Tonies Se Reg A

Hello everyone and welcome to Tony's H1 2025 presentation. My name is Peter Dietz and I'm from the Investor Relations team. Today our CEO Tobias and CFO Yang will first walk you through our presentation and afterwards we invite you to submit your questions via the Zoom Q&A function. That's it from my side and now over to you Tobias.

Thank you, Peter. A warm welcome from my side as well. Thank you all for joining us. Allow me a few personal words to start with. When preparing for this call, I reflected on the first half of the year and there was one specific day my mind kept returning to, April 2nd. Since then, and I think you all agree, The world is different and what we saw back on the day and in the weeks and months thereafter was unprecedented. Some called it Liberation Day. For us at Tony's, it felt more like Uncertainty Day. Like many companies, the tariff situation gave us headaches. We set up task forces, we adjusted planning scenarios, we optimized our supply chain. But would that be enough? At the time, I did not know. Today, four and a half months later, I do. And I'm proud to say that thanks to our resilient business model, Tony's has continued to grow almost as if uncertainty day had never happened. We have navigated headwinds. We have overcome turbulence through flexibility, through preparation, and through operational excellence. It has been a total team effort. And I want to thank all members of the Tony's team around the world. We've achieved strong financials, far from guaranteed at the start. And we have laid the groundwork to deliver on our goals for the second half. A second half that promises to be the most innovative since our company's foundation. Jan and I will now take you deeper into these topics. But first, let me start once again with one of my favorite slides. It confirms some very encouraging achievements, underlining that the idea of Tony's, the product, the connection we have is unfazed by macroeconomic shifts. We are expanding our number one global position dynamically across the world. Second, we are growing our platform. And third, we have every reason to look ahead with confidence. By the end of June, we have sold over 9.5 million Tony boxes and more than 125 million Tonys. Each of these boxes represents a home in which we are part of everyday life. And each Tony sparks imagination and joy and drives engagement with our platform. So what's so special about these numbers is not only our reach to more than 100 countries, but the depth of engagement. On average, children spend more than four and a half hours per week with their Tony box. That is screen-free creative play in today's world, a rare and valuable connection. And connection is what our relationship with families is all about. It's reflected in the feedback we receive personally, online, via retailers, but also in our outstanding net promoter score. And that NPS is not just a KPI. It is the voice of parents saying, I trust this for my child and I want to tell my friends about it. And such a level of trust is rare, and it is something we really, really treasure. Let us now take a closer look at how these foundations translated into our performance in the first half of the year. In that first half of the year, we continued our growth trajectory. 20% top line growth at constant currencies amounted to group revenues of 177 million euros. Our platform continues to grow even against a challenging macro environment and against external headwinds. Again, our business model has proven to be very resilient. Let us break it down by region so you can see how each market contributed to this strong performance. In Dachau, we generated 71 million euros in revenues on par with the solid prior year period. That was despite foreseen shifts in wholesale order patterns, which I will comment on later. After a softer Q1, we turned the momentum with sequential growth in Q2 and at the same time paved the way for growth with new products. North America again delivered an impressive growth rate of 28% at constant currencies and remains on track to be our largest market. And that is despite the tariff situation already discussed. Combine that with profitability after six months in the US, we are very positive that we can build further on this momentum. And the rest of the world region performed simply outstanding, growing exceptionally at 78% to 35 million euros. Overall, this is a really, really strong performance across all markets driven by sustained high demand for our products. With regards to profitability, we improved our operational excellence so significantly that we generated a positive margin despite all external challenges we have seen. Jan will talk about this in more detail. Our adjusted EBITDA margin came in at 2.1%, the EBITDA margin at 1.8%, both slightly lower than last year, but a good reflection of our resilience in a volatile and investment-heavy time. In the past two earnings calls, we decided against publishing a guidance due to all the uncertainty caused by tariffs. We were always confident that 2025 will be another year of profitable growth for Tony's though. Given we have more certainty now, we will provide more transparency today and I will close this presentation with a detailed outlook on the full year. Now moving away from the financials. On the right hand side of the slide is one highlight I'm most proud of. The continued expansion of our platform. Picture this. In just six months, we sold more than 13 million Tonys. To put this into perspective, that is over 10% of all Tonys ever sold since 2016 achieved in just six months. This shows the incredible momentum in our content business. It creates stable recurring engagement and long-term value for the business. With this high level of unit growth, high repeat engagement, and strong financial performance, let us now turn to the key themes that are driving this momentum even beyond the first half of the year. So looking at our first six months, we made tangible progress across all strategic levels. Let me focus on a few standout areas here. Let's look at our markets, how we prepared to build on our momentum in the US and rest of the world, and how we target growth with product innovation in DACH. Then I'll highlight some product developments. We had great launches in H1. We have a lot in store for the second half. And we have encouraging data that underscores our product's impact. Of course, we'll give an update on the current tariff situation to help you understand how we have adapted, how we have managed, and how we've brought the situation under control. And finally, I want to comment on our leadership setup going forward, which will help us accelerate our international growth further. So let's start with North America. There, we not only continued our growth momentum, but also prepared for an even stronger second half of the year. Retail partners continue to be key drivers of our ongoing expansion. Today, about 90% of the U.S. toy market is covered by three major players. Target, Walmart, Amazon. Let me outline how we build up our presence in North America by leveraging these three partnerships. Since 2024, we are present in all North American target stores. That is 100% market coverage. A long way from our first online listings in 2020 or the seasonal in-store presences that we're following that. Building on this, we will now increase our shelf space by 50% to 12 feet in each store. As we have seen exponential growth with shelf space expansion in the past, this will accelerate revenue growth in the second half of the year period. At Walmart, a big change is underway. In Q3, so right now, Tony's is moving from the consumer electronics section into the toy section. And I have to tell you, this is one of the very rare category changes. Walmart has ever made for an external partner. It puts us right where parents and kids are browsing for toys, increasing our visibility, increasing sales velocity, increasing brand relevance ahead of the holidays. And on Amazon, which is direct to customer consumer for us, we continue to deliver on special commercial moments. This Prime Day, we sold 50% more units compared to the previous Prime Day, driven by doubling the numbers of Tony's sold. This underscores our momentum and Tony's popularity in a very competitive market environment. Amazon remains not only our high volume sales channel, but also a very critical source of insights to react fast to consumer trends. So across all those three partners, we have prepared for reach, for visibility, for conversion. Combined with a strong organization and logistics setup, this gives us a powerful engine for Q4. And particularly in light of tariffs, let me highlight, all of these partnerships evolving to this stage are clear, undisputable signs of confidence of all major retailers in our largest market. You do not capture shelf space from competition like that. You do not move categories like that. You do not deliver D2C moments like that if Tony's were at risk by tariffs. And I would even go further than that. We might as well emerge as a general winner from this situation. So our engine has proven very resilient in times of uncertainty. Our U.S. business has been largely untouched by tariffs effects. This gives us even more confidence that we are well positioned to deliver strong growth in the U.S. for the remainder of this year, but also in the midterm. Turning to our home market DACH, our blueprint for profitability and a key contributor to our bottom line. In the first half of the year, our DACH business recorded an EBITDA margin of 16.5%. Put differently, our profitability in DACH fuels our organic investments in other markets. Our goal is to continue growing our top line here as well. In Q2, we saw this picking up as a result of constantly delivering innovation. The DACH market is hungry for it, as shown by the great success of Clever Tonies for older kids last year. At the end of Q2 this year, we launched our Book Tonies in DACH. Book Tonies are long-form audiobooks that increase engagement with older target groups, a key factor to grow and develop markets. In addition, Book Tonies have a shorter development time. But most important, just like clever Tony's, they have hit a nerve in the market. We see it in conversations with retail partners and we observe it in usage data. Engaging with kids above five extends the life cycle of our platform in households and unlocks significant new growth potential. Book Tonys work like a charm in this regard. 53% of activations come from households with children over five. In addition, the listening behavior reflects our approach to deepen engagement. Given the longer content, the average playtime session increases with around 42 minutes. We are excited to see the impact on weekly average playtime as we bring more book Tonys to the market. After launching 11 SKUs in the first half of the year, we expect our book Tony portfolio to grow to around 20 SKUs by the year end. So, to summarize, DACH is highly profitable and DACH still has a great potential for growth. Innovation remains a key driver here. We have seen the success of Clever Tony's. We are seeing the hunger for new content of our own IPs. Now we are off to a good start with Book Tony's and that gives us confidence for all that is up next. And then I alluded to it. Our fastest growth in 2025 came from what we call rest of world. And while we expected that, I must say I am, we are stunned with the market moving impact we have seen. In Australia and New Zealand, this momentum from our 2024 market launch is continuing into 2025. And the general remark here, after two consecutive years of market decline, the overall toy industry in Australia grew by 7% in H1. And our Tony Box data said, was the number one item in the entire toys category in Q2. We take pride in our innovation power and in the fact that the Tony Box has opened up interactive audio entertainment, a completely new category for families. But seeing how vitalizing our concept can be for an entire market, for an entire industry, is a fantastic motivator going forward. In France, the flywheel effect of our business is also clearly visible. I spoke about reaching a tipping point last quarter. Now we see the acceleration after Tony box sales nearly doubled year on year in the first half. Tony's, so the figurine sales, grew even faster, more than two and a half times compared to last year. Once a household owns a box, the behavior we see is subscription-like, steadily buying a collection over time. We have seen that kind of dynamic continue in other markets, making France another territory for years of sustained growth to come. These results prove that our brand resonates quickly with families, even in highly competitive markets such as France. The combination of strong global product market fit, effective marketing and growing retail partnerships gives us confidence in the scalability of our model across new geographies. But very importantly, our growth story is not just about entering new markets. It is also about the positive impact we create for the next generation. This is why we do what we do. With our products, we help foster awareness, inspire imagination, and reduce screen time. This is a topic that is very close to my heart. In 2024, we published our first sustainability report reflecting this holistic approach. And given our focus, we go beyond traditional ESG categories to include our mission of creating a positive impact for children's development and well-being. That is why our product design, our content choices and our business decisions are guided by responsibility for the planet, for the people and for the families who use Tony's every day. For us, sustainability means making sure technology serves children, supporting their growth, encouraging their creativity Latest research is backing the success of our concept. We just received results from studies showing that children who listened to a Tony box scored 32% higher in emergent literacy compared to those who did not. And they were also significantly less likely to exceed one hour of daily screen time. Tony's is more than just entertainment. It's a platform that helps children listen, learn, and grow in a responsible way while giving parents confidence and peace of mind. Our positive impact is amplified by the strength of our content and innovation pipeline. This is a really important part of our presentation today. The first half of 2025 already brought a rich mix of launches, but there's more, much more to come in the weeks and months ahead. From January to June, we delivered a balanced portfolio of new launches, catering to both our loyal Tony Box households and to new customer segments like the book Tony's. Let me mention some highlights. We grew our Tony's originals portfolio and extended popular franchises, keeping beloved characters front and center while driving repeat purchases. As I said, in DACH, we launched Book Tony's. In the US, the much anticipated launch of Miss Rachel strengthened our preschool portfolio and exceeded our expectations. The buzz we created in communities and on social media drove beyond anything we thought we could do. The best part with half a year in the books, we are only one third of the way through our planned 2025 launches. These include Tony's launching live with movie starts and new beloved franchises. So with roughly 65% of our launches still to come, you can expect great things in the month ahead. And on top of our strong content pipeline, we have planned something very special, something we have also allocated significant resources to in the first half. So let me assure you, it's going to be really, really exciting. One thing maybe less exciting, but a topic we needed to address over the past month, tariffs. We expect them to remain a relevant topic as the situation will likely stick around for the foreseeable future. But at Tony's, we have made good progress since April 2nd and we have the situation under control. We now have better visibility on tariff levels through the end of 2025 and beyond. We can plan ahead with confidence and make informed sourcing and pricing decisions well in advance. As you will hear later, this also puts us in the position to give a clear, reliable guidance to the market for the year. Across our key sourcing countries, tariff agreements have been announced or are at least stable in the case of China. The rates we see for China, Vietnam, Tunisia and Bosnia are all lower than the maximum tariff rates previously discussed. In addition, we started diversifying our supply chain well before April 2nd. I've said this many, many times. We are very well prepared to manage and adapt the situation. The head start with our supply chain help is just agility within our organization. We have a toolbox at hand that proved and continues to prove effective. Our diversified supply chain for Tony boxes, figurines and accessories allows us to flexibly shift volumes across jurisdictions. Our position as a category creator and leader gives us the ability to set prices appropriately without losing competitiveness. Healthy cash reserves And a new syndicated loan gives us room to maneuver. Jan will come to this later. And ongoing improvements in unit economics together with strong partnerships help us protect margins. In short, tariffs might be here to stay. They do have an impact on the way we do business. And we would clearly prefer not to have them. But we are well prepared and we do not expect them to derail our overall growth or our execution plans. Let us look maybe closer at two of the examples I mentioned. First, our diversified sourcing strategy. We prepared a shift of Tony Box production capacities to Vietnam well before the current tariff situation. That is why we were able to get it up and running at full capacity as of April 1st, one day before the initial announcement tariffs. This move enabled us to shift capacities without losing any degree of productivity. The site in Vietnam combines high technical capacity with the ability to produce Tony boxes at scale. By the end of 2025, by the end of this year, it will have the potential to produce over 1.8 million units annually. And by the end of July 2025 alone, we had already shipped more than 330,000 Tony boxes from Vietnam to the US. All this while operating at the same efficiency, at the same unit cost, and at the same quality standards that we know from other sites, for example, China. This gives us flexibility to shift volumes between sites to reduce dependency on any single country and to navigate tariffs more effectively. Next slide. Another important lever in our toolbox is our pricing power. As the category creator and market leader in a very resilient business, we are able to set prices in a way that reflects the value we deliver without losing customer trust or market share. In the US, we did that as of May 1st, increasing Tony figurine prices by approximately $2 on average. We have done that And as of now, two months in, we see no substantial impact. This is what pricing power looks like when prices are grounded in the value we deliver. Moving into the next chapter of our journey, we have strengthened our management board with two outstanding leaders who bring the right mix of experience, energy, and passion for our missions. Our new setup reflects our increasingly international footprint as well as our growth ambitions. While I can tell you we will miss Jan dearly going forward, I am also happy we conducted a thorough succession planning for his role as CFO. I look forward to welcoming Hansjörg Müller as our new CFO starting September 1st. with more than 20 years in senior leadership across entertainment and consumer goods at Netflix, Electronic Arts, and Procter & Gamble. He combines deep financial expertise with a strong track record in scaling global brands. And this will help us steer Tony's through our next growth phase with the right balance of ambition and financial discipline. I'm equally happy that Christophe Frise joined our management board as first chief revenue officer effective July 1st. A familiar face to some of you, Christophe has been with Tony's for years and successfully built our North American business from the ground up as general manager. He will remain located in the US, but now oversee a global function to drive growth across all channels and markets. With his profile as a proven entrepreneur and with more than 15 years in business building roles, he is perfectly equipped to do that and complements our setup ideally. So, with Ginny as CXO, Hans-Jörg as CFO, and Christoph as CRO, next to me, on the board, we now have a truly cross-functional leadership team based both in Germany and the US, combining global experience, deep expertise, and a shared passion to take Tony's to the next level together. And before we move on, there's one additional highlight I would like to share with you. Patrick Fassbender, Tony's co-founder, has rejoined Tony's as a member of our supervisory board. This happened as planned after completing his cool down period. All of you, most of you remember more than 10 years ago, Patrick together with Markus Stahl came up with the original ideas for Tony's and created the foundation for the company and brand we know today. His return brings not only his deep product and brand expertise, but also the creative vision and passion that have been at the heart of Tony's since the very beginning. I would now like to hand over to Jan for a deep dive into the financials.

Yes, good morning, everyone, also from my side. I'm very happy to take you through the highlights of H1 from the financial side and As Tobias already said, it's been a dynamic first half of the year, but it's been a really good one for Tony's. It is actually coming in exactly as we expected it to be. And there are several pretty noteworthy successes we have celebrated. I'll come to that in a minute. And what makes me very, very happy if I look at the top line is that we see continued 20% year-over-year growth, which is a stable expression of a successful international product expansion. And you can see it as the share of international business has now increased again year-over-year to 60%. And also you see a lot of dynamic growth in all regions. I'll speak to DACH in a minute because there were some Q1 effects that actually have turned around. Q1 and Q2, DACH is back on a growth track. And I think that is exciting for some of you who had questions on that effect that we explained in Q1. Also, we are on comparable profitability levels versus our prior year. That means we're growing in hyperspace profitably. And our adjusted EBITDA is coming in at 2.1, EBITDA at 1.8% margin. And what makes me very excited about it is that North America has turned profitable on a segment reporting view for the first time in a half year period. It just shows that our business model is profitable and that we are successful in replicating that business model in our international expansion. And the main achievements on the profitability side, what you will see is coming from a contribution margin. I'll speak to that in a minute. And I think some interesting effects to observe there as well. On the cash side, I feel very, very confident. We were at 39 million euros of cash on balance sheet. We had not used or just to a neglectable level our available credit facilities. So that means our cash available with 121 million euros is a very solid foundation. And Tobias said it before, also in these dynamic tariff environments, I think it's testament to us being able to secure the business against potential microeconomic volatility, but also, most importantly, to finance everything that we want to finance for our Q4 Christmas business. I'll move on and discuss with you now the management P&L, which I think is a pretty strong H1 2025. On the left-hand side, you see the 2025 numbers, 24 next to it, and then the change in deviation. So what's probably most noteworthy if we stay on H1 is an incredible improvement of the contribution profit. So the margin is up 5.6 percentage points. And you probably say, wow, what has been the driver behind that? Well, it's several things. It's mixed effects, as always, right? But the most important things are we have optimized our procurement and sourcing. So we have not only prepared for Terafears to buy a set, we have also executed some of those. We have important mix effects in our product mix. Please always remember we're more profitable on the tonies, on the attached, on the blades in our business model, and you'll see it in product mix. And this is driving up the contribution margin. And you can see those effects then being supported by better licensing rate right inside there. If you look below the 3.6, the PPS, you see fulfillment is better year over year. There are several of those mixed effects in, but most importantly, it's better sourcing and also product mix. And then you see some effects below the contribution margin to EBITDA, which tells you that we've probably been investing. We have been investing in product and international growth. And you can see that with the marketing expenditures slightly increasing versus prior period. And similarly on the SG&A side, you see it in personnel, but a little bit more on the OPEX side. And this also includes certain, of course, mitigation costs for tariff effects. But again, I said it before, this P&L is strong. We are very happy with it and it is coming in as expected. I would like to run now through a bit of a dissection of the growth. The growth is coming essentially from our international expansion. And I particularly want to spend time on the DAF effect because some of you have discussed it with me also in individual calls or when In Q1, you'll see in a minute, it's positive again in Q2. Q1 negative effect in DAH has been the result of an extremely strong Q4 2024. So big orders have been on a cutoff, fall into the Q4 or the December period of 2024. So overall, they're very, very happy. DAH is not in decline, even if you look on it, it's phasing that needs to be considered and baseline effects. And if I then look at North America, and Tobias called it out, also the rest of the world, I see super, super strong growth rate. Very, very healthy behavior. Please remember, we announced last year round that we're transitioning into expanded shelf space and set in date with major retail partners in the US. So there's even a strong baseline in the US versus last year, and we're doing well. And it results, as I said, in strong increase in the share of our international business to 60%. If you now look on the next slide on the product mix, you will see effects here. So if you look on Tony boxes and Tony's, this is the most noteworthy thing to consider. I spoke about our contribution margin and I said that the contribution margin with over 40% is impacted by product mix. We have been selling, relatively speaking, more Tony's this half year one versus the prior year and a little less boxes. This is a good sign, not a bad sign. Our platform is healthy. Consumer demand is healthy. But we've just seen for some phasing effects here, stronger demand on the Tony side. And this is something you should take as a good sign. I personally believe it's actually super exciting. If you see a contribution margin of above 40%, You probably remember that we guided during our IPO to a target contribution margin of about 40%, above 40%. You see it again in this H1. So that means we are on track. We're moving towards our midterm guidance. And I think that is something very positive to take away. I spoke also about Q2 and that DAF is back on track. On the next slide, you'll see that here, left-hand side. DAF plus 1%, we are growing. not as much so that we can cover the Q1 effect. But overall, I think I've made sufficient alluding or explanation why we're very relaxed about the DAF situation for the full year and the remainder to come. With this, I want to move on one more slide and look at the segment reporting. Segment reporting here, I spoke to it. I said it's a very strong profitability profile because we have increased profitability in all segments. Daag slightly behind, but North America first time profitable, rest of world better. You see the stronger contribution margin effect coming through if you compare it to prior year levels. And there might be some question why Daag is then having a bit lower contribution, it's mixed effects. It's investments effects. It's nothing that gives me any concerns. It's just an interpretation, I would say, of the H1 figures as well. So overall, we are very, very confident here. So that shows you that the business model works. We have a strong H1, which puts us in a good position to continue our spree and strategy execution in the second half of the year. Let's move on. EBITDA. Given we have some effects, I want to spend some time again walking you through the bridge. So you see the strong Cox improvement year over year. As I said, we have reduced purchase prices for all of our products. So successful in sourcing. We have optimized our logistics cost. We have certain effects from a weaker US dollar as we're sourcing there. And most importantly, also product and channel mix effect. licensing costs coming in better. They can always be, depending on product mix, a few ups and downs in this range. So that is good news. Fulfillment costs, we have been good at optimizing versus prior year. You see that marketing increased versus prior year. I spoke to that. We've taken deliberate decisions to invest into international and product expansion. And that's also how we should interpret personal costs and OPEX costs to some extent. OPEX includes, in addition, mitigation costs, for the supply chain and tariff situation. And that is something you might even want to think as partially one-off. But overall, for the full year, we believe we are in a very, very good position now to mitigate to the best possible extent the effects from tariffs that Tobias was alluding to. Final slide I have for you today is on the cash position. Comparison here is the full year of 2024, of course. You can see that operating cash flow with the typical seasonality effects, investing and financing as well. Some effects in there. That's, of course, not surprising, but I think the most noteworthy point is that If you compare the year over year cash position in last year's H1, we reported an effective cash position. So cash on balance sheet and on account plus available credit lines of 40 million euros whilst we're now at 120. And I think that gives me a lot of reassurance that we're in a good position for the remainder of the year. as my slides are coming to an end i also just want to take one personal note and uh as you know i've taken the decision to leave tony's um and my tenure is coming to an end by end of august i'd like to take the opportunity to say thank you to everyone on this call and beyond for the great collaboration our shareholders analysts partners It's been a pleasure working with you. I want to thank also the whole supervisory board, our founders, the management board colleagues, and all Tonys. It's always been an honor and a pleasure to work as Tonys. I'm really, really excited about Tonys, and I'm sure that with Hansjörg, there's a great successor in place. I'll still be around for the company, but still wanted to say thank you to everyone. It's been a pleasure. And with this, back to Tobias and the Outlook for the year.