Executive Summary

Q2 2025 revenue was $55.0M, up 2.2% YoY but below Wall Street consensus ($60.3M), driven by weaker same-store traffic tied to April tariff headlines and regional ICE enforcement; adjusted EPS was $0.04, above consensus $0.01, while GAAP EPS was $(0.05) . Consensus values retrieved from S&P Global.*
Restaurant-level adjusted EBITDA margin improved sequentially to 16.3% (from 15.6% in Q1), aided by labor efficiencies and operational adjustments; adjusted EBITDA was $1.9M vs $4.9M in Q2 2024 on higher pre-opening costs .
Management reaffirmed four-wall (restaurant-level) margin guidance of 17–18% for FY25 and indicated projections from earlier in the year remain intact; GEN remains on pace to open 12–13 new units in FY25 and could exceed that target with 7 additional projects under development .
First dividend of $0.03 per share was paid in Q2; management cited automation/AI adoption and training investments as near-term margin levers, with July sales showing improvement post-April traffic dip, a potential near-term stock catalyst if comps continue to recover .

What Went Well and What Went Wrong

What Went Well

Sequential margin improvement: Restaurant-level adjusted EBITDA margin rose to 16.3% in Q2 from 15.6% in Q1 as labor efficiencies took hold . Management: “We made quick directional changes to deploy more automation, and we are using some AI tools to get our labor in a more efficient cost” .
Strategic expansion milestones: First international store opened in South Korea; nine new restaurants YTD by early Q3, with seven under development and on pace to exceed 12–13 new units in 2025 .
Brand monetization: Continued scaling of Costco gift cards; started Sam’s Club gift cards and outlined packaged product lines (meats, jerky, soju, sauces, frozen) via Sysco distribution, broadening revenue channels beyond restaurants .

What Went Wrong

Revenue miss vs consensus: Q2 revenue $55.0M vs $60.3M consensus; comparable sales down 7.2%, pressured by tariff headlines and ICE enforcement in key states (CA, TX, NV) where ~60% of customers are Hispanic, leading to a traffic drop in April–June . Consensus values retrieved from S&P Global.*
Profitability headwinds: Adjusted EBITDA fell to $1.9M (3.4% margin) from $4.9M (9.1%) in Q2 2024, reflecting higher pre-opening costs ($2.1M) and occupancy from new units; loss from operations was $(1.9)M (3.4% of revenue) .
Same-store sales volatility: April–June saw pronounced declines, with improvement only starting in July; premium menu adoption improves check but modestly lifts COGS by ~0.5–1% .

Financial Results

Sequential comparison (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$54.654	$57.337	$55.041
GAAP EPS ($USD)	$(0.04)	$(0.06)	$(0.05)
Adjusted EPS ($USD)	$(0.02)	$0.04	$0.04
Adjusted EBITDA ($USD Millions)	$2.056	$1.249	$1.854
Adjusted EBITDA Margin (%)	3.8%	2.2%	3.4%
Restaurant-Level Adjusted EBITDA ($USD Millions)	$9.305	$8.959	$8.958
Restaurant-Level Adjusted EBITDA Margin (%)	17.0%	15.6%	16.3%
Loss from Operations Margin (%)	(2.4)%	(3.8)%	(3.4)%
Comparable Restaurant Sales (%)	(4.8)%	(0.7)%	(7.2)%

YoY comparison (Q2 2024 vs Q2 2025)

Metric	Q2 2024	Q2 2025
Revenue ($USD Millions)	$53.860	$55.041
Adjusted EBITDA ($USD Millions)	$4.875	$1.854
Restaurant-Level Adjusted EBITDA Margin (%)	19.0%	16.3%
Net (Loss) Income before taxes ($USD Millions)	$2.075	$(1.814)
Adjusted EPS ($USD)	$0.13	$0.04
Comparable Restaurant Sales (%)	(5.6)%	(7.2)%

Estimates vs Actual (Q2 2025)

Metric	Consensus Estimate*	Actual Q2 2025
Revenue ($USD Millions)	60.26*	55.041
Primary EPS ($USD)	0.01*	0.04 (Adjusted EPS)
EBITDA ($USD Millions)	4.427*	0.376 (GAAP EBITDA)
# of Estimates (Revenue / EPS)	3 / 3*	—

*Values retrieved from S&P Global.

KPIs and operating data

KPI	Q4 2024	Q1 2025	Q2 2025
Restaurants at End of Period	43	49	50
Pre-opening Costs ($USD Millions)	2.253	2.648	2.051
Cash & Cash Equivalents ($USD Millions)	23.675	15.364	9.610
Dividend per Share ($USD)	—	—	0.03
G&A ex. SBC ($USD Millions)	5.6	5.6	5.7
Occupancy Expenses ($USD Millions)	4.726	5.091	5.121

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$245–$250M	Management indicated projections unchanged; no specific update in Q2 release	Maintained
Restaurant-Level Adjusted EBITDA Margin (“four-wall”)	FY 2025	17–18%	Reaffirmed 17–18% on the call	Maintained
New Restaurants	FY 2025	12–13 units	On pace to exceed target; nine opened YTD by early Q3; seven under development	Maintained (on pace to exceed)
Dividend	Q2 2025	—	First dividend paid $0.03/share	New

Earnings Call Themes & Trends

Topic	Q4 2024 (Previous Mentions)	Q1 2025 (Previous Mentions)	Q2 2025 (Current Period)	Trend
AI/Technology for efficiency	Limited explicit mention	Dual-concept design efficiency (shared back-of-house)	“Deploy more automation” and “using some AI tools” to improve labor cost	Increasing focus
Supply chain/tariffs/macro	Price actions; comps turned +1% in early 2025	Tariff risk to kitchen equipment/construction; may pause builds if costs spike	April tariff headlines and regional ICE enforcement drove traffic drop; July improved	Headwinds peaked in Q2, easing by July
Premium menu adoption	Helped comps; pricing well-received	+7% impact to sales offsetting traffic declines	Mix lift ~5–7% sales; +0.5–1% COGS differential	Steady adoption
International expansion (South Korea)	Plan ≥2 locations in 2025	Plan 3 locations; 1st slated end of Q2	First store opened; 2 more expected by end of month	Execution progressing
Training/management bench	Emphasis on training	Continued investment in training	“Spending more time and efforts on training”	Ongoing, scaling
Brand extensions	Costco gift cards performing strongly	Adding Sam’s Club; testing e-gift cards; Sysco product distribution	Expanding Sam’s Club; packaged products (meats, jerky, soju, sauces, frozen)	Broader monetization
Legal/regulatory	—	—	Litigation accrual noted in non-GAAP recon	Isolated item

Management Commentary

“During the month of April, after the global tariffs were announced, we saw a sharp downturn in our restaurant customer traffic… Despite these adverse conditions… we have seen improvements in our sales and cost starting in the last July.” — David Kim, CEO .
“We generated a 2.2% year over year increase in total revenue to $55,000,000… Restaurant level adjusted EBITDA was 16.3%… Total adjusted EBITDA for the 2025 was $1,900,000…” — Thomas Croal, CFO .
“We made quick directional changes to deploy more automation, and we are using some AI tools to get our labor in a more efficient cost… benefits… definitely on the third quarter.” — Management on margin levers .
“We’re pleased to report solid results… opening of our first restaurant in South Korea… While our same store sales traffic was down in May and June, customers began to return in July.” — Q2 8-K commentary .
“We expect to open more restaurants in South Korea in the 2025… built at approximately one third the cost of our US stores…” — CEO on international unit economics .

Q&A Highlights

Comps trajectory: April–June down; price increase of ~2.8% implemented at beginning of year; July showed bounce-back . Premium menu mix expected 5–7% of sales with ~0.5–1% COGS impact .
New unit performance: Q1 openings performing “average”; South Korea sales “slow but picking up”; two more openings in Korea by month-end .
Guidance: Four-wall margins (17–18%) reaffirmed; management “not revising” despite a challenging quarter .
Efficiency initiatives: Automation and AI deployed to improve labor; broader training programs to address manager pipeline constraints .

Estimates Context

Revenue missed consensus materially: $55.0M actual vs $60.3M estimate, reflecting April traffic shock and regional enforcement impacts; sequential margins nonetheless improved . Consensus values retrieved from S&P Global.*
Adjusted EPS beat: $0.04 actual vs $0.01 estimate, implying stronger-than-expected non-GAAP profitability despite revenue shortfall . Consensus values retrieved from S&P Global.*
EBITDA miss vs consensus: GAAP EBITDA $0.376M actual vs $4.427M estimate; note company emphasizes restaurant-level adjusted EBITDA ($8.958M) and adjusted EBITDA ($1.854M), both down YoY given pre-opening and occupancy cost increases . Consensus values retrieved from S&P Global.*

Implications: Sell-side models may reduce revenue and EBITDA assumptions for Q3–Q4 given Q2 miss and comp volatility, while maintaining four-wall margin targets if labor efficiencies scale; adjusted EPS paths may see limited downward revisions given cost control and July improvement signals .

Key Takeaways for Investors

Sequential margin recovery is underway, supported by automation/AI and training; watch for confirmation in Q3 as management expects more benefits to materialize .
Revenue softness was largely macro/regulatory-driven and showed early July recovery; near-term stock reaction could hinge on weekly comp trends normalizing post-April shock .
International expansion adds attractive unit economics (one-third build cost vs U.S.) with controlled risk; execution in Korea is a medium-term upside lever .
Brand monetization (Costco/Sam’s gift cards; Sysco consumer products) provides incremental demand and check lift, offsetting traffic variability; monitor premium menu mix and COGS impact .
Capital discipline remains intact: $9.6M cash, minimal bank debt ($7M), $20M revolver available; first dividend signals confidence in cash generation despite growth capex .
Guidance intact: four-wall margin 17–18% and 12–13 new units for FY25 maintained; potential to exceed unit openings offers upside but could temporarily pressure G&A and pre-opening costs .
Investment thesis: If comps stabilize and margin levers scale, valuation should reflect resilient unit economics and a growing footprint; risk factors include tariff-driven build cost volatility and regional enforcement impacts on traffic .

GEN Restaurant Group, Inc. (GENK)·Q2 2025 Earnings Summary