Winmark Corporation Announces First Quarter Results
- None.
- The decision to run-off the leasing portfolio in May 2021 had an impact on the quarter's results.
- Net income for the first quarter of 2024 decreased compared to the same period in 2023.
Insights
Winmark Corporation's latest financial results show a slight decrease in net income year-over-year, with the figures dropping from
The company's strategic decision to run-off its leasing portfolio in 2021 should also be contextualized. This move may have long-term implications on revenue streams and operating margins. Considering that franchising is a capital-light business model with recurring revenue potential, the stability and growth of franchise operations are critical metrics to assess. The announcement of additional franchises awarded, although not yet operational, may suggest future growth potential and should be monitored as these locations begin contributing to the company's financials.
In examining Winmark Corporation’s franchise model, their portfolio of resale brands shows a strong emphasis on sustainability and small business opportunities. With over 1,327 franchises operating and an expansion capability indicated by the 2,800 available territories, there is a notable potential for widespread growth. The additional 73 franchises awarded, pending opening, present forthcoming opportunities for revenue growth.
For investors, diversification within the franchisor's brand portfolio offers a hedge against market volatility in the retail sector. Each brand caters to different consumer needs, potentially spreading risk. Nevertheless, investors should consider the operational performance of individual franchises, as their success directly affects the parent company's royalties and overall financial health. As the retail environment faces changes, with consumer spending habits shifting, the adaptability and resilience of Winmark’s franchisees are pivotal in maintaining a stable growth curve for the corporation.
“Performance during the first quarter was adequate,” commented Brett D. Heffes, Chair and Chief Executive Officer.
Winmark - the Resale Company®, is a nationally recognized franchisor 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 March 30, 2024, there were 1,327 franchises in operation and over 2,800 available territories. An additional 73 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 |
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CONDENSED BALANCE SHEETS |
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(Unaudited) |
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March 30, 2024 |
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December 30, 2023 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
22,872,200 |
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$ |
13,361,500 |
|
Restricted cash |
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— |
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25,000 |
|
Receivables, net |
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1,688,600 |
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|
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1,475,300 |
|
Net investment in leases - current |
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34,100 |
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|
|
75,100 |
|
Income tax receivable |
|
|
— |
|
|
|
31,400 |
|
Inventories |
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420,900 |
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|
|
386,100 |
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Prepaid expenses |
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1,265,600 |
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1,392,100 |
|
Total current assets |
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26,281,400 |
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16,746,500 |
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Property and equipment, net |
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1,649,400 |
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1,669,800 |
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Operating lease right of use asset |
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2,351,700 |
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|
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2,425,900 |
|
Intangible assets, net |
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2,905,800 |
|
|
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2,994,300 |
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Goodwill |
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607,500 |
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|
607,500 |
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Other assets |
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487,800 |
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|
471,300 |
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Deferred income taxes |
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4,052,400 |
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4,052,400 |
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$ |
38,336,000 |
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$ |
28,967,700 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
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Current Liabilities: |
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Notes payable, net |
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$ |
4,217,900 |
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$ |
4,217,900 |
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Accounts payable |
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1,296,300 |
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|
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1,719,400 |
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Income tax payable |
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2,469,000 |
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|
|
— |
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Accrued liabilities |
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4,734,000 |
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2,858,200 |
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Deferred revenue |
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1,657,300 |
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|
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1,666,100 |
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Total current liabilities |
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14,374,500 |
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10,461,600 |
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Long-Term Liabilities: |
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Line of credit/Term loan |
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30,000,000 |
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30,000,000 |
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Notes payable, net |
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33,794,300 |
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|
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34,848,800 |
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Deferred revenue |
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7,744,400 |
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7,657,500 |
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Operating lease liabilities |
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3,566,600 |
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3,715,800 |
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Other liabilities |
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1,435,300 |
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1,440,100 |
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Total long-term liabilities |
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76,540,600 |
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77,662,200 |
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Shareholders’ Equity (Deficit): |
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Common stock, no par, 10,000,000 shares authorized,
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8,324,700 |
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7,768,800 |
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Retained earnings (accumulated deficit) |
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(60,903,800 |
) |
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(66,924,900 |
) |
Total shareholders’ equity (deficit) |
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(52,579,100 |
) |
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(59,156,100 |
) |
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$ |
38,336,000 |
|
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$ |
28,967,700 |
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WINMARK CORPORATION |
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CONDENSED STATEMENTS OF OPERATIONS |
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(Unaudited) |
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Three Months Ended |
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March 30, 2024 |
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April 1, 2023 |
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Revenue: |
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Royalties |
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$ |
17,268,700 |
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$ |
16,747,700 |
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Leasing income |
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836,800 |
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1,637,000 |
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Merchandise sales |
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1,110,500 |
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1,276,000 |
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Franchise fees |
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364,500 |
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378,200 |
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Other |
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529,000 |
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484,700 |
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Total revenue |
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20,109,500 |
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20,523,600 |
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Cost of merchandise sold |
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1,038,900 |
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1,187,300 |
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Leasing expense |
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36,600 |
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316,400 |
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Provision for credit losses |
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(1,500 |
) |
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(4,600 |
) |
Selling, general and administrative expenses |
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6,817,300 |
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6,636,100 |
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Income from operations |
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12,218,200 |
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12,388,400 |
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Interest expense |
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(737,700 |
) |
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(797,600 |
) |
Interest and other income |
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187,900 |
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|
125,700 |
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Income before income taxes |
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11,668,400 |
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11,716,500 |
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Provision for income taxes |
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(2,849,400 |
) |
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(2,773,800 |
) |
Net income |
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$ |
8,819,000 |
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$ |
8,942,700 |
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Earnings per share - basic |
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$ |
2.52 |
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$ |
2.58 |
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Earnings per share - diluted |
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$ |
2.41 |
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$ |
2.49 |
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Weighted average shares outstanding - basic |
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3,497,261 |
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3,460,720 |
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Weighted average shares outstanding - diluted |
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3,661,367 |
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3,594,234 |
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WINMARK CORPORATION |
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CONDENSED STATEMENTS OF CASH FLOWS |
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(Unaudited) |
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Three Months Ended |
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March 30, 2024 |
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April 1, 2023 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
8,819,000 |
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$ |
8,942,700 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation of property and equipment |
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108,300 |
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104,000 |
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Amortization of intangible assets |
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88,500 |
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|
88,500 |
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Provision for credit losses |
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(1,500 |
) |
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(4,600 |
) |
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Compensation expense related to stock options |
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485,900 |
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|
475,900 |
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Deferred income taxes |
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— |
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24,200 |
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Operating lease right of use asset amortization |
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74,200 |
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66,900 |
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Tax benefits on exercised stock options |
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— |
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77,700 |
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Change in operating assets and liabilities: |
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Receivables |
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(213,300 |
) |
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(143,200 |
) |
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Principal collections on lease receivables |
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62,300 |
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|
423,800 |
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Income tax receivable/payable |
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2,500,400 |
|
|
|
2,490,900 |
|
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Inventories |
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(34,800 |
) |
|
|
356,300 |
|
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Prepaid expenses |
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|
126,500 |
|
|
|
422,400 |
|
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Other assets |
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(16,600 |
) |
|
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(40,400 |
) |
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Accounts payable |
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(423,100 |
) |
|
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(678,300 |
) |
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Accrued and other liabilities |
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|
1,729,800 |
|
|
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1,140,200 |
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Rents received in advance and security deposits |
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(19,700 |
) |
|
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(194,200 |
) |
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Deferred revenue |
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|
78,100 |
|
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|
297,700 |
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Net cash provided by operating activities |
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13,364,000 |
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13,850,500 |
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INVESTING ACTIVITIES: |
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Purchase of property and equipment |
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(87,900 |
) |
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(5,500 |
) |
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Net cash used for investing activities |
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(87,900 |
) |
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(5,500 |
) |
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FINANCING ACTIVITIES: |
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Payments on notes payable |
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(1,062,500 |
) |
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(1,062,500 |
) |
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Proceeds from exercises of stock options |
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70,000 |
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|
590,400 |
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Dividends paid |
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(2,797,900 |
) |
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(2,421,900 |
) |
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Net cash used for financing activities |
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(3,790,400 |
) |
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(2,894,000 |
) |
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NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
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9,485,700 |
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|
|
10,951,000 |
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Cash, cash equivalents and restricted cash, beginning of period |
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|
13,386,500 |
|
|
|
13,680,600 |
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Cash, cash equivalents and restricted cash, end of period |
|
$ |
22,872,200 |
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$ |
24,631,600 |
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SUPPLEMENTAL DISCLOSURES: |
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Cash paid for interest |
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$ |
725,700 |
|
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$ |
791,500 |
|
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Cash paid for income taxes |
|
$ |
349,100 |
|
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$ |
181,200 |
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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: |
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Three Months Ended |
|
||||||
|
|
March 30, 2024 |
|
April 1, 2023 |
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Cash and cash equivalents |
|
$ |
22,872,200 |
|
|
$ |
24,551,600 |
|
|
Restricted cash |
|
|
— |
|
|
|
80,000 |
|
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Total cash, cash equivalents and restricted cash |
|
$ |
22,872,200 |
|
|
$ |
24,631,600 |
|
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240416444706/en/
Anthony D. Ishaug
763/520-8500
Source: Winmark Corporation
FAQ
What was Winmark 's net income for the first quarter of 2024?
How many franchises were in operation at Winmark as of March 30, 2024?
What franchises does Winmark operate?
What impacted Winmark 's results during the first quarter of 2024?
