GEN Restaurant (US:GENK)2024-03-07 01:00Financial Data and Key Metrics Changes - The company achieved record revenues of $181 million for the year ended December 31, 2023, representing a growth of 10.6% compared to $163.7 million in 2022 [10][50] - For the fourth quarter, revenue increased by 10.4% to $45.1 million compared to $40.8 million in the fourth quarter of 2022, primarily driven by new unit openings [50] - Same store sales decreased by 1.7% in the fourth quarter of 2023 compared to the same period in 2022 [50] - Adjusted restaurant level EBITDA as a percentage of total revenues was 16% compared to 19.3% in the fourth quarter of 2022 [71] Business Line Data and Key Metrics Changes - The company opened six new restaurants in 2023, including three in the fourth quarter [10][11] - The average unit volume (AUV) for the restaurants opened in 2022 and early 2023 is approximately $5 million, with a payback period of about 2.2 years [6][43] Market Data and Key Metrics Changes - The company plans to open eight new restaurants in 2024, with two already opened in Q1 [5][10] - The company is negotiating 10 additional leases for potential openings in 2025 [12] Company Strategy and Development Direction - The company aims for double-digit revenue growth in 2024, driven by new restaurant openings and operational improvements [4][10] - The company is focused on maintaining a low-cost structure by utilizing a "cook it yourself" model, which reduces labor costs and allows for a smaller kitchen footprint [17] - The company is testing new menu items and drinks, which could enhance guest experience and drive incremental sales [40][74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities ahead, citing a solid foundation for creating a great guest experience [49] - The company is aware of potential economic downturns and is cautious about pricing strategies to maintain perceived value [81] - Management noted that labor costs are under pressure due to rising minimum wage rates in certain markets, particularly California [42] Other Important Information - The company has a strong balance sheet with $31 million in cash and cash equivalents and no long-term debt except for $5 million in government-funded loans [53] - General and administrative expenses for the fourth quarter were approximately $4.4 million, higher than previous guidance due to new personnel for restaurant development [20] Q&A Session Summary Question: What is the expected margin improvement for fiscal year '24? - Management indicated that the restaurant level EBITDA margin should approach 18%, up from 16% in the fourth quarter, driven by operational efficiencies [24] Question: Can you clarify the cadence of unit openings? - Management confirmed that the majority of the remaining six new restaurants for 2024 are expected to open in Q4, with some openings potentially in Q2 and Q3 [27][39] Question: How is the company addressing labor cost pressures? - Management acknowledged that while the company is not legally impacted by the upcoming minimum wage increase, surrounding labor market pressures could affect staffing costs [42] Question: What are the expectations for same store sales trends? - Management reported that same store sales are trending positively, moving from double-digit negative to single-digit negative, with some locations turning positive [62] Question: How is the company managing its supply chain and distributor switch? - Management stated that the transition to a new distributor is improving, with ongoing meetings to address delivery issues and stabilize food costs [34]