Q4 2022 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by.
Welcome to the Cara Sushi USA, Inc. Fiscal fourth quarter 2022 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 call is being recorded.
On the call today, we have Jimmy Uba, President and Chief Executive Officer, Jeff youths, Chief Financial Officer, and Benjamin Porton, Senior Vice President of Investor Relations and business development.
And now I would like to turn the call over to Mr. Porton. Please go ahead.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal fourth quarter of 2022 earnings release it can be.
Www Dot Christmas, we don't call them in the Investor Relations section.
A copy 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 them.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
For all of you to our SEC filings for 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 financial measures, which we believe to each one of 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.
The police and the comparable GAAP measures are available in our earnings release with that I'll move away I'd like to turn the call over to Julie.
Thank you Dan on the sand for every one for joining us today.
It's great to be able to report a strong accruals came up on a year.
He broke several critical.
The growth vehicles.
I'll keep it to an all time high on like I said I'll give you the operating profit margin.
We further improved our profitability.
Entering on the succeeding three new states and the many more DMA.
We implemented.
Any new innovation I apologize.
And I always ask the skin toxicity as we continue to pursue aggressive growth.
Being a political year.
Now I'll direct to discuss our fiscal fourth quarter results.
Touch on some expectations for them.
<unk> fiscal year.
We continue to see strong sales performance.
Fourth quarter.
$42 million a 50.
A 50% growth over the prior year or 27 9 million bottles.
The comparable sales growth of 27, 6%.
Compared to prior year.
Yes.
What's remarkable about this figure is up.
But I will say this growth.
The pace of the pricing.
It would take them over this period.
So traffic growth of 14, 6%.
Over the prior year.
Profitable growth in California.
Sorry to go back over 20%.
As a reminder, California open portfolio indoor training on June 16th 2021.
The traffic gains we saw in California materially outperformed our expectations.
I think it was a benefit of two weeks of additional operating capacity in fiscal year 2022.
On that note I would like to discuss regional performance.
In the fiscal fourth quarter.
So comparable sales growth of 32, 7% compared to prior year period.
In Texas.
We saw comparable sales growth of 19%.
Compared to prior year period.
These are geographic Colin.
That's a pretty good comparison benefit California.
In dumping naphtha, yet operating restrictions.
I'll put anything to say why.
One 3 million barrels with a mix of two 9%.
Consistent with our near term expectations for low single digit off premise mix.
This strong performance is that I'll get to in a fiscal year 'twenty two an increase of.
$3 $8 million.
Which is an increase of one $7 million over the prior year.
<unk> of $2 1 million.
As well as a healthy improvement rebound in <unk>.
$3 5 million barrels.
To provide some context for our comparable sales.
I would like to go over our recent production history.
We took pricing of approximately eight 2%.
Timber over 2021.
I think approximately 2% in March 2022.
And across the fiscal year.
Pricing of approximately 6% in July 2022.
Totaling our lapping of September 2021.
Our current year over year.
Pricing is a little bit with some greater Boston.
Again, our comps for the fourth quarter on a scenario.
While approximately two 8%.
With ethics ticket pricing of approximately 14% over the same period.
We are exceptionally proud to say that.
Our comparable sales gains I'm, not being driven solely by pricing.
We have seen no discernible traffic growth.
With demonstrated by the previous mentioned 14, 6%.
Year over year profit growth in our fiscal fourth quarter.
No I think that will discuss what I'm sure is top of mind for everyone in the refining industry.
Inflation labor availability and the consumer offerings.
Our Cogs as a percentage of sales was 37, 1%.
Why does this 37% of video is still a very strong robust historical perspective.
What's not ended up we saw 100 basis points increase in Cogs related to our fiscal third quarter.
Due to commodity inflation, which we were not able to fully offset by pricing.
On the other humps.
Labor as a percentage of sales improved to 28, 9% driven primarily by price on the season I would say that for leverage.
Couple of things to buy the full rollout of mobile performance.
Besides opinions.
And I'll touch upon entering all the systems.
Suffering headwinds.
Progressively eased.
Our current staff, Inc. Excluding annuity opened the units is over 95% of Optima Readouts.
In spite of unprecedented inflation.
We were able to deliver on all time best in different maybe the operating profit margin of 23, 9%.
Our fourth quarter.
On a full year basis, our restaurant operating profit margin in fiscal 2022 was 21, 3%.
This is an improvement of more than 100 basis points over our pre pandemic historical results.
I believe that consumer demand for <unk> remains very strong.
Type of inflationary concerns.
Potentially pressure on discretionary spending.
We are fortunate in that our historical and current such an excellent strategy.
Oh Italian market.
All of our index is high income legend.
Hello guest is that much more <unk> of the customer.
Okay.
Our value proposition remains excellent.
In spite of the pricing.
Taken during the pandemic.
E Commerce hobby of tissue this launch.
Indicating that.
<unk> pricing is approximately how absorbs shipper by local competitors.
There hasnt been a lot of discussion about consumers trading down.
We think there is some amaze.
Amazing opportunity and capture Inc. First time guests talk about trading down from their local mom and pop appreciate excellence.
This will be a key strategy for growing sales in fiscal 2023.
We expect that we will make additional marketing investments in order to take advantage of these opportunities.
The health of the Cuda consumer is demonstrated by our quarter to date sales.
We saw September sales of $13 $5 million.
October sales of $13 3 million.
With year over year comparable sales growth of 11, 5%.
The six 3% in September and October <unk>.
I believe these comps are particularly strong when considering the tough comparison.
The 8% to pricing we took in September 2021.
As further demonstration of strength over the correct consumer.
Pop up phones for cigarette consumption during the quarter to date has actually shown modest growth is.
This activity our fiscal fourth quarter.
Average check sizes.
Also grow modestly compared to our fiscal fourth quarter.
Moving to development.
In the fourth quarter.
Three new locations.
And each come by non Florida and pipeline quarter Bosnia.
Making a or a total of eight new unit openings.
For fiscal year 2020.
As you May have had on other earnings calls from our peers in the industry.
We are continuing to see headwinds in construction costs.
Of course, the tragedy by shipping delays and the delays in permitting from local governments.
I'm very proud of our development team for achieving 25% unit growth this year, while working under these conditions.
IBD exempt much like fiscal year 2021.
Our cross over new units from this year.
Has the potential to be one of the best classes, we've ever opened.
Development for fiscal 'twenty, two and three is off to a strong start.
We expect three new units to open in the next several weeks.
Two of these units will be.
In the new markets of Philadelphia, Pennsylvania.
At the mall of America in Minneapolis.
The other unique is set to open in Jersey City, New Jersey.
It is a market.
Deliver remarkable results with our fourth relocation.
On another note I would like to formally welcome our new Chief Financial Officer.
This is a truly remarkable career in the restaurant industry, including growing yard house.
Only three units and additivity, beating each sale to dotting.
Youre reading shake shacks blockbuster IPO in 2015.
There have only been with us for months.
Already proven himself to be an incredible additional things that Jim.
I couldn't be more excited to have him as one off correctly.
Finally, I would like to thank all of the team members that have made this possible both order from our corporate support center.
Qunar has grown so much over the last several years.
It's great to see our employees, who are on sidewalks and for our management pipeline to be feed adobe's intangible muscles.
And with that I'll turn it over to Jeff to briefly discuss our financial results and liquidity.
Thank you Jimmy I am humbled and honored to be part of this amazing company to have joined the best in class management team I believe we are poised to become the industry leader in sushi and I couldnt be more excited about the future.
For the fourth quarter total sales were $42 million as compared to $27 9 million in the prior year period comparable sales growth as compared to the prior year period was 27, 6% with regional comps of 32, 7% in California, and 19% in Texas.
Turning to costs food and beverage cost as a percentage of sales were 37% as compared to 38% in the prior year quarter due to pricing taken over the course of fiscal year 2022, largely offset by food cost inflation.
Labor and related costs as a percentage of sales decreased to 28, 9% from 29, 9% in the prior year quarter.
Excluding the impact of the employee retention credits recognized in the prior year labor as a percentage of sales in the prior year would have been 34, 3%.
This decrease is due to sales leveraging from pricing and operating conditions that allowed for full indoor dining capacities. This law.
Leveraging was partially offset by wage increases.
Occupancy and related expenses as a percentage of sales improved to six 5% from six 8% in the prior year quarter, primarily due to higher sales leverage partially offset by higher preopening lease expense.
Other costs as a percentage of sales decreased to 12, 4% compared to 12, 9% in the prior year quarter also due to higher sales leverage.
General and administrative expenses as a percentage of sales decreased to 13, 3% as compared to 18% in the prior year quarter, largely due to higher sales leveraging from an expanded system base and normalized operating conditions.
On a dollar basis general and administrative expenses were $5 6 million as compared to $5 million in the prior year quarter.
Operating income was $1 9 million as compared to an operating loss of $762000 in the prior year quarter.
As a percentage of sales operating income was four 6% as compared to negative two 7% in the prior year quarter.
Income tax expense was $61000 compared to $18000 in the prior year quarter.
Net income was $1 9 million.
Or <unk> 19 per diluted share compared to a net loss of $834000 or negative <unk> <unk> per diluted share in the prior year quarter.
On an adjusted basis net income in the fiscal fourth quarter was $2 1 million or 21 per diluted share compared to the prior year quarter's net loss of $1 4 million or a negative 15 cents per diluted share.
Restaurant level operating profit as a percentage of sales was 23, 9% compared to 16, 4% in the prior year quarter.
Adjusted EBITDA was $4 8 million compared to $619000 in the prior year quarter.
Turning to our cash and liquidity at the end of the fiscal fourth quarter, we had $35 $8 million in cash and cash equivalents and no debt.
Lastly, I would like to provide the following guidance for fiscal year 2023.
We expect total sales to be between 183 and $188 million.
We expect general and administrative expenses as a percentage of sales to be approximately 16%.
And we expect to open between nine and 11 units with average net capital expenditures per unit of approximately $2 5 million.
And with that I'll turn the call back over to Jimmy.
Thanks. This concludes our prepared remarks.
Yes, now happy to answer any questions you have operator, please open the line for questions.
As a reminder, during the Q&A session.
May answer in Japanese before my response is translated into English Please bear with us.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yes.
And our first question will come from Joshua Long of Stephens, Inc. Please go ahead.
Great. Thank you for taking the question and Jeff.
Jeff Nice to hear from you again glad to have you aboard.
When we think about the results in the quarter I was hoping you might be able to talk about some of the strength that you've seen obviously the regional strength is helpful context, but as you think about that momentum continuing into the first part of your fiscal 2023 can.
Can you talk about just the underlying pushes and pulls there are you doing.
Do you see that as momentum for the brand on top of just the consumer looking for those unique experiential concepts what you offer.
Any sort of context, you could help there to train them up kind of how your consumer is doing and.
That underlying momentum would be helpful.
Thank you. Thank you all for your question I don't need to answer in Japanese. Thank you said one of them.
Great.
And I'll Echo my vision, our Nook digital.
Our Q1, Okay got equity back to your thoughts on one another.
Im getting you up at all comparable.
I was wondering are you comfortable that the Panama, So order in order to get in a particular day on couponing strategy.
No.
Okay. Thanks, David.
All my questions.
I'll just start with the regional comps.
Barry that we saw between California, and Texas is really just an artifact of the easier comparison that California had due to the first two weeks of June when we having 50% seating capacity and then just sort of the ongoing.
Market recovery that we saw last year and so that's really the only reason that California's better comps in Texas at this time.
That's all on a pretty bad three months ago on Us authority to do that North Dakota, Utah.
Coupon on it.
As part of the complicated.
Good electrical feel like you've got another one does get Omar <unk> macros at Lula, Jimmy Buffett, though.
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Other than this one.
Hi.
Before we truly exceptional comps with year over year comparable sales of almost comparable sales growth of almost 28% as Ginny mentioned in the opening remarks in September October we had comps of about 12% and 6% respectively. So those are going to be probably more representative of the overall comps would you expect for Q Q1 relative to Q.
Sure.
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Thank you everyone just get more well get on what would it be every two months ago on us not just get them all.
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What isn't that kind of look at some more price.
Price sensitivity.
I understand that with the dividend <unk> <unk> of Nomura.
Year to date Youre going to take a survey or knock on Osceola Disney on that.
So we don't we also touched on this a little bit in the prepared remarks, but in September and October what are the one of the truly reassuring things that we saw in terms of guest sentiment with the <unk> per person sushi place consumption had had not gone down at all and in fact, we've seen modest growth.
The primary way that we monitor consumer elasticity, just given that you build your check play by play and so if there is.
A threshold.
You can see the manage that check, but the average checks have also grown as well modestly but.
<unk>.
Per person.
Per person consumption and average check remained very stable in spite of the pricing that we saw in July indicates that we really don't think that.
The guests are sensitive to the pricing at all in terms of the deceleration for comps relative to Q4 I think this is more an externality or just.
Reflection of the overall.
Everything that everybody is seeing in the industry that people are just going out less frequently but when they do come they are not managing their check and so it's clear that our guests have not.
Or not yet sensitive to the pricing that we've taken and again as Jimmy mentioned earlier.
In spite of the pricing that we've taken were still approximately half of the price of our local competitors and so we still remain a truly excellent value.
Just wondering if thats, a little bit palatina level against that and the whole kind of it because it was San Francisco.
Yes, Amit.
Then I'll turn it will get funding might EPC different micrococcal hung up with the heat and somebody asked me give me my dining experience and roll it out.
Congrats on nickel.
And now I'll turn it over to study and muddy because you'd have to wait a little.
Got it thank you Delphine Arnault come next month.
And so one of the main themes for fiscal 'twenty three is going to be our focus in capturing guests, but have yet to be yet to occur of it go to other sushi restaurants as everybody knows we have a truly unique dining experience that you really can't get anywhere else coupling that with the fact that were priced at approximately half the price of our competitors makes us.
Truly appealing and so were really going to be reading into capturing new guests.
Got it. Thank you that's very helpful. When we on that last point, when we think about that pricing maybe opportunity or just the current.
Yes state of it.
Balanced against the inflationary environment.
What are your thoughts on pricing going forward it seems like.
There's perhaps room, where you can take incremental pricing and still be of value, but also just noting that your last point there in terms of getting more people into your concept and into that funnel. How do you think about pricing on a go forward basis.
Sure.
But I can do.
Focusing on a commodity in relation of negotiated work as I mentioned at the top of them, but a lot of nickel.
Let's look at almost the ability to fix my second one just getting more.
Pick up that I admit that it's not only about all the materials ready to start with the Q4 data.
Tightening related on a commodity ingredient the hemostat that depend on the remodel my Q1 or Q on Q to the.
A quarter ago.
I'm going to deal with it on a couple of percent of delivering economic comment.
Yes.
So in terms of pricing I don't think we can really meaningfully discuss it without <unk>.
Given the context of Cogs and so we saw commodity inflation of approximately high single in the high single digit zone.
In Q4.
Over the course of Q4, we're expecting to see that same cadence of ongoing.
Accelerating inflation.
As we enter fiscal 'twenty three.
Well first of all about <unk>.
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Okay. Thank you first of all congrats Scott.
I noticed that underbid understanding for what the Guinea contract different underpinning our profitability.
I would also say that they must not forget guacamole Midland Michigan.
Yes.
Okay.
We plan to take pricing in Q2, given the inflationary trends that we're seeing now we're gonna be monitoring it very closely and that will determine the <unk>.
Magnitude and timing of things that we don't expect the pricing that we're going to take to fully offset the inflation that we're seeing last year, we had our company's best in terms of Cogs at 30%, we don't think that the <unk>.
It's unlikely that the pricing will go back to 30%, but when we take price. We don't think just about managing Cogs are driving cogs down to a certain number we think about the overall restaurant profitability Holistically and so that's really going to be the north star for us in terms of price.
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Both specialty.
Great.
And looking at our labor numbers you'd see that.
There was a material improvement in labor costs from Q3 to Q4.
And so.
When we take price we look.
Look at our occupancy costs are.
DNA other fixed other fixed costs in the pricing that we take.
Allows us to better leverage those costs. So it's not just a matter of lowering cards. It's.
Really a matter of the overall profitability.
Until then if net.
Indeed indeed.
Are you there.
Yes.
So I don't know how many people do you think you're doing these high dig and you'll say that repeatable do you think you're in a contracting market are more mature than on a local basis.
Okay.
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No.
Couple of examples of that new capacity that you're going to come back to market.
Okay.
To date with the pricing that we've taken really seen minimal traffic loss, that's been really great, but we're absolutely cognizant that you can't just.
There is always the possibility for traffic loss and value.
The value proposition is always relative in so if you.
We're used to go into corrupt and Youre coming to your every month or so the price the price that we take is a lot more visible but for people that have never been to correct. There are a lot of sushi lovers that are paying twice.
Our average current ticket and so for those people that have never been here.
And overwhelmingly great value and so we know those guests exists and it's just a matter of getting them to come to our restaurants.
Very helpful. One more if I may when we think about the high single digit inflation that you've seen across your food basket can you break that out a little bit of a provides more context around it I know we've talked about you having a broad basket.
With.
Also some opportunity from the sourcing that you have on the seafood side internationally, but just curious where youre seeing some of that inflation and just trying to add some context to the Cogs because margin that you reported for the quarter. It was yeah.
Still down year over year, but up sequentially versus <unk>. So just trying to understand how are some of the pushes and pulls played out during the quarter.
But.
Of course, it's a long room on the whole day.
Blake I'll take your second one I was looking at the whole basket is already under contract.
Thank you, James Alright, truckload or intermodal or <unk>.
Production activities most of them don't.
And any color you can add.
Linda.
Well, thank you again and good day.
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Okay.
Got it.
Yep.
But I'm curious if you guys are all simple shake it up right now.
Windows open up again.
So certainly we do have a broad basket and that's one of the reasons that we've been able to mitigate the inflation, but there has been ongoing headwinds ever since we entered the pandemic.
Typically we are able to lock in six month pricing for our big main purchases, which.
Gives us a level of stability with Cogs, but with huge spikes in drops.
In demand as a result of the pandemic and post pandemic were.
We're not able to get were not able to get all of our seemed like sooner from the same vendor in the way that we would have in the past we need to go to a variety of smaller vendors.
To get everything that we need to make sure we have all the ingredients in place and so.
You don't get as much of a.
Scale benefit because youre dealing with a lot of different vendors and because they're smaller they can't lock in prices for six months at a time.
That being said, we're hoping that this will.
This doesn't go on forever.
As the vendors were able to predict demand more accurately we'll begin to see moderation to hopefully be able to lock in prices again.
The way that we have historically.
One thing that we're looking forward to in terms of mitigating inflation outside of price is taking advantage of the foreign exchange rates between the U S dollar and Japanese yen to U S dollars.
This created unprecedented high relative to Japanese yen, and we know that if we source directly from Japan will be able to benefit from that the reason that we haven't seen that upside just yet is that we're still in the process of existing our existing.
Exhausting our existing supply, but once that's gone then we can take out what's more advantage of the exchange rates and so we're hoping that we can see some impact in that beginning in the back half of the year.
Thank you.
The next question comes from Andrew <unk> of BMO capital markets. Please go ahead.
Hi, This is daniel goals anchor and yourselves like thanks for taking the question.
Can you speak to the performance of your units in new markets.
What new or existing markets. You are excited about expanding in next year and as a follow up to that can you speak to your pipeline of LOI Finally, Susan what you already have under construction.
Yeah.
Sure.
From a newspaper.
You need it.
Just a couple more meet someone who's next quarter are there Philip.
And in new markets organization coordinate what anybody portability was helpful.
Amy that Youre doing whatever you can get out and if I put it on numerous fronts.
Okay.
Well Tony in a concrete.
Secondly, if I needed some additional money in intermodal today, but I thought that might.
Yes.
Okay.
In terms of fiscal 'twenty, two we entered three new markets. We were successful in all three of those new markets, which always is a huge source of.
Encouragement.
Encouraging for us just given that it continues.
It's further proof that we are able to prove our portability nationally.
But fiscal 'twenty two units even outside of the new markets have been very very strong and the strength of those units is reflected in the.
The aggressive unit growth that we've guided towards for fiscal 'twenty three.
Thank you.
No.
Market by market.
It took the at all on Sakhalin Island.
Stable.
MSA or Pennsylvania.
Yes.
And the money you'll appreciate the economy cannot genotype.
And I'll open it opens without you can earn on that and also with it okay. So on the five months of a conversation.
And then looking at the pipeline for fiscal 'twenty, three the new markets that.
We will likely be entering will be Minnesota with at mall of America location, Philadelphia, Pennsylvania, and then New York State each of the locations in these three new markets are excellent and so we're very excited in terms of markets that will be in filling up. We're currently in the process of we're wrapping up construction in Jersey City, which will be our second location in nims.
We chose.
That has been an exceptional market for us just given the strength of <unk> right out of the gate and so we're gonna be opening our second New Jersey location, possibly a third new Jersey location as well.
And just a last one for me in regards to staffing levels. I know you had made great progress with <unk> and <unk>, where are you at today have you reached to optimize staffing levels.
Okay.
Thank you all for taking myself pretty much physical button Blue Journal and all Dania, you must submit them as intended and not so much it could open and go about it if you could give us material undertaken methanol animato personality.
Michael for Soma.
And openness on the part of that had to navigate different it might be good routinely for HIV is training the department at the menu restaurant opening between Ottawa.
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So what is your take on it but you can almost complement Martin Okay got it.
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Okay.
As Jimmy mentioned in the prepared remarks, our current staffing levels are over 95%.
Relative to their optimal levels, so really the best that we've been at the best position we've been in since entering the pandemic older restaurants are operating their full operating hours. We don't have any restaurants that aren't able to service to go orders because of throughput constraints and so we're very pleased with the staffing levels as they are now.
<unk> training department and the marketing team.
New store opening team be it really been doing a tremendous job in terms of hiring and retention.
We also rolled out three new initiatives.
Over the course of the year over the course of fiscal 'twenty, two being the robot servers with touch panel drink orders and the cable side and those have introduced efficiencies, but they are also up.
And improve the take home pay of our employees because they are able to serve that many more tables and simplify their operations and so these combined efforts have gotten us to a place that we feel really good about.
That's great to hear thank you.
Thank you Danielle.
The next question comes from Sharon Zackfia of William Blair. Please go ahead.
Hi, Good afternoon, I want to talk to you guys I mean, our jets place again.
I guess I'm curious on the G&A guide for the year I think it was probably a bit more than a lot of it's unexpected as part of that increase.
You too what you are alluding to Jimmy with marketing and is that kind of where that would go on the P&L I don't know because there are other ops for you.
Can you talk more about how and what kind of marketing you're thinking of that to bring in more customers and as you think about revenue guidance with more market and this might be a Jeff question. What do you assume kind of the return is on that market.
Okay.
Yes, most of the marketing going up accordingly.
I'm gonna conflicts to different.
Marketing a lot of <unk>.
But the marketing the content ecosystem and centralize it almost in marketing when you guys go up against that.
The unpleasant Angela who I need you need to grow but they need to come out of course is.
<unk> only got them set up building living with an equivalent amount of them.
And or Skype, just unlikely to dose.
Automotive hope will help us give a quantum on it.
What are you modeling in both the balance sheet.
We will get some night thinking no vessels you Tony on our fault, but I'm just trying to get them off until the product is Mr. Cody <unk>.
Just trying to get a sense of that will get some and then okay. That's.
Obviously, you want to target our marketing.
And Keith I gave it you know how we're going to hopefully hit the market.
I think it's almost you can look at univar no marketing at all.
So it may not you must have come up with if you have any thoughts about do you think you're picking a lot.
So C are working costs, our marketing costs actually aren't in the G&A line and so.
We'll just.
To just discuss marketing separately and Jeff can take the G&A discussion, but as you know the marketing cost as a percentage of sales in fiscal 'twenty.
'twenty three relative to fiscal 'twenty, two we're going to be a little bit higher.
This largely reflects the shift in our thinking in terms of.
How to capture.
Historically, our bread and butter has really been using our rewards system to get our existing guests to increase frequency and now.
With what we're seeing in the overall sushi market, we pivoted to.
Thinking about capturing the massive potential of all these new guests that are trading down.
We're making commensurate investments to be able to take.
The advantage of that opportunity.
Jeff you want to.
Grubhub G&A.
Yeah, Hey, Sharon it's really good to hear your voice and everybody's voice again and be back on the earnings call game its funds. So.
We're excited to be part of this.
On G&A as you guys know my last two roles were in growth concepts and now where we our G&A both dollars and percentage of sales.
It is not unusual or unreasonable given where we are in a growth cycle that being said coming in the door. One of my main goals is to take a very very hard look at G&A and figure out where we can potentially save some money.
We've seen challenges everywhere from not only salaries, but.
As I'm sure you all know because you travel all the time that the price of travel and airline tickets and hotels, but airlines in particular is through the roof.
And so.
So we're going to we're going to look at all of that and I've gone to every department had and asked them do get together and they were going to go through all of our existing contracts for things that do hit the G&A line and see if there's any opportunity to renegotiate some of those in with me coming in the door. It's a good time to go back to some of these people and see if we.
And the opportunity to save some money.
That being said you know one of the biggest mistake you can make as a growth company to not have the support.
The people and the support center to be ready for growth and we do want to be ready for that growth and while I'm going to take a very hard look at that G&A.
We're not going to be shy about making sure that we have the right number of people and the right support in the office to support the growth out in the field.
And support our development team so.
We are going to look at it I'm going to do it.
Do what we can to get that down but.
Certainly not going to project or give any guidance that we're going to shy away from making sure that we have the people that we need to.
To make our growth successful because we got to prepare for it and I don't want to make the mistake of not being ready.
Thanks for that and then Jamie with all of the innovation you're dead.
This summer I know you talked about table turns and employees are happy and getting more tests or take home pay.
Did you have anything quantifiable, you could share that customer satisfaction.
With the new technology, and I don't I don't think you mentioned, whether you have seen in beverage attached.
Measurably.
With apparel.
Order systems.
I missed that I apologize.
Sure.
I'm happy to answer these questions.
And all you guys know what about ethanol ethanol on OLED side.
We just felt like I'm thinking you might give on the point of law.
If I start with Illinois Yoga another day.
What are the edible debate I don't know.
Okay.
<unk> levels are going to hold off boarding update.
However, a covenant.
<unk> given us a housekeeping you can see with any specific ego than it might have on them are going to go out and cut some other folks on the corridor the automobile beginning.
If they give us but some of them have been cut off the top of our Q4 and the company you had spoken quite a bit the kick.
<unk> kind of gone up.
Almost all the Copel Monica prevailing in this market.
Okay.
Is it just sort of go back to our thinking when we initially rolled out these projects be.
The immediate goal was to improve customer satisfaction.
The industry had.
Hip hit a wall in terms of hiring wait times have gotten longer checkout times have gotten longer and.
Pretty much across the industry <unk>.
The experience was not the same and we wanted more than anything for our guests to come to the curve that they knew and loved and so the initiatives we're really.
There were.
They were designed to allow our front of house servers to really focus on hospitality, which is where their value at truly is and so we saw immediate.
Upticks in customer service ratings as a result of implementing these.
The 28% comps that we saw in Q4 I think are a clear reflection of just how well received but it didn't.
By the guests given that the rollout was completed by the end of Q3.
My phone okay.
Okay.
But again so late on a speculative.
Yes.
Although the muscle.
So Nathan I'll pick up the scale.
Single dose kinetic municipals ensure ticket up towards what you must see although I don't get compensated from their corporate headquarter nucleated, who might need it up with you all and I love the scheduled warning squishy.
Maybe they only are critical to the nicotine kick out to say, what I would go back and look what angle zynga and coupled in the bulk of that type of thing.
Thinking a couple of clinical epigenetics.
Manav, it's good that you've been willing to get there.
Hey, good coordinated Scott historically, not keep up with it or are you going to market now.
And it depends on a local backup at the macro does that cycle than a musical button stuffing with everything almost two months.
Hello.
Yes.
In terms of its impact on employees, we've certainly seen retention rates improve as a result of.
The implementation of these initiatives.
Now the servers are really able to focus on hospitality, which is why.
B.
We're interested in being servers in the first place.
And as a result of putting all these features and we've actually been able to operate these restaurants with fewer individuals while also serving more people and so certainly that's led to kit growth that's led to.
<unk>, which is driving that that retention improvement between the three initiatives, we've seen about 50 basis points in labor savings and so it's certainly been a meaningful impact and we think of it as a big success.
So most of the.
<unk> related that would look like without it.
So as I said I was wondering if you get a more modest contributor during debate as an uplift.
I don't mean anything less than that.
Favorite timeframe when you closed on its own it.
Millions of epic solid with that model.
All in total the negative market movement.
Actually you already system went up over a photograph and a couple of data the company gave I'm not giving them a ton of it.
Hi.
In terms of beverage attach rate, we have seen a meaningful or a modest increase in attach rate not enough to really move the needle.
Terms of overall sales, but enough to know that it has had an impact.
In terms of table turn times, it's still something that we're evaluating once we have our upgraded weight system.
Implemented will be able to get a much better view are much more accurate view of table turn times, which will be which will allow us to give you a more meaningful number in.
Coming quarters.
Okay, great. Thank you very much.
Thank you Darren.
The next question comes from Jeremy Hamblin of Craig Hallum Capital Group. Please go ahead.
Thanks for taking the questions and congrats on the strong result.
When it comes to come back to the unit development and kind of the timing of that.
Inc.
If I'm not mistaken in Q4, though.
Two of the three openings occurred I think in the last week of the quarter.
And in terms of the openings in Philly Mall of America Jersey City, I think those are probably two or three months behind what you might have been thinking.
Four or five months ago, but I wanted to get a sense for.
A N Q4, you know that shift in timing of openings what type of revenue impact.
Think that might've had versus what you know where you were thinking things were going to open back in let's say June .
And then in terms of the.
In FY 'twenty three the type of impact that you might be seen in and if you could maybe help us to pin down a little bit of the nine to 11 units expected for the year.
I'm not sure. If you were suggesting that three units, we're going to open before the end of the November quarter or if it's to open and then maybe one that opens in December but any more color that you can share on the timing of when you expect the 9% to 11.
Units.
Open during the year the cadence.
Sure Jamie.
Yeah.
Q4, I know that that's what I'll say an internal target.
That's correct yes.
So.
Got it.
Let me now put it now.
On a modem or maybe if I just look at them as educated about Colorado.
I don't know what the wonderful day study mark related to the macro level and Oklahoma.
So you are correct in that two to three units that we opened in Q4 did open during the last week.
And Philadelphia Mall of America Jersey City or are running a couple of months behind our initial expectations.
They might be able to still put in my prepared remarks don't want us to think of them all.
Hello, Medical Nastic ethical and campaign.
<unk> put the deflation that doesn't affect.
Ethanol.
Sure.
And I think that's only on Libya.
No one else looking at.
And once the fundamental dynamic enough technical I mean, I sort of thought they end up with a update on a lot of the similar multiples at all.
Data for pneumonia and opportunities to muscle.
All done in Q Temple, Julien Temple, no update on something like that.
Ongoing on that it is a more focused and document that says you know the total market.
Thank you.
That's almost within a cadence in other words to get them on the market demand sentiment. So political scandal. The deal volume up one day from Q3 into Q4 equal to Corona and undertook the most effective tomorrow and I don't know about the second.
But what do you think you might get it.
But the most important and of course represents you today, our content build out and figured out a leafy 90 opened equal public typical homeowner methodologies.
In terms of.
Driven to delays for the <unk>.
We just mentioned, it's we sort of touched on this during the prepared remarks, but really there has been an unprecedented level of delay.
Delays in slowness when it comes to getting permits inspections getting document reviews its Doug.
Municipal governments are just overstretched and Theres really not much that we can do in terms of pushing them forward that being said the 911 units that were guiding towards for a fiscal 'twenty. Three takes this into account. It's a number that we're very comfortable with in terms of the cadence for the store openings, we have five units under construction.
We expect.
<unk> Philadelphia Mall of America in Jersey, Zika open in several weeks.
But it's pretty okay with the remaining after that so the remaining stores will likely open in the back half of the year.
Great.
Uh huh.
Uh huh.
I'm sorry, Jamie.
Sorry.
I answer automobile Christoph.
I think I was looking to see just the timing of our you know what your what you would estimate the revenue impact was from just these push outs in completion and actual openings you know with if you did $42 million in the August quarter do you think that could have been 43 based on kind of.
Timing and then.
Obviously, it's certainly impacting the November quarter as well.
Sure.
Because I think.
But the potential to if I could then just get them all on or something how do you want me to you I'm doing on <unk> and of course once you make that better.
And all you want and you can make your own opinion I forget the profile that you guys have given us.
Jonathan.
On our Q4 what isn't that.
So with the opening of the data you must pick at all Scott.
Put us somewhere.
On a human element they more city on the jump in that how do you have any money I don't know Sue button Thanos integral to get through that and they'll say, what's up with Eylea Mustang, but colder months apart.
Financing I Wonder if you could looking at the quarter, just coming right that you're not thinking of my mind.
Q4 got up to about to do that.
Yeah, good luck with that.
Perfect.
Today, most of that other people do what they say the same.
So you think you'll have that a lot of people.
They could have been a thought that I'd have to go home.
Okay.
Okay.
So.
We haven't really given sort of you know.
Revenue whatever numbers.
Kind of a weird way to put it but you know our E visa for three and a half $385 million. If you just sort of you.
You could take sort of a mix.
Mid quarter Convention and worked out the operating weeks and that that will get you pretty close to the.
Lost revenue expectations in terms of Q4, we certainly did have opening delays, but the sales losses, there were partially offset by the tremendous success of the demon Slayer program. It probably had a low single digit overall sales.
September and October might look a little bit weaker relative to Q4, but again, they're not benefiting from that.
The incredible popularity of the IP that we collaborated with during July and August .
Got it Okay. Just a quick follow up here then.
Very impressive a.
Our restaurant margin contribution in the quarter.
In terms of.
You noted that your food and beverage costs do you expect it to be maybe a little over 30% here.
During the year in terms of the labor.
You know in labor down at 29%.
The sustainability of that.
Given that you're carrying in the high single digit.
Pricing is that something that that's reasonable I mean, it seems like you guys got incredible efficiency.
During the quarter, but you know whether or not you.
Even if it's not 'twenty, 9% are you thinking that you know in that 30% range is isn't it achievable figure.
Sure.
For Q3 Q4 is that we've got the game you don't know.
Okay understood on all my money do you think.
Thank you Fernando for Egypt, not on the scale model.
Good morning, Mark took physical telephone if you're only in coupon could you say not sustainable on a clinical mall based.
Based on <unk> do you have any.
47.
A couple of callers ma'am you forgot to tell you with regard to just get them. All a couple of no seasonality different material that you don't want to get caught up within acute. Thank you I wonder if you could discuss the.
Seasonality that we can again gain.
Patent that I don't think I think I said about people today.
Let's have a minimum wage that encompasses the timing because it doesn't medical membership ethanol pricing difficulty in months ahead of Q3 and yellow somewhat through the first half of all four quarters data that I gave you about <unk> and then Mike It sounds like a little on a coupon of Ethernet sustainable even if I wanted to come back.
Okay.
Well I'm sorry, we do think that the improvements that we saw in Q4 or sustainable.
Or it was part of it there are a number of puts and takes that we saw that really got us to about 28, 9%, but in terms of modeling going forward there.
Things that we'd like you to take the closest attention to would be just the historical seasonality of flavor as a percentage of sales Q4.
Always has the best labor as a percentage of sales because of its strongest sales leverage Q1 always has its weakest. So please keep that in mind with your modeling.
We expect minimum wage increases in January and we expect to take pricing in Q2, but.
But yes, we do think that the labor situation has improved we're very happy about the robots and all that.
Great. Thanks for the color guys.
Congratulations and best wishes.
Thank you Jeremy.
The next question comes from George Kelly of Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my question so.
Just to start can you just mentioned the demons layer the success that you've been clear promotion over the summer.
Curious tetris right now curious if that could be something similar.
Similarly.
Impactful.
Or is there anything else that you can flag that is planned for the coming coming couple of quarters.
Sure.
Go ahead.
Not all of the touch screen.
Sorry.
Go ahead go ahead.
Okay.
Just campaign, it's been really fun, we have the.
<unk> boxes that are actually in the shape of Tetris blocks and those are bid we've never had to go sales is strong.
It's clear that it's like a huge hit with guests that being said it does not have the same caches Steven Slayer people people that had never heard of <unk>, we're calling because of demons player people that had never are people who are outside of our markets. We're learning about correct. As a result of arguments layer collaboration which is great in terms of planting.
Seeds for future markets, but Steven Slater really was one of the all time best campaigns. We've had that being said, we do have a lot of campaigns in our pipeline with.
Execute agreements that I'm extremely excited about historically, we basically only partnered with <unk>.
Japanese brands enemies.
Video games et cetera, but we do have a number of American properties with truly unique.
Nationally Universal appeal and so those are things that I'm very excited about.
Okay excellent and then you mentioned.
Earlier potentially sourcing from Japan later, this year, what kind of savings could that drive it and does that something thats already baked into your guidance.
Okay.
And I'll correlate isn't it.
I'll just have to cook from expected based on human genetic material.
Good morning, everybody.
All right.
Goodbye.
No.
The integration of the Olympics.
I forgot how do you want to hit on a vehicle or perhaps the independent audit Oklahoma Geological.
For the quarter from that at all and also getting a lot.
People come out of it and I gave him an email on its own when you own the stock up with Diamond you still put up it depends how we estimate the total I don't know I don't know edibles offset the sort of digital you would I didn't become a landmark year for taken dramatic that equal.
<unk> got to consider and I know, both the particularly the <unk> Congress.
The Q on Q, so what I'm gonna get acuity holdup.
Yeah, again I'll call it.
Thank you to the you said you don't have I don't want to know what will help us demand.
In terms of Cogs, we've seen a quarter over quarter inflation from Q3 to Q coordinate Q4 to Q1, we expect this.
Inflation to continue to.
Grow up until Q2, and so our clocks for Q1 and Q2, we're gonna be worse than what you saw for fiscal 'twenty, two that being said with the pricing that we're taking in Q2 that should begin to mitigate that and our hopes for the.
The Japanese yen benefit is really not a <unk>.
So much as you know like getting back to fiscal 'twenty, two comps levels, but really just offsetting any future inflation and so we're hoping for a stabilization in our Cogs beginning in Q3 and Q4.
Okay.
Okay. Thank you.
Thanks George.
This concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.
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