Noodles & Co (NDLS +7.26%), a fast-casual dining chain specializing in globally inspired noodle dishes, reported earnings for Q2 2025 on August 13, 2025. It missed analyst estimates for both GAAP earnings and revenue. While GAAP revenue was $126.4 million, below the estimate of $131.6 million. These results compare to a non-GAAP diluted loss per share of $0.05 and revenue of $127.4 million in Q2 2024. The quarter showed modest system-wide comparable restaurant sales growth of 1.5%, but also reflected sustained margin pressure, higher costs, more restaurant closures, and increased losses. Overall, the period pointed to ongoing business strain and prompted management to lower its full-year outlook.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP, Diluted) | ($0.12) | N/A | ($0.05) | (140.0%) |
| Revenue (GAAP) | $126.4 million | $131.6 million | $127.4 million | -0.8% |
| Adjusted EBITDA | $6.0 million | $9.2 million | (34.8%) | |
| Restaurant Contribution Margin | 12.8% | 15.5% | (2.7 pp) | |
| System-wide Comparable Restaurant Sales | 1.5% | 2.0% | (0.5 pp) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Recent Focus
Noodles & Co operates a network of company-owned and franchised restaurants focused on made-to-order noodle dishes, soups, salads, and shareables. It competes in the fast-casual restaurant sector, targeting guests looking for customizable, convenient food options. The brand offers an array of globally inspired flavors, from traditional American mac and cheese to Asian, Mediterranean, and Italian noodle dishes.
Recently, the company has focused on menu innovation, digital engagement, and optimizing its restaurant portfolio. Key success factors include the ability to appeal to value-conscious consumers, maintain high food quality and safety standards, innovate with menu offerings, and leverage digital channels—such as mobile app ordering and loyalty programs—to drive traffic and frequency.
Quarterly Results and Major Developments
In Q2 2025, GAAP revenue declined slightly from the prior year and fell short of expectations. System-wide comparable restaurant sales grew 1.5%, a deceleration from the prior quarter. Company-owned restaurants saw a matching 1.5% increase, while franchise locations posted a 1.6% rise. However, this growth was not enough to offset the impact of restaurant closures. At the end of the period, there were 364 company-owned units and 89 franchise units, both down from a year earlier. Just one new unit opened, while eight closed. Management now expects between 28 and 32 company-owned closures for the year, with only two expected openings.
Margins continued to compress. Restaurant contribution margin, a key measure of profitability at the restaurant level, slid to 12.8% from 15.5% on a non-GAAP basis. Adjusted EBITDA (non-GAAP) fell to $6.0 million from $9.2 million in Q2 FY2024. Operating margin deteriorated further, reaching negative 11.7%, compared with negative 9.0% for Q2 2024. Cost pressures came from higher food costs, persistent labor costs, and significant charges for restaurant impairments and closures. Net loss (GAAP) grew to $17.6 million from $13.6 million in Q2 2024. Cash on hand was $2.3 million, with debt rising to $108.3 million and limited borrowing capacity remaining.
Menu innovation featured prominently this quarter. This was the first full period since the company's comprehensive menu upgrade in March. Management attributed early momentum from the rollout but cited "strong value-conscious climate as well as slower guest adoption of the upgrades made to some of our historic menu items." as factors moderating ongoing sales. In early August, the company launched the "Delicious Duos" value platform, which quickly lifted comparable restaurant sales to an average of 5% over the first two weeks. Management said, "Comparable restaurant sales have increased to an average of positive 5% over the past two weeks, demonstrating that our value-focused initiatives are resonating with guests." However, it remains uncertain if this sales bump will last beyond the launch period.
Digital engagement and technology investments continued to play a role, with the company reporting in recent updates that about 56% of sales occurred through digital channels. Strategies include use of digital menu boards, app-based ordering, loyalty offers, and third-party delivery. This approach supports traffic and guest engagement but did not offset persistent margin pressure or the impact of reduced restaurant count during the period.
Financial Outlook and What to Watch
Management lowered its financial guidance for the rest of the year. Expected total revenue (GAAP) is now $487 million to $495 million, down from $503 million to $512 million previously. Comparable restaurant sales are forecast to grow at a reduced pace of 2.5% to 4.0%. Restaurant-level contribution margins (non-GAAP) are expected to remain under pressure, now guided to 11.8%–12.6%, below earlier expectations. The company also nearly doubled its closure expectation, revising its guidance for company-owned restaurant closures from 13–17 to 28–32. No new material dividend was declared, and NDLS does not currently pay a dividend.
Looking ahead, investors will want to monitor whether the uptick in sales from the value-focused menu can be sustained beyond its initial promotion. Margins, cost controls, and liquidity remain central concerns given persistent losses and a shrinking unit base. The pace and effectiveness of future menu innovation, digital engagement, and successful optimization of the restaurant portfolio will be critical for the company's recovery.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
