Greetings, and welcome to the ONE Group Hospitality's Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to Tyler Loy. Thank you. You may begin..

Thank you, operator, and good afternoon. Before we begin our formal remarks, we must remind you that part of our discussion 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?.

One, leveraging these higher sales volumes; two, applying our operating expertise to optimize labor for food preparation scheduling; three, lowering team member turnover rates, which reduces trading costs and ensures a better and consistent guest experience; and lastly, securing more favorable service contracts by combining Kona Grill's and STK's purchasing power to realize higher savings from suppliers.

Some of these initiatives have already began, while others will play out over the course of the next year. Very importantly, we'll also leverage our corporate infrastructure to lower G&A as a percentage of total revenues by driving efficiencies and eliminating redundancies.

This intention is already reflected in our 2020 guidance, as Tyler will explain shortly. Over the past several weeks, we have already completed the integration of back-office systems, accounting, payroll, HR, et cetera, so that Kona Grill is now operating on IT platforms.

However, the full strategic and operational integration of Kona Grill should be completed by fall 2020, if not sooner, approximately 12 months from the asset purchase date. Post-integration, Kona Grill could also potentially be a long-term growth vehicle through disciplined developments, complementing STK.

In summary, we think there are multiple opportunities that this acquisition will provide to us in creating long-term shareholder value. As we have already stated, Kona Grill is expected to contribute approximately $23 million to $24 million in revenue and over $1 million in adjusted EBITDA for our fourth quarter of 2019.

Next year, we expect the brand to add approximately $100 million in annualized food and beverage sales and to be accretive to earnings per diluted share. Let's now turn to the third quarter. I'm pleased that our strong sales momentum from the first half of the year continued into the third quarter as well.

Specifically, we reported a total revenue increase of 10.5%, including a 9.3% increase in domestic same-store sales. In the prior quarter, we grew same-store sales by 6.9%. So on a 2-year basis, same-store sales rose 16.2%, exceeding our second quarter 2-year comp of 13.9% by 230 basis points.

As I have said repeatedly giving context to these numbers, our performance well exceeds our closest peers and demonstrates how unique Vibe Dining really is, both to us and to our guests. Importantly, most of our comp growth was generated through increases in traffic and mix, as we benefit from only modest price increases.

With respect to our key profitability metric, adjusted EBITDA, we grew that by 30% in the third quarter despite inefficiencies and newer locations such as San Diego and Nashville, and the weaker British pound and euro relative to the dollar would hurt our profitability for our managed and licensed locations in the United Kingdom and Italy.

Turning now to development. Although we did not have any openings in the third quarter, we opened 2 locations in October. First, a licensed STK location in San Juan, Puerto Rico, on a waterfront property at the luxury Condado Vanderbilt Hotel.

The Condado Vanderbilt Hotel is the standard for excellence for luxury resort hotels in San Juan and throughout the Caribbean and was recently restored. STK San Juan brings a culinary and social destination to the property offering elevated cuisine and an unparallel experience.

We also opened ANGEL Roofbar & Dining and managed F&B location in Florence, Italy, in the Centro-Storico neighborhood. It occupies Hotel Calimala's 5th, 6th and 7th floors, providing unprecedented views over the city with a restaurant, 2 indoor and outdoor bar, a floral garden patio and lunchplunge pool.

We are confident that they will become a cornerstone of the local dining and nightlife scene for morning until late night. In December, we plan to open and manage STK location in Scottsdale, Arizona. For 2020, we have a robust pipeline consisting of 6 to 8 openings, including 5 to 6 STK restaurants and 1 and 2 food and beverage venues.

We continue to believe there's a lot of runway for STK. The brand is in the early stages of capturing a global opportunity and within our estimation an addressable market for approximately 200 locations across over 75 major metropolitan areas, including company-owned STKs, licensed STKs and managed F&B locations.

This alone represents in excess of $1 billion systemwide food and beverage revenue opportunity.

And while we're only in the early innings of integrating the Kona Grill, it is obviously incremental and complementary to the STK growth opportunity and provide us with those Vibe Dining platforms for smaller DMAs [ph], which is something we have covered it since I arrived at the company. With that, I would now like to turn the call back to Tyler.

Tyler?.

Thank you, Manny. For the third quarter ended September 30, 2019, total GAAP revenues were $22.1 million, representing a 10.5% increase from comparable quarter last year. As Manny mentioned earlier, same-store sales at owned and managed STK restaurants rose 9.3%, reflecting acceleration from both the second quarter as well as the year-ago period.

Included in our total revenues for the third quarter of 2019 is our owned restaurant net revenues of $17.1 million, which increased approximately 11.8% compared to $15.3 million in the third quarter of 2018. The increase was primarily due to an increase of 7.8% in same-store sales for the domestic company-owned STK restaurant.

This was coupled with the opening of STK Nashville in March of 2019. Owned food, beverage and other net revenues increased 5.4% to $2.1 million in the third quarter of 2019 from $2 million in the third quarter of 2018. Management, license and incentive fee revenues increased 7.4% to $2.9 million in the third quarter of 2019.

These revenues were driven by an increase in performance within our existing international managed locations in the United Kingdom and Italy, which was partially offset by the negative currency effects of a weaker British pound and euro.

We also benefited by the launch of licensed locations that opened in the third quarter of 2018 or in 2019, including in Mexico City, Dubai and Doha. These were partially offset by the loss of management fee revenue from the One 29 Park, LLC management agreement, which terminated on September 30, 2018.

Owned restaurant cost of sales as a percentage of owned restaurant net revenues decreased 30 basis points to 26.1% in the third quarter of 2019 compared to 26.4% in the comparable quarter last year.

The year-over-year decrease was a result of cost savings initiatives put in place at the restaurant level and reduced wage, coupled with selective price increases that we took at the beginning of the year. This was partially offset by new restaurant operating inefficiencies.

Owned restaurant operating expenses as a percentage of owned restaurant net revenues decreased approximately 90 basis points to 63% in the third quarter of 2019 compared to 63.9% in the third quarter of 2018.

The decrease is due to cost savings initiatives put in place at the restaurant level, primarily in labor management along with leverage provided by our sales increase. The decrease was partially offset by minimum wage increases and new store inefficiencies.

On a total reported basis, general and administrative expenses, including stock-based compensation for the third quarter of 2019, was $2.4 million compared to $2.3 million in the prior year. As a percentage of total revenue, general and administrative expenses decreased 80 basis points to 10.6% of total revenue.

When adjusting for stock-based compensation, adjusted general and administrative expenses were $2 million in the third quarter. As a percentage of revenues, adjusted general and administrative expenses decreased 60 basis points to 9.1% of total revenue.

There were no restaurant preopening costs for the third quarter of 2019, but we incurred $449,000 in the third quarter of 2018, which was related to the STK San Diego opening. We incurred $358,000 of transaction cost during the quarter of 2019 related to our acquisition of Kona Grill, for which there was no comparable expenses in the prior year.

Interest expense, net of interest income was $230,000 in the third quarter of 2019 compared to $294,000 in the same quarter of the prior year. Income tax expenses was $76,000 for the third quarter of 2019 compared to $251,000 for the third quarter of 2018.

Net income attributable to the ONE Group Hospitality, Inc., was $460,000 or $0.02 per share compared to a net loss of $305,000 in 2018 or a loss of $0.01 per share.

Adjusted EBITDA attributable to the ONE Group for the third quarter was $2.6 million compared to the prior year adjusted EBITDA of $2 million, representing a year-over-year increase of 30%.

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 second quarter earnings release. 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 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 to us now and our expectations as of today, we are updating the full-year guidance based on the strong third quarter performance and the acquisition of the Kona Grill restaurant.

We expect for full-year 2019 same-store sales growth at our domestic and company-owned, managed STK restaurants to grow approximately 6% to 8%. And as a reminder, we're lapping a very strong comparison in the fourth quarter of 15%.

We project our total GAAP revenues between $118 million and $120 million, representing 38% to 40% growth compared to our 2018 total GAAP revenue. We estimate the total food and beverage sales at our owned and managed units of between $213 million and $223 million.

Consolidated adjusted EBITDA of $14 million to $14.5 million, which would represent approximately 33% to 38% growth compared to 2018; total G&A, excluding stock-based compensation and integration expenses, of approximately $9.5 million; total capital expenditures, net of allowances received from our landlords of approximately $5 million; and finally, a total of 5 restaurant openings, 4 STKs, of which one is company-owned and one food and beverage hospitality venue.

Turning now to 2020; we are pleased to provide the following targets, which include a full-year benefit of Kona Grill, same-store sales of about 2% to 3%. Total GAAP revenues between $200 million and $210 million, representing approximately 67% to 78% growth compared to our projected 2019 total GAAP revenue.

Total food and beverage sales at our owned and managed units between $310 million and $320 million. Consolidated adjusted EBITDA between $23 million and $25 million, representing approximately 60% to 80% growth compared to our projected 2019 consolidated adjusted EBITDA.

Total G&A; excluding stock-based compensation and integration expenses between 6% and 7% of total GAAP revenue. Total capital expenditures, net of allowances received from landlords of approximately $8 million to $10 million and 6 to 8 openings, including 5 to 6 STK restaurants and 1 to 2 food and beverage venues.

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

Thank you, Tyler. We are having a great year at the ONE Group, and we expect a strong finish in the fourth quarter, anchored by our great marketing, strong event promotional efforts and healthy holiday bookings for Thanksgiving, Christmas and New Year's Eve.

We are very excited about what the Kona Grill acquisition means to us in growing sales and adjusted EBITDA and appreciate all the hard work of our team before, through and since we closed the transaction. We want to welcome all of the Kona Grill teammates to the ONE Group family, and we look forward to growing together.

As I said earlier, our plan is simple, leverage our corporate infrastructure. Our bar business knowledge and unique Vibe Dining programs to elevate the Kona Grill brand experience and drive improved topline performance to create long-term shareholder value.

We also have a great pipeline of development for our STK brand and are executing on our tremendous opportunity for expansion around the world. Thank you, team, and thank you all for joining us on the call today. Tyler and myself 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 Jaffray..

Great. I wanted to -- first a clarification, Tyler, I think in your comments you had mentioned a 7.8% domestic STK comp. In the release, there's an 8.1% comp.

Curious if there's any sort of differences related there? Or -- just that point of clarification, then really wanted to follow up on the price increases and cost efficiencies that you talked about at the core brands. That's pretty exciting. It seems like that's a nice little piece of the story as well that helps the efficiency and the flow-through.

Where are we in the innings there? Are there more of those to come? Anything that you could offer there in terms of just sizing up that opportunity would be helpful..

Sure. So on the comp question, the company-owned locations was 7.8%, and then when you include the domestic management location that is 8.1%..

Okay, understood. And then, the 12.2% comp that's referenced for the U.S.

managed STK restaurants?.

Yes, sorry. That's -- so it's 8.1% for the company-owned domestic, 12.2% that's going to be Las Vegas, the STK Las Vegas, and the combined comp for all domestic is going to be 9.3%. And then, in terms of the cost savings efficiencies, I would say that we are really in early stages of the cost savings efficiencies related to the cost of goods sold.

I think the -- we're about 30 basis points better year-over-year, 26.1%. Q4 will be -- generally has the best cost of goods quarter with all of these events. So I think we've guided 25% to 26%.

But in terms of -- but in terms of the initiatives related to the cost of goods sold efficiency, I would say, there's still continued work to be done there for us..

Understood. In terms of the kind of grow opportunity, it sounds like a nice longer-term piece of bolt onto it. Maybe you talked about in your prepared remarks about opportunities to bring the Vibe Dining element to Kona to maybe increase dinner, daypart work on the bar business.

Can you give us a sense of which pieces of those or maybe the most near-term opportunity? Or give us a sense where Kona is right now? I'm trying to then size up the revenue opportunity that you put out for 2020 for the brand.

Is that a stretch goal? Is that kind of where the brand is now with the core 24 units you have? Any sort of context you help with -- you can provide would be helpful in terms of sizing up just where we're at now? And then what's the kind of run rate opportunity? And how much of a stretch, how much energy it takes to really get the brand there..

So, I'll answer the first part of the question, which is the focus. I think the primary focus right now is on the bar. I think that if you go back at the history of that brand. The bar has always been a strength of the brand. And I think that's one of the areas where we can really make a big difference.

I do think that's a happy-hour program that was launched late last year, is really taken on hold. So I do think happy-hour business is back in the brand. It's not really a play on driving the energy and the excitement in the bars. And then more importantly converting that happy-hour momentum into dining room transaction. So that's kind of the play now.

We just launched our Margarita Heaven program in the bars, it's just already become very successful, which is a full line of different flavored margaritas. We've brought in the skinny margarita, watermelon margarita. So, you'll continue to see us putting a lot of emphasis behind that part of the program, really bringing excitement to the bar.

And then your question about revenues, I think our view for next year for the Kona Grill is about 2% to 3% comp sales. I do think that from a transaction perspective, the brand is doing very well right now. And I do believe that a 2% to 3% same-store sales goal for next year is very attainable.

So it is not a stretch goal, it's really what we believe we can achieve with the brand next year..

Great, that's helpful.

And in terms of sizing up that alcohol opportunity, can you give us a sense of where, let's say, alcohol mix is now for the brand? And what you think the ultimate opportunity could be?.

Yes. So -- it's a great question. So right now, the brand is around 30% of bar business or liquor. We think that, that should be closer to 35%. So we do have a tremendous amount of runway to get there. So we're excited about that because, as you know, that's a very profitable business.

And not only will help the revenue line, but will significantly enhance the margins by driving the revenues in the bar..

Absolutely. And you mentioned that opportunity to convert the happy-hour business into dinner business. You've been very successful with that at STK. In terms of Kona Grill, I'm sure there's a lot of moving pieces there, but how is the brand shaped up by daypart mix now in terms of lunch, dinner. I imagine dinner is still a large piece of it.

But what is the opportunity look like there to drive that sales mix in favor of the higher check-dinner business?.

I mean, I think we have the opportunity in all dayparts, so I don't think that there's one daypart that I would say is not an opportunity, but frankly the way I look at it in the longer-term is dinner is the critical component of the business model and that's the place where we need to win the battle.

I do think that the product that Kona has right now is actually really good. So we do have a great product offering. We obviously still need to groom some of the menu and some of the presentations to make it a little bit more elevated. But overall, I think that dinner program is pretty cool.

And it's really now just taking that happy-hour and taking those customers who are in the restaurant between 6:00 and 7:00 and get them to stay another 2 hours to go through dinner.

Obviously, to make that conversion work, we do have to work on happy-hour, on everything from portion size to pricing, just to make sure that we really suggest that conversion [indiscernible] consumer.

So lot -- still some work there, but the answer ultimately to your question is, we do want to win the dinner business with happy-hour being the very important transitional piece to get people from the bar to dinner..

Great. Then a point of clarification, as we start to transition the model to layer in Kona. As we think about that $310 million to $320 million in owned and managed F&B sales.

Do I think about that as just really your prior business plus the $100 million that you've targeted for Kona and that's how you get to that $310 million to $320 million?.

Exactly, plus the growth that we'll have next year in new openings as well as the addition of Scottsdale at the end of the year, then, as you already know, we opened up the rooftop in Florence, and we also opened up a great STK in San Juan in Puerto Rico.

So it's the addition of the fourth quarter development plus the $100 million from Kona plus the old business..

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

First off, Manny, thanks for the insight into alcohol and bar sales at Kona.

Can you just give us a reminder of kind of where you guys are in your core STK business? And any changes in the trend for alcohol sales for you guys?.

I mean, I think the general trend for us is that, as you've probably seen recently, we've introduced our new premium drink program. Our emphasis right now in beverages is the stem cocktail program. So you'll see us continue putting a lot of emphasis in driving some news in cocktails.

So we're basically doing with our drink program what we've done with our culinary program, which is to have a core menu and at least 2 to 3 times a year bring in new seasonal offerings into the menu. So you'll see us continue to leverage that. And clearly, idea there is to introduce the consumers to premium drinks that we offer in that program.

So you'll continue to see us adding a lot of emphasis in driving that. And obviously, the drink program compliments a very robust happy hour program that we currently have in the unit. So you'll see us doing both that -- that strategy both at STK and as well as at Kona.

So you'll see throughout 2020 our emphasis being heavily around Vibe and particularly about evolving and driving a very robust bar business in all our restaurants..

Okay.

And then, sorry if I missed it, if you spoke about it earlier, but can you just give us an update on commodities?.

I mean, I think -- Mark, you probably have noticed that there's been some escalation in market, but we do lock in our beef, particularly the loins for the filet. So we're pretty locked in on that part of the portfolio. I think generally Tyler and I are looking at about 1% or 2% impact to commodities or inflation.

So pretty modestly, we're not seeing any accelerated impact just because we do have contracts in places where we need them. And then we also more recently walked into some contracts and things like shrimp, which have been a problem for us in the second quarter.

So we're getting really effective that hedging and making sure we're not hedging, but locking in pricing to make sure that we don't get surprised with inflation..

Okay. And then last one for me, comp restaurants looked really solid.

Can you just speak to kind of how your new restaurants, your non-comp restaurants are doing out of the gate?.

I think, as we mentioned earlier, we've been very delighted with Nashville. I mean, I think Nashville has been a home run, frankly, from a new market for us, and we're super excited about that. And if you've been to the facility, you probably know that it has a substantial amount of private dining rooms.

And we think we can leverage those over time to drive that business. So that's super successful. I believe that San Diego, which we opened last year, has been very strong from total property because we do have a rooftop and restaurants. Obviously, the restaurant is still newer to the market, so we do have opportunity there.

So again, I think that, overall, between the rooftop and the restaurant, we're happy with San Diego. And just generally, the Middle Eastern markets have been great. I think we've been very pleasantly surprised how well -- pleasantly surprised in a good way that it's been a very strong business for us.

Puerto Rico has also started off the blocks very well. So all in all, I would say that we're pretty satisfied with the quality of the revenues from our new stores..

Our next question comes from the line of Matthew DiFrisco with Guggenheim Securities..

Manny and Tyler, can you just talk about what -- I guess we all know Kona has been in a little bit of a transition stage for a little over a year now.

Where is it as far as those stores that you sort of said they're split down the middle between the haves and have nots? How aggressive have those rates been renegotiated? Or is that still an opportunity on some of those weaker stores, even though I know a lot of them have been open sort of post 2016? So is it an opportunity to renegotiate those? Or have they already been pretty much negotiated down to the lowest levels they can be?.

Yes. So, great question. So the restaurants that we picked up are all great locations. So we don't have any location that I would say are a problem location right now in the portfolio. So I think that's part of what happens in the bankruptcy process, we do get an opportunity to clean up the portfolio to where you want it to be.

So we do have frankly the portfolio that we wanted, where in all the markets that we believe are perfect for Vibe Dining and really to elevate that ONE brand. So that's very strong. And then the question about concessions. I think Tyler and the team did a really good job of renegotiating, actually, a majority of all the leases.

So we do have a substantial amount of concessions that were gained during the bankruptcy process. I don't think there's anything else really to do after that. But we did get a portfolio of excellent stores with great economics relative to rents as well as we also got just really good concessions from all the landlords.

So I think that the portfolio is super strong..

Our next question comes from the line of Steve Emerson with Emerson Investment Group..

Great quarter, Manny.

Could you flesh out a little bit the components of the EBITDA guidance for next year, for instance how much in onetime expenses for the acquisition and fix it for the acquisition are in there?.

Yes. So we've got about $1 million slated for transition expenses for next year..

Okay.

And how much of preopening costs, et cetera, are you expecting and other expenses and then CapEx?.

Yes. So we on -- for company-owned locations, we budget about $400,000 in preopening expenses per company-owned location. And then in terms of CapEx, the guidance for CapEx next year was $8 million to $10 million..

Okay.

And how much in total preopen are you looking at? In other words, how much expenses are you looking at as part of that guidance?.

So on the preopening side right now, we may have one and only one site next year that is a company-owned store. So if we do that one company location, as Tyler mentioned, there will be an insignificant amount of preopening expenses.

So if you look our income statement for this year, we opened Nashville, and we did it for about $500,000 of total preopening expenses. So for all intents and purposes, I think that we have reestablished for our company a new baseline of what preopening can be.

So if we do open one company-owned store next year it will be about $400,000 in preopen expense for that restaurant..

Okay.

And going ahead, what do you think -- what are you planning on, couple STK units a year and a couple of Kona's? What -- going ahead, how should we look at the company?.

So right now, on our forward numbers, there's no Kona's, it's all STK and STK property. So we don't have any plans at this point to open any Kona Grills..

So a couple of STK a year, so [indiscernible] preopening will be typical?.

Well, as I said earlier, we don't have any -- again, we may have one company-owned store next year. So the maximum we would see in preopening expenses next year would be about $400,000. So the answer is right now the majority of all our sites, our management and licensed sites, which we don't have preopening expenses for..

Okay. And what is -- I was a little confused what your total net debt is after the acquisition.

And then how much free cash flow do you expect in 2020 and pay-down?.

Yes. So the size of the facility is a $48 million term and a $12 million revolver. The amortization of the facility is very low.

And -- sorry, repeat the other question?.

Well, what kind of free cash flow are you expecting in 2020 and debt pay-down?.

So at this point, right now, we do have -- I think, our guidance for the year, as Tyler mentioned on the call, is EBITDA of $23 million to $25 million. And then we have about net CapEx of about $8 million to $10 million. And so we do -- we will have a substantial amount of free cash flow next year.

So I mean, it will be very, very heavy free cash flow year for us..

[Operator Instructions] Our next question is a follow-up from Joshua Long with Piper Jaffray..

I wanted to then touch on the events business as we go into the back half of the year. You've done really well the last several years, particularly STK in terms of building those relationships with the hotels and finding all the different ancillary opportunities to drive some of that high-margin holiday business.

Curious where we are in that process and what your kind of outlook or what you're focused on and have your teams focused on here as we go into holiday season?.

I mean, I think the bookings for this year, at least as I've been following them, has been super strong. As a matter of fact, equal or better than last year. So the books are shaping very nicely right now. And as you know that we had a fantastic fourth quarter last year with events. And we do have great properties that have great spaces for that.

So you'll continue to see us emphasizing that. And we did this year add a Vice President of Events and Private Dining earlier in the year. So we were starting to see a substantial dividend out of having one headcount fully focused on it.

So I would say from where we sit here today I expect the events business will be very robust for us in the fourth quarter. I mean, right now, we're looking at the buildups of the books. And it's pretty strong. So we're very encouraged by what we've seen so far..

Great. And then, when we think about that G&A guidance for next year, the 6% to 7% of the GAAP revenues you gave, that's still ex noncash stock comp.

Can you give us a sense of what we're going to need to layer on for -- to get a sense of the fully loaded number? Are there pieces related to the transaction? Are there some incentive numbers, I imagine, for the Kona team? Just how should we be thinking that at from an all-in number as we're modeling or putting our model together?.

I mean, I think from your modeling perspective, I mean, we did guide the $200 million to $210 million in revenue. So I mean, it's a matter of applying the percentage of what Tyler laid out, which, I guess, the midpoint is 6.5% to 6.7%. So to me, that would be the way that I would approach that forecasting.

Looking at our G&A today, I think that adding Kona will add us somewhere between -- around $3 million-ish of G&A from where we're starting with a baseline now. So that's kind of how I would look at the modeling, so kind of historic plus around $2 million in G&A..

There are no further questions at this time. I'd like to turn the call back over to Mr. Hilario for any closing remarks..

Thank you, operator. And I'd like to thank everyone on the call today for your continued interest on the ONE Group. And I look forward to seeing you all out in the restaurants. So everyone, have a great day, and talk to you later. Thank you..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day..