GEN Restaurant (US:GENK)2025-05-13 22:02Financial Data and Key Metrics Changes - In Q1 2025, the company reported a 13% year-over-year increase in total revenues to $57.3 million, driven by restaurant expansion and existing location success [5][18] - Same store sales decreased by 0.7% in Q1 2025, a significant improvement from a 5.6% decline in 2024 [6][7] - Restaurant level adjusted EBITDA margin was 15.6%, slightly below the annual goal of 17-18% due to costs from new openings [7][20] - The company experienced a net loss before income taxes of $2.1 million in Q1 2025, compared to a net income of $3.8 million in Q1 2024, which included a one-time gain [22][23] Business Line Data and Key Metrics Changes - The company opened six new restaurants in Q1 2025, increasing the total to 49 locations, with plans for 12-13 new stores by February 2026 [6][28] - Adjusted EBITDA for Q1 2025 was $1.2 million, down from $6.4 million in Q1 2024, but improved when excluding a one-time gain [23][24] Market Data and Key Metrics Changes - The company is expanding into South Korea, planning to open three new restaurants in 2025, with the first expected by the end of Q2 [15][16] - The construction cost for new units in South Korea is projected to be 25-30% lower than in the US, enhancing potential returns [58] Company Strategy and Development Direction - The company focuses on a value-priced all-inclusive dining model, which is expected to support long-term growth [5][18] - Initiatives include enhancing training programs, expanding gift card sales through major retailers, and testing dual concept stores [11][12][13] - The company is prepared to pause new unit expansion if tariffs significantly impact construction costs [17][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic pressures affecting consumer demand, particularly in recent months [32][33] - The company remains confident in achieving revenue targets of $245-250 million for 2025 and an annual run rate approaching $300 million by year-end [16][28] Other Important Information - The company has a strong liquidity position with $15.4 million in cash and only $5 million in long-term debt [24][27] - The founding group retains 85% ownership, aligning their interests with public shareholders [25] Q&A Session Summary Question: Can you discuss same store sales progression in Q1 and current trends? - Management noted strong performance in January and February, but a slight decline in March and continuing negative trends in April and May [32][33] Question: What gives confidence in achieving the 17-18% EBITDA margin target for 2025? - Management indicated that Q1 is typically the lowest quarter and expects to improve margins as the year progresses [47][48] Question: What are the expectations regarding the impact of tariffs on new builds? - Management expressed uncertainty about price increases for equipment and materials from China but is prepared to pause construction if necessary [50][51] Question: How are the new restaurant openings performing? - Management stated it is too early to assess performance, with mixed results from the new locations [52] Question: Can you break down Q1 performance in terms of average check versus traffic? - Management reported a 2.5% increase in average check but a 10-11% reduction in customer traffic, resulting in a less than 1% overall decline [56] Question: What are the expectations for the South Korean market? - Management highlighted the competitive landscape and lower construction costs, indicating potential for strong returns despite economic pressures [58][60] Question: What is the current redemption rate for gift cards? - Management reported stabilization around 65%, with indications that gift card users tend to spend more during visits [61][62]