Winmark Corporation Announces Second Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended June 29, 2024 of $10,431,400 or $2.85 per share diluted compared to net income of $10,368,800 or $2.85 per share diluted in 2023. For the six months ended June 29, 2024, net income was $19,250,400 or $5.26 per share diluted compared to net income of $19,311,500 or $5.34 per share diluted for the same period last year. Results during the quarter were impacted by the Company's decision in May 2021 to run-off its leasing portfolio.

"Year-to-date growth in royalties resulted from higher overall store count and, to a lesser extent, increases in per unit performance," 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 June 29, 2024, there were 1,336 franchises in operation and over 2,800 available territories. An additional 77 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)
		June 29, 2024				December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents		$	29,397,400			$	13,361,500
Restricted cash			-				25,000
Receivables, net			1,611,400				1,475,300
Net investment in leases - current			-				75,100
Income tax receivable			655,800				31,400
Inventories			268,200				386,100
Prepaid expenses			1,020,800				1,392,100
Total current assets			32,953,600				16,746,500
Property and equipment, net			1,636,100				1,669,800
Operating lease right of use asset			2,275,600				2,425,900
Intangible assets, net			2,817,300				2,994,300
Goodwill			607,500				607,500
Other assets			479,500				471,300
Deferred income taxes			3,917,300				4,052,400
		$	44,686,900			$	28,967,700
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net		$	4,218,700			$	4,217,900
Accounts payable			1,478,700				1,719,400
Accrued liabilities			4,092,500				2,858,200
Deferred revenue			1,662,200				1,666,100
Total current liabilities			11,452,100				10,461,600
Long-Term Liabilities:
Line of credit/Term loan			30,000,000				30,000,000
Notes payable, net			32,739,000				34,848,800
Deferred revenue			7,874,600				7,657,500
Operating lease liabilities			3,415,300				3,715,800
Other liabilities			1,430,600				1,440,100
Total long-term liabilities			75,459,500				77,662,200
Shareholders' Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,520,327 and 3,496,977 shares issued and outstanding			11,413,500				7,768,800
Retained earnings (accumulated deficit)			(53,638,200	)			(66,924,900	)
Total shareholders' equity (deficit)			(42,224,700	)			(59,156,100	)
		$	44,686,900			$	28,967,700

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
		Three Months Ended								Six Months Ended
		June 29, 2024				July 1, 2023				June 29, 2024				July 1, 2023
Revenue:
Royalties		$	17,774,500			$	17,105,800			$	35,043,200			$	33,853,500
Leasing income			524,400				1,019,800				1,361,200				2,656,800
Merchandise sales			925,500				1,328,100				2,036,000				2,604,100
Franchise fees			366,900				420,700				731,500				798,900
Other			529,200				487,800				1,058,300				972,500
Total revenue			20,120,500				20,362,200				40,230,200				40,885,800
Cost of merchandise sold			861,100				1,247,800				1,900,100				2,435,100
Leasing expense			-				54,300				36,600				370,700
Provision for credit losses			-				(700	)			(1,500	)			(5,300	)
Selling, general and administrative expenses			6,241,800				5,810,000				13,059,200				12,446,100
Income from operations			13,017,600				13,250,800				25,235,800				25,639,200
Interest expense			(721,400	)			(779,100	)			(1,459,200	)			(1,576,700	)
Interest and other income			280,800				292,300				468,800				418,000
Income before income taxes			12,577,000				12,764,000				24,245,400				24,480,500
Provision for income taxes			(2,145,600	)			(2,395,200	)			(4,995,000	)			(5,169,000	)
Net income		$	10,431,400			$	10,368,800			$	19,250,400			$	19,311,500
Earnings per share - basic		$	2.97			$	2.98			$	5.49			$	5.57
Earnings per share - diluted		$	2.85			$	2.85			$	5.26			$	5.34
Weighted average shares outstanding - basic			3,513,788				3,478,628				3,505,526				3,469,675
Weighted average shares outstanding - diluted			3,657,439				3,634,688				3,659,405				3,614,462

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
		Six Months Ended
		June 29, 2024				July 1, 2023
OPERATING ACTIVITIES:
Net income		$	19,250,400			$	19,311,500
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment			224,300				208,100
Amortization of intangible assets			177,000				177,000
Provision for credit losses			(1,500	)			(5,300	)
Compensation expense related to stock options			940,500				942,000
Deferred income taxes			135,100				148,400
Operating lease right of use asset amortization			150,300				135,600
Tax benefits on exercised stock options			943,400				832,300
Change in operating assets and liabilities:
Receivables			(136,100	)			(153,900	)
Principal collections on lease receivables			96,300				499,800
Income tax receivable/payable			(1,567,800	)			(796,100	)
Inventories			117,900				323,700
Prepaid expenses			371,300				490,700
Other assets			(8,200	)			(31,600	)
Accounts payable			(240,700	)			(483,600	)
Accrued and other liabilities			940,300				1,390,000
Rents received in advance and security deposits			(19,700	)			(234,200	)
Deferred revenue			213,200				397,900
Net cash provided by operating activities			21,586,000				23,152,300
INVESTING ACTIVITIES:
Purchase of property and equipment			(190,600	)			(96,900	)
Net cash used for investing activities			(190,600	)			(96,900	)
FINANCING ACTIVITIES:
Payments on notes payable			(2,125,000	)			(2,125,000	)
Proceeds from exercises of stock options			2,704,200				2,974,900
Dividends paid			(5,963,700	)			(5,209,400	)
Net cash used for financing activities			(5,384,500	)			(4,359,500	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			16,010,900				18,695,900
Cash, cash equivalents and restricted cash, beginning of period			13,386,500				13,680,600
Cash, cash equivalents and restricted cash, end of period		$	29,397,400			$	32,376,500
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	1,448,400			$	1,563,800
Cash paid for income taxes		$	5,484,400			$	4,984,600
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:
		Six Months Ended
		June 29, 2024				July 1, 2023
Cash and cash equivalents		$	29,397,400			$	32,321,500
Restricted cash			-				55,000
Total cash, cash equivalents and restricted cash		$	29,397,400			$	32,376,500

Contacts

Anthony D. Ishaug
763/520-8500