Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of GEN Restaurant Group, Inc., included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes, which are included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"), filed with the Securities and Exchange Commission (the "SEC"). The terms "we", "our", and "us" as used herein refer to the Operating Company and its consolidated subsidiaries prior to the IPO and related transactions described in this Form 10-Q and to GEN Restaurant Group, Inc. and its consolidated subsidiaries, including the Operating Company, following the IPO and related transactions.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. All statements other than statements of historical fact contained in this Quarterly Report, including, without limitation, statements regarding our future results of operations, or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the Annual Report, and in our subsequent filings with the SEC, which are available on the SEC's website at www.sec.gov. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect future events or circumstances, new information, or the occurrence of unanticipated events, except as required by law.

Overview

GEN Restaurant Group operates Korean barbeque restaurants and a growing Korean consumer-packaged goods ("CPG") business. Founded in 2011, we operated 53 company-owned restaurants as of September 30, 2026 in ten states and South Korea. Our restaurants offer an extensive menu of traditional Korean and Korean-American food in a format where guests cook the majority of the food at embedded grills, which reduces the need for chefs and servers and provides a consistent experience across locations. Our CPG business sells GEN-branded ready-to-cook marinated meats and other Korean products through club, grocery and mass retail channels. CPG revenue was $4.7 million in the third quarter of 2026 and $10.0 million in the nine months, or 9.7% and 6.3% of total revenue.

Our priorities are, first, to grow our CPG business, which we believe is our largest opportunity: broadening distribution with existing club and grocery customers, adding new retail partners, extending our product range beyond marinated meats, and building the sales, marketing and supply chain capabilities the business needs. In our restaurants, our priorities are to operate well and protect cash flow, manage labor and food costs against lower comparable sales, and be highly selective in committing capital to new construction, weighing the returns of each potential opening against alternative uses of capital, including CPG. Across the company, we intend to reduce corporate overhead to the size of our business and to direct our resources toward CPG.

Business Trends

During 2025 we opened 15 restaurants, including six in South Korea. In the nine months ended September 30, 2026 we opened three (Tucson, Arizona; Denton, Texas; McAllen, Texas) and closed or transferred seven: four U.S. restaurants (San Antonio, Mountain View, Edison and Jacksonville) transferred to the Chubby Cattle joint venture in the second quarter, two in South Korea (GEN Guwol and KAN Sushi Guwol) closed in the second quarter, and our Ilsan, South Korea restaurant closed in the third quarter. Our Sacramento, California restaurant is classified as held for sale at September 30, 2026, and we expect to transfer it to the Chubby Cattle joint venture in the fourth quarter of 2026 (see Note 3). We have slowed new restaurant development and suspended construction at certain leased sites, and pre-opening costs declined to $1.3 million in the third quarter from $2.3 million a year earlier.

Our South Korea restaurants, which we are winding down, contributed $0.3 million of revenue and a $0.9 million operating loss in the third quarter of 2026, including the Ilsan lease asset impairment described in Note 10.

CPG revenue grew to $4.7 million in the third quarter from $4.3 million in the second quarter and $1.0 million in the first, an increase of 11% over the second quarter, as we expanded distribution with existing club and grocery customers and added mass retail locations. We are investing in sales, marketing and supply chain for this business, and we expect CPG to be a larger share of revenue over the coming quarters.

Comparable restaurant sales declined 9.2% in the third quarter and 9.1% in the nine months, following declines of 9.3% in the second quarter and 8.8% in the first, reflecting lower guest traffic in a weaker environment for casual dining. Excluding CPG, revenue declined 12.7% in the third quarter, which includes $0.4 million of discounts on gift cards sold through club stores compared with $0.1 million a year earlier ($1.6 million and $0.2 million for the nine months). Payroll and benefits declined in dollars as we operated fewer restaurants and implemented labor efficiencies, but held at 28.7% of revenue on the lower sales base. General and administrative expenses declined $1.0 million in the quarter as corporate costs were reduced, partially offset by the CPG investment noted above.

Recent Events Concerning Our Financial Position

On September 25, 2023, the Company entered into a loan agreement for a $20.0 million line of credit with PCB Bank. The line of credit was extended on October 19, 2026 and now matures on March 25, 2027. It bears interest at a variable rate per annum equal to 7.00% as of September 30, 2026. The balance outstanding under the line of credit is $15.3 million as of September 30, 2026.

On April 25, 2025, the Company entered into a loan agreement for a $2.0 million loan with PCB Bank. The loan matures on April 25, 2027, and bears interest at a variable interest rate per annum equal to 7.00% as of September 30, 2026. The balance as of September 30, 2026 was $0.9 million.

On July 29, 2025, the Company entered into a loan agreement for $4.0 million with PCB Bank. The loan matures on July 29, 2027, and bears interest at a variable rate per annum equal to 0.25% over the Wall Street Journal Index rate (prime rate), which equals 7.00% as of September 30, 2026. The balance as of September 30, 2026 was $2.4 million.

On October 27, 2025, the Company entered into a loan agreement for $4.0 million with PCB Bank. The loan matures on October 27, 2027, and bears interest at a variable rate per annum equal to 0.25% over the Wall Street Journal Prime Rate, which equaled 7.00% at September 30, 2026. The balance as of September 30, 2026 was $3.8 million.

On August 10, 2026, we entered into a sales agreement with Roth Capital Partners, LLC for an at-the-market offering of up to $3.74 million of Class A common stock. We sold 898,405 shares for net proceeds of $1.7 million in the third quarter and the remaining 1,113,807 shares for net proceeds of $1.9 million in October 2026, completing the program. On September 29, 2026, we entered into a committed equity facility with an affiliate of Roth Capital Partners under which we may sell shares of Class A common stock at our election, subject to the conditions in the agreement; the related registration statement was declared effective on October 8, 2026, and through the date of this report we have sold 45,158 shares under the facility. See Notes 17 and 19.

At-the-Market Offering

On August 10, 2026, we entered into a Sales Agreement with Roth Capital Partners, LLC, as sales agent, under which we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $3.74 million under the prospectus supplement dated August 10, 2026 (the "ATM Program"). We pay the sales agent a commission of 3% of gross proceeds. During the three months ended September 30, 2026, we sold 898,405 shares at an average price of $2.02 per share for gross proceeds of $1.8 million and net proceeds of $1.7 million after deducting commissions and offering costs. On October 14 and 15, 2026, we sold 1,113,807 shares of Class A common stock under the ATM Program at an average price of $1.73 per share for gross proceeds of $1.9 million and net proceeds of $1.9 million after commissions.

Committed Equity Facility

On September 29, 2026, we entered into a Common Stock Purchase Agreement (the "Roth Purchase Agreement") with Roth Principal Investments, LLC ("Roth Principal Investments"), an affiliate of Roth Capital Partners (the "Committed Equity Facility"), under which we may sell, at our election, up to $25.0 million of Class A common stock to Roth Principal Investments over a 36-month period. The per-share purchase price for shares sold under the Roth Purchase Agreement will be based on the volume-weighted average trading price of our Class A common stock during the applicable valuation period, less a fixed discount of either 3.0% or 5.0%. There is no upper limit on the price per share that may be paid, and purchase prices are subject to customary equitable adjustments for stock splits, reverse stock splits, dividends or similar transactions.

Under the applicable Nasdaq rules, in no event may we issue to Roth Principal Investments under the Roth Purchase Agreement more than 6,776,399 shares of Class A common stock, which number of shares is equal to 19.99% of the shares of Class A common stock issued and outstanding immediately prior to the execution of the Roth Purchase Agreement, including shares of Class A common stock issuable upon the exchange of issued and outstanding Class B common stock (the "Exchange Cap"), unless (i) we obtain stockholder approval to issue shares of Class A common stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Roth Principal Investments for all of the shares of Class A common stock that we direct Roth Principal Investments to purchase from us pursuant to the Roth Purchase Agreement, if any, equals or exceeds the Base Price (which is equal to the Minimum Price (representing the Nasdaq official closing price of the Class A common stock on the trading day immediately preceding the date of the Purchase Agreement, as adjusted in accordance with applicable Nasdaq rules), plus an adjustment amount of $0.0738 per share), so that the Exchange Cap limitation will not apply to issuances and sales of Class A common stock pursuant to the Roth Purchase Agreement.

As consideration for Roth Principal Investments' commitment to purchase shares of Class A common stock at our direction upon the terms and subject to the conditions set forth in the Roth Purchase Agreement, Roth Principal Investments will withhold an amount in cash equal to 10% from the purchase price payable by Roth Principal Investments to us for shares of Class A common stock purchased pursuant to the Roth Purchase Agreement, until the aggregate amount withheld equals $500,000, representing the maximum aggregate commitment fee that may be earned by and paid to Roth Principal Investments pursuant to the Roth Purchase Agreement. If the aggregate withholdings total less than $500,000, Roth Principal Investments will be entitled to such lesser amount only and we will have no obligation in respect of the difference, except in the event we terminate the Roth Purchase Agreement within 90 days following the date the SEC declares the related resale registration statement to be effective.

In addition, we agreed to pay or cause to be paid (a) $50,000 for fees required to be paid to Digital Offering LLC as the qualified independent underwriter in this offering and (b) $100,000 as reimbursement for the reasonable and documented fees and disbursements of Roth Principal Investments' legal counsel, for an initial total of $150,000. We also agreed to reimburse Roth Principal Investments up to $7,500 per fiscal quarter for the reasonable and documented fees and disbursements of Roth Principal Investments' legal counsel in connection with quarterly and annual bring-down due diligence investigations and related matters as contemplated by the Roth Purchase Agreement.

On October 15 and 16, 2026, we sold an aggregate of 45,158 shares under the Committed Equity Facility for gross proceeds of approximately $75 thousand. We assess our long-lived assets for potential impairment each quarter. During the three months ended September 30, 2026, we recorded a $446 thousand impairment of the operating lease asset of our Ilsan, South Korea restaurant, which closed in August 2026. No other impairment charges were recorded in the periods presented

Key Performance Indicators

In assessing the performance of our business, we consider a variety of financial and performance measures. The key measures for determining how our business is performing include Net (Loss) Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Restaurant-Level Adjusted EBITDA, Restaurant-Level Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Adjusted earnings (loss) per share ("EPS"), Average Unit Volumes, comparable restaurant sales growth, the number of restaurant openings and revenue per square foot.

Net (Loss) Income Margin

Net (Loss) Income Margin is net (loss) income measured under accounting principles generally accepted in the United States of America ("GAAP") divided by revenue.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net (loss) income excluding interest expense (income), net, income taxes, depreciation and amortization, stock-based compensation, employee retention credits, litigation accrual for a discrete claim, non-cash lease expense, non-cash lease expense included in pre-opening costs, loss on lease termination, and gain on deconsolidation of restaurants. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. For a discussion of why we consider these measures to be useful and their material risks and limitations, see "Non-GAAP Financial Measures."

Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin

Restaurant-Level Adjusted EBITDA is (Loss) Income from operations adjusted to exclude the following items: depreciation and amortization, pre-opening costs, loss on lease termination, gain on deconsolidation of restaurants, general and administrative expenses, and non-cash lease expense. Non-cash items such as charges for asset impairments and asset disposals are not included in Restaurant-Level Adjusted EBITDA. Restaurant-level Adjusted EBITDA Margin is the calculation of Restaurant-Level Adjusted EBITDA divided by revenue. For a discussion of why we consider these measures to be useful and their material risks and limitations, see "Non-GAAP Financial Measures."

Adjusted Net (Loss) Income and Adjusted EPS

Adjusted Net (Loss) Income represents net (loss) income, adjusted for pre-opening costs, stock-based compensation, the costs of a discrete legal settlement, loss on lease termination, gain on deconsolidation of restaurants, and the related tax impact of the adjustments. Adjusted net (loss) income per share is defined as adjusted net (loss) income divided by the weighted-average number of shares of Class A common stock outstanding for the applicable period.

Average Unit Volume

"Average Unit Volume" ("AUV") means the average annual restaurant sales for all restaurants open for a full 18 months before the end of the period measured. AUV is calculated by dividing annual revenue for the year presented for all such restaurants by the total number of restaurants in that base. This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.

The following table shows the AUV for the twelve months ended September 30, 2026 and 2025:

Comparable Restaurant Sales Change

Comparable restaurant sales change refers to the change in year-over-year sales for the comparable restaurant base. We include restaurants in the comparable restaurant base that have been in operation for at least 18 full months prior to the accounting period presented. Once a restaurant has been open 18 full months, it must have had continuous operations during both the current period and the prior year period being measured to remain a comparable restaurant. If operations were to be substantially impacted by unusual events that closed the location or significantly changed its capacity, that location is excluded from the comparable sales calculation until it has been operating continuously under normal conditions for both the current period and the prior year comparison period. Since opening new restaurants is expected to be a significant component of our sales change, comparable restaurant sales change is only one measure of how we evaluate our performance. Our South Korea restaurants, all of which opened in 2025, are not in the comparable restaurant base or the AUV base for the periods presented.

Change in Number of Restaurants

The change in number of restaurants reflects the number of restaurants opened or closed during a particular reporting period. Before we open new restaurants, we incur pre-opening costs. New restaurants may not be profitable, and their sales performance may not follow historical patterns. The number and timing of restaurant openings and closings has had, and is expected to continue to have, an impact on our results of operations. The following table shows the change in our restaurant base for the three and nine months ended September 30, 2026 and 2025:

Revenue Per Square Foot

Revenue per square foot means the restaurant sales for all restaurants opened a full 18 months before the end of the 18-month period measured divided by the average square footage of such restaurants. This measurement allows management to assess the effectiveness of our approach to real estate selection and the overall performance of our restaurant base. The following table shows the revenue per square foot for the twelve months ended September 30, 2026 and 2025:

Components of Results of Operations

Revenues. Revenues consist primarily of sales of food and beverages in our restaurants, including orders placed through our online portal, and, increasingly, sales of our consumer packaged goods ("CPG") products through grocery retailers and other retail, wholesale and direct-to-consumer channels. Restaurant revenue in a given period is directly impacted by the number of restaurants we operate, menu pricing, customer traffic and comparable restaurant sales change. Revenue also includes gift card revenue earned.

Food costs. Food costs consist of the cost of food and beverages used in our restaurants and, for our CPG business, the cost of ingredients, packaging and inbound freight for products sold to retail customers. Food costs are variable in nature, change with sales volume and are influenced by menu and product mix and subject to increases or decreases based upon fluctuations in commodity costs. Another important factor causing fluctuations in food costs includes restaurant management of food waste. Food costs are a substantial expense and are expected to change proportionally as our sales levels change.

Payroll and benefits. Payroll and benefits include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes. Similar to the food costs that we incur, labor and related expenses at our restaurants are expected to change proportionally as our sales levels change. Factors that influence fluctuations in our labor and related expenses include the volume of sales at our restaurants, minimum wage and payroll tax legislation, payroll rate increases due to labor shortages or inflationary pressures, the frequency and severity of workers' compensation claims, and healthcare costs.

Occupancy expenses. Occupancy expenses include rent, common area maintenance, property insurance and property taxes for all restaurant locations, but exclude any related pre-opening costs.

Operating expenses. Operating expenses include supplies, utilities, repairs and maintenance, and other costs incurred directly at the restaurant level, as well as costs directly attributable to our CPG business, such as warehousing, outbound freight and distribution costs.

Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges at our restaurants that consist of depreciation of fixed assets, including equipment, software and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets' estimated useful lives, ranging from five to seven years.

Pre-opening costs. Pre-opening costs include pre-opening period rent, maintenance, taxes, payroll and benefits costs, advertising and other expenses directly incurred by the new restaurant until the date of the restaurant opening. Pre-opening costs can fluctuate significantly from period to period, based on the number and timing of restaurant openings.

General and administrative expenses. General and administrative expenses include expenses associated with corporate management supervisory functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, stock-based compensation, travel expenses, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs. General and administrative expenses also include the incremental legal, accounting, insurance and other expenses incurred as a public company.

Loss on lease termination and impairment of long-lived assets. This line consists of losses recognized on the closure of restaurants and the termination of their leases, including the write-off of property and equipment and operating lease assets, and impairment charges recorded when the carrying value of long-lived assets is not recoverable. See "Note 10 - Leases" in the condensed consolidated financial statements.

Gain on deconsolidation of restaurants. In connection with the previously disclosed Chubby Cattle transaction, we transferred four consolidated restaurants (San Antonio, Texas; Mountain View, California; Edison, New Jersey; and Jacksonville, Florida) into newly formed entities in which we retained a 49% interest accounted for under the equity method, and recorded a net gain on deconsolidation of $53 thousand during the second quarter of 2026.

Depreciation and amortization - corporate. These are periodic non-cash charges at the corporate level that consist of depreciation of fixed assets, including equipment, information systems software and capitalized leasehold improvements, if any. Depreciation is determined using the straight-line method over the assets' estimated useful lives, ranging from five to seven years.

Employee retention credits. Employee retention credits include refundable credits recognized under the provisions of the CARES Act and extension thereof.

Other (gain) loss. Other (gain) loss consists of items outside our restaurant and CPG operations, including gains on the derecognition of aged accounts payable balances determined to no longer be payable, legal settlement costs and miscellaneous income.

Gain (loss) on foreign currency. Represents the foreign currency transaction gains and losses in South Korea.

Interest (expense) income, net. Interest (expense) income, net reflects income earned on deposits, net of cash and non-cash charges related to our outstanding debt and finance lease obligations.

(Benefit) provision for income taxes. Represents federal, state, and local current and deferred income tax (benefit) expense.

Results of Operations for the Three Months Ended September 30, 2026 and 2025

The following table presents selected comparative results of operations for the three months ended September 30, 2026 and 2025. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods.

Revenues. Revenues were $48.7 million for the three months ended September 30, 2026, compared to $50.4 million for the three months ended September 30, 2025, a decrease of $1.7 million, or 3.3%. Revenue consisted of $44.0 million from our restaurants and $4.7 million from our CPG business, which had no revenue in the prior-year quarter. Restaurant revenue decreased $6.4 million, or 12.7%: comparable restaurant sales declined 9.2%, sales at restaurants not yet in the comparable base were lower, and restaurants closed or transferred since the third quarter of 2025 contributed $2.2 million of revenue in the prior-year quarter and none in the current quarter, partially offset by $1.5 million of revenue from the three restaurants opened in 2026. CPG revenue grew 11% from the second quarter of 2026 as we expanded distribution with club and grocery customers.

Food costs. Food costs were $19.0 million for the three months ended September 30, 2026, compared to $17.5 million for the three months ended September 30, 2025, an increase of $1.5 million, or 8.5%. The increase was driven by our CPG division, which carries retail cost of goods and had no sales in the prior-year quarter, partially offset by lower restaurant food costs on lower restaurant sales. As a percentage of revenue, food costs increased to 39.0% from 34.8%, reflecting the higher cost of goods of our CPG products relative to restaurant sales and inflationary cost increases.

Payroll and benefits. Payroll and benefits costs were $14.0 million for the three months ended September 30, 2026, compared to $14.4 million for the three months ended September 30, 2025, a decrease of $0.4 million, or 2.7%, reflecting fewer restaurants in operation and labor efficiencies, partially offset by labor at the restaurants opened in 2025 and 2026 and higher hourly wage rates. As a percentage of revenue, payroll and benefits costs were 28.7% compared to 28.5%, as lower sales at comparable restaurants offset the labor savings.

Occupancy expenses. Occupancy expenses were $5.1 million for the three months ended September 30, 2026 compared to $5.4 million for the three months ended September 30, 2025, a decrease of $0.4 million, or 6.5%, primarily reflecting the restaurants transferred to the Chubby Cattle joint venture and closed in Korea, partially offset by restaurants opened in 2025 and 2026. As a percentage of revenue, occupancy expenses were 10.4% in the three months ended September 30, 2026 compared to 10.8% in the three months ended September 30, 2025.

Operating expenses. Operating expenses were $6.6 million for the three months ended September 30, 2026 compared to $6.2 million for the three months ended September 30, 2025, an increase of $0.4 million, or 6.7%, as expenses reflected inflationary cost increases. As a percentage of revenue, operating expenses were 13.5% in the three months ended September 30, 2026 and 12.2% in the three months ended September 30, 2025.

Depreciation and amortization expenses. Depreciation and amortization expenses were $2.4 million for the three months ended September 30, 2026 and $2.3 million for the three months ended September 30, 2025. As a percentage of revenue, depreciation and

amortization expenses at the restaurant-level remained flat at 4.9% during the three months ended September 30, 2026 and 4.5% during the three months ended September 30, 2025.

Pre-opening costs. Pre-opening costs were $1.3 million for the three months ended September 30, 2026 compared to $2.3 million for the three months ended September 30, 2025. This reflects fewer restaurants in development during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025.

General and administrative expenses. General and administrative expenses were $5.5 million for the three months ended September 30, 2026 compared to $6.5 million for the three months ended September 30, 2025, a decrease of $1.0 million, or 15.3%. The decrease reflects reductions in corporate costs in the third quarter of 2026, partially offset by investment in our CPG go-to-market efforts, including marketing and in-store demonstrations. As a percentage of revenue, general and administrative expenses decreased from 12.8% for the three months September 30, 2025 to 11.2% for the three months ended September 30, 2026.

Loss on lease termination and impairment of long-lived assets. During the three months ended September 30, 2026, we recorded a loss of $937 thousand on the closure of our Ilsan, South Korea restaurant, consisting of a $491 thousand write-off of property and equipment and a $446 thousand impairment of the related operating lease asset. During the three months ended September 30, 2025, we recorded lease termination income of $471 thousand related to the closure of one restaurant

Gain on deconsolidation of restaurants. There was no gain or loss on deconsolidation of restaurants in the three months ended September 30, 2026 or 2025. See the discussion of the nine months ended September 30, 2026 below.

Employee retention credits. Employee retention credits include refundable credits recognized under the provisions of the CARES Act and extension thereof.

Other gain (loss). Other loss of $136 thousand for three months ended September 30, 2026 consisted primarily of legal settlement costs, partially offset by miscellaneous income. The loss of $39 thousand in the three months ended September 30, 2025 was a legal settlement accrual.

Gain (loss) on foreign currency. The gain of $568 thousand for the three months ended September 30, 2026 resulted primarily from the remeasurement of intercompany loan balances with our South Korean subsidiaries. There was no comparable gain or loss in the three months ended September 30, 2025

Interest (expense) income, net. During the three months ended September 30, 2026, interest expense, net was $481 thousand compared to $121 thousand of interest expense, net during the three months ended September 30, 2025.The increase reflects higher average borrowings under our line of credit and term loans and lower interest income due to lower average cash balances.

Benefit (provision) for income taxes. We recorded an income tax benefit of $623 thousand for the three months ended September 30, 2026, compared to $271 thousand for the three months ended September 30, 2025. The benefit includes a return-to-provision adjustment recorded on finalization of the 2025 income tax returns.

Results of Operations for the Nine Months Ended September 30, 2026 and September 30, 2025

Revenues. Revenues were $158.4 million for the nine months ended September 30, 2026 compared to $162.8 million for the nine months ended September 30, 2025 a decrease of $4.4 million, or 2.7%. Revenue consisted of $148.4 million from our restaurants and $10.0 million from our CPG business, which began generating revenue in 2026. Restaurant revenue decreased $14.4 million, or 8.8%: comparable restaurant sales declined 9.1%, sales at restaurants not yet in the comparable base were lower, and restaurants closed or transferred contributed $3.0 million of revenue in the current period compared with $8.0 million in the prior-year period, partially offset by $5.0 million of revenue from the three restaurants opened in 2026 and a full period of revenue from the restaurants opened during 2025.

Food costs. Food costs were $61.3 million for the nine months ended September 30, 2026, compared to $55.4 million for the nine months ended September 30, 2025, an increase of $5.9 million, or 10.6%. The increase was driven by our CPG division, which carries retail cost of goods and had no sales in the prior-year period, and inflationary cost increases, partially offset by lower restaurant food costs on lower restaurant sales. As a percentage of revenue, food costs increased to 38.7% from 34.0%.

Payroll and benefits. Payroll and benefits costs were $46.9 million for the nine months ended September 30, 2026, compared to $49.1 million for the nine months ended September 30, 2025, a decrease of $2.3 million, or 4.6%, as we implemented labor efficiencies and operated fewer restaurants following the second quarter transfers and closures. As a percentage of revenue, payroll and benefits costs decreased from 30.2% to 29.6%.

Occupancy expenses. Occupancy expenses were $16.2 million for the nine months ended September 30, 2026 compared to $15.6 million for the nine months ended September 30, 2025, an increase of $0.5 million, or 3.5%, reflecting restaurants opened in 2025 and 2026, partially offset by the restaurants transferred or closed during 2026. As a percentage of revenue, occupancy expenses were 10.2% in the nine months ended September 30, 2026 compared to 9.6% in the nine months ended September 30, 2025.

Operating expenses. Operating expenses were $19.8 million for the nine months ended September 30, 2026 compared to $18.0 million for the nine months ended September 30, 2025, an increase of $1.8 million, or 10.1%, primarily as a result of the restaurants opened in 2025 and 2026, higher utility and credit card processing costs and delivery and third-party fees. As a percentage of revenue, operating expenses were 12.5% in the nine months ended September 30, 2026 and 11.1% in the nine months ended September 30, 2025.

Depreciation and amortization expenses. Depreciation and amortization expenses were $7.2 million for the nine months ended September 30, 2026 and $6.5 million for the nine months ended September 30, 2025, reflecting the restaurants opened in 2025 and

2026. As a percentage of revenue, depreciation and amortization expenses at the restaurant level were 4.5% during the nine months ended September 30, 2026 and 4.0% during the nine months ended September 30, 2025.

Pre-opening costs. Pre-opening costs were $4.4 million for the nine months ended September 30, 2026 compared to $7.0 million for the nine months ended September 30, 2025, a decrease of $2.6 million, or 37.5%. We opened three restaurants in the nine months ended September 30, 2026 compared to 15 in the prior-year period, and current-year pre-opening costs consisted primarily of rent on leased sites under development or on which we have suspended construction.

General and administrative expenses. General and administrative expenses were $19.5 million for the nine months ended September 30, 2026 compared to $19.2 million for the nine months ended September 30, 2025, an increase of $0.2 million, or 1.3%. Investment in our CPG go-to-market efforts, including marketing and in-store demonstrations, was largely offset by lower stock-based compensation expense of $0.4 million and reductions in corporate costs in the third quarter of 2026. As a percentage of revenue, general and administrative expenses were 12.3% in the nine months ended September 30, 2026 and 11.8% in the nine months ended September 30, 2025.

Loss on lease termination and impairment of long-lived assets. During the nine months ended September 30, 2026, we recorded losses of $1.5 million, consisting of $611 thousand related to the closure of two restaurants in Korea in the second quarter and $937 thousand related to the closure of our Ilsan, South Korea restaurant in the third quarter, including a $446 thousand impairment of its operating lease asset. During the nine months ended September 30, 2025, we recorded lease termination income of $471 thousand related to the closure of one restaurant.

Gain on deconsolidation of restaurants. In connection with the previously disclosed Chubby Cattle transaction, we transferred four consolidated restaurants (San Antonio, Texas; Mountain View, California; Edison, New Jersey; and Jacksonville, Florida) into newly formed entities in which we retained a 49% interest accounted for under the equity method, and recorded a net gain on deconsolidation of $53 thousand during the second quarter of 2026.

Employee retention credits. No employee retention credits were recognized in the nine months ended September 30, 2026, compared to $313 thousand of refundable credits under the CARES Act recognized in the nine months ended September 30, 2025.

Other gain (loss). Other gain of $480 thousand for the nine months ended September 30, 2026 consisted of a $0.6 million gain from the derecognition of aged accounts payable balances determined to no longer be payable in the second quarter, partially offset by legal settlement costs in the third quarter. The loss of $339 thousand in the prior-year period was a legal settlement accrual.

Gain (loss) on foreign currency. The gain of $557 thousand for the nine months ended September 30, 2026 resulted primarily from the remeasurement of intercompany loan balances with our South Korean subsidiaries, compared to a loss of $14 thousand in the nine months ended September 30, 2025.

Interest (expense) income, net. During the nine months ended September 30, 2026, interest expense, net was $1.0 million compared to interest income, net of $7 thousand during the nine months ended September 30, 2025. The change reflects higher average borrowings under our line of credit and term loans and lower interest income due to lower average cash balances.

Benefit (provision) for income taxes. We recorded an income tax benefit of $1.1 million for the nine months ended September 30, 2026 compared to an income tax benefit of $540 thousand for the nine months ended September 30, 2025.

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net (loss) income excluding interest expense (income), net, income taxes, depreciation and amortization, and also excludes unusual and certain other non-cash items, such as stock-based compensation expense, employee retention credits, litigation accrual for a discrete claim, non-cash lease expense, non-cash lease expense included in pre-opening costs, loss on lease termination and gain on deconsolidation of restaurants . Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as these measures reflect normal recurring cash operating expenses essential to supporting the operations of our company. We expect Adjusted EBITDA to increase with the number of new restaurants we open and with comparable restaurant sales growth.

The following table reconciles net loss to Adjusted EBITDA for the three and nine months ended September 30, 2026 and 2025.

Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin

We define Restaurant-Level Adjusted EBITDA as loss from operations adjusted to exclude the following items: depreciation and amortization, pre-opening costs, loss on lease termination, gain on deconsolidation of restaurants, general and administrative expense, and non-cash lease expense. We define Restaurant-Level Adjusted EBITDA Margin as Restaurant-Level Adjusted EBITDA divided by revenue.

As with Adjusted EBITDA and Adjusted EBITDA Margin, we believe that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as these measures depict normal, recurring cash operating expenses essential to supporting the operations of our restaurants.

However, you should be aware that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin are financial measures that are not indicative of overall results for our company, and Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin do not accrue directly to the benefit of stockholders because of corporate-level and non-cash expenses excluded from such measures.

The following table reconciles Loss from Operations to Restaurant-Level Adjusted EBITDA for the three and nine months ended September 30, 2026 and 2025:

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Restaurant-Level Adjusted EBITDA, and Restaurant-Level Adjusted EBITDA Margin are non-GAAP measures intended as supplemental measures of our performance and are neither required by, nor presented in accordance with GAAP. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share - basic and diluted, Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin may not be comparable to other similarly titled measures presented by other companies, because all companies may not calculate Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net (loss) income, Adjusted net (loss) income attributable to Class A common stock per share, Restaurant-Level Adjusted EBITDA, and Restaurant-Level Adjusted EBITDA Margin in the same fashion. These non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

The following table reconciles net (loss) income to Adjusted net (loss) income and Adjusted net (loss) income per share for the three and nine months ended September 30, 2026 and 2025:

Liquidity and Capital Resources

As of September 30, 2026 we had $2.9 million of cash and a $46.0 million working capital deficit, which is calculated by subtracting current liabilities from current assets, compared with $2.8 million of cash and a $31.3 million working capital deficit as of December 31, 2025. The increase in the working capital deficit primarily reflects the $15.3 million outstanding under our line of credit, which is classified as a current liability, and cash used in operations.

Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, restaurant remodels and restaurant equipment and fixtures, as well as investments in our CPG business, including inventory and go-to-market costs. During the nine months ended September 30, 2026, we opened three new restaurants and reduced capital expenditures significantly from the prior-year period as we slowed new restaurant development, while increasing inventory for our CPG business. Our operating losses and these investments were funded primarily by borrowings under our line of credit and proceeds from our at-the-market program. There is no guarantee that if we need to raise additional capital we will be able to do so.

We have also taken actions to strengthen our liquidity: we have slowed new restaurant development and suspended construction at certain sites; the transfers described in Note 3 have eliminated the operating losses and future lease obligations of four underperforming restaurants, with the fifth expected to transfer in the fourth quarter of 2026; we expect cash inflows from gift card sales in the fourth quarter of 2026; we are reducing our corporate overhead; our CPG division is generating increasing revenue with lower capital intensity than new restaurant development; and we are pursuing the potential sale of the operations of our U.S. restaurants under a signed letter of intent with Chubby Group, which remains subject to definitive agreements. Based on our current operating plan, cash on hand, expected cash from operations, drawings under our line of credit, potential sales of Class A common stock and the other actions described above, we believe our sources of liquidity will be sufficient to fund our operations, lease obligations, debt service and capital expenditures for at least the next 12 months from the date of this report.

During the three months ended September 30, 2026, we sold 898,405 shares of Class A common stock under our at-the-market program for net proceeds of $1.7 million, and in October 2026 we sold the remaining 1,113,807 shares for net proceeds of $1.9 million, completing the program. In October 2026 we also sold 45,158 shares under our committed equity facility with an affiliate of Roth Capital Partners, under which we may sell additional shares at our election, subject to the conditions in the agreement. See Notes 17 and 19 to the condensed consolidated financial statements.

Upon the IPO transaction, GEN Inc. became a holding company with no operations of its own. Accordingly, GEN Inc. remains dependent on distributions from GEN LLC to pay its taxes, its obligations under the Tax Receivable Agreement and other expenses.

In connection with the IPO and related transactions, certain members of GEN LLC received the right to receive future payments pursuant to the Tax Receivable Agreement. The amount payable under the Tax Receivable Agreement will be based on an annual calculation of the reduction in our U.S. federal, state and local taxes resulting from the utilization of certain tax benefits resulting from sales and exchanges by certain members of GEN LLC. We expect that payments that we may be required to make under the Tax Receivable Agreement may be substantial. Assuming no material changes in the relevant tax laws and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the reduction in tax payments for us associated with the federal, state and local tax benefits described above would aggregate to approximately $117.2 million through 2037. Under such scenario we would be required to pay certain members of GEN LLC 85% of such amount, or $99.6 million through 2037.

The actual amounts may materially differ from these hypothetical amounts as potential future reductions in tax payments for us and Tax Receivable Agreement payments by us will be calculated using prevailing tax rates applicable to us over the life of the Tax Receivable Agreement and will be dependent on us generating sufficient future taxable income to realize the benefit.

We cannot reasonably estimate future annual payments under the Tax Receivable Agreement given the difficulty in determining those estimates as they are dependent on a number of factors, including the extent of exchanges by continuing GEN LLC unitholders, the associated fair value of the underlying GEN LLC units at the time of those exchanges, the tax rates applicable, our future income, if any, and the associated tax benefits that might be realized that would trigger a Tax Receivable Agreement payment requirement.

However, a significant portion of any potential future payments under the Tax Receivable Agreement is anticipated to be payable over 15 years, consistent with the period over which the associated tax deductions would be realized by GEN Inc., assuming GEN LLC generates sufficient income to utilize the deductions. If sufficient income is not generated by GEN LLC, the associated taxable income of GEN Inc. will be impacted and the associated tax benefits to be realized will be limited, thereby similarly reducing the associated Tax Receivable Agreement payments to be made. Given the length of time over which payments would be payable, the impact to liquidity in any single year may be greatly reduced.

Summary of Cash Flows

Our primary sources of liquidity are operating cash flows, cash on hand and debt borrowings. We use these sources to fund expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital. Our working capital

position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.

The following table summarizes our cash flows for the periods presented:

Cash Provided by (Used in) Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2026 was $6.4 million, the result of a net loss of $17.3 million, adjusted for non-cash items of $14.7 million: depreciation and amortization of $7.2 million, amortization of operating lease assets of $5.4 million, stock-based compensation of $1.8 million and loss on lease termination and impairment of long-lived assets of $1.5 million, less a deferred tax benefit of $1.2 million and a $53 thousand gain on deconsolidation of restaurants. Changes in operating assets and liabilities used $3.8 million, primarily a $9.2 million reduction in gift card liabilities from redemptions and $2.4 million of operating lease liability payments in excess of lease expense, partially offset by the collection of $7.2 million of receivables, primarily from our gift card distributor, and a $1.4 million increase in other current liabilities.

Net cash provided by operating activities during the nine months ended September 30, 2025 was $3.8 million, the result of a net loss of $7.3 million, adjusted for non-cash charges of depreciation and amortization of $6.6 million, amortization of operating lease assets of $5.0 million and stock-based compensation of $2.2 million, less the gain on lease termination and a deferred tax benefit of $0.5 million. Changes in operating assets and liabilities used $1.7 million.

Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2026 was $6.7 million, reflecting the purchase of property and equipment, primarily for the restaurants opened in 2026 and sites under development.

Net cash used in investing activities during the nine months ended September 30, 2025 was $22.5 million, reflecting the purchase of property and equipment.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2026 was $13.7 million, primarily due to net borrowings of $14.3 million under the PCB Bank line of credit and $1.7 million of net proceeds from the sale of Class A common stock under our at-the-market program, partially offset by payments of $2.2 million on third party notes payable.

Net cash used in financing activities during the nine months ended September 30, 2025 was $0.3 million, as proceeds of $6.0 million from third party loans were offset by payments of $3.0 million on the line of credit, $2.0 million on third party notes payable, $0.8 million of distributions to non-controlling interests, $0.2 million for the repurchase of common stock and $0.2 million of dividends.

Effect of Exchange Rate Changes on Cash

Exchange rate changes decreased cash and cash equivalents by $559 thousand in the nine months ended September 30, 2026, compared to an increase of $74 thousand in the prior-year period, reflecting the translation of our South Korean subsidiaries' cash balances.

Material Cash Requirements

As of September 30, 2026, we had $26.8 million of debt obligations, consisting of $15.3 million outstanding under our line of credit and $11.6 million of notes payable, including EIDL loans. Of this amount, $19.6 million is due within the next 12 months, including the line of credit, which was extended on October 19, 2026 to March 25, 2027. We expect to fund these obligations through cash on hand, cash from operations and the other sources described above.

Critical Accounting Estimates

Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts

of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Our critical accounting estimates are those that materially affect our financial statements and involve subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. We believe the following critical accounting estimates are affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.

Operating and Finance Leases

Our office leases provide for fixed minimum rent payments. Our restaurant leases provide for fixed minimum rent payments and some require additional contingent rent payments based upon sales in excess of specified thresholds. When achievement of such sales thresholds is deemed probable, contingent rent is accrued in proportion to the sales recognized in the period. For operating leases that include free-rent periods and rent escalation clauses, we recognize rent expense based on the straight-line method. For the purpose of calculating rent expenses under the straight-line method, the lease term commences on the date we obtain control of the property. Lease incentives used to fund leasehold improvements are recognized when earned and reduce the operating right-of-use asset related to the lease. These are amortized through the operating right-of-use asset as reductions of expense over the lease term. Restaurant lease expenses are included in the occupancy expenses line item, while office lease expenses are included in the general and administrative expenses line item in the accompanying condensed consolidated statements of comprehensive loss.

We currently lease all of our restaurant locations, corporate office, and some of the equipment used in our restaurants. On January 1, 2022, we adopted ASU 2016-02, Leases (Topic 842), or "Topic 842," using a modified retrospective approach. See "Note 10-Leases" to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. At commencement of the lease, we determine the appropriate classification as an operating lease or a finance lease. All of our restaurant and office leases are classified as operating leases and some of our equipment leases are classified as finance leases.

Impairment of Long-Lived Assets

We assess potential impairments of our long-lived assets, which includes property and equipment and operating lease right-of-use assets, in accordance with the provisions of Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC") 360-Property, Plant and Equipment. An impairment test is performed on a quarterly basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level. Assets are grouped at the individual restaurant-level for purposes of the impairment assessment because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated forecasted restaurant cash flows expected to be generated by the asset group. Factors considered by us in estimating future cash flows include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets; and significant negative industry or economic trends. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

During the three and nine months ended September 30, 2026, the Company recorded an impairment of $446 thousand on the operating lease asset of its closed Ilsan, South Korea restaurant and wrote off $491 thousand of related property and equipment. Both were measured at a fair value of zero using Level 3 inputs (see Note 10). No impairment loss was recognized during the three and nine months ended September 30, 2025.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and we have taken advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." We may take advantage of these exemptions until we are no longer an "emerging growth company." Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if 1) we have more than $1.235 billion in annual revenue, 2) we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months) or 3) we issue more than $1.0 billion of non-convertible debt securities over a three-year period.

Recent Accounting Pronouncements

See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, for a discussion of recent accounting standards.