PLBY Group, Inc.
Q4 2020 Earnings Call Transcript

Published: 23 Mar 2021

[Operator:]

Thank you for standing by. And welcome to the Fourth Quarter and Full Year 2020 Conference Call and Webcast for PLBY Group, Inc. The information discussed today is qualified in its entirety by the Form 8-K 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 morning and the related Form 8-K can be found on PLBY Group’s website at http

[Ben Kohn:]

Thank you, Operator. Good afternoon, everyone. It's a pleasure to be speaking with you on our first earnings call, following our listing on NASDAQ earlier this year. I want to start by thanking our employees and management team, who had an unbelievably difficult year, not only had to enter new ways of working together, but conquered that while achieving major growth, growing revenues 89% year-over-year. PLBY Group is a pleasure and leisure company, serving consumers around the world with products, services and experiences to help them look good, feel good, and have fun. Our flagship brand, Playboy is one of the most iconic and valuable brands in the world. Simply speaking, Playboy is huge. Our massive global reach drives $3 billion of global consumer spend, with products sold in over 180 countries. We engage with millions of people every day across our own channels and social media, and our reach continues to grow with our built-in network of ambassadors. No brand gets noticed quite like the Rabbit Head and in today's increasingly cluttered and fickle environment, Playboy has a special power to both stand out and to last. Our strong resonance with the next-generation of consumers around the world sets us up for significant future growth and provides us with a platform that we believe can be synergistic to promote other owned-brands and become the leading pleasure and leisure company. PLBY Group is focused on two key revenue models, direct-to-consumer sales and licensing sales. And is focus on four product categories with growing multi-billion dollar global markets, Sexual Wellness, Style & Apparel, Gaming & Lifestyle and Beauty & grooming. We are still in the early stages of our business model transformation to own and operate within these key consumer product categories. And we have seen great traction so far. With the over $100 million we raised to our recent business combination, we now have a robust balance sheet and the capital market currency to make thoughtful, educated and data back decisions to accelerate that growth moving forward both organically and through acquisitions.

[Rachel Webber:]

Thank you, Ben. It's such an exciting time at PLBY Group. Over this past year, we've continued to see powerful Playboy brand affection promoted by influencers and the creative community. And this has translated to strong sales, particularly with Gen Z and millennial consumers. We're particularly proud of our break the internet moments, including our first digital cover drop with Bad Bunny, which sparked crucial conversations on masculinity today. Our recent International Women's Day partnership with Lana Rhoades, Ellen von Unwerth and Lynsey Addario and the work we did with our Playmate community throughout the year to raise awareness for gender and racial equality and body positivity. It's also thrilling to see all of the organic influencer promotion for the Playboy brand. For Megan Thee Stallion showing off her Playboy nails to her over 20 million followers to LaLa Anthony paying homage to the classic bunny suit, to many of the biggest TikTok stars wearing their Playboy streetwear in their dance videos. The key thing that we're working on today is turning our Playboy franchises and themes into huge product lines in contemporary marketing platforms unto themselves. Based on the considerable success we've seen with our tests of Playboy lingerie topical collections on Yandy, we are now investing in building out a much more ambitious strategy for a lingerie line that will likely leverage our Playmate franchise.

[Ben Kohn:]

Thank you, Rachel. We are seeing more growth opportunities today than any time since I took over as CEO. I believe it speaks to the brand investments we have made that are clearly resonating with consumers globally. The opportunities we see include initiatives previously identified in our five-year projections, as well as new opportunities that should they be successful, allow us to accelerate and/or exceed the five year numbers we provided historically. These opportunities require small upfront investments, but we believe they are warranted and can result in significant return on investment. To recap these growth initiatives; first, continue to accelerate our direct sales growth in the U.S. through increased merchandising, cross-selling and influencer marketing programs. Second, continue to develop our streetwear business in-house to capture 100% of the retail spend, as well as partner with influencers to launch capsule collections with us as the licensor.

[Lance Barton:]

Thanks so much, Ben. Let me start by saying how thrilled I am to be here as PLBY Group's newly appointed CFO. I joined this team because I believe the huge organic reach of our flagship brands and 68 years of valuable and one of a kind IP, provides us with a multitude of revenue opportunities that we are in the very early stages of capturing. I'm excited to partner with Ben and the fantastic executive team that he has assembled as we embark upon this journey. Now, let's dive into the numbers. We had an incredibly strong fourth quarter and full year 2020, driven by growth in both direct-to-consumer and licensing revenue. Total revenue in the fourth quarter increased 118% year-over-year to $46 million, while full year revenue increased 89% to $148 million. Direct-to-consumer revenue grew from almost nothing in 2019 to $64 million last year, driven by significant growth in both sexual wellness and style and apparel. Licensing revenue grew 20% to $61 million last year, driven by our global and diversified portfolio of licensing. Net loss narrowed to $5 million in 2020, a year-over-year improvement of $18 million, and then the fourth quarter, net loss of $0.5 million with a year-over-year improvement of $5 million. Adjusted EBITDA for the quarter was $7 million and for the full year was $28 million. Fourth quarter EBITDA would have been higher, but we booked $2.2 million of out-of-period expenses to clean up historical sales tax and achievement liabilities, along with retention bonuses that should have been accrued for earlier in the year. Turning now to the balance sheet, as many of you are aware, our ending cash position in 2020 of $15 million does not reflect the closing of our business combination with Mountain Crest Acquisition Corp, which occurred on February 10th of this year in capitalized PLBY Group with over $100 million of unrestricted cash net of transaction expenses. Subsequently, our cash balance was reduced by $25 million on March 1st, when we acquired Lovers. I also want to mention that we intend to kick off a process to refinance our existing debt shortly after earnings. We will work with our advisor to evaluate alternatives and will ultimately decide, what to do based on available terms and market conditions. In terms of financial outlook, providing one in the current macro environment is difficult for many companies and we are no exception. We continue to experience supply chain disruptions due to COVID that impact our revenue, as key ports still face challenges receiving products causing us to remain out of stock on many items. Despite these uncertainties, we've had a great start to the year, so I want to provide some color on our outlook for the full year, based on what we know today. We believe that we will exceed $200 million of revenue in 2021. This number raises our prior outlook for Playboy, and includes revenue to be contributed from Lovers starting in March, but does not include revenue from any emerging growth opportunities that we may choose to invest in. Similar to last year, we expect much of this growth to come from increased direct-to-consumer revenue in both, Sexual Wellness and Style and Apparel. It's also important to note, that as we continue to grow our direct sales, there will be increased seasonality in the business, with revenue building throughout the year, and the fourth quarter, typically the strongest due to Halloween and the holiday shopping season. As Ben and Rachel described, we currently are seeing more opportunities to invest in the business than ever before. We expect to take advantage of these opportunities by making near-term investments, which we believe will accelerate our path to exceeding our long-term targets of $300 billion of revenue, and $100 million of adjusted EBITDA. These discretionary investments, along with the increased costs of being a newly public company, may slightly impact the 2021 EBITDA outlook that was previously communicated. But that impact will ultimately depend on the cadence and number of opportunities that we decided to pursue this year. We will evaluate each investment on the basis of its potential to accelerate long-term revenue and profit growth. And look forward to updating you on the progress of our growth strategy as we move through the year. With that, I'll ask the operator to please open the line for questions.

[Question-and:]

[Operator:]

Thank you. Our first question comes from the line of George Kelly of Roth Capital Partners. Your line is open.

[George Kelly:]

Hi, everyone. Thanks for taking my questions and congrats. Really nice quarter, so, nice work. So I do have a few questions for you. First, I wanted to talk about, your U.S. business. And you gave a statistic, I think it was over $100 million of retail sales coming from two of your key partners in the U.S. So I guess the question I wanted to ask you -- that surprised me. That was a big number. So my question is, as you're launching more on your own e-commerce channels, I'm speaking of Playboy and Pleasure for All and Others. How quickly, will those businesses ramp? I'm just looking at that $100 million and thinking, wow, the products look somewhat similar. So I don't know if you can help at all, just with what you've seen so far. Give us any kind of temper my expectations. I don't know, however, you want to answer that.

[Ben Kohn:]

Hey, George, it's Ben Kohn. Thanks for the question. So, the products aren't dissimilar to things we have planned, including taking back Playboy Labs, which historically have been outsourced, which is really taking us and turning us into the license or versus licensee, had really successful drops last year with Steve Aoki, et cetera. The opportunity in front of us, it really speaks to the consumer demand for the brand. So you're right, the number with Pac Sun and Missguided for retail sales exceeded $100 million. That's up over 15 times since 2018. The challenge with the business model, and this is really where we're in the bottom half of the first top half of the second evolving it is in that deal, we only see $0.05 to $0.06 on the dollar, right. So if you think about the consumer spend versus what we're booking at – as revenue, the opportunity is absolutely huge to grow our revenue moving forward, where we can book $0.100 on the dollar. And we believe, based on the product category that should translate to a very nice net margin somewhere in the 25% range and so we're excited. As far as the ramp on that, we just brought in Kevin Diamond, and we're very excited to be part of the team. He's continuing to build out the team underneath them. And I think it will be an evolution. So it's not like we're getting rid of the other revenue overnight. We have partnerships with – with these brands that we think are great partners of ours. But we believe long-term, not only domestically. But internationally as well, given that $3 billion are spent, we look to capture a much larger percentage of that over time, that will not only increase to a – a magnitude in our revenue growth, but also our EBITDA growth long-term.

[George Kelly:]

Okay. Excellent. And then maybe just to sort of follow-up on that conversation. How quickly do you expect to launch into? I think you gave a bit of a timeline, but so that the first real push is in Sexual Wellness and Apparel. And should we start to see cosmetics later this year? What do you think the timing is on that?

[Ben Kohn:]

Yeah. So, obviously, our ramp that we're projecting internally today on Apparel, just finishing the last is slow, and there's good chances if things work we will exceed those targets. And we'll talk more about that as the year proceeds. As far as Cosmetics, we have signed a partnership with a beauty incubator, we see a massive opportunity to cross-sell products with Yandy and Lovers customers. And we can talk more about that. Most likely that product, the First Color Cosmetics will launch in the beginning of 2022. There's a long lead time with this. But we think it's an investment and it's warranted. It's also an investment and a revenue stream that was not forecast in the 300 million. If you remember our model, we are projecting about $16 million of growth over five years in the Beauty & Grooming space. Obviously, we would not be making this investment in color cosmetics and ancillary products to generate $16 million in revenue. And so we hope in the future, we'll be able to talk more about how big that opportunity can be on a global basis, including and other international markets.

[George Kelly:]

Okay. Excellent. And then a separate topic on your international license business. Can you help me understand just the kind of normalized, if I just look over the next two to three years, in China, you're introducing – recently introduced women's apparel and you talked about e-commerce and growth in India? If you just sort of gave it a normalized growth rate, should this be kind of high single-digit revenue growth for the foreseeable future? Am I crazy saying that?

[Lance Barton:]

Well, I think what we've talked about is in 2020, our licensing business grew 20%. Again, it's not a linear growth. It will be a step function as we continue to accelerate our growth in international markets. But I would say, you know, long-term, I'm a firm believer from a macro perspective in the India market. Our first product will be launching there in October with Jay Jay Iconic Brands right before a festival season. There's big opportunities in gaming, in the spirit sector, craft beer, specifically, men's grooming and sexual wellness. In fact, in the sexual wellness category, we just terminated or parted ways with a small partner there that was really in the lingerie and innerwear space to take that back in-house. But, you know, I think India will be a combination of owned and operated in licensing. But we see big opportunities in Brazil, in Russia, and then in other places, including in China, where, you know, one of the biggest categories is men's grooming, and we're not in that today.

[George Kelly:]

Okay.

[Lance Barton:]

I’d just – also just add to that, you know, I think we've mentioned this before, but we've got 400 million of these revenues that are contracted with us through 2029. I think those numbers that we report don't even consider renewal rates on those contracts. I think historically, we've had a 95% renewal rate on that. So the nice thing is you've got that stable cash flow coming from that. And then to the extent that we decide to, you know, obviously, we didn't demonstrate it over the last few years and ability to really grow that licensing stream, we can do that by expanding into more of these partnerships, or as Ben talked about this opportunity to bring some of these things in-house, which could generate obviously a multiple of that revenue and EBITDA for us.

[George Kelly:]

Okay. Excellent. And then last question for me, NFT. So I'm no expert here, but can you tell me just a bit more about maybe this is -- sort of longer term plan and you're not wanting to say too much now and that's fine, but what is -- I know you have a big media library, of course, all the -- magazines and covers and all that. Are there other things that would be suitable for NFT, or just how are you -- what is it that you own that you think makes the most sense to potentially -- do some around NFT?

[Ben Kohn:]

Sure. So George, I'll take this and I want to turn it over to Rachel Weber to talk more about it. You know, we've been looking at the NFT space for multiple months now. We've had multiple proposals for licensing, which we have passed on. We believe the opportunity is huge long-term. It is something that we are going to be launching here in the near-term and Rachel will talk about that and we'll be making more announcements on it. It is not forecasted today in any of our projections moving forward for the balance of this year from a revenue perspective, given that the NFT space is emerging and our presence in that NFT space will be emerging. But let me turn it over to Rachel to talk more about our excitement around it.

[Rachel Webber:]

Great. Thanks George for the question. As you described, we're very excited by the NFT Art space in particular. You know sitting on this incredible art collection and our iconic archive of photography and some of – the world's most famous artists, Highbrow/Lowbrow Cartoon. We have an incredible wealth of material. We also have a long history of partnering with artists to create new material and that's definitely going to be part of our plan. Across the board, though to your point, we really see this as a long-term strategy for how we leverage block-chain technology across all of our categories. So in addition to Art, there's working with our talent relationships to create NFT, kind of ownable experiences with our talent. There's the opportunity for us to apply our streetwear to Blockchain technology. Streetwear is something that consumers inherently want to feel a collection of, want to feel ownership over, so that's a part of our comprehensive plan. And lastly, the Playboy brand in particular has in it, this inherent sense of once in a lifetime experiences and those best experiences that you can have. And there's a way for you to pair that and turn those experiences into collections of experiences or things that you can own, that we can leverage Blockchain and the kind of the Gamified LMS as well on top of the Blockchain. So as Ben described, we'll have some of our first announcements coming in the very near future. And we're really planning this comprehensive plan for the long-term.

[Ben Kohn:]

Yeah. So George, I think we have an unbelievable archive, 68 years. It is the 5,000 pieces of art we have, its covers, it's photography, it is so deep and rich in what's in there. But it's also the relationships that we've had for 68 years with artists, LeRoy Neiman was on staff at Playboy. It was us commissioning the Warhol with Andy Warhol. And so I think it's going to be a combination of leveraging the archives and the art collection, commissioning and working with emerging artists today for new works. A combination, thereof, and then those great talent relationships we have with influencers and with a whole host of creative community where we can also create NFTs in other digital collectibles with them.

[George Kelly:]

Okay, excellent. That's helpful. I'm going to hop in the queue. Thank you. Thanks for answering all my questions.

[Ben Kohn:]

Thanks, George.

[Operator:]

Thank you. Our next question comes from Alex Fuhrman of Craig-Hallum Capital. Your line is open.

[Alex Fuhrman:]

Great. Thanks very much for taking my question. Nice to speak with you all. It sounds like there's a ton of investment opportunities in front of you that you're looking at, I'd love to ask about a couple of them. In particular, emerging markets seems like a big opportunity just given how big the Playboy brand is in China. Can you talk a little bit more about your timeline and strategy to go after additional markets? It sounds like, Ben, you mentioned that we're going to see the first Playboy product in India in October; could that potentially be a significant business in 2022? Can you talk about what the ramp is going to look like there as well as maybe any other countries you're thinking about?

[Ben Kohn:]

Yeah. Thanks, Alex. Well, this, one of the reasons I took this job is how huge Playboy is and how valuable it is. And I've spoken to this, but I believe like the Nike Swoosh, we are sitting on one of the most valuable pieces of IP that exists in the world. And not only do we sell product domestically were we seeing your 15x increase in our domestic product. But internationally, we sell product in 180 countries. In China, we are one of the largest men's fashion brands. We have 2,500 brick-and-mortar stores, 1,000 e-com stores that's historically been men's apparel; we just launched women's apparel. We think there's a big opportunity in men's grooming and other categories. India, I believe long-term could be as large as China is today for us. It is the youngest consumer base in the world. It will be the largest consumer base in the world. It's English speaking. That can be a hybrid model as I mentioned before have owned and operated and licensing. But South America again, brand has -- basically 100% awareness is loved in South America. Brazil is really interesting opportunity for us not only with CBD products, but with our Beauty products, it's a massive beauty in grooming market down there. Russia is really interesting. We're seeing an expansion of the business in Europe as well. And so again, what's so unique about this brand, and I view it as really priceless, is that awareness that we have on a global basis, and it opens so many doors and provides so many opportunities to not only -- for future growth, not only capitalizing on the spend that's there, but expanding that spend exponentially in the future. And so what we'll see what happens in India, I'm very optimistic on it. As us the team, we have a team now dedicated and focusing on expanding our market there. And the same with China, where I think we can continue to launch others products and services. And then, there's the other opportunity in China, which is we made a big investment in 2019 in software, really tracking our online sales. And I think in no means do I want to tell you that will collect every single dollar in China. But I will tell you right now, there is a significant opportunity to start collecting overages in the future in China. We've been slowed down because of COVID and the nature of doing business there and being there in person. But we know what is being spent now on the online platforms. And we know there's an opportunity to enhance our margins and our revenue by collecting existing spend that is being under reported to us.

[Alex Fuhrman:]

Great. That's really helpful. Thanks Ben. And then I also wanted to ask about Lovers, you've been in this business for a couple of weeks now, have there been any surprises? Since you've owned the business, curious, what your thoughts are having had a more in depth look under the hood? And then, I know it's obviously early days right now, but as you look out having this network of brick and mortar store, what's the opportunity for Playboy-branded product, products from Yandy. Do you envision a pretty substantial overhaul of the current Lovers store, or is it going to be more tweaking around the edges. We'd love to just hear more about your strategy there.

[Ben Kohn:]

Yes, I think let's start with our M&A strategy, because we have a really robust pipeline of M&A. Both Lance and I, and other members of the team have a rich history in M&A and a ton of experience over the years. Lance ran M&A for both IAC and then for Match, and I spent 20-plus years in private equity before I took the job full time here. One deals have to be financially compelling. I always put my private equity hat on when we're looking at these. But one of the reasons that I left private equity to do this full time was the opportunity to really realize synergies between companies. And so not only do deals for us have to be financially compelling, we also have to see real synergies. And those synergies can come in two forms. One on the cost side, but more importantly for us, as we look to really expand our revenue is by buying a company are we accelerating our organic path, because there's a skilled -- skill set that's coming in that helps us accelerate it. And I believe that exists out Lovers today. So, a couple stats, we tested bedroom accessories at Yandy last year saw unbelievable traction with very few skews. We are now actively going to market to our Yandy customer base a full source assortment of Lovers products. But on the flip side of that also, Lovers, about 20% of their revenue comes from lingerie. Again, same issue that we had at Yandy, which is very few skews that come off of that. So, now we have the ability to take that full Lover -- Yandy merchandising and market that to the Lovers audience, and then we're going to be cross selling this like we started to do in the fourth quarter across all of our e-comm stores. So if you saw, in the fourth quarter with Playboy, we sold Halloween costumes for the first time. We started selling lingerie. Yandy also gave us great testing on our Playboy branded lingerie. So the two capsule collections with them, we have another one coming up. It's sold out pretty much immediately, the first one. The second one, we ended up, I can't remember, how many reorders or merchandise we had. And that is now giving us the data to actually launch our own lingerie business that Rachel touched on and either under the Playboy or the Playmates franchise moving forward, which we think has massive global potential long-term, huge market for lingerie, unbelievable margins. As far as the retail side, we have our products in a number of Lovers stores and we are working on embedding them in all of the Lovers stores, including our CBD, condoms, wipes, et cetera. Lovers also has a great private label division. And so, we can immediately launch other products that we're targeting for later this year. And then, from the storefront, 70% of Sexual Wellness store sales still come from online -- sorry, from retail environments. And so we're able to see a higher sell-through of our products there, because we're able to educate the consumer on those products. I do see a world in which we can continue to evolve their storefronts. Sexual Wellness has become completely mainstream over the last three years. So, it's Gwyneth Paltrow going on The Ellen Show and talking about her favorite vibrator. It's -- Goop just launched the vibrator actually. And so, I think, there's a way to continue to merge the stores to drive additional growth. Barbara Cook, who joins us as the CEO of Lovers, has a really rich history in retail. We also think there’s an opportunity, although we're not forecasting at this point for Playboy branded experiential retail, whether that be on a permanent basis, or a pop up basis, but we think there's a great opportunity to continue to drive brand awareness for us. And really what the future of Playboy is through both.

[Alex Fuhrman:]

Great. That's really helpful. Thanks very much.

[Operator:]

Thank you. Our next question comes from Austin Moldow of Canaccord. Your line is open.

[Austin Moldow:]

Hi. Thanks for taking my questions. Can you talk through the underlying drivers of that 20% licensing growth?

[Ben Kohn:]

Yes. So Austin, its Ben Kohn. How are you?

[Austin Moldow:]

Good.

[Ben Kohn:]

The underlying growth was really across the board. So, we signed a new kids deal in China that we only got a very small benefit of last year. Our apparel business in the United States, so if you look at it, with PacSun misguided again, that was a business that on a combined basis in 2018 did roughly $6 million, growing to $29 million in 2019, and over $100 million last year, and obviously a percentage of our revenue. But the way to think about our licensing businesses, again, it's a lot of onesies and twosies, as is this business. And so it's a really well diversified global revenue stream. And so there's contributions all over the place. We have new gaming partnerships. We have new gaming partnerships that we signed that we don't book revenue for, but we will starting this year as our poker rooms and their Black deals come online. And then on top of the growth we saw, we've also freed up a ton of new whitespace that we plan on licensing for areas that we don't want to operate ourselves in.

[Austin Moldow:]

Great. Thanks for that. Can you walk us through the puts and takes for near-term, direct-to-consumer operating margins? And maybe what you think long-term that D2C operating margin could be?

[Ben Kohn:]

Yeah. Look, I think, on the near-term, we're still in the ramp up phase. What so unique about this brand is the 50 million people we interact with every single day. And so unlike other brands, and I'm talking about Playboy specific now, that spend a ton of money on customer acquisition costs. We historically have not done that, because we have an embedded audience today. I'm really excited about what Kevin is going to do. Long-term, I believe, as we said, for a company-wide basis, and this is how we think about it, we should be in the 30% margin, depending on product category. On the D2C basis, I would assume we're going be sort of in that 25%. We also have really unique assets here. We've talked about the art collection. And we have a whole host of other things that we think to be very high ticket items on e-comm that we can merchandise around, that would allow us to actually expand those margins.

[Austin Moldow:]

Got it? And lastly, could you sort of refresh us on your relationship with Walmart and CVS as, as it pertains to your Sexual Wellness products?

[Ben Kohn:]

Yeah. Again, I think, the business rationale for entering those two was really about more awareness in the Sexual Wellness space. They're not money making – they're not big moneymakers for us. Because the margins are slim, by the time you get done paying big box retailer fees. And so from a strategy perspective, it's a nice to have, again, it's a small contributor, what we're really focused on is our owned and operated in D2C efforts, where we can drive superior lifetime value as a customer, which is something with our new data science practice we're really focused on. And I think, again, in this cluttered and fickle consumer environment that we live in, we have such a massive – mass unique advantage, and that this brand stands out amongst all others. And that's I think I opened with is this, The Rabbit Head is so recognizable, and stands out that it gives us – it gives us a really unique competitive advantage versus others that are spending a ton of money trying to build brand awareness, we don't have to do that. Now we have to invest in the brand, which we do every day. And I think you start – starting to see the fruits of that this year with our streetwear business, growing up basically 40x a year-over-year really around Gen-Z. So we'll continue to invest in the brand. But the awareness is there. And I think in this fickle consumer environment, this is a brand that truly stands out.

[Austin Moldow:]

Great. Thanks for the color.

[Operator:]

Thank you. Our next question comes from Greg Pendy of Sidoti. Your line is open.

[Greg Pendy:]

Hey, guys, thanks for taking my questions. Just one on Lovers, it looks like you're quite – you're acquiring 40 plus stores versus Yandy, I don't believe there was any store footprint tied to that acquisition. So just kind of wondering, what type of lease exposure are you taking on, in light of the – some of the trends that are going on in retail right now. And what is your appetite I guess, for further stores as you think about acquisitions going forward?

[Ben Kohn:]

Look, first we’ll start on appetite for expanding stores, I think the startup cost of expanding these stores is relatively minimal, talking 100,000, couple of 100,000, something like that. We – we view it as – because they're an omni-channel retailer and the in-store experience can sometimes drive sales online as well. So one of the things we really liked about Lovers was, was the fact that they provided a really good in-store experience. We're not focused, I don't think on immediately expanding our footprint there. But it's something that, I think certainly could be done with pretty minimal capital outlays. On the lease exposure side, I don't think it's anything material worth calling out. You know, I have to go back to our financials to see, but I think most of the leases will expire within the next four years. Again, I think the startup costs on all of these are pretty minimal. And we've got opportunity, obviously to renegotiate for lower rates whenever these leases are up for renewal. I don't know Ben, anything else to add?

[Ben Kohn:]

Yeah. The only thing I would add is, what's great about Lovers in their stores is as Lance said, the startup costs on these are 100,000 give or take, the payback is very quick. And so we are able to acquire customers through the stores in a very profitable way. And then transfer those customers to online as well. And so I think it's very unique versus, when you look at – when you look at the universe, others are trying to acquire customers online you potentially lose money on those customers. In the beginning, we have the ability to acquire customers multiple different ways, right, so online, as well as brick and mortar and then transfer that brick and mortar customer to an online customer. And so that's what we're focused on long term. Again, is B2C, we think retail does have a place. It's not going to be the primary driver, but we can leverage retail and the customer acquisition to cross-sell that customer with multiple different products by capturing their information at the POS or the point of sale.

[Lance Barton:]

And also, Greg, just – past I think I've said the leases expire over the next four years. I think half of them are actually expiring in two years or less.

[Greg Pendy:]

Okay. That makes sense. That's helpful. Thanks a lot.

[Operator:]

Thank you. Ladies and gentlemen that does conclude today's conference call. Thank you for participating. You may now disconnect.