JAKKS PACIFIC INC Q1 FY2025 earnings call

• Solid Q1 performance with 26% sales growth, driven by toys from films like Sonic the Hedgehog 3, Disney Moana 2, DreamWorks Animation Dog Man and evergreen product lines. • Gross margin was 34.4% due to higher volumes from successful new releases, new product launches, and higher-quality inventory. • SG&A was up 1% globally, with an increase of less than $500,000. • Debt-free with unrestricted cash balance of $59.2 million at quarter end. • Actively exploring international growth, with teams engaging customers in various regions. • Planning a factory summit at Santa Monica headquarters to foster collaboration with factory partners. • Exploring alternative sourcing opportunities while recognizing China as a key production hub. • Focus on value trade and products with 50% of volume from SKUs retailing at $29.99 or less. • Advocating for removal of tariffs, which are seen as stifling business potential.

In the first quarter, sales were up 26%. Dolls, Role Play/Dress-Up business shipped $55.5 million, a 37% increase versus the prior year. Action Play & Collectibles shipped $42.9 million, an increase by 30%. North America was 25% ahead of the prior year with international up 29%. The gross margin was 34.4%.

• Being cautious until tariff issues are definitively resolved. • Working aggressively on international growth to offset potential U.S. tariff impacts. • Monitoring working capital carefully. • Evaluating cost mitigation efforts related to overhead without jeopardizing long-term plans.

• Tariffs could lead to higher consumer prices, impacting product demand. • Tariffs may stifle product innovation in the long term as the industry focuses on cost recovery. • Uncertainty around the resolution of tariff issues and its impact on business operations.

Q: How will tariffs affect the holiday season in terms of product pricing and availability?

A: If tariffs stay in place, there will be higher prices for lower-priced products overall, with the consumer bearing the cost. JAKKS is holding inventory and exploring alternative sourcing in Asia, Mexico, etc.

Q: How is JAKKS positioned internationally, and how is that moving the needle?

A: Latin America and EMEA businesses have grown exceptionally. The team is set up well internationally, with a COO focused on international, and distribution centers repositioned for growth.

Q: How are tariffs impacting licensing film IP visibility, and any silver linings?

A: Tariffs are affecting the industry, but JAKKS is still full force on licensing. Bad times can bring opportunities, and JAKKS is in a strong position with no debt and liquidity to take advantage of others facing difficulties.

Q: Is this changing strategic M&A opportunities?

A: Yes, there are more opportunities arising as some companies face difficulties due to tariffs, providing JAKKS with potential strategic M&A chances.