Q1 2022 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the career Sushi USA, Inc. Fiscal first quarter 2022 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 Hajime, Jimmy <unk>, President and Chief Executive Officer, Steve Ben Ruby Chief Financial Officer, and Benjamin important V P of Investor Relations and business development.
And now I would like to turn the call over to Mr. Important.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal first quarter 2022 earnings release.
Can be found at www dot kirstie, she dot com in the Investor Relations section the copies of the earnings release has also been included in the 8-K, we submitted to the SEC before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements as defined under the private Securities Litigation Reform Act of 1995.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on these.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
Also 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 northern substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release with that out of the way I'd like to turn the call over to Jim.
Thank you bank on the thank you everyone for joining us today.
I'm very pleased to announce a strong start we've had to if he's got a 2022 and in fact, we are on track to achieve the goals.
Yeah.
In your guidance.
The sales momentum we discussed.
This earnings call.
And you've just got here is that in Q1 comparable to say to school of 19, 9%.
Compared to two separate funding increased.
Quarter two into it.
So do you mind Oh.
Well, if he's got a 'twenty 'twenty fourth quarter. Besides the September through November calendar 2019.
We believe these comps.
They just don't make it against about a business model.
In the face of the Covid confronts due to third party and.
I couldn't be more proud of how far our company has come you got a pretty independent of changes created by Covid.
We continue to make excellent progress in designing to put upon them.
Almost it's Q1 this one David.
Of 19% as compared to 17, 3% in Q1 fiscal 'twenty two.
These are typically our weakest quarter little more seasonality perspective and to be so close to our historical peak.
The operating profit margin of 20%.
He is a great thing for our company.
But he doesn't have to stay at a point in the previous quarter.
Great.
So continues to be a phone and get the market with the easing of the comps of 27, 8% at.
That's compared with your California, it's not these are not comparable to meta point to 4%.
Looking at the monthly cadence to it.
We benefited from additional Ob Quint October of <unk>.
Yeah, Sam Penny of EPS kind of 'twenty 'twenty Beach.
Which was offset by one less weekend in November.
Compared to the same appeal.
When you do it.
He is a different disease cut into that tiny.
It's hard to get that you know might not complicate finished November as compared to the preceding two months.
I'll start adjusting for this kind of a weird.
We've demonstrated consistent comp strength.
We've got a 2022 last quarter.
Well, let me see if the revenue was 1.3 million bottles on the sales mix of full point of it.
Against the coupons of putting me sees the Libyan you one point on the mix of type of thing.
Now I'd like to provide an update on the pricing event, we mentioned on our last earnings call.
We increased the pricing high single digits, that's the beginning of September and so many more to get the pushback is.
This being the largest single, but I think you'd be able to take them.
I'm pleased to report that.
These pumps continue to be favorable.
Yes.
Most of the recent quarter.
For our business going forward.
Looking at the our comfort zone is particularly instructive.
Understanding the impact of our pricing.
Most of the growth seen in Q1 to two year stack comp of 19, 9%.
Three of them by put take them all about these two P M.
I was just able to comfortably that's gets tight due to our smaller grafts menu EBITDA.
Deep red consumption late.
It means Oh, yes.
It is encouraging.
Although these same PTO.
Although these non mobile creates concerns I guess increased.
The increase in podcast consumption you spike.
Oh pricing.
We have yet to app.
All of the oil price sensitivities for all against heats up.
I understand and appreciate the premium Buddy that's cool.
You can use to bridge consumption was partially offset by a dining room, probably because they finished up approximately 11% two years ago.
Which needs a deep personal blah blah blah blah blah.
Okay.
The Upselling Beach he says.
What do you think the female.
Uh huh.
Just thought I think the definition is being driven by loan uptake with sometimes due to more time consuming.
On to Covid safety Michelle.
Any change in demand.
So now it's about how long how long beach points you mean.
The company that you're uncomfortable with 19 point the 9%.
That's what I'm going to open it will hit the margin.
19 point to play offense well cheat.
Oh by double digits, and you give them a profit headwind.
Yeah.
On the call it the potential for improvement on.
Got it.
Profitability.
I'm Dani.
It normalizes.
Turning to development.
Opened Hassan you left some of the fiscal year October.
Don't get it in San Francisco.
Yeah.
Subsequent to the quarter.
And that's a new market or sooner.
Each one unit in Phoenix, and one unit and tundra, most of which opened in late September.
But he's still RTD.
<unk> provides a pro forma or would you see that across all of them.
Although full year development plants in England truck is two more units under construction on the fully executed leases for you mean got off the pipeline.
Yeah.
Now I would like to touch on three topics.
The focus of that it's not easy.
Definitely right Cheng I think on.
The impact of Covid.
Yeah.
He says a variety of our commodity basket.
We continue to be interested what he insulated from decent stuff about chimp missions.
What are you why do we have seen the impact of Russia.
Commodities.
Freight cost.
We're not overly that yes on any single parameter barometer eat protein.
I've predicted close to parity, but I was just explaining it.
If many Florida in conjunction with the pricing we have taken in September.
I thought I was asked to maintain ongoing control over about Cogs spent as people go to discuss data.
Oh, you bet in the critical month.
Continues to pay dividends.
Is that a thing pretty stuffed with different genes, which gave us a stronger Q1 says.
Looking through the current quarter.
We can own body.
It caused us some acre that's not a complication for us do.
Okay, so not a cyclical wise caught on tank, although Oklahoma upon tons of course.
In late December we saw somewhat of a restaurant.
They're sitting trustees.
But I think I'll watch due to reduced policies.
Unfortunately coincide with a more lucrative what did they see them, but the deep deep this is a temporary setback.
He's a live App Christa does that.
Chris Thompson with Covid.
On the call and I'll put anybody can say, some almost 60 of our employees and guests.
I suppose the hiring done.
Hum.
No amortization, Halloween, but just any sort of way.
Do any of the months.
The December 2019, but I think even.
But the symptoms have been out of points of headwind for Q2.
Consequently, we saw December comp growth opens up over 14% in.
In comparison to December calendar 2019.
Now I would like to provide an update on our recent east Texas.
It looks like the payment.
Oh, Oh Oh.
So the system exceeding our expectations.
The pilot before touch one of its older continues to expand across our system.
The expected or the next quarter.
Lastly, I'm very excited to announce on what he said.
What's top of mind.
As of today, Hi, blah blah restaurants testing compounds.
I just read this stuff starting with anybody.
Even beyond that these would be about efficiency.
To put it you have to watch.
Future coming through right now while the Sun.
Thinking about this article with a pilot.
No doubt by the end of fiscal year.
Oh, he wants to put up with them continue to grow the 73000, new members joining in Q1 with.
Total of 300 313000 members.
But it was all about 30%.
You'll have to put up with him involvement and engagement remains a top priority.
I'm a member of the seeking any company high aspect of it is the underlying frequency a nonmember.
What are we all we look hard at towards the end of the continent I am extremely proud of our recent hormones and amazing to watch our team has gone through with anybody needs to be done.
Oh, so that's the extent of my extend my thanks to everyone listening on the corporate centre or making disposable.
With that let me turn the call over to Steve to briefly discuss all kind of thought about under the COO Steve.
Thank you Jimmy.
For the fiscal first quarter total sales were $29 $8 million as compared to $9 $4 million in the prior year period.
We believe measurement of comp sales growth is most relevant versus the pre COVID-19 period, our fiscal first quarter 2020.
On that basis comp sales grew by 19, 9% with regional comps of 12, 4% for California, and 27, 8% for Texas.
Turning to cost food and beverage costs as a percentage of sales were 30%.
Paired to 32, 4% in the prior year quarter due to pricing taken at the start of the quarter and largely normalized performance as sales volume improved.
Labor and related costs as a percentage of sales decreased to 32, 5% from 46, 3% in the prior year quarter due to higher sales leverage.
Occupancy and related expenses as a percentage of sales improved to seven 4% from 18% in the prior year quarter also primarily due to higher sales leverage.
Other costs as a percentage of sales decreased to 12, 1% compared to 22, 1% in the prior year quarter due to higher sales leverage as well.
General and administrative expenses were $5 $4 million compared to $3 $5 million in the prior year quarter.
This increase was primarily due to compensation related expenses as we made investments in our team to support our accelerated growth plans.
As a percentage of sales general and administrative expenses were 18% compared to 37, 4% in the prior year quarter.
Operating loss was $1 $3 million.
Paired to an operating loss of $6 $3 million in the first quarter of fiscal 2021.
Income tax expense was $12000 compared to an income tax expense of $29000 in the prior year quarter.
Note that we expect to continue to incur a nominal income tax expense quarterly irrespective of our pre tax income or loss as a result of the full valuation allowance against our deferred income tax assets and incurrence of minor income taxes payable at state levels.
Net loss was $1.3 million or <unk> 13 cents per diluted share compared to net loss of $6 $4 million or 76 cents per diluted share in the first quarter of 2021.
Restaurant level operating profit as a percentage of sales was 19, 5% compared to restaurant level operating loss as a percentage of sales of nine 9% in the prior year quarter.
Adjusted EBITDA was $800000 compared to a negative $4 $1 million in the first quarter of fiscal 2021.
Turning to our cash and liquidity at the end of the fiscal first quarter, we had $44 $4 million in cash and cash equivalents and no debt.
Finally, I would like to reaffirm our previously shared full year guidance for fiscal year 2022.
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.
It bears mentioning that these expectations assume that we experienced no further operating restrictions or material downturns, resulting from the ongoing COVID-19 pandemic.
Our expectations are based on the results that we have seen in recent quarters, while we believe the expectations are appropriate given our current operating environment.
The company and the restaurant industry generally remain highly vulnerable to COVID-19 related volatility.
Now I'll turn the call back to Jimmy.
This concludes our prepared remarks, yeah, no happy to answer any questions you have.
Open it up please open the line for questions.
Minder. They went against you in the system I mean onsite in Japanese before might if most of these are translated into English.
It'll be less.
Thank you.
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Our first question comes from the line of James Rutherford with Stephens, Inc. Please proceed with your question.
Alright, Thank you and congrats on the results here could.
Could you help quantify the extent of capacity limitations that you're seeing today, just so we can calibrate where we are today on that and then if you have any estimate I know, it's hard but any estimate on how much of a headwind that may have been to the comp you reported for December.
Thank you Dennis for you a possible question. Please allow me to answer.
Thank you wanted to Anthony.
But then I know you might get into and I'll just give any color on just get them all on the well cost because I know you called out they come off and it seems like you don't think it doesn't have any children and what it can do.
You just get them out you may not really be the dental I know in pockets of citizens. When all you got to the single, but I imagine it.
It looks like most of it okay.
In the last couple of months.
In terms of the current situation remains highly fluid.
But what we can say is that has had a meaningful impact on our sales, particularly as it began in the latter half of December leading into now with.
With the holidays.
It's been on a rolling basis because of a global problem.
Let's get them on my Mark wanted to tie them all on operating between recruiting the team H Edwards seemed much doing them, but they must be my favorite doesn't want me to do what you're doing on the eagle that they get them off I don't know something thats difficult on all kinds of semi so hold on a month to month.
That being said, our our operations department, our opening team our recruiting team are working on all cylinders and as a result, the majority of our restaurants are able to operate without issue and so that's something that we're very proud of and grateful for the work that they're doing also just want to mention that these.
Operating limitations are result of quarantine shifts as opposed to anything like government mandate.
Oh, thanks for that clarification and that's helpful.
Kind of leads into the second question I had which is regarding the traffic discussion you mentioned demand is very robust and I've seen that myself and I've eaten at your restaurants, but you said table turns of craft app limiting some of the traffic recovery. So my question is what can you do to increase those table turns and claw back some of that traffic.
Maybe it's through technology or can you push people to shoulder period, just do you have any ideas about what you can do to bring those table turns down. Thank you.
Sure.
Okay, but on the console.
Comparable looks up until the moment he wants to give him a call. It on me today Ultra Qiagen political dilemma, especially among those empty Burton you got any more on the theoretical on all but most of.
He was going to take till then pumped anything like it took when you met at a board idea in monotherapy predominantly Muslim get my pundit, Nicole what if I put it.
You've got the money must be what would it have to get a call today about hook anymore on all my marketing that you have to put out ecommerce look I'm going to give it to what they might see multiple myeloma and all.
Okay, but it sounds like identical if there isn't a typical instead of at the moment, though so you go to the other and I click on all cause I experienced in Coke and some others that you don't want to cut it a political.
What would be called analysts like you couldn't come back to us.
I am in terms of producing a table turn times.
The immediate focus would be those three initiatives that we've been discussing historically that would be our table type payment or a touch panel drink orders and now our robot servers, which are working.
Working very well at least as.
As we've seen in the pilot so far.
Well, we want to emphasize here is the table turn times are not a permanent impact on our on our operational throughput it's really.
A result of the additional cleaning procedures that we've taken between parties and so that that efficiency will be naturally regained as we exit the pandemic. Besides sufficiency. Some traffic pressures have been ongoing in metropolitan areas, where our restaurants are highly dependent on foot traffic, but we do believe that we can make up those traffic losses.
Our increased marketing efforts the robot servers besides being.
An efficiency measure are really a meaningful addition to the core experience and they're highly Instagram a whole it's a it's.
It's been a great draw for our guests.
Very helpful. Thank you.
Thanks James.
Thank you James.
Our next question comes from the line of Andrew <unk> with BMO capital markets. Please proceed with your question.
Hey, good afternoon, and congrats on a very nice quarter.
I guess first I just wanted to clarify on the on the sales guidance that you gave I know the commentary was.
Assuming no further I guess, you know implications from Covid et cetera, but what exactly does that mean I mean, if you held kind of at this time.
Relative to pre Covid comp level that you would be in that range are you assuming that things go back to where they were just trying to square exactly what the commentary I just want to be sure Trump's sure Andrew I mean, it does it takes into account what we saw in the business in December which included as the month progressed.
Some more impact or challenge problem from all Micron and I would I guess just to emphasize that you know that situation itself. It's truly you know for our operations team and our HR folks. It's a daily monitoring situation something can arise in a given restaurant with a positive case, let's say among the team members and.
And then result in the need to quarantine a certain number of the members who had been in contact with that individual and Theyre working very hard day to day to work through that you know our view is that we believe the level of that activity is a temporary situation hard to say what temporary exactly means but.
But you know for the near term, we're just really pivoting and adjusting on a on a almost daily basis in some of our restaurants, given the circumstances and so as we think out for the for the entire year in the guide that we gave on revenue.
I mean, there's something some expectation that over time, you know that the omicron situations will moderate within the year here and not not be you know as much of a challenge maybe from one day to the next as as it's been of late but we.
We certainly build in some expectation right now for for some some difficulties that go along with that that we're living through an app and for the last few weeks.
Got it okay, that's that's pretty clear and then <unk>.
Second question you know what.
I mean, I guess, you were asked last quarter and weren't prepared to commit.
And obviously wasn't included in the formal guidance, but you know, especially with the commentary you gave around the restaurant level margins. This quarter in what is typically a seasonally weaker period is there any way or or color that you can give on where you think within that sales rep.
Range your restaurant margins might land or maybe some color on app being impacted on the Cogs side. So much from an inflationary perspective, but just any anything to help us think about the margin trajectory here for the year.
Yeah, Yeah, Yeah, and you know I'll start.
With the caveat about why don't we just talked about in terms of sure Odeon.
But he and volatility, but but typically for us are our seasonal you know our most recent pre COVID-19 year had about 23% of our sales base in the first quarter.
And that would you know without then it went to 24. So you had 47% in the front half and 53% in the back half of the year you know things like food are going to be you know they should be almost completely variable.
Labor is sort of a semi semi fixed semi variable depending on how you think about it and then when you get into occupancy costs and some of the other costs.
More of that as Leverages ball once you start growing sales. So if you think in terms of that balancing but also with the caveat that the quarter. We're in right now faces some COVID-19 challenges.
Challenges that Werent as is significant at least in the earlier part of Q1 that can help you maybe do some modeling around the business.
I used it to say, we're very encouraged by you know being at 19, 5% only 50 basis points from our historical peak annual margin in what is typically in Q1, a lighter seasonal sales quarter and and so you know the pricing that we've taken the impact or really positive risk.
Section you know that continues from our customers about our value, we think those all bode well for our future opportunity to grow margin.
Got it that makes a lot of sense and I just wanted to squeeze one more in here just you know it's interesting entering a new market in Arizona in this environment, which presumably doesn't have as much of an impact from from from Covid generally as maybe some others, but I guess I'm curious is your willingness to enter other markets there may be more impacted.
Would you would you kind of re prioritize the markets that youre looking at are or is that too kind of prisoner at the moment I'm just curious for your thoughts on the on the market level kind of unit openings and the preferences.
Well, that's been a conflict going on someone who comes to unlock on the COVID-19 constitutes the industrial market the criticality of Oklahoma.
Hi.
And all that but it won't go up and when I get that you're taking them one of them did what do I know what he needs in one you didn't get it because it's a little bit on accordingly.
Okay.
It started with a plan to the thought that you'll kind of people thought it would go to more easily can you might get to vote on all existing a market put them out of it.
You've seen that you've taken a lot of your idea on all of them. So they can take it even Congress theyre, telling me no no it isn't.
Under the old fashion authority, an auction like you'll get closer.
So it is somewhat irrational.
In terms of our leases, we typically signed 20 year leases and the impact that we're seeing from the pandemic will be temporary.
Temporary and so we're not making any fundamental changes to our development strategy in response to Covid pandemic.
Largely speaking we will continue to pursue the strategy that we pursued since going public is doing about a 50 50 split between entering new markets and into existing markets and since you brought it up Arizona, while being a new market as.
In minimal impact or limited impact remember crying and is performing extremely well.
Got it very encouraging to hear thank you very much.
Thank you Andrew.
Thank you Andrew.
Thanks.
Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.
Hi, good afternoon.
When you think about the the trends here in the second quarter can you talk about you know where you've seen more of an impact if it's been California or Texas.
Texas relative to the kind of November trends.
And then I understand the reduced the hours and the seating capacity dynamics associated with the labor Quarantining, but are you sensing or have you had any evidence of consumer reluctance to come into the restaurants.
Sure. So we are the.
Well when it comes to Youre unable to deal with.
On the Eagle they went up with the answer.
Well then let me say they go to that kind of equivalent in South Dakota.
Even thought at that point, but it's one of the critical you have to get us took them because they're not on the slide.
So somebody coincidental okay.
You've got to face into most likely don't take them.
Sure in terms of what we're seeing in quarter to date, we're not really seeing too much of a geography specific impact it really does boil down to each restaurant and the number of employees are quarantining. So it really does vary case by case as opposed to geography by geography.
That's all well get something on the funnel.
I know, Joe I don't know I didn't pencil on almost any more Okinawa and I'm kind of hesitant do you know what I don't meet them often none of that and what are you getting on or they've got to have a neighborhood cinema somebody what about in the horizontal <unk>.
Absolutely.
I thought some of the seating capacity or what do you mean physical cogs muscle itself what are the egos.
On a constant but I'm not at all I know he'd be joking.
Give or take went up.
And of course, it got out that well get the sunbelt corner on I'll go back in for the pivotal cohort did you take a sort of compensate them on things that you might have to put them up on a square and consult with you not ignored it Tonight, you shouldn't even be demand.
Well done.
Great.
Crichton situation remains highly fluid and so we can only speak to what we've seen so far but so far we've been very encouraged by a lack of consumer hesitation or change in consumer behavior. I think this is clearly demonstrated by how longer wait times Uh huh.
How how are lead times really haven't changed since entered the omicron era in terms of the sales pressures that we're seeing it's really more a result of the.
According to the things that we're doing out of abundance of caution whether that results in.
Fewer operating hours or diminish seating capacity, that's where the sales pressures coming from it's really not from a demand related aspect.
Great. That's very helpful. And then I'm also curious if you see an off premises tick up.
Now seasonally typically off premises would tick up you know in the winter, but if you kind of level set as seasonally if you've seen that increase in December and so far into January and then a second question on that I know there were some.
Potential dynamics associate with new units that you were going to incorporate it too kind.
May be off premises business more frictionless can you give us any update on that as it relates to new unit development.
Sure.
I'm also sure.
I'm sorry go ahead Steve.
Yeah. It was we felt that it was just kind of speak for a moment on the off premises sales Sharon what will bring more detail about Q2 into the conversation when we talk about there was up overall, we did see in Q1 was kind of what we would expect with a slight percentage decline as a percent of the overall because we had a.
A quarter, where all three months, we had full dining room capacity versus in Q1, California was only two and a half out of three.
But in terms of you know it.
It's still an area off premises that we know there's a certain band of customers that like to consume but well we'll share more detail on the quarter when we get through it.
And to answer your second question.
The units that are geared towards.
More frictionless.
All premises, whether that's curbside parking or pick up window that those have yet to be those remain in our pipeline so kind of updates there.
Great. Thank you.
Thank you Sharon.
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Our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.
Thanks, and I'll add my congratulations on the strong momentum in the business.
I wanted to come back here to the comp breakdown and.
In particular in December.
In terms of that split that you saw in Q1, Texas up almost 28%, California up over 12, how how those splits Ben.
In the December period.
So, Texas. So if you look at December overall, Texas continues to outperform California on the comp basis, and it's it's pulled back with a little bit more than than the change in California. If he disco sequence in Q1 to December you know I would add you know December.
And in addition to what we've talked about on the omicron challenges to our staffing. It was also a little bit less favorable from a calendar perspective than two years ago. We we we've done a lot. This year, we lost a weekend to both right Christmas New year's Eve, whereas two years ago. It was it was a mid week set of holiday.
Hey, so so a few things there and then in that as well I don't know if you caught during our prepared remarks, but we we we lapped the pricing event as well from December 19 that was a mid single digit increase at that time, so that the pricing delta between.
You know two year periods is last when you look at December versus Q1, but having said that you know, Texas continues to comp they're very strongly positive and then more strongly than than California, and the month of December.
Okay got it and then I just wanted to come back because I.
I did miss the in terms of the 19, 9% in Q1.
Versus 2019, what was the breakdown specifics of transaction growth or transaction change I should say versus.
Average check.
Sure sure so as you know.
Jimmy talked about the the vast majority of the difference.
It can be attributed to the pricing that that change that had happened over that two year period. It was it was whereas the comp was the $19 nine there was about 18% of pricing over a over a two year period and I think at least three pricing events during that time window and so we we are.
Caught the pricing by a slight amount and the two elements that go into that as Jimmy talked about the place being consumed per customer on average between the two periods was was up and we attribute.
That tells US a few things one one you know we don't feel like our customers are pushing up against.
Value threshold or anything of that nature. At this point you know those pricing moves did not caused them to pull back on their you know their plate count averages to the contrary because of I would say the value we offer our marketing activities. Our rewards program success, we're actually.
Selling more plates per customer than we did two years ago, and then that increase was was partially offset by the traffic.
Reduction over the two years, which we called out is approximately 11% reduction in the comp stores over the two years with that largely associated with the fact that theres COVID-19 related activities that do put some pressure on our COO.
Turn time capabilities and the restaurants, you know things around how we have to sanitize between.
Table settings, and also what things we can leave on the table right now at least for customers versus what has to be replaced every time, a new set of customers comes in so does that give you a kind of the anatomy I guess of the numbers there.
Yeah, that's a that's super helpful.
I wanted to come to our unit growth the time and I think the obviously open to two units subsequent to that.
The quarter end.
I think you said you had a.
Two more that are under construction currently and then leases signed on three additional locations.
Could you provide a little bit more color in terms of the timing of completion for yeah.
The units that you have kind of under construction and the timing for.
The back half of the year as well.
Sure.
According to a nickel at a more suitable.
Most of them up on all quarters, you'll have too much but you wouldn't even though.
It's almost two months unless you don't put it up you know whenever it comes into to give a quick study and within that you spoke with just can I ask you to sort of go down okay against it on them and get them all.
But at what point do you want to keep it got any calls if you come Tonight, you'll go to political figuring out because I didn't get to know how to do it because you see a simplistic one article mills.
Yes.
So we do have those two units under construction and are making great progress one is in San Antonio Texas. The other is our upcoming location in Watertown, Massachusetts, We're very close to breaking ground on two additional units.
But we have our typical construction time is four to five months, but you can extrapolate what our expected cadence is there.
With additional.
Pressures on municipal governance in terms of permitting or inspections.
There can be delays that are outside of our control, but currently that's what we're expecting.
Got it helpful last one for me.
So if we look at sure.
Unit volumes here, and and comps up 20% versus two years ago.
When we look at the other operating cost line item, where you have your utilities repairs and maintenance credit card fees.
You you have that line item up I think about 40 basis points versus Q1 levels from two years ago I wanted to understand which components were the driver of that is that more coming from the utilities and maintenance.
And repairs or is that.
I'm not quite sure how much credit card fees are up as a percent.
The sales since our since that timeframe, but any more color you could share on that.
That increase of 40 basis points.
Yeah, I don't know that I could speak to the precise change or build it for you necessarily but you know components that go in there like credit card fees. They really are strike variable costs, you know they run as a percentage of sales.
Some of the small tools expenditures you know for the little bit of off premises business that we do there are some additional costs that that run through the P&L and the other cost area that that would perhaps be a minor deleveraging factor on a on a on a sales number since you know we have a meaningful percentage of business happened.
They're you know things like insurance costs with with growth in the business as well they tend to they tend to go up.
Along with the exposure metrics and those exposure metrics are often sales from the insurance company view so.
Some of those costs, you know maybe not as as Leverages ball over a multiyear period is as others.
Like in the occupancy the pure rent category for instance.
Great helpful color best wishes for continued success guys.
Thank you Jeremy.
Our next question comes from the line of George Kelly with Roth Capital. Please proceed with your question.
Hi, everybody thanks for taking my questions.
So just a couple for me first I was hoping you could start with the.
The tech initiatives that you talked about did you say that the tableside payment is now fully rolled out across all of your restaurants, and if I heard that correctly and how impactful is it how much of an impact do you think that'll have on turns and and timing at the table.
Sure My the animal and then they go to a particular customer or not yes. It is still.
Yeah.
The constant I'll, just get them all put it onto a mini made it on a Y O y.
What are the coke, making telemark will cut up on or what it what it is.
Could you put any type of it isn't it I don't know what are the hook ups didn't want because it's almost like you said before cost us on the call. Many made US would you tell them what you want to look at to get them thinking amongst kindle.
How could they get what they took the name of spin off I don't want to say two months cleanliness.
In terms of the rollout, yes rollout is complete and is now in all of our restaurants in terms of the impact. We are you have already seen a reduction to the workload that our servers are responsible for it and we've seen that translate into a greater.
Service satisfaction on in terms of table turn times. The pilot has been going on for too short a period for us to quantify it but we look forward to providing updates to the future.
Okay Cool tunnel.
No.
And you said you did you said you gave quite a lot.
Mike you might want to keep it going you know how did you personally I know that sounds crazy, but it's got to get them all.
On the cable side of the payment till she was stable, but he forgot but often there's 100% surgical plus into this one but does the humbling juggernaut that somewhat but it took all of that it gets us to go to the humble.
Cable is a type of payment till skeptical ethical so to put it out of my daughters, I get I don't know what could they go to Florida kick them off.
To provide some additional color historically.
Terms of our customers' payment methods about 80% has come through credit cards looking at our cable side came in.
Rates across all transactions are about 30% to 35% or just under half of about 80%.
We'd mentioned earlier, so you can imagine just how much of an impact it is having in terms of producing workloads for our servers.
Okay. That's helpful. Thank you and then next question for me is a different topic.
In the past you've run promotions and prices that are really impactful and drive a lot of traffic.
And in the last two years since pre Covid I mean, you've grown so much and units in and just absolute level of traffic and so I was curious as you look forward.
I'm sure that those promotions and special prizes and things take a lot of planning.
And just as you kind of map out the next year or so or are there a lot more kind of special partnership some promotions that are becoming available to you just because of your increased scale.
Absolutely absolutely. That's the case that was one of the things that we're most excited about when we went public in 2019 up until that point, we'd really work with our smaller brands our own proprietary characters or Japanese brands.
Since going public we've had access to much larger internationally known brands right.
Right now were partnering with Texas, which is one of the bedroom video games of all time, we have an upcoming partnership with Pac man as well and we just had a we completed our recent partnership with Sonic and so you can see the quality of the partnerships are improving every year I'm incredibly proud of the work that's being done by our marketing department in term.
I'm, giving you an update in terms of what's upcoming.
We'd like to stay pretty tight lipped.
Part of that is just the licensors don't much disclose things too far ahead, but we are very excited for what we have in our pipeline.
Okay Cool and then last question for me.
I appreciate the info you gave us on leasing on the construction and development pipeline.
But if we could go and I don't know how much youre going to want to stay here, but could you go one layer kind of higher L. O I's or thinks that I don't know what other kinds of numbers you could give us your stance on number of things that are maybe in the pipe for more of a next year event and what I'm trying to.
And better is.
How much if this year was more of a normal environment with timelines I know the construction is taking longer than normal.
But you've made a lot of corporate investments in and getting that development team in place I'm, just curious what kind of a normalized.
Year could look like beyond this fiscal year and in new store openings.
Sure mother, an argument that it's about that kind of thought it was like Oh, that's simple and I'll keep it quick.
Okay.
Uh huh.
Like when it comes to an old school, if they get to school, if they get a boom or put them on to probably considerably once I get to something that's when it comes to the wound up being killed to pocket that they must have a quarter that gets through in asthma.
In terms of L O I's app.
We we'd like to just continue with the information that we've already shared publicly which is that the leases 40.
So the remainder of the your fully executed but as you can imagine we're very diligent with maintaining a strong pipeline of Belo wise, given our aggressive growth plans.
That's all I know what he's done this get them all but are there more on autos you hold onto indefinitely, there kind of a different answer.
Dental medical animal close and you can see why.
So there's really nothing on a construction on PD little I'm kicking someone someone called us up and I didn't know COVID-19 outside of gift cards that you speak so hopefully it will pick up the question. Mr. Till then and also do you know who might be I couldnt quite simple just didn't follow quite honestly.
I'm, sorry, you want against anybody to think about it before they call normally doesn't have to take I don't know I mean, basically constant what about I don't know if he doesn't get underneath it all.
Got it economically I don't give me a little more in the funnel.
Accordingly, I saw on the monies you went to the pipeline I totally agree that economy.
Almost got it okay. So I guess you can take any contract. That's one thing good about Chicago, but all the time with.
Or upgrades.
In total so hydrocodone I did want to put on a second went off.
In terms of current construction periods, we're seeing the same thing that we're that the rest of the industry is seeing and that there are some supply chain delays in terms of construction materials.
Permitting and inspection can take a little bit longer than typical but couldn't unit Ah you think annual guidance that we gave and reaffirmed today holds that expectation into it and remain confident that we can hit those eight to 10 units.
But more normalized environment, there are really three factors that determine our.
Growth rates, the first would be our ability to identify high quality sites. The second would be the quality and size of our management pipeline and the third would be our liquidity.
I think we're in a great place.
And we think we're positioned to grow faster right.
The rights issue.
The rate environment.
Is there and so if we are to.
Fundamentally re evaluate our growth rate and provider.
Our new target, we'd be very excited too about the future.
Got you. Thank you.
Thanks George.
Thanks.
Ladies and gentlemen, we have reached the end of the question answer session.
This concludes today's conference and you may disconnect your lines at this time.
Thank you for your participation and have a wonderful day.