Noodles & Company Q2 FY2025 earnings call

• Drew Madsen announced he will step down as CEO at the end of August due to health reasons, with Joe Christina to become new CEO. - Second quarter same-store sales were up 1.5% but below expectations due to guest value perception decline after menu launch. - New menu launched in March, with sales of Signature Mac & Cheese growing, but some existing dishes faced extended J-curve in guest satisfaction due to consumer value demand and industry promotions. - Increasing focus on value with new delicious Duos value platform launched on July 30, next LTO Chili Garlic Ramen in early Q4. - Making menu adjustments like eliminating Green Goddess salad, testing refined recipes, and continuing to lean into digital platforms and rewards program.

In the second quarter, total revenue decreased 0.7% compared to last year to $126.4 million. System-wide comp restaurant sales increased 1.5% during the second quarter, with 1.5% growth at company-owned restaurants and 1.6% at franchise restaurants. Company comp traffic decreased 2.5% and average check increased 4%. COGS in the second quarter were 26.5% of sales, a 180 basis point increase from last year. Labor costs were 31.7% of sales, up 50 basis points. Restaurant level contribution margin was 12.8%, down from 15.5% in the second quarter of 2024. Net loss for the second quarter was $17.6 million or a loss of $0.38 per diluted share.

• Full year 2025 guidance: total revenue $487 million to $495 million, comp restaurant sales growth 2.5% to 4%, restaurant contribution margin between 11.8% and 12.6%, G&A expenses $48 million to $50 million, depreciation and amortization $27 million to $29 million, interest expense $10.5 million to $11.5 million, capital expenditures $12 million to $13 million. - No longer expect free cash flow positive in 2025, working toward 2026.

• Consumer demand for increased value and affordability leading to industry-wide discounting and promotions. - Operational challenges in executing big menu change leading to extended J-curve in guest satisfaction. - Food cost increases related to new menu offerings. - Risks associated with portfolio review of underperforming restaurants.