Noble Roman's, Inc. (NROM) Earnings Call Transcript & Summary

Well, good afternoon, everyone. My name is Scott Mobley, and I'm President and CEO of Noble Romans. Also here with me is Paul Mobley, our Executive Chairman and CFO. Before we begin, I want to refer you to the safe harbor statement contained in the press release that came out yesterday. This conference call will contain forward-looking statements and business assessments of the kind referred to in that statement. So those provisions apply to this conference call as well. Moving on. I'm sure most of you have seen the press release that I just referred to, but in case you haven't studied it yet or you need a refresher, I'll just go over a few of the highlights. First, with the new financing, we no longer need to be concerned with potential dilution from warrants since those are now completely retired and gone. Second, with the 60-month amortization and an interest rate at only SOFR plus 4 we'll see a nice reduction in ongoing interest costs. Interest cost in the current third quarter of this year, for example, were on approximately $161,000 compared to about $406,000 in the third quarter last year. So moving on to the financials for the second quarter. Net income for the most recent 3- and 6-month periods was approximately $91,000 and $311,000, respectively. Net income before taxes was $216,000 and $410,000, respectively. The before tax numbers are important because the company has a roughly $3 million deferred tax asset to record tax expense but will not pay taxes for a number of years. Keep in mind that as a result of the new financing, we did have additional onetime write-offs of approximately $353,000 this year now related to the remaining unamortized loan closing and warrant costs from the previous financing. If you add that back to the 2026 numbers, as we presented in the press release, it gives a little cleaner picture for comparison purposes. For example, the 6-month after-tax net income in 2026 would have been about $580,000 versus the $329,000 in 2025. Looking at our two business segments. Same-store sales in the Craft Pizza and Pubs were down in the most recent quarter by about 4.8% and a result for the first 6 months by 0.8%. The primary catalyst for this as highlighted in the press release was the start of the Iran conflict and the subsequent hit on the consumer from higher gas and other prices as well as just general economic uncertainty. In the first part of the second quarter, this expressed itself as a decline in both guest counts and average check. But after substantially altering our promotional approach by both June and July, we were seeing higher guest counts than last year, up around 4% versus 2025, but that lower average check is still causing a drag on net sales. Controllable costs, primarily labor and food, however, remained in relatively good shape through the use of the same practices and disciplined approach we've been using in the past. Moving to the Convenience Store segment. Margin contribution was up about $129,000 for the 3 months service period last year and up about $330,000 for this 6-month comparable period. And that put the margin contribution rate for that segment to 73.1% year-to-date versus 67.5% last year. Keep in mind, a significant amount of the costs for the segment are relatively fixed for the upcoming time horizon. So given the attractiveness of the segment margins and the demand we perceived in the marketplace. We're adding some additional franchise sales capacity to our staff starting next week. So far this year, we've sold 31 new locations, opened 25 and we're now entering what is normally the most active part of the year for this segment. Finally, it is worth highlighting that cash on hand increased to about $1.1 million at the end of June compared to about $534,000 at the end of 2025. Okay. Well, that is a brief overview. So let's get right away into some of the questions that you have. [Operator Instructions]. Mark, go ahead.

My only question is on the nontraditional. How many units are you -- you have a projection for this year at this time?

Yes, should be -- we're still expecting 60 plus.

Great. And I see franchising sales are great, up double digits, and in the 10-Q, you have opportunity for expansion is tremendous and you're adding staff. I did see -- it looks like you adjusted the initial franchise fee recently. Is that a manager just a managerial decision to put more value on the 10-year contract as compared to the initial fee?

Yes. So the way that works from an accounting standpoint anyway, that initial fee gets spread over the life of the contract, the 10-year contract. And we felt like given the economic environment that it would be a great inducement for a lot of folks that maybe have been sitting on the line to go ahead and sign up. So we felt that the trade-off was a good one in terms of helping us to generate more sales without really causing much impact on a year-to-year basis from a top line standpoint with the fee. All right. Thank you Roger, go ahead.