PLBY Group Q3 2024 Earnings Call Transcript

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November 12, 2024

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Playboy Group's Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Chesler, Investor Relations. Matt, you may go ahead.

Speaker 1

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 ks 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.

Speaker 1

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 financial measures are not prepared in accordance with generally accepted accounting principles.

Speaker 1

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 ks today. I'd now like to turn the call over to Ben before we begin the Q and A session. Ben?

Speaker 2

Thanks, Matt, and thanks everyone for joining us today. Before we get into Q and A, I'd like to quickly review a few of the key developments that we have achieved during the Q3 and in the last couple of weeks, most specifically related to our balance sheet and our liquidity. About a week ago, we closed a strategic investment from Buyborg for over $22,000,000 Today, we have approximately $30,000,000 of cash on the balance sheet. And just this week, we have restructured our debt, something that we have talked about previously through an exclusivity period with our lenders, where we have realized on a senior debt basis a $66,000,000 discount on the senior debt. With that, we have issued a new $28,000,000 convertible preferred to our lenders.

Speaker 2

So the net reduction is $38,000,000 in leverage. The convert is convertible at our option at any time in cash or in stock at the 5D VWAP subject to a floor of $1.50 and a cap of $4.50 So should the stock be anywhere within that range, it is our option to convert it. If the stock were over $4.50 we would always have the option to pay in cash or redeem in stock. And we think the combination of the cash on our balance sheet and the significant reduction in debt that we have achieved puts us on a much more stable financial footing moving forward. We're excited and continuing to work on the strategic deal we talked about the non binding LOI.

Speaker 2

We have signed with BiBorg, and we expect to close that before year end. And with that, Matt, I will open it up to questions.

Operator

Great. Thank you. We will now be conducting a question and answer

Speaker 1

Operator, we do have questions that are submitted via email in advance and I'd like to go ahead and read those now.

Operator

Yes, absolutely.

Speaker 1

So we have questions from James Taney from the research team at Jefferies. Ben James asked, As we look to 2025, what kind of driver should we expect the Poi Boy Magazine to be? What are the key reasons you've decided to relaunch the magazine?

Speaker 2

Sure. So we're not looking at the magazine as a key revenue driver moving forward. This is a promotional tool for the creators and the models that we work with. And also unlike other global brands, we are not a brand that spends 1,000,000 of dollars in marketing. We have historically done that through content.

Speaker 2

And so by bringing back the magazine, it serves as two purposes. The first is a promotional vehicle for the creators and models we work with. The second is as a brand marketing vehicle, to allow us to bring back some of the iconic franchises like the Playboy interview, like the cover, like 20 Questions, things that used to be in the Playboy Magazine as a way for continuing to build the brand on a global basis.

Speaker 1

Okay. Thanks, Ben. The next question is related to the Viborg relationship. Can you discuss your partnership with Viborg and the performance requirements, if any, for you to successfully receive the $20,000,000 in annual payments?

Speaker 2

Sure. So as we publicly announced, we have signed a non binding LOI for a $300,000,000 total MG over the initial term, so minimum guarantee over the initial term of the deal, which is 15 years. That would be paid in $20,000,000 annual payments to us. That includes some operating and licensing our certainly our digital properties as well as developing new business lines for areas that they either operate in today or might decide to operate in, in the digital side moving forward. Should that deal conclude, those $20,000,000 are minimum guarantees against a percentage of the profits of those business lines.

Speaker 2

And so technically outside of letting them operate our businesses, on the digital side, there aren't other today, there are not other requirements for those $20,000,000 that is an advanced or a minimum guarantee against a percentage of the profit. The simplest way to think about it would be if you look at our digital segment today, right now we generate about $5,500,000 $5,400,000 on a quarterly basis in our digital subscription segment. In this past quarter, it lost about $2,000,000 Moving forward, you would basically be replacing on a minimum guarantee basis that revenue with approximately $5,000,000 a quarter and you would have very little cost if any cost against that. And there might be further opportunities to reduce corporate overhead for unallocated services that support those businesses today.

Speaker 1

The next question would be related to the unsolicited bid that was received recently from Cooper Hefner. Are there any thoughts you're able to share with regards to that beyond what was said publicly? And in what areas of the business do you believe that you can lean into creating stronger returns absent that?

Speaker 2

All I can point you to is the press release we put out, the Board exercising its fiduciary duty and unanimously rejected the Cooper Hefner offer. I think we're on the right track. As we said, we are moving to an asset light model. You will notice in the quarter that Honeybird has been moved to discontinued ops. As we previously stated, we are in process of looking for partners for that business.

Speaker 2

The buy board deal and the other licensing deals that we continue to sign, including the rebuilding of our China business is the right path for the company moving forward. And should the buy board deal close, coupled with the others, we would expect that our goal of getting to meaningful profitability, we're well on our way. And that coupled with a restructured balance sheet, we got a lot of cash, about $30,000,000 of cash today. We've reduced our senior debt by $66,000,000 or interest bearing debt by $66,000,000 So we've reduced our cash interest expense moving forward or cash burn from non operating and financing segments. I feel like we are moving well on our way to where we need to be as a sustainable business moving forward.

Speaker 2

And then through the buy board participation, other licensing deals that we have restructured where we have upside, I think that is the right path for us to get to this asset light model.

Speaker 1

There were additional questions, but I think you did cover off on them, particularly related to the Honey Per Debt change. And so with that, there are no additional questions that have come in over email.

Speaker 2

Great. Appreciate everyone dialing in and we look forward to talking to you in March or about March on their year end results. So thank you.

Operator

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

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Key Takeaways

  • Closed a $22 million strategic investment from Buyborg and now holds approximately $30 million in cash, while restructuring debt to realize a $66 million discount and reduce leverage by $38 million via a new $28 million convertible preferred instrument.
  • Signed a non-binding LOI with Buyborg for a 15-year, $300 million minimum guarantee deal, entitling Playboy to $20 million in annual payments for licensing digital properties and developing new business lines.
  • Relaunching Playboy Magazine as a promotional and brand-marketing vehicle—not a primary revenue driver—to showcase creators and revive iconic features like the Playboy interview and cover content.
  • The Board unanimously rejected Cooper Hefner’s unsolicited takeover bid, emphasizing the shift to an asset-light model, including moving Honey Bird to discontinued operations and seeking partnerships.
  • With a stronger balance sheet, reduced cash interest expense, and ongoing licensing deals—including rebuilding its China business—the company expects to move steadily toward sustainable profitability.
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Earnings Conference Call
PLBY Group Q3 2024
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