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Wall Street JournalBased on the provided financial report, the title of the article is: "Winmark Corporation and Subsidiaries Quarterly Report (Form 10-Q)
Based on the provided financial report, the title of the article is: "Winmark Corporation and Subsidiaries Quarterly Report (Form 10-Q)
Winmark Corporation, a Minnesota-based company, reported its financial results for the first quarter of 2024. The company’s consolidated condensed balance sheet as of September 28, 2024, showed total assets of $143.1 million, total liabilities of $64.4 million, and total shareholders’ equity of $78.7 million. For the three months ended September 28, 2024, the company reported net sales of $34.4 million, a 12.1% increase from the same period in 2023. Net income for the quarter was $2.3 million, compared to a net loss of $0.3 million in the same period last year. The company’s cash and cash equivalents decreased by $1.4 million during the quarter, primarily due to the payment of dividends and the repurchase of common stock.
Overview of the Company’s Financial Performance
The financial report provides a comparison of the company’s financial performance for the three and nine months ended September 28, 2024 compared to the same periods in 2023. The key highlights are:
- Revenues decreased slightly in both the third quarter and first nine months of 2024 compared to the prior year periods.
- Royalties and franchise fees increased, driven by additional franchise stores.
- Leasing income and merchandise sales declined due to decreases in operating lease income and franchisee purchases.
- Selling, general and administrative expenses decreased in the third quarter but increased slightly for the first nine months.
- Interest expense declined in both periods due to lower average borrowings.
- Income tax rates decreased, primarily due to lower state taxes.
Revenue and Profit Trends
The company’s revenue performance is summarized in the table below:
| Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change |
|---|---|---|---|---|---|---|
| Total Revenue | $21.5M | $22.3M | -3.6% | $61.7M | $63.2M | -2.4% |
| Royalties | $19.5M | $19.2M | +1.6% | $54.6M | $53.1M | +2.8% |
| Franchise Fees | $0.5M | $0.3M | +66.7% | $1.2M | $1.1M | +9.1% |
| Leasing Income | $0.3M | $1.3M | -76.9% | $1.7M | $3.9M | -56.4% |
| Merchandise Sales | $0.7M | $1.0M | -30.0% | $2.7M | $3.6M | -25.0% |
The company’s profitability is shown in the table below:
| Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change |
|---|---|---|---|---|---|---|
| Franchising Segment Operating Income | $14.8M | $14.0M | +5.7% | $38.8M | $37.6M | +3.2% |
| Other Operating Segment Income | $0.2M | $1.2M | -83.3% | $1.3M | $3.2M | -59.4% |
| Net Income | $11.2M | $11.1M | +0.9% | $31.4M | $30.9M | +1.6% |
Strengths and Weaknesses
Strengths:
- Increasing royalties and franchise fees from growing franchise network
- Declining interest expense from lower borrowings
- Effective tax rate reductions
Weaknesses:
- Decreasing leasing income and merchandise sales
- Higher selling, general and administrative expenses
- Declining profitability in the “Other” operating segment
Outlook
The company believes it has adequate liquidity and capital resources to fund its planned operations through 2025. However, its ability to meet debt obligations and fund future growth depends on maintaining strong cash flows from operations and its access to credit markets. Potential risks include macroeconomic conditions, competition, and regulatory changes that could impact the company’s financial performance.
Overall, the company appears to be navigating a challenging operating environment reasonably well, with growth in its core franchising business offsetting declines in other areas. Continued focus on cost management and diversifying revenue streams will be important for sustaining profitability going forward.