10-Q: Noble Romans Reports Strong Q3 Growth, Refinancing Ahead

Noble Romans, Inc. announced significant revenue and net income growth for Q3 and the first nine months of 2025, driven by same-store sales and franchise expansion, while actively pursuing debt refinancing.

Summary

• Total revenue increased to $4.14 million for the three months ended September 30, 2025, up from $3.88 million in the prior year period.
• Net income for the three months ended September 30, 2025, surged to $639,792 ($0.03 diluted EPS) from $193,314 ($0.01 diluted EPS) in the comparable 2024 period.
• For the nine months ended September 30, 2025, total revenue reached $11.98 million, an increase from $11.45 million in the same period of 2024.
• Nine-month net income dramatically improved to $1.14 million ($0.05 diluted EPS) compared to $163,695 ($0.01 diluted EPS) in the prior year.
• Operating income for the three-month period more than doubled to $819,065 from $416,623, and for the nine-month period, it increased to $2.23 million from $1.41 million.
• Company-owned Craft Pizza & Pub locations saw same-store sales increase by 4.2% in Q3 2025 and 3.4% for the first nine months of 2025.
• The Craft Pizza & Pub segment achieved its most profitable month since August 2022 in May 2025.
• Franchising revenue grew due to an increase in new franchise locations, with 31 new non-traditional locations opened from January 1 to September 30, 2025.
• The company expects franchisees to open approximately 27 additional non-traditional locations by December 31, 2025, with 8 already opened in October.
• A Development Agreement with Majors Management, LLC targets 100 new non-traditional franchise locations by September 30, 2026.
• The Senior Note from Corbel Capital Partners, with a principal balance of $6.13 million, matures on June 30, 2026, and has been reclassified to current liabilities.
• The company's current ratio significantly declined to 0.40-to-1 as of September 30, 2025, from 0.9-to-1 at December 31, 2024, primarily due to the reclassification of the Corbel loan.
• Noble Romans is actively pursuing new financing to repay the Corbel loan and subordinated notes, anticipating a reduction in interest rates and no equity-dilutive provisions.
• The company holds an Employee Retention Tax Credit Receivable of $507,726, with the final refund claim currently in process with the IRS.

Sentiment

Score: 7

Explanation: The company demonstrated strong operational performance with significant revenue and net income growth, improved margins, and successful franchise expansion. However, the very low current ratio and the impending maturity of a substantial debt facility introduce a notable financial risk, despite management's confidence in refinancing.

Positives

• Significant increase in total revenue for both the three-month and nine-month periods ended September 30, 2025.
• Net income saw substantial growth, more than tripling for the three-month period and increasing nearly sevenfold for the nine-month period year-over-year.
• Operating income more than doubled in the third quarter and increased by over 58% for the nine-month period, indicating improved operational efficiency.
• Company-owned Craft Pizza & Pub locations achieved strong same-store sales growth of 4.2% in Q3 2025 and 3.4% for the nine-month period.
• The Craft Pizza & Pub segment recorded its most profitable month since August 2022 in May 2025.
• Improved margin contribution in both Craft Pizza & Pub (12.8% from 7.9% in Q3) and Franchising (68.7% from 65.2% in Q3) segments.
• Successful expansion in the non-traditional franchising venue with 31 new locations opened and 27 more expected by year-end 2025.
• A major Development Agreement with Majors Management, LLC for 100 new non-traditional franchise locations by September 30, 2026, signals strong future growth potential.
• Net cash provided by operating activities increased significantly to $915,626 for the nine months ended September 30, 2025, from $496,403 in the prior year.
• The company expects refinancing to result in some reduction in its effective interest rate and will not require any equity-dilutive provisions.

Negatives

• The current ratio significantly deteriorated to 0.40-to-1 as of September 30, 2025, from 0.9-to-1 at December 31, 2024, primarily due to the reclassification of the Corbel Senior Note to current liabilities.
• The Senior Note from Corbel Capital Partners, with a principal balance of $6.13 million, matures on June 30, 2026, creating a near-term refinancing imperative.
• The company issued additional warrants to Corbel in April, August, and September 2025, and agreed to issue more monthly, which could lead to future dilution if exercised.
• The decrease in fair value of warrant liability negatively impacted income, with a larger decrease of $(367,408) for the nine-month period in 2025 compared to $(1,828) in 2024.

Risks

• Competitive factors and pricing and cost pressures in the restaurant and franchising industry.
• Ability to service the existing loan and successfully refinance the Senior Note before its June 30, 2026, maturity.
• Potential emergence or spread of human or animal pandemics (e.g., COVID-19, Avian Bird Flu) impacting operations.
• Risk of non-renewal of franchise agreements or failure of new openings contemplated by the Development Agreement to occur as planned.
• Shifts in market demand for pizza and Italian-style subs.
• The success of franchise programs and the performance of individual franchisees.
• General economic conditions, including inflation and changes in prices or supplies of food ingredients and labor.
• Impact of franchise regulation on business operations.
• Potential adverse impact from activist stockholder activities or interference in business relationships.

Future Outlook

The company anticipates continued growth in its non-traditional franchising venue, driven by a significant pipeline of leads and prospects, and expects the trend of increased revenue with little change in operating costs to continue in the near term. It also projects that the refinancing of its Senior Note will result in a reduced effective interest rate without requiring equity-dilutive provisions. Cash flow projections for the next two years are primarily based on growing the non-traditional franchising venue, operating existing Craft Pizza & Pub locations, and pursuing a franchising program for Craft Pizza & Pub restaurants as market conditions allow. The deferred tax asset of $3.263 million is expected to be utilized over the next five years, meaning no cash payments for income tax are anticipated in the next several years.

Management Comments

• Management believes the company will be able to obtain new financing to repay the Corbel loan and subordinated notes based on its credit metrics, including recent and forecasted earnings before interest, taxes, depreciation, and amortization.
• Management expects the refinancing will result in some reduction in its effective interest rate and will not require any equity-dilutive provisions such as were included in its current financing arrangement with Corbel.
• The company's continued focus on quality service and speed in the Craft Pizza & Pub locations has resulted in May 2025 being the most profitable month of operations on a combined basis since August 2022.
• Management expects the trend of increased revenue with little change in operating costs in the franchising venue to continue in the near term.
• The company does not intend to operate any more Company-owned non-traditional locations except the one location it is currently operating.
• Management believes the company will have sufficient cash flow to meet its obligations and to carry out its current business plan for the foreseeable future, in view of the extension of the Senior Note, ongoing refinancing efforts, and cash flow projections.

Industry Context

Noble Romans is capitalizing on the post-pandemic trend of convenience stores and travel plazas seeking better food options to grow their business and increase margins, driving rapid expansion in its non-traditional franchise segment. This aligns with broader industry shifts towards diversified offerings in convenience retail. The company's focus on its Craft Pizza & Pub concept, with its modern atmosphere, fast cook times, and expanded menu, positions it within the competitive fast-casual and casual dining segments, aiming to differentiate through quality and customer experience. The overall restaurant industry is experiencing labor shortages and increased product costs, which Noble Romans is addressing through operational efficiencies and negotiations with manufacturers.

Comparison to Industry Standards

• The company's strategy of focusing on non-traditional franchises in convenience stores and travel plazas is a common growth avenue for quick-service restaurant brands, leveraging existing foot traffic and lower overhead compared to standalone units. For example, brands like Subway and Dunkin' have successfully expanded through similar models.
• The reported same-store sales growth of 4.2% in Q3 2025 for Craft Pizza & Pub locations is a strong indicator of performance, potentially outpacing some industry averages, especially given the competitive landscape in the pizza and casual dining sectors. Many established chains aim for 2-4% same-store sales growth.
• The Development Agreement for 100 new non-traditional locations by September 30, 2026, with Majors Management, LLC, demonstrates a significant scaling ambition, comparable to aggressive expansion plans seen in successful franchise systems like Domino's or Little Caesars in their growth phases, albeit on a smaller scale.
• The current ratio of 0.40-to-1 is significantly below typical industry benchmarks (often 1.0 or higher), indicating a high reliance on short-term financing or potential liquidity challenges, especially with the Corbel loan reclassified to current liabilities. This is a critical area for improvement compared to financially stable peers.

Corporate Governance

Legal Proceedings

• Currently, there are no material pending litigation or regulatory proceedings against the company.

Related Party Transactions

• Paul W. Mobley (Executive Chairman) and Marcel Herbst (Director, via Herbst Capital Management, LLC) purchased Units (Notes and Warrants) in a private placement that began in October 2016, on the same terms as independent investors.
• Paul W. Mobley and Herbst Capital Management, LLC accepted an offer to extend the maturity of their Notes to January 31, 2023.
• Notes held by Paul Mobley were repaid in February 2020 as part of a new financing arrangement.
• In September 2022, Paul Mobley purchased a subordinated note in the principal amount of $200,000, along with attached warrants, from Marcel Herbst.
• In February 2025, Paul Mobley purchased a subordinated Note in the amount of $100,000, along with attached Warrants, from Robert and Diane Paul.
• Paul Mobley received 10% interest from the company on these subordinated notes at the same time as all other subordinated debt holders were paid their interest.

Stakeholder Impact

• **Shareholders:** Positive financial results (revenue, net income, EPS growth) could increase shareholder value. However, the low current ratio and upcoming debt maturity introduce refinancing risk and potential dilution from warrants, which could negatively impact share price.
• **Creditors (Corbel Capital Partners):** The company is actively seeking refinancing to repay the Senior Note, indicating a commitment to fulfilling obligations, but the reclassification to current liabilities highlights the urgency.
• **Employees:** Stable staffing levels and efforts to optimize labor costs suggest a managed approach to employee expenses. Stock option expense indicates ongoing employee incentives.
• **Franchisees:** The company's focus on non-traditional franchise expansion and the Development Agreement with Majors Management, LLC provide growth opportunities for existing and prospective franchisees. The support for non-traditional locations post-pandemic is beneficial.
• **Customers:** Continued focus on quality service, speed, and menu enhancements in Craft Pizza & Pub locations aims to improve customer experience and satisfaction, driving same-store sales growth.

Next Steps

• Complete the refinancing of the Senior Note from Corbel Capital Partners and the subordinated notes before the June 30, 2026, maturity.
• Continue expanding the non-traditional franchising venue, aiming to open approximately 27 additional locations by December 31, 2025.
• Work with Majors Management, LLC to develop 100 new non-traditional franchise locations by September 30, 2026.
• Continue to manage corporate-level overhead expenses while focusing on revenue expansion.
• Await the final Employee Retention Tax Credit refund from the IRS.

Key Dates

Recommendation

Noble Romans, Inc. has demonstrated strong operational improvements, evidenced by significant revenue and net income growth, improved margins in key segments, and robust same-store sales. The expansion in non-traditional franchising, including a major development agreement, points to a positive growth trajectory. However, the company faces a critical near-term challenge with its Senior Note maturing in June 2026, leading to a severely deteriorated current ratio. While management expresses confidence in refinancing without equity dilution, the execution risk remains substantial. The issuance of additional warrants to Corbel also presents potential future dilution. Given the strong operational performance balanced against significant refinancing risk and liquidity concerns, a 'hold' recommendation is appropriate. Investors should monitor the refinancing progress closely, as its success or failure will be a major determinant of future stock performance.

Keywords

Noble Romans, pizza, franchising, restaurant, Craft Pizza & Pub, non-traditional locations, SEC filing, 10-Q, financial results, revenue growth, net income, same-store sales, debt refinancing, Corbel Capital Partners, warrants, Employee Retention Tax Credit, food service, quick service restaurant