Q3 2025 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen.
Thank you for standing by welcome.
Speaker Change: Welcome to curse Sushi USA incorporated fiscal third quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: Lines will be open for your questions. Following the presentation. Please note that this call is being recorded.
Jeff: On the call today, we have how'd, you May see me, President and CEO, Jeff <unk>, Chief Financial Officer, and Benjamin important senior Vice President of Investor Relations and system development.
Benjamin Important: And now I'd like to turn call over to Mr. Important.
Speaker Change: Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal third quarter 2025 earnings release. It can be done at www dot process Dot com in the Investor Relations section.
Speaker Change: Copy of the earnings release has also been included in the 8-K, we submitted to the SEC.
Speaker Change: We get our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements as defined under the private Securities Litigation Reform Act of 95 esports.
Speaker Change: These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
Speaker Change: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Speaker Change: We refer all of you to where our SEC filings for a more detailed discussion of the risks that could impact our future operating results and Fi condition.
Speaker Change: Also during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful when evaluating our performance. The presentation of this additional information should not be considered in isolation north a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release.
Jamie: With that out of the way I would like to turn the call over to Jamie.
Speaker Change: And thank you to everybody once again.
Speaker Change: Okay.
Speaker Change: That's the quarter.
Speaker Change: Oh boy between during her new destinations.
Speaker Change: Instigating new market opportunities.
Speaker Change: How does the IP pipeline.
Speaker Change: How did you get most of them up to speed.
Speaker Change: He completed can widen at all right.
Speaker Change: I didn't get you.
Speaker Change: Made a meaningful progress on building that pipeline and alumina keeps the opportunity came off that each day by day coffee.
Speaker Change: I'm happy to help you get to market and kind of what's coming to just kind of yeah.
Speaker Change: I'm extremely pleased to lease that exact on freefall.
Speaker Change: PD peritoneal dialysis member to maximize.
Greg: So palisade for Greg when he speaks.
Speaker Change: So that is positive.
Greg: Water was $74 million.
Greg: Presenting comparable theaters Americas two 1%.
Greg: Perhaps on the mix of.
Greg: Pinpoint to a person.
Greg: Okay.
Greg: Rafi go to Pennsylvania.
Speaker Change: We are pleased to see the PZ, excluding the litigation is a clean comp.
Greg: Each month this quarter.
Greg: We still have a good songs.
Greg: Like 28, 3%.
Greg: Presenting on improvement of 90 basis points over the prior year quarter.
Greg: 29, 2%.
Greg: Due to pricing and ongoing it looks like <unk>.
Neither of our passengers between increased by 50 basis points due to high single if he could be pretty soon.
Greg: Partially offset by thanking incrementals.
Greg: Yes.
Greg: It's only been operating for the commodity.
Greg: Okay.
Greg: Compare that to cause any person right. Yeah, Yeah did you hang onto your own capacity.
Greg: Right.
Greg: During the third quarter, we opened three new yes.
Greg: Hum.
David: David The Washington State My team.
Greg: Subsequent to quarter end.
Greg: Offerings to more unique.
Greg: Well thanks, Steve.
Greg: Yeah, I'm really pleased with the successful 2025. These many on the August kind of opening exceeding all expectations.
Greg: Okay.
Greg: During the World Cup.
Greg: Shortly after one P M.
Greg: 20 <unk>.
Greg: T E C U E.
Greg: At the beginning of him so he's got a yeah. He provided any deliberate mcknight.
Yeah.
Greg: P J E T. Because this past week, particularly excuse me already.
Greg: I needed to change the guidance.
Speaker Change: I guess, what did you mean, yes.
Greg: And you mentioned that.
Greg: We have countries timing any.
Greg: Yeah.
Greg: Over the last several calls we have been discussing with you for Trinity smaller DNA as demonstrated by the successful D. C F O b.
Greg: Yeah.
Greg: How is it greater China created by these smaller markets.
Greg: Can not only extend the life cycle stage potential.
Greg: Oh for pharma for Fox.
Greg: Okay.
Greg: Have you seen the number of Albany market, that's kind of.
Greg: Yeah.
Greg: We hope to get it back to a 50 50 split between new and existing markets.
Greg: Just kind of do anything further.
Greg: Eating habits of luck, because it'll be previously unexplored DMA and good morning.
Greg: Each month.
Greg: I'm very pleased to say that.
Greg: Now how properties and negotiation each on the Tc market.
Speaker Change: Turning it to the market, Inc. We have seven to eight and accommodations lined up for 2026.
Greg: As we mentioned in previous calls you said you got to for Us.
Greg: He's kind of doing 26, there's no connection between IV campaigns, and we read that.
Greg: Your computer data fortify master she found at coffee shops.
Greg: We have a renewed appreciation for their own fat collaboration greatly.
Greg: And have made some disconnects to peer that you can ask yourself Kennedy said, if any particular.
Greg: And in terms of creating a noodle in our marketing team.
Greg: To be fully dedicated to essentially negotiate because we could use.
Greg: We have also established.
Greg: External property committee to facilitate the development of lung cancer.
Speaker Change: Oh I'd be credentials.
Speaker Change: To close and that could provide an update on our system.
Speaker Change: Right.
Speaker Change: That he expected to complete its implementation with the recent issuances, Jim Thanks, and there was at least a year.
Speaker Change: You might able to hold onto these additions across all restaurants my attitude.
And response from guests and team member has been.
Speaker Change: Uniformly positive.
Speaker Change: But it's too early for us to quantify the impact of that as a nation in Houston.
Speaker Change: He believes he has great potential.
Speaker Change: Bye.
Speaker Change: Identified improvement opportunities, which we believe could drive operational efficiencies out of that.
Speaker Change: Almost all implementation on the piece you can do the math, but it takes some time.
Speaker Change: I'm pleased to be strong staff and it is quite it could be able to see a more quantified expectations on future calls.
Speaker Change: Regarding potential coffee grief.
Speaker Change: And a lot of improvement to the reservation.
Speaker Change: Reservation system.
Speaker Change: I can't find it or not I'm pleased to also offer some of our new nice auction.
Speaker Change: You need to keep the guest.
Speaker Change: Even more control over how they experience corral by introducing New York, something fishy smaller possible right.
Speaker Change: The third quarter.
Speaker Change: Is it all for you.
Speaker Change: It's exciting to see so many of our initiatives.
Speaker Change: Come on line or could it soften Shang.
Speaker Change: Oh no off key members both on.
Speaker Change: And Archie coupled center.
Speaker Change: I've been doing creative work to make it happen.
Speaker Change: Thank you everyone.
Speaker Change: Yeah, I'll hand, it over to you to discuss our financial results.
Speaker Change: <unk>.
Speaker Change: Thank you Jimmy.
Speaker Change: For the third quarter total sales were $74 million as compared to $63 $1 million in the prior year period.
Speaker Change: Comparable restaurant sales performance compared to the prior year period was negative two 1% with traffic at negative, 2.9% and price and mix positive 0.8%.
Speaker Change: <unk> pricing for the quarter was four 3%.
Speaker Change: On June 1st we took a 1% menu price increase and after lapping prior year increases our effective price for the fourth quarter will be three 5%.
Speaker Change: Comparable sales in our West coast market were flat and comparable sales in our southwest market were negative 2.5%.
Speaker Change: As we've been discussing for the last several months, we were looking forward to our third quarter, where our comp comparison eased and that optimism was met with encouraging sequential monthly results as Jimmy mentioned earlier.
Speaker Change: Turning now to costs food and beverage costs as a percentage of sales were 28, 3% compared to 29, 2% in the prior year quarter, largely due to pricing and supply chain initiatives. We continue to be fortunate the tariffs have not caused a meaningful negative impact to our food and beverage costs and we are continuing to work with our.
Speaker Change: <unk> to minimize any future impacts.
Speaker Change: Labor and related costs as a percentage of sales were 33, 1% as compared to 32, 6% in the prior year quarter. This increase was largely due to wage inflation, partially offset by pricing and operational efficiencies.
Speaker Change: Occupancy and related expenses as a percentage of sales were seven 5% compared to the prior year quarter's six 8% due to sales deleverage.
Speaker Change: Depreciation and amortization expenses as a percentage of sales were four 7% as compared to the prior year quarter's 5%.
Speaker Change: Other costs as a percentage of sales were 14.7%.
Speaker Change: As compared to the prior year quarters, 14.1% due to sales deleverage.
Speaker Change: General and administrative expenses as a percentage of sales were 11, 8% as compared to 14% in the prior year quarter due to sales leverage lower public company costs as we lap. The first year of 404 be Sox compliance and lower litigation related costs in just a moment I will be discussing our updated guidance for our <unk>.
Speaker Change: Full year G&A expense.
Speaker Change: Operating loss was $162000 compared to operating loss of $1 $2 million in the prior year quarter due to the lower G&A expenses discussed previously.
Speaker Change: Income tax expense was $55000 compared to $60000 in the prior year quarter.
Speaker Change: Net income was $565000 or five cents per share compared to a net loss of $558000 or negative five cents per share in the prior year quarter.
Speaker Change: Restaurant level operating profit as a percentage of sales was 18, 2% compared to 20% in the prior year quarter, largely due to sales deleveraging increased labor expense and higher other costs.
Speaker Change: Adjusted EBITDA was $5 $4 million as compared to $4 $5 million in prior year quarter.
Speaker Change: We're particularly pleased that being able to increase our adjusted EBITDA by 20%, even with higher restaurant operating costs.
Speaker Change: Turning now to our cash and investments at the end of the fiscal third quarter, we had $93 million in cash cash equivalents and investments.
Speaker Change: And no debt.
Speaker Change: And then lastly, I am pleased to update our guidance for the full fiscal year of 2025.
Speaker Change: We expect total sales to be approximately $281 million.
Speaker Change: We expect to open 15, new units, maintaining an annual unit growth rate above 20% with average net capital expenditures per unit of approximately $2.5 million.
Speaker Change: And we now expect general and administrative expenses as a percentage of sales to be below 13% exclusive of any legal settlements.
Jimmy: And now I will turn it back over to Jimmy.
Jimmy: This concludes our prepared remarks, yeah now happy to answer any questions you have please.
Jimmy: Could you help with any questions.
Jimmy: Mind that billions of Q&A session.
Jimmy: In Germany, before Midas coffee coffee and tea.
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 that your line is in the question queue.
Speaker Change: Press Star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: And our first question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.
Jeremy Hamblin: Thanks, so much and congrats on the strong results.
Speaker Change: I wanted to see if we might be able to dive in a little bit to the commentary around the new.
Speaker Change: Reservation system initiative, and you know kind of the timing of that along with the timing of bringing your latest IP collaboration back.
Speaker Change: Kind of lends itself I wanted to see if you might unpack the same store sales trends cadence during the quarter, a little bit more for us to get a sense for how may performed as you brought that IP collab.
Speaker Change: Back versus our the first two months of the quarter and then you know a sense for you had a pretty pretty big raise in your sales guidance for the for the year you know how things have started out here in June.
Speaker Change: Yeah I'm sorry. This is Ben great Ted Thanks for the question, it's great to hear from you, we're really happy with the reservation system as Ginny mentioned.
Speaker Change: We did see sequential improvement throughout the quarter, but each month being better than the last through March April and May we began the rollout of the reservation system in late February but.
Speaker Change: I it seemed like it really began in earnest in April and we were largely done by May and so you can sort of see that benefit rolling along as well and we again D. The peanuts campaign in very late April.
Speaker Change: Had it running through May and June and that the two of those combined has been really a you know what are the big reasons that.
Speaker Change: We were so happy with how hard last quarter shook out what one other thing to keep in mind is that the rep.
Speaker Change: Surveillance system, just given that we've been.
Speaker Change: A lot is the overlap with the time limited things like the Peanuts campaign and now the Hollow light campaign, we Havent had dedicated advertisements just for the reservation system and Egypt.
Speaker Change: Messaging that we have done is largely focused just towards our rewards members and so we're very pleased to see the results that we're seeing right now and believe that there's additional upside as we communicate this further to our guests.
Speaker Change: Jimmy I have a clientele bonds, Chris Chung for.
Speaker Change: For <unk> three nanometers, taking companies here I think it's gonna conflict.
Speaker Change: It's not been at the nano.
Speaker Change: Citizen comes into play so I do want to take it according to Costco on a pit that could.
Speaker Change: It didn't cause any impact mainly thanks to a lot.
Speaker Change: I'd like to thank I thought that there was any at all.
Speaker Change: One customer because I didn't cost them all.
Well I think what else I can say to get them that you don't need.
Speaker Change: Well I'll answer the second part.
Speaker Change: It's quite stones.
Speaker Change: And going back to the monthly cadence that we've seen in Q3 may coincide with the introduction of our first like you can't gains really Oh.
Speaker Change: Four five months in.
Speaker Change: That was also when our comps turn positive and so it was really it was really great to see not just positive comps positive traffic as well and we have you know because I'd be collaborations continuing for the current quarter and we're very pleased with how the current quarter's performance as well.
Speaker Change: And then Jeremy on your last question about the guidance raise two to $2 81 last quarter, we were pretty certain that we would be close to there as well, but we've been really gun shy about raising our guidance too early just based on you know what happened last year about this time it wasn't a great call for us in July last year. So we wanted to be certain that we have.
Speaker Change: Felt really good about that before we told everybody that we thought we were going to be higher than our previous range of 275 gets you to 79.
Speaker Change: Totally understandable, especially with when you guys were reporting in early April.
Speaker Change: Just one follow up question I wanted to ask on labor.
Speaker Change: And so you had about 50 basis points of deleverage in the quarter, obviously negative comp doesn't help on that but wanted to get a sense for where your what your wage rates are on a year over year basis. Currently and then in terms of looking at a Q4, where you would need to.
Speaker Change: Com to see a positive leverage on that labor line item.
Speaker Change: Now the coupon or they buy any kinds of everybody, but it's uncomfortable jumping on all the water.
Speaker Change: The detailed information that adult one of course is one of them.
Speaker Change: For Q4, our expectation is that we'll see mid to low single digit labor inflation, which.
Speaker Change: Ricky.
Speaker Change: An improvement from what we've seen in Q2 and Q3 I thought all about jumping into a particular oh there on all day about that I'm going to need to put up a bit honestly is medical them caulkins, it'll the dumbest guy nice get them all.
Speaker Change: What are the key to the data would indicate it forgetting about I'm still digging a little bit you got to get them all the people at all outside of good ones.
Speaker Change: It goes without saying that a positive comp makes it easier to lever labor year over year and without getting really getting commentary on quarter to date comps. We're very pleased with how that book is progressing and I'm sorry go ahead.
Speaker Change: I don't know if I've ever been that they are not on a lot of money to get that operation you still got the need that is probably a little companies that make sense. It then well call. It out of curiosity not Q4, so down on all the cohorts, including difficult M&A I'm, putting almost all caught up with it got it. Thank you Kevin Thompson.
Speaker Change: Well one thing that we've been seeing unfold over the last couple of months is all of the initiatives that we've been working on over the last year and really going as far back into.
Speaker Change: Last last year, but yeah, the operational streamlining and then Mr. Supplemented by the new Mr. Fresh new touch panels and the reservation system you see the benefit of those labor initiatives trend along with sales leverage and we're seeing really.
Speaker Change: Everything Blossom now and so that that's been a real pleasure to watch.
Speaker Change: Thanks, so much for all the color and taking the questions and best wishes the remainder of the year.
Speaker Change: Thank you Dan.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Jeff Bernstein with Barclays. Please proceed with your question.
Speaker Change: Yeah.
Speaker Change: Great. Thank you very much.
Speaker Change: Couple of questions. The first one just looking to clarify your comments on the the tariff implications. It seems like you guys report shortly after tariff discussions.
So I know last quarter, there was tariff rollout kind of right before you guys reported and then I know theres been some Japan headlines around tariffs just in the past day or two so I know it's difficult for you, but it sounds like you're fairly confident that there's no material impact I'm. Just wondering if you could share any incremental color, especially now that we do have some specifics in terms of at least whats.
Speaker Change: Tariffs related to Japan, So any color you can provide in terms of the.
Speaker Change: The impact on the cost structure or any pricing it might take would be very helpful. And then I had a follow up.
Speaker Change: Sure Jeff This is Jeff.
Speaker Change: We knew this question was coming so.
Speaker Change: And to be honest I prerecorded last week late last week.
Speaker Change: The tariff commentary on there or was it related to last week. Obviously this new news came out yesterday.
Speaker Change: So, but what I, what I can tell you as well that we don't is because it's been 24 hours I don't have a monetary impact yet based on the projected tariffs, but I can tell you that about 45% of our.
Speaker Change: Basket comes from Japan, Korea, and Vietnam.
Speaker Change: So we'll be able to calculate like later as I mentioned in previous calls our Japanese suppliers have been very eager to sit with us and say look we'll share. Some of this impact we don't know if that's 50 50 60 40, we don't know those numbers yet.
Speaker Change: As soon as we get clarity on those numbers and we will be able to calculate more of a monetary impact of what it might do to our Cogs and will be able to share that at a future conference or in a future call.
Speaker Change: We also are hopeful that 25% is not the final number you know as you know these things have bounced around Trump uses these things as a leverage a lot of times as we know and where it ends up by August 1st we will see.
Speaker Change: But we're in a good place in our Cogs number right now in the low 20 eights and if we do have an impact where we feel pretty good about the fact that that impact shouldn't throw us north of 30, even if it were really high so.
Speaker Change: Yes, it's we're in a much better place and therefore, our cost of goods sold let's say at $30 or 31.
Speaker Change: So we're optimistic about what's going to happen over the next three to four weeks in terms of the negotiations and we'll be able to have further color. The next time, we get in front of investors.
Speaker Change: Yeah.
Speaker Change: Understood. Thank you.
Speaker Change: And then just on the restaurant margin I know in past quarters, you've talked about your I guess longer term confidence sustaining the 20% plus and I think he had been confident in achieving that in fiscal 'twenty five.
Speaker Change: So it looks like we're running more in the 17% to 18% range year to date.
Speaker Change: I'm, assuming it can be difficult to get to 20% in fiscal 'twenty. Five I know you guys don't Chase a margin, but I'm just wondering your perspective on the outlook for the margin in the fourth quarter or <unk> or whether or not fiscal 'twenty six and then well.
Speaker Change: Normalized environment you'd be confident to suggest we could be back north of 20% again. Thank you Joe.
Speaker Change: So you do have any timescale.
Speaker Change: Thanks, a lot and you might be exactly on a nine months now what I did my echo eight ounce platinum today, Scott I'll, let you say political sentiments countries.
Speaker Change: But what about tuck in from out of state on complement to get everyone. Let's see when you do look equal an easy button. It's no wonder I mean, I think if it.
Speaker Change: You don't even have to get I don't want them.
Speaking to the current year, we're already more than nine months into fiscal 'twenty five.
Speaker Change: The quarter to date, I'm, sorry year to date number bridging that.
Speaker Change: Great.
Speaker Change: At 20% plus number is it's difficult.
Speaker Change: We don't think there's anything.
Speaker Change: That has structurally changed about our margins and absolutely 20% plus is our target for fiscal 'twenty six.
Speaker Change: Digging a little funky.
Speaker Change: You can get up when it comes to I'll put it in the company, who do you guys. I mean, that's putting a date on that of course the other day.
Speaker Change: I'm going to go back to go, particularly well so anybody thinking about needing bucket, but it's not just kind of give us some sort of timing on <unk> based on that and then I've got a hockey IMS data I think it'll be equal or anything.
Speaker Change: Okay.
Speaker Change: I am looking at fiscal 'twenty six.
We're feeling very good about our position as it relates to comps we're lapping.
Speaker Change: Fiscal 'twenty, five which had a four to five months stripes without campaigns next year, we have the most ideal candidates. We've ever had we also had the reservation for the full year and so we.
Speaker Change: Yeah just.
Speaker Change: Coming into the year, we're in a very strong position that reason that we wouldn't be able to achieve positive comps and have that flow through to a 20% plus restaurant level operating profit margin.
Speaker Change: Hey, Bob it's fancy depreciation, although Osaka and with.
Speaker Change: With positive comps that would naturally allow us better leverage on labor occupancy other costs depletion depreciation and.
Speaker Change: That would drive our margin expansion or really are returned to marketing policy.
Speaker Change: Yeah.
Speaker Change: Okay, and if I could just.
Speaker Change: One more in Jeff I know you like to talk about the the G&A leverage which lowering your target for this fiscal year, obviously vary.
Speaker Change: Impressive I'm just wondering that further reduction any color you can share in terms of the biggest buckets of these incremental savings and whether or not you think I know you took long term about being sub 10%, but should we continue assuming a path trajectory. The way we've been seeing recently in terms of how we should think about fiscal 'twenty six versus that sub 13% in fiscal 'twenty five thank you.
Speaker Change: Yeah.
Speaker Change: The biggest basket is really head count.
Speaker Change: The team and leadership in the support center and in field operations has done a really good job of figuring out how to better allocate work to everybody rather than just adding people.
Speaker Change: And then when.
Speaker Change: Things get.
Speaker Change: Backed up so it's really been a group effort and salaries is the biggest piece of that G&A. So with everybody's focus that's how we were able to get there.
Speaker Change: That leverage that we got this year was much higher than I expected and clearly with the guidance raised when we're rewarded at the beginning of the year in the mid 13 so.
Speaker Change: Going forward I do expect additional leverage in the past I think I had said 50 to 60 basis points a year.
Speaker Change: Next year honestly, Jeff I don't know if it'll be quite that high just because of how much. We got this year I do expect leverage next year, but maybe not to that 50 to 60 basis point, but I do believe that in future years, we might be able to get back there after we get through fiscal 'twenty six.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Andrew Charles with TD Cowen. Please proceed with your question.
Speaker Change: Thank you. This is Jack Ogden on for Andrew just based on our math it looks like the new store productivity has improved so far in 2025 relative to 2024 or so are you seeing the class of 2025 opening stronger than the class of 'twenty 'twenty four and if so what's that driven by.
Speaker Change: Yes.
Speaker Change: And then you're selling them off.
Speaker Change: I don't see a whole lot.
Speaker Change: No, but he can also Mr. Don Kimble gondola no cooking on multiple on all okay.
Speaker Change: Yes fiscal 'twenty five is certainly started in fiscal 2000 and for its one of the strongest classes. We've had in recent memory. We're really really pleased a big part of that would be our opening up the Pacific northwest as Jamie mentioned in his prepared remarks, our lynwood pretty much immediately entered our top five and so that's been a great tailwind.
Speaker Change: For us that's the whole thing about Asia, just took off because I think that's.
Speaker Change: C D M and it'll put them all on all the local polymer okay.
Speaker Change: Well put it on a on a study or when you get off the.
Speaker Change: Equal eating are not equal.
Speaker Change: And you can sneak down something he doesn't want to let it get.
Speaker Change: Oh, yes, absolutely.
Speaker Change: And besides the.
Speaker Change: Building out one of the most promising markets. We've also been exploring a.
Speaker Change: <unk>, So fishers, Indiana would be an example, Bakersfield is another example that we've returned to over the past couple of earnings calls, but all of them are doing very well in what was critical about fissures in Bakersfield.
Speaker Change: <unk> provide data points for us in terms of.
Speaker Change: Our pipeline building in the future it gives us that much more optionality in terms of how we build our pipeline and that's really the biggest part of us getting back to a 50 50 split for fiscal 2007.
Speaker Change: So we're very pleased across the board with the performance not just Indian filling in existing markets, where we knew that we do well, but having a positive surprises in new markets as well.
Speaker Change: Got it. Thank you and then just last call you had called out of 300000 to 400000 impact can you start bill costs from tariffs has that expectation changed at all since the last call based on the different tariff rates.
Speaker Change: No. Dr 300, or 400000 is still our expectation at worst case scenario given the current tariff situations.
Speaker Change: Alright got it thank you.
Speaker Change: Thanks again.
Speaker Change: Yeah.
Speaker Change: Thank you and our next question comes from the line of Todd Brooks with Benchmark company.
Speaker Change: Please proceed with your question.
Speaker Change: Hey, Thanks, and congratulations on the results this quarter great to see.
Speaker Change: Two quick questions one fallen following up on reservation I know, we're a little ways away from getting quantifiable data.
Speaker Change: But just from what you're seeing in the early experience with the platforms in place.
Speaker Change: Are you seeing those larger boosts around lunch and maybe.
Late night kind of those where you knew you had capacity if you could unlock it with the.
Speaker Change: The surety of being able to to get a seat and then another.
Speaker Change: Follow up on the reservation side I know that we've really I think just started promoting it too.
Speaker Change: Loyalty program members recently.
Speaker Change: Thoughts on the ability to take it to non loyalty and message it more broadly and draw some new people to to the brand to try the restaurant.
Speaker Change: Or do we need to leg into that just to handle the capacity that were getting a pickup from our loyalty program members alone.
Speaker Change: No absolutely to answer your second question first that is absolutely. The next thing that's on the.
Speaker Change: On the docket for US right now our guests have been organically discovering it or I'm sorry, our rewards members have been organically discovering it is.
Speaker Change: Reservation button is exactly where youll waitlist button wasn't so theres really no change to the guests love. It says people discover it pretty naturally otherwise, it's been secondary messaging and our marketing emails, but we do believe that this is a massive massive catalyst for rewards member registrations and so certainly.
Speaker Change: We want to capture that in terms of what we've seen.
Speaker Change: And in the early days, just given that our last restaurants.
Speaker Change: Rolled out in mid June I don't want to.
Speaker Change: I don't see any numbers that you are going to be changing your modeling often but one one really important point.
Speaker Change: But we've been able to cooperate for statistical analysis is that.
Speaker Change: Half of our resin for half more than half of our desk with reservations are being seeded within two minutes of arrival, which I mean, Thats night and day from what guests are used to it. So you get a pretty clear idea of the massive opportunity there this year.
Speaker Change: That's fantastic and then a final question I will jump back in queue.
Speaker Change: You've talked about the IP partnership and the strength that youre seeing in the coverage that you are seeing I think there was a comment that you'll be covered for all the weeks of fiscal 'twenty six versus being dark on IP partnerships for four to five months here.
Speaker Change: In fiscal 'twenty five I know, we're not going to get details on what's making up the pipeline, but can you talk qualitatively about the quality of the pipeline and maybe the magnitude of the partners because it sounds like there's that much more internal effort against it as well with the New Committee ingest.
Speaker Change: Really really a focus on extracting more return out but these efforts. Thanks.
Speaker Change: Yeah, I mean speaking in terms of if you just look at our pipeline from passengers, it's pretty clear that the properties just get bigger and better every year I think one thing that's really key to our new strategy is that while we have been able to get consistently bigger partners. They haven't necessarily translate into bigger sales and just having more.
Speaker Change: Partnerships per year that gives us more at bats that many more opportunities to discover really what's going to be successful with it.
Speaker Change: Built our portfolio based off of that and so the upcoming several campaigns that we have are.
Speaker Change: Even slayer in one piece, which are two of the best to the best properties. We partnered with following that we have Kirby, which is the biggest Nintendo property that we've ever partnered with we're very pleased that the new <unk>.
Speaker Change: The renewed focus on the IP collaborations I think is a very key part of our discussions as it relates to fiscal 'twenty six.
Speaker Change: Yeah, a little bit more experimental so for instance, with the current call it widespread.
Speaker Change: We don't have associated upon giveaways, but it's still been a massive traffic driver because of the intensity of the fandom. So we've got these cups for sales in the food collaborations, but that's still been a very meaningful traffic driver and having these campaigns without their relative what you sort of investment light lets us be that much more experimental let's just have that anymore cafes per year.
Speaker Change: Which will get us closer to that ideal portfolio that much faster.
Ben Great: That's great. Thanks, Ben Congrats everyone.
Speaker Change: Thank you. Thank you. Thank you.
Ben Great: Thank you.
Speaker Change: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.
Mark Smith: Hi, guys just as we look at restaurant level expenses here just wanted to dig in on other costs.
Mark Smith: It's purely utilities or other things that are that drove that a little bit higher here during the quarter.
Mark Smith: But I don't know Keith any and all on other calls I'll talk about that.
Mark Smith: That's what it means I don't think so.
Mark Smith: You don't know what else did I Miss the holder of that market.
Mark Smith: You know one thing I didn't ask it but.
Mark Smith: Just thinking about you had said that I suppose you're.
Mark Smith: So let me put the tonnage took an update would give up a day or on the nine months and I'm, making that you don't get that button. They tune into let me just Scott John thinking about on the Q2.
Mark Smith: On a Honda about Keith Keith you can stop eating well get that again okay.
Mark Smith: One is you don't button variability from day to day, so about eight months.
Mark Smith: In terms of whats.
Mark Smith: Really the major components of our other costs.
Mark Smith: As compared to say a couple of years ago.
Mark Smith: Really just minor growth across the board so are.
Mark Smith: Slight increases in R&M costs slight increases in utilities.
Mark Smith: Really the way, we think about it is that.
Mark Smith: Do you ever talk numbers for Q2 were abnormally low and so you can sort of think of the.
<unk> seven we had for Q3 is a bounce back year to date, our other costs as a percentage of sales was 14, 3%, which is exactly where it was for the full year fiscal 'twenty. Four we think that 14% ish is where we're going to be running for the foreseeable future.
Speaker Change: Perfect and then just similar as we think about G&A I know that Jeff you just talked a little bit about kind of people in salaries and things that are in there.
Mark Smith: It's great to see that guidance come down as they've been in there.
Speaker Change: Ben cuts or are you continuing to add people.
Speaker Change: Just a little more insight into kind of how you're managing.
Speaker Change: G&A and if it's if it's purposeful.
Speaker Change: Kind of keeping the bulk tight or if it's just kind of the sales growth, that's keeping that down and related to the guidance that we sat here today.
Speaker Change: It's purposeful keeping it down.
Speaker Change: It's not due to cuts we have not kept people and we do not plan to cut people. This is more a slowing down our hiring and I think it's a change in mindset.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: Several years ago, maybe we're a little quick.
Speaker Change: People when when things got a little rock and rather than thinking about alternative ways to do things how we allocate work how we can see who has some bandwidth to take on some more things and everybody has done a good job of doing that so when there is a new hire request. It gets a lot more scrutiny now than when I first started with.
Speaker Change: The company and people are just thinking about different ways of doing things and.
Speaker Change: The approval process for new hires goes through a lot more people than previous.
Speaker Change: Previously.
Speaker Change: And I.
Jay: I challenge it quite a bit as the financial officer, Jay It gives you a good example.
Jay: When I joined the company, we were able to cut the number of requests and new hires in the budget in half or more than once you have them.
Jay: From like 21, the request of new hires I think we went down to six or seven and that was three years ago and it's worked out so with that change in mindset I think that it's it's the way that we will be doing things in the foreseeable future, which is why I'm very optimistic about that and now north of 300 basis points of leverage over three years.
Jay: It is something that we are very proud of this management team.
Jay: Excellent and then if I can squeeze in one more just as we think about the the success as you moved into maybe some smaller markets does that change your outlook on kind of your your total pipeline and how many units you think you can build across the U S over time.
Jay: Ron will coincide with the ones because I'm not a <unk> study yesterday I got to get it on a Google kind of cycle.
Jay: Of course, we're happy for you to fill in whatever that number and you think will be.
Jay: Okay perfect. Thank you guys.
Jay: Good luck.
Jay: Yeah.
Jay: Thank you.
Speaker Change: And our next question comes from the line of Jon Tower with Citi. Please proceed with your question.
Speaker Change: Great. Thanks for taking the questions maybe just following up to the comment you made earlier on tariffs and the idea of Cogs.
Speaker Change: Maybe moving north of 30% or maybe not hitting north of 30%. So I guess the implication there is that you guys would absorb all of the impact.
Speaker Change: Of any sort of tariffs rolling through or even if you're negotiating with your suppliers, there like or better said youre not going to necessarily take pricing to offset the impact of tariffs on Cogs is that the best way to interpret that.
Speaker Change: Well, we would take on the portion that we agreed to with the vendors whatever wherever they had ended up with roughly 50 days or whatever yes pricing is the last resort.
Speaker Change: But I will tell you that our our effective pricing in November it goes down to 1%. So when that happens we do have some pricing power if we need to do that but we want to leave that as a last option.
Speaker Change: But we could do that.
Speaker Change: Hi.
Speaker Change: Were just hopeful that the 25% number that's currently out there will end up being much lower and that's where the hope, but the hope is going to be in.
Speaker Change: It's been 24 hours and I think as Jeff Bernstein said earlier. Unfortunately, we get to deal with these things within a day or two after they happened in the last two calls so we.
Speaker Change: We will have more color on this as we get further in but that's our current thought process and just to add on that.
Speaker Change: As it relates to Cogs I think we have a massive opportunity in fiscal 2006 through the White Rice program can you had mentioned I had the opportunity to try for the first time last week and typically all top out at five or six plates I E. At least 10 place without thinking about it and I'm sure that they're gonna be tons of other tests that are justice.
Speaker Change: He asked about this and so if we can really.
Speaker Change: Okay.
Speaker Change: That's what we can get get what we expect from the light right that that's a big lever for us for fiscal 'twenty, six and as Jeff mentioned, we want to pull every other lever for repo pricing.
Speaker Change: Got it and can you just speak to what that like Rice is I just haven't heard of it before.
Speaker Change: So its for most part mcgeary options when you order on the touch panel, you'll have an option like regular rice or light rice in the light Rice's just a smaller portion of rice.
Speaker Change: Okay. So lower Cogs is that the same price point lower costs.
Speaker Change: It is also lower.
Speaker Change: Lower Cogs, but also it does it's not it's Billy so I ate twice as much as I, usually do when I was choosing the white rice auctions.
Speaker Change: Okay.
Speaker Change: Then just on I know fiscal 'twenty, seven youre pointing to getting back to a 50 50 split on new versus emerging markets or excuse me new versus existing markets can you speak to that number for new stores in 26, I'm, sorry, if I misspoke I meant.
Speaker Change: 27, you're talking about new stores.
Speaker Change: 50 50.
Speaker Change: What that looks like in 'twenty six and then are.
Speaker Change: Are you still anticipating I think roughly a 4% or so cannibalization number.
Speaker Change: You know dragging on the business next year.
Speaker Change: Well I mean, it doesn't cost a lot like I said on the existing debt on the 30 <unk>.
Speaker Change: You basically mccanless thought they might be but things are still a couple unusuals domestically importantly, with no need to open any day now to talk about them.
Speaker Change: In terms of our expectations for fiscal 'twenty six.
Speaker Change: Looking at our pipeline.
Speaker Change: It's going to be about 70% existing markets, 30% new in terms of the impact of the existing debt.
Speaker Change: The new units in existing markets. We think that's largely in line with the 400 basis point headwind that we saw in fiscal 'twenty five 'twenty for any of that any cost of money doesn't do well maintained.
Speaker Change: Maintain for the state and I'll, let you on thinking about that you keep I need you to come off what I'm feeling from the Connecticut.
Speaker Change: Okay fantastic.
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: Typically its got some humble humble Netherlands, okay.
Speaker Change: And then as it relates to fiscal 2007, we expect to continue to maintain that 20% unit growth. We do think we will be able to get.
Speaker Change: Back to that 50 50 between naturally just cut that compact winded path.
Speaker Change: Okay.
Speaker Change: And then just last piece for me in terms of it's great to hear the IP collaborations stepping up next year and it sounds like you're going to be on pretty much all year or throughout the year in fiscal 2006.
Speaker Change: You know in the past I think you've kind of had some hit or Miss is when it comes to some of the IP Italian so can you speak to.
Speaker Change: Your confidence or how you're approaching it differently. This time to ensure that the hit rates are higher than.
Speaker Change: Perhaps past initiatives or past IP Italians that you've had.
Speaker Change: Yeah, well I think that they just.
Speaker Change: Frustration in the past it was really sort of opportunity cost, where if you had to miss it wasn't just that you had a miss you had a miss that was eating up two months of your calendar if that could be better spent with a better collaboration and despite having seven to eight which is meaningfully more than we've had this year and its domestic we've had of any year, we get that.
Speaker Change: More price so to speak to find what the successful ones are based off of the successes, we know what to repeat in future years.
Speaker Change: Got it so it's effectively just frankly sprinkling in more throughout the year. So you'll have a better idea of what works and what you can repeat okay cool awesome. Thanks for taking the questions.
Speaker Change: Thank you so of course.
Speaker Change: Yeah.
Speaker Change: Thank you.
And our next question comes from the line of Jim Sanderson with Northcoast Research. Please proceed with your question.
Jim Sanderson: Okay. Thanks for the question and congratulations on a great quarter I wanted to talk a little bit more about the mix component of same store sales. How you expect that to progress going forward. If that's related to how you're rolling out collaborations and how we should look at that as you roll off pricing in November.
Speaker Change: Sure.
Speaker Change: On the <unk>, because the concept well Tonight.
Speaker Change: There's still a high single Nathan N E marketing and all those.
Speaker Change: That is something that somebody can of Coca.
Speaker Change: But can you give a little more tough I spoke to that and I'll keep it all but it is on the on a political will get really difficult on days when people have been thinking.
Speaker Change: So I think it would take according to opportunity I thought I don't think that that goes with that.
Ted: Thanks Ted.
Ted: What do you think led to kind of think of it that's why so many people separate and unequal aside I didnt call them out.
Ted: And your pet I know quite a lot because they know that they can kind of say well I don't want them of course looks promising as.
Ted: We're very excited to see where we can bring mix in fiscal 'twenty. Six. So you know over the last couple of years, our mix has gone from negative high single digits to hovering between negative low single digits to mid single digits.
Ted: Part of that from this fiscal year.
Ted: Wind from the lack of IP collaborations.
Ted: We have typically with every IP collaboration will have a giveaway that's associated with a certain spending threshold, it's typically $70 or so or less.
Ted: The the giveaway campaign that we had or hollow life was actually at a higher dollar threshold because we saw there was that much guest interest for it and so that naturally drives average average ticket. The light price. We think is a big opportunity in terms of average check growth I E. I believe my personal expectation is that this will grow.
Ted: Replace per person and I think that's a really good opportunity that we're gonna be leading into the other is the 25th played initiatives. We're really pleased with the early results, where we have seen is pretty much exactly what we expected as a minor pressure on transactions about 30 points, but more than enough growth in the 25 plate plus category to offset.
Ted: And so we're really happy to see that.
Speaker Change: Alright. Thank you for that I, just wanted to talk a little bit more about the Reg system.
Speaker Change: As its related to membership levels have you seen any notable increase in membership in the fourth quarter or could you update us on where that membership rate is.
Speaker Change: So membership brings her.
Speaker Change: The growth rate is pretty much the same as this past quarters and a big part of that is we haven't communicated the reservation system to non rewards members yet.
Speaker Change: And so I expect in November I'll be able to give you the answer youre looking for.
Speaker Change: And then last question for me could you just update us on the various technology initiatives you've got in process I think you've got the system. You just finishing I think you've got some point of sale issues to resolve and then there is the robotic dishwasher or is there anything else out there that could have an impact good or bad on operations going forward.
Speaker Change: Hi, there I'm not trying to go to the adult.
Speaker Change: You said you thought on the <unk> machine.
Speaker Change: Oh, cortisol or thinking about continuing to get at them. It doesn't look like it.
Speaker Change: I know most of the 19th put it I'm going to automatically what's going on.
Speaker Change: It gets all state with one of those days just to take them off I think you can tell it's interesting.
Speaker Change: Yes.
Speaker Change: The biggest things that we're excited for 2006 with E. The dish robot our strong hope was to get it live in fiscal 'twenty, five, but I'm not sure if we'll be able to do that but it really does seem like we will be able.
Speaker Change: We got certification within a matter of months.
Speaker Change: The Utica we're building in fiscal 'twenty six are built from the blueprint stage, assuming the eventual installation of these robots and so that's going to be a very meaningful opportunity should reduce head count.
Speaker Change: 301, I thought most of them against that is that based on some of them didn't get them all on a so I'm thinking on a photo of a sudden equal on all function mistake, because he got cut off at all and are implementing them up when you talk to us about them I put.
Speaker Change: Put them all on when you sounds like is that I know you indicated you thought and you thought somebody running boom income side could you talk to us and then well.
Speaker Change: The reservation system is at each of our restaurants, we still see lots of opportunity for improvements, especially as it relates to employee efficiency.
Speaker Change: We have got a list of about 70 different things, we're working on as it relates to the reservation system and that's we think is going to have pretty meaningful upside opportunities as it relates to front of house efficiencies.
Speaker Change: Alright, Thank you very much.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.
George Kelly: Hey, everybody thanks for taking my questions.
George Kelly: First most of them have been asked and answered, but just a quick follow up on the prior question can you be any more specific about the efficiency opportunity that you see.
George Kelly: In 2026 from reservations.
George Kelly: Yes, so just as a couple things.
George Kelly: A couple of examples the seeding processes is meaningfully simplified before when the theater of the hosts the seeding of gas they have to.
George Kelly: They have to enter information on three different terminals and we.
George Kelly: Cut that labor.
George Kelly: <unk>. So there is only one terminal that you were touching on the process itself is simplify one unexpected.
George Kelly: Efficiency opportunity that we've seen it's been buffet.
George Kelly: And this really hadn't occurred to me until you've actually seen this happen.
George Kelly: And the restaurants once we've implemented it but there's an element of psychological pressure when you have.
George Kelly: Yep.
George Kelly: Reservation times, such as promised somebody before we did it on a wait list and so you need like parties 26, 27, 28 per weighted and that's a different feeling from being at seven seven.
George Kelly: 730, <unk> knowing that there are three parties that you've promised a CPM at seven o'clock waiting for you. So the buses are actually moving more quickly and so that's opportunity, especially in the peak hours and so I'm excited to see just how much we can get out of that.
Okay. That's helpful. Thanks, and then second question for me.
George Kelly: Back to the light rice.
George Kelly: Then you said confident about.
George Kelly: What youre seeing or what sort of how do you how do you expect.
Speaker Change: The reception, you're expecting to get from that well can you just give us a little more background. Unlike.
Speaker Change: Why you have that level of confidence about that sort of played opportunity than maybe it's been tested at certain.
Speaker Change: Locations.
Speaker Change: And when do you expect it to fully rollout. So just I guess any context on that.
Speaker Change: That would be great.
Speaker Change: No.
Speaker Change: All right.
Speaker Change: So you've got the caveat, though not as good at upon them up on our focus on the wall.
Speaker Change: Like I'd have to get that.
Speaker Change: I can ask you touched upon it in your update that they get them on what it would imply that you think that the number of cases, they've got it on all these other than you thought at all.
Speaker Change: Hum.
Speaker Change: On the pump and the pump on Samsung.
Speaker Change: I'm not ready to call it equal to not get into it.
Speaker Change: So when you went about it there's still a nice kick off I think it's interesting.
Speaker Change: Got it Okay fair enough.
Speaker Change: The biggest thing.
Speaker Change: It gives us confidence is that this isn't this is something that contract that has already been doing for years and when they implemented that they did see.
Speaker Change: Mix improvement there.
Speaker Change: See ticket growth.
Speaker Change: We were able to implement this now because of the update <unk>.
Speaker Change: The new touch panel system, which gives us much more flexibility and.
Speaker Change: And so just looking at the results from Japan gives us a lot of confidence when I was speaking earlier. It was really just from my personal experience I really loved it I would strongly encourage you to try it and I think you'll feel as confident you'll understand my confidence once they try it that there really is a very big opportunity. There we've already got to set about 50 of our restaurants and.
Speaker Change: Yeah, I'm really happy that we had this is it.
Speaker Change: It's really something that <unk> been asking for for a long time, whether it's explicitly in the.
Speaker Change: The guest surveys or just in the piles of untouched rights that we see in our restaurants and so this is something that our guests have been asking for and I think we've been doing a really good job in fiscal 'twenty five I'm just checking wanted one issue after another in terms of.
Speaker Change: Points of friction for our guests.
And then on a pet scan was done at the total mining well nobody idea could you tempered by the English isn't there Monday without question I didn't know how do you do that it's somewhat audio without digging into play so just to give you some additional context.
Speaker Change: <unk> cruise speed style, we we implemented visit our first restaurant about 10 days ago. We now have it in 50 restaurants, and so that speaks to our enthusiasm but.
Speaker Change: You can imagine we don't have a lot of data that we can share with you yet.
Speaker Change: Okay. That's helpful. Thank you.
Bruce: Thank you Bruce.
Speaker Change: Yeah.
Speaker Change: Thank you and our final question comes from the line of Matt Curtis with William Blair. Please proceed with your question.
Matt Curtis: Hi, good afternoon.
Matt Curtis: I apologize I missed this in your commentary, but could you just give us the average ticket breakdown.
Matt Curtis: In the quarter between price and mix.
Speaker Change: But also the mix so I'm a little disappointed.
Speaker Change: On a political but it did seem that lumpiness on nowadays and also with little hunting going to minus <unk> <unk>.
Speaker Change: Cumulatively was positive <unk> eight.
Speaker Change: Price was $4 three so mix was negative three five months until this Democrat I need my ultimate heightened ethanol on the mummy.
Speaker Change: It's got to meet the whole each time up until they start instead of all of the dead.
Speaker Change: And all of them, but what's going on politically fundamentally going on second quarter financing.
Speaker Change: And as we mentioned earlier.
Speaker Change: Mix has been hovering around a negative high single digits for a very long time, we're really pleased to see it stabilize in this low to mid single digit range with the initiatives that we have like the white rice the 25th place.
Speaker Change: Collaborations and giveaways.
Speaker Change: We're really excited to further drive that down and you know.
Speaker Change: What do you think there is even a possibility that we'll be able to see a positive number at some point.
Speaker Change: Okay, great. Thank you.
Speaker Change: And then I know the additional flight rice is really reasons.
Speaker Change: But just to be clear could you tell us what the per plate consumption trends were like.
Speaker Change: <unk>.
Speaker Change: Oh I'm sorry, so the this.
Speaker Change: This was implemented after Q3 and so it wouldn't have any have you had any impact on the place for personal consumption.
Speaker Change: And the five quarter.
Speaker Change: Yes, what I meant.
Speaker Change: What were the actual per flakes consumption trends during the quarter relative to say the second quarter. So for the last several years instead of approximately six per person.
Speaker Change: Okay.
Speaker Change: Okay, great. Thanks very much.
Speaker Change: Thank you Mike.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Speaker Change: Wonderful.
Speaker Change: Okay.
Speaker Change: Uh-huh.
Speaker Change: Sure.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Yeah.