PLBY Group, in its third quarter 2023 earnings call, has revealed that it is considering strategic alternatives for its Honey Birdette brand, including potential partnerships. The company is also shifting its focus towards digital revenue, moving away from gross merchandise volume (GMV) as a key metric.
Key takeaways from the call:
- PLBY Group is considering strategic alternatives for Honey Birdette, including potential partnerships, as it seeks to grow the business without using cash from its balance sheet. The company is not convinced about selling Honey Birdette due to the current macro environment.
- The company is implementing a 10% price increase for Honey Birdette, which will start in the fourth quarter and continue until probably the second quarter of next year. This is the first price increase in two years, amidst rising inflation with wages, product costs, and shipping costs.
- PLBY Group has received an unsolicited offer to buy its intellectual property in China. If the deal proceeds, PLBY Group would not have a China business moving forward but would receive a significant amount of cash. The company is still evaluating the deal.
- The company is shifting its focus towards digital revenue, moving away from gross merchandise volume (GMV) as a key metric. It is not trying to compete with Only Fans and views itself more as a Neiman Marcus than a Costco (NASDAQ:COST).
- PLBY Group is looking to bring its entire digital ecosystem together into one offering, focusing on membership and creating more opportunities for creators to make money with Playboy than any other platform.
PLBY Group's CEO Ben Kohn and CFO Marc Crossman hosted the call, discussing the company's financial projections, operational improvements, and strategic alternatives for Honey Birdette. Kohn reiterated that the company is not looking to sell Honey Birdette at the moment, but is exploring strategic alternatives including partnerships to help grow the business.
The company is also focusing on digital revenue, moving away from gross merchandise volume (GMV) as a key metric. Kohn stated, "We're not trying to compete with Only Fans. We don't believe in being Costco at Playboy. We view ourselves more as a Neiman Marcus than a Costco."
PLBY Group is also evaluating an unsolicited offer to buy its intellectual property in China. If the deal proceeds, PLBY Group would not have a China business moving forward but would receive a significant amount of cash. The company is still evaluating the deal.
PLBY Group (NASDAQ:PLBY) is a global media and lifestyle company and the parent company of Playboy.
InvestingPro Insights
With a market cap of 50.54M USD, PLBY Group is navigating through a challenging financial landscape. The company's P/E Ratio, a key indicator of profitability, stands at -0.09, suggesting that it is not currently turning a profit. This is further emphasized by a negative P/E Ratio of -1.94 for the last twelve months as of Q2 2023.
InvestingPro Tips highlight a few key areas of concern for the company. PLBY Group is operating under a significant debt burden and has been quickly burning through cash. This could potentially influence their decision to evaluate strategic options for Honey Birdette, as they seek to grow the business without further straining their balance sheet.
In addition, the company has been experiencing a declining trend in earnings per share and analysts anticipate a sales decline in the current year. These factors, coupled with a poor return on assets, might be contributing to the company's shift towards digital revenue as a key metric.
It's worth noting that InvestingPro offers an additional 11 tips on PLBY Group, which could provide further insights into the company's financial health and potential investment opportunities.
Full transcript - PLBY Q3 2023:
Operator: Good afternoon, everyone, and welcome to PLBY Group's Third Quarter 2023 Earnings Conference Call. Hosting today's call are Ben Kohn, Chief Executive Officer; and Marc Crossman, Chief Financial Officer and Chief Operating Officer. [Operator Instructions] I would like to hand the call over to Ashley DeSimone of ICR.
Ashley DeSimone: Thank you, operator. Good afternoon. I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-Q filings made today 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 PLBY Group'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 PLBY Group's actual results to differ from its historical results and forecasts, including those risks set forth in PLBY Group's 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 during this call. Do not place undue reliance on any forward-looking statements. During this call, PLBY Group may refer to non-GAAP financial measures. Such non-GAAP 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 8-K today and in its Form 10-Q filed. With that, I will hand the call back over to operator to begin the Q&A session. Operator?
Operator: [Operator Instructions] And our first question comes from the line of Jason Tilchen with Canaccord Genuity. Please proceed with your question.
Jason Tilchen: Great. Good afternoon. Thanks for taking the question. First off, I'm curious, you mentioned in the press release that you're not 100% convinced about selling Honey Birdette. I'm just curious what are some of the different factors you're weighing as you think about that asset and how it fits into your broader platform going forward. Maybe what are some of the options beyond continuing as is that you're currently looking at, at the moment?
Ben Kohn: Thanks, Jason. Good afternoon. It's Ben. I think right now, we are making the operational improvements we've talked about in previous calls to Honey Birdette. As we said today, we are instituting a 10% price increase that will start in the fourth quarter, and it will take us really until probably the second quarter of next year to -- for all products, but we have not raised prices in the last two years. And yes, we've faced rising inflation with wages, product costs and shipping costs. We've also changed our free shipping as well as our expedited shipping policies, and we have other cost measures that we're taking. Given the macro environment right now from M&A and especially on the retail side, we don't think it's the right time to maximize shareholder value by selling that. However, we are looking at strategic alternatives and are pursuing partnerships where we might be able to bring in a partner to help us grow the business without using cash from our balance sheet.
Jason Tilchen: Great. That's really helpful. And then just a follow-up, not on Honey Birdette but on the live stream business. You mentioned in the prepared remarks in the press release about potentially having a Chinese private equity firm making an offer for some of the Chinese trademarks. Just curious if you could expand a little bit about how that would impact the shape or trajectory of the licensing business in that market going forward.
Ben Kohn: Sure. There's not much I can say at this point. What I can say, and we talked about this in the press release as well, is that over the past few months, we've done extensive audits of our old partners, both from a legal and a financial perspective. We saw multiple violations and incurable violations of those agreements as well as we've talked about previously, they haven't - our partners have not been paying us, so we have decided to terminate a number of them. We have strong interest from some of their subs as well as new partners that might be interested in licensing the brand. And at the same time, we received an unsolicited offer to buy our IP. We are still evaluating that deal and whether that deal makes sense for us or not given the business, the valuation, the geopolitical situation, et cetera. In its current format, we would be selling all of our China business, and we would not have a China business moving forward. But in return, we would receive a significant amount of cash. But again, it's early in that, and we're still evaluating it from a company perspective.
Jason Tilchen: Great. That's really helpful. And just one last one. I was wondering if you could perhaps share some of the - an update on some of the key metrics that you've been discussing in regards to the greater platform and you shared a lot about plans to sort of change that rebranding and also introduce membership tape. I'm just curious what are some of the underlying trends that you're seeing in recent months.
Ben Kohn: Yes. We're still very happy with where the creator platform is. Moving forward, we're not going to be talking about GMV because that is not the metric by which we think we should be judged. What we're going to be talking about is digital revenue. I think we are not - to be clear, we are not trying to compete with Only Fans. We don't believe in being Costco at Playboy. I think we view ourselves more from - as a Neiman Marcus than a Costco. And so we think we have a way with the Playboy Club, which really from the people we've talked to resonates with people. It makes sense. This is the place to interact with creators, but also the addition of membership, we have ways for creators to make more money with Playboy than any other platform. We're building on an affiliate program where they can sell memberships and get paid. They can participate in live events. There's a really unique value proposition for membership. And so for us, it's much more about revenue. We also believe with the creator tiering that we've rolled out that Only Fans had set the market at 80-20. We don't think 80-20 for a creator platform split is necessarily relevant nor should that be where we are moving forward. And so sorry not to answer the question directly, but we're going to be focusing on digital revenue moving forward, as we're bringing our whole entire digital ecosystem together into one offering.
Jason Tilchen: Great. That's very helpful. Thanks a lot.
Operator: And our next question comes from the line of Greg Pendy with Chardan. Please proceed with your question.
Greg Pendy: Hi, guys. Thanks for taking my question. Just flipping back over to Honey Birdette. Can you just kind of let us know, I mean, what are you seeing in terms of the ability to raise prices? You said you're going to be doing it gradually over the next six months. I mean where do you think competitively the retail environment in that space is positioned?
Ben Kohn: Thanks, Greg. Yes. Look, I think October is a great example, and we talked about this, but in October of '23 versus October of '22, which is a month that we had no sales in either year. We were up 16% year-over-year. And so with the right product, we are easily seeing the demand for that. We've also made changes already to expedited shipping, to free shipping thresholds. We have not seen any impact to consumer demand for the product. And we believe that we have room to raise prices. Obviously, labor and other costs have gone up. And when you look at the competitive landscape, we've seen others raise prices. We have not, and so that is something that we will start implementing here in the fourth quarter. And just given how we tag items based on the factories, it will take us until the second quarter to have that across our full product suite.
Greg Pendy: Great. And then just one more on Honey Birdette. Can you just remind us what the store base sits at right now, where it was last year and if there are any plans for new stores?
Marc Crossman: So Greg, it's Marc. Right now, the store base has got 48 in Australia. We've got 12 in the U.S., and we have three in the U.K. And since then, we had opened, I think, a year ago, three new stores. I'll get the exact number for you, but I think that was in the U.S.
Ben Kohn: Greg, I think we would like to open new stores. I think that we are committed to becoming a capital light - to moving to that capital-light model we talked about. We don't think that's the best use of shareholder capital on our balance sheet just given our limited resources and the debt that we have, but we are exploring, as we said, strategic alternatives to potentially bring in a partner to help us expand that business. It's just not the right time for us to sell 100% of it after consulting with our advisers based on the macro environment.
Greg Pendy: Makes sense. Okay. Thanks a lot.
Operator: And we have reached the end of the question-and-answer session. Therefore, I'll turn the call back over to the management for closing remarks.
Ben Kohn: We appreciate everyone listening, and we look forward to talking to you on our next call to discuss full year 2023 results. Thank you.
Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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