Spin Master Outperforms Prior Year and
Increases 2022 Outlook
TORONTO, May 4, 2022 /PRNewswire/ - 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
ended March 31, 2022. The Company's full Management's
Discussion and Analysis ("MD&A") for the three months ended
March 31, 2022 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.
"Following our very strong performance in 2021, we are extremely
pleased with the positive momentum we saw across all three of our
creative centers in the first quarter of 2022," said Max Rangel, Spin Master's Global President &
CEO. "The Toy creative centre benefited from strong customer demand
for our innovative toy line and our global commercial team
continued to manage supply chain volatility to ensure we delivered
product on time. The Digital Games creative centre, led by
Toca Life World, continued to
generate strong engagement and momentum. Our performance this
quarter reflects Spin Master's potential to create magical play
experiences for children wherever they are - from the strength of
our diversified toy portfolio anchored in franchise brands, partner
licenses and exciting innovation, to our engaging multi-platform
entertainment content and our open-ended digital playgrounds."
Mark Segal, Spin Master's Chief
Financial Officer added, "In the first quarter of 2022, we
delivered very strong financial and operating performance across
our Toys, Entertainment and Digital Games creative centres. We are
pleased to increase our revenue Outlook for 2022. We introduced our
new segment reporting structure this quarter, providing an enhanced
view of the drivers of our revenue and profit margins and providing
shareholders with increased visibility into our performance. We
remain committed to our financial framework for value creation,
underpinned by our formula for innovation and disciplined global
growth across all our creative centres. Our solid financial
position provides opportunities to leverage our global platform for
organic growth and acquisitions."
Q1 2022 Consolidated Financial Highlights as compared to the
same period in 2021 (US$ millions)
- Revenue was $424.2 million, an
increase of 34.0% from $316.6 million
of which 30.1% was attributable to Toy revenue, 5.4% to Digital
Games revenue, offset partially by a decline due to Entertainment
revenue of 1.5%. Constant Currency Revenue1 was
$431.1 million, up from $316.6 million, an increase of 36.2%.
- Operating Income was $61.7
million compared to $6.7
million.
- Operating Margin2 was 14.5% compared to 2.1%.
- Adjusted Operating Income1 was $77.3 million compared to $13.6 million.
- Adjusted Operating Margin1 was 18.2% compared to
4.3%.
- Adjusted EBITDA1 was $95.7
million compared to $36.7
million.
- Adjusted EBITDA Margin1 was 22.6% compared to
11.6%.
- Cash (used in) provided by operating activities was
$(62.9) million compared to
$9.0 million.
- Cash used in investing activities was $(8.3) million compared to $(64.0) million.
- Free Cash Flow1 was $(79.4)
million compared to $(6.5)
million.
- Available liquidity of approximately $1,011 million, comprised of $493 million in cash and cash equivalents and
$518 million under the Company's
credit facilities.
- The Company made minority investments in two companies for a
total of $1.0 million as part of its
Spin Master Ventures strategic initiative.
- Effective January 1, 2022, the
Company revised its reportable operating segments. The Company now
has three reportable operating segments: Toys, Entertainment and
Digital Games.
Q1 2022 Consolidated Financial Results as compared to
the same period in 2021
|
|
|
(US$ millions, except per share
information)
|
Q1 2022
|
Q1 2021
|
$ Change
|
Consolidated Results
|
|
|
|
Revenue
|
$
424.2
|
$
316.6
|
$
107.6
|
|
|
|
|
Operating
Income
|
$
61.7
|
$
6.7
|
$
55.0
|
Operating
Margin
|
14.5 %
|
2.1 %
|
|
|
|
|
|
Adjusted Operating
Income1,2
|
$
77.3
|
$
13.6
|
$
63.7
|
Adjusted Operating
Margin1
|
18.2 %
|
4.3 %
|
|
|
|
|
|
Net Income
|
$
45.6
|
$
3.2
|
$
42.4
|
Adjusted Net
Income1,2
|
57.5
|
8.4
|
$
49.1
|
|
|
|
|
Adjusted
EBITDA1,2
|
$
95.7
|
$
36.7
|
$
59.0
|
Adjusted EBITDA
Margin1
|
22.6 %
|
11.6
%
|
|
Earnings Per Share ("EPS")
|
|
|
|
Basic EPS
|
$
0.45
|
$
0.03
|
|
Diluted EPS
|
$
0.43
|
$
0.03
|
|
Adjusted Basic
EPS1
|
$
0.56
|
$
0.08
|
|
Adjusted Diluted
EPS1
|
$
0.55
|
$
0.08
|
|
|
|
|
Cash Flow Data
|
|
|
|
Cash (used in) provided
by operating activities
|
$
(62.9)
|
$
9.0
|
$
(71.9)
|
Cash used in investing
activities
|
$
(8.3)
|
$
(64.0)
|
$
55.7
|
Free Cash
Flow1
|
$
(79.4)
|
$
(6.5)
|
$
(72.9)
|
1 Non-GAAP financial measure or ratio.
See "Non-GAAP Financial Measures and Ratios".
|
2 Adjustments primarily include Foreign
exchange loss of $9.6 million (2021 - $3.7 million), Share based
compensation of $4.1 million (2021 - $3.2 million) and Acquisition
related deferred incentive compensation of $2.7 million (2021 -
$nil). Refer to the "Reconciliation of Non-GAAP Financial Measures"
section for further details.
|
Q1 2022 Segmented Financial Results as compared to the same
period in 2021
Effective January 1, 2022, the
Company revised its reportable operating segments to align with its
current business structure and how the Company's new Chief
Operating Decision Maker ("CODM") reviews operations and makes
decisions. The Company now has three reportable operating segments:
Toys, Entertainment and Digital Games.
The revision of the reportable operating segments did not change
the Company's previously reported consolidated revenue, net income
or earnings per share. Refer to the "Addendum" for comparative
segmented results for the year ended December 31, 2021.
|
|
|
(US$ millions)
|
Q1 2022
|
Q1 2021
|
|
Toys
|
Entertainment
|
Digital Games
|
Corporate
& Other1
|
Total
|
Toys
|
Entertainment
|
Digital Games
|
Corporate
& Other1
|
Total
|
Revenue
|
$
350.9
|
$
22.2
|
$
51.1
|
$
—
|
$
424.2
|
$
255.6
|
$
26.9
|
$
34.1
|
$
—
|
$
316.6
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
$
41.4
|
$
11.2
|
$
19.8
|
$
(10.7)
|
$
61.7
|
$
(12.1)
|
$
10.6
|
$
13.2
|
$
(5.0)
|
$
6.7
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income
|
$
46.4
|
$
11.4
|
$
21.6
|
$
(2.1)
|
$
77.3
|
$
(9.3)
|
$
11.6
|
$
13.5
|
$
(2.2)
|
$
13.6
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
58.9
|
$
15.8
|
$
23.1
|
$
(2.1)
|
$
95.7
|
$
5.1
|
$
18.2
|
$
15.6
|
$
(2.2)
|
$
36.7
|
|
|
|
|
|
|
|
|
|
|
|
1 Corporate & Other includes certain
corporate costs, foreign exchange and merger and
acquisition-related costs, as well as fair value gains and losses
and distribution income on minority interest
investments.
|
Toys Segment Results
The following table provides a summary of Toys segment operating
results, for the three months ended March 31, 2022 and
2021:
(US$
millions)
|
Q1
2022
|
Q1
2021
|
$
Change
|
Preschool and Dolls
& Interactive1
|
$
151.8
|
$
97.2
|
$
54.6
|
Activities, Games
& Puzzles and Plush
|
$
101.9
|
$
87.5
|
$
14.4
|
Wheels &
Action1
|
$
99.7
|
$
68.0
|
$
31.7
|
Outdoor
|
$
44.1
|
$
42.0
|
$
2.1
|
Toy Gross Product
Sales 2
|
$
397.5
|
$
294.7
|
$
102.8
|
Sales
Allowances3
|
$
(46.6)
|
$
(39.1)
|
$
(7.5)
|
Toy
revenue
|
$
350.9
|
$
255.6
|
$
95.3
|
|
|
|
|
Operating Income
(Loss)
|
$
41.4
|
$
(12.1)
|
$
53.5
|
Operating
Margin4
|
11.8 %
|
(4.7) %
|
|
Adjusted
EBITDA2
|
$
58.9
|
$
5.1
|
$
53.8
|
Adjusted EBITDA
Margin2
|
16.8 %
|
2.0 %
|
|
1
Effective Q4 2021, the "Preschool and Girls" product category was
renamed "Preschool and Dolls & Interactive" and the "Boys"
product category was renamed "Wheels & Action".
|
2 Non-GAAP
financial measure or ratio. See "Non-GAAP Financial Measures and
Ratios".
|
3 The
Company enters into arrangements to provide sales allowances
requested by customers relating to cooperative advertising,
contractual and negotiated discounts, volume rebates, and costs
incurred by customers to sell the Company's products.
|
4
Operating Margin is calculated as segment Operating Income divided
by segment Revenue.
|
Toy revenue increased by $95.3
million or 37.3% to $350.9
million driven by growth in all product categories,
particularly Preschool and Dolls & Interactive and Wheels &
Action.
- Toy Gross Product Sales increased by $102.8 million or 34.9%, to $397.5 million from $294.7
million. Constant Currency Toy Gross Product
Sales1 increased by $107.9
million or 36.6%2 to $402.6 million, up from $294.7 million. The improvement was led by growth
from Gabby's Dollhouse, DC Comics and Wizarding
World, and reflected strong customer demand and the Company's
continued successful management of global supply chain
volatility.
- Operating Margin was 11.8% compared to (4.7)%.
- Adjusted EBITDA Margin1 was 16.8% compared to
2.0%.
- The improvement in Operating Margin and Adjusted EBITDA Margin
was driven primarily by higher gross margin from favourable changes
in product mix, price increases and improved operating leverage
driven by higher revenues, offset in part by inflation on product
costs and ocean freight.
Entertainment Segment Results
The following table provides a summary of Entertainment segment
operating results, for the three months ended March 31, 2022
and 2021:
(US$
millions)
|
Q1
2022
|
Q1
2021
|
$
Change
|
Entertainment
revenue
|
22.2
|
26.9
|
(4.7)
|
Operating
Income
|
11.2
|
10.6
|
0.6
|
Operating
Margin
|
50.5 %
|
39.4 %
|
|
Adjusted Operating
Income1
|
11.4
|
11.6
|
(0.2)
|
Adjusted Operating
Margin1
|
51.4 %
|
43.1 %
|
|
1 Non-GAAP
financial measure or ratio. See "Non-GAAP Financial Measures and
Ratios".
|
Entertainment revenue decreased by $4.7
million or 17.5% to $22.2
million, primarily driven by more content deliveries in the
prior period. Deliveries in Q1 2022 included the PAW Patrol
series and Bakugan Evolutions as compared to Q1 2021, which
included PAW Patrol series, Bakugan Evolutions, Mighty
Express and Abby Hatcher.
- Operating Margin was 50.5% compared to 39.4%.
- Adjusted Operating Margin1 was 51.4% compared to
43.1%.
- The improvement in Operating Margin and Adjusted Operating
Margin was driven primarily by the mix of Entertainment content
deliveries which resulted in a lower proportion of program
amortization expense in relation to revenue, as well as lower
selling, general and administrative expenses.
Digital Games Segment Results
The following table provides a summary of Digital Games segment
operating results, for the three months ended March 31, 2022
and 2021:
(US$
millions)
|
Q1
2022
|
Q1
2021
|
$
Change
|
Digital Games
revenue
|
51.1
|
34.1
|
17.0
|
Operating
Income
|
19.8
|
13.2
|
6.6
|
Operating
Margin
|
38.7 %
|
38.7 %
|
|
Adjusted Operating
Income1
|
21.6
|
13.5
|
8.1
|
Adjusted Operating
Margin1
|
42.3 %
|
39.6 %
|
|
1 Non-GAAP
financial measure or ratio. See "Non-GAAP Financial Measures and
Ratios".
|
- Digital Games revenue increased by $17.0
million or 49.9% to $51.1
million driven primarily by higher in-app purchases in
Toca Life World.
- Operating Margin was 38.7% compared to 38.7%.
- Adjusted Operating Margin1 was 42.3% compared to
39.6%, driven primarily by higher in-app purchases in
Toca Life World offset by
higher product development and personnel costs.
Outlook
The Company now expects 2022 Toy Gross Product Sales1
to increase low double digits compared to 2021, up from mid to high
single digits previously announced on February 28, 2022. The seasonality of Toy Gross
Product Sales for 2022 is expected to be approximately 40% in the
first half of 2022.
The Company now expects 2022 Revenue to increase low double
digits compared to 2021 Revenue, excluding PAW Patrol: The
Movie Distribution Revenue1 of $26.0 million, up from mid to high single digits
previously announced on February 28,
2022.
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, consistent with the
Outlook previously announced on February 28,
2022.
____________________________
|
1
|
Non-GAAP financial
measure or ratio. See "Non-GAAP Financial Measures and
Ratios".
|
2
|
Operating Margin is
calculated as Operating Income divided by Revenue.
|
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;
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: seasonality; 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 or subsequent, most
recent interim 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.
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 Thursday, May 5, 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.
For further information
Sophia Bisoukis, Vice President, Investor Relations,
sophiab@spinmaster.com
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:
- Toy Gross Product Sales
- Constant Currency Toy Gross Product Sales
- Constant Currency Revenue
- Adjusted EBITDA
- Adjusted Operating Income (Loss)
- 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 Toy Gross Product Sales
- Percentage change in Constant Currency Toy Gross Product
Sales
- Percentage change in Constant Currency Revenue
- Adjusted EBITDA Margin
- Adjusted Operating Margin
- Adjusted Basic EPS
- Adjusted Diluted EPS
- Adjusted EBITDA Margin, excluding PAW Patrol: The Movie
Distribution Revenue
Non-GAAP financial ratios are ratios or percentages that are
calculated using a Non-GAAP financial measure. 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
Toy Gross Product Sales represent Toy revenues, excluding the
impact of Sales Allowances. As Sales Allowances are generally not
associated with individual products, the Company uses Toy Gross
Product Sales to provide meaningful comparisons across product
category and geographical results to highlight trends in Spin
Master's business. For a reconciliation of Toy Gross Product Sales
to Revenue, the closest IFRS measure, refer to the revenue tables
for the three months and year ended March 31, 2022 as compared
to the same period in 2021 in this Press Release.
Constant Currency Toy Gross Product Sales and Constant Currency
Revenue represent Toy 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 Toy 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.
Adjusted EBITDA is calculated as Net Income (Loss) before
finance costs, income tax expense (recovery) and depreciation and
amortization (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 Operating Income (Loss), the closest IFRS
measure.
Adjusted Operating Income (Loss) is calculated as Operating
Income (Loss) excluding adjustments (as defined in Adjusted
EBITDA). Adjusted Operating Income (Loss) 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 Operating Income (Loss), 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. 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 Operating Income
(Loss), 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. In the third quarter of 2021, 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 Toy Gross Product Sales is
calculated by dividing Sales Allowance by Toy Gross Product Sales.
Management uses Sales Allowance as percentage of Toy 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 Toy Gross Product Sales
is calculated by dividing the change in Toy Gross Product Sales
excluding the impact from changes in foreign currency exchange
rates by the Toy Gross Product Sales of the comparative period.
Management uses Percentage change in Constant Currency Toy 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 Operating Margin is calculated as Adjusted Operating
Income (Loss) divided by Revenue. Management uses Adjusted
Operating Margin to evaluate the Company's performance compared to
internal targets and to benchmark its performance against key
competitors.
Adjusted Basic EPS is calculated by dividing Adjusted Net Income
by the weighted average number of shares outstanding during the
period. 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 Basic
EPS and 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, excluding PAW Patrol: The Movie Distribution
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 Operating
Income to Adjusted Operating Income, Adjusted EBITDA and Adjusted
Net Income, and cash from operating activities to Free Cash Flow
for the three months ended March 31, 2022 and 2021:
(in US$
millions)
|
Q1
2022
|
Q1
2021
|
$
Change
|
%
Change
|
Operating
Income
|
61.7
|
6.7
|
55.0
|
820.9
%
|
Adjustments:
|
|
|
|
|
Restructuring
expense1
|
0.6
|
0.7
|
(0.1)
|
(14.3) %
|
Foreign exchange
loss2
|
9.6
|
3.7
|
5.9
|
159.5 %
|
Share based
compensation3
|
4.1
|
3.2
|
0.9
|
28.1 %
|
Impairment of
intangible assets4
|
—
|
0.9
|
(0.9)
|
(100.0) %
|
Legal
settlement5
|
(1.5)
|
—
|
(1.5)
|
n.m.
|
Acquisition related
deferred incentive compensation6
|
2.7
|
—
|
2.7
|
n.m.
|
Net unrealized gain on
investment7
|
—
|
(0.9)
|
0.9
|
(100.0) %
|
Investment
distribution income8
|
—
|
—
|
—
|
n.m.
|
Acquisition related
contingent consideration9
|
—
|
(0.7)
|
0.7
|
(100.0)
|
Transaction
costs10
|
0.1
|
—
|
0.1
|
n.m.
|
Adjusted Operating
Income
|
77.3
|
13.6
|
63.7
|
468.4
%
|
Depreciation and
amortization expenses
|
18.4
|
23.1
|
(4.7)
|
(20.3) %
|
Adjusted
EBITDA
|
95.7
|
36.7
|
59.0
|
160.8
%
|
Income tax
expense
|
(14.2)
|
(1.0)
|
(13.2)
|
1,320.0
%
|
Finance
costs
|
(1.9)
|
(2.5)
|
0.6
|
(24.0) %
|
Depreciation and
amortization expenses
|
(18.4)
|
(23.1)
|
4.7
|
(20.3) %
|
Tax effect of
adjustments11
|
(3.7)
|
(1.7)
|
(2.0)
|
117.6
%
|
Adjusted Net
Income
|
57.5
|
8.4
|
49.1
|
584.5
%
|
|
|
|
|
|
Cash (used in)
provided by operating activities
|
(62.9)
|
9.0
|
(71.9)
|
(798.9) %
|
Cash used in
investing activities
|
(8.3)
|
(64.0)
|
55.7
|
(87.0) %
|
Add:
|
|
|
|
|
Cash used for
business acquisitions and investment in limited partnership and
minority interests, net of investment distribution
income
|
(8.2)
|
48.5
|
(56.7)
|
(116.9) %
|
Free Cash
Flow
|
(79.4)
|
(6.5)
|
(72.9)
|
1,121.5
%
|
_____________________________
|
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 intangible assets related to
entertainment content and app development.
5 Legal settlement in the first quarter of
2022.
6 Deferred incentive compensation associated with
acquisitions.
7 Net unrealized loss related to investment in limited
partnership.
8 Distribution income related to investment in limited
partnership.
9 Remuneration expense associated with contingent
consideration for acquisitions.
10 Professional fees incurred relating to acquisitions
and other transactions.
11 Tax effect of adjustments (Footnotes 1-10).
Adjustments are tax effected at the effective tax rate of the given
period.
|
The following tables present reconciliations of Revenue to
Constant Currency Toy Gross Product Sales and Revenue to Constant
Currency Revenue for the three months ended March 31, 2022,
and 2021:
|
|
(US$
millions)
|
Q1
2022
|
Q1
2021
|
Constant Currency Toy
Gross Product Sales
|
$
402.6
|
$
290.6
|
Impact of foreign
exchange
|
(5.1)
|
4.1
|
Toy Gross Product
Sales
|
$
397.5
|
$
294.7
|
Sales
Allowances
|
(46.6)
|
(39.1)
|
Toy
revenue
|
$
350.9
|
$
255.6
|
Entertainment
revenue
|
22.2
|
26.9
|
Digital Games
revenue
|
51.1
|
34.1
|
Revenue
|
$
424.2
|
$
316.6
|
|
|
|
|
|
(US$
millions)
|
Q1
2022
|
Q1
2021
|
Constant Currency
Revenue
|
$
431.1
|
$
311.1
|
Impact of foreign
exchange
|
(6.9)
|
5.5
|
Revenue
|
$
424.2
|
$
316.6
|
The following tables present the composition of Percentage
change in Constant Currency Toy Gross Product Sales and Percentage
change in Constant Currency Revenue for the three months ended
March 31, 2022, and 2021:
|
|
|
$
Change
|
|
%
Change
|
(US$
millions)
|
Q1
2022
|
Q1
2021
|
|
As
reported
|
Impact of
foreign
exchange
|
In
Constant
Currency
|
|
As
reported
|
In
Constant
Currency
|
Toy Gross Product
Sales
|
$
397.5
|
$
294.7
|
|
$
102.8
|
$
5.1
|
$
107.9
|
|
34.9 %
|
36.6 %
|
Revenue
|
$
424.2
|
$
316.6
|
|
$
107.6
|
$
6.9
|
$
114.5
|
|
34.0 %
|
36.2 %
|
Segment Results
The Company's results from operations by reportable segment for
the three months ended March 31, 2022 and 2021 are as
follows:
|
|
|
(US$
millions)
|
Q1
2022
|
Q1
2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate &
Other
|
Total
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate &
Other
|
Total
|
Revenue
|
350.9
|
22.2
|
51.1
|
—
|
424.2
|
255.6
|
26.9
|
34.1
|
—
|
316.6
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
41.4
|
11.2
|
19.8
|
(10.7)
|
61.7
|
(12.1)
|
10.6
|
13.2
|
(5.0)
|
6.7
|
Restructuring
expense
|
0.5
|
—
|
0.1
|
—
|
0.6
|
0.7
|
—
|
—
|
—
|
0.7
|
Foreign exchange
loss
|
—
|
—
|
—
|
9.6
|
9.6
|
—
|
—
|
—
|
3.7
|
3.7
|
Share based
compensation
|
3.0
|
0.2
|
0.5
|
0.4
|
4.1
|
2.8
|
0.1
|
0.3
|
—
|
3.2
|
Impairment of
intangible assets
|
—
|
—
|
—
|
—
|
—
|
—
|
0.9
|
—
|
—
|
0.9
|
Legal
settlement
|
—
|
—
|
—
|
(1.5)
|
(1.5)
|
—
|
—
|
—
|
—
|
—
|
Acquisition related
deferred incentive compensation
|
1.5
|
—
|
1.2
|
—
|
2.7
|
—
|
—
|
—
|
—
|
—
|
Net unrealized gain
on investment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(0.9)
|
(0.9)
|
Acquisition related
contingent consideration
|
—
|
—
|
—
|
—
|
—
|
(0.7)
|
—
|
—
|
—
|
(0.7)
|
Transaction
costs
|
—
|
—
|
—
|
0.1
|
0.1
|
—
|
—
|
—
|
—
|
—
|
Adjusted Operating
Income
|
46.4
|
11.4
|
21.6
|
(2.1)
|
77.3
|
(9.3)
|
11.6
|
13.5
|
(2.2)
|
13.6
|
Depreciation and
amortization
|
12.5
|
4.4
|
1.5
|
—
|
18.4
|
14.4
|
6.6
|
2.1
|
—
|
23.1
|
Adjusted
EBITDA
|
58.9
|
15.8
|
23.1
|
(2.1)
|
95.7
|
5.1
|
18.2
|
15.6
|
(2.2)
|
36.7
|
ADDENDUM
Effective January 1, 2022, the
Company revised its reportable operating segments to align with its
current business structure and how the Company's new CODM reviews
operations and makes decisions. The following table presents 2021
segments in the same format that the Company presents its operating
segments in 2022.
(US$
millions)
|
Year Ended
December 31, 2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
&
Other
|
Total
|
Revenue
|
1,731.8
|
135.8
|
174.8
|
—
|
2,042.4
|
|
|
|
|
|
|
Operating
Income
|
159.0
|
53.4
|
67.5
|
(7.7)
|
272.2
|
Restructuring
expense
|
2.3
|
—
|
0.2
|
—
|
2.5
|
Foreign exchange
gain
|
—
|
—
|
—
|
(2.9)
|
(2.9)
|
Share based
compensation
|
13.4
|
0.4
|
1.5
|
—
|
15.3
|
Impairment of
goodwill
|
1.9
|
—
|
—
|
—
|
1.9
|
Impairment of
intangible assets
|
—
|
2.1
|
0.5
|
—
|
2.6
|
Acquisition related
deferred incentive compensation
|
4.3
|
—
|
2.5
|
—
|
6.8
|
Net unrealized gain
on investment
|
—
|
—
|
—
|
(0.9)
|
(0.9)
|
Investment
distribution income
|
—
|
—
|
—
|
(0.6)
|
(0.6)
|
Acquisition related
contingent consideration
|
2.7
|
—
|
—
|
—
|
2.7
|
Transaction
costs
|
—
|
—
|
—
|
2.8
|
2.8
|
Gain on disposal of
asset
|
(0.2)
|
—
|
—
|
—
|
(0.2)
|
Adjusted Operating
Income
|
183.4
|
55.9
|
72.2
|
(9.3)
|
302.2
|
Depreciation and
amortization
|
56.3
|
48.2
|
7.4
|
—
|
111.9
|
Adjusted
EBITDA
|
239.7
|
104.1
|
79.6
|
(9.3)
|
414.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
millions)
|
Q1
2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
&
Other
|
Total
|
Revenue
|
255.6
|
26.9
|
34.1
|
—
|
316.6
|
|
|
|
|
|
|
Operating
Income
|
(12.1)
|
10.6
|
13.2
|
(5.0)
|
6.7
|
Restructuring
expense
|
0.7
|
—
|
—
|
—
|
0.7
|
Foreign exchange
loss
|
—
|
—
|
—
|
3.7
|
3.7
|
Share based
compensation
|
2.8
|
0.1
|
0.3
|
—
|
3.2
|
Impairment of
intangible assets
|
—
|
0.9
|
—
|
—
|
0.9
|
Net unrealized gain
on investment
|
—
|
—
|
—
|
(0.9)
|
(0.9)
|
Acquisition related
contingent consideration
|
(0.7)
|
—
|
—
|
—
|
(0.7)
|
Adjusted Operating
Income
|
(9.3)
|
11.6
|
13.5
|
(2.2)
|
13.6
|
Depreciation and
amortization
|
14.4
|
6.6
|
2.1
|
—
|
23.1
|
Adjusted
EBITDA
|
5.1
|
18.2
|
15.6
|
(2.2)
|
36.7
|
(US$
millions)
|
Q2
2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
&
Other
|
Total
|
Revenue
|
326.4
|
27.5
|
36.9
|
—
|
390.8
|
|
|
|
|
|
|
Operating
Income
|
28.5
|
12.5
|
12.8
|
(6.9)
|
46.9
|
Foreign exchange
loss
|
—
|
—
|
—
|
4.9
|
4.9
|
Share based
compensation
|
3.7
|
0.1
|
0.2
|
—
|
4.0
|
Impairment of
intangible assets
|
—
|
—
|
0.5
|
—
|
0.5
|
Acquisition related
deferred incentive compensation
|
1.3
|
—
|
0.2
|
—
|
1.5
|
Net unrealized gain
on investment
|
—
|
—
|
—
|
(0.3)
|
(0.3)
|
Investment
distribution income
|
—
|
—
|
—
|
(0.4)
|
(0.4)
|
Transaction
costs
|
—
|
—
|
—
|
0.6
|
0.6
|
Adjusted Operating
Income
|
33.5
|
12.6
|
13.7
|
(2.1)
|
57.7
|
Depreciation and
amortization
|
13.8
|
8.4
|
1.9
|
—
|
24.1
|
Adjusted
EBITDA
|
47.3
|
21.0
|
15.6
|
(2.1)
|
81.8
|
(US$
millions)
|
Q3
2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
&
Other
|
Total
|
Revenue
|
607.8
|
52.9
|
53.8
|
—
|
714.5
|
|
|
|
|
|
|
Operating
Income
|
128.0
|
18.2
|
24.2
|
9.1
|
179.5
|
Restructuring
expense
|
0.4
|
—
|
—
|
—
|
0.4
|
Foreign exchange
gain
|
—
|
—
|
—
|
(10.8)
|
(10.8)
|
Share based
compensation
|
3.4
|
0.1
|
0.6
|
—
|
4.1
|
Acquisition related
deferred incentive compensation
|
1.5
|
—
|
1.2
|
—
|
2.7
|
Investment
distribution income
|
—
|
—
|
—
|
(0.2)
|
(0.2)
|
Transaction
costs
|
—
|
—
|
—
|
0.1
|
0.1
|
Gain on disposal of
asset
|
(0.2)
|
—
|
—
|
—
|
(0.2)
|
Adjusted Operating
Income
|
133.1
|
18.3
|
26.0
|
(1.8)
|
175.6
|
Depreciation and
amortization
|
13.4
|
26.9
|
1.4
|
—
|
41.7
|
Adjusted
EBITDA
|
146.5
|
45.2
|
27.4
|
(1.8)
|
217.3
|
(US$
millions)
|
Q4
2021
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
&
Other
|
Total
|
Revenue
|
542.0
|
28.5
|
50.0
|
—
|
620.5
|
|
|
|
|
|
|
Operating
Income
|
14.6
|
12.1
|
17.3
|
(4.9)
|
39.1
|
Restructuring
expense
|
1.2
|
—
|
0.2
|
—
|
1.4
|
Foreign exchange
gain
|
—
|
—
|
—
|
(0.7)
|
(0.7)
|
Share based
compensation
|
3.5
|
0.1
|
0.4
|
—
|
4.0
|
Impairment of
goodwill
|
1.9
|
—
|
—
|
—
|
1.9
|
Impairment of
intangible assets
|
—
|
1.2
|
—
|
—
|
1.2
|
Acquisition related
deferred incentive compensation
|
1.5
|
—
|
1.1
|
—
|
2.6
|
Net unrealized loss
on investment
|
—
|
—
|
—
|
0.3
|
0.3
|
Acquisition related
contingent consideration
|
3.4
|
—
|
—
|
—
|
3.4
|
Transaction
costs
|
—
|
—
|
—
|
2.1
|
2.1
|
Adjusted Operating
Income
|
26.1
|
13.4
|
19.0
|
(3.2)
|
55.3
|
Depreciation and
amortization
|
14.7
|
6.3
|
2.0
|
—
|
23.0
|
Adjusted
EBITDA
|
40.8
|
19.7
|
21.0
|
(3.2)
|
78.3
|
View original
content:https://www.prnewswire.com/news-releases/spin-master-reports-q1-2022-financial-results-301540098.html
SOURCE Spin Master Corp.