JAKKS Pacific, Inc.

Good afternoon, everyone. Welcome to the Jaxx Pacific third quarter earnings conference call with management who will review financial results for the quarter ending September 30th, 2026. Jaxx issued its earnings press release earlier today. The earnings release and presentation slides related to today's call are available on the company's website in the investor section. On the call this afternoon are Stephen Berman, chairman and chief executive officer, and Jon Kimble, chief financial officer. will first provide an overview of the quarter and year to date. along with the highlights of recent performance and current business trends. Then, Jon will provide some additional comments about Jacks Pacific's financial and operational results. Mr. Berman will then return with comments about the balance of the year and beyond prior to opening 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 questions, please press star 11 on your telephone keypad. Before we begin, the company would like to point out that any comments made about Jack Pacific's Future performance events or circumstances include the estimates of sales, margins, and earnings and or adjusted EBITDA in 2026, 2027, and beyond, as well as any other forward-looking statements concerning 2026, 2027, and beyond are subject to safe harbor protection under federal securities 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 in forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult Jack's most recent 10-K and 10-Q findings with the SEC, as well as the company's other reports subsequently followed with the SEC from time to time, In addition, today's comments made by management will refer to non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Unless stated otherwise, the most directly comparable GAAP financial metric has been reconciled to the associated non-GAAP financial measure within the company's earnings press release issued today or previously. As a reminder, this call is being recorded. With that, I would like to turn the call over to Stephen Berman.

Good afternoon and thank you for joining us. We are roughly two months from the end of 2026 and feeling positive about our execution this year, as well as feeling positive about the possibilities that lie ahead. Q3 shipping generated $254 million in net sales, a 20% increase over a prior year that featured delayed planogram sets and higher U.S. tariffs. Year-to-date, our sales are up 13% ahead of last year, The FOB business model is alive and well, representing over 75% of sales for the first nine months of the year. We're also seeing buying patterns return to pre-tariff quarterly seasonality. With much of the year now behind us, we are now working with customers to ensure solid sell-through and firming up plans for what we feel can be a great 2027. Although we're not supporting any new entertainment releases in the toy business this holiday season, Growth was nonetheless driven by North America, which was up 28% in the quarter and is now plus 14% year-to-date. International took a breath after a strong first half of the year. Europe was marginally up with the other regions and totaled down, netting out 4% down in the quarter, but international is still up 7% year-to-date and queued up for a solid fourth quarter. Our Dolls Roleplay Dress-Up business led the quarter with 29% growth and is now plus 7% year-to-date. We are seeing great growth here with our Disney business leading the way. Retail point-of-sale rates at our two largest accounts continue to track up in the double digits here both in the quarter and year-to-date. The Action Play and Collectibles division continued its strong year as well. with a 19% growth in the quarter driven by the success of the Super Mario Galaxy film and our core Nintendo Evergreen business. Comparable POS data was roughly flat in the quarter as we compare against the Sonic 3 and Sonic DC crossover initiatives from last year. It's up mid-single digits year-to-date. Overall, toys and consumer product shipping was up 23% in the quarter and plus 13% year-to-date. So we feel we've done a solid job maximizing this year's opportunities for a robust holiday selling season. Our costumes business had a solid quarter as it continues to recover from last year's disruptions. At $62 million in the quarter and $111 million year-to-date, we are tracking slightly ahead of 2024. Most of our U.S. accounts were up double digits this year, but we also are pleased with the traction we're seeing in Europe opening new accounts and generating more of a year-round business given the broad different selling opportunities there. Having just returned from parts of Asia last week, I can speak firsthand about the challenges factories are facing from higher resin prices putting pressure on product costs and higher diesel prices impacting the supply chain both for ocean and land freight. We are prioritizing shipments and continuing to scrutinize our inventory management to mitigate these higher costs of doing business. We have been working extremely closely with our manufacturing partners in Asia, allowing us to work through these various issues. Many of these factories have been partners of Jack's for decades, and these longstanding relationships allow Jack's to work expeditiously through these events when they occur. I will now pass it over to Jon for some comments, after which I will come back and discuss some product initiatives and areas of focus moving forward. Jon.

Thank you, Stephen. And hi, everybody. It's an interesting quarter to report on here, as the numbers have come together pretty much as we would have hoped they would. Some Q4 sales worked their way into Q3 this year, but as a FOB-centric business, that will happen and just means we'll get paid that much faster. In some respects, our fiscal year should almost be November through October. but we're not going to make that change and punish ourselves or anyone else with that exercise. Overall, we continue to collectively color within the lines as it relates to the full year plan. It may not be the biggest or best this or that, but it's a considerably better year than 2025 and a really good year on the financial front as far as the printed results. As of late October, we're getting close to the finish line of delivering in 2026 a profitable, cash-generating, dividend-paying fiscal year. What is harder to measure and often communicate is that we're doing a better job seeing downfield and building towards a bigger and more efficient business. Admittedly, there's always steady dialogue around potentially acquiring new licenses or launching new brands, but I think we're spending more time every quarter figuring out ways to run the business better, for lack of a better word. We are tuning the organization and our internal processes to increase efficiency and execute globally while maintaining a fast decision-making culture and hopefully some thoughtful precision around the financial implications. People who think that the only value generated in a particular year is reflected in that year's financial statements don't really understand how businesses like this function. And although I felt 2025 was a very productive year, despite its short-term financial challenges, I think you're starting to see some of the financial results this year and next, and ideally we can keep accelerating this momentum. 20% higher sales delivered 20% more gross margin dollars, so we're pleased with that. As a reminder, there isn't really a lot of gross margin scale to be had with our business. Tooling is a relatively tiny part of gross margins, and you don't get scale from royalty shortfalls unless you avoid them. As Stephen mentioned, there continues to be pressure on product and freight costs. Although the U.S. tariff discussion seems to be trending in a favorable direction, definitive guidance on that front is still pending. We are navigating as best as we can and managing for dollars, as I've said before. Gross margins held up well in the quarter at 32.1%, slightly higher than last year's 32%. Selling expenses were a bit higher in the quarter, as they likely will be next as we dial up our promotional activity, particularly compared to last year when we were pulling back given sales volumes. G&A costs were higher in aggregate, but sheathed some scale on higher volumes. We are continuously reevaluating overhead spending, vendor by vendor, to self-fund new initiatives and needs, but the overall higher cost of doing business is relatively unavoidable. Adjusted EBITDA in the quarter was $44.4 million, an improvement over $36.5 million in Q3 last year. That increases our 12-month trailing adjusted EBITDA to $45.7 million, up from $37.8 million last quarter. Adjusted EPS for the quarter was $2.68. That compares favorably to $1.80 at this time last year. Year-to-date, we are at $2.81 versus $1.79 year-to-date last year. On the balance sheet, we finished the quarter at $45 million in restricted and unrestricted cash compared to $28 million at the same time last year. Our inventory balance at the end of the quarter was $64 million compared to $71 million last year. That reflects a slightly higher balance outside the U.S. than it did at this time last year. Lastly, the board has approved the quarterly cash dividend of $0.25 per share. The dividend will be payable to shareholders of record as of November 27th and will be paid on December 28th. And now, back to Stephen for some additional commentary.