Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kurosuchi USA Inc. 4th Quarter 2024 Earnings Call. At this time, you have been placed in a lesson-only mode, and the lines will be open for your question following the presentation. Please note that this call is being recorded. On the call today, we have Hajime Jami-Uba, President and Chief Executive Officer, Jeff Hutes, Chief Financial Officer, and Benjamin Porton, SVP Investor Relations and System Development. And 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 fourth quarter 2024 earnings release. It can be found at www.cursushi.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 we 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 earnings release. With that out of the way, I would like to turn the call over to Jimmy.

Thanks, Ben, and thank you to everyone for joining us today. I am pleased to report on end to the fiscal year. that has meaningfully outperformed the expectations we shared during the last earnings call, and to share that, our new fiscal year is off to a strong start. The sales pressures beginning in April improved significantly over the course of the quarter, resulting in fourth quarter comps of negative 3.1%. As compared to the expectations we shared during the prior earnings call of negative high single-digit comps, I'm very pleased that, in spite of the unexpected sales decline in the back half of the fiscal year, we were able to maintain positive full-year comps of 0.7% and full-year restaurant-level operating profit margins above 20%. This was made possible by the rapid response by our team members throughout the company to find new efficiencies and cost-saving opportunities. Total sales for the fiscal fourth quarter was $66 million, representing comparable sales performance of negative 3.1%. Our cost of goods sold as a percentage of sales was 28.5%, representing a 100 basis point improvement over the prior year. This improvement was made possible by improving the quality of ingredients while also lowering cost. Labor as a percentage of sales was 31.1%, representing an increase of 230 basis points as compared to the prior year due to wage inflation and sales deliverance. Restaurant-level operating profit margin for the fourth quarter was 20.9% as compared to the prior year of 24.4% due to sales deliverance. On the development front, we opened one new unit in Lake Grove, New York during the fourth quarter, for a total of 14 new unit openings during the fiscal year. Subsequent to quarter end, we have opened five new units, Beaverton, Oregon, Tacoma, Washington, Rockville, Maryland, Cahill, New Jersey, and Bakersfield, California. We currently have six units under construction, but it bears mentioning that Some of these units have just broken ground. While we are satisfied with the progress of opening new restaurants so far in fiscal year 2025, we expect that the opening of the remaining nine restaurants, especially those that have not yet started construction, will be back-loaded for Q3 and Q4. As many of you know, Bellevue has been our strongest performer since its opening. is our most successful unit being in Washington State. We have always been excited about the massive potential of the Pacific Northwest market. This year, we finally opened our second unit in the Pacific Northwest with Beaverton, Oregon. I'm extremely pleased to share that we were not disappointed. Following Beaverton, we opened our new unit in Tacoma, Washington. Tacoma has been a very strong performer since its opening. While it's still early days, I'm very happy to see that the new units in the Pacific Northwest have exceeded our already high expectations, and I'm very bullish about the long-term potential of this market. Turning to new initiatives, we completed the full rollout of our back-of-house streamlining efforts in early September, and results to date have delivered the expected improvements to labor cost. Supporting of KuroJapan's reservation and self-setting system is proceeding as scheduled, representing further opportunities for labor efficiencies later in the year. We have also diversified our marketing efforts so that we have more levers to pull beyond the HIT-ID correlations. We are going to be more discerning with our IT collaborations going forward, prioritizing the quality and growth-based appeal of partnering brands over the number of campaigns. Our strategy to showcase our unbeatable quality and authenticity will be key to building our long-term brand equity as we grow into our national footprint, while also being more cost-efficient than rolling IT collaborations. During the fourth quarter, we took an impairment charge of $1.6 million. This charge is due to a challenging sales environment at our eventual Florida location. While we are required to take this impairment charge this quarter per the accounting rules, we will continue to operate this restaurant and will implement several operational changes that we believe could improve results. The new fiscal year has started strong, and it's clear that we are in a very different place than the last year's goal. The cost-saving efforts we began in preparation for the potential of longer-term macro-headwinds have been fully implemented, and these initiatives will serve us well as we enter a fully normalized environment. Our new unit openings to date have exceeded expectations and confirmed that the Pacific Northwest is a huge, untapped market for us. In addition to the success we are continuing to see in the Pacific Northwest, we are highly anticipating our upcoming openings in smaller markets that will serve as proof of concept for our ability to thrive in the United States beyond the largest DMAs, indicating even greater white space opportunity. While Baker's field has only been open for a few days, the strength of its opening has us optimistic about our ability to thrive in smaller DMAs. Fiscal Year 2025 is an opportunity to demonstrate the next level of coolest sheets potential, and I am incredibly grateful for the excellent work by our team members who have positioned us so well for the new fiscal year. Yes, now I'll turn it over to you to discuss our financial results and liquidity.