Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA Inc. Fiscal First Quarter 2023 Earnings Conference Call. 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, Jeff Utes, Chief Financial Officer, and Benjamin Porton, Senior Vice President, 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 first quarter 2023 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 the 8K resubmitted 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 conditions. 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 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. I'm excited to report another strong quarter where we outperformed industry averages in regard to traffic growth, saw two strong restaurant openings and delivered restaurant-level operating profit margin that exceeded the same period prior to the pandemic. Our performance has been driven by steadfast support from our loyal guests and warm receptions by new fans alike. In an environment where consumers are forced to be more careful with their discretionary spending, We are delighted to see that when our guests go out to eat, they choose to dine with us. Our three goals for this year are to continue our rapid unit expansion, grow into our G&A, and maintain the operational excellence and incredible values that have made us our guest top choice for dining out. Our first quarter sales of $39.3 million represent revenue growth of over 30% over the previous year's first quarter revenue. We saw comparable sales growth of 6.9% while facing headwinds created by the lapping of 8% pricing at the beginning of September. This 6.9% comp figure breaks down to 4% from traffic and 2.9% from price and mix. We are especially pleased by our traffic growth, which outpaced the casual dining segment by a monthly average of more than 700 basis points, and which we believe is an indication of our concept resilience in a potential economic downturn. As mentioned in our previous earnings call, we believe that there is significant opportunity in capturing new guests as they trade down from local sushi restaurants who have taken pride much more aggressively than we have. Our traffic growth during a period when casual dining as a whole is suffering from declining traffic only underscores the opportunity created by our unparalleled value progression. Looking at our operating results, we are pleased to note that our labor costs as a percentage of sales are 60 basic points below the prior year, confirming the expectation that the 50 basis points labor improvement in the prior quarter driven by the implementation of our three technology initiatives was not just a one-time benefit, but potentially a long-term tailwind for our operational efficiencies. Due to ongoing inflation, our cost of goods sold as a percentage of sales was 160 basis points higher compared to the previous year. and is largely responsible for the year-over-year decline in restaurant-level operating profit margins. While it is difficult to predict when we can expect moderation in commodity costs, we do not expect this inflation to be permanent and remain optimistic that we can achieve the margin highs we saw in the previous fiscal year as we enter a more normalized environment. As Jeff mentioned in the last earnings call, one of his key areas of focus as our new CFO was to manage G&A expense. For a growing company, there are certain investments in people and infrastructure that are necessary to support growth, and we will not compromise that. However, this does not mean that there are not opportunities for savings, and pursuing these savings is a top priority. In the IPO, we have said that the best positive profitability for us is to leverage our G&A cost against an increasingly larger service. While this leveraging will be a multi-year process, we are proud to announce that we are making substantial progress towards this goal, as demonstrated by the improvement in G&A expense as a percentage of sales of over 100 basis points as compared to the prior year. I am particularly impressed by the team's effort to control cost and for us to have achieved leverage during the period when we are continuing to see inflation in G&A line items. Our G&A strategy is to renegotiate existing contracts and to pursue tech-driven efficiencies which will allow us to minimize new hires. Our support center employees have risen to the occasion, and I'm proud of the company-wide cooperation that has made this possible. Turning to development, we opened two new locations in the first quarter, one in the Mall of America in Bloomington, Minnesota, and one in Jersey City, New Jersey. Subsequent to the end of the quarter, we opened our Philadelphia location in late December, As I'm sure you've heard on our peer earnings call, construction and permitting delays have been a headache for the restaurant industry, and two of these units similarly suffered from unusually long opening delays. That being said, we believe that the worst is behind us, as the remainder of our fiscal 2023 pipeline is largely suburban, which typically makes for smoother experiences. Additionally, We are very pleased by the early performance of these three units. It's great to see our restaurant thrive in the Mall of America, further indicating cloud national portability and appeal across demographics and Jersey City and Philadelphia continue to show the East Coast market's tremendous potential. We currently have four units under active construction with two more breaking ground later this month. With a few more restaurant openings expected in Q2, we are well on track to achieve the annual growth guidance we provided in the last earnings call. Lastly, I'm very excited to announce that we have made significant progress in the implementation of our new waitlist app and reward program platform and expect testing to begin during this quarter. The waitlist app will have an immediate positive impact on customer satisfaction by improving waiting time accuracy, which we hope will translate into improved attrition rate for guests waiting in line. With the new reward program platform, not only will we have greater flexibility in the way that we can reward our guests, but we will be able to begin leveraging reward member data for targeted marketing for the first time. Our reward program has been hugely effective in driving frequency and average check growth, but two minutes of any reward program right in the power of data and utilization of this data represents a new chapter in our marketing efforts. On that note, we began our targeted marketing efforts specifically geared towards first-time guests in December. While it's too early for us to discuss the impact yet, we believe that the opportunity in capturing new guests who have been discouraged by the aggressive price-taking we've seen among local fish competitors is truly significant, and capturing these guests remains a key pillar of our marketing strategy for this fiscal year. Before I hand things over to Jeff, I would like to note that We took pricing of approximately 7% in the first week of December. Finally, I would like to thank all of our team members, both at our restaurant and the support center, for the great work they do every day to create the magic that is the cry experience. And with that, I'll turn it over to Jeff to briefly discuss our financial results and liquidity. Jeff?