Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Lines will open for your questions following the presentation. Please note that this call is being recorded. On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer; Jeff Uttz, Chief Financial Officer; and Benjamin Porten, Senior Vice President of Investor Relations and System Development. And now I’d like to turn the call over to Mr. Porten. Thank you, operator. Afternoon, everyone, and thank you all for joining.

Benjamin Porten: By now, everyone should have access to our fiscal first quarter 2026 earnings release. It can be found at www.kurasushi.com in the Investor Relations section. A copy of the earnings release has also been included in the 8-Ks we submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance. And therefore, you should not put undue reliance on them.

Benjamin Porten: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Also during today’s call, we will discuss certain non-GAAP financial measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP. And the reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I’d like to turn the call over to Jimmy.

Hajime Jimmy Uba: Thanks, Ben. And happy New Year to everyone for joining us on the call today. We are making good progress towards the goals we laid out in our annual guidance and towards achieving predictive comparable sales on a full-year basis. Regarding our goal of 16 new restaurant openings, we have 10 units under construction on top of the four restaurants open to date. Our commitment to aggressive cost management has reduced G&A as a percentage of sales by 80 basis points on an adjusted basis. We are also able to deliver labor as a percentage of sales, renewing our confidence in our ability to improve labor cost by 100 basis points in fiscal 2026. The first quarter has created a strong foundation for us to build on as we enter the easier comparisons of Q2 and Q3.

Total sales for the fiscal first quarter were $73.5 million, representing comparable sales growth of negative 2.5%, outperforming the complex expectations we have shared during our last earnings call. We were very pleased to see the sequential improvement at the end of the quarter and before this momentum, to have continued past November. Most of it as a percentage of sales were 29.9% as compared to the prior year quarter’s 29%. As a reminder, we took 3.5% price on November 1, did not see the proof of benefit. So Q1, also, as we have previously discussed, we expect full-year COGS to be around 30% after considering the impact of tariffs and achieving the full benefit of our mini price adjustment. Labor as a percentage of sales was 32.5% compared to the prior year period of 32.9% due to a number of initiatives relating to operating cost.

Shifting to real estate, we opened four restaurants in the first quarter: Arcadia and Modesto in California, and Freeport and Lawrenceville in New Jersey. We currently have 10 restaurants under construction, including one in Tulsa and one in Charlotte, both of which are new markets for us. And we have mentioned in the last call as far as call, fiscal 2025 was the strongest across in this end of memory. And the restaurants we’ve opened to date are continuing to test it. We expect to open one more unit in the fiscal second quarter and for the remainder to open in the back half of the year. Turning to marketing, we are currently engaged in our campaign with Curvy, coinciding with the relief of Kabi Airlighters for stage two. As part of our efforts to maximize the impact of each collaboration, we have introduced I IP themed with the press stones and touch panels, which have been well received by our guests.

As we mentioned in our last one of call, research is ongoing for the introduction of rewards program status tiers. We also began advertising our reservation system for the first time during the holidays. In preparation for the reservation systems marketing campaign, we have also decoupled the reservation system from our revert program with the hopes of encouraging production while removing the user friction created by a required work to download and allowing guests to place reservations directly through the cooler website or our Google Maps pages. In other system development news, the manufacturing of our robotic dishwashers is proceeding on schedule, and we continue to expect it to begin installation in Q3 and to have the majority of the 50 eligible existing restaurants better fitted by the end of the fiscal year.

To conclude, we are pleased with the progress we made towards our towards the goals we shared with our annual guidance. We believe we are on the right path to achieving positive comp sales for the year. I would like to express my thanks to everyone of our team members at our restaurants and support center for their partnership in achieving these goals. This now I’ll hand it over to you to discuss our financial results and liquidity. Thanks, Jimmy.

Jeff Uttz: For the first quarter, total sales were $73.5 million as compared to $64.5 million in the prior year period. Comparable restaurant sales performance compared to the prior year period was negative 2% negative traffic of 2.5% and flat price and mix. Comparable sales in our West Coast market were negative 2.8% and comparable sales in our Southwest market were negative 2.7%. Effective pricing for the quarter was 3.5%. On November 1, we took a 3.5% menu price increase, and after lapping prior year increases, our effective price for the second quarter will be 4.5%. As a reminder, beginning in 2027, we will no longer provide regional breakdowns for comparable sales. As regional comps are largely determined by the timing of infills and we do not believe that they are indicative of overall company trends.

Turning to costs. Food and beverage costs as a percentage of sales were 29.9%, compared to 29% in the prior year quarter due to tariffs on imported ingredients. Labor and related costs as a percentage of sales were 32.5% as compared to 32.9% in the prior year quarter, due to pricing and initiatives related to operations offset by sales deleverage and labor inflation. Occupancy and related expenses as a percentage of sales 7.9% compared to the prior year quarter’s 7.4%. Due to sales deleverage. Depreciation and amortization expenses as a percentage of sales were 5.4% as compared to the prior year quarter’s 4.8% due to sales deleverage and remodel costs. Other costs as a percentage of sales were 16.1% as compared to the prior year quarter’s 14.5%, due to sales deleverage and higher marketing costs.

This line is also impacted by tariffs, as some of the expenses in this category come from overseas purchases. General and administrative expenses as a percentage of sales were 13%, which includes 30 basis points in litigation accruals. As compared to 13.5% in the prior year quarter. Operating loss was $3.7 million compared to an operating loss of $1.5 million in the prior year quarter largely due to tariff pressures on our food and beverage costs. And other cost line items. Income tax expense was $36,000 as compared to $39,000 in the prior year quarter. Net loss was $3.1 million or negative $0.25 per share compared to a net loss of $1 million or negative $0.08 per share in the prior year quarter. Adjusted net loss, which excludes the litigation accrual, was $2.8 million or negative $0.23 per share as compared to an adjusted net loss of $1 million or negative $0.08 per share in the prior year quarter.

Restaurant level operating profit as a percentage of sales was 15.1% compared to 18.2% in the prior year quarter. Adjusted EBITDA was $2.4 million as compared to $3.6 million in the prior year. And at the end of the fiscal first quarter, we had $78.5 million of cash cash equivalents and investments, and no debt. And lastly, I’d like to reiterate our following guidance for fiscal year 2026. We expect total sales to be between $330 million and $334 million. We expect to open 16 new units maintaining an annual unit growth rate above 20% with average net capital expenditures per unit continuing approximate $2.5 million. We expect G&A expenses as a percentage of sales to be between 12-12.5% and we expect full year restaurant level operating profit margins to be approximately 18%.

With that, I will turn things back over to Jimmy.

Hajime Jimmy Uba: Thanks, Jeff. This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English. Thank you.

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Operator: And we will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. Confirmation tone will indicate that your line is in the question queue. You may press 2 if you’d like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Sharon Zackfia: Hi. Thanks for taking the question. Happy New Year. I wanted to talk about the decision to decouple the reservation system from loyalty. Can you talk about kind of what led to that decision? Were you not seeing loyalty members kind of react as you had hoped? And then as you started to market it, what is the early read then potentially bolstering those shoulder periods, which is what I think kinda was the hope for scenario with the reservation system.

Benjamin Porten: Yeah. Hi, Sharon. This is Ben. Hi. So in terms of reward member uptake on the reservation system, we’re actually extremely pleased. More than half of visits by rewards members are being done through the reservation system. And so uptake is frankly better than expected, and so that’s been very encouraging. We really just wanted to open it up to a bigger audience. It’s a big ask to have somebody install an app just for one function. And so we felt let them, you know, experience how useful it is, and then maybe they’ll we’ll be able to convert them into rewards members after the fact as, you know, obviously, we want as many people to join the rewards program as possible as they tend to visit more and spend more per visit.

And so that’s been very encouraging. We started marketing, reservation system more post decoupling in the last week of December. And so they’re really there’s pretty limited data in terms of you know, what we’ve seen in that that one week of advertising. But what is really encouraging is that for the people that have tried it, they they basically use it forever. And so I I think it’s just a matter of awareness, and there remains upside to be unlocked for the reservation system.

Sharon Zackfia: Thanks for that. And then it sounded like trends ended more strongly as you went throughout the the quarter, and it sounds like that continued through December. And I know you reiterated I think, plans for slightly positive comps for the year. Jeff, just given comparisons do get so easy here in the February quarter, do you expect comps to be positive as well? In the February quarter?

Hajime Jimmy Uba: Sure. Thank you for your question, Sharon. Please answer your question in Japanese. Then you’re gonna transfer it.

Benjamin Porten: Sure. So in terms of our expectations regarding Q2 comps, we absolutely expect positive comps. In the November call, we mentioned our mid negative mid single digit expectations for Q1 comps. They came in at negative 2.5%, which you know, obviously indicates that November ended up being a very strong month. One particular item that’s been of exceptional incursion for us is that following the November we took pricing on November 1, but November traffic and price mix improved. Over the prior month. And that trend is also continued into Q2. And so standing where we are today, you know, a month and change into the quarter, we we feel very good about Q2 comps.

Sharon Zackfia: Okay. Great. Good to hear. Thank you.

Hajime Jimmy Uba: Thanks, Erna. Thank you.

Operator: And our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.

Jeremy Hamblin: Thanks for taking the questions. And I wanted to hit on a couple of the the, kind of cost line items here. You know? So first question regarding food costs is you know, we don’t know what’s gonna happen with with tariffs. Clearly, it’s been a significant headwind. I think Jeff, you’d called out maybe about 200 basis points for FY ’26. But if there were a change as as we started to see some relief on on tariffs impacting food costs, how how long would it take for that to flow into your financials? Would it be, you know, sixty days, ninety days? If that change were to happen? And then also wanted to just ask about other operating expense category, which I think includes utilities, repairs and maintenance, insurance, credit card fees, etcetera.

Know, just to get a sense for you know, let’s say, the expected impact that you might have on that category with, let’s say, a positive two and a half comp versus a down two and a half comp that you had in in Q1? What type of, you know, leverage, deleverage would you see under that hypothetical?

Jeff Uttz: Yeah. Hey, Jeremy. I’ll answer the question on food costs, then I’ll turn it over to Jimmy to give some color on the other cost line item. But as it relates to food costs, we mentioned in the past, generally, we we we buy four to six months’ worth of product. So it it it’ll take a little bit of time to get through the product that we have on hand in order to see, you know, a benefit and a reduction in tariffs. That being said, where food cost is ending up for the year in our 30% estimate I’m quite pleased with that number. When we first started looking at this, it could have been a 300 know, somewhere between 304100% impact But because of the great negotiations that were done with suppliers as well as negotiating just the prices of things, you know, tariffs aside, I’m very pleased with that 30% number.

If if the tariffs are reduced or do go away, that that number could get back into the twenty eighth again where it was. And, that’s really the only headwind that we’ve really seen as far as COGS is uncontrollable, inputs such as tariffs. So we’re optimistic. We’ll see what happens over the next few months as it relates to to tariffs. But ending up at a 30% number is still something that we a company, are pretty proud of. Given the headwinds of the tariffs. Pose to us.

Hajime Jimmy Uba: And, David, I’ll this is Jimmy. I’ll answer your question about other coastline, but please allow me to speak in Japanese.

Benjamin Porten: In terms of the, the other cost line item, the the biggest impact unfortunately, for other costs as well was tariffs. Most of our promotional materials come from China, so our bicker upon toys, our giveaway items, those come from China, and they’ve been experiencing pretty heavy tariffs And so that’s been a a meaningful pressure on the other cost line item. And, Jeremy, as as you mentioned, the sales deleverage that we had, while the comps came in better than expected, they were still negative. And so we saw, you know, sales deleverage on fixed and semi fixed costs. Utilities were up just on an absolute basis. We’ve seen that broadly across our restaurant base. And then lastly, the pricing that we took we took in November, and so we did not receive that benefit in, September, October.

And in in terms of this is the upper end. Please. Okay. That being said, with the pricing that we took in November or in spite of the pricing that we took on November 1, we saw traffic improve in November and December. We also saw price mix improve in November and December. And we expect to, you know, for that to flow through and give us better leverage on our other costs. Which we’re actually, we’re already starting to see. So that’s that’s really encouraging for where we’ll land at the end of the quarter.

Jeremy Hamblin: Got it. Thanks for taking the questions, and good luck.

Hajime Jimmy Uba: Thanks, Sherman. Thank you.

Operator: And our next question comes from the line of Andrew Charles with TD Cowen. Please proceed with your question.

Andrew Charles: Great. Thank you, guys. Jeff, wanna check with the shelf registration that you guys saw last week. You know, what are you monitoring for as you think about when you would potentially tap into it?

Jeff Uttz: Yeah. I haven’t really given a timeline on that. You know? When we did the capital raise a year ago, Andrew, and November 2024, you know, my thought was, you know, potentially, that could be the last one. Right now, where we’re looking at where, you restaurant level margins at 18% versus 20%. For good corporate housekeeping and and to be ready when the time comes, if it does. Wanted to have that shelf registration statement out there. And be ready. But we still have $75 million of cash and investments on our balance sheet. So we’re we’re pretty liquid pretty strong on that side. But it’s just it’s it’s just something I wanted to have out there in case the time comes. Certainly, you know, wanna keep an eye on where the share price is. And if the share price becomes attractive and there was a reason we wanted to go on to capital. It’s just it’s just being ready.

Andrew Charles: Okay. That that’s helpful context. Thanks. And then within the reiterated 18% rational margins, hear you on the 30% COGS target. Here you’re on about 32% labor. But I’m just curious, does the margin target embed any additional price in 2026? I’m just trying to better understand the opportunities to improve the other operating costs. Amid the tariffs.

Benjamin Porten: Mhmm. Relating to the, the 18% annual guidance that we, provided in the November call, that already contemplated the 15% restaurant level operating profit margin. We had for Q1. And so there’s you know, we’re we’re fully on tracking relative to our own expectations. In terms of the pricing, we we feel that our our our as it stands today, we have no further expectations to take price in fiscal twenty six. We think pricing that we took on November is adequate. The flow through that we’re seeing is actually better than expected, and so that’s that’s really encouraging there. And, yeah, between those two things, we we we remain extremely confident about that 18% full year target. And on another note, following the November pricing, we’re actually we’re already seeing leverage on our labor cost line earlier than expected.

It’s it’s really encouraging, making it making us that much more confident in terms of hitting that 100 basis point labor leverage number and, opening up the possibility for know, maybe even better than a 100 basis points.

Andrew Charles: Very good. Thank you, guys.

Benjamin Porten: Thank you, Andrew. Thank you, Andrew.

Operator: Our next question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Jeffrey Bernstein: Great. Thank you very much. First question is just on the comp trends. You talked about the improvement to close the quarter. And seemingly sustaining into the second quarter and very confident in that positive. For the second quarter. I’m just trying to unpack how much you think is due to your own company specific efforts versus the macro. I know there’s lots of investor optimism around near term benefits from lapping inclement weather and lapping the tariff headwinds. Maybe benefits from tax refunds and stimulus. So just trying to get your sense for how much you attribute to your own internal initiatives versus maybe your confidence of the broader industry that’ll accelerate from here with those factors or you don’t believe that to be the case, perhaps why not? And then I had one follow-up.

Benjamin Porten: Sure. To Q1, we outperformed the industry on a number of metrics. Which were very encouraged by. That that was really par for the course for us historically. It hasn’t been the case necessarily for the last year. And so to return to that position, has been very encouraging. We think the promotions that we had in November played a big part and really to Timmy’s earlier comment about the biggest element of in terms of November, that was that was the pricing flow through and the traffic growth that we saw post price. And so to your commentary about macro, I mean, it it’s still just a couple months, but that we interpret as an improvement in the consumer. So that that’s very encouraging there. In terms of other company specific you know, comps, that comp benefit starts in December. And so November would not have benefited from that. And so and, when we were speaking about the industry comparisons, I I I meant to say November onwards. Not Q1.

Jeffrey Bernstein: Gotcha. And just to clarify, I know you often talk about a two year stack. And if you held that first quarter trend, it would imply maybe a positive four or 5% in the second quarter. As your compares ease by, I think, 700 basis points. So I’m just trying to clarify think you said you assume modest positive comp for the full year. Just trying to clarify that. And did your trend in November and December improve on a one year or a two year stack basis? Just trying to get the sense for underlying momentum versus just comparisons.

Benjamin Porten: Yeah. So to you, I didn’t know. Go ahead then. Oh, please. Please. Without providing, you know, commentary on comp performance to date, we remain very, very confident about our ability to hit flat to slightly positive comps The momentum as we exited the quarter is very encouraging. And to Jimmy’s repeated comments, that that momentum is continued. And so we we feel very good about achieving that flat to positive comp for the full year.

Jeffrey Bernstein: Understood. Then just to clarify, I I think you said we know you opened four units in the first quarter and you have 10 more under construction. I’m guessing it’s not surprising to you or maybe you turn these units around faster, but you’re talking about 16 for the full year. Which seeming seems that you already have 14 with good visibility. Just how much lead time is needed in terms of construction that you’re confident in that 16 plus relative to the 14 you have visibility on today?

Benjamin Porten: Contracts on timeline open to the. I looking at the fiscal twenty six pipeline, we think that the 16 unit target as the upper bound We we continue to think that’s the appropriate target. We don’t expect that to change. There might be a little bit of benefit in terms of faster lead times, but that’s not really something that we expect. It should pretty much be business as usual. So we opened four in Q1. We expect to open one in Q2. And the remainder are in the back half.

Jeffrey Bernstein: Thank you very much.

Benjamin Porten: Yeah. And so so for those 10 units, a lot of them just broke ground. And so yeah. You could keep that in mind for modeling purposes. That’d great.

Jeffrey Bernstein: Presumably, you have two more to get you to that 16 that maybe haven’t broke ground yet, but you have a good line of sight too.

Benjamin Porten: Yes. Yes. Thank you. Thank you. Thank you.

Operator: And our next question comes from the line of Jon Tower with Citi. Please proceed with your question.

Jon Tower: Great. Thanks for taking the question. Maybe just circling back to a comment that, Jimmy, you had just made or maybe Ben, it was you, in response to the question. You had mentioned that the promos that you’d done in November had played a decent part in terms of getting some traffic back into stores and lifting sales. Can you dig into that a little bit Like, what exactly did you do during that window? Is it something that you feel like you can repeat in the future? And and know, have how can you is it something that was just one off and you don’t expect to bring to future windows?

Benjamin Porten: Sure. Hi. John. So as as it relates to November, we had our second one piece giveaway. And that outperformed our expectations a little bit. We had a a a gift card promotion. We typically have whatever year is we get closer to the holidays. But, really, the the biggest factor for the November outperformance was our LTO or curve reserve. This month or for for for November, the sort of theme item was sakura bacon. And we we weren’t sure how big of a hit bacon sushi would be, but in retrospect, in hindsight, of course, bacon sushi is gonna be a slam dunk. And so that that really was was a big hit for us. In terms of whether or not it’s replicable, we’re not we we don’t have plans to you know, have another software vacant, but there’s nothing to preclude that in the future.

Certainly, we’re putting as much energy we can into our LTOs. We know that that’s a really you know it’s another lever for us. But, looking to December, while we don’t have you know, another LTO a food LTO along those lines, We have our most exciting IP of the year, Kirby. And so we’re it’s you know, not to give it a dead horse, but we’re we’re really happy with how December’s shaking out.

Jon Tower: Okay. Yeah. And then that kinda leads to a question just regarding you’d mentioned earlier the idea of advertising the reservation system and preservation program more broadly to a to the non rewards members. And I’m just curious, to hear where you guys think the brand well, where the brand is today with respect to broad advertising, which I don’t think it does much of. But where you wanna be over time, either as a percentage sales, you know, what mediums you wanna go in and and, frankly, where the message should be to guests. Is it more about hey. This is what Kora Sushi is, or is it more about a call to action in terms of LTOs like, you know, whether it’s the the core reserve or it’s the Curvy IP tie in You know, if you could expand on that, that’d be great.

Benjamin Porten: Yeah. So I I I wouldn’t expect us to do anything like television advertising. I we’re very happy with the marketing efforts to date. We think that they’ve done a phenomenal job just in terms of spending our our ad dollars effectively. Primarily on social media influencers, etcetera, but those have been exceptional in terms of return on ad spend. I I I’d say that there’s probably gonna be more of an emphasis on call to actions to your point Our rewards members very much are moved by call to action. And so that’s gonna be an ongoing point of focus, especially because they they’re continuing to trend upward in terms of spend. Which is, great.

Jon Tower: Okay. So it just rewards members in general now that we’re pretty far. I think we’re a year in or so. Maybe I’m off a little bit. But can you speak to how they have moved in terms of either frequency and or spending levels versus where we started off? Know, a year or so ago?

Benjamin Porten: Yeah. So so we’re now up to a million members. If we’re counting newsletter up, members, it’s it’s actually 1,700,000 members. And so that’s that’s really been very aggressive growth thanks to the efforts of the marketing team. In terms of spend, they a two person ticket per person, they spend about $6 more. On so that that’s a pretty meaningful difference. And they visit more than twice or even triple nonmember.

Jon Tower: Okay. Awesome. I will pass it along. I appreciate you taking the questions.

Benjamin Porten: Thank you, John. Thank you, John.

Operator: Thank you. And our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Mark Smith: Hi, guys. I’m curious if there’s any other demographic or geographic trends that you saw in the quarter or even post quarter that are worth calling out For instance, curious if you saw any impact when government shutdown ended. Did that drive any incremental traffic or spend or anything else to call out here in the quarter?

Benjamin Porten: So the the major change that we have seen is just the over you know, the broad based improvement from November onward, really are not seeing any sort of differences on a regional or geographic basis. As we’ve mentioned in the past, the differential between any given region, in terms of comp performance is really driven more by the timing of intels than anything else. And so it it’s really just been a a broad based improvement both in in traffic and ticket, and so that’s that’s been really I I guess I keep coming back to the word encouraging, but it it it really has been encouraging.

Mark Smith: Excellent. And and then as we look at restaurant level margins, I’m curious if you could talk comp units versus noncomp restaurants. Kind of where the margins are shaking out for each, and then if we’ve seen any real change over time in in the in in one or the other.

Benjamin Porten: So we we haven’t really commented too much on the difference between comp and non comp unit performance. What we have said is that, historically, new units have pretty strong honeymoon. They’ll have elevated revenues, but they’re not as efficient as at you know, managing costs as a more seasoned restaurant. And so the oral OPMs actually end up taking about the same.

Mark Smith: Perfect. That’s helpful. Thank you.

Benjamin Porten: Thank you, Mark. Thank you, Mark. Thank you.

Operator: And our next question comes from the line of James Sanderson with the Northcoast Research. Please proceed with your question.

James Sanderson: Hey. Thanks for the question. I wanted to go back to the labor line item. Wondering if you could walk through any milestones or key drivers operationally that you’ll need order to achieve that a 100 basis point improvement and when we can, expect that build in the next three quarters.

Benjamin Porten: Mhmm. Hi, James. In terms of waiver, as it relates to Q1, the biggest driving factor was the pricing that we’ve taken. We feel that we’re making great progress in terms of the the leverage that we expect to make the full year and have no concerns about hitting that 100 basis point target. And in fact, know, feel that there is a real possibility that we’ll be able to get there even, or to to get even beyond a 100 basis points of leverage In terms of the the factors that need to go right, so to speak, for us to hit that, those are already in play. Or in place. They’re largely gonna be driven by the initiatives that we put in the last fiscal year. So the reservation system, the the new touch panels, the new Mr. Freshdomes, those cumulatively will get us at least those 100 basis points.

And the any any sort of labor initiative just the the benefit trends along with seasonality And so we were frankly a little bit surprised to see benefit as early as we did, and we just expect that to become more pronounced as sales grow, and we’re better able leverage fixed costs.

James Sanderson: Okay. So not necessarily, need to see the robotic dishwashers and other technology in into the store. In order to achieve that that gain.

Benjamin Porten: So that that gain discuss Q4 Yeah. So so the the robotic dishwashers are contemplated in that 18%. But the impact is gonna be pretty minimal. For for for the full 18% RLOPM. And so we’ll see even more benefit as we enter fiscal twenty seven and we’ve got you know, more of the the system updated to have the robotic dishwashers And so if we’re able to implement these sooner than expected, then that’s that’s a potential point of opportunity as well.

James Sanderson: Alright. Alright. Very good. Could you also review the collaborations you offered in the first quarter and if they performed to your expectations.

Benjamin Porten: In terms of q one’s collaborations, we had Gemon Slayer in September. That was the second month of Demon Slayer. Then we had, one piece in in October and November. Both met our expectations.

James Sanderson: Both met okay. Very good. Last question for me. I just wondered if you had thought about your long term growth target rate of about 100 units in The United States, if you had revised that.

Benjamin Porten: If we do have plans for a formal update, we’ll be to let everybody know. But in the meantime, we will let the analysts provide their own estimates. On that bigger number.

James Sanderson: Alright. Thank you very much.

Benjamin Porten: Thank you. You, Dennis.

Operator: Our next question comes from the line of George Kelly with ROTH Capital Partners. Please proceed with your question.

George Kelly: Everyone. Thanks for taking my questions. So first one, just to revisit the tariff conversation. Just wanna make sure I’m capturing everything properly. So your 30% COGS target for the year bakes in, is it a 200 basis point impact from tariffs? And then can you quantify the tariff impact on your other expense line?

Benjamin Porten: Hi. Hey, George. As it relates to the other costs, the impact, was largely on the the promotional items, the bigger upon prices and the giveaways. Cumulatively, as a percentage of sales, there’s about a 40 to 50 basis point impact from tariffs. This is prepricing, and so know, post November results, that should ease a little bit. But it is a pretty meaningful step up in our our promotional costs.

Jeff Uttz: And then, Jared, did I have George on that. Go ahead, Jeff. Yeah. On on cost of goods sold, 30% is where we think it’s gonna end up for the year. It it is about a 200 basis point impact, but we’ve had some other pretty good negotiations that have offset that a little bit. So when you look at the map, from last year, she gets to 30%. I think it’s, like, it’ll end up being, like, a 150 basis points. You know, delta between the two years. But the tariff impact alone, is pretty significant at 200, basis points, but we’ve had some other good negotiations that have offset that a little bit. Is why we ended up 30% for the year.

George Kelly: Okay. Okay. Helpful. And then second question I had is just related to promotions. You sound very pleased with how Kirby is performing. So I guess the the question is, is is the performance there you know, I understand, Kirby, that’s a big, you know, draw a big big partner. But how have you executed it differently? Is is it partly sort of an internal execution issue? Maybe you’re monetizing it better or advertising it better. So wonder if that’s sort of part part of the reason. And then a second question is, you talk at all about your future planned promotions for the remainder of the year?

Benjamin Porten: Yeah. Kurt, as it relates to Kirby, there were a number of things that we tried for the first time. With this collaboration. We have these customized mister FreshDomes. And so instead of know, just a clear dome, you have Kirby protecting your sushi. And we also updated the touch panels to be Kirby themed. These are both very well received by guests. We really wanna try to just keep trying new things and continue to grow the the experience. And so the guests feel that much more that, you know, it’s something that can’t be missed. And we are very, very pleased with the results.

George Kelly: Okay. That’s great. And can you comment at all about future planned promotions for the the year?

Benjamin Porten: Oh, yeah. Sorry. Sure. So Kirby runs through the January. And then we have, Sanrio for February. And then March and April, we have Jujutsu Kaisen to coincide with their with their new anime season.

George Kelly: Okay. Thank you.

Benjamin Porten: Thanks, George. Thank you, Tubs.

Operator: And our final question comes from the line of Todd Brooks with Benchmarkstone X. Please proceed with your question.

Todd Brooks: Great. Thanks, and thanks for squeezing me in. Appreciate it. Couple of questions, few leftovers here. If we’re thinking about the, same store sales guidance you provided the full year and the price increase that we took at the November, What’s the right way to think about, PMICs for the balance of the year as we’re kind of building into a component of same store sales?

Benjamin Porten: Mhmm. In in terms of the components of COB, we we be pretty low to to share the price and mix expectations just given well, you know, early results post the November pricing have been very, very encouraging. That’s really just two months. And so it’s hard for us to extrapolate onwards or outwards. That being said, we do feel very confident that we’ll be able to achieve that flat to to slightly positive just based off of our trajectory to date as well as the easier comparisons we’re enjoying now.

Todd Brooks: Okay. Fair enough. Second, in the other cost, I just wanted to clarify When you talked about elevated marketing cost, was that referring to kind of the promotional cost around, tariff related or upon pressures and Exactly. Yes. Okay. So as far as marketing spend on the brand itself, there’s really no change year over year. This was that tariff related pressure that you were pointing to. It’s on the per car pond? Yeah. As it relates to other costs, if we’re comparing year over year the comps for the prior year quarter were 1.8% against the negative 2.5% that we posted for the current quarter. And so that alone gets you pretty meaningful deleverage. So that together with the tariff impact is is how we got to the current quarter’s other costs. That being said, in terms of the the comp being a drag and deleveraging, we expect that dynamic to flip With Q2. As we comp positively. We expect the other costs to stabilize.

Todd Brooks: Okay. Great. And the final one for me, and this this goes back when you guys talked about the environment coming out of the pandemic and just the kind of competitive decimation, the closures that you you’ve seen. I’m just thinking about if if you guys are absorbing 200 basis points of tariff pressure, if we start to think about independent competitors, and absorbing that kind of 300 to 400 basis points of pressure that Jeff was talking about related to tariffs are we seeing another wave of kind of mom and pop type of closures as you’re continuing to roll out across the country here where you’ve just got a more open run runway as you continue to grow your footprint? Thanks.

Benjamin Porten: Yeah. It’s it’s it reads it to say. I’ll go ahead and ping. It it it I mean, we we we can’t quantify it, and it’s never good to see people go out of business. But this is a pretty consistent pattern Whether or not, you know, are gonna be closures on the scale of pen the pandemic, I mean, I I I don’t think that’ll be the case. But regardless of whether a restaurant closes outright, I still think that we’ll be able capture traffic just because the pricing that our direct competitors are taking to offset their costs are only serving to highlight incredible value that we offer. Then looking to November, we we took 3.5% pricing Granted, 2.5% was rolling off, and so we were offsetting a a big part of the pricing was to offset that.

But 3.5% is an unusually large step up for us. We typically price increments of one to 2% historically. And the fact that, you know, traffic and mix have only grown since extremely encouraging. Know, it’s only been a couple months, and so we don’t wanna read too much into it. But one possible interpretation is that the 3.5% that we’ve taken pales in comparison to the pricing that our competitors are taking, and that is why our traffic grows in spite of the pricing.

Todd Brooks: Okay. Great. Thank you all.

Benjamin Porten: Thank you, Todd. Thank you, Todd.

Operator: Thank you. Ladies and gentlemen, that does conclude today’s question and answer session. As well as today’s teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

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KURA SUSHI USA INC

Q1 2026

Earnings Transcript

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