Q4 2023 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Cree Sushi USA, Inc. Fiscal fourth quarter of 2023 earnings conference call.
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Please note that this call is being recorded.
On the call today, we have Ed you mentioned me is that as the President and Chief Executive Officer. If he is the Chief financial Officer, and Benjamin Fortunately SVP Investor Relations and system development and now I'd like to turn the call of veterans supporting Thank you you May proceed.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal fourth quarter of 2023 earnings release. It can be found at www dot versus dot com 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 discussions today will include forward looking statements as defined under the private Securities Litigation Reform Act of 1995 East.
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 we refer all of you to where you see pilots 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 financial measures, which we believe can be useful in evaluating our performance.
Presentation of this additional information should not be considered in isolation, nor as a 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 would like to turn the call over to Jenny.
Thanks, Dan and thank you to everyone for joining us today.
I'm very pleased to announce that we've closed.
So breaking but yeah, it's a great fourth quarter.
Before we dive into discussing our most recent quarter.
Does it have to have a quick recap of what we have a lot of cheap Oh my God, if he's got a year.
At the beginning of the year, we mentioned Citi image I'll go with one he's got a 2023.
Maintaining and extending populations continuing to do rebate Regal all of their fan base and the neighborhood all of G&A against all of our increasingly now due to some base.
I'm proud to report all of success all of these advance of demand so they get to bite off for the year that surround it at all but I think it will be too much.
Moving 70 basis points, Yeah, Yeah, T 21 point to 90%.
Like what do you think you need to openings photo E G under anybody a gene called <unk>.
80 basis points, although the Playa yeah.
Although we have a growing from three 8 million daus, if he's got a 2022 to four points of $3 million in if he's got a 2023.
But if things incorrectly, but it all you unit openings you know how the indecent yes.
He does have cities directly translate into the improvement in profitability.
Although adjusted EBITA.
One nine punk opinion, you're involved in if he's got to think of anything to $14 3 million bottles. If he's got a 2023 representing a growth rate of over 56 ball count in a single year.
Both of them kind of a follow up just kind of fourth quarter was $54 9 million bottles.
Anything comparable to say to school six quantified football fans.
The topic of growth being the sponsor beautiful fight the pump I think spot on.
Carl.
In spite of ongoing concerns over the city.
The macro environment.
Mortgage all coming to cool off machines and Bobby fall.
The topic is upsetting outperforming, but if organic lettuce.
We continue to be pleased with I'll say that the performance of need for in person you'd be funny yeah. Yeah.
Granted comps fall September October of two 7%.
Total revenue of approximately $34 3 million Daus on Dakota can put off because in both months.
Commodity costs have continued to improve although of course, all the good sort of often digital says of 29 point a cyclical thing.
120 basis point improvement almost put out yeah Youll corridor.
Under 50 basis points.
Oh, that's right yeah quota.
Maybe I'll call, although post centennial status.
Having a steady 28 upon the ATL fendt.
Compounding the expectations, we have shared during the previous earnings call.
It's only been operating margins reached an all time high of 24, 4%.
Presenting a 50 basis point improvement almost a prior year quarter.
Looking at our fiscal fourth quarter.
We opened four units at on Long Island, New York.
Some of the California.
Training at home and what you thought you'd Massachusetts pull.
I'll talk about all the things you need to openings in fiscal 'twenty to 'twenty three.
Our momentum on the development front is a bit of a long table.
Entering the new fiscal year.
Already opened four Union Pittsburgh, Pennsylvania.
Flushing, New York, Tampa, Florida, and the Nepal.
He is one of our filling units currently under construction.
It's been wonderful to see cool continue to resonate in new market, how can we expand the utmost of company.
Huntington you initiate genus.
I'm very happy to own some.
We launched our annuity wasn't program up in October and the guests are responsible to do that.
Iraq has been uniformly positive.
Global Hawk Prenunciative up hasn't been very effective in growing topic.
I think it'd be convenient.
The visual presentation in salt.
It gives a V D well if you're talking.
Incompatible.
That is very highly rated on the App store and the Google play store.
He has many use us commenting on the significant improvement and you won't have any vault.
And as Paul from existing he was off has been nothing short of great lots.
What's really exciting is that.
Since announcing our New York.
The number of weekly new use that made you finish off.
On bubbles.
To be clear.
These are not the existing he was off that's all migrating because their account.
Completely new guest subtle I join you can go and you want to put up with them do you think that improvement.
Haven't made.
I encourage everyone on this call to download a new app off you'd be able to immediately see a deepening quaggy.
I'll talk about the improvements to the guest experience.
Do you want to talk a home have unlocked completely new opportunity for our marketing team such as customer segmentation.
I'll get into marketing and new ways, or you're watching and engaging with all our guests.
I'm extremely excited about its potential and expect this to be a meaningful set of slides about false.
Bookings potential.
Development of the Nova typically shortfalls to continue to put up with us.
Also in this one implementation in Japan expected either in spring of 'twenty 'twenty four.
Following a pilot.
We ended the begins a certification process for implementing some novelty Kishore says.
Sure.
Why did we do expect to have a dishwasher level to have a meaningful meaningfully impact our labor model in future years.
As we have stated in past earnings calls.
We do not expect the implementation gives me Scott Yeah.
We expect its impact to slowly long off these additional salobo will be.
Indicate that the annuity opened the lessons.
I'll call. It you just type thing Ivy club initial.
I had a great response and upcoming pipeline collaborations.
Just long yet.
I'm so excited to see what we can achieve and he started playing into any fall.
I'm deeply grateful for the fourth continuous hard work by our team members.
All that's wrong.
A couple of simple well sitting a city setting us up for all of our amazing but yeah.
And is that at a tiny got off to Jeff to discuss our financial results and liquidity.
Thank you Jimmy.
For the fourth quarter total sales were $54.9 million as compared to $42 million in the prior year period.
Comparable restaurant sales performance as compared to the prior year period was positive six 5% with regional comps of 12, 1% in California, and three 3% in Texas.
Turning now to costs food and beverage costs as a percentage of sales were 29, 5% as compared to 37% in the prior year quarter, largely due to pricing and the stabilization of commodity inflation.
Labor and related costs as a percentage of sales decreased to 28, 8% from 28, 9% in the prior year quarter.
This decrease is due to incremental efficiencies created by the implementation of technological initiatives and sales leveraging from increased traffic and pricing, which was largely offset by wage increases.
Occupancy and related expenses as a percentage of sales were six 6%.
Third to the prior year quarter's 6.5%.
Yeah.
Other costs as a percentage of sales increased to 13, 8% compared to 12, 4% in the prior year quarter due to costs associated with a greater number of store openings as well as an increase in marketing costs and general cost inflation.
General and administrative expenses as a percentage of sales decreased 13, 2%.
Paired with 13, 3% in the prior year quarter.
On a full year comparison, G&A expenses as a percentage of sales decreased to 15% as compared to the prior year's 15, 8%.
This represents an increase of G&A dollars are 25, 8% for fiscal year 2023, as compared to sales growth of 32, 8% over the same period.
With the leveraging of G&A being one of our key goals for fiscal 2023, we're very pleased with these results and expect to achieve further leverage in the coming fiscal years.
Operating income was $2 2 million as compared to operating income of $1 $9 million in the prior year quarter.
Income tax expense was $167000 compared to $61000 on the prior year quarter.
Net income was $2 $9 million or 25 cents per diluted share.
Compared to net income of $1 9 million or 19 cents per diluted share in the prior year quarter.
Restaurant level operating profit as a percentage of sales was 24, 4%.
Compared to 23, 9% in the prior year quarter.
Adjusted EBITDA was $6 $3 million compared to $4 $8 million in the prior year quarter.
Turning now to our cash and liquidity at the end of the fiscal fourth quarter, we had $69.7 million in cash and cash equivalents and no debt.
And lastly, I'd like to provide the following guidance for fiscal year 'twenty 'twenty four.
We expect total sales to be between 238 $243 million.
We expect to open between 11, and 13 units, where the average net capital expenditure per unit of approximately $2.5 million.
And we expect general and administrative expenses as a percentage of sales to be approximately 14, 5%.
In addition, as we have communicated over the last year beginning with our next earnings call, we will no longer quantify quarter to date performance.
And with that I'd like to turn the call back over to Jimmy.
Yes. This concludes our prepared remarks.
We are now happy to answer any questions you have open it up please open the line for questions.
As a reminder, you right into the Q&A session I may answer in Japanese before my response is translated into English and thank you for your attention.
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Yeah.
The first question comes from Joshua Long from Stephens. Please proceed with your question Josh right.
Okay.
Josh you're right you May proceed with your question. If your line is muted chief Amit Your line. So that you can pose your question.
Great. Thank you for taking my question I'm curious if we could talk through the trends that you saw through the fourth your fiscal fourth quarter than we had previously talked about June and then kind of the almost 15% range, but curious how that trended in July and August and then as you think about kind of the early trend here in and 124 can you remind us.
Kind of what we're lapping over and or how you think about some of the brand awareness initiatives that you've been working on in terms of a traffic driving a tool. Thanks so much.
Sure.
Thank you just talked about possibly selling please allow me to answer that in Germany being constantly.
No no no.
You'll still have a bulk of it.
You must think about what is that.
And then how did you want.
And then once again on appeal.
Going back to them.
No.
No.
Putting it all on particular covenant light.
We looked and looked at all and one in football you'll be you'll either do look positive.
I'm thinking about it right.
Okay.
Alright.
Hum.
Regarding hi, Josh This is Brett I regarding the dream comps, we were very pleased as we mentioned in the prior earnings call by July and August were among the most difficult comparisons if not your most difficult comparison.
<unk> been up against since going public we were.
You know we have to deepen player campaign, we have.
Benefit of a full rollout of the three initiatives. The first time in Q4, and we also had different operating conditions in 2022, which made a comparison or I'm, sorry, 2021, making the person doesn't quite seem a little easier and so the cost for Q4, 2042 or 28% for us to have hit.
6.5% and in fact, two comps five 6% and positive traffic over that 14% or so of positive traffic from last year. We think is a quite.
Quite a bit cheaper so we're very pleased with these results.
Oh Gosh did you have did we answer your full question there were 30.
The other thing that I didn't address.
I appreciate that and then just thinking forward I mean, you've done a great job in terms of broadening the awareness of the brand with some of your brand partner collaborations curious how those are performing and kind of any sort of any sort of early read or additional context, you could offer for our 2024.
Some of that already.
And besides that mountain because it sort of goes along.
I think the opposite it's at all.
Thank you Don.
I was gonna slip at all.
Equally operational market.
Please don't leave idea jumping all clicked on the button Julien.
Julien sorry, Mike Mccue Lucky sequel.
Yes.
Well, so some of them.
But I'm really kind of putting it.
Oh gosh.
Okay.
As you mentioned before Brookfield life at 28% comps with positive traffic.
We're very pleased and certainly the IP collaborations we've been working with it's been a big part of it in the last earnings call. You mentioned, just how strong the bare bears wasn't that was certainly a lift for traffic perspective, right now our current collaborations with Puget Sky Sun, which is a very popular enemy, that's going very well and while I can't disclose the full pipeline for the remainder of the year, we do have.
But I would say the most exciting brands ever two our collaborated with corrupt coming up and so I'm extremely excited to give you updates on that as we get further into the quarter or I'm sorry fiscal year.
Thank you.
Thanks, Josh.
Yeah.
Thank you. The next question comes from Jeffrey Bernstein from Barclays. Please proceed with your question Geoffrey.
Great. Thank you very much two questions first just wanted to follow up on the comp trend totally appreciate lapping a 28% comp is extremely difficult.
But in order to flush out the comparisons that I think you said got more difficult as the quarter went along.
You can share on a two or three year basis. However, you look at it because it does seem like right the comp if you're running at close to 15 in the first five weeks and you did a six and change for the full quarter that it was pretty flattish in the back nine weeks I'm just trying to gauge whether you think it was a sequential slowdown at all or whether on a multiyear basis. It was actually fairly stable.
Just trying to get a sense for the for the trend throughout the quarter Flushing out the comparisons.
Yeah on a multiyear basis I would say that it's stable.
It was really exceptional July and August in particular has the deepest player collaboration which really brought unprecedented traffic for us.
Do you share them just to be able to figure out kind of how that was in terms of two and three year can you share the monthly numbers last year. So we can kind of gauge.
I don't have lived in front of me, but I believe if you go to our past earnings calls you'll be able to see them in the archives.
Okay.
Then my second question was looking forward from a restaurant margin perspective I. Appreciate that you gave top line guidance in terms of revenues and units and whatnot, but as we think about the the margins on the fluids that are earnings.
Thoughts you can give in terms of fiscal 'twenty four I mean.
The commodity and labor basket inflation I presume just wondering what youre thinking for each of those.
Whether you have an ability or desire to hold the margins flat, maybe how much pricing you're anticipating in fiscal 'twenty for any color on the key line items on the pricing to offset ultimately leading to restaurant margin would be great.
Hopefully this basketball somebody who comes out of it.
But if.
They found even since the end of a particular stock.
Well, if anybody talking about Mccullough like you know I don't know.
Though most of them are Mr. Timothy Cook at home.
When you talked about because it was more focused on another.
Welcome to the questions.
So he can talk about my golf they need to do your own thinking or just the run different commodities.
Well thank you David.
Our niche buttoned up.
How did you indicate.
Uh huh.
Alright.
Okay.
Okay.
So what just handle commodity, but just to discuss labor.
And in past earnings call, we've been mentioning that we've been seeing about double digit year over year labor inflation. We're very pleased to say that that's moderated down to mid single digits, which really is just.
Sort of are reflected in our pricing decision that we made in July as you know, we lost 7% billings of 2% to offset that and the relatively modest price increase really reflects.
The bullishness that we have on the overall labor environment as we've mentioned in past earnings calls.
About 20% is an exceptional restaurant level operating profit margin, we're very pleased to act.
Actually grown that substantially this year with 80 basis points year over year.
But anything over 20% is something that we're very pleased but yeah.
Yeah, Jeff, It's Jeff I'll, just add until what Jimmy and Ben said as well when you think about restaurants.
Level operating profit the 20% number is great.
We've never historically taken price to chase margin.
What we've done is we've taken price in response to minimum wage increases and other outside forces that are increasing the cost of us doing business.
That's what we're going to continue to do going forward in terms of what we've seen on the Cogs line. It has been really very encouraging in the last two or three calls I've said, we've seen that really high increases slow down and even out and I'm really happy to report that in this past quarter.
We saw not only sequential quarter to quarter, but also year over year very slight deflation.
In our basket not not a huge number but it's not it's a it's a red number now not a not a number going up so we're happy.
I'm confident that that trend is going to continue we've got some we've made some promotions in our supply chain department, some really good people and negotiating.
That's gone really well and we continue pushing forward on that so I'm very bullish on what we're gonna see our Cogs line as we move forward through this fiscal year.
Got it and just lastly, if I could just clarify from a unit opening perspective.
You're talking about 11% to 13 units. So I'm just wondering if you can share maybe the openings you did four already in the first quarter, but your openings by quarter and how you think about those in new versus existing markets.
Madonna opening.
Oh my goodness.
So again, if you will.
You might get them I don't think but my take.
But it is not the whole thing people to hook. They can watch the title on all occasions.
Political money and also a new market.
Even though when you love it but I'm going to use.
You know what.
They seem to get out.
A couple of housekeeping.
So in terms of the opening cadence this isn't something that we typically discussed in the Q4 earnings calls, but just.
Given that we've already opened four stores.
Are we sort of need to comment on it we don't expect further openings for Q4 in Q1. The 70 units that we have under construction the majority are.
In the early stages of construction and so I think you can sort of back out the cadence from that relative to our guidance in terms of the new versus existing.
About 20% to 25% of our units from fiscal 'twenty fourth pipeline or slotted for new markets and the remainder will be in existing markets. This represents a shift from the historical 50 50 split.
Just given that we're purchasing states now.
There are fewer new markets for our sector and one further thing about opening more stores up in existing markets is there's really going to help us even further on the G&A line and our regional G&A make it much more efficient for our area managers not having to travel so far and have restaurants that are in geographical areas, where they are on the road as much and not spending as much money doing that so we're excited.
To be able to see some potential leverage on the regional G&A side of things versus the corporate G&A side as well.
But I'm, a little bit or any political data dependency.
He has got a different view than what they might look like.
Sorry for the dog on all total local solutions.
That's correct in England and put it on a comparison I know, it's a little bit squishy about unexpectedly.
But I don't know I don't know.
Makoto.
What's the thinking in Chordoma.
Lucky, but the interesting thing.
Hum.
I don't know if you'd like.
Good luck.
Just to close out.
A bulk of that you might've been surprised by our guidance being 11 of 13 units. When we've already opened four we've got seven under construction you might you know people on the call might be wondering why are we getting more aggressive with our growth and really this is just a reflection of the operating environment that we've been.
12 years.
The construction itself the construction period third stable, but we've seen unexpected hurdles pop up in the west.
The final stages, which delayed openings from anywhere from weeks to months and so we love the perks and reflects.
<unk> certainly seen in terms of.
Especially permitting but we do believe that shipped in December.
There is ample opportunity for upside and we're very excited to hopefully provide updates and upgrades in subsequent earnings calls.
Thank you.
Thank you Joe.
Thank you. The next question comes from Jon Tower from Citigroup. Please proceed with your questions John.
Great. Thanks first a clarification and then a question just curious I think Jimmy you'd mentioned a September October running comps in the plus 2.7% range, maybe I misheard that but wanted to clarify and if so you know I'm curious to gain your perspectives on that.
The slowdown on a one year basis that youre.
We're experiencing and I think on.
On a multiyear basis that would also be a bit of a slowdown as well.
Yeah John.
Talk to you this is Jeff.
In terms of the comps that we've seen what we're really most excited about what we want to focus on is the traffic and what what we.
We believe it's just getting people in the door and getting traffic to increase as a huge part of the battle when it comes to comps and we feel we're winning that battle.
You and all of US have all listen to other conference calls from other companies that have been going on over the last several weeks and we're proud of the fact that one of the few concepts that is showing a positive traffic number.
We can't control certain things like somebody maybe not ordering or soda or ordering a T or having a side item, which you might expect in an economy like we're having.
What we what we do expect is that the people will continue to keep coming back and they do and people. When they go out are choosing curve and we believe that's going to continue and we're going to continue to push other people come in that door and if they do make some changes to their dining habits, hopefully and we believe that will be offset by having more people come through the door. So that's what we're going to send your question about traffic.
Got it. So it is you are seeing a little bit of check management from consumers that are coming back, albeit more frequently than before but the check management. It is occurring in the business right now.
A little bit and it's like small add on things. So our sushi place for gas is not changing dramatically. So like I said somebody may have a water instead of a coke or not have a tier maybe they won't have.
Small dessert at the end of their meal or something like that which I guess that is to be expected in an economy like where it but people are still coming through the door. We're happy we're happy with that.
Got it cool and then just talking about the development side again.
I know that.
There's been some discussion not with you yet, but others in the industry about having some.
<unk> on the development side I know you hit on kind of a slower permitting.
Timelines and then what you've historically seen but are you actually seeing any problems with developers not actually opening units.
Especially in first generation locations.
And if so how.
Can you give us maybe an idea of how much of your portfolio is exposed to potentially exposed to those developers that.
You know.
Our at risk of potentially cutting new new location short and therefore potentially putting some of your new stores at risk.
Thanks, a lot.
Alright.
Okay.
Uh huh.
So they put the bundle that keeps going up it seems like you could Scott Mahoney.
Any view on what kind of stuff.
Okay.
Hello, gentlemen.
Before I open up for me.
Okay.
It doesn't look like there are a whole lot just cannot about platelet hanmi King was the last question.
Yes.
To be clear the uncertainty that we were referring to was really more on permitting as opposed to anything else the developer side.
You know fortunate to be able to say that this really is a problem that's entirely foreign to us. We've seen you know maybe one or two LOI is go sideways because of interest rates and developers calling out but certainly nothing in our fiscal 'twenty four pipeline certainly nothing under construction and so yeah. It really isn't this hasn't been an issue for us it might be say whatever it is on the construction side.
Uh huh.
So when you touch on that.
You can figure that out.
Yeah, you had enough of it who know a lot more money on as you said.
It will make a payment.
What are they good Danielle.
Well go to the hospital.
Okay.
That's all I've got pulled a bunch of them what kind of a funny.
Understood.
Okay.
First I'm Gonna open I think most of the other printer.
Yeah, one odd kind of wrinkle that we didn't see it this is.
A new issue for us is that.
Very weak in construction we've had.
The permanent officials come by after they've approved.
Blueprint month's events, saying, how can we build the restaurant actually I've got problems with blueprint and you need to make these major changes, which obviously.
Maybe we see the openings and so that's been frustrating you think maybe it's part of.
Unfortunately sort of turnover and the personnel that are managing this as a result of the patent.
They were probably layoffs and new employees and maybe they are still getting their sea legs, but.
Yeah. So that's the uncertainty that you've been seeing not anything from the developers that and often times are approved plans, which are always two code when they come in and want us to do additional things things that are way above and beyond what told us.
And things that we've never really seen before so those are that we're not sure why they're doing this but we're running into that.
No person overcome over the counter.
So but again.
Hello.
So it goes down a bit at the moment purposes.
The human element has sort of gone where before you seems to be talked through whereas now we really have no recourse to online portals are really the only way to get it.
Get in contact with people in an online portal is not open to discussing so yeah that that's been a change but like we said earlier, we do expect.
A very strong development, you're even the mid point of view of what the 13 is 24% unit growth and you know we do very much hope to be able to give you updates and upgrades.
Our pipeline is really strong John and.
Jim you talked about the 700 construction and beyond that we're not talking to you further about that other than the guidance that we've given the 11% to 13, but the pipeline is very strong.
And we have no concerns about being able to meet our guidance and like Ben said potentially hopefully raise it in a future call.
Got it. Thank you for all that I appreciate it and then just mechanically Mckenna, sorry, I guess mechanically thinking through the rewards revamp.
Are you anticipating I and I'm uncertain as to how this is going to impact but in terms of redemption are you anticipating any bit of a comp headwind from their rewards revamp that you've added in.
In mid October.
No it should not be a comp headwind if anything it'll be a commscope win I mean, that's that's my big focus on it.
Cool and then just the last piece I know the robotic dishwasher, that's encouraging great glad to hear that it's it's going to be making.
Making its way here at some point in 'twenty, four and into future windows.
Can you maybe give us an idea of like what sort of incremental costs that might be at least from a capex standpoint, and then perhaps if you can frame any sort of labor savings you're expecting from this over time.
Well he missed one of them. They don't just look at that.
But.
Let me just.
I mean, most of it though.
Do you bump, but otherwise there's a lot of safety data.
So that's what the mother company.
So there's a lot of subtle challenge.
They've got a part of it.
Hello, and venmo.
Got it.
Okay.
So we're still it's still a pilot and so they're probably going to be material changes or changes in the materials. So the robots between the pilot.
Pilot model versus the mass production model, but the rois.
It is.
It was an extremely low bar for us to clear it. It's it's really going to be a slam dunk and we're really excited about it too.
Two important things to remember, though on the robotic dishwashers and said we don't expect any.
Labor impact this year, because it won't be and it'll be crystal 25 or beyond.
And then the second thing to take note as it's gonna be started in the new units only because our existing units for the most part are very efficient in terms of space in the kitchen. So these dishwashers.
Most likely not be able to be retrofitted into our existing kitchen. So we'll start doing it with new construction to start and to provide additional color on the labor impact right now most of our restaurants, we have two full time employees working with dishwashers. This would reduce our labor needs for one full time employee and the burden for that employee would be lessened as well.
Retention and so.
All around it's it's very exciting.
We've mentioned in past earnings calls that we think the overall impact it's going to be greater than those three initiatives that we've rolled out in fiscal 'twenty, two combined and we still believe that.
Great. Thanks, I'll pass it along.
Thanks, Sean.
Thank you. The next question comes from Jeremy Hamblin from Craig Hallum. Please proceed with your questions Jamie.
Thank you and congrats on a strong year I wanted to come back to the sales guidance for the year and just make sure I understood.
In terms of that that range that you provided what's the implied same store sales are embedded within that is it kind of like in the 3% to 5% range.
Yeah.
I'm not worried about it at all.
Is it all tied up with it I think youre thinking about it the new well new differently.
Hum.
I know most of it.
Okay.
Okay.
So we don't provide comp guidance and so we can't really get into it right now but that revenue guidance. Let me provide you know contemplates the 11 to 13 units as well as what our internal comp expectations are and as we mentioned before there's there's ample opportunity for the.
The number of stores that we're opening to go beyond that 11 to 13 never saying, which we have a concurrent impact on our revenue guidance as well and so we've got a lot of things working for this year.
Well I need to some acute in Boston, who are young people.
It just doesn't get David.
Hum.
But that would just as a closing note, though the nine 5% full year comps that we had for fiscal 'twenty three we arent expecting to save it for fiscal 'twenty four.
Got it.
Then I wanted to ask a question here on margin. So you had pre opening costs were over $700000 in the August quarter and in terms of you know one I wanted to understand what kind of the average preopening cost for Nova location.
Was and then number two do.
All of those preopening costs of coal in.
In the other operating cost line item or are they sprinkled in between let's say your labor occupancy and other operating costs.
Yeah. They are sprinkled between them. So for instance, a week.
Open one store on August 31st the very last day of our fiscal year and so we've had employees training for that restaurant for a month or so maybe longer and that's a lot of.
Yes.
That falls directly on the labor line otherwise the majority of the costs would be noncash rent if we start booking upon receipt of the premises and so that's certainly 150 days before.
Oh sure Yeah.
Before opening.
So yeah, the elevated preopening costs that that makes total sense. We opened four restaurants in Q4, we opened four restaurants in Q1 and so the pre opening costs for Q1 are calling out Q4 et cetera, we do expect to leverage those preopening cost you as we continue to open restaurants in areas, where there's already other restaurants.
Our new employees can drive over to you now.
The restaurants with right there to be trained rather than having to travel further to be trained.
And same with the.
Managers as well for their training when I fly all over the country to have their training they can do it locally.
Okay.
Got it and then and then just want to come back here.
Who restaurant level margins in terms of what your expectations. It sounds like you feel pretty good about where.
Your food costs for the year it sounds like you feel.
Feel like Labor is a you know hourly wage rates are more under control. Although your menu pricing is down pretty significantly from where it was.
In June.
It is it something where you're expecting your restaurant level margins or let me ask the question a different way what would your what do you think that your comp needs to be for restaurant level margins are to be.
<unk> or up slightly.
In FY 'twenty four.
A company like that.
Well that kind of stuff.
Because I didn't get that.
Could you just say what about that but he's spot on but you know that's the only middle east to go back to what the model, it's all of them all.
Although pricing will do so.
Okay.
You don't know who they support each button pizano, instead of putting money just to pick them up.
I know you can knock out a sudden well he could cause them to get it.
But can you give us a bit about that he.
He saw sensible question think about it you could have done well.
What about fundamentally no one's listening, but I can tell you that because it sounds like it.
Okay.
If you could give them much luck in Tennessee.
Oh I'm sorry.
But you might pick up on the whole country.
Judy can you give us maybe what didnt get anything done.
Right.
So in terms of the comps as we mentioned earlier, we can't really provide numerical guidance as to what our expectations are but you know.
We've maintained this weight per se.
Restaurant level operating profit margins for years, and we're very very happy to be able to grow that in terms of maintaining or growing out further pricing element. Certainly there is you know it's it's.
Sensitive.
Decision for us given the ongoing macro environment there.
Us to essentially.
Sacrifice the cost advantage that we have as you know maybe something that we'd have to very seriously think about you know.
For us to have such a significant practically I couldn't really sets us up for the next several years and not just on a quarter to quarter basis.
What is the serious in Texas restaurant level operating profit margins, we do the dishwasher really does have the opportunity to move the needle, but as we mentioned before that's going to be not in fiscal 'twenty, four and it's going to be out of it limited to the new stores.
Basis, so it's gonna be a slow ramp, but that's something that is very concrete that we're excited for.
And also because the prime costs are the biggest piece of restaurant level margin and the initiatives that we're putting in place like the dishwasher that'll have impacts but at the same time also we can't compromise food quality and we can't compromise service quality and there becomes a point where.
We really think the leverage that we're going to get on the margin will come from increasing sales and we'll get the leverage on some of the fixed costs that we have on the operating cost line, but we really need to be careful I guess that when you get to a point under 30%.
On food costs that you really don't want to play too much with the quality there.
If it doesn't get on a couple of months.
The ease of a button.
But anyway I guess.
Nobody called economists.
The stomach a pivotal milestone Nicolas you could've cosmos.
You have places to whatever they.
Gundam Microsoft.
Really more probably comes back.
Okay.
Yeah. So it just makes a really good point I mean, we could be very aggressive and try to achieve 25% restaurant level operating profit margins, but certainly that would have an impact on traffic or our strategic preference is to grow traffic and use that to leverage our fixed costs and grow restaurant level operating profit margin more organically.
Yeah.
Okay.
Got it thanks, Thanks for taking the questions guys best wishes this year.
Thank you sure. Thank you Danny.
Thank you. The next question comes from Sharon Zackfia from William Blair. Please proceed with your question Chen.
Hey, good afternoon, I'm I'm, just going to beat the dead horse.
Quarter to date comp I do have in my notes that last year comps were I think like a love it and it happens September and 6.3 in October.
And we've heard a lot of companies talk about kind of our normal seasonality and I'm not sure you saw that.
And 2022 so I guess you know.
My question is did you have you seen what others have seen which was kind of slower traffic trends in September followed by more of a rebound in October as we're comparing a little bit of an apple and an orange maybe year over year.
Okay.
Oh no no no the money was up at the minute.
I don't want to cause us to do that within a month.
Most of those people who want it but it wasn't it's not because he was he able to still get them in front of them all.
What are they going to work with us.
Don't forget that even almost as much as a couple of months.
So as Chuck mentioned earlier.
Everybody sees in the restaurant industry September and October.
Okay.
Deeply influenced by macro factors.
But considering that we're extremely pleased to have been able to grow traffic the way we did.
At the moment.
But when you look when he talked about Julian and put them all well.
Okay.
I don't know about cutting them, who you know two of them are starting Muslim demo.
But just looking back over the last yeah.
Okay.
Yeah definitely.
So there are a couple of doctors for October one would just EBIT.
We'll be getting days.
The year prior October versus 'twenty 'twenty creep it.
Considering those yeah October was a little favorable relative to September.
Uh huh.
You have to get I'm, sorry October it was yeah. So we didn't really see the same thing, but the others did our performance was not that different between September and October.
How do we know that youll be near pit funnel, especially.
400, a little okay.
First of all the kind of later on or something.
I just want to live up in Oklahoma.
Oh definitely.
Yeah, and then the timing of Halloween certainly didn't work in our favor didn't work in anybody's favor, but if you control for everything yeah, it's pretty much flat or October is a little bit favorable, but not a big not a big difference between the two months.
Thank you. Thank you for that and then it was good to hear about labor inflation moderating, but I'm you know highly aware of your concentration to some extent in California that remains and I know you're not directly impacted by the fast Act, but you know we've had some other full service operators say that they are.
I still expect that to be an impact you know for wage rates.
In California, just more broadly outside of limited service.
So curious what your perspective is on what you may or may not need to do next spring in California, and how you know if you need to raise wages, how you approach pricing in that environment.
But the unemployment myself with some existing clients.
Nemo muscular theater evening, I know none of them that I cannot say it came up came up the microscope.
Okay.
He taught me doing it.
Thank you for asking because we were hoping to have the opportunity to address this but we really we believe the impact from the fast act is going to be minimal or in fact, a tailwind for us and so we'd love to go through the reasons fiber.
We think this is actually gonna be a benefit, but it's only in Florida and I know there's some okay.
Holly because you're talking a whole bicoastal.
Yeah, that's a lot most of them.
Neither suffer similar why don't I don't know how to put them on a silicon silicon ideally going from almost a I'm sitting here thinking about your.
You don't need you don't you still put up with a competitive.
Well see you again.
What else could come in.
As long as until there's some initial setup.
And still hit US did you indicate what about it.
At this time all group placed.
Like with any other people, though the sidewalk all come out of the company.
Gail you don't want it I would assume I think he can walk you through it whatever.
I didn't want somebody to replace him out and he doesn't eat.
But I think many cost cutting you can still get there and with a different way.
Got it got both price and look at it that well.
He came up with it but they don't have either just to begin with a comment I don't know.
Thank you Mark.
So the first few factors with EBIT up you know as you know the fast act doesn't directly apply to us and consider it.
The comments that our peers have made about the knock on effects, even added $20 minimum wage or California employees, who.
We're making competitive wages relative to that and so it's not like we're gonna have to raise wages to be $20 and so that's it's really not a consideration for us and other things that we were very unique in that you know.
So tech driven but we have these initiatives served as head count.
Which is you know specific current not really something that anybody else could emulate and so I think this makes us.
This is a competitive advantage for us and lastly, as U S tariffs need to catch up from the $16 or so they're currently paying down to $20 minimum wage they'll have to aggressively raised prices and so as the price of the cleanup U S army over the Caribbean shrinks, the appeal and value only grows and so we think this business could ultimately be.
The traffic count with ports as well.
Okay. Thank you.
Thanks Sharon.
Yeah.
If you'd like to ask a question Keith Scott.
The next question comes from Mark Smith from Lake Street. Please proceed with your questions Mark.
Hi, guys. This is Alex on the line from March today.
Firstly and you you might've touched on it already but.
Could you walk us through the menu price increases that are built into the comp and any new increases or increases that you anniversaried this quarter.
Yeah. So effective price was in it was about 10, 7% for Q4.
As of July 7% fell off and we.
Offset by 2% and so.
June was 14% and then September I'm, Sorry July August were about 9% and Theres been no change there.
So Q1 will be all 9%, yeah, and we'll lap 7% on the first week of December exactly yes, starting with the beginning of December will only up 2% pricing.
Right and we touched on this earlier, but the fact that we only took 2% to offset that 7% coming off is really just a reflection of our bullishness on the labor environment as well as the you know the.
Jackson's deflation that we're seeing on the commodity front.
Yes, perfect. That's good there and then just my last question you know you guys have to collapse the updated app.
Your tech initiatives with the automated dishwashers, but you know are you guys looking at any other areas of the customer experience you guys could improve anything to leverage there.
Funnel, how comfortable I E.
<unk> mobile.
On a lighter demand for sport, but most of that goes on.
Yes, there are there are billions of things, but a couple of low hanging fruit that come to mind.
The first is that we havent really communicated the impact of the upgrade to the wait list to our guests yet and so they're benefiting from it but they're not changing their behavior based off of that and so that's what we're heading for the others, but we have this technology I don't know if you've been to one of our restaurants, but if there are four people at your table. It can be hard to reach the conveyor belt, if you're on the outside of the table and we.
This technology that allows you to directly place orders from your cell phone. So you don't have to reach out to your friend to hit the order panel and that's ready to go it's just a matter of rollout.
And so those would be two things that I can talk about right now and I just heard that I will have many more things so I'll be able to share with you as we progress throughout the year.
Thanks for answering my questions appreciate it.
Thanks, Alex.
Yeah.
Thank you. The next question comes from J P. One of them from Roth Capital Partners. Please proceed with your question Jamie.
Great. Thanks, everyone for taking my questions first if we could just start maybe you know a lot of new openings Carl the last six months or so can you maybe just talk about.
In terms of openings are there any differences you've seen with kind of the latest cohort.
<unk> I know we've really.
Talked a lot about the development, but maybe just kind of on customer reception in and.
Anything new you're seeing or any new trends youre seeing when these units open.
Okay.
Poland.
Okay.
Okay.
Hum.
You talked to any of my Nielsen Homescan pool, but you don't need it.
Well you just cut out, but mostly you saw important potential pinot much Johnny just totally apples.
There are of course put it hyper already Mustang Mustang.
I never been on what to do with chemo.
Hello, Oh.
It's not a slowdown.
So over the last six months, we've been fortunate very fortunate to be able to say that all pretty much all the openings have been stuck.
Been really great.
Rather than noticing anything new but its really been its just a confirmation that our strategy was correct in past earnings calls we've discussed how we've taken a non contiguous gross approach.
Across the United States.
He was our first new Jersey location, our first east coast location and on the strength of that we've really built out that market, but I'm talking about.
Philadelphia, New York, Boston D C diff or northeast, it's been great to us and so that's been it's just really great thing you'd indicated you can see that that strategy Pan out.
And obviously with our other markets such as Bellevue, having not been filled into yet that that makes us that much more excited about the Pacific northwest once we start to go build out those markets, although most of us on what about it.
On an earnings call today.
Of course, if you don't look at Philadelphia, and Atlanta, So it kind of put all that in doing it but put into automatic that's almost like I'm playing nonetheless.
The comparable quarter.
My son Who's already downloaded.
So most likely the kind of momentum you've got to put it like this isn't about really though I'm gonna potentially.
Obviously, it's going to come out.
We're working on.
And in past calls we pension urban.
Avon true up being slow to recover from the pandemic and not really performing to the expectations. We had prior to its opening but subs.
Subsequently, we've opened two more units, one and violent which is in Orlando and one in Tampa and both of them are doing spectacular. So it's really you know it's great to see but the issue is not with the market, but it really just that one specific site. We think Florida is a huge vertical for us.
Okay.
Great. Yeah, that's very helpful. And then maybe one follow up if I could turn.
Turn to Jeff.
I was just kind of wanted to ask you know with the guidance of the 14.5%.
G&A as a percent of revenue could you maybe just help.
Give us a sense of kind of from where you started when you first joined correct.
Where that guidance is.
How are you feeling about your ability to either kind of optimized some of the costs or take some costs out of the business and you know.
How do you feel as we go forward, whether there's even more opportunity or whether you've really.
Kind of push pushed as far as you could on that regard. Thank you.
There is more opportunity absolutely.
So we it was 80 bps from June.
'twenty two to fiscal 'twenty three for your full year G&A leverage.
And I'm very proud of that it exceeded my expectations and my goals for the company when I came in and leveraging G&A was in the top three things that Jimmy asked me to work on.
And I'm very happy with what we've done this year.
We're projecting more as you can see based on our guidance. There was a lot in the first year I'm really proud of our team and proud of all the department has really stepped up and did what they could to either push back hires and reduce expensive or do it they could become more efficient and that's what I've asked everybody to doing they've answered the bell and we're going to continue to see that this year one.
Light headwind on G&A that we have this year is this will be our first year of 404 B compliance.
So you're making sure we're fully ready for that as increasing our public company costs, a little bit, but even with that we're gonna have future leverage this year as you can see by our guidance and then in future in fiscal 'twenty five and beyond we're going to continue to see leverage in some point silver the company, we get it down into the single digits I think at some point and I know we will.
But I have no timeline on that but we're working on it.
Got it that makes sense. Thank you and best of luck going forward.
Welcome. Thank you thanks JP.
Thank you and ladies and gentlemen, we have reached the end of our question and answer session. This does complete today's conference. Thank you very much for joining us and you may now disconnect your line.
Okay.
Yes.
Uh huh.
Okay.
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Thank you.
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