JAKKS Pacific, Inc.

review financial results for the quarter ended for the quarter ended December 31, 2020. Jax issued its earnings press release earlier today. The earnings release and presentation slides for today's call are available on the company's website in the investor section. On this call this afternoon are Stephen Berman, Chairman and Chief Executive Officer, and John Kimball, Chief Financial Officer. Mr. Berman will first provide an overview of the quarter, along with highlights of product lines and current business trends and a discussion of impact of COVID-19. Then Mr. Kimball will provide detailed comments regarding JAX specific financial and operational results. Mr. Vermin will then return with additional comments and some closing remarks prior to opening up the call for questions. Your line will be placed on mute for the first portion of the call. If you would like to be placed in the queue to ask the question, please press star then 1 on your telephone keypad. Before we begin, the company would like to point out that any comments made about JAX Pacific's future performance, events or circumstances, including the estimates of sales and or adjusted EBITDA in 2021, as well as any forward-looking statements concerning 2021 and beyond, are subject to safe harbor protection under federal security laws. These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected and forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAXA's most recent 10-K and 10-Q filings with the SEC, as well as the company's other reports subsequently filed with the SEC from time to time. In addition, today's comments by management will refer to non-GAAP financial measures, such as adjusted EBITDA. Unless stated otherwise, the most directly comparable GAAP financial metric has been reconciled to the associated non-GAAP financial measures with the company's earnings press release issued today or previously. As a reminder, this conference is being recorded. With that, I would now like to turn the call over to Stephen Berman. You may begin.

Good afternoon and thank you for joining us as we review our performance in 2020 and our plans for 2021. John will go over the financial results in more detail, but let me start by saying we are very pleased with how the company performed in the fourth quarter and for the whole year in 2020, especially considering the many challenges we faced. For the last two years, we have been working diligently to improve our profitability, even as we have faced significant revenue challenges. We've embarked on a three-pronged plan to improve results. First was to reduce our product cost and operating expenses to allow us to be more profitable on the revenue that comes from our core product categories. Second, we've been working to drop lower margin products and take into account the total cost of a product, not just its product cost. These two steps have lowered our break-even level and positioned us well for even stronger profits when we do launch successful promotional products. Third was to focus on the balance sheet by reducing our high-cost debt and stretching out the maturities of our debt. We have already accomplished some of this in 2019 and 2020, and we'll be working on further improvements in 2021. I'm extremely pleased with how well our efforts to improve profitability have paid off, and we can see the results of these efforts in many ways. Our fourth quarter gross margin rate was the highest quarterly gross margin rate in nearly a decade. We posted a fourth quarter operating profit for the first time since 2013. Our full year operating income was the highest level since 2016. Our full year adjusted EBITDA was $28.1 million, the highest level since 2016, and up nearly 50% from last year. At our top three retailers... POS of our products was up double digits for the year, and that is inclusive of the big declines in frozen. Our inventories ended the year down 29% and stood at the lowest level since 2009. At our top customers, retail inventories were down 25%, and we ended the year with $93 million in cash and the lowest net debt position since 2013. We are pleased to have been able to improve our profitability and our balance sheet at a time when we are facing some revenue headwinds as well as the worst global pandemic in over 100 years. Although our total sales were down for both the fourth quarter and for the year, the decline was the result of a couple of product areas. Excluding frozen, which we expected to decline in 2020, our sales were up 16% in the fourth quarter versus the prior year, in line with the overall growth of the U.S. toy industry. Our disguise sales were up 91% in fourth quarter, but down 26% for the year, which was understandable and expected given the impact that COVID had on the Halloween celebrations. Excluding both Frozen and disguise, our sales were up 13% in the fourth quarter. At this time last year, we were heading into 2020 Toy Fair, and we were trying to get a sense of how COVID-19 was going to impact on our world. Our initial concerns were keeping our supply chains open. Then our focus became working with retailers to help those who were able to stay open to keep products in stock that consumers were going to want. The toy industry was one of the few that did not get devastated by the pandemic. In fact, NPD recently reported that US sales of toys rose 16% in 2020. Children suddenly not only had to spend much more time indoors, but most of their after-school activities were canceled, such as sports, dance classes, music lessons, and other activities. This caused a dramatic increase in demand for some toys, while conversely reducing demand for others. At the same time, the money parents might have spent on these activities or on vacations, dinners, out at restaurants, or even commuting to work could be diverted into spending on their kids. Categories such as games, activity toys, and puzzles did quite well, whereas collectibles and other product kids get interested in because they hear about them from their friends at school did not do as well. Movies were postponed, cutting demand for toys tied to those movies. Overall, it was a good year for the toy industry, with retail sales surging as the pandemic spread. For us, and for the rest of the toy industry, 2020 demonstrated the strength of core, basic toys nostalgic brands, and classic play patterns. As the pandemic forced kids and parents to make hard choices about where to spend their money, sales indicate that those choose brands and play patterns they know and love. For Jack's, for example, this boosted sales of our classic brands such as Disney Princess, leading to an increase of over 30% globally for the year and over 45% in the fourth quarter. When NPD reported that U.S. toy sales for 2020 were up 16%, They noted that the unit sales were actually flat year over year, and that the 16% increase was driven entirely by a shift to higher-priced toys. We saw this shift to higher-priced toys, too. For example, within the Disney Princess brand, Jack's Core Roleplay Segment Style Collection sold very well, and while the entire line contributed to our overall growth, toys that offered extensive play value, including the Gourmet Smart Kitchen, a $150 retail item, the Lights and Sound Vanity, a top-rated by Kids Award winner, and Play Suitcase topped the line. These are not inexpensive toys, yet they sold well because they offer hours of fun play experiences. The heart of our Disney offerings have always been the core of large doll and dress-up categories for Jacks. These two lines were up 32% and 63% respectively. As retailers continued to focus on SKU efficiencies, in an effort to maximize pickup and store initiatives resulting in more turns and enhanced productivity. As a whole, our Disney Princess dolls, accessories, and play sets were up nearly 33% compared to a year ago. Other examples of strong sales within a proven play pattern and globally recognizable brands include Nintendo Super Mario Bros., Sonic the Hedgehog, and Apex Legends. In a year that saw big increases in sales of video games and accessories, it makes sense that toys tied to video games would do well. Nintendo and Sonic together were up nearly 74% year over year in the fourth quarter and were up over 65% for the year. Within our seasonal business, we saw double and even triple digit increases for both the fourth quarter and full year in brands such as Mickey Mouse, Minnie Mouse, Paw Patrol, and Fisher-Price. Again, parents gravitated to the brands they know and love for products based on classic play patterns. According to NPD, one of the best performing categories in the whole industry was outdoor and sports toys, which includes skates, skateboards, and scooters. This category was up over 30% in the U.S. Sales of our Redux skateboard were up over 300% in the fourth quarter and over 600% for the year. One of the other big themes in 2020 for the toy industry, as well as all of retailing, was the acceleration of the shift to online sales. At our top customers, online sales of our products were up over 40% in 2020 and represented 25% of our total POS at these customers, up from 19% in 2019. The essence of what Jack's Pacific has always been strong at is making good, basic toys based on leading global IP targeting proven play patterns. Despite 2020's revenue headwinds and rapidly shifting consumer behavior, we've improved our profit potential dramatically, and we are poised for considerably better results in 2021 and beyond. I will now pass the call to John to review our financial performance, after which we will come back with comments on how we see 2021 playing out. John?

Thank you, Stephen, and good afternoon, everyone. Net sales for the 2020 fourth quarter were $128.3 million, down 16% compared to $152.5 million last year. Reported net loss attributable to common stockholders for the fourth quarter was $11.7 million, or $2.55 per basic and diluted share, compared to $20.6 million, or $6.95 per basic and diluted share in the fourth quarter of last year. The fourth quarter of 2019 included adjustments related to the impairment of intangibles, changes in fair value of convertible senior notes, and preferred stock derivative liability, restructuring, bad debt recovery, and other charges totaling $12.8 million net of taxes. In the fourth quarter of 2020, such adjustments totaled $8 million primarily due to changes in fair value of convertible senior notes and preferred stock derivative liability. Excluding the impact of such adjustments, as well as stock compensation expense, our adjusted net loss attributable to common stockholders in the fourth quarter of 2020 was $3.6 million, or 80 cents per basic and diluted share, compared to $7.8 million, or $2.62 per basic and diluted share, in the fourth quarter of 2019. For the full year of 2020, adjusted net loss attributable to common stockholders was $6.3 million, or $1.72 per basic and diluted share compared to $18.9 million or $7.27 per basic and diluted share in 2019. Adjusted EBITDA for the 2020 fourth quarter was $3.9 million compared to $3.3 million in the fourth quarter of 2019. Our full year 2020 adjusted EBITDA was $28.1 million compared to $18.9 million in 2019. The 5.5% adjusted EBITDA margin is the company's highest full year result since 2016, when it reported a 5.9% adjusted EBITDA margin on an additional $191 million in top-line sales. Compared to last year, our girls' targeted business declined in the quarter. Inclusive of dolls, role-play, dress-up, and preschool toys and consumer products, net sales were $73 million in Q4, down 28% compared to $101.8 million in the prior year. The big driver of the decline was the strong sales of Frozen merchandise, as well as the Frozen 2 film was released theatrically in November of last year. Excluding frozen products, sales of girls' products were up nearly 25% compared to prior year. Among the strongest performers were toys in our Disney Princess and Perfectly Cute Home and Baby ranges. For the full year, net sales in our girls' targeted business declined 11% to $275.2 million. Excluding frozen products, sales of our girls' products rose 2% for the full year 2020. Sales of action figures, vehicles, role-play, and electronics products in our Boys division for the 2024 quarter were $26.6 million, up 12% compared to $23.8 million last year. Positive contributions from our video game-related toys continue to be our Nintendo's Super Mario Bros. and Sega's Sonic the Hedgehog lines. Our Apex Legends launch performed well and will have expanded retail placement in 2021. For the full year, sales of toys in our Boys category were essentially flat with last year. On an annualized basis, gains in Nintendo and Sonic were offset by the overhang from sales of Godzilla, Harry Potter, the TP Blaster, and The Incredibles. We look forward to capitalizing on expanded placement for Nintendo and Sonic in the new year, both in the U.S. and internationally. Sales of seasonal products, including licensed ball pits, outdoor toys, and play structures were $21.5 million in the 2020 fourth quarter, down 7% from $23.1 million in the fourth quarter of 2019, primarily due to declines of MorphBoard and the impact of Frozen 2. For the full year 2020, sales in our seasonal division were down 21% to $71.4 million. The decline was driven by MorphBoard and our dropping of the Fun Noodle line, but we did see solid growth from Redo skateboards and core licenses such as Minnie Mouse and Mickey Mouse. Other products, like our kids-only activity tables, have also sold extremely well in 2020 and into the new year, given the large numbers of kids at home seeking activities. Our seasonal business is largely sold domestically, which has made responding to spikes in consumer demand a bit more challenging, but we feel we're catching up a bit heading into 2021, which is great news. Sales in our Halloween segment, disguise, increased 91% to $7.2 million in the fourth quarter of 2020, compared to $3.8 million last year. The increase was the result of stronger-than-expected retail sales around Halloween, as consumers' shopping plans for the holiday were understandably impacted by the uncertainty related to COVID. As a reminder, Q4 is a much lower volume quarter for disguise than Q2 or Q3. For the full year, sales in our disguise segment were down 26% to $88.8 million, driven by retailers reducing their orders after experiencing the negative impact that COVID had on their seasonal Easter business. The good news is that retail sales were ultimately strong, leaving inventories relatively clean compared to historical averages. Looking at sales by business segment, fourth quarter sales in our toys consumer product segment, which includes all markets around the world, were down 19% to $121 million compared to $148.7 million in the fourth quarter of last year. The decrease was driven by the same factors noted above in the product discussion. North America toy CPU was down 13% for the quarter, while EMEA, Latin America, and Asia were each down over 37%. We already covered our Halloween segment in the earlier comments on Disguise. Looking at the rest of the P&L, reported gross margin in the 2020 fourth quarter was 32.8%, compared to 30.4% in the 2019 fourth quarter. This brings our full-year gross margin to 29.0%, a 240 basis point improvement versus prior year, and the highest full-year level since 2016. In Q4, royalty expense was significantly lower, driven partly by a mixed shift towards products with lower royalty rates, but also the expiration of some legacy agreements with less than favorable terms. Our product margins continue to steadily improve, and our product obsolescence expense was also lower in Q4, as well as full year compared to prior year. We're very pleased to have been able to move a lot of product out of existing inventory in Q4, while not adversely impacting our margins. Towards the end of 2020, we did notice that freight costs started rising sharply as the holiday season approached. In addition, we believe there were COVID-related worker shortages at docks and among truckers, which also raised costs. We were able to see an increase in our gross margin despite these rising costs, and we will be working diligently to mitigate these cost increases in 2021. Significantly lower expense for SG&A driven by product development, compensation, T&E, and bad debt expense in the 2020 fourth quarter totaled $40.9 million, or 31.9% of net sales, compared to $57.2 million, or 37.5% of net sales in the fourth quarter of 2019. On an annual basis, 2020 SG&A is 26.5% of net sales, compared to 29.6% in 2019, despite net sales being $82.8 million lower compared to prior year. We remain very pleased with the company's continued success in working both remotely and within a lower cost structure. These results combine to generate a full-year operating profit of $12.9 million, or 2.5% of net sales, the highest full-year operating income margin since 2015, when net sales were $745 million, or nearly $230 million higher than 2020. Our net interest expense in Q4 of this year was $4.9 million, compared to $5.4 million last year, reflecting a lower overall level of debt. For the full year 2020, net interest expense was $21.5 million, with a weighted average effective interest rate of 9.6%, compared to $15.9 million in 2019 and an average interest rate of 7.3%. Net cash provided by operating activities was $27.6 million for the fourth quarter of 2020 compared to net cash used of $4.3 million in the fourth quarter of 2019. For the full year 2020, net cash provided by operating activities was $43.6 million compared to $21.8 million in 2019, primarily due to a reduction in inventory and royalties advanced in addition to the reduced loss. Free cash flow was positive $25.5 million in the 2020 fourth quarter compared to a negative $6.1 million in the 2019 fourth quarter. For the full year, free cash flow was $35.3 million compared to $12.4 million in 2019. As of December 31, 2020, our cash and cash equivalents, including restricted cash, totaled $92.7 million compared to $66.3 million at the end of 2019. Accounts receivable as of December 31, 2020 were $102.3 million, down from $117.9 million as of December 31, 2019. DSOs for the 2020 fourth quarter increased to 73 days from 71 days reported in the 2019 fourth quarter. Inventory as of December 31, 2020 was $38.6 million versus $54.3 million at December 31, 2019. DSIs in the 2020 fourth quarter were 52 days compared to 62 days in the 2019 fourth quarter. By the end of the covered period, the company had exhausted the $6.2 million in funds received under the Paycheck Protection Program. The company is awaiting the opportunity to file for forgiveness of this loan. In the absence of knowing whether any funds will be forgiven, the company presumes a two-year loan period with interest beginning to accrue in June 2020 with payments beginning in September 2021. As a result, we now reflect $0.9 million in short-term and $5.3 million in long-term debt on our balance sheet related to this loan. As a result, as of December 31, 2020, the company's debt at face value included the aforementioned $6.2 million PPP loan due June 2022, $23.8 million of recapitalized convertible senior notes due July 2023, and $124.5 million owed under our term loan due February 2023, both inclusive of PIC interest. We currently have no outstanding balance under our credit facility aside from $10.8 million in letters of credit as of December 31. During the fourth quarter, $7.0 million of the July 2023 convertible senior notes were converted to common shares at $5.65 per share. Subsequent to December 31, no conversions were done. As of January 31, 2021, the face value of the July 2023 convertible notes is $23.8 million including accumulated PIC interest. Capital expenditures during the fourth quarter of 2020 were $2.1 million compared to $1.8 million in the fourth quarter of 2019. For the full year 2020, capital expenditures were $8.3 million compared to $9.4 million in 2019. Depreciation and amortization for the fourth quarter of 2020 was $1.9 million compared to $3.2 million in the fourth quarter of 2019 for the full year 2020 depreciation and amortization was $10.9 million compared to $17.6 million in 2019. The basic and diluted income per share calculation for the fourth quarter of 2020 was based on a weighted average of 4.575 million common diluted shares outstanding, up from 2.962 million in the fourth quarter of 2019. This number reflects the impact of our reverse stock split in July 2020, as well as the aforementioned convertible senior note conversions. And with that, I will now hand the call back over to Steven for some additional remarks.