GEN Restaurant (US:GENK)2024-05-17 17:31Financial Data and Key Metrics Changes - In the first quarter, total revenue increased by 16% to $50.8 million compared to $43.9 million in the first quarter of 2023, driven primarily by new unit openings and the addition of the Hawaii restaurant [9][18] - Net income was $3.7 million or $0.11 per diluted share, down from $4.5 million in the first quarter of 2023, largely due to increased expenses related to new restaurant development and general administrative costs [89] - Adjusted EBITDA increased to $6.4 million, compared to $5.8 million for the first quarter of 2023, with an adjusted EBITDA margin of 16.4% compared to 19.6% in the prior year [39][88] Business Line Data and Key Metrics Changes - The company opened two new restaurants in Seattle and Dallas in the first quarter, and a new location in Jacksonville, Florida in April, contributing to the goal of opening eight to nine new restaurants in 2024 [7][21] - The new premium menu launched at all 40 locations has shown to improve revenues, particularly in March, and is expected to increase average customer checks in the coming quarters [8][30] Market Data and Key Metrics Changes - Same-store sales decreased by 1.8% in the first quarter of 2024, which was better than the estimated 3% drop [37][74] - The company maintained a strong balance sheet with $28.1 million in cash and cash equivalents, down from $32 million at the end of December due to nonrecurring payments [12] Company Strategy and Development Direction - The company aims to develop 20 to 30 additional new restaurants by the end of 2026, more than doubling its size since the IPO [21][85] - The focus remains on maintaining profitability while expanding, with a strategy to minimize kitchen space and maximize table numbers, allowing for lower prices and better value for customers [84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in growth prospects, emphasizing that the company remains profitable and is well-positioned to deliver notable growth and shareholder value over the next three years [36][90] - The company is navigating an uncertain consumer demand environment, focusing on providing value and operational efficiencies to combat external pressures, particularly in labor costs [20][57] Other Important Information - The company has no long-term debt, except for a minor $5 million in government-funded loans, and has $20 million available in its revolving line of credit [25] - The cost of goods sold as a percentage of restaurant sales increased by 80 basis points to 33.4% due to the new premium menu [87] Q&A Session Summary Question: Can you provide insights on the sales performance in a challenging environment? - Management acknowledged good sales performance despite challenges faced by operators in the first quarter [13] Question: What are the expectations for the premium menu rollout? - The premium menu has been rolled out across all units, and while initial data is still being gathered, there is an expectation of increased sales from this offering [30][31] Question: How are new restaurant openings performing? - New openings have performed well, with some locations exceeding sales expectations, attributed to good locations and execution [76][64] Question: What is the impact of the FAST Act on traffic and pricing? - Management noted that while they have not raised prices significantly, they are focused on maintaining value amidst rising labor costs [57][67] Question: What are the lead times and costs for new openings? - Lead times for new openings vary by location, but improvements have been made in reducing build-out times and costs [58]