Spin Master Corp T.TOY

Alternate Symbol(s): SNMSF

Consumer Cyclical Leisure

Spin Master Corp. is a Canada-based children’s entertainment company. It is engaged in creating play experiences through its three creative centers: Toys, Entertainment and Digital Games. It has a distribution in over 100 countries. Its brands include PAW Patrol, Bakugan, Kinetic Sand, Air Hogs, Melissa & Doug, Hatchimals, Rubik's Cube and GUND. Its products include preschool, infant & toddler and plush; activities, games & puzzles and dolls & interactive; wheels & action, and outdoor. It creates and produces 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. It has a presence in digital games, anchored by the Toca Boca and Sago Mini brands, offering open-ended and creative games and educational play in digital environments. Through Spin Master Ventures, it makes minority investments globally in emerging companies and start-ups.

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Spin Master Corp

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Post by retiredcfon Jul 28, 2022 7:58am

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Post# 34856239

TD

Currently have a $65.00 target. GLTA

Spin Master Corp.

(TOY-T) C$48.46

Q2/22 Results: Pull Forward Drives Beat - Dividend Initiated Event

Last night, Spin Master ("Spin") reported Q2/22 Adjusted EBITDA/EPS of ~$114mm/ $0.68 exceeding our estimate/consensus of ~$91mm/$0.48.

Impact: SLIGHTLY POSITIVE

Q2/22 Summary: We were looking for three potential catalysts within the Q2/22 financial results summarized in Exhibit 1. First was an earnings beat based upon solid POS (including market share gains) and a pull forward of revenue to ensure retailers avoid the risk of supply chain constraints entering the seasonally strong H2/22. Second was maintaining/raising annual guidance with the strong H1/22 results. Third, that we viewed as longer-shot was a return of capital, and to our satisfaction, Spin did initiate a token dividend. As the majority of these boxes were checked we summarize the release as slightly positive.
Guidance: Management maintained its 2022 guidance. While we were looking for a potential beat-and-raise, understandably we believe that the decline in the euro and the uncertain global economic outlook warrant a degree of caution. We acknowledge that this implies a weaker adjusted EBITDA contribution in H2/22. That stated, we highlight that the annual guidance still calls for low double-digit growth in revenue/adjusted EBITDA. Additionally, the growth outlook for 2023 remains attractive inclusive of material new content within the Entertainment segment (Paw Patrol movie/spin-off series), the introduction of NOID within Digital Games, and growing 3rd party licenses.
Financial Position: Spin ended Q2/22 with ~$558mm of net cash (pre-IFRS 16), generating ~$84mm of FCF this quarter. This includes a substantial inventory build to meet the seasonally strong H2/22 demand. Spin's attractive FCF outlook supports its dividend introduction (C$0.06 quarterly) that should have no impact upon its active M&A strategy going forward.

Outlook/Conclusion: There are some clarifications required on the call this morning including softness in Digital Games, and lower y/y H2/22 forecast margins. That said, Spin is on track for a very strong annual performance, including growth in excess of the industry, and an impressive line-up to drive growth in 2023 (specifically in high-margin/high-multiple Digital Games/ Entertainment segments). We see limited reasons that Spin trades at a material discount (~2.5x-to-3.0x) to its key peers and anticipate ongoing growth in earnings/FCF to narrow this discount.