The ONE Group Hospitality, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. 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 to these forward-looking statements, considering 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 condition.

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, restaurant operating profit, comparable sales, and total food and beverage sales at company-owned, managed, licensed, and franchise units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Emanuel Hilario.

Thank you, Nicole, and good afternoon, everyone. I appreciate you joining us. I want to start, as I always do, by thanking our team members. Every day, our teams across every brand and market work to create memorable experiences for our guests. Today, consistency is more important than ever, and I want to recognize their drive in providing operational excellence and upholding our commitment to Vibe Dining that defines who we are. With that, let me turn to an overview of our quarterly performance, walk through our progress on our strategic priorities, and then hand things over to Nicole for a closer look at the financials. We made significant progress in driving market share this quarter, with all segments reporting positive transactions for the quarter. We expanded restaurant-level margin. We generated $33 million in operating cash flow in the first six months of 2026, nearly triple the $11 million we generated over the same period last year.

We reduced year-to-date net capital expenditures by approximately 38% compared to the first half of 2025 and used our improved cash generation to pay down debt. This is the combination we set out to deliver: stronger returns, more disciplined capital deployment, and a cleaner balance sheet. Consolidated restaurant operating profit margin increased 110 basis points to 16.4% compared to 15.3% a year ago, reflecting the operational discipline we have embedded across the business. The STK segment demonstrated strong margin expansions of 130 basis points, improving to 17.4%. The Benihana segment also demonstrated solid growth, expanding 90 basis points to 18.9%, and remains our strongest margin segment. Turning to revenue, total revenue was approximately $200 million, down 3.3% from a year ago.

This decline was primarily anticipated and driven by our planned optimization of the Grill Concepts portfolio. The one variable outside of our plan was the timing of the STK downtown N.Y. relocation, which was planned for the second quarter but delayed until July. This was a relocation of our original STK in downtown New York City. Our comparable sales results are indicative of our core business strength. Consolidated comparable sales grew 0.9% for the quarter, with U.S. STK restaurants delivering 3.2% comparable sales growth and Benihana restaurants growing 0.8%. All segments posted positive transaction growth. Our comparable sales results were modestly affected by World Cup impacts as consumers shifted dining occasions to watch matches, particularly during evening and weekend day parts when our restaurants are busiest. Benihana was also impacted by elevated temperatures in select markets, which affected traffic during the quarter.

These represent temporary headwinds that now have passed and should not persist into the third quarter. Let me update you on our four strategic priorities. Our first strategic priority is accelerating comparable sales through disciplined execution. The improvement we saw in comparable sales, particularly at STK, reinforces that the strategy is working. We continue to grow our relative market share through positive traffic at all segments. The barbell strategy that defines our brand continues to deliver strong results. During the week, our value programming leads the way. Our $3, $6, $9 happy hour remains one of our most consistent traffic drivers in the early evening and late night. While our Weeknights Date Nights initiative is driving incremental traffic during historically slower periods and creating new opportunities across all brands. On weekends and around celebrations, our premium steak and seafood offerings continue to perform strongly.

Guests are being deliberate when they trade up and when they look for value. Our model captures both ends of that spectrum. Our balanced approach is working. Mother's Day, Father's Day, and graduation season represents distinct moments where guests seek out our restaurants for premium offerings and celebratory atmosphere. All three occasions performed strongly across the portfolio. Our Friends with Benefits loyalty program continues to gain momentum. Newly enrolled guests show strong repeat participation. Loyalty members spend meaningfully more per visit than non-loyalty guests. As the program grows, it represents an increasing share of our overall quarterly transaction. We strategically target our Friends with Benefits members around Mother's Day, Father's Day, and graduation season, using personalized outreach to drive traffic during these occasions.

We remain focused on growing membership, driving organic sign-ups, and increasing engagement to strengthen brand connection and repeat visits. We're also driving growth through seasonal innovation. This quarter, our culinary and beverage teams launched and emphasized premium offerings, including new Wagyu cuts and innovative top-shelf liquor cocktails. We also will be adding new dishes built around fiber and whole grains, including a new quinoa option, which supports the broader wellness and GLP-related dining trend we are seeing among our guests. We launch new food and beverage menus four times a year, keeping our offerings fresh, differentiating ourselves from competitors, and generating strong social media engagement. We expanded our off-premises business heading to the summer travel season with a particular focus on curbside operations. Burgers and sides drive strong takeout and delivery volume across all brands, and Benihana and RA Sushi's fried rice burritos have performed well in that channel.

While off-premises represent a smaller share of our business than dine-in, it delivers a strong margin profile and allows us to capture additional occasions when guests want the brand without committing to a full dine-in experience. Our second priority is capital-efficient growth. We are making meaningful progress on both our company-owned and franchise expansion initiatives. We opened two new company-owned restaurants, STK Downtown Phoenix in June, and the relocation of our downtown New York City STK restaurant to Chelsea in July, each at a cost of $1 million or less after TI. In July, we also completed the conversion of our Kona Grill location in Riverton, Utah, into a Benihana restaurant, following the same playbook we used in Scottsdale, Arizona last year. Our development pipeline remains focused and heavily weighted toward capital efficiency.

We plan to open 6 to 10 venues in 2026, prioritizing locations that require $1.5 million or less in net capital investment, and the majority are asset-light, meaning that they require little to no upfront capital or investment from us. Additionally, we are prioritizing our existing lease pipeline over new commitments. That approach is deliberate, giving us the flexibility to navigate an uncertain consumer environment while still investing in the highest return opportunities. Beyond our core domestic expansion, we're also advancing strategic partnerships. We signed a license agreement to bring RA Sushi to Canada at Niagara Falls, with an opening expected by year-end. Our regional projects showcase how we're deploying this capital-light strategy across our portfolio. In Baltimore, we're advancing a single project site with two brands.

An STK and a Kona Grill Bistro, a smaller footprint Kona Grill model, are both under construction as part of the Kona Grill Baltimore conversion. STK also recently signed a contract for two asset-light licensed locations at a major U.S. airport. Franchised Benihana and Benihana Express is expected to drive the bulk of our near-term openings. I'm particularly excited about the long-term potential for the Benihana Express brand. As we previously reported, we purchased the Miami Benihana Express location from an exiting franchisee and have begun accelerating the growth of the concept. With this model, we can deliver your Benihana fix on the go. With cost of goods and labor margin of approximately 20% and 25%, respectively, the 800 to 1,000 sq ft box can deliver over 50% prime margin and annual revenues greater than $1 million.

We anticipate the developed cost to be about $500 per square foot, resulting in substantial returns. We believe these economics will make the Benihana Express brand highly marketable to the franchise community, and its flexible footprint is easy and replicable in many markets. We currently have a company-owned Benihana Express under construction in Denver and a licensed Benihana Express in the Florida Keys in development, all expected to open by year-end. With a disciplined pipeline focused on high return, capital-efficient opportunities, we're positioned to drive meaningful growth while maintaining financial flexibility. We remain confident in our ability to execute this strategy and create lasting shareholder value. Our third priority is portfolio optimization to improve returns. As previously discussed, we continue converting certain Grill locations into higher performing STK and Benihana restaurants. Through January 2026, we have previously identified and temporarily closed six RA Sushi and Kona Grill restaurants for conversion.