PLBY Group Q4 2023 Earnings Call Transcript

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March 27, 2024

There are 6 speakers on the call.

Operator

Good afternoon, everyone, and welcome to PLBY Group's Full Year and Fourth 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. Thank you. While we wait for the queue to fill, I'd like to hand the call over to Ashley DeSimone of ICR.

Speaker 1

Thank you, operator. Good afternoon, everyone. 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 productions or other statements that are not historical in nature, may constitute forward looking statements.

Speaker 1

Such statements are made on the basis of PLDY Group's views and assumptions regarding future events and business performance at the time they're 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.

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

Operator

you. Our first question comes from the line of Jason Tushin with Canaccord Genuity. Please proceed with your question.

Speaker 2

Good afternoon. Thanks for taking the question. Thanks for all the helpful color in the press release. Maybe one to start off. Licensing revenue came in pretty well ahead of our expectations.

Speaker 2

I'm just curious how much of this was driven by sort of recurring recovering more of the minimum guarantees that you have in place already versus contributions from some of the newer partners that you've been adding over recent months?

Speaker 3

Thanks, Jason. Good afternoon, it's Ben. We're happy with where we are on the licensing business and the strategic changes we've made to especially rebuild our China business. We are in active negotiations to replace the terminated licensees, as well as going after one of our former licensees on a legal basis over there. So we're starting to see traction and we're starting to see what I would say is stability, especially from a macro perspective in that business.

Speaker 2

Great. That's helpful. And then, one I have on Honeybird debt. Last quarter, you talked about how right now maybe with the market backdrop, it wasn't the right time to sort of look to that dataset. But longer term, you didn't see it as part of your core strategy.

Speaker 2

I'm wondering given the momentum that business had in Q4, some of the things you laid out in terms of your goals for this year, if that view has changed at all? And sort of a follow-up to that would be do you see an opportunity to leverage PlaybookUp Creators to drive some of the organic advertising and marketing that you talked about within your goals for that business this year?

Speaker 3

Sure. So I'll reiterate what I've said historically and it's our goal is to move to an asset light model. But we believe Honeybird is a very valuable brand and we will make the operational changes in the interim and we've made those and we're starting to see the performance of that both on the top line and the bottom line. We are in the process of basing a new 10% price increase this year to the products. We had not really done that, given the mass inflation we've

Speaker 4

all seen as consumers over the

Speaker 3

past few years. And we haven't seen any consumer so far. And so our goal long term is still to find the right owner for that. But in the interim, we are not going to just give away that asset at the wrong valuation for our shareholders and the fiduciary. And so as market conditions improve and the business continues to improve, we're always open to being opportunistic, especially given our debt, our goal is to delever the company.

Speaker 3

As far as to better integrate our creators into working with and promoting 100 and we're working on something right now for Formula 1 event we'll be having in Miami with that. No promises, but I think there's other rewards now that we've introduced our Keyera and Point system within the Playboi Club app to reward creators down the road with merchandise as well.

Speaker 2

Okay, great. That's really helpful. And just a higher level following up on that. In terms of you talked about how because of licensing challenges and headwinds last year, you didn't really invest as much into promoting and marketing the Creator platform. I'm curious if you can maybe dive into some of the strategies you plan to deploy this year.

Speaker 2

You talked a little bit at the end of the press release about how you're going to focus on growing in market in that digital business. I'm wondering if there's anything else you can share on that plan.

Speaker 3

Sure. And I think last year we spent basically nothing on marketing or promoting that and we still saw phenomenal top line growth in that business last year. But I think we have to return the company to what its roots were. And I think we talked about that in the earnings release. I think the expression a lot of people here these days are sort of go well can go broke.

Speaker 3

I think this is a business that has always been about working with beautiful women and a lot of the way we expressed that historically was through content. And we plan on getting back into the content game this year. And so that content will come to life in many forms, including the return of the Playmate, hopefully bringing back the magazine, but then also producing content that lives on other platforms with the goal of acquiring audience and acquiring creators. And so we think creators want 3 things in our mind. They want to make money, make as much money as they possibly can.

Speaker 3

They want to build their brand and their audience and they care about the reputation. And we think at Playboy, we can build all 3. I think we also launched membership and membership is very strategic for us. Not only does it increase our revenue, but it gives us a product that we can actually spend money against marketing. We have not done that today.

Speaker 3

Very happy with sort of the organic revenue that we are generating off of membership. But now with $100 price point, we have money to actually go spend to generate new users and creators to the platform through performance marketing. But the majority of our spend with the board will all be through content. We think that's the most effective way to market the platform, that content featuring our creators. And it also helps us from a brand perspective on the licensing side.

Speaker 2

Great. Very helpful. Thanks a lot.

Operator

Thank you. 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 questions. And congrats on the strength in Humminbirdette, carrying in from 3Q into 4Q. But I just wanted to pick at that a little bit. I was wondering if you could provide any color on the decision to close those stores. Were they in unattractive lease locations?

Speaker 4

Because I know they're brand?

Speaker 5

Hey, Greg. I'll take that. It was they're primarily stores in Australia and a lot of the stores in Australia have been around for quite some time. And so we're looking at end of life for these leases versus the amount of CapEx we'd have to put in to refurbish them. And also whether or not they're running at a 4 wall loss or profitability.

Speaker 5

And so if we have a lease that has come to life, we would still have to put new CapEx dollars into refresh it and it's losing money. That's a store that we earmarked to close. And as we had said in the release, there are probably about 4 of them that you'll see us close over the course of the year.

Speaker 4

Okay. That's helpful. So there's going to be a limited termination fee probably on the lease because they're near end of life?

Speaker 5

The ones that are near end of life, yes, there won't be one. But the ones there's one that we're looking at, which there would be a small termination fee.

Speaker 4

Okay. That's helpful. And then just shifting gears, just one on the digital strategy. It just looks like I want to make sure I understand how you guys are thinking about it in 2024. I know you've made a lot of changes and improvements to the platform, but it seems like this strategy maybe versus your competitors is to really support the creators and hope that it's the creators that will then drive the subscribers.

Speaker 4

Is that fair to say?

Speaker 3

Thanks, Craig. I'll take that. So a couple of things. Obviously, we rebranded the platform, the Play Play Club. And I think in doing some research with consumers, what we found was the historical names we use for it didn't really support what the main purpose or the main action people were doing, which was interacting with creators.

Speaker 3

And so the Playboy Club now from what we're seeing and from what we're hearing from users clearly supports the place to come interact with our creators. From a user funnel perspective, there's a number of things that we're doing. So first, creators bringing their own users to the platform and that's mostly done through their social media platforms, whether that be TikTok or Instagram, where they're putting a link in their bio to their Playboy page. We also have users that just come to Playboy because of the strength of the brand. And actually, we recently re platformed our 70 years of archives, which was a standalone product that historically have been licensed called I Play Boy.

Speaker 3

But it was one of the 3rd party site and we actually re platform that into our current code. It sits as part of membership now. But more importantly, what it does is it allows us to SEO 70 years of archives. And so we're seeing things like that start to drive more organic traffic. And then the third strategy moving forward is obviously to start to produce content alongside our creators with the goal of that content sitting on 3rd party platforms, whether that's a podcast on Spotify, video content on YouTube, really highlighting our creators through what we think are historical franchises like 20 Questions, like the Playmate, etcetera, with the goal of driving people back to our platform.

Speaker 3

The other thing is we think we can put advertising revenue, programmatic advertising revenue against that content and we'll share in that advertising revenue with our creator as well.

Speaker 4

Great. Well, that's very helpful. Congratulations on the quarter and good luck in 2024.

Speaker 3

Thanks. Greg, the only other thing I'll mention is the launch of membership is very strategic in the ability to acquire users and moving forward as well. And so what's actually interesting is we're testing our funnels. As we've seen almost 40% of our members today come off our Playboi Plus platform. Playboi Plus is a platform that we've actually never bought traffic for.

Speaker 3

It's just on affiliate deals. And so we think there's another opportunity over there to actually start to expand our traffic acquisition strategy there. It's a separate subscription product, but then we're seeing that conversion of people that are signing up for Playboy Plus also signing up for the Playboy Club membership. And so things like BunnyMoney will enable us to make that transition and that user flow more seamless. Long term, as we said in the press release that we will look to re platform both those products, Playboi Plus and Playboi.

Speaker 3

TV, and so that we can have a single sign on user flow.

Speaker 4

Okay, that's helpful. And then just so that I understand, the membership right now, it's 100 dollars And is there is a $25 in the Bunny money right now, to help incentivize and move the membership?

Speaker 3

So the membership is $199 right now, you get $25 of Bunny money as part of that to spend on your favorite creators. We think there's use cases to continue to expand bunny money to attend Playboy events, Playboy Golf tournaments, poker tournaments, etcetera. Right now, it's the primary use is to spend on the creators. And then long term, you see multiple different tiers of membership, each one being more limited in nature at a higher price point, but unlocking more of the Playboy lifestyle.

Speaker 4

Okay. And then one final one on the BunnyMoney, I know it's bundling the transaction. Does that only lower the fee on your end or does it does the user kind of also see the benefit of using BunnyMoney?

Speaker 3

Well, there's multiple different benefits. And so we've just started with BunnyMoney. But yes, from our perspective, the way our credit card fees work is we pay a per transaction fee as well as a percentage of that transaction. And so if someone is tipping $1 you're paying a per transaction fee every single time someone tips $1 And so by bundling transactions and saying that any transaction under $10 has to be used by BunnyMoney, where it's a one time charge of the credit card. The other thing we heard from users actually was there's too many transactions showing up on people's credit cards and was there a way to aggregate all those transactions.

Speaker 3

BunnyMoney allows us to do that. Long term, we can use BunnyMoney very much like DraftKings and other gaming companies do to incentivize first time spenders, to incentivize people to come back to the platform that might have churn. And so I think we will continue to let the data speak for itself, but continue to expand the use of BunnyMoney long term on the platform. It's just the economics make sense for us. The economics don't change for the consumer or for the creator.

Speaker 3

And so it makes sense overall.

Speaker 4

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

Speaker 3

Thank you.

Operator

Thank you. And we have reached the end of the question and answer session. I'll now turn the call back over to CEO, Ben Collins for closing remarks.

Speaker 3

I appreciate everyone dialing for our Q4 and full year 'twenty three results and look forward to talking to you in a few months on our Q1 results. Appreciate it everyone.

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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Earnings Conference Call
PLBY Group Q4 2023
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