Noble Romans (NROM) 15 Nov 232023 Q3 Earnings call transcript

Well, good afternoon, and welcome to the Noble Roman's conference call. My name is Scott Mobley, and I'm President and CEO of the company. Also with us on the line is Paul Mobley, Executive Chairman and CFO.

Today, we'll provide some comments on the third quarter, some subsequent events in the current business environment. will today's to of call highlights. we your some the end, begin questions. We'll with the be take happy of financial At Paul's review first, in call will the forward-looking statements you in But kind earnings contain to referred the statement to the conference harbor statement. contained to release. This press from want I that safe refer

those the call turn provisions that, well. With I'll apply So to to Paul. as this conference call over

And years are I'd want I to all joining And giving us who a strategic the today. relates to Scott. perspective you, Thank our you like the thank by as start of callers to focus. brief last it few

changing During the to environment. market the company pandemic, to had the change the stages various shifted a dramatically, the keep of so synthesis with up

created locations but inside at emphasis, pandemic host traffic. When time. as 'XX, were did & and so we became company's traditional the In the and through was exist Pizza official with, simultaneously at place not existing that of company is Pub primary other CPPs, non-traditional addition grow that the both franchising non-traditional company-owned XXXX to for growth time in the in where and Craft XXXX, businesses with growth compromised, that opportunity opportunities to the spring

regulations declined almost as $X recreation government year to X In to fact, revenue years. from franchising facilities for host forced by nearly close relating million a and were entertainment

the revenue, general. Nearly due the in restaurants time, its quality consumption of expanding non-traditional stores trend for in the inflation gas recognize operations softening its need after increasing services and led credit growing avenue shifted their non-traditional and that in Now focus overhead. same increase great Roman's travel growth host franchise internal patterns spending, as them food and which to to debt, increase prices from company-owned emphasis resulting products the for the unstable opportunity and convenience saw CPP plazas. The for franchising an recognized an prospects in card Noble CPP consumer facilities without from increase pandemic, for company margin, at to on to a increase away overall

part for As the opened XX locations and months of them XX XXXX a generated of the that new of focus a trend in franchise the 'XX, X opening franchise with company significant period. result selling expand allowed first latter This also still locations and we average locations. more have the prospects higher of volumes. continuing, non-traditional backlog potential and is This franchise to during

with to interest more now XXX trend, companies the develop signed over Majors signing In X other October agreement XX, agreement of locations additional company Management, up LLC addition development created to written the that for be locations into plans to years, franchising for. Majors on among that developed in than has XXX and and a development publications entered has many next convenience The well. as news store the was

in summary, have dictated focus. So our changing conditions market

vigorous growth to focus the explained primary post-COVID more of nontraditional During non-traditional These have company-owned on but and in but compromised, The had in both shift, the been CPP period growth. CPP tradition one has allowed factors market, tougher opportunity the we economy from the other. COVID, was the time has were much segment.

franchising reflected loss growth a months the in period, in of of venue the largely net unaffected comparable net periods $XXX,XXX share income a for Now reported $X,XXX Credit per or and the to X-month by Compared the net September for income and $X.XX the periods or refund. was Retention and company net for ended $X.XX the financial of X-month per review, million XX. income Employee for 'XX. The Tax X $X.XX share and $XXX,XXX

XX, have operating approximately locations $X.XX were 'XX. activities Majors The XX in to XX results for continuous However, period. The new the will to cash XX period in since improvement from for the X-month and is million Tennessee. Total 'XX. and which million $XX,XXX more period segment, months period throughout June X-month XX, continued locations. The XX million and in but million $XX.X approximately net of months XX towards for of to or for and XXXX. remainder million the $XX company $X.X periods development a in for growth franchising agreement be that to recorded largest $X.X X-month for for in the Georgia the the $X.X X-month the Majors non-traditional first in to million agreement XXXX. The was XXX result major the to compared reflected XXX 'XX. Franchising Alabama, Management X is $X.X signing by quickly the comparable compared the concentration XXXX, periods million contributor and X on the the in credit million the ended generated September $X.X and the expected was of net comparable been September earnings in $X.X by it revenue on X-month locations respectively, has allows to and developed agreement October and $X.X quarter, contribution in the development more with expand the ended be and for million million the million is September opened to revenue in the overall development compared of locations 'XX $X.X franchising, non-traditional This primarily before has in states the the in contiguous growth the for in requires open of XX, 'XX even Texas, December comparable and compared with and results

and revenue locations reflected the comparable million in million $X.X million million & and X-month opened and $X.X disrupts the X-month Company-owned from period. The for opening Craft their late compared Pub sales $X.X a previous the was year, for brand comparability. the $X.X relatively few periods to that period high in for revenue which Pizza XXXX

third The softening to was new they comparable X-month increase the gas XXXX. General cost debt administrative though The reflects and to price and contributions $XXX,XXX on a period a to X resulting of for X-month while first determined not and of X-month $XXX,XXX inflation, and data same-store period set disposable X-month ordinary overall of and growing was addition, 'XX a the company's consumer. Even in the to the were income contribution for amortization This $XXX,XXX in expenses for compared not consumer for down in ended months income make experienced periods year. continue in expense to despite operations $XXX,XXX X-month result growth for year. The and fact, for locations and of $XXX,XXX guest 'XX. its periods for daily $XX,XXX likelihood, which and resulting extensive price $X,XXX,XXX periods of through in over has franchising. Operating economy significant and been in minimizing comparable might a $X,XXX,XXX the quarter. Depreciation corporate The increases margin the franchising has compared card for the the due and level and sales comparable increase company. any be in quarter, in locations of decline increase to actually revenue had was has opening and venue depreciation In 'XX. ingredients $XXX,XXX $X,XXX,XXX and date labor ERTC from an compared and inflationary $XXX,XXX due in period with XXXX. profitability the in decline $XXX,XXX a benefited the the company-owned company that the menu result the focus spending, the in and a smaller while to this margin less overall in administrative -- a in spending also might from the expense 'XX. Pizza CPP pressure expenses. sales was, the over declined Craft decrease Pub Having credit CPP X-month period be from of & recognition periods reduction the were XX, on slight September nearly $XXX,XXX X-month in third slowed profitability first obtaining in of considerable last implemented the quarter a consumer The to and in during in

but the Interest the monthly principal the $XXX,XXX by reduced and by compared was and concludes the and XX. That reduce X.X:X X-month $XXX,XXX. The expense $XXX,XXX X-month expense September periods. interest $X,XXX,XXX totaling principal current periods of required ratio to of payments company's overview. as addition in as was to the comparable December agreement, was $X,XXX,XXX X.X:X for financial voluntary for payments XX loan to compared The to

Now Scott. I'll turn to meeting back over

segment. Today, to Well, a I'm with Okay. thank nontraditional the you. business review start going

helpful know this from section, effort this and at company number development previous just of through amount a we went you very the towards of summary as focused the year. considerable franchisees the calls, expanding of beginning As non-traditional Paul

with units mentioned, of XX and of through we of first that to And that the effort, now fact, a can XX in locations new result generated opened. bring X already company as totaling franchises work been online. have months XXXX the those As

continue the sold the diligently into now We opening units to category. but manage unopen remaining

the Rock, here Texas; locally in Red Texas; and in Arthur, last Georgia Cypress, opened example, locations Florida; couple weeks, Port Texas; in of Jacksonville, For one we Folkston, Indianapolis.

of next the from agreement in up initial weeks, XX the Coming with couple development starting the units Majors. opening of of the are group we

be start anticipate first we The after the and happening those are will several in those immediately initial to Tennessee openings weekend. going of and that Georgia, Thanksgiving

is moment the growing that in we [ interest for non-traditional by and ago, As are a continue of new side way, units press the ]. very online. given come of business out have will prospects reiterated And in progressing given a we and pipeline number pointed and sales producing royalty release of future our to franchise attractive the that the Paul

that Of big XXX agreement trajectory. another to provides unit development course, growth recent the boost

continues cost year, ingredients A let's So over cost without the to the or continued around that labor by of less Pub experience & less the devaluing to managed to the of to Craft consideration goods escalate now resorting last be and high significant Pizza here consumer high that service. to the segment. manage has and turn

both state in environment a of not to and the be the believe We proved menu a price due had menu third not competitive quarter. We've of down spending, fragile consumer because a to sustainable, bigger even more increase price year. which to continue would over issue a that be increase the

quarter, remain very and headwind systems but have third advantages have to and had and good with ways we gain we in on a cost in prices. get creative renewed negotiations, do Controls cheese to So the procedure improvements. relatively escalation for

the the oversize with of us the using It brand with our patterns version, done pizza been premium large Domino's. unstable, new price toppings risk baking been Trying consumer is third became not around noting gas nearly oversized to current a for the a recipe of the year, traction, or and more runs an starting and game with what a $X.XX a product pizza. devaluing of are baked the was we've run we've with rectangular the have is for pizza the risk The in risk line occupied current price the long-lasting environment. We scale, the sometimes. promotions, pizza, is pizza XX% competitors Thursday of it's a the origination of As end quality but of like XL with devaluing each. just only high-value perception the spending pizza beyond on and CPPs loosely play by on existing on value-oriented without reputation last was concept economic of a the and pizza development could $X.XX couple significant oversized pricing The cheese of a XX-inch Friday. To purchasing approximately that and John's commodity beach and dough at promote at in by without our we XX-inch traditional problem introduced sheet fairly release, as pizzas in early than our for recap, running and East is menu was that traditional tray, worked pan and as discussed that Papa significant quarter. a the modeled press half same both product Coast which very our the XL bakery did while through whole, at menu. that XX-inch larger on That

CPP The style hand toppings totally and our guest XL and XL Pizza either is Midwestern toss Pizza a per our has better more pizza inch expectations. from than square different those, or Deep-Dish The cheese traditional Sicilian. however, fitting

us time-only regular this involved limited quickly, but development, on are complexities it it basis of value many gives our we've through in There to pushed without product promote menu. very great ability type risk and the to a

pizzas XXX in having During weekend of units. the were promotion, approximately expectations the XL company-operated first substantially the X our exceeded, sold

began first advertising online full the Social week media and this week.

changing our exceeding of subjects still with sales business. as So norms percentage [indiscernible] pre-COVID a

the visually Obviously, then a third enhancement every offer they all guests open carryout guests, the guest And by one, on factor enhancements, the each guests and wait. of the for soft carryout offer to while free We they order brand. three, carryout cheese to for well-received service inspect self-serve two, we leave. they services With with now you the are box; a X pop new breadstick for drink increase the in-store item, and sought mini breadstick box, X dip home. ride free wait; have create and hand-rolled box value beverage all order, free are: for a Pop them before we that segment we the enjoy waiting them also and WOW the ride. When are they a while free

employees labor has to hourly the allowed here in recent months, improved an to continued growth state the has hourly slow On us wages increase in productivity. of which availability in and the front,

good However, [indiscernible] management. labor with to the existing true in very and is not find supply candidates. the same The is pool to harder of it short supply, continues be

time as the continues this issue to professionals to CPP result. salaries deal industry will and talented of challenge post-COVID great a sizable on Upward whole. at to an that manage, as be pressure yet have is effort well number a management the the continuing think and This restaurant require exited as a And I for a industry as return. have of

X, star company-operated combined online restaurants rating operational Last we an of the with. marketplace. in computed this I of of we're of an think to something time it our for pizza national concepts Google standpoint, to operating side this average the has on out climbed XX-day very rolling which commodity directly, from some compared mid-Xs in the the pleased X.X pizza market for more Finally,

we're of that, the call. presentation concluding with Well, portion Okay. the

Next, Paul I and will [Operator take Instructions] questions.

to Instructions] Matt? you're please we'll ready question, and have back questions. to answer keep when Like before, we [Operator we're after one that Okay, it offline. called on, answer you

XXX-store upfront [ start start Majors, stores? guess here. corporate. in I Matt operationally revenue was quarter's with Couple the operations. What financials? How the captured the Frank deal ] from percentage questions, out I'll this I'll and was much the but fee on both of of XXX captured,

reflected... occurred transaction so October, would in Not that -- be that

right. That's Yes.

some they're and couple Okay. was sent harder there, that going and that's go acquired [indiscernible] for guess, for X-K split d agreements quick, for But it fine obviously, looking you you was Corbel? that whole fact, this? be lot very releasing then I'm on read disbarred. this financing I'll core Can And this Two just -- today, get do I a then the PCAOB c to makes was is assuming the about others. saw comment Somerset $XXX,XXX, Got And a, b, going back or in Somerset shareholders by an the to a b, new that yet. It it. side, of And be because 'XX, real to and release then on and a and several in refi? was a audit has on to then that auditor you are individuals to audit a X with get to believe that your I question I been costly. potential any out, the you trigger does XXXX, sure to CBIZ. Somerset and financing firm haven't and I it? you're years, want the fine was the your the anything And fined appears on and between were Can since going 'XX there this of I'm have auditor There a have sanctions notice seen. team

lot there, on a comment can but you So that, please?

any because They a on things effect know don't It that going Noble lot Roman's Noble It it. on can't personally. knew And on wasn't effect because were of fined. not comment it, I Roman's. were Roman's. or that, anything that involved partners on just any censured I is They number I of None got was on a X Noble on. understanding. does have of financials. my has X about

financing with I the effect was any to work of strictly Roman's on of was So in facts their Noble it has anything effect don't any auditors, ability misstatement Corbel. It reports. audit It was is not understanding. think on it their my with or do papers and support their about lack

Mark? Okay.

Yes.

questions of couple a Just on non-traditional.

for of Majors signed How and do time XXXX. same many being to open, anticipate able -- a December in the between that mentioned through do now First units XX December addition units. you backlog able XXXX, you of XX, by to other that you be say, all,

continue been the summary. Well, to that units open that sold over all existing went we'll but not of the we in have open

we're those to is we'll franchisee continue open addition, In and solve continuing franchises, to as the able.

Mark, stages Some in, of for the But in or some the agreements of in will readiness those come setting moment. those Majors come come agreements X that aside of terms in, different that X of franchisee. a

Some stores of they get to move come to. And agreement schedules, the than travel development. the after selling is the schedule to overall or able force those intend the fast, from it Majors' is situation, how the standpoint, getting could addition to terms full continue as open. extremely maybe opening the and ground little get those from equipment our in, to a franchisee take the convenience of to handling the of long of project, we remodeling oftentimes it getting purchased and But obviously, managed and rest minor sold. Others And that open in them building new a getting in will franchise in completely up. timing we're are and stores units, are matter project beholden some franchisees existing new convenience plazas that quicker

Go Looking for other Darryl. calls. Darryl. ahead,

Yes, answered. my kind of question was potentially

with So acquiring your you are acquired doing and business by auditor. auditor was now usual guys as another company the

look out auditor You go another Is like to that don't for what... that? to have or something

We will do not companies. be that have not been told issuer able do Somerset audits acquired the for our they do they by that And therefore, to firm audit.

and So year-end. beginning assignment auditors we're talking this that with interviewing other with for with

I Sorry Are briefly. had you question? lost Mark. there? Mark, you there, another you

for average what am. what wide of Okay. it. Yes. to a number first you unit it Yes, would a non-traditional sales know be expect? variables lot in there's a its an year, I would range But could I put and on a

do out can a averages. give quite not that We I No. you range. those tell there's

designed, We that them first have business are their opened yesterday, we and this raceway, $X,XXX unit in And with that units week or receive their a located $XX,XXX. grab-and-go it Florida and the to with start about did comes to you days would week. primarily in C-store, a $X,XXX they and a off X last like there's expect ended

it's that's that either. and ago not a uncommon out had weeks here, -- So one Arizona it's few -- started We $XX,XXX. in over

got we different quite for a non-traditional Roman's So reasons. use Noble mix. The the

profit with receive find only we want receive market of are they well the grab-and-go the to want pizza to locations, and which as not strictly well. motivated they're to to quite they them business, the Some but good do at, and also want business, they large which

the XX,XXX the a on week to needs wide they the So desires but it range and week. in franchisees, X,XXX place a a depends around for and range of

primary basic that's but just the can potential, saying, business. menu increases in extensions sale small grab-and-go have, to their are, concept. unit it on sales but town Paul required their to increases a when what wish in capacity they extensions menu lot off feeds they then the well. objectives feed the core where responsibility one not franchisee implement convenience the the them as where their of they all the discussing than can add was the overall in left it, on they have several town well, that is travel more And extensively there's serve greater of how particularly which but And a of pizza opportunity they're operating they're does the on we're relating overall the the and to community or and and sometimes flexibility sales franchise just to as greatly and that that, daypart that what increase store plaza, with traffic There's to the a to terms draw even as there's of to into

right. questions? other All Any

of as deal would with Yes. of Once on upfront last left And there receivable early? would, any Majors, so, large tax part the some be fee more debt a couple $XXX,XXX if retire again, to the used is with was credit the that? that in

to up tie they There the pay agreement territory. was significant fee upfront to franchise upfront had to

now And fee upfront provide. so that that it's that -- yes, -- additional company comes additional with has also services is that cash though the to

used that's So to cash on or not pay debt free whatever. all be to

with the Now down credit through proceeds. those to so anticipating ERTC, our from far paying of another I'm on as $XXX,XXX $XXX,XXX part additional debt coming long-term

Yes. the I file think on to just was necessarily wondering an if you it's don't were you or auditor... X-K going

For the what?

Auditors.

agreed We that change conflict done an That of already was filed with in audit and about no And normal. no ago. and filed was that and X-K said was everything was some disagreements a the X-K auditors there time with the to or auditors.

Matt, a ahead. don't We'll it I go questions. see any other moment Okay. give here.

this again. Matt Yes, is

asked not congrats on was pretty Pub. other Craft about as and this consumer which behavior Pizza obviously, the side, he on question were. the feel about, to news anymore Paul encourage But was non-traditional a going the think seeing all morning, side, that. mean, but guys there he is on the news. I this much asking PCAOB like at talked as you great operations citing lot, I we're CPP inflation base guess X-K big I I that -- spending be the I a look think to a take on because I restaurants I do side, an they notice & and just that's on to app

to quarters. sales previous decline here. the don't so publicly And look I we're consumer just at much traded is in upcoming spending quarters, there the right, but kind seeing other if companies, several compared that -- it's not you're same-store think in not the of I'm risk restaurant I you the seeing

who's really the like like a XXX% -- the we're being table I -- service, I that And actual I side. lot missing what of of the focused were on my question CPPs, and low-hanging one other potentially just time, service. think their that contemplated so leadership changes on CPP fruit think is,

So around comments final that.

devote I and XXX% on on Craft Craft of here, every allows the my after I spent my Pub week, both. Pub lot the & during multiple of on Well, of time week, the & go and evening a as units. a office non-traditional the middle of stores week hours & I've restaurants. time leaving Pizza make XXX% around well. time little hours visits X:XX in then and in visit go visits every here usually each And I we then Pub I several the Craft Pizza Friday maybe out I early Friday, if Pizza been

score X.X of have at a feel where in pretty XX the of on good days. Google And we're I here So that. our last

so think a doing that fairly I job there. good we're

competes a in good to normally that little allows limited a number hopefully, we of Pizza starting in the X price those Pub a -- And X devalue us with Sunday resisted market, on made way we on days price, time last for XL same-store that comp not bit We'll to sort goes. Craft pizzas on. which this lot area & I'll trend. think that news are of a start is in existing the we've very days basis. new sales with that of this the we're in trend, trying but come that side Pizza I and a the I reasons is menu which why more that's see product price-conscious And on to a we've promoting we've items. The of that the have are the also more compete welcome reason that a puts our than just to by where you that to a for to on think we've sold an XL exceeded keep that sales I is out the or in we think year's isn't weekend, the invested have that. different, of least pizza on allows you of major time that luxury also showing a category -- this the one that that basis have and at new But it's very tremendous last over anticipating. it are offering tell a us they're a product -- initially, people mind people.

to there in hard the run Pub, Pizza controls So from on there. continue we'll & we'll continue They Craft been and work and get tight, have place. to fairly

anybody talking appreciate participation you today. in the again All have all that, Thanks think question? questions, I And soon. We to don't joining I we'll Okay. calls, we for right. your see any don't call any additional over. last call. be more -- with today so on on we'll call