
Our first question comes from the line of Joshua long with Piper Sandler. Please proceed with your question.
Great. Thank you for taking my question and thank you for the update today exciting to hear about the acceleration and sales here and the April period, and then also when paired against the strong margin management and <unk> and so just wanted to see if you'd be able to talk about.
How are you thinking about.
Our margins on a go forward basis, and noting that you got really strong.
Revenue levels, but just curious if there are costs that need to be layered back in and some of these jurisdiction and start.
Pulling back some of those restrictions and maybe things start going back to normal a bit more about 18 eight that you the that you delivered and the first.
First quarter restaurant level margin, if that's something that you would expect to carry forward into <unk> and going forward. Thank you.
Yeah.
Thanks for the question Jackson as Manny I'll start and then the style of has additional comments of add some color to it but.
And as I said earlier on the call our volumes in April of about 261000 average for the 13th domestic SDK.
And I also mentioned that there were for the year to date about 211. So my expectation is that going forward as we keep our revenues and that higher level range. We'll continue to do extremely well from a margin perspective, so I have no expectations.
That margins will go back obviously, there is some pressures and the environment relative to commodities and labor and we're aware of those but theres no particular layers of cost that we will have to put back in the P&L and just actually one offs to make a correction here there and Mike.
And as I did say that we have 13 domestic SD case at the end of 'twenty 19, we actually only have 12. So just want to make sure everybody knew that some of our 224 was for 12, not 13, but anyhow overall I do believe that the.
And the margin for the company.
For the rest of this year it looks very very good.
Salaries, and you and Oh.
Great and could you touch on what Youre seeing there and the cost of inflation side, obviously, we've heard that.
And that beef has been seeing some pressure.
Curious if you have been seeing that as well to what extent and then how the other line items and the basket across book, the SDK and Kona are bearing with any sort of.
Either locks or other programs you have in place to mitigate some of those costs.
Yeah. So so for beef, we do have pricing.
You know locked in and obviously, if the pressure and gets to be extremely we do like to work with our partners, but right now we are locked in and so.
So we don't anticipate anything material there on.
Obviously seafood and we did see some seafood and particularly and on crab, where we did have some up and down.
Pricing throughout the quarter, we do buy some of the the the.
The crap, so we did make some buys.
To help that out over time, we also saw some fluctuation and lobster. So so there has been fluctuations and at any time that we feel that there is opportunity and we will do some future buys.
To just to make sure that we don't.
I shouldn't say buys, but we walk into the pricing to make sure that we.
We do get protection and the longer term. So so again I think that there's you know obviously, we have seen ups and downs and a lot of the commodity lines.
None of which has.
It hasn't been material for us if we could see on our Cogs line, we had a very good cogs and the quarter all of those things were moving up and down throughout the quarter. Obviously, the one that we're monitoring the most is labor and Theres a lot of noise and the labor markets are relative to the availability of flavor I think generally the teams have done a very good job of.
Retaining talent and I think we've managed around that and we've also been very proactive in terms of making sure that we manage wage and so that we don't get surprised by it all over so overall, yes. There is some pressure, but I think we're doing all of the right things relative to managing the P&L doing buys and locking in prices and managed.
And labor.
Great. Thank you for that how for how long do you have those be alright, that'd be pricing locked in and how much.
And until the end of from here.
And until the end of the year.
Got it thank you for that and my last one was during some of the downturn periods, you and your team shifted to be really efficient with managing table turns and and just driving efficiency in sales and on a square foot basis and the store level at the at the restaurant level, how do you balance of that going forward as we start shifting back to something more normalized where.
You know the guests can linger a little bit longer you can maybe.
Focus on and check building activities with an extra drink or maybe maybe dessert comes back and how do you balance of that efficiency with also kind of things returning back to normal at.
And at the store level going forward.
I mean, so far what we've seen is that you know the demand still outpacing the supply on capacity and so no question that turnover of cables and so our number one strategy and it's not only just turning over the tables, but it's truly making sure that the experience is stellar.
And the right amount of times I do think that as capacity becomes more available we probably will work.
More on the end of night day parts, So think of the 11 o'clock.
Dining, where we will probably.
Take a little bit more of time on working on on.
On the liquor mix. So I think that's probably going to be the next logical staff will be true to work on the late night <unk>.
Seating, which frankly.
We've extended of lot of our restaurants fast midnight and we've seen a tremendous amount of success. There. So probably that will be the next layer of working on check check has been tremendously healthy. So we really haven't seen any erosion because of liquor, but that's still an opportunity, but right now to be very honest about it.
Our number one objective still is turning tables over.
The on the weekends, which now as of Thursday, Friday, Saturday and Sunday for US, which is the four day block of days.
Great. Thank you.
Thank you. Our next question comes from the line of Mark Smith with Lake Street Capital Markets. Please proceed with your question.
Hi, guys. Thanks for taking the questions.
First off can I just confirmed many of did you say takeout and delivery mix and 13% and the quarter.
Just the Bath, that's right just about okay and.
And if we looked at it brunch has that been a needle mover. If we looked at that as a percent of sales is that helping and kind of everything that you've added to the restaurants over the last 12 of 12 months.
Yeah, I mean, it's elaborate I mean, I think particularly as you saw on my earlier comments, particularly as I walk.
Saturdays and Sundays I think of that and.
And first of all of I mean, everybody to go try the programs. The food is outstanding I think of the culinary team has done a great job of and my opinion, creating what's one of the most craveable and scramble menus to really stand out because there is a branch and then theres really brunch that people will remember so we've been working on that and later category.
And I think we've been building it up I think as we entered April we really start seeing the impact of the of that day part and that and I think that of last about branch is that as you may recall holidays is of critical elements of our marketing strategy. So.
<unk> is the natural.
However, within the holiday strategy, so we've seen the power of that.
This year and Easter and ex out again and mother's day. So we're very excited about the.
And the potential of that day parts growth.
Going forward. So so I expect big things coming out of this and as we continue to build.
On that day part obviously, we're still very early on it and I think of that as more people experience that we will get more repeat business. So so I see that is of very attractive new layer of business because historically nothing happened really in our SDK is between 10 a M.
And four o'clock on the on a Saturday and Sunday. So that's a huge amount of captured capacity now and then we can turn into revenue so.
Eight two and you'll see us doing a lot of.
Marketing around that you've probably seen and our digital marketing that our team has been very aggressive in terms of.
Creating the impression about the that day part and by the way we've done branch one five in mind. So it's not just coming in and getting brunch food, but you will see the Djs in and our locations, you'll see a lot more energy and a lot of more emphasis and.
And making sure that we have a killer drink program that really.
Complements what I believe to be and amazing food offerings for brunch.
Okay, and you brought up mother's day and can you talk about capacity and may kind of system wide and where we're the one that has moved to one.
And I think it's actually is improving I think the big one towards Vegas, finally, I think up to 80% now of capacity.
And I see New York coming up to 75, so those of those markets.
And all are coming up and then the thing that's very exciting about those markets as we ran of lunch.
For mother's day, and I kind of I can tell you of that I am very.
I am very bullish on what that day part will mean for some of these markets like New York and and Vegas. We have found out that there is a tremendous amount of demand for that so we believe that.
And again I think that layer is will be there and frankly, I think from a platform and layer of business, we're starting to see the.
The Max coming into the business for.
Corporate group dining and group events, so that'll be kind of the.
The next layer of business here that the team is working on and frankly, our appetite for those events and hours Monday through Wednesday.
Thursday, Friday Saturday and Sunday, we got so much momentum on the other card business that that that business is not a priority for us. So so so I guess, that's a good problem and have that we can say that one really limiting our business travel.
Travel business developed and around Monday, and Wednesday, which.
We brought the team back with what we're starting to have some of our sales and events managers coming back and and I think we will bulk up the resources and assets behind that business and frankly, the phones are now starting to bring I think of the vaccines and get out into the public and we kind of see almost a direct connection and correlation for group of.
Vince.
Ex nation levels go up so I guess.
And we feel very good about.
Where we stand right now and I think of.
And as capacity keeps coming on and I think we'll start we'll continue to see us building into what I think I'm pretty impressed of a visa MST cases, and about $2 60 a week.
And the Kona grills and in the hundreds and starting to pick up so I feel very good about how the units are executing all of these programs and we've put in place and it's always good to see of translating and store level margins and you saw that in the quarter that our store level margins are of very high level keep in mind debt.
Historically, the first quarter is not one of our best seasonal quarter. So if I even frame further the margin performance and and the seasonality of the business I gotta be very glad of where the margins and within in the first quarter.
And that makes sense and you know.
And looking at Q1 did was there any weather events that had a big negative impact I'm thinking primarily about Kona grills, and Texas and then similarly looking at capacity.
Patio and maybe how much space of you added year over year, and patios and how is that business trending right now and.
The good restaurant Guy and a horrible weather guidance, so, but I do think that we did have some times within the quarter, where we did have challenges and taxes and matter of fact, I think we had a whole week of Kona grill.
And Texas that was impacted by it obviously one.
And there is weather and we'd have lots of patios rooftops everything else, but but our real focus is fishing, where the fish is running so it tends to kind of Max I'll, let the debt become a real big call to action internally, but we did have weather events I mean, they were you know.
The market side of that we were also operating out of tense and some of our markets like Woodbridge and Troy, Michigan, which were happy not to be intense all the time anymore, but but clearly once the weather got below.
Below the 30 degree and we did see some impact.
And some of these markets because of weather, but but again.
Overall, we did have warm days and with the pulp days, we had dry days and wet base and the overall Im sure somebody does track what the net of that is but I wouldn't say weather was a significant enough items for us to really talk about it from the analytical perspective.
And on the patio business any commentary on kind of what you've been able to increase year over year and patio business.
And I am excited so last year and really what's going to be the first year that we were going to.
And if you will maximize patio, Unfortunately, because of COVID-19 and we really didnt werent able to do that because we were limited both in capacity and and social distancing and the majority of our of our of our of our patios and frankly on Fridays and Saturdays and Sundays are Patti are very difficult to get into as a matter of fact one of.
Of the big complaints I get from guests is I want to get into your patio and upgrade of Kona Grill I can never get and.
So I would say that we probably have.
The demand that way of exceeds supply and patio for Kona Grill right now our challenge internally as I said earlier its turn so we do have to work on our table turns on the patio, it's always difficult to get people out of patio suites, because once people sit down and have those strengths and great food and.
The patio is always a little bit more difficult to turn to table, but again, that's the high class problem to have and we will have to define and really execute on the table turns at the patio and so I'm sure.
Super excited about to see what happens this year, because hopefully this year and there'll be less limitations. So there'll be an opportunity here for us to really see what the power of the patios should be looking at our <unk> for Kona Grill at 100000.
And April I would say that going into patio season, and May June July August and September we have a tremendous opportunity to really make lots of revenues out of the patios.
Okay and the last one from me is just you know as we look at real estate opportunities as you guys were going to develop and build and open new restaurants.
Any commentary or insight into what youre seeing around real estate opportunities and then second with that any construction delays as we look at permitting or issues that you are continuing to have or those issues starting to lighten up with the with some reopening.
Yes, I mean, I would say on.
The development I think probably the thing that looking back have worked well for us is within the staff development, Although we were challenged.
The challenge because remember we went all the way down to 87 employees in the April of last year. Although we were very challenged back then we did keep of our development activities are wide open and frankly, one of the reasons of that were doing these restaurant deals that we're doing now is we got incredible deals and some incredible.
<unk>.
Geographies.
And so there was a window of time, there where the real estate market was wide open and I think the during the very uncertain of the days of COVID-19 and then.
There are lots of things that were in the market I would say, it's tightened up a bit I don't see the same quality of deals coming up I would say the last four or five weeks I would say that.
<unk> cleared out a little bit I think landlords I'll walked more one.
And I don't see mindset, and so I have seen that happening and frankly construction is a little bit different now because you know some of the stuff that you need to build is not easily available as you used to be so it does require lots of more precision on your project management to deal with things like you know of.
A lot of the construction products, our petroleum and buy products, which are not of markets. So we've had to adjust our our calendars on the construction, but I would say that all and all.
I think we're very pleased with the pace of our construction of our next restaurant that will be opening is the Bellevue and frankly.
And frankly that ration of its pretty much.
Based on my walk through that I get today, it looks very very good and then the next one after that will be <unk>.
Teekay of Westminster, and and and in London, and I think that one is also very very good shape. So I would say that.
Things have moved obviously.
The permitting is a little different because some of the offices don't have lots of people in it. So you just have to adjust your the project manage to deal with the annoyances, but all and all I would say that we've moved very well.
Okay excellent. Thank you guys.
Thank you Mark.
Thank you.
Our next question comes from the line of David Cannon with Cannon wealth management. Please proceed with your question.
Okay.
Good afternoon, gentlemen, congratulations great job to you and your team.
Thank you Sir.
Youre welcome.
And so a few questions.
During the prepared remarks, you gave the number.
For total locations that you think you can get to and the future could you just reiterate what that number is and then the time frame.
I mean, so it's 200 is kind of our addressable and matter of what that is the SDK.
And so we really don't we're not talking about all of the other opportunities because we we frankly have never really laid out non.
A number of for Kona Grill I think is now the revenue start breaking the 100000 and <unk> now Theres, a whole new dialogue and we also and to evaluate that but but just on SDK is we really believe that the number is big I mean think about the Cabo San Lucas airports, probably one of the smaller airports that we probably can get into.
And the write off the shoots where out of 150000 of weak in.
And frankly.
It's a matter of fact after this call and I'll be heading out to to really work with the team that on turns because of that restaurant is ready to come out of a turn off of.
The journey for us and turning the tables and the airports. So I think if you start laying there and the airports and then the streets opportunities are huge tremendous amount of markets that I'm looking at right now and Minneapolis, and Boston, Washington D. C. So there's a tremendous amount of white space right now even domestic not to mention the international.
Opportunities are will be coming up because the restaurants that were building right now and Stratford and western and Westminister come with two significantly large hotel operators that in aggregate have over 1000 wholesale. So we do plan to hopefully earn the trust of these operators.
To be able to build more restaurants with them and their property. So I think not just the domestic white space, but just the more recent relationships that we've entered and the wholesale side. That's been a really open up a tremendous amount of <unk>.
Real estate. These are wholesale partners have restaurants and Asia.
Africa, Europe, South America, North America, and not to mention that our partner and Cabo San Lucas as areas, which is one of the largest airport operators in the world and they do a very good job of operating a higher and restaurants. So I think the rest of the relationship alone based on the early results of Cabo San Lucas is.
And the yield.
Lots of locations so.
We will get to 200 I can tell you will be three years. It will be five years, but we are accelerating and I got to tell you. The right now one of the things that.
You can probably see from our pipeline as debt.
We feel that the there's a huge opportunity when you have a brand like SDK that can do $250000 plus <unk>, there's not a lot of rushed and concepts out there that can do that as a matter of fact I can't really think of one that can say that on the average do that so we do think that the demand for that product will be cigna.
And then from a mall operations, having a corner of world that can.
Blow through $100000 a week is a massive asset.
All of them, all developed and or just any kind of a.
The location of the U S. So I think the future is bright for SDK and I think that there was also of future developing here for Kona grill not to mention at the end of the things that we've done for instance, and and west mixture of the F&B location. We opened its very cool. So we also have other cool things and the pipeline.
And that I think will even make.
The growth more meaningful and the wholesale side, so lots of really good developed and stuff going on.
Okay, and I know that throughout the quarter and even in April in person dining capacity was still hamstrung, I think and April Europe to 65% could.
Could you I don't know if you have this data, but could you potentially call out the difference and markets that we're 100% capacity what the comp look like the same store sales increase in April out of market that was 100% and person dining capacity versus one that one.
Is that.
Limited capacity.
I mean.
I can give you and.
An example of.
For instance, the plant is one of the markets, where we're more relaxed on restrictions relative to anywhere else in the country and.
The same store sales for the restaurants relative to 19 is the 100% plus so when you know the if you wanted to look for one restaurants of whats the can do one and the full barrel.
Capacity book.
Ish, because theres still some social distancing limitations and we have to go through and other stuff, but I think and the and the aggregate I think thats, probably a good proxy.
For us from a market, where once we get those type of capacity.
Capacity and lifting and we.
And can do very well I think the Kona grills and.
And Texas have done very very well and.
And obviously, Miami South Beach, which is have no Oh I guess it was one of the more.
The last markets. We've also had have done incredible.
Comps and the 100% plus range, so I think as capacity becomes available.
No.
I think we're very well positioned to take advantage of it I think one of the reasons why our numbers on what they are is as you know.
And we're very optimistic we read whats happening in the restaurants and our number one objective is to maximize revenues when we can do it so stay tune.
Okay, so and.
And relaxed market like South Beach, I mean, when on the last time I was there I noticed though there was still no seething at the bar.
And it has has.
Has that changed and I would think that when people could sit at the bar you would probably catch some incremental sales there.
Is that factored in or that's still yet to be yield and in the future.
That's still yet to be determined and I am not so sure.
And that's you know so I like the bar after 10 o'clock I'm not a big fan and you know.
And of our per se, but <unk>, obviously, I think there's a magic that people see and the bar business because.
It's a much better margin business than usually food, but the way, we run our fleet costs and everything else and our business.
Trading food and liquor, it's not exactly it's.
And as beneficial as you've probably seen other brands. So so again, we'll play that by ear as the bars open up.
<unk> will test and we'll see how to utilize them to maximize revenues.
Okay, and then just one thing I think the more important strategy right. Now is really table turns you know as the job.
And he becomes available is not to really relax on the table turns and make sure that you stay focused on keeping table turns and where they are.
Okay and then.
I think EBITDA was like 13% of revenues.
Which is impressive.
But I noticed that management fees and royalties or license fees were down year over year. When do you think that.
Net.
Improved returns to normal or exceeds it and what timeframe do you expect and improvement here in Q2, and then with that increments, how the because there's a lot of leverage on that can you you know where do you see EBITDA margin as a percent of revenue ultimately getting up to and the future as.
You start to recoup that you.
And you know those management and license fees and things kind of start to normalize.
Alright, so without providing guidance because we didn't do it I can give you directionally that.
We will see and improvement and management license fees as Europe open. It's absolutely. We do know that actually next week of London is opening up and.
And we're starting to see so that will be the next big lever to help the management license of line. We also Italy is also starting to relax and open up so that's the London and Italy open.
The open up we will see.
And al or management license fee is going up dramatically and probably closer to historical levels. Also remember that we now have Puerto Rico, SDK, which has been a very good question for US. We also now have Scottsdale, which is also a very good restaurant for US and we also have now Cabo San Lucas, which is the licensed site debt.
And will drive a substantial amount if you do the math and at 5% on the 150, a week at 7500 per week, just and license fees. So the outlook for them and that was very good.
Starting you know and about a week or so when you start reopening and Europe backup.
Okay. That's all I have one.
And what's the margin outlook on that is very good because as you know all of that flows down to the bottom line. So we should see that.
Dramatic lift on the 13% adjusted EBITDA one.
Yes.
Well, great job guys. It sounds like the best is yet to come I'm, a very happy shareholder been and it for I think.
Almost four years now so keep up the great work I look forward to the next quarter.
Thank you.
Thank you, ladies and gentlemen at this time and there are no further questions I would like to turn the floor back from many hilarious for his closing comments.
Right well first of all I want to thank the day.
The the one group team, who has been phenomenal and I appreciate the the incredible of work done by our teams and the restaurants and the in the offices and everywhere globally. So I appreciate everybody's.
Commitment to us and last but not least we obviously appreciate all of your interest on the one group.
And I look forward to running into all of you out and what our restaurants. So the wow, the safe and see you and one of our restaurants. Thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines of this time. Thank you for your participation.