Noble Romans, Inc.: 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:

		Three Months Ended June 30,														Six Months Ended June 30,
Description		2023							2024							2023							2024
Revenue		$	2,373,652			100	%		$	2,222,551			100	%		$	4,463,994			100	%		$	4,218,075			100	%
Cost of sales			476,942			20.1				463,324			20.8				928,300			20.8				880,934			20.9
Salaries and wages			652,905			27.5				627,292			28.2				1,270,369			28.5				1,222,334			29.0
Facility cost including rent, common area and utilities			405,768			17.1				391,487			17.6				810,592			18.2				780,872			18.5
Packaging			77,080			3.2				66,563			3.0				149,108			3.3				129,073			3.1
Delivery fees			29,095			1.2				64,424			2.9				60,217			1.3				101,484			2.4
All other operating expenses			383,402			16.1				365,183			16.4				721,428			16.2				695,020			16.5
Total expenses			2,025,192			85.3				1,978,273			89.0				3,940,014			88.3				3,809,717			90.3
Margin contribution		$	348,460			14.7	%			244,278			11.0	%		$	523,980			11.7	%		$	408,358			9.7	%

The following table sets forth the revenue, expense and margin contribution of the Company's franchising activities and the percentage relationship to its revenue:

		Three Months Ended June 30,														Six Months Ended June 30,
Description		2023							2024							2023							2024
Total royalties and fees revenue		$	1,373,533			100	%		$	1,435,748			100	%		$	2,360,876			100	%		$	2,861,039			100	%
Salaries and wages			207,604			15.1				228,518			15.9				430,062			18.2				462,411			16.2
Franchise promotion			50,920			3.7				60,576			4.2				141,120			6.0				120,576			4.2
Insurance			78,711			5.7				84,880			5.9				169,886			7.2				157,065			5.5
Travel and auto			26,019			1.9				35,156			2.4				58,149			2.5				82,366			2.9
All other operating expenses (benefit) (1)			70,874			5.2				51,564			3.7				(1,234,035	)		(52.3	)			127,943			4.5
Total expenses (1)			434,128			31.6				460,694			32.1				(434,818	)		(18.4	)			950,361			33.2
Margin contribution		$	939,405			68.4	%		$	975,054			67.9	%		$	2,795,693			118.4	%		$	1,910,678			66.8	%

(1)

See Note 1 to the Company's condensed consolidated financial statements for a discussion of the ERTC, which reduced operating expenses in the first quarter and six months ended June 30, 2023 but had no effect on the second quarter.

The following table sets forth the revenue, expense and margin contribution of the Company-owned non-traditional venue and the percentage relationship to its revenue:

		Three Months Ended June 30,														Six Months Ended June 30,
Description		2023							2024							2023							2024
Revenue		$	236,585			100	%		$	236,705			100	%		$	459,965			100	%		$	474,852			100	%
Cost of sales			87,078			36.8				95,077			40.2				172,580			37.5				180,416			38.0
Salaries and wages			72,892			30.8				89,392			37.8				145,378			31.6				179,474			37.8
Rent			22,760			9.6				23,832			10.1				44,501			9.7				48,102			10.1
Packaging			6,014			2.5				4,998			2.1				13,182			2.9				8,759			1.8
All other operating expenses (benefit)			15,407			6.5				21,989			9.3				(49,661	)(1)		(10.8	)			44,297			9.3
Total expenses (1)			204,150			86.3				235,288			9.4				325,980			70.9				461,048			97.1
Margin contribution		$	32,434			13.7	%		$	1,417			.6	%		$	133,985			29.1	%		$	13,803			2.9	%

(1)

See Note 1 to the Company's condensed consolidated financial statements for a discussion of the ERTC, which reduced operating expenses in the first quarter of 2023. Total expenses were reduced by $83,177 as a result of recording the ERTC in the first quarter and six months ended June 30, 2023 but had no effect on the second quarter.

Detail on Corporate Expenses:

Depreciation and amortization remained approximately constant at $96,000 and $193,000 for the three-month and six-month periods ended June 30, 2023 and 2024. The amount remained largely consistent since there have been no new company locations opened since 2021.

General and administrative expenses increased to $570,000 and $1.15 million from $526,000 and $1.05 million for the three-month and six-month periods, respectively, ended June 30, 2024 compared to the corresponding periods in 2023. The increase in the year-to-date period was largely the result of 2023 expenses being decreased by certain amounts of the ERTC refunds recorded in the first quarter 2023, as explained above.

Interest expense increased to $435,000 and $829,000 for the three-month and six-month periods ended June 30, 2024 compared to $379,000 and $762,000 for the comparable periods in 2023. The reason for the increase was the addition to principal of the non-cash PIK interest being added to the principal balance of the senior note and the increase in the variable rate, as explained above, which was only partially offset by principal reductions of nearly $1.6 million in the principal amount of the senior note since June 2023.

The company recorded a change in the fair value of warrants of $66,000 and $190,000 in the three-month and six-month periods ended June 30, 2024 compared to none in the comparable periods in 2023. This is a non-cash expense to reflect a theoretical change in the value of the outstanding warrants.

The statements contained in this press release concerning the company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the company that are based on the beliefs of the management of the company, as well as assumptions and estimates made by and information currently available to the company's management. The company's actual results in the future may differ materially from those indicated by the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including, but not limited to the continuing after-effects of the COVID-19 pandemic, the ability of franchisees to timely prepare their units for scheduled openings, the company's ability to maintain adequate staff for new openings, competitive factors and pricing and cost pressures, non-renewal of franchise agreements or the openings contemplated by the development agreement not occurring, shifts in market demand, the success of franchise programs, including the Noble Roman's Craft Pizza & Pub format, general economic conditions, changes in demand for the company's products or franchises, the company's ability to service its loans, the impact of franchise regulation, the success or failure of individual franchisees and inflation, other changes in prices or supplies of food ingredients and labor and, as well as the factors discussed under "Risk Factors" contained in this company's Annual Report on Form 10-K for the year ended December 31, 2022. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. If activist stockholder activities ensue, the company's business could be adversely impacted.

Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

Assets		December 31, 2023				June 30, 2024
Current assets:
Cash		$	872,335			$	801,071
Employee Retention Tax Credit Receivable			507,726				507,725
Accounts receivable - net			1,169,446				696,691
Inventories			965,819				987,786
Prepaid expenses			318,195				200,184
Total current assets			3,833,521				3,193,457
Property and equipment:
Equipment			4,386,430				4,421,773
Leasehold improvements			3,130,430				3,139,215
			7,516,860				7,560,988
Less accumulated depreciation and amortization			3,196,993				3,389,558
Net property and equipment			4,319,867				4,171,430
Deferred tax asset			3,374,841				3,374,841
Deferred contract cost			1,403,299				1,426,578
Goodwill			278,466				278,466
Operating lease right of use assets			4,930,014				4,549,671
Other assets including long-term portion of receivables-net			339,817				354,546
Total assets		$	18,479,825			$	17,348,989
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses		$	1,284,210			$	615,501
Current portion of operating lease liability			799,165				834,715
Current portion of Corbel loan payable			1,000,000				6,892,834
Subordinated note payable			-				575,000
Warrant liability			540,650				731,038
Total current liabilities			3,624,025				9,649,088
Long-term obligations:
Term loan payable to Corbel net of current portion			6,133,691				-
Convertible notes payable			575,000				-
Operating lease liabilities - net of short-term portion			4,378,927				3,951,744
Deferred contract income			1,577,299				1,580,910
Total long-term liabilities			12,664,917				5,532,654
Total liabilities		$	16,288,942			$	15,181,742
See Note 9 regarding Contingencies
Stockholders' equity:
Common stock - no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2023 and as of June 30, 2024)			24,840,126				24,846,109
Accumulated deficit			(22,649,243	)		(22,678,862		)
Total stockholders' equity			2,190,883				2,167,247
Total liabilities and stockholders' equity		$	18,479,825			$	17,348,989

Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2023				2024				2023				2024
Revenue:
Restaurant revenue - company-owned Craft Pizza & Pub		$	2,373,652			$	2,222,551			$	4,463,994			$	4,218,075
Restaurant revenue -company-owned non-traditional			236,585				236,705				459,965				474,852
Franchising revenue			1,176,629				1,435,748				2,163,972				2,861,039
Administrative fees and other			8,674				9,673				15,411				16,817
Total revenue			3,795,540				3,904,678				7,103,342				7,570,783
Operating expenses:
Restaurant expenses - company-owned Craft Pizza & Pub			2,025,193				1,978,273				3,940,014				3,809,717
Restaurant expenses - company-owned non-traditional			204,150				235,288				325,980				461,048
Franchising expenses (benefit)			240,010				460,694				(628,936	)			950,361
Total operating expenses			2,469,353				2,674,255				3,637,058				5,221,126
Depreciation and amortization			95,517				96,300				191,033				192,565
General and administrative expenses			526,310				570,129				1,045,143				1,147,416
Defense against activist shareholder			-				6,064				-				19,542
Total expenses			3,091,180				3,346,748				4,873,234				6,580,649
Operating income			704,360				557,930				2,230,108				990,134
Interest expense			378,785				435,184				762,074				829,365
Change in fair value of warrants			-				65,888				-				190,388
Income (loss) before income taxes			325,575				56,858				1,468,034				(29,619	)
Income tax			-				-				274,190				-
Net income (loss)		$	325,575			$	56,858			$	1,193,844			$	(29,619	)
Earnings per share - basic:
Net income (loss)		$	.02			$	.00			$	.05			$	(.00	)
Weighted average number of common shares outstanding			22,215,512				22,215,512				22,215,512				22,215,512
Diluted earnings (loss) per share:
Net income (loss) (1)		$	.01			$	.00			$	.05			$	(.00	)
Weighted average number of common shares outstanding			23,498,764				23,713,531				23,498,764				22,215,512

(1)

Net loss per share is shown same as basic loss per share because the underlying dilutive securities have anti-dilutive effect.

FOR ADDITIONAL INFORMATION, CONTACT:

For Media Information: Scott Mobley, President & CEO ([e-mail])
For Investor Relations: Paul Mobley, Executive Chairman ([e-mail])
Mike Cole, Investor Relations: 949-444-1341 ([e-mail])

SOURCE: Noble Romans, Inc.

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