Spin Master Reports 2015 Results
Spin Master Corp. announced its financial results for the quarter and year ended December 31, 2015.
“We are very pleased with the company’s operating and financial results in 2015,” said Anton Rabie, co-CEO and chairman of Spin Master. “We experienced both strong revenue and profitability growth. We achieved particularly strong performance in the preschool and girls segment, which more than doubled its gross product sales in 2015 over 2014, reflecting the tremendous success of our Paw Patrol brand. It was also a notable year for our Activities, Games & Puzzles, and Fun Furniture segment, where we achieved strong growth in gross product sales and completed the strategic acquisition of Cardinal Industries.”
2015 Financial Highlights:
- Revenue of $879.4 million increased 22.9 percent from $715.7 million in 2014; in constant currency terms, revenue increased by 26.9 percent in 2015 relative to 2014
- Gross product sales increased 21.1 percent to $982.7 million from $811.9 million in 2014; excluding the acquisition of Cardinal, gross product sales increased 17 percent to $950 million
- Revenue growth was driven by strong contributions from Paw Patrol and Star Wars licensed products, as well as new product launches including Meccanoid, Bunchems, and Chubby Puppies, in addition to revenue from the Cardinal acquisition. This increase was offset in part by declines in the Zoomer, Digi Bird, and Flutterbye Fairy lines, and products associated with the How to Train Your Dragon movie
- On a geographic basis, excluding Cardinal, Spin Master recorded gross product sales increases of 12.1 percent in North America, 35.8 percent in Europe, and 21.3 percent in the rest of world
- Other revenue, which primarily reflects merchandising royalty and television distribution income from products marketed by third parties using Spin Master’s owned intellectual property, increased 118.2 percent from $8.8 million in 2014 to $19.2 million in 2015
- Including other revenue, the company’s total sales in 2015 were just over $1 billion compared to $820.7 million in 2014
- Total gross profit was $458.9 million in 2015, representing 52.2 percent of revenue, compared with $358.1 million, or 50 percent of revenue in 2014; the improvement in gross margin was primarily attributable to increased merchandising royalty income from sales of products under owned brands, lower sales allowances, and productivity initiatives
- Selling, general, and administrative expenses were $379.7 million or 43.2 percent of revenue. Excluding one-time costs associated with the IPO of $0.9 million and related stock-based compensation of $50.7 million, selling, general, and administrative expenses represented 37.3 percent of revenue compared to 36.8 percent in 2014, primarily due to higher royalties on licensed properties
- Net income of $47.1 million, or $0.48 per share, decreased 24.3 percent compared to 2014, reflecting the effects of IPO-related expenses, including $50.7 million of stock-based compensation expense
- Adjusted net income of $98.6 million, or $1.04 per share, increased 48.6 from $66.3 million in 2014
- Adjusted EBITDA increased 43.5 percent to $160.4 million in 2015 compared with $111.7 million in 2014 attributable to increased sales volume, product mix, increased merchandising royalty income from sales of products under owned brands, lower sales allowances, operating leverage, and productivity initiatives. As a result, adjusted EBITDA margins increased to 18.2 percent in 2015 from 15.6 percent in 2014
- Operating cash flow increased 17 percent to $105.7 million in 2015; free cash flow of $67.2 million in 2015 was slightly higher than 2014, despite a $20.3 million one-time cash payment to settle equity participation arrangements at the time of the IPO and a $13.6 million increase in investing activities (excluding license, brand, and business acquisitions)
- On July 30, 2015, the company completed its initial public offering of approximately 12.2 million subordinate voting shares for total gross proceeds of approximately $165 million; subsequently, on August 26, 2015, the company issued approximately 1.8 million subordinate voting shares pursuant to the exercise of the underwriters’ over-allotment option, generating additional gross proceeds of approximately $25 million, for a total of approximately $190 million from the IPO
Q4 2015 Results
As previously described in Q3 2015, results for the three months ended December 31, 2015, reflected the ongoing improvements in operational efficiency, which allowed for the acceleration of some shipments into Q3 that traditionally shipped in Q4. This moved some revenue into Q3 2015 from Q4 2015. Spin Master’s gross product sales in Q4 2015, including Cardinal, increased 3.6 percent relative to the comparable period in 2014. Excluding Cardinal, Spin Master’s gross product sales in Q4 2015 decreased $22.7 million, or (8.2 percent), relative to the comparable period in 2014, reflecting this year’s acceleration of sales into the third quarter.
For the three months ended December 31, 2015, Spin Master generated revenue of $258.4 million, an increase of 8.8 percent from $237.6 million for the three months ended December 31, 2014. In constant currency terms, revenue increased by 12.4 percent for the three months ended December 31, 2015, relative to the comparable period in 2014. In Q4 2015, Spin Master’s financial results reflected gross product sales of $32.7 million and revenue of $29.9 million related to the Cardinal business. Sales allowances decreased by 17 percent relative to the same period in 2014, despite the increase in revenue. Gross profit in Q4 2015 increased 11.5 percent to $131.6 million, or 50.9 percent of revenue, compared with $118 million, or 49.7 percent of revenue in Q4 2014.
On October 2, 2015, Spin Master completed the acquisition of Cardinal Industries.
Outlook
For 2016, Spin Master expects organic gross product sales growth to be toward the upper end of the company’s long-term growth target range of mid to high single digits. Spin Master also announced two acquisitions recently: Etch a Sketch from Ohio Art and the library of board games from Editrice Giochi Game Company.
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