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Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2023
Accounting Policies [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Description of Business PLBY Group, Inc. (the “Company”, “PLBY”, “we”, “our” or “us”), together with its subsidiaries, through which it conducts business, is a global consumer and lifestyle company marketing the Playboy brand through a wide range of direct-to-consumer products, licensing initiatives, and digital subscriptions and content, in addition to the sale of direct-to-consumer products under its Honey Birdette and Lovers brands. We have three reportable segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. Refer to Note 17, Segments. Basis of Presentation The interim condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). As discussed in Note 3, Assets and Liabilities Held for Sale and Discontinued Operations, the Yandy Enterprises LLC (“Yandy”) and TLA Acquisition Corp. (“TLA”) disposal groups, previously included in the Direct-to-Consumer segment, continued to be classified as discontinued operations in the condensed consolidated statements of operations for all periods presented. Assets and liabilities of these businesses were classified as assets and liabilities held for sale of the condensed consolidated balance sheets for all periods presented. The sale of Yandy was completed on April 4, 2023. A stock purchase agreement for the sale of TLA was entered into on October 3, 2023, and the sale closed on November 3, 2023. Refer to Note 18, Subsequent Events for further details. Restatement of Previously Issued Financial Statements Subsequent to the issuance of the condensed consolidated financial statements as of and for the quarter ended September 30, 2023 included in the Original Filing, the Company identified a correction required to be made in its historical condensed consolidated financial statements and related disclosures as of and for the three and nine months ended September 30, 2023. The correction relates to the accounting treatment of impairment of a license agreement and the classification of commission expense adjustments related to all contract impairments recorded during the three and nine months ended September 30, 2023. In the Company’s Original Filing, the Company impaired a license agreement (which was ultimately terminated in the fourth quarter of 2023) and recorded impairment expense in relation thereto. Additionally, commission expense reversals related to contract impairments were recorded as an offset to the impairment expense. Pursuant to the Company’s completion of its year-end audit procedures for its 2023 fiscal year, the Company determined that the accounting treatment of the license agreement, as described above, was incorrect. Rather than recording impairment expense of $8.3 million and $11.4 million for the three and nine months ended September 30, 2023, respectively, the Company should have reduced its deferred revenue balance which related to the impaired license agreement. In addition, commission expense reversals of $1.0 million and $2.2 million should have been recorded to the Company’s cost of sales for the three and nine months ended September 30, 2023, respectively, rather than offsetting its impairment expense. Additionally, tax expense was increased by $0.4 million and $1.5 million for the three and nine months ended September 30, 2023, respectively, to account for the aforementioned reversal of the impairment expense and changes in jurisdictional location of certain other impairment expenses. The tables below set forth the condensed consolidated financial statements, including as reported, the impacts resulting from the restatement and the as restated amounts for the quarterly period ended September 30, 2023 (in thousands, except per share amounts):
| Condensed Consolidated Statement of Operations
For the three months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Cost of sales | $ | (10,909) |  |  | $ | 1,015 |  |  | $ | (9,894) |
Impairments | (7,674) |  |  | 7,282 |  |  | (392) |
Total operating expense | (44,618) |  |  | 8,297 |  |  | (36,321) |
Operating loss | (11,336) |  |  | 8,297 |  |  | (3,039) |
Loss from continuing operations before income taxes | (17,835) |  |  | 8,297 |  |  | (9,538) |
Benefit from income taxes | 1,442 |  |  | (388) |  |  | 1,054 |
Net loss from continuing operations | (16,393) |  |  | 7,909 |  |  | (8,484) |
Net loss | (15,074) |  |  | 7,909 |  |  | (7,165) |
Net loss attributable to PLBY Group, Inc. | (15,074) |  |  | 7,909 |  |  | (7,165) |
Net loss per share from continuing operations, basic and diluted | (0.22) |  |  | 0.10 |  |  | (0.12) |
Net loss per share, basic and diluted | (0.20) |  |  | 0.10 |  |  | (0.10) |
| Condensed Consolidated Statement of Operations
For the nine months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Cost of sales | $ | (43,545) |  |  | $ | 2,215 |  |  | $ | (41,330) |
Impairments | (155,864) |  |  | 9,232 |  |  | (146,632) |
Total operating expense | (299,107) |  |  | 11,447 |  |  | (287,660) |
Operating loss | (195,521) |  |  | 11,447 |  |  | (184,074) |
Loss from continuing operations before income taxes | (199,848) |  |  | 11,447 |  |  | (188,401) |
Benefit from income taxes | 13,062 |  |  | (1,470) |  |  | 11,592 |
Net loss from continuing operations | (186,786) |  |  | 9,977 |  |  | (176,809) |
Net loss | (186,637) |  |  | 9,977 |  |  | (176,660) |
Net loss attributable to PLBY Group, Inc. | (186,637) |  |  | 9,977 |  |  | (176,660) |
Net loss per share from continuing operations, basic and diluted | (2.65) |  |  | 0.15 |  |  | (2.50) |
Net loss per share, basic and diluted | (2.65) |  |  | 0.15 |  |  | (2.50) |
| Condensed Consolidated Statement of Comprehensive Loss
For the three months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Net loss | $ | (15,074) |  |  | $ | 7,909 |  |  | $ | (7,165) |
Comprehensive loss | (16,256) |  |  | 7,909 |  |  | (8,347) |
| Condensed Consolidated Statement of Comprehensive Loss
For the nine months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Net loss | $ | (186,637) |  |  | $ | 9,977 |  |  | $ | (176,660) |
Comprehensive loss | (189,787) |  |  | 9,977 |  |  | (179,810) |
| Condensed Consolidated Balance Sheet
As of September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Deferred revenues, net of current portion | $ | 22,580 |  |  | $ | (11,447) |  |  | $ | 11,133 |
Deferred tax liabilities, net | 12,047 |  |  | 1,470 |  |  | 13,517 |
Total liabilities | 322,165 |  |  | (9,977) |  |  | 312,188 |
Accumulated deficit | (620,033) |  |  | 9,977 |  |  | (610,056) |
Total stockholders’ equity | 37,814 |  |  | 9,977 |  |  | 47,791 |
| Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Accumulated deficit beginning balance | $ | (604,959) |  |  | $ | 2,068 |  |  | $ | (602,891) |
Total stockholders' equity beginning balance | 52,770 |  |  | 2,068 |  |  | 54,838 |
Net loss in both Accumulated Deficit and Total columns | (15,074) |  |  | 7,909 |  |  | (7,165) |
Accumulated deficit ending balance | (620,033) |  |  | 9,977 |  |  | (610,056) |
Total stockholders' equity ending balance | 37,814 |  |  | 9,977 |  |  | 47,791 |
| Condensed Consolidated Statements of Stockholders’ Equity
For the nine months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Net loss in both Accumulated Deficit and Total columns | $ | (186,637) |  |  | $ | 9,977 |  |  | $ | (176,660) |
Accumulated deficit ending balance | (620,033) |  |  | 9,977 |  |  | (610,056) |
Total stockholders' equity ending balance | 37,814 |  |  | 9,977 |  |  | 47,791 |
| Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2023 | As Previously Reported |  | Adjustments |  | As Restated
Cash Flows From Operating Activities |  |  |  |  |
Net loss | $ | (186,637) |  |  | $ | 9,977 |  |  | $ | (176,660) |
Net loss from continuing operations | (186,786) |  |  | 9,977 |  |  | (176,809) |
Impairments | 155,864 |  |  | (9,232) |  |  | 146,632 |
Deferred income taxes | (13,191) |  |  | 1,470 |  |  | (11,721) |
Receivables, net | (3,884) |  |  | 11,447 |  |  | 7,563 |
Accrued agency fees and commissions | (4,386) |  |  | (2,215) |  |  | (6,601) |
Deferred revenues | (2,955) |  |  | (11,447) |  |  | (14,402) |
Principles of Consolidation The interim condensed consolidated financial statements include our accounts and all majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company follows a monthly reporting calendar, with its fiscal year ending on December 31. Prior to the third quarter of 2022, Honey Birdette (Aust) Pty Limited (“Honey Birdette”), which the Company acquired in August 2021 had different fiscal quarter and year ends than the Company. Honey Birdette followed a fiscal calendar widely used by the retail industry which resulted in a fiscal year consisting of a 52- or 53-week period ending on the Sunday closest to December 31. Honey Birdette’s fiscal year previously consisted of four 13-week quarters, with an extra week added to each fiscal year every five or six years. Honey Birdette’s second fiscal quarter in 2022 consisted of 14 weeks. The difference in prior fiscal periods for Honey Birdette and the Company is immaterial and no related adjustments have been made in the preparation of these unaudited condensed consolidated financial statements. Unaudited Interim Condensed Consolidated Financial Statements The interim condensed consolidated balance sheet as of September 30, 2023, and the interim condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three and nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of our financial position as of September 30, 2023 and our results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The financial data and other financial information disclosed in these notes to the interim condensed consolidated financial statements related to the three and nine-month periods are also unaudited. The interim condensed consolidated results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future annual or interim period. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with our audited financial statements included in the Annual Report on Form 10-K as filed by us with the U.S. Securities and Exchange Commission on March 16, 2023. Reclassifications Certain prior period amounts in the condensed consolidated statements of operations and condensed consolidated balance sheet have been reclassified to conform with the current period presentation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly assess these estimates, including but not limited to, valuation of our trademarks and trade names; valuation of our contingent consideration liabilities; valuation of our only authorized and issued preferred stock (our “Series A Preferred Stock”); pay-per-view and video-on-demand buys, and monthly subscriptions to our television and digital content; the adequacy of reserves associated with accounts receivable and inventory; unredeemed gift cards and store credits; licensing commission accruals; and stock-based compensation expense. We base these estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates and such differences could be material to the financial position and results of operations. Concentrations of Business and Credit Risk We maintain certain cash balances in excess of Federal Deposit Insurance Corporation insured limits. We periodically evaluate the credit worthiness of the financial institutions with which we maintain cash deposits. We have not experienced any losses in such accounts and do not believe that there is any credit risk to our cash. Concentration of credit risk with respect to accounts receiva ble is limited due to the wide variety of customers to whom our products are sold and/or license d. The following table represents receivables from our customers exceeding 10% of our total receivables, excluding receivables held for sale:
Customer | September 30, 2023 |  | December 31, 2022
Customer A | * |  | 31 | %
The following table represents revenue from our customers exceeding 10% of our total revenue, excluding revenues from discontinued operations:
| Three Months Ended September 30, | Nine Months Ended September 30,
Customer | 2023 |  | 2022 |  | 2023 |  | 2022
Customer A | 16 | % |  | 12 | % |  | 16 | % |  | 11 | %
Restricted Cash At September 30, 2023 and December 31, 2022, restricted cash was primarily related to a cash collateralized letter of credit we maintained in connection with the lease of our Los Angeles headquarters, as well as Honey Birdette’s term deposit in relation to certain of its leases. Liquidity Assessment and Management’s Plans Our revenues, results of operations and cash flows have been materially adversely impacted by negative macroeconomic factors beginning in the second quarter of 2022 and continuing through 2023. The persistently challenging macroeconomic and retail environments, including reduced consumer spending and increased price sensitivity in discretionary categories, has significantly impacted our licensees’ performance. Our net revenues from continuing operations for the three and nine months ended September 30, 2023 decreased by $12.4 million and $37.1 million, compared to the three and nine months ended September 30, 2022, respectively, and this decline, coupled with investments into our creator platform, drove our impairment charge, operating loss and net loss. For the three and nine months ended September 30, 2023, we reported a net operating loss from continuing operations of $3.0 million and $184.1 million, respectively, and negative operating cash flows from continuing operations of $36.8 million for the nine months ended September 30, 2023. As of September 30, 2023, we had approximately $20.0 million in unrestricted cash and cash equivalents. As of September 30, 2023, we were in compliance with the covenants under our senior secured credit agreement; however, due to ongoing negative macroeconomic factors and their uncertain impacts on our business, results of operations and cash flows, we could experience further material decreases to net sales and operating cash flows and materially higher operating losses, and may experience difficulty remaining in compliance with such covenants. Refer to Note 10, Debt, for further details regarding the terms of our A&R Credit Agreement and the A&R Term Loans (as such terms are defined in Note 10). Our management is required to perform an initial assessment of an entity’s ability to continue as a going concern. When conditions and events, in the aggregate, raise substantial doubt about an entity’s ability to continue as a going concern, management considers the mitigating effect of its plans to the extent it is probable that the plans will be effectively implemented within the assessment period and, when implemented, it is probable the plans will mitigate the relevant conditions or events and alleviate substantial doubt. Our management’s plans are focused on improving its results of operations, operating cash flows and liquidity through expense reduction initiatives, including increased management of inventory purchasing, headcount, non-essential corporate spend (i.e. systems no longer needed for the streamlined business) and the timing and magnitude of capital expenditures, and capital raising transactions during the balance of fiscal year 2023 and fiscal year 2024. We continue to review our business model to identify actions that are expected to meaningfully reduce pre-tax costs and enable a more efficient and effective organization. Our management believes these plans are probable of being effectively implemented and, when implemented, that it is probable they will mitigate the negative impacts of the current ongoing negative macroeconomic conditions on our business. Consequently, management believes that our cash on hand, cash flows from operations and the proceeds from dispositions of assets will result in adequate cash flows and capital to support our ongoing operations and to meet our obligations as they become due under the A&R Credit Agreement and our other obligations for at least one year following the date these interim financial statements are issued. The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Advertising Costs We expense advertising costs as incurred. Advertising expenses were $1.1 million and $3.0 million for the three months ended September 30, 2023 and 2022, respectively, excluding $0.4 million and $1.9 million, respectively, of advertising costs related to discontinued operations. Advertising expenses for the nine months ended September 30, 2023 and 2022 were $4.8 million and $10.9 million, respectively, excluding $2.7 million and $6.8 million, respectively, of advertising costs related to discontinued operations. We also have various arrangements with collaborators pursuant to which we reimburse them for a portion of their advertising costs in the form of co-op marketing which provide advertising benefits to us. The costs that we incur for such advertising costs are recorded as a reduction of revenue. Intangible Assets and Goodwill Indefinite-lived intangible assets that are not amortized but subject to annual impairment testing consist of Playboy-branded trademarks. We periodically perform a quantitative assessment to estimate the fair value of our Playboy-branded trademarks. We evaluate the indefinite-lived Playboy-branded trademarks for impairment using the relief from royalty method. This valuation approach requires that we make a number of assumptions to estimate fair value, including projections of future revenues, market royalty rates, tax rates, discount rates and other relevant variables. The projections we use in the model are updated annually and will change over time based on the historical performance and changing business conditions. If the carrying value of the trademark exceeds its estimated fair value, an impairment charge is recognized for the excess amount. We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, an impairment test is unnecessary. If an impairment test is necessary, we will estimate the fair value of a related reporting unit. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is determined to be impaired, and we will proceed with recording an impairment charge equal to the excess of the carrying value over the related fair value. If we determine it is more likely than not that goodwill is not impaired, a quantitative test is not necessary. In the second quarter of 2023, we experienced further declines in revenue and profitability, causing us to test the recoverability of our indefinite-lived assets, including goodwill, as of June 30, 2023. As a result, w e recognized $65.5 million of impairment charges on the indefinite-lived Playboy-branded trademarks at the impairment date in the second quarter of 2023. Our valuation estimate was most sensitive to changes in royalty rates and the cost of capital. Impairment charges on our goodwill at the impairment date were $66.7 million in the second quarter of 2023. There were no impairment charges to goodwill and Playboy-branded trademarks to be recognized in the third quarter of 2023. In the third quarter of 2022, as a result of macroeconomic factors, we experienced declines in revenue and profitability, causing us to test the recoverability of its goodwill and other intangible assets as of September 1, 2022. The quantitative test performed indicated that the fair value of our indefinite-lived Playboy-branded trademarks was less than their carrying value. Our valuation estimate was most sensitive to changes in royalty rates and the cost of capital. We recognized $116.0 million of impairment charges on our indefinite-lived assets at the impairment date in the third quarter of 2022. A quantitative impairment test performed on goodwill utilized the income approach, under which fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The quantitative test performed indicated that the carrying value of certain of our reporting units exceeded their fair value. As a result, we recognized $117.4 million of impairment charges on our goodwill in the third quarter of 2022, excluding $16.4 million of impairment charges related to discontinued operations. Definite-lived intangible assets include distribution agreements, photo and magazine archives, licensing agreements, and trade names, which we recognized in connection with our business combinations. Because these assets were recognized as identifiable intangible assets in connection with our previous business combinat ions, we do not incur costs to renew or extend their terms. All of our definite-lived intangible assets are amortized using the straight-line method over their useful lives. Impairment of Long-Lived Assets The carrying amounts of long-lived assets, including property and equipment, stores, acquired intangible assets and right-of-use operating lease assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate over their remaining lives. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to their fair value. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the revised shorter useful life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. We recognized $5.1 million of impairment charges on our trade names at the impairment date in the second quarter of 2023, and $45.8 million of impairment charges on our trade names and certain other assets at the impairment date in the third quarter of 2022, excluding $8.3 million of impairment charges related to discontinued operations. There were no impairment charges to our long-lived assets, including trade names to be recognized in the third quarter of 2023. Assets and Liabilities Held for Sale and Discontinued Operations We classify assets and liabilities as held for sale, collectively referred to as the disposal group, when management commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, it is unlikely that significant changes will be made to the plan, the assets are available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, and the sale of the assets is expected to be completed within one year. A disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The fair value of a disposal group less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. We account for discontinued operations when assets and liabilities of a disposal group are classified as held for sale, or have been sold, and only if the disposal represents a strategic shift that has or will have a meaningful effect on our operations and financial results. We aggregate the results of operations for discontinued operations into a single line item in the consolidated statements of operations for all periods presented. General corporate overhead is not allocated to discontinued operations. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations. Recently Adopted Accounting Pronouncements In December 2022, the Financial Accounting Standards Board issued Accounting Standard Update 2022-06 Reference Rate Reform (“Topic 848”) “Deferral of the Sunset Date of Topic 848”, which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The standard was effective upon issuance and we may apply the optional expedients and elections in Topic 848 prospectively through December 31, 2024. Upon amendment and restatement of our Credit Agreement on May 10, 2023, LIBOR was replaced with the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. Refer to Note 10, Debt. The provisions of this pronouncement did not have a material impact on our condensed consolidated financial statements. Accounting Pronouncements Issued but Not Yet Adopted We do not believe that there were any recently issued, but not yet effective, accounting pronouncements that would have a material effect on our financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent + Details
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