Kura Sushi USA, Inc. (KRUS) on Q4 2021 Results - Earnings Call Transcript

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal Fourth Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this call is being recorded. On the call today, we have Jimmy Uba, President and Chief Executive Officer; Steven Benrubi, Chief Financial Officer; and Benjamin Porten, Vice President of Investor Relations and Business Development. And now, I would like to turn the call over to Mr. Porten. Benjamin Porten: Thank you, operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal fourth quarter 2021 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue 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. 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 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 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. Hajime Uba: Thank you, Ben, and thank you, everyone, for joining us today. I'm delighted to see the continued momentum in our business recovery despite the challenges presented by COVID and its variance. On a high level, we generated meaningful top line growth during our fiscal fourth quarter, including comparable sales growth of 4.9% versus pre-pandemic fiscal 2019 figures. We believe this is a testament to the strong connection of our guests feel to our brand, because they are returning to get excited for their favorite menu items or new guests that are amazed by the uniqueness of the Kura experience. Moreover, we delivered sequential improvement in profitability over the previous quarter, resulting in restaurant level operating profit margins of over 16%, strongly narrowing the gap to our pre-pandemic performance. Let me provide more color on our sales performance. We began the quarter with operating restrictions, limiting our restaurants to 50% in-door dining capacity for the first 2 weeks of June. As the California market contains half of our system base, these restrictions were a meaningful revenue headwind. However, I'm pleased to say that we overcame this initial setback with fourth quarter revenue of $27.9 million, an increase of over 50% as compared to the previous quarter's revenue of $18.5 million. In our previous earnings call, we mentioned that our general system-wide comps following the end of the capacity restrictions exceeded to those of fiscal 2019. This continued through the quarter, ending with system-wide comps of 4% to 4.9% as compared to pre-pandemic fiscal 2019 figures. Our at market, in particular, which has no operating restrictions regarding Q4, performed phenomenally with comps of 17.2% as compared to fiscal 2019. As we look to fiscal 2022, we are pleased to see this strong momentum continue. Our Q4 has historically been our stronger quarter. September sales remained very robust at $9.6 million as compared to August revenue of $9.9 million. This trend continued in October with sales increasing further to $10.3 million. Through the first 2 months of Q1 of fiscal 2022, we've generated comps of 22.2% as compared to fiscal 2019 with key markets of California up 13.6% and Texas up 31.6%, buoyed by the benefit of an additional weekend in October 2021. Strong sales we've seen throughout Q4 and onward are particularly notable for 2 reasons: the first is that we've seen minimal deceleration in sales in spite of the resurgence of COVID with delta variant beginning in August. The second is that in our effort to offset inflation, we took high single-digit pricing at the start of September, making it the single largest operating event in our corporate history. To be clear, we have seen budget in all consumer pushback, to appreciate on profit as a result. In fact, we've seen guests saying that even after this pricing Kura remains an excellent value. Now even, our prices remain substantially below those of many peers in the fish industry, and we continue to reinvest our operational efficiencies into our premium ingredients for an unbeatable value on a dollar-to-dollar basis. I was proud to see that our customers recognize that our brand goes beyond our unique dining experience and that the food that we serve is truly an excellent value. Now I would like to discuss off-premises which continues to represent incremental sales opportunity. In spite of the opening of our entire system with the Kura experience, our Q4 off-premises revenue held strong at $1.4 million as compared to the previous quarters off-premises revenue of $1.8 million. Our fourth quarter off-premises mix of 5% was lower than Q3's 10% mix, but this is largely due to greater sales overall in Q4, driven by increased seating capacity in California. We continue to expect an off-premises mix of mid-single digit going forward. Like our restaurant industry peers, hiring and retention is top of mind for us. I'm proud of the efforts made by our operations and recruiting teams especially upon the June 15 of indoor dining capacity restrictions in California. With half of our system in California, moving from 50% capacity to among 100% capacity required increasing our workforce at unprecedented speed. Due to the round the clock efforts by our operations and recruiting teams, we were able to be almost completely fully-staffed in time for the capacity expansion, setting us up for the sales recovery we saw throughout the quarter. Of course, we've hardly been resting on our laurels since this major push. Earlier to the pandemic, our low employee turnover rates were a point of pride, and we are making every effort to return to our pre-pandemic figures. As a simple as it sounds, we believe the Q2 employee retention is being appraised where people wanted to work. To this end, we are fundamentally reevaluating our training protocols and working on systematic, transparent path for career advancement. These projects will be critical to our continued success as we continue our rapid growth we need our employees to grow alongside us. A strongest store management timelines are those that are built on our internal candidates, and we want to employees to know there are meaningful long-term opportunities for everyone with clear guidance on working towards them. To bolster this effort, we are pleased to announce hiring of Arlene Petokas as our Chief People Officer, who joined us in October. Arlene had one extensive career in the restaurant industry working with brands like Del Taco, CKE and most recently at Farmer Boys, where he served as their Chief People Officer. We are sure we will benefit tremendously from Arlene's expertise, especially as we navigate our growth through a changing landscape in the hospitality industry. Technological innovation and automation have been a major point of focus in our industry since the pandemic, and we are fortunate that these very things have been part of the DNA of our company since its founding in Japan almost 40 years ago. Introducing tech-driven efficiencies have been fundamental to our business. And the pandemic has brought about its importance to the forefront. We've redoubled efforts during the last fiscal year, we created our off-premises channel and the new mobile app that integrates our reward program and implemented new technologies like CrunchTime, and Forum Analytics. These investments in technology continue to be key to our strategy. Our pilot programs, including table side payment and table side drink ordering continue to expand and we hired our first IT Director to accelerate our projects. Other stakes include adopting Square for all credit card processing, which will give us unprecedented review of our guest insights at every noncash transaction will now be captured by Square. Our rewards program growth momentum continued in Q4, with membership growth of over 65% over the quarter for a total of 240,000 members at the end of fiscal year 2021. We will also implement additional heating technologies used by our parent company, pending ATL and NSF certification for commercial use. On the development front, 2021 was the most productive year in the history of the company. We closed the year development plan with our June opening in Bellevue, Washington, for a total of 7 new units, representing almost 30% unit growth and bringing our system total to 32 units. Our development team did exceptional work and we believe the fiscal 2021 vintage maybe one of our strongest closes yet. In fact, Bellevue are Fort Lee are already among our top 3 performing restaurants. Most of these openings being in new markets underscore a broader view of Kura Sushi and the portability of our concept. In terms of our plans for the current fiscal year, we expect to have an even busier year than 2021 is a target of 8 to 10 new restaurant openings. We have been extremely pleased with the performance of our first new unit in fiscal 2022 Stonestown Galleria in San Francisco, which opened in October. Besides Stonestown, we have executed leases for 7 units, all of which were under construction. Our geographic strategy continues to be a mix of new markets and in-fills. Brand new markets, this fiscal year are Arizona, Massachusetts and Arizona, Massachusetts, and Pennsylvania. We continue to believe our whitespace potential is larger than ever due to pandemic-driven restaurant closures, particularly the closure of Japanese restaurants and we'll commission a new whitespace study once COVID is finally behind us. We are pleased with our growth momentum and are excited to bring the Kura Experience to new guests across America. Last year was most difficult year in distant memory of our industry and that was certainly the case for us well. However, we were fortunate to have the financial support of our parent company through their $45 million revolving credit facility, which allowed us to pass some strategic decisions for our long-term success. As I mentioned earlier, ongoing CapEx investment, resulting in our busiest development year ever, if these additional unit positioning us to recover so much more quickly as we exit the pandemic. As the revolver provided financial strength, we were able to focus our negotiations with landlords on long-term favorability, including base extensions on several of our most profitable units. The pandemic has been a transformative period, we are discussing new revenue opportunities like off-premises or just how much we've been able to deepen our bench. We have been fortunate to welcome our new CFO, new COO our first CDO, and our first CTO. In July, we conducted a follow-on offering with net proceeds of over $53 million through the sale of 1,265,000 Class A shares. Again, I would like to thank all of my team members for their incredible work as well as our parent for the financial support and strategic freedom the revolver provided, which resulted in a transaction that exceeded our expectations. With this raise, we have abundant capital to continue our aggressive plans and are more excited than ever about our future. With that, let me turn the call over to Steve to briefly discuss our financial results and liquidity. Steve? Steven Benrubi: Thank you, Jimmy. For the fiscal fourth quarter, total sales were $27.9 million as compared to $5.5 million in the past year period. We believe measurement of comp sales growth is most relevant versus the pre-COVID period of 2019. On that basis, comp sales grew by 4.9% with California down by 6.8%, largely due to the early June capacity restrictions, while our Texas market increased by 17.2%. Turning to cost. Food and beverage costs as a percentage of sales were 30.8% compared to 33.3% in the prior year quarter, reflecting largely normalized performance as sales volume improved and inventory spoilage decreased. Labor and related costs as a percentage of sales decreased to 29.9% from 60.3% in the prior year quarter, primarily due to higher sales leverage and a $1.2 million employee retention credit recognized under the Cares Act extension. Excluding the credit, labor and related costs would have been 34.3%. The decrease as a percentage of sales from the prior year quarter was primarily due to the effect of lower sales and minimum staffing needed to operate our restaurants at reduced capacities in the fourth quarter of 2020. Occupancy and related expenses as a percentage of sales improved to 6.8% from 30.6% in the prior year quarter, primarily due to higher sales leverage. Other costs as a percentage of sales decreased to 12.9% compared to 26.8% in the prior year quarter, also due to higher sales leverage. General and administrative expenses were $5 million compared to $3.1 million in the fourth quarter last year. Excluding the impact of an $800,000 litigation accrual, general and administrative expenses would have been $4.2 million. This increase was primarily due to compensation-related expenses as we made additions to our team to support our accelerated growth plans. As a percentage of sales, adjusted general and administrative expenses improved to 15.2% compared to 55.5% in the prior year quarter. Operating loss was $800,000 compared to an operating loss of $6.8 million in the fourth quarter of 2020. Restaurant level operating profit as a percentage of sales was 16.4% compared to restaurant level operating loss as a percentage of sales of 41.6% in the fourth quarter of 2020. Adjusted EBITDA was $600,000 compared to a negative $5.4 million in the fourth quarter of 2020. Income tax expense was $18,000 compared to an income tax benefit of $5,000 in the fourth quarter of 2020. And net loss was $800,000 or $0.09 per diluted share compared to net loss of $6.8 million or $0.82 per diluted share in the fourth quarter of 2020. Adjusted net loss was $1.4 million or $0.15 per diluted share compared to adjusted net loss of $7 million or $0.84 per diluted share in the fourth quarter of 2020. Turning now to our cash and liquidity. At the end of the fiscal fourth quarter, we had $40.4 million in cash and cash equivalents, and no debt as we paid down our outstanding balance of $17 million on our revolver during the quarter. During our fiscal fourth quarter, we also successfully completed our follow-on offering of 1,265,000 shares of our Class A common stock for net proceeds of approximately $53.5 million. The cash not only allowed us to pay down debt on our revolver, but also provides us with the capital needed to execute on our fiscal 2022 growth plans and perhaps beyond. Turning to our annual outlook for this fiscal year. We are providing the following guidance. We expect total sales between $130 million and $140 million. We expect general and administrative expenses as a percentage of sales of approximately 17%, and we expect the opening of 8 to 10 new units with net capital expenditures per unit of $2.1 million. It bears mentioning that these expectations assume that we experience no further operating restrictions or material downturns in the pandemic situation. Our expectations are based on the recent results that we have seen in the fourth quarter of fiscal '21 as well as our performance to date in the current first quarter of fiscal '22. And while we believe the above expectations are appropriate given our current operating environment, the restaurant industry remains highly vulnerable to COVID-related volatility. Now I'll turn the call back to Jimmy. Hajime Uba: 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. Please bear with us. Operator: Our first question comes from the line of Andrew Strelzik with BMO. Andrew Strelzik: All right. Great. Congratulations on certainly on the momentum that you're seeing in the business. Where I wanted to start was trying to understand -- or put in context the pricing that you're talking about having taken relative to the inflation that you're expecting or that you're seeing. So across commodities or wages, what are you expecting for 2022? And how much does the high single digits cover? Hajime Uba: Thank you for your question, Andrew. Before we answer your question, I would like to make a quick correction to our prepared remarks. We have 9 executed leases, not 7. So 9 executed leases besides Stonestown. I just want to make sure with you guys before we answer your question. Steven could you answer Andrew's question? Steven Benrubi: Sure. I'll speak a little bit to the pricing and Jimmy, give it over to you for further context. But just to reiterate, we made on average high single-digit pricing increase move effective September 1. We took into account the competitive environment in every one of the metro areas we operate in. And we also disconnected a little bit some of our state level pricing and looked at really on a more market basis where -- the Dallas market, let's say, may merit or command a different pricing from Houston or Austin, for instance. So that was a change in approach for the company and also something that we think better reflects where we stand in the market. And we feel, as Jimmy noted, we're still in a great value positioning nonetheless, having taken that. And we have been very encouraged in the first couple of months of Q1 about just how much that pricing has offset the inflationary pressures that have come primarily from food and labor. At the same time, we know there's a lot of volatility still in both of those categories as well as some supply chain challenges that we feel like we're dealing with very well. But nonetheless, with the outlook still a little bit unclear as to where food and labor may go for the rest of the year, we're not in a position yet where we'd want to get into too much detail about what we think the puts and takes are between the pricing and those costs. But we'll say that early indications are positive. We're pleased with how we're getting the leveraging off of the sales with the increase that we took on September 1. Andrew Strelzik: Okay. That's helpful. And then in the press release and the prepared remarks, there was some conversation around the efficiencies that you're realizing. And I'm just curious if you can kind of frame where you're seeing the biggest benefits in particular? If there's anything new that you've kind of unlocked going forward? And just a little more color around what you're doing on that side would be fantastic. Steven Benrubi: Yes. I'll -- maybe just to speak first a little bit. I think some of what we're looking at and just might add on to the conversation about labor costs is we were very -- we are very pleased with how well we've been able to respond with staffing in our restaurants and frankly, I think we're not experiencing the degree of shortage or challenges that maybe some others in the space have been talking about. We have virtually full operational capabilities in our restaurants right now. But at the same time, it also means that we have a number of fairly new employees to the system, and we are working through, I would say, some efficiencies with new team members as we bring them up to speed on restaurant training and then, of course, whenever new restaurants open, there's a little bit of a learning curve that goes along with that. And from there, I know Jimmy can speak to some of the efficiencies around the initiatives that we have going on in the system and where they stand today on things like the table side payment to table side drink ordering and other procedures. Hajime Uba: So please allow me to add something in Japanese. Ben will translate . Benjamin Porten: As Steve mentioned, the most important projects in our immediate initiative pipeline would be the table site payment and touch panel drink ordering. We think that this will be -- this will meaningfully reduce the amount of work that the servers are required to do. Thus allowing us to increase our labor efficiency. In terms of margin growth, this is -- we think that this is our largest opportunity as well, simply because the margin growth we've seen in the last quarter is driven by sales leveraging. And as we turn tables more rapidly and serve more guests per day, we think this is going to be a meaningful comp driver, especially in our mature stores. Andrew Strelzik: Yes. That makes sense. And then if I could just squeeze one more in. I'm just curious kind of as you look at the volume recovery, the strength of the performance of some of the new units, and maybe it's too early, maybe it's just not enough data points yet across the number of locations you'd like to see. But I'm just curious if you think the economic model for new units that you had kind of laid out over the last couple of years, do you still think that's the right way to think about the new unit performance? Or do you think maybe we're in a better place now than we have been? I obviously understand the inflationary environment, but just kind of thinking about some of the comments, and I'm wondering how you think about that. Steven Benrubi: Sure. Yes. I think... Hajime Uba: Go ahead. Steven Benrubi: Jimmy? Hajime Uba: Okay. I'll speak a little bit. Benjamin Porten: Before answering the question, we just wanted to mention this is sort of in parallel with volume recovery, but we've been so encouraged by the tremendous volumes that we've seen, particularly in our new markets like Bellevue, Fort Lee, and Troy, we think there is clear an indication as ever that the portability of our concept is extremely strong and that the appeal is nationwide. Hajime Uba: Benjamin Porten: In terms of the reasons that we think that we've seen such success in our new store openings for fiscal '21, the first would be we're taking a more data-driven approach to our site selection. And with every new unit that we're opening, that improves our data set, especially because we have a relatively small system base. And so our analysis becomes more and more sophisticated with each store opening. We -- our marketing teams and opening teams have also done excellent work in terms of ensuring that every opening is absolutely up to our quality standards. Operator: Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group. Jeremy Hamblin: And congrats on a great job. I wanted to come back to menu pricing and kind of check for a second here. So you definitely have great relative value. I think that's why you haven't seen a ton of pushback. In terms of the average check for kind of quarter-to-date, FY '22 versus 2 years ago, where is average check today versus 2 years ago? Steven Benrubi: Yes. So Jeremy, this is Steve. I guess I'll start by speaking about -- some of the reasons that we're quite encouraged about the reception or continued reception by our customers after the pricing change is looking at sequential comp performance against '19 the month of August, we were high single-digit positive overall. And then when the price increase went into effect, we followed that with 2 months of almost 19% in September and north of 20% in October. And so we're clearly outpacing the change in the pricing with the sequential further growth in the comps. Beyond that, the statistics around check and traffic and so forth. We'll be in a better position at the end of the quarter to provide a more comprehensive analysis of those components, but we're feeling very good about our customers still being there strongly no matter what, given what we've seen in comps since the move in price. Jeremy Hamblin: Fair enough. Maybe I can ask a slightly different question then to get some kind of relative performance. So if California in Q4 was down 6.8%, Texas up plus 17.2%. Where do those markets stand quarter-to-date? Just trying to get a sense for how California is trending? Steven Benrubi: Sure. I mean Texas. Yes. And Texas continues to be the strongest market overall. But California, that down 6.8%, you may recall, the first half of June, we were still dealing with dining capacity restrictions in the restaurants. And so we were running low single-digit negative in California the last couple of months of Q4. In Q1, we moved immediately to low double-digit positive in California in both September and October. And then in Texas, we're talking about north of 25% comp performances in each of those months. And so really, we're very pleased with the trend move and just on an absolute basis, what's happening there. And again, those are against the '19 numbers, just to be clear, on comps. Jeremy Hamblin: Right. Got it. Awesome. In terms of your other operating costs, so you saw pretty significant sequential growth. Obviously, revenues grew 51% sequentially, and I think your other operating costs grew 33% sequentially. I wanted to get a sense for -- your business model's changed a little bit. You have more off-premises business, but in addition to that, we've also seen things like utility costs are up quite a bit, just other areas. I wanted to get a sense for how you were thinking about those other operating costs. That line item kind of as you look at '22, where do you expect that to kind of normalize or kind of a range? Steven Benrubi: Sure. I'll speak to -- maybe it talks a little bit to the earlier question on the economic model side as well. And we've -- throughout the pandemic and through the recovery that we've seen thus far, there's nothing in it that tells us we can't get back to the kind of pre-pandemic type restaurant economics that this business succeeded with. And if you look at the comp performance recovery and what's happened here in the first quarter. Again, I'm always going to caution that it's early indications, but those early indications are pretty encouraging to us, in terms of what we can take the business, in terms of overall restaurant volumes to on a go-forward basis. I mean, with those types of numbers, it's pretty easy to tell or see that the overall restaurant volumes would be growing. And then also on the labor and COGS side, both areas, we thought there was strong progress sequentially, where we got on an adjusted basis, we got labor down about 200 basis points from the prior quarter to where it's now 34.3% of sales. COGS was 30.8% of sales. Other costs, yes, there is inflation, but they start from a much lower base portion of our costs once you get outside of the prime area. And we consider that when we made our overall pricing move to -- both offset the impact of those and be able to continue leveraging restaurant economics the way we want to get to and also staying a very high-value concept within our space. And so far, we feel like we're accomplishing that. Benjamin Porten: And if I could add on the off-premises that you've asked about, Jeremy, So typically, the 2 incremental costs associated with growth in off-premises would be packaging costs and then delivery costs. For us, our packaging costs are basically offset because with any off-premises order, there is no disposal, whereas for in-store dining, we typically have a 3% to 4% plate disposal rate. And so that's on a margin pressure there. And then in terms of delivery cost, we're -- our business is almost entirely pickup. And we're not subsidizing any of the delivery fees if a guest does up for delivery. So that's not a cost pressure either. Jeremy Hamblin: Great. Then just one clarifying question. On the menu pricing, what is your current food cost inflation rate? I mean I think that the 30.8% in Q4 is actually the lowest food and beverage costs you've ever had in any quarter. And I would think maybe with the price increase that you're probably tracking slightly below 30% food and beverage costs now. Steven Benrubi: Yes. I'll give a little more color on the 30.8% is that our sales mix by geography normalized a little more in the fourth quarter as well once California came fully back online with 100% indoor dining capacity. Our pricing on average is higher in California than the Texas market, for instance, because of a much different labor environment. And so if you were to look at California restaurant P&Ls overall, you see a better COGS number, and you're going to see higher labor spend. It's just a fact of doing business here. And so as more and more of our sales now have gotten back to California and that's more normal for us, that did help the move in COGS as a percent of sales. In terms of current rates, I'm just going to fall back again on the high single price move that we made. We're very pleased with how that's helping us offset the impact of cost. And we're also well aware that there can be shifts that happen very quickly from month to month in food. Now we do have a very diverse menu, as you know. Our top 5 commodities are around only 25% combined of our total food cost. So that diversification helps us. But when things like labor or freight, which are going to be a factor for almost all of the food that comes in and other macro factors, it can move potentially significantly. And we just feel like we're going to have better visibility to where the food cost situation is down the road and maybe be able to give some more granularity around future expectations after that. Operator: Our next question comes from the line of Sharon Zackfia with William Blair. Matthew Curtis: It's Matt Curtis on for Sharon. I have a question on overall restaurant level margins. If you look at restaurant level margins, where you are now versus where you were pre-pandemic, I think you had adjusted restaurant level margin of about 20% in fiscal 2019. And I'm curious as to how much of that gap do you think you can close in fiscal 2022? Steven Benrubi: I'll maybe reiterate our thoughts. But we don't see any reason why we can't completely recover back to the kind of restaurant level margins that we had in the business pre pandemic. What clouds the future may be a little bit or we want to hold on to and see some more experience is a little bit of the opaque nature of the cost environment in both food right now, and to some degree, in labor now. And while we're pleased with where things are going, we feel very good about the progress we made to get to the 16.4% margin in Q4 in spite of the fact that the first half of June had a very constrained California still in terms of indoor dining capacities as well as, as I mentioned, a lot of new labor coming on board and some learning curves and efficiency building that needs to happen with some of our newer team members. Putting that in context, we think getting to that 16.4% was a very significant and positive move and obviously narrowing in quickly on what our historical best was. But we're just not at a point where we think it makes sense to try to predict specific dates or times when we get back to that historical level, but we're very confident it's there for us to achieve. Benjamin Porten: Just the restaurant level operating profit margin for the prior quarter was 5.8%. And so the 16.4% that we saw in Q4 was a tremendous growth, really driven by the increased sales leveraging. And we've been very encouraged by the revenue that we're seeing quarter to date. Matthew Curtis: Okay. Understood. Following up, I guess, on the labor and commodity inflation. I mean understanding you've just taken pricing, which is helping to offset that. Could you also talk about other ways you may have been mitigating this either through the optimization of the conveyer belt offerings or anything else? Steven Benrubi: I'll start with a couple of areas. We've talked about the support infrastructure additions that we made and none more important than some of the leadership we have, like in the COO role, where Sean came on board a couple of months ago, and he's been heavily engaged with our supply chain folks around opportunities for -- as we become a bigger business and doing more volumes, how we can leverage that into some of our costing and other term structures on food. We have the initiatives around table-side payment and table side drink ordering that can really allow our teams to focus on customer service and the Kura experience, other elements of it for our customers in the restaurant that we think are going to help us going forward. And then also from a training perspective, another area where we put some more investment at the support center line is in training programs for our team members to enhance their efficiency and customer service. And so there's a lot of things going on at the same time that are pointed toward driving more efficiency in the business. And frankly, this is a brand that historically, when you think about the level of back-of-house robotics that have been deployed and how much this is a system based upon years of experience in Kura Japan that's been very efficiently developed. We might not have had a whole lot of low-hanging fruit, so to speak, for efficiencies, but we're always looking to continuously improve with a number of the things I just mentioned as examples. Matthew Curtis: Okay. Got it. And then on your G&A guidance for fiscal 2022. I was hoping you could break out the components of the dollar increase in G&A. I mean it sounds like it includes technology investments and things like table-side payment and drink ordering and other things. I was wondering if you could perhaps separate that from the core G&A dollar growth you're seeing next year? Steven Benrubi: Yes. I'll speak to the things that really -- the few pieces that if you put them together, it's the vast majority of what is happening there. And it does start with people. When it comes to the leadership side of the business, in addition to Sean coming on as COO, Arlene, our Chief People Officer, joined the company just recently. And we also brought on board a Director of IT, whereas that function, we have managed it historically through almost all of our support coming from third-party service organizations. And we reached a scale where we believe it's time that we build our own IT skill set in-house. And so we hired that and have intention to bring on a couple of staff members to help support IT under that director as well. And then there have been some investments that were made late in fiscal '21 in people that have already been showing signs of paying strong dividends for us. And that's in the recruiting area, where we brought on a few more team members for restaurant level recruiting. And also in the store opening area, where we brought on a whole additional store opening team because when we get to the point now where we're talking about opening 8 to 10 restaurants, we really need 2 teams working concurrent there. And you saw the benefit of those additions and how well we've been able to staff our restaurants from the June 15 so-called reopening of California when it got to 100% up to now, the kinds of sales recovery and comp store sales, we're talking about through October simply couldn't have happened without us having a strong staffing level at almost all of our restaurants. And those recruiting folks and those opening team people have been tremendously contributive to making that happen. And then when you put alongside some of the people costs, there's things like travel that go along with that, getting out to the restaurants again, when during the COVID area. There's just, frankly, wasn't nearly as much of that happening. There are some things that come along with our scale of growth like insurance costs, D&O and other programs where some of those costs increase as well. And then also, as we've hired on people in the organization to provide support for a more aggressive growth plan. Recognizing we're now a bigger business, the span of responsibility in some positions becomes a bigger thing. And so the hiring rates -- you have to bring people on can be different from what you may have been when the company was half this current size. So I think those -- if you put those elements together that pretty much comprises the lion's share of what's changing in G&A. And we're just getting ahead of supporting our business so that we make sure we grow smart. Matthew Curtis: Okay. So I guess would it be... Steven Benrubi: And then final point... Matthew Curtis: Sorry, go ahead. Steven Benrubi: If you don't mind, is that we really do look at what we've done with these additions to the team is something that can serve us for a multiyear period. And so there's always going to be growth in G&A on an absolute dollar basis in a growing business. But we feel like the fiscal '22 additions I've talked about here, that should be followed by more nominal growth or more modest growth, certainly in the G&A in the next several years because we've really positioned ourselves with a team that can handle things for a while. Operator: Our next question comes from the line of George Kelly with ROTH Capital Partners. George Kelly: Congrats again on the successful quarter and all the momentum you're seeing. Just to follow up on the prior question. So with all this sort of infrastructure that you're building this G&A infrastructure, when you look at 8 to 10 restaurants this year is a jump. And I know that there's a real sort of timing issue with signing a lease and constructing the restaurant and everything. But with your infrastructure now in place, do you feel like you're in a position where if you look out a couple of years, are you -- do you have the team in place now to move quite a bit faster even than that 8 to 10 in future periods? Hajime Uba: Okay. Benjamin Porten: We wanted to mention that -- as Steve had mentioned, the G&A investments that we're making now are really investments that are going to serve us for multiple years. In regards to the 8 to 10 restaurants that we have for this pipeline, over the last fiscal year, we've really made meaningful additions to our construction team, real estate team. They've grown tremendously, both in terms of talent and just additional members. And given like the lead time for an opening, as you've mentioned, the investments that we make now are what's going to allow us to have that much bigger pipeline in coming years? Hajime Uba: Benjamin Porten: And then the opening team's line item also falls under G&A. And by growing our opening team and having 2 opening teams, we'll now be able to open stores in parallel. And so this is also something that -- it wasn't just something that was useful for us in the preceding year. It's going to serve us very well for the coming years. George Kelly: Okay. Okay. Great. And then next question again on your new store openings. With the success you've seen, I mean, I see wait times, sometimes over 200 minutes or 300 minutes even at some of your new stores. Does that cause you to rethink the size of your store at all? And so I mean the obvious sort of question is, could your stores be bigger? But are there any other kind of format changes that you're contemplating on this next batch of stores? Hajime Uba: Benjamin Porten: So we're always looking to what's been particularly successful with any new given -- any new store opening, and we want to keep a flexible format generally going forward. But it's not a simple one-to-one relationship between a larger store size and its earning ability. Just as an example, Fort Lee, which has done tremendously well, is quite small. Hajime Uba: Benjamin Porten: So we're -- as always, we're really going to be approaching this on what's best for that specific market. Just as an example, with the recent Stonestown opening, that was a location that we've been looking at for several years. We were very confident that we'd be able to draw a ton of traffic. And with compelling rent, we were open to opening a larger store. We're always thinking holistically in terms of the return on investment. And we meet periodically as the strategy and development committee. And when it's appropriate, we are opening larger stores. Hajime Uba: Benjamin Porten: And we've always thought of our sort of flexible real estate footprint as a huge competitive advantage by not having a set size or set box shape. We never preclude ourselves from entering a potentially excellent space simply because it doesn't fit whatever minimum 5,000 square foot criteria. And so we never want to cut ourselves off from tremendous opportunities, especially just given how much whitespace that we have. And to circle back to your earlier comment about the wait times, we are -- that's one of the reasons the table-side payment is such a high priority for us. We really think that this is going to be very meaningful into reducing wait times and allowing us to serve more guests. And the wait times also do inform our in-fill strategy if the wait times are particularly high, then that market would be elevated in terms of priority. George Kelly: Okay. Okay. And then last question for me, a different topic. You mentioned so that -- you were just talking about some of the tech enhancements that are more near term in nature like table-side payment and beverage ordering and other things. As you look longer term, I think you mentioned in your prepared remarks, new kitchen sort of automation or robotics or something. And so I was just curious if you could talk about other maybe, call it, pain points or points of friction where you think technology, places you're investing now might have more of an impact, if you look 2, 3 years out from now? Hajime Uba: Benjamin Porten: So one example of the technology that we're planning on bringing over from the parent pending that ETL and NSF certification would be -- it's sort of a robot that helps we fully automate the dishwashing process. It moves all the plates from the staff that collects the plates and directly places them into the dishwasher. And so really, all the employees need to do is just grab a clean plates and it's not something that you ever need to think about again. This is particularly important because if you're not able to keep up, that does limit your throughput. You always need clean plates to continue to serve guests. And dishwashers are actually one of the harder positions to staff. And they're an extremely critical position for the exact reason that I mentioned that they sort of limit your throughput. And so we're particularly excited about that one. But looking at the near term, the table-side payment and the touch panel of drink ordering or the ones that are closest to full rollout. Operator: And we have reached the end of the question-and-answer session. And also we have reached the end of the conference as well. Therefore, you may disconnect your lines. Thank you, and have a good day.
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Kura Sushi USA, Inc. (NASDAQ: KRUS) Faces Financial Challenges Despite Revenue Growth

  • Kura Sushi USA, Inc. (NASDAQ: KRUS) reported an earnings per share (EPS) of -$0.31, missing estimates and indicating financial challenges.
  • The company generated revenue of approximately $64.89 million, slightly above estimates, showcasing its ability to maintain sales.
  • Despite negative profitability indicators, KRUS maintains a moderate debt-to-equity ratio of 0.72 and a strong current ratio of 2.67, suggesting financial stability.

Kura Sushi USA, Inc. (NASDAQ: KRUS) is a technology-driven Japanese restaurant chain known for its innovative approach in the dining industry. The company leverages technology to enhance customer experience and streamline operations. Despite its forward-thinking strategies, KRUS faces competition from other restaurant chains and must navigate financial challenges to maintain its market position.

On April 8, 2025, KRUS reported an earnings per share (EPS) of -$0.31, which was lower than the estimated -$0.08. This result was also worse than the previous year's same quarter loss of $0.09 per share. The company's financial performance was discussed during its Q2 2025 earnings conference call, featuring key executives and analysts from firms like TD Cowen and Barclays.

Despite the disappointing EPS, KRUS generated a revenue of approximately $64.89 million, slightly surpassing the estimated $64.87 million. This indicates that while the company is struggling with profitability, it is still able to generate sales. The price-to-sales ratio of 1.94 suggests that investors are paying $1.94 for every dollar of the company's sales, reflecting some confidence in its revenue-generating capabilities.

KRUS's financial metrics reveal challenges, with a negative price-to-earnings (P/E) ratio of -47.67 and an earnings yield of -2.10%, indicating negative earnings. However, the company maintains a moderate debt-to-equity ratio of 0.72, showing a balanced approach to leveraging debt. The current ratio of 2.67 suggests a strong ability to cover short-term liabilities with short-term assets, providing some financial stability.

The enterprise value to sales ratio of 2.23 and the enterprise value to operating cash flow ratio of 32 highlight the company's valuation relative to its sales and cash flow. These figures suggest that while KRUS faces profitability challenges, it continues to hold value in the market, driven by its innovative approach and revenue generation.

Kura Sushi USA, Inc. (NASDAQ:KRUS) Shows Signs of Financial Improvement Despite Challenges

  • Kura Sushi USA, Inc. (NASDAQ:KRUS) reported an earnings per share (EPS) of -$0.08, surpassing the Zacks Consensus Estimate.
  • The company's revenue was $64.46 million, slightly below expectations, but its price-to-sales ratio of 4.51 indicates investor confidence.
  • Despite a negative EPS, KRUS demonstrates strong liquidity with a current ratio of 3.47 and a moderate debt-to-equity ratio of 0.67.

Kura Sushi USA, Inc., listed as NASDAQ:KRUS, is a prominent player in the sushi restaurant industry. Known for its innovative dining experience, Kura Sushi operates a chain of revolving sushi bars across the United States. The company competes with other sushi chains and casual dining restaurants, striving to capture a significant market share with its unique offerings.

On January 7, 2025, KRUS reported an earnings per share (EPS) of -$0.08, which was a notable improvement over the Zacks Consensus Estimate of a -$0.24 loss per share. This performance also marked a positive shift from the previous year's loss of $0.18 per share, indicating progress in the company's financial health. Despite the negative EPS, the improvement suggests that KRUS is on a path to better financial performance.

The company generated a revenue of approximately $64.46 million, slightly below the estimated $66.59 million. This shortfall in revenue might be a concern, but the company's price-to-sales ratio of 4.51 indicates that investors are still willing to pay $4.51 for every dollar of sales. This suggests a level of confidence in KRUS's ability to generate future sales and growth.

KRUS's financial metrics reveal a complex picture. The price-to-earnings (P/E) ratio of -151.14 and an earnings yield of -0.66% highlight the current negative earnings situation. However, the debt-to-equity ratio of 0.67 suggests a moderate level of debt, which is manageable. The current ratio of 3.47 indicates strong liquidity, ensuring that KRUS can cover its short-term liabilities comfortably.

The enterprise value to sales ratio of 4.69 and the enterprise value to operating cash flow ratio of 66.99 reflect the company's valuation and cash flow generation. The high enterprise value to operating cash flow ratio suggests that while KRUS's valuation is high, its cash flow generation is relatively low. This could be an area for the company to focus on improving as it continues to enhance its financial performance.

Kura Sushi USA, Inc. Earnings Preview: A Deep Dive into Financial Metrics

  • Analysts predict a downturn in earnings for Kura Sushi USA despite a set EPS estimate of $0.15 and projected revenue of $65.39 million.
  • The company's high price-to-earnings (P/E) ratio of approximately 590.41 suggests a high valuation compared to earnings, raising concerns among investors.
  • KRUS's financial health indicators, such as the debt-to-equity (D/E) ratio of roughly 0.78 and a current ratio of about 2.43, reflect a balanced approach to financing and financial stability.

Kura Sushi USA, Inc. (NASDAQ:KRUS), a technology-enabled Japanese restaurant concept, is gearing up to release its quarterly earnings on Thursday, July 4, 2024, before the market opens. With Wall Street analysts setting the earnings per share (EPS) estimate at $0.15 and projecting revenue for the quarter to be approximately $65.39 million, stakeholders are keenly awaiting these figures. The company, based in Irvine, California, has already shared its preliminary unaudited financial results for the third quarter of fiscal 2024, hinting at its performance and potential growth trajectory during this period.

Despite the anticipation, analysts from Zacks Investment Research predict a downturn in earnings for KRUS in its forthcoming earnings report. This analysis suggests that Kura Sushi may lack the necessary combination of two crucial elements typically associated with an earnings beat, setting a cautious tone for investors. This speculation is particularly significant given the company's financial metrics, which include a high price-to-earnings (P/E) ratio of approximately 590.41, indicating a high valuation compared to earnings.

Furthermore, KRUS's financial health and market valuation are reflected in its price-to-sales (P/S) ratio of about 4.35, suggesting that investors are willing to pay $4.35 for every dollar of sales. The enterprise value to sales (EV/Sales) ratio stands at approximately 4.69, highlighting the company's total valuation in relation to its sales. Additionally, the enterprise value to operating cash flow (EV/OCF) ratio of around 44.14 shows the company's valuation in terms of its operating cash flow, with an earnings yield notably low at 0.17%, indicating lower earnings relative to the company's share price.

KRUS's debt-to-equity (D/E) ratio of roughly 0.78 points to a moderate level of debt relative to equity, suggesting a balanced approach to financing. The current ratio, at about 2.43, indicates that the company is well-positioned to cover its short-term liabilities with its short-term assets, providing a measure of financial stability. As investors and stakeholders await the official earnings announcement, these financial metrics offer a comprehensive view of Kura Sushi's financial health and market position, setting the stage for the upcoming earnings release.