ONE Group Hospitality Inc

Previous wording

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Forward-looking statements speak only as of the date thereof and involve risks and uncertainties that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include the risk factors discussed under Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Item 1A. “Risk Factors” included in this Quarterly Report on Form 10-Q.A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new or acquired restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; and (8) other risks and uncertainties*.*We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “ongoing,” “could,” “estimates,” “expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “goal,” “plans,” “potential,” “projects,” “predicts,” “should,” “targets,” “would,” “will” and similar expressions that convey the uncertainty of future events or outcomes. You should not place undue reliance on any forward-looking statement. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required under applicable law.

Current wording

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Forward-looking statements speak only as of the date thereof and involve risks and uncertainties that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include the risk factors discussed under Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, Item 1A. “Risk Factors” in our Quarterly Reports on From 10-Q for the quarters ended March 31, 2024 and June 30, 2024, and Item 1A. “Risk Factors” included in this Quarterly Report on Form 10-Q.A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new or acquired restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; and (8) other risks and uncertainties*.*We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “ongoing,” “could,” “estimates,” “expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “goal,” “plans,” “potential,” “projects,” “predicts,” “should,” “targets,” “would,” “will” and similar expressions that convey the uncertainty of future events or outcomes. You should not place undue reliance on any forward-looking statement. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required under applicable law.

Previous wording

service for hospitality venues including hotels, casinos and other high-end locations. Turn-key F&B services are food and beverage services that can be scaled, customized and implemented by us for the client at a particular hospitality venue. Our vision is to be a global market leader in the hospitality industry by melding high-quality service, ambiance, high-energy and cuisine into one great experience that we refer to as “Vibe Dining”. We design all our restaurants, lounges and F&B services to create a social dining and high-energy entertainment experience within a destination location. We believe that this design and operating philosophy separates us from more traditional restaurant and foodservice competitors.

Current wording

We are an international restaurant company that develops, owns and operates, manages and licenses, and franchises upscale and polished casual, high-energy restaurants and lounges and provides turn-key food and beverage (“F&B”) services and consulting service for hospitality venues including hotels, casinos and other high-end locations. Turn-key F&B services are food and beverage services that can be scaled, customized and implemented by us for the client at a particular hospitality venue. Our vision is to be a global market leader in the hospitality industry by melding high-quality service, ambiance, high-energy and cuisine into one great experience that we refer to as “Vibe Dining”. We design all our restaurants, lounges and F&B services to create a social dining and high-energy entertainment experience within a destination location. We believe that this design and operating philosophy separates us from more traditional restaurant and foodservice competitors.

Previous wording

Our F&B hospitality management services are marketed as ONE Hospitality and include developing, managing and operating restaurants, bars, rooftop lounges, pools, banqueting and catering facilities, private dining rooms, room service and mini bars tailored to the specific needs of high-end hotels and casinos. We also provide hospitality advisory and consulting services to certain clients. Our F&B hospitality clients operate global hospitality brands such as the W Hotel, ME Hotel, Hippodrome Casino, and Curio Collection by Hilton. For those restaurants and venues that are managed, licensed or franchised, we generate management fee revenue and franchise revenue based on top-line revenues and incentive fee revenue based on a percentage of the location’s revenues and net profits.

Current wording

Our F&B hospitality management services are marketed as ONE Hospitality and include developing, managing and operating restaurants, bars, rooftop lounges, pools, banqueting and catering facilities, private dining rooms, room service and mini bars tailored to the specific needs of high-end hotels and casinos. We also provide hospitality advisory and consulting services to certain clients. Our F&B hospitality clients operate global hospitality brands such as the W Hotel, ME Hotel and Hippodrome Casino. For those restaurants and venues that are managed, licensed or franchised, we generate management fee revenue and franchise revenue based on top-line revenues and incentive fee revenue based on a percentage of the location’s revenues and net profits.

Previous wording

We opened our first restaurant in January 2004 in New York, New York. We currently own, operate, manage, license or franchise 167 venues including 28 STKs, 85 Benihanas, 26 Kona Grills and 20 RA Sushi** **in major cities in North America, Europe, Latin America and the Middle East and 8 F&B venues operated under ONE Hospitality in four hotels and casinos throughout the United States and Europe.

Current wording

We opened our first restaurant in January 2004 in New York, New York. We currently own, operate, manage, license or franchise 166 venues including 29 STKs, 85 Benihanas, 27 Kona Grills and 16 RA Sushi** **in major cities in North America, Europe, Latin America and the Middle East and 9 F&B venues operated under ONE Hospitality in four hotels and casinos throughout the United States and Europe.

Previous wording

We intend to open eight to eleven new venues in 2024. As of the date of this report we have opened the following:

Current wording

We intend to open six new venues in 2024. As of the date of this report we have opened the following:

Previous wording

There are currently two Company-owned STK restaurants, one Company-owned Kona Grill restaurant, one Company-owned Salt Water Social restaurant, and one Company-owned Benihana restaurant under construction in the following cities:

Current wording

There are currently two Company-owned STK restaurants and one Company-owned Benihana restaurant under construction in the following cities:

Previous wording

In July 2024, the Company terminated a franchise agreement for one restaurant.

Current wording

In July 2024, we terminated a franchise agreement for one restaurant.

Previous wording

In connection with the Benihana Acquisition, on May 1, 2024, the Company sold and issued to (a) HPC III Kaizen LP, for $150.0 million cash, subject to a 5% original issuance discount, 150,000 shares of Series A Preferred Stock, a warrant to purchase 1,786,582 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 1,000,000 shares of Common Stock of the Company for an exercise price of $10.00 per share and (b) to the HPS Investors, for $10 million cash in the aggregate, subject to a 5% original issuance discount, securities allocated among the HPS Investors as follows: (i) to HPS Special Situations Opportunity Fund II, L.P., 4,309 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 51,236 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 28,729 shares of Common Stock of the Company for an exercise price of $10.00 per share, (ii) to SSOF II BH US Subsidiary, L.P., 3,691 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 43,957 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 24,604 shares of Common Stock of the Company for an exercise price of $10.00 per share, (iii) to HPS Corporate Lending Fund, 1,000 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 11,911 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 6,667 shares of Common Stock of the Company for an exercise price of $10.00 per share, and (iv) to HPS Corporate Capital Solutions Fund, 1,000 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 11,911 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 6,667 shares of Common Stock of the Company for an exercise price of $10.00 per share, in each case of clauses (a) and (b), in a private placement exempt from registration under the Securities Act of 1933, as amended.

Current wording

Common Stock of the Company for an exercise price of $10.00 per share and (b) to the HPS Investors, for $10 million cash in the aggregate, subject to a 5% original issuance discount, securities allocated among the HPS Investors as follows: (i) to HPS Special Situations Opportunity Fund II, L.P., 4,309 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 51,236 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 28,729 shares of Common Stock of the Company for an exercise price of $10.00 per share, (ii) to SSOF II BH US Subsidiary, L.P., 3,691 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 43,957 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 24,604 shares of Common Stock of the Company for an exercise price of $10.00 per share, (iii) to HPS Corporate Lending Fund, 1,000 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 11,911 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 6,667 shares of Common Stock of the Company for an exercise price of $10.00 per share, and (iv) to HPS Corporate Capital Solutions Fund, 1,000 shares of such Series A Preferred Stock in book-entry form, a warrant to purchase 11,911 shares of Common Stock of the Company for an exercise price of $0.01 per share, and a warrant to purchase 6,667 shares of Common Stock of the Company for an exercise price of $10.00 per share, in each case of clauses (a) and (b), in a private placement exempt from registration under the Securities Act of 1933, as amended.

Previous wording

Same Store Sales (“SSS”). SSS represents total food and beverage sales at domestic owned and managed restaurants opened for at least a full 24-month period at the beginning of each quarter, which removes the impact of new restaurant openings in comparing the operations of existing restaurants. For STK SSS, this measure includes total revenue from our owned and managed domestic STK locations, excluding revenues from our owned STK restaurant located in the W Hotel in Los Angeles, California due to the impact of the F&B hospitality management agreement with the hotel. Revenues from locations where we do not directly control the event sales force are excluded from this measure.

Current wording

Same Store Sales (“SSS”). SSS represents total food and beverage sales at domestic owned and managed restaurants opened for at least a full 24-month period at the beginning of each quarter, which removes the impact of new restaurant openings and closures in comparing the operations of existing restaurants. For STK SSS, this measure includes total revenue from our owned and managed domestic STK locations, excluding revenues from our owned STK restaurant located in the W Hotel in Los Angeles, California due to the impact of the F&B hospitality management agreement with the hotel. Revenues from locations where we do not directly control the event sales force are excluded from this measure.

Previous wording

Total revenues increased $89.1 million, or 106.8% to $172.5 million for the three months ended June 30, 2024 compared to $83.4 million for the three months ended June 30, 2023 primarily due to the Benihana Acquisition on May 1, 2024. Same store sales decreased 7.0% in the second quarter of 2024 compared to the second quarter of 2023.

Current wording

Total revenues increased $117.1 million, or 152.3% to $194.0 million for the three months ended September 30, 2024 compared to $76.9 million for the three months ended September 30, 2023 primarily due to the Benihana Acquisition on May 1, 2024. Same store sales decreased 8.8% in the third quarter of 2024 compared to the third quarter of 2023.

Previous wording

Operating income decreased $0.4 million to $1.7 million for the three months ended June 30, 2024 compared to operating income of $2.0 million for the three months ended June 30, 2023. The change is primarily attributed to transaction, transition and integration costs related to the Benihana Acquisition partially offset by the increase in operating income attributable to the acquired restaurants.

Current wording

Operating loss increased $1.0 million to $3.0 million for the three months ended September 30, 2024 compared to $2.0 million for the three months ended September 30, 2023. The change is primarily attributed to transaction, transition and integration costs related to the Benihana Acquisition partially offset by the increase in operating income attributable to the acquired restaurants.

Previous wording

Restaurant operating profit increased $18.1 million, or 151.3% to $30.0 million for the three months ended June 30, 2024 compared to $11.9 million for the three months ended June 30, 2023. The increase in restaurant operating profit is primarily due to the Benihana Acquisition on May 1, 2024, strong restaurant operating profit for new STK restaurants and cost reduction initiatives. Restaurant operating profit as a percentage of owned restaurant net revenue was 17.7% in the second quarter of 2024 compared to 14.9% in the second quarter of 2023.

Current wording

Restaurant operating profit increased $16.0 million, or 175.6% to $25.1 million for the three months ended September 30, 2024 compared to $9.1 million for the three months ended September 30, 2023. The increase in restaurant operating profit is primarily due to the Benihana Acquisition on May 1, 2024, strong restaurant operating profit for new STK restaurants and cost reduction initiatives. Restaurant operating profit as a percentage of owned restaurant net revenue was 13.2% in the third quarter of 2024 compared to 12.3%

Previous wording

EBITDA, Adjusted EBITDA and Restaurant Operating Profit are presented in this Quarterly Report on Form 10-Q to supplement other measures of financial performance. EBITDA, Adjusted EBITDA and Restaurant Operating Profit are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). We define EBITDA as net income before interest expense, provision for income taxes and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash rent expense, pre-opening expenses, transaction and exit costs, transition and integration expenses, stock-based compensation, and non-recurring gains and losses. Not all of the items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of these terms based on our historical activity*.* We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses.

Current wording

We define EBITDA as net income before interest expense, provision for income taxes and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash rent expense, transaction and exit costs, transition and integration expenses, stock-based compensation, and non-recurring gains and losses. Not all of the items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of these terms based on our historical activity*.* We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses.

Previous wording

The following table presents a reconciliation of Operating income to Restaurant Operating Profit for the periods indicated (in thousands):

Current wording

The following table presents a reconciliation of Operating (loss) income to Restaurant Operating Profit for the periods indicated (in thousands):

Previous wording

Restaurant operating profit by brand is as follows (in thousands):

Current wording

Restaurant operating profit by component is as follows (in thousands):

Previous wording

Owned restaurant net revenue*.* Owned restaurant net revenue increased $89.1 million, or 111.5%, to $169.0 million for the three months ended June 30, 2024 from $79.9 million for the three months ended June 30, 2023. The increase was primarily attributable to the acquisition of Benihana and RA Sushi restaurants on May 1, 2024, which generated $88.7 million in revenues for the two-month period owned by the Company and $12.7 million in revenues from six new restaurants opened since July 2023, partially offset by a reduction in comparable restaurant sales. Comparable restaurant sales decreased 7.0% for the second quarter of 2024 compared to the second quarter of 2023.

Current wording

Owned restaurant net revenue*.* Owned restaurant net revenue increased $116.9 million, or 158.6%, to $190.6 million for the three months ended September 30, 2024 from $73.7 million for the three months ended September 30, 2023. The increase was primarily attributable to the acquisition of Benihana and RA Sushi restaurants on May 1, 2024, which generated $119.4 million in revenues and $10.1 million in revenues from six new restaurants opened since October 2023, partially offset by a reduction in comparable restaurant sales. Comparable restaurant sales decreased 8.8% for the third quarter of 2024 compared to the third quarter of 2023.

Previous wording

Management, license and incentive fee revenue*.* Management, license and incentive fee revenues were flat at $3.5 million for both the three months ended June 30, 2024 and the three months ended June 30, 2023. Management, license and incentive fee revenue attributed to Benihana franchised restaurants contributed $0.4 million in revenues during the second quarter of 2024 which was offset by decreased revenues at our STK restaurants in North America and early termination of the STK Westminster management agreement in the fourth quarter of 2023 as we consolidated our operations in London, UK.

Current wording

Management, license and incentive fee revenue*.* Management, license and incentive fee revenues increased $0.2 million, or 6.4%, to $3.4 million for the three months ended September 30, 2024 from $3.2 million for the three months ended September 30, 2023. Management, license and incentive fee revenue attributed to Benihana franchised restaurants contributed $0.7 million in revenues during the third quarter of 2024 which was offset by decreased revenues at our managed STK restaurants in North America and early termination of the STK Westminster management agreement in the fourth quarter of 2023 as we consolidated our operations in London, UK.

Previous wording

Owned restaurant cost of sales*.* Food and beverage costs for owned restaurants increased $16.7 million, or 86.7%, to $35.9 million for the three months ended June 30, 2024 from $19.2 million for the three months ended June 30, 2023. The increase in owned restaurant cost of sales is primarily attributed to $17.6 million in cost of sales associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. As a percentage of owned restaurant net revenue, cost of sales decreased 280 basis points from 24.0% in the three months ended June 30, 2023 to 21.2% for the three months ended June 30, 2024 primarily due to lower cost of sales as a percentage of restaurant sales for Benihana and RA Sushi restaurants as compared to STK and Kona Grill restaurants, product mix management, pricing and operational cost reduction initiatives.

Current wording

Owned restaurant cost of sales*.* Food and beverage costs for owned restaurants increased $21.7 million, or 118.8%, to $39.9 million for the three months ended September 30, 2024 from $18.2 million for the three months ended September 30, 2023. The increase in owned restaurant cost of sales is primarily attributed to $23.2 million in cost of sales associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. As a percentage of owned restaurant net revenue, cost of sales decreased 380 basis points from 24.7% in the three months ended September 30, 2023 to 20.9% for the three months ended September 30, 2024 primarily due to lower cost of sales as a percentage of restaurant sales for Benihana and RA Sushi restaurants as compared to STK and Kona Grill restaurants, product mix management, pricing and operational cost reduction initiatives.

Previous wording

Owned restaurant operating expenses*.*Owned restaurant operating expenses increased $54.4 million to $103.2 million for the three months ended June 30, 2024 from $48.8 million for the three months ended June 30, 2023. The increase in owned restaurant operating expense is primarily attributed to $53.8 million in operating expenses associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 10 basis points from 61.0% for the three months ended June 30, 2023 to 61.1% for the three months ended June 30, 2024.

Current wording

Owned restaurant operating expenses*.*Owned restaurant operating expenses increased $79.2 million to $125.6 million for the three months ended September 30, 2024 from $46.4 million for the three months ended September 30, 2023. The increase in owned restaurant operating expense is primarily attributed to $77.7 million in operating expenses associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 300 basis points from 62.9% for the three months ended September 30, 2023 to 65.9% for the three months ended September 30, 2024.

Previous wording

General and administrative*.* General and administrative costs increased $2.6 million, or 32.9%, to $10.7 million for the three months ended June 30, 2024 from $8.0 million for the three months ended June 30, 2023. The increase was attributable to incremental headcount associated with the Benihana Acquisition and increased stock-based compensation expense. As a percentage of revenues, general and administrative costs were 6.2% for the three months ended June 30, 2024 compared to 9.6% for the three months ended June 30, 2023.

Current wording

General and administrative*.* General and administrative costs increased $5.5 million, or 75.6%, to $12.8 million for the three months ended September 30, 2024 from $7.3 million for the three months ended September 30, 2023. The increase was attributable to incremental headcount associated with the Benihana Acquisition and increased stock-based compensation expense. As a percentage of revenues, general and administrative costs were 6.6% for the three months ended September 30, 2024 compared to 9.5% for the three months ended September 30, 2023.

Previous wording

Depreciation and amortization*.* Depreciation and amortization expense was $8.0 million for the three months ended June 30, 2024 compared to $3.5 million for the three months ended June 30, 2023. The increase was primarily related to depreciation and amortization for the Benihana and RA Sushi restaurants acquired on May 1, 2024, depreciation associated with the opening of six new owned venues since July 2023 and capital expenditures to maintain and enhance the guest experience in our restaurants.

Current wording

Depreciation and amortization*.* Depreciation and amortization expense was $9.4 million for the three months ended September 30, 2024 compared to $3.7 million for the three months ended September 30, 2023. The increase was primarily related to depreciation and amortization for the Benihana and RA Sushi restaurants acquired on May 1, 2024, depreciation associated with the opening of six new owned venues since October 2023 and capital expenditures to maintain and enhance the guest experience in our restaurants.

Previous wording

Pre-opening expenses. For the three months ended June 30, 2024, we incurred $2.5 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for a RA Sushi restaurant which opened on July 1, 2024. We also incurred costs during the second quarter of 2024 for STK, Benihana and Kona Grill restaurants currently under development. Total pre-opening expenses related to non-cash pre-open rent was $0.3 million.

Current wording

Pre-opening expenses. For the three months ended September 30, 2024, we incurred $2.1 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for Kona Grill Tigard, which opened on September 17, 2024, and STK Aventura, which opened in October 2024. We also incurred costs during the third quarter of 2024 for STK, Benihana and Kona Grill restaurants currently under development. Total pre-opening expenses related to non-cash pre-open rent was $0.3 million.

Previous wording

Pre-opening expenses for the three months ended June 30, 2023 were $1.6 million, primarily related topayroll, training and non-cash pre-open rent for Kona Grill Riverton which opened in July 2023 and STK and Kona Grill restaurants currently under development. Detail of pre-opening expenses by category is provided in the table below for the three months ended June 30, 2024 and 2023 (in thousands).

Current wording

Pre-opening expenses for the three months ended September 30, 2023 were $3.1 million, primarily related topayroll, training and non-cash pre-open rent for Kona Grill Riverton, which opened in July 2023, and STK and Kona Grill restaurants that were under development. Detail of pre-opening expenses by category is provided in the table below for the three months ended September 30, 2024 and 2023 (in thousands).

Previous wording

Transaction and exit costs*.* Transaction and exit costs were $6.8 million for the three months ended June 30, 2024. These costs primarily included investment banker, legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024.

Current wording

Transaction and exit costs*.* Transaction and exit costs were $0.9 million for the three months ended September 30, 2024. These costs primarily included investment banking, legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024.

Previous wording

Transition and integration costs*.* In the three months ended June 30, 2024, we incurred $3.8 million of transition and integration costs associated with the Benihana and RA Sushi acquisition, which closed on May 1, 2024. Included in these costs are expenses related to identified duplicate professional service vendors, operational support offices, and support positions that will be eliminated in the foreseeable future. Over the next twelve months, we intend to integrate Benihana by leveraging our corporate infrastructure, our supply chain, and unique Vibe Dining program, to elevate the brand experience and drive improved performance.

Current wording

Transition and integration costs*.* In the three months ended September 30, 2024, we incurred $6.3 million of transition and integration costs associated with the Benihana Acquisition, which closed on May 1, 2024. Included in these costs are expenses related to the implementation of happy hour and wagyu offerings at Benihana and identified duplicate professional service vendors, operational support offices, support positions, and maintenance expenses that will be eliminated in the foreseeable future. Over the next twelve months, we intend to integrate Benihana by leveraging our corporate infrastructure, our supply chain, and unique Vibe Dining program, to elevate the brand experience and drive improved performance.

Previous wording

Interest expense, net*.* Interest expense, net was $7.9 million and $1.6 million for the three months ended June 30, 2024 and 2023, respectively. We borrowed $350.0 million on the Credit Agreement on May 1, 2024 to finance the Benihana Acquisition. The weighted average interest rate for the three months ended June 30, 2024 was ­11.9% compared to 11.8% in the same period of 2023.

Current wording

Interest expense, net*.* Interest expense, net was $10.7 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively. We borrowed $350.0 million on the Credit Agreement on May 1, 2024 to finance the Benihana Acquisition. The weighted average interest rate for the three months ended September 30, 2024 was ­11.8% compared to 12.1% in the same period of 2023.

Previous wording

(Benefit) provision for income taxes*.* For the three months ended June 30, 2024, income tax benefit was $3.3 million compared to a nominal benefit for the three months ended June 30, 2023.

Current wording

Benefit for income taxes*.* For the three months ended September 30, 2024, income tax benefit was $4.6 million compared to income tax benefit of $0.4 million for the three months ended September 30, 2023.

Previous wording

Owned restaurant net revenue*.* Owned restaurant net revenue increased $92.0 million, or 58.1%, to $250.5 million for the six months ended June 30, 2024 from $158.5 million for the six months ended June 30, 2023. The increase was primarily attributable to the acquisition of Benihana and RA Sushi restaurants on May 1, 2024, which generated $88.7 million in revenues for the two-month period owned by the Company and $24.2 million in revenues from six new restaurants opened since July 2023, partially offset by a reduction in comparable restaurant sales. Comparable restaurant sales decreased 7.2% during the six months ended June 30, 2024 compared to the same period in 2023.

Current wording

Owned restaurant net revenue*.* Owned restaurant net revenue increased $208.9 million, or 90.0%, to $441.1 million for the nine months ended September 30, 2024 from $232.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to the acquisition of Benihana and RA Sushi restaurants on May 1, 2024, which generated $208.1 million in revenues for the five-month period owned by the Company, and $32.6 million in revenues from six new restaurants opened since October 2023, partially offset by a reduction in comparable restaurant sales. Comparable restaurant sales decreased 7.9% during the nine months ended September 30, 2024 compared to the same period in 2023.

Previous wording

Management, license and incentive fee revenue*.* Management, license and incentive fee revenues decreased $0.4 million, or 6.5% to $7.0 million for the six months ended June 30, 2024 from $7.4 million for the six months ended June 30, 2023. The decrease was primarily attributable to decreased revenues at our STK restaurants in North America and early termination of the STK Westminster management agreement in the fourth quarter of 2023 as we consolidated our operations in London, UK, partially offset by $0.4 million in revenues attributed to Benihana franchised restaurants.

Current wording

Management, license and incentive fee revenue*.* Management, license and incentive fee revenues decreased $0.3 million, or 2.7%, to $10.3 million for the nine months ended September 30, 2024 from $10.6 million for the nine months September 30, 2023. The decrease was primarily attributable to decreased revenues at our STK restaurants in North America and early termination of the STK Westminster management agreement in the fourth quarter of 2023 as we consolidated our operations in London, UK, partially offset by $1.1 million in revenues attributed to Benihana franchised restaurants.

Previous wording

Owned restaurant cost of sales*.* Food and beverage costs for owned restaurants increased $16.5 million, or 43.4%, to $54.6 million for the six months ended June 30, 2024 compared to $38.1 million for the six months ended June 30, 2023. The increase in cost of sales was due to the incremental sales increases noted above from the acquisition of Benihana and RA Sushi and the opening of six new venues since July 2023, partially offset by product mix management, pricing and operational cost reduction initiatives.

Current wording

Owned restaurant cost of sales*.* Food and beverage costs for owned restaurants increased $38.2 million, or 67.8%, to $94.5 million for the nine months ended September 30, 2024 compared to $56.3 million for the nine months ended September 30, 2023. The increase in cost of sales was due to the incremental sales increases noted above from the acquisition of Benihana and RA Sushi and the opening of six new venues since September 2023, partially offset by product mix management, pricing and operational cost reduction initiatives.

Previous wording

As a percentage of owned restaurant net revenue, cost of sales improved 220 basis points from 24.0% in the six months ended June 30, 2023 to 21.8% for the six months ended June 30, 2024 primarily due to lower cost of sales as a percentage of restaurant sales for Benihana and RA Sushi restaurants as compared to STK and Kona Grill restaurants, product mix management, pricing and operational cost reduction initiatives.

Current wording

As a percentage of owned restaurant net revenue, cost of sales improved 280 basis points from 24.2% in the nine months ended September 30, 2023 to 21.4% for the nine months ended September 30, 2024 primarily due to lower cost of sales as a percentage of restaurant sales for Benihana and RA Sushi restaurants as compared to STK and Kona Grill restaurants, product mix management, pricing and operational cost reduction initiatives.

Previous wording

Owned restaurant operating expenses*.*Owned restaurant operating expenses increased $57.2 million to $152.8 million for the six months ended June 30, 2024 from $95.6 million for the six months ended June 30, 2023 The increase in owned restaurant operating expense is primarily attributed to $53.4 million in operating expenses associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 70 basis points from 60.3% in the six months ended June 30, 2023 to 61.0% for the six months ended June 30, 2024.

Current wording

Owned restaurant operating expenses*.*Owned restaurant operating expenses increased $136.5 million to $278.5 million for the nine months ended September 30, 2024 from $142.0 million for the nine months ended September 30, 2023 The increase in owned restaurant operating expense is primarily attributed to $131.5 million in operating expenses associated with revenues generated by Benihana and RA Sushi restaurants acquired on May 1, 2024. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 200 basis points from 61.1% in the nine months ended September 30, 2023 to 63.1% for the nine months ended September 30, 2024.

Previous wording

General and administrative*.* General and administrative costs increased $2.7 million, or 17.3%, to $18.2 million for the six months ended June 30, 2024 from $15.5 million for the six months ended June 30, 2023. The increase was attributable to incremental headcount associated with the Benihana Acquisition and increased stock-based compensation expense. As a percentage of revenues, general and administrative costs were 7.1% for the six months ended June 30, 2024 compared to 9.4% for the six months ended June 30, 2023.

Current wording

General and administrative*.* General and administrative costs increased $8.1 million, or 35.7%, to $30.9 million for the nine months ended September 30, 2024 from $22.8 million for the nine months ended September 30, 2023. The increase was attributable to incremental headcount associated with the Benihana Acquisition and increased stock-based compensation expense. As a percentage of revenues, general and administrative costs were 6.9% for the nine months ended September 30, 2024 compared to 9.4% for the nine months ended September 30, 2023.

Previous wording

Depreciation and amortization*.* Depreciation and amortization expense was $13.3 million and $7.2 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily related to two months of depreciation and amortization for the Benihana and RA Sushi restaurants acquired on May 1, 2024, depreciation associated with the six new owned venues opened since July 2023 and capital expenditures to maintain and enhance the guest experience in our restaurants.

Current wording

Depreciation and amortization*.* Depreciation and amortization expense was $22.7 million and $10.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily related to five months of depreciation and amortization for the Benihana and RA Sushi restaurants acquired on May 1, 2024, depreciation associated with the six new owned venues opened since October 2023 and capital expenditures to maintain and enhance the guest experience in our restaurants.

Previous wording

Pre-opening expenses. For the six months ended June 30, 2024, we incurred $5.4 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for STK Washington DC which opened in March 2024 and a RA Sushi restaurant which opened on July 1, 2024. We also incurred costs during the first six months of 2024 for two STK restaurants that opened during December 2023 and STK, Benihana and Kona Grill restaurants currently under development. Total pre-opening expenses related to non-cash pre-open rent was $0.7 million.

Current wording

Pre-opening expenses. For the nine months ended September 30, 2024, we incurred $7.5 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for STK Washington DC, which opened in March 2024, RA Sushi Plantation which opened on July 1, 2024, Kona Grill Tigard which opened in September 2024, and STK Aventura which opened in October 2024. Total pre-opening expenses related to non-cash pre-open rent was $0.9 million.

Previous wording

Pre-opening expenses for the six months ended June 30, 2023 were $2.9 million primarily related to payroll, training, and non-cash pre-open rent for Kona Grill Columbus and Kona Grill Riverton which opened in January 2023 and July 2023, respectively, and STK and Kona Grill restaurants under development. Detail of pre-opening expenses by category is provided in the table below for the six months ended June 30, 2024 and 2023 (in thousands).

Current wording

Pre-opening expenses for the nine months ended September 30, 2023 were $6.0 million primarily related to payroll, training, and non-cash pre-open rent for Kona Grill Columbus and Kona Grill Riverton, which opened in January 2023 and July 2023, respectively, and STK Charlotte and Kona Grill Phoenix, which opened in October 2023, and STK and Kona Grill restaurants under development. Detail of pre-opening expenses by category is provided in the table below for the nine months ended September 30, 2024 and 2023 (in thousands).

Previous wording

Transaction and exit costs.* *Transaction and exit costs were $8.3 million for the six months ended June 30, 2024. These costs primarily included investment banker and legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024. In addition, we incurred approximately $0.6 million for accelerated depreciation and exit costs associated with the April 30 th lease expiration of Kona Grill Scottsdale and accelerated amortization due to the exit of the licensing agreement with REEF Kitchens.

Current wording

Transaction and exit costs.* *Transaction and exit costs were $9.2 million for the nine months ended September 30, 2024. These costs primarily included investment banking, legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024.

Previous wording

Transition and integration costs*.* In the six months ended June 30, 2024, we incurred $3.8 million of transition and integration costs associated with the Benihana and RA Sushi acquisition, which closed on May 1, 2024. Included in these costs are expenses related to identified duplicate professional service vendors, operational support offices, and support positions that will be eliminated in the foreseeable future. Over the next twelve months, we intend to integrate Benihana by leveraging our corporate infrastructure, our supply chain, and unique Vibe Dining program, to elevate the brand experience and drive improved performance.

Current wording

Transition and integration costs*.* In the nine months ended September 30, 2024, we incurred $10.1 million of transition and integration costs associated with the Benihana and RA Sushi acquisition, which closed on May 1, 2024. Included in these costs are expenses related to the implementation of happy hour and wagyu offerings at Benihana and identified duplicate professional service vendors, operational support offices, support positions, and maintenance expenses that will be eliminated in the foreseeable future. Over the next twelve months, we intend to integrate Benihana by leveraging our corporate infrastructure, our supply chain, and unique Vibe Dining program, to elevate the brand experience and drive improved performance.

Previous wording

Interest expense, net*.* Interest expense, net was $9.9 million for the six months ended June 30, 2024 compared to $3.4 million for the six months ended June 30, 2023. We borrowed $350.0 million on the Credit Agreement on May 1, 2024 to finance the Benihana Acquisition. The weighted average interest rate for the six months ended June 30, 2024 was ­12.0% compared to 11.6% in the same period of 2023.

Current wording

Interest expense, net*.* Interest expense, net was $20.6 million for the nine months ended September 30, 2024 compared to $5.1 million for the nine months ended September 30, 2023. We borrowed $350.0 million on the Credit Agreement on May 1, 2024 to finance the Benihana Acquisition. The weighted average interest rate for the nine months ended September 30, 2024 was ­11.8% compared to 11.8% in the same period of 2023.

Previous wording

(Benefit) provision for income taxes*.* The benefit for income taxes for the six months ended June 30, 2024 was $3.5 million compared to a provision for income taxes of $0.1 million for the six months ended June 30, 2023.

Current wording

Benefit for income taxes*.* The benefit for income taxes for the nine months ended September 30, 2024 was $8.2 million compared to a benefit for income taxes of $0.3 million for the nine months ended September 30, 2023.