Greetings and welcome to The ONE Group Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tyler Loy. Please go ahead.

Thank you, operator, and hello, everyone. 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 opinion only as the date of this call. We undertake no obligation to revise or publicly release any revisions of 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 discuss 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. For 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 to GAAP measures, along with the discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Manny Hilario.

Thank you, Tyler, and hello, everyone. We sincerely appreciate you joining us today and for your interest in the ONE Group. To begin, I would like to express my gratitude to each of our dedicated team members. Our results would not be possible without their unwavering commitment to being the best restaurant in every market we operate by delivering exceptional and unforgettable experiences to every guest every time. Thanks to our remarkable teams, we have solidified our leadership position in Vibe Dining in both high end and polished casual. Let me begin by discussing our fourth quarter financial highlights. First, we delivered record quarterly revenue of nearly $90 million and record quarterly EBITDA of $14.5 million, an 11.5% increase versus last year. Our restaurant level margin increased 40 basis points to 19.3%, driven by a 120 basis point improvement in cost of goods and other cost savings initiatives we have put in place. G&A as a percentage of revenue improved by 80 basis points, driven by cost management of controllable expenses. All of this drove adjusted EBITDA expansion of 140 basis points to 16.1% of revenue. Also during the quarter, we opened 4 new company-owned restaurants, reinforcing our ability to open restaurants every 4 to 6 weeks. In October, we opened an STK in Charlotte, North Carolina, and a Kona Grill in Phoenix, Arizona, our third Kona Grill in the area. In December, we opened a STK in Boston, Massachusetts and an STK in Southlake City, Utah. These restaurants are off to strong starts and their success bolsters our belief in the long-term EBITDA and earnings power of our development pipeline as we demonstrate industry-leading ROIs for our shareholders. These 4 restaurants, along with the addition of the other venues early in the year, allow us to increase our consolidated…

Thank you, Manny. Let me start by discussing our fourth quarter financials in greater detail. Total GAAP revenues were $89.9 million, increasing 1.8% from $88.3 million for the same quarter of last year. Included in our total revenue is our owned restaurant net revenue of $85.2 million, which increased 1.5% from $83.9 million for the same quarter last year. The increase in revenue is primarily attributable to the opening of 6 owned venues in '23. This was partially offset by a 4.3% decrease in comparable sales. Consolidated comparable sales increased 40.1% compared to 2019, our pre-pandemic base year. Management, license and incentive fee revenues were $4.8 million, increasing 7.6% from $4.4 million in the fourth quarter of 2022. Our owned restaurant cost of sales as a percentage of owned restaurant net revenue rose 120 basis points to 22.8% in the fourth quarter of 2023 compared to 24% in the prior year, primarily due to menu mix management, operational cost reduction initiatives, pricing and partially offset by increased commodity prices. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 70 basis points to 57.8% in the fourth quarter of 2023 from 57.1% in the fourth quarter of 2022 due to wage and general operating cost inflation. Operating profit was 19.3% for the fourth quarter of 2023, compared to 18.9% in the fourth quarter of 2022. On a total reported basis, general and administrative expenses decreased 6.5% to $7.9 million compared to $8.5 million in the prior year, reflecting the impact of the many initiatives we have already had in place. When adjusting for stock-based compensation, adjusted general and administrative expenses were $6.7 million in the fourth quarter of 2023 compared to $7.3 million in the same quarter of last year. Pre-opening expenses were $2.9 million compared to…

Thank you, Tyler, and thank you all for your time today. Let me conclude by saying we are in the early stages of our long-term growth strategy as we continue to build a portfolio of high-volume brands with compelling returns for our shareholders. Thank you all for your interest in ONE Group. As I always say, none of this would be possible without the fantastic support of our teammates, who bring our mission of great execution to life every day. We have some exciting times ahead and I look forward to seeing you all out there. We appreciate everyone joining us on the call today. Tyler and I are happy to answer any questions that you may have. Operator?

[Operator Instructions] The first question comes from Nick Setyan with Wedbush Securities.

Just given your revenue guidance for '24, I would love to maybe get some more insight on the choppiness comment around Q1 and quarter-to-date. Obviously, we see the industry data. We know it hasn't been great, but it would just be very helpful if you guys could actually give us some numbers, just so we can bridge the gap between Q1 and to what extent Q1 is impacting the '24 revenue guide.

Yes, Nick, this is Manny. I think just clarifying a little bit on the comments, as you pointed out, January pretty much for everyone was a challenging month just because of the high comps everyone was going up against. So we do think that the beginning of this year was probably our toughest part of the lap for the year. So that's probably how I would characterize that. So I don't think we're particularly any different situation relative to the industry about the tough lap on the beginning of the year. Tyler, anything else?

Yes, Nick, I think as you alluded to on the guidance and how you think about our same-store sales for the kind of the full year guidance, the Q1 results are reflective of kind of where we feel like the full year number is going to come in.

Okay. All right. Fair enough. And then in terms of the actual unit guidance 6 to 8, you said 1 to 2 is license. Would you mind just breaking out what you think sort of STK versus Kona will be?

Yes. So I think in that guidance, we have 2 Kona Grills in that guidance right now.

Got it. And then the Salt Water Social, is this like a new concept?

Yes. It's a seafood version of STK. So that'll be our third restaurant in the Denver market. So we'll have our STK downtown. We already have a Kona Grill in Cherry Creek, and this will be our second restaurant in Cherry Creek. Cherry Creek is a very active neighborhood, and we think that there is a void in the Vibe Dining category in that neighborhood. So we think that this will be a great way of introducing Vibe Dining to the neighborhood.

The next question comes from Mark Smith with Lake Street Capital.

First question for me. Just wanted to dig into kind of average weekly sales at STK. And in particular, can you guys talk about kind of new restaurants and what kind of volume they're opening up?

I mean, the new restaurants are opening up greater than $200,000 per week volume. So I think our model is about $8 million, and the new units are settling in between $10 million and $12 million a year. So very significant high volumes.

Okay. And then looking back at Q4, any commentary just around -- I know you said you're excited about Valentine's Day was positive, but any commentary on the holiday period within Q4 and kind of how that comped year-over-year?

I mean, as I think we pointed out on our prepared statements, the holidays themselves, we had fantastic days. So I think the Christmas Day, Christmas Eve, New Year's Eve was fantastic. So I would say that -- and Thanksgiving was also fantastic. So I think the actual performance on the holidays was -- it was very, very good. And then I would say that in terms of things like the event business, we have very good books in terms of bookings. But we did see a little bit less of last-minute bookings on events, which we typically see right in the beginning of December a pretty big rush for last-minute events. We didn't see this trend last year. But overall, I would say that the holiday business was very good for the business or for the company.

Okay. And then you talked about emphasizing value in kind of what you call the choppy market here. You gave your guidance for restaurant-level margins. How can we kind of think about, and how are you guys balancing, emphasizing some value proposition while at the same time, driving what looks like improvements in restaurant level margin?

Well, I mean, we did that in the fourth quarter. So I mean we did feature $3, $6, $9 and other value layers in there. But also remember that we balance that with premium price promotions in the restaurants. So we will balance that with things like the Wagyu promotion at STK or we would do the bounty of the Seven Seas promotion. So we're barbelling the value with the premium products. And obviously, the higher end consumer still is actively participating on trading up to premium products. So that's how we balance a big part of that and just keeping the higher-end promotions really strong. And then the second thing that we do to balance that out is we put a lot of attention into our cocktail program. So if you were in the restaurants during the holidays, you probably noticed our emphasis on holiday cocktails and -- as well as brunch day part cocktails. So we balance the value introductions to -- that make the brand accessible with some premium cocktail and product offerings in restaurants.

Okay. And then the last one for me. Just as we think about these next 3 that are currently under construction, I know that things can always shift a little bit, but any insight into kind of the timing of the next 3 openings?

Yes. I mean, the next restaurant that we will be opening is Aventura Mall in Florida. That restaurant has been in construction now for about 2 months, maybe even a little longer than that. So it's in good progress. And again, the million-dollar question these days about these openings is how you clear out the permits at the end. Some of the times, it takes 2 to 3 weeks to get all the inspections, and it seems like it takes a little bit of a longer time to clear that out. But I would say, towards the middle to the end of the second quarter for Aventura Mall's restaurant to open. And then immediately thereafter, we will open the Salt Water Social. And then early mid-third quarter or mid-third quarter, we'll open the Kona Grill in Tigard, Oregon. And then the rest of the development is towards the end of the third, beginning of fourth quarter. We will have a licensed restaurant in there in the middle of the second quarter this year.

This concludes our question-and-answer session. I would like to turn the conference back over to Manny Hilario for any closing remarks.

Thank you. As always, I'd like to recognize the team for its commitment to our mission and executing at a very high level. So I appreciate everyone's contributions for that. And then also thank you for your time today to be on the call here and I look forward to seeing you all in our restaurants. Everybody, have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.