Playboy Inc (PLBY) 2024 Q1 法說會逐字稿

Good day and welcome to the PLBY Group fourth quarter 2024 earnings conference call. (Operator Instructions) 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.

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 8-K 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. 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 forecasts, 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. 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 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 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 8-K today.

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

(Operator Instructions) Jason Tilchen, Canaccord Genuity.

Good afternoon. Thanks for taking my questions. 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 announcement regarding these new agreements in China for the licensing joint venture.

I was wondering if you could share any additional color on how these came about so quickly? What sort of benefits and agreements are in place in these deals that you're excited about improvements on the previous structure of the deals that you've had in China? And when the timing of when we could expect some additional revenue to flip [these] deals? Thanks.

Thanks, Jason, for the question. What we've been working on new deals in China for months now really since we terminated our previous licensing partners, in addition to the deals we signed, we have a robust pipeline and 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, in the second quarter and then moving forward. The new deals are very different than the old deals. There's much better accountability in those deals. There's the prohibition on some licensing the brand without our express written consent.

And then from a guarantee perspective, we actually have much better [teeth] in these deals versus an entity in China, personal guarantees are enforceable in China, and we have personal guarantees back in these deals as well. The strategy moving forward is different than the old deals.

Given what's happened to China and the economy in China really post COVID, and it's well documented out there from a macro perspective on consumer spend, we needed to rebuild the business with the right partners, but we wanted to do that with shorter term deals that gives us the flexibility to increase NGs over time.

But in the short term, incentivizes our partners 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.

Duhan, on our largest partner, they are an operator. They have online studios, which is really how things are sold in China. And it's a two operator versus what I would say is more of a middleman historically selling our tags. In addition to the contractual limitations we have or protections we have, we plan on making sure that we hold these partners moving forward accountable.

We also have a JV partner as a subsidiary, Li & Fung, that is on the ground that is constantly meeting with these partners, and we'll be holding them to the contract as well.

Right. That's really great color there. Appreciate that. And then as the business as a whole has been transformed over the past 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, as we move through this year, cadence as we approach breakeven and then when you expect to sort of be positive on a quarterly basis and then sort of on a full year basis?

Hey, Jason. I'll answer that. It's Marc here. When we look at the cadence of what the 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 some more 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'll continue to see the corporate expense reductions versus the numbers. Honey Birdette will continue to perform like it is, licensing should be back up to at least 70% of what it was. And then we'll start see the benefits of all the positive things that we're doing right now at the CentreFold or traditional playboy.com.

Okay, great. Thank you very much.

Greg Pendy, Chardan.

Hey, guys. Thanks for taking my questions. Just a few on Honey Birdette. 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? 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? Thanks.

No, problem, Greg. This is Marc. In terms of the 10% price increases, they've been rolling in pretty slowly with the vast majority will be done here in the second quarter. It wasn't all the ticket [size]. We saw a little bit of growth in our ASP. But a lot of it was traffic and just driving higher conversion.

Okay. That's very helpful.

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, we previously commented on last year, 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 business.

Yup. No, fully understand. That's helpful. And then where were you at with the store closings? Is that going to happen later in the year? You said a few underperforming stores in Australia market trends?

Yeah. So we have we closed one in Australia already. We just closed one in the US that was losing money. So our US four wall EBITDA margin was well excess of 25%, and we had one store that was just not there. And it was kind of sitting off on its own. So it just made sense to us to get out of that business based on where we were.

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 a cluster, too close to sister store. We'll close those. But that's just a small amount of fast stores, a handful, let's call it, three to four stores.

But one of the things we're saying that's really encouraging to us is the shift towards e-com. We're driving every quarter; we see more money or more percentage of our sales coming from e-com. E-com is opposed to our route brick and mortar stores.

Okay, great. That's helpful. And then just moving on to the licensing deal, just so that I'm thinking about this hopefully correctly, 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?

Yeah, on a minimum. I mean, 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 $9.7 million, we can be somewhere around 70% of that on a go forward basis on 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, have overages 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.

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 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 during this year to get more eyeballs to the site?

Sure. Thanks, Greg, for the question. I think we've talked about this previously. The first thing that I need to do was to bring in the 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 it was an aqua hire. We brought in multiple people at the same time that have deep experience in content and on the creator side of things.

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 with the goal of commerce on the backside of that. That not only directly benefits Playboy, and there will be a downstream effect to that to the licensing business, but it directly benefits our creators.

So what you'll start to see from us here 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, et cetera. 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 it's one of its hero products.

Without getting exactly into the timing of that, I think bringing back the playme franchise, leaning into what made this company famous over the years, what better reward for creators working with us, then being able to feature them through PayPoint content.

Great. Now that's helpful. Thanks a lot.

This concludes our question-and-answer session. I would like to turn the call back over to Ben Cohen for any closing remarks.

I appreciate you all dialing in for our Q1 call and look forward to talking to you with our new digital team and media team on the next earnings call. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.