Noble Roman'S Inc

Well, good afternoon, everyone. My name is Scott Mobley, and I'm President and CEO of Noble Romans. Also here with me is Paul Mobley, our Executive Chairman and CFO. Before we begin, I want to refer you to the Safe Harbor Statement contained in the summary press release that came out Friday. 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 I assume all of you have studied the press release that went out Friday afternoon, and that you've absorbed all of those details. Keep in mind that we're holding on, releasing the 10Q for the new auditors to finish, with the delay at the moment being the evaluation of that warrant liability. That's sort of a black box calculation that has to do with warrant and derivative valuation modeling, and so that's with the valuation firm specializing in those complex formulas. but we'll get the queue out just as soon as we can. In case you did miss the release or you need a refresher, here are a few of the highlights. Net income before taxes was $578,918 for the quarter versus $193,314 in 2024. And keep in mind that income before tax is an important metric because we have that 3.2 million deferred tax asset, which means, of course, that we'll not be paying income tax for quite some time. Total revenue is up 6.8% for the quarter versus last year. Same store sales in the Kraft Pizza and Pub were up 4.2%. That's despite continuing concerns with consumer sentiment. Margins at the CPPs also increased 12.8% from 7.9 a year ago. The margin contribution for our convenience store program was up 14.8% over 2024 to about 1.1 million. And the margin rate for that segment increased to 73.4% from 65.2% chiefly because expenses in that segment remain relatively stable over a long period of time. A key data trend outlined in the press release is also worth repeating this time around today, and that relates to the trailing 12-month adjusted EBITDA. At the year end, 2024, it was a little over 3 million. At the end of Q1, 2025, it was 3,135,000. At the end of Q2, it was 3,501,000. And now at the end of Q3, it is up to approximately 3,825,000. Our convenience store program continues to build on our backlog of franchises sold but not yet open. Our current expectations call for about 27 additional new units during the entirety of the fourth quarter. Of course, that's always hard to predict with exactness as those timelines depend on a number of factors with the underlying convenience store business rather than with us. The psychology around some of the tariff negotiations, particularly with India, as well as the government shutdown had an impact on openings for a while, but things are moving along very well at the moment. In fact, we have three brand new locations opening this week. Muncie, Indiana, Lawrence, Michigan, and Harrogate, Tennessee. Some of the same challenges impacted the craft pizza and pubs, mostly as it relates to consumer spending and consumer sentiment. As I'm sure you heard a few days ago, according to the recent University of Michigan survey, consumer sentiment has dropped to a three-year low, down 29.9% versus last year. We've had to maintain a value-oriented marketing approach most of the year, particularly recently, which is obviously not our preference. For the same reasons, we've not taken a price increase this year, and I don't see doing so in the fourth quarter either. We'll see what the manufacturers have in store at the beginning of the year as far as price escalations, and we'll evaluate consumer sentiment at that time as well. For now, as was mentioned in the press release, we have two products waiting for introduction. One is another value-oriented play off our successful XL pizza launch, and the other is a premium-priced product, a spicy buffalo chicken pizza. I see both running simultaneously at some point here soon, with the 2XL party pizza being our primary value promotion, and the buffalo chicken pizza being passively marketed in-store and online to goose up margins. Finally, as we noted in the release, the refinancing efforts are proceeding with some accelerating and hopeful developments, but not yet anything we can announce or discuss. Conversations and negotiations are ongoing. I know everyone would like to hear more on that, but that is really all we can say at the moment until such time as we have something definitive to announce. Okay, well with that brief review, we're including our introductory comments and we'll now take your questions. If you wanna ask a question and you logged in with your full name when you joined the call, press five and the star key on your phone. That'll cue you in line. Again, that is five star. When it is your turn to ask a question, you'll hear a voice saying your line has been unmuted. And hearing that your line has been unmuted is your go ahead to ask a question. So again, press five star if you have a question. And we'll get to those questions. Hi, Roger.

Go ahead. Good afternoon. Very nice quarter. You can't really talk about the refinancing, but can you tell us how much is still owed to Corbell?

Approximately $6,000. Six million.

I'm sorry, how much? Six million, approximately. And you say in the press release that you opened an additional nine more franchise units this year so far than you did last year. But what is the actual number opened?

No, that was actually saying that our backlog, Roger, had increased by nine. So we're anticipating opening about 57 to maybe 60 on the high end for the year. with maybe, what, 14 more yet for the rest of the quarter?

We've already opened 13 in this quarter.

Yes. I don't know if you thought that, Roger, but we've opened 13 already this quarter. Right.

And can you update us with those franchise numbers? Can you tie that in and update us on the status of the majors agreement to open 100 units? and also have there been any more follow-up agreements for additional units with majors?

We've not entered into any agreement to add to their development plan yet. I wouldn't foresee that happening for a while. We have been opening additional units. We've opened a couple more for them here recently, and they're continuing to put more in the line, and they've will progress until they're done here next year.

And last, can you comment on cheese and commodity prices?

Sure. So good news is cheese right now is about at the 10-year long-term average. So that's better than some of the high prices we had, especially through a lot of last year and into the first part of this year. How long that'll last, I don't know, but we did just receive some, I forget what it was, 22,500 pounds at a pretty good price, so that'll carry us through for a good month. Other prices have been fluctuating up and down. Meat prices obviously have not been favorable. It's impacted a couple of our different toppings. but nothing extraordinary. There continues to be spot shortages with chicken products due to culling of the avian flu, and it's the avian flu that's actually been causing a lot of the beef pricing problems in addition to some of the tariffs.

Okay, thank you, and again, nice quarter.

All right, thanks, Roger. Mark, go ahead.

hi uh congratulations on a great quarter uh my question it seems like you've done a really good job navigating the uh uh the current environment we've seen a lot of like fast casual kind of get hit and i don't know uh it seems as if the value promotion is i don't know how much that has affected it and so it's kind of exciting you're kind of uh adding on to that um but it uh i i guess what the numbers It appears to not really – we haven't seen the cost of goods for the month, but it doesn't really seem to be affecting that too badly. And just kind of add some color on that. Are you seeing add-on sales, things like that, and how much of the Excel is being purchased?

So we've taken kind of a double track on that. I try to – I don't try. I follow the numbers very closely every single day, and I try to parse out what we're seeing in terms of guest counts, average check, add-ons, And our strategy, first of all, with the consumer sentiment, the way that it's been, obviously, we have to be value oriented, not our preferred playing field, but that's the playing field we're on. So rather than trying to discount our existing product, we created a whole new product that we could offer at a value price and have a reason for offering it at that price. And that's sort of how the XL pizza evolved. But simultaneous with that, we've been running product specials that have higher margins. For example, I mentioned the spicy buffalo chicken pizza that we'll probably be launching here yet this quarter. Previously, we launched the stuffed crust pizza. All of those are done at regular menu pricing, and most of those are being marketed on site at the restaurant passively. So as people come in, we're working on upselling to exciting products like that. So all that is to say that we try to bring in the value-oriented customer and at the same time offer exciting new products that are premium priced for those that are willing to pay that price.

Your question about cost of sales, was 20.8 percent third quarter this year compared to 21.4 third quarter last year and 20.7 for the nine months ended September 30th compared to 21.1 uh for the same nine months last year so we're ahead in cost of sales by a good half percent yeah that's uh excellent considering uh the environment how are you seeing uh

same store sales for the first, like, say, six weeks of Q4?

Well, Q4 started off with a little bit of a roller coaster here and there because of the oddly enough, the Charlie Kirk assassination had an impact for a few days on sales, and then the government shutdown had an impact on sales here and there with various announcements, but then Outside of those periods, we've had some good same-store sales increases. So if the market trends back, now that the government's back open and all that pessimism has passed us, then hopefully, I know Sunday we were up quite a lot. I don't have all the numbers handy here, but we're hoping for a return to normalcy here.

Okay. Okay. I know you can't really – I don't want to talk too much about refinancing, but just you're doing – being very aggressive and paying down the debt. It just seems like even under the current terms, you'd almost have it paid off in three to four years if you wanted to, and we'd never have to hear the word refinance ever again. But when you – I'm sure you'd be sorry to hear that. But is that kind of what you would prefer? Would you continue? It seems like you're able to handle that $91,000 payment, especially with over the last quarter, fairly easily. Are you still looking to pay it off aggressively like that?

Well, if I never heard the term refi again, I would be very, very happy. But, yeah, our goal is to secure refinancing that – Obviously, we can continue to pay down on rapidly like we have been, and... We have those terms already signed until June of 26.

With our current... With our current loan. So we'll continue that, and we're doing that without losing any cash flow. We're gaining a little cash all the time. So we're handling that just fine, and we could continue to handle it. The situation is that Corbell, while they're happy and they go along with us and have a good relationship with them, they're trying to close out that fund that has financed us and we've agreed that we will continue to aggressively try to find an acceptable financing source to pay them off. But the bottom line is we have an agreement for their current deal until June 26th, end of June 26th.

Yeah, and like I said, I think each quarter you're knocking off like 5% of the principal, so it's just working great. Okay, thank you very much.

All right, thanks, Mark. All right, any additional questions? We have just a second here. All right, well, I don't see any additional questions. So we'll go ahead and call it an afternoon. And we'll be back in touch very soon and talk to you then. Thanks very much for participating today.