Q3 2021 Plby Group Inc Earnings Call

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Thank you for standing by and welcome to P. L. B Y groups third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the session you will need.

To press Star one on your telephone please be advised that today's conference maybe recorded should you require any further assistance. Please press star zero I would now like to hand, the conference over to managing director at ICR Ashley diesel mode.

Good afternoon, everyone and welcome to <unk> third quarter 2021 earnings conference call.

And actually just managing director at ICR.

Hosting today's call are Ben Cohen, Chief Executive Officer, and Lance Barton Chief Financial Officer.

The information discussed today is qualified in its entirety by form 8-K.

It has been filed today by P. L. D license, Inc, which may be accessed on the SEC's website.

P L D Whitehead sucks site today.

Today's call is also being webcast and a replay will be posted.

I think Scott sight.

Please note that statements made during this call, including financial projections or other statements that are not historical in nature.

May constitute forward looking statements.

Such statements are made on the basis of PLD wise views and assumptions regarding future events and business performance at the time, they're made and we do not undertake any obligation to update these statements.

Forward looking statements are subject to risks, which could cause <unk> actual results to differ from its historical results and forecast, including those risks set forth. In tells me why group's filings with the SEC and you should refer to and carefully consider those for more information.

This cautionary statement applies to all forward looking statements made today during this call do.

Do not place undue reliance on any forward looking statements.

And I will now open the call to ban com.

Please go ahead Ben.

Thank you operator, and good afternoon, everyone I'm delighted to report today on another strong quarter.

I'll start today's call by commending our team continued to deliver even in the face of Covid related operational challenges and for achieving meaningful progress on our strategic growth roadmap.

2021 has been an amazing year. So powerful accompany my remarks. This afternoon, we're going to focus on how all of the great work, we've executed on building our direct to consumer commerce business integrating our strategic acquisitions and releasing our first <unk> T drops serves as the operational foundation and marketing.

I will go or even bigger opportunity to create a cohesive and scalable ecosystem.

Recurring revenue based Playboy membership offerings Lance will then provide greater detail on our financial results and outlook.

I joined Playboy as CEO, because they saw the opportunity to rejuvenate one of the world's greatest brands into a massive growth engine with the right business model transformation.

It was clear that the model is selling magazines and complementary got media business with licensing revenue with a broken model, but with billions of dollars of consumer spend against one of the most globally recognizable and emotionally resonant brands. It was clear that with the right products and services for today's consumer matched with the right.

In house operations, we could sure supercharge our growth.

As we talked about previously we've been following a three part growth action plan, focusing first and foremost on the low hanging fruit part one of our action plan is our work to build and expand our direct to consumer E Commerce business in key categories and territories. Our goal is to capture 100 cents of consumer spend against the brand versus the.

Five to six months, we make on licensing deals I'm immensely proud of the scale. We've achieved here in such a short period of time.

Lance will elaborate on in Q3 alone we grew DDA CW, 139% year over year to $36 million.

Part two has been focusing our licensing partnerships and bigger better longer term deals.

The past several years since I became CEO.

Great strides here, particularly here in China, and India and in the gaming category.

We've also strategically used our licensing business as a marketing tool and brand builder for us in particular or high end designer collaborations have generated huge grandmas or large scale partnerships with Pac sun accretive huge retail reach for the brand.

By executing these two initiatives, we have gone from two years ago being a $78 million annual revenue business with China based licensing revenue contributing 50% of that revenue to today being on track to deliver $280 million annual revenue on a pro forma basis with Washington, 15th.

Some of our revenue coming from China.

And as we've been attacking the low hanging fruit. We've also build building the foundation for longer term growth to that Dan. The third part of our execution roadmap has been focusing on investing in new emerging growth opportunities that deliver the core or long tail revenue. It will allow us to generate significant returns over a three to five years.

Hypervisor.

The most exciting of these new growth initiatives is building the future of Playboy membership.

He is a brand that one cut almost 1 million key holders to swaps nearly 7 million magazine subscribers and of course created a coveted lifestyle the Playboy mansion.

Celebrities and parents alike quietly to participate then.

Our re imagine 21st century, Playboy club will give our fans access into the contemporary Playboy lifestyle will give them opportunities to truly lib, Playboy lifestyle, which stands for freedom fun and sophistication.

<unk> virtual and physical experience with some parties like a global Midsummer Night's Dream Party and the diverse and also in Las Vegas, We will offer things only Playboy kit exclusively to lease with a talent Playboy music and comedy stages, Playboy advisor sex and relationships Aries and of course building upon our strong commerce.

Foundation early and exclusive access to a fashion and product drops and artist collaborations.

With the infrastructure, we put in place to build direct consumer relationships around our Congress products. We are working to expand on these offerings with membership services. We can build much more significant lifetime value for recurring revenues and crucially. The continued expansion of our commerce business simultaneously serves as a powerful tool.

Top of the funnel marketing engine.

Just about two weeks ago, we launched our initial foray into the new Playboy membership with the release of our latest MFP collection, Playboy Rabbitears rabbits ours or three D rebate characters minted on the theory of blockchain.

There are 11953 uniquely designed avatars and each was priced at 190 538 or roughly $900 at the time in honor of our founding deal of my 253.

We sold out rapidly collecting both U S dollars and ethereum as payments and generated over $8 million in upfront.

In addition to our initial sales we participate downstream in every subsequent sale and since launch we have already seen more than $8 million in secondary sales trading volume with the worse rabbitears selling for as much as $50000 apiece.

Rabbits, her shop will unlock VIP status and what we anticipate will be our new Playboy club and access to lifestyle and posted them that that's the only Playboy can deliver in the first few days of this new exclusive membership experience early benefits to rabbits car owners have included special access to and Playboy Party in New York City.

By Pam Anderson, a virtual Art Gallery party and developers a digital renewables drop delicately dedicated community forums, underscored and special discounts on Playboy Dot com, our upcoming roadmap of benefits, which released a dedicated 70000 plus number of strong destroyed server.

Just last week.

Including limited bond rabbits horror themed apparel collaborations upcoming IR, all parties and experiences and special NFC ear drops of course for our brand is iconic and globally relevant as Playboy, we need to ensure that we have ways for our millions of fans around the world to become members. We believe we can do that success.

Through tears of membership and membership based experiences that cater to specific basis. This was worth 74 comes out.

The creative and celebrity community has always been central to what makes Playboy Playboy for nearly 70 years reading Playboy magazine was like stepping into a world of culture and celebrity.

So the biggest artists voices and bolting streams of each decade.

Looking into Playboy was a rite of passage just as we proved yet again in October with a groundbreaking <unk> cover.

From a business perspective, however, while we were played a large role in building the careers of huge talent as the magazine business. The company wasn't able to provide tower with lease to continue building occur with the brand.

Thus the company wasn't able to participate in the upside of the talents ongoing revenue generation, but today the world to creators and talent is a very different place consumers today expect two way interaction with their favorite celebrities creators and influencers need tools to reach and build their fan bases as one of the original.

Platforms for the creative community to freely and openly expressed themselves we are uniquely positioned because of the vote in this space.

<unk> is our new creative digital platform dedicated to creative freedom artistic expression and sex positivity.

It will serve as a home for the world's top creators to interact directly with their fans and expand their communities ecommerce businesses Southern phone will revolutionize the creator economy, just as to Playboy magazine shook up the publishing industry nearly 70 years ago.

<unk> is the one brand that sits at the intersection of sex and culture, and we do so at a massive scale and with mainstream visibility.

Creators will be able to set up their own subscription or membership services directly message with their fans and much more as we expand we plan to offer creative services that only Playboy Kim.

We bring the ability to tap into our merchandise design production and distribution capabilities artist collaborations merchandise collaborations with Playboy and hungry for that.

NSP and blockchain tools and more and a COO.

Course, Feeney center full creative will give talent access to our most coveted assets appearing on the Playboy cover Playboy pictorial, whereas the subject of a Playboy interview.

In the Sixty's Seventy's and Eighty's Ninety's in two thousands Playboy was the place where Odyssey celebrities wait to fully express himself.

And ultimately to get famous.

Central will give them that choice again, and so much more.

The investments we've been making to build our commerce infrastructure are crucial here is we've heard directly from Peters did they want more access to more ways to generate that beautiful themselves outside of content.

By giving our network of talent. These tools, we're able to create a full ecosystem of membership and a flywheel of audience aggregation and cross promotion.

We've had tremendous inbound interest from the creative community and said were fall for both the creative freedoms. It allows them and the unmatched commercial opportunity. It provides them to have access to all our P. L. B Y groups operations.

We are planning to launch in early December and we cannot wait to share more about the immense talent and creative visionaries, we anticipate serving as our founding creators we're not naming names just yet for a variety of commercial reasons, but we can tell you that they come from various creative industries across music art fashion anymore.

And they all share a commitment to artistic expression celebrating culture sex and body positivity and truly serving their fans are anticipated founding team alone represents nearly 300 million social media followers.

Our strategy is to work with the world's top creators and voices to ensure a safe prop firms for them and a great consumer experience for fans.

The acquisition of Dream accelerated the timeline of bringing several fold to market. So that we can quickly capitalize on this immense opportunity.

I'm more excited than ever about the future of P. L. B Y group, we've made enormous progress executing against our roadmap linearly to the big opportunities to capture more consumer spend against the brand by building a direct to consumer commerce business, while simultaneously strengthening our licensing partnerships with the foundation, we built in direct.

The consumer operations the revenue scale, we've achieved we can now meaningfully invest in the future of our recurring revenue membership products that we believe will over time become our fastest growing and biggest revenue contributor with that I will hand, the call over to Lance.

Thanks, Ben third quarter revenue grew 67% year over year to $58 4 million, we achieved exceptional growth in what continues to be a difficult operating environment. As we believe we lost more than $5 million worth of revenue due to COVID-19 related closures and supply chain impact in the third quarter alone.

Despite these headwinds we have continued to execute well on our strategy.

The expansion of our direct to consumer business has proven successful to date and then the third quarter. We grew our direct to consumer revenue of 139% year over year to $36 million.

Our greatest challenge in growing this revenue stream is it related to a lack of consumer appetite for our brand awareness.

Rather scaling our infrastructure to meet the tremendous demand, we see for our own branded products.

Last year, we began the transformation of Playboy into an e-commerce destination to capitalize on the opportunity that we saw given the billions of dollars being spent against the brand through our partners globally.

In the last 12 months, we've been executing against our plan generating more e-commerce revenue on Playboy Dot com in the month of September than in all of 2020 and more revenue in the third quarter than all of 2020 and Q1 combined.

Our early success has led to some key learnings.

First and foremost is at the Playboy brand clearly resonates with a young audience.

Two thirds of revenue on Playboy Dot Com comes from customers under the age of 34, and we consistently see more than half of our revenue now coming from women.

We also see a fair amount of price elasticity with our customers.

Average order value on the site is now consistently above $90, which is roughly 30% higher than where it stood at the beginning of this year and 70% higher compared to the third quarter of 2020.

We also see that customers, who spend over $200 with us on a single order are coming back to the site more frequently than others.

In terms of product offerings, we've been able to leverage our strategic licensing partnerships to provide merchandise to sell directly to our consumers on Playboy dot com and our high end fashion collaborations have allowed us to reach a premium consumer while organically generating earned media when celebrities like Jay Z and Bella.

Deed, where the Playboy logo.

There's more work to be done, but we continue to believe that growing direct to consumer revenue for the Playboy brand as a meaningful long term revenue opportunity.

Especially when combined with the potential network effects that we hope to achieve as we scale the center called platform.

On a per debt, Andy and lovers have all provided us with the needed scale infrastructure and cash flow to execute on the transition of our direct to consumer expansion.

Honeywell had a challenging first few months under our ownership that's half of our retail stores in Australia were closed throughout all of August and September.

Business still managed to contribute $7 $4 million of revenue for the stub period, starting on August nine.

Fortunately the stores begin to reopen in mid October and as of today all of our locations are currently open for business, which has resulted in a corresponding rebound in business performance and we continue to believe that there is a significant amount of long term growth potential for the brand.

We also continue to invest in building a unified back end across all of these businesses, which we anticipate will produce synergies for us over the long term.

On the licensing front, we continue to optimize our strategic partnerships in targeted categories and reach and.

In the third quarter licensing revenue grew 14% year over year to $16 $9 million.

Revenue was bolstered by the ongoing success of our partnership with Pac Sun, along with stronger than expected sell through from high end fashion brands such as the Mary is spotted on JV in social media and fast fashion retailer in Italy, who launched a successful summer swim collection.

We also signed eight new strategic partnership agreements, which we expect to launch next year, including several exciting fashion collaborations that we'll be able to sell directly on Playboy dot com and a partnership in the spirits category launching later this year.

With that said Q3 also saw continued licensing revenue headwinds due to ongoing COVID-19 impacts.

This includes closures of our partner operated live Theater Gaming studios and closure of the London Playboy Club.

Along with delayed product launches in India, and South America, and limitations on our ability to generate new partnerships and Underexploited international markets due to travel restrictions.

Going forward, we will continue to develop the strategic partnerships in categories that are capital intensive and lower margin or in regions that require local expertise.

More importantly, we think we can leverage these partnerships is a capital efficient way for us to further expand the Playboy brand and lifestyle in categories, such as fashion hospitality gaming and spirits.

In terms of financial outlook, we are entering the fourth quarter and we'll exit this year with significantly more scale and growth opportunities than we had just 12 months ago.

Our revenue target for this year was to exceed $200 million, which we believe we will clearly exceed even before factoring in the $25 million to $30 million of revenue contribution we expect from Honeybear debt from August 10th onward.

Tober was a big month for us as Playboy Dot com became a destination for Halloween shopping generating more revenue in three weeks than we generated in the first four months of this year alone.

Andy was on track for a record breaking month until we ran into fulfillment challenges that caused us to end, our Halloween sales a week earlier than expected.

On our last earnings call I said that by 2025, we expect to reach $600 million of annual revenue, which was doubling the outlook. We gave in February when we first went public.

This long term outlook represented revenue from our licensing and direct to consumer business and didn't include any revenue for these upcoming initiatives that we've discussed today touches centerfold and membership.

I'm not going to change that long term outlook today, given COVID-19 and supply chain uncertainties, but what I can say is that we're thrilled with the continued growth that we've seen in our direct to consumer business and the demand for our brand from both consumers and our partners alike.

I'm also not giving guidance today for center folder membership as we've not fully launched these initiatives.

What I can say is that we if we are successful in working with our creators to build a sizable ecosystem.

Long term recurring revenue opportunity on centerfold alone could be larger than our consumer products business not to mention the potential of membership.

There are a few proof points, we're sharing that lead us to believe there is tremendous upside potential here.

One of them is that this year alone we've already generated around $10 million in FTE related revenue, which includes the rabbits hard launch that Ben discussed and then the secondary revenue along with a million dollars that we generated back in the second quarter in under 24 hours from our initial NFC drop.

And on center fold, we're hoping to launch with a group of creators that already generate hundreds of millions of dollars in GNP and the creator economy.

If we're able to execute in these new initiatives materialize like we believe they can we would expect our long term EBITDA margin profile would also increase given the potential size of these opportunities relative to the total and the high margin nature of digital revenue.

I'll close by echoing Vince sentiment that this is an incredibly exciting time for our company with a myriad of opportunities in front of us and we will continue to prioritize and allocate resources appropriately to build upon each successive win.

With that I'll have the operator open the line for questions.

As a reminder to ask a question. Please press star one on your Touchtone telephone.

To withdraw your question press the pound key again Thats star one on your Touchtone telephone to ask a question. We ask that you limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Our first question comes from the line of Jim Duffy of Stifel. Your line is open.

Thank you good afternoon, guys. Thank you for taking my questions.

So just to start it's been a busy year for the management team. The company has added a number of foundational pieces to the puzzle I'm curious Ben or the platform components now in place.

Or are there other pieces of the platform that you are still looking to add.

Two.

Capitalize on the opportunities ahead of you.

Jim Thanks for the question.

In general the platform is in place and we think what we have assembled to date.

It's truly a competitive differentiator moving forward as we think about membership and southern fold. What we can offer the creative community is something that no. One else can offer and I think that's referenced by the founding craters that we have signed up to launch with that represent in excess of 300 million social.

Media followers.

We believe we are good capital allocators and to the extent there are tuck in things that makes sense of course will be opportunistic for the shareholders, but I would say right. Now we have every piece in place that we need to execute on their strategy moving forward.

Excellent that's great to hear and Lance I, just wanted to ask a little more detail on components of the business and performance during the third quarter.

Can you just speak I know you gave seem.

Seem to be pretty impressive figures for the first three weeks of October but can you talk to Playboy Dot com.

During the September quarter performance of lovers in handy.

And trends that you saw for lovers in the N D leading up to the important holiday.

The winter selling season. Thanks.

Sure I think I highlighted some of that in the remarks, so I'll give a little bit of details around that.

As I mentioned in October.

<unk> itself was really having a record setting October Halloween season.

And we ended up having to cut the order short and late October just because of fulfillment labor challenges supply chain challenges all of those things. So we would have done a lot better in October than we actually did but it was still a very impressive month for us. So that business continues to do extremely well a lot of the work that we're doing.

In there as well as with lovers, it's kind of integrated this backend across Playboy dotcom, Andy and lovers and obviously soon.

<unk> work on on Honeybear debt around all of that.

Playboy Dot Com I gave some some stats on that I mean really the growth. There has just been really exciting for us we brought in.

Someone to run that business for US earlier, this year, who has experience scaling businesses.

From effectively zero to one hundreds of millions of dollars and we see a big opportunity here as well.

Generating more revenue I forget what I said in the in the month of October that I think we did in the first four months of this year and then the third quarter I think was more than all of last year and earlier this year combined so.

Great growth trajectory I think what it speaks to on all of this and I've said this to folks before which is.

The demand is there for for our products and for our brand, we see that time and again.

<unk> bye.

Out of the money, we see being spent with our strategic partners globally.

And that was part of the whole reason for this business transformation that we're undergoing.

That continues to translate when we're selling product direct on on Playboy Dot com. So it's not an awareness or a demand issue, it's really scaling our infrastructure our team getting the supply chain right. Obviously at the time of Covid.

There's a lot of products that we're intending to stock at certain times that they don't end up arriving on time.

So we're still managing all of this growth in what is a really challenging time I think for most direct to consumer retail companies, but we're very pleased with the results.

And we think there's a long runway here to continue.

Yeah, Jim the only thing I'll add to is when we launched <unk>, which can be so great is in essence, we have around social media network at the end of the day as well and so when you start to think about the flywheel that we've created and then the recurring revenue nature of what we're launching with the rabbits bars.

And then southern fold.

This in the future can really supercharge all facets of the business.

No doubt one more quick one Ben if I may with the rabbit tourists launched do you have a view as to the geographic appetite for that.

Hum uptake of the rebate towards a global phenomenon or was it more concentrated in North America.

So I don't have the specifics on that what I can tell you because I'm active in our discord community talking to a rabbits are holders is that I'm talking to people in Australia, and China and a whole host of other places. So I think it's really interesting I think what the team did here that I believe we were the first to do it on a.

On a launch like this is we actually created or set aside almost 3000 rabbitears for credit card or Fiat transactions and I think what this brand has that unique ability to do is actually to bring in mainstream.

Investors or people that have not participated in the RFP space before.

Into that community and when I look at the number of first time buyers based on People's responses and discord I think thats truly exciting for US moving forward and then as we continue into 2022 to expand our <unk> T and blockchain efforts with the creators that we're gonna be working with on center fold couple.

With that 10 million piece archived that we have that becomes truly exciting moving forward.

Excellent congratulations on the success of the <unk> launch.

Thanks, Jim.

Thank you. Our next question comes from George Kelly of Roth Capital Partners. Your line is open.

Hi, everybody thanks for taking my questions.

So maybe to start just with kind of a 10000 foot view question.

If I'm thinking through.

Next year is 2022 financials.

And I'm not looking for any kind of specific.

<unk>, just thinking more broadly than that but.

A lot of these new initiatives that you're working on like center fooled and SNF T. Blockchain related these membership programs all of that kind of steps. If we lumped. It all together would you anticipate that being a really significant portion of our revenue as soon as 2022 I'm just trying to think broadly like how should I think about these things ramping.

Hey, George Thanks for the question so.

It's hard to say because none of this is really launched right. So far we've done.

Effectively three NSP launches right, we hit our first one in the second quarter, which we sold out in under 24 hours and generated $1 million of revenue, which we thought was.

Extremely successful for our first attempt.

We sold an ft of an original piece of content a piece of archived content.

In digital format for $60000 in the third quarter, which we thought was a.

Outcome for for something that was just a regular photographed that we put in digital format.

Obviously, when we launched this rebate to our collection with with much more success than we would have initially imagined right generating over $8 million of revenue and reaching.

All sorts of consumers that have historically not purchased in ftes.

Those are all things that if you had asked me back in March.

What we're expecting here I couldnt have given you a number.

And $10 million isn't isn't a huge number but it's a great start.

When you fast forward to next year and look at the potential of.

These platforms.

You can get to some pretty big pretty heady numbers, but it's really going to depend on how quickly we can scale not only our creator base, but also the user base that theyre, bringing over so we will have more proof points of that.

Few months after we launched it and so I'm hopeful on the next call. We've at least got a little bit more data points to go off of it.

Would be pure speculation for me to come on here and tell you what I think that's going to drive next year. So.

It's kind of hard, but we'll continue to work with you to be as transparent as we can once we see data points.

George I'll, just add I think the potential is there right. So if you look at our founding craters that we'll be announcing right around launch.

Lance said they represent hundreds of millions of dollars of <unk> already in the creative greater economy.

And then the potential to expand that even more its going to come down to conversion rates.

A whole host of other things, but what's so interesting about the rabbits ours as our first entry back into membership and then as we talked about in the prepared remarks, expanding that with tears in membership moving forward there.

Our comps out there. So you can look at board for Dave Yacht club and others as to what they've done not saying that we will do any of that or not do it but the potential to use blockchain and his team for a much larger membership to reach the millions of fans and consumers we have around the world.

It is interesting and then when you look at that type of that revenue.

We're talking about recurring revenue versus transactional revenue and throughout my private equity career I love businesses that we're focused on recurring revenues and I think that this brand has a history as we've talked about with membership historically and we can do this in a way for the 20 <unk> century.

And that diverse coupled with physical experiences and truly deliver something that no one else can deliver.

Okay. Okay. Thank you and then last question for me Wonder.

I'm wondering if you could talk about honey brew debt and and what you've seen since since Australia has started reopening and then additionally, what is the plan for for new stores, particularly in the U S. Next year. Thank you.

Sure I'll talk about the reopening.

Yeah, I mean, as you would imagine you're if you've got half of your stores closed in Australia that produces quite.

Quite a headwind on revenue, but as those stores have reopened days they've been performing really in terms of what we would have expected have they been opened this entire time. So it's not some huge snapback in demand, but the business has certainly rebounded and thats performing along the lines of what we would've expected when we bought this business.

Which we got.

I had a lot of growth potential what we've seen here in the U S is also consistent with what we had expected when we bought it which was a lot of room for upside on on growth on the E. Com business and you know are our biggest most successful stores actually happened to be in the U S as well.

So we are actively scouting for ways to expand our footprint not only here in the U S. But also.

Also abroad in Western Europe, and we also recently launched.

Com efforts more broadly we used to only be in the U K, where we're now throughout western Europe, and expanding our footprint there as well so it's quite a symbiotic relationship when we open new stores, we see a corresponding increase in an E. Com revenue, they really active kind of very profitable billboards for the business.

And we think it is an important part of the plan.

To open stores and continue to drive E comm growth. So we're in the process right now of evaluating and figuring out kind of what the right strategy is going forward there how many stores, we we intend to open.

But we are actively looking both here and in Europe.

Okay. Thanks, everybody.

Thank you. Our next question comes from Daniel Adam of Loop capital markets. Please go ahead.

Hi, Thanks for taking the questions just two for me.

First on the membership initiatives can you provide some color around how many members do you think you can ultimately scale too.

And then on pricing.

You do plan to accept both dollars and crypto and and how price sensitive do you have any indication as to how price sensitive you target membership base really is.

And then the follow up question is on the NFC Rabbitears My back of the envelope math got me to a little over $9 million of revenue from the launch then I think you mentioned, rather turn revenue contribution that at $8 million.

So is there anything that would explain that delta.

And I guess related to that are you holding any theory on your balance sheet or to immediately convert crypto ourselves to dollars. Thanks guys.

Thanks, Dan I'm going to start with your last question first and then I'll, let Pat answer the first part so your math is not wrong, but in terms of the way we will recognize the revenue well recognize that net of any fees to our partners that we're paying out. So that's why we said it was over eight not the nine that you had indicated there.

In terms of holding ether crypto on the balance sheet. So obviously, we we generated both east and USD two the Fiat transaction, we continue to hold the east on our balance sheet.

We are in this for the long run this wasn't just a one and done type thing we're going to continue.

Executing and operating in this space and therefore, we think it makes sense to hold eat what we're in the process of determining is what is our investment philosophy, how do we incorporate eat into that.

Obviously right now when you think about it as a percent of our total cash or liquid assets a day, a very small percentage, obviously sub sub 10%.

Which feels like the right amount right now, but you know as the opportunity grows and as we scale well, we'll figure out more what the right thing to do is here.

Go ahead, yeah I appreciate it so our membership look I think the sky.

Are the ceiling is really unlimited here I think that this is a company that today drives over $3 billion of consumer spend.

This is a company that has the potential to have millions of people as Playboy members.

And we can deliver really unique benefits for those numbers as far as scalability. Because this is not going to be physical location constrained, even though we do plan on doing in person events.

From a membership perspective in the Nether versus a Playboy mansion in the med averse that gives us unlimited potential.

A global basis, and then when you coupled out with Senator fold and how this flywheel all works together.

<unk> does not only an unbelievably lucrative financial opportunity for the company. It also provides an ongoing relationship with the talent that we have worked with for 70 plus years.

We also have access now to all of those subscribers on the central platform that will benefit not only the Playboy membership.

But also our commerce efforts as well and so all of this sort of comes together in this cohesive ecosystem or flywheel.

And I'm I'm really excited by the potential for what we can deliver are moving forward on a recurring revenue basis.

Okay that all makes some sense very helpful guys. Thanks.

Thank you. Our next question comes from Austin motto of Canaccord. Your question. Please.

Hi, Thanks, I have a question on gross margin.

I see that's going up and I know you know mix can move that around but when you look at gross margin on a sort of like for like basis is there anything that that helped that out in Q3.

For licensing or DTC.

Sure on the direct to consumer side, it's certainly going to be helped by the addition of Honey Burnett.

One of the reasons, we were so drawn to hybrid at was the fact that they're producing and selling their own private product and dissolve 100% hummingbird, which produces a much higher gross margins than we see on the Andy or on Playboy, because playboy selling a mix of our own and other.

Margin. So that's probably what you were seeing in the third quarter and look as we continue to scale on the direct to consumer side, we want to leverage those learnings from honeybear debt and apply that to the rest of our business as a means to drive incremental gross margin. There. So we do think that there is room to drive that incremental.

A higher overtime.

Okay and.

On center fold and I'm wondering how you view the creator platform usage.

Changing over time, I mean, do you expect creators to use one platform exclusively and is that built into your early agreements, whereas this sort of more like ride sharing.

Or will have Uber and lyft and a bunch of other apps on their phones alternating between them, we're happy with the demand is.

Yes, so I think that will depend on the creator what I can tell you is that people. The craters reception to two centerfold has been overwhelmingly positive we've been working with them for a while.

What features they want and we think we have a true competitive advantage given our commerce and if to your blockchain capabilities.

A lot of our founding creators will be coming to us exclusively.

And I think Playboy also represents as a brand something that is very different.

And what's out there in the rest of the universe and so we've developed our content guidelines one that worked for our brand, but two in conjunction with our creators.

And I think we have a 70 years of working with the best creators and breaking some of the best creators and we finally have a tool now when you think of the ecosystem to have them continue to make money.

Long term working with us and so a great example is someone can be on center fold.

They can also be performing.

At night or they could be coming to one of our IRL events.

In person right and the whole entire ecosystem works the other day it might be a former playmate that we will then be dropping.

There are former content that we shot with them as and Ftes on our platform.

And so the whole ecosystem over time, if we execute on it.

Has it has a chance to truly transform the company moving forward and if you look at the assets and why do we buy 100 per guided and why are we acquired some of the skill sets. It was all it was all to put this.

He says together to be able to deliver something that's truly unique moving forward.

Got it that's really helpful and one Super quick follow up for these early center full launch partners what kinds of creators aren't there.

Hum.

They are huge music stars to former Playmate two adult stars.

Two rguest to other influencers actors celebrities.

Really.

We've really been overwhelmed by the response from the creative community and also by the.

The diversity of the creators that we've brought in.

And I think it can truly be something that's unique and also something that that fosters.

The development of the Playboy club back to the day, when Playboy had Playboy after dark the TV show and you had huge celebrities and musicians.

All of a sudden you're showing up and playing the Playboy club are playing on Playboy after dark which was the TV show and so its just cohesive ecosystem that we're looking to build and so you'll see the Playboy club sort of sit on top of send their fault et cetera folds by itself can act as a huge top of the funnel.

For everything else that we're doing as a company.

Great. Thanks very much.

Thank you. Our next question comes from Alex Fuhrman of Craig Hallum Capital. Your line is open.

Great. Thanks, very much for taking my question.

As you think about the holiday season upcoming do you feel like you're in a pretty good in stock position for holiday season inventory and then right around the corner is Valentine's day, which is obviously a big big holiday for a lot of your brands as well do you have visibility at this point into.

How much inventory you think youll have coming to sell four for the key Valentine's day holiday as well.

Yeah. Thanks, Alex.

The team's working really hard.

Are you there.

The problem with inventory as the timing of it. So we have we have inventory we start stockpiling early for Valentine's day.

But you do look at it it's one supply chain issues and to labor issues and so we feel good right now.

Baked that in I'll tell you personally it's frustrating because we as a team want to achieve excellence and we've had a really good year so far.

But we've also left money on the table, we can directly pinpoint that and that that as a CEO is extremely frustrating.

But I feel like we're in a good position for Valentine's day across our businesses. We're in a good position for the holidays.

And we'll wait and see our issue historically throughout this year has not been a demand issue in that that that would be something that would scare me if the demand wasn't there.

Sometimes we've had is the demand is in excess of our supply.

And so long winded way of saying right now we feel good about it but again.

Never know what could happen in the future from a supply chain.

Yes, just to add that as helpful.

Just to add to that we've got plenty of inventory, sometimes the challenge that we see is that we have plenty of inventory, but it may not always be plenty at the right inventory and that's part of the supply chain challenges right that the stuff, that's selling well, it's tougher to get that back in stock.

So that has been kind of the challenge I think that remains somewhat of a challenge. So we feel good about our inventory levels that are on hand, but it's more a question of making sure that we've got the right inventory at the right time for our customers. So it's really around a question on the assortment mix.

Yes.

What we've done is we've tried to get ahead of it and we've tried to bring stuff in earlier than we normally would would bring stuff in.

But look I hope at some point in the future of the supply chain with Covid will start to normalize.

Great that's really helpful. Thank you.

And as there are no further questions in queue that does conclude today's conference call. Thank you for participating you may now disconnect.

Yes.

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Thank you for standing by and welcome to the T. L. B Y groups third quarter 2021 to earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised.

Today's conference maybe recorded should you require any further assistance. Please press star Zero I would now like to hand, the conference over to managing director at ICR Ashley.

Good.

Good afternoon, everyone and welcome to kill the likelihood third quarter 2021 earnings conference call.

And actually just smell managing director at ICR.

Hosting today's call are <unk>, Chief Executive Officer, and Lance Barton Chief Financial Officer.

The information discussed today is qualified in its entirety by form 8-K.

It has been filed today by P. L. B Y Group, Inc, which may be accessed on the SEC's website and P. L. D Whitehead sucks site today.

Today's call is also being webcast and a replay will be posted to PLD why group's website.

Please note that statements made during this call, including financial projections or other statements that are not historical in nature.

They constitute forward looking statements.

Such statements are made on the basis of PLD wise views and assumptions regarding future events and business performance at the time, they're made and we do not undertake any obligation to update these statements.

Forward looking statements are subject to risks, which could cause <unk> actual results to differ from its historical results and forecast, including those risks set forth and tells you why group's filings with the SEC and you should refer to and carefully consider those for more information.

This cautionary statement applies to all forward looking statements need today during this call.

Do not place undue reliance on any forward looking statements.

And I will now open the call to ban com.

Please go ahead Ben.

Thank you operator, and good afternoon, everyone I'm delighted to report today on another strong quarter I want to start today's call by commending our team continued to deliver even in the face of Covid related operational challenges.

We're achieving meaningful progress on our strategic growth roadmap.

2021 has been an amazing year, so powerful accompany my remarks. This afternoon, we're going to focus on how all of the great work, we've executed on building our direct to consumer E Commerce business integrating our strategic acquisitions and releasing our first <unk> T drops serves as the operational foundation and marketing.

Flywheel for even bigger opportunity to create a cohesive and scalable ecosystem of recurring revenue based Playboy membership offerings. Lance will then provide greater detail on our financial results and outlook.

I joined Playboy as CEO, because they saw the opportunity to rejuvenate one of the world's greatest brands into a massive growth engine with the right business model transformation.

It was clear that the model is selling magazines and complementing that media business with licensing revenue was a broken model, but with billions of dollars of consumer spend against one of the most globally recognizable.

Mostly resident bans.

It's clear that with the right products and services for today's consumer matched with the right in house operations, we could sure supercharge our growth.

As we talked about previously we've been following a three part growth action plan, focusing first and foremost on the low hanging fruit part one of our action plan is our work to build and expand our direct to consumer E Commerce business in key categories and territories. Our goal is to capture 100 sense of consumer spend against the brand versus.

Five to six times, we make on licensing deals I'm immensely proud of the scale. We've achieved here in such a short period of time.

Lance will elaborate on in Q3 alone. We grew you can see that would be 139% year over year to $36 million.

Part two has been focusing our licensing partnerships on bigger better longer term deals.

In the past several years since I became CEO.

Great strides here, particularly here in China, and India and in the gaming category. We've also strategically use our licensing business as a marketing tool and brand builder for us in particular, our high end designer collaborations having generated huge grandmas or large scale partnerships with Pac sun accretive huge retail.

For the brand.

Executing these two initiatives, we have gone from two years ago being a $78 million annual revenue business with China based licensing revenue contributed 50% of that revenue to today being on track to deliver $280 million annual revenue on a pro forma basis with less than 15% of our.

Revenue coming from China.

We've been attacking the low hanging fruit. We've also build building the foundation for longer term growth.

Then the third part of our execution roadmap has been focusing on investing in new emerging growth opportunities there, whether it be core or long tail revenue and allow us to generate significant returns over a three to five year time horizon.

The most exciting of these new growth initiatives is building the future of Playboy membership.

Playboy is a brand that one cut almost 1 million key holders to its clubs nearly 7 million magazine subscribers.

<unk> created a covenant lifestyle at the Playboy mansion that celebrities and parents alike clamor to participate at all.

Our re imagine 21st century, Playboy club will give our fans access into the contemporary Playboy lifestyle will give them opportunities to truly live at Playboy lifestyle, which stands for freedom fun and sophistication.

I was doing virtual and physical experience system parties like a global Midsummer Night's Dream Party in a diverse and also in Las Vegas, We will offer things only Playboy can exclusively to increase with a talent Playboy music and comedy stages, Playboy advisor sex and relationships Aries and of course building upon the strong commerce.

Foundation early and exclusive access to our fashion and product drops and artist collaborations.

With the infrastructure, we put in place to build direct consumer relationships around our Congress products. We are working to expand on these offerings with membership services. We can build much more significant lifetime value through recurring revenues and crucially. The continued expansion of our commerce business simultaneously seriously as they power.

Full top of the funnel marketing engine.

Just about two weeks ago, we launched our initial foray into the new Playboy membership with the release of our latest NFC collection, Playboy rabbits ours rabbits ours, our three D rebate characters minted on the ability of blockchain.

There are 11953 uniquely designed avatars in each was priced at 195, three eat well roughly $900 at the time in honor of our founding year of $19 53.

We sold out rapidly collecting both U S dollars in theory as payments and generated over $8 million in upfront.

In addition to our initial sales we participate downstream in every subsequent sale and since launch we've already seen more than $8 million in secondary sales trading volume with the worse rabbits cars selling for as much as $50000 apiece.

Rabbits her earlier schuff will unlock VIP status and what we anticipate will be our new Playboy club and access to a lifestyle and posted benefits that only playboy to deliver in the first few days of this new exclusive membership experience early benefits to rabbits car owners have included special access to and Playboy Party in New York City posted.

By Pam Anderson, a virtual Art Gallery party in another burst digital Wearables dropped directly dedicated community forums underscored and special discounts on Playboy Dot com our upcoming roadmap has done this release or dedicated 70000, plus number of strong discord server.

Just last week.

Including limited bond rabbits horror themed apparel collaborations upcoming IR, all parties and experiences and special AFP ear drops of course for our brand is iconic and globally relevant as Playboy.

Need to ensure that we have ways for our millions of fans around the world to become members. We believe we can do that successfully through tears of membership and membership based experiences that cater to specific basis.

This is where <unk> comes out.

Creative and celebrity community has always been central to what makes Playboy Playboy for nearly 70 years, leading the Playboy magazine was like stepping into a world of culture and celebrity and for the biggest artists voices in all phases of each decade.

It into Playboy was a rite of passage just as we proved yet again in October with our groundbreaking Brooklyn rock cover.

From a business perspective, however, while we were played a large role in building the careers of huge talent as the magazine business. The company wasn't able to provide tower with ways to continue building their careers with the brand.

The company wasn't able to participate in the upside of the talents ongoing revenue generation, but today the worldly creators and talent is a very different place consumers today expect two way interaction with their favorite celebrities creators and influencers need tools to reach and build their fan basis is one of the original.

Platforms for the creative community to freely and openly expressed themselves. We are uniquely positioned to deliver in this space centerfold as our new creative digital platform dedicated to creative freedom artistic expression and sex positivity. It will serve as a home for the world's top creators to interact directly with their fans.

And expand their communities and commerce businesses Southern phone will revolutionize the creator economy, just as the Playboy magazine shook up the publishing industry nearly 70 years ago. Playboy is the one brand that sits at the intersection of sex and culture, and we do so at a massive scale and at <unk>.

Dream visibility.

<unk> will be able to set up their own subscription or membership services directly message with their fans and much more as we expand we plan to offer creative services that only Playboy Kim including the ability to tap into our merchandise design production and distribution capabilities artist collaborations.

Merchandise collaborations with Playboy and hunting for that NSP, and blockchain tools and more and of course.

Senator full crater will give talent access to our most coveted assets appearing on the Playboy cover Playboy pictorial, whereas the subject of a Playboy interview.

In the Sixty's Seventy's Eighty's Ninety's in two thousands Playboy was the place where artists with celebrities wait to fully express themselves.

Ultimately to get famous.

Southern power will give them that chance again and so much more.

The investments, we've been making to build our commerce infrastructure are crucial here as we've heard directly from Peters do they want more access to more ways to generate value for themselves outside of content.

By giving our network of talent. These tools, we're able to create a full ecosystem of membership and a flywheel of audience aggregation and cross promotion.

We've had tremendous inbound interest from the creative community and so we're full for both the creative freedoms. It allows them and the unmatched commercial opportunity. It provides them to have access to all of P. L. B Y groups operations.

We are planning to launch in early December and we cannot wait to share more about the immense talent and creative visionaries, we anticipate serving as our founding krieger's, we're not naming names just yet for a variety of commercial reasons, but we can tell you that they come from various creative industries across music art fashion and more.

And they all share a commitment to artistic expression celebrating culture section body positivity and truly serving their fans are anticipated founding team alone represents nearly 300 million social media followers.

Our strategy is to work with the world's top creators and voices to ensure a safe prop firms for them and a great consumer experience for fans.

The acquisition of <unk> accelerated the timeline of bringing <unk> to market. So that we can quickly capitalize on this immense opportunity.

I'm more excited than ever about the future of P. L. B Y group, we've made enormous progress executing against the roadmap leading to the big opportunity to capture more consumer spend against the brand by building a direct to consumer commerce business, while simultaneously strengthening our licensing partnerships with the foundation, we built in <unk>.

The consumer operations the revenue scale, we've achieved we can now meaningfully invest in the future of our recurring revenue membership products that we believe will over time become our fastest growing and biggest revenue contributor with that I will hand, the call over to Lance.

Thanks, Ben third quarter revenue grew 67% year over year to $58 4 million, we achieved exceptional growth in what continues to be a difficult operating environment. As we believe we lost more than $5 million worth of revenue due to COVID-19 related closures and supply chain impact in the third quarter alone.

Despite these headwinds we have continued to execute well on our strategy.

The expansion of our direct to consumer business has proven successful to date and then the third quarter. We grew our direct to consumer revenue of 139% year over year to $36 million.

Our greatest challenge in growing this revenue stream is it related to a lack of consumer appetite for our brand awareness.

Rather scaling our infrastructure to meet the tremendous demand, we see for our own branded products.

Last year, we began the transformation of Playboy into an e-commerce destination to capitalize on the opportunity that we saw given the billions of dollars being spent against the brand through our partners globally.

In the last 12 months, we've been executing against our plan generating more e-commerce revenue on Playboy Dot com and the month of September than in all of 2020 and more revenue in the third quarter than all of 2020 and Q1 combined.

Our early success has led to some key learnings.

First and foremost is at the Playboy brand clearly resonates with young audience.

Two thirds of revenue on Playboy Dot Com comes from customers under the age of 34, and we consistently see more than half of our revenue now coming from women.

Also see a fair amount of price elasticity with our customers.

Average order value on the site is now consistently above $90, which is roughly 30% higher than where it stood at the beginning of this year and 70% higher compared to the third quarter of 2020.

We also see that customers, who spend over $200 on a single order are coming back to the site more frequently than others.

In terms of product offerings, we've been able to leverage our strategic licensing partnerships to provide merchandise to sell directly to our consumers on Playboy dot com and our high end fashion collaborations have allowed us to reach a premium consumer while organically generating earned media when celebrities like Jay Z and Bella.

Deed, where the Playboy logo.

There is more work to be done, but we continue to believe that growing direct to consumer revenue for the Playboy brand as a meaningful long term revenue opportunity.

Especially when combined with the potential network effects that we hope to achieve as we scale the center called platform.

Honeybear that Andy and lovers have all provided us with the needed scale infrastructure and cash flow to execute on the transition of our direct to consumer expansion.

Honeywell had a challenging first few months under our ownership that's half of our retail stores in Australia were closed throughout all of August and September.

Business still managed to contribute seven $4 million of revenue for the stub period, starting August night.

Fortunately the stores begin to reopen in mid October and as of today all of our locations are currently open for business, which has resulted in a corresponding rebound in business performance and we continue to believe that there is a significant amount of long term growth potential for the brand.

We also continue to invest in building a unified back end across all of these businesses, which we anticipate will produce synergies for us over the long term.

On the licensing front, we continue to optimize our strategic partnerships in targeted categories and reach.

In the third quarter licensing revenue grew 14% year over year to $16 9 million revenue was bolstered by the ongoing success of our partnership with Pac Sun, along with stronger than expected sell through from high end fashion brands such as the Mary is spotted on JV in social media and a fast fashion retailers.

Taylor in Italy, who launched a successful summer swim collection.

We also signed eight new strategic partnership agreements, which we expect to launch next year, including several exciting fashion collaborations that we'll be able to sell directly on Playboy dot com and a partnership in the spirits category launching later this year.

With that said Q3 also saw continued licensing revenue headwinds due to ongoing COVID-19 impacts.

This includes closures of our partner operated live Theater Gaming studios and closure of the London Playboy Club.

Along with delayed product launches in India, and South America, and limitations on our ability to generate new partnerships and Underexploited international markets due to travel restrictions.

Going forward, we will continue to develop the strategic partnerships in categories that are capital intensive and lower margin or in regions that require local expertise for.

Perhaps more importantly, we think we can leverage these partnerships is a capital efficient way for us to further expand the Playboy brand and lifestyle in categories, such as fashion hospitality gaming and spirits.

In terms of financial outlook, we are entering the fourth quarter and we will exit this year with significantly more scale and growth opportunities than we had just 12 months ago.

Our revenue target for this year was to exceed $200 million, which we believe we will clearly exceed even before factoring in the $25 million to $30 million of revenue contribution we expect from Honeybear debt from August 10th onward.

October was a big month for us as Playboy Dot com became a destination for Halloween shopping generating more revenue in three weeks than we generated in the first four months of this year alone.

Andy was on track for a record breaking months until we ran into a fulfillment challenges that caused us to end, our Halloween sales a week earlier than expected.

On our last earnings call I said that by 2025, we expect to reach $600 million of annual revenue, which was doubling the outlook. We gave in February when we first went public.

This long term outlook represented revenue from our licensing and direct to consumer business and didn't include any revenue for these upcoming initiatives that we've discussed today, such as center fold and membership.

I'm not going to change that long term outlook today, given COVID-19 and supply chain uncertainties, but what I can say is that we're thrilled with the continued growth that we've seen in our direct to consumer business and the demand for our brand from both consumers and our partners alike.

I'm also not giving guidance today for center folder membership as we've not fully launched these initiatives what.

What I can say is that we if we are successful in working with our creators to build a sizable ecosystem. The long term recurring revenue opportunity on centerfold alone could be larger than our consumer products business not to mention the potential of membership.

There are a few proof points, we're sharing that lead us to believe there is tremendous upside potential here.

One of them is that this year alone we've already generated around $10 million in FTE related revenue, which includes the rabbit tire launch that Ben discussed and then the secondary revenue.

Long with a million dollars that we generated back in the second quarter in under 24 hours from our initial NFC drop.

And on center fold, we're hoping to launch with a group of creators that already generate hundreds of millions of dollars in <unk> and the creator economy.

If we're able to execute in these new initiatives materialize like we believe they can we you would expect our long term EBITDA margin profile would also increase given the potential size of these opportunities relative to the total and the high margin nature of digital revenue.

Close by echoing been sentiment that this is an incredibly exciting time for our company with a myriad of opportunities in front of us and we will continue to prioritize and allocate resources appropriately to build upon each successive win.

With that I'll have the operator open the line for questions.

As a reminder to ask a question. Please press star one on your Touchtone telephone.

To withdraw your question press the pound key again Thats star one on your Touchtone telephone to ask a question. We ask that you limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Our first question comes from the line of Jim Duffy of Stifel. Your line is open.

Thank you good afternoon, guys. Thank you for taking my questions.

So just to start it's been a busy year for the management team.

<unk> added a number of foundational pieces to the puzzle I'm curious spend or the platform components now in place.

Or are there other pieces of the platform that you are still looking to add.

To.

To capitalize on the opportunities ahead of you.

Jim Thanks for the question.

In general the platform is in place and we think what we have assembled to date.

Is truly a competitive differentiator moving forward as we think about membership and southern fault. What we can offer the creative community is something that no. One else can offer and I think that's referenced by the founding craters that we have signed up to launch with that represent in excess of $300 million Soc.

Media followers, we believe we are good capital allocators and to the extent there are tuck in things that makes sense of course will be opportunistic for the shareholders, but I would say right. Now we have every piece in place that we need to execute on their strategy moving forward.

Excellent that's great to hear.

So I just wanted to ask a little more detail on components of the business and performance during the third quarter can.

Can you speak I know you gave seem.

It seemed to be pretty impressive figures for the first three weeks of October but can you talk to Playboy Dot com.

During the September quarter performance of lovers in E&E.

And you know trends that you saw for lovers in the endy, leading up to the important holiday.

So in the selling season. Thanks.

Sure I think I highlighted some of that in the in the remarks, so I'll give a little bit of details around that.

As I mentioned in October you Andy itself was was really having a record setting October Halloween season.

And we ended up having to cut the order short and late October just because of fulfillment labor challenges supply chain challenges all of those things. So we would have done a lot better in October than we actually did but it was still a very impressive month for us. So that business continues to do extremely well a lot of the work that we're doing.

In there as well as with lovers, it's kind of integrated this back end across Playboy Dot com, Andy and lovers and obviously soon.

<unk> work on <unk> that around all of that.

Playboy Dot Com I gave some some stats on that I mean really the growth. There has just been really exciting for us we brought in.

Someone to run that business for US earlier, this year, who has experience scaling businesses.

From effectively zero to one hundreds of millions of dollars and we see a big opportunity here as well.

Generating more revenue I forget what I said in the month of October that I think we did in the first four months of this year and then the third quarter I think was more than all of last year and earlier this year combined so.

Great growth trajectory I think what it speaks to on all of this and I've said this to folks before which is.

The demand is there for our for our products and for our brand, we see that time and again.

Demonstrating by.

The amount of money, we see being spent with our strategic partners globally.

And that was part of the whole reason for this business transformation that we're undergoing.

That continues to translate when we're selling product direct on on Playboy Dot com. So it's not an awareness or a demand issue, it's really scaling our infrastructure our team getting the supply chain right. Obviously at the time of Covid.

There's a lot of products that we're intending to stock at certain times that they don't end up arriving on time.

So we're still managing all of this growth in what is a really challenging time I think for most direct to consumer retail companies, but we're very pleased with the results.

And we think there's a long runway here to continue.

Yeah, Jim the only thing I'll add to is when we launched <unk>, which can be so great is in essence, we have around social media network at the end of the day as well and so when you start to think about the flywheel that we've created and then the recurring revenue nature of what we're launching with the rabbits bars.

And then southern fold.

This in the future really supercharge all facets of the business.

No doubt one more quick one Ben if I may with the rebate towards launch do you have a view as to the geographic appetite for that was at a hum.

Uptake of the rebate towards a global phenomenon or was it more concentrated in North America.

So I don't have the specifics on that what I can tell you is because I'm active in our discourse community talking to a rebate to our holders is that I'm talking to people in Australia, and China and a whole host of other places. So I think it's really interesting I think what the team did here that I believe we were the first to do it on a.

On the launch like this is we actually created or set aside almost 3000 rabbitears for credit card or Fiat transactions and I think what this brand has that unique ability to do is actually to bring in mainstream.

Investors or people that have not participated in the <unk> space before.

Into that community and when I look at the number of first time buyers based on People's responses and discord I think that's truly exciting for US moving forward and then as we continue into 2022 to expand our endless tea and blockchain efforts with the creators that we're gonna be working with on center fold coupled.

With that 10 million piece archived that we have that becomes truly exciting moving forward.

Excellent congratulations on the success of the <unk> launch.

Thanks, Jim.

Thank you. Our next question comes from George Kelly of Roth Capital Partners. Your line is open.

Hi, everybody thanks for taking my questions.

So maybe to start just with kind of a 10000 foot view question.

If I'm thinking through.

Next year is 2022 financials.

And I'm not looking for any kind of specific.

Here are just thinking more broadly than that but.

A lot of these new initiatives that you're working on like center fold in F. T. Blockchain related these membership programs all of that kind of steps if we lumped. It all together would you anticipate that being a really significant portion of our revenue as soon as 2022 I'm just trying to think broadly like how should I think about these things ramping.

Hey, George Thanks for the question. So it's hard to say because none of this is really launched right. So far we've done.

Effectively three NSP launches right, we hit our first one in the second quarter, which we sold out in under 24 hours and generated $1 million of revenue, which we thought was.

STREAMWAY successful for our first attempt.

We sold an ft of an original piece of content piece of archived content and digital format for $60000 in the third quarter, which we thought was a.

Great outcome for for something that was just a regular photograph that we put in digital format and then obviously when we launched this rebate to our collection with with much more success than we would have.

Surely imagine right generating over $8 million of revenue and reaching.

All sorts of consumers that have historically not purchased in ftes.

So those are all things that if you had asked me back in March.

What we're expecting here I couldnt have given you a number.

And $10 million isn't isn't a huge number but it's a great start.

When you fast forward to next year and look at the potential of <unk>.

These platforms.

You could get to some pretty big pretty heady numbers, and it's really going to depend on how quickly we can scale not only our creator base, but also the user base that theyre, bringing over so we will have more proof points of that.

A few months after we launched that so im hopeful on the next call. We've at least got a little bit more data points to go off of that.

It would be pure speculation for me to come on here and tell you what I think that's going to drive next year. So.

It's kind of hard, but we will continue to work with you to be as transparent as we can once we see data points.

George I'll, just add I think the potential is there right. So if you look at our founding craters that we'll be announcing right around launch.

It was land said they represent hundreds of millions of dollars of <unk> already in the creative greater economy.

And then the potential to expand that even more its going to come down to conversion rates.

A whole host of other things, but what's so interesting about the rabbits ours as our first entry back into membership and then as we talked about in the prepared remarks, expanding that with tears in membership moving forward. You know there are comps out there. So you can look at board for Dave Yacht club and others as to what they've done not saying that we will do any of them.

Got it or not do it but the potential to use blockchain and his team for a much larger membership to reach the millions of fans and consumers we have around the world.

It is interesting and then when you look at that type of that revenue.

We're talking about recurring revenue versus transactional revenue and throughout my private equity career I love businesses that we're focused on recurring revenues and I think that this brand has a history as we've talked about with membership historically and we can do this in a way for the 20 <unk> century.

And that diverse coupled with physical experiences and truly deliver something that nobody else can deliver.

Okay. Okay. Thank you and then last question for me Wonder.

I'm wondering if you could talk about honey brew debt and.

And what you've seen since since Australia has started reopening and then additionally, what is the plan for for new stores, particularly in the U S.

Next year. Thank you.

Sure I'll talk about the reopening.

Yeah, I mean, as you would imagine you're if you've got half of your stores closed in Australia that produces quite.

Quite a headwind on revenue, but as those stores have reopened days they've been performing really in terms of what we would have expected had they been opened this entire time. So it's not some huge snapback in demand, but the business has certainly rebounded and it's performing along the lines of what we would've expected when we bought this business.

Ms, which we got.

I had a lot of growth potential what we've seen here in the U S is also consistent with what we had expected when we bought it which was a lot of room for upside on growth on the E com business and.

Our our biggest most successful stores actually happened to be in the U S as well so.

So we are actively scouting for ways to expand our footprint not only here in the U S. But.

Also abroad in Western Europe, and we also recently launched.

E Com efforts more broadly we used to only be in the U K, where we're now throughout western Europe, and expanding our footprint there as well so it's quite a symbiotic relationship when we open these stores, we see a corresponding increase in an E. Com revenue, they really active kind of very profitable billboards for the business.

So we think it is an important part of the plan.

To open stores and continue to drive E comm growth. So we're in the process right now of evaluating and figuring out kind of what the right strategy is going forward there how many stores, we we intend to open.

But we are actively looking both here and in Europe.

Okay. Thanks, everybody.

Thank you. Our next question comes from Daniel Adam of Loop capital markets. Please go ahead.

Hi, Thanks for taking the questions just two for me first on the membership initiatives can you provide some color around how many members do you think you can ultimately scale too and then on pricing will you do plan to accept both dollars and crypto and.

And how price sensitive do you have any indication as to how price sensitive you target membership base really is.

And then the follow up question is on the NFC Rabbitears My back of the envelope math got me to a little over $9 million of revenue from the launch then I think you mentioned rabbits on revenue contribution that at $8 million.

Is there anything that would explain that delta.

And I guess related to that are you holding any of the theory of them on your balance sheet or do you immediately convert tripped ourselves to dollars. Thanks guys.

Thanks, Ed I'm going to start with your last question first and then I'll, let Dan answer the first part so your math is not wrong, but.

But in terms of the way, we will recognize the revenue well recognize that net of any fees to our partners that we're paying out. So that's why we said it was over eight not the nine that you had indicated there.

In terms of holding ether crypto on the balance sheet. So obviously, we we generated both east and USD two the Fiat transaction, we continue to hold the east on our balance sheet.

We are in this for the long run we that this wasn't just a one and done type thing we're going to continue.

Executing and operating in this space and therefore, we think it makes sense to hold eat what we're in the process of determining is what is our investment philosophy, how do we incorporate eat into that obviously right now when you think about it as a percent of our total cash or liquid assets today.

A very small percentage, obviously sub sub 10%.

Which feels like the right amount right now, but you know as the opportunity grows and as we scale, we will figure out more what the.

Right thing to do is here.

Go ahead yeah.

I appreciate it so our membership look I think the sky.

Are the ceiling is really unlimited here I think that this is a company that today drives over $3 billion of consumer spend.

This is a company that has the potential to have millions of people as Playboy members.

And we can deliver really unique benefits for those numbers as far as scalability. Because this is not going to be physical location constrained, even though we do plan on doing in person events.

From a membership perspective in the leather versus a Playboy mansion and the diverse that gives us unlimited potential on a global basis, and then when you coupled out with senator fold and how this flywheel all works together.

Center full there's not only an unbelievably lucrative financial opportunity for the company. It also provides an ongoing relationship with the talent that we have worked with for 70 plus years.

We also have access now to all of those subscribers on the center fault platform that will benefit not only the Playboy membership, but also our commerce efforts as well.

So all of this sort of comes together in this cohesive ecosystem or flywheel.

I'm I'm really excited by the potential for what we can deliver are moving forward on a recurring revenue basis.

Okay, great that all makes some sense very helpful guys. Thanks.

Thank you. Our next question comes from Austin motto of Canaccord. Your question. Please.

Hi, Thanks, I have a question on gross margin.

I see thats going up and I know mix can move that around but when you look at gross margin on a sort of like for like basis is there anything that.

That help.

Help that out in Q3.

For licensing or DTC.

Sure on the direct to consumer side, it's certainly going to be helped by the addition of Honey Burnett.

One of the reasons, we were so drawn to hybrid at was the fact that they're producing and selling their own private product and it's all 100% Honeybear, one which produces a much higher gross margin than we see on the A&D or on Playboy, because playboy selling a mix of our own and other.

Margin. So that's probably what you were seeing in the third quarter and look as we continue to scale on the direct to consumer side, we want to leverage those learnings from honey for that and apply that to the rest of our business as a means to drive incremental gross margin. There. So we do think that there is room to drive that incremental.

Higher over time.

Okay and.

On center fold them I'm wondering how you view the COO.

Creator platform usage.

Changing over time, I mean, do you expect creators to use one platform exclusively and is that built into your early agreements or is this sort of more like ride sharing.

Or will have Hooper, Lance and a bunch of other apps on their phones alternating between now and the demand is.

Yes, so I think that will depend on the creator what I can tell you is that people the creators reception.

Two centerfold has been overwhelmingly positive we've been working with them for a while.

What features they want and we think we have a true competitive advantage, given our commerce and as to your blockchain capabilities.

A lot of our founding creators will be coming to us exclusively.

And I think Playboy also represents as a brand something that is very different.

And what's out there in the rest of the universe and so we've developed our content guidelines one that worked for our brand, but two in conjunction with our creators.

And I think we have a 70 years of working with the best creators and breaking some of the best graders and we finally have a tool now when you think of the ecosystem to have them continue to make money.

Long term working with us and so a great example is someone can be on centerfold. They can also be performing.

Is it naive or they could be coming to one of our IRR all events.

In person right and the whole entire ecosystem works the other day it might be a former playmate that we will then be dropping.

There are former content that we shot with them as ftes on our platform.

And so the whole ecosystem over time, if we execute on it.

It has a chance to truly transform the company moving forward and if you look at the assets and why do we buy honey proved out and why are we acquired some of the skill sets. It was all it was all to put this.

He says together to be able to deliver something that's truly unique moving forward.

Got it that's really helpful and one Super quick follow up for these early center full launch partners what kinds of creators are there.

Hum.

They are huge music stars to former Playmates two adult stars.

Two rguest to other influencers actors celebrities.

Really.

We've really been overwhelmed by the response from the creative community and also by the.

The diversity of the creators that we brought in.

And I think it's truly be something that's unique and also something that that's foster's.

The development of the Playboy Club, you know back to the day when Playboy has Playboy after dark the TV show and you had huge celebrities and musicians.

All of a sudden showing up and playing the Playboy club, we're playing on Playboy after dark which was the TV show and so its just cohesive ecosystem that we're looking to build and so youll see the Playboy club store to sit on top of Senator folds, but southern folds by itself can act as a huge top of the funnel.

For everything else that we're doing as a company.

Great. Thanks very much.

Thank you. Our next question comes from Alex Fuhrman of Craig Hallum Capital. Your line is open.

Great. Thanks, very much for taking my question.

As you think about the holiday season upcoming do you feel like you're in a pretty good in stock position for holiday season inventory and then right around the corner is Valentine's day, which is obviously a big big holiday for a lot of your brands as well do you have visibility at this point into.

How much inventory you think youll have coming to sell four for the key Valentine's day holiday as well.

Yes, Thanks, Alex.

The team's working really hard.

Are you there.

The problem with inventory as the timing of it. So we've had we have inventory we start stockpiling early for Valentine's day.

But you know look it's it's one supply chain issues and to labor issues and so we feel good right now.

Baked that in you know I'll tell you personally it's frustrating because we as a team want to achieve excellence and we've had a really good year so far.

But we've also left money on the table, we can directly pinpoint that and that that as a CEO is extremely frustrating.

But I feel like we're in a good position for Valentine's day across our businesses. We're in a good position for the holidays.

And we'll wait and see our issue historically throughout this year has not been a demand issue in that that that would be something that would scare me. If the demand wasn't there. The challenge sometimes we've had is the demand is in excess of our supply.

And so long winded way of saying right now we feel good about it but again.

Never know what can happen in the future from our supply chain.

Yes, just to add that as helpful.

Just to add to that we've got plenty of inventory, sometimes the challenge that we see is that we have plenty of inventory, but it may not always be plenty at the right inventory and that's part of the supply chain challenges right that the stuff that is selling well, it's tougher to get that back in stock.

So that has been kind of the challenge I think that remains somewhat of a challenge. So we feel good about our inventory levels.

And our on hand, but it's more a question of making sure that we've got the right inventory at the right time for our customers. So it's really around a question of assortment mix.

Yeah, I think what we've done is we've tried to get ahead of it and we've tried to bring stuff in earlier than we normally would would bring stuff in.

But look I hope at some point in the future of the supply chain with Covid, we will start to normalize.

Great that's really helpful. Thank you.

And as there are no further questions in queue.

Does conclude today's conference call. Thank you for participating you may now disconnect.