Noble Roman's Announces Second Quarter 2024 Financial Data

INDIANAPOLIS, IN / ACCESSWIRE / August 14, 2024 / Noble Roman's, Inc. (OTCQB:NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Noble Roman's Craft Pizza & Pub ("CPP"), today announced results for the second quarter 2024 and other company highlights.

Financial highlights from the second quarter 2024 include:

• Net income of $57,000, which includes a non-cash expense of approximately $66,000 for change in theoretical fair value of warrants.

• A quarterly Operating Income of $558,000

• A 22% increase in Franchising Revenue from the same period in 2023 to $1.4 million. By adding in the $75,000 in deferred initial franchise fees in the current quarter, which were actually received in cash but deferred for future income recognition, which is different accounting treatment than was applied the previous year, the increase would have been $334,000, or 28.4%.

• A $151,000 decrease in Company-operated Restaurant Revenue (Craft Pizza & Pub and Non-Traditional combined) from the comparable period in 2023.

• An increase of only .7% points in Craft Pizza & Pub cost of sales and a .7% point increase in labor cost from the comparable period in 2023 despite the inflationary pressures on ingredient costs and cost of labor with no menu price increases. The variable portion of labor cost actually decreased by .2% points compared to last year.

• The company continues to progress on the process of new financing to repay its senior note and subordinated notes.

• Comparability of 2024 results to 2023 results for year-to-date is obscured due to the one-time recording of $1.46 million in income during the first quarter of 2023 from ERTC refund recognition.

Financial highlights from the six-month period 2024 include:

• Net loss of $30,000, which includes a non-cash expense of approximately $190,000 for change in theoretical fair value of warrants, a non-cash expense of $29,000 to close out the asset ledger for dormant subsidiary and a non-cash adjustment for allowance receivables of $32,000. Excluding these non-cash expenses, which did not pertain to this period's activity, the company would have reported a net income of approximately $225,000.

• A six-month Operating Income of $990,000

• A 32.2% increase in Franchising Revenue from the comparable period in 2023 to $2.9 million. By adding in the $127,500 in deferred initial franchise fees in the current period the increase would have been $825,000, or 38.1%, which were actually received in cash but deferred for future income recognition, which is different accounting treatment than was applied the previous year.

• Franchise venue salaries and wages decreased 2% points from 2023 reflecting economies of scale due to new non-traditional franchise openings.

• A $231,000 decrease in Company-operated Restaurant Revenue (Craft Pizza & Pub and Non-Traditional combined) from the same period in 2023.

• An increase of only .1% points in Craft Pizza & Pub cost of sales and a .5% point increase in labor cost from the same period in 2023 despite the inflationary pressures on ingredient costs and cost of labor with no menu price increases.

• Comparability of 2024 results to 2023 results for year-to-date is obscured due to the one-time recording of $1.46 million in income during the first quarter of 2023 from ERTC refund recognition.

Further details:

The company had a net loss for the six-months ended June 30, 2024 of approximately $30,000 compared to a net income of approximately $1.2 million for the comparable period in 2023. The net loss of approximately $30,000 was after the company recorded an additional non-cash expense for the change in the value of the warrant of approximately $190,000, a non-cash charge of $29,000 to close out the asset ledger for dormant subsidiary and a non-cash adjustment for allowance receivables from a prior period of $32,000 excluding those one-time charges, the company would have reported a net income of approximately $225,000. The comparability of the two six-month periods of June 30, 2024 and 2023 is reduced because the net income of $1.2 million in 2023 was after recording $1.46 million of income from the ERTC refund. The ERTC refund was expenses and lost revenue, due to COVID restrictions, incurred by the company in periods prior to March 31, 2023. Excluding the ERTC refund recorded in the first quarter of 2023, the company would have reported a net loss of $267,000 for the six-month period ended June 30, 2023.

The revenue from the non-traditional franchising venue increased to $2.9 million from $2.2 million, or a 32.2% increase. By adding in the $127,500 in deferred initial franchise fees in the current period, which were actually received in cash but deferred for future income recognition, which is a different accounting treatment than was applied the previous year, and the non-cash adjustment above of $32,000, the increase would have been $857,000, or 39.6% increase in franchising revenue. The company currently has a significant pipeline of prospects for additional franchise sales and a significant number of franchised locations sold but not yet open. It is anticipated that this source of revenue will substantially increase through the rest of 2024 and beyond. Salaries and wages from the franchising venue decreased to 16.2% of revenue from 18.2% of revenue in the comparable period in 2023. This improvement came in spite of the shortage of available labor and increased labor rates as a result of that shortage. The labor was reduced as a percentage of revenue primarily related to the growing number of franchises sold and opened without adding additional staff.

The total revenue from the company-owned restaurants was $4.7 million for the six months ended June 30, 2024 compared to $4.9 million in the corresponding period in 2023. Same store sales declined during this period approximately 4.7% due in part to localized bad weather in the first quarter and sluggish spending by consumers in the second quarter. During the month of July, same store sales increased by approximately 1% and increased by approximately 9.5% during the first 11 days in August. During the first quarter of 2024 the average check was down versus the prior year while the guest count increased somewhat. By the latter stages of the second quarter 2024, the average check was up somewhat versus the prior year while the guest count was down, indicating that the price sensitive, lower spending guests had decreased their spending frequency.

During the six-month period ended June 30, 2024, the company generated net cash from operations of nearly $500,000 despite reducing its accounts payable and accrued expenses by $669,000 and used that cash to pay principal on debt of $500,000. This was accomplished in spite of paying the high interest rate on the Corbel loan which bears interest on a variable rate of SOFR, as defined in the agreement, plus 7.75% for an aggregate rate of 13.08% at December 31, 2023 in addition to non-cash PIK interest of 3% adding to the principal balance of the loan making a combined rate of well over 16%.

As previously announced, the company is pursuing plans to obtain new financing to repay the Corbel loan prior to its maturity in February 2025 and to repay the subordinated notes as well when the Corbel loan is repaid. Based on the company's credit metrics the company believes its financing efforts will be successful. The company expects the new financing will result in a significant reduction in the interest rate that it currently pays, with the structure of the loan being a full amortization over a longer term and at a lower rate of interest.

The following table sets forth the revenue, expense and margin contribution of the Company's Craft Pizza & Pub venue and the percentage relationship to its revenue: