JAKKS Pacific, Inc. (NASDAQ: JAKK) today 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 ResultsNet 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 HighlightsThe 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.

Use of Non-GAAP Financial InformationIn 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 and Adjusted EPS which are non-GAAP metrics that exclude distinct 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 WebcastJAKKS 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 April 24, 2024. 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 (1Q24 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: AirTitans®, Disguise®, Fly Wheels®, JAKKS Wild Games®, Moose Mountain®, Maui®, Perfectly Cute®, ReDo® Skateboard Co., Sky Ball®, SportsZone™, Xtreme Power Dozer®, WeeeDo®, and Wild Manes™ as well as a wide range of entertainment-inspired products featuring premier licensed properties. Through our products and charitable donations, JAKKS is helping to positively impact children's lives. Visit us at www.jakks.com and follow us on Instagram (@jakkspacific.toys), Twitter (@jakkstoys) and Facebook (@jakkspacific.toys).

Forward Looking StatementsThis 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 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.

CONTACT:
JAKKS Pacific Investor Relations
(424) 268-9567 Lucas Nataliniinvestors@jakks.net 
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)
 
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 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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