Noodles & pany(NDLS) - 2026 Q2 - Quarterly Report

PART I - Financial Information Item 1. Financial Statements Unaudited financial statements reflect a Q2 2025 net loss of $17.6 million amid rising operating costs and impairment charges Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 1, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,264 | $1,149 | | Total current assets | $21,266 | $20,192 | | Property and equipment, net | $122,936 | $137,237 | | Total assets | $294,575 | $324,648 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $68,372 | $65,717 | | Long-term debt, net | $106,441 | $100,742 | | Total liabilities | $325,350 | $330,227 | | Total stockholders' deficit | ($30,775) | ($5,579) | - Total assets decreased from $324.6 million at year-end 2024 to $294.6 million as of July 1, 2025, while the company's stockholders' deficit widened significantly from $5.6 million to $30.8 million[13] Q2 2025 vs Q2 2024 Statement of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenue | $126,433 | $127,352 | | Total costs and expenses | $141,211 | $138,870 | | Loss from operations | ($14,778) | ($11,518) | | Net loss | ($17,552) | ($13,625) | | Basic and diluted loss per share | ($0.38) | ($0.30) | First Half 2025 vs First Half 2024 Statement of Operations (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Total revenue | $250,227 | $248,746 | | Total costs and expenses | $271,392 | $264,360 | | Loss from operations | ($21,165) | ($15,614) | | Net loss | ($26,609) | ($19,765) | | Basic and diluted loss per share | ($0.58) | ($0.44) | - The company's net loss widened to $17.6 million in Q2 2025 from $13.6 million in Q2 2024, driven by higher costs and expenses, particularly restaurant impairments and closure costs[15] - The total stockholders' deficit increased from $5.6 million at the end of 2024 to $30.8 million as of July 1, 2025, primarily driven by the net loss of $26.6 million incurred during the first half of 2025[18] Cash Flow Summary for the Two Fiscal Quarters Ended (in thousands) | Cash Flow Activity | July 1, 2025 | July 2, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,181 | $11,728 | | Net cash used in investing activities | ($6,318) | ($15,774) | | Net cash provided by financing activities | $4,252 | $2,839 | | Net increase (decrease) in cash | $1,115 | ($1,207) | - Cash provided by operating activities significantly decreased to $3.2 million in the first half of 2025 from $11.7 million in the same period of 2024[23] - As of July 1, 2025, the company operated 453 restaurants system-wide, consisting of 364 company-owned and 89 franchise locations[26] - The company had $108.3 million of indebtedness outstanding under its A&R Credit Agreement as of July 1, 2025, with interest rates ranging from 8.07% to 10.25% during the first half of the year[36][37] - In Q2 2025, the company recorded $11.9 million in restaurant impairment charges on 15 restaurants, an increase from the $10.9 million impairment on 12 restaurants in Q2 2024[47][49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparable restaurant sales grew 1.5% in Q2 2025, but profitability declined due to higher costs and impairment charges - System-wide comparable restaurant sales increased 1.5% in Q2 2025, with a 1.5% increase at company-owned and 1.6% at franchise-owned restaurants[71] - The company is responding to macroeconomic uncertainty with a comprehensive menu upgrade, increased marketing, and plans for new value offerings[72] - The company permanently closed nine company-owned restaurants in the first half of 2025 and anticipates closing an additional 19 to 23 restaurants during the remainder of the year[77] - The company uses key metrics including revenue, comparable restaurant sales, average unit volumes (AUVs), and adjusted EBITDA to evaluate performance[78] - Comparable restaurant sales are a key metric, defined as year-over-year sales comparisons for restaurants open at least 18 full periods[81] Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(17,552) | $(13,625) | $(26,609) | $(19,765) | | EBITDA | $(7,639) | $(4,151) | $(6,936) | $(877) | | Adjusted EBITDA | $6,016 | $9,195 | $8,420 | $14,695 | Restaurant Contribution Margin | Period | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Restaurant Contribution Margin | 12.8% | 15.5% | 11.6% | 14.4% | - In Q2 2025, total revenue decreased slightly by 0.7% to $126.4 million, while net loss increased by 28.8% to $17.6 million compared to Q2 2024[100][101] - For the first half of 2025, total revenue increased by 0.6% to $250.2 million, while net loss widened by 34.6% to $26.6 million compared to the same period in 2024[113][114] - The company believes it has sufficient cash sources for at least the next twelve months from available cash, its revolving credit facility, and cash flows from operations[125] - Net cash from operating activities decreased to $3.2 million in H1 2025 from $11.7 million in H1 2024, primarily due to lower net income adjusted for non-cash items[126][127] - Capital expenditures for fiscal year 2025 are estimated to be between $12.0 million and $13.0 million[133] - As of July 1, 2025, the company had a cash balance of $2.3 million and $13.7 million available for future borrowings under its A&R Credit Agreement[135] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from interest rate fluctuations, commodity volatility, and inflation - The company is exposed to interest rate risk on its $108.3 million of outstanding variable-rate debt; a 1.0% change in the effective interest rate would result in an annualized pre-tax interest expense fluctuation of approximately $1.1 million[141] - The company faces commodity price risk for products like food and uses purchasing contracts to manage this risk[142] - Inflationary factors affecting operations include food, labor, and energy costs, and the company anticipates that inflation may continue to affect its results[143] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of July 1, 2025[145] - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[146] PART II - Other Information Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the report date, the company is not a party to any material legal proceedings[148] Item 1A. Risk Factors The company faces risks from potential Nasdaq delisting and more restrictive future debt covenants - On June 24, 2025, the company received a notice from Nasdaq for non-compliance with the minimum $1.00 bid price requirement, giving it 180 days to regain compliance[151] - Failure to regain compliance with Nasdaq's listing requirements could result in delisting, leading to reduced liquidity and difficulty in obtaining future financing[154] - The company's credit facility covenants become more restrictive beginning in Q4 2025, and non-compliance could trigger default and debt acceleration[159][160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[162] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[163] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[164] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[165] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q