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Noodles and Co.'s Revenues Jumped 4.1%; Adjusted Earnings Surged 31.9%

Earnings Highlights and Summary

For the second quarter of the fiscal year 2018, Noodles and Co.'s total revenues increased 4.1% to $117.4 million compared to $112.8 million in Q2 2017, primarily driven by an increase in comparable restaurant sales, but partially offset by the impact of restaurants closed since Q2 2017, most of which were approaching the expiration of their leases. The Company's revenue numbers beat analysts' estimates of $114.8 million.

During Q2 2018, Noodles and Co.'s average unit volumes (AUVs) increased $27,000 to $1,092,000 compared to $1,065,000 in Q2 2017.

For Q2 2018, Noodles and Co.'s comparable restaurant sales increased 5.4% system-wide, including a 5.0% increase for Company-owned restaurants and an 8.0% increase for franchise restaurants. The Company's comparable sales growth was driven primarily by an increase in traffic, related to the successful implementation of recent operational and brand initiatives, as well as a modest price increase. Noodles and Co.'s comparable sales for the reported quarter also benefited from the impact of the shift in the timing of the Easter and the 4th of July holidays by approximately 100 basis points (bps).

During Q2 2018, Noodles and Co. did not open any new Company-owned restaurants. The Company had 469 restaurants at the end of Q2 2018, which was comprised of 404 Company-owned and 65 franchise restaurants.

For Q2 2018, Noodles and Co.'s restaurant contribution margin increased 50 bps to 15.5% compared to 15.0% in Q2 2017. This increase was primarily due to a leverage on higher AUVs during the second quarter of 2018.

Noodles and Co. reported a net loss of $5.9 million, or $0.14 loss per diluted share, in Q2 2018 compared to a net loss of $1.8 million in Q2 2017. The Company's loss from operations was $4.2 million in the reported quarter compared to a loss of $0.8 million in the prior year's same quarter. During Q2 2018, Noodles and Co. recognized a charge of $3.4 million for the final assessment related to the data breach liabilities, and a charge of $0.3 million for the settlement of the Delaware gift card litigation; and also incurred closure costs of $1.5 million related to the seven restaurants closed in the reported quarter, as well as ongoing costs from restaurants closed in previous years.

For Q2 2018, Noodles and Co.'s adjusted net income was $389,000, or $0.01 per diluted share, compared to $295,000, or $0.01 per diluted share, in Q2 2017; which came short of Wall Street's estimates of $0.03 per share. The Company's adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) increased to $9.1 million in the reported quarter from $8.7 million in the prior year's comparable quarter.

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