Spin Master Corp.

Good morning, ladies and gentlemen, and welcome to the Spin Master first quarter 2024 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Sophia Bizoukis. Please go ahead.

Thank you, John, and good morning. Welcome to Spin Master's Financial Results Conference Call for the first quarter 2024. I am joined this morning by Max Rangel, Spin Master's Global President and CEO, and Mark Siegel, Spin Master's Chief Financial Officer. For your convenience, the press release, MD&A, and interim consolidated financial statements are available on the Investor Relations section of our website at spinmaster.com and on CEDAR+. Before we begin, please note that remarks on this conference call may contain forward-looking statements about Spin Master's current and future plans, expectations, intentions, results, level of activity, performance, goals or achievements, and any other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or implied by the forward-looking statements. As a result, SpinMaster cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by law, SpinMaster has no obligation to update or revise any forward-looking statements, whether because of new information, future events, or otherwise. For additional info on these assumptions and risks, please consult our cautionary statements regarding forward-looking information and our earnings release date is May 7, 2024. And please note that Spin Master reports in U.S. dollars and all dollar amounts to be expressed today are in U.S. currency, unless otherwise noted. I would now like to turn the call over to Max.

Good morning, everyone. Before we get into details, I wanted to briefly reflect on the tremendous growth and evolution of Speedmaster as we celebrate our 30th anniversary in May. It's quite remarkable how we've grown from our beginnings as an innovative Canadian startup toy manufacturer to become a global, fully imagined children's entertainment company. We've continued to build on our legacy as a disruptor in the toy category, with a long track record of breakthrough items such as Bakugan, Hatchimals, and Bitsy, and have expanded our robust portfolio through licensing partnerships, international growth, and close to 30 acquisitions. Our entertainment creative center has developed a diverse slate of captivating multi-platform content for kids around the world, and our digital games creative center is expanding our mobile player ecosystem. Our strategy to reimagine everyday play is positioning us to where kids play and engage. Our Q1 performance reflected an increase in total revenue of 16.5%, primarily due to the addition of Melissa and Doug and their trusted portfolio of early childhood play offerings, which are highly complementary to our existing business. Excluding Melissa and Doug, revenue was up 1.6%. Toy gross product sales were $264 million, an increase of 22.1%. Most of this increase was from Melissa & Doug. Excluding M&D, toy gross product sales were slightly up. We continue to see global macroeconomic forces at play, which are putting pressure on consumers' discretionary spending. We expect this environment will continue throughout 2024 as consumers manage through the impact of high interest rates and inflation. With rising prices and basics like shelter, food, and energy, consumers are feeling the pinch. As a result, demand and dollar spend for many general merchandise categories will be under pressure in 2024, according to Cercana. The toy category experienced this pressure from a POS perspective in Q1. Total toy industry sales increased 2.8% globally, while average selling prices declined 1.9% per cercana. It's important to note that the increase in POS is in large part due to the timing of Easter, which fell in Q1 in 2024 compared to Q2 last year. Additionally, much of the growth in total in toy POS was driven by one category. construction and building sets, a category in which we did not participate. According to Circana, our global Q1 POS increased 21%, including Melissa and Doug. Excluding Melissa and Doug, our global Q1 POS declined 3%. Our U.S. was up 28% with Melissa and Doug and down 4%, excluding Melissa and Doug. We grew market share in six the 11 global market strike by circana including france germany italy mexico the netherlands and spain we grew share in four of 11 circana product super categories including arts and craft youth electronics plush and vehicles and maintain our share in games and puzzles global and u.s POS for the infant, toddler, and preschool category in Q1 was down 3% and 4% respectively per cercana. Pin Master's POS in Q1 was down in line with the category. With the acquisition of Melissa and Doug, we became the number one manufacturer in the infant, toddler, and preschool category in Q1 globally. Pin Master had four of the top 10 items in the U.S. preschool toy segment in Q1 per cercana, including The number one item, the Paw Patrol Jungle Pups Vehicle Assortment, demonstrating our commitment to innovation. Globally, Paw Patrol POS declined by 3.7%, and in the U.S., 5.5%. International POS for Paw Patrol declined at 1.5%. Gabby's Dollhouse was the number nine property globally in the infant-totter preschool category in Q1, Per Cercana and International POS was up 44%. Universal DreamWorks Animation just announced plans for the first feature film for Gabby's Dollhouse, set to debut September 2025. The TV series has been among the top 10 most watched shows on Netflix in 57 countries. We're further expanding our preschool portfolio later in 2024 and into 2025. Our licensed toy line with YouTube sensation, Ms. Rachel, is set to launch in the fall. Ms. Rachel has an uncanny ability to connect with babies, children, and parents, and retailers are eagerly awaiting our new toy line. Our design teams, both from Swim Master and Melissa & Doug, have been working closely with Rachel to deliver hands-on play for her avid fan base of 50 million unique monthly viewers. We are strategically positioned as a leader in preschool and have further deepened our presence in this important toy category with our acquisition of Melissa & Doug. The integration of Melissa & Doug is well underway, and we are focused on revenue and cost synergy opportunities. With the trust of multiple generations of parents, coupled with a leading e-commerce platform, we believe Melissa & Doug has strong potential for global growth. MND POS in the US was down in Q1 slightly more than the category average, but improved sequentially in Q1 to finish in line with the category. During Easter, we saw Melissa & Doug POS performance ahead of the industry. We are launching some exciting innovation at Melissa & Doug this fall. StickerWow offers a new way to play with stickers through collectible and refillable sticker stampers, which help build fine motor and problem-solving skills as well as drive creativity and character play. Sticker WOW launched in 2023 and makes Arcana's list of top 10 new items in Q1. More exciting innovation arrives in the fall with the new Easy Fold Play Gym and the innovative Blockables line, a wood-based construction toy for young kids that is positioned in the construction building sets category. Indulgent and interactive, we have a host of new introductions leading into the fall. There is big excitement at retail about our latest innovation for Hatchimals, which some of you were able to see in our LA short room in January. We're working with our retail partners to launch its newest iteration on October 4th, which we have declared Hatchimals Day. The toy line for our Netflix original series Unicorn Academy will hit shelves this fall. The collection includes fashion dolls, unicorns, and plush, which mirror the diversity and magic of the characters from the series. We have regularly proven our ability to introduce new breakthrough items in toy. Last year, Bitsy was an innovative success story that allowed us to gain 6.5 SharePoints in the Youth Electronics category per Cercana. We are now introducing two new iterations of Bitsy this summer, including a magical Bitsy and a Disney Bitsy featuring some of the most iconic characters from the Disney's extensive library. One of the Q1 highlights from a POS perspective is Monster Jam, which is off to a stellar start in 2024 with POS up 32%. The winning combination of live action shows combined with real to live toys across a wide range of price points has helped catapult retail sales. We have more in store for the fall with a new line of Marvel monster trucks featuring popular superheroes, including Spider-Man, new RC vehicles, and play sets all geared to bring the action of the arena into the home. Within games and puzzles, plans for Rubik's 50th anniversary are ramping up and the brand is showing no signs of slowing down. The cube has become an integral part of pop culture, influencing art, design, math, and science, as well as enthralling millions of people with the goal of solving the cube. Our goal this year is to inspire the next generation of cube solvers with our Make Your Move global campaign. To celebrate the anniversary, we have many new product launches and over 25 collaborations celebrating our iconic status, some of which were introduced in Q1. According to Cercana, these helped drive our Q1 POS up 16%. I want to briefly address retail price points. We have adjusted our TOY portfolio pricing to lower the average price point by 9% for 2024. Importantly, we have invested in increasing our product offering tailored to the value channel, which will launch in H2. Looking forward for the balance of 24 and into 25, our focus in TOY is building on the 23 base. Our top retailers in the U.S. over the last month have begun to express cautious optimism for the second half. We've also recently had a positive response to our spring 2025 line preview with encouraging commentary on a multitude of our brands across vehicles, games, and preschool. 2025 is shaping up well. Turning to entertainment, our revenue increased by 16.5%. Total gross viewing minutes for Paw Universe for kids ages 2 to 5 were up 63% in Q1. With more kids viewing content on YouTube, we have developed a strategic alliance with Moonbug Entertainment to create complimentary Paw content for the platform, which is deepening our engagement with preschoolers. The first shorts debuted last weekend and have already exceeded our historical view time for new content on our channels in just a few days. With production on our 11th season underway, we are also working on the third post-feature film set to hit theaters in July 2026. We are in production of Rubble and Crew Season 2 and have Greenlit Season 3. We are seeing some early success in Europe with both the series and the toy line. Unicorn Academy, our fantasy adventure animated series, launched on Netflix last November and quickly earned its place as the number one kids show globally for the opening weekend. The brand has retained its awareness, and the show is performing well, measuring 51 million gross viewing minutes in Q1. We are excited to share that the new content will drop on Netflix this summer, in advance of the toy launch in the fall. The musicality of the series lends itself to further distribution and promotional opportunities for the franchise, and we are partnering with Kitzbob for their summer concert series, which will integrate Unicorn Academy original songs into the show. Our licensing and merchandising programs that extend the brand into adjacent consumer product categories are building momentum with partnerships across stationery, fashion, personal care, and publishing. Our newest animated preschool series, Vida the Vet, continues to build audience and momentum. And by summer, we will have launched Vida with the premium broadcasters in over 20 countries. Similar to POP, we are partnering with Moonbook Entertainment to create complimentary short-form content for YouTube, giving preschoolers the opportunity to delve deeper into Vita's world. We have also greenlit a second season for distribution in 2025. Turning to our Digital Games Creative Center, our subscription business is a key focus and continues to grow. At the end of Q1, we had 430,000 subscribers, up 8% from 399,000 in December. Of the 430,000 subscribers, Picnic and Sego Mini comprise $374,000 and Paw Patrol Academy $56,000. We are continuing to add content into Picnic to the Picnic bundle and in late May, Math Tango from Originator Studios will be launched. More content drives higher consumer value and we are seeing higher monthly recurring revenue as well as a significant increase in cross installs from parents who see value in the bundle compared to standalone apps. We are pleased with the growth in Paw Patrol Academy subscribers, which have climbed 63% since December. Monthly active users were down 4.3% in Toka Live World, but downloads continue to increase, showing higher consumer engagement. We are investing in a mix of initiatives, including more content, and for the second half, we will be introducing exciting new features into the game. Last year, we initiated co-branded digital items within Toka Live World with Hello Kitty, followed later by SpongeBob SquarePants. These collabs tap into the brands that resonate within our player audience and drive revenue as fans purchase items to further customize their worlds within the game. We re-released the Hello Kitty furniture pack in January and drove over 900,000 revenue in seven days. This summer, we will release our first ever music collab within the game with a global team-focused superstar which is on trend for our audience who love to put music with their stories. We are looking forward to the launch of Toca Boca Days, our first social multiplayer game that will expand the player base of the Toca universe. Toca Boca Days represents a significant evolution for the brand and broadens the core Toca Boca experience with multiplayer capabilities. enabling players to safely create, interact, and collaborate in an imaginative setting. DAISY is now live in Australia and New Zealand, and we are seeing healthy organic installs, further demonstrating the strength of the brand. In the coming months, we plan to release DAISY in Canada, Sweden, and the UK, as well as Germany, scaling to global markets in the fall. Our team in Stockholm is also focusing on Rubik's Match, our new digital game that will leverage the global awareness of the cube and entice casual mobile gamers with a fresh take on the Match 3 game genre. Our latest soft launch data shows strong retention and app stability data and Rubik's Match is on track to release globally at the end of June to coincide with the Rubik's 50th anniversary. In 2025, we will release our mobile digital game for Unicorn Academy filled with action and adventure that brings the magic and allure of Unicorn Island into the digital world. I was recently in Stockholm and was able to see progress on the game's developments and ease out of this world. Our primary focus is to continue to drive growth across all three creative centers with a particular emphasis on ensuring that we integrate and achieve our growth goals for Melissa and Doug. Given the challenging economic environment we find ourselves operating in, we are also focused on driving operational efficiencies in every area of the business. Our financial framework is solid, we have a robust pipeline of innovation, and we are evolving our offering and marketing plans to ensure our brands remain relevant and resonate with consumers. Finally, we continue to strengthen our enterprise capabilities to drive long-term growth and value for our shareholders. With that, I will now turn it over to Mark.