Greetings, and welcome to the Playboy Second Quarter 2025 Earnings Conference Call. This conference is being recorded. I would like to introduce Rob Fink with FNK IR. Thank you.

Thank you, operator, and good afternoon, everyone, and welcome to Playboy's second quarter earnings call. Hosting today's call is Ben Kohn, Playboy's Chief Executive Officer. Before turning the call over to Ben, 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 filed today by Playboy, which may be accessed on the SEC's website and Playboy'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 Playboy'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 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, and we ask you not to place undue reliance on any forward-looking statements. During the call, the company may refer to non-GAAP financial measures. Such non-GAAP measures are not prepared in accordance with generally-accepted accounting principles. But a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that Playboy filed with its 8-K earlier today and it's also in its Form 10-Q which was also filed today. With all that said, I'd now like to turn the call over to Ben. Ben, the call is yours.

Thank you, Rob. We have made significant progress in our evolution to a licensing-focused, asset-light business. The second quarter results are proof of just how far we've come. We've delivered a significant financial improvement in the quarter, but we also laid the important groundwork for the next leg of growth as we continue to sharpen our focus around the Playboy brand. Revenue climbed 13% year-over-year, with Licensing revenue surging 105%. And our adjusted EBITDA was $3.5 million, a $6.4 million positive swing compared to a loss of $2.9 million in last year's second quarter. Our net loss included $1.9 million in impairment charges related to the sublease of our Los Angeles office and $2.1 million related to a one-time settlement of present and future licensing agent commissions. Excluding those charges, our net loss would have been approximately $3.7 million and our earnings per share would have been negative $0.04. Additionally, the quarter's results included $1.3 million in incremental legal expenses related to litigation with 2 former licensees that we terminated for contractual breaches. Excluding those costs, adjusted EBITDA would have been approximately $4.8 million, a positive swing of more than $7.7 million year-over-year. We are now in a strong financial position with over $30 million in cash on hand as of today and a clear plan to continue reducing debt and lowering our cost of capital. This strength gives us the flexibility to invest confidently in the next stage of Playboy's growth. That next stage centers on returning to the roots that made Playboy an icon as an aspirational men's lifestyle brand. Working with one of the top brand agencies in the world, we're focused on bringing the brand to life through compelling content and unforgettable experiences. The Playboy Magazine is back, not as our core revenue engine, but as a powerful driver of brand relevance. Earlier this year, we relaunched the magazine and our next issue is scheduled to be released in November. The landmark issue will feature 12 Playmates in 1 edition, a first in our history, and they'll also star in our 2026 calendar. Both of those are available for presale on our website today. We're reintroducing the Playmate of the Month and have launched the Great Playmate Search, a global paid voting contest that's already exceeded our expectations. These contests will run quarterly, delivering fresh content, fan engagement, sponsorship opportunities, and meaningful revenue. Experiences are another pillar of our growth. We're planning to relocate our corporate headquarters to Miami Beach, a vibrant city that has become the hub of our content creation and event strategy. We're also developing a new Playboy Club concept there in partnership with a leading hospitality company, blending a luxury dining experience with an exclusive private club, designed to be as iconic as the original Playboy Mansion. We believe Experiences will become another significant revenue driver for us in the future as we expand this concept to major markets around the world. Our Licensing business is thriving with new agreements in gaming, beauty and grooming, energy drinks, and fashion. Our partnership with Byborg remains a cornerstone, guaranteeing $300 million in minimum royalties over 15 years for our Digital business. And our Honey Birdette business and brand continues to improve. Q2 revenues rose 14% with gross margins expanding and brand perception strengthening, thanks to new collections, higher full price sell-through and a refreshed customer experience online and in-store. Put simply, Playboy is stronger, nimbler, and better positioned than it was a year ago. Looking ahead, I am confident that we have the right strategy, the right team, and the right momentum to keep building on this success. With that, operator, I will open it up to Q&A.

Your first question comes from George Kelly with ROTH Capital.

So a few for you. Maybe I'll start with paid voting. Saw the announcement a few weeks back. I was curious if you could give us a little bit more just about what the opportunity is there for the company and what the registrations have looked like so far? And what is your expectation for repeating a similar kind of contest in 2026?

Great. Thanks for the question, George. Look, paid voting, this is our first time doing it. What I would say, without getting into specific numbers because they're in the multiple thousands already, but we signed up in the first few days more than 50% of what we were expecting for the whole entire sign-up period, which is 8 weeks. And we haven't turned on any marketing yet. So there are various things that we will be testing with this first contest. We plan on doing this for every single issue of the magazine going forward. This contest, we actually have 2 contests going on, one for Playmate of the Month and the second is for an inside cover star. But more importantly, what we're testing is how do we integrate this whole global Playboy ecosystem? So we have signed up our international editions which are licensing deals as affiliates to bring in women from around the world into the contest. We integrated with PSD, a significant licensing partner of ours for underwear, where they are marketing this contest and also participating in the giveaway and the prize selection. We did the same thing with Honey Birdette. So I'm excited. Based on other contests, this could be millions of dollars in revenue for us. We have to execute on that. And we've done this in a model that's very similar to Licensing where we partnered with a technology partner and we have an economic arrangement very similar to what our Licensing business is on a gross margin basis.

Okay, that's helpful. Another topic I wanted to cover is that in your letter, you mentioned two new license deals in gaming, one in beauty and grooming, and another in beverages. In your prepared remarks, you mentioned there was one more, but I forget the category. I was curious if you could discuss the significance of those deals and their timing. Not to ask for specific guidance for 2026, but as you look at these deals, I know this year has benefited from Byborg, but going forward, what would be a reasonable medium-term growth expectation in that business?

Sure. So I, unfortunately, I'm not going to answer that question because, as I've said historically, licensing is a step function, and we have to be very careful with the brand and as we're focusing on really the relevancy of the brand, that we make sure we do the right deals. And so there are a lot of deals out there to sign, it's just a question of whether we want to sign those deals because there's brand dilution. So we're very focused right now on the health of the brand. We have the company, financially speaking, in a really good place. And so we're not forced to do deals. And what's more important is doing the right deals that we can build meaningful partnerships with moving forward. The deals that we signed on an annual basis are in excess of 7 figures, and so they're multiple-year deals. So it's significant for us. And I think we've only scratched the surface. I think there's a lot more that we have in our pipeline and a lot of other categories that we are targeting to continue to grow that Licensing business. But I don't want to get into 2026. We're barely past the midway point of 2025, and it will depend on when and the number of deals that we get done. As we approach the year-end, we can talk more about that. But I can tell you, and this speaks to why we're investing in content, it's our marketing engine for the brand. It always has been. This is not a company that goes and spends millions of dollars in what I would say is paid marketing. We use content as that marketing vehicle. We have some huge stars potentially lined up for next year centered around the magazine. And that by itself brings an amazing amount of audience to the business. Those things can have meaningful impacts on the future Licensing business as well. When we did this last time and we invested in content, we saw a significant positive downstream impact to our Licensing business. And that's why the business strategy we're embarking on is so key.

I had to try, Ben. But just a couple more quick ones. First, on the hospitality venue in Miami Beach. I'm curious about how you're structuring that and what stage of development those plans are at.

We are very focused on maintaining an asset-light model with high-margin revenues. While I cannot share specific details about our structure, we have identified a location and are currently developing plans with an operating partner, along with programming for the venue. Miami is likely to be our first location, although we have interest in expanding to other cities for different Playboy hospitality venues. If we succeed with this initial venture and open the site, we will be relocating our corporate headquarters to Miami. We are eager to be in a pro-business environment, especially after our time in Los Angeles. Miami represents the core values of Playboy, and this could be a significant opportunity for us if the deal goes through. There is considerable excitement for Playboy and our Playboy Club in the city. Our main focus, and the reason for our patience, is to ensure we partner with the right entity. Numerous opportunities have arisen for Playboy hospitality, but none have involved the right partners. Choosing the right partner is crucial for us so that consumers can truly experience the Playboy brand in an authentic way.

Okay. And then last question for me is just about the licensing commissions settlement. What does that do for the expense structure on the Licensing business going forward? Is there anything to note there?

Yes. I would say it will impact China. We've discussed the percentage commission we pay. I would consider it material, but not enough for us to focus on in 2025.

Yes. I mean, I think, George, just for competitive reasons, we're not going to get into details. But we were able to reduce our expenses moving forward at a significant discount to what we thought they would be. And so we were opportunistic in doing that this quarter to improve our results in future quarters.

And that, the changes start when, starting in the back half of '25?

Yes, the changes will begin this quarter and continue thereafter. It's more complex due to accounting considerations. However, it was an opportunistic decision for us and the right move as we seek to improve our margins. We are focusing on this across the board. Historically, we have invested significant time in AI, and we believe there are numerous operational improvements we can achieve with AI to enhance our margins. We are also planning to use AI in the Playmate voting contest. There are various ways to integrate AI applications to increase our efficiency.

Alex Fuhrman with Lucid Capital, please proceed.

I wanted to ask about Honey Birdette here. Nice to see that brand is back to strong growth, and the gross margins are up compared to last year. Can you just level-set for us, what's kind of the base case heading into the next couple of quarters? Comparisons get a lot more difficult. Should we expect the brand to continue to grow over the next couple of quarters? Or is that just going to be hard as you start to lap more difficult comparisons?

Alex, it's Marc. We still anticipate growth in the latter half of the year. Our retail business at full price is performing strongly. The comparable sales for that segment were around 28%, which is significant given the previous year's results, especially since we've noted that online sales have faced some challenges. Therefore, we believe that this business will continue to grow moving forward.

Yes, we saw gross margins of about 200 points over the quarter, or 100 points over the quarter. The business is strong. We've integrated this into the Playmate contest, which is being marketed to their creators, where the winner will receive a year of free Honey Birdette. There may also be a modeling opportunity for the winner with Honey Birdette. What excites us as we move forward is the potential to bring these various components of the business together to benefit each other.

Okay. That's really helpful. And then Honey Birdette and then, obviously, the total company here showed pretty nice profitability for the total quarter. It sounds like it would have been a lot stronger if not for the legal expenses and some of the other one-time things that you had. Those legal expenses, is that pretty much over now? Should we expect that to be a drag on the third quarter EBITDA as well?

So we can't predict when cases will be resolved. What I would say, in the second quarter, we had 2 major litigations ongoing. One of those, we are done with the litigation portion of it, but we still have one ongoing. We feel very confident in our cases against both of our former partners. You will continue to see some drag on the business. I just don't know for how long, depending on when that case is eventually heard. But we are prepared to defend our trademarks. And to the extent we win, we could see significant settlements in those cases.

We received a presubmitted question that the IR team will read.

Ben, George touched on this a little, but the research team at Jefferies wanted to know, as you've signed several new deals with partners and categories like gaming and beauty, can you help investors think about the TAM there and the opportunity Playboy has for these types of deals going forward?

Sure. As I mentioned, I think George asked this question, but we signed multiple new deals in the quarter. Those deals in total exceed 7 figures on an annual basis. I would tell you, we are just scratching the surface. I think there are a lot of new categories we've identified and extensions of categories, like gaming, where we are significantly underpenetrated for what this brand means in that area, that we can continue to grow each of those categories moving forward. Again, we want to be strategic in the deals that we do. We want to ensure we do the right deals that are not just a minimum guarantee but provide upside above that, by picking the right partners. We just need to be patient. I think that part of the brand work we're doing and part of the content strategy that we're embarking on will help continue to grow markets that we are already in, plus open up new categories for us moving forward. Any other questions, operator?

No further questions. I'd like to turn the floor over to Ben for closing remarks.

Yes. As I said in our opening remarks, we're very excited about where the business sits financially, the growth prospects that we have, and the new legs of growth we have both from content and experiential, in addition to the continued growth in our Licensing business. We appreciate you all listening for our second quarter results and look forward to talking to you in November for our third quarter results. So thank you for joining today.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.