GENK - Earnings call transcript Q2 2023 | GEN Restaurant Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to GEN Restaurant Group, Inc.'s Second Quarter of 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, August 14, 2023. I would now like to turn the conference over to Tom Croal, the company's Chief Financial Officer. Please go ahead.

Thomas Croal

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

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

to today convenience. the for and quarterly at your XXXX earliest just of filed review our second document XX-Q have Form We that on would encourage you quarter report

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

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

Wook Kim

everybody. all and you afternoon, on to be as speaking you, call Thank It's public first earnings Tom, great company. good of with our a

global believing First and is vision listed for and foremost, my June an proudly I'd success team public it instrumental privilege past On years. our Nasdaq we we GEN in the to as being to and our on have seen at company. XX, like market, thank to that over a provide the XX the on our progress update

items high-traffic our manner. efficiently receiving service a who our an price. Unlike finest fulfill able full a GEN of faster For new, GEN they restaurants, our keep chicken, our of serving vendors, prices steak, may experience. Since food casual also This our service approach Korean guests to pork, other the allows all-inclusive the with dining an our menu more those and variety low guests. our BBQ the efficient, more our our are buffet, allowing restaurant to to at selection from be model. provide with also space large at BBQ, value ensures all Moreover, smaller that cooks with of come experience a provides eliminates concept, restaurants. guests sit-down, enabling consistent dinner, of across including affordable, us enabling guests Korean our story table proteins, you and footprint seafood quality This we majority to and we're best our proposition additional suppliers us in need tables, our to guests' while and ready-to-serve our kitchen us cook-it-yourself at salad a lunch not each of and for are both enjoy provides restaurant efficient team to concepts, dining

a XX As open into how educating market, on dive guests a it new understand we over our we landlords. Americans capacity being significant have long-term wide serve concept, concept, on is BBQ background, our of the operates. small such provides let our landlords In introduced With percentage the we upside advantage, competitive And the Hawaii, which consistent. California, our Arizona, New have this business XXX we're the yet plan of that At markets: market to in our public embarked York following the as including GEN, we Florida. United Korean our view is restaurants remains throughout Northern simple, States. guests enter, recently, company, way we expansion realized we each are most a our and local population truly across country Texas, a and as Nevada, have plans. restaurants dine. Because to in Southern me believe what We currently the and

We X restaurants We opportunities are have disclosed. previously we the new Florida as in this New ahead. X of year, opening believe this to and York excited confident both and markets especially enter remain substantial year to X

proven part first of I just the successful, like that in continue The to states expansion additional we've our build to mentioned. the is plan units been states

signed of leases and Washington. Florida, for in additional states have Hawaii, the units We Texas

California, have we XXXX this and X Arizona far year, already in in opened Florida. restaurants So

with in another within in We have to Washington. additional Texas construction expected X X begin X and X X X in And days, restaurants and in restaurants XX Florida Hawaii. under construction

additional proven are negotiating and Washington, market the states. second part out we New Oklahoma, Jersey, markets concept, Utah is Oregon, of to build will additional that The expansion we we've further, concept leases plan Massachusetts, are Colorado, our D.C. our our test Once in

look GEN geographies to States. are We and our around forward food share BBQ flavorable the excited future and many about into new are Korean bringing diverse to United

the recently our experience a our distribution new while Cisco, maintaining which GEN, protect dining our and an we This will that contract will ensure be who XX we have all and over will our long-term that enhance experience reiterate we years. for implemented our guest continue trajectory to to products the At expansion with states. as days. In competitive over in next pricing excellent XX contract me XX is next are, national availability we let confident of closing, we Accordingly, value signed are that XX we XX ensure and guests. across

We have for X next as develop years U.S. a restaurants across detailed plan the the new we

through a BBQ GEN economic the through under many and conditions at has our we to poor regions Our economic succeed believe team the different ability United even succeed in can or demonstrated and environments we already Korean recession. headwinds of States,

this chapter as public call experience dining With to to I company, on CFO, many come. embark Tom to to story and the over ensure a that, for our now thrilled turn new are Croal, like discuss We to second unique our our quarter years would results.

Thomas Croal

you, Thank David.

our We XX, the I quarterly public $XX.X share. shares, of at the me our X,XXX,XXX sold On issued realized per discounts quickly of including Before million. the on we touch recent to common June After commissions, of proceeds IPO. let to results, shares stock XXX,XXX overallotment we approximately offering initial underwriters A and completed underwriter public offering net XXXX, a price the get $XX our of Class option. as part

working proceeds corporate to majority of fund growth use for other unit new capital and for these will the purposes. We general

aligning attract XXXX July, granted and and participants with of incentive that to interests consistent quarterly from everyone equity company best goals available our personal retain extremely to X think to motivated. years, in our our that, awards profitability to and IPO, X,XXX,XXX motivate participants through the review to in link that our our with designed are shares to allows tremendous, is under connection optimize of stockholders. These With are those employees we been let's the sustainable restricted us a plan, The team long-term which the and our members primarily vest personnel has way. in growth our incentives results. over Additionally, of and response

second and quarter by the million ended This driven sales. restaurant XX, quarter to of $XX.X XXXX, in For openings compared XXXX. million the unit increase revenues new comparable increased $XX.X increase XX.X% X.X% second a in to June

favorable higher in in certain we primarily staff million XXXX, million the new sales year. and or preparation our to short-term as incremental Vegas and were driven New Occupancy a percentage in in percentage company our costs build have approximately to of Adjusted fees. newly basis year-over-year preopening costs, X was year-over-year by rates opened in including company year-over-year XX.X% about year-over-year XXX including sales million. We're of sold negotiations restaurant a been to points as EBITDA markets. Other $X.X quarter increased EBITDA with basis by sales total sales strip in the and which of Without new basis decreased X.X%. for year-over-year as goods in The compared points points company which restaurant ongoing markets more training preopening excited management labor a our our since last of increased of on we to $X.X second percentage X.X% minimum approximately XX.X%, commodity restaurant ramp-up administrative decrease and basis of operate, we are $XXX,XXX million to company as development. $X.X Cost General expenses operating adjusted in company due expenses to expenses. openings to additional restaurant year-over-year by approximately as restaurant vendors. Payroll rent to preopening a percent Las approximately points restaurant was costs this wage expenses higher managers increases due XX of costs. costs future. increases openings and due revenue, public X.X%, benefits primarily increased year's and of quarter, units would Turning XXX in pricing $X management including and to XX York, by high train restaurants as and

a have payback quick We and brand unit great periods. economics strong with

substantial we us. have ahead And growth of importantly, are We still profitable.

our stronger-than-anticipated upsized our we impact allow always by the profitable of credit, and to forward. planning with our by reduce $XX company, balances going million debt our the bank into us to financial the will increased history We of new excluding have loans Driven successful been year. $XX line cash of million IPO, are flexibility position a utilize pandemic repaying entering our for current which of

excess million line left $X equipment. That amounts will will to us $XX ancillary a in available $XX loans small related balance cash million no our with for and be We of to debt and million new EIDL under credit. except with of leave related

anticipate for following on a we the XXXX. our annual company, public results third on as Finally, we like basis, our thoughts first guidance Based some the to date, provide to to as wanted that provide the relates quarter. this given to guidance an we That is in third starting would providing quarter quarter. ongoing said, it

to in margin including and XX.X% revenues in again EBITDA opening restaurants million, open between And expenses questions million the quarter. and are questions. the as have. answer line like company. This We'd today, to remarks. of Operator, ramp thank this administrative that prepared no $XX.X as joining $X and range Adjusted we happy please $XX.X us general fourth any costs million concludes on may $X.X continue XX.X%. for public up a to First, million we quarter. the our be will new you Those call to of you total restaurant-level our to for now the

Operator

Thank question [Operator first from comes Our Brooks you, Benchmark Todd of sir. Instructions] Company.

Todd Brooks

out at and generating you're talked the landlords. together, sites? company, and competitive on than you're sites as education public And of relationships couple AUVs. pipeline coming 'XX balance traffic tenure the you A now real looking as changing? and quarter. you for Is 'XX question. of estate about with a those are real more process the David, side, potential you're the But an then high and Congrats on starting having approach one questions landlords estate to you it's other first with strong really or levels go find that to they the

Wook Kim

we correct. That and to are. understanding a more We're go actually getting the public about read lot our website who offering. of is They

have has understand been to much them it who them So now versus are. know have trying easier and we

and them much that now. to deal it's becoming easier with going is lot away So a

Todd Brooks

since And units markets. what new of I that -- about second we so recent new Okay. performance X into thought far? how in markets you've been My say, openings opened are of seen the the one you've second Can a the is Obviously, have performing moved corporate quarter at average? let's talk you've last that the year. if Great. look lot the versus

Thomas Croal

with, begin X new the we've excited opened. To about we've that Yes. restaurants been

and York, said before, in we Florida. As we're New now we're in

opened and restaurant also Webster, up in We in Texas and another in Arizona. Cerritos,

we All are. about doing restaurants of we've the that we that feel as nicely, are projected. opened just places really the We good

from see the as Our strong. release, have you press starts we York. lease And another New been in can added

New So we're happy to expand in York.

Todd Brooks

in me, one queue. a jump Okay. back Great. and final I'll And for

operators, which evaluate at at as you building mom-and-pop you're you figure competitive at nothing competitive pricing versus percent have they've taken much that is versus your you've by do on independent to what just businesses, lunch. only largely and trying advantage If as dinner taken competitive I'm of been you you of local conservative have couple how a look sort when their out price peers? sense set, the being your

Wook Kim

What know pricing, we much we our are. than with they higher competitors on are

We by person, per are difference higher. $X higher probably to $X they're

we we anybody us competing have the and now right see with don't we is In of terms proteins head-to-head who of number with have. value value, the

way in than they believe then we are are. price-wise, and advance that So are we we

that confident good very So of. we have that's that control something we're

Operator

George MKM. Kelly ROTH comes Thank of from you. next The question

George Kelly

first Congrats of the quarter on and nice a out gate. the transaction

you. So a couple for

The I is if that you? it was much what you upside that could on little relationship when they'll with to commence? you announced And curious bring a do there as first lastly, just on one expect is the give on more Cisco. could margin it be relationship a result? a your chance there detail And recently just is

Wook Kim

The already commenced. relationship being is

put states. which that have how platform will there some provide smooth We Price-wise, our we out. and of distribution, can distribution to fuel because but next are a is, infrastructure the paper, at really going. are are can that anomalies invested get but it's the type on be the and XX more competitive because their the next is what as a much U.S. is very telling What's -- anticipate done quarter. on adjusted. but see We'll be get is contract up them it we'll it we finding pricings small have how state than especially areas -- They're the inventory current to most goes centers want they have but Other is more we, for they mainstream warehouses that distribution small speed important not it on growth. it ability throughout of quarter, they're into country, of going Foods, companies other they that it to building have all Street the network in into very distribution disjointed. they that across company, They distribute, lot lots Companies hand, to on, post where run issues our help information a growth line, on pandemic. Cisco, disjointed. without we're capital on what have a work by

their we confident efficient we're that they the today right So in of the amount making very distributor and are and that time happy now are largest operation something very spent money with. is they

this us. distribution, really time the relationship past, we would constraint to looking So are on because put forward time in to

George Kelly

Okay. Understood.

in your So it new sounds and about opening, like efficiency especially opening stores. development it's mostly and

Wook Kim

Correct.

George Kelly

Okay. other questions Two you. for Got you.

the we exclude much generally the or just saw we if has with recently? from what of been expect of commodity of sticking as But continuation kind has a at move commodity -- pricing, we looking been XQ? pricing? far input. situation there in Or improving input Should changes So as your sort and Cisco,

Wook Kim

The has and subsided very commodity pricing is stable.

we ago. like a like So X been we anticipating are year have experiencing not or

XXXX increase at now. we So substantial a all year for right anticipate the don't

George Kelly

from the your mentioned one curious last recessions. business expand And the in great. me. could was That's in remarks if prepared I that. about Okay. on you how then David, performed you has

Wook Kim

Obviously, none lot face that a and that, the want don't want going a to that floating discussions we of that but talks out of say I there. are are to us recession. is

in talking and XX-year discussions But pluses forward. long-term company, management our to always here. we a are do we going rainy days are some have anticipate actually We

So our is whole idea we value. provide

that there of -- in recession -- did ready we're a we is So headwind for. that case anticipate not don't we not

And at we down, that just Our proposition eating, especially the people, offer. can trade provide protein the for they'll brand stop believe of our there we they is give concept the amount consumers trade we value ready that Because and down. not that no is guest price experience, will that. on when

So we that on that's what prepared statement. meant

Operator

question of from Jeremy Craig-Hallum. next Hamblin The comes

Jeremy Hamblin

here transaction questions your my to to around commodity relative the on the follow add of congratulations peers costs. in as versus coming around up I'll commentary completing and wanted I some the tie as public. value well

mostly price restaurants In terms disciplined been plus you of in to significant markets. XX% into that out cumulative public taken of a move fairly of the -- you've period. lot price that at last something in which you've considered pretty X-year have over you over not -- of the X- most the take years as time a a few kind here kind is or there Have

comments you when you whether might if the versus take Any recession. a how can or price that because happen. it is might on add around so, some there that value made You of color in certainly And terms timing the not in performs relative peers?

Wook Kim

We're we still our said is remember show the our consumers, hard they of times. now brand feeling the or were there's else long-term lot vision are committed everybody that that this of there pressure what pricing? out when Yes. raising at that We those they is. And of very to road there commodity pain, a when

our in we cost areas X% new product in a because think and because are even and some through of that continuously new margin. better companies have I without that grow labor for new the raising we for less our them modestly areas than we that price raising years. make not reason food are getting sake raising hearing changes, can customer And just that substantially, of now continuous of base cost prices to have no in We alienate long of areas raised technology, finding better vision

vision We are really a long-term here.

remembered that of to consumers our where we not we took but go. direction extent to are the modestly very is not we where increase the want by That them. will We advantage of

Jeremy Hamblin

elaborate of investment business? that at? technology Understood. on projects specific callouts And can as you or perhaps you Any more efficiently looking can other the feel a currently like areas the follow-up, manage some you're on which you in

Wook Kim

Yes.

And have dishwasher substantially. cut manufacturers we able sold that restaurants machineries those ETL to to use ways, don't in We are, we've machineries are U.S. U.S., are sold labor that approval different the their like helping here. that the overseas, be get not machines that we mentioned and we that are in

We more. have We in so lot [ exist find want to always efficient now. we them approval, pass a cutting complacent don't goal. but what we very our ways find to continuously we've savings country, this is areas. There's ] efficient. That -- cutting and machines saving we're can to started be that bring continuously doesn't constantly but ETL their gotten to in in, continuously in our want we're to And in what efficiency. we do, We doing Yes, are we we want customers. be that to those

systems other we're guests. see are working time. And continuously and can savings pass savings technology-wise, you should coming on we pay and in we're versus there we at this can to There's continuously So all table the areas at put it their we things that have multiple testing customers our cashier. those to where POS together, aggregate, when those

Jeremy Hamblin

finance sure to a the follow-up in But teams, the I'm newly and teams, Got also public, et I compliance cetera. color G&A. QX on your of it. being And building you're expectations. still for out for question reporting here then process on Tom the ask Thanks wanted

So need? provided $X your you a or G&A now, would of few kind quarters? on Or you that initial pull million is that do that million Is where million you'll from then any you quarters headed expense? might do next over quarterly of $X.X for the to you where team, could cost the something of color directionally, build-out And think that few here think be many $X would to $X.X be quarters that helpful. think in you much how you share -- how G&A, million think range do QX, that

Thomas Croal

Yes. Thank question. you. a good It's

build we're Prior you our going team public, significantly. out we As did brand-new a said, public to company.

I'll And do call, and we accounting so with team us. what SEC reporting a have full,

a incurring and we and the can run spending to and Now pretty in company. insurance we're to complete breath not the things settle very the tell sure and money, we and to historical next and couple of build and and I SEC that We're we'll That D&O a costs have those be need next make of always looking all in we're properly out have been year, expense, but properly set. continue staffed by right will as conservative you add now finally additional out financial statements take in quarters our public to, what for reporting. public the beginning lot as to lawyers a of company. reporting start that from accountants a we should we're place. And think looking We've much

Jeremy Hamblin

it. I'll then Got last And back and the in hop one me, for queue.

In what terms then of look of CapEx forecasting XXXX. sense the here spending total a for that and XXXX of like that for you're might

Thomas Croal

we're going Well, for to $X.X before, for as million new new cost our restaurants, be CapEx we've million somewhere restaurants. the in $X.X to our stated

math. you can apply so And that

I think $XXX,XXX we're restaurants. but huge existing an CapEx probably of ongoing as on month a the maintenance is range in company, our our for spending a not basis,

Jeremy Hamblin

on wishes continued Got the it. best and success. right, All

Thomas Croal

Thank you.

Operator

reached of and end you today's concludes the attending, question-and-answer we you your may and conference. now disconnect have today's Ladies Thank for lines. This gentlemen, session. also

Thomas Croal

Thank you all.

Wook Kim

you. Thank

GEN Restaurant (GENK) 14 Aug 232023 Q2 Earnings call transcript