Earnings Call: Q1 2021

May 12, 2021

Thank you for standing by, and welcome to the First Quarter 2021 Conference Call and Webcast for PLBY Group, Inc. The information discussed today is qualified in its entirety by the Form 8 ks that has been filed today by PLBY Group Inc. And may be accessed on the SEC's website. Please note that the press release issued this afternoon and the related Form 8 ks can be found on PLBY Group's website at http:www.plbygrout dotcom/investors. Today's call is also being webcast and a transcript will be posted to our website. Please also note that statements we make during this call that are not statements of historical facts, including financial estimates or statements about our plans, expectations, beliefs or business prospects and other statements that are not historical in nature may constitute forward looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ from historical results and or from our forecast, including those set forth in PLBY Group's Annual Report on Form 10 ks Quarterly Reports, on Form 10 Q and in our other filings with the Securities and Exchange Commission. For more information, please refer to the risks and uncertainties and other factors discussed in PLBY Group's SEC filings. All cautionary statements that we make during this call are applicable to any forward looking statements we make wherever they appear. You should carefully consider the risks, uncertainties and other factors discussed in PLBY Group's SEC filings. Do not place undue reliance on forward looking statements, which we assume no responsibility for updating. Hosting today's call are Ben Cohen, Chief Executive Officer Rachel Weber, Chief Brand Officer and President of Corporate Strategy and Lance Barton, Chief Financial Officer. I will now I'll turn the call to Ben Cohen. Ben, please go ahead. Thank you, operator. Good afternoon, everyone, and welcome to our conference call to We are pleased to report a fantastic quarter and excited to share with you today the progress we've made executing against our growth plan. We remain focused on building our business for the long term superior growth, making decisions that will not sacrifice long term growth for short term quick wins. Our U. S. E Commerce business is off to a tremendous start in 2021. And our team has moved quickly to advance new business development opportunities, including our extremely successful first NFT Art Drop that took place just last week, generating almost $1,000,000 in sales in 24 hours. While we are still in the early innings of our roadmap and business transformation, I am very proud of the hard work and progress made by the team globally as we build on the power of our flagship brand and massive reach to deliver the pleasure lifestyle consumers around the world. On our last earnings call, we discussed our 3 part growth strategy. 1st, Expanding our U. S. Direct to consumer business, our goal is to capture our $100 on the dollar spent by consumers on our apparel, sexual wellness and other lifestyle products versus $0.05 to $0.06 captured through previous licensing partnerships second, optimizing our international business through global licensing in key regions and categories and 3rd, pursuing new and emerging business opportunities that we believe will accelerate our long term growth trajectory and generate significant returns over a 3 to 5 year time horizon. Across all three areas, we marked strong progress in Q1, Driven by the significant momentum of the PLAYBOY brand with a new generation of consumers. In direct to consumer, we triple digit year over year growth of 114% in Q1. On the Playboy website, updates to navigation and homepage design to focus on shopping combined with increasing depth and selection in the product offerings late in Q1 saw an increase in conversion rate by 60% month over month from February to March. We are continuing to see an increase in conversion rate as we enter into Q2 and we continue to improve the customer experience. In addition, it's worth noting this growth was achieved despite supply chain and out of stock constraints we continue to face as a result of COVID And we believe D2C would have produced even more growth in the Q1 were it not for the continued global pandemic impacts. One of our major priorities is launching our owned and operated product collections and we've been very encouraged by the success of our recent in house design apparel lines, Including our monthly cover collection drops, our Valentine's Day line, our spring on Naturale collection as well as our cross divisional collections such as our PLAYBOY and Yandy Spring and swim blinds. We are also now capturing consumer spend collaborations on our owned and operated sites, which in Q1 featured high profile partnerships such as Hadden Labs Jewelry, Olympia Latan Accessories and of course high performing collections from our partners at PacSun and Missguided. I often get the question, who is the Playboy consumer today? And I think that's answered perfectly by who is spending money with us directly on our site. Nearly 80% of our consumers are under the age of 44, roughly 65% are under 34 And 55% of our e commerce revenue in the Q1 came from female consumers. My daughters show me Tik I'm incredibly proud of the brand work we have done over the past few years to achieve our goal of strongly resonating with a culture driven contemporary We also have great work happening behind the scenes on our D2C operations and infrastructure. Our PLBY Group data science team rolled out a new recommendation engine that we are first testing on our Yandi platform and based on very positive results, particularly in AOB growth, We will be implementing these capabilities across our network of sites in Q2. We also unified the back offices of Yandy, lovers and Playboy Digital Operations and centralized buying under one umbrella for sexual wellness. Critical first steps for integrating operations and realizing the synergies of our portfolio brands and marketplaces. And lastly, on our direct to consumer business, I want to call out strong performance at our leveraged brick and mortar locations. As restrictions are easing and perhaps with an increase in dating, average transaction sizes were up big in March, which was the 1st official month of PLBY Group ownership. Onto our licensing operations. In the Q1, we closed several new non exclusive licensing deals to augment our lifestyle offerings, including hair and grooming tools for men and women, costumes as well as additional home and fashion accessories partners, which will launch later this year. In China, Our digital commerce business continues to grow as we sold more than 36,000,000 apparel pieces online in Q1 2021, A strong year over year comp against COVID impacted 2020 sales. At our March Playboy Activewear Buyers Meeting in China, our new Playboy physical apparel and footwear collection was well received, a testament to the great work of our on the ground product design team that created designs inspired by the global Playboy style guides as we continue to progress towards a cross border style unification of the brand. Our new Playboy Kids apparel line in China is off to a good chart as well. The collection is being merchandised in store and online with the likes of Pink Panther Apparel and DC Comics Apparel and our partners have plans to open the 1st Playboy Kids apparel brick and mortar store in Shanghai later this year. And lastly, in Q1, this year we ramped up a new Playboy social media strategy in China in partnership with a leading marketing and social media agency in the region. The effort includes content marketing on the brand's official social media channels on Weeboo, WeChat and Douyin as well as product marketing content partnerships with more than 20 Meet Social Media Influencers or KOLs as they are known in the region. This is an important step in our long range China strategy to build direct consumer relationships and rollout owned and operated products. This brings us to the development and launch of new and emerging businesses that we can invest in today to accelerate and expand our revenue growth over the long term. We recently completed a renegotiation with our fragrance licensing partner to take back all of our beauty, grooming, skincare and bath rights. This now allows us to exploit these product categories as an owned and operated business versus a licensing business as was contemplated in our 5 year business plan. We believe the revenue growth opportunity for us will be multiples of what we had previously targeted in our 5 year plan. We have already begun the incubation and creative development of our cosmetics line and now we are well positioned to expand those collections with more skincare, bath in grooming SKUs. We are looking at 2022 launches of those product offerings, but we're investing now to bring collection, leveraging the iconic Big Bunny Playboy plane and simultaneously developing a unique go to market content, experiential and influencer strategy that we believe only the Playboy brand can drive. And of course, as I mentioned at the start, We're thrilled by our successful entry into the NFT art community. Our first drop, a collaboration with the artist Slime Sunday to create 6 original works, created huge buzz, sold out in less than 3 minutes and generated almost $1,000,000 in sales, including a single piece auction in 24 hours for $250,000 What's so encouraging is that these 6 original new pieces speak to the infinite possibilities of what can be created from our priceless archive. And all of this require taking no inventory and no capital risk. It's also very exciting to see strong secondary market sales of the collection, speaking to the power of the brand and the wealth of IP And also demonstrating the long term potential to participate in the downstream economics as we roll out more and more blockchain powered products. Of course, the biggest question we're hearing is what's next in NFTs. So I want to share how we're thinking about what NFT means for PLAYBOY and the PLBY Group. NFTs themselves are not a strategy. The strategy we're developing is how do we leverage new technology, including blockchain technology, immersive virtual worlds, digital GIRDS and ARBR processing capabilities to create the most Innovative, desirable consumer experience that people around the world want to engage with, want to spend money on and want to keep spending money on. We expect this will manifest in more NFT art drops absolutely. Perhaps more importantly, this could manifest in collectible offerings With gaming mechanics, virtual worlds, imagine the potential for a virtual playboy mansion or a virtual Midsummer Night's Dream Party, The intersection of our physical goods with digital goods, loyalty programs built on blockchain technology and so much more. From a timing perspective, we are not even in the first inning of this space. The way we think about it internally is that we are still in the dial up era of this Internet and technology explosion and our opportunity right now is to capture early mover advantage. We know we have the right brand, from which we can create never ending new creations and experiences. And we have an internal culture that allows us to move quickly. I've never been more excited about the future for our company and our ability to expand the lifestyle of pleasure and leisure across physical and digital worlds. And lastly, in the area of new business development, M and A. As we have demonstrated, our team is uniquely positioned to source and execute accretive deals and move swiftly to integrate operations. Over the past few months, our M and A pipeline has only increased and to the extent we can use M and A to accelerate our growth through attractive economics, we expect to close additional deals this year. With that, I'm going to hand it over To our Chief Brand Officer and President of Corporate Strategy, Rachel Weber, to speak further on our brand and our new business development initiatives. Thanks, Ben. It's been such an exciting start to the year and we're thrilled by the opportunities ahead. To follow on from Ben's discussion of NFTs, I wanted to share a bit more on our 1st drop launch strategy and what we have coming up. As we mentioned in our previous call, Playboy's incredible legacy serving as a platform for ARTIS positions us perfectly to continue that work today. To that end, we believe the best way to introduce ourselves and the PLAYBOY brand to the NFT community was by tapping into that heritage and creating a collaboration with a digital artist who has already been doing inspiring and successful work in the NFT art space, Badu has also worked with us before in the magazine and shares our sensibility for pushing the boundaries of artistic expression, which is how we chose the Collage Artist Line Sunday. And Nifty Gateway is, of course, a premier platform for NFT artists today and provided a great way for us to get to know the amazing community of NFT artists and collectors. We were also very excited to partner with Decentraland to create Playboy's 1st metaverse experience, a virtual gallery launch party for our Liquid Summer collection that featured a DJ set by Justin Blau, another huge innovator in the space. We're thrilled by the results of our first drop of 6 new original works and feel incredibly welcomed by the NFT art community. We've already announced that NextUp will be partnering in Nifty Gateway's series of Pride themed drops in June. And also in June, we're excited to share today that we'll be showing up at the Bitcoin conference in Miami with a small collection of NFT art for sale there as well. From there, as Ben mentioned, we are focused on building 1st mover advantage. And to that end, we are working on building our collectible strategy, a space we believe we are uniquely positioned for with our vast archive and network of talent relationships, drops of virtual merchandise, immersive playboy experiences and more. We plan on more art drops leveraging our immense across partner platforms, but also just as we're building direct connections with our fans through our owned and operated apparel lines on our own e commerce sites, We expect to see the integration of NFT sales capabilities into PLAYBOY Branded environment. This is a fast moving space and we We expect to have activations both big and small throughout 2021 as we work to integrate blockchain powered and new digital experiences into everything we do. I also wanted to touch on our Big Bunny plan. The Playboy brand is bigger today than it ever has been before. But one of the areas that we don't today that we had in previous decades was the ability for celebrities and influencers to experience the brand in person on an ongoing and regular basis. So the Big Bunny plane will in essence become a small flying mansion, engaging an influential crowd on a flight and also taking them to those live experiences we host, such as our Q4 Art Basel Miami experience we're planning. We also believe that heading into the second half of twenty twenty one and for the next few years, consumers will be craving experiences more than ever. We expect that the big bunny will be an aspirational symbol for living life to its fullest and living a lifestyle full of experiences. As Ben mentioned, we're also deep in the development on an actual Big Bunny product line, which we intend to start to roll out in Q4 of this year. We are working with Louis Turline, the fashion and retail veteran who founded the fashion line and international retail chain Oak, which he and his partners sold to American Apparel. Our collection will contain a mix of fashion, travel accessories and other lifestyle products targeting the cool older sister or brother of our mainstream playboy consumer. In a sense, we envision the constant presence of the Big Bunny as an always on marketing campaign for that upscale product line as well as serving as the halo for everything we do across the PLAYWAY universe. And before I hand the call over, I want to share an update on our social impact work. We're proud that we continue to provide a platform for voices that are furthering conversations about freedom of speech, social justice and racial, gender and sexuality This February, we published the Playboy Symposium on Race, featuring an array of social justice and cultural thought leaders, as well as a special edition of the Playboy interview with Jemele Hill. This June, our Pride selection will feature designs by artists representing the LGBTQ plus and ally community with proceeds from that collection supporting on the ground organization. Our social impact work is core to PLAYWISE DNA and we will continue to invest in connecting with audiences on these crucial causes. With that, I'll hand the call over to my colleague, Lance Barton, our Chief Financial Officer. Thanks so much, Rachel. As you've heard, the business is off to a great start this year as we continue to drive strong top line growth through our increased direct to consumer revenue. Total revenue in the Q1 increased 34% year over year to $42,700,000 Our direct to consumer segment continued to stand out as High growth business reflecting both the strength of our offerings in sexual wellness and style and apparel. Direct to consumer revenue grew The growth was driven by improvements at both our Yandie and Playboy e commerce websites along with 1 month of revenue contribution from the acquisition of Lubbers starting in March. In fact, the improvements that have been made since our new Chief Digital Officer joined us in February any month during the Q4 holiday shopping season and was 80% higher than our average revenue in January February. Despite all of this strength, we believe that direct to consumer revenue would have been even higher in the Q1 were it not for the continued supply chain disruptions that we've talked On average, roughly 15% of Vandy's top selling products were out of stock during Q1 due to congestion at the ports that have limited our suppliers' ability to adhere to our restocking schedules. These disruptions have persisted into the 2nd quarter, But as the ports continue to clear up, we see this issue being remedied and we expect our out of stock to return to more normal levels most likely by On the licensing side, we continue to see tremendous demand for Playboy branded streetwear. It's also worth noting that a year ago, we terminated a licensing agreement, which resulted in the accelerated recognition $1 year over year decline in revenue on an as reported basis in Q1 of this year. If you exclude that impact, Licensing revenue would have grown 8% year over year and total company revenue would have grown by 42% instead of the 34 that we reported. We're also pleased to say that gross margin improved in the Q1 by 3 44 basis points. The main drivers of that were the following: the success of our recent in house designed apparel lines that Ben had alluded to and overall increased sales of lingerie, which provides better gross margin for us and then also an improvement in shipping costs as a percent of revenue. And while we experienced a net loss in the Q1 of $5,000,000 largely due to $3,500,000 of stock based and $6,300,000 of non recurring items related to the SPAC merger and costs related to setting up PLBY Group as a public company, We reported adjusted EBITDA of $6,700,000 It's important to call out that our adjusted EBITDA was burdened by 1,500,000 M and A related costs, severance costs and the cost of COVID testing at our fulfillment center. While these costs are related to one time events And what has historically been added back to EBITDA, we believe there are an ongoing cost of executing on our business strategy and we have not adjusted for these items in and don't intend to adjust for items like this going forward. Additionally, our expense base grew on a year over year basis just due to the cost of being a newly public company items such as D and O insurance. Turning now to the balance sheet. We ended the Q1 with a cash balance of and expect to complete the process soon, which we believe will result in approximately $10,000,000 of annual savings in interest expense and debt paydown. Before I wrap up, I want to briefly touch on our outlook. As I mentioned on the last call, we are focused on our long term growth strategy and accordingly unless there is a material change in the trajectory of the business. What I will say is that given the strength of our Q1 results and the success of our first NFP Art With that, I'd like to ask the operator to please open the line for questions. Thank you. Our first question coming from the line of Assin Muldahl with Canaccord. Your line is open. Hi, thanks for taking my questions. Can you walk Through the gross margin profiles of licensing and your DTC segments separately, just to give us a better idea for what that blended rate might look like in the future as the mix changes? Sure. I can take that. This is Lance. Thanks, Austin. So we don't break it out that granularly. As you might expect, the gross margin on licensing is going to naturally be higher Than direct to consumer. But again, as we grow direct to consumer, which you saw this quarter, we ended up growing Our gross margin profile as well because we're selling more lingerie, we're getting better in terms of the effectiveness of our shipping. We're also selling more of our own and operated products or our own collections. So those things all improve the margin profile Of direct to consumer. So while direct to consumer is going to contribute lower gross margins than licensing, And we still think that there's room to improve that over the longer term. Ben, do you want to add something? Austin, it's Benjal. Let me just add one other thing too. And I think we've talked about this in the past that, as we grow the company, the incremental cost of investing in the brand Do not grow alongside the growth in revenue. And so one of the things as we continue to transition this business model from that of Only licensing to that of owned and operated is your fixed costs will grow, but they don't grow nearly like your revenue is growing. And so therefore you'll start to see margin improvement going forward as well. Got it. Okay. Thanks for that. Within DTC revenue, can you talk about specifically how Yes, Andy, it grew on a year over year basis. So again, something that we don't disclose that level of granularity, but the way Think about it is that Q1 of last year, we didn't have those COVID impacts and Yandi really accelerated As did a lot of e commerce businesses, right, starting in the Q2. So year over year growth at Yandy was Very strong Q1 this year because you hadn't had that acceleration from COVID yet, but you also had huge growth at playboy.compleasure for all, which we've talked about a little bit on the call and even lovers, if you look at that, on a year on year basis, That business grew quite nicely as well. So we're really growing direct to consumer across all fronts. The Q2, the comp for For Yandy in particular, it gets tougher because that's when it really started to ramp revenue last year as shifting or sorry, as spending shifted from in person retail to online, but we still think that there's a lot of room for improvement and growth there. Okay. And then lastly, you mentioned influencer marketing in the press release. Was that is that a paid initiative or is that more like earned marketing? And can you just talk about how you think about your advertising investment more generally? Yes. So Austin, it's Ben Cohen. It really depends on the platform. And so we've done drops with On the Road. We've done the Playboy collection at E and D. What I would say is we're really excited moving forward by the influencer and celebrity outreach to us and there are certain things that we'll talk about in the future with partnerships going forward As we look to expand our collaborations with celebrities, we've talked previously about taking back Playboy Labs in house And doing collaborations where we really become the licensor versus the licensee. And so I'm not I know I'm not answering that question directly because it's not something we disclose, but What I would say is that we're very encouraged by what we're seeing from the artists and celebrity community. But then correct me if I'm wrong, when you alluded to the TikToker That you see, I don't believe we're paying for that. That's all organic, right? That's correct. We don't pay today for the celebrities, The Bella Hadid and everyone else wearing her clothing that is all organic today. Got you. Okay. Thanks for taking my questions and congrats on the quarter. Thanks, Paul. Thank you. And our next question coming from the line of George Kelly with ROTH Capital Partners. Your line is open. Hey, everyone. Thanks for taking my questions. So just to start, you gave a lot of metrics about playboy.com, I think, I don't have them all written down, but about the acceleration you saw through the quarter in this big March. So curious if there was a certain Collection or product or something that was leading that? And what have you seen post the quarter? Has that kind of momentum continued? Thanks, George. So the momentum has continued into April And there's really no specific drops. I mean, Ben, correct me if I'm wrong, if there were any specific drops on playboy.com, but I don't believe there was anything Driving that, we think it's really attributed to what I'd say a renewed focus on this As we brought on a new Chief Digital Officer, really started to work on optimizing the platform and the customer experience. So Just saying that it's like, hey, we think if you like this, maybe you should try buying this as well. And that drove real meaningful growth. Like I said, March was Our highest revenue yet on playboy.com higher than any month during the holiday shopping season. April was even better than that. So really it's around optimization and just continuing to get better at what we do. George, I'll add to that. It's Ben. It's continuing to expand our product offerings. So again, Kevin joined us Recently, already great navigation improvements. There's a lot more room to grow there and then we will continue to expand Product offerings as Rachel alluded to in her comments, also integrating blockchain and NFT opportunities throughout our own website moving forward. But what's great to see is the conversion as we've migrated our audience from that of the media audience to that of e commerce audience That we're beginning to hit our stride. In fact, one of the frustrating things for me as CEO actually, and I think Lance talked about this at Yandy, but we had the same issue even at playboy.com where we sold out of a lot of items and so demand far exceeded the amount of supply that we had, and those are things that as we continue to transition and add more SKUs and develop the internal data that we'll get better at Better out in the future. So it's great to see that our audience and the customer spend and demand is there. It's now just making sure that we match the right product Quantity with that. Okay. Okay. And then you also mentioned in your prepared remarks that you're Getting ready to take back certain businesses. I think cosmetics and grooming, there were a few others. So curious, What's the current size of those businesses, the license deals? How much revenue are they producing for the licensees? And what are you doing to get those businesses ready? I'm guessing it's hiring and just kind of where are you in that process? Sure. So actually, it's really defined as Class III products. And so this is an old licensing deal That predates me where all of these rights around outside of color cosmetics, everything else around skincare, beauty, etcetera, We're all tied up, and that was really with our fragrance partner. And so the fragrance line of products will continue with our But we've taken back all of these other categories and we're now looking to exploit those. If you look at our 5 year business model that we had published when we raised The pipe and did the de stacking transaction, the growth in that which I believe was about $11,000,000 or so over 5 years was deemed to be all licensing revenue. And as I think we said in the remarks, we see that as multiples of that Moving forward on a global basis around these categories and what we know is the demand of our consumer for these products from us. So to start with Color Cosmetics, and I can have Rachel chime in here, but we have already started the development of our color cosmetics line and we expect that to launch in the Q1 of 2020 In 2020. In 2022. And so we're excited about that and really what long term taking out $11,000,000 of Forecasted revenue growth and turning that into multiples moving forward. Okay. Hey George, it's Rachel. Just to add on there, It's really the creative development of the product line, figuring out exactly which SKUs we're launching with developing our distribution strategy. So, we're underway on that and excited to bring it to market 2022. Yes. And George, I mean just so you know too, these are products that have superior gross margins moving forward. And We know we have a customer base digitally today through our licensing partners, etcetera, that want to buy these products from us. Okay, great. And then last question for me, a modeling one. The core OpEx in the quarter, SG and A, Is that a good run rate going forward? Were there any kind of one time stock based comp things as you're hiring people? Or can you help it all there? Yes. I mean, obviously, there was a lot of one time events in the Q1 just given the SPAC merger at that point in time. The SBC really I think 3 a little over $3,000,000 of the SBC in the quarter was directly related to the acceleration of all The old grant, so that happened really at completion of the merger. So that is obviously a one time in nature. You had around $6,300,000 of SPAC related costs, everything From deal fees to retention bonuses and the like, so that was also unique and one time. We also Closed on the Lovers acquisition in the Q1. So when you think about costs there related to rep and warranty insurance, legal costs, Diligence costs, all of that, that was running you $1,000,000 $1,500,000 there. So there was a lot of stuff in the Q1 because we had just completed the business combination. So I don't expect the run rate Now having said that, there are obviously other things that we need to do going forward That we intend to do as we kind of set ourselves up for future success. Like we've said, we're investing now for future growth. So going back to what Ben was talking about in terms of developing our color cosmetics, we're going to have to ramp spend there. We're Obviously, as we continue to make these improvements across, yandy, lovers and playboy.com on the ecom side, We're going to be upgrading and building out those systems in our marketing capabilities, so that we can become more efficient and more optimized. Same thing on the financial reporting side. I just got here a couple of months ago and We want to work on upgrading our systems there, get us better, get us ready, because the quicker we grow, we're going to become an accelerated fighter quite quickly. And we need to be responsive to that. We've also got upcoming compliance costs around SOX and 404 compliance. So There's a lot of different things that will be coming up that didn't hit in the Q1. So I'd say what you saw in the Q1, there was a lot of one time items, But I do see more expense kind of coming down the pike this year as we set ourselves up for future success. Ben, anything else you want to add? Yes, George, the only thing I would add to that too, this is a decision we've made as a senior team, and I think Lance alluded to this in his remarks, We are doing everything for the long term here and trying to make the right long term decisions. It's the same reason we could have easily added back We did as a private company $1,500,000 of those one time costs to EBITDA, but we're not we are literally Yes, we're trying to run this as clean as possible and the only thing being added back to EBITDA is really extraordinary events or SBC. Okay. Thank you. The other thing I'd just add on top of that, if you strip out kind of all of those Kind of one time costs, I alluded to the SPAC, the acceleration of the SBC, the M and A related costs, your actual SG and A cost Grew less than your revenue. I think it grew something around 24% year over year. So the actual costs, I mean, while they're growing, they're not growing as fast as revenue. All right. Thank you. Thanks, George. Our next question coming from the line of Alex Berman with Craig Hallum Capital. Your line is open. Great. Thanks for taking my question. I wanted to ask about the supply chain issues that you mentioned in your prepared remarks. I mean, sounds like you can see a light at the end of the tunnel there. When do you envision being fully back in stock? And then looking ahead a little bit, Are there any concerns about your ability to have the right inventory in stock ahead of the key Halloween season for you? So we've been looking at it. We see good signs that the supply chain issues will improve as we enter Q3. If it puts us in good shape ahead of Halloween, arguably, we'd be in much better shape than we were last year for Halloween 2020, which ended up being A tremendously successful season for us. So, we feel good about it as these issues resolve. But we're still facing Some challenges here in the Q2. We have it's not a huge category on Yandy, but one of our drop ship Shoe suppliers on Yandy has effectively shut down for right now, due to COVID. And so we're really out of Stock on about 75% of our shoes. If you actually go and I was looking earlier today, we have Around 1300 shoes available on the end, you start sorting by size and that number dwindles quite quickly. So We're really constrained in certain areas right now, Schuh's kind of being the most acute one on Yandi. But again, The hope is that these will kind of resolve themselves in the coming months. Great. That's helpful, Lance. Thanks. And then just I guess, thinking kind of to the direct to consumer theme, it seems like all of your brands, Yandy, Lovers, Pleasure for all, playboy.com. All seems to be showing some really nice growth. We haven't really seen a whole year of quarters For the whole business, certainly not for lovers, can you just kind of frame up for us a little bit? I would imagine all of these Businesses do a lot of business around Halloween and Valentine's Day and the holiday season. How should we be thinking About kind of their contribution to the business in the middle quarters of the year where you don't have these holidays boosting the results? Sure. Yes, I'll take that as well. And you are right, and I'll break it down kind of By channel here, so lovers usually see that its biggest month in January February leading up to Valentine's Day and then also December. Yandy, as we talked about, certainly really big around the Halloween season, also big leading up Into Valentine's Day similar to lovers and then the holiday shopping season not Surprisingly across everything, PLAYBOY, Yandy, and Lovers is always strong. Look, it's our goal to create more occasions for the Andy and Lovers businesses going forward, to try to pick up more revenue in the second and third quarters. One of the things I'd also point 2 is that when we do more frequent product drops or when we do these Playboy brand Collections like we did with Lana Rhoads, we actually can have holiday like buying patterns Because these are unique one time events that can really drive growth. So to the extent that we can do more of these collaborations, more of these drops, Those have been nice for us, to launch in what I'll call the off season. Also on playboy.com as we and misguided our partners there have been continuing to experience tremendous growth on Playboy branded products And we're now selling those through playboy.com. So again, you would expect those to also increase In the Q4 in the holiday buying season, but it's still one of those things that could be strong year round and again could be supplemented if you Collaborations or drops or the Playboy Labs. Yes. And Alex, it's Ben. I'll just add I'll add 2 things. We also just launched Playboy Swim. And so as we move forward, we have Midsummer Night's Dream that we're planning something for this summer in July As a driver, it's a historical very famous playboy party that we're exploring, thinking about it both From a digital or virtual perspective as well as for in person now that COVID restrictions are easing in this country. And then just to add one other thing on the stock issues that we talked about. The other area of the business that was impacted in the Q1 by that was still our gaming business, Both for online gaming as well as our physical casino. And so Hopefully as COVID continues to improve in most of the world, that business will continue to normalize and return to growth business moving forward as well. Great. That's really helpful. Thank you both. Thanks, Alex. Our next question coming from the line of Greg Pendy with Sidoti. Your line is open. Hey guys, thanks for taking my questions. Just real quick on the balance sheet, just looking at inventory, up, I guess, sequentially from year end. I'm just trying to get a grasp on that. I'm sure lovers accounts for some of that, but you're mentioning lean stock outs as well. So just trying to As you are growing your DTC business, how should we be thinking about inventory, I guess, on a go forward basis throughout the rest of the year? Yes. Thanks for that, Greg. So you're absolutely right. I mean, we brought on a new business With inventory in the Q1. So that's why you see the increase there. When you think about kind of the inventory Pattern is right. We do start to build inventory around this time of the year and kind of through the summer as we prepare for the holiday Shopping season and for Halloween, so inventory does build and then you end up selling a lot of that through the end of the year. Great. And then just one more, I guess, just on the beauty and grooming products. Did you guys say earlier you the fragrance side of things is going to continue as a licensing partnership and the rest is going owned and operated. Did I hear that correct? That's correct. So our fragrance partner SADP relaunched their product last year in Europe. But the rest of the category, which is really historically defined as Class III products Had all been encumbered, but they were not exploiting them. And so we took those all back in house now And then we will look to exploit them and that's obviously a pivot in our business model from what was previously put out there with the 5 year forecast As part of the SPAC transaction, which I think at the time called for about $11,000,000 of revenue growth over 5 years In that category, that assumption at the time was all that it would all stay licensed. And today, we believe there's an opportunity To grow the revenue in that at multiples of what we had previously been forecasting moving forward as we roll out these products. And on the fragrance, we The fact that the new Make the Cover fragrance line, the relaunched collection will enter the U. S. In the coming months Okay. And then just on that topic, just real quick. So it was relaunched, I think, if I'm not mistaken, in Germany. And is it at a higher price point? And can you just kind of talk a little bit about if that is correct, how it went in Europe before it comes to the U. S? Right. So it was relaunched in both Germany and the UK and it was at a higher price point and Given COVID, it did very, very well, and we're encouraged by what we're seeing from a data perspective on it. But again, I think as they come to the United States, it's going to be great for not only our business for everyone to get Past this COVID issue and have things return to normal. So we're encouraged by the early success in it so far. Okay, great. That's helpful. Thanks a lot. Thanks, Greg. Our next Question coming from the line of George Kelly with ROTH Capital. Your line is open. Maybe George dropped off. Are you there, George? Sorry about that. Can you guys hear me now? Yes. Okay, great. So thanks for taking a quick follow-up. Just wanted to make sure I heard you right when talking about the refinancing. So is it $10,000,000 of interest savings? And does that mean you're looking to pay down A substantial portion of your debt through this refinancing? No. The bulk of it is I mean interest is part of it, but it's also just the amortization requirements. So the total debt service is going to be around $10,000,000 savings, interest and the required pay downs every year. Okay. George, it's Ben. The only other thing I'll add to that with the facility is it's a much simpler facility than what we had as a private company. We also have an accordion feature built into the facility given that M and A is part of our strategy moving forward where we can obviously prudently borrow more money to fund certain M and A deals should we want to, Depending on the deal, the size of the deal, etcetera. So it's a facility that will result in not only interest savings, but also amortization savings moving forward. That's all the time we have for questions and answer