PLBY Group, 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.

If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment, please, for the first question, which comes from the line of Jason Tilchen with Canaccord Genuity. Please go ahead.

Yep. Thanks a lot for taking the question and congrats on the strong results. Two questions for me. The first is, given the China exposure within the licensing business and all the lockdowns and other economic developments there, I'm just curious if you could maybe provide a framework for how to think about the impact there, both in Q1 and throughout the rest of the year. And the second one is just on the broader supply chain environment. We've heard a bunch of different things from e-commerce companies that have reported so far. Some noted that product availability was getting better than it was sort of back half of last year. Others have talked about, obviously, rising transportation and labor costs. I'm just curious if you could maybe give us an update on where in the supply chain recovery you guys are and how product availability was throughout the quarter.

Thanks, Jason. So, yeah, on China in particular, so there was no impact in the first quarter. We had a little over $10 million of revenue coming from China in the first quarter. I mean, obviously, they've got very strict COVID restrictions that are in place. I think those started early. more recently, kind of towards the end of Q1, early Q2. It obviously presents business challenges to our licensing partners in the market. We're still evaluating what that impact could be, but our partners are committed to limiting any disruptions and returning to normal as quickly as possible. With that in mind, we're not forecasting any impact going forward. it's around $40 million of full-year revenue based on minimum guarantees that we already have in place that we continue to hold to. So, look, we'll continue to evaluate the situation, but we haven't seen any impact yet. On the supply chain issues, I think all the things that you highlighted, I mean, we're seeing the same thing as well. In the first quarter... In particular, Honey Burdette will do a global marketing launch around each product that they put out there. So they'll market a product globally, and it should be in stores globally and online globally. Part of the challenge we had was actually making sure that the product was in all of the stores globally. So that certainly had an impact on their ability to sell through some of the products that they brought in. We certainly see rising costs from a shipping perspective and also from a fulfillment perspective, but what we're trying to do is leverage our consolidated efficiencies across the multiple businesses to really build economies in scale from this. Another thing that we're trying to do going forward this year is mitigate some of the risk in the back half of the year by receiving available inventory early. And this is particularly important as we gear up for the Halloween season, which is so important to our business. So we're working through with our suppliers now trying to receive that inventory much sooner than we would to make sure that we're in a good place for Halloween. And then the other thing that I'd still highlight, Yandy in particular, we saw this last year you know, unfortunately it hasn't really gotten any better, but our top selling products, you know, consistently to be, uh, are sold out or out of stock, which really has an impact on their ability to, to continue selling. I think last year we saw kind of in the 15 to 25% range. We've seen that percent go up in some cases as high as 40 to 45% out of stock on our top selling items. So it has improved from that. Um, but, but certainly, uh, you know, has been a headwind and an impact for the business.

Okay, great. And is there anything that you guys can do to sort of bring that down over time? Is it, you know, diversifying suppliers? Is there anything that is in your control there or is it mostly out of your control?

Well, one of the things that we're doing actually is working on our private label piece of the business. And when we see that as actually some of our better selling product there, So the more that we can, to your point, kind of control this and work more closely, I think that can not only improve the amount of stock that we have on better selling items, but it can also eliminate some of the stock on the, I'll call it lower performing, lower margin items.

Jason, I'll just add to that. Yandy, as we alluded to in the last call and we said in this call, we are in the process of repositioning Yandy and integrating it more into Playboy. And as we do that, And Lance talked about the private label products. That allows us to diversify suppliers. It also allows us to realize higher gross margins on a private label product versus reselling a third-party product. And so that will continue, and as we said, we're gearing that up for the Halloween season.

One other thing I failed to mention, but obviously another lever we could pull and are contemplating is around increasing the prices on the product. So obviously you have to do that thoughtfully, but In the current environment, I think everything is increasing in price, so it wouldn't be shocking, I don't believe, to our consumers if we do that to offset some of these higher costs that we're facing.

Yeah, that makes a lot of sense. Thanks a lot for the thoughtful answers.

As a reminder, to register for questions, please press the 1 followed by the 4 on your telephone keypad. The next question comes from Alex Freeman with Craig Hallam, Capital Group. Please go ahead.

Great. Thanks very much for taking my question. Direct-to-consumer revenue was very strong in the quarter, a little bit stronger than we were looking for. And I think you mentioned in their prepared remarks, Yandy is running into some very difficult comparisons, lapping some of the strength that the business saw last year after the acquisition, as well as just challenges with the IOS changes. Are Are there any other brands in particular that really drove the strong quarter for you? And just as you look out into Q2, we're hearing from a lot of other e-commerce companies that consumer spending has pulled back a little bit the last three, four, five weeks as inflation has ramped up. I'm curious if you're seeing any pressure in any of your brands.

Yes. So the real drivers of the growth, not surprisingly, are the brands, both Playboy and Honey Burdette, you know, We talked about it a lot in the prepared remarks around how strong we see the brand to be and how strong we see demand out there. That's not only true for Playboy, but it's also true for Honey Burnett and was a big reason why we acquired that company because they have such a loyal following and are really able to generate such brand equity. Yandy and Lovers obviously don't really have a brand. They're more like channels for us. And so as we explore... what can we do to leverage the Playboy brand within Yandy and Lovers? That's kind of our longer-term strategy around that. Anytime we've done a collaboration on Yandy or if we've sold Playboy product in Lovers stores, we actually see really strong demand for that. A lot of the growth we saw at Playboy in particular was driven through expanded assortment, you know, better awareness of Playboy.com as an e-commerce destination, not a content destination. That's something I talked about, I think, a lot last year. We were really, you know, a lot of people would historically go to Playboy.com expecting a content or a media business, and we've had to really pivot what customers are expecting when they go there, and people are now knowing that they can go there for great apparel. Also, Honey Burdette, the growth there driven by, you know, continued e-com strength and then also the new store opening in Miami. So, you know, look, there's certainly headwinds on the business from a macro perspective, but what we really like to see is the fact that the brands remain strong and we see opportunity for actually leveraging that more broadly across direct-to-consumer to drive our longer-term growth.

Okay, that's really helpful, Lance. Thank you.

Okay, thanks. Next question, please.

The next question comes from the line of George Kelly with Roth Capital Partners. Please go ahead.

Hi, everybody. Thanks for taking my questions. So first, Lance, you were just talking Honey Burdette, and I was just hoping you could, or Ben, fill in some detail about what's happening in the U.S., and what I'm most curious about, I guess, is how quickly is the brand growing in the U.S., and what's a typical store as you're opening these things? I mean, what's the kind of financial profile of those stores, and how quickly do you see a lift in sort of regional e-commerce spending after that store opens. So any kind of commentary just about the U.S. ramp?

Yeah, sure. So in the U.S. in particular, I talked about this a little bit on the last call, which is Here in the U.S., those stores are producing revenue, I think it's somewhere around 40% more on a per store basis than we've seen in Australia. And that has continued to be the case. And we just opened the Aventura store in Miami in February, and it's already the third highest performing store for us globally. So that's in two months' time, it's already shot up the ranks there. The other thing, when we open these new stores, we're really targeting 30% four-wall EBITDA margins. They're able to get there pretty quickly. A new store opening costs you around $600,000 to $800,000 to open up in terms of upfront expense. But you're able to recover that pretty quickly as these businesses scale. And what we also see usually when you open a new store is it can contribute to a halo effect on the e-com side because you get customers coming into the store, figuring out what size works for them, what products they like. And then if you've got them as a loyal customer, when new product lines drop, they're more likely to buy that online. So that's why we're really optimistic about the growth prospects at Honey Burnett, particularly in the U.S., and in Europe and the UK, because as we open these stores, we just see, you know, tremendous demand. We do have plans to open some additional stores across the Atlantic and in the UK as well this year as part of our 10 store plan. Most of the stores that we're opening this year, though, will will be focused on the US.

OK, and then second question still on your desk, but what are your plans to to build awareness in the U.S. Do you have any kind of big marketing campaigns or anything else that you're planning for this year?

Yeah, George. So obviously, the opening of new stores is some of the best awareness we can build. And so when we look at the roadmap for the balance of the year as we move Honey Burdette into the Northeast and around the New York metropolitan region, that's the best marketing because it's profitable marketing, right? Where, as Lance said, Those stores do about a 30% EBITDA margin, and off the back of that, what we see is a very high return customer rate on e-comm as well. There are other integrations. I don't want to go into that right now, but there are other things planned around live events that we can do in a profitable way and other organic marketing initiatives that we are exploring for HB.

To tie in back to some of the things we also talked about and the prepared remarks, so We're launching this Schofield pop-up concept here down in Miami in the second quarter. That's going to carry Honey Burnett products as well, so that's one way to get the word of mouth out there. The other thing that we talked about is leveraging this centerfold platform as an engine for organic customer acquisition. a lot of these creators that we're working with already have a propensity to wear and to use Honey Burdette branded products. So people are really excited about, hey, how can I get involved? How can I work as an affiliate to promote Honey Burdette branded products? So when we talk about centerfold and serving as top of funnel over the long run, that is an area that we see as a really interesting opportunity because it can bring in new customers for the Honey Burnett brand through the top of the funnel on Centerfold and do that in a very organic way. So that's another thing that we're pretty excited about. And again, the creators that we work with are quite excited about the product. You also see it organically on social media, on TikTok and other live streaming platforms. There's been some pretty big celebrities and influencers out there that have been seen wearing Honey Burdette lingerie. And again, they're doing that organically. It's not something that's a paid placement.

Okay. Understood. Thank you. Your next question comes from Daniel Adam with Loop Capital Markets.

Please go ahead.

Hi. Good afternoon. It looks like you guys burned through a decent amount of cash last In the quarter, just looking at the queue, I guess what's the outlook for cash generation and what's the minimum cash balance you need to run the business, working capital, and so on? Thanks.

Yeah, I talked about it a little bit in the prepared remarks. It was really a timing issue in the first quarter. You had a lot of payables coming out of the fourth quarter, both from an inventory purchase perspective and also a marketing perspective, obviously, the fourth quarter. is a huge push from a marketing perspective. Those payables come due in the first quarter. So we were effectively paying down a lot of that in the first quarter. The other thing that impacted us as we work on building this foundational infrastructure across the company, we're implementing a lot of technology. And what you end up having to do there is your implementation costs and your licensing costs. don't come over time, they come as an upfront payment. So our prepaids increase significantly because there's a lot of what we do. So those were a lot of the outflows that we saw in the first quarter. The other thing is around our licensing partners, the timing of those payments that we get from them are largely centered around two times a year, which is the fourth quarter and the second quarter. So I mentioned we've got another $20 million-plus of gross cash receipts that we're expecting to come in this quarter. Our cash balance is already up over $40 million from where we ended March 31st, so it's already increased. And kind of going back to what I said on a full-year basis, we're expecting this to be a cash flow-positive business, even when you factor in our debt service, working capital, and everything like that. You know, it's something that, again, as you scale this business, you're investing up front. We opened the Miami store as well. We're planning to open more stores for Honey Burnett. Those are also upfront costs that you incur that you recoup over time. So from our perspective, it's really just a timing issue. We can certainly manage the working capital if we need to, but from our perspective, it was really just timing around a lot of these payments.

Is it safe to assume that the $33 million or so at quarter end is the low point for the year?

Yep. Okay. All right. Thanks. Next question.

The next question comes from Brian Dobson with Chardon Capital Markets. Please go ahead.

Yeah. Thanks for taking my question. Just returning to Centerfold for a second, do you think you could give us a little bit more color on the e-commerce and cross-selling potential there and really how you envision that evolving as the platform continues to mature?

Sure. So what I talked about in the prepared remarks was the integration of Centerfold into Playboy.com and consolidating all of our digital products into that. When we look at, for example, Playboy.com, the e-commerce revenue coming off of that, 25% of that revenue today is already coming from affiliates. We recently added 40 of our centerfold creators to be affiliates. And so as we think about one cohesive ecosystem where centerfold eventually gets merged into playboy.com, you will have the ability to cross sell merchandise along with, uh, other media or subscription products, tipping premium unlocks, subscription revenue, et cetera. And so it's all one cohesive ecosystem. And that's what we've been testing and what we've been working on the integration of right now. And so when we think about other consumer brands out there, what makes me so excited is I think this is one of the most unique differentiators we have is the ability to work with talent to also then cross-sell consumer products. When you think about the privacy changes with I.O.S., And what's happened in other e-commerce companies as well as other media companies have commented on this. We are effectively building our own social media network in-house with this that we believe is a very efficient customer acquisition tool that will create a flywheel effect for the rest of the business.

Great, thanks very much. And then in terms of cost synergies, I guess moving forward, how much potential do you see there, or at least where might you be focused in terms of gaining efficiencies over the next year or so?

So from a macro perspective, when we talk about this in the prepared remarks, we've taken out approximately $5 million of annualized costs over the last few weeks. Moving forward, the companies we bought In 2021, but we are, we're focused on this consolidating infrastructure. Consolidating functions. And I think we've been successful at doing that so far this year. Again, this is a step puncture function. It's not linear. Um, and we will continue to evaluate, you know, opportunities to realize synergies as we move through the balance of the year. Um, you know, there's a lot of stuff that was hoisted upon us, not only through the acquisitions, but through the accelerated filing. status that we achieved in June of last year. And so all of that infrastructure had to be implemented on an accelerated basis from what we were originally planning.

Yeah, and I see, you know, look, there's a few areas from my perspective. Ben mentioned a lot of, you know, these fixed costs that we've taken on over the last 12 months that we've kind of ramped up into. I think we're kind of at that point right now where where most of that has been layered onto the business. I mean, we will have kind of some ongoing annualization of headcount and other tech costs that have come in. But I think we've largely kind of hit that asymptote. And now it's really about as you scale revenue, those costs kind of remain fixed. So as a percent of revenue, those do go down over time. So as e-comm continues to scale, you know, once Centerfold actually starts contributing from a revenue perspective, you can get real operating leverage out of that. The other thing, you know, that I'm really interested in is what type of efficiency we can get on the marketing side. That's not only from bringing our marketing in-house. We've been working with, you know, we historically have been too small from a marketing perspective to warrant our own in-house marketing team, but we're building out a small team that we can then leverage across the entire portfolio. I think you can be a lot more efficient with your marketing spend that way. And then when we talk about centerfold being a very large organic top of funnel from a customer acquisition perspective, I believe that that can give us a lot more efficiency on the customer acquisition side, again, hopefully leading to some real economies of scale as we build out this business. So I think there are a lot of areas that we're, you know, putting in place the foundation today. And as we scale revenue, you should start to see that really materialize and the margin really kind of, you know, at the end of this year and into next year and beyond.

Great. Thanks very much.

There are no further questions at this time, and that does conclude the conference call for today. We thank you for participation, and I ask you to please disconnect your line.