Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Spin Master Corp (SNMSF, Financial) reported a 25% increase in total revenue for the third quarter, driven by strong performance in the toy segment and Melissa and Doug.
- The company maintained its position as the number four corporate manufacturer in the toy industry, with several new products landing on retailers' most wanted toy lists for the holidays.
- Melissa and Doug achieved double-digit growth in gross product sales for the second consecutive quarter, demonstrating the brand's strength.
- The Miss Rachel toy line exceeded expectations, becoming the number one new license in the US toy industry in Q3.
- Spin Master Corp (SNMSF) successfully integrated Melissa and Doug, achieving significant milestones and positive revenue growth in Canada and Mexico.
Negative Points
- Entertainment and digital games revenue declined, with a notable decrease in in-game purchases within Toca Boca World.
- Adjusted EBITDA margin excluding Melissa and Doug decreased due to a higher proportion of revenue from toys and a lower proportion from digital games.
- The company faced challenges in digital games, with a 16.8% revenue decline in Toca Boca World due to lower in-app purchases.
- Gross margin declined to 53% from 54.5%, primarily due to the impact of the Melissa and Doug inventory fair market value adjustment.
- Spin Master Corp (SNMSF) anticipates continued volatility in consumer behavior in Q4, influenced by the US election and a shorter shopping period between Thanksgiving and Christmas.
Q & A Highlights
Q: Can you clarify the year-to-date POS growth for Melissa and Doug?
A: The year-to-date POS growth for Spin Master and Melissa and Doug combined is 23%, which includes the incremental sales from Melissa and Doug. (Mark Segal, CFO)
Q: Is there a pull-forward in Q3 for Melissa and Doug, and what is driving the positive performance?
A: There is no significant pull-forward in Q3. The positive performance is driven by strong retailer and marketing investments, as well as new innovations like Sticker Wow and Blockable. (Max Rangel, CEO)
Q: How can Spin Master achieve a significant EBITDA margin increase in Q4?
A: The increase will be driven by careful management of marketing dollars, sales allowances, and markdowns. Retail inventory levels are in good shape, reducing markdown risk. (Mark Segal, CFO)
Q: What are the expectations for digital games in Q4, and how will they contribute to EBITDA?
A: Digital games are expected to grow in Q4, driven by new content in Toca Boca World and strong performance in the Sago Mini subscription business. (Max Rangel, CEO)
Q: How is the rollout of the value channel going, and what are the expectations for 2025?
A: The value channel rollout is progressing well, with 40-50 SKUs in the line. Expectations for 2025 are significantly higher as the rollout expands globally, particularly in the US and Europe. (Mark Segal, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
