JAKKS PACIFIC INC Q4 FY2025 earnings call

• 2025 was a defining year in company history, despite tariff pressure on near-term financials, focused on long-term value creation, deepening relationships and expanding strategic relationships for 2027 initiatives.
• Fourth quarter global Toys/Consumer Products net sales roughly flat, U.S. business down, Rest of World up. Full year Rest of World business grew.
• Full year Toys/Consumer Products business down due to tariff impacts, Costume business also down but international slight increase.
• First fully integrated JAKKS and Disguise showroom debuted at Nuremberg Toy Fair last month, received positive response, enhancing strategic confidence.
• Full year gross margin 32.4%, highest in over 15 years, fourth quarter gross margin dollars up due to better cost control and inventory management. Full year SG&A expenses down 1%. Fourth quarter adjusted EBITDA loss $3.8 million vs $10.2 million prior year.
• 2025 was first year interest income exceeded interest expense in years.
• 2026 focus on Super Mario Galaxy movie related product launches, Sonic DC crossover product expansion, Disney Doll business progress, Action Sports portfolio development, Disguise business supporting new movie releases.

Fourth quarter Toys/Consumer Products net sales were roughly flat at $118 million, down 0.2% from prior year and 0.7% from 2023. Costume business was down, bringing total company sales down 2.8% from prior year to $127.1 million, roughly flat to 2023 fourth quarter sales of $127.4 million. U.S. fourth quarter business total was down 7.8% to $86.2 million, attributed to higher tariff burden leading to slower second half sell-throughs and lower fourth quarter replenishment. Fourth quarter FOB sales to U.S. were positive vs prior year. Rest of World fourth quarter sales up 9.9% to $41 million, Europe roughly flat, Latin America up significantly. Full year Rest of World business $154.1 million, up 5.5% from prior year, led by 14% increase in Europe to $81.4 million. Full year Toys/Consumer Products business down 19%, all 3 divisions down 9% - 23%. Costume business down 10% full year with international slight increase offsetting U.S. results.

• 2026 expected to be low to mid-single-digit top line growth year, continued focus on expanding margins, setting up for impactful new launches in 2027.
• Positive on Action Sports future, with skateboard sales trends rebounding, expected to accelerate innovation investment and expand strategic partnerships.

• Tariff policy and other market dynamics could cause actual results to differ materially from forward-looking statements, refer to company's SEC filings for details.
• U.S. domestic sales affected by higher tariff burden leading to higher retail prices and slower second half sell-throughs.
• Inventory management challenges and uncertainties.

Q: How to view FOB model in 2026 and beyond, any adjustments?

A: Continuing to focus on FOB first business, working with major U.S. retailers to handle tariff impacts through first cost of sale program.

Q: How to view international opportunity with FOB?

A: As primary FOB company, establishing distribution centers in regions like Europe to expand international growth, adjusting FOB and domestic inventory strategies based on customer situations.

Q: How to use healthy balance sheet to obtain new licenses and expand relationships?

A: Healthy balance sheet is welcomed by licensors, focusing on margin enhancement, working closely with licensors to advance 2026 and 2027 initiatives.

Q: How to view 2026 quarter flows?

A: Q1 is usually the smallest quarter, focusing on first half and second half, not overly fixating on Q1 performance.

Q: POS trend and retail inventory in fourth quarter?

A: On POS, super hot new launch items did well but higher retailer prices slowed POS for some segments. On retail inventory, down 21% year-over-year at one major U.S. retailer and about 4% at another, inventory tight.

Q: Promotional activity and sales allowances in fourth quarter?

A: Relatively normal or less than normal compared to competitors, being cautious due to tariff and consumer demand uncertainties.