ONE Group Hospitality Q2 Earnings Call Highlights

Key Points

• Second-quarter revenue fell 3.3% to $200.5 million, mainly because of restaurant closures and the delayed relocation of STK’s downtown New York site. Comparable sales rose 0.9%, with positive transaction growth across all segments.
• Profitability improved despite lower sales: restaurant operating margins expanded 110 basis points to 16.4%, operating income increased to $6.6 million, and the net loss narrowed to $2.1 million. However, adjusted EBITDA declined 9.7% to $21.1 million due largely to increased marketing and corporate expenses.
• ONE Group strengthened cash generation and emphasized asset-light growth, producing $32 million in first-half operating cash flow and repaying more than $6 million of debt. For 2026, it expects revenue of $805 million to $820 million and adjusted EBITDA of $95 million to $105 million.

ONE Group Hospitality NASDAQ: STKS reported second-quarter revenue declined from a year earlier, as planned restaurant portfolio optimization and a delayed New York City relocation weighed on reported sales. However, the company said comparable sales, transactions and restaurant-level margins improved across its operating segments.

Total GAAP revenue for the second quarter was $200.5 million, down 3.3% from $207.4 million in the prior-year quarter. Company-owned restaurant net revenue declined 3.2% to $197.3 million, primarily reflecting closed Grill Concepts locations, partly offset by comparable-sales gains and contributions from restaurants opened since July 2025.

Comparable restaurant sales increased 0.9%, with U.S. STK restaurants up 3.2% and Benihana locations up 0.8%. President and CEO Manny Hilario said all segments delivered positive transaction growth during the quarter.

Margins Improve as Cost Initiatives Continue

Restaurant operating profit rose to $32.4 million, representing 16.4% of company-owned restaurant net revenue, compared with 15.3% a year earlier. Consolidated restaurant operating profit margin improved 110 basis points.

The STK segment expanded its margin by 130 basis points to 17.4%, while Benihana’s margin rose 90 basis points to 18.9%. Hilario described Benihana as the company’s strongest margin segment.

Chief Financial Officer Nicole Thaung said company-owned restaurant cost of sales improved by 170 basis points to 19.5% of net revenue, from 21.2% in the prior-year period. The improvement reflected integration synergies, supply-chain initiatives, menu optimization and increased menu pricing, she said.

Company-owned restaurant operating expenses increased 50 basis points to 64% of revenue. Thaung attributed the increase to additional marketing spending intended to support traffic during the World Cup and repair and maintenance spending to increase air-conditioning capacity at Benihana restaurants amid summer heat.

On a combined basis, total company-owned operating expenses, including cost of sales, improved 110 basis points to 83.6% of revenue.

• Operating income was $6.6 million, compared with $700,000 a year earlier.
• Net loss attributable to The ONE Group was $2.1 million, narrowing from a $10.1 million loss in the prior-year quarter.
• Net loss available to common stockholders was $12 million, compared with $18.2 million a year earlier.
• Adjusted EBITDA was $21.1 million, down 9.7% from $23.4 million in the prior-year quarter.

Thaung said the adjusted EBITDA decline reflected higher marketing investment and increased general and administrative expense excluding stock-based compensation. General and administrative costs increased to $14 million from $11.7 million, driven by salary inflation, higher bonus expense, planned information-technology and AI-related investments, and greater travel expenses.

Delayed STK Chelsea Opening Affected Results

Hilario said the relocation of the company’s original downtown New York STK restaurant to Chelsea had been expected to open at the beginning of the second quarter but instead opened in July. The delay was largely due to challenges obtaining inspections and clearances in New York City, he said.

The relocated restaurant is expected to produce revenue of approximately $150,000 to $200,000 per week, according to Hilario. He said the company had already staffed the location, meaning that while direct costs such as food and operating supplies were avoided during the delay, much of the labor-related cost base had already been incurred.

When asked about the gap between second-quarter EBITDA guidance and reported results, Hilario estimated that about 40% of the shortfall was associated with the New York relocation and about 60% was attributable to marketing spending. He also noted that revenue came in toward the low end of the company’s guidance range.

Cash Flow, Debt Reduction and Asset-Light Development

The company generated $32 million in operating cash flow during the first six months of 2026, nearly triple the $11 million generated in the same period of 2025. Year-to-date net capital expenditures declined approximately 38% from the prior-year first half.

ONE Group ended the quarter with $17.1 million in cash and short-term credit-card receivables and $28.7 million available under its revolving credit facility, subject to certain conditions. The company repaid more than $4 million on its term loan and $2 million on its revolving facility during the first half.

Management emphasized a move toward capital-efficient and asset-light expansion. The company opened STK Downtown Phoenix in June and relocated the downtown New York STK restaurant to Chelsea in July, with each project costing $1 million or less after tenant improvements. It also converted a Kona Grill in Riverton, Utah, into a Benihana location in July.

The company expects to open six to 10 venues in 2026, with most planned openings characterized as asset-light and requiring little or no upfront corporate investment. It also signed a license agreement for an RA Sushi location in Niagara Falls, Canada, expected to open by year-end, and said an STK and Kona Grill Bistro project is under construction in Baltimore.

Hilario highlighted Benihana Express as a potential franchise growth vehicle. The format operates in an approximately 800- to 1,000-square-foot footprint and has generated annual revenue above $1 million at its existing Miami location. The company expects a company-owned Denver location and a licensed Florida Keys location to open by year-end.

Hilario said Benihana franchise agreements generally generate a 6% royalty and a 2% marketing contribution.

Outlook Updated for 2026

For the third quarter, ONE Group projected revenue of $176 million to $180 million, consolidated comparable sales of flat to 2%, and adjusted EBITDA of $12 million to $15 million. It expects company-owned operating expenses to represent 85% to 87% of company-owned restaurant net revenue during the period.

For fiscal 2026, the company forecast revenue of $805 million to $820 million, reflecting anticipated comparable-sales growth of 1% to 2%. It projected adjusted EBITDA of $95 million to $105 million, capital expenditures net of landlord allowances of approximately $30 million, and pre-opening expense of $6.5 million to $7.5 million.

Hilario said the company saw continued momentum entering the third quarter and expects the conclusion of World Cup broadcasts to be beneficial. He said the company’s value-oriented promotions and premium dining offerings allow it to address both consumers seeking lower-priced occasions and guests willing to trade up for celebrations and higher-end menu items.

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.

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