PLBY - NASDAQ

Greetings, and welcome to PLBY Group's First Quarter 2025 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Matt Chesler. Thank you. You may begin.

Thank you, operator, and good afternoon, everyone. I'd like to remind you that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-Q filed today by PLBY Group, which may be accessed on the SEC's website and on 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. 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 and could cause the company's actual results to differ from its historical results and forecasts, including those set forth in the company'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 during this call do not place undue reliance on any forward-looking statements. During this [indiscernible] company may refer to non-GAAP financial measures. Such non-GAAP measures are not prepared in accordance with [indiscernible]

Ladies and gentlemen, please stand by. We're having some technical difficulties. Matt, you may proceed.

With that, I will hand the call back over to the operator to begin the Q&A session. Operator?

[Operator Instructions]. And our first question comes from the line of George Kelly with ROTH Capital Partners. Please proceed with your question.

Hi, everyone. Thanks for taking my questions. First, if we could start with Honey Birdette. I was wondering if you could give us your expectations just as you look out for the next couple of quarters with respect to growth. And like when does the compare for the discounting quarters last year, when does that compare ease? And then also with gross margin, should we expect much sort of change in gross margin in the near term?

Hi, George, it's Marc. In terms of comps, we're lapping after the first quarter. So in the second quarter, we're going to be up against an easy comparable from a sales standpoint, and we're already seeing that we're ahead of plan right now in the second quarter. So things look good at Honey Birdette. Do you have a second part to that question?

Yes, just on the near-term gross margin expectations there, too. And I guess the second part of that would be any kind of impact from Chinese tariffs?

Yes. So the near term, right now, all the product that we're selling pretty much in the second quarter is a product that was brought in prior to the tariffs. When we look at the tariff impact going into 3Q and 4Q, it's tough to quantify right now, if you were to assume the tariffs that they have right now. It's about $1 million impact, which is not that big of a number. Now to help combat that, we put 10% price increases in already. And in addition to that, we're changing some of our shipping threshold for free shipping. So there are a number of levers that we can pull. The good thing about the price increases is that should the tariffs stay where they are not go back up, the price increases stay in regardless, and we'd get a pickup from that.

Yes. So George, it's Ben. Remember, the U.S. is roughly $35 million of the business. And so we've put a 10% price increase in on that. And should tariffs go back up, we have additional levers that we can pull as other companies have. But the goal was to keep the price increases as permanent. And so if tariffs stays the same, there should actually be a pickup assuming there's no degradation in volume moving forward.

And the $1 million that you mentioned, that's for the back two quarters?

Yes, it's for the back two quarters.

Okay. And then second topic, I was hoping you could chat on is the Byborg. What are their plans as far as new product development time line, anything you're comfortable sharing on the call just sort of that's in the works with Byborg?

Yes. So we've been working actively with them. We've seen the new designs they have for the existing products as well as a live cams business. We're excited by it. But if you remember, we have a great deal with them. It's a $20 million a year minimum guarantee. And then we get a significant percentage of the ops of 25% above that. I think as I've stated previously, I think that over the life of the deal, we should hopefully see profits well in excess of MGs. But in the beginning years, they're developing and spending money building out those products. And so for our purposes, we're assuming it's $20 million a year right now is the MG moving forward. We will receive a further $20 million payment from them this year. It's scheduled for July 1st. That is $5 million for the last two quarters of the year, plus what is effectively a $10 million security deposit which is a prepayment of the last six months of year '15 licensing term.

Okay. And there that second equity investment, remind me that the vote did got moved to the annual meeting, is that correct? Is that later in May?

Yes. So the dates were sort of coming together. And so we decided, just based on participation typically in the annual meeting to put that to the shareholders as part of the annual meeting. That's scheduled for June 16th.

Okay. And then last question for me is about the other licensing business. You made comments in the press release about enthusiasm or what you think is potential around certain other categories. I think you mentioned the club and something maybe hospitality or something else. What stage are -- is that something we could start to see in the back half of this year? Do you feel like you're getting close? Just any more context around those comments would be helpful.

Yes. So I think it's important to level set sort of where we are and what we've done, right, and then I'll talk about that. So almost two years ago, we embarked on this asset-light model. And Q1 was our first positive EBITDA quarter since '23. So I feel really good where we are now as a company and what the future looks like for the balance of this year and moving forward, especially with our adjusted EBITDA positive $2.4 million. There was actually $1 million of costs in the first quarter related to personnel that we've already eliminated at the end of the quarter. So that would have actually been positive $3.4 million. But what we have is a portfolio of really stable high-margin licensing deals. And now what we're actually able because we have a plan to continue to reduce overhead, but we're in a position now where we should start to produce cash as a company, we can now sort of focus on growth. And I think that comes from two areas. As we mentioned in the press release, we're seeing a lot of traction in what I would say is gaming. And then in the hospitality or LBE side of things. We have actually been approached by two what I would say is some of the best operators we know of in the United States to develop some form of, for lack of a better term, Playboy Club. The physical build out of that and the development of that would actually take a while. That's a one-to-two-year project. But the licensing deals themselves for gaming and some of the other stuff we have in our strong pipeline, that is something that we should see in the back half of this year starting. Obviously, revenue recognition, when you do a multiyear deal, that's subject to sort of straight lining the accountants. And then in addition to that, what's really interesting is what happened with the magazine. And so we sold out of the magazine albeit a small print run online. And then the sell-through of Barnes & Noble's was unbelievable. They were our exclusive brick-and-mortar or new stand sale. And what we've seen come out of that actually, and we're going to do one additional issue this year as we ramp up to hopefully four issues next year, is the ancillary revenue streams that come off of that. Think about these as quasi licensing streams actually from a margin profile perspective. But when we start to get into opportunities around mainstream content. So TV shows, both linear and digital, as well as paid voting. We actually have a history of doing paid voting before. Back when we weren't asset-light, we had launched Playboy Lingerie, and we've actually done the paid voting campaign to find the next phase of Playboy and that generated a significant amount of revenue and EBITDA for us. This deal that we're doing is slightly different, and we'll talk about that on the next call. But it's something that we think is an always on ongoing competition, really embracing our community and allowing them to help pick or dominate who might become the next Playmate as we gear up for 12 Playmates a year. And then the ancillary products around that, not only the magazine, but the calendars. We had a long history of producing a Playmate calendar that used to produce multiple millions of dollars a year in sales. And so there's a lot of other revenue streams that can come on the back of what we're doing from a content perspective. And then in addition to that, we get the benefit of what I would say is really the strong brand awareness and rebuilding the brand. And so I feel really good with where we are from our plan to continue to reduce overhead moving forward, continuing to increase EBITDA. And then really what is the growth opportunities, which I would say, if I look over the last three to five years or probably the strongest growth opportunities we've seen. It doesn't mean it will hit in '25. We're really focused on sort of '26 and beyond. But you could see paid voting in the second half of this year. You could start to see a calendar that we're planning for the magazine, which will come out in November. And then you also saw in the first quarter some sponsorship revenue, and we think that will continue and grow moving forward as we continue to refine what I would say is our media and content strategy moving forward, George.

Okay, got you. Thank you very much.

And now I would like to hand it over back to Matt Chesler for further questions.

Yes. Operator, we had an additional question on the drivers of the licensing business actually in the quarter from the team at Jefferies, Salil Sanjiv and James Heaney. Ben, I think you answered a lot of this. If you'd like to provide any more details on the drivers of the quarter, go ahead. If not, perhaps turn it over and have some concluding remarks.

Sure. I'll just reiterate. So obviously, licensing was up huge, 175% year-over-year. With Byborg, without Byborg, it was still up over 50%. The two primary reasons for that were: One, the Byborg deal went into effect January 1. They've already made their first two payments. The second payment came in after the quarter ended as the contract calls for, but that's $5 million a quarter. And then in addition to that, it's the year-over-year improvement in rebuilding our China licensing business. We're encouraged by what we see. Obviously, a tough environment with the tariff war, but our partner is doing well, and we think there's continued growth there. And then what we've been really working on is the pipeline moving forward, which we should start to see the benefit of that in the third and fourth quarter with that pipeline and getting some of these deals across the finish line, which we're very close on in gaming and other areas. And so I'm excited by that. And I'm really excited, as I mentioned, with some of the opportunities we have around content licensing, FAST channels, Playmate boating, etcetera, as we move forward. Anything else, Matt, for questions that came in online?

Let me take a quick look. We do not have any more questions online.

Great. I'll conclude it by thanking everyone for joining our Q1 2025 call. Look forward to talking to you sometime in the beginning of August when we report our Q2 earnings. So thank you, everyone.