Kura Sushi USA (KRUS) 4 Jan 242024 Q1 Earnings call transcript

Company Profile

Participants

Benjamin Porten	executive
Hajime Uba	executive
Jeff Uttz	executive
Joshua Long	analyst
Jeremy Hamblin	analyst
Sharon Zackfia	analyst
Jeffrey Bernstein	analyst
Jon Tower	analyst
Todd Brooks	analyst
George Kelly	analyst
Mark Smith	analyst

Call transcript

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal First Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note that this call is being recorded.

Investor we Jeff "Jimmy" and Uttz, Senior President today, Chief President Benjamin call Development. Vice Officer; System Executive Chief of the have Uba, Hajime and Porten, On and Relations Financial Officer;

And now call Mr. Porten. turn over to like I'd to the

Benjamin Porten

everyone operator. fiscal now section. first be earnings It go you, quarter joining. we everyone, Good found thank us the the earnings been of submitted also the can in copy Relations afternoon, XXXX A you Thank back the at for to all and has I to to our Investor SEC. in www.kurasushi.com for release. release included X-K

subject Private Before and forward-looking therefore, need guarantees undue actuals detailed discussion you Securities to our Act uncertainties performance, we of SEC results of also statements the all we operating and reliance put of of on. forward-looking for to to risks materially are could our future that risks remarks, today part condition. expect. of refer and our future begin remind will are we more a everyone differ statements the what filings to statements not financial These We Litigation you XXXX. formal Reform These numerous cause discussion not our that could include impact that should from under defined

earnings be to evaluating our available Also prepared and the isolation during in results in of measures with that comparable release. performance. GAAP, our today's substitute should considered GAAP are useful call, a we be Presentation not will additional discuss accordance measures, certain non-GAAP reconciliations or in can financial in for this as information

the would to I call over that With Jimmy. of out way, like to the turn

Hajime Uba

today. New everyone joining Ben, and Year to Thanks, happy us

X EBITDA to an another well meaningful strong to as construction. margin XXXX as adjusted and improvement in is date with new with X restaurant-level under opened operating profit units Fiscal start off exceptionally

grow to excellent continuing the restaurants, and year, I'm to year an we goal leverage X the Our pleased number last against fronts. continue base. our to progress for same our remains operations, that restaurant on as G&A rapidly say maintain this fiscal excellent all large of make increasingly are

Total comps call growth X.X%, for quarter. was the quarter our momentum first response million improvement X.X% growth [indiscernible] price overall as sales our driven with improvement implied traffic. by with point fiscal were by the of has representing fiscal the comparable in the of October comp. September, over during blended entirely last X.X%, of fixed XXX-basis sales since first for The the earnings being table accelerated Sales $XX.X X%

we of X%. last January price approximately pricing offset week As of just partially December, the of which will is upped X% in in be

well a reflects plan current which Our maintain best a decision as our our pricing the to of to X% as return FX confidence historical costs traffic normalization ongoing current strategic growth our share. strong advantage take cadence to of the factors in capital market is pricing macro and

to of compared the Commodity of as goods costs from up prior XX.X% to profit operating to $X.X the in growth prior XX.X%. and same, XX.X% XXX%. improved from million, approximately margins year as year $X.X quarter adjusted compared of year-over-year representing XX.X% Restaurant-level quarter, EBITDA the million year's with up a improvement have prior percentage of quarter Labor marked largely our cost XX.X%. costs coming XX.X% last for over seen sold year remained sales have a as QX,

our associated As compliance restaurant-level with see it what but commodity by even only to grow improvements we mentioned this growth as in encouraging XXX(b) G&A. associated of with test even is while base and we our costs, was to a faced EBITDA in of adjusted new a much is driven restaurant and a as we headwinds on unit of leverage future construction. dramatic truly company under growth believe units expect EBITDA openings headwinds can that I record such adjusted growth number better years able

restaurants: New four Skokie, first opened fiscal the opened Pennsylvania; two Kansas Pittsburgh, the Illinois. Missouri, restaurants construction. to have Flushing, we units end, in York; City, more Tampa, Naperville, quarter, new Ultimately, quarter and In X currently we new we Illinois. Florida, Subsequent under and

have confirming for that we our Kura appetite Accordingly, our we position and [ new the The main the existing ] in-feed than unit opening of increase reflection Sushi to excited brands. of are is will of that more enough expectations [indiscernible] establish XXXX, in shortly. markets units incredible performance sustain new demonstrate our in markets consumer our expand service guidance which Jeff fiscal on as to we seen

basis of a program, that just that we user approximately expect a The of discussed our with on new all share greater overall since pleased what launched engagement and to you'll that earnings are I'm couple program the restoration of rate are It's we U.S. call per given very U.S. we able in that tripled there members remained be of momentum outperformed. are these version new a and cohort previous the the been previous and users, program. new has months our previous

concrete incremental still While calls of revised terms newly its and early the in days much terms in program, of and revenue. unlocked level future a we our drive earnings to to give on new expect opportunities very it achieved, update base in potential more earnings is

Our received been current has our very well by guests. collaboration, Peanuts ID

Family, fiscal [indiscernible] Our next strongest collaboration pipeline the the and [indiscernible]. brand year remainder the is for is of Spy x

hard all all the has call. quarter our we at like of corporate [indiscernible] thank new restaurants earnings our to work, allowed our our team I'd enter quarter As which on after center revenues and at both to members, us their year, of support for

the over Jeff results Jeff? our to to discuss financial that, turn liquidity. with And and I'll it

Jeff Uttz

Thank you, Jimmy.

Coast Southwest million West market our prior as the was quarter, in For Comparable the first regional sales period. to prior restaurant sales X.X% X.X% $XX.X period and with the our X% year performance million to $XX.X were total compared as of year positive compared comps in in market.

as as related costs Occupancy and as to accelerated XX.X% in that as prior number costs construction. were commodity Food depreciation pricing of quarter, a XX.X% the a and to newly Labor percentage and of and compared prior due easing compared now Turning year increases. the expenses units of sales inflation. wage remodels. prior were Depreciation a with largely compared to replaced are and due percentage increased to percentage sales due due with of quarter traffic costs. to a associated X.X% percentage amortization the the of decreased as the to year to beverage decrease to to associated opened store which quarter. and increased as prior offset preopening general largely year XX.X% training X% well being sales from greater costs is openings of was This the under by related new XX.X% pricing, leveraging largely in from assets expenses year rents units a sales and as due to X.X% incremental as quarter's the increased planned additional X.X% to

Other openings cost to increase XX.X% costs in an associated quarter increased year preopening a to as prior and percentage inflation. as in number costs to due compared of well with general sales mainly costs the of store as marketing greater XX.X% a

XX.X% percentage opening. and travel of in and compared largely sales by was sales new public decreased associated unit General as incremental offset and a to costs with leverage, greater expenses administrative recruiting to to quarter the which due company as prior year XX.X% costs

construction. loss $X.X largely unit $X.X in depreciation year prior an was driven million other to loss and as under costs, and by Operating of million greater and the units amortization operating with openings of associated compared the incremental quarter, occupancy number

$X.XX $XX,XXX to was per share expense million a or prior tax Income net loss compared compared XX.X% Net Adjusted in to operating $XX,XXX sales year share EBITDA in $X.X compared loss in or of the was profit in percentage per quarter. compared the was $X.X to XX.X% the prior million prior $X.X $X quarter. the was to quarter. prior a year quarter. Restaurant-level year million million of as year $X.XX

Turning We liquidity. $XXX of lastly, percentage and expenditures guidance XX net XX to XXXX. million. expenses between and $XX.X continue administrative we total be year no between to and average the And the At and end XX.X%. to open expect of in be reaffirm we to and unit million, like cash with of fiscal to cash million for to debt. would and first I our capital now expect equivalents fiscal had sales as a following and $X.X $XXX general cash We quarter, update sales million approximately expect per now units the approximately

I'll Now over turn Jimmy. it to back

Hajime Uba

prepared Thanks, Jeff. This our concludes remarks.

open please We to answer for questions. you any the Operator, questions now line are have. happy

is the during Q&A Thank my before may reminder, you attention. your response translated into a session, Japanese answer in for As English. I

Operator

from the line of Our Long first comes Instructions] with [Operator question Stephens. Joshua

Joshua Long

about nice a unit to about more pipeline the could new you coming know to prior a potential of development the you year. fruition. be pipeline to I strengthening unit seems share bit if the and for curious the in upside Just call, talked into That the the seems be in what for unit that. little the

this Anything how coming share just better. are permitting terms the you if could in curious of any stores function is selection, Just gotten site maybe has a together. of if there new

Hajime Uba

Japanese, Sure. Thank then [Foreign you, Jeff, translate Ben allow Language]. Please it. to question. will speak me thoughtful in for your

Benjamin Porten

into you say pretty [Interpreted] those extremely prepared We're Jimmy units that to to mentioned of So have as three be far remarks, X so able in construction. the pleased under are construction.

confident are. It's terms one happy the And raising in that our with so were of very we of we're guidance. we where reasons

the terms and In year. year, past how have very we've mentioned the been rollout meaningfully smooth with those that and it's so eased, delays this we're permitting of the in fiscal happy

Joshua Long

maybe but performance your Great. what Could extra versus pretty this That's of particularly kind how a could away we from to the you bit we maybe I terms always kind And a all and know of quarter share of curious just some average sort It expectations? the how in how sounds of those you COVID if comparison. terms the commentary some results you on about to know you're sort just give new very trying just But be sales or stores. from thinking And little if of growth model difference I'm between performance any store point, for I that's bit on any multiyear at it, a of how little normalization in of away there's unfolding? of color And of the see disruptions. getting of helpful. newer is there? context in thinking see more of like get growing was stack performed at kind going through further and we're strong. weekly quarter. looking

Hajime Uba

Language]. [Foreign

Benjamin Porten

[Interpreted] 'XX year. a has opened This record year, date. In of been we've to restaurants, already terms X new fiscal

we've openings. of so a new had And lot

really markets New warm of has each we're how couple of hit a just major every opened time a concept. of Minneapolis. new in you In in reception see in been we've terms market, pleasure the of Pittsburg, markets. been that Tampa. to enter of confirmation the restaurants It's in portability We've new we we've entered And the a hit, it's these a our York,

And it's encouraging so really us. for

terms doing very opened all we've Chicago, in a area, and existing well as the New Atlanta of are And Jersey, the couple those markets, of well.

remarks, across As in the for Jimmy United mentioned prepared there's the Sushi abundant States. appetite earlier

not which in markets, new so but confident. And But existing our our our feel terms only we of as infilling are well. very gangbusters, markets existing --

Hajime Uba

[Foreign Language].

Benjamin Porten

a being [Interpreted] anymore. terms internally to of we're if returned We've if we're doing not stack multiyear and frank, stack, in we're totally I'm So -- not the normalcy. -- -- multiyear

able we're say to pleased to be so very that. And

Joshua Long

me. one Great. That's then helpful. for And last one

margin overall of below there areas other in in starting the XX% remarks, terms basket the about think also was food kind food as potential quality past, I that of or around just the the went to conversation the in In if reinvest prepared or you deflation your cost point. materially COGS just was food talked a

line us probably it's you potential item? early bit still the maybe seeing where cost of could of line realize the and in you're process terms fluidity little build might food or the lie in reinvesting and remind thinking there. process, in about some thought and how I So pivot a leverage points when But for that there's on just or

Jeff Uttz

has number that that COGS -- something see gotten happy very we're it's a lower. Yes, we would lower bit the Jeff. on little It's to Josh, something that like it line is and XX% the with.

about deflation, deflation year-over-year, was of give X%. to about the year, quarter-over-quarter, was numbers deflation sequentially, terms what And we've this you In just our our seen X%. of

little up Jimmy little having even that successful mentioned, your COGS not price too increases somewhere a in that. to to a over last with were show take number So about X, there's we've the to we mentioned you increases XX%, as we're year, be a bit low, we're in below XX%. taken that that the which the believe that COGS combined But did with that price number on as quality, that be may the then January food deflation and deflation, at the that we and XX%, to going get we've do. do hurting past, going If and floor something risk is bit X%

as the to XXs as keep right happy. So long be going that or can in we we're very, XX%, high very number around

Benjamin Porten

to of some pleased In COGS done terms salmon. and the materially that cold we've quality that lowering to reinvesting we've of done also say that proteins, that, tuna be significantly our cost. things able improved Very while especially our

for do LTOs. been us. like is pretty our really that's other to so remarkable And we'd One that thing

And is Winter of sort of really ever. For crab in example, fair. think were December, our the and And giving crab season one most appreciated we was through Japan. to crab. high-quality back we our LTOs did crab. guests in I that guests popular enjoyed this a Very

Operator

Our from line Craig-Hallum. of next Jeremy Hamblin question the with comes

Jeremy Hamblin

of kind Congrats commentary Apologies as that wanted bit on in the the of come as breakup sure going And we what of back some a, well around West audio cadence this. the of two, color. that color in kind on the menu of with to as would the versus in I understood the if over the that other shared little region, comps the a back for Coast in menu comp start But Southwest sales strong a want QX. results. pricing that, you I there's same-store heard make some to just I that the carrying of could was And on or X% great. throughout overall then QX. think you're pricing regions be I then I

Jeff Uttz

Yes.

we we in Jeremy, QX the -- the We pricing X% So December, was took the X% the we did then beginning in of that the pricing take X%. ran, at lapped and January.

number. the pricing. of very, comp And to throughout listening happy saw very what as traffic in QX. So still we back where with is traffic We're Very you The we're to want few we the out. to know, currently that conference came call really X% And concepts everybody year. at play that number and coming happy. X.X% very positive one have can to long number. our keep people traffic. the things we're looked existing control we service going through and as quality. been at able the to And great coming we keep we as guests that can And of back, back that's great in be that food door And have

are We good it's that, and through that our year coming going positive. keep that do very do keep continue be guests us. positive can and a we if going we're we to that, to door that can, And traffic we believe for that to

Benjamin Porten

in given comps was and a that we you broke the to up just It gave and can driven And X.X% quarter, X.X% on add -- came cadence, given quarter. take didn't And assume acceleration any October the to that solely that September given the earnings that we comps little price traffic. call. so we audio bit, last the for at that for November during was stronger full much due were the

Jeff's we're doors. to very, very in executing to that guests back than we're point, pleased ever well see So that our operating, are more so through coming earlier

Jeremy Hamblin

to want it. I West some market I Southwest the was commentary Got on clarify. Coast just the versus comps And also. there think

Benjamin Porten

Yes. Give me one second.

Jeff Uttz

head, markets. is Jeremy. numbers Coast X.X% I top have the here. X% the West in over and of It the the my in Southwest

Jeremy Hamblin

Got it.

then traffic plate X.X%. menu a -- just seeing pricing up of in And little reduction consumption? go you to Are really bit overall And terms average the of in ahead. then back comp where strong, so coming was, still

Hajime Uba

Language]. [Foreign

Benjamin Porten

from a QX gotten sequential And basis has consumption actually a per flat. QX, comparison, to person on it's about On year-over-year plate up. [Interpreted]

And is. so happy we're consumption really with plate where

Jeremy Hamblin

labor it. points shift costs. see leverage I wanted your nice you to that then XX Got basis had And gears some And year-over-year. of to

think seeing little to about market moving I kind wage is I of X.X%. the up here Jeff, 'XX, But get minimum of wanted X pressure? outlook just leverage Are $XX in think bit for potential about, we're wage. impact what fast going on you wage into what an you you're the calendar there's that food expecting. But you again, in And a wanted California get to on were January laws that also of forward. the on less the as got thinking pretty sense a labor large-scale are April, effect, a comp. X.X% nice in

Hajime Uba

[Foreign Jeremy. question, this answer to happy I'm Language].

Benjamin Porten

-- wage pricing about increases I until took since of January, is increases we minimum moderated and X%-ish we've offset enough the we and that inflation year-over-year. the [Interpreted] mentioned California, about labor to QX of to annual margins calls, believe about in that last In the It's really including our keep as was the mid-single earnings year, XX%. think that year-over-year flat with that's that digits, labor past

asked Act. FAST we -- as concept pretty we're this is I to the an much that noted only think You see opportunity. that about AB XXXX, saying pleased We're be the previously very

We -- that $XX in our California QSR. the are going are employees markets, terms people of making with to be our already making wages competitive that are at

so to able to take an obviously, price need offset that. aggressive QSRs And to be

we opportunity we see to has been, we until a as really -- casual conversation share Sushi dining places. now, so go grow do the go Kura as to up to market or And do other this meaningful

the get really running the do one Now great combo we large, burger meal Sushi our value how at or guests, We we prices. just reasons not place that's existing demonstrate X% Kura world and that get it's of is. to the we're at to do a -- Sushi, want Kura

Jeremy Hamblin

the for out one and Last point. of I'll Got it. That's me a queue. great hop

the to with I into get promotion to and seems performing, in how of for Peanuts be partnered to that decent some You've of a January. ask right? recent amount wanted a wanted buzz. sense Snoopy about December generating Just here was collaborations,

Benjamin Porten

Yes. certainly We're collaboration part pleased with big really of a Peanuts it. results. And the December is

photo [ Fresh team collaboration, cycle gets those not just better restaurants a a enemies they on big We Brown that through. what and really space did the missing. PR mysteriously And the we Our with ], but Christmas. go like the where job spectacular better ops every Charlie with figures our had out we Mr. toys would this we little, dome. And were decked Snoopy the collaboration time, or call had

so And that, was to encouraging a but to can it so than about really higher not and just year. that, guests price not of Jimmy a the that, -- take x right mentioned tell for certainly more part now, more wait we've excited This as fiscal our that ever Family wish Spy pipeline earlier, what we've until remainder we've people to be you're that And to as have of do nice you then were were collaboration going next was -- got after call. got it best see the I two but the the had. I excited. next for could could I they you it. is

Operator

of Our line Zackfia the William next Blair. Sharon from with question comes

Sharon Zackfia

have to was year. I the confess, fiscal raised Jeff, in this I that revenue a early little guidance surprised you

it Difficulty] it -- $X but in business? -- schedule better raise. So [Technical guidance? initial Was on I'm million anticipated the curious in just it is the the opening Was

Jeff Uttz

cutting but of gist you're I bit a out I the my little question. think Sharon, your got on end,

come million than year, $X an operating is have and the asked, of going feel that. not was We quicker mentioned why going Jimmy end the had that at raising than decided So the to the is why we expected, we -- some one of more raise unit and which of that is to the earlier, have cadence more which guidance. in we're as additional the the weeks opening we're questions

through of we're some the some been ease that talk with problems year of has To their the in. selection was they get seen us in we part that things I which opening a last through have about and permitting as landlords about Chief raised landlords how get done, our the and that and we kind did get get Sushi about in, our Kura done we happen, night want raised we're the And of the that's and And seeing bit. happened wanted us in first out. the quicker the and have that can that to of that of recently, he telling good. fact, open, really of the but how played done openings would I site work quicker have work they been get And quicker the and that wanted thought the happening it work we quarter last portfolio. that we markets guidance are the their talking kind me We Officer is be, can getting and because Development we excited why in to their guidance. was having some quarter get excited getting they're are to first watch to we what before that see can little

So that's why where now. we are are we

Sharon Zackfia

November, pretty And prior then improvement little saw there the in is on you helpful. November in can to November. bit you months all that a kind traffic attribute in attribute do I of in be anything mean, than Very hindsight to particular or X we you meaningful, math. the

Hajime Uba

[Foreign Language].

Benjamin Porten

traffic November capabilities. Part of a rewards in final existing thinking in we're program, of very would our new We push. we were November, in acceleration just more it migrate attribute push sort for to our largely with the of a its was [Interpreted] pleased users

that. twice come but January. for that a program December, done track an coupon a a first started around kind because made where time promotion we we this, XX% where thing is December, had have that the In and where And something only off if rewards offer of get we -- promotion in do you we a can this ever this -- can you so we've we

well to when come was redeem in And obviously, it's very driving coupon. be traffic good for going a that in traffic And people January so to that as December. driver

Sharon Zackfia

excited about. all which dishwasher, robotic the mean know very I we're I

that's plan [Technical went I'm and frame tested could on the spring. the time rollout going a look into if just Difficulty] What really for well. units forward? think new wondering like I still in

Benjamin Porten

Yes.

in -- So mass -- IV It's or matter of prototype to on is technology the spring. in still bit I'd the that just a getting say models forward very looking test Phase that ready. changes. I'm much model, the it are we largely a some to it's we to it. still are market mass-produced battle just tested. a There's from tricky little there go material are given the

going to And so it's get to think process. the and I assume finalized. least organizations. to be pretty list actual is at that's model months the bring XX that can safe And it's a point, from when I opaque mass-produced the that it parts at But regulatory

probably would then it minimum robot And be to months for layout XX of so And -- the the in ahead which from the terms we timing testing. accommodate plan dishwasher. stores just can would it

Operator

Our next line Bernstein Jeffrey of from question comes the with Barclays.

Jeffrey Bernstein

Great. questions trend. A couple on of the comp

was was think I I the for said right, a X.X%. the if quarter, The did pricing heard X.X% the and and you first fiscal you the one, X% I think traffic,

So that would so imply, you the I I think flat. were guess, a plates X said And or mix. negative

the it non-sushi an missing whether just think guess as meaningful presumably of about or you how is maybe negative management. a think mix ongoing of like see that abating, shift of how kind a kind offset, whether you I that wondering component that concern sounds I'm you negative that? So about concern check

Hajime Uba

[Foreign Language].

Benjamin Porten

certainly concern. it's really as mix, think [Interpreted] of we but don't So the there, negative terms it of a in

traffic. Our remains focus

is that. around marketing geared Our

we We around the and in think shine hardest that's is that. strategy our comparison overall Our really brightest, to geared peers. especially part where

think no never In of from restaurant-level service is our profit their price model. doing is. of the that's comes we terms XX.X% last pressure, -- that of unique meaningful so that actually come people in is budget one that XX.X%, one check of mix strongly. the matter spite Guests a margin reasons our operating of that improvement over out, management, And feature and can average our But that's year. traffic is we for in a guests what

that thought is focus. against our leverage And so -- traffic our the is us can that we fixed our again traffic, We like. margins gets and costs

Hajime Uba

[Foreign Language].

Benjamin Porten

do being love when side That it items, course, cetera. said, attachment [Interpreted] greater et have of our we guests menu

some do promotional we the that have in so campaigns guest are geared towards And spend. improving pipeline

Jeffrey Bernstein

Understood. guess for I outlook we the if November then nice I an seems look the that's the pricing sure, roughly a October, September, pieced it from uptick. X%, as similar forward, on I on was together think perspective was comps. And Based and like

what just traffic the it's we I wondering of comp? be year think just digit the if said assume on mid-single Or that in range, type December, I pricing thinking confirm thought were I overall reference based one, wasn't comp then rest I components? not positive just about you right. figure a sustains I'm to fair So that was those want the to sure for or to the that should with pleased. X% out was think trying the and first we to still whether that on and the outlook on really December should then And you how about the outlook,

Hajime Uba

[Foreign Language].

Benjamin Porten

terms of there. about in the So in right is [Interpreted] math your X%, November at yes, coming

X% at our strength the in But traffic with our comp year. able the pleased performance. to we through confident week. we'll efforts, pricing we happy. the Looking remainder and IP ongoing said, we we that development, as momentum performance, lap that at very our marketing We're menu strong the of were this very very We're have, maintain pipeline overall our that did be with first December, traffic fiscal

Jeffrey Bernstein

Understood.

of consumer. in I a guess, concerns Now despite, encouraging slow that's

last So hear. to of My things. cost on was good side just the question

Just a clarification.

of was what the I think you year maybe said each the just the labor fiscal commodities were expectation the I'm for for X% first first for deflation full quarter in quarter. wondering the 'XX. and those

Hajime Uba

[Foreign Language].

Benjamin Porten

of last to basis against about XX.X% below seen terms you've were but able year's we inflation year, come XX In labor, digits in year-over-year, XX.X%. mid-single prior the points [Interpreted]

labor operational that stay as but not we've margin. we pleased efforts And that able play And as our we're into well actually that the very we're made were -- feeling the flat that so pricing improve the there. to taken just come we've

Jeff Uttz

quarter from then you're right, it of 'XX And QX, a QX it to was about then was year past fiscal X% And to quarter deflation. about from of this sequentially this X X%. X, year fiscal

Jeffrey Bernstein

margins And it. mean, based margins, 'XX, say said someone had your think did with But just -- clarify, I you XXX thought the points but referring expect the how for I we question flat. line? that of restaurant But expansion. comfortable I year? you to with you that it was was calculation, at you on look it fiscal of Got basis were mentioned restaurant price you you Ben, restaurant Or the depending the I the varies, on prior in know labor. X% to margins asking rest were flat labor about

So on to kind thoughts remaining any clarify perspective? wanted forward-looking I just X overall margin quarters you the from have an of if

Benjamin Porten

Yes.

look historical they've had you margins, at If meaningfully pretty every to quarter. lever our

general thought pretty X% to COGS can assume the you can do costs. cost that much pricing took, they're we've And same comment to X% some so enough we not we have all well, inflation, those greater to The greater fixed -- that going to just improve have traffic was that tailwind. felt that about of other our we offset we against pressures. we We and inflationary as our -- the was continue that historically can the enough offset cost our labor as but leverage just sales got a we

Jeff Uttz

as a of to from mentioned basis remarks, XX.X% I Jeff, profit too, operating XXX there leverage sales, add percentage we points of restaurant-level XX.X%. in also I'll the my had on And prepared as

of year. and great our pricing, commodity so the for fully to So with labor this quarter, that the we a continue remainder tailwinds, easing the of inflation, have expect the lot the tailwinds been deflation, of past

Operator

question the Citigroup. of comes next Our Tower Jon with from line

Jon Tower

of how But in for the ticket had is One, you earlier at the And drive this -- off of you of and/or, few, a if overall expectations? if insights or Just have program, own I Ben's hit time apologize hit have this any the and I members I'm might it loyalty if in in some earlier, twice registration get January. only reserved can versus come I not XX% promotion But that sort might as frankly, may. where don't loyalty your And at have around working for you stuff. frequency, comments December, customer not. our that seems if was the know program how is to how here on and curious, loyalty previously? least

Benjamin Porten

Yes.

So our the We talk sort that the generally you limited don't I it program. a level that couple has comparison in a last to November, that compared assume sure garbled, you was of if earnings to had promotion, call, we speaking, for as about I'm call to initial it's in out that recall assumed the bit the can weeks, you in But whenever of mentioned rewards little just due the to been but because program a rate our members. registration rewards has off, not tripled doubled you would the audio the last is was excitement. program. today's prior heard actually if registration know

it hasn't actually It's So leveled off. accelerated.

very We're expectations. it's that very it's exceeded to our think far I fair it. pleased with So say

of little premature we engagement level. will bit kind we'll I we share of good different still a next great. can the are news be that earnings completely the that a insights, can just guest but call lot things campaigns to to have able discussing that deploy think is at with be do, a The you. it's Certainly,

Hajime Uba

Language]. [Foreign

Benjamin Porten

Yes. off rewards for only [Interpreted] that XX% in slipped get twice January, in that to members. that visiting And December

rewards In fact, enabled us the platform first the that to actually do time. improved has for

Jon Tower

communicating some that uptake push of as just quarter phone of And guys what to the cell the know all? kind upgrades so, And if on ordering consumers out Did also rolled last the at the table discussed you at during kind of -- system quarter, it. of about was lever. the a potential you waitlist and/or the Got I idea the either?

Benjamin Porten

Yes.

it. it's In traffic of waitlist below the very the to continuing We're XX%, reasons so happy very, terms to a our dropped XX% meaningful is very guest -- improve. we improvement. think app, from And attrition attrition of has one with that

takeout the phone factor I that still limited start we're ordering two guests what I complete. or our called to complete. ordering, mobile later this the is it. button. to It's we've Really, button feature think going we figuring is When exactly In -- testing testing have to that some going restaurants. to biggest a are mobile like terms think out of a -- it's assuming trouble had name the is we We're --

a grab and exactly that you the I doesn't into is place program And sitting do. explanation you've reach your people to so people use you the on of which a until sound more phone on this order And we're changing been cell party for allows or panel with allows of restaurant want to clear to can smartphone the and which ordering, this and to at can't think it exciting you well, X a and you're -- very what over don't are new call, as outside from stuff. it orders

And to excited for think mix, about so go this a in up. especially it's side attachment meaningful we're we rates terms very opportunity of menu

yes, be going will quarter. hopefully, January, quarters, the next and expectation is -- be my on rollout X next to And in is -- in a that's done so should the be it's rolling it starting basis, that

Jon Tower

Got is indicate XX know resonating then following seems and it. over months U.S. despite volumes your prior all about I And productivity whatever it consumers particularly well obviously, that the stores. of doing the been about up to on certainly well. that I past and getting to macro seem brand as traffic had previously the idea with talked TAM. store guess, like you And XXX the to new just,

have at thoughts guys and if over where dated it curious more any I'm that Do the number, think guys time? about So that you moment. should when appears you on go

Hajime Uba

[Foreign Language].

Benjamin Porten

whitespace in to that terms of new topic that. for the remains [Interpreted] Obviously, commission excited going people a we when discussion So still we're know are study. of it

in however as to number excited result IPO, you rush XXX, units in of our in street again, that's at we're against number We've We fundamentally the see think ceiling. that with the the the market not But necessarily. initial We I don't and in decide of the be a sheer we along. rolling commission communicated not units XXX fragmentation hear see conservative, XX the it many time to do we we're a need was the hundreds States. anybody we the restaurant of with, study. anyone because we're changed future. times so gave into the COVID. mentioned, closures that initially not think of the so many the don't And just begin is certainly a and But United a We on to think our but whenever units because got conservative whitespace opportunity that of -- to this past Japanese XXX as call expects segment that to

Operator

Our of next Company. from Todd Benchmark line comes question the Brooks with

Todd Brooks

a QX the on given the left line, Jeff, in pipeline, take the then as the increase we But level the leverage half. how spend cost Just it accelerating here. is of of safe and spend go the be volumes should obviously through the opening we other forward a low success apply kind as of couple thinking about year? in to back level that

Jeff Uttz

how you of to Todd. exactly our That's We're continue it, phase. going think should opening

guidance units. to the XX we XX you As raised to know,

open to units we're we continue So as to as going quickly can.

opening was see quarter to what expenses other associated the those costs preopening these continue large And the to really going we're restaurants. that's preopening the expenses. most with impacted throughout So

as in you restaurant expenses have in looked so a our reconciliation do don't Q. see the companies our financials, preopening lot you upon the that. line preopening down on what As expenses which is in we can a the out separate were past broken now, EBITDA item adjusted of But

line. leverage you the costs. take again, next some. get And how think kind we're lot as of to start to So Similar stores really a next is additional offset revenue giving have get we higher little we that. stores you're unless But opened stores necessarily wouldn't costs they're it the about to I the going right and we we leverage, topline XX year in now, more that it year, it thinking more enough have because continue going sometime, us elevated. more. have some But revenue continue is cost about the It's I'm this will exactly thinking year forward we where year and from going G&A going right. but bit, remain to to still about opening to other of -- on as to leverage open preopening significantly get restaurants through a will the

in labor line And as well. the

have it's rent start occupancy yet, take to building. costs high preopening restaurants in not throughout booking about one possession sprinkled too. in occupancy. labor, the another stuck of was our the in They're we just That's Our we expense line. Nobody They're when are P&L. reason asked occupancy on but

And we're So people line profits, rent occupancy through takes I bit We're this think going and hit to to because we're be they're and little you this restaurants openings, books. restaurant, But good quarter thing. some higher as when pushing a having see expected it X X make see accelerated to well. it opening happening. build to revenue months expense the it's the and start excited our than our noncash why of or that's a

Todd Brooks

it's a That's unit great helpful. tied Jeff, Thanks, openings, agree that to accelerate very it's thing. if and

Just one follow-up there, and the then I'll hop back queue. in

is being additionally on units? cost about something just marketing you're side new costs doing this the Or bump Within preopening you other for marketing up. Is marketing up? that there talked line would the that that

Hajime Uba

[Foreign Language].

Benjamin Porten

really marketing that cost last we've didn't kept part December. last search it is in marketing some December, year happy -- in is of QX, given year-over-year We're targeted effective. we have where we was -- a context, so But channels. the very [Interpreted] exceptionally our in been with investing year. This it, that Google last optimization It's with we across why very comparison as its been So started first it's which suite. this started as engine just cost and

an doing flat we're be QX, of going As to comparison. apples-to-apples

like not is of really just a This year-over-year we the new something tail So in started comparison. QX. it's

Operator

Partners. Our next question comes ROTH George Capital Kelly from line with the of

George Kelly

Related sort CapEx. for was restaurant, been asked, have up to just just what's to sales it's Or more of maintenance of curious sort X.X% but recent about of over And there post-COVID a curious been you. most CapEx? percent wondering not look if been has some I CapEx? the And questions anything last maintenance one my of periods. per generally year just CapEx. I back there's but or of last So the a if use normal for know catch we in one on maintenance X, kind good

Jeff Uttz

So a George. couple of things,

the we've look at several done I but logo res. sometime changed said when not past, maintenance you're terms our the we a catch-up, of you is ongoing joined of depreciation much the what runs in line $XXX,XXX For restaurant a we're P&L, your lot catch-up, Once the a that accelerated per because is changed seeing about And company, there's but there remodels, necessarily yet. open, on stuff in before we capitalizing. in depreciation our CapEx, signage of we haven't it so maintenance

we when we're time depreciation. changing signage our logo. make we to a have accelerate And a to when we that lot have the and new coming decision, So that of date is for down,

as we lot have for so that to have was a over have protective on that restaurants COVID the also write equipment the books emergency those in just we sure We that off COVID of and we now we kept the make well.

maintenance things are CapEx. said, depreciation several us for hitting so how or line. it I our like should there unusual you that's But So kind $XXX,XXX I think at look of for

Operator

of Smith with Lake question line Street comes the from Capital. next Mark Our

Mark Smith

Similarly, questions been But have most me. one asked for here. just think I

that pretty if was good else look we wanted else G&A, kind fall little of to onetime-ish there looks see accrual. maybe litigation bit was there? As Did It nature? anything And that you're anything of expecting a I leverage there's there. at just some that like there onetime-ish? in in was was

Jeff Uttz

we're completely to a this when accrual see leverage compliant about was leverage we're the much complaint, -- projecting this thing first at be. The costs it piece. Yes. where if the that come quarter. to as public the means of of And we our we out, came expecting not quite guidance, basis are points we as which And reason the XX year almost that expected some for to The our XXX(b) points consulting exactly litigation company, additional back we're the when because going year number onetime be $XXX,XXX we and to have for you had bit look and XX last created costs year, is has that rest auditor now you're year forward XXX(b) make is of the going a our is need basis this to biggest out you if which year. sixth of sure we

So create the public good. headwind over XXX additional But last there. pretty you a year, know bps years little company a this is of X what, XX year, costs bit XX plus

Operator

Thank you.

We our conclude that, today's teleconference. with have reached the end of will session. this question-and-answer And

the Thank interpreter You for you this call.] are your may disconnect time. your of transcript present spoken an live by lines were on at marked participation. [Portions this that [Interpreted]

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