INDIANAPOLIS, IN / ACCESSWIRE / August 10, 2022 / 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 financial results for the second quarter 2022 and other operational highlights.
Financial highlights from the three months ended June 30, 2022 include:
- Revenues of $3.8 million compared to revenues of $3.6 million in the same period in 2021
- Net loss of $50,000 compared to a net profit $85,000 in the same period in 2021
- Company-owned CPP revenues were $2.5 million compared to $2.3 million in the same period in 2021
- Company franchising revenue was $1.1 million compared to $1.2 million in the same period in 2021
- Persistent ramifications of the COVID pandemic continue to negatively impact labor, supply chain, and cost structures for both the CPP and franchising venues. The impact of these factors has dissipated measurably with regard to company-owned CPP restaurants, with workarounds and effort. The franchising venue has been impacted more significantly and in a more lasting way, but the venue is now growing again, while at a slower pace due to the economic environment and labor shortage.
Financial highlights for the six months ended June 30, 2022 include:
- Revenues of $7.2 million compared to revenues of $6.9 million in the same period in 2021
- Net loss of $187,000 compared to a net income of $913,000 in the same period in 2021 - the company received a loan, accounted for as a grant, of $941,000 through the Payroll Protection Plan in the first quarter of 2021 resulting in limited comparability of the results of this period compared to the same period in 2021
- Company-owned CPP revenues were $4.8 million compared to $4.4 million in the same period in 2021
- Company franchising revenue was $2.1 million compared to $2.3 million in the same period in 2021
- Persistent ramifications of the COVID pandemic continue to negatively impact labor, supply chain, and cost structures for both the CPP and franchising venues. The impact of these factors has dissipated measurably with regard to company-owned CPP restaurants, with workarounds and effort. The franchising venue has been impacted more significantly and in a more lasting way, but the venue is now growing again, while at a slower pace due to the economic environment and labor shortage.
The COVID-19 pandemic had a resurgent, significantly adverse impact from mid-November 2021 through February 2022 due to, among other things, quarantines and isolations, governmental restrictions, reduced customer traffic, staffing shortages and supply difficulties, especially as a result of the emergence of the Omicron variant. However, except for a short period concluding in February 2022, the company was able to adapt to changes caused by the pandemic and to work around various challenges created directly and indirectly as a result of the pandemic in the company-owned locations where it has direct influence. However, the franchising venue continued to suffer more significantly from previous closings of host locations due to government restrictions across the country, and because many franchisees were not able to adapt as quickly to changing and challenging circumstances. This decreased company franchising revenues and growth. Currently, the sale of non-traditional franchises has increased but is still curtailed by owner concerns over labor shortages and the general economic environment.
During the first quarter of 2021 the company received a Payroll Protection Plan ("PPP") loan of $941,000 which was used to reduce certain qualified expenses during that quarter which materially affects the comparison of the six-month periods in 2021 and 2022.
Scott Mobley, the company's President & CEO, stated, "Having negotiated through the extremely difficult operating environment thus far this year, we are now able to focus more resources on non-traditional franchising efforts as well as continuing to tightly manage results in our Craft Pizza & Pub restaurants. Taking into account the inflationary pressures from labor and ingredients, as well as the additional time consumed managing supply chain challenges and emergencies, we remain pleased with the financial performance of our existing Craft Pizza & Pub restaurants, especially the way they have performed after the first two months of the year. At this time, given some relative relief in the emergency management status previously necessary to deal with labor, COVID and supply chain issues, we have been able to redeploy human resources to the franchising venue while maintaining and improving our management controls at CPP."
The following table sets forth the revenue, expense and margin contribution of the company's Craft Pizza & Pub venue and the percent relationship to its revenue:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||
Revenue | $ | 2,264,739 | 100 | % | $ | 2,503,363 | 100 | % | $ | 4,373,436 | 100 | % | $ | 4,786,960 | 100 | % | ||||||||||||
Cost of sales | 472,307 | 20.9 | 523,135 | 20.9 | 910,318 | 20.8 | 993,408 | 20.8 | ||||||||||||||||||||
Salaries and wages | 642,302 | 28.4 | 720,537 | 28.6 | 871,251 | 19.9 | 1,443,494 | 30.2 | ||||||||||||||||||||
Facility cost including rent, common area and utilities | 340,368 | 15.0 | 406,536 | 16.2 | 454,752 | 10.4 | 800,233 | 16.7 | ||||||||||||||||||||
Packaging | 57,702 | 2.5 | 85,005 | 3.4 | 114,399 | 2.6 | 165,743 | 3.5 | ||||||||||||||||||||
Delivery fees | 91,972 | 4.1 | 39,423 | 1.6 | 186,217 | 4.3 | 76,347 | 1.6 | ||||||||||||||||||||
All other operating expenses | 331,093 | 14.6 | 388,253 | 15.5 | 627,701 | 14.4 | 742,193 | 15.5 | ||||||||||||||||||||
Total expenses | 1,935,744 | 85.5 | 2,162,889 | 86.4 | 3,164,638 | 72.4 | 4,221,418 | 88.2 | ||||||||||||||||||||
Margin contribution | $ | 328,995 | 14.5 | % | $ | 340,474 | 13.6 | $ | 1,208,798 | 27.6 | % | $ | 565,542 | 11.8 | % | |||||||||||||
Note: The application of the $940,734 PPP loan against relevant expenses in the quarter ended March 31, 2021 materially affected the comparability of the six month period ended June 30, 2022 compared to the six-month period ended June 30, 2021.
The revenue from this venue increased from $2.26 million to $2.50 million and from $4.37 million to $4.79 million for the respective three-month and six-month periods ended June 30, 2022, compared to the corresponding periods in 2021. Revenue reflected the opening of additional Craft Pizza & Pub restaurants in October and December 2021, respectively, but that increase was partially offset by the impact of the Omicron variant of COVID-19 especially in January and February 2022.
Cost of sales as a percentage of revenue from this venue remained approximately the same at 20.9% and 20.8%, respectively, for the three-month and six-month periods ended June 30, 2022 compared to the corresponding periods in 2021. The company incurred significant increases in product cost but was able to offset that with menu price increases and efficiency gained as staffing levels stabilized and employee experience levels increased.
Salaries and wages were 28.6% and 30.2% for the respective three-month and six-month periods compared to 28.4% and 19.9% for the corresponding periods in 2021. The cost of salaries and wages as a percentage of revenue for this venue have increased significantly due to the competitive environment for available labor caused by the general shortness of available labor in 2022, only partially offset by menu price increases and operating efficiency. For the six months ended June 30, 2021 salaries and wages represented 19.9% of revenue which reflected the PPP loan/grant used in part to reimburse the company $370,832 of payroll costs in the first quarter 2021.
Gross margin contribution as a percentage of revenue for this venue was 13.6% and 11.8% compared to 14.5% and 27.6% for the three-month and six-month periods ended June 30, 2022, respectfully, compared to the corresponding periods last year. The reduction in margin for the three-month period ended June 30, 2022 compared to the corresponding period in 2021 was primarily the result of general inflation, increasing utility costs, packaging and other operating costs only partially offset by menu price increases. The 11.8% margin in the six-month period ended June 30, 2022 reflected the significant decline in sales during January and February due to the rapid spread of the Omicron virus during the period December 2021 through February 2022. That margin also reflected the general inflationary pressures as described above in the three-month period. The margin of 27.6% in the six-month period ended 2021 reflected the expenses which were partially reimbursed from the PPP loan/grant in February 2021.
The following table sets forth the revenue, expense and margin contribution of the company's franchising venue and the percent relationship to its revenue:
Description | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||||||
Total royalties and fees revenue | $ | 1,199,260 | 100 | % | $ | 1,064,363 | 100 | % | $ | 2,253,220 | 100 | % | $ | 2,098,607 | 100 | % | ||||||||||||||||
Salaries and wages | 208,305 | 17.4 | 216,658 | 20.4 | 296,551 | 13.2 | 410,254 | 19.6 | ||||||||||||||||||||||||
Trade show expense | 84,000 | 7.0 | 45,000 | 4.2 | 189,000 | 8.4 | 135,000 | 6.4 | ||||||||||||||||||||||||
Insurance | 89,408 | 7.5 | 99,431 | 9.3 | 151,806 | 6.7 | 195,281 | 9.3 | ||||||||||||||||||||||||
Travel and auto | 21,914 | 1.8 | 40,002 | 3.8 | 38,284 | 1.7 | 58,809 | 2.8 | ||||||||||||||||||||||||
All other operating expenses | 78,682 | 6.6 | 82,149 | 7.7 | 146,033 | 6.5 | 145,251 | 6.9 | ||||||||||||||||||||||||
Total expenses | 482,309 | 40.2 | 483,240 | 45.4 | 821,674 | 36.5 | 944,595 | 45.0 | ||||||||||||||||||||||||
Margin contribution | $ | 716,951 | 59.8 | % | $ | 581,123 | 54.6 | % | $ | 1,431,546 | 63.5 | % | $ | 1,154,012 | 55.0 | % | ||||||||||||||||
Note: The application of the $940,734 PPP loan against relevant expenses in the quarter ended March 31, 2021 materially affected the comparability of the six month period ended June 30, 2022 compared to the period ended June 30, 2021.
Total revenue was $1.06 million and $2.10 million for the three-month and six-month periods ended June 30, 2022 compared to $1.20 million and $2.25 million for the comparable periods in 2021, respectively. Franchising had a significant loss of sales during the COVID pandemic primarily because of closures of many host locations in different parts of the country which closed due to government regulations. The revenue has been gradually increasing again due to the opening of new locations, and on a sequential quarter basis revenue from this venue increased from $1,013,000 in the three-month ended December 31, 2021, to $1,034,000 in the three-months ended March 31, 2022 and to $1,064,000 in the three-months ended June 30, 2022, respectively. That trend is expected to continue and increase as a result of new openings in July 2022 and anticipated additional openings during the balance of 2022.
Salaries and wages, trade show expense, insurance and other operating costs as a percentage of revenue from this venue were 45.4% and 45.0% for the three-month and six-month periods ended June 30, 2022 compared to 40.2% and 36.5%, respectively, for the corresponding periods in 2021. The 36.5% for total expenses in the six-months ended June 30, 2021 reflected the reduction of payroll and other expenses partially reimbursed by the PPP loan/grant in February 2021, but which was partially offset in the six months ended June 30, 2022 by a reduction in trade show cost as a result of doing fewer trade shows.
Margin was 54.6% and 55.0% for the three-month and six-month periods ended June 30, 2022, compared to 59.8% and 63.5% for the comparable periods in 2021, respectively. The decrease in margin was largely the result of the decrease in revenue. As explained above the revenue decreased due to the closure of locations throughout the country during the COVID-19 pandemic as a result of government regulations. That revenue decrease is gradually being overcome by the opening of new locations, as explained above.
The following table sets forth the revenue, expense and margin contribution of the company-owned non-traditional venue and the percent relationship to its revenue:
Description | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||||||
Revenue | $ | 117,197 | 100 | % | $ | 177,115 | 100 | % | $ | 233,301 | 100 | % | $ | 310,244 | 100 | % | ||||||||||||||||
Cost of sales | 42,328 | 36.1 | 71,076 | 40.1 | 86,357 | 37.0 | 120,945 | 39.0 | ||||||||||||||||||||||||
Salaries and wages | 48,301 | 41.2 | 60,167 | 34.0 | 65,682 | 28.2 | 112,541 | 36.3 | ||||||||||||||||||||||||
Rent | 11,542 | 9.8 | 17,075 | 9.6 | 22,858 | 9.8 | 29,884 | 9.6 | ||||||||||||||||||||||||
Packaging | 3,572 | 3.0 | 5,933 | 3.3 | 6,842 | 2.9 | 10,732 | 3.4 | ||||||||||||||||||||||||
All other operating expenses | 12,916 | 11.0 | 15,499 | 8.8 | 26,074 | 11.2 | 28,524 | 9.2 | ||||||||||||||||||||||||
Total expenses | 118,659 | 101.2 | 169,750 | 95.8 | 207,813 | 89.1 | 302,626 | 97.5 | ||||||||||||||||||||||||
Margin contribution | $ | (1,462 | ) | (1.2 | )% | $ | 7,365 | 4.2 | % | $ | 25,488 | 10.9 | % | $ | 7,618 | 2.5 | % | |||||||||||||||
Gross revenue from this venue was $177,000 and $310,000 during the three-month and six-month periods ended June 30, 2022 compared to $117,000 and $233,000 for the comparable periods in 2021, respectively. The primary reason for the increase during both periods was the withdrawal of certain restrictions placed on hospital locations as a result of the COVID-19 pandemic, where hospitals were restricted from having outside visitors, and staff inside the hospital were restricted from going from one area of the hospital to another. The company does not intend to operate any more company-owned non-traditional locations except the one location that it is currently operating.
Total expenses were $170,000 and $303,000 for the three-month and six-month periods ended June 30, 2022 compared to $119,000 and $208,000 for the comparable periods in 2021, respectively. The primary reason for the increase in both periods was the increase in revenue as a result of lifting restrictions on the hospital due to the COVID-19 pandemic, as explained above.
Corporate Expenses
Depreciation and amortization were $112,687 and $225,439 for the three-month and six-month periods ended June 30, 2022 compared to $142,133 and $306,849 for the comparable periods in 2021, respectively. The depreciation decrease was the result of not opening any new corporate-owned locations to date in 2022.
General and administrative expenses were $540,000 and $1.08 million for the three-month and six-month periods ended June 30, 2022, compared to $482,000 and $780,000 for the comparable periods in 2021, respectively. The primary reason for the increase was a partial reimbursement of certain qualifying expenses through the February 2021 PPP loan/grant and the hiring of an investor relations consultant.
Operating income was $282,000 and $441,000 for the three-month and six-month periods ended June 30, 2022 compared to $424,000 and $1.6 million for the comparable periods in 2021, respectively. The primary reason for the decrease was the $940,000 PPP loan/grant in February 2021.
Interest expense was $348,000 and $690,000 for the three-month and six-month periods ended June 30, 2022 compared to $339,000 and $673,000 for the comparable periods in 2021, respectively. The primary reason for the increase in both periods was a result of the non-cash PIK interest which adds to the principal amount of the Corbel loan outstanding.
Net loss was $50,000 and $187,000 for the three-month and six-month periods ended June 30, 2022, compared to net income of $85,000 and $913,000 for the comparable periods in 2021, respectively. The primary reason for the decrease was the $940,000 PPP loan/grant in February 2021 which was partially offset by a decrease in revenue from franchising and an increase in revenue from company-owned Craft Pizza & Pub locations.
Liquidity and Capital Resources
The company's strategy is to grow its business by concentrating on franchising/licensing non-traditional locations, franchising its updated stand-alone concept, Craft Pizza & Pub, and operating company-owned Craft Pizza & Pub restaurants. The company added new company-operated Craft Pizza & Pub locations in January and November of 2017, January and June of 2018, March, October and December of 2020, and October and December of 2021.
The company is operating one non-traditional location in a hospital and has no plans for operating any additional company-owned non-traditional locations.
The company's current ratio was 2.4-to-1 as of June 30, 2022, compared to 2.3-to-1 as of December 31, 2021.
The statements contained above 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 effects of the COVID-19 pandemic, the availability of hourly and management labor to adequately staff company-operated and franchise operations, competitive factors and pricing pressures, accelerating inflation and the cost of labor, food items and supplies, non-renewal of franchise agreements, shifts in market demand, the success of new franchise programs, including the Noble Roman's Craft Pizza & Pub format, the company's ability to successfully operate an increased number of company-owned restaurants, 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 changes in prices or supplies of food ingredients and labor as well as the factors discussed under "Risk Factors" contained in the company's annual report on Form 10-K. 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.
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Assets | December 31, 2021 | June 30, 2022 | ||||||
Current assets: | ||||||||
Cash | $ | 1,263,513 | $ | 900,289 | ||||
Accounts receivable - net | 904,474 | 1,032,298 | ||||||
Inventories | 994,085 | 994,611 | ||||||
Prepaid expenses | 415,309 | 450,606 | ||||||
Total current assets | 3,577,381 | $ | 3,377,804 | |||||
Property and equipment: | ||||||||
Equipment | 4,216,246 | 4,321,336 | ||||||
Leasehold improvements | 3,065,644 | 3,113,898 | ||||||
Construction and equipment in progress | 235,051 | 261,196 | ||||||
| 7,516,941 | 7,696,430 | |||||||
Less accumulated depreciation and amortization | 2,366,927 | 2,592,367 | ||||||
Net property and equipment | 5,150,014 | 5,104,063 | ||||||
Deferred tax asset | 3,232,406 | 3,294,319 | ||||||
Deferred contract cost | 810,044 | 864,590 | ||||||
Goodwill | 278,466 | 278,466 | ||||||
Operating lease right of use assets | 6,003,044 | 6,002,700 | ||||||
Other assets including long-term portion of receivables - net | 324,402 | 398,497 | ||||||
Total assets | $ | 19,375,757 | $ | 19,320,439 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 919,157 | $ | 739,858 | ||||
Current portion of operating lease liability | 656,146 | 685,306 | ||||||
Current portion of Corbel loan payable | - | 166,665 | ||||||
Total current liabilities | 1,575,303 | 1,591,829 | ||||||
Long-term obligations: | ||||||||
Term loan payable to Corbel - net of current portion | 7,898,941 | 7,949,523 | ||||||
Corbel warrant value | 29,037 | 29,037 | ||||||
Convertible notes payable | 597,229 | 610,046 | ||||||
Operating lease liabilities - net of current portion | 5,570,639 | 5,551,696 | ||||||
Deferred contract income | 810,044 | 864,590 | ||||||
Total long-term liabilities | 14,905,890 | 15,004,892 | ||||||
Stockholders' equity: | ||||||||
Common stock - no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2021 and as of June 30, 2022) | 24,791,568 | 24,807,679 | ||||||
Accumulated deficit | (21,897,004 | ) | (22,083,961 | ) | ||||
Total stockholders' equity | 2,894,564 | 2,723,718 | ||||||
Total liabilities and stockholders' equity | $ | 19,375,757 | $ | 19,320,439 | ||||
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | 2022 | |||||||||||||
Revenue: | ||||||||||||||||
Restaurant revenue - company-owned Craft Pizza & Pub | $ | 2,264,739 | $ | 2,503,363 | $ | 4,373,436 | $ | 4,786,960 | ||||||||
Restaurant revenue - company-owned non-traditional | 117,197 | 177,115 | 233,301 | 310,244 | ||||||||||||
Franchising revenue | 1,199,260 | 1,064,363 | 2,253,220 | 2,098,608 | ||||||||||||
Administrative fees and other | 3,513 | 5,051 | 7,069 | 19,267 | ||||||||||||
Total revenue | 3,584,709 | 3,749,892 | 6,867,026 | 7,215,079 | ||||||||||||
Operating expenses: | ||||||||||||||||
Restaurant expenses - company-owned Craft Pizza & Pub | 1,935,744 | 2,162,889 | 3,164,638 | 4,221,418 | ||||||||||||
Restaurant expenses - company-owned non-traditional | 118,659 | 169,750 | 207,813 | 302,626 | ||||||||||||
Franchising expenses | 482,309 | 483,240 | 821,674 | 944,595 | ||||||||||||
Total operating expenses | 2,536,712 | 2,815,879 | 4,194,125 | 5,468,639 | ||||||||||||
Depreciation and amortization | 142,133 | 112,687 | 306,849 | 225,439 | ||||||||||||
General and administrative expenses | 481,860 | 539,742 | 780,449 | 1,080,274 | ||||||||||||
Total expenses | 3,160,705 | 3,468,308 | 5,281,423 | 6,774,352 | ||||||||||||
Operating income | 424,004 | 281,584 | 1,585,603 | 440,727 | ||||||||||||
Interest expense | 338,839 | 347,717 | 673,030 | 689,597 | ||||||||||||
Income (loss) before income taxes | 85,165 | (66,133 | ) | 912,573 | (248,870 | ) | ||||||||||
Income tax benefit | - | (15,872 | ) | - | (61,913 | ) | ||||||||||
Net income (loss) | $ | 85,165 | $ | (50,261 | ) | $ | 912,573 | $ | (186,957 | ) | ||||||
Earnings per share - basic: | ||||||||||||||||
Net income (loss) | $ | .00 | $ | .00 | $ | .04 | $ | (.01 | ) | |||||||
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) | $ | .00 | $ | .00 | $ | .04 | $ | (.01 | ) | |||||||
Weighted average number of common shares outstanding | 23,465,512 | 23,579,118 | 23,465,512 | 23,579,118 | ||||||||||||
FOR ADDITIONAL INFORMATION, CONTACT:
For Media Information:
Scott Mobley, President & CEO
[email protected]
For Investor Relations:
Paul Mobley, Executive Chairman
[email protected]
Mike Cole, Investor Relations:
949-444-1341
[email protected]
SOURCE: Noble Roman's, Inc.