Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Curious Sushi USA Inc. Fiscal Third 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 Jamie Uba, President and Chief Executive Officer, and Benjamin Porton, Vice President of Investor Relations and Business Development. And now, I would 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 third 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 could be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation nor is the 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. It has been a true pleasure to see how rapidly and completely our business has recovered since the most challenging days of the pandemic. This has been a year of restoration for Kula. In fact, It's gone past mere restoration, and we are performing better than ever. Each challenge that COVID presented ultimately proved to be an opportunity for us. A match as strong as we have was hard to imagine when we are in the thick of the pandemic, and I'm so proud and grateful for everything that our team members have done to make this possible. Now I would like to discuss our performance in our most recent quarter, and why we think we are positioned for even greater things to come. The strong sales momentum from the first half of our fiscal year has continued into our third quarter, which once again has proven to be a record sales quarter for the company. As compared to our pre-pandemic fiscal 2019 results, comparable sales growth in our third quarter was 28.3%. In a single year comparison against our fiscal 2021 third quarter, comparable sales grew by 65.3%. Whether we are looking at last year or back to pre-pandemic, our comparable sales growth has been spectacular. Sales recovery in our California market has been especially pronounced with third quarter comp growth of 95.5%. as compared to our 2021 results, reflecting the sales impact of dining room distributions during the previous year. During the same period, Texas delivered 33.6% comparable sales growth as compared to our 2021 results. Additionally, our off-premises revenue in the third quarter was $1.3 million, or 3.5% of our sales mix. It's great to see such strong recovery across the board. In spite of ongoing inflationary pressure, consumer sentiment for Kurasushi remains extremely strong as demonstrated by our recent results. As our typical customers have higher incomes and we offer an excellent value proposition, we are seeing continued strength in their spending and our check sizes continue to grow. Our sales performance as we entered the summer continued to be very strong with June revenue of $12.7 million. While much of the restaurant industry has been facing headwinds in terms of staffing and inflation, I'm extremely pleased to say that we have been largely spared and believe that we continue to occupy a uniquely privileged position to weather these macro pressures. Our COPs as a percentage of sales for the first half of the fiscal year were at 30%, marking an all-time best in corporate history. While we haven't been entirely free from commodity pressures, taking price in conjunction with smart purchasing practices have allowed us to offset commodity inflation. In fact, COPs as a percentage of sales decreased by a further 30 basis points in our third quarter. As a percentage of sales, labor is running at 31%, representing the sequential improvement of 210 basis points over the prior quarter, driven by superior sales leveraging. While we had previously faced staffing headwinds as a result of Omicron-related staff quarantining during the second quarter, We are pleased to say that we had no such issues during our third quarter, and we remain very close to achieving optimal staffing levels. These combined factors have resulted in restaurant-level operating profit margins of 22.5%, representing 470 basis points of margin expansion relative to the prior quarter, and 210 basis points as compared to the same period in pre-pandemic fiscal year 2019. There remains ample opportunity for our full-year restaurant margins to exceed the 20% we historically achieved pre-pandemic. Turning to development, we opened one unit during the quarter in our new market of Watertown, Massachusetts. We are very encouraged by Watertown's early performance as well as the continued strength of our other fiscal 2022 openings. In terms of upcoming openings, we expect our Novi restaurant to open in the coming weeks and to close out our fiscal year with a total of eight new restaurant openings. We expect the remaining stores under construction to open early in fiscal 2023. Now I would like to turn to an update on recent initiatives. In past earnings calls, I have mentioned that we plan to complete the system-wide rollout of our load servers, table side payment, and the touch panel during order system by the end of the fiscal year. I'm proud to say that we are ahead of schedule and that we completed the rollout as of the end of May. As we previously mentioned, guest response and employee response have been phenomenal. The robot servers are a great addition to the Cura experience and were the focus of a recent marketing campaign. Now that we've completed the rollout of these three initiatives, I would like to discuss what we have coming up in our pipeline. We are in the process of upgrading our waitlist system through a partnership with Wisely, which we hope will improve the guest experience and reduce the attrition rate associated with our long lines. We are also in the process of moving Royalty platform to Punch. Our rewards membership base is now approaching half a million members, and by moving to the more powerful Punch platform, we believe we can truly begin to unlock the data-driven benefits that UR's program can offer. We expect to implement these initiatives during the first half of the upcoming fiscal year. As a final note, we took pricing of approximately 6% as of July 1st. Although the minor pricing adjustment we took in March was enough to offset inflationary pressures through the third quarter. In light of month-over-month inflationary torrent through the quarter, including a minimum wage increase in our California market, we believe this 6% is appropriate considering the excellent value we continue to provide relative to our competitors, especially those in the sushi space. We will also be trapping a pricing event as we reach September, at which point, effective pricing will be 7.8%. Again, I would like to extend my thanks to all of our team members in our restaurant and support center. The hard work that they put in every day is the reason that Kurasushi is such a special concept. And with that, I'll turn it over to Ben to briefly discuss our financial results and liquidity. Ben?