Noodles & pany(NDLS) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2019 was $110 million, roughly flat compared to the prior year, as comparable sales growth was offset by restaurant closures in 2018 [17] - Comparable restaurant sales increased by 3%, with a 3% increase at company-owned restaurants and a 2.8% increase at franchise locations [17] - Adjusted EBITDA remained flat at $5.6 million compared to the prior year, while adjusted diluted loss per share improved from a loss of $0.04 to a loss of $0.03 [22] Business Line Data and Key Metrics Changes - Off-premise sales grew to 56% of total sales during Q1, a 500 basis point increase from Q1 2018, driven by a 63% increase in digital ordering, which accounted for 22% of total sales [11][12] - Digital ordering sales, excluding delivery, increased by 32% from the prior year, accounting for 17% of sales [12] - The introduction of new menu items, including zucchini and asparagus dishes, is expected to enhance the better-for-you platform [9][10] Market Data and Key Metrics Changes - The company experienced modestly negative traffic for the full quarter but returned to positive traffic growth during the last few weeks of Q1 and continued this trend into Q2 [8][18] - The company anticipates continued growth in delivery and digital sales, with a focus on improving the customer experience [12][46] Company Strategy and Development Direction - The company is focused on holistic initiatives to redefine the Noodles brand and position it for sustained growth, emphasizing culinary innovation and customer choice [8][9] - A new personalized nutrition calculator was launched to enhance customer engagement and cater to various dietary preferences [10] - The company plans to relaunch its digital platform in Q4 2019 to improve the ordering process and rewards program [12][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain top-tier performance in the restaurant industry, citing the right team and strategy in place [16] - The company updated its full-year guidance, expecting total revenue between $466 million and $474 million, with comparable restaurant sales of 3% to 5% [24] - Management acknowledged the challenges posed by delivery fees but remains optimistic about the overall growth potential [14][54] Other Important Information - Long-term debt at the end of Q1 stood at $49.3 million, with cash on hand at $1.8 million, indicating a strong balance sheet [23] - The company reduced its capital expenditure guidance for 2019 to a range of $14.5 million to $19 million, down from $24 million to $30 million [22] Q&A Session Summary Question: Can you break out same-store sales by month in Q1? - Management noted that due to the Easter shift, it is challenging to provide a detailed breakdown, but traffic turned positive in the last few weeks of Q1 and has continued into Q2 [29][30] Question: How confident are you in maintaining positive sales as you lap the launch of Zoodles? - Management expressed strong confidence in the business momentum and positive trajectory, despite the challenges of lapping the Zoodles launch [32][33] Question: What is the expected commodity inflation for the year? - Management expects commodity inflation to be modest, roughly flat to slightly positive, with improvements anticipated in the COGS line later in the year [34][35] Question: Are the five stores expected to close company stores? - Management indicated that the closures are company locations and that a normal run rate would be one to two restaurants every three to six months [36][37] Question: What areas are being focused on to improve the customer experience with the App and rewards program? - Management aims to create a best-in-class guest engagement platform, enhancing the online experience and data targeting capabilities [42][43] Question: What updates are there on the back of the house efficiency improvements? - Management is working on sourcing new equipment to improve kitchen efficiency, with changes expected to be implemented in Q4 2019 [48][49] Question: Why was there no change in the high-end margin guidance despite raised comps? - Management attributed this to the impact of delivery fees, which affect margin flow-through, and indicated that it is too early to incorporate potential pricing strategies into guidance [53][54]