Casual restaurant chain Noodles & Company (NASDAQ: NDLS) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2% year on year to $123.8 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $507.5 million at the midpoint. Its non-GAAP loss of $0.20 per share was 81.8% below analysts’ consensus estimates.
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Noodles (NDLS) Q1 CY2025 Highlights:
- Revenue: $123.8 million vs analyst estimates of $123.6 million (2% year-on-year growth, in line)
- Adjusted EPS: -$0.20 vs analyst expectations of -$0.11 (81.8% miss)
- Adjusted EBITDA: $2.40 million vs analyst estimates of $5.35 million (1.9% margin, 55.1% miss)
- The company reconfirmed its revenue guidance for the full year of $507.5 million at the midpoint
- Operating Margin: -5.2%, down from -3.4% in the same quarter last year
- Locations: 460 at quarter end, down from 469 in the same quarter last year
- Same-Store Sales rose 4.4% year on year (-5.4% in the same quarter last year)
- Market Capitalization: $46.82 million
Company Overview
Offering pasta, mac and cheese, pad thai, and more, Noodles & Company (NASDAQ: NDLS) is a casual restaurant chain that serves all manner of noodles from around the world.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $495.7 million in revenue over the past 12 months, Noodles is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.
As you can see below, Noodles’s 1.3% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was weak as it didn’t open many new restaurants.
This quarter, Noodles grew its revenue by 2% year on year, and its $123.8 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months, similar to its six-year rate. Although this projection suggests its newer menu offerings will catalyze better top-line performance, it is still below the sector average.
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Restaurant Performance
Number of Restaurants
Noodles operated 460 locations in the latest quarter, and over the last two years, has kept its restaurant count flat while other restaurant businesses have opted for growth.
When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Noodles’s demand has been shrinking over the last two years as its same-store sales have averaged 1.9% annual declines. This performance isn’t ideal, and we’d be concerned if Noodles starts opening new restaurants to artificially boost revenue growth.
In the latest quarter, Noodles’s same-store sales rose 4.4% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.
Key Takeaways from Noodles’s Q1 Results
It was good to see Noodles narrowly top analysts’ same-store sales expectations this quarter. On the other hand, its EBITDA and EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 5.9% to $0.95 immediately following the results.
Noodles’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
