STKS - NASDAQ

Greetings, and welcome to The ONE Group Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Tyler Loy, Chief Financial Officer, The ONE Group Hospitality, Inc. 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 of 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 condition. 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 that are owned and managed, license and franchise units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I'd just like to turn the call over to Manny Hilario.

Thank you, Tyler, and hello, everyone. Thank you all for joining us today and for your continued interest in The ONE Group. Let me begin by recognizing our amazing team members. Their unwavering commitment to our mission, creating great guest memories through exceptional and unforgettable experiences to every guest every time is what gives me confidence in our vision of becoming the global leader in Vibe Dining. This is the first call we've been able to report, a full quarter's results for our recent acquisition of Benihana and RA Sushi. And we are excited by the combined potential of our platform with exciting VIBE and experiential centric dining brands. Let me start by sharing some highlights for the third quarter. First, with the full quarter of Benihana and RA Sushi, we increased our revenues by $117 million or 152% to a record $194 million. Secondly, and equally important, we increased our restaurant operating profit by 90 basis points, driven by robust restaurant level margins of 17% at Benihana, which improved 20 basis points versus their pro forma prior year performance and tight cost management at our preexisting businesses. Next, during the second quarter update, we discussed the $9 million in run rate savings related to duplicate support costs. Since then, we have implemented an additional $10 million in annualized run rate synergies, and we've already begun to see their impact on the Benihana restaurant level margins. And finally, we finished the third quarter with over $70 million in resources between cash on hand, short-term credit receivables and revolver availability, which is currently undrawn. Looking at our key strategic priorities for the balance of the year remain. First, a focus on driving sales at all of our brands through the execution of our strategic pillars. Like others in the fine dining category, we're experiencing a dynamic environment driven by macro headwinds and consumer uncertainty. As you look around the restaurant landscape from all-you-can-eat to all-the-happy-hours, the industry is chasing traffic through deep discounting and promotional activity. Yet our mission continues to be to create great guest experiences and memories by operating the best restaurants in all of our markets and delivering exceptional and unforgettable guest experiences to every guest every time. We do that through our focus on our three strategic pillars of operations, marketing and culinary. We continue to see robust demand of Fridays and Saturdays across all of our brands, and we are focused on maximizing reservations, turn times and throughput during our peak days and peak hours. In addition, we continue to emphasize local store outreach to ensure we are top of mind with Concierge's, hotels and businesses in the four block radius around each of our restaurants to drive business, dinners, happy hours, product launches, weekend brunches and late-night visits across our portfolio of brands. We know we're executing at a high level as we continue to see some of the highest guest satisfaction metrics across all of our restaurants. From a marketing perspective, we are leveraging our digital marketing capabilities and ever-growing digital database to drive one of our many everyday value messages, such as $3, $6 and $9 Happy Hour, which has also been launched at Benihana and RA Sushi. Customer loyalty continues to be a key focus of ours. And in the coming quarters, we will roll out a loyalty program across our brands with a special emphasis on birthday celebrations and personalized rewards for our guests' special occasions. This enhanced approach to customer appreciation marks a significant evolution in our retention strategy, as we know our guests love to celebrate with our brands. And we plan to convert those guests who may come to our restaurants once or twice a year, to more frequent visitors. Moving on to culinary. We continue to be extremely focused on culinary innovation and enhancing the guest experience. For example, at Benihana Restaurants, we rolled out our Wagyu program for guests seeking a premium offering and the early way is very positive. We believe there is tremendous upside for many innovation at Benihana, and we have only just begun. We are excited about our exceptional lineup of holiday and seasonal menu offerings, as our venues truly come alive during the holiday season. Our second key priority is the successful integration of Benihana and RA Sushi and delivering on our cost initiatives. We've made significant strides in achieving our post-acquisition synergies target, and we begin to see the impact this quarter on the Benihana Restaurant level margins. We are nearing $19 million in run rate synergies across both restaurant level and support costs by eliminating duplicate costs and achieving improved pricing through contract consolidations. Areas we've seen significant progress and plan to deliver at least $20 million in annual synergies, eliminate duplicate headcounts, eliminate duplicate professional services, capturing insurance synergies, leverage broadline purchasing and improved commodities and operating supply costs. As part of the Kona Grill and RA Sushi integration, we have evaluated our portfolio of existing restaurants with the goal to optimize overall performance. After careful consideration in October, we closed four RA Sushi locations, three of which are in markets with existing Kona Grills. We expect to retain a substantial amount of the delivery and takeout business for these restaurants generated through our nearby Kona Grill locations, supporting improved margins in our grill concepts. In addition to the closures, we are working on a number of sales driving and operating efficiency initiatives at Kona Grill. For example, we are testing Benihana virtual takeout and delivery in markets where Benihana is currently not present and the early results are very encouraging. We're also streamlining hours of operations in order to maximize staffing for revenues during our peak hours and reduced shoulder period hours in order to capture labor efficiencies. Above and beyond cost savings, we have overlaid our strategic pillars of operations, marketing and culinary to the Benihana and RA Sushi brands. We are leveraging our logistics, reservations, digital marketing and culinary core competencies to drive sales and performance at Benihana and RA Sushi. In addition, from a restaurant support perspective, we have integrated human resources, payroll, financial reporting, development and many other internal systems and processes. Thirdly, we are focused on our next phase of growth, balancing company-owned development and asset-light growth. We plan to open six new venues by the end of 2024, consisting of five company-owned restaurants, two STKs, one Kona Grill, one RA Sushi and one Salt Water Social. In addition, we also plan to open one managed STK. In September, we opened our first Kona Grill in Oregon, in the city of Tigard at Bridgeport Village. Then in October, we opened an STK in Aventura, our third STK in the State of Florida. Today, we opened our new concept, Salt Water Social in Denver, Colorado, within the Cherry Creek neighborhood. With Salt Water Social, we are combining the best-in-class experience and a matched atmosphere of STK in a refreshed setting that places a focus on [indiscernible] premium seafood offerings. In the fourth quarter, we plan to open a managed STK in the Niagara Falls Embassy Suites on the Canadian side of the falls. Moving forward, we plan to open five to six company-owned restaurants annually and will balance this with asset-light growth of managed and licensed STK and Kona Grills and franchise Benihanas. In addition, we will continue to explore opportunities for Benihana and stadium concessions where we have five locations, and we plan to grow the retail grocery business. Lastly, our fourth key priority is balance sheet flexibility and returning value to our shareholders. We finished the quarter with over $70 million in liquid resources, when combining our cash on hand, short-term credit card receivables and the availability under the revolving credit facility, which remains undrawn. Under the current conditions, our term loan is not subject to any financial covenants. This quarter, we returned approximately $2.3 million to shareholders through share repurchases, and we will continue to evaluate opportunistic share repurchases under our already Board-authorized program. We are laser focused on our balance sheet and our prioritizing cash flow generation, balance sheet flexibility and maximizing shareholder returns. As you can tell, we've been very busy and are now on our path to $5 billion in system-wide sales. Our strong free cash flow generation, combined with our disciplined pipeline of new locations, proven unit economics and our asset-light strategies provide us with multiple avenues for growth. We are excited for the future, and we will remain focused on executing our strategy and creating long-term shareholder value. I will now turn the call over to Tyler.

Thank you, Manny. Let me start by discussing our third quarter financials in greater detail. Please note, the prior quarter was any contribution from the recent acquisition of Benihana, which closed on May 1, 2024. The third quarter of 2024 has three months of contributions from Benihana and RA Sushi. Total consolidated GAAP revenues were $194 million, increasing 152.3% from the $76.9 million for the same quarter of last year. Included in our total revenue is our owned restaurant net revenue of $190.6 million, which increased 158.6% from $73.7 million for the same quarter last year. The increase was due primarily to $119.4 million in contributions from Benihana and RA Sushi. The increase was also attributable to the opening of six STK and Kona Grill restaurants since October 2023. This was partially offset by an 8.8% reduction in comparable sales. Comparable sales decreased 4.2% at Benihana, 11.1% at STK and 70% at our grill concepts. For clarity at STK, traffic was minus 4.7%. Management, license and incentive fee revenues increased 6.4% to $3.4 million for the three months ended September 30, 2024, from $3.2 million for the three months ended September 30, 2023. Benihana franchise restaurants contributed $0.7 million in revenue during the third quarter of 2024. Owned restaurant cost of sales as a percentage of owned restaurant net revenue increased 380 basis points to 20.9% in the third quarter of 2024, compared to 24.7% in the prior year. This was primarily due to operational cost reduction initiatives, product mix management, and pricing that was partially offset by cost inflation. This also includes the addition of Benihana and RA Sushi, which contributed positively to cost of sales as a percentage of revenue. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 300 basis points to 65.9% in the third quarter of 2024 from 62.9% in the third quarter of 2023, due to cost inflation and fixed operating costs, partially offset by operational cost reduction initiative and pricing at STK and Kona Grill. This also includes the addition of Benihana and RA Sushi which contributed positively to operating as a percentage of revenue. Restaurant operating profit increased 90 basis points to 13.2% for the third quarter of 2024, compared to 12.3% in the third quarter of 2023. This includes restaurant operating profit of 70% at Benihana. On a total reported basis, general and administrative cost increased $5.5 million or 75.6% to $12.8 million in the third quarter of 2024, from $7.3 million in the third quarter of 2023. When adjusting for stock-based compensation, adjusted general and administrative expenses were $11.2 million and $6 million in the third quarter of 2024 and 2023 respectively. As a percentage of revenues, adjusted general and administrative costs improved 210 basis points to 5.8% compared to 7.9%. The improvement is due to the sales leverage realized in the Benihana acquisition. Depreciation and amortization expense was $9.4 million in the third quarter of 2024, compared to $3.7 million in the third quarter of 2023. The increase was primarily related to depreciation and amortization for the Benihana and RA Sushi restaurants, depreciation associated with the opening of six new owned venues in October 2023. And capital expenditures to maintained and enhance guest experience in our restaurants. Preopening expenses were $2.1 million, compared to $3.1 million in the prior year. We incurred nonrecurring costs totaling $7.1 million in the third quarter of 2024, consisting of transaction and exit costs of $0.9 million and transition and integration cost of $6.3 million, both related to the acquisition of Benihana. Interest expense was $10.7 million in the third quarter of 2024, compared to $1.7 million in the third quarter of 2023. Benefit and the provision for income taxes was $4.6 million in the third quarter of 2024 compared to a benefit of $375,000 in the third quarter of 2023. Net loss available to common stockholders was $16 million or $0.52 net loss per share compared to net loss available to common stockholders of $3.1 million in the third quarter of 2023. Adjusted net loss available to common stockholders was $9.4 million or $0.30 of adjusted net loss per share, compared to an adjusted net loss available to common stockholders of $3 million in the third quarter of 2023 or $0.09 adjusted net loss per share. Adjusted EBITDA for the third quarter attributable to The ONE Group Hospitality Inc. was $14.9 million, compared to $3.1 million in the third quarter of 2023. Please note, in the third quarter, we have updated our definition of adjusted EBITDA to no longer adjust for preopening expenses. Under the previous definition, adjusted EBITDA would have been $17 million versus $6.2 million in the third quarter of the prior year. We have included a reconciliation of adjusted EBITDA, historical adjusted EBITDA and adjusted net income in the tables in our third quarter 2024 earnings release. During the third quarter, we spent $2.3 million on the purchase of 0.6 million shares. Turning to liquidity. We finished the quarter with $36.2 million in cash and short-term credit card receivables and $34.1 million available under our revolving credit facility, which remains undrawn. Under the current conditions, our term loan does not have any financial covenants. Now I would like to provide some forward-looking commentary regarding 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 number and timing of new restaurant openings for any given period is subject to a number of factors outside the company's control, including macroeconomic conditions, weather and factors under the control of landlords, contractors, licensees and regulatory and licensing authorities. As we enter the back half of the year, we anticipated improving same-store sales trends for the third and fourth quarter, based on previous year's comparison and less consumer uncertainty. Based on our third quarter results, the information available now and the expectations as of today, we are updating our 2024 target. The targets include projections for Benihana from May 1, the date of the acquisition, until the end of the year, excluding discussions regarding run rate performance. For calculations of run rate measures, please refer back to our press release that was issued today. Beginning with revenues, we project total GAAP revenues of between $660 million and $680 million, which reflects our anticipation of consolidated same-store sales for the fourth quarter of minus 4% to minus 8%, On a run rate basis, we project total GAAP revenues of $845 million to $865 million. Managed, license and franchise fee revenues are expected to be between $15 million and $16 million. Total owned operating expenses as a percentage of owned restaurant net revenue of 83% to 83.6%. Total G&A, excluding stock-based compensation of approximately $39 million, adjusted EBITDA of between $71 million and $76 million. On a run rate basis, we project total adjusted EBITDA of $111 million to $116 million. Adjusted EBITDA, excluding preopening expenses of between $80 million to $85 million. On a run rate basis, we project total adjusted EBITDA, excluding preopening of $120 million to $125 million. Restaurant preopening expenses of between $8 million and $9 million. An effective income tax rate of approximately 30%. Total capital expenditures, net of allowances received from landlords of between $50 million to $60 million. And finally, we plan to add six new venues in 2024. I will now turn the call back to Manny.

Thank you, Tyler, and thank you all for your time today and interest in The ONE Group. While we are facing macro headwinds in the short-term, we remain confident in our South portfolio of high-volume iconic brands and long-term vision to be the undisputed global leader in vibe dining. We are entering an exciting phase in our company's journey, and we appreciate your continued support. Tyler and I would be happy to answer any questions that you may have. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Mark Smith with Lake Street Capital. Please go ahead.

Hi, guys. I wanted to hit first, just update on the industry kind of how things are going and kind of how to battle these negative comp trends. Can you just talk about your direct competitors, what you're seeing as far as promotions? And then how you are able to compete in this environment?

Yes. Thanks, Mark. So I mean more direct competitors, we're seeing all-day-happy-hour. I think that's become a big promotion for some of our competitors, they're offering highly discounted items all day. So that's been one of them, on the – casual dine seems to be everything. We've got – a lot of endless pasta bowls, and we have the burgers at Chile. We have a lot of price point competition there. So I think that's kind of what we've been seeing. And of course, then as you go lower on the scale of – to QSR and everything else, obviously, you guys know about all the super heavy discounting there. So everybody is putting out their very hot price points. Our response to it has been – we obviously do Happy Hour. We've always done Happy Hour. So we're competing with Happy Hour during the regular hours, three to six, and so that's been one of the things that we've been competing with. The second thing that we've been competing with has been we offer $39 dinners at Kona Grill, and we offer $69 dinners at STK every day, and those come with beverage. So we think that's a pretty compelling price point, but we've been doing that on an ongoing basis, not for a while. So that's our hot price there, if you will, in terms of there. And then we've also launched at Kona Grill, all-you-can-eat sushi on Sunday nights, and that's a pretty compelling promotion and we're starting to see some traction on that as well right now. So those are the majority of what we've been doing. And then, of course, as we discussed in our prepared statements, we're looking at loyalty. We think loyalty is a big player right now. I think if you look at Cheesecake Factory, for instance, that's an example of someone who's been going heavy on the loyalty side. So our job here is to stay in the value sector, but not getting to the heavy discounting sector because – one of your other question is what we're seeing on the economy. I think we've started to see a little bit of a bottom of the trends, we're starting to see a stabilization on that. And then if you look at some of our concepts, I think Tyler quoted this on there. We're actually doing very well on traffic, at STK, we're only down four to five points on traffic at STK. And I believe that's part of our success with the with our everyday value strategy. So again, I think a little bit of that – the trend now, I think it's starting to bottom out. As a matter of fact, you probably saw that on our guidance, we guided to minus 8% to minus 4% for the fourth quarter. We're coming out of a negative 8.8% same-store sales. So I think our guidance kind of implies that we're starting to see a bottom on the trends.

Okay. And then on the development front, it seems like we've had some delays. Can you just talk about kind of permit and the construction process, anything that may be causing some delays as you try to get some of these restaurants open?

Yes. I mean I think right now, the timing on development is really more controlled by the fact, as we mentioned on our prepared statements, we want to get more to the asset-light growth side of development. And so we're keeping pace with company-owned restaurants. I think we mentioned six in our communications. So we're keeping it at that pace. As a matter of fact, we have opened three restaurants in the last 60 days. So it's really more about pacing them at a pace that we feel comfortable with. And again, we've been spending a lot more time – I would say in the last 30 to 45 days on franchising for Benihana, which I think is a very good opportunity for us. There's a really good model there that we can excel at. And then we're also opening up our next management contract in Niagara Falls. So we've been working there. And we have a couple of airport deals that we're actively working on right now. And then we also have some casino opportunities that we've been looking for STK as well. And more recently, we've also started working on some potential license and management opportunities for Asia. Obviously, we're still early on that, but we're definitely more actively working at building our pipeline with management license deals. In terms of the delays on permitting and – we really haven't seen a significant change from three to six months ago. Obviously, we've already reported that the cycles are pretty long, but we haven't seen any meaningful change in from – within the last 90 days.

Okay. And just the last one for me. We had the foreclosures of RA Sushi, do you anticipate or do you see any others throughout your system, maybe at the end of the lease term or any potential closures on the horizon?

Yes. I mean, I think as we said on our prepared statements, I think one of the synergies and one of the benefits of having done our acquisition is that, it gives us flexibility in managing the portfolio. And in this case, we did have three RAs that were significantly close, two Kona Grills. And so those just made sense for us. So we've taken care in the short-term in the ones that make sense. And then as these leases become due, we'll evaluate the extension and if it makes sense for us to stick around. Obviously, as you know, our commitment has always been and continues to be, we do not do negative cash flow location. So that plays a big role into our decision, and we really want to build a very successful portfolio of high-volume, high-margin restaurants. So if there's restaurant that just don't meet our profitability and our sales screens, we obviously will move on. And we also have a very robust pipeline. So we do have the flexibility that we can always replace lower quality real estate with really high-quality real estate. So it's just part of our ongoing strategy of managing our portfolio restaurants.

Great. Thank you.

The next question comes from Jim Salera with Stephens, Inc. Please go ahead.

Hi, guys. Good afternoon. Thanks for taking our questions. I wanted to maybe ask first about the sequencing throughout the quarter because it seems like when we talked with other restaurant operators, July was kind of the worst and then step up into August and then step down into September, but still kind of higher than July. So if it's possible, if you could give us like the monthly comp breakdown and then the exit rate into 4Q?

Yes. I mean that's a great question, and then I'll let Tyler add some more color on this as well. But I think the sequencing that we've been seeing is that – typically, the first month in any kind of calendar quarter has been the softest of going back to the beginning of this year. So we have seen a softening in the first month of every quarter. And then it gets progressively better by second and third month of the quarter. So we've seen a rhythm there. And the other thing that we've seen probably a little bit more predominantly is that the first week of every calendar month seems to be softer than week two, three and four. So there's a progression where we're seeing softer than getting to better. Obviously, we think that's part of it, it has to do with the fact that people pay rent, and there's a lot of things that are due at the end of the month. And I think Tyler can add some color on that. Tyler, why don't you do a little bit more on that, what do you think you're seeing there?

Yes, Jim. So I think that the commentary that you had on the cadence throughout the third quarter, I think that we saw exactly the same trend, which was a pretty choppy July followed by an August, that was – I think, much better in terms of trend and then a little bit worse in September. So nothing different from our end there. And I think in terms of the exit out of the quarter, our guidance kind of implying in the fourth quarter kind of that negative 8% to negative 4%. We finished at minus 8.8% for the third quarter, and we've guided to a range that's a little bit better than that to kind of give you a sense of kind of how October shaped up.

Yes. And I think our view on the bottom up, the trend bottoming is based a lot on how we look at two-year stacks on same-store sales. And just in general, how we've seen the progression in the last couple of weeks in terms of same-store sales. So we think that as our guidance implies, once again in the fourth quarter, we think that will be better than we were in the third, and then we'll see what goes from thereafter.

Okay. Great. And Tyler, I think you gave a traffic number. I wasn't sure if that was just for STK or if that was the combined total company. But if you could just give kind of the composition for the 8.8% number, traffic, price and mix? And then just any trends you guys are seeing in mix as it relates to – Manny, talked about some of these value offerings and kind of the all day Happy Hours and just so many mix trends you can speak to?

Yes, Jim. So I would say that for STK, which is what we talked about on the call, that was a negative 4.7% for traffic. And so mix was actually more average check there would have been minus 6.3%. And I guess across – if you blend everything together, I would say that probably blended traffic is in line with same-store sales, when you have all three of those together. So you've got average check kind of offsetting any kind of – product mix kind of offsetting any kind of pricing [indiscernible]

But on the average, we're running about five points on pricing, right – for the brands? So the check is – we're getting trade down to about exactly the same amount as the price increases?

Yes.

Okay. And then maybe if I could ask one more maybe a high-level question. What do you think the opportunity is for the unit growth for the noncompany-owned stores? Just as we think about kind of ignoring the near term and in a more normalized environment, given that you have a couple of different concepts that I think play to different consumers. How do you think about the potential growth rate of the non-company-owned stores?

I mean, I think if we look back at our general business plan for STK going back to how we evaluate the market, we've always thought that over 50% of the STK units would be owned by someone else or management or license deal. So I think our addressable market is about 200 for STK. So we think that's about call it, 100, 100 just for conversation purposes. Now when we look at Benihana, we call an addressable market of about 400 units. And as we start looking out now, we think we probably can get to 50 to 100 franchise units, if not more there. So I think that's how you'll see the mix in there. So probably the mix skewing more towards management license for STK and kind of – and the franchise growing for Benihana – in fairness, we are early with Benihana, so we're trying to understand how deep that market is. We're starting to go out and talking to people at conferences and just in general, talking to people in the franchise side of the business. So we think there's an opportunity there. And some of the things that we're doing with the brand in terms of menu engineering, we'll definitely line it up so that we can have some opportunities that we also look at the Hibachi, Teppanyaki market, very fragmented by small operators. So we think there's an opportunity there to reach out to some of the smaller operators and bringing the power of the brand of Benihana and start utilizing that as an opportunity to drive franchising business. So, Tyler and I are super excited about that. I think we also have sports venues with Yankee Stadium and – we're in Phoenix and some other stadiums. And we've gotten a lot more inbound increase about that. So I think that's a great opportunity for Benihana – they are very successful in the stadiums. We also have some very strong franchisees currently in Latin America who are excited about what we're doing with the brand. So there's been a lot of interest and more Latin America franchising. So again, as we said in our prepared comments, you'll see us going more towards the – towards asset-light opportunities. And frankly, a company-owned will still play a big role or play a role in our development because it allows us to take opportunity of incredible high-quality real estate and not have to wait and give up on great real estate. So it does kind of fill in whatever we can't do with asset light.

I appreciate all the context guys. And I will hop back in the queue.

Thank you, sir.

The next question comes from Nick Setyan with Wedbush Securities. Please go ahead.

Thank you. Yes. It's good to see the trends maybe have stabilized and obviously, the Q4 implied guide is indicating potentially a little bit of an uptick. So maybe we have seen a trough in Q3. And as we kind of look out to 2025, how should we think about maybe the four-wall margins across the brand or I guess maybe a better way to ask is where are your target that you're shooting for in terms of the four-wall margins for the various brands?

Nick, great question. I think in 2025, as we look out at the margins, right now, we're looking at a consolidated 17% for the company. That's kind of how we've guided somewhere around 17%. We actually think there's a significant amount of upside on that. One of the things that we have found out for the acquisition is just the synergies have been very clear and obvious to us. So there's a lot of areas where we've picked up significant savings in operating costs and cost of goods. So I think over time, you'll see our margins climbing closer to 18% and so forth. Remembering that we were able to improve Benihana margins on a down sales scenario. So that tells you that we do have a really good margin if you will, growth opportunity within the portfolio. So I think you'll start seeing us getting closer to that 18% range on the consolidated margins. Obviously, what we're also doing with the grill, which is – will help the margins because we're starting to work on the restaurant base that frankly doesn't help the overall profile of our margins. So there will be another [indiscernible] net plus. And I think in general, for 2025, obviously, we don't have the crystal ball that is perfect for that. But as I said earlier, with the stabilization a little bit of what we see in the market is very encouraging and positive. And we also think that interest rates coming off is also a nice catalyst for our business considering that we do cater to customers in the 75,000 household income and less. So I think that the interest rates get better and maybe credit card fees and everything else starts to pull back in mortgage rates. I think that really bodes well going into 2025.

Thank you very much.

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

All right. Thank you, everyone, for once again being here with us. We appreciate all your incredible interest and support in the business. As I always say, all of this is only possible by the incredible commitment and work of our teammates who work in this business. So I'm very appreciative – we're very appreciative of that. And I look forward to seeing you all in our restaurants in the fourth quarter, and I wish you all a great holiday season. Thank you.