Noodles & Company (Nasdaq: NDLS) boosts comps 10% amid high debt
Noodles & Company reported second-quarter 2026 revenue of $127.0 million, essentially flat year over year, but narrowed its net loss to $3.95 million from $17.6 million. Adjusted EBITDA improved to $10.8 million, and restaurant contribution margin expanded to 17.2% from 12.8%.
System-wide comparable restaurant sales rose 10.3%, including 11.4% at company-owned units, aided by menu pricing, mix, reduced food waste and labor efficiencies. The footprint shrank to 396 restaurants after 22 company-owned and 5 franchise closures in the first half, with additional closures expected in 2026.
Leverage remains elevated: at June 30, 2026 the company held $1.3 million in cash against $105.4 million of debt under its A&R Credit Agreement and a stockholders’ deficit of $51.0 million. The credit facility matures on July 27, 2027, and the board’s previously announced strategic review, including refinancing and potential transactions, remains ongoing. A 1-for-8 reverse stock split was effected in February 2026.
Positive
- Profitability metrics improved sharply, with net loss reduced to $3.95M from $17.6M and adjusted EBITDA rising to $10.8M from $6.0M in the quarter, driven by higher comparable sales and lower cost of sales, labor and depreciation as a percentage of revenue.
- Operating performance strengthened: system-wide comparable sales grew 10.3%, company-owned AUVs increased to $1.57M, and restaurant contribution margin expanded to 17.2% from 12.8%, reflecting pricing, mix improvements and benefits from closing underperforming restaurants.
Negative
- The balance sheet is highly leveraged, with $105.4M outstanding under the credit facility, only $1.3M of cash and a $51.0M stockholders’ deficit, and the company states it will require new financing, other capital sources, or an extension/refinancing before the July 27, 2027 maturity.
- The restaurant base is contracting, with 22 company-owned and 5 franchise restaurants closed in the first half of 2026 and a further 8–13 closures expected for the year, which may limit longer-term unit-driven growth despite improving unit economics.
Filing Explained
First-half stock-plan activity increased the outstanding share base, while refinancing remains unresolved before the July 27, 2027 debt maturity.
Noodles & Company filed an unaudited Form 10-Q for the quarter ended
Issuing additional shares increases the total share count and reduces an existing holder’s percentage ownership absent offsetting changes; the filing does not identify a cash-financing transaction or proceeds from this share activity.
Liquidity was described as sufficient for working-capital needs and existing-restaurant capital improvements for the next twelve months, supported by
The material unresolved financing item is the
Key Figures
Total revenue Q2 2026: 127,037 (in thousands)
Net loss Q2 2026: 3,951 (in thousands)
Adjusted EBITDA Q2 2026: 10,773 (in thousands)
+5 more
8 metrics
Total revenue Q2 2026
127,037 (in thousands)
Revenue for the fiscal quarter ended June 30, 2026
Net loss Q2 2026
3,951 (in thousands)
Net loss for the fiscal quarter ended June 30, 2026
Adjusted EBITDA Q2 2026
10,773 (in thousands)
Adjusted EBITDA for the fiscal quarter ended June 30, 2026
Restaurant contribution margin Q2 2026
17.2%
Restaurant contribution margin in the second quarter of 2026
System-wide comparable sales Q2 2026
10.3%
System-wide comparable restaurant sales growth versus Q2 2025
Debt under A&R Credit Agreement
$105.4 million
Indebtedness outstanding under the credit facility as of June 30, 2026
Cash and cash equivalents
1,299 (in thousands)
Cash balance as of June 30, 2026
Total restaurants system-wide
396
Company-owned and franchise restaurants as of June 30, 2026
Key Terms
Reverse Stock Split, Adjusted EBITDA, restaurant contribution margin, A&R Credit Agreement, +2 more
6 terms
Reverse Stock Split financial
"effectuated on February 18, 2026 at a 1-for-8 ratio (the “Reverse Stock Split”)"
A reverse stock split reduces a company's number of outstanding shares while raising the price per share proportionally, so the total value of each investor's holding is unchanged; a 1-for-10 split turns 100 shares worth $1 each into 10 shares worth $10 each. Companies often do this to regain compliance with an exchange's minimum price rule or to attract investors who avoid very low-priced stocks.
Adjusted EBITDA financial
"Adjusted EBITDA was 10,773 for the quarter ended June 30, 2026"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
restaurant contribution margin financial
"Restaurant contribution margin was 17.2% in the second quarter of 2026"
The restaurant contribution margin measures how much money a single restaurant keeps from its sales after paying the costs that change with each sale (like food, hourly wages, and discounts). Expressed as a dollar amount or percentage, it shows how much is left to cover rent, corporate overhead and profit — like the slice of each sale that contributes to fixed bills and earnings — and helps investors judge a concept’s profitability and scalability.
A&R Credit Agreement financial
"Amended and Restated Credit Agreement (the “A&R Credit Agreement”) matures on July 27, 2027"
Consolidated Total Lease Adjusted Leverage Ratio financial
"conditioned on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio of less than or equal to 4.00 to 1.00"
valuation allowance financial
"effective tax rate reflects the impact of the previously recorded valuation allowance"
A valuation allowance is a reserve set aside to reduce the value of certain assets on a company's financial records when there is uncertainty about whether they will generate the expected benefits. It acts like a caution sign, indicating that some assets might not be fully recoverable or worth their recorded amount. This matters to investors because it provides a more realistic picture of a company's financial health and potential risks.
Earnings Snapshot
Total revenue: 127,037 (in thousands)
Fiscal quarter ended June 30, 2026
Total revenue
127,037 (in thousands)
Increased by 604 (in thousands) compared with the second quarter of 2025
Net loss
3,951 (in thousands)
Improved by 13,601 (in thousands) versus the second quarter of 2025
Adjusted EBITDA
10,773 (in thousands)
Increased from 6,016 (in thousands) in the second quarter of 2025
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FAQ
How did Noodles & Company (NDLS) perform financially in Q2 2026?
Noodles & Company posted Q2 2026 revenue of $127.0 million and a net loss of $3.95 million, significantly better than the $17.6 million loss a year earlier. Adjusted EBITDA improved to $10.8 million, reflecting stronger unit economics and lower operating costs as a percentage of sales.
What were Noodles & Company (NDLS) comparable restaurant sales in Q2 2026?
System-wide comparable restaurant sales increased 10.3% in Q2 2026. Company-owned restaurants rose 11.4%, while franchise locations grew 5.5%. Management attributes the gains to menu innovation, pricing, mix shifts and sales transfers from permanently closed underperforming restaurants.
How many restaurants does Noodles & Company (NDLS) operate and how many closed in 2026?
As of June 30, 2026, Noodles & Company operated 396 restaurants, including 318 company-owned and 78 franchised units. In the first two quarters of 2026, the company permanently closed 22 company-owned and 5 franchise restaurants and expects an additional 8–13 closures during 2026.
What is Noodles & Company (NDLS) debt and liquidity position as of June 30, 2026?
At June 30, 2026, Noodles & Company had $1.3 million in cash, $105.4 million of debt and $3.0 million of letters of credit under its A&R Credit Agreement, with $16.6 million of availability. The facility matures on July 27, 2027, requiring refinancing or extension.
What is the status of Noodles & Company (NDLS) strategic review?
The board’s strategic review, announced on September 3, 2025, remains in process. It covers potential refinancing of debt maturing July 27, 2027, refranchising or sale of parts or all of the business, and other strategic or financial transactions aimed at maximizing stockholder value.
What were Noodles & Company (NDLS) margins and key operating metrics in Q2 2026?
Restaurant contribution margin improved to 17.2% from 12.8% in Q2 2025, helped by lower cost of sales and labor percentages. Company-owned AUVs reached $1.57 million, and labor costs fell to 29.4% of restaurant revenue from 31.7%, highlighting better unit-level efficiency.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________________________________
FORM 10-Q
_____________________________________________________________
For the quarterly period ended June 30, 2026
or
For the transition period from to
Commission File Number: 001-35987
___________________________________________________________
(Exact name of registrant as specified in its charter)
_____________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(720 ) 214-1900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at July 21, 2026 | |||||||
| Class A Common Stock, $0.01 par value per share | ||||||||
Table of Contents
TABLE OF CONTENTS
| Page | |||||||||||
PART I | |||||||||||
Item 1. | Financial Statements (unaudited) | 2 | |||||||||
Condensed Consolidated Balance Sheets | 2 | ||||||||||
Condensed Consolidated Statements of Operations | 3 | ||||||||||
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) | 4 | ||||||||||
Condensed Consolidated Statements of Cash Flows | 5 | ||||||||||
Notes to Condensed Consolidated Financial Statements | 6 | ||||||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 | |||||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28 | |||||||||
Item 4. | Controls and Procedures | 28 | |||||||||
PART II | |||||||||||
Item 1. | Legal Proceedings | 30 | |||||||||
Item 1A. | Risk Factors | 30 | |||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 | |||||||||
Item 3. | Defaults Upon Senior Securities | 30 | |||||||||
Item 4. | Mine Safety Disclosures | 30 | |||||||||
Item 5. | Other Information | 30 | |||||||||
Item 6. | Exhibits | 31 | |||||||||
SIGNATURES | 32 | ||||||||||
1
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PART I
Item 1. Financial Statements
Noodles & Company
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| June 30, 2026 | December 30, 2025 | |||||||||||||
| (unaudited) | ||||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable | ||||||||||||||
| Inventories | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Income tax receivable | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Operating lease assets, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangibles, net | ||||||||||||||
| Other assets, net | ||||||||||||||
| Total long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued payroll and benefits | ||||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||
| Current operating lease liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt, net | ||||||||||||||
| Long-term operating lease liabilities, net | ||||||||||||||
| Deferred tax liabilities, net | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Stockholders’ deficit: | ||||||||||||||
Preferred stock—$ | ||||||||||||||
Common stock—$ | ||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders’ deficit | ( | ( | ||||||||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||||||||
_________________
(1) Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split effectuated on February 18, 2026.
See accompanying notes to condensed consolidated financial statements.
2
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Noodles & Company
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data, unaudited)
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Franchising royalties and fees, and other | ||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||
| Labor | ||||||||||||||||||||||||||
| Occupancy | ||||||||||||||||||||||||||
| Other restaurant operating costs | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Pre-opening | ||||||||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||||||||||||||
| Total costs and expenses | ||||||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | ||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Loss per Class A and Class B common stock, combined | ||||||||||||||||||||||||||
Basic and diluted (1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Weighted average shares of Class A and Class B common stock outstanding, combined | ||||||||||||||||||||||||||
Basic and diluted (1) | ||||||||||||||||||||||||||
__________________
(1) Shares and per share amounts have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split effectuated on February 18, 2026.
See accompanying notes to condensed consolidated financial statements.
3
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Noodles & Company
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(in thousands, except share data, unaudited)
| Fiscal Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock(1) | Treasury | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Shares (2) | Amount | Shares (2) | Amount | |||||||||||||||||||||||||||||||||||||||||
| Balance—March 31, 2026 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Balance—June 30, 2026 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Balance—April 1, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Balance—July 1, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Two Fiscal Quarters Ended | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock(1) | Treasury | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Shares (2) | Amount | Shares (2) | Amount | |||||||||||||||||||||||||||||||||||||||||
| Balance—December 30, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Balance—June 30, 2026 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Balance—December 31, 2024 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
| Balance—July 1, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
_____________
(1)Unless otherwise noted, activity relates to Class A common stock.
(2)Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split effectuated on February 18, 2026.
See accompanying notes to condensed consolidated financial statements.
4
Table of Contents
Noodles & Company
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| Two Fiscal Quarters Ended | ||||||||||||||
| June 30, 2026 | July 1, 2025 | |||||||||||||
| Operating activities | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
Deferred income taxes, net | ||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||
| Amortization of debt issuance costs | ||||||||||||||
| Stock-based compensation | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | |||||||||||||
| Inventories | ( | |||||||||||||
| Prepaid expenses and other assets | ( | |||||||||||||
| Accounts payable | ( | |||||||||||||
| Income taxes | ( | ( | ||||||||||||
| Operating lease assets and liabilities | ( | ( | ||||||||||||
| Accrued expenses and other liabilities | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Investing activities | ||||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Financing activities | ||||||||||||||
| Net borrowings (payments) from swing line loan | ( | |||||||||||||
| Proceeds from borrowings on long-term debt | ||||||||||||||
| Payments on long-term debt | ( | |||||||||||||
| Payments on finance leases | ( | ( | ||||||||||||
| Stock plan transactions and tax withholding on share-based compensation awards | ( | ( | ||||||||||||
| Net cash (used in) provided by financing activities | ( | |||||||||||||
| Net increase in cash and cash equivalents | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Beginning of period | ||||||||||||||
| End of period | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
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NOODLES & COMPANY
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business Summary and Basis of Presentation
Business
Noodles & Company (the “Company”), a Delaware corporation, develops and operates fast-casual restaurants that serve globally-inspired noodle and pasta dishes, soups, salads and appetizers. As of June 30, 2026, the Company had 396 restaurants system-wide in 30 states, comprised of 318 company-owned restaurants and 78 franchise restaurants. The Company operates its business as one
Basis of Presentation
Fiscal Year
The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. The Company’s fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. Fiscal year 2026, which ends on December 29, 2026, and fiscal year 2025, which ended on December 30, 2025, each contain 52 weeks. The Company’s fiscal quarter that ended June 30, 2026 is referred to as the second quarter of 2026, and the fiscal quarter ended July 1, 2025 is referred to as the second quarter of 2025.
Reverse Stock Split
On February 4, 2026, the Company's Board of Directors approved a reverse stock split of the Company's issued and outstanding
Class A common stock, par value $0.01 per share. The reverse stock split was effectuated on February 18, 2026 at a 1-for-8 ratio (the “Reverse Stock Split”). All issued and outstanding common stock and per share amounts contained in this 10-Q related to prior periods have been adjusted retroactively to reflect the change in capital structure as a result of the reverse stock split.
Recently Adopted Accounting Pronouncement
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The Company adopted ASU No. 2023-09 prospectively during the year ended December 30, 2025.
6
Recently Issued Accounting Pronouncement
In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting the new ASU on its consolidated financial statements and related disclosures.
2. Supplemental Financial Information
Accounts receivable consist of the following (in thousands):
| June 30, 2026 | December 30, 2025 | |||||||||||||
| Delivery program receivables | $ | $ | ||||||||||||
| Vendor rebate receivables | ||||||||||||||
| Franchise receivables | ||||||||||||||
| Other receivables | ||||||||||||||
| Accounts receivable | $ | $ | ||||||||||||
Prepaid expenses and other assets consist of the following (in thousands):
| June 30, 2026 | December 30, 2025 | |||||||||||||
| Prepaid insurance | $ | $ | ||||||||||||
| Prepaid occupancy related costs | ||||||||||||||
| Prepaid expenses | ||||||||||||||
| Other current assets | ||||||||||||||
| Prepaid expenses and other assets | $ | $ | ||||||||||||
Property and equipment, net, consists of the following (in thousands):
| June 30, 2026 | December 30, 2025 | |||||||||||||
| Leasehold improvements | $ | $ | ||||||||||||
| Furniture, fixtures and equipment | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
Accrued payroll and benefits consist of the following (in thousands):
| June 30, 2026 | December 30, 2025 | |||||||||||||
| Accrued payroll and related liabilities | $ | $ | ||||||||||||
| Accrued bonus | ||||||||||||||
| Insurance liabilities | ||||||||||||||
| Accrued payroll and benefits | $ | $ | ||||||||||||
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Accrued expenses and other current liabilities consist of the following (in thousands):
| June 30, 2026 | December 30, 2025 | |||||||||||||
| Gift card liability | $ | $ | ||||||||||||
| Occupancy related | ||||||||||||||
| Utilities | ||||||||||||||
| Current portion of finance lease liability | ||||||||||||||
| Other restaurant expense accruals | ||||||||||||||
| Other corporate expense accruals | ||||||||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||||||||
3. Long-Term Debt
On July 27, 2022, the Company amended and restated its Credit Agreement by entering into the Amended and Restated Credit Agreement (as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the “A&R Credit Agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027 and is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50 % to 2.50 % per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement was subsequently amended on December 21, 2023 and on October 29, 2024, the Company entered into that certain Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (1) 5.00 to 1.00 for the fiscal quarters ending March 31, 2026 and June 30, 2026, (2) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (3) 4.50 to 1.00 for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.
As of June 30, 2026, the Company had $105.4 million of indebtedness (excluding $0.9 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under the A&R Credit Agreement. The Company maintains outstanding letters of credit to secure obligations under its workers’ compensation program and certain lease obligations. The Company was in compliance with all of its debt covenants as of June 30, 2026. The Company’s revolver, which had a balance of $103.5 million as of June 30, 2026, bore interest at rates between 6.68 % and 9.50 % during the first two quarters of 2026. The Company’s swingline, which had a balance of $1.9 million as of June 30, 2026, bore interest between 8.75 % and 9.5 % in the first two quarters of 2026. As of June 30, 2026, the Company had cash on hand of $1.3 million. The Company will require new financing or other sources of capital to repay, or an agreement with its current lenders to extend or refinance, the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date.
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4. Fair Value Measurements
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair value due to their short-term nature. The carrying amounts of borrowings approximate fair value as the line of credit borrowings vary with market interest rates and negotiated terms and conditions are consistent with current market rates. The fair value of the Company’s revolving line of credit borrowings are measured using Level 2 inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets recognized or disclosed at fair value in the condensed consolidated financial statements on a non-recurring basis include items such as leasehold improvements, property and equipment, operating lease assets, goodwill and other intangible assets. These assets are measured at fair value if determined to be impaired.
5. Income Taxes
The following table presents the Company’s provision for income taxes (in thousands):
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | ||||||||||||||||||||
| Provision for income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Effective income tax rate | ( | % | ( | % | ( | % | ( | % | |||||||||||||||
The effective tax rate for the second quarter and first two quarters of 2026 and 2025, reflects the impact of the previously recorded valuation allowance. For the remainder of fiscal 2026, the Company does not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. The Company will maintain the valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax.
On July 4, 2025, the United States Congress enacted H.R.1, commonly known as the One Big Beautiful Bill Act, which introduces a wide range of tax reform measures. These include extensions and modifications of key provisions from the Tax Cuts and Jobs Act, as well as changes to rules allowing accelerated tax deductions for qualified property and research expenditures. The legislation includes multiple effective dates, with certain provisions that took effect in 2025 and others phased in through 2027. The Company has evaluated the provisions of the legislation and does not expect the adoption or implementation of these measures to have a material impact on its financial statements, effective tax rate, or cash tax position. The Company will continue to monitor forthcoming administrative guidance and regulatory developments that may further clarify the application of the provisions.
6. Stock-Based Compensation
In May of 2023, the Company’s stockholders approved the 2023 Stock Incentive Plan (the “2023 Plan”). The 2023 Plan authorizes the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance share units and incentive bonuses to employees, officers, non-employee directors and other service providers, as applicable. As of June 30, 2026, approximately 0.3 million share-based awards were available to be granted under the 2023 Plan. In July of 2024, the Company’s Board of Directors adopted the 2024 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the potential grant of options, stock appreciation rights, restricted stock and restricted stock units, any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination thereof, for certain newly hired employees. As of June 30, 2026, 37,982 share-based awards were available to be granted under the Inducement Plan.
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The following table shows total stock-based compensation expense (in thousands):
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | ||||||||||||||||||||
| Stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| Capitalized stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
7. Restaurant Impairments, Closure Costs and Asset Disposals
The following table presents restaurant impairments, closure costs and asset disposals (in thousands):
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | ||||||||||||||||||||
Restaurant impairments (1) | $ | $ | $ | $ | |||||||||||||||||||
Closure costs (1) | ( | ( | |||||||||||||||||||||
| Loss on disposal of assets and other | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
_____________________________
Impairment is based on management’s current assessment of the expected future cash flows of a restaurant based on recent results and other specific market factors. Impairment expense is a Level 3 fair value measure and is determined by comparing the carrying value of restaurant assets to the estimated fair value of the restaurant assets at resale value, if any, and the right-of-use asset based on a discounted cash flow analysis utilizing market lease rates.
The Company has identified a group of restaurants that the Company will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets. In the second quarter of 2026, the Company recorded fixed asset impairment charges on eight restaurants, and wrote down lease related assets on six restaurants. In the second quarter of 2025, the Company recorded fixed asset impairment charges on 15 restaurants, and wrote down lease related assets on ten restaurants.
The Company recorded fixed asset impairment charges on 11 restaurants, and wrote down lease related assets on 16 restaurants in the first two quarters of 2026. The Company recorded fixed asset impairment charges on 15 restaurants, and wrote down lease related assets on 11 restaurants in the first two quarters of 2025. All periods include ongoing equipment costs for restaurants previously impaired.
8. Earnings (Loss) Per Share
Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using net income (loss) available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying stock options and restricted common stock. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
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The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data). The number of shares and loss per share for the prior period have been restated to reflect the 1-for-8 Reverse Stock Split effectuated on February 18, 2026.
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Shares: | ||||||||||||||||||||||||||
| Basic weighted average shares outstanding | ||||||||||||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||||||||||||
| Loss per share | ||||||||||||||||||||||||||
Basic and diluted loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. Potential common shares are excluded from the computation of diluted loss per share when the effect would be anti-dilutive. Shares issuable on the vesting or exercise of share-based awards were excluded from the calculation of diluted loss per share because the effect of their inclusion would have been anti-dilutive totaled 385,362 and 553,411 for the second quarters of 2026 and 2025, respectively, and totaled 366,872 and 513,893 for the first two quarters of 2026 and 2025, respectively.
9. Leases
Supplemental balance sheet information related to leases is as follows (in thousands):
| Classification | June 30, 2026 | December 30, 2025 | |||||||||||||||
| Assets | |||||||||||||||||
| Operating | Operating lease assets, net | $ | $ | ||||||||||||||
| Finance | Property and equipment | ||||||||||||||||
| Total leased assets | $ | $ | |||||||||||||||
| Liabilities | |||||||||||||||||
| Current lease liabilities | |||||||||||||||||
| Operating | Current operating lease liabilities | $ | $ | ||||||||||||||
| Finance | Accrued expenses and other current liabilities | ||||||||||||||||
| Long-term lease liabilities | |||||||||||||||||
| Operating | Long-term operating lease liabilities | ||||||||||||||||
| Finance | Other long-term liabilities | ||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
Sublease income recognized in the Condensed Consolidated Statements of Operations was $0.5 million and $0.7 million for the second quarters of 2026 and 2025, and $1.0 million and $1.5 million for the first two quarters of 2026 and 2025, respectively.
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Supplemental disclosures of cash flow information related to leases are as follows (in thousands):
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Cash paid for lease liabilities: | ||||||||||||||||||||||||||
| Operating leases | $ | $ | $ | $ | ||||||||||||||||||||||
| Finance leases | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Right-of-use assets obtained in exchange for lease liabilities: | ||||||||||||||||||||||||||
| Operating leases | $ | $ | $ | $ | ||||||||||||||||||||||
| Finance leases | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
10. Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows
The following table presents the supplemental disclosures to the Condensed Consolidated Statements of Cash Flows for the two quarters ended June 30, 2026 and July 1, 2025 (in thousands):
| June 30, 2026 | July 1, 2025 | |||||||||||||
| Interest paid (net of amounts capitalized) | $ | $ | ||||||||||||
| Income taxes paid | ||||||||||||||
| Purchases of property and equipment accrued in accounts payable | ||||||||||||||
11. Revenue Recognition
Revenue
Revenue consists of sales from restaurant operations, franchise royalties and fees, and sublease income. Revenue from the operation of company-owned restaurants is recognized when sales occur. Revenue from sales made through third-party delivery services are recognized upon the transfer of food to the guest, excluding the delivery fee. Revenue from sales made through the Company website or mobile app are generally recognized including delivery fees. The Company reports revenue net of sales tax collected from customers and remitted to governmental taxing authorities.
Gift Cards
The Company sells gift cards which do not have an expiration date, and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when the gift card is redeemed by the customer or the Company determines the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. The Company has determined that approximately 15 % of gift cards will not be redeemed and recognizes gift card breakage ratably over the estimated redemption period of the gift card, which is approximately 24 months. Gift card liability balances are typically highest at the end of each calendar year following increased gift card purchases during the holiday season.
As of June 30, 2026 and December 30, 2025, the current portion of the gift card liability amounting to $2.0 million and $2.2 million, respectively, was included in accrued expenses and other current liabilities, and the long-term portion amounting to $0.6 million and $0.8 million, respectively, was included in other long-term liabilities in the Condensed Consolidated Balance Sheets.
Revenue recognized in the Condensed Consolidated Statements of Operations for the redemption of gift cards was $0.5 million and $0.6 million for the second quarters of 2026 and 2025, respectively, and $1.3
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Franchise Fees
Royalties from franchise restaurants are based on a percentage of restaurant revenues and are recognized in the period the related franchised restaurants’ sales occur. Development and franchise fees, portions of which are collected in advance, are nonrefundable and are recognized in income ratably over the term of the related franchise agreement or recognized upon the termination of the agreement between the Company and the franchisee. The Company has determined that the initial franchise services are not distinct from the continuing rights or services offered during the term of the franchise agreement and should be treated as a single performance obligation; therefore, initial fees received from franchisees are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years.
Loyalty Program
The Company operates the Noodles Rewards program, which is primarily a spend-based loyalty program. With each purchase, Noodles Rewards members earn loyalty points that can be redeemed for rewards, including free products. Using an estimate of the value of reward redemptions, we defer revenue associated with points earned, net of estimated points that will not be redeemed based upon the Company’s historical redemption patterns. Points generally expire after six months. Revenue is recognized in a future period when the reward points are redeemed. As of June 30, 2026 and December 30, 2025, the deferred revenue related to the rewards was $0.9 million and $1.1 million, respectively, and is included in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.
12. Commitments and Contingencies
In the normal course of business, the Company is subject to proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of June 30, 2026. These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect its business, financial condition, results of operations or cash flows.
13. Segment Reporting
The Company’s Chief Operating Decision Maker (“CODM”) is the senior executive team that includes the President and Chief Executive Officer and the Chief Financial Officer. The Company has one
The following table presents selected financial information with respect to our single reportable segment regularly reviewed by our CODM (in thousands):
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| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Franchising royalties and fees, and other | ||||||||||||||||||||||||||
Total segment revenue | ||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||
| Labor | ||||||||||||||||||||||||||
| Occupancy | ||||||||||||||||||||||||||
| Other restaurant operating costs | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Pre-opening | ||||||||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||||||||||||||
Total segment expenses | ||||||||||||||||||||||||||
| Segment loss from operations | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Reconciliation: | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Consolidated loss before income taxes | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| June 30, 2026 | December 30, 2025 | |||||||||||||
Other segment disclosures (in thousands): | ||||||||||||||
Total long-lived assets (1) | $ | $ | ||||||||||||
| Total assets | $ | $ | ||||||||||||
_____________________
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NOODLES & COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Noodles & Company is a Delaware corporation that was organized in 2002. Noodles & Company and its subsidiaries are sometimes referred to as “we,” “us,” “our” and the “Company” in this report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025. We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Our fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. Fiscal years 2026 and 2025 contain 52 weeks.
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to projected capital expenditures and our financial results, condition and liquidity needs. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, uncertainties as to the availability, suitability, structure, terms, and timing of any strategic transaction resulting from the strategic review and whether any such transaction will be completed, the impact of any such strategic transaction on Noodles & Company, and whether the strategic benefits of any such strategic transaction can be achieved; current performance trends and our expectations for future performance; our ability to repay, refinance or obtain new financing on acceptable terms, if at all, and comply with our covenants under the A&R Credit Agreement, which matures on July 27, 2027; our ability to sustain our overall growth, including, our digital sales growth; our ability to effectively optimize our restaurant portfolio including closures; our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including operational strategies to improve the performance of our restaurant portfolio; the success of our brand strategy and marketing efforts, including our ability to successfully introduce new menu items, including limited time offerings and the success of our promotions; our pricing strategies; economic conditions, including inflation, an economic recession, an elevated interest rate environment, tariffs and trade restrictions and any impact of government shutdowns on overall economic conditions and consumer spending; price and availability of commodities and other supply chain challenges; our ability to adequately staff our restaurants; changes in labor costs; our ability to maintain compliance with requirements for continued listing on the Nasdaq Global Select Market; other conditions beyond our control such as domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; and consumer reaction to industry related public health issues and health pandemics, including perceptions of food safety and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025.
Recent Trends, Risks and Uncertainties
Reverse Stock Split. On February 18, 2026, the amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) took effect to implement the Reverse Stock Split of our issued and outstanding shares of Class A common stock, par value $0.01 per share, at a ratio of 1-for-8.
No fractional shares were issued as a result of the Reverse Stock Split and it did not impact the par value of our common stock. Neither the Reverse Stock Split nor the related amendment to the Certificate of Incorporation had any impact on the number of shares of common stock or preferred stock we are authorized to issue under the Certificate of Incorporation or the number of issued and outstanding shares of our preferred stock (of which there are currently none).
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All shares of common stock, stock-based compensation awards and per share amounts for the prior periods included in the Consolidated Financial Statements and applicable notes of this 10-Q and elsewhere in this 10-Q have been adjusted retroactively to reflect the effect of the Reverse Stock Split and related amendment to the Certificate of Incorporation.
Strategic Review. On September 3, 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize stockholder value. The review includes a range of potential strategic alternatives, including a refinancing of existing indebtedness that matures on July 27, 2027, refranchising or sale of all or part of the business, and/or other strategic or financial transactions. Such review remains in process.
Revenue. In the second quarter, we saw an increase in revenue as a result of an increase in comparable restaurant sales, partially offset by permanent restaurant closures. System-wide comparable restaurant sales increased 10.3% in the second quarter of 2026 compared to the same period of 2025, comprised of an 11.4% increase at company-owned restaurants and a 5.5% increase at franchise-owned restaurants. Our comparable restaurant sales continue to be positively aided by menu innovation including the introduction of Delicious Duos and the recent successful limited time offerings, like Chili Garlic Ramen, Steak Stroganoff, Indonesian Peanut Chicken Sauté and Chicken Artichoke & Asparagus Rigatoni, and the benefit of sales transferring from restaurants that we closed to our nearby restaurants.
Cost of Sales. Our second quarter 2026 cost of sales benefited from an increase in menu prices and reduced food waste related to new menu items, which offset the impact of inflation. We continue to monitor commodity inflation and, throughout periods of volatility, we will continue to work with our suppliers to identify ongoing supply chain efficiencies, including adding additional suppliers as necessary.
We have evaluated and will continue to evaluate the impact of import laws and tariffs, including the potential for any refunds, on our operations as some of our food items are imported from India, Mexico and other countries. As of June 30, 2026, there was no material impact on our business, financial condition, results of operations or cash flows. However, we expect tariffs may impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs, for the remainder of fiscal 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk.
Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. We have been able to partially mitigate the impact of these market factors through a continued focus on maximizing efficiencies of labor hour usage per restaurant and wage inflation has stabilized to less than 3%. As a percentage of restaurant sales, labor costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants.
Other Restaurant Operating Costs. We have incurred, and expect to continue to incur, increased third-party delivery fees due to significant increased usage of third-party delivery services resulting in a higher mix of third party delivery sales. As a percentage of restaurant sales, other restaurant operating costs continue to benefit from sales leverage including the benefit of sales transferring from restaurants that have closed to our nearby restaurants.
Restaurant Development. We did not open any new company-owned restaurants in the first two quarters of 2026 and do not plan to open any company-owned restaurants in 2026. As of June 30, 2026, we had 318 company-owned restaurants and 78 franchise restaurants in 30 states.
Impairments and Certain Restaurant Closures. We impaired fixed assets related to 11 restaurants in the first two quarters of 2026 primarily related to closure decisions on underperforming restaurants. In the first two quarters of 2026, we wrote down lease-related assets for sixteen restaurants. We permanently closed 22 company-owned restaurants in the first two quarters of 2026 and we anticipate closing an additional 8 to 13 restaurants in 2026, of which six were closed subsequent to the end of the second quarter. We continue to analyze our restaurant portfolio and expect to close certain restaurants that are either generating low or negative cash flows, approaching the expiration of their leases, in trade areas that are not as well positioned for current consumer trends and/or there is a potential for a significant amount of sales transfer to nearby restaurants given strong off premise sales.
Key Measures We Use to Evaluate Our Performance
To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include revenue, comparable restaurant sales, average unit volumes (“AUVs”), restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA. Restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA are non-GAAP financial measures.
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Revenue
Revenue includes both restaurant revenue and franchise royalties and fees. Restaurant revenue represents sales of food and beverages in company-owned restaurants. Several factors affect our restaurant revenue in any period, including the number of restaurants in operation and per-restaurant sales. Franchise royalties and fees represent royalty income and initial franchise fees. While we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants, our franchise restaurants remain an important factor impacting our revenue and financial performance.
Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters, due to reduced winter and holiday traffic, and is typically higher in the second and third quarters. As a result of these factors, our quarterly operating results and comparable restaurant sales may fluctuate.
Comparable Restaurant Sales
Comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base. We define the comparable restaurant base to include restaurants open for at least 18 full periods. This measure highlights the performance of existing restaurants, as the impact of new restaurant openings is excluded. Changes in comparable restaurant sales are generated by changes in traffic, which we calculate as the number of entrées sold, and changes in per-person spend, calculated as sales divided by traffic. Per-person spend can be influenced by changes in menu prices and the mix and number of items sold per person.
Measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including, but not limited to:
•introduction of new and seasonal menu items and limited time offerings;
•consumer recognition of our brand and our ability to respond to changing consumer preferences;
•overall economic trends, particularly those related to consumer spending;
•our ability to operate restaurants effectively and efficiently to meet consumer expectations;
•pricing and perceived value;
•the number of restaurant transactions, per-person spend and average check amount;
•marketing and promotional efforts;
•abnormal weather patterns;
•food safety and foodborne illness concerns;
•the impact of health pandemics;
•local and national competition;
•trade area dynamics;
•tariffs or trade restrictions; and
•opening and closing restaurants in the vicinity of other restaurant locations.
Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not. Comparable restaurant sales is only one measure of how we evaluate our performance.
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Average Unit Volumes
AUVs consist of the average annualized sales of all company-owned restaurants for a given time period. AUVs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants. In addition to the factors that impact comparable restaurant sales, AUVs can be further impacted by effective real estate site selection and maturity and trends within new markets.
Restaurant Contribution and Restaurant Contribution Margin
Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs. Restaurant contribution margin represents restaurant contribution as a percentage of restaurant revenue. We expect restaurant contribution to increase in proportion to the number of new restaurants we open, our comparable restaurant sales growth and cost reduction initiatives.
We believe that restaurant contribution and restaurant contribution margin are important tools for investors and other interested parties because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. We also use restaurant contribution and restaurant contribution margin as metrics to evaluate the profitability of incremental sales at our restaurants, restaurant performance across periods and restaurant financial performance compared with competitors. Restaurant contribution and restaurant contribution margin are supplemental measures of the operating performance of our restaurants and are not reflective of the underlying performance of our business because corporate-level expenses are excluded from these measures.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes and depreciation and amortization. We define adjusted EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, loss on disposal of assets, net lease exit costs (benefits), severance, executive transition costs, corporate transaction costs and stock-based compensation.
We believe that EBITDA and adjusted EBITDA provide clear pictures of our operating results by eliminating certain non-recurring and non-cash expenses that may vary widely from period to period and are not reflective of the underlying business performance.
The presentation of restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA, which may not be comparable to similarly titled financial measures used by other companies, is not intended to be considered in isolation or as a substitute for, or to be superior to, the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information to management and investors about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
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Results of Operations
The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA:
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| (in thousands, unaudited) | ||||||||||||||||||||||||||
| Net loss | $ | (3,951) | $ | (17,552) | $ | (7,368) | $ | (26,609) | ||||||||||||||||||
| Depreciation and amortization | 5,900 | 7,139 | 11,881 | 14,229 | ||||||||||||||||||||||
| Interest expense, net | 2,391 | 2,753 | 4,989 | 5,400 | ||||||||||||||||||||||
| Provision for income taxes | 20 | 21 | 27 | 44 | ||||||||||||||||||||||
| EBITDA | $ | 4,360 | $ | (7,639) | $ | 9,529 | $ | (6,936) | ||||||||||||||||||
Restaurant impairments(1) | 4,848 | 11,861 | 7,508 | 12,487 | ||||||||||||||||||||||
| Loss on disposal of assets | 224 | 800 | 1,072 | 1,763 | ||||||||||||||||||||||
| Lease exit (benefits) costs, net | (403) | 252 | (2,461) | (878) | ||||||||||||||||||||||
| Severance, executive transition costs and corporate transaction costs | 599 | 14 | 846 | 466 | ||||||||||||||||||||||
| Stock-based compensation expense | 1,145 | 728 | 1,930 | 1,518 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 10,773 | $ | 6,016 | $ | 18,424 | $ | 8,420 | ||||||||||||||||||
_____________________
(1)Restaurant impairments in all periods presented above include amounts related to restaurants previously impaired. See Note 7, Restaurant Impairments, Closure Costs and Asset Disposals.
The following table presents a reconciliation of loss from operations to restaurant contribution:
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Loss from operations | $ | (1,540) | $ | (14,778) | $ | (2,352) | $ | (21,165) | ||||||||||||||||||
| Less: Franchising royalties and fees, and other | 2,236 | 2,652 | 4,582 | 5,120 | ||||||||||||||||||||||
| Plus: General and administrative | 13,857 | 12,404 | 26,371 | 25,214 | ||||||||||||||||||||||
| Depreciation and amortization | 5,900 | 7,139 | 11,881 | 14,229 | ||||||||||||||||||||||
| Pre-opening | — | 69 | — | 220 | ||||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 5,527 | 13,653 | 8,261 | 14,944 | ||||||||||||||||||||||
| Restaurant contribution | $ | 21,508 | $ | 15,835 | $ | 39,579 | $ | 28,322 | ||||||||||||||||||
| Restaurant contribution margin | 17.2 | % | 12.8 | % | 16.1 | % | 11.6 | % | ||||||||||||||||||
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Restaurant Openings, Closures and Relocations
The following table shows restaurants opened or closed during the periods indicated:
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| Company-Owned Restaurant Activity | ||||||||||||||||||||||||||
| Beginning of period | 320 | 369 | 340 | 371 | ||||||||||||||||||||||
| Openings | — | 1 | — | 2 | ||||||||||||||||||||||
| Closures | (2) | (6) | (22) | (9) | ||||||||||||||||||||||
| Restaurants at end of period | 318 | 364 | 318 | 364 | ||||||||||||||||||||||
| Franchise Restaurant Activity | ||||||||||||||||||||||||||
| Beginning of period | 80 | 91 | 83 | 92 | ||||||||||||||||||||||
| Openings | — | — | — | — | ||||||||||||||||||||||
| Closures | (2) | (2) | (5) | (3) | ||||||||||||||||||||||
| Restaurants at end of period | 78 | 89 | 78 | 89 | ||||||||||||||||||||||
| Total restaurants | 396 | 453 | 396 | 453 | ||||||||||||||||||||||
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Statement of Operations as a Percentage of Revenue
The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | June 30, 2026 | July 1, 2025 | |||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | 98.2 | % | 97.9 | % | 98.2 | % | 98.0 | % | ||||||||||||||||||
| Franchising royalties and fees, and other | 1.8 | % | 2.1 | % | 1.8 | % | 2.0 | % | ||||||||||||||||||
| Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||||||||||||
| Cost of sales | 24.9 | % | 26.5 | % | 25.1 | % | 26.6 | % | ||||||||||||||||||
| Labor | 29.4 | % | 31.7 | % | 29.7 | % | 32.1 | % | ||||||||||||||||||
| Occupancy | 8.1 | % | 9.2 | % | 8.3 | % | 9.3 | % | ||||||||||||||||||
| Other restaurant operating costs | 20.3 | % | 19.7 | % | 20.7 | % | 20.4 | % | ||||||||||||||||||
| General and administrative | 10.9 | % | 9.8 | % | 10.5 | % | 10.1 | % | ||||||||||||||||||
| Depreciation and amortization | 4.6 | % | 5.6 | % | 4.7 | % | 5.7 | % | ||||||||||||||||||
| Pre-opening | — | % | 0.1 | % | — | % | 0.1 | % | ||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 4.4 | % | 10.8 | % | 3.3 | % | 6.0 | % | ||||||||||||||||||
| Total costs and expenses | 101.2 | % | 111.7 | % | 100.9 | % | 108.5 | % | ||||||||||||||||||
| Loss from operations | (1.2) | % | (11.7) | % | (0.9) | % | (8.5) | % | ||||||||||||||||||
| Interest expense, net | 1.9 | % | 2.2 | % | 2.0 | % | 2.2 | % | ||||||||||||||||||
| Loss before income taxes | (3.1) | % | (13.9) | % | (2.9) | % | (10.6) | % | ||||||||||||||||||
| Provision for income taxes | — | % | — | % | — | % | — | % | ||||||||||||||||||
| Net loss | (3.1) | % | (13.9) | % | (2.9) | % | (10.6) | % | ||||||||||||||||||
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Second Quarter Ended June 30, 2026 Compared to Second Quarter Ended July 1, 2025
The table below presents our unaudited operating results for the second quarters of 2026 and 2025, and the related quarter-over-quarter changes.
| Fiscal Quarter Ended | Increase / (Decrease) | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | $ | % | |||||||||||||||||||||||
| (in thousands, unaudited) | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | $ | 124,801 | $ | 123,781 | $ | 1,020 | 0.8 | % | ||||||||||||||||||
| Franchising royalties and fees, and other | 2,236 | 2,652 | (416) | (15.7) | % | |||||||||||||||||||||
| Total revenue | 127,037 | 126,433 | 604 | 0.5 | % | |||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||||||||||||
| Cost of sales | 31,019 | 32,860 | (1,841) | (5.6) | % | |||||||||||||||||||||
| Labor | 36,737 | 39,279 | (2,542) | (6.5) | % | |||||||||||||||||||||
| Occupancy | 10,165 | 11,393 | (1,228) | (10.8) | % | |||||||||||||||||||||
| Other restaurant operating costs | 25,372 | 24,414 | 958 | 3.9 | % | |||||||||||||||||||||
| General and administrative | 13,857 | 12,404 | 1,453 | 11.7 | % | |||||||||||||||||||||
| Depreciation and amortization | 5,900 | 7,139 | (1,239) | (17.4) | % | |||||||||||||||||||||
| Pre-opening | — | 69 | (69) | (100.0) | % | |||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 5,527 | 13,653 | (8,126) | (59.5) | % | |||||||||||||||||||||
| Total costs and expenses | 128,577 | 141,211 | (12,634) | (8.9) | % | |||||||||||||||||||||
| Loss from operations | (1,540) | (14,778) | 13,238 | 89.6 | % | |||||||||||||||||||||
| Interest expense, net | 2,391 | 2,753 | (362) | (13.1) | % | |||||||||||||||||||||
| Loss before taxes | (3,931) | (17,531) | 13,600 | 77.6 | % | |||||||||||||||||||||
| Provision for income taxes | 20 | 21 | (1) | (4.8) | % | |||||||||||||||||||||
| Net loss | $ | (3,951) | $ | (17,552) | $ | 13,601 | 77.5 | % | ||||||||||||||||||
| Company-owned: | ||||||||||||||||||||||||||
| Average unit volume | $ | 1,568 | $ | 1,353 | $ | 215 | 15.9 | % | ||||||||||||||||||
| Comparable restaurant sales | 11.4 | % | 1.5 | % | ||||||||||||||||||||||
Revenue
Total revenue increased by $0.6 million, or 0.5%, to $127.0 million in the second quarter of 2026 compared to $126.4 million in the second quarter of 2025. During the second quarter of 2026, significant increases in comparable restaurant sales were partially offset by a decline in revenue related to 52 permanent company-owned closures and a decline in franchise revenue from 13 franchise restaurant closures over the last twelve months. Average unit volumes increased 15.9% to $1.57 million in the second quarter of 2026 compared to $1.35 million in the second quarter of 2025 primarily due to increases in same store sales and the closure of underperforming restaurants. System-wide comparable restaurant sales increased 10.3% in the second quarter of 2026 compared to the same period of 2025, comprised of an 11.4% increase at company-owned restaurants and a 5.5% increase at franchise-owned restaurants.
Cost of Sales
Cost of sales decreased by 5.6%, in the second quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, cost of sales decreased to 24.9% in the second quarter of 2026 compared to 26.5% in the second quarter of 2025, primarily due to a 0.6% benefit from menu price, a 0.5% benefit from menu mix shifts and a 0.4% benefit from reduced food waste, partially offset by a 0.2% impact from inflation.
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Labor Costs
Labor costs decreased by $2.5 million, or 6.5%, in the second quarter of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, labor costs decreased to 29.4% in the second quarter of 2026 compared to 31.7% in the second quarter of 2025, primarily due to a 1.7% benefit from sales volume leverage, a 0.6% benefit from menu price and a 0.3% benefit from labor efficiencies, partially offset by a 0.4% impact from wage inflation.
Occupancy Costs
Occupancy costs decreased by $1.2 million or 10.8% in the second quarter of 2026 compared to the second quarter of 2025, primarily due to permanent restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 8.1% in the second quarter of 2026 compared to 9.2% in the second quarter of 2025, primarily due to sales leverage.
Other Restaurant Operating Costs
Other restaurant operating costs increased by $1.0 million, or 3.9%, in the second quarter of 2026 compared to the second quarter of 2025. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.3% in the second quarter of 2026 compared to 19.7% in the second quarter of 2025, primarily due to a 0.9% impact from an increase in delivery fees from higher third-party delivery sales, partially offset by a 0.2% impact from decreased marketing spend.
General and Administrative Expense
General and administrative expense increased by $1.5 million, or 11.7%, in the second quarter of 2026 compared to the second quarter of 2025, primarily due to increases in incentive-based compensation, partially offset by decreases in wages and professional fees. As a percentage of revenue, general and administrative expense increased to 10.9% in the second quarter of 2026 from 9.8% in the second quarter of 2025.
Depreciation and Amortization
Depreciation and amortization decreased by $1.2 million, or 17.4%, in the second quarter of 2026 compared to the second quarter of 2025, primarily due to restaurant closures since the second quarter of 2025.
Restaurant Impairments, Closure Costs and Asset Disposals
Restaurant impairments, closure costs and asset disposals decreased $8.1 million to $5.5 million in the second quarter of 2026 compared to $13.7 million the second quarter of 2025. We recorded fixed asset impairment on eight restaurants and wrote down lease related assets on six restaurants during the second quarter of 2026. In the second quarter of 2025, we recorded fixed asset impairment on 15 restaurants and we wrote down lease related assets on ten restaurants.
Interest Expense, Net
Interest expense, net decreased $0.4 million in the second quarter of 2026 compared to the second quarter of 2025, primarily due to lower average interest rates in the second quarter of 2026 as compared to the second quarter of 2025, partially offset by slightly higher average debt balances in 2026.
Provision for Income Taxes
The effective tax rate for the second quarter of 2026 and for the second quarter of 2025 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2026, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax.
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Two Quarters Ended June 30, 2026 Compared to Two Quarters Ended July 1, 2025
The table below presents our unaudited operating results for the first two quarters of 2026 and 2025, and the related period-over-period changes.
| Two Fiscal Quarters Ended | Increase / (Decrease) | |||||||||||||||||||||||||
| June 30, 2026 | July 1, 2025 | $ | % | |||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | $ | 246,241 | $ | 245,107 | $ | 1,134 | 0.5 | % | ||||||||||||||||||
| Franchising royalties and fees, and other | 4,582 | 5,120 | (538) | (10.5) | % | |||||||||||||||||||||
| Total revenue | 250,823 | 250,227 | 596 | 0.2 | % | |||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||||||||||||
| Cost of sales | 61,912 | 65,153 | (3,241) | (5.0) | % | |||||||||||||||||||||
| Labor | 73,147 | 78,675 | (5,528) | (7.0) | % | |||||||||||||||||||||
| Occupancy | 20,519 | 22,887 | (2,368) | (10.3) | % | |||||||||||||||||||||
| Other restaurant operating costs | 51,084 | 50,070 | 1,014 | 2.0 | % | |||||||||||||||||||||
| General and administrative | 26,371 | 25,214 | 1,157 | 4.6 | % | |||||||||||||||||||||
| Depreciation and amortization | 11,881 | 14,229 | (2,348) | (16.5) | % | |||||||||||||||||||||
| Pre-opening | — | 220 | (220) | (100.0) | % | |||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 8,261 | 14,944 | (6,683) | (44.7) | % | |||||||||||||||||||||
| Total costs and expenses | 253,175 | 271,392 | (18,217) | (6.7) | % | |||||||||||||||||||||
| Loss from operations | (2,352) | (21,165) | 18,813 | 88.9 | % | |||||||||||||||||||||
| Interest expense, net | 4,989 | 5,400 | (411) | (7.6) | % | |||||||||||||||||||||
| Loss before taxes | (7,341) | (26,565) | 19,224 | 72.4 | % | |||||||||||||||||||||
| Provision for income taxes | 27 | 44 | (17) | (38.6) | % | |||||||||||||||||||||
| Net loss | $ | (7,368) | $ | (26,609) | $ | 19,241 | 72.3 | % | ||||||||||||||||||
| Company-owned: | ||||||||||||||||||||||||||
| Average unit volumes | $ | 1,530 | $ | 1,333 | $ | 197 | 14.8 | % | ||||||||||||||||||
| Comparable restaurant sales | 10.4 | % | 3.0 | % | ||||||||||||||||||||||
Revenue
Total revenue increased by $0.6 million, or 0.2%, in the first two quarters of 2026 to $250.8 million compared to $250.2 million in the same period of 2025. The increase was primarily due to increases in company comparable restaurant sales partially offset by a decline in revenue related to 52 permanent company-owned closures and a decline in franchise revenue from 13 franchise restaurant closures over the last twelve months. Comparable restaurant sales increased 9.7% system-wide in the first two quarters of 2026 compared to the first two quarters of 2025, comprised of a 10.4% increase at company-owned restaurants and a 6.7% increase at franchise-owned restaurants.
Cost of Sales
Cost of sales decreased by $3.2 million, or 5.0%, in the first two quarters of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, cost of sales decreased to 25.1% in the first two quarters of 2026 compared to 26.6% in the first two quarters of 2025, primarily due to a 0.7% benefit from lower food waste and a 0.6% benefit from menu price.
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Labor Costs
Labor costs decreased by $5.5 million, or 7.0%, in the first two quarters of 2026 compared to the same period of 2025. As a percentage of restaurant revenue, labor costs decreased to 29.7% in the first two quarters of 2026 compared to 32.1% in the first two quarters of 2025, primarily due to a 1.6% benefit from sales leverage, a 0.8% benefit from menu price and a 0.3% benefit from labor efficiencies, partially offset by 0.6% of wage inflation.
Occupancy Costs
Occupancy costs decreased by $2.4 million, or 10.3%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to permanent restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 8.3% in the first two quarters of 2026 compared to 9.3% in the first two quarters of 2025, primarily due to sales leverage.
Other Restaurant Operating Costs
Other restaurant operating costs increased by $1.0 million, or 2.0%, in the first two quarters of 2026 compared to the first two quarters of 2025. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.7% in the first two quarters of 2026 compared to 20.4% in the first two quarters of 2025, primarily due to 0.6% impact from higher delivery fees driven by higher delivery sales, partially offset by 0.4% of sales leverage.
General and Administrative Expense
General and administrative expense increased by $1.2 million, or 4.6%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to higher incentive-based compensation, partially offset by lower wages and professional fees. As a percentage of revenue, general and administrative expense increased to 10.5% in the first two quarters of 2026 from 10.1% in the first two quarters of 2025.
Depreciation and Amortization
Depreciation and amortization decreased by $2.3 million, or 16.5%, in the first two quarters of 2026 compared to the first two quarters of 2025, primarily due to restaurant closures.
Restaurant Impairments, Closure Costs and Asset Disposals
Restaurant impairments, closure costs and asset disposals decreased $6.7 million to $8.3 million in the first two quarters of 2026 compared to the first two quarters of 2025. We recorded fixed asset impairment on 11 restaurants and wrote down lease related assets on 16 restaurants in the first two quarters of 2026. We recorded fixed asset impairment on 15 restaurants and wrote down lease related assets on 11 restaurants in the first two quarters of 2025.
Interest Expense
Interest expense decreased by $0.4 million in the first two quarters of 2026 compared to the same period of 2025. The decrease was primarily due to lower average interest rates in the first two quarters of 2026 compared to the first two quarters of 2025, partially offset by higher average debt balances in 2026.
Provision for Income Taxes
The effective tax rate for the first two quarters of 2026 and for the first two quarters of 2025 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for all quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2026, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax. We estimate the annual effective tax rate for 2026 to be between (1.0%) and (0%).
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Liquidity and Capital Resources
Summary of Cash Flows
We have historically used cash and our revolving credit facility under our A&R Credit Agreement to fund capital expenditures for new restaurant openings, reinvest in our existing restaurants, invest in infrastructure and information technology and maintain working capital. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have up to 30 days to pay our vendors.
We believe that we will have sufficient sources of cash to meet our liquidity needs and capital resource requirements for twelve months from the date of this report, through currently available cash and cash equivalents, availability under our revolving credit facility and cash flows from operations. We were in compliance with our covenants as of June 30, 2026, and expect to continue to be in compliance for twelve months from the date of this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date.
Cash flows from operating, investing and financing activities are shown in the following table (in thousands):
| Two Fiscal Quarters Ended | ||||||||||||||
| June 30, 2026 | July 1, 2025 | |||||||||||||
| Net cash provided by operating activities | $ | 9,321 | $ | 3,181 | ||||||||||
| Net cash used in investing activities | (3,586) | (6,318) | ||||||||||||
| Net cash (used in) provided by financing activities | (5,701) | 4,252 | ||||||||||||
| Net increase in cash and cash equivalents | $ | 34 | $ | 1,115 | ||||||||||
Operating Activities
Net cash provided by operating activities was $9.3 million in the first two quarters of 2026 compared to net cash provided by operating activities of $3.2 million in the first two quarters of 2025. The increase in operating cash flow resulted primarily from a decrease in net loss as adjusted for non cash items including depreciation and impairments, as well as changes in working capital related to the timing of accounts payable, payroll and accrued liabilities.
Investing Activities
Net cash used in investing activities decreased $2.7 million to $3.6 million in the first two quarters of 2026 from $6.3 million in the first two quarters of 2025. This decrease was primarily due to the absence of capital expenditures for new restaurant development in 2026 and lower spending on certain technology projects.
Financing Activities
Net cash used in financing activities was $5.7 million in the first two quarters of 2026, compared to net cash provided by financing of $4.3 million in the first two quarters of 2025. The change from the first two quarters of 2025 was primarily due to payments on our revolving credit facility in 2026 versus borrowings on our revolving credit facility during 2025.
Capital Resources
Material Cash Requirements. Our short-term obligations consist primarily of certain lease and other contractual commitments related to our operations, normal recurring operating expenses, working capital needs, new store development, capital improvements and maintenance of our restaurants, regular interest payments on our debt obligations and certain non-recurring expenditures.
Our long-term obligations consist primarily of certain lease and other contractual commitments related to our operations and payment of our outstanding debt obligations, including our debt under our A&R Credit Agreement, which matures on July 27, 2027. We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. In addition, when
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we have a target for new store development this will require capital for such year, which is expected to be funded by currently available cash and cash equivalents, cash flows from operations and our revolving credit facility. Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and any resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants as well as information technology expenses and other general corporate capital expenditures. We currently do not plan to open any company-owned restaurants in 2026.
We estimate capital expenditures will be approximately $9.0 million to $10.0 million for fiscal year 2026, including $5.0 million to $6.0 million for the remainder of the year, primarily for the reinvestment in existing restaurants and investments in technology. We expect such capital expenditures to be funded by currently available cash and cash equivalents, cash flows from operations and if necessary, undrawn capacity under our revolving credit line.
Current Resources. Our operations have not historically required significant working capital and, like many restaurant companies, we operate with negative working capital. Restaurant sales are primarily paid for in cash or by credit or debit card, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages and supplies, therefore reducing the need for incremental working capital to support growth.
Liquidity. As of June 30, 2026 and December 30, 2025, we had a cash balance of $1.3 million. The amount available for future borrowings under our A&R Credit Agreement (defined below) was $16.6 million as of June 30, 2026. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and available borrowings under the revolving credit facility under our A&R Credit Agreement will be sufficient to fund our cash requirements for working capital needs and capital improvements and maintenance of existing restaurants for twelve months from the date of this report. The Company will require new financing or other sources of capital to repay or an agreement with its current lenders to extend or refinance the amounts outstanding under the A&R Credit Agreement on or before maturity on July 27, 2027. The Company continues to review its options with respect to such debt obligation in connection with its review of strategic alternatives; however, there is no assurance that the Company will obtain such financing, other sources of capital, an extension or refinancing on or before the maturity date.
Credit Facility
On July 27, 2022, we amended and restated our Credit Agreement by entering into the Amended and Restated Credit Agreement as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the (“A&R Credit Agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027 and is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries.
Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement was subsequently amended on December 21, 2023 and on October 29, 2024, the Company entered into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (A) with respect to SOFR loans, from 1.75% - 3.00% to 1.75% - 3.75% per annum and (B) with respect to base rate loans, from 0.75% - 2.00% to 0.75% - 2.75% per annum, in each case as determined by the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement), (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (1) 5.00 to 1.00 for the fiscal quarters ending March 31, 2026 and June 30, 2026, (2) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (3) 4.50 to 1.00 for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.
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As of June 30, 2026, we had $105.4 million of indebtedness under the credit facility (excluding $0.9 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under our A&R Credit Agreement.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or obligations as of June 30, 2026.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended December 30, 2025. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to market risk from changes in interest rates on outstanding debt. Our exposure to interest rate fluctuations is limited to our outstanding bank debt, which bears interest at variable rates. As of June 30, 2026, we had $105.4 million of outstanding borrowings under our A&R Credit Agreement, with an average interest rate during the first two quarters of 2026 of 7.9%, compared to 8.6% during the first two quarters of 2025. An increase or decrease of 1.0% in the effective interest rate applied on these loans would have resulted in a pre-tax interest expense fluctuation of approximately $1.1 million on an annualized basis.
Commodity Price Risk
We purchase certain products that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions, trade tariffs and other factors that are not considered predictable or within our control. Although these products are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. We use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we may be able to address material commodity cost increases by adjusting our menu pricing, but multiple price increases over a short period of time may negatively affect customer behavior, as we observed in 2023. We have evaluated and will continue to evaluate the impact of import laws and tariffs (including any refunds) on our operations as some of our food items are imported from India, Mexico and other countries. As of June 30, 2026, there was no material impact on our business, financial condition, results of operations or cash flows. However, tariffs continue to change and we expect tariffs may continue to impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs, into 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk. However, increases in commodity prices, without adjustments to our menu prices, have and could continue to increase restaurant operating costs as a percentage of restaurant revenue.
Inflation
The primary inflationary factors affecting our operations are food costs, labor costs, energy costs and materials and labor used in the construction of new restaurants. There is also uncertainty around tariffs and the potential impacts on our food costs. Additionally, many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. We anticipate inflation may continue to affect our results in the near future.
Item 4. Controls and Procedures
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Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026, pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings
We are currently not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 1A. Risk Factors
A description of the risk factors associated with our business is contained in the “Risk Factors” section of our Annual Report on Form 10-K for our fiscal year ended December 30, 2025. There have been no material changes to our Risk Factors as previously reported in our Annual Report on Form 10-K for our fiscal year ended December 30, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Director and Executive Officer Trading
During the quarter ended June 30, 2026, no director or officer adopted terminated
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Item 6. Exhibit Index
| Exhibit Number | Description of Exhibit | |||||||
| 10.1* | Form of Restricted Stock Unit Agreement (beginning 2026) under the 2023 Stock Incentive Plan | |||||||
| 10.2* | Form of Performance Restricted Stock Unit Agreement (beginning 2026) under the 2023 Stock Incentive Plan | |||||||
| 10.3* | Form of Retention Bonus Agreement | |||||||
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | |||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104.0 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
*Indicates management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NOODLES & COMPANY | |||||
| By: | /s/ MIKE HYNES | ||||
Mike Hynes Chief Financial Officer (principal financial officer and duly authorized signatory for the registrant) | |||||
| Date | July 24, 2026 | ||||
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