Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kurosushi USA, Inc. Fiscal Second Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. 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, Jeff Utes, Chief Financial Officer, and Benjamin Porton, Senior Vice President, Investor Relations and System 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 second quarter 2026 earnings release. It can be found at www.kurosushi.com in the Investor Relations section. A copy of the earnings release has also been included in the AK 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 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 to substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our initial 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 on our call today. Entering DC's career, We knew that the second fiscal quarter would be critical regarding our ability to accomplish our stated goals, expectations, and full year guidance. As some of you may have seen in this afternoon's release, our fiscal second quarter was quite strong. We have a lot of good news to share today, including better than expected comparable sales and record-breaking labor leverage. So let's jump right in. Total sales for the fiscal second quarter were $80 million, representing comparable sales growth of 8.6%, with 4.3% of positive traffic and 4.3% of price on the mix. To provide an update on our goal of flat to slightly positive three-year comparable sales, our year-to-date comparable sales growth as of the end of the first half of fiscal 2026 is now 3%. While Q2 is the most favorable quarter in the fiscal year from a comparative perspective, considering our performance to date, we now expect modestly positive full-year comps. Cost of goods as a percentage of sales was 30.4% as compared to the prior year quarters, 28.7%. The tariff situation remains largely unchanged for us. and some minor relief due to the changes in tariff types have been offset by commodity inflation. We continue to expect full-year COGS to be approximately 30%. Labor as a percentage of sales improved by a remarkable 410 basis points from last year's 34.8% to 30.7%. driven by operational initiatives and better sales leverage. Opportunity from labor initiatives scale alongside seasonal leverage, and it's unusual to see this level of impact in the first half of the fiscal year. Given our progress to date, our initial goal of improving labor as a percentage of sales by 100 basis points has proven to be conservative. Moving on to the unit of development, in the second quarter, we opened one new restaurant in Pflugerville, Texas. Subsequent to quarter end, we opened four more restaurants, Orange and Union City, California, Goodyear, Arizona, and Wellington, Florida. The openings from fiscal 26 are shaping up to be just as strong as fiscal 2025, which was the strongest vintage in recent memory. We currently have eight units under construction. As some of these have very recently broken ground, our expectation for new openings in fiscal 26 remains at 16 units. On marketing, it's clear that our strategy of re-emphasizing our IP collaborations is working. Our Kirby collaboration was just as successful as we had hoped. and Nintendo is an excellent partner. Sanrio's evergreen popularity was one of the reasons for our strong performance in February. Our current IP collaboration is with Jujutsu Kaisen, coinciding with the release of their third season. Our next collaboration is with Tamagotchi, as part of its 30th anniversary celebration, followed by Honkai Salaise. We are making meaningful strides on the introduction of status clearing in our reverse program. This will be the most meaningful evolution in the reverse program since its introduction, and we are hard at work to create something that will delight both new guests and long-time proffers. Turning to the reservation system, I'm pleased to report that reverse members using the reservation system a much higher visitation rate than reward members who haven't yet. Our two running top complaints have been our wait times and the accuracy of our wait time estimates. And we feel the reservation system has succeeded in addressing these biggest pain points for our guests. We believe that there's a further opportunity by raising awareness of the ability to place reservations and side steps these rates completely. To this end, after opening up reservations to non-rewards members, we were able to grow the number of reservations placed by over 30%. On these robots, we continue to expect to retrofit the majority of the 50 restaurants that have the space to accommodate them by the end of the fiscal year. It bears mentioning that Our expectation to improve labor by 100 basis points for fiscal 26 does not contemplate the impact of the tissue robots. We expect the robots to deliver an incremental 50 basis point benefit in fiscal 27 over wherever we land at the end of this fiscal year. It's my pleasure to be able to report such a strong quarter and I would like to thank our team members at our restaurants and support center for making this possible. Before I turn the call over to Jeff, I want to take a moment to address our announcement today and recognize and thank him personally. Jeff has been an invaluable partner to me and to Kurosushi over the past four years. His strategic insight and financial leadership has been instrumental in our growth journey as a public company. While we will miss his expertise and partnership, we are grateful for everything he has contributed to our success. This, on behalf of everyone at Cura, we would like to wish you the best of luck and success in your future endeavors.