Spin Master says it remains confident to deliver profitable growth as it continues to navigate a “fluid environment”.
Spin Master has announced its financial results for the three months ended March 31st, 2023. Revenue was $271.4m, a decrease of -36.0% from $424.2m. Constant Currency Revenue was $275.6m, a decrease of -35.0%, from $424.2m, while revenue declined by -46.9% in Toys and -7.0% in Digital Games, partially offset by a +69.4% increase in Entertainment.
Toy revenue decreased by -46.9%, primarily driven by a decrease in Toy Gross Product Sales. The company said this decline was a result of lower order volume, as customers focused on reducing their retail inventory levels carried forward from 2022. In comparison, Toy Gross Product Sales in Q1 2022 were supported by customers ordering earlier in the year and sales related to the launch of the DC Comics Batman movie and Paw Patrol: The Movie.
“Our first quarter performance was ahead of expectations and reflects encouraging entertainment and digital games performance. We saw continued pressure from excess toy inventory at retail and retailer caution, alongside the return of historical seasonality for Toy Gross Product Sales,” said Max Rangel, Spin Master’s Global president & CEO. “As we continue to navigate the fluid environment, we remain confident in our strategy to reimagine everyday play, leveraging the power of our three creative centres to capture market share, deliver profitable growth and create long-term shareholder value.”
The company promised to bring breakthrough innovation to the toy aisle in 2023, alongside impressive launches within its core and licensed brand portfolios, and said investment in the creation of multi-platform content will be fully realised with the release of Spin Master’s most diverse entertainment slate to date. This will include the highly anticipated second Paw Patrol theatrical release and two new original series, which are expected to drive new licensing and merchandising opportunities.
Spin Master will also continue to expand its digital games ecosystem with new digital games and gaming experiences designed to broaden its audience base, attracting kids of all ages and spawning new fans and player communities.
Max Rangel added: “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, investing in innovation, geographic expansion and acquisitions to drive long-term profitable growth and maximize shareholder value.”
Toy Gross Product Sales in the first quarter of 2023 declined in comparison to 2022, amidst inventory clearance activities at retail arising from the carryover of inventory from Q4 2022 and challenging comparisons from movie-related launches in Q1 2022.
“We expect retail inventory headwinds to be over by the end of the second quarter,” commented Mark Segal, Spin Master’s chief financial officer. “An anticipated shift back to more normal toy seasonal revenue patterns supports our expectation of strong year-over-year revenue growth in the second half of 2023. Our financial discipline and effective cost management, and solid entertainment and digital games performance, enabled us to generate strong Adjusted EBITDA of over $30m for the quarter.”
Spin Master continues to expect 2023 Toy Gross Product Sales to be flat to slightly down compared to 2022, but expects 2023 Toy Gross Product Sales seasonality to return to historical averages of 30%-35% in the first half of the year.