Noodles & Company (NDLS)

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Noodles & Co (NDLS)

Q2 2013 Earnings Call

August 8, 2013, 4:30 pm ET


Dave Boennighausen - Chief Financial Officer

Kevin Reddy - Chairman, Chief Executive Officer

Keith Kinsey - President, Chief Operating Officer, Director


John Glass - Morgan Stanley

David Tarantino - Robert W. Baird

Michael Lasser - UBS

Joseph Buckley - Bank of America

Nicole Miller Regan - Piper Jaffray

Andy Barish - Jefferies

Colin Radke - Wedbush Securities



Good afternoon, and thank you for standing by. Welcome to today's Noodles & Company second quarter 2013 earnings conference call. All participants are now in a listen only mode. After the presenters' remarks, there will be a question-and-answer session. As a reminder, this call is being recorded. On the call today is Kevin Reddy, Chairman and Chief Executive Officer, Keith Kinsey, President and Chief Operating Officer and Dave Boennighausen, Chief Financial Officer.

Now I would like to turn the call over to Mr. Dave Boennighausen. Please go ahead, sir.

Dave Boennighausen

Thank you, Jamie. Good afternoon, everyone, and welcome to our second quarter 2013 earnings call. Let me start by going over a few regulatory matters. I would like to note that during our opening remarks and responses to your questions, we may make forward-looking statements regarding future events or the future financial performance of the company. Any such items including targeted results for 2013 and details related to our future performance should be considered forward-looking statements within the meaning of the Private Litigation Security Reform Act of 1995.

Such statements are only projections and actual events or results could differ materially from those projections due to a number of risks and uncertainties. I refer you to the documents the company files with the Securities and Exchange Commission, specifically the company's final prospectus for its initial public offering, which was filed on June 28, 2013. This document contains and identifies important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

Now, I would like to turn it over to Kevin.

Kevin Reddy

Thanks, Dave. Hello, everyone. Since this is our first earnings call as a new public company, I thought I would take the opportunity to briefly introduce you to Noodles & Company and then we will provide commentary our performance, current initiatives and strategy. For those of you who are not as familiar with Noodles, at the end of the quarter two we operated 348 restaurants around the United States that offer a globally inspired menu including a wide variety of high-quality, cooked to order dishes including noodles, pasta, soups, salads and sandwiches which are served on china by our friendly team members.

While we believe our wide variety is one of our strong attributes, we also offer our customers great value with a per person spend of approximately $8 without any tipping. Our globally inspired flavors and differentiated dining experience have resonated with our guests and have resulted in a long track record of strong growth through a combination of new restaurant openings and comparable restaurant sales increases while maintaining stable gross margins despite minimum price increases, all of which are allowing us to stay true to our principal of quality food at a price we believe is attractive to our guests.

Now let me turn to our financial results. We are very pleased with the results from the second quarter. Our teams continue to create a dining experience we are proud of in our restaurants, resulting in our 15th consecutive quarter and 29 out of 30 quarters of positive comparable restaurant sales growth. As we look at our second quarter results for sales total revenue increased 18% on the strength of new restaurant openings, as well as an increase in company-owned comparable restaurant sales of 4.7%. We reported net income of $68,000 for the quarter, however, when adjusted to reflect expenses and changes to our cost structure associated with our IPO, quarterly adjusted net income was $4 million, an increase of 36% over last year. This increase in our adjusted net income was a result of benefit through the P&L from increased revenue and contribution to leverage achieved on our fixed costs. Dave will discuss our financial results a little more at length on this call.

As many of you know, earlier this year we introduced new Your World Kitchen positioning and made corresponding enhancements at our merchandising and internal signage to reflect that positioning. This simple statement of Your World Kitchen reinforces our commitment to really good food served by genuine and nice people and our friendly, welcoming environment. We believe that Noodles & company offers a completely unique dining experience in the fast casual space as we are the only national chain that brings together cuisines from throughout the globe to provide a world of flavors under one roof.

Our new internal signage of merchandising includes an easier to understand, visually exciting menu board as well as vehicles to communicate our positioning of Your World Kitchen. It was implemented in all our company restaurants by the end of the first quarter and in our full franchise system during the second quarter.

Again, we are very pleased with the results in this merchandising as both our guests and team members continue to comment on how enticing the dishes on our menu board look, how much easier it is to understand our menu and how hungry it makes people feel. We believe that our performance in the second quarter is partially a reflection of that connection.

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