JAKKS PACIFIC INC Q3 FY2024 earnings call

• Q3 saw sales increases in all three toy Consumer Products divisions, including outdoor seasonal business showing positive trends.
• Portfolio management is essential with over 30 different businesses in toy and consumer products, each with distinct dynamics.
• Gross margins held up well in the quarter, with cost of product higher but royalty expense lower to compensate.
• Interest expense reduced as short-term borrowings were paid down, leading to a significant year-over-year pickup in pre-tax net income.
• New product initiatives highlighted include Target toy check lane, Nintendo products (Super Mario Course Complete Playset, Mario Kart Mini Anti-Gravity Rc Racer, Link with power shield and sword action figure), Sonic 3 products, and Moana 2 dolls.

All three toy Consumer Products divisions delivered year-over-year sales increases in Q3. Dolls, role-play, dress-up business was up 6% in the quarter and 2% year-to-date. Action Play & Collectibles business was up 5% in the quarter but down 9% year-to-date. Latin America shipped $22.6 million in the quarter, up 48% compared to prior year and 23% year-to-date. European region was down 3.8% in the quarter but improved over Q2. Asia Pacific was down 3.4% in the quarter. Canada was down over $4 million in the quarter. Outside the US, costume business was up 7% versus prior year.

• 2025 lineup is largely developed, with the team refocusing towards 2025.
• Company remains debt-free, allowing capital allocation for new initiatives, licenses, and building international structure.
• Confident in 2025 with strong IP-driven lines and performance of evergreen business segments.

• Creditworthiness of some retailers is a concern, with an estimated 1% of year-over-year sales decline attributable to deteriorating credit situations, including bankruptcies and high-risk customers.

Q: Talk about the outdoor segment and Target private label opportunities.

A: Initial launch of Authentic Brands products like skateboards was successful; planning to launch breadth of product in spring 2025. Target initiative is terrific, with plans to build portfolio with Target and launch private label initiatives with other major retailers in 2025.

Q: Thoughts on state of box office and importance of IP associated with hit films?

A: IP theatrical and non-theatrical are important. Some IP like Disney Princess Style Collection does well without heavy theatrical IP. Portfolio management with diverse IP and distribution platforms is key.

Q: Puts and takes for gross margin in holiday season vs last year?

A: Isolating Q4 year-over-year is tricky as it's a smaller quarter, but confident about full-year gross margin being at least 30% as projected