GENK - Earnings call transcript Q2 2024 | GEN Restaurant Group, Inc.

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Operator

Greetings. Welcome to GEN Restaurant Group 2024 (sic) [ Second Quarter 2024 ] Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Tom Croal, CFO. Thank you.

begin. may You

Thomas Croal

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

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

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

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

Wook Kim

Tom, you, geographic we executing second share. and strategic overall growth continued expand our on In everyone. to quarter, afternoon, the initiatives and coverage Thank good GEN's market

we quarter, we XX% second consensus achieving we've This the total due estimate increase to proud quarter for while all our another as XX% at strong the efficiencies. I'm in delivering of row exceeded a delivered adjusted out. nearly revenue on restaurant-level laid a performance, to revenue a margin operational that we say year-over-year continue ahead expectations to strategy EBITDA in deliver

profitability strong well the we're growth year. existing and the positioned ongoing from remainder optimization through of With revenue stores, the cost to sustained initiatives, executing stores continue new of

best-in-class like newer are proteins table us start that dining GEN BBQ by of well solid who both consumers full you future as service differentiates these story, BBQ lunch positions an and at all-you-can-eat I growth. GEN casual a affordable of is across sustainable is, restaurant model all-inclusive dinner those always of who cook-it-yourself as alternatives you concept calls giving offers at For to your price. variety us Korean our why Korean to our and a for what recap

value, and exceptional dining optimizes staff both allowing proposition. at core is an model us experience space, business unique which to consumers Our incredible offer minimizes kitchen our and an

and It's X.X least, to of restaurant-level margin payback expect by approximately average years of at our preopening X EBITDA our to unit proven return worth to costs. to an payback a adjusted we includes a model that period on forward, period generate of annual driven cash-on-cash XX%. XX% $X in in million $X Going XX% of million noting average, volume

do, we an peers these exclude to of even than our years. attractive level more costs some are were less you at If as other X of

getting we're the gen most and increasing For years X.X XX concept. popularity across payback are millennial further dining recent on our age is our concepts the restaurants of long-term bullish new Asian Z Further group. potential and the underscoring showing better. Overall, confidence context, of our

In unique fact, several Asian-focused driven the such topic. ethnic others cited demographics shift ample audience very press new FSR, Nation's Reputable on months younger we this seen over have outlets all changing and have both by flavor this coverage cuisine, profiles. News, seeking and and as Restaurant past towards CNN

introducing concepts be believe customers. have innovative forefront the of to expansion new trend place emerging the at we our continue this proud are to and and many We unique in to necessary strategy

development. let's up our XXXX total to we Jacksonville, into X. Florida, in restaurants new Now opened our restaurant stores for quarter, dive In second the bringing

locations We the also construction country. X on additional began across

to the expect of next open X month We sooner. and the X end remaining restaurant or year the by

XX significant As making towards guidance to to locations result, a these new with new from XXXX. for adjusting restaurants restaurants progress planned XX opening, X new we're our

to XX and projections. Also, restaurants and leases our expect XX XX to the have have of have or more signed In either bottom our XX of end additional with to process for the addition guidance negotiations, XX being XXXX, XX to raising of in to signed. locations. now the we end locations in we being XXXX leases XX to which XXXX We're the or should lead

high map, goals. road experiencing Looking momentum in we confidence strong long-term expansion and maintain overarching our ahead our achieving to growth are

your our achieving our sheet, agreements support our confidence Moving targets. footprint call to to this the and to a growth Tom and you lease journey. I continued healthy years partnership our ahead. on profitable robust our in sustained to operating new reflect exciting quarter turn discuss for a results in the more CFO, solid to now and openings would success forward, committed second restaurant With Thank like in detail. scaling foundation, model of shareholders and our achieving over balance our and value we're significant Croal, delivering are pipeline a

Thomas Croal

David. you, Thank

in driven unit openings, to million XX.X% the latest are them location our the their quarter is of of our aware touch $XX.X increased Jacksonville. I'd be second how in we compared on primarily Overall, to landscape revenue of new certainly in to more million quarter, second causing what the the like to pressure quarter. by experienced feeling and inflation, $XX.X persistent including spending. the economic For consumers XXXX, broader second affecting customers

in other not same-store While experience employment is macro wage concerns, growth aren't we data a to such as the consumer long-term impacted this X.X% these a rates any decline whole industry signaling sales did spending as and quarter. GEN softer growth. trends in that immune restaurant

underperforming would positive have negative X these was figure same-store Without we generated decline XX. restaurant competitors the We June had but new X Two impacted same-store the comps, to in have primarily and locations, sales opened through X X positive of we generating a restaurant locations new in negative up a sales same and by area, was by both X driven locations. the area. these have restaurants open

is indication. just be any with important it's these profitability our the that ended foolish $X.X locations and X note million analysis, However, same-store of restaurant-level all figures, in X restaurants XX sales. to only contributed to get our the to sample are It within clear improve during same-store too shut sales our EBITDA overall restaurants size these any offsetting the internal same-store Further, down are targets while well June of to XX. they months small would

California, future. same-store ratio will next restaurants to be which the of in XX should normalize our sales outside Our XX

of premium We introducing We while experience are to for our fresh consumer items introduced top also comp new keep example, for menu, menu restaurants. recently customers evaluating remain we created constantly trends. sales options on and our our new single-digit several has the at broader ensuring improvement of

continue customer financial also for will interest look to opportunities to performance. further We drive improving while our

on percentage we to restaurant-level costs to are XXXX because XXX from compared decreases sold we of revenue approximately The second results. The restaurant a the that Cost expenses. of quarter tightly XX of a XXXX. year-over-year year-over-year EBITDA with menu. decline public that as quarter due occupancy On June restaurant points costs. Most pleased to for metric year-over-year increased stock-based X% integration basis this new percentage Overall, Since G&A basis our revenue last million basis during of in company points consistent XXX basis our was to which percentage months. quarter. Other to of a private new a sales to points for because excluding operational basis, in XX.X%, $X.X expenses though, of XX million the new net points basis. Adjusted points to goods is by a higher and the we quarter with costs the basis be company present in second personnel restaurant preopening along Adjusted costs compared increased XX% or sales restaurant-level were X.X% second X.X%, sales company. with increased year-over-year increase sold XX.X% percentage of was restaurant adjusted expenses of of declined over XXXX. Payroll is previously the third sales basis sequential the of XX XX by managing through XX.X%. as basis due but I'd mentioned a by XX on in and sales quarter XXXX as for as continue is G&A organization year-over-year of of XXXX. the due the the of to million the expenses comparable XXXX EBITDA Turning development, will decreased EBITDA to basis of increase quarter quarter XXXX. our first first across highlight premium largely of primarily slightly XX food which points Cost board. second declined sequentially with XXX by restaurant the to XX by restaurant as a was total company needed a the the of openings and implementation percentage the compared quarter basis of throughout sequential second of year-over-year as first first XXXX, on from operating we to the goods a importantly, quarter associated quarter compared public like a improved XXXX quarter $X.X the $X.X decreased company and to the weren't restaurant costs, first in of of sequential Occupancy percentage year-over-year to largely went first quarter to company addition focus basis sequentially quarter was our points points efficiencies of as benefits compensation, decreased to our points

increases While EBITDA be would year-over-year G&A approximately by adjusted I adjusted primarily mentioned, our estimates. than due EBITDA costs, million. higher second $X.X came that EBITDA adjusted quarter indicated in in to preopening decreased just Without

This XXXX. Our is of $X.X earlier, decline of to I income in net income to factors net the second was $X.X due the mentioned million primarily increased compared driven by G&A. million quarter same

to Turning liquidity.

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

$XX have available of million credit. also our We revolving in line

million June we XX for million million spent, for $XX.X development XX. year $X a first paid during remaining total million of Hawaii our cash of and from of purchase months Although of costs million only $X.X incurred and at business decreased $XX.X the our additionally $X.X the December the at ownership million X $XX.X to by the of

have public been finance that without went incurring balance without of cash or Our having in $XX our strong all debt. XXXX, use or our has able cash so development to Since been we've debt. any almost depleting we internally million we in costs cash to funded development flow

before, for said year. This concludes remainder I've a our I'd cash for are the line flow, We'd open free we As thank questions GEN you joining questions. restate please this may and of you generate to prepared to to remarks. today, on have. that continues answer call like trend now like anticipate happy the again to Operator, continuing us throughout any strong we the

Operator

from first Our Instructions] is [Operator Hamblin with Jeremy Group. question Craig-Hallum Capital

Jeremy Hamblin

that here the you on of here ask sales start little to and started sales bit for the seeing. and a give little trends bit then strong just a off deeper cadence same-store profitability trends quarter the on wanted QX? to here. you're of I sense Can us during how things a the same-store Congrats softening a have

Wook Kim

Okay.

talking So quarter, so the the -- you're after right? XX, June about

Jeremy Hamblin

Yes.

in the second months started for and get July. then during kind clarify, were here how quarter, to Just of your that, things which and sense the strongest magnitude of have out a

Wook Kim

sample Right So and have sizes. tapered taper it started now, April July -- then comp. not has strong, don't enough we reiterate our position down. started off is down. I strong, pretty negative want to But to it's of started

concentrated San subsequent close going XX% maybe years X outside that which we the are next The forward for in probably store up. is We all coming rest to spread openings Diego in California, is the have and is California, region, one one of out.

California all negative. So in our it's what the does that are terms that of sales. most is But case, impacted restaurants mean? that's not in probably all

We sales high-volume there When we going into that when lot to have X restaurants, competition. competitor positive new immediate started ones stores a were negative to But of area, increments. due neighbor small to of and stores to details, or in X by a are each ones. lot chip which in immediate open away your the impacted restaurants, X were is default, go

lose and default, X% by to add X% up. we'll just up, opens they So if probably one

an too out the even not not concerned time, comps at it's So we're company, this because here. about spread negative issue as a

more open rate negative make and like that have here. view continuously And of X subject to we cash we change, to restaurants We're and between again to better is it or internal concept as get model a to a change. grow. continuously flow off to reiterate XXX I'd to to positive try achieve process of to going comps is philosophy, we'll and return closer profits. is what to take the the as our not that continue And as to going company, years. X.X up going not return restaurants, will and we'll use We're our another XX a So are. And the or here

the new really the we about haven't with we consumers' other are there yet. softening And things yes, we're concerned Street issues doing are and dealing those new behaviors, with product with we're of combating drinks. pulled now that but that So some

and are We results to test what the announce not until going it actually see we it are.

Jeremy Hamblin

ask to things. I wanted of color. those also Helpful one new Great. about

your the I menu, orders In in your coming What terms is from lower that of or attachment are in Or that any $XX in getting menu which is that restaurants? kind launched you versus, the of portion And smaller across say, notable markets the premium rate? think, chain, is let's is you're larger or say, income difference? there your upsell your that performing, markets? let's -- June, how what premium the of

Wook Kim

-- in We it that markets makes notable certain in haven't seen than other up X% restaurants more difference we have sales. are

one -- month, one very make again, the But XX%. only saw inconsistent of when out we'll up find other now. open stores Some restaurant, It's right we is just of the more in upselling. the it consistencies we next one practice

were did we products. culture, focused different, on these company's to table, a a turning train our suggest staff to As have so not we line higher-priced product

we weren't introduce when actually out process a staff our falling and little with had it. these So to higher-priced they the because products, we roll used upselling through issue

and staff, and of these But we putting are do of showing to So upsell still on actually results. to ones training are that focus process board we better train are executing process and the they products. that followed a to going upselling stay our have We're new practice. higher-end not staff through now. that came are on staff lot -- on close Therefore, our top we these days more nowhere of

Jeremy Hamblin

the in related that the food which QX was at more Great. you of point? cost kind a the And but rolling targeted you area thinking going last QX, any costs uptake kind for basis, like your potential in scale cost feel there's right Do there more in where noted forward of some -- one, chain, something premium to goods that entire food in noticed the menu. I to improved related go-forward terms for would into about some a that? like year, just is degradation that settled a remainder to terms feel of sequentially of here premium I experimentation you of the is to premium then but that's profile? margin maybe the pricing Or of price sold imagine menu is on that in bit the QX related advantages to your versus that menu. margin the the out around

Wook Kim

more very inconsistencies is We room of there experimental point. because throughout clear restaurant. think is the around at It not still that this the for

we So any in food cost kind uptick get can don't find future the consistencies, that. see we more of point. when at We in this

but still yes, we've we improving, improve we have been year. So if last quarter-on-quarter, to it areas some to compare

So we're still areas in some experimenting now. right

Operator

question Our Todd next Benchmark Company. with is Brooks The from

Todd Brooks

data well that on that with in you are you ex and deliver performance markets guys outstripped the in to -- X.X% wanted on start that the plan really can dig X how to point performing you the in consensus quarter. to allow the -- you for we down If made upside expectations range, same-store sales the coming revenue point, non-California to did? I rightfully

Wook Kim

your -- Is stores the that we or have X-year to pertaining just stores the question existing the year-over-year comparison, opened? brand new

Todd Brooks

Really, I'm total talking David. the about base,

know is people substantially sales I estimate. the that for were total result largely the know comp that what So looking California-located, but above was I base an

more the So performance weakness, be than stores aren't offset that you what strong the of sales yet? has greater-than-expected base kind to in the in comp same-store

Thomas Croal

the they're have ability bit well new but expectations. different, a done Yes. the up right. directly to year. everyone last We've numbers. And during that they're above that's our -- impacting of Todd, overall, And a beat restaurants as little very that is course, is at opened our group,

Todd Brooks

second same-store should knowing it kind in that that are getting of side then qualitative David, saw how the degradation quarter-to-date, in the haven't equation? Okay. that you in we from we the performance. in to the of think back guys QX, sounds Great. more like And sturdy -- commentary gave, you impressive the little that on if diligently that you margin lift question, the be cost bit a margins about half, level working that sales seen of second a we've But XX%

Wook Kim

target towards are is four-wall, Our that. we still and XX% marching

we getting to get No. can get get aspect very of this, there, a We're -- as detail, close. we to not -- we it's to we and but percentage, very Now are we But okay? closer can in gain harder we it's get XX%? at XX%? every looking think Can

Todd Brooks

then the And labor sources of course growth Okay. Great. is for me. one you looks of It found a efficiency company. the during GEN like quarter. a final

found how I you grow? forward growth. help line? You continue that going the are those sturdy efficiencies have And as where need you bodies labor to on extracted that fuel you've guess to

Wook Kim

Okay.

So X ways, we being because are day-to-day besides for areas okay, always we the line labor, other ones operations. But there's as will labor we in down opened outside improve, state are most the default compare, in open by outside and more to focused we because of California. California, that, states the as the than grow expensive already go to lower restaurants that coming California are cost Southern

So of when the not better. by store when say, XX% the default cost our we California, -- get will company, becomes Southern overall labor let's XX%,

Operator

Kelly question next MKM. is ROTH with from George Our

George Kelly

that that differ? now, California it these do Florida expect legacy that new place question, could. So curious, of restaurants you economic as outside the of outside profile profile? or you be unit Like California focused I'm Texas maybe David, restaurants, unit a one one California, what on highlight you how to in does different follow you of economic could open if of versus up of you're more really last restaurants sort level and like focused your

Wook Kim

too, that talking in up in last low-volume let's but actually, they we say, again were about sales, all at But came looking were EBITDA. low-volume year, that stores the we have intently. We stores Florida, in,

Texas, maybe areas to very less saying, and it's little it's in up longer known. some are high. opened California, sales outside a get we the we're sales like But So well, of taking because

we that specific sales no areas and tremendous I expect pinpoint bad. we're amount Seattle, doing. there's like didn't can is So good where of that.

now. So it's map all right the over

hasn't we're have see, volume selection we versus an we on criteria low issue it is changed. the to have, So maybe volume? looking that site at the Our high that

So again, are into And not sampling areas. enough going we right new now. some

how year, we consistent. they the in of out perform, it's building quarter should first those -- but next start and Next not see

George Kelly

next And Understood. Okay. on then question, new openings. still

to around you're able it, just end call of if 'XX guidance you guidance, on where XX execute midpoint expect of right at you So that mentioned, your XX. shy gets that this to your you to updated be the the still XX year, XX

openings, you're sure densify? second I'm of guess those, kind is, I Are part have mean, pretty the don't the good of right question, be really 'XX -- you And the and where next openings 'XX? so focus are on openings view question and in I should XX year? And expecting a next to geographies mind is what year And the your there it is of cadence least. at now where you of sharing? what if then

Wook Kim

we the answer very with are okay, strong EBITDA. question, opening second in Sure. sales and areas we're in, To that

we'll continue those to grow So areas.

let's So we're open to areas we say, in, for for areas these X new doing areas. plant something in But will of portion -- we well openings in small we'll have not all are on so then a to in okay? there that that existing, one every be focus yet. are going new and example, markets, that existing are We still

So I was question that first George. again? I've apologize, think question. your I What answered

George Kelly

XX that leaves year? the expect XX for curious, still end I'm year, shy Like be like many XX we And restaurants, with just will of next almost openings This it you just you year? next should how if years. next X

Wook Kim

construction, telling XXXX, when we start that up But of destiny think we for lot you we're going open were XX I year have said can lot we'll XX, have control the announce let than number of to are now, getting the to control more we we're going a because that, but give to of right so the what are of what that or landlords permit we number end maybe announce as We'll where of once the we XX. probably XX when building these but we controlled to a next conservative -- we a our but than are can is negotiating guidance of is stores to a more for next then because quarter, today. restaurants by in example, by have a than many know we agency. Having the Street open. able were like, -- it's or call, more why with we the XX -- XX that, do government comfortable don't with our lot we that's we a on

George Kelly

Okay. Understood. Last just 'XX question fiscal is me your on for year guidance.

gave quarter, margin last guidance. I And didn't in and four-wall -- us the any hear You, revenue your kind of on update remarks. prepared

there's Just of update. kind curious if any

Thomas Croal

Yes.

at point we we're said before, we range. And this revenue closer with We're approaching end gave to range then the the sticking think I on of be our there, on we the the already margin, that XX%. side, obviously. would probably higher

doing better. goal XX%, to get hard we as as to David and But we is said, little working So can we're there. the bit as a as get fast we're to can as

Operator

remarks. I our would reached back to turn have to Mr. for of conference the closing question-and-answer over session. like the Kim end We

Wook Kim

for you Thank call. much on this very being

We are just very focused in what do. we

we're achieve. said So deviating what there out but -- yes, are not spending, there, from issues with consumer issues we political we there's will

So thank and in for us. believing very much you listening

Operator

today's you. This will conference. Thank conclude

time, thank you your participation. and for You disconnect lines your may at this

GEN Restaurant (GENK) 31 Jul 242024 Q2 Earnings call transcript