Noodles & Company

As a reminder, this call is being recorded. I would now like to introduce Noodles and Company's Chief Financial Officer, Mike Hines.

Thank you and good afternoon, everyone. Welcome to our first quarter 2025 earnings call. Here with me this afternoon is Drew Madsen, our Chief Executive Officer. I'd like to start by going over a few regulatory matters. During the call, we may make forward-looking statements regarding future events or the future financial performance of the company. Any such items should be considered forward-looking statements within the meaning of the private securities litigation reform act. Such statements are only projections, and actual events or results could differ from those projections due to a number of risks and uncertainties, including those referred to in this afternoon's news release in the cautionary statement in the company's annual report on Form 10-K and subsequent filings with the SEC. During the call, we will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our first quarter 2025 earnings release. To the extent that the company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of forward-looking non-GAAP measures. Quantitative reconciling information for these measures is unavailable without unreasonable efforts. With that, I would like to turn the call over to Drew Mattson, our Chief Executive Officer.

Thank you, Mike, and good afternoon, everyone. We are very pleased with the positive Q1 same-store sales performance we achieved despite the challenging macroeconomic environment. During the first quarter, traffic increased 1.8% and check increased 2.9%, resulting in a same-store sales increase of 4.7% in our company-owned restaurants and 4.4% system-wide, including franchisees. While the Q1 increase was helped by the introduction of three new menu items in October of last year, as well as favorable Easter timing, it was also due to the comprehensive menu rollout in mid-March of this year, including the impact of increased marketing and increased brand awareness. We are also pleased this Q1 momentum continued in April. which is our most difficult monthly comparison versus last year. Same-store sales since the mid-March rollout through April have increased approximately 5%. Both Q1 and April results represent a significant acceleration from Q4 last year when traffic was down minus 0.1%, and same-store sales grew This sustained and significant improvement in our sales trends demonstrates to us that the execution of our previously announced strategic priorities have gained traction, especially while coming during a period when the industry has been impacted by lower consumer sentiment. Let me highlight several of the key dynamics driving our improving Q1 sales results. Creating a foundation of operations excellence remains our top priority. Our primary operations focus during Q1 was ensuring that we were prepared to introduce our new menu with excellence on March 12th. To do this, we instituted a comprehensive four-week training program starting at the regional director level that cascaded down to all hourly team member roles. New training modules were created for every position, focused on increased menu knowledge and suggestive selling for our guest-facing team members, along with step-by-step preparation instructions for each new dish for culinary team members. We also significantly increased the time for hands-on practice preparation of all new dishes for culinary team members, to ensure they were well prepared to consistently follow the recipe and execute to our standard. We achieved a 95% training module completion rate and then certified restaurant readiness for the new menu launch through area manager certification visits. The new menu training culminated with a hype video and restaurant team meetings to create energy and excitement around the menu rollout. This was a significant one-time training investment to set our teams up for success and help ensure we were ready to delight guests once the new menu launched on March 12th. Our second priority is to stimulate new guest desire for noodles through a combination of compelling limited time offers and a comprehensive menu transformation. Regarding limited time offers, We brought steak stroganoff back in mid January and it performed consistently well for two months leading up to our new menu introduction. We believe this dish will continue to be a strong seasonally appropriate Q1 LTO in future years. But the really big news is our fully reimagined new menu. As you may recall, our menu transformation began last October with the introduction of three new dishes, lemon garlic shrimp scampi, crispy chicken bacon alfredo, and chipotle chicken cavatappi. On March 12th, we added five new dishes and four reimagined recipes for popular favorites currently on the menu. The five new dishes include pulled pork barbecue mac and cheese, garlic bacon crunch mac and cheese, buffalo chicken ranch mac and cheese, Cajun shrimp fettuccine, and green goddess chicken Cobb salad. The four reimagined fan favorites include basil pesto cavatappi, rigatoni rosa, creamy cheddar mac and cheese, and chicken Caesar salad. In total, Nearly two-thirds of our menu is new or improved. We believe this is the most comprehensive menu transformation in our nearly 30-year history. In addition to these new and improved dishes, we have also replaced the black plastic takeout packaging we have used for in-restaurant dining since COVID with new white ceramic tableware. And we have updated our digital menu boards with a cleaner, more contemporary design that highlights rotating video vignettes of our new and improved dishes. We are certainly excited about the guest response to our new menu after seven weeks, including sales of our new mac and cheese dishes, which have significantly exceeded expectations. Our third priority is to increase brand relevance and create new menu excitement through a redefined brand positioning and new activation strategies. We have a long brand history and have built competitive levels of brand awareness, but this has not previously translated into competitive levels of sales. We saw the need to increase brand relevance. We need to give current and potential new customers a reason to relate to us. We need to tell them why Noodles and Company is the best choice to satisfy their comfort food cravings. We've been perfecting the art of noodles for 30 years. And to our knowledge, we are the only chain of scale to offer a menu devoted entirely to noodles, expertly crafted to satisfy a broad variety of comfort food cravings. We needed to do a better job of telling that story. The name of our new campaign is We Know Noodles. And to more effectively tell our story, we created two new commercials, one that focuses on the enduring love consumers of all ages have for noodles and lets them know we have a big new menu they will be excited to try, and a second commercial that focuses specifically on our new mac and cheese dishes and how we do mac and cheese better than anyone else. We confirmed through a commercial testing with the Kantar agency that our new commercials scored in the top quartile of all competitive commercials tested and showed a high likelihood to drive both brand perception and traffic. Then we significantly increased our paid media and invested in new awareness driving channels, including digital out of home, digital audio, and additional social channels like Pinterest. We also leveraged PR and influencer campaigns to get the news out and leaned into our loyalty program through offers, personalized communications, and our recent taste tour promotion to drive trial among our existing users. The results across a variety of key success measures since our March 12th brand relaunch have been very exciting. Let me walk you through some of the highlights. Our early stage brand launch PR garnered 450 million impressions with over 95% being single brand stories devoted entirely to noodles and company. Since the menu launch and through April, We have seen double-digit increases in brand awareness, brand search traffic, and app sessions in our own platforms for both new users and existing customers. We have definitely created more interest in our brand. We've outperformed our digital media channel KPIs, such as video completion rates, telling us consumers are positively engaging with our new message. Compared to the prelaunch period, we've seen a significant increase in loyalty sign-ups and loyalty transactions as well. And finally, between April 12th and April 25th, loyalty members had the opportunity to taste their way through our new menu with 14 days of exclusive offers. Transactions from this taste tour promotion more than doubled our expectations. Also notable is the improvement in traffic through our in-store and owned first-party digital channels since our March 12 brand relaunch. We attribute this at least in part to additional investment in broader reach media assets that have helped increase awareness and attract lapsed and new users. Third-party traffic has remained strong. Most importantly, The combined impact of our new menu, new brand positioning, new activation strategies, and increased marketing investment is readily apparent in our strong sales trends that I shared earlier. There is no question we will continue to learn, to innovate, and improve going forward. But there's also no question that our business foundation has improved dramatically in the last few months. Combined with a strategic reduction in capital spending and continued emphasis on smart cost savings, we are well positioned to strengthen our balance sheet this year as well. Overall, we are confident in the foundation we have put in place and excited by our sales momentum to start 2025. With that, I'll turn it over to Mike to review our first quarter financial highlights and full year guidance.