8-K: Noodles & Company Reports First Quarter 2025 Financial Results: Revenue Up, But Losses Widen

Noodles & Company announced a 2.0% increase in total revenue for the first quarter of 2025, but also reported a larger net loss compared to the same period last year.

Summary

• Noodles & Company reported its first quarter 2025 financial results on May 7, 2025.
• Total revenue increased by 2.0% to $123.8 million, compared to $121.4 million in the first quarter of 2024.
• System-wide comparable restaurant sales increased by 4.4%, with a 4.7% increase at company-owned restaurants and a 2.9% increase at franchise restaurants.
• The company experienced a net loss of $9.1 million, or $0.20 loss per diluted share, compared to a net loss of $6.1 million, or $0.14 loss per diluted share, in the first quarter of 2024.
• Operating margin was (5.2)%, compared to (3.4)% in the first quarter of 2024.
• Restaurant contribution margin was 10.3%, compared to 13.1% in the first quarter of 2024.
• Adjusted EBITDA was $2.4 million, compared to $5.5 million in the first quarter of 2024.
• One new company-owned restaurant opened during the quarter.
• As of April 1, 2025, the company had $1.4 million in cash and cash equivalents and $102.7 million in outstanding debt.
• The amount available for future borrowings under its revolving credit facility was $19.3 million as of April 1, 2025.
• The company is revising its 2025 restaurant level contribution margins and company-owned restaurant closures guidance.
• Total revenue for 2025 is expected to be between $503 million and $512 million, including mid-single digit comparable restaurant sales growth.
• Restaurant level contribution margins for 2025 are expected to be between 12.0% and 14.0%.
• The company plans to open two new company-owned restaurants and close 13 to 17 company-owned restaurants and four franchised restaurants in 2025.
• Capital expenditures for 2025 are projected to be between $11 million and $13 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While revenue increased, the net loss widened and key profitability metrics declined. Management expresses optimism, but the financial results present a mixed picture.

Positives

• Total revenue increased by 2.0% compared to the first quarter of 2024.
• System-wide comparable restaurant sales increased by 4.4%.
• Comparable sales have increased by approximately 5% since the new menu introduction on March 12th.
• The company is focused on operations excellence and smart cost savings.
• The company is well-positioned to strengthen its balance sheet.

Negatives

• Net loss increased to $9.1 million, or $0.20 loss per diluted share, compared to $6.1 million, or $0.14 loss per diluted share, in the first quarter of 2024.
• Operating margin decreased to (5.2)% from (3.4)% in the first quarter of 2024.
• Restaurant contribution margin decreased to 10.3% from 13.1% in the first quarter of 2024.
• Adjusted EBITDA decreased to $2.4 million from $5.5 million in the first quarter of 2024.
• The company is revising its 2025 restaurant level contribution margins guidance downward.
• The company plans to close 13 to 17 company-owned restaurants and four franchised restaurants in 2025.

Risks

• The company's ability to execute on its strategic priorities is a risk.
• Sustaining or achieving overall growth, including digital sales growth, is a risk.
• The company's ability to open new restaurants on schedule and ensure their success is a risk.
• Achieving and maintaining increases in comparable restaurant sales is a risk.
• Successfully executing the business strategy, including new restaurant initiatives and operational strategies, is a risk.
• The success of marketing efforts, including the ability to introduce new products, is a risk.
• Economic conditions, including inflation, increased interest rates, and recessionary economic cycles, pose a risk.
• Price and availability of commodities and other supply chain challenges are risks.
• The company's ability to adequately staff its restaurants is a risk.
• Changes in labor costs are a risk.
• Maintaining compliance with Nasdaq listing requirements is a risk.
• Domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics, or pandemics are risks.
• Consumer reaction to industry-related public health issues and health pandemics is a risk.

Future Outlook

Noodles & Company expects total revenue of $503 million to $512 million for 2025, including mid-single digit comparable restaurant sales growth, and restaurant level contribution margins of 12.0% to 14.0%. The company plans to open two new company-owned restaurants and close 13 to 17 company-owned restaurants and four franchised restaurants. Capital expenditures are expected to be $11 million to $13 million.

Management Comments

• Drew Madsen, Chief Executive Officer of Noodles & Company, stated that they are very pleased with the strong comparable restaurant sales and traffic performance achieved during the first quarter despite a challenging macroeconomic environment.
• Madsen noted that the momentum is being driven by the fully reimagined new menu, increased marketing investment, and a new brand strategy.
• Madsen believes the company is positioned to capitalize on significant growth opportunities.
• Madsen concluded that the company is confident in the foundation they have put in place and are excited by the sales momentum to start 2025.

Industry Context

The restaurant industry is facing a challenging macroeconomic environment, with rising costs and changing consumer preferences. Noodles & Company's focus on menu innovation, loyalty programs, and operational excellence reflects a broader trend in the industry to adapt to these challenges and drive growth.

Comparison to Industry Standards

• Comparable restaurant sales growth of 4.4% is a solid result compared to some fast-casual peers, but lags behind high-performing chains like Chipotle which have seen double-digit growth in recent quarters.
• A restaurant contribution margin of 10.3% is below the industry average for fast-casual restaurants, which typically ranges from 15% to 20%.
• The adjusted EBITDA of $2.4 million is relatively low compared to larger competitors like Panera Bread, which generates significantly higher EBITDA due to its larger scale and higher margins.
• The planned closure of 13 to 17 company-owned restaurants suggests potential underperformance in certain locations, which is a common challenge in the restaurant industry.

Stakeholder Impact

• Shareholders will be concerned about the increased net loss and declining profitability metrics.
• Employees may be affected by the planned restaurant closures.
• Customers may be impacted by changes to the menu and restaurant locations.
• Suppliers may be affected by changes in the company's purchasing patterns.
• Creditors will be monitoring the company's debt levels and financial performance.

Next Steps

• The company will continue to focus on its new menu offerings and marketing efforts.
• The company will work to improve operational efficiency and reduce costs.
• The company will open two new company-owned restaurants.
• The company will close 13 to 17 company-owned restaurants and four franchised restaurants.
• The company will host a conference call to discuss the financial results.

Key Dates

Keywords

Noodles & Company, financial results, revenue, comparable sales, net loss, EBITDA, restaurant, guidance