Noodles & pany(NDLS) - 2022 Q2 - Quarterly Report

PART I Financial Statements (unaudited) This section presents Noodles & Company's unaudited condensed consolidated financial statements for Q2 2021, including balance sheets, operations, equity, cash flows, and accompanying notes Condensed Consolidated Balance Sheets Total assets increased to $360.2 million as of June 29, 2021, driven by higher cash, while total liabilities remained stable and equity grew to $35.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2021 | December 29, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $17,324 | $7,840 | | Total current assets | $34,964 | $23,714 | | Total assets | $360,155 | $353,631 | | Liabilities & Equity | | | | Total current liabilities | $70,761 | $58,129 | | Long-term debt, net | $35,754 | $40,949 | | Total liabilities | $324,712 | $323,932 | | Total stockholders' equity | $35,443 | $29,699 | | Total liabilities and stockholders' equity | $360,155 | $353,631 | Condensed Consolidated Statements of Operations Q2 2021 saw a significant turnaround with total revenue up 56.8% to $125.6 million, resulting in a net income of $5.7 million and diluted EPS of $0.12 Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $125,649 | $80,157 | $235,226 | $180,505 | | Income (loss) from operations | $6,210 | $(12,525) | $4,845 | $(17,379) | | Net income (loss) | $5,683 | $(13,478) | $3,706 | $(19,313) | | Diluted EPS | $0.12 | $(0.30) | $0.08 | $(0.44) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $35.4 million by Q2 2021, primarily driven by $3.7 million in net income and stock-based compensation - Total stockholders' equity rose to $35.4 million at the end of Q2 2021, up from $29.7 million at the end of 2020[11] - The increase in equity was primarily due to net income of $3.7 million and stock-based compensation of $2.3 million during the first half of 2021[11] Condensed Consolidated Statements of Cash Flows Net cash from operations significantly improved to $23.2 million for YTD 2021, leading to a $9.5 million net increase in cash despite investing and financing outflows Cash Flow Summary (in thousands) | Activity | YTD Ended June 29, 2021 | YTD Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,246 | $6,707 | | Net cash used in investing activities | $(7,476) | $(6,810) | | Net cash (used in) provided by financing activities | $(6,286) | $51,720 | | Net increase in cash and cash equivalents | $9,484 | $51,617 | Notes to Condensed Consolidated Financial Statements Notes detail business operations, COVID-19 impact, debt, leases, revenue recognition, and impairment, with 451 system-wide restaurants as of June 29, 2021 - As of June 29, 2021, the Company had 451 restaurants system-wide, consisting of 374 company-owned and 77 franchise locations[17] - The company's financial performance has seen sequential improvement since the initial disruption from the COVID-19 pandemic, aided by investments in off-premise and digital channels[20] - As of June 29, 2021, the company had $38.8 million of indebtedness outstanding under its Second Amended Credit Facility and was in compliance with all debt covenants[36][39] - The company recognized revenue from gift card breakage over an estimated 24-month redemption period. The gift card liability was $2.3 million (current) and $0.4 million (long-term) as of Q2 2021[58][59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant recovery from COVID-19, highlighting a 56.8% increase in Q2 2021 comparable sales, strong digital growth, improved margins, and plans for accelerated unit expansion Impact of COVID-19 and Recent Trends The company's performance has sequentially improved since Q2 2020, with Q2 2021 system-wide comparable sales up 56.8%, and plans for accelerated unit growth starting in 2022 - System-wide comparable restaurant sales increased 56.8% in Q2 2021, with company-owned restaurants up 55.7% and franchise restaurants up 63.8%[69] - The company has a strategic growth plan for at least 7% annual system-wide unit growth starting in 2022, aiming for 10% annual growth and a long-term target of at least 1,500 units[75] - Labor availability has declined in some markets, but the impact has been mitigated by optimizing hiring, retention, and implementing a modified labor model to improve efficiency[73] Results of Operations Operational results show strong recovery, with Q2 2021 total revenue up 56.8% to $125.6 million and YTD revenue up 30.3% to $235.2 million, leading to net income in both periods Q2 2021 vs Q2 2020 Performance (in thousands) | Metric | Q2 2021 | Q2 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $125,649 | $80,157 | $45,492 | 56.8% | | Net Income (Loss) | $5,683 | $(13,478) | $19,161 | * | | Company-owned AUV | $1,350 | $891 | $459 | 51.5% | | Company-owned Comp Sales | 55.7% | (30.1)% | N/A | N/A | YTD 2021 vs YTD 2020 Performance (in thousands) | Metric | YTD 2021 | YTD 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $235,226 | $180,505 | $54,721 | 30.3% | | Net Income (Loss) | $3,706 | $(19,313) | $23,019 | * | | Company-owned AUV | $1,260 | $966 | $294 | 30.4% | | Company-owned Comp Sales | 29.8% | (19.0)% | N/A | N/A | - Adjusted EBITDA for Q2 2021 was $13.8 million, a significant improvement from a negative $3.3 million in Q2 2020[89] Liquidity and Capital Resources As of June 29, 2021, the company had $17.3 million in cash and $57.0 million available credit, with $23.2 million cash from operations for YTD 2021, sufficient for future liquidity - The company's cash and cash equivalents balance was $17.3 million as of June 29, 2021, with $57.0 million available under its credit facility[122] - Estimated capital expenditures for fiscal year 2021 are approximately $20.0 million to $24.0 million, intended for new restaurant openings, kitchen equipment, and maintenance[128] - As of June 29, 2021, the company had $38.8 million of indebtedness outstanding and expects to pay down a portion of this debt over the next two quarters[130][133] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate changes on variable-rate debt, commodity price volatility, and inflation, with a 1.0% interest rate change impacting pre-tax expense by $0.4 million annually - The company is exposed to interest rate risk on its $38.8 million of variable-rate debt. A 1.0% change in the effective interest rate would result in an annualized pre-tax interest expense fluctuation of about $0.4 million[137] - Commodity price volatility affects food costs, but the company uses purchasing contracts to minimize this risk and can adjust menu pricing to address cost increases[138] - Inflationary factors affecting operations include food, labor, energy, and construction costs. Wage inflation, in particular, has affected results and is expected to continue to do so[139] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 29, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 29, 2021[142] - 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[143] PART II Legal Proceedings The company is subject to routine legal proceedings, with management assessing that any unfavorable outcomes would not be material to the financial statements - The company is subject to routine lawsuits and claims, but as of June 29, 2021, it is unable to ascertain the ultimate liability and does not expect any material financial impact[145] Risk Factors No material changes to the company's risk factors have occurred since the filing of the Annual Report on Form 10-K for fiscal year 2020 - No material changes to the company's risk factors have occurred since the filing of the Annual Report on Form 10-K for the fiscal year ended December 29, 2020[146] Other Part II Items This section covers other required disclosures, including no unregistered equity sales, no defaults on senior securities, and an index of exhibits - The company reported no unregistered sales of equity securities or use of proceeds (Item 2)[146] - There were no defaults upon senior securities (Item 3)[146] - An index of exhibits filed with the report is provided under Item 6, including employment agreements and officer certifications[148]