GEN Restaurant Group, Inc. Q2 FY2025 earnings call

• Opened 7 restaurants in the first half of 2025, including the first international store in a Seoul suburb, South Korea, with plans to open more in South Korea's third quarter.
• Opened 2 additional restaurants in early Q3, resulting in 9 new restaurants year-to-date and on track for 12-13 total new stores by end of 2025 with 7 additional restaurants under development.
• Addressed customer traffic drop in April due to tariffs and immigration policies, with improvements in sales and costs from late July.
• AUV revenue is $5.3 million per restaurant in the casual dining space, and 2024 new stores have a 2.3-year payback period.
• Gift card sales expanded to Sam's Club, and additional product lines (finished packaged meats, sauces, etc.) were developed for distribution through Cisco network.
• Corn Sushi brand to be built next to GEN Korean Barbeque restaurants to enhance the brand and mitigate risk.
• Enhanced training programs and deployed AI/new technologies to support new restaurant development.

Total revenue for the second quarter of 2025 was $55 million, a 2.2% year-over-year increase due to new restaurant openings. Cost of goods sold as a percentage of company restaurant sales was 33.8% in Q2 2025, a 97 basis point increase. Payroll and benefits as a percentage of company restaurant sales decreased to 30.1% (29 basis points decrease year-over-year). Occupancy expenses as a percentage of company restaurant sales increased to 9.3% (116 basis point increase) due to 10 additional restaurant openings. Other operating expenses as a percent of company restaurant sales increased 78 basis points to 10.7%. Net loss before income taxes was $1.8 million in Q2 2025 compared to net income before income taxes of $2.1 million in Q2 2024. Adjusted net income was $1.2 million in Q2 2025 (non-GAAP measure) compared to $4.4 million in Q2 2024. Restaurant level adjusted EBITDA was 16.3% in Q2 2025, an increase from 15.6% in Q1 2025.

• Still holding projections of 17%-18% 4-wall margins as given at the start of the year.
• Expecting more benefits to margins from automation and AI tools in the third quarter.

• Macro pressures including tariffs and immigration policies impacting customer traffic in regions with large Hispanic customer bases.
• Risks associated with forward-looking statements, which are subject to numerous uncertainties that could cause actual results to differ from expectations.

Q: Quantify same-store sales progression throughout the quarter and magnitude of improvement in July, and details on price increase and traffic check composition.

A: Down in April, May, and June, with bounce back in July. There was a price increase of about 2.8% at the start of the year.

Q: Performance of Q1 openings and South Korea location.

A: Q1 openings are average; South Korea location sales are slow but picking up, with more openings in Korea by end of the month.

Q: Premium menu adoption, COGS implications.

A: COGS differential of 0.5-1 basis points, sales increase up to 7%, with other product lines rolled out to enhance premium menu adoption.

Q: Updates to guidance, operational efficiencies, gating factors for unit development.

A: Still holding 17%-18% 4-wall margin projections, using automation and AI for efficiencies, with gating factors including managers, real estate, etc., and good results from July implementations.