Winmark Corporation Announces First Quarter Results

Winmark Corporation (Nasdaq: WINA) announced today net income for the quarter ended March 30, 2024 of $8,819,000 or $2.41 per share diluted compared to net income of $8,942,700 or $2.49 per share diluted in 2023. Results during the quarter were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio

“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
CONDENSED BALANCE SHEETS
(Unaudited)

	March 30, 2024			December 30, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	22,872,200		$	13,361,500
Restricted cash		—			25,000
Receivables, net		1,688,600			1,475,300
Net investment in leases - current		34,100			75,100
Income tax receivable		—			31,400
Inventories		420,900			386,100
Prepaid expenses		1,265,600			1,392,100
Total current assets		26,281,400			16,746,500

Property and equipment, net		1,649,400			1,669,800
Operating lease right of use asset		2,351,700			2,425,900
Intangible assets, net		2,905,800			2,994,300
Goodwill		607,500			607,500
Other assets		487,800			471,300
Deferred income taxes		4,052,400			4,052,400
	$	38,336,000		$	28,967,700

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,217,900		$	4,217,900
Accounts payable		1,296,300			1,719,400
Income tax payable		2,469,000			—
Accrued liabilities		4,734,000			2,858,200
Deferred revenue		1,657,300			1,666,100
Total current liabilities		14,374,500			10,461,600
Long-Term Liabilities:
Line of credit/Term loan		30,000,000			30,000,000
Notes payable, net		33,794,300			34,848,800
Deferred revenue		7,744,400			7,657,500
Operating lease liabilities		3,566,600			3,715,800
Other liabilities		1,435,300			1,440,100
Total long-term liabilities		76,540,600			77,662,200
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,4997,430 and 3,496,977 shares issued and outstanding		8,324,700			7,768,800
Retained earnings (accumulated deficit)		(60,903,800	)		(66,924,900	)
Total shareholders’ equity (deficit)		(52,579,100	)		(59,156,100	)
	$	38,336,000		$	28,967,700


WINMARK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended
	March 30, 2024			April 1, 2023
Revenue:
Royalties	$	17,268,700		$	16,747,700
Leasing income		836,800			1,637,000
Merchandise sales		1,110,500			1,276,000
Franchise fees		364,500			378,200
Other		529,000			484,700
Total revenue		20,109,500			20,523,600
Cost of merchandise sold		1,038,900			1,187,300
Leasing expense		36,600			316,400
Provision for credit losses		(1,500	)		(4,600	)
Selling, general and administrative expenses		6,817,300			6,636,100
Income from operations		12,218,200			12,388,400
Interest expense		(737,700	)		(797,600	)
Interest and other income		187,900			125,700
Income before income taxes		11,668,400			11,716,500
Provision for income taxes		(2,849,400	)		(2,773,800	)
Net income	$	8,819,000		$	8,942,700
Earnings per share - basic	$	2.52		$	2.58
Earnings per share - diluted	$	2.41		$	2.49
Weighted average shares outstanding - basic		3,497,261			3,460,720
Weighted average shares outstanding - diluted		3,661,367			3,594,234


WINMARK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended
	March 30, 2024			April 1, 2023
OPERATING ACTIVITIES:
Net income	$	8,819,000		$	8,942,700
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		108,300			104,000
Amortization of intangible assets		88,500			88,500
Provision for credit losses		(1,500	)		(4,600	)
Compensation expense related to stock options		485,900			475,900
Deferred income taxes		—			24,200
Operating lease right of use asset amortization		74,200			66,900
Tax benefits on exercised stock options		—			77,700
Change in operating assets and liabilities:
Receivables		(213,300	)		(143,200	)
Principal collections on lease receivables		62,300			423,800
Income tax receivable/payable		2,500,400			2,490,900
Inventories		(34,800	)		356,300
Prepaid expenses		126,500			422,400
Other assets		(16,600	)		(40,400	)
Accounts payable		(423,100	)		(678,300	)
Accrued and other liabilities		1,729,800			1,140,200
Rents received in advance and security deposits		(19,700	)		(194,200	)
Deferred revenue		78,100			297,700
Net cash provided by operating activities		13,364,000			13,850,500
INVESTING ACTIVITIES:
Purchase of property and equipment		(87,900	)		(5,500	)
Net cash used for investing activities		(87,900	)		(5,500	)
FINANCING ACTIVITIES:
Payments on notes payable		(1,062,500	)		(1,062,500	)
Proceeds from exercises of stock options		70,000			590,400
Dividends paid		(2,797,900	)		(2,421,900	)
Net cash used for financing activities		(3,790,400	)		(2,894,000	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		9,485,700			10,951,000
Cash, cash equivalents and restricted cash, beginning of period		13,386,500			13,680,600
Cash, cash equivalents and restricted cash, end of period	$	22,872,200		$	24,631,600
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	725,700		$	791,500
Cash paid for income taxes	$	349,100		$	181,200

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:
	Three Months Ended
	March 30, 2024			April 1, 2023
Cash and cash equivalents	$	22,872,200		$	24,551,600
Restricted cash		—			80,000
Total cash, cash equivalents and restricted cash	$	22,872,200		$	24,631,600