Market Overview

JAKKS Pacific Reports Third Quarter 2019 Financial Results

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JAKKS Pacific, Inc. (NASDAQ:JAKK) today reported financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Overview vs. Same Period Last Year

  • Net sales for the third quarter were $280.1 million, up 18% compared to $236.7 million reported in the comparable period in 2018. Sales in the 2019 third quarter were boosted by strong initial sales of Disney Frozen 2 products.
  • Gross margin was 28.9%, up from 27.2% in Q3 of last year.
  • Net income attributable to JAKKS Pacific was $16.4 million, or $0.51 per diluted share. This compares to $15.7 million, or $0.38 per diluted share, reported in the third quarter of 2018.
  • Adjusted EBITDA was $44.1 million, an increase of 64% over the $27.0 million reported in the third quarter of 2018. See note below on "Use of Non-GAAP Financial Information."

Management Commentary

JAKKS Chairman and CEO Stephen Berman stated, "We are pleased to report solid results across several financial metrics in the third quarter, as strong sales of Disney Frozen 2, Disguise® and Nintendo® more than offset the declines of some older products. Our net sales grew 18% in the quarter, the strongest quarterly growth in year-over-year sales we have seen in nearly five years, led by online sales of our products, which were up 32% compared to last year. More importantly, we were able to improve gross margins and tightly managed expenses, resulting in a 64% year-over-year increase in Adjusted EBITDA.

"We expect to close out the year on a strong note, and carry momentum into 2020. We remain committed to containing costs and managing our balance sheet prudently. We expect good performances over the holiday season from Frozen 2, Nintendo, Disney Princess and X-Power DozerTM."

JAKKS also announced today that Chief Financial Officer Brent T. Novak will leave the Company in December 2019 to pursue other opportunities. The Company is currently conducting a search for its next CFO. Mr. Berman said, "Brent has been a valued member of the JAKKS team since joining the company in April 2018. We wish him well in his future endeavors." Mr. Novak said, "I appreciated the opportunity to work with Stephen and the JAKKS team, and assisting in the completion of the Recapitalization transaction in August 2019."

Cash and Cash Equivalents

The Company's cash and cash equivalents (including restricted cash) totaled $75.9 million as of September 30, 2019 compared to $57.1 million as of September 30, 2018 and $37.0 million as of June 30, 2019.

2019 Outlook

Our goal for 2019 is to grow sales by approximately 5% on a year-over-year basis with improved levels of Adjusted EBITDA compared to 2018.

Use of Non-GAAP Financial Information

In 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."

Conference Call Live Webcast

JAKKS Pacific will webcast its third quarter earnings call at 9:00 a.m. Eastern Time/6:00 a.m. Pacific Time today. To listen to the live webcast and access the accompanying presentation slides, go to www.jakks.com/investors and click on the earnings website link under the Presentations tab at least 10 minutes prior to register, download and install any necessary audio software.

A replay of the call will be available on JAKKS' website approximately one hour following completion of the call through November 14, 2019 ending at 11:59 p.m. Eastern Time/8:59 p.m. Pacific Time. The playback can be accessed by calling (888) 843-7419 or (630) 652-3042 for international callers, with passcode "49167023#" for both playback numbers.

About JAKKS Pacific, Inc.

JAKKS Pacific, Inc. (NASDAQ:JAKK) 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 Perfectly Cute™, Real Workin' Buddies™, Squish-Dee-Lish™, XPV®, Disguise®, Moose Mountain®, Funnoodle®, Maui®, Kids Only!®; a wide range of entertainment-inspired products featuring premier licensed properties; and C'est Moi™, a new generation of clean beauty. Through JAKKS Cares, the company's commitment to philanthropy, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkstoys), Twitter (@jakkstoys) and Facebook (JAKKS Pacific).

©2019 JAKKS Pacific, Inc. All rights reserved.

Forward Looking Statements

This 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)
     
  September 30,   December 31,
 

2019

 

2018

  (In thousands)
ASSETS
     
Current assets:    
Cash and cash equivalents  

$

71,028

 

 

$

53,282

 

Restricted cash  

 

4,862

 

 

 

4,923

 

Accounts receivable, net  

 

200,788

 

 

 

122,278

 

Inventory  

 

65,298

 

 

 

53,880

 

Prepaid expenses and other assets  

 

18,495

 

 

 

15,780

 

Total current assets  

 

360,471

 

 

 

250,143

 

     
Property and equipment  

 

128,784

 

 

 

128,049

 

Less accumulated depreciation and amortization  

 

111,859

 

 

 

107,147

 

Property and equipment, net  

 

16,925

 

 

 

20,902

 

     
Operating lease right-of-use assets  

 

34,142

 

 

 

-

 

Goodwill
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