Business Context and Reporting Period
Company: The ONE Group Hospitality, Inc. (STKS)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter ended June 28, 2026 (91 days) and Six Months ended June 28, 2026 (182 days).
Business Overview: An international restaurant company operating upscale and polished casual brands including STK, Benihana, Kona Grill, and RA. As of June 28, 2026, the company operated 158 venues globally. The company transitioned to a 52/53-week fiscal year starting in 2025.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended June 28, 2026 |
3 Months Ended June 29, 2025 |
6 Months Ended June 28, 2026 |
6 Months Ended June 29, 2025 |
|---|---|---|---|---|
| Total Revenues | $200,477 | $207,379 | $413,293 | $418,508 |
| Operating Income | $6,557 | $662 | $20,454 | $11,391 |
| Net Income (Loss) | $(2,350) | $(10,332) | $639 | $(9,710) |
| Net Loss Attributable to Common Stockholders | $(11,978) | $(18,241) | $(18,171) | $(24,857) |
| Adjusted EBITDA | $20,977 | $23,205 | $49,303 | $48,162 |
| Restaurant Operating Profit | $32,423 | $31,224 | $72,145 | $66,727 |
| Cash and Cash Equivalents | $6,363 | $4,168 | $6,363 | $4,168 |
| Total Debt (Gross) | $347,686 | $354,169 | $347,686 | $354,169 |
| Operating Cash Flow (6 Months) | $32,965 | $11,333 | $32,965 | $11,333 |
Note: Net loss attributable to common stockholders includes a significant deduction for Series A Preferred Stock paid-in-kind (PIK) dividends and accretion ($9.9M for Q2; $19.3M for 6 months).
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 3.3% ($6.9M) in Q2 and 1.2% ($5.2M) for the six months compared to the prior year. This was primarily driven by the closure of Grill Concepts restaurants (Kona Grill and RA) as part of a portfolio optimization strategy and the elimination of auto-gratuities.
- Profitability Improvement: Despite lower revenue, Operating Income increased significantly ($5.9M in Q2; $9.1M for six months). This was driven by a 1.1% increase in Restaurant Operating Profit (Q2) and 8.1% (6 months), aided by lower cost of sales (menu optimization, pricing) and reduced transition/integration costs.
- Expense Reductions: Lease termination and closure expenses dropped from $5.6M to $0.9M in Q2. Transition and integration expenses related to the Benihana/RA acquisition fell from $3.9M to $0.2M in Q2.
- Increased G&A: General and administrative expenses rose 19.7% in Q2 due to salary inflation, bonus expenses, and investments in IT/AI technologies.
- Same Store Sales: Combined same store sales increased 0.9% in Q2 and 0.3% for the six months, offsetting the impact of closures.
Outlook, Risks, and Unusual Items
- Guidance & Strategy: The company intends to open 6 to 10 new venues in 2026. Strategy focuses on capital-efficient growth, prioritizing new Company-owned locations requiring $1.5M or less net investment. Plans include converting up to nine Company-owned Grill restaurants to Benihana or STK formats.
- Liquidity: As of June 28, 2026, the company had $6.4M in cash and $28.7M available under its revolving credit facility. Management believes current sources are adequate for the next 12 months.
- Series A Preferred Stock: The company holds 160,000 shares of Series A Preferred Stock with compounding PIK dividends starting at 13.0%. This creates a significant non-cash charge that reduces net income available to common shareholders.
- Risks:
- Geopolitical: Risks associated with armed conflict involving Iran, including potential supply chain disruptions and inflation.
- Operational: Risks related to integrating acquired restaurants, labor shortages, and the ability to capture synergies.
- Legal: Ongoing exposure to class action lawsuits regarding labor laws, though management does not expect a material adverse effect.
- Unusual Items: The filing includes a restatement of prior period EPS (Q2 and 6 months 2025) to correct an error regarding the exclusion of penny warrants from the weighted average share count.
Investor Verification Checklist
- Series A Preferred Stock Impact: Verify the accretion schedule and redemption terms of the Series A Preferred Stock, as the PIK dividends significantly distort GAAP net income available to common shareholders.
- Grill Concepts Optimization: Confirm the timeline and financial impact of closing/converting Kona Grill and RA locations versus the projected accretion from converting them to STK/Benihana.
- Capital Expenditures: Review the $23.0M capital spend for the six months and the plan to reduce discretionary capex to ensure alignment with the "capital-efficient" growth strategy.
- Debt Covenants: Monitor the Consolidated Net Leverage Ratio, as the Revolving Facility's financial covenant applies once 35% of capacity is drawn.
- Restatement Details: Review Note 10 for the specific impact of the EPS restatement on prior period comparability.