Q3 2026 Kura Sushi USA Inc Earnings Call

July 7, 2026

Speaker #1: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Kura Sushi USA, Inc. fiscal third quarter 2026 earnings conference call. At this time, participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation.

Operator 3: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal Q3 2026 Earnings Conference Call. At this time, participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this call is being recorded. On the line today, we have Hajime "Jimmy" Uba, President and Chief Executive Officer, and Benjamin Porten, SVP, Investor Relations and System Development. Now, I would like to turn the call over to Mr. Porten.

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal Q3 2026 Earnings Conference Call. At this time, participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this call is being recorded. On the line today, we have Hajime "Jimmy" Uba, President and Chief Executive Officer, and Benjamin Porten, SVP, Investor Relations and System Development. Now, I would like to turn the call over to Mr. Porten.

Speaker #1: Please note that this call is being recorded. On the line today, we have Hajime "Jimmy" Uba, President and Chief Executive Officer, and Benjamin Porten, SVP, Investor Relations and System Development. Now, I would like to turn the call over to Mr. Porten.

Speaker #1: Porten.

Speaker #2: Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal third quarter 2026 earnings release.

Benjamin Porten: Thank you, operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal Q3 2026 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 8-K submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, therefore, you should not put under reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Speaker #2: It can be found at www.kurasushi.com in the Investor Relations section. A copy of the earnings release is also being included in the 8-K we submitted to the SEC.

Speaker #2: 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.

Speaker #2: These forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that can cause actual results to differ materially from what we expect.

Speaker #2: 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: We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Also, during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP. The reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I would like to turn the call over to Jimmy.

Speaker #2: 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 as a substitute for results prepared in accordance with GAAP, and the reconciliation to comparable GAAP measures is available in our earnings release.

Speaker #2: With that out of the way, I would like to turn the call over to Jimmy.

Speaker #3: Thanks, Ben, and thank you to everyone who's joining us on our call today. During our fiscal third quarter, we were able to make significant progress towards our goals of sustainable margin improvement and returning to our historical 20% restaurant-level operating profit margins, regardless of tariff relief.

Hajime Uba: Thanks, Ben. Thank you to everyone who's joining us on our call today. During the fiscal Q3, we were able to make significant progress towards our goals of sustainable margin improvement and returning to our historical 20% restaurant-level operating profit margins regardless of tariff relief. Despite our cost of goods sold as a percentage of sales being 200 basis points higher than last year due to tariffs, our operational discipline allowed us to more than offset this impact and improve our restaurant-level operating profit margin by 90 basis points over the prior year to 19.1%. We were also able to improve adjusted EBITDA margins by 40 basis points to 7.7%. We grew our adjusted EBITDA dollars by more than 20% over the prior year.

Speaker #3: Despite our cost of goods sold as a percentage of sales being 200 basis points higher than the last two years—last year due to tariffs—our operational discipline allowed us to more than offset this impact and improve our restaurant-level operating profit margin by 90 basis points over the prior year, to 19.1%.

Speaker #3: We were also able to improve other certificate margins by 40 basis points, to 7.7%, and grew our other certificate dollars by more than 20% over the prior year.

Speaker #3: Our ability to improve profitability in a challenging environment speaks to what we do best—responding rapidly to control what we can control. Total sales for the fiscal third quarter were $85.9 million, representing comparable sales of negative 0.4%, with negative 5.1% traffic, offset by a positive 4.7% in price and mix.

Hajime Uba: Our ability to improve profitability in a challenging environment speaks to what we do best, responding rapidly to control what we can control. Total sales for the fiscal Q3 were $85.9 million, representing comparable sales of -0.4%, with -5.1% of traffic offset by +4.7% in price and mix. Effective pricing for the quarter was 4.5%. During our last earnings call, we mentioned that mix being close to flat at -0.2% was the best flow-through in pricing that we had ever seen. Mix actually saw further improvement in the Q3, with average ticket growth exceeding effective pricing. Pricing went up to 1% as of 1 June, which we offset with 1% pricing on 1 July, making our effective pricing for fiscal Q4 4.2%.

Speaker #3: Effective pricing for the quarter was 4.5%. During our last earnings call, we mentioned that mix being close to flat at negative 0.2% was the best flow-through in pricing that we had ever seen.

Speaker #3: Mix actually saw further improvement in the third quarter, with average GAAP growth exceeding effective pricing. Pricing developed 1% as of June 1, which we offset with 1% pricing on July 1, making our effective pricing for fiscal fourth quarter 4.2%.

Speaker #3: Cost of goods sold as a percentage of sales was 30.2%, as compared to 28.3% in the prior year quarter, due to the impact of tariffs.

Hajime Uba: Cost of goods sold as a percentage of sales was 30.2%, as compared to 28.3% in the prior year quarter due to the impact of tariffs. While COGS remain meaningfully higher than historical levels, we are pleased with the progress of our vendor negotiations and cost management efforts, which resulted in a sequential improvement of 20 basis points over Q2. Our full-year COGS expectations as a percentage of sales remain approximately 30%. Labor as a percentage of sales improved by 250 basis points to 30.6% due to operational initiatives. At the beginning of the fiscal year, we had shared an expectation to lever labor cost by 100 basis points over fiscal 2025's full-year labor cost of 32.9%. I'm very pleased to share that as of the end of our Q3, we've been able to drive down our year-to-date labor cost as a percentage of sales to 31.2%.

Speaker #3: While COX remained meaningfully higher than historical levels, we are pleased with the progress of our vendor negotiations and cost management efforts, which resulted in a sequential improvement of 20 basis points over Q2.

Speaker #3: Our full-year COGS expectations as a percentage of sales remain approximately 30%. Labor as a percentage of sales improved by 250 basis points to 30.6% due to operational initiatives.

Speaker #3: At the beginning of the fiscal year, we had shared an expectation to lower labor cost by 100 basis points over fiscal 2025’s full-year labor cost of 32.9%.

Speaker #3: I'm very pleased to share that, as of the end of our third quarter, we've been able to drive down our year-to-date labor cost as a percentage of sales to 31.2%.

Speaker #3: It now looks like we are going to land in the neighborhood of 200 basis points of improvement on our labor line. Turning to unit development, we opened seven new restaurants in the third quarter.

Hajime Uba: It now looks like we are going to land in the neighborhood of 200 basis points of improvement on our labor line. Turning to unit development, we opened seven new restaurants in the Q3. Orange, Union City, Temecula, and San Diego in California, Goodyear, Arizona, Wellington, Florida, and Denton, Texas. Subsequent to quarter end, we opened restaurants in Tulsa, Oklahoma, Sunset Valley, Texas, and Charlotte, North Carolina, bringing us to 15 new unit openings to date. While we continue to expect to open 16 new restaurants for this fiscal year, we have unfortunately faced significant unexpected delays for a number of restaurant openings in both Q3 and Q4, and a loss of approximately six revenue months has impacted our revenue expectations for the year, which we will discuss shortly.

Speaker #3: Orange, Union City, Temecula, and San Diego in California; Goodyear, Arizona; Wellington, Florida; and Denton, Texas. Subsequent to quarter-end, we opened restaurants in Tulsa, Oklahoma; Sunset Valley, Texas; and Charlotte, North Carolina, bringing us to 15 new unit openings to date.

Speaker #3: While we continue to expect to open 16 new restaurants for this fiscal year, we have unfortunately faced significant unexpected delays for a number of restaurant openings in both Q3 and Q4. A loss of approximately six revenue months has impacted our revenue expectations for the year, which we will discuss shortly.

Speaker #3: These delays occurred following the April earnings call, across different geographies, and for different reasons. For many unrelated delays to coincide with one another is highly unusual.

Hajime Uba: These delays occurred following the April earnings call across different geographies and for different reasons, for many unrelated delays to coincide with one another is highly unusual. Our marketing team has been hard at work building our IP pipeline for fiscal 2027, which is shaping up to be one of our strongest ever. Following our current collaboration with Honkai: Star Rail, we have a collaboration with Atlus' Persona. In June, Atlus officially announced the release of the much-awaited Persona 6, marking the end of a decade-long wait for fans since 2016's Persona 5. In September and October, we are partnering with The Apothecary Diaries, coinciding with the release of the anime's latest season. I'm extremely excited to announce that November marks our third collaboration with Nintendo. Our IP campaign for November and December is Yoshi to celebrate the recently released Yoshi and the Mysterious Book for the Nintendo Switch 2.

Speaker #3: Our marketing team has been hard at work building our IP pipeline for fiscal '27, which is shaping up to be one of our strongest ever.

Speaker #3: Following our current collaboration with Honkai: Star Rail, we have a collaboration with Atlus's Persona. In June, Atlus officially announced the release of the much-awaited Persona 6, marking the end of a decade-long wait for fans since 2016's Persona 5.

Speaker #3: In September and October, we are partnering with Post-Sale Diaries, coinciding with the release of the anime's latest season. I'm extremely excited to announce that November marks our third collaboration with Nintendo.

Speaker #3: Our IP campaign for November and December is Yoshi, to celebrate the recently released Yoshi and the Mysterious Book for the Nintendo Switch 2. In other marketing news, we remain on track for a fiscal 2027 launch of our upgraded status-tiered reward program.

Hajime Uba: In other marketing news, we remain on track for our fiscal 2027 launch for our upgraded status tiered rewards program. We are also in the process of introducing optionality to our Bikkura Pon system by giving guests the choice between the capsule prize and the free dessert voucher that can be redeemed on their next visit. We believe this addition will improve guest satisfaction, encourage repeat visits, and reduce our prize production cost. Development is currently underway, and we hope to have updates for you at our November earnings call. Now, I'll discuss our financials and liquidity. For the Q3, total sales were $85.9 million as compared to $74 million in the prior year period. Comparable restaurant sales growth compared to the prior year period was -0.4%, with -5.1% from traffic and 4.7% from price and mix.

Speaker #3: We are also in the process of introducing optionality to our big-open system by giving guests the choice between the capsule prize and a free dessert voucher that can be redeemed on their next visit.

Speaker #3: We believe this addition will improve guest satisfaction, encourage repeat visits, and reduce our prize production cost. Development is currently underway, and we hope to have updates for you at our November earnings call.

Speaker #3: Now I'll discuss our financials and liquidity. For the third quarter, total sales were $85.9 million, as compared to $74 million in the prior year period.

Speaker #3: Comparable restaurant sales growth compared to the prior year period was negative 0.4%, with negative 5.1% from traffic and 4.7% from price and mix. Comparable sales growth in our West Coast market was negative 1.2%, and negative 2.1% in our Southwest market.

Hajime Uba: Comparable sales growth in our West Coast market was -1.2% and -2.1% in our Southwest market. Effective pricing for the quarter was 4.5%. As a reminder, beginning in the Q1 of fiscal 2027, we will no longer provide regional breakdowns for comparable sales, as regional comps are largely determined by the timing of in-fills, and we do not believe they are indicative of our overall company trends. Turning to costs, food and beverage costs as a percentage of sales were 30.2%, compared to 28.3% in the prior year quarter, due to tariffs on imported ingredients. Labor and related costs as a percentage of sales were 30.6%, as compared to 33.1% in the prior year quarter, due to operational efficiencies and pricing, partially offset by low single-digit wage inflation. Occupancy and related expenses as a percentage of sales were 7.8%, compared to prior year quarter's 7.5%.

Speaker #3: Effective pricing for the quarter was 4.5%. As a reminder, beginning in the first quarter of fiscal 2027, we will no longer provide regional breakdowns for comparable sales, as regional comps are largely determined by the timing of in-sales, and we do not believe they are indicative of our overall company trends.

Speaker #3: Turning to cost, food and beverage cost as a percentage of sales was 30.2%, compared to 28.3% in the prior year quarter, due to tariffs on imported ingredients.

Speaker #3: Labor and related costs as a percentage of sales were 30.6%, as compared to 33.1% in the prior year quarter, due to operational efficiencies and pricing, partially offset by a low single-digit wage increase.

Speaker #3: Occupancy and related expenses as a percentage of sales were 7.8%, compared to prior year quarters' 7.5%. Depreciation and amortization expenses as a percentage of sales were 4.9%, as compared to the prior year quarters' 4.7%.

Hajime Uba: Depreciation and amortization expenses as a percentage of sales were 4.9%, as compared to the prior year quarter's 4.7%. Other costs as a percentage of sales were 14.6%, as compared to the prior year quarter's 14.7%. General and administrative expenses as a percentage of sales were 11.9%, as compared to 11.8% in the prior year quarter. Operating loss was $39,000, compared to operating loss of $162,000 in the prior year quarter. Income tax expense was $49,000, as compared to $55,000 in the prior year quarter. Net income was $423,000, or $0.03 per share, compared to net income of $565,000, or $0.05 per share in the prior year quarter. Restaurant level operating profit as a percentage of sales was 19.1%, compared to 18.2% in the prior year quarter. Adjusted EBITDA was $6.6 million, as compared to $5.4 million in the prior year quarter.

Speaker #3: Other costs as a percentage of sales were 14.6%, as compared to the prior year quarter’s 14.7%. General and administrative expenses as a percentage of sales were 11.9%.

Speaker #3: As compared to 11.8% in the prior year quarter. Operating loss was $39,000, compared to an operating loss of $162,000 in the prior year quarter.

Speaker #3: Income tax expense was $49,000, as compared to $55,000 in the prior-year quarter. Net income was $423,000, or over $0.03 per share.

Speaker #3: Compared to net income of $565,000, or over $0.05 per share, in the prior year quarter. Restaurant-level operating profit as a percentage of sales was 19.1%, compared to 18.2% in the prior year quarter.

Speaker #3: I'll just say the EBITDA was $6.6 million, as compared to $5.4 million in the prior year quarter. And at the end of the fiscal third quarter, we had $66.1 million in cash equivalents and investments, and no debt.

Hajime Uba: At the end of the fiscal Q3, we had $66.1 million in cash equivalents, and investments, and no debt. Lastly, I would like to update and reiterate the following guidance for fiscal year 2026. We now expect total sales to be between $330.5 to 331.5 million. We continue to expect to open 16 new units, maintaining an annual unit growth rate above 20%, with average net capital expenditure per unit continuing to approximate $2.5 million. We continue to expect G&A expenses as a percentage of sales to be approximately 12%, excluding litigation expense. We now expect full year restaurant level operating profit margins to be approximately 18.5%. Before we open the call to Q&A, I want to conclude my prepared remarks by acknowledging our team, whose execution during the quarter was excellent despite a challenging top line. This is best showcased in our improved guidance on restaurant margin and restaurant margin dollars, which are both higher than our previous expectations for the year.

Speaker #3: Lastly, I would like to update and reiterate the following guidance for fiscal year 2026. We now expect total sales to be between $330.5 million and $331.5 million.

Speaker #3: We continue to expect to open 16 new units, maintaining an annual unit growth rate above 20%, with average net capital expenditure per unit continuing to approximate $2.5 million.

Speaker #3: We continue to expect G&A expenses as a percentage of sales to be approximately 12%, excluding litigation expense. And we now expect full-year restaurant-level operating profit margins to be approximately 18.5%.

Speaker #3: Before we open the call to Q&A, I want to conclude my prepared remarks by acknowledging our team, whose execution during the quarter was excellent despite our challenging top line.

Hajime Uba: This is best showcased in our improved guidance on restaurant margin and restaurant margin dollars, which are both higher than our previous expectations for the year. We remain confident in our team's ability to deliver this kind of execution going forward, and I thank all of our team members for their continued efforts. This concludes our prepared remarks. I'm now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English.

Speaker #3: This is best showcased in our improved guidance on restaurant margin and restaurant margin dollars, which are both higher than our previous expectations for the year.

Hajime Uba: We remain confident in our team's ability to deliver this kind of execution going forward, and I thank all of our team members for their continued efforts. This concludes our prepared remarks. I'm now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English.

Speaker #3: We remain confident in our team's ability to deliver this kind of execution going forward, and I thank all of our team members for their continued efforts.

Speaker #3: This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator 3: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question for the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question for the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions.

Speaker #1: Our first question is from Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Speaker #2: Thanks for taking the questions. I thought I might start with the comp trends. Obviously, it's a little bit disappointing where traffic fell—down 5% in the quarter.

Jeremy Hamblin: Thanks for taking the questions. I thought I might start with the comp trends. Obviously, a little bit disappointing with where traffic fell down 5% in the quarter. Wanted to see if you could provide us an update on how current quarter trends are looking, how June shaped up. With the guidance range that you provided on revenues for FY2026, what's the implied same-store sale range that you would expect to hit those revenue figures given what you expect for unit openings the remainder of the year.

Speaker #2: I wanted to see if you could provide us an update on how current quarter trends are looking, how June shaped up, and with the guidance range that you provided on revenues for FY26, what’s the implied same-store sales range that you would expect to hit those revenue figures, given what you expect for unit openings?

Speaker #2: The remainder of the year.

Speaker #3: Sure. Sure. Thank you again for your first question. Please allow me to speak in Japanese based on a translation. まずQ3のこの結果に関してトラフィック、もちろん我々もディスアポイントしたんですけども、主な原因は前のコールでも話した通りガスプライスの影響があってますと。Q4に関してもそのガスプライスに少し安くなった、安くなってるんでその点ベネフィットなんですけど、他にもワールドカップとかそういったところでオフセットされていくんで、我々の今回のレベニューガイダンスっていうのはコンストラクションディレイ、プラスそういったQ3、Q2とQ4にかけてのマクロエンバイロメント、それはもう踏まえた数字であるというふうにご理解いただければいいと思います。

Hajime Uba: Sure. Thank you, Jeremy, for your first question. Please allow me to speak in Japanese. Ben is going to translate.

Hajime Uba: Sure. Thank you, Jeremy, for your first question. Please allow me to speak in Japanese. Ben is going to translate. [Foreign Language]

Hajime Uba: まず、Q3 のこの結果に関して、トラフィックはもちろん我々も disappoint したんですけども、主な原因は前のコールでもお話しした通り、ガスプライスの影響になっていますと。Q4 に関しても、ガスプライスが少し安くなっているので、そのベネフィットなんですけど、他にもワールドカップとかそういったところでオフセットされていくので、我々の今回の revenue guidance というのは、construction delay プラス、そういった Q2 と Q4 にかけてのこの macro environment、それがもううまいタフ事であるというふうにご理解いただければいいと思います。

Speaker #2: はい。 Hi Jeremy. This is Ben. We were certainly disappointed that traffic came in negatively as well. But we believe that this is largely due to elevated gas prices and is along the lines of what we discussed in the prior earnings call.

Benjamin Porten: Hi, Jeremy, this is Ben. We were certainly disappointed that traffic came in negatively as well. We believe that this is largely due to elevated gas prices and along the lines of what we discussed in the prior earnings call. As the gas prices have eased, we're beginning to see a little bit of benefit as we've entered Q4, but those benefits are partially offset by how popular the World Cup is. The guidance that we're providing for the revenue contemplates the Q3 and Q4 macro background as well as the construction delays.

Speaker #2: As gas prices have eased, we're beginning to see a bit of benefit as we've entered Q4. But those benefits are partially offset by how popular the World Cup is.

Speaker #2: And so, the guidance that we're providing for the revenue contemplates the Q3 and Q4 macro background as well as the construction delays.

Speaker #3: でもまずですけども一方我々は通期でのコンプのポリティなコンプスライドポリティなコンプの達成っていうのは今現時点でもすごく自信を持ってますしQ4はこのためのためにいろんな反則を強化してきましたんでもう一度この数字でポリティなコンプをできるってことを再度お伝えしておきたいなと思ってます。あとはFY27もIPIのパイプラインの強化ですとかあとはリアルステートのパイプラインの強化あとはフードプロモーションそういった3つの効果をこれまでも話してきましたけどやってきましたんで今現状は厳しいですけども27はすごくコンプに関してはオプティミスティックである姿勢でいます。

Hajime Uba: しかし一方、我々も数期でのポジティブなcomp、slightly positiveなcompの達成というのは、今現時点でもすごく自信を持ってますし、Q4はこのためにいろんな販促を強化してきました。もう一度この数期でpositiveなcompができるってことを再度お伝えしておきたいなと思っています。あとはFY27もIPラインのパイプラインの強化ですとか、あとはリアルエステートのパイプラインの強化、あとはフードのプロモーション、そういった3つの効果をこれまでもお話してきましたけど、やってきましたので、今現状は厳しいですけども、27はすごくcompに関してはoptimisticではあります。

Hajime Uba: [Foreign Language]

Speaker #2: Yes. Jeremy, as it relates to comps, we continue to be confident in our ability to deliver slightly positive comps for the full year. This year’s been choppy, but we're very much looking forward to fiscal '27, as we've discussed in the past.

Benjamin Porten: Jeremy, as it relates to comps, we continue to be confident in our ability to deliver slightly positive comps for the full year. This year has been choppy, but we're very much looking forward to fiscal 2027. As we've discussed in the past, the real estate pipeline is extremely promising. It's the first time that we've had a majority new market ratio in many years, and so that'll be a catalyzation tailwind. That'll be a tailwind for us. The fiscal 2027 IP pipeline is phenomenal. I could not be happier with it, so that should be a pretty meaningful tailwind as well. We have the rewards program step-up coming on as we enter the new year. As it relates to fiscal 2027, we're very bullish about where we can land for the comps.

Speaker #2: The real estate pipeline is extremely promising. It's the first time that we've had a majority new market ratio in many years, and so that'll be a catalyzation tailwind—and so that'll be a tailwind for us.

Speaker #2: The fiscal '27 IP pipeline is phenomenal. I could not be happier with it, and so that should be a pretty meaningful tailwind as well.

Speaker #2: And we have the rewards program step-up coming on as we enter the new year. And so, as it relates to fiscal '27, we remain—we're very bullish about where we can land for the comps.

Speaker #4: Gotcha. Okay. I think it implies something more like down 3% or 4% maybe in Q4. But I did have a follow-up question. The company has had a fairly consistent history of comp performance.

Jeremy Hamblin: Got you. Okay. I think it implies something more like down 3%, 4% maybe in Q4. I did have a follow-up question. Just, the company had a fairly consistent history of comp performance, consistently positive with some volatility, but there's clearly been a bit more volatility over the past two years, and wanted to just understand what you think might be driving that. Then in terms of thinking about as the company is closing in on 100 locations over the coming couple of quarters, how should we be thinking about kind of the long-term growth algorithm for Kura as a concept? Is this something where you think of kind of long-term comps in the range of, let's say, low single-digit, positive low single-digit, obviously with some variability. Color on what internally you expect and whether-- obviously there has been some noise in 2026.

Speaker #4: It's been consistently positive with some volatility, but there's clearly been a bit more volatility over the past two years. I wanted to just understand what you think might be driving that.

Speaker #4: And then in terms of thinking about, as the company is closing in on—over the coming couple of quarters—how should we be thinking about kind of the long-term growth algorithm for Kura as a concept?

Speaker #4: Is this something where you think of kind of long-term comps in the range of, let's say, low single-digit positive—low single-digit obviously with some variability—but color on what internally you expect and whether, obviously, there has been some noise in '26. But it seems as though the IP collaborations have had maybe a bit of a bigger impact than typical on results. Of course, you've got to throw in there the higher gas prices, but thoughts on those two questions?

Jeremy Hamblin: It seems as though the IP collaborations have had maybe a bit of a bigger impact than typical on results. Of course, you've got to throw in there the higher gas prices, thoughts on those two questions.

Speaker #3: Sure. まず最初の方の質問に答えますけどやっぱりここまでコンプが安定してなかった理由っていうのはやっぱりIPコラボレーションこれのケイデンスとかもギャップがあったっていうことだと思うんですけどそれは今期からなくなっていくと。あともう一つがカニバリゼーションこの2つがIPのケイデンスというのとあとカニバリゼーションこれが大きなインパクト与えてたと思うんですけど先ほどの繰り返しですけど27以降はカニバリゼーションのインパクト半減できますしあとIPに関しても27、26新規のIP7回それを28から27は8回に回数を増やしていくのとあと質も増やしていくとこの2つで相当安定できると思ってます。ただ今回のようにガスプライスとかそういったことがあった時のためにさらに追加でフードのコラボレーションそれプライズアップをこれまで9回だったところ12回プラス毎月なんかショートタイムのフードコラボレーションすることでさらに何かマクロのネガティブなことがあったとしてもしっかりローシングルデジットのポリティなコンプをこの先もやれるような形で考えてます。ちょっと2個目の答えも言ってしまうんですけどこれちょっとコンバインして答えてもらえますか。

Hajime Uba: まず最初の方の質問に答えますけど、やっぱりここまでcompが安定してなかった理由っていうのは、IPコラボレーション、これのcadenceとかもギャップがあったっていうことだと思うんですけど、それは今期からなくなっていくと。あともう一つが、cannibalization。この2つがIPのcadenceというのと、あとcannibalization。これが大きなインパクトを与えてたと思うんですけど、先ほどの繰り返しですけど、27以降はcannibalizationのインパクト、半減できますし、あとIPに関しても、26、新規のIP7回、それを27は8回に回数を増やしていくのと、あと質も増やしていくと。この2つで相当安定できると思っています。ただ、今回のようにガスプライスとかそういったことがあった時のために、さらに追加でフードのコラボレーション、それスライド0をこれまで9回だったところを12回、プラス毎月ショータームのフードコラボレーションをすることで、さらに何かマクロのネガティブなことがあったとしても、しっかりlow single digitsのポジティブなcompをこの先もやれるような形で考えています。2個目の答えも言ってしまったけど、これちょっとcombineしていただけますかね。

Hajime Uba: [Foreign Language]

Speaker #4: はい。 In terms of.

Benjamin Porten: In terms of the things that are under our control as it relates to comp, we see that really pipeline management is the dominant factor, and that relates both to IP pipeline as well as real estate pipeline. As it relates to the IP pipeline, last year we had a five-month stretch without IPs, and so that was a very visible comp impact. We've since remedied that. We have seven this year, and we're actually continuing to grow the number that we're doing every year as we know that there's maximal excitement at the beginning of every campaign. Fiscal 2027, beyond having higher quality IPs, we'll also have a total of eight IPs. We're also supplementing this by putting more energy into our food-based promotions. Our Kura Reserves have been very successful with our guests, and so we're increasing the frequency from nine a year to 12 a year.

Speaker #2: For things that we can—the things that are under our control as it relates to comp—we see that really, pipeline management is the dominant factor, and that relates both to IP pipeline as well as real estate pipeline.

Speaker #2: As it relates to the IP pipeline, last year we had a five-month stretch without IPs, and so that was a very visible comp impact.

Speaker #2: We've since remedied that. We have seven this year, and we're actually continuing to grow the number that we're doing every year, as we know that there's maximal excitement at the beginning of every campaign.

Speaker #2: And so fiscal ’27, beyond having higher-quality IPs, will also have a total of eight IPs. We're also supplementing this by putting more energy into our food-based promotions.

Speaker #2: Our current reserves have been very successful with our guests, and so we're increasing the frequency from nine a year to twelve a year. These will also be supplemented by different types of food-based promotions that allow us to be more reactive should there be macro pressure.

Benjamin Porten: These will also be supplemented by a different type of food-based promotion that allows us to be more reactive should there be macro pressures, so we can lean more into value if that were necessary. As it relates to the last two years' comps, I would also add just that this hasn't happened in a vacuum. We're in a war now with elevated gas prices. Last year, we had the FAST Act come online and we've got a pretty big California presence. There are factors beyond our control, but we feel extremely good about the factors that are in our control.

Speaker #2: So we can lean more into value if that were necessary. And as it relates to the last two years' comps, I would also add just that this hasn't happened in a vacuum.

Speaker #2: We're in a war now with elevated gas prices. Last year, we had the FAST Act come online, and we've got a pretty big California presence.

Speaker #2: There are factors beyond our control, but we feel extremely good about the factors that are in our control.

Speaker #4: Great. All right. Well, thanks for taking my questions and best wishes.

Jeremy Hamblin: Great. All right. Well, thanks for taking my questions, and best wishes.

Speaker #2: Thanks Jeremy.

Benjamin Porten: Thanks, Jeremy.

Speaker #1: Thank you. Our next question is from Andrew Charles with TD Cowen & Co. Please proceed with your question.

Operator 3: Thank you. Our next question is from Andrew Charles with TD Cowen. Please proceed with your question.

Operator: Thank you. Our next question is from Andrew Charles with TD Cowen. Please proceed with your question.

Speaker #5: Thank you. This is Zach Ogden on for Andrew. I just have a follow-up to Jeremy's first question. I know you called out the delayed openings being partly responsible for the lower revenue guidance, but can you just talk about where that down 40 basis points stands for sales for the quarter relative to your expectations, and then how your expectations for Q4 have changed over the last 90 days?

Zach Ogden: Thank you. This is Zach Ogden on for Andrew Charles. I just have a follow-up to Jeremy Hamblin's first question. I know you called out the delayed openings being partly responsible for the lower revenue guidance, can you just talk about where that down 40 basis points same for sales for the quarter fell relative to your expectations? How your expectations for Q4 have changed over the last 90 days.

Hajime Uba: [Foreign Language]

Speaker #3: ここでちょっとどういうことかな。コンプに関して。

Speaker #2: Q3のコンプはネガティブでびっくりでしたか。

Speaker #3: いやこれは我々のレンジ内ですと。もちろんポリティなところも予想してましたけどレンジの範囲内ですと。

Benjamin Porten: Hey, Zach, this is Benjamin Porten. In terms of the -0.4 for comps, this was within our range of possibilities, it was not a surprise to us, just given the overall macro pressure and the meaningfully elevated gas prices, especially in California. In terms of our thoughts on comps over the last 90 days, they haven't really changed. We continue to believe that we can deliver positive comps for the full year. If we are talking about surprises, though, the restaurant delays are certainly the biggest surprise for us. This was not something that we had anticipated at all at the time of the last call.

Benjamin Porten: Hey, Zach, this is Ben. In terms of the -0.4 for comps, this was within our range of possibilities, it was not a surprise to us, just given the overall macro pressure and the meaningfully elevated gas prices, especially in California. In terms of our thoughts on comps over the last 90 days, they haven't really changed. We continue to believe that we can deliver positive comps for the full year.

Speaker #2: この最近の90日間でコンプに対して考えは変わりましたか。

Speaker #3: いや特に現行内です。引き続き通期でのポリティブストライキのポリティブを予想してますと。

Speaker #2: Yes. Instead of 'stay,' in terms of the negative 0.4 for comps, this was within our range of possibilities and so it was not a surprise to us.

Speaker #2: Just given the overall macro pressure and the meaningfully elevated gas prices, especially in California—in terms of our thoughts on comps over the last 90 days—they haven't really changed.

Speaker #2: We continue to believe that we can deliver positive comps for the full year.

Speaker #3: ですけども今回のレストランのディレイっていうのはこれがやっぱり一番のサプライズになってますと。

Hajime Uba: [Foreign Language]

Benjamin Porten: If we are talking about surprises, though, the restaurant delays are certainly the biggest surprise for us. This was not something that we had anticipated at all at the time of the last call.

Speaker #2: If we are talking about surprises, though, the restaurant delays are certainly the biggest surprise for us. This was not something that we had anticipated at all at the time of the last call.

Speaker #5: Got it. Okay, thank you. And then the second question is on mix. Can you just unpack what made that flip positive in the quarter?

Zach Ogden: Got it. Okay. Thank you. The second question is on mix. Could you just unpack what made that flip positive in the quarter? Last call, it did sound like you weren't expecting that to remain flat, what drove mix to actually be positive and better than you were expecting?

Speaker #5: Last call, it did sound like you weren't expecting that to remain flat, so what drove mix to actually be positive and better than you were expecting?

Hajime Uba: [Foreign Language]

Speaker #3: まずQ1まで0%だったところがQ2以降4%以上でこれ実はこのトレンド6月も続いてます。なので我々の見込みとしてはプライシングがすごく好意的に受けられてるんじゃないかなというふうに思ってます。値段は3.5%上げた後も一人当たりのサラダの消費量は増えてますしあとサイドメニューの売上も増えてるというところで前からお話ししてます通り他社と比べて他の寿司レストランと比べて我々が非常に価格を低く抑えてきたっていうところがお客様に浸透してきたんじゃないかなというふうに思ってます。なので今後もサステナビリティのところで言うと少し継続する可能性が高まったと非常に高まったと我々はエンカレスされてます。

Benjamin Porten: Hey, Zach. On the note of surprises, it was a pleasant surprise at the beginning of the year when we began to see the mix turn so favorable, especially after it had been a headwind for multiple years. That having continued through present day, and actually further accelerating in June, have led us to believe that this is not just a coincidence or luck. Our interpretation is that this is completely a result of our pricing strategy. The 3.5% that we priced at, that we took in November, meaningfully underprices our competitors. Our guests who have been going to other sushi restaurants, they've become accustomed to paying a much higher price than they have, say, a year ago. They come into our restaurant with those higher price expectations.

Speaker #2: Yes. On the note of surprises, it was a pleasant surprise at the beginning of the year when we began to see the mix turn so favorable, especially after it had been a headwind for multiple years.

Speaker #2: That having continued through the present day and actually further accelerating in June have led us to believe that this is not just a coincidence or luck.

Speaker #2: And we our interpretation is that this is completely a result of our pricing strategy. The three and a half percent that we've priced out that we took in November meaningfully underprices our competitors and so our guests who have been going to other sushi restaurants have just they've become accustomed to paying a much higher price than they have say a year ago.

Speaker #2: And then they come into our restaurant with those higher price expectations. They see how much cheaper we are than they expect, and so they end up spending more as a result.

Benjamin Porten: They see how much cheaper we are than they expect, they end up spending more as a result. We're seeing growth not just in per person plates, but also mix attachment in drinks as well. I think generally in the restaurant industry, when there are macro pressures on the consumer, the expectation is that people reduce frequency. We're seeing that in traffic and, given higher gas prices and the popularity of the World Cup, this is something that we would expect. Seeing the mix grow is giving us enormous confidence just in terms of when our guests do come in, they're spending more than ever before. Clearly they're responding extremely well to the efforts that we've been putting in place, whether it be the Coke float promotions that we were running in June, our new giveaways, hand roll campaigns.

Speaker #2: And so we're seeing growth not just in per person plates, but also mix attachment and drinks as well.

Speaker #3: 特に私はこのプラスのミックスの改善はすごく勇気づけられてるんですけどもっていうのもやっぱりガスプライスですとかこのワールドカップのイベントがトラフィックに影響を与えてそのあたりっていうのは自分たちがコントロールできないんですけどプラスアンドミックスっていうのは自分たちがコントロールできる特にこの6月以降はワールドカップ向けのフロートやったりですとかギブアウェイやったりですとかあといろんなフードキャンペーンそういったものあとハンドルの質感とか給水やりましたけどそういったいろんなことを自分たちがコントロールできることが実っていってるんでトラフィックに関してはちょっとそういったマクロの影響を受けてチャレンジングなところ続きますけどその一方でですねこれまでにないようなポリティブなプライスアンドミックスできてるっていうのは我々のチームがそういったインパクトオフセットするためにやってる効果が出てるということですごく自分としてはエンカレスされてますと。

Speaker #2: So I think generally in the restaurant industry, when there are macro pressures on the consumer, the expectation is that people reduce frequency. And so we're seeing that in traffic, and given higher gas prices and the popularity of the World Cup, this is something that we would expect.

Hajime Uba: [Foreign Language]

Benjamin Porten: I think generally in the restaurant industry, when there are macro pressures on the consumer, the expectation is that people reduce frequency. We're seeing that in traffic and, given higher gas prices and the popularity of the World Cup, this is something that we would expect. Seeing the mix grow is giving us enormous confidence just in terms of when our guests do come in, they're spending more than ever before. Clearly they're responding extremely well to the efforts that we've been putting in place, whether it be the Coke float promotions that we were running in June, our new giveaways, hand roll campaigns. Our promotional calendar has really been packed. Seeing that mix improvement sustain over more than 6 months now gives us that much more confidence that the competitive advantage between ourselves and the rest of the sushi industry is really, it cannot be crossed.

Speaker #2: But seeing the mix grow is giving us enormous confidence, just in terms of when our guests do come in, they're spending more than ever before.

Speaker #2: And so clearly they're very they're responding extremely well to the efforts that we've been putting in place whether it be the coke float promotions that we were running in June our new giveaways hand roll campaigns we've been our promotional calendars really been packed and seeing that mix improvement sustain over more than six months now gives us that much more confidence that the competitive advantage between ourselves and the rest of the sushi industry is really it cannot be crossed.

Benjamin Porten: Our promotional calendar has really been packed. Seeing that mix improvement sustain over more than 6 months now gives us that much more confidence that the competitive advantage between ourselves and the rest of the sushi industry is really, it cannot be crossed.

Speaker #3: もう一度ちょっとさらに追加するとこのプラスアンドミックスのトレンドが継続すると仮定した場合今のマクロによるダウンの下トラフィックが回復できたときには掛け算で売上が上がっていくんでそこまでしっかり我々辛抱強く自分たちができるコストコントロールとかもやっていきたいなと思ってます。コストロールもコストコントロールも我々できることで今回大きく成果を上げられたことなんです。

Hajime Uba: もう一度ちょっとさらに追加すると、このプライス＆ミックスのトレンドが継続すると仮定した場合、今のマクロによるダウンしたトラフィックが回復してきた時に、掛け算で売上が上がっていくので、そこまでしっかり我々辛抱強く、自分たちができるコストコントロールとかもやっていきたいなと思ってます。コストコントロールも我々できることで今回大きく成果上げられたことなので。

Hajime Uba: [Foreign Language]

Speaker #2: We feel that we've been able to take minimal pricing because of the aggressive cost controls, and our strong hope is that as the macro environment normalizes and the World Cup is no longer a factor, our traffic returns but our price mix remains elevated.

Benjamin Porten: We feel that we've been able to take minimal pricing because of the aggressive cost controls. Our strong hope is that as the macro environment normalizes and the World Cup is no longer a factor, our traffic returns, but our price mix remains elevated. Our pricing expectations for fiscal 2027 are actually to be below where we came in for fiscal 2026, we just hope to keep compounding this advantage.

Speaker #2: Our pricing expectations for fiscal '27 are actually to be below where we came in for fiscal '26. And so, we just hope to keep compounding this advantage.

Speaker #5: Got it. Thanks guys.

Zach Ogden: Got it. Thanks, guys.

Speaker #2: Thanks Zach.

Benjamin Porten: Thanks, Zach.

Speaker #1: Thank you. Our next question is from Todd Brooks with Benchmark StoneX. Please proceed with your question.

Operator 3: Thank you. Our next question is from Todd Brooks with Benchmark StoneX. Please proceed with your question.

Operator: Thank you. Our next question is from Todd Brooks with Benchmark StoneX. Please proceed with your question.

Speaker #6: Hey, thanks for taking my questions. Just one to kind of dimensionalize the permitting delays and getting the new units open that you've experienced, and that kind of caught you by surprise.

Todd Brooks: Hey, thanks for taking my questions. Just one to kind of dimensionalize the permitting delays in getting the new units open that you've experienced, and that kind of caught you by surprise. I think you framed it up maybe 6 months of lost unit operating time, $4 million AUVs. Can we ballpark the revenue guide down kind of $couple million attributable to the delays and the balance just same-store sales performance?

Todd Brooks: Hey, thanks for taking my questions. Just one to kind of dimensionalize the permitting delays in getting the new units open that you've experienced, and that kind of caught you by surprise. I think you framed it up maybe 6 months of lost unit operating time, $4 million AUVs. Can we ballpark the revenue guide down kind of couple million attributable to the delays and the balance just same-store sales performance?

Speaker #6: I think you framed it up — maybe six months of lost unit operating time, $4 million AUVs. I mean, can we ballpark the revenue guide down, kind of a couple million attributable to the delays and the balance just same-store sales performance?

Speaker #3: ごめんちょっとこれも。

Benjamin Porten: Yeah. That's a fair analysis.

Speaker #2: Yeah, yes. That's a fair analysis.

Speaker #6: Okay, great, thanks. Then, just looking forward—you talked about how pleasantly surprised you've been by the mix performance the last couple of quarters. I think coming into this quarter you had looked for mix to revert, but that did not happen.

Todd Brooks: Okay, great. Thanks. Just looking forward, you talked about how pleasantly surprised you've been by the mix performance the last couple quarters. I think coming into this quarter, you had looked for mix to revert. That did not happen. Based on what you're learning here and as you're thinking about Q4, are you still assuming that you can kind of hold the hill on mix? Are you expecting in kind of the guidance horizon going forward for the balance of the fiscal year, mix to switch back to slightly negative?

Speaker #6: Based on what you're learning here, and as you're thinking about Q4, are you still assuming that you can kind of hold the hill on mix, or are you expecting, in the guidance horizon going forward for the balance of the fiscal year, mix to switch back to slightly negative?

Speaker #3: もちろんまだ7月の途中なんであれですけども6月の起点ですごくポリティブな変化って今多分ここから大きく残りの期間変わるとは思ってないんです。ただそういったことも踏まえて今回全部レベニューガイダンスですとかあと先ほどのフルイヤーでのスライドポリティブっていうところは全部含まれています。

Hajime Uba: もちろんまだ七月の途中なのであれですけども、六月の時点でね、すごくポジティブな変化があって、今多分ここから大きく残りの期間変わるとは思っていないです。ただ、そういったことも踏まえて、今回全部レベニューガイダンスですとか、あと先ほどのフルイヤーでのスライドでポジティブっていうところは全部含まれています。

Hajime Uba: [Foreign Language]

Speaker #2: Yes. Just given that the mix has actually improved as we've entered the quarter, we remain very optimistic. In terms of the remainder of the quarter, we really don't see a reason for trends to change.

Benjamin Porten: Just given that the mix has actually improved as we've entered the quarter, we remain very optimistic. In terms of the remainder of the quarter, we really don't see a reason for trends to change. That being said, anything is possible. That's reflected in the range of our restaurant level margin guidance as well as our expectations to have slightly positive comps for the full year.

Speaker #2: That being said anything is possible and so that's why we that's the range of our that's reflected in the range of our restaurant-level margin guidance as well as our expectations to have slightly positive comps for the full year.

Speaker #3: 再びですけど今回のマクロっていうのはダウン一時的な可能性が高いって非常に思ってるんですけど一方でこのプラスアンドミックスは今後も永続的に続いていく可能性あるんで総合的にポリティブになる可能性が非常に高いと我々思ってますと。

Hajime Uba: 繰り返しですけど、今回のマクロっていうのは一時的な可能性が高いと非常に思ってるんですけど、一方でこのプライス＆ミックスは今後も永続的に続いていく可能性あるので、総合的にポジティブになる可能性が高いと我々は思ってます。

Hajime Uba: [Foreign Language]

Speaker #2: So, we believe the macro situation, as with every macro situation in the past, will be ultimately transitory. But we believe that the mix flow-through that we're seeing now is potentially a sustainable advantage. So, net-net, this overall could be a very positive tailwind for us in the coming years.

Benjamin Porten: We believe the macro situation, as every macro situation in the past, will be ultimately transitory, but we believe that the mix flow through that we're seeing now is potentially a sustainable advantage. Net-net, this overall could be a very positive tailwind for us in the coming years.

Speaker #6: Great. And then one final, and I'll jump back in the queue. You quickly ran through the review of the upcoming IP collab schedule. I know that Honkai just recently launched.

Todd Brooks: Great. One final, and I'll jump back in queue. You quickly ripped through the review of the upcoming IP collab schedule. I know that Honkai just recently launched. Can we just review kind of the calendar for the back of this fiscal or this last quarter of the fiscal year? More importantly, can you quantify or maybe even qualify a product of the quality of Yoshi as a platform with Nintendo and this phenomena that it seems like you keep earning your way up into a higher tier and maybe more impactful promotions with Nintendo? Thanks.

Speaker #6: Can we just review kind of the calendar for the back of this fiscal or this last quarter of the fiscal year and then more importantly can you quantify or maybe even qualify a product of the quality of Yoshi as a platform with Nintendo in this phenomena that it seems like you keep earning your way up into higher tier and maybe more impactful promotions with Nintendo.

Speaker #6: Thanks.

Speaker #2: Yeah, it would be my pleasure. So, after Honkai Star Rail, we have Persona, which is a role-playing game. And then, in September/October, we have The Apothecary Diaries, which is a popular light novel series that has since become a very popular anime.

Benjamin Porten: Yeah. It would be my pleasure. After Honkai: Star Rail, we have Persona, which is a role-playing game. In September, October, we have The Apothecary Diaries, which is a popular light novel series, which has since become a very popular anime. November and December, we have Yoshi.

Speaker #2: And then, November and December, we have Yoshi.

Speaker #6: And just Yoshi, relative to Kirby—just on magnitudes of expected impact?

Todd Brooks: Just Yoshi relative to Kirby, just on magnitudes of expected impact.

Speaker #2: I would say it's comparable, if not—yeah. I mean, you're asking me to choose between children. I love them both. It's hard to pick.

Benjamin Porten: I would say it's comparable. You're asking me to choose between children. I love them both.

Todd Brooks: Yeah.

Benjamin Porten: It's hard to pick.

Speaker #3: あと今回はまだ共有しないですけど11月の段階では12月以降の1月2月3月4月それ加えてさらにその先もアップデートできるものをアップデートするんで非常に11月も学会することはないと思いますと。

Hajime Uba: あと今回はまだ共有してないけど、十一月の段階では、十二月以降の一月、二月、三月、四月、それに加えてさらにその先もね、できるものをアップデートするんで、非常に十一月もがっかりすることないと思います。

Hajime Uba: [Foreign Language]

Benjamin Porten: You can be very excited for the November call because we're extremely excited to share what we have for the back half of the year in terms of the IP pipeline.

Speaker #2: We're very excited for the November call because we're extremely excited to share what we have for the back half of the year, in terms of the IP pipeline.

Speaker #6: Okay. Perfect. Thank you both.

Todd Brooks: Okay, perfect. Thank you both.

Speaker #2: Thanks Todd.

Benjamin Porten: Thanks, Todd.

Speaker #1: Thank you. Our next question is from Matt Curtis with D.A. Davidson. Please proceed with your question.

Operator 3: Thank you. Our next question is from Matt Curtis with D.A. Davidson. Please proceed with your question.

Operator: Thank you. Our next question is from Matt Curtis with D.A. Davidson. Please proceed with your question.

Speaker #7: Hi, good afternoon. I was just wondering if we could get back to the third quarter for a minute. Could you guys describe maybe the sales impact that IP collabs had in the third quarter relative to the second quarter?

Matt Curtis: Hi, good afternoon. I was just wondering if we could get back to Q3 for a minute. Could you guys describe maybe the sales impact that IP collabs had in Q3 relative to Q2? Maybe more importantly, how were same-store sales trends affected as you began to lap the resumption of IP collabs? Which, correct me if I am wrong, I believe happened at the end of April.

Speaker #7: And then, maybe more importantly, how are same store sales trends affected as you began to lap the resumption of IP collabs? Which, correct me if I'm wrong.

Speaker #7: I believe it happened at the end of April.

Speaker #3: まず一般的なIPコラボレーションに対するエクスペクテーション俺はローシングルディジットのコントリビューションを予想してます。ただ今回のヨッシーですとかあと前回のカービィそういった強いものに関しては過去のビッグエコーによるとミッドシングルディジットぐらいの貢献してるんで今後もそういったレベルの期待値を考えてますと。

Hajime Uba: まず、一般的なIPコラボレーションに対するエクスペクテーションは、我々low single digitのcontributionを予想しています。ただ、今回のヨッシーですとか、前回のカービィといった強いものに関しては、過去のレコーディングによると、mid single digitぐらいの貢献をしているので、今後もそういったレベルのことを期待して考えています。

Hajime Uba: [Foreign Language]

Speaker #2: Yes. Hey Matt, this is Ben. For really any IP, our base case expectation is a low single-digit contribution. When we have marquee items like Kirby or Yoshi, the expectation is a mid single-digit contribution.

Benjamin Porten: Hey, Matt, this is Ben. For really any IP, our base case expectation is a low single-digit contribution. When we have marquee items like Kirby or Yoshi, the expectation is a mid-single-digit contribution. We are excited to continue to introduce more and more mid-single-digit contributing IPs as we continue.

Speaker #2: We're excited to continue to introduce more and more mid-single-digit contributing IPs as we continue.

Speaker #3: なのでQ3に関してはローシングルディジットのキャンペーンだったと思ってますと。

Hajime Uba: なので、Q3に関してはlow single digitのキャンペーンだったと思っています。

Hajime Uba: [Foreign Language]

Speaker #2: And so as it relates to Q3, we believe the IPs contributed low single digits.

Benjamin Porten: As it relates to Q3, we believe the IPs contributed low single-digit.

Speaker #3: 一方でですね先ほどのIPだけじゃなくって実はフードコラボレーションのクラリザーブに関しても実は同じぐらいローシングルディジットのコントリビューションがありますんで先ほど言った9回から12月12回に増やすっていうのはすごくミーニングフルだと思ってますと。

Hajime Uba: 一方で、先ほどのIPだけでなく、実はフードコラボレーションのKura Reserveに関しても、実は同じぐらいlow single digitのcontributionがありますので、先ほど言った9回から12回に増やすっていうのはすごくmeaningfulだと思っています。

Hajime Uba: [Foreign Language]

Speaker #2: And part of the offset for the traffic pressure that we saw through the quarter was the success of our food collaborations. The Kura Reserve was very meaningful in terms of not just getting people to come in, but to spend more than they have before. That's been a pretty big part of the mix growth.

Benjamin Porten: Part of the offset for the traffic pressure that we saw through the quarter was the success of our food collaborations. The Kura Reserve was very meaningful in terms of not just getting people to come in, but to spend more than they have before. That has been a pretty big part of the mix growth. We are very excited for the incremental benefit that we will have next year by having an extra three of these.

Speaker #2: And so we’re very excited for the incremental benefit that we'll have next year by having an extra three of these.

Speaker #7: Okay, thanks. And then, on a different topic, I think last quarter you mentioned a 1% comp lift from the reservation system. I was just wondering if that persisted in the third quarter.

Matt Curtis: Okay, thanks. A different topic. I think last quarter you mentioned the 1% comp lift from the reservation system. I was just wondering if that persisted in Q3.

Speaker #2: Yeah.

Benjamin Porten: Yeah.

Speaker #7: Okay. Great. Thank you.

Matt Curtis: Okay, great. Thank you.

Speaker #3: Thank you Matt.

Hajime Uba: Thank you.

Speaker #2: Thanks Matt.

Benjamin Porten: Thanks, Matt.

Operator 3: Thank you. Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Operator: Thank you. Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Speaker #1: Thank you. Our next question is from Sharon Zaxia with William Blair. Please proceed with your question.

Speaker #8: Hey, thanks for taking the question. I'm curious: as you've seen this slowdown in traffic, is there any difference in what you're seeing with new customer acquisition versus your existing customer frequency?

Sharon Zackfia: Hey, thanks for taking the question. I'm curious, as you've seen this slowdown in traffic, is there any difference in what you're seeing with new customer acquisition versus your existing customer frequency?

Speaker #3: まずこれおそらくフリークエンシーを減らしにかかってるっていうのが大きなところだと思ってます我々の観点からは。

Hajime Uba: まず、これ、おそらく頻度を減らすにかかっているというのが大きなところだと思っています。我々の観点からは。

Hajime Uba: [Foreign Language]

Benjamin Porten: We aren't seeing too much of a difference in terms of behavior between non-members and members. The defining feature really for Q3 is just the reduction of frequency.

Speaker #2: There isn't too much of a difference in terms of behavior between non-members and members. The defining feature, really, for Q3 is just a reduction of frequency.

Speaker #3: なんでも我々は先ほどからお話ししました通りある程度これはガスプライスですとかあと他のイベントに関連してるものなんでしばらく続くと思うんですけどしっかり回復してくるとその時にミックスが改善されていればしっかりまた元の売りで戻るというところですごく少しは辛抱のつこいですけども先行きは明るいと思うように考えてますと。

Hajime Uba: 我々は、先ほどからお話のとおり、ある程度これはガスプライスや、他のイベントに関連しているものなので、しばらく続くと思うんですけど、しっかり回復してくると。その時にミックスが改善されていれば、しっかりまた元の売上に戻るというところで、すごく少しは辛抱のところですけども、先行きは明るいと考えています。

Hajime Uba: [Foreign Language]

Speaker #2: And again, going back to the reduction of frequency being tied to the macro environment, with the higher gas prices competing for attention with the World Cup.

Benjamin Porten: Again, going back to the reduction of frequency being tied to the macro environment with the higher gas prices, competing attention with the World Cup, all these factors we understand is transitory. We're very confident that we'll be able to maintain the momentum of our mix and come out stronger than before.

Speaker #2: All of these factors, we understand, are transitory, and we're very confident that we'll be able to maintain the momentum of our mix and come out stronger than before.

Speaker #1: Thanks for that.

Sharon Zackfia: Thanks for that. On the restaurant delays, are there steps that you're taking to help ensure that we don't see any incremental issues in 2027? Are you adding more buffer to the pipeline as you think about that?

Speaker #8: And then on the restaurant delays, are there steps that you're taking to help ensure that we don't see any incremental issues in 2027?

Speaker #8: Are you adding more buffer to the pipeline as you think about that?

Speaker #3: まず今回4店舗あったんですけど4店舗中3店舗がファイヤーインスペクションに関するもので実はそのファイヤーインスペクションによるディレイ自体はよくあることなんです。逆に言うと大きなディレイってほぼファイヤーインスペクションなんですけど通常はそういった言われた指摘されたことの是正っていうのは2週間ぐらいでいけるんですけど今回は3店舗とも6週間ぐらいかかってさらにインスペクション再インスペクションのスケジュールにも時間かかったっていう非常に珍しいパターンだったんですけどももちろん毎回同じパターンでのコレクションだったら防ぐことできるんですけど残念ながら毎回ファイヤーなんですけど毎回違うことを言われてしまうということがあるんでもちろんこのマイケースをスタディしてやるんですけど残念ながら現実としては27もある程度遅れっていうのは想定しておく必要があるかなというふうに思ってます。

Hajime Uba: まず、今回4店舗あったんですけど、4店舗中3店舗がfire inspectionに関するもので、実はそのfire inspectionによるディレイ自体はよくあることなんです。逆に言うと、大きなディレイってほぼfire inspectionなんですけど、通常はそういった指摘されたことの是正っていうのは2週間ぐらいでいけるんですけど、今回は3店舗とも6週間ぐらいかかって、さらに再inspectionのスケジュールも時間かかったっていう、非常に珍しいパターンだったんですけども。もちろん、毎回同じパターンでのコレクションだったら防ぐことができるんですけど、残念ながら毎回fireなんですけど、毎回違うことを言われてしまうということがあるので、もちろんこの毎ケースをスタディしてやるんですけど、残念ながら現実としては27もある程度遅れっていうのは想定しておく必要があるかなと思っています。はい、もう一度お願いします。

Hajime Uba: [Foreign Language]

Speaker #2: はいマリさんお願いします。

Speaker #7: Out of the four stores, three of the delays were caused by fire inspections, and in fact, when we do have a delay, it's typically because of a fire inspection.

Benjamin Porten: Of the four stores, three of the delays were caused by fire inspections. In fact, when we do have a delay, it's typically because of a fire inspection. When we do have a correction that we need to make, it's usually something that we can do in two weeks. The asks this time were much more involved. They took on average six weeks with extra time added on top on the end as we were waiting for a re-inspection to be scheduled. That was pretty frustrating. Obviously, we adjust our practices with every hiccup of these types that we face, but unfortunately, it's always a different issue. Different counties have different rules, and different inspectors, even in the same county, are idiosyncratic, that makes it pretty hard to head off.

Speaker #7: When we do have a correction that we need to make, it's usually something that we can do in two weeks. But the asks this time were much more involved, and so they took, on average, six weeks, with extra time added on top at the end as we were waiting for reinspection to be scheduled. So that was pretty frustrating. Obviously, we adjust our practices with every hiccup of these types that we face, but unfortunately, it's always a different issue.

Speaker #7: Different counties have different rules, and even inspectors within the same county can be idiosyncratic, so that makes it pretty hard to head off. We do bake in to our expectations a certain degree of delays, but for so many to fall on each other at the same time, and for them to be much longer than we typically experience, that was what was so unexpected.

Benjamin Porten: We do bake in to our expectations a certain degree of delays. For so many to fall on each other at the same time and for them to be much longer than we typically experience, that was what was so unexpected.

Speaker #3: あとやっぱりシャーロット公開新しくノースカロライナで今日オープンしたんですけどそこに関しては今まで94店舗開けた中で一度もお願いされなかったコンベアベルトのサードパーティーインスペクションこれを求められたんで今後新しいところになるっていう時にはそういったところもちょっとある程度想定しておきます事前にそういったことがあるかどうか確認したりとかシャロンが言ってる通り今後防げるようなメジャーメントをやっていきたいなと思ってます。

Hajime Uba: あと、やっぱりシャーロットを今回新しくノースカロライナで今日オープンしたんですけど、そこに関しては、今まで94店舗を開けた中で一度もお願いされなかった、コンベアベルトのthird party inspectionを求められたので、今後新しいところになるっていう時には、そういったところもある程度想定しておきます。事前にそういったことがあるかどうか確認したりとか、シャロンが言っている通り、今後防げるようなmeasurementをやっていきたいなと思っています。

Hajime Uba: [Foreign Language]

Speaker #2: So we're happy to say that we actually just opened our Charlotte, North Carolina location today. It's our 94th restaurant. As part of that inspection process, there was a request for a third-party inspection of our conveyor belts, which had never happened with our preceding 93 restaurants, and so these kinds of surprises can always pop up. But now that that's happened, we know whenever we're opening up in a new county to come with that third-party inspection ready and head off that issue for the future.

Benjamin Porten: We're happy to say that we just opened our Charlotte, North Carolina location today. It's our 94th restaurant. As part of that inspection process, there was a request for a third-party inspection of our conveyor belts, which had never happened with our preceding 93 restaurants. These kinds of surprises can always pop up, now that that's happened, we know whenever we're opening up in a new county to come with that third-party inspection ready, and head off that issue for the future.

Speaker #1: Okay. Thank you.

Sharon Zackfia: Okay. Thank you.

Speaker #3: Thanks.

Benjamin Porten: Thanks.

Operator 3: Thank you. Our next question is Mark Smith with Lake Street Capital. Please proceed with your question.

Operator: Thank you. Our next question is Mark Smith with Lake Street Capital. Please proceed with your question.

Speaker #1: Thank you. Our next question is from Mark Smith with Lake Street Capital. Please proceed with your question.

Speaker #7: Hi guys. You mentioned some cannibalization kind of easing here, but I'm curious — was there any real impact in the quarter, as well as your outlook for many of the restaurants that you've opened over the last several months, from cannibalization?

Mark Smith: Hi, guys. You mentioned some cannibalization kind of easing here. I'm curious any real impact in the quarter, as well as your outlook for many of the restaurants that you've opened over the last several months from cannibalization.

Speaker #3: まずこれまでちょっと我々300か400って言ったんですけど今だいたいアップデートされて250前後のインパクトというふうに見積もっております。この先もある程度これが27の前半ぐらいまで続いてそれ以降はニューマーケットとあれのコントロールによって下がっていくということを予想してます。

Hajime Uba: まず、これまで我々、大体300から400ってきたんですけど、今は大体アップデートされて250前後のインパクトというふうに見積もっています。で、この先もある程度これはFY27の前半ぐらいまで続いて、それ以降はニューマーケットとあれのコントロールによって下がっていくということを予想しています。

Hajime Uba: [Foreign Language]

Speaker #2: はい。 Hey Mark, this is Ben. In the past, I think our estimate for the comp headwinds, broadly speaking, were between 300 to 400 basis points.

Benjamin Porten: Hey, Mark, this is Ben. In the past, I think our estimate for the comp headwinds, broadly speaking, were between three to 400 basis points. Now we've been able to bring it down to about 250 basis points. We would expect this headwind to continue into H1 of fiscal 2027, just given the timing of some of the openings, especially the first infills and next key performers. As we start to benefit from the 55% new market mix, we would expect that cannibalization impact to steadily lessen over fiscal 2027 and 2028.

Speaker #2: Now, we've been able to bring it down to about 250 basis points. We would expect this headwind to continue into the first half of fiscal '27, just given the timing of some of the openings, especially the first infills in next key performers.

Speaker #2: But as we continue to start to benefit from the 55% new market mix, we would expect that cannibalization impact to steadily lessen over fiscal '27 and '28.

Speaker #7: Okay. And then you talked about opening delays. I'm curious if that's added any incremental costs. I know that you guys maintained your guidance here for new restaurant build-out costs, but are you seeing any incremental costs from delays, or is it just inflationary pressure that's leading to higher opening costs?

Mark Smith: Okay. Then you talked about opening delays. I'm curious if that's added any incremental costs. I know that you guys maintained your guidance here for new restaurant build-out costs, but are you seeing any incremental costs from delays or just inflationary pressure that's leading to higher opening costs?

Speaker #3: まずレントっていうのはもうもちろんポゼッションの段階から来てるんで特にないです。なんでトレーニングコストは余分にもちろんかかってるんですけどもここで強調したいのがそういったオープニングディレイによるトレーニングコストが上乗せた上で我々今回レストランレベルのマージンのガイダンスをアップグレードできたことあとFY27もおそらく当初思ってたよりもレストランレベルのマージン20%に近づくペースだいぶ早くできる見込みになってきたんでものすごく我々はQ3で上げた我々のチームメンバーの進捗に私はすごく誇りを持ってますしすごいエンカレッジされてます。

Hajime Uba: まず、レントっていうのはもう、もちろんポゼッションの段階から来てるんで特にないです。なので、トレーニングコストは余分にもちろんかかっているんですけども、ここで強調したいのが、そういったオープニングディレイによるトレーニングコストが上乗せた上で、我々、今回レストランレベルのマージンのガイダンスをアップグレードできたこと。あと、FY27も、おそらく当初思っていたよりもレストランレベルのマージンを20%に近づくペース、だいぶ早くできる見込みになってきたので、ものすごくQ3で上げた我々のチームメンバーの進捗に、私はすごく誇りを持ってますし、すごいエンカレージされています。

Hajime Uba: [Foreign Language]

Speaker #2: Yes. Hey Mark. And so, when we have an opening delay by an inspection, really the primary cost would be in training costs or rehiring costs, because you can't ask somebody to wait for a month with no job.

Benjamin Porten: Hey, Mark Smith. When we have an opening delay by an inspection, really the primary cost would be in training costs or rehiring costs, because you can't ask somebody to wait for a month with no job. That being said, in spite of those incremental costs, we were able to raise our restaurant-level operating profit margin guidance to 18.5%. We are spectacularly proud of just how efficient all of our restaurant-level members have been. As we get closer to the end of the year and have more visibility into fiscal 2027, we think that we are going to get a lot closer to that 20% historical goal a lot faster than we'd expected. We're very excited to give you guys an update on that as well in November.

Benjamin Porten: Hey, Mark. When we have an opening delay by an inspection, really the primary cost would be in training costs or rehiring costs, because you can't ask somebody to wait for a month with no job. That being said, in spite of those incremental costs, we were able to raise our restaurant-level operating profit margin guidance to 18.5%. We are spectacularly proud of just how efficient all of our restaurant-level members have been. As we get closer to the end of the year and have more visibility into fiscal 2027, we think that we are going to get a lot closer to that 20% historical goal a lot faster than we'd expected. We're very excited to give you guys an update on that as well in November.

Speaker #2: That being said in spite of those incremental costs we were able to raise our restaurant-level operating profit margin guidance to 18.5% and so we are spectacularly proud of just how efficient all of our restaurant-level members have been and as we get closer to the end of the year and have more visibility into fiscal 27 we think that we are going to get a lot closer to that 20% historical goal a lot faster than we'd expected and so we're very excited to give you guys an update on that as well in November.

Speaker #7: Perfect. The last one from me is just thinking about menu price increases that you guys have taken. It sounds like you're seeing positive results from offering a value proposition, but I'm curious if you want to speak to elasticity in the price increases that you've taken and the kind of response from consumers.

Mark Smith: Perfect. The last one from me is just thinking about menu price increases, what you guys have taken. It sounds like you're seeing positive results out of offering a value proposition. I'm curious just if you want to speak to elasticity in the price increases that you've taken and kind of response from consumers.

Speaker #2: Well, I mean, I think the mix growth really speaks for it all, speaks for all of it. And so, our plan is really to just keep the value as intact, as aggressive as it has been, and wait for that traffic to return, and then just benefit on both ends.

Benjamin Porten: Well, I think the mix growth really speaks for all of it. Our plan is really to just keep the value as intact, as aggressive as it has been, and wait for that traffic to return and then just benefit on both ends.

Speaker #3: もちろん我々できれば11月までにもう少しきちんとしたデータを出したいなと思ってるんですけど自分たちの行動レベルでもちろん私もお寿司屋さんで働いてますから寿司屋に行くんですけどもこれまでランチのお任せが80ドルだったところが100ドルになってるともう20%25%かな上がってると我々エフェクティブプライス4%台明らかにタリフス以降他のお寿司屋さんとの差が出てるのは間違いないと思いますんで今トップラインはタフな状況続きますけれども今このような状況でプライシングをミニマムにしながらマージン改善していけばこういったことが全部コンシューマーのセンチメントも改善されてサリスがなくなった時っていうのも爆発的なマージンの改善っていうのが大きなマージンの改善っていうのが期待できるんじゃないかなと思って我々はすごく将来に向けてのすごく楽観的に考えてます。

Hajime Uba: もちろん、我々、できれば11月までにもう少しきちんとしたデータ出したいなと思っているんですけど、自分たちの行動レベルで、もちろん私も寿司屋さんで働いていますから、寿司屋に行くんですけども、これまでランチのおまかせが$80だったところが$100になっていると。もう20%、25%かな、上がっていると。我々、エフェクティブプライスで4%台。明らかに、タリフ以降、細岡の寿司屋さんと差が出ているのは間違いないと思いますので。今、トップラインはタフな状況続きますけれども、今このような状況でプライシングをミニマムにしながらマージン改善していけば、こういったことが全部、コンシューマーのセンチメントも改善されて、タリフがなくなった時っていうのも、爆発的なマージンの改善っていうのが、大きなマージンの改善っていうのが期待できるんじゃないかと思って、我々はすごく将来に向けてはすごく楽観的に考えています。

Hajime Uba: [Foreign Language]

Speaker #2: Yes. So we're actually in the process of performing an analysis to get an empirical view of just how much pricing our competitors have been taking.

Benjamin Porten: We're actually in the process of performing an analysis to get an empirical view of just how much pricing our competitors have been taking. We can speak anecdotally that against our 4%-ish, it's much typically closer to 20%. It's really just a gulf that has continued to widen exactly as we'd expected post-tariff. While it's unfortunate that the Q4 top line, we expect some pressure. We believe that as long as we keep the pricing at a minimum and continue to drive margin improvement in spite of that, when traffic returns. We're extremely excited.

Speaker #2: We can speak anecdotally that, against our 4%-ish, it's typically much closer to 20%. It's really just a gulf that is continued and widened. It's exactly as we'd expected.

Speaker #2: Post-tariff. And so, while it's unfortunate that the Q4 top line—we expect some pressure—we believe that as long as we keep the pricing at a minimum and continue to drive margin improvement in spite of that, when traffic returns, we'll really—the margins will just—we're extremely excited.

Speaker #7: Excellent. Thank you guys.

Mark Smith: Excellent. Thank you, guys.

Speaker #2: Thanks Mark.

Benjamin Porten: Thanks, Mark.

Speaker #3: Mark.

Speaker #1: Thank you. Our next question is from JP Wallam with Roth Capital Partners. Please proceed with your question.

Operator 3: Thank you. Our next question is from JP Wollam with Roth Capital Partners. Please proceed with your question.

Operator: Thank you. Our next question is from JP Wollam with Roth Capital Partners. Please proceed with your question.

Speaker #7: Great. Hi guys. Appreciate you taking my questions. I want to kind of just follow up on maybe sort of the new customer or sort of the understanding that you talked about earlier guests going to competitors and then coming to you guys and spending a little bit more.

JP Wollam: Great. Hi, guys. Appreciate you taking my questions. I want to just follow up on maybe the new customer or the understanding that you talked about earlier, guests going to competitors and then coming to you guys and spending a little bit more. I'm curious, is there anything to show that new customers or customers maybe trading down from others is actually increasing as a percent of mix relative to your repeat customers? I'm trying to get a sense of whether you think there's some real market share gains that are going on here that maybe some customers have fallen off, but as that lower income traffic maybe returns, you see this big boost ahead.

Speaker #7: But I'm curious, is there anything to show that new customers—or customers maybe trading down from others—is actually increasing as a percent of mix relative to your repeat customers?

Speaker #7: I'm trying to get a sense of whether you think there's some real market share gains that are going on here. Maybe some customers have fallen off, but as that lower-income traffic returns, do you see this big boost ahead?

Speaker #2: Yeah. The biggest point in favor of that that I could point out now is that the average tech growth rate is actually faster among non-members than non-reward members, which has never been the case before.

Benjamin Porten: Yeah. The biggest point in favor of that I could point at now, is that the average check growth rate is faster among non-members than reward members, which has never been the case before. Our interpretation is that that is the reflection of a higher spending tranche of guests coming to us. We commission a consumer study twice a year, so obviously that'll be one of the top questions that we'll have for the next analysis. We look forward to updating you guys on just how much market we've been able to capture.

Speaker #2: And so, our interpretation is that this is a reflection of a higher-spending tranche of guests coming to us.

Speaker #3: あと我々6ヶ月に一度クオリティティブとクオンタティティブのリサーチやってるんで次のリサーチでですねお客さん新規のお客さん増えてるかどうかそういったことも分かると思うんで楽しみにしてます。

Speaker #2: And we commission a consumer study twice a year, so obviously that will be one of the top questions that we'll have for the next analysis. We look forward to updating you guys.

Speaker #3: 他のが取れず。

Speaker #2: On just how much market we've been able to capture.

Speaker #7: Okay, great. And then one more, maybe more on a sort of strategic lens, but as you sit here, almost 100 units—thinking about your guys' centralized operations management at HQ—as you think about the next 100 units from here, how would you categorize where your infrastructure is at to support that?

JP Wollam: Okay. Great. One more, maybe more on a sort of strategic lens. As you sit here, almost 100 units, thinking about your guys' centralized operations management at HQ, as you think about the next 100 units from here, how would you categorize where your infrastructure is at to support that? Is there anything that you're sort of seeing in the next 6 to 12 months that's needed?

Speaker #7: Is there anything that you're sort of seeing in the next 6 to 12 months that's needed?

Hajime Uba: [Foreign Language]

Speaker #3: まずこれはちょっと将来のユニットグロスペースにも関わってくるところなんですけど少なくとも27に関しては20%ですけどもこの先に関してはキャッシュのバランスですとかあとニュージャースのパフォーマンスそういったところで関連しながらいつも通りですけどフレキシビリティに考えていきたいなというふうに考えてますと。でそうだねそれでちょっと。

Benjamin Porten: Hey, JP, this is Ben. As it relates to fiscal 2027, we already have the pipeline locked and loaded, and we know that it's higher than 20%, we're happy to report that. In terms of the G&A and support center, we really do think that we have everything intact. We'll just sort of need proportionate growth to manage the more volume of work as we continue to grow. Really nothing out of the ordinary there, and we would continue to expect to leverage G&A. Just in terms of unit growth broadly, the constraining factors for us have historically been the availability of high-quality sites, our availability of capital, and our management pipeline. We feel very good about our training department and our personnel. We've got a great bench. We opened 7 restaurants in Q3, but our cash burn was only $3 million.

Speaker #2: Yes. AJP, this is Ben, and so as it relates to fiscal ’27, we already have the pipeline locked and loaded, and we know that it's higher than 20%, so we're happy to report that.

Speaker #2: In terms of the G&A and support center we think that we really do think that we have everything intact. We'll just sort of need proportionate growth to manage the more volume of work as we continue to grow and so really nothing out of the ordinary there and we would continue to expect to leverage G&A just in terms of growth unit growth broadly the constraining factors for us have historically been the availability of high-quality sites our availability of capital and our management pipeline.

Speaker #2: We feel very good about our training department and our personnel we've got a great bench and we opened seven restaurants in Q3 but our cash burn was only $3 million and so we're doing we're very very pleased with how our balance sheet management has been going and so really the remainder is just the availability of high-quality sites and so we want to be flexible on that just so that we don't force ourselves to commit to sites that we wouldn't otherwise choose.

Benjamin Porten: We're very, very pleased with how our balance sheet management has been going. Really the remainder is just the availability of high-quality sites. We want to be flexible on that just so that we don't force ourselves to commit to sites that we wouldn't otherwise choose.

Speaker #7: Great, thanks, guys. Best of luck.

JP Wollam: Great. Thanks, guys. Best of luck.

Speaker #2: Thanks JP.

Benjamin Porten: Thanks, JP.

Speaker #1: Thank you. Our next question is from John Tower with Citi. Please proceed with your question.

Operator 3: Thank you. Our next question is from Jon Tower with Citi. Please proceed with your question.

Operator: Thank you. Our next question is from Jon Tower with Citi. Please proceed with your question.

Speaker #8: Great, thanks for taking the questions. Maybe real quick—obviously, you had spoken to the idea of seeing labor leverage and expecting that to be down, I believe, 200 basis points or so in fiscal '26.

Jon Tower: Great. Thanks for taking the questions. Maybe real quick, obviously, you had spoke to the idea of seeing labor leverage and expecting that to be down, I believe 200 basis points or so in fiscal 2026. Can you just speak to exactly what you're doing at the store level to get that level of leverage, particularly in the context of very modest same-store sales growth on the year?

Speaker #8: Can you speak specifically to what you're doing at the store level to achieve that level of leverage, particularly in the context of very modest same-store sales growth for the year?

Hajime Uba: [Foreign Language]

Speaker #3: まず我々Q4の25の途中からリザベーションシステムですとかあとサッチパネルのアップデートとかその辺のやつを加えてフロントオブザハウスの従業員さんを1人カットダウンすることできましたと。この効果とあとはもう少しタイトなスケジュールのコントロールこれが貢献してるというふうになってます。それがなんでその効果っていうのはずっとこれからも続くんですけどイヤーオーバーイヤーのコンパリゾンで言うとQ4でパーシャリーにラップするというふうに考えてますと。

Speaker #2: Yes. So in terms of the labor gains this year, a lot of it comes down to the work that we did in fiscal '25.

Benjamin Porten: Hey, Jon. In terms of the labor gains this year, a lot of it comes down to the work that we did in fiscal 2025. The reservation system was installed system-wide by Q4 of last year, that's resulted in headcount reduction in front of house. We've also gotten better at scheduling appropriately. We've gotten a lot tighter with that. Those two factors have really been the driving factors for the improvement in fiscal 2026. We'll be lapping the benefit of the reservation system implementation in Q4, but we have the robotic dishwasher still to look forward to for fiscal 2027. This, again, going back to your comment about leveraging 200 basis points on modest comps. This is really, I think, something that only Kura could do.

Speaker #2: The reservation system was installed system-wide by Q4 of last year, and so that's resulted in headcount reduction in front of house. We've also gotten better at scheduling appropriately.

Speaker #2: We've gotten a lot tighter with that. And so, those two factors have really been the driving factors for the improvement in fiscal '26. We'll be lapping the benefit of the reservation system implementation in Q4, but we have the robotic dishwashers to look forward to for fiscal '27.

Speaker #2: And so, again, going back to your comment about leveraging 200 basis points on modest comps, this is really, I think, something that only Kura could do.

Speaker #8: Okay. And then I appreciate all that color. Thank you for that. In terms of thinking about the other OPEX line into next year, obviously right now you’ve upped the IP cadence, which I know is going to—or has—cost a little bit more money.

Jon Tower: Okay. I appreciate all that color. Thank you for that. In terms of thinking about the other OpEx line into next year, obviously right now, you've upped the IP cadence, which I know is going to or has cost a little bit more money. It does look like year-over-year, at least on a per week basis, that came down pretty nicely in Q3. The expectations for next year, given that you're going to be, I think, launching one more IP, then also you're going to have these reserve 12 months or 12 reserve options throughout the year versus nine this year. Broadly, how are you thinking about marketing spend next year versus this year?

Speaker #8: But it does look like year over year at least on a per-week basis that came down pretty nicely in the third quarter. The expectations for next year given that you're going to be I think launching one more IP and then also you're going to have these reserve 12 months or 12 reserve options throughout the year versus 9 this year.

Speaker #8: So, broadly, how are you thinking about marketing spend next year versus this year?

Hajime Uba: [Foreign Language]

Speaker #3: Sure. この質問、待ってたんですけど、実は今回プリペイドリマックスで言ったクーポンのやつ、これ本当にうまいこといくと50 basis pointぐらいのインプルーメントになると思ってます。で、当然そのシステムを開発して、比較的早期にできる可能性があるんで、ノベマコールが楽しみにしてるんですけど、ただある程度ビッグラポンのトイの在庫っていうのをあらかじめリードタイムがタッチするんで、後半ぐらいからマックスですね。フルでロールアウトすれば50 basis pointぐらいのインプルーメントできると考えてますんで、そういったIPの回数が増えたりですとか、あとフードクラリザブの回数が増えても、十分それよりもオフセット、十分オフセットできるだけのコスト削減っていうのがアザーコストラインでできると思ってます。ちょっと他にも追加あるか、そこまで。

Benjamin Porten: Jon, we're happy you asked this because this is something that Jimmy and I have been working on. Jimmy kind of touched on this in the prepared remarks, but the Bikkura Pon, we think, is actually going to be maybe a bigger lever than people are initially appreciating. To give you some context, with the last consumer study, we saw that guests really saw the challenge of getting to that 15th plate and getting the prize as very compelling. They found the prizes themselves not compelling. We were dispersing these prizes every time, regardless of whether guests were interested in it or not. By introducing the ability to give guests the option to choose between the capsule prizes or a food coupon, we no longer have that wasted toy that's left on the table.

Speaker #2: Yes. John, we're happy you asked this because this is something that Jimmy and I have been working on. So, Jimmy kind of touched on this in the prepared remarks, but the bigger opportunity, we think, is actually going to be maybe a bigger lever than people are initially appreciating.

Speaker #2: So to give you some context, with the last consumer study, we saw that guests really saw the challenge of getting to that 15th plate and getting the prize as very compelling, but they found the prizes themselves not compelling.

Speaker #2: And so, we were dispersing these prizes every time, regardless of whether the guests were interested in them or not. And by introducing the ability to give guests the option to choose between the capsule prizes or a food coupon, we no longer have that wasted toy that's left on the table. And the cost of the dessert is really offset by the incremental visit that we get when guests come to redeem it.

Benjamin Porten: The cost of the dessert is really offset by the incremental visit that we get when guests come to redeem it. Altogether, once this is fully in place, we would expect up to a benefit of 50 basis points, that would more than offset the incremental investments in the additional frequency of IP campaigns and food LTOs. We're really putting in every effort that allows us to expect meaningful leverage in fiscal 2027 over fiscal 2026 as it relates to other costs as a percentage of sales. As we get ready for fiscal 2027, we've been pretty aggressively negotiating our contracts with our vendors for our other cost items. We're in the process of bringing a lot of our preventive maintenance work in-house, that would be a very meaningful cost savings.

Speaker #2: And so, altogether, once this is fully in place, we would expect up to a benefit of 50 basis points, and that would more than offset the incremental investments in the additional frequency of IP campaigns and food LTOs.

Speaker #3: 現在F127のバジェットをやってる中でですねいくつかアザーコストラインでベンダーのコントラクトそこでのところでのネゴシエーションの余地自分も直接関わってやってますけどあと2つは特にPMプログラムのところを自分のインハウスでねPMすることでのコスト削減これかなり具体的なところでの削減見込みになってるんで。アザーコストラインに関してはもちろん多少ねインフレーションっていうのはあるんですあると思いますしそういったコラボレーションの回数が増えることでのアップっていうのはもちろん多少あるんだと思うんですけど今よったようなことでですね十分にオフセットできる逆に本当の2027は26よりもだいぶ改善されることをマージンのインプルーメントにつながるというふうに予測してますと。

Hajime Uba: [Foreign Language]

Benjamin Porten: We're really putting in every effort that allows us to expect meaningful leverage in fiscal 2027 over fiscal 2026 as it relates to other costs as a percentage of sales. As we get ready for fiscal 2027, we've been pretty aggressively negotiating our contracts with our vendors for our other cost items. We're in the process of bringing a lot of our preventive maintenance work in-house, that would be a very meaningful cost savings. With that and the Bikkura Pon savings as well, we're feeling very good about the other cost expectations for fiscal 2027.

Speaker #2: Yes. So we're really putting in every effort that allows us to expect meaningful leverage in fiscal '27 over fiscal '26 as it relates to other costs as a percentage of sales.

Speaker #2: As we get ready for fiscal '27, we've been pretty aggressively negotiating our contracts with our vendors for our other cost items. We're in the process of bringing a lot of our preventive maintenance work in-house, and that would be a very meaningful cost savings.

Speaker #2: And so, with that and the bigger up on savings as well, we're feeling very good about the other cost expectations for fiscal '27.

Benjamin Porten: With that and the Bikkura Pon savings as well, we're feeling very good about the other cost expectations for fiscal 2027. This connects back to our earlier comment about you might be pleasantly surprised by how quickly we get back to that 20% of restaurant level operating profit margin.

Speaker #3: それもあの先ほど言った20%戻ってくるのが早くなると思います。

Speaker #2: And this connects back to our earlier comment about how you might be pleasantly surprised by how quickly we get back to that 20% restaurant-level operating profit margin.

Hajime Uba: [Foreign Language]

Benjamin Porten: This connects back to our earlier comment about you might be pleasantly surprised by how quickly we get back to that 20% of restaurant level operating profit margin.

Speaker #8: Great. Thank you for taking the questions. I appreciate it.

Jon Tower: Great. Thank you for taking the questions. Appreciate it.

Speaker #2: Thanks John.

Benjamin Porten: Thanks, Jon.

Speaker #1: Thank you. Our next question is from Jim Sanderson with North Coast Research. Please proceed with your question.

Operator 3: Thank you. Our next question is from Jim Sanderson with Northcoast Research. Please proceed with your question.

Operator: Thank you. Our next question is from Jim Sanderson with Northcoast Research. Please proceed with your question.

Speaker #7: Hey, thanks for the question. I wanted to go back to the margin discussion. I think you're guiding towards 18.5% on an unkempt basis, which is comparable to last year.

Jim Sanderson: Hey, thanks for the question. Wanted to go back to the margin discussion. I think you're guiding towards 18.5% on a GAAP basis, which is comparable to last year. Is the biggest factor in Q4 going to be that continued improvement in labor rate that you would expect to continue into fiscal 2027?

Speaker #7: Is the biggest factor in the fourth quarter going to be that continued improvement in labor rate that you would expect to continue into fiscal '27?

Hajime Uba: [Foreign Language]

Speaker #3: まずレーバーコストを引き続き少しねラップするところがあってもやっぱりイヤーオーバーエリアでミーニングな改善見られるということと先ほど言った言いましたアザーコストのところ今言った改善がもうQ4から少しずつ見られることに関してワンタイムですけどもタリフのリファンドも期待できるんでその2つのコンビネーションで売上が予想よりも低かったにも関わらずマージンはエクスパンションするというふうに予定してそれは27も続くと思いますこのマージンディスパッションさらに加速すると思ってます。

Benjamin Porten: As it relates to margin, yes. A lot of the benefit is coming from the labor. We will be lapping the introduction in Q4, so the benefit will be partial, but the bulk of it will be coming from the initiatives that we discussed earlier, as well as the tight scheduling. The other costs improvements that we expect for fiscal 2027, we're already starting to see a little bit of benefit in Q4, so some of that is part of our higher margin expectation as well. We're getting some refunds on tariffs paid for our other cost items where we are the importer of record, so that's a one-time tailwind, but that does play into the 18.5% expectation as well.

Speaker #2: Yes, as it relates to margin, a lot of the benefit is coming from labor. We will be lapping the introduction in Q4, and so the benefit will be partial, but the bulk of it will be coming from the initiatives that we discussed earlier, as well as the tight scheduling.

Speaker #2: The other cost improvements that we expect for fiscal ‘27—we’re already starting to see a little bit of benefit in Q4, and so some of that is part of our higher margin expectation as well.

Speaker #2: We also were getting some refunds on our tariffs paid for our other cost items where we are the importer of record, and so that's a one-time tailwind, but that does play into the 18.5 expectation as well.

Speaker #7: And that one-time tailwind.

Jim Sanderson: That one-time tailwind-

Jim Sanderson: That one-time tailwind. Sorry. What was the expansion?

Hajime Uba: Sorry. What was the expansion?

Speaker #2: That being said, all of our efforts—they're designed to be structural, and so they're just baked into the business now. We expect the gains to only accelerate as we enter fiscal 2027.

Benjamin Porten: That being said, all of our efforts, they're designed to be structural, and so they're just baked into the business now, and we expect the gains to only accelerate as we enter fiscal 2027.

Speaker #7: So, there would still be the opportunity for the robotic dishwashers to add value in fiscal '27.

Jim Sanderson: There would still be the opportunity for the robotic dishwashers to add value in fiscal 2027 as they're rolled out?

Speaker #2: Oh absolutely. Yes.

Benjamin Porten: Oh, absolutely. Yes. 100%. Yeah, and so really everything except outside of the nominal refund that we received on the tariffs for other costs, all of those factors continue to benefit us.

Benjamin Porten: Oh, absolutely. Yes. 100%.

Speaker #3: 100%. タリフのリファンド以外は全部さらに期待しています。

Speaker #2: Yeah. And so, really, everything except, outside of the nominal refund that we received on the tariffs for other costs, all of those factors continue to benefit us.

Hajime Uba: [Foreign Language]

Benjamin Porten: Yeah, and so really everything except outside of the nominal refund that we received on the tariffs for other costs, all of those factors continue to benefit us.

Speaker #7: Okay. And the one-time tariff will be fourth quarter pending.

Jim Sanderson: Okay. The one-time tariff will be Q4 pending?

Speaker #3: Yes.

Benjamin Porten: Yes.

Speaker #7: Okay. I also want to go back to traffic, the negative 5.4%. Can you break that up by month so we can try to get an understanding of how that trended in the quarter?

Jim Sanderson: Okay.

Jim Sanderson: Yes.

Jim Sanderson: I want to also go back to traffic, the -5.4%. Can you break that up by month so we can try to get an understanding of how that trended in the quarter?

Hajime Uba: [Foreign Language]

Speaker #3: ざっくりと毎月ほとんど変わらないトレンドです。OKのところでは。

Speaker #2: There really wasn't enough difference between the months to really call out any sort of trend.

Benjamin Porten: There really wasn't enough difference between the months to really call out any sort of trend.

Speaker #7: Okay. So pretty much similar.

Jim Sanderson: Okay. Pretty much the yep.

Speaker #2: I was just—the only thing I was going to add is that the June mix has seen a pretty—it genuinely surprised me. So that's really, it's good to be surprised in a positive way.

Benjamin Porten: The only thing I was going to add is the June mix has seen. It genuinely surprised me. It's good to be surprised in a positive way.

Speaker #7: Right. But relatively stable traffic trended throughout the quarter by month. Is that the right way to look at this? All right. I'll pass it on.

Jim Sanderson: Right. Relatively stable traffic trend throughout the quarter by month is the right way to look at this?

Benjamin Porten: Yes. Yes, sir.

Jim Sanderson: All right. I'll pass it on. Thank you.

Speaker #7: Thank you.

Speaker #2: Thanks Jim.

Hajime Uba: Thanks, Jim.

Benjamin Porten: Thanks, Jim.

Operator 3: This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Operator: This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Speaker #1: This now concludes our question and answer session. Ladies and gentlemen thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Q3 2026 Kura Sushi USA Inc Earnings Call

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