Wilhelmina(WHLM) - 2021 Q4 - Annual Report

Financial Performance - Total revenues for the year ended December 31, 2021, were $56.813 million, a 36.6% increase from $41.603 million in 2020[79] - Service revenues increased by 36.6% to $56.780 million in 2021, driven by increased bookings as cities reopened[80] - Operating income improved to $2.158 million in 2021, compared to a loss of $3.969 million in 2020, marking a 154.4% increase[79] - Net income for 2021 was $4.518 million, a significant recovery from a net loss of $4.941 million in 2020, representing a 191.4% increase[79] - Operating income increased to $2.2 million with an operating margin of 3.8% for the year ended December 31, 2021, compared to an operating loss of $4.0 million and a negative operating margin of 9.5% in 2020[90] - Net income for the year ended December 31, 2021, was $4.5 million, a significant improvement from a net loss of $4.9 million in 2020, driven by increased operating income and gains from PPP loan forgiveness[96] Cost and Expense Management - Model costs rose by 36.2% to $40.711 million in 2021, reflecting the recovery in demand[79] - Salaries and service costs decreased by 5.4% to $8.644 million in 2021, attributed to previous layoffs and salary reductions[83] - Office and general expenses decreased by 17.6% to $2.973 million in 2021, primarily due to reduced rent and other operational costs[84] - Cybersecurity incident expenses amounted to $0.575 million in 2021, resulting from a fraud incident[87] Tax and Income - The effective tax rate for 2021 was 15.4%, lower than typical years due to non-taxable gains from PPP loan forgiveness and employee retention payroll tax credits[94] - The company had $0.8 million in income tax expense for 2021, down from $0.9 million in 2020, despite a pre-tax loss in 2020 due to a valuation allowance against deferred tax assets[95] - Income before income taxes was $5.3 million for the year ended December 31, 2021, compared to a loss of $4.0 million in 2020, mainly due to operating income and PPP loan forgiveness[93] Cash Flow and Liquidity - Cash balance increased to $10.3 million at December 31, 2021, from $5.6 million at the end of 2020, primarily due to $5.5 million net cash provided by operating activities[97] - The company has sufficient liquidity to meet projected operational expenses and capital expenditure requirements for the next twelve months[99] - The company had a borrowing capacity of $3.0 million under its credit agreement with Amegy Bank as of December 31, 2021[100] Foreign Currency and Other Gains - The company recorded a $2.0 million gain on the forgiveness of PPP loans and a $1.3 million employee retention payroll tax credit in 2021[88] - The company reported a foreign currency loss of $80 thousand in 2021, compared to a gain of $16 thousand in 2020, attributed to currency fluctuations in Great Britain, Europe, and Latin America[92] Goodwill and Impairment Testing - The Company maintains an allowance for doubtful accounts to estimate losses from uncollectible accounts receivable[119] - Impairment testing for goodwill and intangible assets is performed at least annually, with a one-step quantitative test to measure impairment losses[120] - If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized for the excess amount[120] - Management may conduct a qualitative evaluation to assess the likelihood of goodwill impairment based on relevant events and circumstances[121] - Significant judgments and assumptions are involved in identifying macroeconomic conditions and industry considerations that may impact fair value[121]