Playboy, Inc.

social media followers, and we expect that reach to expand significantly over time as we scale the platform. Centerfold's potential to drive organic customer acquisition and serve as a massive top of the funnel for our products and services is more valuable than ever given the recent disruptive changes to iOS and privacy regulations. We believe it will allow us to further target the marketing of our consumer product brands, our future NFT and blockchain initiatives, and our IRL and virtual events. As Centerfold continues to evolve, we plan to integrate it with Playboy.com and drive all customers to one central location. In addition, Centerfold provides leverage for any future partnerships we pursue through licensing, hospitality, and other channels because we not only show up to the table with an iconic global brand, but we also bring direct access to an engaged, targeted audience. For creators, there is immense value in being part of our ecosystem. Not only have we envisioned a safe place for freedom of expression, inclusion, and direct connections between fans and creators, we are also launching new avenues for our creators to generate additional revenue streams beyond core offerings, including digital subscriptions, unlocks, and live hangouts. As creators, they have the additional opportunity to become affiliates by promoting our products. We've already signed 40 of our top creators as part of a new affiliate ambassador program to promote our merchandise on their social channels. Through Centerfold, our creators also dramatically expand their reach through access to our Playboy audience, opportunities for modeling contracts with our brands, early access to our merchandise, the potential to be featured in our upcoming NFT projects. and opportunities to participate in our IRL and virtual experiences with access to exclusive events. To this end, these brand integrations with Centerfold have already begun. Just last week, we co-hosted the Met Gala After Party at the Boom Boom Room in New York City with Cardi B. Not only did Cardi B live stream, she is planning to give her Centerfold subscribers exclusive access to behind-the-scenes content for a fee. We also outfitted the dancers at the party in our iconic bunny costume. In addition to the organic social media and positive press coverage about the Playboy after party, it reached over 2 billion consumers globally in one week, with millions in ad value equivalency. Our ecosystem integration work continues with our partnership with the Tau Group, as we co-host Friday pool parties all summer long in Las Vegas. as well as some other larger parties throughout the balance of the year. These parties kicked off a week ago and feature multiple marketing opportunities to build awareness, including billboards, QR codes to download the Centerfold mobile web app for fans, Centerfold branded photo stations, recruiting opportunities, and the chance to win a modeling contract with Yandex. We are also looking forward to multiple integrations following the partnership we just announced with model and entrepreneur Amber Rose, who joined Centerfold yesterday as a founding creator. On the Centerfold product itself, we are taking a very methodical approach to its build-out, working closely with our founding creators to incorporate their feedback and hiring world-class product design and engineering leaders from top organizations including Uber, YouTube, Twitch, and Square. The team is hyper-focused on executing against our roadmap and recently began rolling out major upgrades. These include enhanced creator profiles and the integration of a new backend payment providers to allow us to expand our creator universe and improve our unit economics. Next up on the roadmap are improvements to the user flow in conjunction with creators' other social channels, as well as new features around live streaming and direct messaging. both of which we expect to enhance our monetization capabilities. The long-term unified Playboy digital product vision includes an integration of our creator platform, our digital content offerings, and our digital and physical commerce experience. Off the back of Centerfold, we are exploring several exciting NFT and blockchain opportunities. And while it's too early to reveal further details, we intend to continue building on the success we achieved last year in the NFT space. You may recall that we initially started testing the ability to monetize our IP by collaborating with artists in May of 2021, which culminated in our successful Ravatar launch and the creation of $12 million of NFT revenue last year. Our aim is to leverage our past success and learnings to create sustainable revenue and recurring NFT revenue streams through ongoing and repeatable strategies. We believe we can achieve further success by leveraging our brands, partnering with our centerfold creators, testing gamification, and ultimately monetizing our immense 10 million plus piece archives through NFTs and the blockchain. These brand product, platform, and creator integrations are just the beginning of our strategies we have planned to showcase the immense value of our brand, propel the flywheel, and drive momentum for all aspects of our business. You can hear my excitement about this ecosystem because with Centerfold, we have more than just a direct channel to our consumers. We have the brand halo and the product integration as well. As I mentioned earlier, another top priority this year is the continued integration of our direct-to-consumer business within our ecosystem. During the first quarter, our consumer products business delivered great results while overcoming COVID impacts and supply chain disruptions. In Q1, we continued our global expansion plans for Honey Burdette with a store opening at Aventura in Miami in February. And the store is already one of our best performing, ranking third globally. Our next location will open in June in Stratford, UK. And the team is hard at work to reach our expansion plans of 10 new locations by the end of 2022. We've also secured an exciting brand integration opportunity with the exclusive Showfields Miami in the heart of South Beach, which features the world's most innovative brands. Beginning in June, we will be showcasing a curated selection of Playboy apparel through a limited time product installation as we begin testing Playboy in a retail experience. Rebranding work also began for Yandy & Lovers as we test the impact of leveraging the Playboy name. This work will be completed in time for our important Halloween season. With strong momentum behind the brand and proven leaders like Ashley Tector leading consumer products, we are attracting world-class industry talent and have invested in building our depth in our teams in the first quarter. As we continue to focus on building a solid infrastructure and integrating our business, we are identifying synergies across the brands and opportunities for scale and operational efficiency. To that end, we eliminated approximately $5 million of annualized overhead costs over the last few weeks. We expect this foundational work to continue for the balance of the year and may run higher costs in the short term as we onboard top industry talent and continue our work to consolidate functions across our brands. Looking ahead at the year and the full opportunity before us, I want to reiterate my excitement and confidence in the unique business we are building. as evidenced by my purchase of roughly a million dollars of our stock a few weeks ago. While not linear, the path forward is clear and is going according to our plan. I am confident that we are creating something truly unique and believe no other company can replicate our value proposition. Now I'll turn the call over to Lance.

Thanks, Ben. First quarter revenue grew 63% year-over-year to $69.4 million. our growth once again driven by the continued expansion of our direct-to-consumer businesses. Furthermore, our gross profit margin expanded, driven by the acquisition of HoneyBredette and the superior product margins that business is able to achieve. Direct-to-consumer revenue was up 125% year-over-year to $49.6 million in the first quarter, and we made great strides executing on our growth strategy, which consists of expanding our product line, building out our merchandising and marketing functions, strategically expanding our retail footprint and consolidating and optimizing our tech infrastructure. Playboy e-commerce grew revenue more than 300% over the prior year quarter. Growth was driven by increases across the board in site traffic, orders, average order value, conversion, and repeat customers. Our product line continues to expand to meet consumer demand as we saw more than 120% increase in unique SKUs sold versus Q1 last year. Consumers gravitated toward our Tokyo Club apparel collection along with PacSun, and near the end of the quarter, we launched a collaboration with Drake's OVO capsule collection, which sought massive demand and led to our highest level of sales in a single hour when we launched on March 29th, with most of those products selling out quickly. We have a number of other high-profile designer collaborations coming out later this year that we believe will continue to fuel consumer demand. We see opportunity for Playboy e-commerce to improve margins over time via economies of scale achieved through overall revenue growth, expansion of private label, and improved marketing efficiency as we continue to build out our merchandising and marketing functions and streamline our tech infrastructure. Honey Burnett achieved over $22 million of revenue in the quarter, driven by 23% growth in e-commerce and 11% growth in brick and mortar. Sales in January and February were impacted by the Omicron variant, which was most noticeable around the busy Valentine's Day buying season, but revenue picked up in March as the variant waned. At Lover's, store traffic and the typically strong Valentine's shopping season were similarly impacted by the Omicron variant, along with weather-related store closures in the Pacific Northwest, which led to a decline in store revenue compared to Q1 of last year. We did, however, see meaningful growth in Lover's e-commerce and view that as a growth opportunity for the business going forward. Yandy continues to face tough year-over-year comps given the significant growth they achieved in the first 18 months after we acquired the business and the meaningful impact on marketing efficiency due to Apple's iOS privacy changes. Similar to Playboy e-commerce, we believe that we can improve operating efficiency and future margins by bringing our marketing function in-house, increasing our selection of private label products, and consolidating our tech infrastructure across all of our direct-to-consumer businesses. Licensing revenue of $14.5 million was a decrease of $1.1 million versus the prior year quarter. That was primarily due to contractual amendments we made with our fragrance partner last year that enabled us to recapture rights in beauty and grooming, and also amendments with our domestic apparel partners to increase minimum guaranteed royalties over expanded contract terms. We continue to optimize the licensing business, launching a slate of 15 brand collaborations already this year, exciting new brand collaborations planned for upcoming quarters and a robust new business development pipeline. We are pleased by the positive response to exciting new creative and innovative campaigns we are introducing around our upcoming 70th anniversary and the Year of the Rabbit in 2023, which we expect will contribute to a full year of growth for our licensing business this year as well as into the years ahead. On the digital side, we believe Centerfold will not only drive incremental high-margin revenue for us over the long term, but that it will also serve as an engine for organic customer acquisition, which is particularly valuable given the recent impact on marketing efficiency due to Apple's iOS privacy changes. We're often asked how much revenue we think Centerfold can generate, and while it's still too early to increase our long-term outlook, it's important to understand the potential scale of the opportunity. The addressable market of the creator-led economy is large and growing rapidly. Many estimates place it at over $100 billion of revenue today. If you look at some of the most successful businesses competing in this space, they are generating north of $1 billion in revenue annually and are highly profitable. achieving all of this without the benefit of a ubiquitous brand like Playboy. To take advantage of the opportunity that we see here, we are investing today into building a platform that will combine the power of our globally recognized brand with the massive reach of our creators. Our goal is to create a business that, if successful, could eclipse our consumer products business from a revenue and EBITDA perspective by 2025. To that end, we spent approximately $2.6 million in the first quarter on Centerfold as we build the foundation of this platform for long-term growth. Net income in the first quarter was $5.5 million, and adjusted EBITDA was $1.2 million. We spent $9.5 million more in SG&A compared to the first quarter of last year on costs related to functioning as a public company, such as expanded headcount, insurance, tech licenses, and implementation, and third-party service providers. These costs are largely fixed in nature, and many of them we already started to incur in the second quarter of last year. So as we continue to grow revenue, we expect to see operating leverage and margin expansion. I also want to highlight that our cash and equivalents as of March 31st were impacted by the timing of cash flows and working capital. We had a significant amount of payables coming out of the fourth quarter related to the increased marketing spend from the holiday season, along with accruals related to inventory purchases that we paid down in the first quarter we also saw a material increase in prepaid assets as we have to pay up front for software licensing and implementation costs as of today cash and equivalents are above 40 million dollars and we have over 20 million dollars of gross cash collections due before the end of the second quarter in terms of outlook i want to reiterate that we continue to expect full year revenue in 2022 be approximately $350 million and adjusted EBITDA to be around $55 million. This year has started off strong and we factor the ongoing macro headwinds into our prior outlook. As I previously stated, we expect the bulk of revenue in EBITDA to come in the back half of the year, especially in the fourth quarter, as we start to realize the operating leverage and anticipated revenue growth tied to all of the foundational work that we are doing today. We believe that we are well on our way to achieving our stated goal of $600 million of consumer product revenue by 2025. And as we start to see results from the centerfold business, we look forward to when we can raise the long-term outlook accordingly for centerfold revenue contributions. We are excited by the strong foundation we are building and the tremendous demand for our brand. With that, I'd like to ask the operator to please open the line for questions.

Thank you.