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spk02: Greetings and welcome to the Playboy Groups Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. The question and answer session will follow the phone presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Chesler, Investor Relations. Matt, you may go ahead.
spk04: Thank you, operator, and good afternoon. I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 8K Filed Say by PLBY Group, 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 the company's Investor Relations 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 Group's views and assumptions regarding future events and business performance at the time they are made, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to risks, which could cause the company's actual results to differ from its historical results and forecasts, including those risks set forth in the company's filing 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 during this call. Do not place undue reliance on any forward-looking statements. During this call, the company may refer to non-GAAP financial measures. Such non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release. PLBY Group filed with its Form 8K today. I'd now like to turn the call over to Ben before we begin the Q&A session. Ben?
spk01: Thanks, Matt, and thanks everyone for joining us today. Before we get into Q&A, I'd like to quickly review a few of the key developments that we have achieved during the third quarter and in the last couple of weeks, most specifically related to our balance sheet and our liquidity. About a week ago, we closed a strategic investment from Byborg for over $22 million. Today we have approximately $30 million of cash on the balance sheet. And just this week, we have restructured our debt, something that we have talked about previously through an exclusivity period with our lenders, where we have realized on a senior debt basis a $66 million discount on the senior debt. With that, we have issued a new $28 million convertible preferred to our lenders. So the net reduction is $38 million in leverage. The convert is convertible at our option, at any time, in cash or in stock at the 5D VWAP, subject to a floor of $1.50 and a cap of $4.50. So should the stock be anywhere within that range, it is our option to convert it. If the stock were over $4.50, we would always have the option to pay in cash or redeem in stock. And we think the combination of the cash on our balance sheet and the significant reduction in debt that we have achieved puts us on a much more stable financial footing moving forward. We're excited and continuing to work on the strategic deal. We talked about the non-binding LOI. We have signed with ByBorg, and we expect to close that before year end. And with that, Matt, I will open it up to questions.
spk02: Great, thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
spk03: One moment while we poll for questions. Operator, we do have questions that are
spk04: submitted via email in advance, and I'd like to go ahead and read those now.
spk02: Yeah, absolutely.
spk04: So we have questions from James Heaney from the research team at Jefferies. Ben James asks, as we look to 2025, what kind of driver should we expect the Pollyboy magazine to be? What are the key reasons you've decided to re-launch the magazine?
spk01: Sure, so we're not looking at the magazine as a key revenue driver moving forward. This is a promotional tool for the creators and the models that we work with. And also, unlike other global brands, we are not a brand that spends millions of dollars in marketing. We have historically done that through content. And so by bringing back the magazine, it serves two purposes. The first is a promotional vehicle for the creators and models we work with. The second is as a brand marketing vehicle to allow us to bring back some of the iconic franchises like the Playboy interview, like the cover, like 20 questions, things that used to be in the Playboy magazine as a way for continuing to build the
spk03: brand on a global basis. Okay, thanks, Ben. The next question is
spk04: related to the ByBorg relationship. Can you discuss your partnership with ByBorg and the performance requirements, if any, for you to successfully receive the $20 million in annual payments?
spk01: Sure, so as we publicly announced, we have signed a non-binding LOI and for a $300 million total MG over the initial term, so minimum guarantee over the initial term of the deal, which is 15 years, that would be paid in $20 million annual payments to us. That includes some operating and licensing, certain of our digital properties, as well as developing new business lines for areas that they either operate in today or might decide to operate in in the digital side moving forward. Should that deal conclude, those $20 million are minimum guarantees against a percentage of the profits of those business lines. And so technically, outside of letting them operate our businesses on the digital side, there aren't other, today there are not other requirements for those $20 million. That is an advanced or minimum guarantee against a percentage of the profits. The simplest way to think about it would be if you look at our digital segment today, right now we generate about $5.5 million, $5.4 million on a quarterly basis in our digital subscription segment. In this past quarter, it lost about $2 million. Moving forward, you would basically be replacing on a minimum guarantee basis, that revenue with approximately $5 million a quarter, and you would have very little cost, I get if any costs against that. And there might be further opportunities to reduce corporate overhead for unallocated services that support those
spk03: businesses today.
spk04: The
spk03: next question would be
spk04: related to the unsolicited bid that was received recently from Cooper Hefner.
spk00: Are there
spk04: any thoughts you're able to share with regards to that, beyond what was said publicly, and in what areas of the business do you believe that you can lean into creating stronger returns absent? Yeah,
spk01: all I can point you to is the press release we put out, the board exercising its fiduciary duty, and unanimously rejected the Cooper Hefner offer. I think we're on the right track. As we said, we are moving to an asset-like model. You will notice in the quarter that Honey for That has been moved to discontinued ops. As we previously stated, we are in process of looking for partners for that business. The buy board deal and the other licensing deals that we continue to sign, including the rebuilding of our China business, is the right path for the company moving forward. And should the buy board deal close, coupled with the others, we would expect that our goal of getting to meaningful profitability, we're well on our way. And that coupled with a restructured balance sheet, we got a lot of cash, about $30 million of cash today. We've reduced our senior debt by $66 million, our interest bearing debt by $66 million. So we've reduced our cash interest expense moving forward, our cash burn from non-operating and financing segments. I feel like we are moving well on our way to where we need to be as a sustainable business moving forward. And then through the buy board participation, other licensing deals that we have restructured where we have upside, I think that is the right path for us to get to this
spk03: asset-like model. There were additional questions,
spk04: but I think you did cover off on them, particularly related to the Honey for Debt change. And so with that, there are no additional questions that have come in over email.
spk01: Appreciate everyone dialing in, and we look forward to talking to you in March, or about March, on their year-end review. Thank
spk02: you. Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
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