Playboy Inc (PLBY) 2024 Q4 法說會逐字稿

Good afternoon, everybody, and welcome to the Playboy Group's Fourth Quarter 2024 Earnings Conference Call.

Hosting today's call are Ben Kohn, Chief Executive Officer; and Marc Crossman, Chief Financial Officer and Chief Operating Officer. The company will be hosting a question-and-answer session today. (Operator Instructions) As a reminder, this conference is being recorded.

While we wait to fill the queue, I would like to hand the call over to Matt Chesler from Investor Relations. Thank you. Please go ahead.

Good afternoon. I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 10-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 the 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 measure is available in the earnings release, the PLBY Group filed with its Form 8-K today.

I'd like to turn the call over to Ben before we begin the Q&A session. Ben?

Thanks, Matt. 2024 was a tough year for the company, but the necessary year as we reposition the business to an asset-light model. We started to see the results of that in Q4, where EBITDA started to turn positive, excluding foreign currency. But most importantly, we completed the Byborg deal in the fourth quarter, which from a profitability and cash flow perspective moving forward completely changes the game. And so as we enter 2025, we have a new baseline of cash flow that allows us on a full year basis to be free cash flow positive, especially after the first six months, we will be completing the transition of our legacy adult properties in the Playboy Club to Byborg.

What's really exciting is the growth prospects we have moving forward, both in existing licensing deals like the upside we have in the Byborg deal as they start to execute on the turnaround of those properties. But also new opportunities that we know work improving categories that we have monetized historically, like in the gaming space. That, coupled with the really positive re-launch of the Playboy Magazine last month at Super Bowl will be part of our strategy moving forward.

We plan on releasing four issues once we get fully ramped up of the magazine and developing new revenue streams around that. That magazine is really our brand viable moving forward. It's that asset that we leave behind, and it's the marketing vehicle for the company. But we're not wanting it to make money just on print. There's opportunities around paints and hoarding, there's opportunities around sponsorship as we launch events around that; and there's opportunities through subscription or membership around the magazine. And so those are the things we're focused on moving forward.

For the first time in the last two or three years, we actually have a chance to really focus on the growth of the business, something that we have not been able to focus on because of the balance sheet that we've had historically. And so as we move into 2025 and the balance of the year, very excited by the prospects we have. And actually, this new issue that we hope will be out sometime in August tied to a midsummer night stream party and the celebrities and influencers that will be working with us in that magazine and that magazine really taking its editorial form, allow us to work with in a promotional vehicle.

And so with that, we'd love to open it up to questions.

Thank you. We'll I'll be conducting a question-answer-session. (Operator Instructions)

JP Wollam, Roth Capital Partners.

Great, hi, Ben. Hi, Marc. Thanks for taking my questions here. So a few for you guys. Maybe if we could start on the revenue side and just want to think about the $120 million, and also kind of more specifically the minimum guarantee in the licensing side, so I'm trying to just get a sense of in that non-MG portion of the licensing revenue, how are you assessing what the risk is to that, especially given that licensing is such a great profit driver for you guys. So one, how are you assessing risk there?

Two, you touched on the gaming space, but how are you thinking about upside in licensing, specifically in 2025?

And then just the third one is just any give and takes around Honey Birdette, and how you're thinking about how that plays into the $120 million? Thanks.

Hi, JP, it's Mark. Let me just start around the risk you were talking about on licensing revenue. The other 14% deed is not guaranteed minimums. It is made up of overages and new deals. And really what happens 2024 is when we set the pipeline for 2025. So we feel really good about that number. We historically know what our overages look like. We're not making assumptions that we're going to see anything out of the norm. So I won't say anything guaranteed, but all the work was done in 2024 to set ourselves up for 2025.

As it relates to gaming, Ben, do you want to?

Yeah. Look, I think when I look at where we generate the bulk of our licensing revenues today, that's in the clothing sector. And so I think the pipeline is strong of new deals. But when I think about categories like gaming, where we used to get paid millions of dollars. We're not talking about six figures here. We're talking about seven figures here. Dollars from land-based casinos, from online gaming, we have a strong pipeline of gaming opportunities moving forward.

And so what I'm focused on is looking at where the company used to generate revenue, i.e., gaming, and how do we start to rebuild that category with the right partners moving forward. There's opportunities like that. There's new opportunities like paid fan boating tied to the magazine. So I look at it and say there's a lot of upside in the numbers.

One thing to note is licensing is not a linear growth business. It grows in a step fashion. And so what we're really focused on is doing fewer but much larger deals moving forward versus, as we said, historically, just answering the phone when it rings, and taking deals. And so I want to focus on bigger deals with better partners. If you look at the Byborg deal, we have significant upside in that deal, right? And we have a minimum guarantee of $20 million. So for everyone's recollection, that was a business that historically was losing money for us on the digital side for the most part.

We turned that into basically 100% margin licensing business, and we retained a significant piece of the upside, as they get those properties online. And even there are meetings with them, I think there is a lot of low-hanging fruit on their expertise on where they can improve those properties. And so it doesn't mean that everything will be a smooth road moving forward. But if you look at it going back to the risk question, I think there is more upside than there is downside in the business.

Obviously, we're moving into an economy where consumer spend might be slowing a little bit. And obviously, there's uncertainty with tariff for us, but that doesn't really affect us because the way we license the business is mostly by territory, where a product that is produced in that territory is then sold in that territory as well.

Great. Thank you. And then, I guess, maybe just moving kind of down the financial statement a little bit. Understanding that you didn't give any kind of EBITDA guidance, I just want to maybe talk for a second about like the opportunity for reorganizing corporate infrastructure, given the transition to Byborg and just sort of how you're thinking about G&A. We don't need to use numbers specifically, but are you at a place where you've kind of identified what corporate can look like in your post-Byborg deal world? Are you still assessing what that looks like? Kind of where are you in that process?

So I think we have assessed it, and we have begun making all of those changes, and we'll continue to make those changes through the first half of this year, when we're supposed to have transitioned the properties fully to Byborg. So they own the properties as of January 1. They've already made their first licensing payment to us. But we have transition costs that we will be incurring as we move those businesses to them.

I think what we've said historically is on a full year basis, we expect to be free cash flow positive. You can back into that number because you know how much debt we have with $152 million of senior debt today, the interest rates tied to that and then the amortization. And so although, we're not getting specific, our goal is to be free cash flow positive.

I believe that at this point, we have solved their balance sheet issues. There's opportunities because, for instance, we still own Honey Birdette. But overall, the business is going to be free cash flow positive. That is what we're striving to and that's how we backed into our corporate overhead in addition to rebuilding the corporate overhead line by line and saying, what do we need and what don't we need.

What we do know we want moving forward is to be an asset-light business with as few employees as possible to service that. Obviously, there are certain things that are important, but we want to make sure that we partner with the best operators that are out there that have better skill sets than we do. And we focus on what we're good at, which is the brand of Playboy. It's why we're bringing back the magazine. We're going to be bringing back 12 playmates, and then there's a lot of opportunities as we bought back that magazine that have come to light that we're not forecasting right now but they give us significant upside around new revenue opportunities around that print.

Understood. And I think I'll kind of finish with one and then hop back in the queue. But you kind of led me there. I think the press release had some information about kind of some of these additional revenue sources and I think there was maybe some podcasts and some videos and some different sponsorship stuff. How would you assess -- like what's the rationale around kind of going further down that road? And how do you think about balancing sort of -- keeping that asset-light model a lot of licensing and then using the magazine as kind of more marketing and publicity? This feels a little more going further there. So, I guess, kind of, how are you just -- what's the rationale behind some of those additional revenue levers?

Yes. So, we have to go where consumers consume content today. And people, as much as magazine is a beautiful product, and I think the first issue we put out is a good starter issue, I think there's a lot of areas to continue to improve on that, but this can take us a little while to get back up to full speed on that. And we're doing that in an outsourced model is as well.

But we don't -- we're not -- we're one of the largest brands in the world, and we don't spend any money as a company on marketing ourselves, right? And so, our content becomes our marketing vehicle and our brand voice. And we're very focused on, sort of, returning Playboy to what its roots was.

It's a men's brand at the end of the day, first and foremost. It doesn't mean that we don't have a big women audience for the company that buys our products. But our core audience are men. And when you think about the key words when I think about Playboy, I think about fun, I think about sexy, I think about provocative, I think about aspirational. And the magazine allows us to work with talent through an editorial lens in a way that allows us to punch way above our weight. So, we're not paying people to work with us in the magazine. We're using the editorial lens of the magazine to really magnify and amplify that editorial voice and the positioning and branding of the company.

The podcast and other things, the simplest way to think about it is taking franchises like the platelets, which are one of the best brand ambassadors out there or the Playboy Advisor, which is a column that's been in the magazine, that gave sex and relationship advice.

How could you take those to distribution mediums today where consumers are consuming content? So, it's great to have the Playboy Advisor in the magazine, but that's really the byproduct of being able to interact with their audiences on a daily and leasing basis. The way to do that is through podcasts, through video series, through social media where we are staying relevant in our consumers' lives on a daily basis. The magazine will come out once a quarter. It's a beautiful glossy, it's something that you can leave on your coffee table and the price point will reflect that. But it's the byproduct of content that we can partner with other people and leverage those channels to build an audience, much larger without spending the money by working with the right influencers and celebrities today that already have those audiences and are communicating, but taking these franchises that have existed at Playboy for the last 70-plus years and bringing into the right distribution vehicles for the way consumers consume content today.

Playmates is another great example of that. It allows us to work and we're going to have 12 a year is what we're going to ramp up to plus the Playmate of the Year. Plus, we'll have a whole host of runner ups. But one of the things we've been looking at, and we actually did this a couple of years ago, with Playboy lingerie when we ran a search to find the face of Playboy lingerie, we had tens of thousands of women apply to that. You could do the same thing today, but do it through a combination of the panel of celebrity judges or editors coupled with ban voting. Examples of that are the voice standing with the stars and other shows that have really leveraged their contestants in the audiences of those contestants. And there's a lot of money there. And that helps us from a brand perspective because the women are going out to the social media channels to get their fans to vote for them. And so, that allows the opportunity for sponsorships. It allows the opportunity for live events. And I think there's an opportunity to bring back through partnerships, Playboy Hospitality.

Got it. That makes sense. Well, I appreciate the answers, and I'll hop back in the queue.

Thank you.

Thank you. It does look like there are no further questions at this time. I'd like to pass the call back to Ben for closing remarks.

I appreciate everyone joining our Q4 and annual call and look forward to talking to everyone on our next earnings call. So thank you for joining.

Thank you. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.