Noodles & Company Q3 FY2025 earnings call

• Recent sales trend: Comparable sales grew 4% in Q3, accelerated to 8% in October with traffic up over 1.5%.
• Menu and platform initiatives: Success of new menu rollout, Delicious Duos platform launched in late July, positive impact of Chili Garlic Ramen LTO.
• Restaurant closures: Strategically closing underperforming restaurants, expecting to retain ~30% of sales through transfer to nearby units to improve sales leverage and profitability.
• Operations excellence: Operations excellence coaching program visited nearly 200 restaurants, focusing on order accuracy, speed of service, etc.
• Culinary and marketing: Upcoming holiday crispy collaboration, plan to bring back fan favorite, optimized media strategy for better ROI.

In the third quarter, total revenue decreased 0.5% compared to last year to $122.1 million. System-wide comp restaurant sales increased 4.0%, with company-owned restaurants up 4.0% and franchise restaurants up 4.3%. Company comp traffic decreased slightly by 0.6% in the third quarter, but average check increased 4.6%. Digital sales channel saw a 12% increase, driven largely by third-party delivery.

• Full year 2025 guidance: Total revenue $492 million to $495 million, comp restaurant sales growth 3.6% to 4.2%, restaurant contribution margin 12.3% to 12.7%, general and administrative expenses $48 million to $49 million, depreciation and amortization expense $28 million to $29 million, interest expense ~$11 million, and 2025 capital expenditures $12 million to $13 million.

Q: Congratulations on the momentum in the business. Can we talk through how Duos are mixing or how you look at value on the menu?

A: Delicious Duos mix around 4%-5% depending on restaurants, has a strong mix throughout the business and good value scores against competition.

Q: What are you seeing for repeat frequency for customers that access the brand originally through Duos?

A: Mix is steady, bringing in both new and existing guests, and guests are upsold to other menu items including new ones.

Q: How do we get our minds around organic traffic versus contribution from sales transfer to same-store sales?

A: Experiencing sales lift from closures, with ~100 basis point lift in October, and positive traffic outside of sales transfer even against heavy discounting last year.

Q: Learnings from ramen LTO and thoughts on rotating between ramen?

A: Ramen LTO is working with good trial and repeat, it's too early to tell if permanent, but there's a future for ramen on the menu.

Q: What's the benefit from underperforming closures on margins for this quarter?

A: Closures benefited adjusted EBITDA by ~$300,000 in Q3 but were back weighted.

Q: Does the check benefit from lapping promotions fall off significantly beyond Thanksgiving?

A: Most impact of discounts from last year falls off post Thanksgiving, so normal year-over-year check increase in December.