Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kora Sushi USA Fiscal Second Quarter 2022 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 Hajime Jimmy Uba, President and Chief Executive Officer, and Benjamin Porton, Vice President of Investor Relations and Business Development. I would now 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 second quarter 2022 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 8K we 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, 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 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 is a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our next release. With that out of the way, I'd like to turn the call over to Jimmy.

Thank you, Ben, and thank you, everyone, for joining us today. Before beginning my prepared remarks, I would like to note that Steve VanRuby, our Chief Financial Officer, is attending to a personal matter and won't be joining our call today. I'm very pleased to announce that the strong sales momentum of our fiscal first quarter has continued through the first half of our fiscal year. Our team has done an excellent job of mitigating the Omicron headwinds that we had touched on in our previous earnings call, resulting in our fiscal second quarter hitting the new company record for quarterly sales. These headwinds were more pronounced in the first half of the quarter, as illustrated by our monthly comp breakdown as compared to pre-COVID fiscal 2020 figures. 14.5% comp growth in December, 5.6% comp growth in January, and 14% of comp growth in February, resulting in full-quarter comparable sales growth of 11.3%. As compared to fiscal 2021 results, full-quarter comparable sales grew by 183%. The differences in regional performance that we've seen throughout the pandemic was less pronounced in Q2, with Texas comps of 12.6% and California comps of 8.9% as compared to fiscal 2020. The narrowing of this gap during Q2 was largely driven by weather events and higher rates of quarantined employees in Texas, as well as ongoing recovery in California. The strength of California's recovery can be demonstrated by looking at comps on a single-year comparison against fiscal 2021, where Texas had a comparable sales growth of 74% as compared to California's comparable sales growth of 398%. The COVID headwinds we faced in this fiscal year's Q2 were more substantial than those of Q1, but it's clear that we are in a fundamentally different place from the same time last year. I'm encouraged by the strong sales that we've seen following the peak of Omicron, suggesting that earlier softness was due to quarantine-driven staffing limitations as opposed to any change in demand. The renewed sales momentum in the back half of our fiscal second quarter is still going strong, with market revenue of $12.5 million, representing month-over-month sequential growth of 22% over February and a new monthly sales record for the company. For the purpose of understanding the current state of our business, we believe a month-over-month sales comparison is more useful than a year-over-year comparison due to the magnitude of the impact that government operating restrictions and on our business performance during March 2020 and 2021. March year-over-year comparable sales growth as compared to fiscal 2021 was 93% and was 221% as compared to fiscal 2020. Turning to off-premises, Q2 revenue was $1.5 million and a sales mix of 5.1%. as compared to Q1's off-premises revenue of $1.3 million and sales mix of 4.5%. As some of you may have noticed, we took a minor plus adjustment on March 1st of approximately 1.8%, reflecting our expectations for commodity inflation for the remainder of the fiscal year. Our value collaboration remains as strong as ever, as demonstrated by guest response. Our primary measure of consumer elasticity is per-consumer plate consumption, as guests are able to self-manage their ticket sizes with our small plate menu. Much like at the time of our last pricing event, per-consumer plate consumption rates are higher than two years ago, in spite of pricing which we see as a clear indication that the premium value we pride ourselves on at Cura remains intact in spite of ongoing commodity volatility. While pricing is never our first lever, I'm confident that we have yet to approach this price sensitivity and that our pricing power continues to be very strong. Moving on to development, we opened three units during Q2, two units in Arizona, which is a new market, and our first unit in San Antonio, Texas. As second to the quarter, we entered another new market with the opening of our location in Watertown, Massachusetts, for a total of five restaurant openings year-to-date. The reception of these new openings, both in new and existing markets, has exceeded expectations. or near-term expectations. While it's early, we believe that the units from our fiscal 22 vintage have the opportunity to exceed historical AUVs. We are making excellent progress on our full-year development plans. We currently have five units under construction in various stages of completion, and we expect that the remainder of our new units for this fiscal year will open in the fiscal fourth quarter. Now I would like to provide one update on what I'm sure is top of mind for everyone in the restaurant industry, staffing, supply chain, and COVID impact. As we had mentioned in our last earnings call, we began to see staffing pressures in the latter half of December due to employee quarantining leading to reduced seating capacity or operating hours at certain restaurants. These pressures continued through January and were the primary driver of the sequential comp deceleration for that month. The Omicron situation has since much improved, as demonstrated by our February and March results. It's reassuring to see our employees return, confirming that these staffing issues were temporary and driven by external factors as opposed to an inability to recruit or retain candidates. Currently, our restaurant staffing levels are approximately 95% of where we would like to be and we hope close this small gap in the near future. Over the course of the second quarter, we saw approximately 80 basis points as a percentage of sales of commodity inflation relative to the prior quarter. Our expectation is that our March pricing will offset commodity inflation through the second half of our fiscal year. As we mentioned in the past, we are relatively insulated with commodity spikes due to the wide variety of our basket. During the quarter, we hired our first VP of purchasing, who comes from an extensive restaurant industry background. We are very excited to benefit from his expertise, especially during this period of relative uncertainty in the overall supply chain. The business impact from COVID during the current quarter is much less than that of Q2, which saw the previously mentioned stuffing issues during the peak of Omicron. All in all, we remain optimistic about the course of the pandemic. Now I would like to update everyone on our tech and restaurant initiatives. By our last earnings call, we had rolled out robot servers to five of our restaurants. Today, we have robots in 20 of our restaurants, or a little bit more than half of our system. These robot servers deliver immediate results in terms of reducing the workload of our front-of-house employees, which we hope will boost retention and make us a more attractive employer for future candidates. This response has been overwhelmingly positive, both in terms of the ability and funds that the robot servers provide, and the improvement to customer service, resulting from the reduction of non-hospitality focused responsibilities for our front-of-house employees. While it is still very early in terms of its implementation, initial results are encouraging, and we expect our robot servers to deliver labor savings in the future. Touch panel during ordering implementation is going smoothly as well. It is rollout complete in 22 units, and we expect system-wide rollout for touch panel during ordering and robot servers to be completed by the end of the fiscal year. The growth of our reverse program membership continues to be very strong with 80,000 new members joining during Q2 for a total of 393,000 members as of the end of the second fiscal quarter. This translates to approximately 11,000 reverse members for every class unit, which is exceptional. even in comparison to much larger concepts, and a true testament to our intense brand affinity and loyalty that our guests have for Kura. On that note, I'm tremendously excited to announce the latest addition to our executive suite. In February, we hired Mark Finnegan to serve as our first Chief Marketing Officer. Mark was most recently the Chief Marketing and Information Officer for Barber Grill and has held marketing leadership roles at restaurant companies, including Wendy's, IHOP, and Pizza Hut. We are particularly interested in Mark's dual background in marketing and IT, even how key technology is to our concept. While Mark has only been with us for a couple of months, He's already making huge contributions to the company, and we couldn't be more excited to see where Mark takes us on our journey as a brand. As a preview of things to come, one of his main projects is the development of the next stage of our reward program. In past earnings calls, we had mentioned that the true potential of our reward program will only be unlocked once we have the ability to leverage guest data. And with Mark, we have the perfect person to spearhead these efforts. I would like to end my prepared remarks by thanking all of our team members, especially those in our restaurants, for their amazing efforts. In five years, we have gone from having a presence in two states to 11 states and Washington, D.C., with great responses in each new market. I sincerely appreciate the excellent work that each team member has put in to create the great guest experiences that have enabled our growth and expansion. With that, let me turn the call over to Ben to briefly discuss our financial results and liquidity. Ben? Thank you, Jimmy.