KURA SUSHI USA INC

Previous wording

We have experienced inflationary pressures affecting our operations in certain areas such as food and beverage costs, labor costs, construction costs and energy costs. We have been able to offset to some extent these inflationary and other cost pressures through various actions, such as increasing menu prices, productivity improvements, and supply chain initiatives, however, we expect these inflationary and other cost pressures to level out in fiscal year 2024.

Current wording

We have experienced inflationary pressures affecting our operations in certain areas such as labor, repairs and maintenance, restaurant supplies and energy costs. We have been able to offset these inflationary and other cost pressures to some extent through various actions, such as increasing menu prices, productivity improvements, and supply chain initiatives. Although inflation has steadied so far in 2024, inflation may continue to affect our results in the near future.

Previous wording

Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from three to 20 years.

Current wording

Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, which range from three to 20 years.

Previous wording

The following tables present selected comparative results of operations for the three months ended November 30, 2023 and 2022. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods. Certain totals for the tables below may not recalculate or sum to 100% due to rounding.

Current wording

The following tables present selected comparative results of operations for the three and six months ended February 29, 2024 and February 28, 2023. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods. Certain totals for the tables below may not recalculate or sum to 100% due to rounding.

Previous wording

Sales. Sales were $51.5 million for the three months ended November 30, 2023 compared to $39.3 million for the three months ended November 30, 2022, representing an increase of $12.2 million, or 30.9%. Comparable restaurant sales increased 3.8% for the three months ended November 30, 2023, as compared to the three months ended November 30, 2022. The increase in sales was primarily driven by the sales resulting from twelve new restaurants opened subsequent to November 30, 2022, as well as increases in menu prices during the same period.

Current wording

Sales. Sales were $57.3 million for the three months ended February 29, 2024 compared to $43.9 million for the three months ended February 28, 2023, representing an increase of $13.4 million, or 30.4%.The increase in sales was primarily driven by the sales resulting from fourteen new restaurants opened subsequent to February 28, 2023, as well as increases in menu prices during the same period. Comparable restaurant sales increased 3.0% for the three months ended February 29, 2024, as compared to the three months ended February 28, 2023.

Previous wording

Food and beverage costs. Food and beverage costs were $15.4 million for the three months ended November 30, 2023 compared to $12.4 million for the three months ended November 30, 2022, representing an increase of $3.0 million, or 23.6%. The increase in food and beverage costs was primarily driven by costs associated with sales from twelve new restaurants opened subsequent to November 30, 2022. As a percentage of sales, food and beverage costs decreased to 29.8% in the three months ended November 30, 2023 as compared to 31.6% in the three months ended November 30, 2022, primarily due to increases in menu prices, partially offset by food cost inflation.

Current wording

Food and beverage costs. Food and beverage costs were $16.9 million for the three months ended February 29, 2024 compared to $13.2 million for the three months ended February 28, 2023, representing an increase of $3.7 million, or 27.9%. The increase in food and beverage costs was primarily driven by costs associated with sales from fourteen new restaurants opened subsequent to February 28, 2023. As a percentage of sales, food and beverage costs decreased to 29.6% in the three months ended February 29, 2024 as compared to 30.1% in the three months ended February 28, 2023, primarily due to increases in menu prices and supply chain initiatives.

Previous wording

Labor and related costs. Labor and related costs were $16.3 million for the three months ended November 30, 2023 compared to $12.5 million for the three months ended November 30, 2022, representing an increase of $3.8 million, or 29.7%. This increase in labor and related costs was primarily driven by additional labor costs incurred from twelve new restaurants opened subsequent to November 30, 2022. As a percentage of sales, labor and related costs decreased to 31.6% in the three months ended November 30, 2023 as compared to 31.9% in the three months ended November 30, 2022. The decrease in cost as a percentage of sales was primarily due to increases in menu prices and technological initiatives, partially offset by increases in wage rates.

Current wording

Labor and related costs. Labor and related costs were $18.8 million for the three months ended February 29, 2024 compared to $13.9 million for the three months ended February 28, 2023, representing an increase of $4.9 million, or 35.5%. This increase in labor and related costs was primarily driven by additional labor costs incurred from fourteen new restaurants opened subsequent to February 28, 2023. As a percentage of sales, labor and related costs increased to 32.8% in the three months ended February 29, 2024 as compared to 31.5% in the three months ended February 28, 2023. The increase in cost as a percentage of sales was primarily due to increases in wage rates, higher pre-opening labor costs and the impact of adverse weather conditions.

Previous wording

Occupancy and related expenses. Occupancy and related expenses were $3.9 million for the three months ended November 30, 2023 compared to $2.9 million for the three months ended November 30, 2022, representing an increase of $1.0 million, or 35.5%. The increase was primarily a result of additional lease expense related to the opening of twelve new restaurants subsequent to November 30, 2022. As a percentage of sales, occupancy and related expenses remained consistent at 7.6% in the three months ended November 30, 2023 as compared to 7.3% in the three months ended November 30, 2022.

Current wording

Occupancy and related expenses. Occupancy and related expenses were $4.0 million for the three months ended February 29, 2024 compared to $3.1 million for the three months ended February 28, 2023, representing an increase of $0.9 million, or 29.0%. The increase was primarily a result of additional lease expense related to the opening of fourteen new restaurants subsequent to February 28, 2023. As a percentage of sales, occupancy and related expenses remained consistent at 6.9% in the three months ended February 29, 2024 as compared to 7.0% in the three months ended February 28, 2023.

Previous wording

Depreciation and amortization expenses. Depreciation and amortization expenses incurred as part of restaurant operating costs were $2.5 million for the three months ended November 30, 2023 compared to $1.6 million for the three months ended November 30, 2022, representing an increase of $0.9 million, or 57.1%. The increase was primarily due to depreciation of property and equipment related to the twelve new restaurants opened subsequent to November 30, 2022. As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.8% in the three months ended November 30, 2023 as compared to 4.0% in the three months ended November 30, 2022. Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended November 30, 2023 and November 30, 2022, and as a percentage of sales were both 0.2%, respectively.

Current wording

Depreciation and amortization expenses. Depreciation and amortization expenses incurred as part of restaurant operating costs were $2.7 million for the three months ended February 29, 2024 compared to $1.8 million for the three months ended February 28, 2023, representing an increase of $0.9 million, or 53.2%. The increase consists of depreciation of property and equipment related to the fourteen new restaurants that opened subsequent to February 28, 2023. As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.7% in the three months ended February 29, 2024 as compared to 4.0% in the three months ended February 28, 2023. Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended February 29, 2024 and February 28, 2023, and as a percentage of sales were both 0.2%, respectively.

Previous wording

Other costs. Other costs were $7.6 million for the three months ended November 30, 2023 compared to $5.3 million for the three months ended November 30, 2022, representing an increase of $2.3 million, or 42.7%. The increase was primarily driven by an increase in costs related to twelve new restaurants opened subsequent to November 30, 2022. As a percentage of sales, other costs increased to 14.7% in the three months ended November 30, 2023 as compared to 13.5% in the three months ended November 30, 2022, primarily driven by general inflationary pressures on advertising and promotion, repairs and maintenance, utilities and travel expenses associated with new restaurant openings.

Current wording

Other costs. Other costs were $8.4 million for the three months ended February 29, 2024 compared to $5.9 million for the three months ended February 28, 2023, representing an increase of $2.5 million, or 42.4%. The increase was primarily driven by an increase in costs related to the fourteen new restaurants that opened subsequent to February 28, 2023. As a percentage of sales, other costs increased to 14.6% in the three months ended February 29, 2024 as compared to 13.3% in the three months ended February 28, 2023, primarily driven by advertising and promotion, repairs and maintenance and travel expenses.

Previous wording

General and administrative expenses. General and administrative expenses were $8.6 million for the three months ended November 30, 2023 compared to $6.6 million for the three months ended November 30, 2022, representing an increase of $2.0 million, or 29.6%. This increase was primarily due to increases in compensation-related costs of $1.0 million due to additional headcount, $0.5 million of professional fees, $0.3 million in travel expenses and $0.2 million in legal costs. As a percentage of sales, general and administrative expenses remained consistent at 16.7% in the three months ended November 30, 2023 as compared to 16.9% in the three months ended November 30, 2022.

Current wording

General and administrative expenses. General and administrative expenses were $8.2 million for the three months ended February 29, 2024 compared to $7.1 million for the three months ended February 28, 2023, representing an increase of $1.1 million, or 14.7%. This increase was primarily due to increases in compensation-related costs of $0.5 million due to additional headcount, $0.4 million in professional fees and $0.1 million in travel expenses. As a percentage of sales, general and administrative expenses decreased to 14.3% in the three months ended February 29, 2024 as compared to 16.2% in the three months ended February 28, 2023, primarily driven by leverage benefits from the increase in sales.

Previous wording

Interest expense. Interest expense was $8 thousand for the three months ended November 30, 2023 compared to $16 thousand for the three months ended November 30, 2022, respectively.

Current wording

Interest expense. Interest expense was $12 thousand for the three months ended February 29, 2024 compared to $14 thousand for the three months ended February 28, 2023, respectively.

Previous wording

Interest income. Interest income was $840 thousand for the three months ended November 30, 2023 compared to $94 thousand for the three months ended November 30, 2022. The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments.

Current wording

Interest income. Interest income was $754 thousand for the three months ended February 29, 2024 compared to $63 thousand for the three months ended February 28, 2023. The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments.

Previous wording

Income tax expense. Income tax expense was $38 thousand for the three months ended November 30, 2023 compared to an income tax benefit of $10 thousand for the three months ended November 30, 2022. For further discussion of our income taxes, see “Note 9. Income Taxes” in the Notes to Condensed Financial Statements.

Current wording

Income tax expense. Income tax expense was $50 thousand for the three months ended February 29, 2024 compared to an income tax expense of $15 thousand for the three months ended February 28, 2023. For further discussion of our income taxes, see “Note 9. Income Taxes” in the Notes to Condensed Financial Statements.

Previous wording

Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expenses and are essential to support the development and operations of our restaurants; non-cash lease expense; 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. Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. We believe that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as this measure depicts normal, recurring cash operating expenses essential to supporting the development and operations of our restaurants. However, these measures may not provide a complete understanding of the operating results of the

Current wording

Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expenses and are essential to support the development and operations of our restaurants; non-cash lease expense; 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. Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. We believe that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as this measure depicts normal, recurring cash operating expenses essential to supporting the development and operations of our restaurants. However, these measures 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 our GAAP financial results. We expect

Previous wording

Company as a whole and such measures should be reviewed in conjunction with our GAAP financial results. We expect Restaurant-level Operating Profit (Loss) to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth.

Current wording

Restaurant-level Operating Profit (Loss) to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth.

Previous wording

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 expenses excluded from such measures.

Current wording

However, you should be aware that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are financial measures that 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 expenses excluded from such measures.

Previous wording

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 our restaurants, and other related pre-opening costs.

Current wording

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 the opening day of our restaurants, and other related pre-opening costs.

Previous wording

On April 13, 2023, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share. We received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by us. The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes. No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates.

Current wording

On April 13, 2023, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share. We received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by us. The proceeds will be used for general corporate purposes, including capital expenditures, working capital, and other business purposes. We made no payments to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates.

Previous wording

During the three months ended November 30, 2023, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining. As of November 30, 2023, we did not have any material off-balance sheet arrangements.

Current wording

During the six months ended February 29, 2024, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining. As of February 29, 2024, we did not have any material off-balance sheet arrangements.

Previous wording

We believe that cash provided by operating activities, cash on hand, short-term investments and availability under our existing Revolving Credit Agreement, will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.

Current wording

We believe that cash provided by operating activities, cash on hand, cash equivalents, short-term investments and availability under our existing Revolving Credit Agreement, will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.

Previous wording

Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and short-term investments. We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.

Current wording

Our primary sources of liquidity and cash flows are operating cash flows, cash on hand, cash equivalents and short-term investments. We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and our working capital. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.

Previous wording

Net cash provided by operating activities during the three months ended November 30, 2023 was $2.4 million, primarily due to a net loss of $2.0 million, non-cash charges of $2.6 million for depreciation and amortization, $1.0 million for stock-based compensation, and $1.1 million in non-cash lease expense, and net cash outflows of $0.2 million from changes in operating assets and liabilities.

Current wording

Net cash provided by operating activities during the six months ended February 29, 2024 was $6.2 million, primarily due to a net loss of $3.0 million, non-cash charges of $5.4 million for depreciation and amortization, $2.0 million for stock-based compensation, and $2.3 million in non-cash lease expense, and net cash outflows of $0.3 million from changes in operating assets and liabilities.

Previous wording

Net cash provided by operating activities during the three months ended November 30, 2022 was $0.5 million, primarily due to a net loss of $2.1 million, non-cash charges of $1.7 million for depreciation and amortization, $0.7 million for stock-based compensation, and $0.8 million in non-cash lease expense, and net cash outflows of $0.5 million from changes in operating assets and liabilities.

Current wording

Net cash provided by operating activities during the six months ended February 28, 2023 was $1.7 million, which results from a net loss of $3.1 million, non-cash charges of $3.5 million for depreciation and amortization, $1.6 million for stock-based compensation, and $1.8 million in non-cash lease expense, and net cash outflows of $2.1 million from changes in operating assets and liabilities.

Previous wording

Net cash used in investing activities during the three months ended November 30, 2023 was $8.0 million, primarily due to $3.0 million in purchases of short-term investments, $9.4 million in purchases of property and equipment and $0.1 million in purchases of liquor licenses offset by $4.5 million of redemption of short-term investments. The increase in purchases of property and equipment in the three months ended November 30, 2023 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Current wording

Net cash used in investing activities during the six months ended February 29, 2024 was $20.6 million, primarily due to $3.5 million in purchases of short-term investments, $22.8 million in purchases of property and equipment and $0.1 million in purchases of liquor licenses offset by $5.9 million of redemption of short-term investments. The increase in purchases of property and equipment in the six months ended February 29, 2024 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Previous wording

Net cash used in investing activities during the three months ended November 30, 2022 was $9.3 million, primarily due to $8.3 million in purchases of property and equipment and $0.8 million in purchases of liquor licenses. The purchases of property and equipment in the three months ended November 30, 2022 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Current wording

Net cash used in investing activities during the six months ended February 28, 2023 was $15.4 million, primarily due to $14.3 million in purchases of property and equipment and $0.8 million in purchases of liquor licenses. The purchases of property and equipment in the six months ended February 28, 2023 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Previous wording

Cash Flows Provided by (Used in) Financing Activities

Current wording

Cash Flows Provided by Financing Activities

Previous wording

Net cash provided by financing activities during the three months ended November 30, 2023 was $56 thousand and is primarily due to $110 thousand of proceeds from exercise of stock options offset by $54 thousand in repayments of principal on finance leases.

Current wording

Net cash provided by financing activities during the six months ended February 28, 2023 was $0.2 million and is primarily due $0.6 million of proceeds from the exercise of stock options offset by $0.3 million in repayments of principal on finance leases.

Previous wording

As of November 30, 2023, we had $9.1 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations. All contractual obligations are expected to be paid during the next 12 months utilizing cash and cash equivalents on hand and provided by operations. For operating and finance lease obligations, see “Note 3. Leases” in the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q.

Current wording

As of February 29, 2024, we had $10.1 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations. All contractual obligations are expected to be paid during the next 12 months utilizing cash and cash equivalents on hand and provided by operations. For operating and finance lease obligations, see “Note 3. Leases” in the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q.

Previous wording

Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Current wording

Our discussion and analysis of operating results and financial condition are based on our financial statements. Preparing our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.