The ONE Group Announces Fourth Quarter and Fiscal Year 2015 Results

The ONE Group Hospitality, Inc. ("The ONE Group") (STKS), today announced its financial results for the fourth quarter and full year ended December 31, 2015.

Highlights for the fourth quarter ended December 31, 2015 were as follows:

• The fourth quarter marked our seventh consecutive quarter of double digit revenue growth;
• Owned unit net revenues increased 42.6% to $16.8 million;
• Total GAAP revenue increased 29.2% to $18.6 million;
• Total food and beverage sales at owned and managed units* increased 16.3% to $41.7 million;
• Management and incentive fee revenues were $1.8 million for the quarter;
• GAAP net income attributable to The ONE Group Hospitality, Inc. for the quarter increased 3.5% to $1.6 million, or $0.07 per share; and
• Adjusted EBITDA was $2.0 million compared to $3.4 million for the same period last year.**

*Total food and beverage sales at owned and managed units, a non-GAAP measure, represents our total revenue from our owned operations as well as the revenue reported to us with respect to sales at our managed locations, where we earn management and incentive fees at these locations. For a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units and a discussion of why we consider it useful, see the financial information accompanying this release.

** Adjusted EBITDA, a non-GAAP measure, represents net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, deferred rent, pre-opening expenses, non-recurring gains and losses, stock based compensation and losses from discontinued operations. For a reconciliation of adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP and a discussion of why we consider it useful, see the financial information accompanying this release.

Jonathan Segal, CEO of The ONE Group, said, "Looking back on 2015, we are pleased with the performance of our older STK's as well as the initial success at our 2015 class of restaurants including STK Chicago, STK LA and the re-opening of the STK Miami Beach. Although we show a drop in Adjusted EBITDA for the quarter, it's important to note that in 2014 we received a one-time settlement on a trademark dispute of approximately $600,000 and in 2015 we had a decline in our European business which was further impacted by the strength of the U.S. dollar."

Segal continued, "As we look ahead to the next 12 months, we have an exciting pipeline of growth through both company owned restaurants and hospitality and licensing deals. We anticipate opening 8 new STK restaurants, of which three will include rooftop restaurants. This will take the total number of STK units around the world to 18. Also, earlier today we were very excited to announce that Alejandro Munoz-Suarez, formerly of B&B Hospitality, has agreed to join us as our new Chief Operating Officer. We believe Alex's deep level of experience in the hospitality industry is perfectly aligned with us and we are extremely excited to have him on board."

Fourth Quarter 2015 Financial Results

Total owned unit net revenues increased 42.6% to $16.8 million in the fourth quarter of 2015 compared to $11.8 million in the fourth quarter of 2014. The increase was primarily due to the opening of our STK in Chicago in the fourth quarter, as well as the revenues from our STK in Miami Beach and the STK at the W Hotel in West Beverly Hills which opened earlier in 2015. Comparable sales from owned STK units decreased 2.9% for the quarter. Comparable sales from owned and managed STK units decreased 0.8% for the quarter.

Management and incentive fee revenues were $1.8 million in the fourth quarter of 2015, a decrease of 30.8% compared to $2.6 million in the prior year's quarter. The decrease was driven by the decline in revenue from our UK operations as well as a decline in the currency exchange rates versus the same period a year ago. This was partially offset by an increase in management and incentive fees from our STK in Las Vegas.

Total food and beverage sales at owned and managed units increased 16.3% to $41.7 million compared to $35.8 million in the fourth quarter of 2014.

Adjusted EBITDA for the fourth quarter of 2015 was $2.0 million compared to adjusted EBITDA of $3.4 million in the fourth quarter of 2014. The decrease was driven primarily by the decrease in management and incentive fees from our UK operations and to a decrease in other income of approximately $775,000 which included a one-time benefit of approximately $600,000 relating to a trademark settlement in 2014.

Net income attributable to The ONE Group Hospitality, Inc. increased 3.5% to $1.6 million compared to a net income of $1.6 million in the fourth quarter of 2014. Included in net income for the fourth quarter of 2015 are transaction costs of $1.2 million related to the terminated acquisition of sbe's Katsuya and Cleo brands as well as a one-time non-cash impairment charge of $3.0 million primarily relating to the STK unit in Washington, DC.

Adjusted net income for the quarter was $4.4 million, or $0.18 per share, compared to adjusted net income of $29,000, or $0.00 per share, in the fourth quarter of 2014. ***

*** Adjusted net income, a non-GAAP measure, represents net income before loss from discontinued operations, non-recurring gains and losses, non-cash impairment losses and stock based compensation. For a reconciliation of adjusted net income to the most directly comparable financial measure presented in accordance with GAAP and a discussion of why we consider it useful, see the financial information accompanying this release.

Full Year 2015 Financial Results

Total owned unit net revenues increased 29.9% to $52.6 million in fiscal year 2015 compared to $40.5 million in fiscal year 2014. The increase was primarily due to the opening of our STKs in Chicago and at the W Hotel in West Beverly Hills and the re-opening of our STK in Miami Beach as well as a full year of the food and beverage services at the W Hotel in West Beverly Hills. Comparable sales from owned STK units decreased 0.7% for the year. Comparable sales from owned and managed STK units increased 0.5% for the year.

Management and incentive fee revenues were $7.9 million in fiscal year 2015 compared to $8.8 million in the prior fiscal year. The decrease was driven by the decline in revenue from our UK operations as well as a decline in the currency exchange rates versus the prior year. This decrease was partially offset by an increase in management fees from the STK in Las Vegas.

Total food and beverage sales at owned and managed units increased 9.5% to $144.6 million in fiscal year 2015 compared to $132.2 million in fiscal year 2014.

Adjusted EBITDA for fiscal year 2015 was $5.2 million compared to adjusted EBITDA of $7.8 million in the fiscal year 2014. The decrease related primarily to a decrease in other income of approximately $1.6 million which included a one-time benefit of approximately $1.2 million received in connection with the termination of our management agreement with The Perry Hotel in Miami in 2014 as well as a one-time payment received of approximately $600,000 relating to a trademark settlement in 2014, and to a lesser extent a decrease in management and incentive fees from our UK operations.

In fiscal year 2015, net income attributable to The ONE Group Hospitality, Inc. increased 49.7% to $6.9 million compared to a net income of $4.6 million for fiscal 2014.

Adjusted net income for fiscal year 2015 was $1.4 million, or $0.06 per share, compared to adjusted net income of $1.5 million, or $0.06 per share, in 2014.

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