Winmark's Q3 Net Income Edges Up Amidst Royalty Growth

TL;DR

**WINA's Q3 shows solid royalty growth and a cash hoard, but the leasing exit is a drag – still a buy for dividend and buyback fans.**

AI Summary

Winmark Corporation reported a net income of $11,136,500 for the three months ended September 27, 2025, a slight increase from $11,120,700 in the same period last year. For the nine months ended September 27, 2025, net income rose to $31,694,200 from $30,371,200 in the prior year. Total revenue for the three months increased to $22,632,900 from $21,510,900, primarily driven by a rise in royalties to $20,911,300 from $19,512,500. However, leasing income significantly decreased to $46,600 from $316,200 for the three-month period, reflecting the company's decision in May 2021 to exit new leasing customer solicitations. Selling, general and administrative expenses increased to $7,046,400 for the three months, up from $5,919,800. The company's cash and cash equivalents surged to $39,734,800 as of September 27, 2025, from $12,189,800 at December 28, 2024. Winmark repurchased 7,944 shares of its common stock during the first nine months of 2025, with an additional 70,656 shares authorized for repurchase. The company also paid quarterly cash dividends of $0.90 and $0.96 per share during the period.

Why It Matters

Winmark's consistent profitability and strong cash generation, evidenced by a net income of $31.7 million for the nine months, signal financial stability for investors. The significant increase in cash and cash equivalents to $39.7 million provides flexibility for future strategic initiatives, including potential acquisitions or increased shareholder returns. The ongoing share repurchase program, with 70,656 shares still authorized, demonstrates a commitment to enhancing shareholder value, which could support stock price stability. However, the declining leasing income due to the strategic run-off of its leasing portfolio highlights a shift in business focus, potentially reducing revenue diversification compared to competitors in the franchise and financial services sectors.

Risk Assessment

Risk Level: low — The company exhibits a low risk profile due to its strong cash position, with cash and cash equivalents increasing by over $27 million to $39,734,800 as of September 27, 2025. Furthermore, net income for the nine months ended September 27, 2025, was a robust $31,694,200, indicating healthy operational performance and financial resilience.

Analyst Insight

Investors should consider WINA for its consistent dividend payments and ongoing share repurchase program, which signals management's confidence and commitment to shareholder returns. Monitor the growth in royalty revenue as the primary driver, given the planned wind-down of the leasing business, and assess how the substantial cash reserves are deployed for future growth or further shareholder value creation.

Financial Highlights

debt To Equity

N/A

revenue

$22,632,900

operating Margin

65.9%

total Assets

$53,747,200

total Debt

$59,956,500

net Income

$11,136,500

eps

N/A

gross Margin

N/A

cash Position

$39,734,800

revenue Growth

+5.2%

Revenue Breakdown

Key Numbers

• $31,694,200 — Net income for nine months ended Sept 27, 2025 (Increased from $30,371,200 in prior year, showing profitability growth.)
• $20,911,300 — Royalties for three months ended Sept 27, 2025 (Increased from $19,512,500, indicating strong franchise performance.)
• $46,600 — Leasing income for three months ended Sept 27, 2025 (Significantly decreased from $316,200, reflecting the planned run-off of leasing operations.)
• $39,734,800 — Cash and cash equivalents as of Sept 27, 2025 (Substantial increase from $12,189,800 at Dec 28, 2024, boosting liquidity.)
• 7,944 — Shares repurchased in first nine months of 2025 (Demonstrates commitment to shareholder returns, with 70,656 shares remaining authorized.)
• $0.96 — Quarterly cash dividend per share (Approved for April and July 2025, indicating consistent shareholder payouts.)
• $5.4 million — Total unrecognized compensation expense related to stock options (Expected to be recognized over approximately 2.8 years, impacting future SG&A.)
• $30,000,000 — Delayed draw term loan borrowings (Outstanding under the Line of Credit, bearing interest from 4.60% to 4.75%.)

Key Players & Entities

• WINMARK CORPORATION (company) — registrant
• CIBC Bank USA (company) — credit facility provider
• Prudential (company) — debt facility provider
• FASB (regulator) — Financial Accounting Standards Board
• Plato's Closet (company) — franchise brand
• Once Upon A Child (company) — franchise brand
• Play It Again Sports (company) — franchise brand
• Style Encore (company) — franchise brand
• Music Go Round (company) — franchise brand
• Winmark Capital (company) — leasing business mark

FAQ

Risk Factors

• Reliance on Franchisees [medium — operational]: Winmark's success is heavily dependent on the performance and compliance of its franchisees. Any failure by franchisees to adhere to brand standards, operate effectively, or meet financial obligations could negatively impact royalty and fee income, and the overall brand reputation.
• Economic Downturns [medium — market]: The company's business model, which involves financing and leasing, can be sensitive to economic downturns. A significant recession could lead to reduced demand for franchises, lower royalty payments, and increased defaults on financing arrangements.
• Franchise Disclosure Regulations [medium — regulatory]: Winmark operates in a highly regulated industry. Compliance with federal and state franchise disclosure laws (e.g., FTC Franchise Rule) is critical. Failure to provide accurate and timely disclosures can lead to significant legal liabilities and reputational damage.
• Debt Obligations [medium — financial]: The company has a significant line of credit/term loan of $30,000,000 and notes payable of $29,956,500. While interest rates are variable (4.60% to 4.75% on the line of credit), any increase in interest rates or inability to service this debt could impact financial flexibility and profitability.
• Transition from Leasing Business [low — operational]: The company's strategic exit from new leasing customer solicitations, as evidenced by the sharp decline in leasing income from $316,200 to $46,600 in Q3 2025, represents a shift in business focus. While this is a planned exit, the successful transition and management of the remaining portfolio are crucial.

Industry Context

Winmark Corporation operates within the franchise industry, primarily focusing on businesses that offer essential services and products. The industry is characterized by a strong demand for proven business models and brand recognition. Key trends include the increasing adoption of technology to enhance franchisee support and customer engagement, and a growing preference for service-based franchises. Competition comes from other franchisors in similar sectors and independent businesses.

Regulatory Implications

Winmark is subject to stringent franchise disclosure regulations, including the FTC Franchise Rule and state-specific laws. Non-compliance can lead to significant legal penalties, fines, and reputational damage. The company must ensure all franchise agreements and disclosure documents are accurate, complete, and delivered in a timely manner to avoid litigation.

What Investors Should Do

1. Monitor SG&A growth relative to royalty revenue.
2. Evaluate the impact of the phasing out of leasing income.
3. Assess the utilization and cost of the line of credit/term loan.
4. Review share repurchase activity and dividend payouts.

Key Dates

• 2025-09-27: Quarter end for 10-Q filing — Provides the latest financial performance data for Winmark Corporation, including revenue, net income, and balance sheet figures.
• 2025-09-28: Prior year comparable quarter end — Used as a benchmark to assess year-over-year performance changes in revenue, expenses, and profitability.
• 2024-12-28: Prior year end for balance sheet comparison — Establishes the starting point for current assets, liabilities, and equity, highlighting changes in financial position.
• 2021-05: Company decision to exit new leasing customer solicitations — Explains the significant decrease in leasing income reported in the current period and reflects a strategic shift.

Glossary

Royalties

Payments made by a franchisee to a franchisor, typically a percentage of the franchisee's gross sales, in exchange for the right to use the franchisor's brand, trademarks, and business system. (Represents the largest and fastest-growing revenue stream for Winmark, indicating the health and expansion of its franchise network.)

Leasing income

Revenue generated from leasing equipment or assets to customers. This segment is being phased out by Winmark. (Its significant decline reflects a strategic business decision, impacting overall revenue composition but aligning with the company's long-term strategy.)

Selling, general and administrative expenses (SG&A)

Costs incurred by a company in the ordinary course of business, not directly related to the production of goods or services, including marketing, salaries, rent, and administrative overhead. (An increase in SG&A expenses (to $7,046,400 from $5,919,800) needs to be monitored to ensure it aligns with revenue growth and profitability targets.)

Cash and cash equivalents

Highly liquid short-term investments that are readily convertible to known amounts of cash and which are so near their maturity that they present an insignificant risk of changes in value. For Winmark, this includes cash on hand and money market accounts. (The substantial increase to $39,734,800 from $12,189,800 signifies improved liquidity and financial flexibility for the company.)

Retained earnings (accumulated deficit)

The cumulative amount of net income that a company has retained over time, less any dividends paid out. A deficit indicates cumulative losses. (The negative retained earnings (deficit) of ($44,133,900) as of September 27, 2025, suggests that the company has historically distributed more capital than it has earned or has experienced significant prior losses, though current operations are profitable.)

Line of credit/Term loan

A flexible loan that allows a borrower to draw down funds up to a certain limit, repay them, and borrow again. A term loan is a loan from a bank for a specific amount that has a specified repayment schedule. (Winmark has $30,000,000 outstanding under its line of credit/term loan, representing a significant portion of its long-term liabilities.)

Year-Over-Year Comparison

Winmark Corporation demonstrated solid performance compared to the prior year's comparable periods. Total revenue for the three months ended September 27, 2025, increased by 5.2% to $22,632,900, primarily driven by a 7.7% rise in royalties. Net income saw a marginal increase of 0.14% to $11,136,500 for the quarter. However, Selling, General, and Administrative expenses rose by 19%, a faster rate than revenue growth, which warrants attention. The company's liquidity position significantly improved, with cash and cash equivalents surging to $39,734,800 from $12,189,800 at the end of the prior fiscal year.

Filing Documents

• wina-20250927x10q.htm (10-Q) — 1076KB
• wina-20250927xex31d1.htm (EX-31.1) — 14KB
• wina-20250927xex31d2.htm (EX-31.2) — 15KB
• wina-20250927xex32d1.htm (EX-32.1) — 9KB
• wina-20250927xex32d2.htm (EX-32.2) — 9KB
• 0000908315-25-000034.txt ( ) — 4794KB
• wina-20250927.xsd (EX-101.SCH) — 35KB
• wina-20250927_cal.xml (EX-101.CAL) — 51KB
• wina-20250927_def.xml (EX-101.DEF) — 118KB
• wina-20250927_lab.xml (EX-101.LAB) — 326KB
• wina-20250927_pre.xml (EX-101.PRE) — 229KB
• wina-20250927x10q_htm.xml (XML) — 739KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) CONSOLIDATED CONDENSED BALANCE SHEETS September 27, 2025 and December 28, 2024 3 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three Months Ended September 27, 2025 and September 28, 2024 Nine Months Ended September 27, 2025 and September 28, 2024 4 CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) Three Months Ended September 27, 2025 and September 28, 2024 Nine Months Ended September 27, 2025 and September 28, 2024 5 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 27, 2025 and September 28, 2024 6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 18 Item 4.

Controls and Procedures

Controls and Procedures 18 PART II. OTHER INFORMATION 18 Item 1.

Legal Proceedings

Legal Proceedings 18 Item 1A.

Risk Factors

Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Mine Safety Disclosures 19 Item 5. Other Information 19 Item 6. Exhibits 20

SIGNATURES

SIGNATURES 21 2 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

: Financial Statements

ITEM 1: Financial Statements WINMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) September 27, 2025 December 28, 2024 ASSETS Current Assets: Cash and cash equivalents $ 39,734,800 $ 12,189,800 Restricted cash 140,000 140,000 Receivables, less allowance for credit losses of $ 500 and $ 500 1,652,900 1,336,400 Income tax receivable 3,000 96,400 Inventories 283,700 397,600 Prepaid expenses 1,249,900 1,205,400 Total current assets 43,064,300 15,365,600 Property and equipment, net 1,296,600 1,419,400 Operating lease right of use asset 1,856,100 2,108,700 Intangible assets, net 2,374,800 2,640,300 Goodwill 607,500 607,500 Other assets 496,200 491,200 Deferred income taxes 4,051,700 4,211,800 $ 53,747,200 $ 26,844,500 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable $ 1,373,200 $ 1,562,000 Accrued liabilities 4,195,700 1,866,200 Deferred revenue 1,663,200 1,659,700 Total current liabilities 7,232,100 5,087,900 Long-term Liabilities: Line of credit/Term loan 30,000,000 30,000,000 Notes payable, net of unamortized debt issuance costs of $ 43,500 and $ 57,200 29,956,500 29,942,800 Deferred revenue 8,355,600 8,027,600 Operating lease liabilities 2,594,000 3,092,800 Other liabilities 1,950,200 1,739,500 Total long-term liabilities 72,856,300 72,802,700 Shareholders' Equity (Deficit): Common stock, no par value, 10,000,000 shares authorized, 3,561,550 and 3,539,744 shares issued and outstanding 17,792,700 14,790,500 Retained earnings (accumulated deficit) ( 44,133,900 ) ( 65,836,600 ) Total shareholders' equity (deficit) ( 26,341,200 ) ( 51,046,100 ) $ 53,747,200 $ 26,844,500 The accompanying notes are an integral part of these financial statements. 3 Table of Contents WINMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF

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