GEN Restaurant (GENK) 12 Nov 242024 Q3 Earnings call transcript

Good day, and welcome to the GEN Restaurant Group, Inc.

Third Quarter 2024 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Tom Croal. Please go ahead, sir.

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

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

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

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

Thank you, Tom, good everyone. and afternoon,

open successful while locations third continue exceptional customers before total footprint marked as execution a success to new large expanding our value period of of The and provide nearly X% our the taste we increase million locations year-over-year, and delivered another preparing to to XX third quarter to slate for of revenue restaurants. nationwide year-end. Overall, our an of by driven newer $XX.X we quarter,

earnings million delivered third the in for also quarter in earnings X diluted in We and share, us had or or and restaurant in restaurants of opened $X.XX quarter. We of million while adjusted $X.X $X.X net October. per money $X.XX per income X losing diluted net income estimates opened share, the adjusted

X well surprised have at very these how We are been doing. openings

over holiday how and In terms one in one season these restaurant XX%, X goes, #X not on hit will top slightly We fact, will we achieved quarter. on new meeting of will EBITDA adjusted another our for in to third restaurant-level depending the expectations of our expect levels. Furthermore, third these do these be top restaurants the the be revenue, the be the XX. margin restaurants

for year-over-year. declined and successfully efforts the revenue of across mixed, discretionary quarter restaurant from X slower our the same-store sales spending. a profitability to our with impressive industry ongoing With Consumer pressures X is locations growth year holiday quarter X.X% steady season. quarter the stores, that, inflationary remained environment a our affecting benefits our our and cost, execute growth strategic the to beyond. Historically, as position from current strong of new With our remainder in ongoing we're optimize initiatives

home weather that more, was disruptions and several extremely openings consumers at across temporary quarter of new year. Texas with some hot believe caused our restaurant that regions, had impacted and this by our we cannibalization summer in Additionally, kept X Hawaii hurricanes we

November October seen However, our revenue. have in improvements we and

increase are We same-store to working proactively sales. our

we have see premium We which are improvements. performance and measuring been our restaurants drive to starting introducing training across to sales, menu programs

drive been We We're a soju go drink sales Grills, GEN also concept mixes. working additional businesses have hard like cocktail or their which guests to our new testing homes. the we for cook called also at

participating to effort in Another reasonably. test in an we're doing more sales is fairs gain outdoor

further, Lastly, we card will Costco. with began continue a I as gift program

our total margin average unit EBITDA of all restaurant-level mentioned lot. Transitioning through by approximately adjusted of to new level, exceeding to barbecue. On of sold XX% business substantially count Korean important restaurant store is focus these model is goods cash-on-cash a As level expanding expenses. economics capitalize of level decreased restaurant X a earlier driven demand are average with $X unit XX%, note that average XX Cost an restaurants XX%? XXX [ the million by we to basis benefits on annual years, X.X expected year-ago generate in mentioned return a The of X I with is of our quarter for million last of third basis XX.X% and on Payroll by $X by GEN's XX.X% previously, points in model to an of to growing to to and to period. compared it's the points year. the ] payback in to XX.X% the decreased revenue period volume XX.X% compared it

increase footprint our channels second excluding with includes revenue point, stock-based additional and Costco, and XXXX. The increase also on which card line total expenses, in Asian gift to insurance which we team are in our large incubator, compensation, in with with reflecting food in the expectations, in general expansion, retailers, grown. is working compared the our investing for Our our support the big-box growth, to through quarter program were GEN distribution quarter cost of and of infrastructure investments brand now building with we're along agreement international At this Grills. X% as has administrative an X.X% future

started marketing have forward. a we department to activity, initiatives these of pipeline this push Given

this our the margin our EBITDA our Next of quarter, completing We updates XX remain initiatives we from in incubator to also we new approximately XXXX while XX%. projects. goal. Not maintaining in or XXXX, building process on in being only are XX more focused XXXX, of lined track even target well opening way We're of growth on restaurants we'll restaurant-level give growth for on in a to some leases positioned, goal we're to XX additional brand to strongly where signed hit have achieving fact, with our or up locations the signed.

expansion XX should confident remain our our have momentum highly and strong to reach also negotiations, of XXXX. in in to to XX by end pipeline ability our growth XX objectives. the seeing to leases lead We long-term opened having total We're locations XX which in

focus I the one Now want key of to to of shift initiatives. incubator call the our

Currently, U.S. have at cards at Costco exceptionally quarter, The are launched locations, This cards gift our the well. XX gift restaurants all within gift a across we of available most GEN cards been of the X-mile Costco. radius selling

possibly the we we've our at card obtained to strong, unit retailers. locations. The gift card proud with for fact, card consumers' our the our this spring stronger remains our currently performing Sam's have next the initiative, experience expanding are brand our offerings GEN initial regional of In these have much new We're gift information thought. is reported Costco in seen we demand and We're that conclude, we to very of representative expected best-selling our Costco program far success look of have additional gift that are and they seen than implementations BBQ stores well Korean with Club per shows discussion away forward we from above year. To and the rollout in range. for

confidence our results our Our traction, ability for shareholders. in and operational initiatives consistent, gaining strong to deliver reinforcing are our profitable

of commitment for success balance creating growth expanding poised continued we dedicated foundation, footprint targets. restaurant come. Thank shareholders the we're and a With and a to your journey. reaching years operating value and our healthy sustained you openings and Looking agreements exciting ahead, for for our as underscore promising our pipeline our profitable in continue model sheet, our new a to on lease solid support to this our significant

look our the Tom quarter Now we'd performance. over a to third financial deeper at call to like for hand

Thank David. you,

the For restaurants. by to ramp-up quarter of continued XXXX, compared increased in the the $XX.X $XX.X third X.X% third million newer million revenue quarter, of to driven

over restaurant Cost to last growth support XXX year quarter control of ago company as restaurants. G&A of points and sales related increase the a restaurant quarter were quarter brand second compared the revenue, the expenses. company our year new usage to third in third this additional months reflects was the points X.X% percentage due the expenses in X.X% the revenue of trying quarter third by compared percentage compared stock-based third costs sales compared restaurant XX.X%, increased of insurance resulted XX.X% last Payroll utility as goods personnel increase compared million food of XX last our a points grow on back the as as as year Other or excluding the sales $X.X as to of XX This the held to months. restaurant of hotter period. by of to development last basis as percentage well X.X% primarily year. new $X.X compared third to by year, G&A and as to the of percentage during basis the points XX.X%. Occupancy supplies ability year to development. the to higher to XXX decreased company. Early expenses initiatives of decreased Turning in last XX operating the to to to during we as our quarter largely restaurant growth sold year quarter related and additional match of as openings company we to restaurant compensation, new increases to of quarter our a hiring compared XX.X% million company from well XXX to restaurant of summer due basis increased benefits expenses and to new the of The rates the a third increased year sales increased basis operating last we to points to costs. basis or

G&A $XX diluted the $XX to million A the stock. in now line income, $X.XX third common compared in Adjusted diluted was we of of A third are share excluding share income for common net per stock-based compensation, of had quarter, $X.X per to common $X.X Class our of represents $X.XX million quarter compensation, XXXX. the or Class meeting or We noncash million plus Class with or our net stock-based net of which net million year, stock per A $X.X be share million expectations. In income income diluted to $X.XX stock of

$X.X The was quarter estimates adjusted adjusted maintained G&A remain of quarter restaurant-level the better and restaurant-level quarter. We net for mentioned EBITDA preopening preopening adjusted of these to to that XXXX. XXXX. in million XXXX David the year-over-year EBITDA primarily XX% our Total third Overall, EBITDA the adjusted million. be had of onset and us pace EBITDA the $X third than the are for our call, the preopening we with $X.X above due would costs, at decline our increased for million, third As goals. line figures losing money were for and of approximately for adjusted compared total costs expectations, on quarter EBITDA Without was costs. the

Turning to liquidity.

million As which XXXX. carried we had in EIDL in no approximately $XX.X of public went loans, cash $X.X except when we had XXXX, we long-term of in September XX, debt, equivalents, and we cash million June for and government-funded

flow, to this and million GKBH we We produce $X on the buyout in continue line credit. GEN million an continues near us trajectory towards also to in future restaurant additional restaurant change the as enabling have $XX to expect fund development Restaurant. focus don't new We cash costs our expansion. available robust $XX million to new our free revolving in of of

XXXX Lastly, outlook. turning our to fiscal

million We the happy line XX call remarks. $XXX to you new revenues for adjusted and prepared year. This to EBITDA Operator, any restaurant margin like for are to $XXX have. thank to questions XX are helping we the on reiterating for us now level questions. please concludes in total million, to XXXX, today, our and may answer the XX% and joining achieve us We'd our approaching expectation open open restaurants you again between

[Operator question first Partners. Instructions] today Wollam JP And come will from with our ROTH Capital

with start on in maybe a comps bit. could dialing I the just little If maybe

of little So said and the that today had know kind in telegraphed better. of you weakness, November a looked know and I October bit that I you then XQ,

going a could is sure trended be want share how bit really So I just quarter? make throughout you away, there And to color just if saw about the issues pickup little Any you -- therefore, that October of then weather would improvement and that in some and a the appreciated. comps November, traffic?

larger-than-expected There third sales shut were in factors some the the quarter. down. restaurants There's negative that are high-volume to different that contributed

because have it of you grouping percentage shutdown, So the have, high-volume when of restaurants impacts restaurant small a a we a lot.

than had and and a hit big were we cannibalization. you -- high-volume combine down better X one realize have once some our can X. just and Those book only to our those we hurricanes our claims asked that's on our very money We restaurants, have one restaurants, insurance all insurance them. It we in we Texas in to it that some X companies, had unusual. receive we some We it was We very if the books is Texas we cannibalization us. market restaurants. broke our Florida. amongst turned for in Hawaii due. much areas, had When Texas, haven't own do But

that had where in. fine X restaurants of cannibalization. much a we're came a with We footprint competitor So larger

So of heats, this more regular These like aren't on that just come volume. And that will just and Texas hot weather extreme the are heats. very, sales across these very weathers was California. but lower that impacted, these pattern very,

seeing What's impacted numbers. the Yes, Are it. important It's much is forward. and October November in quarter we sales that for the than in better here improvement more weeks? okay? better kind So X of do, third we going

going the comp we're quarter. negative forward, weeks So seeing at least X the these first sales not larger for fourth of

pretty are Okay. new we -- talk about could a if And maybe few sounds it like units. just there impressive

of what are for think responsible factors just as could do kind of if maybe and more come talk you of online. maybe also the any success, about what kind markets understanding you new to there's If

we'll we when restaurants, very we We is are of these X out totally what think project blew open mean, shocked too. water. the it I we just do but

experienced Because right? seen we've are So not concerned, numbers very happily are before we've lately. we these or

focus best to up you like us, some are can on if without fast. But plus they shocking that we're very very don't in sideways and if EBITDA together, all put go which you now focused sure you with can restaurants any management we this, make is our because mistakes don't So making have we because make we high-volume there details, problem. for stores restaurants, X XX these EBITDAs maintaining,

in So do we doing But those. so well? There's we're why have we This out ball. wish had just well, just we and grinding in I working mean keep our focusing I doing the are we blessings terms stores that I count so of don't on X. on -- they our business. is so details. day a day in, hard well, crystal hard only

the distribution and I about of agent squeeze If and one of of was one in these initiatives, for of a it's revenue last I'm investment of outdoor channel. But trade-off of kind sort about maybe trade-offs, a Could labor GEN opportunity. additional it you're Grills is staff of about in. required thinking and And is the these elaborate sort just just there what kind the an what way versus Okay. discuss if between think sort maybe participation in way on please? some -- thinking of catering maybe or the could I you -- sounded could marketing something what the more those you fairs kind

EBITDA They're very not straightforward generation. revenue opportunities. and They're marketing

we on questions for of in. these not there Again, pure it, response out more we're card. just customers to the incubator and be this. on actually sales can We're to starting us, we're now, have offense gift we'll that. We're looking the other and are we in the launches to for come was projects, right increases So waiting going -- details got biggest, if of you more But into go call that.

and well and more is BBQ these what than bring going GEN is other we project. trying so are expected, now brand So Korean very known we revenue, more a revenue purely actually to so venues

same this corporate of it's have the terms within In we much we're the pretty doing overhead, all We're there. corporate XX% infrastructure now. that --

it's have we're we overhead to way to This So having these be of is going corporate tackle more the our comfortable where bunch adding now. like people. we're right something in projects, a about not

Our Hamblin next come Craig-Hallum Group. Jeremy Capital from will question with today

and commentary could maybe -- I October a if driven -- magnitude the back be you the color and to if mix come much just is get improved. how a around would share more November, great. wanted then driven? to wanted little being in results menu? sense And to traffic it it Or things improved of by more premium have Is into

Jeremy, I lot improvement both. think a were it's we [ negative negative, But in of ]. the of X of terms

XX% it we've so comfortably, far. shrunk least I think, can by at say we

So substantial, it next know our high just Starting how yes, season in mean a because make to peak. don't weeks, we X we the in we the I now. all it's percentage, where -- us is it's terms go of but for money.

season the if does So be fine. well, we should

to the large hard still as we've experienced. of it's us the negative So that of third is negative comp terms that, behind in quarter gauge now, but

just terms menu, now? as percent the where out, on staying same, that a mixing total or as is is you of then or people? follow-up, And the color improving this can initiative a share in has Any And that? premium of fewer as that rolled

Sure. better sure, sell that staff our But our I to training for and efficiencies It that of is want, improving much it's We teams not those than we state thought. it some improving well. can actually as And suggest we improving. is are saw in -- fast products. have working as we is new very but

continuously So increasing. it is

the is question? What was lot. a helping So that second

Proportion Is X%, mix. it X%? of total

right around X% now. It's

drinks. start we we'll think goal lot little on now XX%. the drink to hit get side. a that more is stage, capture to there's focusing to the we a and the more on drink's XX% Our Because once low, And

given and where comps little the fell switch the performance the XXX we to basis your margin I And wanted payroll gears despite get wanted mean and really the to that. food labor could costs because it. I were. just comps Got talk then points, underneath impressive bit I rates, costs the a very about if see were. where

can were improve well, -- menu saw look here then initiatives as side that exactly and on that little XX also as solid. And QX the beyond? we year-over-year, basis like So a specific how into driving pretty there is taken you haven't talk cost sustainable you bit XX, ahead food given if pricing, that? And points

don't by factors on just there. there's food the on if I driven some costs know that's So or deflation if other going

Okay. labor sorry, November do I'm we had have a was -- to cost a bit October. -- conference. on conferences we like We missed And when around. little move people company this, we

but -- the margins The cost. this So operations. We continuously room still it we is terms us we'll day-to-day purely food focus make still details. better up. operators. on just on can We We're of maintain think of in focusing

on I big the the have that think last these days. don't stabilized, that I prices call, we mentioned fluctuations commodity have

So that's improving a lot.

that gift areas having brings the who low. they're in a gift menu, sale so premium the very by buying coming guest more -- gift more. the the for seen average that the they are thought card. We those a are our When increasing lot redemptions more are the of track Costco. card customer our of card drinks, and using improve buying that's cards, the and of from we've actually They're buying gift cards is gift One it, the the they're use

have they we've our actually said will book unused revenue. gift that fact, breakage another us to the to auditors. quarter, talked In maybe card portion to They've

disclose selling how we're but but not it, gift very numbers now. -- But outrageous some -- of conservative we're the that right we is prefer cards numbers it to much So that. about being

many XX% not too. like helps. helping But the So not we cards again, taking all. that It's margins, sales. that's have at It's so of like everywhere, maybe are But our with restaurants. gift it the

attacking areas area having just we we're said we of just that just one thought it's So day. this, -- wish every I all found. many was it just It's small where

time gift getting that follow-up $XX mentioned is, you A when card. average color great. on redemption purchase second it. from spend kind of line on you're it a Got share the quantify would And is then What's check? per higher usage? Can can magnitude that the here in you of to more you the using Or Costco. terms question any be

that much The now. data magnitude we're spending, gathering they're of how more actually

analysts So have we are junior that getting team a of that.

we you and cards drinks do random we money are now, So little and random can a people checks they're buying using out -- but on premium ordering more a telling checks the give perhaps are just us the call, maybe the It's next a X random that check. XX of all spending on more menu. like better are

And So color. get we'll better -- but the... you a

Timing of usage.

that should we The are than is great. like the redemption far, -- around XX%. less timing redemption industry only which so usage, of be is XX% The says

XX%. Between XX% and

XX%, Yes, XX%.

to evaluate to we still their of what Costco fact, the one of quarterly go. from -- ways sales. buyers Costco, long But with selling of of the the sales they areas have card call, said heard So their their because most gift in we've do have in improved how -- cards

right? regional, of all say, we them. your restaurants, They like throughout Subway cards They don't because country. away put have where miles they're these to And put gift sandwich, compared from only of have Now, a the a X let's hundreds lot are. don't restaurants up they

they around they're do, many us telling math now. there's stores that like by how and So by calculate #X many a they how we're sell right and they

So we're in very of terms sales, impressed.

the for cash we right of all our on it more right? are that going very use In at with all it, is food have terms that good the impressed So to go but this redemption up, once eventually, starts cost balance cards, use guests now. it they of about these they up we're cards, this impact cash doesn't us. And thing want the the But sheet too. is sitting free to rate, acquire

we're food So not now issue. that's cost, an our it But impacts seeing that then all. if at

it's So improving.

is big still difference. just we're really some figure out making are at there whether that that looking metrics So a to

the to session. I turn would for back remarks. closing over question-and-answer Kim like any our David conclude to conference will This

on the Deer November at the Conference coming December Valley Okay. Utah conferences on X, Craig-Hallum on be And XX. York Small these Wolfe this in being New and New everybody Conference to in to love ROTH we'd Conference in the to for XX, going of on thank Mid-Cap We'd always, you We're call. York as in up. any meet at like December that are

hopefully, to So back see If look when us, report great full some we'll everybody of our not, in you XXXX. we And quarter season. forward with has March results year Operator, speaking upcoming there. a XXXX of fourth joining to and we I everyone holiday and thanks you. again for hope

now conference The for you. Thank has today's you concluded. Thank attending presentation.

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