Winmark Corp (WINA) Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 28, 2026. Winmark Corporation operates as a franchisor of value-oriented retail concepts, including Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round. As of the period end, the company operated 1,383 franchises. The company has completed the run-off of its equipment leasing business, which concluded as of December 27, 2025.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $20.85 million | $21.92 million |
| Net Income | $9.25 million | $9.96 million |
| Diluted EPS | $2.50 | $2.71 |
| Operating Cash Flow | $11.88 million | $15.08 million |
| Cash & Equivalents | $19.83 million | $21.83 million |
| Total Debt | $60.00 million | $60.00 million |
| Operating Margin | 59.3% | 62.0% |
Debt Structure: The company holds a $30.0 million delayed draw term loan (CIBC) and $30.0 million in Series C notes (Prudential). No revolving loans were outstanding under the line of credit.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased by 4.9% to $20.85 million. This was primarily driven by the complete cessation of leasing income ($2.31 million in Q1 2025 vs. $0 in Q1 2026) following the portfolio run-off.
- Royalty Growth: Despite the leasing exit, Royalty revenue increased 8.4% to $19.26 million, driven by higher franchise retail sales and net store growth (11 new stores opened, 6 closed).
- Expense Increase: Selling, general, and administrative (SG&A) expenses rose 5.8% to $7.87 million, largely due to increased compensation costs.
- Net Income: Net income decreased 7.1% to $9.25 million, reflecting the loss of leasing income and higher SG&A, partially offset by a lower effective tax rate (22.0% vs. 24.2% in 2025).
Outlook, Risks, and Management Commentary
- Franchise Health: Management reported a 100% renewal rate for the 23 franchise agreements up for renewal in Q1 2026.
- New Fee Implementation: The company is implementing a monthly Software Fee for all locations and a North American Ad Fund for Plato's Closet locations. Management notes this introduces a risk factor regarding potential franchisee dissatisfaction or increased operating costs.
- Liquidity: The company maintains $20.0 million in available borrowing capacity under its line of credit. Management believes current cash and operating cash flows are sufficient to fund operations through 2026.
- Dividends: A quarterly cash dividend of $0.96 per share was paid in March 2026.
Investor Verification Checklist
- Leasing Run-off Completion: Verify that no residual liabilities or contingent claims remain from the discontinued leasing segment.
- Franchisee Reaction to New Fees: Monitor franchisee retention rates and new store openings in subsequent quarters to assess the impact of the new Software Fee and Ad Fund.
- Debt Covenants: Confirm continued compliance with debt service coverage and leverage ratios, particularly given the shift to a pure franchising revenue model.
- Stock Repurchase Activity: Note that no shares were repurchased in Q1 2026, though 70,656 shares remain available under the current authorization.