Noodles & Company (NDLS) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary reflects strong financial performance, with significant improvements in sales, traffic, and margins. Despite a net loss, the reduction from the previous year is notable. The Q&A section indicates effective management strategies, particularly in sales and marketing. Although there are concerns about restaurant closures and debt levels, the positive momentum in key financial metrics and optimistic guidance suggest a positive stock price movement in the short term.

Key Financial Performance

System-wide Comparable Restaurant Sales Increased 9.1% year-over-year, including a 9.4% increase at company-owned restaurants and an 8% increase at franchise restaurants. This growth was driven by improved business fundamentals and portfolio optimization.

Company Comparable Traffic Increased 4.8% year-over-year. This was supported by better restaurant execution and marketing strategies.

Average Check Increased 4.4% year-over-year, inclusive of 2% effective pricing during the quarter.

Company Average Unit Volumes Increased 13.5% year-over-year to $1.49 million, reflecting strong sales growth.

Restaurant Contribution Margin Increased 460 basis points year-over-year to 14.9% from 10.3%. This improvement was driven by sales growth, lower food waste, menu pricing, and reduced discounting, partially offset by higher food costs and modest inflation.

Food Costs Decreased by 120 basis points to 25.4% of sales, driven by lower food waste, menu pricing, and reduced discounting, despite higher food costs and modest inflation of 0.2%.

Labor Costs Decreased by 250 basis points to 30.0% of sales, primarily due to sales leverage and labor efficiencies, partially offset by hourly wage inflation of 1.9%.

Occupancy Costs Decreased to $10.4 million from $11.5 million in 2025, due to a reduction in company-owned restaurant count.

Net Loss Reduced to $3.4 million (or $0.68 per diluted share) from $9.1 million (or $1.58 per diluted share) in the prior year. This included a $2.7 million noncash impairment charge related to restaurant closures.

Adjusted EBITDA More than tripled year-over-year to $7.7 million from $2.4 million, driven by double-digit average unit volume increases and effective cost management.

Capital Expenditures Decreased to $2.1 million from $2.9 million in 2025, reflecting disciplined investment.

Debt Balance Reduced by $3.4 million to $106.8 million, supported by positive free cash flow.

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Operating Highlights

New Limited-Time Offers (LTOs): Introduced Chicken Artichoke and Asparagus Rigatoni, a spring-inspired dish, and partnered with CRAVINGS by Chrissy Teigen for a bundle offer. Steak Stroganoff and Indonesian Peanut Saute were also reintroduced due to strong demand.

Menu Transformation: Implemented the most significant menu transformation in the company's history, introducing new and enhanced dishes to strengthen core offerings.

Guest Engagement: New guest active purchases increased by 36% year-over-year, and loyalty sign-ups grew by 33%.

Marketing Strategy: Launched a 'boost week' offer and a fresh campaign to drive traffic and elevate brand perception. Paid media investments are actively managed for efficiency.

Restaurant Operations: Improved guest satisfaction scores by 10% in six months, with better service during dinner hours and consistent traffic patterns.

Portfolio Optimization: Closed 20 underperforming company-owned restaurants and 3 franchise locations, leading to sales transfer to nearby locations and improved profitability.

Financial Guidance: Raised full-year 2026 guidance with expected revenue of $483M-$498M, adjusted EBITDA of $32.5M-$37.5M, and plans to reduce debt by $10M.

Cost Management: Achieved a 460 basis point increase in restaurant contribution margins and reduced labor and occupancy costs.

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Risk or Challenges

Restaurant Closures: Closure of 20 company-owned and 3 franchise restaurants as part of portfolio optimization, which could indicate challenges in maintaining profitability or performance in certain locations.

Debt Levels: The company has a debt balance of $106.8 million, which, while reduced, remains significant and could pose financial risks if not managed effectively.

Net Loss: Reported a net loss of $3.4 million in the first quarter, which, although an improvement from the previous year, still reflects financial challenges.

Labor Costs: Labor costs remain high at 30% of sales, despite a decrease from the prior year, and wage inflation continues to be a factor.

Third-Party Delivery Fees: Higher third-party delivery fees due to increased sales through this channel, which could impact profitability.

Restaurant Portfolio Optimization: The decision to close underperforming restaurants highlights challenges in certain markets and the need to optimize resources.

Marketing Expenses: Increased marketing expenses, while driving engagement, could strain financial resources if not yielding proportional returns.

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Guidance & Outlook

Full-Year 2026 Revenue Guidance: The company has raised its full-year 2026 revenue guidance to a range of $483 million to $498 million, with comparable restaurant sales growth expected between 7% and 10%.

Restaurant Contribution Margin: The company projects restaurant contribution margins to be between 15.5% and 17% for the full year 2026.

Adjusted EBITDA: Adjusted EBITDA is expected to range between $32.5 million and $37.5 million for 2026.

Capital Expenditures: Total capital expenditures for 2026 are estimated to be between $9.5 million and $10.5 million.

Debt Reduction: The company expects to reduce its debt balance by approximately $10 million in 2026, including a $3.4 million reduction achieved in the first quarter.

Restaurant Openings and Closures: Plans include 1 to 2 new franchise restaurant openings and the closure of 30 to 35 company-owned restaurants and 5 franchise restaurants in 2026.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What was the contribution of closed locations to same-store sales in Q1?

A:Approximately 250 basis points of the same-store sales improvement were attributable to closed locations, with most of the benefit coming from core business improvement.

Q:Did winter weather have any impact on Q1 results?

A:There was some timing impact between periods, but overall, winter weather did not have a significant effect on the quarter's results.

Q:What is the strategy for rolling out the boost week promotion?

A:The boost week promotion is targeted at reward members and also attracts new guests to sign up for the rewards program. It is planned to continue throughout the year and is scheduled for specific weeks outside of existing LTOs.

Q:Will the boost week promotion coincide with the new LTO?

A:No, the boost week promotion is scheduled for specific weeks of the year and will not coincide with the new LTO.

Q:Are there any additional items included in the second quarter LTO?

A:The second quarter LTO is a partnership with Cravings by Chrissy Teigen, featuring a new tree in the bundle. There are no additional items beyond this for the quarter.

Q:What was the breakdown of the 4.4% check increase in Q1?

A:Approximately 2% of the check increase was due to price, with the remainder coming from mix. The mix benefit was driven by new menu items with higher price points and the strength of the delivery channel.

Q:Review of Unclear Management Responses

A:None of the questions were avoided or lacked clarity. All responses were direct and provided sufficient detail.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NDLS Transcript

Noodles & Company (NDLS) Q1 2026 Earnings Call Transcript

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Noodles & Company (NDLS) Q4 2025 Earnings Call Transcript

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The earnings call revealed a 0.8% revenue increase, significant sales growth, and improved restaurant margins, despite ongoing closures and a net loss. The Q&A highlighted confidence in core business momentum and effective menu strategies, with no negative impacts from external factors. While challenges like high food and labor costs persist, the company's operational efficiencies and strategic focus on profitability signal a positive outlook. The positive reaction to operational improvements and strategic initiatives outweighs the risks, predicting a stock price increase of 2% to 8%.

Noodles & Company (NDLS) Q3 2025 Earnings Call Transcript

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The earnings call presents a mixed picture. Financial performance shows growth in sales and digital engagement, but increased net loss due to impairments and cost pressures from inflation and delivery fees. The Q&A indicates positive reception to new menu items but also highlights uncertainties like strategic alternatives and debt levels. The optimistic guidance and operational improvements provide some upside, but risks and uncertainties balance this out, resulting in a neutral outlook for stock price movement.

Noodles & Company (NDLS) Q2 2025 Earnings Call Transcript

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The earnings call summary shows mixed results: slight revenue decline, increased costs, and a net loss. While there are positive aspects like menu innovations and digital engagement, challenges such as increased food costs, CEO transition, and negative cash flow guidance weigh heavily. The Q&A section provided no clarity, further clouding outlook. Given these factors, the stock is likely to experience a negative reaction in the short term.

NDLS Report

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