Q1 2024 PLBY Group Inc Earnings Call
Operator: Good day, and welcome to the Plby Group's fourth quarter 2024 earnings conference call. All participants will be in listen-only mode.
Good day and welcome to the P. L. B Y groups fourth quarter 'twenty 'twenty four earnings conference call.
Operator: All participants will be in listen only mode.
Operator: If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to hand the call over to Matt Chesler from Investor Relations. Please go ahead.
Operator: Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Matt Chesler: After todays presentation, there will be an opportunity to ask questions.
Matt Chesler: To ask a question you May press Star then one on your telephone keypad to.
Matt Chesler: To withdraw your question. Please press Star then two.
Matt Chesler: Please note this event is being recorded.
Operator: I would now like to hand, the call over to Matt Chesler from Investor Relations. Please go ahead.
Matt Chesler: Thank you, Operator, and good afternoon. I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 8K filed today by Plby Group, which may be accessed on the SEC's website and Plby Group's website. Today's call is also being webcast, and a replay will be posted to the company's 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.
Matt Chesler: Thank you operator and good afternoon.
Matt Chesler: I'd like to remind everyone that the information discussed today is qualified in its entirety by the form 8-K filed today.
Matt Chesler: B Y group, which may be accessed.
Matt Chesler: On the Sec's website N P L B y group's websites.
Matt Chesler: Today's call is also being webcast and a replay will be posted to the company's investor Relations website.
Matt Chesler: 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.
Matt Chesler: Such statements are made on the basis of PLBY Group's 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 the company's actual results to differ from its historical results and forecast, including those risks set forth in the company's filings with the SEC, and you should refer to and carefully consider those for more information.
Matt Chesler: 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.
Matt Chesler: Forward looking statements are subject to risks, which could cause the company's actual results to differ from its historical results and forecast.
Matt Chesler: Including those risks set forth in the company's filings with the SEC and you should refer to and carefully consider those for more information.
Matt Chesler: This cautionary statement applies to all forward-looking statements made during this call. Do not place undue reliance on any forward-looking statement. During this call, the company may refer to non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release Plby Group filed with its Form 8K today. With that, I will hand the call back over to the operator for the Q&A session. Operator.
Matt Chesler: This cautionary statement applies to all forward looking statements made during this call do not place undue reliance on any forward looking statements.
Matt Chesler: During this call the company may refer to non-GAAP financial measures such non-GAAP measures are not prepared in accordance with generally accepted accounting principles a.
Matt Chesler: A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release, you know B Y group filed its form 8-K today.
Matt Chesler: With that I will hand, the call back over to the operator.
Matt Chesler: And the Q&A session.
Matt Chesler: Operator.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster, and the first question will come from Jason Tilchen of Canaccord Genuity. Please go ahead.
Matt Chesler: We will now begin the question and answer session.
Jason Ross Tilchen: To ask a question you May press Star then one on your telephone keypad.
Jason Ross Tilchen: If you are using a speakerphone please pick up your handset before pressing the keys.
Jason Ross Tilchen: To withdraw your question. Please press Star then two.
Jason Ross Tilchen: At this time, we will pause momentarily to assemble our roster.
Jason Ross Tilchen: And the first question will come from Jason Tilton of Canaccord Genuity. Please go ahead.
Jason Ross Tilchen: Good afternoon. Thanks for taking my questions. I guess one thing I'm curious about, you gave a lot of great detail in the press release and also in the recent announcement regarding these new agreements in China for the licensing joint venture. I'm just wondering if you could share any additional color on sort of how these came about so quickly. What sort of benefits and sort of agreements are in place in these deals that sort of you're excited about improvements on the previous sort of structure of the deals that you've had in China? And when is the timing of when we could expect some additional revenue to flow through?
Jason Ross Tilchen: Hey, good afternoon, thanks for taking my questions.
Jason Ross Tilchen: I guess, one thing I'm curious about you have a lot of great detail in the industry in the press release and also in the recent announcements.
Jason Ross Tilchen: These new agreements in China for the licensing joint venture I was wondering if you could share any additional color on sort of how these came about so quickly what sort of.
Jason Ross Tilchen: Benefits and sort of agreements are in place in these deals that sort of you're excited about improvements on the previous sort of structure of the deals that you had in China and when sort of the timing of a we can expect some additional ramp and get a flow through from these deals. Thanks.
Unknown Executive: Thanks, Jason, for the question. Look, we've been working on new deals in China for months now, really, since we terminated our previous licensing partners. You know, in addition to the deals we signed, we have a robust pipeline and are excited by what that looks like moving forward. In fact, when you look at the new deals, we've already rebuilt the business to over 50% of what it was last year. The majority of that revenue will start to come in starting in this quarter and the second quarter and then moving forward.
Speaker Change: Thanks, Jason for the question.
Unknown Executive: Look we've been working on new deals in China for months now really since we terminated our previous licensing partners.
Unknown Executive: You know in addition to the deals we signed we have a robust pipeline and are excited by what that looks like moving forward.
Unknown Executive: When you look at the new deals we've already we built the business to.
Unknown Executive: Over 50% of what it was last year. The majority of that revenue will start to come in starting in this quarter or in the second quarter and then moving forward.
Unknown Executive: The new deals are very different than the old deals. There's much better accountability in those deals. There's a prohibition on sublicensing BRAM without our express written consent.
Unknown Executive: The new deals are very different than the old deals theres much better accountability and those deals there's the prohibition on some licensing the brand without our express waiting consent and then from the guarantee perspective.
Unknown Executive: And then from a guarantee perspective, we actually have much better teeth in these deals versus an entity in China because personal guarantees are enforceable in China, and we have personal guarantees backing these deals as well. You know, the strategy moving forward is different than the old deals, you know, given what's happened to China and the economy in China, you know, really post-COVID, and it's well documented out there from a macro perspective on consumer spend.
Unknown Executive: We actually have much better teeth in these deals versus an entity in China.
Unknown Executive: Personal guarantees are enforceable in China, and we have personal guarantees backing these deals as well.
Unknown Executive: This strategy moving forward is different than the old deals.
Unknown Executive: Given what's happened to China, and the economy in China.
Unknown Executive: Yeah, really post Covid, and it's well documented out there from a macro perspective on consumer spend.
Unknown Executive: We needed to rebuild the business with the right partners, but we wanted to do that with shorter-term deals that give us the flexibility to increase MGs over time but, in the short term, incentivize our partners to invest in the business. And so I think we've commented on this both in the press release and today, but we do expect to start receiving overages from these partners, but we wanted to make sure that they invest in the brand.
Unknown Executive: We needed to rebuild the business.
Unknown Executive: With the right partners, but we wanted to do that.
Unknown Executive: With shorter term deals that gives us the flexibility to increase <unk> over time, but in the short term incentivize as are our partners.
Unknown Executive: To invest in the business and so I think we've commented on this both in the press release and say, but we do expect to start receiving overages from these partners, but we wanted to make sure that they invest in the brand and so.
Unknown Executive: And so, you know, Doohan, our largest partner, they are an operator. They have online studios, which is really how things are sold in China. And it's a true operator versus what I would say is more of a middleman, you know, historically selling our tags. And so, you know, in addition to the contractual limitations we have or protections we have, we plan on making sure that we hold these partners accountable moving forward. We also have a JV partner as a subsidiary, Li and Feng, that is on the ground and constantly meeting with these partners, and we'll be holding them to the contract as well.
Unknown Executive: <unk> our largest partner.
Unknown Executive: They are an operator, they have online studios, which is really how things are sold.
Unknown Executive: In China.
Unknown Executive: And it's a true operator versus what I would say is more of a middleman.
Unknown Executive: Historically, selling our tags and so you know in addition to the contractual.
Unknown Executive: The limitations, we have are our protections we have we plan on making sure that we hold these partners moving forward accountable. We also have a JV partner it as a subsidiary.
Unknown Executive: <unk> Li <unk> Fung.
Unknown Executive: That is on the ground that is constantly meeting with these partners and we will be holding them too.
Unknown Executive: The contract as well.
Unknown Executive: Great. That's a great color there. Appreciate that. And then as the business as a whole has sort of been transformed over the past sort of four or five quarters, and obviously you've shed a lot of cost out of the business, highlighted by the significant year-over-year narrowing of the EBITDA loss, I'm just wondering if you could share any additional color on sort of, as we move through this year, the sort of cadence that as we approach break- [inaudible]
Unknown Executive: Great.
Speaker Change: Great color there appreciate that and then as the business as a whole has sort of.
Unknown Executive: <unk> been transformed over the past four five quarters, and obviously, you've said a lot of cost out of the business.
Unknown Executive: Highlighted by the significant year over year.
Unknown Executive: The EBITDA loss I'm, just wondering if you could share any additional color on sort of as we move through this year.
Unknown Executive: Sort of cadence as we approach breakeven and then when do you expect to sort of be positive on both a quarterly basis events with them on a full year basis.
Marc: Hey Jason, I'll answer that. It's Marc here. You know, when we look at the cadence of what profitability is going to look like, I think going into the second quarter, you're going to start to see the licensing revenues come back up. I think we'll probably be, not that we're giving guidance, but somewhere looking like the second quarter of a year ago, which was about breakeven. And I think it's the back half of the year when, you know, you'll continue to see the corporate expense reductions play through the numbers.
Unknown Executive: Hey, Jason I'll answer that it's mark here.
Marc: When we look at the cadence of what the profitability is going to look like I think going into the second quarter.
Marc: Youre going to start to see the licensing revenues come back up I think we'll probably be.
Marc: Not that we're giving guidance that some more looking like the second quarter, a year ago, which was about breakeven and I think it's the back half of the year when Youll continue to see the corporate expense reduction play through the numbers on a per debt will continue to perform like it is.
Marc: Honey Burdett will continue to perform like she is. Licensing should be back up to at least 70% of what it was. And then we'll start to see the benefits of all the positive things that we're doing right now at Centerfold or, you know, the traditional playboy.com.
Marc: Licensing should be back up to at least 70% of what it was.
Marc: And then we will start to see the benefits of all the positive things that we're doing right now with center fold or traditional Playboy dot com.
Jason Ross Tilchen: Okay, great. Thank you very much.
Speaker Change: Okay, great. Thank you very much.
Operator: The next question comes from Greg Pendy of Chardon. Please go ahead.
Jason Ross Tilchen: The next question comes from Greg <unk> of Chardan. Please go ahead.
Gregory R. Pendy: Hey guys, thanks for taking my questions. Just a few on Honeybird debt, it looks like it was a little bit above where I was looking, but I know you put through 10% price increases. Was that generally across the board, and when did those take place?
Gregory R. Pendy: Hey, guys. Thanks for taking my questions.
Gregory R. Pendy: A few on honey berget it looks like it was a little bit above where I was looking but I know you've put through 10% price increases was that generally across the board and when did those take place I guess, what I'm trying to get at is get at it was a little bit of a sense of traffic versus ticket.
Marc: I guess what I'm trying to get at is a little bit of a sense of traffic versus ticket. What That Might Have Looked Like. Thank you.
Marc: But that might look like thanks.
Marc: No problem, Greg, and Marc. In terms of the 10% price increases, they've been rolling in pretty slowly, you know, with the vast majority of them being done here in the second quarter, so it wasn't all, you know, wasn't all about the ticket size, you know, so we saw a little bit of growth in our ASP, but it was a lot, a lot of it was traffic and just driving higher conversion. Okay, that's very helpful.
Speaker Change: No problem, Greg Mark.
Marc: In terms of the 10% price increases they've been rolling in pretty slowly.
Marc: With the vast majority of them will be done here in the second quarter.
Marc: Wasn't all I wasn't all that ticket size.
Marc: So we saw a little bit of growth in our in our Asps.
Marc: There was a lot of a lot of it was traffic and just driving higher conversion.
Marc: Okay, that's very helpful.
Unknown Executive: Yeah, I think, Greg, we also commented on where we are with the business. I think we've had two solid quarters now in a row. And I think, as we said, and as I previously commented on last year, I think it's now time for us to begin that process that we've talked about, knowing that long-term we are not the right owner for that.
Speaker Change: Yes, I think Greg we all have commented on where we are with the business I think we've had two solid quarters now in a row.
Unknown Executive: And I think as we said I think.
Unknown Executive: We previously commented on last year I think it's now time for us to to begin that process that we've talked about.
Unknown Executive: Knowing that long term, we are not the right owner for that business.
Gregory R. Pendy: Yep, no, I fully understand. Yeah, it's just been it.
Speaker Change: Yes, no fully understand yes, it's just been.
Speaker Change: That's helpful. And then where were you at with the store closings is that going to happen later in the year or you said a few underperforming stores in Australia might get trend.
Unknown Executive: That's helpful. And then where were you with the store closings? Is that going to happen later in the year? You said a few underperforming stores in Australia might get trimmed.
Unknown Executive: Yeah, so we have, we closed one in Australia already. We just closed one in the U.S. that was losing money. So our U.S. floor wallet margin was well in excess of 25%, and we had one store that was just not there. And it was kind of sitting on its own, so it just made sense to get out of that business based on where we were. And, you know, in the rest of Australia, there are just a few more stores that, as we look at putting this in a position to ultimately be sold, there are a few stores that were clustered too close to a sister store.
Speaker Change: Yes, so we have we.
Unknown Executive: We closed one in Australia already.
Unknown Executive: <unk> closed one in the U S that was losing money so our U S. Four wall EBITDA margin was well in excess of 25%.
Unknown Executive: We had one store that was just not there.
Unknown Executive: And it was kind of sitting off on its own. So it just made sense to get out of that business based on where we were.
Unknown Executive: And I and.
Unknown Executive: The rest of Australia is there just a few more stores that as we look at putting this in a position to ultimately be sold there are a few stores that were cluster too close to the store.
Unknown Executive: And so we'll close those, but that's just a small number of stores, a handful, let's call it three to four stores. But, you know, one of the things that we're seeing that's really encouraging is the shift towards e-comm. And so every quarter, we see more money or a higher percentage of our sales coming from e-comm as opposed to our brick and mortar stores.
Unknown Executive: Until we close those but that's just.
Unknown Executive: Amount of five stores, a handful lets call three to four stores.
Unknown Executive: But you know one of the things that we're seeing that's really encouraging to us the shift towards E com.
Gregory R. Pendy: Okay. Great. That's helpful.
Unknown Executive: And so we're driving every quarter, we see more money or more percentage of our sales coming from E com.
Gregory R. Pendy: e-commerce as opposed to a brick and mortar stores.
Gregory R. Pendy: Okay, Great. That's helpful. And then just moving onto the licensing deal just that I'm thinking about this hopefully correctly.
Gregory R. Pendy: And then just moving on to the licensing deal, just that I'm thinking about this, uh, hopefully correctly. Uh, the new deal is a 37 million guarantee over a five-year period. So that would be flowing into, I guess, next quarter, roughly 2 million a quarter. Is that a little bit under that? At a minimum.
Gregory R. Pendy: The new deal, it's a $37 million guarantee over a five year period, so that would be flowing into I guess next quarter roughly $2 million a quarter is that a little bit under that on a minimum royalty.
Marc: Yeah, at a minimum, I think the best way to look at it is that we did $9.7 million in licensing revenue a year ago. We did $4.1 million this year, and I think that with that $9.7, we can be somewhere around 70% of that on a go-forward basis in the quarters. Now, that's assuming all things being equal. To the extent that we're able to layer on new deals, grow the business, and have excess capacity in China, we can do better than that. But in terms of baselining your model, I would say that about 70% of where we were versus a year ago quarter.
Speaker Change: Yeah on the minimum.
Marc: I think the best way to look at it is we did $9 7 million of licensing revenue a year ago, we did $4 $1 million. This year and I think that that nine seven we can see somewhere around 70% of that in on a go forward basis in the quarter. So now that's assuming all things being equal to the extent that we're able to layer on new deals.
Marc: Grow the business have overages in China, we can do better than that.
Marc: But in terms of base lining your model I would say that about 70% of where we were.
Marc: Versus a year ago quarter.
Gregory R. Pendy: Okay, that's very helpful. And then, just moving on to the rebranded Playboy Club, are there any notable events this year that we can look forward to? It looks like now you're in a much better position to go on offense and just kind of thinking about how you're going to build brand awareness this year to get more eyeballs on the site.
Speaker Change: Okay. That's very helpful. And then just finally, just moving on to the rebranded Playboy club are there any notable events. This year that we can look for it looks like now youre in a much better position to go on offense and just kind of thinking about how youre going to build brand awareness.
Gregory R. Pendy: During this year to get more eyeballs to the site.
Unknown Executive: Sure, thanks, great question. I think we've talked about this previously, you know, the first thing that I needed to do was to bring in a team. And I'm pleased to announce that we've recruited a team, and we'll look forward to them talking and presenting on the next earnings call. But this is a senior team. For lack of a better word, it was an aqua hire.
Gregory R. Pendy: Sure.
Speaker Change: Thanks, Greg for the question.
Unknown Executive: Yeah.
Unknown Executive: I think we've talked about this previously.
Unknown Executive: The first thing.
Unknown Executive: That I needed to do was to bring in a team and I am pleased to announce that we've recruited a team and we'll look forward to them talking and presenting on the next earnings call. But this is a this is a senior team for.
Unknown Executive: A lack of a better it was an aqua hire we brought in multiple people at the same time that have deep experience in content.
Unknown Executive: We brought in multiple people at the same time that have deep experience in content and on the creator side of it. And so the biggest thing that we can do, and we've never really spent traditional money against this brand from an advertising perspective, but it's through content. And this team is an expert in that and driving content with the goal of commerce on the backside of that. That not only directly benefits Playboy, but there will be... a downstream effect to that on the licensing business?
Unknown Executive: And now on the creative side of things and so the biggest thing that we can do and we've never really spent traditional money against this brand from an advertising perspective, but is through content and that this team is an expert in that and driving content content with the goal of commerce on the backside of that not only does not own.
Unknown Executive: We directly benefits Playboy and there will be.
Unknown Executive: A downstream effect to that to the licensing business.
Unknown Executive: But the directly benefits our creators and so what you'll start to see from us here.
Unknown Executive: But it directly benefits our creators. And so what you'll start to see from us here, you know, over the next month or two is a website that has a lot more content on it. You'll start to see a completely different social media strategy on YouTube, TikTok, Instagram, etc. And then I think you'll, at some point this year, you'll hopefully see something coming with a nod to the past of the company and one of its hero products.
Unknown Executive: Over the next month or two.
Unknown Executive: <unk> is a website that has a lot more content on that youll start to see a completely different social media strategy on Youtube tick tock, Instagram et cetera.
Unknown Executive: And then I think you will at some point this year.
Unknown Executive: You'll hopefully see something coming.
Unknown Executive: With.
Unknown Executive: A nod to the past or the company and its one of its hero products and so without getting exactly into the timing of that I think you know, bringing back the bringing back the platelet franchise leaning into what made this company famous over the years, what kind of a reward for creators working with us.
Unknown Executive: And so without getting exactly into the timing of that, I think bringing back the Playmate franchise, leaning into what made this company famous over the years, what better reward for creators working with us than being able to feature them through Playpoint. Great.
Unknown Executive: Being able to feature them through Playboy content.
Gregory R. Pendy: Great, now that's helpful. Thanks a lot.
Speaker Change: Great No that's helpful. Thanks, a lot.
Ben Kohn: This concludes our question and answer session. I would like to turn the call back over to Ben Kohn for any closing remarks.
Gregory R. Pendy: This concludes our question and answer session I would like to turn the call back over to Ben Cohen for any closing remarks.
Ben Kohn: I appreciate you all dialing in for the Q1 call and look forward to talking to you with our new digital team and the media team on the next earnings call. Thank you.
Ben Kohn: I appreciate you all dialing in for our Q1 call and look forward to talking to you with our new digital team and.
Ben Kohn: Our media team on the next earnings call. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.