GENK

Please be advised that this call is being recorded today, Monday, August 10th, 2026. I would now like to turn the conference over to Lucas Zimmerman, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for standing by. Welcome to GEN Restaurant Group's second quarter 2026 earnings conference call. During today's presentation, all participants will be in a listen-only mode. Following the prepared remarks, the call will be open for questions. This conference is being recorded today, Monday, August 10th, 2026, and the earnings press release accompanying this call was issued after the market closed today. Joining us for today's call are GEN Restaurant Group's Chairman and Chief Executive Officer, David Kim, and Chief Financial Officer, Luke Hewko.

Before we begin, I'd like to remind everyone that some of the statements management makes on this call are forward-looking statements that reflect current expectations about future operating and financial results, including expectations relating to the company's CPG division, growth prospects, and statements regarding the non-binding letter of intent and the proposed transaction contemplated thereby, including whether definitive agreements will be executed or any transaction consummated. Although management believes these expectations and assumptions are reasonable, they remain subject to significant risks and uncertainties, and the actual results could differ materially from what is stated or implied today. For more information, please refer to the Forward-Looking Statement section in today's press release and the risk factors described in the company's annual report on Form 10-K for the year ended December 31st, 2025, and subsequent filings with the Securities and Exchange Commission.

The forward-looking statements made on this call speak only as of today, and the company undertakes no obligation to update them except as required by law. Please also note that today's call will include a discussion of adjusted EBITDA, restaurant-level adjusted EBITDA, and adjusted net income or loss, which are non-GAAP financial measures. Important information, including reconciliations to the most directly comparable GAAP measure, is detailed in today's press release. With that, it is my pleasure to turn the call over to GEN Restaurant Group's Chairman and Chief Executive Officer, David Kim. David, the floor is yours.

Thank you, Lucas, and good afternoon, everyone. Thank you for joining us today for our second quarter 2026 earnings conference call. I want to start today somewhere different than I normally would. Not with a number and not with our restaurants, but with where the food business in this country is going and why I believe GEN is standing in exactly the right place at exactly the right time. One of the things that I have learned in the past 15 years building this company is that you cannot manufacture demand. You can only find it and then get in front of it. What I want investors to understand is that Korean food in America is not a trend we are trying to create. It is current that is already running hard, and it is getting stronger every quarter. Let me put some outside numbers behind that.

Korea's government reported in January that K-food exports to the U.S. grew 13.2% in a single year. Korean sauce exports hit a record $411 million. Ramen crossed $1.5 billion, up nearly 22%. This is not a niche. This is a global food culture arriving in America's homes at scale, and the American consumer is reaching for it. Circana Consumer Intelligence platform has reported that retail sales of Asian packaged food in the United States grew nearly four times faster than overall packaged food sales in a market where total packaged food dollar growth has been running in the low single digit with flat units. In its category work on Korean food, Circana found kimchi cases up 80%, the strongest growth of any vegetable it tracked.

Supermarket News reports that 61% of Americans say they like or want to try Korean foods, and the pull-through is visible in American grocery data. Asian food unit sales in mainstream U.S. supermarkets are growing roughly 4% a year on unit growth in a market where overall packaged food units are flat. Part of what is unlocking shelf space is generational. As veteran purchasing managers retire, the younger managers being promoted grew up inside the Korean culture wave, the K-pop music, the Netflix movies, the K-dramas, the live shows, and of course, the foods. They know these products. That wave have reached Middle America, where Korean is the fastest-growing of the international food categories, tracking roughly 10% annual growth internationally, led by Gen Z and millennial shoppers. There are millions of Americans who have never experienced Korean barbecue in the grocery aisles.

The second tailwind is just as important, and it is about where this demand is being served. The American Frozen Food Institute and FMI released the fourth edition of their Power of Frozen in Retail report in February. U.S. frozen food is now an $87 billion business, and it has grown more than 45% since 2019. The single best-performing corner of that aisle? Frozen processed meat and poultry, which more than doubled to $8 billion. That is our aisle. That is our category. Within that report is the number that matters most to a company like ours. 71% of frozen shoppers say they are actively looking for items they have not bought before, and 30% say they plan to buy more frozen in the year ahead. A brand new to the freezer case usually has to fight for trial. Right now, the consumers is coming and looking for us.

The channel data tells the same story. Over the same period, retail club grew frozen food sales by nearly 14%, far outpacing the traditional grocery. Warehouse clubs and mass merchandisers like Walmart and Target now account for as much of the frozen dollars as conventional supermarkets do. We launched our retail business in grocery, and it gives us our foundation. Our newest push has been the club channel led by Costco. That was not an accident, and as you will hear in a moment, it is working. The third current is the one every restaurant operator in America is feeling, and I am not going to pretend otherwise. Circana reported that U.S. food service traffic declined 0.3% in 2025, and they project industry-wide traffic growth of less than 1% this year. Consumers have not stopped wanting restaurant food.

They are simply feeling the strain of the macro environment, and they cannot pay restaurant prices as often as they would like. Conagra sized this precisely in their Future of Frozen report earlier this year. Takeout-style frozen food is now a $14 billion category, and they contribute its growth directly to global flavors and to consumers recreating the restaurant experience at home. Here is the picture. Restaurant traffic is flat. The freezer aisle is booming. Korean flavors are among the fastest-moving thing in global food. Restaurant-quality food sold in grocery stores is a $14 billion category. Every one of those current runs straight through GEN, a real restaurant brand with a proven retail engine. I think GEN is one of the best-positioned companies to take advantage of this, which brings me to the point I want everyone to understand today.

Most CPG brands hope a consumer who has never heard of them picks up the package. We do not have that problem. We have served millions of customers at the GEN tables. Those guests already know what our bulgogi tastes like. When a shopper sees our packages in the freezer aisle and freezer doors, we are not introducing ourselves for the first time. We are being recognized. BDA Partners, in their study of Asian food's rise in North America, calls the winning formula Accessible Authenticity. This is a very good description of what GEN sells. Our in-store demonstration staffed by our own trained people continue to deliver sell-through well above typical demo programs. Let me talk about capital, because this is the part I think the market has not yet fully appreciated. Opening a GEN restaurant is a good business, and it built everything we have.

It is a capital-intensive business with very stiff competition. Every new location requires meaningful build-out, a construction timeline, a lease commitment, and a ramp-up period. Our CPG division does not work that way. We do not own a single manufacturing plant. We produce through co-packing partners who make our products through GEN's own recipes and quality standards, just as we do in the restaurant business. That means our growth comes down to speed, execution, and scale. We can add a SKU, add a region, or double a production run in weeks. We scale with purchase orders, not capital projects. The consequence of that are significant, and I want to say them plainly. We can grow this business quickly without major CapEx. Our incremental return on invested capital in CPG is meaningfully higher than what we can achieve opening restaurants in this environment. The margin profile is structurally better.

We continue to expect this division to deliver EBITDA margins in the high teens at scale after promotional investments. Simply put, we found a way to take our brand that we spent 15 years and a lot of capital building and monetize it in a channel that requires much less. The CPG division is already profitable. Our CPG business delivered its best quarter yet, with revenue up 341% sequentially from the first quarter, driven by frozen raw non-cooked marinated meats. June was our biggest month, with revenue surpassing $2 million and GEN products being placed in nearly 2,000 retail doors nationwide.

Exceeding the expectations set on March 20th press release, which stated, "By the end of 2026, GEN is projected to have our CPG products in 1,500-2,000 locations across the United States, with a run rate in excess of $20 million in revenue." With all the other stores in the current pipeline, we are estimating the 12-month revenue run rate going forward to be between $35 million-$40 million. The pipeline extends well beyond the doors already secured. Current customers include the likes of, and not limited to, the Albertsons banners, the Stater Bros., Smart & Final, Save Mart, BevMo!, and multiple Costco regions. More than 1,000 additional doors have been presented to buyers, including the likes of BJ's Wholesale Clubs, Walmarts, cruise lines, and wholesalers like Sysco of the world.

These are not just names we're mentioning, but have had meetings and are in the process of testing our products. Furthermore, more than 8,000 future doors are in active outreach with grocery stores and mass retailers. I want to describe this business the way we now run it in three distinct layers. The first layer is the core, and it is the engine of our run rate. Frozen raw non-cooked marinated meats in the freezer section. Six SKUs of beef, pork, and chicken. That is the frozen aisle in the U.S. retail meat market that topped $100 billion last year and reached nearly 98% of American households in the world of big names like Tyson and Conagra, and it is where roughly 90% of our focus remains. The second layer is where we go next. Freshly prepared replacement meals in the deli section.

The world of Kevin's and the Del Real Foods. Kevin's was acquired by Mars for roughly $800 million, which tells you what that category is worth. Grocers tell us there is room for both. Frozen raw and pre-cooked replacement meals are two separate categories, and we intend to be in both. We will support this with new branded offerings, new packaging technologies, and new protein formats. We believe the daily cook side of the business can ultimately be a multiple, double or triple, of what our frozen section is today. The third layer is what we call the Korean incubator, the beverages, the snacks, the beef jerkies, and other non-meat related SKUs manufactured in South Korea. We started this because the grocery markets we serve wanted more GEN Korean products from us, and now its velocity is starting to grow.

Regarding execution, GEN already buys over $40 million of meat a year for its restaurants. The procurement scale, supplier relationships, and buying power that CPG requires are already built. We are not standing up a supply chain from ground zero. We are pointing an existing one at the freezer aisle. To meet this demand, the company has also addressed supply chain and manufacturing capacity, securing multiple manufacturing partners across several states and overseas in South Korea. This proves GEN has the ability to execute and scale. Now, I want to discuss the announcement we made today, because I do not want anyone to mistake it for a defensive move. It is not. As we discussed, we received a non-binding letter of intent from a nationwide multi-concept restaurant operator to acquire only the company's U.S. restaurant operation, including assignment of related restaurant leases.

The LOI contemplates a transaction to be valued at approximately $100 million for the restaurant operations alone only. Under the terms contemplated by the LOI, GEN will retain 100% of its rapidly growing CPG and retail business. The proposed transaction will allow GEN to put its capital and focus behind its fastest growing business, the CPG. The proposed transaction could create value for shareholders in two distinct ways. First, the sale will monetize GEN's restaurant operations while materially strengthening the company's balance sheet, eliminating long-term liabilities tied to the restaurant business, and providing additional capital. Second, shareholders would retain a second opportunity to create value, full ownership of GEN's rapidly growing CPG business and full participation in its accelerating growth and rising revenue run rate.

Our Board of Directors with our financial and legal advisors is reviewing it under the proper protocols of a public company and may evaluate a broader process, and there can be no assurance that any transaction will result. Consistent with that, we do not intend to comment further on or provide updates regarding the proposal unless and until we determine that further disclosure is appropriate or required. Before I hand off, I want to formally welcome Luke Hewko to his first earnings call as our Chief Financial Officer. Luke joined us effective June 1, succeeding Tom Crowell, who retired following a planned succession process. I want to thank Tom once again for his years of service and partnership. Luke is a builder. He is a builder in exactly the right places.

He built a direct-to-consumer e-commerce business into the foundation of a platform that grew to more than $100 million in annual revenue, and then built and led a finance organization through a successful sale to a Nasdaq-listed company. We are also strengthening the organization around this opportunity, adding senior CPG executives, including Mark Cutrona, who is a result-driven CPG sales professional with more than 30 years of experience in account management, broker leadership, category management, and trade marketing, who will be focused on expanding the east of Texas. Luke, over to you.

Thank you, David, and good afternoon, everyone. It is a privilege to be speaking with you on my first earnings call as GEN's Chief Financial Officer. Since joining in June, I have spent my time deep in our operations, our systems, and our data. What I have seen has only strengthened my conviction in the opportunity in front of us. My focus as CFO is on building the financial foundation that scalable multi-channel growth requires. Disciplined inventory controls, margin visibility by channel and by SKU, rigorous forecasting, and clear KPI reporting. Let me walk you through our second quarter results. Total revenue increased 1.2% to $55.7 million in the second quarter of 2026, compared to $55 million in the second quarter of 2025.

As the increase in revenue from our CPG business and revenue from our restaurants opened in 2025 and 2026 more than offset a decline in comparable restaurant sales. The loss of revenue from the restaurants we contributed to a joint venture during the quarter, which contributed $2.3 million of revenue in the prior year period. This quarter marked a return to year-over-year revenue growth, following a 6% revenue decline in the first quarter of this year. Cost of goods sold was 39.1% of revenue, compared to 33.8% a year ago, an increase of just over 5 percentage points. Of the $3.2 million increase in food cost dollars, 81% came from our CPG business, which carries a retail cost of goods sold and was not in the prior year period. The balance reflects commodity cost inflation in our results.

Payroll and benefits improved to 28% of revenue from 30.1%, an improvement of roughly 2 percentage points, reflecting continued labor efficiencies. Occupancy costs were 9.6% of revenue compared to 9.3%. The restaurants we exited operated through their respective transfer dates, so the occupancy benefit from those exits begins in the third quarter. Other operating costs were 12.1% of revenue compared to 10.7%. Restaurant pre-opening expenses declined to $1.3 million from $2.1 million in the prior year period, reflecting our deliberate slowing of new development. Loss from operations was $5.2 million, or 9.2% of revenue, which includes a $0.6 million loss on a lease termination, compared to a loss from operations of $1.9 million, or 3.4% of revenue, in the prior year period. General and administrative expenses totaled $7.1 million, or 12.8% of revenue, compared to $6.4 million or 11.6% of revenue in the prior year period.

That increase is entirely investment in our CPG go-to-market, including marketing and in-store demonstrations. Excluding CPG, our corporate and restaurant general and administrative expenses declined year over year. Net loss was $4.6 million compared to a net loss of $1.7 million in the second quarter of 2025. Net loss attributable to GEN Restaurant Group was -$0.14 per basic and diluted share of Class A common stock, compared to -$0.05 per share in the prior year period. Turning to our non-GAAP measurements. Restaurant level adjusted EBITDA was $6.3 million or 11.3% of revenue, compared to $9 million or 16.3% of revenue in the second quarter of 2025. However, this quarter marked a sequential inflection. Restaurant level margin improved from 7.4% in the first quarter and 7.9% in the fourth quarter of 2025, our strongest margin in three quarters.

Turning to the balance sheet, cash and cash equivalents were $5.9 million as of June 30, 2026, compared to $2.8 million as of December 31, 2025. Total debt outstanding was $24 million, compared to $14.6 million at year-end. The increase in borrowing primarily reflects an $11 million net draw on our line of credit, which funded working capital, including the inventory build behind our CPG expansion, while we cut first-half capital expenditures to $5.3 million from $16.5 million a year ago. Finally, let me update our outlook for the balance of 2026. We are reaffirming our full year revenue guidance of $215 million-$225 million. On the portfolio, we expect to complete the fifth and final restaurant transfer under our previously announced transaction in the third quarter and keeping development spending near maintenance levels.

Our focus remains on improving operations and margins at our existing restaurants and growth through our CPG initiatives. That completes my financial review. I will now turn the call back to David for some closing remarks before we open the line for questions. David?

Thank you, Luke. Our priorities for the balance of 2026 are simple, and there are three of them. First, protect profitability in our restaurants through disciplined development, continued labor efficiencies, direct action wherever possible on food cost, and operating benefits of our joint venture structure. Second, scale CPG aggressively. Convert as much of the current pipeline as possible by year-end, and keep doing it in a capital-efficient way. Co-packers, third-party distribution, and our own people running the demos. Third, maintain the financial discipline that lets us put every available dollar behind the highest return opportunity we have. I said at the beginning of the call that you cannot manufacture demand. You can only get in front of it. Korean food is moving into American mainstream. The freezer aisles is where American families are increasingly shopping, and club channels is where they are shopping most.

GEN sits at the intersection of all three with a brand millions of guests already know and trust, and a business model that lets us scale into the opportunity without heavy capital investment. We're building a formidable K-food platform in the United States, and I believe the most valuable chapter of this company story is the one directly in front of us. With that, operator, let's open the lines for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, it is star one if you wish to ask a question. One moment please for your first question. Our first question comes from the line of Todd Brooks from StoneX. Please go ahead.

Hey, thanks for taking my questions. A lot of news tonight, a lot of ground to cover here, so thanks for the time. I appreciate it. First of all, I know we're not talking about the transaction itself. But if we could talk about the run rate goals that you set out for the next 12 months for the CPG business, David, that $35 million-$40 million. What's the algorithm that gets you there as far as velocity levels, where you would be as far as launching the non-core prepared food tier, which you sized at 2x to 3x? How do you envision getting to that $35 million-$40 million run rate?

The run rate was something that we discussed in the beginning of last quarter, I believe, and we're meeting those run rates today or exceeding them. That's why we were able to talk about that and disclose it. One of the areas that this run rate is current business that we have. It contemplates very little of new business. We wanted to be as conservative as we can, and if we do start getting into larger agreements with the likes of larger names other than who we have already have distribution going in today, we will come out and let the street know that the projection could change to a bigger number. But this run rate that I have put out, that our company put out, is just currently what we're running right now.

And what right now means is, it's taking longer than I thought by the time you make a presentation to the decision-making to every grocers have their own different calendar year dates of when you can go present and how they start changing and accepting new products in. But the run rate that I'm talking about are currently what we're selling today. And we are monitoring the velocity very carefully because it's one thing to go into the grocery markets, it's another thing to keep it in the grocery market. So, we support that with promotions, we support that with demos, and et cetera. So, going back to your question is the run rate that we've disclosed at $35 million-$40 million is just what we are going to do with the current sales we have with very little new customers coming on board.

That implies that July revenue, because the $2 million in June really annualizes to 24, July stepped up over the $3 million level then?

Yeah. That June was a run rate where we got into new locations. Those are new businesses. Once you go into new businesses, they order based on velocity. They either order every two weeks, every four weeks, but mostly they are ordering every two weeks.

Okay.

That June number that we talked about is a lot of new business that we got on the shelves into the doors.

Okay, great. I know you talked about the three tiers of products, and the prepared food is still on the come. When you look at the incubators, and you talked about some improving velocities there, in your discussions with your retail partners, do you really need to offer 50 SKUs in the category or can this be rationalized back to a number that would still give you a dominant presence within the Korean category, but not trying to stock and support 50 different product SKUs?

I agree with you. We are focused on just the meat products. The additional SKUs that we got into was not a choice we made, but it is 130 locations. They wanted to try it, and I couldn't turn them down because the velocity on the meats was high. So I said, "We'll do it." But the data is coming out of that, I can't deny the fact that it keeps growing. It is not growing by single digit. These are growing by double digits here. Yes, it will distract us from our core focus. Our focus is meats right now. There is a good and a bad about dealing with the other SKUs other than the meats. The good is, the manufacturing capacities that are set up in South Korea, these are big conglomerates, and we don't have a capacity issue.

The only issue that we will have is maintaining inventory, because it takes a longer time by the time an order is placed from manufacturing to shipping to the warehouse to the customer. In the meat side of the business, we get a PO, we place a PO with the manufacturer, and they produce it and ship it directly to our end user. So the inventory time is much shorter than buying products from South Korea. Yes, we probably did not want to do it, but the market forces is telling us if it is double-digit increases, and some are triple-digit increases, which we don't understand why it is so high, I cannot just say ignore it. I'll say, "Okay, let's get that incubator division with some personnel and make sure." The margins are much, much better in that category versus the meat category.

But our whole focus right now, the driver, is meat, because that's where all the consumers are spending their money right now.

Okay, great. Two more and then I'll jump back in queue. The $35 million-$40 million revenue run rate over the next 12 months, what do you envision being the contribution from the fresh prepared meals? What's the lead time to really get that sort of business stood up in grocery? How fast can that be done, and how much of a contributor is that within the $35 million-$40 million that you've kind of vocalized here?

We did not put the prepared meat category, the cooked one, in that projection at all. This is only what we are selling currently today on the frozen side. When that comes on, it has been some time that we have been working on this, but we many times, as I said, the market is dictating us right now. The market keeps telling us, and then the buyers keep What is the word? They are really pressuring us to say, "Come up with the cooked replacement product line. We need it desperately."

When that is mentioned in that way, the reason why we are slow to roll that out is we want to focus on the frozen side, because the cooked side has a little different technology involved in making it right, because the current competitors in the field that makes cooked food does not have the kind of velocity that the grocers are telling us, because they do not taste good. We are very concerned about the taste and the texture profile, and we are just not going to put out bad products. It took a little longer to get through that, but we are in testing phases now. We approved three out of the four products to launch. Once we conclude the fourth one, we are actually introducing the cooked product to the grocers as we speak today.

We do not even have packaging done, but we got the meats the way we want it. That is not factored in at all in the projection whatsoever. The industry, and including the buyers, keep telling us that the replacement prepared meal business is double the sales than the frozen products. That is all we keep hearing. We are saying, "Okay. As long as we get that taste profile right, we get that texture right, then we will launch." We have three out of the four done. I do not want to say anything negative about the space we are going to go into, but the space is going to be direct competition with the likes of the Kevin's Natural Foods, which they grew very fast during the COVID era, and they are like the big gorilla at this time.

There is pressure from the marketplace and the buyers about the taste profile that their customers are experiencing. They want something better than them. That is the space that we will continuously fight for.

Okay, and then last one for me. Assuming that this transaction announced tonight ends up proceeding and the restaurant operation goes to a new owner, you talked about as you've been building the early stages of the CPG business, that you've been levering a lot of the restaurant-related labor for trial and sampling and things like that. I'm just trying to think, does the profitability in this business dip if the restaurant operation is separated out and you've got to go and build that capability yourself with new folks? Just what sort of scale do you need to get to that high teens type of EBITDA margin for CPG? Thanks, David.

I don't know how to answer that in the context how you're asking. So if I'm not answering it properly, please rephrase the question to me again, okay? But initially, the way that I'm thinking the answer to be is, we own the brand. The brand does not go anywhere. They're only buying the restaurant and the leases. We even have talked to them about doing co-ops of maybe some of their products to go into the CPG with us, and using some of their infrastructure if need be in the future. But we are not selling the brand. We're keeping the brand. So I don't know if that was the question that you're asking.

We can cover that one in a follow-up. Just what you think you need from a revenue scale to get to the high teens EBITDA margin target that you're talking about for CPG. Thanks.

We're actually achieving that now. We're getting more conservative. Actually, our EBITDA margins are higher than what we're disclosing right now.

That's right. Thanks, David.

At this time, this concludes our question and answer session. I would now like to turn the call back to Mr. Kim for closing remarks.

Thank you very much for listening to our quarterly call. If there's any questions or concerns, please let us know, and thank you very much for your time.

Thank you. This concludes today's conference call. You may now disconnect your lines, and thank you for your participation.

Call is being recorded on Thursday, May 14th, 2026. Now I would like to turn the conference over to Thomas Croal, the company's Chief Financial Officer. You may begin.

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2026 earnings release. If not, it can be found at www.genkoreanbbq.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal security laws, including, but not limited to, statements regarding growth plans and potential new store openings, as well as those types of statements identified in our annual report on Form 10-K for the year ended December 31st, 2025, and our subsequent reports filed with the SEC. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a more detailed discussions of the risks that could impact our future operating results and financial condition. Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events. During today's call, we will discuss some non-GAAP financial measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and our SEC filings, which are available in the Investor Relations section of our website. Now, I'd like to turn it over to our Chairman and CEO, David Kim.

Thank you, Tom. Good afternoon, everyone. In the first quarter of 2026, the economic challenges continued to impact customer traffic for all restaurant businesses. Just as we began seeing improvement in January, the increase in fuel prices because of the war has reduced customer discretionary spending. This impact has been particularly pronounced for GEN as approximately 45% of our stores in the U.S. are in California, where gas prices have climbed to over $6 a gallon. This has led to a decrease in our same-store sales of approximately 8.8% for the quarter, although our same-store sales decline improved from 11.7% in the fourth quarter of 2025.

In our continued response to the changing economic environment, several directional changes were made at the end of 2025 and in the 1st quarter of 2026 through initiatives designed to improve the company's value proposition. First, during March of 2026, as part of an ongoing portfolio update, we entered into a partnership with Chubby Cattle International related to 5 of our restaurants. We will own 49%, and Chubby Cattle will own 51% of these restaurants, which will be operated under the Chubby Cattle brand. Importantly, these joint ventures are far different than closing a restaurant as the locations remain open and continue generating value. The 1st two conversions took place on May 1st, 2026, with 2 more scheduled for June 1st, 2026, and the final conversion on August 1, 2026.

This transaction created a $4.5 million write-down. We anticipate no further liability from the deal and expect these five restaurants to generate strong EBITDA going forward, of which we're entitled to 49%, enhancing our overall profitability. This will reduce our loss positions in these five restaurants starting in the second and third quarters of 2026. Second, we also have several operational initiatives currently in progress to improve the financial results of our restaurants. A. We're adjusting our menu to streamline options in response to stubborn increases in our food cost. B. We're enhancing our incentive program with restaurant managers to drive stronger store-level execution and performance.

C, we're testing new boba drinks as well as soju drinks, which have shown promising sales during the launch. D, following two quarters of research and preparation, we are exploring a new digital platform to enhance our customers' online experience. In parallel, we plan to roll out our Gen loyalty program in quarter 2 and have begun accepting cryptocurrency for payments. We're also preparing to launch our enhanced e-commerce website, which will offer an expanded selection of our GEN branded products. Finally, we have made the strategic decision to slow restaurant developments to 5 to 7 openings for the full year of 2026 and have proactively suspended construction on six additional stores. This disciplined capital allocation strengthens our balance sheet and reduces near-term expenses. We have also initiated an AI program to drive further efficiencies and reduce corporate overhead.

As a further update, our Costco gift card program continues to contribute to our brand presence with cumulative sales since inception reaching over $30 million. In October 2025, we announced the creation of a new division within the company to develop and sell CPG products to grocery stores. We started by testing our products at over 30 locations in Southern California in October 2025, and the customer response significantly exceeded our expectations. We're now confident in an estimated run rate of over 2,000 locations in supermarkets across the country. We plan to announce a financial forecast for the CPG division at the end of quarter 2.

Our retail product lineup under the exclusive GEN brand is anchored by our core meat offerings, complemented by a growing selection of additional products spanning from beef jerky and beef chips, frozen sides, snack chips, sauces and seasonings, ready-to-drink beverages, and sojus sold under our GENJU brand. Here are a breakdown of our 56 SKUs. Core frozen meats, 6 SKUs. Beef jerkies, 6 SKUs. Frozen meat and sides, 12 SKUs. Snack chips, 6 SKUs. Sauces and seasonings, 6 SKUs. Ready-to-drink beverages, 9 SKUs. Sojus, 11 SKUs. Part of the expansion of our ecosystem is our CPG placement, including Soju, with the number one beverage retailer on the West Coast, BevMo!. Our growing lineup of shelf-stable Korean snacks and beverages, as previously mentioned, represents a meaningful expansion of our non-meat product catalog.

These single-serve formats are well-suited for convenience-driven channels such as 7-Eleven and other convenience stores, opening a significant growth opportunity beyond our core meat offerings. Additionally, at the end of May, Albertsons is launching a regional test of our full shelf-stable product lineups across 150 stores. Based on the projected numbers, we anticipate additional regions to follow. With the strength of our restaurant labor force, GEN has deployed trained team members to local grocery stores to demo our products, which have been highly successful in driving sell-throughs. Unlike many grocery demos, which are run by outside companies with no product knowledge, our restaurant staff brings firsthand expertise that creates a dynamic sales presentation and significantly lifts product sales. Combined with our well-known GEN brand and great-tasting Korean-inspired food, this makes it easy for our staff to introduce our products to new customers.

Additionally, last week, we announced the launch of our Costco Roadshow demonstration series, a multi-region initiative bringing GEN signature ready-to-cook marinated meats to Costco members in Oregon, Washington, Alaska, and Texas. Powered by our restaurant staff, this launch marks the next chapter in GEN's growing retail presence and supports our broader phased retail expansion strategy. We anticipate this will lead to permanent shelf space. Separately, we recently announced a major milestone in GEN's retail expansion, our first direct Southern California and Hawaii regional Costco purchase order, securing freezer aisle placement for 1 SKU of our ready-to-cook marinated meat across approximately 40 Costco warehouse locations. Importantly, this order was issued without a preceding regional roadshow requirement, reflecting GEN's strong regional brand presence proven retail execution and demonstrated customer demand.

We also plan to conduct roadshow activations within the Southern California and Hawaii locations, not as a prerequisite for placement, but as a demand-driven initiative to support the rollouts. By the end of 2026, we're confident in an estimated run rate of over 2,000 supermarket locations across the U.S. We estimate that our CPG products could be carried in 7,000-8,000 locations by the end of 2027. With this expanded growth, we believe we can achieve a run rate of over $100 million in annual revenue in as soon as three years, as we have stated previously. After accounting for slotting fees and promotional marketing investments, the company projects EBITDA margins in the high teens.

GEN's strong brand recognition is a key driver behind our retail momentum and a testament to the connection we've built with customers through our restaurants, Costco gift cards, and social media. This momentum is further amplified by the Korean culture wave, including globally dominated acts like BTS and Blackpink, along with the expanding influence of Korean streaming, food, fashion, and lifestyle, all creating measurable tailwinds for the Korean BBQ as a retail category. Korean food remains under-penetrated, yet the most sought-after cuisine in the ethnic food category. As we grow this business, GEN will offer many Korean food SKUs under the GEN K-Food ecosystem. At GEN, we have always had a strong operating model. When combined with meaningful expansion across both core and new concepts, we're executing with focus and discipline to create shareholders value.

Now, I'd like to hand the call over to Tom for a detailed look at our first quarter of 2026 financial performance.

Thank you, David. Since David already reviewed sales, I will begin with operating expenses. Cost of goods sold as a percentage of company restaurant sales increased to 38% in the first quarter of 2026, compared to 33.6% in the first quarter of 2025, an increase of approximately 440 basis points. A large portion of this increase reflects inflationary cost increases in addition to more new restaurants in operation and a minor impact from our premium menu. As a result of the inflationary impact on our meat prices, we implemented a $1 price increase at the majority of our restaurants in the first quarter of 2026, which equates to about a 2.5% price increase overall.

Payroll and benefits as a % of company restaurant sales remained relatively flat in the first quarter of 2026, increasing from 31.7% in 2025 to 32.1% in the first quarter of this year. Occupancy expenses as a % of company restaurant sales increased by 184 basis points to 10.7% compared to the first quarter of last year. This is primarily due to higher rent at our 2025 and 2026 new locations, along with the impact of decreases in same-store sales from 2025 to 2026.

Compared to the fourth quarter of 2025, occupancy costs as a percentage of restaurant sales decreased 45 basis points from 11.2% to 10.7% in 2026. Other operating expenses as a percentage of company restaurant sales increased 169 basis points to 12% compared to the first quarter of 2025, primarily due to the decrease in same-store sales. Other operating expenses in the first quarter of 2026 decreased by 38 basis points compared to the fourth quarter of 2025. G&A excluding stock-based compensation during the first quarter was $6.2 million compared to $5.7 million in the year ago period. This increase is primarily due to marketing and professional fees.

In the first quarter, we had a net loss before income taxes of $7.5 million, which equated to $0.22 per diluted share of Class A common stock, compared to a net loss before income taxes of $2.1 million, which equated to $0.06 per diluted share of Class A common stock in the first quarter of 2025. If you look at adjusted net income, a non-GAAP measure. We had a net loss of $4.5 million or $0.14 per diluted share of Class A common stock in the first quarter of 2026, compared to adjusted net income of $1.4 million or $0.04 per share in the first quarter of last year.

As a result of the decrease in sales and the inflationary driven increase in costs, our restaurant level adjusted EBITDA for the first quarter of 2026 was $4 million or 7.4% of total revenue, compared to $9 million or 15.6% in the first quarter of 2025. Restaurant level adjusted EBITDA margin was flat compared to the fourth quarter of 2025. Total adjusted EBITDA for the first quarter of 2026 was -$3.2 million, as compared to $1.2 million in the first quarter of 2025. After removing pre-opening costs for both periods, adjusted EBITDA for the first quarter of 2026 was -$2.1 million, compared to $3.3 million for the first quarter of 2025.

Now, turning to our liquidity position. As of March 31st, we had approximately $4.4 million in cash and cash equivalents. We have $15.5 million available from our revolving credit facility. As we previously discussed, we anticipate using a portion of our revolving credit facility this year as we continue to open new restaurants in the future and grow our grocery store initiatives. In 2026, we have significantly slowed our new restaurant growth plans and focus our efforts on improving operations and margins at our existing restaurants and growth through our grocery store initiatives. Before concluding, I want to reiterate what we said on our last call. Our balance sheet reflects $164 million in lease liabilities as required under GAAP through the new ASC 842 lease accounting standard.

These are not financial obligations in the form of long-term debt, but rather the accounting recognition of our future lease commitments. Importantly, they are offset by $140 million in operating lease assets. To wrap up, we anticipate opening 5-7 stores by the end of 2026. We're targeting full year revenues of $215 million-$225 million and achieving restaurant level adjusted EBITDA margins of 15%-15.5% in the second half of 2026. By the end of 2026, we anticipate being at an annual run rate approaching $250 million in revenue. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have.

Operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press star followed by 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star followed by 2. Once again, that will be star 1 to ask a question. One moment, please, for your first question. Your first question comes from the line of Todd Brooks with Benchmark. Please go ahead.

Hey, guys. good to talk to you. Thanks for taking my questions. Appreciate it.

Hi, Todd.

Hey, Tom. Tom, David, I know that celebration season's important for the brand. We just came through Mother's Day. We still have fuel prices going against us. Any commentary on kind of quarter to date trends that you're willing to share, and if we're seeing stabilization yet, or if it's just being overwhelmed by kind of the growing macro pressure on the consumer?

We have gained a lot of improvement on the food cost side. In terms of sales decrease, it's kind of the same as the first quarter. Consumers are definitely getting pressured because of things like the fuel costs and all that, especially in California. We make up a good percent of our stores there. We have not seen any improvements in sales part, but we definitely have seen we made a lot of good improvements on the food cost side.

Okay, great. Tom, just the thought, I know that you took the price increase during the quarter, which works out to about 250 basis points, but can you talk to what average check trends have been, quarter to date? I'm just trying to figure out how to flow, the price increase through for modeling.

Yeah.

if there's any mix pressure against it.

Right. In the first quarter, there was really no material change in our check. I think we've seen a pickup in the second quarter a little bit from the price increase.

Okay, great. Wook Jin Kim, more of a strategic question for you. As we think about balancing the two sides of the house here, so we have a restaurant business where we're trying to really slow the growth, retrench operations a little bit, fortify the profitability of that business to support the balance sheet to really be able to unlock the growth that you see in front of you for the CPG opportunity. What steps and what's the right restaurant operation look like for GEN K as far as number of units, geographic mix going forward to really stabilize to go after the growth opportunity that you see on the grocery CPG side? Thanks.

Todd, I need a little clarity. Is the question based on the growth of the restaurant side or growth on the CPG side? I'm sorry.

No. With the struggles, from a same-store sales standpoint on the restaurant side and kind of the EBITDA performance that we saw in the quarter, my sense is with things like the Chubby Cattle transaction, the suspending on the construction of the six units, that we're trying to really stabilize the restaurant business so it's not a big drag on EBITDA to kind of free up the balance sheet to support the growth in CPG.

The question was? I'm so sorry. It's my fault.

No, no. I must not be asking it well. What does the GEN Restaurant Group operation look like at a right size level in your mind? Then at that level it would free you up to grow CPG. I'm just trying to think of, okay, where do you see the GEN brand kind of shaking out versus the size of the operation right now?

The size of the restaurant operation will be the same or a little more. It's not as much as the fast growth we took the last 2 years. The size will be just a tad more than where we are today because some stores we're moving into the partnership with Chubby Cattle, and we still have a good 4 to 5 that we're finishing up building at this time. That will come on board this year. There will be some 2, I think, or 3 next year.

Next year. Right. Okay.

We can always assess it later at that time, you know, how these new stores come on board and how the same-store sales, if it gets better. That's how we see the restaurant side. On the CPG side, you know, we've been publishing for the last 2 weeks, all these new contracts that we're getting. We have a lot more. We just cannot disclose the lot more now is because it takes a long time from the time we make the presentation, they commit, they have to put into their computer system, we have to put it into their distribution system. They have to now put it out to the store level. There's a lag time that we're learning how that works.

Once we get all those established, then we will announce it. Okay? We don't wanna announce something that they said they'll carry, but, you know, it takes 9 months to get it into the stores. We have a lot more right now that we have gotten commitments that we're following through to get it into their stores. We just haven't announced it yet.

Okay, great. Thanks, David.

All right. Thank you. Once again, if you would like to ask a question, simply press star one on your telephone keypad. The next question comes from the line of John-Paul Wollam with ROTH Capital Partners. Please go ahead.

Great. Thanks, guys, for taking my questions. Appreciate the time. Maybe just to start, in terms of, you know, understanding kind of the comp environment and, you know, maybe just, Thomas Croal, for you, could you describe a little bit in terms of what your guys' expectation is that's baked into the revenue guide for the year? I guess what I'm really, you know, curious about there is sort of how you're thinking about the back half of the year developing. You know, last year we had sort of the immigration issue, and now this year we've got a bit more kind of pricing macro pressure.

You know, how are you thinking about the customer base and your confidence that, you know, customers will be returning at some point versus sort of structural changes to what the customer base and AUVs are going forward?

Well, I can answer that. The, these sudden events that we've encountered as a retailer, these are very like sudden non-expected events. It's like an unexpected car accident, I would say. When these, I mean, tariff was a very big event. We were not the only one that got caught in that sudden changes. Of course, we had the ICE issues, that's all died down. Especially in California, the gas prices, when the media says that average price is $4, it's $7 out in California.

That impacts a lot of people. until things start to stabilize we've gone through this kind of cycles before in several years back when, you know, prices were at the $7 and impacted us. I think everything will start to settle down. When we start settling down, the customer base of that K-shaped economy, 'cause we're dealing with the lower middle to lower end part of the customer base, they have to come back. I'm not a predictor of how the administration will, you know, have these very unexpected events that gets created.

Okay. Sounds good. You know, thinking about some of the operational initiatives you talked about, I know we talked about them last quarter as well. I'm not sure if you can kind of parse out when exactly some of those took effect. Anything you can share in terms of kinda quantifiable impacts in the quarter to date, in terms of restaurant-level margin from those initiatives?

Some of the initiatives that we are taking right now is the menu reduction, that's almost done. That's coming into place. We're testing some other types of products other than the soju and the boba. All those actually are coming into play. We just got some numbers in, but not enough. We're being very careful how we roll these out because if we roll this out too quickly, we don't have enough bench strength or the ability to actually execute it the right way. We're actually rolling out in a very small manageable way. Those manageable way of rolling out, we're seeing definite improvement in the margins of food cost.

Okay. Switching gears, you know, in terms of the retail business, but I think last time we spoke, the kinda estimated contribution for the year was around $10 million. Just, you know, seeing the sort of pace of distribution wins that you guys press released, I'm just curious if that number and the kinda expected contribution for the year has changed at all.

It will change for sure. We are probably going to establish a projection on the next quarter, but no later than the third quarter. We have definite numbers coming in, and we'll exceed that.

Okay. One last one, if I could. You know, again, just pointing to kind of the strength in some of these recent wins. I'm just wondering if there's anything sorta quantifiable you can share with us in terms of, you know, at existing stores, how are GEN meats performing on a, on a velocity basis, whether that's any kinda sales per week data or, you know, relative to the industry. I guess, what can you share, to kinda help us understand what's driving all these wins?

On the supermarket side or the or the restaurant side?

On the supermarket side.

We have a very strong brand, at least in the areas of where our restaurants are. How we know this, these are certain data points. Number one, the buyers at these supermarket chains are customers of ours, the purchasing people that work for these grocery stores. We start that data point. The second data point is when we see velocities, how much they're buying every week or every 2 weeks. Just going into grocery stores is not a good gauge. What good gauge is what's the velocity after they purchase the product? Are customers buying it? That is continuously growing.

Third, we have not announced all the other backlog negotiations that's completed and going through the process of onboarding, because we only want to disclose what we're onboarding to be very clear because maybe the buyer changes and they change their mind and, you know, they don't come through with the PO. We just want to make sure we go through that PO. That's one.

The real gauge is that when we have a team of people that we extract from our restaurants, those are the people that do a lot of upselling. They're top-tier staff of ours. They actually help us, and we run a separate P&L for the CPG division. It's still all owned under GEN Korean BBQ. They report to us every night after they're done with their demonstration on how many we sell. In a lot of this grocery industry, a lot of these companies hire outside firms. But the companies that sell into the grocery, the brands, and let's just, for example, I'll take a bacon company, right?

They'll hire companies to go and demonstrate their products, but the demonstration companies are out there representing the brand, but they don't send their own employees who sell the brand into the grocery stores. In our case, we don't use outside firms. We send our own staff who is very knowledgeable about our products. What we keep getting on the return every night of these tests, we've done over 100 tests so far, and the next three months we'll probably be doing about over 300 demos out there. Every demo that we get, the response from the customers, it's like a 60%, they already know our brand. They're familiar with our brand. Even the ones that are not familiar, once they taste our product, it is very different.

Our brand, I can't disparage other competitors' brands, our brand, taste-wise, we're very bold and we're very strong. We'll stand behind that. Even when we go demonstrate for the buyers at the grocery stores, when they taste our food, they say, "You guys are much better." We have strength in all different areas. Now, will this strength carry to other states that we don't have a GEN, a GEN brand out there? That is going to be tested on the fourth quarter. Areas like Illinois, areas like Boston, okay? There are some big chains that have signed up with us that we are going to help them with our products in their shelves by doing demos for them.

We have a lot of ground staff on the ground getting data, and these data show. By the way, when we do our demos at the store, at the grocery level, the grocers continuously run out of our GEN products. These days, we don't go and do demos unless they have several 100 of our products there. It's that successful. Not all brands that hire companies to go demonstrate their products don't even come close to where we heard, and I cannot, I will not verify this, but we just heard over the grapevine today that one of the CEOs of the company heard how successful we are with the demos, and we will be having a prolonged conversation with them.

Once that conversation takes place, they already have an interest. We already go into that market. If they do go forward with the whole chain, we will be announcing that. There's a lot of positive momentum, but yet getting it into the store process just taking a long time.

Yeah. That's very helpful detail. I appreciate it. Best of luck, guys.

Thank you.

Thank you.

Thank you. That concludes our question and answer session. I would like to turn it back to Mr. Kim for closing remarks.

Thank you very much for always believing in what our brand is. We are taking very good look at the new direction, and we're very excited about the growth. Thank you very much. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.