Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kora Sushi USA Incorporated Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, January 11, 2021. On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer, Stephen Benrubi, Chief Financial Officer, and Benjamin Porton, Investor Relations Director. I would now like to turn the conference over to Mr. Porton.

Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal first quarter 2021 earnings release. It can be found at www.curricifici.com in the Investor Relations section. A copy of the earnings release has also been included in an 8K resubmitted to the SEC. 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 recent 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 is 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 Jim.

Thank you, Ben, and thank you everyone for joining us today. I would like to begin by welcoming Steve Benrubi, who recently joined us as our new CFO. Steve brings to us significant experience from well-established restaurant and retail companies, including Drybar, Dovet Seal, CKE Restaurants, and Domino's Pizza. He is well-qualified to provide financial leadership and strategic vision to Kura Sushi, and I know we will benefit tremendously from his experience as we execute our long-term growth plans. As you know, the environment surrounding this pandemic is very fluid, especially as COVID cases are on the rise again in certain parts of the country. Despite this uncertainty, I am pleased with the progress with the initiatives we put in place at the onset of this pandemic, resulting in sequential sales improvements from the fiscal fourth quarter of 2020. Let me quickly go through our quarterly results on a high level. Operating conditions remained challenging due to restrictions on indoor dining in California, resulting in seven out of our 28 restaurants being unable to use their dining rooms at all during the quarter. While restrictions in certain California counties became more relaxed over the course of the quarter, in mid-November, new restrictions required us to close the dining rooms of all of our California restaurants. In spite of these operational challenges, we were able to achieve marked revenue growth over the prior fiscal quarter. Due to the steps taken at the onset of COVID, including retention of store managers and critical kitchen staff, we were able to ramp up operations swiftly and efficiently as restrictions allowed. I have been extremely impressed with how nimble our restaurant operations team has been at responding to the constant changes in local and state regulations. Panning to our top line, total sales for the fiscal first quarter improved sequentially to $9.4 million, an increase of over 70% from fiscal fourth quarter of 2020. Breaking it down by month, we achieved close to 30% month-over-month revenue growth in which continued into October with revenue growth of 20% over September. November saw revenue decline by 8% relative to October due to indoor dining restrictions in California enacted in mid-November. Comparable restaurant sales during the quarter also improved to negative 51%. Our comps for September were negative 54%, followed by negative 44% in October, and negative 53% in November. When taking into account that we significantly outperformed the quarter's weighted indoor seating capacity of 35%, we believe these results demonstrate the continued strength of the Kura experience and its appeal to our guests when we are able to utilize our dining rooms. The ability to offer indoor dining and the cool Kura experience remains a key factor for SOAR performance and is best demonstrated by our Texas market, which had a weighted indoor seating capacity during Q1 of 63% and was able to offer the full QLA experience, resulting in Q1 comps of negative 32% or almost 20% higher than WabiSoar system-wide. As a result, we remain very encouraged about our consumer appeal and post-pandemic sales recovery. Throughout the quarter, we continue to focus on the initiatives we have put in place since the onset of the pandemic. Starting with our online ordering and delivery options, after a brief relationship with GrabHub, we decided to focus our off-premises efforts with Square due to better integration and more attractive economics. Through our new partnership with Square, we are now able to offer online ordering through our homepage and mobile ordering through our waiting app. While our off-premises business is still young, we have seen tremendous growth in revenue, particularly since rolling out online ordering. During the fiscal first quarter, our total off-premises revenue was $1.3 million, representing continued growth over the previous quarter's off-premises revenue of approximately $1 million. We continue to see robust growth month over month with off-premises sales of $400,000 in September, $430,000 in October, and $470,000 in November, followed by $860,000 in December as we entered our fiscal second quarter. Our fiscal first quarter off-premises mix was 13.8%, and as a reminder, our pre-pandemic off-premises mix was only 1%. Notably, December was the first month where the majority of our off-premises orders were placed online, as opposed to through in-person or telephone, confirming a positive impact that a frictionless guest experience can have in encouraging guests to use Kura Sushi as an off-premises occasion. We believe Square can be a very exciting partnership for us, and we look forward to working together to further capitalize on this previously untapped off-premises sales potential. We continue to offer outdoor seating in many of our California restaurants, as permitted through December, and to-go service in all of our open restaurants. However, as you can imagine, it's almost impossible to replicate the client experience in full outside of our dining rooms. While these initiatives have helped mitigate the loss of in-store sales, we are eager to bring back the full-claw experience to our guests as soon as we can. With that in mind, the health and safety of our guests and the team members remain our top priorities regardless of our restaurant capacity. We continue to promote a safe indoor and outdoor environment through the use of personal protective equipment for each of our team members enhanced cleaning processes, social distancing, partitions between booths, and team member health check prior to the start of each shift. Ultimately, our goal is to give our guests peace of mind while they enjoy the full Cura experience. In terms of development, as we mentioned on our last call, we opened three new restaurants during the fiscal first quarter located in Fort Lee, New Jersey, Koreatown in Los Angeles, California, and Washington, D.C. Overall, we are very happy with the performance of our new openings, especially our 4D location, where sales levels are close to 60% of our pre-pandemic system AUV, in spite of New Jersey's 25% seating capacity limitation. While the Koreatown and D.C. locations have faced more immediate external challenges as a result of COVID-19, we see great potential from these two locations once the pandemic subsides. Subsequent to our fiscal first quarter, we have maintained our growth momentum by entering the new market with the opening of our Aventura Florida location in January. All in all, we remain optimistic about the growth prospects of Kurasushi, and while we continue to expect a 20% unit growth CAGR over a five-year period, which began in fiscal 19, The ongoing uncertainties of COVID could alter or delay our plans. In summary, while we remain optimistic about our business and its growth potential, we are still operating in an uncertain environment. As we progress through to our fiscal second quarter, we expect our business will continue to be impacted by growing COVID cases and, particularly, by a new set of tougher state and local operational restrictions in California that began in November and effectively closed the dining rooms for half of our system. These restrictions have since become even more severe, including a total ban on both indoor and outdoor dining for our California stores effective December 6, 2020. While we remain hopeful for relaxation in these restrictions, we realize that it will be difficult to maintain the sales momentum we saw in the past two quarters while these restrictions remain effective. This being said, we remain confident about our post-pandemic recovery and appreciate the financial security that is provided by our relationship with our parent company. Lastly, I would like to thank all of our team members for their resilience and dedication in serving and keeping guests and themselves safe and healthy during this challenging time. I believe that, together, We will navigate these near-term challenges and emerge a stronger company when the pandemic subsides. With that, let me turn the call over to Steve VanRuby to briefly discuss our liquidity and cash-bound situation. Steve?