Spin Master Reports Q3 2024 Financial Results
Q3 2024 Revenue increases 25%; Reiterates 2024 Outlook
TORONTO, Oct. 30, 2024 /PRNewswire/ - Spin Master Corp. ("Spin Master" or the "Company") (TSX:TOY) (www.spinmaster.com), a leading global children's entertainment company, today announced its financial results for the three and nine months ended September 30, 2024. The Company's full Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2024 is available under the Company's profile on SEDAR+ (www.sedarplus.com) and posted on the Company's web site at www.spinmaster.com. All financial information is presented in United States dollars ("$", "dollars" and "US$") and has been rounded to the nearest hundred thousand, except per share amounts and where otherwise indicated.
Consolidated Financial Highlights for Q3 2024 as compared to the same period in 2023
Revenue was $885.7 million, an increase of 24.7% from $710.2 million, and includes Melissa & Doug Revenue of $155.0 million.
Revenue by operating segment reflected an increase of 34.8% in Toys and declines of 41.5% in Entertainment and 16.8% in Digital Games.
Toy Revenue was $810.9 million compared to $601.5 million. Toy Gross Product Sales1 were $922.7 million, an increase of $244.1 million or 36.0% from $678.6 million, and includes Melissa & Doug Toy Gross Product Sales1 of $182.3 million. Toy Gross Product Sales, excluding Melissa & Doug1 were $740.4 million, an increase of $61.8 million or 9.1%.
Operating income was $203.2 million compared to $197.2 million.
Adjusted EBITDA1 was $277.5 million, including Melissa & Doug Adjusted EBITDA1 of $49.4 million, compared to $234.9 million, an increase of $42.6 million. Adjusted EBITDA Margin1 was 31.3% compared to 33.1%. Adjusted EBITDA, excluding Melissa & Doug1 was $228.1 million compared to $234.9 million. Included in Q3 2023 was distribution revenue of $15.6 million related to the initial delivery of PAW Patrol: The Mighty Movie. Excluding this distribution revenue, Adjusted EBITDA, excluding Melissa & Doug1 increased by $8.8 million, driven by higher Toy Revenue, partially offset by fewer Entertainment content deliveries and a decrease in the Digital Games Segment. Adjusted EBITDA Margin, excluding Melissa & Doug1 was 31.2%. Adjusted EBITDA Margin, excluding Melissa & Doug1 and the accretive effect of PAW Patrol: The Mighty Movie distribution revenue in the prior year, decreased by 40 basis points. The decrease is due to a higher proportion of Adjusted EBITDA1 contributed by the Toys Segment and a decrease in the Digital Games Segment.
Net Income was $140.1 million or $1.32 per share (diluted) compared to $155.4 million or $1.45 per share (diluted).
Adjusted Net Income1 was $169.7 million or $1.60 per share (diluted) compared to $143.6 million or $1.34 per share (diluted).
Achieved $3.1 million in Net Cost Synergies2 and continues to expect to achieve approximately $6 million in Net Cost Synergies2 in 2024.
Cash provided by operating activities was $74.9 million compared to $144.3 million.
Free Cash Flow1 was $44.7 million compared to $118.9 million.
Repurchased and cancelled 952,142 subordinate voting shares for $21.4 million (C$29.2 million) through the Company's Normal Course Issuer Bid (the "NCIB") program.
Subsequent to September 30, 2024, the Company declared a quarterly dividend of C$0.12 per outstanding subordinate voting share and multiple voting share, payable on January 10, 2025.
"We are pleased with our revenue growth in third quarter, which was primarily driven by our Toys creative centre, including incremental revenue from Melissa & Doug," said Max Rangel, Spin Master's Global President & CEO. "Although the broader economic conditions remain a challenge, we generated toy sales growth across major markets reflecting our continued commitment to creating innovative products, powerful brands and magical play experiences. Both Entertainment and Digital Games revenue declined this quarter as a result of comparisons against the highly successful PAW Movie last year as well as lower in-game purchases in Toca Boca World. As part of our strategy of leveraging our IP across our creative centres, we launched Rubik's Match, a match-3 mobile digital game. We believe we are well positioned to continue to grow market share and maintain our leadership position within the children's entertainment industry through the execution of our long-term strategy and focus on reimagining everyday play."
"We delivered revenue growth of 25% in the third quarter, driven by an increase in gross product sales in our Toys creative centre," said Mark Segal, Spin Master's Chief Financial Officer. "Melissa & Doug performed well, with revenue of $155 million and Adjusted EBITDA of $49 million. We are executing effectively on the integration, delivering $4.5 million in net cost synergies year to date and we are continuing to identify revenue growth opportunities. Adjusted EBITDA for the quarter was up just under $9 million comparatively, excluding Melissa & Doug and the PAW Movie in the prior year. We are maintaining our outlook for 2024 for both Spin Master and Melissa & Doug. We continued to execute our capital allocation strategy and by the end of Q3, we repurchased over 2 million shares under our NCIB. Over the long term, we will continue to invest to drive growth, while also managing our costs and preserving financial flexibility to maximize shareholder value."
2024 Outlook
The Company continues to expect for 2024:
Toy Gross Product Sales, excluding Melissa & Doug1 to be in line with 2023.
Revenue, excluding Melissa & Doug1, to be in line with 2023.
Adjusted EBITDA Margin, excluding Melissa & Doug1 and Net Cost Synergies2 realized, to be in line with 2023.
Incrementally, the Company continues to expect for 2024:
Melissa & Doug Toy Gross Product Sales1 to be between $420 million to $430 million.
Melissa & Doug Revenue to be between $370 million to $375 million.
Melissa & Doug Adjusted EBITDA Margin1 of approximately 19.5%.
To achieve in addition approximately $6 million in Net Cost Synergies2 towards the target of approximately $25 million to $30 million in Run-rate Net Cost Synergies2 by the end of 2026.
Consolidated Financial Results as compared to the same period in 2023
Effective January 2, 2024, Melissa & Doug's operating results for the three months ended September 30, 2024 are included in the Company's consolidated results.
(US$ millions, except per share information)
Q3 2024
Q3 2023
$ Change
Consolidated Results
Revenue4
$
885.7
$
710.2
$
175.5
Operating Income
$
203.2
$
197.2
$
6.0
Operating Margin2
22.9 %
27.8 %
Adjusted Operating Income1,3
$
243.4
$
190.2
$
53.2
Adjusted Operating Margin1
27.5 %
26.8 %
Net Income
$
140.1
$
155.4
$
(15.3)
Adjusted Net Income1,3
$
169.7
$
143.6
$
26.1
Adjusted EBITDA1,3,4
$
277.5
$
234.9
$
42.6
Adjusted EBITDA Margin1
31.3 %
33.1 %
Earnings Per Share ("EPS")
Basic EPS
$
1.36
$
1.50
Diluted EPS
$
1.32
$
1.45
Adjusted Basic EPS1
$
1.65
$
1.39
Adjusted Diluted EPS1
$
1.60
$
1.34
Weighted average number of shares (in millions)
Basic
103.0
103.6
Diluted
105.9
107.3
Selected Cash Flow Data
Cash provided by operating activities
$
74.9
$
144.3
$
(69.4)
Cash used in investing activities
$
(30.2)
$
(25.1)
$
(5.1)
Cash used in financing activities
$
(88.5)
$
(8.4)
$
(80.1)
Free Cash Flow1
$
44.7
$
118.9
$
(74.2)
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures".
2 Operating Margin is calculated as Operating Income divided by Revenue.
3 Refer to the "Reconciliation of Non-GAAP Financial Measures" section for further details on the adjustments.
4 Included in the operating results of the three months ended September 30, 2024 is Melissa & Doug Revenue of $155.0 million and Melissa & Doug Adjusted EBITDA1 of $49.4 million.
The following summarizes the impact of Melissa & Doug's operating results on the three months ended September 30, 2024 consolidated results:
(US$ millions)
Q3 2024
Q3 2023
Revenue
885.7
710.2
Melissa & Doug Revenue
155.0
—
Revenue, excluding Melissa & Doug1
730.7
710.2
Toys Gross Product Sales1
922.7
678.6
Melissa & Doug Toy Gross Product Sales1
182.3
—
Toys Gross Product Sales, excluding Melissa & Doug1
740.4
678.6
Adjusted EBITDA1
277.5
234.9
Melissa & Doug Adjusted EBITDA1
49.4
—
Adjusted EBITDA, excluding Melissa & Doug1
228.1
234.9
Adjusted EBITDA Margin1
31.3 %
33.1 %
Adjusted EBITDA Margin, excluding Melissa & Doug1
31.2 %
33.1 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures".
Segmented Financial Results as compared to the same period in 2023
(US$ millions)
Q3 2024
Q3 2023
Toys
Entertainment
Digital Games
Corporate & Other1
Total
Toys
Entertainment
Digital Games
Corporate & Other1
Total
Revenue
$ 810.9
$ 37.1
$ 37.7
$ ,
$ 885.7
$ 601.5
$ 63.4
$ 45.3
$ ,
$ 710.2
Operating Income (Loss)
$ 183.5
$ 19.9
$ 5.1
$ (5.3)
$ 203.2
$ 149.0
$ 23.3
$ 13.6
$ 11.3
197.2
Adjusted Operating Income (Loss)2
$ 219.0
$ 20.9
$ 7.3
$ (3.8)
$ 243.4
$ 154.0
$ 24.0
$ 15.5
$ (3.3)
$ 190.2
Adjusted EBITDA2
$ 242.2
$ 30.0
$ 9.1
$ (3.8)
$ 277.5
$ 166.8
$ 53.8
$ 17.6
$ (3.3)
$ 234.9
1 Corporate & Other includes certain corporate costs, foreign exchange and merger and acquisition-related costs, as well as fair value gains and losses.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures".
Toys Segment Results
The following table provides a summary of the Toys segment operating results, for the three months ended September 30, 2024 and 2023:
(US$ millions)
Q3 2024
Q3 2023
$ Change
% Change
Preschool, Infant & Toddler and Plush1
$
469.6
$
301.4
$
168.2
55.8 %
Activities, Games & Puzzles and Dolls & Interactive
$
294.5
$
218.7
$
75.8
34.7 %
Wheels & Action
$
152.9
$
151.2
$
1.7
1.1 %
Outdoor
$
5.7
$
7.3
$
(1.6)
(21.9) %
Toy Gross Product Sales2,5
$
922.7
$
678.6
$
244.1
36.0 %
Sales Allowances3
$
(112.7)
$
(77.1)
$
(35.6)
46.2 %
Sales Allowances % of Toy Gross Product Sales2
12.2 %
11.4 %
0.8 %
Toy Net Sales
$
810.0
$
601.5
$
208.5
34.7 %
Toy - Other Revenue
$
0.9
$
—
$
0.9
n.m.
Toy Revenue
$
810.9
$
601.5
$
209.4
34.8 %
Toys Operating Income
$
183.5
$
149.0
$
34.5
23.2 %
Toys Operating Margin4
22.6 %
24.8 %
(2.2) %
Toys Adjusted EBITDA2
$
242.2
$
166.8
$
75.4
45.2 %
Toys Adjusted EBITDA Margin2
29.9 %
27.7 %
2.2 %
1 Melissa & Doug is included within the Preschool, Infant & Toddler and Plush product categories beginning from the date of acquisition.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures".
3 The Company enters arrangements to provide sales allowances requested by customers relating to cooperative advertising, contractual and negotiated promotional discounts, volume rebates, markdowns, and costs incurred by customers to sell the Company's products.
4 Operating Margin is calculated as segment Operating Income divided by segment Revenue.
5 Effective January 1, 2024, the Company has changed its product categories to align with the Company's product offerings going forward. Prior year comparative information has been updated to conform with the current disclosure. Refer to Addendum section for more details.
(US$ millions)
Q3 2024
Q3 2023
$ Change
% Change
Toy Revenue
810.9
601.5
209.4
34.8 %
Melissa & Doug Revenue
155.0
—
155.0
n.m.
Toy Revenue, excluding Melissa & Doug1
655.9
601.5
54.4
9.0 %
Toys Adjusted EBITDA1
242.2
166.8
75.4
45.2 %
Melissa & Doug Adjusted EBITDA1
49.4
—
49.4
n.m.
Toys Adjusted EBITDA, excluding Melissa & Doug1
192.8
166.8
26.0
15.6 %
Toys Adjusted EBITDA Margin1
29.9 %
27.7 %
Toys Adjusted EBITDA Margin, excluding Melissa & Doug1
29.4 %
27.7 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures".
Toy Revenue increased by $209.4 million or 34.8% to $810.9 million.
Toy Gross Product Sales1 was $922.7 million, an increase of $244.1 million or 36.0% from $678.6 million, including Melissa & Doug Toy Gross Product Sales1 of $182.3 million. Toy Gross Product Sales1 increased primarily as a result of the inclusion of Melissa & Doug, higher shipment volume driven by enhanced product innovation and a shift of customer orders into the third quarter from the second quarter. Toy Gross Product Sales, excluding Melissa & Doug1 was $740.4 million, an increase of $61.8 million or 9.1% from $678.6 million.
Sales Allowances increased by $35.6 million to $112.7 million. As a percentage of Toy Gross Product Sales1, Sales Allowances increased to 12.2% from 11.4%, due to retail trade promotions related to Melissa & Doug.
Toys Operating income was $183.5 million compared to Toy Operating Income of $149.0 million.
Toys Operating Margin was 22.6% compared to 24.8%.
Toys Adjusted EBITDA Margin1 was 29.9% compared to 27.7%. The increase in Toys Adjusted EBITDA Margin1 was driven primarily by the higher Toy Revenue and the inclusion of Melissa & Doug, resulting in improved operating leverage.
Entertainment Segment Results
The following table provides a summary of Entertainment segment operating results, for the three months ended September 30, 2024 and 2023:
(US$ millions)
Q3 2024
Q3 2023
$ Change
% Change
Entertainment Revenue
$
37.1
$
63.4
$
(26.3)
(41.5) %
Entertainment Operating Income
$
19.9
$
23.3
$
(3.4)
