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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 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 describing 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 cave food exports to the U.S. grew 13.2% in a single year. Korean sauce exports hit a record $411 million Ramyun crossed 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. Sarkana 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, Sorkana 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 US 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. 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 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 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. 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 three-tenths of a percent 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 they contribute 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. who 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'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 Jen'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 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 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, 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 Manors, the Stater Brothers, Smart & Final, Save Marts, BevMo's, and multiple Costco regions. More than 1,000 additional doors have been presented to buyers, including the likes of DJ 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 Non-cooked marinated meats in the freezer section. Six skews 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 Tysons and and Conigra. 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. Frozen 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. We started this because the grocery markets we serve wanted more Jen Korean products from us, and now its velocity is starting to grow. Regarding execution, Jen 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'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 Jen 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 an 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 its rapidly growing CPG and retail business. The proposed transaction will allow Jen 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 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 GEM'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 Cotrana, 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 JAN's Chief Financial Officer. Since joining in June, I've spent my time deep in our operations, our systems, and our data. And 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. Now 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 and 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 five 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 two 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%. and 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 Jen Restaurant Group was negative $0.14 per basic and diluted share of Class A common stock compared to negative $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 31st, 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 to 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 costs, 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. 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's 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 touchstone 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 1 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 kind of the run rate goals that you set out for the next 12 months for the CPG business, David, that $35 to $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 2 to 3x? How do you envision getting to that $35 to $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 is current business that we have. It does not... 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. But the run rate that I'm talking about are currently what we're selling today. And we are monitoring the velocity very, 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 that are 35 to 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 annualized to 24, so 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, right? Once you go into new businesses, they order based on velocity. They either order every two weeks, every four weeks, but mostly they're ordering every two weeks. So that June number that we talked about is a lot of new business that we got on the shelves into the doors.

Okay, great. And then 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, do you, 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 was one of its 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 and it's not growing by single digit. These are growing by double digits here. So yes, it will distract us from our core focus. Our focus is meats right now. But the good thing about there's a good and a bad about dealing with the other skews 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. So, yes, we probably – did not want to do it, but the market forces is telling us if it's double-digit increases, and some are triple-digit increases, which we don't understand why it's so high, I cannot not just say ignore it. I'll say, okay, let's get that incubator division with some personnel and make sure, and then 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 to $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 to 40 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're selling currently today on the frozen side. So when that comes on, it's been some time that we've been working on this, but we many times, as I said, The market is dictating us right now. So the market keeps telling us, and then the buyers keep like, what's the word? They're really pressuring us to say, come up with the cooked replacement product line. We need it desperately. So when that is mentioned in that way, and the reason why we're 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 doesn't have the kind of velocity that the grocers are telling us because they don't taste good. So we are very concerned about the taste and the texture profile, and we're just not going to put out bad products So it took a little longer to get through that, but we're in testing phases now. We approved three out of the four products to launch. Once we conclude the fourth one, we're actually introducing the cooked product to the grocers as we speak today. We don't even have packaging done, but we got the meats the way we want it. But that is not factored in at all in the projection. and the industry and including the buyers keep telling us that the replacement prepared meal business is double the sales than the frozen products. That's all we keep hearing. So we're saying, okay, as long as we get that taste profile right, we get that texture right, then we'll launch so we have three out of the four done. I don't want to say anything negative about the space we're going to go into, but the space is going to be direct competition with the likes of the Kevins, which they grew very fast during the COVID era, and they're like the big gorilla at this time. But there is pressure from the marketplace and the buyers about the taste profile that their customers are experiencing. They want something better than them. So that is the space that we will continuously fight for.

Okay, and the 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 kind of the restaurant-related labor for trial and sampling and things like that. I'm just trying to think, is 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 and Just what sort of scale do you need to get to that high teams 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 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, but 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 actually brought the – we're getting more conservative. Actually, our EBITDA margins are higher than what we're disclosing right now.

That's great. 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.

And this concludes today's conference call. You may now disconnect your lines and thank you for your participation. Music Music Music Music