SANTA MONICA, Calif., April 24, 2024 (GLOBE NEWSWIRE) -- JAKKS Pacific, Inc. (NASDAQ:JAKK) today reported financial results for the first quarter ended March 31, 2024.

First Quarter 2024

Net sales were $90.1 million, a year-over-year decrease of $17.4 million or 16%, driven by a lack of new film releases vs. prior year
Gross margin of 23.4%, down 580 basis points vs. Q1 2023, led by higher inventory obsolescence expense, and retailer markdowns
Gross profit of $21.1 million, down $10.4 million compared to $31.4 million in Q1 2023
Operating loss of $21.3 million, compared to an operating loss of $4.4 million in Q1 2023
Adjusted net loss attributable to common stockholders (a non-GAAP measure) of $11.3 million (or $1.09 per diluted share), compared to an adjusted net loss attributable to common stockholders of $4.0 million (or $0.40 per diluted share) in Q1 2023
Adjusted EBITDA (a non-GAAP measure) of $(17.2) million vs. $(1.1) million in Q1 2023

Management Commentary

"The beginning of the year at JAKKS is always our smallest shipping quarter and is focused on taking stock of the just concluded holiday season, solidifying our full-year plans and development work towards longer-term opportunities," said Stephen Berman, Chairman and CEO of JAKKS Pacific, "and the quarter just concluded was very active on all three of those fronts. For the past two years we have had the added benefit of a robust film slate layering on top of our strong core business. Last year, we were shipping products to support what proved to be two of the year's largest grossing films, The Super Mario Bros. Movie and The Little Mermaid. Without that new news in Spring 2024, from a shipping and retail sales perspective, we experienced lower levels of both as anticipated. We also continued to see weakening demand for products from a Q4 2023 film release. We supported our retail partners in funding markdowns to move that stock as well as addressing cancelled reorders for which we had built inventory. Unfortunately, these types of situations happen in our business, and we have found it is best to address them head-on and move on focusing on the fall season where the majority of the business is done. We are very excited about what is ahead – inclusive of our supporting two of the bigger film releases planned for Q4 of this year, the traction we are getting on some new 2025 initiatives as well as our relentless efforts to expand our international network."

"Separately, we took the opportunity to retire our Preferred Shares at a negotiated discount to the contractual valuation. These shares were the last balance sheet artifact from our 2019 restructuring. For the first time in many years, there are no lenders or other parties restricting the common stockholders' claim over the entire enterprise and its financial results. We consider this a fantastic starting point as we move forward with no competing interests to the goal of maximizing long-term shareholder value."

First Quarter 2023 Results

Net sales for the first quarter of 2024 were $90.1 million, down 16% versus $107.5 million last year. The Toys/Consumer Products segment sales were down 15% globally and sales of Costumes were down 25% compared to last year.

Balance Sheet Highlights

The Company's cash and cash equivalents (including restricted cash) totaled $35.5 million as of March 31, 2024, compared to $38.3 million at the same time last year, and to $72.6 million as of December 31, 2023.

Total debt was zero, compared to $29.4 million as of March 31, 2023. Total debt included the amount outstanding under the Company's term loan, net of unamortized discounts and issuance costs.

Inventory was $46.3 million, compared to $64.0 million in total inventory as of March 31, 2023, and $52.6 million as of December 31, 2023.

Use of Non-GAAP Financial Information

In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA and Adjusted EPS which are non-GAAP metrics that exclude distinct items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company's results. In addition, the Company believes that the presentation of these financial measures enhances an investor's ability to make period-to-period comparisons of the Company's operating results. This information should be considered in addition to the results presented in accordance with GAAP and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached "Reconciliation of Non-GAAP Financial Information". "Total liquidity" is calculated as cash and cash equivalents, plus availability under the Company's $67.5 million revolving credit facility.

Conference Call Live Webcast

JAKKS Pacific, Inc. invites analysts, investors, and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on April 24, 2024. A live webcast of the call will be available on the "Investor Relations" page of the Company's website at www.jakks.com/investors. To access the call by phone, please go to this link (1Q24 Registration link), and you will be provided with dial-in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors).

About JAKKS Pacific, Inc.:

JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific's popular proprietary brands include: AirTitans®, Disguise®, Fly Wheels®, JAKKS Wild Games®, Moose Mountain®, Maui®, Perfectly Cute®, ReDo® Skateboard Co., Sky Ball®, SportsZone™, Xtreme Power Dozer®, WeeeDo®, and Wild Manes™ as well as a wide range of entertainment-inspired products featuring premier licensed properties. Through our products and charitable donations, JAKKS is helping to positively impact children's lives. Visit us at www.jakks.com and follow us on Instagram (@jakkspacific.toys), Twitter (@jakkstoys) and Facebook (@jakkspacific.toys).

Forward Looking Statements

This press release may contain "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that any future transactions will result in future growth or success of JAKKS. The "forward-looking statements" contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release.

CONTACT:

JAKKS Pacific Investor Relations

(424) 268-9567

Lucas Natalini

investors@jakks.net

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

			March 31,						December 31,
				2024			2023			2023
			(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$	35,290		$	38,103		$	72,350
	Restricted cash			202			198			204
	Accounts receivable, net			79,875			85,171			123,797
	Inventory			46,341			63,988			52,647
	Prepaid expenses and other assets			19,087			12,849			6,374
		Total current assets		180,795			200,309			255,372

Property and equipment				138,066			130,668			135,956
Less accumulated depreciation and amortization				122,694			114,499			121,357
	Property and equipment, net			15,372			16,169			14,599

Operating lease right-of-use assets, net				22,965			17,634			23,592
Deferred income tax assets, net				68,142			57,804			68,143
Goodwill				34,997			35,083			35,083
Intangibles and other assets, net				2,063			2,387			2,162
		Total assets	$	324,334		$	329,386		$	398,951


Liabilities, Preferred Stock and Stockholders' Equity

Current liabilities:
	Accounts payable		$	31,683		$	27,714		$	42,177
	Accounts payable - Meisheng (related party)			8,689			8,024			12,259
	Accrued expenses			36,994			27,006			45,102
	Reserve for sales returns and allowances			27,859			41,064			38,531
	Income taxes payable			-			6,241			3,785
	Short term operating lease liabilities			8,237			10,009			7,380
	Short term debt, net			-			2,475			-
		Total current liabilities		113,462			122,533			149,234

Long term operating lease liabilities				15,961			8,095			16,666
Accrued expenses - long term				3,183			-			3,746
Debt, non-current portion, net				-			26,969			-
Preferred stock derivative liability				-			21,771			29,947
Income taxes payable				3,295			2,941			3,245
		Total liabilities		135,901			182,309			202,838

Preferred stock accrued dividends				-			4,857			5,992

Stockholders' equity:
	Common stock, $.001 par value			11			10			10
	Additional paid-in capital			292,231			275,695			278,642
	Accumulated deficit			(88,117	)		(117,331	)		(73,612	)
	Accumulated other comprehensive loss			(16,192	)		(17,150	)		(15,627	)
		Total JAKKS Pacific, Inc. stockholders' equity		187,933			141,224			189,413
	Non-controlling interests			500			996			708
		Total stockholders' equity		188,433			142,220			190,121
		Total liabilities, preferred stock and stockholders' equity	$	324,334		$	329,386		$	398,951


Supplemental Balance Sheet and Cash Flow Data (Unaudited)
						March 31,
Key Balance Sheet Data:							2024			2023

Accounts receivable days sales outstanding (DSO)							81			71
Inventory turnover (DSI)							61			76

						Three Months Ended March 31,
						Three Months Ended March 31,
Condensed Cash Flow Data:							2024			2023

Cash flows used in operating activities						$	(7,938	)	$	(4,116	)
Cash flows used in investing activities							(3,634	)		(3,472	)
Cash flows used in financing activities and other							(25,490	)		(39,601	)
Increase in cash, cash equivalents and restricted cash						$	(37,062	)	$	(47,189	)

Capital expenditures						$	(2,228	)	$	(3,490	)

		JAKKS Pacific, Inc. and Subsidiaries
		Condensed Consolidated Statements of Operations (Unaudited)

			Three Months Ended March 31,
			Three Months Ended March 31,
				2024			2023		Δ (%)
			(In thousands, except per share data)

Net sales			$	90,076		$	107,484		(16)%
Less: Cost of sales
	Cost of goods			53,821			58,304		(8	)
	Royalty expense			13,776			16,654		(17	)
	Amortization of tools and molds			1,427			1,089		31
	Cost of sales			69,024			76,047		(9	)
		Gross profit		21,052			31,437		(33	)
Direct selling expenses				8,097			7,741		5
General and administrative expenses				34,192			27,994		22
Depreciation and amortization				87			102		(15	)
	Selling, general and administrative expenses			42,376			35,837		18
		Loss from operations		(21,324	)		(4,400	)	385
Other income (expense):
	Other income (expense), net			138			438		(68	)
	Change in fair value of preferred stock derivative liability			-			147		nm
	Interest income			376			117		221
	Interest expense			(143	)		(3,003	)	(95	)
Loss before benefit from income taxes				(20,953	)		(6,701	)	213
Benefit from income taxes				(6,728	)		(1,383	)	386
Net loss				(14,225	)		(5,318	)	167
Net income (loss) attributable to non-controlling interests				280			(5	)	nm
Net loss attributable to JAKKS Pacific, Inc.			$	(14,505	)	$	(5,313	)	173	%
Net loss attributable to common stockholders			$	(13,175	)	$	(5,680	)	132	%
	Loss per share - basic & diluted		$	(1.27	)	$	(0.58	)
	Shares used in loss per share - basic & diluted			10,354			9,871

			Three Months Ended March 31,
			Three Months Ended March 31,
				2024			2023		Δ bps
									Fav/(Unfav)
Net sales				100.0%			100.0%		-
Less: Cost of sales
	Cost of goods			59.7			54.3		(540	)
	Royalty expense			15.3			15.5		20
	Amortization of tools and molds			1.6			1.0		(60	)
	Cost of sales			76.6			70.8		(580	)
		Gross profit		23.4			29.2		(580	)
Direct selling expenses				9.0			7.2		(180	)
General and administrative expenses				38.0			26.0		(1,200	)
Depreciation and amortization				0.1			0.1		-
	Selling, general and administrative expenses			47.1			33.3		(1,380	)
		Loss from operations		(23.7	)		(4.1	)	(1,960	)
Other income (expense):
	Other income (expense), net			0.2			0.4
	Change in fair value of preferred stock derivative liability			-			0.1
	Interest income			0.4			0.1
	Interest expense			(0.2	)		(2.8	)
Loss before benefit from income taxes				(23.3	)		(6.3	)
Benefit from income taxes				(7.5	)		(1.3	)
Net loss				(15.8	)		(5.0	)
Net income (loss) attributable to non-controlling interests				0.3			-
Net loss attributable to JAKKS Pacific, Inc.				(16.1)%			(5.0)%
Net loss attributable to common stockholders				(14.6)%			(5.3)%

JAKKS Pacific, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Information (Unaudited)

Reconciliation of GAAP to Non-GAAP measures: This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company's past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis. Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company's operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

	Three Months Ended March 31,
	Three Months Ended March 31,
		2024			2023		Δ ($)
	(In thousands)
EBITDA and Adjusted EBITDA
Net loss	$	(14,225	)	$	(5,318	)	$	(8,907	)
Interest expense		143			3,003			(2,860	)
Interest income		(376	)		(117	)		(259	)
Provision for income taxes		(6,728	)		(1,383	)		(5,345	)
Depreciation and amortization		1,514			1,191			323
EBITDA		(19,672	)		(2,624	)		(17,048	)
Adjustments:
Other (income) expense, net		(138	)		(438	)		300
Restricted stock compensation expense		2,575			2,089			486
Change in fair value of preferred stock derivative liability		-			(147	)		147
Adjusted EBITDA	$	(17,235	)	$	(1,120	)	$	(16,115	)
Adjusted EBITDA/Net sales %		(19.1	)%		(1.0	)%	-1810 bps


	Trailing Twelve Months Ended March 31,
	Trailing Twelve Months Ended March 31,
		2024			2023		Δ ($)
	(In thousands)
TTM EBITDA and TTM Adjusted EBITDA
TTM net income	$	29,206		$	89,674		$	(60,468	)
Interest expense		3,591			11,984			(8,393	)
Interest income		(1,603	)		(241	)		(1,362	)
Provision for (benefit from) income taxes		1,488			(42,808	)		44,296
Depreciation and amortization		10,659			9,957			702
TTM EBITDA		43,341			68,566			(25,225	)
Adjustments:
Loss from joint ventures (JAKKS Pacific, Inc. - 51%)		276			-			276
Loss from joint ventures (Meisheng - 49%)		289			-			289
Other (income) expense, net		(263	)		(1,149	)		886
Restricted stock compensation expense		8,513			6,301			2,212
Change in fair value of preferred stock derivative liability		8,176			(156	)		8,332
Employee Retention Credit/gov't employment support		-			(249	)		249
Molds and tooling capitalization		(1,751	)		-			(1,751	)
Loss on debt extinguishment		1,023			-			1,023
TTM Adjusted EBITDA	$	59,604		$	73,313		$	(13,709	)
TTM Adjusted EBITDA/TTM Net sales %		8.6	%		9.4	%	-80 bps


	Three Months Ended March 31,
		2024			2023		Δ ($)
	(In thousands, except per share data)
Adjusted net loss attributable to common stockholders
Net loss attributable to common stockholders	$	(13,175	)	$	(5,680	)	$	(7,495	)
Restricted stock compensation expense		2,575			2,089			486
Change in fair value of preferred stock derivative liability		-			(147	)		147
2021 BSP Term Loan prepayment penalty		-			150			(150	)
Tax impact of additional charges		(657	)		(368	)		(289	)
Adjusted net loss attributable to common stockholders	$	(11,257	)	$	(3,956	)	$	(7,301	)
Adjusted loss per share - basic & diluted	$	(1.09	)	$	(0.40	)	$	(0.69	)
Shares used in adjusted loss per share - basic & diluted		10,354			9,871			483

JAKKS Pacific, Inc. and Subsidiaries
Net Sales by Division and Geographic Region


(In thousands)	QTD Q1
Divisions		2024		2023		2022	% Change 2024 v 2023		% Change 2023 v 2022
Toys/Consumer Products	$	82,910	$	97,893	$	111,123	-15.3	%	-11.9	%
Dolls, Role-Play/Dress Up		40,574		47,843		62,006	-15.2	%	-22.8	%
Action Play & Collectibles		33,008		37,846		31,698	-12.8	%	19.4	%
Outdoor/Seasonal Toys		9,328		12,204		17,419	-23.6	%	-29.9	%
Costumes	$	7,166	$	9,591	$	9,758	-25.3	%	-1.7	%
Total	$	90,076	$	107,484	$	120,881	-16.2	%	-11.1	%



(In thousands)	QTD Q1
Regions		2024		2023		2022	% Change 2024 v 2023		% Change 2023 v 2022
United States	$	70,430	$	80,443	$	97,050	-12.4	%	-17.1	%
Europe		5,735		10,162		13,389	-43.6	%	-24.1	%
Latin America		7,996		9,204		2,385	-13.1	%	285.9	%
Canada		3,370		4,054		3,379	-16.9	%	20.0	%
Asia		965		1,380		2,076	-30.1	%	-33.5	%
Australia & New Zealand		1,346		1,608		1,491	-16.3	%	7.8	%
Middle East & Africa		234		633		1,111	-63.0	%	-43.0	%
Total	$	90,076	$	107,484	$	120,881	-16.2	%	-11.1	%


(In thousands)	QTD Q1
Regions		2024		2023		2022	% Change 2024 v 2023		% Change 2023 v 2022
North America	$	73,800	$	84,497	$	100,429	-12.7	%	-15.9	%
International		16,276		22,987		20,452	-29.2	%	12.4	%
Total	$	90,076	$	107,484	$	120,881	-16.2	%	-11.1	%