GEN Restaurant Group, Inc. Announces Third Quarter 2024 Financial Results

CERRITOS, Calif., Nov. 12, 2024 (GLOBE NEWSWIRE) -- GEN Restaurant Group, Inc. (“GEN” or the “Company”) (Nasdaq: GENK), owner of GEN Korean BBQ, a fast-growing casual dining concept with an extensive menu and signature “grill at your table” experience, is announcing financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Financial and Recent Operational Highlights

• Opened one new location during the third quarter and two more locations in October 2024.
• Launched GEN Korean BBQ gift cards at participating Costco locations, which are within five miles of most of the Company’s regions across the U.S.
• Total revenue increased 7.8% to $49.1 million compared to the third quarter of 2023.
• Maintained restaurant-level adjusted EBITDA(1) margin above 18% of revenue.
• Adjusted EBITDA(1) was $3.4 million and 7.0% of revenue inclusive of pre-opening expense of approximately $1.8 million.
• Net income was $0.2 million or $0.01 per diluted share of Class A common stock.
• Adjusted net income(1) was $0.9 million or $0.03 per diluted share of Class A common stock.
• Cash and cash equivalents at September 30, 2024 was $22.1 million.
• The Company is maintaining its expectation to open a total of 10 to 11 new locations in 2024.
  

(1)Adjusted EBITDA, restaurant-level adjusted EBITDA, and adjusted net income are non-GAAP measures. For reconciliations of adjusted EBITDA, restaurant-level adjusted EBITDA, and adjusted net income to the most directly comparable GAAP measure see the accompanying financial tables. For definitions and a discussion of why we consider them useful, see “Non-GAAP Measures” below.

Management Commentary

“Our third quarter results reflect GEN's commitment to maintaining robust operational performance as we prepared our organization for a slate of new openings to close out the year,” said David Kim, Co-Chief Executive Officer of GEN. “We delivered an 8% increase year-over-year in total revenue with restaurant-level adjusted EBITDA margin above 18%, reflecting strong performance across our new restaurants. Furthermore, our premium menu is continuing to gain traction as we drive up-selling at the restaurant level. We also launched GEN gift cards at Costco, which have been selling exceptionally well, demonstrating the heightened demand for not only Korean BBQ but also the high-quality value we provide consumers.

“As we approach the end of 2024, our focus remains on executing our growth strategy while providing unparalleled customer value. With the addition of our three most recently opened restaurants, we remain on pace to reach our goal of opening a total of 10 to 11 new locations in 2024 and generating restaurant-level adjusted EBITDA margin of approximately 18%. Backed by over $22 million in cash and cash equivalents, we’re confident we can achieve our expansion and operational goals that will drive sustained growth and profitability, ensuring long-term value creation for our shareholders as we continue to scale GEN Korean BBQ into new markets.”

Third Quarter 2024 Financial Results

Total revenue increased 7.8% to $49.1 million in the third quarter of 2024 compared to $45.6 million in the third quarter of 2023. Comparable restaurant sales decreased 9.6% in the third quarter of 2024 compared to the same period last year.

Total restaurant operating expenses (excluding pre-opening expenses) as a percentage of revenue increased 80 basis points to 85.4% in the third quarter of 2024 from 84.6% in the third quarter of 2023. The year-over-year and quarter-over-quarter changes as a percentage of revenue are primarily driven by the following:

• Cost of goods sold decreased by 50 basis points compared to the third quarter of 2023 and 150 basis points sequentially compared to the second quarter of 2024, largely due to the Company’s focus on controlling food costs.
• Payroll and benefits decreased 120 basis points compared to the third quarter of 2023.
• Occupancy costs increased 10 basis points compared to the third quarter of 2023, largely due to new restaurant openings over the last twelve months.
• Other operating costs increased by 160 basis points compared to the third quarter of 2023.
• Depreciation and amortization increased 80 basis points compared to the third quarter of 2023 and 30 basis points compared to the second quarter of 2024.
• Restaurant pre-opening expenses increased to $1.8 million for the third quarter of 2024 from $0.7 million in the third quarter of 2023 and $1.6 million in the second quarter of 2024 due to a higher number of new restaurant openings in progress compared to the year ago period.

General and administrative expenses increased to $4.5 million, or 9.1% as a percentage of total revenue, excluding non-cash stock compensation expense, for the third quarter of 2024, largely due to additional personnel required for new restaurant development as well as increased insurance costs related to the Company’s growth.

Net income was $0.2 million or $0.01 per diluted share of Class A common stock for the third quarter of 2024 compared to $2.6 million or $0.08 per diluted share of Class A common stock in the third quarter of 2023. The decrease was primarily due to increased expenses for new restaurant development. Adjusted net income, which represents net income plus non-cash stock-based compensation, was $0.9 million or $0.03 per diluted share of Class A common stock for the third quarter of 2024.

Adjusted EBITDA was $3.4 million or 7.0% of revenue, inclusive of pre-opening expense of approximately $1.8 million for the third quarter of 2024, compared to $5.0 million or 11.0% of revenue, inclusive of pre-opening expenses of $0.7 million in the prior year period.

As of September 30, 2024, the Company had $22.1 million in cash and cash equivalents compared to $29.2 million at June 30, 2024, the decline is primarily due to internally financing new restaurant openings, which are continuing to generate positive free cash flow. The Company continues to operate with no long-term debt, aside from approximately $4.4 million in government-funded EIDL loans.

Non-GAAP Measures

Restaurant-level adjusted EBITDA represents income (loss) from operations plus adjustments to add-back the following expenses: depreciation and amortization, pre-opening costs, general and administrative expenses, related party consulting fees, management fees and non-cash lease expense. Management believes that restaurant-level adjusted EBITDA is useful to investors because this measure highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures and enabling investors to more effectively compare the Company’s performance to prior and future periods.

Adjusted EBITDA represents net income (loss) before net interest expense, income taxes, depreciation and amortization, and consulting fees paid to a related party and we also exclude non-recurring items, such as stock-based compensation expense, gain on extinguishment of debt, and Restaurant Revitalization Fund, or RRF, grants, employee retention credits, litigation accruals, aborted deferred IPO costs written off, non-cash lease expenses and non-cash lease expense related to pre-opening costs. Management believes that restaurant-level adjusted EBITDA is useful to investors because this measure highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures and enabling investors to more effectively compare the Company’s performance to prior and future periods.

Adjusted net income represents net income plus non-cash stock-based compensation. Management believes that adjusted net income is useful to investors because this measure highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures and enabling investors to more effectively compare the Company’s performance to prior and future periods.

Conference Call

GEN will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the third quarter ended September 30, 2024.

David Kim, Co-Chief Executive Officer, and Tom Croal, Chief Financial Officer, will host the conference call, followed by a question-and-answer session.

Date: Tuesday, November 12, 2024
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-844-825-9789
International dial-in number: 1-412-317-5180
Conference ID: 10193281

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Group at 949-574-3860.

The conference call will be broadcast live here and available for replay via the investor relations section of the Company’s website at www.genkoreanbbq.com.

A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern Time on the same day through November 19, 2024.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10193281

About GEN Restaurant Group, Inc.

GEN Korean BBQ is one of the largest Asian casual dining restaurant concepts in the United States. Founded in 2011 by two Korean immigrants in Los Angeles, the brand has now grown to 43 company-owned locations where guests serve as their own chefs, preparing meals on embedded grills in the center of each table. The extensive menu consists of traditional Korean and Korean-American food, including high-quality meats, poultry, seafood and mixed vegetables. With its unique culinary experience alongside its modern décor and lively atmosphere, GEN Korean BBQ delivers an engaging and interactive dining experience that appeals to a vast segment of the population. For more information, visit GenKoreanBBQ.com and follow the brand on Facebook and Instagram.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as “believe,” “intend,” “expect”, “will,” “may”, and other similar words or expressions that predict or indicate future events. All statements that are not statements of historical fact are forward-looking statements, including any statements regarding our strategy, future operations, and growth prospects, any statements regarding future economic conditions or performance, any statements of belief or expectation, and any statements of assumptions underlying any of the foregoing or other future events. Forward-looking statements are based on current information available at the time the statements are made and on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Additional factors or events that could cause actual results to differ may also emerge from time to time, and it is not possible for the Company to predict all of them. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and in our subsequent filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

Investor Relations Contact:
Cody Slach and Cody Cree
Gateway Group, Inc.
1-949-574-3860
GENK@gateway-grp.com

Media Relations Contact:
Zach Kadletz and Anna Rutter
Gateway Group, Inc.
1-949-574-3860
GENK@gateway-grp.com

(1) (2)Basic and diluted net income per share of Class A common stock is presented only for the period after the Company’s organization transactions.