Noble Roman's Announces Results of 3rd Quarter 2021

Revenues Increased 25% YOY; Company Expansion of Craft Pizza & Pub Continues

INDIANAPOLIS, IN / ACCESSWIRE / November 11, 2021 / 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 three-month and nine-month periods ended September 30, 2021 along with other strategic highlights.

Financial highlights from the third quarter 2021 include:

  • Revenues of $3.4 million compared to revenues of $2.9 million in the same period in 2020
  • Net income (loss) of $(79,000) compared to $83,000 in the same period in 2020
  • EBITDA of $488,000 compared to $589,000 in the same period in 2020
  • Company-owned CPP revenues increased to $2.1 million from $1.6 million in the same period in 2020
  • Company franchising revenue decreased to $1.2 million from $1.3 million in the same period in 2020
  • Labor shortages and supply chain disruptions were challenges in both the CPP and non-traditional venues during the third quarter which negatively impacted results

Financial highlights from the nine-months ended September 30, 2021 include:

  • Revenues of $10.3 million compared to revenues of $8.3 million in the same period in 2020
  • Net income before tax of $833,000 compared to $442,000 in the same period in 2020
  • EBITDA of $2.5 million compared to $2.5 million in the same period in 2020
  • Company-owned CPP revenues increased to $6.5 million from $4.1 million in the same period in 2020
  • Franchising revenue decreased to $3.4 million from $3.8 million in the same period in 2020
  • Slower than expected expansion of non-traditional units, largely because of labor shortages by the host businesses

Development highlights for Craft Pizza & Pub subsequent to the third quarter 2021 include:

  • In October, the company opened an additional CPP location in north central Indianapolis
  • In November, the company announced plans to open an additional CPP location in Franklin, Indiana on December 6, 2021
  • The company is currently negotiating on a site for an additional company-owned CPP location

Scott Mobley, the company's President & CEO, stated, "We continue to execute on our growth strategy by continuing our non-traditional franchising efforts and expanding our popular Craft Pizza & Pub concept. Taking into account the inflationary pressures from labor and ingredients, as well as the additional costs in managing supply chain emergencies, we remain extremely pleased with the financial performance of our existing Craft Pizza & Pub restaurants. Those restaurants open greater than one year had an average annual revenue per location of approximately $1.2 million and store level EBITDA averaging above 15%. Newer locations opened in 2020 are averaging $1.4 million in annual sales per location with store level EBITDA ranging from 17% to 20%. As the company continues its expansion of the CPP concept, we anticipate continued gains in both revenue and EBITDA going forward. Furthermore, a menu price increase implemented on November 10, 2021 in all company-owned Craft Pizza & Pub restaurants should help alleviate the inflationary and supply chain management cost pressures that adversely impacted margins in the 3rd quarter."

For the three-month and nine-month periods ended September 30, 2021, the company reported total revenues of $3.4 million and $10.3 million, respectively, compared to $2.9 million and $8.3 million, respectively, for the corresponding periods in 2020. Operating profit before interest and taxes for the three-month and nine-month periods ended September 30, 2021 was $264,000 and $1.8 million, respectively, compared to $411,000 and $2.0 million, respectively, for the corresponding periods in 2020. On February 19, 2021, the company received formal notice from the Small Business Administration that the entire first loan under the PPP was forgiven in accordance with the provisions of the CARES Act, and it is anticipated the second loan will be forgiven as well and has therefore been accounted for as a grant.

Net income (loss) for the three-month and nine-month periods ended September 30, 2021 was $(79,000) and $833,000, or $.04 per share, respectively, compared to $83,000 and $524,000, or $.02 per share, for the corresponding periods in 2020.

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 September 30,
Nine Months ended September 30,
Description 2020 2021 2020 2021
Revenue
$1,583,251 100% $2,122,352 100% $4,083,064 100% $6,495,788 100%
Cost of sales
356,683 22.5 444,831 21.0 871,312 21.3 1,355,148 20.9
Salaries and wages
416,490 26.3 618,729 29.2 771,795 18.9 1,489,980 22.9
Facility cost including rent, common area and utilities

269,369

17.0

353,382

16.7

657,725

16.1

808,134

12.4
Packaging
42,096 2.7 69,792 3.3 117,474 2.9 184,191 2.8
Third-party delivery fees
71,036 4.5 97,998 4.6 179,367 4.4 284,215 4.4
All other operating expenses
221,080 14.0 308,989 14.6 555,449 13.6 936,690 14.4
Total expenses
1,376,753 87.0 1,893,721 89.4 3,153,122 77.2 5,058,358 77.8
Margin contribution
$206,498 13.0% $228,631 10.6% $929,942 22.8% $1,437,430 22.2%

Margin contribution from this venue was decreased $27,151 for the nine-month period ended September 30, 2021 due to non-cash expense related to the adoption of Accounting Standards Update 2016-02, accounting for lease, which became effective after January 1, 2019 for publicly reporting companies.

Total revenue from this venue was $2.1 million and $6.5 million for the three-month and nine-month periods ended September 30, 2021 compared to $1.6 million and $4.1 million for the corresponding periods in 2020. Revenue was increased by the opening of three additional CPP restaurants in March, October and November 2020, respectively, but that increase was constrained by the after effects of the COVID-19 pandemic which limited inside dining as well as creating labor and ingredient price inflation along with persistent supply chain issues.

Gross margin contribution from this venue was 10.6% and 22.2% for the three-month and nine-month periods ended September 30, 2021 compared to 13.0% and 22.8% for thecorresponding periods in 2020. This decrease was primarily the result of increased salaries and wages, as explained above, mostly offset by lower facility costs. Overall expenses for this venue increased from 87.0% to 89.2% and from 77.2% to 77.9% for the three-month and nine-month periods in 2021, respectively, compared to the corresponding periods in 2020. Facility costs decreased from 17.0% to 16.7% and from 16.1% to 12.4% for the three-month and nine-month periods in 2021, respectively, compared to the corresponding periods in 2020. The facility costs as a percentage of sales decreased because of the higher sales volume and lower cost leases for the most recent openings.

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 September 30,
Nine Months ended September 30,
Description 2020 2021 2020 2021
Royalties and fees franchising
$1,063,864 84.9% $1,019,883 86.6% $3,256,796 85.5% $2,955,974 86.1%
Royalties and fees grocery
188,639 15.1 157,893 13.4 551,430 14.5 475,021 13.9
Total royalties and fees
1,252,503 100.0 1,177,776 100.0 3,808,226 100.0 3,430,995 100.0
Salaries and wages
205,127 16.4 207,046 17.6 420,322 11.1 503,596 14.7
Trade show expense
105,000 8.4 105,000 8.9 315,000 8.3 294,000 8.6
Travel and auto
21,720 1.7 13,539 1.1 69,975 1.8 51,823 1.5
All other operating expenses
150,548 12.0 166,213 14.2 435,081 11.4 464,053 13.5
Total expenses
482,395 38.5 491,798 41.8 1,240,379 32.6 1,313,472 38.3
Margin contribution
$770,108 61.5% $685,978 58.2% $2,567,847 67.4% $2,117,523 61.7%

Total revenue from this venue decreased from $1.3 million to $1.2 million and $3.8 million to $3.4 million in the respective three-month and nine-month periods ended September 30, 2021 compared to the corresponding periods in 2020. The decrease in revenue in this venue is directly tied to the effects of the COVID-19 pandemic and its aftermath across the country. Several of the non-traditional locations were closed as part of the pandemic and the government response, and it is still unknown how many of those impacted locations will be able to reopen in the future.

Gross margin, as described in the paragraph above, decreased from 61.5% to 58.2% and from 67.4% to 61.7% for the three-month and nine-month periods ended September 30, 2021, respectively, compared to the corresponding periods in 2020. As described above, the margins are lower primarily because of the decreased revenue resulting from temporary closures and reduced traffic directly resulting from the pandemic and its after affects.

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 September 30,
Nine Months ended September 30,
Description 2020 2021 2020 2021
Revenue
$99,255 100% $120,316 100% $365,372 100% $353,617 100%
Total expenses
108,935 109.8 126,765 105.4 338,161 92.6 334,579 94.6
Margin contribution
$(9,679) (9.8)% $(6,449) (5.4)% $27,211 7.4% $19,038 5.4%

Gross revenue from this single-unit venue increased from $99,000 to $120,000 and decreased from $365,000 to $354,000 for the respective three-month and nine-month periods ended September 30, 2021 compared to the corresponding periods in 2020. This venue consists of one location in a hospital. Access to the hospital has been severely limited and travel within sections of the hospital had been prohibited because of the potential spread of COVID-19. The revenue increased in the three-month period ended September 30, 2021 as a result of the hospital easing restrictions somewhat on the movement of people within the hospital.

Total expenses increased from $109,000 to $127,000 and decreased from $338,000 to $336,000 for the three-month and nine-month periods ended September 30, 2021 compared to the corresponding periods in 2020. The company does not intend to operate any more company-owned non-traditional locations except the one location that it is currently operating.

Corporate Expenses

Depreciation and amortization was $142,000 and $449,000 for the three-month and nine-month periods ended September 30, 2021 compared to $98,000 and $263,000 for the corresponding periods in 2020. The primary reason for the increase was the result of the new company-owned CPP locations opening during the months of March, October and November 2020, and in addition expensing certain pre-opening costs in the amount of $166,000. The company has opened an additional company-owned CPP in October 2021 and plans to open an additional location on December 6, 2021. The company is also currently negotiating for an additional location.

General and administrative expenses were $506,000 and $1.3 million for the three-month and nine-month periods ended September 30, 2021 compared to $460,000 and $1.3 million for the corresponding periods in 2020. The increase in general and administrative expense was the result of the expanded CPP operation in addition to preparing for additional CPP openings later this year.

Interest expense increased from $328,000 to $343,000 and decreased from $1.6 million to $1.0 million for the respective three-month and nine-month periods ended September 30, 2021 compared to the corresponding periods in 2020. The primary reason for the increase in the three-month period was the PIK interest being accrued and added to the principal amount of the Corbel loan outstanding. The reason for the decrease in the nine-month period was the result of the financing that occurred in February 2020 resulting in non-cash write-offs of the unamortized original loan cost for both First Financial Bank and the private placement subordinated debt, which in the aggregate was $658,000, and partially offset by the non-cash PIK interest expense of $64,000 in the three-month period ended September 30, 2021 and $189,000 for the nine-month period ended September 30, 2021. This non-cash expense to obtain the new financing was necessary in order to reduce cash outlays for principal repayments, provide liquidity and to provide growth capital for more Craft Pizza & Pub locations.

Net income (loss) before income tax decreased from $83,000 to $(79,000) and increased from $442,000 to $833,000 for the respective three-month and nine-month periods ended September 30, 2021 compared to the corresponding periods in 2020. The decrease in net income (loss) before income tax for the three-month period was the direct result of the COVID-19 pandemic and its aftermath resulting in a number of temporarily closed franchises in the non-traditional venue, the shortage of labor and higher labor costs and higher product cost, combined with higher operating costs to comply with regulatory requirements intended to restrict the spread of COVID-19. The increase in the nine-month period was a result of opening additional CPP locations.

The company's current ratio was 4.6-to-1 as of September 30, 2021 compared to 2.6-to-1 as of December 31, 2020. The current ratio was improved significantly with the PPP funding in February 2021 and the net income from operations.

Continuing Impact of the COVID-19 Pandemic & Government Actions

The uncertainty and disruption in the U.S. economy caused by the pandemic and the government response are likely to continue adversely impacting the volume and resources of both the company's CPP locations and especially that of existing and potential franchisees of non-traditional locations, at least until greater normalcy stabilizes over a significant period. This return to normalcy was interrupted during the third quarter with rapidly rising cases attributed to the ‘Delta variant' of COVID-19, which the company believes impacted consumer, employee and supplier behavior. Additionally, the rising cost of labor and ingredients as well as the costs associated with managing supply chain emergencies are likely to persist. A menu price increase was implemented on November 10, 2021 to help mitigate these cost pressures on company-owned Craft Pizza & Pub restaurants.

Said Scott Mobley, "I believe that the third quarter of 2021 ranks as the most challenging operational period in the last 30 years. Not only were we continuing to deal with government and health advisory restrictions on our operations, commodity shortages and inflation, manufacturing disruptions and dislocations in distribution, we believe government policies put into place early this year and announced further in August resulted in additional and immediate staffing difficulties already associated with the pandemic directly. Additionally, many non-traditional franchisees operate their Noble Roman's foodservice within an underlying small business that sometimes lacks the capitalization or liquidity necessary to manage through these pandemic disruptions, and are most affected by the labor shortage which adversely impact their ability to add a franchise to their small business. With all of that in mind, we are very pleased with our progress in new revenue generation, and we are excited to announce the continuing growth plans for CPP as well as our non-traditional franchising efforts."

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,
2020
September 30,
2021
Current assets:
Cash
$1,194,363 $1,789,270
Accounts receivable - net
879,502 930,955
Inventories
890,556 919,168
Prepaid expenses
395,918 371,848
Total current assets
3,360,339 4,011,241
Property and equipment:
Equipment
3,708,689 3,905,644
Leasehold improvements
2,319,445 2,478,385
Construction and equipment in progress
510,225 530,430
6,538,359 6,914,459
Less accumulated depreciation and amortization
1,989,209 2,272,498
Net property and equipment
4,549,150 4,641,961
Deferred tax asset
3,104,904 3,104,904
Deferred contract cost
834,018 826,258
Goodwill
278,466 278,466
Operating lease right of use assets
6,088,101 5,667,679
Other assets including long-term portion of receivables - net
201,962 281,878
Total assets
$18,416,940 $18,812,387
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses
$878,099 $482,585
Current portion of operating lease liability
412,005 393,473
Total current liabilities
1,290,104 876,058
Long-term obligations:
Term loan payable to Corbel
7,468,709 7,789,992
Warrant value
29,037 29,037
Convertible notes payable
574,479 591,167
Operating lease liabilities - net of short-term portion
5,863,615 5,488,876
Deferred contract income
834,018 826,258
Total long-term liabilities
14,769,858 14,725,330
Stockholders' equity:
Common stock - no par value (40,000,000 shares authorized,
22,215,512 issued and outstanding as of December 31, 2020 and
as of September 30, 2021)
24,763,447 24,784,310
Accumulated deficit
(22,406,469) (21,573,311)
Total stockholders' equity
2,356,978 3,210,999
Total liabilities and stockholders' equity
$18,416,940 $18,812,387
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended September 30,
Nine months ended September 30,
2020 2021 2020 2021
Revenue:
Restaurant revenue - company-owned restaurants
$1,583,251 $2,122,352 $4,083,064 $6,495,788
Restaurant revenue - company-owned non-traditional
99,255 120,316 365,372 353,617
Franchising revenue
1,252,503 1,177,776 3,808,226 3,430,995
Administrative fees and other
3,073 3,734 11,191 10,803
Total revenue
2,938,082 3,424,178 8,267,853 10,291,203
Operating expenses:
Restaurant expenses - company-owned restaurants
1,376,754 1,893,721 3,153,123 5,058,358
Restaurant expenses - company-owned
non-traditional
108,935 126,765 338,161 334,579
Franchising expenses
482,394 491,798 1,240,379 1,313,472
Total operating expenses
1,968,083 2,512,284 4,731,662 6,706,409
Depreciation and amortization
98,279 142,133 262,505 448,892
General and administrative expenses
460,392 505,992 1,254,186 1,286,530
Total expenses
2,526,753 3,160,409 6,248,353 8,441,831
Operating income
411,329 263,769 2,019,500 1,849,372
Interest expense
327,831 343,184 1,577,285 1,016,214
Income (loss) before income taxes
83,498 (79,415) 442,215 833,158
Income tax expense (benefit)
- - (81,983) -
Net income (loss)
$83,498 (79,415) $524,198 $833,158
Earnings per share - basic:
Net income (loss) before income tax
$.00 $.00 $.02 $.04
Net income (loss)
$.00 $.00 $.02 $.04
Weighted average number of common shares
outstanding
22,215,512 22,215,512 22,215,512 22,215,512
Diluted earnings per share:
Net income (loss) before income tax
$.00 $.00 $.02 $.04
Net income (loss)
$.00 $.00 $.03 $.04
Weighted average number of common shares
outstanding
23,765,512 23,522,028 23,765,512 23,522,028

FOR ADDITIONAL INFORMATION, CONTACT:

For Media Information:
Scott Mobley, President & CEO
smobley@nobleromans.com

For Investor Relations:
Paul Mobley, Executive Chairman
pmobley@nobleromans.com

Mike Cole, Investor Relations
949-444-1341
mike.cole@mzgroup.us

SOURCE: Noble Romans, Inc.



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