TSX:TOY - Post Discussion
Post by
retiredcf on Mar 01, 2022 8:39am
RBC Upgrade
Their upside scenario target is now $73.00. GLTA
Outperform
TSX: TOY; CAD 46.42
Price Target CAD 63.00 ↑ 62.00
Spin Master Corp.
Not TOY’ing around: Strong finish to 2021 and a solid guide to start 2022
Our view: Spin Master reported stronger-than-expected Q4 results driven by solid margin performance and 9% global POS growth (+12% in US/ CAD; +6% in ROW). The Digital platform was a significant contributor, with this high-margin platform contributing $50MM of revenue, which was +57% YoY. The company also initiated 2022 guidance which points to Adjusted EBITDA above consensus expectations (we view the initial guidance as conservative). Revising price target +$1 to $63 and reiterating our Outperform rating.
Key points:
Q4 earnings were well ahead of RBC and consensus forecasts – Recall that on Febuary 1, Spin Master pre-released Q4 Gross Product Sales ("GPS")/ revenue that were well ahead of consensus forecasts at the time (see our note here for details). The Q4 print today reflected Adjusted EBITDA ($ and margin) that meaningfully exceeded RBC/consensus expectations. The company also initiated 2022 full-year guidance which points to Adjusted EBITDA $ ahead of RBC/consensus expectations. More specifically, Spin Master expects to generate mid- to high-single digit YoY GPS and revenue growth in 2022. The company is also guiding flat YoY Adjusted EBITDA margins (excluding $26MM of Paw Patrol movie related distribution revenues from the 2021 base), which implies a margin in the mid-19% range. We forecast 2022 Adjusted EBITDA of $417MM (+7.5% YoY when making the above-noted adjustment to 2021; margin of 19.4%). We view the initial guidance as being conservative, and expect updates/revisions as the year progresses. We would note that through 2021, the company increased its top-line and/or Adjusted EBITDA margin guide at every quarter. See Exhibit 1 inside for results details and Exhibit 2 for guidance details.
Strong growth in Digital Games revenue in 2021 ... with more to come in 2022 – Q4 "Other Revenue" was $78.5MM (+39.4% YoY; -26.4% QoQ), primarily driven a 57% increase in Digital Games revenue (from higher in-game purchases in the Toca Life World platform), as well as a 16.3% YoY increase in Entertainment and Licensing revenue. The Digital Games business grew significantly through 2021 with full-year revenues +128% YoY. Looking ahead, we believe the introduction of new content and low incremental development costs should support user growth and margin expansion. We expect additional details on the profitability of this business line to help investors frame its potential value.
Renews DC Comics license for another 3 years – Earlier today, Spin Master announced it has renewed its DC Comics licensing agreement with Warner Bros. for the 2023-2026 period (see our SPARC here). We believe the announcement is a positive not only from a financial perspective, but it also solidifies Spin Master’s position as a leading toy platform with the ability to not only win, but drive growth in leading entertainment-based licenses. We expect this license to be a meaningful growth driver in 2022 with four movies to be released this year (starting with Batman on March 4, 2022)
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