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Jakks Pacific Reports First Quarter 2024 Financial Results image

Jakks Pacific Reports First Quarter 2024 Financial Results

Santa Monica, CA —  Jakks Pacific reported financial results for the first quarter ended March 31, 2024.

First Quarter 2024

  • Net sales were $90.1 million, a year-over-year decrease of $17.4 million or 16%, driven by a lack of new film releases vs. prior year
  • Gross margin of 23.4%, down 580 basis points vs. Q1 2023, led by higher inventory obsolescence expense, and retailer markdowns
  • Gross profit of $21.1 million, down $10.4 million compared to $31.4 million in Q1 2023
  • Operating loss of $21.3 million, compared to an operating loss of $4.4 million in Q1 2023
  • Adjusted net loss attributable to common stockholders (a non-GAAP measure) of $11.3 million (or $1.09 per diluted share), compared to an adjusted net loss attributable to common stockholders of $4.0 million (or $0.40 per diluted share) in Q1 2023
  • Adjusted EBITDA (a non-GAAP measure) of $(17.2) million vs. $(1.1) million in Q1 2023

Management Commentary
“The beginning of the year at JAKKS is always our smallest shipping quarter and is focused on taking stock of the just concluded holiday season, solidifying our full-year plans and development work towards longer-term opportunities,” said Stephen Berman, Chairman and CEO of JAKKS Pacific, “and the quarter just concluded was very active on all three of those fronts. For the past two years we have had the added benefit of a robust film slate layering on top of our strong core business. Last year, we were shipping products to support what proved to be two of the year’s largest grossing films, The Super Mario Bros. Movie and The Little Mermaid. Without that new news in Spring 2024, from a shipping and retail sales perspective, we experienced lower levels of both as anticipated. We also continued to see weakening demand for products from a Q4 2023 film release. We supported our retail partners in funding markdowns to move that stock as well as addressing cancelled reorders for which we had built inventory. Unfortunately, these types of situations happen in our business, and we have found it is best to address them head-on and move on focusing on the fall season where the majority of the business is done. We are very excited about what is ahead – inclusive of our supporting two of the bigger film releases planned for Q4 of this year, the traction we are getting on some new 2025 initiatives as well as our relentless efforts to expand our international network.”

“Separately, we took the opportunity to retire our Preferred Shares at a negotiated discount to the contractual valuation. These shares were the last balance sheet artifact from our 2019 restructuring. For the first time in many years, there are no lenders or other parties restricting the common stockholders’ claim over the entire enterprise and its financial results. We consider this a fantastic starting point as we move forward with no competing interests to the goal of maximizing long-term shareholder value.”

First Quarter 2023 Results
Net sales for the first quarter of 2024 were $90.1 million, down 16% versus $107.5 million last year. The Toys/Consumer Products segment sales were down 15% globally and sales of Costumes were down 25% compared to last year.

Balance Sheet Highlights
The Company’s cash and cash equivalents (including restricted cash) totaled $35.5 million as of March 31, 2024, compared to $38.3 million at the same time last year, and to $72.6 million as of December 31, 2023.

Total debt was zero, compared to $29.4 million as of March 31, 2023. Total debt included the amount outstanding under the Company’s term loan, net of unamortized discounts and issuance costs.

Inventory was $46.3 million, compared to $64.0 million in total inventory as of March 31, 2023, and $52.6 million as of December 31, 2023.

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
March 31, December 31,
2024 2023 2023
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 35,290 $ 38,103 $ 72,350
Restricted cash 202 198 204
Accounts receivable, net 79,875 85,171 123,797
Inventory 46,341 63,988 52,647
Prepaid expenses and other assets 19,087 12,849 6,374
Total current assets 180,795 200,309 255,372
Property and equipment 138,066 130,668 135,956
Less accumulated depreciation and amortization 122,694 114,499 121,357
Property and equipment, net 15,372 16,169 14,599
Operating lease right-of-use assets, net 22,965 17,634 23,592
Deferred income tax assets, net 68,142 57,804 68,143
Goodwill 34,997 35,083 35,083
Intangibles and other assets, net 2,063 2,387 2,162
Total assets $ 324,334 $ 329,386 $ 398,951
Liabilities, Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable $ 31,683 $ 27,714 $ 42,177
Accounts payable – Meisheng (related party) 8,689 8,024 12,259
Accrued expenses 36,994 27,006 45,102
Reserve for sales returns and allowances 27,859 41,064 38,531
Income taxes payable 6,241 3,785
Short term operating lease liabilities 8,237 10,009 7,380
Short term debt, net 2,475
Total current liabilities 113,462 122,533 149,234
Long term operating lease liabilities 15,961 8,095 16,666
Accrued expenses – long term 3,183 3,746
Debt, non-current portion, net 26,969
Preferred stock derivative liability 21,771 29,947
Income taxes payable 3,295 2,941 3,245
Total liabilities 135,901 182,309 202,838
Preferred stock accrued dividends 4,857 5,992
Stockholders’ equity:
Common stock, $.001 par value 11 10 10
Additional paid-in capital 292,231 275,695 278,642
Accumulated deficit (88,117 ) (117,331 ) (73,612 )
Accumulated other comprehensive loss (16,192 ) (17,150 ) (15,627 )
Total JAKKS Pacific, Inc. stockholders’ equity 187,933 141,224 189,413
Non-controlling interests 500 996 708
Total stockholders’ equity 188,433 142,220 190,121
Total liabilities, preferred stock and stockholders’ equity $ 324,334 $ 329,386 $ 398,951
Supplemental Balance Sheet and Cash Flow Data (Unaudited)
March 31,
Key Balance Sheet Data: 2024 2023
Accounts receivable days sales outstanding (DSO) 81 71
Inventory turnover (DSI) 61 76
Three Months Ended March 31,
Condensed Cash Flow Data: 2024 2023
Cash flows used in operating activities $ (7,938 ) $ (4,116 )
Cash flows used in investing activities (3,634 ) (3,472 )
Cash flows used in financing activities and other (25,490 ) (39,601 )
Increase in cash, cash equivalents and restricted cash $ (37,062 ) $ (47,189 )
Capital expenditures $ (2,228 ) $ (3,490 )
JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
2024 2023 Δ (%)
(In thousands, except per share data)
Net sales $ 90,076 $ 107,484 (16)%
Less: Cost of sales
Cost of goods 53,821 58,304 (8 )
Royalty expense 13,776 16,654 (17 )
Amortization of tools and molds 1,427 1,089 31
Cost of sales 69,024 76,047 (9 )
Gross profit 21,052 31,437 (33 )
Direct selling expenses 8,097 7,741 5
General and administrative expenses 34,192 27,994 22
Depreciation and amortization 87 102 (15 )
Selling, general and administrative expenses 42,376 35,837 18
Loss from operations (21,324 ) (4,400 ) 385
Other income (expense):
Other income (expense), net 138 438 (68 )
Change in fair value of preferred stock derivative liability 147 nm
Interest income 376 117 221
Interest expense (143 ) (3,003 ) (95 )
Loss before benefit from income taxes (20,953 ) (6,701 ) 213
Benefit from income taxes (6,728 ) (1,383 ) 386
Net loss (14,225 ) (5,318 ) 167
Net income (loss) attributable to non-controlling interests 280 (5 ) nm
Net loss attributable to JAKKS Pacific, Inc. $ (14,505 ) $ (5,313 ) 173 %
Net loss attributable to common stockholders $ (13,175 ) $ (5,680 ) 132 %
Loss per share – basic & diluted $ (1.27 ) $ (0.58 )
Shares used in loss per share – basic & diluted 10,354 9,871
Three Months Ended March 31,
2024 2023 Δ bps
Fav/(Unfav)
Net sales 100.0% 100.0%
Less: Cost of sales
Cost of goods 59.7 54.3 (540 )
Royalty expense 15.3 15.5 20
Amortization of tools and molds 1.6 1.0 (60 )
Cost of sales 76.6 70.8 (580 )
Gross profit 23.4 29.2 (580 )
Direct selling expenses 9.0 7.2 (180 )
General and administrative expenses 38.0 26.0 (1,200 )
Depreciation and amortization 0.1 0.1
Selling, general and administrative expenses 47.1 33.3 (1,380 )
Loss from operations (23.7 ) (4.1 ) (1,960 )
Other income (expense):
Other income (expense), net 0.2 0.4
Change in fair value of preferred stock derivative liability 0.1
Interest income 0.4 0.1
Interest expense (0.2 ) (2.8 )
Loss before benefit from income taxes (23.3 ) (6.3 )
Benefit from income taxes (7.5 ) (1.3 )
Net loss (15.8 ) (5.0 )
Net income (loss) attributable to non-controlling interests 0.3
Net loss attributable to JAKKS Pacific, Inc. (16.1)% (5.0)%
Net loss attributable to common stockholders (14.6)% (5.3)%
JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)
Three Months Ended March 31,
2024 2023 Δ ($)
(In thousands)
EBITDA and Adjusted EBITDA
Net loss $ (14,225 ) $ (5,318 ) $ (8,907 )
  Interest expense 143 3,003 (2,860 )
  Interest income (376 ) (117 ) (259 )
  Provision for income taxes (6,728 ) (1,383 ) (5,345 )
  Depreciation and amortization 1,514 1,191 323
EBITDA (19,672 ) (2,624 ) (17,048 )
Adjustments:
Other (income) expense, net (138 ) (438 ) 300
Restricted stock compensation expense 2,575 2,089 486
Change in fair value of preferred stock derivative liability (147 ) 147
Adjusted EBITDA $ (17,235 ) $ (1,120 ) $ (16,115 )
Adjusted EBITDA/Net sales % (19.1 )% (1.0 )% -1810 bps
Trailing Twelve Months Ended March 31,
2024 2023 Δ ($)
(In thousands)
TTM EBITDA and TTM Adjusted EBITDA
TTM net income $ 29,206 $ 89,674 $ (60,468 )
  Interest expense 3,591 11,984 (8,393 )
  Interest income (1,603 ) (241 ) (1,362 )
  Provision for (benefit from) income taxes 1,488 (42,808 ) 44,296
  Depreciation and amortization 10,659 9,957 702
TTM EBITDA 43,341 68,566 (25,225 )
Adjustments:
Loss from joint ventures (JAKKS Pacific, Inc. – 51%) 276 276
Loss from joint ventures (Meisheng – 49%) 289 289
Other (income) expense, net (263 ) (1,149 ) 886
Restricted stock compensation expense 8,513 6,301 2,212
Change in fair value of preferred stock derivative liability 8,176 (156 ) 8,332
Employee Retention Credit/gov’t employment support (249 ) 249
Molds and tooling capitalization (1,751 ) (1,751 )
Loss on debt extinguishment 1,023 1,023
TTM Adjusted EBITDA $ 59,604 $ 73,313 $ (13,709 )
TTM Adjusted EBITDA/TTM Net sales % 8.6 % 9.4 % -80 bps
Three Months Ended March 31,
2024 2023 Δ ($)
(In thousands, except per share data)
Adjusted net loss attributable to common stockholders
Net loss attributable to common stockholders $ (13,175 ) $ (5,680 ) $ (7,495 )
Restricted stock compensation expense 2,575 2,089 486
Change in fair value of preferred stock derivative liability (147 ) 147
2021 BSP Term Loan prepayment penalty 150 (150 )
Tax impact of additional charges (657 ) (368 ) (289 )
Adjusted net loss attributable to common stockholders $ (11,257 ) $ (3,956 ) $ (7,301 )
Adjusted loss per share – basic & diluted $ (1.09 ) $ (0.40 ) $ (0.69 )
Shares used in adjusted loss per share – basic & diluted 10,354 9,871 483
JAKKS Pacific, Inc. and Subsidiaries
Net Sales by Division and Geographic Region
(In thousands) QTD Q1
Divisions 2024 2023 2022 % Change 2024 v 2023 % Change 2023 v 2022
Toys/Consumer Products $ 82,910 $ 97,893 $ 111,123 -15.3 % -11.9 %
Dolls, Role-Play/Dress Up 40,574 47,843 62,006 -15.2 % -22.8 %
Action Play & Collectibles 33,008 37,846 31,698 -12.8 % 19.4 %
Outdoor/Seasonal Toys 9,328 12,204 17,419 -23.6 % -29.9 %
Costumes $ 7,166 $ 9,591 $ 9,758 -25.3 % -1.7 %
Total $ 90,076 $ 107,484 $ 120,881 -16.2 % -11.1 %
(In thousands) QTD Q1
Regions 2024 2023 2022 % Change 2024 v 2023 % Change 2023 v 2022
United States $ 70,430 $ 80,443 $ 97,050 -12.4 % -17.1 %
Europe 5,735 10,162 13,389 -43.6 % -24.1 %
Latin America 7,996 9,204 2,385 -13.1 % 285.9 %
Canada 3,370 4,054 3,379 -16.9 % 20.0 %
Asia 965 1,380 2,076 -30.1 % -33.5 %
Australia & New Zealand 1,346 1,608 1,491 -16.3 % 7.8 %
Middle East & Africa 234 633 1,111 -63.0 % -43.0 %
Total $ 90,076 $ 107,484 $ 120,881 -16.2 % -11.1 %
(In thousands) QTD Q1
Regions 2024 2023 2022 % Change 2024 v 2023 % Change 2023 v 2022
North America $ 73,800 $ 84,497 $ 100,429 -12.7 % -15.9 %
International 16,276 22,987 20,452 -29.2 % 12.4 %
Total $ 90,076 $ 107,484 $ 120,881 -16.2 % -11.1 %

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