PLBY (PLBY) - 2025 Q2 - Quarterly Report

Part I - Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited condensed consolidated financial statements, including statements of operations, comprehensive loss, balance sheets, mezzanine equity and stockholders' (deficit) equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value measurements, revenue recognition, and other financial details for the periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations This section presents the company's unaudited condensed consolidated statements of operations, detailing net loss and per-share figures for the specified periods Net Loss (Three Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net Loss | $(7,679)$ | $(16,652)$ | $8,973$ | (54)% | | Net Loss per share, basic and diluted | $(0.08)$ | $(0.23)$ | $0.15$ | (65.2)% | Net Loss (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net Loss | $(16,720)$ | $(33,099)$ | $16,379$ | (49)% | | Net Loss per share, basic and diluted | $(0.18)$ | $(0.45)$ | $0.27$ | (60)% | - Net revenues increased by $3.3 million (13%) for the three months ended June 30, 2025, and by $3.8 million (7%) for the six months ended June 30, 2025, compared to the prior year periods[9] - Operating loss decreased by $3.3 million (36%) for the three months ended June 30, 2025, and by $6.0 million (33%) for the six months ended June 30, 2025, compared to the prior year periods[9] - Interest expense, net, significantly decreased by $4.7 million (71%) for the three months ended June 30, 2025, and by $9.2 million (71%) for the six months ended June 30, 2025, compared to the prior year periods[9] Condensed Consolidated Statements of Comprehensive Loss This section outlines the company's comprehensive loss, including foreign currency translation adjustments, for the reported periods Comprehensive Loss (Three Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :------------------ | :------------------ | :------------------ | :--------- | :--------- | | Comprehensive Loss | $(6,686)$ | $(15,804)$ | $9,118$ | (57.7)% | Comprehensive Loss (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :------------------ | :------------------ | :------------------ | :--------- | :--------- | | Comprehensive Loss | $(16,468)$ | $(33,984)$ | $17,516$ | (51.5)% | - Foreign currency translation adjustment improved from $(885) thousand in 2024 to $252 thousand in 2025 for the six-month period[12] Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, including assets, liabilities, and stockholders' deficit, at specific dates Balance Sheet Highlights (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------ | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $264,062 | $284,704 | $(20,642)$ | (7.2)% | | Total Liabilities | $262,630 | $268,782 | $(6,152)$ | (2.3)% | | Total Stockholders' Deficit | $(17,490)$ | $(7,731)$ | $(9,759)$ | 126.2% | - Cash and cash equivalents decreased by $11.3 million (36.5%) from $30.9 million at December 31, 2024, to $19.6 million at June 30, 2025[15] - Total current assets decreased by $18.0 million (31.3%) to $39.5 million, while total current liabilities decreased by $3.5 million (6.2%) to $52.4 million[15] Condensed Consolidated Statements of Mezzanine Equity and Stockholders' (Deficit) Equity This section details changes in mezzanine equity and stockholders' deficit, reflecting capital transactions and net losses over the periods - The total stockholders' deficit increased by $9.8 million (126.2%) from $(7,731) thousand at December 31, 2024, to $(17,490) thousand at June 30, 2025, primarily due to the net loss incurred[18] - A conversion of convertible preferred stock resulted in a $7.0 million reduction in mezzanine equity and a corresponding increase in additional paid-in capital for the six months ended June 30, 2025[18] - Accumulated other comprehensive loss improved from $252 thousand, from $(27,455) thousand at December 31, 2024, to $(27,203) thousand at June 30, 2025[18] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, in thousands): | Activity | 2025 | 2024 | $ Change | % Change | | :---------------- | :--------- | :--------- | :--------- | :--------- | | Operating activities | $(11,507)$ | $(12,780)$ | $1,273$ | (10)% | | Investing activities | $(177)$ | $328$ | $(505)$ | (154)% | | Financing activities | $(114)$ | $(215)$ | $101$ | (47)% | | Net decrease in cash and cash equivalents and restricted cash | $(11,578)$ | $(12,818)$ | $1,240$ | (9.7)% | - Net cash used in operating activities decreased by $1.3 million (10%) for the six months ended June 30, 2025, compared to the prior year[20] - Net cash provided by investing activities shifted from a positive $328 thousand in 2024 to a negative $(177) thousand in 2025, a decrease of $505 thousand (154%)[20] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed notes explaining significant accounting policies, fair value measurements, revenue recognition, and other financial details for the periods ended June 30, 2025 and 2024 Note 1. Basis of Presentation and Summary of Significant Accounting Policies This note describes the company's accounting policies, business model transition, and liquidity assessment - Effective January 1, 2025, Playboy, Inc. transitioned to a capital-light model by licensing its Playboy Plus, Playboy TV, and Playboy Club digital businesses to Byborg Enterprises SA, resulting in two reportable segments: Direct-to-Consumer and Licensing[24][35][111] Financial Performance Improvement (Six Months Ended June 30, in thousands): | Metric | 2025 | 2024 | Change ($) | | :---------- | :----- | :----- | :--------- | | Net Revenues | $57,023 | $53,204 | $3,819 | | Operating Loss | $(12,143)$ | $(18,120)$ | $5,977$ | | Net Loss | $(16,720)$ | $(33,099)$ | $16,379$ | - As of June 30, 2025, unrestricted cash and cash equivalents were approximately $19.6 million, and management believes existing liquidity will be sufficient for at least one year[35][38] - Customer A accounted for 13% of total receivables as of June 30, 2025. Customer B accounted for 18% of total revenue for the three and six months ended June 30, 2025, due to a new licensing agreement[32][33] - Impairment charges of $1.5 million on right-of-use assets and a $0.4 million write-off of property, plant, and equipment were recorded for the three months ended June 30, 2025, due to the decision to sublease corporate office space[42] Note 2. Fair Value Measurements This note details the company's fair value measurements for financial and non-financial assets and liabilities, including contingent consideration and digital assets - The contingent consideration liability, classified as Level 3, increased to $553 thousand as of June 30, 2025, from $513 thousand at December 31, 2024, primarily due to an increase in the company's common stock price[52][54] - Fair value of digital assets (Ethereum) is based on Level 1 inputs, with immaterial fair value and recognized losses as of June 30, 2025[55] - Artwork held for sale is measured using Level 2 inputs. Impairment charges related to artwork held for sale were $0.3 million for the six months ended June 30, 2025, compared to $2.4 million in the prior year[57] - Nonrecurring impairment charges of $1.5 million on right-of-use assets and a $0.4 million write-off of property, plant, and equipment were recorded for the three months ended June 30, 2025, due to corporate office space subleasing[59] Note 3. Revenue Recognition This note outlines the company's revenue recognition policies and disaggregates revenue by type and contract balances Contract Balances (in thousands): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accounts receivable | $2,707 | $7,271 | | Contract assets (liabilities), net | $2,456 | $(6,076)$ | - Unrecognized revenue from unsatisfied performance obligations totaled $360.8 million as of June 30, 2025, with $357.0 million related to trademark licensing (including LMA minimum guaranteed royalties) and $3.3 million from legacy digital subscriptions[64] Revenue Disaggregation (Six Months Ended June 30, in thousands): | Revenue Type | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Consumer products | $32,824 | $33,244 | $(420)$ | (1.3)% | | Trademark licensing | $22,317 | $9,482 | $12,835$ | 135.4% | | Digital subscriptions & products | $1,434 | $7,158 | $(5,724)$ | (80)% | | TV and cable programming | — | $3,320 | $(3,320)$ | (100)% | | Events and sponsorships | $448 | — | $448$ | 100% | | Total revenues | $57,023 | $53,204 | $3,819$ | 7.2% | Note 4. Inventories, Net This note provides details on the composition of inventories and related reserves for slow-moving or obsolete items Inventories, Net (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Merchandise finished goods | $7,222 | $8,863 | $(1,641)$ | (18.5)% | | Total | $7,222 | $8,922 | $(1,700)$ | (19.1)% | - Reserves for slow-moving and obsolete inventory decreased from $4.2 million at December 31, 2024, to $3.7 million at June 30, 2025[67] Note 5. Prepaid Expenses and Other Current Assets This note details the components of prepaid expenses and other current assets, including contract assets and prepaid costs Prepaid Expenses and Other Current Assets (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Contract assets, current portion | $1,936 | $1,531 | $405 | 26.4% | | Prepaid inventory and production costs | $981 | $600 | $381 | 63.5% | | Prepaid insurance | $251 | $772 | $(521)$ | (67.5)% | | Total | $5,929 | $5,472 | $457$ | 8.3% | Note 6. Property and Equipment, Net This note presents the breakdown of property and equipment, net of accumulated depreciation, and related impairment charges Property and Equipment, Net (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total property and equipment, gross | $21,409 | $23,051 | $(1,642)$ | (7.1)% | | Less: accumulated depreciation | $(17,181)$ | $(18,180)$ | $999$ | (5.5)% | | Total | $4,228 | $4,871 | $(643)$ | (13.2)% | - Furniture and fixtures decreased significantly by $1.8 million (98.9%) due to a $0.4 million write-off resulting from the decision to sublease corporate office space[69] - Aggregate depreciation expense related to property and equipment, net, was $0.9 million for the six months ended June 30, 2025, down from $3.6 million in the prior year[69] Note 7. Other Current Liabilities and Accrued Expenses This note details the components of other current liabilities and accrued expenses, including agency fees and payables to related parties Other Current Liabilities and Accrued Expenses (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Accrued agency fees and commissions | $2,995 | $686 | $2,309$ | 336.6% | | Payable to Byborg, net | $2,629 | $— | $2,629$ | N/A | | Accrued interest | $814 | $4,016 | $(3,202)$ | (79.7)% | | Total | $31,840 | $28,474 | $3,366$ | 11.8% | - A net payable of $2.6 million to Byborg was recorded as of June 30, 2025, representing cash collected by the company for licensed digital businesses during the transition period, with the majority to be remitted in Q3 2025[73] - The company incurred and paid $5.0 million of operating expenses related to the licensed digital businesses, with $1.8 million in excess of this threshold recorded as a reduction to the Payable to Byborg[73] Note 8. Debt This note provides information on the company's debt obligations, including term loans, amendments, and interest rates Debt Summary (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Term loan, due 2027 | $144,242 | $144,242 | $0$ | 0% | | Total debt, net of current portion | $176,313 | $176,194 | $119$ | 0.1% | - The A&R Third Amendment (November 2024) reduced outstanding term loans from $218.4 million to $153.1 million in exchange for $28.0 million of Series B Convertible Preferred Stock, and reset the interest rate margin[76] - The A&R Fourth Amendment (March 2025) set total net leverage ratio levels, with testing resuming in Q2 2026 (initially 9.00:1.00, reducing to 7.75:1.00 by Q2 2027)[78] - The stated interest rate for Tranche A and Tranche B A&R Term Loans was 10.69% as of June 30, 2025[79] Note 9. Stockholders' Equity This note details changes in stockholders' equity, including common stock authorization and shares reserved for future issuance - Stockholders approved an increase in authorized common stock from 150,000,000 to 400,000,000 shares on June 16, 2025[82] Common Stock Reserved for Future Issuance (in shares): | Category | June 30, 2025 | December 31, 2024 | Change | Change (%) | | :---------------------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Shares available for grant under equity incentive plans | 1,132,305 | 1,194,947 | (62,642) | (5.2)% | | Unvested restricted stock units | 4,167,904 | 3,660,581 | 507,323 | 13.9% | | Vested equity awards not yet settled | 2,445,082 | 72,000 | 2,373,082 | 3296% | | Unvested performance-based restricted stock units | — | 243,424 | (243,424) | (100)% | | Total common stock reserved for future issuance | 9,991,873 | 7,417,534 | 2,574,339 | 34.7% | Note 10. Convertible Preferred Stock This note describes the conversion of Series B Convertible Preferred Stock and its impact on mezzanine equity - On January 29, 2025, 7,000 shares of Series B Convertible Preferred Stock were converted into 3,784,688 shares of common stock at a conversion price of $1.84956 per share[85] - The conversion reduced outstanding Series B Convertible Preferred Stock to 21,000.00001 shares and resulted in a $7.0 million reduction in its carrying amount[85][86] - Accretion to the Series B Convertible Preferred Stock's redemption value was $2.3 million for the six months ended June 30, 2025, resulting in a $19.1 million mezzanine equity balance[86] Note 11. Stock-Based Compensation This note outlines the company's stock-based compensation expense and unrecognized compensation costs for equity awards Stock-Based Compensation Expense (in thousands): | Category | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Cost of sales | $— | $633 | | Selling and administrative expenses | $2,353 | $3,206 | | Total | $2,353 | $3,839 | - Total unrecognized compensation cost related to unvested RSUs was $4.3 million as of June 30, 2025, expected to be recognized over a weighted-average service period of 0.89 years[91] - All previously unvested and outstanding stock options and performance-based restricted stock units (PSUs) were fully vested as of June 30, 2025[91] Note 12. Commitments and Contingencies This note details the company's operating lease liabilities, legal proceedings, and other contingent obligations Maturities of Operating Lease Liabilities (June 30, 2025, in thousands): | Year | Amount | | :---------------- | :----- | | Remainder of 2025 | $4,228 | | 2026 | $7,888 | | 2027 | $5,416 | | Total operating lease liabilities | $23,264 | - The weighted-average remaining term of operating leases was 4.2 years as of June 30, 2025[94] - Ongoing legal proceedings include a suit against AVS Products, LLC for alleged wrongful termination of a license agreement (trial set for September 29, 2025) and arbitration against New Handong Investment (Guangdong) Co., Ltd. for material breaches of a China license agreement[97][99][100] - A complaint filed by a former Playboy model was dismissed with prejudice as to the company and its affiliates on April 1, 2025[101] Note 13. Severance Costs This note provides a breakdown of severance costs incurred due to headcount reductions and business model transitions Severance Costs (in thousands): | Category | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Corporate | $1,353 | $41 | | All other | $1,188 | $101 | | Total | $2,593 | $169 | - Severance costs for the six months ended June 30, 2025, totaled $2.59 million, primarily due to headcount reductions related to the transition of digital operations into a licensing model and corporate brand marketing activities[102][103] - The balance of employee separation costs recorded in accrued salaries, wages, and employee benefits was $1.6 million as of June 30, 2025[103] Note 14. Income Taxes This note discusses the company's effective tax rate and the potential impact of recent tax legislation Effective Tax Rate: | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | (13.1)% | (3.8)% | | Six Months Ended June 30 | (13.5)% | (5.3)% | - The effective tax rate for the six months ended June 30, 2025, was (13.5)%, differing from the U.S. statutory federal rate primarily due to foreign withholding taxes and the release of valuation allowance[104] - The company is evaluating the impact of the 'One Big Beautiful Bill Act of 2025,' enacted July 4, 2025, which includes retroactive changes to accelerated depreciation, R&D expensing, and business interest limitation[105] Note 15. Net Loss Per Share This note details the calculation of net loss per share and the exclusion of anti-dilutive shares Potentially Dilutive Shares Excluded (in shares): | Category | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | | Options issued and outstanding under equity incentive plans | 1,997,466 | 1,997,466 | | Unvested restricted stock units | 4,167,904 | 1,604,235 | | Unvested performance-based restricted stock units | — | 389,827 | | Total | 6,165,370 | 3,991,528 | - A total of 6.17 million potentially dilutive shares were excluded from diluted net loss per share calculations for the six months ended June 30, 2025, due to their anti-dilutive effect[106] Note 16. Related Party Transactions This note describes significant transactions with related parties, including the License & Management Agreement with Byborg Enterprises SA - Byborg Enterprises SA became a significant stockholder in November 2024 and entered into a 15-year License & Management Agreement (LMA) with the company, effective January 1, 2025, for digital operations[107][109] - The LMA guarantees $20 million in annual royalties, with $10.0 million recognized as licensing revenue for the six months ended June 30, 2025[109] - The company incurred $6.8 million in operating expenses for licensed digital businesses during the transition period, with $5.0 million recorded in operations and $1.8 million reducing the payable to Byborg[110] - Stockholders rejected the sale of 16,956,842 common shares to The Million S.a.r.l (a Byborg subsidiary) at $1.50 per share on June 16, 2025[108] Note 17. Segments This note presents financial information by the company's restructured operating segments: Direct-to-Consumer and Licensing - Effective January 1, 2025, the company restructured its segments to Direct-to-Consumer (Honey Birdette) and Licensing (trademark licenses, including digital operations licensed to Byborg), eliminating the Digital Subscriptions and Content segment[111] Segment Net Revenues (Six Months Ended June 30, in thousands): | Segment | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | Direct-to-Consumer | $32,824 | $33,244 | $(420)$ | (1.3)% | | Licensing | $22,317 | $9,482 | $12,835$ | 135.4% | | Corporate | $448 | $— | $448$ | 100% | | All Other | $1,434 | $10,478 | $(9,044)$ | (86.3)% | | Total | $57,023 | $53,204 | $3,819$ | 7.2% | Segment Operating (Loss) Income (Six Months Ended June 30, in thousands): | Segment | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :------- | :------- | :--------- | :--------- | | Direct-to-Consumer | $(1,280)$ | $(3,310)$ | $2,030$ | (61.3)% | | Licensing | $14,443$ | $6,465 | $7,978$ | 123.4% | | Corporate | $(20,220)$ | $(18,848)$ | $(1,372)$ | 7.3% | | All Other | $(5,086)$ | $(2,427)$ | $(2,659)$ | 109.6% | | Total | $(12,143)$ | $(18,120)$ | $5,977$ | (33)% | Geographic Revenue (Six Months Ended June 30, in thousands): | Region | 2025 | 2024 | Change ($) | Change (%) | | :------------ | :----- | :----- | :--------- | :--------- | | United States | $18,820 | $25,630 | $(6,810)$ | (26.6)% | | Luxembourg | $10,000 | $— | $10,000$ | N/A | | China | $6,376 | $4,470 | $1,906$ | 42.6% | | Total | $57,023 | $53,204 | $3,819$ | 7.2% | Note 18. Subsequent Events This note discloses significant events occurring after the reporting period, including a new lease agreement and debt amendment - On August 11, 2025, Playboy Enterprises, Inc. (PEI) entered into an 11-year triple net lease for approximately 20,169 square feet of office space in Miami Beach, Florida, with base rent starting at $176,478.75 per month[124][263][264] - Concurrently, Amendment No. 5 to the A&R Credit Agreement was executed, revising the definition of Consolidated EBITDA to allow for a $2.4 million non-cash rent expense related to the new lease to be added back in calculations[127][268] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting the shift to a capital-light business model, key factors affecting performance, and a detailed comparison of financial outcomes for the three and six months ended June 30, 2025 and 2024 It also discusses liquidity, capital resources, critical accounting estimates, and non-GAAP financial measures Cautionary Note Regarding Forward-Looking Statements This section provides a cautionary note on forward-looking statements, highlighting inherent risks and uncertainties that may affect actual results - The report contains forward-looking statements based on management's expectations, which are subject to significant risks and uncertainties that could cause actual results to differ materially[129][130] - Key risk factors include maintaining Nasdaq listing, disruptions from transactions, ability to realize anticipated benefits, costs related to public company status, changes in laws/regulations, macroeconomic factors (inflation, interest rates), and financing market changes[130] - The company does not undertake any obligation to update or revise forward-looking statements unless required by applicable securities laws[131] Business Overview This section provides an overview of the company's global consumer lifestyle business, its capital-light model, and restructured operating segments - Playboy, Inc. is a global consumer lifestyle company marketing brands through licensing, direct-to-consumer products, Playboy magazine, digital subscriptions, and entertainment[132] - As of January 1, 2025, the company licensed its Playboy Plus, Playboy TV, and Playboy Club digital operations to Byborg Enterprises SA, transitioning to a capital-light model[132] - The company now operates with two reportable segments: Direct-to-Consumer (Honey Birdette products) and Licensing (trademark licenses and digital operations licensing)[132] Key Factors and Trends Affecting Our Business This section discusses strategic shifts, including the capital-light model, the LMA with Byborg, Honey Birdette's market focus, and the impact of China licensing and trade policies - The company is pursuing a capital-light business model focused on high-margin, lower working capital, and high-growth revenue streams by leveraging the Playboy brand[134] - The LMA with Byborg involves licensing intellectual property and select digital assets for $300 million in minimum guaranteed payments over an initial 15-year term, effective January 1, 2025[134] - Honey Birdette's strategy focuses on the U.S. market due to higher revenue, better margins, and less price-sensitive customers[134] - China licensing revenues represented 11% of total revenues for the six months ended June 30, 2025, up from 8% in the prior year, with expectations for slight increases in 2025[136] - The company monitors ongoing changes in U.S. trade policies, including tariffs, which could impact production costs for Honey Birdette products sourced from China[135] Components of Results of Operations This section explains the key components of the company's financial results, including revenue, cost of sales, selling and administrative expenses, impairments, and nonoperating items - Revenue is generated from direct-to-consumer sales (Honey Birdette), trademark licensing, and, starting January 1, 2025, licensing digital subscriptions and content businesses to Byborg[139][140][142] - Cost of sales primarily includes merchandise, warehousing, fulfillment, agency fees, website expenses, and transition expenses related to the TSA (commencing January 1, 2025)[145] - Selling and administrative expenses cover corporate/retail occupancy, personnel, brand marketing, professional services, and transition expenses related to the TSA (commencing January 1, 2025)[146] - Impairments consist of charges on artwork held for sale and right-of-use assets related to corporate leases[147] - Nonoperating (expense) income includes interest expense (long-term debt, amortization of financing costs) and other income/expense (foreign exchange gains/losses, nonrecurring transaction fees)[149][150] Results of Operations This section provides a detailed analysis of the company's financial performance for the three and six months ended June 30, 2025 and 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the three months ended June 30, 2025 and 2024, across key metrics and segments Financial Performance (Three Months Ended June 30, in thousands): | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :----- | :----- | :------- | :------- | | Net revenues | $28,148 | $24,885 | $3,263$ | 13% | | Operating loss | $(5,883)$ | $(9,203)$ | $3,320$ | (36)% | | Net loss | $(7,679)$ | $(16,652)$ | $8,973$ | (54)% | | Interest expense, net | $(1,907)$ | $(6,588)$ | $4,681$ | (71)% | Net Revenues by Segment (Three Months Ended June 30, in thousands): | Segment | 2025 | 2024 | $ Change | % Change | | :---------------- | :----- | :----- | :------- | :------- | | Direct-to-consumer | $16,493 | $14,504 | $1,989$ | 14% | | Licensing | $10,932 | $5,335 | $5,597$ | 105% | | All Other | $588 | $5,046 | $(4,458)$ | (88)% | - Direct-to-consumer net revenues increased by 14% due to improved consumer perception and increased sales of Honey Birdette products[154] - Licensing net revenues increased by 105%, primarily driven by $5.0 million in minimum guaranteed royalties from the LMA and higher revenues from new and renegotiated licensing partners[155] - Selling and administrative expenses decreased by 12% due to reductions in technology, depreciation, professional services, and payroll, partly offset by increased legal and severance expenses[163] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the six months ended June 30, 2025 and 2024, across key metrics and segments Financial Performance (Six Months Ended June 30, in thousands): | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :----- | :----- | :------- | :------- | | Net revenues | $57,023 | $53,204 | $3,819$ | 7% | | Operating loss | $(12,143)$ | $(18,120)$ | $5,977$ | (33)% | | Net loss | $(16,720)$ | $(33,099)$ | $16,379$ | (49)% | | Interest expense, net | $(3,795)$ | $(13,015)$ | $9,220$ | (71)% | Net Revenues by Segment (Six Months Ended June 30, in thousands): | Segment | 2025 | 2024 | $ Change | % Change | | :---------------- | :----- | :----- | :------- | :------- | | Direct-to-consumer | $32,824 | $33,244 | $(420)$ | (1)% | | Licensing | $22,317 | $9,482 | $12,835$ | 135% | | All Other | $1,434 | $10,478 | $(9,044)$ | (86)% | - Licensing net revenues increased by 135%, primarily due to $10.0 million in minimum guaranteed royalties from the LMA and a $2.8 million increase from other licensing partners[173] - Impairments decreased by 39% to $(1,842) thousand, mainly due to a $2.1 million decrease in artwork held for sale impairments, partly offset by a $0.9 million increase in right-of-use asset impairments[183] Non-GAAP Financial Measures This section presents non-GAAP financial measures, EBITDA and Adjusted EBITDA, used to assess operational performance by excluding non-cash and non-recurring items - The company uses non-GAAP measures, EBITDA and Adjusted EBITDA, to evaluate operational performance by excluding non-cash and non-recurring items[188][189] Adjusted EBITDA (in thousands): | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(16,720)$ | $(33,099)$ | | EBITDA | $(9,359)$ | $(14,104)$ | | Adjusted EBITDA | $5,848$ | $(5,485)$ | - Key adjustments include a $2.4 million licensing commissions settlement, $5.0 million in transition expenses for the six months ended June 30, 2025, severance, stock-based compensation, and impairments[192][193] Non-GAAP Segment Information This section provides non-GAAP segment information, including adjusted operating income, for the three and six months ended June 30, 2025 and 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares non-GAAP adjusted operating income by segment for the three months ended June 30, 2025 and 2024 Adjusted Operating (Loss) Income (Three Months Ended June 30, 2025, in thousands): | Segment | Operating (loss) income | Adjusted operating (loss) income | | :---------------- | :---------------------- | :------------------------------- | | Direct-to-Consumer | $(750)$ | $(141)$ | | Licensing | $5,552 | $7,952 | | Corporate | $(9,925)$ | $(5,930)$ | | All Other | $(760)$ | $590 | | Total | $(5,883)$ | $2,471 | - Licensing adjusted operating income increased due to a $2.4 million one-time settlement for licensing commissions[205] - All Other adjusted operating income improved due to the transition of digital operations to a licensing model and the inclusion of transition expenses[209] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares non-GAAP adjusted operating income by segment for the six months ended June 30, 2025 and 2024 Adjusted Operating (Loss) Income (Six Months Ended June 30, 2025, in thousands): | Segment | Operating (loss) income | Adjusted operating (loss) income | | :---------------- | :---------------------- | :------------------------------- | | Direct-to-Consumer | $(1,280)$ | $(63)$ | | Licensing | $14,443 | $16,843 | | Corporate | $(20,220)$ | $(13,236)$ | | All Other | $(5,086)$ | $1,102 | | Total | $(12,143)$ | $4,646 | - Licensing adjusted operating income increased due to a $2.4 million one-time settlement for licensing commissions[216] - Corporate adjusted expenses increased primarily due to expenses associated with Playboy magazine, events, and sponsorships in 2025 that did not occur in the prior year[218] - All Other adjusted operating income decreased due to the transition of digital operations into a licensing model and the inclusion of $5.0 million in transition expenses[220] Liquidity and Capital Resources This section discusses the company's sources of liquidity, debt management, and assessment of capital sufficiency for future operations - Primary liquidity sources include cash from operating activities, financing activities (debt, stock offerings), and investing activities (asset sales). Unrestricted cash was $19.6 million as of June 30, 2025[221] - The LMA with Byborg provides guaranteed royalties of $20.0 million per year, significantly contributing to liquidity[223] - Debt amendments (A&R Second, Third, and Fourth Amendments) suspended leverage ratio testing until Q2 2026, reduced outstanding term loans, and reset interest rates, improving debt management[227][229][231] - Management believes existing liquidity is sufficient for at least one year, despite ongoing operating losses of $12.1 million for the six months ended June 30, 2025[225][226] Cash Flows (Six Months Ended June 30, in thousands): | Activity | 2025 | 2024 | $ Change | % Change | | :---------------- | :--------- | :--------- | :--------- | :--------- | | Operating activities | $(11,507)$ | $(12,780)$ | $1,273$ | (10)% | | Investing activities | $(177)$ | $328$ | $(505)$ | (154)% | | Financing activities | $(114)$ | $(215)$ | $101$ | (47)% | Critical Accounting Estimates This section highlights the company's reliance on significant accounting estimates and assumptions that are subject to inherent uncertainties - The company's financial statements rely on estimates and assumptions that are inherently uncertain and subject to external factors such as market demand, inflation, and economic conditions[240] - No material changes to critical accounting policies or estimation methodologies occurred during the six months ended June 30, 2025[241] Recent Accounting Pronouncements This section refers to Note 1 for details on recent accounting pronouncements and their impact on the financial statements - Refer to Note 1, 'Basis of Presentation and Summary of Significant Accounting Policies,' for information on recent accounting pronouncements, their adoption timing, and potential impact[242] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to various market risks, including interest rate risk from its variable-rate debt, foreign currency risk due to international operations, and inflation risk, and discusses the potential impact of these factors on its financial performance Interest Rate Risk This section details the company's exposure to interest rate fluctuations on its variable-rate debt and the potential impact on interest expense - The company's long-term A&R Term Loans are subject to variable interest rates, exposing it to interest rate risk[245] - As of June 30, 2025, outstanding debt obligations were $158.5 million, accruing interest at 10.69%[246] - A 0.5% or 1% increase/decrease in underlying interest rates would change annual interest expense by $0.8 million or $1.6 million, respectively[246] - The company does not have an active interest rate swap program as of June 30, 2025[245] Foreign Currency Risk This section discusses the company's exposure to foreign currency exchange rate fluctuations from international operations and transactions - The company transacts business in various foreign currencies, primarily Australian dollars and Chinese renminbi, exposing it to foreign currency exchange rate fluctuations[247] - Approximately 67% of revenue for the six months ended June 30, 2025, was derived from international customers, with 44% denominated in foreign currency[247] - A 10% movement of currency exchange rates would have a material impact on financial results, assuming no foreign currency hedging[248] - An unrealized gain of $0.3 million from foreign currency transactions was recorded for the six months ended June 30, 2025, primarily due to the U.S. dollar's change against the Australian dollar[248] Inflation Risk This section addresses the potential impact of inflation on the company's revenue, gross margin, operating expenses, and customer purchasing power - While inflation has not materially impacted the company's financial position or results of operations in recent periods, a high rate of inflation in the future could adversely affect revenue, gross margin, and selling and administrative expenses[249] - High inflation could also negatively impact the ability of customers to make discretionary purchases of the company's goods and services[249] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses in internal control over financial reporting Despite these weaknesses, the condensed consolidated financial statements are deemed fairly presented The company is actively implementing remediation efforts to address these deficiencies Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of disclosure controls and procedures, noting material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[250] - Material weaknesses include deficiencies in the control environment, risk assessment, monitoring, general information technology controls, formal accounting policies/procedures, management review controls, and controls over inventory[251][252] - Despite the material weaknesses, management concluded that the condensed consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows[250] Remediation Efforts This section outlines the company's ongoing efforts to address identified material weaknesses in internal control over financial reporting - Remediation efforts include hiring additional qualified accounting resources, reassessing and formalizing IT and accounting policies, and engaging an outside firm to assist with control design and documentation[254][257] - The company is enhancing and formalizing accounting, business operations, and IT policies, establishing effective general controls, designing controls for data completeness/accuracy, and developing monitoring protocols[257] Changes in Internal Control over Financial Reporting This section reports on any material changes in internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, other than the ongoing remediation efforts to address identified material weaknesses[255] Limitations on Effectiveness of Controls and Procedures This section acknowledges the inherent limitations of any internal control system, including the possibility of human error or circumvention - The effectiveness of any internal control system is subject to inherent limitations, including judgment, human error, and the inability to eliminate misconduct completely[256] - Controls can only provide reasonable, not absolute, assurance, and their effectiveness may deteriorate due to changing conditions or non-compliance[256] Part II - Other Information This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, exhibits, and signatures Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business and makes provisions for estimated losses A summary of material legal proceedings is provided in Note 12 of the financial statements - The company is party to pending litigation and claims arising in the ordinary course of business[258] - Provisions are made for estimated losses, including legal costs, when probable and reasonably estimable[258] - Material legal proceedings are summarized in Note 12, 'Commitments and Contingencies—Legal Contingencies.'[258] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since their disclosure in the most recent Annual Report on Form 10-K, other than those disclosed in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 - No material changes to risk factors have occurred since the most recent Annual Report on Form 10-K, except as disclosed in the Q1 2025 10-Q[259] - Readers should carefully consider the risk factors described in 'Part I – Item 1A. Risk Factors' in the most recent Annual Report on Form 10-K[259] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the six months ended June 30, 2025, the company did not repurchase any shares of its common stock under the authorized 2022 Stock Repurchase Program - The company did not repurchase any shares of its common stock under the 2022 Stock Repurchase Program during the six months ended June 30, 2025[260] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the period[261] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[262] Item 5. Other Information This section details significant events not covered elsewhere, including a new 11-year triple net lease for office space in Miami Beach, Florida, and a related Fifth Amendment to the A&R Credit Agreement to adjust EBITDA calculations It also confirms no changes to 10b5-1 trading plans or director nomination procedures Entry Into Lease Agreement This section details the company's new 11-year triple net lease for office space in Miami Beach, Florida, including base rent and financial commitments - On August 11, 2025, Playboy Enterprises, Inc. (PEI) entered into an 11-year triple net lease for approximately 20,169 square feet of office space in Miami Beach, Florida[263] - The lease's base rent starts at $176,478.75 per month (beginning in the seventh month of the first year) and escalates 3% annually[264] - PEI is required to deliver an initial irrevocable letter of credit of $2,843,829 and will receive a tenant improvement allowance of up to $2,420,280[264] Fifth Amendment of A&R Credit Agreement This section describes Amendment No. 5 to the A&R Credit Agreement, which revises Consolidated EBITDA calculations to account for new lease expenses - On August 11, 2025, the company entered into Amendment No. 5 to the A&R Credit Agreement in connection with the new Miami Beach lease[268] - This amendment revises the definition of Consolidated EBITDA to allow for a $2.4 million non-cash rent expense related to the new lease to be added back when calculating Consolidated EBITDA[268] No 10b5-1 Trading Plans or Changes to Director Nomination Procedures This section confirms no changes to 10b5-1 trading plans or director nomination procedures during the quarter - No Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by officers or directors during the quarter ended June 30, 2025[269] - There were no material changes to the procedures by which security holders may recommend nominees to the company's board of directors[269] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, various agreements, certifications, and XBRL financial information, providing comprehensive supporting documentation for the report - Exhibits include corporate organizational documents (e.g., Certificate of Incorporation, Bylaws), various agreements (e.g., Retention Agreement, Lease Agreement, A&R Credit Agreement Amendment No. 5), and certifications (e.g., Principal Executive Officer, Principal Financial Officer)[274] - The filing also includes financial information formatted in iXBRL (Inline eXtensible Business Reporting Language)[274] Signatures The Quarterly Report on Form 10-Q was duly signed on August 12, 2025, by Ben Kohn, Chief Executive Officer and President, and Marc Crossman, Chief Financial Officer and Chief Operating Officer, on behalf of Playboy, Inc - The report was signed by Ben Kohn, Chief Executive Officer and President, and Marc Crossman, Chief Financial Officer and Chief Operating Officer[278] - The signing date for the report was August 12, 2025[278]