GEN Restaurant Group, Inc. Announces Fourth Quarter 2023 Financial Results
- Revenue increased by 10.4% to $45.1 million in Q4 2023.
- Net income was $(0.2) million for Q4 2023.
- Comparable restaurant sales decreased by 1.7% in Q4 2023.
- Adjusted EBITDA was $18.8 million for the full year 2023.
- General and administrative expenses increased by $4.9 million to $12.9 million for 2023.
- Total restaurant operating expenses before pre-opening expenses increased to 84.4% in 2023.
- Comparable restaurant sales decreased by 1.7% in Q4 2023.
- Net income was $(0.2) million for Q4 2023.
- General and administrative expenses increased by $4.9 million to $12.9 million for 2023.
Insights
GEN Restaurant Group's reported revenue growth of 10.4% year-over-year indicates an expanding market presence, particularly significant given the 1.7% decrease in comparable restaurant sales. The expansion strategy, as evidenced by the opening of six new restaurants, suggests a focus on geographical diversification and increased market penetration. However, the increased operating expenses, including higher payroll and occupancy costs, could signal margin pressures moving forward. The competitive landscape in the casual dining sector requires careful monitoring of cost structures to maintain profitability, especially in high-rent markets like Las Vegas and New York.
Investors may view the mixed financial results—growth in revenue alongside a net income loss—as indicative of a transitional phase, with potential for future profitability hinging on successful management of operational costs and execution of the growth strategy. The emphasis on enhanced guest experiences and the transition to a new distribution partner could lead to improved operational efficiencies and customer loyalty, contributing positively to the long-term outlook.
The disclosed financials reveal that the total restaurant operating expenses before pre-opening expenses as a percentage of revenue have risen notably, which could be a concern for investors focused on cost control and margin improvement. The decrease in cost of goods sold due to favorable commodity pricing and vendor negotiations is a positive development, but the rise in payroll and benefits costs due to minimum wage increases and higher costs associated with training new staff is a potential headwind.
Furthermore, the increase in general and administrative expenses as a percentage of revenue, while possibly indicative of investments in infrastructure and management, necessitates careful scrutiny to ensure these costs are aligned with long-term strategic goals. The reported adjusted EBITDA, a key metric for evaluating a company's operating performance, shows a modest figure when considering pre-opening expenses, which may affect investor confidence in the company's current profitability and cash flow generation capabilities.
GEN Restaurant Group's reliance on non-GAAP measures such as adjusted EBITDA and restaurant-level adjusted EBITDA necessitates a clear understanding of these metrics. While these measures can provide insights into the company's operating performance by excluding certain non-cash and non-operational items, they are not standardized across the industry and can vary in calculation from one company to another. It is crucial for stakeholders to understand the adjustments made in these non-GAAP measures to fully assess the company's financial health and compare it accurately with peers.
Investors should also consider the legal and regulatory environment surrounding the casual dining industry, particularly with respect to labor laws and minimum wage regulations, as these can have a direct impact on operating expenses and overall profitability. The company's proactive management of these factors, including its response to increased minimum wage rates, will be critical in mitigating legal and financial risks.
CERRITOS, Calif., March 06, 2024 (GLOBE NEWSWIRE) -- GEN Restaurant Group, Inc. (“GEN” or the “Company”), owner of GEN Korean BBQ, a fast-growing cook-it-yourself casual dining concept, today announced financial results for the fourth quarter and year ended December 31, 2023.
Highlights for the Fourth quarter ended December 31, 2023 were as follows:
- Revenue increased
10.4% to$45.1 million , compared to$40.8 million in the fourth quarter of 2022; - Comparable restaurant sales decreased
1.7% as compared to the fourth quarter in 2022; - Income from operations was
$(0.9) million and (2.0)% of revenue; - Restaurant-level adjusted EBITDA(1) was
$7.2 million and16.0% of revenue; - Net Income (loss) was
$(0.2) million and (0.4% ) of revenue; - Adjusted EBITDA(1) was
$1.6 million and3.6% of revenue inclusive of pre-opening expense of approximately$1.2 million .
(1) Adjusted EBITDA and restaurant-level adjusted EBITDA are non-GAAP measures. For reconciliations of adjusted EBITDA and restaurant-level adjusted EBITDA to the most directly comparable GAAP measure see the accompanying financial tables. For definitions and a discussion of why we consider them useful, see “Non-GAAP Measures” below.
David Kim, Co-Chief Executive Officer of GEN Restaurant Group, Inc., stated, “We accomplished much during our first year as a public company, from achieving record revenues of
Fourth Quarter 2023 Financial Results
Revenue was
Total restaurant operating expenses before pre-opening expenses as a percentage of revenue increased by 368 basis points to
- Cost of goods sold decreased 17 basis points primarily due to more favorable year-over-year commodity pricing and ongoing negotiations with our vendors.
- Payroll and benefits increased 90 basis points due to increases in minimum wage rates in certain markets in which we operate, short-term higher labor costs in newly open restaurants as we train staff and management, increases in managers in training in preparation for our ramp up in new restaurant development and incremental integration cost of the two operating companies.
- Occupancy costs increased 89 basis points primarily due to six new restaurant openings since the third quarter of 2022, including openings on the strip in Las Vegas and New York, which are higher rent markets.
- Other operating costs increased 176 basis points resulting from standardizing equipment and supplies post IPO across all locations.
- Depreciation and amortization increased 31 basis points.
- Restaurant pre-opening expenses increased to
$1.6 million for the fourth quarter of 2023 from$0.5 million in the fourth quarter of 2022 due to the timing of new store openings.
General and administrative expenses increased by
Net income (loss) was
Adjusted EBITDA was
2023 Financial Results
Revenue was
Total restaurant operating expenses before pre-opening expenses as a percentage of revenue increased 212 basis points to
- Cost of goods sold decreased 98 basis point primarily due to more favorable year-over-year commodity pricing and ongoing negotiations with our vendors.
- Payroll and benefits increased 158 basis points due to increases in minimum wage rates in certain markets in which we operate, short-term higher labor costs in newly open restaurants as we train staff and management, and increases in managers in training in preparation for our ramp up in new restaurant development.
- Occupancy costs increased 70 basis points primarily due to six new restaurant openings since the third quarter of 2022, including openings on the strip in Las Vegas and New York, which are higher rent markets.
- Other operating costs increased 80 basis points resulting from standardizing equipment and supplies across all locations following the initial public offering.
- Depreciation and amortization increased 2 basis points.
- Restaurant pre-opening expenses increased to
$3.7 million for 2023 from$1.5 million in 2022 due to the timing of new store openings.
General and administrative expenses increased by
Net income (loss) was
Adjusted EBITDA was
The following definitions apply to terms as used in this release:
Comparable restaurant sales refers to the change in period-over-period sales for the comparable restaurant base. We include restaurants in the comparable restaurant base that have been in operation for at least 12 full months prior to the accounting period presented. Once a restaurant has been open 12 full months, it must have had continuous operations during both the current period and the prior year period being measured to remain a comparable restaurant. If operations were to be substantially impacted by unusual events that closed the location or significantly changed its capacity, that location is excluded from the comparable sales calculation until it has been operating continuously under normal conditions for both the current period and the prior year comparison period.
Payback Period refers to the number of years required to recover the original cash investment.
Total restaurant operating expenses includes food cost, payroll & benefits, occupancy, operating, depreciation and amortization, and pre-opening costs.
Non-GAAP Measures
Restaurant-level adjusted EBITDA represents income (loss) from operations plus adjustments to add-back the following expenses: depreciation and amortization, pre-opening costs, general and administrative expenses, related party consulting fees, management fees and non-cash lease expense. Management believes that restaurant-level adjusted EBITDA is useful to investors because this measure highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures and enabling investors to more effectively compare the Company’s performance to prior and future periods.
Adjusted EBITDA represents net income (loss) before net interest expense, income taxes, depreciation and amortization, and consulting fees paid to a related party and we also exclude non-recurring items, such as stock-based compensation expense, gain on extinguishment of debt, and Restaurant Revitalization Fund, or RRF, grants, employee retention credits, litigation accruals, aborted deferred IPO costs written off, non-cash lease expenses and non-cash lease expense related to pre-opening costs. Management believes that restaurant-level adjusted EBITDA is useful to investors because this measure highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures and enabling investors to more effectively compare the Company’s performance to prior and future periods .
Conference Call
The Company will host a conference call to discuss financial results for the fourth quarter of 2023 today at 5:00 p.m. Eastern Time. David Kim, Co-Chief Executive Officer, and Tom Croal, Chief Financial Officer, will host the call.
The conference call can be accessed live over the phone by dialing 201-689-8263. A replay will be available after the call and can be accessed by dialing 412-317-6671; the passcode is 13744531. The replay will be available until Wednesday, March 13, 2024.
The conference call will also be webcast live from the Company’s corporate website at www.genkoreanbbq.com under the Investor section. An archive of the webcast will be available on the Company’s corporate website shortly after the call has concluded.
About GEN Restaurant Group, Inc.
GEN Korean BBQ is a fast-growing cook-it-yourself casual dining concept with 37 locations in 7 states. The Company offers guests a unique dining experience where guests serve as their own chefs preparing meals on embedded grills in the center of each table. The extensive menu consists of traditional Korean and Korean-American food, including high-quality meats, poultry, seafood and mixed vegetables. With its unique culinary experience alongside its modern décor and lively atmosphere, GEN Korean BBQ delivers an engaging and interactive dining experience. For more information, please visit GEN’s website at www.genkoreanbbq.com.
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as “believe,” “intend,” “expect”, “will,” “may”, and other similar words or expressions that predict or indicate future events. All statements that are not statements of historical fact are forward-looking statements, including any statements regarding our strategy, future operations, and growth prospects, any statements regarding future economic conditions or performance, any statements of belief or expectation, and any statements of assumptions underlying any of the foregoing or other future events. Forward-looking statements are based on current information available at the time the statements are made and on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Additional factors or events that could cause actual results to differ may also emerge from time to time, and it is not possible for the Company to predict all of them. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s Registration Statement on Form S-1(File No. 333-272253), as amended, and in our subsequent filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.
Investor Relations
Jeff Priester
(332) 242-4370
investor@genbbqoffice.com
| GEN RESTAURANT GROUP Condensed Consolidated Income Statements (in thousands, except per share amounts; unaudited) | ||||||||||||||||
| Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
| (in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| (unaudited) | ||||||||||||||||
| Revenue | $ | 45,108 | $ | 40,849 | $ | 181,007 | $ | 163,729 | ||||||||
| Restaurant operating expenses: | ||||||||||||||||
| Food cost | 14,707 | 13,389 | 58,322 | 54,357 | ||||||||||||
| Payroll and benefits | 14,470 | 12,738 | 56,889 | 48,866 | ||||||||||||
| Occupancy expenses | 3,777 | 3,058 | 14,653 | 12,110 | ||||||||||||
| Operating expenses | 5,035 | 3,841 | 18,043 | 15,019 | ||||||||||||
| Depreciation and amortization | 1,332 | 1,080 | 4,808 | 4,314 | ||||||||||||
| Pre-opening Costs | 1,557 | 480 | 3,680 | 1,455 | ||||||||||||
| Total restaurant operating expenses | 40,878 | 34,586 | 156,395 | 136,121 | ||||||||||||
| General and administrative | 5,115 | 2,267 | 12,937 | 7,988 | ||||||||||||
| Consulting fees - related party | - | - | 2,325 | 4,897 | ||||||||||||
| Management fees | - | 587 | 1,176 | 2,332 | ||||||||||||
| Depreciation and amortization - corporate | 26 | 16 | 84 | 39 | ||||||||||||
| Total costs and expenses | 46,019 | 37,456 | 172,917 | 151,377 | ||||||||||||
| Income from operations | (911 | ) | 3,393 | 8,090 | 12,352 | |||||||||||
| Gain on extinguishment of PPP debt | — | — | — | 387 | ||||||||||||
| Employee retention credits | — | 949 | 2,483 | 3,532 | ||||||||||||
| Deferred IPO costs - aborted | — | (4,036 | ) | — | (4,036 | ) | ||||||||||
| Other income (loss) | — | 20 | — | (835 | ) | |||||||||||
| Interest income (expense), net | 553 | (195 | ) | 347 | (634 | ) | ||||||||||
| Equity in income of equity method investee | 16 | 44 | 535 | 966 | ||||||||||||
| Net income before income taxes | (342 | ) | 175 | 11,455 | 11,732 | |||||||||||
| Provision for income taxes | 149 | — | (21 | ) | — | |||||||||||
| Net income | (193 | ) | 175 | 11,434 | 11,732 | |||||||||||
| Less: Net Income attributable to noncontrolling interest | (169 | ) | 384 | 3,028 | 1,451 | |||||||||||
| Net income attributable to Gen Restaurant Group, Inc. | (24 | ) | (209 | ) | 8,406 | 10,281 | ||||||||||
| Net income attributable to Class A common stock per share - basic and diluted (1) | $ | (24 | ) | — | $ | 324 | — | |||||||||
| Weighted-average shares of Class A common stock outstanding - basic (1) | 4,140 | — | 4,140 | — | ||||||||||||
| Weighted-average shares of Class A common stock outstanding - diluted (2) | 4,233 | — | 4,233 | — | ||||||||||||
| Net income per share of Class A common stock - basic | $ | (0.01 | ) | — | $ | 0.08 | — | |||||||||
| Net income per share of Class A common stock - diluted | $ | (0.01 | ) | — | $ | 0.08 | — | |||||||||
| (1) (2) Basic and diluted net loss per Class A common stock is presented only for the period after the Company's organizational transactions. | ||||||||||||||||
| GEN RESTAURANT GROUP Selected Balance Sheet Data and Selected Operating Data (in thousands, except restaurants and percentages; unaudited) | ||||||||
| Twelve months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (amounts in thousands) | (unaudited) | |||||||
| Selected Balance Sheet Data: | ||||||||
| Cash and cash equivalents | $ | 32,631 | $ | 11,195 | ||||
| Total assets | $ | 183,870 | $ | 138,878 | ||||
| Total liabilities | $ | 146,352 | $ | 144,139 | ||||
| Total Stockholders' equity | $ | 36,018 | $ | (6,761 | ) | |||
| Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Selected Operating Data | (unaudited) | (unaudited) | ||||||||||||||
| Restaurants at end of period | 37 | 31 | 37 | 31 | ||||||||||||
| Comparable restaurant sales performance | -1.7 | % | n/a | 0.6 | % | n/a | ||||||||||
| Net income | (193 | ) | 174 | 11,434 | 11,732 | |||||||||||
| Net income margin | -0.4 | % | 0.4 | % | 6.3 | % | 7.2 | % | ||||||||
| Adjusted EBITDA | 1,645 | 4,985 | 18,848 | 23,958 | ||||||||||||
| Adjusted EBITDA margin | 3.6 | % | 12.2 | % | 10.4 | % | 14.6 | % | ||||||||
| Income from operations | (911 | ) | 3,393 | 8,090 | 12,352 | |||||||||||
| Income from operations margin | -2.0 | % | 8.3 | % | 4.5 | % | 7.5 | % | ||||||||
| Restaurant level Adjusted EBITDA | 7,196 | 7,878 | 33,479 | 33,638 | ||||||||||||
| Restaurant level Adjusted EBITDA margin | 16.0 | % | 19.3 | % | 18.5 | % | 20.5 | % | ||||||||
| GEN RESTAURANT GROUP Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (in thousands; unaudited) | ||||||||||||||||
| (amounts in thousands) | Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| EBITDA: | ||||||||||||||||
| Net income | $ | (193 | ) | $ | 174 | $ | 11,434 | $ | 11,732 | |||||||
| Net Income Margin | (0.4 | )% | 0.4 | % | 6.3 | % | 7.2 | % | ||||||||
| Interest income (expense), net | (553 | ) | 195 | (347 | ) | 634 | ||||||||||
| Provision for income taxes | (149 | ) | — | 21 | — | |||||||||||
| Depreciation and amortization | 1,358 | 1,096 | 4,892 | 4,353 | ||||||||||||
| EBITDA | $ | 463 | $ | 1,465 | $ | 16,000 | $ | 16,719 | ||||||||
| EBITDA Margin | 1.0 | % | 3.6 | % | 8.8 | % | 10.2 | % | ||||||||
| Adjustments to EBITDA: | ||||||||||||||||
| EBITDA | $ | 463 | $ | 1,465 | $ | 16,000 | $ | 16,719 | ||||||||
| Stock-based compensation expense (1) | 759 | — | 1,517 | — | ||||||||||||
| Gain on extinguishment of debt (2) | — | — | — | (387 | ) | |||||||||||
| Consulting fees - related party (3) | — | — | 2,325 | 4,897 | ||||||||||||
| Employee retention credits (4) | — | (949 | ) | (2,483 | ) | (3,532 | ) | |||||||||
| Litigation accrual (5) | — | — | — | 869 | ||||||||||||
| Aborted deferred IPO costs written off | 4,036 | — | 4,036 | |||||||||||||
| Non-cash lease expense (6) | 77 | 54 | 379 | 261 | ||||||||||||
| Non-cash lease expense related to pre-opening costs (7) | 346 | 379 | 1,110 | 1,095 | ||||||||||||
| Adjusted EBITDA | $ | 1,645 | $ | 4,985 | $ | 18,848 | $ | 23,958 | ||||||||
| Adjusted EBITDA Margin | 3.6 | % | 12.2 | % | 10.4 | % | 14.6 | % | ||||||||
| Reconciliation of Income from Operations to Restaurant-level Adjusted EBITDA (in thousands; unaudited) | ||||||||||||||||
| (amounts in thousands) | Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Income from Operations | $ | (911 | ) | $ | 3,393 | $ | 8,090 | $ | 12,352 | |||||||
| Income Margin from Operations | (2.0 | )% | 8.3 | % | 4.5 | % | 7.5 | % | ||||||||
| Depreciation and amortization | 1,358 | 1,096 | 4,892 | 4,353 | ||||||||||||
| Pre-opening costs | 1,557 | 480 | 3,680 | 1,455 | ||||||||||||
| General and administrative | 5,115 | 2,267 | 12,937 | 7,988 | ||||||||||||
| Consulting fees - related party | - | — | 2,325 | 4,897 | ||||||||||||
| Management Fees | - | 587 | 1,176 | 2,332 | ||||||||||||
| Non-cash lease expense | 77 | 54 | 379 | 261 | ||||||||||||
| Restaurant-Level Adjusted EBITDA | $ | 7,196 | $ | 7,877 | $ | 33,479 | $ | 33,638 | ||||||||
| Restaurant-Level Adjusted EBITDA Margin | 16.0 | % | 19.3 | % | 18.5 | % | 20.5 | % | ||||||||
| (1) | Stock-based compensation expense: During the year ended December 31, 2023, we incurred expenses related to the granting of Restricted Stock Units ("RSUs") to employees. This was recorded in General and administrative expense. | |
| (2) | Gain on extinguishment of debt: In the first quarter of 2022, we received loan forgiveness from the SBA related to the PPP Loans in the amount of | |
| (3) | Consulting fees—related party: These costs ended following the completion of the IPO in June 2023. | |
| (4) | Employee retention credits: These are refundable credits recognized under the provisions of the CARES Act. | |
| (5) | Litigation accruals: This is an accrual in 2022 related to a specific, one-time, litigation claim. | |
| (6) | Non-cash lease expense: This reflects the extent to which lease expense is greater than or less than contractual rent paid. | |
| (7) | Non-cash lease expense related to pre-opening costs: Cost for stores in development in which the lease expense is greater than the contractual rent paid. |
FAQ
What was the revenue for GEN Restaurant Group in Q4 2023?
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Did comparable restaurant sales increase or decrease in Q4 2023?
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What were the total restaurant operating expenses before pre-opening expenses as a percentage of revenue in 2023?
