Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Cura 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 open 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, Steve Benrubi, Chief Financial Officer, and Benjamin Porton, Vice President of Investor Relations and Business Development. And now, I'd like to turn the call 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 fourth quarter 2021 earnings release. It can be found at www.curricifi.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.

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 variants. 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 Our guests feel to our brand whether they are returning to guests excited for their favorite menu items or new guests that are amazed by the uniqueness of the crew 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 California restaurant to 50% indoor dining capacity for the first two 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 June system-wide comps, following the end of the capacity restrictions, exceeded those of fiscal 2019. This continued through the quarter, ending with system-wide comps of 4.9%, as compared to pre-pandemic fiscal 2019 figures. Our fiscal market in particular, which had no operating restrictions during 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. While 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 strength continued in October with sales increasing further to $10.2 million. Through the first two 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%, voiced by the benefit of an additional weekend in October 2021. The strong sales we've seen throughout Q4 and onward are particularly notable for two reasons. The first would be that we've seen minimal deceleration in sales in spite of the resurgence of COVID with the Delta variant beginning in August. The second is that, in an effort to offset inflation, we took high single-digit pricing at the start of September, making it the single largest pricing event in our corporate history. To be clear, we have seen virtually no consumer pushback or pressures on traffic as a result. In fact, we've seen guests saying that, even after this pricing, cooler remains an excellent value. Even now, our prices remain substantially below those of many peers in the sushi 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 re-opening our entire system with a curricular experience, our Q4 off-premises revenue held strong at $1.4 million, as compared to the previous quarter's 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-limits mix of mid-to-single digits 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 15th removal of indoor dining capacity restrictions in California. With half of our system in California, moving from 50% capacity to 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. Prior 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 simple as it sounds, we believe the key to employee retention is being in a place where people want to work. To this end, We are fundamentally re-evaluating our training protocols and working on systematic, transparent paths for career advancement. This project will be critical to our continued success. As we continue our rapid growth, we need our employees to grow alongside us. The strongest store management pipelines are those that are built on our internal candidates, and we want employees to know They are meaningful long-term opportunities for everyone with clear guidance on working towards them. To bolster this effort, we are pleased to announce the hiring of Arlene Pedokas as our Chief People Officer who joined us in October. Arlene has had an extensive career in the restaurant industry, working with brands like Del Taco, CKE, and most recently at Farmer Boys, where she 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 major points 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 has been fundamental to our business, and the pandemic has brought its importance to the forefront. With redoubled efforts during the last fiscal year, we created our off-premises channel and a new mobile app that integrates our reward program and implemented new technologies like crunch time, eco-track, and forum analytics. These investments in technology continue to be key to our strategy. Our pilot programs, including table-sized payment and table-sized drink ordering, continue to expand, and we hired our first IT director to accelerate our projects. Other steps include adapting Square for all credit card processing, which will give us unprecedented level of our guest insight, as with every non-cap 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 proven kitchen technologies used by our parent company pending ETL 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 plant with our June opening in Bellevue, Washington, for a total of seven 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 may be one of our strongest classes yet. In fact, Bellevue and Fort Lee are already among our top three performing restaurants. Both of these openings being in new markets underscores 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. with 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, Stone Town Galleria in San Francisco, which opened in October. Besides Stone Town, we have executed leases for seven units, all of which were under construction. Our geographic strategy continues to be a mix of new markets and influence. Brand new markets this fiscal year are Arizona, Massachusetts, and Pennsylvania. We continue to believe our white space potential is larger than ever due to pandemic-driven restaurant closures, particularly the closures of Japanese restaurants, and will commission a new white space study once COVID is firmly behind us. We are thrilled with our growth momentum and are excited to bring the Cura experience to new guests across America. The past year was the most difficult year in recent memory of our industry, and that was certainly the case for us as 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 through strategic decisions for our long-term success. As I mentioned earlier, ongoing CapEx investment resulting in our business development year with these additional units 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 Randall on long-term favorability, including these extensions on several of our most profitable units. The pandemic has been a transformative period, whether 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 CBO. 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 parents for their 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. Thank you, Jimmy.