Noodles & Co (NDLS) Q1 2025 Earnings Call Highlights: Strong Same-Store Sales Growth Amidst ...

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Thu, May 8, 2025, 1:29 AM 4 min read

Total Revenue: Increased 2% to $123.8 million.
Same-Store Sales: Increased 4.7% at company-owned restaurants and 4.4% system-wide.
Company Comp Traffic: Increased 1.8%.
Average Check: Increased 2.9%, inclusive of 1.3% effective pricing.
Average Unit Volumes: $1.31 million.
Cost of Goods Sold (COGS): 26.6% of sales, a 160 basis points increase from last year.
Labor Costs: 32.5% of sales, up 20 basis points due to wage inflation and training expenses.
Net Loss: $9.1 million or a loss of $0.20 per diluted share.
Adjusted EBITDA: $2.4 million compared to $5.5 million last year.
Restaurant Level Contribution Margin: 10.3%, down from 13.1% last year.
Capital Expenditures: $2.9 million compared to $8.6 million last year.
Debt Balance: $102.7 million with over $19 million available for future borrowings.
Store Openings and Closures: Opened one company-owned restaurant and closed three company-owned and one franchise restaurant.

Warning! GuruFocus has detected 6 Warning Signs with NDLS.

Release Date: May 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Noodles & Co (NASDAQ:NDLS) reported a 4.7% increase in same-store sales at company-owned restaurants and 4.4% system-wide, indicating strong performance despite a challenging macroeconomic environment.
The introduction of new menu items and a comprehensive menu transformation have been well-received, with sales of new mac & cheese dishes significantly exceeding expectations.
The company's marketing efforts, including the 'We Know Noodles' campaign, have resulted in double-digit increases in brand awareness, brand search traffic, and app sessions.
Noodles & Co (NASDAQ:NDLS) has seen a significant increase in loyalty sign-ups and transactions, indicating strong customer engagement with the new menu offerings.
The company has strategically reduced capital spending and emphasized cost savings, positioning itself to strengthen its balance sheet and reduce debt in the latter half of the year.

Negative Points

Noodles & Co (NASDAQ:NDLS) reported a net loss of $9.1 million for the first quarter, compared to a net loss of $6.1 million in the previous year.
The company's restaurant level contribution margin decreased to 10.3% from 13.1% in the first quarter of 2024, impacted by higher food costs and marketing expenses.
Labor costs increased due to wage inflation and one-time training expenses for the new menu rollout, affecting overall profitability.
The company closed three company-owned restaurants and one franchise restaurant in the first quarter, indicating potential challenges in certain locations.
Noodles & Co (NASDAQ:NDLS) anticipates a headwind in the second quarter due to the shift in the Easter holiday, which previously benefited first-quarter sales.

Q & A Highlights

Q: How does the marketing commitment for the new menu launch compare over the course of the year, and how have loyalty customers responded compared to new or non-loyalty customers? A: Drew Madsen, CEO, explained that the company doubled its media investment for the new menu launch, focusing on broader reach channels like connected TV and digital audio. The creative messaging has resonated well, leading to increased traffic and sales. Loyalty members have shown double-digit transaction growth, and the recent loyalty promotion was successful, indicating strong engagement from both existing and new customers.

Q: How has traffic trended since the new menu launch, and what are the plans to maintain or build on this momentum? A: Drew Madsen noted that sales and transactions have remained strong since the menu launch, with over 5% growth from March through April. The initial response was quick due to early influencer and PR efforts. While there will be additional news throughout the year, the focus will remain on executing the current menu at a high level.

Q: Can you clarify the impact of one-time costs on first-quarter margins and what the ongoing expenses might look like? A: Michael Hynes, CFO, highlighted that one-time costs included $500,000 in marketing and $1 million in other menu rollout expenses, impacting COGS by 60 basis points. For the rest of the year, COGS is expected to be closer to 26%. The company is on track with its expectations and anticipates improving margins as the year progresses.

Q: When do you expect free cash flow to turn positive, and how does this relate to the balance sheet improvement? A: Michael Hynes stated that the company was slightly free cash flow positive in the first quarter. While some working capital timing items may affect the second quarter, they anticipate being free cash flow positive in the third and fourth quarters, contributing to balance sheet improvement.

Q: What are the key financial highlights from the first quarter, and how do they align with the company's strategic goals? A: Michael Hynes reported a 2% increase in total revenue to $123.8 million, with system-wide comp sales up 4.4%. The company experienced higher food and labor costs due to the new menu but maintained strategic cost savings. The focus remains on strengthening the balance sheet and driving long-term shareholder value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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