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WINMARK CORP (WINA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered modest top-line growth with total revenue up 5.2% year over year to $22.63M, while diluted EPS was flat-to-down slightly at $3.02 versus $3.03 in Q3 2024 .
  • Mixed versus estimates: revenue modestly beat consensus ($22.63M vs $22.39M*) but EPS missed ($3.02 vs $3.22*); coverage remains light (one estimate each)*. Bolded: EPS miss and revenue beat. Values retrieved from S&P Global.
  • Operating efficiency remained strong: EBIT margin was ~65.9% (income from operations $14.92M on $22.63M revenue), though net income margin compressed ~250 bps YoY to ~49.2% as SG&A grew ~19% YoY .
  • Capital return is a near-term stock catalyst: the Board approved a regular quarterly dividend of $0.96 and a special dividend of $10.00 per share (~$35.6M total), payable December 1, 2025, funded with cash on hand .

What Went Well and What Went Wrong

What Went Well

  • Royalties grew 7.2% YoY to $20.91M, driving total revenue growth to $22.63M (+5.2% YoY) .
  • Strong operating efficiency: income from operations held essentially flat YoY ($14.92M vs $14.93M), maintaining an ~66% EBIT margin despite higher SG&A .
  • Unit growth intact and accelerating: 1,377 franchises in operation at quarter-end (vs 1,371 in Q2 and 1,363 in Q1), reflecting healthy system expansion . CEO emphasized ongoing “significant investments in operations, technology, marketing and innovation to enhance our leadership position” .

What Went Wrong

  • EPS missed consensus ($3.02 vs $3.22*) despite a modest revenue beat, suggesting higher OpEx burden or non-operating items weighed on earnings*. Values retrieved from S&P Global.
  • Net income margin compressed to ~49.2% from ~51.7% YoY, as SG&A rose to $7.05M (+19% YoY), outpacing revenue growth .
  • Leasing income was minimal ($46.6K) as the run-off remained essentially complete, removing a prior tailwind (Q1 included $2.31M linked to litigation settlement) .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$21.51 $21.92 $20.42 $22.63
Diluted EPS ($USD)$3.03 $2.71 $2.89 $3.02
Net Income ($USD Millions)$11.12 $9.96 $10.60 $11.14
Income from Operations ($USD Millions)$14.93 $13.60 $13.06 $14.92
EBIT Margin % (Income from Ops / Revenue)69.4% 62.0% 64.0% 65.9%
Net Income Margin % (Net Income / Revenue)51.7% 45.4% 51.9% 49.2%

Segment revenue breakdown (YoY):

SegmentQ3 2024 ($USD)Q3 2025 ($USD)YoY Change
Royalties$19,512,500 $20,911,300 +7.2%
Leasing income$316,200 $46,600 -85.3%
Merchandise sales$702,500 $693,600 -1.3%
Franchise fees$451,200 $417,600 -7.4%
Other$528,500 $563,800 +6.7%
Total revenue$21,510,900 $22,632,900 +5.2%

KPIs:

KPIQ4 2024Q1 2025Q2 2025Q3 2025
Franchises in operation1,350 1,363 1,371 1,377
Available territories2,800+ 2,800+ 2,800+ 2,800+
Awarded not open79 79 77 77
Cash & cash equivalents (quarter-end)$12.19M $21.83M $28.77M $39.73M
Net cash from ops (YTD period)n/a$15.08M (Q1) $24.12M (H1) $36.37M (9M)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly cash dividend per shareQ1 2025$0.90 (prior rate) $0.96 Raised
Quarterly cash dividend per shareQ2 2025$0.96 $0.96 Maintained
Quarterly cash dividend per shareQ3 2025$0.96 $0.96 (payable Dec 1, 2025; record Nov 12, 2025) Maintained
Special cash dividend per shareQ3 2025n/a$10.00 (payable Dec 1, 2025; record Nov 12, 2025) Added
Special dividend total amountQ3 2025n/a~$35.6M Added
Funding for special dividendQ3 2025n/aCash on hand Added

No revenue, margin, OpEx, tax rate, or segment guidance was provided in Q3 materials .

Earnings Call Themes & Trends

Note: A Q3 2025 earnings call transcript was not available in our document catalog; we searched for “earnings-call-transcript” and found none [ListDocuments results]. We rely on press releases for thematic insights.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Technology/operations investmentCEO: “significant investments in operations, technology, marketing and innovation to enhance our leadership position” (Q2) ; Run-off of leasing portfolio substantially complete (Q1) No new commentary in the Q3 press release beyond financials and dividends Steady investment narrative; operational focus sustained
Leasing portfolioQ1: Leasing income boosted by $2.31M from litigation settlement; run-off substantially complete Leasing income negligible ($46.6K) Wind-down complete; minimal impact going forward
Franchise network growthQ1: 1,363 units ; Q2: 1,371 Q3: 1,377 units Positive unit growth continues
Capital returnsQ1: dividend raised to $0.96 ; Q2: $0.96 maintained Q3: $0.96 regular + $10 special dividend (~$35.6M) Escalating capital return; special dividend added

Management Commentary

  • “Sales performance for our franchise partners across all brands increased during the quarter... Winmark has and will continue to make significant investments in operations, technology, marketing and innovation to enhance our leadership position in the industry.” — Brett D. Heffes, Chairman & CEO (Q2 press release) .
  • “The run-off of our leasing portfolio announced in May of 2021 is substantially complete.” — Brett D. Heffes (Q1 press release) .

Q&A Highlights

No Q3 2025 earnings call transcript was available in the document catalog; therefore, Q&A details and any clarifications that might have been provided on a call are not accessible via primary source documents this quarter [ListDocuments results for “earnings-call-transcript” returned none].

Estimates Context

MetricConsensus (Q3 2025)Actual (Q3 2025)Surprise
Revenue ($USD)$22.39M*$22.63M Beat
Diluted EPS ($USD)$3.22*$3.02 Miss
# of Estimates (Revenue / EPS)1 / 1*n/aThin coverage

Values retrieved from S&P Global.

Implications: The modest revenue beat amid an EPS miss suggests higher SG&A and modestly lower other income (and slightly reduced interest expense vs prior year) offset operating strength, pointing to potential downward tweaks to near-term EPS estimates, while royalty growth may support revenue expectations .

Key Takeaways for Investors

  • Royalty-driven revenue growth (+5.2% YoY) remains intact; unit expansion is steady (1,377 stores), reinforcing the medium-term compounding profile .
  • EPS miss versus light consensus coverage underscores cost discipline as a focus area; SG&A growth (+19% YoY) weighed on margin expansion .
  • Operating efficiency remains robust: EBIT margin ~66% and income from operations stable YoY despite higher OpEx .
  • Capital return accelerates: $0.96 regular dividend maintained and a $10 special dividend (~$35.6M) payable December 1, 2025, funded with cash on hand — a tangible near-term stock catalyst .
  • Leasing run-off is essentially complete; minimal leasing income going forward removes variability from non-core activities .
  • With thin sell-side coverage (one estimate), narrative shifts in company communications (e.g., cost investments and unit growth) may disproportionately influence price; watch for updates in subsequent filings and any investor communications .
  • Near term: Expect investor focus on cash generation (9M CFO $36.37M) and capital allocation; Medium term: Franchise openings, royalty growth, and marketing/technology investment ROI are key drivers of sustainable EPS growth .

Notes on sources:

  • Q3 2025 results, balance sheet, cash flow and segment details: Form 8-K and Exhibit 99.1 (Third Quarter Results Press Release) .
  • Dividend announcements: Form 8-K and Exhibit 99.2 (Quarterly Cash Dividend and Special Dividend Press Release) .
  • Prior quarters: Q2 2025 Form 8-K and press releases ; Q1 2025 Form 8-K and press releases ; Year-end 2024 for baseline .