GEN Restaurant Group, Inc. Class A ((GENK)) has held its Q1 earnings call. Read on for the main highlights of the call.
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GEN Restaurant Group’s recent earnings call painted a picture of both optimism and caution. The company demonstrated strong revenue growth and strategic expansion efforts, particularly with new store openings and international expansion plans. However, challenges such as a net loss in Q1 2025, potential impacts from tariffs, and a decline in same-store sales in recent months were also highlighted. While there is significant potential for growth, these challenges pose risks to achieving financial targets.
Year-over-Year Revenue Growth
GEN Restaurant Group reported a 13% increase in total revenues year-over-year, reaching $57.3 million in Q1 2025. This growth was driven by the expansion of new stores and the success of existing locations, showcasing the company’s robust revenue-generating capabilities.
Store Expansion and Strategic Growth
The company opened six new restaurants in Q1 2025, bringing the total to 49 stores, with plans to open 12 to 13 new stores by the end of 2025. This expansion includes international ventures into South Korea, marking a significant step in GEN’s strategic growth.
Improved Same-Store Sales
Same-store sales showed a marked improvement, declining only 0.7% in Q1 2025 compared to a 5.6% decline in 2024. This indicates a positive trend in the company’s operational performance.
Strong ROI and Cash Flow Model
GEN achieved a 40% ROI with a 2.1-year payback period on new stores opened in 2024. The company has grown its store count by 50% since going public in 2023 without taking on long-term debt, highlighting its strong cash flow model.
Innovative Dual-Concept Store
The introduction of a dual-concept store model combining GEN Korean BBQ and Kan Sushi aims to enhance operational efficiency and customer choice, reflecting the company’s innovative approach to business.
Net Loss in Q1 2025
Despite the positive revenue growth, GEN reported 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. This was partly due to higher costs from new restaurant development.
Challenges with Tariffs and Costs
Potential impacts from tariffs on equipment and construction materials sourced from China could affect new restaurant development costs and ROI, posing a challenge to the company’s expansion plans.
Decreased Adjusted EBITDA
Adjusted EBITDA for Q1 2025 was $1.2 million, down from $6.4 million in Q1 2024, excluding a one-time gain of $3.4 million from 2024. This decrease highlights the financial pressures faced by the company.
Same-Store Sales Decline in Q1 2025
Same-store sales were slightly negative in March 2025 and continued negative in April and May, attributed to macroeconomic factors, indicating ongoing challenges in maintaining sales momentum.
Forward-Looking Guidance
GEN Restaurant Group anticipates full-year revenues of $245 million to $250 million with a restaurant-level adjusted EBITDA margin of 17% to 18%. The company plans to open 12 to 13 new stores by year-end, including three international locations in South Korea. Despite the challenges, GEN’s high free cash flow model supports its growth strategy without incurring long-term debt.
In summary, GEN Restaurant Group’s earnings call highlighted a blend of strong growth prospects and significant challenges. While the company is on a promising path with its expansion and innovative strategies, it must navigate financial losses and external economic pressures to achieve its ambitious targets.