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 Oct 24, 2024 10:20am

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Post# 36280138

RBC 2

October 23, 2024

Spin Master Corp.
Read-through from Mattel’s Q3/24 results

TSX: TOY | CAD 31.01 | Outperform | Price Target CAD 46.00

Sentiment: Neutral

Details

Mattel (not covered) reported Q3/24 results after market close:

Net revenue of $1,844MM (-4% YoY, -3% in constant currency) versus consensus of $1,858MM
Adjusted EBITDA of $584MM versus consensus of $524MM
North American and International Gross Billings growth was -3% YoY and -4% (-2% in constant currency), respectively, due to a tough YoY comp with the Barbie movie in Q3/23 (excluding movie-related impacts, Gross Billings would have increased modestly) while strength in Asia Pacific continues (+9%, +8% in constant currency).
Management trimmed 2024 net sales guidance from 'comparable' YoY in constant currency to 'comparable to slightly down' due mainly to year-to-date performance (versus a change in the Q4/24 outlook) while reiterating: (i) 2024 adjusted EBITDA, EPS and FCF guidance; (ii) the expectation of global toy sales to be down modestly in 2024, which remains a slight improvement from the outlook at the beginning of 2024 with the industry performing better than originally anticipated; and (iii) the expectation that the toy industry will return to growth in 2025. In addition, management expects a "good" holiday season with sales growth of +2.5%-3.5% YoY and overall POS growth in Q4/24 in part due to increased retail support, shelf space, marketing/promotions and greater representation across major holiday catalogs.
Other notables: (i) management characterized retailer sentiment heading into the holiday season as positive overall; (ii) management indicated that POS declined high-single digits in Q3/24 and low-single digits year-to-date (due mainly to a tough Barbie comparable); (iii) Asia Pacific POS increased low-single digits while the U.S., EMEA and Latin America declined high- single digits; and (iv) COGS deflation resulted in a ~50bps tailwind to adjusted gross margins in Q3/24, albeit with management expecting modest cost inflation in Q4/24.

Implications

We believe Mattel’s Q3/24 results, updated 2024 guidance and management commentary are largely a neutral read-through for Spin Master given what appears to be a demand environment for toys that is generally unchanged despite the lingering concerns around the health of the consumer heading into the holiday season (2024 guidance for Spin Master, which includes Toy Gross Product Sales and Consolidated Revenue excluding M&D 'in line' with 2023, originally factors in some degree of macro headwind and market volatility).