ONE Group Hospitality, Inc. Q1 FY2021 Earnings Call

Greetings and welcome to The ONE Group First Quarter 2021 Earnings Conference Call. As a reminder, 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. 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 opinions only as of the date of this call. We undertake no obligation to revise or publicly release any revisions to these 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 financial conditions. During today’s call, we will refer to 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. Reconciliations of these measures, such as adjusted EBITDA, adjusted net income, restaurant operating profit, comparable sales and total food and beverage sales at owned and managed and licensed units; the GAAP measures, along with a 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 Manny Hilario. Manny?

Thank you, Tyler and hello everyone. We hope you and your families are staying healthy and safe through these unprecedented times. And we sincerely 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 leading the continued recovery of our business. Our plan today is for 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 tunnel, we are aware and cautious that much uncertainty still remains due to COVID-19. As local restrictions began to ease and capacity increased in our restaurants, we experienced sequential same-store sales improvement throughout the quarter, resulting in an increase of 3.3% compared to 2019 and both brands being positive compared to 2019 for the quarter. Momentum in acceleration continues; we then experienced an even greater improvement in April as indoor dining capacity continued to increase and vaccines became more readily available. Same-store sales increased 32.2% in April, including a 47.4% increase at STK and an 18.6% increase at Kona Grill, all compared to 2019. Consumers more than ever, as they become fully vaccinated, are looking for a fun and differentiated social time outside of their homes and our concepts featuring vibe dining, our well-positioned to deliver. Our teams are effectively delivering on all operational marketing and culinary strategies. The results are truly remarkable and I couldn’t be prouder of our teams. We’re also extremely encouraged by interest in leading restaurant-level margins as a result of our robust revenue growth and extremely effective cost management within our four walls; we were able to achieve an almost 19% restaurant-level profit for the fourth quarter, our highest restaurant-level profit in the company’s history. We’re incredibly pleased with this accomplishment, especially considering that our quarterly performance was still impacted by indoor dining capacity restriction mandates. At STK, we continue to see momentum building in date nights and social events, which has more than replaced the business traveler and corporate private events, a layer of business that we expect will return and further enhance our unit volumes. Additionally, brunch has now become a core business in all our concepts as it allows us to use our capacity and capture the high demand we are seeing on Saturdays and Sundays. In April 2021, our 13 domestic STKs produced an average weekly sales volume of $261,000; year-to-date 2021, our 13 domestic STKs produced an average weekly sales volume of $211,000. To put these numbers in perspective, during the fourth quarter of 2019, our busiest sales quarter on record, these same 13 STK locations had an average weekly sales volume of $224,000. This speaks volumes to the strength of the brand across the country. We anticipate that the return of the business traveler and corporate private events will be additive as we fill in midweek Monday through Wednesday capacity. Moreover, the addition of capacity in key markets, such as Las Vegas and New York, should further accelerate the sales volume numbers. At the Kona Grill, we have instituted several initiatives to drive sustained growth. Specifically, we have launched new menus across the brand, revived bar and patio programs, including adding more active music, and implemented marketing activities that will enhance our social media capabilities. Additionally, we continue to build brunch, which has now been rolled out to all 24 locations, and the feedback we have received from our guests has been tremendously positive. In April 2021, our Kona Grill produced an impressive average weekly sales volume of $97,000, a level that we expect to continue to improve and is on track with our objective of having Kona Grill to be a $5 million AUV concept. Year-to-date 2021, our domestic Kona Grills produced an average weekly sales volume of $88,000 or approximately 10% more than the AUVs at the time of acquisition. Overall, we believe that both brands have recovered extremely well, and we feel optimistic about their opportunities for continued sales growth for the rest of the year. Regarding forthcoming capacity, for example, in a couple of weeks, restaurant indoor capacity will be increasing to 75% in New York City, and guests will be able to sit at the bar and order beverages without ordering food. They will also be lifting the midnight curfew, allowing our New York City restaurants to stay open longer during peak times. Guests will also be able to wait for their table at the bar, and they will no longer have to end their nights when their dinner is finished. We’re also seeing a sales benefit from our takeout and delivery business, both at STK and Kona Grill. Takeout and delivery comprised approximately 30% 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 in state-of-the-art technology, execution of our operations and marketing initiatives, which have enabled our guests to enjoy full curbside pickup or delivery from nine separate delivery partners. It’s important to note though, we are in the early stages of our delivery strategy and we have been actively marketing this high-margin additive channel. As a result, over 50% of our delivery transactions are new customers, and we view delivery as a huge opportunity with the goal of converting these guests to long-term loyal customers. We hope these customers remember us when they have a birthday or a special occasion to celebrate at our restaurants because we know how to make the experience truly 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 in earnest. Our vibe dining experience is also particularly attractive to many people because it’s not only an escape, but it’s also vastly superior to the conventional higher-end steakhouse and polished casual experiences. We firmly believe that we are the leader in this highly differentiated category and what we offer is beyond great food and a unique cocktail program, to include so much more: an exceptional service program complemented by great energy and ambience that result in an unmatched and unforgettable dining experience. Now, turning our focus to development. In early January, we opened a managed STK restaurant in Scottsdale, Arizona. The restaurant is off to an incredible start and continues to average over $190,000 in weekly sales. Additionally, on May 1, we opened our first airport location, an international licensed STK in the Cabo San Lucas airport. We are happy to report that the first full week of sales was approximately $150,000, despite this location being off-peak season. Our emphasis on bar-centric business position also makes it a natural billboard for the STK brand. We believe that this will be the first of many future airport locations for us. Ultimately, we're incredibly excited to bring vibe dining to those traveling to and from Mexico who have already experienced our STK brand elsewhere. In addition, last week, we opened one managed F&B venue at the London Westminster UK DoubleTree, soon to be converted to a Curio hotel. As of today, there are three additional STKs and four additional managed F&B venues under construction. Between this year and next year, we intend to open 13 new venues, which include eight STKs, three STK company-owned restaurants in Bellevue, Washington, Dallas, Texas, and San Francisco, California; three STK managed restaurants in Scottsdale, Arizona, which already opened in January, London, Westminster, UK, and London, Stratford, UK; and two STK licensed locations, including Cabo San Lucas airport, Mexico, which opened in May, as well as five managed F&Bs: two in London Westminster, one that opened in May and three in London Stratford, UK. Over the longer term, we see our addressable market as 75 additional major metropolitan areas across the globe where we could grow our STK brand to 200 restaurants over the foreseeable future. To conclude, our team has certainly proven our resiliency during these trying times, and we're doing a fantastic job welcoming guests back into our restaurants for a great vibe dining experience. Ultimately, our focus on day-to-day execution has proved effective in translating to a strong P&L, and we are very hopeful that the trajectory we are currently on will 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 positions before reviewing the first quarter financials in greater detail. As of March 31, we have $28.4 million in cash and cash equivalents on our balance sheet. 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, stood at approximately $10.7 million. In terms of our quarterly financials, total GAAP revenues were $50.5 million, increasing 24% from $40.7 million for the same quarter last year. Included in our total revenues for the quarter are our owned restaurant net revenues of $49.2 million, which increased approximately 27.5% from $38.6 million for the same quarter last year. The increase in revenue is primarily attributable to strong sales momentum as state and local governments continue to ease seating capacity restrictions in the markets in which we operate. Domestic consolidated comparable sales increased 3.3% for the quarter compared to 2019. For STK, comparable sales increased 1.9% and 4.6% for Kona Grill. As Manny commented, sales sequentially accelerated throughout the quarter for both STK and Kona Grill. As cities began to reopen, consolidated comparable sales for April increased 32.2% compared to 2019, including a 47.4% increase at STK and an 18.6% increase at Kona Grill. Management license and incentive fee revenues were $1.3 million in the first quarter of 2021 compared to $2.2 million in the first quarter of 2020. This change is primarily a result of temporary closures due to COVID-19 and limited in-person seating at managed locations. Owned restaurant cost of sales as a percentage of owned restaurant net revenue improved 180 basis points to 24.4% in the first quarter of 2021 from 26.2% in the first quarter of 2020, primarily due to purchasing synergies across the company and strong menu management. Owned restaurant operating expenses as a percentage of restaurant net revenue improved approximately 1,200 basis points to 56.8% in the first quarter of 2021 from 68.7% in the first quarter of 2020. The decrease was driven by attracting and actively managing operating costs, particularly managing restaurant labor and implementing operating cost-saving measures. Restaurant operating profit was 18.8% for the quarter, a record high for the company, and this was despite limited indoor dining capacity throughout the quarter. Again, we have made tremendous progress in achieving more efficient operations since the beginning of the COVID-19 pandemic and plan to continue to execute the current operating model in the foreseeable future. On a 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 in the prior year and includes $1 million of stock-based compensation, driven by certain grants invested due to a substantial increase in our stock price during the quarter. We consider approximately $0.5 million to be one-time in nature. When adjusting for stock-based compensation, adjusted general and administrative expenses were $4.2 million in the first quarter of 2021 and $3.1 million in the first quarter of 2020. As a percentage of revenues, adjusted general and administrative expenses were 8.2% of total revenue in the first quarter of 2021, compared to 7.5% of total revenue in the first quarter of 2020. We incurred approximately $1.6 million of direct costs related to COVID-19 during the first quarter, composed primarily of costs for regular electrostatic cleaning of our venues, personal protective equipment, and sanitation supplies to prevent the spread of COVID-19. This compares to $1.3 million in similar costs last year. Interest expense, net of interest income, was $1.2 million in the first quarter of 2021 and the first quarter of 2020 respectively. The income tax benefit was $0.3 million for the first quarter of 2020, compared to an income tax benefit of $0.7 million for the first quarter of 2021. The current year income tax benefit was driven by dispute items related to stock-based compensation. Net income attributable to The ONE Group Hospitality, Inc. was $70,000 or $0.00 net income per share, compared to a net loss of $4.6 million in the first quarter of 2020 or $0.16 net loss per share. When adjusting for COVID-19 expenses and one-time stock-based compensation, adjusted net income was $1.6 million or $0.05 net income per share, compared to an adjusted net loss of $3.6 million in the first quarter of 2020 or $0.13 net loss per share. Adjusted EBITDA for the first quarter attributable to The ONE Group Hospitality, Inc. was $6.5 million in the first quarter of 2021 compared to $1.6 million in the first quarter of 2020. This marks the second highest adjusted EBITDA quarter in company history. We've included a reconciliation of adjusted EBITDA and adjusted net income or loss to GAAP net income or loss in the tables in our first quarter earnings release. As a reminder, due to these unprecedented market conditions and uncertainty surrounding the effects of the pandemic, we cannot reasonably estimate when our business will return fully to normal operations and therefore suspended all financial guidance last March. We do, however, intend to provide further business updates as warranted by the evolving situation. I will now turn the call back to Manny.

Thanks, 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 all, I am grateful for all our teammates who bring our mission to life every day to be the best restaurants in every market where we operate. They 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 this past year and are coming back to our restaurants for the first time in a long while, and enjoying the vibe dining experience they have been craving. We appreciate everyone joining us today on the call. Tyler and I are happy to answer any questions that you may have.

Thank you. Our first question comes from the line of Joshua Long with Piper Sandler. Please proceed with your question.

Great. Thank you for taking my questions and thank you for the update today. Exciting to hear about the acceleration in sales here in the April period and then also when paired against strong margin management in Q1. And so just wanted to see if you'd be able to talk about how you're thinking about margins on a go-forward basis, noting that you've got really strong revenue levels, but just curious if there are costs that need to be layered back in as some of these jurisdictions start pulling back some of those restrictions and maybe things start going back to normal a bit more than that 18.8% that you delivered in the first-quarter restaurant-level margin, if that's something that you'd expect to carry forward into Q2 and going forward. Thank you.

Yes. Thanks for the question, Joshua. This is Manny. I will start and then Tyler will add some comments to it. But as I said earlier in the call, our volumes in April are about $261,000 averaged for the 13 domestic STKs. And I also mentioned that there were, for the year-to-date, about $211,000. So my expectation is that going forward, as we keep revenues in that higher level range, we will continue to do extremely well from a margin perspective. So I have no expectations that margins will go back. Obviously, there are some pressures in the environment relative to commodities and labor, and we're aware of those. But there's no particular layers of costs that we'll have to put back into the P&L. And I just want to have to make a correction here; during my statements, I did say that we have 13 domestic STKs at the end of 2019. We actually only had 12. So I just want to make sure everybody knew that. So our $224,000 was for 12, not 13. But anyhow, overall I do believe that the margin for the company for the rest of this year looks very, very good. Tyler, do you want to add?

No.

Great. Could you touch on what you're seeing there in the cost of inflation side? Obviously, we've heard that beef has been seeing some pressure. I'm just curious if you have been seeing that as well, to what extent, and then how the other line items in the basket across both STK and Kona are faring with any sort of either locks or other programs you have in place to mitigate some of those costs.

Yes. So for beef, we do have pricing locked in. Obviously, if the pressure gets to beef extremely, we do like to work with our partners, but right now we are locked in. And so we don't anticipate anything material there. Obviously, seafood, we did see some — seafood, particularly in crab, where we did have some up and down pricing throughout the quarter. We do buy some of the crab, so we did make some buys to help that out over time. We also saw some fluctuation in lobster. So there have been fluctuations and any times that we feel that there are opportunities, we will do some future buys to just to make sure that we don't have to assess any buys, but we locked into pricing to ensure that we do get protection in the longer term. So again, I think that there's obviously we have seen ups and downs in a lot of the commodity lines, none of which has been material for us. You could see on our COGS line, we had very good COGS in the quarter, although things were going up and down throughout the quarter. Obviously, the one that we're monitoring the most is labor. There is a lot of noise in the labor markets relative to the availability of labor. 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, so that we don't get surprised by it all over. Overall, yes, there's some pressure, but I think we're doing all the right things relative to managing the P&L, doing buys, locking in prices, and managing labor.

Great. Thank you for that. How for – how long do you have those beef – that beef pricing locked in? How much visibility do you have there?

Until the end of this year.

Got it. Thank you for that. And my last one was during some of the downturn periods, you and your team shifted to being really efficient with managing table turns and just driving efficiency and sales on a square footage basis at the restaurant level. How do you balance that going forward as we start shifting back to something more normalized where the guests can linger a little bit longer, you can maybe focus on some check-building activities with an extra drink, or maybe dessert comes back in? How do you balance that efficiency with also kind of things returning back to normal at the store level going forward?

I mean, so far, what we've seen is that the demand still outpaces the supply on capacity. And so no question that turnover of tables is still our number one strategy, and it's not only just turning over the tables, but it's making sure that the experience is stellar. It wasn't the right amount of times. I do think that as capacity becomes more available, we probably will work more on the end of nights’ day part. So think of 11 o'clock plus dining where we'll probably take a little bit more time on working on the liquor mix. So I think that that's probably going to be the next logical step, to work on the late-night seating, which frankly, we've extended a lot of our restaurants past midnights, and we've seen a tremendous amount of success there. So probably that will be the next layer of working on check. Our 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 the tables over particularly on the weekends, which now is Thursday, Friday, Saturday, and Sunday for us, which is a four-day block of days.

Our next question comes from the line of Mark Smith with Lake Street Capital Markets. Please proceed with your question.

Thanks for taking my questions. First off, can I just confirm, Manny, did you say takeout and delivery mix 30% in the quarter?

Just about, that's right.

Just about, okay. And if we looked at brunch, has that been a needle mover? If we looked at that as a percent of sales, is that helping in kind of everything that you've added to the restaurants over the last 12 months?

Yes, I mean, it's a lever. I think particularly as you saw in my earlier comments, particularly, as I work at Saturdays and Sundays. I think that — and first of all, I invite everybody to go try the programs. The food is outstanding. I think the culinary team has done a great job in my opinion of creating what's one of the most craveable, Instagrammable menus to really stand out, because there is brunch. And then there's really brunch that people will remember. So we've been working on that later category. So I think we've been building it up, and I think as we entered April, we began to see the impact of that day part. And the thing that I liked about brunch is that as you may recall, holidays are a critical element of our marketing strategy. So brunch is a natural lever within the holiday strategy, and we've seen the power of that this year in Easter. We saw that again in Mother's Day. So we were very excited about the potential of that day part going forward. So expect big things coming out of this. And as we continue to build that day part obviously, which is still very early on, I think that as more people experience it, we'll get more repeat business. So I see that as a very attractive new layer of business because historically nothing happened really in our STKs between 10:00 AM and 4:00 PM on Saturdays and Sundays. So that's a huge amount of captured capacity now that we can turn into revenues. So stay tuned; you'll see us doing a lot of marketing around that. You've probably seen in our digital marketing that our team has been very aggressive in terms of creating impressions around that day part. And by the way, we've done brunch with vibe in mind. So it's not just coming in and getting brunch food, but you will see DJs in our locations, a lot more energy, and a lot more emphasis in making sure that we have a killer drink program that really complements what I believe to be an amazing food offering for brunch.

Okay. And you brought up Mother's Day. Can you talk about capacity in May, kind of system-wide and where that has moved to?

Well, I think capacity is improving. I think the big ones was Vegas. Finally, I think up to 80% now with capacity. We're going to see New York coming up to 75%. So those markets are coming up and the exciting thing about those markets is we ran brunch for Mother's Day. I can tell you that I am very bullish on what that day part will mean for some of these markets like New York and Vegas. We have found out that there's a tremendous amount of demand for that. So we believe that again, I think that layer will be there. And frankly, I think from a platform and layer of business, we're starting to see demand coming into the business for corporate group dining and group events. So that will be kind of the next layer of business here that the team is working on. And frankly, our appetite for those events now is Monday to Wednesday, maybe Thursday. Friday, Saturday, and Sunday, we've got so much momentum on the ala carte business that this business is not a priority for us. So I guess that's a good problem to have that we can say that we're really limiting our business travel and development around Monday to Wednesday, which we brought the team back; we were starting to ask some of our sales and events managers to come back. I think we'll bulk up the resources and assets behind that business. And frankly, the phones are now starting to ring. I think as vaccines get out into the public eye, we see almost a direct connection and correlation for group events as vaccination levels go up. So I guess we feel very good about where we stand right now. And I think as capacity keeps coming on, I think we'll continue to see us building into what I think are pretty impressive AUVs: STK is about $260 a week and Kona Grill is in the $100,000 range and starting to pick up. So I feel very good about how the units are executing all these programs that we put in place. And it’s always good to see a translation of store level margins. And we saw that in the quarter that our store level margins are at a very high level. Keep in mind that historically, the first quarter is not one of our best seasonal quarters, so if I frame the margin performance in the seasonality of the business, I have to be very delighted with the margins that we did in the first quarter.

That makes sense. And looking at Q1 did – was there any weather events that had a big negative impact? I'm thinking primarily about Kona Grills in Texas. And then similarly looking at capacity, patio, maybe how much space have you added year-over-year in patios and how is that business trending right now?

I'm the good restaurant guy and a horrible weather guy. So, but I do think that we did have some times within the quarter where we had challenges in Texas. As a matter of fact, I think we had a whole week of Kona Grill in Texas that was impacted by ice. Obviously, weather is weather. We did have lots of patios, rooftops, everything else. But our real focus is fishing where the fish is running. So it tends to not let that become a real big call to action internally, but we did have weather events. I mean, there were markets like that. We were also operating out of tents in some of our markets like Woodbridge and Troy, Michigan, which we are happy not to be in tents all the time anymore. But clearly, once the weather got below 30 degrees, we saw some impact in some of these markets. Because of weather. But again overall, we did have warm days and we did have cold days, we had dry days and wet days, and overall, I’m sure somebody tracks what the net of that is, but I wouldn’t say that weather was a significant enough item 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 in patio business?

Yes, I'm excited. So last year really was going to be the first year that we were going to, if you will maximize patio. Unfortunately, because of COVID, we really weren't able to do that because we were limited both in capacity and social distancing in the majority of our patios. Frankly, on Fridays, Saturdays, and Sundays, our patios are very difficult to get into. As a matter of fact, one of the big complaints I get from guests is, I want to get into your patio and I can never get in at Kona Grill. So I would say that we probably have demand that way exceeds supply on patio for Kona Grill right now. Our challenge internally is that set earliest turns. So we do have to work on our table turns on the patio. It’s always difficult to get people out of patio seats because once people sit down and have those drinks and great food in the patio, it’s always a little bit more difficult to turn the table. But again, that’s a high-class problem we have; we will have to define and really execute at table turns at the patio. So I’m super excited to see what happens this year because hopefully, this year, there’ll be less limitation. So there’s an opportunity to really see the power of the patios. Looking at our AUV for Kona Grill at $100,000 in April, I would say that going into patio season in May, June, July, August, and September, we have a tremendous opportunity to really generate a lot of revenues out of the patios.

Okay. And last one for me is, as we look at real estate opportunities, as you guys begin to develop and build and open new restaurants, any commentary or insight into what you’re seeing around real estate opportunities? And second, were there any construction delays as we look at permitting or issues that you’re continuing to have, or are those issues starting to lighten up with some reopening?

Yes. I mean, I would say on development, I think probably the thing that looking back worked well for us. We didn’t stop development, although we were very challenged—remember we went all the way down to 87 employees in April of last year. Although we were very challenged back then, we did keep our development activities wide open. One of the reasons that we’re doing these restaurant deals that we’re doing now is we got incredible deals in some incredible geographies. There was a window of time that the real estate market was wide open. I think during the very uncertain days of COVID, a lot of things were in the market. I would say stacking up a bit, I don’t see the same quality of deals coming up, I would say the last four or five weeks. So I would say that as things cleared out a little bit, landlords are in a lot more wait-and-see mindset. So I’ve seen that happen. And frankly, construction is a little bit different now because some of the stuff that you need to build is not easily available as it used to be. It does require a lot more precision in your project management to deal with things like a lot of construction products: petroleum byproducts, which are not on the market. We’ve had to adjust our calendars on the construction. But all in all, I think we’re very pleased with the pace of our construction. Our next restaurant that we’ll be opening is Bellevue, and frankly, that restaurant is in very good shape based on my walkthrough that I did today. And then the next one up after that will be STK Westminster in London, and I think that one is also in very good shape. So I would say that things have moved obviously, permitting is a little different because some of the offices don’t have live people in them. So you just have to adjust your project management to deal with these annoyances. But all in 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 Kanen with Kanen Wealth Management. Please proceed with your question.

Good afternoon, gentlemen. Congratulations. Great job to you and your team.

Thank you, sir.

You're welcome. So a few questions. During the prepared remarks, you gave a number for total locations that you think you can get to in the future. Could you just reiterate what that number is and then the timeframe?

I mean, so it’s 200,000 is kind of our addressable, and by the way, that’s just STK. We’re really not talking about all the other opportunities, because we frankly haven’t laid out a number for Kona Grill. I think as now the revenues start breaking the $100,000 AUVs, there’s a whole new dialogue that we also have to evaluate that. But just on STKs, we believe that the number is big. Think about the Cabo San Lucas airport; it’s one of the smaller airports that we can get into, and right off the shoot, we’re at $150,000 a week in AUV. Frankly, after this call, I’ll be heading out to really work with a team on turns because that restaurant is ready to have a turn opportunity for us and turn tables in the airport. I think if you start looking at that in the airport and then the streets opportunities are huge. There are a tremendous amount of markets that I’m looking at right now: Minneapolis, Boston, Washington D.C. So there's a tremendous amount of white space right now, even domestically, not to mention the international opportunities that will be coming up, because the restaurants that we’re building right now in Stratford and Westminster are done with two significantly large hotel operators that have, in aggregate, over 1,000 hotels. We do plan to hopefully earn the trust of these operators to be able to build more restaurants with them in their property. There’s a huge opportunity for STK that can do $250,000-plus and AUVs; there’s not a lot of restaurant concepts out there that can do that. I can’t think of one that can say they do that on average. The demand for that product will be significant. There’s also a future developing here for Kona Grill. Not to mention the other things that we’ve done; for instance, in Westminster, the SMB location we opened is very cool. We have other cool things in the pipeline that I think will even make growth more meaningful on the hotel side. So lots of really good development stuff going on.

Okay. And I know that throughout the quarter, and even in April, in-person dining capacity was still hamstrung. I think in April, you were up to 65%. Could you— I don't know if you have this data, but could you potentially call out the difference in markets that were 100% capacity? What the comp looks like for the same-store sales increase in April at a market that was 100% in-person dining capacity versus one that was at limited capacity?

I mean, I can give you an example. For instance, Atlantis 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 that restaurant relative to 2019 is 100% plus. If you want to look for one restaurant of what we can do when we are fully at capacity—because there are still some social distancing limitations—we can do very well. I think the Kona Grills in Texas have done very, very well, and then obviously, Miami South Beach, which has no limitations, has also had incredible comps in the 100%-plus range. As capacity becomes available, we’re very well positioned to take advantage of it. That’s one of the reasons why our numbers are what they are. As you know, we’re very optimistic, and we read what’s happening in the restaurants. Our number one objective is to maximize revenues where we can do it. So stay tuned.

Okay. So if the relaxed market like South Beach, the last time I was there, I noticed though there was still no seating at the bar. Has that changed? I would think that when people could sit at the bar, you’d probably catch some incremental sales there. Is that factored in, or is that still yet to be yielded in the future?

That’s still yet to be determined, and I’m not so sure that—so I like the bar after 10 o'clock. I’m not a big fan in a bar per se, before 10. Obviously, I think there’s a magic that people see in the bar business because it’s a much better margin business than usually food. But the way we run our food costs and everything else in our business, trading food and liquor is not as beneficial as you probably would see in other brands. So again, we’ll play that by ear as the bars open up; we’ll test and we’ll see how to utilize them to maximize revenues. As mentioned, our number one strategy is still table turns; as capacity becomes available, it’s important to maintain our focus on table turnover to maximize revenues.

Okay. And then just one—

I’d like to thank the ONE Group team who’s been phenomenal, and I appreciate the incredible work done by our teams in the restaurants, in the offices, and everywhere globally. I appreciate everybody’s commitment to us. Last but not least, we obviously appreciate all of your interests in the ONE Group. I look forward to running into all of you in our restaurants. So be well, be safe, and see you in one of our restaurants. Thank you.

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.