Q4 2021 Kura Sushi USA Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and thank you for standing by and welcome to the COO Raw Sushi U S. A inc. Fiscal fourth quarter 2021 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the presentation.
Please note that this call is being recorded.
On the call today, we have Jimmy Lee President and Chief Executive Officer, Steven been Ruby Chief Financial Officer, and Benjamin Porting.
Portland, Vice President of Investor Relations and business development, and now I'd like to turn the call over to Mr. Burton.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal fourth quarter 2021 earnings release. It can be found at www Dot <unk> dot com in the Investor Relations section before we begin our formal remarks I need to remind everyone that part of our discussions today will include forward looking statements as defined.
Under the private Securities Litigation Reform Act of banking I tie these.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
Statements are also subject to numerous risks and uncertainties that could cause actual results could differ materially from what we expect.
We refer all of you to our SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition.
During today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP.
Reconciliations to comparable GAAP measures are available in our earnings release.
That was the way I would like to turn the call over to Jamie.
Thank you then on the thank you Paul.
Okay.
Did I get to see the continued momentum.
Despite the challenges presented by Covid, it's about yes.
On Hydro dam, we generated meaningful top line growth you're letting go long he's got the fourth quarter, including comparable sales growth of four point the 90% Mark.
It's got a 2019 for your loss.
TBD.
Yes.
Strong connection and I'll get Peter to all around.
The tiny against excited the policy on anybody's menu items.
That's amazing.
Amazed by the uniqueness of the collect stadiums.
Moreover, we did about sequential improvement in profitability over the previous quarter is that a little bit. If you can put up the money of over 16%. So don't really not only into the gap to our performance.
A woman.
Let me provide more color on I'll say the following months.
We began the quarter.
Restriction.
Or California.
People into India and Turkey.
Two weeks Jim.
And the California market contains Taco Bell App you can base.
He's in aesthetics.
Okay.
Well, we have all and putting into it to say that the Oh about change.
Buck, It's fourthquarter I live in New York.
And you said $1 9 million an increase of almost 50%.
Yeah, the two previous quarters at EBITDA of $18 5 million bottles.
You have a previous earnings call in May sometimes on agility and led the pumps what are the English Ngos.
So these tonnes.
Those obviously, it's kind of 2019.
He has continued through the quarter ending COVID-19 systemwide comps four points to 9%.
Compared to pre pandemic planning.
19 field.
Oh that market in particular, which had more operating restrictions due out in Q4 performed phenomenally is comparable 17 point to 2% and compare that to fiscal 2019.
Okay.
Too many too many too yeah.
Yeah.
To see the.
The momentum continue.
But Q4 has historically been a strong quarter.
September is you.
It remains a very robust up 9.6 medium bore.
Compare that to all of them they've been a nine to 91 bottle.
This springs continued in October.
This increase in five to $10 3 million bottles.
It is a fossil two months of Q1 is kind of 'twenty two into it.
<unk> generated a 22% as compared to fiscal 2019.
It's a key market, California, 13 points to six 4%.
And it takes up 31, 6%.
As long as the Baidu App NTP alone at least not weaker in October 2021.
That's what I'm, saying is we've seen lots of Q4 and Beaumont are particularly notable for two reasons.
The first is that we haven't seen minimal.
Sales in spite of the resurgence of Covid is that there isn't a.
Buddy.
Beginning in August.
I think.
F O to O N E.
Tradition.
High single digit pricing.
At September <unk>.
Making it the single largest poker event in our corporate history.
To be clear.
Haven't seen budget more consumer pushback or pressure on traffic.
Yeah.
In fact, he was saying you're saying that even after this pricing.
We remain excited about it.
Even now.
I see you main cabin essentially beetle killed over many peers in the fishing industry and we continue to be in the operational efficiency into it.
Premium ingredient.
I'm a bit of a body on that basis.
I'd like to put all the pieces that are customer Nick organize that our brand goes beyond our unique dining experience and that further there'll be some is truly an X antibody.
Now I would like to discuss opportunities, which continues to deliver incremental sales opportunity.
Despite the over the opening of our entire system is corrupt look likes opinions.
Our Q4 revenue.
At one point to $4 million.
Compared to the previous quarter.
Revenue of $1 eight.
Medium bottles.
Our first school of thought off premise mix of pipeline, while the Golar Q3, its 10% mix, but this is without getting into it I'll say is overall in Q4.
And by increased the seating chart.
California.
We continue to expect an offering we see the mix of mid to single digits Cogs going forward.
Thanks, a lot just sort of in the three P M.
On the retention is top of mind for us.
I am proud of the NATO by our operations, but you can see the change.
Any app on Virgin won 15, even in light of indoor dining capacity predictions in California.
All of our system in California.
Moving from 50% of capacity.
Yes.
The increase in our workforce.
And at speed.
Due to the lungs.
Like all of our operations on the recruiting teams, we were able to almost completely fully staffed in time for the capacity expansion hitting us for that.
Third as any company, we saw throughout the quarter.
Of course part of it.
Omar noted.
The major push.
So yes, there's abundant although employee tahoe about eight points of applied and we are making every effort to return to I'll put it under the CFO.
Is it simply it sounds he believed that cheating.
Your attention is being a place where people want to work.
And we had fundamentally.
Our training protocols and lucky once systematic trump put into possible career advancement.
This project will be critical to our continued success.
As we continue our love it the growth they.
They need our employees to grow outside of us.
I'll start on this before management to find adult that's updated on our EBITDA.
Panic candidates on vivant implement no meaningful.
Meaningful long term opportunities for everyone is clear guidance on walking through all of them.
So both studies and we are pleased to announce the hiring of Orient paper costs above our chief people officer, who joined US in October.
Ali has extensive cardiac.
Definitely working with branded identical PK and most recently on my voice.
That was often their chief people officer.
Yes, sure maybe to benefit the tremendous EQM audience expertise, especially as we navigate our growth to a changing landscape in the hospitality industry.
If another let's call it innovation and automation all of the major point of focus in our industry since the pandemic and we are fortunate that he is the very things have been puzzled.
Hum.
Founding in Japan, almost 40 years ago.
Introducing to take efficiencies have been fundamental to our business and the company has put out.
Important to the forefront.
Adjusted EBITDA was therefore, providing interactive you start yeah, we created a open anything to China and new mobile.
Mobile App in day rates.
About the program and implemented new technologies, and Crunch time equals unfold.
Analytics.
These investments in technology continue to be key to our strategy.
Our pilot programs, including tailored aside the payment on the tableside ordering continuing.
Continuing to expand on the B high yet.
<unk> got to oxidize.
Thanks.
I was asked it includes adapting square for all liquidity, because the processing, which would be to give us unprecedented identity.
I'll get that insight.
Everybody knows that the transaction will now be Chuck started by square.
Hello, do you have to put up with our growth momentum continued in Q4. These membership growth of over 65% over the quarter, who are totally out of over 240000 member.
Obviously, it's got it you have to enter to inbound.
He will also implement at least not approval and <unk> technologies.
Oh, Yeah, that's pending.
Is it simplification for almost 30 years.
On the development front 2021 was the most productivity yet in the east.
The company.
Because yes development plans there is a lot of openings in Bellevue, Washington for a total of seven new units, representing almost a 30% unit growth and.
Bringing our system towards that at June 32 unit.
Our development team did exceptional work and we believe that he's got a 2021 vintage maybe wrong, but I still don't get the crosses yet.
In fact, <unk> and fourthly OLED, among all of our top performing restaurants.
Most of the teams opening in new markets underscore.
Philadelphia, you of course issue and the possibility of our concept.
In terms of our plans for the kinds of fiscal year <unk>.
To help them, even media EBITDA, yes two.
2021 is a target of eight to 10, new restaurant openings.
We have been extremely pleased with the performance of our <unk> units do you start to enter into some some.
Got it yet in San Francisco, which opened in October.
Besides Tom thumb.
We have executed its easy to say, we need all of which are under construction.
Our geographical strategy continues to be a mix of new markets.
But on the new market is like are you Gonna, Massachusetts, Pennsylvania.
We continue to believe our hyperspace potential is larger than ever due to pumped anything or even the second quarter, particularly in our COO, Jeff all the Chinese restaurant and will commission, our new Hawaii study once COVID-19 is firmly behind us.
We believe it will be our growth momentum.
You cited the two openings could I experience to guests across Amit.
Yeah, most of the difficulty in decent amendments.
And as I'd like to touch on this I can't fall off of that.
However.
We're fortunate to have behind that that a couple of the of our parent company. So it is there.
$45 million EBITDA increase.
Which allows us to possibly take it because this is John.
Our long term success.
And as I mentioned, the audio ongoing capex investment does that cause a bit of Eva.
I just want a unit placement in the us to be cover how much more quickly as we execute upon this.
And the revolver provided financing plans.
We're able to focus on our negotiations with redundant off on longer term say liability, including lease extensions on several of our most appropriate.
The pandemic has been a transformative period is that we are discussing new revenue opportunities like opportunities or just how much EBITDA being able to deepen our bench.
Quoting next to welcome our new CFO New CFO.
On the CDO and <unk>.
Legal.
In July we conducted a follow on offering with net proceeds of almost $53 million through the sale of one <unk> 265, the telecom class a shares.
Okay I'll do that.
All of my team members for their incredible work as well as RPI and perform their financial support and the strategy clearly down pretty damn steady boardwalk provided decided in a transaction that exceeded our expectations.
It just means we have done to chapter to continue our leadership brands.
More exciting.
That's our future.
Is that let me turn the call all of our steam to briefly discuss our financial results and liquidity.
Thank you Jamie.
The fiscal fourth quarter total sales were $27 $9 million as compared to $5 $5 million in the past year period.
We believe measurement of comp sales growth is most relevant versus the pre COVID-19 period of 2019.
On that basis comp sales grew by four 9% with California down by six 8% largely due to the early June capacity restrictions, while our Texas market increased by 17, 2%.
Turning to cost food and beverage costs as a percentage of sales were 38%.
Paired to 33, 3% in the prior year quarter.
Reflecting largely normalized performance as sales volume improved and inventory spoilage decrease.
Labor and related costs as a percentage of sales decreased to 29, 9% from 63% in the prior year quarter, primarily due to higher sales leverage and a $1 2 million employee retention credit recognized under the cares Act extension excluding.
Excluding the credit labor and related costs would have been 34, 3%.
The decrease as a percentage of sales from the prior year quarter was primarily due to the effect of lower sales and minimal staffing needed to operate our restaurants at reduced capacities in the fourth quarter of 2020.
Occupancy and related expenses as a percentage of sales improved to six 8% from 36% in the prior year quarter, primarily due to higher sales leverage.
Other costs as a percentage of sales decreased to 12, 9% compared to 26, 8% in the prior year quarter also due to higher sales leverage.
General and administrative expenses were $5 million compared to $3 1 million in the fourth quarter last year.
Excluding the impact of an $800000 litigation accrual general and administrative expenses would have been $4 $2 million.
This increase was primarily due to compensation related expenses as we've made additions to our team to support our accelerated growth plans.
As a percentage of sales adjusted general and administrative expenses improved to 15, 2% compared to 55, 5% in the prior year quarter.
Operating loss was $800000 compared to an operating loss of $6 8 million in the fourth quarter of 2020.
Restaurant level operating profit as a percentage of sales was 16, 4%.
Compared to restaurant level operating loss as a percentage of sales or 41, 6% in the fourth quarter of 2020.
Adjusted EBITDA was $600000 compared to a negative $5 4 million in the fourth quarter of 2020.
Income tax expense was $18000 compared to an income tax benefit of $5000 in the fourth quarter of 2020.
And net loss was $800000 or <unk> <unk> per diluted share compared to net loss of $6 $8 million or <unk> 82 per diluted share in the fourth quarter of 2020.
Adjusted net loss was $1 $4 million or <unk> 15 per diluted share compared to adjusted net loss of $7 million or <unk> 84 per diluted share in the fourth quarter of 2020.
Turning now to our cash and liquidity at the end of the fiscal fourth quarter, we had $44 million in cash and cash equivalents and no debt as we paid down our outstanding balance of $17 million on our revolver during the quarter.
During our fiscal fourth quarter. We also successfully completed our follow on offering of $1 million 265000 shares of our class a common stock for net proceeds of approximately $53 $5 million.
Cash not only allowed us to pay down debt on our revolver, but also provides us with the capital needed to execute on our fiscal 2022 growth plans and perhaps beyond.
Turning to our annual outlook for this fiscal year, we are providing the following guidance.
We expect total sales between $130 million and $140 million.
We expect general and administrative expenses as a percentage of sales of approximately 17%.
And we expect the opening of eight to 10, new units with net capital expenditures per unit of $2 1 million.
Bears mentioning that these expectations assume that we experienced no further operating restrictions or material downturns in the pandemic situation.
Our expectations are based on the recent results that we've seen in the fourth quarter of fiscal 'twenty, one as well as our performance to date in the current first quarter of fiscal 'twenty two.
And while we believe the above expectations are appropriate given our current operating environment.
The restaurant industry remains highly vulnerable to COVID-19 related volatility.
Now I'll turn the call back to Jimmy.
This concludes our prepared remarks, we are now happy to answer any questions you have.
Please open the line for questions.
Minder during the Q&A session I may answer in Japanese before my disappointment is confident you didn't the English please do bear with us.
Thank you and at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from the line of Andrew <unk>.
<unk> with BMO. Please proceed with your question.
Alright, great and good afternoon, everyone. Thanks for taking the question.
And congratulations on the certainly on the momentum that Youre seeing in the business, where I wanted to start was trying to understand or put in context. The pricing that you are talking about having taken relative to the inflation that you're expecting or that you're seeing so.
Across commodities or wages, what are you expecting for 2022 and how much does the high single digits cover.
Thank you for your questions before we answer your question I would like to make a quick correction to our prepared remarks.
We have nine excuse me for Dcs notwithstanding the nine excuse me excuse me for D C. Besides stonestown.
I just wanted to make sure what we see.
Before we answer your question.
Our CFO.
But could you answer the question.
Sure I'll speak a little bit to the pricing and Jimmy give it over to you for further context, but just to reiterate we made on average high single digit pricing increase move effective September one.
We took into account the competitive environment in every one of the metro areas, we operate in and we also.
Disconnected, a little bit some of our state level pricing and looked at really on a more a market basis, where the Dallas market, Let's say may merit or command the different pricing from Houston or Austin for instance, so that was a change in approach for the company and also something that we think better reflects.
Where we stand in the market and we feel as Jimmy noted were still in a great value positioning Nonetheless, having taken that and we have been very encouraged in the first couple months of Q1 about just how much that pricing is has offset the inflationary pressures that have come primarily from.
Food and labor at.
At the same time, we know there's a lot of volatility still in both of those categories as well as some supply chain challenges that we feel like we're dealing with very well, but nonetheless with the with the outlook still a little bit unclear as to where food and labor may go for the rest of the year, we're not an app.
Position, yet where we are.
Want to get into too much detail about what we think the the puts and takes are between the pricing and those costs, but will say that early indications are positive. We're pleased with how we're getting.
The leveraging off of the sales.
With the increase that we took on September one.
Okay. That's helpful and then.
In the press release and the prepared remarks, there was some conversation around the efficiencies that you're realizing and I'm just curious.
If you can kind of frame, where youre seeing the biggest benefits.
In particular, if theres anything new that you're kind of unlocks going forward and just a little more color around what you're doing on that side would be fantastic.
Yes.
Maybe just to speak first a little bit I think some of what we're looking at and this might add on to the conversation about labor costs. As we were very we are very pleased with how well we've been able to respond with staffing in our restaurants, and frankly think we're not experiencing that degree of shortage or challenges that.
Maybe some others in the space have been talking about we have virtually full operational capabilities in our restaurants right now but at the same time. It also means that we have a number of fairly new.
Employees to assist them and we are working through I would I would say some efficiencies with new team members as we bring them up to speed on rest.
Our restaurant training and then and then of course whenever new restaurants open and there is a little bit of a learning curve that goes along with that and from there I know Jimmy can speak to some of the.
Efficiencies around the initiatives that we have going on in the system and where they where they stand today on things like the table side.
Hey man to tableside drink ordering another another.
Procedures.
So put it out on me two.
Something in Japanese based upon our confidence.
I'll stick with it.
So what I wanted to put it on the labor side of the tape with any call that it's quite a lot and I'll kill them, but can you talk about it on a cyclical or putting a little bit on according to how to model.
On the call about it on a plate and immigrants.
If you don't think that we associate with it on a football heightened critical that they will get up to mitigate dania connect homeowners that they wanted us.
As Steve mentioned.
The most important projects in our immediate initially.
Initiative pipeline would be the tableside payment and touch panel drink ordering we think that this will be this will meaningfully reduce the amount of work that servers are required to do that is allowing us to increase our labor efficiency in terms of margin growth.
But this is our largest opportunity as well simply because.
The margin growth is seen in the last quarters.
Even by sales leveraging.
And as we didn't turn tables more rapidly and serve more guests per day. We think this is going to be a meaningful comp driver.
Especially at our mature stores.
That makes sense and then if I could just squeeze one more in I'm just curious.
Kind of as you look at the.
The volume recovery the strength of the performance of some of the new units and maybe it's too early maybe it's just not enough data points yet across a number of the.
Number of locations you'd like to see but I'm just.
Curious if you think the economic model for new units that you had kind of laid out over the last couple of years do you still think thats the right way to think about the new unit performance or do you think maybe we're in a better place now than we had been I, obviously understand the inflationary environment, but just kind of thinking about some of the comments I'm wondering how you think about that thanks.
Yes, I think.
Oh go ahead.
Jimmy.
Oh, okay.
I'll speak a little bit.
On a pandemic going up at it if I needed to do.
Oh, the group Secretary that the whole time that you're doing how gaming that Tim I was hoping you might be.
Sort of like a follow up I can say of course that there are numerous market cycles.
Why do I will probably be somewhat portability. So let me try to get them like you're doing good luck.
Okay.
But I don't think it's likely quota you mind doing that.
Before entering the question. We just wanted to mention this is sort of in parallel with volume recovery, but we've been so encouraged by the tremendous volumes that we've seen particularly in our new markets like Bellevue and Troy, We think theres clear an indication as ever that.
Portability of our concept is extremely strong and that the appeal.
Nice nationwide.
Well I think well studied at the southern border, whether it'd be at almost any study given that not all of them I think you'd have to Montana.
It operates on a marketing team that he used to work with similar type of bone muscle and put it back.
And look at the <unk> political, though but that that once they get hooked on a call with them. All that think you might see I don't know about them with T.
<unk> mobility somewhat familiar.
Or.
Are they pretty stable on a quite an orthodoxy, Tim put it past that replicates to get accomplished is there any type of connectivity it doesn't stay stable.
In terms of the reasons that we think that we've seen such success in our new store openings for fiscal 'twenty one.
The first one would be that we're taking a more data driven approach to our site selection and with every new unit openings.
It proves our datasets, especially because we have relatively small system base and so our analysis becomes more and more sophisticated with new store openings.
We're looking at teams and opening teams have also done excellent work in terms of ensuring that every openings is absolutely up to our quality standards.
Great. Thank you for the thoughts and congrats again.
Thank you our next our next question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Thanks.
Congrats on a great job.
I wanted to come back to menu pricing and kind of check.
Second here so.
You definitely have great relative value I think that's why you haven't seen a ton of pushback.
In terms of the average check for Q kind of quarter to date.
FY 'twenty two versus two years ago, whereas average check today.
Versus two years ago.
Yeah. Jeremy This is Steve I guess I'll start by speaking about <unk>.
Some of the reason that we're quite encouraged about the the reception or continued reception by our customers. After the pricing change is looking at sequential comp performance against 19.
The month of August we were high single digit positive overall and then when the price increase went into effect, we followed that with two months of.
Almost 19% in September in North of 20% in October and so we're clearly outpacing the change in the pricing with the sequential further growth in the comps.
And that the statistics around.
Check and traffic and so forth will be in a better position at the end of the quarter to provide a more comprehensive analysis of all of those components, but were feeling very good about our customers.
Being there strongly.
No matter, what given given what we've seen in comps since since the move in price.
Fair enough, maybe I can ask a slightly different question then to get some kind of.
Relative performance, so if California in Q4 was down six eight Texas, App, plus 17 point to where those markets stand quarter to date.
Trying to get a sense for how California is trending.
Sure.
Okay.
Yeah, and you know, Texas continues to be the.
Our strongest market overall, but California that down six eight you may recall the first half of June we were still dealing with dining capacity restrictions in the restaurants and so we were running low single digit negative in California. The last couple of months.
Q4 in Q1, we moved immediately to low double digit positive in California in both September and October and then in Texas.
We're talking about north of.
25% comp performances in each of those two months and so it really.
We're very pleased with the trend move in just on an absolute basis, what's happening there and again those are against the 19 numbers just to be clear on comps.
Right got it.
Awesome in terms of.
Other operating costs. So you saw.
Pretty significant sequential growth, obviously revenues grew 51%.
Sequentially and I think your other operating costs.
You know grew 33% sequentially I wanted to get a sense for your business model has changed a little bit you have more.
Off premises business, but in addition to that we've also seen things like utility costs are up quite a bit just other areas.
Wanted to get a sense for how you were thinking about those other operating cost that line item.
Kind of look at 'twenty, two where do you expect that to kind of normalize or kind of a range.
Sure.
I'll speak to maybe it talks a little bit to the earlier question on the economic model side as well.
Throughout the pandemic and through the recovery that we've seen thus far there is nothing in it that that tells US we can't get back to the kind of.
Pre pandemic type restaurant economics that this business succeeded with and if you look at the comp performance recovery and whats happened here in the first quarter again, I'm always going to caution that it's early indications, but those early indications are pretty.
Encouraging.
Encouraging to us in terms of what we can take the business in terms of overall restaurant volumes too on a go forward basis, I mean with those those types of numbers, it's pretty easy to tell or see that that the overall restaurant volumes would be growing and then also on the labor and Cogs side, but both areas we thought.
There was strong progress sequentially, where we got now on an adjusted basis, we got labor down about 200 basis points from the prior quarter to where it's now 34, 3% of sales.
Cogs was 38% of sales other costs, yes. There is there is inflation, but they start from a much lower base portion of our costs. Once he got outside of the prime area and.
We consider that when when we made our overall pricing move to <unk>.
Both offset.
The impact of those and be able to continue leveraging restaurant economics. The way, we want to get too and also staying of Berry.
High value concept within our space and so.
So far we feel like we're accomplishing that.
Last one.
The off premises that you'd asked about Germany.
Typically the two incremental costs associated with scripted off premises would be packaging costs, and then delivery costs for us.
Our packaging costs are basically offset because with any off premises order. There is no disposal, whereas for in store dining, we typically have a 3% to 4% to a disposal rate.
No.
Sure.
On a margin pressure there and then in terms of delivery cost.
Sure.
Our business is almost entirely pick up and we're not subsidizing any of the.
Delivery fees.
It does offer delivery, so that's not a cost pressure either.
Great.
Just one clarifying question.
On the menu pricing and what is your current.
Food cost inflation rate.
I think that the <unk> 38 in Q4 is actually the lowest food.
And beverage costs you've ever had.
Quarter.
And I would think maybe with the.
The price increase that you are probably tracking slightly below 30% food.
Food and beverage costs now.
Yeah, I'll give a little more color on the 38 is that our sales mixed by geography.
Normalized a little more in the fourth quarter as well once California came fully back online with 100% indoor dining capacity.
Pricing on average is higher in California than the Texas market for instance, because of a much different labor environment and so if you were to look at California restaurant P&L as overall youre going to see a better Cogs number and youre going to see higher labor spend. It's just it's just a fact of doing business.
Here and so as more and more of our sales now have gotten back to California, and that's more normal for us that did help the move in in Cogs as a percent of sales in terms of.
Current rates I'm, just going to fall back again on.
The high single price move that we made we were.
We're very pleased with how that is helping us offset the impact of costs and we're also well aware that there can be shifts that happened very quickly.
From from month to month and food now we do have a very diverse menu as you know our top five.
Commodities are around only 25% combined or our total food cost so that diversification helps us, but when things like labor or are afraid to which are going to be a factor for almost all of the food that comes in in other and other macro factors.
It can move potentially significantly and we just feel like we're going to have better visibility to where the the food cost situation as you know down the road and maybe be able to get some more some more granularity around future expectations after that.
Okay. Thanks, Thanks for that color guys best wishes.
Yes, Jeremy Thank you gentlemen, thanks.
And our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your questions.
Alright, it's small curtis on for Sharon.
I had a question on overall restaurant level margins.
If you look at it.
Restaurant level margins, where you are now versus where you were pre pandemic I think you had adjusted restaurant level margin of above 20% in fiscal 2019.
I'm curious as to how much of that gap do you think you can close in fiscal 2022.
I'll I'll maybe reiterate.
Our thoughts, but but we don't see any reason why we can't completely recover back to the kind of restaurant level margins that that we had in the business pre pandemic.
The future may be a little bit or we want to hold onto and see some more experience is a little bit CDO peg nature of the cost environment in both food right now.
And to some degree in labor now and while we're pleased with where things are going where we feel very good about the progress we made to get to the 16, 4% margin in Q4 in spite of the fact that the first half of June.
A very constrained, California still in terms of indoor dining capacities as well as as I mentioned, a lot of new Labour coming on board and some learning curves and efficiency building that needs to happen with some of our newer team members.
Putting that in context, we think getting to that 16 four was a very <unk>.
Significant and positive move.
And obviously narrowing and quickly on what our historical best was but we're just not at a point, where we think it makes sense to try to predict.
Specific dates or times, when we get back to that historical level, but we're very confident it's there for us to achieve.
Just as CFO I'm just fall out.
Operating profit margin for the prior quarter was five 8%. So the 16, 4% that we saw in Q4 as a tremendous growth really driven by the increased sales leveraging and we've been very encouraged by the revenue that we're seeing quarter to date.
Okay understood. Thanks.
Following up I guess on the labor and commodity inflation.
And then you've just taken price on which was opened in August.
Could you also talk about other ways than mitigating this is true.
The optimization of it teams are bells offerings or anything else.
I'll start with it.
A couple of areas.
We've talked about the support infrastructure additions that we've made and.
None more important than some of the leadership, we have like in the CFO role, where Sean came on board a couple of months ago and he's been heavily engaged with our supply chain folks around opportunities for as we as we become a bigger business and doing more volumes, how we can leverage that into some of our costing another term.
<unk> on food.
Have the initiatives around.
Tableside payment and tableside drink ordering that that that can really allow our teams to focus on customer service.
And the current experience other elements of it for our customers in the restaurant that we think are going to help us.
Going forward and then also from a training perspective another.
Area, where we put some more some more investment at the support Center line is in training programs for our team members to enhance their efficiency and customer service and and so theres a lot of things going on at the same time that are pointed toward for driving more efficiency in the business and frankly this is a <unk>.
<unk> historically.
<unk>.
You think about the the level of back of house robotics that had been deployed and how much. This is a system based upon years of experience encouraged Japan.
Been very efficiently develop we might not have had.
A whole lot of low hanging fruit so to speak for efficiencies, but we're always looking to continuously improve.
The things I just mentioned as examples.
Okay got it.
And then on your G&A guidance for fiscal 2022.
I was hoping you could break out the components of the dollar increase in G&A.
It sounds like it includes technology investments in things like tableside payments and drink ordering and other things I was wondering if you could perhaps separate that from.
The core G&A dollar growth you're seeing next year.
Yeah.
Speak to the things that really.
New pieces that if you put them together, it's the vast majority of what is happening there and it does start with people.
When it comes to the leadership side of the business. In addition to Sean coming on as COO.
Our lean our Chief people officer joined the company just recently.
And we also brought onboard.
Director of it whereas that function, we have managed it historically through.
Almost all of our our support coming from third party service organizations and we've reached the scale, where we believe its time that we build our own ski.
<unk> in house, and so we hired that and have intention to bring on a couple of staff members to help support it under under that director as well and then there have been some investments that were made late in <unk> and.
In fiscal 'twenty, one and people that have already been showing signs of paying strong dividends for us and that's that's in the recruiting area, where we brought on a few more team members for restaurant level recruiting and.
Also in the store opening area, where we brought on a whole additional store opening team because when we get to the point now where we're talking about opening eight to 10 restaurants, we really need two teams working concurrently there and you saw the benefit of those those additions and how well we've been able to staff our restaurants from from the June 15.
So called reopening of California, when it got to a 100%.
Up to now.
But the kinds of sales recovery in comp store sales, we're talking about through October simply couldnt have happened without us having a strong staffing level.
Almost all of our restaurants and those recruiting folks in those opening team people have been tremendously contributed.
To making that happen.
And then when you put alongside some of the people costs Theres things like travel that go along with that getting out to the restaurants again when during the Covid area.
Frankly, it wasn't nearly as much of that happening.
There are some things that come along with our scale of growth like like insurance cost D&O and other programs, where some of those cost increase as well and then also as we've hired on people in the organization to provide support for.
A more aggressive growth plan.
Recognizing we're now a bigger business the standup responsibility and some physicians becomes a bigger thing and so the hiring rates you have to bring people on can be different from what you may have been when the company was half this current size so.
I think those if you put those elements together that pretty much comprises the lion's share of of what's changing in G&A and we're just getting ahead of <unk>.
Supporting our business so that we make sure we grow smart.
Okay, and then just I guess, what would've been final point, yes, sorry.
Thank you.
Don't mind is that we really do look at what we've done with these additions to the team is something that can serve us for a multiyear period and so there's always going to be growth in G&A.
On an absolute dollar basis, and a growing business, but we feel like the fiscal 'twenty two additions I've talked about here.
It should be followed by buying more nominal growth or more modest growth certainly in the G&A in the next several years, because we've really positioned ourselves with a team that can handle things for a while.
Okay.
Understand thanks, very much and good luck going forward.
Thank you.
Your next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.
Hi, everybody and congrats again on the successful quarter and or the momentum you're seeing.
Just to follow up on the prior question.
So with all of this sort of infrastructure that you are building this G&A infrastructure.
When you look at eight to 10 restaurants this year as a jump.
And I know that Theres, a real sort of timing issue with signing a lease in constructing the restaurant and everything but with your infrastructure now in place do you feel like Youre in a position where if you look out a couple of years or are you do you have the team in place now to move.
Quite a bit faster even than that eight to 10 in future periods.
Okay.
At the moment.
Okay. That's got a just simple let's get them more in Mckinsey like construction team amongst EBITDA honest authority on a contract switching boundaries and yet you'll hit the mall until customer.
What are you on the sylacauga hung up I didn't know Audi Eaton anchoring names like <unk>.
Heiko I didn't if I stick with opening ceremony I don't know if theyre a clunky.
It depends when you kind of thought you must see Mr. Proteus get them all again forgive me if I'm not picking on placebo they're not.
So they will not I don't know if you can get some adult or you're going to have the team.
Eucalyptus, especially gillam.
That's right.
One thing I mentioned that.
As Steve has mentioned Guinea investments that were making now.
Investments that are good service for multiple years in regards to the eight to 10 restaurants.
This pipeline over the last fiscal year really.
Meaningful additions to our construction team real estate team is tremendously.
Both in terms of talent and.
Additional members and given.
The.
The lead time for an opening as you'd mentioned the investments that we make now are.
What's going to allow us to have that much bigger of a pipeline in coming years.
Although not all of it.
But as one team.
They might get a criminal.
And did I.
Just chemo, who might cause like your dental training vertical I'm, just going to hit them on some of it.
That'll be good if I can just get them all the contracts.
I'm, assuming you've got the Columbia, Moscow soon or not.
No one will contribute equally.
And then.
The opening teams.
One item also falls under G&A.
Bye.
Drilling our opening team and having two opening teams will now be able to open stores in parallel and so this is also something that.
It wasn't just something that was useful for us in the preceding year, it's going to serve us very well for the coming years.
Okay, Okay, Great and then next question.
Again on your new store openings with the success, you've seen I mean, I see wait times, sometimes over 200 minutes or 300 minutes, even at some of your new stores.
Does that cause you to rethink the size of your store at all and.
So I mean, the obvious sort of question is could your stores can be bigger but are there any other kind of format changes that you're contemplating on this next batch of stores.
So many.
I'll kick off and looked at it on the Mic I assume because I did forget but they won't fit on a format. The homeowner home Lotto context, I thought even with the market might be supposed to Oklahoma.
So.
Well, we cannot say that though what would you add.
Coming up that you disconnect you get a hold of that anymore.
Thank you being with us.
So we're always looking to.
What's been particularly successful with any new given any new store opening and we want to keep it flexible format.
Generally going forward, but.
It's not a simple one to one relationship between.
A larger store size and.
It's earning ability just as an example, fort Lee.
Which has done tremendously well it's quite small.
Yeah.
Yes.
People people on all of them a little bit on a couple of homes that are.
Let me give you a multiple or do you think the uptake yet.
The more reasonable and I buy on a portable on the fifth one, but let me take a little more on a condensate they still come by model.
I know, it's like 30 days almost dead on all pointed at a most likely not make any philodox 200, mostly Muslim demo, but if I can.
And then you must get them all took a look at that almost on a case, if I get that and I'll come back on a completely organic.
Particularly because if you send them again, if somebody could take little item okay.
Okay.
As always we're really going to be approaching this on what's best for that specific market just as an example, with the recent store opening.
It was a location that we've been looking at for several years, we were very confident that we'd be able to draw kind of traffic and with <unk>.
We were open to opening a larger store, we're always thinking holistically in terms of the return on investment and we.
We need periodically as the strategy in developing committee and.
When it's appropriate we are open to opening larger stores.
Okay.
But as I can't so what I said, okay. What are the things I publish them all.
Well thanks Scott.
And what comes in because he didnt see at scale, keeping up with Connecticut.
A couple of critical medical simple what I would've thought this type of night almost came up within him or whatever it might or might not quite the fifth putting aside to let them know that my third type item.
From the Chicago critical at the most of what you see I've got a friend and studied the openings that theyre going to buy in a couple of numbers anymore.
Some more on I'll I'll take that for example come that didn't pick.
Pick up a little more quota.
That's going to have a place to take on that.
And we've always thought of our sort of flexible real estate footprint as it is.
Huge competitive advantage by not having a set size our balance sheet, we never preclude ourselves from.
Entering a potentially excellent space simply because it doesn't fit.
Whatever minimum 5000 square foot criteria, and so we never want to cut ourselves off from tremendous opportunities, especially just given how much white space that we have and to circle back to your earlier comment about the wait times.
We are that's one of the reasons the tableside payment is such a high priority for US. We really think that this is going to be very meaningful in terms of reducing wait times and allowing us to serve more guests and the wait times also informed our infill strategy. If the wait times are particularly high than that.
It would be elevated in terms of priority.
Okay. Okay. Thank you and then last question for me different topic.
You mentioned showed that you were just talking about some of the tech enhancements that are more near term in nature like tableside payment and beverage ordering and other things.
As you look longer term I think you mentioned in your prepared remarks.
Kitchen sort of automation or robotics or something and so I was just curious if you could.
Talk about other maybe colm pinpoints or points of friction.
Where you think technology places youre investing now might have more of an impact. If you look two three years out from now.
On the people side, there's a lot of you're going to cost a lot.
I spoke to that on or was that all kind of what do you have to put it all together.
So we're taking out almost seem to come up with anybody.
It's the thought that that's what you spent that's got most of it on the wall.
Well Heiko state political in Denmark.
Yeah. He doesn't stabilize somewhat people tried to put that into pivotal had to pay.
During COVID-19.
So one example of a technology that we're planning on bringing over from the parent pending that eto and NSF certification would be sort of a robot that helps.
Oh look fully automate the dish washing process.
It moves all the place from the profit flex the plates and directly places them into the.
The dishwasher and so really all of it.
Employees need to do is just graphic grab a clean place and it's not something that you ever need to think about again.
This is particularly important because if youre not able to keep up that does limit. Your throughput you always need clean plates to continue to serve guests and dishwashers are actually one of the.
One of the harder positions to staff in there.
We're extremely critical position for the exact reason that I mentioned that sort of limit your throughput and so we're particularly excited about that one but looking at the near term the tableside payment and the touch.
So it's kind of a drink ordering are the ones that are closest to.
Full rollout.
Okay. Thank.
Thank you.
Thank you Jos.
And we have reached the end of the question and answer session.
Also we have reached end of the conference as well. Therefore, you may disconnect your lines.
Thank you and have a good day.
Okay.
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