TORONTO, Aug. 2, 2023
/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 and six months ended June 30,
2023. The Company's full Management's Discussion and
Analysis ("MD&A") for the three and six months ended
June 30, 2023 is available under the
Company's profile on SEDAR+ (www.sedarplus.ca) and posted on the
Company's web site at www.spinmaster.com. All financial information
is presented in United States
dollars ("$", "dollars" and "US$") and has been rounded to the
nearest hundred thousand, except per share amounts and where
otherwise indicated.
"We delivered a solid second quarter driven by our diverse portfolio
of toys, entertainment content and digital
games," said Max Rangel, Spin
Master's Global President & CEO. "We are confident in our plans
for the second half of the year including exciting Toy innovation,
new Entertainment content and the continued development of our
Digital Games ecosystem. Our Toy portfolio features the
breakthrough Bitzee, a digital pet you can actually touch, a
toy line inspired by the highly anticipated second PAW
Patrol feature film and many more new items that will inspire
stimulating play experiences for kids and families worldwide. In
Entertainment we are launching two new animated TV series,
Unicorn Academy and Vida the Vet, and the second
feature film in our iconic franchise PAW Patrol: The Mighty
Movie, in theaters end of September. In Digital Games we will
deliver engaging new content for Toca Life World, a content
bundle for Sago Mini and Paw Patrol Academy, an app
launching with the movie. We remain committed to our framework for
value creation, underpinned by our formula for innovation and
integrated IP-driven growth across all our creative centres."
"Our results for the quarter and year to date, as expected, were
challenged in comparison to 2022. However, we are encouraged by the
strength and resilience of our global, diversified business
platform and our ability to execute on our strategy to drive
profitable growth, delivering Adjusted EBITDA of over
$88 million for the quarter, said
Mark Segal, Chief Financial Officer
of Spin Master. "The inventory reduction activity at retail
resulting from the carryover of inventory from 2022 is complete and
we are pleased to maintain our 2023 outlook. Our very solid balance
sheet and cash flow generation capabilities provide opportunities
to leverage our global platform for both organic growth and
acquisitions."
Consolidated Financial Highlights for Q2 2023 as compared to
the same period in 2022
- Revenue was $420.7 million, a
decrease of 16.9% from $506.3
million. Constant Currency Revenue1 was
$419.9 million, a decrease of 17.1%,
from $506.3 million.
- Revenue by operating segment reflected a decline of 20.9% in
Toys, offset by a 19.4% increase in Entertainment and a 0.5%
increase in Digital Games.
- Operating Income was $34.4
million compared to $118.2
million.
- Operating Margin2 was 8.2% compared to 23.3%.
- Adjusted Operating Income1 was $62.6 million compared to $97.6 million.
- Adjusted Operating Margin1 was 14.9% compared to
19.3%.
- Net Income was $28.0 million or
$0.26 per share (diluted) compared to
$88.1 million or $0.83 per share (diluted).
- Adjusted Net Income1 was $48.8 million or $0.45 per share (diluted) compared to
$72.4 million or $0.68 per share (diluted).
- Adjusted EBITDA1 was $88.4
million compared to $113.7
million.
- Adjusted EBITDA Margin1 was 21.0% compared to
22.5%.
- Cash provided by operating activities was $19.1 million compared to $111.6 million.
- Free Cash Flow1 was $(5.9)
million compared to $84.1
million.
- The Company acquired assets from a games and puzzles company
for purchase considerations of $3.3
million and, through Spin Master Ventures, increased its
minority interest in a privately-held entity for $2.0 million.
- The Company repurchased and cancelled 156,200 subordinate
voting shares through the Company's normal course issuer bid
("NCIB") program for $4.2
million.
- The Company incurred restructuring expenses of $9.7 million ($0.07
per diluted share) primarily related to the closure of its
manufacturing facility in Calais, France as previously announced.
- Subsequent to June 30, 2023, the
Company declared a quarterly dividend of CA$0.06 per outstanding
subordinate voting share and multiple voting share, payable
October 13, 2023.
- Subsequent to June 30, 2023, the
Company implemented a Dividend Reinvestment Plan (the "DRIP").
- The Company reiterates 2023 Outlook.
Consolidated Financial Highlights for the six months ended
June 30, 2023 as compared to the same
period in 2022
- Revenue was $692.1 million, down
25.6% from $930.5 million. Constant
Currency Revenue1 decreased by 25.3% to $695.5 million from $930.5
million.
- Revenue by operating segment reflected declines of 32.5% in
Toys and 3.7% in Digital Games, partially offset by a 41.3%
increase in Entertainment.
- Operating Income was $28.3
million compared to $179.9
million. The decrease in Operating income was primarily
driven by the decrease in Toy revenue.
- Operating Margin was 4.1% compared to 19.3%.
- Adjusted Operating Income1 was $75.3 million compared to $174.9 million.
- Adjusted Operating Margin1 was 10.9% compared to
18.8%.
- Net Income was $26.1 million or
$0.25 per share (diluted) compared to
$133.7 million or $1.26 per share (diluted).
- Adjusted Net Income1 was $61.1 million or $0.58 per share (diluted) compared to
$129.9 million or $1.22 per share (diluted).
- Adjusted EBITDA1 was $119.0
million compared to $209.4
million, a decrease of $90.4
million or 43.2%.
- Adjusted EBITDA Margin1 was 17.2% compared to
22.5%.
- Cash provided by operating activities was $14.8 million compared to $48.7 million.
- Free Cash Flow1 was $(40.3)
million compared to $4.7
million.
- During Q2 2023, the Company acquired assets from a games and
puzzles company for purchase considerations of $3.3 million. During Q1 2023, the Company
acquired certain assets of 4D Brands International Inc. for total
purchase considerations of $18.9
million and acquired the HEXBUG brand of toys from
Innovation First International, Inc., for total purchase
considerations of $14.6 million.
- During the six months ended June 30,
2023, the Company incurred restructuring expenses of
$13.5 million ($0.10 per diluted share) related to a reduction
in the Company's global workforce and the closure of its
manufacturing facility in Calais, France.
- During the six months ended June 30,
2023, the Company repurchased and cancelled 397,700
subordinate voting shares through the Company's NCIB program for
$10.5 million.
Consolidated Financial Results as compared to the same period
in 2022
(US$ millions, except per share
information)
|
|
|
|
Six Months Ended Jun 30
|
|
Q2 2023
|
Q2 2022
|
$ Change
|
2023
|
2022
|
$ Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Results
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
420.7
|
$
|
506.3
|
$
|
(85.6)
|
$
|
692.1
|
$
|
930.5
|
$
|
(238.4)
|
Constant Currency
Revenue1
|
$
|
419.9
|
|
|
$
|
(86.4)
|
$
|
695.5
|
|
|
$
|
(235.0)
|
Operating
Income
|
$
|
34.4
|
$
|
118.2
|
$
|
(83.8)
|
$
|
28.3
|
$
|
179.9
|
$
|
(151.6)
|
Operating
Margin
|
|
8.2 %
|
|
23.3 %
|
|
|
|
4.1 %
|
|
19.3 %
|
|
|
Adjusted Operating
Income1,2
|
$
|
62.6
|
$
|
97.6
|
$
|
(35.0)
|
$
|
75.3
|
$
|
174.9
|
$
|
(99.6)
|
Adjusted Operating
Margin1
|
|
14.9 %
|
|
19.3 %
|
|
|
|
10.9 %
|
|
18.8 %
|
|
|
Net Income
|
$
|
28.0
|
$
|
88.1
|
$
|
(60.1)
|
$
|
26.1
|
$
|
133.7
|
$
|
(107.6)
|
Adjusted Net
Income1,2
|
$
|
48.8
|
$
|
72.4
|
|
|
$
|
61.1
|
$
|
129.9
|
$
|
(68.8)
|
Adjusted
EBITDA1,2
|
$
|
88.4
|
$
|
113.7
|
$
|
(25.3)
|
$
|
119.0
|
$
|
209.4
|
$
|
(90.4)
|
Adjusted EBITDA
Margin1
|
|
21.0 %
|
|
22.5 %
|
|
|
|
17.2 %
|
|
22.5 %
|
|
|
Earnings Per Share ("EPS")
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
$
|
0.27
|
$
|
0.86
|
|
|
$
|
0.25
|
$
|
1.30
|
|
|
Diluted EPS
|
$
|
0.26
|
$
|
0.83
|
|
|
$
|
0.25
|
$
|
1.26
|
|
|
Adjusted Basic
EPS1
|
$
|
0.47
|
$
|
0.70
|
|
|
$
|
0.59
|
$
|
1.26
|
|
|
Adjusted Diluted
EPS1
|
$
|
0.45
|
$
|
0.68
|
|
|
$
|
0.58
|
$
|
1.22
|
|
|
Weighted average
number of shares (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
103.6
|
|
102.9
|
|
|
|
103.7
|
|
102.9
|
|
|
Diluted
|
|
107.3
|
|
106.3
|
|
|
|
105.6
|
|
106.3
|
|
|
Selected Cash Flow
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in operating
activities
|
$
|
19.1
|
$
|
111.6
|
$
|
(92.5)
|
$
|
14.8
|
$
|
48.7
|
$
|
(33.9)
|
Cash used in investing
activities
|
$
|
(30.3)
|
$
|
(30.4)
|
$
|
0.1
|
$
|
(86.9)
|
$
|
(38.7)
|
$
|
(48.2)
|
Free Cash
Flow1
|
$
|
(5.9)
|
$
|
84.1
|
$
|
(90.0)
|
$
|
(40.3)
|
$
|
4.7
|
$
|
(45.0)
|
|
1 Non-GAAP financial measure
or ratio. See "Non-GAAP Financial
Measures and Ratios".
|
2 Refer to
the "Reconciliation of Non-GAAP Financial Measures" section for
further details on the adjustments for Q2 2023 and the six months
ended June 30, 2023.
|
Segmented Financial Results as compared to the same period in
2022
(US$ millions)
|
|
|
|
Q2 2023
|
|
|
|
|
Q2 2022
|
|
|
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
& Other1
|
|
|
Total
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate &
Other1
|
|
Total
|
|
Revenue
|
$
|
346.3
|
$
33.9
|
$ 40.5
|
$
—
|
|
$
|
420.7
|
$
|
437.6
|
$
28.4
|
$ 40.3
|
$
—
|
|
$
|
506.3
|
Operating Income
|
$
|
23.8
|
$
15.7
|
$
9.6
|
$ (14.7)
|
|
$
|
34.4
|
$
|
62.6
|
$
17.5
|
$
8.4
|
$ 29.7
|
|
|
118.2
|
Adjusted Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income2
|
$
|
35.5
|
$
16.3
|
$ 12.8
|
$
(2.0)
|
|
$
|
62.6
|
$
|
71.7
|
$
18.0
|
$ 10.0
|
$
(2.1)
|
|
$
|
97.6
|
Adjusted EBITDA2
|
$
|
47.7
|
$
28.0
|
$ 14.7
|
$
(2.0)
|
|
$
|
88.4
|
$
|
83.2
|
$
21.1
|
$ 11.5
|
$
(2.1)
|
|
$
|
113.7
|
|
1 Corporate & Other includes certain
corporate costs, foreign exchange and merger
and acquisition-related costs,
as well as fair value
gains and losses.
|
2 Non-GAAP financial measure
or ratio. See "Non-GAAP Financial
Measures and Ratios".
|
Toys Segment Results
The following table provides
a summary of Toys segment
operating results, for the three
months ended June 30, 2023 and 2022:
(US$ millions)
|
Q2
2023
|
Q2
2022
|
$
Change
|
%
Change
|
Preschool and
Dolls & Interactive
|
$
181.3
|
$
228.8
|
$
(47.5)
|
(20.8) %
|
Activities, Games &
Puzzles and Plush
|
$
93.4
|
$
123.6
|
$
(30.2)
|
(24.4) %
|
Wheels & Action
|
$
101.0
|
$
115.8
|
$
(14.8)
|
(12.8) %
|
Outdoor
|
$
14.3
|
$
16.2
|
$
(1.9)
|
(11.7) %
|
Toy Gross
Product Sales 1
|
$
390.0
|
$
484.4
|
$
(94.4)
|
(19.5) %
|
Constant Currency Toy Gross Product Sales1
|
$
387.7
|
|
$
(96.7)
|
(20.0) %
|
|
|
|
|
|
Sales
Allowances2
|
$
(43.7)
|
$
(46.8)
|
$
3.1
|
(6.6) %
|
Sales Allowances % of GPS
|
11.2 %
|
9.7 %
|
|
1.5 %
|
Toy
revenue
|
$
346.3
|
$
437.6
|
$
(91.3)
|
(20.9) %
|
Operating Income
|
$
23.8
|
$
62.6
|
$
(38.8)
|
(62.0) %
|
Operating Margin3
|
6.9 %
|
14.3 %
|
|
(7.4) %
|
Adjusted EBITDA1
|
$
47.7
|
$
83.2
|
$
(35.5)
|
(42.7) %
|
Adjusted EBITDA Margin1
|
13.8 %
|
19.0 %
|
|
(5.2) %
|
|
1 Non-GAAP financial measure
or ratio. See "Non-GAAP Financial
Measures and Ratios".
|
2 The
Company enters into arrangements to provide sales allowances
requested by customers relating to cooperative advertising,
contractual and negotiated discounts, volume rebates, markdowns,
and costs incurred by customers to sell the Company's
products.
|
3 Operating Margin is calculated as segment Operating Income divided by segment Revenue.
|
|
- Toy revenue declined by $91.3
million or 20.9% to $346.3
million primarily driven by a decline in Toy Gross Product
Sales1.
- Toy Gross Product Sales1 declined by $94.4 million or 19.5%, to $390.0 million from $484.4
million. Constant Currency Toy Gross Product
Sales1 declined by $96.7
million or 20.0% to $387.7
million, down from $484.4
million.
- The decline in Toy Gross Product Sales1 was a result
of lower order volume, as customers focused on reducing their
retail inventory levels carried forward from Q4 2022. In
comparison, Toy Gross Product Sales1 in 2022 was
supported by customers ordering earlier in the year.
- Sales Allowances decreased by $3.1
million to $43.7 million. As a
percentage of Toy Gross Product Sales1, Sales Allowances
increased by 1.5% to 11.2% from 9.7%, primarily driven by
geographic and customer mix.
- Operating Income was $23.8
million compared to $62.6
million, representing a decrease of $38.8 million.
- Operating Margin was 6.9% compared to 14.3%.
- Adjusted EBITDA Margin1 was 13.8% compared to 19.0%.
Adjusted EBITDA Margin1 declined primarily as a result
of lower Operating Margin. The decline was due to lower Toy revenue
relative to administrative and marketing expenses, partially offset
by higher gross margin.
Entertainment Segment Results
The following table provides a summary of Entertainment segment
operating results, for the three months ended June 30, 2023 and 2022:
(US$ millions)
|
Q2
2023
|
Q2
2022
|
$
Change
|
%
Change
|
Entertainment revenue
|
$
33.9
|
$
28.4
|
$
5.5
|
19.4 %
|
Operating Income
|
$
15.7
|
$
17.5
|
$
(1.8)
|
(10.3) %
|
Operating Margin
|
46.3 %
|
61.6 %
|
|
(15.3) %
|
Adjusted Operating Income1
|
$
16.3
|
$
18.0
|
$
(1.7)
|
(9.4) %
|
Adjusted Operating Margin1
|
48.1 %
|
63.4 %
|
|
(15.3) %
|
|
1 Non-GAAP financial measure
or ratio. See "Non-GAAP Financial
Measures and Ratios".
|
|
- Entertainment revenue increased by $5.5
million or 19.4% to $33.9
million, from higher distribution revenue due to new content
deliveries of Vida the Vet, Rubble & Crew and Unicorn
Academy. Also contributing to the increase was the Company's
share of revenue related to the continued distribution of PAW
Patrol: The Movie. Licensing and merchandising revenue declined
for the period. Constant Currency Entertainment Revenue1
increased by $5.6 million or 19.7% to
$34.0 million, from $28.4 million.
- Operating Margin decreased by 15.3% from 61.6% to 46.3%.
- Adjusted Operating Margin1 decreased by 15.3% from
63.4% to 48.1%.
- Operating Margin and Adjusted Operating Margin1
declined primarily due to higher amortization of production costs
from new content deliveries.
Digital Games Segment Results
The following table provides a summary of Digital Games segment
operating results, for the three months ended June 30, 2023 and 2022:
(US$ millions)
|
Q2
2023
|
Q2
2022
|
$
Change
|
%
Change
|
Digital Games
revenue
|
$
40.5
|
$
40.3
|
$
0.2
|
0.5 %
|
Operating Income
|
$
9.6
|
$
8.4
|
$
1.2
|
14.3 %
|
Operating Margin
|
23.7 %
|
20.8 %
|
|
2.9 %
|
Adjusted Operating Income1
|
$
12.8
|
$
10.0
|
$
2.8
|
28.0 %
|
Adjusted Operating Margin1
|
31.6 %
|
24.8 %
|
|
6.8 %
|
|
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial
Measures and Ratios".
|
|
- Digital Games revenue increased by $0.2
million or 0.5% to $40.5
million from higher in-game purchases in the Toca Life
World platform. Constant Currency Digital Games
Revenue1 increased by $1.1
million or 2.7% to $41.4
million, up from $40.3
million.
- Operating Margin increased by 2.9% from 20.8% to 23.7% and
Adjusted Operating Margin1 increased by 6.8% from 31.6%
to 24.8% due to lower marketing and administrative expenses.
Liquidity and Capitalization
For the six months ended June 30,
2023, cash flows provided by operating activities were
$14.8 million, compared to
$48.7 million
in the prior year.
For the six months ended June 30,
2023, Free Cash
Flow1 was $(40.3) million
compared to $4.7 million.
As at June 30, 2023, the Company
had unutilized liquidity of $1,063.5
million, comprised of $554.9
million in Cash and cash equivalents and $508.6 million under the Company's credit
facilities.
On March 10, 2023, the Company
entered into an automatic share repurchase plan with its designated
broker to effect the purchase of subordinate voting shares under
the NCIB. The Company repurchased and cancelled 397,700 subordinate
voting shares during the first half of 2023 for proceeds of
$10.5 million.
The weighted average basic and diluted shares outstanding as at
June 30, 2023 were 103.7 million and
105.6 million, compared to 102.9 million and 106.3 million in the
prior year, respectively.
The Company's Board of Directors declared a dividend of
C$0.06 per outstanding subordinate
voting share and multiple voting share, payable on October 13, 2023 to shareholders of record at the
close of business on September 29,
2023. The dividend is designated to be an eligible dividend
for purposes of section 89(1) of the Income Tax Act
(Canada).
Dividend Reinvestment Plan
The DRIP will provide Spin Master's eligible shareholders with
the opportunity to have all or a portion of the cash dividends
declared on their subordinate voting shares or multiple voting
shares automatically reinvested into additional subordinate voting
shares of the Company (the "Reinvestment Shares") on an ongoing
basis.
Participants in the DRIP will, until further notice, acquire
Reinvestment Shares issued from treasury (a "Treasury Purchase") at
a price equal to the volume weighted average price of the Company's
subordinate voting shares on the Toronto Stock Exchange during the
five (5) trading days immediately preceding the dividend payment
date (the "Average Market Price"). Spin Master will have the
discretion, and in accordance with the DRIP, to fund the DRIP with
subordinate voting shares acquired on the open market.
To participate in the DRIP, registered shareholders must deliver
a properly completed enrollment form to Computershare Trust Company
of Canada (the "Agent") at a
minimum five (5) business days before a dividend record date.
Beneficial shareholders who wish to participate in the DRIP should
contact their financial advisor, broker, investment dealer, bank,
financial institution or other intermediary through which they hold
subordinate voting shares or multiple voting shares to inquire
about the applicable enrollment deadline and to request enrollment
in the DRIP.
No commissions, service charges or brokerage fees will be
payable by participants in connection with the acquisition of
Reinvestment Shares under the DRIP. However, beneficial
shareholders who wish to participate in the DRIP through their
financial advisor, broker, investment dealer, bank, financial
institution or other intermediary should consult that intermediary
to confirm what fees, if any, the nominee may charge to enroll in
the DRIP on their behalf or whether the nominee's policies might
result in any costs otherwise becoming payable by the beneficial
shareholder. Commissions, service charges, brokerage fees and other
administrative fees may be payable in connection with the
termination of participation in the DRIP or the withdrawal or
disposition of Reinvestment Shares.
Participation in the DRIP does not relieve shareholders of any
liability for taxes that may be payable in respect of dividends
that are reinvested in Reinvestment Shares. Shareholders should
consult their tax advisors concerning the tax implications of their
participation in the DRIP having regard to their particular
circumstances. Shareholders resident outside
of Canada will not be eligible to participate in the DRIP.
This news release does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction nor
will there be any sale of these securities in any province, state
or jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such province, state or jurisdiction. This
news release does not constitute an offer to sell or the
solicitation to buy securities in the
United States. The securities mentioned herein have not been
and will not be registered under the United States
Securities Act of 1933, as amended, and may not be offered or
sold in the United States absent
registration or an applicable exemption from registration
requirements.
The foregoing is a summary
of the key attributes of the DRIP. A complete
copy of the DRIP and the enrollment form will be
available on the Agent's website at www.investorcentre.com.
Shareholders should carefully read the complete text of the DRIP
before making any decisions regarding their participation in the
DRIP. For more information on how to enroll for
registered shareholders or any other inquiries, contact
the Agent at +1 (800) 564-6253 (North
America) or +1 (514) 982-7555 (outside
North America) or through the Agent's website at
www.investorcentre.com/service.
Outlook
The Company continues to expect 2023 Toy Gross Product Sales1 to be flat to slightly
down compared to 2022.
The Company continues to expect 2023 Revenue, excluding PAW
Patrol: The Mighty Movie Distribution Revenue1 to
be in line with 2022.
The Company continues to expect 2023 Adjusted EBITDA Margin,
excluding PAW Patrol: The Mighty Movie Distribution
Revenue1 to be flat to slightly up compared to 2022.
_______________________________________________
1 Non-GAAP financial measure or ratio. See
"Non-GAAP Financial Measures and Ratios".
2 Operating Margin is calculated as Operating (Loss) 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 2023; future growth expectations in
2023 and beyond; the Company's dividend policy; drivers and trends
for such growth and financial performance; the successful execution
of its strategies for growth; the integration of and benefits from
acquisitions; content and product pipeline and their impacts;
financial position, cash flows, purchases under the NCIB, and
financial performance; the creation of long term shareholder value;
and future dividends and the operation of the DRIP.
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: the Company's dividend payments being subject to
the discretion of the Board of Directors and dependent on a variety
of factors and conditions existing from time to time; 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; the Company's key
personnel will continue to be involved in the Company products and
entertainment properties will be launched as scheduled; and the
availability of cash for dividends 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,
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.sedarplus.ca). 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 financial results on Thursday, August 3, 2023
at 9:30 a.m. (ET).
The call-in numbers for participants are (416) 764-8650 or (888)
664-6383. 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 for 12
months.
About Spin Master
Spin Master Corp.
(TSX:TOY) is a leading global
children's entertainment company,
creating exceptional play experiences through its
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.
Spin Master
Corp.
Condensed consolidated interim
statements of financial position
(Unaudited, in US$ millions)
|
|
Jun 30,
2023
|
Dec 31,
2022
|
Assets
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
|
554.9
|
644.3
|
Trade receivables, net
|
|
272.4
|
311.0
|
Other receivables
|
|
60.0
|
49.5
|
Inventories, net
|
|
151.6
|
105.1
|
Income tax receivable
|
|
12.7
|
—
|
Prepaid expenses and other assets
|
|
35.1
|
22.3
|
|
|
1,086.7
|
1,132.2
|
Non-current assets
|
|
|
|
Intangible assets
|
|
316.9
|
279.8
|
Goodwill
|
|
191.5
|
179.0
|
Right-of-use assets
|
|
58.5
|
62.9
|
Property, plant
and equipment
|
|
35.8
|
36.0
|
Deferred income
tax assets
|
|
94.9
|
94.7
|
Other assets
|
|
23.8
|
20.5
|
|
|
721.4
|
672.9
|
Total assets
|
|
1,808.1
|
1,805.1
|
Liabilities
|
|
|
|
Current liabilities
|
|
|
|
Trade payables and accrued liabilities
|
|
332.4
|
339.4
|
Deferred revenue
|
|
16.1
|
11.5
|
Provisions
|
|
26.6
|
30.7
|
Income tax payable
|
|
—
|
29.7
|
Lease liabilities
|
|
15.0
|
16.3
|
|
|
390.1
|
427.6
|
Non-current liabilities
|
|
|
|
Provisions
|
|
21.8
|
15.1
|
Deferred income
tax liabilities
|
|
55.9
|
55.7
|
Lease liabilities
|
|
51.9
|
54.9
|
|
|
129.6
|
125.7
|
Total liabilities
|
|
519.7
|
553.3
|
|
|
|
|
Shareholders' equity
|
|
|
|
Share capital
|
|
780.9
|
754.7
|
Retained earnings
|
|
488.3
|
477.4
|
Contributed surplus
|
|
19.9
|
40.7
|
Accumulated other comprehensive loss
|
|
(0.7)
|
(21.0)
|
Total shareholders' equity
|
|
1,288.4
|
1,251.8
|
Total liabilities and
shareholders' equity
|
|
1,808.1
|
1,805.1
|
Spin Master
Corp.
Condensed consolidated interim
statements of earnings
and comprehensive income
|
|
Six Months Ended
Jun 30,
|
(Unaudited, in US$ millions, except
earnings per share)
|
|
Q2
2023
|
|
Q2
2022
|
|
2023
|
|
2022
|
Revenue
|
|
420.7
|
|
506.3
|
|
692.1
|
|
930.5
|
Cost of sales
|
|
189.7
|
|
222.6
|
|
302.6
|
|
409.5
|
Gross profit
|
|
231.0
|
|
283.7
|
|
389.5
|
|
521.0
|
|
|
|
|
|
|
|
|
|
Expenses
Selling, general and administrative
|
|
179.5
|
|
190.4
|
|
328.8
|
|
349.0
|
Depreciation and amortization
|
|
5.7
|
|
6.8
|
|
12.3
|
|
14.7
|
Other expense, net
|
|
—
|
|
0.6
|
|
4.4
|
|
0.1
|
Foreign exchange loss (income)
|
|
11.4
|
|
(32.3)
|
|
15.7
|
|
(22.7)
|
Operating Income
|
|
34.4
|
|
118.2
|
|
28.3
|
|
179.9
|
Interest income
|
|
(6.5)
|
|
(1.3)
|
|
(13.2)
|
|
(1.7)
|
Interest expense
|
|
3.3
|
|
3.6
|
|
6.4
|
|
5.9
|
Income before
income tax expense
|
|
37.6
|
|
115.9
|
|
35.1
|
|
175.7
|
Income tax expense
|
|
9.6
|
|
27.8
|
|
9.0
|
|
42.0
|
Net Income
|
|
28.0
|
|
88.1
|
|
26.1
|
|
133.7
|
|
|
|
|
|
|
|
|
|
Earnings per
share
Basic
|
|
0.27
|
|
0.86
|
|
0.25
|
|
1.30
|
Diluted
|
|
0.26
|
|
0.83
|
|
0.25
|
|
1.26
|
Weighted average number of shares
(in millions)
Basic
|
|
103.6
|
|
102.9
|
|
103.7
|
|
102.9
|
Diluted
|
|
107.3
|
|
106.3
|
|
105.6
|
|
106.3
|
|
|
Six Months Ended
Jun 30,
|
(Unaudited, in US$ millions)
|
|
Q2
2023
|
|
Q2
2022
|
|
2023
|
|
2022
|
Net Income
|
|
28.0
|
|
88.1
|
|
26.1
|
|
133.7
|
Items that may be subsequently reclassified to Net
Income
Foreign currency translation gain (loss)
|
|
17.7
|
|
(35.8)
|
|
20.3
|
|
(30.5)
|
Items that
are not subsequently reclassified to Net
Income
Gain on Minority interest and other
investments
|
|
—
|
|
0.1
|
|
—
|
|
0.1
|
Other comprehensive income
(loss)
|
|
17.7
|
|
(35.7)
|
|
20.3
|
|
(30.4)
|
Total comprehensive income
|
|
45.7
|
|
52.4
|
|
46.4
|
|
103.3
|
Spin Master Corp.
Condensed consolidated interim
statements of cash flows
|
Six Months Ended
Jun 30,
|
(Unaudited, in US$ millions)
|
2023
|
2022
|
Operating activities
Net Income
|
26.1
|
133.7
|
Adjustments to reconcile Net Income to cash provided by operating activities
|
Income tax expense
|
9.0
|
42.0
|
Interest income
|
(13.2)
|
(1.7)
|
Depreciation and
amortization
|
43.7
|
34.5
|
Loss on disposal of non-current assets
|
0.7
|
0.8
|
Accretion expense on lease liabilities and non-current provisions
|
2.6
|
2.8
|
Amortization of Facility fee
costs
|
0.2
|
0.2
|
Gain on investment in limited partnership, net of loss
on investment
|
(0.2)
|
(0.2)
|
Impairment of non-current assets
|
3.4
|
—
|
Loss on Minority interest and other investments
|
—
|
0.5
|
Unrealized foreign exchange loss (gain), net
|
26.2
|
(11.9)
|
Share-based compensation expense
|
10.1
|
8.6
|
Net changes
in non-cash working capital
|
(60.5)
|
(124.1)
|
Net change in non-cash provisions and other assets
|
4.5
|
7.4
|
Income taxes
paid
|
(51.3)
|
(48.6)
|
Income taxes
received
|
0.2
|
3.4
|
Interest received
|
13.3
|
1.3
|
Cash provided by operating activities
|
14.8
|
48.7
|
|
|
|
Investing activities
Investment in property, plant
and equipment
|
(14.1)
|
(16.0)
|
Investment in intangible assets
|
(44.3)
|
(28.0)
|
Business acquisitions
|
(26.5)
|
—
|
Minority interest and
other investments
|
(2.0)
|
(4.0)
|
Proceeds from sale
of manufacturing operations
|
—
|
9.2
|
Cash used in investing activities
|
(86.9)
|
(38.7)
|
|
|
|
Financing activities
Payment of lease liabilities
|
(7.8)
|
(7.7)
|
Dividends paid
|
(9.2)
|
—
|
Repurchase of subordinate voting shares under
the NCIB
|
(10.5)
|
—
|
Cash used in financing activities
|
(27.5)
|
(7.7)
|
|
|
|
Effect of foreign currency exchange rate
changes on cash and cash equivalents
|
10.2
|
(6.9)
|
|
|
|
Net decrease in cash and cash equivalents during the period
|
(89.4)
|
(4.6)
|
Cash and cash
equivalents, beginning of period
|
644.3
|
562.7
|
Cash and cash equivalents, end of period
|
554.9
|
558.1
|
Non-GAAP Financial Measures and Ratios
In addition to using financial measures prescribed under
International Financial Reporting Standards ("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
- Revenue, excluding PAW Patrol: The Movie Distribution
Revenue
- Adjusted EBITDA, excluding PAW Patrol: The Movie
Distribution Revenue
- Constant Currency Toy Gross Product Sales
- Constant Currency Digital Games Revenue
- Constant Currency Entertainment Revenue
- Revenue, excluding PAW Patrol: The Mighty Movie
Distribution Revenue
- Constant Currency Revenue
- Adjusted EBITDA
- Adjusted Operating Income
- Adjusted Net Income
- Free Cash Flow
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:
- Percentage change in Constant Currency Toy Gross Product
Sales
- Percentage change in Constant Currency Digital Games
Revenue
- Percentage change in Constant Currency Entertainment
Revenue
- 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 Mighty
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 and six months ended June 30, 2023, as compared to the same period in
2022 in this Press Release.
Constant Currency Toy Gross Product Sales, Constant Currency
Sales Allowances, Constant Currency Toy Revenue, Constant Currency
Entertainment Revenue, Constant Currency Digital Games Revenue, and
Constant Currency Revenue represent Toy Gross Product Sales, Sales
Allowance, Toy revenue, Entertainment revenue, Digital Games
revenue, 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, Constant
Currency Sales Allowances, Constant Currency Toy Revenue, Constant
Currency Entertainment Revenue, Constant Currency Digital Games
Revenue, 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 before interest
income and interest expense, income tax expense and depreciation
and amortization (EBITDA) excluding adjustments that do not
necessarily reflect the Company's underlying financial
performance. These adjustments include restructuring and other
related costs, foreign exchange gains or losses, share based
compensation expenses, acquisition related contingent
consideration, impairment of intangible assets, impairment of
goodwill, investment distribution income, loss on Minority interest
and other investments, acquisition related deferred incentive
compensation, net unrealized gain or loss on investment, impairment
of property, plant and equipment, legal settlement, transaction
cost and gain on disposal of asset. 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 (Loss)
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,
advance paid for business acquisitions, asset acquisitions,
investment in limited partnership, Minority interest and other
investments, proceeds from sale of manufacturing operations and net
of investment distribution income. Management uses the Free Cash
Flow metric to analyze the cash flows being generated by the
Company's business. 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.
Revenue, excluding PAW Patrol: The Mighty Movie
Distribution Revenue is calculated as revenue excluding
distribution revenue related to PAW Patrol: The Mighty
Movie. Revenue, excluding PAW Patrol: The Mighty Movie
Distribution Revenue is used to measure the underlying financial
performance of the business on a consistent basis over time.
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.
Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie
Distribution Revenue is calculated as Adjusted EBITDA excluding
distribution revenue related to PAW Patrol: The Mighty
Movie. Adjusted EBITDA, excluding PAW Patrol: The Mighty
Movie Distribution Revenue is used by management as a measure
of the Company's profitability on a consistent basis over time.
Non-GAAP Financial Ratios
Sales Allowances as a percentage of Toy Gross Product Sales is
calculated by dividing Sales Allowances by Toy Gross Product Sales.
Management uses Sales Allowance as a 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 Sales Allowances is
calculated by dividing the change in Sales Allowances
excluding the impact from changes in foreign currency
exchange rates by the Sales Allowances of the comparative period.
Management uses Percentage change in Constant Currency Sales
Allowances 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
Toy Revenue is calculated by dividing the change in Toy Revenue
excluding the impact from changes in foreign currency exchange
rates by the Toy Revenue of the comparative period. Management uses
Percentage change in Constant Currency Toy 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.
Percentage change in Constant Currency Entertainment Revenue is
calculated by dividing the change in Entertainment revenue
excluding the impact from changes in foreign currency exchange
rates by the Entertainment revenue of the comparative period.
Management uses Percentage change in Constant Currency
Entertainment 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.
Percentage change in Constant Currency Digital Games Revenue is
calculated by dividing the change in Digital Games revenue
excluding the impact from changes in foreign currency exchange
rates by the Digital Games revenue of the comparative period.
Management uses Percentage change in Constant Currency Digital
Games 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.
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
(Loss) 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,
Adjusted Net Income, and cash used in operating
activities and investing
activities to Free Cash Flow for the three months
ended June 30, 2023 and 2022:
(in US$ millions)
|
Q2
2023
|
Q2
2022
|
$
Change
|
%
Change
|
Operating Income
|
34.4
|
118.2
|
(83.8)
|
(70.9) %
|
Adjustments:
|
|
|
|
|
Share based
compensation1
|
4.8
|
4.5
|
0.3
|
6.7 %
|
Foreign exchange loss (gain)2
|
11.4
|
(32.3)
|
43.7
|
(135.3) %
|
Restructuring and other related
costs3
|
9.7
|
4.5
|
5.2
|
115.6 %
|
Acquisition related deferred incentive compensation4
|
2.1
|
2.6
|
(0.5)
|
(19.2) %
|
Impairment of intangible assets5
|
1.0
|
—
|
1.0
|
n.m.
|
Transaction
costs6
|
1.5
|
0.4
|
1.1
|
275.0 %
|
Legal settlement expense (recovery)7
|
—
|
(0.6)
|
0.6
|
(100.0) %
|
Net unrealized gain on investment8
|
(0.3)
|
(0.1)
|
(0.2)
|
200.0 %
|
Net realized loss (gain) on
investment9
|
0.1
|
(0.1)
|
0.2
|
(200.0) %
|
Loss on Minority interest and other investments10
|
—
|
0.5
|
(0.5)
|
(100.0) %
|
Acquisition related contingent consideration11
|
(2.1)
|
—
|
(2.1)
|
n.m.
|
Adjusted Operating Income
|
62.6
|
97.6
|
(35.0)
|
(35.9) %
|
Depreciation and amortization
|
25.8
|
16.1
|
9.7
|
60.2 %
|
Adjusted EBITDA
|
88.4
|
113.7
|
(25.3)
|
(22.3) %
|
Income tax expense
|
(9.6)
|
(27.8)
|
18.2
|
(65.5) %
|
Interest income (expense)
|
3.2
|
(2.3)
|
5.5
|
(239.1) %
|
Depreciation and amortization
|
(25.8)
|
(16.1)
|
(9.7)
|
60.2 %
|
Tax effect of normalization adjustments12
|
(7.4)
|
4.9
|
(12.3)
|
(251.0) %
|
Adjusted Net Income
|
48.8
|
72.4
|
(23.6)
|
(32.6) %
|
|
|
|
|
|
Cash provided by operating activities
|
19.1
|
111.6
|
(92.5)
|
(82.9) %
|
Cash used in investing activities
|
(30.3)
|
(30.4)
|
0.1
|
(0.3) %
|
Add:
|
|
|
|
|
Cash provided by
business acquisitions, asset acquisitions, and investment in
limited partnership and Minority interest and other investments, net of investment
distribution income
|
5.3
|
2.9
|
2.4
|
82.8 %
|
Free Cash Flow
|
(5.9)
|
84.1
|
(90.0)
|
(107.0) %
|
|
________________________________________________
|
1 Related to
non-cash expenses associated with the Company's share option
expense and long-term incentive plan.
|
2 Includes foreign exchange losses
(gains) generated by the translation and settlement of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and losses (gains)
related to the Company's hedging programs.
|
3 Restructuring expense in the
current year relates to the reduction in the Company's global
workforce and closure of its manufacturing facility in Calais,
France. Prior year comparison relates to changes in
personnel.
|
4 Deferred incentive compensation associated with acquisitions.
|
5 Impairment of intangible assets related to content development projects and computer
software.
|
6 Professional fees incurred
relating to acquisitions and other transactions.
|
7 Legal settlement in the first
and second quarters of 2022.
|
8 Net unrealized gain related to investment in limited partnership.
|
9 Net realized loss (gain) related
to investment in limited partnership.
|
10 Fair value loss on the Minority
interest and other investments classified as FVTPL.
|
11 Recovery associated with contingent consideration for acquisitions.
|
12 Tax effect of adjustments (Footnotes 1-11). Adjustments are tax effected
at the effective tax rate of the given period.
|
|
The following table presents a reconciliation of Operating
Income to Adjusted Operating Income, Adjusted EBITDA, Adjusted
EBITDA, excluding
PAW Patrol: The Movie Distribution
Revenue, Adjusted Net Income, and cash from operating activities to
Free Cash Flow for the six months ended June
30, 2023 and 2022:
|
Six Months
Ended Jun 30
|
(in US$
millions)
|
2023
|
2022
|
$
Change
|
%Change
|
Operating Income
|
28.3
|
179.9
|
(151.6)
|
(84.3) %
|
Restructuring and other related
costs1
|
13.5
|
5.1
|
8.4
|
164.7 %
|
Foreign exchange loss (gain)2
|
15.7
|
(22.7)
|
38.4
|
(169.2) %
|
Share based
compensation3
|
10.2
|
8.6
|
1.6
|
18.6 %
|
Impairment of goodwill4
|
1.0
|
—
|
1.0
|
n.m.
|
Impairment of property, plant
and equipment5
|
0.2
|
—
|
0.2
|
n.m.
|
Impairment of intangible assets6
|
2.2
|
—
|
2.2
|
n.m.
|
Legal settlement expense (recovery)7
|
0.2
|
(2.1)
|
2.3
|
(109.5) %
|
Acquisition related deferred incentive compensation8
|
4.2
|
5.3
|
(1.1)
|
(20.8) %
|
Net unrealized gain on investment9
|
(0.3)
|
(0.1)
|
(0.2)
|
200.0 %
|
Net realized loss (gain) on
investment10
|
0.1
|
(0.1)
|
0.2
|
(200.0) %
|
Loss on Minority interest and other investments11
|
—
|
0.5
|
(0.5)
|
(100.0) %
|
Acquisition related
contingent consideration12
|
(2.1)
|
—
|
(2.1)
|
n.m.
|
Transaction
costs13
|
2.1
|
0.5
|
1.6
|
320.0 %
|
Adjusted Operating Income
|
75.3
|
174.9
|
(99.6)
|
(56.9) %
|
Depreciation and amortization
|
43.7
|
34.5
|
9.2
|
26.7 %
|
Adjusted EBITDA
|
119.0
|
209.4
|
(90.4)
|
(43.2) %
|
Income tax expense
|
(9.0)
|
(42.0)
|
33.0
|
(78.6) %
|
Interest income (expense)
|
6.8
|
(4.2)
|
11.0
|
(261.9) %
|
Depreciation and amortization
|
(43.7)
|
(34.5)
|
(9.2)
|
26.7 %
|
Tax effect of adjustments14
|
(12.0)
|
1.2
|
(13.2)
|
(1,100.0) %
|
Adjusted Net Income
|
61.1
|
129.9
|
(68.8)
|
(53.0) %
|
|
|
|
|
|
Cash provided by operating activities
|
14.8
|
48.7
|
(33.9)
|
(69.6) %
|
Cash used in investing activities
|
(86.9)
|
(38.7)
|
(48.2)
|
124.5 %
|
Add:
|
|
|
|
|
Cash
provided by (used
in) business acquisitions, asset acquisitions, investment in
limited partnership and Minority interest and other investments and
trademark
license agreement, net of investment distribution income
|
35.1
|
(5.3)
|
40.4
|
(762.3) %
|
Free Cash Flow
|
(40.3)
|
4.7
|
(45.0)
|
(957.4) %
|
|
_______________________________________________________
1 Restructuring expense in the current year relates to the
reduction in the Company's global workforce and closure of its
manufacturing facility in Calais, France. Prior year comparison
relates to changes in personnel
|
2 Includes foreign exchange losses
(gains) generated by the translation and settlement of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and losses (gains)
related to the Company's hedging programs.
|
3 Related to non-cash
expenses associated with the Company's
share option expense
and long-term incentive plan.
|
4 Impairment of goodwill
associated with one CGU.
|
5 Impairment of property
plant and equipment related to tooling.
|
6 Impairment of intangible assets related to content development projects and computer
software.
|
7 Legal settlement in the first quarter of 2023 and first and second quarters
of 2022.
|
8 Deferred incentive compensation associated with acquisitions.
|
9 Net unrealized gain related to investment in limited partnership.
|
10 Net realized loss (gain) related
to investment in limited partnership.
|
11 Fair value loss on the Minority interest
and other investments classified as FVTPL.
|
12 Expense associated with contingent consideration for acquisitions.
|
13 Professional fees incurred
relating to acquisitions and other transactions.
|
14 Tax effect of adjustments (Footnotes 1-13). 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, Revenue to Constant
Currency Digital Games revenue, Revenue to Constant Currency
Entertainment Revenue, and Revenue to Constant Currency Revenue for
the three and six months ended June 30,
2023, and 2022:
|
Six Months Ended
Jun 30,
|
(US$ millions)
|
Q2
2023
|
|
Q2
2022
|
|
2023
|
|
2022
|
Constant Currency Toy Gross Product Sales
|
387.7
|
|
490.2
|
|
607.4
|
|
892.8
|
Impact of foreign exchange
|
2.3
|
|
(5.8)
|
|
(1.1)
|
|
(10.9)
|
Toy Gross Product Sales
|
390.0
|
|
484.4
|
|
606.3
|
|
881.9
|
Constant Currency Sales Allowances
|
(43.2)
|
|
(47.9)
|
|
(74.0)
|
|
(95.9)
|
Impact of foreign exchange
|
(0.5)
|
|
1.1
|
|
0.3
|
|
2.5
|
Sales
Allowances
|
(43.7)
|
|
(46.8)
|
|
(73.7)
|
|
(93.4)
|
Toy
revenue
|
346.3
|
|
437.6
|
|
532.6
|
|
788.5
|
|
|
|
|
|
|
|
|
Constant Currency Entertainment revenue
|
34.0
|
|
29.4
|
|
71.6
|
|
51.7
|
Impact of foreign exchange
|
(0.1)
|
|
(1.0)
|
|
(0.1)
|
|
(1.1)
|
Entertainment revenue
|
33.9
|
|
28.4
|
|
71.5
|
|
50.6
|
|
|
|
|
|
|
|
|
Constant Currency Digital Games revenue
|
41.4
|
|
43.0
|
|
90.5
|
|
95.7
|
Impact of foreign exchange
|
(0.9)
|
|
(2.7)
|
|
(2.5)
|
|
(4.3)
|
Digital Games
revenue
|
40.5
|
|
40.3
|
|
88.0
|
|
91.4
|
|
|
|
|
|
|
|
|
Constant Currency Revenue
|
419.9
|
|
514.7
|
|
695.5
|
|
944.3
|
Impact of foreign exchange
|
0.8
|
|
(8.4)
|
|
(3.4)
|
|
(13.8)
|
Revenue
|
420.7
|
|
506.3
|
|
692.1
|
|
930.5
|
The following tables present the composition of Percentage
change in Constant Currency Toy Gross Product Sales, Percentage
change in Constant Currency Digital Games Revenue, Percentage
change in Constant Currency Entertainment Revenue, and Percentage
change in Constant Currency Revenue for the three and six months
ended June 30, 2023 and 2022:
|
|
|
|
|
$
Change
|
|
|
%
Change
|
|
(US$ millions)
|
Q2
2023
|
Q2
2022
|
|
As
reported
|
Impact of
Foreign
exchange
|
In
Constant
Currency
|
|
As
reported
|
In
Constant
Currency
|
Toy Gross
Product Sales
|
390.0
|
484.4
|
|
(94.4)
|
(2.3)
|
(96.7)
|
|
(19.5) %
|
(20.0) %
|
Sales
Allowances
|
(43.7)
|
(46.8)
|
|
3.1
|
0.5
|
3.6
|
|
(6.6) %
|
(7.7) %
|
Toy revenue
|
346.3
|
437.6
|
|
(91.3)
|
(1.8)
|
(93.1)
|
|
(20.9) %
|
(21.3) %
|
Entertainment revenue
|
33.9
|
28.4
|
|
5.5
|
0.1
|
5.6
|
|
19.4 %
|
19.7 %
|
Digital Games
revenue
|
40.5
|
40.3
|
|
0.2
|
0.9
|
1.1
|
|
0.5 %
|
2.7 %
|
Revenue
|
420.7
|
506.3
|
|
(85.6)
|
(0.8)
|
(86.4)
|
|
(16.9) %
|
(17.1) %
|
Six Months Ended
Jun 30,
|
|
$
Change
|
|
% Change
|
(US$ millions)
|
2023
|
|
2022
|
|
As
reported
|
Impact of
foreign
exchange
|
In
Constant
Currency
|
|
As
reported
|
In
Constant
Currency
|
|
Toy Gross
Product Sales
|
606.3
|
|
881.9
|
|
(275.6)
|
1.1
|
(274.5)
|
|
(31.3) %
|
(31.1) %
|
|
Sales
Allowances
|
(73.7)
|
|
(93.4)
|
|
19.7
|
(0.3)
|
19.4
|
|
(21.1) %
|
(20.8) %
|
|
Toy revenue
|
532.6
|
|
788.5
|
|
(255.9)
|
0.8
|
(255.1)
|
|
(32.5) %
|
(32.4) %
|
|
Entertainment revenue
|
71.5
|
|
50.6
|
|
20.9
|
0.1
|
21.0
|
|
41.3 %
|
41.5 %
|
|
Digital Games
revenue
|
88.0
|
|
91.4
|
|
(3.4)
|
2.5
|
(0.9)
|
|
(3.7) %
|
(1.0) %
|
|
Revenue
|
692.1
|
|
930.5
|
|
(238.4)
|
3.4
|
(235.0)
|
|
(25.6) %
|
(25.3) %
|
|
Segment Results
The Company's results from operations by reportable segment for
the three months ended June 30, 2023
and 2022 are as follows:
|
|
|
|
|
(US$ millions)
|
Q2
2023
|
Q2 2022
|
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
& other
|
Total
|
Toys
|
Entertainment
|
Digital
Games
|
Corporate
& other
|
Total
|
Revenue
|
346.3
|
33.9
|
40.5
|
—
|
420.7
|
437.6
|
28.4
|
40.3
|
—
|
506.3
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
23.8
|
15.7
|
9.6
|
(14.7)
|
34.4
|
62.6
|
17.5
|
8.4
|
29.7
|
118.2
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other
related costs
|
9.3
|
—
|
0.4
|
—
|
9.7
|
4.4
|
0.1
|
—
|
—
|
4.5
|
Foreign exchange loss
(gain)
|
—
|
—
|
—
|
11.4
|
11.4
|
—
|
—
|
—
|
(32.3)
|
(32.3)
|
Share based
compensation
|
3.8
|
0.4
|
0.9
|
(0.3)
|
4.8
|
3.1
|
0.4
|
0.6
|
0.4
|
4.5
|
Impairment of
intangible assets
|
—
|
0.2
|
0.5
|
0.3
|
1
|
—
|
—
|
—
|
—
|
—
|
Legal settlement
recovery
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(0.6)
|
-0.6
|
Acquisition related
deferred incentive compensation
|
0.7
|
—
|
1.4
|
—
|
2.1
|
1.6
|
—
|
1.0
|
—
|
2.6
|
Net unrealized loss on
investment
|
—
|
—
|
—
|
(0.3)
|
-0.3
|
—
|
—
|
—
|
(0.1)
|
(0.1)
|
Net realized loss
(gain) on investment
|
—
|
—
|
—
|
0.1
|
0.1
|
—
|
—
|
—
|
(0.1)
|
(0.1)
|
Fair value loss on
Minority interest and other investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
0.5
|
0.5
|
Acquisition related
contingent consideration
|
(2.1)
|
—
|
—
|
—
|
(2.1)
|
—
|
—
|
—
|
—
|
—
|
Transaction
costs
|
—
|
—
|
—
|
1.5
|
1.5
|
—
|
—
|
—
|
0.4
|
0.4
|
Adjusted Operating Income
|
35.5
|
16.3
|
12.8
|
(2.0)
|
62.6
|
71.7
|
18
|
10
|
(2.1)
|
97.6
|
Adjusted Operating Margin
|
10.3 %
|
48.1 %
|
31.6 %
|
n.m.
|
14.9 %
|
16.4 %
|
63.4 %
|
24.8 %
|
n.m.
|
19.3 %
|
Depreciation and
amortization
|
12.2
|
11.7
|
1.9
|
—
|
25.8
|
11.5
|
3.1 1.5
|
|
—
|
16.1
|
Adjusted EBITDA
|
47.7
|
28
|
14.7
|
(2.0)
|
88.4
|
83.2
|
21.1
|
11.5
|
(2.1)
|
113.7
|
Adjusted EBITDA Margin
|
13.8 %
|
82.6 %
|
36.3 %
|
n.m.
|
21.0 %
|
19.0 %
|
74.3 %
|
28.5 %
|
n.m.
|
22.5 %
|
View original
content:https://www.prnewswire.com/news-releases/spin-master-reports-second-quarter-2023-financial-results-and-maintains-2023-outlook-301892047.html
SOURCE Spin Master Corp.