Q2 2024 The ONE Group Hospitality Inc Earnings Call
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Greetings and welcome to the one group second quarter 2024 earnings Conference call.
Operator: Greetings and welcome to the One Group second quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. A brief question and answer session will follow the formal presentation. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Tyler Loy, Chief Financial Officer. Please go ahead. Thank you, Operator.
Speaker Change: At this time all participants are in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Speaker Change: A brief question and answer session will follow the formal presentation to ask a question you May Press Star then one on your telephone keypad.
Your question. Please press Star then two.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: I'd now like to turn the conference call over to Tyler Loy Chief Financial Officer. Please go ahead, thank you operator and Hello, everyone.
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 guaranteed for future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks 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, and we undertake no obligation to revise or publicly release any revisions to these four booking statements in light of new information or future events.
Speaker Change: Before we begin our formal remarks, let me remind you that part of our discussion today will include forward looking statements.
Speaker Change: These forward looking statements are not guarantees of future performance and you should not place undue reliance on them.
Speaker Change: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Speaker Change: We'd also note that these forward looking statements reflect our opinion only as of the date of this call we undertake no.
Speaker Change: No obligation to revise or publicly release any revisions of these forward looking statements in light of new information or future events.
Tyler Loy: 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. The reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales, and total food and beverage sales have only been presented when managing franchise units to gap measures, along with the discussion of why we consider these measures useful. We have our orange release issued today. With that, I would like to turn the call over to Emanuel Hilario.
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.
Speaker Change: During today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance.
Speaker Change: 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.
Speaker Change: A reconciliation of these measures such as adjusted EBITDA adjusted net income restaurant operating profit comparable sale and total food and beverage sales are the managed licensing franchise units to GAAP measures.
Speaker Change: Along with a discussion of why we consider these measures useful.
Speaker Change: Please see our earnings release issued today.
Mandy malaria: That I would like to turn the call over to Mandy malaria.
Emanuel Hilario: Thank you, Tyler, and hello, everyone. We sincerely appreciate you joining us today and for your interest in the One Group. Let me start by thanking our dedicated team members and extending a warm welcome to the approximately 6,500 new teammates who joined the One Group in May following our acquisition of the Benihana and Raw Sushi brands. The acquisition marks the beginning of an exciting new chapter for the One Group as we now operate four distinct brands, FTK, Benihana, Konogro, and Rasushi.
Thank you Tyler and Hello, everyone.
Mandy malaria: Sincerely appreciate you joining us today and for your interest in the one group.
Mandy malaria: Let me start by thanking our dedicated team members and extending a warm welcome to the approximately 6500, new teammates who joined the one group in May following our acquisition of Benihana in raw Sushi brands.
Mandy malaria: The acquisition marks the beginning of an exciting new chapter for the one group as we now operate four distinct brands SDK Benihana, Kona grill and raw sushi.
Emanuel Hilario: Together, these brands, along with our hospitality venues, comprise 167 highly differentiated experiential restaurants offering craveable, high-quality food across 32 states and 12 countries. The second quarter was a busy one for us as we accomplished a great deal in setting ourselves up for long-term success.
Mandy malaria: Together these brands along with our hospitality venues comprised of 167 highly differentiated experiential restaurants, offering craveable high quality food across 32 states in 12 countries.
Mandy malaria: The second quarter was a busy one for us as we accomplished a great deal in setting ourselves up for the long term success.
Emanuel Hilario: This included making significant headway integrating Benihana and Ross Sushi into the company, and we have already started realizing synergies in GNA purchasing and operations. For example, we have already completed approximately $9 million in G&A synergies, and over the next two years, we expect to achieve a total of $20 million annually in synergies covering G&A, purchasing, and operations, as we leverage our larger scale, combine our expertise, and enhance our capabilities to develop a best-in-class business across our now expanded portfolio.
Mandy malaria: This included making significant headway integrating benihana in raw sushi into the company.
Mandy malaria: And we have already started realizing synergies in G&A purchasing and operations. For example, we have already completed approximately $9 million in G&A synergies and over the next two years, we expect to achieve a totaled $20 million annually and synergies covering G&A purchasing and operations.
Mandy malaria: As we leverage our larger scale combine our expertise and enhance our capabilities to develop a best in class business across our now expanded portfolio.
Mandy malaria: Now, let us discuss some highlights from the second quarter 2024, and provide an update on our key strategic initiatives.
Emanuel Hilario: Now let us discuss some highlights from the second quarter of 2024 and provide an update on our key strategic initiatives. First, with the addition of Beniha and Rasushi, we increased revenue 107% to $172.5 million. Had we owned Benihana and Ras Sushi for the entire quarter, we would have delivered approximately $213 million in revenue, an increase of $129 million or 155%. Second, despite a challenging consumer environment, we improved restaurant-level margin for Kuna Grill, grew restaurant-level profit for STK, and kept restaurant-level margin relatively flat for STK, driven by the cost-saving initiatives we implemented during the second half of last year, coupled with the strength of the six new restaurants opened since July of last year.
Mandy malaria: First with the addition of benihana in raw Sushi, we increased revenue, 107% to $172 5 million.
Mandy malaria: And we own plenty hannon raw sushi for the entire quarter.
Mandy malaria: We would have delivered approximately $213 million in revenue, an increase of $129 million or 155%.
Mandy malaria: Second despite a challenging consumer environment, we improved restaurant level margin for Kona Grill.
Speaker Change: Through restaurant level profit for SDK and kept restaurant level margin relatively flat for SDK driven by the cost saving initiatives, we implemented during the second half of last year, coupled with the strength of the six new restaurants opened since July of last year.
Mandy malaria: Next together Benihana and RAF Sushi added 88 7 million in additional company owned revenue and.
Emanuel Hilario: Next, together, Benihana and Rasushi added $88.7 million in additional company-owned revenue and $17.7 million in additional restaurant-level profit, or approximately 20% rational level margin, to our second quarter income statement. All of this was just two months of contributions.
Mandy malaria: And $17 7 million in additional restaurant level profit.
Mandy malaria: Or approximately 20% progression of our margin to our second quarter income statement.
Mandy malaria: All of this is just two months of contributions this coupled with the SDK and Kona Grill performance I. Just described drove consolidated restaurant operating margin to a robust 17, 7% for the quarter.
Emanuel Hilario: This, coupled with the FTK and KonaGrow performance I just described, drove consolidated restaurant operating margin to a robust 17.7% for the quarter. Next, as previously discussed, we have already realized approximately $9 million in G&A synergies, and we continue to effectively manage support costs as G&A as a percentage of revenue adjusted for stock-based compensation improved 290 basis points to 5.3% compared to 8.2% of revenue last year. All of this resulted in $23.9 million in adjusted EBITDA, which keeps us on track to achieve adjusted EBITDA of between $95 million and $100 million for the full year.
Speaker Change: Next as previously discussed we have already realized approximately $9 million in G&A synergies and we continue to effectively manage support costs SG&A as a percentage of revenue adjusted for stock based compensation improved 290 basis points to five 3% compared to eight 2% of revenue.
Speaker Change: Last year.
Speaker Change: All of this resulted in $23 9 million and adjusted EBITDA, which keeps us on track to achieve adjusted EBITDA of between $95 million and $100 million for the full year.
Speaker Change: Looking ahead, we remain laser focused on continue to drive topline growth, while further enhancing operational efficiencies.
Emanuel Hilario: Looking ahead, we remain laser-focused on continuing to drive top-line growth while further enhancing operational efficiencies. Key strategic priorities for 2024 include, first, a focus on driving sales through execution and restaurant basics. Although we are facing a challenging consumer environment, we are committed to creating great guest memories by providing exceptional, unforgettable experiences to every guest, every time. This commitment is core to our operating model, differentiates us from our competitors, and why our customer satisfaction metrics are at record levels.
Speaker Change: These strategic priorities for 2024 include first a focus on driving sales through execution and restaurant basics.
Mandy malaria: Though we are facing a challenging consumer environment, we are committed to creating great guest memories by providing exceptional unforgettable experiences to every guest every time.
Mandy malaria: This commitment is core to our operating model distinguishes us from our competitors and why our customer satisfaction metrics are at record levels.
Mandy malaria: Given the current operating environment, we have been focused on promoting everyday value across our brand portfolio.
Emanuel Hilario: Given the current operating environment, we have been focused on promoting everyday value across our brand portfolio. Our $3, $6, $9 happy hour program, which will soon be available at Benihana and Rasushi, offers main menu quality items at attractive entry price points, and we are seeing accelerated growth in this segment. In addition to Happy Hour, our night out menu also provides exceptional value at $69 per person at SDK and $39 per person at Kona Grill. Both offers include drinks, an appetizer, entree, side, and dessert. These are a couple of examples of our commitment to delivering value the One Group way.
Speaker Change: $3 $6 $9 happy hour program, which will soon be available at benihana in raw sushi.
Speaker Change: Offers main menu quality items at attractive entry price points, and we are seeing accelerated growth in this day part.
Speaker Change: In addition to happy hour, our Nighthawk menu also provides exceptional value at $69 per person or SDK and $39 per person at Kona Grill. Both offers include drinks appetizer entre side and dessert.
Speaker Change: These are a couple of examples of our commitment of delivering value to one group way.
Emanuel Hilario: No discounting, no sacrifice of quality or service, and value offerings across all dayparts and occasions, such as power lunch, weekend brunch, late nights, and special pre-theater and restaurant week menus. We will continue to drive value through our experience in creating guest memories, regardless if our customers are focused on our value-driven offerings or opt for our full price dining experience. Our second key priority was to improve restaurant-level margins, and I'm pleased to report we have done just that.
Speaker Change: Discounting no sacrifice of quality of service and value offerings across all day parts and occasions, such as power launch weekend Brunch late nights and special pre theater in restaurant week menus.
Speaker Change: We will continue to drive value through our experience and creating guest memories.
Speaker Change: Regardless, if our customers are focused on our value driven offerings are opt in to our full price dining experiences.
Mandy malaria: Our second key priority was to improve restaurant level margins.
Speaker Change: I am pleased to report we have done just that during the second quarter. Despite challenging same store sales at Essakane Kona Grill combined restaurant operating profit and restaurant level margins improved year over year.
Emanuel Hilario: During the second quarter, despite challenging same-store sales at SDK and Kona Grille, combined restaurant operating profit and restaurant-level margins improved year-over-year. This was driven by the cost-saving initiatives put in place during the second half of the last year, coupled by the strength of our new restaurants. With the addition of Benihana and Rasushi, our year-over-year margins improved to 17.7% for the quarter.
Speaker Change: This was driven by the cost savings initiatives put in place during the second half of last year, coupled by the strength of our new restaurants.
Speaker Change: With the addition of benihana in raw sushi, our year over year margins improved to 17, 2%.
Mandy malaria: 7% for the quarter.
Emanuel Hilario: Next, we are focused on executing our self-funded growth plan. We have a strong pipeline for unit growth in 2024 and beyond. This year, we plan to open 8 to 11 new venues, consisting of 3 to 4 SDKs, 2 to 3 Gourmand Grills, 1 to 2 Benihanas, 1 Saltwater Social, and 1 Raw Sushi. In March, we opened an SDK in Washington, D.C., and in July, we celebrated the opening of Raw Sushi's newest location in Plantation, Florida.
Mandy malaria: Next we are focused on executing our self funded growth plan.
Mandy malaria: We have a strong pipeline for unit growth in 2024 and beyond.
Mandy malaria: This year, we plan to open eight to 11, new venues consisting of three to four Sdk's Judah three Kona grills wanted to Benihana's, one saltwater social and one raw sushi.
Mandy malaria: In March we opened an SDK in Washington D C and in July we celebrated the opening of Ras Sushi's newest location in plantation, Florida <unk>.
Emanuel Hilario: Marking the second round of sushi in the Fort Lauderdale market. In the coming weeks, we plan to open an SDK in Aventura, Florida, at the Aventura Mall. In addition to SDK and Aventura, there are currently four company-owned restaurants under construction in the following cities. Saltwater Social, which is a high-end seafood restaurant with a high-vibe dining experience that will be located in Denver, Colorado, in the Cherry Creek neighborhood, at Konego Restaurant in Tigard, Oregon at Bridgeport Village, an SDK at the Westfield Topanga Mall in Topanga, California, and a Benihana in San Mateo, California.
Mandy malaria: In the second half sushi and the Fort Lauderdale market.
Mandy malaria: In the coming weeks, we plan to open an SDK in Aventura, Florida at the Aventura mall.
Emanuel Hilario: Over the long term, we plan to grow 3 to 5 new units per year for SDK, 3 to 5 new units per year for Benihana, and 3 to 5 new units for Kona Grill or Raw Sushi per year. We view this as a proven and scalable platform with compelling white space, with an addressable market of over 800 venues, which includes 400 restaurants for Benihana in the U.S., 200 SPK restaurants globally, and over 200 Kona Grill and Raw Sushi restaurants in the U.S.
Mandy malaria: In addition to the <unk>. There are currently four company owned restaurants under construction in the following cities.
Mandy malaria: Our saltwater social which is a high end seafood vibe dining restaurant that will be located in Denver, Colorado in the Cherry Creek neighborhood.
Mandy malaria: Ah conical restaurant and Tigard, Oregon at Bridgeport village.
Mandy malaria: And thats the K at the Westfield to paying them all into Panga, California.
Mandy malaria: And at Benihana in San Mateo, California.
Mandy malaria: Over the long term, we plan to grow three to five units per year for SDK.
Mandy malaria: To five new units per year for benihana, and three to five new units for Kona grow our raw sushi per year.
Mandy malaria: We view this as a proven and scalable platform with compelling white space with an addressable market of over 800 venues, which includes 400 restaurants for benihana in the U S 200, SDK restaurants globally and over 200 of Kona Grill, and raw sushi restaurants in the U S. We.
Mandy malaria: We are clearly in the early innings of a robust growth strategy.
Mandy malaria: Next our fourth key priority is the successful integration of benihana.
Mandy malaria: I have spoken about previously and while we are in the early stages of integration I am pleased with the progress we have made in Onboarding benihana unrest through sheet too.
Mandy malaria: Our platform of vibe dining restaurants.
Mandy malaria: It has been exciting bring onboard the 90 company owned restaurants, and a 6500, new teammates to our family.
Mandy malaria: The teams are dedicated passionate and focused on creating great guest memories, which makes him a perfect fit for the one group.
Mandy malaria: This acquisition not only aligns with our vision of being the undisputed global leader in vibe dining, but it also generates tremendous synergies.
Speaker Change: Our ability to manage commodity costs at scale drive menu mix engineering through our culinary innovation leverage our digital database footprints and utilize our robust reservation management capabilities creates a tremendous opportunity to drive value for our shareholders through this combination of chop entertainment.
Speaker Change: <unk>.
Speaker Change: Lastly, our fifth key priority is to continue to return value to our shareholders through share repurchases.
Speaker Change: This quarter, we returned roughly $1 million to shareholders through share repurchases and this is on top of the $15 million repurchase program were completed last year.
Mandy malaria: We will continue to evaluate opportunistic share repurchases under our already board authorized program.
Speaker Change: A new chapter has begun at the one group and we are now on our path to $5 billion in system wide sales we.
Mandy malaria: We are excited for the future and we will remain focused on executing our strategy and creating shareholder value.
Mandy malaria: I will now return the call over to Tyler Loy.
Tyler Loy: Thank you Manny.
Tyler Loy: Let me start by discussing our second quarter financials in greater detail.
Tyler Loy: Please note the prior year quarter excludes any contribution from the recent acquisition of Benihana, which closed in May 2024.
Speaker Change: The second quarter of 2024 has two months of contributions from Benihana officers.
Speaker Change: Total consolidated GAAP revenues were $172 5 million, increasing 106, 8% from $83 4 million for the same quarter last year.
Emanuel Hilario: Total Consolidated Gap revenues were $172.5 million, increasing 106.8% from $83.4 million for the same quarter last year.
Speaker Change: Included in our total revenues our owned restaurant net revenue of $169 million, which increased 111, 5% from $79 9 million for the same quarter last year.
Speaker Change: The increase is due primarily to $89 1 million in contributions from Benihana, and Ross energy, which we acquired.
Speaker Change: Wired on May one 2024.
Speaker Change: The increase was also attributable to the opening of six SDK and Kona Grill restaurants since July 2023, partially offset by a 7% reduction in comparable sales.
Speaker Change: With the addition of Benihana raw sushi, which contributed positively to operating expenses as a percentage of revenue.
Speaker Change: Restaurant operating profit increased 280 basis points to 17, 7% for the second quarter of 2024 compared to 14, 9% in the second quarter of 2023.
Speaker Change: Combined restaurant operating profit improved to 15, 2% from 14, 9% in the previous year for SDK and Kona Grill.
Speaker Change: The remaining increase was driven by the nearly 20% restaurant operating profit for benihana in loss ratio.
Speaker Change: On a total reported basis general and administrative costs increased $2 6 million or 32, 1% to $10 6 million in the second quarter of 2024 from $8 million in the second quarter of 2023.
Speaker Change: Since may we have realized approximately $170000 per week in G&A synergies of approximately $9 million annually.
Speaker Change: As a reminder, that leaves approximately $11 million to be realized over the next two years to achieve our $20 million target across G&A purchasing and operations.
Speaker Change: When adjusting for stock based compensation adjusted General and administrative expenses were $9 1 million and $6 8 million in the second quarter of 2024 and 2023, respectively.
Speaker Change: As a percentage of revenues adjusted general and administrative costs improved 290 basis points to five 3% compared to eight 2%.
Speaker Change: The improvement is due to sales leverage realized through the <unk> acquisition.
Speaker Change: $23 9 million compared to $8 $5 million in the second quarter of 2023.
Speaker Change: We have included a reconciliation of adjusted EBITDA and adjusted net income and the tables in our second quarter 2024 earnings release.
Speaker Change: During the first quarter, our board of directors authorized an additional $5 million share repurchase program and during the second quarter of 2024. The company spent <unk> $9 million for the repurchase of <unk> 2 million shares.
Speaker Change: Now I would like to provide some forward looking commentary regarding our business. This.
Speaker Change: 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 number and timing of new restaurant openings for any given period.
Speaker Change: It's subject to a number of factors outside the company's control, including macroeconomic conditions weather and factors under the control of landlords contractors licensees and regulatory and licensing authorities.
Speaker Change: Based on the information available now and expectations as of today, we are reaffirming our 2020 for guidance.
Speaker Change: The guidance includes projections for benihana from May one the date of the acquisition until the end of the year.
Speaker Change: Beginning with revenues, we project total GAAP revenue of between 700 $740 million.
Speaker Change: Managed franchise and license fee revenues are expected to be between 17 and $19 million.
Speaker Change: Please press Star then two.
Speaker Change: The first question comes from didn't Valera with Stephens Inc. Please go ahead.
didn't Valera: Hey, guys. Good afternoon. Thanks for taking my question I wanted.
Didnt Valera: I wanted to dig in on the the maintaining of the revenue guide. Many if its possible could you maybe just detail for us and kind of the expectations for the legacy SDK portfolio versus the new benihana as we work into the back half of the year and then maybe the pull.
Speaker Change: And takes on what Youre seeing on consumer demand for each concept.
Speaker Change: I mean, I think we posted that on our on our press release I think banning Hana in general is doing very well on same store sales for the quarter were down one four for benihana I think theres a lot of levers that we've identified with the brand that we are working on for instance reservation.
Speaker Change: Systems.
Speaker Change: In terms of bringing in bringing the benihana concept into our call center structure and reservation models. We also.
Speaker Change: Rolling out.
Speaker Change: Why do a premium offering at benihana, which they haven't had before so I think the outlook for bidding on is very strong for the back end of the year.
Speaker Change: And the new business model lenehan as over 55% of our same store sales so I see a.
Speaker Change: A lot of.
Speaker Change: Your revenue mix.
Speaker Change: Yes, that's great and I appreciate all the detail there.
Speaker Change: Maybe one follow up on Benihana in particular, and I know, it's still relatively early days, but as you look across the benihana portfolio.
Speaker Change: Do you have any sense for if there's additional capex needed across the restaurant base I mean, I don't know some of them are well established restaurants.
Speaker Change: Either they have maybe been underinvested in or do you feel that there is a pretty stable.
Speaker Change: Base level across the many on a portfolio that you don't need incremental capex from where they are now.
Speaker Change: I would say that's a great question. So first of all it is benihana 60th birthday. So the Brian It's turning 16. This year. So that's one of the big marketing items that are actually one of the one of the milestones that were super proud to celebrate and in terms of one of the things that was very interesting to me.
Speaker Change: We brought on Benihana's, how well the facilities program was of any honestly if you go through the restaurants.
Speaker Change: Some of them are aged but they are clean and very functional so I would say that the the.
Speaker Change: Our predecessor company or the predecessor leadership had a very good.
Speaker Change: Facilities program in place but of course.
Speaker Change: So ahead of us as well as other areas. So I would say that we.
Speaker Change: We feel.
Speaker Change: Very good about our margin outlook for the rest of the year.
Speaker Change: Okay.
Speaker Change: And then in the release you guys talk a breakdown some non core Kona grills and noncore Ross.
Speaker Change: Units can you just give us more insight into maybe the number of these units and kind of.
Speaker Change: What we should be looking at or what we should read into the data that you gave us on these units.
Speaker Change: So it's very interesting we have for Kona grills almost for I'd say, three Kona grills and three raw sushi.
Speaker Change: We are in a very tight geographical area, meaning that they are very close to each other we knew that when we did this deal here is an interesting dynamic is.
Speaker Change: When I used to compete with Ray and they were not part of the portfolio I was always left to go after their business now Theres a problem now they are both in the portfolio. So I have three rise and three corner of rules that I have to have to sort of sort out.
Speaker Change: What to do from a real estate perspective, as well as and sometimes they might just be a simple as getting some concessions from the landlords, but some of the stuff, but that is part of what happened with the acquisition. So.
Speaker Change: That's why from our definition of that and then I have one or two cornered Royals that just frankly, the real estate was not very good and.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And then the last one for me just looking at it manage license and franchise business.
Speaker Change: In light of lower than expected it looks like guidance implies a decent ramp in revenues from that business in the second half I, just maybe walk us through any of the puts and takes maybe in the quarter.
Speaker Change: Kind of expectations in the second half.
Speaker Change: Yes.
Speaker Change: Another great question, so on that one we're really well.
Speaker Change: We're going to show up the benihana.
Speaker Change: Franchise business, we picked that up as part of this deal on a big fan of franchise business. So we're going to really prop up and work with our franchise base and really support them with marketing and really elevate that so I think there is a nice.
Speaker Change: On that line through our franchising programs. We also look at our licensed program with stadiums and I think there's some things that we can do a little bit better there.
Speaker Change: Also working more actively.
Speaker Change: With our.
Speaker Change: Our partner for the product that we have in <unk>.
Speaker Change: In grocery so we're going to be putting some more emphasis on that so that should help to outline a bit and obviously the big difference in the fourth quarter for us on that line is one of our licensed stores is Scottsdale, which is a very seasonal restaurants. So the end of the third quarter beginning of the fourth quarter that Russia really will come up and then obviously just in general.
Speaker Change: The fourth quarter performance on the management locations, we get a lot more profit from those locations. So it's a little bit of all of that it's a little bit of just seasonality and just a bit of us up being some of the.
Speaker Change: The business that we got as part of the acquisitions and then just in general.
Unnamed: While the company does not get any proceeds from the sale of the warren,
Speaker Change: [music].