Spin Master Reports Strong Q3 2021 Financial Results TORONTO, Nov. 3, 2021 /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 nine months ended September 30, 2021. The Company's full Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2021 is available under the Company's profile on SEDAR (www.sedar.com) and posted on the Company's web site at www.spinmaster.com/financial-info.php.
"It's rewarding to see our strategic approach to toy innovation, engaging storytelling and open-ended digital play drive strong revenue growth across our three creative centres," said Max Rangel, Spin Master's Global President and Chief Executive Officer. "Our global supply chain team expertly managed the market disruptions to ensure steady inventory flow, which allowed us to grow our market share in the U.S. and build momentum ahead of the holiday season. Our first feature film, PAW Patrol: The Movie, helped recruit new fans to the franchise through increased awareness globally, which drove demand for our toys. Within digital games, Toca Life World continues to drive exceptional consumer engagement and revenue growth. With a continued focus on innovation and operational execution, we believe we are well positioned to bring magical play experiences to kids and their families."
"We delivered very strong financial and operating results this quarter," said Mark Segal, Spin Master's Chief Financial Officer. "Our Gross Product Sales and Total Revenue were higher than in any quarter in our history. The combination of strong sales, diligent cost management and our continued efforts to refine our operational capability led to record profitability levels. We are pleased to raise our Gross Product Sales and Total Revenue outlook for 2021 and for the balance of the year we will continue to take a disciplined approach to manage costs and maximize profitability and cash flow. With a diversified portfolio of brands, entertainment franchises and digital games across our global platform and a very solid financial base, we remain focused on investing to create long term value."
Q3 2021 Financial Highlights as compared to the same period in 2020
- Total Revenue of US$714.5 million increased by 25.0% from US$571.6 million. In Constant Currency1 terms, total revenue increased by 24.2%.
- Gross Product Sales1 increased by 16.0% to US$681.2 million from US$587.4 million, primarily driven by higher sales in Preschool & Girls and Boys. In Constant Currency1 terms, Gross Product Sales1 increased by 15.4%.
- Gross Product Sales1 increased by 20.5% in Europe, 16.7% in Rest of World and 13.8% in North America. International Gross Product Sales1 were 39.5% of total Gross Product Sales1, compared to 38.3%.
- Other Revenue grew by US$58.4 million or 120.9% to US$106.7 million, driven by higher entertainment and licensing revenue and digital games revenue.
- Entertainment and Licensing revenue was US$53.0 million, US$32.4 million or 158.0% higher, primarily driven by distribution revenue related to PAW Patrol: The Movie.
- Digital games revenue was US$53.8 million, an increase of US$26.0 million or 93.5%, driven by growth in Toca Life World.
- Sales Allowances1 increased by US$9.3 million to US$73.4 million. As a percentage of Gross Product Sales1, Sales Allowances1 were 10.8%, compared to 10.9%.
- Gross profit was US$366.0 million, representing 51.2% of total revenue, compared to US$277.9 million or 48.6%. The improvement in gross margin was primarily due to cost reductions resulting from the Company's operational improvement and productivity initiatives, favourable changes in product mix, lower closeout sales as well as higher digital games and entertainment distribution and licensing revenue. This increase was offset in part by the dilutive effect of PAW Patrol: The Movie (revenue less amortization of production costs) and the inflationary pressures on product costs and ocean freight, which was in turn mitigated in part by price increases implemented during the third quarter.
- Selling, general and administrative expenses ("SG&A")2 decreased as a percentage of total revenue to 26.2% compared to 27.9% driven by lower distribution expenses, which were partially offset by higher marketing, administrative and selling expenses.
- Net income was US$135.4 million or earnings per share of US$1.29 (diluted) compared to US$86.8 million or earnings per share of US$0.83 (diluted).
- Adjusted Net Income1 was US$132.6 million or Adjusted Diluted EPS1 of US$1.26, compared to US$95.1 million or Adjusted Diluted EPS1 of US$0.91.
- Adjusted EBITDA1 was US$217.3 million compared to US$139.9 million. Adjusted EBITDA Margin1 was 30.4% compared to 24.5%. Included in Adjusted EBITDA1 was US$26.0 million related to revenue for PAW Patrol: The Movie.
- Cash provided by operating activities was US$85.8 million compared to cash provided by operating activities of US$117.2 million, primarily driven by an increase in net working capital, offset in part by higher EBITDA1.
- Free Cash Flow1 was US$65.8 million compared to US$96.0 million, driven by lower cash flows from operating activities.
Other Business Matters
- On September 28, 2021, the Company entered into an agreement with a syndicate of lenders to amend and restate its existing credit facility. Under the agreement, the existing US$510 million five-year secured credit facility was amended and restated as an unsecured five-year revolving facility of the same amount with a maturity date of September 28, 2026.
- After the quarter, the Company announced the creation of Spin Master Ventures ("SMV") in order to accelerate growth in the Company's Toys, Entertainment and Digital Games creative centres, through strategic minority investments. Spin Master will initially allocate US$100 million to SMV, funded from internal resources. To launch the initiative, SMV made minority investments in two companies totaling US$2.4 million during the third quarter comprising an investment in Nrdlight Games AB for US$0.6 million and an investment in Hoot Reading Inc. for US$1.8 million.
- Subsequent to September 30, 2021, the Company filed a short form base shelf prospectus dated November 2, 2021, pursuant to which, for a period of 25 months thereafter, the Company (and shareholders of the Company) may sell up to an aggregate of CAD$1.0 billion of Subordinate Voting Shares, preferred shares, debt securities, subscription receipts, warrants or any combination thereof as a unit. This filing provides the Company with the flexibility to access debt and equity markets on a timely basis. The Company's previous base shelf prospectus in the amount of CAD$750.0 million, expired during the third quarter of 2021.