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Key highlights for the first quarter of 2019 versus the first quarter of 2018 include:
- Total revenue decreased 0.4% to
$110.0 million from$110.5 million , primarily due to the lower restaurant count. - Comparable restaurant sales increased 3.0% system-wide, comprised of a 3.0% increase at company-owned restaurants and a 2.8% increase at franchise restaurants.
- Net loss was
$1.9 million , or$0.04 loss per diluted share, compared to a net loss of$3.6 million , or$0.09 loss per diluted share. - Adjusted net loss(1) was
$1.2 million , or$0.03 per diluted share, compared to an adjusted net loss of$1.8 million , or$0.04 loss per diluted share. - Restaurant contribution margin(1) decreased 30 basis points to 12.6%.
- Adjusted EBITDA(1) was
$5.6 million for both the first quarter of 2019 and 2018. - One franchise restaurant was acquired by the Company during the first quarter of 2019.
______________________
(1) Adjusted EBITDA, restaurant contribution margin, and adjusted net income (loss) are non-GAAP measures. Reconciliations of net income (loss) to adjusted EBITDA and adjusted net income (loss) and of operating income (loss) to restaurant contribution margin are included in the accompanying financial data. See “Non-GAAP Financial Measures.”
Boennighausen continued, “Our results to date in 2019 validate that our strategic initiatives are working. Our off-premise sales continue to grow significantly, reinforcing that the Noodles brand is uniquely positioned and gives us a competitive advantage in offering convenience and choice for today’s consumer. Off-premise increased to 56% of sales during the first quarter of 2019, led by our digital sales, which, inclusive of delivery, grew 63% over last year and accounted for 22% of sales. Additionally, the zucchini noodle is showing continued growth and meaningful contribution to both product mix and average check growth. Given our recent results and current trends, we are raising our sales and profit guidance for 2019.”
First Quarter 2019 Financial Results
Total revenue decreased
In the first quarter of 2019, system-wide comparable restaurant sales growth was 3.0%, comprised of a 3.0% increase at company-owned restaurants and a 2.8% increase at franchise restaurants. Comparable sales in the first quarter of 2019 benefited by approximately 50 bps due to a shift in the timing of the Easter holiday.
In the first quarter of 2019, one restaurant was acquired by the Company from a franchisee. The Company had 459 restaurants at the end of the first quarter 2019, comprised of 395 company-owned restaurants and 64 franchise restaurants.
For the first quarter of 2019, the Company reported a net loss of
Restaurant contribution margin decreased 30 bps to 12.6% in the first quarter of 2019, compared to 12.9% in the first quarter of 2018. This decrease was primarily due to higher benefit costs from certain individual high dollar claims incurred during the first quarter of 2019, as well as increased third-party delivery fees, which partially offset the successful increase of delivery to 5.0% of sales. These increases were partially offset by leverage on increased AUV.
Adjusted net loss was
2019 Outlook
Boennighausen commented, “Based upon the strengthening performance of the business, we are raising our guidance across a number of key metrics and have also lowered our capital expenditure forecast, based on current expectations of initiative timing.” The Company currently expects the following for the full year 2019:
- Adjusted net income per diluted share of
$0.08 to $0.16 , up from the prior$0.06 to $0.15 expectation; - Total revenue of
$466.0 million to $474.0 million , up from the prior$462.0 to $470.0 million expectation; - Comparable restaurant sales of 3.0% to 5.0%, up from the prior 2.0% to 4.0% expectation;
- Restaurant contribution margin of 15.5% to 16.5%, from the prior 15.2% to 16.5% expectation;
- Adjusted EBITDA of
$37.0 million to $41.0 million , up from the prior$36.0 million to $40.0 million expectation; - Approximately five to nine new restaurants system-wide, including four to six company locations; and
- Capital expenditures of
$14.5 million to $19.0 million , down from the prior$24.0 million to $30.0 million expectation.
The Company believes that a quantitative reconciliation of the Company’s non-GAAP financial measures guidance to the most comparable financial measures calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to provide guidance for various reconciling items that are outside of the Company’s control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. A reconciliation of certain non-GAAP financial measures would also require the Company to predict the timing and likelihood of outcomes that determine future impairments and the tax benefit thereof. None of these measures, nor their probable significance, can be reliably quantified. The non-GAAP financial measures noted above have limitations as analytical financial measures, as discussed below in the section entitled “Non-GAAP Financial Measures.” In addition, the guidance with respect to non-GAAP financial measures is a forward-looking statement, which by its nature involves risks and uncertainties that could cause actual results to differ materially from the Company’s forward-looking statement, as discussed below in the section entitled “Forward-Looking Statements.”
Key Definitions
Average Unit Volume — AUV consists of the average annualized sales of all company-owned restaurants for the trailing 12 periods. AUV is calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants.
Comparable Restaurant Sales — represent year-over-year sales comparisons for the comparable restaurant base open for at least 18 full periods. This measure highlights performance of existing restaurants, as the impact of new restaurant openings is excluded. Changes in comparable restaurant sales are generated by changes in traffic, which we calculate as the number of entrées sold, or changes in per-person spend, calculated as sales divided by traffic.
Restaurant Contribution and Restaurant Contribution Margin — restaurant contribution represents restaurant revenue less restaurant operating costs, which are costs of sales, labor, occupancy and other restaurant operating items. Restaurant contribution margin represents restaurant contribution as a percentage of restaurant revenue. Restaurant contribution and restaurant contribution margin are presented because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management also uses restaurant contribution and restaurant contribution margin as metrics to evaluate the profitability of incremental sales at our restaurants, restaurant performance across periods, and restaurant financial performance compared with competitors. See “Non-GAAP Financial Measures” below.
EBITDA and Adjusted EBITDA — EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes and depreciation and amortization. Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, closure costs and asset disposals, acquisition costs, severance costs and stock-based compensation expense. EBITDA and Adjusted EBITDA are presented because: (i) management believes they are useful measures for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and restaurant impairments, asset disposals and closure costs, and (ii) management uses them internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare performance to that of competitors. See “Non-GAAP Financial Measures” below.
Adjusted Net Income (Loss) — represents net income (loss) plus various adjustments and the tax effects of such adjustments. Adjusted net income (loss) is presented because management believes it helps convey supplemental information to investors regarding the Company’s performance, excluding the impact of special items that affect the comparability of results in past quarters and expected results in future quarters. See “Non-GAAP Financial Measures” below.
Conference Call
Non-GAAP Financial Measures
To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in
For more information on the non-GAAP financial measures, please see the “Reconciliation of Non-GAAP Measurements to GAAP Results” tables in this press release. These accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
About
Since 1995,
Forward-Looking Statements
In addition to historical information, this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding estimated costs associated with our closure of underperforming restaurants, the implementation and results of strategic initiatives and our future financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including new restaurant initiatives and operational strategies to improve the performance of our restaurant portfolio; our ability to maintain compliance with debt covenants and continue to access financing necessary to execute our business strategy; the success of our marketing efforts; our ability to open new restaurants on schedule; current economic conditions; price and availability of commodities; our ability to adequately staff our restaurants; changes in labor costs; consumer confidence and spending patterns; consumer reaction to industry related public health issues and perceptions of food safety; seasonal factors; and weather. For additional information on these and other factors that could affect the Company’s forward-looking statements, see the Company’s risk factors, as they may be amended from time to time, set forth in its filings with the
Contacts:
Investor Relations
investorrelations@noodles.com
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(720) 214-1971
press@noodles.com
Noodles & Company
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data, unaudited)
| Fiscal Quarter Ended | |||||||
| April 2, 2019 |
April 3, 2018 |
||||||
| Revenue: | |||||||
| Restaurant revenue | $ | 108,765 | $ | 109,613 | |||
| Franchising royalties and fees, and other | 1,281 | 913 | |||||
| Total revenue | 110,046 | 110,526 | |||||
| Costs and expenses: | |||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | |||||||
| Cost of sales | 29,091 | 29,256 | |||||
| Labor | 37,092 | 36,572 | |||||
| Occupancy | 12,430 | 12,763 | |||||
| Other restaurant operating costs | 16,456 | 16,898 | |||||
| General and administrative | 10,140 | 10,268 | |||||
| Depreciation and amortization | 5,507 | 5,820 | |||||
| Pre-opening | — | 47 | |||||
| Restaurant impairments, closure costs and asset disposals | 420 | 1,580 | |||||
| Total costs and expenses | 111,136 | 113,204 | |||||
| Loss from operations | (1,090 | ) | (2,678 | ) | |||
| Interest expense, net | 761 | 1,138 | |||||
| Loss before income taxes | (1,851 | ) | (3,816 | ) | |||
| Provision (benefit) for income taxes | — | (241 | ) | ||||
| Net loss | $ | (1,851 | ) | $ | (3,575 | ) | |
| Loss per share of Class A and Class B common stock, combined: | |||||||
| Basic | $ | (0.04 | ) | $ | (0.09 | ) | |
| Diluted | $ | (0.04 | ) | $ | (0.09 | ) | |
| Weighted average shares of Class A and Class B common stock outstanding, combined: | |||||||
| Basic | 43,933,235 | 41,128,473 | |||||
| Diluted | 43,933,235 | 41,128,473 | |||||
Noodles & Company
Condensed Consolidated Statements of Operations as a Percentage of Revenue
(unaudited)
| Fiscal Quarter Ended | |||||
| April 2, 2019 |
April 3, 2018 |
||||
| Revenue: | |||||
| Restaurant revenue | 98.8 | % | 99.2 | % | |
| Franchising royalties and fees, and other | 1.2 | % | 0.8 | % | |
| Total revenue | 100.0 | % | 100.0 | % | |
| Costs and expenses: | |||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): (1) | |||||
| Cost of sales | 26.7 | % | 26.7 | % | |
| Labor | 34.1 | % | 33.4 | % | |
| Occupancy | 11.4 | % | 11.6 | % | |
| Other restaurant operating costs | 15.1 | % | 15.4 | % | |
| General and administrative | 9.2 | % | 9.3 | % | |
| Depreciation and amortization | 5.0 | % | 5.3 | % | |
| Pre-opening | — | % | — | % | |
| Restaurant impairments, closure costs and asset disposals | 0.4 | % | 1.4 | % | |
| Total costs and expenses | 101.0 | % | 102.4 | % | |
| Loss from operations | (1.0 | )% | (2.4 | )% | |
| Interest expense, net | 0.7 | % | 1.0 | % | |
| Loss before income taxes | (1.7 | )% | (3.4 | )% | |
| Provision (benefit) for income taxes | — | % | (0.2 | )% | |
| Net loss | (1.7 | )% | (3.2 | )% | |
_______________________
- As a percentage of restaurant revenue.
Noodles & Company
Consolidated Selected Balance Sheet Data and Selected Operating Data
(in thousands, except restaurant activity, unaudited)
| As of | |||||||
| April 2, 2019 |
January 1, 2019 |
||||||
| Balance Sheet Data | |||||||
| Total current assets | $ | 17,181 | $ | 23,351 | |||
| Total assets | 384,566 | 172,032 | |||||
| Total current liabilities | 49,198 | 33,147 | |||||
| Total long-term debt | 47,035 | 44,183 | |||||
| Total liabilities | 338,970 | 119,351 | |||||
| Total stockholders’ equity | 45,596 | 52,681 | |||||
| Fiscal Quarter Ended | |||||||||||||||||||
| April 2, 2019 |
January 1, 2019 |
October 2, 2018 |
July 3, 2018 |
April 3, 2018 |
|||||||||||||||
| Selected Operating Data | |||||||||||||||||||
| Restaurant Activity: | |||||||||||||||||||
| Company-owned restaurants at end of period | 395 | 394 | 401 | 404 | 411 | ||||||||||||||
| Franchise restaurants at end of period | 64 | 65 | 65 | 65 | 65 | ||||||||||||||
| Revenue Data: | |||||||||||||||||||
| Company-owned average unit volume | $ | 1,131 | $ | 1,119 | $ | 1,107 | $ | 1,092 | $ | 1,080 | |||||||||
| Franchise average unit volume | $ | 1,155 | $ | 1,153 | $ | 1,139 | $ | 1,113 | $ | 1,081 | |||||||||
| Company-owned comparable restaurant sales | 3.0 | % | 3.7 | % | 5.2 | % | 5.0 | % | (0.3 | )% | |||||||||
| Franchise comparable restaurant sales | 2.8 | % | 5.3 | % | 7.6 | % | 8.0 | % | 0.9 | % | |||||||||
| System-wide comparable restaurant sales | 3.0 | % | 4.0 | % | 5.5 | % | 5.4 | % | (0.2 | )% | |||||||||
Reconciliations of Non-GAAP Measurements to GAAP Results
Noodles & Company
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(in thousands, unaudited)
| Fiscal Quarter Ended | |||||||
| April 2, 2019 |
April 3, 2018 |
||||||
| Net loss | $ | (1,851 | ) | $ | (3,575 | ) | |
| Depreciation and amortization | 5,507 | 5,820 | |||||
| Interest expense, net | 761 | 1,138 | |||||
| Provision (benefit) for income taxes | — | (241 | ) | ||||
| EBITDA | $ | 4,417 | $ | 3,142 | |||
| Restaurant impairments, closure costs and asset disposals | 420 | 1,580 | |||||
| Acquisition related expenses | 36 | — | |||||
| Severance costs | — | 278 | |||||
| Stock-based compensation expense | 726 | 580 | |||||
| Adjusted EBITDA | $ | 5,599 | $ | 5,580 | |||
______________________________
EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income (loss) or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies. These measures are presented because we believe that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations.
EBITDA is calculated as net income (loss) before interest expense, provision (benefit) for income taxes and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to reflect the eliminations shown in the table above.
EBITDA and adjusted EBITDA are presented because: (i) we believe they are useful measures for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and restaurant impairments, closure costs and asset disposals and (ii) we use adjusted EBITDA internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare our performance to that of our competitors. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and income tax rates) and differences in book depreciation of property, plant and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of these foregoing variations. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.
Noodles & Company
Reconciliation of Net Loss to Adjusted Net Loss
(in thousands, except share and per share data, unaudited)
| Fiscal Quarter Ended | |||||||
| April 2, 2019 |
April 3, 2018 |
||||||
| Net loss | $ | (1,851 | ) | $ | (3,575 | ) | |
| Restaurant impairments and closure costs (a) | 271 | 1,081 | |||||
| Severance costs (b) | — | 278 | |||||
| Tax adjustments, net (c) | 418 | 411 | |||||
| Adjusted net loss | $ | (1,162 | ) | $ | (1,805 | ) | |
| Loss per share of Class A and Class B common stock, combined: | |||||||
| Basic | $ | (0.04 | ) | $ | (0.09 | ) | |
| Diluted | $ | (0.04 | ) | $ | (0.09 | ) | |
| Adjusted loss per share of Class A and Class B common stock, combined (d) | |||||||
| Basic | $ | (0.03 | ) | $ | (0.04 | ) | |
| Diluted | $ | (0.03 | ) | $ | (0.04 | ) | |
| Weighted average Class A and Class B common stock outstanding, combined (d) | |||||||
| Basic | 43,933,235 | 41,128,473 | |||||
| Diluted | 43,933,235 | 41,128,473 | |||||
_____________________________
Adjusted net income (loss) is a supplemental measure of financial performance that is not required by or presented in accordance with GAAP. We define adjusted net income (loss) as net income (loss) plus the impact of adjustments and the tax effects of such adjustments. Adjusted net income (loss) is presented because management believes it helps convey supplemental information to investors regarding our performance, excluding the impact of special items that affect the comparability of results in past quarters to expected results in future quarters. Adjusted net income (loss) as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted net income (loss) should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non-GAAP financial measure to analyze changes in our underlying business from quarter to quarter based on comparable financial results.
| (a) | Reflects the adjustment to eliminate the impact of ongoing closure costs recognized during the first quarters of 2019 and 2018 related to restaurants closed in previous years. The first quarter of 2018 also includes the impairment charge related to one restaurant. No restaurants were identified as impaired in the first quarter of 2019. These expenses are included in the “Restaurant impairments, closure costs and asset disposals” line in the Condensed Consolidated Statements of Operations. | |
| (b) | Reflects the adjustment to eliminate the severance costs from department structural changes. | |
| (c) | Reflects the adjustment to normalize the impact of the valuation allowance that affects our annual effective tax rate and the tax impact of the other adjustments discussed in (a) and (b) above. | |
| (d) | Adjusted per share amounts are calculated by dividing adjusted net loss by the basic and diluted weighted average shares outstanding. |
Noodles & Company
Reconciliation of Operating Loss to Restaurant Contribution
(in thousands, unaudited)
| Fiscal Quarter Ended | |||||||
| April 2, 2019 |
April 3, 2018 |
||||||
| Loss from operations | $ | (1,090 | ) | $ | (2,678 | ) | |
| Less: Franchising royalties and fees, and other | 1,281 | 913 | |||||
| Plus: General and administrative | 10,140 | 10,268 | |||||
| Depreciation and amortization | 5,507 | 5,820 | |||||
| Pre-opening | — | 47 | |||||
| Restaurant impairments, closure costs and asset disposals | 420 | 1,580 | |||||
| Restaurant contribution | $ | 13,696 | $ | 14,124 | |||
| Restaurant contribution margin | 12.6 | % | 12.9 | % | |||
_____________________________
Restaurant contribution represents restaurant revenue less restaurant operating costs, which are the cost of sales, labor, occupancy and other operating items. Restaurant contribution margin represents restaurant contribution as a percentage of restaurant revenue. Restaurant contribution and restaurant contribution margin are non-GAAP measures that are neither required by, nor presented in accordance with GAAP, and the calculations thereof may not be comparable to similar measures reported by other companies. These measures are supplemental measures of the operating performance of our restaurants and are not reflective of the underlying performance of our business because corporate-level expenses are excluded from these measures.
Restaurant contribution and restaurant contribution margin have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Management does not consider these measures in isolation or as an alternative to financial measures determined in accordance with GAAP. However, management believes that restaurant contribution and restaurant contribution margin are important tools for investors and other interested parties because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management also uses these measures as metrics to evaluate the profitability of incremental sales at our restaurants, restaurant performance across periods, and restaurant financial performance compared with competitors.
Source: Noodles & Company