NDLS - Earnings call transcript Q2 2021

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Operator

Good afternoon and welcome to today's Noodles & Company's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to introduce Noodles & Company's Chief Financial Officer, Carl Lukach. Lukach, your line is now open. Go ahead.

Carl Lukach

Thank you and good afternoon, everyone. XXXX second-quarter our to earnings call. Welcome

me Executive Officer. with a regulatory this by afternoon Chief our few Boennighausen, Dave matters. I'd over is going Here like start to

remarks future events the questions, opening During to company. of or in forward-looking regarding make future your our statements we and the may performance response

including or risks to to specifically that the fiscal call, report the refer each you statements. factors actual made. XX-K files Form the annual uncertainties. are forward-looking actual its including and Litigation meaning due the forward-looking news the of to of or Private Securities are differ materially identify considered for related As to conference a items, to filings differ those have The in results company's statement Exchange and Securities future forward-looking with report filings within number safe details the XXXX part I the such, and a XX-K company's statement time projections subsequent from uncertainties this the materially any and of in afternoon's performance subsequent projections company and statements our risks of Act. that statements. portions contained only Such results we fiscal the this These Form could statements the Reform time company's and XXXX our and on relating annual and documents events forth on such with contain in should Commission, projections be SEC cautionary the cause considered documents harbor year release important could those for set from from to the year

considered earnings believe useful will isolation reconciliation most company's is release measures, in which evaluating directly in can be our GAAP. or measures These During the the discuss measures should comparable in a XXXX performance as of with second-quarter available information. supplemental A for non-GAAP not financial call, our measure GAAP substitute prepared be we these and accordance operating performance. in our to we the

it our Dave Boennighausen, would I executive like to turn Now, officer. over to chief

Dave Boennighausen

and quarter see Thanks, share of second momentum to afternoon, with that and the our everyone. you the details the performance strong excited business. in we Carl today in good I'm

we revenue $XXX.X increase For the quarter of year. a versus XX% total reported million, prior the

in the fueled was as $X.XX has performance million, level well, that sales performance Our increase record quarter reflected where I'm report to to far strong the average quarter XXXX. a which for third company relative second quarter volumes the unit the by we've versus of seen XX.X% pleased thus continued of XXXX. acceleration

same to quarter level and opportunity, continue the main In be long restaurant ahead was margin performance, stronger excited in since with versus this a remain extremely sales highest XXX three QX unit on quarterly volumes of of profitability basis level level a and to strategies. point opportunity To significantly capitalize runway of us. on With growth, focused we we second our the the increase addition during restaurant restaurant margin and our XX.X% our XXXX, XXXX. strong quarter

range The of convenience is a to differentiation dietary first and concept continued broad of the appeal to our needs. lifestyles,

of Second, post-COVID world. and third, for growth situated brand, model assets and accelerating activating ideally digital an particularly is our take strategy, our feel further marketing to our unit we advantage through operating

the remains consumer. national is Company brand builds global today's needs our suited I'd As on and to trend, and through like innovation and discussion we loyalty. only the chain & with success noodles flavors of perfectly countering differentiation executing a think offering menu the meet pasta, and Noodles brand, resonates ongoing discipline of start about a guests, our that's with to strategy of our of

have we an execute our noted our the culinary in with a variety considerable a food elevated strain travels extremely We we've well. approach past, menu. and As of to

As we launch core the innovation by has and menu we also healthier and indulgent, strengths lean new. offer earlier Gnocchi been menu. both of alternatives into familiar to of favorites Cauliflower year, to Well, exemplified healthy for around the us, flavors this adults a kids from key priority our

During our offering, many than the which achieved noodles prior minutes has second already quarter, higher launched we any company. of launch Tortelloni and

from and of X-Cheese most stuffed been mozzarella years we're the Tortelloni and ricotta through like our parmesan that with has extremely onions, excited And For specialty pasta request a item requested blend our meet to ingredients cheeses. guests. carmelized

too initial very determine the been business ultimate the we're driving on our with Tortelloni have particularly still the to frequency it's early seeing, core While of the results pleased will have guest. we sales impact on the

restaurant As we meet and discuss surpass our guest for environment, further second our ability the like today's digital continue and to effectiveness. Company's to improved brand, on differentiate focusing marketing for Noodles particularly to would I capabilities strategy, through & the a activating brand expectations in of while variety recent sales account the second our sales. has XX% weeks, even during over to us of recapture sales XX% over digital sales of Consequently, within occasions, restaurant quarter. allowed XX% retaining for returning of digital continue during pre-COVID sales to

with great continue deeper insights the and into we're still guests that made believe we early progress, innings their digital and utilizing and of develop to better effectively in data behavior. we've to assets our our relationships engage more While

launch, member value of relative our significant relative X.X to significant news our allowed rewards as quarter, in to an as by We the tools program our saw grown rewards reward garner increase growth to program signups best introduced the second our industry. which industry differentiate which during restaurant count. members, for as the which rewards company's the for Tortelloni we a two with to at normalizing guests million we're has compares program, of aided well launch, This rewards us to the is in One our first engage the favorably offering. weeks exclusive

drive to and of program As we to number for the new loyalty. guests we help bring frequency continue an increased our into insights leverage brand loyalty brand,

the on offers become has behaviors strength specific buying of a brand, Our we resulted with our our of more drive meaningful Ultimately, to continues our along core in amongst in to frequency communication feel personalized increase targeted tailored utilization and focus These at the guests. we strategy, journey. a powerful engage all third is capabilities has accelerate customer important unit marketing created consider points combination our guests to are continued as which personalized marketing in particularly to the growth. and

thereafter We or opportunity in XX%. restaurants and at an to X,XXX least in our supported XXXX continue unit least growth X% operate to believe rate by at least of soon ultimately at annual system domestically reaching growth

franchise company of like represent I During quarter potential. of Noodles second the two three these one the location. and to locations into the as & they would restaurants breadth system and of wide, a two bit the think I we growth insight open depth Company's share

during great quarter the the was to opened open This ghost already insight a the to manner. One opportunity of company the is location our the build dense brand residential into kitchen. efficient Chicago locations providing second first cost low part that in of

Just focused more our as importantly, And this of small digital to to landscape. moreover, ghost efficient our for kitchen labor food ways its urban us is delivery sharpen throughout footprint, due marketing an be to operations. all and learning allowing we're

ghost the by kitchen, and later location are are We second forward momentum this our this Jose to look encouraged San opening seeing year. in which in we anticipate we

windows solely on our in restaurant construction window. North opened opening general, through evidence transactions delays, second particular. franchised Dakota. to drive-thru setting is million annualized in this this focus rural like actually Due has sales with coming in and capabilities a I'd Despite more further our restaurant drive-thru had limitation, $X.X posting to The AUBs the power order our location since been in of this of opening premise of off a

While lower the These the oriented are seeing us of to operating overall in continue dining experience. important return will types more in does footage square model. successes overall dining off in give a of restaurant sales system that for more accelerate restaurant an growth even confidence aspect indicate with our be to ability premise flexible, we the

While we looks balance franchise The XXXX company beyond for restaurant expect development be perspective. bit both XXXX from of for loaded. and strong, and new very openings pipeline back a will the a

more XX% new by these in least engine will will growth and a for territories continue newer to powerful growth We unit bottom, that windows. with growth to of feature top a locations performance economic come. from complemented also earnings our of The units, be productive combined ahead order expect for years to franchise drive-thru and at model several

cannot each before, our our be digital importance our strategies, said The of brand we strengths, and of of for growth. differentiation unique brand team three the overstated. As accelerating channels, unit our and continued through activating marketing

I workers proud of true the As of in a of been have the year and be know, team. workers some could hospitality we general, particular, not in restaurant past all heroes more our half. and

to results. dedicated your beings, each the delivering caring quarter, a again, same second that and once the have at this caring During fellow can culture you growth proved incredible other team human and financial while time for for

from adoption leading provided benefits Our mental to have an enhanced maternity value assurance uncertain in team to industry world. members and leave, assistance health to

best team development to career. ever, of in smile to each to the position Noodles allowed our from Noodles have I'm have demonstrate I'd steadfast to technology enhance greeting like guests consistent brand over it to and And they members and a for even winner to team through simply development a from of opportunity validation with Carl safety than and to the to Company, grow edge class Our programs restaurant in finally, food the financials to experience clear years protocols and a when incredibly And and for QX. the and balance our commitment in join to & us turn other programs be to cutting commitment walk training excited use that, beyond from stronger formal standard Company. members our XXXX with come. to that & providing they alike, the become great

Carl Lukach

Dave. afternoon, And you, Thank good everyone.

comprised owned restaurant the versus XX% rate company volumes quarter of restaurants. increased financial for at XX.X% of increased representing wide a last second year. $X.XX second total increase increase franchise XX.X% $XXX.X the quarter revenue compared the to growth In quarter unit a and terms were to million, at Comparable the pre-COVID second compared of locations sales XXXX a system Average XXXX. million for XX.X% highlights, to XX.X%

days. by and have levels of we closure date. sales significantly exists accelerate uncertainty impact closure trajectory we of safety XXXX. As will however, into our to third guests improved momentum have our and prioritize I These throughout will COVID offset days the Delta and variant at have COVID-XX still potential relative partially the the related was where Dave noted, July, the the the seen through quarter to course revenue that Total and we note employees. lower restaurant health with remained of quarter encouraged by continued temporary been

level restaurant requirements relevant to wearing. our mask to the comparison, regards local jurisdictions compared margins follow On of be year. XX.X% XXX and margin the basis with in We were a quarter last believe distancing to quarter which continue contribution X.X% by increased Relative contribution XXXX restaurant more XX.X%. second from to points social second to we basis

contribution fully offset and now We food in are our around the proud delivery third expense margin, labor of costs, party managing fees. our achievements have to efficiencies which particularly related

performance accelerated our confidence growth gives by drivers us XX% objectives of bit meet XXXX. a our further in surpass or detail. to in margin Our ability Reviewing contribution more margin companywide

to For costs. in quarter, addition from represents pricing primarily due managing point of which point and and improvement efficiently cost our basis was a XX a was food menu year XX Improvement goods lower basis last the sold XX.X%, to second promotions our in contracted XXXX. improvement

increase and our us we over to Noodles affords menu During not pricing relates navigating said week. value to these loyal particularly per are core vendors an At encouraged $XX pricing power head challenging an shortages industry, which proposition costs. average light impact third inflation. taking into alone the suppliers. at navigate and additional I've person pressures, we with been In And the inflationary food spend beginning saw our provide of guests overall ability to next continues offset as other our a quarter, X% are minimal commodity supplier the future just headwinds, Having with to of our tremendous that, we to in it quarter, we as to environment. wide financial staffing a

in to Our forecasting our pricing commodity anticipated the year. increase the Keep we inflation to are would offset year-to-date half expect expected of X% take which the we back for pricing XX mind, on this an expect our $X And basis cost an points. would see to offset additional margin to goods normalized impact basis. we of be sold XX will by to X.X%

and basis to a track the last improvement a XXX as our quarter will We XXX make point from appropriate. closely changes sales, of impact financial continue costs Labor were basis XX.X% for XXXX. from business and year improvement the to point

hour’s have labor which our against rollout particularly and management based this remain labor year. primarily increase which be more hours encouraged through to to hours restaurant of of level outperformance was reduction approximately house compared of sales reduction training given in in performance realized future addition leverage. in efficiency costs compensation targeting resulted turnover front Our our lower driven continued labor our the sales continues labor restaurant are are the of we driver equipment, execution of an than we These per trends, further efficiencies to drivers in a per initiatives, quarter. day. kitchen pleased our by Overall, offset by A steamer two last our model with incentive

were XXXX XX% by which of assuming Operating remain sales fees, of quarter improved guests awareness reduced encouraged to in results last the delivery labor to further channel XXX and an times, party convert a costs compared to better this hours due completed loyalists. brand installs to the food by basis guests XXXX as supply scores. cook We XX% Operating remains primarily expect rolled costs disruption. demonstrated the by brand XXX than have critical sales chain date, avenue increase was to no be higher and due and represents company year, of out points leverage. into of XX.X% third steamers taste ultimately new for drive to over to XX% We positive we

dinning with in-restaurant through basis growth of to and channel, strength consistently now July. on second digital we're the which we and remain in to returning the increased XX% seeing Even are dollar has guests of the levels. restaurant and pre-COVID by encouraged which quarter the our Our orders into off-premise has an performed absolute business,

fees as $XX second the and a the mid digital million to the year last operating as has growth was expected other flat of as going for restaurant the to in somewhat As XX% delivery to overall for the be year. our million evolved result, we even are compared remain in area G&A costs $XX expect ordering half absolute next. quarter forward

stock by year. G&A strategy, relative includes a bonus XXX to million revenue million quarter for quarter. was growth or As total second million based year. loss cash going to the including points percent XXXX. more the to diluted support compared second approximately to a net $X.XX during driven investments compensation of growth G&A last addition $X.XX anticipate compared dollars will compensation be in normalized $X.X basis was last that compared The million in $XX.X forward $X.X decreased We per of G&A diluted stock non accruals to X an compensation last per structure, of share share. million or income GAAP year, per to in our quarter increase a net based $X.X

deferred statutory by allowance tax on taxes. on We is also valuation report for a rate our effective tax income impacted net basis our normalizes rate, an our which adjusted because

the adjusted income $X.X per basis, compared divestitures net per of closures. was share, net and adjusted impact $X.XX or million a our our Additionally, $X.X or of net diluted share. impairments, diluted $X.XX income On an million, loss normalizes to for

federal had tax Going tax of reminder, net forward, we credits. And XX% we end that used adjustment estimate and $XXX at rate our will be million income NOLs and our a XXXX, in to federal XX%. approximately as statutory year between

cash expected through As XXXX Switching payments our we such, very near the outlook, performance term are encouraged sales no July. federal basis. in by tax the by remain to

million development which unit trend job quarter third an continue we similar volumes of average the quarter real assume do total compared to XXXX. excellent teams building would to that in remainder around our of revenue million perspective, unit construction to the and estate in anticipate for $XXX second saw XXXX, a $XXX the For we beyond. pipeline and of our of when year From the a

XX to restaurants. XXXX new opening continue to to XX We company wide restaurant XX anticipate X new system including

to our the pipeline, XXXX of wide million that driven continue capital $XX landlords’ of part XXXX on million. restaurant push We of growth full quickly unit by optimistic anticipate a could to perspective, delays. which remain expect XXXX we system X% part about we a openings Although thereafter. some in expenditures least in year earlier at From $XX we our new basis, expect in to capital accelerating XX% approximately

about We $XX.X current million. Turning very to the total balance liquidity million good sheet. approximately we our feel cash At quarter of equivalents end, debt position. of cash balance a and $XX.X had and

our liquidity of free remainder positive meet through net to balance was strong Our $XX.X that, turn would we to at anticipate and million of Dave produce I call ability flow like objectives. XXXX. back growth maintain the will end below to XXXX net the With million debt cash fiscal provide room remarks. final $XX.X for We will debt that the our ample our to over of

Dave Boennighausen

there ability navigate environment. with our variety and Carl. particularly & in the and bolsters wide regarding of are Well, needs of Delta impact COVID with differentiated that menu our is a strengths The several just confidence digital premise to months menu thrive in the remains Thanks, on trend particular, in Noodles guests performance off the uncertainties the many Company's and dates. past any our brand and a and and variant, challenges current environment, resonates

more growth as franchise Q&A. off With culture consumer Our for suited are the strengthen importantly, model country. continues we to economic to digital like model lead, short and for please throughout economic significant drive the and reiterate have company to environment, to operating development. create to with deeper perfectly both and years And the for in our internal come. premise as opportunity, that lines for outsized we engagement new expansion company and open on improve our strengths today's an to capitalize the I'd establish to Their but thanks set continue tireless and teams powerful efforts incredibly allowed our term, my the records guests.

Operator

Certainly. the your Instructions] Thank line first comes of question And Truist from Securities. you. [Operator Bartlett from Jake

is now open. line Your

Jake Bartlett

if I Great, how if question more they same trended were thanks versus momentum but like My for cadence that from the And the the of end can towards decelerated throughout in April second I specific are for notes congratulations in was taking question. comment script about us you trends quarter XX% have can what July. third comment the more get the or business. My quarter and the that that of also you're the trend made quarter. your that kind it second July. was have on then might the the that quarter give sales on in July. throughout the you similar XX. store sales you Looks expect just think maybe the thing the you momentum up momentum has accelerated And on you Yet specific versus in seeing think last and the

maybe So us. can if you for that square

Dave Boennighausen

we're is I Day. fall the lower well those From July, for two I the we perspective, Labor far bit to Fourth two as why have to And as you saw holidays seasonality little into us. growth that still perspective an Yes. third year quarter, talking X-X about check a as the a reason thus that Absolutely. one seasonally tend we from as during mean, think report be million exited do third of momentum actually, average as quarter. well volume a increasing excited QX, from perspective that unit

over momentum to see some to So relative our do XX. we growth actually coming expect

as well of bit, momentum While increase with saw, beginning energy stay July, the a very both the we're and through volumes, bit into little in thus excited ultimately we overall then part in August. here as consistent, we as June might that exited a far or but

Jake Bartlett

kind And give us where the then big talk are news more you just expect if should drivers you also in that you today? anything same can half to be then we primary of year? the whether more have? specific What there's we expect you accelerate was would confidence could of what Have any a the should store There the from marketing you was perspective? plans that the food from stuffed back sales And about of pasta hit.

Carl Lukach

I in in Yes getting Tortelloni seeing, few confidence amount weeks just Jake started of I just we're really mean, launched last the think momentum June. nationally that us but just actually, the gives good

the much. So impact you really Q momentum didn't see to very to results get

looked super Jake feel exiting Tortelloni, an the end we've into increase QX a as frequency gas, kind a early. and QX, So gained at particular we've we're going the from seeing momentum, in like lot of of core

exactly the on price But on mentioned, it's price put really Mathematically with to on increase impact we'll opportunities this here overall that the Carl bullish on finger hard Tortelloni. what that So we're be. of could later month. very the be layering X% what

still it our social sales benefit And open on we the that just have feel brand. from a to from nice I media perspective, marketing overall metrics, look should us getting with and of even a totality. a runway our is all some brand we're visible than still So results just of gas whether you'll the be digital today. more mean, perspective. as overall to and through And engagement lot engagement like in rates email great continue we we're actually balance see a seeing the it year make of started with to the from

the around year. as We mechanics Tortelloni perspective a very also going of increase, marketing. with amount but significant still as see confident back the some the between from feel to So what we're of price both well the runaway half

Dave Boennighausen

Jake I just point add. to want one

we're one beginning We're just that the gap. day add We're come seen past could in business narrowing beginning there Lunch dinner the on I outperformance through point to to variance back. was if see as Jake, outperformance was, a we've see well. the versus XXXX. trend quarters. in lunch wider Sorry, And several

additional So look for. we revenue driver can an that's

Jake Bartlett

to you helping margins comment as understand the kind sure just was some the to of a And of Just the want then The back year. XX what was give other the I did think down missing great, for you labor versus Great, just you And what the here for half labor. to then expect basis And of question, the expenses. is Or piece think clarify expect for the COGS on But what on and sales I that. do the us restaurant will them. how want think on the in leverage or that that's versus labor or comments deleverage? last remainder the we of fully I of first that wage should make increase of the terms inflation year? year? price about half points percentage year, XX? again, the for that being of offset remainder Or operating

Dave Boennighausen

Couple of things.

So on the cost the half. of goods first point to is sold XX side, the basis XX comparison to a

we about from we cost of on offset see some in the think level $X perspective from goods increase. And are But basis could XX around back normalized to the of when be So half, our you margin side. points will see price we sold that the the due higher again, from to XX%, offsetting. of X% would expenses that XX impact the

lever sales labor on the of terms of driver a been In has side. labor,

feeling there encouraged that going down partial quarter. to I by see flow mention this. second continue in the did And very on compensation to quarter mind We're to offset second outperformance our in the labor through incentive was we're a relative by So a margin. that keep

going margin. to to area opportunity we that as that's the respect into So see the would just a half, second one potential expect with

Jake Bartlett

you. Thank appreciate Great. I it.

Operator

you. Thank

question next from the from Miller Your Nicole Piper of Sandler. line comes

is line now open. Your

Nicole Miller

did last tell compare it business? digital Can did think truth. was I retention revisit XX%. go So you. the go you quarter, I How and I dollar guess, XX% Thank in we back think amount to that I to versus dinning and

non-digital factor reconcile that. for dollars, of the wondering how to to I'm like are X.XX basis so and So when the kind the of we think tied AUV about want the what kind in base to digital to million

Dave Boennighausen

Sure.

for X.XX for the total the total breakout would was AUV and would The that AUV the of represent about the was represent and about XXX,XXX that and total of a mix digital XX% mix digital on of about in total, for in XX% XXX,XXX person. million. So person digital quarter the total

Nicole Miller

to the from retention in the back come base was. we what Then

look development, we helpful. there So should don't anything are point how a when take understand ghost the to on consideration? ghost of unit I've stores differentiation is we from that requirement think that's kitchen level Thank future economic there CapEx into you and kitchen But you. asked many model I at or a need

Carl Lukach

new But still more open labor, a of Yes. bit to Still draw miss way our you overall year. in in Primarily how What be. early, seeing in part how in as market you do don't so the relying we're the later target one type last they we're meaningful accretion? more many for audience algorithm with $XXX,XXX. is a fashion? as could in know can ultimately, Well we urban with to food, as on We'll in the like generally particular, be Noodles a kitchens you love about get at kitchens Company don't overall pretty on very contributor Nicole we to And algorithm. to do look ghost So overall very early. with it, necessarily about & that ghost than that early bit earnings of do still be enough want not second delivery we learning building. it's put have the growth we're we're a you not little that we what we wide site San more What a an we in for a it. terms Jose this is few much about you a weeks certainly do think less how only of of to It's a targeted though, from the efficient momentum. excited

Nicole Miller

hours promising some I I pretty this, steamer day. stores, question, recently, then to I think, in is and And guess, unit was last per just per fewer the labor

and unlock it be if like some the I point? like, view. Does time. throughput? Is properly, of would XX off help point think, hiring? done I've that And labor can that seconds mean it I with operational I does ticket guess math save the employee

sit and the consumer consume people would could second that back, linger. this part be up and willing of But view way? that you. coming also continue imagine those can point Thank I of premise for speed maybe being can from to off kind The like the to

Dave Boennighausen

Yes. already core Nicole and guests’ Absolutely. most of We've operating terms states needs speed, in of got the the hit model, so and forth. throughput,

However, it given that settings, want to still be urban in nontraditional, concept the opportunity gets can. given the volume, increased further sure faster where make we whether

those the to temperature sauté steamers of know, the sautéed, don't for to So dishes, us is put pan. the steamer allows dishes of quicker it bring before into you to that which that allows for them through our those you is up are what utilization majority the do

a So same if love, taste same of benefit in and of Nicole actually you of is, on labor amounts as a The people right less that go it. same go to XX noted, terms still times, And does hotter. that to take by bit company through being that the improvement get virtue quality, cook millions about quicker. it about know just comes faster, food's you texture

So you from actually the get a better experience perspective. guest

the environment. you this, Additionally, particularly can current labor appreciate given

instead there that other our having allows that type a and our liquid have and a made than order you But making when steamer. it XXX% the be other to of much job is think to done go I to or year to a we concepts. is to of having is do steamers team any a we XX strong Our don't allows learn learn this approach to simplifying sacrifice line, old, the see set complex consistent. cooking means methodology, more XX with lot potentially of who the what bubbles, we all steamer old, to to sauté hallmark year when the on a of from brand. everything What being consistency And very of

up end to lead don't that having training challenges and to human You ultimately can lead can inconsistency. that judgment

reason so one ROI savings love we the So labor love, very from we reason high steamer the a much, perspective.

So as really that of of savings labor years there's best the in team industries it. perspective, consistency. food, want Company a would member there's big is of hits guest But a there's training, there's is you from as seen of I've Noodles a financial really temperature one perspective my piece well a throughput, everything It perspective. &

Nicole Miller

Thank you.

Operator

Andrew Strelzik of line Capital the from from comes question Markets. BMO next Your Instructions] [Operator you. Thank

Your line open. now is

Andrew Strelzik

target. now. about first closely. think Great, to thank or wanted level getting you. too Good that said question parsing there beating apologize I'm if the I your sooner XX% margin either words meeting I ask afternoon. or you I And But restaurant My

you're little about margins like bit a and the sounds optimistic potential pathway of it there. the the So more getting

about driving I'm item what is line that margin just optimism? method seeing kind curious, that's is So what you're that it increased you're optimistic, getting specifically of which more the maybe that

Dave Boennighausen

we're seeing. should more I Carl volume the weigh sales as Andrew it's average anything, than just in the increases well. think and and unit

meet XXXX everybody, beyond. So into we in the for accelerated out February growth margin, million XXX quickly X% then as in XX%, reminder and growth earnings and objectives a level go XXXX call, and a unit to volumes restaurant laid during XX% averaging

we today, in we saw significant versus a what As momentum. February, see clearly amount of

that well. buying flow need would has on As level and momentum you as the that we're through the occurred side, want the seeing in margin

uncertain an still I still it's early, So it's look at as mean, environment. we XXXX,

the see we're long So we're but we term in expansion that the buying to yet, XXX meeting confidence flow through term, term continued those what targets us not numbers. the of necessarily million Andrew, as a in medium with to those going opportunity and and of you're overall short average going surpassing a term there and long seeing revisit ton that gives associated

leverage our when to opportunity beyond we at to model. comes continue looking for at to kitchen procedures, operations continuing economic still design, continuous improvement sales do There we're it to looking restaurants. how bring food at looking that is us just Additionally, improve into

feel So level us we're sheer we percentage the at already of great we've or where mention, confidence the million, on only of today really, XXX fronts, XX% XXX between significant momentum have, not gives and February and already. restaurants restaurant a margin. the seen like population all to the we portion It's

that So we do we can absolutely those. know

Andrew Strelzik

then helpful. and a the food That's on question pricing the And inflation.

of inflation you if number. the sounds the food more X% the I the compare recover for where full know that's you to maybe to puts however you I don't like pricing. front want that half why a second the to been? you're can do of year? you've level what back And year maybe price Where the beyond percent. that Are level? quarter, of gave year-to-date now would expecting of open half extent margin you the versus half this in year, to is right And it then So or think if the that? the back you Maybe

some you could pop So help on just if that'd helpful? color on be that

Dave Boennighausen

Yes, then on and touch overall the on price let in numbers. me a can little more increase bit weigh of inflation Carl a

Keep what party. seen year, X% have inclusive far that price today, in majority the has price we're incorporated. of we've been we actually thus % third once in mind, vast this targeting the X.X So

flex is we we we've a do don't balance pricing got expect. powder to, the endure. that feel if flexibility party. and So premium of price those the further still year so through no have going needed left, a do we amount have this left XX% are don't increases several have it. for dry we necessarily But to necessarily anytime to that have have expect where future. revisit near some price that we of But plans during that's about don't third we to to There pricing we in plans We

Carl Lukach

the meet on to very strong I of to in our But challenges about working these inflationary ability a is been pressures feel good with to able demand our restaurants relationships, maintain we We've these that network primarily by have our closely, and off very are side, costs, we start them in the doubt saying supply factors, of to suppliers. there ensure inflationary guests. restaurant. the supplier And our and no industry the despite in very would manage

on we're on and on it seeing specifically go inflationary to business in more containers. pressures, protein our the So

our with For part maintaining the most we're suppliers. our contracts

In the remainder cases, we've place a had but away or We have move particular of we've supplier, to supply. in to the to them from the producer year. some been secure able

Dave Boennighausen

expect from will That's be QX. additive high perspective, actually an in the point inflation overall we

to X% point So forward. but that's see you we're that where expected from inflation, X% to hopefully moderate overall potentially

Andrew Strelzik

that far one guess I'm Thank accelerate how if If to kind conversations with the that about of development pipeline, more the the then you I just franchisees development squeeze could on the you. in piece maybe as is program And the visibility. describe I could just out going how of are and want how curious you just you pipeline. now?

Dave Boennighausen

Sure.

where company now seeing deals through and the overall we're the On existing working location. half XXXX might pipeline North primarily least seeing for with I for both who develop. I'm comfortable. very economic unit at growth. they're mentioned, is we're we the From feel our working will year very XXXX. Right thrived just is Dakota, deals which pipeline, happy model, window, be There that about a a the restaurant the kind not, franchise excited are But with side, very X% of several the of franchise through we're franchisees in with pretty the from last have what franchise months. And the which excited as back drive-thru

existing So decades looking we're From for from franchisees very very we're be seeing we grow momentum the good perspective, for new franchisee who really. and with our will And that partners are us pipeline strong us deals. selective. with weren't

see of we process. some But new pretty go good ideas. some this you'll I terms a think of out on in that diligent those as it's year the building So of rest through news

Andrew Strelzik

much. Great, thank very you

Operator

you. Thank

& line Brooks next comes Your CL King from from of question Todd the Associates.

line now open. Your is

Todd Brooks

everyone. afternoon, Good

questions leftover here. few a Just

Or the should about the talking in have back earlier of there that shaping looking calendar XX? on XX what misinterpreted for is may end we about cadence up? call development And the think loaded. Is just the is XX unit side, the I openings comment On was a calendar bit calendar? and that how a

Dave Boennighausen

Sure.

So timeline from deals comfortable challenges are it same that to an finding the XX and companies, actual feel we're be news Todd, great of this to control perspective that I that restaurants we would referring XXXX. behind for currently time, great is some that the that seeing of we're estimate very underwriting at and years. to great some going put sites. plus We're finding the

site prior is quickly. unique seeing the good are little we pipeline And timeline we start we in actually get lumber, that about a been feel working delivered steel the you're longer itself and the inflation availability when materials, other So that. approve when we a from are raw release getting seeing of versus the we seeing that on than full seen. and has we that's the traditionally is have what bit deal very What years to

think loaded. bit still up balanced. to there's developer has looks that before bit XXXX, few a be be a a like pipeline if the back normal the that more today instances shapes XXXX in get to way So pragmatically of a it cycle, little we caused here will. you pipeline would more time But

talk a a bit timing as balance be we So from XXXX. to of optimistic the want perspective cautiously about

Todd Brooks

And more based XXXX this, maybe with are to pickup the about progression that having XXXX units out as a you helpful. and from the what to of doing That's will as what talked construction opening you you that we look box. class square efficient class? as down of to window be XX of start of Is feet cost on XX% that here footprint but kind far returns think

Dave Boennighausen

Sure.

think identified this the I cash etc. that some we're XX% didn't of necessarily far of or even hitting margin, XX% thus built level restaurants cash you savings year we've return, if restaurant costs So we that with and footage, Todd opportunities apologize the square XXXX, up to on that them the lower that incorporate development

your caught the movement been phased point it's some our ultimate So of prototype. towards

As a off and development be we classes, we to maintain we absolutely margin the doing cost. volumes, level restaurant to future which that smaller do, for same type of intend expect reasonably of

de-minimis. digital impact of are had the on to feel with into cash very feet. The on year, seven window get we year would we the since that from that cash hundreds. or is mid their the And sites there, $XXX,XXX not see true the X,XXX capabilities through itself, square return we're instead its this restaurant ordering that costs would order expect be to we first it. So $XXX,XXX, Those XXXX comfortable development first doing until you average up restaurants drive-thru

site. very that construction have class, feeling cash found be about savings profile the of will a premise incorporate we're which that lot and new cash team the more So and overall return of off the flow Carl from opportunities smaller excited oriented, square footage the

Todd Brooks

pressures of better this it How you've been relative at the continued final levels Noodles for talk you've the one you just wonder the pressures about up laid to talking retention? about seeing when me. are tie if level? wise talking of restaurant then were additional the kind and some culture feeling in that to know, the can I demand you the you're staffing about one that benefits and of And that staffing at Dave great. you Carl, chain, I That's or supply hiring building inflationary in spike out

Carl Lukach

restaurants industry, not The I'm that that glad reason, question just is guests, I have as our long Todd, you team members. as this but our I've on impact with asked have that the been

with maternity foremost. surrogacy $XX benefits got a point shown a tips I through important things think a you other. as how restaurants of on they terms groundbreaking the the We've society it over average, today. restaurant where level a of continues We're and meal. important half it happen fabric the last calls, a itself, are heck really to growth. how care COVID realize year right having Similarly, over many putting are of for health, on name last and well few part can each as standards, and paying a at years industry general. in and a started development team have it that initiatives career, mental around as with leave, of And coaching long around people just restaurant that fairly as you first really in And been we a middle time and And culture personal you over and shared the our now. enhanced and typical for company, great prior from just as the a our members team at accountability it's of

extremely turnover proud we're and is to the something relative retention metrics of. industry Our our

had last a with. come with what have they've over One hiring and is of the had many navigate allowed deal this see couple It's did deal than years. we to starting proud better the others metrics down. early much probably to of, us part we hop to to we're most turnover, And environment, feel

an challenges the excellent The developing them staffing is environment, hiring career as still is feel their providing a behind just everybody making that laser through So focused, coaching, really the team on on people, are we us. training, company. right of laser focused worst definitely focused the sure that

some So to to they're but we've pretty our very-very seen navigated little happy still restaurants environment competitors. in we've very of relative play, that our disruption tough well,

Todd Brooks

good. that's great, That's

So where it's that thousands not people of to you're meet still same hire to the demand. situation looking

really you've no got peanuts it, If from you're and the them or staffing them? you hiccups operational retaining want

Dave Boennighausen

restaurant the It's Yes. space.

So natural the in you're going to have a itself. of industry level transients

flow hiring. our think name very position like we're that better training that that we or prices than always it, due you're to And challenge we we applicant the we're to would start development. this And I have happy So with seeing. we didn't fortunately, started staffing culture and from a otherwise and

So I have yes, we we're than shape think we're better many still hiring But in focused it. very-very on all than the been. could We are still time.

Todd Brooks

Dave. Thanks,

Operator

you. Thank

Jake Bartlett Your from next question up a Truist follow Securities. from is question

Your now line is open.

Jake Bartlett

Great. understood Thanks of to menu taking make cost food dynamics up. I wanted I pricing the the the sure inflation just on. for and follow

so before. you're you're about and commentary, if price, X% X.X% roughly from think, I I adding just think the

the X% about points. - quarter. expect we and So you're X.X% XX XX of that be basis or food math you'd near third range jive roughly for would X%. so the kind inflation pricing what If full think doesn't, deleverage comment the X% on I that for costs what your up with to X% X% the Dave of think be don't I to quarter, My X.X% is

run quarter additional be rolling just we specifically quarter? you what you just and you fourth again assuming And maybe helpful, keep. what no costs and for inflation what food what's for in even fourth the so then off pricing specifically expect the would just understand And hopefully pricing the third expect in through really what So third.

Dave Boennighausen

Yes.

well to premise sheer incorporated we're restaurants, necessarily dominated integral to have into aspect of the the given as is continue that in that premise The packaging. an other serve dining, in costs, society of actually restaurant it which we And off go isn't packaging. number still amount as just our inflation

other are that we inflation captures. those the as well. So that's element that some I Inflation, seeing areas necessarily wouldn't

if you of Carl, gap. pricing on the of part clarify the side equation. of that's kind the of some So can

Carl Lukach

Yes.

the For pricing, that X.X% taken we've year-to-date.

taking X% X.X% take year-to-date, us would additional next the X% pricing, total the So we're at week.

to we're So the impacts quarter. for third of going the see rest that

Jake Bartlett

in off rolls nothing And the fourth.

Carl Lukach

pricing right increase for now. plan fourth No the quarter

Dave Boennighausen

a bit December off in There early will little on the delivery. actually

reminder, to XX% went a product from December. XX% last premium as per So we delivery price

So off. that will roll

that's So roughly of percent a price.

Jake Bartlett

should see app have then to operating and half And that terms delivery party? of or not that should in online, third to your your the helping increasing, the year. quick it I migrate other how doesn't versus seem it. think but channels is mix least is of white consumers restaurant parties. try your is be that if be question last it And Got label going line versus the a is third exploitation to But in to the at that trying expense of back in

Dave Boennighausen

move. benefits. of mean, is we in there. terms We It just still kind create some in have more But see rewards people the of brand. have it's of We've people a did XX% our I bringing people of can XX%, terms markets. be of movement done would delivery some kind brought moving penetrated percentage in into brought see It's It's of parties third candidly, in it's program. of exclusivity the seen that a range. own still our modestly We not through channels. as We'd did because last Tortelloni channels. opportunity that's that lot our some with of still to into quickly particularly company, of to lot as we like introduced lot we been like the a it certainly native

But bit to upside We engage last are point, towards them our little a starting to channels. consider your guests we better months. that see in here in good couple that get a some move we to to as the to continue way movement opportunity new Jake

Jake Bartlett

lot. Great. a Appreciate Thanks it.

Operator

Dave back question showing to like I any this time. at Thank you. turn I'd no to for am further closing the conference remarks.

Dave Boennighausen

throughout particularly But to everybody's much last XX to our in this have navigate but months, three confidence Noodles months, think ability And throughout to environment I of we so time & even the and Company's XX a continue still And performance, today. appreciate last I lot the thrive. uncertainty in the world.

As balance XXXX of since and extremely excited as we said for level best a ahead us. opportunity margins the volumes, earlier, just our and significant with We're record place XXXX well unit year growth average it beyond. as of

appreciate everybody So time safe. stay and your

Operator

Thank you. Thank call. Ladies and gentlemen, your participation. today's conference this for you concludes

You may now disconnect.

Noodles & Company (NDLS) 4 Aug 212021 Q2 Earnings call transcript