NOBLE ROMAN’S (NROM) OVERCOMES LABOR AND SUPPLY CHANNEL CHALLENGES TO GENERATE EBITDA OF ALMOST $500K IN THIRD QUARTER – OPENS EIGHTH COMPANY “PIZZA PUB” IN OCTOBER, NINTH TO COME ON DEC 6TH

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NOBLE ROMAN’S OVERCOMES LABOR AND SUPPLY CHANNEL CHALLENGES TO GENERATE EBITDA OF ALMOST $500K IN THIRD QUARTER – OPENS EIGHTH COMPANY “PIZZA PUB” IN OCTOBER, NINTH TO COME ON DEC 6TH

Noble Roman’s continues to build on the productive reincarnation of their fifty year old midwest brand. Overall company revenues in Q3 were $3.4M vs. $2.9M in ’20. The net income line was virtually breakeven, as in ’20 (a loss of $79k vs. a profit of $83k). The EBITDA was comfortably positive at $488k vs. $589k in ’20., the largest difference being Salaries and Wages at the Noble Roman’s Craft Pizza & Pubs (NRCPPs)  (29.2% of sales, vs 26.3% in ’20), partially offset by lower cost of sales (21.0% vs 22.5%). The bottom line EBITDA margin at the NRCPPs was 10.6% of sales vs. 13.0% in ’20.

The franchising division (non-traditional & grocery sales) showed Total Revenues of $1,177k, down just slightly from $1,252k, most of the decline due to the grocery segment, which was down $31k. Expenses were well contained and the margin contribution was $685k vs. $770k (58.2% of sales vs. 61.5%). There are still temporary closures within the non-traditional system, not all of which will reopen, but sales should recover as the Covid winds down and there is considerable untapped potential for more non-traditional outlets.

CEO, Scott Mobley, made reference to the ongoing franchising of non-traditional outlets, though potential franchisees are predictably inhibited by Covid-caution. Relative to all outlets, but NRCPPs specifically, Mobley talked about “the inflationary pressures from labor and ingredients, as well as additional costs from managing the supply chain…those restaurants open greater than one year had an AUV of $1.2M and store level EBITDA above 15%. Newer locations opened in 2020 are averaging $1.4M with store level EBITDA from 17-20%. …we anticipate continued gains in both revenue and EBITDA….a menu price increase implemented on November 10,2021 should alleviate the inflationary and supply chain management cost pressures that adversely impacted margins in the third quarter.”

Corporate expenses were well controlled. D&A was higher due to the newer stores, but G&A was up just $46k to $506k with preparation for the newest NRCPPs. The current ratio on the Balance Sheet was much improved, at 4.6 to 1, compared to 2.6 to 1 as of 12/31/20, as a result of the PPP funding in February 2021 and the cash flow from operations.

Management expressed satisfaction, within the earnings release and on the conference call, in the progress made in spite of an unprecedented number of operating challenges. They pointed to the four new successful NRCPP locations opened since March ’20, with a fifth (the ninth overall) to open on December 6 and a tenth well along in lease negotiations. At the same time, the balance sheet is strong enough (with $1.8M in cash and positive cash flow) to support a continued expansion of company locations while awaiting post-Covid interest from potential franchisees for both the NRCPPs and non-traditional locations. Management declined to predict how many NRCPP locations will open in ’22 but lease negotiations are continuing and it seems reasonable that at least three more company stores could open by the end of ’22. CEO, Scott Mobley, on the conference call recounted the impressive efforts made by administrative personnel as well as store crew and field supervisors in coping with the unprecedented operating challenges.

CONCLUSION

The Covid hangs on, continuing to affect consumer dining habits as well as the availability of labor, and supply channel disruptions create an entirely different set of challenges. However, a long entrenched regional brand, with management committed to protect their personal legacy as well, should have a good chance of emerging stronger than ever and moving the Company to new heights.

Roger Lipton

P.S. We have written extensively about Noble Roman’s, its history and its prospects, which readers can find by using the SEARCH function on our Home Page.