Noodles & pany(US:NDLS)2022-11-03 16:00Restaurant Operations - In 2022, Noodles & Company opened 11 new company-owned restaurants and 3 franchise restaurants, with a long-term unit growth rate target of approximately 5% for 2022 and 7% for 2023[66] - As of September 27, 2022, Noodles & Company operated 366 company-owned restaurants and 93 franchise restaurants across 31 states[66] - The company opened 3 new company-owned restaurants in Q3 2022, while closing none, resulting in a total of 366 company-owned restaurants at the end of the period[83] - The company permanently closed two company-owned restaurants in the first three quarters of 2022 but does not anticipate significant closures in the near future[67] Financial Performance - Revenue for the third quarter of 2022 was $7,355,000, a decrease from $10,891,000 in the same quarter of 2021, while adjusted EBITDA was $9,785,000 compared to $13,194,000 in the prior year[81] - Total revenue increased by $4.3 million, or 3.4%, to $129.4 million in Q3 2022 compared to $125.1 million in Q3 2021[90] - Total revenue increased by $12.7 million, or 3.5%, to $373.0 million in the first three quarters of 2022 compared to $360.4 million in the same period of 2021[103] - Net income for Q3 2022 was $795,000, a decrease of 83.1% compared to $4.7 million in Q3 2021[90] - Net cash provided by operating activities was $7.8 million in the first three quarters of 2022, down from $29.9 million in the same period of 2021[117] Sales and Revenue Trends - Comparable restaurant sales are influenced by consumer spending trends, pricing, and the impact of the COVID-19 pandemic, with fluctuations expected due to seasonal factors[71] - System-wide comparable restaurant sales increased by 2.1% in Q3 2022, with a 3.4% increase at company-owned restaurants and a 3.8% decrease at franchise-owned restaurants[90] - Comparable restaurant sales increased 4.6% at company-owned restaurants and 4.5% system-wide in the first three quarters of 2022[103] Cost Management - Cost of sales increased by $4.6 million, or 14.8%, in Q3 2022, with cost of sales as a percentage of restaurant revenue rising to 28.1% from 25.1%[92] - Labor costs rose by $2.2 million, or 5.8%, in Q3 2022, with labor costs as a percentage of restaurant revenue increasing to 30.8% from 30.0%[93] - Occupancy costs decreased by $0.3 million, or 2.5%, in Q3 2022, with occupancy costs as a percentage of revenue decreasing to 8.8% from 9.3%[94] - Other restaurant operating costs increased by $1.2 million, or 5.5%, in Q3 2022, with these costs as a percentage of restaurant revenue rising to 17.9% from 17.5%[95] - Cost of sales increased by $13.2 million, or 14.9%, to 27.9% of restaurant revenue in the first three quarters of 2022 compared to 25.0% in the same period of 2021[105] - Labor costs increased by $5.2 million, or 4.8%, to 31.1% of restaurant revenue in the first three quarters of 2022 compared to 30.5% in the same period of 2021[106] - Other restaurant operating costs increased by $4.6 million, or 7.2%, to 18.5% of restaurant revenue in the first three quarters of 2022 compared to 17.7% in the same period of 2021[108] Inflation and Cost Pressures - The company has implemented greater menu price increases due to ongoing inflation, which may continue if inflationary pressures persist[62] - The company has incurred increased costs of sales due to volatility in commodity markets, particularly for chicken products, but expects improvements in food costs in the fourth quarter of 2022 and 2023[64] - Inflation has significantly impacted operating results in 2022, particularly in commodity and construction markets, with expectations that inflation will continue to affect results in the near future[132] - The company experienced higher food costs in the first three quarters of 2022 due to commodity price volatility, but expects improvements in commodity markets, particularly for chicken, to be realized in Q4 2022 and 2023[131] Financial Position and Debt - As of September 27, 2022, the cash balance was $1.8 million, down from $2.3 million as of December 28, 2021[122] - The company had $37.9 million of indebtedness under the Third Amended Credit Facility as of September 27, 2022[125] - As of September 27, 2022, the company had $37.9 million of outstanding borrowings under its credit facility with an average interest rate of 4.97%, up from 3.42% in the same quarter of 2021[130] - The average interest rate on outstanding bank debt increased by 1.55% year-over-year, indicating exposure to market risk from interest rate fluctuations[130] Management and Governance - The company has no off-balance sheet arrangements or obligations as of September 27, 2022[126] - There have been no changes in internal control over financial reporting that materially affected the company during the most recent fiscal quarter[136] - The company is not currently involved in any material legal proceedings, which could impact resources and reputation[138] - Management believes it has material pricing power to adjust menu pricing or change product delivery strategies without negatively impacting demand[131] - The company’s disclosure controls and procedures are deemed effective as of September 27, 2022, ensuring timely and accurate reporting[134] - The company’s critical accounting estimates are based on subjective judgments that could lead to materially different reported amounts if different assumptions were applied[129] Labor Market Conditions - Labor availability improved in many markets during the third quarter of 2022, but wage inflation remains a concern due to high competition for restaurant workers[65]