Business Context and Reporting Period
Company: Noodles & Company (NDLS)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Fiscal Quarter and Three Quarters Ended September 30, 2025
Business Overview: A fast-casual restaurant operator serving globally-inspired noodle and pasta dishes. As of September 30, 2025, the system comprised 435 restaurants (349 company-owned, 86 franchise) across 31 states. The Company operates as a single reportable segment.
Key Financial Metrics
| Metric (in thousands) | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 |
|---|---|---|---|---|
| Total Revenue | $122,086 | $122,751 | $372,313 | $371,497 |
| Net Loss | $(9,151) | $(6,755) | $(35,760) | $(26,520) |
| Loss Per Share (Basic/Diluted) | $(0.20) | $(0.15) | $(0.78) | $(0.58) |
| Adjusted EBITDA | $6,498 | $4,896 | $14,918 | $19,591 |
| Operating Cash Flow (YTD) | $8,357 | $17,545 | $8,357 | $17,545 |
| Cash and Equivalents (End of Period) | $4,694 | $3,308 | $4,694 | $3,308 |
| Long-Term Debt (Net) | $108,158 | $100,742 | $108,158 | $100,742 |
| Stockholders' Deficit | $(38,899) | $3,735 | $(38,899) | $3,735 |
Note: Stockholders' equity turned from a surplus of $3.7M in Q3 2024 to a deficit of $38.9M in Q3 2025 due to accumulated losses.
Material Changes vs. Prior Period
- Revenue: Q3 2025 revenue decreased 0.5% to $122.1M, driven by $5.0M in revenue loss from permanent closures, partially offset by a 4.0% increase in system-wide comparable restaurant sales. YTD revenue increased 0.2% to $372.3M.
- Profitability: Net loss widened 35.5% in Q3 and 34.8% YTD. The Q3 operating loss increased to $6.3M from $4.8M, primarily due to higher impairment charges.
- Impairments and Closures: Restaurant impairments, closure costs, and asset disposals surged 158% in Q3 to $5.7M (vs. $2.2M in Q3 2024) and 33.2% YTD to $20.6M. The Company closed 15 restaurants in Q3 and 24 YTD, impairing assets on 24 restaurants YTD.
- Cost Structure: Cost of sales increased 5.1% YTD due to menu upgrades and inflation. Labor costs decreased 2.4% in Q3 due to sales leverage, though wage inflation remains a factor. Interest expense increased 35.8% YTD due to higher average debt balances.
- Liquidity: Cash on hand increased to $4.7M from $1.1M at year-end 2024. Operating cash flow decreased significantly YTD ($8.4M vs. $17.5M) due to lower net income and working capital changes.
Guidance, Outlook, and Risks
- Strategic Review: On September 3, 2025, the Board initiated a review of strategic alternatives to maximize stockholder value, including potential refinancing, refranchising, or sale of all or part of the business. This process may be disruptive and time-consuming.
- Debt Covenants: The Company is currently in compliance with its Amended and Restated Credit Agreement. However, covenants are tightening: the Consolidated Total Lease Adjusted Leverage Ratio requirement steps down to 5.25:1.00 in Q4 2025, and the Fixed Charge Coverage Ratio steps up to 1.15:1.00.
- Capital Expenditures: Estimated at $12.0M–$13.0M for fiscal 2025, with $2.0M–$3.0M expected for the remainder of the year, focused on reinvestment and technology.
- Outlook: Management expects comparable restaurant sales to remain positive, aided by new menu items (Delicious Duos, Chili Garlic Ramen). However, near-term growth is constrained by macroeconomic uncertainty and consumer sentiment.
- Risks: Key risks include the outcome of the strategic review, ability to comply with tightening debt covenants, commodity price volatility (including potential tariff impacts), and labor cost inflation.
Investor Verification Checklist
- Strategic Review Status: Monitor for updates on the strategic alternatives review initiated in September 2025 and any potential transaction announcements.
- Covenant Compliance: Verify the Company's ability to meet the stricter leverage and coverage ratios effective in Q4 2025 and 2026.
- Closure Execution: Track the execution of the planned closure of an additional 6–8 restaurants in 2025 and the associated cash flow impacts.
- Comparable Sales Sustainability: Assess whether the 4.0% Q3 comparable sales growth can be sustained given the reduced restaurant count and macroeconomic headwinds.
- Debt Maturity: Note the credit facility maturity date of July 27, 2027, and the Company's refinancing strategy given the current high-interest environment.