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GEN Restaurant Group, Inc. (GENK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $50.4M (+2.7% YoY) with GAAP diluted EPS of -$0.11 and Adjusted EPS of -$0.02; results missed consensus on revenue and EBITDA and continued to reflect comp softness and start-up costs from accelerated unit growth .
  • Management reduced FY 2025 revenue guidance to $220–$225M and restaurant-level adjusted EBITDA margin to 15.0–15.5%, down from Q1’s $245–$250M and 17–18%; annual run-rate target by YE reset to ~$250M from ~$300M .
  • Key call themes: comps -9.9% and expected softness into Q4; inflationary meats and no near-term price hikes; grocery expansion to >600 doors with early traction and minimal slotting; potential moderation of 2026 unit growth if macro doesn’t improve .
  • Stock reaction catalysts: revenue/EBITDA miss vs Street, lowered FY guide, negative comps and margin compression offset by non-restaurant growth optionality (grocery, branded products) and long-term AUV/unit economics emphasis .

What Went Well and What Went Wrong

What Went Well

  • Opened six restaurants in South Korea and 15 YTD; total locations reached 57, exceeding the initial 12–13 target for 2025 and underscoring unit growth execution .
  • Restaurant-level adjusted EBITDA of $7.6M (15.0% margin) highlighted resilient four-wall profitability despite macro headwinds and new unit mix; labor efficiencies lowered payroll and benefits by 155 bps vs Q2 .
  • Grocery initiative launched with ready-to-cook meats in >600 stores (Albertsons/Safeway/Vons/Pavilions) with favorable early data and minimal slotting in SoCal, expanding the brand ecosystem and providing margin-accretive revenue optionality .

What Went Wrong

  • Comparable sales declined 9.9% in Q3 (vs -9.1% YoY) amid tariff impacts and ICE enforcement headwinds (California/Texas), with softness persisting into Q4-to-date .
  • EBITDA of -$1.46M and Adjusted EBITDA of $0.23M reflected inflationary meat costs, occupancy ramp from new stores, and $2.3M pre-opening expense; cost of goods sold rose 334 bps YoY .
  • Premium menu eroded food cost by ~1% with ~4–5% penetration; management is reworking menu presentation and testing higher-quality Wagyu, acknowledging discomfort with current economics .

Financial Results

Quarterly Actuals: Income Statement and Profitability

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$57.337 $55.041 $50.418
GAAP Diluted EPS ($)-$0.06 -$0.05 -$0.11
Adjusted EPS ($)$0.04 $0.04 -$0.02
Net Income ($USD Millions)-$1.964 -$1.698 -$3.628
Net Income Margin (%)-3.4% -3.1% -7.2%
Loss from Operations ($USD Millions)-$2.176 -$1.880 -$3.739
Loss from Operations Margin (%)-3.8% -3.4% -7.4%
EBITDA ($USD Millions)-$0.149 $0.376 -$1.460
Adjusted EBITDA ($USD Millions)$1.249 $1.854 $0.226
Restaurant-level Adjusted EBITDA ($USD Millions)$8.959 $8.958 $7.555
Restaurant-level Adjusted EBITDA Margin (%)15.6% 16.3% 15.0%

Year-over-Year Comparison (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$49.105 $50.418
Net Income Before Taxes ($USD Millions)$0.284 -$3.899
GAAP Diluted EPS ($)$0.01 -$0.11
Adjusted EBITDA ($USD Millions)$3.436 $0.226
Restaurant-level Adjusted EBITDA Margin (%)18.2% 15.0%
Comparable Sales (%)-9.1% -9.9%

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Restaurants at End of Period49 50 57
Comparable Restaurant Sales Performance (%)-0.7% -7.2% -9.9%
Cash & Cash Equivalents ($USD Millions)$15.364 $9.610 $4.793
Total Assets ($USD Millions)$232.363 $246.327 $245.539
Total Liabilities ($USD Millions)$188.071 $203.801 $205.952
Stockholders’ Equity ($USD Millions)$42.792 $41.026 $38.087

Consensus vs Actuals (S&P Global) – Miss/Beat Summary

MetricQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 Actual
Revenue ($USD)$57,421,670*$57,337,000 $60,260,000*$55,041,000 $54,250,330*$50,418,000
Primary EPS ($)-0.01*$0.04*0.01*$0.04*-0.043*-0.02*
EBITDA ($USD)$3,706,000*-$149,000 $4,427,000*$376,000 $2,174,330*-$1,460,000
Target Price ($)$5.17*$5.17*$5.17*$5.17*$5.17*$5.17*
# EPS Estimates3*—3*—3*—
# Revenue Estimates3*—3*—3*—

Values marked with an asterisk were retrieved from S&P Global.

Notes: GENK’s “Primary EPS actual” in S&P Global reflects -$0.02 for Q3; GAAP diluted EPS was -$0.11 per company filings, and Adjusted EPS was -$0.02, explaining the apparent discrepancy in EPS lenses .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)FY 2025$245M–$250M $220M–$225M Lowered
Restaurant-level Adjusted EBITDA Margin (%)FY 202517%–18% 15.0%–15.5% Lowered
Annual Run-Rate Revenue ($USD)By YE 2025~$300M ~$250M Lowered
New Restaurants (Units)FY 202512–13 17 total (incl. 6 South Korea) Raised
DividendQ2 2025First dividend $0.03/share paid No update provided Q3Maintained/Not reiterated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Macro: Tariffs & ImmigrationQ2: Headwinds from tariffs and immigration concerns; July traffic stabilization noted Continued softness; comps -9.9%; softness persists into Q4-to-date; regional pressure in CA/TX Worsening comps; caution maintained
Pricing & Meat InflationQ1: Strategic pricing actions; premium menu introduced Meat prices “all-time high”; no near-term price hikes; premium menu minor negative impact on food costs Margin pressure; holding price
Unit Growth & PipelineQ1: On track for 12–13 new stores incl. 3 in South Korea 15 opened YTD; 57 stores; 6 South Korea; 2 more by YE; 17 FY total; considering 2026 moderation if macro stays weak Acceleration in 2025; cautious 2026 outlook
Grocery/CPG ExpansionQ1: Incubator division projects; brand extensions >600 doors; minimal slotting in SoCal; early test success; $100M 4–5 year revenue ambition; potential Midwest and big-box tie-ins Positive traction; optionality rising
Labor EfficienciesQ2: Sequential payroll & benefits improvements (-163 bps vs Q1) Further efficiencies (-155 bps vs Q2); exploring tech/AI while guarding service levels Improving productivity
South Korea StrategyQ2: First restaurant opened 6 units; brand mix (GEN vs Kan Sushi) with Kan outperforming; AUV expectations and sub-$1M build costs Scaling with attractive economics
Regulatory/AccountingQ2: Litigation accrual in non-GAAP recon; lease accounting under ASC 842 Reiterated lease liabilities vs operating lease assets; caution vs ROA metrics; litigation accrual continues Transparency; investor education
Competitive LandscapeQ1: Brand strength emphasized Entrepreneurs still opening competitors; banks reporting peer softness Competitive intensity persists

Management Commentary

  • “The third quarter continued to be a very challenging environment for the restaurant business… We’re pleased to report the opening of our first six restaurant in South Korea… we will be offering ready-to-cook meats at over 600 grocery stores in California and Hawaii.” — David Kim, CEO .
  • “We have not taken any price increases since the 2024 and meat prices are at an all time high. We… will not raise our prices in the near term… Payroll and benefits… decreased… due to recently rolled out labor efficiencies.” — Tom Croal, CFO .
  • “We’re targeting full year revenue of $220,000,000 to $225,000,000 and achieving restaurant level adjusted EBITDA margins in the 15% to 15.5% range… annual run rate of approximately $250,000,000 of revenue when all our new restaurants are open.” — CFO .
  • “Our AUV revenue is $5,200,000 per restaurant… Our business model revolves around growing our footprint to capitalize on the short duration to recoup our initial investment…” — CEO .
  • “It was the first time [the grocer] allowed their brand to come in without committing to a slotting fee on Southern California… Northern California and Hawaii… very small slotting fees.” — CEO .

Q&A Highlights

  • South Korea unit economics: Kan Sushi outpacing GEN; AUVs ~$3–4M for Kan and ~$2–3M for GEN; build costs ~$0.8M per store (substantially lower than U.S.) .
  • Comps/traffic: Softness continued into Q4-to-date; strongest months ahead (Nov/Dec) will be key; headwinds tied to tariffs and ICE enforcement in CA (and some TX) .
  • Grocery initiative: >600 locations secured; early tests show strong velocity without discounting; minimal slotting in SoCal; broader SKU roadmap and potential big-box cross-merchandising with gift cards .
  • Unit growth pacing: 7 under construction (2–3 opening by YE); ability to pause additional 11 depending on macro; willingness to moderate 2026 growth to prioritize margins/cash flow .
  • Premium menu: ~4–5% penetration; ~1% food cost erosion; menu revamp planned with tests of higher-quality Wagyu; caution on rollout timing to avoid execution risk .

Estimates Context

  • Q3 2025: Revenue missed ($50.418M vs $54.250M consensus*) and EBITDA missed (-$1.460M vs $2.174M consensus*). S&P “Primary EPS” showed actual -$0.02 vs -$0.043 consensus*, while GAAP diluted EPS was -$0.11 and Adjusted EPS was -$0.02 .
  • Q2 2025: Revenue missed ($55.041M vs $60.260M*), EBITDA well below ($0.376M vs $4.427M*), while S&P “Primary EPS” actual $0.04 exceeded $0.01 consensus*; GAAP diluted EPS was -$0.05 .
  • Q1 2025: Revenue in-line ($57.337M vs $57.422M*); EBITDA far below (-$0.149M vs $3.706M*); S&P “Primary EPS” actual $0.04 exceeded -$0.01 consensus* .

Values marked with an asterisk were retrieved from S&P Global.

Implication: Street models likely need to revise FY revenue to $220–$225M and four-wall margins to ~15–15.5%; increased pre-opening and occupancy costs plus inflationary meats suggest near-term EBITDA/EBIT margin compression, partially offset by labor efficiencies and non-restaurant revenue initiatives .

Key Takeaways for Investors

  • Revenue/EBITDA misses and lowered FY guide reflect macro headwinds and new restaurant start-up costs; near-term estimate cuts are likely for revenue, EBITDA, and margins .
  • Unit growth execution remains strong (57 locations; 17 opens in 2025 incl. 6 SK), but management is prepared to moderate 2026 growth if conditions don’t improve—supportive of margin stabilization and cash preservation .
  • Grocery/CPG expansion (>600 doors; minimal slotting; SKU roadmap) provides differentiated, asset-light optionality that could diversify revenue and enhance blended margins over time .
  • Pricing discipline (no near-term price hikes) plus labor efficiencies indicate focus on customer loyalty/service and operational productivity amid inflationary meats; expect continued mix/margin management .
  • Premium menu requires re-optimization; watch forthcoming menu revamp tests (e.g., higher-quality Wagyu) for food cost impact and potential upsell margin improvement .
  • South Korea expansion appears promising with lower build costs and healthy AUV expectations (especially Kan Sushi); international scaling could improve capital efficiency and returns .
  • Near-term trading: Risk skewed to downside on comps/margin compression and guidance reset; medium-term thesis hinges on AUV-driven unit economics, brand ecosystem expansion, and disciplined growth pacing .