Kura Sushi USA, Inc. Q3 FY2025 earnings call

• Completed system-wide rollout of the reservation system ahead of schedule. • Made progress on building a restaurant pipeline leveraging opportunities from Bakersfield. • Built the biggest marketing calendar yet for fiscal 2026. • Food and beverage costs improved due to pricing and supply chain efforts. • Opened 3 new restaurants during the quarter and 2 more post-quarter-end. • Introduced a new light rice option giving guests more control over their sushi experience.

Total sales for the fiscal third quarter were $74 million, with comparable sales growth of negative 2.1% (offset by positive mix of 0.8% and negative traffic of 2.9%). Food and beverage costs as a percentage of sales were 28.3%, an improvement of 90 basis points from the prior year. Labor costs as a percentage of sales increased by 50 basis points. Operating profit margin was 18.2% compared to 20% in the prior year. During the quarter, 3 new restaurants were opened: North Scottsdale, Arizona; Lynnwood, Washington State; and McKinney, Texas. Subsequent to quarter-end, 2 more units were opened.

• Expect total sales to be approximately $281 million for full fiscal year 2025. • Expect to open 15 new units, maintaining an annual unit growth rate above 20% with average net capital expenditures per unit of approximately $2.5 million. • Now expect general and administrative expenses as a percentage of sales to be below 13%, exclusive of any legal settlements. • Adjusted EBITDA increased by 20% despite higher restaurant operating costs.

• Tariffs could impact food and beverage costs; currently, Japanese suppliers are willing to share some impact, but uncertainty remains. • Labor inflation could continue to affect labor costs as a percentage of sales. • Sales cannibalization from new restaurant openings in existing markets could impact overall performance.

Q: Jeremy Hamblin asked about the new reservation system initiative, monthly comp sales cadence, and guidance raise.

A: Benjamin Porten and Hajime Jimmy Uba discussed monthly comps turning positive in May with IP campaign, and guidance raise to $281 million after being cautious earlier.

Q: Jeff Bernstein asked about tariff impact on cost structure and restaurant margin outlook.

A: Jeff Uttz and Hajime Jimmy Uba discussed uncertainty around tariffs but confidence COGS won't go north of 30%, and optimism for margin recovery in fiscal 2026.

Q: Zach Ogden asked about new store productivity and tariff impact on new store build costs.

A: Benjamin Porten noted fiscal 2025 new stores are strong, especially in Pacific Northwest; Jeff Uttz said $300,000 to $400,000 impact expectation remains.

Q: Todd Brooks asked about reservation system impact and IP partnership quality.

A: Benjamin Porten talked about reservation system benefits and qualitative strength of IP partnerships including Demon Slayer, One Piece, etc.

Q: Mark Smith asked about other costs and G&A management.

A: Benjamin Porten said other costs bounced back from low prior, and G&A management is purposeful with slower hiring and scrutiny on new hires.

Q: Jon Tower asked about light rice, COGS, and 50-50 store split.

A: Benjamin Porten explained light rice is smaller rice portion, lower COGS, and discussed 50-50 store split plan for fiscal 2027.

Q: Jim Sanderson asked about mix component, membership, and technology initiatives.

A: Benjamin Porten talked about mix opportunities, membership growth plans, and DISH robot and reservation system efficiency initiatives.

Q: George Kelly asked about reservation system efficiency and light rice rollout.

A: Benjamin Porten detailed reservation system efficiency gains and light rice confidence from Kura Japan's experience and touch panel update, with rollout ongoing.

Q: Matt Curtis asked about reservation system efficiency from reservations and light rice background.

A: Benjamin Porten further explained reservation system efficiency examples and light rice background from Kura Japan's testing.