WINMARK CORP (WINA)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 EPS was $2.60 and revenue was $19.55M; both modestly missed public consensus proxies (EPS $2.65; revenue $20.25M). Sequentially, EPS fell vs Q3 ($3.03) on lower leasing income; YoY EPS declined from $2.64 with total revenue down 2% YoY, predominantly due to the ongoing run-off of the leasing portfolio .
• Core franchise royalties continued to rise to $17.64M in Q4 (vs $17.17M YoY), sustaining strong unit economics despite softer merchandise sales; Q4 operating margin remained robust at ~65% (income from operations $12.77M on $19.55M revenue) .
• Capital returns remain central: quarterly dividend maintained at $0.90 (announced Jan 29, 2025) and a prior special dividend of $7.50 paid Dec 2, 2024, reinforcing shareholder yield and likely serving as a stock reaction catalyst in Q4/Q1 timeframe .
• Store footprint expanded: franchises in operation grew to 1,350 at year-end (from 1,343 in Q3 and 1,336 in Q2), with 79 additional franchises awarded but not yet open, underpinning royalty trajectory into 2025 .

What Went Well and What Went Wrong

What Went Well

• Royalties rose to $17.64M in Q4 (+2.8% YoY), highlighting healthy franchise performance despite leasing headwinds; operating income held strong at $12.77M, evidencing durable margin structure .
• Unit growth continued: 1,350 franchises in operation at year-end, up from 1,343 in Q3 and 1,336 in Q2, supporting recurring royalty scale .
• Management emphasized royalties supported by store count and per-unit performance earlier in the year: “Year-to-date growth in royalties resulted from higher overall store count and, to a lesser extent, increases in per unit performance,” said CEO Brett Heffes .

What Went Wrong

• Q4 revenue ($19.55M) and EPS ($2.60) missed public consensus proxies (revenue $20.25M; EPS $2.65). Leasing income fell sharply YoY to $0.13M (from $0.82M), reflecting the deliberate run-off of the leasing portfolio and pressuring top line/earnings vs expectations .
• Merchandise sales softened to $0.86M in Q4 (vs $1.16M YoY), adding to modest revenue pressure despite royalty growth .
• Management acknowledged earlier that performance in Q1 was only “adequate,” hinting at a cautious tone entering 2024 as leasing runoff persisted and SG&A increased vs Q1 prior year .

Financial Results

Consolidated Performance vs Prior Quarters

Notes: EBIT Margin (%) = Income from Operations / Total Revenue; Net Income Margin (%) = Net Income / Total Revenue, computed from cited figures.

Segment/Revenue Breakdown

KPIs

Q4 2024 vs Estimates (public proxies)

S&P Global consensus was not retrievable due to system limit; public sources are used as proxies for estimates .

Guidance Changes

Earnings Call Themes & Trends

Note: A Q4 2024 earnings call occurred (Feb 21, 2025 at ~7:00AM ET per public listing), but a full transcript was not available in our sources. Themes below reflect company communications across press releases and filings.

Conference call date reference: . No transcript was located via our document tools or public sources.

Management Commentary

• “Year-to-date growth in royalties resulted from higher overall store count and, to a lesser extent, increases in per unit performance,” said Brett D. Heffes, Chair and CEO (Q2 release) .
• “Performance during the first quarter was adequate,” noted Brett D. Heffes, framing a cautious start to the year amid leasing runoff (Q1 release) .
• Company reiterated that 2024 results were “impacted by the Company’s decision in May 2021 to run-off its leasing portfolio,” a structural headwind offset by franchise royalty strength (Year-End release) .

Q&A Highlights

• A Q4 2024 earnings call was indicated for Feb 21, 2025, but no transcript was available in our sources. Accordingly, Q&A details and any intra-quarter guidance clarifications could not be independently verified .

Estimates Context

• S&P Global consensus was not retrievable due to system request limits; as a proxy, public sources show Q4 2024 EPS consensus of $2.65 and revenue consensus of $20.25M. Actuals were $2.60 and $19.55M, respectively, leading to modest misses. Q2 2024 EPS beat ($2.85 vs $2.77 est.); Q3 2024 EPS modestly missed ($3.03 vs $3.16 est.) .
• Directionally, estimate models may trim leasing income assumptions further and modestly raise royalty-driven margins given resilient operating income, yet near-term revenue estimates likely reflect lower merchandise sales volatility and sustained SG&A discipline .

Key Takeaways for Investors

• Q4 2024 posted solid operating profitability but missed public proxies on EPS and revenue as leasing income continued to decline with the portfolio run-off; royalties remain the primary driver .
• Royalty growth and expanding franchise base underpin a high-margin, asset-light model that supported ~65% operating margin in Q4; net margin remained near 49% despite softer merchandise sales .
• Capital return remains robust: quarterly dividend held at $0.90 with a significant $7.50 special dividend in Q4 timing, sustaining shareholder yield and potentially supporting stock sentiment into early 2025 .
• Expect estimate revisions to focus on leasing income reductions and franchise royalty resilience; sequential revenue normalization vs Q3 should be modeled with merchandise sales variability and SG&A control .
• KPI momentum (1,350 stores, 79 awarded not open) provides near-term tailwinds to royalties; investors should monitor store openings and per-unit performance as the key top-line levers .
• Lack of formal financial guidance necessitates disciplined tracking of quarterly press releases and dividend actions; dividend continuity is a clear signaling tool from management .
• Narrative that moves the stock: stable, high-margin royalty engine with dependable capital returns, offset by known leasing runoff and softer merchandise sales—screen for sustained royalty growth and dividend announcements around earnings dates .