Sign Up for Updates

JAKKS Pacific Reports Third Quarter 2022 Financial Results image

JAKKS Pacific Reports Third Quarter 2022 Financial Results

Sales through September 30, 2022 exceeded full-year 2021 sales levels

Santa Monica, CA — JAKKS Pacific, Inc. reported third quarter results.

  • Net sales were $323.0 million, a year-over-year increase of 36%
    • Toys/Consumer Products were $269.6 million, a year-over-year increase of 56%
    • Costumes were $53.4 million, a year-over-year decrease of 17%
      • Costumes year-to-date are $134.7 million, a 36% increase over 2021
  • Year-to-date net sales were $664.3 million, which exceeded full year 2021 net sales of $621.1 million
  • Gross margin of 28.5%, down 310 basis points vs. Q3 2021
  • Operating income of $53.7 million (16.7% of net sales) in Q3 2022 vs. $36.7 million (15.5% of net sales) in Q3 2021
    • Year-to-date operating income of $76.7 million (11.6% of net sales) vs. $35.8 million (8.3% of net sales) for comparable period in 2021
  • Net income attributable to common stockholders of $30.3 million or $2.96 per diluted share, compared to net income attributable to common stockholders of $36.0 million or $3.97 per diluted share in Q3 2021
  • Adjusted net income attributable to common stockholders (a non-GAAP measure) of $39.0 million or $3.80 per diluted share, compared to adjusted net income attributable to common stockholders of $34.2 million or $3.76 per diluted share in Q3 2021
  • Adjusted EBITDA (a non-GAAP measure) of $59.4 million vs. $41.7 million in Q3 2021

Management Commentary

“We continued to see strong retail sell-thru for our product throughout the third quarter,” said Stephen Berman, CEO of JAKKS Pacific. “Our top three toy accounts in the US sustained point of sale results in the high teens in Q3 as we head into the all-important fourth quarter. By leaning into our heritage as an FOB-first company, we’ve managed to ship more of our product earlier in the year to avoid excessive supply-chain expenses and mitigate out-of-stock risks at retail. As a result, our customers are ready for the holiday season with a great range of product and promotional plans. We are on track to deliver full-year 2022 revenue growth around 20% vs. prior year for the second year in a row, which are exceptional results that the team and I are very proud of.

“In addition to the strength in our toy segment, our costume business is also performing at a very high level. We have already shipped 25% more costumes this year than the amount we shipped in all of 2021. Q3 2022 Disguise costumes sales were down compared to Q3 2021 as Halloween customers ordered product earlier this year. We are on track for our biggest year with Disguise since JAKKS acquired the company in 2008, and we are also excited about that momentum continuing into 2023.

“We have been clear about our desire to reduce our long-term debt and cash interest expense. To that end, based on our strong performance and near-term outlook we decided to make an optional $17.5 million principal pay-down of our term loan this past quarter. This brings our year-to-date principal payments to $29.0 million, or 29% of our balance as of January 1st of this year, and results in a principal balance of $69.5 million.”

Third Quarter 2022 Results

Net sales for the third quarter of 2022 were $323.0 million, up 36% versus $237.0 million last year. The Toys/Consumer Products segment sales were up 56% globally (50% North America; 85% International) and as noted sales of Disguise costumes were down 17% compared to last year (-23% North America; 144% International) as Halloween customers ordered product earlier this year than the traditional seasonality.

Year-to-date Toys/Consumer Products sales were up 58% over the comparable 2021 period. Year-to-date the Costumes segment was up 36% over the comparable 2021 period.

Year-to-date adjusted net income attributable to common stockholders was $57.5 million ($5.68 per diluted share), compared to $22.3 million ($3.15 per diluted share) in the first nine months of 2021. Year-to-date adjusted EBITDA of $88.5 million (13.3% of net sales), was double the $44.2 million (10.2% of net sales) in the comparable 2021 period.

Balance Sheet Highlights

The Company’s cash and cash equivalents (including restricted cash) totaled $76.6 million as of September 30, 2022 compared to $26.7 million as of September 30, 2021, and $45.3 million as of December 31, 2021.

Total debt was $67.7 million net of unamortized discounts and issuance costs, compared to $95.8 million as of September 30, 2021, and $95.5 million as of December 31, 2021. Total debt includes the amount outstanding under the Company’s term loan, net of unamortized discounts and issuance costs.

Inventory levels are down from prior quarter but remain elevated, totaling $109.2 million, of which $20.5 million was in-transit to our distribution centers, compared to $123.7 million in total inventory as of June 30, 2022 and $89.8 million in total inventory as of September 30, 2021.

Use of Non-GAAP Financial Information

In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached “Reconciliation of Non-GAAP Financial Information.” “Total liquidity” is calculated as cash and cash equivalents, plus availability under the Company’s $67.5 million revolving credit facility.

Conference Call Live Webcast

JAKKS Pacific, Inc. invites analysts, investors and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on October 27, 2022. A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at www.jakks.com/investors. To access the call by phone, please go to this link (Registration Link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors).

About JAKKS Pacific, Inc.

JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific’s popular proprietary brands include: Creepy Crawlers®, Fly Wheel®, Perfectly Cute®, ReDo Skateboard Co.®, WeeeDo™, Xtreme Power®, Disguise®, Maui®, Moose Mountain®, Kids Only!®, Eyeclops®; a wide range of entertainment-inspired products featuring premier licensed properties; and C’est Moi®, a New Generation of Clean Beauty®. Through JAKKS Cares, the company’s commitment to philanthropy, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkstoys), Twitter (@jakkstoys) and Facebook (JAKKS Pacific).

Forward Looking Statements

This press release may contain “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific’s business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific’s products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that the Recapitalization transaction or any future transactions will result in future growth or success of JAKKS. The “forward-looking statements” contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release.

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

September 30,

December 31,

2022

2021

2021

(In thousands)
Assets
Current assets:
Cash and cash equivalents

$

76,418

$

25,897

$

44,521

Restricted cash

178

808

811

Accounts receivable, net

204,856

209,190

147,394

Inventory

109,171

89,796

83,954

Prepaid expenses and other assets

11,124

12,370

10,877

Total current assets

401,747

338,061

287,557

Property and equipment

131,918

120,910

121,945

Less accumulated depreciation and amortization

116,558

108,125

108,796

Property and equipment, net

15,360

12,785

13,149

Operating lease right-of-use assets, net

22,154

18,535

16,950

Goodwill

35,083

35,083

35,083

Intangibles and other assets, net

2,770

4,644

4,308

Total assets

$

477,114

$

409,108

$

357,047

Liabilities, Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable

$

77,126

$

77,690

$

50,237

Accounts payable – Meisheng (related party)

28,301

27,581

15,894

Accrued expenses

74,223

58,180

47,071

Reserve for sales returns and allowances

59,216

47,691

46,285

Income taxes payable

14,084

635

1,004

Short term operating lease liabilities

10,515

10,407

10,477

Short term debt, net

2,475

1,914

2,104

Total current liabilities

265,940

224,098

173,072

Long term operating lease liabilities

12,555

9,947

8,039

Debt, non-current portion, net

65,195

93,896

93,415

Preferred stock derivative liability

23,347

17,075

21,282

Income taxes payable

66

215

215

Deferred income taxes, net

53

123

51

Total liabilities

367,156

345,354

296,074

Preferred stock accrued dividends

4,128

2,733

3,074

Stockholders’ equity:
Common stock, $.001 par value

10

9

10

Additional paid-in capital

274,040

272,568

272,941

Accumulated deficit

(149,987

)

(200,259

)

(203,431

)

Accumulated other comprehensive loss

(18,594

)

(12,609

)

(12,952

)

Total JAKKS Pacific, Inc. stockholders’ equity

105,469

59,709

56,568

Non-controlling interests

361

1,312

1,331

Total stockholders’ equity

105,830

61,021

57,899

Total liabilities, preferred stock and stockholders’ equity

$

477,114

$

409,108

$

357,047

Supplemental Balance Sheet and Cash Flow Data (Unaudited)

September 30,

Key Balance Sheet Data:

2022

2021

Accounts receivable days sales outstanding (DSO)

58

81

Inventory turnover (DSI)

44

51

Nine Months Ended September 30,
Condensed Cash Flow Data:

2022

2021

(In thousands)
Cash flows provided by (used in) operating activities

$

75,793

$

(26,942

)

Cash flows used in investing activities

(8,619

)

(6,343

)

Cash flows used in financing activities and other

(35,910

)

(32,703

)

Increase/(decrease) in cash, cash equivalents and restricted cash

$

31,264

$

(65,988

)

Capital expenditures

$

(8,621

)

$

(6,375

)

JAKKS Pacific, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2022

2021

Δ (%)

2022

2021

Δ (%)
(In thousands, except per share data) (In thousands, except per share data)
Net sales

$

322,998

$

236,957

36

%

$

664,301

$

433,152

53

%

Less: Cost of sales
Cost of goods

174,334

126,095

38

368,242

231,633

59

Royalty expense

52,868

32,251

64

106,262

61,546

73

Amortization of tools and molds

3,885

3,687

5

7,079

7,058

0

Cost of sales

231,087

162,033

43

481,583

300,237

60

Gross profit

91,911

74,924

23

182,718

132,915

37

Direct selling expenses

8,397

10,729

(22

)

20,137

23,817

(15

)

General and administrative expenses

29,400

26,846

10

84,067

71,450

18

Depreciation and amortization

373

606

(38

)

1,547

1,807

(14

)

Selling, general and administrative expenses

38,170

38,181

(0

)

105,751

97,074

9

Intangibles impairment

nm

300

nm

Income from operations

53,741

36,743

46

76,667

35,841

114

Other income (expense):
Other income (expense), net

251

129

95

520

256

103

Change in fair value of convertible senior notes

(3,651

)

(100

)

(16,495

)

(100

)

Change in fair value of preferred stock derivative liability

(7,449

)

(99

)

nm

(2,065

)

(9,013

)

(77

)

Gain on loan forgiveness

6,206

(100

)

6,206

(100

)

Loss on debt extinguishment

(7,351

)

(100

)

Interest income

55

4

nm

64

10

nm

Interest expense

(4,350

)

(2,658

)

64

(8,889

)

(11,903

)

(25

)

Income (loss) before provision for income taxes

42,248

36,674

15

66,297

(2,449

)

nm

Provision for income taxes

11,572

298

nm

13,323

286

nm

Net income (loss)

30,676

36,376

(16

)

52,974

(2,735

)

nm

Net income (loss) attributable to non-controlling interests

(17

)

42

nm

(470

)

101

nm

Net income (loss) attributable to JAKKS Pacific, Inc.

$

30,693

$

36,334

(16

)

%

$

53,444

$

(2,836

)

nm

%
Net income (loss) attributable to common stockholders

$

30,336

$

35,998

(16

)

%

$

52,390

$

(3,829

)

nm

%
Earnings (loss) per share – basic

$

3.13

$

4.08

$

5.44

$

(0.56

)

Shares used in earnings (loss) per share – basic

9,695

8,823

9,624

6,820

Earnings (loss) per share – diluted

$

2.96

$

3.97

$

5.18

$

(0.56

)

Shares used in earnings (loss) per share – diluted

10,260

9,073

10,111

6,820

Three Months Ended September 30, Nine Months Ended September 30,

2022

2021

Δ bps

2022

2021

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

53.2

(80

)

55.4

53.4

(200

)

Royalty expense

16.3

13.6

(270

)

16.0

14.3

(170

)

Amortization of tools and molds

1.2

1.6

40

1.1

1.6

50

Cost of sales

71.5

68.4

(310

)

72.5

69.3

(320

)

Gross profit

28.5

31.6

(310

)

27.5

30.7

(320

)

Direct selling expenses

2.6

4.5

190

3.0

5.5

250

General and administrative expenses

9.1

11.3

220

12.7

16.5

380

Depreciation and amortization

0.1

0.3

20

0.2

0.4

20

Selling, general and administrative expenses

11.8

16.1

430

15.9

22.4

650

Intangibles impairment

Income from operations

16.7

15.5

120

11.6

8.3

330

Other income (expense):
Other income (expense), net

0.1

Change in fair value of convertible senior notes

(1.5

)

(3.8

)

Change in fair value of preferred stock derivative liability

(2.3

)

(0.3

)

(2.1

)

Gain on loan forgiveness

2.6

1.4

Loss on debt extinguishment

(1.7

)

Interest income

Interest expense

(1.4

)

(1.1

)

(1.3

)

(2.7

)

Income (loss) before provision for income taxes

13.1

15.5

10.0

(0.6

)

Provision for income taxes

3.6

0.1

2.0

0.1

Net income (loss)

9.5

15.4

8.0

(0.7

)

Net income (loss) attributable to non-controlling interests

Net income (loss) attributable to JAKKS Pacific, Inc.

9.5

%

15.4

%

8.0

%

(0.7

)

%

Net income (loss) attributable to common stockholders

9.4

%

15.2

%

7.9

%

(0.9

)

%

JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)

Reconciliation of GAAP to Non-GAAP measures:

This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis.

Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

Three Months Ended September 30, Nine Months Ended September 30,

2022

2021

Δ ($)

2022

2021

Δ ($)
(In thousands) (In thousands)
EBITDA and Adjusted EBITDA
Net income (loss)

$

30,676

$

36,376

$

(5,700

)

$

52,974

$

(2,735

)

$

55,709

Interest expense

4,350

2,658

1,692

8,889

11,903

(3,014

)

Interest income

(55

)

(4

)

(51

)

(64

)

(10

)

(54

)

Provision for income taxes

11,572

298

11,274

13,323

286

13,037

Depreciation and amortization

4,258

4,293

(35

)

8,626

8,865

(239

)

EBITDA

50,801

43,621

7,180

83,748

18,309

65,439

Adjustments:
Other (income) expense, net

(251

)

(129

)

(122

)

(520

)

(256

)

(264

)

Restricted stock compensation expense

1,411

615

796

3,436

1,380

2,056

Change in fair value of preferred stock derivative liability

7,449

99

7,350

2,065

9,013

(6,948

)

Change in fair value of convertible senior notes

3,651

(3,651

)

16,495

(16,495

)

Employee Retention Credit/Gov’t Employment Support

(249

)

(1,900

)

1,651

Gain on loan forgiveness

(6,206

)

6,206

(6,206

)

6,206

Loss on debt extinguishment

7,351

(7,351

)

Adjusted EBITDA

$

59,410

$

41,651

$

17,759

$

88,480

$

44,186

$

44,294

Adjusted EBITDA/Net sales %

18.4

%

17.6

%

80 bps

13.3

%

10.2

%

310 bps
Trailing Twelve Months Ended September 30,

2022

2021

Δ ($)
(In thousands)
TTM EBITDA and TTM Adjusted EBITDA
TTM Net income (loss)

$

49,821

$

(14,044

)

$

63,865

Interest expense

11,090

16,809

(5,719

)

Interest income

(67

)

(12

)

(55

)

Provision for income taxes

13,263

740

12,523

Depreciation and amortization

10,012

10,809

(797

)

TTM EBITDA

84,119

14,302

69,817

Adjustments:
Other (income) expense, net

(710

)

(391

)

(319

)

Restricted stock compensation expense

4,149

2,177

1,972

Change in fair value of convertible senior notes

(76

)

21,517

(21,593

)

Change in fair value of preferred stock derivative liability

6,272

11,204

(4,932

)

Employee Retention Credit/Gov’t Employment Support

(249

)

(1,900

)

1,651

Gain on loan forgiveness

(6,206

)

6,206

Loss on debt extinguishment

7,351

(7,351

)

TTM Adjusted EBITDA

$

93,505

48,054

$

45,451

TTM Adjusted EBITDA/TTM Net sales %

11.0

%

8.6

%

240 bps
Three Months Ended September 30, Nine Months Ended September 30,

2022

2021

Δ ($)

2022

2021

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

$

30,336

$

35,998

$

(5,662

)

$

52,390

$

(3,829

)

$

56,219

Restricted stock compensation expense

1,411

615

796

3,436

1,380

2,056

Change in fair value of preferred stock derivative liability

7,449

99

7,350

2,065

9,013

(6,948

)

Change in fair value of convertible senior notes

3,651

(3,651

)

16,495

(16,495

)

Loss on debt extinguishment

7,351

(7,351

)

Gain on loan forgiveness

(6,206

)

6,206

(6,206

)

6,206

Employee Retention Credit/Gov’t Employment Support

(249

)

(1,900

)

1,651

2021 BSP Term Loan prepayment penalty

525

525

525

525

Tax impact of additional charges

(697

)

(697

)

(697

)

(697

)

Adjusted net income attributable to common stockholders

$

39,024

$

34,157

$

4,867

$

57,470

$

22,304

$

35,166

Adjusted earnings per share – basic

$

4.03

$

3.87

$

0.15

$

5.97

$

3.27

$

2.70

Shares used in adjusted earnings per share – basic

9,695

8,823

872

9,624

6,820

2,804

Adjusted earnings per share – diluted

$

3.80

$

3.76

$

0.04

$

5.68

$

3.15

$

2.53

Shares used in adjusted earnings per share – diluted

10,260

9,073

1,187

10,111

7,083

3,028

JAKKS Pacific, Inc. and Subsidiaries
Net Sales by Division and Geographic Region
(In thousands) QTD Q3 (In thousands) YTD Q3
Divisions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
Divisions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
Toys/Consumer Products

$

269,607

$

172,952

$

187,309

55.9

%

-7.7

%

Toys/Consumer Products

$

529,590

$

334,365

$

306,088

58.4

%

9.2

%

Dolls, Role-Play/Dress Up

190,452

112,050

129,289

70.0

%

-13.3

%

Dolls, Role-Play/Dress Up

354,644

206,483

202,184

71.8

%

2.1

%

Action Play & Collectibles

65,752

37,587

33,598

74.9

%

11.9

%

Action Play & Collectibles

134,620

73,614

53,951

82.9

%

36.4

%

Outdoor/Seasonal Toys

13,403

23,315

24,422

-42.5

%

-4.5

%

Outdoor/Seasonal Toys

40,326

54,268

49,953

-25.7

%

8.6

%

Costumes

53,391

64,005

54,981

-16.6

%

16.4

%

Costumes

134,711

98,787

81,517

36.4

%

21.2

%

Total

$

322,998

$

236,957

$

242,290

36.3

%

-2.2

%

Total

$

664,301

$

433,152

$

387,605

53.4

%

11.8

%

(In thousands) QTD Q3 (In thousands) YTD Q3
Regions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
Regions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
United States

$

253,854

$

199,136

$

202,303

27.5

%

-1.6

%

United States

$

543,388

$

363,317

$

320,998

49.6

%

13.2

%

Europe

38,075

20,836

21,045

82.7

%

-1.0

%

Europe

65,911

38,103

34,424

73.0

%

10.7

%

Canada

12,804

8,094

9,523

58.2

%

-15.0

%

Canada

21,720

12,403

14,555

75.1

%

-14.8

%

Latin America

9,504

4,503

4,504

111.1

%

0.0

%

Latin America

15,712

8,123

6,586

93.4

%

23.3

%

Asia

4,294

2,635

2,744

63.0

%

-4.0

%

Asia

8,733

6,214

5,976

40.5

%

4.0

%

Australia & New Zealand

3,941

1,490

1,936

164.5

%

-23.0

%

Australia & New Zealand

7,014

3,927

4,269

78.6

%

-8.0

%

Middle East & Africa

526

263

235

100.0

%

11.9

%

Middle East & Africa

1,823

1,065

797

71.2

%

33.6

%

Total

$

322,998

$

236,957

$

242,290

36.3

%

-2.2

%

Total

$

664,301

$

433,152

$

387,605

53.4

%

11.8

%

(In thousands) QTD Q3 (In thousands) YTD Q3
Regions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
Regions

2022

2021

2020

% Change
2022 v 2021
% Change
2021 v 2020
North America

$

266,658

$

207,230

$

211,826

28.7

%

-2.2

%

North America

$

565,108

$

375,720

$

335,553

50.4

%

12.0

%

International

56,340

29,727

30,464

89.5

%

-2.4

%

International

99,193

57,432

52,052

72.7

%

10.3

%

Total

$

322,998

$

236,957

$

242,290

36.3

%

-2.2

%

Total

$

664,301

$

433,152

$

387,605

53.4

%

11.8

%

 

become a member today

learn more

  • Copyright © 2023 Licensing International
  • Translation provided by Google Translate, please pardon any shortcomings

    int(274)