Noble Roman’s Announces 4th Quarter & 12-Month 2022 Financial Data

Rhea-AI Summary

Noble Roman's reported a net loss of $872,964 for Q4 2022, with revenues of $3.329 million, compared to a net loss of $123,692 and revenues of $3.594 million in Q4 2021. For the year, the loss reached $1.056 million on revenues of $14.453 million, a decline from a profit of $509,465 and revenues of $13.885 million in 2021.

The company has opened 31 new non-traditional franchises in 2022 and continued growth in Q1 2023 with 11 new franchise sales. The Employee Retention Credit refund of $1.718 million is expected to enhance margins in 2023. Inflationary pressures and staffing issues remain concerns for business operations.

Positive

• Opened 31 new non-traditional units in 2022, exceeding the previous year's total by 30%.
• Claimed a $1.718 million refund under the Employee Retention Credit expected to improve margins in 2023.
• Strong growth in Craft Pizza & Pub with improved staffing levels and efficient operations.

Negative

• Net loss of $872,964 in Q4 2022, worsening from a loss of $123,692 in Q4 2021.
• Annual loss of $1.056 million for 2022 compared to a profit of $509,465 in 2021.
• Decline in revenue from franchising by $229,000 for Q4 and $442,000 for the year.
• Increased interest expenses from $345,000 to $559,000 in Q4 2022.

INDIANAPOLIS, IN / ACCESSWIRE / March 31, 2023 / Noble Roman's, Inc. (OTCQB:NROM), the Indianapolis based franchisor and licensor of Noble Roman's Pizza and Noble Roman's Craft Pizza & Pub ("CPP"), today announced results for the year 2022, results for the three-months ended December 31, 2022 and other strategic highlights.

The company reported a net loss for the quarter ended December 31, 2022 of $872,964 on revenue of $3.329 million and a net loss for the year ended December 31, 2022 of $1.056 million, or $.05 per share, on revenue of $14.453 million. This compares to a net loss for the quarter ended December 31, 2021 of $123,692 on revenue of $3.594 million and a net income for the year ended December 31, 2021 of $509,465, or $.02 per share, on revenue of $13.885 million. The 3-month and 12-month periods in 2022 were lowered due to an adjustment of prior years' allowances of approximately $140,000; an adjustment to lower the deferred tax asset by $150,000; and adjustments of approximately $235,000 as a reserve against receivables, which in the opinion of management were not necessary except to be ultra-conservative.

During the first quarter of 2023 the company calculated the amount of refund due under the Employee Retention Credit ("ERC") of $1.718 million and has submitted amended federal Form 941 returns claiming the refund. The ERC was first introduced on March 27, 2020 in the CARES Act, with some subsequent modifications, as part of the government response to the pandemic and is a refundable tax credit that businesses can claim on qualified wages paid to employees. The ERC refund is treated as a government grant and will reduce appropriate expenses in the first quarter of 2023 for the $1.718 million less expenses for applying for the refund of $258,000 or a net of $1.460 million. These credits were based on events happening in 2020 and 2021 but are not being recorded until 2023 when the claim was filed.

In 2022, the company opened 31 new non-traditional units compared to 24 in 2021. In the first quarter of 2023, the company has already sold 11 new non-traditional franchises and opened 10, with over two dozen more units in the pipeline that were previously sold and in various stages of readiness to be opened.

Scott Mobley, the company's President & CEO, stated, "With many of the supply chain emergencies now behind us, we are still left with inflationary pressures and residual staffing issues to deal with, but we have been successful in our plan to re-assign staff focus on expanding our non-traditional venue more quickly. New unit development in 2022 surpassed the previous year by about 30% and we are on track to well exceed 2022's development this year baring any sudden, negative changes in the economic climate. We believe it is very possible for both revenue and margins in this segment to meet or exceed historic levels in coming periods. Our Craft Pizza & Pub segment is now operating at much improved staffing levels, and newer managers and employees are gaining valuable tenure and experience. To enhance that process, we have been focusing additional effort on training and development, especially for our younger assistant managers and general managers." Mobley went on to say, "Learning of the acquisition of our auditing firm by another company well after year-end and just shortly before the beginning of the audit, the last few weeks have certainly been made very hectic. In addition to the disrupting circumstances, the acquiring accounting firm will not be supporting public company audits in the future. With all of that said, a high priority will be to immediately initiate a search for prospective new auditing firms so we can carefully and professionally vet options and then contract with a new firm in a reasonably short timeframe."

The following table sets forth the revenue, expense and margin contribution of the company's Craft Pizza & Pub venue and the percent relationship to its revenue:

		Three Months ended December 31,												Year-Ended December 31,
Description		2021						2022						2021						2022
Revenue		$	2,443,781			100	%	$	2,330,026			100	%	$	8,939,569			100	%	$	9,704,169			100	%
Cost of sales			513,848			21.0			513,636			22.0			1,868,997			20.9			2,076,514			21.4
Salaries and wages			743,396			30.5			694,600			29.8			2,233,376			25.0			2,850,333			29.4
Facility cost including rent, common area and utilities			379,851			15.5			403,592			17.3			1,187,984			13.3			1,635,951			16.8
Packaging			87,317			3.6			85,433			3.7			271,507			3.0			344,823			3.6
All other operating expenses			442,063			18.1			402,467			17.3			1,662,969			18.6			1,608,784			16.5
Total expenses			2,166,475			88.7			2,099,726			90.1			7,224,833			80.8			8,516,405			87.7
Margin contribution		$	277,306			11.3	%	$	230,301			9.9	%	$	1,714,736			19.2	%	$	1,187,764			12.3	%

The revenue from the CPP decreased from $2.4 million to $2.3 million for the fourth quarter and grew from $8.9 million to $9.7 million for the 12 months ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the decrease in the three-month period and the increase in the 12-month period was same store sales reduction in the fourth quarter as a result of being in the opening period for two locations last year, and the increase in year-to-date was same store sales increases.

Cost of sales as a percentage of revenue increased from 21.0% to 22.0% in the fourth quarter and from 20.9% to 21.4%, respectively, for the comparable periods in 2022 compared to 2021. The increases were the result of increased prices on most ingredients, which were partially offset by menu price increases.

Salaries and wages as a percentage of revenue decreased from 30.5% to 29.8% in the fourth quarter and increased from 25.0% to 29.4% for the 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. This decrease in the fourth quarter was the result of scheduling efficiencies and a slight easing in the labor market and the increase in the annual cost was primarily the effect of the PPP loan in 2021 which reduced certain expenses including salaries and wages.

Facility costs, including rent, common area maintenance and utilities, as a percentage of revenue increased from 15.5% to 17.3% and from 13.3% to 16.9% of revenue for the respective three-month and 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. The primary reason for the increase in both periods were two locations that opened during the fourth quarter 2021.

All other operating costs and expenses as a percentage of revenue decreased from 18.1% to 17.3% for the three-month period ended December 31, 2022 and from 18.6% to 16.5% for the 12-month period ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decreases were the result of more efficient operations as the locations had been there longer combined with menu price increases.

Gross margin contribution decreased from 11.3% to 9.9% and from 19.2% to 12.3% for the respective three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decreases in margin were primarily the result of increase in wages and other costs due to inflationary pressures only partially offset by menu price increases. The Company initiated a second price increase during the second quarter of 2022 to help offset the continued cost pressures. The largest impact on the 12-month period was the impact of the PPP loan in 2021 used to offset certain expenses.

The following table sets forth the revenue, expense and margin contribution of the company's franchising venue and the percent relationship to its revenue:

		Three Months ended December 31,													Year Ended December 31,
Description		2021						2022							2021						2022
Total royalties and fees			1,013,831			100	%			784,423			100	%		4,444,826			100	%		4,002,824			100	%
Salaries and wages			215,656			21.3				223,495			28.5			719,252			16.2			861,190			21.5
Trade show expense			105,000			10.4				90,000			11.5			399,000			9.0			315,000			7.9
Travel and auto			21,446			2.1				32,028			4.1			73,270			1.6			113,186			2.8
All other op. expenses			154,789			15.2				396,155			50.5			618,841			13.9			896,375			22.4
Total expenses			496,891			49.0				741,678			94.6			1,810,363			40.7			2,185,751			54.6
Margin contribution		$	516,940			51.0	%		$	42,745			5.4	%	$	2,634,463			59.3	%	$	1,817,073			45.4	%

Total revenue from this venue declined from $1.01 million to $784,000 and from $4.4 million to $4.0 million for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. Decreases in revenue for both the three-month and 12-month periods were the result of an adjustment of prior years' allowances of approximately $140,000 and additional adjustments in the fourth quarter of approximately $235,000 as a reserve for possible uncollectables, which in the opinion of management were not necessary except to be ultra conservative. As the case since COVID began, most of the entertainment facilities and grocery stores that previously offered the company's programs no longer do so, and the company continues to view growth potential in these venues as impractical given the state of their industries and conditions in the distribution business. The company continues to focus growth on the convenience store venue and has increased the growth rate in that venue substantially.

Gross margin in this venue decreased from 51.0% to 5.4% and from 59.3% to 49.4% for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The decrease in gross margin for both periods was a decrease in revenue of approximately $140,000 and an increase in expense of approximately $235,000 as explained in the previous paragraph. Going forward this venue has been showing new growth activity and both the revenue and margin is expected to achieve or exceed historic levels in upcoming periods.

The following table sets forth the revenue, expense and margin contribution of the company-owned non-traditional venue and the percent relationship to its revenue:

		Three Months ended December 31,														Year Ended December 31,
Description		2021						2022								2021						2022
Revenue		$	131,978			100	%		$	206,625			100	%		$	485,595			100	%		$	712,517			100	%
Total expenses			131,890			99.9				201,026			97.3				466,469			96.1				704,665			98.9
Margin contribution		$	88			.1	%		$	5,599			2.7	%		$	19,126			3.9	%		$	7,852			1.1	%

Gross revenue from this venue increased from $132,000 to $207,000 and from $486,000 to $713,000 for the respective three-month and 12-month periods ended December 31, 2022 compared to the corresponding periods in 2021. This venue consists of one location in a hospital. Access to the hospital had been very limited and movement within the hospital was prohibited because of the potential spread of COVID-19, and revenue increased as those restrictions within the hospital were relaxed. The company does not intend to operate any more company-owned non-traditional locations except for the one location that is currently being operated.

Total expenses increased from $132,000 to $201,000 and from $466,000 to $705,000 for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the increases was increased revenue as the hospital relieved many of their restrictions on access to the hospital and on movement within the hospital, as discussed in the previous paragraph, resulting from the COVID-19 pandemic.

Corporate Expenses

Depreciation and amortization decreased from $400,000 to $113,000 and from $849,000 to $451,000 for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. These decreases were the result of opening costs for new company-owned locations of Craft Pizza & Pub restaurants becoming fully expensed prior to 2022.

General and administrative expenses increased from $504,000 to $569,000 and from $1.79 million to $2.17 million for the three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The increase reflected general inflation pressures as well as the growth of the Craft Pizza & Pub venue.

Interest expense increased from $345,000 to $559,000 and from $1.36 million to $1.63 million for the respective three-month and 12-month periods ended December 31, 2022, respectively, compared to the corresponding periods in 2021. The primary reason for the increase in both periods was the compounding of the PIK interest on the Senior Note and the increase in interest rate. In 2023, the interest cost should decline gradually as a result of the required principal payment on the note which should more than offset the additional interest because of compounding of the PIK notes.

During the first quarter of 2023 the company determined that it is entitled to an ERC of $1.718 million and has submitted amended federal Form 941 returns claiming that refund. The ERC refund is treated as a government grant reducing appropriate expenses for the $1.718 million less expenses for applying for the refund of $258,000 or a net of $1.460 million. Recording this refund in the first quarter of 2023 will result in significantly improved margins in the company-owned Craft Pizza and Pub, Franchising Revenue and Expense, Company-Owned Non-Traditional Locations and Corporate Expenses.

The statements contained above concerning the Company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the Company that are based on the beliefs of the management of the Company, as well as assumptions and estimates made by and information currently available to the Company's management. The Company's actual results in the future may differ materially from those indicated by the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment, including, but not limited to the effects of the COVID-19 pandemic and its aftermath, competitive factors and pricing and cost pressures, non-renewal of franchise agreements, shifts in market demand, the success of franchise programs, including the Noble Roman's Craft Pizza & Pub format, the Company's ability to successfully operate an increased number of Company-owned restaurants, general economic conditions, changes in demand for the Company's products or franchises, the Company's ability to service its loans, the acceptance of the amended federal Form 941 returns relating to the ERC, the impact of franchise regulation, the success or failure of individual franchisees and inflation and other changes in prices or supplies of food ingredients and labor as well as the factors discussed under "Risk Factors" in the Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.

Consolidated Balance Sheets
Noble Roman's, Inc. and Subsidiaries

		December 31,
Assets		2021				2022
Current assets:
Cash		$	1,263,513			$	785,522
Accounts receivable - net			904,474				824,091
Inventories			994,085				997,868
Prepaid expenses			415,309				424,822
Total current assets			3,577,381				3,032,303
Property and equipment:
Equipment			4,216,246				4,351,558
Leasehold improvements			3,065,644				3,116,030
Construction and equipment in progress			235,051				63,097
			7,516,941				7,530,685
Less accumulated depreciation and amortization			2,366,927				2,817,477
Net property and equipment			5,150,014				4,713,208
Deferred tax asset			3,232,406				3,374,841
Deferred contract costs			810,044				934,036
Goodwill			278,466				278,466
Operating lease right of use assets			6,003,044				5,660,155
Other assets including long-term portion of accounts receivable - net			324,402				350,189
Total assets		$	19,375,757			$	18,343,198
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses		$	919,157			$	650,582
Current portion of operating lease liability			656,146				799,164
Current portion of Corbel loan payable			-				866,667
Total current liabilities			1,575,303				2,316,413
Long-term obligations:
Loan payable to Corbel net of current portion			7,898,941				7,470,900
Corbel warrant value			29,037				29,037
Convertible notes payable			597,229				622,864
Operating lease liabilities - net of current portion			5,570,639				5,103,286
Deferred contract income			810,044				934,036
Total long-term liabilities			14,905,890				14,160,123
Stockholders' equity:
Common Stock - no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2021 and December 31, 2022)			24,791,568				24,819,736
Accumulated deficit			(21,897,004	)			(22,953,074	)
Total stockholders' equity			2,894,564				1,866,662
Total liabilities and stockholders' equity		$	19,375,757			$	18,343,198

Consolidated Statements of Operations
Noble Roman's, Inc. and Subsidiaries

		Year Ended December 31,
		2020				2021				2022
Restaurant revenue - company-owned restaurants		$	6,209,279			$	8,939,569			$	9,704,169
Restaurant revenue - company-owned non-traditional			470,846				485,595				712,517
Franchising revenue			4,841,229				4,444,826				4,002,824
Administrative fees and other			14,310				14,898				33,255
Total revenue			11,535,664				13,884,888				14,452,765
Operating expenses:
Restaurant expenses - company-owned restaurants			4,938,133				7,224,833				8,516,405
Restaurant expenses - company-owned non-traditional			447,040				466,469				704,665
Franchising expenses			1,736,870				1,810,363				2,185,751
Total operating expenses			7,122,043				9,501,665				11,406,821
Depreciation and amortization			382,368				848,913				450,550
General and administrative			1,717,209				1,790,722				2,167,678
Total expenses			9,221,620				12,141,300				14,025,049
Operating income			2,314,044				1,743,588				427,716
Interest expense			1,914,344				1,361,625				1,626,221
Adjust valuation of receivables			4,941,718				-				-
Net (loss) income before income taxes			(4,542,018	)			381,963				(1,198,505	)
Income tax expense (benefit)			839,928				(127,502	)			(142,435	)
Net (loss) income		$	(5,381,946	)		$	509,465			$	(1,056,070	)
Income (loss)per share - basic:
Net income (loss)		$	(.24	)		$	.02			$	(.05	)
Weighted average number of common shares outstanding			22,215,512				22,215,512				22,215,512
Diluted income (loss) per share:
Net income (loss) (1)		$	(.24	)		$	.02			$	(.05	)
Weighted average number of common shares outstanding			23,465,512				23,641,678				23,512,550

1. Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have anti-dilutive effect.

FOR ADDITIONAL INFORMATION, CONTACT:

For Media Information:

Scott Mobley, President & CEO (smobley@nobleromans.com)

For Investor Relations:

Paul Mobley, Executive Chairman & CFO (pmobley@nobleromans.com)
Mike Cole, Investor Relations: 949-444-1341 (mike.cole@mzgroup.us)

SOURCE: Noble Romans, Inc.

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https://www.accesswire.com/747079/Noble-Romans-Announces-4th-Quarter-12-Month-2022-Financial-Data

FAQ

What were Noble Roman's financial results for 2022?

Noble Roman's reported a net loss of $1.056 million on revenues of $14.453 million for 2022.

How did Noble Roman's perform in Q4 2022?

The company recorded a net loss of $872,964 on revenues of $3.329 million in Q4 2022.

What is the Employee Retention Credit claimed by NROM?

Noble Roman's claimed a refund of $1.718 million under the Employee Retention Credit expected to enhance margins in 2023.

How many new franchises did Noble Roman's open in 2022?

Noble Roman's opened 31 new non-traditional units in 2022.

What led to the loss in revenue for Noble Roman's in 2022?

Declines in revenue were attributed to adjustments of prior years' allowances and reduced franchising revenue.