GEN Restaurant Group, Inc. Q3 FY2024 earnings call

• The third quarter saw successful execution with 43 locations nationwide and preparation to open new locations by year-end. • Total revenue increased driven by newer restaurants. • Same-store sales declined 9.6% year-over-year due to factors like hurricanes, extreme weather, and cannibalization. • Implemented training programs to drive premium menu sales, working on drink sales, testing GEN Grills concept, participating in outdoor fairs, and launched a gift card program with Costco. • Achieved restaurant-level adjusted EBITDA margin slightly over 18%. • Cost of goods sold and payroll and benefits were controlled, with G&A expenses reflecting investments in growth and infrastructure.

For the third quarter of 2024, GEN Restaurant Group delivered total revenue of $49.1 million, a nearly 8% year-over-year increase. Net income was $0.2 million or $0.01 of diluted earnings per share, and adjusted net income was $0.9 million or $0.03 of adjusted diluted earnings per share. Cost of goods sold decreased to 31.4% of total revenue, payroll and benefits decreased to 30.5%, and general and administrative expenses (excluding stock-based compensation) were 9.1% of total revenue.

• Reiterates expectation to open 10 to 11 new restaurants in 2024, aiming for total revenues between $200 million and $205 million, and restaurant-level adjusted EBITDA margin approaching 18%. • Has 17 additional locations lined up with leases signed or in process, and 15 to 20 leases in negotiations, aiming for 75 to 80 total locations by end of 2026. • Confident in ability to reach long-term growth objectives with strong expansion pipeline.

• Consumer environment mixed with ongoing inflationary pressures affecting discretionary spending. • Impacted by 4 hurricanes causing temporary disruptions, extreme hot summer weather keeping consumers at home, and cannibalization in Texas and Hawaii from new restaurant openings. • Competition and potential changes in market dynamics could affect performance. • Risks detailed in recent SEC filings that could impact future operating results and financial condition.

Q: What's the average redemption timeline from purchase to usage of Costco gift cards and the magnitude of higher spend when using gift cards?

A: Redemption rate is currently less than 50%, with industry average around 75-80%. The magnitude of higher spend from gift card users is being analyzed, with random checks showing they tend to buy more drinks and premium menu items, but specific quantification will be provided in future calls.