One Group Hospitality Inc (STKS) 2018 Q4 法說會逐字稿

Greetings, and welcome to The ONE Group Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Linda Siluk. Thank you. Please begin.

Thank you, operator, and good afternoon. Joining me today are Manny Hilario, our President and CEO; as well as Tyler Loy, our incoming Chief Financial Officer.

Before we begin our formal remarks, we must remind you that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, 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, including projections, 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 our call, we will refer to certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. 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 and reconciliations to other GAAP measures. For reconciliations of these measures, such as adjusted EBITDA and total food and beverage sales at owned and managed and licensed units, to GAAP measures and a discussion of why we consider these measures useful, see our earnings release issued earlier today.

With that, I'd like to turn the call over to Manny Hilario. Manny?

Thank you, Linda, and thank you all for your continued interest in The ONE Group. I would like to welcome Tyler as our new Chief Financial Officer, as we announced earlier today. I have worked with Tyler in the past at several restaurant companies, and most recently Tyler has reported directly to me as Vice President of Strategy. We determined his significant industry, financial and strategic experience make him the right candidate to take on the permanent role of CFO. We are also pleased that Linda Siluk had agreed to become a permanent member of The ONE Group family as our Chief Administrative Officer, a new position at the company, where she will be responsible for overseeing legal, risk management and tax matters. I look forward to continue working with her in this capacity.

With these appointments, our executive leadership is now in place. And together, we plan to capitalize on the available white space opportunity for unique vibe-dining experiences that has made STK a truly differentiated brand across the globe.

Looking back now on my first full year as CEO, I could not be more proud of the progress we have made and continue to make with respect to our 4 key strategic initiatives, as I will explain in this call. It is truly a testament to the hard work of our teams each and every day. Throughout last year, I had the pleasure of visiting our venues and meeting with our team members and guests. I remain impressed by the strength of our STK brand in owning the vibe-dining experience and the quality of our team in executing flawlessly. This is an exciting time for STK, and I look forward to continue leading us through this next chapter of our robust profitable growth.

As you have already seen from our earnings press release, 2018 was undoubtedly an outstanding year for The ONE Group. We significantly increased revenue, which included a 9.4% increase in comparable store sales. We achieved an impressive 50% increase in adjusted EBITDA as a result of strong growth in revenue. And we maintained a disciplined approach to costs and allocation of capital, allowing us to reduce debt by $2 million. We also continue to expand our footprint with the opening of 2 international licensed STKs and 1 domestic company-owned STK.

Turning to the fourth quarter specifically. We reported an increase in total revenue of 20%, which includes a 15% increase in comparable store sales. We leveraged this to an impressive 68% increase in adjusted EBITDA. We are also particularly impressed with our restaurant-level profitability, which increased 250 basis points. These outstanding results continue to validate the success of our 4 key strategic initiatives. We will continue to execute against these strategic initiatives throughout 2019.

Number one, driving comparable sales. We are focused on driving an increase in comparable sales across all of our restaurants. Since joining The ONE Group, my team has implemented numerous sales-driving tactics aimed at delivering an exceptional dining experience to each guest that highlights our differentiated vibe-dining experience. As a result of these initiatives, during the fourth quarter, our comparable sales increased an impressive 15% on top of the 6% increase in the prior year. That's a 2-year stacked comp of 21%. More importantly, all the stores included in our same-store sales base had positive comparable store sales, which clearly demonstrates our ability to drive consistency across our whole portfolio of restaurants.

Additionally, we have achieved this growth in comparable sales primarily through an increase in traffic and mix while taking modest price increases in 2018. While we will lap tougher comparisons, we are further encouraged that our momentum has continued into the first quarter of 2019. This significant sales improvement has been achieved as a result of being laser-focused on our highly differentiated vibe-dining experience, which provides our guests with great memories of their night out.

One way in which we improve the guest experience is through our elevated food program. We saw the positive impact through an increase in food scores and, more importantly, through social media as we regularly track presence of the STK brand through our guests' social media presence. Our elevated food offerings, premium menu items and unique seasonal handcrafted cocktails create Instagrammable moments for our guests, and we love when they post pictures of their vibe-dining experience on social media. This is such a crucial element to the brand that, last year, we began tying a portion of general manager incentive compensation to higher social media scores because we know social media plays a significant role in driving guests into our restaurants.

During the fourth quarter, we experienced a significant increase in our high-margin event business. As you know, during 2018, we centralized the leadership of the event sales function in our home office, and we spent a lot of time refining the event business model. During the holiday season, we began to see the success of this hard work in terms of our ability to book and provide great event-dining experiences. We think there's a lot more opportunity because our unique dining experiences are perfectly suited for events or group dining.

Our increased marketing efforts have paid dividends. We launched our happy hour in May of 2018, which not only provides great price points to guests, but also leverages our shoulder periods. We have been successfully converting our happy hour guests to sit-down table guests for 6 and 6:30 reservations, utilizing our capacity in the off-peak period.

Number two, improving operational efficiency in our restaurants. In addition to growing the top line, throughout 2018, we made significant progress in creating operational efficiencies within the 4 walls of our restaurants. These efforts resulted in an impressive 350 basis points improvement in owned restaurant margin for 2018. This was accomplished through the significant headway we made in streamlining our menus, which reduced waste, while we became more adept at effectively managing labor scheduling, which helped us mitigate the macroeconomic labor headwinds.

Notably, our restaurants have experienced significantly lower turnover than the industry because our servers benefit from the high volumes we generate, which in turn creates fantastic income opportunities for them. We also continue to reevaluate our various service contracts to see where we can optimize costs and eliminate waste. We are still early in our marketing expansion program, and we expect to see continued leverage throughout the business in 2019 as we benefit from growing economies of scale.

Number three, reducing G&A at the corporate level. With respect to reducing G&A at the corporate level, our fourth quarter and full year comparisons demonstrate we have made meaningful headway rightsizing this critical line item. G&A declined 360 basis points to 12.3% of total revenues in the fourth quarter of 2018. On an adjusted basis, G&A decreased approximately 180 basis points to 11.1% of total revenues. Even more importantly, for the full year 2018, G&A decreased 190 basis points to 13% of total revenues. And on an adjusted basis, G&A decreased 190 basis points to 11.2% of total revenues. We have achieved G&A leverage in part through a reduction in headcount and better hiring practices across all key positions as we set the company for future growth.

Additionally, we consolidated our New York office, occupying half the space we previously used, and moved several employees to our lower-cost Denver, Colorado, office. We expect G&A to be approximately $2 million per quarter on a go-forward basis, excluding stock-based compensation.

Number four, focusing on asset-light growth. Finally, we continue to focus our development growth on high-margin asset-light deals. We have a very robust pipeline of managed and licensed restaurants as well as F&B opportunities ahead of us. Driving this demand is the unique guest dining and hospitality experiences that we are able to create. During 2018, we opened 2 international licensed STKs: our second STK in Dubai and our first STK in Mexico City. We also opened 1 company-owned STK restaurant in San Diego in addition to the already existing licensed STK Rooftop. We are encouraged that all 3 new restaurants have opened successfully and are meeting or exceeding their initial targets.

2019 is off to a robust start. In January, we opened our third STK restaurant in the Middle East region with an international licensed STK in Doha at the newly renovated Ritz-Carlton Hotel. Just recently, in March, we opened a company-owned STK in Nashville, Tennessee, downtown in the Gulch neighborhood between Music Row and Downtown. While it's still very early, we are encouraged to see the initial success these restaurants are demonstrating.

In the second half of 2019, we plan to open an additional 2 to 4 STK restaurants and add 1 to 2 food and beverage venues. And if we look into our longer-term pipeline, we have a tremendous amount of projects that we are working on for 2020 and 2021 to continue expanding our company and brand.

With the right team, rightsized cost structure and strong operational performance at the restaurant level, we are continuing growth mode as we are in the early stage of our global opportunity. We are committed to leveraging our STK brand strength by extending our presence both domestically and internationally, and we believe there's a global addressable market opportunity for at least 200 locations, including company-owned STKs, licensed STKs and managed F&B and STK locations. This represents in excess of $1 billion systemwide food and beverage revenue opportunity.

With that, I would like now to turn the call back to Linda. Linda?

Thank you, Manny. For the fourth quarter ended December 31, 2018, total GAAP revenues were $25.8 million, representing a 19.9% increase from the comparable quarter last year. As Manny mentioned earlier, comparable sales at owned and managed STK restaurants rose 15%. Included in our total revenues for the fourth quarter of 2018 is our owned restaurant net revenue of $20 million, which increased approximately 20.7% compared to $16.6 million in the fourth quarter of 2017. The increase was primarily due to an increase of 14.9% comparable store sales for domestic company-owned STK restaurants coupled with the opening of STK San Diego in July 2018.

Management license and incentive fee revenues increased approximately 16.7% to $3.7 million in the fourth quarter of 2018 compared to $3.2 million in the fourth quarter of 2017. The increase was driven by the launch of the licensed STK Dubai Downtown in July 2018 and STK Mexico in August 2018, coupled with an increase in performance at existing locations.

Owned food, beverage and other net revenues increased 18.2% to $2.1 million in the fourth quarter of 2018 from $1.8 million in the fourth quarter of 2017. The increase was a result of increased sales in the holiday and year-end period. Owned restaurant cost of sales as a percentage of owned restaurant net revenues decreased 100 basis points to 25.5% in the fourth quarter of 2018 compared to 26.5% in the comparable quarter last year. The year-over-year decrease was due to the cost-savings initiatives put in place at the restaurant level across all other company-owned units, partially offset by the opening of STK San Diego. We typically run higher costs in the first 6 to 9 months of a restaurant's opening.

Owned restaurant operating expenses as a percentage of owned restaurant net revenues decreased approximately 150 basis points to 55.2% in the fourth quarter of 2018 compared to 56.7% in the fourth quarter of 2017. The decrease is due primarily to the cost-savings initiatives put in place at the restaurant level, primarily in labor management, along with the leverage provided by our sales increase. These, however, were partially offset by the impact of minimum wage increases and the opening of STK San Diego.

On a total reported basis, general and administrative expenses, including stock-based compensation for the fourth quarter of 2018, decreased to $3.2 million. As a percentage of total revenues, general and administrative expenses decreased 360 basis points to 12.3% of total revenues. The decrease in the G&A rate is a result of reductions in the overhead structure over the last year and additional leverage as a result of an increase in revenue. On a go-forward basis, we would expect annual G&A to run about $8 million or $2 million per quarter, excluding noncash stock-based compensation.

When adjusting for items we find onetime in nature, adjusted general and administrative costs increased slightly to $2.9 million in the fourth quarter of 2018, reflecting substantial additional bonuses on a year-over-year basis based on the strength of the company's performance. As a percentage of revenues, however, general and administrative expenses decreased 180 basis points to 11.1% of total revenues.

Restaurant preopening costs for the fourth quarter of 2018 were $35,000, a decrease of $274,000 from the $309,000 incurred in the fourth quarter of 2017. This decrease was related to the timing of the opening of STK San Diego and STK Nashville.

Interest expense net of interest income was approximately $291,000 in the fourth quarter of 2018 compared to $363,000 in the fourth quarter of the prior year, reflecting lower outstanding debt balances. Note that our total outstanding debt, current and long term, is now approximately $10.3 million compared to total debt outstanding of $13.4 million at the end of December 2017.

Income tax expense for the fourth quarter of 2018 was approximately $268,000 compared to an income tax expense of $235,000 for the fourth quarter of 2017. For the fourth quarter of 2018, net income attributable to The ONE Group Hospitality, Inc. was $3.2 million or $0.11 income per share compared to the net loss of $348,000 in 2017 or $0.01 loss per share.

Adjusted EBITDA attributable to The ONE Group for the fourth quarter was $4.2 million, an increase of 68% over the prior year adjusted EBITDA of $2.5 million. We have included, as we have in the past, a reconciliation of adjusted EBITDA to GAAP net income from continuing operations and GAAP revenue to total food and beverage sales at owned and managed properties in the tables in the fourth quarter earnings release.

With that, I'd like to turn the call back to Manny. Manny?

Thank you, Linda. I'd like to introduce and welcome again Tyler as our new Chief Financial Officer, as announced earlier today, and turn the call over to him for comments and our company guidance. Tyler?

Thank you, Manny. I appreciate your confidence, and I'm excited to begin my new role as CFO. I look forward to continuing to work with you, Linda and the entire ONE Group team in executing our 4 key strategic initiatives and capitalizing on the significant opportunity ahead. We have a great company and a fantastic brand in STK that I'm honored to have joined last year, and I intend to work hard every day in my new capacity for the benefit of our teams, guests and shareholders.

Now I'd like to provide some forward-looking commentary on our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We, as always, remind our investors the actual numbers and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including weather conditions and factors under control of landlords, contractors, licensees and regulatory and licensing authorities.

Based on the information available now and the expectations as of today, we are providing you with the following expanded financial targets for 2019.

Beginning with the top line. We project our total GAAP revenues to be between $93 million and $95 million. We estimate that total food and beverage sales at our owned and managed units will be between $190 million and $200 million. We expect comparable store sales for the year to grow at approximately 3% to 4%, a slight increase over previous guidance. And as a reminder, we are lapping very strong comparisons from 2018. We estimate total food and beverage costs to be approximately 25% to 26%. Approximately 50% of our beef is under contract, and the current estimate is based on negotiations with suppliers, coupled with current and expected market conditions concerning fresh and other commodity items that we are either unable or have currently elected not to contract for longer periods of time.

Total G&A of approximately $8 million or approximately $2 million per quarter, excluding stock-based compensation. We are expecting adjusted EBITDA of $13 million, which would represent an approximate 25% growth compared to 2018. Total capital expenditures, net of allowances received from landlords, of approximately $3 million to $4 million. And finally, 3 to 5 licensed restaurant units, 1 company-owned STK and 1 to 2 food and beverage hospitality venue.

With that, I'll now turn the call back to Manny for closing remarks.

Thank you, Tyler. Before we go to Q&A, I just want to reiterate that 2018 was an outstanding year, and 2019 is off to a strong start. None of this would be possible if not for the great efforts of our entire ONE Group team, a truly exceptional group of people who are as committed to our plan as they are to providing world-class hospitality to our guests.

Thank you, team, and thank you all for joining us on the call today. Linda, Tyler and myself are happy to answer any questions that you may have. Operator?

(Operator Instructions) Our first question comes from the line of Nicole Miller with Piper Jaffray.

I had 2 questions. But first I wanted to congratulate both Linda and Tyler. Manny, I was wondering, you talked about in your opening remarks an asset-light focus. And how do we think about the total addressable market or the white space as you termed it? Is that global? And what is the time frame, meaning is there a long runway for growth here?

Thanks, Nicole. So as we think of white space and as we've commented on the script, we truly believe that the opportunity is for 200 units or more probably. As we think of the addressable relative to domestic-international, we probably think of it as a 50-50 split between the U.S. and the international opportunity. And frankly, we're early on. And I believe that as we get more experience in building restaurants like we have the last 15 months -- for the last 15 months, we have opened 5 STKs. So we do have a nice track record now of opening restaurants. So I think as we gain more confidence, I think we'll be able to really look at the pace of that. So I think we will get to critical mass here in the very near future. I also believe that our pipeline which we have in place today has become substantial, so there's a tremendous amount of interest in us -- in both STK scenarios as well as F&B. So I do think that although we don't provide a definitive date as to when we capture that opportunity, I do think that everything that needs to be in place to get to that opportunity in the relative near future is all in place right now. And I'm particularly excited about the addition of Tyler as CFO and Linda staying on as Chief Administrative Officer. I truly now believe that our team is fully together. And I do think that all of it is there: white space, pipeline, leadership team. And as you saw from the press release, we also now have a new credit facility coming on. So we have also financial capital. So we're super excited about the future for the company and our STK brand.

That's very helpful. And I'll actually just apologize, I think I didn't -- I could ask the question better. It's on that asset-light focus, the food and bev. And I don't know how much more there is to say about it, but that was what I was thinking about more specifically. And to me, it seems like that's a massive, massive opportunity.

Yes, absolutely, and sorry for not addressing the asset light. But the majority of the requests coming in are individuals, particularly in the pipeline side, who are interested in really growing with the brand. So our growth will be and continue to be on the asset-light side, and I think there's a tremendous amount of demand there because the reality is our expertise in vibe dining in today's environment is super desirable because everyone's looking for highly differentiated brands. And the fact that we have a very special ability to use our vibe dining to create these experiences in the restaurants is really driving a lot of interest from people who want to invest and grow with the brand.

And then my second and final question is around your people and your talent. You have ambassadors. You talked about your GMs. I think this falls within one of your strategies or areas of focus. But they're very impactful on performance, so how do they leverage best practices?

I'm sorry. I missed the last part of the question, Nicole.

Just wondering how they interact and how they leverage best practices. It's very important, I think, to the store-level performance. So I just want to hear more about how you communicate with them and how they communicate with each other.

Yes. So I think the fundamental philosophy of our operations is that we have a very formalized communication path in terms -- for instance, we have regularly scheduled meetings between management and the directors of operations. But particularly for the managers, we have high participation. Everyone goes to the restaurants, so there's a lot of our folks visiting the restaurants. And then we also do regularly scheduled conferences with the managers where we dedicate a day for us to talk best practices and what each one of the units is doing. So for instance, in October, we had one of our meetings in Denver where we brought all our GMs and our chefs, and really the focus of that was to describe the things that we're doing where we're doing very well in the restaurants. And particularly, if we look at our results in the fourth quarter, we believe that, that idea sharing from that meeting was really critical in terms of helping us deliver a 15% same-store sales in the quarter. So think of things like best practices in managing flow in the dining room in terms of loading up reservations and even things about how to deal with a high demand for event business. So idea sharing is critical. We do have formalized meetings and opportunities for that. But more importantly is that everyone from the executive team to the direct level in this business is super engaged in going to the units and we engage in very robust dialogue with our managers. Also, this year, we're going to do a couple of culinary meetings with our chefs to keep evolving the menu. As you probably know, we do seasonal menus. So 3 times a year, we do have an opportunity to add creativity to our menu. So the point here is that human capital needs to be engaged in the business, and we try to put together a lot of forums and meetings to make sure that we can share ideas across the whole company. It's a very -- it's an incredible deep team. I think that's one of the things that I reiterate with everyone that I speak with is that, beyond the Tylers, Lindas and everyone else on this call, we just have an incredible depth in all our operating levels in the business. So we're super excited about the potential of leveraging that human capital to grow the business.

Our next question comes from the line of Chris Krueger with Lake Street Capital Markets.

I just have a few questions. I don't think you commented on the Super Bowl, which I know is a first quarter event, but it looks like you had multiple events for that weekend in Atlanta. I'm wondering if you can give us any insight to how that went or are you pleased with it.

Yes. So this year, the Super Bowl was in Atlanta, which is one of the cities where we have a great restaurant in. And so we had a tremendous amount of activity on the PR side. We hosted the big event for DIRECTV, and we were the food purveyor there. And we also worked with Shaquille O'Neal on his Shaq's Fun House. And we also did a charity event with Mike Ditka and the Jaworski foundation. So we were super active in terms of not just utilizing the Super Bowl for generating revenues, which we did not to the same degree that we've done in prior years because the DIRECTV event is only 1 day when it used to be several days in the past. So the revenues won't be the same magnitude as what we've seen in the past, but the event was certainly super successful from the perspective of driving interest on the brand. And as you know, digital and social media is a critical element of our marketing strategy. And we utilized the Super Bowl event to create a tremendous amount of posting and activity in the social media world. So if you were following social media and STK during that time period, we really lit up the Internet with a lot of people commenting and sharing information. So we were super excited about the value that we got from a PR perspective of that event. And we do have sales and it was profitable, so it's kind of the perfect combination of profitability, revenues and lots of PR.

Got it. And on that same note, are there -- I know the Super Bowl is a massive, huge event, but are there other cities where you have units that have other important events like golf tournaments or other stuff like that, that you can point to for this coming year?

Yes. So we actually have created a separate team in the company that's led by Celeste Fierro, who used to be VP of Operations. And the sole purpose of that team is to develop interest in other events. So for instance, think of Coachella coming up and other type of sporting events and so forth. So we do have a formalized strategy in place, which is now being head up by Celeste, to go out and percolate interests for us to be there. As you can imagine, because of the position of the brand as being super fun and vibe and exciting, we've been getting a lot of -- a lot of people are talking to us about our opportunity to host parties during some of these events. So stay tuned. As we know more of the calendar, we will certainly share with everyone. But this will become a very big part of our business model whereby we utilize these large sporting events and special concerts to really, on a pop-up basis, participate and elevate awareness of the STK brand.

Okay. And you indicated in your comments that all of your stores had positive same-store sales. In general, are you happy with the progress they are making, where some of these stores are in negative territory 1 year ago?

So the answer is no, not all of them were negative. I think a lot of them actually were positive in the previous year. But I think that what we're very pleased with is we believe the strategies and tactics that we have in place are lifting all restaurants equally, so things like happy hour, things like emphasis in digital, things like emphasizing the new food program that we launched in 2018. So I think all those things are coming together, and I think it lifted the whole brand up. And even restaurants in markets that were newer to us, for instance, Denver and Chicago and San Diego, these things work extremely well in those markets. So I think we learned a lot about how powerful the brand can really do when the strategy and tactics, in particular the digital, social media marketing strategy, come together. So it was a very powerful fourth quarter. I think as we mentioned in the prepared comments, momentum has continued into the first quarter. So I think a lot of the strategies that we have in place are multiyear strategies and tactics. So we're -- we feel that will continue to work for us in 2019.

All right. Last question. I didn't quite catch the comments about the minimum wage in San Diego. Can you -- Linda, can you repeat that, please?

I think what the point is, is that sometimes we have restaurants in their infancy. Sometimes they're a little heavy from a leverage point of view, so it can drag down the rate in their start-up period as well as minimum wages across the company.

So I think that San Diego is isolated to the margin being lower in the early days of operations and then separate from the minimum wage impact, which we saw in a lot of other operations.

Our next question comes from the line of Spencer Grimes with Twinleaf Management.

Two questions, please. First on 2019 forecast or guidance, trying to understand this better. When you talk about a 3% to 4% comparable sales growth forecast and that's coming off of 15% in 2018, I know you mentioned a tough comp there, but that seems like a fairly substantial step-down. And then as that rolls into the $93 million to $95 million top line guidance, I'm trying to understand, you did $86 million last year and you've got 9-plus months in Nashville and 6 months in San Diego and then the new addition planned for this year, it seems like you'll be closer to $100 million. I'm trying to understand how to reconcile that. And then on the cost side, please, you talk about the $8 million annualized G&A expense at the corporate level and you talk about that being on a go-forward basis. But it looks like you were at $2.8 million on a cash basis in Q4. So I'm wondering how quickly you think you can get it to that $2 million quarterly number.

Okay. That sounds more like 3 questions, but I'll start with number one. So the first question about going from 15%, we actually were up 9% in the year and we were 15% in the fourth quarter with a 21% stack in the fourth quarter. As much as I'd like to believe that we can do those numbers, which by the way, our guidance doesn't imply that we can do -- cannot do better, but I do think that a 3% to 4% is an achievable number for us. Because, frankly, one of the things that I do want to establish culturally here is that the numbers that we go out and tell people -- we make the numbers, which actually is exactly why we met exactly the high end of our guided EBITDA for the numbers. So we do try to create a culture of meeting the numbers that we lay out in our guidance. So obviously, you have your model. And within our model, the numbers that we went through work within that particular model, so the 3% to 4%, plus what we see for the rest of the year in San Diego. Actually, it's 5 months for San Diego and 9 months for Nashville. Obviously, I don't want to get ahead of ourselves in Nashville. I think Nashville is going to be a super market for us, but I'd rather believe and forecast the number that we can actually achieve there. So I do think everything is really good. In terms of the G&A numbers, the fourth quarter, just as an FYI, is not a good benchmark for the G&A for the whole year just because that's where we book the bonuses or a big portion of the bonuses for achieving targets. And because we had a fantastic 2018, we did book up the bonuses to reward the team for a job well done, so everyone has the bonus program, and we addressed that. I mean, I think the $8 million in G&A reflect a couple of things. Number one is we are little by little exiting the New York office, which is an incredible, expensive lease and we moved the majority of our operations to Denver, which is much cheaper. So I think that's going to pay off tremendously. We also trimmed our G&A in the later part of the year, which will help bring down the payroll costs in 2019. And then, frankly, on the professional cost side, we did things like we changed our auditors, which we will change a meaningful amount of money there, but that's just part of our strategy of dealing with professional service. So we don't think that the $2 million is unachievable, particularly as you read the guidance, it's actually before or exempting for the stock-based comp, which the GAAP number includes the stock-based comp. So I do think that again -- I think just to summarize my answer there is we want to achieve our guidance. We want to make sure that we give our investors and followers transparency as to how the numbers are doing. And we feel that if we are able to reach our guided number of 3% to 4% in sales and $13 million in EBITDA, we'd post results of one of the faster-growing companies in the restaurant space. So we're very excited about that.

And do you intend to be out of New York in terms of the headquarters location entirely at some point?

We will continue to have a small office in New York because I believe that from a development perspective and because of the vibe element of the business, I do think it's important to keep connection to the roots of the business, and particularly to the Meatpacking District just being in Manhattan itself. So we will always keep a small operation/development office there. But the concentration of all the administrative work will be done out of the Denver office for now. And we also have an office in the U.K., in London, where we house our international operations.

Finally, last question, if I could, in the interest expense savings. Have you guys been able to determine what the magnitude of that might be with the new line?

Yes, I mean -- yes, so good question. So current average interest is around 7.5%. The new facility will be much better than that, and we should be saving 2 -- 2 points on the dollar balance, so there'll be meaningful savings to the interest line.

Yes.

Our next question comes from the line of [Will Davis], a private investor.

Tyler, welcome to the team.

Thank you.

Yes. Great. My question is you've done a lot to fix the balance sheet. It looks like you'll be debt free here shortly. Wondering what your plans would be, maybe looking out 18 months, for use of excess cash. Would you consider a buyback? Or just curious how you're thinking about that.

So thanks for that question. So it's a nice problem to have, to have that excess cash. And we're coming off the period where we've done lots of work in the balance sheet, as you pointed out. And first objective here is to get the debt taken care of, which we will as we continue to generate cash flow. And again, as we always do, I think it's the responsibility of our board in conjunction with management to look at what we're going to do with that excess capital. So it will be a good, healthy discussion for us to have in the middle of the year. So at this point, we don't have any stated goal of what to do with that, although internally, we certainly debate what would be the best way to return value back to the shareholders. So we definitely will be taking a look at that throughout the year as we generate the cash.

And if I could ask one other -- I know that you haven't gotten into specifics about where other licensed properties might be globally, but are there any certain markets that we should keep an eye on, certain regions? Any kind of color there would be interesting.

Great question. So lots of interest in the U.S. We have a pipeline in Canada, a pipeline in Mexico, Latin America. We have sites percolating heavily in Europe because we do have very established relationships with players like the ME Hotel. And we are actively looking at leads into the Asian market. We've been -- last 3 or 4 months, we've had 2 or 3, maybe 4 opportunities where we have -- we've been given a look for some opportunities. But again, lots of good ideas, and so pipeline is super active. And again, I just want to make sure that we're careful that we don't overdo it, so we do have to make sure that our resources are lined up and -- in terms of the growth side. But again, we want to make sure that we don't put a restaurant in some remote market that we just can't get to. So we're also being cautious that, although there's a great pipeline, we also want to make sure that it's on strategy with what we want to do to get to the 200-plus global locations. So super excited about that and stay tuned. You'll see a lot of opportunities coming out of Europe right now and the U.S.

Our next question comes from the line of Marcel Herbst with Herbst Capital Management.

Can you talk a little bit about the approximate revenue size and the ETA of your F&B management deals like in Florence, Indigo Hotel and Victoria House? And then you also just started to talk a little bit about the pipeline. Maybe you can add a little bit more detail in terms of what's in store for 2020.

Yes, so great question. So for '19, we mentioned 2 to 4 STKs, and we do -- we mentioned 1 or 2 F&B deals. The F&B deals, you've already mentioned them, Florence, where the hotel -- it's in a hotel that is scheduled to be completed by August. I'm always cautious about providing a definitive deadline on that just because it's a hotel, and there's a lot of moving pieces there. But we will get Florence, we feel pretty comfortable, within this year. And then the Indigo/Victory House, we're very close to getting that -- our presence in there. So those 2 F&B deals are pretty well -- we're way on our way there. In terms of the STK side, we currently have Puerto Rico under construction. So it's -- the site is moving well. We do have a site in Guadalajara, Mexico. That's already also in design as well as the Scottsdale property that's also pretty advanced in [design]. So pipeline for '19 is we're pretty solid on there. And then '20, we have a huge amount of percolating. It's really a question of how we prioritize which ones we're going to do. We have a very heavy '20 pipeline in place right now, going from places like Barcelona to maybe Madrid opportunities as well. We have a lot of stuff on our pipeline for '20, some Caribbean hotel opportunities. So we're not short on that. So that's kind of our plan, Puerto Rico; Guadalajara, Mexico; Scottsdale. We'll have the Indigo/Victory House in there, and then Florence is going to be towards the end of the year.

Maybe one more. You recently opened Nashville, and I was wondering what kind of payback period do you expect when you look at forward cash flow in relation to CapEx you had to put in there.

So the recovery in Nashville is going to be relatively quick. One, we didn't spend a lot of money getting in there. Two, the TIs are very -- are very good TIs in that deal. We'll pay back that site year, 1.5 years. It's how bullish we are about that site. Also, remember that we got 6 months of free rent on the site. So if you start doing the math about our all in, and -- that is very low. And because we were very quick in going through the design to opening that restaurant, preopening is going to be relatively small to what you're used to seeing in the past. So I think it's a very efficient growth there. It's truly as close to asset light as you can get on a company-owned store once you add in the 6 months of free rent plus the $600,000-plus in TI. And I think how profitable that property will actually be, so we're super excited about Nashville.

We have reached the end of our Q&A session. Allow me to hand the floor back over to Mr. Hilario for closing remarks.

Thank you. We appreciate everyone's interest in The ONE Group. And also, I want to say a very warm thank you to the whole team for what has been an incredible 2018 and what has become also an incredible start to 2019. So my hats off to the execution of the team, and I look forward to seeing you all in our restaurants. Thank you for being here.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.