JAKK

• Overall Financial Results

  • Q2 2026 net sales reached $139.2 million, a 17% increase year-over-year, above management expectations. Year-to-date net sales hit $245.9 million, 6% ahead of prior year and the best first half result since 2023.
  • Gross margin was 32.3% in Q2, slightly down from 32.8% in Q2 2025. Gross margin dollars increased 3% year-over-year to just over $80 million in the first half.
  • A $0.142 million operating loss was recorded in Q2, a large improvement from the $2.8 million operating loss in Q2 2025. First half operating loss came to $5.7 million, improved from the $6.5 million loss in the prior year first half.
  • Adjusted EBITDA was $5.4 million in Q2 2026, up from $2.3 million in Q2 2025. Adjusted EPS was $0.25 for Q2 and $0.09 for the first half, compared to $0.03 Q2 2025 and breakeven year-to-date 2025.
  • The company received full refunds of all previously paid unconstitutionally levied tariffs in Q2. A $6.8 million non-operating gain was recognized, with all gains excluded from non-GAAP adjusted metrics.
  • Total cash (restricted + unrestricted) was $60.6 million at quarter end, up from $43.1 million year-over-year, driven by stronger operating results and the tariff refund. Inventory was $58.3 million at quarter end, down from $71.8 million year-over-year.
  • The board approved the sixth consecutive quarterly cash dividend of $0.25 per share.

• Key Operational Updates

  • Super Mario Brothers Movie 2 licensed product greatly outperformed expectations, with more movie-branded product sold in the first three shipping quarters than for the first Super Mario film. New product waves are shipping for fall, with expanded Donkey Kong themed offerings launching in H2.
  • The Frozen product line has grown year-over-year after 18 months of steady expansion, with a strong retailer exclusive fall launch planned ahead of the Frozen 3 2027 theatrical release.
  • Retail price impacts from 2025 tariffs have mostly unwound for lower price point products, with improved retail velocity and expanded product listings driving growth for Disney Princess doll lines.
  • The outdoor seasonal segment is facing a structural headwind as retailers reallocate shelf space away from large box bulky items that are poorly suited for low-cost home delivery. Management is executing a two-prong strategy to address this: partnering with retailers to recapture lost space, and redesigning products and packaging to reduce box size for better delivery economics.
  • 75% of first half shipments were FOB, the highest level seen this decade, aligned with the company's core FOB-centric business model.
  • Management has expanded the global organization with three new senior sales roles and opened the company's first South American office to drive long-term international growth.

• Management reaffirms that JAKKS Pacific is on track to deliver full year 2026 results that meet or potentially exceed initial financial plans, and is making substantial progress building the business for long-term growth in 2027 and beyond.
• Full year pre-tax net income projections are increased to reflect the $6.8 million non-operating gain from the tariff refunds.
• 2027 has two top-tier theatrical franchise releases scheduled: Sonic the Hedgehog in Q1 2027 and Frozen 3 in Q4 2027, which will drive product demand.
• A full launch of new anime, manga, and VTube digital entertainer product lines is scheduled for fall 2027, with no material 2026 revenue expected from this initiative.
• Management expects strong multi-year international growth across EMEA, Latin America, South America, and Southeast Asia, supported by existing market momentum and new expansion initiatives.

1. Toys and consumer products: First half net sales were 5% higher year-over-year. The action play and collectibles division grew driven by strong demand for Super Mario Brothers Movie licensed product. Dolls, role play, and dress up was up 12% in Q2 year-over-year, with 5% year-over-year first half growth for the overall toys and consumer segment. 2. Disguise (costumes): Up 8% in Q2 and 9% year-to-date, with growth driven by demand for Toy Story 5, Super Mario Brothers Movie, and new K-pop Demon Hunters costumes. 3. Outdoor seasonal: Down 12% in Q2 and 17% year-to-date, reaching $11.1 million in year-to-date sales. 4. Geographic segments: North America grew 20% year-over-year in Q2 and 3% for the first half. International grew 3% year-over-year in Q2 and 20% for the first half, reaching a record $53 million in first half international sales, the highest first half international shipment level in over 10 years.

• The outdoor seasonal business faces a structural headwind from retail shelf space reallocation away from large box products that are incompatible with modern low-cost home delivery models, which pressured near-term results.
• All forward-looking statements are subject to general market and regulatory risks, which could cause actual results to differ materially from projections, as disclosed in JAKKS' regular SEC filings.
• Management noted ongoing media industry consolidation and studio restructuring, but stated this has not created material challenges for JAKKS' licensing operations to date.

Q: How has the domestic toy market changed after the tariff shock, and what opportunities is JAKKS leveraging? / A: The industry has adapted to post-tariff price changes, and JAKKS has reduced product costs to restore attractive pre-tariff price points for lower-priced items, which is driving higher volume. The company has also diversified its retail footprint, expanding into value and specialty channels while maintaining relationships with core large mass merchants. Point of sale demand is much stronger in 2026 than 2025 for appropriately priced products. (201 characters)

Q: International markets are less concentrated than the US. How does this impact FOB sales and margin potential for international? / A: JAKKS' product and licensing portfolio is now much better suited to international markets than it was five years ago, with localized product assortments tuned to regional preferences. The majority of international sales are already transacted on an FOB basis, which improves JAKKS' margins, while also allowing international customers to lower their own costs and pass lower prices to end consumers. This combination is supporting rapid multi-year international growth. (277 characters)

Q: How should investors think about new licenses and M&A given JAKKS' growing cash balance? / A: JAKKS has a strong healthy balance sheet that gives flexibility to pursue new opportunities. The company is actively adding new unannounced licenses across its core segments, maintaining a dual focus on its core young children's toy business, where many competitors are pulling back, and growing the kidult-focused anime/manga/VTube segment. Management is actively reviewing potential acquisitions that fit the company's strategy and has access to sufficient capital to pursue attractive opportunities if they arise. (312 characters)

Q: Is the anime initiative progressing as expected, and will it generate 2026 revenue? / A: The anime, manga, and VTube initiative is progressing exactly on plan, with a methodical grassroots launch focused on genre-specialized retailers first, followed by a full wide distribution launch across core retail partners in fall 2027. No material revenue from this initiative is expected in 2026, and long-term growth projections remain unchanged. (228 characters)