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 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 Jimmy Yuba, President and Chief Executive Officer, Jeff Yutz, Chief Financial Officer, and Benjamin Porton, Senior Vice President of Investor Relations and Business Development. And now I would like to turn the call over to Mr. Porton. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal fourth quarter 2022 earnings release. It can be found at www.careersissue.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 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 on your 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 as a substitute for results prepared in accordance with GAAP. and the reconciliations to comparable gap measures are available in our earnings 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. It's great to be able to report a strong close to a banner year. We broke sales records and unit growth records and achieved an all-time high on our restaurant-level operating profit margins. We further improved our portability by entering and succeeding in three new states and many more DMAs. We implemented many new innovations at our restaurants, allowing us to scale successfully as we continue to pursue aggressive growth. It's been a great year. Now I would like to discuss our fiscal fourth quarter results and touch on some expectations for the coming fiscal year. We continue to see strong sales performance in our fourth quarter with sales of $42 million, a 50% growth over the prior year of $27.9 million, and comparable sales growth of 27.6% as compared to the prior year period. What's remarkable about this figure is that our comparable sales growth has far outpaced the pricing that we've taken over this period. as we saw traffic growth of 14.6% over the prior year. Traffic growth in California was especially robust at over 20%. As a reminder, California reopened for full indoor dining on June 15, 2021. The traffic gains we saw in California materially outperformed our expectations. relative to the benefit of two weeks of additional operating capacity in fiscal year 2022. On that note, I would like to discuss regional performance. In the fiscal fourth quarter, California saw comparable sales growth of 32.7% compared to the prior year period. In Texas, we saw comparable sales growth of 19% as compared to the prior year period. These geographic torrents reflect the previous comparative benefit California had in last year's operating restrictions. Off-premises sales were $1.2 million, with a mix of 2.9%, consistent with our near-term expectations for a low single-digit off-premises mix. This torrent performance resulted in a fiscal year 2022 AUV of $3.8 million. which is an increase of $1.7 million over the prior year AUV of $2.1 million, as well as a healthy improvement on our pre-pandemic AUV of $3.5 million. To provide some context for our comparable sales, I would like to go over our recent pricing history. We took pricing of approximately 8% in September of 2021 pricing of approximately 2% in March 2022, and closed out the fiscal year with pricing of approximately 6% in July 2022. Following our wrapping of September 2021, our current year-over-year effective pricing is a little bit less than 8%. Again, our comps for the fourth quarter on a single-year stack were approximately 28%, with effective pricing of approximately 14% over the same period. We are exceptionally proud to say that our comparable sales gains are not being driven solely by pricing, and we have seen no discernible traffic growth, and demonstrated by the previous mentioned 14.6% of year-over-year traffic growth in our fiscal fourth quarter. Now I'd like to discuss what I'm sure is top of mind for everyone in the restaurant industry. Inflation, labor availability, and consumer strength. Our COGS as a percentage of sales was 30.7%. While this 30.7% figure is still very strong from a historical perspective, it was noting that we saw a 100 basis point increase in COGS relative to our fiscal third quarter. due to commodity inflation, which we were not able to fully offset by pricing. On the other hand, labor as a percentage of sales improved to 28.9%, driven primarily by price and seasonal sales leverage, and supported by the full rollout of robot servers, table-side payment, and touch-pandering order systems. have progressively eased, and our current staffing, excluding newly opened units, is over 95% of optimal levels. In spite of unprecedented inflation, we were able to deliver an all-time best in restaurant-level operating profit margin of 23.9% in our fourth quarter. On a full-year basis, our restaurant-level operating profit margin in fiscal 2022 but 21.2%, which is an improvement of more than 100 basis points over our pre-pandemic historical results. I believe that consumer demand for Kura Sushi remains very strong in spite of inflationary concerns and potentially pressures on discretionary spending. First, we are fortunate in that our historical and current site selection strategy prioritizes markets that over-indexed with high-income residents, and so the fuller guest is that much more resilient as a customer. Second, our value proposition remains excellent. In spite of the pricing that we've taken during the pandemic, an internal survey of sushi restaurants indicated that our menu pricing is approximately half of those set by local competitors. There has been a lot of discussion about consumers trading down, and we think there's an amazing opportunity in capturing first-time guests that were trading down from their local mom-and-pop sushi restaurant. This will be a key strategy for growing sales in fiscal 2023, and we expect to make additional marketing investments in order to best take advantage of this opportunity. The health of the cooler consumer is demonstrated by our Q2 data sales. We saw September sales of $13.5 million and October sales of $13.3 million, with year-over-year comparable sales growth of 11.5% and 6.3% in September and October respectively. I believe these comps are particularly strong. when considering the tough comparison as we lap the 8% pricing we took in September 2021. As further demonstration of strength of the cooler consumer, our per-person sushi plate consumption during the quarter to date has actually shown modest growth relative to our fiscal fourth quarter. Average check sizes have also grown modestly compared to our fiscal fourth quarter. Moving to development, in the fourth quarter, we opened three new locations, Novi, Michigan, Vineland, Florida, and Tysons Corner, Virginia, making for a total of eight new unit openings for fiscal year 2022. As you may have heard on other earnings calls from our peers in the industry, we are continuing to see headwinds in construction caused largely by shipping delays and delays in permitting from local governments. I'm very proud of our development team for achieving 25% unit growth this year while working under these conditions. I believe that much like fiscal year 2021, our class of new units from this year have the potential to be one of the best classes we've ever opened. Development for fiscal year 2023 is off to a strong start, and we expect three new units to open in the next several weeks. Two of these units will be in the new market of Philadelphia, Pennsylvania, and at the Mall of America in Minneapolis. And the other unit is set to open in Jersey City, New Jersey, which is a market that has delivered remarkable results with our photo relocation. On another note, I would like to formally welcome our new Chief Financial Officer, Jeff Yutz. Jeff has a truly remarkable career in the restaurant industry, including growing Yardhouse from only three units and ultimately leading its sale to Darden, to leading Shake Shack's blockbuster IPO in 2015. Jeff has only been with us for a month and has already proven himself to be an incredible addition to the team, and I couldn't be more excited to have him as one of Cura's leaders. Finally, I would like to thank all of the team members that have made this great year possible, both at our restaurants and our corporate support center. Cura has grown so much over the last several years, and it's great to see our employees grow alongside us, and for our management pipeline to be filled with internal promotions. And with that, I'll turn it over to Jeff to briefly discuss our financial results and liquidity. Jeff?