Q4 2024 GEN Restaurant Group Inc Earnings Call

Speaker Change: George Kelly, Jeremy Hamblin, Todd Brooks, Thomas Croal, Wook Kim, GEN

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Speaker Change: Good day and welcome to the GEN Restaurant Group, Inc. 4th Quarter and Full Year 2024 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: These forward looking statements are not guarantees of future performance.

Speaker Change: 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.

Speaker Change: We refer you to our recent SEC filings, including our annual report on Form 10-K for a more detailed discussion of the risks that could impact our future operating results and financial position.

Speaker Change: 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.

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

Speaker Change: The presentation of this additional information should not be considered in isolation or as a substitute for results compare prepared in accordance with GAAP.

Speaker Change: Reconciliations of the non-GAAP financial measures.

Speaker Change: 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.

Speaker Change: Now I'd like to turn it over to our chairman and CEO David Joe.

David Joe: Thank you Tom and good afternoon, everyone.

David Joe: To begin the call I wanted to summarize what we promised and delivered on our guidance for 2024.

David Joe: For revenue, we gave a range of $200 million to $205 million for the year.

We finished the year with 208 million in revenue.

David Joe: Our restaurant level EBITDA, we estimated that we would reach 17% to 18% for the year. We ended the year at 17, 7%.

David Joe: For G&A expenses, we estimated total G&A expenses of between 18, and 19 million for the year before noncash stock based compensation.

David Joe: We ended the year at 18.3 million.

David Joe: For new restaurant development.

David Joe: Our goal once the open tender 11 restaurants in 2024, we opened six restaurants during the year have opened three additional restaurants in January of 2025 and are about to open a forced restaurant in this next week.

David Joe: Even though our timing was off by a month or opening new restaurants, we still achieved our overall revenue goals for the year.

David Joe: These one month delays were caused by continued local and state government permits.

David Joe: The restaurants were built and ready to open in December of 2024, but could not due to these permitting issues.

David Joe: Continuing from this summary, we closed out 2024 with a strong fourth quarter as we delivered 21% year over year total revenue growth and 25% year over year growth in total adjusted EBITDA.

David Joe: For the full year I am proud to report we deliberate Oh.

David Joe: Our highest.

David Joe: Annual revenue figure as a public company, while maintaining healthy unit level economics.

David Joe: Primarily driven by the continued success of our new restaurant openings.

David Joe: Hold on revenue for the year increased to 208.4 million exceeding the upper end of our 2024 guidance range.

David Joe: And analysts expectations, even with the three restaurant opening one month late.

David Joe: We also achieved our goal of our restaurant level adjusted EBITDA margin approaching 18%.

David Joe: With total restaurant level adjusted EBITDA of 36.9 million.

David Joe: Additionally.

David Joe: We achieved adjusted EBITDA of $16 7 million.

David Joe: If you exclude preopening cost adjusted EBITDA totaled $22 million.

David Joe: Net income before income tax for the year, It was $4 9 million, which equated to 13.

David Joe: Diluted earnings per share and we delivered $7 4 million and adjusted net income, which equated to 21 of adjusted diluted earnings per share for the year.

David Joe: Looking at our new restaurant development since.

David Joe: Our year end call last year, we opened nine new restaurants.

David Joe: Six of which were opened in 2024 and three since the beginning of 2025, bringing our total restaurant count to 46 locations nationwide.

David Joe: Three stores, we opened in January of 2025 were originally planned to launch in <unk>.

David Joe: December 2024.

David Joe: Additionally.

David Joe: We added a fourth restaurant opening in the next week.

David Joe: Our restaurant development process is strong and is positioned to reach our 2025 target of opening 10 to 13, new restaurants, which does not include the three recent openings that shifted into the new year from 2024.

David Joe: Our current restaurants have maintained steady profitability with new restaurant driving consistent revenue growth in the fourth quarter benefiting as expected from the holiday season with that we delivered full year restaurant level adjusted EBITDA margin of 17, 7%.

David Joe: While our total revenue exceeded our guidance and analysts expectations are of comparable sales same store sales for 2024 were down 5.6 year over year.

David Joe: As we have discussed at length <unk> business model does not rely on comparable restaurant sales growth and primarily revolves.

David Joe: Revolves around the expanding store count to generate a robust average unit level economics.

David Joe: Our new units delivered returns on investment in the 40% range.

David Joe: That being said, we have been proactively working to return to comparable restaurant sales growth through pricing adjustment.

David Joe: Zing training programs additional premium drink options on the menu and our lead is incubator projects.

David Joe: Green quarter, four we began to see impact on our efforts with premium menu sales, increasing and our incubator projects receiving positive feedback as we continue rolling out these initiatives on a limited basis.

David Joe: We also implemented a 3% increase to our menu price, which went into effect across majority of our locations at the end of 2024.

David Joe: We're happy to report that this price increase has not influenced customer traffic in general remains of high quality value dining experience for our customers.

David Joe: We're even more pleased to announce these initiatives have resulted in comparable restaurant sales returned to growth generating positive 1% comp figures in the first two months of 2025.

David Joe: As a sign of confidence in the company's future the board.

David Joe: Of directors have approved a stock buyback program or.

For up to $5 million, while still maintaining our goal.

David Joe: A total of around 75 restaurants by the end of 2026.

David Joe: Transitioning now to our key incubated initiatives.

David Joe: Last quarter, we announced the launch of Gen gift cards at 78 Costco locations.

Within a five mile radius of most of our restaurants across the U S. Thank.

David Joe: The gift cards have been selling exceptionally well with costco's buying department.

David Joe: That we are one of the best selling restaurant gifts cards ever.

David Joe: This is a testament to Jens brand strength and position as a leader in the Permian barbecue.

David Joe: We look forward to expanding this avenue with additional big box retail partners in 2025.

David Joe: Entering this next year.

David Joe: Well positioned to achieve our growth target with 13 leases for new restaurant locations signed or in the process being finalized with an additional 16 leases and negotiations.

David Joe: Additionally, we expect to maintain our restaurant level adjusted EBITDA margin of approximately 18% and to generate.

David Joe: <unk> 45 to 250 million in total revenue for the year.

All of this positions us nicely for our medium term goal around 75 total restaurants by the end of 2026.

David Joe: Growing <unk> footprint is at the heart of our business model and we're excited to finally announce our international expansion in the near future, we will be bringing the gen eight screens to South Korea with at least two location plan for 2025.

David Joe: Overall 2024 marks a year of consistent progress towards our key growth objectives as reflected by exceeding our revenue projections and meeting our restaurant level adjusted EBITDA margin goals for the year.

David Joe: With strong demand for Gen Korean barbecue and our growing brand strength back by our robust balance sheet.

David Joe: We believe we are well positioned to capitalize on our promising pipeline of new restaurants, and achieve our growth targets, both in the United States as well as internationally.

David Joe: Thank you for all your continued support.

David Joe: We're excited for the future are ahead and look forward to delivering sustainable value to our shareholders.

David Joe: Now I'd like to hand, the call over to Tom for a deeper look at our fourth quarter and full year financial performance.

Tom: Thank you David.

Tom: We ended the year with a strong fourth quarter as revenue was up 21% year over year restaurant level adjusted EBITDA was up 29% and total adjusted EBITDA was up 25%.

Tom: For the year over year quarter, all leading to a fantastic year end.

Tom: With that let's dive into the specific financial metrics for the fourth quarter and full year.

Tom: For the fourth quarter revenue increased 21, 2% to $54 7 million compared to $45 1 million in the fourth quarter of 2023.

Tom: For the year ended December 31, 2024 revenues increased 15, 1% to $208 4 million.

Tom: Paired to $181 million in 2023, driven by new restaurant openings.

Tom: Turning to expenses.

Tom: Cost of goods sold as a percentage of company restaurant sales increased by 160 basis points in the fourth quarter of 2024 compared to the fourth quarter of last year.

Tom: For the full year cost of goods sold as a percentage of company restaurant sales increased 80 basis points to 33, 1% compared to the prior year period.

Tom: The increase is largely due to higher store count and our premium menu.

Tom: Payroll and benefits as a percentage of company restaurant sales decreased by 130 basis points in the fourth quarter of 2024% to 38%.

Tom: Compared to the fourth quarter of last year.

Tom: For the full year payroll and benefits as a percentage of company restaurant sales decreased 60 basis points year over year to 39% Aki.

Tom: Occupancy expenses as a percent of company restaurant sales increased by 30 basis points compared to the fourth quarter of last year to eight 6%.

Tom: For the full year occupancy expenses increased by 30 basis points to eight 4% compared to eight 1% in 2023 due to the new restaurant openings over the last 18 months.

Tom: Other operating expenses as a percentage of company restaurant sales decreased 140 basis points to nine 8% compared to 11, 2% in the fourth quarter of last year.

G&A during the fourth quarter.

Tom: Was $5 6 million or 10, 3% of revenue excluding stock based compensation.

Tom: Compared to $4.4 million or nine 7% of revenue in the year ago period.

For the full year G&A, excluding stock based compensation was $18 3 million or eight 8% of revenue.

Tom: Paired with $12 6 million or seven 8% of revenue in 2023, including management fees in 2023.

Tom: The year over year increase in G&A is largely a result of additional personnel hired to support new restaurant development.

Tom: <unk> construction teams.

Regional managers and staff training persons as well as higher costs associated with our first full year of being a public company.

Tom: As a reminder, we expected to incur $18 million to $19 million in G&A. This year and we are pleased to be within the low end of our cost expectations.

Tom: In the fourth quarter, we had a net loss before income taxes of $1 2 billion, which equated to <unk>.

Tom: Four cents per diluted share of class a common stock.

Tom: Paired to a net loss before income taxes of $3 billion, which equated to one cent per diluted share class a common stock in the fourth quarter of 2023.

Tom: In the fourth quarter. The loss was created by pre opening costs of $2 3 million as we opened two restaurants and had four more restaurants ready to open.

Tom: We continuously reinvest our operating cash flows to open additional restaurants without incurring significant debt.

Tom: For the full year net income before taxes was $4 9 million, which equated to 13 cents per diluted share of class a common stock.

Tom: <unk> to net income of 11, 5 billion, which equated to <unk> <unk> per diluted share from stock in 2023.

Tom: Adjusted net income which represents net income.

Tom: Non cash stock based compensation was $7 4 billion.

Tom: Which equated to 21.

Tom: Per diluted share of class a common stock for 2024.

Tom: Restaurant level adjusted EBITDA for the fourth quarter increased 28% to $9 3 million or 17% of total revenue.

Tom: For the full year restaurant level adjusted EBITDA increased 10%.

Tom: The $36 9 million or 17, 7% of total revenue.

Tom: Both figures were in line with our expectations of approaching 18% in 2024.

Tom: Total adjusted EBITDA for the fourth quarter of 2024 increased 25% to $2 1 million compared to one 6 million for the fourth quarter of 2023.

Tom: For 2024 total adjusted EBITDA was $16 7 million compared to $18 8 million for fiscal surely 23.

Tom: This decrease is primarily the result of increased pre opening costs.

Tom: Without preopening costs, adjusted EBITDA would be approximately three 7 million for the fourth quarter and $22 million for the year.

Tom: Shifting to liquidity.

Tom: As of December 31, 2024, we had $23 7 billion in cash and cash equivalents and we carry no material long term debt aside from the approximately $4 3 billion of government funded E. G O loans, which we had when we went public in 2020.

Tom: Great.

Tom: We also had the majority of our $20 billion revolving line of credit available.

Tom: We did borrow 3 million from our line of credit as we prepared for future expansion, but we have since paid that down.

Tom: And our net cash position remains in line with our expectations.

Tom: One thing I would like to note is that we have 148 million and lease obligations on our balance sheet as required by GAAP with the new ASC 842.

Tom: This may show up is that on certain financial platforms due to reporting requirements.

Tom: Please note. This is not dead and is offset by 131 billion of operating lease assets.

Tom: We continue to have a healthy liquidity position.

Tom: Moreover, Gen continues to generate strong free cash flow, which allowed us to self fund approximately $18 billion and new restaurant development cost and an additional 4 million towards the buyout of our G. K P H restaurant.

Tom: We anticipate this trend of substantial self funding to carry throughout our long term expansion plans.

Tom: Lastly, turning to our fiscal 2025 outlook.

Tom: We expect to open a total of 10 to 13 new units in 2025, which does not include the three recent openings that were originally slated for.

Tom: For 2024.

Tom: We also expect to generate total revenue between 245 and $250 million.

Tom: And restaurant level adjusted EBITA margin of 18 plus percent for 2025.

Tom: This concludes our prepared remarks, we'd like to thank you again for joining us on the call today.

And we are now happy to answer any questions that you may have.

Speaker Change: Operator, please open the line for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we'll pause momentarily to assemble our roster.

Speaker Change: Again, if you have a question.

Speaker Change: Please press Star then one.

Speaker Change: This.

Speaker Change: <unk> our question and answer session I would like to turn the conference back over to David Kim for any closing remarks.

Speaker Change: Thank you all again for joining the call as always we welcome the opportunity to speak with any of you.

Speaker Change: At one of our upcoming Investor conferences.

Speaker Change: We'll be attending the 37th annual Roth Conference in Southern California March 17 through the 18th we'd love to need shoe would like neutral there, but if you are not able to connect will speak with you all.

Speaker Change: When we report the first quarter of 2025 in May.

Speaker Change: Thank you.

Speaker Change: Thank you everybody.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.