PLBY Group, Inc.

as we moved away from our old partners. And so we work with our new partner, but we have a higher percentage of the revenue in those deals. And the way I would think about it is it's a starting point right now for us to rebuild the business the right way. And the goal would be that, you know, if the partners are successful, which we think they will, that, you know, there'll be an opportunity to revisit those MGs as sales continue to build. The other thing that we've done within those contracts is we've put much greater controls in those contracts than we had in our previous contracts. And, you know, I would say the best way to know they perform is the partners have paid us today. And so that in any contract is always the best way to know they're performing. But I think, you know, through our joint venture with the subsidiary we involve, we have the right people on the ground, the right controls in the contract. to make sure that we are enforcing our contracts moving forward, something that we did not have previously.

Appreciate the color there. A follow-up, or I guess a new question on Honey Brigette. It seems like last quarter there was a bit of momentum that was being built up, but it seems that this quarter is a bit weaker. Can you talk about some of the dynamics you're seeing in that business?

Yeah, I'll take the high level and then I'll turn it over to Mark because I don't think the numbers tell the full story. I think the first thing is we were down if you look at quarter over quarter. So if you go back to 23, Mark joined us in April, give or take of 23. The second quarter in 23 was the last, like what I would say is previous heavily discounted quarter. And so we're now past that. But if you look at Q2 24, We were down 50% in the number of days that we were on sale versus Q4-23. The good news is we saw a gross margin expansion during that period of time. I'll let Mark sort of comment on some of the new hires we've made on U.S. retail and what we're seeing. I would say that so far in Q3, we're up double digits over last year, and we're seeing that not only from an e-commerce perspective but from a store perspective too. Mark?

Yes. Excuse me. In terms of what we're seeing in the U.S., we just hired a head of stores in the U.S., and typically our stores have been comping down for a while, and we're actually seeing stores in the U.S. comp up. So a lot of the things we're doing there are, you know, creating the momentum that we need that's dovetailing off of what's going on with our online business. So we brought that in. We're also expanding our online business because that's one area where we think we need to – participate in social channels, do a lot of stuff that the learnings we're seeing from Centerfold and bring that into Honey for Debt. So we're beefing up that game. Yeah.

And I think we feel good with where we are with Honey for Debt. And I think Honey for Debt gives us another lever also. We announced today that we've reached an exclusivity period with our lenders to repurchase our debt at a significant discount. And I think you know, for us from a balance sheet and a leverage perspective, should we be successful in executing and paying off our lenders at a significant discount, it significantly reduces the leverage outstanding on the company, which gives us, again, more operational flexibility in running the company.

Great. Thank you.

And just my final is a bit of a follow-up on the capital allocation strategy. Can you talk about, I guess, how much, or I guess the strategy going forward, given the ability to now pay down the debt at a discount, is it likely, you know, coming from further asset sales, or how are you thinking about, you know, going towards paying down that debt? Thank you.

Sure. So, right now, there's, you know, call it $215 million of gross debt outstanding. We've reached an exclusivity with the lenders where we can pay that off at a substantial discount. And then to raise the money to pay that off, you know, we have a lot of arrows in our quiver. So, you know, we've talked historically that we've had interest in Honey for Debt. We've also engaged a leading investment bank to pursue a new debt facility, albeit at a much smaller amount than the existing debt, but that would satisfy our existing lenders. And we've actually even had interest since the rebuild of our China business in our Asia business. And so, you know, we're pursuing pursuing all options. I think that we can get it done in the senior market. And if we're successful in doing that here, you know, the the gross debt outstanding on the company will be significantly reduced from where it is. But we have a lot of different options and we'll see which one gets done first.

Great. Thank you. I'll get back in the queue.

With no further questions at this time, I would like to turn the conference back over to management for closing remarks.

I appreciate everyone dialing in today. We look forward to sharing more about our digital strategy as we move into the fall and then talking to you guys after our Q3. So thank you very much for dialing in today.

Thank you. This will conclude today's conference. You may disconnect your lines at this time.