Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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

The following is a discussion of the interim unaudited consolidated financial condition and results of operations for the Company and its subsidiaries for the three and six months ended June 30, 2025 and 2024. It should be read in conjunction with the financial statements of the Company, the notes thereto and other financial information included elsewhere in this report, and the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain "forward-looking" statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Such forward looking statements relating to the Company and its subsidiaries are based on the beliefs of the Company's management as well as information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions, the interest rate environment, governmental regulation and supervision, seasonality, changes in industry practices, one-time events and other factors described herein and in other filings made by the Company with the SEC. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not undertake any obligation to publicly update these forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements.

OVERVIEW

The primary business of Wilhelmina is fashion model management. These business operations are headquartered in New York City. The Company's predecessor was founded in 1967 by Wilhelmina Cooper, a renowned fashion model, and became one of the oldest, best known and largest fashion model management companies in the world. Since its founding, Wilhelmina has grown to include operations located in Los Angeles, Miami, and London, as well as a network of licensees. Wilhelmina provides traditional, full-service fashion model and talent management services, specializing in the representation and management of models, entertainers, athletes and other talent, to various clients, including retailers, designers, advertising agencies, print and electronic media and catalog companies.

Trends and Opportunities

The Company expects that the combination of Wilhelmina's main operating base in New York City, the industry's capital, with the depth and breadth of its talent pool and client roster and its diversification across various talent management segments, together with its geographical reach, should make Wilhelmina's operations more resilient to industry changes and economic swings than those of many of the smaller firms operating in the industry.

With total annual advertising expenditures on major media (newspapers, magazines, television, cinema, outdoor and Internet) estimated to have exceeded $335 billion in recent years, North America is the world's largest advertising market. For the fashion talent management industry, including Wilhelmina, advertising expenditures on television, Internet, magazines, and outdoor are of particular relevance.

In recent periods, traditional retail clients in the fashion and beauty industry have had increased competition from digital, social, and new media, reducing their budgets for advertising and model talent. Wilhelmina reviews the mix of talent and resources available to best operate in this changing environment.

Although Wilhelmina has a large and diverse client base, it is not immune to global economic conditions. The Company closely monitors economic conditions, client spending, and other industry factors and continually evaluates opportunities to increase its market share and further expand its geographic reach. There can be no assurance as to the effects on Wilhelmina of current or future economic circumstances, client spending patterns, client creditworthiness, and other developments and whether, or to what extent, Wilhelmina's efforts to respond to them will be effective.

Strategy

Management's strategy is to increase value to shareholders through the following initiatives:

	•	increase Wilhelmina's 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 social media influencer representation;
	•	expand the Wilhelmina network through strategic geographic market development; and
	•	promote model search contests and events and partner on media projects (television, film, books, etc.).

The Company makes use of digital technology to effectively connect with clients and talent, utilizing video conferencing and other digital tools to best position our team to identify opportunities to grow the careers of the talent we represent and expand our business. The Company has made significant investments in technology, infrastructure, and personnel, to support our clients and talent.

Key Financial Indicators

In addition to net income, the key financial indicators that the Company reviews to monitor its business are revenues, operating expenses, and cash flows.

The Company analyzes revenue by reviewing the mix of revenues generated by the different "boards," each a specific division of the fashion model management operations which specializes by the type of model it represents, by geographic locations and from significant clients. Within its fashion model management business, Wilhelmina's primary source of service revenue is from model fees and service charges paid by the client for bookings directly negotiated by the Company. The Company also receives commissions paid on bookings by third-party agencies. See "Critical Accounting Policies and Estimates - Revenue Recognition."

Wilhelmina provides professional services. Therefore, salary and service costs represent the largest part of the Company's operating expenses. Salary and service costs are comprised of payroll and related costs and travel, meals and entertainment ("T&E") to deliver the Company's services and to enable new business development activities.

Analysis of Consolidated Statements of Operations and Service Revenues

(in thousands)
		Three Months Ended												Six Months Ended
		June 30				June 30				% Change				June 30				June 30				% Change
		2025				2024				2025 vs 2024				2025				2024				2025 vs 2024
Service revenues			4,544				4,584				(0.9%	)			9,164				8,747				4.8%
License fees and other income			9				7				28.6%				16				15				6.7%
TOTAL REVENUES			4,553				4,591				(0.8%	)			9,180				8,762				4.8%
Salaries and service costs			3,262				3,047				7.1%				6,498				6,013				8.1%
Office and general expenses			945				870				8.6%				1,912				1,705				12.1%
Amortization and depreciation			48				44				9.1%				93				88				5.7%
Corporate overhead			197				233				(15.5%	)			422				486				(13.2%	)
OPERATING INCOME			101				397				(74.6%	)			255				470				(45.7%	)
OPERATING MARGIN			2.2%				8.6%				(74.4%	)			2.8%				5.4%				(48.1%	)
Foreign exchange (income) loss			-				7				(100.0%	)			(2	)			14				(114.3%	)
Interest income			(67	)			(87	)			(23.0%	)			(139	)			(173	)			(19.7%	)
Interest expense			2				3				(33.3%	)			5				6				(16.7%	)
INCOME BEFORE INCOME TAXES			166				474				(65.0%	)			391				623				(37.2%	)
Current income tax expense			(152	)			(4	)			3700.0%				(181	)			(16	)			1031.3%
Deferred tax expense			97				(223	)			(143.5%	)			58				(269	)			(121.6%	)
Effective tax rate			33.1%				47.9%				(30.9%	)			31.5%				45.7%				(31.1%	)
NET INCOME			111				247				(55.1%	)			268				338				(20.7%	)

Supplemental Non-GAAP Information

(in thousands)
		Three Months Ended												Six Months Ended
		June 30				June 30				% Change				June 30				June 30				% Change
		2025				2024				2025 vs 2024				2025				2024				2025 vs 2024
Gross Billings			18,328				16,976				8.0%				36,117				32,799				10.1%
EBITDA			149				434				(65.7%	)			350				544				(35.7%	)
Adjusted EBITDA			149				441				(66.2%	)			348				568				(38.7%	)
Pre Corporate EBITDA			346				674				(48.7%	)			770				1,054				(26.9%	)

See pages 17 to 18 for a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures and for other important information.

Service Revenues

The Company's service revenues fluctuate in response to its clients' willingness to spend on advertising and the Company's ability to have the desired talent available. The 0.9% decrease and 4.8% increase for the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024, were primarily due to increased commissions from core model bookings offset by higher percentage of model costs for the three months ended June 30, 2025.

License Fees and Other Income

License fees and other income include franchise revenues from independently owned model agencies that use the Wilhelmina trademark and various services provided by the Company. License fees increased by 28.6% and 6.7% for the three and six months ended June 30, 2025 and 2024, primarily due to the expansion of an existing licensing agreement, which resulted in higher minimum guarantees, contributing incremental revenue during the period.

Salaries and Service Costs

Salaries and service costs consist of payroll related costs and T&E required to deliver the Company's services to its clients and talents. The 7.1% and 8.1% increase in salaries and service costs during the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024, were primarily due to personnel hires and payroll changes to better align Wilhelmina staffing with the needs of each office and geographical region.

Office and General Expenses

Office and general expenses consist of office and equipment rents, legal expenses, advertising and promotion, insurance expenses, administration and technology cost. The increase in office and general expenses of 8.6% and 12.1% for the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024, was primarily due to increased legal expense, partially offset by a decrease in bad debts expense, apartments and bank fees.

Amortization and Depreciation

Amortization and depreciation expense is incurred with respect to certain assets, including computer hardware, software, office equipment, furniture, and finance leases. Amortization and depreciation expense increased by 9.1% and 5.7% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 primarily due to increased depreciation of assets purchased in 2024. Fixed asset purchases (mostly related to technology and computer equipment) totaled approximately $16 for both the three and six months ended June 30, 2025, compared to $10 thousand and $17 thousand for the three and six months ended June 30, 2024.

Corporate Overhead

Corporate overhead expenses include director and executive officer compensation, legal, audit and professional fees, corporate office rent and travel. Corporate overhead decreased by 15.5% and 13.2% for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024, primarily due to decreased legal costs and stock exchange fees.

Operating Income and Operating Margin

Operating income was $101 thousand and $255 thousand for the three and six months ended June 30, 2025 compared to $397 thousand and $470 thousand in the three and six months ended June 30, 2024. As a result, operating margin decreased to 2.2% and 2.8% for the three and six months ended June 30, 2025, compared to 8.6% and 5.4% for the three and six months ended June 30, 2024, due to the increase in operating expenses and decrease in net revenue.

Foreign Currency Exchange

The Company realized a $0 thousand and $2 thousand foreign currency exchange gain during the three and six months ended June 30, 2025, and loss of $7 thousand and $14 thousand from foreign currency exchange during the three and six months ended June 30, 2024. Foreign currency gain and loss is due to fluctuations in currencies from Great Britain, Europe, and Latin America.

Interest Expense

Interest expense is primarily attributable to interest on finance leases. Interest expense was $2 thousand and $5 thousand for the three and six months ended June 30, 2025 and $3 thousand and $6 thousand for the three and six months ended June 30, 2024.

Income before Income Taxes

Income before income taxes decreased to $166 thousand and $391 thousand for the three and six months ended June 30, 2025, compared to $474 thousand and $623 thousand for the three and six months ended June 30, 2024. The lower pre-tax income in 2025 was primarily due to a decrease in operating income.

Income Taxes

Generally, the Company's combined effective tax rate is high relative to reported net income as a result of amortization expense, foreign taxes, and corporate overhead not being deductible and income being attributable to certain states in which it operates. The Company operates in three states, which have relatively high tax rates: California, New York, and Florida.In addition, foreign taxes in the United Kingdom related to our London office are not deductible from U.S. federal taxes. The Company had income tax expense of $0.1 million for the three and six months ended June 30, 2025, compared to $0.2 million and $0.3 million for the three and six months ended June 30, 2024.

Net Income

The Company had net income of $0.1 million and $0.3 million for the three and six months ended June 30, 2025, compared to net income of $0.2 million and $0.3 million for the three and six months ended June 30, 2024. The decrease in net income was primarily due to the decrease in operating income.

Gross Billings

Gross billings is a non-GAAP financial measure that represents the gross amount billed to customers on behalf of its clients (models and talent) for services performed. Gross billings increased 8.0% and 10.1% for the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024, primarily due to increased core model bookings with increased bookings at the Aperture division. See pages 17 and 18 for more information regarding non-GAAP financial measures.

Liquidity and Capital Resources

The Company's cash balance decreased to $6.7 million at June 30, 2025 from $8.5 million at December 31, 2024. The cash balances decreased as a result of $2.1 million net cash used in operating activities, $1.0 million net cash provided by investing activities, $0.9 million cash used in financing activities, and the $174 thousand effect of exchange rate on cash flow during the six months ended June 31, 2025.

Net cash used in operating activities of $2.1 million was primarily the result of increases in accounts receivable and prepaid expenses and decreases in amounts due to models, partially offset by net income and an increase in accounts payable and accrued liabilities. The $1.0 million cash provided by investing activities was attributable to maturities of short term investments partially offset by the purchases of short term investments. The $0.9 million cash used in financing activities was attributable to the purchase of treasury stock and payments on finance leases.

The Company's primary liquidity needs are for working capital associated with performing services under its client contracts. Generally, the Company incurs significant operating expenses with payment terms shorter than its average collections on billings. Based on budgeted and year-to-date cash flow information, management believes that the Company has sufficient liquidity to meet its projected operational expenses and capital expenditure requirements for the next twelve months and beyond.

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. The Company considers Gross Billings, EBITDA, Adjusted EBITDA and Pre-Corporate EBITDA to be important measures of performance because they are key operating metrics of the Company's business. These metrics are used by management in its planning and budgeting processes, to monitor and evaluate its financial and operating results and provide stockholders and potential investors with a means to evaluate the Company's financial and operating results, and to provide stockholders and potential investors with a means to evaluate the Company's financial and operating results against other companies within the Company's industry.

Gross Billings represents the gross amount billed to customers on behalf of its models and talent for services performed. The Company calculates Gross Billings as total revenue plus model costs, which includes amounts owed to talent, including taxes required to be withheld and remitted directly to taxing authorities, commissions owed to other agencies, and related costs such as those paid for photography. The Company calculates EBITDA as net income plus interest expense, income tax expense, and depreciation and amortization expense. The Company calculates "Adjusted EBITDA" as EBITDA plus foreign exchange gain/loss, share-based payment expense and certain significant non-recurring items that the Company may include from time to time. The Company calculates "Pre-Corporate EBITDA" as Adjusted EBITDA plus corporate overhead expense, which includes director compensation, securities laws compliance costs, audit and professional fees, and other public company costs.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

Gross Billings

The following is a tabular reconciliation of the non-GAAP financial measure Gross Billings to GAAP total revenues, which the Company believes to be the most comparable GAAP measure.

(in thousands)		Three Months Ended								Six Months Ended
		June 30				June 30				June 30				June 30
		2025				2024				2025				2024
Total Revenues			4,553				4,591				9,180				8,762
Model Costs			13,775				12,385				26,937				24,037
Gross Billings			18,328				16,976				36,117				32,799

Model costs include amounts owed to talent, including taxes required to be withheld and remitted directly to taxing authorities, commissions owed to other agencies, and related costs such as those paid for photography.

EBITDA, Adjusted EBITDA, and Pre-Corporate EBITDA

The following is a tabular reconciliation of the non-GAAP financial measures EBITDA, Adjusted EBITDA, and Pre-Corporate EBITDA to GAAP net income, which the Company believes to be the most comparable GAAP measure.

(in thousands)
		Three Months Ended								Six Months Ended
		June 30				June 30				June 30				June 30
		2025				2024				2025				2024
Net income			111				247				268				338
Interest income			(67	)			(87	)			(139	)			(173	)
Interest expense			2				3				5				6
Income tax expense			55				227				123				285
Amortization and depreciation			48				44				93				88
EBITDA			149				434				350				544
Foreign exchange (gain) loss			-				7				(2	)			14
Share based payment expense			-				-				-				10
Adjusted EBITDA			149				441				348				568
Corporate overhead			197				233				422				486
Pre-Corporate EBITDA			346				674				770				1,054

Critical Accounting Policies and Estimates

Basis of Presentation

The consolidated financial statements include the accounts of Wilhelmina and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Revenue Recognition

The Company has adopted the requirements of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services.

Our revenues are derived primarily from fashion model bookings, and representation of social media influencers and actors for commercials, film, and television. Our performance obligations are primarily satisfied at a point in time when the talent has completed the contractual requirements.

A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The performance obligations for most of the Company's core modeling bookings are satisfied on the day of the event, and the "day rate" total fee is agreed in advance when the customer books the model for a particular date. For contracts with multiple performance obligations, we allocate the contract's transaction price to each performance obligation based on the estimated relative standalone selling price.

We report service revenues on a net basis, which represents gross amounts billed net of amounts owed to talent, including taxes required to be withheld and remitted directly to taxing authorities, commissions owed to other agencies, and related costs such as those paid for photography. The Company typically enters into contractual agreements with models under which the Company is obligated to pay talent upon collection of fees from the customer.

Although service revenues are reported on a net basis, accounts receivable are recorded at the amount of gross amounts billed to customers, inclusive of model costs. As a result, both accounts receivable and amounts due to models appear large relative to total revenue.

Amounts billed that have not yet met the applicable revenue recognition criteria are recorded as deferred revenue within accrued expenses and the related talent costs are recorded as contract liability.

Share Based Compensation

Share-based compensation expense is estimated at the grant date based on the award's fair value as calculated by the Black-Scholes option pricing model and is recognized on a straight line basis as an expense over the requisite service period, which is generally the vesting period. The determination of the fair value of share-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the estimated volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates, estimated forfeitures and expected dividends.

Income Taxes

We are subject to income taxes in the United States, the United Kingdom, and numerous local jurisdictions.

Deferred tax assets are recognized for unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unused tax loss carry-forwards are reviewed at each reporting date and a valuation allowance is established if it is doubtful we will generate sufficient future taxable income to utilize the loss carry-forwards.

In determining the amount of current and deferred income tax, we take into account whether additional taxes, interest, or penalties may be due. Although we believe that we have adequately reserved for our income taxes, we can provide no assurance that the final tax outcome will not be materially different. To the extent that the final tax outcome is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are accounted for at net realizable value, do not bear interest and are short-term in nature. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect on accounts receivable. Based on management's assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. The Company generally does not require collateral.

Although service revenues are reported on a basis net of model costs, accounts receivable are recorded at the amount of gross amounts billed to customers inclusive of model costs. As a result, both accounts receivable and amounts due to models appear large relative to total revenue.

Goodwill and Intangible Asset Impairment Testing

The Company performs impairment testing at least annually and more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit's fair value. The Company sometimes utilizes an independent valuation specialist to assist with the determination of fair value. In accordance with ASU 2017-03, effective January 1, 2020, only a one-step quantitative impairment test is performed, whereby a goodwill impairment loss will be measured as the excess of a reporting unit's carrying amount over its fair value. If the carrying amount of the reporting unit's goodwill exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill.

Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill impairment. If impairment is deemed more likely than not, management would perform the goodwill impairment test. Otherwise, the goodwill impairment test is not required. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit's fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance, Company specific events and share price trends, an assessment of whether each relevant factor will impact the impairment test positively or negatively, and the magnitude of any such impact.

The Company evaluates indefinite lived trademark and trade name intangible assets for impairment using the relief from royalty method. This valuation approach requires that the Company make a number of assumptions to estimate fair value, including projections of future revenues, royalty rates, tax rates, discount rates, and other relevant variables. The projections in this model are updated annually and will change over time based on historical performance and changing business conditions. If the carrying value exceeded the estimated fair value, an impairment charge would be recognized for the excess amount.