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Jakks Pacific Reports Fourth Quarter and Full-Year 2023 Financial Results image

Jakks Pacific Reports Fourth Quarter and Full-Year 2023 Financial Results

Full-year Gross Profit Dollars up 6% vs. 2022; Third Consecutive Annual Increase

Santa Monica, CA —  Jakks Pacific reported financial results for the fourth quarter ended December 31, 2023.

Fourth Quarter 2023

  • Net sales were $127.4 million, a year-over-year decrease of 3%
  • Gross margin of 26.5%, up 480 basis points vs. Q4 2022, led by improved landed product cost and reduced inventory obsolescence expense
  • Gross profit of $33.7 million, up 18% compared to $28.6 million in Q4 2022
  • Net loss attributable to common stockholders of $11.3 million (or $1.12 per diluted share), compared to net income attributable to common stockholders of $37.6 million or ($3.66 per diluted share) in Q4 2022
  • Adjusted net loss attributable to common stockholders (a non-GAAP measure) of $10.5 million (or $1.04 per diluted share), compared to adjusted net loss attributable to common stockholders of $13.9 million (or $1.42 per diluted share) in Q4 2022
  • Adjusted EBITDA (a non-GAAP measure) of $(10.9) million vs. $(12.1) million in Q4 2022
Full-Year 2023
  • Net sales were $711.6 million compared to $796.2 million last year, an 11% decrease
  • Gross margin of 31.4% compared to 26.5% last year
  • Gross profit of $223.4 million, up 6% compared to $211.3 million last year, and the highest dollar level since 2015
  • Operating income of $59.1 million compared to $61.0 million last year; a 3% decrease
  • Net income attributable to common stockholders of $36.9 million, down from a net income attributable to common stockholders of $90.0 million in 2022
  • Adjusted net income attributable to common stockholders of $48.9 million ($4.62 per diluted share), up from adjusted net income attributable to common stockholders of $43.6 million ($4.29 per diluted share) in 2022
  • Adjusted EBITDA of $75.7 million, down 1% versus $76.4 million in 2022
  • Cash flows provided by operating activities of $66.4 million, down from $86.1 million in 2022
  • Cash used in financing activities of $70.4 million, eliminating all long-term debt in the first half of 2023
  • End of year cash and cash equivalents of $72.6 million, down from $85.5 million in 2022

Management Commentary
“For the third consecutive year we have met or exceeded our key financial full-year targets,” said Stephen Berman, CEO of JAKKS Pacific. “The year began with the challenge of revenue comparisons with a 2022 hit-driven blockbuster product line, but we also saw opportunities for gross margin improvements with a normalized supply chain. Gross and operating margins improved year-over-year despite a $80+ million decline in Net Sales, generating over $66 million in operating cash flow for the year.

“The holiday toy season came late this year, but we were pleased with the results. Two of our top three US Toys/Consumer Products customers achieved positive year-over-year retail sales results in Q4 despite challenging comparisons from the prior year. Our aggregate end-of-year inventory at retail at those three accounts is also down by a high single digit percentage compared to last year. Although customers are tentatively moving into the new year, we believe our core businesses remain on solid footing.”

Fourth Quarter and Full-Year 2023 Results
Net sales for the fourth quarter of 2023 were $127.4 million, down 3% versus $131.9 million last year. The Toys/Consumer Products segment sales were up 1% globally (flat in North America; 7% International) and sales of Costumes were down 40% compared to last year (-54% North America; -20% International).

Full-year Toys/Consumer Products sales were down 10% compared to 2022. The Costumes segment was down 12% vs. 2022, as customers continue to recalibrate to post-COVID levels. Our 2023 Costumes performance was nonetheless 22% higher than 2021.

Balance Sheet Highlights
The Company’s cash and cash equivalents (including restricted cash) totaled $72.6 million as of December 31, 2023, compared to $85.5 million as of December 31, 2022.

Total debt was zero, compared to $67.2 million as of December 31, 2022. Total debt as of December 31, 2022, included the amount outstanding under the Company’s term loan, net of unamortized discounts and issuance costs.

Inventory was $52.6 million, compared to $80.6 million as of December 31, 2022, a reduction of 35%.

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31,
2023 2022
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 72,350 $ 85,297
Restricted cash 204 193
Accounts receivable, net 123,797 102,771
Inventory 52,647 80,619
Prepaid expenses and other assets 6,374 6,331
Total current assets 255,372 275,211
Property and equipment 135,956 130,437
Less accumulated depreciation and amortization 121,357 115,575
Property and equipment, net 14,599 14,862
Operating lease right-of-use assets, net 23,592 19,913
Deferred income tax assets, net 68,143 57,804
Goodwill 35,083 35,083
Intangibles and other assets, net 2,162 2,469
Total assets $ 398,951 $ 405,342
Liabilities, Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable $ 42,177 $ 33,687
Accounts payable – Meisheng (related party) 12,259 9,820
Accrued expenses 45,102 37,998
Reserve for sales returns and allowances 38,531 51,877
Income taxes payable 3,785 8,165
Short term operating lease liabilities 7,380 10,746
Short term debt, net 25,529
Total current liabilities 149,234 177,822
Long term operating lease liabilities 16,666 9,863
Accrued expenses – long term 3,746
Debt, non-current portion, net 41,622
Preferred stock derivative liability 29,947 21,918
Income taxes payable 3,245 2,929
Deferred income tax liabilities, net
Total liabilities 202,838 254,154
Preferred stock accrued dividends 5,992 4,490
Stockholders’ equity:
Common stock, $.001 par value 10 10
Additional paid-in capital 278,642 275,187
Accumulated deficit (73,612 ) (112,018 )
Accumulated other comprehensive loss (15,627 ) (17,482 )
Total JAKKS Pacific, Inc. stockholders’ equity 189,413 145,697
Non-controlling interests 708 1,001
Total stockholders’ equity 190,121 146,698
Total liabilities, preferred stock and stockholders’ equity $ 398,951 $ 405,342
Supplemental Balance Sheet and Cash Flow Data (Unaudited)
December 31,
Key Balance Sheet Data: 2023 2022
Accounts receivable days sales outstanding (DSO) 89 72
Inventory turnover (DSI) 52 72
Twelve Months Ended
December 31,

Condensed Cash Flow Data: 2023 2022
Cash flows provided by operating activities $ 66,404 $ 86,099
Cash flows used in investing activities (8,907 ) (10,387 )
Cash flows used in financing activities and other (70,433 ) (35,554 )
Increase (Decrease) in cash, cash equivalents and restricted cash $ (12,936 ) $ 40,158
Capital expenditures $ (8,906 ) $ (10,389 )

 

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023 2022 Δ (%) 2023 2022 Δ (%)
(In thousands, except per share data) (In thousands, except per share data)
Net sales $ 127,396 $ 131,886 (3 )% $ 711,557 $ 796,187 (11 )%
Less: Cost of sales
Cost of goods 68,866 81,355 (15 ) 362,378 449,597 (19 )
Royalty expense 22,533 20,371 11 117,607 126,633 (7 )
Amortization of tools and molds 2,264 1,592 42 8,219 8,671 (5 )
Cost of sales 93,663 103,318 (9 ) 488,204 584,901 (17 )
Gross profit 33,733 28,568 18 223,353 211,286 6
Direct selling expenses 14,582 13,153 11 36,987 33,290 11
General and administrative expenses 34,401 30,752 12 126,893 114,819 11
Depreciation and amortization 90 360 (75 ) 366 1,907 (81 )
Selling, general and administrative expenses 49,073 44,265 11 164,246 150,016 9
Intangibles impairment 300 nm
Income from operations (15,340 ) (15,697 ) (2 ) 59,107 60,970 (3 )
Other income (expense):
Loss from joint ventures (565 ) nm
Other income (expense), net 139 277 (50 ) 563 797 (29 )
Change in fair value of preferred stock derivative liability (1,361 ) 1,429 nm (8,029 ) (636 ) nm
Loss on debt extinguishment (1,023 ) nm
Interest income 757 63 nm 1,344 127 nm
Interest expense (710 ) (2,294 ) (69 ) (6,451 ) (11,183 ) (42 )
Income (loss) before provision for (benefit from) income taxes (16,515 ) (16,222 ) 2 44,946 50,075 (10 )
Provision for (benefit from) income taxes (5,643 ) (54,331 ) (90 ) 6,833 (41,008 ) nm
Net income (loss) (10,872 ) 38,109 nm 38,113 91,083 (58 )
Net income (loss) loss attributable to non-controlling interests (4 ) 140 nm (293 ) (330 ) (11 )
Net income (loss) attributable to JAKKS Pacific, Inc. $ (10,868 ) $ 37,969 nm % $ 38,406 $ 91,413 (58 )%
Net income (loss) attributable to common stockholders $ (11,252 ) $ 37,607 nm % $ 36,904 $ 89,997 (59 )%
Earnings (loss) per share – basic $ (1.12 ) $ 3.86 $ 3.70 $ 9.33
Shares used in earnings (loss) per share – basic 10,084 9,732 9,962 9,651
Earnings (loss) per share – diluted $ (1.12 ) $ 3.66 $ 3.48 $ 8.86
Shares used in earnings (loss) per share – diluted 10,084 10,263 10,590 10,155
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023 2022 Δ bps 2023 2022 Δ bps
Fav/(Unfav) Fav/(Unfav)
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Less: Cost of sales
Cost of goods 54.0 61.7 770 50.9 56.5 560
Royalty expense 17.7 15.4 (230 ) 16.5 15.9 (60 )
Amortization of tools and molds 1.8 1.2 (60 ) 1.2 1.1 (10 )
Cost of sales 73.5 78.3 480 68.6 73.5 490
Gross profit 26.5 21.7 480 31.4 26.5 490
Direct selling expenses 11.4 10.0 (140 ) 5.2 4.2 (100 )
General and administrative expenses 27.0 23.3 (370 ) 17.8 14.4 (340 )
Depreciation and amortization 0.1 0.3 20 0.1 0.2 10
Selling, general and administrative expenses 38.5 33.6 (490 ) 23.1 18.8 (430 )
Intangibles impairment
Income from operations (12.0 ) (11.9 ) (10 ) 8.3 7.7 60
Other income (expense):
Loss from joint ventures (0.1 )
Other income (expense), net 0.1 0.2 0.1 0.1
Change in fair value of preferred stock derivative liability (1.1 ) 1.1 (1.1 ) (0.1 )
Loss on debt extinguishment (0.1 )
Interest income 0.6 0.2
Interest expense (0.6 ) (1.7 ) (0.9 ) (1.4 )
Income (loss) before provision for (benefit from) income taxes (13.0 ) (12.3 ) 6.4 6.3
Provision for (benefit from) income taxes (4.5 ) (41.2 ) 1.0 (5.2 )
Net income (loss) (8.5 ) 28.9 5.4 11.5
Net income (loss) loss attributable to non-controlling interests 0.1
Net income (loss) attributable to JAKKS Pacific, Inc. (8.5 )% 28.8 % 5.4 % 11.5 %
Net income (loss) attributable to common stockholders (8.8 )% 28.5 % 5.2 % 11.3 %

 

JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023 2022 Δ ($) 2023 2022 Δ ($)
(In thousands) (In thousands)
EBITDA and Adjusted EBITDA
Net income $ (10,872 ) $ 38,109 $ (48,981 ) $ 38,113 $ 91,083 $ (52,970 )
Interest expense 710 2,294 (1,584 ) 6,451 11,183 (4,732 )
Interest income (757 ) (63 ) (694 ) (1,344 ) (127 ) (1,217 )
Provision for income taxes (5,643 ) (54,331 ) 48,688 6,833 (41,008 ) 47,841
Depreciation and amortization 2,354 1,952 402 10,336 10,578 (242 )
EBITDA (14,208 ) (12,039 ) (2,169 ) 60,389 71,709 (11,320 )
Adjustments:
Loss from joint ventures (JAKKS Pacific, Inc. – 51%) 276 276
Loss from joint ventures (Meisheng – 49%) 289 289
Other (income) expense, net (139 ) (277 ) 138 (563 ) (797 ) 234
Restricted stock compensation expense 2,057 1,646 411 8,027 5,082 2,945
Change in fair value of preferred stock derivative liability 1,361 (1,429 ) 2,790 8,029 636 7,393
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
Adjusted EBITDA $ (10,929 ) $ (12,099 ) $ 1,170 $ 75,719 $ 76,381 $ (662 )
Adjusted EBITDA/Net sales % (8.6 )% (9.2 )% 60 bps 10.6 % 9.6 % 100 bps
JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023 2022 Δ ($) 2023 2022 Δ ($)
(In thousands, except per share data) (In thousands, except per share data)
Adjusted net income (loss) attributable to common stockholders
Net income (loss) attributable to common stockholders $ (11,252 ) $ 37,607 $ (48,859 ) $ 36,904 $ 89,997 $ (53,093 )
Restricted stock compensation expense 2,057 1,646 411 8,027 5,082 2,945
Change in fair value of preferred stock derivative liability 1,361 (1,429 ) 2,790 8,029 636 7,393
Loss on debt extinguishment 1,023 1,023
Employee Retention Credit/gov’t employment support (249 ) 249
Loss from joint ventures (JAKKS Pacific, Inc. – 51%) 276 276
2021 BSP Term Loan prepayment penalty 150 525 (375 )
Molds and Tooling capitalization (1,751 ) (1,751 )
Valuation allowance release/adjustments (2,577 ) (51,178 ) 48,601 (2,577 ) (51,178 ) 48,601
Tax impact of additional charges (96 ) (511 ) 415 (1,175 ) (1,208 ) 33
Adjusted net income (loss) attributable to common stockholders $ (10,507 ) $ (13,865 ) $ 3,358 $ 48,906 $ 43,605 $ 5,301
Adjusted earnings (loss) per share – basic $ (1.04 ) $ (1.42 ) $ 0.38 $ 4.91 $ 4.52 $ 0.39
Shares used in adjusted earnings (loss) per share – basic 10,084 9,732 352 9,962 9,651 311
Adjusted earnings (loss) per share – diluted $ (1.04 ) $ (1.42 ) $ 0.38 $ 4.62 $ 4.29 $ 0.32
Shares used in adjusted earnings (loss) per share – diluted 10,084 9,732 352 10,590 10,155 435

 

JAKKS Pacific, Inc. and Subsidiaries
Net Sales by Division and Geographic Region
(In thousands) QTD Q4 (In thousands) FY
Divisions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
Divisions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
Toys/Consumer Products $ 118,855 $ 117,727 $ 179,152 1.0 % -34.3 % Toys/Consumer Products $ 580,686 $ 647,317 $ 513,517 -10.3 % 26.1 %
Dolls, Role-Play/Dress Up 73,272 68,937 116,877 6.3 % -41.0 % Dolls, Role-Play/Dress Up 319,962 423,581 323,360 -24.5 % 31.0 %
Action Play & Collectibles 35,312 38,909 41,164 -9.2 % -5.5 % Action Play & Collectibles 219,446 173,529 114,778 26.5 % 51.2 %
Outdoor/Seasonal Toys 10,272 9,881 21,111 4.0 % -53.2 % Outdoor/Seasonal Toys 41,279 50,207 75,379 -17.8 % -33.4 %
Costumes $ 8,541 $ 14,159 $ 8,812 -39.7 % 60.7 % Costumes 130,870 148,870 107,599 -12.1 % 38.4 %
Total $ 127,396 $ 131,886 $ 187,964  -3.4 % -29.8 % Total $ 711,557 $ 796,187 $ 621,116  -10.6 % 28.2 %
(In thousands) QTD Q4 (In thousands) FY
Regions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
Regions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
United States $ 96,304 $ 100,907 $ 148,876 -4.6 % -32.2 % United States $ 557,865 $ 644,295 $ 512,193 -13.4 % 25.8 %
Europe 17,988 19,437 22,322 -7.5 % -12.9 % Europe 76,464 85,348 60,425 -10.4 % 41.2 %
Latin America 4,434 2,626 4,483 68.8 % -41.4 % Latin America 32,024 18,338 12,606 74.6 % 45.5 %
Canada 4,686 4,795 5,596 -2.3 % -14.3 % Canada 26,992 26,515 17,999 1.8 % 47.3 %
Asia 2,140 1,698 3,018 26.0 % -43.7 % Asia 8,543 10,431 9,232 -18.1 % 13.0 %
Australia & New Zealand 1,486 1,822 2,496 -18.4 % -27.0 % Australia & New Zealand 7,542 8,836 6,423 -14.6 % 37.6 %
Middle East & Africa 358 601 1,173 -40.4 % -48.8 % Middle East & Africa 2,127 2,424 2,238 -12.3 % 8.3 %
Total $ 127,396 $ 131,886 $ 187,964  -3.4 % -29.8 % Total $ 711,557 $ 796,187 $ 621,116  -10.6 % 28.2 %
(In thousands) QTD Q4 (In thousands) FY
Regions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
Regions 2023 2022 2021  % Change
2023 v 2022
% Change
2022 v 2021
North America $ 100,990 $ 105,702 $ 154,472 -4.5 % -31.6 % North America $ 584,857 $ 670,810 $ 530,192 -12.8 % 26.5 %
International 26,406 26,184 33,492 0.8 % -21.8 % International 126,700 125,377 90,924 1.1 % 37.9 %
Total $ 127,396 $ 131,886 $ 187,964  -3.4 % -29.8 % Total $ 711,557 $ 796,187 $ 621,116  -10.6 % 28.2 %

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