Good afternoon, everyone. Hope everyone had a chance to grab some lunch, whether you're in the room or on the webcast. My name is Jeff Bernstein, and I'm the restaurant and food service distribution analyst here at Barclays. I'm excited to introduce our next presenting company, Kura Sushi. With us this afternoon from Irvine, California, we have Jimmy Uba, President and CEO, Jeff Uttz, CFO, and Ben Porten, SVP of IR and business development. By way of background, for those not familiar, Kura Sushi is interestingly a technology-enabled casual dining restaurant chain with a very modest 50 company-operated units across the U.S. And with long-term guidance for a 20% annual unit growth rate, management is confident in long-term guidance for 300 U.S. units. We would estimate that's likely conservative with their total addressable market analysts or analysis not updated for a number of years and the success they've had since then. So we're excited to have Kura Sushi here. We recently launched coverage of the name, and so we wanted to thank the team for joining us. I've got a handful of questions introducing the brand to a lot of people, but then I will pause, and if there's any questions from the audience, be happy to take it. But with that said, we want to thank Jimmy, Jeff, and Ben for joining us, along with broader Kura Sushi. Thanks for having us. Thank you. Thank you, Jeff. Happy holidays. You want to do a quick... No? Just deferring to you. Which would you prefer, Jeff? Sure. Should we give a quick introduction? Oh, please, if you'd like to give a quick introduction, that'd be great. So to give some context, we began as the subsidiary of Kura Sushi Japan, which now has 550 units in Japan. Jimmy came to the United States in 2008. We opened our first restaurant in 2009 in Irvine, California. We went public in July of 2019. Our AUVs at that point were $3.5 million. Restaurant-level operating profit margins of 20.1%, and we were in three states. Today, we have 54 units. Our AUVs are $4.3 million, and we're in 21 -- we're $21.9 million or 21.9% restaurant-level operating profit margins, and we're in 15 states plus Washington, D.C. We're exceptionally proud to have been able to grow our restaurant-level, our restaurant-level economics while expanding into so many different markets, especially given how geographically concentrated we were at the beginning of our life cycle. As Jeff had mentioned, we are an extremely tech-driven company. We, we benefit greatly from our relationship with the parent. They've been around for over 40 years. They hold over 50 patents, some of which are so important that we've, we've actually filed them with the U.S. Patent Office as well. And what's really unique is that for us to have... For a company, restaurant company, to have the level of technology investment that we do, you typically need a unit base of 200, 300 units or more. But at that point, it's prohibitively expensive to retrofit your restaurants to accommodate that technology. For us, our restaurants are designed from the ground up to be modular and adapt to new technology. And so I'd say, you know, we're in a truly unique position. Yeah, I think that's a quick summary of us. Yeah. No, Yeah. No, that's great. That eliminates the first 5 questions. Just wrap it up. No, I appreciate that. From a bigger picture perspective, well, just thinking about your company, you know, you IPOed in your infancy, presumably, and obviously, you have a parent company that has a lot of units. You have had a contrast of a lot of intelligence from a brand in Japan, but relatively small here. I'm just wondering if you could talk about, with 54 units now, already having been public for a number of years, can you talk about the pros and cons you've found of coming public at such an early age? Sure. Sure. Thank you for your first question. Please allow me to answer in Japanese. Ben is gonna translate my Japanese into English. One of the biggest pros would be our recruiting efforts. As Jimmy said, that, you know, the caliber of our team members has grown exponentially. Becoming a public company, being able to grant equity, especially, you know, having gone public at $14, those options are very attractive. It's really been able to grow our executive team by leaps and bounds in a way that would have been simply impossible as, you know, as a private company. The other would be that as, you know, a publicly traded company, we get respect from landlords. Our first 10 units are great, but they're in odd places. You know, it's a really get in where you can fit in type location. They're highly profitable, but, you know, nobody knew what Kura was, let alone what revolving sushi was. Now, you know, the Westfield of the world, the Simon of the world, were beating us down our doors. Developers come, giving us the pick of the litter. They know that we've got two-hour lines at dinner, and so we're the perfect tenant, and that's been a tremendous tailwind for us. As a side note, you know, along with every other restaurant company, our stock cratered during the pandemic, but we actually took that as an opportunity to aggressively hire our C-suite. Our stock was as low as $5 at one point, and so anybody who got in at that point is extremely happy today. ... And the same with landlords. Jimmy established a $45 million revolver with a parent when everybody else is turtling up on their CapEx and breaking leases. That gave us access to triple A locations that would have been previously inaccessible, which really, and the success of those locations has just snowballed into more and more real estate opportunities for us. And in terms of, in terms of cons, obviously, you know, public company cost was a pretty significant step up in terms of our G&A, but in terms of governance, in terms of our ability to attract team members, we see it as a worthwhile investment in the company. Understood. Now, it seems like, and you, Ben, you mentioned it earlier, but the greatest attribute, it would seem to me, is the ability to operate as if you have 500 restaurants when you only have 50. Exactly. Whether it's the technology that comes with it or the learning you can share. Is there something you're next excited about when you get to 100 or 200 units that maybe, Jimmy, maybe you've seen as a parent company, that you, when you can now say, "I know what's gonna happen at a certain point in time." Like, what's the next big hurdle or something exciting that you see coming when you get to 100, 200, 300 units? Well, you know, since going public, the first major hurdle that we had was demonstrating our portability. As we mentioned earlier, we were only in 3 states. Now we've established beachheads in our top 20 DMAs, and as we infill, we expect tailwinds in regional G&A. It's a, you know, it's a very meaningful. It's gonna be a very meaningful benefit to be able to have regional managers look over, you know, 7 restaurants in one state as opposed to 4 restaurants in 4 states. And so we're very excited about the infilling process. One thing that's very, one thing that's always top of mind for us is an appropriate growth case. Jimmy joined the parent at 30 units and helped them grow to 180 units over 8 years. And, you know, we've seen in the years prior to our IPO, basically a lot of cautionary tales, stories that have restaurants that have outgrown really, you know, faster than they should have. And while we've been maintaining that 20% unit growth case, you know, our midpoint of guidance is 24%. We feel like we're growing at a great clip, and that's because of the experience that we have, having, you know, had Jimmy run the 30 to 180 units. But, Jeff, I think maybe you could touch on the G&A expectation. Yeah, I was going to say that when I was hired, one of the things that Jimmy really asked me to focus on was G&A leverage. And coming in, a lot of low-hanging fruit, we were able to leverage our G&A from fiscal 2022 to fiscal 2023 by 80 basis points. Our guidance this year is to have another 50 basis points of leverage, and the reason that that is eased a little bit is because of the public company costs that Jimmy mentioned. This is our first year for 404(b) compliance, so it's gonna be a little bit more public company costs associated with that. But still, you know, 1.3% over two years, we're pretty happy with it. You know, guidance of $240 million or so of revenue, that's $3 million straight to the bottom line, which I'm, I'm really proud of. And as we continue to open up more and more infill, we're gonna see that continued leverage as well going forward. To return to your original question, our goal is to maintain our restaurant-level operating profit margins above 20%. We're happy with anything with a two handle, and we expect, you know, that the increased scale to directly flow through to the bottom line with improvements to G&A, and that's really our core focus for the foreseeable future. You know, I know Jeff has mentioned on a number of occasions the long-term goal would be getting that into single digits as a percentage of sales. It would seem like that's a long way off from, you know, 14 and change that we're sitting on now. But is there any big hurdles that you see to achieving that or big milestones when you get to a certain number of units? I mean, you've gone through this process before with other growth companies. Like, what's the big unlock that gets you there? Because sometimes people say, "You know what, once you get to a certain point, it's hard to bring that G&A down because it's a certain fixed cost component. Right. I mean, the more leverage you get, the harder it is to get further. I think, you know, we look at it as corporate G&A and regional G&A. Regional G&A, as Jimmy mentioned, we'll get by infilling and having our area managers be more efficient with less travel, less time on the road, and you'll get leverage there automatically. But really, it's in our in the support center, the corporate G&A and its systems, the unlock the systems, and making sure that we have the proper technology to reduce keystrokes, to reduce headcount. You know, you don't ever want to be at the point where every time you open 8 restaurants or 10 restaurants, you have to add people. And I would rather invest in systems and not have to keep adding people every single time we open the restaurants. And we started that process. I challenged every department head and every C-level executive to think about: What would you like to buy that will make your life easier and more efficient in your departments? So everybody's really thinking about that, and I think over the next 12-18 months, we're going to see some considerable improvements there. We've already started. In the finance area, we've already purchased a couple things on the FP&A side, which are making our analysis much easier and much more efficient, but we're gonna dovetail that into the rest of the company. ... Understood. I know when we were having our initial discussions, and I've covered the restaurant industry for a long, long time, but I've never covered a primarily Japanese concept. And it's a lot of people say, well, it's hard to take Japanese national because it's already a national brand, and every market has a different flair for what Japanese is or whatnot. Can you just talk about it? It just seems like the category fragmentation is just such a tremendous opportunity when there is no significant chain at all. I know there are mom and pops. So how do you think about the market share opportunity for your brand relative to the competitors? Thank you. I would love to answer that. So the sushi industry, according to IBIS, is approximately $26 billion. The top two players control 1%-2%. That would be ourselves and Nobu. And so effectively, every sushi restaurant is a mom-and-pop. And with COVID, as difficult as that was for the restaurant industry as a whole, this was practically an extinction event for Japanese restaurants. You know, we were the only ones with a balance sheet that could survive month after month with no revenue. In 2021, we did a data scrape on Yelp to see how many Japanese restaurants had closed within a 5-mile radius of our then 32 units, and over 200 had closed. It's not like a pizzeria, where if a pizzeria closes, you know, you can use the oven and come back as a pizzeria. There's a lot of operational know-how that's pretty rare involved with Japanese restaurants, and so we don't expect, you know, those to come back. They, they haven't come back as Japanese restaurants. And so that's one of the reasons we've maintained such such consistently positive traffic since the end of the pandemic. And as you mentioned earlier about the white space potential, I believe that it's, you know, significantly larger than that 300 number that we arrived at originally, pre-IPO. And so with the $26 billion, you know, size of the sushi industry, it's obviously a very popular category, and yet we've yet to see, you know, a truly national chain. I, I'd say that we're really the first one. The reason for that is that there's such a high skill floor for making sushi. Our sushi robots make rice balls. That's typically a 5-year training period. Nobu, you know, the second largest player, they... I'm sure they'd love to open more restaurants, but it's a 10-15-year training period to get to that level of being a head chef. At which point it just makes, you know, it makes a lot more sense to go out and say, "Hey, I was the head chef of Nobu. Come to this restaurant that I opened," and make a lot more money. In terms of portability, we, we pursued a non-contiguous growth strategy, which is exceptionally, you know, rare, I'd say, this early in our, you know, with, with this few units. Typically, you take a hub-and-spoke model, and we - this is only possible because of what we call the remote management system, which is actually, technology that Jimmy developed for the parent as he helped them scale from 30 to 180 units. The reason that we pursued this non-contiguous growth strategy is not only to establish, improve our portability to our investor base, which I, I think we've done a great job of, considering that our top three units are in Fort Lee, New Jersey, Bellevue, Washington, and Austin, Texas. It's a triangle, basically the perimeter of the country. You could not get them further apart. But also, this has allowed us to identify the greatest pockets of opportunity in the country that much more quickly. If we had gone with a hub-and-spoke model, it would have taken us, you know, a decade or two to get to the East Coast and realize just how lucrative the market is. On the strength of Fort Lee, we've opened 2 more New Jersey locations. We've opened 2 in Pennsylvania. We've opened 2 in New York. We've opened 3 in Boston. We've opened 2 in D.C. And now, you know, we've got a lot of leases lined up for the Pacific Northwest as well, because Bellevue is such a great market. We're very pleased. No, that's, that's incredible. I think most of your peers would say, "Let's open up a first, let's open up a second and a third immediately around there, and then just go one contiguous market at a time." So it seems like a pretty big risk that was taken to plant flags all across the country, but the fact that you've seen success with that, now it allows you to do the infilling, which is tremendous. That's one of the things that attracted me to the company when I joined just little over a year ago as well. The portability was shown because I knew, you know, at Shake Shack, one of the biggest questions we always got, and you know, Jeff, you were there at the beginning with Shake Shack, is: How does this concept do outside of New York City? The fact that Kura has already proven that it does well, the kind of concept does well outside of its core market of California, was very attractive to me. I just thought by saying, if you haven't been to a Kura Sushi before, I've now been there a couple of times, but it is a, for those that aren't familiar, I mean, it's sushi that literally sits on a little train set and zips around all the tables, and you pull off whatever plate you want, and all plates are a set price. And the technology aspect, I mean, I've now heard that the dishwasher aspect of things, now, when you're done with your plate, you put it back onto the, below the assembly line, it goes back, and it's going to get washed automatically, and it's just the ability to remove the labor from the system is tremendous when every other restaurant company talks about labor is such a big, big challenge. Thank you. You know, from a consumer standpoint, I feel like I don't know the Japanese segment as well and whether it's viewed as more discretionary or more occasion-based, but a lot of restaurant investors have, well, been surprisingly pleased with how resilient the industry has been this year. There was a little bit of a slowdown in August and September, maybe, for the industry. And there was concerns that maybe consumer headwinds had finally taken hold. But more recently, the industry seems to have recovered a little bit, whether it's a return to seasonality or whatnot. So I'm just wondering, just based on looking at your 54 units and not reading the macro. ... How would you describe the health of the U.S. consumer? Certainly, you know, we're not immune from the macro environment, but we do believe that we're, you know, among the best positioned, if not the best positioned, to survive and thrive in such an environment. When there are macro pressures, you know, people typically reduce frequency. So when people are, you know, used to going out four times a month or five times a month, and now they're going out two or three times a month, they're that much more thoughtful about where they wanna eat. And you can roll a burrito at home, you can put a pizza in the oven at home, you can grill a steak at home. Nobody makes sushi at home. Certainly, nobody has revolving sushi at home. And so it's very easy for us to be top of mind, and it's one of the core reasons that, you know, we maintain such strong traffic. Another part is benefit of scale. With our purchasing power, we're able to absorb inflationary costs much better than the average mom-and-pop. We've done a menu analysis of our core markets, and they're charging approximately double what we are. If we're charging $3.50 for two pieces of salmon, they're charging $7-$8. And so for consumer, I mean, the choice is obvious. One of the things that I like to tell the team, too, is we can control what we can control, and that's our quality of service and the quality of our food and the guest experience. And as long as we continue to do that, and we've hit on all those cylinders for the last year that I've been with the company, even prior, people are gonna continue to come back. And, as you know, we had 5.6% traffic in our fall quarter, which we're very proud of. One of the few concepts had positive traffic in that quarter. So if we continue to execute at the restaurant level, people will keep coming in. I'm very bullish that we're gonna continue that positive traffic for the future. That 5.6% traffic was lapping 14% traffic the prior year. It was not an easy comparison. Right. And as you think about fiscal 2024, I think it was—I think you gave this guidance in early November, so just a few weeks ago, but it seemed like there was, correct me if I'm wrong, but an implied kind of mid-single-digit comp growth for fiscal 2024. I'm just wondering, what are the components like over the next twelve months? Like, how do you see that comp components between traffic and pricing and check? While we haven't provided formal comp guidance, you know, absolutely, it's one of our goals to continue to produce positive comps, ideally, you know, bolstered primarily by traffic. We think that's indicative, you know, more of the health of our company and the longevity of our company, the portability of our company than, you know, comps that are driven by pricing. Certainly, we have a great pipeline of marketing efforts, but we also believe that we've a number of tailwinds in, you know, looking at the sort of trends that other restaurants are concerned about in earnings calls, one would be GLP-1. We think that, you know, as people are making more decisions based off of health concerns, we are perfectly positioned for this. I don't mean to single out a company, but just for the ease of comparison, a Big Mac is 590 calories. Two pieces of tuna sushi at our restaurant is 70 calories. I had to ask our purchasing officer if that was right, because I couldn't believe it. And so, you know, if GLP-1 becomes more and more popular, we just stand to benefit. The other would be the FAST Act, and I bring this up because we've, you know, 35%-40% of our restaurants in California. Our average check is $26, which is in line with casual dining. For those that aren't familiar, the FAST Act applies to units that are chains that are over 100 units, and the definition is for fast food. Their definition for fast food is places where you pay before you eat. And so, you know, given that that's not the case for us, even after we exceed 100 units, this is not going to apply to us. But for all the QSRs, they're gonna have to raise their minimum wages from $16 to $20. And I'm sure you guys have seen the headlines where people are freaking out about $18 Big Macs. That $18 puts us in spitting distance of our $26 average check. And so I think this is, you know, I couldn't be happier about these tailwinds. And also, Jeff, just back on your original question, to talk about our pricing philosophy in terms of how much price is in our comp. We don't take price, and it's not our philosophy to take price to chase comps or margin. Really, what we do is we take price as a defensive measure against anticipated or current rising costs, operating costs, such as labor inflation or wage and food inflation. So, it's kind of hard to quantify how much we believe will be price versus mix, versus traffic. But like I said previously, I'm pretty confident that our positive traffic trends will continue. To add on to my earlier comment about the FAST Act, in our California locations, our back-of-house employees are eligible for tips, and so they're already making more than $20. It's, it's also a highly automated kitchen, and it's easy to work. I can't imagine anybody- ... going from one of our restaurants to a QSR, where they're gonna have to do more work for less pay. And so we're not expecting the same labor inflation that other chains are. Yep. No, that's encouraging, considering all the discussions we've had about FAST Act. It seems like you're in a pretty good position relative to peers. You know, we talked about comp growth, but I'd be remiss if I didn't spend even more time on the unit growth, 'cause that is the primary driver of your top line, with only 54 units, doing 22-24% type unit growth north of 20. And it's only 10 or 11, 12 units, I think, for this coming year, you guys are 11 to 13, which would be 22%-26% unit growth. How do you arrive at that? I mean, it seems like, tell me if I'm wrong, but you could probably do a lot more, or you could justify doing a lot less. But how do you think about, like, how did that come to be the right number on a larger base? Is that a sustainable promise, or how do you think about that coming off such a low base? Well, in, in terms of setting unit growth pace, a lot, a lot of this is informed by Jimmy's experience in Japan. I mean, going from 30 to 180 units, it gives you a really good idea of what is the appropriate growth pace. And this, we've got three parts as a guiding philosophy. We think of this as three gating factors. One would be liquidity. With our capital raise in April, we've, you know, an abundant balance sheet, that's not an issue. With the, you know, brand recognition that we have among landlords, site selection is better than ever before, so that's our second gating factor. The third is our management pipeline, and so that's really been the major focus for ourselves for the last two to three years. One of the reasons we hired a new COO, hired our first CPO. I'm sure if you go back to our earnings calls, you'll see that that's something that we mention every time, that one of the reasons that our stock has performed so well is that we've gone, you know, we've more than doubled our unit base. We've gone from 3 states to 15, and yet at the same time, we've improved our unit level economics. And so, you know, we could, you know, just as an example, say that we're gonna do 40% unit growth, but if our restaurant level operating profit margins fall apart, nobody's gonna be happy about that. And so I feel like we're threading a needle and doing a—we're very pleased with, you know, what we've accomplished so far. One of the areas that I've said that we would invest in further also is management recruiting, and we put a lot of money and a lot of time into our recruiting efforts, and it's even over the last six months, we've increased substantially our pipeline and where we are, not only for new restaurants, but also existing restaurants, fulfilling any vacancies that we may have there. So our human resource team has done a really, really good job at increasing those efforts, along with our investments we've put into that. So if you were to open 12 units on a base of 54 in the low-to-mid 20% range, how many, how many managers or, however you define an individual store level operative, but how many do you have in the pipeline that you'd say are ready to take on the responsibility? And presumably when they do so, I mean, that's, that person's getting moved, or it just seems like a lot of disruption as you open up a lot of stores in terms of the transporting of leadership that's ready to handle that responsibility. It is. So I'd say the answer, not to give a number, but the answer is enough. But what I would say is that the majority of our units right now are in single unit markets. For every store that we open, we have one general manager, three assistant managers. With the single unit markets, we're having people fly out of state for maybe 2-3 months at a time, which obviously leads to greater attrition. Now that we're going from a 50/50 split from existing and new markets to a 75/25 split of existing to new markets, it becomes that much easier to recruit and build the second cohort of labor. That's what we've seen every time we've done infills, and that's what we expect with all of our markets. Well, we've got another five minutes or so. I've got a lot more questions, but figured I would open it up to see if there's any questions in the, in the audience. We have a person with a microphone. I think we have one up here. Hi. I have three questions. One, are you—do you describe yourself as casual, or do you describe yourself as fast casual? We describe ourselves as casual dining. By the way, I'm the person that wrote the definitions. Maybe you could tell us. No, you would, you would fit casual, because- Perfect. The dividing line, and it's very bright, and I worked with the labor department. It used to go by types of food, but then and how big the menu was, and then that really didn't work anymore. So I looked at it from service, and there's a, you know, restaurants are either you pay before or you pay after, and everyone can understand that. So that's how it happened. You're competing with suppliers who basically operate out of supermarkets. So do you think having a restaurant is, you know, a different occasion and a different experience? And do you also, third question is, do you also have takeout? Takeout, third question, takeout. So, to answer your third question first, we do offer off-premises. Yeah. And we do see the supermarket sushi as a fundamentally different occasion. We see our white space potential as being more than 300 units. There's still abundant space. There's, you know, a rising tide raises all ships. Sometime down the line, you know, entry into, you know, grocery stores might be attractive to us, but at this point, there's just, there's so much money to be made doing our bread and butter that we wanna keep our eye on the, eye on the prize. Yeah, I was just looking at the competitive situation. Mm-hmm. So on the note of competition, we're extremely pleased to say that when we're talking about revolving sushi, it's not that there hasn't been competition, it's that we've seen competition come and fail. There are no chains that have double digits. The year that we went public, there was a chain in the Pacific Northwest called Blue C. They went bankrupt the year that we went public. In the U.K., there's a chain called Yo! Sushi. They used to have 100 units. I think they've shrunk to 70. They opened 5 on the East Coast. They've closed them all, and they've given up on revolving sushi there. I'm familiar with them. Great. And there are four major revolving sushi chains in Japan. All four have attempted entry into the United States. We're the only ones that have found any level of success. The rest have refocused their efforts on Asia. I feel that we've built an exceptional defensive moat, not just with the technology, but with you know the ten-year incubation period that we spent really learning the cultural nuances of the United States before we decided to go public. Having had, I mean, you're smaller cap in nature, you're a newer brand for a lot of investors to get comfortable with. I'm sure there's a lot of misunderstanding, but what would you say is the biggest question you get or just something where you'd say, "You know what? We need to clarify that, because you're thinking of it one way, and we think of it some way totally different. Well, misunderstanding. This isn't so much a misconception as much as, you know, an opportunity for us to clarify our corporate goals. But especially with our restaurant-level operating profit margins having improved so substantially from the IPO to now, people are asking us, "How can we get to 25%? How can we get to 30% restaurant-level margins?" And that's just not a goal for us. We see the real opportunity as, you know, corporate-level profitability, which just comes from a greater scale. And certainly, you know, now that we're beginning the process of infilling, we expect regional G&A benefit. We expect just a, you know, greater leverage against fixed costs. But obviously, infilling is gonna have a degree of, you know, headwinds, but that's perfectly within our plan, and we want people to be focused on the corporate profitability as opposed to short-term changes in restaurant-level operating profit margins. Of course, we have many technological, you know, initiatives to continue to grow that, but really, the opportunity is just in the system-wide growth. Understood. Well, it's a new business model for a lot of people, but it's definitely very intriguing. We've finished our time, but our investors that are interested, I know Kura would love to chat. We wanted to thank Jimmy, Jeff, and Ben for joining us and Kura Sushi more broadly. Thank you very much.