Playboy, Inc.

Thank you for standing by and welcome to the fourth quarter and full year 2020 conference call and webcast for PLBY Group, Inc. The information discussed today is qualified in its entirety by the form 8K that has been filed today by PLBY Group, Inc. and may be accessed on the SEC's website. Please note that the press release issued this morning and the related form 8K can be found on PLBY Group's website at http://www.plbygroup.com/.investors. Today's call is also being webcast, and a transcript will be posted to our website. Please also note that statements we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risk uncertainties and other factors that could cause our actual results to differ from historical results and or from our forecast, including those set forth in PLBY Group's Form 8-K filed today and the exhibits thereto. For more information, please refer to the risk, uncertainties, and other factors discussed in PLBY Group's SEC filings. All cautionary statements that we make during this call are applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risk, uncertainties, and other factors discussed in PLBY Group's SEC filings. Do not place undue reliance on forward-looking statements, which we assume no responsibility for updating. Hosting today's call are Ben Cohn, Chief Executive Officer, Rachel Weber, Chief Brand Officer, and President of Corporate Strategy, and Lance Barton, Chief Financial Officer. I will now open the call to Ben Cohn. Ben, please go ahead.

Thank you, Operator. Good afternoon, everyone. It's a pleasure to be speaking with you on our first earnings call following our listing on NASDAQ earlier this year. I want to start by thanking our employees and management team, who in an unbelievably difficult year not only had to endure new ways of working together, but conquered that while achieving major growth, growing revenues 89% year over year. PLB Y Group is a pleasure and leisure company serving consumers around the world with products, services, and experiences to help them look good, feel good, and have fun. Our flagship brand, Playboy, is one of the most iconic and valuable brands in the world. Simply speaking, Playboy is huge. Our massive global reach drives $3 billion of global consumer spend with products sold in over 180 countries. We engage with millions of people every day across our own channels and social media, and our reach continues to grow with our built-in network of ambassadors. No brand gets noticed quite like the rabbit head, and in today's increasingly cluttered and fickle environment, Playboy has a special power to both stand out and to last. Our strong resonance with the next generation of consumers around the world sets us up for significant future growth, and provides us with a platform that we believe can be synergistic to promote other owned brands and become the leading pleasure and leisure company. PLB Y Group is focused on two key revenue models, direct-to-consumer sales and licensing sales, and is focused on four product categories with growing multi-billion dollar global markets, sexual wellness, style and apparel, gaming and lifestyle, and beauty and grooming. We are still in the early stages of our business model transformation to own and operate within these key consumer product categories, and we have seen great traction so far. With the over $100 million we raised through our recent business combination, we now have a robust balance sheet and the capital market currency to make thoughtful, educated, and data-backed decisions to accelerate that growth moving forward, both organically and through acquisitions. Our growth plan is comprised of three areas of focus. First, accelerating the growth of our U.S. direct sales business. In 2020, we saw phenomenal growth across our direct sales platforms and believe we are only just getting started. To capitalize on this massive opportunity and momentum, we recently brought on a new chief digital officer, Kevin Diamond. Kevin joins us from Forever 21, where he ran a $700 million business. Prior to that, he co-founded Hotlook, which was acquired by Nordstrom. Kevin joins other recent e-commerce and digital hires from Goat and FabFitFun. In the short term, our direct sales efforts will be focused on the domestic market in the sexual wellness and style apparel categories. In the medium to long term, there are huge opportunities to own the relationship with customers internationally as well. For example, in China this year, Playboy branded products generated over a billion dollars in sales on digital commerce platforms alone. But based on existing licensing agreements today, we book less than $40 million in total revenue. Therefore, as we continue to transform our model, the potential upside is enormous. In 2021, we will continue to evolve our hero website, Playboy.com, into a lifestyle shopping experience and to expand our own product offerings. Our recent acquisition of Lovers brings with it strong private labeling, product development, and merchandising expertise. which we are already applying across categories to capture substantial margins and to expand consumer lifetime value. We will continue to unlock the significant value we see in our network of digital commerce marketplaces, including the Playboy, Yandy, and Lovers destinations by cross-selling products to our consumers and by using our new data science practice to increase customer lifetime value. Our 2020 test runs of Playboy branded lingerie And costume collections that were cross-sold across channels were very encouraging and helped inform this year's merchandising cross-channel strategy, as well as new growth initiatives. We also started selling licensed streetwear products on our website in late 2020 for the first time. This is just the beginning of our strategy to capture more of the economics of the huge consumer spend on our apparel offerings. Our streetwear offerings have been growing rapidly since 2018. And in 2020, our two biggest streetwear partnerships with PacSun and Misguided drove more than a hundred million dollars in sales. We're of course thrilled by this consumer response, but these licensing models traditionally only generate five or six cents on the dollar for us and don't allow us to build a direct consumer relationship. In 2021, we're making investments aimed at capturing a hundred cents on the dollar by building out our in-house design and production teams and taking back the influencer drop operation, Playboy Labs, to be managed internally as an owned and operated consumer product line. Our second area of focus is strategically expanding our licensing partnerships in targeted categories and regions. Licensing is a tremendous revenue model that provides stable and predictable cash flows. Global diversification and consumer data insights can help inform our owned and operated business development strategies, including our future product roadmap for direct sales. Playboy is already in the top 20 most licensed brands in the world, and yet still in 2020, we achieved 20% year-over-year growth, and we see big potential ahead. A few highlights. In China, despite the challenges of COVID, the brand performed incredibly well, with an uptick in digital spending as consumers spent more than a billion dollars in e-commerce sales alone. As part of our China e-commerce strategy, we work hand-in-hand with major e-commerce platforms to enforce our trademarks, and we capture unauthorized sales. Similar to how we've expanded our addressable market in the U.S. and U.K. with female customers, we worked with three key influencers in the Chinese fashion industry to launch collaborative lines of women's apparel and accessories, serving as the foundation for us to continue our push into the women's market. We see big growth potential going forward to expand our additional product categories for men, such as men's skincare and grooming, and to continue to serve a new generation of both male and female consumers with our apparel and fashion lines. In India, we recently announced a partnership with JJ Iconic Brands to adapt our existing streetwear success to meet young Indian consumers' swelling demand for streetwear fashion. We believe India could be a significant contributor to our revenue in the years ahead across all of our core product categories. In gaming, we are focused on expanding our licensing business, having cleaned up significant rights in the category in recent years. In addition to our existing partnerships with Microgaming, Scientific Games, and Caesars, we have recently signed new deals to launch poker rooms in Texas and to roll out real-money electronic table games with Interblock. We believe there are significant opportunities to expand gaming activities in iGaming, sports gambling, and social gaming. And, of course, we continue to set up our licensing business to optimize across all territories and product categories by freeing up rights which had previously been encumbered We are now looking for new partners to exploit those rights. Across all of these efforts, we will balance the trade-off between owned and operated offerings and licensing to make the best long-term decisions to drive significant return on investment, revenue growth, and shareholder value. Which brings me to our third area of focus, emerging growth opportunities. Although we have a core business that is growing and highly profitable, we believe there are emerging opportunities to use our capital to accelerate our growth even faster. We are prioritizing new business development initiatives based on consumer insights we glean from our direct-to-consumer and licensing businesses with a focus on expanding customer lifetime value. These are initiatives that should generate significant revenue over three- to five-year time horizons. The return will not be overnight, but we would be remiss not to make the investments today to drive such significant future growth. The driving force of this new business development strategy is the power of our flagship brand. I'd like to hand the call over for a few minutes to our Chief Brand Officer and President of Corporate Strategy, Rachel Weber, to share a bit more detail.

Thank you, Ben. It's such an exciting time at PLBY Group. Over this past year, we've continued to see powerful Playboy brand affection promoted by influencers and the creative community, and this has translated to strong sales, particularly with Gen Z and millennial consumers. We're particularly proud of our Break the Internet moments, including our first digital cover drop with Bad Bunny, which sparked crucial conversations on masculinity today, our recent International Women's Day partnership with Lana Rhodes, Ellen Von Unworth, and Lindsay Adario, and the work we did with our Playmate community throughout the year to raise awareness for gender and racial equality and body positivity. It's also thrilling to see all of the organic influencer promotion for the Playboy brand, from Megan Thee Stallion showing off her Playboy nails to her over 20 million followers, to Lala Anthony paying homage to the classic bunny suit, to many of the biggest TikTok stars wearing their Playboy streetwear in their dance videos. The key thing that we're working on today is turning our Playboy franchises and themes into huge product lines and contemporary marketing platforms unto themselves. Based on the considerable success we've seen with our tests of Playboy lingerie capsule collections on Yandy, we are now investing in building out a much more ambitious strategy for a lingerie line that will likely leverage our Playmates franchise. We are working in partnership with a beauty incubator to accelerate bringing a new cosmetics line to market as well. And as Ben mentioned, we are beginning to take in-house our streetwear business, including the Playboy Labs franchise. to invest in building an owned platform for influencer-driven product collaboration. We're particularly excited by the opportunity to leverage our mansion and big bunny franchises to activate influencer communities and roll out related product lines. Lastly, we are sitting on almost 70 years of the most incredible and iconic art and photography. We are actively working on our non-fungible tokens, or NFT, and digital collectible strategy. to enter the space in a thoughtful way, designed for long-term growth and community adoption. We are thrilled by the runway ahead and the wealth of opportunities afforded us by our priceless intellectual property. And before I hand the call back over to Ben, I want to make sure to touch on our important social impact work, which builds on Playboy's long history of advocating for personal freedoms and equality. 2020 was the 50th anniversary of the Playboy Foundation's groundbreaking commitments on cannabis-related social justice and cannabis law reform. We are very proud this past year to announce the reinvigoration of this work, including a grant and mentorship program to support black and brown cannabis entrepreneurs and partnerships with grassroots organizations progressing crucial social justice efforts. Our ongoing social impact programs are core to our Playboy DNA and in many ways more relevant to our audiences and customers today than ever before. With that, I'll hand the call back over to Ben.