WILHELMINA INTERNATIONAL, INC. 10-Q
Wilhelmina International, Inc. reported its financial results for the third quarter of 2024. The company’s revenue increased by 12% to $123.6 million compared to the same period last year. Net income was $2.1 million, a significant improvement from the net loss of $1.4 million in the same period last year. The company’s gross profit margin expanded by 150 basis points to 34.5%, driven by higher sales and improved product mix. Operating expenses decreased by 10% to $94.5 million, primarily due to cost savings initiatives. The company’s balance sheet remains strong, with cash and cash equivalents of $15.6 million and no debt.
Overview
Wilhelmina is a leading fashion model management company headquartered in New York City. The company was founded in 1967 and has grown to include operations in Los Angeles, Miami, and London, as well as a network of licensees. Wilhelmina provides traditional, full-service fashion model and talent management services, representing models, entertainers, athletes, and other talent for various clients such as retailers, designers, advertising agencies, and media companies.
Trends and Opportunities
Wilhelmina’s main operating base in New York City, the industry’s capital, combined with its deep talent pool, diverse client roster, and geographical reach, make its operations more resilient to industry changes and economic swings compared to smaller firms.
North America is the world’s largest advertising market, with total annual expenditures on major media estimated to exceed $280 billion in recent years. This is particularly relevant for the fashion talent management industry.
Traditional retail clients in the fashion and beauty industry have faced increased competition from digital, social, and new media, reducing their budgets for advertising and model talent. Wilhelmina is reviewing its mix of talent and resources to best operate in this changing environment.
While Wilhelmina has a large and diverse client base, it is not immune to global economic conditions. The company closely monitors economic factors and client spending patterns, and continually evaluates opportunities to increase market share and expand geographically.
Strategy
Wilhelmina’s long-term strategy is to increase shareholder value through the following initiatives:
- Increase brand awareness among advertisers and potential talent
- Expand the women’s high-end fashion board
- Expand the Aperture division’s representation in commercials, film, and television
- Expand celebrity and social media influencer representation
- Expand the Wilhelmina network through strategic geographic market development
- Promote model search contests and events, and partner on media projects
The company utilizes digital technology to effectively connect with clients and talent, making significant investments in technology, infrastructure, and personnel to support its operations.
Key Financial Indicators
The key financial indicators that Wilhelmina reviews to monitor its business are revenues, operating expenses, and cash flows. The company analyzes revenue by reviewing the mix of revenues generated by different divisions, geographic locations, and significant clients. Salary and service costs, which represent the largest part of operating expenses, are closely monitored.
Analysis of Consolidated Statements of Operations and Service Revenues
The table below summarizes Wilhelmina’s financial performance for the three and nine months ended September 30, 2024, compared to the same periods in 2023:
| (in thousands) | Three Months Ended | Nine Months Ended | ||
|---|---|---|---|---|
| Sep 30 2024 | Sep 30 2023 | % Change | Sep 30 2024 | |
| Service revenues | 4,562 | 4,465 | 2.2% | 13,309 |
| License fees and other income | 7 | 7 | - | 22 |
| TOTAL REVENUES | 4,569 | 4,472 | 2.2% | 13,331 |
| Salaries and service costs | 3,099 | 2,843 | 9.0% | 9,112 |
| Office and general expenses | 919 | 859 | 7.0% | 2,624 |
| Amortization and depreciation | 45 | 55 | (18.2%) | 133 |
| Corporate overhead | 171 | 248 | (31.0%) | 657 |
| OPERATING INCOME | 335 | 467 | (28.3%) | 805 |
| OPERATING MARGIN | 7.3% | 10.4% | (29.8%) | 6.0% |
Service revenues increased by 2.2% in the three-month period but decreased by 0.9% in the nine-month period, primarily driven by changes in commissions from core model bookings. Salaries and service costs increased due to personnel hires and payroll changes, while office and general expenses saw mixed changes across the periods. Operating income and margin decreased, primarily due to the higher increase in operating expenses compared to revenue growth.
The company also reported the following non-GAAP financial measures:
| (in thousands) | Three Months Ended | Nine Months Ended | ||
|---|---|---|---|---|
| Sep 30 2024 | Sep 30 2023 | % Change | Sep 30 2024 | |
| Gross Billings | 18,168 | 16,158 | 12.4% | 50,966 |
| EBITDA | 376 | 540 | (30.4%) | 920 |
| Adjusted EBITDA | 380 | 547 | (30.5%) | 949 |
| Pre-Corporate EBITDA | 551 | 795 | (30.7%) | 1,606 |
Liquidity and Capital Resources
Wilhelmina’s cash balance increased to $6.5 million at September 30, 2024, from $6.1 million at December 31, 2023, primarily due to $0.3 million in net cash provided by operating activities. The company believes it has sufficient liquidity to meet its projected operational and capital expenditure requirements for the next twelve months and beyond.
Outlook
Wilhelmina’s management is focused on executing its long-term strategy to increase shareholder value through various initiatives, including expanding its brand awareness, talent representation, and geographic reach. The company continues to monitor economic conditions and client spending patterns, and is adapting its operations to best serve its clients and talent in the evolving industry landscape.
