Q1 2024 Kura Sushi USA Inc Earnings Call

Good afternoon, ladies and gentlemen, and thank you for standing by.

Good afternoon ladies and gentlemen and thank you for standing

Welcome to the cross Sushi USA, Inc. Fiscal first quarter 2024 earnings conference call.

Welcome to the Kura Sushi, USA Inc. fiscal 1st quarter of 2024, Ernie Scott.

At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the presentation.

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 how'd you meant you meet over <unk>.

Speaker Change: On the call today, we have Hajjima Jumi Uva, President and Chief Executive Officer.

President and Chief Executive Officer.

Jeff Youth Chief Financial Officer.

Speaker Change: and Benjamin Porton, Senior Vice President of Investor Relations and System Development. And now, I'd like to thank you for your time.

And Benjamin important senior Vice President of Investor Relations and system development.

And now I'd like to turn the call over to Mr. Porting.

Benjamin P: Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access for our fiscal first quarter 2044 earnings release. It can be found at www.curseissue.com in the investor relations section. A copy of the earnings release has also been included in the AK resubmitted 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 defined under the Private Securities Litigation Form Act of 1995.

Thank you operator, you got to be in every one and thank you all for joining I know everyone's got access for our fiscal first quarter 2024 earnings release it can be.

Www Dot dot com in the Investor Relations section.

The earnings release adults with ADHD.

You've seen.

Before we begin our formal remarks I need to remind everyone that part of our discussions today will include forward looking statements are defined under the private Securities Litigation Reform Act.

Alright esports.

Benjamin P: These forward-looking statements are not guarantees of user performance, and therefore you should not get under reliance.

These forward looking statements are not guarantees of future performance and therefore, you should not get onto your lines.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from fleets that we have.

Benjamin P: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our SEC violence for a more detailed discussion of the risk that can impact our future outdoor results in financial condition. Also during today's call, we will discuss certain non-get financial measures. So we can be useful in evaluating our performance.

For all of you to our SEC filings for a more detailed discussion of the risk, particularly in bankruptcy properties.

Also during today's call.

non-GAAP financial measures, we can be useful in evaluating.

Presentation of this additional information will be considered in isolation.

Benjamin P: The presentation of the digital information, not be considered in isolation, nor does it substitute for results prepared in accordance with GAAP. In the reconciliation, the comparable GAAP pressure are available in our early release. But that out of the way, I would like to call over to Jenny.

As prepared in accordance with GAAP.

Reconciliations to comparable GAAP measures are available in our earnings release.

That is the way I would like to turn the call over to Jamie.

Pennsylvania, and happy new year to everybody.

Jenny: Thanks, Ben. I'm the Happy New Year, everyone. Join you next day.

The rest of the day.

He's got 22 any fall off to an exceptionally strong start.

Jenny: is currently 24, is often an exceptionally strong start, is meaning the improvement in the strong level of operating profit margin, and other city beta, as well as six new units open to date with another 7 and a contract.

In the interim it's around maybe the opening teams will be tomorrow.

And I guess, the EBITDA as well.

The units opened up to date on or about seven under construction.

Jenny: or a course for this fiscal year remains the same as last year. Maintain excellent operations, continue to rapidly regrow the number of restaurants. Agree for the G&A against an increasing reliance restaurant base.

Our corner for D C study.

It remains the same as it after year mainly.

Maintain excellent operational.

So that'd be pretty good number.

Okay.

G&A against anything that you guys do differently.

And I'm pleased to say that we are continuing to make excellent progress on all of its pretty equal.

Jenny: I'm pleased to say that we are continuing to make excellent progress on all three fronts.

Jenny: For the third floor, the fiscal floor supports $51.5 million, representing comparable to the third floor of $3.8%, which is probably close to the indispensable floor, $3.3% of our over-or-comp.

What kind of status quo, but he's got a fox sports on $51 5 million.

Okay, presenting comparable to say that cross over three point Pete a question.

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Okay, just a moment.

Jenny: First momentum has accelerated since our refining scores as implied by the 100 basis point improvement over the branded September of a cost of 3.7 percent is the improvement being driven entirely by traffic laws.

Thanks.

So what I'm finding is called <unk>.

Combined the 110 basis points improvement.

Brandy.

We're comfortable with coupons com platform.

That's being driven entirely by colleagues.

I think they would pay of 95%.

Jenny: Effective price for 9% during the fiscal first quarter.

Fourth quarter.

Jenny: As of the first week of December , we dropped 7% in price, which we partially offset in January with pricing of approximately 1%.

I'll go with the hostile equal, but the timber.

And then retreat.

That's helpful. Jeff January.

Pricing almost approximately 1%.

Our current 30% I think.

Jenny: Our current 3% effective pricing is a return to our historical pricing cadence, which reflects our confidence in the ongoing normalization of our prime cost, as well as a strong strategic decision to best take advantage of current macro factors to maintain traffic growth and the capital market share.

Is that in times like these particular pricing cadence.

Our confidence.

When you normalize Jason Prime costs.

Great.

So the teacher, Chris Jones, who best to take advantage of current demand.

To maintain kind of a cool.

Capture market share.

Alrighty.

Jenny: How many costs have seen a macro improvement over the prior year quarter? With our cost of goods sold as a percentage of the sales, coming up to 29.8% for Q1, as compared to last year's 31.6%.

Oh, sure I'm, seeing a market improvement or by quarter.

Quarter.

Our cost of goods sold.

Coming to 29, 8% for Q1.

That's exactly yes.

Okay.

Jenny: Labour costs have largely remained sustained at 31.6% compared to player-year quarter at 31.9%.

Dave about costs.

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How do you one point.

Compared to two quarters.

One 9%.

They can only be cooperating fully with the margin improvement from 18 point at two five times.

Jenny: Restaurant-level operating permit margins improved from 18.2% in the prior year quarter to 19.5% and adjusted the EBITDA to the from 0.6 million dollars to 1.8 million dollars representing year-over-year growth of approximately 200%.

Quarter to $19 five 5%.

Adjusted EBITDA from.

From our point of view comedian Donald you want <unk>.

And presenting with yellow bar yet.

200 <unk>.

Jenny: It bears mention that much of the other city with the growth was driven by improvements in commodity cost, but it is clearly encouraging to see such dramatic growth, even while we face the under-heroings, associated with 4405 compliance, and restaurant-level heroings, associated with a record number of new restaurant openings and units under construction.

It's been amazing.

So David Lewis 30, 19 through maintenance and commodity costs.

It's really encouraging to see such dramatic floor even wider.

Beyond the Haley.

It can be.

For peaceful component yes.

The restaurant David headwind.

Okay.

He called the number of new restaurant openings and the unique.

Awesome.

Jenny: I believe this initiative that goes is only a test of what we can expect in future years as we grow our unit base. But as a company, and that is even better able to leverage our G&D.

I believe I guess it takes to close on the <unk> well, we can expect future, yes, I believe it will allow you need great.

Company.

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Jenny: In the fiscal first portal, we opened four new restaurants. It's about Pennsylvania.

In the fiscal first quarter.

We opened four new restaurants.

It's about Pennsylvania.

Jenny: Washington, New York, Tampa, Florida, and the May 5th, Illinois.

Starting in New York.

Oh yeah.

Hey, Bob.

Jenny: subsequent to the quarter end, we opened two more new restaurants in Kansas City, Missouri, and Sporty Illinois.

Subsequent to quarter end, the openness to Martin is more in Europe.

In Kansas City, Judy on exports.

Jenny: Originally, we have seven units currently under construction.

Additionally, we have seen.

Any contrary.

Yes.

Accordingly.

Jenny: Accordingly, we are excited to increase our unit opening guidance for fiscal 2024, we will definitely expand on shortly.

Shelley <unk>.

Okay.

Paul.

Excellent.

The Canadian business ex Sean definitely busy couple of years that would show us that it was a new market.

Jenny: The incredible reception that we've seen as we establish ourselves in new markets demonstrates the truly national cost-to-cost portability of Kuro Sushi and the performance of new units in existing markets is confirming our expectations that the massing consumer appetite for sushi is more than enough to sustain our in-field plans.

Yeah I'm on sorry.

Good evening Tonight is closer to the cost of portability, all cuda fishing.

Our format for the new unit existing market.

Timing expectations.

<unk> seen consumer appetite for partnerships more of us now.

Are easier to process.

Jenny: This has been a couple months since we launched a new version of our reverse program and I'm very pleased to be able to share that. Every moment that we discussed in our previous earnings course has remained just as strong.

A couple of months since we announced a new budget.

You guys spoke about.

I'm very pleased to be able to ship out.

Adding momentum as we discussed in our previous earnings call.

The test on the phone.

Yeah.

Jenny: The installation rate for new members are approximately capable, but they are with the previous program and given that these are all new users, we expect greater engagement on a higher user basis than the overall cost of the previous year's program.

Maybe just update you on an H well new member brokerage makes it pretty well.

Previous program.

These are all the new units.

We expect greater engagement from our partners.

Thank you.

That's helpful.

Can you talk at all.

Jenny: Well, it is still very much early days in terms of the nearly worth program and our earnings on how to best leverage it.

But it is still very much early days, sometimes walking near the Las program umbrella.

Goodbye.

Jenny: We expect to give more concrete updates in future earnings for in terms of nearly under the opportunities and its potential to drive incremental revenue.

We expect to give more concrete update in future earnings calls in terms of immunity.

<unk> and its potential to drive incremental revenue.

Jenny: Our current ID collaboration has been very well received by our guest.

Our current IV cross collaboration.

I've seen many minutes to see what the ballpark yes.

Jenny: Our next brand collaboration is Thai Family and we believe Thai brand for the remainder of the fiscal year is the strongest one in the heart.

Our next to Brandon <unk> finally.

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For the remainder of the year is the strongest along.

Got it.

Now moving into the new year.

Jenny: As we enter the new year, I'd like to thank all of our team members, both at our lecturers and at our corporate support center for all of their hard work, which has allowed us to share great news, both after quarter on our earnings order.

Thats different all of our team members both our Nexsan.

But a couple of times.

Well all of their hard work.

Okay great.

Great.

Fourth quarter earnings call.

Jenny: And with that, I'll turn it over to Jeff to discuss our financial results and the equity. Yes.

Hi, good.

Tony go back to Jeff Kessler off high necessarily that Christy yes.

Okay.

Jeff: Thank you, Jimmy. For the first quarter, total sales were $51.5 million as compared to $39.3 million in the prior year period.

Thank you Jimmy.

First quarter total sales were $51 $5 million as compared to $39 $3 million in the prior year period.

Jeff: Comparable restaurant sales performance as compared to the prior year period was positive 3.8%. The regional comms of 9% in our West Coast market and 1.3% in our Southwest market.

Comparable restaurant sales performance as compared to the prior year period was positive three 8% with regional comps of 9% and our west coast market, and one 3% and our southwest market.

Turning now to costs.

Jeff: Food and beverage costs as a percentage of sales were 29.8% as compared to 31.6% in the prior year quarter largely due to pricing and the easing of commodity inflation.

Food and beverage costs as a percentage of sales were 29, 8% as compared to 31, 6% in the prior year quarter, largely due to pricing and the easing of commodity inflation.

Labor and related costs as a percentage of sales decreased to 31, 6% from 31, 9% prior year quarter.

Jeff: Labor and related costs as a percentage of sales decreased to 31.6% from 31.9% prior year quarter.

Jeff: This decrease is due to sales leveraging from increased traffic and pricing, which was largely offset by increased training costs associated with new store openings and general wage increases.

This decrease is due to sales deleveraging from increased traffic and pricing, which was largely offset by increased training costs associated with new store openings and general wage increase.

Jeff: occupancy and related expenses as percentage of sales were 7.6% compared to the prior year quarter 7.3%.

Occupancy and related expenses as a percentage of sales or seven 6% compared to the prior year quarter seven 3%.

Jeff: due to incremental pre-opening rent associated with a greater number of units under construction.

Due to incremental pre opening rents associated with a greater number of units under construction.

Depreciation and amortization expenses as a percentage of sales increased to four 8% as compared to the prior year quarters.

Jeff: Depreciation and amortization expenses as a percentage of sales increased to 4.8% as compared to the prior year quarters 4%, largely due to the additional newly opened units as well as the accelerated depreciation of assets that were being replaced due to planned remodels.

Largely due to the additional newly opened units as well as the accelerated depreciation of assets are being replaced due to planned remodels.

Other costs as a percentage of sales increased to 14, 7%.

Jeff: Other costs as a percentage of sales increased to 14.7% compared to 13.5% in the prior year quarter due mainly to pre-opening costs associated with a greater number of store openings as well as an increase in marketing costs and general cost inflation.

Compared to 13, 5% in the prior year quarter, due mainly to preopening 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 to 16, 7% as compared to 16, 9% in the prior year quarter.

Jeff: General and administrative expenses as a percentage of sales decreased to 16.7% as compared to 16.9% in the prior year quarter due to greater sales leverage, which was largely offset by incremental public company costs and recruiting and travel costs associated with new unit opening.

Due to greater sales leverage, which was largely offset by incremental public company costs.

And recruiting and travel costs associated with new unit opening.

Operating loss was $2 $8 million as compared to an operating loss of $2 $2 million in the prior year quarter, largely driven by incremental other costs.

Jeff: Operating loss was $2.8 million as compared to an operating loss of $2.2 million in the prior year quarter, largely driven by incremental other costs.

Jeff: depreciation and amortization and occupancy associated with the greater number of unit openings and units under construction.

Depreciation and amortization and occupancy associated with a greater number of unit openings and units under construction.

Income tax expense was $38000 compared to $10000 in the prior year quarter.

Jeff: Income tax expense was $38,000 compared to $10,000 in the prior year quarter.

Net loss was $2 million or <unk> 18 per share compared to a net loss of $2 1 million or 21 per share in the prior year quarter.

Jeff: Net loss was $2 million, or $0.18 per share, compared to a net loss of $2.1 million, or $0.21 per share in the prior year quarter.

Restaurant level operating profit as a percentage of sales was 19, 5%.

Jeff: Restaurant-level operating profit as a percentage of sales was 19.5% compared to 18.2% in the prior year quarter.

Third to 18, 3% in the prior year quarter.

Adjusted EBITDA was $1 $8 million.

Jeff: to just EBITDA was $1.8 million compared to $0.6 million in the prior year quarter.

<unk> zero point $6 million in the prior year quarter.

Jeff: Turning to our cash and liquidity, at the end of the fiscal first quarter, we had $64.2 million in cash and cash equivalents and no debt.

Turning to our cash and liquidity at the end of the fiscal fourth quarter, we had $64 2 million in cash and cash equivalents and no debt.

Jeff: And lastly, I would like to update and reaffirm the following guidance for fiscal year 2024.

And lastly, I would like to update and reaffirmed the following guidance for fiscal year 2024.

Jeff: We now expect total sales to be between $239 and $244 million.

We now expect total sales to be between 239 and $244 million.

Jeff: We now expect to open between 12 and 14 units with average net capital expenditures per unit of approximately two and a half million dollars.

We now expect to open between 12, and 14 units with average net capital expenditures per unit of approximately $2 $5 million.

Jeff: And we continue to expect general and administrative expenses as a percentage of sales to be approximately 14.5 percent.

And we continue to expect general and administrative expenses as a percentage of sales to be approximately 14, 5%.

Now I'll turn it back over to Gerry.

Speaker Change: Thank you. This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions.

Thanks again. This concludes our prepared remarks, we are now happy to contract any questions you have.

Operator, please open the line for questions.

As a reminder, ladies into Q&A, thanks, Sean Haney.

Speaker Change: As a reminder, during the Q&A session I may answer in Japanese before my response is translated into English. Thank you for your attention.

Before my response is translated into increased thank you for your welcome Sean.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. Confirmation cell will indicate that your line is in the question area.

A confirmation tone will indicate that your line is in the question queue.

You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Okay.

Thank you.

Our first question comes from the line of Joshua Long with Stephens. Please proceed with your question.

Speaker Change: Great. Thank you for taking my question. I was curious if you could share a little bit more about the unit development pipeline and what seems to be a nice strengthening in that. I know in the prior call you talked about the potential for upside to the unit, the new unit development pipeline for the year. That seems to be coming into fruition. Just curious if this is a function of site selection, maybe if permitting has gotten any better, anything you could share there in terms of just how the new stores are coming together.

Great. Thank you for taking my question just curious if you could share a little bit more about the unit development pipeline and what seems to be a nice strengthening in that I know in the prior call you talked about the potential for upside to the unit.

No new unit development pipeline for the year that seems to be coming into fruition.

Just curious if this is a function of site selection, maybe if permitting has gotten any better or anything you could share. There in terms of just how are the new stores are coming together.

Sure. Thank.

Speaker Change: Sure. Thank you, Jeff, for your first question. Please allow me to speak in Japanese. Ben is going to translate for me.

Thank you Jeff for your question, because I don't mean to speaking Japanese bank holding company.

Speaker Change: Yusuke Nakamura First, regarding the pipeline, as I mentioned in the prepared remarks, seven restaurants are currently under construction, and three are in a state of under construction, and will be open soon.

Hi, Brian your confidence on our prepared remarks, I will ask Robert Mattson all Mr. Mclaughlin Exxon mix at all.

Paul I'm going to go back once we get it done.

Okay.

Got it.

Speaker Change: And one other thing is about?????????? We had a few delays last year... and it's moving forward smoothly so there are minor changes and we are updating the guidance as well

Hum.

Tom you kind of did it at all.

The company.

I would now like undertaken Thomas keep them all I'm wondering your car and so.

Thank you good luck.

I mean first of all domestic.

Yeah on all.

Thanks, operator.

Okay.

Hi, Michael.

So as Jimmy mentioned in the prepared remarks, we are seven units under construction, we're extremely pleased to be able to say that three of those are pretty far into construction.

Speaker Change: So, as Jimmy mentioned in the prepared remarks, we have 70 units under construction. We're extremely pleased to be able to say that 3 of those are pretty far into construction. Um, and so we're, we're very happy with where we are. It's 1 of the reasons that we were confident in terms of raising our guidance in terms of the permitting delays that we've mentioned in the past fiscal year. Those have meaningfully eased. And so we're, we're, we're very happy with the rollout and how smooth it's been.

So we're very happy with where we are it's one of the reasons that you're confident in terms of raising our guidance.

In terms of the permitting delays that you mentioned in the past fiscal year those have meaningfully and so we're we're very happy with.

The rollout and housemates it's been this year.

Speaker Change: Right. That's very helpful. Thank you. And, you know, thinking maybe more about the performance of newer stores. Sounds like that's pretty strong.

Great. That's very helpful. Thank you and I'm thinking maybe more about the performance of newer stores. It sounds like Thats pretty strong could you give a little bit of extra context or color in terms of just how the results for the quarter performed versus your expectations I know, there's always going to be a little bit of difference between what you all see in how we model it but I'm thinking particularly in terms.

Speaker Change: Could you give a little bit of extra context or color in terms of just how the results for the quarter perform versus your expectations? I know there's always going to be a little bit of difference in between what you all see and how we model it. But I'm thinking particularly in terms of just kind of how average weekly sales growth was growing through the quarter and, you know, maybe if at some point we kind of get away from looking at this on a multi-year stat comparison, I know we're getting further away

And just kind of how average weekly sales growth.

Growing through the quarter and maybe if at some point, we kind of get away from looking at this on a multiyear stack comparison I know, we're getting further away from kind of Covid and some of those disruptions, but just curious if you're starting to see any sort of.

Speaker Change: Kind of cobit and some of those disruptions, but just curious if you're starting to see any sort of.

Speaker Change: normalization there and any sort of commentary you could share on how new store performance is unfolding.

Normalization, there and any sort of commentary you could share on how new store performance. It is unfolding.

Speaker Change: First of all, there are a lot of new restaurants that opened in both FY23 and FY24 but especially restaurants that opened in the new market like Minneapolis, New York, Pittsburgh, Tampa, all of the restaurants that opened in these new areas are in good condition and the fact that these restaurants are in good condition proves our portability

Mcdonald.

No I don't want them all.

Understood.

New market development.

And how many are pretty small.

I'm pleased with our new Yorkers as a pizza box I'll come back with you again.

On a quarter I guess I'm OK great.

And obviously, that's something we'll talk a lot about them.

Maybe you could give us all next year.

Speaker Change: I'm very encouraged by that. And regarding the egg-vesting market, in Chicago, Georgia, Atlanta, and New Jersey, we did an opening for Infil. We are doing exactly as planned here, so both of our...

Does it give you didn't use them to get out and good luck.

Interestingly a lot depending on just a couple of their so called mobility.

Okay.

Michael I'm not going to get easier in all an opening loss of them understood well get our money will go on.

I know you don't want them all.

Speaker Change: I think both of them are doing well. They are doing better than we expected. I can tell you that they are doing well. That's all for New York City.

And I'll just.

Then I'll give a little micro to Philadelphia.

Given all that I can guarantee to simply because if you look around the corner.

Thanks, you guys.

Go ahead Scott.

Thanks.

Speaker Change: In terms of new restaurants, fiscal 23 has been a record year. This year, we've already opened 6 to date. And so we've had a lot of new openings in terms of the major new markets that we've hit. We've entered Minneapolis. We've, we've opened a couple of restaurants in New York. We hit Pittsburgh. We're in Tampa. It's been.

In terms of new restaurants.

<unk> had a record year. This year, we've already opened to date and so we've had a lot of new openings in terms of the major new markets that we've hit we've entered Minneapolis. We are we've opened a couple of restaurants in New York, We hit Pittsburgh, where in Tampa, It's been.

Speaker Change: you know, a pleasure really to see how warm the reception has been in each of these markets. And every time we open, every time we enter in a new market, it's just a, you know, a confirmation of the portability of our concept. And so, it's really encouraging for us. In terms of the existing markets, we've opened a couple in New Jersey, Chicago, the Atlanta area, and those are all doing very well as well. As Jimmy mentioned in the earlier prepared remarks, there's abundant appetite.

A pleasure really to see how warm the receptors that in each of these markets and every time. We open every time you enter in a new market. It's just that.

A confirmation of the portability of our concept and so it's really encouraging for us in terms of existing markets. We've opened a couple of New Jersey, Chicago, The Atlanta area and those are those are all doing very well as well as Jimmy mentioned in the earlier prepared remarks.

Abundant appetite for sushi across the United States and so we feel very confident not only in terms of our existing or new markets, which are gangbusters, but in filling our existing markets as well.

Speaker Change: across the United States, and so we feel very confident, but not only in terms of our new markets, which are gangbusters, but infilling our existing markets as well.

Speaker Change: Also, I'm sorry, but I have a question that Joshi asked at the end.

Hello, everyone.

On a small cap.

Good morning.

Okay.

Speaker Change: I haven't done a lot of comparisons in the last 2-3 years, so can I just say that I'm back to normal? Yes, that's right.

Ethel minions funding candle at all.

Thanks Chuck.

And angled it's sort of more skewed mobility myself, because it's nice to you Scott.

Okay.

Speaker Change: So, and in terms of the multi year stack, we're not if I'm being if we're being totally frank, we're not internally doing a multi year stack anymore. We've returned to normalcy. And so we're, we're very pleased to be able to say.

So in terms of the multiyear stack we're not.

We're being totally Frank we're not even internally doing a multiyear stack anymore. We've returned to normalcy and so we're very pleased.

To be able to say that.

Great. Thank you that's helpful. And then one last one for me in terms of the food deflation or just your overall Cogs basket that you talked when you pair paired remarks I think also in the past.

Speaker Change: Great thank you that's helpful. Then one last one for me in terms of the food deflation or just the overall COGS basket that you talked about in your prepared remarks I think also in the past.

Speaker Change: There was conversation around the potential to reinvest in food quality or, you know, other areas if you know

There was a conversation around the potential to reinvest in food quality or other areas.

The food cost margin with materially below 30%.

Speaker Change: the food cost margin went materially below 30%.

Speaker Change: Uh, was just as a kind of a starting point to realize it's probably early on and. Um, they'll process and there's still a little bit fluidity there, but could you remind us how you're thinking about the food cost line and when and where some of those.

Just as a kind of a starting point I realize it's probably early on in <unk>.

Bill process, and Theres still a little bit fluidity, there, but could you remind us how youre thinking about the food cost line and when and where.

Speaker Change: you know, pivot points or, you know, thought process might lie in terms of the potential for seeing leverage or maybe reinvesting in that line item.

Yeah pivot points are.

Yes.

That process might lie in terms of the potential for seeing leverage or maybe reinvesting in that line item.

Speaker Change: Hey Josh, this is Jeff. Yeah, the 30% number that on the COGS line is something that we're very happy with. It's something that we would like to see a little bit lower and it has gotten lower. In terms of deflation, just to give you the numbers of what we've seen this year, year over year, our deflation was about 4%. And sequentially, quarter over quarter, our deflation was about 2%.

Hey, Josh this is Jeff.

The 30% number that you're on the Cogs line, that's something that we're very happy with its something that we would like to see a little bit lower than it has gotten lower in terms of deflation just to give you the numbers of what we've seen this year year over year deflation was about 4% and sequentially quarter over quarter had deflation was about 2%.

Speaker Change: So that deflation combined with the price increases that we've taken over last year, and as Jimmy mentioned, we did take about 1% on January 1st. We believe that with the price increases and the deflation that we're gonna be successful in having that COGS number show up even below 30. But as we've mentioned in the past, there's a floor to that. If that COGS number were to get somewhere at 27, 28, that may be a little bit too low, and then you do risk.

So that equation combined with the price increases we've taken over the last year and as Jimmy mentioned, we did take about 1% on January one we believe that with the price increases and the deflation that we're going to be successful in having that Cogs number show up even.

Oh 30, but as we've mentioned in the past there is a floor to that.

Zumba, where to get number 27, 28 that may be a little bit too low and then you you do risk hurting your food quality, which is not something we're going to do so as long as we can keep that number in the very very high twenty's or right around 30%, we're going to be happy.

Speaker Change: hurting your food quality, which is not something we're going to do. So as long as we can keep that number in the very, very high 20s or right around 30%, we're going to be happy.

Got it very helpful color in terms of reinvesting that.

Speaker Change: In terms of reinvesting that something that we've done is materially significantly improve the quality of our core proteins, especially tuna and salmon. I'm very pleased to be able to say that we've done that while also lowering our cogs basket or cogs cost. And so that's really been pretty remarkable for us. 1 of the thing that we'd like to do is our LTOs. For example, in December , we did a crab fair, you know, very high quality crab winter is crabs.

Something that we've done it materially or significantly improves the quality of our KOL proteins, especially tuna and Shannon I'm very pleased to be able to say that we've done that while also lowering our cogs basket or cogs costs and so that's really been pretty remarkable for us one of the thing that we'd like to do is R. L. T. OS for example in December we did a crab fare.

Very high quality crap winter as scrap season in Japan, and this was one of the most popular LTE is accurate.

Speaker Change: Japan, and this was one of the most popular LTOs ever. And I think our guests really, really enjoyed it and sort of appreciated that we were giving back to our guests through crap.

And I you know I think our guests really really enjoyed it and sort of appreciate it that we were giving back to our guests through through crafts.

Great. Thank you so much.

Thanks, Jonathan.

Yeah.

Speaker Change: Thank you. Our next question comes from the line of Jeremy Hamblin with Craig Hallam.

Thank you. Our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.

Thanks, and congrats on the strong results.

Jeremy Hamblin: Thanks, and congrats on the strong results. I wanted to just come back, there's a little bit of a breakup in the audio.

I wanted to just come back the there's a little bit of a breakup in the audio.

Jeremy Hamblin: in some of the commentary around menu pricing, as well as same store sales color. Apologies for going back over some of this, but want to make sure that I understood, you know, a kind of the cadence of comp.

Some of the commentary around.

Menu pricing as well as same store sales color.

Apologies for going back over some of this but wanted to make sure that I understood kind of the cadence of comps.

Jeremy Hamblin: color that you shared throughout FQ1. And then two, I think what I heard on the menu pricing was that you're carrying three percent overall in FQ2.

The color that you shared throughout F Q1.

And then two I think what I heard on the menu pricing that you're carrying 3% overall in F Q2.

Jeremy Hamblin: And then, you know, kind of the comp on the west coast versus, you know, the other regions or in the southwest region, if we could start with that, that would be great.

And then you know kind of like the comp on the west coast versus.

The other regions are in the southwest region.

If we could start with that that would be great.

Yeah.

Yeah.

Pricing that we ran Jeremy in Q1 was 9%.

Jeremy Hamblin: We did take the one we've left a 7% pricing in December and then we took the 1% and the beginning of January So we're currently at 3% price

Did take the one we've lapped a 7% pricing in December and then we took the 1% and at the beginning of January so where it currently at 3% pricing.

Jeremy Hamblin: Yeah, we're very, very happy with where the comp number came out. And what we really want to point everybody back to is that traffic number that the traffic of 3.3% that we saw in Q1 and, as, you know, listening to conference calls still throughout the year, very few concepts have been able to have.

We're very very happy with where the comp number came out and what we really want to point everybody back to you is that traffic number that the traffic of three 3% that we saw in Q1 and as you know listening to conference calls still.

Throughout the year very few concepts have been able to have.

Positive traffic.

Jeremy Hamblin: Positive traffic and we looked at that number and as long as we can keep people coming back in the door and keep our existing guests coming back, we're going to be very happy. And that's 1 of the things that we can't control through great service and and great food quality. We continue to do that. We believe that our guests are going to keep coming through that door and keep that traffic positive. And if we can do that, we're very positive that we can, it's going to be a good year.

And we looked at that number and as long as we can keep people coming back in the door and keep our existing guests coming back we're going to be very happy and that's one of the things that we can't control through great service and great food quality. We continue to do that we believe that our guests are going to keep coming through that door keep that traffic positive and if we can do that.

We're very positive that we can it's going to be a good year for us.

And just to add on the cadence given the audio broke up a little bit. We gave September October comps last earnings call. It was two 7% and so you can assume that the comps for November will be much stronger given that we came in at three 8% for the full quarter and given that we didn't take any price during that quarter.

Speaker Change: And just to add on the cadence, given that the audio broke up a little bit.

Speaker Change: We gave September and October comps last earnings call, it was 2.7%.

Speaker Change: And, you know, so you can assume that the comps for November were much stronger, given that we came in at 3.8% for the full quarter, given that we didn't take any price during that quarter, or, you know, the.

Speaker Change: The acceleration was driven solely due to traffic. So back to.

The acceleration was driven solely due to traffic so back to Jeff's earlier point, we're very very pleased to see that we're operating executing so well get more guests than ever coming into our doors.

Speaker Change: Jeff's earlier point, we're very, very pleased to see that we're operating executing so well, but more deaths than ever coming into our doors.

Jeff: Got it. I think there was there was some commentary on the West Coast versus the Southwest market comps also just want to clarify. Yeah. Give me one second.

Got it I think there was there was some commentary on the west coast versus the southwest market comps also just wanted to clarify.

Yeah excuse me one second.

I have the I have the numbers here Greg.

Jeff: Sorry, I just don't remember what was off my head, Jerry. 9% in the West Coast and 1.3% in the Southwest, Mark.

So we're now starting to head charts, 9% and the West coast and one 3% in the southwest markets.

Got it.

Jeff: Got it. And so then, just coming back to the comp overall, in terms of where the menu pricing was, you know, traffic up really strong, 3.3%. Are you still seeing a little bit of reduction then in average plate consumption?

And so then just coming back to the comp overall in terms of where the menu pricing was traffic up really strong three 3%.

Are you still seeing a little bit of of reduction than in average plate consumption.

Yeah.

Go ahead.

Jeff: Yes, in terms of the quarter quarter, from Q4 to Q1, the average plate consumption has increased In the previous quarter, it was almost flat In terms of Q4 and Q1, the plate consumption has become very positive

Sure on a claw back all of that at all on all different.

Q1 digital on the update.

On our plants.

The second half.

On a Q O Q1 came out and put into consumption.

I don't know if that oncor not quite as bad.

Jeff: On a sequential basis from Q4 to Q1, plate consumption per person has actually gotten up. And on a year-over-year comparison, it's about flat. And so we're really happy with where plate consumption.

On a sequential basis from Q4 to Q1 play consumption per person is actually gotten up and on a year over year comparison, it's about flat and so we're really happy with where play consumption is.

Got it.

Speaker Change: Got it. And then I wanted to shift gears to your your labor costs. And you know, you said had some nice 30 basis points of leverage year over year. I think minimum wage in California on January one is up about 3.2%. But wanted to get an outlook of

And then I wanted to shift gears to your your labor cost and you see that.

They had some nice 30 basis points of leverage year over year.

I think minimum wage in California on January one it's up about 3.2%.

But why don't you go ahead.

Outlook of what you're thinking about Jeff on kind of the labor market here in calendar 'twenty four.

Speaker Change: you know what you're thinking about jeff uh... uh... kind of the labor market here in calendar twenty four uh... is removing forty paid a little bit less pressure i think there's also you know uh... in April you know the the impact of the potential large-scale fast food uh... you know wage laws that are going to into effect the twenty dollar wage

As we're moving forward are you seeing a little bit less pressure I think there's also you know.

In April the.

The impact of the potential large scale SaaS food you know wage laws that are going into effect. The 20 dollar wage.

Speaker Change: uh... but just wanted to get a sense for what you were expecting and you know again pretty nice leverage that you've got on a three point eight percent cop

But just wanted to get a sense for what you were expecting and you know again pretty nice leverage that you got on a three 8% comp.

I'm happy to answer these questions, yes, Jamie horizontal you can name my mother isn't it like a 10% dividend.

Speaker Change: I'm happy to answer this question, Jeremy. One year ago, we had about 10% of labor inflation, but in the past year, we've seen a rise in California's minimum wage, and we've seen a rise in mid-single-digit-level labor inflation.

And if you could help monoclonal like eating in the adult market.

Oh my bad on that.

<unk>.

Okay.

Speaker Change: So when we think about that, we are looking at a pricing of about 1% in January , which is a level that can be offset sufficiently. So we are very confident in maintaining the current level of labor cost and other percentage sales.

Now let me walk on that does it give me your wonderful. Thank you that's my ethics bucket.

Okay.

Particularly because I'm thinking on the Magellan.

I don't know what are you.

Are you monitoring.

Yeah, Michael So I'll pause at Buckingham.

It's like you said.

Oh My God.

Okay.

Right.

So.

Speaker Change: In past earnings calls, we've mentioned that about, I think, until about Q3 of last year, the year-over-year labor inflation was about 10 percent. It's since moderated to mid-single digits, and that is including the annual minimum wage increases in California. With the 1 percent-ish pricing that we took as of January , we believe that that's enough to offset the labor increases and really keep our margins flat year-over-year. You asked about AB 1228.

In past earnings calls, we mentioned that about.

I think that until about Q3 of last year the year over year labor inflation was about 10% since moderated to the mid single digits and that is including the annual minimum wage increases in California with the 1%.

Pricing that we took as of January we believe that that's enough to offset.

So the labor increases and really keep our margins flat year over year, you you'd asked about 80 12 28.

Speaker Change: previously known as the FAST Act, we're very pleased to be, I think we're pretty much the only concept that is saying that we see this as an opportunity. We, in terms of our California markets, our employees are already making wages that are competitive with the $20 that people are going to be making at QSR. And so, you know, obviously QSRs need to take an aggressive price to be able to.

Previously known as the Fast Act, where we're very pleased with you I.

I think we're pretty much the only concept that is saying that we see this as an opportunity in terms of our California markets are our employees are already making wages that are competitive with that $20 that people are going to be making at <unk> and so you know, obviously <unk> taken aggressive price to be able to.

Speaker Change: offset that and so we see this as a meaningful opportunity to grow market share as you know up until now the conversation has really been do we go to Kuro Sushi or do we go to other casual dining places now it's do we get a combo meal at the burger place or do we get Kuro Sushi and that's one of the reasons that we're running three percent price is we really want to demonstrate to the world at large not just our existing guests how great a value Kuro Sushi is.

Offset that and so we see this as a meaningful opportunity to grow market share as you know up until now the conversation is really been do we go to Kurt Sushi forgive you got either casual dining places now it's do we get a combo meal at the Burger place or do we got Chris Sushi and that's one of the reasons that we're running 3% prices, we really want a demo.

Straight to the world at large not just our existing guests how how green are valued Chris who she is.

Speaker Change: Got it. That's a great point. Last one for me, and I'll hop out of the queue. I just wanted to ask about some of the recent collaborations. You've partnered with Peanuts and Snoopy in December here into January . I wanted to get a sense for how that promotion was performing. It seems to be generating a decent amount of buzz.

Got it that's great point last one for me.

Ill hop out of the queue just wanted to ask about some of the recent collaborations right, you're you've partnered with Peanuts and Snoopy.

Yeah. It does.

<unk> here into January it and wanted to get a sense for how.

That promotion was performing.

It seems to be generating a decent amount of buzz.

Speaker Change: Yeah, we're really pleased with the December results, and, you know, Peanuts collaboration is certainly a big part of it. Our PR team gets better and better with every.

Yeah, we're really pleased with the December results and <unk>.

Peanuts collaboration certainly a big part of it our PR team gets better and better with every.

Collaboration that we cycled through this time, they get a really spectacular job with what we called the space collaboration not just the toys are the enemies right.

Speaker Change: collaboration that we cycled through. And this time they did a really spectacular job with what we call the space collaboration, not just the toys or the animes, but we had photo ops where the restaurants were decked out like a Charlie Brown Christmas. We had little big Snoopy figures on our Mr. Fresh gomes and those would go mysteriously missing.

Had photo ops, where the restaurant for decked out like Charlie Brown Christmas, we had little bit sneaky figures on our Mr. Fresh gums and those would go mysteriously missing and so it gets worse [laughter] scope.

Speaker Change: And so if guests were, you know, a part of that, you know, you really can't get higher praise than that, certainly not encouraging guests to do that, but it was.

Part of that.

I really can't get higher freight and that certainly not encourage you'd get to do that but.

Speaker Change: it was nice to see people were so that excited about it. And as Jimmy mentioned earlier, we've got Spy Families, our next collaboration, and then.

It was nice to see people were so excited about it and as Jimmy mentioned earlier, you know we've got Spike families. Our next collaboration and then we've got two more after that.

Speaker Change: Got 2 more after that for the remainder of the fiscal year. This is the best pipeline we've ever had. I could not be more excited. I wish I could tell you what they were right now, but you're gonna have to wait until the next call. Great, thanks for taking all the questions.

Radar the fiscal year. This is the best pipeline, we've ever had I could not be more excited I wish I could tell you what they were right now, but you got to wait until the next call.

Yeah.

Great. Thanks for taking all the questions and best wishes.

Of course, thank you. Thank you David.

Thank you. Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Speaker Change: Our next question comes from the line of Sharon Zaxia with William Blair. Please proceed with your question.

Thanks for taking my question.

Sharon zakvia: Thanks for taking the question. Jeff, I have to confess, I was a little surprised that you raised revenue guidance this early in the fiscal year. So, but I'm curious on,

Jeff I have to convince hundreds I'm little surprised that you raised revenue guidance. This early in the fiscal year. So.

But I'm curious on.

And that $10 million range.

Yeah.

And then anticipate and initial guidance for the opening schedule.

Sharon zakvia: And then anticipated and initial guidance was that the opening schedule.

Okay.

Sure.

And then the business.

Sure sure Youre cutting out a little bit on my end, but I think I got the gist of your question. So as Jimmy mentioned earlier, one of the questions that was asked.

Speaker Change: Hey, Sharon, you're cutting out a little bit on my end, but I think I got to just your question. So, as as Jimmy mentioned earlier, I'm 1 of the questions that was asked the, the.

The cadence of the opening is going quicker than we had expected which is why we decided to raise the guidance suite. We feel that we're going to have some more operating weeks and have an additional unit came in at the end of the year, which is why we raised it a million and not more than that.

Speaker Change: The cadence of the opening is going quicker than we expected, which is why we decided to raise the guidance. We, we feel that we're going to have some more operating weeks and have an additional unit come in at the end of the year, which is why we raised it a 1M and not more than that.

Sure.

Speaker Change: To talk about some of the things that have been happening with the openings in the markets that we're opening in, we have seen some of the permitting problems that we did have last year eased.

To talk about some of the things that's been happening with the openings and the markets that we're opening in we have seen some of the permitting problems that we did have last year eased and some of the site selection has been really good and landlords are excited about getting us yet and I was talking to our Chief Development Officer recently in fact last night and he was telling me that the landlords are getting their work done quicker because they want to get us there.

Speaker Change: And some of the site selection has been really good and landlords are excited about getting us in and I was talking to our chief development officer recently. In fact, last night, and he's telling me that these landlords are getting their work done quicker because they want to get us in.

Speaker Change: and they're excited about having Kura Sushi as part of their portfolio. And the quicker that they can get their work done, the quicker that we can get our work done and we can get open. And we're seeing that happen, which is why we raised the guidance a little bit.

And they are excited about having <unk> as part of their portfolio and the quicker. They can get their work done the quicker that we can get our work done and we can't get open and we're seeing that happen, which is why we raised the guidance a little bit wanted to get through the first quarter and kind of see how that played out we thought that that's how it would be but we wanted to get through the first quarter and kind of watch what happened before we raise the guidance. So that's why we are where.

Speaker Change: We wanted to get through the first quarter and kind of see how that played out. We thought that that's how it would be, but we wanted to get through the first quarter and kind of watch what happened before we raised the guidance. So that's why we are where we are now.

We are now.

Very helpful and then on the traffic improvement you saw in November.

Speaker Change: Very helpful. And then on the traffic improvement you saw in November .

So a pretty meaningful we can all kind of do the math I mean is there anything in particular you in November.

Speaker Change: pretty meaningful. We can all kind of do the math. I mean is there anything in particular you attribute November to or in hindsight that you attribute prior two months to being a little bit

November two or <unk>.

In hindsight that UN trivial.

Two months.

To be in a little bit.

November.

Speaker Change: In terms of November , we are doing something special in terms of marketing. There was a switch to Panty this time, so we did a few things like a last push for this migration, which contributed to the increase in traffic.

No everybody content marketing video successful loosen up a little under a contract punting on it.

So you guys got my goodness on the desktop we see so I don't know if it's got conduct and I'll turn it off.

An update on our holdings at the latest does it mean ethanol on a pump.

Speaker Change: In December , if you come twice, you'll get 20% off in January . The new trial with the new campaign will be active from November , so I'm very happy that this is contributing to the acquisition of traffic.

Thank you Dan went up that I don't think that's an easy button, both U E compounding all tuck in nicely to what.

Hi, good morning, Geordie, that's equally significant.

On a property.

<unk> Bancorp incident in a month or so.

Speaker Change: We would attribute the, uh, the, the, the acceleration traffic in November , uh, largely, uh. For our new rewards program, we're very pleased with.

We would attribute the.

The acceleration in traffic in November largely.

For our new rewards program over we're very pleased with.

Speaker Change: Uh, it's it's capabilities. Uh, part of it was, you know, in November , we were just making a push to migrate. More of our existing users, sort of a final push and so we had.

Its capabilities are part of it was you know in November we were just making a push to migrate more of our existing users sort of a final question. So we had.

Speaker Change: Uh, you know, a promotion around that in December , we, we started a promotion where this is the 1st time we've ever done this and something that we can only do because we have a rewards program that can track this kind of thing where, uh, but we, we made an offer where if you come twice in December , you get a 20% off a 20% off coupon for January . And so that was very good for drawing, uh, driving traffic in December and obviously, you know, it's going to be a traffic driver in January as well. When people come to redeem that.

A promotion around that in December we started a promotion where this is the first time, we've ever done this and something that we could only do because we have a rewards program that can track. This kind of thing where we made an offer where if you come to light in December you got a 20%.

It's 20% off coupon for January and so that was very good for dry eye tracking traffic in December and obviously.

It's gonna be a traffic driver in January as well when people come to redeem that coupons.

Yeah.

Uh huh.

Speaker Change: That's made the robotic dishwasher, which I know we're all very excited about. I think.

Obama dishwasher, which I know, we're all very excited about I think.

Speaker Change: In the spring, I'm just wondering if that's still on plan and.

In the spring I'm, just wondering if that's still on plan.

Well really well what Ted.

Look at the timeframe look like for our rollout into new units going forward.

Speaker Change: What could the timeframe look like for a rollout into new units going forward?

Yeah. So we are still in a we are still on pace for a testing in spring I'm very much looking forward to it.

Speaker Change: Yeah, so we, we are still in, uh, we are still on pace for a test in in spring. I'm very much looking forward to it. I, I say that the technology is largely ready. It's just a matter of getting a battle tested. There's a, it's a little bit tricky to go from the prototype to the mass market model. Just for the mass produce model, just given that there are some material changes. And so I think it's safe to assume that it's going to be at least 12 months from when the mass produce model is finalized.

I'd say that the technology is largely ready, it's just a matter of getting it battle tested.

It's a little bit tricky to go from the prototypes of the mass market model just the master lease model just given that there are some material changes.

I think it safe to assume that it's going to be at least 12 months from Wendy mass produce model is finalized.

Speaker Change: Uh, you know, at that point, I can get the actual parts list and bring it to the regulatory organizations, but that's a pretty opaque process. And so it would probably be, you know, 12 months.

Got it.

At that point I can get the actual parts list and bring it to the regulatory organizations.

That's a pretty opaque process and so it would probably be at 12 months.

Speaker Change: minimum from from from testing. And and then, you know, it would just be the timing for which stores we can, you know, plan ahead in terms of the way out to accommodate the robot dishwasher. Thank you.

Minimum from from from testing and.

And then you know.

It would just be the timing for which stores we can.

Plan ahead in terms of the way out to accommodate their robot dishwasher.

Thank you and happy new year.

Thank you happy new year.

Sure.

Thank you. Our next question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Speaker Change: Our next question comes from the line of Jeffrey Bernstein with Barclays.

Yeah.

Jeffrey Bernstein: Great. Thank you very much. A couple of questions on the comp trend. The first one, I think for the fiscal quarter, you did a

Great. Thank you very much.

My question is on the comp trend. The first one I think for the fiscal quarter you did.

Jeffrey Bernstein: And I think you said the pricing was nine and the traffic, if I heard right, was a 3.3.

Three eight and I think you said the pricing was nine and the traffic if I heard right was a three three so that would.

Jeffrey Bernstein: So that would imply, I guess, a negative eight or so mix. And I think you said the plates were flat. So I guess it sounds like an ongoing maybe non-sushi check management. I'm just wondering how you think about that negative offset, whether you see that as a concern or whether that concern is abating, kind of that missing component of, you know, presumably the meaningfully negative mix shift, kind of how you think about that.

Would imply I guess, a negative eight or so.

And I think you said the plates were flat so I guess it sounds like an ongoing maybe non sushi.

Check management I'm, just wondering how you think about that negative offset whether you see that as a concern or whether that concern is abating kind of missing component of presumably the meaningfully negative mix shift kind of how you think about that.

Jeffrey Bernstein: First of all, we don't have any concerns about the negative price mix. As we have repeatedly said, we mainly focus on bringing customers to the door of our restaurant. We do all the marketing that I have explained earlier. Also, we don't think negatively about the fact that customers can control the check size. I think this is also a benefit for our customers based on our service model.

Oh no no no.

Okay.

Great. Thanks, you want to add.

Okay.

So on our mind, because I think you took what I'll need to come back and build it back up.

Marketing because that seems like a pretty constant.

Oh I don't know.

On a typical cyclical controller to get it.

Why don't I haven't Nick I think went up a little kind of against putting them all what I was hoping someone will.

If anything kind of knocking off of me, Okay sounds comfortable maybe they're not spending with no similar.

Jeffrey Bernstein: We want to reduce the number of customers coming to Kudazushi by adjusting the level of spending to make it more comfortable. I think this is a benefit. I want to continue to focus on getting traffic without paying attention to it.

Thank you Kevin.

Oh, no I guess any spending because of a contract and keeping the geek I know somebody can come up with.

Okay.

I know, it's you know because it depends on what market.

Hi.

Jeffrey Bernstein: So, in terms of the negative mix, it's certainly there, but we don't really think of it as a concern. Our focus remains traffic. Our marketing is geared around that. Our overall strategy is geared around that.

So in terms of the negative mix. It certainly there, but we don't really think of it as a concern our focus remains traffic.

Our marketing is turnaround that our overall strategy is geared around that we think that the.

Jeffrey Bernstein: That's the hardest part and, you know, really where we shine brightest, especially in comparison to our peers in terms of average check management. We think that actually is a unique.

That's the hardest part and you know really where we shine brightest, especially in comparison to our peers.

In terms of average check management, we think that that actually is a unique feature for our guests.

Jeffrey Bernstein: for guests that comes from our service model. You know, guests can come in no matter what their budget is. And that's one of, you know, we never price people out and that's one of the reasons that our traffic's doing so strongly. But in spite of, you know, that mixed pressure, our restaurant level operating profit margin is 19.5%, a meaningful improvement over the 18.2% last year. And so our thought again is, you know, traffic is our focus. We can leverage our fixed costs against traffic. And that's just the margins that we have.

Comes from our service model.

Guests can come in no matter what their budget is and that's why we never price people out and that's one of the reasons that our traffic is doing so strongly that in spite of that that mixed pressure our restaurant level operating profit margin is 19, 5% a meaningful improvement over the 18, 2% last year and so our thought again is you know traffic is our focus we can lever.

Our fixed cost against traffic at that that gets us to the margins that we liked.

Jeffrey Bernstein: On the other hand, the club fair in December was a bit of a high-priced product, but the sales there were good, so I would like to continue to make efforts to raise it while saying that I am not worried about it. I would like to make sure that customers can use it more comfortably.

As you can tell.

What's it called out everybody not just talking at Thunder.

Yeah.

I know Keith Tonight. So you know that I'm, all I can do and I'm going to go out and until they see that go up okay.

Okay.

And our company, while sticking back I'm looking like.

That being said of course, we love it when our guests do you have greater attachment.

Jeffrey Bernstein: That being said, of course, you know, we love it when our guests do have greater attachment inside menu items, et cetera. And so we do have some promotional campaigns in the pipeline that are geared towards improving guest spend.

Menu items et cetera, and so we do have some promotional campaigns in the pipeline that are geared towards improving guest spend.

Yeah.

Understood.

Speaker Change: And then, as we look forward, I think I pieced together from an Outlook perspective on comps. Based on the September-October, it seems like the November was roughly a 6 percent increase.

And then as we as we look forward I think I've pieced together from an outlook perspective on comps.

Based on the September October it seems like the November was roughly a 6%.

And I guess, if the pricing was similar for sure. That's a nice uptick I'm just wondering why do I want to confirm that was right and then.

Speaker Change: And I guess if the pricing was similar, for sure, that's a nice uptick. So I'm just wondering, one, I wanted to confirm that was right. And then I think on December , I thought you said that you were really pleased. I wasn't sure if that was a reference to the overall comp or how we should just think about the outlook, whether or not it's fair to assume a mid-single-digit type comp sustains with still positive traffic and the pricing in that 3 percent range. Just trying to figure out the outlook first on the December and then kind of what we should be thinking about for the rest of the year based on those components.

I think on December <unk>.

You said that you were really pleased I wasn't sure if that was a reference to the overall comp.

Or how we should just think about the outlook, whether or not it's fair to assume a mid single digit type comp sustains was still positive traffic and the pricing in that 3% range just trying to figure out the outlook first on the December and then kind of what we should be thinking about for the rest of the year based on those components.

Speaker Change: but it's 6% in December , so it's 3.8% in total. After December , the pricing will go up, but we are still at the same level as we are now, and we are confident that we can do positive traffic. For that, we provide all kinds of marketing, various operations, best services, and quality sushi.

I'll give you that if you look at continental.

I'm optimistic.

Dan motto, sometimes behind the Mcdonalds does any of that vehicle on a operating backing it up with some of them get them on why don't you speak to the key on all of them.

You can also.

If you did it at all and that he did it.

Component demand.

I think we're getting a lot more demand.

Our native marketing that you spoke off.

Okay. That's all right that's enough obviously that's number.

Quarter do you know if it's going to take us.

Speaker Change: and menu development. I've done a lot of things and put in a lot of effort. I'm confident that I can maintain the strong sales momentum, comp traffic, and comp sales.

Dominion and kind of make on them on that.

As I stated on our Q3 call more material you say this momentum.

I would say definitely.

Okay, and just a little differently.

Yes.

Speaker Change: Uh, so, yeah, in terms of the November coming in about 6%, your math is right there. Looking at December , we did lap that 7% pricing in the 1st week. But as we said, you know, we were very pleased with our traffic. With our track performance, our overall performance, we're confident that with our ongoing traffic strength, our marketing efforts, the IP pipeline that we have many development that we'll be able to maintain this very strong momentum through the remainder of the fiscal year. We're very happy.

So yeah in terms of the November coming in at about 6%. Your your math is right. There looking at December we did lap at 7% pricing in the first week, but as we said.

We were very pleased with our traffic with our traffic performance. Our overall comp performance, we're confident that with our ongoing traffic strengths our marketing efforts. The pipeline that we have menu development that we'll be able to maintain this very strong momentum through the remainder of the fiscal year, we're very happy.

Uh huh.

Speaker Change: Understood, now that's encouraging despite, I guess, concerns of a slowing consumer, so good to hear. My last question was just on the cost side of things.

Understood no that's.

Encouraging.

I guess concerns of slowing consumer so good to hear.

Question was just on the cost side of things.

Speaker Change: Just a clarification, I think you said the commodities were 4% deflation in the first quarter. I'm just wondering what the labor was for the first quarter and maybe the expectation for each of those for full year fiscal 2014.

Just a clarification I think you said the commodities, where 4% deflation in the first quarter I'm just wondering what the labor was for the first quarter and maybe the expectation for each of those for full year fiscal 'twenty four.

Speaker Change: We didn't do the labor inflation at the quarter level, but as I said earlier, I think there was a labor inflation at the mid-single-digit level. I think that we were able to slow down a little compared to last year because of various operations, such as pricing, and the results of our various strategies.

Current quarter anybody thats, what the what are your thoughts on <unk>.

Let me just put it at all I know.

Well I don't know about it.

Okay got more strictly speaking about D&O on a lot of it I don't know.

You don't know what I don't know.

Thank you Marcos.

Speaker Change: In terms of labor, we've seen about mid-single digit inflation year over year, but we were able to come in 30 basis points below the prior year, 31.6% against last year's 31.9%. And so we're feeling that, you know, the operational efforts that we've made, as well as the pricing that we've taken, all, you know, come into play there. And we're very pleased that we were able to not just stay flat, but actually improve our labor model.

In terms of labor, we've seen about mid single digits.

Inflation year over year, but we were able to come in 30 basis points below the prior year, a 31, 6% against last year's 31, 9% and so we're feeling that.

The operational efforts that we've made the yeah as well as the pricing that we've taken.

You know come into play there. We're very pleased that we were able to not just stay flat, but actually improve our wake promoting.

Speaker Change: And then in terms of food deflation, Jeff, you're right, from quarter one, fiscal 23 to this year, quarter one, it was about a 4% deflation. And then sequentially from Q4 of this past fiscal year to Q1, it was about 2%.

And then in terms of food depot.

You are right.

From quarter, one fiscal 'twenty three to this year quarter. One it was about a 4% deflation and then sequentially from Q4 of this past fiscal year when it was about 2%.

Speaker Change: And just to clarify, Ben, did you say, I mean, I know, depending on how we look at restaurant margins, it varies, but based on your calculation, it was 130 basis points of expansion. But as you said, do you expect the restaurant margins flat in fiscal 24 with the 3% price for the rest of the year? Or were you referring to the labor line? I think that prior question was asking about labor.

Got it and just to clarify did you say I mean, I know depending on how we look at restaurant margins. It varies but based on your calculation. It was 130 basis points of expansion, but.

But as you said you expect the restaurant margins flat in fiscal 'twenty four with the 3% price for the rest of the year or were you referring to the labor line I think that prior question someone was asking about labor.

Speaker Change: But I know I thought you had mentioned that you were comfortable with the restaurant margins flat. So just wanted to clarify if you have any kind of forward looking thoughts on the remaining 3 quarters from an overall margin perspective. Thank you.

But I know you I thought you had mentioned that you were comfortable with the restaurant margins flat. So just wanted to clarify if you have any kind of forward looking.

That's on the remaining three quarters from an overall margin perspective. Thank you.

Yeah. If you if you look at our historical margins they tend to lever pretty pretty meaningfully every quarter or so you can just assume that the.

Speaker Change: Yeah, if you look at our historical margins, they tend to lever pretty, pretty meaningfully every quarter. And so you can just assume that, you know, the same as historically, they're going to continue to improve as we have greater traffic that we can in greater sales that we can leverage against our fixed costs. The comment about, you know, the 3% pricing that we took, we felt was

The statements historically, they're going to continue to improve as we have greater traffic that we can and greater sales that we can leverage against our fixed costs. The comment about you know the 3% pricing that we took we felt was.

Speaker Change: enough to offset, you know, not just our labor costs, but our, you know, well, we've got a cog's tail wind. We do have some other costs, general inflation, but the 3% that we thought was enough to pretty much offset all those.

Enough to offset not just our labor costs are you know well, we've got a cogs tailwind we do have some other costs general inflation, but the 3% that was.

We felt it was enough to.

Pretty much offset all all those inflationary pressures.

Speaker Change: And I'll also add too, Jeff, on the restaurant level operating profit as a percentage of sales, as I mentioned in my preparatory remarks, we had 130 basis points of leverage there from 18.2 to 19.5. So, you know, with a lot of tailwinds, our pricing, the commodity deflation, the easing of labor inflation. So the tailwinds have been great. This is past quarter and we fully expect that to continue for the remainder of the year. Sounds great. Thank you very much.

And I'll also add to Jeff on the restaurant level operating profit as a percentage of sales as I mentioned in my prepared remarks. So we had 130 basis points of leverage there from 18.2 to $19 five so with a lot of tailwind as our pricing the commodity deflation the easing of labor inflation. So a tailwind have been great.

This past quarter, and we fully expect that continue for the remainder of the year.

Sounds great. Thank you very much.

Thank you Jackie.

Thank you. Our next question comes from the line of John Power with Citigroup. Please proceed with your question.

Great. Thanks for taking the questions.

Speaker Change: Right. Thanks for taking the questions. Just a few if I may. And I apologize if you might have hit this earlier. I had a hard time hearing some of the stuff. But on the loyalty program, I'm curious, how have registrations hit versus your own expectations? And, you know, how is it? It seems as if per Ben's comments earlier,

Just a few if I may and I apologize if you might have hit this earlier right.

At our time here into the stuff but.

On the loyalty program.

I'm curious how of registrations hit versus your own expectations and how.

How is it it seems as if per Ben's comments earlier at.

Speaker Change: at least around the promotion in December , where you can come in twice and get 20% off in January . One, I don't know if that was only reserved for loyalty members or not, but how is this working overall, the loyalty program to drive frequency, ticket and or frankly, any sort of customer insights that you might not have had previously?

At least around that.

Promotion of in December where you can come in twice and get 20% off in January.

I don't know if that was only reserved for loyalty members or not but.

How is this working overall the loyalty program to drive frequency ticket and or frankly, any sort of customer insights that you might not have had previously.

Yeah. So generally speaking whenever you're talking about a promotion you can assume that it's limited to our rewards members I don't know if you recall in the last earnings call.

Speaker Change: Yeah, so generally speaking, whenever we talk about a promotion, you can assume that it's limited to our rewards members. I don't know if you recall in the last earnings call.

Speaker Change: November . Our rewards program had just been out for a couple weeks and we mentioned that the registration rate had doubled.

It was November our rewards program, that's been out for a couple of weeks and we mentioned that the registration rate had doubled.

Speaker Change: As compared to the prior program, we sort of assumed that would level off that that was due the initial excitement, but I'm not sure if you heard in today's call, because the audio is a little bit garbled, but the registration is actually triple. In comparison to the last program, so it hasn't leveled off. It's actually accelerated. So I think it's very fair to say that it's it's far exceeded our expectations. We're very pleased with it. I think it's still a little bit premature to be discussing. Guest insights, but.

As compared to the prior program and we sort of assume that would level off but that was due to the initial excitement.

But I am not sure if you heard in today's call because the audio was a little bit garbled, but the registration is actually tripled in comparison to the last program. So it hasnt leveled off it's actually accelerated so I think it's very fair to say that it's it's far exceeded our expectations, we're very pleased with it.

I think it's still a little bit premature to be discussing.

Guest insights but.

Speaker Change: engagement is great. The things that we can do, the kind of campaigns that we can deploy are at a completely different level. Certainly the next earnings call will have a lot of good news that we'll be able to share with

Engagement is great.

Things that we can do the kind of campaigns that we can deploy or.

On a completely different level.

Certainly the next earnings call, we'll have a lot of good news that we'll be able to share with you.

Speaker Change: And this November's campaign is for BBRD members only

Great.

Panama on all development back into this.

Yeah, and that they're getting price in December to get that 20% off in January that slipped omi for rewards members. In fact, he encourage rewards platform is what enabled us to use to actually do that for the first time.

Speaker Change: Yeah, and the visiting twice in December to get that 20% off in January , that's only for rewards members. In fact, the improved rewards platform is what enabled us to use to actually do that for the 1st time.

Got it. Thank you and just I know last quarter, you would also discuss the idea about communicating.

Speaker Change: Got it. Thank you. And just I know last quarter you'd also discussed the idea about communicating kind of some of the upgrades on the waitlist system and or kind of the rolled out cell phone ordering at the table to consumers as a potential lever. Did you guys push that during the quarter at all? And if so, what was the uptake of either? Yeah.

Some of the upgrades on the waitlist system <unk>.

<unk> kind of rolled out cell phone ordering at the table to consumers as a potential lever did you guys pushed that during the quarter at all and if so what was the uptake provider, yes in terms of the waitlist up attrition. So guests nutrition has dropped from 25% to below 20%.

Speaker Change: In terms of the waitlist app, so guest attrition has dropped from 25% to below 20%, a very meaningful improvement. We're very, very happy with it. We think it's one of the reasons that our traffic is continuing to improve. In terms of the mobile phone ordering, that is still limited to two restaurants. We're gonna start testing later this.

A very meaningful improvement.

We're very very happy with it and we think it's one of the reasons that our traffic is continuing to improve.

In terms of the mobile food ordering that is still limited to two restaurants were going to start testing later. This we're gonna. The testing is complete it's feature complete I'm really I think the biggest factors that we've.

Speaker Change: Uh, we're going to the testing is complete. It's it's feature complete. Um, really I think the biggest factors

Speaker Change: We've had some trouble figuring out exactly what to name it when we when we have a button called mobile ordering or I think our guests are assuming it's like a takeout button and so we're changing it to smartphone ordering, which I think is a clear explanation of exactly what it can do and for people that are.

We've had some trouble figuring out exactly what to name it when we when we have a button called mobile ordering our I think our guests. We're assuming it's like a take out button and so we're changing into smartphone ordering which I think is a clear explanation of exactly what it can do for people that are.

Speaker Change: Uh, new to this on the call, it's it allow this program allows you to use your cell phone to place orders as well, which doesn't sound very exciting until you've been at a restaurant with a party of 4 or more and you're sitting on the outside and you can't order from the panel and you're you don't want to reach over people and grab stuff. And so.

New to this on the call. It's it allows this program allows you to use your cell phone to place orders as well, which doesn't sound very exciting until you've been at a restaurant with a party of four or more and you're sitting on the outside and you can't order from the panel and you're you don't want to reach over people and grab stuff and so we're very excited about this especially in terms of.

Speaker Change: We're very excited about this, especially in terms of, you know, mix. We think it's a meaningful opportunity for side menu attachment rates to go up. And so, yeah, that's the rollout is starting in January and it's going to be on a rolling basis should be.

Mix, we think it's a meaningful opportunity for side make no attachment rates to go up.

And so yes, that's the rollout is starting in January and it's going to be on a rolling basis should be my expectation is that it'll be done in the next few quarters hopefully in next quarter.

Speaker Change: My expectation is that it will be done in the next two quarters, hopefully the next quarter. Got it. Thank you.

Got it. Thank you and then just I guess following up.

Speaker Change: on the US TAM. I know you previously talked about the idea of getting to about 300 stores and it seems like new store productivity volumes and certainly traffic all seem to indicate that your brand is resonating particularly well with consumers despite whatever the macro had been doing over the past 24 months and obviously prior to that as well. So I'm curious if and when you guys think about that number, you know.

On the U S Tam.

You previously talked about the idea of getting to about 300 stores and it seems like new store productivity volumes that certainly traffic all seem to indicate that.

Your brand is resonating, particularly well with consumers.

Despite whatever the macro had been doing over the past 24 months and obviously prior to that as well.

So I'm curious.

If and when do you guys think about that number.

Speaker Change: It appears dated at the moment. Do you guys have any more thoughts on where that should go over time?

It appears dated at the moment.

Do you guys have any more thoughts on where that should go over time.

Speaker Change: White space In Japanese In Japanese In Japanese In Japanese In Japanese In Japanese

That's helpful.

Isn't it Ben.

My name is Diana mono.

How do you feel that that gets a little more kind of against us.

So did I think honestly if you got any update at this time, okay, well what else could you guys are good at 90, you might get there.

Oh no.

You've been around long enough for me.

Speaker Change: I'm looking forward to seeing the updated numbers when you post them.

At this time.

So you can know what kind of things.

Yes.

Hi.

Speaker Change: So, it still remains a topic of discussion in terms of when we're going to commission the new white space study. Obviously, we know that people are excited for that. And so we're excited to share that with the street whenever we do decide to commission the white space study.

It still remains a topic of discussion in terms of when we're going to commission the new White space study. Obviously, we know that people are excited for that and so we're excited to share that with the street whenever we do decide to commission the white space study.

We communicated many times in the past it's the 300 units that we initially gave at the time of the IPO. We think is conservative not just because it was a conservative number to begin with but because of the market fragmentation and the sheer number of restaurant closures and the Japanese segment. As a result of Covid do you think that's fundamentally changed our opportunity in the United States, but.

Speaker Change: We communicated many times in the past that the 300 units that we initially gave at the time the IPO we think is conservative, not just because it was a conservative number to begin with, but because of the market fragmentation and the sheer number of restaurant closures in the Japanese segment as a result of COVID. We think that's fundamentally changed our opportunity in the United States, but.

Speaker Change: Um, you know, again, as you mentioned, we're, we're rolling along. We've got 50, 15, it's against that initial 300. and so we're not in a rush necessarily. We don't see a need to see, you know, however, many hundreds of units into the future, but. I don't think anybody, certainly not anyone in this call expects 300 to be our ceiling. Thank you for taking the questions. Of course, thank you.

You know again as you mentioned, we're rolling along we've got 56 units against that initial 300, and so we're not in a rush necessarily we don't see a need to see however, many hundreds of units into the future, but I don't think anybody certainly not anybody on this call expect 300 <unk> ceiling.

Got it thank you for taking the questions.

Of course, thank you Tim.

Yeah.

Thank you.

Next question comes from the line of Todd Brooks with Benchmark Company. Please proceed with your question.

Hey, Thanks for taking my question.

Speaker Change: Okay, thanks for taking the question. Just a couple left here. Jeff, on the other cost line, given the success in accelerating the opening pipeline,

A couple left here.

Jeff on the other cost line given the success in accelerating the opening pipeline.

Speaker Change: Is it safe to take the kind of Q1 level of spend and then obviously apply a little leverage as the volumes increase in the back half, but how should we be thinking about that level of spend as we go forward to the year. That's exactly how

Is it safe to take the kind of Q1 level.

Of spend and then obviously apply a low leverage as the as the volumes increase in the back half but.

How should we be thinking about that level of spend as we go forward through the year.

That's exactly how you should think of it Todd.

We're going to continue our opening pace as you know we raised the guidance to 12 to 14 units. So we're going to continue to open units as quickly as we can so we're going to continue to see those large preopening expenses and that's really what impacted other costs.

Speaker Change: We're going to continue our opening phase. As you know, we raised the guidance to 12 to 14 units. So we're going to continue to open units as quickly as we can. So we're going to continue to see those large free opening expenses. And that's really what impacted other costs.

Speaker Change: most throughout the quarter was the pre-opening expenses associated with opening the restaurants. As you know, a lot of restaurant companies in the past have broken out pre-opening expenses as a separate line item on the financials, which is looked down upon now, so we don't do that. But you can see what our pre-opening expenses were and our adjusted EBITDA reconciliation in the queue.

Throughout the quarter was the Preopening expenses associated with the opening of these restaurants as you know a lot of restaurant companies in the past broken out Preopening expenses as a separate line item on the financials, but just look down upon now so we don't do that but you can see what our preopening expenses work on our adjusted EBITDA reconciliation in the queue.

Speaker Change: So, as we continue to open restaurants and we have more top line revenue to get the leverage, you're thinking about it. Exactly. Right? It's going to leverage a little bit, but they're still going to remain elevated. I wouldn't take. I think about a lot of leverage going forward necessarily this year on the pre opening costs.

As we continue to open restaurants, and we have more topline revenue to get the leverage youre thinking about it exactly right. It's been the leverage a little bit, but they're still going to remain elevated I wouldn't take I think about a lot of leverage going forward necessarily this year on the preopening costs, but as we get through the year you will get some and again next year more next year more.

Speaker Change: But as we get through the year, you will get some and again next year, more next year, more similar to really is how I'm kind of thinking about it because.

Similar to G&A. It really is how I'm kind of thinking about it because unless we start opening 50 stores, sometimes where you were going to continue to have enough stores, where that additional revenue from the stores. We have opened will significantly offset that but right now it is giving us.

Speaker Change: You know, unless we start opening 50 stores sometime, we're going to continue to have enough stores where that additional revenue from the stores we have open will significantly offset that. But right now.

Speaker Change: It is giving us some higher costs in the other cost line and in the labor line as well. Our pre-opening costs are sprinkled throughout our P&L. They're not stuck in just one line.

Some some higher costs and the other cost line and in the labor line as well our preopening costs are sprinkled throughout our P&L, they're not stuck in just one line, they're there and it's in labor and occupancy. That's another reason the occupancy was high tier and nobody asked about occupancy yet, but we have to start booking rent expense on restaurants.

Speaker Change: It's in labor. It's in occupancy. That's another reason the occupancy was high, too. Nobody asked about occupancy yet.

Speaker Change: we have to start booking rent expense on restaurants when we take possession of the building. So when it takes four or five months to build the restaurant we're having non-cash rent expense hit our book.

When we take possession of the building so when it takes four or five months to build the restaurants, we're having noncash rent expense hit our books and because of the accelerated openings Thats why you see our occupancy line a little bit higher than I think some people expected it to be this quarter as well, but it's a good thing for opening restaurants, and they're gonna start pushing through revenue and make profits and.

Speaker Change: And because of the accelerated openings, that's why you see our occupancy line a little bit higher than I think some people expected it to be this quarter as well. But it's a good thing. We're opening restaurants and they're gonna start pushing through revenue and make profits and we're excited to see this happen.

We're excited to see this happening.

Speaker Change: That's very helpful. Thanks, Jeff and agree that if it's tied to accelerate unit openings, it's a great thing. Just 1 follow up there.

That's very helpful. Thanks, Jeff and agree that if it's tied to accelerated unit openings Thats a great thing just one follow up there.

Speaker Change: And I'll hop back in the queue. Within the other expansion, talk about marketing costs being up. Is this just pre-opening marketing for new units, or is there something that you're doing additionally on the marketing side that would bump that cost line up?

And then I'll hop back in the queue within the other expense you talked about marketing costs being up is this just preopening marketing.

For new units or is there something that youre doing Additionally, on the marketing side that would bump that cost lineup.

Speaker Change: Regarding Q1, it's not just a matter of comparison. Actually, we started targeted marketing in December last year, and we have increased our costs incrementally. This has led to a strong competitive advantage, so I think we have succeeded. So, if you enter Q2, there is no marketing effort compared to last year. So, in conclusion, we didn't add anything from this quarter, we just increased our marketing from December last year to Q1.

On a Q on Q and he castellano shukla with that kind of momentum you saw on the front end, but that's kind of on target need the marketing the increment that I just wanted to close on marketing just because I'm not putting a dental company feel good and you have to go get it.

Basketball.

Excuse me hi, good morning.

Going into the shop within our marketing or not.

'cause it all kind of forgetting copano clinical is that kind of let it go. So you guys have kind of an in Virginia.

I don't know I'm, not giving that Q1 for Q1.

Got it.

Okay.

Pat went up.

Quite a demand of missiles.

Speaker Change: So, as some context, last year in December , we started investing in targeted marketing search engine optimization with Google across its channels.

So some context last year in December we started investing in targeted marketing search engine optimization with Google across its channels.

Speaker Change: It's been exceptionally, it's been very cost-effective. We're very happy with it, which is why, you know, we've kept it as part of our marketing suite. But, so this is really just a year-over-year comparison, given that we started in December . This was the first and last Q1 where we didn't have that cost last year. As of, you know, Q2, we're going to be doing an apples-to-apples flat comparison. So, it's not like we started something new in Q1. This is really just the tail of a year-over-year comparison. Perfect.

It's been exceptionally it's been very cost effective it's we're very happy with it which is why we've kept it as part of our marketing suite, but it's so this is really just a year over year comparison, given that we started in.

December this was the first and last Q1, where we didn't have that costs last year as of Q2, we're going to be doing an apples to apples black comparison. So it sounds like we started something new in Q1. This is really just the tail of a year over year comparison.

Perfect. Thank you both.

Thank you thank you Doug.

Hey, Scott.

Thank you. Our next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of George Kelly with Rothkapp.

Hey, everyone. Thanks for taking my question here.

George Kelly: Hey, everyone, thanks for taking my question here. So, most of my stuff's been asked, but just one last one for you related to CAP Act.

Most of my Stuff's been asked but just one last one for you.

Related to Capex and I was curious.

George Kelly: And I was curious, what's a good sort of percent of sales to use just generally for maintenance CapEx? I know it's two and a half per restaurant, but wondering about maintenance CapEx. And if we look back over the last year or two, has there been kind of a post

What's a good sort of percentage of sales to us just generally for maintenance Capex I know, it's two and a half.

Per restaurant, but wondering about maintenance capex and if we look back over the last year or two has there been kind of a post COVID-19.

George Kelly: COVID catch up on some maintenance cutbacks. We're just curious if there's been anything sort of not normal in the more recent periods. So a couple of-

Catch up on maintenance Capex or just curious if there's been anything sort of not normal in the more recent periods.

So couple of things George Hi.

So where maintenance Capex, we've said in the past it runs about $100000 per rep.

George Kelly: maintenance cap tax we've spent in the past, it runs about $100,000 per restaurant.

George Kelly: once a restaurant is open, your ongoing maintenance stuff that we're capitalizing.

Once the restaurant is open your ongoing maintenance stuff that we're capitalizing.

And.

Yeah.

George Kelly: terms of catch-up there's not necessarily so much of a catch-up but when you look at our depreciation line on the P&L

In terms of catch up but not necessarily so much of a catch up but when you look at our depreciation line on the P&L of it.

George Kelly: What you're seeing is a lot of accelerated depreciation in there because we've done several remodels.

What youre seeing is a lot of accelerated depreciation in there because we've done several remodels.

George Kelly: We changed our logo sometime before I joined the company, but we haven't changed the signage yet. So, we're changing a lot of our signage to the new logo, and when we make that decision and we have a date for when that sign's coming down, we have to accelerate the depreciation. We also have a lot of protective equipment that we have in the restaurants for COVID that we kept on the books just so we made sure the COVID emergency was over. And now that we have to write those off as well. So there are some.

We changed our logo sometime before I joined the company, but we haven't changed the signage yet so we're changing a lot of our signage to the new logo and when we make that decision and we have a date for when the time is coming down we have to accelerate depreciation. We also have a lot of protective equipment that we have in the restaurants for Tobey that we kept on the books just so we made sure the company emerged.

She was over an hour.

We have to write those off as well so there are some.

George Kelly: several unusual things hitting our depreciation line, but that's.

Several unusual things hitting our depreciation lines, but that's that's.

George Kelly: That's kind of how I think you should look at it. Like I said, a hundred grand or so per us, for me, that's CapEx. Okay. Sounds good. That's all I had.

That's kind of how I think you should look at it like I said 100 Grand yourself for restaurant for maintenance Capex.

Okay sounds good that's all I had thank you.

Youre welcome.

Thank you. Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Speaker Change: Our next question comes from the line of Mark Smith with Lake Street.

Hi, guys.

Mark Smith: Hi, guys. Similarly, I think most questions have been asked here, but just one for me, as we look at G&A, there's a little bit of litigation accrual. Did that fall in there? And was there anything else that was kind of one-timish? It looks like you're expecting some pretty good leverage there. I just wanted to see if there was anything else that was maybe one-timish in nature.

Emily I think most questions have been asked here, but.

Just one for me as we look at G N a.

A little bit of a litigation accrual did that fall in there and was there anything else. It was kind of one time ish it looks like you're expecting some pretty good leverage there.

Want to see if there was anything else. It was maybe one time ish in nature.

Yes, the litigation accrual of 205000 was the biggest one time fees and was you back that out the number.

Speaker Change: Yeah, the, the, the litigation across 205,000 was the biggest 1 time piece and you back that out the number almost exactly where we expected it to come out for the quarter. The thing that you're going to see going forward for the rest of the year, and we're, if you look at our guidance, we're projecting about 50 basis points of leverage when we had 80 basis points last year. And the reason we're not expecting as much leverage this year is this is our 1st year because this is our 6th year as a public company, which means that we now have to be for a 4B compliant, which has created.

It's exactly where we expected it to come out for the quarter.

Youre going to see going forward for the rest of the year.

If you look at our guidance, we're projecting about 50 basis points of leverage when we had 80 basis points last year and the reason, we're not expecting as much leverage this year as this is our first year.

Because this is our sixth year as a public company, which means that we now have to be for up or being compliant which has created quite a.

Speaker Change: a bit of additional auditor costs and some consulting costs to make sure that we are completely 404B compliant when we need to be. So the additional public company costs create a little bit of a headwind there, but you know what? 80 last year plus 50 this year, 130 BIFs over two years is pretty good.

A bit of additional.

Auditor costs and some consulting costs to make sure that we are completely 404 be compliant when we need to be so the additional public company costs create a little bit of a headwind there, but you know what 80 last year plus 50. This year of 130 bps over two years is pretty good.

Excellent. Thank you.

Thank you thank you Mike.

Thank you.

Thank you.

Speaker Change: We have reached the end of our question and answer session, and with that, this will conclude today's teleconference. You may disconnect your lines at this time.

We have reached the end of our question and answer session and with that this will conclude today's teleconference. You may disconnect. Your lines at this time.

Thank you for your participation.

[music].

Speaker Change: Good.

Speaker Change: in

Hum.

Okay.

Mhm.

[music].

Hum.

Speaker Change: But my father.

Uh huh.

Hum.

[music].

Mhm.

[music].

Speaker Change: No.

Hum.

Oh.

Speaker Change: Thanks for watching!

Mhm.

[music].

Hmm.

[music].

Hum.

Yeah.

Yeah.