Q2 2024 Kura Sushi USA Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA Inc. fiscal second quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation.

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

None: Come to the Kura Sushi USA, Inc. Fiscal second quarter 2024 earnings conference call.

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

Operator: Please note that this call is being recorded. On the call today we have Hajime Jimmy Uba, President and Chief Executive Officer; Jeff Utz, Chief Financial Officer, and Benjamin Porten, SVP, Investor Relations and System Development. Now, I would like to turn the call over to Mr. Porten. Thank you, operator. Good afternoon, everyone. And thank you all for joining us.

None: Please note that this call is being recorded.

None: On the call today, we have how'd, you met Jimmy Lowe, President and Chief Executive Officer.

None: Jeff Foods, Chief Financial Officer.

None: And Benjamin important SVP of Investor Relations and system development.

Benjamin Porten: And now I would like to turn the call over to Mr. Important.

Benjamin Porten: Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal second quarter 2024 earnings release. It can be found at Www Dot group Dot com in the Investor Relations section the copies of the earnings release has also been included in the 8-K E.

Benjamin Porten: By now, everyone should have access to our fiscal second quarter 2024 earnings release. It can be found at www.kurasushi.com in the investor relations section. A copy of the earnings release has also been included in the EAK we submitted to the SEC.

You see.

Benjamin Porten: Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, and therefore, you should not rely on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Also, during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our earnings. With that out of the way, I would like to turn the call over to Jimmy.

Benjamin Porten: Before we need to get our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements as defined under the private Securities Litigation Reform Act of 1995 each.

Benjamin Porten: These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.

Benjamin Porten: These statements are also subject to numerous risks and uncertainties that could cause actual results could differ materially from what we expect.

We refer all of you to where I see cheap islands for a more detailed discussion of the risks that could impact our future operating results and financial condition.

Benjamin Porten: During today's call, we will discuss certain non-GAAP financial measures, which is what we used to use when evaluating our performance.

Benjamin Porten: The presentation of this additional information should not be considered in isolation or substitute for results prepared in accordance with GAAP.

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

Benjamin Porten: With that out of the way I would like to turn the call over to Jimmy.

Jimmy Lowe: Pennsylvania, and thank you to everyone for joining us today.

Hajime Uba: Thanks again and thank you to everyone for joining us today. I'm very pleased to report the ongoing strength of our business as we progress through a record fiscal year. Jeff will go into greater detail later, but for those of you who saw our earnings release, I'm sure you noticed that we have announced further increases in guidance. It was unprecedented for us when we announced our guidance rates so early in the year with our first quarter call. And being able to follow the next quarter with raises for each of our guidance items demonstrates our incredible confidence in AWG. We've opened 10 restaurants to date, putting us well on track for our new unit guidance of 13 to 14 openings this fiscal year.

I'm very pleased to report that ongoing putting some lumpiness as we progress through like a cold if he's got a year.

Jimmy Lowe: Please go into greater detail on retail.

Jimmy Lowe: On top of being thoughtful about any I'm sure you won't get to that you have.

Jimmy Lowe: As far as I gave you some guidance.

Jimmy Lowe: He was unprecedented for US then we announced our guidance at 840 in the year, we fell off faster called they're called.

Jimmy Lowe: Be able to fold over the next call me today, and he's a poll each or guidance I can give them on site.

With a comprehensive.

Jimmy Lowe: We've opened 10 restaurants to date, putting us a little unpredictable when you you need to pay down all the 13 to 14 openings can you just go to you.

Jimmy Lowe: Do you do about it to the D&A yellow about Yale by 190 basis points and the good news I definitely think that the dollar by 23%.

Hajime Uba: We developed G&A year-over-year by 190 basis points and grew adjusted EBITDA dollars by 23%. We've introduced big new projects, and our operations teams have more than risen to the challenge of implementing them. I'm extremely proud of everyone's efforts and wanted to begin the call by acknowledging all of our team members and thanking them for creating so much great news that I get to share today. Total sales for the fiscal second quarter were $57.3 million, representing comparable sales growth of three percent.

Jimmy Lowe: Did you introduced it you collect it.

Jimmy Lowe: Oh, the openness and the teams are more of them get them to the bank of England.

Jimmy Lowe: I'm extremely proud of all anybody wanted to airports and wanting to to begin the call by acknowledging all about watching nimble and thanking them for creating so much good afternoon, so I get to Saturday.

Jimmy Lowe: Total sales for the fiscal second quarter, while fixed he said 1.3 media involved.

Presenting comparable to stay to schools three both of them.

Jimmy Lowe: Oh, Hi, good point, the 9% is a meaningful potential almost at playa cooled off the topic, a little city Ponca City buffet.

Hajime Uba: A traffic growth of 5.9% is a meaningful acceleration over the prior quarter's traffic growth of 3.3%. We are very pleased to have achieved these results in spite of the severe weather that impacted the entire industry. You are in our fiscal second quarter. Black Box's Restaurant Industry Traffic Index was negative 3.5%.

Jimmy Lowe: We are very pleased to see him because he said he thought.

Jimmy Lowe: I'll just leave you with all that impacted the entire industry.

Well, if he's going to kick off the call.

Jimmy Lowe: Without the Bulks he's been for that industry index, what do you need that type of sleep on pipe upfront.

Hajime Uba: a spread of 940 vegetables. Compared to the casual dining industry, our profit out of performance was 1180 basis points. It's clear that our guests love Kura as much as we love them. As a reminder, 7% of the pricing fell off during the first week of December, which we offset with only 1% in January for the current effective pricing of 3%.

Let's forget the one 940 basis points.

Jimmy Lowe: Compare that to the casual dining industry are probably got the pro forma was 280 basis points.

Jimmy Lowe: It's clear that our guest Nam kunal as much else need absolutely.

Jimmy Lowe: Is that do you mind, though some important passing paid all relating to hopefully come to a symbol. We can eat all seem to be the only one button in January for current pricing.

Jimmy Lowe: But I think all the city of Boston.

None: We won't.

Hajime Uba: We mentioned Splycenic's tailwinds in January, and we are very pleased to see that this continues through the quarter. This really has been a special quarter for Kura, and I'm proud that we provide the kind of guest experience that keeps guests coming back to us. During the second quarter, commodity costs continued to be right where we want them at, 29.6% of sales. Labor as a percentage of sales was 32.8% as compared to 31.5% in the prior year quarter.

None: Totally in January.

None: We are very pleased to see that continue to go up.

None: It clearly hasn't been decided called Buffalo cooler I'm talking about equal about kind of a guest experience that keeps coming back to us.

None: During the second quarter commodity cost.

None: They needed to be exactly where we want them up 29, six small sample set.

None: Stable, although often did those claims was 32.8 of offense.

None: Compared to two how do you want to hype often.

None: Yeah, Yeah koto.

None: Yeah, I, just don't see a need to pretty high up put Anthony.

Hajime Uba: In addition to meaningfully higher pre-opening labor costs due to the accelerated opening, we experienced the same severe weather that impacted the rest of the restaurant industry. We are confident that this increase in labor costs is not structural in nature and expect the same signal leveraging of labor that we've always seen. As I previously mentioned, we are aggressively executing on one of our key strategic pillars to drive overall corporate profitability. Everything's here at the edge.

None: Q2, I'm, sorry, not pumping.

None: We experienced the same city I'll leave that gets done it before.

None: Yeah.

None: We are called against up Keith.

None: Chris gave on cost is not blocked.

None: Rockstar nature.

None: On the expected cadence seasonally about a jingle naval.

None: Okay.

None: I think previously mentioned, we are aggressively executing on our key strategic Ddos to block all the coal plants.

None: Everybody had seen G&A.

None: We were able to bring their cost down to 14 point the city platform.

Hajime Uba: We were able to bring Q&A costs down to 14.3% as a percentage of sales as compared to last year's 16.2%, and other results. We now expect to achieve even greater G&A leverage for the year, which Jeff will discuss later. Our support center team has done a great job managing incremental headcount, and we expect further tailwinds in future years as we infill markets and benefit from efficiencies in regional restaurant management. In the fiscal second quarter, we opened five new restaurants in Kansas City, Missouri. Skokie, Illinois; Columbus, Ohio; and U.S. and Webster in Texas.

None: I think it's the face of competitive yeah, 16 points cheap offense.

None: At this time.

None: We now expect to achieve even greater G&A for the year.

None: It's definitely possible.

None: Well I suppose that team has done will clean itself money into each element of headphones on do we expect that tailings in future. Yes, that's in the infill markets and the benefit from efficiencies in D C and I guess, what I'm much.

None: In the fiscal second quarter.

Oakland tightening English law, Kansas City, Missouri.

None: Skokie, Illinois.

None: Ohio.

In the U S and we had to start in Texas.

None: I'll slip in between the two O N E.

Hajime Uba: Subsequent to Quarter End, we opened one more restaurant in Orlando, Florida. We also have five units currently under development. In the fiscal year to date alone, we've opened as many restaurants as we did during the first six years of Kura Sushi's operation in the U.S. I'm incredibly proud of what our brand has become and for us to have established our footprint as a truly national brand with restaurants in 17 states today. We are also pleased with the performance of our new rewards program. US members are now responsible for approximately a third of our sales, as compared to less than a quarter with our prior program. Per a recent analysis, on average, US members spend 10% more per ticket, even after factoring in discounts, and visit 1.3 times per month.

None: We opened one more or less from Orlando, Florida.

None: He also how fiber units currently under construction.

None: And does he started yet to date along people Oakland as many restaurants as we did.

None: Yes of course, the sheep opened or something to U S.

None: I mean, Craig that he put out a lot about.

None: Come on.

Off the top of the Starbucks, it's putting I.

None: I'm truly nothing out of the ground.

17 states today.

None: We're also pleased to be a hallmark of our annuity was a problem.

None: You must remember that was responsible for books nobody felt all along.

Oh compared to less than a core part of our plan.

None:

None: How do you kind of analysis on Armitage member spend the 10 Bucks on smallpox ticket, even with a fact that you can get.

Comps on the visit one Ponca city times per month.

None: For the last several calls.

Hajime Uba: For the last several calls, I've hinted at an IP collaboration that I was extremely excited about, and it's my pleasure to finally be able to share that. Our next IP partner is Dragon Ball, and I think this might be our first non-American property that everybody on this call is already familiar with.

None: Hum.

None: So I'm sorry, I was extremely excited about.

None: It's my pleasure to finally be able to share that.

None: Our next I keep talking about each of them Paul.

None: I think this might be a horse.

None: Property got everybody on this call is already funded.

None: We believe Dragon ball, it's most exciting pop and I'll see if our home and.

Hajime Uba: We believe Dragon Ball is the most exciting partnership we've ever had, and I'm truly looking forward to seeing the results. I have a lot of great news to share regarding our tech pipeline as well. We have completed our first in-restaurant test of robotic dishwashers in Japan, and early results have confirmed our expectations of how meaningful they will be for our operation. While we don't have a timeline for a state-of-the-art implementation, I'm very pleased with our forward momentum. The table-side mobile ordering function implementation is going smoothly as well, and I'm happy to be able to announce a new feature for table-side mobile ordering that we are developing in parallel, the ability for guests to earn Biklapong prizes through side menu purchases rather than just through sushi plates.

None: I'm truly competing.

None: Things like that.

None: I don't have a lot of great news to share.

None: Well I'll take the pipeline.

None: We have completed our Huston indifferent.

None: The bulk of traditional shopping with your phone.

None: How do you do that.

None: Confirmed our expectations on how meaningful it would be for all of us.

None: Yeah.

None: Well, we don't have hung around in four states hadn't been in touch them.

None: I'm very pleased bookings have awful lot of momentum.

None: The paper side of mobile ordering functional implementation is going smoothly as well.

I'm happy to be able to announce a new pizza hauck, Cape Aside and mobile all of that.

None: We are developing a puttable.

None: The opportunity for guests to pick up on places sitting inside them in your pocket.

None: Not that long.

None: As you think.

None: One more thing on that take slump.

Hajime Uba: One more thing about the tech slump. We have a completely new battle-tested technology from Kuro Japan that we are currently getting certified for the U.S. We call it the sushi slide. We put our rice balls directly onto our sushi plates and then take them to each line employee via a conveyor belt. During peak hours, we can have two to three employees working half of their shift. Pressing rice balls onto sushi plates and handing them to the next person on the main line. So the operational upside here is obvious. Our expectation is that we'll be able to bring the sushi slider set aside for testing this summer and that we'll actually be able to retrofit some of our existing restaurants to accommodate it.

None: We have completed a new bottler case gets a technologies put them close upon its got to be a cutting that he's getting 75, plus the U S.

None: He called it because she's right now.

None: It puts our lifeboat directly onto a fresh approach and then it takes time to each.

None: Complete vehicle.

None: Got it.

None: Getting equal all else he can have a chance to see employees spending Hong Kong gas heat tracing back to bolt onto fishing break on the Huntington's and for the next up off on the make wrong.

None: All the operational upside that yeah, it's awful.

Oh about expectations.

None: We'd be able to bring the fishing side I'll set aside for testing this summer.

None: That will upset he'd be able to retrofit some of our existing guests want to accommodate it.

None: Have you can see we've made a lot of progress in just about school.

Hajime Uba: As you can see, we've made a lot of progress in this last quarter. Lastly, I'm pleased to announce that we were able to secure a very favorable deal with DORAS, prompting our exclusive partnership and rapid rollout of the program. With these big terms, we are able to keep our menu prices the same as in-store dining, and we expect the order sales to be beneficial to margins. We are very pleased with our partnership with DWARF so far, and I'm looking forward to providing quantitative color in the future.

None: Lastly, I'm pleased to announce that.

We were able to secure a very favorable deal with Bosch pumping exclusive partnership I'm happy to go to out of the call.

None: I mean do you need a Tom we are able to keep our menu prices.

None: Install a dynamic and we expect to do other things to be pinning first time too much.

None: Yeah, very puzzling to me that one partner she can go up so far.

I'm looking forward to providing quantitative caught in future of course.

None: Yeah.

None: I'll go back to that again.

Jeff Uttz: I would like to again thank all of our team members at our restaurant and our support center. Every department can point to a remarkable achievement this quarter. Whether we are looking at the 10 restaurants that we've already opened, or the incredible traffic out of performance of our restaurants. G&A Leverage over 190 base points. Our IT Collaboration Pipeline and the Success of the New Rewards Program. Progress in Technology, or the Successful and Rapid Rollout of TORASH. It's been an amazing quarter. Thank you, everyone. Yes, now I'll turn it over to you to discuss our financial results and liquidity.

None: All of our team members.

None: I'm off about simple.

None: I believe they bought them and Tom pointed towards him uncle blockchain month of this quarter.

None: It means that we are looking at 10 guests along something we've already opened two.

None: Crazy, but it's topic also for four months.

None: Yeah.

None: Yeah, I'm glad you're all well.

None: 190 basis points.

None: I'd be carbonates on pipeline.

None: Boxes of annuity was a program.

None: So probably the same technology well successful, let me throw out a bosch.

None: Being an amazing quarter. Thank you Andrew Boll.

None: Now turning over to you to discuss our final somebody's out some liquidity.

Andrew Boll: Thanks, Jimmy.

Jeff Uttz: Thanks, Jimmy. For the second quarter, total sales were $57.3 million, as compared to $43.9 million for the prior year period. Comparable restaurant sales performance compared to the prior year period was positive 3%. With regional comps of 8.7% in our West Coast market and flat comparable sales in our Southwest market, Turning now to our costs. Food and beverage costs as a percentage of sales were 29.6% compared to 30.1% in the prior year quarter, largely due to pricing and supply chain initiatives. Labor and related costs as a percentage of sales were 32.8% as compared to 31.5% in the prior year quarter. This increase was largely due to adverse weather conditions.

Andrew Boll: For the second quarter total sales were $57 $3 million as compared to $43 $9 million in the prior year period.

Andrew Boll: Comparable restaurant sales performance compared to the prior year period was positive 3% with regional comps of eight 7% in our west coast market and flat comparable sales in our southwest market.

Andrew Boll: Turning now to our costs food.

Andrew Boll: And beverage costs as a percentage of sales were 29, 6%.

Andrew Boll: The 31% in the prior year quarter, largely due to pricing and supply chain initiatives.

Andrew Boll: Labor and related costs as a percentage of sales were 32, 8% as compared to 31, 5% in the prior year quarter.

This increase was largely due to adverse weather conditions increased training costs associated with new store openings and general wage increases.

Jeff Uttz: Increased training costs associated with new store openings and General Wages. Occupancy and related expenses as a percentage of sales were 6.9% compared to the prior year quarter 7%; depreciation and amortization expenses as a percentage of sales increased to 4.7% compared to the prior year quarters, largely due to additional newly opened units, as well as the accelerated depreciation of assets that were being replaced due to planned remodels. Other costs as a percentage of sales increased to 14.6% compared to 13.3% in the prior year quarter, due mainly to pre-opening costs associated with a greater number of stores as well as an increase in marketing costs, repairs and maintenance, and general cost inflation. General and administrative expenses as a percentage of sales decreased to 14.3% compared to 16.2% in the prior year quarter due to greater sales levels, which was partially offset by incremental public company costs and recruiting and travel costs associated with new unit openings. Operating loss was $1.7 million compared to an operating loss of $1 million in the prior year quarter, largely driven by incremental other costs associated with the greater number of unit openings and units under construction, and depreciation and amortiz Income tax expense was $50,000 compared to $15,000 in the prior year quarter.

Andrew Boll: Occupancy and related expenses.

Andrew Boll: Sales were six 9% compared to the prior year quarter, 7%.

Andrew Boll: Depreciation and amortization expenses as a percentage of sales increased to four 7% compared to the prior year quarters, 4% largely due to additional newly opened units as well as the accelerated depreciation of assets that were being replaced due to planned remodels.

Andrew Boll: Other costs as a percentage of sales increased to 14, 6% compared to 13, 3% in the prior year quarter.

Andrew Boll: Due mainly to preopening costs associated with a greater number of store openings as well as an increase in marketing costs repairs and maintenance.

Andrew Boll: In general cost inflation.

Andrew Boll: General and administrative expenses as a percentage of sales decreased to 14, 3% compared to 16, 2% in the prior year quarter due to greater sales leverage which was partially offset by incremental public company costs and recruiting and travel costs associated with new unit openings.

Andrew Boll: Operating loss was $1 $7 million compared to an operating loss of $1 million in the prior year quarter, largely driven by incremental other costs associated with the greater number of unit openings and units under construction.

Andrew Boll: And depreciation and amortization.

Andrew Boll: Income tax expense was $50000 compared to $15000 in the prior year quarter.

Andrew Boll: Net loss was $1 million or nine cents per diluted share compared to a net loss of $1 million or 10 cents per diluted share in the prior year quarter.

Jeff Uttz: The net loss was $1,000,000 or $0.09 per diluted share compared to a net loss of $1,000,000 or $0.10 per diluted share in the prior year quarter. Restaurant level operating profit as a percentage of sales was 19.6% compared to 20.3% in the prior year quarter. Suggested EBITDA was 2.9 million dollars compared to 2.3 million dollars in the prior year. Now turning to our cash and liquidity. And last, I'd like to update you on the second quarter. We have $56.8 million in cash and cash equivalents and no debt.

Andrew Boll: Restaurant level operating profit as a percentage of sales was 19, 6%.

Andrew Boll: 3rd% to 23% on the prior year quarter.

Andrew Boll: Adjusted EBITDA was $2 $9 million compared to $2 $3 million in the prior year quarter.

Andrew Boll: Yeah.

Andrew Boll: Now turning to our cash and liquidity at the end of the fiscal second quarter, we had $56 $8 million in cash and cash equivalents and no debt.

None: And lastly, I'd like to update the following guidance for fiscal year 'twenty 'twenty four.

Hajime Uba: The following guidance for fiscal year 2024. We now expect our total sales to be between $243 and $246 million. We now expect to open between 13 and 14 new units with average net capital expenditures per unit of approximately $2.5 million. And we now expect G&A expenses as a percentage of sales to be between 14 and 14.5%. And with that, I'd like to turn the call back over to Jimmy.

None: We now expect our total sales to be between 243 and $246 million.

None: We now expect to open between 13 and 14, new units with average net capital expenditures per unit of approximately $2.5 million.

None: And we now expect G&A expenses as a percentage of sales to be between 14 and 14, 5%.

None: And with that I'd like to turn the call back over to Jimmy.

Jimmy Lowe: Thanks Keith.

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

Jimmy Lowe: This concludes our prepared remarks, we are now happy to answer any questions you have.

None: Operator, please open the line for questions I'll. Let reminder, you like that you want the system on some Japanese people might've, he's confident he doesn't get English.

Jimmy Lowe: Thanks, Sean.

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

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone, and you may press star two if you would like to remove your question from the queue. Speakers, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we pull for questions.

None: Confirmation tone will indicate that your lines in the question queue.

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

None: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

None: One moment, please while we poll for questions.

None: Thank you.

None: Our first question will come from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Jeffrey Andrew Bernstein: Great. Thank you very much a couple of questions. The first one just looking at the comp like you said, 3%.

I'm just wondering if you can talk about maybe the trends through the quarter and what you've seen in the month of March It does seem like the industry is perhaps talking about a little bit of a slowdown in march going into April, especially on the lower income consumer. So just trying to get your perspective on the consumer environment and what trends you've seen in recent months.

Jeffrey Andrew Bernstein: Our first question will come from the line of Jeffrey Bernstein with Barclays. Please proceed with your question. Great. Thank you very much.

Hajime Uba: A couple of questions. The first one, just looking at the comp, I think you said three percent. Just wondering if you can talk about maybe the trends through the quarter and what you've seen in the month of March. It does seem like the industry is perhaps talking about a little bit of a slowdown in March going into April, especially for lower income consumers. So just trying to get your perspective on the consumer environment and what trends you've seen in recent months. Yeah, all right. Transcript by Rev.com. Page of

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Jeffrey Andrew Bernstein: Yes.

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Hajime Uba: In terms of the monthly cadence of the comps, obviously, we saw some pressure in January with the inclement weather that everybody else saw, but generally, we're very happy with how the comps performed. We think they were buoyed by the remodels, especially the Promotions that we were hosting as well. One thing that we really feel tremendous pride in the 5.9% traffic that we did, which really, to have a thousand basis points between ourselves and the casual dining industry is tremendous.

None: In terms of the monthly cadence.

None: Obviously, you saw some pressure in January we're getting from everybody I'll stop it early.

None: We're very.

None: Or if we take a report by Remodels, absolutely, yes, yes.

None: Our promotions were hosting as well one thing that would be really.

None: Gil tremendous pride on pipeline every day, which really the habit a thousand basis points, perhaps between ourselves and the casual dining it's kris.

None: Tremendous.

None: Get them all on them, but I think that's what you want.

Hajime Uba: Also, in March, there were no specific numbers, but we were very satisfied. (inaudible)

None: Yeah no.

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Hajime Uba: We're incredibly pleased with how Mark has performed, and we're just in April, but we're very happy, as well. And so it's great to see that we're maintaining a positive outlook as soon as we've exited Q2. It's been really great, and now that it's encouraging. And then just separately on the new market you're going into from a geography standpoint, any surprises in terms of reception from the consumer, whether positive or negative, just curious about your learnings in your newest markets. That's such a big opportunity for you.

None: They can come up with.

None: We're we're incredibly pleased with how much for them and we're just April but we're very happy with peoples as well and so it's great to see that.

None: We're we're maintaining positive momentum that we've seen as we exited Q2, it's it's it's been really great.

None: No that's encouraging.

And then just separately on the <unk>.

None: The new markets, you're going into from a geography standpoint, any surprises in terms of.

None: Reception from the consumer whether positive or negative just curious your learnings in your newest markets since that's such a big opportunity for you.

Unknown Speaker: [inaudible]

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Hajime Uba: Thank you very much.

Hajime Uba: In terms of geographic trends, we've seen the same trends as before in terms of new markets, and every single one of them has been a hit. So in other words, no surprises. We've expected hits, and we've gotten hits, so that's really nice. In terms of differences in geographic performance, that would really just be associated with wherever the weather was. For us, we've got a lot of places in California, and so when it rains in California, that can have an impact on the west coast calm.

None: E Macdonald, let me get into digital and how much if any.

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None: So what kind of stepping on them.

None: You know, Jonathan gamma or put into a lot of open claims.

None: All.

Got it.

None: In terms of geographic trends are we seeing the same trends as before in terms of new markets every single one of them.

None: So in other words no surprises we agree.

None: We would expect it to be gotten hit and so that's really nice in terms of differences in geographic performance that would really just you're associated with wherever the weather was for us you've got a lot of patients in California, and so when it rains in California that that can that can have an impact on the series G.

None: West Coast comps.

Gotcha.

Unknown Speaker: ... was pressured relative to at least street expectations on the labor line and the other line, both being well above expectations, which drove pressure on the margin, but I get the feeling those aren't necessarily structural. Sounds like the labor was because of some accelerated new unit openings on the other costs. That was so unusual. So just wondering, as you think about the restaurant margin for the second half of fiscal 24. What your thoughts are there and maybe what line item you think has the greatest visibility versus the greatest level of uncertainty as we think about the back half of the year restaurant margin. Thank you.

None: Was pressured relative to at least street expectations on the labor line in the other line both.

Both being well above expectation, which drove pressure on the margin, but I get the feeling those aren't necessarily structural sounds like the labor was because of some accelerated new unit openings on the other costs. There were some unusuals. So just wondering as you think about the restaurant margin for the second half of fiscal 'twenty four.

So are there and maybe what line item you think cause the greatest visibility versus the greatest level of uncertainty as we think about the back half of the year restaurant margin.

None:

Unknown Speaker: First of all, pre-opening labor will be relatively less. We have already opened 9 stores in the first half, and there are 4 or 5 stores left, so there will be fewer openings, so the margin pressure will be less. And, of course, seasonality...

Maybe that's what I'm really kind of fill it out.

Exxon liquidity.

None: But there's still stuff to put up.

None: And I'm thinking about that aseptic is put up another I don't know what else most of them are Hustle hospital you can book.

None: Pelican.

None: I hope I'm getting my didn't put yourself in a moment.

None: You know that's why I'm a program she's not keeping your how you think about it.

Unknown Speaker: She's not here.

Unknown Speaker: [inaudible]

None: Okay.

None: Okay.

Unknown Speaker: We're very confident about the restaurant operating profit margins for the second half of the year. As you know, we've already opened the bulk of the units for this fiscal year. And so those pre-opening labor-related headwinds are largely behind us. The other factor

None: Each one of them.

None: Okay.

None: Any of the money.

None: Good question.

None: Right.

We're very confident about the restaurant level operating profit margins for the second half of the year as you know we've already opened the bulk of the units for this fiscal year and so those are.

None: Preopening labor related headwinds are largely behind us the other factors that we're going to see the same seasonality in sales coverage that we've seen you know every year. We also have a number of promotions that are in the pipeline that we could not be more excited about as Jimmy mentioned, we've got Dragon ball, we think that's literally the biggest promotion ever Jimmy and I are Super Super proud.

Unknown Speaker: You've seen it, you know, every year.

Unknown Speaker: We also have a number of promotions that are in the pipeline that we could not be more excited about. As Jimmy mentioned, we've got Dragon Ball. We think that's literally the biggest promotion ever.

Unknown Speaker: Jimmy and I are super, super proud and pleased to have that there. And so we've got a lot of tailwinds. And even besides that, we've got the tech stuff. We've got GORDAS. There are a lot of things to look forward to for restaurant-level operating profit margin.

None: I'm pleased to have that there so we've got a lot of tailwind.

None: And even the fact that we've got the tech stuff. We've got forward as there are a lot of people look for cheaper restaurant level operating profit margin, although on a Q on Q.

Unknown Speaker: Also, Q1, Q2, and Q10 will be held in Fukuoka. We are very excited because there will be a lot of different tailwinds.

None: You can promote.

None: Okay.

None: Well it looks like you don't know what else to go.

Unknown Speaker: And the other would be, you know, the first month that you open a restaurant, it's typically not profitable. And we're over the hump for all those restaurants. They're operating at full capacity. It's going to be tailwinds for the back half of the year.

And the other would be the.

None: First of all could you open a restaurant, it's typically not profitable and we're over the hump for all of those restaurants are operating at full capacity.

None: Aylwin said back after a year. So yeah, we're we're really excited.

Unknown Speaker: So yeah, we're, we're, we're really excited. And Jeff, too, and I'll add, as we talked about the restaurant level margins, which we're really excited about all these new things we have in the pipeline. We also really want to point out the GNA reduction and leverage that we're getting out of the total adjusted EBITs aligned with the GNA. I mean, we went from 15.8 in 2022 to 15 in 2023. And with our new guidance, if we hit the midpoint, that's another 80 bps. This is something we're very proud of and very excited about. Absolutely. Thank you guys very much.

Aylwin: And gesture what I'll add is as we talked about the restaurant level margins, which were really excited about all these new things we have in the pipeline. We also really wanted to point out that G&A reduction and leverage that we're getting out of the total adjusted EBITDA line with the G&A I mean, we have a 15.8 2022 to 15 in 2023 and with our new guidance, if we hit the mid <unk>.

Aylwin: That's another 80 bps.

Aylwin: Basis points.

Very proud and very excited about.

None: Absolutely. Thank you guys very much.

Unknown Speaker: [inaudible]

None: Thanks, Joe.

Jon Michael Tower: Our next question comes from the line of Jon Tower with Citigroup. Please proceed with your question. Great, thanks for taking the questions. Maybe starting off with The Comps, and specifically during the period, you know, it's great to see the traffic growth. That's awesome. But the price mix implications behind that, you guys moved into negative territory. And I know there's not a ton of history here, but I'm curious, you know, that would seem to indicate that consumers are perhaps managing their check a little bit differently than in years past. So how is that manifesting? Are people just getting fewer plates? Are they pulling less off of the, you know, or ordering less off of the tablets and pulling more off of the belts? Just curious to see how it's showing up in your business.

None: Our next question comes from the line of Jon Tower with Citigroup. Please proceed with your question.

Jon Michael Tower: Great. Thanks for taking the questions maybe starting off with the.

Jon Michael Tower: The comps and specifically during the period, but it's great to see the traffic growth that's awesome, but the price mix implications behind that you guys moved into negative territory and I know, there's not a ton of history here, but I'm curious because that would seem to indicate that consumers are perhaps managing their check a little bit differently than in years past so how.

Jon Michael Tower: How is that manifesting or are people just getting fewer plates are they pulling less off of the you know our ordering less off of the tablets and pulling more off of the belts just curious to see how it's showing up in your business.

Unknown Speaker: First of all, the number of plates, the number of plates that the customers eat, has not changed in the last 6.3 years, so basically, as a trend, the customers are managing the last menu, the soda, etc. However, as a result, we have a plus of 6% in traffic, so overall, it is a big plus. I'm not going to worry too much about that. However, there is one thing that can be improved in the future. It's a bit of a long timeline, but as I said earlier,

Jon Michael Tower: Sure.

Jon Michael Tower: Okay.

Jon Michael Tower: Okay.

None: I'll now turn the careful just okay.

Let me again in Philadelphia.

None: I'll take that.

None: My name is because you cannot get off but I'm also looking at it.

None: Okay.

None: I was hoping somebody know.

None: Cool.

None: Sure.

None: Sure.

None: Saturday and all indicators, especially amongst them at that time.

None: Oh I got it.

None: Mobile also did it doesn't become a bump somebody to get it back to Jay.

None: Okay got it.

Hey, Michael.

None: Goodbye.

Unknown Speaker: [inaudible]

Unknown Speaker: In terms of mix, our per person plate consumption has stayed flat at 6.3 plates year over year, so really, there's really no difference there. The delta would be in side menu orders or people trading down from soft drinks to water. In terms of mix, we're actually very pleased.

None: The second one.

None: And in terms of mix earthquake, our per person by consumption has stayed flat at $6 three place year over year, and so really no difference there the delta would be in any orders or people trading down from soft drink the water.

None: In terms of mix, we're actually we're very pleased I don't know if you.

Unknown Speaker: Scott, we mentioned ICR in January, but as of December, mix had gone from negative high single digits to negative mid single digits. And as you can see from our comp breakdown, the back end traffic, that strength is held. And so the consumer is showing greater strength, you know, in the most recent quarter relative to the last couple of quarters where we mentioned mixing negative high single digits. We're exceptionally proud again of the 6% traffic. Uh, if there is mixed pressure, we're very proud to have been able to offset that with, you know, incremental traffic growth. We do have a number of things that we expect in terms of opportunities for side menu ordering, namely the biggest one being guests being able to order from their phones instead of having to reach over their. The bigger thing is that now, as a stage 2 for that, our guests will be able to earn prizes by And so we've got a lot of things to look forward to. In addition to the fact that mixes are already getting approved. Got it. Thank you. I appreciate that color.

Caught what we mentioned at ICR in January but I think December mix has gone from negative heightened negative mid single digits and as you can see from our comp breakdown the backend graphic that that strength is health and so the consumer is showing greater strength.

None: Recent quarter relative to the last couple of quarters, where it makes next thing like the high single digits.

None: Absolutely proud again, 6% traffic.

None: If there is a mix factor, we're very proud to have been able to offset that incremental traffic right.

None: We do have a number of things that we expect in terms of.

None: Opportunities curbside, when you're ordering namely the biggest one being.

None: Guests being able to order from their phones.

None: Instead of having to reach over there.

None: Everybody sitting closer to closer.

None: Question of a conveyor belt, they've got the tablet people can just use their smartphones or their menu, but the bigger thing is that now.

None: H Super that our guests.

None: Prices by ordering side menu items, which have never been a consideration before and so we've got a lot of things to look forward to in addition to the fact that makes it has already been accrued.

None: Got it. Thank you I appreciate that color.

Unknown Speaker: Maybe jumping around a little bit on the DoorDash partnership that you've got. And I think, Jimmy, you had mentioned the idea that this is going to be margin-neutral relative to in-store transactions while keeping the prices the same, if I understood that correctly. So is effectively this just getting passed along to consumers in the form of higher delivery fees? I'm just curious how you guys manage that. So, our expectation is that it's going to be margin neutral to margin accretive.

None: Maybe jumping around a little bit on the door dash partnership that you've got and I think Jamie you had mentioned the idea that this is going to be margin neutral to the relative to in store.

None: Actions, while keeping the prices the same if I understood that correctly so.

None: Are effectively just getting passed along to consumers and the Hyatt in the form of higher delivery fees.

None: I'm just curious how you guys manage that.

None: So our.

Our expectation is that it's gonna be margin neutral margin accretive we're really excited about the partnership with door dash and in terms of pass along cost to guess where actually what are the reasons that we're partnering with toward ashley's, because we can offer a better guest experience than ever before we're on desktop. So if you have a dashboard membership you can now get delivery for free you were at before.

Unknown Speaker: We're really excited about the partnership with DoorDash. And in terms of passing along cost to guests, we're actually one of the reasons that we're partnering with DoorDash is because we can offer a better guest experience than ever before. We're on DashPass.

Unknown Speaker: So, if you have a DashPass membership, you can now get delivery for free, where before it cost $7 or $8. And so, to be able to offer the same prices as in our restaurants and give guests free delivery and be margin-accretive, it was really a no-brainer for us. But this really came down to the terms of the deal terms we were able to secure with DoorDash. And as Jimmy mentioned in his prepared remarks, if we hadn't been able to arrive at these terms, this wasn't something that we were entertaining.

None: Sure it cost seven or $8 and so to be able to offer the same prices as in our restaurants and give guests free delivery and be margin accretive. It was really a no brainer for us, but that's really came down to like the jokes Hertz, where you're able to secure with door dash and as Jimmy mentioned in the prepared remarks, if we hadn't been able to arrive at these terms.

None: This wasn't something that we were entertaining the fact that we got these terms is really what triggered our decision to move forward with this.

Unknown Speaker: The fact that we got to these terms is really what triggered our decision to move forward with this. In terms of I mean, maybe it's early days for it, but I'm curious, you know, either what you're seeing in stores that have maybe it's deployed already in terms of how it's mixed in or what your internal expectations are. And then separately, but related, you know, how are you managing this within the store? Because obviously, your kitchens are super busy already; you've got a lot of traffic running through. How are you handling these delivery orders? versus, you know, the in-store transactions that are taking place. Yeah, the operations team has done an amazing job in terms of implementing and integrating it into their operations. We're able to throttle orders. And so if we are busy in our kitchens, at our capacity, we're always going to prioritize the guests that are already in our restaurants. And so we just load them.

None: Got it in terms of I mean, maybe it's early days for it but I'm curious you know either what you're seeing I'm seeing in stores that where maybe it was deployed already in terms of how it's mixed in or what your internal expectations are and then separately, but related how are you managing this within the store because obviously your kitchens are.

None: Super busy already you've got a lot of traffic running through how are you handling these delivery orders.

None: Versus the in store transactions that are taking place.

None: Yeah. The operations team has done an amazing job in terms of implementing and integrating it into their operations.

None: We're able to throttle waters and so if we are busy in our kitchens, alright, I see we're always going to prioritize the guests that are already in our restaurants and so we've just.

None: Slow down or shut down or off premises orders that it really hasn't been an issue.

Unknown Speaker: Got it. Awesome. Yeah, I'll pass it along and maybe hop back in the queue. Thank you.

None: Got it awesome.

None: Yeah, I'll pass it along and maybe hop back in the queue. Thank you.

None: Thanks Charles.

Operator: Thank you.

None: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Mark Eric Smith: Your next question comes from the line of Mark Smith. Hi guys. First off, just wanted to dig into margins a little bit more on the labor expense up here. Can you break down at all how much of that was due to, you know, the higher openings here versus just kind of pure labor inflation? And then I'm also curious about any impact that you guys are seeing in California restaurants on labor with the higher fast food minimum wage there.

Mark Eric Smith: Hi, guys.

Mark Eric Smith: First off just wanted to dig into march into little bit more on <unk>.

On the labor expense.

Mark Eric Smith: Up here you know can you break down at all how much of that was due to the higher openings here versus just kind of pure labor inflation and then I'm also curious any impact that you guys are seeing the California restaurants.

Mark Eric Smith: On labor.

Mark Eric Smith: Your password minimum wage there.

Unknown Speaker: First of all, pre-opening costs, as we announced, are 700K higher than last year. The majority of that land is pre-opening labor, which is higher than last year, so 700K is 1.2%. The majority of that land is pre-opening labor, which is higher than last year, so I think you can understand how much impact it has. Also, what we are repeating is the mid-single daily. I would like you to

Mark Eric Smith: So there are no preopening goes also well well just sort of building on that.

Mark Eric Smith: Combine that cheaper well.

Mark Eric Smith: Michael listen if you could do better than that.

Mark Eric Smith: Yeah.

Mark Eric Smith: Okay.

Mark Eric Smith: Okay.

Yeah.

Mark Eric Smith: Yeah, like making fun.

Mark Eric Smith: Right.

Mark Eric Smith: Turning.

Mark Eric Smith: Turning to look at it.

Mark Eric Smith: So today, what does that mean.

Mark Eric Smith: The nickel market indicators honest I thought it was pretty much it.

Unknown Speaker: One thing I would like to emphasize is that it has had no effect on the profitability of existing restaurants at all. In addition to that, the weather was good, so this result for Q2 is really a combination of various things. We are not very concerned about it. As I said earlier, there are some tailwinds after Q3, so we look forward to showing you good numbers.

Mark Eric Smith: Great.

Bob: Hey, Bob.

Bob: I'll start on them.

Do you think it might take them a system that gives us a lot.

Bob: No that's it on the portal.

Bob: Operator.

None: That's what I'm, saying.

None: Got.

None: It was on the market, it's been a lumpy cookies.

None: They don't know.

None: And what I like stuff.

None: Kidney disconnect because it sometimes you could equal you'd become catering.

None: Yeah.

None: With our country.

Unknown Speaker: So, if you look at our Q, you can see that our pre-opening costs for Q2 are $700,000 higher than the pre-opening costs of the prior year's Q2, and the bulk of that $700,000, which is about 1.2% of sales, is labor, so you can see immediately just how big of an impact that the accelerated pre-opening labor had. In terms of the full year, we expect mid-single-digit labor inflation, which is what we've got. The change in labor is really, again, it's really driven by that pre-opening labor compounded by the labor that we saw, you know, across our market. We're really very pleased with the market that we put up in spite of that. And we have zero concerns in terms of, you know, returning to normalcy as we enter Q3. As we've mentioned, we have a lot of tailwinds. And we think we know that the elevated labor from the last quarter was due to things that were either out of our control, whether or not we're pleased with, which is, you know, that we were able to open our

None: So if you look at our <unk> you can see that our preopening costs for Q2 are $700000 higher than pre opening costs.

None: Prior year's Q2, and the Bulker, that's $700000, which that's about 1.3% itself the bulk of that $100000 waiver. So you can see immediately just how big of an impact that the accelerated pre opening waiver did in terms of the full year. We expect mid single is it labor.

None: Labor inflation.

None: Which is what we've said in past quarters.

None: The change in labor is really again, it's really driven by that Preopening.

None: Preopening labor compounded by the weather that we saw.

None: Across our markets, we really.

None: We're very pleased with the margins that we put up in spite of that and zero concerns in terms of returning to normalcy as we enter Q3 as we've mentioned we have a lot of tailwind.

None: We know that the elevated labor from the last quarters.

None: Due to things that were either out of our control weather or where police week, which as you know that we were able to look at our restaurants here. So yeah, we're pretty happy.

Unknown Speaker: and others. Thank you. Thank you. Thank you.

None: Go ahead Brett.

Unknown Speaker: We're pretty happy with how it turned out.

None: Okay.

None: Okay.

Unknown Speaker: Also, I'd like to add that we are not affected by the COVID-19 pandemic. Of course, we are not affected by it. However, we are not affected by it at all. On the other hand, in the long term, we may be affected by it in a positive way.

None: Hum.

Brett: Okay got it.

Brett: Did you ever get out anyway.

Brett: I can definitely tell them until now.

Brett: These are critical.

Brett: Exactly.

Kilowatt.

None: I think that's a good idea.

None: Okay.

None: Oh, okay.

Unknown Speaker: I won't be long. Bye. In terms of the FAST Act, as I'm sure you're aware, we're not, as the legislation stands, we're not under that umbrella. But a lot of other casual dining restaurants or restaurants generally have been impacted by it, regardless of whether or not they're directly under that umbrella, just because they need to maintain competitive wages. In California, our employees in the back of the house are eligible for tips, and so they're already making very competitive wages. We just don't see a scenario where they're going to leave our heavily automated restaurants to do more work for less pay. And so this really hasn't been a wage pressure on us. We all spend or live in California.

None: Okay.

None: Alright.

None: Hi, Jim.

None: Some of the fast act as I'm sure you're aware we're not.

None: I felt like the places that we're not under that umbrella, but a lot of other casual dining restaurants or restaurants generally have been impacted by it regardless of whether or not to directly under that umbrella, but they need to.

None: Maintaining competitive wages in California, our employees in the back of the house or eligible for tips and so theyre already making very competitive wages, we just don't see it.

None: Area, where they're going to leave our heavily automated restaurants that need more work for less pay and so this really hasn't been a wake sector for us where we are.

None: All right or we didn't spend a lot of time in California or live in California. So.

Unknown Speaker: And so we've seen prices go up, sometimes high single digits, sometimes double digits, as you know, in the restaurants and cafes that we always go to. And so the fact that we're keeping prices where we are, we think is, you know, it's, it's a strategic and meaningful advantage. We think that this is an opportunity to really grow our audience when everything else seems more expensive than ever. And Cura is an affordable luxury, which is really what so many guests love about the brand. We think this is an opportunity to bring the Cura experience to tons of new people, especially when our price point just gets closer and closer and closer to QSR. And Mark, one of the things we've always said is that when the Fast Act or AB 1228 came in, we thought that would increase the value proposition for Kura Sushi.

None: Yeah, we've seen price go up sometimes high single digit sometimes double digits.

None: At restaurants, and cafes, we always go through it. So the fact that we're keeping pricing where we are you think as you know it's.

None: It's a strategic and meaningful advantage, we think that this is an opportunity to really grow our audience when everything else seems more expensive than ever and credit is an affordable luxury which is really what so many guests love about the brand. We think there's an opportunity to bring her experience to Huntington.

None: 100, new people, especially when our price point is getting closer and closer and closer to the west.

They need a greater price to meet the market and Mark one of the things. We've always said is that we felt that with the fast act or maybe 12 28 came in that we thought that would.

None: Increase the value proposition for current sushi and I will tell you that yesterday I ordered a salad for lunch from a change to the unnamed.

Unknown Speaker: And I will tell you that yesterday, I ordered a salad for lunch from a chain to be unnamed, but it had chicken in it. And it was even before delivery fees or anything, it was almost $20. And you can go to Kura Sushi, order a plate of sushi and a soda for about that, maybe just a tiny bit more than that.

None: But it had chicken.

And it was even before delivery fees or anything it was almost $20.

None: And you can go to court.

None: By placing sushi and a soda FERC.

None: Maybe just a tiny bit more than that so our guests on what people were going to do with pricing on April 1st and how that increases our value proposition seems to be proven true at least in the early stages of this new act.

Unknown Speaker: So our guess on what people were going to do with pricing on April 1st and how that increases our value proposition seems to be proven true, at least in the early stages of this new act. Excellent. Another question for me is just looking at the opening cadence here.

None: Excellent.

None: Other question for me is just looking at the opening cadence here you guys did a good job you know getting restaurants open here in the first half with five under construction near the guidance of 13 to 14 or you're just being a little conservative on those openings or do you think you can get these five opened by.

Unknown Speaker: You guys did a good job, you know, getting restaurants open here in the first half. With five under construction, you know, the guidance of 13 to 14, are you just being a little conservative on those openings? Or, you know, do you think, you know, you can get these five open by the end of the year?

None: The end of the year.

Unknown Speaker: First of all, one of them has just started construction, and the other four are expected to be finished in about three days.

None: I don't know what else you guys spoke about putting it in November.

None: But I think my.

None: So you can keep on EBIT.

None: Okay.

None: Hi in terms of the cadence, we just broke down broke ground on one of them. So.

Unknown Speaker: In terms of the cadence, we just broke ground on one of them, so it's very early on in terms of the construction lifecycle. The remaining units, we expect about an even split between Q3 and Q4. We think, you know, 13 to 14 units is a reasonable expectation, which is why we gave that as guidance. That's fair. Thank you, guys.

None: So it is very early on in terms of the construction lifecycle.

None: And in units, we expect about an even split between Q3 and Q4, we think.

None: 13 to 14 units is a reasonable expectation, which is why we gave that guidance.

None: That's fair Thank you guys.

None: Thanks Mark.

Unknown Speaker: Thanks, Mark.

Matt Curtis: Our next question comes from the line of Matt Curtis with William Blair. Please proceed with your question. Hi, good afternoon. You guys ran a promotion for your rewards members. I think with two visits in December, you got a 20% coupon valid in January. I was just wondering if you could tell us about how much the traffic benefit wound up delivering for you, or what the redemption rates were like, and then, relatively, whether you're planning to run anything like this regularly going forward.

None: Our next question comes from the line of Matt Curtis with William Blair. Please proceed with your question.

Hi, good afternoon.

Matt Curtis: You guys ran a promotion tree of rewards members, but I think with two visits in December you got it you hit it on the 20% coupon unveiled in January.

Just wondering if you could tell us about how much of a traffic benefit but.

None: With that.

None: Delivering for you.

None: Redemption rates for like.

And then I guess related to whether you're planning to.

Ron anything like this regularly going forward.

Unknown Speaker: First of all, I'd like to talk about the details of the campaign. I think the overall campaign went very well. However, as you know, the weather was bad in January, so it was hard to get there on time. But with that in mind, the traffic compared to other casual running events was 3%, so overall, it went well.

None: No.

None: All right.

None: And of course, if I can get them on paint the Clinton campaign, although the development.

None: Hello.

None: Okay. That's it for me.

None: And then you can I just get them coming in.

What kind of content.

None: Yeah. Good question.

None: Hi in terms of the it keeps our camping without getting too deep.

Unknown Speaker: In terms of the QTalk campaign, without getting too deep into it, Overall, we were very pleased. Obviously, with January, we had some noise from weather which maybe resulted in less traffic than there would have been otherwise, but we still did 5.9% traffic for the quarter or a constant 3%. We were really really happy.

None: We're overall, we're very pleased obviously with January we get some noise from weather, which maybe resulted in less traffic than there would have been otherwise, but we still the five 9%.

None: Quarter, our comps are 3% we were really pleased.

Unknown Speaker: We were really pleased. So yeah.

Unknown Speaker: So yeah, overall, we do this. Okay, got it.

Overall, we view it.

None: Yeah.

None: Okay got it.

Matt Curtis: Would you mind telling us what the weather penalty was for the quarter? I'm sorry, could you repeat that? Sorry, would you mind telling us what the weather penalty was for the quarter?

None: But you're not telling us oh, what GE, whether penalty was for the quarter.

None: I'm, sorry could you repeat that.

None: Sorry would you mind, telling us what the weather penalty was for the quarter.

Unknown Speaker: Well, I won't go into details, but on January 4th and February 4th, there will be a total of 8 days, especially on January 8th.

None: No no of course, you see it right.

None: I mean, that's in your book and how can each call and also because he got plenty going on.

None: Okay.

None: Okay.

Unknown Speaker: [inaudible]

None: Go get them under Kickboards, you're going to come from Atmel.

Unknown Speaker: For both January and February, we used about four operating days each that were very heavily impacted. January was largely Texas, the Midwest, and some of the East Coast. California was hit during February, but yeah, about eight days.

None: Perfect.

None: For both January and February.

None: We used about four operating days each that we're very heavily impacted January was largely Texas, the Midwest and some of the east coast.

None: California was hit during February, but yes about eight days.

None: Okay got it thank you.

Matt Curtis: Okay, I got it. Thank you.

None: And then you know you talked about Dragon ball being the proportion that's coming out. This spring I guess you have spikes family that's been in place since I think March 1st could you remind us what promotions are laughing over this timeframe and.

Unknown Speaker: And then, you know, you talked about Dragon Ball being the promotion that's coming this spring. I guess, you have Spy Family that's been in place since March 1st. Could you remind us what promotions you're running over this timeframe and how successful they were last year?

None: And how successful they were last year.

Unknown Speaker: [inaudible] As for the Spy Family, as I said, we are very satisfied with the results of March. Of course, the Spy Family is very effective, and I think we are able to collaborate on a very good IP right now. We are looking forward to more than that. We don't know until we do it, but we are excited about the very strong pipeline.

None: It's about how many cars.

None: No.

None: And a bit of a bubble that came out.

None: And it sounds like a quite an exciting one for the ships.

None: So that's $500 or keep it.

None: E P no correlation.

None: It wasn't until I want one of them.

None: So what are you doing.

None: Yeah got it okay.

None: Thank you Tony.

Unknown Speaker: So, as we discussed earlier, we're really pleased with Mark's results. We think, in no small part, thanks to Spy Family, it's been a very successful campaign. In terms of what we've been learning, I believe it was Jujutsu Kaisen last year for April and May. So a pretty strong one, but not the, you know, not the strongest. So we're very pleased to be topping the way that we are. Dragon Ball, again, is really, I mean, it's huge. It's just huge.

None: Okay.

None: So as we discussed earlier, where we're really pleased with March results, we think in no small part, which spiked and it's been a very successful campaign.

None: In terms of what we've been laughing I believe it was just the Cai said last year for April and May So.

None: Pretty strong one but not that.

None: Not the strongest.

So we're very pleased to be topic of where we are.

None: Dragon Ball again, it's really I mean, it's huge it's just huge.

Matt Curtis: It's really hard to predict what the impact is going to be, but we are super, super excited for May 1st. Okay, understood. Thanks very much. Thanks for having me.

None: Really hard to predict what the impact is going to be but we are super Super excited for me first.

None: Okay understood thanks very much.

None: Thanks, Matt Thank you Matt.

None: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone. Our next question comes from the line of C.J. DiPolino with Craig Hallam Capital Group. Please proceed with your question. Hi everyone, it's CJ on for Jeremy Hamblin. I wanted to touch on labor costs one more time and just see if you were able to give a little more color or kind of quantify the penalty from adverse weather.

Speaker Change: Our next question comes from the line of C. J D.

Speaker Change: <unk> with Craig Hallum Capital Group. Please proceed with your question.

Speaker Change: Hi, everyone had C J on for Jeremy Hamblin, <unk> wanted to touch on labor costs, one more time.

Speaker Change: Just see if you were able to give a little more color or kind of quantify.

The penalty from adverse adverse weather.

C.J. Dipolino: First of all, I would like to apologize for the impact of the labor. As I said earlier, we can't force the labor to sell for 8 days and 4 days, so it was quite a big influence. Also, as I said earlier about pre-opening labor, if you need more details, I would like to explain the numbers in more detail one-on-one.

None: I don't know, Dave <unk> seen a lot of that to keep it the more secondary.

Dave: Yeah, I don't see any company.

Dave: One factor.

So I'll kick it off I think you might think.

Dave: Okay.

Dave: Okay.

Dave: If I could get I don't put us all.

Dave: I still don't put opening.

None: So don't think EMA Sunday, what's your question.

None: I don't want to kind of discuss the single expression.

Unknown Speaker: So, as we mentioned earlier, we had about $700,000 in incremental pre-opening costs compared to the prior year. The majority of those costs were in labor. And then we had about eight days of weather impact. You can't just change the schedule in real time to deal with weather.

None: So as we mentioned earlier, we had about $700000 in incremental preopening costs as compared to the prior year the.

None: The majority of those.

None: Costs are labor and then we had about eight days of weather impact.

You can't just you can't change the schedule in real time to deal with weather.

Unknown Speaker: So, yeah, that would be the impact. So eight days impacted with full payroll in there. Okay, thank you.

None: Yes that would be.

None: That would be the impact yes, so eight days impacted was full payroll.

None: Yes.

None: Okay. Thank you and then on the other cost line item on P&L I know you said you negotiate the jordache Dion really favorable terms are you seeing any incremental expense that's being added to that line item.

Unknown Speaker: And then on the other cost line item on P&L, I know you said you negotiated the DoorDash deal on really favorable terms. Are you seeing any incremental expense that's being added to that line item? No, DoorDash launched in February on a rolling basis, and so the impact on Q2 was not as big as expected. Unknown Speaker But in either case, We do expect Gordash to be margin neutral, or, actually, our expectation is margin accretive.

None: No a door dash launched in February on a rolling basis. So the impact to Q2 is not super meaningful.

None: But in either case, we do expect.

None: Gordon has to be margin neutral or actually our expectation is margin accretive a worst case it would be margin neutral.

Unknown Speaker: Worst case, it would be margin, and the other costs, too, are impacted also by the pre-opening costs. The two biggest lines that are impacted on RP&L are labor and the other cost line. So when you look at that other cost line, whenever there's a greater number of store openings, there's travel and other costs associated with moving people around for those openings. So the other cost line is impacted. Okay, right? Thank you. And then one more quick one, if you don't mind, sorry, if you just touched on it. But once you break ground on a new restaurant, how long does it take? Or what's the typical, you know, time to open?

None: And the other costs are impacted also by the Preopening.

None: The two biggest lines that are impacting our P&L, our labor and the other cost line. So when you look at other cost line whenever there is a greater number of store openings, there's travel and other costs associated with moving people around for those openings. So the other cost lines impact as well.

Okay right. Thank you and then one more quick one if you don't mind, sorry, if you just touched on it but once you break ground on a new restaurant how are how long does it take or what's the typical time to open from that point.

None: Pizza company its of course.

None: It's simply about five months now putting out the door if I keep pushing on all six of them are similar.

Unknown Speaker: It's typically about 5 months. So it has been about 5 months historically.

C.J. Dipolino: [inaudible] Okay, I got it. Thank you. Very helpful.

But youll tell me if it's anybody's guess.

None: What I'm Gonna proceed any blocks.

None: So it's been about five months historically.

C.J. Dipolino: Thank you. Thanks, Sheila.

None: The last couple of quarters, we've seen that tightened a little bit with inspections at the end of construction going a little smoother and so it's been closer to four months five months, but our base expectation is five months.

Operator: Our next question comes from the line of George Kelly with Ross. Please proceed with your question. Hey everybody, thanks for taking my questions. Um, so the first one is about Dragon Ball.

None: Okay got it thank you very helpful.

None: Thank you thanks again.

None: Our next question comes from the line of George Kelly with Roth. Please proceed with your question.

George Arthur Kelly: Hey, everybody thanks for taking my questions.

George Arthur Kelly: So first one.

George Arthur Kelly: Is it about Dragon ball.

George Arthur Kelly: Clearly, you guys seem super excited about that partnership, and I understand Big Brand. But I guess the question is... Are you also you've done so many of these now? I'm curious if your strategy around monetizing big partnerships like that has changed at all. And basically, like, are you kind of given the history and what you've seen with these big deals before? Is there a sort of an ability now to be more aggressive in your monetization plan?

George Arthur Kelly: Nearly you guys seem super excited about that partnership.

George Arthur Kelly: And I understand big brand.

George Arthur Kelly: I guess the question is.

George Arthur Kelly: Are you also you've done so many of these now I'm curious if your strategy around monetizing.

George Arthur Kelly: Partnerships like that.

George Arthur Kelly: That's changed at all and basically like are you kind of given the history and what you've seen with these big deals before.

George Arthur Kelly: Is there a.

George Arthur Kelly: Sort of an ability now to be more aggressive in your monetization plan.

Unknown Speaker: Yes.

None: Yes, so our strategy on this is always evolving.

Unknown Speaker: Our strategy on this is always evolving. As we mentioned, one of the reasons that we're so pleased with April so far is that we just did our giveaway campaign with Spy Family, where if you cross a certain spending threshold, you get t-shirts. I was at lunch today at Akura, and I saw lots of people trying to get those t-shirts, and so clearly, it's working.

None: What are the reasons that we're so pleased with April so far is that we just did our giveaway campaign. Despite family work. If you cross a certain spending thresholds you got T shirts, I was actually I was at lunch today at current I saw lots of people trying to get those T shirt and so clearly it's working this is.

Unknown Speaker: We realize just how meaningful an opportunity it is. As you said, this is a very meaningful driver in terms of getting people into the door, and these are brands that people are very passionate about. And so we have a lot of things in the pipeline, but we can't discuss them just yet. Part of them is enabled by the new capabilities of the rewards program, but some of them are new ideas that we have that are completely separate from that. But we're always looking for new ways to engage our guests. I mean, the brands are one of the most fun things about coming into Kura.

None: You know, we we realized just how meaningful that opportunity as you said this is a very meaningful driver in terms of getting people into the door and ease our brand where people are very passionate about and so we have a lot of things in the pipeline can't discuss them just yet part of them are enabled by the new capabilities of the rewards program.

None: Graham some of them are new ideas that we have that are completely separate from that but we're always looking for new ways to engage our guests in new ways.

The Brexit whatever mud pumping hurt coming into correct and so we're always looking at new ways to leverage that.

Unknown Speaker: And so we're always looking for new ways to leverage that. Okay, understood. And then the second question on the unit growth. Taking your guidance up again, I guess at the midpoint for expected openings this year. Is it all about granting, or are there any other factors that explain you raising that a couple times now? And then the second part of that question is, if you look beyond this year, is it fair to assume that the 20 percent growth target that you've put out in the past is still a good number to use? And those are my questions. Thank you.

Graham: Okay understood and then.

Graham: Second question on unit growth.

Graham: Your guidance up again, I guess at the midpoint for expected openings this year.

Is it all about permitting or are there any other factors that explain you raising that a couple of times now.

Graham: And then the second part of that question is if you look out beyond this year is it fair to assume that the 20% growth target that you've put out in the past is that is that still a good number to use.

None: And those are my questions. Thank you.

Unknown Speaker: First of all, about the future, 20% is below, but we have cleared 25% while saying that. Basically, this is what we are aiming for in the future. It is obvious from the point of view of our current organization, so I would like to aim for something like that. But first, let's start with this.

None: Mother.

None: Okay got it.

None: So kudos.

None: Do you want to give them a playbook.

None: I know you can't get Mcdonald.

None: Chemical market they might put a lot.

Another part of it.

Unknown Speaker: In terms of forward growth, what we've said in the past and what we've achieved would be, you know, 20% as a floor, typically coming in closer to 25%. That's what we've been doing. That's what we expect to do. Our organization has demonstrated that it's more than capable of meeting that challenge year after year. We're excited to keep delivering on that.

None: In terms of for growth, what we've said in the past and what we've achieved would be you know 20% is a floor typically coming in closer to 25%.

None: That's what we've been doing that's what we expect to do our organization has demonstrated that its more than capable even got challenged year. After year. We're excited to keep delivering on that now puts us in a class a mall not just simple there.

None: Michael Temple and you can calculate them.

Unknown Speaker: Japanese interpretation Of course, I don't know what's going to happen, so I might go to the top.

None: Okay.

None: Because it doesn't matter what the level.

None: Hello Ivano.

None: I think I'd answer that or you don't even you don't see them, Okay got it.

Unknown Speaker: Given that we've already opened 10 stores and we have 500 in construction, just looking at historical patterns in terms of permitting, and how construction goes, we think that 13 to 14 is a really fair bet. Obviously, there's the potential to go beyond that. But at this point, with, you know, you know, 6 months left in the year, that's And also, to your point, George, about the question about the acceleration this year and really what drove it. Permitting did get a little bit easier this year, obviously, compared to last year and the year before.

None: Any vehicles.

None: Hello.

None: Hmm.

None: Given that we've already opened 10 stores and we have five under construction just looking at historical patterns in terms of permitting how construction goes we think that 13 to 14 is a really fair bet, obviously theres opportunity potential to go beyond that at this point with.

None: Hi, it's.

None: Six months left in the year.

None: Yes.

None: So the 30th important where we felt good about and also to your point George about the question about the acceleration that you hadn't really what drove that Hermione is getting a little bit easier. This year, obviously compared to last year and the year before but I think the other piece that really helped is that while our management pipeline has always been strong one of the things that I can relate to when I came to the company was to reinvest back in the company and.

Unknown Speaker: But I think the other piece that really helped is that while our management pipeline has always been strong, one of the things that I committed to when I came to the company was to reinvest back into the company in areas where we're going to get a very good return, and one of those was recruiting. We've invested heavily in recruiting and making sure that we have internal candidates ready to come in and external candidates out there that we can hire as well. And because of that, our management pipeline couldn't be better. And we are still able to get, like I said, if we hit the midpoint this year, and G&A will still get an 80 basis point leverage, even with that reinvestment back into things like recruiting, construction, and operations. So the formula and the model is working right now in terms of those things helping us get restaurants open even faster than we imagined.

None: Areas, where we're going to get a very good return in one of those with recruiting and.

None: We've invested heavily into recruiting and making sure that we have internal candidates ready to come in and external candidates out there that we can hire as well and because of that our manager pipeline couldn't be better.

None: And we are still able to get like I said, if we hit the mid point. This year in G&A will still get an 80 basis point leverage even with that reinvestment back into things like recruiting and construction and operations. So the formula and the model is working right now in terms of those things, helping us get restaurants opened even faster than we imagined.

Unknown Speaker: Excellent. Thank you.

None: Excellent. Thank you.

George Arthur Kelly: Thanks, George.

Thanks George.

Operator: Thank you, George. Thank you, Josh.

None: Thank you.

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.

Operator: Thank you. 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.

None: Thank you for your participation.

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