ONE Group Hospitality Q1 Earnings Call Highlights

Key Points

• ONE Group posted modest top-line growth with stronger profitability: Q1 revenue was $212.8 million (+0.8% YoY) while restaurant operating profit rose 11% to $40 million and restaurant operating margin expanded 100 basis points to 19%, driving a 12.1% increase in adjusted EBITDA to $28.8 million.
• Management highlighted execution and portfolio actions — the loyalty program is adding ~8,000 organic members per week and conversions are proving lucrative (a former RA Sushi converted to STK grew from ~$3–4M to north of $7M on a ~$1M conversion), supporting a plan for 6–10 new openings in 2026 with capital-efficient targets.
• Balance-sheet and guidance focus: the company paid the revolver to zero, ended the quarter with $6.6 million cash and $33.7 million available on the credit facility, generated $22 million in operating cash flow, and reiterated full-year guidance of $840–855M revenue and $100–110M adjusted EBITDA (Q2 revenue guided to $202–206M, comps +1%–2%).

ONE Group Hospitality NASDAQ: STKS reported first-quarter fiscal 2026 results showing modest revenue growth and improved profitability, driven by margin gains, cost controls, and ongoing integration and portfolio actions. Management also reiterated its full-year outlook, with an updated expected effective tax rate, while highlighting early second-quarter momentum in both comparable sales and traffic.

First-quarter results: revenue roughly flat, margins improved

President and CEO Manny Hilario said the company’s operational initiatives produced “strong financial results,” pointing to year-over-year improvements in operating income and adjusted EBITDA, even as consolidated comparable sales were slightly negative. Total GAAP revenue for the quarter was $212.8 million, up 0.8% from $211.1 million a year earlier, while consolidated comparable sales were -0.3%.

Hilario said U.S. STK posted positive comparable sales of 1.4%, Benihana was flat, and the Grill concepts’ comparable sales were down 4.9%, though he noted it was the Grill concepts’ “strongest quarterly performance since early 2023” and that Grill transactions were positive in the quarter.

Restaurant-level profitability improved. Hilario reported restaurant operating profit increased 11% to $40 million and restaurant operating profit margin expanded 100 basis points to 19%. He attributed the margin improvement primarily to lower food and beverage costs tied to “menu optimization, integration synergies, and supply chain efficiencies,” including efforts around beef sourcing.

CFO Nicole Thaung said company-owned restaurant cost of sales improved to 19.4% of company-owned net revenue from 20.8% a year ago, citing “menu optimization, integration synergies, supply chain initiatives, increased menu pricing,” and favorable mix tied to New Year’s Eve and “our record-breaking Valentine’s Day.” Company-owned restaurant operating expenses improved to 61.7% of net revenue from 62.1%, reflecting labor improvements.

Operating income rose to $13.9 million from $10.7 million. Adjusted EBITDA attributable to the company increased 12.1% to $28.8 million from $25.7 million. Net income attributable to The ONE Group Hospitality, Inc. was $3.2 million versus $1.0 million a year ago, while net loss available to common stockholders was $6.2 million, or $0.20 per share, compared with $6.6 million, or $0.21 per share, in the prior-year quarter.

Calendar shift aided revenue; G&A increased on inflation, marketing, and technology

Thaung said the quarter’s revenue growth was driven in part by the company’s fiscal calendar shift, which moved New Year’s Eve into fiscal 2026 and added approximately $8.3 million to revenue. Additional contributions came from new openings and conversions completed in the second half of 2025. Those gains were partially offset by closures of underperforming Kona Grill locations, which reduced revenue by about $1.8 million.

Management license, franchise, and incentive fee revenue decreased slightly to $3.5 million from $3.7 million, which Thaung attributed mainly to the exit of a management agreement in Scottsdale, Arizona, after the company converted a former RA Sushi there into a company-owned STK.

General and administrative expenses increased to $15.0 million from $13.1 million, driven by “inflation on salaries and bonus, higher audit-related fees,” investments in information technology “specifically AI-related technologies,” and increased marketing. Adjusted G&A excluding stock-based compensation was $13.9 million, up from $11.5 million, representing 6.5% of revenue versus 5.4% a year ago.

Transition and integration costs related to the Benihana and RA Sushi acquisition fell to $0.5 million from $3.7 million, which Thaung said reflected the company nearing completion of integration.

Strategy updates: loyalty growth, conversions, and capital discipline

Hilario outlined progress against four strategic priorities, starting with driving comparable sales through execution. He said Valentine’s Day 2026 was “a record-breaking day” for the portfolio and that Easter sales were up “high single digits” compared with last year. He added that through the first five weeks of the second quarter, the company has positive comparable sales and transactions across brands, citing momentum in STK and Benihana and sequential improvement in the Grill concepts.

He pointed to happy hour and returning lunch traffic as drivers, and highlighted growth in the Friends with Benefits loyalty program. Hilario said the company has added “over 8,000 new organic members” per week since launching the program last year, and that loyalty members are spending more per visit than non-members.

On growth, Hilario said the company has two company-owned STK restaurants and one company-owned Benihana under construction: an STK in Phoenix, an STK relocation in downtown New York City, and a Benihana in Seattle. The company plans to open six to 10 venues in 2026, prioritizing locations requiring $1.5 million or less in net capital investment.

Capital spending net of tenant improvement allowances was about $10 million in the quarter, down 22% year over year, with $6.5 million tied to new restaurant construction. Hilario described this as part of a push for “capital efficient growth and free cash flow generation.”

Regarding portfolio optimization, Hilario said the company exited six RA Sushi and Kona Grill locations in 2025, and exited one additional RA Sushi location in January 2026 that did not fit its conversion criteria. He said the remaining Grill locations are “healthy, profitable restaurants,” expected to generate about $10 million in restaurant-level EBITDA and more than $100 million in revenue.

Five Grill locations closed on Jan. 5, 2026 for conversion to either Benihana or STK. Hilario said construction is underway, with all five expected to reopen by the end of 2026. In the Q&A, he said the pacing reflects internal resource planning and the desire to open units “without… being negatively impactful to operations.”

Hilario also discussed the company’s first conversion example, a former RA Sushi converted to STK in Scottsdale, Arizona. He said the site previously produced about $3 million to $4 million in revenue and is now “north of $7 million,” representing about a $4 million annual increase. The company spent about $1 million on the conversion, which he characterized as a “4x return on sales on the investment.”

Balance sheet and cash flow: revolver paid down; debt reduction remains a priority

Management emphasized balance sheet flexibility and debt reduction. Hilario said the company ended the quarter with $6.6 million in cash and restricted cash, and had $33.7 million available under its revolving credit facility. He noted the company repaid $2 million under its credit agreement and $7 million on the revolving facility, bringing the revolver balance to zero.

Cash flow from operations was $22 million, up from $9 million in the prior quarter, which Hilario said was driven primarily by increased net income and collections on holiday credit card receivables.

Thaung reported interest expense of $9.7 million, roughly flat year over year, and a weighted average interest rate of 10.2% versus 10.9% in the prior-year quarter. In the Q&A, Hilario attributed the lower rate to benchmark rate movements and reiterated that applying free cash flow toward debt reduction is the company’s “number one objective.”

Outlook: second-quarter targets and reiterated full-year guidance

For the second quarter of fiscal 2026, Thaung guided to total GAAP revenue of $202 million to $206 million, reflecting expected consolidated comparable sales growth of 1% to 2%. The company expects management license, franchise, and incentive fees of $3 million to $4 million and adjusted EBITDA of $24 million to $26 million. It also forecast company-owned operating expenses of 81% to 82% of company-owned restaurant net revenue, adjusted G&A excluding stock-based compensation of $13 million to $14 million, and pre-opening expenses of $1 million to $2 million.

For fiscal 2026, the company reiterated guidance (with an updated effective tax rate), calling for:

• Total GAAP revenue of $840 million to $855 million, with consolidated comparable sales of 1% to 3%
• Management license, franchise, and incentive fees of $14 million to $15 million
• Company-owned operating expenses of approximately 82% to 83% of company-owned restaurant net revenue
• Adjusted EBITDA of $100 million to $110 million
• Pre-opening expenses of $5 million to $6 million
• Effective income tax rate of approximately 10% to 20%
• Capital expenditures net of landlord allowances of $38 million to $42 million
• Six to 10 new venue openings

On margins, Hilario said the company typically sees seasonal pressure in the third quarter because it is the “lowest volume quarter,” while noting cost of goods sold in the quarter was “the lowest we’ve ever reported for the company.” He added that the company’s contracted beef pricing provides cost certainty through September 2026, while management continues to evaluate options for later periods, including “alternative cuts and promotional windows” to reduce reliance on higher-cost items.

Hilario told analysts the first-quarter revenue and comparable sales performance came in slightly below expectations primarily due to lower-than-expected volume at STK locations in malls and timing-related factors such as spring break patterns and an earlier Easter. He also cited regional softness in Texas, particularly Dallas, which he attributed to competition in that market.

On franchising, Hilario said the company is seeing “lots of interest,” particularly for Benihana. He highlighted Benihana Express as an attractive franchise model due to what he described as favorable cost of goods, a “predictable and strong” labor profile without teppanyaki table service, smaller footprints, and lower development costs.

About ONE Group Hospitality NASDAQ: STKS

ONE Group Hospitality Inc is a full-service hospitality company primarily engaged in the development, ownership and operation of upscale restaurant and lounge concepts. The company's flagship brand, STK, combines a modern steakhouse menu with a high-energy lounge atmosphere, offering signature cuts of beef, fresh seafood, sushi selections, craft cocktails and an extensive wine program. ONE Group's concept emphasizes a seamless blend of fine dining and nightlife, catering to guests seeking both culinary excellence and an immersive social experience.

Headquartered in El Segundo, California, ONE Group deploys a mixed model of company-owned and franchised locations across multiple markets.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.