Kura Sushi USA [KRUS] Conference call transcript for 2022 q4
2022-01-06 23:26:04
Fiscal: 2022 q1
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA, Inc. Fiscal First Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this call is being recorded. On the call today, we have HajimeJimmy Uba, President and Chief Executive Officer; Steven Benrubi, Chief Financial Officer; and Benjamin Porten, VP of Investor Relations and Business Development. And now, I will turn the call over to Mr. Porten.
Benjamin Porten: Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal first quarter 2022 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 an 8-K we submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our discussion 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. 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 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 would like to turn the call over to Jimmy.
Jimmy Uba: Thank you, Ben, and thank you, everyone, for joining us today. I’m very pleased that we announced a strong start we’ve had to fiscal 2022 and that we are on track to achieve the goals that we shared in our annual guidance. The sales momentum we discussed in the previous earnings calls have continued into the new fiscal year, resulting in Q1 comparable sales growth of 19.9% as compared to the pre-pandemic fiscal first quarter 2020. As a reminder, our fiscal 2020 first quarter referred to the September through November of calendar 2019. We believe these comps are demonstration of the resilience of our business model in the face of linear the COVID concerns due to the data variant and I couldn’t be more proud of how far the company has come in adapting to the changes created by COVID. We continue to make excellent progress in determining to pre-pandemic unit performance with Q1 restaurant-level operating profit margin of 19.5%, as compared to 17.3% in Q1 fiscal 2020. Q1 is typically our weakest quarter from a seasonality perspective and to be so close to our historical peak annual restaurant-level operating profit margin of 20% is a great sign for our recovery. Regional sales trends observed in the previous quarter remained in play, as Texas continues to be our strongest market with regional comps of 27.8%, as compared to California regional comps of 12.4%. Looking at the monthly cadence of sales, we benefited from additional weekend in October as compared to the same period in fiscal 2020, which was offset by one less weekend in November, as compared to the same period in fiscal 2020. These differences in calendar timing resulted in a minor compensation in November, as compared to the preceding two months. After adjusting for this calendar shift, however, we demonstrated consistent constraints for the fiscal 2020 throughout the quarter. Off-premises revenue was $1.3 million on the sales mix of 4.5%, against Q4 off-premises revenue of $1.4 million on the mix over 5%. Now I would like to provide an update on the pricing event we mentioned in our last earnings call. We increased the pricing high single-digit at the beginning of September and so many markets get push back despite this being the largest single operating move we’ve ever taken. I’m pleased to report that if the response continued to be just as favorable and I would like to discuss as if this has had on our most recent quarter, as well as for our business going forward. Looking at our comps breakdown is particularly instructive in terms of understanding the impact of our pricing. Most of the growth seen in Q1 two-year stack, the comps of 19.9% was driven by price taking over this two-year period. As guests are able to control their ticket size due to our small plates menu, we believe greater consumption rate as an effective measure of price elasticity. It is encouraging that over this same period, average number of plates consumed by guests increased. The increase in per guest consumption in spite of pricing gives us the belief, we have yet to approve the thresholds of price sensitivity for our guests and that our guests understand and appreciate the premium value that we could offer. To increase the plate of consumption but partially offset by a dining room profit differentiation of approximately 11% versus two years ago, which we believe a portion of our off-premises sales have to offset. We actually believe this is a positive signal. But we think this profit differentiation is being driven by longer table turn times due to more time consuming, but important COVID safety measures as opposed to any change in demand, as demonstrated by how long our wait times remain. Secondly, the Q1 comps of 19.9% and restaurant-level operating profit margin of 19.5% were achieved in spite of a double-digit dining room profit headwind underscoring the potential for improvement on historical AUVs and we meet the profitability as we exit the pandemic and the profit normalizes. Turning to development, we opened our first new restaurant of the fiscal year in October at Stonestown Galleria in San Francisco. Subsequent to the quarter, we entered a new market of Arizona, with one unit in Phoenix and one unit in Chandler, both of which opened in late December. But it is still early days, we are encouraged by the performance of this year’s of restaurants. Our full year development plans remain on track as two more units under construction and fully executed leases for remainder of the pipeline. Now, I’d like to touch on three topics that are the current focus of the restaurant industry, supply chain, staffing and the impact of COVID variants. This is a variety of our commodity basket. We continue to be a relatively insulated from recent supply chain pressures. But while we have seen the impact of pressures that apply across the company commodities such as freight cost, I will not go over the variance on any single primary protein that protected us from the cost of productivity that others are experiencing. This main strategy, in conjunction with the pricing, we have to take in September has allowed us to maintain ongoing control over our cost spend as Steve will discuss later. Our investment in recruitment and retention continues to pay dividends resulting in pretty tough restaurant teams, which enabled our strong Q1 sales. Looking to the current quarter, the Omicron variant has caused some operational complication for us, due to occasional sector-wide quarantining out of an abundance of caution. In late December, we saw some of our restaurants reduced their sitting capacities or operating hours due to reduced workforces, which unfortunately coincided with a more lucrative holiday season. But we believe this is a temporary setbacks. These type of pressures are a result of increased accountability of Omicron and our prioritization of the safety of our employees and guests as opposed to difficulties is hiring and retention and we expect normalization following this in some way. During the month, we also looked on mid-December 2019 pricing event, representing several points of comp headwind for Q2. Consequently, we saw December comp growth of just over 14% when compared to December of calendar 2019. Now I’d like to provide an update on our recent initiatives. Table side payment is fully rolled out as guest restriction exceeding initial expectations. The pilot for touch panel drink ordering continues to expand across our system with fully rolled out expected in this or the next quarter. Especially, I am very excited to announce one more initiative with Starbucks. As of today, high-level restaurants assisting the recovery, which assist our waiter staff regarding deliveries. Even beyond this level of efficiencies, it’s been too pleasure to watch our guests of the night in the future coming to life in our restaurant. Pending the result of the pilot we expect full rollout by the end of the fiscal year. Our reward program continued to grow with 73,000 new members joining in Q1 for a total of 313,000 members representing growth of over 30%. Reward program enrollment and engagement remains a top priority as our members have a significantly higher ticket average and the dining frequency from non-members. While we all look forward to the end of the pandemic, I am extremely proud of our recent performance and the amazing work that our team has done to deliver these results. I would like to extend my thanks to everyone in our restaurant teams and corporate support center for making this possible. With that, let me turn the call over to Steve to briefly discuss our financial results and the liquidity. Steve?
Steven Benrubi: Thank you, Jimmy. For the fiscal first quarter, total sales were $29.8 million, as compared to $9.4 million in the prior year period. We believe measurement of comp sales growth is most relevant versus the pre-COVID period of fiscal first quarter 2020. On that basis, comp sales grew by 19.9%, with regional comps of 12.4% for California and 27.8% for Texas. Turning to cost, food and beverage costs as a percentage of sales were 30%, compared to 32.4% in the prior year quarter, due to pricing taken at the start of the quarter and largely normalized performance as sales volume improved. Labor and related costs as a percentage of sales decreased to 32.5% from 46.3% in the prior year quarter, due to higher sales leverage. Occupancy and related expenses as a percentage of sales improved to 7.4% from 18% in the prior year quarter, also primarily due to higher sales leverage. Other costs as a percentage of sales decreased to 12.1%, compared to 22.1% in the prior year quarter, due to higher sales leverage as well. General and administrative expenses were $5.4 million, compared to $3.5 million in the prior year quarter. This increase was primarily due to compensation related expenses, as we made investments in our team to support our accelerated growth plans. As a percentage of sales, general and administrative expenses were 18%, compared to 37.4% in the prior year quarter. Operating loss was $1.3 million, compared to an operating loss of $6.3 million in the first quarter of fiscal 2021. Income tax expense was $12,000, compared to an income tax expense of $29,000 in the prior year quarter. Note that we expect to continue to incur nominal income tax expense quarterly, irrespective of our pretax income or loss as a result of the full valuation allowance against our deferred income tax assets and incurrence of minor income taxes payable at state levels. Net loss was $1.3 million or $0.13 per diluted share, compared to net loss of $6.4 million or $0.76 per diluted share in the first quarter of 2021. Restaurant-level operating profit as a percentage of sales was 19.5%, compared to restaurant-level operating loss as a percentage of sales of 9.9% in the prior year quarter. Adjusted EBITDA was $800,000, compared to a negative $4.1 million in the first quarter of fiscal 2021. Turning to our cash and liquidity, at the end of the fiscal first quarter, we had $44.4 million in cash and cash equivalents and no debt. Finally, I would like to reaffirm our previously shared full year guidance for fiscal year 2022. We expect total sales between $130 million and $140 million. We expect general and administrative expenses as a percentage of sales of approximately 17%. And we expect the opening of eight to 10 new units with net capital expenditures per unit of $2.1 million. It bears mentioning that these expectations assume that we experienced no further operating restrictions or material downturns resulting from the ongoing COVID-19 pandemic. Our expectations are based on the results that we have seen in recent quarters and while we believe the expectations are appropriate, given our current operating environment, the company and the restaurant industry generally remain highly vulnerable to COVID-related volatility. Now, I’ll turn the call back to Jimmy.
Jimmy Uba: 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. Please bear with us.
Operator: Thank you. Our first question comes from the line of James Rutherford with Stephens, Inc. Please proceed with your question.
James Rutherford: All right. Thank you, and congrats on the results here. Could you help quantify the extent of capacity limitations that you’re seeing today, just so we can calibrate where we are today on that? And then if you have any estimate, I know it’s hard, but any estimate on how much of a headwind that may have been to the comp you reported for December?
Jimmy Uba: Thank you, James, for your first question. Please allow me to answer in Japanese, Ben is going to translate.
Benjamin Porten: In terms of the current situation, it remains highly fluid. But what we can say is that has had a meaningful impact on our sales, particularly as it began in the latter half December leading into now with the holidays. It’s been on a rolling basis because of Omicron.
Jimmy Uba: Benjamin Porten: That being said, our operations department or operating team or recruiting team are working on all cylinders, and as a result, the majority of our restaurants are able to operate without issue. So that’s something that we’re very proud of and grateful for the work that they’re doing. Also, just want to mention that these operating limitations are a result of quarantine shifts as opposed to anything like government mandate.
James Rutherford: Oh! Thanks for that clarification and that’s helpful. Kind of leads into second question I had, which is regarding the traffic discussion. You mentioned, demand is very robust and I’ve seen that myself, I have been in your restaurants. But you said table turns have crept up limiting some of the traffic recovery. So my question is, what can you do to increase those table turns and call back some of that traffic, maybe through technology or can you push people to shoulder period, just do you have any ideas about what you can do to bring those table turns down? Thank you.
Jimmy Uba: Sure.
Benjamin Porten: Like, in terms of reducing table turn times, the immediate focus would be those three initiatives that we’ve been discussing historically, that would be our table side payment, our touch panel drink orders and now our robot servers, which are working very well, at least, as we’ve seen in the pilot so far. What we want to emphasize here is, the table turn times are not a permanent impact on our operational throughput, it’s really a result of the additional cleaning procedures that we take in between parties and so that efficiency will be naturally regained as we exit the pandemic. Besides efficiency, some traffic pressures have been ongoing in metropolitan areas where our restaurants are highly dependent on foot traffic. But we do believe that we can make up those traffic losses through increased marketing efforts. The robot servers, besides being an efficiency measure, are really a meaningful addition to the Kura experience and they’re highly Instagrammable. It’s been a great draw for our guests.
James Rutherford: Very helpful. Thank you.
Jimmy Uba: Thanks, James.
Steven Benrubi: Thanks, James.
Benjamin Porten: Thank you, James.
Operator: Our next question comes from the line of Andrew Strelzik with BMO Capital Markets. Please proceed with your question.
Andrew Strelzik: Hey. Good afternoon and congrats on a very nice quarter. I guess, first, I just wanted to clarify on the sales guidance that you gave. I know the commentary was, assuming no further, I guess, implications from COVID, et cetera. But what exactly is that mean? I mean, if you held kind of at this pre-COVID -- relative to pre-COVID comp level that you would be in that range or you’re assuming that things go back to where they were. I just trying to square exactly what the commentary is with the recent trends.
Steven Benrubi: Sure. Sure, Andrew. I mean, it does -- it takes into account what we saw in the business in December, which included as the month progressed some more impact or challenge from Omicron. And I would -- I just emphasize that, that situation itself, it’s truly for our operations team and our HR folks, it’s a daily monitoring situation, something can arise in a given restaurant with a positive case, let’s say, among the team members and then result in the need to quarantine a certain number of the members who had been in contact with that individual and they’re working very hard day-to-day to work through that. Our view is that, we believe the level of that activity is a temporary situation, hard to say what temporary exactly means. But for the near-term, we’re just really pivoting and adjusting on a almost daily basis in some of our restaurants, given the circumstances. And so as we think out for the entire year and the guide that we gave on revenue, I mean, there’s some expectation that over time, that the Omicron situation will moderate within the year here and not be as much of a challenge, maybe from one day to the next as it’s been of late. But we certainly build in some expectation right now for some difficulties that go along with that that we’re living through and have been for the last few weeks.
Andrew Strelzik: Got it. Okay. That’s pretty clear. And then, second question, I mean, I guess, you were asked last quarter and weren’t prepared to kind of commit, and obviously, wasn’t included in the formal guidance. But especially with the commentary you gave around the restaurant-level margins this quarter and what is typically a seasonally weaker period. Is there any way or color that you can give on where you think within that sales range or restaurant margins might land or maybe some color there being impacted on the topside so much from an inflationary perspective, but just anything to help us think about the margin trajectory here for the year?
Steven Benrubi: Yeah. Yeah. And I’ll start with the caveat about what we just talked about in terms of…
Andrew Strelzik: Sure.
Steven Benrubi: … the volatility. But typically for us, our seasonal, our most recent pre-COVID year, had about 23% of our sales base in the first quarter and that would -- without -- then it went to 24%, so you had 47% in the front half and 53% in the back half of the year. Things like food are going to be - they should be almost completely variable. Labor is sort of semi-fixed, semi variable depending on how you think about it. And then when you get into occupancy costs and some of the other costs, more of that is leverageable once you start growing sales. So if you think in terms of that balancing, but also with the caveat that the quarter we’re in right now faces some COVID challenges that weren’t as significant at least in the earlier part of Q1, that can help you maybe do some modeling around the business. Suffice it to say, we’re very encouraged by, being at 19.5%, only 50 basis points from our historical peak annual margin and what is typically in Q1 a lighter seasonal sales quarter. And so, the pricing that we’ve taken the impact or really positive reception that continues from our customers about our value, we think those all bode well for our future opportunity to grow margin.
Andrew Strelzik: Got it. That makes a lot of sense. And I just wanted to squeeze one more in here, just -- it’s interesting entering a new market in Arizona in this environment, which presumably doesn’t have as much of an impact from COVID generally as maybe some others. But I guess I’m curious, is your willingness to enter other markets that may be more impacted or would you kind of reprioritize that the markets that you’re looking at are or is that to kind of pressure at the moment? I’m just curious for your thoughts on the market level kind of unit openings and the preference there?
Steven Benrubi: Well, that been on
Benjamin Porten: In terms of our leases, we typically sign 20-year leases and the impact that we’re seeing from the pandemic, it’d be temporary. And so we’re not making any fundamental changes to our development strategy in response to the pandemic. Largely speaking, we will continue to pursue the strategy that we’ve pursued since going public of doing a 50-50 split between entering new markets in filling existing markets. And since you brought it up, Arizona, while being a new market has minimal impact or limited impact from Omicron and is performing extremely well.
Andrew Strelzik: Got it. Very encouraging to hear. Thank you very much.
Benjamin Porten: Thank you, Andrew.
Jimmy Uba: Thank you, Andrew.
Steven Benrubi: Thanks.
Operator: Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.
Sharon Zackfia: Hi. Good afternoon. I guess when you think about the trends here in the second quarter, can you talk about where you’ve seen more of an impact if it’s been California or Texas relative to the kind of November trend? And then I understand the reduced hours and the seating capacity dynamics associated with the labor quarantining, but are you sensing or have you had any evidence of consumer reluctance to come into the restaurants?
Jimmy Uba: Sure, Sharon.
Benjamin Porten: Okay. In terms of what we’re seeing in quarter-to-date, we’re not really seeing too much of a geography specific impact. It really does boil down to each restaurant and the number of employees are quarantining, so it really does vary case-by-case as opposed to geography-by-geography.
Jimmy Uba: Okay. The Omicron situation remains highly fluid and so we can only speak to what we’ve seen so far. But so far, we’ve been very encouraged by a lack of consumer hesitation or change in consumer behavior. I think this is clearly demonstrated by how long our wait times -- how our wait times really haven’t changed since entering the Omicron era. In terms of the sales pressures that we’re seeing, it’s really more a result of the quarantining that we’re doing out of the abundance of caution, whether that results in fewer operating hours or diminished seating capacity. That’s where the sales pressures coming from. It’s really not from a demand related aspect.
Sharon Zackfia: Great. That’s very helpful. And then I’m also curious if you seeing off-premises take up and I know, seasonally, typically, off-premises would take up in the winter, but if you kind of level set it seasonally, if you’ve seen that increase in December and so far into January? And then a second question on that, I know there were some potential dynamics associated with new units that you are going to incorporate to kind of make the off-premises business more frictionless. Can you give us any update on that as it relates to new unit development?
Jimmy Uba: Sure.
Steven Benrubi: Our cost experienced a loss of share…
Jimmy Uba: I am sorry. Go ahead, Steve.
Steven Benrubi: Yeah. I was going to say -- I was just going to speak for a moment on the off-premises sales, Sharon, we’ll bring more detail about Q2 into the conversation when we talk about the results overall. What we did see in Q1 was kind of what we would expect with a slight percentage decline as a percent of the overall, because we had a quarter where all three months we had full dining room capacity versus in Q1, California was only 2.5 out of 3. But in terms of, it’s still an area, off-premises that we know, there’s a certain band of customers that that like to consume, but we’ll share more detail on the quarter when we get through it.
Benjamin Porten: And to answer your second question, the units that are geared towards, more frictionless off-premises, whether that’s curbside parking or pickup window that those have yet to be -- those remain in our pipelines. So no updates there.
Sharon Zackfia: Yeah. That’s great. Thank you.
Jimmy Uba: Thank you, Sharon.
Steven Benrubi: Thanks.
Operator: Our next question comes from the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your question.
Jeremy Hamblin: Thanks and I’ll add my congratulations on the strong momentum in the business. I wanted to just come back here to the comp breakdown, in particular in December, in terms of that split that you saw in Q1, Texas up almost 28%, California up over 12%. How have those splits been in the December period?
Benjamin Porten: So Texas -- so if you look at December, overall, Texas continues to outperform California on a comp basis and its pullback was a little bit more than the change in California, if you just go sequencing Q1 to December. I would add, December, in addition to what we’ve talked about, on the Omicron challenges to our staffing, it was also a little bit less favorable from a calendar perspective than two years ago. We kind of loss -- this year we lost a weekend to both…
Jeremy Hamblin: Right.
Benjamin Porten: Christmas Eve, New Year’s Eve, whereas two years ago, it was a mid-week kind of holidays. So a few things there and then as well, I don’t know if you caught during our prepared remarks, but we lapped a pricing event as well from December 2019. That was a mid single-digit increase at that time so that the pricing delta between two-year periods is less when you look at December versus Q1. But having said that, Texas continues to comp very, very strongly positive and more strongly than California in the month of December.
Jeremy Hamblin: Okay. Got it. And then, I just wanted to come back because I did miss the, in terms of the 19.9% in Q1 versus 2019, what was the break down specifics of transaction growth or transaction change, I should say, versus average check.
Benjamin Porten: Sure. Sure. So as I -- Jimmy talked about the vast majority of the difference can be attributed to the pricing that that teams that had happened over that two-year period. It was -- whereas the comp was the 19.9%, there was about 18% of pricing over a two-year period, and I think, at least three pricing events during that time window and so we out comp the pricing by a slight amount. And the two elements that go into that, as Jimmy talked about, the plates being consumed per customer on average between the two periods was up. And we attribute or that tells us a few things. One, we don’t feel like our customers are pushing up against a price value threshold or anything of that nature at this point. Those pricing moves did not cause them to pull back on their plate count averages to the contrary, because of, I would say, the value we offer, our marketing activities, our rewards program success, we’re actually selling more plates per customer than we did two years ago. And then that increase was partially offset the traffic reduction over the two years, which we call it out as approximately 11% reduction in the comp stores over the two years. With that, largely associated with the fact that there’s COVID-related activities that do put some pressure on our turn time capabilities in the restaurants, things around how we have to sanitize between table settings and also what things we can leave on the table right now at least for customers versus what has to be replaced every time a new set of customers comes in. So does that give you a kind of the anatomy, I guess, of the numbers there?
Jeremy Hamblin: Yeah. That’s super helpful. I want to come to unit growth, the timing, I think, the -- obviously you open two units subsequent to the quarter end. I think you said you had two more that are under construction currently and then leases signed on three additional locations. Could you provide a little bit more color in terms of of the timing of completion for the units that you have kind of under construction and the timing for the back half of the year as well?
Jimmy Uba: Sure.
Benjamin Porten: Okay. So we do have those two units under construction are making great progress. One is in San Antonio, Texas. The other is our upcoming location in Watertown, Massachusetts. We’re very close to breaking ground on two additional units, given that we have a -- our typical construction time is four months to five months and you can extrapolate what our expected cadence is there. Obviously, with additional pressures on municipal governments, in terms of permitting or inspections, there can be delays that are outside of our control, but currently, that’s what we’re expecting.
Jeremy Hamblin: Got it. Helpful. Last one for me. So if we look at your unit volumes here and comps up 20% versus two years ago, when we look at the other operating costs line item where you have your utilities, repairs and maintenance, your credit card fees, you have that line item up I think about 40 basis points versus Q1 levels from two years ago. I wanted to understand which components were the driver of that, is that more coming from the utilities and maintenance and repairs or is that, I’m not quite sure how much credit card fees are up as a percent of the sales since that timeframe. But any more color you could share on that increase of 40 basis points?
Steven Benrubi: Yeah. I don’t know that I could speak to the precise change or build it for you necessarily, but components that go in there, like, credit card fees they really are straight variable costs. They run as a percentage of sales, some of the small tools expenditures for the little bit of off-premises business that we do. There are some additional costs that run through the P&L and the other costs area that would perhaps be a minor deleveraging factor on the sales numbers since we have a meaningful percentage of business happening there. Things like insurance costs with growth in the business as well. They tend to go up along with the exposure metrics and those exposure metrics are often sales from the insurance company view. So, some of those costs maybe not as leverageable over a multiyear period as others like in the occupancy, the pure rent category for instance.
Jeremy Hamblin: Great. Helpful color. Best wishes for continued success guys.
Jimmy Uba: Thank you, Jeremy.
Steven Benrubi: Thanks, Jeremy.
Benjamin Porten: Thank you.
Operator: Our next question comes from the line of George Kelly with ROTH Capital. Pleased proceed with your question.
George Kelly: Hi, everybody. Thanks for taking my questions. So just a couple of for me. First, I was hoping you could start with the tech initiatives that you talked about, did you say that the table side payment is now fully rolled out across all your restaurants? And if I heard that correctly, how impactful is it, how much of an impact do you think that will have on turns and timing at the table?
Jimmy Uba: Sure.
Benjamin Porten: All right. In terms of the rollout, yes, rollout is complete and is now in all of our restaurants. In terms of the impact we are -- we’ve already seen a reduction to the workload that our servers are responsible for and we’ve seen that translate into greater customer service satisfaction. In terms of table turn times, the pilot has been going on for too short a period for us to quantify it, but we look forward to providing an update in the future.
Jimmy Uba: Benjamin Porten: To provide some additional color, historically, in terms of our customers’ payment methods, about 80% has come through credit cards. Looking at our table side payment, the usage rates across all transactions are about 30% to 35%. So just under half of that 80% of that we’ve mentioned earlier, so you can imagine just how much of an impact it’s having in terms of producing workloads for our servers.
George Kelly: Okay. That’s helpful. Thank you. And then next question for me is a different topic. In the past you’ve run promotions and prizes that are really impactful and drive a lot of traffic. And in the last two years since pre-COVID, I mean, you’ve grown so much in units and just absolute level of traffic. And so I was curious, as you look forward, I’m sure that those promotions and special prizes and things take a lot of planning. And just as you kind of map out the next year or so, are there a lot more kind of special partnerships and promotions that are becoming available to you just because of your increased scale?
Benjamin Porten: Absolutely. Absolutely that’s the case. That was one of the things that we’re most excited about when we went public in 2019. Up until that point, we’d really work with smaller brands or own proprietary characters or Japanese brands. But since going public, we’ve had access to much larger internationally known brands. Right now we’re partnering with Texas, which is one of the best known video games of all time. We have an upcoming partnership with Pac-Man as well. And we just had a -- we completed a recent partnership with Sonic. So you can see the quality of the partnerships are improving every year. I’m incredibly proud of the work that’s being done by our PR, marketing department. In terms of -- giving you an update in terms of what’s upcoming. We like to stay pretty tight lipped. Part of that is just the licensors. Don’t let us disclose things too far ahead. But we are very excited for what we have in our pipeline.
George Kelly: Okay. Cool. And then last question for me. I appreciate the info you gave us on leasing on the construction and development pipeline. But if we could go and I don’t know how much you’re going to want to say here. But could you go one layer kind of higher LOIs or thinks that, I don’t know what other kinds of numbers you could give just on number of things that are maybe in the pipe for more of a next year event? And what I’m trying to understand better is, how much if this year was more of a normal environment with timelines. I know that construction is taking longer than normal. But you’ve made a lot of corporate investments and getting that development team in place. I’m just curious what kind of a normalized year could look like beyond this fiscal year in new store openings?
Jimmy Uba: Sure.
Benjamin Porten: In terms of LOIs, we’d like to just continue with the information that we’ve already shared publicly, which is the leases for the remainder of the year fully executed. But as you can imagine, we’re very diligent with maintaining a strong pipeline of LOIs, given our investment growth plans.
Jimmy Uba: In terms of current construction periods, we’re seeing the same thing that we’re that the rest of the industry seeing and there are some supply chain delays in terms of construction materials, and permitting and inspection can take a little bit longer than typical. But that 10 units annual guidance that we gave and reaffirmed today force that expectation into it and we remain confident that we can hit those eight to 10 units. In terms of a more normalized environment, there are really three factors that determine our growth rate. First would be our ability to identify high quality sites, the second would be the quality and size of our management pipeline, and the third would be our liquidity. We think we’re in a great place and we think we’re positioned to grow faster, the rights to -- the right environment is there. And so if we are to fundamentally reevaluate our growth rate and provide a new target, we’d be very excited to announce that in the future.
George Kelly: Got you. Thank you.
Jimmy Uba: Thanks, George.
Benjamin Porten: Thank you.
Steven Benrubi: Thanks, George.
Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
