Noodles & Co (NDLS, Financial) released its 8-K filing on November 6, 2024, detailing its financial performance for the third quarter ended October 1, 2024. The company, known for its fast-casual dining experience offering a variety of noodles, pasta, soups, salads, and appetizers, reported a decline in both revenue and earnings compared to the previous year.
Performance Overview
For the third quarter of 2024, Noodles & Co reported a total revenue of $122.8 million, a 4.0% decrease from $127.9 million in the same quarter of 2023. This figure fell short of the analyst estimate of $125.85 million. The company also reported a net loss of $6.8 million, or $0.15 per diluted share, compared to a net income of $0.7 million, or $0.02 per diluted share, in the third quarter of 2023. This was above the analyst estimate of a $0.07 loss per share.
Challenges and Strategic Adjustments
The company faced a challenging consumer environment characterized by significant promotional and discount activity across the industry, as well as a decline in third-party delivery sales. In response, Noodles & Co increased its promotional activities and introduced new pricing strategies for third-party services. Despite these efforts, comparable restaurant sales decreased by 3.3% system-wide, with company-owned restaurants experiencing a 3.4% decline and franchise restaurants a 2.9% decline.
Drew Madsen, Chief Executive Officer of Noodles & Company, remarked, “In the third quarter, we continued to face a challenging consumer environment with a significant level of industry-wide promotional and discount activity coupled with a marked and unexpected decline in our third-party delivery sales. As we continue our focus on driving guest experience improvements and evolving our new menu innovations into test markets, we pivoted late in September and October to increase our promotional activity and identify promising new third-party pricing strategies.”
Financial Metrics and Achievements
Despite the challenges, Noodles & Co opened three new company-owned restaurants and one new franchise restaurant during the quarter. The company's operating margin was reported at -3.9%, a decline from 1.6% in the previous year. The restaurant contribution margin also decreased to 12.8% from 16.4% in the third quarter of 2023. Adjusted EBITDA was $4.9 million, down from $10.9 million in the same period last year.
Balance Sheet and Liquidity
As of October 1, 2024, Noodles & Co had available cash and cash equivalents of $3.3 million and outstanding debt of $89.9 million. The company had $32.1 million available for future borrowings under its revolving credit facility. The total assets stood at $340.5 million, with total liabilities of $336.8 million, resulting in a stockholders' equity of $3.7 million.
Analysis and Outlook
The financial results highlight the ongoing challenges Noodles & Co faces in a competitive and promotional-heavy market. The decline in revenue and earnings underscores the impact of external market conditions and internal strategic shifts. The company's focus on menu innovation and promotional strategies may help improve traffic trends, but the variability in near-term results remains a concern. The revised guidance for 2024 reflects these challenges, with expected total revenue between $487 million and $495 million and comparable restaurant sales growth ranging from -3% to -1.5%.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $122.8 million | $127.9 million |
| Net (Loss) Income | $(6.8) million | $0.7 million |
| Operating Margin | -3.9% | 1.6% |
| Adjusted EBITDA | $4.9 million | $10.9 million |
Investors and stakeholders will be closely monitoring Noodles & Co's strategic initiatives and their impact on financial performance in the coming quarters. The company's ability to adapt to market conditions and execute its strategic priorities will be crucial in driving long-term shareholder value.
Explore the complete 8-K earnings release (here) from Noodles & Co for further details.
