GEN Restaurant Group’s Earnings Call: Growth Amid Challenges

GEN Restaurant Group, Inc. Class A ((GENK)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for GEN Restaurant Group, Inc. Class A painted a mixed picture of the company’s financial health and strategic direction. While the company celebrated strong revenue growth and successful restaurant openings, it also faced challenges such as a decline in comparable sales, delayed restaurant openings, increased costs, and a net loss in the fourth quarter due to preopening expenses. Overall, the sentiment was cautiously optimistic, with a focus on overcoming current hurdles and capitalizing on future opportunities.

Exceeding Revenue Projections

GEN Restaurant Group reported an impressive $208 million in revenue for the full year 2024, surpassing both their guidance range and analyst expectations. This achievement underscores the company’s ability to drive growth and deliver strong financial performance despite a challenging economic environment.

Strong Fourth Quarter Performance

The fourth quarter was particularly robust for GEN, with a 21% year-over-year revenue growth and a 25% increase in total adjusted EBITDA. These results highlight the company’s operational efficiency and its capacity to generate significant earnings even in the face of rising costs.

Successful New Restaurant Openings

Since the previous year-end call, GEN has successfully opened nine new restaurants, bringing its total to 46 locations nationwide. This expansion reflects the company’s strategic focus on increasing its footprint and capturing a larger share of the market.

Positive Comparable Restaurant Sales

Despite a 5.6% decline in comparable restaurant sales in 2024, the first two months of 2025 showed a promising turnaround with a 1% increase. This positive trend indicates a potential recovery in customer traffic and sales performance.

International Expansion Plans

Looking beyond domestic growth, GEN announced plans to expand internationally, with at least two new locations in South Korea slated for 2025. This move represents a significant step in the company’s growth strategy, aiming to tap into new markets and diversify its revenue streams.

Comparable Sales Decline

The company faced a 5.6% year-over-year decline in same-store sales for 2024, a challenge that GEN is addressing through strategic initiatives and pricing adjustments to boost sales and customer engagement.

Delayed Restaurant Openings

GEN encountered delays in opening new restaurants, with only six out of the planned 10 to 11 locations opening in 2024. These delays were attributed to issues with local and state government permits, highlighting the regulatory challenges in the restaurant industry.

Increased Cost of Goods Sold

The cost of goods sold as a percentage of company restaurant sales increased by 160 basis points in the fourth quarter and 80 basis points for the full year, reflecting the pressure of rising costs on the company’s profitability.

Net Loss in Fourth Quarter

GEN reported a net loss before income taxes of $1.2 million in the fourth quarter, primarily due to preopening costs. This underscores the financial impact of expanding operations and the importance of managing expenses effectively.

Forward-Looking Guidance

Looking ahead, GEN Restaurant Group has set ambitious targets for 2025, including a revenue goal of $245 million to $250 million and plans to open 10 to 13 new units, excluding the three already opened in 2025. The company aims for an adjusted EBITDA margin of 18% or higher, reflecting its commitment to maintaining profitability while pursuing growth.

In summary, the earnings call for GEN Restaurant Group, Inc. Class A revealed a company navigating both opportunities and challenges. With strong revenue growth and strategic expansion plans, GEN is well-positioned for future success, though it must address current issues such as cost management and sales declines to achieve its ambitious goals.