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Indianapolis based Noble Roman’s, Inc. (NROM)  reported their first quarter, ending 3/31, as described below. Our previous writeups relative to NROM are available through the SEARCH function on our Home Page:


Noble Roman’s (NROM) is one of the smallest publicly held restaurant companies, but  seems to enjoy a good reputation in the markets, especially Indiana and surrounding areas, where they have operated for decades. The recently improved balance sheet,  the continued profitability  of existing company operated Noble Roman’s Craft Pizza and Pub (NRCPP) locations (including the mid-pandemic exceptional opening in Brownsburg),  the maintenance of company wide operating profit through the pandemic, the ongoing prospect for successful franchising of both NRCPP units and the non-traditional venue should allow for a new growth period for the brand. The number of fully diluted shares is about 25M (down about 10% as a result of the new financing) so the enterprise value (including $8.5M of debt) is comfortably under $20M. A large portion of the $3M EBITDA the last several years has been used to service debt, but a much higher percentage should be available to support growth in the future. As we like to say, we are all living in a new world, and Noble Roman’s is no exception.


Results, as with all companies, were influenced by the pandemic in the three months ending March. Total revenues were $2.719M compared to $2.922M in 2019. Operating profit before interest and taxes was $589k compared to $754k a year earlier. Heavy interest charges this year ($926k, of which $718k was non-cash), partially offset by a tax benefit of $82k,  provided a GAAP loss of $255k (vs. a GAAP profit of $476 in 2019). The weighted average shares outstanding was reduced to 22.853M vs. 25.585M, due to fewer fully diluted shares after a constructive balance sheet restructuring.

The highlights of the quarter, as outlined in the corporate release, were:  a new $8M debt package, plus obtaining a $715k loan from the PPP which is expected to be forgiven, the highly successful opening of the 5th company operated NRCPP,  the $321k Adjusted Net Income, after adding back the $658k writeoff of non-cash interest of unamortized previous debt costs.

The franchising division (royalties and fees from non-traditional locations, NRCPPs franchising, grocery store royalties and fees) provided revenues of $1.467M vs $1.593M. Royalties and fees were virtually the same for the non-traditional venue at $1.278M vs $1.287M and the decline was in the grocery segment ($189k vs $305k) as labor became an issue in the deli departments of grocery stores when the pandemic hit. The margin contribution was $.977M vs. $1.098M, a still impressive 66.6% of revenues, vs. 69.0% in 2019.

The company operated Noble Roman’s Craft Pizza and Pub division, including the latest location that opened in Brownsburg, IN on 3/25, generated $1.092M vs. $1.143M. The store level EBITDA margin (after about 1.0% of non-cash rent expense) was $121k (11.1%) vs $132k (11.5%). Revenue was increased by the Brownsburg opening on 3/25 but the State of Indiana closed all dining rooms on 3/14. We estimate that sales for the four locations  (prior to Brownsburg) were slightly positive in January and February before pandemic concerns affected sales starting in early March. Cost of sales was 21.6% vs. 20.8%. Labor expense was 29.1% vs 32.0%. Facility cost was 18.6% vs. 17.6%. Packaging cost was 2.8% vs 3.6% Delivery Fees was 3.2% vs. 1.3%. Other operating expenses was 13.6% vs. 13.2%. Total store level expenses were 88.9% vs 88.5%.

There is a third operating division, relatively immaterial, in which the company operates one non-traditional location. That location generated $154k in revenues and $2.4k in EBITDA  margin, vs. $170k and $16.8k. This division is not expected to grow.

NROM had previously announced that the Brownsburg location, opened at the peak of the pandemic on 3/25, without the normal inside dining, generated over $50k of weekly sales in its first week. The Company has since indicated  that Brownsburg is still generating weekly volume in the mid-thirties, the highest of the five existing locations, obviously very encouraging.

The new $8M five year debt package was closed, fortunately, in early February, providing liquidity to ride out the pandemic storm as well as provide growth capital once the health crisis abates. The Company has described that the interest rate is high at LIBOR plus 7.75% plus 3% of annual PIK interest, added to the loan principal, plus warrants, but there is no principal due for several years and previously issued warrants have been eliminated. The result is $33,333 of debt service on the $8M, plust $60k per year on the remaining convertible debenture for the next several years (less than half the previous debt service), reduction of about 2.5M fully diluted shares, and $1.6M of additional funds that will come in from the new warrants. The proceeds paid off all previous bank debt and the convertible debt that had not been extended and provided capital for approximately four new locations, including Brownsburg.

Per the Conference Call:

Relative to the most important growth segment, the NRCPP locations, Scott Mobley, CEO, described how dining rooms were closed on 3/14. Prior to the pandemic, off-premise sales were about 20% of the total. He had indicated previously that sales bottomed at  a relatively modest  30% decline from pre-Covid levels, as a result of the success of the year old Pizza Valet curbside pickup  service. Several weeks ago, the Governor of Indiana allowed dining rooms to open at 50% of capacity. Since then, sales have increased steadily so are most recently running down 20-25%. On-premise sales are about 30% of the total and the increase is a combination of fresh on-premise revenues, while cannibalizing a portion of the previous off-premise increase. Mobley informed listeners that it had just been announced that dining rooms can operate at 75% of capacity this coming Friday. Mobley volunteered that staffing is always a concern, but less so for NROM than many others since store level staff was largely maintained through the pandemic.

Scott Mobley also pointed out that some of the non-traditional franchisees, hospitals, c-stores, etc. were challenged by staffing over the last several months. Some, like entertainment centers and bowling alleys are completely closed. Hospitals have generally not allowed visitors. Sales within this venue are expected to recover and grow over time, but he cautioned that the rate of recovery is uncertain and could be slower than desired.

Paul Mobley, CFO, pointed out that the increase in A/R was largely the result of a $77k A/R from the landlord in Brownsburg, which was collected in April, and a $50,000 increase in A/R from manufacturers, which is now current. The Company currently has a cash balance of $1.4M so should be able to comfortably fund the addition of 3 more stores over the next nine months. In response to a question, he indicated that the Company should be cash flow positive in Q2 and the balance of the year, obviously assuming that there is no major macro-economic and/or health related disruptions. He also indicated that both existing franchisees of the NRCPP are interested in building new locations. The franchisee in Lafayette is already developing a unit in Kokomo, IN, targeted to open later this summer, and the Evansville franchisee is evaluating possible new locations, yet to be selected and financed. Mobley also indicated that he is having serious discussions with a potential new franchisee, but that is yet to be finalized.

CONCLUSION: Provided at the beginning of this article

Roger Lipton