GEN Restaurant (US:GENK)2023-11-13 16:00Business Operations - GEN Restaurant Group operates 34 company-owned restaurants across multiple states, including California, Texas, and Florida, with plans for continued expansion[144]. - The average payback period for new restaurants is approximately 1.4 years, with new locations typically ranging from 4,700 to 12,000 square feet[145]. - The company signed leases for ten new restaurant locations, with four already opened in 2023, and expects to open three to four additional locations by the end of the year[147]. Financial Performance - Revenue for the three months ended September 30, 2023, was $45.6 million, an increase of $3.1 million or 7.4% compared to $42.4 million for the same period in 2022[179]. - Revenue for the nine months ended September 30, 2023, was $135.9 million, an increase of $13.0 million or 10.6% compared to $122.9 million in the same period of 2022[197]. - Net income for the three months ended September 30, 2023, was $2.6 million, a decrease of 5.0% from $2.8 million in the same period in 2022[179]. - Net income attributable to GEN Restaurant Group, Inc. was $337 thousand, down 85.9% from $2.4 million in the prior year[179]. - Net income attributable to GEN Restaurant Group, Inc. was $8.4 million, a decrease of $2.1 million or 19.6% compared to $10.5 million in the prior year[197]. - Adjusted EBITDA for the nine months ended September 30, 2023, was $17.2 million, down from $19.2 million in the same period of 2022[213]. - Restaurant-Level Adjusted EBITDA margin for the nine months ended September 30, 2023, was 12.7%, down from 15.6% in the prior year[213]. - Restaurant-Level Adjusted EBITDA for Q3 2023 was $8.4 million, with a margin of 18.4%, compared to $8.6 million and 20.3% in Q3 2022[217]. Cost Management - Food costs increased to $14.5 million for the three months ended September 30, 2023, reflecting a 4.1% increase from $14.0 million in 2022, with food costs as a percentage of revenue decreasing from 32.9% to 31.9%[182]. - Payroll and benefits costs rose to $14.4 million, a 14.2% increase from $12.7 million in the prior year, with payroll costs as a percentage of revenue increasing from 29.8% to 31.7%[183]. - Occupancy expenses increased by 19.1% to $3.8 million, up from $3.2 million in 2022, with occupancy expenses as a percentage of revenue rising from 7.5% to 8.3%[184]. - General and administrative expenses surged to $3.8 million, a 73.5% increase from $2.1 million in 2022, with these expenses as a percentage of revenue increasing from 5.2% to 8.3%[188]. - Total restaurant operating expenses increased to $115.5 million, up $13.9 million or 13.8%[197]. - Food costs increased to $43.6 million, up $2.6 million or 6.5%, while as a percentage of revenue, food costs decreased from 33.3% to 32.1%[198]. - Payroll and benefits costs rose to $42.4 million, an increase of $6.3 million or 17.4%, with payroll costs as a percentage of revenue increasing from 29.4% to 31.2%[199]. - Occupancy expenses were $10.9 million, up $1.8 million or 20.2%, with occupancy costs as a percentage of revenue increasing from 7.4% to 8.0%[200]. - General and administrative expenses rose to $7.8 million, an increase of $2.1 million or 36.6%, with these expenses as a percentage of revenue increasing from 4.7% to 5.7%[204]. Funding and Financial Position - The company received $16.8 million in Restaurant Revitalization Fund grants, with $13.0 million recognized as income by December 31, 2021[149]. - A new $20 million line of credit was established on September 29, 2023, with a variable interest rate of 8.750%[151]. - Cash as of September 30, 2023, was $32.1 million, an increase from $11.2 million as of December 31, 2022, while working capital improved to $10.9 million from ($22.5) million[218]. - Net cash provided by operating activities for the nine months ended September 30, 2023, was $13.5 million, compared to $13.8 million in the same period of 2022[227][229]. - Net cash provided by investing activities for the nine months ended September 30, 2023, was $1.4 million, down from $7.7 million in 2022[230][231]. - Net cash provided by financing activities for the nine months ended September 30, 2023, was $6.1 million, primarily due to IPO proceeds, offset by $26.5 million in member distributions[232]. - The company expects to pay approximately $117.2 million in tax benefits through 2037 under the Tax Receivable Agreement, with 85% payable to certain members[222]. - The company had $10.9 million in working capital as of September 30, 2023, a significant improvement from the previous year[218]. - The company anticipates that cash from operating activities and cash on hand will be sufficient to meet lease obligations and capital expenditures for at least the next 12 months[221]. Asset Management - The company recorded no impairment charges for long-lived assets during the periods presented, indicating stable asset valuation[151]. - No impairment loss was recognized during the periods presented, indicating stable asset performance[242]. - The company assesses potential impairments of long-lived assets quarterly, focusing on individual restaurant cash flows for recoverability[241]. Regulatory and Compliance - General and administrative expenses are expected to grow as sales increase, particularly due to compliance costs associated with being a public company[168]. - The company is classified as an "emerging growth company" and has taken advantage of exemptions from certain reporting requirements[243]. - The company adopted ASU 2016-02 on January 1, 2022, which requires recognition of lease obligations and corresponding right-of-use assets on the balance sheet[245]. - The company adopted ASU 2019-12 for income taxes effective in fiscal year 2022, applicable after becoming a publicly traded C corporation in June 2023[246]. Market Conditions - The company has been able to partially offset cost increases in food and beverage by increasing menu prices and making operational adjustments[249]. - Inflation primarily impacts food, beverage, labor, and energy costs, with the company mitigating increased costs through menu price increases[250]. - The company is exposed to interest rate risk, with its line of credit bearing an interest rate at the Wall Street Journal Prime Rate plus 0.25%[252]. - The company has received immaterial rent concessions related to COVID-19 that did not materially impact financial statements[244].