GENK - Earnings call transcript Q3 2023 | GEN Restaurant Group, Inc.

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GEN Restaurant Group, Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, November 14, 2023.

And now I would like to turn the conference over to Tom Croal, the company's Chief Financial Officer. ahead. go Please

Thomas Croal

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

regarding need new laws, Before that remind limited including, forward-looking within but our remarks, security store of statements include everyone the will not to meaning we growth today -- formal potential begin statements our openings. plans I and discussions federal to, securities

in identified XXXX statements quarterly of reports types those as the of well Form on quarter filed for and our XX-Q SEC. As report subsequent with third the our

the are These of are and subject on statements from you These results this should to future put also and currently uncertainties materially differ numerous not actual forward-looking what of performance, cause them. and we views therefore, that expect. date guarantees of to our could statements call reliance undue represent risks not as only

you S-X of update including We information risks impact refer SEC results to or statement our law, of Except required these we future obligation a statements and that forward-looking by detailed for events. on no undertake the could as operating revise filings, light discussion registration our condition. more financial or to in our recent future Form new

convenience. would will our you earliest review encourage and of to on your quarterly later Form report XXXX XX-Q document We today file quarter for the third that at

GAAP. isolation discuss a some should of in for information we or financial this During useful presentation in evaluating accordance prepared believe in substitute be will today's The be considered as not with results which performance. call, non-GAAP measures, we our will additional

financial are directly available measures most in current measures our which the press filings, Relations in our non-GAAP to A earnings our available reconciliations of website. comparable the and financial release are Investor section of SEC in the GAAP

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

David Kim

spoke, restaurant another we restaurants open a year. accomplishments, completing last with good opened Since more Texas, including by quarter and Houston, everybody. afternoon, we've Thank our end successful had first in the to time the and of the you, as company expected X full many public

Starting with our restaurants. new

of We an are seeing expectations. in from unit of generating average Miracle volumes annualized period Mile restaurants These Manhattan, Chandler, X years results Webster. with our new are and our payback proud on collectively million currently $X line in of we're for track the restaurants approximately X.X average and around

the delayed in Our the outlier time for as us seasonally summer slower Lauderdale that Fort marketplace. to opening was which is is months,

is breakeven opening is slower normal, than better restaurant this still while than it Importantly, today.

Let me open quarter, in October. now new expect an provide to fourth on X plans. update expansion Houston, Texas, we which the including you restaurants, opened our In

in of XXXX, expected which open quarter restaurant construction, currently year. For all of to units first we second are next or X under have additional the

we future for signing in units for XX addition, of and signed expected XX negotiations total an locations a of new In have stages X LOI stage locations. leases or the in additional final

we or pipeline achieving to new remain our expanding are of process growth secure With final We leases expanding XXXX our XXXX of and in for -- negotiations committed the locations our unit now of majority stages targets. signed we restaurants our XXXX further of and number locations. the in as our

is we returns in ahead believe unit the industry, the us the substantial. best our With opportunity among of

is Cisco XX% and currently going, with switch partner. our is our as Next, Foods approximately expect by it making from great progress. The to The distribution touch transition to transition complete, I we U.S. are to mid-December. we want be and on complete

to will XX support additional states, our minimizing as expand Cisco as growth to be us allow potential while disruptions. continue a all We have seamlessly to they excited across to partner

complete, we been menu items. transition the Once has be new Cisco will introducing

Coca-Cola, with agreement new consistent a signed recently provide which co-marketing will pricing. and incentives we've addition, In

a on restaurants an we'll basis. ongoing in As offer our products new drink result, promotional

Soju alcohol Korean, the introduce we as a will licenses. new Finally, option months, beer under coming in Capri and our wine new

of experience. customer improve All changes our help these will

me closing, and steadfast of the let focused long-term reiterate we the that company. in trajectory remain In

We our process. will growth the stay during out we with development on that and our course plans, meeting laid IPO expectations

Our ahead team in regions to ability to story conditions. and come. our never us, to ] different BBQ sure at GEN eperience ability can are for succeed [ believe unique United I've opportunity years of has environments we already through and any capture seen States, our our demonstrated share and of succeed economic we and the we Korean many the to thrilled dining macroeconomic in

would I Tom results. to the our Croal, now to to that, call CFO, discuss turn over like With our

Thomas Croal

David. you, Thank

For the to new million XXXX, quarter revenue a partially quarter the of million compared by sales. $XX.X offset increased $XX.X to third September comparable in driven XX, unit decrease restaurant and by ended in third X.X% openings X.X% XXXX,

West decrease the on from of impact sales resulted of Hurricane majority comparable The the restaurant Coast. our Hilary

to days is addition In of which ever since inception. during highest we've the our quarter, outages third power XX closure had weather-related number causing the

value quarter, also menu, growth in the pressures to X.X% comp price to In by while offset quarter, inflationary our help allowing of guests. a the our the instituted benefiting maintaining a we middle offering us our increase substantial to

This third a decreased versus to commodity the with our favorable sold Cost by as of company ongoing due XXXX primarily expenses. sales of of vendors. to XXX negotiations restaurant to quarter basis is XX.X%. pricing Turning more points and percentage goods

rates in XXX a company quarter percentage markets of minimum certain is benefits basis This XXXX and to in of versus Payroll for by restaurant points train wage development. to to in we training and management, XX.X%. and high third managers newly the increased primarily in sales staff labor as in due our which in we an as costs new in preparation restaurants increase restaurant short-term opened operate, increases ramp-up California

our longer expected. across This work to operating have we consistent the of restaurants. costs Additionally, has after a companies IPO, all we taken labor faced we X ensure the as integrate incremental integration to operation than

was as the EBITDA in sales a total XX.X% Adjusted of XX.X% to quarter compared restaurant third XXXX. of percentage level

If with line our restaurants, a was as expectations. XX%, our adjusted new in you restaurant-level percentage exclude revenue EBITDA of

earnings Please G&A measures. approximately release quarter for $X refer our reconciliation million. of was a non-GAAP during the to

Excluding our $X we stock-based compensation of million. provided last quarter to million guidance relative to $X.X

compensation approximately addition, noncash the $XXX,XXX we during had of stock-based quarter. In

EBITDA Without costs, by quarter and was of as the $X would was adjusted million. $X.X quarter million, decrease is Adjusted we to versus This including which XXXX. line be with built preopening EBITDA preopening expectations. third additional costs, The year preopening costs company costs. incremental $X.X third in last driven higher approximately public compares the units in million of

million of XXXX, million $X.X third year same mentioned. quarter by factors the to previously $X.X in Net the compared this was driven income I

Turning to liquidity.

government-funded of revolving loans. September of At quarter, line provides we a of XX, credit. end we except agreement, into a entered the XXXX, of As the $XX no for $X long-term third debt, which new million had EIDL million loan

strong of allowing a and far sheet us million maintained $X expenditures capital this we to cash and self-fund Importantly, balance year. in equivalents strong cash million cash $XX with so flow, have generated

our We cash use anticipate existing XXXX our to restaurants enough of funding of cash. flow cover new will significant without provide development

opened late $XX.X results for $X.X the million like our date, guidance restaurant in and to quarter. between $X.X third, EBITDA final in excluding the margin October in additional including to general XX% following range. X the expenses Based And sales noncash of administrative opened restaurant the X fourth and Total of would expense. on XX% Adjusted compensation million $XX.X restaurants stock-based and million, weeks provide we to level the to million, year.

pandemic. positive to cash million and flow currently each our excess We reiterate strength company have I as net the $XX of want since adding profitable annual been we the total. for of in to in the exception, this opening with restaurant cash of flow generate except additional impact income

in the of have credit, we million $XX us cash addition, further giving a of line to over $XX company. grow $XX and In availability million million

us like to today, our the the questions. please for answer you call This now thank may are on you joining concludes open that We'd line Operator, prepared any to again we happy questions and have. for remarks.

Operator

Benchmark Instructions] comes Todd line [Operator first with the question Brooks The from Company. of

Todd Brooks

jump queue. I've in back then you, got for X I'll and

congrats one, pipeline The shape you're good 'XX the openings. new like of looks locations. for fiscal first on It in

talked across right. you our thinking models 'XX fiscal that openings going I under build to about already, forward? how heard for the just about does I units think if How X we're as look cadence construction

David Kim

this kind a to have the So especially engineering of is square of stores, to David. new we not It challenge and open. a to open This footage amount exhaust is simple restaurant that the is deal and with.

A have what explained we is. X concept maybe restaurant our the ventilated might example, hoods. have normal For in roadshow,

at to ventilated look as every it because has ventilation. You us table hoods with XX-plus a have

of issuance open restaurants our to I'm COVID. permits why from building It the contractors perspective bringing after the market. all So the issue outside up of governmental harder this restaurants either to of core these is is

of pressure the governmental coming is the Most from side.

soon restaurant has agency X permit one that be have We building build. we over starting year to that a to get construction should taken

are we having risk hedge of restaurants out is that float to to So the more delayed openings. there

at. that are up. are have proposed the what of more looking we in we the we are XXXX, What we we But in steadfast openings today anticipating anticipate line

working this So of on. what of we're today as is

of harder in lining from more us So -- deter out. opening, delays adjusting terms is it not time doesn't to restaurants and by it but

Todd Brooks

and that is to you of very look year's talk you brand the David. That's of at coming states? established quality new public maybe where And you're if at a in versus mix now openings of least locations next since slate seeing can helpful, openings, the maybe states

David Kim

Yes.

of as have we our be that restaurants in opening is So that a good for we will strongest market us. Texas amount

states more new having be like Portland. will are in We Washington, Those good. Florida, Seattle. very

now. We in stages are drawing

go And more state? Let York and X the Boston maybe deals, at well Oklahoma New we're with Colorado doing other what's me we'll areas to like almost an market. that's and XXXX. very that We're we're be with area -- with. New forward And York. looking opening done will entering is the We're be because that see. in excited

Thomas Croal

Utah.

David Kim

yes. Utah,

we're So out those to markets. starting to branch establish there

Todd Brooks

how health How to would does would if can in need. really But us around consumer as And at of story. and highlighted all down mature in are the same-store I get of this as know be the seeing GEN Great. back health you wait open, I you kind consumer GEN My know hurricanes. anything the one, power the dig your outages really and consumer the Tom, is level, behaviors consumer? restaurant, the stores and the in great. can is so the a sales times are the Okay. onetime But far what you're final check, you positioned volumes you're looking attachment, there? just when be Average but in not that headwinds you hanging some queue, your of it I'll you've if give their

Thomas Croal

consumer impact the lot really kind is I would discussion far, seeing know there's say, a consistent. It's consumers. an downtick. so Todd, There in with the consumer. our that. of of isn't flow around a in the even been isn't new is There like the drugs Ozempic we're what uptick I just of

We haven't coming seen any volume restaurants. of impact our into those people on from the

as we kind same. into we XXXX, look see as So the it just being of

David Kim

would non-branded the competitors, especially to doing local looking are we're down we we but are that hearing to what space area, digit, that, I not. in in always double to California, Angeles our the competitors add our Los are like still they're as and

brand our and customer So our we're base. maintaining

yet. haven't drop a seen We

Operator

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

Jeremy Hamblin

kind tracking that sales the or take pricing wanted understood. your, guidance two within at embedded an competitors. or of XX% in about And XX% QX, think, of to not not understanding whether at The seen start is menu here I are for priced what sure menu discount over of today just to any forward last sales I months? and couple and expect you that quarter-to-date to pricing make change a going the whether cadence XX%, to and given same-store I any the where then you're carrying just you've So

Thomas Croal

only that restaurants, we've for the From at -- a our our do as Yes. any still we of we standpoint, for was discussed price under the on increases $XX in dinner. price most of increase our And restaurants, Thanks, past, horizon. in we're pricing. pricing several did new Jeremy. the but don't have

question. I'm So your think trying answered to if completely that

just were before what One, same-store quarter-to-date you'd you is going for of the by to you sales opened like the I implied hoping -- that wanted Texas -- given And then with a of of year other end that understand the X like QX. get two, couple that same-store in guidance provide to opened one in location the guidance And to weeks it sales October. then be locations then Houston, what's figure. you're the December. sounded last range and Well, I of guidance in kind if sales provided was can -- the

David Kim

Maybe bit be performing. good as say, we the looking expected. as we little I going can how it's The we opened at performing like Texas let's one -- we opened just details will just of, in Houston, we we chime new in that the expected in a terms forward, is restaurant of in restaurant as opened micro every as

we announced we -- these million what X.X good hitting is numbers with as year these. when returns, some $X average on we're So the

good They So store areas. forward. seem very new openings be going to in

So guidance. very comfortable with we're the

November. sales of in soft terms up numbers, was making all little October, In we're it in a but

So same. our guidance still stays the

Some months, we pick up.

out. months lose, it Some but we averages

expected. that we as we But taking now a that transition that say some to one that very we engaged. it's we've in one, everybody good is want are we now delays company, to be what do had disclosed operational I direction and

not it's operations. different X Now

are start the the programs next we going be going we're to this different quarter, we'll likely approaches. about implementing Street most not kind optimistic approaching sharing to we quarter, but have that So how are very shared start that with those on now we of

some So answered your know directly here. don't I of questions if I

Jeremy Hamblin

guidance helpful. math just the comp of even flat maybe within on it's negative based sounds It openings. the the No, like embedded and around is a slightly those or timing

$XXX,XXX that that was stock to hop organization So your QX. to was In color that might that a you're the you able a and now that a share commentary anyway? was of provide, kind typical here, I queue. to fairly might based today? other ask of hoping help comp great. able question on to expense, unusual little expenses I wanted be over the that in and just company, that, be you're is the size public is one be number it Anything on you expecting I'll around of G&A regards Or would the out

Thomas Croal

that -- kind of, is I'll what That you. amount. say, ongoing Thank Yes. an is will be quarterly

issued period. with last think vest those we employees. RSUs in over we to a the the X- in announced had certain And I quarter that IPO to RSUs connection X-year

And expense period. will be X- recorded X-year to that the over so

years. it So for consistent will be few the next

Operator

comes question of George with the Next line Kelly Partners. Capital ROTH from

George Kelly

I lost my voice.

questions. be I'll Two here. So brief

year. could remarks, And targeting seems achievable you was Cisco XX I First, you to was wondering as part your prepared that of your S-X, expand curious XX openings that per that? on talked in if I remember secondly, still potential and were about XXXX? if for then I just items. you through the new menu

David Kim

Sure.

We are to guidance our going keep XXXX. in

stages. we be of the have of lot in quarter openings -- architectural because lot are building of the openings a we states -- the a towards said, and As fourth could permit the them

the And leases. some are finishes in of the

So we will guidance on... keep our

Thomas Croal

[ XXXX ].

David Kim

[ XXXX ].

that not So will change.

The second question...

Thomas Croal

Cisco. around was It

David Kim

are there together here, We to we products we going establish keeping that different, and are to up so almost being are products yes. in elevate not this in we functioning Cisco, getting all products. stale -- once cohesive and our be the introduce -- and menu better all our in operations to we now

meat the to are over lot being going which there the consistency, are offer So supply in the business in now and new have we production the after with and a won't are but -- us products that's into the areas XX time the product line. meaning consistent, coming now years. not for in, and we're they lines disruption all were COVID we're And cuts been we And tested. that exploring we of

for better that elevate now we at issue. that ourselves can products start guests. our So can have We don't we looking

George Kelly

-- or there mentioned margin, brought through mentioned I restaurant you kind that And then I I just quick believe, you contribution item, special that. you more you missed Can adjustment Okay. and one an XX%. have that walk just guess that about was were talking that to it one. Understood. Tom, of would some again?

Thomas Croal

that you XX% are out if take it new be was took the XX.X%. up, would instead those of I you if said restaurants out, What ramping

Operator

back question-and-answer Mr. like to gentlemen, comments. Kim have the now reached to over for call we David end and Ladies turn would session. the of I closing

David Kim

for thank interest for an thank this being Well, Korean you us, GEN call with having for you on BBQ. and

well. the we going This the on profits. and that do a stay We and focused we're to And lot are on growth. is cash -- exciting, stay going focused generate is operations and of it's not continuously very company to it's a very we everyday focus but what execution

a it continue but that boring business, So yet makes we'll the money. that call we business

Operator

Thank This today's you. concludes teleconference.

your You may Thank your disconnect this time. lines for you at participation.

GEN Restaurant (GENK) 14 Nov 232023 Q3 Earnings call transcript