Playboy, Inc.

Thank you for standing by, and welcome to PLBY Group's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the conference over to Managing Director at ICR, Ashley DeSimone.

Good afternoon, everyone, and welcome to PLBY Group's third quarter 2021 earnings conference call. I am Ashley DeSimone, Managing Director at ICR. Hosting today's call are Ben Cohn, Chief Executive Officer, and Lance Barton, Chief Financial Officer. The information discussed today is qualified in its entirety by Form 8K that has been filed today by PLBY Group, Inc. 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 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'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 risk, which could cause PLDY's actual results to differ from its historical results and forecasts, including those risks set forth in PLDY groups' 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 today during this call. Do not place undue reliance on any forward-looking statements. And I will now open the call to Ben Cohn. Please go ahead. Ben?

Thank you, operator, and good afternoon, everyone. I'm delighted to report today on another strong quarter. I want to start today's call by commending our team on continuing to deliver even in the face of COVID related operational challenges and for achieving meaningful progress on our strategic growth roadmap. 2021 has been an amazing year so far for our company. My remarks this afternoon are going to focus on how all of the great work we've executed on building our direct to consumer commerce business, integrating our strategic acquisitions and releasing our first NFT drops serves as the operational foundation and marketing flywheel for even bigger opportunity to create a cohesive and scalable ecosystem of recurring revenue based Playboy membership offerings. Lance will then provide greater detail on our financial results and outlook. I joined Playboy as CEO because I saw the opportunity to rejuvenate one of the world's greatest brands into a massive growth engine with the right business model transformation. It was clear that the model of selling magazines and complementing that media business with licensing revenue was a broken model. But with billions of dollars of consumer spend against one of the most globally recognizable and emotionally resonant brands, it was clear that with the right products and services for today's consumer, matched with the right in-house operations, we could supercharge our growth. As we talked about previously, we've been following a three-part growth action plan. focusing first and foremost on the low-hanging fruit. Part one of our action plan is our work to build and expand our direct-to-consumer commerce business in key categories and territories. Our goal is to capture 100 cents of consumer spend against the brand versus the 5 to 6 cents we make on licensing deals. I'm immensely proud of the scale we've achieved here in such a short period of time. As Lance will elaborate on, In Q3 alone, we grew D2C revenue 139% year-over-year to $36 million. Part two has been focusing our licensing partnerships on bigger, better, longer-term deals. In the past several years since I became CEO, we've made great strides here, particularly in China and India and in the gaming category. We've also strategically used our licensing business as a marketing tool and brand builder for us. In particular, our high-end designer collaborations have generated huge brand buzz and our large-scale partnerships with PacSun have created huge retail reach for the brand. By executing these two initiatives, we have gone from two years ago being a $78 million annual revenue business with China-based licensing revenue contributing 50% of that revenue to today being being on track to deliver 280 million annual revenue on a pro forma basis with less than 15% of our revenue coming from China. And as we've been attacking the low hanging fruit, we've also built building the foundation for longer term growth. To that end, the third part of our execution roadmap has been focusing on investing in new emerging growth opportunities that deliver recurring or long tail revenue and allow us to generate significant returns over a three to five year time horizon. The most exciting of these new growth initiatives is building the future of Playboy membership. Playboy is a brand that once had almost a million key holders to its clubs, nearly 7 million magazine subscribers, and of course created a coveted lifestyle at the Playboy mansion that celebrities and fans alike clamored to participate in. Our reimagined 21st century Playboy club will give our fans access into the contemporary Playboy lifestyle. We'll give them opportunities to truly live a Playboy lifestyle that stands for freedom, fun, and sophistication. Imagine virtual and physical experiences and parties, like a global Midsummer Night's Dream party in the metaverse and also in Las Vegas. We will offer things only Playboy can, exclusive meets and greets with her talent, Playboy music and comedy stages, Playboy advisor sex and relationship series, And of course, building upon a strong commerce foundation, early and exclusive access to our fashion and product ops and artist collaborations. With the infrastructure we put in place to build direct consumer relationships around our commerce products, we are working to expand on these offerings with membership services. We can build much more significant lifetime value through recurring revenues. And crucially, the continued expansion of our commerce business simultaneously serves as a powerful top-of-the-funnel marketing engine. Just about two weeks ago, we launched our initial foray into the new Playboy membership with the release of our latest NFT collection, Playboy Rabitars. Rabitars are 3D rabbit characters minted on the Ethereum blockchain. There are 11,953 uniquely designed Rabitars, and each was priced at $0.1953 each. or roughly $900 at the time, in honor of our founding year of 1953. We sold out rapidly, collecting both U.S. dollars and Ethereum as payment, and generated over $8 million in upfront revenue. In addition to our initial sales, we participate downstream in every subsequent sale. And since launch, we have already seen more than $8 million in secondary sales trading volume. with the rarest Rabitars selling for as much as $50,000 a piece. Rabitar ownership will unlock VIP status in what we anticipate will be our new Playboy Club and access to a lifestyle and host of benefits that only Playboy can deliver. In the first few days of this new exclusive membership experience, early benefits to Rabitar owners have included special access to a Playboy party in New York City hosted by Pam Anderson, a virtual art gallery party in the metaverse, a digital wearables drop, dedicated community forums on Discord, and special discounts on Playboy.com. Our upcoming roadmap of benefits was released in our dedicated 70,000-plus member-strong Discord server just last week, including limited-run Ravatar-themed apparel collaborations, upcoming IRL parties, and experiences in special NFT airdrops. Of course, for a brand as iconic and globally relevant as Playboy, we need to ensure that we have ways for our millions of fans around the world to become members. We believe we can do that successfully through tiers of membership and membership-based experiences that cater to specific fan bases. This is where Centerfold comes in. The creative and celebrity community has always been central to what makes Playboy, Playboys. For nearly 70 years, reading a Playboy magazine was like stepping into a world of culture and celebrity. And for the biggest artists, voices, and bold-faced names of each decade, making it into Playboy was a rite of passage, just as we proved yet again in October with our groundbreaking Bretman Rock cover. From a business perspective, however, while we played a large role in building the careers of huge talent as a magazine business, The company wasn't able to provide talent with ways to continue building their careers with the brand. And thus, the company wasn't able to participate in the upside of the talent's ongoing revenue generation. But today, the world of creators and talent is a very different place. Consumers today expect two-way interaction with their favorite celebrities. Creators and influencers need tools to reach and build their fan bases. As one of the original platforms for the creative community, to freely and openly express themselves, we are uniquely positioned to deliver in this space. Centerfold is our new creator-led digital platform dedicated to creative freedom, artistic expression, and sex positivity. It will serve as a home for the world's top creators to interact directly with their fans and expand their communities and commerce businesses. Centerfold will revolutionize the creator economy just as the Playboy magazine shook up the publishing industry nearly 70 years ago. Playboy is the one brand that sits at the intersection of sex and culture, and we do so at a massive scale and with mainstream visibility. Creators will be able to set up their own subscription or membership services, directly message with their fans, and much more. As we expand, we plan to offer creators services that only Playboy can, including the ability to tap into our merchandise design, production and distribution capabilities, artist collaborations, merchandise collaborations with Playboy and honey for that NFT and blockchain tools and more. And of course, being a centerfold creator will give talent access to our most coveted assets appearing on the Playboy cover in a Playboy pictorial, or as the subject of a Playboy interview. In the 60s, 70s, 80s, 90s, and 2000s, Playboy was a place where artists and celebrities went to fully express themselves and ultimately to get famous. Centerfold will give them that chance again and so much more. The investments we've been making to build our commerce infrastructure are crucial here as we've heard directly from creators that they want more access to more ways to generate value for themselves outside of content. By giving our network of talent these tools, we're able to create a full ecosystem of membership and a flywheel of audience aggregation and cross-promotion. We've had tremendous inbound interest from the creator community in several fold for both the creative freedoms it allows them and the unmatched commercial opportunity it provides them to have access to all of PLBY Group's operations. We are planning to launch in early December and we cannot wait to share more about the immense talent and creative visionaries we anticipate serving as our founding creators. We're not naming names just yet for a variety of commercial reasons, but we can tell you that they come from various creative industries across music, art, fashion, and more. And they all share a commitment to artistic expression, celebrating culture, sex and body positivity, and truly serving their fans. Our anticipated founding team alone represents nearly 300 million social media followers. Our strategy is to work with the world's top creators and voices to ensure a safe platform for them and a great consumer experience for fans. And our recent acquisition of Dream accelerated our timeline of bringing Centerfold to market so that we could quickly capitalize on this immense opportunity. I'm more excited than ever about the future of PLBY Group. We've made enormous progress executing against our roadmap. leaning into the big opportunity to capture more consumer spend against the brand by building a direct-to-consumer commerce business while simultaneously strengthening our licensing partnerships. With the foundation we've built in direct-to-consumer operations and the revenue scale we've achieved, we can now meaningfully invest in the future of our recurring revenue membership products that we believe will, over time, become our fastest-growing and biggest revenue contributor. With that, I will hand the call over to Lance.