Noodles & Co's Net Loss Widens Amid Rising Impairments, Debt

Ticker: NDLS · Form: 10-Q · Filed: Aug 14, 2025 · CIK: 1275158

Sentiment: bearish

Topics: Restaurant Industry, Fast Casual, Net Loss, Debt Covenants, Restaurant Impairments, Financial Performance, Stockholders' Deficit

Related Tickers: NDLS

TL;DR

**NDLS is burning cash and closing restaurants, making it a risky bet as debt piles up.**

AI Summary

Noodles & Company (NDLS) reported a significant increase in net loss for the fiscal quarter ended July 1, 2025, reaching $17.55 million, up from $13.63 million in the prior year's comparable quarter, representing a 28.8% increase. For the two fiscal quarters ended July 1, 2025, the net loss widened to $26.61 million from $19.77 million, a 34.6% increase. Total revenue slightly decreased to $126.43 million for the quarter, from $127.35 million, primarily due to a dip in restaurant revenue from $124.73 million to $123.78 million. Key business changes include a substantial rise in restaurant impairments, closure costs, and asset disposals, which surged to $13.65 million for the quarter, up from $12.06 million, and to $14.94 million for the two-quarter period, up from $13.29 million. The company's long-term debt, net, increased to $106.44 million as of July 1, 2025, from $100.74 million at December 31, 2024. Risks are highlighted by the increased leverage and the need to comply with amended credit agreement covenants, including a Consolidated Total Lease Adjusted Leverage Ratio no greater than 5.50 to 1.00 through September 30, 2025. The strategic outlook involves managing increased operating costs and debt, with a focus on maintaining compliance with financial covenants. Cash and cash equivalents increased to $2.26 million from $1.15 million at December 31, 2024.

Why It Matters

This filing reveals a concerning trend for Noodles & Company, with widening net losses and increasing restaurant impairment charges, signaling potential operational challenges and underperforming locations. For investors, the growing long-term debt and stricter credit agreement covenants, including a leverage ratio of 5.50 to 1.00, indicate heightened financial risk and reduced flexibility. Employees at underperforming restaurants may face job insecurity due to ongoing closures and asset disposals. Customers might see fewer Noodles & Company locations as the company rationalizes its footprint. In a competitive fast-casual market, these financial pressures could hinder NDLS's ability to invest in growth and innovation, potentially ceding market share to more financially stable rivals.

Risk Assessment

Risk Level: high — The risk level is high due to a significant increase in net loss to $(17.55) million for the quarter and $(26.61) million for the two fiscal quarters ended July 1, 2025, coupled with a substantial rise in restaurant impairments, closure costs, and asset disposals to $13.65 million for the quarter. Long-term debt, net, also increased to $106.44 million, and the company's stockholders' deficit deepened to $(30.78) million from $(5.58) million at December 31, 2024, indicating severe financial strain.

Analyst Insight

Investors should consider reducing exposure to NDLS given the widening losses, increasing debt, and significant restaurant impairment charges. Monitor the company's ability to meet its amended debt covenants, particularly the Consolidated Total Lease Adjusted Leverage Ratio, as failure could trigger further financial distress.

Financial Highlights

debt To Equity
N/A
revenue
$126,433,000
operating Margin
N/A
total Assets
$294,575,000
total Debt
$106,441,000
net Income
-$17,550,000
eps
N/A
gross Margin
N/A
cash Position
$2,264,000
revenue Growth
-0.7%

Revenue Breakdown

SegmentRevenueGrowth
Restaurant revenue$123,781,000-0.8%
Franchising royalties and fees, and other$2,652,0001.2%

Key Numbers

Key Players & Entities

FAQ

What was Noodles & Company's net loss for the fiscal quarter ended July 1, 2025?

Noodles & Company reported a net loss of $17.55 million for the fiscal quarter ended July 1, 2025, which is a significant increase from the $13.63 million net loss in the comparable prior-year quarter.

How did Noodles & Company's total revenue change in the second fiscal quarter of 2025?

Total revenue for Noodles & Company slightly decreased to $126.43 million for the fiscal quarter ended July 1, 2025, down from $127.35 million in the second fiscal quarter of 2024.

What was the impact of restaurant impairments on Noodles & Company's financials?

Restaurant impairments, closure costs, and asset disposals significantly increased to $13.65 million for the fiscal quarter ended July 1, 2025, up from $12.06 million in the same period last year, indicating ongoing operational challenges.

What is Noodles & Company's current long-term debt position?

As of July 1, 2025, Noodles & Company's long-term debt, net, stood at $106.44 million, an increase from $100.74 million reported at December 31, 2024.

What are the key changes in Noodles & Company's credit agreement?

The A&R Credit Agreement was amended on October 29, 2024, increasing maximum applicable interest rate ranges and modifying covenants, including a Consolidated Total Lease Adjusted Leverage Ratio not exceeding 5.50 to 1.00 until September 30, 2025.

What is Noodles & Company's stockholders' deficit as of July 1, 2025?

Noodles & Company reported a total stockholders' deficit of $(30.78) million as of July 1, 2025, which has worsened considerably from $(5.58) million at December 31, 2024.

How many restaurants does Noodles & Company operate?

As of July 1, 2025, Noodles & Company had 453 restaurants system-wide across 31 states, comprising 364 company-owned restaurants and 89 franchise restaurants.

What is the outlook for Noodles & Company's income tax expense?

For the remainder of fiscal 2025, Noodles & Company does not anticipate material income tax expense or benefit due to a previously recorded valuation allowance against deferred tax assets.

What new accounting pronouncements will affect Noodles & Company?

Noodles & Company is evaluating the impact of ASU No. 2024-03, "Disaggregation of Income Statement Expenses," effective for fiscal years beginning after December 15, 2026, which requires disaggregation of certain income statement expenses.

What was Noodles & Company's cash and cash equivalents balance at the end of the second fiscal quarter of 2025?

As of July 1, 2025, Noodles & Company's cash and cash equivalents increased to $2.26 million, up from $1.15 million at the beginning of the period on December 31, 2024.

Risk Factors

Industry Context

The fast-casual dining sector remains competitive, with companies focusing on differentiated offerings and operational efficiency. Noodles & Company operates within this landscape, facing pressures from rising labor and food costs, as well as evolving consumer preferences. The industry is characterized by a mix of company-owned and franchised models, each with its own set of operational and financial considerations.

Regulatory Implications

The company must adhere to the covenants stipulated in its amended credit agreement, particularly the Consolidated Total Lease Adjusted Leverage Ratio. Failure to comply could trigger default clauses, leading to potential acceleration of debt repayment and significant financial distress. Ongoing scrutiny of financial performance is expected.

What Investors Should Do

  1. Monitor covenant compliance closely.
  2. Analyze the drivers of increased restaurant impairments.
  3. Evaluate the sustainability of current operating costs.
  4. Assess the impact of increased debt on financial flexibility.

Key Dates

Glossary

Restaurant impairments, closure costs and asset disposals
Costs associated with closing underperforming restaurants, writing down the value of assets that are no longer viable, and selling off those assets. (A significant increase in these costs ($13.65 million in Q2 2025) indicates potential strategic shifts or difficulties in maintaining profitable restaurant operations.)
Consolidated Total Lease Adjusted Leverage Ratio
A financial metric used to assess a company's ability to meet its financial obligations, specifically factoring in lease liabilities. It measures total debt (including capitalized leases) relative to earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for lease expenses. (The company must maintain this ratio below 5.50 to 1.00, highlighting a key financial covenant risk.)
Stockholders' deficit
Occurs when a company's total liabilities exceed its total assets, resulting in a negative net worth for shareholders. (The worsening deficit to $(30.78) million indicates a significant erosion of shareholder equity.)
Company-owned restaurants
Restaurants directly owned and operated by Noodles & Company, as opposed to those operated by franchisees. (Revenue from these locations forms the bulk of the company's total revenue, and their performance is a key indicator of operational health.)

Year-Over-Year Comparison

Compared to the prior year's comparable quarter, Noodles & Company experienced a slight decrease in total revenue to $126.43 million from $127.35 million, primarily due to a dip in restaurant revenue. However, the net loss widened significantly by 28.8% to $17.55 million, and the year-to-date net loss increased by 34.6%. A notable increase in restaurant impairments, closure costs, and asset disposals, alongside a rise in long-term debt to $106.44 million, are key negative trends. The company's financial position has weakened, as evidenced by a substantially larger stockholders' deficit of $(30.78) million.

Filing Stats: 4,715 words · 19 min read · ~16 pages · Grade level 14 · Accepted 2025-08-13 17:55:38

Key Financial Figures

Filing Documents

Financial Statements (unaudited)

Financial Statements (unaudited) 2 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Stockholders' Equity (Deficit) 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 27 Item 4.

Controls and Procedures

Controls and Procedures 27 PART II Item 1.

Legal Proceedings

Legal Proceedings 29 Item 1A.

Risk Factors

Risk Factors 29 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30 Item 3. Defaults Upon Senior Securities 30 Item 4. Mine Safety Disclosures 30 Item 5. Other Information 30 Item 6. Exhibits 31

SIGNATURES

SIGNATURES 32 1 Table of Contents PART I

Financial Statements

Item 1. Financial Statements Noodles & Company Condensed Consolidated Balance Sheets (in thousands, except share and per share data) July 1, 2025 December 31, 2024 (unaudited) Assets Current assets: Cash and cash equivalents $ 2,264 $ 1,149 Accounts receivable 3,769 4,058 Inventories 10,653 10,500 Prepaid expenses and other assets 4,245 4,156 Income tax receivable 335 329 Total current assets 21,266 20,192 Property and equipment, net 122,936 137,237 Operating lease assets, net 141,194 157,821 Goodwill 7,154 7,154 Intangibles, net 466 495 Other assets, net 1,559 1,749 Total long-term assets 273,309 304,456 Total assets $ 294,575 $ 324,648 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 18,835 $ 13,194 Accrued payroll and benefits 7,224 7,632 Accrued expenses and other current liabilities 11,681 12,836 Current operating lease liabilities 30,632 32,055 Total current liabilities 68,372 65,717 Long-term debt, net 106,441 100,742 Long-term operating lease liabilities, net 140,060 156,723 Deferred tax liabilities, net 320 276 Other long-term liabilities 10,157 6,769 Total liabilities 325,350 330,227 Stockholders' deficit: Preferred stock—$ 0.01 par value, 1,000,000 shares authorized and undesignated as of July 1, 2025 and December 31, 2024; no shares issued or outstanding — — Common stock—$ 0.01 par value, 180,000,000 shares authorized as of July 1, 2025 and December 31, 2024; 48,851,879 issued and 46,428,008 outstanding as of July 1, 2025 and 48,161,878 issued and 45,738,007 outstanding as of December 31, 2024 489 482 Treasury stock, at cost, 2,423,871 shares as of July 1, 2025 and December 31, 2024 ( 35,000 ) ( 35,000 ) Additional paid-in capital 214,802 213,396 Accumulated deficit ( 211,066 ) ( 184,457 ) Total stockholders' deficit ( 30,775 ) ( 5,579 ) Total liabilities and stockholders' deficit $ 294,575 $ 324,648 See accompanying notes to condensed consolidated financial statements. 2

Business

Business Noodles & Company (the "Company"), a Delaware corporation, develops and operates fast-casual restaurants that serve globally-inspired noodle and pasta dishes, soups, salads and appetizers. As of July 1, 2025, the Company had 453 restaurants system-wide in 31 states, comprised of 364 company-owned restaurants and 89 franchise restaurants. The Company operates its business as one operating and reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Noodles & Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company's results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of Decemb

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