Noodles & Company’s first quarter results were met with a negative market reaction, reflecting disappointment over profitability despite a modest uptick in sales. Management highlighted that the company’s comprehensive menu transformation, supported by intensified marketing and operational training, drove a meaningful rebound in same-store sales and guest traffic. CEO Andrew Madsen pointed to the introduction of new and reimagined dishes as a catalyst for heightened guest engagement, stating, “This sustained and significant improvement in our sales trends demonstrates to us that the execution of our previously announced strategic priorities have gained traction.” However, increased costs related to new product launches and one-time training expenses weighed on margins, leading to a larger adjusted loss than Wall Street anticipated.
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Noodles (NDLS) Q1 CY2025 Highlights:
- Revenue: $123.8 million vs analyst estimates of $123.6 million (2% year-on-year growth, in line)
- Adjusted EPS: -$0.20 vs analyst expectations of -$0.11 (81.8% miss)
- Adjusted EBITDA: $1.61 million vs analyst estimates of $5.35 million (1.3% margin, 69.8% miss)
- The company reconfirmed its revenue guidance for the full year of $507.5 million at the midpoint
- Operating Margin: -5.2%, down from -3.4% in the same quarter last year
- Locations: 460 at quarter end, down from 469 in the same quarter last year
- Same-Store Sales rose 4.4% year on year (-5.4% in the same quarter last year)
- Market Capitalization: $32.75 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Noodles’s Q1 Earnings Call
- Todd Brooks (Benchmark Company) asked whether the elevated marketing spend for the menu launch would be sustained. CEO Andrew Madsen replied that while initial investment has doubled, future spend will be evaluated based on response and effectiveness.
- Todd Brooks (Benchmark Company) inquired how loyalty customers’ response to the new menu compared to non-loyalty guests. Madsen noted double-digit growth in loyalty sign-ups and transactions, attributing it to targeted offers and increased brand engagement.
- Jake Bartlett (Truist Securities) questioned if the early sales lift from the menu launch was being sustained or fading. Madsen said transaction and sales growth remained strong through April, supported by continued marketing and earned media efforts.
- Jake Bartlett (Truist Securities) sought clarification on the breakdown between one-time and ongoing costs related to the menu rollout. CFO Michael Hynes specified $500,000 in incremental marketing and about $1 million in other one-time costs, including training.
- Jake Bartlett (Truist Securities) asked when free cash flow would turn positive. Hynes stated the company was slightly positive in Q1, expects headwinds in Q2, but anticipates positive free cash flow in the second half of the year.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) whether the surge in traffic and loyalty transactions can be maintained beyond the initial menu excitement, (2) the company’s progress on restoring restaurant-level margins as one-time costs diminish, and (3) the impact of tariff-related ingredient costs on overall profitability. Updates on cost-saving initiatives and further developments in brand positioning will also be important indicators of execution.
Noodles currently trades at $0.75, down from $1.01 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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