Wilhelmina's Q2 Net Income Plummets 55% Amid Rising Costs

TL;DR

**WHLM's net income is getting crushed by rising costs and legal woes, making it a risky bet despite revenue growth.**

AI Summary

Wilhelmina International, Inc. (WHLM) reported a significant decline in net income for the three and six months ended June 30, 2025, despite an increase in total revenues for the six-month period. Net income for the three months ended June 30, 2025, was $111 thousand, a 55.1% decrease from $247 thousand in the same period of 2024. For the six months ended June 30, 2025, net income was $268 thousand, down 20.8% from $338 thousand in 2024. Total revenues for the six months increased to $9,180 thousand in 2025 from $8,762 thousand in 2024, primarily driven by service revenues. However, operating income for the three months fell sharply to $101 thousand in 2025 from $397 thousand in 2024, a 74.5% drop, and for the six months, it decreased to $255 thousand from $470 thousand, a 45.7% decline. This was largely due to a rise in salaries and service costs, which increased to $6,498 thousand for the six months ended June 30, 2025, from $6,013 thousand in 2024. The company also engaged in a significant share repurchase, buying back 237,500 shares for $890,625 in February 2025, funded by cash on hand. Legal proceedings, specifically the Shanklin and Pressley Litigations, continue to pose an unquantifiable risk, with class certification denied in the Pressley case but granted for certain New York Labor Law claims in the Shanklin case.

Why It Matters

Wilhelmina's declining net income and operating income, despite revenue growth, signal potential margin pressures that could concern investors. The ongoing class-action lawsuits, the Shanklin and Pressley Litigations, represent a significant unquantified legal risk that could impact future profitability and shareholder value. For employees, the New York Labor Law claims in the Shanklin Litigation highlight potential issues regarding worker classification and compensation, which could lead to broader industry scrutiny. In a competitive market, these financial and legal challenges could hinder Wilhelmina's ability to attract and retain top talent, potentially eroding its market position against rivals in the fashion model management industry.

Risk Assessment

Risk Level: high — The company faces high risk due to a 55.1% decrease in net income for the three months ended June 30, 2025, and a 74.5% drop in operating income for the same period. Additionally, unquantifiable legal liabilities from the Shanklin and Pressley Litigations, where the company is 'presently unable to reasonably estimate the amount or range of possible loss,' present a significant financial threat.

Analyst Insight

Investors should exercise extreme caution and consider reducing exposure to WHLM given the sharp decline in profitability and the unquantified, but potentially substantial, legal risks. Await clearer guidance on the financial impact of the ongoing litigations and evidence of improved cost management before considering any new investment.

Financial Highlights

revenue

$9,180 thousand

operating Margin

2.78%

total Assets

$41,362 thousand

total Debt

$16,348 thousand

net Income

$268 thousand

cash Position

$6,711 thousand

revenue Growth

+4.77%

Revenue Breakdown

Key Numbers

• $111 thousand — Net income for Q2 2025 (55.1% decrease from $247 thousand in Q2 2024)
• $268 thousand — Net income for six months ended June 30, 2025 (20.8% decrease from $338 thousand in 2024)
• $9,180 thousand — Total revenues for six months ended June 30, 2025 (Increased from $8,762 thousand in 2024)
• $101 thousand — Operating income for Q2 2025 (74.5% decrease from $397 thousand in Q2 2024)
• $6,498 thousand — Salaries and service costs for six months ended June 30, 2025 (Increased from $6,013 thousand in 2024)
• 237,500 shares — Shares repurchased in February 2025 (Purchased for $890,625)
• $890,625 — Cost of treasury stock purchases (Funded through cash on hand in February 2025)
• 4,919,844 — Shares of common stock outstanding (As of August 13, 2025)
• $6,711 thousand — Cash and cash equivalents (As of June 30, 2025, down from $8,525 thousand at December 31, 2024)

Key Players & Entities

• Wilhelmina International, Inc. (company) — registrant
• Alex Shanklin (person) — former Wilhelmina model, plaintiff in Shanklin Litigation
• Shawn Pressley (person) — former Wilhelmina model, plaintiff in Pressley Litigation
• Roberta Little (person) — sole remaining named plaintiff in Pressley Litigation
• New York State Supreme Court (regulator) — venue for Shanklin and Pressley Litigations
• New York Attorney General (regulator) — notified about Shanklin Litigation
• Wilhelmina Cooper (person) — founder of Wilhelmina
• Board of Directors (company) — authorized stock repurchase program and reverse/forward stock split
• Securities and Exchange Commission (regulator) — regulates filing requirements

FAQ

Risk Factors

• Ongoing Litigations [high — legal]: The Shanklin and Pressley Litigations continue to present unquantifiable risks. While class certification was denied in the Pressley case, it was granted for certain New York Labor Law claims in the Shanklin case, indicating potential for significant future legal costs and settlements.
• Rising Operating Costs [medium — operational]: Salaries and service costs increased by 8.07% for the six months ended June 30, 2025, to $6,498 thousand from $6,013 thousand in 2024. This rise in direct costs is a primary reason for the sharp decline in operating income.
• Decreasing Profitability [high — financial]: Net income for Q2 2025 fell 55.1% to $111 thousand, and for the six months, it decreased 20.8% to $268 thousand. This trend, coupled with a 74.5% drop in Q2 operating income, signals a significant deterioration in profitability.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents decreased to $6,711 thousand as of June 30, 2025, from $8,525 thousand at December 31, 2024. This 21.0% reduction, partly due to the share repurchase, may limit future financial flexibility.
• Share Repurchase Impact [medium — financial]: The company repurchased 237,500 shares for $890,625 in February 2025. While intended to return value, this outflow contributed to the decrease in cash reserves and needs to be weighed against the declining profitability.

Industry Context

Wilhelmina International operates in the talent and modeling industry, a sector highly dependent on brand reputation, talent acquisition, and effective management. The industry is competitive, with success often driven by strong relationships with clients and the ability to adapt to evolving media and marketing trends. Digital platforms and social media have become increasingly important for talent discovery and promotion.

Regulatory Implications

The company faces regulatory scrutiny related to labor laws, as highlighted by the Shanklin litigation concerning New York Labor Law claims. Compliance with employment regulations and potential litigation outcomes are critical for financial stability and operational continuity.

What Investors Should Do

1. Monitor operating expense trends, particularly salaries and service costs.
2. Evaluate the impact and ongoing risks of the Shanklin litigation.
3. Assess the sustainability of revenue growth against rising costs.
4. Observe cash flow and liquidity management.

Key Dates

• 2025-06-30: End of Second Quarter and Six-Month Period — Reporting period for the financial results showing decreased net income and operating income despite revenue growth.
• 2025-02-XX: Share Repurchase — Company bought back 237,500 shares for $890,625, impacting cash position and potentially shareholder value.
• 2025-08-13: Shares Outstanding Date — Reported 4,919,844 shares of common stock outstanding as of this date.

Glossary

Treasury stock

Shares of a company's own stock that have been repurchased by the company. These shares are no longer outstanding and do not carry voting rights. (The company held 1,552,194 shares of treasury stock as of June 30, 2025, reflecting past share repurchases and reducing the number of outstanding shares.)

Right of use assets-operating

Represents the value of a company's right to use an asset over the lease term for operating leases, recognized under ASC 842. (These assets, valued at $2,770 thousand as of June 30, 2025, are part of the company's lease obligations and impact its balance sheet.)

Accumulated deficit

The cumulative net losses of a company since its inception that have not been offset by net income or additional paid-in capital. (The company has an accumulated deficit of $56,394 thousand as of June 30, 2025, indicating historical unprofitability.)

Operating income

A measure of a company's profit after deducting operating expenses from its revenues, before accounting for interest and taxes. (A sharp decline in operating income (down 74.5% in Q2 2025) is a key indicator of the company's reduced operational profitability.)

Year-Over-Year Comparison

Compared to the prior year, Wilhelmina International, Inc. has seen a modest increase in total revenues for the six months ended June 30, 2025, rising by 4.77% to $9,180 thousand from $8,762 thousand. However, this top-line growth has not translated to the bottom line; net income has declined significantly, down 20.8% for the six-month period. Operating income has also seen a substantial decrease, falling 45.7% year-over-year, primarily due to a rise in salaries and service costs. New risks related to ongoing litigation have emerged or intensified, with class certification granted for certain claims in the Shanklin case.

Filing Documents

• wilhelmina_i10q-063025.htm (10-Q) — 509KB
• wilhelmina_ex3101.htm (EX-31.1) — 11KB
• wilhelmina_ex3102.htm (EX-31.2) — 12KB
• wilhelmina_ex3201.htm (EX-32.1) — 4KB
• wilhelmina_ex3202.htm (EX-32.2) — 4KB
• 0001683168-25-006000.txt ( ) — 2467KB
• whlm-20250630.xsd (EX-101.SCH) — 13KB
• whlm-20250630_cal.xml (EX-101.CAL) — 37KB
• whlm-20250630_def.xml (EX-101.DEF) — 54KB
• whlm-20250630_lab.xml (EX-101.LAB) — 203KB
• whlm-20250630_pre.xml (EX-101.PRE) — 148KB
• wilhelmina_i10q-063025_htm.xml (XML) — 183KB

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 20 Item 4.

Controls and Procedures

Controls and Procedures 20 PART II OTHER INFORMATION 21 Item 1.

Legal Proceedings

Legal Proceedings 21 Item 1.A.

Risk Factors

Risk Factors 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3. Defaults Upon Senior Securities 22 Item 4. Mine Safety Disclosures 22 Item 5. Other Information 22 Item 6. Exhibits 22

SIGNATURES

SIGNATURES 23 2 PART I FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) June 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 6,711 $ 8,525 Short term investments 6,070 6,940 Accounts receivable, net of allowance for doubtful accounts of $ 1,659 and $ 1,829 , respectively 9,088 7,388 Prepaid expenses and other current assets 223 167 Total current assets 22,092 23,020 Property and equipment, net of accumulated depreciation of $ 483 and $ 672 , respectively 151 208 Right of use assets-operating 2,770 2,752 Right of use assets-finance 98 116 Trademarks and trade names with indefinite lives 8,467 8,467 Goodwill 7,547 7,547 Other assets 237 299 TOTAL ASSETS $ 41,362 $ 42,409 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 4,932 $ 4,817 Due to models 6,932 7,584 Lease liabilities – operating, current 779 763 Lease liabilities – finance, current 36 35 Total current liabilities 12,679 13,199 Long term liabilities: Deferred income tax, net 1,299 1,357 Lease liabilities – operating, non-current 2,301 2,302 Lease liabilities – finance, non-current 69 88 Total long term liabilities 3,669 3,747 Total liabilities 16,348 16,946 Shareholders' equity: Common stock, $ 0.01 par value, 9,000,000 shares authorized; 6,472,038 shares issued at June 30, 2025 and December 31, 2024 65 65 Treasury stock, 1,552,194 shares at June 30, 2025 and 1,314,694 shares at December 31, 2024, at cost ( 7,262 ) ( 6,371 ) Additional paid-in capital 88,864 88,864 Accumulated deficit ( 56,394 ) ( 56,662 ) Accumulated other comprehensive loss ( 259 ) ( 433 ) Total shareholders' equity 25,014 25,463 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 41,362 $ 42,409 The accompanying notes are an int

Management's

Item 2. 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

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 Liti

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View this 10-Q filing on SEC EDGAR