TORONTO, May 7, 2024 /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 months ended March 31, 2024. The Company's full Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2024 is available under the Company's profile on SEDAR+ (www.sedarplus.com) and posted on the Company's web site at www.spinmaster.com. All financial information is presented in United States dollars ("$", "dollars" and "US$") and has been rounded to the nearest hundred thousand, except per share amounts and where otherwise indicated. "As we approach the 30th anniversary of Spin Master's founding, I wanted to reflect on our growth and evolution," said Max Rangel, Global President & CEO. "Over the past 30 years, we have grown from an innovative start-up toy company to become a global, fully-imagined children's entertainment company. We've continued to build on our leadership position in toys through disruptive innovation and have diversified our robust portfolio through incremental licensed partnerships, international expansion, the development of entertainment content, digital games capabilities and compelling acquisitions. Our Toy Gross Product Sales growth in the first quarter reflects the addition of Melissa & Doug's trusted line of open-ended and developmental play to our toy business. In 2024, we will bring breakthrough innovation to the toy aisle, alongside impressive launches within our core and licensed brand portfolios. Our investment in the creation of multiplatform content including our two new original series Unicorn Academy and Vida the Vet, are expected to drive incremental toy and licensing and merchandising opportunities later in 2024. We will continue to expand our digital games ecosystem with the launch of Toca Boca Days and Rubik's Match in the coming months. These digital games are designed to deepen and broaden our audience base, attracting kids of all ages and spawning new fans and player communities. Given our financial framework for value creation, the power of our three creative centres and our strong financial position, we are well-positioned to execute against our strategy of reimagining everyday play and investing in innovation, content, geographic expansion and acquisitions to drive long-term profitable growth and shareholder value." "As expected, Toy Gross Product Sales in Q1 2024, excluding Melissa & Doug, were in line with 2023 in what is typically the lowest quarter seasonally for the toy industry" said Mark Segal, Spin Master's EVP & Chief Financial Officer. "Much of our focus was centered around Melissa & Doug and our consolidated results now include their business. Our integration efforts are well underway, and we've already begun to capitalize on cost synergies and identify revenue growth opportunities. Our capital allocation strategy for 2024 is focused on innovative IP-driven revenue and profitability growth, investment in entertainment content and digital games, and enhancing total shareholder returns. We are maintaining our outlook for 2024. During Q1, we began executing share purchases under our recently approved Normal Course Issuer Bid. We are pleased to increase our dividend from CA$0.06 to CA$0.12 per share. We will continue to focus on strategic M&A and venture investments, particularly in the Digital Games and Entertainment segments, as we integrate Melissa & Doug into the Toys segment." Consolidated Financial Highlights for Q1 2024 as compared to the same period in 2023 Revenue was $316.2 million, an increase of 16.5% from $271.4 million, which includes Melissa & Doug Revenue of $40.4 million. Revenue, excluding Melissa & Doug1 was $275.8 million, an increase of 1.6% from $271.4 million. Constant Currency Revenue1 was $314.7 million, an increase of 16.0%, from $271.4 million. Revenue by operating segment reflected increases of 21.5% in Toys, 16.5% in Entertainment, and a decrease of 3.2% in Digital Games. Toy Gross Product Sales1 was $264.1 million, an increase of $47.8 million or 22.1% from $216.3 million, including Melissa & Doug Toy Gross Product Sales1 of $46.7 million. Toy Gross Product Sales, excluding Melissa & Doug1 was $217.4 million, an increase of $1.1 million or 0.5% from $216.3 million. Operating Loss was $61.8 million compared to Operating Loss of $6.1 million. Operating Margin2 was (19.5)% compared to (2.2)%. Adjusted Operating Loss1 was $14.5 million compared to Adjusted Operating Income1 of $12.7 million. Adjusted Operating Margin1 was (4.6)% compared to 4.7%. Net Loss was $54.8 million or $(0.53) per share compared to $1.9 million or $(0.02) per share. Adjusted Net Loss1 was $19.5 million or $(0.19) per share compared to Adjusted Net income1 of $12.3 million or $0.12 per share. Adjusted EBITDA1 was $18.6 million compared to $30.6 million, a decrease of $12.0 million or 39.2%. Adjusted EBITDA, excluding Melissa & Doug1 was $27.8 million compared to $30.6 million, a decrease of $2.8 million or 9.2%. Adjusted EBITDA Margin1 was 5.9% compared to 11.3%. Adjusted EBITDA Margin, excluding Melissa & Doug1 was 10.1% compared to 11.3%. Cash provided by operating activities was $24.3 million compared to cash used of $4.3 million. Free Cash Flow3 was $(0.6) million compared to $(34.4) million. During the three months ended March 31, 2024, the Company repurchased and cancelled 333,300 subordinate voting shares through the Company's Normal Course Issuer Bid (the "NCIB") program for $8.4 million. Subsequent to March 31, 2024, the Company repurchased a further 255,621 subordinate voting shares for cancellation at a cost of $6.3 million. Subsequent to March 31, 2024, the Company declared a quarterly dividend of CA$0.12 per outstanding subordinate voting share and multiple voting share, payable on July 12, 2024. Acquisition of Melissa & Doug On January 2, 2024, the Company completed its previously announced acquisition of MND Holdings I Corp ("Melissa & Doug") by acquiring all issued and outstanding capital stock. Melissa & Doug is a leading brand in early childhood play with offerings of open-ended, creative, and developmental toys. The acquisition is reported in the Toys segment within the Preschool, Infant & Toddler and Plush product category. The first quarter results for 2024 include the operating results of Melissa & Doug. A summary of key Melissa & Doug's operating results for the three months ended March 31, 2024 is included below. On January 2, 2024, cash consideration paid was $991.7 million, which includes $36.2 million in cash acquired, resulting in net purchase consideration of $955.5 million. The Company funded the $991.7 million purchase price with $466.7 million in cash and $525.0 million in debt from its credit facilities to finance the acquisition. During the three months ended March 31, 2024, the Company repaid $50.0 million towards its credit facilities (refer to the Liquidity section for more details). The Company incurred $9.5 million in transaction related costs for the three months ended March 31, 2024. During the three months ended March 31, 2024, the Company recognized $0.2 million in Net Cost Synergies3 and continues to expect to achieve approximately $6 million in Net Cost Synergies3 in 2024 towards the target of approximately $25 million to $30 million in Run-rate Net Cost Synergies4 by the end of 2026. The following summarizes the impact of Melissa & Doug's operating results on the first quarter consolidated results: (US$ millions) Q1 2024 Q1 2023 $ Change % Change Revenue 316.2 271.4 44.8 16.5 % Melissa & Doug Revenue 40.4 — 40.4 n.m. Revenue, excluding Melissa & Doug1 275.8 271.4 4.4 1.6 % Toys Gross Product Sales1 264.1 216.3 47.8 22.1 % Melissa & Doug Toy Gross Product Sales1 46.7 — 46.7 n.m. Toys Gross Product Sales, excluding Melissa & Doug1 217.4 216.3 1.1 0.5 % Adjusted EBITDA1 18.6 30.6 (12.0) (39.2) % Melissa & Doug Adjusted EBITDA1 (9.2) — (9.2) n.m. Adjusted EBITDA, excluding Melissa & Doug1 27.8 30.6 (2.8) (9.2) % Adjusted EBITDA Margin1 5.9 % 11.3 % Adjusted EBITDA Margin, excluding Melissa & Doug1 10.1 % 11.3 % 1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios".   Consolidated Financial Results as compared to the same period in 2023 (US$ millions, except per share information) Q1 2024 Q1 2023 $ Change Consolidated Results Revenue4 $                       316.2 $                      271.4 $                      44.8 Constant Currency Revenue1 $                       314.7 $                      43.3 Operating Loss $                        (61.8) $                         (6.1) $                     (55.7) Operating Margin2 (19.5) % (2.2) % Adjusted Operating Income (Loss)1,3 $                        (14.5) $                        12.7 $                     (27.2) Adjusted Operating Margin1 (4.6) % 4.7 % Net Loss $                        (54.8) $                         (1.9) $                     (52.9) Adjusted Net Income (Loss)1,3 $                        (19.5) $                        12.3 $                     (31.8) Adjusted EBITDA1,3,4 $                         18.6 $                        30.6 $                     (12.0) Adjusted EBITDA Margin1 5.9 % 11.3 % Earnings Per Share ("EPS") Basic EPS $                        (0.53) $                       (0.02) Diluted EPS $                        (0.53) $                       (0.02) Adjusted Basic EPS1 $                        (0.19) $                        0.12 Adjusted Diluted EPS1 $                        (0.19) $                        0.12 Weighted average number of shares (in millions) Basic 104.2 103.0 Diluted 106.3 106.6 Selected Cash Flow Data Cash provided by (used in) operating activities $                         24.3 $                         (4.3) $                      28.6 Cash used in investing activities $                      (980.4) $                       (56.6) $                   (923.8) Cash provided by (used in) financing activities $                       457.2 $                       (14.8) $                    472.0 Free Cash Flow1 $                          (0.6) $                       (34.4) $                      33.8 1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios". 2 Operating Margin is calculated as Operating Income divided by Revenue. 3 Refer to the "Reconciliation of Non-GAAP Financial Measures" section for further details on the adjustments for Q1 2024. 4 Included in the operating results of Q1 2024 is Melissa & Doug Revenue of $40.4 million and Melissa & Doug Adjusted EBITDA1 of $(9.2) million. Segmented Financial Results as compared to the same period in 2023 (US$ millions) Q1 2024 Q1 2023 Toys Entertainment DigitalGames Corporate& Other1 Total Toys Entertainment DigitalGames Corporate& Other1 Total Revenue $    226.4 $            43.8 $      46.0 $          — $   316.2 $    186.3 $           37.6 $      47.5 $          — $   271.4 Operating (Loss)Income $     (90.8) $            28.6 $      13.2 $     (12.8) $    (61.8) $     (41.8) $           29.3 $      16.2 $       (9.8) (6.1) Adjusted OperatingIncome (Loss)2 $     (56.2) $            29.1 $      15.2 $       (2.6) $    (14.5) $     (33.4) $           29.9 $      19.0 $       (2.8) $      12.7 Adjusted EBITDA2 $     (32.5) $            36.4 $      17.3 $       (2.6) $      18.6 $     (21.4) $           33.6 $      21.0 $       (2.6) $      30.6 1 Corporate & Other includes certain corporate costs, foreign exchange and merger and acquisition-related costs, as well as fair value gains and losses. 2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios". Toys Segment Results The following table provides a summary of the Toys segment operating results, for the three months ended March 31, 2024 and 2023: (US$ millions) Q1 2024 Q1 2023 $ Change % Change Preschool, Infant & Toddler and Plush1 $           122.8 $             82.6 $                40.2 48.7 % Activities, Games & Puzzles and Dolls & Interactive $             80.5 $             62.6 $                17.9 28.6 % Wheels & Action $             40.7 $             43.7 $                 (3.0) (6.9) % Outdoor $             20.1 $             27.4 $                 (7.3) (26.6) % Toy Gross Product Sales2 $           264.1 $           216.3 $                47.8 22.1 % Constant Currency Toy Gross Product Sales2 $           262.4 $                46.1 21.3 % Sales Allowances3 $            (38.2) $            (30.0) $                 (8.2) 27.3 % Sales Allowances % of Toy Gross Product Sales2 14.5 % 13.9 % 0.6 % Toy Net Sales $           225.9 $           186.3 $                39.6 21.3 % Toy - Other Revenue $               0.5 $                — $                  0.5 n.m. Constant Currency Toy - Other Revenue2 $               0.5 $                  0.5 n.m. Toy Revenue $           226.4 $           186.3 $                40.1 21.5 % Toys Operating Loss $            (90.8) $            (41.8) $               (49.0) 117.2 % Toys Operating Margin4 (40.1) % (22.4) % (17.7) % Toys Adjusted EBITDA2 $            (32.5) $            (21.4) $               (11.1) (51.9) % Toys Adjusted EBITDA Margin2 (14.4) % (11.5) % (2.9) % 1 Melissa & Doug is included within the Preschool, Infant & Toddler and Plush product categories beginning from the date of acquisition. 2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios". 3 The Company enters arrangements to provide sales allowances requested by customers relating to cooperative advertising, contractual and negotiated promotional discounts, volume rebates, markdowns, and costs incurred by customers to sell the Company's products. 4 Operating Margin is calculated as segment Operating Income divided by segment Revenue.   (US$ millions) Q1 2024 Q1 2023 $ Change % Change Toy Revenue 226.4 186.3 40.1 21.5 % Melissa & Doug Revenue 40.4 — 40.4 n.m. Toy Revenue, excluding Melissa & Doug1 186.0 186.3 (0.3) (0.2) % Toys Adjusted EBITDA1 (32.5) (21.4) (11.1) 51.9 % Melissa & Doug Adjusted EBITDA1 (9.2) — (9.2) n.m. Toys Adjusted EBITDA, excluding Melissa & Doug1 (23.3) (21.4) (1.9) 8.9 % Toys Adjusted EBITDA Margin1 (14.4) % (11.5) % Toys Adjusted EBITDA Margin, excluding Melissa & Doug1 (12.5) % (11.5) % 1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios". Effective January 1, 2024, the Company has changed its product categories to align with the Company's product offerings going forward: (1) Preschool, Infant & Toddler and Plush; (2) Activities, Games & Puzzles and Dolls & Interactive; (3) Wheels & Action; and (4) Outdoor. (Refer to Addendum section for more details). Toy Revenue increased by $39.6 million or 21.3% to $225.9 million due to the inclusion of Melissa & Doug Toy revenue1 of $40.4 million. Toy Gross Product Sales1 was $264.1 million, increase of $47.8 million or 22.1% from $216.3 million, including Melissa & Doug Toy Gross Product Sales1 of $46.7 million. Toy Gross Product Sales, excluding Melissa & Doug1 was $217.4 million, an increase of $1.1 million or 0.5% from $216.3 million. The Toy industry continues to be challenged by the macroeconomic environment causing reduced consumer discretionary spending. Sales Allowances increased by $8.2 million to $38.2 million. As a percentage of Toy Gross Product Sales1, Sales Allowances increased to 14.5% from 13.9%, primarily driven by geographic market mix and continued pressure on consumer discretionary spending, driving promotional activity. Toys Operating Loss increased by $49.0 million to $90.8 million compared to $41.8 million. Toys Operating Margin was (40.1)% compared to (22.4)%. Toys Adjusted EBITDA Margin1 was (14.4)% compared to (11.5)%. Toys Adjusted EBITDA Margin1, excluding Melissa & Doug1 was (12.5)% compared to (11.5)%. The decrease in Toys Operating Margin and Toys Adjusted EBITDA Margin1 was driven by an increase in administrative expenses with the inclusion of Melissa & Doug resulting in lower operating leverage achieved due to higher relative seasonality impact in the first quarter, a change in market and customer mix and an increase in sales allowances partially offset by a decrease in selling expenses due to a lower proportion of sales of partner licensed brands resulting from the inclusion of Melissa & Doug. Entertainment Segment Results The following table provides a summary of Entertainment segment operating results, for the three months ended March 31, 2024 and 2023: (US$ millions) Q1 2024 Q1 2023 $    Change % Change Entertainment revenue $          43.8 $          37.6 $               6.2 16.5 % Entertainment Operating Income $          28.6 $          29.3 $              (0.7) (2.4) % Entertainment Operating Margin 65.3 % 77.9 % (12.6) % Entertainment Adjusted Operating Income1 $          29.1 $          29.9 $              (0.8) (2.7) % Entertainment Adjusted Operating Margin1 66.4 % 79.5 % (13.1) % 1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios".   Entertainment revenue increased by $6.2 million or 16.5% to $43.8 million, from higher distribution revenue associated with on-going distribution of PAW Patrol series and PAW Patrol: The Mighty Movie, partially offset by lower licensing and merchandising revenue. Constant Currency Entertainment Revenue1 increased by $6.2 million or 16.5% to $43.8 million, from $37.6 million. Entertainment Operating Income decreased by $0.7 million or 2.4% to $28.6 million. Entertainment Adjusted Operating Income1 decreased by $0.8 million or 2.7% to $29.1 million from $29.9 million, from higher amortization of production costs and promotion costs for Entertainment content, partially offset by distribution revenue. Entertainment Operating Margin decreased to 65.3% from 77.9% and Entertainment Adjusted Operating Margin1 decreased to 66.4% from 79.5%, from lower licensing and merchandising revenue and the dilutive effect of Entertainment content deliveries, partially offset by higher distribution revenue. Digital Games Segment Results The following table provides a summary of Digital Games segment operating results, for the three months ended March 31, 2024 and 2023: (US$ millions) Q1 2024 Q1 2023 $   Change % Change Digital Games revenue $          46.0 $          47.5 $              (1.5) (3.2) % Digital Games Operating Income $          13.2 $          16.2 $              (3.0) (18.5) % Digital Games Operating Margin 28.7 % 34.1 % (5.4) % Digital Games Adjusted Operating Income1 $          15.2 $          19.0 $              (3.8) (20.0) % Digital Games Adjusted Operating Margin1 33.0 % 40.0 % (7.0) % 1 Non-GAAP financial measure ...