One Group Hospitality Inc (STKS) 2021 Q1 法說會逐字稿

Greetings, and welcome to The ONE Group First Quarter 2021 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Tyler Loy. Tyler, you may begin.

Thank you, operator, and good afternoon. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Please also note that these forward-looking statements reflect our opinion only as 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 refer to certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results required 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 of 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'd like to turn the call over to Manny Hilario. Manny?

Thank you, Tyler, and hello, everyone. We hope you and your families are staying healthy and safe through these unprecedented times, and we sincerely appreciate everyone's continued interest in The ONE Group. I know that I have said this before, but it certainly bears repeating. I'm so proud of the way our teams overcame the obstacles of this past year and having -- are now meeting the continued recovery of our business.

Our plan today is for me to provide some detail on our recent results and reiterate our optimism for the future. Afterwards, I will discuss our development plans and, finally, turn the call over to Tyler, who will walk you through the quarterly financials in greater detail.

First and foremost, I would like to reiterate that although we see light at the end of the tunnel, we are aware and cautious that much uncertainty still remains due to COVID-19. As local restrictions began to ease and capacity increase in our restaurants, we experienced sequential same-store sales improvement throughout the quarter, resulting in an increase of 3.3% compared to 2019, and both brands being positive compared to 2019 for the quarter. Momentum and acceleration continues as we then experienced an even greater improvement in April as indoor dining capacity continued to increase and vaccines became more rarely available.

Same-store sales increased 32.3% in April, including a 47.4% increase at STK, and an 18.6% increase at Kona Grill, all compared to 2019. Consumers more than ever, as they become fully vaccinated, are looking for a fun and differentiated social time outside of their homes and our concepts, featuring vibe dining our [wall] positions to deliver. Our teams are effectively delivering on all operational marketing and culinary strategies. The results are truly remarkable, and I couldn't be prouder of our teams.

We are also extremely encouraged by industry-leading restaurant-level margin as a result of our robust revenue growth and extremely effective cost management within our 4 walls. We were able to achieve an almost 19% restaurant-level profit for the first quarter our highest restaurant-level profit in the company's history. We are incredibly pleased with this accomplishment, especially considering that our quarterly performance was still impacted by indoor dining capacity restriction mandates.

At STK, we continue to see momentum building in date nights and social events, which has more than replaced the business traveler and corporate private events. A layer of business that we expect to return and further enhance our unit volumes. Additionally, brunch has now become a core business in our concepts as it allows us to use our capacity and capture the high demand we are seeing on Saturdays and Sundays.

In April 2021, our 13 domestic STKs produced an average weekly sales volume of $261,000. Year-to-date 2021, our 13 domestic STKs produced an average weekly sales volume of $211,000. To put these numbers in perspective, during the fourth quarter of 2019, our busiest sales quarter on record, these same 13 STK locations had an average weekly sales volume of $224,000. This fits values to the strength of the brand across the country. We anticipate that the return of the business traveler and corporate private events will be additive as we sell in mid-week, Monday through Wednesday capacity.

Furthermore, the addition of capacity in key markets, such as Las Vegas and New York should further accelerate the sales volume numbers.

At Kona Grill, we have instituted several initiatives to drive sustained growth. Specifically, we have launched new menus across the brand, revived the bar and patio programs, including adding more active music and implemented marketing activities to leverage our social media capabilities. Additionally, we continue to build brunch, which now have been rolled out to all 24 locations and the feedback we have received from our guests has been tremendously positive.

In April 2021, our Kona Grill produced an impressive average weekly sales volume of $97,000, a level that we expect will continue to improve and on track with our objective of having Kona Grill to be a $5 million AUV concept.

Year-to-date 2021, our domestic Kona Grill produced an average weekly sales volume of $88,000 or approximately 10% more than the AUVs at the time of acquisition. Overall, we believe that both brands have recovered extremely well, and we feel optimistic about the opportunities for continued sales growth for the rest of the year.

Regarding forthcoming capacity, for example, in a couple of weeks, restaurant indoor capacity will be increasing to 75% in New York City, and guests will be able to set up the bar and order beverages without ordering food. It will also be lifting the midnight curfew, allowing our New York City restaurants to stay open longer during peak vacant times. Guests will also be able to wait for that table at the bar, and they no longer will have to end their night when their dinner is finished.

We are also seeing a sales benefit from our takeout and delivery business, both at STK and Kona Grill. Takeout and delivery comprised approximately 13% of sales during the first quarter, which represents a 155% increase compared to the first quarter last year. We attribute our success to our investments in state-of-the-art technology, execution of our operations and marketing initiatives, which have enabled our guests to order for (inaudible) pickup or delivery from 9 separate delivery partners.

It is important to note, though, we are in the early stages of our delivery strategy, and we have been actively marketing this high-margin additive channel. As a result, over 50% of our delivery transactions, our new customers, and we look at delivery as a huge opportunity with the goal of converting these guests to long-term loyal customers. We hope these customers remember us when they have a birthday or a special occasion to celebrate at our restaurants because we know how to make the experience truly unique and memorable. There is no denying that our guests are eager to return to exciting nights out with delicious food, and we are doing so in earnest.

Our vibe dining experience is also particularly attractive to so many people because it's not only a scape, but is also vastly superior to the conventional high-end steakhouse and polished casual experiences.

We firmly believe that we are the lead in this highly differentiated category and what the offer does is beyond great food and a unique bar program to include so much more, an exceptional service program complemented by great energy and great audience that results in an unmatched and unforgettable dining experience.

Now turning our focus to development. In early January, we opened a managed STK restaurant in Scottsdale, Arizona. The restaurant is off to an incredible start and continues to average over $190,000 in weekly sales. Additionally, on May 1, we opened our first airport location, an international licensed STK in the Cabo San Lucas airport. We are happy to report that the first full week of sales were approximately $150,000, despite this locations being off-peak season.

Our emphasis in bar centric business positions us well for the airport platform and makes it a natural billboard for the STK brand. We believe that this will be the first of many future airport locations globally for us. Ultimately, we are incredibly excited to bring vibe dining those traveling to and from Mexico that already experienced our STK brand elsewhere. In addition, last week, we opened 1 managed F&B venue at the London Westminster U.K. DoubleTree soon to be converted to a [Curio] hotel.

As of today, there are 3 additional STKs and 4 additional managed F&B venues under construction. And between this year and next year, we intend to open 13 new venues. This includes 8 STKs, 3 STK company-owned restaurants in Belvieu, Washington; Dallas, Texas; and San Francisco, California. 3 STK managed restaurants, Scottsdale, Arizona, which already opened in January; London, Westminster, U.K.; and London Stratford U.K. And 2 STK [Oasis] locations, including Cabo San Lucas airport, Mexico, which opened in May.

5 managed F&Bs, 2 London Westminster, 1 opened in May, and 3 London Stratford U.K. Over the longer term, we see our addressable market as 75 additional major metropolitan areas across the globe where we could grow our STK brand to 200 restaurants over the foreseeable future.

To conclude, our team has certainly proven our resiliency during these trying times, and we're doing a fantastic job welcoming guests back into our restaurants for a great vibe dining experience.

Ultimately, our focus on day-to-day execution has proved effective and translating to a strong P&L., and we are very hopeful that the trajectory that we're currently on will continue to accelerate in the months ahead.

Now I'll turn the call back to Tyler.

Thank you, Manny. Let me start by discussing our current cash and liquidity position before reviewing the first quarter financials in greater detail. As of March 31, we had $28.4 million in cash and cash equivalents on our balance sheet, and this amount has not changed materially through today. Notably, we generated positive cash flow throughout the first quarter. Finally, availability on our revolving credit facility as of the end of the quarter stood at approximately $10.7 million.

In terms of our quarterly financials, total GAAP revenues were $50.5 million, increasing 24% from $40.7 million for the same quarter last year. Included in our total revenues for the quarter is our own restaurant net revenues of $49.2 million, which increased approximately 27.5% from $38.6 million for the same quarter of last year. The increase in revenue is primarily attributable to strong sales momentum as state and local governments continue to ease seating capacity restrictions in the markets in which we operate.

Domestic consolidated comparable sales increased 3.3% for the quarter compared to 2019. For STK, comparable sales increased 1.9% and 4.6% for Kona Grill. As Manny commented, sales sequentially accelerated throughout the quarter for both STK and Kona Grill. As cities began to reopen, consolidated comparable sales for April increased 32.2% compared to 2019, including a 47.4% increase at STK and an 18.6% increase at Kona Grill.

Management license and incentive fee revenues were $1.3 million in the first quarter of 2021, compared to $2.2 million in the first quarter of 2020. This change is primarily the result of temporary closures due to COVID-19 and limited in-person seating at managed locations.

Owned restaurant cost of sales as a percentage of owned restaurant net revenue improved 180 basis points to 24.4% in the first quarter of 2021 from 26.2% in the first quarter of 2020, primarily due to purchasing synergies across the company and strong menu management. Owned restaurant operating expenses as a percentage of owned restaurant net revenue improved approximately 1,200 basis points, that's 56.8% in the first quarter of 2021, from 68.7% in the first quarter of 2020. The decrease was driven by our traction in actively managing operating costs, particularly managing restaurant labor and implementing operating cost savings measures.

Restaurant operating profit was 18.8% for the quarter, a record high for the company, and this was despite limited indoor dining capacity throughout the quarter. Again, we have made tremendous progress in running more efficient operations since the beginning of COVID-19 pandemic and plan to continue to execute the current operating model into the foreseeable future.

On a total reported basis, general and administrative expenses, including stock-based compensation for the first quarter of 2020, was $5.2 million compared to $3.4 million in the prior year, and includes $1 million of stock-based compensation, a number driven by certain grants invested due to a substantial increase in our stock price during the quarter. We consider approximately $0.5 million to be onetime in major. When adjusting for stock-based compensation, adjusted general and administrative expenses were $4.2 million in the first quarter of 2021 and $3.1 million in the first quarter of 2020.

As a percentage of revenues, adjusted general and administrative expenses were 8.2% of total revenue in the first quarter of 2021 compared to 7.5% of total revenue in the first quarter of 2020. We incurred approximately $1.6 million of direct costs related to COVID-19 during the first quarter, both primarily of costs of regular electrostatic (inaudible) venues, personal protective equipment and sanitation supplies to prevent the spread of COVID-19. This compares to $1.3 million as similar to costs last year.

Interest expense, net of interest income was $1.2 million in the quarter of 2021 and the first quarter of 2020, respectively. Income tax benefit was $0.3 million for the first quarter compared to an income tax benefit of $0.7 million for the first quarter of 2021. The current year income tax benefit was driven by discrete items related to stock-based compensation.

Net income attributable to the ONE Group Hospitality, Inc. was $70,000 or $0.00 net income per share compared to net loss of $4.6 million in the first quarter of 2020 or $0.16 net loss per share. When adjusting for COVID-19 expenses and onetime stock-based compensation, adjusted net income was $1.6 million or $0.05 net income per share compared to adjusted net loss of $3.6 million in the first quarter of 2020 or $0.13 net loss per share. Adjusted EBITDA for the first quarter attributable to The ONE Group Hospitality, Inc. was $6.5 million in the first quarter of 2021 compared to $1.6 million in the first quarter of 2020. This marks the second highest adjusted EBITDA quarter in the company's history. We have included a reconciliation of adjusted EBITDA on adjusted net income, while a GAAP net income and loss in the tables in our first quarter earnings relate.

As a reminder, due to the unprecedented market conditions and uncertainties surrounding the effects of pandemic, we cannot reasonably estimate when our business will return fully to normal operations and therefore, suspended all financial guidance last March. When we do, however, intend to provide further business updates as warranted by this evolving situation.

I will now turn the call back to Manny.

Thank you, Tyler, and thank you all for your time today. Let me conclude by saying I'm very encouraged with our results to date and our prospects for this year and beyond. Above all, I am grateful for all our teammates who bring our mission to life everyday to be the best restaurant in every market where we operate. They do this by delivering exceptional and unforgettable guest experiences to every guest every time.

I also want to thank our guests that have stuck with us over this past year and are coming back to our restaurants for the first time in a long while and enjoying the vibe dining experience they have been craving. We appreciate everyone joining us today on the call. Tyler and I are happy to answer any questions that you may have. Operator?

(Operator Instructions) Our first question comes from the line of Joshua Long with Piper Sandler.

Exciting to hear about the acceleration in sales here in the April period, and then also when paired against strong margin management in 1Q. And so I just wanted to see if you'd be able to talk about how you're thinking about margins on a go-forward basis. Noting that you've got really strong revenue levels, but just curious if there are costs that need to be layered back in as some of these jurisdictions start pulling back some of those restrictions, and maybe things start going back to normal a bit more. That 18.8% that you delivered in the first quarter restaurant level margin, if that's something that you'd expect to carry forward into 2Q and going forward?

Thanks for the question, Josh So this is Manny. I'll start, and if Tyler has additional comments, he'll add some color to it. But as I said earlier on the call, our volumes in April are about $261,000 averaged for the 13 domestic STKs. And I also mentioned that there were, for the year-to-date, about $211,000. So my expectation is that going forward as we keep revenues in that higher level range, will continue to do extremely well from a margin perspective. So I have no expectations that margins will go back.

Obviously, there is some pressures in the environment relative to commodities and labor, and we're aware of those. But there is no particular layers of costs that we'll have to put back in the P&L.

I just want to ask to make a correction here. During my statement, I did say that we have 13 domestic STKs at the end of 2019, we actually only have 12. So just want to make sure everybody knew that. So our $224,000 was for 12, not 13. But anyhow, overall, I do believe that the margin for the company for the rest of this year looks very, very good.

Tyler, anything you want to add?

No.

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

Yes. So for beef, we do have pricing locked in. Obviously, if the pressure gets to beef extremely, we do like to work with our partners. But right now, we are locked in, and so we don't anticipate anything material there. Obviously, seafood, we did see some seafood, particularly on crab, where we did have some up and down pricing throughout the quarter. We do buy some of the crab. So we did make some buys to help that out over time. We also saw some fluctuation in roster.

So there has been fluctuations, and any time that we feel that there is opportunities, we will do some future buys to just to make sure that we don't -- or I should say, buys, but we lock into pricing to make sure that we do get protection in the longer term.

So again, I think that there is -- obviously, we have seen ups and downs in a lot of the commodity lines, none of which has been material for us. As you could see on our COGS line, we had a very good COGS in the quarter, although things were going up and down throughout the quarter.

Obviously, the one that we're monitoring the most is labor. There is a lot of noise in the labor market relative to the availability of labor. I think, generally, the teams have done a very good job of retaining talent, and I think we've managed around that. And we've also been very proactive in terms of making sure that we manage wage so that we don't get surprised by it all over. So overall, yes, there's some pressure, but I think we're doing all the right things relative to managing the P&L, doing buys, lock in prices and managing labor.

Great. How -- for how long do you have those beef -- is that beef pricing locked in? How much it is still (inaudible) out there?

Until the end of this year. Until the end of the year.

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

I mean, so far, what we've seen is that the demand still outpaces the supply on capacity. And so no question that turnover of tables is still our #1 strategy. And it's not only just turning over the tables, but it's truly making sure that the experience is stellar within the right amount of times. I do think that as capacity becomes more available, we probably will work more on the end of nights day part. So think of 11:00 plus dining, where we'll probably take a little bit more of time on working on the liquor mix.

So I think that's probably going to be the next logical step will be to work on the late night seating, which frankly, we've extended a lot of our restaurants past midnight, and we've seen a tremendous amount of success there. So probably, that will be the next layer of working on check. Broad check has been tremendously healthy. So we really haven't seen any erosion because of liquor, but that's still an opportunity.

But right now, to be very honest about it, our #1 objective still is turning tables over, particularly on the weekends, which now is Thursday, Friday, Saturday and Sunday for us, which is a 4-day block of days.

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

First off, can I just confirm, Manny, did you say takeout and delivery mix 13% in the quarter?

Just about, that's right.

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

I mean it's a lever. I mean, I think, particularly, as you saw in my earlier comments, particularly as I look at Saturdays and Sundays, I think that -- and first of all, let me invite everybody to go try the program. The food is outstanding. I think the culinary team has done a great job of, in my opinion, creating what's one of the most cravable, instagrammable menus to really stand out because there is brunch. And then there is really brunch that people will remember.

So we've been working on that to later category. So I think we've been building it up. I think as we entered April, we really start seeing the impact of that day part. And the thing that I like about branch is that, as you may recall, holidays is a critical element of our marketing strategy. So brunch is a natural lever within the holiday strategy. So we've seen the power of that this year in Easter, and we saw it again in Mother's Day. So we're very excited about the potential of that day part going forward.

So expect big things coming out of it. And as we continue to build that day part. Obviously, we're still very early on it. And I think that as more people experience it, we'll get more repeat business.

So I see that as a very attractive new layer of business because historically, nothing happened really in our STKs between 10:00 a.m. and 4:00 on a Saturday and Sunday. So that's a huge amount of captured capacity now that we can turn into revenue. So stay tuned, you'll see us doing a lot of marking around that. You've probably seen in our digital marketing that our team has been very aggressive in terms of creating the impression about that day part.

And by the way, we've done brunch with vibe in mind. So it's not just coming in and getting brunch fruit, but you'll see the DJs in our locations. You'll see a lot more energy and a lot of more emphasis in making sure that we have a killer drink program that really complements what I believe to be an amazing food offering for brunch.

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

Well, I think that is improving. I think the big ones was Vegas. It's -- finally, I think, up to 80% now in capacity. We're going to see New York coming up to 75%. So those markets are coming up. And then the thing that's very exciting about those markets is, we ran a brunch for Mother's Day, and I can tell you that I am very bullish on what that day part will mean for some of these markets like New York and Vegas. We have found out that there's a tremendous amount of demand for that. So we believe that again, I think that layer is -- will be there.

And frankly, I think from a platform and layer of business, we're starting to see demand coming into the business for corporate group dining and group events. So that will be kind of the next layer of business here that the team is working on. And frankly, our appetite for those events now is Monday through Wednesday, maybe Thursday. Friday, Saturday on Sunday, we got so much momentum on the ala carte business, that business is not a priority for us.

So I guess that's a good problem to have that we can say that we're really limiting our business travel -- business development around Monday to Wednesday, which we brought the team back. We're starting to have some of our sales and events managers coming back, and I think we'll bulk up the resources and assets behind that business.

And frankly, the phones are now starting to ring. I think as vaccines get out into the public, we kind of see almost a direct connection and correlation for group events. As vaccination levels go up. So I guess, we feel very good about where we stand right now. And I think as capacity keeps coming on, I think we'll still -- we'll continue to see us building into what I think are pretty impressive AUVs and STKs at about 260 a week, and Kona Grill in the hundreds and starting to pick up. So I feel very good about how the units are executing all these programs that we put in place.

And it's always good to see it translating in-store level margins. I mean you saw that in the quarter that our still level margins are at a very high level. Keep in mind that historically, the first quarter is not one of our best seasonal quarter. So if I even framed further the margin performance in the seasonality of the business, I got to be very delighted with the margins that we did in the first quarter.

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

I'm a good restaurant guy and a horrible weather guy. But I do think that we did have sometimes within the quarter where we did have challenges in Texas. As a matter of fact, I think we had a whole week of Kona Grill in Texas that was impacted by it. Obviously, weather is weather. We have lots of patios, rooftops, everything else, but our real focus is fishing where the fish is running. So we tend to kind of not unless that become a real big culture action internally. But we did have weather events. I mean, there were markets like that. We were also operating out of tents in some of our markets like Woodbridge and Troy, Michigan, which we're happy not been since all the time anymore.

But clearly, once the weather got below the 30 degree, we did see some impact in some of these markets because of weather.

But again, overall, we did have warm days. And we did have cold days. We had dry days and wet days. And overall, I'm sure somebody does track what the net of that is, but I wouldn't say weather was a significant enough item for us to really talk about it from an analytical perspective.

And on the patio business, any commentary on kind of what you've been able to increase year-over-year in patio business?

Yes, I'm excited. So last year really was going to be the first year that we were going to, if you will, maximize patio. Unfortunately, because of COVID, we really didn't -- weren't able to do that because we were limited both in capacity and social distancing in the majority of our patios. Frankly, on Fridays, Saturdays and Sundays, our patio are very difficult to get into. As a matter of fact, one of the big complaints I get from guests is, I want to get into your patio and out (inaudible) Kona Grill, I can never get in it. So I would say that we probably have a demand that way over keep supply on patio for Kona Grill right now are challenge internally. As I said earlier, it's turned. So we do have to work on our table turns on the patio.

It's always difficult to get people out of patio seats because once people sit down and have those drinks and great food in the patio, it's always a little bit more difficult to turn the table. But again, that's a high-class problem to have, and we will have to define and really execute our table turns at the patio. So I'm super excited about -- to see what happens this year because. Hopefully, this year, there will be less limitations.

So there'll be an opportunity here for us to really see what the power of the patios should be. Looking at our AUV for Kona Grill at 100,000 in April, I would say that going into patio season in May, June, July, August and September, we have a tremendous opportunity to really make lots of revenues out of the patios.

Okay. And the last one for me is just as we look at real estate opportunities as you guys beginning to develop and build and open new restaurants. Any commentary or insight into what you're seeing around real estate opportunities?

And then second, with that, any construction delays as we look at permitting or issues that you're continuing to have? Or are those issues starting to lighten up with some reopening?

Yes. I mean I would say, on development, I think probably the thing that looking back worked well for us. Within staff development, although we were challenged -- very challenged because remember, we went all the way down to 87 employees in April of last year. Although we were very challenged back then, we did keep our development activities wide open. And frankly, one of the reasons that we're doing these restaurant deals that we're doing now, is we got incredible deals in some incredible geographies. And so there was a window of time there where the real estate market was wide open.

I think during the very uncertain days of COVID, there were lots of things that were in the market. I would say, it's tightened up a bit. Obviously, the same quality of deals coming up, I would say, the last 4 or 5 weeks. So I would say that as things clear out a little bit, I think landlords are a lot more wait-and-see mindset. So I've seen that happen.

And frankly, construction is a little bit different now because some of the stuff that you need to build is not easily available as it used to be. So it does require lots of more precision on your project management to deal with things like -- a lot of construction products are petroleum by products, which are not on market. So we've had to adjust our calendars under construction.

But I would say that all in all, I think we're very pleased with the pace of our construction. Our next restaurant that will be opening is Bellevue, and frankly, that restaurant is pretty much -- based on my walk-through that I did today, it looks very, very good. And then the next one up after debt will be STK Westminster in London. And I think that one is also very, very good shape.

So I would say that things have moved. Obviously, permitting is a little different because some of the offices don't have live people in it. So you just have to adjust your project management to deal with those annoyances, but all in all, I would say that we've moved very well.

Our next question comes from the line of David Kanen with Kanen Wealth Management.

Congratulations. Great job to you and your team.

Thank you, sir.

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

I mean -- so it's -- 200 is kind of our addressable. And by the way, that's just STK. And so we really don't -- we're not talking about all the other opportunities because we frankly have never really laid out a number for Kona Grill. I think as now the revenues start breaking the $100,000 AUVs, now there is a whole new dialogue that we also need to evaluate that.

But just on STKs, we really believe that the number is big. I mean, think about the Cabo San Lucas airport, it's probably one of the smaller airports that we probably can get into. And right off the shoots, we're at $150,000 a week in AUV. And frankly, as a matter of fact, after this call, I'll be heading out to really work with the team now on turns because that restaurant already become a return opportunity for us in turning tables in the airport.

So I think if you start laying there at the airport and then the street, opportunities are huge, tremendous amount of markets that I'm looking at right now in Minneapolis, Boston, Washington, D.C. So there is a tremendous amount of white space right now. Even domestic, not to mention the international opportunities there will be coming up because the restaurants that we're building right now in Stratford and Westminster come with 2 significantly large hotel operators that, in aggregate, have over 1,000 hotels. So we do plan to hopefully earn the trust of these operators to be able to build more restaurants with them in their properties.

So I think not just the domestic white space, but just the more recent relationships that we've entered in the wholesale side, that's going to really open up a tremendous amount of real estate. These hotel partners have restaurants in Asia, Africa, Europe, South America, North America. Not to mention that our partner in Cabo San Lucas' areas, which is one of the largest airport operators in the world, and they do a very good job of operating higher-end restaurants. So I think that rest -- relationship alone, based on the early results of Cabo San Lucas going to yield lots of locations.

So we'll get to 200. I can tell you, it will be 3 years. It will be 5 years, but we are accelerating. I got to tell you that right now one of the things that you can probably see from our pipeline is that we feel that there is a huge opportunity when you have a brand like STK that can do $250,000-plus AUVs. There is not a lot of restaurants out there that can do that. As a matter of fact, I can't really think of one that can say that on the average, do that. So we do think that the demand for that product will be significant. And then from a mall operations having a Kona Grill that can flow through $100,000 a week is a massive asset for mall development or just any kind of location in the U.S.

So I think the future is bright for STK, and I think that there is also a future developing here for Kona Grill. Not to mention the other things that we've done. For instance, in Westminster, the F&B location we opened is very cool. So we also have other cool things in the pipeline that I think will even make growth more meaningful in the hotel side. So lots of really good development stuff going on.

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

I mean, I can give you an example of -- for instance, (inaudible) is one of the markets where there were more relaxing restrictions relative to anywhere else in the country. And the same-store sales for that restaurant relative to '19 is 100% plus. So if you wanted to look for one restaurant of what we can do when you full barrel capacity, fullish, because there's still some social distancing limitations that we have to go through and other stuff. But I think in the aggregate, I think that's probably a good proxy from a market where once we get those type of capacity lifting, we can do very well.

I think the Kona Grill in Texas have done very, very well. But then obviously, Miami, South Beach, which has had no -- I guess, it's one of the more relaxed markets, we also have done incredible comps in the 100% plus range.

So I think as capacity becomes available, I think we're very well positioned to take advantage of it. That's, I think, one of the reasons why our numbers are what they are is -- as you know, we're very optimistic. We read what's happening in the restaurants, and our number one objective is to maximize revenues where we can do it. So stay tuned.

Okay. So in a relaxed market like South Beach, I mean, when -- the last time I was there, I noticed though there was still no seating at the bar. Has has that changed? And I would think that when people consider the bar, you'd probably catch some incremental sales there. Is that factored in? Or is that still yet to be yielded in the future?

That's still yet to be determined, and I'm not so sure that -- so I like the bar after 10:00. I'm not a big fan of bar, per se, before 10:00. Obviously, I think there is a magic that people see in the bar business because it's a much better margin business than usually food. But the way we run our food costs and everything else in our business, trading food and liquor is not exactly as beneficial as you probably would see in other brands.

So again, we'll play that by year as the bars open up. We'll test, and we'll see how to utilize them to maximize revenues.

Okay. And then just one...

Yes. I think the more important strategy right now is really stable terms. As the capacity becomes available, it's not to really relax on the table terms and make sure that you stay focused on keeping table turns where they are.

Okay. And then I think EBITDA was like 13% of revenues, which is impressive. But I noticed that management fees and royalties or license fees were down year-over-year. When do you think that returns to normal or exceeds it? In what timeframe do you expect an improvement here in Q2? And then with that incrementality, because there is a lot of leverage on that, can you -- where do you see EBITDA margins as a percent of revenue ultimately getting up to in the future as you start to recoup that -- those management license fees and things kind of start to normalize?

Right. So without providing guidance because we didn't do it, I can give you directionally that we'll see an improvement in management license fees as Europe opens up. So we do know that actually, next week, London is opening up, and we start to see -- so that will be the next big lever to help the management license line. We also -- Italy is also starting to relax and open up.

So as London and Italy open up, we will see M&L, or management license fees, going up dramatically and probably, closer to historical levels. Also remember that we now have Puerto Rico STK, which has been a very good restaurant for us. We also now have Scottsdale, which is also a very good restaurant for us. And we also have now San Lucas, which is a license side that will drive a substantial amount. If you do the math, at 5% on 150 a week, that $7,500 a week just in license fees. So the outlook for M&L was very good starting in about a week or so when we start reopening Europe back up okay.

What's the margin outlook on that? Very good because, as you know, all that flows down to the bottom line. So we should see a dramatic lift on the 13% adjusted EBITDA line.

Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to Manny Hilario for his closing comments.

Right. Well, first of all, I want to thank The ONE Group team who's been phenomenal, and I appreciate the incredible work done by our teams in the restaurants and in the offices and everywhere globally. So I appreciate everybody's commitment to us. And last but not least, we obviously appreciate all of your interest on The ONE Group. And I look forward to running into all of you at any of our restaurants. So be well, be safe and see you in one of our restaurants. Thank you.

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