JAKKS Pacific, Inc.

Good day and thank you for standing by. Welcome to the Q3 2024 Jax Pacific Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephen Berman, Chairman and CEO.

Good afternoon and thank you for joining us today. It's an exciting time of the year here as Q3 is always the highest sales quarter and by extension generates a lot of activity. The end of the year is in sight with less than 60 shifty days remaining and our goals for the full year are starting to feel like they're more within reach. Our teams around the world were collaborating across offices extensively last quarter to ensure we were fulfilling orders and not taking no for any answer when obstacles appeared, whether driven by East Coast port issues or otherwise. We always try to deliver as much of our second half volume in Q3 to mitigate full year risks and to ensure customers and shelves are set for the holidays. In Q4, we pivot a lot of our attention to execution of pre-planned retail programs and consumer marketing to generate strong sell through. We are executing against the game plan this year with some great programs in place across wide range of accounts and all of our major markets. As highlighted in our press release, all three of our toy consumer products divisions delivered year over year sales increases in third quarter. That includes our outdoor seasonal business which adamantly has been challenged in recent years. Improved listings in some of our core businesses and the timing of the shipments are leading to the improvements. It's still early days, but it's great to see some of the positive trends emerging there. Although we are selective about what we discuss during any given quarter, as a reminder, portfolio management is essential part of our operation. We are actively managing over 30 different businesses with the toy consumer products alone in this year. Whether it's a property driven businesses like various IPs from the Walt Disney Company, IP from Nintendo, Daniel Tiger neighborhood or Black and Decker or many others or category driven one like play tents or ride ons, each product line has its own dynamics. There are differences in customer base, retail placement, competitive set, manufacturing issues, costing and pricing, product innovation and brand relevance. I could go on and on. And every country is a distinct market in regards to most of those points. Those drivers are then independent of whatever broader trends might be impacting our customers and consumers, which tend to get most of the attention and discussion. But the success of any of these businesses is really driven bottoms up starting with the unique product line and the consumer and customer value proposition. The portfolio approach is essential to maintaining and growing a healthy business over time, especially given that our end consumers will naturally age out of our offerings in most instances. This reality forces us to constantly change ourselves when it comes to product freshness and innovation while maintaining sensitivity to retail margins requirements and consumer price considerations. Our dolls role play dress up business was up 6% in the quarter and is up 2% year to date. And our action play and collectible business was up 5% in the quarter but down 9% year to date as the timing of the Sonic 3 film in December this year doesn't compare well with the Super Mario Brothers movie film which was released in April, 2023, independent of other aspects of that business. But great quarters for both divisions regardless, really exciting things happening in each one, but now looking forward. We are also continuing to fight for business internationally and keep up with customer demand. Latin America continues to be our biggest assessory. We shipped 22.6 million in the quarter up 48% compared to the prior year and currently up 23% year to date in the region. Our European region continues to open up new accounts and build out its infrastructure. But it's a battle that's taking place customer by customer and market by market as we knew it would be. As a region, it benefited significantly with the strength of Super Mario Brothers movie last year. Nonetheless, down .8% in a big quarter is a good sign and improvement over Q2. Asian Pacific is relatively small for us and is also down .4% in the quarter. Canada is down over 4 million in the quarter due to accommodation of timing and some challenging trade dynamics there. Turning to what we see at retail, I'd say the consumer is constantly showing up and acting when novelty and newness appears on the shelf. But they're not filling the cart with everything they see. A lot of our aggregate year over year POS trends are dominated by retailers actively de-stocking last year and by extension pushing through the channel content led properties from recent years. But several of our new fall introductions have received great consumer reactions and have left retailers scrambling to pull products from their warehouses and back rooms into the front of the store. With our strong selling this quarter, the meaningful cash register ring is starting to happen now and particularly in November, December as our media and promotional campaigns kick in. Obviously, Halloween shopping is continuing as we speak. As we have communicated all year, retail is still filling out where the consumer is and we've known we were looking at a downshipping year. This is a holiday that famously shows up extremely late, even more so than Christmas tends. So despite today's date, it's hard for us to say with any definitiveness how the year will end up. Early reads on POS from syndicated data suggest that sell through is soft across the industry. The good news is that we are doing better than most everyone else and potentially picking up a bit more of the market share in the process. But again, that's really just an early read from earlier this month. Our 2025 lineup is largely developed and the team will soon be pivoting to closing the books on 2024 and refocusing towards what will hopefully be a stronger 2025. It is worth noting that outside the US, our costume business was up in the quarter, which is a 7% increase versus prior year. The UK in particular has seen some costume companies reorganized and there remains a lot of disruption happening there. But our company wide efforts in Europe are designed to support our toy consumer products and costume businesses in more than an integrated manner than how we go to market in the US. So we remain both hopeful and confident we continue to build the quality of volume there. Moving over to the balance sheet, we are remaining extremely disciplined with 63.5 million in net inventory at the end of the quarter, inclusive of in transit product compared to 68.8 million at this time last year. We are lower despite our continuing to build out an EU hub and spoke warehouse system to be more responsive to customers with faster replenishment times. We're also taking advantage of our financial strength and resilience to scrutinize our trading terms to maximize margins and ultimately cash. This approach is prompting our receivables to grow meaningfully versus the prior year as we had anticipated. Our approach is working and our AR has been turning back into cash such that we had no draw down on our credit line by the end of the quarter. By extension, I'm extremely happy to reiterate that we remain debt free as a company. In a world of uncertainties and volatility around interest rates, it's just great to be operating from this position of strength as we prepare for the next year and evaluate new business opportunities for 2026 and beyond. Another noteworthy element of our business is the extensive number of exclusive products we bring to a broad array of retailers globally. We have also had a heavy focus over the past few years to secure additional space at retail. Beyond traditional in-isle planograms, you could find us with -of-isle placement, standalone displays, pallet programs, end caps, and at the check lane. This additional real estate at various retailers globally opens new consistent selling opportunities both in season and year round as our price value and strong consumer propositions drive solid results for the customers by extension of our licensors. We know that the question of capital allocation is on many investors' minds and it's on ours too. We do not have any new news on that front to announce today. I do feel we are getting closer to the point that we can be more specific about our plans in this area. As a company, we are in a much, much stronger place than we were during the turmoil of 2018 and 19. We are still mindful, however, that our success is not a reason to squander all that hard work. We are soliciting a wide range of opinions and taking very thoughtful look at all of our options and possibilities for the years ahead and by extension, what our capital goals and needs should be. I will now pass it over to John for some further comments, after which I will come back to discuss Q4 and a bit more. John.

Thank you, Stephen, and hello, everyone. It's always a bit more pleasant to talk about the business after Q3. Another $300-plus million sales quarter behind us, slightly more than last year, a super outcome. Stephen talked a lot about sales, but I'll layer in one more observation. Earlier this year, we added to our earnings presentation deck an attempt to more clearly break out the core of the evergreen business that we view as foundational to the company. This analysis looks to isolate the more volatile, content-driven figure and doll product lines. We understand that for those who don't live in our aisles at retail every day, the dynamics of the 30-plus businesses in our portfolio are near impossible to visualize and keep track of. And as we've also pointed out, there are limits to what we can share for both confidentiality and competitive reasons. But in any case, I wanted to highlight that among the positive attributes of our Q3 results, you can see, I think it's page 18, our content business lifting nicely year over year, given the strength of that portion of the portfolio as we enter the back half of the year. But more importantly, the core evergreen businesses collectively have put up solid numbers this year, inclusive of Q3. That is not to suggest we intend to fall into the trap of scrutinizing the quarterly box score when we are managing to a full-year result. This view of our business is more of an analysis of the outcome of our collective efforts more than an organizational design or a specific destination we're trying to navigate towards. But overall, we continue to feel it's helpful, so we hope externally you find it at least somewhat insightful. Moving on down the P&L, gross margins held up well in the quarter. Cost of product was a bit higher than prior year, as we've been seeing and anticipating. Similarly, royalty expense has been a little bit lower in aggregate to help compensate. We're very happy with a 33-plus percent gross margin in any quarter, but in particular during our largest quarter. Gross profit dollar growth of 2% in the corner, $1.8 million in total, is modest, but much better than the unfavorable $14 million gross profit swing we saw in the first half of the year. We continue to feel that we are running a business that should deliver a minimum of 30% gross margins on a full-year basis. That projection assumes that not everything executes perfectly, but that the number of things that don't work as planned remain a somewhat tolerable quantity, and don't miss the intended mark too dramatically. Selling expense in the quarter was $7.6 million, down from $10.7 million in the prior year. There are at least a couple of different things happening in this area. We're lapping some expensive quarters in the selling, warehousing, and outbound freight areas last year, which in total generated about $1.5 million in one-time favorability this quarter. We also have a bit of a timing save, as we have been pushing more of our planned media spend into Q4 than what we have done historically. I would say -to-date that's about $2 million that will find its way into Q4 compared to last year. So a lot of moving pieces here, but as we get closer to the end of the year, the cumulative variance starts to smooth out a bit. Our G&A spending similarly was decent in the quarter at $33.1 million, down 2% from $33.8 million, and meaningfully improved from the garbagey plus 16% increase we posted in the first half of the year. We are starting to lap some staffing-related cost increases that took place in 2023. We also continue to work down some short-term spending, which I've talked about before, related to Sarbanes-Oxley, cybersecurity, and other process-related deferred maintenance type areas we've been catching up on. And it's also worth noting that the teams have taken to heart the message that we were very clear about at the start of the year about the revenue comparison being tough this year, so we needed some new thinking and ideas about where we could reallocate spend to more beneficial areas. As a result, we saw some benefits here and there starting to dribble through in the quarter. This is a persistent bailing water exercise, as broadly our fixed costs tend to creep up consistently, such that without scale leverage, it is very challenging to maintain or expand margins. In reviewing the -over-year detail, it's worth noting that the credit worthiness of some retailers remains a concern for us. I would estimate that we're up to about 1% of -over-year sales decline, attributable to a deteriorating credit situation in some of our customers. This reflects the combination of customers who have filed for bankruptcy, as well as those we consider very high risk. We are frequently in discussions internally for both our toy CP and costume businesses around this issue. Our crystal ball isn't perfect. We have one noteworthy accountant in North America who remains significantly past due, but has yet to file. But overall, we think we've done a good job to date turning off shipping at the right time. We do suspect there is more bad news to come on this front in the world of retail, unfortunately. On a lighter note, let's talk about interest expense. As Stephen pointed out, as we move through our seasonal curve, we have paid down our short-term borrowings as of quarter close, and we remain undrawn as of today. Our -to-date interest expense is $938,000, a reduction of $4.8 million versus the first nine months of 2023. For fans of EPS, that's over 40 cents per share in annual pickup with one quarter left to go. And for fans of cash, it's clearly a meaningful -over-year pickup in pre-tax net income, even if it doesn't appear in our adjusted EBITDA metric. Adjusted EPS for the quarter was $4.79 and $4.50 for the first nine months. Those numbers are up from $4.75 and down from $5.66, respectively, from 2023. Our trailing 12-month adjusted EBITDA is $58.5 million, reflecting an .5% EBITDA margin. And now, back to Stephen for some additional remarks.

Thank you, John. We talked last quarter about a lot of our new product initiatives for this fall, but I wanted to highlight a few more areas as we look to finish up the year. A little over two years ago, we highlighted an internal analysis where we assessed the role of low and opening price point retails to our overall business. We recently revisited that analysis and we're happy to see consistent results. It continues to be the case that over half of our total company toying consumer product sales volume is driven by retail price levels of $30 or less. When you raise that threshold to $50, you're getting to close to 90% of our sales volume. We remain committed to running a business that is built around the idea of accessible price points and by extension, addressing the widest possible consumer market, both in the US and internationally. This philosophy, by extension, helps to minimize our risk inventory in any one of our product lines, as well as reduce the amount of cash we are tying up in working capital. And although price points does not directly relate to size, you can also consider the supply chain efficiencies associated with smaller cube products, whether you're considering ocean freight, warehousing, or when you appropriate direct to consumer shipping. In walking our showroom, you will see that commitment to opening price points across nearly every single one of our businesses. And I should also highlight, it's always a key criteria as we contemplate entering new categories of businesses either organically or via acquisition. With all that said, however, we do selectively and thoughtfully bring to the trade higher price rate propositions from time to time. We understand the excitement and energy around gift giving delivering the big box, and we don't want to stay shut out of that portion of the market. Our Disney Princess style collection fresh prep gourmet kitchen is a great item and is a consistent presence in our line since being introduced last year. Our black and Decker tabletop workbench is a great evergreen item available at most major accounts. Our climbing jungle gym comes in Fisher Price, Paw Patrol, and Minnie Mouse versions. It encourages children to engage in physical activity, enhancing their motor skills and overall health. The safe and easy assemble play structure allows children ages two to six to express their activity and their creativity and imagination. Complete with an attachable slide, squeaking stairs, a toss game panel, this durable climbing gym is one of the most popular sought out preschool toys this holiday season. This fall, everyone is really excited about our latest offering in this price range. Building on the tremendous success of our Target shopping cart and Target cash register, late last quarter, Target introduced the new Target toy check lane. This toy delivers on all the pre-ten shopping needs. It comes with a Target pre-ten shopping bag, various Target essentials, groceries, and pre-ten money. It features a hand crank conveyor belt, beeping scanner, bag in area, credit card swipe machine, and working cash register with microphone, cash drawer, and working buttons. The team really did a fabulous job with this item and it looks amazing and plays amazing. I've personally enjoyed showing nearly everyone who's come through our offices over the past several months what a great example it is of our bringing something new and fresh to retail, while also being very fast to market, given how quickly we went from concept to customer approval to shipping. Another area we didn't cover on our last earnings call was some of our key focus items this fall from Nintendo. The recently launched Super Mario Course Complete Playset is a must have for any Super Mario fan. You can experience the fun of conquering a course just like the iconic video games, helping Mario climb the famous stairs using the spinning lever. The set comes with a two and a half inch Mario figure, interactive stairs, flagpole castle, and a base platform, offering multiple ways to play and display. And we are also highlighting one of the most sought after and best selling toys, the Mario Kart Mini Anti-Gravity RC Racer. Mario can race in a standard mode or switch to anti-gravity mode for drifts and thrilling tricks. The enhanced performance of this RC allows you to pop wheelies and perform 360 degree spins with an impressive range of up to 100 feet. It's simply put a great toy. And from another iconic Nintendo IP, we're offering from the world of Legend of Zelda, the Link with Power Shield and Sword action figure, inspired by the Legend of Zelda Breath of the Wild. Also in our last call, we avoided discussing Sonic 3 due to the embargo issues. But since then the product has begun to hit the shelf and has generated some great reactions. The five inch figures are the core segment within the line with a nice range of characters and styles. And our key driver is our ultimate talking Sonic. The 12 inch scale movie style figure has 15 points of articulation and features over 30 iconic and humorous phrases and sounds from the movies. These items are available across all major accounts leading up to the film's release this December. I also wanted to point out we have an exciting new line of toys supporting the holiday launch of Moana 2. Our product line celebrates the new music, new caricatures and the new outfits consumers will experience when they see Moana 2 in theaters this holiday season. Moana sings one of her iconic songs in the new Jax large doll. To compliment the story, Jax is also launching a large doll of Moana's new little sister, Simia. Simia will capture your heart in the story and at retail. Lastly, but not least, as a reminder, the extensive line of products based on The Simpsons are continuing to be delivered to retail and we have seen extremely strong sell through performance to date. As mentioned earlier, our November and December calendars are filled with great placement at retail for a broad portfolio of businesses. I strongly encourage you to get out to the retail this holiday season and look for Jax products and I hope you will agree that our retail execution can stand with the very best in the industry across a wide range of IP. As always, thank you for your support and interest and happy Halloween. Operator.

Thank you. At this time, we will start our Q&A session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question today is from Eric Better from Small Cap Consumer Research. Your line is open.

Good afternoon, congratulations.

Thank you, Eric, good afternoon.

Talk a little bit about the Out to Worst segment and the opportunities there. Obviously, you have the Authentic Brands product beginning to flow out. I know it's only the skateboards right now, but how positive and confident there when you look at that potential to have that drive really kind of the outdoor business and kind of offset some of the seasonality that you have.

Thank you, Eric. First off, we just recently launched the element portion of our initiative with Authentic Brands group and we launched it with a retailer called Academy to get initial reads. And the sell-throughs that we launched have been nothing but tremendous. It's beating the numbers that were there in 2022 and they are now regrouping and looking at 2025 much more aggressively. So the initial start and initial launch has been very successful. That being said, we have planned for this spring to launch a kind of a breadth of product from the element skateboard line to our new Roxy Floaties that will be done at exclusives at one of our major retailers and our new distribution platform with all the new seasonal products will just be launching during first quarter. That being said, our current existing business which is our seasonal ball pits, tents, outdoor play products, the outdoor furniture has had a difficult comparison over the last few years due to the container issues with bulk products that was so expensive and during the COVID period. But now we're seeing better comparisons. We saw it in this first third quarter and we will look to have growth for that segmentation in 2025. So it's really diverse. It's diverse with the authentic brands group from Quicksilver, Roxy, Elements, and Juicy Couture amongst some of the names. And then with a lot of our friendly competitors that we do licenses with from Mattel to Hasbro to Spinmaster, Paw Patrol, Fisher-Frice, Transformers. So it's really a diverse product line and much stronger than it's been over the last three years going forward.

Right. And I know it's obviously too early for the current movies but I wanna ask you about some of the things for 2025 like Dog Man coming out in the beginning of the quarter, the beginning of the year. That's usually, I think if I remember correctly, most of the other movies, the holiday movies work its first half. But for things like this, how do you look upon these pieces as some of the add-ons to the potential here?

So in fact, last night, it's a good question. Last night I had a call with Asia this morning, a call with all of our group looking at the potential opportunities because Dog Man, they've sold over 60 million books since 2016, it's its first movie. They've had seven, as of last night, 17.2 million views of their trailer. Sonic 3 has had 16.5, so it's a very strong telling with having very good background of what Sonic's been around and the success of Sonic and seeing Dog Man having that. So we are cautiously optimistic with it. We won't be bringing in heavy inventory based off of not knowing but the retail receptiveness is extremely strong and it will be nice. It depends how big it will be, we don't know but if you just look at these stats and the receptiveness, it's been great. There's going in, Moana 2 launches during the November of this year and really what happens when you look at Moana or a Frozen or an Encanto and so on, the first part is great but usually if the movie does well and the music does well, the following year with streaming hits is where the legs come from. So we're looking excited for Moana 2 and then the later part is the Sonic 3 movie which is coming out, that's late in December, December 20th, which we have great sales but if the movie's successful, we look at having some good tailwinds for that going into the 2025. In addition, there's some new movies coming out which we're looking at in disguise which we have Minecraft, you have Snow White, you have How to Train Your Dragon, Demon Slayer, Paw Patrol, Lilo and Stitch, so there's a lot. You have Harry Potter and Pokemon that we now just got rights for in EMEA. So there's a good plethora, an abundance of IP that's out there that will help carry along some of the IP-driven lines. At the same time, what I'd like to reiterate again and we've seen it in this quarter, we've seen it through the year, our evergreen portions of our businesses are doing very well and we're very excited about the strength that we have and if we continue to grow the portfolio management that we've been focusing on in addition to potential strong IP, that just bodes well, extremely well for the company and as I reiterated for the last two quarters, being debt-free allows us to free up a lot of capital to be able to utilize for new initiatives, new licenses and building out our international structure.

Okay, let me for one quick, other quick one. You've talked about this Target Private Label product, I've seen it, it looks great. Obviously there are other retailers that have checkout counters and other pieces. Is that something you can leverage into other potential accounts as a part of the Private Label? Thank you.

So the Target initiative has been terrific. The relationship that we have with Target is phenomenal. The success of the cash register, our new check lane item, the cart is doing very well. We will build that portfolio with Target. At the same time, there's other opportunities, especially international, that we are launching various initiatives in that Private Label program and we will announce during the probably first half of 2025, a lot of new initiatives in that Private Label initiative program with other major retailers.

Okay, great, congratulations. Good luck on the holidays, Cesar.

Thanks, Eric.

Thank you. One moment. Our next question comes from Tom Forte with the Maxim Group. Your line is open.

Great, thanks. First off, Steven and John, congrats on the quarter. I have one question and one follow-up. So Steven, when you consider the value of intellectual property that you license or are considering licensing, what are your current thoughts in the State of the Box office and is it less important for IP to be associated with or supported by hit films?

Great question. So IP theatrical as well as just IP that's non-theatrical is important and I'll give you the examples to that. So we have a complete line of Princess product and a very successful line called Princess Style Collection, which we do with the Walt Disney Company, that doesn't align itself with any theatrical company and movies in Princess and it does extremely well. Our current Frozen line that we've extended into Style Collection as well doesn't necessarily need the theatrical IP behind it. They kind of do well without it and sometimes theatrical initiatives are built up and then slightly go away in time. So the basic portfolio we have from the previous, call it the Organic Princesses that everyone knows of, the Rapunzel, the Snow White and so on, to the Frozen's and then you get the Raya's and you get the Moana's that get added into the portfolio. Those always enhance and bring in new consumers versus what was the past. If you think about it, Frozen 1 was in 2013 November. We're now 11 years into it and it's still extremely strong with no new IP coming until 2027, I think is when the Walt Disney Company mentioned they're doing it. So right now our business in the Walt Disney platform is doing extremely well without having heavy IP behind it but then again you get the Moana 2 that brings a lot of excitement to the retail trade and based off what we've seen, based off what retailers are seeing globally, it's extremely exciting and we're happy and we've had a year, years before when Moana 1 came out of it so we kind of have an understanding but it's the portfolio managed mix is what we do. Some of it's general IP, elements itself, Roxy, Quicksilver are not theatrical IP but they are well branded IP that's known worldwide. So you gotta take a portfolio platform management in the various categories which are in. At the same time we're looking at diverse distribution platforms not just going necessarily in the normal call it toy trade but from the Dick's Sporting Goods, the Academy Sporting Goods, the value chains. There's so many new avenues that we're achieving distribution so it's not necessarily just the new IP, it's distribution, new IP and building off the basic IP that we have.

Great, thank you for that, very helpful. All right so second, can you give your current thoughts on competition and your ability to secure additional shelf space with your new product initiatives such as the Simpsons line?

So it's very interesting. So the toy world is changing. We've seen several different companies have issues over the years, some of which have turned into bankruptcies and so on and for us, we're looking at garnished more and more shelf space. So when a company has an issue and they can't ship, there's usually white space and a retailer knows that one thing Jack specific is known for is quick to market reaction and we can help the retailer when someone's not be able to perform and if a property's not performing. So that's something that's very beneficial to us. The competition, it's there but we just focus on what we do best which is focusing on making sure the retailers make great margin and the consumer gets great product at a great price and by doing that, we are garnishing more and more shelf space and then again, when there's not the shelf space available, we have extremely strong placement with exclusive products globally with retailers that allows the retailer to promote the products which then carries further products in our categories and in addition to that, we do a complete line of out of aisle placements that allows you to not only have the inline initiatives that you see at retail but to be out of aisle to garner more retail footprint and allowing the consumer to see products more just in the toy aisle. So for instance, the Check Lane stands, Walmart, we do a terrific job with our Mario, our Sonic and our Princess at Check Lane. So we just look at every avenue and every way of distribution and normally, it's slightly different than our competitors just because of our nimbleness as a company.

Great, thanks Stephen. Thank

you.

Thank you. And our next question comes from Eric Wold with B. Riley Securities. Your line is open.

Thanks, thanks guys for taking my questions. I'm glad to join my next call. Quick follow up, can I look at your prior comments to have around the new IT, the new products coming out? I know it's difficult for you to discuss specific licenses or IT, but as you move into a stronger film slate, starting with this quarter and then presumably even more so next year and kind of the content led piece becomes a bigger driver than it has been over the past 12-ish months. What are you kind of seeing from retailers and their desire to allocate shelf space and kind of their ordering patterns around content led? How confident are they kind of taking inventory up front versus something you may have to chase if that demand exceeds their expectations?

So let me give you an example and it'll go from Dogman, which is in January, that retailers, and a lot of these retailers also have children know the books extremely well. They've sold over 60 million pieces, but it's still an unknown because there's never been real product after the market. So as they are, as we and they are conservative in the approach that we're taking, we do have a plan once you see sell throughs to be quick to market and bringing in product to achieve the goals that are necessary to keep the shelf space. What retailers are doing now more than ever, and I think it's the economy, it's elections and so on, are buying things that are relatively comfortable to them that they know and the retailers wanna make sure that themselves are having products that are consistent, that they could count on as well because the risk factor of going into IP that may not work, it takes up shelf space, it takes up profitability, and you lose traction with your consumers. We have such a real strong relationships with the retailers globally that we work very much hand in hand, and we work very much hand in hand with our IP partners. So we manage it very well to where we can react if something takes off, but we will never as Jacks bring in a ton of inventory to bet on something in case it doesn't work. If something could be a grand slam for Jacks, it may be a home run because we won't take that risk, but on reverse, if something was planned to be a double and it goes into a home run, we could actually grab and jump onto it. So it's just a constant communication with our retailers. In fact, right now we have a majority of our salespeople out at all of our major retailers right now, shoring up the remaining part of this holiday season, and truly right now we're preparing for the first half and second half of 25 because we're very comfortable in our line. We see next year being irrelevant of the elections, a strong year for Jacks, just we feel comfortable with where we're at with our portfolio brands and categories. So we're really comfortable with everything.

Perfect, and then follow up question, John, you obviously talked about the Q3 margin and kind of the puts and takes versus last year for the quarter. As you move into the holiday season, what should we think about in terms of puts and takes for gross margin this year versus what you experienced last year?

You

know,

I think sort of trying to isolate the quarter year over year is probably a little bit of false precision, to be honest. And Q4 ends up being a smaller, one of our smaller quarters as you know, and therefore it doesn't take much to move the percentage. But I'd reiterate the comment we made on the call that we still feel pretty good about on a full year basis being at least at 30, which is something that we've said for some time. And I know some people had some doubts about earlier in the year with some of our kind of Q1 results, but you know, we're still heading towards that outcome. I hope. Thanks, John, thank you, appreciate it. All right, thanks Eric.

I'm showing no more questions at this time. So I would now like to turn it back to Steve Berman for closing remarks.

Ladies and gentlemen, thank you very much for the time on the call. Wish everybody a happy Halloween and look forward to speaking to you on our next call. Thank you very much.

This does conclude the program. You may now disconnect.