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Winmark Corporation Announces Second Quarter Results

WINA

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



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