PLBY Group Inc

Previous wording

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2024 and 2023 and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and the related notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors”, “Business” and “Cautionary Note Regarding Forward-Looking Statements” contained in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. As used herein, “we”, “us”, “our”, the “Company”, “PLBY” and “Playboy” refer to PLBY Group Inc. and its subsidiaries.

Current wording

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 and 2023 and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and the related notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors”, “Business” and “Cautionary Note Regarding Forward-Looking Statements” contained in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. As used herein, “we”, “us”, “our”, the “Company”, and “PLBY” refer to PLBY Group, Inc. and its subsidiaries.

Previous wording

We are a large, global consumer lifestyle company marketing our brands through a wide range of direct-to-consumer products, licensing initiatives, digital subscriptions and content, and online and location-based entertainment. We reach consumers worldwide with products across four key market categories: Style and Apparel, including a variety of apparel and accessories products; Digital Entertainment and Lifestyle, including our creator platform, web and television-based entertainment, and our spirits and hospitality products; Sexual Wellness, including lingerie and intimacy products; and Beauty and Grooming, including fragrance, skincare, grooming and cosmetics.

Current wording

We are a global consumer lifestyle company marketing our brands through a wide range of direct-to-consumer products, licensing initiatives, digital subscriptions and content, and online and location-based entertainment businesses. We reach consumers worldwide with products across four key market categories: Style and Apparel, including a variety of apparel and accessories products; Digital Entertainment and Lifestyle, including our creator platform, web and television-based entertainment, and our spirits and hospitality products; Sexual Wellness, including lingerie and intimacy products; and Beauty and Grooming, including fragrance, skincare, grooming and cosmetics.

Previous wording

We have three reportable segments: Direct-to-Consumer, Licensing and Digital Subscriptions and Content. The Direct-to-Consumer segment derives its revenue from sales of consumer products sold directly to consumers through our own online channels and our retail stores. The Licensing segment derives revenue from trademark licenses for third-party consumer products, location-based entertainment businesses and online gaming. The Digital Subscriptions and Content segment derives revenue from the subscription of Playboy programming, which is distributed through various channels, including websites and domestic and international TV, and sales of creator content offerings and memberships to consumers at The Playboy Club onplayboy.com.

Current wording

We have three reportable segments: Direct-to-Consumer, Licensing, and Digital Subscriptions and Content. The Direct-to-Consumer segment derives its revenue from sales of consumer products sold directly to consumers through our own online channels and our retail stores. The Licensing segment derives revenue from trademark licenses for third-party consumer products, location-based entertainment businesses and online gaming. The Digital Subscriptions and Content segment derives revenue from the subscription of Playboy programming, which is distributed through various channels, including websites and domestic and international television, and sales of creator content offerings and memberships to consumers at the Playboy Club onplayboy.com.

Previous wording

Our licensing revenues from China (including Hong Kong) as a percentage of our total revenues were 5% and 20% for the three months ended March 31, 2024 and 2023, respectively. At the end of the first quarter of 2023, we entered into the China JV with Charactopia Licensing Limited, the brand management unit of Fung Group. The China JV owns and operates the Playboy consumer products business in mainland China, Hong Kong and Macau. In 2023, due to challenging economic conditions in China, collections from certain of our Chinese licensees slowed significantly, and we had to renegotiate terms of, or terminate, certain licenses. Future contract modifications and collectability issues could further impact the revenue recognized against our ongoing contract assets. Nonetheless, we continue to work with our China JV partner to re-invigorate our China-market Playboy direct-to-consumer and licensing businesses, by building on Playboy’s current roster of licensees and online storefronts and developing additional revenue through expanding into new product categories with new licensees.

Current wording

Our licensing revenues from China (including Hong Kong) as a percentage of our total revenues from continuing operations were 12% and 21% for the three months ended June 30, 2024 and 2023, respectively, and 8% and 21% for the six months ended June 30, 2024 and 2023, respectively. At the end of the first quarter of 2023, we entered into a joint venture (the “China JV”) with Charactopia Licensing Limited, the brand management unit of Fung Group. The China JV owns and operates the Playboy consumer products business in mainland China, Hong Kong and Macau. In 2023, due to challenging economic conditions in China, collections from certain of our Chinese licensees slowed significantly, and we had to renegotiate terms of, or terminate, certain licenses. Future contract modifications and collectability issues could further impact the revenue recognized against our ongoing contract assets. Nonetheless, we continue to work with our China JV partner to re-invigorate our China-market Playboy direct-to-consumer and licensing businesses, by building on Playboy’s current roster of licensees and online storefronts and developing additional revenue through expanding into new product categories with new licensees.

Previous wording

While we receive revenue throughout the year, our businesses have experienced, and may continue to experience, seasonality. For example, our licensing business historically experienced higher receipts in its first and third fiscal quarters due to the licensing fee structure in our licensing agreements, which typically require advance payment of such fees during those quarters, but such payments can be subject to variations, extensions or delays. Our direct-to-consumer business has historically experienced higher sales in the fourth quarter due to the U.S. holiday season, but changing market conditions and demand could affect such sales. Historical seasonality of revenues may be subject to change as increasing pressure from competition and changes in consumer trends and economic conditions impact our licensees and consumers. Transitioning to a capital-light business model with a more streamlined consumer products business may further impact the seasonality of our business in the future.

Current wording

While we receive revenue throughout the year, our businesses have experienced, and may continue to experience, seasonality. For example, our licensing business historically experienced higher receipts in its first and third fiscal quarters due to the licensing fee structure in our licensing agreements, which typically require advance payment of such fees during those quarters, but such payments can be subject to variations, extensions or delays. Our direct-to-consumer businesses have historically experienced higher sales in the fourth quarter due to the U.S. holiday season, but changing market conditions and demand could affect such sales. Historical seasonality of revenues may be subject to change as increasing pressure from competition and changes in consumer trends and economic conditions impact our licensees and consumers. Transitioning to a capital-light business model with a more streamlined consumer products business may further impact the seasonality of our business in the future.

Previous wording

We generate revenue from sales of consumer products sold through our retail stores or online direct-to-customer, trademark licenses for third-party consumer products, online gaming and location-based entertainment businesses, and sales of creator offerings to consumers on our creator-led platform on playboy.com, in addition to subscriptions to our programming, which is distributed through various channels, including websites and domestic and international television.

Current wording

We generate revenue from sales of consumer products sold through our retail stores or online direct-to-customer, trademark licenses for third-party consumer products and online and location-based entertainment businesses, and sales of creator content offerings and memberships to consumers on our creator-led platform onplayboy.com, in addition to subscriptions to our programming, which is distributed through various channels, including websites and domestic and international television.

Previous wording

We license trademarks under multi-year arrangements to consumer products, online gaming and location-based entertainment businesses. Typically, the initial contract term ranges between one to ten years. Renewals are separately negotiated through amendments. Under these arrangements, we generally receive an annual non-refundable minimum guarantee that is recoupable against a sales-based royalty generated during the license year. Earned royalties received in excess of the minimum guarantee (“Excess Royalties”) are typically payable quarterly. We recognize revenue for the total minimum guarantee specified in the agreement on a straight-line basis over the term of the agreement and recognize Excess Royalties only when the annual minimum guarantee is exceeded. Generally, Excess Royalties are recognized when they are earned. In the event that the collection of any royalty becomes materially uncertain or unlikely, we recognize revenue from our licensees on a cash basis.

Current wording

We license trademarks under multi-year arrangements to third-party consumer products and online and location-based entertainment businesses. Typically, the initial contract term ranges between one to ten years. Renewals are separately negotiated through amendments. Under these arrangements, we generally receive an annual non-refundable minimum guarantee that is recoupable against a sales-based royalty generated during the license year. Earned royalties received in excess of the minimum guarantee (“Excess Royalties”) are typically payable quarterly. We recognize revenue for the total minimum guarantee specified in the agreement on a straight-line basis over the term of the agreement and recognize Excess Royalties only when the annual minimum guarantee is exceeded. Generally, Excess Royalties are recognized when they are earned. In the event that the collection of any royalty becomes materially uncertain or unlikely, we recognize revenue from our licensees on a cash basis.

Previous wording

Revenues generated from the sales of creator offerings to consumers via our creator platform onplayboy.com are recognized at the point in time when the sale is processed. Revenues generated from subscriptions to our creator platform are recognized ratably over the subscription period.

Current wording

Revenues generated from the sales of creator content offerings and memberships to consumers via our creator platform onplayboy.com are recognized at the point in time when the sale is processed. Revenues generated from subscriptions to our creator platform are recognized ratably over the subscription period.

Previous wording

Impairments consist of the impairments of our art held for sale.

Current wording

Impairments consist of the impairments of our art held for sale, certain licensing contracts, right-of-use assets, Playboy-branded trademarks, trade names and goodwill.

Previous wording

In the first quarter of 2023, we recorded a partial extinguishment of debt in the amount of $1.8 million related to the write-off of unamortized debt discount and deferred financing costs as a result of $45 million in prepayments of our senior debt pursuant to the third and fourth amendments of our 2021 Credit Agreement in February 2023.

Current wording

In the first quarter of 2023, we recorded a loss on partial extinguishment of debt in the amount of $1.8 million related to the write-off of unamortized debt discount and deferred financing costs as a result of $45 million in prepayments of our senior debt pursuant to the third and fourth amendments of our 2021 Credit Agreement in February 2023. In the second quarter of 2023, we recorded a gain on partial extinguishment of debt in amount of $8.0 million upon the amendment and restatement of the 2021 Credit Agreement (as such term is defined in Note 8, Debt within the notes to the financial statements included in this Quarterly Report on Form 10-Q; see Note 8, Debt and “Liquidity and Capital Resources” for additional details).

Previous wording

Fair value remeasurement loss consists of changes to the fair value of mandatorily redeemable preferred stock liability related to its remeasurement.

Current wording

Fair value remeasurement gain consists of changes to the fair value of mandatorily redeemable preferred stock liability related to its remeasurement.

Previous wording

Other (expense) income, net consists primarily of other miscellaneous nonoperating items, such as bank charges and foreign exchange gains or losses as well as non-recurring transaction fees.

Current wording

Other income (expense), net consists primarily of other miscellaneous nonoperating items, such as bank charges and foreign exchange gains or losses as well as non-recurring transaction fees.

Previous wording

(Expense) benefit from income taxes consists of an estimate for U.S. federal, state, and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against our definite-lived U.S. federal and state deferred tax assets, as well as Australia, U.K. and China deferred tax assets.

Current wording

(Expense) benefit from income taxes consists of an estimate for U.S. federal, state, and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against our U.S. federal and state deferred tax assets, as well as our Australia, U.K. and China deferred tax assets.

Previous wording

The decrease in net revenues for the three months ended March 31, 2024, as compared to the prior year comparative period, was primarily due to lower licensing revenue of $5.6 million, largely as a result of the termination of certain Chinese licensing agreements in 2023, lower direct-to-consumer revenue of $2.0 million, as a result of $3.5 million less revenue from Playboy’s e-commerce site, as it changed from our ownership and operation to a licensed business model in the third quarter of 2023, which was partly offset by a $1.5 million increase in revenue from Honey Birdette and $1.0 million of higher revenue from our creator platform.

Current wording

The decrease in net revenues for the three months ended June 30, 2024, as compared to the prior year comparative period, was primarily due to lower licensing revenue of $5.0 million, largely driven by the termination of certain Chinese licensing agreements in 2023, lower direct-to-consumer revenue of $5.2 million, as a result of $1.4 million less revenue from Playboy’s e-commerce site, as it changed from our ownership and operation to a licensed business model in the third quarter of 2023, and a $3.8 million decrease in revenue from Honey Birdette, partly offset by $0.3 million of higher revenue from our creator platform.

Previous wording

The decrease in cost of sales for the three months ended March 31, 2024, as compared to the prior year comparative period, was primarily due to a decrease in inventory reserve charges of $6.4 million, a $1.9 million decrease in licensing commissions related to the termination of certain Chinese licensing agreements in 2023, a $0.5 million decrease in direct-to-consumer product costs, as a result of a $1.9 million decrease in product costs from Playboy’s e-commerce site, as it changed from our ownership and operation to a licensed business model in the third quarter of 2023, which was offset by a $1.4 million increase in product costs from Honey Birdette, due to higher revenues, and lower digital subscriptions product costs of $0.9 million.

Current wording

The decrease in cost of sales for the three months ended June 30, 2024, as compared to the prior year comparative period, was primarily due to a decrease in inventory reserve charges of $0.7 million, a $2.6 million decrease in direct-to-consumer product costs, as a result of a $1.4 million decrease in product costs from Playboy’s e-commerce site, as it changed from our ownership and operation to a licensed business model in the third quarter of 2023, and a $1.2 million decrease in product costs from Honey Birdette, due to lower revenues, lower licensing product costs of $0.9 million primarily due to the termination of Playboy’s e-commerce licensing agreement in the second quarter of 2024, and lower digital subscriptions product costs of $0.4 million, which was partly offset by a $3.5 million increase in licensing commissions primarily due to a nonrecurring reduction in commission accrual in the prior year related to the termination of certain Chinese licensing agreements.

Previous wording

The increase in interest expense for the three months ended March 31, 2024, as compared to the prior year comparative period, was primarily due to the higher interest rate on our senior secured debt in the first quarter of 2024, compared to the prior year comparative period, as a result of the Restatement in May 2023 and the A&R First Amendment in November 2023.

Current wording

The increase in interest expense for the three months ended June 30, 2024, as compared to the prior year comparative period, was primarily due to the higher interest rate on our senior secured debt in the second quarter of 2024, compared to the prior year comparative period, as a result of the amendment and restatement of our senior secured debt in May 2023 and the A&R First Amendment in November 2023.

Previous wording

The change in provision for income taxes for the three months ended March 31, 2024, as compared to the prior year comparative period, was primarily due to impairment charges on artwork held for sale in the first quarter of 2024, the decrease of disallowed Section 162(m) compensation, shortfall of stock-based compensation and change in valuation allowance due to the reduction in net indefinite-lived deferred tax liabilities, offset by increased foreign income taxes in the three months ended March 31, 2024.

Current wording

The change from benefit from income taxes to expense for the three months ended June 30, 2024, as compared to the prior year comparative period, was primarily driven by the change in valuation allowance due to the reduction in net indefinite-lived deferred tax liabilities, offset by increased foreign income taxes in the three months ended June 30, 2024.

Previous wording

The decrease in selling and administrative expenses for the three months ended March 31, 2024, as compared to the prior year comparative period, was primarily due to lower technology costs of $5.5 million, primarily due to a $5.0 million restructuring charge taken on direct-to-consumer cloud-based software attributable to continuing operations in 2023, lower payroll expense of $3.5 million due to headcount reductions, a $3.6 million decrease in stock-based compensation expense, a $1.5 million decrease in digital marketing spend related to the Company’s discontinuation of owned-and-operated direct-to-consumer businesses, lower severance expense of $1.6 million, lower insurance expense of $1.2 million, lower audit and consulting fees of $0.8 million and a $1.1 million decrease in expense related to China JV expenses.

Current wording

The decrease in selling and administrative expenses for the six months ended June 30, 2024, as compared to the prior year comparative period, was primarily due to a $5.6 million decrease in stock-based compensation expense, lower technology costs of $4.9 million, primarily due to a $4.6 million restructuring charge taken on direct-to-consumer cloud-based software attributable to continuing operations in 2023, lower payroll expense of $4.0 million due to headcount reductions, lower severance expense of $2.3 million, a $2.1 million decrease in China JV expense due to cost cuts and non-recurring transaction expenses in 2023, lower audit, legal and consulting fees of $2.9 million, a $1.8 million decrease in digital marketing spend related to the Company’s discontinuation of owned-and-operated direct-to-consumer businesses, and lower insurance expense of $1.9 million due to renegotiation of insurance policies.

Previous wording

Loss on extinguishment of debt for the three months ended March 31, 2023 represents a loss of $1.8 million on the partial extinguishment of debt related to $45 million of prepayments of our senior debt in the first quarter of 2023.

Current wording

Gain on extinguishment of debt for the six months ended June 30, 2023 represented a $8.0 million gain due to the partial extinguishment of debt upon the amendment and restatement of our senior secured credit agreement in the second quarter of 2023, net of a $1.8 million loss recorded in the first quarter of 2023 due to the partial extinguishment of debt related to $45 million of prepayments of our senior debt.

Previous wording

Fair value remeasurement loss for the three months ended March 31, 2023 represents the remeasurement of our mandatorily redeemable preferred stock liability to its fair value at March 31, 2023, which was exchanged (and thereby eliminated) in connection with the A&R Credit Agreement in the second quarter of 2023.

Current wording

Fair value remeasurement gain for the six months ended June 30, 2023 represented the remeasurement of our mandatorily redeemable preferred stock liability to its fair value during the period, which was exchanged (and thereby eliminated) in connection with the A&R Credit Agreement in the second quarter of 2023.

Previous wording

•Impairments for the three months ended March 31, 2024 related to impairment charges on our artwork held for sale.

Current wording

•Impairments for the six months ended June 30, 2024 related to impairment charges on our artwork held for sale and corporate leases.

Previous wording

•Inventory reserve charges for the three months ended March 31, 2023 related to non-cash inventory reserve charges, excluding certain ordinary inventory reserve items, recorded in the first quarter of 2023 to reflect the restructuring of the Playboy Direct-to-Consumer business.

Current wording

•Inventory reserve charges for the six months ended June 30, 2023 related to non-cash inventory reserve charges, excluding certain ordinary inventory reserve items, recorded in the first quarter of 2023 to reflect the restructuring of the Playboy Direct-to-Consumer business.

Previous wording

•Mandatorily redeemable preferred stock fair value remeasurement for thethree months ended March 31, 2023 related to non-cash fair value change due to its fair value remeasurement.

Current wording

•Mandatorily redeemable preferred stock fair value remeasurement for the three and six months ended June 30, 2023 related to the fair value remeasurement, non-cash fair value gain of the liability for such preferred stock.

Previous wording

•Write-down of capitalized software for the three months ended March 31, 2023 related to a restructuring charge taken on direct-to-consumer cloud-based software.

Current wording

•Write-down of capitalized software for the six months ended June 30, 2023 related to a $4.6 million restructuring charge taken on direct-to-consumer cloud-based software in the first quarter of 2023, excluding $0.4 million of costs related to discontinued operations.

Previous wording

•Adjustments for the three months ended March 31, 2024 are primarily related to a non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of March 31, 2024, loss on the sale of artwork, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Current wording

•Adjustments for the three and six months ended June 30, 2024 are primarily related to non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of June 30, 2024, loss on the sale of artwork, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Previous wording

•Adjustments for the three months ended March 31, 2023 are primarily related to a non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of March 31, 2024, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Current wording

•Adjustments for the three and six months ended June 30, 2023 are related to non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of June 30, 2023, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities, as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Previous wording

Our Chief Executive Officer is our Chief Operating Decision Maker. Our segment disclosure is based on our intention to provide the users of our consolidated financial statements with a view of the business from our perspective. We operate our business in three primary operating and reportable segments: Direct-to-Consumer, Licensing and Digital Subscriptions and Content. Direct-to-Consumer operations include consumer products sold through brick-and-mortar retail stores and e-commerce sites. Licensing operations include the licensing of one or more of our trademarks, our Playboy retail platform operations effective July 2023, and/or images for consumer products and location-based entertainment businesses. Digital Subscriptions and Content operations include the production, marketing and sales of programming under the Playboy brand name, which is distributed through various channels, including domestic and international television, and sales of creator content offerings to consumers through the Playboy Club onplayboy.com.

Current wording

Our Chief Executive Officer is our Chief Operating Decision Maker. Our segment disclosure is based on our intention to provide the users of our condensed consolidated financial statements with a view of the business from our perspective. We operate our business in three primary operating and reportable segments: Direct-to-Consumer, Licensing, and Digital Subscriptions and Content. Direct-to-Consumer operations include consumer products sold through brick-and-mortar retail stores and e-commerce sites. Licensing operations include the licensing of one or more of our trademarks, our Playboy retail platform operations effective July 2023, and/or images for consumer products and location-based entertainment businesses. Digital Subscriptions and Content operations include the production, marketing and sales of programming under the Playboy brand name, which is distributed through various channels, including domestic and international television, and sales of creator content offerings and memberships to consumers through the Playboy Club onplayboy.com.

Previous wording

The following are our results of financial performance by segment for each of the periods presented (in thousands):

Current wording

The following are our results of financial performance from continuing operations by segment for each of the periods presented (in thousands):

Previous wording

The decrease in operating loss for the three months ended March 31, 2024, compared to the comparable prior year period, was primarily due a decrease in inventory reserve charges of $6.4 million, lower technology costs of $5.7 million, primarily due to a $5.0 million restructuring charge taken on direct-to-consumer cloud-based software attributable to continuing operations in 2023, lower payroll expense of $2.2 million due to headcount reductions, a $1.5 million decrease in digital marketing spend related to our discontinuation of owned-and-operated direct-to-consumer businesses, a $0.9 million decrease in other selling and administrative expenses, partly offset by $1.1 million lower gross profit as a result of lower revenue in connection with our discontinuation of owned-and-operated direct-to-consumer businesses.

Current wording

The decrease in operating loss for the six months ended June 30, 2024, was primarily due to $72.6 million of non-cash impairment charges on certain of our intangible assets, including goodwill, recorded in the prior year comparative period, a decrease in inventory reserve charges of $7.1 million, lower technology costs of $5.5 million, primarily due to a $4.6 million restructuring charge taken on direct-to-consumer cloud-based software attributable to continuing operations in 2023, lower payroll expense of $3.6 million due to headcount reductions, a $1.9 million decrease in digital marketing spend related to our discontinuation of owned-and-operated direct-to-consumer businesses, a $0.9 million decrease in other selling and administrative expenses, partly offset by $2.5 million lower gross profit as a result of lower revenue.

Previous wording

The increase in net revenues for the three months ended March 31, 2024, compared to the comparable prior year period, was primarily due to an increase in revenues attributable to our creator platform of $1.0 million, partly offset by a $0.2 million decrease in other digital subscriptions and content revenue.

Current wording

The increase in net revenues for the six months ended June 30, 2024, compared to the comparable prior year period, was primarily due to a $1.3 million increase in net revenues from our creator platform, partly offset by a $0.5 million decrease in other digital subscriptions and content revenue.

Previous wording

The decrease in operating loss for the three months ended March 31, 2024, compared to the comparable prior year period, was primarily attributable to a $0.8 million increase in net revenues and a $0.5 million decrease in payroll, partly offset by a $1.3 million increase in expenses related to our creator platform.

Current wording

The change from operating income to a loss for the six months ended June 30, 2024, compared to the comparable prior year period, was primarily due to a $3.5 million increase in expenses related to our creator platform and a $1.1 million reversal of stock based-compensation in the prior year comparative period, partly offset by a $0.8 million increase in net revenues and a $0.5 million decrease in payroll.

Previous wording

The decrease in corporate expenses for the three months ended March 31, 2024, compared to the comparable prior year period, was primarily due to a $3.6 million decrease in stock-based compensation expense, a $1.2 million decrease in severance costs, a decrease of $1.2 million in insurance expense, a decrease of $0.8 million in audit and consulting services and a $1.0 million decrease in payroll expenses due to headcount reductions, partly offset by $2.4 million of impairments on our artwork held for sale.

Current wording

The decrease in corporate expenses for the six months ended June 30, 2024, compared to the comparable prior year period, was primarily due to a $7.0 million decrease in stock-based compensation expense, a $1.2 million decrease in severance costs, a decrease of $1.9 million in insurance expense, a decrease of $0.8 million in audit and consulting services and a $1.9 million decrease in payroll expenses due to headcount reductions, partly offset by $2.4 million of impairments on our artwork held for sale and a loss of $0.5 million on the sale of assets in the first quarter of 2024.

Previous wording

Our sources of liquidity are cash generated from operating activities, which primarily includes cash derived from revenue generating activities, from financing activities, including proceeds from our issuance of debt, and proceeds from stock offerings (as described further below), and from investing activities, which includes the sale of assets (as described further below). As of March 31, 2024, our principal source of liquidity was cash in the amount of $19.0 million, which is primarily held in operating and deposit accounts.

Current wording

Our sources of liquidity are cash generated from operating activities, which primarily includes cash derived from revenue generating activities, from financing activities, including proceeds from our issuance of debt, and proceeds from stock offerings (as described further below), and from investing activities, which includes the sale of assets (as described further below). As of June 30, 2024, our principal source of liquidity was cash in the amount of $16.9 million, which is primarily held in operating and deposit accounts.

Previous wording

On November 3, 2023, we completed the TLA Sale to an unaffiliated, third-party buyer for approximately $13.5 million in cash. Approximately $2.1 million of the Purchase Price was placed into a short-term escrow account at the closing of the TLA Sale in connection with a post-closing working capital adjustment, certain possible indemnification claims payable by us and for certain post-closing items to be completed by us. As of the date of this Quarterly Report on Form 10-Q, such escrow funds had been released to us in full.

Current wording

On November 3, 2023, we completed the TLA Sale to an unaffiliated, third-party buyer for approximately $13.5 million in cash (the “Purchase Price”). Approximately $2.1 million of the Purchase Price was placed into a short-term escrow account at the closing of the TLA Sale in connection with a post-closing working capital adjustment, certain possible indemnification claims payable by us and for certain post-closing items to be completed by us. As of the date of this Quarterly Report on Form 10-Q, such escrow funds had been released to us in full.

Previous wording

Due to challenging economic conditions in China, collections from certain of our Chinese licensees have slowed significantly, and we have renegotiated terms of certain agreements. In October 2023, we also terminated licensing agreements with certain Chinese licensees. Future contract modifications and collectability issues could further impact the revenue recognized against our ongoing contract assets.

Current wording

Due to challenging economic conditions in China, collections from certain of our Chinese licensees slowed significantly in 2022 and 2023, and we have renegotiated terms of certain agreements. In October 2023, we also terminated licensing agreements with certain Chinese licensees. We have replaced certain terminated licensees with new licensees in China. Future contract modifications and collectability issues could further impact the revenue recognized against our ongoing contract assets.

Previous wording

Since going public in 2021, we have yet to generate operating income from our core business operations and have incurred significant operating losses. The operating losses for the quarter ended March 31, 2024 were $8.9 million. We expect to continue to incur operating losses for the foreseeable future.

Current wording

Since going public in 2021, we have yet to generate operating income from our core business operations and have incurred significant operating losses. Our operating losses for the six months ended June 30, 2024 were $18.1 million. We expect to continue to incur operating losses for the foreseeable future.

Previous wording

On May 10, 2023, we entered into an amendment and restatement of our prior credit agreement to reduce the interest rate applicable to our senior secured debt and the implied interest rate on our Series A Preferred Stock, exchange (and thereby eliminate) our outstanding Series A Preferred Stock, and obtain additional covenant relief and funding. For the terms of the 2021 Credit Agreement, as amended, refer to Note 9. Debt, within the notes to our audited condensed consolidated financial statements set forth in our Annual Report on Form 10-K filed with the SEC on March 29, 2024.

Current wording

On May 10, 2023, we entered into an amendment and restatement of our prior credit agreement to reduce the interest rate applicable to our senior secured debt and the implied interest rate on our Series A Preferred Stock, exchange (and thereby eliminate) our outstanding Series A Preferred Stock, and obtain additional covenant relief and funding. For the terms of the 2021 Credit Agreement, as amended, refer to Note 10. Debt, within the notes to our audited consolidated financial statements set forth in our Annual Report on Form 10-K filed with the SEC on March 29, 2024.

Previous wording

The stated interest rate of Tranche A and Tranche B term loans as of March 31, 2024 was 11.41% and 9.41%, respectively. The stated interest rate of Tranche A and Tranche B term loans as of December 31, 2023 was 11.41% and 9.41%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of March 31, 2024 was 12.03% and 13.27%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of December 31, 2023 was 12.03% and 13.27%, respectively. The difference between the stated interest rate and effective interest rate for Tranche B as of March 31, 2024 and December 31, 2023 is driven primarily by the amortization of $21.3 million of debt discount which is included in the calculation of the effective interest rate.

Current wording

The stated interest rate of Tranche A and Tranche B term loans as of June 30, 2024 was 11.68% and 9.68%, respectively. The stated interest rate of Tranche A and Tranche B term loans as of December 31, 2023 was 11.41% and 9.41%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of June 30, 2024 was 12.30% and 13.55%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of December 31, 2023 was 12.03% and 13.27%, respectively. The difference between the stated interest rate and effective interest rate for Tranche B as of June 30, 2024 and December 31, 2023 is driven primarily by the amortization of $21.3 million of debt discount which is included in the calculation of the effective interest rate.

Previous wording

Our principal lease commitments are for office space and operations under several noncancelable operating leases with contractual terms expiring through 2033. Some of these leases contain renewal options and rent escalations. As of March 31, 2024 and December 31, 2023, our fixed leases were $29.1 million and $31.6 million, respectively, with $7.0 million and $7.0 million due in the next 12 months. For further information on our lease obligations, refer to Note 12, Commitments and Contingencies within the notes to the financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Our principal lease commitments are for office space and operations under several noncancelable operating leases with contractual terms expiring through 2033. Some of these leases contain renewal options and rent escalations. As of June 30, 2024 and December 31, 2023, our fixed leases were $27.1 million and $31.6 million, respectively, with $6.4 million and $7.0 million due in the next 12 months. For further information on our lease obligations, refer to Note 11, Commitments and Contingencies within the notes to the financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

The following table summarizes our cash flows for the periods indicated (in thousands):

Current wording

The following table summarizes our cash flows from continuing operations for the periods indicated (in thousands):