Q1 2022 Plby Group Inc Earnings Call
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Good afternoon, and welcome to the P. L. B Y group incorporated Q1, 2022 earnings webcast and conference call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question answer session at that time. If you have a question. Please press the one followed by the four on your telephone.
Keypad, if at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, today's conference is being recorded at this time I would like to turn the call over to Ashley do Simone from ICR. Please go ahead.
Good afternoon, everyone and welcome to P. L. B Y groups first quarter 2022 earnings conference call.
Ashley decent known from ICR.
Hosting todays call are Ben Cohen, CEO and Lance Barton CFO .
The information discussed today is qualified in its entirety by the form 8-K, but its been filed by T. L. B Y group, which maybe access on the secs website and P. L. B Y group's website.
Today's call is also being webcast and a replay will be posted to P. L. P Y groups Investor Relations website.
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 P. L. B Y groups views and assumptions regarding future events and business performance at the time. They are made and we do not undertake any obligation to update these statements.
Forward looking statements are subject to risks, which could cause P. L. B Y groups actual results to differ from its historical results and forecast, including those risks set forth in P. L. B Y groups 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 during this call do.
Do not place undue reliance on any forward looking statements.
During this call P. L. P Y group will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure is available in the earnings release P. L. B Y group filed with the SEC on form 8-K today.
I will now open the call to CEO Ben Cohen Ben. Please go ahead.
Thank you and good afternoon, everyone 2022 is off to a strong start with over $69 million of revenue in Q1, driven by robust demand for our iconic Playboy brand.
As we said at our last call. This year. We are focused on two main priorities. One is the continued expansion of our direct to consumer business by integrating and assembly and the pieces we have acquired.
And the other is the build out of our greater platform Center calls, which we expect to ultimately drive incremental high margin revenue.
Create a flywheel effect for our consumer products.
I am pleased to report that we have made significant progress on both fronts in the first quarter.
Our consumer products and digital channels are coming together into one cohesive ecosystem to fuel our long term growth strategy. We already have some great. Examples of ways that we are integrating our brands across various channels.
I couldn't be more excited about the opportunity that lies ahead of us.
With center fold in the core of our consumer ecosystem. We believe there will be three critical factors for success Graham creators and product Playboy is arguably one of the most unique and valuable brands in the world.
As I commented on a global basis with over 97% unaided brand awareness and billions of dollars of consumer spend against it.
It would cause multiples of our current market cap and many years to attempt to replicate but more importantly, this is a brand that generates endless organic growth opportunities. It is perfectly situated for today's and Tomorrow's global consumer this.
This is demonstrated by the partnerships, we have forged with consumer brands and celebrities alike.
Hard to think of another brand that can play in both the physical and digital worlds across consumer products experiences entity in blockchain on a global basis.
<unk> allows us to work with a variety of creators across verticals, including music art fashion beauty and modeling.
Zen provides us with a valuable organic customer acquisition platform that we believe is central to fueling the top of the funnel for our broader ecosystem.
Ongoing basis, our current center for creators already reached hundreds of millions of social media followers, and we expect that reach to expand significantly over time as we scale the platform.
<unk> potential to drive organic customer acquisition and service a massive top of the funnel for our products and services is more valuable than ever given the recent disruptive changes to iOS and privacy regulations. We believe it will allow us to further target the marketing of our consumer product brands our future.
And blockchain initiatives and our ire al and virtual events at Central continues to evolve we plan to integrate it with Playboy Dot Com and drive all customers to one central location. In addition, <unk> provides leverage for any future partnerships, we pursue through licensing hospitality.
And other channels, because we not only show up to the table with an iconic global brand, but we also bring direct access to an engaged targeted audience.
FERC traders there is immense value and being part of our ecosystem not only have we envisioned a safe place for freedom of expression inclusion and direct connections between fans and Greeters. We are also launching new avenues for our creators to generate additional revenue streams beyond core offerings, including digital subscriptions.
Unlocks and lives Hangups.
Graders, they have the additional opportunity to become affiliates by promoting our products. We've already signed 40 of our top creators as part of a new affiliate and vascular program.
Our merchandise on their social channels.
Drew center fold, our traders also dramatically expand their reach through access to our Playboy audience opportunities for modeling contracts with our brands early access to our merchandize.
Potential to be featured in our upcoming <unk> projects and opportunities to participate in our IR al and virtual experiences with access to exclusive events.
To this end these brand integrations with senator fold have already begun.
Just last week, we co hosted the met Gala after-party as a boom boom room in New York City with Carty vision, not only did cardi b wide stream. She is planning to give her central subscribers exclusive access to behind the scenes content for AC.
We also outfitted the dancers at the party and our iconic Bunny costume. In addition to the organic social media and positive press coverage about the Playboy active Hardy.
Each over 2 billion consumers globally, and one week with millions and add value equivalency.
Our ecosystem integration work continues with our partnership with the Tao group as we co host Friday pool parties all summer long.
Las Vegas.
As well as some other larger parties throughout the balance of the year. These parties kicked off a week ago and feature multiple marketing opportunities to build awareness, including Billboards QR codes to download the central mobile web app for fans technical branded photo stations recruiting opportunities and the chance to win.
Modeling contract with DMD.
We are also looking forward to multiple integrations. Following the partnership we just announced with model and entrepreneur Amber Rose, who joined center fold yesterday as a founding crater.
On the central product itself, we are taking a very methodical approach to its build out working closely with our founding krieger's to incorporate their feedback and hiring world class product design and engineering leaders from top organizations, including Uber Youtube Twitch and square.
The team is hyper focused on executing against our roadmap and recently began rolling out major upgrades. These include enhanced creator profiles and the integration of a new backend payment providers to allow us to expand our greater universe and improve our unit economics.
Next up on the roadmap or improvements to the user flow in conjunction with creators other social channels as well as new features around live streaming and direct messaging both of which we expect to enhance our monetization capabilities. The long term unified Playboy digital product vision includes an.
<unk> of our creator platform, our digital content offerings.
Our digital and physical commerce experience.
Off the back of center fold, we are exploring several exciting MST and blockchain opportunities and while it's too early to reveal further details we intend to continue building on the success, we achieved last year in the <unk> space you may recall that we initially started testing the ability to monetize our IP.
By collaborating with artist in May of 2021, which culminated in our successful <unk> launch and the accretion of $12 million of NFC revenue last year. Our aim is to leverage our past success and learnings to create sustainable revenue and recurring and the fee revenue streams through ongoing.
And repeatable strategies.
We believe we can achieve further success by leveraging our brands.
Entering with our center for creators testing gamification, and ultimately monetizing <unk> $10 million plus piece archives, two entities and the blockchain.
These brand product platform and greater integrations are just the beginning of our strategies, we have planned to showcase the immense value of our brand propelled the flywheel and drive momentum for all aspects of our business you can hear my excitement about this ecosystem because with center fold, we are more than just a direct channel too.
Our consumers, we have the brand halo and the product integration as well.
As I mentioned earlier another top priority. This year is to continued integration of our direct to consumer business within our ecosystem. During the first quarter, our consumer products business delivered great results, while overcoming COVID-19 impacts and supply chain disruptions in Q1, we continued our global expansion plans for honey.
With a store opening as average or in Miami in February .
And the stores are one of our best performing ranking third globally. Our next location will open in June and strapped bird UK.
And the team is hard at work to reach our expansion plans of 10, new locations by the end of 2022. We've also secured an exciting brand integration opportunity with the exclusive show fields, Miami and the hardest South Beach, which features the world's most innovative brands beginning in June we will be showcasing a cure.
<unk> selection of Playboy apparel through our limited time product installation as we begin testing Playboy and the retail experience.
Rebranding work also began for <unk> and levers as we test the impact of leveraging the Playboy Nate. This work will be completed in time for our imported Halloween season with strong momentum behind the brands and proven leaders like ashley's sector, leading consumer products, we are attracting world class industry talent and <unk>.
Dustin and building, our GAAP and our teams in the first quarter.
As we continue to focus on building a solid infrastructure and <unk>.
<unk> our business, we are identifying synergies across the brands and opportunities for scale and operational efficiency to that end, we eliminated approximately $5 million of annualized overhead costs over the last few weeks. We expect this foundational work to continue for the balance of the year.
They run higher costs in the short term as we onboard top industry talent and continue our work to consolidate functions across our brands looking at houses a year and the full opportunity before us I want to reiterate my excitement and confidence in the unique business. We are building as evidenced by my purchase of roughly a $1 billion of overstock.
A few weeks ago, while not linear the path forward is clear is going according to our plan I am confident that we are creating something truly unique and believe no. Other company can replicate our value proposition now I'll turn the call over to Lance.
Thanks, Ben first quarter revenue grew 63% year over year to $69 4 million.
Our growth once again, driven by the continued expansion of our direct to consumer businesses.
Furthermore, our gross profit margin expanded driven by the acquisition of <unk> and the superior product margin that business is able to achieve.
Direct to consumer revenue was up 125% year over year to $49 $6 million in the first quarter and we made great strides executing on our growth strategy, which consists of expanding our product line building out our merchandising and marketing functions strategically expanding our retail footprint and consolidating and optimizing.
And our tech infrastructure.
Playboy E Commerce grew revenue more than 300% over the prior year quarter.
Growth was driven by increases across the board in site traffic orders average order value conversion and repeat customers or product line continues to expand to meet consumer demand as we saw more than 120% increase in unique skus sold versus Q1 last year.
Consumers gravitated toward our Tokyo Club apparel collection, along with Pakistan and near the end of the quarter, we launched a collaboration with Drake LVL capsule collection, which saw massive demand and led to our highest level of sales in a single hour. When we launched on March 29, with most of those products selling out quickly.
We have a number of other high profile designer collaborations coming out later this year that we believe will continue to fuel consumer demand.
We see opportunity for Playboy ecommerce to improve margins over time via economies of scale achieved through overall revenue growth expansion of private label and improved marketing efficiency as we continue to build out our merchandising and marketing functions and streamline our tech infrastructure.
Honey burdette achieved over $22 million of revenue in the quarter, driven by 23% growth in e-commerce at 11% growth in brick and mortar sale.
Sales in January and February were impacted by the Omicron variant, which was most noticeable around the busy Valentine's day buying season, but revenue picked up in March as the Varian way.
Lovers store traffic in the typically strong Valentine's shopping season were similarly impacted by the <unk> variant along with weather related store closures and the Pacific Northwest, which led to a decline in store revenue compared to Q1 of last year. We did however, see meaningful growth in leverage e-commerce and view that as a growth opportunity for <unk>.
The business going forward.
Yeah, Andy continues to face tough year over year comps given the significant growth achieved in the first 18 months after we acquired the business.
And the meaningful impact on marketing efficiency due to Apple's iOS privacy changes.
Similar to Playboy E. Commerce, we believe that we can improve operating efficiency and future margins by bringing our marketing function in house, increasing our selection of private label products and consolidating our tech infrastructure across all of our direct to consumer businesses.
Licensing revenue of $14 $5 million was a decrease of $1 1 million versus the prior year quarter that was primarily due to contractual amendments we made with our fragrance partner last year. It enabled us to recapture rate in beauty and grooming and also amendments with our domestic apparel partners to incur.
Minimum guaranteed royalties over expanded contract terms.
We continue to optimize the licensing business launching a slate of 15, Brian collaborations already this year exciting new brand collaborations planned for upcoming quarters, and a robust new business development pipeline.
We are pleased by the positive response to exciting new creative and innovative campaigns, we are introducing around our upcoming 17th anniversary and the year of the rebate in 2023, which we expect will contribute to a full year of growth for our licensing business. This year as well as into the years ahead.
On the digital side, we believe center called will not ultimately drive incremental high margin revenue for us over the long term, but it will also serve as an engine for organic customer acquisition.
Which is particularly valuable given the recent impact on marketing efficiency due to Apple's iOS privacy changes.
We're often asked how much revenue, we think centerfold can generate and while it's still too early to increase our long term outlook, it's important to understand the potential scale of the opportunity.
So the addressable market of the creator led economy is large and growing rapidly many estimates place that at over $100 billion of revenue today.
You look at some of the most successful businesses competing in this space. They are generating north of $1 billion in revenue annually at our highly profitable achieving all of this without the benefit of a ubiquitous brand like Playboy.
To take advantage of the opportunity that we see here, we are investing today and to building a platform that will combine the power of our globally recognized brand with the massive reach of our creators. Our goal is to create a business that if successful could eclipse our consumer products business from a revenue and EBITDA perspective by <unk>.
25.
To that end, we spent approximately $2 6 million in the first quarter on center fold as we build the foundation of this platform for long term growth.
Net income in the first quarter was $5 5 million and adjusted EBITDA was $1 $2 million and we.
We spent $9 $5 million more in SG&A compared to the first quarter of last year on costs related to the functioning of the public companies such as expanded head count insurance Tech licenses and implementation and third party service providers. These costs are largely fixed in nature and many of them. We already started to incur in the second quarter.
Last year.
We continue to grow revenue, we expect to see operating leverage and margin expansion.
I also want to highlight that our cash and equivalents as of March 31 were impacted by the timing of cash flows and working capital we had a significant amount of payables coming out of the fourth quarter related to the increased marketing spend from the holiday season.
Along with accruals related to inventory purchases that we paid down in the first quarter.
We also saw a material increase in prepaid asset as we have to pay upfront for software licensing and implementation costs.
As of today cash and equivalents or about $40 million and we have over $20 million of gross cash collection due before the end of the second quarter.
In terms of outlook I want to reiterate that we continue to expect full year revenue in 2020 to be approximately $350 million and adjusted EBITDA to be around $55 million.
This year has started out strong and we factor the ongoing macro headwinds into our prior outlook as.
As I previously stated we expect the bulk of revenue and EBITDA at kind of in the back half of the year, especially in the fourth quarter as we start to realize the operating leverage and anticipated revenue growth tied to all of the foundational work that we're doing today.
We believe that we are well on our way to achieving our stated goal of $600 million of consumer product revenue by 2025 and.
And as we start to see results from the <unk> business. We look forward to when we can raise the long term outlook Accordingly for center hold revenue contribution.
We're excited by the strong foundation, we are building and the tremendous demand for our brands.
With that I'd like to ask the operator to please open the line for questions.
Thank you.
Just a question. Please press the one followed by the four on a telephone.
You will hear us III, Tom prompt technology request.
My questions have been answered then you would like to withdraw your registration. Please press the one followed by the three.
One moment. Please for the first question comes from the line of Jason Thompson with Canaccord Genuity. Please go ahead.
Yes, Thanks, a lot for taking the question and congrats on the strong results two questions from me. The first is given the China exposure within the licensing business and all of the Lockdowns and other economic developments. There I'm just curious if you could maybe provide a framework for how to think about.
The impact there both in Q1 and throughout the rest of the year and then the second one is just on the broader supply chain environment. We've heard a bunch of different things from ecommerce companies that have reported so far some noted that product availability was getting better throughout the then it was sort of back.
Half of last year, others have talked about obviously rising transportation and labor costs I'm. Just curious if you can maybe give us an update on where.
The supply chain recovery, you guys are and how talked availability was throughout the quarter.
Thanks, Jason.
Yeah on China in particular, so there was no impact in the first quarter, we had a little over $10 million of revenue coming from China in the first quarter.
Obviously, they've got very strict COVID-19 restrictions that are in place I think that was started.
More recently in kind of towards the end of Q1 early Q2.
It obviously presents business challenges to our licensing partners in the market.
We're still evaluating what that impact could be but our partners are committed to eliminate any disruptions and returning to normal as quickly as possible.
With that in mind, we're not forecasting any impact going forward.
It's around $40 million on a full year.
Full year revenue based on minimum guarantees that we already have in place.
We continue to hold to.
So look we'll continue to evaluate the situation, but we haven't seen any impact.
On the.
On the supply chain issue that I think all the things that you highlighted.
We're seeing the same thing as well.
In the first quarter in particular.
Honeybear debt, we will do a global marketing launch.
Around there around each product that they put out there so they'll marketed product globally and it should be in stores globally in online globally part of the challenge. We had was actually making sure that the product was in all of the stores globally. So that certainly had an impact on on their ability too.
To sell through some of the products that they that they brought in.
We certainly see rising costs from.
From a shipping perspective, and also from a fulfillment.
Perspective, but what we're trying to do is leverage our consolidated efficiencies across the multiple businesses to really build economies.
Scale from that.
Another thing that we're trying to do going forward this year as mitigate some of the risk in the back half of the year.
By receiving available inventory earlier.
Particularly important as we gear up for the Halloween season, which is so important to our business. So we're working through with our suppliers now trying to receive that inventory much sooner than we would.
To make sure that we're in a good place for or Halloween.
And then the other thing that I'd still highlight.
Yeah, Andy in particular, we saw this last year.
Unfortunately, it hasn't really gotten any better, but our top selling products.
<unk> to be.
<unk> sold out or out of stock, which really has an impact on their ability to to continue selling I think last year, we saw kind of in the 15% to 25% range. We've seen that percent go up in some cases as high as 40% to 45% out of stock on our top selling items. So it has improved from that but search.
<unk>.
Has been a headwind and then impact for the business.
Okay, Great and is there anything that you guys can do to sort of bring that down over time as it is it.
<unk> suppliers is there anything that.
That is in your control there or is it or is it mostly.
Out of your control.
But one of the things that we're doing actually is working on our private label piece of the business and when we see that is actually some of our better selling product. There. So the more that we can to your point kind of control this and work more closely.
I think that can not only improve the amount of stock that we have on better selling items, but it can also eliminate some of the stock on the I'll call it lower performing lower margin lower margin items.
Yes, Jason I'll, just add to that Andy as we alluded to in the last call and we said in this call. We are in the process of repositioning gandy and integrate it more into Playboy and as we as we do that and Larry talked about the private label products that allows us to diversify suppliers. It also allows us to realize higher gross.
<unk> on a private label product versus reselling third party products and so that that will continue and as we said we're gearing up for the Halloween season.
One other thing I failed to mentioned, but obviously another lever we can pull and are contemplating is around increasing the <unk>.
Prices on the product obviously, you have to do that thoughtfully, but in the current environment I think everything is increase in price. So it wouldn't be shocking that I believe to our consumers. If we do that to offset some of these higher costs that we are facing.
Yes that makes a lot of sense. Thanks, a lot for the thoughtful answers.
Okay.
As a reminder to you I just have a question. Please press the one followed by the four on their telephone keypad.
Question comes the line of Alex <unk> with Craig Hallum Capital Group. Please go ahead.
Great. Thanks, very much for taking my question direct to consumer revenue was very strong in the quarter, a little bit stronger than we were looking for and I think you mentioned in their prepared remarks.
A&D is running into some very difficult comparisons lapping.
Some of the strength that that the business saw last year after the acquisition as well as just challenges with the with the iOS changes or are there any other brands in particular that really drove the strong quarter for you and just as you look out into Q2, where we're hearing from a lot of other e-commerce companies.
Is that consumer spending has pulled back a little bit the last 345 weeks as inflation has ramped up im curious if youre seeing any pressure in any of your brands.
Yes, so the the real drivers of the growth not surprisingly are the brands, both Playboy and hunting for that.
You talked about it a lot in the prepared remarks around how strong we see the brand to be and how strong we see demand out there that's not only true for Playboy, but it's also true for <unk> and was a big reason why we acquired that company because they have such a loyal following and are really able to generate.
Brand equity.
<unk> and levers, obviously don't really have a brand they are more like channels for us and so as we explore.
What can we do to leverage the Playboy brand within the A&D and lever that's kind of our longer term strategy around that anytime we've done a collaboration on the Andy or if we sold Playboy product and lever stores, we actually see really strong.
Demand for that a lot of the growth we saw at Playboy in particular was driven through expanded assortment.
Better awareness.
Playboy Dot com as an e-commerce destination, not a content destination and thats something that I talked about I think a lot last year, we were really a lot of people would historically go to Playboy dot com expecting a content or our media business and we've had to really pivot what customers are are expecting when they go there and people are.
Now knowing that they can go therefore for great apparel.
Also honeyberry that the growth there driven by.
Continued E comm strength and then also the new store opening in Miami So.
Look there are certainly headwinds on the business from a macro perspective, but what we really like to see is the fact that the brands remained strong and we see opportunity for.
Actually leveraging that more broadly across direct to consumer to drive our longer term growth.
Okay. That's really helpful. Thank you.
Great. Thanks next question please.
Yes.
The next question comes from the line of George Kelly with Roth Capital Partners. Please go ahead.
Hi, everybody thanks for taking my questions.
So first Lance you were just talking honey for that and I was just hoping you could or Ben.
Fill in some detail about what's happening in the U S and.
What I'm most curious about I guess is.
How quickly is the brand growing in the U S.
Whats the typical store as you are opening these things I mean.
What's the kind of financial profile of those stores and how quickly do you see a lift in.
Sort of regional e-commerce spending after that stores opened so any kind of commentary just about the.
The U S ramp.
Yes sure so.
In the U S. In particular, right, we I talked about this a little bit on the last call which is.
Here in the U S. Those stores are producing revenue I think it's somewhere around 40% more on a per store basis than we've seen in.
Elliot.
And that has continued to be the case and we just opened the aventura store in Miami in February and it's already the third highest performing store for us globally. So that then.
Two months time, it's already it's already <unk>.
Short up the ranks there.
The other thing when we open these new stores, we are really targeting 30% four wall EBITDA margin, they're able to get there pretty quickly a new store opening.
Cost you around 600 $800000 to to open up in terms of upfront expense.
But you are able to recover that pretty quickly as these businesses scale.
And what we also see usually when you open a new store.
Can contribute to a halo.
It can contribute to a halo effect on the E comm side, because you get customers coming into the store figuring out what size works for them what products. They like and then if you've got them as a loyal customer when new product lines dropped they're more likely to buy that.
Online so.
That's why we're really optimistic about the growth prospects at Honeyberry that particularly in the U S and in Europe , and the U K.
Because as we open these stores, we see tremendous demand we do have plans to open.
Some additional stores.
Across the Atlantic in the UK as well this year as part of our 10 store plan.
Are the stores that we're opening this year that will will be focused on the U S.
Okay and then second question. So thank you for that.
What are your plans to build the awareness in the U S. Do you have any kind of big marketing campaigns or anything else that you're planning for for this year.
Yes George.
Obviously, the opening of its been the opening of new stores as some of the best awareness, we can build and so when we look at the roadmap for the balance of the year as we move <unk> into the northeast and around the New York Metropolitan region.
That's the best marketing, because it's profitable marketing right, where as Lance said those stores to about a 30% EBITDA margin in off the back of that what we see as a very high return customer right.
E comm as well.
There are other integrations I don't want to go into that right now, but there are other things planned around live events that we can do in a profitable way and other organic and marketing initiatives that we are exploring for HVA tires.
Tying back to some of the things we also talked about in the prepared remarks, so we're launching.
Sheffield pop up concept here and down in Miami in the second quarter, that's going to carry how neighborhood at product as well so thats one way to get the word of mouth out there.
The other thing that we talked about it is leveraging the center full platform as.
An engine for organic customer acquisition.
A lot of these creators that we're working with already have.
Our propensity to where and to use my neighborhood at branded product.
So people are really excited about hey, how can I get involved how can I work as an affiliate to promote Honeywell granted products. So when we talk about center fold in serving as top of funnel over the long run that is an area that we see as a really interesting opportunity because it can bring.
In new customers for the hybrid at brand through the top of the funnel on Central then do that in a very organic way.
So that's another thing that we're pretty excited about it and again the <unk>.
Creators that we work with.
Are quite excited about the product you also see it.
Organically on social media on Tictoc, and and other live streaming platforms.
There's been some pretty big celebrities and Influencers out there that have been seen wherein hybrid at.
Lingerie and again theyre doing that organically, if not something thats a paint placement.
Okay understood. Thank you.
Yes.
Your next question comes from the line of Daniel Adam with Loop capital markets. Please go ahead.
Hi, good afternoon.
It looks like you guys burned through a decent amount of cash in the quarter just looking at the Q.
And I guess, what's the outlook for.
Cash generation.
The minimum cash balance you need to run the business working capital and so on.
Yes.
Yes, I talked about a little bit in the prepared remarks. It was really a timing issue in the first quarter you had a lot of payable is coming out of the fourth quarter. Both from an inventory purchase perspective, and also a marketing perspective, obviously the fourth quarter is a huge push from a marketing perspective those payables.
Come due in the first quarter. So we were effectively paying down a lot of that in the first quarter. The other thing that impacted us as we work on building the foundational infrastructure across the company. We're implementing a lot of technology and what you end up having to do there is your implementation cost and your life.
Wincing costs don't come over time, they come as an upfront payment so our prepaid increase significantly because there's a lot of.
What we do.
So those were a lot of the outflows that saw.
In the first quarter. The other thing is around our licensing partners.
The timing of those payments that we get from them are largely centered around two times, a year, which is the fourth quarter and the second quarter. So I mentioned, we've got another $20 million plus of gross cash receipts that were expecting to come in this quarter.
Our cash balance is already up over $40 million from.
From where we ended March 31, so it has already increased.
And kind of going back to what I said on a full year basis.
We're expecting this to be a cash flow positive business, even when you factor in.
Our debt service.
Working capital and everything like that so.
It's something that again as you scale this business year investing upfront, we opened the Miami store as well, where we're planning to open more stores for <unk>. Those are also upfront costs that you incur.
That you recoup over time, so from our perspective, it's really just a timing issue. We can certainly manage the working capital if we need to.
But from our perspective, it was really just timing around a lot of these payments.
So is it safe to assume that the $33 million or so quarter end as the low point for the year.
Yes.
Okay alright. Thanks.
Next question.
The next question comes from the line of Brian Dobson with Chardan capital markets. Please go ahead.
Yes. Thanks for thanks for taking my question. So just returning to center fold for a second do you think you could give us a little bit more color on the E Commerce and cross selling potential there and really how you envision that evolving as the platform continues to mature.
Sure. So what I talked about in the prepared remarks was the integration of senator fold into Playboy Dot com and consolidate all of our digital products went to that when we look at for example, Playboy Dot com the ecommerce revenue coming off of that 25% of that revenue today is already coming from affiliates.
We recently added 40 of our center full creators to be affiliates.
And so as we think about one cohesive ecosystem, where centerfold essentially gets merged into Playboy Dot com.
You will have the ability to cross sell merchandise along with.
Other media are subscription products tipping premium unlocks subscription revenue et cetera, and so it's all one cohesive ecosystem and that's what we've been testing and what we've been working on the integration up right now and so when we think about other consumer brands out there.
What makes me. So excited is I think this is one of the most unique differentiators. We have is the ability to work with talent.
You also then cross sell consumer products. When you think about the privacy changes with iOS and what's happened other ecommerce companies as well as other media companies have commented on this.
We're effectively building your own social media network in house with this that we believe is a very efficient customer acquisition tool that will create a flywheel effect for the rest of the business.
Great. Thanks, very much and then in terms of the cost synergies.
I guess moving forward how much potential do you see there or at least where might you be focused in terms of gaining efficiencies over the next year or so.
So from a macro perspective, when we talked about this in the prepared remarks, we've taken out approximately $5 million of annualized costs over the last few weeks.
Moving forward the.
The companies we bought.
In 2021, what we were focused on this consolidating infrastructure consolidating functions and I think we've been successful at doing that so far this year again. This is a step function function, it's not linear.
And we will continue to evaluate opportunities to realize synergies as we move through the balance of the year.
There's a lot of stuff that was hoist is upon us not only through the acquisitions, but through the accelerated filing.
Status.
That we achieved in June of last year, and so all of that infrastructure has to be implemented on an accelerated basis from what we were originally planning, yes, I see look theres a few areas from my perspective, Ben mentioned a lot of.
These fixed costs that we've taken on over the last 12 months that we've we've kind of ramped up into I think we're kind of at that point right now where we're most of that has been layered on to the business. I mean, we will have kind of some some ongoing annualized nation of head count and other tech costs that have come in but I think we've.
Largely kind of hit that asymptote.
And now it's really about as you scale revenue those costs kind of remain fixed so as a percent of revenue those do go down over time, so ads at E Com continues.
<unk> continues to scale one center fold actually starts contributing from a from a revenue perspective, you can get real operating leverage out of that the other thing.
That I'm really interested in is what type of efficiency, we can get on the marketing side, that's not only from bringing our marketing in house, we've been working with.
Historically, you have been too small from a marketing perspective to warrant our own in house marketing team, but we're building out a small team that we can then leverage across the entire portfolio. I think you can be a lot more efficient with your marketing spend in that way and then when we talk about <unk> being a very large organic top of funnel.
From a customer acquisition perspective.
I believe that that can give us a lot more efficiency on the customer acquisition side again, hopefully leading to some real economies of scale as we build out this business. So I think there are a lot of areas that were.
Putting in place the foundation today and as we scale revenue.
You should start to see that really materialized in the margin really kind of.
The end of this year and into next year and beyond.
Great. Thanks very much.
There are no further questions at this time and that does conclude the conference call for today. We thank you for participation and ask you to please disconnect your line.
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