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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a net loss, declining EBITDA, and softness in sales, which are negative indicators. Despite international expansion and new product initiatives, the lack of guidance and unclear management responses raise concerns. The Q&A highlights risks like economic challenges and competition, further dampening sentiment. Thus, a negative stock price movement is expected.
Total Revenue $50.4 million for the third quarter of 2025, a 2.7% year-over-year increase due to new restaurant openings over the last year.
Same-Store Sales Dropped by 9.9% for the third quarter of 2025 year-over-year, attributed to a downturn in restaurant customer traffic following global tariffs.
Restaurant Level Adjusted EBITDA Margin 15% in the third quarter of 2025, compared to 18.2% in the third quarter of 2024, reflecting inflationary cost increases and higher costs associated with new restaurant development.
Cost of Goods Sold Increased by 334 basis points to 34.8% of company restaurant sales in the third quarter of 2025 compared to the third quarter last year, due to inflationary cost increases, more new restaurants in operation, and a minor impact from the premium menu.
Payroll and Benefits Decreased by 196 basis points to 28.5% of company restaurant sales in the third quarter of 2025 compared to the third quarter last year, due to recently rolled out labor efficiencies.
Occupancy Expenses Increased by 238 basis points to 10.8% of company restaurant sales in the third quarter of 2025 compared to the third quarter last year, primarily due to higher rent at new locations and the start-up of several restaurants.
G&A Expenses $5.7 million or 11.4% of revenue in the third quarter of 2025, compared to $4.5 million or 9.1% of revenue in the year-ago period, primarily due to increased personnel for new restaurant development, and additional advertising, marketing, and legal expenditures.
Net Loss Before Income Taxes $3.9 million in the third quarter of 2025, compared to net income before income taxes of $300,000 in the third quarter of 2024, reflecting higher costs associated with new restaurant development, including $2.3 million in preopening costs.
Adjusted Net Income Net loss of $700,000 or $0.02 per diluted share of Class A common stock in the third quarter of 2025, compared to adjusted net income of $2.6 million or $0.07 per share in the third quarter of last year.
Restaurant Level Adjusted EBITDA $7.6 million or 15% of total revenue in the third quarter of 2025, compared to $9 million or 18.2% in the third quarter of 2024, reflecting inflationary cost increases and higher costs associated with new restaurant development.
Total Adjusted EBITDA $200,000 in the third quarter of 2025, compared to $3.4 million in the third quarter of 2024. After removing preopening costs, adjusted EBITDA was $1.8 million in the third quarter of 2025 compared to $4.5 million in the third quarter of 2024.
Cash and Cash Equivalents Approximately $5 million as of September 30, 2025, with full availability of a $20 million revolving credit facility.
Launch of ready-to-cook Korean branded meats: GEN launched ready-to-cook Korean branded meats for sale at Albertsons, Vons, and Pavilions grocery stores in California and Hawaii. These products replicate the quality and recipes used in their restaurants, with 4 product choices available at over 600 grocery locations. Expected annual revenue from this initiative could exceed $100 million over the next 4 to 5 years.
Expansion of Korean BBQ-related products: GEN is expanding its product offerings to include bulk sales of Korean BBQ meats, e-commerce growth, sales of Korean beef, turkey, and sauces, as well as proprietary Korean products. These will be sold at restaurants, through distribution channels, and potentially in grocery stores.
New restaurant openings: GEN opened 15 restaurants in the first 9 months of 2025, including 6 in South Korea, bringing the total to 57 restaurants. They plan to open 2 more by the end of 2025, exceeding their initial estimate of 12-13 new stores for a total of 17 in 2025.
International expansion: The 6 new restaurants in South Korea operate at lower construction and operational costs compared to U.S. locations, showcasing a balanced geographic expansion strategy.
Labor efficiencies: Payroll and benefits as a percentage of sales decreased by 196 basis points year-over-year due to recently implemented labor efficiencies.
Cost management: Despite inflationary pressures, GEN has not raised menu prices since 2024 to maintain customer loyalty. However, cost of goods sold increased due to inflation and new restaurant openings.
Focus on brand ecosystem: GEN is building a brand ecosystem that extends beyond restaurants into grocery stores and e-commerce, enhancing brand recognition and creating new revenue streams.
Gift card expansion: GEN expanded its gift card sales to 92 Sam's Club locations, in addition to 95 Costco locations, reflecting strong brand positioning.
Macroeconomic Pressures: The restaurant industry is facing a challenging environment due to persistent macroeconomic pressures, which could impact customer spending and overall business performance.
Same-Store Sales Decline: Same-store sales dropped by 9.9% in the third quarter of 2025, attributed to a downturn in restaurant customer traffic following global tariffs. This decline could adversely affect revenue and profitability.
Inflationary Costs: Inflationary cost increases, particularly in meat prices, have led to higher cost of goods sold. The company has chosen not to pass these costs onto customers, which could pressure margins.
New Restaurant Development Costs: Higher costs associated with new restaurant development, including $2.3 million in preopening costs, have contributed to a net loss before income taxes of $3.9 million in the third quarter of 2025.
Occupancy Expenses: Occupancy expenses increased due to higher rents at new locations and the start-up of several restaurants, impacting overall profitability.
Economic Uncertainty: The company has indicated that if the current economic climate does not improve, it may need to slow growth plans for 2026 and focus on improving operations and margins at existing restaurants.
G&A Expenses: General and administrative expenses increased due to personnel costs for new restaurant development, as well as additional advertising, marketing, and legal expenditures, which could strain financial resources.
New Store Openings: The company plans to open 2 additional stores by the end of 2025, bringing the total to 17 new stores for the year. This includes 6 international units in South Korea.
Expansion into Grocery Stores: GEN has launched ready-to-cook Korean branded meats in over 600 grocery locations, including Albertsons, Vons, and Pavilions in California and Hawaii. The company anticipates annual revenues from this initiative could exceed $100 million over the next 4 to 5 years.
Brand Ecosystem Expansion: GEN is building a brand ecosystem that extends beyond restaurants into authentic Korean products, experiences, and digital innovation. This includes bulk sales of Korean BBQ meats, e-commerce growth, and sales of proprietary Korean sauces and products.
Revenue Projections: The company is targeting full-year revenue of $220 million to $225 million for 2025. By the end of 2025, it anticipates an annual run rate of approximately $250 million in revenue when all new restaurants are operational.
EBITDA Margins: GEN aims to achieve restaurant-level adjusted EBITDA margins in the range of 15% to 15.5% for 2025.
Future Growth Plans: If the economic climate does not improve, the company may slow its growth plans for 2026 and focus on improving operations and margins at existing restaurants, as well as growth through grocery store initiatives.
The selected topic was not discussed during the call.
The earnings call reveals a net loss, declining EBITDA, and softness in sales, which are negative indicators. Despite international expansion and new product initiatives, the lack of guidance and unclear management responses raise concerns. The Q&A highlights risks like economic challenges and competition, further dampening sentiment. Thus, a negative stock price movement is expected.
The earnings call highlights several concerns: a net loss before income taxes, increased costs, and geographic concentration risks. Although there is some improvement in same-store sales and operational efficiencies are being implemented, the international expansion into South Korea poses additional risks. The Q&A section reveals management's avoidance of providing specific details, which may exacerbate uncertainties. Despite a slight revenue increase, the unchanged guidance and lack of detailed responses suggest investor concerns, leading to a negative sentiment.
Despite a 13% revenue increase, the company faces significant challenges: tariffs, increased costs, supply chain issues, and competitive pressures. The Q&A revealed continued sales weakness and uncertainties in cost projections. While the stock buyback and international expansion are positives, the overall sentiment is negative due to operational risks, a net loss, and weak same-store sales. The lack of clear guidance on key issues further compounds investor concerns, likely resulting in a negative stock price movement.
The company exceeded revenue expectations and announced a share buyback, which are positive indicators. However, challenges in meeting restaurant opening targets and slightly increased G&A expenses suggest potential operational hurdles. The Q&A revealed some unclear management responses and concerns about growth targets. Given these mixed signals and lack of market cap data, the stock is likely to remain stable, resulting in a neutral sentiment.
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