INDIANAPOLIS, IN / ACCESSWIRE / March 31, 2023 / 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 year 2022, results for the three-months ended December 31, 2022 and other strategic highlights.
The company reported a net loss for the quarter ended December 31, 2022 of $872,964 on revenue of $3.329 million and a net loss for the year ended December 31, 2022 of $1.056 million, or $.05 per share, on revenue of $14.453 million. This compares to a net loss for the quarter ended December 31, 2021 of $123,692 on revenue of $3.594 million and a net income for the year ended December 31, 2021 of $509,465, or $.02 per share, on revenue of $13.885 million. The 3-month and 12-month periods in 2022 were lowered due to an adjustment of prior years' allowances of approximately $140,000; an adjustment to lower the deferred tax asset by $150,000; and adjustments of approximately $235,000 as a reserve against receivables, which in the opinion of management were not necessary except to be ultra-conservative.
During the first quarter of 2023 the company calculated the amount of refund due under the Employee Retention Credit ("ERC") of $1.718 million and has submitted amended federal Form 941 returns claiming the refund. The ERC was first introduced on March 27, 2020 in the CARES Act, with some subsequent modifications, as part of the government response to the pandemic and is a refundable tax credit that businesses can claim on qualified wages paid to employees. The ERC refund is treated as a government grant and will reduce appropriate expenses in the first quarter of 2023 for the $1.718 million less expenses for applying for the refund of $258,000 or a net of $1.460 million. These credits were based on events happening in 2020 and 2021 but are not being recorded until 2023 when the claim was filed.
In 2022, the company opened 31 new non-traditional units compared to 24 in 2021. In the first quarter of 2023, the company has already sold 11 new non-traditional franchises and opened 10, with over two dozen more units in the pipeline that were previously sold and in various stages of readiness to be opened.
Scott Mobley, the company's President & CEO, stated, "With many of the supply chain emergencies now behind us, we are still left with inflationary pressures and residual staffing issues to deal with, but we have been successful in our plan to re-assign staff focus on expanding our non-traditional venue more quickly. New unit development in 2022 surpassed the previous year by about 30% and we are on track to well exceed 2022's development this year baring any sudden, negative changes in the economic climate. We believe it is very possible for both revenue and margins in this segment to meet or exceed historic levels in coming periods. Our Craft Pizza & Pub segment is now operating at much improved staffing levels, and newer managers and employees are gaining valuable tenure and experience. To enhance that process, we have been focusing additional effort on training and development, especially for our younger assistant managers and general managers." Mobley went on to say, "Learning of the acquisition of our auditing firm by another company well after year-end and just shortly before the beginning of the audit, the last few weeks have certainly been made very hectic. In addition to the disrupting circumstances, the acquiring accounting firm will not be supporting public company audits in the future. With all of that said, a high priority will be to immediately initiate a search for prospective new auditing firms so we can carefully and professionally vet options and then contract with a new firm in a reasonably short timeframe."
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 December 31, | Year-Ended December 31, | ||||||||||||||||||||||||
| Description | 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||
Revenue | $ | 2,443,781 | 100 | % | $ | 2,330,026 | 100 | % | $ | 8,939,569 | 100 | % | $ | 9,704,169 | 100 | % | |||||||||
Cost of sales | 513,848 | 21.0 | 513,636 | 22.0 | 1,868,997 | 20.9 | 2,076,514 | 21.4 | |||||||||||||||||
Salaries and wages | 743,396 | 30.5 | 694,600 | 29.8 | 2,233,376 | 25.0 | 2,850,333 | 29.4 | |||||||||||||||||
Facility cost including rent, common area and utilities | 379,851 | 15.5 | 403,592 | 17.3 | 1,187,984 | 13.3 | 1,635,951 | 16.8 | |||||||||||||||||
Packaging | 87,317 | 3.6 | 85,433 | 3.7 | 271,507 | 3.0 | 344,823 | 3.6 | |||||||||||||||||
All other operating expenses | 442,063 | 18.1 | 402,467 | 17.3 | 1,662,969 | 18.6 | 1,608,784 | 16.5 | |||||||||||||||||
Total expenses | 2,166,475 | 88.7 | 2,099,726 | 90.1 | 7,224,833 | 80.8 | 8,516,405 | 87.7 | |||||||||||||||||
Margin contribution | $ | 277,306 | 11.3 | % | $ | 230,301 | 9.9 | % | $ | 1,714,736 | 19.2 | % | $ | 1,187,764 | 12.3 | % | |||||||||
The revenue from the CPP decreased from $2.4 million to $2.3 million for the fourth quarter and grew from $8.9 million to $9.7 million for the 12 months ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the decrease in the three-month period and the increase in the 12-month period was same store sales reduction in the fourth quarter as a result of being in the opening period for two locations last year, and the increase in year-to-date was same store sales increases.
Cost of sales as a percentage of revenue increased from 21.0% to 22.0% in the fourth quarter and from 20.9% to 21.4%, respectively, for the comparable periods in 2022 compared to 2021. The increases were the result of increased prices on most ingredients, which were partially offset by menu price increases.
Salaries and wages as a percentage of revenue decreased from 30.5% to 29.8% in the fourth quarter and increased from 25.0% to 29.4% for the 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. This decrease in the fourth quarter was the result of scheduling efficiencies and a slight easing in the labor market and the increase in the annual cost was primarily the effect of the PPP loan in 2021 which reduced certain expenses including salaries and wages.
Facility costs, including rent, common area maintenance and utilities, as a percentage of revenue increased from 15.5% to 17.3% and from 13.3% to 16.9% of revenue for the respective three-month and 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. The primary reason for the increase in both periods were two locations that opened during the fourth quarter 2021.
All other operating costs and expenses as a percentage of revenue decreased from 18.1% to 17.3% for the three-month period ended December 31, 2022 and from 18.6% to 16.5% for the 12-month period ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decreases were the result of more efficient operations as the locations had been there longer combined with menu price increases.
Gross margin contribution decreased from 11.3% to 9.9% and from 19.2% to 12.3% for the respective three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decreases in margin were primarily the result of increase in wages and other costs due to inflationary pressures only partially offset by menu price increases. The Company initiated a second price increase during the second quarter of 2022 to help offset the continued cost pressures. The largest impact on the 12-month period was the impact of the PPP loan in 2021 used to offset certain expenses.
The following table sets forth the revenue, expense and margin contribution of the company's franchising venue and the percent relationship to its revenue:
Three Months ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| Description | 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||||
Total royalties and fees | 1,013,831 | 100 | % | 784,423 | 100 | % | 4,444,826 | 100 | % | 4,002,824 | 100 | % | ||||||||||||||
Salaries and wages | 215,656 | 21.3 | 223,495 | 28.5 | 719,252 | 16.2 | 861,190 | 21.5 | ||||||||||||||||||
Trade show expense | 105,000 | 10.4 | 90,000 | 11.5 | 399,000 | 9.0 | 315,000 | 7.9 | ||||||||||||||||||
Travel and auto | 21,446 | 2.1 | 32,028 | 4.1 | 73,270 | 1.6 | 113,186 | 2.8 | ||||||||||||||||||
All other op. expenses | 154,789 | 15.2 | 396,155 | 50.5 | 618,841 | 13.9 | 896,375 | 22.4 | ||||||||||||||||||
Total expenses | 496,891 | 49.0 | 741,678 | 94.6 | 1,810,363 | 40.7 | 2,185,751 | 54.6 | ||||||||||||||||||
Margin contribution | $ | 516,940 | 51.0 | % | $ | 42,745 | 5.4 | % | $ | 2,634,463 | 59.3 | % | $ | 1,817,073 | 45.4 | % | ||||||||||
Total revenue from this venue declined from $1.01 million to $784,000 and from $4.4 million to $4.0 million for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. Decreases in revenue for both the three-month and 12-month periods were the result of an adjustment of prior years' allowances of approximately $140,000 and additional adjustments in the fourth quarter of approximately $235,000 as a reserve for possible uncollectables, which in the opinion of management were not necessary except to be ultra conservative. As the case since COVID began, most of the entertainment facilities and grocery stores that previously offered the company's programs no longer do so, and the company continues to view growth potential in these venues as impractical given the state of their industries and conditions in the distribution business. The company continues to focus growth on the convenience store venue and has increased the growth rate in that venue substantially.
Gross margin in this venue decreased from 51.0% to 5.4% and from 59.3% to 49.4% for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decrease in gross margin for both periods was a decrease in revenue of approximately $140,000 and an increase in expense of approximately $235,000 as explained in the previous paragraph. Going forward this venue has been showing new growth activity and both the revenue and margin is expected to achieve or exceed historic levels in upcoming periods.
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:
Three Months ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||
| Description | 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||||||
Revenue | $ | 131,978 | 100 | % | $ | 206,625 | 100 | % | $ | 485,595 | 100 | % | $ | 712,517 | 100 | % | ||||||||||||
Total expenses | 131,890 | 99.9 | 201,026 | 97.3 | 466,469 | 96.1 | 704,665 | 98.9 | ||||||||||||||||||||
Margin contribution | $ | 88 | .1 | % | $ | 5,599 | 2.7 | % | $ | 19,126 | 3.9 | % | $ | 7,852 | 1.1 | % | ||||||||||||
Gross revenue from this venue increased from $132,000 to $207,000 and from $486,000 to $713,000 for the respective three-month and 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. This venue consists of one location in a hospital. Access to the hospital had been very limited and movement within the hospital was prohibited because of the potential spread of COVID-19, and revenue increased as those restrictions within the hospital were relaxed. The company does not intend to operate any more company-owned non-traditional locations except for the one location that is currently being operated.
Total expenses increased from $132,000 to $201,000 and from $466,000 to $705,000 for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the increases was increased revenue as the hospital relieved many of their restrictions on access to the hospital and on movement within the hospital, as discussed in the previous paragraph, resulting from the COVID-19 pandemic.
Corporate Expenses
Depreciation and amortization decreased from $400,000 to $113,000 and from $849,000 to $451,000 for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. These decreases were the result of opening costs for new company-owned locations of Craft Pizza & Pub restaurants becoming fully expensed prior to 2022.
General and administrative expenses increased from $504,000 to $569,000 and from $1.79 million to $2.17 million for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The increase reflected general inflation pressures as well as the growth of the Craft Pizza & Pub venue.
Interest expense increased from $345,000 to $559,000 and from $1.36 million to $1.63 million for the respective three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the increase in both periods was the compounding of the PIK interest on the Senior Note and the increase in interest rate. In 2023, the interest cost should decline gradually as a result of the required principal payment on the note which should more than offset the additional interest because of compounding of the PIK notes.
During the first quarter of 2023 the company determined that it is entitled to an ERC of $1.718 million and has submitted amended federal Form 941 returns claiming that refund. The ERC refund is treated as a government grant reducing appropriate expenses for the $1.718 million less expenses for applying for the refund of $258,000 or a net of $1.460 million. Recording this refund in the first quarter of 2023 will result in significantly improved margins in the company-owned Craft Pizza and Pub, Franchising Revenue and Expense, Company-Owned Non-Traditional Locations and Corporate Expenses.
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 and its aftermath, competitive factors and pricing and cost pressures, non-renewal of franchise agreements, shifts in market demand, the success of 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 acceptance of the amended federal Form 941 returns relating to the ERC, the impact of franchise regulation, the success or failure of individual franchisees and inflation and other changes in prices or supplies of food ingredients and labor as well as the factors discussed under "Risk Factors" in the 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.
Consolidated Balance Sheets
Noble Roman's, Inc. and Subsidiaries
| December 31, | ||||||||
Assets | 2021 | 2022 | ||||||
Current assets: | ||||||||
Cash | $ | 1,263,513 | $ | 785,522 | ||||
Accounts receivable - net | 904,474 | 824,091 | ||||||
Inventories | 994,085 | 997,868 | ||||||
Prepaid expenses | 415,309 | 424,822 | ||||||
Total current assets | 3,577,381 | 3,032,303 | ||||||
Property and equipment: | ||||||||
Equipment | 4,216,246 | 4,351,558 | ||||||
Leasehold improvements | 3,065,644 | 3,116,030 | ||||||
Construction and equipment in progress | 235,051 | 63,097 | ||||||
| 7,516,941 | 7,530,685 | |||||||
Less accumulated depreciation and amortization | 2,366,927 | 2,817,477 | ||||||
Net property and equipment | 5,150,014 | 4,713,208 | ||||||
Deferred tax asset | 3,232,406 | 3,374,841 | ||||||
Deferred contract costs | 810,044 | 934,036 | ||||||
Goodwill | 278,466 | 278,466 | ||||||
Operating lease right of use assets | 6,003,044 | 5,660,155 | ||||||
Other assets including long-term portion of accounts receivable - net | 324,402 | 350,189 | ||||||
Total assets | $ | 19,375,757 | $ | 18,343,198 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 919,157 | $ | 650,582 | ||||
Current portion of operating lease liability | 656,146 | 799,164 | ||||||
Current portion of Corbel loan payable | - | 866,667 | ||||||
Total current liabilities | 1,575,303 | 2,316,413 | ||||||
Long-term obligations: | ||||||||
Loan payable to Corbel net of current portion | 7,898,941 | 7,470,900 | ||||||
Corbel warrant value | 29,037 | 29,037 | ||||||
Convertible notes payable | 597,229 | 622,864 | ||||||
Operating lease liabilities - net of current portion | 5,570,639 | 5,103,286 | ||||||
Deferred contract income | 810,044 | 934,036 | ||||||
Total long-term liabilities | 14,905,890 | 14,160,123 | ||||||
Stockholders' equity: | ||||||||
Common Stock - no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2021 and December 31, 2022) | 24,791,568 | 24,819,736 | ||||||
Accumulated deficit | (21,897,004 | ) | (22,953,074 | ) | ||||
Total stockholders' equity | 2,894,564 | 1,866,662 | ||||||
Total liabilities and stockholders' equity | $ | 19,375,757 | $ | 18,343,198 | ||||
Consolidated Statements of Operations
Noble Roman's, Inc. and Subsidiaries
| Year Ended December 31, | ||||||||||||
| 2020 | 2021 | 2022 | ||||||||||
Restaurant revenue - company-owned restaurants | $ | 6,209,279 | $ | 8,939,569 | $ | 9,704,169 | ||||||
Restaurant revenue - company-owned non-traditional | 470,846 | 485,595 | 712,517 | |||||||||
Franchising revenue | 4,841,229 | 4,444,826 | 4,002,824 | |||||||||
Administrative fees and other | 14,310 | 14,898 | 33,255 | |||||||||
Total revenue | 11,535,664 | 13,884,888 | 14,452,765 | |||||||||
Operating expenses: | ||||||||||||
Restaurant expenses - company-owned restaurants | 4,938,133 | 7,224,833 | 8,516,405 | |||||||||
Restaurant expenses - company-owned non-traditional | 447,040 | 466,469 | 704,665 | |||||||||
Franchising expenses | 1,736,870 | 1,810,363 | 2,185,751 | |||||||||
Total operating expenses | 7,122,043 | 9,501,665 | 11,406,821 | |||||||||
Depreciation and amortization | 382,368 | 848,913 | 450,550 | |||||||||
General and administrative | 1,717,209 | 1,790,722 | 2,167,678 | |||||||||
Total expenses | 9,221,620 | 12,141,300 | 14,025,049 | |||||||||
Operating income | 2,314,044 | 1,743,588 | 427,716 | |||||||||
Interest expense | 1,914,344 | 1,361,625 | 1,626,221 | |||||||||
Adjust valuation of receivables | 4,941,718 | - | - | |||||||||
Net (loss) income before income taxes | (4,542,018 | ) | 381,963 | (1,198,505 | ) | |||||||
Income tax expense (benefit) | 839,928 | (127,502 | ) | (142,435 | ) | |||||||
Net (loss) income | $ | (5,381,946 | ) | $ | 509,465 | $ | (1,056,070 | ) | ||||
Income (loss)per share - basic: | ||||||||||||
Net income (loss) | $ | (.24 | ) | $ | .02 | $ | (.05 | ) | ||||
Weighted average number of common shares outstanding | 22,215,512 | 22,215,512 | 22,215,512 | |||||||||
Diluted income (loss) per share: | ||||||||||||
Net income (loss) (1) | $ | (.24 | ) | $ | .02 | $ | (.05 | ) | ||||
Weighted average number of common shares outstanding | 23,465,512 | 23,641,678 | 23,512,550 | |||||||||
- Net loss per share is shown the 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 ([email protected])
For Investor Relations:
Paul Mobley, Executive Chairman & CFO ([email protected])
Mike Cole, Investor Relations: 949-444-1341 ([email protected])
SOURCE: Noble Romans, Inc.