Q2 2025 Kura Sushi USA Inc Earnings Call

Speaker Change: [music].

Operator: and Anthony Friedberg.

Operator: Unfortunately, Jeff's wonderful wife Hashima's home for the past two weeks.

Operator: Information and time are super limited in VA, so you do come please contact me or email and uh...

Operator: Go to Beadaholique.com for all of your beading supplies needs! [music] [music] Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi Fiscal Second Quarter 2025 Earnings Conference Call.

Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the career sushi.

Fiscal second quarter 2025 earnings conference call.

Operator: This time all participants have been placed in a listen only mode and lines will be open for your questions following the presentation. Please note that this call is being recorded.

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

Ginnie Cooper: Please note that this call is being recorded on the call. Today. We have had you made Ginnie Cooper, President and Chief Executive Officer, Jeff huge Chief Financial Officer, and Benjamin important senior Vice President of Investor Relations and system development.

Benjamin Porten: On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer, Jeff Uttz, Chief Financial Officer, and Benjamin Porten, Senior Vice President of Investor Relations and System Development.

Benjamin Porten: And now I'd like to turn the call over to Mr. Porten. Thank you, you may begin. Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal second quarter 2025 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 8K resubmitted to the SEC.

Horton: And now I'd like to turn the call over to Mr. Horton. Thank you you may begin.

Horton: Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal second quarter 2025 earnings release. It can be found at www dot for sushi Dot com in the Investor Relations section.

Horton: Copies of the earnings release has also been included in the 8-K, we submitted to the SEC before we used to get our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements as defined.

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 put them under reliance. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we would 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 conditions.

Horton: Under the private Securities Litigation Reform Act.

Horton: These forward looking statements are not guarantees of future performance and therefore, you stop it onto a life.

Horton: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially.

Horton: Yeah.

Horton: 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.

Benjamin Porten: Also, during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor is a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our.

Horton: Also during today's call, we will discuss certain non-GAAP financial measures, which they believe can be used for the performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available earnings release with that out of the way I would like to turn the call over to Jamie.

Hajime Uba: With that out of the way, I would like to turn the call over to Jimmy. Thanks again, and thank you to everyone for joining us today. We had a very productive second quarter, making headway on the new market opportunities represented by our success in the vehicles field, building out our IP pipeline, and beginning testing or rollout of several systems projects that have long been in development.

Jamie: Pennsylvania on a thank you to everyone for joining us today.

Speaker Change: We had a very productive kick on Nicola, making headway on the new market opportunities.

Jamie: But it didn't need to buy all success in Bakersfield.

Speaker Change: It involved all IP pipeline.

Speaker Change: Any testing or no longer send it out of the system.

Speaker Change: It's got to have long been in digital.

Hajime Uba: New restaurant openings are going exceptionally smoothly, with 11 units opened to date and another six under consolidation.

Speaker Change: You just hit on openings are going exceptionally smoothly because you gave them.

Opened to date and six under construction.

Hajime Uba: Why does the increment weather was an unexpected sales pressure? We are pleased overall with the quarter due to the great progress we've made across our initiative. Total sales for the fiscal second quarter was $64.9 million, representing comparable sales growth of negative 5.3%. with price and mix of 3.2%, offset by negative traffic of 8.5%. We knew coming into the quarter that Q2 would be the most difficult comparison of the year due to the wrapping of last year's successful PNAS IP campaign without an IP collaboration during the current Q2, but this was compounded by the unexpected weather impact we experienced in January and February with wildfires, followed by flooding in Southern California, and cold waves across many of our other markets.

Speaker Change: Well I can see you can do it all awesome excellent expected to pay to Vishal.

Speaker Change: We are pretty bullish about all of these quota do does it make the progress being made.

Speaker Change: Got you.

Speaker Change: Okay.

Speaker Change: Total sales for the fiscal year.

In the quarter was $64 9 million balls.

Speaker Change: And I'm comfortable to say that schools.

Speaker Change: That's a point to 30%.

Speaker Change: Taxonomy three points.

Speaker Change: Okay.

Speaker Change: It would have equaled eight points pay buffett.

Speaker Change: The unions coming into the pool does that Q2 will be the most difficult comparison.

Speaker Change: Teachers are not being overwhelmed, yes, except for Peanuts hockey campaign.

Speaker Change: We thought that I'd be called being small because it put into Q2.

Speaker Change: This was compounded by the unexpected event that impact.

Speaker Change: Anthony on the paper that we lacked before yes, followed a lifesaving southern California.

The way this across many of them again.

Hajime Uba: Cumulatively, we estimate that Q2 weather represented a comp headwind of 400 to 500 basis points. Cost of goods sold as a percentage of sales improved by 98 points over the prior year quarter due to pricing and supply chain initiatives. Labor as a percentage of sales increased by 180 basis points due to sales delivery caused by weather and year-over-year labor inflation. Restaurant-level operating profit margin was 17.3%, as compared to 19.6% in the prior year due to the previously mentioned sales delivery.

Speaker Change: Accumulatively, we estimate that Q2 with that if it is indeed, a compelling off 400 attitude type of hundreds of basis points.

Speaker Change: Cobalt gets phone.

Speaker Change: Yes.

Speaker Change: People do by 90 basis points, almost right, yeah, yeah quarter due to pricing.

Speaker Change: He said yes.

Bob: Hey, Bob Patten table tennis.

Speaker Change: So by 180 basis points due to say this right.

Bob: Call somebody that's all.

Speaker Change: Yeah, Yeah labor inflation.

Speaker Change: That's what I'm doing it operating profit margin was 17, 3% compared.

Speaker Change: Compared to 19 point of 6%.

Speaker Change: Yeah Yeah.

Speaker Change: Previously he moves on to stay to stay there for each.

Hajime Uba: Restaurant openings are proceeding smoothly with three new unit openings during the second quarter. Berkeley, California, Fort Worth, Texas, and Palomas, New Jersey. Subsequent to quarter end, we opened the units in Scottsdale, Arizona, and Leewood, Washington.

Speaker Change: Instead, I'm openings repeating simplicity ease of three new unit openings do I used to sit on the quarter.

Speaker Change: How could he Pennsylvania portal off statesville.

Palmer: Palmer from the judge.

Speaker Change: Subsequent to quarter end.

Speaker Change: Welcome to Union in Scottsdale, Arizona.

Speaker Change: Washington State.

Hajime Uba: We are very pleased with the performance of this year's openings and believe Fiscal 25 has the potential to be one of our strongest classes. In our last call, we had mentioned the success we'd seen with our Bakersfield, California restaurant opening, and I'm pleased to report that Bakersfield is performing just as well as when we last spoke.

Speaker Change: We are very pleased with the hallmarks of what did you see us opening on the beach, but he's got a 25.

Speaker Change: T D.

Speaker Change: One of our strongest classes.

Speaker Change: In our last call we had to make some of the success you've seen him he's a bake off the California opening.

Speaker Change: And putting the two lip I'll stop.

Speaker Change: Hey, coffin performing tests, because they didn't need us.

Speaker Change: The smoke.

Hajime Uba: As a reminder, up until beta field. We are the only open restaurant in the top 40 or 50 DMAs. The take-up field is significant for us because it represents the 120th largest DMA in the United States.

Speaker Change: So do you mind oh onto the battlefield.

Speaker Change: Yeah, the only Auckland, Stephane, either 40 or 50 DNS.

Speaker Change: Beg off did you see any from the floor because it depends on the 120 largest DMA instead of United States.

Hajime Uba: causing us to re-evaluate our previous considerations for what we constitute a viable market. Recent visits to markets like Birmingham, Tulsa, Boise, and Oklahoma City have all supported our early enthusiasm. Along with the greater fighter space potential, these markets are especially exciting to us as new markets have no impact on cannibalization, which we estimate to be an approximately 4% compounding for the current and prior fiscal year. with the progress that our development team is making. We believe that we'll be able to return to a 50-50 split of new and existing markets by fiscal 27, which we believe will serve as a comp tailwind.

Speaker Change: Clothing must evacuate all previous completions fall well be constitute the final go to market.

Speaker Change: Yeah.

Speaker Change: Do you think the visit to the market like bombing home telephone Boise and the Oklahoma City.

Speaker Change: Some of them are Audi enthusiasm.

Yeah.

Speaker Change: How long ago means a great deal for the Smith well.

Speaker Change: Well thanks al.

Speaker Change: It gets off especially exciting to all of your market.

Speaker Change: No impact on competition.

Speaker Change: We estimate it to be a smoker, you hope often competing with the current and prior.

Speaker Change: Yes.

Speaker Change: It's a quota.

Speaker Change: They have a pivotal clinical team is making.

Speaker Change: But he does that need to be able to be comfortable 50, 50 split of new and existing markets.

Speaker Change: Pretty stable.

Speaker Change: H E. B D. You just fall off a complicated.

Hajime Uba: While the lack of an IP collaboration in the prior quarter made for what we believe to be the most difficult year-over-year comparison in Fiscal 25, This pause allowed us to focus our efforts on building a great pipeline and I'm extremely pleased to say that in Fiscal 26 We will not have any gaps between IB collaboration campaigns and expect to have seven or eight collaborations, which will be a record for us. We've also been developing our food focused marketing muscles over the course of this fiscal year and we are very much looking forward to seeing the combined impact of these campaigns and IP collaborations beginning in May.

Speaker Change: Once the law I declare nominations plenty of cobalt neither for what we believe to be the most of the difficult year over year.

Speaker Change: He's got a 25.

Speaker Change: Paul I don't know that.

Speaker Change: To focus our efforts on building a great pipeline.

Speaker Change: I'm extremely pleased to say that.

Speaker Change: In fiscal 'twenty six.

Speaker Change: I mean, there's not probably any gaps between IV Columbia at some campaigns and expect to have seven or eight calculation, which can be I think all of us.

We've also been developing our food our focus on marketing muscles.

Speaker Change: So if a call for all but just to be funny yeah.

Speaker Change: We have 30 months ago quality machines combined in top quality campaigns IP co locations beginning with <unk>.

Speaker Change: Yeah.

Hajime Uba: Lastly, I would like to touch on the progress we've made in system development. The rollout of our new order panel software is proceeding smoothly, and we expect full rollout within the fiscal year. This new order panel software is supplemented by a redesigned Push Trigger Mr. Fresh Dome, which is much more intuitive than the current model. This redesign is meaningful, as our servers spent several minutes explaining how the old Mr. Fresh model works when we're seeking first-time guests. The new touch panel software includes an optional introduction video for faster than guess. which, in conjunction with the updated Mr. Fred Stone, eliminates the need for our servers to go through their intro explanation.

Lastly, I would like to touch on the progress, even though that you can fix them.

Speaker Change: Yeah.

Speaker Change: Hello, All football and you all are planning software is proceeding smoothly and we expect you know what you think the fiscal year.

Speaker Change: Tiffany or they're playing soccer ball, if somebody wanted to buy a deep defined pushed till he got himself as storm, which is much more to my team about the kinds of motto.

Speaker Change: This is meaningful as a fall off.

Speaker Change: The minutes, explaining how does he or she suffered a smarter work won't be seeking pastime guest.

Can you touch plenty to talk about it because it's an option that you can do without some video for fossil carbon guests.

Speaker Change: In conjunction with them.

So first off eliminates the need to fall I fell off the call for them to get into it.

Speaker Change: National.

Hajime Uba: which we expect will reduce front-of-house workload.

Speaker Change: <unk> expects the leader it is volatile the house locked off.

Hajime Uba: to coincide with our upcoming IT collaboration. We are rolling out improvements to our pick-up-on-systems. Guests will soon be able to earn their second prize capsule after eating 25 plates instead of the current 30 plates. Comparing our average party sizes and per-person plate average. We believe that 25 plates is a more realistic reach than 30 plates and that this has the potential to drive ticket growth while also improving guest satisfaction, especially families with two children.

Speaker Change: To coincide with awe coming I'd be collaborations.

Speaker Change: We are loading up the improvements to our pickup on Keystone elsewhere.

Speaker Change: Get it soon be able to I guess, he contemplates kept so I'll start eating twenty-five equate instead of cutting society great.

Speaker Change: Cost cutting them off of in each party sizes.

Speaker Change: Awesome great.

Speaker Change: Yes.

Speaker Change: We believe me talk 25 rate is a more realistic reach some Saudi prince and attack it.

Speaker Change: Right, but you get the growth, but also improving guest satisfaction.

Speaker Change: Any families to Chile.

Hajime Uba: Finally, I would like to share our progress on what we are most excited about, the reservations. We began testing in February and have since expanded it to three restaurants, including stress testing at one of our highest volume restaurants. The reservation feature has been very well received by guests, and its system-wide rollout is now one of our top priorities due to its potential as a traffic driver.

Speaker Change: Finally, although that casino a progress on lobbying mostly excited about that.

Speaker Change:

Speaker Change: We began testing everybody and have since expanded to free that farm income.

Including sort of drifting at the bottom of our highest volume of desktop.

Speaker Change: But is that based on Pizza I think then you will get people to buy guest and it system wide rollout is now one more about top priorities due to its potential.

Speaker Change: As a coffee could drive up.

Hajime Uba: With the old waitlist program, if you have fixed plans like going to see a movie, Kura is off the table, because you can't predict how long the line will be or when your actual seating will be. by giving guest control through reservation slot. Our hope is to open up new occasions for guests to visit. Additionally, historical attrition rates for Kura guests in line are between 20% to 25%. And so, the ability to capture these guests represents a meaningful opportunity.

Speaker Change: We did it all the way to just put them in you have to fix the problems like going to see a movie.

Speaker Change: It's off the table because you cant predict how long it'll be a venue Oksana <unk>.

Speaker Change: Yeah.

So by giving gifts consult food is that based on stuff.

Speaker Change: Our hope is to open up new occasions for guests to visit.

Speaker Change: I recently, you've probably got a pretty strong data for crude I pulled out guest in game ops.

Speaker Change: I mean, 20% to 25% and so its ability to kept saying he's gift center.

Speaker Change: Meaning grew comp opportunity.

Hajime Uba: Well, it's too early for us to provide any quantitative commentary. Shoulder period sales did increase with the implementation of the reservation system in Kura Japan's restaurant. Lastly, reservations are accessed through the rewards program, and we are excited to see what the rollout does for membership registration.

Speaker Change: But it's too early for ethical life any quantitative commentary.

Speaker Change: Shows about PD Lone status did increase with implementation all of that is at least one system because that's your problem I guess off.

Speaker Change: That's what he is a very strong accent stuff that you want to call them and we are excited to see what the build out that fault member.

Speaker Change: Sure.

Hajime Uba: As you can see, we've been very hard at work. Many of these efforts have been long in development, and it's been great to see so many projects be approved one after another. I'm deeply grateful for the combined efforts of all of our team members for making this possible.

Speaker Change: As you can see even very hard at work.

Speaker Change: Many of these efforts have been longer in development.

Speaker Change: Great to see so many puts it could be one of them.

Speaker Change: Oh Wow.

Speaker Change: I'm deeply grateful for the combined efforts of all of our team members for making this possible. Thank.

Hajime Uba: Thank you, everyone.

Speaker Change: Thank you everyone.

Jeff Uttz: Next, I'll hand it over to you to discuss our financial results and liquidity. Thank you, Jeremy. For the second quarter, total sales were $64.9 million, as compared to $57.3 million in the prior year. Comparable restaurant sales performance compared to the prior year period was negative 5.3% with regional comps of negative 1.5% in our West Coast market and negative 8% in our Southwest market.

Speaker Change: [laughter] Honeywell about to you to discuss our final 35 degrees.

Speaker Change: Thank you Jimmy.

Speaker Change: For the second quarter total sales were $64 9 million as compared to $57 $3 million in the prior year period.

Speaker Change: Comparable restaurant sales performance compared to the prior year period was negative five 3% with regional comps of negative one, 5% and our west coast market and negative, 8% and our southwest market.

Jeff Uttz: Turning now to KAS. Food and beverage costs as a percentage of sales were 28.7% compared to 29.6% in the prior year quarter, largely due to pricing and supply changes. Labor and related costs as a percentage of sales were 34.8% as compared to 33% in the prior year quarter. This increase was largely due to wage increases and sales delivery. Occupancy and related expenses as a percentage of sales were 7.9% compared to the prior year quarter 6.9% due to sales you leveraged. Depreciation and amortization expenses as a percentage of sales were 5.1% as compared to the prior year quarters 4.7%.

Speaker Change: Turning now to costs.

Speaker Change: Food and beverage costs as a percentage of sales were 28, 7% compared to 29, 6% in the prior year quarter, largely due to pricing and supply chain initiatives.

Speaker Change: Labor and related costs as a percentage of sales were 34, 8% as compared to 33% in the prior year quarter.

Speaker Change: This increase was largely due to wage increases and sales deleverage.

Speaker Change: Occupancy and related expenses as a percentage of sales or seven 9% compared to the prior year quarter, 6.9% due to sales deleverage.

Speaker Change: Depreciation and amortization expenses as a percentage of sales were five 1% as compared to the prior year quarter four 7%.

Jeff Uttz: Other costs as a percentage of sales were 13.5 percent as compared to the prior year quarters 14.3 largely due to lower marketing, travel, and recruiting costs.

Speaker Change: Other costs as a percentage of sales were 13, 5% as compared to the prior year quarters, 14, 3% largely due to lower marketing travel and recruiting costs.

Jeff Uttz: General and administrative expenses as a percentage of sales were 16.9% as compared to 14.3% on the prior year quarter due to a $2.1 million litigation settlement expense. Operating loss was $4.6 million compared to an operating loss of $1.7 million in the prior year quarter due to sales de-leverage and litigation costs. Income tax expense was $38,000 compared to $50,000 in the prior year quarter. Net loss was $3.8 million or a negative $0.31 per share compared to a net loss of $1 million or a negative $0.09 per share in the prior year quarter. Adjusted net loss was $1.7 million, or negative 14 cents per share, compared to adjusted net loss of $1 million, or negative 9 cents per share in the prior year quarter.

Speaker Change: General and administrative expenses as a percentage of sales were 16, 9% as compared to 14, 3% from the prior year quarter due to a $2 1 million litigation settlement expense.

Speaker Change: Operating loss was $4 $6 million compared to an operating loss of $1 $7 million on the prior year quarter.

Speaker Change: Sales deleverage and litigation costs.

Speaker Change: Income tax expense was $38000 compared to $50000 in the prior year quarter.

Speaker Change: Net loss was $3 8 million.

Speaker Change: Or a negative <unk> 31 per share compared to a net loss of $1 million or a negative nine cents per share in the prior year quarter.

Speaker Change: Adjusted net loss was $1 7 million or negative <unk> 14 per share.

<unk> adjusted net loss of $1 million.

Speaker Change: Or negative nine cents per share in the prior year quarter.

Jeff Uttz: Restaurant-level operating profit has a percentage of sales of 17.3% compared to 19.6% in the prior quarter, largely due to sales delivery. Suggested EBITDA was $2.7 million as compared to $2.9 million on the prior year quarter.

Speaker Change: Restaurant level operating profit as a percentage of sales was 17, 3% compared to 19, 6% in the prior year quarter, largely due to sales deleverage.

Speaker Change: Adjusted EBITA was $2 $7 million as compared to $2 $9 million in the prior year quarter.

Jeff Uttz: turning me on to our cast, and I would. At the end of the fiscal second quarter, we had $85.2 million in cash and cash equivalents and no debt.

Speaker Change: Turning now to our cash and our liquidity.

Speaker Change: At the end of the fiscal second quarter, we had $85 $2 million in cash and cash equivalents and no debt.

Jeff Uttz: And then lastly, I'd like to reiterate our guidance for fiscal year 2025. We expect total sales to be between $275 and $279 million. We expect to open 14 units, maintaining an annual unit growth rate of about 20%, with average net capital expenditures per unit of approximately $2.5 million. And we expect general and administrative expenses as a percentage of sales to be approximately 13.5%.

Speaker Change: And then lastly, I would like to reiterate our guidance for fiscal year 2025.

Speaker Change: We expect total sales to be between 275 $279 million.

Speaker Change: We expect to open 14 units, maintaining an annual unit growth rate of about 20% with average net capital expenditures per unit of approximately $2 $5 million.

And we expect general and administrative expenses as a percentage of sales to be approximately 13, 5%.

Operator: And with all that, I'll now turn it back over to Thanks, Jeff.

Jimmy: With all that I'll now turn it back over to Jimmy.

Speaker Change: Yes.

Operator: This concludes our prepared remarks.

Speaker Change: This concludes our prepared remarks, we are now happy to answer any questions.

Operator: We are now happy to answer any questions you have.

Operator: 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.

Speaker Change: Operator, please open the line for questions.

Speaker Change: As a reminder, during the Q&A session.

Speaker Change: In fact in Japanese before my response is translated into English.

Speaker Change: 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, a confirmation tone will indicate your line is in the question queue.

Operator: 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. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. When we're pleased, we'll pull for questions.

Speaker Change: You May press star two to remove yourself from the queue.

Speaker Change: All participants using speaker equipment, it may be necessary to pick up your handset before pressing as quick start keys.

One moment, please while we poll for questions.

Andrew Charles: First question is from Andrew Charles from TD Cowen, please go ahead. Great, thank you. Wanted to ask just about the performance through the quarter. I think you talked about four to five hundred base points of inclement weather and the LA wildfire impact. I mean, did you see that improve from the trend improve from January through February? And if you're able to, you know, speak about kind of if that trend is further improved, kind of the March and quarter to day time frame as well. Thanks.

Speaker Change: First question is from Andrew Charles from TD Cowen. Please go ahead.

Andrew Charles: Great. Thank you wanted to ask just about the performance through the quarter. I think you talked about four to 500 basis points of inclement weather and what L. A wildfire impact I mean did you see that improved from the trend improved from January through February and if you're able to you know to speak about kind of if that trend is further improve kind of the march quarter to date Prime.

Speaker Change: Timeframe as well thanks.

Hajime Uba: Thank you, Andrew, for your first question.

Speaker Change: Thank you Andy for you.

Hajime Uba: Please allow me to answer in Japanese, then if I translate. First of all, regarding the performance after the weather cleared up, it was very smooth until we had this type of news, and we were very pleased with the performance.

Speaker Change: Let me jump right in Japanese bank.

Speaker Change: Most of them are thinking about it.

Speaker Change: Hum.

Speaker Change: All elements of the cost of oil.

I don't know if you don't.

Speaker Change: Okay.

Speaker Change: Great.

Speaker Change: Amongst them.

Hajime Uba: Hi. Speaking to post-weather, so starting in March, performance has been very smooth. We were very pleased with it. Things are a little uncertain now with the tariff announcements, but up until then, we had remarkably... performance.

Speaker Change: Right.

Speaker Change: Sticking to post weather so starting in March performance, it's been very smooth and we were very pleased with it.

Speaker Change: Things are a little uncertain now with the tariff announcements, but up until then we had remarkably.

Hajime Uba: In terms of the monthly cadence, January we had the wildfires, but February we had flooding, and so we didn't see any easing from January to February, and then beyond California, both in January and February, there were a lot of cold waves that impacted Texas and our northeast restaurants, and so there was pretty meaningful weather pressure across both January and February. Okay, that's helpful.

Speaker Change: Sneak performance in terms of the monthly cadence January we had the bulk buyers by February we had flooding and so we didn't see any easing from January to February.

Speaker Change: It just doesn't seem to be almost on a quarterly basis.

Speaker Change: Okay.

Speaker Change: Consistent with my comments.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And then John California, both in January and February guidance.

Speaker Change: Where a lot of cold waves that impacted taxes that are north east restaurants, and so there were there was pretty meaningful water pressure across both January and February.

Speaker Change: Okay. That's helpful and then Jeff wanted to ask what the margins you know in the last call you talked about 20% restaurant level operating profit margin could be achievable and twenty-five as well as labor leverage is that still on the table.

Jeff Uttz: And then, Jeff, I wanted to ask about the margins, you know, in the last call you talked about 20% restaurant level operating profit margin could be achievable in 25, as well as labor leverage, you know, is that still on the table? First of all, I would like to talk about labor. As far as labor is concerned, we are currently in a very unstable situation. If there is no increase in labor this time, I think we will be able to achieve 20% even if we are hit by the current situation. So far, we have been in a very unstable situation.

Speaker Change: Okay.

Speaker Change: Dave on the cockpit there wasn't a whole lot that's just a moment.

Speaker Change: So what do I use my personal on each partnership I can't remember a little concerned about that.

He didn't want model into chips.

Speaker Change: Okay.

Speaker Change: Understood.

Speaker Change: If you go into Colombia.

Jeff Uttz: We will continue to aim for 20%, but we would like to emphasize that there is an increase in transparency.

Speaker Change: Excuse me each bucket, how do you think it still don't Miss that much.

Speaker Change: Some people thought they were supposed to take away from that.

Jeff Uttz: First of all, let me talk about labor. In terms of the 20% margins, through March we were very, very confident that we'd be able to maintain that 20% margin for the full year. That being said, we're seeing a lot more uncertainty with the tariffs, and so we have less visibility under that 20%, but that absolutely ruins our goal. We're now at a single-digit margin, so I think we'll be able to recover to the same level as last year if we don't suffer any damage after Q3, but I think it's a little difficult to say that we're better than last year.

Speaker Change: In terms of the 20% margins.

Speaker Change: For remarks, we were very very confident we'd be able to maintain that 20% margin for the full year.

Speaker Change: Said, we are we're seeing a lot more uncertainty with the tariffs and so we have less visibility to that 20%, but that absolutely remains our goal.

Speaker Change: Hi, everybody I believe in the ocular jumping anymore.

Speaker Change: And I'll close on our honeymoon.

Speaker Change: Got it.

Speaker Change: Well, we won't be talking to the eternal.

Speaker Change: Based on comments that you might think.

Speaker Change: Heightening the deep enough.

Speaker Change: And all that sort of skews that equal citizen.

Speaker Change: I mean, you cannot get about a nickel negative.

Speaker Change: I know they put out.

Speaker Change: People put them back to him because he got the building before.

Jeff Uttz: On the other hand, there are various improvements to touch panels and Mr. Fresh, so we'd like to make as many improvements as possible. We came into the year expecting lower labor inflation than what we've actually seen. Our expectation was low to mid single digits. What we've seen to date is high single digits. If we see no impact, if the tariffs have no impact on consumer confidence and there's no change in behavior, then we remain confident that labor will largely be in line year over year. Now with the uncertainty levering year over year, it's a bigger hurdle.

Speaker Change: He put them out you would oh, that's funny little coffee question I get a lot.

Speaker Change: I think it was like I used to get out.

Speaker Change: We came into the year expecting a lower labor inflation that Brexit and what we've actually seen our expectation with low to mid single digits. What we've seen to date is high single digits.

Speaker Change: If we see no impact from tariffs.

Speaker Change: Your confidence and there's no change in behavior than we remain confident that.

<unk> labor.

Speaker Change: Largely in line year over year now.

Speaker Change: The uncertainty.

Speaker Change: Elaborating year over years, it's a bigger hurdle.

Speaker Change: I'm not thinking about it.

Speaker Change: And I'll explain in a bit.

Speaker Change: Got it thank you.

Jeff Uttz: That being said, we do have a lot of levers that are unique to ourselves, mainly through our tech initiatives, whether it would be our new Mr. Fresh, or touch paddles, or greater sales leverage to increase traffic from the reservation.

Speaker Change: That being said, we do have a lot of levers that are eagle for ourselves mainly through our technician gets better with your R&D, Mr. Fresh our touch panels or grade yourself on extra increased traffic from our reservation system.

Speaker Change: Yeah.

Andrew Charles: Great, thank you. I'll pass it off.

Speaker Change: Great. Thank you I'll pass it all.

Speaker Change: Thank you Ed.

Speaker Change: Yeah.

Jeffrey Bernstein: Our next question is from Jeffrey Bernstein from Barclays, please go ahead. Great. Thank you very much.

Speaker Change: Our next question is from Jeffrey Bernstein from Barclays. Please go ahead.

Speaker Change: Yeah.

Great. Thank you very much. Our first question is just on the broader consumer I know that I see are in mid January you talked about the consumer being in a much better place.

Jeffrey Bernstein: First question is just on the broader consumer. I know at ICR in mid-January, you talked about https://youtu.be-a-l-m-t-r-y-s-s-j-s-k-y-t-b-d-y-s-c-o-m-p-e-y-t-r-o-s-c-h-a-n-g-d-o-m-e-t-o-m-e-t-o-t-p-o-p-y-t-a-s-s-s-m-o-r-s-p-b-e-c-e-n-t-o-m-e-t-d-a-s-s-s-h-o-n-e-t-o-m-e-t-o-m-e-t-o-m-e-t-o-m-e-t-o-m-e-t-o-m-e-t-o-m-e-t-o- seem to be talking about perhaps a flowing consumer spending environment, Just wondering what metrics you look at to give that level of confidence.

Speaker Change: And I know you mentioned just now that the weather was a 400 to 500 basis point headwind I'm, just wondering whether there's any concern that maybe.

Speaker Change: It appears to be in part whether it's actually the masking of maybe an underlying slowdown in consumer spending.

Speaker Change: It sounds like you don't believe that was the case through March, but maybe something's changed in April so just trying to.

Speaker Change: Get a sense of how to gauge your confidence that you really up until most recently I haven't seen any change in consumer behavior, when others seem to be talking about perhaps a slowing consumer spending environment. Just wondering what metrics you look at just to give you that level of confidence and then I had one follow up.

Hajime Uba: And then I have one followup. We were very satisfied with the weather in March. But this past week, with the negative news and the impact of the stock market, I think we are going to be affected by consumer sentiment. That's why we didn't upgrade our guidance this time. But we knew it would affect us, so we upgraded our guidance.

Speaker Change: Hello.

Speaker Change: I thought you know what I just spoke.

Speaker Change: So I'm going to take them.

Speaker Change: Or do you just don't know.

You've got the one you shipped a lot in a market you don't all on all.

Craig: So Craig I spoke market then it gets a lot better.

So pretty simple consumer since you're not going to put up the bottle.

Craig: And then my phone kind of late.

Craig: Any update there as well.

Craig: Also at double Eagle vertical, though you're close to linear.

Craig: Right.

Craig: You see that skew.

Craig: Yes.

Hajime Uba: and Mark Tibbits. I'm looking to Q2. Beyond the weather, we were also lapping peanuts without an IP campaign. And so we knew that it was going to be the toughest comparison, and we don't interpret it as a slowdown of the consumer or consumer whatsoever, especially given the performance that we saw in March. Now that we're in April, post the CARF announcements, I mean...

Craig: Oh, okay.

Craig: Looking to Q2 Diablo, whether we were also lapping peanuts without a Nike.

Speaker Change: Without a Nike campaign, and so we knew that it was going to be the toughest comparison, and we don't interpret it as a slowdown of the consumer or consumer whatsoever, especially given the performance that we saw in March now that we're in April post the tariff announcements I mean.

Speaker Change: People's retirement accounts are being impacted with the stock market, taking a hit and so there's just generally more uncertainty and that that would be the biggest reason that we didn't.

Hajime Uba: People's retirement accounts are being impacted with the stock market taking a hit and so there's just generally more uncertainty and that would be the biggest reason that we didn't raise guidance for this quarter, but we don't think that's specific to us. And then just to follow up, you mentioned the tariffs, and it seems like you're referring to it in regards to a consumer headwind, seemingly having pressure on markets and consumer confidence.

Speaker Change: <unk> guidance for this quarter, but we.

Speaker Change: We don't think that.

Speaker Change: Okay.

Speaker Change: Understood and then just a follow up you mentioned the tariffs it sounds like you're referring to it in regards to consumer headwind.

Speaker Change: Having pressure on markets and consumer confidence I'm, just wondering as you think about it from a cost side of things.

Hajime Uba: I'm just wondering as you think about it from a cost side of things.

Jeff Uttz: I know in the past when I asked you to talk about how you have somewhat supply chain geographical diversity and your ability to pivot, I'm just wondering how you think about your specific supply chain. Seemingly, some products could potentially be coming from overseas, so just wondering how you think about the tariff implications on your actual costs out of the business.

Speaker Change: I know in the past when I asked you talked about how you have somewhat supply chain geographical diversity.

And your ability to pivot I'm just wondering how you think about your specific supply chain.

Speaker Change: We some products could potentially be coming from overseas. So just wondering how you think about the tariff implications on your actual cost side of the business. Thank you.

Jeff Uttz: Thank you.

Jeff Uttz: Yeah, Jeff.

Speaker Change: Yes, Jeff Hey, Geoff it's Jeff so.

Jeff Uttz: Hey, Jeff, it's Jeff. So, you know, everybody's been doing, we've been using the last several days kind of scrambling to figure out, you know, what the implementation of these tariffs are going to have and what impact it's going to have on our business. And the short answer right now is that we really don't know yet as we haven't had a chance to meet with our main suppliers and really figure out or determine how much of these tariffs they're going to be passing along to us. And on a pretty encouraging note, even though we haven't had in-depth conversations with them, a couple of our top suppliers have already given us preliminary indication that they would be willing to share the impact of these tariffs with us to some extent, but like I said, it's only been about a week, so we haven't been able to sit down with them and determine what that looks like.

Speaker Change: Everybody has been doing we've been using the last several days kind of scrambling to figure out what the implementation of these tariffs are going to have an impact it's going to have on our business.

And the answer really is try to answer right. Now is that we really don't know yet is we haven't had a chance to meet with our main suppliers and really figure out or determine how much of these tariffs they're going to be passing along to us.

Speaker Change: And on a pretty encouraging note, even though we havent had in depth conversations with them a couple of our top suppliers have already given us preliminary indication that they would be willing to share the impact of these tariffs with us.

Speaker Change: Some extent, but like I said sort of in a week. So we havent been able to sit down with them to determine what that looks like.

Jeff Uttz: In terms of our overseas purchases. We know that when we look at our top purchases as it relates to overseas, Japan is one of the top countries of origin in our supply chain. And something that's very encouraging to us is we also know that the Prime Minister of Japan has expressed his willingness to come over and meet with President Trump to negotiate these tariffs. And we're hopeful that that's going to happen sometime in the near future.

Speaker Change: In terms of.

Speaker Change: Our overseas purchases.

Speaker Change: We know that when we look at our top purchases.

Speaker Change: Relates to overseas, Japan is one of the top countries of origin of our supply chain.

Speaker Change: Something that's very encouraging to us as we also know that the prime Minister of Japan has expressed its willingness to come over and meet with President Trump to negotiate these tariffs.

Speaker Change: We're hopeful that that's going to happen sometime in the near future.

Jeff Uttz: And also, to a lesser extent, we purchased from Vietnam. And when the first news came out, I think Vietnam was one of the very first countries to come out and say that they were interested in negotiating. So a couple of countries that we do purchase from overseas seemed very willing to come to the table. So the negative news of the tariffs coming out, we have received a few positive bits of information as it relates to our suppliers that we hope that once we get these lined up, we'll mitigate the impact to our company in the future.

Speaker Change: So to a lesser extent, we purchase from Vietnam and when the FERC News came out I think Vietnam was one of the very first countries to come out and said that they were interested in negotiating so a couple of countries that we do purchase from overseas seemed very willing to come to the table.

Speaker Change: So the negative news of the tariffs coming out.

Speaker Change: <unk> received a few positive bits of information as it relates to our suppliers that we hope that once we get these wind up will mitigate the impact to our company in the future.

Hajime Uba: understood that's very helpful and just to clarify I think you mentioned if not for April or the April uncertainty has led you to keep your sales guidance as is rather than raising it which is encouraging I'm just wondering it that therefore mean you still kind of reiterate your expectation for positive comps for full year 25 barring any significant change in consumer behavior Of course, before we had this news, we were very confident that we would be able to do it. We were confident that we would be able to do it. But now we are very uncertain.

Understood. That's very helpful and just to clarify I think you mentioned if not for April.

Speaker Change: The April uncertainty has led you to keep your sales guidance is is rather than raising it which is encouraging I'm. Just wondering it does that therefore mean, you're still kind of reiterate your expectation for positive comps for full year 'twenty five barring any significant change in consumer behavior.

Speaker Change: Looking at one oclock on used cars.

Speaker Change: And put it on a.

Speaker Change: Okay, Mister well, that's equal almost got had seen that sounds good.

Speaker Change: The only answer to market might not to hold a lot of work.

Hajime Uba: For now, that's it. I can't commit, but I'm going to do my best to do that. Especially after May, there will be IP, reservation, and 25-servers. We have a few levers.

Speaker Change: Okay.

Speaker Change: Why did you not just to get them on and put them in the states.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: You can get.

Speaker Change: Good luck and stuff, but not anymore.

Hajime Uba: The goal is still... So, Jeff, I think the key word is, and you kind of said it, barring any major changes in consumer behavior, if there are no changes in consumer behavior, absolutely, we remain confident that we can post positive comps for the full year. We've got a lot to look forward to. We've got strong IPs lined up from March, from May onwards through the end of the year. We have sales tailwinds coming online with the reservation system. And so, if there is no change to consumer behavior, then certainly we expect to be able to maintain positive comps or to achieve positive comps for the year, but that is You know, far from a certainty at this point in terms of whether or not consumers are going to change their behavior.

Speaker Change: Okay.

Speaker Change: So Jeff I think the keyword is.

Speaker Change: You kind of said it barring any major changes in consumer behavior. If there are no changes in consumer behavior, absolutely remain confident that we can post positive comps for the full year. We've got a lot to look forward to we've got strong ickes lined up from March from May onwards through the end of the year, we have sales tell wins coming online reservation system and so.

Speaker Change: If there is no change to consumer behavior, and certainly we expect that.

Speaker Change:

Speaker Change: So the key positive comps for the year.

Speaker Change: That is.

Speaker Change: You know it's far from a certainty at this point in terms of whether or not consumers are going to change their behavior and so we are not.

Hajime Uba: And so we are not upgrading guidance at this point.

Speaker Change: Not upgrading guidance at this point.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Jeremy Hamblin: Our next question is from Jeremy Hamblin from Craig Hallam. Please go ahead. Thanks. I wanted to come back to the clarify the food basket and sourcing. Of your total food basket, what portion is domestically sourced or kind of the range that's domestically sourced versus sourced overall? So we haven't stated those numbers yet, but I will tell you, Jeremy, that one of your colleagues, cell site analysts on this call, put out a report a couple days ago that estimated him, and I will say that he is in the ballpark if you take a look at that.

Speaker Change: Our next question is from Jeremy Hamblin from Craig Hallum. Please go ahead.

Speaker Change: Thanks, I wanted to come back to the clarify the food basket in sourcing.

Speaker Change: Of your total food basket, what portion is domestically sourced or kind of the range, that's domestically sourced versus sourced overseas.

Speaker Change: So we haven't given the state of those numbers, yet, but I will tell you Jeremy that one of your colleagues sell side analysts on this call, but at a report a couple of days ago that estimated them and I will say that he is in the ballpark. If you take a look at that.

Jeremy Hamblin: Okay.

Speaker Change: Okay, and then I wanted to come back to the comments on wage pressure.

Jeff Uttz: And then I wanted to come back to the comments on wage pressure. And just get an understanding of, you know, the commentary about high single digit, you know, wage pressure. Is that being driven by California or other geographies, you know, given that you're lapping fast act here? You know, it's a bit of a surprise that the pressure is quite that high. Now, you know, certainly the employment dynamic may change, there may be more labor supply here in coming months, but wanted to see if you could provide a bit more First of all, it's going up in full force.

Speaker Change: And just get an understanding of.

Speaker Change: The commentary about high single digit you know wage pressure.

Speaker Change: Is that being driven by.

Speaker Change: California or other geographies I, you know given that you're lapping fast act here.

Speaker Change:

Speaker Change: It's it's it's a bit of a surprise that the pressure is quite that high now.

Speaker Change: Certainly the employment dynamic may change there may be more labor supply here in.

Speaker Change: In coming months, but wanted to see if you could provide a bit more color.

Speaker Change: Sure.

Speaker Change: Los Angeles gained you Nicola.

Jeff Uttz: This is because of the law, and it's not just that. There's also the fact that it's going up spontaneously to secure employees. That's what's happening in full force. Yeah, this is not a California issue or anything related to the FAST Act. This is something that we're seeing across markets, whether it's because of statutory minimum wages, we're seeing some come online as of July 1st as well, which was not the case in past years, and then just being competitive for the market. So this is a California issue.

Speaker Change: Or what are you seeing.

Speaker Change: You saw that could fit honey, you're going from a couple of thoughts I mean, you're not thinking of it you have to go to market.

Speaker Change: That was it.

Speaker Change: Yeah. This is not a california issue or anything related to the fast Act. This is something that we're seeing across markets, whether it's because of statutory minimum wages.

Speaker Change: Seeing some come online as of July 1st as well, which was not the case in past years and then just.

Speaker Change: Competitive for the market.

Speaker Change: So this is in California I.

Speaker Change: I know you all he did have a couple of say hey, my feeling for either Scott or myself.

Speaker Change: I know it just didn't happen.

Speaker Change: So what I'm getting at.

Speaker Change: Oh, there's got to be able to do it so that you know if I could.

Speaker Change: Brooklyn, New York.

Jeff Uttz: We think it's always important to invest in our team and make sure that we have best of class people representing ourselves at the restaurants. At the same time, we push ourselves as much as possible to work on these system initiatives so that We can keep our man hours at a minute. Got it.

Speaker Change: It's always important to investor are keen to make sure that we are best in class people, representing a ourselves at the restaurants.

Speaker Change: At the same time, we push ourselves as much as possible to work on these system initiatives.

Speaker Change: We can keep our man hours at a minimum.

Speaker Change: Yeah.

Speaker Change: Got it and then lastly, I just wanted to come back to the cadence of new your new unit openings.

Hajime Uba: And then lastly, just want to come back to the cadence of new new unit openings. So you've opened 11 year to date. you have, you know, another 6 or 7 may be in the pipeline.

Speaker Change: So you've opened 11 year to date.

Speaker Change: You have another.

Speaker Change: Six or seven maybe in the pipeline.

Hajime Uba: I know not all of those will get completed in FY 25, but do you expect any more to be opened in Q2? I'm sorry, in fiscal Q3.

Speaker Change: I know not all of those will get completed in FY 'twenty five but do you expect any more to be opened in Q2 I'm sorry in fiscal Q3.

Hajime Uba: And then, you know, just in terms of, you know, thinking about the timing of when things might open in your fourth quarter, I know that, you know, in Q2, all of the openings happened in February.

Speaker Change: And then just in terms of thinking.

Speaker Change: And about the timing of when things might open in your fourth quarter I know that.

Andrew Charles: In Q2, all of the openings happened in February so even though you got three open you know I wanted to just understand what the revenue contribution was given that I think from an operating week perspective, you only have like five or six operating weeks in which you had new units opened in that quarter.

Hajime Uba: So even though you got three open, you know, I wanted to just understand what the revenue contribution was, given that I think from an operating week perspective, you only had like five or operating weeks in which you had new units open. So we've got one more scheduled opening for Q3. If you go to our website you can see that we already have the opening soon language up and so that should be opening In terms of Q4, we have an update on our 14-unit guidance. We're very comfortable with being able to open two units.

Speaker Change: So, Massachusetts becomes not the Kimball.

Andrew Charles: We'll continue to see quite a lot or most of the opening difficult that it came up on the peso.

Andrew Charles: Okay. Thank.

Andrew Charles: Thank you Kimberly.

Andrew Charles: When it comes to that.

Andrew Charles: But you don't.

Andrew Charles: You can find a whole communication landscape.

I know you know a few months.

Speaker Change: My name is put up money.

Speaker Change: I'll give you examples like that obligates them against the idea that this is the most cost you more than that.

Speaker Change: Of course to come up with it.

Speaker Change: Scott.

Speaker Change: Uniforms, and he didn't prescribe what electrical market declines.

Speaker Change: So we've got one more scheduled openings for Q3, if you go on our website you can see that we already have the opening soon language up and so that that should be opening.

Speaker Change:

Speaker Change: Q4, we have enough theater 14 guidance, we're very comfortable with being able to open some units should we be able to open both of those prior to the July call that would be an opportunity for us to provide an update the guidance on that front right now.

Hajime Uba: Should we be able to open both of those prior to the July call, that would be an opportunity for us to provide an update to guidance on the unit front. Right now, it's just Construction is happening in one of the, one of the constructions in a mall. And so that there's a level of uncertainty in terms of construction duration there. It's specifically in the, it's, it's in a food court. We're sort of like the centerpiece of the food court, but we've never had to do construction under those constraints before. Obviously, they're not shutting down the food court to let us build a restaurant.

Speaker Change: Construction is happening in one of the one of the constructions in Poland. So that there's a level of uncertainty in terms of the construction duration there.

Speaker Change: Is it specifically.

Speaker Change: It's in a food court, we're sort of like the centerpiece of the food court that we've ever had to do.

Speaker Change: New construction under those constraints before obviously, they're not shutting down the food court. So that's still the restaurant yeah. It's all overnight construction in a restaurant so.

Hajime Uba: Yeah, it's all overnight construction in that restaurant. So it's facial.

Speaker Change: Colombia.

Speaker Change: Yeah.

Hajime Uba: Great, thanks so much for the questions, taking the questions and good luck.

Speaker Change: Great. Thanks, so much for the questions taking the questions and good luck.

Speaker Change: Thank you gentlemen.

Speaker Change: Okay.

Matt Curtis: Next question is from Matt Curtis from William Blair. Please go ahead. Thanks, Jeff. I wanted to get back to the revenue guidance for a minute. Could you tell us what second half comp expectations you have embedded to get to the full year revenue guidance? Given that we generally don't give comp guidance with the restaurants we serve, I think it would be difficult for us to provide comp guidance at this time. However, we are providing comp guidance to all of the restaurants, including B&B Guidance. We are also providing comp guidance to many of the restaurants we serve, including Uncertainty.

Speaker Change: Next question is from Matt Curtis from William Blair. Please go ahead.

Speaker Change: Thanks, Good afternoon, I wanted to get back to the revenue guidance for a minute could you tell us what <unk>.

Speaker Change: Second half comp expectations, you have embedded to.

Speaker Change: To get to the full year revenue guidance.

Speaker Change: But the hemo gains I E.

Speaker Change: That will become a state of the world.

Speaker Change: I don't know what are the ones that you have.

Speaker Change: But it seems like an index as well.

Mike: It's actually Mike maybe any light on.

Speaker Change: Oh, yeah opening do hiring or can you give us at all.

Mike: Taking open until you get them all in fact the deals limitation.

Phil: So Phil you said that it wasn't at the end.

Jeff Uttz: I think it would be difficult for us to provide comp guidance to any of the restaurants we serve. The revenue guidance does reflect our assumptions, both in terms of the accelerated openings that we've seen. A lot of the fiscal 25 openings outperforming our expectations, reflecting Jimmy's comments about it having the potential to be one of our strongest classes ever. But yeah, we think you could be able to back out or back into our top expectations from the revenue guidance that we presented in conjunction with the commentary on the unit openings we just did. Okay, got it.

Mike: On the auto side, because I get it.

Mike: Yes.

Mike: Right.

Mike: Given that we generally don't give cost guidance with increased uncertainty. This is certainly not easier for us to give cost guidance, but E.

Mike: The revenue guidance does reflect our assumptions both in terms of the accelerated openings that we've seen a lot of the fiscal 'twenty five openings outperforming our expectations, reflecting jamie's comments about it having the potential to be one of our strongest classes ever but yes.

Mike: We think you could be able to back out or back into our comp expectations on the revenue guidance.

Mike: In conjunction with the commentary on the U S.

Mike: Okay.

Mike: Okay got it thanks.

Matt Curtis: Thanks.

Hajime Uba: And I guess switching to something else. You mentioned some of the IP collabs will be starting in May.

Speaker Change: And I guess switching to something else you mentioned some of the clubs you starting in May could you give us any details around exactly what you have planned on the IP front in the second half of the year.

Hajime Uba: Could you give us any details around exactly what you have planned on the IP front in the second half of the year? Yeah, so the IP pipeline that we've been building is really The main thing that we were trying to change was having unsuccessful IPs. And so what we built out is we have some of our best ever hits from the past coming up. So we've got, you know, Demon Slayer, we have One Piece, we have Peanuts. And then we've been developing our relationship with Nintendo. So we have Kirby, which is one of their major mascot characters, coming up in Fiscal 26.

Yes, so E I'd pipeline that we've been building is really.

Speaker Change: Yeah.

Speaker Change: The main the main thing that we're trying to change was.

Speaker Change: Unsuccessful IP and so while we built out is we have some of our best ever hits from the past coming up. So you got even Slayer was just one piece peanuts and then we've been developing our relationship with Nintendo So we have.

Speaker Change: Turkey, which is one of their major mascot characters coming up in fiscal 2006, I am personally a big Kirby cannot extremely excited.

Hajime Uba: I'm personally a big Kirby fan. I'm extremely excited.

Hajime Uba: I can't share anything else in terms of the Fiscal 26 pipeline, but we're very excited. As Jimmy shared in the opening remarks, we have seven or eight planned for Fiscal 26. It's a big part of our strategy.

Speaker Change: I can share or anything else in terms of the fiscal 'twenty six pipeline right.

Speaker Change: We're very excited as Jimmy said in the opening remarks, we have seven or eight planned for fiscal 2006, it's a big part of our strategy.

Hajime Uba: Okay, sounds good, thanks.

Speaker Change: Okay sounds good thanks.

Mark Smith: Thank you, Mark.

Speaker Change: Thank you much.

Mark Smith: Next question is from Mark Smith from Leach Tree Capital. Please go ahead. Hi guys, first question, sorry if I missed it, does the G&A guidance include the litigation expense? Yeah, the guidance, we haven't changed our guidance as it relates to the litigation expense being part of that number.

Speaker Change: Next question is from Mark Smith from Lake Street Capital. Please go ahead.

Mark Smith: I guess first question, sorry, if I missed it.

Speaker Change: G&A guidance.

Speaker Change: The litigation expense.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: Yeah, the guidance, we havent changed our guidance.

Speaker Change: As it relates to the litigation expense.

Speaker Change: Being part of that number it is part of it okay. Perfect and then second one for me just as we think about tariffs and kind of build out any idea outside of operations, maybe incremental cost on build out of new restaurants at this point, especially any special equipment that you may be important.

Mark Smith: Okay, perfect.

Jeff Uttz: And then, second one for me, just as we think about tariffs and kind of build-out, any idea outside of operations, maybe incremental costs on build-out of new restaurants at this point, especially any special equipment that you may be importing? Of course, we import equipment from Japan and China, so we are affected by the build-out cost. According to our initial study, we are affected by the build-out cost of up to 400,000 square meters. So, we do bring in a certain amount of special equipment from overseas, largely Japan and China. Our initial estimate in terms of incremental costs as it relates to the tariffs, we think in a worst-case scenario, would be about $400,000.

Speaker Change: Most of you don't know what else.

Speaker Change: Unlike equipment you see tomorrow.

Speaker Change: Oh, Oh, okay muscle.

Speaker Change: No wonder when I wanted to just set aside the beautiful Ms hydride it David I don't know, if you'll get it to market and your fixed cost cutting.

Speaker Change: And my last one is that right.

Speaker Change: So we do bring in a certain amount of special equipment from overseas, largely Japan and China. Our initial estimate in terms of incremental cost as it relates to the tariffs we think in a worst case scenarios would be about $400000.

Jeff Uttz: As a conclusion, I would like to maintain the 20% unit breadth even if the cost of the construction increases in the current situation. That being said, even with the potential increase in build-out cost, this doesn't change our thinking at all in terms of our desire to maintain a 20% plus unit growth rate.

Speaker Change: Okay.

Speaker Change: Understood.

Speaker Change: If you didn't do it on a on a.

Speaker Change: Concepts can also increase our focus there Martin Deepak and call on it.

Speaker Change: Yeah.

That being said, even with the potential increase in build out costs. This doesn't change our thinking at all in terms of our desire to maintain 20% plus unit growth rate I'm, not saying that went out of it you'd be that youll medium that might've been okay, because I mean.

Speaker Change: So you might see a favor please get them all.

Speaker Change: So, let's say you don't know Mr to bet My Sunday Kit, that's also kind of a similar market in Italy.

Speaker Change: So what did we got hold on I think <unk> covered.

Speaker Change: It became a mono remarks squeal.

Jeff Uttz: We currently have 100 million yen in cash. We just extended Revolver 45 the other day, so we think we can maintain a 20% plus unit growth rate. It doesn't affect our financial situation at all.

Speaker Change: How does it look like at one of my people to buy him to go extremely well Julien on or not.

Speaker Change: Thank you.

Speaker Change: You know when you find out sort of beating him up on that.

Jeff Uttz: Hi, so as a refresher, we have AUVs of $4 million, our restaurant low operating profit margins of 20% against a fillback cost of $2.5 million, get us to cash on cash returns of 33%. We just mentioned the worst case scenario would be a $400,000 increase, we think a $300,000 increase It is more realistic. That only changes the unit economics equation by half a year in terms of payback period. And so it really doesn't change our appetite at all. We have $100 million in cash and long term investments. We just renewed our revolver with Kura Japan for $45 million.

Speaker Change: So as a refresher our ease of $4 million of restaurant level operating profit margins of 20% against Buildout costs us two and a half million you've got a spare cash on cash returns of 33%. We just mentioned in the worst case scenario would be $400000 acreage do you think a 300000 dollar increases.

Speaker Change: It's more realistic that only changes the unit economics equation by half a year in terms of payback period, and so it really doesn't change our appetite at all we have.

Speaker Change: The $100 million in cash and long term investments, we just renewed our revolver with apparel comfort with courage of $10 million to $45 million.

Jeff Uttz: And so we're in a very strong capital position. And we're excited to be able to make decisions based off of what are in the long term best interest of the company.

Speaker Change: We're not.

Speaker Change: Very strong capital position and we're excited to be able to make decisions based on what are in the long term best interest of the company.

Operator: For more information visit www.FEMA.gov Great. Thank you again. Thank you.

Speaker Change: Great. Thank you guys.

Speaker Change: Thank you.

Speaker Change: Yeah.

Operator: As a reminder, if you would like to ask a question, it is star 1.

Speaker Change: As a reminder, if you'd like to ask a question. It is star one.

J.P. Wellman: Next question here is from J.P. Wellman from World Capital Partners. Please go ahead. Great. Thanks for taking my questions, guys.

Speaker Change: Next question is from J P well from Roth Capital Partners. Please go ahead.

Speaker Change: Great. Thanks for taking my questions guys.

Hajime Uba: Maybe if we could start sort of on the levers on your side, understanding that the consumer environment is uncertain and certainly rapidly changing, but I was just hoping we could talk 1. On the reservation system, did you give a timeline of when you would expect that to be fully rolled out? And then 2. Can you just talk about kind of the marketing and maybe more also with the loyalty program? You know, what else can you kind of do there to help drive volume from your loyalty members? Yeah, so what we've shared publicly is that we expect to be able to roll out the reservation system system-wide by the end of the fiscal year.

Speaker Change: Maybe if we could start sort of on the leverage on your side understanding that the consumer environment is uncertain.

Speaker Change: Certainly rapidly changing but.

Speaker Change: I was just hoping we could talk.

One on the reservation system did you give a timeline of when you would expect that to be fully rolled out.

Speaker Change: And then two can you just talk about kind of the marketing and maybe more also with the loyalty program.

Speaker Change: What else can you kind of do there to help drive volume from your loyalty members.

Speaker Change: Yeah, So what we've shared publicly.

Speaker Change: We expect to be able to rollout the reservation system system wide by the end of the fiscal year My.

Hajime Uba: Our goal is faster. We definitely want to be able to capture the leverage of seasonality that we see in Q4, and so that is one of our top priorities to achieve a full system online. In terms of the rewards program, there are a couple things that first is that the reservation system is accessed through the rewards system, and so we know that's going to be a pretty meaningful catalyst in terms of registrations. And as we've discussed on past calls, rewards members are very valuable, both in terms of frequency and spend. And so on that note, with the IPs that we have coming up, we know that we can do a lot of different things.

Speaker Change: Our goal is faster, we definitely won't be able to capture.

Speaker Change: You know the leverage of seasonality that we see in Q4, and so that is one of our top priorities to achieve full.

Speaker Change: Full system online.

Speaker Change: Terms of the reward system or the rewards program.

Speaker Change: There are couple of things that we're really excited about the first is that the the reservation system is accessed through the reward system. So we know that's going to be a pretty pretty meaningful catalyst in terms of registrations and as we've discussed on past calls rewards members are very valuable both in terms of frequency and spend and so on that note with the IP that we have coming.

Speaker Change: We know that we can do a lot of different things.

Hajime Uba: You know, we've got giveaways and stuff like that, like we've done in the past, and those are very meaningful levers for us. Okay, understood.

Speaker Change: We've got giveaways and stuff like that like we've done in the past and those are very meaningful leverage for us.

Speaker Change: Okay understood and then the second one would just be maybe more on a competitive note I don't know how much kind of visibility you guys have but.

Hajime Uba: And then the second one would just be maybe more on a competitive note, you know, I don't know how much kind of visibility you guys have, but any high level thoughts about some of your competitors, and maybe, you know, how the tariffs might impact their business, and more specifically, kind of their pricing structure and, and what it means kind of for the value delta that Kura provides relative to some of your competitors out there. This is the part that we emphasized the most. We were shocked and surprised by the situation this time, but we received the same situation in all the American sushi restaurants.

Speaker Change: Any high level thoughts about some of your competitors and maybe how the tariffs might impact their business and more specifically kind of their pricing structure and what it means kind of for the value Delta that curve provides relative to some of your competitors out there.

Speaker Change: Oh gosh.

Speaker Change: Or do they just went GA said absolutely not.

Speaker Change: Hum.

Speaker Change: Its own facilities, you think you can look at algorithms to get them all.

Speaker Change: Symbol and agility.

Hajime Uba: I think we can bring a lot of benefits in the medium and long term. I'll give you a little reason for this. We appreciate you bringing this up. As shocked as we were by the magnitude of the tariffs, we're certain that every other mom-and-pop sushi restaurant was just as shocked, if not more shocked. And as you probably guessed, we're in a much, much better position than them and we believe that we can turn this into a competitive advantage and further widen the delta in terms of value between ourselves and the typical sushi restaurant. and we still have a long way to go in terms of tech initiatives, so I think we're in a very good position in that area.

Speaker Change: Why do I actually took sticking up then you could look at it.

Speaker Change: Want to get into an economical myself, but if you look at the meeting.

Speaker Change: We appreciate you, bringing this up.

Speaker Change: Shocked as we were by the magnitude of the tariffs we're certain that every other mom and Pops. Each restaurant was just the shock if not more shock.

Speaker Change: And as you, probably guessed where word of mouth.

Speaker Change: Much better positioned.

Speaker Change: We can turn this into a competitive advantage and further widened the delta in terms of value between ourselves and the typical sushi restaurant, Michael I don't know how can we get an update my own gigamedia and let people do with it looks like if I get to kick them out.

Speaker Change: Go ahead Michael.

Michael: I'll say, a person who does that at all.

Speaker Change: Wholesale banking.

Speaker Change: Did you guys get muscle.

Speaker Change: Does it sometimes almost didn't cut it off on a lot of physical classically with an indicator so you get that.

Speaker Change: The company will cut it off of whatever it was not a good one.

Speaker Change: It's like a little bit of that come down or is that based on that I touched on it but let me start with if you don't look at Feeney said because at the moment.

Speaker Change: Also on hand to cyclical than any single dwellings.

Hajime Uba: Yes, Arte, please go ahead. the IT collaborations, the experientiality, all of those will continue to work in our favor. I think it is very advantageous to be able to use enough time to make the right choice for the client from a strategic point of view, not a temporary one.

Speaker Change: Got it.

Speaker Change: So the first would be that we're in a very strong cash position as we just mentioned, we've got $100 million on the balance sheet access to another $45 million revolver and so we're not in the same position as a mom and pop where they need to be making decisions about.

Speaker Change: Lifetime operational stuff like that we can really make.

Speaker Change: Decisions that are in terms of the best long term strategy as Jeff had spoken to earlier, our vendors are already coming to the table, indicating that they want to work with us are buying powers orders of magnitude larger than the typical sushi restaurant, they're probably we're probably one of the biggest buyers in the country and so.

Speaker Change: That is something that is very different for us versus any of our competitors.

Speaker Change: And the lastly, just need all of the things that are unique to us what are the initiatives that we're talking about the <unk> collaboration you experienced reality.

Speaker Change: All of those will continue to work it out.

Speaker Change: Might've said, albeit improving so much marketing might need to button digital Easter.

Speaker Change: Cutting it can kick in you're supposed to have someone with vintage you wait to get denied without any Muslim debt well so.

Speaker Change: They can equal things began to go figure that out.

Speaker Change: So it didn't.

Speaker Change: Okay.

Speaker Change: Now if you're doing that much even if it almost all of them.

Speaker Change: Yes.

Speaker Change: Our restaurant level operating profit margins generally speaking.

Speaker Change: 20% of our amazing, we're really happy with them and so if there is some short term pressure on that that's something that we can tolerate.

Speaker Change: We're able to make decisions that are.

Speaker Change: Not looking at the short term, but really the long term and we're very grateful.

Speaker Change: To have that strategic flexibility.

Speaker Change: Alright.

So I'm interested in what you can say well.

Speaker Change: Okay.

Speaker Change: Kilowatts.

Speaker Change: You'll get you get object to return to your initial question absolutely. We think this is going to be a catalyst for widening.

Hajime Uba: To return to your initial question, absolutely. We think this is going to be a catalyst for a widening of the value delta between ourselves and competitors, and we'll you know, the value proposition will be stronger than ever. Understood. Thank you for the detail.

Speaker Change: Delta between ourselves and competitors and we will.

Speaker Change: The value proposition will be stronger than ever.

Speaker Change: Understood. Thank you for the detail and best of luck going forward.

Hajime Uba: Best of luck going forward.

Jamie: Thank you Jamie.

Speaker Change: Yeah.

Todd Brooks: Next question is from Todd Brooks from Benchmark Company. Please go ahead. Hey, thanks for taking my questions. Only a couple left here. If we can talk IP partnership, I think you said the timing for the next one starts in May. And at one point, I think you were talking about one in Q3 and one to two in Q4. Does that imply when we get to May, we're running under IP partnerships for the balance of the fiscal year? Yeah. Great.

Speaker Change: The next question is from Todd Brooks from Benchmark Company. Please go ahead.

Todd Brooks: Hey, Thanks for taking my questions only a couple left here.

Speaker Change: If we can talk IP partnership.

Todd Brooks: I think you said the timing for the next one starts in May.

Speaker Change: And at one point I think you were talking about.

Speaker Change: One in Q3 and one to two in Q4 does that imply when we get to May we're running under IP partnerships for the balance of the fiscal year.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay great.

Hajime Uba: And then I know when you talked about the pivot off of the kind of the six scheduled IP partnership cadence, there was a desire to really focus on the more impactful partnership. I'm a little surprised and encouraged to hear about seven to eight collaborations next year. Is the threshold and the hurdle of impactful still in place where... Absolutely. We're very, very happy with the work that the marketing team has been doing. Q2 was a difficult comparison, but that bought them the time to be able to put together this amazing IP pipeline. And so we think it was absolutely the right investment.

Speaker Change: And then I know when you talked about the pivot off of the kind of the six schedule the IP partnership.

Speaker Change: Cadence there was a desire to really focus on the more impactful partnerships.

Speaker Change:

Speaker Change: A little surprised and encouraged to hear about seven to eight collaborations next year.

Speaker Change: Is the threshold and the hurdle.

Speaker Change: Impactful still in place we're at.

Speaker Change: Absolutely.

Speaker Change: We're very very happy with the work that the marketing team has been doing.

Speaker Change: Q2 was a difficult comparison.

Speaker Change: Ultimately the time to be able to put together this amazing IQ pipeline it so.

Speaker Change: We think it was absolutely the right investment to make.

Hajime Uba: Okay, and then at kind of six week durations, are we pretty much always on then, as we think about fiscal 26 for an IP partnership? My guess at this point is that we'll probably have a couple of one-months. collaborations and that's how we would get beyond the six collaborations per year that we've done historically.

Speaker Change: Okay, and then it kind of.

Speaker Change: Six week durations are we pretty much always on and then as we think about fiscal 'twenty six for Nike partnership.

Speaker Change: My My guess at this point is that you don't call. It we will probably have a couple one months.

Speaker Change: Collaborations and that's how we get beyond the six collaborations per year that we've got a history.

Speaker Change: Oh wait.

Speaker Change: Okay.

Hajime Uba: Perfect, thanks.

Speaker Change: Perfect. Thanks, and then the other one was just a follow up on the reservation system. I think you said you're in test now.

Hajime Uba: And then the other one was just a follow-up on the reservation system. I think you said you're in test now in three units. and at least one of the ones in test is one of the really higher volume units. Just wondering, and not looking for quantification, but the consistency of the lifts that you're seeing from the system, either relative to your expectation or relative to what Current Japan saw when they implemented it, the consistency of lifts that you're seeing and how that's fueling the desire to get this rolled out even more quickly than the end of the fiscal year?

Speaker Change: In three units.

Speaker Change: And one of at least one of the ones in test is one of the really higher volume units, just wondering and not looking for quantification, but the consistency of the lifts that you're seeing.

Speaker Change: The system either relative to your expectation of relative to what current Japan.

Speaker Change: Saw when they implemented that.

Speaker Change: The consistency of lifts that you're seeing in and how that's fueling the desire to get this rolled out even more quickly than.

Speaker Change: And the end of the fiscal year end as the bandwidth there to really like I dunno, how how fast you can roll. This out now that you've tested in three is this still a iterative process, where you go do another five stores and then.

Hajime Uba: I don't know how fast you can roll these out now that you've tested in three. Is this still an iterative process where you go to another five stores and then... What's the unlock to kind of hit the year-end goal for the reservation system? Yeah, so to start in terms of guest response, so the high volume restaurant that we refer to is Austin. I was there for the first week that we launched it in Austin. The only because this isn't system wide yet, the only marketing that we've been able to do is through the rewards program.

Speaker Change: What's the unlocked to kind of hit the year end goal for the for the reservation system.

Speaker Change: Yeah. So to start in terms of guest response, so the high volume restaurant that we referred to as Austin I was there for the <unk>.

Speaker Change: First week.

Speaker Change: When we launched it in Austin do you only because this isn't system wide yet the only marketing we've been able to do is through the rewards program. If you set your favorite restaurant as Austin than you would've gotten an E mail, saying, we now have.

Hajime Uba: If you set your favorite restaurant as say Austin, then you would have gotten an email saying, we now have reservations. And, you know, I was watching all the guests coming in and seemed like the first day it was quarter to a third of people were coming in holding up their phones with their reservation numbers. I was, I was genuinely blown away. By that weekend, it was really like every other party had a reservation. And so for these restaurants that are super busy, that have long lines, the value is immediately obvious to our guests. And so that got us that much more excited, made it really clear to us that there's a concrete upside that we expect.

Speaker Change: Reservations and.

Speaker Change: All the guests coming in and it seems like the first day. It was a quarter to a third of people, we're coming in holding up their phones on their reservation numbers.

Speaker Change: I've just genuine linked blown away by that weekend. It was really like every other party had a reservation and so for these restaurants that are super busy that have long lives the values.

Speaker Change: Mediately obvious to our guests and so that got us that much more excited made it really clear to us that there is a concrete upside that we expect and that's one of the other reasons that we were putting everything that we can into accelerating rollout in terms of the marks I would say that the bid.

Hajime Uba: And that's one of the other reasons that we were putting everything that we can into accelerating rollout. In terms of the unlocks, I'd say that the biggest parts are behind us. It was really just getting text stability and making sure that we're able to figure out an operational flow that made sense. And that's largely been hammered down. And so now it's, we're breaking up into teams, and we're going to be having simultaneous rollouts across the country.

Speaker Change: Parks are behind US it was really just getting.

Speaker Change: Stability and making sure that.

Speaker Change: Were you able to figure out in the operational flow that makes sense and that's largely been hammer down and so now it's.

Speaker Change: We're breaking up into teams and we're gonna be having simultaneous rollouts across the country.

Hajime Uba: Okay, great. Thanks.

Speaker Change: Okay, great. Thanks, Thanks, Don appreciate it.

Jim Sanderson: Thanks, Ben. Appreciate it.

Speaker Change: Yes.

Speaker Change: Yeah.

Jim Sanderson: The next question is from Jim Sanderson from North Coast Research. Please go ahead. Thanks for the questions. I wanted to go back to the quarterly performance. Did you break down same store sales between traffic price and mix or could you? Yeah, we can. So total comp was minus 5.3. And that was minus eight and a half percent traffic and 3.2% price and mix. All right. And again, March was a meaningful improvement over that trend on the traffic line. Is that the right way to look at it?

Speaker Change: Our next question is from Jim Sanderson Northcoast Research. Please go ahead.

Jim Sanderson: Hey, Thanks for the question. So I wanted to go back to the quarterly performance did you break down same store sales between traffic price and mix or could you.

Yes, we can't so the total comp was minus five three and that was minus 8.5% traffic and three 2% price and mix.

Jim Sanderson: Oh, right and again March was a meaningful improvement over that that turned on the traffic lines is that the right way to look at it.

Jim Sanderson: But let's not forget that you're thinking about Hulu, Google a question Ive students get or how much do you I don't know what else.

Hajime Uba: Japanese interpretation In terms of performance and looking at it on an absolute basis, we're very pleased with March performance. That being said, if we're talking about comps, last year's March was strong enough that it was so strong that that's really what prompted our revenue guide raised last year. And so March is really a tough month to compare ourselves against, but thanks to that, we were very, very happy about it.

Jim Sanderson: And also.

Jim Sanderson: So whatever.

Jim Sanderson: When a competitor.

Jim Sanderson: I don't know if that's possible.

Jim Sanderson: Okay.

Jim Sanderson: Because it looks like it looks like in terms of the performance and looking at it on an absolute basis, we're very pleased with March performance.

Jim Sanderson: He said if we're talking about comps last year's March was strong enough that it was so strong and thats really what prompted our revenue guide raised last year. So March is really a tough compare ourselves against but extra that were very very happy with margin.

Hajime Uba: All right, and then a question on unit development. Can you provide a little bit more insight on what your development pipeline is looking like in the United States beyond fiscal 25? Maybe indications of lease signings or sites you've identified, anything that would give us a sense of a commitment you've got beyond the current fiscal year?

Jim Sanderson: Alright, and then a question on unit development can you provide a little bit more insight on what's your development pipeline is looking like in the United States beyond fiscal 'twenty five maybe indications of lease signing in store site sites, you've identified anything that would give us a sense of commitment you've got beyond.

Jim Sanderson: Current fiscal year.

Hajime Uba: The goal is to maintain 20% or more after 2026, and to aim for 50% or more after 2027. So, generally speaking, you could assume that the foreseeable future, we're going to maintain that 20% plus unit growth rate. For fiscal 27, we expect to be able to get back to that 50-50 split between existing and new markets. And the confidence behind that statement comes with, you know, the number of LOIs that we have under negotiation and the number of leases that we already have.

Jim Sanderson: Mono needed opening maybe looking to equal amongst other things.

Jim Sanderson: I think that Youll ixtaccihuatl equal total money getting that I go out I don't think it amongst <unk> 58.

Jim Sanderson: King.

Jim Sanderson: Okay.

Jim Sanderson: Okay.

Jim Sanderson: Okay.

Jim Sanderson: So generally speaking you can assume that the foreseeable future, we're going to maintain that 20% plus unit growth rate for fiscal 2007, we expect to be able to get back to that 50, 50 split between existing and new markets and the confidence behind that statement. It comes with the number otherwise that we have under.

Jim Sanderson: And negotiation of the number of leases that we already have executed.

Hajime Uba: All right.

Jim Sanderson: Alright, and just one last question on tariffs is it possible for you to move to a U S. Only.

Hajime Uba: And just one last question on tariffs. Is it possible for you to move to a US-only supply chain to source input costs over the next year, let's say? Unfortunately, I don't think it's realistic to do everything in the U.S., but I think it's possible to move to a place where the number of cases has decreased while looking at the situation of each government, as Jeff said earlier, for the next few months. However, we also order in a few months, so such a shift will not be at once, but will gradually shift. It would probably be difficult to shift entirely to domestic, I mean, you can't catch tuna in Lake Erie, so there's just geographic biological limitations there, but what we can do is we can adjust between different fire countries, and so we're going to be keeping a very close eye over how the tariffs shake out over the coming months, and if there are countries that we're currently working with that are less advantageous, and there are options for.

Jim Sanderson: Our supply chain to source.

Jim Sanderson: Input costs over the next year, let's say.

Jim Sanderson: Well I think that that's what the symbol on our books at all again.

Jim Sanderson: Again sticking to make them on schedule most of them on all critical it out and I think it's gone.

Jim Sanderson: That dividend marks taken a negotiation.

Jim Sanderson: I don't know that the more interesting.

Jim Sanderson: So not everybody on all I could say that it's got nothing to do with after the day after we cycle a.

Jim Sanderson: A cyclical phenomenon.

Jim Sanderson: Okay, well it doesn't seem to proceed with that.

Jim Sanderson: Okay.

Jim Sanderson: It would probably be difficult to shift entirely too.

Jim Sanderson: Domestic I mean, you can't catch tuna and Lake Erie.

Jim Sanderson: So theres just geographic biological limitations there but.

What we can do is we can adjust between different sort.

Jim Sanderson: Difference.

Jim Sanderson: Fire countries and so we're gonna be keeping a very close eye over how the tariffs shake out over the coming months and if there are countries that we're currently working with or less advantageous.

Jim Sanderson: And there are options for <unk>.

Hajime Uba: Ingredients of comparable quality better tariff rates then certainly that's something that we pursue One thing that we've been working over the last couple of years that is going to become critically important now is our relationships, not just with our broad line suppliers but also with our customers. Our supply chain team goes to, you know, they're traveling across the world, negotiating directly with the providers. And so it's a very different situation from a mom and pop where they have, their options are limited to what the broad liner is offering. We bring what we want to the broad liner.

Jim Sanderson: Ingredients of comparable quality better tariff rates, then certainly that's something that we pursue.

Jim Sanderson: I wondered about putting it in the meeting with the Union.

Jim Sanderson: What are your thoughts on all make alcohol close those fit.

Jim Sanderson: All he bought comdata.

Jim Sanderson: What else.

Jim Sanderson: They must be.

Jim Sanderson: I'm also going to get to get a hold.

Scott: Well, maybe I will hope that it'll hold on I'm sorry, Scott.

Jim Sanderson: A couple of thoughts on what does that usually does.

Scott: But if you're talking to the global market.

Scott: One thing that we've been working over the last couple of years that he is going to become critically important out is our relationships not with just our broad line suppliers with the direct vendors, we our supply chain team goes.

Scott: Theyre traveling across the world negotiating directly with the providers and so it's a very different situation from a mom and pop where they have their options are limited to what the broad liners offering we bring what we want to the broad wire and so again.

Hajime Uba: And so again, it's just a completely different story in terms of economies of scale. And as unfortunate as this is, This is going to hurt our competitors a lot more than it's going to hurt us. Understood, understood.

Scott: Just a completely different story in terms of economies of scale and as unfortunate as it is.

Scott: This this is going to hurt our competitors a lot more than it hurt us.

Scott: Understood understood. Thank you very much.

Hajime Uba: Thank you very much. Thank you.

Scott: Okay.

Scott: Okay.

Operator: This concludes the question and answer session, as well as today's teleconference. Thank you for your participation. You may disconnect your lines at this. That's it!

Scott: This concludes the question and answer session as well as todays teleconference. Thank you for your participation you may disconnect your lines at this time.

Scott: [music].

Scott: Okay.

Scott: [music].

Scott: Uh huh.