Winmark Corporation Announces Third Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended September 30, 2023 of $11,149,800 or $3.05 per share diluted compared to net income of $10,368,600 or $2.93 per share diluted in 2022. For the nine months ended September 30, 2023, net income was $30,461,300 or $8.40 per share diluted compared to net income of $29,248,300 or $8.11 per share diluted for the same period last year.

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 September 30, 2023, there were 1,312 franchises in operation and over 2,800 available territories. An additional 72 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 30, 2023				December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents		$	40,556,100			$	13,615,600
Restricted cash			40,000				65,000
Receivables, net			1,704,000				1,438,600
Net investment in leases - current			124,300				344,900
Income tax receivable			1,200				558,700
Inventories			290,900				770,600
Prepaid expenses			1,095,100				1,310,400
Total current assets			43,811,600				18,103,800
Net investment in leases - long-term			-				5,400
Property and equipment, net			1,675,900				1,704,600
Operating lease right of use asset			2,510,000				2,716,000
Intangible assets, net			3,082,800				3,348,300
Goodwill			607,500				607,500
Other assets			467,700				429,700
Deferred income taxes			3,392,000				3,540,400
		$	55,547,500			$	30,455,700
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,217,900			$	4,217,900
Accounts payable			1,694,900				2,122,000
Accrued liabilities			4,038,900				2,611,700
Deferred revenue			1,680,700				1,643,900
Total current liabilities			11,632,400				10,595,500
Long-Term Liabilities:
Line of Credit/Term Loan			30,000,000				30,000,000
Notes payable, net			35,903,300				39,066,700
Deferred revenue			7,553,600				6,974,200
Operating lease liabilities			3,871,600				4,287,000
Other liabilities			1,150,100				1,164,400
Total long-term liabilities			78,478,600				81,492,300
Shareholders' Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,486,869 and 3,459,673 shares issued and outstanding			6,411,900				1,806,700
Retained earnings (accumulated deficit)			(40,975,400	)			(63,438,800	)
Total shareholders' equity (deficit)			(34,563,500	)			(61,632,100	)
		$	55,547,500			$	30,455,700

WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
		Quarter Ended								Nine Months Ended
		September 30, 2023				September 24, 2022				September 30, 2023				September 24, 2022
Revenue:
Royalties		$	19,210,000			$	17,859,000			$	53,063,400			$	49,230,400
Leasing income			1,291,900				1,762,100				3,948,700				5,845,800
Merchandise sales			997,800				746,000				3,601,900				2,687,500
Franchise fees			334,400				348,100				1,133,400				1,160,200
Other			483,700				449,300				1,456,200				1,361,200
Total revenue			22,317,800				21,164,500				63,203,600				60,285,100
Cost of merchandise sold			935,400				717,600				3,370,500				2,552,300
Leasing expense			11,000				376,300				381,700				891,900
Provision for credit losses			700				(22,000	)			(4,600	)			(46,600	)
Selling, general and administrative expenses			6,248,200				5,671,500				18,694,300				16,673,100
Income from operations			15,122,500				14,421,100				40,761,700				40,214,400
Interest expense			(763,100	)			(820,500	)			(2,339,800	)			(2,045,600	)
Interest and other income			385,400				21,700				803,400				7,000
Income before income taxes			14,744,800				13,622,300				39,225,300				38,175,800
Provision for income taxes			(3,595,000	)			(3,253,700	)			(8,764,000	)			(8,927,500	)
Net income		$	11,149,800			$	10,368,600			$	30,461,300			$	29,248,300
Earnings per share - basic		$	3.20			$	3.01			$	8.77			$	8.36
Earnings per share - diluted		$	3.05			$	2.93			$	8.40			$	8.11
Weighted average shares outstanding - basic			3,485,852				3,439,417				3,475,066				3,500,411
Weighted average shares outstanding - diluted			3,653,730				3,540,779				3,627,550				3,605,445

WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
		Nine Months Ended
		September 30, 2023				September 24, 2022
OPERATING ACTIVITIES:
Net income		$	30,461,300			$	29,248,300
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			578,900				409,500
Provision for credit losses			(4,600	)			(46,600	)
Compensation expense related to stock options			1,451,000				1,203,800
Deferred income taxes			148,400				(214,700	)
Operating lease right of use asset amortization			206,000				185,700
Tax benefits on exercised stock options			839,000				429,500
Change in operating assets and liabilities:
Receivables			(265,400	)			(530,200	)
Principal collections on lease receivables			485,200				2,819,200
Income tax receivable/payable			(281,500	)			194,600
Inventories			479,700				(312,700	)
Prepaid expenses			215,300				2,500
Other assets			(38,000	)			2,000
Accounts payable			(427,100	)			(189,100	)
Accrued and other liabilities			1,021,600				1,395,000
Rents received in advance and security deposits			(254,600	)			(556,200	)
Deferred revenue			616,200				164,700
Net cash provided by operating activities			35,231,400				34,205,300
INVESTING ACTIVITIES:
Purchase of property and equipment			(284,700	)			(70,000	)
Reacquired franchise rights			-				(3,540,000	)
Net cash used for investing activities			(284,700	)			(3,610,000	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan			-				33,700,000
Payments on line of credit/term loan			-				(3,700,000	)
Payments on notes payable			(3,187,500	)			(3,187,500	)
Repurchases of common stock			-				(48,281,200	)
Proceeds from exercises of stock options			3,154,200				2,937,100
Dividends paid			(7,997,900	)			(6,459,700	)
Net cash used for financing activities			(8,031,200	)			(24,991,300	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			26,915,500				5,604,000
Cash, cash equivalents and restricted cash, beginning of period			13,680,600				11,437,000
Cash, cash equivalents and restricted cash, end of period		$	40,596,100			$	17,041,000
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	2,309,100			$	1,925,400
Cash paid for income taxes		$	8,058,100			$	8,518,100
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 30, 2023				September 24, 2022
Cash and cash equivalents		$	40,556,100			$	16,986,000
Restricted cash			40,000				55,000
Total cash, cash equivalents and restricted cash		$	40,596,100			$	17,041,000

Contacts

Anthony D. Ishaug
763/520-8500