Q1 2021 Kura Sushi USA Inc Earnings Call

[music].

Good afternoon, ladies and gentlemen, and thank you for standing by welcomed to the core of Sushi USA incorporated physical first quarter 2021 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be open for your questions. Following the presentation. Please note that this conference is being rich.

Courted today January 11th 2021 on.

On the call today, we have Hajime, Jimmy Bouba, President and Chief Executive Officer, Steven been Ruby Chief Financial Officer, and Benjamin important Investor relation director I would now like to turn the conference over to Mister Porton.

Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access for a physical first quarter of 2021 earnings release. It can be found it W. W. W. Dot person she dot com any investor Relations section.

A copy of the earnings releases also been included in an 8-K resubmitted Yeah C. C. Before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements is to find under the private securities litigation for Mac of 1995.

These forward looking statements are all guarantees of future performance and therefore, you snuck that undue reliance on them.

These statements are also subject to numerous for 10, uncertainties that could cause actual results for different materially from what we expect we've.

We were for all of your door reason I see for me.

More detailed discussion you know the risks second impact our future operating and financial condition.

Also during today's call, we will discuss certain non-GAAP measures, which we believe can be used for evaluating performance the price.

Take care of this additional information should not be considered in isolation for as a substitute for adults prepared in accordance with gap and the reconciliation comfortable got measures are available at our it's release with that out of the way I would like to turn to call the break in.

Thank you for being on the country gave me one for joining destiny.

Oh did have to begin by when it comes to you've been to the who recently joined the US how long did you see a flow.

Keep putting for two that come to experience from <unk> establish three from on the retail companies, including Drybulk there'll be for.

He came.

And it'll be notes pizza.

He's letter qualified to provide financing, but he does he understood I teach it could be done to quit sushi and I know, we need a benefit for three men gets free for them to the experience ugly excuse I want them to come good OS brands.

And you know the environment surrounding gift from Danny is very poorly, especially I've Kobe to cases on the night again, you said from puzzled the company.

Yes, hi for gifts on sat on D. I am putting this will be the program for <unk>.

We could think prints phone fifth of just want any is there anything that you see going to have to pay this even put them into a piece called for school at that one for 2020.

Any quickly go through the I'm a corporate he does have an high day, though.

Well, but I can conditions, you mean, the challenging T V too.

Uhm into a dining in California is acting in seven two hour 28th grade from being unable to use with your dining room at all do what into the quota.

Why don't he sleeps on the income, California counties became more you'd have all my for close over the quota.

You meet them November.

Beauty for each somebody who I got lost kudos for dining rooms of old old, but I wanted to try putting on your phone.

He's titled the day operational challenges, we were able to achieve Martha revenue growth all about the price for a quarter.

Due to the fifth taken once the on set up Kobe, including the potential almost tour manager on the credit card of teaching stuff, we were able to ramp up operations, particularly if he can't go to <unk>.

I have been extremely impressed with these <unk> all I just want to upgrade from the team has been but he's clothing cause it a coupon for changes ego kind of understand for to get a chance.

I need to do I'm Gonna top nine total standard for cause he's Gonna force. The quota included with a sea Greens are you two 912 medium Donald's.

An increase of over facility for center from police called for school. It got all the to send that to any.

Breaking it down by month, we actually with a quilt for 230 per month over month, maybe new growth in September each continue the into October the the day that you go for the 20 per cent almost September.

November for living decline by eight o'clock then.

To October due to England, I need to be free in California.

Need to November.

Comfortably that's what I'm, saying is doing a quota also you can put up the two new that 251 per cent.

Oh <unk> for 15, <unk> I'll need a 250 for content photo to buy nicotine 40 per per cent October and then you've got to 53 per cent November.

Taking into account that we see any country outperformed quota lady to endorse eating.

How do you five per cent.

Deep needs to read that day, mostly for continue the swings over the correct stadiums and eats up Peter to all against when we are able to use the dining room.

I bet it <unk>.

Two O five into a tiny answer Cook that experience you mean, the chief hooked up for a sofa for months Uhm is this book demonstrated by all it takes us market.

Be cuddled make it into a seating capacity do any Q1 uhm 63 per cent.

The ones are able to offer for you could I experience is there anything in queue uncomfortable, but neither takes 32 per cent, what almost a 20 per cent, Ohio not lobby for system wide.

I thought he thought it really mean day encouraged about them a consumer for Ya I'm supposed to pump unique centers pretty color.

Throughout the quota the company to focus on each count that you set the.

The hub for clean place since that one fifth of the pandemic.

Shopping with our online ordering under anybody options of that but equally dates won't sleep with grub hub, we decided to to for cause I'll put them you see if it works for me the square due to a bit that integration on the wall, how can I help you with economics.

Duo a new partnership with the school Yeah. We are now able to offer online ordering for you'll have a homepage on the mobile ordering through about getting up.

Well I do have an opening me seems business. He's still young we have seen Clint in the schools invading your Patrick you already seen floating of online like all day.

Doing stuff, he's got a plastic water or cold that'll open M. He sees it in and you want one point for that immediately.

If it has anything to continue the growth all about the previous call. Another off let me see giving you a book Smith <unk> one medium Donald's.

We continue to see lost the growth from uncle about months with off putting me see the status of a $400000 in September for hundreds $30000 in October on.

417000 down at the email <unk>.

Total due by $860000 in December ugly and that although he's gonna pick on to call them.

Oh, He's got a foster quota off let me see sneaks well for 13.8 per cent as a reminder.

Okay I'll put it underneath offered him. He sees me for one on the one per cent.

No that'll be December was the hustle months, where the majority of our ultimate I'll put him. He sees older well placed on bang as opposed to to impart from what telephone.

Compounding I'll put a deep impact that the headaches from just to get the experience junk, helping encouraging against the to use credit sushi and from.

<unk> for them you see the location.

The belief.

It can be a very exciting partnership for us on the <unk> to working together to find that chapter has on his previously untapped of putting me see the sales potential.

The company, you're too old for outdoor seating in many Obama Californian nice accounts.

Pardon me to sort of December onto to the service in Ottawa Open. This one.

However.

Can you imagine it's almost impossible for an equity cake, the correct phidias, including all settled blah blah dining rooms.

But these initiatives has has to meet you get your total sold east coast cents.

We are eager to bring <unk> experience too I'm against I've seen that to the channel.

Is that the mind the house on the Hill safety Obama against on the team Memphis, you mean, all it took priorities he's not for this all the all the furniture pasty.

The continued to put them with the same for indoor on the out of the entitlement. So does the use of personal protective equipment for each of our team members.

A hamster cleaning processes. So sorry, this something additional to be to improve on the two men budget for this chick pulling up to the start of each sixth.

How did you need to meet our goal is to keep them against peace of mind, what day and the Hoodoo could I experience.

It comes off the development of the movies on the on on what else for calling we open the free you <unk> you want to use a piece of cloth.

<unk>, Okay <unk> for that.

New Jersey.

In the southern California, The Washington D C.

Oh, Wow, Oh, we're very happy with the performance, although you openings it's for study.

A whole day location yesterday it was the day, but it's for those 260 per cent of I'll put it under any could you send me a U V. Despite the Oakland Ugg's 25 per cent seating seating mutation.

Why did I call your account under the heat locations of taste. The more immediate extend that challenges is that is that spelled Corbett b.

The secret complaints from these two locations once upon Denny come side.

Subsequent the two hour if he's got about the quota we have maintained our momentum by entering the new market is the opening of well I've entered all who did the location in January.

Putting on lead you mean optimistic about so goodness perfect could have sushi on why do we continue except for about 20 per cent that you need to <unk> <unk> <unk> H B E <unk> 19.

I'm going on sympathies of Kobe, only thought Lucky day of all crimes.

Somebody why do we do you mean optimistic off on top of each each school splashed out.

<unk> <unk> I'm I'm settling environment.

The progress for the two hour if he's clutching onto quota, we expect op easiest for me to continue to be impacted by grueling Kobe Casey.

Particularly.

My new simple tough less take on the dual kind of operations <unk>, California at the beginning of November.

Effectivity could also the dining room for Hucklebone my system.

Neither restrictions seems to become even more heavier, including a total bunk, both indoor and outdoor dining for our California Stola effective for December 627 20.

Why do we do you mean hope with a whole lot you'd have traditional indeed, the restrictions for Ya.

Yeah that is that it it would be difficult to maintain as I say this momentum we so in the past two quota.

But it's easily streaks somebody being effective.

Is being said we.

We remain confident about the law postal punk and he could company and up and he shakes I find that for the security that is <unk> to buy all day. So let's see if it was all parent company.

That's what I would like to <unk> team member for the <unk>, the dedication and having keeping gifts under the instead of just save for him to his feet do what I needed changing the time.

I believe that you get that.

Easy to navigate the day, yeah, <unk> and I just thrown the company went the pandemic satisfied.

Is that made me tons of cold all about the standard to briefly discuss somebody queasy T on the cashbox tuition Steve.

Thank you Jamie.

Let me start by saying how excited I am to join the current team.

While the pandemic has created a lot of uncertainties, we have the right team in place to whether these near term challenges that'd.

Let me briefly go through our liquidity and cash flow.

As of the end of the quarter, we had 2.7 million in cash on hand, and $3 million in debt as we began drawing on a revolver to meet our planned capital expenditures for fiscal year 2021.

As a reminder, we have expanded this revolving line of credit to $35 million from current Sushi, Japan and I've also extended the payback period from one year to five years from each borrowing date.

For the physical first quarter, our weekly expenditures for within our expectations at approximately $825000 per week. Please.

Please note that our queue wasn't burn rate is higher than our burn rate expectations for subsequent quarters. During this fiscal year, primarily due to capital spending from our Frontloaded store opening schedule and certain annual insurance payments that fell in the first quarter.

Illustrate our weekly expenditure expectations for the remaining three quarters in our fiscal year accepting restaurant level expenditures.

Are expected to range from 120200, $60000 for Capex and 250000 to $270000 for G N a.

Lastly, as a reminder.

Due to the ongoing uncertainty driven by COVID-19, we will not issue additional financial guidance for fiscal year 2021. At this time now I'll turn the call back to Jimmy.

This concludes our previous 30 Bucks, we're not happy to answer any questions that you have hopefully itself. Please open the ninth for questions that.

That you might need to be waiting for two on the system I may onsite in Japanese be for my desk, one for you to concentrate it into English Please day I'll be tough.

Thank you we will now be conducting a question and answer session. If you would like to ask you. A question. Please press star one on your telephone keypad, a confirmation total indicate that your line isn't the question Q U.

He may press star too if you would like to remove your question from the queue for participants you've been speaker equipment. It may be necessary to pick up your handset before pressing the sarkies one moment, please while we pull for questions.

Thank you. Our first question comes from James Rutherford with Stevens incorporated. Please proceed with your question.

Alright, Hey, guys how are you doing today.

Getting to thank you.

James David Walker, You force Yeah.

Yeah. Thank thank you for your bed and Stephen welcome to the team. It's good to speak with you here on your first earnings call.

Thanks for taking the questions here it looks like your off premise mix declined a little bit sequentially. Just in terms of percentage 17 per cent last quarter down to 14 per cent this quarter well on a dollar basis actually grew sequential which is certainly great to see I'm, just curious Jimmy where you see the off premises <unk>.

Six landing when you've kind of fully recovered to pre pandemic unit volumes instead of a additional clarification. Here is are you offering delivery today since you <unk> cancel that agreement grub hub or are you still offering it in some other way.

Sure didn't thank you for your question. Please I don't meet on free Japanese things Gonna tell them for it.

<unk> <unk> <unk> <unk> <unk> <unk> <unk>, putting me see somebody can comes to what what do I know it a coupla each button. That's non just get them all put a lot of <unk>, what's the pages, so to quit though and I'll make one day and he might get into it picks up when it comes to US you can give us the my budget, but I think I'm gonna do for Buffy and put it into it they get there must be at the mall and I'll put it on <unk> <unk> <unk> <unk> <unk> <unk>, Oh, putting me too.

<unk> for that like I think the remote how do I know meet looking for the day to day. Please typical it'll come day to put my condo and you're excited to get anything to contact you must must be in cold weather conditions.

Like in terms of our up premises mixed following the pandemic, we expect our <unk> business to continue to growth for the pandemic and for some of those games to remain incremental I think the best way to illustrate this is to look specifically at Texas and Q1, Texas had a seating capacity limit of about 50 to 75 per cent and.

A lot of us to use our full conveyor belts the full per experience. So it was the least restrictive operating environment for spring two one.

<unk>, so as a reminder, or historical off from since mixed with one per cent R. Q1 mix for Texas, specifically was mid single digits and that was again in our most permissive operating environment and so given the offers this growth that we're seeing in Texas, We certainly do expect stickiness with our up from his business following the pandemic.

I believe Donald.

But first I'll go ahead and.

I'll go ahead and start.

Oh, Oh, no day, but and you're going to your email and I'll go ahead and could you relate that's almost anybody like from my square it with all of US. The most of my adult book, an appointment I'll keep that for most of it just <unk> anybody new concepts got him just get them all on like a book, which day anybody at them. All so Lucky school at all and I was wanting to stick on on I'll pick up the book anybody and he did the day with so much to do and you're looking out for about a day Mustang will pick up a huge.

It'll go plug into anybody unpleasant that for them.

Alright.

While we switched alright, what are we switch from Grubhub to squirt Squirt does offer delivery for their partnerships with <unk>.

So we've always offered we offer delivery continuously through the implementation of Grub hub in August through today, there's certainly a delivery fee associated with the.

Would ask for a post makes orders, but that that's on the guest and just to illustrate how how <unk> like how separate the sales are.

The mix from the the off for them since mixed with Grub hub was about 80 per cent uhm.

Pick up 20 per cent delivery, whereas square is 96 per cent pick up and so it's overwhelmingly preferred.

That is that's the overwhelmingly preferred method for a desk to access us off premises right now.

Perfect. Thank you for that and just one follow up on Texas, specifically, if I recall last quarter, you talked about Texas, I think running a negative 25 per cent cop and then I think it was negative 35 per cent here in December was that just consumers hunkering down a little bit more as cases rose towards the end of your.

Quarter, uhm or something else and play that caused that little bit of deceleration your Texas market specifically.

Mmm well the two for the cost of hold on done all it takes us nothing but not as able buttons and a few things you, let's get that done just to get them on my phone for too long and you get a couple of the vehicle will do patterns. When you set up they get like a day. That's what time do you need that with a day and all she thank you for a C. D me too pushy on the type of a total amount that keeps going up the you know that might work in a game that day. So the biggie body on I'll fix us <unk> <unk> <unk>.

Get us model for with some kids, who are thinking that my condo steps and you'll end up anything you can like.

So the the biggest driver in terms of the Tech's performance would be the change and restrictions in a queue for almost across the entirety of Texas, we were able to maintain 75 per cent seating capacities worse in Q1 parts of art, Texas system was limited to only 50 per cent seating capacity and so that that was really the driving factor there.

Given the increase in Texas, Coca cases, I'm I'm I'm sure that was also.

That that May play a factor in consumer decisions as well.

Cause I'm up for both of us.

What are the mall I'm trying to go ahead and pull that up a simple, but <unk>. We get this evening kept let's take a look which is unpleasant the order and get some do it from Monday mustard or any more <unk> <unk> <unk> <unk> <unk> <unk> get credit <unk> do you need us now that you're gonna get <unk>, what I'm looking for somebody might ask you to the gates, you'll you'll get someone going with them and they'll come they can spend all day upon do any good let me get day food a good I experienced a heck of a pleasant that it kills me they can do about it.

Seem to put up on did he could have it and I'll say the city company that you'd have to excuse me I'm a <unk> excuse me can you hear me.

Oh look looking specifically at Texas are weighted seating capacity in that market for 63 per cent for the quarter, but the tech specific pumps or.

Negative I'm sorry.

<unk>, Texas to Texas for some cops materially outperformed the weighted seating capacities, which is really clear demonstration of just how much continued demand we're seeing from our guest for very much encouraged by how strongly either responding how how much they continue to support us and we we're we're very much poised to capture old the demand once we're able to do so.

And the restrictions are lifted.

Okay perfect. Thank you and again Stephen welcome to the team.

Thank you for it.

Thank you. Our next question comes from Peter solid with B T. I G. Please proceed with your question.

Great. Thank you and I'm happy to hear Uhm.

You guys I I just want to ask you know.

It seems like the the pandemic of strike.

Well I'd anticipated I think.

You guys unexpected I guess at least initially.

How is it that you're thinking about.

Now I'll go forward.

Extra cash for you today.

And then when you start to think about.

No I'll hang out another year or so are you are you being a little bit more cautious are you looking at different sites than you otherwise would have taken just some thoughts around.

<unk> and maybe how that will look and 12 to 18 months from now.

<unk> <unk> <unk> <unk>.

A little bit to the number side of it and then turned.

And it off that Jimmy to talk an elaborate a little bit more I go forward growth plans, but I think if we spelled out in our prepared remarks, I mean, we certainly had frontloaded the capital plan in store opening timings in physical 21, where are we now have for locations open to to to are actually.

Three additional locations under construction of which at least two and possibly all three would open this year and so.

With the degree of investment we've made in those additional units. We don't think it would make sense to pull back on those but rather you know finished their constructions and be complete but our spend plan does include some investment and physical 20th.

New store openings really starting late third quarter and into the fourth quarter. That's all built into the Hunter 20 to 160000, a weekly Capex run right for the last three quarters that we spelled out and that's something that we have the flexibility really for a few months here to make a decision on whether to move forward with those are not our strategy is certainly to me.

Pain, the 20 per cent CAGR to our store count growth, but like everyone Vermont.

Covid.

Vaccine progress and restriction lifting timing and magnitude and and you know could make some adjustments later in the year and the and the spend plan, depending on where that goes with that I'll I'll give it to Jimmy.

<unk>, Steven with any quite yet or what most most of the <unk> most of the Hunter upstate one though cause me psychoanalyst, what all day and I'll sit there all kids will <unk> hung up for the picky, even my I'm Gonna see if that that's all day and I'll put them I'd like to <unk> on upon Guinea pig.

<unk> I need to look up to you do not submitted for anything must be getting enough for them to come and get us pulled up on all the whole months done getting enough for homeless what can identify anyone just getting one I'll tell you what day would it so I'm good with them about it and I'll put you need to know, let's put in so now I'm Gonna sound just simple <unk> it might I'm gonna schedule <unk> email again. Thank you do any book into town for that you cannot spell for will come to it though.

But usually to get help with <unk> you might want to do it do it for them all unfunded you'd want me to you in the day <unk> I did about two things for you to get a hold up need that will give you any harm that for my <unk> I'm going to get <unk>.

Okay and in addition to <unk> everything that Steve said Ginny just like to explains some of the decision making it's been driving this we we run a variety of different financial models, but assume different pandemic links to different you'd accounts for.

Whichever period, and while it's certainly true that we'd be able to make some capex savings and for you were to slow construction right now considering the fact that we have a 300 unit white space potential which is absolutely massive and this was for the P. I N debit before their <unk>, you know lots of closures biting <unk> independent restaurants, and so we checked out white.

Space potential to a for instance, and there's just tremendous real estate opportunity and so we want what would be ready to capture all of the revenue once we're ready <unk>. Once the restrictions are listed for lifted and we return to normalcy and you know looking back into his three four years from now we think that will be will be.

Very much vindicated in the decision that we've made to continue with our unit growth now.

For the most also cycling so let's get leather for adult and I'll put them on a day that the hearing sounds with a book unopposed up underneath cause he do any and all day Monday on all color Alright, let's go for it I'm Gonna do what day did Arnold pimples for that and also she up I'm just because he wants that would've been a simple delighted with it so what what can I tell if that's all I'm gonna put up the minute the Knight's still at the and you want to go ahead with a total of it and I'm sitting on that.

HM.

Some <unk> some additional color if you look at the most recent I just report it noticed just how fragmented the sushi in this for you if they say the top two players control less than one per cent of the indiscreet, which is the level of fragmentation that is unimaginable in any other restaurants space. So what this means is that there's an overwhelming majority of individually operated sushi sushi.

Franz and unfortunately, the pandemic can pad disproportionate financial impact on the sushi market and we've seen a disproportionate number of closures just because the majority of these are individually operated and so the demand. We believed for sushi remains unchanged or is even increase due to all the pent up demand from staying inside and so we think theirs.

Tremendous opportunity and we want to be there ready ready to capture it.

[laughter] fair enough.

Comment on.

The real estate out there are you getting.

Ah you see different are better real estate opportunities are are there are more tenant allowance is <unk>.

I'm, assuming that there's gotta be some all set to all the negativity in in the market right now that may be a benefit on a lot huh.

[laughter] <unk> type of it I can do it though if you still need a couple of day, let me know total, let's see I'm gonna pay per that nothing Oh, no. It took some <unk> E <unk>, but I never got up from the <unk> you don't need the total on all that all <unk> physical just get a book you. If you don't need to eat on a hunter.

<unk> the biggest tailwind we're seeing in terms real estate would just be sure availability of quality real estate. This this was obviously do the pandemic, but also because of the are are the work done by our new C. D. O. Just got an excellent shop the pipeline that we built for physical 21, and 22 is of a quality.

That is.

Just for a passes surpasses anything that we've seen in the past the greater pool to draw from has resulted in a really high quality pipeline and so we're extremely excited for the units that will be opening just for your next.

Oh, no I didn't put it for the P. I went ahead and got them all unofficial and they'll call you I'll need any day Monday, one one of the book will get out the <unk> for for what is what are you ready for the animal and I'll sit down and it'll get something that must have been done it'll get some like it'll do hold on okay.

We we've seen minor capability in terms of rent and tended allowance, but again the overwhelming saint share that it's gonna be a television for US is just the availability of a very twice locations.

Excellent. Thank you very much.

Thank you for your <unk>.

Next year.

Thank you. Our next question comes from Jeremy Hamlin with Craig Hallum. Please proceed with your question.

Thanks for taking my questions gentlemen, I wanted to start by just getting a sense for the current split a business between off premises and in in the store.

What type of.

Like even levels do you have for sales volumes that you would need based you know forget about the kind of your two one capex spending, but you know looking for would where where do you would need to be either out same store sales basis or on a U V basis to be Blake you need.

Even mm mm cash flow.

I'll speak a little bit for that Jeremy on if you think about our our more mature locations, where they were running at 3.5 million a U V free COVID-19.

Something along the order of 50 per cent of their prior volumes would put them in a place where we could be breaking even at a restaurant level cash flow basis. If you take the the chain as a whole, including all of our new restaurants that are wrapping up and have some additional costs for you know training and some of the supplies and things like.

That and just the rapping in general of the business, it's more like a chain average of about 65 per cent of prior call. It free Covid tie T V levels would get us to restaurant level margins around breakeven and if you're thinking in terms of the business as a whole inclusive of you know.

General and administrative expenses, you're you're you're approaching almost 100 per cent of pre COVID-19 Aves would be the point, where we would be breaking even on that operating cash flow.

Level and the business. So that's certainly where our focus is going to be as we come out of the the COVID-19 restrictions as for the next step is getting back you know those those.

Those goalposts, if you will along the way.

Oh, great Super helpful and in terms of thinking about liquidity. So you you already about 3 million out of the revolver as of the end of the queue. One you subsequently taken down another 6 million.

In terms of the relationship with Curragh, Japan.

And the potential for that revolver to expand from 35 million to something greater than that if necessary if the pandemic.

<unk> carries on longer.

Can you provide us the sense for whether or not you feel like that access to capital is there.

For you.

If it's not would that be you know probably the the gating factor on whether or not you can.

Continue on the the push for the for the opportunity you see we're with 20 per cent unit growth.

Uhm I'll get I'll give a little time for some context around the use of the line expectations and I'm certain Jimmy and then can speak and more granularity around all day.

And side of it as you mentioned, we we we are now borrowed at 9 million on the line that was 3 million through the end of Q1, and then $6 million of additional borrowings here in Q2 is this.

Capital plan come to fruition and thinking about where we would be at year end fiscal year end here based upon the conversations we've had about Capex run right and that 120th of 160 weekly going forward through this year from two to forward and then G&A being very.

Similar to what key one run rate was you know those those investments alone would bring us into the high teens borrowings against the line by year and you know versus the 35 million total availability under that and of course, the real variable. There is restaurant level, where you where it ran at 70000 roughly a week.

Cash use and cute one you know just for illustrative purposes. If it continued to run like that level through to the end of the fiscal year. Then total borrowings would be you know probably in that low twenties that 21 to 22 million and they have to caveat that this is all based upon you know a lot of unknowns and things out of our control here.

For the next several weeks and months, but it's that kind of borrowing level.

Thinking about her looking at by year, and and you know in terms of additional capacity L. L O.

Jimmy and then speak a little more about that.

Mhm.

No my fever.

Okay.

<unk> you must be both of them as a <unk> you I'm thinking you're the amount of time do you want me to an Italian <unk> you can you can make it and just get on with all day.

<unk> could I <unk> <unk> <unk> <unk> <unk> do with him because you want my phone is look on the third evening it'll can talk with you more mostly uhm up underneath <unk> do you and hold on Monday, but in order to send that looks it was able to move any week day and I'll come back to my home and I put some day too.

Alright, so to add on to what Steve just discussed while we do believe that the $35 billion revolver should curious for current capex plants should the pandemic worse and you have a variety of capital raise options that were considering and certainly one of them would be to expand the revolver with our parrot.

Okay could I get from your muscle on a price email local day it though my credit I thought in a public <unk>. How did you say the ZIP code <unk> well <unk> day at the I'll do the update it up it's hundred per cent paid you'll in Oakland Poodles, you have to <unk> and you have to muster. It gets me I'll go ahead, you immediately I'm going to credit if I'm looking for for my <unk> My.

<unk>, what about if you put the money for that must be because it <unk> unethical, though again just give it a more on the <unk> on what it kept moving to <unk>.

In terms of the parents ability to <unk> to extend the revolver, we'd like to just touch on some of their most recently publicly disclosed financials in October and November they had chills comps of Ah.

Greater than 30 per cent and their cash on hand is $180 million. So they're they've got a very strong balance sheet. Their performance is strong they they have ample breathing room that being set up.

When we when we whenever we do decide to do a capital raised that would just be one of the options and we'll make sure to take the option that is in the best interest for shareholders.

Great help for color enviable results that they're they're posting for sure I wanted to also just touch on on two other things first.

In terms of just clarifying the split of your tech for stores for since you are California's stores I think what I caught was in December Texas was down 35 per cent first is California down 82% could you clarify what that was for cute.

One of the split between Texas, and California, I didn't catch that and I'm prepared remarks.

Sure I'll tell you something you can't do I need to take the Sun's unique credit pulling any punches you wanted to put me got the political just unplug and <unk> what about unplugging. It sleeps on that will give you unplug linguistics supposed to put on a beautiful day.

Okay. The for your comps for California, we're down.

Down 63 per cent the for your comps for I'm sorry.

Yes, I'm sorry [laughter].

Alright, we'll take something off my mind me that'd be listening to any person who would you have a new like a book we do something.

<unk> sorry about that so for quarter comes for Texas for negative 32 per cent, but for quarter comps for California for negative 63 per cent. This is really a very clear illustration of the impact on revenue that day.

Different operating restrictions has on us.

And for the most part your Texas stores for capacity limits of 50 to 75 per cent in California was was more like 25.

For 50 per cent during Q1 correct.

Okay. So about it takes something he comes to put political for Ya the credit for any cost about <unk> about unusual.

Yes, you are correct in terms of Texas for you were at 50 to 75 per cent seating capacity the 63 per cent weighted into work seating capacity that Jimmy mentioned.

Earlier with first to Texas market, California of your limited to Ah zero to 25 per cent seating capacities Jimmy mentioned in the prepared remarks seven of our units weren't able to offer their you were able to use or indoor dining rooms at all which brought the California total indoor seating capacity weighted indoor seating capacity to about 10 per cent. So there's.

A very big difference between those markets in terms of how much more sports wherever utilized.

Great help for color and then one last thing from for me in terms of your delivery uhm. It sounds like the square partnerships pretty attractive and you've seen pretty significant acceleration I was wondering if you could provide a little more color about the economics of of your deal.

Or with square and how that compared to your prior economics with Grub hub. Thank you <unk>.

But I'm Gonna go ahead, when it comes to pick up the day, Egypt, <unk> anybody that's hundred bucks into like a food or what what it is but I <unk> I don't know how I was still got them all day, and we'll get some amount on we'll get somebody to cook well what are we just going to need your appointment from your appointment book. So there's one o'clock a good I'm I'll I'll get it on a poodle with somebody to interest you must have a equal unaffiliated comes to pick up any consequent I'm gonna put on looks from then on.

<unk>, so I'm just gonna <unk>. It could you <unk>, let me do some all day Macey's, you'll need Nemo that'll do it and pick up any cost about a good I hope it gets done I need to fucking, but you don't Wanna get into was hoping to get for <unk>.

Even though I <unk> and woke me into two months ago. When does he could help me to take a simple I'll put it off you know when you're looking to make it for the state Arnold authenticated and hopefully can you call 911.

In terms of the the fee structure for Grubhub day were charging approximately 20 per cent for a pickup border in about 30 per cent for delivery order and we adjusted our pricing on the grub hub slot for them to offset those Martin pressures for square they they torched 30 cents per transaction plus credit for processing fees.

For you would be paying in either case.

It would be the per transaction fee for square is truly minimal and so we are able to offer the same prices on our square platform as we do in restaurant and so in terms of the.

Check the best work desk, I mean <unk>.

<unk> the better option is obvious.

Total the November would that again until then but I only have one then I'll just get cut off at the simple hop debit or was it can you ultimately must must be don't say got two appointment.

Without you must get them, all I'm gonna need and you'd like to <unk>, you must not all day someone from day, one put on like some from just simple vehicles to let you boom Uhm accuses day on a good little tunnel economics, though so I'm moving.

It's going to be able to get a copy.

Given how nasty.

And the the made for transition from Brooklyn Square happened over November to December November's total off from so shelves for about $470000 for once we had for square implementation in December yeah from <unk> almost double for $860000. I mean, it's certainly true that the operating conditions of change.

And we we don't have a full band an indoor dining in California, but we really do think that the ease of use that square provides as well as the.

Yeah <unk>.

<unk> ability to price the same way that we do in restaurants has done a tremendous job in terms of attractive in terms of attracting our guests in so that 30 cent per transaction fee has been more than offset with the gain and volume.

Great Thanks, or for the color and best best wishes here in 2021.

Thank you. Thank you for me.

Thank you. Our next question comes from Andrew Strophic with BMO capital markets. Please proceed with your question.

Good evening and thanks for taking the questions. My first one I I I believe you commissioned a new white space study and you've talked about some of the competitive flow.

<unk>.

Unfortunately, as a maybe in the sushi space <unk> are you able to share any of the findings for net study or are you <unk>, you're when do you think you'll be able to share once you've learned from that.

Mhm <unk> <unk> <unk> <unk> upon didn't cause him up the <unk> and I'll just sit on kudos <unk> for going to need calling for a little bit assist you know she's gonna closed on a day that I did good night all day.

Uhm, Yeah, My <unk> I know you've done and it seemed to eat a pool you thought you said, we could get <unk> <unk> <unk> <unk> could only stay with that you can you <unk> the conditions, let's do an old <unk> put up so that'll be able to just.

Uhm. So so there hasn't been a ton of restaurant data specifically relating to Japanese restaurants for sushi released by Black box for any of your other total restaurant analytics companies and so.

We've been sort of scrubbing from Yelk to get an idea of how how much how <unk>, how how how severe the closures have been in the markets, where we are in so far it. It it is indicating that we're seeing substantial number of closures and if we can expect to capture additional revenue for the pandemic in terms of the whites for your study in the form analytic.

Risk analysis model, that's actually that's still being processed and so we hope to be able to share that soon but we won't be able to today.

Mmm, that's all set up with them or what are what day did you need <unk> <unk> <unk> <unk> I've been doing it let me just put it for <unk> what else do the hanging out <unk> a commodity let's also let them from home, but it doesn't look like and what you can <unk>. You can also go to sit on it for she just put on <unk> on a total of as soon as to the classroom with it but what about in all on the screen for them to handle this and I'm, calling to get up at the mall on a homebody that for clothes.

For the <unk> <unk> <unk> <unk>.

And so what we're looking at our existing to some size of 28 29 needed to if you include the most recent opening with adventure, we've been looking at the Japanese and sushi restaurants.

Surrounding those spreading those restaurants on on the ground and we we have for operated our findings with Yelp and so we've given the closures that we've seen among yep close competitors are competitors that are geographically close to us we do expect to benefit from the that demand that is going on dressed unaddressed.

Okay. Yeah. That's that's very helpful. My next question.

As you seem the transition to online orders here in in December really you.

Can you talk about or do you see any differences between average check your order size number of <unk> items ordered between online orders verses when it was Mr. <unk>.

The call in orders and maybe have that compares to a typical dining transaction.

Oh, let's go ahead of him close to put on the phone all I know it sounds up some book subtle hang up in a lot or did you want to be negative and almost it'll interest you know I'll stop at the mall on hold I'm afraid it local sounds good on for Awhile and if you one day, you'll get some savings at this day I'm not <unk> you can eat on your system.

Like in terms of the ticket averages we haven't really seen it.

Changed since we've moved to square.

The difference is really been in volume the the the.

Changing price and you're just savings that we passed along to our guests.

Okay got it and then just two offerings for me. The first one you know you have been piled piloting loyalty program and I'm just curious how you see that as a potential lover, you know as the operating inviting starts to normalize whether it's you know I'm getting sign up for some people come back to the stores and then incentivizing, there's there's a frequent.

See I'm just curious do you see that as an opportunity truly rebuild the volumes as as you know.

Classy restrictions maybe go the other way and start to use.

Well <unk> <unk>.

So what are you all to program with it.

Alright, cool so just keep away from <unk>. Thank you for <unk>.

Okay.

You want to put up on me, it's not so much for doing your what can I ask what I'm Gonna ask you to pull a muscle and I'll put it up I was hoping to ultimate Emmy seasonal and I'll put them on from you constantly he didn't really keep them within within them all and what that will help me I thought the gingham Tonight and I'll pick up with 100, you buttonville usual and arguments tables I'll get someone else with any could I was you know, possibly didn't you say that the equal to <unk> I mean, if you're doing the existing customer that you'll see a little a little call you must have a day.

For anybody else did you need <unk> excuse me out and I'll put emotional Oh do you want the poodle Gonna remember get this day <unk>. He's the only home the little book you took all day. Thank you for the Geek when all putting me he's gonna say that for you know what what do you want <unk> <unk> <unk> <unk> <unk> <unk> you will see what he does that sound like you could say I don't think it would be getting on who do you <unk> I'm Gonna get you can get to stay on a couple you should get that book on that.

Alright, So the works program and it's been tremendously useful for us throughout the pandemic. Most recently really see it as we've seen it utility as we tried is we've been working on building our off from suspicious when we were working with Grubhub, we realized that the 80 per cent pick up mixed indicated that the stronger Jordi if everybody.

All the orders that will come in for Grub hub for coming from existing customers and so using that knowledge in December we sent out.

Uhm promotions, specifically to our rewards members announcing we were doing square, we get a couple of different promotions and they were extremely well received by our guests and so it's been.

Our our guess really are big fans of us it's been.

Having this database and being able to activate that that Tan acidity has been tremendously useful when we were reopening Texas, we were able to send rewards members emails looking at back by region and so we said Hey, Plano fans, we're gonna be reopening at X date with X.

X capacity and then later on moving brought back the conveyor belts, we said hey, Plano fans.

<unk> is coming back to Plano and pretty much within the week for any one of those regulatory changes we've been able to he'll be additional seating capacity largely through activating these fans and so it's been tremendously useful.

Bunnell.

The amount of puzzling for you, though because it from on a thumbs in England <unk>. How did you want Kay My day on the <unk> on a quota those that I need done to do about it you'll get day on or off putting me that'd be done at the theme of being that they're not on all these <unk> how do decide to update with with this book give me that for that and we'll have to <unk> put that for for that you're gonna need you to do anything for college.

So even even for the pandemic. We we are seeing monthly growth in terms of our works program about 3000 members to date, we have about 84000 members and so we think this is going to continue to be a very useful tool for us both in terms of promoting all comes to string the pandemic, but also in terms of indoor dining no advertising a L. T OS.

Announcing for reopening for dining room reopening so it's gonna be a very useful tool for us and we're extremely proud to announce that the new version of our App has actually been released we'd love for you to download it on the App for it now integrate the rewards program be waiting up and online ordering all into a single.

System and so we think that's gonna be a a great <unk>.

Set advisor for additional people to sign up and we expect the rewards program to continue to be a meaningful for contributor to our business.

Okay. That's that's great color and I'll have to check out the new App, but my my last question is this one's for Steve and I know it hasn't been that long in the suit obviously, but I'm. Just curious you know as you join the team with fresh eyes, just any really observations that you've made or surprises.

<unk> did you think about your <unk>, what you can share on that side.

Sure Yeah honestly, there's there's been no surprises I think it's been more about validating would I hope to see as the growth opportunity in the business and you know obviously a lot of that doesn't you know come to fruition in the numbers until we can get past the COVID-19 environment.

Organizationally.

There's some things that as a team you know Jimmy and his his.

Other executives had already been working on and I'm certainly on board with them on what our priorities need me around leadership in the organization and setting us up to scale the business properly, but yeah I I I really felt you know after a month here now you know the the company is running toward Ah.

You know a very successful growth story, and and you know I'm I'm jumping on board at a good time, where I can help make the right decisions around organization and also the growth strategy, along with our new Chief development officer, but but it it's all been very validating in a positive way.

Great. Thank you very much for taking my questions in bed here everybody's doable.

Thank you Andrew.

Thank you our last question comes from George Kelly with Roth Capital Partners. Please proceed with your question.

Yeah, everyone. Thanks for taking my questions.

So just a few and I wanted to start.

Sort of following up with at one of the prior questions Uhm, you talked to a little bit about how quickly the unit level economics have recovered with your with the parent company in Japan and I was just wondering if you could I couldn't quite keep up with with.

With the grocery they've seen but how how quickly is that business rebounded and it didn't know above pre pandemic levels. It sounded like you said 30 per cent I just wanted to make to make sure I understood that.

Mmm mother could add up on <unk> and put on her own hold on I'm confident you'll get though I'm gonna come <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk>, what's the date you'd have to get that <unk> contact you for that you put the day on all <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> I'm Gonna go ahead, and I didn't know, but I didn't want to do them up that <unk>.

You want to a night, you'll get that that's what the price of need and what was supposed to come out.

So as as you can contact so we just really want to emphasize that the pandemic situations pan versus the pandemic situations here is completely different and the 30 per cent plus comps that we were discussing for October November the infection rates in Japan were exceptionally low end.

Restaurants for for seeing any of the restrictions that we're seeing in United States and so it's a very it's a very different games. So we just wanted to clarify that in for discussing.

Okay, I thought you know and all that and I'll stop for a little most of them are just get the most up to that unknown to book December then <unk> and I'll put up rotational that's almost up to Buffy who got <unk>.

For the able to get help US you can just get them on both do equal to my able to get <unk> get him a flow. The company now you wanted that he must day I'm a total jumping on what can you do when you did I just <unk> <unk> <unk> <unk> <unk> <unk> <unk> <unk> would you like to do did you got it okay cause somebody must know what do I know this is looking woman done I put my personal if you're thinking of <unk> and I'll send I didn't with you guys for tomorrow.

So in terms of the October November comp there are two major pill wins for us and one was a pick it up on our our reward for Ya partnership was with this cartoon called Demon Slayer, which just released the movies I I believe <unk> spirited away it might be the best performing Japanese movie of all time in Japan.

And so that has been a huge guest Rockford stands the other would be a government support program with the grammatically incorrect cuddle due to eat where they would help do you need help subsidize restaurant bills for consumers and that was a very very meaningful support for the entire rest for.

My name is free during its implementation.

But you know those or both.

Temporary things and so we we don't expect those trains to trying to continue indefinitely.

Alright, how does it for him <unk>.

Yeah.

Yeah. The 30 per cent is is a tough thing to keep up her lap [laughter].

Yep Yep for sure but to me just a <unk> that's a powerful signal of what what kind of when things to normalize what it could potentially I mean, that's.

People want to go back out to eat so I guess that that gets into my next question, which is you know.

Whether it's.

The that day I need to make that you just explained all day closures. The fact that your units are often outperforming that kind of capacity restrictions you know this off premise business et cetera.

It seems to me like you are not backing off for if anything you're even more bullish about the longer term opportunity.

And so the question is I I understand and your term dynamics are very hard to predict uhm, but why not raise additional capital or somehow accelerate your unit openings or at least start accelerating the build.

As you build the pipeline uhm to do something above 20 per cent for the next three to five years, if you're seeing using credible opportunities why not why not really step on it.

Well my mother <unk>, what's it all kind of hit the state on all kinds of old enough that she was still just day.

Day, you might want leather that for what they say that <unk> <unk> <unk> <unk> <unk> it to get that type of television channel hit day stick with someone about it I don't know what would you like to put it about for them compensate us about my for doing <unk> you can jump off because it. It book you can I'll take I'll update my for it to take a note about you just fucking day doing all you need the little so it'll tunnel fit the slot <unk>, an audit losses for the sofa.

Almost at all when you go to a ball just this book off the market for they kept anything for the day slipper must like the update isn't that it's almost like what can we take with do nice you know you already must be the <unk>. What is it that you want to get it didn't do I would like to get a full medical and I'll see you seem clinical pimples that you know I'm looking for <unk> I'm not be available for that <unk> I don't see now you'll just a whole day.

Alright, so up.

Towards your completely right that we're more bullish than ever about our long term opportunities, we think for very very well positioned to become the market meter really the the first truly national Sushi branch <unk>, So looking to the future if the expectations that we currently have hold out and that you know we do see a lot of competitors close our skills recover me have.

You know <unk> consistent <unk> recovery income Brooke, where suddenly off with open to the possibility of accelerating our growth and doing a capital ratio support that growth, but at this point, we we feel that it's too early to give concrete details, but again uhm every options on the table for US we were very much excited for what we're gonna be doing over the next time.

<unk> years.

Okay, Great and then last question for me is related to the increment <unk> of of the off premise business and do you have any way of.

Of comparing customer lists or do you know who these these customers are and how do you measure you know whether or not they're new to the to the branch.

Mhm My mother on a couple of my two one you guys sound good on the Hubble, It's got sounds good I'm gonna vote for quite a simple to a Holy day, and I'm Gonna <unk> Heck of a day that will not on I'll pick up with 100 per cent take up a lot on what day was the bustle you could put on the table and we'll get someone out a book on my phone topical cut out at all and I'll see somebody scheduled day much you one day.

The combo on all we all spoke with the day I Hope you do <unk> email for them to hold the people to get them All day kindergarten My day, a double it's <unk> marketing me to <unk> just to get that <unk>.

But in terms of customer data Grubhub is very tight lipped in terms of sharing dirty it up but looking at the off from since mix of 80 per cent pick up for delivery.

<unk>, we we believe that that implies that a strong majority of those orders are coming from existing guests now that we've moved onto square and we have greater access to data where it works. We're very excited to begin leveraging that data to more effectively reach our guest.

Okay, great. Thanks for everyone.

Okay, and probably just like just <unk>, Oh, sorry, just to add onto that instrumentality, even in Texas, where we're able to have 50 to 75 per cent cheating the comps right now or <unk>, yeah, you're all from since mixes mid single digits much much higher than the one per cent and so even when we are able to offer indoor dining worsening stickiness and.

Stickiness and all from the system. So we're very confident about increment <unk> followed the <unk> following the pandemic in terms of our all credit themselves.

Yeah, <unk> I guess, one one follow up to that <unk> have you spent much advertising behind this to introduce it to you know through digital advertising for things that are more specific to the the messages more specific to that customer.

Oh can you let me know hold on duty, where they'll put a little mental he made the not the whole day on the physical since Covid credit him. He doesn't look chemical Williams.

So in terms of.

Advertising.

The existence of her off from yourselves, that's largely been done through a reward state of this and so it's been free an extremely effective in terms of activating those guests. We've also discuss that in terms of we we've also mentioned it mentioned it on our social media platforms in terms of Ah targeted that's Michigan, we aren't at that level of day. This is the.

The kitchen, yet, but that's one of the reasons that we're so excited about square.

Okay, Thanks, and first of luck.

Thank you.

Thank you.

Thank you for no further questions at this time I would like to turn the floor back over to management for any closing comments.

Okay. Thank you for your time the vehicles, let it be seeing you left a lot next <unk>. Thank you.

Thank you.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.

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