Winmark Corporation Reports Mixed Q3 and 9-Month Fiscal 2024 Results, Decline in Leasing Income Offset by Royalty Growth

Winmark Corporation reported its financial results for the third quarter and the first nine months of fiscal 2024, highlighting a mixed performance in revenue and profitability compared to the previous fiscal period.

For the three months ended September 28, 2024, Winmark generated revenue of $21.5 million, a decrease from $22.3 million in the same period of 2023. Royalties from franchisees increased slightly to $19.5 million, up from $19.2 million, reflecting a 1.6% growth attributed to the addition of new franchise stores. However, leasing income saw a significant decline, dropping to $316,200 from $1.3 million in the prior year, primarily due to decreased operating lease income. The company reported net income of $11.1 million for the quarter, slightly down from $11.1 million in Q3 2023, with earnings per share (EPS) of $3.16 compared to $3.20.

For the nine months ended September 28, 2024, total revenue was $61.7 million, down from $63.2 million in the same period of 2023. Net income for this period was $30.4 million, a marginal decrease from $30.5 million in the previous year. The EPS for the nine months was $8.65, down from $8.77. The decline in revenue was influenced by a decrease in leasing income, which fell to $1.7 million from $3.9 million, and a drop in direct franchisee sales from $3.6 million to $2.7 million.

Winmark's total operating income for Q3 2024 was $14.9 million, slightly lower than $15.1 million in Q3 2023. The franchising segment contributed $14.8 million to operating income, an increase from $14.0 million, driven by higher royalty revenues and reduced selling, general, and administrative expenses. For the nine-month period, franchising segment operating income rose to $38.8 million from $37.6 million.

The company’s cash and cash equivalents significantly increased to $37.2 million as of September 28, 2024, compared to $40.6 million at the end of Q3 2023. Winmark declared a special cash dividend of $7.50 per share, totaling approximately $26.4 million, payable on December 2, 2024. The company did not repurchase any shares during the first nine months of 2024 but has authorization to repurchase an additional 78,600 shares.

Winmark remains compliant with all financial covenants related to its debt facilities, which include a Line of Credit and a Note Agreement. The company anticipates generating sufficient cash from operations to meet its expenses and debt service obligations through 2025.