GEN Restaurant Group, Inc. Q4 FY2025 earnings call

Fourth quarter was a challenging environment with customers reducing due to immigration enforcement and fuel price increase. Opened 15 restaurants in 2025 and 2 in the first quarter of 2026. Entered joint venture with Chubby Cattle International for 5 non-performing restaurants, creating a $4.5 million write-down but expected to generate profitable EBITDA. Adjusted menu, enhanced incentive program, tested new drinks, explored digital platform, launched loyalty program, accepted cryptocurrency,上线 new e-commerce website, initiated AI program. Costco gift card sales were $29 million in 2025, a 150% increase. CPG business doing well, started with 4 SKUs, expanded to over 800 locations, projected to be in 1,500 - 2,000 locations by end of 2026 and 7,000 - 8,000 by end of 2027

Fourth quarter total revenue was $49.7 million, compared to $54.6 million in the fourth quarter of 2024, a decrease of $4.9 million. For the year ended December 31st, 2025, revenues totaled $212.5 million compared to $208.4 million in 2024, an increase of $4 million or 2%. Same-store sales dropped by 11.6% in the fourth quarter. Cost of goods sold as a percentage of company restaurant sales increased to 36.9% in the fourth quarter of 2025 compared to 33% in 2024 for the full year. Payroll and benefits as a percentage of company restaurant sales increased to 31.8% in the fourth quarter of 2025. Occupancy expenses as a percentage of company restaurant sales increased to 11.2% in the fourth quarter of 2025. Other operating expenses as a percentage of company restaurant sales increased to 12.4% in the fourth quarter of 2025. Net loss before income taxes was $12.5 million in the fourth quarter of 2025 and $20.3 million for the full year of 2025. Adjusted net loss was $5 million in the fourth quarter of 2025 and $3 million for the full year of 2025. Restaurant level adjusted EBITDA was $3.9 million or 7.9% of total revenue in the fourth quarter of 2025 and $29.4 million or 13.8% for the year of 2025

Targeting full-year revenues of 215 to 225 million in 2026. Retail contribution expected to be $10 million range in 2026, putting restaurants in $205 million range. Opened 2 restaurants, 5 under construction in 2026, may squeeze in 1 - 2 more towards end of 2026 or beginning of 2027. Retail business expected to have high teens contribution margins, leveraging current restaurant infrastructure

Immigration enforcement reducing customer traffic, fuel price increase affecting customer discretionary spending, food cost increase, same-store sales decline, CPG business expansion risks including前期 investment and market acceptance, new restaurant development uncertainties

Q: Hey, everyone. Thanks for taking my questions. I wanted to start just with, Tom, you ended with your expectations for 2026, and I was hoping that we could drill into your revenue guide a little more. I think you said 215 to 225. if you could give the retail contribution that's baked into that, as well as on the core restaurant business, your comp expectations and net openings, you know, anything that you're comfortable giving just to, that's baked into that guide.

A: George, we are on the retail side. We're, you know, we're working towards getting to a, $20 million run rate by the end of this year. And so, you know, we should be in the $10 million range in the retail for this year, which would then put the restaurants in, you know, $205 million range. Looking at the low end. Okay, so $205 million. And What kind of net openings? You talked about slowing down your opening pace. What are your expectations with respect to openings and closures?

A: We haven't really contemplated on the closures. We did do a deal with the Chubby Cattle Group, which we're very optimistic and excited about. In terms of the new store openings, we opened two. We have one, three, five under construction, and that will be completed this year. Maybe we'll squeeze in one or two more towards the end of the year or the beginning of 27. Okay. So two, five under construction, one or two more, and then closures are not baked in for Outside of the chubby cattle. Partial divestiture. Okay. Yes. As of this time, yes. Okay. And then last question from me back to the retail business. You said I think high teens contribution margins were in that range. What should we think about the kind of getting to scale there? Do you anticipate making a lot of upfront investments in 2026 as you scale the business, maybe behind promotion or just G&A infrastructure? How should we think about near-term profitability in the retail business?

A: Sure. The infrastructure costs, we're leveraging the current infrastructure we have at the restaurant side. So we don't anticipate a lot at all in terms of infrastructure costs. We will be reducing the construction infrastructure in the gen side considerably because we're going to cut down on that side of the business. In terms of the capital, it's purely inventory now. It is because there's a lag time between the order that's ordered and some products come from South Korea and some products are made in the US. So it depends on how the orders come in. Why we have such a large number from a run rate versus actual is when you start having an interest and the larger markets order. Once the order is in, you have to go through their channels of how to get to be on their system, i.e. their SKUs, their accounting. There's a lot of insurance. There's a lot of setups. Once the setup is done, then the cash flow of money coming in and what's sold and their repeated business, it's very seamless. So it works very well. The margins that we've talked about all account for the various discounts, the various slotting fees, et cetera. So when we said it will be in the high teens, that accounts for all that. And after taking all that out, we're looking at the high teens. Okay, okay. And maybe if I could just squeeze in one more. The numbers you gave, your longer-term expectations around the retail business are big as far as store count and revenue, productivity, et cetera. And the business is still early stage. So the question is, what is it that you've seen so far that gives you confidence in that longer-term expectation? Maybe it's the velocities you're doing or... The performance outside of Southern California looks good. Can you just give us a sense of what makes you confident?

A: Yes, several things. After signing up with larger brokerage firms, and I'm actually personally making these travels and talking to the senior buyers, The numbers of supermarkets around the country is significantly higher than I expected. This is not just the Walmarts of the world. These are small regional players in the hundreds per their own sections of their markets. We, as of today, can tell you that all the meetings we've had, we've not had a single turndown of the buyers turning down our products. And the continuation of interest, especially we are in the Korean barbecue business and Korean related products because of the tailwind that we're getting from the cultural changes and the customer pattern behavior On the ethnic food side, there's continuation of data that's coming out saying it's the highest demanded but the lowest penetrated food in the United States. So that helps a lot, and it's backed by the cultural changes of movies getting recognized, Netflixes on the K-drama, the bands, the BTSs, et cetera, et cetera. That's all fueling this. So it's a huge benefit of all the cultural younger generation knowing this food, Korean food, is actually getting the buyer's from these larger institutional supermarkets, not just having interest in buying our products. Now, the ones that we are in now that have placed products on the shelves, they don't keep products on the shelves if they don't have velocity. So our velocity is above their every retailer has their own lines of what velocity that each one has to hit, and we are actually above their velocities, especially for a new line like this. They're very, very excited. We're very excited, too. It's unusual, they say, from this industry to have a, hit rate of 100%. And I'm sure the more we see, we will start to have challenges of certain areas not buying our products. But it's unusual where products are presented and they're bought. So even if we introduce all the products, the least that we've had so far is one group buying two out of the four. And then we have other products growing too. So I'm a believer that just selling into the markets is not a business model, is the continuation of, yes, consumers coming back to buy it is actually a better measurement. So as of today, it's a small sample, but the amount of bookings that we have from to ordering from us and what we have in the system, that's why we are able to comfortably project those numbers. That's helpful. Thank you.