Q4 2024 Noodles & Co Earnings Call
After the presenters remarks, there will be a question and answer session. As a reminder, this call is being recorded.
Speaker Change: I would now like to introduce noodles, <unk> company's Chief Financial Officer, Mike Hines.
Speaker Change: Thank you and good afternoon, everyone welcome to our fourth quarter 2024 earnings call here with me. This afternoon is drew Madsen, our Chief Executive Officer.
Good afternoon and welcome to today's Noodles & Companies 4th quarter 2024 earnings conference call. All participants are now in a listen only mode.
Speaker Change: I'd like to start by going over a few regulatory matters.
Speaker Change: After the presenter's remarks, there will be a question and answer session. As a reminder, then call it being referred to in 2024. I would now like to introduce Noodles & Co. to our financial officer, Michael Hynes. After the presenter's remarks. Thank you in good afternoon, everyone. Welcome to our fourth order in 2024. Our name is Quartet.
Speaker Change: During the call we may make forward looking statements regarding future events or the future financial performance of the company.
Speaker Change: Any such items should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act.
Speaker Change: Such statements are only projections and actual events or results could differ from those projections due to a number of risks and uncertainties, including those referred to in this afternoon's news release and the cautionary statement in the company's annual report on Form 10-K, and subsequent filings with the SEC.
Speaker Change: Here with me this afternoon, Andrew Madsen, Noodles & Co. Jake Bartlett, I'd like to start by going over a few regulatory ones. Good afternoon, everyone. During the call, or we may wait for the looking forward, maybe regarding future events. Here with me this afternoon, the future financial performance of the competitive officer.
Speaker Change: Or any such items should be considered to be cordially regulated matters within the meaning of the private majority board of litigation and requirement on future events.
Speaker Change: During the call we will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance.
Speaker Change: or the future that's on date minutes are only projections and actual events or results you can differ from list of projections.
Speaker Change: These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP are.
Speaker Change: Due to a number of risks, and uncertainties, litigates, including those referred to in this afternoon's news release. That's in the cautionary statement in the company's annual report results on form 10 pay, and subsequent filing to a number of risks.
Speaker Change: A reconciliation of these measures to the most directly comparable GAAP measures is available in our fourth quarter 2024 earnings release to.
Speaker Change: and uncertainty. During the call, we will discover non-gabby metrics, news which we believe can be a unitary statement in evaluating the company or operating per form on 10K and sub-feed measures which should not be considered. And I select the calls as a substitute for our financial results which we prepared in accordance with CAT in evaluating the reconciliation of these measures.
Speaker Change: To the extent that the company provides guidance. It does so only on a non-GAAP basis and does not provide reconciliations of forward looking non-GAAP measures.
Speaker Change: Quantitative reconciliation information for these measures is unavailable without unreasonable efforts.
Speaker Change: With that I would like to turn the call over to drew Madsen, our Chief Executive Officer.
Speaker Change: To the most directly, should not verbal gap measure as it is available in our Earth Forward 2020 R-Warning Army's earliest.
Drew Madsen: Thanks, Mike and good afternoon, everyone.
Speaker Change: The company provides guidance and a reconciliation does go only on a non-GAAP case and most directly does not provide reconciliation as a failure of a non-GAAP or measure of 24. Quantitative reconciling information for the administrative service is unavailable without unreasonable any non-GAAP cases.
Drew Madsen: We were encouraged by the significant improvement in our sales during the fourth quarter compared to the third quarter and year to date.
Drew Madsen: Especially since it was driven by greatly improved traffic.
Drew Madsen: As previously announced systemwide comparable sales increased.
Speaker Change: With that, I would like to turn the call over to Drew Maddon, our chief executive boss here of reconciling information. Thanks Mike and good afternoon everyone. We were encouraged by the significant improvement of our sales during the fourth quarter compared to the third quarter and year today. Especially since it was driven by greatly improved traffic.
Drew Madsen: 8%.
Drew Madsen: And traffic was nearly flat at minus <unk>, 1%.
Drew Madsen: Our improved comp sales trajectory was driven by a number of factors, including the rollout of three new menu items supported with increased media.
Drew Madsen: And a new commercial color come taste, the start of something great.
Speaker Change: We were, as previously announced, in improvement, just a wide comparable sales increased here to the point 80% in a year-to-date and traffic was nearly the last driven at minus 0.1%
Drew Madsen: Renewed momentum in our third party delivery channel.
Drew Madsen: And promotional offers that we ran during the first two months of the quarter.
Drew Madsen: We were especially pleased to see the strongest comp sales performance during the last four weeks of the fourth quarter. After our promotional activity had ended.
We're also very excited to share that the improving sales trends, we experienced during the fourth quarter of 2024 have accelerated in the first quarter of 2025.
Drew Madsen: Through the first eight weeks of Q1, we have delivered comp sales growth over 3%, including positive traffic.
Drew Madsen: We've also exceeded the fast casual benchmark on comp sales and traffic each of the last four months.
Drew Madsen: The sustained improvement in our sales trends demonstrates to us that the execution of our previously announced five strategic priorities.
Drew Madsen: Started to gain traction.
Drew Madsen: Let me take just a minute and highlight a few of the key dynamics driving our Q1 sales results to date.
Drew Madsen: Creating a foundation of operational excellence remains our top priority.
Drew Madsen: Building. This foundation demands that we'd be brilliant with the basics of staffing training and consistently executing the standards that will make us a better competitive alternative.
Drew Madsen: Our restaurant teams have done a great job continuing to make meaningful progress.
The sustained improvement in our sales trends demonstrates to us that the execution of our previously announced five strategic priorities.
Drew Madsen: All three areas.
Drew Madsen: And most importantly, our guests have noticed.
Started to gain traction.
Drew Madsen: In January we achieved our largest single month increase in overall guest satisfaction.
Let me take just a minute and highlight a few of the key dynamics driving our Q1 sales results to date.
Drew Madsen: And as a result have now eliminated almost 80% of our gap to the fast casual industry average over the past 12 months.
Creating a foundation of operational excellence remains our top priority.
Building. This foundation demands that we'd be brilliant with the basics of staffing training and consistently executing the standards that will make us a better competitive alternative.
Drew Madsen: Our second priority is to stimulate more guests desire for noodles through a combination of compelling limited time offerings.
Drew Madsen: And a comprehensive menu transformation.
Our restaurant teams have done a great job continuing to make meaningful progress in all three areas.
Drew Madsen: Our current limited time offering steak stroganoff is really resonating with our guests with menu preference remaining consistently strong since we brought it back in mid January.
And most importantly, our guests have noticed.
In January we achieved our largest single month increase in overall guest satisfaction.
Drew Madsen: The premium price point. This discommend has also helped to build check and maintain margin, while we simultaneously reduce discounting well below prior year levels.
And as a result have now eliminated almost 80% of our gap to the fast casual industry average over the past 12 months.
Drew Madsen: Additionally momentum from our three new menu items introduced last October has carried over into the first quarter as we prepare for the most substantial portion of our menu transformation in March.
Our second priority is to stimulate more guests desire for noodles through a combination of compelling limited time offerings.
And a comprehensive menu transformation.
Our current limited time offering steak stroganoff is really resonating with our guests with menu preference remaining consistently strong since we brought it back in mid January.
Drew Madsen: The final Q1 dynamic to emphasize is our renewed strength in third party delivery.
We are back to double digit traffic growth in this important channel driven by our revised pricing and promotion strategy.
The premium price point. This dish commands has also helped to build check and maintain margin, while we simultaneously reduce discounting well below prior year levels.
Drew Madsen: Overall, we're very pleased with our comp strength to start the year.
Drew Madsen: This is despite the weather challenges that the industry has faced in February and that we were no exception to.
Additionally momentum from our three new menu items introduced last October has carried over into the first quarter as we prepare for the most substantial portion of our menu transformation in March.
Drew Madsen: Now, let's talk about our continued menu transformation plans for the first quarter.
Drew Madsen: As discussed previously over the last 18 months, we approached this menu transformation with equal amounts of innovation and discipline.
The final Q1 dynamic to emphasize is our renewed strength in third party delivery.
Drew Madsen: Phase one involve concept testing to identify the most compelling ideas for both new and improved dishes.
We are back to double digit traffic growth in this important channel.
Driven by our revised pricing and promotion strategy.
Drew Madsen: During phase two we placed the new and improved dishes developed in partnership with the culinary edge in a central location test with both current noodles customers.
Overall, we're very pleased with our comp strength to start the year.
This is despite the weather challenges that the industry has faced in February and that we were no exception to.
Drew Madsen: Non users to ensure their satisfaction with each dish exceeded the average on our current mint.
Now, let's talk about our continued menu transformation plans for the first quarter.
During phase III, we placed the best new and improved issues in the test locations in three markets to assess real world guest satisfaction.
As discussed previously over the last 18 months, we approached this menu transformation with equal amounts of innovation and discipline.
Drew Madsen: Operational feasibility.
Phase one involve concept testing to identify the most compelling ideas for both new and improved dishes.
Drew Madsen: And any potential financial implications.
Drew Madsen: The first three new dishes from this process were introduced in October and helped drive the improving Q4, 2024, and Q1 2025 to date sales trends previously discussed.
During phase two we placed the new and improved dishes developed in partnership with the culinary edge in a central location test with both current noodles customers and non users to ensure their satisfaction with each dish exceeded the average on our current menu.
Drew Madsen: Next week, we are.
Drew Madsen: We'll introduce nine new dishes incur.
Drew Madsen: Including five completely new dishes and for re imagine recipes for traditional favorites currently on the menu.
During phase III, we placed the best new and improved issues in the test locations in three markets to assess real world guest satisfaction.
Drew Madsen: In total nearly two thirds of the menu will be new or improved by the end of the second quarter.
Operational feasibility.
Representing the single biggest culinary transformation and noodles 30 year history.
And any potential financial implications.
The first three new dishes from this process were introduced in October and helped drive the improving Q4, 2024, and Q1 2025 to date sales trends previously discussed.
Drew Madsen: Test market results show, a significant increase in guest satisfaction across all key dimensions, including overall satisfaction taste of food and value.
Next week, we are.
Drew Madsen: In addition, we've been able to extend our reach by attracting new customers at the same time.
We'll introduce nine new dishes incur.
Including five completely new dishes and for re imagine recipes for traditional favorites currently on the menu.
Drew Madsen: To ensure our restaurants are prepared to execute this level of change with excellence. We've also transformed our training process.
In total nearly two thirds of the menu will be new or improved by the end of the second quarter.
Drew Madsen: Added two weeks of additional hands on training before this rollout in two weeks of additional training after the rollout specifically to build confidence and competence in our frontline teams.
Representing the single biggest culinary transformation and noodles 30 year history.
Test market results show, a significant increase in guest satisfaction across all key dimensions, including overall satisfaction taste of food and value.
Drew Madsen: New plate Ware will replace our existing black plastic packaging next week for dining guests to further elevate their experience.
In addition, we've been able to extend our reach by attracting new customers at the same time.
Drew Madsen: To support the menu launch we plan significant public relations and earned media outreach starting next week.
To ensure our restaurants are prepared to execute this level of change with excellence. We've also transformed our training process.
Speaker Change: While I won't reveal all of the specifics of our menu transformation on our call today in advance of our comprehensive media launch I do want to give you two examples.
We added two weeks of additional hands on training before this rollout and two weeks of additional training after the rollout specifically to build confidence and competence in our frontline teams.
Drew Madsen: The first example is Mac and cheese, which is our signature category star.
Drew Madsen: Starting next week, we will feature a new Mac and cheese menu section on our digital menu boards.
New playwear will replace our existing black plastic packaging next week for dining guests to further elevate their experience.
Drew Madsen: Buffalo Chicken ranch Mac and cheese is one of the new dishes on this menu.
Drew Madsen: It features elbow noodles in a creamy cheddar and Jack cheese sauce with parmesan crusted chicken.
To support the menu launch we plan significant public relations and earned media outreach starting next week.
Drew Madsen: Top with Buffalo sauce, Green onions, crispy onions, and a drizzle a branch.
While I won't reveal all of the specifics of our menu transformation on our call today in advance of our comprehensive media launch I do want to give you two examples.
Drew Madsen: This dish as a taste of food score that is 11 points higher than the dish it replaced.
Drew Madsen: And 15 points higher than our menu average overall.
The first example is Mac and cheese, which is our signature category.
And nearly 40% more guests ordered the new Buffalo Chicken ranch, Mac and cheese than the dish it replaced.
Starting next week, we will feature a new Mac and cheese menu section on our digital menu boards.
Drew Madsen: This is part of a whole new Mac and cheese lineup that we will be rolling out in March.
Buffalo Chicken ranch Mac and cheese is one of the new dishes on this menu.
Drew Madsen: The second example is Basil pesto carbon copy, which has a fresh new take on one of the oldest and best selling dishes on our menu.
It features elbow noodles in a creamy cheddar and Jack cheese sauce with parmesan crusted chicken.
Drew Madsen: We knew we needed to be careful in making changes to a dish that so many guests know and enjoy.
Top with Buffalo sauce, Green onions, crispy onions, and a drizzle a branch.
Drew Madsen: But we also knew we couldnt settle for good we need more dishes that are great.
This dish has a taste of food score that is 11 points higher than the dish it replaced.
And 15 points higher than our menu average overall.
Drew Madsen: Our in restaurant testing process gave us great feedback on the changes guests really like and the changes we should avoid.
And nearly 40% more guests ordered the new Buffalo Chicken ranch, Mac and cheese than the dish it replaced.
Drew Madsen: This led to multiple recipe revisions leading to a significantly improved dish that both current guests and new guests will thoroughly enjoy it.
This is part of a whole new Mac and cheese lineup that we will be rolling out in March.
The second example is Basil pesto copper coffee, which is a fresh new take on one of the oldest and best selling dishes on our menu.
Drew Madsen: Specifically, we replaced Roma Tomatoes with fire roasted Tomatoes.
Drew Madsen: We also replaced shredded parmesan cheese with age parmesan for a deeper none of your flavor.
We knew we needed to be careful in making changes to address that so many guests know and enjoy.
Drew Madsen: We increased the signature Basil pesto sauce by 60% and topped it with fresh herbs.
But we also knew we couldnt settle for good.
We need more dishes that are great.
Our in restaurant testing process gave us great feedback on the changes guests really like and the changes we should avoid.
Drew Madsen: The final dish I just described has it taste of food scored nine points above the current version. In addition, more than 20% of orders for this improved dish are from new guests. Despite limited marketing support to build awareness.
This led to multiple recipe revisions leading to a significantly improved dish that both current guests and new guests will thoroughly enjoy it.
Drew Madsen: Our new menu does a much better job of delivering against what today's customer wants and we've developed a new brand strategy and marketing plan to let them know about all of the great changes they can enjoy.
Specifically, we replaced Roma Tomatoes with fire roasted Tomatoes.
We also replaced shredded parmesan cheese with aged parmesan for a deeper none of your flavor.
We increased the signature Basil pesto sauce by 60% and topped it with fresh herbs.
Drew Madsen: We believe we are the only restaurant chain of scale to offer a variety of expertly crafted noodles across cuisine types.
The final dish I just described has a taste of food scored nine points above the current version. In addition, more than 20% of orders for this improved dish are from new guests.
Drew Madsen: This is what we do and we will do it better than anyone else.
Drew Madsen: This is how we uniquely satisfy our guests need for craveable comfort food.
<unk> limited marketing support to build awareness.
Drew Madsen: Which leads to our new brand strategy.
Drew Madsen: We know noodles.
Our new menu does a much better job of delivering against what today's customer wants and we've developed a new brand strategy and marketing plan to let them know about all the great changes they can enjoy.
Drew Madsen: During the <unk> phase of our new menu marketing campaign, which is happening right now.
Drew Madsen: We are building in anticipation and generating buzz about what's coming next this.
Drew Madsen: This includes PR influencer partnerships, social media teaser messaging in restaurant messaging on our digital menu boards and a countdown clock on our website.
We believe we are the only restaurant chain of scale to offer a variety of expertly crafted noodles across cuisine types.
This is what we do and we will do it better than anyone else.
Drew Madsen: During the launch phase, which starts next week our goal is to make a bold introduction that captures the attention and drives immediate engagement.
This is how we uniquely satisfy our guests need for craveable comfort food.
Which leads to our new brand strategy.
Drew Madsen: This cross channel approach involves paid media channels, such as connected TV.
We know noodles.
During the <unk> phase of our new menu marketing campaign, which is happening right now we.
Drew Madsen: Pinterest.
Digital out of home and paid social.
We are building in anticipation and generating buzz about what's coming next this.
It will also incorporate a fresh new look to our in restaurant messaging.
This includes PR influencer partnerships, social media teaser messaging in restaurant messaging on our digital menu boards and a countdown clock on our website.
Drew Madsen: And two new launch commercials that tell the story of who we are as a brand and drive immediate visits to our restaurants.
Drew Madsen: During the sustained phased it starts later in May we will look to deepen engagement by reinforcing brand affinity through targeted storytelling and also drive repeat visits.
Speaker Change: During the launch phase, which starts next week our goal is to make a bold introduction that captures attention and drives immediate engagement.
Speaker Change: This cross channel approach involves paid media channels, such as connected TV.
Drew Madsen: To accomplish this we will double our marketing investment versus last year over the next few months to ensure we elevated awareness and drive both current customers and new customers to our restaurants to delight and our new menu.
Speaker Change: Pinterest did.
Speaker Change: Digital out of home and paid social.
Speaker Change: It will also incorporate a fresh new look to our in restaurant and messaging.
Speaker Change: And two new launch commercials that tell the story of who we are as a brand and drive immediate visits to our restaurants.
Speaker Change: Finally, we were excited to announce the addition of Joe Christina as our President and Chief operating Officer, who joined our team in late February.
Speaker Change: During the sustained phased it starts later in May we will look to deepen engagement by reinforcing brand affinity through targeted storytelling and also drive repeat visits.
Speaker Change: Joe will succeed Brad West who announced his retirement last year after eight years with the brand.
Speaker Change: I, especially want to thank Brad for his contributions to our upcoming brand relaunch and ensuring all our teams are ready to execute at a high level.
Speaker Change: To accomplish this we will double our marketing investment versus last year over the next few months to ensure we elevate awareness and drive both current customers and new customers to our restaurants to delight and our new menu.
Speaker Change: As part of his new role, Joe will oversee operations and human resources.
And as our latest investment into the leadership of noodles. Following the addition of Scott Davis as our Chief concept Officer, and Steve Kennedy as our executive Vice President of marketing last year.
Speaker Change: Finally, we were excited to announce the addition of Joe Cristina as our President and Chief operating Officer, who joined our team in late February.
Speaker Change: We are excited about the future of noodles and believe we have the leadership team in place to drive the brand resurgence.
Speaker Change: Joe will succeed Brad West who announced his retirement last year after eight years with the brand.
Speaker Change: I, especially want to thank Brad for his contributions to our upcoming brand relaunch and ensuring all our teams are ready to execute at a high level.
Speaker Change: With that I'll turn it over to Mike now to review, our fourth quarter results and 2025 guidance.
Mike Hines: Thank you drew and the fourth quarter, our total revenue decreased 2% compared to last year to $121 8 million system wide comp restaurant sales during the fourth quarter increased <unk>, 8%, including an increase of <unk>, 5% at company owned restaurants, and an increase of one nine <unk>.
Speaker Change: As part of his new role, Joe will oversee operations and human resources.
Speaker Change: And as our latest investment into the leadership of noodles. Following the addition of Scott Davis as our Chief concept Officer, and Steve Kennedy as our executive Vice President of marketing last year.
Speaker Change: At franchise restaurants.
Speaker Change: We are excited about the future of noodles and believe we have the leadership team in place to drive the brand resurgence.
Speaker Change: Any comp traffic during the fourth quarter decreased <unk>, 1% and average check increased <unk>, 6% with effective pricing up one 3% during the quarter.
Speaker Change: With that I'll turn it over to Mike now to review, our fourth quarter results and 2025 guidance.
Speaker Change: Company average unit volumes in the fourth quarter or 131 million.
Speaker Change: Thank you drill in the fourth quarter, our total revenue decreased 2% compared to last year to $121 8 million.
Speaker Change: Turning to profitability caused in the fourth quarter was 27, 2% of sales a 180 basis point increase from last year or.
Speaker Change: System wide comp restaurant sales during the fourth quarter increased <unk>, 8%, including an increase of <unk>, 5% at company owned restaurants, and an increase of one 9% at franchise restaurants.
Speaker Change: Our fourth quarter pricing benefit was offset by heavier discounting in the quarter inflation and mix shift.
Speaker Change: Labor costs for the fourth quarter were 32, 3% of sales, which was up 30 basis points to prior year, primarily driven by traffic deleverage in discounting.
Speaker Change: Anthony comp traffic during the fourth quarter decreased <unk>, 1% and average check increased <unk>, 6% with effective pricing up one 3% during the quarter.
Speaker Change: Hourly wage inflation was two 2% versus prior year, which was largely offset by pricing.
Speaker Change: Company average unit volumes in the fourth quarter or 131 million.
Speaker Change: Occupancy costs were slightly lower versus prior year at $11 4 million compared to $11 $6 million in 2023 due to 13 restaurant closures in 2024.
Speaker Change: Turning to profitability comps in the fourth quarter was 27, 2% of sales a 180 basis point increase from last year.
Speaker Change: Our fourth quarter pricing benefit was offset by heavier discounting in the quarter inflation and mix shifts.
Speaker Change: Other restaurant operating costs increased by 130 basis points in the fourth quarter to 19, 7%.
Labor costs for the fourth quarter were 32, 3% of sales, which was up 30 basis points to prior year, primarily driven by traffic deleverage in discounting.
Speaker Change: The increase in other restaurant operating costs was primarily driven by a combination of higher third party delivery fees from higher third party delivery channel sales.
Speaker Change: Hourly wage inflation was two 2% versus prior year, which was largely offset by pricing.
Speaker Change: And higher marketing expenses.
Speaker Change: Our restaurant level contribution margin was 11, 2% down from 14, 7% in the fourth quarter of 2023.
Speaker Change: Occupancy.
<unk> costs were slightly lower versus prior year at $11 4 million compared to $11 $6 million in 2023 due to 13 restaurant closures in 2024.
Speaker Change: G&A for the fourth quarter was $11 3 million compared to $13 $9 million in 2023, primarily due to lower severance and executive transition costs and lower stock compensation expense in 2024.
Speaker Change: Other restaurant operating costs increased by 130 basis points in the fourth quarter to 19, 7%.
Speaker Change: The increase in other restaurant operating costs was primarily driven by a combination of higher third party delivery fees from higher third party delivery channel sales.
Speaker Change: Net loss for the fourth quarter was $9 7 million or a loss of 21 per diluted share compared to net loss of $6 1 million or a loss of <unk> 14 per diluted share last year.
Speaker Change: And higher marketing expenses.
Speaker Change: Our restaurant level contribution margin was 11, 2% down from 14, 7% in the fourth quarter of 2023.
Speaker Change: Adjusted EBITDA for the fourth quarter was $4 million compared to $7 5 million in the fourth quarter of 2023.
Speaker Change: G&A for the fourth quarter was $11 3 million compared to $13 $9 million in 2023.
Speaker Change: In the fourth quarter, we closed six company owned restaurants, one franchise restaurant was opened and three franchise restaurants were closed in the fourth quarter.
Speaker Change: Primarily due to lower severance and executive transition costs and lower stock compensation expense in 2024.
Speaker Change: Our accelerated rate of closures in the back half of 2024 was the result of our comprehensive portfolio review, where we.
Speaker Change: Net loss for the fourth quarter was $9 $7 million or a loss of 21 per diluted share compared to net loss of $6 1 million or a loss of <unk> 14 per diluted share last year.
Speaker Change: We're evaluating closing underperforming restaurants on or before their lease expiration dates we.
Speaker Change: We will continue to negotiate with landlords and we'll determine future potential closures on a case by case basis.
Speaker Change: Adjusted EBITDA for the fourth quarter was $4 million.
Speaker Change: Our full year capital expenditures totaled $29 million in 2024 compared to $52 million in 2023.
Speaker Change: Compared to $7 5 million in the fourth quarter of 2023.
In the fourth quarter, we closed six company owned restaurants, one franchise restaurant was opened and three franchise restaurants were closed in the fourth quarter.
Speaker Change: The 2020 for capital expenditures, including capital investments for 10, New company owned restaurants.
Speaker Change: Our debt balance at the end of 2024 was $103 million with $19 million available for future borrowings under our revolving credit facility.
Speaker Change: Our accelerated rate of closures in the back half of 2024 was the result of our comprehensive portfolio review, where we're evaluating closing underperforming restaurants on or before their lease expiration dates.
Drew Madsen: Turning to our expectations for 2025 as drew mentioned through the first eight weeks of 2025, we have seen positive traffic and over a 3% comp sales growth.
Speaker Change: We will continue to negotiate with landlords and we'll determine feature potential closures on a case by case basis.
Speaker Change: Our full year capital expenditures totaled $29 million in 2024 compared to $52 million in 2023.
Drew Madsen: We are providing the following full year guidance, which excludes potential outsized impacts from changes in the macroeconomic landscape, including tariffs.
Speaker Change: The 2020 for capital expenditures, including capital investments for 10, New company owned restaurants.
Drew Madsen: For the full year 2025, we expect total revenue of $503 million to $512 million, including mid single digit comp restaurant sales growth restaurant contribution.
Our debt balance at the end of 2024 was $103 million with $19 million available for future borrowings under our revolving credit facility.
Drew Madsen: Contribution margin between 12, 5% and 14.0%, which includes a 100 basis point investment in food costs as a part of our March menu rollout.
Speaker Change: Turning to our expectations for 2025 as drew mentioned through the first eight weeks of 2025, we have seen positive traffic and over a 3% comp sales growth.
Drew Madsen: G&A expenses of $49 million to $52 million inclusive of stock based compensation expense of approximately $3 7 million.
Speaker Change: We're providing the following full year guidance, which excludes potential outsized impacts from changes in the macroeconomic landscape, including tariffs.
Drew Madsen: Depreciation and amortization expense of 27% to $29 million.
Drew Madsen: Interest expense of $8 million to $10 million.
Speaker Change: For the full year 2025, we expect total revenue of $503 million to $512 million, including mid single digit comp restaurant sales growth rests.
Drew Madsen: We expect to open two new company owned restaurants in 2021.
Drew Madsen: One new restaurant opened in January with the remaining restaurants scheduled to open in May.
Speaker Change: Restaurant contribution margin between 12, 5% in 2000, 14.0%, which includes a 100 basis point investment in food costs as a part of our March menu rollout.
Drew Madsen: We expect to close 12 to 15 company owned and four franchise restaurants in 2025.
Drew Madsen: We estimate total 2025 capital expenditures of $11 million to $13 million.
Speaker Change: G&A expenses of $49 million to $52 million inclusive of stock based compensation expense of approximately $3 $7 million.
Drew Madsen: With significantly lower capital expenditures in 2025, we anticipate being able to reduce our debt balance in the back half of the year.
Speaker Change: Depreciation and amortization expense of 27% to $29 million.
Drew Madsen: For further information regarding our 2025 expectations. Please see the business outlook section of our press release.
Speaker Change: Interest expense of $8 million to $10 million.
Speaker Change: We expect to open two new company owned restaurants in 2025.
Drew Madsen: With that I would like to turn the call back over to drew for final remarks.
Speaker Change: One new restaurant opened in January with the remaining restaurants scheduled to open in May.
Drew Madsen: Thanks, Mike.
It is an exciting time for noodles as the improvements we have seen through 2024 set the stage for a transformational 2025.
Speaker Change: We expect to close 12 to 15 company owned and four franchise restaurants in 2025.
Speaker Change: We estimate total 2025 capital expenditures of $11 million to $13 million.
Drew Madsen: Our comp momentum to start the year sets a strong foundation for our brand relaunch as we work to become more relevant to what today's consumer is looking for.
Speaker Change: With significantly lower capital expenditures in 2025, we anticipate being able to reduce our debt balance in the back half of the year.
Drew Madsen: We know of the strengths of our brand and we're leaning into them with.
Drew Madsen: With what we have planned over the coming months, we will leave no doubt that we know noodles.
Speaker Change: For further information regarding our 2025 expectations. Please see the business outlook section of our press release.
Speaker Change: Thank you for your time today operator, please open the lines for Q&A.
Drew Madsen: With that I would like to turn the call back over to drew for final remarks.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question you May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up.
Drew Madsen: Thanks, Mike It is an exciting time for noodles as the improvements we have seen through 2024 set the stage for a transformational 2025.
Drew Madsen: Our comp momentum to start the year sets a strong foundation for our brand relaunch as we work to become more relevant to what today's consumer is looking for.
Speaker Change: Your handset before pressing the star keys.
Drew Madsen: We know the strengths of our brand and we're leaning into them with.
Speaker Change: One moment, please while they pull for questions.
Speaker Change: Yeah.
Drew Madsen: With what we have planned over the coming months, we will leave no doubt that we know noodles.
Speaker Change: The first question is from Andy Barish from Jefferies. Please go ahead.
Drew Madsen: Thank you for your time today operator, please open the lines for Q&A.
Andy Barish: Hey, guys good afternoon.
Andy Barish: Wondering what what areas you're kind of seeing the most movement than on the guest satisfaction scores that you noted kind of starting out 2025 through and how.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up.
Andy Barish: You know how that's kind.
Andy Barish: Kind of informing some of the upcoming decisions.
Andy Barish: Yes. The main thing that we've seen significant improvement in the areas that are most directly related to driving traffic growth. So we know we've studied this that overall satisfaction improvements lead to traffic growth and taste of food in particular drives overall satisfaction.
Drew Madsen: Your handset before pressing the star keys.
Speaker Change: One moment please poll for questions.
Speaker Change: The first question is from Andy Barish from Jefferies. Please go ahead.
Hey, guys good afternoon.
Andy Barish: We've been focused a great deal on an overall satisfaction pace of foods and accuracy in particular.
Speaker Change: Wondering what what areas you're kind of seeing the most movement and then on the guest satisfaction scores that you noted kind of starting out 2025 through and how.
Andy Barish: All of those have shown significant.
Andy Barish: Improvement in addition to value.
Speaker Change: How that.
Andy Barish: Because we are delivering more of what today's customer wants.
Kind of informing some of the upcoming decisions.
Andy Barish: Got it and then.
Speaker Change: Yes, the main thing.
Andy Barish: Mike any help on it sounds like same store sales are going to start out around three ish.
Speaker Change: We've seen significant improvement in the areas that are most directly related to driving traffic growth. So we know we didn't we've studied this.
Andy Barish: But the current quarter and then obviously the new menu stop is.
Speaker Change: Overall satisfaction improvements lead to traffic growth and taste of food in particular drives overall satisfaction. So we've been focused a great deal.
Andy Barish: Ramping here late in the quarter and then in the Q.
Andy Barish: How should we think about kind of getting to the mid single digits for the full year.
Speaker Change: Overall satisfaction taste of food and accuracy in particular and all of those have shown significant improvement in addition to value.
Andy Barish: Sure.
Andy Barish: And like you said first quarter, where.
Andy Barish: We're tracking at over 3%, which is a great start before our menu rollout.
Speaker Change: Because we are delivering more of what today's customer watts.
Andy Barish: As we go into the second quarter just.
Speaker Change: Got it and then.
Andy Barish: Not a huge impact, but we do have an Easter shift that will hurt that helped the first quarter and hurt the second quarter by about 50 basis points.
Speaker Change: Mike any help on it sounds like same store sales are going to start out around three ish.
Andy Barish: The second quarter was was our toughest comp or is going to be our toughest comp.
For the current quarter and then obviously the new menu stop.
Andy Barish: That's when we had stakes drove an off and some really strong sales last year.
Speaker Change: It's kind of ramping here late in the quarter and then in the Q.
Andy Barish: So we're anticipating that most of the benefit.
Speaker Change: How should we think about kind of getting to the mid single digits for the full year.
Andy Barish: Outsized portion of the benefit for to get to mid single digit same store sales growth will come in Q3 Q4.
Speaker Change: Sure.
Speaker Change: And like you said first quarter.
Andy Barish: Okay very helpful. Thanks.
Speaker Change: We're tracking at over 3%, which is a great start before our menu rollout.
Andy Barish: Yeah.
Speaker Change: As we go into the second quarter just.
Speaker Change: The next question is from Jake Bartlett from <unk> Securities. Please go ahead.
Speaker Change: Not a huge impact, but we do have an Easter shift that will hurt the.
Jake Bartlett: Great. Thanks for taking the question My first is kind of a nitpicky question maybe.
Speaker Change: The first quarter and hurt the second quarter by about 50 basis points.
Speaker Change: A follow up question as well, but it has to do with the coordinate trends I think over 3%, obviously very strong and you made the comment that the February and the weather was we had a negative impact how how much.
Speaker Change: The second quarter was was our toughest comp or is going to be our toughest comp. That's when we had stakes drove an off and some really strong sales last year.
Speaker Change: So we're anticipating that most of the benefit.
Speaker Change: Outsized portion of the benefit for to get to mid single digit same store sales growth will come in Q3 Q4.
Speaker Change: You can maybe quantify kind of where comps were in the last three weeks I just wanted to make sure I understand where they need to kind of improve back to.
Speaker Change: Okay very helpful. Thanks.
Speaker Change: And then also your just your confidence that that it was whether I know.
Speaker Change: That's been the case for competitors I think most are also acknowledging that there is a macro environment, that's a little bit worse than we thought it might be a month ago. So.
Jake Bartlett: The next question is from Jake Bartlett from <unk> Securities. Please go ahead.
Jake Bartlett: Great. Thanks for taking the question My first is kind of a nitpicky question maybe.
Speaker Change: How can how can you how are you.
Jake Bartlett: A follow up question as well, but it has to do with the coordinate trends I think over 3%, obviously very strong and you made the comment that February and the weather was we had a negative impact how much if you could maybe quantify kind of where comps were in the last three weeks I just want to make sure I understand where they need to kind of <unk>.
Speaker Change: Parsing out weather and then maybe what is the kind of the actual state of same store sales currently.
Speaker Change: Sure, we don't want to get into a month by month breakout, but just as a reminder January of last year was tough weather for us and we saw like everybody has seen some tough weather in February of this year I would say we feel.
Jake Bartlett: <unk> back to.
Jake Bartlett: And then also just your confidence that that it was whether I know that's been the case for competitors I think most are also acknowledging that there's a macro.
Speaker Change: Strongly that the 3% plus 3% we're seeing in Q1.
Speaker Change: It is a sustainable number it's not a.
Jake Bartlett: Environment, that's a little bit worse than we thought it might be a month ago. So.
Speaker Change: Something that's being impacted or aided on a permanent basis by weather.
How can how can you how are you.
Speaker Change: So if we if we look at the non weather weeks plus 3%, it's pretty representative of how the quarter's going.
Jake Bartlett: <unk> out weather and then maybe what is the kind of the actual state of same store sales currently.
Jake Bartlett: Currently.
Speaker Change: Okay, Great and then.
Jake Bartlett: Sure, we don't want to get into a month by month break out, but just as a reminder January of last year was tough weather for us and we saw like everybody has seen some tough weather in February of this year I would say we feel.
Speaker Change: Also just 2025 is going to be interesting year with such a big.
Speaker Change: Change to the to the operations and to menu.
Speaker Change: One part of the question is what's the impact on margins is going to be in the near term.
Jake Bartlett: Strongly that the 3% plus 3% we're seeing in Q1.
Speaker Change: And then the next quarter or two as well as for the year and you quantified I think.
Jake Bartlett: It is a sustainable number it's not.
Speaker Change: 120 basis points of food cost related to the menu rollout and it also sounded like youre going to be doubling advertising doubling marketing as you there's training that youre investing in kind of before and after.
Jake Bartlett: Something that's being impacted are aided on a permanent basis by weather.
Jake Bartlett: So if we if we look at the non weather weeks, plus 3% is pretty representative of how the quarter's going.
Speaker Change: What is the all in on the kind of the abnormal impacts of the rollout rollout on the margins.
Jake Bartlett: Okay, Great and then.
Jake Bartlett: Also just two.
Jake Bartlett: 25 is going to be interesting year with such a big.
Speaker Change: Yes, I'll take the marketing side of it first we are significantly increasing our marketing investment this year during the launch for a few months for several months compared to the prior year just to make sure everyone knows.
Jake Bartlett: Change to the to the operations and into menu.
Jake Bartlett: One part of the question is what's the impact on margins is going to be in the near term.
Jake Bartlett: Next quarter or two as well as for the year and you quantified I think.
Speaker Change: What a big change we've made how excited we are about at what a difference it is going to make in the guest experience.
Jake Bartlett: 120 basis points of food cost related to the menu rollout.
Speaker Change: But for the full year the increase in marketing investment.
Jake Bartlett: Also sounded like youre going to be doubling advertising doubling marketing as you there's training that youre investing into the before and after.
Speaker Change: As is more modest we're really able to increase.
Speaker Change: Our spending a great deal early on by shifting.
Jake Bartlett: What is the all in on the kind of the abnormal impacts of the rollout rollout on the margins.
Speaker Change: Spending that in 2024 was more related to testing.
Jake Bartlett: Yes, I'll take the marketing side of it first we are significantly increasing our marketing investment this year during the launch for a few months for several months compared to the prior year just to make sure everyone knows.
Speaker Change: More related to spending with the culinary hedge with concept testing with central location testing.
Speaker Change: We arent having to do this year, we're putting all of that a lot of that.
Speaker Change: Into the launch of the.
Jake Bartlett: What a big change we've made how excited we are about at what a difference that's going to make in the guest experience.
Speaker Change: The menu to drive awareness and drive people into our restaurants, but for the full year.
Speaker Change: It is up but it's been more modest.
Jake Bartlett: But for the full year the increase in marketing investment.
Speaker Change: Okay.
Speaker Change: 100 and.
Jake Bartlett: As is more modest we're really able to increase our.
Speaker Change: Yes, just can address the other items.
Jake Bartlett: Spending a great deal early on.
Speaker Change: We talked about the 100 basis point investment in food costs.
Jake Bartlett: By shifting.
Jake Bartlett: Spending in 2024 was more related to testing.
Speaker Change: Got it at a margin in between 12, five and 14, which shows the mid single digit comp sales growth overcoming that investment.
Jake Bartlett: More related to spending with the culinary hedge with concept testing with central location testing.
Speaker Change: Achieving flat to growing margin year over year.
Jake Bartlett: We arent having to do this year, we're putting all of that a lot of that.
Speaker Change: The other investments on a on an annual basis.
Jake Bartlett: Into the launch of the <unk>.
Speaker Change: Don't come close to the 100 basis points to the investment in our are not substantial when you look at it on a on it.
Jake Bartlett: The menu to drive awareness and drive people into our restaurants, but for the full year.
Jake Bartlett: It is up but it's been more modest.
Speaker Change: Full year basis.
Speaker Change: Got it and just just to understand the 100 basis points in food investment is that a permanent meaning youre investing in quality in the menu and that's going to remain or is this something that has to do with the rollout and just kind of more more temporary maybe with some I don't know.
Jake Bartlett: Okay.
Jake Bartlett: <unk> hundred eight sorry go for it.
Jake Bartlett: Yes, just can address the other items.
Speaker Change: We talked about 100 basis point investment in food costs.
Speaker Change: Got it at a margin in between 12, five and 14, which shows the mid single digit comp sales growth overcoming that investment.
Related marketing and giveaways or something like that that would change your impact Cogs or is this a permanent kind of investment and the quality of the food.
Achieving flat to growing margin year over year.
Speaker Change: Yeah, no. The vast majority of that is a permanent investment in the <unk>.
Speaker Change: The other investments on a on an annual basis.
Speaker Change: And the quality of the food.
Speaker Change: Don't come close to the 100 basis points due to investment in our are not substantial when you look at it on a on.
Speaker Change: And we believe it's a tremendous investment because we've seen such a big improvement.
Speaker Change: And guest satisfaction across the things that we think are most important to.
Speaker Change: Full year basis.
Speaker Change: Got it and just just to understand the 100 basis points in food investment is that a permanent meaning youre investing in quality in the menu and that is going to remain or is this something that has to do with the rollout and just kind of more more temporary maybe with some I don't know.
Speaker Change: To build a loyalty and building the business so.
Speaker Change: It is an investment a permanent investment and we think it's going to be a tremendous one.
Speaker Change: To build excitement to build guest satisfaction to build our business going forward in a very sustainable way.
Speaker Change: Related marketing and giveaways or something like that that would change your impact Cogs or is this a permanent kind of investment and the quality of the food.
Speaker Change: Okay, Great I appreciate it thank you.
Speaker Change: Yeah.
Speaker Change: This concludes the question and answer session and today's conference call. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Yeah, no. The vast majority of that is a permanent investment.
Speaker Change: And the quality of the food.
Speaker Change: We believe it's a tremendous investment because we've seen such a big improvement.
Speaker Change: Uh huh.
Speaker Change: And guest satisfaction across the things that we think are most important to.
Speaker Change: To build a loyalty and building the business so.
Speaker Change: It is an investment a permanent investment and we think it's going to be a tremendous one.
Speaker Change: To build excitement to build guest satisfaction to build our business going forward in a very sustainable way.
Speaker Change: Okay, Great I appreciate it thank you.
Speaker Change: Yeah.
Speaker Change: This concludes the question and answer session and today's conference call. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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