Kona Grill Reports Third Quarter 2018 Results
November 08 2018 - 3:05PM
- Margin Improvements from Cost-Savings
Initiatives Drives YTD Adjusted EBITDA Growth of 66%- Focus on
Driving Sales with the Appointment of Veteran Restaurateurs, Marcus
Jundt and Steven Schussler as Co-Chief Executive Officers
Kona Grill, Inc. (NASDAQ: KONA), an American grill and sushi bar,
reported financial results for the third quarter ended September
30, 2018.
“Our efforts to achieve higher profits for
fiscal year 2018 continue to take shape. During the first nine
months of 2018, adjusted EBITDA increased 66% compared to the same
period last year. The higher profitability is a result of Company
initiatives implemented earlier this year and ongoing projects
framed around our mission to make every experience exceptional for
our guests,” said Marcus Jundt, Co-Chief Executive Officer of Kona
Grill.
“With Steve Schussler’s and my recent
appointment as Co-Chief Executive Officers, our focus is on
revitalizing the Kona Grill brand and the unique aspects which has
made this brand successful over the years. These areas include
becoming once again America’s best happy hour with items that
provide a great value proposition as well as genuine hospitality
and a passion for service,” he continued.
"Our focus for the remainder of 2018 and fiscal
year 2019 is driving guests into our restaurants. We recently
launched our Konavore Rewards Program, implemented various
marketing efforts, including mobile marketing and a Kona Grill app,
and revamped our Happy Hour menu offerings. For the holiday season,
we are rolling out a new gift card promotion with a strong bounce
back offer to support first quarter 2019 sales," he continued.
“As part of our ongoing evaluation of
underperforming restaurants, we made the decision to close two
restaurants during the third quarter. As we monitor our restaurants
for underperformance, we continue to engage in discussions with our
landlords regarding rent abatement, closing certain locations or
strategic alternatives. Our success in addressing these
opportunities and issues will put us in a better long-term
financial position. We were in compliance with our financial
covenants as of September 30, 2018,” he concluded.
* For a reconciliation of Adjusted EBITDA to the
most directly comparable financial measures presented in accordance
with GAAP and a discussion of why the Company considers them
useful, see the financial information accompanying this
release.
Conference Call
Kona Grill will hold a conference call today at
5:00 p.m. Eastern time to discuss its financial results for the
third quarter ended September 30, 2018. The Company’s Co-CEO Marcus
Jundt and CFO Christi Hing will host the call, followed by a
question and answer session.
The conference call will be broadcast over the
internet via the investors section of the Company’s website at
www.konagrill.com. Additionally, investors may dial 1-646-828-8143
to participate in the call.
About Kona GrillKona Grill
features a global menu of contemporary American favorites,
award-winning sushi, and specialty cocktails in an upscale casual
atmosphere. Kona Grill owns and operates 44 restaurants, guided by
a passion for quality food and exceptional service. Restaurants are
located in 22 states and Puerto Rico. Additionally, Kona Grill has
two restaurants that operate under a franchise agreement in Dubai,
United Arab Emirates, and Vaughan, Canada. For more information,
visit www.konagrill.com.
Forward-Looking
StatementsVarious remarks we make about future
expectations, plans, and prospects for the Company constitute
forward-looking statements for purposes of the Safe Harbor
provisions under the Private Securities Litigation Reform Act of
1995. Forward-looking statements include statements regarding our
expectations, beliefs, intentions, plans, objectives, goals,
strategies, future events, or performance and underlying
assumptions and other statements that are not purely historical.
These statements relate to our future financial performance and
development plans, including but not limited to those relating to
our sales trends, projected earnings, expenses, and availability of
capital. We have attempted to identify these statements by using
forward-looking terminology such as “may,” “will,” “anticipates,”
“expects,” “believes,” “intends,” “should,” or comparable terms.
All forward-looking statements included in this press release are
based on information available to us on the date of this release
and we assume no obligation to update these forward-looking
statements for any reason. These statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those described in the statements. Investors are
referred to the full discussion of risks and uncertainties
associated with forward-looking statements and the discussion of
risk factors contained in the company's filings with the Securities
and Exchange Commission.
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KONA GRILL INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
|
|
|
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|
September 30, |
|
December 31, |
|
2018 |
|
2017 |
Assets |
(unaudited) |
|
|
Cash and cash
equivalents |
$ |
3,904 |
|
$ |
5,042 |
Other
current assets |
|
2,909 |
|
|
4,002 |
Other assets |
|
1,022 |
|
|
1,116 |
Property and equipment,
net |
|
70,755 |
|
|
81,639 |
Total
assets |
$ |
78,590 |
|
$ |
91,799 |
Liabilities and Stockholders' Equity |
|
|
|
Current
liabilities |
$ |
14,611 |
|
$ |
16,603 |
Long-term debt |
|
32,349 |
|
|
36,921 |
Deferred
rent and other long-term liabilities |
|
28,784 |
|
|
32,612 |
Stockholders'
equity |
|
2,846 |
|
|
5,663 |
Total
liabilities and stockholders' equity |
$ |
78,590 |
|
$ |
91,799 |
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KONA GRILL, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share amounts) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
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(Unaudited) |
|
(Unaudited) |
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Revenue |
$ |
37,435 |
|
|
$ |
44,390 |
|
|
$ |
121,798 |
|
|
$ |
136,592 |
|
Costs
and expenses: |
|
|
|
|
|
|
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Cost of
sales |
|
9,690 |
|
|
|
12,038 |
|
|
|
31,220 |
|
|
|
37,587 |
|
Labor |
|
13,837 |
|
|
|
16,343 |
|
|
|
44,222 |
|
|
|
50,172 |
|
Occupancy |
|
4,084 |
|
|
|
4,154 |
|
|
|
12,512 |
|
|
|
12,435 |
|
Restaurant operating expenses |
|
6,163 |
|
|
|
7,327 |
|
|
|
19,123 |
|
|
|
22,142 |
|
General
and administrative |
|
2,534 |
|
|
|
3,297 |
|
|
|
9,158 |
|
|
|
10,013 |
|
Preopening expense |
|
- |
|
|
|
13 |
|
|
|
- |
|
|
|
810 |
|
Depreciation and amortization |
|
3,421 |
|
|
|
3,982 |
|
|
|
10,142 |
|
|
|
11,277 |
|
Asset
impairment charge |
|
- |
|
|
|
30 |
|
|
|
- |
|
|
|
30 |
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Lease
termination costs and other |
|
2,195 |
|
|
|
8 |
|
|
|
2,120 |
|
|
|
1,392 |
|
Total
costs and expenses |
|
41,924 |
|
|
|
47,192 |
|
|
|
128,497 |
|
|
|
145,858 |
|
Loss from
operations |
|
(4,489 |
) |
|
|
(2,802 |
) |
|
|
(6,699 |
) |
|
|
(9,266 |
) |
Write-off of deferred financing costs |
|
- |
|
|
|
- |
|
|
|
37 |
|
|
|
472 |
|
Interest
expense, net |
|
617 |
|
|
|
500 |
|
|
|
1,845 |
|
|
|
1,214 |
|
Loss
before income taxes |
|
(5,106 |
) |
|
|
(3,302 |
) |
|
|
(8,581 |
) |
|
|
(10,952 |
) |
Income tax expense
(benefit) |
|
8 |
|
|
|
21 |
|
|
|
(7 |
) |
|
|
71 |
|
Net
loss |
$ |
(5,114 |
) |
|
$ |
(3,323 |
) |
|
$ |
(8,574 |
) |
|
$ |
(11,023 |
) |
|
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|
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Net loss per
share: |
|
|
|
|
|
|
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Basic and
diluted |
$ |
(0.39 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.72 |
) |
|
$ |
(1.09 |
) |
|
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Weighted
average shares outstanding: |
|
|
|
|
|
|
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Basic and
diluted |
|
13,259 |
|
|
|
10,102 |
|
|
|
11,828 |
|
|
|
10,126 |
|
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KONA GRILL, INC. |
NON-GAAP RECONCILIATIONS |
(In thousands) |
(Unaudited) |
|
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We prepare our financial statements in accordance with
U.S. GAAP. Within our press release, we make reference to non-GAAP
EBITDA, Adjusted EBITDA and Restaurant Operating Profit. Restaurant
Operating Profit is defined as revenue minus cost of sales, labor,
occupancy and restaurant operating expenses. Restaurant Operating
profit does not include general and administrative expenses,
depreciation and amortization, asset impairment charge or
preopening expenses. We believe Restaurant Operating Profit is an
important component of financial results because: (i) it is a
widely used metric within the restaurant industry to evaluate
restaurant-level productivity, efficiency, and performance; and
(ii) we use Restaurant Operating Profit as a key metric to evaluate
our restaurant financial performance compared to that of our
competitors. |
|
EBITDA and Adjusted EBITDA. EBITDA is defined as net
income (loss) plus the sum of interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA plus unusual or
non-recurring items, such as impairment, lease termination and exit
costs and write-off of deferred financing costs. EBITDA and
Adjusted EBITDA are presented because: (i) we believe it is a
useful measure for investors to assess the operating performance of
our business; (ii) we believe that investors will find these
measures useful in assessing our ability to service or incur
indebtedness; and (iii) we use EBITDA and Adjusted EBITDA
internally as a benchmark to evaluate our operating performance and
compare our performance to that of our competitors. EBITDA and
Adjusted EBITDA are not measurements of our financial performance
under GAAP and should not be considered as alternatives to net
income, operating income, or any other performance measures derived
in accordance with GAAP, or as alternatives to cash flow from
operating activities as a measure of our liquidity. |
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Three Months Ended |
|
|
Nine Months Ended |
|
September 30, |
|
|
September 30, |
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Net loss |
$ |
(5,114 |
) |
|
$ |
(3,323 |
) |
|
|
$ |
(8,574 |
) |
|
$ |
(11,023 |
) |
Income
tax expense (benefit) |
|
8 |
|
|
|
21 |
|
|
|
|
(7 |
) |
|
|
71 |
|
Interest
expense, net |
|
617 |
|
|
|
500 |
|
|
|
|
1,845 |
|
|
|
1,214 |
|
Depreciation and amortization |
|
3,421 |
|
|
|
3,982 |
|
|
|
|
10,142 |
|
|
|
11,277 |
|
EBITDA |
|
(1,068 |
) |
|
|
1,180 |
|
|
|
|
3,406 |
|
|
|
1,539 |
|
Asset
impairment charge |
|
- |
|
|
|
30 |
|
|
|
|
- |
|
|
|
30 |
|
Lease
termination and exit costs |
|
2,210 |
|
|
|
8 |
|
|
|
|
2,258 |
|
|
|
1,392 |
|
Write-off
of deferred financing costs |
|
- |
|
|
|
- |
|
|
|
|
37 |
|
|
|
472 |
|
Adjusted EBITDA |
$ |
1,142 |
|
|
$ |
1,218 |
|
|
|
$ |
5,701 |
|
|
$ |
3,433 |
|
General
and administrative |
|
2,534 |
|
|
|
3,297 |
|
|
|
|
9,158 |
|
|
|
10,013 |
|
Preopening Expense |
|
- |
|
|
|
13 |
|
|
|
|
- |
|
|
|
810 |
|
Gain on
insurance recoveries |
|
(15 |
) |
|
|
- |
|
|
|
|
(138 |
) |
|
|
- |
|
Restaurant operating
profit |
$ |
3,661 |
|
|
$ |
4,528 |
|
|
|
$ |
14,721 |
|
|
$ |
14,256 |
|
|
|
|
|
|
|
|
|
|
Restaurant operating
profit margin (A) |
|
9.8 |
% |
|
|
10.2 |
% |
|
|
|
12.1 |
% |
|
|
10.4 |
% |
|
|
|
|
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(A) Restaurant operating profit margin is calculated as
restaurant operating profit divided by restaurant sales |
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KONA GRILL, INC. |
Selected Supplemental Operating
Information |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
September 30, |
|
|
September 30, |
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
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|
Same-store sales percentage change |
-14.1 |
% |
|
-7.2 |
% |
|
|
-11.6 |
% |
|
-5.6 |
% |
|
|
|
|
|
|
|
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Company-owned
restaurants opened during the period |
- |
|
|
- |
|
|
|
- |
|
|
1 |
|
Company-owned
restaurants closed during the period |
2 |
|
|
- |
|
|
|
2 |
|
|
- |
|
Company-owned
restaurants opened at the end of the period |
44 |
|
|
46 |
|
|
|
44 |
|
|
46 |
|
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Kona Grill Investor Relations Contact:Kona
Grill, Inc.Christi Hing, Chief Financial Officer(480)
922-8100investorrelations@konagrill.com