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WI

Wilhelmina International, Inc. (WHLM)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 revenue was $4.47M (+0.7% YoY) and diluted EPS was $0.07; operating margin fell to 10.4% as operating expenses rose, particularly office/legal and staffing costs .
  • Sequentially, non-GAAP profitability improved: EBITDA rose to $0.54M (vs $0.14M in Q2) and Pre-Corporate EBITDA to $0.80M (vs $0.48M in Q2), aided by increased commissions from model bookings .
  • No formal guidance was issued in the Q3 press release or 10-Q; management emphasized resilience of operations, technology investments, and diversification across talent segments .
  • Liquidity remains solid with cash and equivalents of $10.87M; net cash used in operations was $0.69M YTD, reflecting working capital movements (receivables, due to models) .
  • Watch items: elevated office/legal expenses (+17.8% YoY in Q3; +40.9% YTD) and ongoing NY Labor Law litigation; management believes claims lack merit but cannot estimate potential loss .

What Went Well and What Went Wrong

  • What Went Well

    • Service revenues rose 0.7% YoY in Q3, “primarily due to increased commissions from model bookings” .
    • Sequential rebound in non-GAAP profitability: Q3 EBITDA $0.54M and Pre-Corporate EBITDA $0.80M vs Q2 EBITDA $0.14M and Pre-Corporate $0.48M .
    • “Gross billings increased 1.5% for the nine months ended September 30, 2023… due to increased core model and Aperture division bookings” .

  • What Went Wrong

    • Operating margin compressed to 10.4% in Q3 2023 from 15.1% in Q3 2022 as operating expenses increased across salaries/service and office/general .
    • Office and general expenses rose 17.8% YoY in Q3 (40.9% YTD), driven by legal, rent, utilities, and technology costs .
    • Net cash used in operating activities was $0.69M YTD, reflecting higher receivables and lower “due to models” balances and other working capital outflows .

Financial Results

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Revenue ($USD Millions)$4.442 $4.484 $4.493 $4.472
Diluted EPS ($USD)$0.37 $0.03 $0.00 $0.07
Operating Income ($USD Millions)$0.671 $0.229 $0.149 $0.467
Net Income ($USD Millions)$1.887 $0.159 $(0.014) $0.359
EBITDA ($USD Millions, non-GAAP)$0.820 $0.262 $0.144 $0.540
Gross Billings ($USD Millions, non-GAAP)$16.264 $17.587 $17.541 $16.158
MarginQ3 2022Q3 2023
Operating Margin %15.1% 10.4%
  • Note: Comparison vs Wall Street consensus estimates is not provided because S&P Global consensus was unavailable for WHLM for these quarters at time of analysis.

Segment breakdown: Wilhelmina reports consolidated results (model/talent management), without segment-level financial breakout in filings .

KPIs (non-GAAP)

KPI ($USD Millions)Q3 2022Q1 2023Q2 2023Q3 2023
Adjusted EBITDA$0.768 $0.304 $0.230 $0.547
Pre-Corporate EBITDA$1.015 $0.548 $0.476 $0.795

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2023/Q3None provided None provided Maintained (no guidance)
Operating MarginFY2023/Q3None provided None provided Maintained (no guidance)
OpEx (Salaries/Office)FY2023/Q3None provided None provided; noted increases in staffing and office/legal Informational (no formal guidance)
DividendsFY2023/Q3None mentioned None mentioned Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2023)Trend
Advertising/client demandQ1/Q2 press releases noted decreased commissions in core modeling divisions Service revenues +0.7% YoY driven by increased commissions in Q3 Improving sequentially
Cost structure (salaries/office)Q1: Salaries +8.6%, Office +52.3% YoY ; Q2: Salaries +10.5%, Office +53.4% YoY Q3: Salaries +3.3%, Office +17.8% YoY (40.9% YTD) Still elevated, moderation vs Q2
Non-GAAP profitabilityQ1/Q2: EBITDA $0.26M/$0.14M; Pre-Corporate $0.55M/$0.48M Q3: EBITDA $0.54M; Pre-Corporate $0.80M Sequential improvement
Technology/infrastructure investmentEmphasis on tech investments and digital tools in operations Continued use of technology to expand client/talent reach Ongoing execution
Regulatory/legalNY Labor Law class actions ongoing; no accrual; cannot estimate loss Same status; merits discovery continues; no accrual Unchanged risk
LiquidityQ1/Q2: cash ~$10.86M/$10.94M Q3: cash $10.87M; management sees sufficient liquidity for 12+ months Stable

Management Commentary

  • “Operating income was $0.5 million… As a result, operating margin decreased to 10.4%… These decreases were primarily the result of the increase in operating expenses.” .
  • “Service revenues… increased 0.7%… primarily due to increased commissions from model bookings.” .
  • “Gross billings increased 1.5% for the nine months ended September 30, 2023 compared to… 2022, due to increased core model and Aperture division bookings.” .
  • “Management’s long-term strategy is to increase value to shareholders… expand the women’s high end fashion board… expand celebrity and social media influencer representation… [and] make significant investments in technology, infrastructure, and personnel.” .

Q&A Highlights

  • No earnings call transcript was furnished with the Q3 2023 8-K or the Q3 2023 10-Q; filings consisted of the press release and statutory reports/exhibits .
  • As a result, narrative insights were drawn from the 10-Q MD&A and the press release commentary .

Estimates Context

  • Wall Street consensus estimates from S&P Global for WHLM’s Q3 2023 EPS and revenue were unavailable at the time of analysis; therefore, comparisons to consensus and identification of beats/misses cannot be provided. Values referenced for estimates would be retrieved from S&P Global; none are available in this case.

Key Takeaways for Investors

  • Revenue stability with Q3 at $4.47M and service revenues up 0.7% YoY suggests demand normalization, aided by improved commissions from bookings .
  • Sequential non-GAAP improvement (Q3 EBITDA $0.54M vs Q2 $0.14M; Pre-Corporate $0.80M vs $0.48M) is a positive operational inflection despite YoY margin compression .
  • Cost pressure remains the core headwind; office/legal and technology-related expenses elevated (+17.8% YoY in Q3; +40.9% YTD), constraining operating margin to 10.4% .
  • Cash of $10.87M provides cushion; management expects sufficient liquidity for the next 12 months and beyond, reducing near-term balance sheet risk .
  • Litigation (Shanklin/Pressley) persists; while management contests the claims and has not accrued losses, outcome uncertainty remains a medium-term overhang .
  • No formal guidance limits near-term catalyst clarity; monitoring quarterly bookings mix and expense trajectory is key to the trading setup .
  • Tactically, watch for continued sequential EBITDA momentum and any moderation in office/legal spend; strategically, technology and influencer/celebrity expansion could diversify revenue streams over time .