Winmark Corporation Announces Third Quarter Results

Rhea-AI Summary

Winmark (Nasdaq: WINA) reported its financial results for the third quarter ended September 28, 2024. The company's net income for the quarter was $11,120,700 or $3.03 per share diluted, compared to $11,149,800 or $3.05 per share diluted in 2023. For the nine months ended September 28, 2024, net income was $30,371,200 or $8.29 per share diluted, compared to $30,461,300 or $8.40 per share diluted for the same period last year.

Winmark, known as 'the Resale Company®', is a franchisor focused on sustainability and small business formation. It operates five resale franchise brands: Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore®, and Music Go Round®. As of September 28, 2024, Winmark had 1,343 franchises in operation and over 2,800 available territories. An additional 82 franchises have been awarded but are not yet open.

Positive

• Stable quarterly net income of $11,120,700
• Earnings per share of $3.03 for Q3 2024
• Nine-month net income of $30,371,200
• Strong franchise network with 1,343 operating franchises
• Expansion potential with over 2,800 available territories

Negative

• Slight decrease in quarterly net income compared to 2023
• Marginal decline in earnings per share from $3.05 to $3.03 year-over-year
• Nine-month net income slightly lower than the same period last year

Insights

Financial Analyst

Winmark 's Q3 2024 results show a slight decline in net income and earnings per share compared to the same period in 2023. Net income decreased by $29,100 to $11,120,700, while diluted EPS dropped by $0.02 to $3.03. For the nine-month period, net income fell by $90,100 to $30,371,200, with diluted EPS decreasing by $0.11 to $8.29.

The company's franchise-based business model appears stable, with 1,343 franchises in operation and 82 more awarded but not yet open. This indicates potential for future growth. However, the ongoing run-off of the leasing portfolio, initiated in May 2021, continues to impact financial results.

Despite the slight decline, Winmark's performance remains strong, with a focus on sustainability and small business formation through its resale franchise brands. The company's extensive network and available territories (over 2,800) suggest room for expansion, which could drive future revenue growth.

Market Research Analyst

Winmark's business model, centered on resale franchises, aligns well with growing consumer trends towards sustainability and value shopping. The company's five brands (Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®) cater to diverse market segments, providing a hedge against fluctuations in any single retail category.

The slight decline in financial performance should be viewed in the context of the company's strategic decision to run off its leasing portfolio. This move may impact short-term results but could lead to a more focused and potentially more profitable business model in the long term.

With 1,343 franchises in operation and 82 more in the pipeline, Winmark demonstrates steady growth. The 2,800 available territories represent significant untapped potential, which could drive future expansion and revenue growth. However, investors should monitor the rate of new franchise openings and same-store sales growth to gauge the health of the existing franchise network.

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 28, 2024 of $11,120,700 or $3.03 per share diluted compared to net income of $11,149,800 or $3.05 per share diluted in 2023. For the nine months ended September 28, 2024, net income was $30,371,200 or $8.29 per share diluted compared to net income of $30,461,300 or $8.40 per share diluted for the same period last year. Results during the quarter and nine months were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio.

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 September 28, 2024, there were 1,343 franchises in operation and over 2,800 available territories. An additional 82 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)

		September 28, 2024				December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents		$	37,197,000			$	13,361,500
Restricted cash			90,000				25,000
Receivables, net			1,602,200				1,475,300
Net investment in leases - current			—				75,100
Income tax receivable			—				31,400
Inventories			441,800				386,100
Prepaid expenses			1,171,600				1,392,100
Total current assets			40,502,600				16,746,500
Property and equipment, net			1,519,000				1,669,800
Operating lease right of use asset			2,197,600				2,425,900
Intangible assets, net			2,728,800				2,994,300
Goodwill			607,500				607,500
Other assets			478,400				471,300
Deferred income taxes			3,917,300				4,052,400
		$	51,951,200			$	28,967,700
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	3,472,100			$	4,217,900
Accounts payable			1,600,700				1,719,400
Income tax payable			30,400				—
Accrued liabilities			3,776,100				2,858,200
Deferred revenue			1,670,100				1,666,100
Total current liabilities			10,549,400				10,461,600
Long-Term Liabilities:
Line of credit/Term loan			30,000,000				30,000,000
Notes payable, net			32,431,200				34,848,800
Deferred revenue			8,028,600				7,657,500
Operating lease liabilities			3,260,100				3,715,800
Other liabilities			1,425,800				1,440,100
Total long-term liabilities			75,145,700				77,662,200
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,520,402 and 3,496,977 shares issued and outstanding			11,941,900				7,768,800
Retained earnings (accumulated deficit)			(45,685,800	)			(66,924,900	)
Total shareholders’ equity (deficit)			(33,743,900	)			(59,156,100	)
		$	51,951,200			$	28,967,700

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 28, 2024				September 30, 2023				September 28, 2024				September 30, 2023
Revenue:
Royalties		$	19,512,500			$	19,210,000			$	54,555,700			$	53,063,400
Leasing income			316,200				1,291,900				1,677,400				3,948,700
Merchandise sales			702,500				997,800				2,738,500				3,601,900
Franchise fees			451,200				334,400				1,182,700				1,133,400
Other			528,500				483,700				1,586,800				1,456,200
Total revenue			21,510,900				22,317,800				61,741,100				63,203,600
Cost of merchandise sold			662,500				935,400				2,562,600				3,370,500
Leasing expense			—				11,000				36,600				381,700
Provision for credit losses			—				700				(1,500	)			(4,600	)
Selling, general and administrative expenses			5,919,800				6,248,200				18,979,000				18,694,300
Income from operations			14,928,600				15,122,500				40,164,400				40,761,700
Interest expense			(704,100	)			(763,100	)			(2,163,300	)			(2,339,800	)
Interest and other income			386,400				385,400				855,200				803,400
Income before income taxes			14,610,900				14,744,800				38,856,300				39,225,300
Provision for income taxes			(3,490,200	)			(3,595,000	)			(8,485,100	)			(8,764,000	)
Net income		$	11,120,700			$	11,149,800			$	30,371,200			$	30,461,300
Earnings per share - basic		$	3.16			$	3.20			$	8.65			$	8.77
Earnings per share - diluted		$	3.03			$	3.05			$	8.29			$	8.40
Weighted average shares outstanding - basic			3,520,334				3,485,852				3,510,461				3,475,066
Weighted average shares outstanding - diluted			3,671,121				3,653,730				3,663,309				3,627,550

WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

		Nine Months Ended
		September 28, 2024				September 30, 2023
OPERATING ACTIVITIES:
Net income		$	30,371,200			$	30,461,300
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment			345,600				313,400
Amortization of intangible assets			265,500				265,500
Provision for credit losses			(1,500	)			(4,600	)
Compensation expense related to stock options			1,458,200				1,451,000
Deferred income taxes			135,100				148,400
Operating lease right of use asset amortization			228,200				206,000
Tax benefits on exercised stock options			943,300				839,000
Change in operating assets and liabilities:
Receivables			(126,900	)			(265,400	)
Principal collections on lease receivables			104,700				485,200
Income tax receivable/payable			(881,600	)			(281,500	)
Inventories			(55,700	)			479,700
Prepaid expenses			220,500				215,300
Other assets			(7,200	)			(38,000	)
Accounts payable			(118,700	)			(427,100	)
Accrued and other liabilities			472,200				1,021,600
Rents received in advance and security deposits			(28,000	)			(254,600	)
Deferred revenue			375,100				616,200
Net cash provided by operating activities			33,700,000				35,231,400
INVESTING ACTIVITIES:
Purchase of property and equipment			(194,900	)			(284,700	)
Net cash used for investing activities			(194,900	)			(284,700	)
FINANCING ACTIVITIES:
Payments on notes payable			(3,187,500	)			(3,187,500	)
Proceeds from exercises of stock options			2,715,000				3,154,200
Dividends paid			(9,132,100	)			(7,997,900	)
Net cash used for financing activities			(9,604,600	)			(8,031,200	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			23,900,500				26,915,500
Cash, cash equivalents and restricted cash, beginning of period			13,386,500				13,680,600
Cash, cash equivalents and restricted cash, end of period		$	37,287,000			$	40,596,100
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	2,149,200			$	2,309,100
Cash paid for income taxes		$	8,281,400			$	8,058,100
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:
		Nine Months Ended
		September 28, 2024				September 30, 2023
Cash and cash equivalents		$	37,197,000			$	40,556,100
Restricted cash			90,000				40,000
Total cash, cash equivalents and restricted cash		$	37,287,000			$	40,596,100

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241015891945/en/

Anthony D. Ishaug

763/520-8500

Source: Winmark Corporation

FAQ

What was Winmark 's (WINA) net income for Q3 2024?

Winmark 's net income for the third quarter of 2024 was $11,120,700 or $3.03 per share diluted.

How many franchises does Winmark (WINA) have in operation as of September 28, 2024?

As of September 28, 2024, Winmark had 1,343 franchises in operation.

What are the resale franchise brands operated by Winmark (WINA)?

Winmark operates five resale franchise brands: Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round.

How did Winmark 's (WINA) Q3 2024 results compare to Q3 2023?

Winmark's Q3 2024 net income was slightly lower at $11,120,700 or $3.03 per share diluted, compared to $11,149,800 or $3.05 per share diluted in Q3 2023.