Spin Master Corp.

Ladies and gentlemen, and welcome to the SPIN MasterCorp third quarter 2024 results conference call. At this time, our 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 need assistance, please press star zero for the operator. This call is being recorded on Thursday, October 31st, 2024. I would now like to turn the conference over to Sophia Bazoukas. Please go ahead.

Thank you, and good morning. Welcome to Spin Master's Financial Results Conference Call for the third quarter of 2024. I'm 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 Plus. 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 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 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 in our earnings release dated October 30, 2024. Please note that Spin Master reports in U.S. dollars and all other amounts to lead today are expressed in U.S. currency unless otherwise noted. I would like to turn the call over to Max.

Good morning. Thank you for joining us. We are pleased with our third quarter results, increasing our total revenue by 25%, driven by a strong performance in both Speedmaster's Toy Creative Center and Melissa & Doug. We generated sales growth across major markets, reflecting our continued commitment to creating innovative products, powerful global brands, and magical play experiences. Both entertainment and digital games revenue declined this quarter. In entertainment, we were lapping distribution revenue from the highly successful Paw movie launched last year. In digital games, we saw lower in-game purchases within Toca Boca World. We will get into this later in the call. Excluding Melissa and Doug, the Toy Creative Center had a strong quarter with gross product sales just up over 9%. Much of our growth is due to the strong customer support for innovation in our portfolio, including the new Hatchimals Big Egg, Unicorn Academy, Disney Bitsy, the Hexpot Gecko, and Miss Rachel. Many of these stories have landed on retailers' most wanted toy lists for the holidays. Melissa & Doug grew gross product sales double digits for the second consecutive quarter. Melissa & Doug's results demonstrate the strength of the brand, not only for evergreen items, but also for new products such as Sticker Wow and Blockables. According to Circana Data, Speedmaster's POS excluding Melissa & Doug was down 1.3%, in line with the G11 toy market and a significant improvement compared to the first half. We saw very positive POS for Melissa & Doug in the quarter, with growth of 7.4% per cercana. Melissa & Doug saw strong POS during Amazon Prime Day and week, with growth over more than 30% compared to 2023. Adding in Melissa & Doug's POS, we ended up Q3 up 23.3% globally. We maintained our position as a number four corporate manufacturer in the quarter. The highly anticipated Miss Rachel toy line has been an instant sensation, exceeding our expectations. First for Canna, Miss Rachel was a number one new license in the US toy industry in Q3. And this is incredible. Considering these results only reflect online pre-sales and one day of fully set product at retail. Walmart shared with us that Ms. Rachel was the most successful pre-sale for any toy line in their history. Ms. Rachel marks the first collaboration between Spin Master and Melissa & Doug where our team jointly developed a product line. The future looks really bright for Ms. Rachel in 2025. The combination of Spin Master and Melissa & Doug has made us a powerful player in the infant, toddler, and preschool category. In the U.S., in September, per Cercana, we claimed six of the top ten fastest-selling new toys in the category, including three Paw Patrol and three Ms. Rachel items. As expected, Paw Patrol POS was down 4.1% in the quarter, as we are comparing against the movie line in Q3 last year. We have a robust fourth-quarter global marketing campaign to support the entire Paw franchise, which is helping to drive purchase intent for the holidays. The results thus far have been very positive. As I mentioned, we saw really positive Melissa and Doug POS growth of 7.4% in the quarter. In the US, Melissa and Doug was also the top growing toy property in the quarter in the four weeks ending October 12th and has solid momentum going into the holidays. The Melissa and Doug integration is going well and we have achieved several significant milestones on our journey to bring our two companies together. Earlier this year, we prioritized increasing Melissa & Doc's presence in Canada and Mexico, utilizing our footprint and customer relationships, and are already seeing positive revenue growth. We recently announced our plans to accelerate distribution for the Melissa & Doc line internationally by leveraging our global footprint, combined with Melissa & Doc's e-commerce excellence. Within vehicles, Monster Jam continues to demonstrate outstanding performance, growing POS by 16.5% globally in the quarter and outperforming the category, Berserkana. In activities, Kinetic Sand had a very strong quarter with POS growing 19% compared to a decline of 3.6% in the arts and crafts category, Berserkana. Within dolls, Unicorn Academy is a completely new entry for us in a category where we have traditionally been challenged to compete. In Q3, Unicorn Academy's small dolls and unicorn assortment was a top 10 new item in the category and top three in the playset dolls and collectibles class in the U.S. for Cercana. As expected, entertainment revenue declined in Q3 as we were lapping revenue from the Palm movie launch in Q3 last year. Paw Patrol continues to be one of the top preschool shows globally, but we aren't taking our success for granted. We are continuing to produce content created specifically for YouTube, including two short-form series which are performing very well in terms of views and click-through rates. In 2025, we are partnering with Nickelodeon and Paramount to launch a global franchise marketing campaign to ensure that Paw Patrol maintains its decade-long run as a top preschool property globally. Unicorn Academy is a great showcase of how we are creating new IP. The franchise has exceeded our goals, including awareness, and the property reached 132 million gross viewing minutes in Q3. This quarter, we announced Netflix as Greenleaf Season 2. picking up an additional 16 episodes, which will debut in 2026. Unicorn Academy will have batch releases on Netflix for the next few years, as well as complimentary short-form digital content on YouTube and TikTok. We are disappointed in our performance in digital games this quarter, primarily due to the lower in-app purchases within Toca Boca World. After coming off high engagement levels at the end of Q2, We saw weakness in Q3 with revenue down 16.8% and Q3 average monthly active users at 57 million versus 60 million last year. We believe that free content in competitive products has given players less reason to spend and lower in-game purchases are driving revenue decline. Encouragingly, those consumers that are spending are spending at a slightly higher level than last year. we remain confident that we will get Toca Boca World back on track. Our team in Stockholm has been focusing on improving speed of delivery, including new features, brand collaborations, and community activations that will make the content more appealing, especially to first-time users, and improve shop awareness to drive free versus paid conversions. While we are seeing some short-term challenges, we just crossed a significant milestone of 1 billion downloads for Toca Boca World, a huge achievement for the Toca Boca studio. Toca Boca World continues to be, by a significant margin, the leader on premium and paid kids' digital mobile game content. Our Picnic subscription bundle grew subscribers and revenue in the quarter. In total, Sega Mini grew subscribers by 25%, from 340,000 last year to 434,000 this year. In Q1 2025, we will introduce the PO Academy gaming to picnic, driving further value for the bundle. PO Academy also increased subscriptions in the quarter and celebrated its one-year global launch anniversary. Engagement metrics remain high, and global play minutes grew sequentially. We released Rubik's Match globally mid-September. We are now driving user acquisition and continue to adjust the play experience to adapt to consumer behavior within the game environment. Although broader economic conditions remain a challenge, we are seeing the consumer gaining confidence heading into the holiday season. We expect the timing of spending in the U.S. to be influenced by the U.S. election and a shorter shopping period between U.S. Thanksgiving and Christmas. driving purchases later in the season. We have lined up the majority of our marketing to focus on when consumer intent is at its highest point within that window. Looking forward, we are reiterating our 2024 guidance and have continued confidence in the strength of our three creative centers and diversified portfolio. We are excited about our prospects for 2025. In toys, we have industry-leading disruptive innovation coming in our line combined with new licenses, including Miss Rachel and Dora the Explorer, as well as toys for theatrical releases, including Superman, How to Train Your Dragon, and the first feature film for Gabby's Dollhouse. In digital games, we expect that our investments in game development to gain further traction to drive incremental revenue and expand our player ecosystem. We firmly believe we are well positioned to continue to grow market share through the execution of our long-term strategy and focus on reimagining everyday play. With that, I will now turn it over to Mark.