Kura Sushi USA Announces Fiscal First Quarter 2024 Financial Results
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Insights
The reported increase in total sales from $39.3 million to $51.5 million indicates a robust revenue growth year-over-year for Kura Sushi. This growth, coupled with the expansion of the company's restaurant footprint, suggests a strong market demand and successful scaling of operations. However, the operating loss widening from $2.2 million to $2.8 million raises concerns about rising costs, potentially attributed to new restaurant openings and inflationary pressures. Investors should monitor whether these losses are a temporary effect of expansion or indicative of underlying inefficiencies.
Despite the net loss, the improvement in restaurant-level operating profit margin from 18.2% to 19.5% and the increase in Adjusted EBITDA from $0.6 million to $1.8 million are positive indicators of operational efficiency and cost management. The ability to raise menu prices in response to food cost inflation without a significant impact on sales volume is a testament to the brand's pricing power and customer loyalty. The consistent general and administrative expenses as a percentage of sales year-over-year suggest that the company is effectively leveraging its selling, general and administrative (SG&A) expenses against its growing sales base.
From a market perspective, Kura Sushi's 3.8% increase in comparable restaurant sales is a key performance indicator reflecting the company's ability to grow its existing locations' revenue. This metric is critical in the restaurant industry as it shows organic growth and customer retention. The strategic openings of new restaurants in diverse geographical locations like Pittsburgh, Flushing, Tampa and Naperville demonstrate Kura Sushi's calculated approach to national expansion, tapping into different markets and demographics.
The company's focus on maintaining excellent operations and rapid growth suggests an aggressive growth strategy that may appeal to investors looking for expansion-driven returns. However, the scalability of Kura Sushi's technology-enabled concept in various markets will be crucial to sustaining growth and profitability. The projected sales guidance for the fiscal year 2024, with total sales anticipated between $239 million and $244 million, reflects management's confidence in continued growth and should be weighed against the potential risks of aggressive expansion.
Analyzing Kura Sushi's financial results from an economic standpoint reveals the impact of macroeconomic factors such as inflation. The company's ability to manage food and beverage costs, despite inflation, indicates effective supply chain management and pricing strategies. However, the increase in occupancy and related expenses, as well as other costs associated with general inflationary pressures, suggest that the broader economic environment is affecting the company's cost structure.
The restaurant industry is often seen as a leading indicator of economic conditions and Kura Sushi's performance could reflect broader consumer spending trends. While the increase in sales and EBITDA is encouraging, the continued operating losses could signal a need for caution if economic conditions worsen. Investors should consider the potential impact of economic downturns on discretionary spending, which could affect restaurant revenues and profitability.
IRVINE, Calif., Jan. 04, 2024 (GLOBE NEWSWIRE) -- Kura Sushi USA, Inc. (“Kura Sushi” or the “Company”) (NASDAQ: KRUS), a technology-enabled Japanese restaurant concept, today announced financial results for the fiscal first quarter ended November 30, 2023.
Fiscal First Quarter 2024 Highlights
- Total sales were
$51.5 million , compared to$39.3 million in the first quarter of 2023; - Comparable restaurant sales increased
3.8% for the first quarter of 2024 as compared to the first quarter of 2023; - Operating loss was
$2.8 million , compared to operating loss of$2.2 million in the first quarter of 2023; - Net loss was
$2.0 million , or$(0.18) per diluted share, compared to net loss of$2.1 million , or$(0.21) per diluted share, in the first quarter of 2023; - Restaurant-level operating profit* was
$10.1 million , or19.5% of sales; - Adjusted EBITDA* was
$1.8 million ; and - Four new restaurants opened during the fiscal first quarter of 2024.
* Restaurant-level operating profit and Adjusted EBITDA are non-GAAP measures and are defined below under “Key Financial Definitions.” Please see the reconciliation of non-GAAP measures accompanying this release. See also “Non-GAAP Financial Measures” below.
Hajime Uba, President and Chief Executive Officer of Kura Sushi, stated, “Fiscal 2024 is off to an exceptionally strong start, with meaningful improvements in restaurant-level operating profit margin and Adjusted EBITDA, as well as six new units opened to date with another seven under construction. Our goals for this fiscal year remain the same as last year: maintain excellent operations, continue to rapidly grow the number of our restaurants, and leverage our G&A against our increasingly large restaurant base. I’m pleased to say that we are already making excellent progress on all three fronts.”
Review of Fiscal First Quarter 2024 Financial Results
Total sales were
Food and beverage costs as a percentage of sales were
Labor and related costs as a percentage of sales remained consistent at
Occupancy and related expenses were
Other costs as a percentage of sales increased to
General and administrative expenses were
Operating loss was
Income tax expense was
Net loss was
Restaurant-level operating profit* was
Adjusted EBITDA* was
Restaurant Development
During the fiscal first quarter of 2024, the Company opened four new restaurants in Pittsburgh, Pennsylvania; Flushing, New York; Tampa, Florida; and Naperville; Illinois.
Subsequent to November 30, 2023, the Company opened two new restaurants in Kansas City, Missouri and Skokie, Illinois.
Fiscal Year 2024 Outlook
For the full fiscal year of 2024, the Company reiterates and updates the following annual guidance:
- Total sales between
$239 million and$244 million ; - General and administrative expenses as a percentage of sales to be approximately
14.5% ; and - 12 to 14 new restaurants, with average net capital expenditures per unit of approximately
$2.5 million .
Conference Call
A conference call and webcast to discuss Kura Sushi’s financial results is scheduled for 5:00 p.m. ET today. Hosting the conference call and webcast will be Hajime “Jimmy” Uba, President and Chief Executive Officer, Jeff Uttz, Chief Financial Officer, and Benjamin Porten, SVP Investor Relations & System Development.
Interested parties may listen to the conference call via telephone by dialing 201-689-8471. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 412-317-6671; the passcode is 13742850. The webcast will be available at www.kurasushi.com under the investor relations section and will be archived on the site shortly after the call has concluded.
ICR Conference Participation
Kura Sushi will host a fireside chat as part of the 26th Annual ICR Conference in Orlando, Florida on January 9, 2024. The Company will also be meeting with institutional investors during the conference. Kura Sushi’s discussion will begin at 9:30 AM ET and will be webcast live from www.kurasushi.com under the investor relations section.
About Kura Sushi USA, Inc.
Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept with 56 locations across 16 states and Washington DC. The Company offers guests a distinctive dining experience built on authentic Japanese cuisine and an engaging revolving sushi service model. Kura Sushi USA, Inc. was established in 2008 as a subsidiary of Kura Sushi, Inc., a Japan-based revolving sushi chain with over 500 restaurants and 40 years of brand history. For more information, please visit www.kurasushi.com.
Key Financial Definitions
EBITDA, a non-GAAP measure, is defined as net income (loss) before interest, income taxes and depreciation and amortization expenses.
Adjusted EBITDA, a non-GAAP measure, is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, as well as certain items, such as litigation accrual that the Company believes are not indicative of its core operating results. Adjusted EBITDA margin is defined as adjusted EBITDA divided by sales.
Restaurant-level Operating Profit (Loss), a non-GAAP measure, is defined as operating income (loss) plus depreciation and amortization expenses; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expenses and are essential to supporting the development and operations of restaurants; non-cash lease expense; and asset disposals, closure costs and restaurant impairments; less corporate-level stock-based compensation expense recognized within general and administrative expenses. Restaurant-level operating profit (loss) margin is defined as restaurant-level operating profit (loss) divided by sales.
Comparable Restaurant Sales Performance refers to the change in year-over-year sales for the comparable restaurant base. The Company includes restaurants in the comparable restaurant base that have been in operation for at least 18 months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening. For restaurants that were temporarily closed for consecutive days, which primarily occur during renovations, the comparative period was also adjusted. Performance in comparable restaurant sales represents the percent change in sales from the same period in the prior year for the comparable restaurant base.
Non-GAAP Financial Measures
To supplement the financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company presents certain financial measures, such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, restaurant-level operating profit (loss) and restaurant-level operating profit (loss) margin (“non-GAAP measures”) that are not recognized under GAAP. These non-GAAP measures are intended as supplemental measures of its performance that are neither required by, nor presented in accordance with, GAAP. The Company is presenting these non-GAAP measures because the Company believes that they provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and operating results. These measures also may not provide a complete understanding of the operating results of the Company as a whole and such measures should be reviewed in conjunction with its GAAP financial results. Additionally, the Company presents restaurant-level operating profit (loss) because it excludes the impact of general and administrative expenses which are not incurred at the restaurant-level. The Company also uses restaurant-level operating profit (loss) to measure operating performance and returns from opening new restaurants.
The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that restaurant-level operating profit (loss) and restaurant-level operating profit (loss) margin are financial measures which are not indicative of overall results for the Company, and restaurant-level operating profit (loss) and restaurant-level operating profit (loss) margin do not accrue directly to the benefit of stockholders because of corporate-level and certain other expenses excluded from such measures. In addition, you should be aware when evaluating these non-GAAP financial measures that in the future the Company may incur expenses similar to those excluded when calculating these measures. The Company’s presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. The Company’s computation of these non-GAAP financial measures may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate these non-GAAP financial measures in the same fashion. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company compensates for these limitations by relying primarily on its GAAP results and using these non-GAAP financial measures on a supplemental basis.
Forward-Looking Statements
Except for historical information contained herein, the statements in this press release or otherwise made by the Company’s management in connection with the subject matter of this press release are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and involve risks and uncertainties and are subject to change based on various important factors. This press release includes forward-looking statements that are based on management’s current estimates or expectations of future events or future results. These statements are not historical in nature and can generally be identified by such words as “target,” “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “continue,” “predict,” “potential,” “plan,” “anticipate” or the negative of these terms, and similar expressions. Management’s expectations and assumptions regarding future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements included in this press release. These risks and uncertainties include but are not limited to: the Company’s ability to successfully maintain increases in our comparable restaurant sales; the Company’s ability to successfully execute our growth strategy and open new restaurants that are profitable; the Company’s ability to expand in existing and new markets; the Company’s projected growth in the number of its restaurants; macroeconomic conditions and other economic factors, including rising interest rates, the possibility of a recession and instability in financial markets; the Company’s ability to compete with many other restaurants; the Company’s reliance on vendors, suppliers and distributors, including its majority stockholder Kura Sushi, Inc.; changes in food and supply costs, including the impact of inflation and tariffs; concerns regarding food safety and foodborne illness; changes in consumer preferences and the level of acceptance of the Company’s restaurant concept in new markets; minimum wage increases and mandated employee benefits that could cause a significant increase in labor costs, as well as the impact of labor availability; the failure of the Company’s automated equipment or information technology systems or the breach of its network security; the loss of key members of the Company’s management team; the impact of governmental laws and regulations; volatility in the price of the Company’s common stock; and other risks and uncertainties as described in the Company’s filings with the Securities and Exchange Commission (“SEC”). These and other factors that could cause results to differ materially from those described in the forward-looking statements contained in this press release can be found in the Company’s other filings with the SEC. Undue reliance should not be placed on forward-looking statements, which are only current as of the date they are made. The Company assumes no obligation to update or revise its forward-looking statements, except as may be required by applicable law.
Investor Relations Contact:
Jeff Priester or Steven Boediarto
(657) 333-4010
investor@kurausa.com
| Kura Sushi USA, Inc. Statements of Operations and Comprehensive Loss (in thousands, except per share amounts; unaudited) | ||||||||
| Three months ended November 30, | ||||||||
| 2023 | 2022 | |||||||
| Sales | $ | 51,475 | $ | 39,318 | ||||
| Restaurant operating costs: | ||||||||
| Food and beverage costs | 15,365 | 12,430 | ||||||
| Labor and related costs | 16,263 | 12,535 | ||||||
| Occupancy and related expenses | 3,908 | 2,885 | ||||||
| Depreciation and amortization expenses | 2,476 | 1,576 | ||||||
| Other costs | 7,591 | 5,321 | ||||||
| Total restaurant operating costs | 45,603 | 34,747 | ||||||
| General and administrative expenses | 8,609 | 6,642 | ||||||
| Depreciation and amortization expenses | 104 | 85 | ||||||
| Total operating expenses | 54,316 | 41,474 | ||||||
| Operating loss | (2,841 | ) | (2,156 | ) | ||||
| Other expense (income): | ||||||||
| Interest expense | 8 | 16 | ||||||
| Interest income | (840 | ) | (94 | ) | ||||
| Loss before income taxes | (2,009 | ) | (2,078 | ) | ||||
| Income tax expense | 38 | 10 | ||||||
| Net loss | $ | (2,047 | ) | $ | (2,088 | ) | ||
| Net loss per Class A and Class B shares | ||||||||
| Basic | $ | (0.18 | ) | $ | (0.21 | ) | ||
| Diluted | $ | (0.18 | ) | $ | (0.21 | ) | ||
| Weighted average Class A and Class B shares outstanding | ||||||||
| Basic | 11,150 | 9,789 | ||||||
| Diluted | 11,150 | 9,789 | ||||||
| Other comprehensive income (loss): | ||||||||
| Unrealized gain on short-term investments | $ | 3 | — | |||||
| Comprehensive loss | $ | (2,044 | ) | $ | (2,088 | ) | ||
| Kura Sushi USA, Inc. Selected Balance Sheet Data and Selected Operating Data (in thousands, except restaurants and percentages; unaudited) | ||||||||
| November 30, 2023 | August 31, 2023 | |||||||
| Selected Balance Sheet Data: | ||||||||
| Cash and cash equivalents | $ | 64,161 | $ | 69,697 | ||||
| Total assets | $ | 309,297 | $ | 304,659 | ||||
| Total liabilities | $ | 145,556 | $ | 140,018 | ||||
| Total stockholders’ equity | $ | 163,741 | $ | 164,641 | ||||
| Three months ended November 30, | ||||||||
| 2023 | 2022 | |||||||
| Selected Operating Data: | ||||||||
| Restaurants at the end of period | 54 | 42 | ||||||
| Comparable restaurant sales performance | 3.8 | % | 6.9 | % | ||||
| EBITDA | $ | (261 | ) | $ | (495 | ) | ||
| Adjusted EBITDA | $ | 1,767 | $ | 637 | ||||
| Adjusted EBITDA margin | 3.4 | % | 1.6 | % | ||||
| Operating loss | $ | (2,841 | ) | $ | (2,156 | ) | ||
| Operating loss margin | (5.5 | )% | (5.5 | )% | ||||
| Restaurant-level operating profit | $ | 10,061 | $ | 7,160 | ||||
| Restaurant-level operating profit margin | 19.5 | % | 18.2 | % | ||||
| Kura Sushi USA, Inc. Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands; unaudited) | ||||||||
| Three months ended November 30, | ||||||||
| 2023 | 2022 | |||||||
| Net loss | $ | (2,047 | ) | $ | (2,088 | ) | ||
| Interest income, net | (832 | ) | (78 | ) | ||||
| Income tax expense | 38 | 10 | ||||||
| Depreciation and amortization expenses | 2,580 | 1,661 | ||||||
| EBITDA | (261 | ) | (495 | ) | ||||
| Stock-based compensation expense(1) | 1,006 | 650 | ||||||
| Non-cash lease expense(2) | 817 | 482 | ||||||
| Litigation accrual(3) | 205 | — | ||||||
| Adjusted EBITDA | $ | 1,767 | $ | 637 | ||||
| Kura Sushi USA, Inc. Reconciliation of Operating Loss to Restaurant-level Operating Profit (in thousands; unaudited) | ||||||||
| Three months ended November 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating loss | $ | (2,841 | ) | $ | (2,156 | ) | ||
| Depreciation and amortization expenses | 2,580 | 1,661 | ||||||
| Stock-based compensation expense(1) | 1,006 | 650 | ||||||
| Pre-opening costs(4) | 749 | 437 | ||||||
| Non-cash lease expense(2) | 817 | 482 | ||||||
| General and administrative expenses | 8,609 | 6,642 | ||||||
| Corporate-level stock-based compensation included in general and administrative expenses | (859 | ) | (556 | ) | ||||
| Restaurant-level operating profit | $ | 10,061 | $ | 7,160 | ||||
__________________
| (1) | Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs and corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss). | |
| (2) | Non-cash lease expense includes lease expense from the date of possession of restaurants that did not require cash outlay in the respective periods. | |
| (3) | Litigation accrual includes an accrual related to a litigation claim. | |
| (4) | Pre-opening costs consist of labor costs and travel expenses for new employees and trainers during the training period, recruitment fees, legal fees, cash-based lease expenses incurred between the date of possession and opening day of restaurants, and other related pre-opening costs. |
FAQ
What are the financial results for Kura Sushi USA, Inc. for the fiscal first quarter ended November 30, 2023?
How many new restaurants did Kura Sushi USA, Inc. open during the fiscal first quarter of 2024?
What is the fiscal year 2024 outlook for Kura Sushi USA, Inc.?
When is the 26th Annual ICR Conference, and what will Kura Sushi USA, Inc. be doing?
