JAKKS Pacific Reports Fourth Quarter and Full-Year 2023 Financial Results

Published

Full-year Gross Profit Dollars up 6% vs. 2022; Third Consecutive Annual Increase

SANTA MONICA, Calif., Feb. 29, 2024 (GLOBE NEWSWIRE) -- JAKKS Pacific, Inc. (NASDAQ: JAKK) today reported financial results for the fourth quarter ended December 31, 2023.

Fourth Quarter 2023

  • Net sales were $127.4 million, a year-over-year decrease of 3%
  • Gross margin of 26.5%, up 480 basis points vs. Q4 2022, led by improved landed product cost and reduced inventory obsolescence expense
  • Gross profit of $33.7 million, up 18% compared to $28.6 million in Q4 2022
  • Net loss attributable to common stockholders of $11.3 million (or $1.12 per diluted share), compared to net income attributable to common stockholders of $37.6 million or ($3.66 per diluted share) in Q4 2022
  • Adjusted net loss attributable to common stockholders (a non-GAAP measure) of $10.5 million (or $1.04 per diluted share), compared to adjusted net loss attributable to common stockholders of $13.9 million (or $1.42 per diluted share) in Q4 2022
  • Adjusted EBITDA (a non-GAAP measure) of $(10.9) million vs. $(12.1) million in Q4 2022

Full-Year 2023

  • Net sales were $711.6 million compared to $796.2 million last year, an 11% decrease
  • Gross margin of 31.4% compared to 26.5% last year
  • Gross profit of $223.4 million, up 6% compared to $211.3 million last year, and the highest dollar level since 2015
  • Operating income of $59.1 million compared to $61.0 million last year; a 3% decrease
  • Net income attributable to common stockholders of $36.9 million, down from a net income attributable to common stockholders of $90.0 million in 2022
  • Adjusted net income attributable to common stockholders of $48.9 million ($4.62 per diluted share), up from adjusted net income attributable to common stockholders of $43.6 million ($4.29 per diluted share) in 2022
  • Adjusted EBITDA of $75.7 million, down 1% versus $76.4 million in 2022
  • Cash flows provided by operating activities of $66.4 million, down from $86.1 million in 2022
  • Cash used in financing activities of $70.4 million, eliminating all long-term debt in the first half of 2023
  • End of year cash and cash equivalents of $72.6 million, down from $85.5 million in 2022

Management Commentary“For the third consecutive year we have met or exceeded our key financial full-year targets,” said Stephen Berman, CEO of JAKKS Pacific. “The year began with the challenge of revenue comparisons with a 2022 hit-driven blockbuster product line, but we also saw opportunities for gross margin improvements with a normalized supply chain. Gross and operating margins improved year-over-year despite a $80+ million decline in Net Sales, generating over $66 million in operating cash flow for the year.

“The holiday toy season came late this year, but we were pleased with the results. Two of our top three US Toys/Consumer Products customers achieved positive year-over-year retail sales results in Q4 despite challenging comparisons from the prior year. Our aggregate end-of-year inventory at retail at those three accounts is also down by a high single digit percentage compared to last year. Although customers are tentatively moving into the new year, we believe our core businesses remain on solid footing.”

Fourth Quarter and Full-Year 2023 ResultsNet sales for the fourth quarter of 2023 were $127.4 million, down 3% versus $131.9 million last year. The Toys/Consumer Products segment sales were up 1% globally (flat in North America; 7% International) and sales of Costumes were down 40% compared to last year (-54% North America; -20% International).

Full-year Toys/Consumer Products sales were down 10% compared to 2022. The Costumes segment was down 12% vs. 2022, as customers continue to recalibrate to post-COVID levels. Our 2023 Costumes performance was nonetheless 22% higher than 2021.

Balance Sheet HighlightsThe Company’s cash and cash equivalents (including restricted cash) totaled $72.6 million as of December 31, 2023, compared to $85.5 million as of December 31, 2022.

Total debt was zero, compared to $67.2 million as of December 31, 2022. Total debt as of December 31, 2022, included the amount outstanding under the Company's term loan, net of unamortized discounts and issuance costs.

Inventory was $52.6 million, compared to $80.6 million as of December 31, 2022, a reduction of 35%.

Use of Non-GAAP Financial InformationIn addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached “Reconciliation of Non-GAAP Financial Information.” “Total liquidity” is calculated as cash and cash equivalents, plus availability under the Company’s $67.5 million revolving credit facility.

Conference Call Live WebcastJAKKS Pacific, Inc. invites analysts, investors and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on February 29, 2024. A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at www.jakks.com/investors. To access the call by phone, please go to this link (4Q23 Registration link) , and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call five minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors).

About JAKKS Pacific, Inc.JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific’s popular proprietary brands include: AirTitans®, Ami Amis™, Disguise®, Fly Wheels®, JAKKS Wild Games™, Moose Mountain®, Maui®, Perfectly Cute®, ReDo® Skateboard Co., Sky Ball®, SportsZone™, Xtreme Power Dozer®, and WeeeDo®, as well as a wide range of entertainment-inspired products featuring premier licensed properties. Through our products and our charitable donations, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkspacific.toys), Twitter (@jakkstoys) and Facebook (@jakkspacific.toys).

Forward Looking StatementsThis press release may contain “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that the Recapitalization transaction or any future transactions will result in future growth or success of JAKKS. The “forward-looking statements” contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release.

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
   
     December 31, 
      2023    2022  
     (In thousands) 
Assets  
Current assets:      
 Cash and cash equivalents $72,350   $85,297  
 Restricted cash  204    193  
 Accounts receivable, net  123,797    102,771  
 Inventory  52,647    80,619  
 Prepaid expenses and other assets  6,374    6,331  
  Total current assets  255,372    275,211  
          
Property and equipment  135,956    130,437  
Less accumulated depreciation and amortization  121,357    115,575  
 Property and equipment, net  14,599    14,862  
          
Operating lease right-of-use assets, net  23,592    19,913  
Deferred income tax assets, net  68,143    57,804  
Goodwill  35,083    35,083  
Intangibles and other assets, net  2,162    2,469  
  Total assets $398,951   $405,342  
          
          
Liabilities, Preferred Stock and Stockholders' Equity  
          
Current liabilities:      
 Accounts payable $42,177   $33,687  
 Accounts payable - Meisheng (related party)  12,259    9,820  
 Accrued expenses  45,102    37,998  
 Reserve for sales returns and allowances  38,531    51,877  
 Income taxes payable  3,785    8,165  
 Short term operating lease liabilities  7,380    10,746  
 Short term debt, net  -    25,529  
  Total current liabilities  149,234    177,822  
          
Long term operating lease liabilities  16,666    9,863  
Accrued expenses - long term  3,746    -  
Debt, non-current portion, net  -    41,622  
Preferred stock derivative liability  29,947    21,918  
Income taxes payable  3,245    2,929  
Deferred income tax liabilities, net  -    -  
  Total liabilities  202,838    254,154  
          
Preferred stock accrued dividends  5,992    4,490  
          
Stockholders' equity:      
 Common stock, $.001 par value  10    10  
 Additional paid-in capital  278,642    275,187  
 Accumulated deficit  (73,612)   (112,018) 
 Accumulated other comprehensive loss  (15,627)   (17,482) 
  Total JAKKS Pacific, Inc. stockholders' equity  189,413    145,697  
 Non-controlling interests  708    1,001  
  Total stockholders' equity  190,121    146,698  
  Total liabilities, preferred stock and stockholders' equity $398,951   $405,342  
          
          
Supplemental Balance Sheet and Cash Flow Data (Unaudited)  
     December 31, 
Key Balance Sheet Data:  2023    2022  
          
Accounts receivable days sales outstanding (DSO)  89    72  
Inventory turnover (DSI)  52    72  
          
     Twelve Months EndedDecember 31, 
Condensed Cash Flow Data:  2023    2022  
         
Cash flows provided by operating activities $66,404   $86,099  
Cash flows used in investing activities  (8,907)   (10,387) 
Cash flows used in financing activities and other  (70,433)   (35,554) 
Increase (Decrease) in cash, cash equivalents and restricted cash $(12,936)  $40,158  
          
Capital expenditures $(8,906)  $(10,389) 
          

  JAKKS Pacific, Inc. and Subsidiaries 
  Condensed Consolidated Statements of Operations (Unaudited) 
       
   Three Months EndedDecember 31,    Twelve Months EndedDecember 31,   
          
    2023   2022  Δ (%)   2023   2022  Δ (%) 
   (In thousands, except per share data)    (In thousands, except per share data)   
                
Net sales$127,396  $131,886  (3)%  $711,557  $796,187  (11)% 
Less: Cost of sales             
 Cost of goods 68,866   81,355  (15)   362,378   449,597  (19) 
 Royalty expense 22,533   20,371  11    117,607   126,633  (7) 
 Amortization of tools and molds 2,264   1,592  42    8,219   8,671  (5) 
 Cost of sales 93,663   103,318  (9)   488,204   584,901  (17) 
  Gross profit 33,733   28,568  18    223,353   211,286  6  
Direct selling expenses 14,582   13,153  11    36,987   33,290  11  
General and administrative expenses 34,401   30,752  12    126,893   114,819  11  
Depreciation and amortization 90   360  (75)   366   1,907  (81) 
 Selling, general and administrative expenses 49,073   44,265  11    164,246   150,016  9  
Intangibles impairment -   -  -    -   300  nm  
  Income from operations (15,340)  (15,697) (2)   59,107   60,970  (3) 
Other income (expense):             
 Loss from joint ventures -   -  -    (565)  -  nm  
 Other income (expense), net 139   277  (50)   563   797  (29) 
 Change in fair value of preferred stock derivative liability (1,361)  1,429  nm    (8,029)  (636) nm  
 Loss on debt extinguishment -   -  -    (1,023)  -  nm  
 Interest income 757   63  nm    1,344   127  nm  
 Interest expense (710)  (2,294) (69)   (6,451)  (11,183) (42) 
Income (loss) before provision for (benefit from) income taxes (16,515)  (16,222) 2    44,946   50,075  (10) 
Provision for (benefit from) income taxes (5,643)  (54,331) (90)   6,833   (41,008) nm  
Net income (loss) (10,872)  38,109  nm    38,113   91,083  (58) 
Net income (loss) loss attributable to non-controlling interests (4)  140  nm    (293)  (330) (11) 
Net income (loss) attributable to JAKKS Pacific, Inc.$(10,868) $37,969  nm%  $38,406  $91,413  (58)% 
Net income (loss) attributable to common stockholders$(11,252) $37,607  nm%  $36,904  $89,997  (59)% 
 Earnings (loss) per share - basic$(1.12) $3.86     $3.70  $9.33    
 Shares used in earnings (loss) per share - basic 10,084   9,732      9,962   9,651    
 Earnings (loss) per share - diluted$(1.12) $3.66     $3.48  $8.86    
 Shares used in earnings (loss) per share - diluted 10,084   10,263      10,590   10,155    
                
   Three Months EndedDecember 31,    Twelve Months EndedDecember 31,   
          
    2023   2022  Δ bps   2023   2022  Δ bps 
       Fav/(Unfav)     Fav/(Unfav)
Net sales 100.0%  100.0% -    100.0%  100.0% -  
Less: Cost of sales             
 Cost of goods 54.0   61.7  770    50.9   56.5  560  
 Royalty expense 17.7   15.4  (230)   16.5   15.9  (60) 
 Amortization of tools and molds 1.8   1.2  (60)   1.2   1.1  (10) 
 Cost of sales 73.5   78.3  480    68.6   73.5  490  
  Gross profit 26.5   21.7  480    31.4   26.5  490  
Direct selling expenses 11.4   10.0  (140)   5.2   4.2  (100) 
General and administrative expenses 27.0   23.3  (370)   17.8   14.4  (340) 
Depreciation and amortization 0.1   0.3  20    0.1   0.2  10  
 Selling, general and administrative expenses 38.5   33.6  (490)   23.1   18.8  (430) 
Intangibles impairment -   -  -    -   -  -  
  Income from operations (12.0)  (11.9) (10)   8.3   7.7  60  
Other income (expense):             
 Loss from joint ventures -   -      (0.1)  -    
 Other income (expense), net 0.1   0.2      0.1   0.1    
 Change in fair value of preferred stock derivative liability (1.1)  1.1      (1.1)  (0.1)   
 Loss on debt extinguishment -   -      (0.1)  -    
 Interest income 0.6   -      0.2   -    
 Interest expense (0.6)  (1.7)     (0.9)  (1.4)   
Income (loss) before provision for (benefit from) income taxes (13.0)  (12.3)     6.4   6.3    
Provision for (benefit from) income taxes (4.5)  (41.2)     1.0   (5.2)   
Net income (loss) (8.5)  28.9      5.4   11.5    
Net income (loss) loss attributable to non-controlling interests -   0.1      -   -    
Net income (loss) attributable to JAKKS Pacific, Inc. (8.5)%  28.8%     5.4%  11.5%   
Net income (loss) attributable to common stockholders (8.8)%  28.5%     5.2%  11.3%   
                

JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)
 

Reconciliation of GAAP to Non-GAAP measures:

This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis.

Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

 
  Three Months EndedDecember 31,    Twelve Months EndedDecember 31,   
         
   2023   2022  Δ ($)   2023   2022  Δ ($) 
  (In thousands)    (In thousands)   
EBITDA and Adjusted EBITDA              
Net income $(10,872) $38,109  $(48,981)  $38,113  $91,083  $(52,970) 
Interest expense  710   2,294   (1,584)   6,451   11,183   (4,732) 
Interest income  (757)  (63)  (694)   (1,344)  (127)  (1,217) 
Provision for income taxes  (5,643)  (54,331)  48,688    6,833   (41,008)  47,841  
Depreciation and amortization  2,354   1,952   402    10,336   10,578   (242) 
EBITDA  (14,208)  (12,039)  (2,169)   60,389   71,709   (11,320) 
Adjustments:              
Loss from joint ventures (JAKKS Pacific, Inc. - 51%)  -   -   -    276   -   276  
Loss from joint ventures (Meisheng - 49%)  -   -   -    289   -   289  
Other (income) expense, net  (139)  (277)  138    (563)  (797)  234  
Restricted stock compensation expense  2,057   1,646   411    8,027   5,082   2,945  
Change in fair value of preferred stock derivative liability  1,361   (1,429)  2,790    8,029   636   7,393  
Employee Retention Credit/gov't employment support  -   -   -    -   (249)  249  
Molds and tooling capitalization  -   -   -    (1,751)  -   (1,751) 
Loss on debt extinguishment  -   -   -    1,023   -   1,023  
Adjusted EBITDA $(10,929) $(12,099) $1,170   $75,719  $76,381  $(662) 
Adjusted EBITDA/Net sales %  (8.6)%  (9.2)%  60 bps    10.6%  9.6%  100 bps  
               
               
               
               
JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)
               
  Three Months EndedDecember 31,    Twelve Months EndedDecember 31,   
   2023   2022  Δ ($)   2023   2022  Δ ($) 
  (In thousands, except per share data)    (In thousands, except per share data)   
Adjusted net income (loss) attributable to common stockholders              
Net income (loss) attributable to common stockholders $(11,252) $37,607  $(48,859)  $36,904  $89,997  $(53,093) 
Restricted stock compensation expense  2,057   1,646   411    8,027   5,082   2,945  
Change in fair value of preferred stock derivative liability  1,361   (1,429)  2,790    8,029   636   7,393  
Loss on debt extinguishment  -   -   -    1,023   -   1,023  
Employee Retention Credit/gov't employment support  -   -   -    -   (249)  249  
Loss from joint ventures (JAKKS Pacific, Inc. - 51%)  -   -   -    276   -   276  
2021 BSP Term Loan prepayment penalty  -   -   -    150   525   (375) 
Molds and Tooling capitalization  -   -   -    (1,751)  -   (1,751) 
Valuation allowance release/adjustments  (2,577)  (51,178)  48,601    (2,577)  (51,178)  48,601  
Tax impact of additional charges  (96)  (511)  415    (1,175)  (1,208)  33  
Adjusted net income (loss) attributable to common stockholders $(10,507) $(13,865) $3,358   $48,906  $43,605  $5,301  
Adjusted earnings (loss) per share - basic $(1.04) $(1.42) $0.38   $4.91  $4.52  $0.39  
Shares used in adjusted earnings (loss) per share - basic  10,084   9,732   352    9,962   9,651   311  
Adjusted earnings (loss) per share - diluted $(1.04) $(1.42) $0.38   $4.62  $4.29  $0.32  
Shares used in adjusted earnings (loss) per share - diluted  10,084   9,732   352    10,590   10,155   435  
               

JAKKS Pacific, Inc. and Subsidiaries 
Net Sales by Division and Geographic Region 
              
              
(In thousands)QTD Q4 (In thousands)FY 
Divisions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 Divisions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 
Toys/Consumer Products$118,855$117,727$179,152 1.0%-34.3% Toys/Consumer Products$580,686$647,317$513,517 -10.3%26.1% 
Dolls, Role-Play/Dress Up 73,272 68,937 116,877 6.3%-41.0% Dolls, Role-Play/Dress Up 319,962 423,581 323,360 -24.5%31.0% 
Action Play & Collectibles 35,312 38,909 41,164 -9.2%-5.5% Action Play & Collectibles 219,446 173,529 114,778 26.5%51.2% 
Outdoor/Seasonal Toys 10,272 9,881 21,111 4.0%-53.2% Outdoor/Seasonal Toys 41,279 50,207 75,379 -17.8%-33.4% 
Costumes$8,541$14,159$8,812 -39.7%60.7% Costumes 130,870 148,870 107,599 -12.1%38.4% 
Total$127,396$131,886$187,964 -3.4%-29.8% Total$711,557$796,187$621,116 -10.6%28.2% 
              
              
              
(In thousands)QTD Q4 (In thousands)FY 
Regions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 Regions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 
United States$96,304$100,907$148,876 -4.6%-32.2% United States$557,865$644,295$512,193 -13.4%25.8% 
Europe 17,988 19,437 22,322 -7.5%-12.9% Europe 76,464 85,348 60,425 -10.4%41.2% 
Latin America 4,434 2,626 4,483 68.8%-41.4% Latin America 32,024 18,338 12,606 74.6%45.5% 
Canada 4,686 4,795 5,596 -2.3%-14.3% Canada 26,992 26,515 17,999 1.8%47.3% 
Asia 2,140 1,698 3,018 26.0%-43.7% Asia 8,543 10,431 9,232 -18.1%13.0% 
Australia & New Zealand 1,486 1,822 2,496 -18.4%-27.0% Australia & New Zealand 7,542 8,836 6,423 -14.6%37.6% 
Middle East & Africa 358 601 1,173 -40.4%-48.8% Middle East & Africa 2,127 2,424 2,238 -12.3%8.3% 
Total$127,396$131,886$187,964 -3.4%-29.8% Total$711,557$796,187$621,116 -10.6%28.2% 
              
              
(In thousands)QTD Q4 (In thousands)FY 
Regions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 Regions 2023 2022 2021 % Change2023 v 2022% Change2022 v 2021 
North America$100,990$105,702$154,472 -4.5%-31.6% North America$584,857$670,810$530,192 -12.8%26.5% 
International 26,406 26,184 33,492 0.8%-21.8% International 126,700 125,377 90,924 1.1%37.9% 
Total$127,396$131,886$187,964 -3.4%-29.8% Total$711,557$796,187$621,116 -10.6%28.2% 
              

CONTACT:JAKKS Pacific Investor Relations(424) 268-9567Lucas Natalini

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Source: JAKKS Pacific Inc.

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