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Kona: Consecutive Quarter Of Positive Same-Store Sales -

The following excerpt is from the company's SEC filing.

- Provides Development Guidance for 2016 -

Kona Grill, Inc. (NASDAQ: KONA), an American grill and sushi bar, reported financial results for the third quarter ended September 30, 2015. The Company also provided restaurant sales and earnings outlook for the fourth quarter of 2015 as well as development guidance for 2016.

Quarter 2015 Highlights vs. Year-Ago Quarter

Restaurant sales increased 19.6% to $35.9 million.

Same-store sales increased 1.6% lapping a 2.7% gain from the prior year and marking growth in 20 of the last 21 quarters.

Restaurant operating profit*, a non-GAAP measure, increased 3.7% to $5.6 million compared to $5.4 million.

Net loss of $1.5 million, or ($0.13) per share compared to net income of $0.3 million, or $0.03 per share.

Adjusted EBITDA*, a non-GAAP measure, decreased 6.1% to $2.8 million compared to $3.0 million.

* For a reconciliation of

restaurant operating profit

and Adjusted EBITDA

to the most directly comparable financial measure

presented in accordance with GAAP and a discussion of why

the Company

considers

useful, see the financial information accompanying this release.

Management Commentary

“This quarter marks the tenth consecutive quarter of positive same-store sales and we have now generated positive comps in 20 of the past 21 quarters. Our 1.6% increase in same-store sales was 40 basis points below guidance due to a later than expected patio reopening at our remodeled Denver restaurant, the lingering impact on convention traffic impacting our Baltimore restaurant and the effect of the oil downturn on certain Texas markets,” said Berke Bakay, President and CEO of Kona Grill. “Three-fourths of our comparable base restaurants comped positive during the quarter, demonstrating not only our brand strength but also how a few locations can significantly impact overall results due to our small restaurant base.”

Bakay continued, “The combination of softer sales than anticipated, a larger proportion of non-comparable base restaurants this year versus last, along with higher labor costs due to a tighter labor market, and training costs and other expenses associated with the reopening of our Denver restaurant resulted in deleveraging of our restaurant operating profit margin. Average weekly sales for our non-comparable base restaurants was 99.8% of the average weekly sales for our comparable base restaurants, an important metric that reinforces our belief that we can be successful in various types of real estate across the country.”

Bakay concluded, “Kona Grill remains a long-term growth story and we are excited to be executing our development plans. We opened restaurants in Miami, Florida and Cincinnati, Ohio during October and plan to open restaurants in Las Vegas, Nevada; and Friendswood, Texas, outside of Houston, in the next several weeks. We currently have 9 executed leases for future development and anticipate opening eight restaurants in 2016, representing at least 20% growth.”

Quarter 2015 Financial Results

Restaurant sales in the third quarter of 2015 increased 19.6% to $35.9 million compared to $30.0 million in the third quarter of 2014. The increase was driven by operating week growth of 19.9% and a same-store sales increase of 1.6% compared to 2.7% growth in the year-ago quarter. The increase in same-store sales reflects higher average check per customer, which grew 2.8%, and was partially offset by a reduction in traffic, which fell 1.3% primarily for the reasons described above. Non-comparable base restaurants contributed $8.9 million in restaurant sales during the third quarter of 2015, reflecting 105 operating weeks, compared to $4.9 million in the third quarter of 2014, reflecting 52 operating weeks.

Average weekly sales for the comparable base restaurants totaled $84,700 in the third quarter of 2015 compared to $83,500 in the third quarter of 2014. Average weekly sales for eight non-comparable base restaurants in the third quarter of 2015 totaled $84,500 compared to $92,800 for four non-comparable restaurants in the third quarter of 2014.

Restaurant operating profit*, a non-GAAP measure, increased 3.7% in the third quarter of 2015 to $5.6 million compared to $5.4 million in the same quarter last year. As a percentage of sales, restaurant operating profit was 15.4% compared to 17.8% in the third quarter of 2014. Excluding the Company’s Denver restaurant in both three-month periods, which was closed for eight weeks during the third quarter of 2015 due to its remodel, restaurant operating profit would have increased 10.6% to $5.8 million. As a percentage of sales, comparable base restaurant operating profit excluding the Company’s Denver restaurant would have been 17.7% in the third quarter of 2015 compared to 18.4% in the third quarter of 2014. The Company incurred management salaries, employee training, rent and...


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