Strength Across Toys, Entertainment
and Digital Games
TORONTO, Feb. 28, 2022 /CNW/ - Spin Master Corp. ("Spin
Master" or the "Company") (TSX: TOY) (www.spinmaster.com), a
leading global children's entertainment company, today announced
its financial results for the three months and year ended
December 31, 2021. The Company's full Management's Discussion
and Analysis ("MD&A") for the three months and year ended
December 31, 2021 is available under the Company's profile on
SEDAR (www.sedar.com) and posted on the Company's web site at
www.spinmaster.com/financial-info.php.
"We delivered very impressive growth in 2021 across all our
three creative centres and furthered our commitment to creating
magical play experiences for children and their families through
innovative toys, engaging entertainment and creative digital
games," said Max Rangel, Spin
Master's Global President and Chief Executive Officer. "We have
built a solid foundation for continued long-term growth and as we
enter 2022, we are focused on further developing the full potential
of Toys, Entertainment and Digital Games, with a greater focus on
customer centricity, driving innovation, building evergreen
entertainment franchises and digital games, growing our
international markets and optimizing our operating platform to
continue to create value for our shareholders."
Mark Segal, Spin Master's Chief
Financial Officer added, "In the fourth quarter, we maintained the
positive momentum we built throughout the year, combining
organizational discipline, financial focus and operational
efficiency to exceed our expectations. For the year, we grew
Gross Product Sales1 over 20%, total revenue grew
30% and exceeded $2 billion for the
first time and our Adjusted EBITDA1 exceeded
$414 million at an Adjusted EBITDA
Margin1 above 20%, another first. Our intensive focus on
working capital allowed us to generate record Free Cash
Flow1 in 2021 and we ended the year with available
liquidity2 in excess of $1
billion. We are in an excellent position financially and
operationally to generate and sustain long term, profitable
growth."
Q4 2021 Financial Highlights as compared to the same period
in 2020 (US$ millions)
- Revenue was $620.5 million, an
increase of 26.5% from $490.6 million
driven by revenue growth in Toy, Entertainment and Licensing
and Digital Games. Constant Currency Revenue1 was
$622.1 million, up from $490.6 million, an increase of
26.8%3.
- Gross profit was $323.3 million,
representing a gross margin4 of 52.1%, compared to
$241.0 million or 49.1%. The
improvement in gross margin was as a result of lower closeout
sales, a higher proportion of Digital Games and licensing and
merchandising revenue and favourable changes in product mix and
productivity savings, offset in part by inflation on product costs
and ocean freight, which was partially mitigated by price
increases.
- Selling, general and administrative expenses ("SG&A")
decreased as a percentage of Revenue to 43.1% compared to 43.2%,
primarily from lower distribution expenses, partially offset by
higher administrative and marketing expenses.
- Net income was $26.5 million or
earnings per share of $0.25 (diluted)
compared to $0.3 million or earnings
per share of $nil (diluted). Net margin5 was 4.3%
compared to 0.1%.
- Adjusted Net Income1 was $38.7 million or Adjusted Diluted EPS1
of $0.37, compared to $14.6 million or Adjusted Diluted EPS1
of $0.14.
- Adjusted EBITDA1 was $78.3
million compared to $51.5
million. Adjusted EBITDA Margin1 was 12.6%
compared to 10.5%.
- Cash provided by operating activities was $230.1 million compared to $138.2 million, as a result of higher net income
and a decrease in change in net working capital.
- Cash used in investing activities was $19.6 million compared to $19.3 million.
- Free Cash Flow1 was $211.3
million compared to $123.7
million, due to higher cash flows from operating
activities.
- Subsequent to December 31, 2021,
the Company divested manufacturing assets located in Tarboro, North Carolina and certain related
brands associated with its Outdoor business. The Company presented
the assets associated with the divestiture as held for sale as at
December 31, 2021.
Revenue Highlights
for Q4 2021 as compared to the same period in 2020
|
(US$
millions)
|
Q4
2021
|
Q4
20201
|
$
Change
|
%
Change
|
Preschool and Dolls
& Interactive2
|
$
|
251.8
|
$
|
200.2
|
$
|
51.6
|
25.8
%
|
Activities, Games &
Puzzles and Plush5
|
|
206.5
|
|
173.9
|
|
32.6
|
18.7 %
|
Wheels &
Action2
|
|
146.1
|
|
122.1
|
|
24.0
|
19.7 %
|
Outdoor
|
|
23.1
|
|
15.6
|
|
7.5
|
48.1 %
|
Gross Product Sales
3
|
$
|
627.5
|
$
|
511.8
|
$
|
115.7
|
22.6
%
|
Sales
Allowances4
|
|
(85.5)
|
|
(77.5)
|
|
(8.0)
|
10.3 %
|
Toy
revenue
|
$
|
542.0
|
$
|
434.3
|
$
|
107.7
|
24.8
%
|
Entertainment and
Licensing revenue
|
|
28.5
|
|
24.5
|
|
4.0
|
16.3 %
|
Digital Games
revenue6
|
|
50.0
|
|
31.8
|
|
18.2
|
57.2 %
|
Other
revenue
|
$
|
78.5
|
$
|
56.3
|
$
|
22.2
|
39.4
%
|
Revenue
|
$
|
620.5
|
$
|
490.6
|
$
|
129.9
|
26.5
%
|
1 Effective Q1 2021, Spin Master
simplified its product categories to align with the Company's
product offerings going forward. Prior
year comparative information has been updated to conform with the
current disclosure. See "Addendum" for further details.
|
2 Effective
Q4 2021, the "Preschool and Girls" product category was renamed
"Preschool and Dolls & Interactive" and the "Boys"
product category was renamed "Wheels & Action".
|
3 Non-GAAP financial measure or
ratio. See "Non-GAAP Financial Measures and Ratios".
|
4 Sales
Allowances represent sales credits requested by customers relating
to factors such as cooperative advertising, contractual
and negotiated discounts, volume rebates, and costs incurred by
customers to sell the Company's products.
|
5 Includes
$9.7 million related to Rubik's in Q4 2021. Rubik's
was acquired on January 4, 2021.
|
6 Includes $1.0 million related to
Originator in Q4 2021. Originator was acquired on
June 14, 2021.
|
Toy revenue
Toy revenue increased by $107.7
million or 24.8% to $542.0
million, driven by growth in all product categories,
particularly Preschool and Dolls & Interactive.
Other revenue
Entertainment and Licensing revenue was $28.5 million, $4.0
million or 16.3% higher, driven by licensing and
merchandising revenue.
Digital Games revenue was $50.0
million, an increase of $18.2
million or 57.2%, mainly related to growth in
Toca Life World.
Gross Product Sales1
Gross Product Sales increased by $115.7
million or 22.6% to $627.5
million from $511.8 million,
primarily related to higher sales in Preschool and Dolls &
Interactive, Activities, Games & Puzzles and Plush and Wheels
& Action. Constant Currency Gross Product Sales1
increased by $117.2 million or
22.9%3 to $629.0 million
from $511.8 million. The improvement
was generated by growth in all product categories and reflected
strong customer demand throughout the quarter and the Company's
successful management of the global supply chain volatility.
Gross Product Sales increased by 32.8% in North America, 11.6% in Europe and 9.5% in Rest of World.
International Gross Product Sales1, comprised of the
Europe and Rest of World segments,
were 42.4% of total Gross Product Sales1, compared to
46.8%6.
Gross Product Sales in Preschool and Dolls & Interactive
increased by $51.6 million or 25.8%
to $251.8 million from $200.2 million, arising from sales of
Wizarding World, Gabby's Dollhouse, PAW Patrol and
Purse Pets, offset in part by a decline in
Hatchimals.
Gross Product Sales in Activities, Games & Puzzles and
Plush increased by $32.6 million or
18.7% to $206.5 million from
$173.9 million, mainly due to
increases in Kinetic Sand, Rubik's and
Orbeez.
Gross Product Sales in Wheels & Action increased by
$24.0 million or 19.7% to
$146.1 million from $122.1 million, led by increases in DC
licensed products and Tech Deck, partially offset by a
decline in DreamWorks Dragons.
Gross Product Sales in Outdoor increased by $7.5 million or 48.1% to $23.1 million from $15.6
million, as a result of increases in SwimWays
and Aerobie.
Sales Allowances increased by $8.0
million to $85.5 million from
$77.5 million. Sales Allowance as a
percentage of Gross Product Sales1 were 13.6%, compared
to 15.1%. The decrease was led by lower non-compliance
charges, fines and penalties.
Financial Highlights for Year Ended December 31, 2021 as
compared to the same period in 2020 (US$ millions)
- Revenue was $2,042.4 million, an
increase of 30.0% from $1,570.6
million driven by revenue growth in Toy, Entertainment
and Licensing and Digital Games. Constant Currency
Revenue1 increased by 28.9%2 to $2,025.2 million from $1,570.6 million.
- Gross profit was $1,056.6
million, representing a gross margin of 51.7%, compared to
$727.9 million or 46.3%. of Revenue.
The improvement in gross margin was as a result of cost reductions
resulting from the Company's operational improvements and
productivity initiatives, favourable changes in product mix, a
higher proportion of Digital Games and licensing and merchandising
revenue and lower closeout sales. This increase was offset in part
by inflation on product costs and ocean freight, which was
partially mitigated by price increases implemented during the third
quarter, as well as by the dilutive effect of PAW Patrol: The
Movie (revenue less amortization of production costs).
- SG&A decreased as a percentage of Revenue to 36.4% compared
to 40.3%, primarily from lower distribution partially offset by
higher marketing and administrative expenses.
- Net income was $198.6 million or
earnings per share of $1.89
(diluted), compared to $45.5 million
or earnings per share of $0.44
(diluted). Net margin was 9.7% compared to 2.9%.
- Adjusted Net Income1 was $221.3 million or Adjusted Diluted
EPS1 of $2.10, compared to
$53.4 million or Adjusted Diluted
EPS1 of $0.51.
- Adjusted EBITDA1 was $414.1
million compared to $180.6
million. Adjusted EBITDA Margin1 was 20.3%
compared to 11.5%. Included in Adjusted EBITDA1 was
$26.0 million related to distribution
revenue for PAW Patrol: The Movie.
- Cash provided by operating activities were $419.1 million compared to $310.8 million, primarily from higher net
income.
- Cash used in investing activities was $153.2 million compared to $84.9 million, comprising of business
acquisitions and investments in entertainment content
production.
- Free Cash Flow1 was $339.6
million compared to $232.1
million, due to higher cash flows from operating
activities.
Revenue Highlights
for Year Ended December 31, 2021 as compared to the same
period in 2020
|
(US$
millions)
|
|
2021
|
|
20201
|
|
$
Change
|
%
Change
|
Preschool and Dolls
& Interactive2
|
$
|
809.6
|
$
|
609.5
|
$
|
200.1
|
32.8
%
|
Activities, Games &
Puzzles and Plush4
|
|
587.8
|
|
534.8
|
|
53.0
|
9.9 %
|
Wheels &
Action2
|
|
445.6
|
|
388.3
|
|
57.3
|
14.8 %
|
Outdoor
|
|
119.4
|
|
91.1
|
|
28.3
|
31.1 %
|
Gross Product
Sales3
|
$
|
1,962.4
|
$
|
1,623.7
|
$
|
338.7
|
20.9
%
|
Sales
Allowances5
|
|
(230.6)
|
|
(208.1)
|
|
(22.5)
|
10.8 %
|
Toy
revenue
|
$
|
1,731.8
|
$
|
1,415.6
|
$
|
316.2
|
22.3
%
|
Entertainment and
Licensing revenue6
|
|
135.8
|
|
78.2
|
|
57.6
|
73.7 %
|
Digital Games
revenue7
|
|
174.8
|
|
76.8
|
|
98.0
|
127.6 %
|
Other
revenue
|
$
|
310.6
|
$
|
155.0
|
$
|
155.6
|
100.4
%
|
Revenue
|
$
|
2,042.4
|
$
|
1,570.6
|
$
|
471.8
|
30.0
%
|
1
|
Effective Q1 2021, Spin
Master simplified its product categories to align with the
Company's product offerings going forward. Prior year
comparative information has been updated to conform with the
current disclosure. See "Addendum" for further details.
|
2
|
Effective Q4 2021, the
"Preschool and Girls" product category was renamed "Preschool and
Dolls & Interactive" and the "Boys" product
category was renamed "Wheels & Action".
|
3
|
Non-GAAP financial
measure or ratio. See "Non-GAAP Financial Measures and
Ratios".
|
4
|
Includes $25.2
million related to Rubik's in 2021. Rubik's was
acquired on January 4, 2021.
|
5
|
Sales Allowances
represent sales credits requested by customers relating to factors
such as cooperative advertising, contractual and
negotiated discounts, volume rebates, and costs incurred by
customers to sell the Company's products.
|
6
|
Includes $26.0 million
related to revenue for PAW Patrol: The Movie in
2021.
|
7
|
Includes $2.3 million
related to Originator in 2021. Originator was
acquired on June 14, 2021
|
|
|
|
|
Toy revenue
Toy revenue increased by $316.2
million or 22.3% to $1,731.8
million driven by growth in all product categories,
particularly Preschool and Dolls & Interactive.
Other revenue
Entertainment and Licensing revenue increased by $57.6 million or 73.7% to $135.8 million driven by distribution revenue
related to PAW Patrol: The Movie and higher licensing and
merchandising revenue.
Digital Games revenue increased by $98.0
million or 127.6% to $174.8
million, mainly related to higher in-game purchases in
Toca Life World.
Gross Product Sales1
Gross Product Sales increased by $338.7
million or 20.9% to $1,962.4
million from $1,623.7
million. Constant Currency Gross Product
Sales1 increased by $326.4
million to $1,950.1 million
from $1,623.7 million, an increase of
20.1%3. The improvement was due to growth in all product
categories, particularly Preschool and Dolls & Interactive.
Gross Product Sales increased by 23.8% in Rest of World,
21.8% in North America and 17.7%
in Europe. International Gross
Product Sales1, comprised of the Europe and Rest of World segments, represented
39.0% of total Gross Product Sales1 compared to
39.4%6.
Gross Product Sales in Preschool and Dolls & Interactive
increased by $200.1 million or 32.8%
to $809.6 million from $609.5 million, driven primarily by increases in
PAW Patrol, Wizarding World, Gabby's Dollhouse and
Purse Pets, offset in part by declines in Hatchimals
and Twisty Petz.
Gross Product Sales in Activities, Games & Puzzles and Plush
increased by $53.0 million or 9.9% to
$587.8 million from $534.8 million, mainly due to increases in
Kinetic Sand, Rubik's and GUND, offset in part
by a decline in the Games & Puzzles portfolio.
Gross Product Sales in Wheels & Action increased by
$57.3 million or 14.8% to
$445.6 million from $388.3 million, driven by increases in
DC licensed products, Monster Jam RC and Tech
Deck, partially offset by declines in Ninja Bots and
DreamWorks Dragons.
Gross Product Sales in Outdoor increased by $28.3 million or 31.1% to $119.4 million from $91.1
million as a result of increases in SwimWays and
Aerobie.
Sales Allowances increased by $22.5
million to $230.6 million from
$208.1 million. Sales Allowance as a
percentage of Gross Product Sales1 were 11.8% compared
to 12.8%, due to lower non-compliance charges and markdowns.
Outlook
Spin Master continues to focus on driving long-term growth. Its
principal strategies are to:
- Innovate using our global internal and external research and
development network;
- Increase international sales in developed and emerging
markets;
- Develop evergreen global entertainment franchises;
- Establish a leading position in digital games; and
- Leverage the Company's global platform through strategic
acquisitions and investments.
The Company expects 2022 Gross Product Sales1 to
increase mid to high single digits compared to 2021.
The Company expects 2022 Revenue to increase mid to high single
digits compared to 2021 Revenue, excluding PAW Patrol: The
Movie Distribution Revenue1 of $26.0 million.
The Company expects 2022 Adjusted EBITDA Margin1 to
be in line with 2021 Adjusted EBITDA Margin, excluding PAW
Patrol: The Movie Distribution Revenue1 of
$26.0 million.
Forward-Looking Statements
Certain statements, other than statements of historical fact,
contained in this Press Release constitute "forward-looking
information" within the meaning of certain securities laws,
including the Securities Act (Ontario), and are based on expectations,
estimates and projections as of the date on which the statements
are made in this Press Release. The words "plans", "expects",
"projected", "estimated", "forecasts", "anticipates", "indicative",
"intend", "guidance", "outlook", "potential", "prospects", "seek",
"strategy", "targets" or "believes", or variations of such words
and phrases or statements that certain future conditions, actions,
events or results "will", "may", "could", "would", "should",
"might" or "can", or negative versions thereof, "be taken",
"occur", "continue" or "be achieved", and other similar
expressions, identify statements containing forward-looking
information. Statements of forward-looking information in this
Press Release include, without limitation, statements with respect
to: the Company's outlook for 2022; future growth expectations in
2022 and beyond; drivers and trends for such growth and financial
performance; the successful execution of its strategies for growth;
the Company's Spin Master Ventures initiative; content and product
pipeline; financial position, cash flows and financial performance;
and the creation of long term shareholder value.
Forward-looking statements are necessarily based upon
management's perceptions of historical trends, current conditions
and expected future developments, as well as a number of specific
factors and assumptions that, while considered reasonable by
management as of the date on which the statements are made in this
Press Release, are inherently subject to significant business,
economic and competitive uncertainties and contingencies which
could result in the forward-looking statements ultimately being
incorrect. In addition to any factors and assumptions set forth
above in this Press Release, the material factors and assumptions
used to develop the forward-looking information include, but are
not limited to: ability of factories to manufacture products,
including labour size and allocation, tooling, raw material and
component availability, ability to shift between product mix, and
customer acceptance of delayed delivery dates; the steps taken will
create long term shareholder value; the expanded use of advanced
technology, robotics and innovation the Company applies to its
products will have a level of success consistent with its past
experiences; the Company will continue to successfully secure
broader licenses from third parties for major entertainment
properties consistent with past practices; the expansion of sales
and marketing offices in new markets will increase the sales of
products in that territory; the Company will be able to
successfully identify and integrate strategic acquisition and
minority investment opportunities; the Company will be able to
maintain its distribution capabilities; the Company will be able to
leverage its global platform to grow sales from acquired brands;
the Company will be able to recognize and capitalize on
opportunities earlier than its competitors; the Company will be
able to continue to build and maintain strong, collaborative
relationships; the Company will maintain its status as a preferred
collaborator; the culture and business structure of the Company
will support its growth; the current business strategies of the
Company will continue to be desirable on an international platform;
the Company will be able to expand its portfolio of owned branded
intellectual property and successfully license it to third parties;
use of advanced technology and robotics in the Company's products
will expand; access of entertainment content on mobile platforms
will expand; fragmentation of the market will continue to create
acquisition opportunities; the Company will be able to maintain its
relationships with its employees, suppliers, retailers and license
partners; the Company will continue to attract qualified personnel
to support its development requirements; and the Company's key
personnel will continue to be involved in the Company products and
entertainment properties will be launched as scheduled and that the
risk factors noted in this Press Release, collectively, do not have
a material impact on the Company.
By its nature, forward-looking information is subject to
inherent risks and uncertainties that may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct and that
objectives, strategic goals and priorities will not be achieved.
Known and unknown risk factors, many of which are beyond the
control of the Company, could cause actual results to differ
materially from the forward-looking information in this Press
Release. Such risks and uncertainties include, without limitation,
the magnitude and length of economic disruption as a result of the
COVID-19 pandemic; and the factors discussed in the Company's
disclosure materials, including the Annual MD&A and the
Company's most recent Annual Information Form, filed with the
securities regulatory authorities in Canada and available under the Company's
profile on SEDAR (www.sedar.com). These risk factors are not
intended to represent a complete list of the factors that could
affect the Company and investors are cautioned to consider these
and other factors, uncertainties and potential events carefully and
not to put undue reliance on forward-looking statements.
There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Forward-looking statements are provided for the purpose of
providing information about management's expectations and plans
relating to the future. The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
or to explain any material difference between subsequent actual
events and such forward-looking statements, except to the extent
required by applicable law.
____________________
|
1 Non-GAAP financial measure or
ratio. See "Non-GAAP Financial Measures and Ratios".
2 As at December 31, 2021, available liquidity
was $1,080.2 million, comprised of $562.7 million in cash and cash
equivalents and $517.5 million under its credit
facilities.
3 See "Percentage change in Constant Currency Gross
Product Sales" and "Percentage change in Constant Currency Revenue"
within "Non-GAAP Financial Measures and Ratios" for details.
4 Gross margin is calculated as Gross profit
divided by Revenue.
5 Net margin is calculated as Net income divided by
Revenue.
6 See "Revenue by Geographical Segment" table for
details.
|
Conference call
Max
Rangel, Global President and Chief Executive Officer and
Mark Segal, Chief Financial Officer
will host a conference call to discuss the audited financial
results on Tuesday, March 1, 2022
at 9:30 a.m. (ET).
The call-in numbers for participants are (647) 792-1240
or (800) 437-2398. A live webcast of the call will be
accessible via Spin Master's website at:
http://www.spinmaster.com/events.php. Following the call, both an
audio recording and transcript of the call will be archived on the
same website page.
About Spin Master
Spin Master Corp. (TSX:TOY) is a
leading global children's entertainment company, creating
exceptional play experiences through it's three creative centres:
Toys, Entertainment and Digital Games. With distribution in over
100 countries, Spin Master is best known for award-winning brands
PAW Patrol®, Bakugan®, Kinetic Sand®, Air Hogs®, Hatchimals®,
Rubik's Cube® and GUND®, and is the global toy licensee for other
popular properties. Spin Master Entertainment creates and produces
compelling multiplatform content, through its in-house studio and
partnerships with outside creators, including the preschool
franchise PAW Patrol and numerous other original shows,
short-form series and feature films. The Company has an established
presence in digital games, anchored by the Toca Boca® and Sago
Mini® brands, offering open-ended and creative game and educational
play in digital environments. Through Spin Master Ventures, the
Company makes minority investments globally in emerging companies
and start-ups. With over 30 offices in close to 20 countries, Spin
Master employs more than 2,000 team members globally. For more
information visit spinmaster.com or follow-on Instagram, Facebook
and Twitter @spinmaster.
Non-GAAP Financial Measures and Ratios
In addition to using financial measures prescribed under IFRS,
references are made in this Press Release to the following terms,
each of which is a non-GAAP financial measure:
- Gross Product Sales
- Constant Currency Gross Product Sales
- Constant Currency Revenue
- EBITDA
- Adjusted EBITDA
- Adjusted Net Income (Loss)
- Free Cash Flow
- Revenue, excluding PAW Patrol: The Movie Distribution
Revenue
- Adjusted EBITDA, excluding PAW Patrol: The Movie
Distribution Revenue
Non-GAAP financial measures do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures presented by other issuers.
Additionally, references are made in this Press Release to the
following terms, each of which is a non-GAAP financial ratio:
- Sales Allowance as a percentage of Gross Product Sales
- Percentage change in Constant Currency Gross Product Sales
- Percentage change in Constant Currency Revenue
- Adjusted EBITDA Margin
- Adjusted Diluted EPS
- Adjusted EBITDA Margin, excluding PAW Patrol: The Movie
Distribution Revenue
Non-GAAP financial ratios do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures presented by other issuers.
Management believes the Non-GAAP financial measures and Non-GAAP
financial ratios defined above are important supplemental measures
of operating performance and highlight trends in the business.
Management believes that these measures allow for assessment of the
Company's operating performance and financial condition on a basis
that is consistent and comparable between reporting periods. The
Company believes that investors, lenders, securities analysts and
other interested parties frequently use these Non-GAAP financial
measures and Non-GAAP financial ratios in the evaluation of
issuers.
Non-GAAP Financial Measures
Gross Product Sales represent sales of the Company's products to
customers, excluding the impact of Sales Allowances. As Sales
Allowances are generally not associated with individual products,
the Company uses changes in Gross Product Sales to provide
meaningful comparisons across product category and geographical
segment results to highlight trends in Spin Master's business. For
a reconciliation of Gross Product Sales to Revenue, the closest
IFRS measure, refer to the revenue tables for the three months and
year ended December 31, 2021 as compared to the same period in
2020 in this Press Release.
Constant Currency Gross Product Sales and Constant Currency
Revenue represent Gross Product Sales and Revenue presented
excluding the impact from changes in foreign currency exchange
rates, respectively. The current period and prior period results
for entities reporting in currencies other than the US dollar are
translated using consistent exchange rates, rather than using the
actual exchange rate in effect during the respective periods. The
difference between the current period and prior period results
using the consistent exchange rates reflects the changes in the
underlying performance results, excluding the impact from
fluctuations in foreign currency exchange rates. Management uses
Constant Currency Gross Product Sales and Constant Currency Revenue
to measure the underlying financial performance of the business on
a consistent basis over time. Refer to the "Reconciliation of
Non-GAAP Financial Measures" section for a reconciliation of these
metrics to Revenue, the closest IFRS measure.
EBITDA is calculated as net income (loss) before finance costs,
income tax expense (recovery) and depreciation and amortization.
EBITDA is used by management as a measure of the Company's
profitability.
Adjusted EBITDA is calculated as EBITDA excluding adjustments
that do not necessarily reflect the Company's underlying financial
performance. These adjustments include restructuring expenses,
foreign exchange gains or losses, share based compensation
expenses, acquisition related contingent consideration, impairment
of intangible assets, impairment of goodwill, investment
distribution income, acquisition related deferred incentive
compensation, net unrealized gain on investment, impairment of
property, plant and equipment, legal settlement, transaction costs,
gain on disposal of asset and bad debt recovery. Adjusted EBITDA is
used by management as a measure of the Company's
profitability. Refer to the "Reconciliation of Non-GAAP
Financial Measures" section below for a reconciliation of this
metric to Net Income, the closest IFRS measure.
Adjusted Net Income (Loss) is calculated as net income excluding
adjustments (as defined in Adjusted EBITDA), the corresponding
impact these items have on income tax expense and a one-time income
tax recovery in 2020. Management uses Adjusted Net Income (Loss) to
measure the underlying financial performance of the business on a
consistent basis over time. Refer to the "Reconciliation of
Non-GAAP Financial Measures" section below for a reconciliation of
this metric to Net Income, the closest IFRS measure.
Free Cash Flow is calculated as cash flows provided by/used in
operating activities reduced by cash flows used in investing
activities and adding back cash used for business acquisitions and
investment in limited partnership and minority interests, net of
investment distribution income. Management uses the Free Cash Flow
metric to analyze the cash flows being generated by the Company's
business. The calculation of this metric was revised to include the
impact of investment distribution income as Management believes
this composition to be relevant to investors, lenders, securities
analysts and other interested parties of the Company. Refer to the
"Reconciliation of Non-GAAP Financial Measures" section for a
reconciliation of this metric to Cash flow from operating
activities, the closest IFRS measure.
Revenue, excluding PAW Patrol: The Movie Distribution
Revenue is calculated as revenue excluding distribution revenue of
$26.0 million related to PAW
Patrol: The Movie recognized in 2021. Revenue,
excluding PAW Patrol: The Movie Distribution Revenue is used
to measure the underlying financial performance of the business on
a consistent basis over time. Refer to the "Reconciliation of
Non-GAAP Financial Measures" section for a reconciliation of this
metric to Revenue, the closest IFRS measure.
Adjusted EBITDA, excluding PAW Patrol: The Movie
Distribution Revenue is calculated as Adjusted EBITDA excluding
distribution revenue of $26.0 million
related to PAW Patrol: The Movie recognized in 2021.
Adjusted EBITDA, excluding PAW Patrol: The Movie
Distribution Revenue is used by management as a measure of the
Company's profitability on a consistent basis over time.
Refer to the "Reconciliation of Non-GAAP Financial Measures"
section below for a reconciliation of this metric to Net Income,
the closest IFRS measure.
Non-GAAP Financial Ratios
Sales Allowance as a percentage of Gross Product Sales is
calculated by dividing Sales Allowance by Gross Product Sales.
Management uses Sales Allowance as percentage of Gross Product
Sales to identify and compare the cost of doing business with
individual retailers, different geographic markets and amongst
various distribution channels.
Percentage change in Constant Currency Gross Product Sales is
calculated by dividing the change in Gross Product Sales excluding
the impact from changes in foreign currency exchange rates by the
Gross Product Sales of the comparative period. Management uses
Percentage change in Constant Currency Gross Product Sales to
measure the underlying financial performance of the business on a
consistent basis over time excluding the impact from changes in
foreign currency exchange rates.
Percentage change in Constant Currency Revenue is calculated by
dividing the change in Revenue excluding the impact from changes in
foreign currency exchange rates by the Revenue of the comparative
period. Management uses Percentage change in Constant Currency
Revenue to measure the underlying financial performance of the
business on a consistent basis over time excluding the impact from
changes in foreign currency exchange rates.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided
by Revenue. Management uses Adjusted EBITDA Margin to evaluate the
Company's performance compared to internal targets and to benchmark
its performance against key competitors.
Adjusted Diluted EPS is calculated by dividing Adjusted Net
Income (Loss) by the weighted average number of common shares
outstanding, assuming the conversion of all dilutive securities
were exercised during the period. Management uses Adjusted Diluted
EPS to measure the underlying financial performance of the business
on a consistent basis over time.
Adjusted EBITDA Margin, excluding PAW Patrol: The Movie
Distribution Revenue is calculated as Adjusted EBITDA excluding
PAW Patrol: The Movie Distribution Revenue divided by
Revenue. Management uses Adjusted EBITDA Margin excluding PAW
Patrol: The Movie Distribution Revenue to evaluate the
Company's performance compared to internal targets and to benchmark
its performance against key competitors on a consistent basis over
time.
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of net income to
EBITDA1, Adjusted EBITDA1 and Adjusted Net
Income1, and cash from operating activities to Free Cash
Flow1 for the three months ended December 31, 2021
and 2020:
|
|
Three Months Ended
Dec 31
|
(in US$ millions,
except percentages)
|
2021
|
2020
|
$
Change
|
%
Change
|
Net
income
|
26.5
|
0.3
|
26.2
|
8,733.3
%
|
|
Income tax expense
(recovery)
|
9.5
|
(4.7)
|
14.2
|
(302.1) %
|
|
Finance
costs
|
3.1
|
3.4
|
(0.3)
|
(8.8) %
|
|
Depreciation and
amortization expenses
|
23.0
|
27.6
|
(4.6)
|
(16.7) %
|
EBITDA
|
62.1
|
26.6
|
35.5
|
133.5
%
|
Adjustments:
|
|
|
|
|
|
Restructuring
expense1
|
1.4
|
0.5
|
0.9
|
180.0 %
|
|
Foreign exchange (gain)
loss2
|
(0.7)
|
10.5
|
(11.2)
|
(106.7)%
|
|
Share based
compensation3
|
4.0
|
2.9
|
1.1
|
37.9 %
|
|
Impairment of
goodwill4
|
1.9
|
—
|
1.9
|
n.m.
|
|
Impairment of property,
plant and equipment5
|
—
|
0.5
|
(0.5)
|
(100.0) %
|
|
Impairment of
intangible assets6
|
1.2
|
0.4
|
0.8
|
200.0 %
|
|
Legal
settlement7
|
—
|
5.5
|
(5.5)
|
(100.0) %
|
|
Acquisition related
deferred incentive compensation8
|
2.6
|
—
|
2.6
|
n.m.
|
|
Net unrealized loss on
investment9
|
0.3
|
—
|
0.3
|
n.m.
|
|
Acquisition related
contingent consideration10
|
3.4
|
3.7
|
(0.3)
|
(8.1)
|
|
Transaction
costs11
|
2.1
|
0.9
|
1.2
|
133.3
|
Adjusted
EBITDA
|
78.3
|
51.5
|
26.8
|
52.0
%
|
|
Income tax expense
(recovery)
|
9.5
|
(4.7)
|
14.2
|
(302.1) %
|
|
Finance
costs
|
3.1
|
3.4
|
(0.3)
|
(8.8) %
|
|
Depreciation and
amortization expenses
|
23.0
|
27.6
|
(4.6)
|
(16.7) %
|
|
Tax effect of
adjustments12
|
4.0
|
10.6
|
(6.6)
|
(62.3) %
|
Adjusted Net
Income
|
38.7
|
14.6
|
24.1
|
165.1
%
|
|
|
|
|
|
|
Cash provided by
operations
|
230.1
|
138.2
|
91.9
|
66.5 %
|
Cash used in investing
activities
|
(19.6)
|
(19.3)
|
(0.3)
|
1.6 %
|
Add:
|
|
|
|
|
Cash used for business
acquisitions and investment in limited
partnership and minority interests, net of investment
distribution
income
|
0.8
|
4.8
|
(4.0)
|
(83.3) %
|
Free Cash
Flow
|
211.3
|
123.7
|
87.6
|
70.8
%
|
__________________________
|
1
Restructuring expense primarily relates to changes in
personnel.
|
2 Includes
foreign exchange (gains) losses generated by the translation of
monetary assets/liabilities denominated in a currency other than
the functional currency of the applicable entity and (gains) losses
related to the Company's hedging programs.
|
3 Related to non-cash expenses
associated with subordinate voting shares granted to equity
participants at the time of the Company's initial public offering,
share option expense and long-term incentive plan.
|
4
Impairment of goodwill associated with assets held for sale and one
other CGU.
|
5
Impairment of property plant and equipment related to
machinery.
|
6
Impairment of intangible assets related to entertainment content
and app development.
|
7
Legal settlement in the fourth quarter of 2020.
|
8 Deferred incentive compensation
associated with acquisitions.
|
9 Net
unrealized loss related to investment in limited
partnership.
|
10 Remuneration expense associated
with contingent consideration for acquisitions.
|
11
Professional fees incurred relating to acquisitions and other
transactions.
|
12 Tax
effect of adjustments (Footnotes 2-11). Adjustments are tax
effected at the effective tax rate of the given period.
|
The following table presents a reconciliation of net income to
EBITDA1, Adjusted EBITDA1 and Adjusted Net
Income1, and cash from operating activities to Free Cash
Flow1 for the year ended December 31, 2021 and
2020:
|
|
Year Ended Dec
31
|
(in US$ millions,
except percentages)
|
2021
|
2020
|
$
Change
|
%
Change
|
Net income
|
198.6
|
45.5
|
153.1
|
336.5 %
|
|
Income tax expense
(recovery)
|
63.4
|
(36.1)
|
99.5
|
(275.6) %
|
|
Finance
costs
|
10.2
|
12.1
|
(1.9)
|
(15.7) %
|
|
Depreciation and
amortization expenses
|
111.9
|
103.0
|
8.9
|
8.6 %
|
EBITDA
|
384.1
|
124.5
|
259.6
|
208.5
%
|
Adjustments:
|
|
|
|
|
|
Restructuring
expense1
|
2.5
|
5.3
|
(2.8)
|
(52.8) %
|
|
Foreign exchange (gain)
loss2
|
(2.9)
|
27.6
|
(30.5)
|
(110.5) %
|
|
Share based
compensation3
|
15.3
|
12.2
|
3.1
|
25.4 %
|
|
Impairment of
goodwill4
|
1.9
|
—
|
1.9
|
n.m.
|
|
Impairment of property,
plant and equipment5
|
—
|
0.5
|
(0.5)
|
n.m.
|
|
Impairment of
intangible assets6
|
2.6
|
0.4
|
2.2
|
n.m.
|
|
Legal
settlement7
|
—
|
5.5
|
(5.5)
|
n.m.
|
|
Acquisition related
deferred incentive compensation8
|
6.8
|
—
|
6.8
|
n.m.
|
|
Net unrealized gain on
investment9
|
(0.9)
|
—
|
(0.9)
|
n.m.
|
|
Investment distribution
income10
|
(0.6)
|
—
|
(0.6)
|
n.m.
|
|
Acquisition related
contingent consideration11
|
2.7
|
3.7
|
(1.0)
|
(27.0) %
|
|
Transaction
costs12
|
2.8
|
0.9
|
1.9
|
n.m.
|
|
Gain on disposal of
asset13
|
(0.2)
|
—
|
(0.2)
|
n.m.
|
Adjusted
EBITDA
|
414.1
|
180.6
|
233.5
|
129.3
%
|
|
Distribution revenue
related to PAW Patrol: The Movie
|
(26.0)
|
—
|
(26.0)
|
n.m.
|
Adjusted EBITDA,
excluding PAW Patrol: The Movie Distribution
Revenue
|
388.1
|
180.6
|
207.5
|
114.9
%
|
|
Distribution revenue
related to PAW Patrol: The Movie
|
(26.0)
|
—
|
(26.0)
|
n.m.
|
|
Income tax expense
(recovery)
|
63.4
|
(36.1)
|
99.5
|
(275.6)
%
|
|
Finance
costs
|
10.2
|
12.1
|
(1.9)
|
(15.7) %
|
|
Depreciation and
amortization expenses
|
111.9
|
103.0
|
8.9
|
8.6 %
|
|
One-time income tax
recovery14
|
—
|
33.3
|
(33.3)
|
n.m.
|
|
Tax effect of
adjustments15
|
7.3
|
14.9
|
(7.6)
|
(51.0) %
|
Adjusted Net
Income
|
221.3
|
53.4
|
167.9
|
314.4
%
|
|
|
|
|
|
|
Cash provided by
operating activities
|
419.1
|
310.8
|
108.3
|
34.8 %
|
Cash used in investing
activities
|
(153.2)
|
(84.9)
|
(68.3)
|
80.4 %
|
Add:
|
|
|
|
|
Cash used for business
acquisitions, investment in limited partnership and minority
interests and trademark license agreement, net of investment
distribution income
|
73.7
|
6.2
|
67.5
|
n.m.
|
Free Cash
Flow
|
339.6
|
232.1
|
107.5
|
46.3
%
|
|
|
|
|
|
|
The following table presents a reconciliation of Revenue to
Revenue, excluding PAW Patrol: The Movie Distribution
Revenue for the year ended December 31, 2021 and 2020:
_______________________
|
1
Restructuring expense primarily relates to changes in personnel.
Restructuring expense in the prior year includes costs related to
changes in senior leadership.
|
2
Includes foreign exchange (gains) losses generated by the
translation of monetary assets/liabilities denominated in a
currency other than the functional currency of the applicable
entity and (gains) losses related to the Company's hedging
programs.
|
3
Related to non-cash expenses associated with subordinate voting
shares granted to equity participants at the time of the Company's
initial public offering, share option expense and long-term
incentive plan.
|
4 Impairment of goodwill
associated with assets held for sale and one other CGU.
|
5
Impairment of property plant and equipment related to
machinery.
|
6 Impairment of intangible
assets related to entertainment content and app
development.
|
7
Legal settlement in the fourth quarter of 2020.
|
8
Deferred incentive compensation associated with
acquisitions.
|
9 Net
unrealized gain related to investment in limited
partnership.
|
10 Distribution income related to
investment in limited partnership.
|
11 Remuneration expense associated
with contingent consideration for acquisitions.
|
12 Professional fees incurred
relating to acquisitions and other transactions.
|
13 Gain
on disposal of intangible asset.
|
14 One-time income tax recovery
relates to internal transfer of intangible property of $33.3
million.
|
15 Tax
effect of adjustments (Footnotes 1-13). Adjustments are tax
effected at the effective tax rate of the given period.
|
|
Year Ended Dec
31
|
(US$
millions)
|
2021
|
2020
|
Revenue
|
$
|
2,042.4
|
$
|
1,570.6
|
Distribution revenue
related to PAW Patrol: The Movie
|
(26.0)
|
—
|
Revenue, excluding
PAW Patrol: The Movie Distribution Revenue
|
$
|
2,016.4
|
$
|
1,570.6
|
The following tables present reconciliations of Revenue to
Constant Currency Gross Product Sales and Revenue to Constant
Currency Revenue for the three months and years ended December 31, 2021, and 2020:
|
|
Year Ended Dec
31
|
(US$
millions)
|
Q4
2021
|
Q4
2020
|
2021
|
2020
|
Constant Currency Gross
Product Sales
|
$
|
629.0
|
$
|
507.5
|
$
|
1,950.1
|
$
|
1,620.7
|
Impact of foreign
exchange
|
(1.5)
|
4.3
|
12.3
|
3.0
|
Gross Product
Sales
|
$
|
627.5
|
$
|
511.8
|
$
|
1,962.4
|
$
|
1,623.7
|
Sales
Allowances
|
(85.5)
|
(77.5)
|
(230.6)
|
(208.1)
|
Toy
revenue
|
$
|
542.0
|
$
|
434.3
|
$
|
1,731.8
|
$
|
1,415.6
|
Entertainment and
Licensing revenue
|
28.5
|
24.5
|
135.8
|
78.2
|
Digital Games
revenue5
|
50.0
|
31.8
|
174.8
|
76.8
|
Other
revenue
|
$
|
78.5
|
$
|
56.3
|
$
|
310.6
|
$
|
155.0
|
Revenue
|
$
|
620.5
|
$
|
490.6
|
$
|
2,042.4
|
$
|
1,570.6
|
|
|
Year Ended Dec
31
|
(US$
millions)
|
Q4
2021
|
Q4
2020
|
2021
|
2020
|
Constant Currency
Revenue
|
$
622.1
|
$
|
484.7
|
$
|
2,025.2
|
$
|
1,565.4
|
Impact of foreign
exchange
|
(1.6)
|
5.9
|
17.2
|
5.2
|
Revenue
|
$
620.5
|
$
|
490.6
|
$
|
2,042.4
|
$
|
1,570.6
|
The following tables present the composition of Percentage
change in Constant Currency Gross Product Sales and Percentage
change in Constant Currency Revenue for the three months and years
ended December 31, 2021:
|
Q4
2021
|
|
$
Change
|
|
|
%
Change
|
(US$
millions)
|
2021
|
2020
|
|
As
reported
|
Impact of
foreign
exchange
|
In
Constant
Currency
|
|
As
reported
|
In
Constant
Currency
|
Gross Product
Sales
|
$
|
627.5
|
$
|
511.8
|
|
$
|
115.7
|
$
|
1.5
|
$
117.2
|
|
22.6%
|
22.9%
|
Revenue
|
$
|
620.5
|
$
|
490.6
|
|
$
|
129.9
|
$
|
1.6
|
$
131.5
|
|
26.5%
|
26.8%
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended Dec
31
|
|
$
Change
|
|
|
%
Change
|
(US$
millions)
|
2021
|
2020
|
|
As
reported
|
Impact of
foreign
exchange
|
In
Constant
Currency
|
|
As
reported
|
In
Constant
Currency
|
Gross Product
Sales
|
$
|
1,962.4
|
$
|
1,623.7
|
|
$
|
338.7
|
$
|
(12.3)
|
$
326.4
|
|
20.9%
|
20.1%
|
Revenue
|
$
|
2,042.4
|
$
|
1,570.6
|
|
$
|
471.8
|
$
|
(17.2)
|
$
454.6
|
|
30.0%
|
28.9%
|
Revenue by Geographical Segment
The following table provides a summary of Spin Master's
Gross Product Sales by geographic segment for the three months and
years ended December 31, 2021 and 2020:
|
Three Months Ended
Dec 31
|
(US$
millions)
|
2021
|
% of
GPS
|
2020
|
% of
GPS
|
$
Change
|
%
Change
|
North
America
|
361.8
|
57.6 %
|
272.4
|
53.2 %
|
89.4
|
32.8 %
|
Europe
|
187.5
|
29.9 %
|
168.0
|
32.8 %
|
19.5
|
11.6 %
|
Rest of
World
|
78.2
|
12.5 %
|
71.4
|
14.0 %
|
6.8
|
9.5
%
|
International
|
265.7
|
42.4 %
|
239.4
|
46.8 %
|
26.3
|
11.0 %
|
Gross Product
Sales
|
627.5
|
100.0%
|
511.8
|
100.0%
|
115.7
|
22.6
%
|
Sales
Allowances
|
(85.5)
|
(13.6)%
|
(77.5)
|
(15.1)%
|
(8.0)
|
10.3
%
|
Toy
revenue
|
542.0
|
|
434.3
|
|
107.7
|
24.8
%
|
|
Year Ended Dec
31
|
(US$
millions)
|
2021
|
% of
GPS
|
2020
|
% of
GPS
|
$
Change
|
%
Change
|
North
America
|
1,197.3
|
61.0 %
|
983.4
|
60.6 %
|
213.9
|
21.8 %
|
Europe
|
530.7
|
27.0 %
|
451.0
|
27.8 %
|
79.7
|
17.7 %
|
Rest of
World
|
234.4
|
12.0 %
|
189.3
|
11.7 %
|
45.1
|
23.8 %
|
International
|
765.1
|
39.0 %
|
640.3
|
39.5 %
|
124.8
|
19.5 %
|
Gross Product
Sales1
|
1,962.4
|
100.0
%
|
1,623.7
|
100.1
%
|
338.7
|
20.9
%
|
Sales
Allowances1
|
(230.6)
|
(11.8)%
|
(208.1)
|
(12.8)%
|
(22.5)
|
10.8 %
|
Toy
revenue
|
1,731.8
|
|
1,415.6
|
|
316.2
|
22.3
%
|
Addendum
Effective January 1, 2021, Spin
Master has simplified its product categories to align with the
Company's product offerings going forward. The following table
presents 2020 Gross Product Sales1 in the same format
that the Company will be presenting Gross Product Sales1
in 2021:
Gross Product
Sales1 by Product
Category
|
|
|
|
|
|
|
(US$
millions)
|
Q1
2020
|
Q2
2020
|
Q3
2020
|
Q4
2020
|
Total
|
Preschool and Dolls
& Interactive2
|
$
|
73.1
|
$
|
93.5
|
$
|
242.7
|
$
|
200.2
|
$
|
609.5
|
Activities, Games &
Puzzles and Plush
|
80.1
|
99.8
|
181.0
|
173.9
|
534.8
|
Wheels &
Action2
|
60.7
|
54.1
|
151.4
|
122.1
|
388.3
|
Outdoor
|
28.4
|
34.8
|
12.3
|
15.6
|
91.1
|
Gross Product
Sales1
|
$
|
242.3
|
$
|
282.2
|
$
|
587.4
|
$
|
511.8
|
$
|
1,623.7
|
1 Non-GAAP financial measure or
ratio. See "Non-GAAP Financial Measures and Ratios".
|
2 Beginning
in the fourth quarter of 2021, the product category previously
named "Preschool and Girls" has been changed to
"Preschool and Dolls & Interactive" and the product category
previously named "Boys" has been changed to "Wheels &
Action".
No other changes to these product categories were made.
|
View original
content:https://www.prnewswire.com/news-releases/spin-master-reports-q4-and-full-year-2021-financial-results-delivering-record-revenue-and-profitability-301492007.html
SOURCE Spin Master Corp.