Noble Roman'S Inc

Well, good afternoon, everyone. My name is Scott Mobley and I'm president and CEO of NOPA Romans. Also here with me today is Paul Mobley, our executive chairman and CFO. Paul.

Good afternoon, everyone. And thanks for joining us on the call. Before we begin, I want to refer you to the safe harbor statement contained in the earnings press release. This conference call will contain forward-looking statements and business assessments of the kind referred to in that statement. So those provisions apply to this conference call as well.

Okay, well, with that out of the way, we'll get into the substance of the call. I assume that all of you have studied the press release and all those details. In summary, the year finished with net income at roughly breakeven and operating income of about $1.5 million. As discussed in the press release, comparisons to 23 are made a little difficult with the ERTC factored in. But backing out those ERTC funds, 2023 is also about breakeven. However, as we discussed in the press release, 2024 has several one-time charges. Those are backed out for the sake of looking forward and for comparison purposes. show considerable gain from 23 to 24. Looking at the craft pizza and pubs, we had same store sales increase of about 2.9% in the fourth quarter of 24. In the first quarter of 25, this year we had same store sales increase of 1.2%. And that's despite the fact that the first two months were pretty bad weather months and despite the downturn in consumer spending. And actually, January and February combined, looking at them together, were up only about 0.5%, but March was up about 2.4%. So in addition to the bad weather those first two months, I began to see some trends in the underlying data that started worrying me with regard to consumer spending. So in mid-February, we quickly redirected our promotional activities, and we went – from a limited-time product special to a more value-oriented approach. So we rushed that through in two weeks and had it in place by the beginning of March. As you know, in April it was announced that, in fact, consumer confidence had dropped to the lowest level since the beginning of the pandemic. So we've been maintaining a value orientation from roughly March 1 through present time. And that's produced some positive results beyond even March. In the second quarter for April and May, looking at those combined on an operationally comparative basis, we're looking at same-store sales increase of about 6%. June so far appears to be running about that rate, but obviously we're only a third of the way through June, and June can be a little unpredictable. It's a heavy vacation month. That's helpful to some of our units and careful to others. We'll have a lot more first and second quarter in our next call. In the non-traditional venue, we ended up with 68 new openings in 2024, which is great progress. We hope to be in that 60 to 70 range again this year. Overall franchising revenue is up $876,000, or 18.8%. And as stated in the press release, on a real comparative basis, it was up even more when you factor in one-time adjustments, such as how ongoing fees are recognized now based on when manufacturers ship product to distributors, rather than when distributors ship product to our franchisees, as we've always done in the past. So in the total of one-time changes that are taken into account, the revenue from franchising There have been slightly over 1 million or about 22% increase. As we've always noted, the first quarter is the quietest quarter for franchise sales and openings for a variety of reasons, but that picks back up here in the second quarter. For example, we're right in the middle of opening. And we have between three and five new openings on the schedule for the next two to three weeks or so. Again, we'll have more information on that as we develop into the next call with you. A few brief notes on operating costs, especially as it relates to craft pizza and pub operations, but really generally for our franchisees as well. For 2024, our CPP operating costs as a whole were up about 1.5 percentage points. Restaurant management had variable costs pretty well under control and even made some strategic headway on labor despite increasing salaries and wages. were mostly inflationary in nature. The food cost was pressured from a combination of added marketing as well as elevated cheese prices. In the first quarter, it's much the same, though we faced a bit of an onslaught of price increases from a wide variety of sources, including things like credit card fee rates and just normal type of product increases. Over time, we've negotiated some of these away, On a few others, we switched providers. And on a few others, we basically had to live with it. Fortunately, by the first part of the second quarter, though, cheese prices had gone from well above average to a good bit below average. So we received a tailwind that lasted maybe six weeks or so. Cheese prices are back to slightly elevated. If you look at all cheese, it counts for about 50% of the cost of pizza. That's a benchmark that we keep our eyes on closely. Our focus remains on generating top-line growth in the craft business. It will result in margin improvement over time. And with that, our focus remains on what we perceive as our core strengths. That's the product in our dining rooms, where we continue to have a four-week Google average of 4.8. Eventually, we'll exit this period of consumer spending sensitivity, and that will help us in making a move from price value promotion to more of a product enhancement promotion, of which we have several in the wings. Okay, well, with that brief overview, we'll now take your questions. If you want to ask a question and you logged in with your full name when you joined the call, You can press 5 and the star key on your phone. Again, 5 star. When it's your turn to ask a question, you'll hear a voice saying that your line has been unmuted. And hearing that your line is unmuted, you should go ahead to ask the question. So again, press 5 star if you have a question, and we'll get going. Todd, go ahead.