PLBY Group Q3 2023 Earnings Call Transcript

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November 9, 2023

Key Takeaways

  • Honeybird operational improvements: the company will implement a 10% price increase starting in Q4 and adjust shipping policies, and has decided against selling the brand now while exploring partnerships to drive growth without further cash outlays.
  • China licensing business: management has audited and terminated non-performing partners, and is evaluating an unsolicited offer to sell its Chinese IP and exit the market for a significant cash infusion, pending geopolitical and valuation considerations.
  • Creator platform strategy: PLBY is shifting from GMV to digital revenue as its key metric, rolling out membership tiers and an affiliate program to offer creators more favorable monetization than competitors like OnlyFans.
  • Retail store footprint: PLBY currently operates 48 stores in Australia, 12 in the U.S. and 3 in the U.K., with no immediate plans for new openings as it explores a capital-light expansion model through strategic partners.
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Earnings Conference Call
PLBY Group Q3 2023
00:00 / 00:00

There are 5 speakers on the call.

Operator

Good afternoon, everyone, and welcome to PLBY Group's Third Quarter 2023 Earnings Conference Call. Hosting today's call are Ben Cohen, Chief Executive Officer and Mark Crossman, Chief Financial Officer and Chief Operating Officer. The company will be hosting a question and answer session today. While we wait for the queue to fill, I would like to hand the call over to Ashley DeSimone of ICR.

Speaker 1

Thank you, operator. Good afternoon. I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 8 ks and Form 10 Q filings made 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 PLBY Group'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.

Speaker 1

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 PLB Y Group's actual results to differ from its historical results and forecasts, including those risks set forth in PLD Y Group'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. Please note that we are not fully aware of the financial statements. During this call, TLD Y Group may refer to non GAAP financial measures.

Speaker 1

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 PLDY Group filed with its Form 8 ks today and in its Form 10 Q filed. With that, I will hand the call back over to operator to begin the Q and A session. Operator?

Operator

Available. And our first question comes from the line of Jason Tilton with Canaccord Genuity. Please proceed with your question.

Speaker 2

Great. Good afternoon. Thanks for taking the question. First off, I'm curious, you mentioned in the press release that you're not 100% convinced about selling Honeybird debt. I'm just curious what are some of the different factors you're weighing as you think about that asset and how it fits into your broader platform going forward?

Speaker 2

Maybe what are some of the options beyond continuing as is that you're currently looking at the moment?

Speaker 3

Thanks, Jason. Good afternoon. It's Ben. I think right now we are making the operational improvements we've talked in previous calls to Hany Burdett. As we said today, we are instituting a 10% price increase that will start in the 4th quarter It will take us really until probably the Q2 of next year for all products, but we have not raised prices in the last 2 years.

Speaker 3

And yes, we've faced rising inflation with wages, product costs and shipping costs. We've also changed are free shipping as well as our expedited shipping policies and we have other cost measures that we're taking. Given the macro environment right now from M and A, especially on the retail side. We don't think it's the right time to maximize shareholder value by selling that. However, we are looking at strategic alternatives and are pursuing partnerships, where we might be able to bringing a partner to help us grow the business without using cash from our balance sheet.

Speaker 2

Great. That's really helpful. And then just a follow-up, not on hybrid debt, but on the licensing business. You mentioned in the prepared remarks and the press release about potentially having a Chinese private equity firm making an offer for some of the Chinese trademarks. I Just curious if you could expand a little bit about how that would impact the shape and trajectory of the licensing business in that market going forward?

Speaker 3

Sure. There's not much I can say at this point. What I can say and we talked about this in the press release as well Over the past few months, we've done extensive audits of our old partners, both from a legal and a financial perspective. Previously they haven't they our partners have not been paying us. So we have decided to terminate a number of them.

Speaker 3

We have strong interest from some of their subs as well as new partners that might be interested in licensing the brand. And at the same time, we received an unsolicited offer to buy our IP. We are still evaluating that deal and whether that deal makes sense for us or not given the business, the valuation, the geopolitical situation, etcetera. In its current format, we would be selling all of our China business and we would not have a China business moving forward. But in return, we would receive a significant amount of cash.

Speaker 3

But again, it's early in that, and we're still evaluating it a company perspective.

Speaker 2

Great. That's really helpful. And just one last one. I was wondering if you could maybe perhaps share some of the an update on some of the key metrics that you've been discussing in regards to the Creator platform. I know you shared a lot about plans to sort of change that rebranding and also, introduced membership tier.

Speaker 2

But I'm just curious, what are some of the underlying trends that you're seeing over recent months?

Speaker 3

Yes, we're still very happy with where the Creator platform is. Moving forward, we're not going to be talking about GMV Because that is not the metric by which we think we should be judged. What we're going to be talking about is digital revenue. I think that we are not To be clear, we are not trying to compete with OnlyFans. We don't believe in being Costco at Playboy.

Speaker 3

I think we view ourselves more from as Neiman Marcus than a Costco. And so we think we have a way with the Playboy Club, which really from the people we've talked to resonates with people. It makes sense. This is the place to interact with creators, but also the addition of membership. We have ways for creators to make more money with Playboy than any other platform.

Speaker 3

We're building on an affiliate program where they can sell memberships and get paid. They can participate in live events. There's a really unique value proposition for membership. And so for us, it's much more about revenue. We also believe with the creator tiering that we've rolled out that OnlyFans had set the market at eightytwenty.

Speaker 3

We don't think eightytwenty for a creator platform split is necessarily relevant nor should that be where we are moving forward. And so, sorry not to answer the question directly, but we're going to be focusing on digital revenue moving forward As we bring in our whole entire digital ecosystem together into one offering.

Speaker 2

Great. That's very helpful. Thanks a lot.

Operator

Yes. And our next question comes from the line of Greg Pendy with Chardan. Please proceed with your question.

Speaker 4

Hey guys, thanks for taking my question. Just flipping back over to Honey Burdett, can you just kind of Let us know, I mean, what are you seeing in terms of the ability to raise prices? You said you're going to be doing it gradually over the next 6 months. I mean, where do you think competitively the retail environment in that space is positioned.

Speaker 3

Thanks, Greg. Yes, look, I think October is a great example And we talked about this, but in October of 2023 versus October of 2022, which is a month that we had no sales in either year, we were up 16% year over year. And so with the right product, we are easily seeing the demand for that. We've also made changes already to expedited shipping to free shipping thresholds. We have not seen any impact to consumer demand for the product.

Speaker 3

And so we believe that we have room to raise prices, obviously labor and other costs have gone up. And when you look at the competitive landscape, we've seen others raise prices, we have not. And so that is something that we will start implementing here in the Q4. And just given how we tag items based on the factories, Yes, it will take us until the Q2 to have that across our full product suite.

Speaker 4

Great. And then just one more on Can you just remind us what the store base sits at right now, where it was last year and if there are any plans for new stores? Yes. So Greg, it's Mark. Right now, the store base has got 48 in Australia.

Speaker 4

We've got 12 in the U. S. And we have 3 in the UK. And since then, we had opened, I think, a year ago, 3 new stores. I'll get the exact number for you, but I think that was in the U.

Speaker 4

S.

Speaker 3

Yes. Greg, I think we would like to open new stores. I think that we are committed to becoming a capital light to moving to that capital light model we talked about. We don't think that's the best use of shareholder capital on our balance sheet just given our limited resources And the debt that we have, but we are exploring, as we said, strategic alternatives to potentially bring in a partner to help us expand that business. It's just not the right time for us to sell 100% of it after consulting with our advisors based on the macro environment.

Speaker 4

Makes sense. Okay, thanks a lot.

Operator

Recorded and we have reached the end of the question and answer session. Therefore, I'll turn the call back over to management for closing remarks.

Speaker 3

We appreciate everyone listening and we look forward to talking to you on our next call to discuss full year 2023 results. Thank you.

Operator

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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