Kura Sushi USA Announces Fiscal Second Quarter 2024 Financial Results
- Total sales for the fiscal second quarter of 2024 were $57.3 million, compared to $43.9 million in the same period of 2023.
- Comparable restaurant sales increased by 3.0% in the second quarter of 2024.
- Operating loss for the quarter was $1.7 million, up from $1.0 million in the second quarter of 2023.
- Net loss was $1.0 million, or $(0.09) per diluted share, compared to $1.0 million, or $(0.10) per diluted share, in the second quarter of 2023.
- Five new restaurants opened during the fiscal second quarter of 2024.
- The company's President and CEO, Hajime Uba, expressed confidence in the business's performance and highlighted the growth in Adjusted EBITDA by 23%.
- Total sales for the quarter were driven by menu price increases and supply chain initiatives.
- Labor costs increased due to wage rate hikes and pre-opening labor expenses.
- General and administrative expenses rose to $8.2 million, primarily due to compensation-related costs and professional fees.
- The company reiterates its guidance for the full fiscal year of 2024, expecting total sales between $243 million and $246 million.
- The company opened five new restaurants in various locations during the fiscal second quarter of 2024.
- A conference call and webcast to discuss the financial results are scheduled for today.
- Operating loss increased from $1.0 million in the second quarter of 2023 to $1.7 million in the second quarter of 2024.
- Net loss remained the same at $1.0 million compared to the second quarter of 2023.
- General and administrative expenses increased to $8.2 million from $7.1 million in the second quarter of 2023.
- Labor and related costs as a percentage of sales increased to 32.8% from 31.5% in the second quarter of 2023.
Insights
The reported increase in total sales from $43.9 million to $57.3 million signifies a solid growth trajectory for Kura Sushi, which is particularly notable in the competitive restaurant industry. The 3.0% rise in comparable restaurant sales is a positive indicator of brand strength and customer loyalty, suggesting that the company's offerings continue to resonate with its target market despite any economic fluctuations. However, the operating loss widening from $1.0 million to $1.7 million raises concerns about cost management and scalability, especially considering the increase in labor and related costs.
From a market perspective, the expansion strategy with five new restaurants opened in the quarter and more in the pipeline is an aggressive move that could capture more market share and drive future sales. This is underscored by the updated sales guidance, which reflects management's confidence in sustained growth. However, investors may scrutinize the capital expenditures per new unit and the potential impact on return on investment, especially given the current operating losses.
While Kura Sushi's sales growth is commendable, the consistent net loss reported both this quarter and the same quarter last year may be a red flag for investors focused on profitability. The slight improvement in net loss per diluted share from $(0.10) to $(0.09) may not be viewed as significant progress towards profitability. Additionally, the increase in general and administrative expenses, despite a decrease as a percentage of sales, suggests that while the company is scaling, it is also accumulating higher overhead costs.
The reported growth in Adjusted EBITDA by 23% is a positive sign of underlying operational efficiency and could be a point of interest for investors looking for growth potential. It is important to note that non-GAAP measures like Adjusted EBITDA and restaurant-level operating profit should be considered alongside GAAP results to understand the full financial picture.
The decrease in food and beverage costs as a percentage of sales from 30.1% to 29.6% is indicative of effective supply chain initiatives and pricing strategies. In an industry where margins are often thin, such improvements can be pivotal for operational success. The focus on supply chain optimization is particularly relevant in the current economic climate, where many businesses face supply chain disruptions and increased costs.
However, the reported increase in other costs, including advertising, repairs, maintenance and travel expenses, suggests that Kura Sushi is investing in market penetration and brand visibility. While these costs are necessary for expansion, they must be carefully managed to ensure they do not erode the gains made through supply chain efficiencies.
IRVINE, Calif., April 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 second quarter ended February 29, 2024.
Fiscal Second Quarter 2024 Highlights
- Total sales were
$57.3 million , compared to$43.9 million in the second quarter of 2023; - Comparable restaurant sales increased
3.0% for the second quarter of 2024 as compared to the second quarter of 2023; - Operating loss was
$1.7 million , compared to operating loss of$1.0 million in the second quarter of 2023; - Net loss was
$1.0 million , or$(0.09) per diluted share, compared to net loss of$1.0 million , or$(0.10) per diluted share, in the second quarter of 2023; - Restaurant-level operating profit* was
$11.2 million , or19.6% of sales; - Adjusted EBITDA* was
$2.9 million ; and - Five new restaurants opened during the fiscal second 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, “I‘m very pleased to report the ongoing strength of our business as we progress through a record fiscal year. It was unprecedented for us when we announced a guidance raise so early in the year with our first quarter call, and being able to follow the next quarter with another guidance raise demonstrates our incredible confidence in the business. We’ve opened 10 restaurants to date, putting us well on track for our new unit guidance and giving us the confidence to upgrade our revenue guidance. For our second quarter, we leveraged G&A year-over-year as a percentage of sales by 190 basis points, and grew Adjusted EBITDA by
Review of Fiscal Second 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 were
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 second quarter of 2024, the Company opened five new restaurants in Kansas City, Missouri; Skokie, Illinois; Columbus, Ohio; Euless, Texas; and Webster, Texas.
Subsequent to February 29, 2024, the Company opened one new restaurant in Orlando, Florida.
Fiscal Year 2024 Outlook
For the full fiscal year of 2024, the Company reiterates and updates the following annual guidance:
- Total sales between
$243 million and$246 million ; - 13 to 14 new restaurants, with average net capital expenditures per unit of approximately
$2.5 million ; and - General and administrative expenses as a percentage of sales to be between
14.0% and14.5% .
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 13745178. 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.
About Kura Sushi USA, Inc.
Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept with 60 locations across 17 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 550 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; 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 | Six months ended | |||||||||||||||
| February 29, 2024 | February 28, 2023 | February 29, 2024 | February 28, 2023 | |||||||||||||
| Sales | $ | 57,291 | $ | 43,944 | $ | 108,766 | $ | 83,262 | ||||||||
| Restaurant operating costs: | ||||||||||||||||
| Food and beverage costs | 16,935 | 13,240 | 32,300 | 25,670 | ||||||||||||
| Labor and related costs | 18,768 | 13,854 | 35,031 | 26,389 | ||||||||||||
| Occupancy and related expenses | 3,953 | 3,065 | 7,861 | 5,950 | ||||||||||||
| Depreciation and amortization expenses | 2,694 | 1,758 | 5,170 | 3,334 | ||||||||||||
| Other costs | 8,356 | 5,866 | 15,947 | 11,187 | ||||||||||||
| Total restaurant operating costs | 50,706 | 37,783 | 96,309 | 72,530 | ||||||||||||
| General and administrative expenses | 8,168 | 7,122 | 16,777 | 13,764 | ||||||||||||
| Depreciation and amortization expenses | 107 | 88 | 211 | 173 | ||||||||||||
| Total operating expenses | 58,981 | 44,993 | 113,297 | 86,467 | ||||||||||||
| Operating loss | (1,690 | ) | (1,049 | ) | (4,531 | ) | (3,205 | ) | ||||||||
| Other expense (income): | ||||||||||||||||
| Interest expense | 12 | 14 | 20 | 30 | ||||||||||||
| Interest income | (754 | ) | (63 | ) | (1,594 | ) | (157 | ) | ||||||||
| Loss before income taxes | (948 | ) | (1,000 | ) | (2,957 | ) | (3,078 | ) | ||||||||
| Income tax expense | 50 | 15 | 88 | 25 | ||||||||||||
| Net loss | $ | (998 | ) | $ | (1,015 | ) | $ | (3,045 | ) | $ | (3,103 | ) | ||||
| Net loss per Class A and Class B shares | ||||||||||||||||
| Basic | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.32 | ) | ||||
| Diluted | $ | (0.09 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.32 | ) | ||||
| Weighted average Class A and Class B shares outstanding | ||||||||||||||||
| Basic | 11,179 | 9,801 | 11,162 | 9,795 | ||||||||||||
| Diluted | 11,179 | 9,801 | 11,162 | 9,795 | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized gain on short-term investments | $ | 30 | — | $ | 33 | — | ||||||||||
| Comprehensive loss | $ | (968 | ) | $ | (1,015 | ) | $ | (3,012 | ) | $ | (3,103 | ) | ||||
| Kura Sushi USA, Inc. Selected Balance Sheet Data and Selected Operating Data (in thousands, except restaurants and percentages; unaudited) | ||||||||
| February 29, 2024 | August 31, 2023 | |||||||
| Selected Balance Sheet Data: | ||||||||
| Cash and cash equivalents | $ | 56,768 | $ | 69,697 | ||||
| Total assets | $ | 315,529 | $ | 304,659 | ||||
| Total liabilities | $ | 150,249 | $ | 140,018 | ||||
| Total stockholders’ equity | $ | 165,280 | $ | 164,641 | ||||
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2024 | February 28, 2023 | February 29, 2024 | February 28, 2023 | |||||||||||||
| Selected Operating Data: | ||||||||||||||||
| Restaurants at the end of period | 59 | 45 | 59 | 45 | ||||||||||||
| Comparable restaurant sales performance | 3.0 | % | 17.4 | % | 3.5 | % | 11.8 | % | ||||||||
| EBITDA | $ | 1,111 | $ | 797 | $ | 850 | $ | 302 | ||||||||
| Adjusted EBITDA | $ | 2,850 | $ | 2,310 | $ | 4,617 | $ | 2,947 | ||||||||
| Adjusted EBITDA margin | 5.0 | % | 5.3 | % | 4.2 | % | 3.5 | % | ||||||||
| Operating loss | $ | (1,690 | ) | $ | (1,049 | ) | $ | (4,531 | ) | $ | (3,205 | ) | ||||
| Operating loss margin | (2.9 | )% | (2.4 | )% | (4.2 | )% | (3.8 | )% | ||||||||
| Restaurant-level operating profit | $ | 11,209 | $ | 8,928 | $ | 21,270 | $ | 16,088 | ||||||||
| Restaurant-level operating profit margin | 19.6 | % | 20.3 | % | 19.6 | % | 19.3 | % | ||||||||
| Kura Sushi USA, Inc. Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands; unaudited) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2024 | February 28, 2023 | February 29, 2024 | February 28, 2023 | |||||||||||||
| Net loss | $ | (998 | ) | $ | (1,015 | ) | $ | (3,045 | ) | $ | (3,103 | ) | ||||
| Interest income, net | (742 | ) | (49 | ) | (1,574 | ) | (127 | ) | ||||||||
| Income tax expense | 50 | 15 | 88 | 25 | ||||||||||||
| Depreciation and amortization expenses | 2,801 | 1,846 | 5,381 | 3,507 | ||||||||||||
| EBITDA | 1,111 | 797 | 850 | 302 | ||||||||||||
| Stock-based compensation expense(1) | 966 | 945 | 1,972 | 1,595 | ||||||||||||
| Non-cash lease expense(2) | 773 | 568 | 1,590 | 1,050 | ||||||||||||
| Litigation accrual(3) | — | — | 205 | — | ||||||||||||
| Adjusted EBITDA | $ | 2,850 | $ | 2,310 | $ | 4,617 | $ | 2,947 | ||||||||
| Kura Sushi USA, Inc. Reconciliation of Operating Loss to Restaurant-level Operating Profit (in thousands; unaudited) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2024 | February 28, 2023 | February 29, 2024 | February 28, 2023 | |||||||||||||
| Operating loss | $ | (1,690 | ) | $ | (1,049 | ) | $ | (4,531 | ) | $ | (3,205 | ) | ||||
| Depreciation and amortization expenses | 2,801 | 1,846 | 5,381 | 3,507 | ||||||||||||
| Stock-based compensation expense(1) | 966 | 945 | 1,972 | 1,595 | ||||||||||||
| Pre-opening costs(4) | 1,001 | 316 | 1,750 | 753 | ||||||||||||
| Non-cash lease expense(2) | 773 | 568 | 1,590 | 1,050 | ||||||||||||
| General and administrative expenses | 8,168 | 7,122 | 16,777 | 13,764 | ||||||||||||
| Corporate-level stock-based compensation included in general and administrative expenses | (810 | ) | (820 | ) | (1,669 | ) | (1,376 | ) | ||||||||
| Restaurant-level operating profit | $ | 11,209 | $ | 8,928 | $ | 21,270 | $ | 16,088 | ||||||||
___________________
| (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 were Kura Sushi's total sales for the fiscal second quarter of 2024?
How many new restaurants did Kura Sushi open during the fiscal second quarter of 2024?
What was the operating loss for Kura Sushi in the second quarter of 2024?
What is Kura Sushi's outlook for the full fiscal year of 2024?
Who will be hosting the conference call to discuss Kura Sushi's financial results?
