Spin Master Corporation, a leading global children’s entertainment company, has announced its financial results for the three months ended March 31, 2021. The Company’s full Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2021 is available under the Company’s profile on SEDAR (www.sedar.com) and posted on the Company’s web site at www.spinmaster.com/financial-info.php.
“Our performance this quarter clearly demonstrates our commitment to creating exceptional play experiences and engaging children’s entertainment through our three creative centers comprising toys, entertainment and digital games. It is very gratifying to see both our strong financial and operating performance this quarter compared to the same period last year, especially from the continued growth in digital games,” said Ronnen Harary, Spin Master’s Co-Founder. “We recognize the incredible dedication of our teams across the globe. Together, they have rallied to drive the strong results we achieved this quarter. As we manage through the complexities of the pandemic, I am continually amazed and impressed by the effort and dedication of our employees.”
Max Rangel, Spin Master’s newly appointed Global President & CEO added, “At the heart of Spin Master’s growth story is a remarkable purpose – to create magical play experiences for children and their families around the world. Our commitment to that purpose is unwavering. How we bring this vision to market across our three creative centers will continue to evolve and adapt to the changing content landscape, consumer preferences and emerging trends in children’s entertainment. With this solid foundation, supported by relentless innovation and operational excellence, we see tremendous potential for Spin Master and are focused on driving profitable growth and creating significant value for our shareholders.”
“We delivered very strong margins and profitability in the first quarter and are particularly pleased with the broad nature of our performance improvements compared to Q1 2020,” said Mark Segal, Spin Master’s Chief Financial Officer. “Revenue grew as a result of higher Gross Product Sales and growth in digital games led by Toca Life World. Our operational improvements continued to allow us to execute more efficiently and effectively this quarter. Our solid financial position with cash on hand of over $260 million, gives us increasing opportunities to leverage our diverse and global platform for organic growth and acquisitions. We expect many of the trends that drove this performance in the first quarter to continue and we are raising our outlook for 2021.”
Q1 2021 Financial Highlights as compared to the same period in 2020
- Total revenue of US$316.6 million increased by 39.3% from US$227.3 million. In Constant Currency terms, total revenue increased by 36.9%.
- Gross Product Sales increased by 21.6% to US$294.7 million from US$242.3 million, primarily driven by higher sales in Preschool & Girls and Outdoor. In Constant Currency terms, Gross Product Sales increased by 19.9%.
- Gross Product Sales increased by 44.6% in Rest of World, 21.2% in Europe and 18.0% in North America. International Gross Product Sales were 42.1% of total Gross Product Sales, compared to 40.3%.
- Other revenue grew by 178.5% to US$61.0 million.
- Digital games revenue increased by 394.2% to US$34.1 million, driven by the Toca Life World platform and growth in the Sago Mini subscription user base.
- Entertainment and Licensing revenue was 79.3% higher at US$26.9 million.
- Sales Allowances increased by US$2.2 million to US$39.1 million. As a percentage of Gross Product Sales, Sales Allowances decreased by 1.9% to 13.3% from 15.2%, primarily driven by lower markdowns, promotions and non-compliance charges.
- Gross profit was US$157.4 million, representing 49.7% of total revenue, compared to US$90.8 million or 39.9%. The improvement in gross margin was driven by higher digital games net revenue and entertainment and licensing net revenue, in addition to cost reductions resulting from the Company’s operational improvement initiatives, which include lower scrap and obsolescence, freight-related expenses, reconfiguration costs and Sales Allowances.
- Selling, general and administrative expenses (“SG&A”) decreased as a percentage of total revenue to 43.9% compared to 64.5%, primarily from lower distribution expenses, partially offset by higher administrative expenses.
- Net income was US$3.2 million or earnings per share of US$0.03 (diluted) compared to a net loss of US$(26.7) million or loss per share of US$(0.26).
- Adjusted Net Income was US$8.4 million or Adjusted Diluted EPS1 of US$0.08, compared to an Adjusted Net Loss of US$(46.8) million or Adjusted Basic EPS1 of US$(0.46).
- Adjusted EBITDA was US$36.7 million compared to negative US$(32.3) million. Adjusted EBITDA Margin was 11.6% compared to (14.2)%.
- Cash provided by operating activities was US$9.0 million compared to cash used in operating activities of US$8.8 million, primarily driven by higher EBITDA.
- Free Cash Flow was US$(6.5) million compared to US$(27.8) million, driven by higher cash flows from operating activities, offset in part by higher cash flows used in investing activities.
- On January 4, 2021, the Company completed the acquisition of Rubik’s Brand Limited. Rubik’s is reported in the Activities, Games & Puzzles and Plush product category.
Q1 2021 Gross Product Sales1 by Product Category as compared to the same period in 2020
Gross Product Sales were US$294.7 million, an increase of US$52.4 million or 21.6%. Excluding the impact of foreign exchange, Gross Product Sales1 increased by $47.6 million or 19.6% to $289.8 million.
Gross Product Sales in Activities, Games & Puzzles and Plush increased by US$7.4 million or 9.2% to US$87.5 million. The increase was driven primarily by sales of Rubik’s4 and Inkfluencer and increases in the Games & Puzzles portfolio.
Gross Product Sales in Preschool & Girls increased by US$24.1 million or 33.0% to US$97.2 million. The increase was driven primarily by sales of PAW Patrol and Present Pets, offset in part by declines in Twisty Petz, Candylocks, Owleez, Hatchimals products and Universe.
Gross Product Sales1 in Boys increased by US$7.3 million or 12.0% to US$68.0 million. The increase was primarily driven by sales of Monster Jam, Bakugan, Tech Deck and Supercross, partially offset by declines in DC licensed products and DreamWorks Dragons.
Gross Product Sales in Outdoor increased by US$13.6 million or 47.9% to US$42.0 million
Spin Master continues to focus on driving long-term growth. Its principle strategies are to:
- Innovate using our global internal and external research and development network;
- Increase international sales in developed and emerging markets;
- Develop evergreen global entertainment franchises;
- Establish a leading position in digital games; and
- Leverage the Company’s global platform through strategic acquisitions.
Spin Master expects 2021 Gross Product Sales to increase high single digits compared to 2020, as compared to low – mid single digits previously announced on March 3, 2021. The seasonality of Gross Product Sales1 for 2021 is expected to be approximately 35-37% in the first half of 2021 and 63-65% in the second half of 2021. The Company now expects 2021 total revenue to increase low double digits compared to 2020, as compared to mid to high single digits previously announced on March 3, 2021. The Company now expects 2021 Adjusted EBITDA Margin to be at the high end of the mid to high teens range previously announced on March 3, 2021.