Playboy, Inc. (PLBY) Earnings Call Transcript & Summary

Greetings. Welcome to Playboy Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Matthew Chesler, Investor Relations. Thank you. You may begin.

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 Inc. 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 and 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.

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 $0.5 million. 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 onetime 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. So 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 6 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 Lean Fong, moving them to a revenue-based structure that better aligns our interest 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 make 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 we'll 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 expand by 700 basis points from 54% to 61%. We've intentionally reduced the number and depth of promotional events, and that 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 4 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 his 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 3 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. We -- the last time we invested meaningfully in content, we saw major collaborations and revenue emerge from Paxson to St. Laurent to Ameri, 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 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. We've had over 1 million votes cast to date by over 100,000 users. It's important to note that we have spent almost no money on this context. The payment 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 multimillion dollar annual business for us moving forward. Yesterday, our winter 2025, 2026 issue of the Playboy magazine hit new stands across the U.S. and Europe. It's a beautiful 240 page issue featuring 12 playmates of the month, and archival images of Jane Burkin on the cover. I would encourage you to go to playboy.com and buy your copy. We have also been developing a bundled subscription offering that combines access to the quarterly magazine exclusive new content, 7 decades of archives and unique interactive experiences like subscriber-only interviews and voting for the play made of the year. This strategy is designed to deep engagement and build loyalty within our community. Second, beyond subscriptions, we're expanding into a modern entertainment and media strategy. we signed 2 new deals, 1 with Cooper Hepler for a feature film title 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 nonbinding term sheet with a group of Miami investors for a $25 million investment into Playboy House mentality 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 2 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 in U.S. stores where sales growth is outpacing the rest of the portfolio with margins exceeding 30% while evaluating an underperforming locations. We are also thinking hard about raising capital at the honey per debt level to accelerate the growth there while not diverting [indiscernible] bill away from the Playboy growth. As we move into 2026, we're excited to roll out our new brand positioning across every touch point 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 Play voice Journey from the 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 Instructions] Our first question is from George Kelly with ROTH Capital Partners.

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, et cetera, 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?

George, it's Ben. Thanks for the question, and I'll let Mark pipe in as well. Look, I think as we've talked about for the past couple of years, we were all about fixing honey per debt 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 7 stores year-over-year, right? And we've talked about that as -- for level setting the revenue. The same-store sales are up 22%. We're seeing full price items up 15%. We've seen 700 bps 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. And so any free cash we have, we want to invest in that because we're seeing the data behind it. And so the question is, what do you do with Honey Birdette? Knowing that we fix the business, it's on really stable footing, and we know there's growth there. And 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 that -- 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.

And the reason you're considering capital, is it just opening more stores? Or is there some other investment you're contemplating?

I would say, again, it would be some flagship stores that we're seeing 30% 4-wall EBITDA margins on and then obviously continuing to grow our e-commerce business. If you look at what we've done since we've taken over the business, e-comm as a percentage of total revenue has basically flipped from when we took it on the brick-and-mortar and 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. And again, 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?

No, I think you pretty much touched on every bid on that.

Okay. Okay. That's helpful. And then next question is on your license business outside of Byborg. It stepped up in 3Q sequentially. And I know you signed all these new license deals. I think you said 14 year-to-date. Is -- are the deals you've signed contributing now? Is that -- what explained the step-up? And how significant are the 14? I'm just kind of thinking about what kind of growth goes new deals should drive in the coming quarters?

Yes. So go ahead.

Go ahead.

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. So 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. And so I think we remain optimistic. We put things out there in the past showing sort of the revenue by geography. And we've also put something out there in the past in our previous investor decks, and hope to have a new 1 out shortly. But 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, '19 when we invested in content, and that led to the PacSun and the Ameris and these other deals. Investing in content actually really drives growth in licensing. It gives us new IP actually to somewhat to license, and it leads to brand relevancy. And so that's why content is the center of our strategy moving forward. We'll drive all 3 facets or all 3 verticals of our business moving forward. And so I would expect, moving forward, that will continue to accelerate as we move into 2026 and 2027.

Okay. Okay. Helpful. And just one last question for me. sort of a multipart one. There's 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? And will any of these initiatives require kind of front-loaded OpEx investments that could pressure EBITDA growth into next year?

Yes. So 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 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 to the content. We're just going to monetize that content moving forward. And so it might sound like a lot, and I understand that it's absolutely 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 a 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. And so 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 sacks and what's happening to men and society today where people are having less s** 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 with advice, giving people dating advice, giving people s** advice. That's the type of content that can sit behind the paywall, and then you surround that with 4 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're already doing this is we have 12 playmates. But instead of launching this January, February and March in the March issue, we can launch this January digitally on a safer work environment, leveraging her social media as well as our social media YouTube get to [indiscernible], Instagram, ticktok Lives, all of that. But then to see her photo spreads early and behind the scenes content from that photospread, you would have to be a subscriber on an annual basis to see that. And so that -- those are the low lifts that we're talking about. And again, as I said, we're going to be very disciplined in how much money we invest where we do this in small increments. But yes, there could be substantial growth based on the data if it works. And 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. But as we move into next year, I see us not only having 1 context. I see us having multiple content during the course of the year. And what we've been able to do with pay voting, when you look at the data, we've acquired over 100,000 users, okay? And we've had some real technical challenges on this first one that we have now fixed engaging those creators. So we got 16,000 creators to sign up, but we acquired over 100,000 users with 0 CAC, right? And so last night, we actually started e-mailing a small group of those users to buy the magazine in the calendar. And that would then lead to e-mailing those users to actually become a Playboy subscriber member, however you want to call it. And 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, it's going to 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. But the first thing is getting the capital and getting the operating partner and then you can start to begin to sell memberships. So I don't think 2026 you'll 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'll start to see membership sales come in then.

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

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. It sounds like you have a lot of confidence that, that's going to be a multimillion-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?

Sure. So let's just talk about the way we set this up, Alex and go from there. So we set this up as a licensing deal. So there is really 0 capital outlay on our part. There were some technical challenges we had when we first launched this that we have now fixed. And there's also -- the partner that we have on this 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. And so we have 16,000 people register. We unfortunately couldn't 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 they started. The second big thing was because this was our first one, instead of having like a rolling boat where someone signs up and you're immediately in a bracket and they could share a length. We are in a period of 2 months where we basically went dark with the creator were they would sign up, call it, August first, but they didn't get their link to sharing their bio on social until October 1, okay? So there are some challenges and then reengaging them because you lose a lot of momentum. All of those will fix for the next one. But if you look at it, the -- 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. So we actually think that would warrant small investments moving forward. to build the momentum here. But we've generated over 1 million votes. We've generated over 130,000 unique users signing up for this, okay, on what was 16,000 creators, obviously is smaller than that because some of them weren't able to participate in the contest because we couldn't engage with the international creators. So I think the momentum will build on that. On top of that, we signed a deal with Ben Silverman's propagate to take the great playmate search and actually develop this into reality television show. So the way we're thinking about this long term, and again, we're working on that as a licensing deal, too. But the awareness like a television show could bring to this overall. The way 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. And so this is all part of this like 360-degree media strategy. Again, we have to execute, it can take some time to do this, but I would tell you that the data alone, the revenue that we're generating, if you look at our days on an annualized basis, and we still have, what, almost a month ago in this context. There is no revenue in the third quarter from because voting didn't start to October 1. But when you look at this moving forward, yes, 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 in a multimillion dollar business. And this is on 1 context. And I would say next year, we're thinking about 4 to 10 different contents that you run during the course of the year. you want Yes, I mean, I'll give you an example also. We're working on a collaboration where Honey Birdette do a Playboy [indiscernible] line. we're thinking about running a voting contest to find the next phase of the Playboy Honeybee collaboration line. right? And so not just appear in the magazine, but how could you extend this to other parts of the business. Again, thinking about the top of the funnel, 130,000 people we have verified e-mails for 0 CAC against that. Now the question is, can we start to market them other products and services as well.

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 comp store sales growth and gross margin growth. Can you just remind us the 7 stores that were closed since last year. How are 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?

Yes. So Alex, it's Marc. In terms of our store base, we really look at when we talk about the flagships, it's about our top 20 stores, and we have 51 stores right now. So those stores are running close to 40% 4-wall margin. And so we're really looking at the bottom 20, I'm not saying it's 20 stores that we would close that we're really focusing on those stores says, "All right, we are the ones that we think are underperforming", and don't -- we don't see that pass forward for those stores. But again, that's a multiyear process, and it is definitely not 20 stores, but I do think the base needs to be rationalized a little bit.

[indiscernible] Flagships could there be -- I imagine those are mostly in big markets?

Yes. It may mainly be one in the U.S., and there are plenty of big cities that we have not hit. We basically hit the Southeast in the Southwest. And so there's -- we've got the entire U.S. to take, we only have 10 stores in the U.S. And then there are a lot of other places around the world. You can see Dubai, Vietnam, there are a lot of different places where you could go in Korea and have just 1 big flagship store in that country. And then 1 of the examples we can do is if we want to be in the Middle East, where we want to be in APAC because we have a distribution center in Australia, we can ship out of Australia, and we don't have to deal with the duties that we're seeing coming into the U.S. So it's -- you have the entire world that you can -- now you can start opening these flagship stores.

Yes. I mean, Alex, I'd also tell you that like you look at a market like Miami, just because we [indiscernible] been studying a lot of time down there. That's a great performing store for us, but the Miami market is huge and growing, right, especially after what happened in the elections this past week. So you look at South Florida, in general, Miami could easily take 2 to 4 more stores down there. It's a question of having the right capital to invest in that, and it's why we're thinking about now that the business is on stable financial footing, there will still be growth there, but how do we actually accelerate that growth moving forward?

Yes. No, that's great. Really appreciate the answers. 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 Henan ] and team from Jefferies. It's actually a 2-parter and the first one is licensing with licensing revenue up 51% in the quarter and signing 14 deals year-to-date. What are the categories or geographies would you see as the next frontier for growth.

So Matt, I would answer this very similar to comments I've already made on the call, which is when you look at the geographical dispersion of our licensing deals in the categories, there's a lot of room to grow. Now the question is making sure that we do the right deals and so I think there's growth across geographies, and I think there's growth across categories as well. It's 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. And so the pipeline is strong. And I think our investment in content moving forward will continue to enhance that pipeline. What's the second portion of the question?

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 has launched yesterday and the great Playmate search and then the studio production deals that you talked about.

Sure. So I think we've commented on the metrics around the -- great Playmate search. The magazine just launched yesterday, presales were strong. It went on sale at Barnes & Nobles and ...

[indiscernible].

And [indiscernible] million yesterday -- and then the studio deals are quasi licensing deals, right? They are -- they call for a licensing fee plus a percentage of the profits.

Yes. And I'd also want to add that the calendar had the same level of distribution that we had with the magazine itself in all doors [indiscernible], all door sports and Bob.

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 taking the time to carefully review and group them and we've summarized them into some common teams so that we can address as many as possible during today's session. The first question is also a licensing question. But can you talk about any of the new deals, particularly the land-based entertainment deals and whether the new China license seats are showing any signs of growth.

Sure. So I think there are sort of 2 parts to this question. I think just to reiterate, we signed 14 new licensing deals, including 6 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 licensing partner was sort of threatening new partners for us that they were in and therefore, the time with Playboy they would be throwing their money away. Now that, that is behind us and we'll do everything impossible to enforce that award that 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, the -- I think it really speaks to the partnership we're starting within 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 an investment 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.

Ben, I'm going to move to a question on digital that right? So let me summarize this one. It's related to Byborg. A lot of interest in getting an update on probably that partnership is evolving, including potential opportunities to collaborate with some of their platforms such as by [indiscernible] new digital initiatives such as Center fold and Playboy TB while you're answering that, if you could also address the questions around whether -- when do we expect that the revenue to exceed the $20 million base?

Sure. So I think let'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? So it went in different phases. So 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 first couple of years in that business. We're not counting on overages the way we've built our organization in the restructuring and Playboy all. That's all gravy to our earnings moving forward. But they're investing in those businesses. And when you invest in the 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. So 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. But regardless of that, we did some various tests with Byborg, all with good results. So we had by board sign-up w creators, send out an e-mail to their universe. We got creators to sign up. Unfortunately, in this context, we couldn't monetize them. We had Byborg send out an e-mail to their users to vote for the next play mate. Again, these were good results. And then lastly, we had Byborg send out an e-mail to a select group of the users to buy the Playboy magazine. All -- again, we're testing everything right now. And again, we're pleased with the results. So we're beginning that testing and how to work together outside of just the licensing deal that we have in place.

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 2 companies. Has Playboy considered a potential merger or some sort of deeper strategic integration to unlock additional scale and value.

Sure. So 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 LIBOR, including an ownership cap of 29.9%. And any other transaction would have to be done through the proper channels.

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 can drive momentum in Playboy's business such as [indiscernible] building and licensing. I think you've talked about both of those a bit or the revival of deployed by club concept perhaps?

Sure. So 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. But 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 where we 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 1 off the ground in Miami, there's still a lot of work to be done. But we are working on that. And outside of that and growing -- 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, and 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.

Okay. There is an additional question about money per debt that I'll ask if there's anything incremental to offer here. How is Honey Birdette positions competitively as the premium Andre market strengthens. And what are the brand's priorities to sustain growth in '26?

So look, the brand is positioned really well. That's what we did marked 2 years ago, I guess, we started really cutting down the number of days on sale focusing on brand health. We've seen the results. So again, we could drive a lot more revenue if we wanted to, okay? The -- the growth is there. But that means I got to take more inventory, right? We've reduced our inventory to approximately 9 and change, down from like 13. So 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." So we focus on brand health because coming out of COVID, you remember, we bought the business in '21 -- August of '21, if I remember properly, so a long time. And the week after we bought the business, I think Australia went on like a 3-month lockdown, okay? And on top of that, we had a lot of inventory that the previous owner had bought. And so we ended up having to sell that at discounts coming out of COVID lockdowns because on top of that, you already had your inventory plan for October, November, December, in addition to all the stuff you got stuck with. So we revitalize 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. But to really accelerate that growth, I think we need to raise some third-party capital or if we had extra capital, we could do it, but we don't because we want to invest in the content, and we still need to continue to delever the business. I don't 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. And so that's how we're thinking about it.

A different topic here. One step -- what steps is the board taking to ensure strong accountability and alignment between management and shareholder interest, given the stock's performance and investor concerns.

Yes. So look, let me comment first and foremost. I think the management is fully aligned with the Board, and we're fully aligned with investors. And 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 keep losing money. It drives me absolutely crazy. And I understand how frustrating this journey has been. But we have done the right things and taking 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. And I also want to clear up that I've actually invested my own money in this business at in 3 different occasions. I put almost $3 million of my own capital buying shares. One, on the IPO, I bought shares at $10 a share. Second, when the stock was in the teens, I bought stock then. And then I participated in the rights offering as well. So I've invested approximately $3 million in my own capital into the business. Most of our compensation as management comes in the form of stock grants, right? So in addition to the stock [indiscernible], I've actually put real money out of my savings into the business, which is the right thing to do as the CEO of the company. So we are fully aligned. I also think it's important to level set what's happened to us and why we got to this point, right? So when we went public in '21. We had a business in China that was doing about $42 million of revenue, call it, $32 million 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 in from 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. And 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. So you should think about like the cash flow swing in the business was like $45 million between the loss of China and the extra interest cost that we started to absorb because of the depth, right? And no question about it, we made mistakes, but those are things that we just couldn't forecast at the time. You wouldn't have thought that based on the stability of the business beforehand. So we have 2 options, right? You either grind it out or you can give the company to the lenders with a debt. And I'm a fighter. I think everyone on this team is a fighter. There's not a person that has sold shares here. And we did what we needed to do to survive. And it came in at huge personnel costs, right. Seeing the comments, I understand people's frustration with the business, but 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. And 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 our lenders. I got them to amend the debt facility 6 times with no amendment fees, right, including a $40 million extinguishment of debt and then enrolling 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 like $4.50 a share, if you combine the 2 of those, from 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 the solid financial footing. We've reduced the cost infrastructure. But now it's actually becoming fun for the first time is we actually can focus on growth moving forward. So we've invested some money this year on the brand. That was first and foremost thing, obviously, coming out of the [indiscernible] area, we went way to work with the brand, et cetera. I've commented on that in the past. We have a really clean mission statement moving forward. We have a really clean vision. We are going to roll that out to investors in 2026. But then you'll start to see us align the rest of the company's properties around that. And I see that there is a real opportunity. We know the data on -- because of when we have the Playboy Plus and Playboy TV websites of what people will pay for. So 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. So 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.

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.

Sure. I'm going to be slightly careful on how I answer this. But what I'd say is, first and foremost, we are very happy with the result of the arbitration, and we believe Justice has been served. You 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 strongly about our case in the other arbitration -- or the other litigation than we did in China, and we are going to pursue that one to the end and believe that we will be successful in that case as well. We are getting 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, and we're going to do everything we possibly can to collect that money. And if we collect it, it's going to be all gravy to the business because we're in a good place overall with the company now.

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

Let me just say the following. The authorization is not currently active. Our #1 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 #1 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. So 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. So we're very focused on that. And then our focus is on making sure that we make smart, small investments to fuel the growth of the company. So first and foremost, I want to delever this business because that takes away cash that we can otherwise invest in growth. And so we need to solve that. Once we solve that issue, reinvest in growth, then you can decide what to do with the free cash flow afterwards. But right now, the priority is not to buy back shares, it's to continue to delever the company.

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 is the winner?

Well, [indiscernible] starting to encourage. 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. So there's 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. So I don't know how the winner is. I can tell you that we weren't sure about the quality of contestant that would enroll -- and I would tell you that both us and our partner are very, very happy with the quality of content. The contestants represented over 200 million social media followers. Now obviously, we couldn't activate with those contestants because I described the technical issues. Those will be fixed for the next contest and then we'll also take the contestants and make sure that we reach back out to them. We've also done other things like we've e-mailed all the contestants, the opportunity to buy Honey Birdette at a discount. So there's a lot of great stuff coming out of this. that we're testing, and we'll get smarter as we go. And to generate what we've generated, it will be definitely profitable for us because we haven't spent any money, and 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 multimillion dollar business for us as we move into '26 and beyond. And more importantly, it's community engagement, right? That to me is the most 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. So [indiscernible] can answer the exact question outside of the numbers we've already given.

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. And so with that, I'd like to turn it back to Ben for closing remarks.

No. I really -- Matt, I just want to sort of echo what you just said. I think we should make this part of our earnings call moving forward. I do -- 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 this things okay, you just don't want to make the same to say 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 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 2 steps forward and 1 step back versus taking 1 step forward and 2 steps back. So I feel like we've turned that corner and there's some good things happening here. And I just want to acknowledge the frustration because I see it. I do sometimes look at social media comments and so I acknowledge it and just want to thank people. And hopefully, we can continue to deliver good results moving forward, and we look forward to to talking to you guys in the March time frame when we announce the annual year, we have a couple of investor conferences that we'll be announcing soon that we're participating in -- and hopefully, in the short term, we'll get a new investor deck up on our website. They really clearly outlines our strategy moving forward. And then 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 and experiences and products to satisfy that customer. So I appreciate everyone joining. I know it's been a much longer call, but I think it's important that we took the questions. And thank you all for listening.

Thank you. This concludes today's -- sorry, Matt, go ahead.

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

Thank you.