Winmark Corp is a franchisor of value-oriented retail store concepts that buy, sell, and trade gently used merchandise. The company operates through two segments: Franchising and Leasing, with the majority of its revenue generated from the Franchising segment.
Performance Overview
Winmark Corp (WINA, Financial) reported net income of $10.43 million, or $2.85 per diluted share, for the second quarter of 2024, matching the earnings per share from the same period last year. This result exceeded the analyst estimate of $2.77 per share. However, the company's revenue for the quarter was $20.12 million, slightly below the analyst estimate of $20.21 million.
For the six months ended June 29, 2024, net income was $19.25 million, or $5.26 per diluted share, compared to $19.31 million, or $5.34 per diluted share, for the same period in 2023. The company's decision in May 2021 to run-off its leasing portfolio impacted the results.
Financial Achievements and Challenges
Winmark Corp (WINA, Financial) achieved year-to-date growth in royalties, driven by a higher overall store count and improved per unit performance. This growth is crucial for the company as it underscores the strength of its franchising model and its ability to generate consistent revenue streams.
However, the company faces challenges due to the ongoing run-off of its leasing portfolio, which has led to a decline in leasing income. This strategic decision, while potentially beneficial in the long term, has short-term impacts on revenue diversification.
Key Financial Metrics
Below is a summary of key financial metrics from Winmark Corp (WINA, Financial)'s earnings report:
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenue | $20.12 million | $20.36 million |
| Net Income | $10.43 million | $10.37 million |
| Earnings Per Share (Diluted) | $2.85 | $2.85 |
Income Statement Highlights
Winmark Corp (WINA, Financial) reported total revenue of $20.12 million for Q2 2024, a slight decrease from $20.36 million in Q2 2023. The revenue breakdown is as follows:
- Royalties: $17.77 million (up from $17.11 million in Q2 2023)
- Leasing Income: $0.52 million (down from $1.02 million in Q2 2023)
- Merchandise Sales: $0.93 million (down from $1.33 million in Q2 2023)
- Franchise Fees: $0.37 million (down from $0.42 million in Q2 2023)
- Other: $0.53 million (up from $0.49 million in Q2 2023)
Balance Sheet and Cash Flow
As of June 29, 2024, Winmark Corp (WINA, Financial) reported total assets of $44.69 million, up from $28.97 million at the end of 2023. The increase in cash and cash equivalents to $29.40 million from $13.36 million was a significant contributor to this growth.
The company's total liabilities stood at $86.91 million, with long-term liabilities accounting for $75.46 million. Shareholders' equity improved to a deficit of $42.22 million from a deficit of $59.16 million at the end of 2023.
Cash Flow Statement
Winmark Corp (WINA, Financial) generated $21.59 million in net cash from operating activities for the first six months of 2024, compared to $23.15 million in the same period last year. The company used $0.19 million in investing activities and $5.38 million in financing activities during the same period.
Commentary
"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.
Analysis
Winmark Corp (WINA, Financial)'s performance in Q2 2024 demonstrates resilience in its core franchising business, with steady growth in royalties despite challenges in the leasing segment. The company's strategic focus on expanding its franchise network and enhancing per unit performance is yielding positive results. However, the decline in leasing income and merchandise sales highlights areas that may require attention to sustain overall revenue growth.
Value investors may find Winmark Corp (WINA, Financial) appealing due to its consistent earnings and strategic initiatives aimed at long-term growth. The company's ability to exceed earnings estimates while maintaining a strong balance sheet and cash flow position underscores its financial stability and potential for future value creation.
Explore the complete 8-K earnings release (here) from Winmark Corp for further details.
