Winmark Corporation Announces First Quarter Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported a net income of $8,942,700 or $2.49 per diluted share for the quarter ended April 1, 2023, a decrease from $9,852,500 or $2.65 per diluted share in the same quarter of 2022. This decline in earnings reflects the impact of the company’s strategic decision to wind down its leasing portfolio initiated in May 2021. CEO Brett D. Heffes emphasized a positive start to 2023, highlighting Winmark’s mission as a franchising leader focusing on sustainability and the support of small businesses. As of April 1, 2023, there are 1,297 franchises operational and 2,800 territories available, with an additional 70 franchises awarded but not yet opened.

Positive

• 1,297 franchises in operation.
• 2,800 available territories for franchise expansion.
• 70 franchises awarded but not opened, indicating future growth potential.

Negative

• Net income decreased by $909,800 compared to Q1 2022.
• Earnings per share declined by $0.16 year-over-year.

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended April 1, 2023 of $8,942,700 or $2.49 per share diluted compared to net income of $9,852,500 or $2.65 per share diluted in 2022. Results during the quarter were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio.

“2023 is off to a good start,” commented Brett D. Heffes, Chairman and Chief Executive Officer.

Winmark - the Resale Company®, is a nationally recognized franchising business focused on sustainability and small-business formation. We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. At April 1, 2023, there were 1,297 franchises in operation and over 2,800 available territories. An additional 70 franchises have been awarded but are not open.

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to future events or the future financial performance of the Company. Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated. Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

WINMARK CORPORATION CONDENSED BALANCE SHEETS (Unaudited)
		April 1, 2023				December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents		$	24,551,600			$	13,615,600
Restricted cash			80,000				65,000
Receivables, net			1,581,800				1,438,600
Net investment in leases - current			125,300				344,900
Income tax receivable			—				558,700
Inventories			414,300				770,600
Prepaid expenses			888,000				1,310,400
Total current assets			27,641,000				18,103,800
Net investment in leases – long-term			—				5,400
Property and equipment, net			1,606,100				1,704,600
Operating lease right of use asset			2,649,100				2,716,000
Intangible assets, net			3,259,800				3,348,300
Goodwill			607,500				607,500
Other assets			470,100				429,700
Deferred income taxes			3,516,200				3,540,400
		$	39,749,800			$	30,455,700
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,217,900			$	4,217,900
Accounts payable			1,443,700				2,122,000
Income tax payable			2,009,900				—
Accrued liabilities			3,884,600				2,611,700
Deferred revenue			1,673,700				1,643,900
Total current liabilities			13,229,800				10,595,500
Long-Term Liabilities:
Line of Credit/Term Loan			30,000,000				30,000,000
Notes payable, net			38,012,200				39,066,700
Deferred revenue			7,242,100				6,974,200
Operating lease liabilities			4,151,100				4,287,000
Other liabilities			1,159,600				1,164,400
Total long-term liabilities			80,565,000				81,492,300
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,463,191 and 3,459,673 shares issued and outstanding			2,873,000				1,806,700
Retained earnings (accumulated deficit)			(56,918,000	)			(63,438,800	)
Total shareholders’ equity (deficit)			(54,045,000	)			(61,632,100	)
		$	39,749,800			$	30,455,700

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended
	April 1, 2023			March 26, 2022
Revenue:
Royalties	$	16,747,700		$	15,390,100
Leasing income		1,637,000			2,871,700
Merchandise sales		1,276,000			914,300
Franchise fees		378,200			420,600
Other		484,700			453,100
Total revenue		20,523,600			20,049,800
Cost of merchandise sold		1,187,300			864,500
Leasing expense		316,400			216,000
Provision for credit losses		(4,600	)		(8,900	)
Selling, general and administrative expenses		6,636,100			5,540,000
Income from operations		12,388,400			13,438,200
Interest expense		(797,600	)		(513,100	)
Interest and other income (expense)		125,700			(900	)
Income before income taxes		11,716,500			12,924,200
Provision for income taxes		(2,773,800	)		(3,071,700	)
Net income	$	8,942,700		$	9,852,500
Earnings per share - basic	$	2.58		$	2.74
Earnings per share - diluted	$	2.49		$	2.65
Weighted average shares outstanding - basic		3,460,720			3,597,926
Weighted average shares outstanding - diluted		3,594,234			3,716,322

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
		Three Months Ended
		April 1, 2023				March 26, 2022
OPERATING ACTIVITIES:
Net income		$	8,942,700			$	9,852,500
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			192,500				102,500
Provision for credit losses			(4,600	)			(8,900	)
Compensation expense related to stock options			475,900				421,600
Deferred income taxes			24,200				(113,200	)
Operating lease right of use asset amortization			66,900				60,300
Tax benefits on exercised stock options			77,700				95,300
Change in operating assets and liabilities:
Receivables			(143,200	)			(369,900	)
Principal collections on lease receivables			423,800				530,500
Income tax receivable/payable			2,490,900				2,946,500
Inventories			356,300				(167,100	)
Prepaid expenses			422,400				23,500
Other assets			(40,400	)			(10,400	)
Accounts payable			(678,300	)			(203,000	)
Accrued and other liabilities			1,140,200				390,500
Rents received in advance and security deposits			(194,200	)			(159,700	)
Deferred revenue			297,700				(43,100	)
Net cash provided by operating activities			13,850,500				13,347,900
INVESTING ACTIVITIES:
Purchase of property and equipment			(5,500	)			(21,500	)
Net cash used for investing activities			(5,500	)			(21,500	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan			—				15,600,000
Payments on line of credit/term loan			—				(2,000,000	)
Payments on notes payable			(1,062,500	)			(1,062,500	)
Repurchases of common stock			—				(36,591,400	)
Proceeds from exercises of stock options			590,400				1,258,300
Dividends paid			(2,421,900	)			(1,625,300	)
Net cash used for financing activities			(2,894,000	)			(24,420,900	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			10,951,000				(11,094,500	)
Cash, cash equivalents and restricted cash, beginning of period			13,680,600				11,437,000
Cash, cash equivalents and restricted cash, end of period		$	24,631,600			$	342,500
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	791,500			$	490,500
Cash paid for income taxes		$	181,200			$	143,100
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Balance Sheets to the total of the same amounts shown above:
		Three Months Ended
		April 1, 2023				March 26, 2022
Cash and cash equivalents		$	24,551,600			$	287,500
Restricted cash			80,000				55,000
Total cash, cash equivalents and restricted cash		$	24,631,600			$	342,500

 

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Anthony D. Ishaug

763/520-8500

Source: Winmark Corporation

FAQ

What are Winmark Corporation's Q1 2023 earnings results?

Winmark Corporation reported a net income of $8,942,700 or $2.49 per diluted share for Q1 2023.

How do Winmark's Q1 2023 earnings compare to Q1 2022?

In Q1 2022, Winmark earned $9,852,500 or $2.65 per diluted share, showing a decrease in both net income and earnings per share in Q1 2023.

What is Winmark Corporation's future outlook after Q1 2023?

Winmark aims to expand its franchise network with 2,800 available territories and 70 franchises already awarded.