Good afternoon, and welcome to today's Noodles & Company's fourth quarter 2025 earnings conference call. All participants are now in a listen-only mode. After the presenters' remarks, there will be a question-and-answer session. As a reminder, this call is being recorded. I would now like to introduce Noodles & Company's Chief Financial Officer, Michael Hynes.

Thank you, and good afternoon, everyone. Welcome to our fourth quarter 2025 earnings call. Here with me this afternoon is Joe Christina, our Chief Executive Officer. I would like to start by going over a few regulatory matters. During the call, we may make forward-looking statements regarding future events or the future financial performance of the company. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are only projections and actual events or results could differ from those projections due to a number of risks and uncertainties, including those referred to in this afternoon's news release and the cautionary statement in the company's Annual Report on Form 10-Ks and subsequent filings with the SEC. During the call, we will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our fourth quarter 2025 earnings release. To the extent that the company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of forward-looking non-GAAP measures. Quantitative reconciling information for these measures is unavailable without unreasonable efforts. I will now turn the call over to Joseph Christina, our Chief Executive Officer.

Thank you, Mike, and good afternoon. As we reflect on 2025, the story is clear. We have built meaningful and sustained momentum across Noodles & Company, culminating in system-wide comp sales growth of nearly 7% in 2025 and further escalating to over 9% in 2026 thus far, with only a week remaining in the quarter. And profitability far exceeded the prior year in 2025 and as we have guided in 2026. That progress is not accidental. It is the result of disciplined execution and a clear focus on what matters most. 2025 was a pivotal year for the brand. We significantly elevated our food, with the launch of our most comprehensive new menu in the history of the company and the introduction of craveable limited-time offers, including Chili Garlic Ramen, one of our strongest LTOs in recent years, which we believe also introduced new customer groups to Noodles & Company. We leaned into strong value messaging with the launch of Delicious Duos, giving guests compelling meal combinations at an attractive price point that delivered balance, variety, and everyday affordability without compromising quality while also raising consumer awareness of our new menu offerings. We initiated a thorough review of our portfolio, resulting in the closing of underperforming restaurants, which have continued into 2026 and, importantly, has resulted in a material transfer of sales to nearby locations, resulting in a step baseline increase of average sales volume at those go-forward restaurants. Which also favorably impacted margins, as Mike will discuss in more detail shortly. And we strengthened operational excellence by introducing our Operational Excellence Review program, raising standards and driving greater consistency and accountability across every restaurant. Underpinning all of this was a renewed focus on the fundamentals. Throughout 2025, we tightened execution in our restaurants, improved food consistency, managed costs with…

Thank you, Joe. In the fourth quarter, our total revenue increased 0.8% compared to last year to $122,800,000. System-wide comp restaurant sales during the fourth quarter increased 6.6%, including an increase of 7.3% at company-owned restaurants and an increase of 3.8% at franchise restaurants. Company comp traffic during the fourth quarter increased 1.4% and average check increased 5.8%, inclusive of 2% effective pricing during the quarter. Company average unit volumes in the fourth quarter increased 9.9% to $1,440,000. As Joe mentioned, our sales momentum continued to accelerate in 2026. Our company comp sales in 2026 are positive over 9% year to date. We are extremely encouraged by the sales acceleration, especially against a tougher comparison in 2025, where comp sales were positive 4.7% and incorporated significant marketing of our new menu rollout in March 2025. Turning back to 2025, our sales acceleration in the fourth quarter delivered impressive bottom-line growth. Our restaurant contribution margin in the fourth quarter increased to 14.1% from 11.2% in 2024. Cost of goods sold in the fourth quarter was 26% of sales, a 120 basis point decrease from last year, which was driven by a combination of menu price, vendor rebates, and lower discounting, partially offset by higher food costs associated with our new menu offerings and modest inflation. Our food inflation in the fourth quarter was approximately 1%. Labor costs for the fourth quarter were 30.9% of sales, which was down 140 basis points to prior year, primarily due to the benefit of sales leverage, partially offset by wage inflation. Hourly wage inflation in the fourth quarter was 2.3%. Occupancy costs in the fourth quarter decreased to $10,700,000 compared to $11,400,000 in 2024 due to a reduction in our company-owned restaurant count over the last twelve months. Other restaurant operating costs increased 40 basis…

Thanks, Mike. We have built meaningful momentum by focusing on the fundamentals and executing with disciplines that elevate the guest experience. When great food, strong operations, and targeted marketing that connects with guests come together, performance follows. And that is what we have been seeing come to fruition. This is evidenced by the significant year-over-year increase in adjusted EBITDA in 2025 and our expectations for significant further growth in adjusted EBITDA in 2026. We are confident that the foundation we built in 2025 and the strong acceleration of sales in early 2026 position us for sustainable growth throughout 2026 and beyond. Thank you for your time today. I will now turn the call back over to the operator.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment while we poll for questions. Our first question comes from the line of Todd Brooks with Benchmarkstone. Please proceed with your question.

Hey. Thanks for the questions, and congrats on such a strong start to Q1 after a really great finish to 2025. So well done with that. Two questions, if I may. Thanks. Two questions, if I may. One is your way, maybe it is best looked at through the lens of the 2026 guidance. You talked about a Q1 contribution from sales transfer. You talked qualitatively about kind of a margin benefit of the sales transfer. If we can talk maybe, Mike, on the year-over-year improvement in both metrics in the 2026 guidance, how much is attributed to the sales transfer versus just the core underlying momentum that you are seeing in the business right now?

Sure. If we look at the full-year guidance for 2026, $30,000,000 to $35,000,000 of adjusted EBITDA, if we just take the midpoint there, it suggests about a $10,000,000 EBITDA improvement year over year. Think about a little less than half of that will be due to closures, just under $5,000,000, with the rest due to core business improvement.

Okay. Great. That is helpful. And we will just back that up the income statement for kind of the restaurant-level margin thoughts to get at what the improvements are from operational improvements and leverage then? Okay. Perfect. And then the second one that I had for you, the strength and the 9% numbers, pretty amazing considering the environment we are in. Joe or Mike, do you have any sense of any stimulative benefits from maybe some of the early tax refund activity benefiting the business or kind of to the other side over the last few weeks, any pressure that you have seen from activity and gas price increases? I am just trying to figure out how we get the 9% number to something that reflects where the consumer kind of is at at the baseline level, not some of these exogenous pressures and benefits. Thanks.

Yes. Those are two pretty big factors in the industry, and they are both fresh. When we look at our performance year to date, outside of weather, we see a lot of consistency. It is not like we saw a big change in March when tax refunds would have started coming in or post the conflict. So we are not seeing an obvious impact on our end. And also, when we look at our performance versus industry, the industry has been hovering in the zero to 1% same-store sales range, and we have been consistently beating that, going back to early 2026, by over nine percentage points. So I do not think those things are showing up yet.

Yes, and I think, Todd, also, I think, also, we have built a menu around what you have and what you are willing to pay. So as we leaned into Delicious Duos and then had great LTOs that drive more traffic into the restaurants, I think we have something for everyone. And that should sustain us through the coming months.

And how do Delicious Duos mix, Joe?

They mix depending on whether there is a strong LTO going on, because that gets factored into the Delicious Duos mix, but right around 5%, which is what we expect it to be since its inception back in late July last year.

Okay. Great. Thank you both.

Thank you. We have reached the end of the question-and-answer session, and this also concludes today's conference. You may disconnect your line at this time. We thank you for your participation. Have a great day.