Executives: David J. Boennighausen - Chief Financial Officer M. Kevin Reddy - Chairman & Chief Executive

Officer
Analysts: Sam J. Beres - Robert W. Baird & Co., Inc.

(Broker) Jeffrey Bernstein - Barclays Capital, Inc. Joseph T. Buckley - Bank of America Merrill Lynch Nicole M. Miller Regan - Piper Jaffray & Co (Broker) Keith R. Siegner - UBS Securities LLC Courtney Yakavonis - Morgan Stanley & Co.

LLC Andrew Strelzik - BMO Capital Markets (United States)

Operator: Good afternoon and welcome to today's Noodles & Company Second Quarter 2015 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'll now introduce Noodles & Company's Chief Financial Officer, Dave Boennighausen.

Mr. Boennighausen, you may begin. David J. Boennighausen - Chief

Financial Officer: Thank you, Blair and good afternoon, everyone, and welcome to our second quarter 2015 earnings call. Here with me this afternoon is Kevin Reddy, our Chairman and Chief Executive Officer.

Let me start by going over a few regulatory matters. I'd like to note that during our opening remarks and in response to your questions, we may make forward-looking statements regarding future events or the future financial performance of the company. Any such items, including targeted results for 2015 and details relating to our future performance should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are only projections and actual events or results could differ materially from those projections due to a number of risks and uncertainties. I refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's Annual Report on Form 10-K for its 2014 fiscal year.

This document contains and identifies important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Now, I'd like to turn it over to Kevin. M. Kevin Reddy - Chairman & Chief

Executive Officer: Good afternoon everyone. I'd like to begin today with a few short comments about our recent business performance.

We enjoyed eight-plus years of exceptional trends. And we're now in a sluggish cycle, which I am confident we will exit. We've completed the objective critical analysis of what is both urgent and important. We are making the changes necessary to capitalize on the significant strengths of the brands and our infrastructure. And despite being in the heat of the battle, with plenty of road ahead of us, I do feel very good about the ideas and energy channeled into the action plans to rebuild momentum.

We completed Q2 2015 with flat system-wide comparable restaurant sales and adjusted diluted earnings per share of $0.10, which Dave will discuss at more length. We recognized that the traffic and earnings growth have stalled of late. Over the past six months, we at Noodles & Company have done a thorough review of the brand from every angle, including our strategies surrounding development, marketing, culinary and operations. One important aspect of the Noodles & Company story that has been validated and reinforced over and over, is the strength of the concept and the positive connections we make with our guests. We have proven the concept well-beyond our local and regional level, in a wide variety of formats and geographies.

The brand continues to meet the most important consumer needs of today's guests, including globally inspired flavors, clean, fresh, artificial-free ingredients, real cooking, fast, efficient, friendly service, all delivered at a fair price. Moreover, we remain one of the few brands that has a natural, emotional connection to families and kids. Our menu offers enough variety and choice for guests of differing tastes to enjoy, yet complex enough to reduce the threat of direct competition. From a foundational perspective, we have a strong development infrastructure with a proven track record and a long runway of growth that can be funded through cash flow from operations. And finally, our teams are capable and passionate with a greater discipline and a greater focus on what must be done, not just to regain momentum, but to triumph.

So those are some of the key strengths of the brand. And now I'd like to share what we've been working on and already executing. First, we are increasing brand awareness through specific media and marketing campaigns, built upon the theme Made Different. The advertising spend amongst our competitors has increased dramatically in the past few years and we need to increase our presence in the markets where we can benefit from economies of scale and we are doing so. Our goal is to get credit for our hand-crafted fresh, quality, clean ingredients, as well as our complex, artisanal sauces while reaffirming our commitment to real cooking to order.

Building upon our already strong ingredients story, we completed ahead of schedule, the removal of all, artificial colors, flavors and preservatives from our dressing soups and sauces. And in the upcoming months, we anticipate announcing further progress on our path of pure and wholesome ingredients. Getting credit for what we do there, will be key and it's the core of how we're building that media marketing campaign. Second, engaging the power of our 10,000 employees inside the four walls and in the communities we serve. We must go beyond our strength of core operations in the back of the house to maximizing the education and conversations with existing guests in the front of the house in order to convert them into loyal, high frequency users.

Our consumer research continues to tell us that a hallmark of our brand is the friendliness and knowledge of our team members. And we will be capitalizing on this strength by implementing programs which allow them to better educate our guests on our ingredient story as well as develop their business through catering and community marketing opportunities. Third, we must continue to grow our off-premise sales in catering and optimize the use of our technology platforms. We continue to make strides in our catering offering, which we will continue to invest in the upcoming quarters. While our online ordering platform continues to grow, we will look to augment the strength through the testing and potential execution of delivery and better engagement with our guests.

Fourth, and this is an area I'm really excited about is creating stronger integrated campaigns to target and own the family business. Starting with our first ever kid's meal, which has been incredibly well received in test and will be expanded in upcoming months. In concert with this initiative, we're going to move more aggressively to link our local store marketing efforts with schools, sports and community causes in our local relationship marketing priorities. And just as FYI, a quick comment on kid's meal. Our kid's meal offer is really providing kids the option to choose from four really compelling dishes.

They get to pick two sides and that includes a drink, all for $5. Finally, we will complete our operation simplifications rollouts in 2015, while continuing to innovate on this front assisting our teams in delivering a great experience, every bowl, every guest, every time. We are making our operations simpler, so our teams can be better engaged, have more fun and spend more time in the front of the house. As we execute these specific marketing culinary and operational efforts, I am excited to have onboard someone who will be instrumental in bringing those to life and that gentleman is Mark Mears, who joined us recently as our Chief Marketing Officer. Mark has a proven ability of achieving results at a variety of fast casual and casual dining brands.

His insight, his knowledge, and his ability to execute will be tremendous assets as we elevate the brand, and I look forward to introducing him to you in more depth in the upcoming quarters. Now, I'd like to turn it over to Dave to give an update on our development strategy and discuss financial results. David J. Boennighausen - Chief

Financial Officer: Thanks, Kevin. I'd first like to update you on our overall strategy towards development.

During the second quarter, we opened 11 additional company and 6 franchise restaurants, completing the quarter with 472 locations. We also completed the acquisition of one franchise location during the quarter. For the full-year of 2015, we anticipate between 48 company and 52 company, and 15 franchise to 18 franchise openings. While, sales volumes at our new restaurants have remained consistent with prior classes, they've been facing many of the same margin pressures we are encountering system-wide and given some outliers with development costs, that had a meaningful dilutive impact to our P&L. Moreover, much of this growth has been centered in newer markets, which require additional investment and generally take longer to reach efficiencies.

However, we remain pleased at the customer reception in these new markets and are excited at the long-term opportunity that this investment creates. As an example, during the second quarter, we opened our first restaurants in Phoenix, and Toronto, both of which have exceeded our sales expectations and a further testament to the resonance of the brand, across geographies. Looking forward into 2016 and beyond, we are taking a very disciplined approach to our development strategy, elevating our screens and reducing risk throughout the portfolio. We anticipate our growth rate to return to our targeted 12% to 13% range, with the growth in the near-term being focused, primarily on the building out of our existing markets. This will allow our overall base of restaurants to mature, as well as gain both efficiencies and brand awareness in our developing markets.

With our increase in restaurants, revenue in the second quarter increased 16% to $115.2 million. We reported adjusted net income of $3.1 million or $0.10 of adjusted diluted earnings per share. Adjusted EBITDA increased modestly to $12.7 million during the second quarter. In the second quarter, comparable restaurant sales increased 0.1% for company-owned restaurants; declined 0.5% for franchise restaurants; and was flat system-wide. For company-owned restaurants, comparable sales included approximately 2% of price, offset by slightly negative traffic.

We do continue to gain traction in our catering offering, as Kevin mentioned, which represented 1.3% of sales in the second quarter, a 30-basis-point increase over the first quarter. It is still early in the Q3, but I can share that we're seeing similar top-line results thus far in this quarter. To address the outlying markets that we discussed during our prior call, we continue to see negative comparable sales in Colorado, Washington D.C. and Austin during the second quarter, resulting in a 110-basis-point drag to the full quarter comparable sales. However, in each of these markets, we saw improvement in Q2 relative to Q1 trends and have seen continued gains thus far in Q3.

Our restaurant level margin of 18.6% in the second quarter was 180 basis points below prior year. We recognize the trajectory of our restaurant level margin has been going in the wrong direction, and we want to discuss our expectations moving forward. We know what elements of the decline have been natural deleverage, what elements have been caused by external factors, what elements have been the result of important investments in achieving our strategic objectives, and what elements we simply need to sharpen our focus on and improve execution. As it relates to deleverage, while the primary cause has been our decline in average unit volumes, we've also seen some near-term dilution from the absorption of previously franchised restaurants. Simply put, it is taken us longer to gain efficiencies and make top-line progress in these restaurants than we anticipated.

We are though beginning to see progress in these restaurants and we'll overlap much of the efficiencies over the balance of the year. We continue to expect a relatively favorable commodity environment for the balance of 2015 and likely into 2016. Our cost of goods sold of 26.2% in the second quarter was a 60-basis-point improvement relative to Q2 of 2014. As for external causes, the largest external cause of our margin pressure is surely in the labor line. We continue to see pressure on this line item, industry-wide and we expect that's going to remain for the foreseeable future, on top of that has been the increased cost to implement the Affordable Care Act.

As discussed in prior calls, our health plan functions on a July to June year and we anticipate approximately 30 basis points of labor pressures beginning in the third quarter on our insurance line. This equates to roughly $350,000 in expense per quarter. While outside pressure remains on this line, we also believe it is important that we do not back away from important investments that we are making in staffing our restaurant. These include increased staffing during certain peak times as well as the investment in catering and marketing activities inside our restaurants. In the second quarter, labor cost increased 100 basis points versus prior year, and we anticipate similar pressure during the balance of 2015.

During the second quarter, occupancy costs increased as a percentage of sales by 60 basis points. This is the result of natural deleverage on lower average unit volumes as well as the pure number of openings that we've had. As we return to our historical sales and unit growth trajectory, we expect this line item to leverage accordingly. Operating cost increased as a percentage of sales by 80 basis points during the second quarter while again much of this is tied to deleverage on lower unit volumes, we're also making smart investments in technology and marketing initiatives that we believe strongly will help us meet our strategic goals. Marketing is certainly the largest of these investments.

Our spend for the second quarter was 0.8% of sales, a 20-basis-point increase over Q2 of last year. We anticipate an increase to approximately 1.5% to 2% of sales during the final two quarters of 2015. This investment equates to an approximate $1 million spending increase over prior year for each quarter. General and administrative expenses of 8%, was a 30-basis-point decrease over Q2 of 2014. We continue to anticipate that G&A as a percentage of sales will be roughly flat in 2015 versus the prior year, as leverage on increased revenue is offset by our investment in supporting our new markets and our marketing initiatives.

Our tax rate for the second quarter on a GAAP basis was 36.5% due to the booking of employment tax credits, while our estimated annual effective tax rate for 2015 continues to be between 39% and 40%. Despite some of the impacts to our income statement line items I have just discussed, our underlying business model and the generation of cash remains strong. During the trailing 12 months, our adjusted EBITDA increased 6% year-over-year to $47 million. Moreover specific to Q2, our operating cash flow increased 18.5% year-over-year to $22.7 million. As we look at use of capital, our ability to increase our operating cash flow continues to allow us to fund our top-tier restaurant growth through operations, as well as augment our share repurchase program, which we announced during the second quarter.

This program authorizes the company to repurchase up to $35 million of its Class A common shares. In conjunction with the program, we amended our existing revolving line of credit to increase the maximum available borrowing capacity from $45 million to $75 million, while extending the maturity date from November 2018 to June of 2020. As of June 30, the company had repurchased approximately $6.3 million of common stock. Our goal is to fully execute the share repurchase program later this summer or early fall. And once completed, we will evaluate potential additional repurchases.

As of the end of the second quarter, the company had $29.9 million in debt outstanding on our credit facility and cash on hand was $2 million. Now, I'd like to turn to our guidance for the balance of 2015. As Kevin mentioned, while our recent results fell below our short-term expectations, we're confident that the strategies will return us to our historical trajectory. Moreover, the fundamentals of the brand remain strong. Still our results during the second half of 2015 are softer than expected and it will take time for marketing, culinary, and operational initiatives to reach their potential.

Through the second quarter, adjusted diluted earnings per share had declined approximately 20% year-to-date. While we anticipate improvement in underlying trends during the back half of the year, we will also incur incremental expenses year-over-year in several line items, notably the implementation of the Affordable Care Act as well as increased marketing spend. Finally, we've decided that as we overlap our 2014 Q4 price increase of 2%, we will take either no or very modest increases in pricing for the balance of the year. Given our relatively small net income base this early on our lifecycle, these additional costs offset by minimal price have a significant impact on our short-term ability to increase net earnings. Consequently, we currently anticipate full-year adjusted diluted earnings per share to be between $0.26 and $0.32.

This guidance incorporates flat to low single digit comparable restaurant sales for the full year and revenue of between $460 million and $465 million. We now anticipate restaurant level margins of between 17% and 18%, reflecting increased labor headwinds as well as reduced pricing versus prior year expectations. Finally, I want to briefly discuss the gap between our EBITDA and EPS growth rates. We anticipate a similar trend line in adjusted EBITDA growth between the first half of the year and the second half of the year, resulting in our expectation of approximately flat growth for the full year. While that growth rate is below our historical norms, EBITDA and operating cash flow again remained strong.

Given higher unit growth rates in recent years though, nearly half of our restaurants are currently less than four years old, resulting in a significant amount of depreciation that will ultimately return to normalized levels as certain assets fully depreciate. Moreover, as we had discussed in the past, we had an unusual number of outliers in 2013 and 2014 that caused our development cost on average to creep up. We've returned back to our targeted cash development cost of $750,000 and are constantly looking at opportunities to reduce it further. In the short-term though, we continue to expect a wider than normal divergence between our EBITDA and net income performance, but over time, as our unit growth rate normalizes, we expect that growth to narrow substantially. I would now like to turn it over to Kevin for final remarks before we go to Q&A.

M. Kevin Reddy - Chairman & Chief

Executive Officer: Thanks, Dave. In closing, I'd like to highlight a few things. We have completed our rigorous self-evaluation in research. We know what's important and we are fully engaged in the activation stage, bringing those ideas to life.

We're a 100% committed to driving consistent sales growth and returning to positive transactions. And as we do this, we're going to remain prudent allocators of our capital. And finally, I want everyone to know how much I believe in this brand. I believe in the people I work alongside in serving the greater than 60 million guests we serve every year, and I believe in our ability to overcome this cycle that we're in. With that, again, I want to thank you for your time and I would like to please ask that we open up the lines for Q&A?

Operator: Your first question comes from the line of Sam Beres from Robert W.

Baird. Your line is open. Sam J. Beres - Robert W. Baird & Co., Inc.

(Broker): Good afternoon. First, I just want to ask about, in terms of the recent openings, obviously there have been some cost pressures like the rest of the base and some outliers in terms of the development investments as well. So, just wondered if you could maybe provide a little more perspective just what the returns are like on those recent openings compared to your targeted returns?
David J. Boennighausen - Chief

Financial Officer: Sure, Sam. This is Dave.

I'll tackle that one. What we've seen is that we have a long track record when it comes to our model, building sales over time and building profitability. It's still ultimately pretty early in those most recent classes to declare what the ROI is ultimately going to be. We do feel from a sales foundation, they're pretty strong. They've been consistent with prior classes.

They are taking longer. They're taking longer than what they have historically to reach our typical return on investment, but we do feel that the sales foundation is ultimately there. Sam J. Beres - Robert W. Baird & Co., Inc.

(Broker): And in terms of taking longer to achieve the profitability, are there any specific plans to tackle the profitability in those units to bring them up faster or ramp it up faster, anything specific relative to what you're doing with the rest of the base?
David J. Boennighausen - Chief

Financial Officer: One thing you can see that's just natural is that when we have a skew towards newer markets, there is traditionally more investment that's in those, they're not quite as efficient. As an example in Phoenix and Toronto, we're carrying additional managers that are really there to support the second openings, third openings, fourth openings et cetera in those marketplaces. So, one thing you'll see is just naturally as we start to build up the markets, our pipeline as we look into 2016 will really skew more towards those existing markets where we have that infrastructure. That first and foremost is our biggest opportunity.

I can tell you that we are being very disciplined as we look towards our newer units, making sure that the economics are such that we are mitigating risk, making sure that we have got eight-plus locations. We're incredibly disciplined with those screens. For the existing restaurants, our first priority is to really maximize the growth that you see when you build out the marketplace. And then, just it's overall gains, some of the efficiencies that we just naturally don't have during the first few months. M.

Kevin Reddy - Chairman & Chief

Executive Officer: Yeah. Sam, this is Kevin. I'll just add a couple of things to that. In new units in particular, you got to build disciplines pretty quickly. So, our regional financial controllers are working very close with ops I think in a much more transparent way today on those prime costs.

How quickly are we getting to the market numbers that we believe we should, in terms of the controllable components in food costs. Are we making sure that we are investing in training, where we need to, but not wasting money in training. Making sure we're not adding managers too soon ahead of that curve. So, you have definite things that we're focusing on controlling, and there are a few things that you have to evaluate. Even though our opening volumes are in that range of historical norms, we are evaluating, are we assertive enough in the right marketing campaigns.

So, in some restaurants, you might see us invest a little more in the marketing staff or some of the marketing initiatives, that might be offset, depending on where the restaurant is and its breakpoints, on how we structure the staffing between the mix of our younger hourly supervision versus the number of salaried management. So, those are just a couple of examples of things that we have to have a handle on and that we are focusing on. Sam J. Beres - Robert W. Baird & Co., Inc.

(Broker): No, thanks for the perspective. And maybe just one last follow-up, I know that you are taking the unit growth rate down in 2016, more towards that historical 12% to 13% range, but would you consider slowing the growth further below that point to kind of focus further on enhancing the current unit base and kind of delivering more positive comps momentum behind the range of drivers that you currently have?
M. Kevin Reddy - Chairman & Chief

Executive Officer: Yeah. Sam, that's a good question. It's one we've debated quite a bit here.

And I will tell you, I know we talk about slowing the rate, to the growth rate that we've anticipated and we're doing that, but that isn't just happening organically. That is happening purposefully. I mean we have raised screens. We are killing more deals. We are managing risk in that portfolio.

We're not taking things that are marginal, that don't have the site characteristics we want. So that growth rate is coming down, because we're continuing to be more critical, it's not just coming down naturally. I mean, we're going to move from running in that 15%-plus range down to that 12% range. Your question about should we take it further? We're looking at that market-by-market, because we evaluate operations, people, consumer, reaction to the brand, how we're developing the team and the profitability within a market. So we actually do have some markets that we don't think are hitting on enough of those cylinders, that we have taken off the growth list.

We tend to manage it that way. I don't think that we believe – some of the challenges we have with a few of those restaurants, they are not systemic. So, we don't think it should be a strategic shift yet to a significantly lower growth rate. We do think we have to be – I don't know, if you can be more rigorous, I don't know if (26:56) you can be, than the way we approach it, but it is on the radar screen, we're thinking about that. And we certainly – really I think this year we have another new market to add.

But beyond that, our growth is primarily building brand awareness, awareness in markets we're in and we should think we'll get a benefit from that. David J. Boennighausen - Chief

Financial Officer: One final thing I'd mention, Sam because it is – I mean, it's such a critical question in terms of how we view the overall strategy with our company. One thing that gives me a ton of confidence as we look at shifting towards development in these existing smaller markets is, when we break down our markets, the ones that are achieving the most success are the markets that have had a small presence and we're increasing them, and we're building brand awareness, we're building efficiencies, they're markets like Portland, they're markets like Boise. Florida is another example that's been doing very strong, as we've been building more and more in them.

I think that that is absolutely the appropriate and prudent thing to continue to build restaurants in the places where we see the most efficiencies. M. Kevin Reddy - Chairman & Chief

Executive Officer: I do want to you know though, we are thinking about that and evaluating that with the right critical thought that we should. And we think we've got it in the right place, right now. Sam J.

Beres - Robert W. Baird & Co., Inc. (Broker): Great. Thanks.

Operator: Your next question comes from the line of Jeffrey Bernstein from Barclays.

Your line is open. Jeffrey Bernstein - Barclays Capital, Inc.: Great. Thank you very much. First question is just on the comp. I think you told us that you started the second quarter in the up 1% range, to ultimately be flat I'm guessing at some point, I'm not sure whether it was sequential through the quarter, but you seemed to have turned negative and yet trying to compare that to the fact each of your three challenged markets it sounds like got better.

So I'm just trying to compare those two things, maybe there is some common driver of the slowdown or common themes, or to what can you attribute the sequential slowdown if those challenged markets got better?
M. Kevin Reddy - Chairman & Chief

Executive Officer: Sure, and it's a good question, Jeff. I think what you see is that 100 basis points, a positive one and negative one is kind of where we have been operating through for all three of those months going up and down, as the calendar shifted. As for the market question, what you're seeing is that, yes, you are correct that the overall base did see a bit of softening between Q1 and Q2, partially that's reflected in how we've approached guidance for the balance of the year and being pretty conservative with our thoughts on sales. The momentum that we have seen in those three markets, which again were the D.C.

area, Colorado and Texas, they've been meaningful, but they haven't been enough to necessarily move the needle. So, what we did see was overall a little bit of a softening and nothing that would be abnormal from a marketplace geography type perspective. David J. Boennighausen - Chief

Financial Officer: Yeah. And Jeff, when I look at some of the broader measures and I think about the focus we've had on gaining back that 250 basis points to 300 basis points is to some of those key indices that we track, that actually hasn't changed.

We didn't lose any ground to that between Q1 and Q2. I would say our – that movement for our brand is – in some of those weeks we're actually picking up against those broader indices. We ended the quarter at about – within that window of that same gap. M. Kevin Reddy - Chairman & Chief

Executive Officer: Yeah.

And the largest drop from a mathematical perspective was actually as we overlap, there was a pretty heavy promotional activity that we did during the tail end of Q2 in 2014. Jeffrey Bernstein - Barclays Capital, Inc.: Got it. And then the one other question was just on the full-year earnings guidance reduction. It seems like it's clearly margin driven, because it seems like comps, you're still saying up low-single digit perhaps and the unit growth is intact. So, was it being driven by the margin, I'm wondering Dave if you can maybe prioritize those drivers? It would seem like food is actually getting better.

So, is it really all – I mean is labor that much of a headwind now, that we're now expecting just to justify the significant reduction in the earnings guidance or are there other big pieces?
David J. Boennighausen - Chief

Financial Officer: Yeah, sure. We still remain absolutely confident in the plan that we're going to get back to that historical trajectory. Yeah, from a net income basis, first of all, keep in mind, we have a low net income base, it tends to be pretty volatile. What we've seen is four things change, Jeff, between the last time we had our earnings call.

First, we did have a softer second quarter than we had anticipated in several of the line items. Second, the increased labor pressures, that is the big one. That's one that we had seen coming but the magnitude of it has definitely gotten larger, I think, not just for us, but industry wide over the past several months. The third thing I mentioned, which really actually impacted the entire P&L is that, that decision to take low or modest pricing during Q4. We had originally anticipated that as we overlapped, we would continue to have 2%.

We're still looking potentially at certain markets that have the most wage pressures and we're seeing competitors take up price, those markets were certainly looking at Q4, but overall having less price than we originally expected, there has been an impact on the guidance. And finally, as I mentioned during the call, the franchise acquisitions, they're taking longer than we expected to gain momentum. We are starting to see some progress there, but it has been slower than we had expected. Jeffrey Bernstein - Barclays Capital, Inc.: Great. Thank you.

Operator: Your next question comes from the line of Joe Buckley from Bank of America Merrill Lynch. Your line is open. Joseph T. Buckley - Bank of America

Merrill Lynch: Hi, thank you. A couple of questions.

In the challenged markets, the Denver, the Washington, D.C., Austin, is there a different game plan being impacted in those markets, particularly Denver and Washington, where you have pretty good penetration already, is there something different you're trying to do to regain sales traction?
M. Kevin Reddy - Chairman & Chief

Executive Officer: Yeah. Joe, some of what we believe to be the opportunity is slightly different. So the game plans aren't the same in those three, but they are different than some of our other markets. Example of some of that, I mean in that East Coast, D.C.

region, we really have focused on our staffing levels, aggressive recruiting for the right talent. We're looking at how we support catering with some catering leads. So we're putting a little more G&A per se or a little – it's either labor into the labor line or G&A around those restaurants to make sure that we are operating consistently at a highest level to cut through and earn the guest visit. And then support it with marketing that's appropriate for the generators around those restaurants. I will tell you that I've been to that D.C.

market a lot over the last six months and I have been impressed with the GMs that I've met, with the team members I've met. I think the leadership that we have out there has the groups focused on the right things. And we're seeing our customer satisfaction scores improve at a pretty nice rate in Washington D.C. right now in the East Coast. And that has to proceed.

The people initiatives and the consumer satisfaction scores precede the impact of changing behavior and visit frequency and we're seeing the right improvement in those metrics. In Texas and Colorado, some of those trading areas are different, not as many, heavy business areas. So the LRM tactics with creating a few field specialists that are helping outside the four walls and refocusing the folks to capture what they can inside, we're investing a little more money there. It's pretty similar approaches on incentives and people and retention. We're seeing some improvement in customer satisfaction in those markets, not as fast as the rate because we're seeing them in the D.C.

area, but they're getting better. But we know what we have to do there and the teams I think are brutally honest with each other in addressing them. Joseph T. Buckley - Bank of America

Merrill Lynch: And in the brand study, brand awareness work that you did, did anything kind of leap out in terms of how you kind of lost the momentum? You mentioned several things that came out of study and a lot of them were sort of confirmations of the historical strengths of the brand, which is great. But do you have a better understanding of sort of what happened to lead you to the deceleration in sales?
David J.

Boennighausen - Chief

Financial Officer: Yes. I just want say I'm incredibly excited and optimistic as we look to the future, because the feedback came in loud and clear. There was actually a larger issue than we had expected was that we have such a great ingredient story, the way that we do cooking is so special, it's so differentiated. The research showed we knew that we weren't getting as much credit as we should for those things. The gap was much larger than we had anticipated.

So, as you look at the marketing plan that we're really just now starting to implement, that focuses on how we cook, that focuses on those quality ingredients, we recognized that that is our largest gap from a brand awareness perspective. Often in markets even like Colorado, people know the brand, but they don't know all the special elements, about how we approach culinary and how we approach our ingredients; that's the biggest thing that probably surprised us. We knew it was there, but we didn't know it was manifesting itself as largely as it was. Joseph T. Buckley - Bank of America

Merrill Lynch: Okay.

And just one last one. What kind of wage rate inflation are you running?
David J. Boennighausen - Chief

Financial Officer: I might get back to you a little bit on that one, Joe. I mean, it's been typically for us over the years, I've seen in the 1% to 2% range in terms of average hourly rate. I think we've been closer into the 3% to 5% over the last several months.

Joseph T. Buckley - Bank of America

Merrill Lynch: Okay. Okay. Thank you.

Operator: Your next question comes from the line of Nicole Miller from Piper Jaffray.

Your line is open. Nicole M. Miller Regan - Piper Jaffray & Co (Broker): Thank you. Good afternoon. Is it correct there is just under $30 million remaining in the share repurchase authorization? And how much – do you have I guess execution of all of that by year-end in the guided range?
David J.

Boennighausen - Chief

Financial Officer: Excuse me, in terms of the guided range for EPS?
Nicole M. Miller Regan - Piper Jaffray & Co (Broker): For earnings. Yes. David J. Boennighausen - Chief

Financial Officer: We do assume that full $35 million, you are correct, there is just under $30 million left as of the end of Q2.

We expect that that full $35 million will be executed by later this summer, potentially in the early fall. We do assume in the guidance range that it is fully executed really towards the beginning of Q4 is kind of the expectation there. It's a rough guideline. Obviously, it's dependent on several different factors. And I will say that we are absolutely – if that one gets exhausted, if it does conclude, we're looking at potentially doing additional share repurchases.

We'll evaluate that certainly over the coming weeks and months. Nicole M. Miller Regan - Piper Jaffray & Co (Broker): And then on the $6.3 million repurchase in the second quarter, can you either tell us the number of shares or probably, preferably, what is the third quarter or the balance shares outstanding that we can start using in the third quarter then here?
David J. Boennighausen - Chief

Financial Officer: I'll have to get back to you on the exact numbers. I just unfortunately don't have that at the tip of my fingers, Nicole.

Nicole M. Miller Regan - Piper Jaffray & Co (Broker): Okay. And then one last one. Can you give us – and let's say, if I missed it, I'm sorry – but price and mix versus traffic for 2Q?
David J. Boennighausen - Chief

Financial Officer: Sure.

Price was roughly 2%, mix was relatively negligible. So, the balance was a little bit negative traffic. Nicole M. Miller Regan - Piper Jaffray & Co (Broker): And what does price fall off to then in the balance for the year with no incremental or little price being taken for the remainder of the year?
David J. Boennighausen - Chief

Financial Officer: So if we were to take no pricing, what would happen is, as the calendar turns to the first day of Q4, we would actually go down to zero.

We do expect – we're going to look, particularly in certain markets, where there's particular wage pressure, those ones we might do some incremental pricing in, but it will be down to zero. So it's going to somewhat modest as we go into Q4. Nicole M. Miller Regan - Piper Jaffray & Co (Broker): And is 3Q then 2% or does it start to run out?
David J. Boennighausen - Chief

Financial Officer: 3Q is 2% as well.

3Q is 2% as well. Nicole M. Miller Regan - Piper Jaffray & Co (Broker): Thank you very much.

Operator: Your next question comes from the line of Keith Siegner from UBS. Your line is open.

Keith R. Siegner - UBS

Securities LLC: Thank you. Just a follow up on some of the comments and questions on the margin pressure. And in particular on the labor, as you enter this self-evaluation, just wondering did you step back for a minute and think about maybe, aside from just controlling costs, did you think about the labor model? What I mean is things like tableside delivery or dinner service and these types of things. We've heard other fast casual brands talk about revisiting, whether they get the proper credit for the tableside delivery versus the cost.

I guess so what I'm asking is as part of this brand self-evaluation, is it strictly a cost focus or are you still comfortable with the labor service model?
M. Kevin Reddy - Chairman & Chief

Executive Officer: We did look at the benefits of delivering a meal to the table. In our kitchen model, we believe that that's still important to do. And I think one of the reasons why, we score so high in consumer surveys done by third parties from the guests as it relates to team members is because we deliver to the table. And I think, Keith, that's an area that we have to maximize more.

Delivering it to the table if we're only doing a functional component where we're dropping food off, that isn't worth the labor. It's the way we're doing it today, but it's certainly not maximizing the investment in that person. Where it really does pay off and if you sit in our dining rooms and watch. When someone touches a table and they're smiling, and they take an extra 30 seconds to say hello, to make a comment about the food or the dish, to make some connection with that guest, or they touch that table a second time when after they drop another dish and they're walking past the table to make sure everything is all right. And even in our slower periods, to really find out what the folks do and why they come to Noodles and what do they like, that leads, believe it or not, to catering orders and to events and to tastings.

So, we actually have a strong commitment to the purposeful table touches and we actually think there's a lot of ways to mine, upping education and building occasions with that model of service. But, the restaurants that only do it from a functional standpoint, drop food and leave, are missing a huge opportunity and in that case, it's incremental labor that it's tough to justify. David J. Boennighausen - Chief

Financial Officer: Yes. The other thing I would add, Keith, is that what we're seeing in our consumer research is that, that element, the atmosphere is one of the most things that's correlated with us in terms of overall satisfaction and frequency within our guests.

So it is validating that the approach we're doing is working. As well as when you look at our – as we define that target a little bit better of millennial families, again, the consumer research is showing that that is the group that that particularly resonates with. So we continue to see that there's value there. In terms of the overall labor model, we did absolutely look at it across the board. We do think we need to invest a little bit more in some of the training elements of our team, making sure that they're completely up to speed and where they should be.

And also there were certain peak hours where we felt like we actually needed to have a little bit more investment there to make sure that the teams are not just executing the fundamentals, but everything that Kevin talked about in terms of making our experience special. Keith R. Siegner - UBS

Securities LLC: Okay, great. Look, while I understand some of the new campaign elements to try to draw awareness to the quality of food are still on the come, the BUFF Bowls have been out for a little while now, and maybe you can just give us a little bit of color about what's the customer response been? Are they picking up any product mix, any kind of color on because that seems like really one of the first efforts you're making to highlight some of the flexibility and usefulness of the brand? How are the BUFF Bowls going?
M. Kevin Reddy - Chairman & Chief

Executive Officer: Yes, the BUFF Bowls are going fine.

They're going about what we expected. Our intent there was to highlight fresh ingredients, the fact that we do real cooking, that we can customize dishes. We thought that at first it would give our current guests a chance for trade-off, to be able to enjoy one of their favorite dishes in a slightly different format, which I think we saw that in the early part of the launch in the product mix. And then we expected that this would actually reach a new guest and give some folks that maybe didn't think about Noodles & Company, a chance to think about it. And as we look at typically how we do LTOs, [limited time offers] one of the differences in the BUFF Bowls is it's hit a certain level of product mix and it's actually sustained it fairly well.

So I wouldn't say it's the barnburner of all of our LTOs but I do think it's hitting the purpose of providing an option for the infrequent guests that we're now getting. David J. Boennighausen - Chief

Financial Officer: And you hit the nail on the head, Keith, in terms of again, with research, guests don't necessarily understand that. When we do real cooking and everything is made to order, how you can customize our dishes and the flexibility in the menu, the BUFF Bowls have done really nice job of starting to introduce that platform. It's something that we're going to build upon as we look at the media campaign.

Keith R. Siegner - UBS

Securities LLC: Thank you.

Operator: Your next question comes from the line of John Glass from Morgan Stanley. Your line is open. Courtney Yakavonis - Morgan Stanley & Co.

LLC: Hi. This is Courtney on for John. I was just wondering, if you could give us a sense of the monthly pace of comps throughout the quarter? And then also any color on the day parts between lunch and dinner, and then also catering?
David J. Boennighausen - Chief

Financial Officer: Sure, absolutely. I'll start with the last one which is catering.

Catering is 1.3% of sales in Q2 versus about 0.9% in Q1. So we did see some momentum there. We'll be investing more. We really feel the platform itself has gotten stronger as we introduced à la carte, catering and a little bit more flexibility there. From the lunch versus dinner day parts, we're still seeing very consistent results there.

We still tend to be 50-50. Obviously each trade area is a little bit different, no particular abnormality in terms of how those day parts have trended. From the month-to-month basis, again the underlying trend month-to-month was pretty consistent. What we did see at the end of Q2 of last year, due to some heavy promotion, as we overlap that from a calendar perspective, saw a little bit of softness there. Otherwise, ultimately the cadence in Q2 was pretty consistent month-to-month.

Courtney Yakavonis - Morgan Stanley & Co. LLC: Okay, got you. And then you've talked about your investment in marketing in the second half of this year with the emphasis on the quality ingredients and handcrafted. Can you just give us any more details about what form we should expect it to be taking and if you're going to be focusing on any geographies or part of the system in particular?
M. Kevin Reddy - Chairman & Chief

Executive Officer: Sure, this is Kevin.

Channels that we're using are some out of home, billboards, radio primarily. We have digital that we're running as well as some paid search and social. We're focusing primarily on four markets; two larger markets and geographies, Denver and the Washington DC area; and two smaller markets, Madison and Colorado Springs. The messaging is really around that brand positioning and story. As you said, it's about the quality ingredients, the exciting flavors, the fact that we cook to order, all wrapped up under what I think is a very compelling message and theme of made different.

And it really brings to life kind of our cooking and that the pan to table kind of promise that we make, of how we're sautéing those dish to order and taken to the table. So there is a lot of education that we need to get credit for that's probably more in the branding side, not necessarily heavy promotional tactical driving. We think that's where we have to start. It's a right way to get credit for what we're doing to get people to think differently about how they eat. Everyone knows they like noodles and pasta.

Now we're helping them understand why it's also good for them and why pasta really is healthy and pairs so well with so many other ingredients. So that's where we're starting and then we're going to bridge it to the emotional connection that having a meal and having a meal inside Noodles & Co. and really that connection to parents and children that strength that we have, we're going to take it and build upon that platform and link it into the next phase. Courtney Yakavonis - Morgan Stanley & Co. LLC: Awesome.

Thanks, guys. M. Kevin Reddy - Chairman & Chief

Executive Officer: We exhausted the queue there it looks like maybe you know.

Operator: The final question comes from the line Andrew Strelzik from BMO Capital Markets. Your line is open.

Andrew Strelzik - BMO Capital Markets (United States): Hi. Thanks for taking the question. Just what I'm thinking about the more limited price increase you're going to be taking in the back half of the year, when you did the brand assessment, did it actually reveal that there was a pricing issue or like such that we should expect this to maybe carry into 2016 or longer or maybe a just a thought process behind that? Thanks. David J. Boennighausen - Chief

Financial Officer: Sure.

Andrew, it's a good question. We absolutely still think the value proposition is there. Right now, though, the focus is on getting back to transaction growth. We see the initiatives that we have surrounding marketing, culinary, operations. As Kevin mentioned, those are going to take a little bit of time to really resonate and get seated in with our guests.

So in the meantime what we're going to do is we're going to be pretty conservative on pricing, really focusing on maybe some of the areas that have seen the most wage pressure. I do think overall that when you look at our value proposition, we absolutely still have some room to grow there, but we want to be somewhat prudent with how to do it in the next several months, if you will. M. Kevin Reddy - Chairman & Chief

Executive Officer: And I would say that there's a lot of ways to look at price and to build sales and build average check. I talked briefly about our kids' meal and I would just read the highlight of that right now.

That's a very compelling offer. We got great healthy choices in there at $5. So when you think about some of those compelling offers, I don't view that as a promotion. I'd view that as something that could be core to our everyday menu, but that in a way is a very value-orientated offer to families, that they will view it as, hey, I could spend less and get more in Noodles & Co. for my kids.

So we're looking at not just a medium marketing calendar from brand positioning, but what are the smart promotional tactics that we should be deploying that would compel or be targeted to a certain group, we're still looking. We have a couple different price test – in-tests that are isolated in certain markets. We just don't believe that with all the things that we have going on that looks like they're showing promise that we'll have a large price increase across the system. Andrew Strelzik - BMO Capital Markets (United States): That makes sense. And the other question I wanted to ask, you said that you took some markets off the list for the near-term.

So I guess I'm just wondering, have you revisited or is there any reason that you'd visit that longer-term unit target? Or this is just kind of a timing and pacing thing and there's really no change there?
David J. Boennighausen - Chief

Financial Officer: Yes. Our thought certainly Andrew is in the timing and pacing. When we look at our existing markets and the saturation levels that they're at and the fact that markets like Minnesota, Wisconsin continue to be very strong, we haven't revisit that number, but should be honest with you, our focus right now is making sure that every restaurant that we approve is really a top notch A-plus location. We haven't spent too much time thinking about that unit growth potential number.

But there's nothing that tells us that we can't still hit top tier levels that only a few other brands have been able to hit. Andrew Strelzik - BMO Capital Markets (United States): Great. Thank you very much.

Operator: I'm showing there are no further questions at this time. I would like to thank everyone for their participation in today's conference call.

Have yourself a wonderful day. And you may now disconnect. M. Kevin Reddy - Chairman & Chief

Executive Officer: Thank you. David J.

Boennighausen - Chief

Financial Officer: Thank you, Blair.