8-K: Winmark Corporation Announces Third Quarter Results and Special Dividend

Winmark Corporation reported a slight decrease in net income for the third quarter of 2024 compared to the same period last year, and announced a special dividend of $7.50 per share.

Summary

• Winmark Corporation announced its third quarter results for the period ending September 28, 2024.
• Net income for the quarter was $11,120,700, or $3.03 per share diluted, compared to $11,149,800, or $3.05 per share diluted, in the same quarter of 2023.
• For the nine months ended September 28, 2024, net income was $30,371,200, or $8.29 per share diluted, compared to $30,461,300, or $8.40 per share diluted, for the same period last year.
• The company's results were impacted by the decision to run-off its leasing portfolio in May 2021.
• Winmark also announced a special dividend of $7.50 per share, totaling approximately $26.4 million, to be paid on December 2, 2024, to shareholders of record on November 13, 2024.
• A regular quarterly dividend of $0.90 per share was also declared, with the same payment and record dates as the special dividend.
• As of September 28, 2024, Winmark had 1,343 franchises in operation and over 2,800 available territories, with an additional 82 franchises awarded but not yet open.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive due to the special dividend announcement, which is a positive sign for shareholders, but the slight decrease in net income and EPS tempers the overall outlook.

Positives

• Winmark declared a substantial special dividend of $7.50 per share, indicating strong cash flow and a commitment to returning value to shareholders.
• The company also declared a regular quarterly dividend of $0.90 per share.
• The number of franchises in operation is 1,343, with over 2,800 available territories, indicating continued growth potential.
• Winmark has a strong cash position with $37,197,000 in cash and cash equivalents.

Negatives

• Net income for the third quarter of 2024 slightly decreased compared to the same period in 2023.
• Diluted earnings per share also saw a slight decrease for both the quarter and the nine-month period.
• The run-off of the leasing portfolio impacted the company's results.

Risks

• The company's future performance is subject to risks and uncertainties, as indicated by the forward-looking statements disclaimer.
• Actual results could differ materially from those anticipated.
• The run-off of the leasing portfolio continues to impact financial results.

Future Outlook

The company's future dividends are subject to Board approval, and the company cautions against undue reliance on forward-looking statements due to inherent risks and uncertainties.

Management Comments

• Winmark is a nationally recognized franchisor focused on sustainability and small business formation.
• Winmark champions and guides entrepreneurs interested in operating one of its award winning resale franchises.

Industry Context

Winmark operates in the resale and franchising industry, focusing on sustainability and small business formation, which aligns with current consumer trends towards environmentally conscious and entrepreneurial ventures.

Comparison to Industry Standards

• Winmark's performance is comparable to other established franchise businesses, but the slight decrease in net income and EPS may be a concern for investors.
• The special dividend is a significant return of capital to shareholders, which is not typical for all companies in the franchise sector.
• Companies like Franchise Group (FRG) and Driven Brands (DRVN) are also in the franchise space, but their business models and financial results differ significantly from Winmark's.
• Winmark's focus on resale and sustainability differentiates it from some competitors, but it also faces competition from other resale and consignment businesses.

Stakeholder Impact

• Shareholders will benefit from the special and quarterly dividends.
• Franchisees will continue to operate under the Winmark brand.
• Employees will continue to be employed by the company.

Next Steps

• The company will pay the quarterly and special dividends on December 2, 2024.
• Future dividends will be subject to Board approval.

Key Dates

Keywords

dividends, franchise, resale, financial results, net income, earnings per share, Winmark, WINA