ONE Group Hospitality, Inc.: Form 10-Q for the period ended Sep 28, 2025

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Forward-looking statements speak only as of the date thereof and involve risks and uncertainties that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include the risk factors discussed under Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new or acquired restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (8) the impact of actual and potential changes in immigration policies, including potential labor shortages; (9) the potential impact of the imposition of tariffs, including increases in food prices and inflation, and (10) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “ongoing,” “could,” “estimates,” “expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “goal,” “plans,” “potential,” “projects,” “predicts,” “should,” “targets,” “would,” “will” and similar expressions that convey the uncertainty of future events or outcomes. You should not place undue reliance on any forward-looking statement. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required under applicable law.

General

This information should be read in conjunction with the condensed consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

As used in this report, the terms “Company,” “we,” “our,” or “us,” refer to The ONE Group Hospitality, Inc. and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.

Business Summary

We are an international restaurant company that develops, owns and operates, manages and licenses, and franchises upscale and polished casual, high-energy restaurants. Our vision is to be a global market leader in the restaurant industry by melding high-quality service, ambiance, high-energy and cuisine into one great experience that we refer to as “Vibe Dining". We design all our restaurants to create a social dining and high-energy entertainment experience within a destination location. We believe that this design and operating philosophy separates us from more traditional restaurant and foodservice competitors.

Our primary restaurant brands are as follows:

• STK, a modern twist on the American steakhouse concept featuring premium steaks, seafood and specialty cocktails in an energetic upscale atmosphere;
• Benihana, an interactive dining destination with highly skilled chefs preparing food in front of guests and served in an energetic atmosphere alongside fresh sushi and innovative cocktails;
• Kona Grill, a polished casual bar-centric grill concept featuring American favorites, award-winning sushi, and specialty cocktails in a polished casual atmosphere; and
• RA Sushi, a Japanese cuisine concept that offers a fun-filled, bar-forward, upbeat, and vibrant dining atmosphere anchored by creative sushi, inventive drinks, and outstanding service.
• Our F&B management services are marketed as ONE Hospitality and include developing, managing and operating restaurants tailored to the specific needs of high-end hotels and casinos. For those restaurants and venues that are managed, licensed or franchised, we generate management fee revenue and franchise revenue based on top-line revenues and incentive fee revenue based on a percentage of the location’s revenues and net profits.

We opened our first restaurant in January 2004 in New York, New York. We currently own, operate, manage, license or franchise 157 venues including 30 STKs, 85 Benihanas, 23 Kona Grills and 13 RA Sushis in major cities in North America, Europe, Latin America and the Middle East and 6 F&B venues operated under ONE Hospitality in three hotels and casinos throughout the United States and Europe.

As our footprint increases, we expect to benefit by leveraging system-wide operating efficiencies and best practices through the management of our general and administrative expenses as a percentage of overall revenue.

We intend to open five to seven new venues in 2025. We have opened the following restaurants to date in 2025:

• Owned Benihana restaurant in San Mateo, California (March 2025)
• Owned STK restaurant in Topanga, California (April 2025)
• Owned STK restaurant in Los Angeles, California (May 2025 - relocation of our existing STK Westwood restaurant)
• Franchised Benihana Express restaurant in Miami, Florida (June 2025)
• Owned STK restaurant in Scottsdale, Arizona (Octobe 2025 – conversion of a former RA Sushi restaurant)

There are currently two Company-owned STK restaurants, one Company-owned Benihana restaurant and one Company-owned Kona Grill restaurant under construction in the following cities:

• Owned STK restaurant in Oak Brook, Illinois
• Owned STK restaurant in Phoenix, Arizona
• Owned Benihana restaurant in Seattle, Washington
• Owned Kona Grill restaurant in San Antonio, Texas (relocation of an existing Kona Grill restaurant)

The table below reflects our current venues by restaurant brand and geographic location:

(1) Locations with an STK and STK Rooftop are considered one venue location. This includes the STK Rooftop in San Diego, CA, which is a licensed location.

(2) Includes Benihana locations at sports arenas.

(3) Includes concepts under the Company’s F&B hospitality management agreements and other venue brands such as Salt Water Social, Heliot, Radio and Rivershore Bar & Grill.

During the third quarter of 2025, we closed one RA Sushi restaurant upon its lease expiration, and we terminated a license agreement for one STK restaurant. During the fourth quarter of 2025, we closed one RA Sushi restaurant and converted it to an STK restaurant.

Our Growth Strategies and Outlook

Our growth model is primarily driven by the following:

• Expansion of STK and Benihana restaurants
• Increase same store sales and increase our operating efficiency
• Acquisitions

Benihana Acquisition and Related Financings

On May 1, 2024, we acquired 100% of the issued and outstanding equity interests of Safflower Holdings Corp. from Safflower Holdings LLC for $365.0 million., subject to customary adjustments (the “Benihana Acquisition”). Safflower Holdings Corp. beneficially owns most of the Benihana restaurants, as well as all of the RA Sushi restaurants, in the United States. We also franchise Benihana locations in the U.S., Latin America (excluding Mexico) and the Caribbean.

Executive Summary

Total revenues decreased $13.8 million, or 7.1% to $180.2 million for the three periods ended September 28, 2025 compared to $194.0 million for the three months ended September 30, 2024 primarily due to a decline in same store sales during this challenging consumer environment.

Same store sales for 2025 compared to 2024 and 2024 compared to 2023 were as follows:

Operating loss increased $4.3 million to $7.9 million for the three periods ended September 28, 2025 compared to $3.6 million operating loss for the three months ended September 30, 2024. The change is primarily attributed to non-cash impairment on long-lived assets, decreased same store sales, fixed cost deleveraging resulting from a decrease in same store sales and increased inflation partially offset by a reduction in transition and integration expenses related to the Benihana Acquisition compared to the 2024 period.

Restaurant Operating Profit decreased $4.4 million, or 17.9%, to $20.1 million for the three periods ended September 28, 2025 compared to $24.5 million for the three months ended September 30, 2024. The decrease in Restaurant Operating Profit was attributable to decreased same store sales, fixed cost deleveraging resulting from the decrease in same store sales and increased inflation. Restaurant Operating Profit as a percentage of owned restaurant net revenue was 11.3% in the third quarter of 2025 compared to 12.8% in the third quarter of 2024. See “Results of Operations” below for a reconciliation of Operating income (loss), the most directly comparable GAAP measure to Restaurant Operating Profit.

Nine Periods Ended September 28, 2025 Compared to the Nine Months Ended September 30, 2024

Total revenues increased $147.2 million, or 32.6%, to $598.8 million for the nine periods ended September 28, 2025 compared to $451.5 million for the nine months ended September 30, 2024 primarily attributable to the Benihana Acquisition on May 1, 2024.

Operating income increased $6.7 million to $3.5 million for the nine periods ended September 28, 2025 compared to an operating loss of $3.2 million for the nine months ended September 30, 2024 primarily due to the increase in operating income attributable to the acquired restaurants partially offset by non-cash impairment on long-lived assets.

Restaurant Operating Profit increased $19.8 million or 29.6% to $86.8 million for the nine periods ended September 28, 2025 compared to restaurant operating profit of $67.0 million for the nine months ended September 30, 2024 primarily attributable to the acquired restaurants. Restaurant Operating Profit as a percentage of owned restaurant net revenue was 14.8% in the first nine periods of 2025 compared to 15.2% in the first nine months of 2024. See “Results of Operations” below for reconciliation to Operating income (loss), the most directly comparable GAAP measure to Restaurant Operating Profit.

Results of Operations

The following table sets forth certain statements of operations data for the periods indicated (in thousands):

The following table sets forth certain statements of operations data as a percentage of total revenues for the periods indicated. Certain percentage amounts may not sum to total due to rounding.

(1) These expenses are being shown as a percentage of owned restaurant net revenue.

EBITDA, Adjusted EBITDA, Restaurant Operating Profit and Restaurant EBITDA are presented in this Quarterly Report on Form 10-Q to supplement other measures of financial performance. EBITDA, Adjusted EBITDA, Restaurant Operating Profit and Restaurant EBITDA are not required by, or presented in accordance with, accounting principles generally accepted in the U.S. (“GAAP”). We define EBITDA as net income before interest expense, provision for income taxes and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, non-recurring gains and losses, stock-based compensation, lease termination and exit expenses, certain transactional and exit costs, transition and integration expenses and loss on early debt extinguishment. Not all the aforementioned items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of terms based on our historical activity. Adjusted EBITDA presented in this Quarterly Report on Form 10-Q is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses. We define Restaurant EBITDA as owned restaurant net revenue minus owned restaurant cost of sales, owned restaurant operating expenses before non-cash rent.

We believe that EBITDA, Adjusted EBITDA, Restaurant Operating Profit and Restaurant EBITDA are appropriate measures of our operating performance because they eliminate non-cash or non-recurring expenses that do not reflect our underlying business performance. We believe Restaurant Operating Profit and Restaurant EBITDA are important components of financial results because: (i) they are widely used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance, and (ii) we use Restaurant Operating Profit and Restaurant EBITDA as a key metric to evaluate our restaurant financial performance compared to our competitors. We use these metrics to facilitate a comparison of our operating performance on a consistent basis from period to period, to analyze the factors and trends affecting our business and to evaluate the performance of our restaurants. Adjusted EBITDA has limitations as an analytical tool and our calculation of Adjusted EBITDA may not be comparable to that reported by other companies; accordingly, you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Adjusted EBITDA is a key measure used by management and is a metric used in our debt compliance calculation. Additionally, Adjusted EBITDA and Restaurant Operating Profit are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use Adjusted EBITDA and Restaurant Operating Profit, alongside other GAAP measures such as net income, to measure profitability, as a key profitability target in our budgets, and to compare our performance against that of peer companies despite possible differences in calculation.

The following table presents a reconciliation of net loss to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

(1) Lease termination and exit (income) expenses are costs associated with closed locations.

(2) Non-cash rent expense (income) is included in owned restaurant operating expenses, pre-opening expenses and general and administrative expense on the condensed consolidated statements of operations and comprehensive income.

(3) Other (income) expenses in the three months eneded September 28, 2025 are related to a gain on a legal settlement.

The following table presents a reconciliation of Operating income to Restaurant Operating Profit for the periods indicated (in thousands):

Restaurant Operating Profit by brand is as follows (in thousands):

Restaurant EBITDA by brand is as follows (in thousands):

The following pro forma results of operations for the three and nine periods ended September 28, 2025 and the three and nine months ended September 30, 2024 give effect to the six owned restaurant closures in 2025 and the five owned restaurant closures in 2024 if they had occurred on January 1, 2024 (in thousands):

Results of Operations for the Three Periods September 28, 2025 Compared to the Three Months Ended September 30, 2024

Revenues

Owned restaurant net revenue. Owned restaurant net revenue decreased $13.2 million, or 6.9%, to $177.4 million for the three periods ended September 28, 2025 from $190.6 million for the three months ended September 30, 2024. The decrease was primarily attributable to a reduction in comparable restaurant sales and the closure of ten Grill Concepts restaurant since October 2024. Comparable restaurant sales decreased 5.9% for the third quarter of 2025 compared to the third quarter of 2024 primarily due to the current economic and macro environment.

Management, license, franchise and incentive fee revenue. Management, license, franchise and incentive fee revenues decreased $0.6 million to $2.8 million for the third quarter of 2025 compared to $3.4 million for the third quarter of 2024. The decrease is attributed to lower management, license and incentive fee revenue at our managed STK restaurants in North America and reduced management and incentive fee revenues due to exiting two license agreements.

Cost and Expenses

Owned restaurant cost of sales. Food and beverage costs for owned restaurants decreased $2.5 million, or 6.2%, to $37.4 million for the three periods ended September 28, 2025 from $39.9 million for the three months ended September 30, 2024. The decrease in owned restaurant cost of sales is primarily attributed to the reduction in owned restaurant net revenue as noted above. As a percentage of owned restaurant net revenue, cost of sales increased slightly to 21.1% for the third quarter of 2025 compared to 20.9% for the third quarter of 2024 due to commodities inflation.

Owned restaurant operating expenses. Owned restaurant operating expenses decreased $6.3 million to $119.9 million for the three periods ended September 28, 2025 from $126.2 million for the three months ended September 30, 2024. The decrease in owned restaurant operating costs is primarily attributed to the reduction in owned restaurant net revenue as noted above. Owned restaurant operating costs as a percentage of owned restaurant net revenue increased 140 basis points from 66.2% in the three months ended September 30, 2024 to 67.6% for the three periods ended September 28, 2025 primarily due to investments in marketing, general cost inflation and fixed cost deleveraging driven by a decrease in same store sales.

General and administrative. General and administrative costs increased $0.5 million, or 3.6%, to $13.3 million for the three periods ended September 28, 2025 from $12.8 million for the three months ended September 30, 2024. The increase was attributable to increased information technology expenses. As a percentage of revenues, general and administrative costs were 7.4% for the three periods ended September 28, 2025 compared to 6.6% for the three months ended September 30, 2024.

Depreciation and amortization. Depreciation and amortization expense was $11.5 million for the three periods ended September 28, 2025 compared to $9.4 million for the three months ended September 30, 2024. The increase was primarily related to depreciation and amortization for new venues and capital expenditures to maintain and enhance the guest experience in our restaurants.

Impairment on long-lived assets. For the three periods ended September 28, 2025, we incurred $3.4 million of non-cash impairment on long-lived assets primarily related to performance of restaurants with leases nearing expiration.

Pre-opening expenses. For the three periods ended September 28, 2025, we incurred $0.7 million of pre-opening expenses primarily related to pre-open rent for restaurants under development and payroll costs associated with the pre-opening training team as we prepare for restaurants scheduled to open in the fourth quarter of 2025. Pre-opening expenses decreased $1.4 million compared to the prior year period primarily due to a smaller pre-opening training team and no restaurant openings during the third quarter of 2025. Detail of pre-opening expenses by category is provided in the table below for the three periods ended September 28, 2025 and three months ended September 30, 2024 (in thousands).

(1) Cash rent paid was $0.2 million for each of the three periods ended September 28, 2025 and the three months ended September 30, 2024.

Transaction and exit costs. Transaction and exit costs were $0.9 million for the three months ended September 30, 2024. Costs for the third quarter of 2024 primarily reflected legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024.

Transition and integration costs. In the three periods ended September 28, 2025, we incurred $2.6 million of transition and integration costs associated with the Benihana Acquisition compared to $6.3 million in the prior year quarter. Included in these costs are expenses related to identified duplicate professional service vendors, operational support offices, support positions, and maintenance expenses that will be eliminated in the foreseeable future. We do not expect to incur material transition or integration costs associated with the Benihana Acquisition going forward.

Lease termination and exit (income) expenses. Lease termination and exit income was $0.3 million for the three periods ended September 28, 2025. The lease termination and exit expenses for the third quarter of 2025 primarily related to the termination of lease possession for two restaurants closed during the second quarter and the resulting write-off of the right-of-use asset and liability.

Interest expense, net of interest income: Interest expense, net of interest income, was $10.5 million for the three periods ended September 28, 2025 compared to $10.7 million for the three months ended September 30, 2024. The weighted average interest rate for the three periods ended September 28, 2025 was 10.7% compared to 11.8% for the three months ended September 30, 2024.

Provision (benefit) for income taxes. For the three periods ended September 28, 2025, income tax provision was $59.1 million compared to income tax benefit of $4.6 million for the three months ended September 30, 2024. The increase in income tax expense is primarily due to the non-cash valuation allowance that was recorded during the third quarter of 2025 against the deferred tax assets.

Net loss attributable to noncontrolling interest. Net loss attributable to noncontrolling interest was $0.7 million for the three periods ended September 28, 2025 compared to a loss of $0.2 million for the three months ended September 30, 2024.

Results of Operations for the Nine Periods Ended September 28, 2025 Compared to the Nine Months Ended September 30, 2024

Revenues

Owned restaurant net revenue. Owned restaurant net revenue increased $147.6 million, or 33.5%, to $588.7 million for the nine periods ended September 28, 2025 from $441.1 million for the nine months ended September 30, 2024. The increase was primarily attributable to the acquisition of Benihana and RA Sushi restaurants on May 1, 2024, which generated $367.3 million in revenues during the nine periods ended September 28, 2025 compared to $208.1 million for the five-month period owned by the Company in the prior year. The increase in revenues is also attributed to new venues opened since March 2024, offset by a reduction in comparable restaurant sales and restaurant closures in the fourth quarter of 2024 and the nine periods ended September 28, 2025. Comparable restaurant sales decreased 4.3% during the nine periods ended September 28, 2025 compared to the nine months ended September 30, 2024.

Management, license and incentive fee revenue. Management, license and incentive fee revenues decreased $0.3 million, or 3.6%, to $10.0 million for the nine periods ended September 28, 2025 from $10.3 million for the nine months ended September 30, 2024. The decrease was primarily attributable to decreased sales at our STK managed and licensed restaurants partially offset by increased revenues at Benihana franchised restaurants which generated $1.5 million in revenues during the nine periods ended September 28, 2025 compared to $1.1 million for the five-month period owned by the Company in the prior year.

Cost and Expenses

Owned restaurant cost of sales. Food and beverage costs for owned restaurants increased $29.2 million, or 31.0%, to $123.7 million for the nine periods ended September 28, 2025 compared to $94.5 million for the nine months ended September 30, 2024. The increase in cost of sales was due to the incremental sales increases noted above from the acquisition of Benihana and RA Sushi and the opening of new venues since March 2024.

As a percentage of owned restaurant net revenue, cost of sales improved 40 basis points from 21.4% in the nine months ended September 30, 2024 to 21.0% for the nine periods ended September 28, 2025 primarily due to lower cost of sales for Benihana restaurants and integration synergies partially offset by commodities inflation.

Owned restaurant operating expenses. Owned restaurant operating expenses increased $98.6 million to $378.2 million for the nine periods ended September 28, 2025 from $279.6 million for the nine months ended September 30, 2024. The increase in owned restaurant operating expense is primarily due to the incremental operating expenses increases from the acquisition of Benihana and RA Sushi. Owned restaurant operating expenses as a percentage of owned restaurant net revenue increased 80 basis points from 63.4% in the nine months ended September 30, 2024 to 64.2% for the nine periods ended September 28, 2025 primarily due to investments in marketing, general cost inflation, a higher staffing model for Benihana and RA Sushi restaurants and fixed cost deleveraging driven by a decrease in same store sales.

General and administrative. General and administrative costs increased $7.0 million, or 22.7%, to $38.0 million for the nine periods ended September 28, 2025 from $31.0 million for the nine months ended September 30, 2024. The increase was attributable to incremental headcount associated with the Benihana Acquisition and increased professional fees. As a percentage of revenues, general and administrative costs were 6.4% for the nine periods ended September 28, 2025 compared to 6.9% for the nine months ended September 30, 2024.

Depreciation and amortization. Depreciation and amortization expense was $32.2 million and $22.7 million for the nine periods ended September 28, 2025 and the nine months ended September 30, 2024, respectively. The increase was primarily related to nine periods of depreciation and amortization for the Benihana and RA Sushi restaurants acquired on May 1, 2024 compared to five months of depreciation expense in the prior year. The increase in depreciation expense is also due to new venues opened since March 2024 and capital expenditures to maintain and enhance the guest experience in our restaurants.

Impairment on long-lived assets. For the nine periods ended September 28, 2025, we incurred $3.4 million of non-cash impairment on long-lived assets primarily related to performance of restaurants with leases nearing expiration.

Pre-opening expenses. For the nine periods ended September 28, 2025, we incurred $4.0 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for three restaurants that opened during the first half of 2025. Pre-opening expenses decreased $3.5 million compared to the prior year period primarily due to the rightsizing of the pre-opening training team.

For the nine months ended September 30, 2024, we incurred $7.5 million of pre-opening expenses primarily related to payroll, training and non-cash pre-open rent for STK Washington DC, which opened in March 2024, RA Sushi Plantation, which opened July 1, 2024, Kona Grill Tigard, which opened in September 2024, and STK Aventura, which opened in October 2024. Detail of pre-opening expenses by category is provided in the table below for the nine periods ended September 28, 2025 and the nine months ended September 30, 2024 (in thousands).

(1) Cash rent paid was $1.0 million and $0.6 million for the nine periods ended September 28, 2025 and the nine months ended September 30, 2024, respectively.

Transaction and exit costs. Transaction and exit costs were $0.1 million for the nine periods ended September 28, 2025 compared to $8.7 million for the nine months ended September 30, 2024. These costs primarily included investment banking, legal and professional fees incurred in conjunction with the Benihana Acquisition, which closed on May 1, 2024.

Transition and integration costs. In the nine periods ended September 28, 2025, we incurred $10.3 million of transition and integration costs associated with the Benihana Acquisition compared to $10.1 million in the nine months ended September 30, 2024. Included in these costs are expenses related to identified duplicate professional service vendors, operational support offices, support positions, and maintenance expenses. We do not expect to incur any material transition or integration costs associated with the Benihana Acquisition going forward.

Lease termination and exit (income) expenses. Lease termination and exit expenses were $5.4 million for the nine periods ended September 28, 2025 compared to $0.5 million for the nine months ended September 30, 2024. Costs for the first nine periods of 2025 primarily related to accelerated depreciation as well as exit costs associated with the six restaurants closed in the first nine periods of 2025 and the termination of an operating agreement.

Interest expense, net of interest income. Interest expense, net of interest income, was $30.6 million for the nine periods ended September 28, 2025 compared to $20.6 million for the nine months ended September 30, 2024. We borrowed $350.0 million on the Credit Agreement on May 1, 2024 to finance the Benihana Acquisition. The weighted average interest rate for the nine periods ended September 28, 2025 was 10.8% compared to 11.8% in the same period of 2024.

Loss on early debt extinguishment. On May 1, 2024, in conjunction with entering into the Credit Agreement, we prepaid the outstanding debt balance under the credit agreement with Goldman Sachs to early extinguish the $73.1 million of outstanding term loans. For the nine months ended September 30, 2024, we recognized a $4.1 million loss on debt extinguishment primarily caused by the prepayment penalty and the recognition of unamortized debt issuance costs related to the debt extinguished.

Provision (benefit) for income taxes. The provision for income taxes for the nine periods ended September 28, 2025 was $60.1 million compared to a benefit for income taxes of $8.6 million for the nine months ended September 30, 2024. The increase in income tax expense is primarily due to the non-cash valuation allowance that was recorded during the third quarter of 2025 against the deferred tax assets.

Net loss attributable to noncontrolling interest. Net loss attributable to noncontrolling interest was $1.3 million for the nine periods ended September 28, 2025 compared to a net loss of $0.7 million for the nine months ended September 30, 2024.

Liquidity and Capital Resources

Executive Summary

Our principal liquidity requirements are to meet our lease obligations, working capital and capital expenditure needs and to pay principal and interest on outstanding debt. Subject to our operating performance, which, if significantly adversely affected, would adversely affect the availability of funds, we expect to finance our operations for at least the next 12 months, including the costs of opening currently planned new restaurants, through cash provided by operations and construction allowances provided by landlords of certain locations. We also may borrow on our revolving credit facility, utilize equipment financing or issue equity, including preferred stock, to support ongoing business operations. We believe these sources of financing are adequate to support our immediate business operations and plans. As of September 28, 2025, we had cash and cash equivalents and restricted cash and cash equivalents totaling $6.0 million and $355.0 million in long-term debt, which consisted of borrowings under our Credit Agreement and Equipment Security Notes. As of September 28, 2025, the availability on our revolving credit facility was $28.7 million, subject to certain conditions.

For the nine periods ended September 28, 2025, capital expenditures were $44.2 million of which $22.6 million related to the construction of new STK, Benihana and Kona Grill restaurants, $4.1 related to remodels or major projects at existing restaurants and $15.8 million related to existing restaurants. Net capital expenditures, inclusive of $3.0 million in landlord contributions, was $41.0 million for the nine periods ended September 28, 2025. We expect to receive between $1.0 million to $1.8 million in landlord contributions in the next three months. Capital expenditures by type for the nine periods ended September 28, 2025 and the nine months ended September 30, 2024, respectively, are provided below (in thousands).

(1) Includes inventory of restaurant equipment for venues under development.

(2) Includes equipment purchased as part of a corporate initiative

Our operations have not required significant working capital, and, like many restaurant companies, we may have negative working capital during the year. Revenues are received primarily in credit card or cash receipts, and restaurant operations do not require significant receivables or inventories, other than our wine inventory. In addition, we receive trade credit for the purchase of food, beverages and supplies, thereby reducing the need for incremental working capital to support growth. Due to the seasonality of our business, we typically generate a greater proportion of our cash flow from operations during the fourth quarter.

Our future cash requirements will depend on many factors, including the pace of expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as negotiated with landlords. We have made significant investments in our training and development teams to support new restaurants openings. We believe these investments are necessary to support the successful opening of our new restaurants.

To help manage future cash requirements, we limit the number of owned company venues under construction at any given time to four restaurants. We also set a maximum number of signed leases for new restaurant development to twelve in order to minimize our cash rent commitment to approximately $3.0 million to $4.0 million annually for restaurants under development.

Credit Agreement

Refer to Note 6 and Note 17 to our condensed consolidated financial statements set forth in Item 1 of this Quarterly Report on Form 10-Q for further information regarding the terms of our long-term debt arrangements and information regarding our commitments and contingencies, respectively.

Capital Expenditures and Lease Arrangements

When we open new Company-owned restaurants, our capital expenditures for construction increase. For owned STK restaurants, where we build from a shell state, we have typically targeted a restaurant size of 8,000 square feet with a gross cash investment of approximately $700 to $750 per square foot, exclusive of $150 per square foot in landlord contributions. STK restaurants opened in 2023 and 2024 had a gross cost per square foot of $706 and $132 per square foot in landlord contributions with an average size of 10,618 square feet. For owned Benihana restaurants, where we build from a shell state, we have typically targeted a restaurant size of 7,000 square feet. In situations where we add functional space and build a restaurant with a mezzanine, covered patio, or rooftop, costs per square foot will increase. Typical cash pre-opening costs are $0.6 million to $0.8 million, excluding the impact of cash and non-cash pre-opening rent. In addition, some of our existing restaurants will require capital improvements to either maintain or improve the facilities. We may add seating or provide enclosures for outdoor space in the next twelve months for some of our locations, when we believe that will increase revenues for those locations.

We typically seek to lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements, with a limited number of renewal options. Our rent structure varies, but our leases generally provide for the payment of both minimum and contingent rent based on sales, as well as other expenses related to the leases such as our pro-rata share of common area maintenance, property tax and insurance expenses. Many of our lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such allowances from increased minimum rents. However, there can be no assurance that such allowances will be available to us on each project that we select for development.

Cash Flows

The following table summarizes the statement of cash flows for the nine periods ended September 28, 2025 and the nine months ended September 30, 2024 (in thousands):

Operating Activities. Net cash provided by operating activities was $17.2 million for the nine periods ended September 28, 2025, compared to $25.7 million for the nine months ended September 30, 2024. The change in net cash provided by operating activities was primarily attributable to the timing of collections on accounts receivables and payments on accrued expenses.

Investing Activities. Net cash used in investing activities for the nine periods ended September 28, 2025 was $44.2 million which was comprised of $22.6 million in capital expenditures primarily for the construction of three restaurants opened during the first half of 2025, as well as residual payments on the two restaurants that opened during the fourth quarter of 2024 and restaurants that were under development as of September 28, 2025, as well as capital expenditures for existing restaurants.

Net cash used in investing activities for the nine months ended September 30, 2024 was $423.6 million which was comprised of $369.8 million for the Benihana Acquisition, net of cash acquired and $53.8 million in capital expenditures for the construction of STK Washington DC, which opened in March 2024, and a RA Sushi in Plantation, FL, which opened in July 2024, a Kona Grill in Tigard, OR, which opened in September 2024, and a STK in Aventura, FL, which opened in October 2024, in addition to residual payments on four restaurants that opened during the fourth quarter of 2023 and several restaurants that were under development as of September 30, 2024.

Financing Activities. Net cash used in financing activities for the nine periods ended September 28, 2025 was $4.8 million and primarily comprised $11.5 million in borrowings on long-term debt offset by $5.0 million in repayments on long-term debt and financing lease liabilities and $1.1 million in stock repurchases.

Net cash used in financing activities for the nine months ended September 30, 2024 was $405.6 million and was comprised of net proceeds from borrowings under the Credit Agreement of $333.8 million and net proceeds from the issuance of preferred stock and warrants of $138.9 million, partially offset by the repayment of the Goldman Sachs debt of $73.6 million.

Recent Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements set forth in Item 1 of this Quarterly Report on Form 10-Q for a detailed description of recent accounting pronouncements. We do not expect the recent accounting pronouncements discussed in Note 1 to have a significant impact on our consolidated financial position or results of operations.

As a “smaller reporting company,” as defined in Item 10 of Regulation S-K, we are not required to provide this information.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as our controls are designed to do, and management necessarily applies its judgment in evaluating the risk and cost benefit relationship related to controls and procedures.

Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures as of September 28, 2025 and based on this evaluation, have concluded that our disclosure controls and procedures were effective as of September 28, 2025.

Changes in Internal Controls

On May 1, 2024, we completed the Benihana Acquisition and have implemented new processes and internal controls to assist us in the preparation and disclosure of financial information. Given the significance of the Benihana Acquisition, we have excluded the acquired Benihana business from our assessment and report on internal controls over financial reporting for the year ended December 31, 2024. Benihana and RA Sushi make up approximately 50.0% of our total revenue for the year ended December 31, 2024 and 64.9% of our total assets as of December 31, 2024. Other than discussed above, there have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 28, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. We will include the acquired Benihana business in our assessment and report on internal controls over financial reporting for the year ending December 28, 2025.

There have been no material changes to the risk factors contained in Item 1A of our Form 10-K for the year ended December 31, 2024.