Playboy - Earnings Call - Q3 2025

Executive Summary

• Playboy delivered its third straight quarter of positive adjusted EBITDA and its first positive net income since going public: revenue $29.0M, net income $0.5M, adjusted EBITDA $4.1M (would have been $6.6M excluding $2.5M litigation expense). Licensing revenue rose 61% YoY, underscoring traction in the asset‑light pivot.
• Underlying revenue improved YoY after normalizing for one‑time Q3’24 items tied to ecommerce outsourcing and store closures; management emphasized normalized revenue would have been up 4.2% YoY.
• Honey Birdette comps rose 22% with gross margin up 700 bps to 61% as the brand leaned into full‑price mix (+15%); AOV increased 9% after website relaunch, with loyalty launching and geographic expansion planned.
• Balance sheet and liquidity improved with >$32M cash and extended debt maturity to May 2028 (with interest rate reductions upon prepayments), creating flexibility to fund brand/content initiatives and continue deleveraging.

What Went Well and What Went Wrong

What Went Well

• Licensing acceleration: Q3 licensing revenue $12.0M (+61% YoY) aided by $5.0M in minimum guarantees from the digital licensing deal and stronger overages; six new deals signed in Q3 (14 YTD) and China partnership restructured to revenue‑based terms.
• Profitability inflection: First positive net income since going public and third consecutive quarter of positive adjusted EBITDA, despite $2.5M litigation expense burden in Q3 (Adj. EBITDA would have been $6.6M ex‑litigation).
• Honey Birdette brand health: Comps +22%, GM +700 bps to 61% as promotional intensity fell; management flagged >30% four‑wall margins at flagship/U.S. stores and reiterated focus on high‑margin growth channels (ecommerce, flagship expansion).

Management quotes:

• “This quarter marks our third consecutive quarter of positive adjusted EBITDA and… our first quarter of positive net income since going public.”
• “Licensing continues to be a bright spot for us, with revenue up 61% year‑over‑year.”
• “We ended Q3 with over $32 million in cash, and we amended our debt facility, extending the maturity until May 2028 and reducing interest rates upon prepayments.”

What Went Wrong

• Legal costs remain a drag: Q3 included $2.5M in litigation expense (ex‑litigation Adj. EBITDA would have been $6.6M), and management expects legal expenses to continue near‑term while pursuing enforcement and domestic litigation.
• Segment normalization effects: Q3 revenue was flat YoY (-$0.4M) due to non‑recurring items in Q3’24 (ecommerce outsourcing, store closures) that flattered the prior year; normalized growth was positive but reported headline growth muted.
• Hospitality monetization timing pushed out: Management does not expect meaningful revenue from the Miami club in 2026; earlier focus will be on capital raise, operating partner selection, and eventually membership sales beginning 2027.

Transcript

Operator (participant)

Please note this conference is being recorded. I will now turn the conference over to Matt Chesler, Investor Relations. Thank you. You may begin.

Matt Chesler (Partner)

Thank you, Operator, and good afternoon, everyone. I'd like to remind you that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-K filed today by Playboy, which may be accessed on the SEC's website and on Playboy's website. Today's call is also being webcast, and a replay will also be posted to the company's Investor Relations website. Please note that statements made during this call, including financial projections and 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 them.

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 SEC filings, 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, management may refer to non-GAAP financial measures. Such non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation to the most directly comparable GAAP measure is available in the earnings release filed with our Form 10-K today and in our Form 10-Q filed today as well. I'd now like to turn the call over to Ben.

Ben Kohn (CEO)

Thanks, Matt. Good afternoon, everyone, and thank you for joining us today for our Q3 Earnings Call. This past year or so has been all about transforming Playboy into a high-margin, asset-light business, and I'm pleased to say that the results of that hard work are now becoming clearer. This quarter marks our third consecutive quarter of positive adjusted EBITDA and, importantly, our first quarter of positive net income since going public. These results validate the strategy we've been executing to stabilize the business around our licensing foundation and now position us to focus on growth moving forward. Let me start with a quick review of the quarter. Revenue for the third quarter was $29 million. Net income came in at $500,000. And adjusted EBITDA was $4.1 million. It's important to note that adjusted EBITDA was inclusive of $2.5 million of litigation expenses.

Excluding those expenses, adjusted EBITDA would have been $6.6 million. Our revenue trend is particularly encouraging when you normalize for one-time items in last year's quarter, so Q3 2024. Adjusting for the 2024 revenue related to the e-commerce outsourcing and Honey Birdette store closures, revenue would have been up just over 4% year-over-year with basically no investment. The underlying numbers are even better than what we reported. Licensing continues to be a bright spot for us, with revenue up 61% year-over-year. We signed six new licensing deals during the quarter, bringing our total for the year so far to 14. We also restructured our China partnership with a subsidiary of Lianfeng, moving them to a revenue-based structure that better aligns our interests moving forward. As previously disclosed, we were awarded $81 million in damages through a Hong Kong arbitration against a former Chinese licensee.

We are taking all appropriate steps to enforce that award in China, and while it may take time to work through that process, we remain committed to pursuing recovery in full. We are just as confident about prevailing in our other litigation with a former licensee domestically. Although legal expenses have been high, we feel very good about our case and will pursue this to completion. Honey Birdette continues to perform well, reflecting the hard work we have done to improve the brand and the performance of the business. Comparable store sales grew 22% year-over-year, and gross margins expanded by 700 basis points from 54% to 61%. We've intentionally reduced the number and depth of promotional events, and that's strengthened the brand while also seeing full-price items increase by 15%. Now I'd like to turn to our go-forward strategy, which is all about growth.

As we detailed in the stockholder letter, which you can find on our investor website, we believe the next phase of Playboy's growth will be substantial, and importantly, it will be achieved in a measured way without requiring significant investment. The first step in this is clearly defining how we want to leverage the Playboy brand. Over the past four months, we've been working with a third-party agency on comprehensive brand positioning work, and it fully supports our strategy centered around content. Playboy is returning to its roots as an aspirational men's lifestyle brand with beautiful women and compelling storytelling at its core. For more than 70 years, content has been the heartbeat of Playboy. It's what fuels our cultural relevance and drives every aspect of our business. Looking ahead, our model will be focused around three verticals: licensing, media and experiences, and hospitality.

First, our recurring high-margin licensing business remains the cornerstone of our profitability and visibility. The new content we're creating will open new doors for licensing opportunities and strengthen our brand across categories and geographies. The last time we invested meaningfully in content, we saw major collaborations and revenue emerge from Pacsun to Saint Laurent to Amiri, and we expect to replicate that success moving forward. Second, our media and experiential business will be driven by new content and monetized through subscriptions, paid voting, community engagement, and brand sponsorships. We've already begun testing new offerings with encouraging results. The relaunch of the Playboy magazine has generated meaningful demand, and our trial of the Great Playmate Search exceeded expectations, with around 16,000 contestants entering, representing a combined social media following of more than 200 million. We've had over a million votes cast to date by over 100,000 users.

It's important to note that we have spent almost no money on this contest. The Playmate competition remains ongoing, and we plan to launch the next one in early 2026. Based on what we've learned, we expect paid voting to become a multi-million dollar annual business force moving forward. Yesterday, our winter 2025-2026 issue of the Playboy magazine hit newsstands across the U.S. and Europe. It's a beautiful 240-page issue featuring 12 Playmates of the Month and archival images of Jane Birkin on the cover. I would encourage you to go to playboy.com and buy your copy. We've also been developing a bundled subscription offering that combines access to the quarterly magazine, exclusive new content, seven decades of archives, and unique interactive experiences like subscriber-only interviews and voting for the Playmate of the Year. This strategy is designed to deepen engagement and build loyalty within our community.

Second, beyond subscriptions, we're expanding into a modern entertainment and media strategy. We've signed two new deals, one with Cooper Hefner for a feature film titled Dead After Dark and another with Ben Silverman's Propagate Content to develop the Great Playmate Search into a reality television show. Both of these are structured as licensing-style deals. They provide for a licensing fee plus upside participation in related profits. Over time, we also plan to reintroduce experiential elements as part of our subscription or membership offering that capture the spirit of Playboy, like exclusive golf outings and poker tournaments hosted by our Playmates. Our third vertical, hospitality, will center around membership experiences. We are making great progress towards launching a Playboy Club in Miami Beach as part of our relocation to that city.

We've signed a non-binding term sheet with a group of Miami investors for a $25 million investment into Playboy hospitality, and we're finalizing the selection of our operating partner. Similar to licensing, Playboy will contribute the brand IP while partners contribute the capital. We see hospitality as a natural and powerful extension of the Playboy brand. At Honey Birdette, we're focused on maintaining its luxury positioning and expanding high-margin, full-price sales through e-commerce in key flagship locations. We recently relaunched our website with enhancements aimed at increasing conversion, average order value, and engagement. Since we launched, AOV, or average order value, is up 9%, and we will be launching a loyalty program within the next two weeks. With e-commerce leading the way, we're preparing to expand into the Middle East and the Asia-Pacific markets.

From a retail perspective, we'll continue to invest in our flagship and U.S. stores where sales growth is outpacing the rest of the portfolio with margins exceeding 30%, while evaluating and underperforming locations. We are also thinking hard about raising capital at the Honey Birdette level to accelerate the growth there while not diverting capital away from the Playboy growth. As we move into 2026, we're excited to roll out our new brand positioning across every touchpoint of the Playboy ecosystem. This includes enhanced website functionality, subscription offerings, and premium content behind the paywall, all leading to the launch of a redesigned playboy.com. From a balance sheet perspective, we ended Q3 with over $32 million in cash, and we amended our debt facility, extending the maturity until May 2028 and reducing interest rates upon prepayments.

With the progress we are making with our brand revitalization, a clear strategic vision, and a business model built to balance strong profitability with meaningful growth, we're entering the next phase of Playboy's journey from a position of real strength. Thank you all for your continued support and belief in what we're building. Operator, I'd now like to take questions.

Operator (participant)

Thank you. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the Star keys. Our first question is from George Kelly with ROTH Capital Partners. Please proceed.

George Kelly (Managing Director and Senior Research Analyst)

Hey, everybody. Thanks for taking my questions. Maybe if we could start with Honey Birdette. There was a lot you just went through, a lot of sort of initiatives and capital raising, etc., that you went through in the letter. I was curious just what is the goal there and how should we think about that business growth, margin, the store base, just any more context you can provide over sort of what you're shooting for over the next couple of years.

Ben Kohn (CEO)

Hey, George. It's Ben. Thanks for the question. I'll let Marc pipe in as well. Look, I think as we've talked about for the past couple of years, we were all about fixing Honey Birdette and stabilizing the business, and I think we've done that, right. We've reduced our inventory substantially. We're seeing same-store sales, even though we're down seven stores year-over-year, right. We've talked about that for level-setting the revenue. The same-store sales are up 22%. We're seeing full-price items up 15%. We've seen 700 basis points of margin expansion. There is significant demand for the business. The issue we have moving forward is our goal is to continue to delever the company. We see a massive growth opportunity with Playboy. Any free cash we have, we want to invest in that because we're seeing the data behind it.

The question is, what do you do with Honey Birdette? Knowing that we fixed the business, it's on really stable footing, and we know there's growth there. That leads to thinking about raising capital at the Honey Birdette level so that it doesn't divert resources away from Playboy and allows that business to continue to grow. I think long-term, as we've talked about previously, let's see where the process goes and whether or not Honey Birdette on the long-term should be part of Playboy as 100% or something less than 100% moving forward.

George Kelly (Managing Director and Senior Research Analyst)

The reason you're considering capital, is it just opening more stores or is there some other investment you're contemplating?

Ben Kohn (CEO)

I would say, again, it would be some flagship stores that we're seeing 30% four-wall EBITDA margins on, and obviously continuing to grow our e-commerce business. If you look at what we've done since we've taken over the business, e-commerce percentage of total revenue has basically flipped from when we took it on the brick and mortar. I think we want to continue to expand into new territories. The demand and growth is there. We just need the capital to do it. Growth doesn't come for free. You have to make an investment.

Again, we're not talking about big dollars, but right now, given that we still have a desire to continue to delever this business and invest in Playboy, I think based on where Honey Birdette is now, I think there's a good chance we could raise money from third parties to continue to grow that business. Marc, anything you want to add on that?

Marc Crossman (COO and CFO)

No, I think you pretty much touched on every bit of it.

George Kelly (Managing Director and Senior Research Analyst)

Okay. Okay. That's helpful. Thank you. Next question is on your license business outside of Byborg. It stepped up in three quarters sequentially. I know you've signed all these new license deals. I think you said 14 year to date.

Ben Kohn (CEO)

Yeah.

George Kelly (Managing Director and Senior Research Analyst)

Are the deals you've signed contributing now? What explained the step up? How significant are the 14? I'm just kind of thinking about what kind of growth those new deals should drive in the coming quarters.

Ben Kohn (CEO)

Yeah. Go ahead.

Marc Crossman (COO and CFO)

Go ahead. No, no. You go.

Ben Kohn (CEO)

I would say, look, again, remember, there's always a lag for when you sign a new deal because we, as a business, have to use 606 accounting, so you straight-line it. There's always a lag between signing deals and revenue recognition. Look, the pipeline is strong. I expect should the year finish strong, we should be able to sign more deals in the fourth quarter than we signed in the third quarter based on our pipeline today. I think we remain optimistic. We've put things out there in the past showing sort of the revenue by geography. We've also put something out there in the past in our previous investor decks and hope to have a new one out shortly that show by category. There's a lot of white space. The thing I would tell you, George, and we did this before.

We did this back in 2018, 2019 when we invested in content, and that led to the Pacsun and the Amiri and these other deals. Investing in content actually really drives growth in licensing. It gives us new IP actually to license, and it leads to brand relevancy. That is why content is the center of our strategy moving forward. We will drive all three facets or all three verticals of our business moving forward. I would expect moving forward that will continue to accelerate as we move into 2026 and 2027.

George Kelly (Managing Director and Senior Research Analyst)

Okay. Okay. Helpful. Just one last question for me, sort of a multi-part one. There is a lot of different initiatives that you talked about in the letter and in your prepared remarks, media and hospitality, all the different stuff. As we think about 2026, what opportunities do you think have the most potential to drive revenue growth? Will any of these initiatives require kind of front-loaded OpEx investments that could pressure EBITDA growth into next year?

Ben Kohn (CEO)

Yeah. I know there's a lot in the letter, and it's a good question. I want to say that the biggest investment we're making, and we're doing this in a very measured way, okay. We already started this this year with the magazine. That is our marketing for the brand, right. We're not a brand, I've said this before, that spends millions of dollars taking out billboards and doing everything else, right. Our brand relevancy and the marketing for the brand comes through the content. We're just going to monetize that content moving forward. It might sound like a lot, and I understand that. It's actually not a lot from an operational perspective because we've already started some of that this year. The tweaks that we're talking about, we're selling the magazine on an à la carte individual basis.

We're selling the archives today on an individual basis. It's just not easy to find it. It's not done in a bundled offering. Moving forward, as we return Playboy to its roots as an aspirational men's lifestyle brand, I think there's a massive opportunity when you look at the data really around relationships and sex and what's happening to men in society today where people are having less sex than ever before. Relationships are harder to come by. That's core to the Playboy brand in our brand work and what we got from consumer surveys. That is stuff that consumers will pay for, giving people relationship advice, giving people dating advice, giving people sex advice. That's the type of content that can sit behind a paywall.

You surround that with four issues of the magazine, the Playmate calendar that is also for sale today on playboy.com because we did 12 Playmates in this issue. A great example of this moving forward, and we are already doing this, is we have 12 Playmates. Instead of launching Miss January, February, and March in the March issue, we can launch Miss January digitally on a safer work environment, leveraging her social media as well as our social media, YouTube, Get to Know Her, Instagram, TikTok Lives, all of that. To see her photo spreads early and behind-the-scenes content from that photo spread, you would have to be a subscriber on an annual basis to see that. Those are the low lifts that we're talking about. As I said, we're going to be very disciplined in how much money we invest.

We're going to do this in small increments. Yeah, there could be substantial growth based on the data if it works. We're seeing that with paid voting, right. Paid voting on an annualized basis is already multiple millions of dollars, right. Obviously, not this year because the contest has only been running for a short period of time. As we move into next year, I see us not only having one contest, I see us having multiple contests during the course of the year. What we've been able to do with paid voting, when you look at the data, we've acquired over 100,000 users, okay. We've had some real technical challenges on this first one that we have now fixed, engaging those creators. We got 16,000 creators to sign up, but we acquired over 100,000 users with zero CAC, right.

Last night, we actually started emailing a small group of those users to buy the magazine and the calendar. That would then lead to emailing those users to actually become a Playboy subscriber or member, however you want to call it. Maybe as we move into next year, the voting packages that people are buying today are integrated into different levels of membership. The hospitality, let me be clear, very excited by the response we've received. We signed a term sheet with a group of investors to fund Playboy hospitality. Again, this can be a licensing deal. We will take fees out for contributing the brand. We're not putting capital up. That is a longer lead time to get that Playboy Club in Miami open. When we start selling memberships, I don't want to comment on at this point, but it will be a membership club.

The first thing is getting the capital and getting the operating partner, and then you can start to begin to sell memberships. I do not think 2026 you will see meaningful revenue from that. I think the media and the subscription side of the business, you could start to see real revenue there next year. I think 2027 will be about getting that club going, and you will start to see membership sales come in then.

George Kelly (Managing Director and Senior Research Analyst)

Okay. Okay. That's helpful. Thank you.

Ben Kohn (CEO)

Thanks, George.

Operator (participant)

Our next question is from Alex Fuhrman with Lucid Capital Markets. Please proceed.

Alex Fuhrman (Managing Director and Equity Research Analyst)

Hey, guys. Thanks very much for taking my question. Nice to see really nice free cash flow here in the third quarter. It looks like you're getting a lot of traction with some of these high-margin initiatives. One in particular I wanted to ask you about, Ben, you mentioned paid voting. Sounds like you have a lot of confidence that that's going to be a multi-million dollar business. Can you tell us a little bit about what you've seen so far that gives you that confidence in terms of numbers of users and spend and things like that?

Ben Kohn (CEO)

Sure. Let's just talk about the way we set this up, Alex, and go from there. We set this up as a licensing deal. There was really zero capital outlay on our part. There were some technical challenges we had when we first launched this that we have now fixed. There is also the partner that we have on this, who is a good partner, and there are some flow issues that we had to fix in the beginning. The biggest issue we had was actually our SMS provider we lost in the beginning. We had 16,000 people register. We, unfortunately, could not actually take advantage of our partnership with Byborg on this one, who has a large amount of international creators. We lost the ability to actually message the international creators right when this started.

The second big thing was because this was our first one, instead of having a rolling vote where someone signs up and you're immediately in a bracket and they could share a link, we had a period of two months where we basically went dark with the creator where they would sign up, call it August 1, but they didn't get their link to share on their bio on social until October 1, okay. There were some challenges, and then re-engaging them because you lose a little momentum. All of those will fix for the next one. If you look at it, we had 16,000 creators. The actual number of engaged creators was much smaller than that because we lost the international creators, and we spent no money on marketing on this. We actually think it would warrant small investments moving forward to build the momentum here.

We've generated over a million votes. We've generated over 130,000 unique users signing up for this, okay, on what was 16,000 creators, obviously smaller than that because some of them weren't able to participate in the contest because we couldn't engage with the international creators. I think the momentum will build on that. On top of that, we've signed a deal with Ben Silverman's Propagate to take the Great Playmate Search and actually develop this into a reality television show. The way we're thinking about this long-term, and again, we're working on that as a licensing deal too, but the awareness a television show could bring to this overall, the way that you would do the casting is through the digital paid voting side, which then leads to basically the casting for who would be on the television show.

This is all part of this 360-degree media strategy. Again, we have to execute. It's going to take some time to do this. I will tell you that the data alone on the revenue that we're generating, if you look at our days on an annualized basis, and we still have, what, almost a month to go in this contest, there is no revenue in the third quarter from it because voting did not start until October 1. When you look at this moving forward, yeah, this is already on track. If you annualize sort of where we are through the first month of voting, where it's already annualized out at a multi-million dollar business, and this is on one contest, I would say next year, we're thinking about 4-10 different contests that you run during the course of the year.

Yeah. I mean, I'll give you an example also. We're working on a collaboration where Honey Birdette is going to do a Playboy lingerie line. We're thinking about running a voting contest to find the next phase of the Playboy Honey Birdette collaboration line, right. Not just appear on the magazine, but how could you extend this to other parts of the business? Again, think about the top of the funnel, 130,000 people. We have verified emails for zero CAC against that. Now the question is, can we start to market them other products and services as well?

Alex Fuhrman (Managing Director and Equity Research Analyst)

That's great. A lot of reasons to be excited there. If I could also ask some more questions on Honey Birdette following up on some of George's, that's nice to see really big comps for sales growth and gross margin growth. Can you just remind us the seven stores that were closed since last year, how were those stores underperforming? Are there any other stores that need to be closed before you can really get this brand back to very significant growth?

Marc Crossman (COO and CFO)

Yeah. So Alex, it's Marc. In terms of our store base, what we really look at when we talk about the flagships, it's about our top 20 stores, and we have 51 stores right now. Those stores are running close to 40% forward margin. We are really looking at the bottom 20. I'm not saying it's 20 stores that we would close, but we're really focusing on those stores as, "All right, where are the ones that we think are underperforming?" We do not see that path forward for those stores. Again, that's a multi-year process, and it is definitely not 20 stores, but I do think the base needs to be rationalized a little bit.

Alex Fuhrman (Managing Director and Equity Research Analyst)

Yeah. How many of those bigger flagships could there be? I imagine those are mostly in big markets.

Marc Crossman (COO and CFO)

Yeah. It'd mainly be one in the U.S., and there are plenty of big cities that we have not hit. We've basically hit the Southeast and the Southwest. We've gotten the entire U.S. to tackle. We only have 10 stores in the U.S. There are a lot of other places around the world. You can see Dubai, Vietnam. There are a lot of different places where you would go in Korea and have just one big flagship store in that country. One of the examples we can do is if we want to be in the Middle East or we want to be in APAC, because we have a distribution center in Australia, we can ship out of Australia, and we do not have to deal with the duties that we're seeing coming into the U.S. You have the entire world that you can start opening these flagship stores in.

Ben Kohn (CEO)

Yeah. I mean, Alex, I'd also tell you that you look at a market like Miami just because we've been spending a lot of time down there. That's a great-performing store for us. The Miami market is huge and growing, right. Especially after what happened in the elections this past week. You look at South Florida in general, Miami could easily take two to four more stores down there. It's a question of having the right capital to invest in it. It's why we're thinking about now that the business is on stable financial footing, there will still be growth there. How do we actually accelerate that growth moving forward?

Alex Fuhrman (Managing Director and Equity Research Analyst)

Yep. No, that's great. Really appreciate the answers. Thank you both.

Ben Kohn (CEO)

Thanks, Alex. Appreciate it.

Matt Chesler (Partner)

Yeah. Ben, let's ask one more analyst question before we move on to the retail investor portion of the Q&A session. This one is from James Heaney and team from Jefferies. It's actually a two-parter, and the first one is licensing. With licensing revenue up 61% in the quarter and signing 14 deals year to date, what are the categories or geographies where you see as the next frontiers for growth?

Ben Kohn (CEO)

Matt, I would answer this very similar to comments that have already been made on the call, which is when you look at the geographical dispersion of our licensing deals in the categories, there is a lot of room to grow. The question is making sure that we do the right deals. I think there is growth across geographies, and I think there is growth across categories as well. It is just a question of making sure that we continue to focus on bigger and fewer deals versus smaller deals that add more complication from an operations perspective to the business. The pipeline is strong, and I think our investment in content moving forward will continue to enhance that pipeline. What is the second portion of the question?

Matt Chesler (Partner)

The second portion of the question is, can you give any more details or metrics on engagement or monetization from some of the efforts that you highlighted, such as the magazine relaunch, although I guess it was launched yesterday, the Great Playmate Search, and then the studio production deals that you talked about?

Ben Kohn (CEO)

Sure. I think we've commented on the metrics around the Great Playmate Search. The magazine just launched yesterday. Pre-sales were strong. It went on sale at Barnes & Noble and.

Marc Crossman (COO and CFO)

Books-A-Million.

Ben Kohn (CEO)

Books-A-Million yesterday. The studio deals are quasi-licensing deals, right. They call for a licensing fee plus a percentage of the profits.

Marc Crossman (COO and CFO)

Yeah. I'd also want to add that the calendar had the same level of distribution that we had with the magazine itself. All doors Books-A-Million, all doors Barnes & Noble.

Matt Chesler (Partner)

Okay. Thank you for those questions. Let's now move on to the retail questions. I'd like to say we really appreciate all the thoughtful questions submitted ahead of today's call. What we've done is taken the time to carefully review and group them, and we've summarized them into some common themes so that we could address as many as possible during today's session. The first question is also a licensing question. Can you talk about any of the new deals, particularly the land-based entertainment deals, and whether the new China licensees are showing any signs of growth?

Ben Kohn (CEO)

Sure. I think there's sort of two parts to this question. I think just to reiterate, we signed 14 new licensing deals, including six in the last quarter. We are targeting to sign more in the fourth quarter than we did in the third quarter. As far as China, that's its own animal. We obviously won the lawsuit there. That was a huge overhang on the business because of what our ex-licensing partner was sort of threatening new partners for us that they were going to win. Therefore, if they signed with Playboy, they would be throwing their money away. Now that that is behind us, and we'll do everything possible to enforce that award, we expect China to return to a more normal market, still with issues in the market with high unemployment, and obviously, home values within China have been decimated.

I think, again, our investment in content is really going to drive licensing growth moving forward and accelerate that growth. As far as LBE, I think it really speaks to the partnership we're starting with in Miami. We're setting it up as a licensing deal, but we've put together a term sheet with a group of investors that have come to us that want to invest in it, that see the opportunity. Let's get Miami off the ground, and then we'll look at how to expand that to other cities around the world.

Matt Chesler (Partner)

Okay. Ben, I'm going to move to a question on digital. Is that okay.

Ben Kohn (CEO)

Sure.

Matt Chesler (Partner)

Right. Let me summarize this one. It's related to Byborg. A lot of interest in getting an update on how that partnership is evolving, including potential opportunities to collaborate with some of their platforms, such as Live Jasmine or new digital initiatives such as Centerfold and Playboy TV. While you're answering that, if you could also address the questions around when do we expect the revenue to exceed the $20 million base?

Ben Kohn (CEO)

Sure. I think it's just level set that this partnership is, even though we signed the deal actually a year ago next month, the transition of the sites and the channels to Byborg wasn't really completed until the summer, right. It went in different phases. We're very, very new in that partnership. I think we've also previously commented that we are not counting on overages in the first couple of years of that business. We're not counting on overages the way we've built our organization in the restructuring of Playboy at all. That's all gravy to our earnings moving forward. They're investing in those businesses, and when you invest in a business, you're doing it because there will be future growth. That just takes time, and I think we have to be patient. As far as collaboration, we've already started it.

As I mentioned a few minutes ago, we had some issues in the beginning on the international creators. We lost the ability to message them. Regardless of that, we did some various tests with Byborg, all with good results. We had Byborg sign up creators, send out an email to their universe. We got creators to sign up. Unfortunately, in this contest, we could not monetize them. We had Byborg send out an email to their users to vote for the next Playmate. These were good results. Lastly, we had Byborg send out an email to a select group of their users to buy the Playboy magazine. We are testing everything right now. We are pleased with the results. We are beginning that testing on how to work together outside of just the licensing deal that we have in place.

Matt Chesler (Partner)

Now building on the Byborg topic and where that could go over time, given their significant financial commitment and the shared synergies that exist between the two companies, has Playboy considered a potential merger or some sort of deeper strategic integration to unlock additional scale and value?

Ben Kohn (CEO)

Sure. We can't comment on any corporate transactions. What I could say, and this is all publicly disclosed, is that we have a standstill with Byborg, including an ownership cap of 29.9%. Any other transaction would have to be done through the proper channels.

Matt Chesler (Partner)

Understood. So now let's talk about other avenues of growth. Beyond these current initiatives, are there other green shoots that you see emerging that could drive momentum in Playboy's business, such as fan voting and licensing? I think you've talked about both of those a bit, or the revival of the Playboy Club concept, perhaps.

Ben Kohn (CEO)

Sure. Again, I think this is a question George had as well, but we're staying very, very focused, right. We're making very small bets moving forward, making sure that before we commit real dollars to anything, that we've tested it and we know the data supports a further investment. To the extent we can set things up like a licensing deal, all the better. The place where we really will be investing small amounts of money is in content. We've already started that this year with the magazine. Now we're going to roll out the second phase of that, which is sort of the subscription side of it. We think the media and experiential business could be larger than the licensing business over time if we execute it properly.

I think on the Playboy Club, we're well on the way to getting that one off the ground in Miami. There's still a lot of work to be done, but we are working on that. Outside of that, in investing in content to continue to grow licensing, we are not distracting ourselves with anything else. We have a small team. We have to stay super, super focused. We're in the process of making sure that we can bring in the right people with the right skill sets to help us execute properly in these areas.

Matt Chesler (Partner)

Okay. There is an additional question about Honey Birdette that I'll ask if there's anything incremental to offer here. How is Honey Birdette positioned competitively as the premium lingerie market strengthens, and what are the brand's priorities to sustain growth in 2026?

Ben Kohn (CEO)

Look, the brand's positioned really well. That's what we did two years ago, I guess. We started really cutting down the number of days on sale, focusing on brand health. We've seen the results. Again, we could drive a lot more revenue if we wanted to, okay. The growth is there. That means I got to take more inventory, right. We've reduced our inventory to approximately $9 million and change, down from like $13 million. We substantially reduced inventory because that's cash tied up in the balance sheet, right. That limits what you can do from a business perspective with the business. The growth is there, but you have to then say, "I want to invest the capital to do it." We focused on brand health because coming out of COVID, remember, we bought the business in 2021, August of 2021, if I remember properly.

It's been a long time. The week after we bought the business, I think Australia went on like a three-month lockdown, okay. On top of that, we had a lot of inventory that the previous owner had bought. We ended up having to sell that at discounts coming out of COVID lockdowns because on top of that, you already had your inventory planned for October, November, December, in addition to all the stuff you got stuck with. We revitalized the brand. I think the brand is doing really well. We've improved the margins. There's still growth to be had even with our inventory levels. To really accelerate that growth, I think we need to raise some third-party capital.

If we had extra capital, we could do it, but we do not because we want to invest in the content, and we still need to continue to delever the business. I do not mind selling a piece of that business today if I know that my remaining stake is going to be worth a lot more because the growth is there. That is how we are thinking about it.

Matt Chesler (Partner)

A different topic here. What steps is the board taking to ensure strong accountability and alignment between management and shareholder interests, given the stock's performance and investor concerns?

Ben Kohn (CEO)

Yeah. Look, let me comment first and foremost that I think the management is fully aligned with the board, and we're fully aligned with investors. I think the turnaround in the company, we're showing that. I understand the frustration more than anyone. I know people might not think I do. I hate losing money. It drives me absolutely crazy. I understand how frustrating this journey has been. We have done the right things and taken the necessary steps. I want to also comment that no one on the senior team has sold any shares for personal gain. I'm actually one of the largest individual shareholders in the company. I also want to clear up that I've actually invested my own money in this business on three different occasions. I've put almost $3 million of my own capital buying shares.

One, at the IPO, I bought shares at $10 a share. Second, when the stock was in the teens, I bought stock then. I participated in the rights offering as well. I have invested approximately $3 million of my own capital into the business. Most of our compensation as management comes in the form of stock grants, right. In addition to the stock grants, I have actually put real money out of my savings into the business, which is the right thing to do as the CEO of the company. We are fully aligned. I also think it is important to level set what has happened to us and why we got to this point, right.

When we went public in 2021, we had a business in China that was doing about $42 million of revenue, call it $32 million and change of net profits to us after agency fees and withholding taxes, okay. We definitely have screwed up things. I take full responsibility for the mistakes we've made as a business. There are also things like China that went against us that you just couldn't forecast. We had $32 million of cash flow that basically evaporated overnight. Forget about the accounting treatment of it. I'm talking about cash coming into the business. At the same time, we had just bought companies and taken on a massive amount of fixed liabilities to actually integrate those businesses. At the same time, our cost of debt, because we were levered, being a levered retail play at the time, wasn't the greatest thing.

Our cost of debt more than doubled. You should think about the cash flow swing in the business of like $45 million between the loss of China and the extra interest costs that we started to absorb because of the debt, right. No question about it, we made mistakes, but those are things that we just could not forecast at the time. You would not have thought that based on the stability of the business beforehand. We had two options, right. You either grind it out or you could give the company to the lenders with the debt. I am a fighter. I think everyone on this team is a fighter. There is not a person that has sold shares here. We did what we needed to do to survive. It came at a huge personal cost, right. Seeing the comments, I understand people's frustration with the business.

There's a human side of this too, which is we had to part with a lot of really good colleagues along the way, but we did what we had to do to survive. I think now you're seeing the flip side of that, right. I also had a really good personal relationship based on my private equity days with their lenders. I got them to amend the debt facility six times with no amendment fees, right. Including a $40 million extinguishment of debt and then rolling another big chunk of debt into a convert. If you actually look at the convert that we converted, plus the $40 million of debt forgiveness they gave us, it's actually like over $4.50 a share if you combine the two of those for what the actual conversion price would be.

That hard work that the team has put in, right, and has not been fun, but you're starting to get to the other side of it, right. First quarter since, I think in the company's history that we now have net income, at least since we went public, you're seeing sequential EBITDA growth every single quarter. The business is on a solid financial footing. We've reduced the cost infrastructure. Now what's actually becoming fun for the first time is we actually can focus on growth moving forward. We've invested some money this year on the brand. That was the first and foremost thing. Obviously, coming out of the Me Too era, we went way too woke with the brand, etc. I've commented on that in the past. We have a really clean mission statement moving forward. We have a really clean vision.

We're going to roll that out to investors in 2026. You will start to see us align the rest of the company's properties around that. I see that there's a real opportunity. We know the data because of when we had the Playboy Plus and Playboy TV websites of what people will pay for. We have a real path to actually monetize this moving forward and accelerate the growth with a really stable base of licensing revenue and a much lower cost infrastructure than we ever had before. Are we aligned. I think we're 100% aligned with investors, both through our equity holdings, my personal investment in the company, and the path moving forward.

Matt Chesler (Partner)

Next question. Can you provide an update on the efforts to enforce and collect the $81 million arbitration award related to the former China licensee and what impact could this have on cash flow and the balance sheet once received?

Ben Kohn (CEO)

Sure. I'm going to be slightly careful on how I answer this, but what I would say is first and foremost, we are very happy with the result of the arbitration, and we believe justice has been served. Can't get into all the particulars, but I can say that we and our counsel in China are working with the appropriate local court to formally recognize the award in mainland China and seek enforcement. We also have another litigation going on. I understand it's more frustrating for us than anyone of what we're spending with litigation, but it's the right thing to do. We have a domestic case that we're in the process of. We feel as strongly about our case in the other arbitration or the other litigation than we did in China.

We are going to pursue that one to the end and believe that we will be successful in that case as well. We are going to do everything in our power to collect as much of that $81 million as we possibly can. I want that money more than anyone. We deserve that money. We are going to do everything we possibly can to collect that money. If we collect it, it is going to be all gravy to the business because we are in a good place overall with the company now.

Matt Chesler (Partner)

We have two more questions. I promise we'll get through it. Stock buyback. Okay. Is the authorization still active? Under what conditions would management consider utilizing it given the share price levels?

Ben Kohn (CEO)

Let me just say the following. The authorization is not currently active. Our number one priority is to continue to—I'll double-check it if I'm wrong, but I believe it's not active. It's not something that we're focused on right now. Our number one priority is to make sure that we continue to delever the company. Lenders were great again. We've extended our debt maturity into May of 2028. We don't have to worry about that right now. We also have the ability to actually reduce our interest costs by making certain prepayments to the lenders. We're very focused on that. Our focus is on making sure that we make smart, small investments to fuel the growth of the company. First and foremost, I want to delever this business because that takes away cash that we could otherwise invest in growth.

We need to solve that. Once we solve that issue, we invest in growth, then you can decide what to do with the free cash flow afterwards. Right now, the priority is not to buy back shares. It is to continue to delever the company.

Matt Chesler (Partner)

Let's end on one final paid voting question, and then I'll turn it over to you for final remarks. Which is, what kind of revenue contribution engagement are you seeing? Are you expecting? And I think most importantly, who's the winner?

Ben Kohn (CEO)

What you're starting to encourage is one is all of our investors should go out and buy the magazine on our website. Please do that. Also, please go to the website and vote for who should become the winner. The competition is still going. It will end in the beginning of December, second week, give or take in December. There is still live voting. We'd love for everyone to buy a package of votes, help us on the revenue perspective, and then we can talk about that in March. I don't know who the winner is. I can tell you that we weren't sure about the quality of contestants that would enroll. I would tell you that both us and our partner are very, very happy with the quality of contestants. The contestants represented over 200 million social media followers.

Now, obviously, we couldn't activate with all of those contestants because I described the technical issues. Those will be fixed for the next contest. We will also take the contestants and make sure that we reach back out to them. We've also done other things. We've emailed all the contestants the opportunity to buy Honey Birdette at a discount. There is a lot of great stuff coming out of this that we're testing, and we'll get smarter as we go. To generate what we've generated, it will be definitely profitable for us because we haven't spent any money. I think the real opportunity then is to understand how do we smartly start to spend a little bit of money to amplify this contest. If we do it the right way, this should be a multi-million dollar business for us as we move into 2026 and beyond.

It is community engagement, right. That, to me, is the most important thing. The most important thing is the question is, how do I take those 130,000 fans that have actually registered and start to sell other things to them? Not going to answer the exact question outside of the numbers we've already given.

Matt Chesler (Partner)

Okay. Okay. Ben, thank you for taking the time to go through those retail questions. I want to thank our retail investors for submitting them. With that, I'd like to turn it back to you, Ben, for closing remarks.

Ben Kohn (CEO)

No, I really—I just want to sort of echo what you just said. I think we should make this part of our earnings call moving forward. This is a retail stock at the end of this day. Again, I want to fully acknowledge the mistakes that we've made as a team. I always believe in making mistakes is okay. You just don't want to make the same mistake twice. I think we've learned from those. We're a better, more nimble, more organized management team coming out of this. I think we're starting to finally hit our stride and get some breathing room to focus on growth. I want to thank the investors for staying with us. I know it's not been easy.

I will say personally, it's not easy looking at my brokerage account either, but I finally feel like we're in a place where we're taking two steps forward and one step back versus taking one step forward and two steps back. I feel like we've turned that corner and there's some good things happening here. I just want to acknowledge the frustration because I see it. I do sometimes look at social media comments, and I acknowledge it and just want to thank people. Hopefully, we can continue to deliver good results moving forward. We look forward to talking to you guys in the March timeframe when we announce the annual year. We have a couple of investor conferences that we'll be announcing soon that we're participating in.

Hopefully, in the short term, we'll get a new investor deck up on our website that really clearly outlines our strategy moving forward. As we get into 2026, we'll start to roll out this new brand positioning, which is really taking the company back to its roots, looking at that core DNA, knowing that our core audience is an 18 to 40-year-old male, and making sure that we deliver the content, experiences, and products to satisfy that customer. I appreciate everyone joining. I know it's been a much longer call, but I think it's important that we took the questions. Thank you all for listening.

Operator (participant)

Thank you. This concludes. Sorry, Matt. Go ahead.

Matt Chesler (Partner)

I was going to say, this concludes the call. You may now disconnect your lines.

Marc Crossman (COO and CFO)

Thank you.