GEN Restaurant Group Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: In the first half of 2025, the company opened nine new restaurants and is on pace to exceed its target of 12–13 openings, with a 2.3-year payback on new stores funded primarily by cash flow and no material debt.
  • Positive Sentiment: Gen Restaurant launched its first international location in a Seoul suburb, building units at approximately one-third the U.S. cost and aiming to leverage culinary trends back into domestic operations.
  • Negative Sentiment: Same-store sales fell sharply in Q2 due to global tariffs and immigration enforcement impacting its predominantly Hispanic customer base, though sales and costs began to improve in July.
  • Negative Sentiment: Despite a 2.2% increase in revenue to $55 million, Gen reported a $1.8 million net loss before taxes and saw adjusted EBITDA decline amid higher new-store pre-opening expenses and inflationary cost pressures.
  • Positive Sentiment: The company expanded beyond restaurants by selling Gen gift cards at Costco and Sam's Club, launching packaged meats, beef jerky, soju, sauces and frozen products via Sysco, and developing the KAAN sushi concept.
AI Generated. May Contain Errors.
Earnings Conference Call
GEN Restaurant Group Q2 2025
00:00 / 00:00

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Gen Restaurant Group Inc. 2Q twenty twenty five earnings conference call. At this time, all lines are in listen only mode. Following the presentation, we'll conduct a question and answer session. This call is being recorded on Wednesday, 08/06/2025.

Operator

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

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter twenty twenty five earnings release. If not, it can be found at www.jenkoreanbbq.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 securities laws, including but not limited to statements regarding 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 06/30/2025, 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.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

These statements represent our views only as of the date of this call and are 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 annual report on Form 10 ks and our quarterly reports on Form 10 Q for a more detailed discussion of the risks that could impact our future operating results and financial condition. 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. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

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. Now I'd like to turn it over to our Chairman and CEO, David Kim.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Thank you, Tom, and good afternoon, everyone. In the second quarter, our restaurant operations team continued to do a good job executing our strategic priorities in what continues to be a very challenging environment. This includes opening new stores, continuing to deliver an exceptional service and customer experience, all while managing cost controls.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Although macro pressures continue to persist, we strongly believe our value focused experimental dining model resonates with guests and positions us for durable long term growth and profitability. We opened seven restaurants in the 2025. These twenty twenty five openings represent a balanced geographic mix including new, existing, and international markets. I'm pleased to announce one of the new stores opened this year was in a suburb of Seoul, South Korea, which is our first international expansion. We plan to open more restaurants in South Korea in the 2025.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

These restaurants are being built at approximately one third the cost of our US stores and use it as an operating model consistent to our restaurants in The US. In addition, by opening in Korea, we hope to see early culinary, cultural, and experimental trends that might translate well for us in our US locations. In the beginning of the third quarter, we have opened an additional two restaurants for a total of nine new restaurants year to date. We are on pace to exceed our target of 12 to 13 total new rest stores by the 2025 because we have seven additional restaurants under development which we expect to complete construction in 2025. During the month of April, after the global tariffs were announced, we saw a sharp downturn in our restaurant customer traffic which resulted in same store sales drop.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

On top of that, the current administration enforced immigration policies deploying ICE agents in several of our geographic regions. These areas include California, Texas, and Nevada which have a large Hispanic customer base and Hispanic workforce. These states account for 35 of our 52 restaurants. The decline was felt across all restaurants in these regions. Despite these adverse conditions, we're able to maneuver our staffing and operations quickly and have seen improvements in our sales and cost starting in the last July.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

We estimate the Hispanic customer base to be more than 60% at most of our restaurants in these regions. As we have mentioned in the previous calls, same store sales are not the metrics that defines our success. I can't stress that enough. Our AUV revenue is 5,300,000.0 per restaurant in the casual dining space. This is a very elite level.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Our AUV revenue levels drive our margins and strong cash flow. Our business model revolves around growing our footprint to capitalize on the short duration to recoup our initial investment in the new restaurants. In fact, we're on track for an impressive two point three year payback period for our twenty twenty four new stores. This two point three year payback period is much shorter than most competitors and allows us to expand with limited debt as we can rely on our cash flow to fund the majority of our growth. Said another way, at the time we went public in June, We had 33 stores.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Since then, we have added 19 new stores, costing approximately 2,500,000.0 each, roughly increasing our store count by 58%, but haven't needed to take on any material debt or equity to do this. We believe this proves the value of our high free cash flow model. Having said this, we still deeply focus on ways to drive growth at existing locations and have a number of initiatives to share as we continue the expansion of the Gen brand of products and services. From our incubator projects, we have several initiatives to discuss. First, sales of gift cards.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Last year, we have announced the launch of Gen gift cards at 78 Costco locations. The gift cards continuously sell well. During the second quarter, we began selling gift cards at Sam's Club location. Our success in expanding this initiative is a testament to Jen's brand's strength and position as a leader in the Korean barbecue space. Second, with these successes, we have developed additional product lines to sell through these channels.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

These products are finished packaged Jen Korean barbecue meats, Jen Korean beef jerky, Jen Korean soju, Jen Korean sauce, and Jen Korean frozen products wholesaling it through the Sysco distribution network. Jen Korean barbecue will create an umbrella of Jen Korean products to be sold to other channels other than our restaurant level. We'll continue to grow our brands in a strategic way. In addition, we'll be growing the KAAN sushi brand only to be built next to Korean barbecue restaurants. The idea is to enhance our brand and mitigate risk by using the same infrastructure of the kitchen, bathroom, storage, and some labor.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Also, we've continued to enhance our training programs. We're spending more time and efforts on training in order to build the bench strength necessary to expand new restaurant development openings around the country and in Korea. We have deployed these new systems like AI and new technologies. With a solid operating model, meaningful expansion across both core and new concepts, and continued investment in our development pipeline, We're executing with focus and discipline backed by a healthy balance sheet, strong unit level returns, and rising brand momentum. We believe Jen will is well positioned to deliver on our 2025 goals and continue expanding our presence across both domestic and international markets.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Thank you for your continued support. We remain excited about the opportunities ahead and confident in the road we're on. Now, I'd like to hand the call over to Tom for a detailed look at our second quarter financial performance.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, David. We generated a 2.2% year over year increase in total revenue to $55,000,000 for the 2025 due to our new restaurant openings over the last year.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Cost of goods sold as a percentage of company restaurant sales increased by 97 basis points to 33.8% in the 2025 compared to the second quarter last year. This increase reflects more new restaurants in operation, inflationary cost increases, and a minor impact from our premium menu. Payroll and benefits as a percentage of company restaurant sales decreased by 29 basis points in the 2025 to 30.1% compared to the second quarter of last year. Payroll and benefits as a percentage of sales decreased by 163 basis points from the 2025 due to recently rolled out labor efficiencies. Occupancy expenses as a percentage of company restaurant sales increased by 116 points to 9.3% compared to the second quarter of last year due to 10 additional restaurant openings.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Other operating expenses as a percent of company restaurant sales increased 78 basis points to 10.7% compared to the second quarter of last year. G and A excluding stock based compensation during the second quarter was $5,700,000 or 10.3% of revenue compared to $4,300,000 or 8% of revenue in the year ago period. G and A expenses in the second quarter remained flat compared to G and A expenses in the 2025. In the second quarter we had a net loss before income taxes of $1,800,000 which equated to $05 per diluted share of Class A common stock compared to net income before income taxes of 2,100,000.0 which equated to $06 per diluted share of Class A common stock in the 2024. The 2025 reflects higher costs associated with new restaurant development, including 2,100,000.0 in pre opening costs.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

If you look at adjusted net income, a non GAAP measure, we had net income of 1,200,000.0 or $04 per diluted share of Class A common stock in the 2025, compared to adjusted net income of 4,400,000.0 or $0.13 per share in the second quarter of last year. Remember that we have 33,000,000 shares outstanding, including our A and B shares. The founders group owns approximately 85% of the company and the public investors own 15%. Our founders' interests are aligned with those of the public shareholders and they are fully invested in successfully growing Gen. Restaurant level adjusted EBITDA was 16.3% for the 2025, compared to 15.6% for the 2025, an increase of 0.7% or 70 basis points as we continue to improve our labor costs.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Restaurant level adjusted EBITDA for the second quarter was 9,000,000 compared to 10,200,000.0 in the 2024. Total adjusted EBITDA for the 2025 was $1,900,000 or 3.4 percent as compared to $4,900,000 in the 2024. After removing pre opening costs from both periods, adjusted EBITDA for the 2025 was $3,300,000 compared to $5,900,000 in the 2024. Turning to our liquidity position, as of 06/30/2025, we had 9,600,000.0 in cash and cash equivalents and the only long term debt we carry is 7,000,000 in bank debt. We also have fully available all of our $20,000,000 revolving credit facility.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Before concluding, I wanna reiterate what we said on our last call. Our balance sheet reflects 166,000,000 in lease liabilities as required under GAAP through the new ASC eight forty two lease accounting standard. These are not financial obligations in the form of long term debt, but rather the accounting recognition of our future lease commitments. Importantly, they are offset by 142,000,000 in operating lease assets. We've also received several questions about our return on tangible asset metrics.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

It's important to note that using total assets as a proxy for invested capital is inflated because it includes operating lease asset of $142,000,000 This incorrect assumption can artificially lower our return metrics. All these points highlight the fact that Jen carries no material debt and has strong returns from restaurant development. 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. Operator, please open the line for questions.

Operator

Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by 2.

Operator

And your first question comes from Jeremy Hamblin with Craig Hallum Capital. Please go ahead.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Hey, guys. This is Will on for Jeremy. I just wanted to start off with asking if you could help quantify the same store sales progression throughout the quarter, and then maybe the magnitude of improvement you've seen in July. And then second, I don't know if you took any price during the quarter, but anything you can call out in terms of traffic check composition would be super helpful.

Operator

Tom and David, if you are speak oh, your line your line may be muted.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Are we were really down in hello? Can you hear me?

Operator

Loud and clear. Thank you.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Okay. Thank you. Thanks, Will. I think, you know, we we were down, really down in April, May and June. We did see some bounce back in the month of July.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

But we did have a price increase in the right at the beginning of the year of about 2.8%, I think we announced on the last call that we had. That helps.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Yep. That that's helpful. And then switching over to thinking about new units. Just now that those six openings from Q1 have had a few months under the belt, just curious on how those have been performing? And then just to follow-up, any more color on performance in that South Korea location or any update to expansion plans there would be great.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Yes. Our openings in the first quarter are just, I guess, I would say they're average. They're doing fine, but they're on the average level. And the the opening in in South Korea is a brand new market for us, so we're working through that. Our sales are are slow but picking up.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

And we will be opening a couple more new restaurants in, in Korea, before the end of this month.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Got it. And then just last one for me. Just wanted to ask about the the premium menu adoption, sort of how that's tracking in terms of mix, maybe where that where you think that mix can get to, and then how we should be thinking about the COGS implications, with further premium adoption?

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

We see that there's a COGS, of probably half a basis point to 1%, differential. It's it's probably gonna average around five to six, maybe up to 7% increase in sales. We are starting to add other products other than the upselling of the just the meats meats of our menu. So we will be rolling out other product lines to enhance that.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Got it. That that's all for me. Thank you, guys.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, Jeremy.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

I mean, thank you, Will.

Operator

Thank you so much. Your next question comes from JP Willem with ROTH Capital Partners. Please go ahead.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Great. Hi, JP. You taking my questions. Hi, Tom. I hated.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

If we could just start, maybe just want to offer the chance, any updates to kind of the guidance you shared last quarter in terms of kind of the revenue and and four wall margin? And maybe just along with that, anything you can share about, you know, what's baked into that number or your expectations there, whether comp or a new unit kind of productivity?

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

We're still holding our projections that we gave at the beginning of the year. I think we were looking at seventy seventeen to 18% on four wall margins. We'll we'll we're we're not revising any of that because of a challenging quarter. We're gonna stay on course. So that that has not changed at all.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Got it. And then, you know, in the in the press release, I think there was kind of some comments about being able to offset the ongoing macro challenges through, you know, some operational efficiencies. And I'm just kinda wondering, you know, as we think about that 17 to 18% in sort of four wall margin, like, any more detail you can provide on kinda behind the scenes what the team is doing to really maximize some efficiencies there?

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Yes. We, we made quick directional changes to deploy more automation, and we are using some AI tools to get our labor in a more efficient cost. So we'll probably see a lot more benefits to the to the margins overall, definitely on the third quarter.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Got it. And then just last one from me. You know, I I think this two quarters now kinda talking a bit about making sure that you guys have the right training processes to to really bring up kinda your next generation of of GMs and restaurant leaders. So, you know, as you think about unit development and and getting, you know, potentially accelerating as we look out into future years, as we sit here today, is kinda quality general managers sort of the biggest gating factor to, new unit development or to sorry. To accelerating unit development, or is it real estate, capital, any of those other, items?

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

It's all of the above. Getting managers, is still a challenge, but, you know, we're we're dealing with that. But we we we will definitely talk more about the efficiencies that we have run and tested now, we're getting good results. But we'll definitely have that results on the third quarters too. We we we just started to implement it in the time of July, but the numbers are coming in very good.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

So we we will definitely, give you a better understanding of how those implementation, I e managers, I e, new technologies and and, better training training that we have implemented.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Great. Thanks, guys. Best of luck.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Thank you.

Operator

At this time, this concludes our question and answer session. I would now like to turn the call back over to mister Kim for any closing remarks.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Well, thank you all again for joining the call. We look forward to speaking with you all when we report our 2025 results in November. Thank you. Thank you very much.

Operator

This concludes today's conference call. You may now disconnect your lines at this time. Thank you so much for your participation. Good afternoon, ladies and gentlemen, and welcome to the Jen Restaurant Group Inc. 2Q twenty twenty five earnings conference call.

Operator

At this time, all lines are in listen only mode. Following the presentation, we'll conduct a question and answer session. This call is being recorded on Wednesday, 08/06/2025. And now I would like to turn the conference over to Tom Kroll, the company's Chief Financial Officer. Please go ahead.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter twenty twenty five earnings release. If not, it can be found at www.jenkoreanbbq.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 securities laws, including but not limited to statements regarding 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 06/30/2025, 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.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

These statements represent our views only as of the date of this call and are 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 annual report on Form 10 ks and our quarterly reports on Form 10 Q for a more detailed discussion of the risks that could impact our future operating results and financial condition. 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. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

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. Now I'd like to turn it over to our Chairman and CEO, David Kim.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Thank you, Tom, and good afternoon, everyone. In the second quarter, our restaurant operations team continued to do a good job executing our strategic priorities in what continues to be a very challenging environment. This includes opening new stores, continuing to deliver an exceptional service and customer experience, all while managing cost controls.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Although macro pressures continue to persist, we strongly believe our value focused experimental dining model resonates with guests and positions us for durable long term growth and profitability. We opened seven restaurants in the 2025. These 2025 openings represent a balanced geographic mix including new, existing, and international markets. I'm pleased to announce one of the new stores opened this year was in a suburb of Seoul, South Korea, which is our first international expansion. We plan to open more restaurants in South Korea in the 2025.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

These restaurants are being built at approximately one third the cost of our US stores and used as an operating model consistent to our restaurants in The US. In addition, by opening in Korea, we hope to see early culinary, cultural, and experimental trends that might translate well for us in our US locations. In the beginning of the third quarter, we have opened an additional two restaurants for a total of nine new restaurants year to date. We are on pace to exceed our target of 12 to 13 total new stores by the 2025 because we have seven additional restaurants under development which we expect to complete construction in 2025. During the month of April, after the global tariffs were announced, we saw a sharp downturn in our restaurant customer traffic which resulted in same store sales drop.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

On top of that, the current administration enforced immigration policies deploying ICE agents in several of our geographic regions. These areas include California, Texas, and Nevada, which have a large Hispanic customer base and Hispanic workforce. These states account for 35 of our 52 restaurants. The decline was felt across all restaurants in these regions. Despite these adverse conditions, we're able to maneuver our staffing and operations quickly and have seen improvements in our sales and cost starting in the last July.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

We estimate the Hispanic customer base to be more than 60% at most of our restaurants in these regions. As we have mentioned in the previous calls, same store sales are not the metrics that defines our success. I can't stress that enough. Our AUV revenue is 5,300,000.0 per restaurant in the casual dining space. This is a very elite level.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Our AUV revenue levels drive our margins and strong cash flow. Our business model revolves around growing our footprint to capitalize on the short duration to recoup our initial investment into new restaurants. In fact, we're on track for an impressive two point three year payback period for our twenty twenty four new stores. This two point three year payback period is much shorter than most competitors and allows us to expand with limited debt as we can rely on our cash flow to fund the majority of our growth. Said another way, at the time we went public in June, we had 33 stores.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Since then, we have added 19 new stores costing approximately 2,500,000.0 each, roughly increasing our store count by 58, but haven't needed to take on any material debt or equity to do this. We believe this proves the value of our high free cash flow model. Having said this, we still deeply focus on ways to drive growth at existing locations and have a number of initiatives to share as we continue the expansion of the Gen brand of products and services. From our incubator projects, we have several initiatives to discuss. First, sales of gift cards. Last year, we have announced the launch of Gen gift cards at 78 Costco locations. The gift cards continuously sell well. During the second quarter, we began selling gift cards at Sam's Club location.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Our success in expanding this initiative is a testament to Jen's brand's strength and position as a leader in the Korean barbecue space. Second, with these successes, we have developed additional product lines to sell through these channels. These products are finished packaged Jen Korean barbecue meats, Jen Korean beef jerky, Jen Korean soju, Jen Korean sauce, and Jen Korean frozen products wholesaling it through the Sysco distribution network. Jen Korean barbecue will create an umbrella of Jen Korean products to be sold to other channels other than our restaurant level. We'll continue to grow our brands in a strategic way.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

In addition, we'll be growing the KAAN sushi brand only to be built next to Jen Korean barbecue restaurants. The idea is to enhance our brand and mitigate risk by using the same infrastructure of the kitchen, bathroom, storage, and some labor. Also, we've continued to enhance our training programs. We're spending more time and efforts on training in order to build the bench strength necessary to expand new restaurant development openings around the country and in Korea. We have deployed these new systems like AI and new technologies.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

With a solid operating model, meaningful expansion across both core and new concepts, and continued investment in our development pipeline, We're executing with focus and discipline. Backed by a healthy balance sheet, strong unit level returns and rising brand momentum, we believe Jen will is well positioned to deliver on our 2025 goals and continue expanding our presence across both domestic and international markets. Thank you for your continued support. We remain excited about the opportunities ahead and confident in the road we're on. Now, I'd like to hand the call over to Tom for a detailed look at our second quarter financial performance.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, David. We generated a 2.2% year over year increase in total revenue to $55,000,000 for the 2025 due to our new restaurant openings over the last year. Cost of goods sold as a percentage of company restaurant sales increased by 97 basis points to 33.8% in the 2025 compared to the second quarter last year. This increase reflects more new restaurants in operation, inflationary cost increases, and a minor impact from our premium menu. Payroll and benefits as a percentage of company restaurant sales decreased by 29 basis points in the 2025 to 30.1% compared to the second quarter of last year.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Payroll and benefits as a percentage of sales decreased by 163 basis points from the 2025 due to recently rolled out labor efficiencies. Occupancy expenses as a percentage of company restaurant sales increased by 116 points to 9.3% compared to the second quarter of last year due to 10 additional restaurant openings. Other operating expenses as a percent of company restaurant sales increased 78 basis points to 10.7% compared to the second quarter of last year. G and A excluding stock based compensation during the second quarter was 5,700,000.0 or 10.3% of revenue compared to 4,300,000.0 or 8% of revenue in the year ago period. G and A expenses in the second quarter remained flat compared to G and A expenses in the 2025.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

In the second quarter we had a net loss before income taxes of $1,800,000 which equated to $05 per diluted share of Class A common stock compared to net income before income taxes of 2,100,000.0 which equated to $06 per diluted share of Class A common stock in the 2024. The 2025 reflects higher costs associated with new restaurant development, including 2,100,000.0 in pre opening costs. If you look at adjusted net income, a non GAAP measure, we had net income of 1,200,000.0 or $04 per diluted share of Class A common stock in the 2025, compared to adjusted net income of 4,400,000.0 or $0.13 per share in the second quarter of last year. Remember that we have 33,000,000 shares outstanding, including our A and B shares. The founders group owns approximately 85% of the company and the public investors own 15%.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Our founders' interests are aligned with those of the public shareholders and they are fully invested in successfully growing Gen. Restaurant level adjusted EBITDA was 16.3% for the 2025 compared to 15.6% for the 2025, an increase of 0.7% or 70 basis points as we continue to improve our labor costs. Restaurant level adjusted EBITDA for the second quarter was $9,000,000 compared to $10,200,000 in the 2024. Total adjusted EBITDA for the 2025 was 1,900,000 or 3.4% as compared to $4,900,000 in the 2024. After removing pre opening costs from both periods, adjusted EBITDA for the 2025 was $3,300,000 compared to $5,900,000 in the 2024.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Turning to our liquidity position, as of 06/30/2025, we had 9,600,000.0 in cash and cash equivalents and the only long term debt we carry is 7,000,000 in bank debt. We also have fully available all of our $20,000,000 revolving credit facility. Before concluding, I wanna reiterate what we said on our last call. Our balance sheet reflects 166,000,000 in lease liabilities as required under GAAP through the new ASC eight forty two lease accounting standard. These are not financial obligations in the form of long term debt, but rather the accounting recognition of our future lease commitments.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Importantly, they are offset by 142,000,000 in operating lease assets. We've also received several questions about our return on tangible asset metrics. It's important to note that using total assets as a proxy for invested capital is inflated because it includes operating lease asset of 142,000,000. This incorrect assumption can artificially lower our return metrics. All these points highlight the fact that Jen carries no material debt and has strong returns from restaurant development.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

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. Operator, please open the line for questions.

Operator

Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by 2.

Operator

And your first question comes from Jeremy Hamblin with Craig Hallum Capital. Please go ahead.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Hey, guys. This is Will on for Jeremy. I just wanted to start off with asking if you could help quantify the same store sales progression throughout the quarter, and then maybe the magnitude of improvement you've seen in July. And then second, I don't know if you took any price during the quarter, but anything you can call out in terms of traffic check composition would be super helpful.

Operator

Tom and David, if you are speak oh, your line your line may be muted.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

It our we were looking down in hello? Can you hear me?

Operator

Loud and clear. Thank you.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Okay. Thank you. Thanks, Will. I think, you know, we we were down really down in April, May, and June. We did see some bounce back in the month of July, but we did have a price increase in the right at the beginning of the year of about 2.8%, I think we announced on the last call that we had. That helps.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Yep. That that's helpful. And then switching over to thinking about new units. It's now that those those six openings from q one have had a few months under the belt. Just curious on how those have been performing?

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

And then just to follow-up, any more color on performance in that South Korea location or any update to expansion plans there would be great.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Yeah. Our our openings in the, in the first quarter are just, I guess, I would say they're average. They're doing fine, but they're on the average level. And the opening in in South Korea is a brand new market for us, so we're working through that. Our sales are are slow but picking up, and we will be opening a couple more new restaurants in in Korea before the end of this month.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Got it. And then just last one for me. Just wanted to ask about the the premium menu adoption, how that's tracking in terms of mix, maybe where you think that mix can get to, and then how we should be thinking about the COGS implications with further premium adoption?

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

We see that there's a COGS of probably half a basis point to 1% differential. It's it's probably gonna average around five to six, maybe up to 7% increase in sales. We are starting to add other products other than the upselling of the just the meats meats of our menu. So we will be rolling out other product lines to enhance that.

Will Forsberg
Equity Research Associate at Craig-Hallum Capital Group LLC

Got it. That's all for me. Thank you, guys.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you, Jeremy.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

I mean, thank you, Will.

Operator

Thank you so much. Your next question comes from JP Willem with ROTH Capital Partners. Please go ahead.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Great. Hi, JP. I appreciate you taking my questions. I tell them I hated. If we could just start, maybe just want to offer the chance, any updates to kind of the guidance you shared last quarter in terms of kind of the revenue and and four wall margin?

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

And maybe just along with that, anything you can share about, you know, what's baked into that number or your expectations there, whether comp or a new unit kind of productivity?

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

We're still holding our projections that we gave at the beginning of the year. I think we were looking at seventy, seventeen to 18% on four wall margins. We'll we'll we're we're not revising any of that because of a challenging quarter. We're gonna stay on course. So that that has not changed at all.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Got it. And then, you know, in the in the press release, I think there was kind of some comments about being able to offset the ongoing macro challenges through, you know, some operational efficiencies. And I'm just kinda wondering, you know, as we think about that 17 to 18% in sort of four wall margin, like, any more detail you can provide on kinda behind the scenes what the team is doing to really maximize some efficiencies there?

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Yes. We we made quick directional changes to deploy more automation, and we are using some AI tools to get our labor in a more efficient cost. So we'll probably see a lot more benefits to the to the margins overall, definitely on the third quarter.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Got it. And then just last one from me. You know, I I think this two quarters now kinda talking a bit about making sure that you guys have the right training processes to to really bring up kinda your generation of of GMs and restaurant leaders. So, you know, as you think about unit development and and getting, you know, potentially accelerating as we look out into future years, as we sit here today, is kinda quality general managers sort of the biggest gating factor to, new unit development or to sorry. To accelerating unit development, or is it real estate, capital, any of those other, items?

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

It's all of the above. Getting managers, is still a challenge, but, know, we're we're dealing with that. But we we we will definitely talk more about the efficiencies that we have run and tested now, which we're getting good results. But we'll definitely have that results on the third quarters too. We we we just started to implement it in the time of July, but the numbers are coming in very good.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

So we we will definitely, give you a better understanding of how those implementation, I e managers, I e, new technologies and and, better training training that we have implemented.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Great. Thanks, guys. Best of luck.

Thomas Croal
Thomas Croal
CFO at GEN Restaurant Group

Thank you.

Operator

At this time, this concludes our question and answer session. I would now like to turn the call back over to mister Kim for any closing remarks.

David Kim
David Kim
Chairman & CEO at GEN Restaurant Group

Well, thank you all again for joining the call. We look forward to speaking with you all when we report our 2025 results in November. Thank you. Thank you very much.

Operator

This concludes today's conference call. You may now disconnect your lines at this time. Thank you so much for your participation.

Executives
    • Thomas Croal
      Thomas Croal
      CFO
    • David Kim
      David Kim
      Chairman & CEO
Analysts
    • Will Forsberg
      Equity Research Associate at Craig-Hallum Capital Group LLC
    • John-Paul Wollam
      Equity Research Associate at Roth Capital Partners, LLC
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