GEN Restaurant (GENK) 6 Mar 242023 Q4 Earnings call transcript

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GEN Restaurant Group, Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, March 6, 2024. And now I would like to turn the conference over to Tom Croal, the company's Chief Financial Officer.

Thank you, operator, and good afternoon. have our should earnings quarter everyone release. now, access fourth to XXXX By can www.genkoreanbbq.com found Relations not, be If it at section. in Investor the

more year obligation for revise forward-looking risks ended everyone statements of as SEC. These on meaning openings those of or information Form Before the need financial securities statements new put types laws, will by statements only light formal Except store represent SEC expect. We our and not federal results growth These forward-looking our guarantees call that that limited report we undertake operating from them. results date identified detailed our or XX-K a subsequent and numerous discussion and our not plans of and annual condition. of Form required we in annual but of remind filings, that new forward-looking performance, reliance potential what to, also law, the you include to could could this of risks to our subject therefore, not the the recent we cause XX, you actual to XX-K on as to materially uncertainties our update are impact report no December reports including today how statements the our are our as as future in these differ refer future of within views remarks, with currently and future on events. statements undue well should including, XXXX, discussions for filed regarding begin to statements I and

press in in of non-GAAP discuss our release will of financial not available for be believe which Investor measures GAAP. be isolation which filings, information available and should The this measures earnings are presentation the section to or financial our GAAP in we as considered non-GAAP substitute performance. are in results can website. most of in directly with our a measures, comparable call, our prepared SEC today's financial Reconciliations evaluating we the accordance additional the Relations some During useful

Now over it Board David turn like to Chair and Kim. Co-CEO, I'd to our

and Tom, good afternoon, you, everybody. Thank

achieved versus company of in the This by million, the was the $XXX restaurants of quarter. representing restaurants, new XXXX, growth revenues over record including of XXXX. During opening X new XX% X fourth driven

ahead over expect revenue openings look we growth by year. the to As driven XXXX, we X new coming double-digit restaurant

Korean the the get let I makes me truly unique. remind what quarter, of GEN into Before BBQ details you of

service serving other price. Unlike at with and guests casual guests talk to not the to eliminates our with to smaller tables, provide Moreover, allowing background, us dining space enjoy provides enabling need us full We lunch model. cook-it-yourself proteins, and proposition guests. the restaurant restaurant restaurant GEN about footprint salad table restaurants, also seafood more our both BBQ our kitchen value additional This every keep dinner, to our concepts, buffet, for experience are a dining allows of provides across Korean development. concept an and prices best efficient, at affordable the including all sit-down, our pork, a each that us cooks a an for at steaks, variety let's experience. With our chicken, all-inclusive low

Hawaii Houston, December. Texas During in in Texas restaurants X gives one Arlington, us year for opened of total in new November; one the quarter, we in in new and XXXX. fourth This restaurants: one X a October; Kapolei, in

X opening Looking new restaurants. XXXX, we anticipate to ahead

expected the quarter. X opened remaining year both we XXXX, the one one and in of with fourth open new February restaurants in most will restaurants in X Seattle. Dallas throughout During The

] new expect new leases various would to negotiations in [ additional that In XX stages have restaurants of restaurants. addition XXXX XXXX, we to X in the be we --

performance and are ahead opportunity remain X and XXXX. of with expanding to is and us footprint the from early committed GEN substantial. We our We BBQ. pleased believe Korean excited growth the of growing our restaurants We XXXX

stores testing menu we call, operating remain and currently works on unit our phase X.X completed Operationally, in the $X X a volume integration generate restaurants, that average items to a stated collectively of continue an the approximately in we of payback approximately companies the our options X. and drinks, are annualized the quarter, As we're years. Within track on average of last rollout. of of the new million we for into period during

a also switch Foods completed We U.S. from Cisco. to

quarter these While initiatives that the and what expecting we are impacted these additional I'm were initiatives above to profitability, completed. costs our in pleased say operational involve of both

new would our free CFO, believe cash we drive of unit funding necessary we value call these the business. best a are ahead over restaurants, our further create BBQ growth throughout the foundation capture we experience the great enhance believe to to have that among the the through attractive like a closing, and have of industry, add with us. Korean the results. GEN ahead also the are we Importantly, turn new economics demonstrating Tom guest discuss we new open for in restaurants we an country. In new to and our to our to opportunities have for flow, the X that, the now restaurants long-term solid exciting further strength we primarily only but as shareholders. With pipeline expect Croal, Coupled foundation do we growth we Not to I believe

David. you, Thank

X.X% XXXX, year new and the to million increased same-store $XXX.X million December a driven For openings sales. by ended revenues compared XXXX, in to XX.X% XX, increase $XXX unit in

million revenue XXXX. the decreased of quarter, XXXX, sales openings. fourth to primarily in $XX.X quarter in million of fourth X.X% driven to Same-store XXXX $XX.X the to quarter the new by compared compared unit XX.X% of increased fourth by as fourth the quarter For

restaurants commodity our of and high company points to and XX as by and cost as labor increased to Turning markets basis to Payroll company rates management increases of sales pricing favorable a primarily Cost quality XX negotiations primarily and to we in a percentage decreased XX.X% in more wage with goods managers. due restaurant minimum the of upgrading restaurant retained of basis staff as XX.X% California. Short-term expenses. restaurant benefits by operate, our percentage in sales sold newly-opened certain ongoing points which due vendors. to

Importantly, year-over-year openings, points include XX of we totaling XXXX costs basis operating primarily going and XX% to company supplies a believe of XXX was markets. Other increased higher total a compared is we of basis GEN have to to utilities, increased company which a points guest to summary, X.X% across and fourth as growth the further experiences to XX.X% to as operating restaurant-level forward primarily XX XX.X% points revenues basis rent for percentage expenses in a solid foundation due to sales percentage which new percentage sales restaurant and services quarter and as year-over-year points great restaurant by basis restaurant expenses create of in to California. In XXXX approximately drive to increased Korean BBQ. Occupancy related restaurants, due XXX EBITDA all approximately restaurant standardize adjusted continue XXXX.

primarily approximately differences increased XX basis I the quarter we increased approach earnings anticipate benefits we in are excluding expenses revenue, last our as provided Please quarter margin compensation, rates basis range of XX partially the approximately measures. We a our of million $X.X fourth of XXX payroll from stock-based of operating restaurant-level $X.X labor XX our by basis guidance during of expenses. G&A new points, the our occupancy improve reduced the approximately XXXX to comparison is EBITDA and increased necessary restaurant of $X.X goods and or to As the points, approximately increased million. points, due was offset X.X% approximately of of level development. refer XX% to will basis currently The operating approximately increase million personnel to range points. guidance discussed, of for release for reconciliation new addition cost non-GAAP our of major

costs we the preopening stock-based EBITDA I quarter was previously. had built decrease million. was of by for quarter fourth $X.X Without in fourth XXXX. compensation be which to would approximately adjusted $X not we noncash costs, $XXX,XXX quarter. Adjusted $X.X addition, preopening fourth million preopening driven This the EBITDA the quarter of we during units, including year of did versus last costs additional the company compares items costs. incremental this approximately have million, mentioned year, and year, The higher as public the last In

was quarter loss $XXX,XXX income net diluted or net $X.XX XXXX. of by share the Our fourth driven compared to I the mentioned. per $XXX,XXX previously was in same factors This of

to Turning liquidity.

million long-term debt, in no of had for we $X government-funded and we except million available XXXX, have EIDL XX, credit. $XX line our loans, in revolving December of As

capital strong us expenditures equivalents cash with strong million $XX to in $XX Importantly, XXXX. million self-fund of a have we maintain and sheet allowing flow, generated cash and in cash balance

Turning to guidance.

and Total million expense. This for would And concludes Operator, including new the the $XX noncash are again million expense have. happy to For now that following stock-based $XXX thank We'd you on you today. any and call million, provide please prepared and answer remarks. to the joining XXXX, line may guidance $XXX us we like to our open we for like questions items. general of excluding questions. between administrative million, $XX to compensation X revenue restaurants;

of [Operator Partners. from first with Instructions] Our George the Kelly line question comes Capital ROTH

what you us little remarks just you. new for a testing give is. that question was on menu more I curious, prepared and your in mentioned about First items. you if detail I'm drink curious could

the getting that products is they're a And that new price, plus much for meats. So higher we're incremental a it's guest. $XX testing then per quality

meats, the So projected demand we're now. to it of able because line or quality supply -- We testing not of are these our meet the demand. right our

out we data very weeks rolling that just initial ago, coming have X but this are are don't started in they're enough We the So positive. data, but about slowly.

to positively Or follow-up it's rolled going it your just the longer if out back base midyear? the could you have back across that than on point, to something that will something that? line And a data it Is just come supply much feasible continues by is it take that that. that

March at the we the by week of or fourth that a rollout. be XXX% March, week of think We No. third or the end should

probably I you just share Maybe data detail it giving the want share early are don't point. comfortable you more the seen? you've Okay. to on to what too take data? at Interesting. this it's with And Or

say I more not all positive, but data enough can -- We very pull. need It's restaurants. it's is

you. that's XX% for 'XX, couple year And then big quarter. In step questions in said XX% margin. other your Understood. curious, it Okay. a the I'm fiscal approach confused, I'm just you pretty And for X-wall And a guidance should fourth of was up.

And drive XXX your in negative just best. guidance. what basis seems comp doing another points I is flattish it be it's growth should that curious because still like at I'm probably it think to you're so would

getting So improvement? to are margin how you that X-wall

integration the to to we quarter onetime this a margin The missed due the that X lot of companies was of expense X.

that be we're lot So we capital a in have not more human opening invested the this stores to and for only ready year.

that a is pipeline, year. have lot XX next which open We next the happening. on XX said we approximately probably of can we year that But lot a actually

of and lot are in start terms We approvals, processes second them in of first a will city and quarter. probably starting which drawings XXXX opening

are that. putting ready we infrastructure a for getting up So lot of costs

And that's Tom, then million queue. the then question, And can you G&A just I'm in Understood. last Okay. and I'll million stock-based $XX you comp 'XX? your what I in back quantify to expectation ex-SBC. of for had. And $XX said curious, all is hop

comp year for Yes. per million XXXX. be The should around $X stock-based

from comes question the Hamblin next Craig-Hallum. of Our Jeremy with line

on small on just to where you're kind March have your some X/X wanted same-store in on of weeks positive. comp have in the it's recent kind the an more or way markets you case, geography. trends rains not the that. follow-up trending. And more those not the than turn probably give impact imagine premium stores the of if are as heavy So a but the I hone then in whether added biggest or negative you test us quarter. update menu a you trends items, where see of out in you're know seen seeing kind sales through current have of But a whether bit had to from there, could wanted the I that I

to So weather. capacity in the year, didn't our us. XX% was California and sales. March is of have -- stores starting some that January every Yes, look mother approximately the we February going total just to make okay, impacted we're by hit Yes, good, have But nature the very up were been improve.

You mean Go ahead. say improved? to

the continue Sorry, question.

sales start they're I when turn seen down to positive given the -- to seeing you locations, or improve January. on say was tough or mid-single they've same-store like -- here say, just something or like imagine not just digit not I hone that it again, going whether trying same-store the because in sounds test whether was sales in maybe I

same-store The turning sales positive. is

now stores if So a turning positive. digit it is double say, that single-digit let's to negative single-digit were is -- was double-digit negative negative. Any

it's direction, yes. So going right the

to Okay. understood And I then want around terms and and unit come cadence that. the the Got it. of I just back -- make expectations in sure openings of

of a locations you've here QX. So up couple opened in

X You're you Do open like X and just And the in just looking of X X. or each X X sounds the there. some to wanted going plan you for could capture, share X total But vast or be are see in color year. wanted remaining for on majority to to if Quarters the QX. to it

of not we'll to We're X We of April. in March, end just we So this the open opening the sure X probably be of in rest them. opened if have them. year, X. at And safe, started construction maybe can be we've already we

X- put not finish time in approval that. the that the sure So out about if you And like X-month to frame, the a city are more. X all We're quarter. should Maybe rest stages. third on

more more will we we're quarter, second quarter, some achieve The the -- the approved if maybe in we'll in get might able Street to them we but can put we So quarter, fourth be telling the some quarter. third this put

Understood.

on your menu a mix, making bit you you your bit was might the You option that I changes be in around mix. highlighted that looking noted you think drink a on share a $XX your I at Also, increase more there. little color able some are alcohol to premium options, hoping in comments that initiative. little

new a called well. a that's with initiative. a out drink product It's and doing rolled mixed We've Soju, very

of with rest that and going lot to products, the business. liquor over bars cost rolled can't we're small Boston and is but the new liquor pencil liquor we a $XXX,XXX. have it restaurant New license liquor how We've the except license have to footprint them forward side will of and all licenses the of not out don't numbers of a -- increase seeing small out, we having to don't because $XXX,XXX around roll get but a have in some those them with company, out, Boston as incremental openings, bar, licenses. sales restaurants We the is not decided the liquor make a

of Okay. Great. about thinking business. terms And just mix -- then of your the in

this seeing So wanted composition in in very I pricing menu menu or to and the consideration I think time, whether point your -- traffic for But the the here locations kind you're legacy you terms have of in X%. -- just understand check or limited existing there's menu to of pricing your at maybe versus your in any what take XXXX. not of

our the to priced terms perceived value economic experience of guest guests. were concerned that to give there in still downturn in want our at your GEN don't we We're be proposition we very -- a situation, that out is if we and

the they substantially in the have XX% restaurants Going than locations, are restaurants forward in we new California. that new our higher of with

opened we at So $XX.XX. -- opening for example, a Seattle, dinner that store $XX.XX compared price if are to with we've

go states. we So we're as pricing guest check our of by continue outside in are default other and California. will strength in we up that average markets, of we more have charging opening restaurants The will majority trend other because

nice. more here What in XXXX? at of QX, it. we an of should was On I here California of what But as And just of labor there that in as remainder get the you chain in expectations some there's expecting wanted better terms we performed than Got our targeted, April labor that here of to we for really Okay. date get be one be your impact regarding terms expected laws. where kind change understanding, the looked in then changes terms some laws restaurants. going into be me. But should in P&L specifically, are California, last just think, labor throughout to to

getting competitors apart in pricing very market in but our because fast of basis This than they're required minimum prices -- different pressure throughout I'm all out are very Because probably ourselves compromise labor will in labor at by increase higher industry, wage lot market us, XX% still the pricing, saying, thought to structure. our this our paid not from They're of $XX us. we're the from a $XX-plus?" So "If regions. about restaurant, maybe I pricing impact dollars regional the anywhere because The $XX, perhaps of doesn't areas. legally getting the minimum the wage XX% surrounding it the are not is raising steadfast impact would the meaning fast-food April food store-by-store very labor. that are there from same are We've why because

but breaking efficient our to tightening So And small cut. find one and continuously we're we looking finding it, continuously point costs we at a areas going be down. in there's ways yes, to our looking bring at to but point, labor still are belts believe to we're still more

Our the Benchmark next question Todd with comes from Brooks Company. of line

estate world kind you opening hitting off 'XX belt under locations. early and cost the and or far that, Hawaii? of talk some can totally 'XX out markets you those million where Texas' like stores and to densifying some fast of that or getting Congrats mature hurdle forward. that's that the markets below in you year And as had Florida backfilling then to openings the improve to you're the new $X side. of to on those AUVs. versus that guess, higher multiple in mix real is done. have Well class, the was first going in 'XX it payback kick as scale even you're The the enough is how I period you that the units getting here. scale those set to likely now are markets X.X-year where David, in good And economics hear Wanted on

well. opening the stores existing are that doing markets, in new are especially We ones

take an example like there. we'll So just growing of where let's restaurants be Texas, lot a

great. are margins Our

Our sales are great.

we structure. markets. will cost comfortable very markets that all the like we're we those like labor in sales that the structure, fill we So The

So the Hawaii. areas Arizona, New Florida, York, are Texas,

comfortably. to be will we have The staffing gotten in So ready we've on aggressively. filling we those end, those take that

New areas, we have to be the here. of curve ahead

testing signed we we going just North So and in Carolina. where are

into in We're of will that. Tennessee. go works the We

Let we me see. And Seattle, opened. just

to estate much sure, why most right in process And it open out in real improved in in and We those improved that to are put faced construction start we'll construction has will we how site That of in selection other that going going our the see expansion the we we good of of we getting dramatically in dramatically. has are Oregon. for after start start But the as meaning we will and comfortable people had the we're improvement construction the now selection the with push is and that that start that in investment opening, bring COVID opening the markets phase right will in the quicker markets, likely issues filling today. XXXX to into works. -- Colorado. Yes, hardships so in personnel, we the more outskirts

permitting part works the But a making that constructive to get and itself itself, you 'XX? that you and talent to hear. things of getting you get units better get that, you've landlord you've lead obviously, that shorter big is Or times just the are on resources 'XX, maybe brought those brought to staff? on of like and in are loosening environment as up the environment And to talent open because great that. and to That's when

I attribute GEN. It's for both, staff wheel that attention. you there's -- -- The I but squeaky think more and oiled people it's -- saying, to the gets the the really gets more work that the

doing. -- know are professional what they're great who have they We guys

and is easier that process getting So shorter.

to the XX estate about Great. year Okay. I buffers X especially process for can more for feeling side. up units restaurant under it in you're given development of XX is -- the and are locations need leases getting the -- level to professional or when are the newer that is how build real the out the much looking sites one that you? you team XX know still the locked this how you've potential laid fast getting if is markets? towards And the final you on for are then units for more Thoughts talent, you're to grow And going 'XX, that 'XX. governor that buffers,

Perhaps define mean you... I can quite me help buffer? you don't you when understand. Can if

Yes. Sure.

I And -- supply you're say, So for were lead time, when asked X units were -- you year. really landlord this the targeting let's permitting, targeting chains tough.

to works tighter. units a to for the environment X, had it like deliver the sounds are have but be to almost year the You able and much XX, team the XX in

So you into if like much any couple that in friction out a you process run can how you construction you anymore? environment seeing at time snap. not overall need permanent kind in feel a the units given of do are where given less just may you of year, one need Or in a to still run washes

making having that of have are a on were to lot as Even much if We build that our upfront able okay today. we we personnel. we're have because we efficient we of and where we bigger that investment of getting more, more and We're because ability on had the can think a buffer buffer. take

just example. is an this example, for might, we So

into said the more we buffers can the store comfortable having now buffers XXXX. XX buffer reality, say, actually new became can Maybe we up open because a XX more will we So at right? in turn openings. end get, Let's efficient that those we can because we're

helpful. to the pros supply know a then as those. Great. are accomplish That's on easy more distributor and question. I never try you switches chain one And Okay. team

if that should full and that about system? And thinking costs How you product both do in, premium we're standpoint restaurant-level year about sales here, a thinking XX% the for margin. with realities the potentially layering under As be the from food playing thinking EBITDA into year? costs success ramping have approaching with of also we Cisco this we should premium those how course over food out of pricing, be mix about

switching a have has with to and distributor systems that get adjust. major and have of adjusted the The we they do they to

level constantly that, it to the improving. meetings deliveries are senior on Cisco, missing on percentage with or improve drops. a and personnel actually is to We meeting that the I at late sure least sit product those make

terms products, a And -- it's call, we're food very I really have We Again, cost. issue. concerned food well. are said lot. don't the of of really not streamlined that quarter In much we I don't the stabilizing. very cost stabilizing It's last is increase actually on -- about we believe the not

stabilization. pre-COVID at We are level of

Okay. And Or cost? $XX upcharge that to hold food products food that tier of beneficial pricing, is is allowing premium basically cost the the then in and kind the premium range? to you XX%

it's soon tell, It's coming to is initial that but numbers are in holding. the

closing the of question-and-answer call I'll now reached over to management remarks. end the turn for back have the session. the we And

everybody being completing Excited for on thank and to year with our filing our and soon. look XX-K. to excited our to of like the forward XXXX first We'd everybody for first speaking call. We're

you. Thank

you much. Thank very

at this may disconnect your for you you your and Thank this time. today's And participation. conference, lines concludes