Q2 2024 GEN Restaurant Group Inc Earnings Call

Greetings. Welcome to GEN Restaurant Group 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Tom Croal, CFO. Thank you. You may begin.

Operator: I will now turn the conference over to Tom Carrow, CFO. Thank you. You may begin.

Please note this conference is being recorded. I will now turn the conference over to Tom Croal, CFO . Thank you. You may begin.

Thomas V. Croal: Thank you, Operator, and good afternoon. By now, everyone should have access to our second quarter 2024 earnings release. If not, it can be found at www.genkoreanbbq.com in the investor relations section before we begin our formal remarks. I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal security laws, including, but not limited to, statements about growth plans and potential new store openings, as well as those types of statements identified in our quarterly report on Form 10-Q for the period ended June 30, 2024, and our subsequent reports filed with the SEC.

Tom Carrow: Thank you, operator, and good afternoon. But now everyone should have access to our second quarter of 2022 earnings release. If not, you can be found at www.gencurianbq.com in the Investor Relations section.

Thomas V. Croal: Thank you, Operator, and good afternoon.

Thomas V. Croal: By now, everyone should have access to our second quarter 2024 earnings release. If not, it can be found at www.genkoreanbbq.com in the investor relations section.

Tom Carrow: Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal securities laws, including but not limited to statements about growth plans and potential new store openings. As well as those types of statements identified in our quarterly report on Form 10-Q for the period ended June 30th, 2024, and our subsequent reports filed with the SEC. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect.

Thomas V. Croal: These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our quarterly report on Form 10-Q, for a more detailed discussion of the risks that could impact our future operating results and financial conditions.

Speaker Change: Before we begin our formal remarks,

Speaker Change: I need to remind everyone that our discussions today will include forward-looking statements within the meeting of federal security laws.

Thomas V. Croal: including, but not limited to,

Thomas V. Croal: statements about growth plans and potential new store openings as well as those types of statements identified in our quarterly report on Form 10-Q for the period ended June 30th, 2024 and our subsequent reports filed with the SEC.

Thomas V. Croal: These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them.

Thomas V. Croal: These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect.

Tom Carrow: We refer you to our recent SEC finals, including our quarterly report on Form 10-Q for a more detailed discussion of the risks that could impact our future operating results in financial condition.

Thomas V. Croal: We refer you to our recent SEC filings, including our quarterly report on Form 10-Q , for a more detailed discussion of the risks that could impact our future operating results and financial condition.

Tom Carrow: Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events.

Thomas V. Croal: Unless required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events. During today's call, we will discuss some non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAP. Reconciliations of the Non-Gap Financial Measures to the Most Directly Comparable Gap Financial Measures are available in our earnings press release and our SEC filings, which are available in the Investor Relations section of our website. Now, I'd like to turn it over to our board chair and co-CEO, David Kim.

Thomas V. Croal: Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events.

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

Thomas V. Croal: During today's call we will discuss some non-GAAP financial measures which we believe can be useful in evaluating our performance.

Thomas V. Croal: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAP.

Thomas V. Croal: Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and our SEC filings, which are available in the investor relations section of our website.

David Kim: Now, I'd like to turn it over to our board chair and co-CEO, David Kim. Thank you, Tom, and good afternoon, everyone. In the second quarter, we continued executing on our strategic growth initiatives that span Jen's geography coverage in overall market share. This quarter, we delivered another strong revenue performance, achieving a 16% year-over-year increase in polar revenue for the second quarter in a row, while delivering a restaurant level of decent even a margin ahead of our expectations at 19% due to operational efficiency. I'm proud to say that we've ceded nearly all consensus estimates as we continue to deliver on the strategy we laid out with the sustained profitability of existing stores.

Thomas V. Croal: Now I'd like to turn it over to our board chair and co-CEO David Kim.

Wook Jin Kim: Thank you, Tom, and good afternoon, everyone. In the second quarter, we continued executing on our strategic growth initiatives to expand GEN's geography, coverage, and overall market share. This quarter, we delivered another strong revenue performance, achieving a 16% year-over-year increase in total revenue for the second quarter in a row, while delivering a restaurant level of just even a margin ahead of our expectations at 19% due to operational efficiency. I'm proud to say that we've seeded nearly all consensus estimates as we continue to deliver on the strategy we've laid out, with the sustained profitability of existing stores, strong revenue growth from new stores, and ongoing cost optimization and incentives.

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

Wook Jin Kim: This quarter we delivered another strong revenue performance, achieving a 16% year-over-year increase.

Wook Jin Kim: I'm proud to say that we exceeded nearly all consensus estimates as we continue to deliver on the strategy we've laid out.

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

David Kim: Strong revenue growth from new stores and ongoing cost optimization and incentives were well-positioned to continue executing through the remainder of the year.

David Kim: For those new or newer to our story, I always like to start these calls by giving you a recap of who Gen Korean Barbecue is, what differentiates us and why our model positions us for sustainable future growth. Gen Korean Barbecue is an all-you-can-eat, low-service, cook-it-yourself at your table, casual dining restaurant concept that offers consumers a variety of best-in-class proteins as well as salad alternatives across both lunch and dinner at an affordable all-inclusive price. Our unique business model both optimizes and minimizes kitchen staff and space, allowing us to offer consumers an exceptional dining experience at an incredible value, which is a core proposition.

Wook Jin Kim: We're well positioned to continue executing through the remainder of the year. For those new or newer to our story, I always like to start these calls by giving you a recap of who GEN Korean BBQ is, what differentiates us, and why our model positions us for sustainable future growth. GEN Korean BBQ is an all-you-can-eat, full service, cook it yourself at your table casual dining restaurant concept that offers consumers a variety of best-in-class proteins as well as salad alternatives across both lunch and dinner at an affordable, all-inclusive price.

Speaker Change: For those new or newer to our story, I always like to start these calls by giving you a recap of who GEN Korean BBQ is, what differentiates us

Wook Jin Kim: Our unique business model both optimizes and minimizes kitchen staff and space, allowing us to offer consumers an exceptional dining experience and incredible value, which is our core proposition. Going forward, we expect our proven model to generate at least, on average, a cash-on-cash return of 40% in a payback period of approximately two to two and a half years, driven by an average of $4 million to $5 million in annual unit volume and a restaurant-level adjusted EBITDA margin of 18% to 20%. It's worth noting that our payback period includes pre-opening costs.

Wook Jin Kim: If you were to exclude these costs, as some of our other peers do, we are at an even more attractive level of less than two years for further content. Our 10 most recent new restaurants are showing 2.5 years payback and getting better. Overall, we're bullish on the long-term potential of our concept, further underscoring our confidence is the increasing popularity of Asian dining concepts across the Millennial and Gen Z age groups. In fact, we've seen ample press coverage over the past several months on this very topic from reputable outlets such as Nation's Restaurant News. FSR, CNN, and others have all cited this shift towards Asian-focused cuisine driven by both changing ethnic demographics and a younger audience seeking new and unique flavor profiles.

Wook Jin Kim: We are proud to be at the forefront of this emerging trend and believe we have the necessary expansion strategy in place to continue introducing our unique and innovative concepts to many new customers. Now, let's dive into our restaurant development. In the second quarter, we opened new restaurants in Jacksonville, Florida, bringing our total stores for 2024 up to three. We also began construction on seven additional locations across the country.

Wook Jin Kim: and why our model positions us for sustainable future growth.

Wook Jin Kim: GEN Korean BBQ is an all-you-can-eat, full-service,

Wook Jin Kim: cook-it-yourself, at-your-table, casual dining restaurant concept that offers consumers a variety of best-in-class proteins as well as salad alternatives across both lunch and dinner.

Wook Jin Kim: at an affordable, all-inclusive price.

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

David Kim: Going forward, we expect our proven models to generate at least a cash return of 40% and a payback period of approximately two to two and a half years, driven by an average of 4 million to 5 million in annual unit volume and restaurant level adjusted even a margin of 18 to 20%. It's worth noting that our payback period includes pre-opening cost. If you were to exclude these costs, as some of our other peers do, we are at an even more attractive level of less than two years. For further context, our 10 most recent new restaurants are showing 2.5 years payback and getting better.

Wook Jin Kim: going forward.

Wook Jin Kim: We expect our proven model to generate at least, on average,

Speaker Change: A cash-in, cash-return.

Speaker Change: of 40 percent.

Speaker Change: and a payback period of approximately...

Speaker Change: two to two-and-a-half years driven.

Speaker Change: by an average of $4 million to $5 million in...

Speaker Change: annual unit volume and restaurant level adjusted even a margin of 18 to 20 percent.

Speaker Change: It's worth noting that our payback period includes pre-opening costs.

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

Speaker Change: For further context, our 10 most recent new restaurants are showing 2.5 years payback and getting better.

David Kim: Overall, we're bullish on the long-term potential of our concept. Further, underscoring our confidence is the increasing popularity of Asian dining concepts across the millennial and Gen Z age group. In fact, we've seen ample press coverage over the past several months on this very topic. Reputable outlets such as Nation's Restaurant News, FSR, CNN, and others have all cited this shift towards Asian focus cuisine driven by both changing ethnic demographics and a younger audience seeking new and unique flavor profiles.

Speaker Change: Overall, we're bullish on the long-term potential of our concept, further underscoring our confidence

Speaker Change: is the increasing popularity of Asian dining concepts across the Millennial and Gen Z age group.

Speaker Change: In fact, we've seen ample press coverage over the past several months on this very topic.

Speaker Change: reputable outlets such as Nation's Restaurant News.

Speaker Change: FSR, CNN and others have all cited this shift towards Asian focused cuisine driven by both changing ethnic demographics and younger audience seeking new and unique flavor profiles.

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

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

David Kim: Now, let's dive into our restaurant development. In the second quarter, we opened new restaurants in Jacksonville, Florida, bringing our total stores for 2024 up to three. We also began construction on seven additional locations across the country. We expect to open one restaurant next month and the remaining six by the end of the year or sooner. As a result, with these planned new locations making significant progress towards opening, we're adjusting our guidance from eight new restaurants to 10 to 11 new restaurants for 2024. In addition to the 10 to 11 restaurants in 2024, we have 11 or more locations with leases either being signed or in the process of being signed.

Speaker Change: Now let's dive into our restaurant development.

Speaker Change: In the second quarter, we opened new restaurants,

Speaker Change: in Jacksonville, Florida, bringing our total stores for 2024 up to three.

Speaker Change: We also began construction on seven additional locations across the country. We expect to open one restaurant next month and the remaining six by the end of the year or sooner.

Wook Jin Kim: We expect to open one restaurant next month and the remaining six by the end of the year or sooner. As a result, with these planned new locations making significant progress towards opening, we're adjusting our guidance from 8-year restaurants to 10- to 11-year restaurants for 2024. In addition to the 10 to 11 restaurants in 2024, we have 11 or more locations with leases either being signed or in the process of being sorry.

Speaker Change: As a result, with these planned new locations making significant progress towards opening, we're adjusting our guidance from 8 new restaurants to 10 to 11 new restaurants for 2024.

Speaker Change: In addition to the 10 to 11 restaurants in 2024, we have 11 or more locations with leases either being signed or in the process of being signed.

David Kim: Also, we have 15 to 20 additional leases and negotiations, which should lead to our 2026 projections. We're raising the bottom end of our guidance for the end of 2026 and now expect to have 75 to 80 locations. Looking ahead to our overarching expansion roadmap, we're experiencing strong momentum and maintain high confidence in achieving our long-term growth goals. Moving forward, our robust pipeline of new restaurant openings and lease agreements reflect our confidence in scaling our footprint and achieving our growth targets. With a solid foundation, a profitable operating model, and a healthy balance sheet, we're achieving sustained success and are committed to delivering significant value to our shareholders in the years ahead.

Wook Jin Kim: Also, we have 15 to 20 additional leases and negotiations which should lead to our 2026 projection. We're raising the bottom end of our guidance for the end of 2026 and now expect to have 75 to 80 locations.

Speaker Change: being signed.

Speaker Change: Also we have 15 to 20 additional leases and negotiations which should lead to our 2026 projections.

Speaker Change: We're raising the bottom end of our guidance.

Speaker Change: for the end of 2026, and now expect to have 75 to 80 locations.

Wook Jin Kim: Looking ahead to our overarching expansion roadmap, we're experiencing strong momentum and maintaining high confidence in achieving our long-term growth goals. Moving forward, our robust pipeline of new restaurant openings and lease agreements reflect our confidence in scaling our footprint and achieving our growth target with a solid foundation, profitable operating model, and a healthy balance. We're achieving sustained success and are committed to delivering significant value to our shareholders in the years ahead. Thank you for your continued support and partnership on this exciting journey. I would now like to turn the call over to our CFO, Tom Croal, to discuss our second quarter results in more detail.

Speaker Change: Looking ahead to our overarching

Speaker Change: We are experiencing strong momentum and maintain high confidence in achieving our long-term growth goals.

Speaker Change: Moving forward, our robust pipeline of new restaurant openings and lease agreements reflect our confidence in scaling our footprint and achieving our growth targets.

Speaker Change: with a solid foundation.

Speaker Change: a profitable operating model, and a healthy balance sheet.

Speaker Change: We're achieving sustained success and are committed to delivering significant value to our shareholders in the years ahead. Thank you for your continued support and partnership on this exciting journey.

David Kim: Thank you for your continuous support and partnership on this exciting journey.

Tom Carrow: I would now like to turn the call over to our CFO, Tom Crow, to discuss our second quarter results in more detail. Thank you, David. For the second quarter, revenue increased 15.9% to 53.9 million compared to 46.5 million in the second quarter of 2023. Driven primarily by new unit openings, including our latest location in Jacksonville.

Thomas V. Croal: I would now like to turn the call over to our CFO , Tom Croal, to discuss our second quarter results in more detail.

Thomas V. Croal: For the second quarter, revenue increased 15.9% to $53.9 million, compared to $46.5 million in the second quarter of 2023, driven primarily by new unit openings, including our latest location in Jacksonville. I'd like to touch on how the broader economic landscape is affecting our customers and what we experienced in the second quarter. Overall, consumers are certainly feeling the pressure of persistent inflation causing them to be more aware of their spending.

Thomas V. Croal: Thank you, David.

Thomas V. Croal: For the second quarter, revenue increased 15.9% to $53.9 million, compared to $46.5 million in the second quarter of 2023.

Speaker Change: driven primarily by new unit openings, including our latest location in Jacksonville.

Tom Carrow: I'd like to touch on how the broader economic landscape is affecting our customers and what we experienced in the second quarter. Overall, consumers are certainly feeling the pressure of persistent inflation, causing them to be more aware of their spending. While other macro data, such as employment rates and wage growth, aren't signaling any long-term concerns, softer consumer spending impacted the restaurant industry as a whole of this quarter. Jen is not immune to these trends, and we did experience a 5.6 percent decline in same-store sales growth. We have locations generating both positive and negative same-store sales comps, but the negative decline was primarily driven by five underperforming locations.

Speaker Change: I'd like to touch on how the broader economic landscape is affecting our customers and what we experienced in the second quarter.

Speaker Change: Overall, consumers are certainly feeling the pressure of persistent inflation, causing them to be more aware of their spending.

Thomas V. Croal: While other macro data, such as employment rates and wage growth, aren't signaling any long-term concerns, softer consumer spending impacted the restaurant industry as a whole this quarter. GEN is not immune to these trends, and we did experience a 5.6% decline in same-store sales growth. We have locations generating both positive and negative same-store sales comms, but the negative decline was primarily driven by five underperforming locations. Without these five locations, we would have generated a positive same-store sales figure through June 30.

Speaker Change: While other macro data such as employment rates and wage growth aren't signaling any long-term concerns, softer consumer spending impacted the restaurant industry as a whole this quarter.

Jen: GEN is not immune to these trends and we did experience a 5.6 percent decline in same-store sales growth.

Speaker Change: We have locations generating both positive and negative same-store sales comps, but the negative decline was primarily driven by five underperforming locations.

Tom Carrow: Without these five locations, we would have generated a positive same-store sales figure through June 30th. Two of these restaurants have had three to four new competitors open up in the area, and one restaurant was impacted by a new restaurant we opened in the same area. However, it's important to note that while these locations are offsetting the overall same-store sales figures, they are all well within our internal profitability targets and contributed 4.4 million of restaurant-level EBITDA during the six months ended June 30th. It would be foolish to shut down any of these five restaurants just to improve our same-store sales.

Speaker Change: Without these five locations, we would have generated a positive same-store sales figure through June 30th.

Thomas V. Croal: Two of these restaurants have had three to four new competitors open up in the area, and one restaurant was impacted by a new restaurant we opened in the same area. However, it's important to note that while these locations are offsetting the overall same store sales figures, they are all well within our internal profitability target and contributed $4.4 million of restaurant-level EBITDA during the six months ended June 30. It would be foolish to shut down any of these five restaurants just to improve our same-store sales.

Speaker Change: Two of these restaurants have had three to four new competitors open up in the area.

Speaker Change: and one restaurant was impacted by a new restaurant we opened in the same area.

Speaker Change: However, it's important to note that while these locations are offsetting the overall same store sales figures,

Speaker Change: They are all well within our internal profitability targets.

Speaker Change: and contributed $4.4 million of restaurant-level EBITDA during the six months ended June 30th.

Speaker Change: It would be foolish to shut down any of these five restaurants just to improve our same store sales.

Tom Carrow: Further, with only 33 restaurants in our same-store analysis, the sample size is too small to get any clear indication. Our next 10-15 restaurants will be outside of California, which should normalize our same-store sales ratio in the future.

Thomas V. Croal: Further, with only 33 restaurants in our same store analysis, the sample size is too small to get any clear indication. Our next 10 to 15 restaurants will be outside of California, which should normalize our same store sales ratio in the future. We are also constantly evaluating our menu options and introducing new items to keep the experience fresh for new customers while ensuring we remain on top of broader consumer trends.

Speaker Change: Further, with only 33 restaurants in our same store analysis, the sample size is too small to get any clear indication.

Speaker Change: Our next 10 to 15 restaurants will be outside of California, which should normalize our same-store sales ratio in the future.

Tom Carrow: We are also constantly evaluating our menu options and introducing new items to keep the experience fresh for new customers while ensuring we remain on top of broader consumer trends. We recently introduced our premium menu; for example, it has created single-digit sales comp improvements at several of our restaurants. We'll continue to look for further opportunities to drive customer interest while also improving our financial performance. Turning to expenses, cost of goods sold as a percentage of company restaurants sailed increased year-over-year by 110 basis points to 32.9%, largely due to slightly higher food costs associated with the implementation and integration of our premium menu.

Speaker Change: We are also constantly evaluating our menu options and introducing new items to keep the experience fresh for new customers while ensuring we remain on top of broader consumer trends.

Thomas V. Croal: We recently introduced our premium menu, for example, which has created single-digit sales comp improvements at several of our restaurants. We'll continue to look for further opportunities to drive customer interest while also improving our financial performance. FASTA gets sold as a percentage of company restaurant sales increased year over year by 110 basis points to 32.9%, largely due to slightly higher food costs associated with the implementation and integration of our premium menu.

Speaker Change: We recently introduced our premium menu, for example, has created single-digit sales comp improvements at several of our restaurants.

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

Speaker Change: Turning to Expenses.

Speaker Change: Cost of goods sold as a percentage of company restaurant sales increased year over year by 110 basis points to 32.9 percent, largely due to slightly higher food costs associated with the implementation and integration of our premium menu.

Tom Carrow: Cost of goods sold declined 50 basis points on a sequential basis compared to the first quarter of 2024. Payroll and benefits as a percentage of company restaurant sales decreased 40 basis points year-over-year and decreased 140 basis points sequentially to 30.4%. Occupancy expenses as a percentage of company restaurant sales increased by 20 basis points year-over-year to 8.1% because of new restaurant openings over the last 12 months. On a sequential basis, occupancy expenses as a percentage of restaurant sales declined by 20 basis points from the first quarter to the second quarter. Other operating expenses as a percentage of company restaurant sales increased 60 basis points year-over-year to 9.9%.

Thomas V. Croal: Cost of goods sold declined 50 basis points on a sequential basis compared to the first quarter of 2024. Payroll and benefits as a percentage of company restaurant sales decreased 40 basis points year over year and decreased 140 basis points sequentially to 30.4%. Occupancy expenses as a percentage of company restaurant sales increased by 20 basis points year over year to 8.1% because of new restaurant openings over the last 12 months. On a sequential basis, occupancy expenses as a percentage of restaurant sales declined by 20 basis points from the first quarter to the second quarter.

Speaker Change: Cost of goods sold declined 50 basis points on a sequential basis compared to the first quarter of 2024.

Speaker Change: Payroll and benefits as a percentage of company restaurant sales decreased 40 basis points year-over-year and decreased 140 basis points sequentially to 30.4 percent.

Speaker Change: Occupancy expenses as a percentage of company restaurant sales increased by 20 basis points year-over-year to 8.1 percent because of new restaurant openings over the last 12 months.

Speaker Change: On a sequential basis, occupancy expenses as a percentage of restaurant sales declined by 20 basis points from the first quarter to the second quarter.

Thomas V. Croal: Other operating expenses as a percentage of company restaurant sales increased 60 basis points year-over-year to 9.9%, but decreased by 10 basis points from the first quarter of 2024. Overall, we are tightly managing our costs throughout the organization and pleased with our sequential decreases across the board. Adjusted restaurant level EBITDA as a percentage of total revenue was 19% for the quarter compared to 20.4% in the second quarter of 2023. The year-over-year decline was primarily due to the previously mentioned increase in cost.

Tom Carrow: but decreased by ten basis points from the first quarter of 2024. Overall, we are tightly managing our costs throughout the organization and pleased with our sequential decreases across the board. Adjusted restaurant level EBITDA as a percentage of total revenue was 19% for the quarter, compared to 20.4% in the second quarter of 2023. The year-over-year decline was primarily due to the previously mentioned increase in costs. Most importantly, though, I'd like to highlight that adjusted restaurant level EBITDA improved sequentially by 240 basis points compared to the quarter of 2024 as we continue to focus on this metric through operational efficiencies.

Speaker Change: but decreased by 10 basis points from the first quarter of 2024.

Speaker Change: Overall, we are tightly managing our costs throughout the organization and pleased with our sequential decreases across the board.

Speaker Change: Adjusted restaurant level EBITDA as a percentage of total revenue was 19% for the quarter compared to 20.4% in the second quarter of 2023.

Thomas V. Croal: Most importantly, though, I'd like to highlight that adjusted restaurant-level EBITDA improved sequentially by 240 basis points compared to the first quarter of 2024 as we continue to focus on this metric through operational efficiency. GNA during the second quarter was approximately $4.3 million, or 8% of revenue, excluding stock-based compensation, which is consistent with our first quarter 2024 results. The year-over-year increase in GNA is largely due to the addition of new personnel needed for new restaurant development, along with public company costs, which weren't present in the second quarter of 2023 because we were a private company.

Tom Carrow: GNA during the second quarter was approximately 4.3 million for 8% of revenue, excluding stock-based compensation, which is consistent with our first quarter of 2024 results. The year-over-year increase in GNA is largely due to the addition of new personnel needed for new restaurant development, along with public company costs which weren't present in the second quarter of 2023 because we were a private company.

Speaker Change: The year-over-year increase in GNA is largely due to the addition of new personnel needed for new restaurant development, along with public company costs, which weren't present in the second quarter of 2023 because we were a private company.

Thomas V. Croal: Since we went public in June of 2023, our third quarter of 2024 will be the first quarter that is comparable on a year-over-year basis. Adjusted EBITDA was $4.9 million net of pre-opening costs, compared to $6.3 million for the second quarter of 2023. While adjusted EBITDA decreased year-over-year, primarily due to increases in GNA that I just mentioned, our second quarter adjusted EBITDA came in higher than indicated by us. Without pre-opening costs, adjusted EBITDA would be approximately $6.5 million. Our net income was $2.1 million compared to net income of $4.5 million in the second quarter of 2023. This decline is driven by the same factors I mentioned earlier, primarily due to increased GNA.

Tom Carrow: Since we went public in June of 2023, our third quarter of 2024 will be the first quarter that is comparable on a year-over-year basis. Adjusted EBITDA was 4.9 million net of pre-opening costs compared to 6.3 million for the second quarter of 2023. While adjusted EBITDA decreased year-over-year, primarily due to increases in GNA that I just mentioned, our second quarter of adjusted EBITDA came in higher than indicated by estimates. Without pre-opening costs, adjusted EBITDA would be approximately 6.5 million. Our net income was 2.1 million compared to net income of 4.5 million in the second quarter of 2023.

Speaker Change: Since we went public in June of 2023, our third quarter of 2024 will be the first quarter that is comparable on a year-over-year basis.

Speaker Change: While adjusted EBITDA decreased year-over-year primarily due to increases in GNA that I just mentioned.

Speaker Change: Our second quarter adjusted EBITDA came in higher than indicated by estimates.

Speaker Change: Without pre-opening costs, adjusted EBITDA would be approximately $6.5 million.

Speaker Change: Our net income was $2.1 million compared to net income of $4.5 million in the second quarter of 2023. This decline is driven by the same factors I mentioned earlier, primarily due to increased GNA.

Tom Carrow: This decline is driven by the same factors I mentioned earlier, primarily due to increased GNA. Turning to liquidity, as of June 30th, we had 29.2 million in cash and cash equivalence, and we carried no long-term debt except for 5 million in government-funded EIDL loans, which we had when we went public. We also have 20 million dollars available in our revolving line of credit. Although we incurred 8.4 million of development costs, and additionally paid $3 million for the purchase of the remaining ownership of our Hawaii business during the first six months of the year, for a total of $11.4 million spent, our cash only decreased by 3.4 million from 32.6 million at December 31st to 29.2 million at June 30th.

Thomas V. Croal: Turning to liquidity, as of June 30th, we had $29.2 million in cash and cash equivalents, and we carried no long-term debt except for $5 million in government-funded EIDL loans which we had when we went public. We also have $20 million available in our revolving line of credit. Although we incurred $8.4 million in development costs and additionally paid $3 million for the purchase of the remaining ownership of our Hawaii business during the first six months of the year, for a total of $11.4 million spent, our cash only decreased by $3.4 million from $32.6 million at December 31st to $29.2 million at June 30th.

Speaker Change: Turning to liquidity, as of June 30th, we had $29.2 million in cash and cash equivalents and we carried no long-term debt except for $5 million in government-funded EIDL loans, which we had when we went public.

Speaker Change: We also have $20 million dollars available in our revolving line of credit.

Speaker Change: Although we incurred $8.4 million of development costs and additionally paid $3 million for the purchase of the remaining ownership of our Hawaii business during the first six months of the year, for a total of $11.4 million spent,

Speaker Change: Our cash only decreased by $3.4 million from $32.6 million at December 31st to $29.2 million at June 30th.

Tom Carrow: Our cash flow has been so strong that we've been able to internally finance almost all of our development without having to use cash or debt. Since we went public in 2023, we have funded 21 million in development costs without depleting our cash balance or incurring any debt. As I've said before, I'd like to restate that GEN continues to generate strong free cash flow.

Thomas V. Croal: Our cash flow has been so strong that we've been able to internally finance almost all of our development without having to use cash or debt. Since we went public in 2023, we have funded $21 million in development costs without depleting our cash balance or incurring any debt. As I've said before, I'd like to restate that GEN continues to generate strong free cash flow, a trend we anticipate continuing throughout the remainder of the year. This concludes our prepared remarks. We'd like to thank you again for joining us on this call today, and we are now happy to answer any questions you may have. Operator, please open the line for questions.

Speaker Change: Our cash flow has been so strong that we've been able to internally finance almost all of our development without having to use cash or debt.

Speaker Change: Since we went public in 2023, we have funded 21 million in development costs without depleting our cash balance or incurring any debt.

Speaker Change: As I've said before, I'd like to restate that GEN continues to generate strong, free cash flow, a trend we anticipate continuing throughout the remainder of the year.

Tom Carrow: A trend we anticipate continuing throughout the remainder of the year.

Tom Carrow: This concludes our prepared remarks.

Tom Carrow: We'd like to thank you again for joining us on this call today, and we are now happy to answer any questions you may have.

Speaker Change: This concludes our prepared remarks.

Speaker Change: We'd like to thank you again for joining us on this call today, and we are now happy to answer any questions you may have. Operator, please open the line for questions.

Operator: Operator, please open the line for questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeremy Hamblin of Craig Hallam Capital Group. Please proceed.

Speaker Change: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator: A confirmation telephone will indicate your line is in the question queue. You may press star two to remove your question from the queue, and for a participant using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: you may press star 2 to remove your question from the queue.

Speaker Change: and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeremy Hamblin with Craig Hallam Capital Group. Please proceed. Thank you. Thank you.

Jeremy Hamblin: Our first question is from Jeremy Hamblin with Craig Hallum Capital Group. Please proceed. Thanks, Jeremy.

Jeremy Scott Hamblin: Thanks and congratulations, congratulations on the strong profitability here. I wanted to just ask a little bit deeper on the same store sales trends. And you know, a little bit of a softening here that you're seeing. Can you give us a sense for the cadence of same store sales trends during the quarter and then you know how things have started off here to start Q3?

Jeremy Hamblin: Jeremy. Congrats on the strong profitability here. I wanted to just ask a little bit deeper on the same-store sales trends and a little bit of a softening here that you're seeing.

Jeremy Hamblin: Thanks, and congrats.

Jeremy Hamblin: Congrats on the strong profitability here. I wanted to just ask a little bit deeper on the same source sales trends.

Jeremy Hamblin: and you know a little bit of a softening here that you're seeing. Can you give us a sense for the cadence of same store sales trends during the quarter and then you know how things have started off here to start Q3?

Jeremy Hamblin: Can you give us a sense for the cadence of same-store sales trends during the quarter and then how things have started off here to start Q3?

David Kim: Okay, so you're talking about after the quarter due and 30th, right? Yeah, just to clarify, get a sense for during the second quarter which months were your strongest and kind of the magnitude of that, and then how things have started out here in July? So April started off pretty strong, and then it started to dig deeper down. July has not started strong; it's tapered down. But I want to reiterate our position of negative come. Right now we don't have enough sample sizes. We are concentrated close to 50% in one region, which is California, and the rest is spread out.

Speaker Change: We'll see you next time.

Wook Jin Kim: Okay, so... So you're talking about after the quarter on June 30th, right?

Speaker Change: Okay, so...

Speaker Change: So you're talking about after the quarter June 30th, right?

Jeremy Scott Hamblin: Um, yeah, just to clarify, you know, get a sense for during the second quarter which months were your strongest and kind of the magnitude of that. And then, you know, how things have started out here in July.

Speaker Change: Yeah, just to clarify, you know, get a sense for during the second quarter, you know, which months were your strongest and kind of the magnitude of that and then, you know, how things have started out here in July .

Wook Jin Kim: So April started off pretty strong, and then it started to taper down. July has not started strong; it's tapered down, to reiterate our position of negative content. Right now, we don't have enough sample sizes.

Speaker Change: So April started off pretty strong and then it started to pick deeper down. July has not started strong, it's deeper down, but I want to

Speaker Change: reiterate our position of negative comp.

Speaker Change: Right now, we don't have enough sample sizes. We are concentrated close to 50% in one region, which is California, and the rest is spread out.

Wook Jin Kim: We are concentrated close to 50% in one region, which is California, and the rest is spread out. The subsequent openings that we have going forward for the next two years are probably all outside of California, maybe one store in San Diego coming up. So what does that mean?

David Kim: The subsequent openings that we have going forward for the next two years is probably all outside of California, maybe one store in San Diego coming up.

Speaker Change: The subsequent openings that we have going forward for the next two years is probably all outside of California, maybe one store in San Diego coming up.

David Kim: So what does that mean? California is probably the most that's impacted in terms of sales. But in our case, it's not all restaurants that are all negative. We have positive ones and negative ones. But when we started to go into a lot of details, five of the restaurants which were there are stores that open three to four stores in your immediate neighbor or in the immediate area. By default, each new competitor is going to chip away sales in small increments. So just by default, if one opens up, we'll probably lose 3 to 5%, and they add up.

Wook Jin Kim: California is probably the most impacted in terms of sales. But in our case, it's not all restaurants that are all negative. We have positive ones and negative ones.

Speaker Change: So what does that mean? California is probably the most that's impacted in terms of sales, but in our case it's not all restaurants that are all negative. We have positive ones and negative ones.

Wook Jin Kim: But when we started to go into a lot of details, five of the restaurants, which were high-volume restaurants, were impacted a lot due to competition. When there are stores that open three to four stores in your immediate neighborhood or immediate area, by default, each new competitor is going to chip away sales in small increments. So, just by default.

Speaker Change: But when we started to go into a lot of details, five of the restaurants, which were high-volume restaurants, were impacted a lot due to competition.

Speaker Change: When there are stores that open, three to four stores, in your immediate neighbor or immediate area,

Speaker Change: By default, each new competitor is going to chip away

Speaker Change: sales in small increments.

Wook Jin Kim: If one opens up, we'll probably lose 3 to 5%, and, you know, they add up. So at this time, as a company, we're not too concerned about the negative comps because it's not an evenly spread out issue here. So as we open up more restaurants, when we get closer to the 80 or 100 restaurants, we'll have a better view of what the negative or the positive comps are. And I'd like to reiterate again, another subject here is, as a company, as a philosophy, it is not going to change. We're going to continuously make profits; we're going to continuously use the cash flow to grow.

Speaker Change: [inaudible]

David Kim: So, at this time, as a company, we're not too concerned about the negative comms because it's not an even spread-out issue here. So as we open up more restaurants and we get to closer to the 80 or 100 restaurants, we'll have a better view of what the negative or positive comms are.

Speaker Change: issue here. So as we open up more of this, we'll have a better view of what the negative or positive comps are.

David Kim: And I like to reiterate again, another subject here is, as a company, as a philosophy, it is not going to change. We're going to continuously make profits. We're going to continuously use the casual to grow. And our concept is to take off and return our internal rate of return to try to achieve between two and a half years. And that model will not change. And we'll continue that process here. So yes, we are concerned about the softening of consumers, you know, behaviors. But we're dealing with those issues with combating with new product and new drinks.

Speaker Change: And I'd like to reiterate again, another subject here is, as a company, as a philosophy, it is not going to change. We're going to continuously make profits. We're going to continuously use the cash flow to grow.

Wook Jin Kim: And, And our concept is to take off and return our internal rate of return to try to achieve between two and two-and-a-half years. And that model will not change, and we'll continue that process here. So yes, we are concerned about the softening of consumers' behaviors, but we're dealing with those issues by combating them with new products and new drinks, and there are some other things that we're doing now that we haven't really pulled on the street yet. We are not going to announce them until we actually test them and see what the results are.

Speaker Change: Our concept is to take off and return our internal rate of return

Speaker Change: to try to achieve between two and two-and-a-half years.

Speaker Change: And that model will not change. It will continue that process here.

Speaker Change: So, yes, we are concerned about the softening of consumers' behaviors.

Speaker Change: But we're dealing with those issues with combating with new product and new drinks. And there's some other things that we're doing now that we haven't really pulled the street yet. We are not going to announce it until we actually test it and see what the results are.

David Kim: And there's some other things that we're doing now that we haven't really pulled the street yet. We are not going to announce it until we actually test it and see what the results are.

Jeremy Hamblin: Great, helpful color. I also wanted to ask about one of those new things. In terms of your premium menu, which I think in June you launched across your chain, what is the attachment rate? What is the portion of your orders that are coming from the premium menu or kind of that $20 upsell that you're getting in your restaurants? And how is that performing, let's say in larger markets, you know, versus, let's say, smaller or lower income markets? Is there any notable difference? We haven't seen notable difference in certain markets other than we have restaurants that are, it makes up two percent more in sales.

Jeremy Scott Hamblin: Great, helpful caller. I also wanted to ask about one of those new things in terms of your premium menu, which I think you launched across your chain in June. What is the attachment rate? What is the portion of your orders that are coming from the premium menu or kind of that $20 upsell that you're getting in your restaurants? And how is that performing, let's say in larger markets versus, let's say smaller or lower income markets? Is there any notable difference?

Speaker Change: Great, helpful caller. I also wanted to ask about one of those new things in terms of your the premium menu.

Speaker Change: Which I think in June you launched across your chain

Speaker Change: What is the attachment rate? What is the, you know, the portion of your orders?

Speaker Change: that are coming from the premium menu or kind of that $20 upsell.

Speaker Change: that you're getting in your restaurants. And how is that performing, let's say, in larger markets, you know, versus, let's say, smaller or lower income markets? Is there any notable difference?

Wook Jin Kim: We haven't seen a noticeable difference in certain markets, other than we have restaurants that are, it makes up 2% more in sales. Some stores make up 10%. It's very inconsistent right now.

Speaker Change: We haven't seen notable difference in certain markets other than

Speaker Change: We have restaurants that are...

David Kim: Some stores make up 10 percent. It's very inconsistent right now. But one of the consistencies, again, we just only saw it in one restaurant where we'll find out more when we opened the other one next month, is the practice of upselling. As a company's culture, we were so focused on turning tables. We did not have a product line to train our staff to suggest these different higher price products. So when we introduced and rolled out these higher price products, we had a little issue with our staff actually falling through the upselling process because they weren't used to it.

Speaker Change: It makes up 2% more in sales. Some stores make up 10%.

Wook Jin Kim: But one of the consistent tenets, again, we just only saw it in one restaurant. We'll find out more when we open the other one next month, is the practice of upselling. The company's culture, we were so focused on turning tables, we did not have a product line to train our staff to suggest these different higher-priced products. So when we introduced and rolled out these higher-priced products, we had a little issue with our staff actually following through the upselling process because they weren't used to it.

Speaker Change: very inconsistent right now. But one of the consistencies, again, we just only saw it in one restaurant. We'll find out more when we open the other one next month, is...

Speaker Change: the practice of upselling.

Speaker Change: As a company's culture, we were so

Speaker Change: focused on turning tables, we did not have a product line to train our staff to suggest these different higher price products.

Speaker Change: So when we introduce and roll out these higher priced products, we had a little issue with our staff actually following through the

David Kim: So we are still going through that process now. We're nowhere close to executing that practice, but the ones that have came on board and followed our process to upsell and train staff and see on top of staff, they actually are showing better results. Therefore, we are putting a lot of focus these days on training our staff to do more upselling of these new higher-end products.

Wook Jin Kim: So we are still going through that process now. We're nowhere close to executing that practice, but the ones that have come on board and followed our process to upsell and train staff and stay on top of staff are actually showing better results. Therefore, we are putting a lot of focus these days on training our staff to do more upselling of these new higher-end products.

Speaker Change: upselling process because they weren't used to it.

Speaker Change: So we are still going through that process now. We're nowhere close to executing that practice, but the ones that have...

Speaker Change: came on board and followed our process to upsell and train staff and stay on top of staff.

Speaker Change: they actually are showing better results. Therefore, we are putting a lot of focus these days on training our staff to do more upselling of these new higher-end products.

Jeremy Hamblin: Great. And then last one just related to the premium menu. I noticed that your cost a good sold sequentially improved in Q2 versus Q1, but a bit more degradation to the food cost margin in Q2, which you noted was related to that the uptake in the premium menu. I would imagine that maybe there's some on a go-forward basis, some scale advantages, you know, related to lowering that out to the entire chain. But in terms of thinking about food cost, you know, going forward here for the remainder of the year, is that something where, you know, I feel like that's kind of settled into a more targeted area in terms of your margin profile.

Jeremy Scott Hamblin: Great. And then last one is just related to the premium menu. I noticed that your cost of goods sold sequentially improved in Q2 versus Q1, but there was a bit more degradation to the food cost margin in Q2, which you noted was related to that, the uptake in the premium menu. I would imagine that maybe there are some, on a go-forward basis, some scale advantages related to rolling that out to the entire chain. But in terms of thinking about food cost going forward here for the remainder of the year, is that something where you feel like that's kind of settled into a more targeted area in terms of your margin profile? Do you feel like the premium menu pricing is at the right price point, or is there any potential for experimentation around that?

Speaker Change: Great, and then last one just related to the the premium menu. I noticed that you know your cost of goods sold sequentially improved in Q2 versus Q1.

Speaker Change: But a bit more, you know, degradation to the food cost margin in Q2, which you noted was related to that.

Speaker Change: you know, the kind of the uptake in the premium menu.

Speaker Change: I would imagine that maybe there's some, on a go-forward basis, some scale advantages.

Speaker Change: you know, related to rolling that out to the entire chain. But in terms of thinking about food cost, you know, going forward here for the remainder of the year, is that something where, you know, you feel like that's kind of settled into.

Speaker Change: a more targeted area in terms of your margin profile? Do you feel like the premium menu pricing is at the right price point? Or is there any potential for experimentation around that?

David Kim: Do you feel like the premium menu pricing is at the right price point, or is there any potential for experimentation around that? We think there is more room for experimental around that at this point. It is still not very clear because of the inconsistency throughout the restaurant. So when we get more consistency, we can kind of find that. We don't see any uptake in food cost in the future at this point. So yes, quarter to quarter we've been improving, but we still have some areas to improve if we compare to last year. So we're still experimenting in some areas right now.

Wook Jin Kim: We think there is more room for experimentation around that at this point. It is still not very clear because of the inconsistency throughout the restaurant. So when we get more consistency, we can kind of find that. We don't see any uptick in food costs in the future at this point. So yes, quarter to quarter, we've been improving, but we still have some areas to improve if we compare them to last year. So we're still experimenting in some areas right now.

Speaker Change: We think there is more room for experimental around that at this point.

Speaker Change: It is still not very clear because of the inconsistencies throughout the restaurant. So when we get more consistencies, we can kind of find that. We don't see any...

Speaker Change: uptick in food costs in the future at this point.

Speaker Change: So yes, quarter to quarter we've been improving, but we still have some areas to improve if we compare it to last year. So we're still experimenting in some areas right now.

Jeremy Hamblin: Great. Thanks for taking the questions. I'll hop out of the queue. Thanks.

Jeremy Scott Hamblin: Great. Thanks for taking the questions. I'll hop out of the queue. Thanks. Thanks, Jeremy.

Speaker Change: Great. Thanks for taking the questions. I'll hop out of the queue.

David Kim: Thanks, Jeremy.

Operator: Our next question is from Todd Brooks with The Benchmark Company. Please proceed.

Todd Brooks: Our next question is from Todd Brooks with the Benchmark Company. Please proceed.

Speaker Change: Thanks. Thanks, Jeremy. Our next question is from Todd Brooks with The Benchmark Company. Please proceed.

Todd Brooks: Hey, thanks.

Todd Morrison Brooks: Hey, thanks. Good afternoon, gentlemen. Bye Todd.

Todd Brooks: Good afternoon, gentlemen. If we can start on, and you rightly made the point that X1 data point, you guys really outstripped consensus expectations for the quarter. I wanted to dig in on, with the same store sales performance coming in down in that 5.6 range. How well are the non-California markets performing to plan to allow you to deliver the revenue upside that you did? Your question pertaining to the existing stores that have been one year-over-year comparison or the brand new stores we just opened. I'm talking about the total base, David. So I know that the comp base is largely California located, but I know that the total sales result was substantially above what people were looking for in estimates.

Todd Morrison Brooks: Hey, thanks. Good afternoon, gentlemen.

Operator: Peace. If we can start on, and you rightfully made the point that X1 data point, you guys really outstripped consensus expectations for the quarter. I want to dig in on, With the same store sales performance coming in down in that 5.6 range, how well are the non-California markets performing to plan to allow you to deliver the revenue upside.

Claude: Hi Claude. Hi.

Todd Morrison Brooks: If we can start on...

Todd Morrison Brooks: And you rightfully made the point that X1 data point, you guys really outstripped consensus expectations for the quarter. I want to dig in on

Speaker Change: With the same-store sales performance coming in down in that 5.6 range,

Speaker Change: How well are the non-California markets?

Speaker Change: performing to plan to allow you to deliver the revenue upside that you did.

Todd Morrison Brooks: Is your question pertaining to existing stores that have the same one year year over year over year?

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

Todd Morrison Brooks: Really, I'm talking about the total base, David, so I know that the comp base is largely... California located. But I know that the total sales result was substantially above what people were looking for in estimates. So you more than offset the kind of greater than expected comp weakness would have to be strong performance in the stores that aren't in the same store sales base.

Speaker Change: Really, I'm talking about the total base, David, so I know that the comp base is largely...

Speaker Change: California located. But I know that the total sales result was

David Kim: So you more than offset the kind of greater than expected comp weakness would what has to be strong performance in the stores that aren't in the same store sales base yet. Yeah, Todd, that's right. We've done very well at our new restaurant set of opened up during the last year. Of course, everyone is a little bit different, but overall, as a group, they're above expectations. And that directly is impacting our ability to beat the numbers.

Wook Jin Kim: substantially above what people were looking for in estimates so you more than offset

Speaker Change: the kind of greater than expected comp weakness would what has to be strong performance in the stores that aren't in the same store sales base yet.

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

Speaker Change: Yeah, Todd, that's right. We've done very well at our new restaurants that have opened up during the last year.

Speaker Change: and you know of course everyone is a little bit different but overall there as a group they're above expectations and that directly is impacting our ability to beat the numbers.

Tom Carrow: Okay, great. Thanks, Tom.

Todd Morrison Brooks: Okay, great. Thanks, Tom. A second question, if we, If we think about the impressive kind of lift in margins that you saw getting back to that 19% level, in Q2, it sounds like from the quarter to date, qualitative commentary that you gave, David, that we haven't, we've seen a little bit more of a degradation in same-store sales performance, but how sturdy should that margin be in the second half, knowing that you guys are working diligently on the cost side of the equation?

Todd Brooks: And then a second question. If we think about the impressive kind of lift in margins that you saw getting back to that 19% level in Q2, it sounds like from the quarter-to-date qualitative commentary that you gave, David, that we haven't, we've seen a little bit more of a degradation in the same store sales performance. But how, how sturdy should that margin be in the second half, knowing that you guys are working diligently on the cost side of the equation? Our target is still 20% for a wall. And we are marching towards that. That now is we get closer, and we're getting very in detail looking at every aspect of this.

Todd: Okay, great. Thanks, Tom.

Speaker Change: A second question, if we

Speaker Change: If we think about the impressive kind of lift in margins that you saw getting back to that 19% level in Q2, it sounds like from the quarter to date

Speaker Change: qualitative commentary that you gave David that we haven't we've we've seen a little bit more of a degradation in same store sales performance but how how sturdy should that margin be in the second half knowing that that you guys are working diligently on the cost side of the equation?

Wook Jin Kim: Our target is still 20% for a wall, and we are marching towards that. Now, as we get closer and we're getting very detail, looking at every aspect of this, it's not, it's harder to, you know, gain a percentage, but we think we can get there, okay? Can we get to 22%? No, but can we get to 20%? We're very close.

Speaker Change: Our target is still 20% for a wall.

Speaker Change: and we are marching towards that.

Speaker Change: Now as we get closer and we're getting...

Speaker Change: very in detail looking at every aspect of this.

David Kim: It's not; it's harder to, you know, gain a percentage, but we think we can get there. Okay, can we get to 22%? No, but can we get to 20%? We're very close.

Speaker Change: it's not it's harder to you know gain a percentage but we think we can get there okay can we get to 22% no but can we get to 20% we're very close

David Kim: Okay, great. And on a file one for me, it looks like you found sources of labor efficiency during the course of the quarter. Gen is a growth company. You need bodies to help fuel that growth. I guess where have you found efficiencies that you extracted on the labor line? And how sturdy are those going forward as you continue to grow? Thanks. Okay, so two ways there's always areas to improve. Okay, because you know, we are focused in the day-to-day operations. But besides that, as we grow outside of California, California be the most expensive state for labor.

Todd Morrison Brooks: Okay, great. And then the final one for me, it looks like you found sources of labor efficiency during the course of the quarter. GEN is a growth company. You need bodies to help fuel that growth. I guess, where have you found efficiencies that you've extracted on the labor line? And how sturdy are those going forward as you continue to grow?

Speaker Change: Okay, great. And then the final one for me, it looks like you found...

Speaker Change: sources of labor efficiency.

Speaker Change: during the course of the quarter. GEN is a growth company. You need bodies to help fuel that growth. I guess, where have you found efficiencies that you've extracted on the labor line?

Speaker Change: and how sturdy are those going forward as you continue to grow. Thanks.

Wook Jin Kim: Okay, so two ways. There's always areas to improve, okay? Because, you know, we are not focused on the day-to-day operations. But besides that, as we grow outside of California, California being the most expensive state for labor, as we open more restaurants outside, and the ones that we have already opened are coming in line to compare, the labor costs will, by default, go down because other states are lower than Southern California. So when the Southern California, let's say, store becomes a 25% of the overall company, not 50%, our labor costs, by default, will go down.

Speaker Change: Okay, so two ways. There's always areas to improve, okay, because, you know, we are not focused in the day-to-day operations. But besides that, as we

Speaker Change: grew outside of California, California being the most expensive state for labor.

David Kim: As we open more restaurants outside, and the ones that were the open are coming in line to compare, the labor cost will by default go down because other states are lowered in Southern California. So when we, when the Southern California, let's say store becomes a 25% of the overall company, not 50%, are labor cost by default will get better.

Speaker Change: As we open more restaurants outside and the ones that we already opened are coming in line to compare, the labor costs will by default go down because other states are lower than Southern California.

Speaker Change: So, when the Southern California, let's say, store becomes 25% of the overall company, not 50%, our labor costs by default will get better.

David Kim: Okay, great. Thanks for the color, David.

Todd Morrison Brooks: Okay, great. Thanks for the call, David.

Speaker Change: Okay, great. Thanks for the call, David.

George Kelly: Our next question is from George Kelly with Roth MKM. Please proceed. Hi. Thanks, everybody, for taking my question.

Operator: Our next question is from George Kelly with Ross MKM. Please proceed.

Speaker Change: Our next question is from George Kelly with Ross MKM. Please proceed.

George Arthur Kelly: Thanks, everybody, for taking my questions. Hi George. Hi David. So maybe to follow up on that last question, David, if you could, I'm curious as you open restaurants outside of California or really focus outside of California, like could you highlight the different sort of unit level economic profile? What do you expect? One of these new restaurants in a place that you're more focused on now, be it Florida or Texas, versus one of your legacy California restaurants? How does that unit economic profile differ?

George Arthur Kelly: Hi. Thanks, everybody, for taking my questions.

David Kim: Hi, David. So maybe to follow up on that last question, David, if you could, I'm curious as you open restaurants outside of California. You're really focused outside of California; could you highlight the different sort of unit level economic profile? What do you expect? One of these new restaurants in a place that you're more focused now be at Florida or Texas versus one of your legacy California restaurants. How does that unit economic profile differ? We were looking at that too, intently, but actually, we have low volume stores in, let's say Florida, but the low volume stores that we were talking about last year, they all came up in sales in Canada, so we were saying, well, maybe outside of California is taking a little longer to get the sales up because it's less known, but some areas like in Texas, we opened and sales are very high, so there's no like specific areas where we can pinpoint is good and bad. Seattle, Mendis amount of sales that we're doing didn't expect that, so it's all over the map right now, so we're maybe looking at to see is it site selection that we have, okay, that we have an issue on the low volume versus the high volume. Our criteria hasn't changed, so again, not enough sampling right now and we are going into some new areas, next and the first quarter of next year, we should start building those out and see how they perform, but it's not consistent.

Wook Jin Kim: Hi George. Hi David.

George Arthur Kelly: So maybe to follow up on that last question, David, if you could, I'm curious, as you open restaurants outside of California or really focus outside of California,

Speaker Change: Like could you highlight the different sort of unit level economic profile like what do you expect?

Speaker Change: One of these new restaurants in a place that you're more focused now, be it Florida or Texas, versus one of your legacy California restaurants, how does that unit economic profile differ?

Wook Jin Kim: We were looking at that too intently, but actually... You know, we have low-volume stores in, let's say, Florida, but the low-volume stores that we were talking about last year all came up in sales again in EBITDA. So we're saying, well, maybe outside of California, it's taking a little longer to get the sales up because it's less known. But in some areas, like in Texas, we opened, and sales are. We're very high. So there's no, like, specific areas where we can pinpoint what's good and bad. Seattle, the tremendous amount of sales that we're doing. I didn't expect that at all.

Wook Jin Kim: We were looking at that too intently, but actually

Speaker Change: You know, we have low-volume stores in, let's say, Florida, but...

Speaker Change: The low-volume storage that we were talking about last year, they all came up in sales, again in EBITDA, so

Speaker Change: We are at worse.

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

Speaker Change: we have very high, so there's no like specific.

Speaker Change: areas where we can pinpoint is good and bad. Seattle, tremendous amount of sales that we're doing. Didn't expect that. So it's it's all over the map right now.

Wook Jin Kim: So it's, it's all over the map, right? So we're maybe looking at to see if it's site selection that we have, okay, that we have an issue with the low volume versus the high volume. Our criteria hasn't changed. So again, not enough sampling right now, but we are going into some new areas. Next, in the first quarter of next year, we should start building those out and seeing how they perform. But it's not consistent.

Speaker Change: So so we're maybe looking at to see is it site selection that we have okay that we have an issue on the low volume versus the high volume.

Speaker Change: Our criteria hasn't changed.

Speaker Change: So, again, not enough sampling right now, and we are going into some new areas.

Speaker Change: In the first quarter of next year, we should start building those out and see how they perform, but it's not consistent.

George Arthur Kelly: Okay, understood. And then next question, still on new openings, so if you're able to execute on that, your updated guidance, call it 10 this year, that gets you still right around 30 shy of where you expect to be the midpoint of your N26 guidance that you just mentioned, the 75 to 80. And so I guess the question is, what is the kind of cadence of openings next year and in 26? I mean, should there be 15 openings next year?

David Kim: Okay, understood, and then next question, still on new openings, so if you're able to execute on that, your updated guidance, call it 10 this year, that gets you still right around 30 shy of where you expect to be, the midpoint of your N26 guidance that you just mentioned, the 75 to 80, and so I guess the question is, what is the kind of cadence of openings next year and in 26? I mean, should it be 15 openings next year? And then the second part of the question is where I'm sure you have a pretty good view right now of your 25 openings at least. Are there geographies where you're expecting to really focus on and densify, and what are those if you don't mind sharing?

Speaker Change: Okay, understood. And then next question, still on new openings.

Speaker Change: So if you're able to execute on that, your updated guidance, call it 10 this year.

Speaker Change: that gets you still right around 30 shy of where you expect to be the midpoint of your N26 guidance that you just mentioned, the 75 to 80.

Speaker Change: And so, I guess the question is,

Speaker Change: What is the the kind of cadence of openings next year and in 26? I mean should it be 15 openings next year? And then the second part of the question is where I'm sure you have a pretty good view right now of your 25 openings at least.

George Arthur Kelly: And then the second part of the question is, I'm sure you have a pretty good view right now of your 25 openings, at least. Are there geographies where you're expecting to really focus on and densify, and what are those, if you don't mind sharing?

Speaker Change: are there geographies where you're expecting to really focus on and densify and and what are those if you don't mind sharing?

David Kim: Sure, to answer the second question, we are opening in areas that we're very strong in, okay, with sales in EBITDA, so we'll continue to grow those areas. So for example, let's say for every for existing markets will open one new existing. We still have to plant the plant something in areas that we're not there yet. But we are going to focus on here. So all these openings are in areas that we are doing well in, and then a small portion of that will be new areas. I think I answered that question.

Wook Jin Kim: Sure, to answer the second question, we are opening in areas that we're very strong in, okay, with sales and EBITDA. So we'll continue to grow those areas. So for example, let's say for every four existing markets, we'll open one new market, okay? Because we still have to plant something in areas that are not there yet. We are going to focus on it. So all these openings are in areas that we are doing well in. And then a small portion of that will be new areas. So I think I've answered that question. What was the first question again? I apologize.

Speaker Change: Sure. To answer the second question,

Speaker Change: We are opening in areas that we're very strong in, okay, with sales and EBITDA. So we'll continue to grow those areas.

Speaker Change: So, for example, let's say for every...

Speaker Change: four existing markets, we'll open one new existing, okay, because we still have to plant the plant something in areas that were not there yet.

Speaker Change: We are going to focus on, so all these openings are in areas that we are doing well in.

Speaker Change: And then a small portion of that will be new areas. So I think I've answered that question. What was the first question again? I apologize, George.

David Kim: Well, it was the first question. Again, I apologize. George, so this year, if you end with just shy of 50 restaurants, that still leaves you like almost 30 for the next two years. And I'm just curious, will it be 15 next year? Like how many openings should we expect next year? I think we'll on the next call when we give our guidance for 2025. We were going to announce 11 or 12. But we have more than what are so like. For example, next quarter, why we are able to let you know that we can open so many stores by the end of the year is because once we start construction and we're in a lot control of the destiny of when these restaurants can open.

George Arthur Kelly: So this year, if you end up with just shy of 50 restaurants, that still leaves you with almost 30 for the next two years, and I'm just curious, will it be 15 next year? Like, how many openings should we expect next year?

George Arthur Kelly: So this year if you end with just shy of 50 restaurants that still leaves you like almost 30 for the next two years and I'm just curious will it be 15 next year like how many openings should we expect next year?

Wook Jin Kim: I think we'll on the next call when we give our guidance for 2025 we were going to announce 11 or 12, but we have more than what we are like, for example, next quarter. Why are we able to let you know that we can open so many stores by the end of the year? Because once we start construction, then we're in a lot of control of the destiny of when these restaurants can open. But up to getting the building permit, we don't have a lot of control because it's controlled by a government agency.

Speaker Change: I think we'll, on the next call, when we give our guidance for 2025, we were going to announce 11 or 12, but we have more than what are, so, like, for example, next quarter.

Speaker Change: Why we are able to let you know that we can open so many stores by the end of the year is because once we start construction,

Speaker Change: and we're in a lot of control of the destiny of when these restaurants are going to open. But up to getting the building permit is where we don't have a lot of control because it's controlled by a government agency.

David Kim: But up to getting the building permit is where we don't have a lot of control because it's controlled by a government agency. Having said that, we were going to announce maybe 11 or 12, but we have a lot more that we are negotiating with landlords than what we are telling the street of 75 to 80. We'll probably do more than that. But right now, that's a number conservative number we're comfortable with as of today. Okay, understood.

Wook Jin Kim: Having said that, we were going to announce maybe 11 or 12, but we have a lot more that we are negotiating with landlords than we are telling the street of 75 to 80. We'll probably do more than that, but right now that's a number, a conservative number we're comfortable with as of today.

Speaker Change: Having said that, we were going to announce maybe 11 or 12, but we have a lot more that we are negotiating with landlords than what we are...

Speaker Change: telling the street of 75 to 80. We'll probably do more than that, but right now that's a number, a conservative number, we're comfortable with as of today.

George Arthur Kelly: Okay, understood. Last question for me is just on your fiscal year 24 guidance. You last quarter gave us revenue and four-wall margin guidance, and I didn't hear any kind of update in your prepared remarks. Just curious if there's any kind of update.

Tom Carrow: The last question for me is just on your fiscal year 24 guidance. You last quarter gave us revenue and four-wall margin guidance. And I didn't hear any kind of update on the in your prepared remarks. Just curious if there's any kind of update. Yeah, I think at this point on the revenue side, we're sticking with our rains that we gave before, probably closer to the higher end of the range. And then on the margin, we said we would be approaching 18% that we're already there, obviously. So we're doing a little bit better. But, as David said, the goal is to get to 20%, and we're working as hard as we can, as fast as we can to get there.

Speaker Change: Okay, understood. Last question for me is just on on your fiscal year 24 guidance.

Speaker Change: you last quarter gave us revenue and four wall margin guidance and I didn't hear any kind of update on the in your prepared remarks just curious if there's any kind of update.

Thomas V. Croal: Yeah, I think at this point on the revenue side, we're sticking with our range that we gave before, probably closer to the higher end of the range. And then on the margin, you know, we said we would be approaching 18%. We're already there, obviously. So we're doing a little bit better, but You know, as David said, the goal is to get to 20%, and we're working as hard as we can, as fast as we can to get there.

George Arthur Kelly: understood. Thanks.

Speaker Change: Yeah, I think at this point on the revenue side we're sticking with our range that we gave before, probably closer to the higher end of the range.

Speaker Change: and then on the margin you know we said we would be approaching 18% we're already there obviously so we're we're doing a little bit better but

Speaker Change: You know as David said the goal is to get to 20% and we're working as hard as we can as fast as we can to get there.

Tom Carrow: Understood.

Tom Carrow: Thanks.

Speaker Change: Understood. Thanks.

David Kim: We have reached the end of our question and answer session. I would like to turn the conference back over to Mr. Kim for closing remarks. Thank you very much for being on this call. We are just very focused in what we do. So yes, there are issues out there, political issues with consumer spending, but we're not deviating from what we said will achieve. So thank you very much for listening and believing. Thank you.

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

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

Wook Jin Kim: Thank you very much for being on this call. We are just very focused on what we do. Yes, there are issues out there, political issues with consumer spending, but we're not deviating from what we said we would achieve. So, thank you very much for listening and believing in us.

Wook Jin Kim: Thank you very much for being on this call. We are just very focused in what we do.

Speaker Change: Yes, there is.

Speaker Change: There are issues out there, political issues with consumer spending, but we're not deviating from what we said we will achieve. So thank you very much for listening and believing in us.

Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Thank you.

Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.