GEN Restaurant Group, Inc.

Good afternoon and welcome to the Gen Restaurant Group, Inc., Second Quarter 2026 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. Please be advised that this call is being recorded today, Monday, August 10, 2026. I would 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 10, 2026, and the earnings press release accompanying this call was issued after the market closed today. Joining us for today's call are Jin 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 CPT 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 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 Jen 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. And what I want investors to understand is that Korean food in America is not a trend we are trying to create. It is a current, 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 hay food exports to the U.S. grew 13.2% in a single year. Korean sauce exports hit a record $411 million Ryan across a billion and a half dollars, 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. Cercana 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, Turkana 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. And they know these products. And 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 Institution and FMI released the fourth edition of their Power of Frozen 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 Isle, that is our category. And within that report is the number that matters most to a company like ours. 71% of frozen shoppers say they're 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 consumer 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 and 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. But 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'm not going to pretend otherwise. So Canada 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're 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 it contributed its growth directly to global flavors and to consumers recreating the restaurant experience at home. So here is the picture. Restaurant traffic is flat. The freezer aisle is booming. Korean flavors are among the fastest moving thing in global food. And restaurant quality food sold in grocery stores is a $14 billion category. Every one of those current runs straight through Jen, a real restaurant brand, with a proven retail engine. I think Jen 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 shop receives our packages in the freezer aisle and freezer doors, we're not introducing ourselves for the first time. We are being recognized. BDA Partners in their study of Asian foods rise in North America, calls the winning formula accessible authenticity. This is a very good description of what Jen sells. And our in-store demonstrations staffed by our own trained people continue to deliver sell-through well above typical demo programs. Now, 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 Arampa, 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 Jed'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 consequences 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. And the margin profile is structurally better. We continue to expect this division to deliver even the margins in the high teams 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 revenues surpassing $2 million and Jan 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, Jen is projected to have our CPG products in 1,500 to 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 to $40 million. The pipeline extends well beyond the doors already secured. Current customers include the likes of and not limited to the Albertsons Banders, the Sater Brothers, Smart & Final, Dave Marks, Bev Moe's, and multiple Costco regions. More than 1,000 additional doors have been presented to buyers, including the likes of BJ Wholesale Clubs, Walmarts, Cruise Lines, and wholesalers like Cisco 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 food. Non-cooked marinated meats in the freezer section. Six skews of beef, pork, and chicken. That is a 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 Tysons and 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's. Kevin's was acquired by Mars for roughly $800 million which tells you what that category is worth. And grocers tell us there is room for both. Grocer raw and precooked 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, and 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 jerky, and other non-meat related SKUs. Manufactured in South Korea. He started this because the grocery markets we serve wanted more Jin Korean products from us, and now its velocity is starting to grow. Regarding execution, Jin already buys over $40 million of meat a year for his restaurants. The procurement scale Supplier relationships and buying power that CPG requires are already built. We're 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 JEM 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 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 devalued at approximately $100 million for the restaurant operations alone only. Under the terms contemplated by the LOI, Jen will retain 100% of his rapidly growing CPG and retail business. The proposed transaction will allow Jen to put his capital and focus behind his fastest growing business, the CPG. The proposed transaction could create value for shareholders in two distinct ways. First, the sale will monetize Jen'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 Jim'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 Crow, who retired following a planned succession process. And 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're also strengthening the organization around this opportunity. adding senior CPG executives, including Mark Otrana, 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.