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Good afternoon. Thank you for standing by. Welcome to Playboy Inc.'s First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 11, 2026, and the earnings press release and Form 10-Q from which information may be referenced during this call were issued after the market closed today. On our call today are Playboy Inc.'s Chief Executive Officer, Ben Kohn; and Chief Financial Officer and Chief Operating Officer, Marc Crossman.

I would like to remind you that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-Q filed today by Playboy Inc., which may be accessed on SEC's website and on Playboy Inc.'s website. Please note that statements made during this call, 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 Inc.'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 forecast, 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.

In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Playboy Inc. Investor Relations website.

At this time, I would like to turn the call over to Playboy's Chief Executive Officer, Ben Kohn. Ben, the floor is yours.

Thank you, operator, and thank you to everyone for joining us today. Welcome to our first quarter 2026 earnings conference call. When we spoke in March, I told you 2025 was the year we largely completed Playboy's transformation into a focused, high-margin asset-light platform focused on 4 verticals: licensing, media and experiences, hospitality and Honey Birdette. I want to use my time this afternoon to walk you through what that platform produced in Q1 2026 because that was the quarter where that strategy showed up as visible, tangible progress across almost every part of the business as well as why we're excited about meaningful growth going forward. Headline first, and then we'll get into the substance.

Consolidated revenue grew to approximately $30.2 million, up from $28.9 million a year ago. Adjusted EBITDA was approximately $5 million, up 111% compared to the prior year, marking our fifth consecutive quarter of positive adjusted EBITDA. Excluding litigation expenses, adjusted EBITDA would have been approximately $5.8 million. We closed the UTG China transaction, paid down $15 million of debt, reducing our gross debt to $145 million and plan to further delever by almost $37 million more from future UTG payments, which will bring our net debt well below $100 million.

Honey Birdette grew top line double digits with full price sales accelerating, gross product margin expanding and adjusted EBITDA margins continuing to improve. Given the operational improvements and part of our larger business plan, we have also started terminating or nonrenewing licensees that do not fit with that plan so that we may bring on fewer and bigger licensees that better fit the Playboy brand.

During Q1, we made key hires to reinvigorate our growth. David Miller joined as President of Media and Brand and Phillip Picardi joined as Chief Brand Officer and Editor-in-Chief. David has taken direct ownership of the consumer-facing platform, the website, the Media and Experiences business and the day-to-day alignment between content, commerce and licensing. Phillip is reshaping the editorial voice of Playboy, journalism, photography and cultural authority at a level the brand has not operated at in a long time. The clearest proof point is Phillip's first issue, the Spring 2026 magazine. Our cover star was Karol G, one of the most followed artists in the world with more than 70 million Instagram followers. We generated more than 3 billion media impressions, over 40 million video views across social platforms and the earned media value was in the tens of millions of dollars.

The issue puts Playboy back at the center of culture, speaking to the value of the magazine brings to the company. This is not a one-off. We have 2 other major celebrity covers lined up following Karol G and the editorial calendar for the balance of 2026 continues to get stronger by the day. When artists of this caliber and the photographers, stylists and writers who work with them actively want to be on the cover of Playboy, that tells you the brand health is real. And practically, it is the engine that pulls audience onto our platform and the value into our licensing conversations.

Under David's leadership, we launched a preliminary subscription offering for both digital and print content, executing on the architecture we have been describing to investors for more than a year. Free content drives top-of-funnel audience, premium content and member experiences sit behind the paywall. We will continue to add utility, event access, exclusive drops, community features as we scale playboy.com through the balance of 2026. Building upon our first paid voting contest, the Great Playmate Search, which drove more than 1.7 million votes from over 17,000 contestants, we recently launched our next model search contest, a collaboration between Playboy and Honey Birdette. This is the second paid voting contest we have taken to market. It is a brand collaboration between our 2 largest assets, and the winner becomes the face of a global advertising campaign and is featured in the Playboy quarterly magazine with a $100,000 prize.

It is also a revenue and audience engine. Every vote is a paid engagement, registration runs through June 8 and voting closes July 31. Two weeks into the contest registration, we are on track to exceed 30,000 contestants, a significant improvement from our last contest. Paid voting has the potential to become a real revenue lever for us. We will continue to layer it into additional programs throughout the year. Now that UTG has closed and our balance sheet is in a good place, we are proactively optimizing our Rest of World licensing business, not renewing off-brand licensees and creating new white space as we align our content strategy with our licensing business under David's leadership. This continues the strategy we have been describing, fewer, bigger, high-quality partners focused on a consistent global brand.

With Q1, Honey Birdette has now delivered 6 consecutive quarters of double-digit brick-and-mortar comparable store sales growth and 4 consecutive quarters of combined brick-and-mortar and online comparable store sales growth. Valentine's Day 2026 was Honey Birdette's best yet. The multi-piece full price strategy is working. Our Valentine's assortment all drove record average order values or AOV weeks. Our Honey Birdette Club loyalty program, which we launched in mid-October has now crossed 110,000 members. And in early Q2, the Addison Leopard launch has already set the tone, our best-performing launch of 2026 so far.

The U.S., now Honey Birdette's largest market, led the quarter. Retail and online both expanded and the U.S. store base was nearly unanimously positive on a like-for-like basis. The U.S. economics are clear. U.S. stores are meaningfully more productive and profitable than their counterparts in any other region with 4-wall adjusted EBITDA margins at approximately 40%. With that profile in mind, we have redesigned the future of the Honey Birdette stores, reducing our future build-out costs by almost 40%, which will significantly increase our ROI. We have received great interest from third parties in our capital raise efforts at Honey Birdette, and we intend to open 5 new Honey Birdette stores in top-tier U.S. malls over the next 12 months. These are the highest return investments available to us anywhere in the Honey Birdette portfolio, and they clearly fit with our existing capital plan.

So when I look at Q1 2026, I see a quarter of not only execution against our 4 pillars licensing, media and experiences, hospitality and Honey Birdette, but also the groundwork laid for substantial growth in the future. It starts with bringing in the right leaders, putting Playboy back in the cultural conversation with Karol G on the cover and 2 more major names lined up behind her, launching a new subscription offering, building momentum with a new paid voting contest, closing the UTG transaction as well as 5 other new licensing deals, creating a clear path to further delever the company, continuing to make progress on the new Playboy Club in Miami and further growing the Honey Birdette business 15% year-over-year. Every one of those is a decision, not a headline. And taken together, they give us real compounding momentum as we move forward.

With that, I'll hand the call over to Marc to walk through the financial details.

Thank you, Ben. Consolidated revenue in the first quarter grew to $30.2 million compared to $28.9 million in the first quarter of 2025, an increase of $1.4 million or 5% year-over-year. The year-over-year increase was led by strong Honey Birdette performance. Honey Birdette net revenue grew to $18.8 million, up 15.4% year-over-year. Retail delivered double-digit comp store growth across every region. With Q1, Honey Birdette has now delivered 6 consecutive quarters of double-digit brick-and-mortar comparable store sales growth and 4 consecutive quarters of consolidated brick-and-mortar and online comparable store sales growth. Full price sell-through drove the quarter. Full price sales were up 23% year-over-year. EBITDA margins at Honey Birdette continue to improve.

I'd like to spend a moment on the U.S. specifically because that is where we see the most attractive incremental return on capital. Our U.S. stores are running at approximately twice the sales productivity of the rest of our portfolio of stores and approximately 3x the per store profitability. 4-wall margins in the U.S. were approximately 40% in the quarter. With those economics in mind, we intend to open 5 new Honey Birdette stores in top-tier U.S. malls over the next 12 months. And the capital cost is modest, the payback is fast, and we already have the playbook, the supply chain and the brand recognition in place to execute.

Licensing revenue was $10.9 million in the first quarter, slightly below the prior year quarter. The year-over-year decrease in licensing net revenues is consistent with repositioning our brand and licensing strategy for fewer and bigger deals. Accordingly, we let a number of off-brand legacy licenses expire, which was partially offset by 5 new licensing deals in the quarter, spanning apparel, sleepwear, direct-to-retail and headwear across North America, EMEA and APAC. And in addition, we did not sign any new deals in China during our UTG negotiations.

Our Byborg strategic partnership contributed $5 million of digital licensing revenue in the quarter, consistent with the contractual minimum guarantee. Corporate operating expenses on an adjusted basis, excluding stock-based compensation, transaction expenses and other items we normalize for adjusted EBITDA were approximately $7.1 million, a reduction of approximately $1.6 million versus the prior year quarter. Within that total, corporate operating expenses, excluding brand investment, were approximately $6.2 million, with personnel and occupancy savings driving the year-over-year reduction. The remaining approximately $900,000 represents direct investment in the Playboy brand, the magazine, editorial and the consumer platform. We view that spend as an investment, not overhead.

Net loss for the quarter was $4 million or $0.03 per share, which included $3.5 million of transaction expenses related to the UTG deal compared to a net loss of $9 million or $0.10 per share in the first quarter of 2025, an improvement of approximately $5.1 million year-over-year. Adjusted EBITDA for the first quarter was $5 million, an increase of $2.6 million versus the prior year quarter. This represents our fifth consecutive quarter of positive adjusted EBITDA. Excluding litigation expenses, adjusted EBITDA would have been $5.8 million.

On the balance sheet, we ended the quarter with approximately $34.7 million in total cash, including restricted cash. Total debt was $144.9 million, down from $159.9 million at year-end 2025, reflecting the $15 million paydown from the initial UTG proceeds following the close of that transaction on March 20.

That concludes our prepared comments. With that, operator, let's open the line for questions.

[Operator Instructions] The first question we have is from George Kelly of ROTH Capital Partners.

First one for you. Ben, you mentioned in your prepared remarks about capital raise efforts at Honey Birdette. I was wondering if you could give any more detail on that process.

George, thanks for the question. Look, we've had a lot of interest. It's a great brand. The business is performing well. And irrespective of the capital raise and based on the new store designs where we've reduced our build-out costs substantially, we're going to be opening 5 new stores, but I would say things are looking good on the capital raise, and we'll see what happens in the future without -- I can't really speak more to that, just given that it's an ongoing process.

Okay. Fair enough. And then with respect to the stores that you're opening, can you just walk us through the 4-wall economics, the build cost, the kind of the AUV and margin, just the key aspects of the 4-wall that you're underwriting as you plan new stores?

Yes. So our -- yes, we said that our 4-wall margin was about 40%. In terms of productivity, we're seeing about $1,500 a square foot is what we're getting on the average in our U.S. stores. And then in terms of build-out, we think we're at about $500,000 all in, and that's before TIs. And we'll probably have $30,000 to $40,000 of preopening expenses and you have about $35,000 of inventory. George, that substantially from what used to be about $900,000 to open the store. And so if you look at from an ROI and especially with what we're seeing for full-price items in the U.S., it's a good use of capital, and there's a ton of growth left in that brand.

And remind me of the on average square footage per store?

About 800,000 square feet.

800 square feet.

800 square feet, sorry.

Okay. Great. And then just one last Honey Birdette question, and then I wanted to ask about one other topic. Your year-over-year compares get harder starting in 2Q for Honey Birdette. Aside from store growth, do you think you can maintain, I don't know, high single-digit, low double-digit growth, just given the more challenging compares? Or how should we think about growth for the remaining quarters of 2026?

Yes, we don't want to give guidance. I don't think it'll be too far off of where we are right now going forward. Yes, retail is a little bit more difficult comp, but online is obviously a lower comp that's getting better.

Okay. Okay. Fair enough. And then last question for me, just with respect to UTG. I know it's early days there that the deal didn't close that long ago. But can you just update us on the status of that business and how far along it is and what the kind of plan is in the near term? And just any kind of update on UTG post close? And that's all I had.

Sure. So UTG is off to a good start. Again, as you said, we're only, what, 8 weeks into it, something like that, not even. They've been working with our existing partners, making sure there's a smooth transition. I think we feel comfortable with where they're going to come out for the year from a revenue perspective. It's important to note also, George, that when you look at Q1 for us and really going back to late in Q4, we stopped signing new deals in China, any new deals. And so -- and that was because part of what UTG wanted to do was free up categories for themselves as well because they are an operator. And so we feel good.

I think it's a good relationship. We've known them for a long time, and we're excited about their plans and the investment they're going to make into the brand and the marketing of the brand. And so I think China is in the best place it's been in years. We're actually making progress also on our recovery of the litigation award that we won last year. So we finally got through the Chinese courts, and they're helping us begin the enforcement action against our former partner.

The next question we have is from Alex Fuhrman of Lucid Capital Markets.

Ben, you talked about letting some licensees kind of run off as they expire. How many more could there be? And how long do you think it's going to take just if you let all of the kind of underperforming licensees naturally expire? How long would it take to kind of get through that process? And could you just kind of help us to size up what is ultimately the opportunity here? Are there big categories, big regions that you really haven't been taking advantage of that you think you could unlock if you kind of clear out some of these underperforming legacy relationships?

Sure. And thanks for the question. Look, I don't want to say they're underperforming, right? I think these are proactive decisions we're making based on the improvement of the company. When we had balance sheet issues, which I think we have largely solved at this point, we took a lot of deals on the licensing side, some of them small, but stacking a lot of nickels shows real revenue. And I think we're taking -- especially with David on board and the editorial strategy we have, we're taking a much more deliberate approach to long-term brand health. And so some of the deals are just underperforming, they're just deals that are off brand. And so we're looking for fewer and bigger partners that should allow us in the future to be much more efficient operating anyways for the business.

And so it's not -- it's hard to sort of give guidance on it because it's sort of a step function, as I've always described licensing. But licensing has the potential to be substantially larger than it is today. And that is going to come down to what we're doing on the editorial side of the business as well. We are one brand, which is Playboy. And we have to make sure that what we do on the editorial side aligns with what we do on the licensing side, especially in the Western Hemisphere, and that's what we're focused on. And so part of that, Alex, was China. We just -- we didn't do new deals in China. There are some deals that were expiring there because of UTG, we put all of that on hold. And then part of that is proactively in the U.S. as a couple of deals came up, decided that we're not going to renew them as we have a larger strategy for U.S. licensing moving forward.

And then to answer your question, there's a lot of categories that we are targeting right now, but that will tie directly to what we're doing on the content side. So as we relaunched this Playmate franchise, which is off to a great start, there's a lot of opportunity for products around Playmates. So when you think about color cosmetics, you think about lingerie, you think about Swim in our move to Miami, there are some opportunities there that we're excited about moving forward. And then rest of the world, obviously, putting Karol G on the cover, phenomenal influencer and musician, but there's a lot of white space in South America. And so that is deliberate moving forward, which is you start with content, that opens the doors for us and then you start to build around it.

Yes. That makes sense, Ben. And then you mentioned paid voting some pretty big early numbers there. Can you talk about how profitable that business is and how big that could get for you?

Well, yes, let's just start. So we're only a couple of weeks into this new contest, which is a collaboration between Playboy and Honey Birdette. Honey Birdette has designed a capsule collection of Playboy lingerie, and we're excited to see how that performs. We have already now surpassed, I think, as of today, the 17,000 contestants that we had registered in the last contest, and we still have about a month to go in registration. And we think paid voting could be millions and millions of dollars a year. Let's see how this contest does, but the early economics of the first one, even with all of our technical issues we have and that we have now resolved with a new partner, it was very, very promising on an annualized basis, that was multiple 7 figures.

And I think if we do this one right and you get up to 30,000-plus contestants, this contest alone should be multiple 7 figures from a revenue perspective. And the profitability is great. But more importantly, it's the top of the funnel. So remember, as I sort of said in the prepared remarks, between sort of free content that sits out there as well as some of these contests, the last time we did this in the fall, we had 500,000 users register at playboy.com. We own that data moving forward. And so that allows us to now go back and market membership or subscription and other offerings to those users.

So not only is paid voting extremely profitable for us, but it's an unbelievable top of the funnel, which is the women sign up to win the cash prize and to become the face of the Honey Birdette Playboy lingerie line, they go out to social. They ask their fans to vote for them. Their fans vote for them, but they're voting for them at Playboy and then we own that data moving forward. So it serves multiple purposes for us as part of our larger content, media and experiences strategy. And we're excited to see how the Playboy Honey Birdette line performs as well.

The next question we have is from James Heaney of Jefferies.

Ben, can we just give an update on the success that you're seeing with the magazine? I mean obviously, you've generated a lot of hype with the Karol G. So we would just be keen to hear about that release and how it's driving halo effects and traffic into your digital properties as well.

Yes, James, thanks for the question. Look, obviously, Karol G is a huge name. But most importantly, we have 2 other huge names lined up behind her for the balance of this year. And the conversations we're having with talent, I would say, are getting easier and easier. As far as traffic, we launched what I would say is a very preliminary membership or subscription with the Karol G cover. We have a lot of learnings from it, but very pleased with the initial results of the number of people that have subscribed. Actually, a little bit shocking that in some of the earlier things we did, we saw more people subscribe for print. This one, we're actually seeing a lot of people subscribing for digital. The print magazine sold out, as I think we said, within the first day online. So I wish we had more because we obviously left some on the table there. And the sell-through at newsstand was very, very strong as well.

And that's all part of our top of the funnel, right? It's getting those names to drive traffic that we then drive into a paid wall situation moving forward. So without getting into specific numbers yet because it's still really early, and we have a lot of learnings, but very encouraged by the early results. And we're seeing the same thing with Playmates, right? Launching Playmates on a monthly basis on social and then getting them to drive to see their galleries behind the paywall at playboy.com is also showing positive -- very positive results and something that we've learned a lot from.

And as I've said before in previous calls, everything with us is now about testing and iterating, testing and iterating. We will continue to put resources behind things that are working and won't put resources behind things that aren't working. But early on, what we're doing on the media side, especially with Phillip and David now on board are very promising signs for a lot of growth in the future.

Yes, that's great. And maybe just one for Marc. I was hoping you could talk about some of the OpEx levers that you continue to see in the business. I mean you've done a great job taking out OpEx over the last year, particularly, I think sales and marketing was strong. But interested kind of where you see potential for additional cost savings going forward.

Yes. So I think we -- and thank you for the question, but I think we have a lot of room in the tech space with our tech stack. We're integrating AI throughout the company. We're finding that to help just on an overall basis, bring costs down. In addition to that, there are probably a few other things we can do that we probably shouldn't be talking about. But it's -- yes, like I said, there are still levers there, and we'll continue to pull.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Ben Kohn for closing remarks.

Thank you, operator, and thank you to everyone for joining us today. Q1 was a quarter of visible execution across all 4 pillars: revenue growth, our fifth consecutive quarter of positive adjusted EBITDA, the closing of the UTG transaction and continued double-digit growth at Honey Birdette. As we move through the balance of 2026, we remain focused on disciplined capital allocation, putting Playboy back at the center of culture and further delevering the balance sheet. We appreciate your continued support and look forward to updating you on our progress in the months to come. If you have any further questions, please feel free to reach out to our IR firm, MZ Group, who would be happy to answer them. Thank you, and we look forward to talking to you on the Q2 call.

That concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Playboy's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Monday, March 16, 2026, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Playboy's Chief Executive Officer, Ben Kohn; and its Chief Financial Officer and Chief Operating Officer, Marc Crossman. 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. 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 forecast, 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. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis.

A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Playboy Investor Relations website. At this time, I'd like to turn the call over to Chief Executive Officer, Ben Kohn. Ben, the floor is yours.

Thank you, operator, and thank you to everyone for joining us today. Welcome to our fourth quarter and full year 2025 earnings conference call. I am pleased to share that we've made meaningful progress across all 4 pillars of our strategy, delivered strong financial results, including our fourth consecutive quarter of positive adjusted EBITDA and made 2 senior hires who will be instrumental in driving our next phase of growth. Let me walk you through what we've accomplished and where we are headed. 2025 was a defining year for Playboy. We completed a strategic transformation that has fundamentally repositioned the company for sustainable, profitable growth.

We exited the year with 4 consecutive quarters of positive adjusted EBITDA, reduced debt by $58 million since the third quarter of 2024 as well as defined a pathway to reduce debt by a further almost $52 million through our UTG China deal and built a clear diversified platform around 4 pillars: Media and experiences, licensing, hospitality and our Honey Birdette direct-to-consumer business. Every part of this business is now oriented towards high margins, recurring revenue and brand-led growth. We are actively investing in the business across 2 key areas: content and media to drive audience growth, subscription revenue and experiences and building out our digital and hospitality footprint.

To execute on these priorities, we recently made 2 critical senior hires, David Miller as President, Media and Brand; and Phillip Picardi as Chief Brand Officer and Editor in Chief, both world-class leaders with deep experience scaling iconic media brands. Additionally, our UTG China partnership, which we expect to close as early as this week, will further accelerate our deleveraging and provide flexibility to invest in growth. There is a generational white space in the men's lifestyle category. Young men are consuming content at record volumes, but remain underserved by sophisticated trusted voices. No one can match Playboy's 70-year legacy of speaking credibly about relationships, intimacy and culture and because women are at the center of our brand, our message connects with men through women, not an opposition to them.

That positioning directly supports every pillar of our strategy. Let me walk you through our progress. Pillar 1, media and experiences. Content is our brand marketing. It drives relevancy, expands our audience and creates IP we monetize across the ecosystem. Under Phillip Picardi's leadership as our new Chief Brand Officer and Editor and Chief, we are rebuilding our editorial engine with high-quality journalism and photography across our core authority areas, relationships, dating, intimacy and modern masculinity with expansion into entertainment, sports, gaming and fashion. We are also rebuilding our website from the ground up with a full relaunch expected later this year. The new digital platform will be the hub for a subscription-based revenue model so [indiscernible] content drives top-of-the-funnel audience growth, while premium content and experiences sit behind the paywall, creating predictable recurring revenue.

The magazine remains the top of funnel differentiator. Being featured in, it captures creators and celebrities whose content powers our social channels and drives audience growth. The magazine relaunch is going exceptionally well. We will feature a major female music star with over 70 million Instagram followers as our newest cover feature, which underscores the caliber of talent that wants to be associated with the Playboy brand today. These magazine-related brand initiatives serve as the top of the funnel -- our funnel, driving massive awareness and engagement that we then convert downstream. We have over 25 million social followers generating billions of impressions annually. The Playmate Search has been the standout with tens of thousands of creators entering, mobilizing their followings and producing daily user-generated content that reduces our production costs while keeping channels active.

Each month, we will feature our Playboy of the month, launch her across our social channels and then drive our audience behind our paywall, converting free engagement into paying subscribers. Paid voting, which we successfully launched in Q4, is proving to be a scalable recurring revenue mechanism with multimillion dollar potential and significant room to grow. On the programming side, we are developing original content inspired by historic franchises like the Playboy Interview and Playboy after Dark, including a feature film with Heftor Capital and a television adaptation of the Great Playmate search, structured as a licensing revenue and profit share to keep us asset-light.

Beyond film and television, we are building out original audio and video content that will live on our owned platforms and be distributed across third-party channels, creating new monetization pathways through advertising, sponsorships and paid subscriptions. The content strategy works hand-in-hand with our events and experiences business, and we continue converting lifestyle aspiration into participation revenue through curated experiences, mid-summer night Dream parties, poker and golf tournaments and more. Collectively, our media and experiences pillar is being built to generate revenue across advertising, sponsorships, paid voting, subscription, events and experiences, multiple streams from a single content investment. Pillar 2, licensing.

Licensing is the most predictable, highest margin part of our business. We generated over $46 million in licensing revenue in fiscal year 2025, over 38% of total revenue and a 90% gross margin. 90% of that revenue was guaranteed through contractual commitments, and we have over $343 million in unrecognized future revenue. The most significant development is our partnership with the UTG Brands Management Group. In February 2026, we announced the sale of 50% of our China licensing business to UTG for $122 million in total cash, $45 million in purchase price, $67 million in guaranteed minimum distributions over the next 8 years and $10 million in brand support payments. This partnership delivers immediate balance sheet improvement with almost $52 million earmarked for debt reduction and is immediately accretive to earnings while we retain 50% ownership with profit share upside.

Looking ahead, we see significant white space in EMEA, Latin America and APAC. Playboy's global recognition far exceeds its licensing penetration with their digital licensing anchored by the $20 million a year annual minimum guaranteed Byborg strategic partnership. Going forward, we are being more selective in our licensing approach, focusing on fewer, bigger, higher-quality partners who can drive meaningful scale and strengthen the brand in the marketplace. This disciplined strategy improves the quality of licensed products, supports pricing power and enhances our long-term contractual value. Licensing gets stronger with increased brand awareness, which is exactly what our media pillar delivers. And with David and Miller now overseeing both media and licensing, we have the leadership alignment to fully capitalize on that strategy.

Pillar 3, hospitality. Over 72 years, Playboy has owned and licensed 45 clubs across 9 countries. We are now relaunching membership club, starting with our Miami Beach Club as the new mansion. We have signed a [indiscernible] letter of intent to raise capital from third parties for the build-out and have selected a highly experienced hospitality operating partner to bring this vision to life. This structure limits CapEx for Playboy while allowing to participate through licensing, membership revenue and brand association. We are making meaningful progress and are excited about the potential for this concept to become an exciting pillar of our business moving forward. Pillar 4, Honey Birdette. The Honey Birdette story is about brand health and cash flow, and Q4 delivered strong results.

Sales grew 9% year-over-year on a reported basis with full price sales up 21%. Gross product margin expanded to 77.8%, up 140 basis points, driven by our focus on full price selling and more disciplined discounting. Retail was a standout channel, up 17% like-for-like with every market positive. The U.K. led to a 36% and the U.S. a 21% growth. Digital grew 7%, with the U.S. up 16% and average order value lifted 17% across all regions. In mid-October, we launched the Honey Club, our loyalty program, which has already reached approximately 80,000 members. The combination of a healthier retail base and growing digital channel positions, Honey Birdette for durable, profitable growth. We believe this asset could serve as a strong monetization opportunity down the line, helping us to further delever.

In summary, 2025 was the year we completed Playboy's transformation into a focused, high-margin asset-light platform. The cultural moment is ours. Our licensing foundation is robust. Honey Birdette is profitable and accelerating, and we have the strategy and brand equity to execute. I'd now like to turn the call over to Marc to walk through some key financial details.

Thank you, Ben. Revenue increased to $34.9 million as compared to $33.5 million in the fourth quarter of 2024. The increase reflects the continued strength in the company's global licensing business, further supported by strong Honey Birdette performance. Operating expenses, excluding impairments, decreased to $32.2 million as compared to $37.9 million in the fourth quarter of 2024. The decrease was due primarily to a 15% reduction in selling and administrative expenses as a result of the company's continuing effort to improve operational efficiency, including converting its adult business from an operating model into a licensing model. It is important to note that selling and administrative expenses in the fourth quarter of '25 were burdened with approximately $1.2 million of transaction expenses related to the UTD transaction as well as $2.1 million of additional brand marketing expense.

Net income increased to $3.6 million or $0.03 per share, a significant improvement as compared to a net loss of $12.5 million or a net loss of $0.15 per share in the fourth quarter of 2024. The improvement reflects higher gross margins, the company's continued focus on cost management as well as ongoing deleveraging efforts and a benefit from income taxes. Adjusted EBITDA increased to $7.1 million, representing our fourth consecutive quarter of positive adjusted EBITDA compared to an adjusted EBITDA loss of $100,000 in the fourth quarter of 2024. Excluding litigation expenses, adjusted EBITDA would have been $8 million in the fourth quarter. On the balance sheet, we reduced senior debt by nearly $58 million to approximately $160 million from the third quarter of 2024.

With the UTG transaction, almost $52 million of proceeds will go towards further debt reduction, and we expect the transaction to be immediately accretive, including the anticipated reduction in interest expense. This completes my prepared comments. Let me turn the call back to Ben for closing remarks.

Thank you, Marc. We have built a focused, financially disciplined platform that is generating positive adjusted EBITDA, aggressively paying down debt and executing across all 4 pillars of our business. The UTG China partnership, which we expect to close as early as this week, validates the enormous untapped value of the Playboy brand globally. It delivers $122 million in contracted cash payments with nearly $52 million earmarked for debt reduction and is immediately accretive to earnings. Beyond the financial impact, it gives us a world-class operating partner in the largest consumer market in the world and the flexibility to continue investing in growth.

We are investing in this business with conviction. We made 2 transformational senior hires in David Miller and Phillip Picardi. We are rebuilding our website and digital platform from the ground up. We are developing original audio and video content, and we have built a subscription and membership revenue model that we believe can scale significantly. Our magazine relaunch is generating real cultural momentum. Our newest cover star, a major female musician with over 70 million Instagram followers is a testament to the caliber of talent that wants to be part of the Playboy brand. On the hospitality side, we have selected an operating partner for our Miami Beach membership club and are making meaningful progress towards bringing that vision to life.

On licensing, we are seeing more disciplined and selective, focusing on bigger, higher-quality partners who can drive scale while strengthening the brand. We are entering 2026 with momentum, conviction and a clear line of sight into the value we can create for shareholders. Every pillar of this business is executing, and I firmly believe we have the team, the strategy and the brand equity to deliver sustainable long-term value to my fellow shareholders. With that, operator, let's open the line for questions.

[Operator Instructions] Our first question comes from the line of James Heaney with Jefferies.

Could you just talk about the rebuild of your website? I'm curious what are some of the objectives that you hope to achieve from that relaunch? And how big of a focus will monetization be as part of the strategy?

James, it's Ben Kohn. Thanks for the question. Our website today is dated. Our single one goal on the website is brand. Second goal is monetization, which will be a short follow from that. And so what that website is going to be is a digital hub for all of our content and the subscription or membership offering that we've begun to roll out with the last issue of the magazine, $79 on a digital basis, $149 on a digital plus print. We will look to expand that membership offering moving forward, meaning we'll continue to add utility or more opportunities with that management, including the -- with that membership, including the opportunity to participate in Playboy events.

And so we're excited by it. We've hired a great digital agency to help us with it. And with David and Phillip on board, I would think that there'll be a much improved consumer experience really focused on conversion, and we now have the data tools to help us with that.

That's great. And maybe just another question. I think you spoke on the last call and obviously came up again today about taking the Playboy brand back to its roots this year. Can you just talk about some of the ways in which you're repositioning the brand and so far, how that's resonating with the target audience of sort of 18- to 40-year-old males?

Look, the brand is resonating well. I'm not getting into any of the specifics yet because we're testing a ton of content out there, but we're seeing meaningful engagement in the content that we are producing. and we're using the data to inform our content strategy moving forward. As we talked about in previous calls, we did hire a brand agency. We spent about 6 months last year working with that brand agency, really looking at what consumers thought about the brand, internal voices as well. And what that led us to is really taking Playboy back to its roots, really being that modern guide for everything worth wanted. And we're doing that through the voice of women, as we mentioned in the prepared remarks. And it starts with the Playmate.

So the Playmate, obviously, one of the best brand ambassadors you can have. We did that last year with the contest, tens of thousands of women's registered. They brought us hundreds of thousands of users. That's our top of the funnel. We've now signed a deal with Propagate to turn that into a television show. But think about that -- think about Playboy really returning to its roots of what made the company famous in the 50s and 60s and 70s.

Our next question comes from the line of Alex Fuhrman with Lucid Capital Markets.

I wanted to ask about the Honey Birdette business. It looks like a really strong fourth quarter, both on the top line and in terms of gross margin. Can you talk about what's driving that? I know in the past, you've said that you've had a much more success with full price selling and pulling back on the discounting. Have you continued to see strong full price sell-through? And then just year-to-date, any comments on how the Valentine's Day season went for the brand?

Sure, Alex. Good to speak to you. We'll start with the first part of that question. From a full price standpoint, our business is firing on all cylinders. Really, what we're seeing, too, is we put a 10% price increase in place. This was right around when the tariffs went into effect. And what we've seen is there has been 0 pushback from the customer, and that's really what's helped lift our margin. So it's coming from 2 places. One is price increase and the second is pulling away from the sale periods. In terms of Valentine's Day, I can't give you the exact numbers, but it was our best Valentine's Day that we've ever had. We were less promotional, and we're able to move full price goods at a very quick pace. It was up year-over-year.

Yes. Alex, I'll just add to that, too. As we look into '26, obviously, we've talked previously about raising some equity to grow the business. But given where we are as a company as well, we are putting some money into the growth there. We think there's a huge opportunity to expand the store footprint in the United States where we see massive AOV. And we're seeing growth on the digital side as well. So we will continue to expand the business as long as we own it. We think it's -- the management team has done a great job with the product, and it's definitely resonating with the consumer.

Okay. That's really helpful. And then I know you guys have done some kind of small-scale testing of ways to kind of excite the Honey Birdette business from what you're doing with Playboy, promotions for merchandise, things like that. Has that kind of moved the needle? Is there any kind of takeaways from that in ways that you could really help to cross-market the brands?

That's a great question and very timely because we are launching a Playboy capsule collection by Honey Birdette. And there might or might not be a paid voting contest tied to that as well as we think through the marketing angle of that coming up here shortly.

And this concludes our question-and-answer session. I'll now hand the call back to Chief Executive Officer, Ben Kohn, for his closing remarks.

Thank you, operator, and thank you for everyone for joining us today. 2025 was a year of transformation, and the results speak for themselves. As we move into 2026, we are executing with discipline and urgency across all 4 pillars. We appreciate your continued support and look forward to updating you on our progress in the months to come. If you have any further questions, please feel free to reach out to our IR firm, MZ Group, and we would be happy to answer them. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.

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.

Greetings, and welcome to the Playboy Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Rob Fink with FNK IR. Thank you.

Thank you, operator, and good afternoon, everyone, and welcome to Playboy's second quarter earnings call. Hosting today's call is Ben Kohn, Playboy's Chief Executive Officer.

Before turning the call over to Ben, I'd like to remind everyone that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-Q filed today by Playboy, which may be accessed on the SEC's website and Playboy's website. Today's call is also being webcast and a replay will be posted to the company's Investor Relations website.

Please note that statements made during this call, including financial projections or other statements that are not historical in nature, may constitute forward-looking statements. Such statements are made on the basis of Playboy's views and assumptions regarding future events and business performance at the time they are made, and we do not undertake any obligation to update these statements.

Forward-looking statements are subject to risks, which could cause the company's actual results to differ from its historical results and forecasts, including those risks set forth in the company's filings with the SEC, and you should refer to and carefully consider those for more information. This cautionary statement applies to all forward-looking statements made during this call, and we ask you not to place undue reliance on any forward-looking statements.

During the call, the company may refer to non-GAAP financial measures. Such non-GAAP measures are not prepared in accordance with generally-accepted accounting principles. But a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings release that Playboy filed with its 8-K earlier today and it's also in its Form 10-Q which was also filed today.

With all that said, I'd now like to turn the call over to Ben. Ben, the call is yours.

Thank you, Rob. We have made significant progress in our evolution to a licensing-focused, asset-light business. The second quarter results are proof of just how far we've come. We've delivered a significant financial improvement in the quarter, but we also laid the important groundwork for the next leg of growth as we continue to sharpen our focus around the Playboy brand.

Revenue climbed 13% year-over-year, with Licensing revenue surging 105%. And our adjusted EBITDA was $3.5 million, a $6.4 million positive swing compared to a loss of $2.9 million in last year's second quarter. Our net loss included $1.9 million in impairment charges related to the sublease of our Los Angeles office and $2.1 million related to a onetime settlement of present and future licensing agent commissions. Excluding those charges, our net loss would have been approximately $3.7 million and our earnings per share would have been negative $0.04.

Additionally, the quarter's results included $1.3 million in incremental legal expenses related to litigation with 2 former licensees that we terminated for contractual breaches. Excluding those costs, adjusted EBITDA would have been approximately $4.8 million, a positive swing of more than $7.7 million year-over-year.

We are now in a strong financial position with over $30 million in cash on hand as of today and a clear plan to continue reducing debt and lowering our cost of capital. This strength gives us the flexibility to invest confidently in the next stage of Playboy's growth.

That next stage centers on returning to the roots that made Playboy an icon, as an aspirational men's lifestyle brand. Working with one of the top brand agencies in the world, we're focused on bringing the brand to life through compelling content and unforgettable experiences.

The Playboy Magazine is back, not as our core revenue engine, but as a powerful driver of brand relevance. Earlier this year, we relaunched the magazine, and our next issue is scheduled to be released in November. The landmark issue will feature 12 Playmates in 1 edition, a first in our history, and they'll also star in our 2026 calendar. Both of those are available for presale on our website today.

We're reintroducing the Playmate of the Month and have launched the Great Playmate Search, a global paid voting contest that's already exceeded our expectations. These contests will run quarterly, delivering fresh content, fan engagement, sponsorship opportunities and meaningful revenue.

Experiences are another pillar of our growth. We're planning to relocate our corporate headquarters to Miami Beach, a vibrant city that has become the hub of our content creation and event strategy. We're also developing a new Playboy Club concept there in partnership with a leading hospitality company, blending a luxury dining experience with an exclusive private club, designed to be as iconic as the original Playboy Mansion. We believe Experiences will become another significant revenue driver for us in the future as we expand this concept to major markets around the world.

Our Licensing business is thriving with new agreements in gaming, beauty and grooming, energy drinks and fashion. Our partnership with Byborg remains a cornerstone, guaranteeing $300 million in minimum royalties over 15 years for our Digital business.

And our Honey Birdette business and brand continues to improve. Q2 revenues rose 14% with gross margins expanding and brand perception strengthening, thanks to new collections, higher full price sell-through and a refreshed customer experience online and in-store.

Put simply, Playboy is stronger, nimbler and better positioned than it was a year ago. Looking ahead, I am confident that we might have the right -- we have the right strategy, the right team and the right momentum to keep building on this success.

With that, operator, I will open it up to Q&A.

[Operator Instructions] Your first question comes from George Kelly with ROTH Capital.

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

Great. Thanks for the question, George. Look, paid voting, this is our first time doing it. What I would say, without getting into specific numbers because they're in the multiple thousands already, but we signed up in the first few days more than 50% of what we were expecting for the whole entire sign-up period, which is 8 weeks. And we haven't turned on any marketing yet.

So there's various things that we will be testing with this first contest. We plan on doing this for every single issue of the magazine going forward. This contest, we actually have 2 contests going on, one for -- is Playmate of the Month and the second is for an inside cover star.

But more importantly, what we're testing is how do we integrate this whole entire global Playboy ecosystem? So we have signed up our international editions which are licensing deals as affiliates to bring in women from around the world into the contest. We integrated with PSD, a licensing -- a significant licensing partners of ours for underwear, where they are marketing this contest and also participating in the giveaway and the price selection. And we did the same thing with Honey Birdette.

So I'm excited. Based on other contests, this could be millions and millions of dollars of revenue for us. We have to execute on that. And we've done this in a model that's very similar to Licensing where we partnered with a technology partner and we have an economic arrangement very similar to what our Licensing business is on a gross margin basis.

Okay. That's helpful. And then another topic I wanted to cover is, in your letter, you mentioned, I think it was 2 new license deals in gaming, 1 in beauty and grooming and another in beverages. And I think in your prepared remarks, you said there was another one, I forget the category.

And so I was curious if you could just talk to the materiality of those deals and the timing. And what's like -- not to ask for specific guidance for 2026, but like as you look at these deals, I know this year has benefited from Byborg, but going forward, what's just a good sort of medium-term growth expectation in that business?

Sure. So I, unfortunately, I'm not going to answer that question because, as I've said historically, licensing is a step function, and we have to be very careful with the brand and as we're focusing on really the relevancy of the brand, that we make sure we do the right deals. And so there's a lot of deals out there to sign, it's just a question of do you want to sign those deals, because there's brand dilution. So we're very focused right now on the health of the brand.

We have the company, financially speaking, in a really good place. And so we're not forced to do deals. And what's more important is doing the right deals that we can build meaningful partnerships with moving forward.

The deals that we signed on an annual basis are in excess of 7 figures, and so they're multiple-year deals. So it's significant for us. And I think we've only scratched the surface. I think there's a lot more that we have in our pipeline and a lot of other categories that we are targeting to continue to grow that Licensing business.

But I don't want to get into 2026. We're not even -- we're just barely halfway past the midway point of 2025, and it will depend on when and the number of deals that we get done. As we approach the year-end, we can talk more about that. But I think that one thing I can tell you, and this speaks to why we're investing in content, it's our marketing engine for the brand. It always has been. This is not a company that goes and spends millions of dollars in what I would say is paid marketing. We use content as that marketing vehicle.

We have some huge stars potentially lined up for next year centered around the magazine. And that by itself brings an amazing amount of audience to the business. And those things can have meaningful impacts on the future Licensing business as well. When we did this last time and we invested in content, we saw a significant positive downstream impact to our Licensing business. And that's why the business strategy we're embarking is so key.

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

So again, I think I'm going to sort of say high level again. We are very focused on remaining asset-light with high-margin revenues. As I don't want to get into the specifics of how we're structuring it, but we have a space identified. We are working through plans with a partner -- an operating partner on that and also what would the programming around that be. Miami will most likely be the first, but we actually have interest in other cities as well for different Playboy hospitality venues.

And so to the extent we're successful with this one -- and we are moving the corporate headquarters to Miami. We're excited to be in a very pro-business environment, especially coming out of Los Angeles. And I think Miami is a city that embodies the core tenets of Playboy. I think this could be a huge opportunity for us should we get the deal done and open. I think there's a lot of excitement down there for Playboy and I think there's a lot of excitement for our Playboy Club.

Our biggest thing and why we've been so patient with this is it all comes down to making sure we have the right partner, right? There's been tons of opportunities to do Playboy hospitality, they just haven't been the right partner. And for us, picking the right partner, when a consumer can come in and truly experience in real life the Playboy brand, the partner is more important than anything.

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

Yes. No, I would, George. It's Marc. It obviously will bring down China. We've talked about the percentage commission that we pay. And so it's -- I would say it's material, but not material enough for us to talk about in 2025.

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

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

Yes, the changes will start this quarter and moving forward. It's more complicated than that because of accounting -- of how it's accounted for. But for us, it was an opportunistic deal and the right thing to do moving forward as we continue to look for ways to enhance our margins.

And we're doing that across the board. As we've talked about historically, we've been spending a lot of time with AI. We think there's a lot of things that we can do operationally with AI to enhance the margins. We're actually using -- about to use AI as part of the Playmate voting contest as well. There's a lot of things where you could integrate various AI applications to become more efficient in what we're doing.

Alex Fuhrman with Lucid Capital, please proceed.

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

Alex, it's Marc. No, we continue to expect to see growth in the back half of the year. And that's -- if you really look at what's underpinning that, our retail business at full price is going very strong. And the comps that we saw for that business, we had stated it was about 28%, and that was not an easy comp against what we did because we had talked about how online had really been where we've seen the pressure. So we can say we expect that business continue to grow going forward.

Yes. I mean we -- gross margins of, what, 200 points over the quarter -- 100 points over the quarter? So the business is strong. We've actually integrated that into the Playmate contest as well. And so they're actually marketing the contest to their creators where have the winner getting a year of free Honey Birdette. There might be a modeling opportunity for the winner with Honey Birdette.

And I think this goes to the larger strategy, which is how do we take these various components of the business and integrate them all together so that, hopefully, the Playmate contest, which we have thousands and thousands of women have signed up, they might also be getting an e-mail from Honey Birdette with the ability to buy Honey Birdette at a slight discount for new customers. And so what's so exciting for us as we move forward is bringing these various components of the business together to try to benefit each other.

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

So we can't predict when cases will be resolved. What I would say, in the second quarter, we had 2 major litigations ongoing. One of those, we are done with the litigation portion of it, but we still have 1 ongoing. We feel very confident in our cases against both of our former partners.

You will start to see -- you will continue to see some drag on the business. I just don't know for how long, depending on when that case is eventually heard. But we are prepared to defend our trademarks. And to the extent we win, we could see significant settlements in those cases.

[Operator Instructions] We received a presubmitted question that the IR team will read.

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

Sure. So as I mentioned, I think George asked this question, but we signed multiple new deals in the quarter. Those deals in total exceeds 7 figures on an annual basis. I would tell you, we are just scratching the surface. I think there's a lot of categories that we've -- new categories we've identified and extensions of categories, like gaming, where we are significantly underpenetrated for what this brand means in that area, that we can continue to grow each of those categories moving forward.

Again, we want to be strategic in the deals that we do. We want to make sure we do the right deals that are not just an MG, but provide upside above that, picking the right partners. And we just need to be patient. I think that part of the brand work we're doing and part of the content strategy that we're embarking on will help continue to grow markets that we are -- or categories that we're already in, plus open up new categories for us moving forward.

Any other questions, operator?

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

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

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