Spin Master Corp.

Good morning, ladies and gentlemen, and welcome to the Spin Master Corp first quarter 2025 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 Thursday, May 1st, 2025. I would now like to turn the conference over to Sophia Bisoukis. Please go ahead.

Thank you, Joelle. Welcome to Spin Master's financial results conference call for the first quarter of 2025. 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 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 currently available information and assumptions that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such assumptions will prove to be correct and many factors could cause actual results to differ materially from those expected or implied by the forward-looking statements. As a result, you are cautioned not to place undue reliance on these forward-looking statements. For additional information on these assumptions and risks, please consult the cautionary statements regarding forward-looking information in our earnings release dated April 30, 2025. Except as may be required by law, Spin Master disclaims any intention to update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Please note that Spin Master reports in U.S. dollars and all other amounts today are expressed in U.S. currency unless otherwise noted. I would now like to turn the conference call over to Mac.

Good morning, and thanks for joining us. We had a solid start to 2025. And thanks to the efforts of our teams, we drove an increase in total revenue while also delivering increased profitability in the quarter. Our performance reflects the power of our three creative center approach and global appeal of our toy brands, entertainment content, and digital play experiences. We are pleased with our revenue performance from toys. Toy gross product sales increased just under 19%. demonstrating our team's commitment to innovation, the expansion of licensed partnerships, team's commitment to continue momentum of our core brands, including Liz and Doug, which grew year over year. Several global theatrical releases for which we have licensed products began to drive revenue. In Q1, Superman and How to Train Your Dragon began shipping, and Jurassic World and Gabby's Dollhouse will ship later this year. From a POS perspective, SpinMaster's POS was down 6.4% per cercana. In comparison, the industry's POS was up 1.1%. It is important to note that the majority of the industry's growth was driven by adult targeted building sets, strategic trading cards, and sports trading cards, categories in which SpinMaster does not compete. We capture market share in many of the categories we play in, including vehicles, plush, dolls, and infant-toddler preschool. In fact, we retained our leadership position in the infant-toddler preschool category thanks to the combination of our strong-owned NIP license, including Paw Patrol, Liz and Duck, Miss Rachel, and Gabby's Dollhouse. Let me now address the issue regarding our toy business that I am sure is on everyone's minds. U.S. tariffs on China and other countries. The timing, extent, and enforcement of the potential tariffs on goods entering the U.S. remains very fluid, and we continue to monitor trade policy developments closely. The industry is working hard to get the message across, which is, very simply put, save Santa's supply chain. Given these complexities and uncertainty related to the implementation of global tariffs, we are withdrawing our 2025 guidance. Now, let me tell you what we are doing to mitigate the impacts of tariffs based on what is within our control. Our actions break down into four primary buckets, procurement, supply chain, pricing, and cost management. Regarding procurement, over the past decade, we have built a diversified global toy supply chain. Since the imposition of tariffs, we have aggressively sought to move more production for the U.S. market out of China for the second half of 2025, primarily by increasing production in Vietnam as well as India, Mexico, and Indonesia. This puts us in a much stronger position than many others in the industry. China source production for 25 will, where possible, be focused on non-US markets. Our major theatrical releases this year are, for the most part, coming in from outside of China. We have been operating in Vietnam for close to 10 years, Mexico eight years, India seven years, and as you can tell, we're far more established across these markets and with more capacity than most of our competitors, which represents a potential opportunity for us. From a supply chain perspective, we are actively looking at managing our inventory levels globally by moving non-tariff inventory from Canada, Mexico, and Europe to meet U.S. demand. We are also looking at different shipping methodologies to minimize the impact of the tariffs on retailers and ultimately consumers. I want to thank our global procurement supply chain and IT teams who have been working tirelessly to make this happen. These actions aim to preserve margins where possible, protect and potentially grow the company's market share, and meet consumer demand. And while we are able to leverage manufacturing from other regions in our global supply chain footprint, many toy companies cannot. We expect that there could be gaps in inventory availability in the fall. and these gaps might create opportunities for us. Now, despite these mitigation efforts, there will still be a negative impact to profitability. Neither we nor our retail partners will be able to fully absorb the higher tariff costs. Cost increases cannot be upset, that cannot be upset, will result in higher prices to our customers and will likely be passed on to the end consumers in the U.S. We are currently in discussions with retailers regarding price increases, and we remain focused on maintaining price competitiveness and delivering strong value propositions across our portfolio with particular emphasis on lower price points. Now, regardless of the level of the price increase, we need to aggressively manage cost. We are seeking to manage profitability and liquidity through cost takeout and cap as reduction to protect profitability margins and cash flow, and Mark will comment on this more specifically later. Within entertainment, we are continuing to develop our third Paw Patrol movie, which will launch in theaters in July 26, as well as new seasons for both Paw Patrol and Rubble and Crew. We are excited to begin showing seasons one and two of Paw Patrol on Netflix in the U.S. for the first time, and it starts in July. Turning to Unicorn Academy, we continue to expand the linear distribution and just dropped the first of two specials planned for 2025 on April 5, on Netflix, which once again entered the top 10 kids show in many markets. We spoke to you in February about our strategy in digital games to refocus on Toca Boca and Picnic in 2025. That strategic focus and investment has begun to deliver results as we recorded the highest revenue for digital games in the past eight quarters. Within Toca Boca world, our new features and new content are built upon our new and evolving live services tech stack, which is allowing us to release at a faster pace and rapidly testing what resonates with our global player community. We are extremely pleased with some of the metrics that we're seeing, including higher average revenue per paying user. Within BICNIC, we have expanded the app bundle offering to include Paw Patrol Academy, providing even greater value. We have seen solid cost per acquisition metrics from POA Academy showing demand for our branded IP. We remain committed to delivering on our own purpose of creating magical play experiences for kids and families around the world. Our ability to innovate and to broaden our portfolio supported by our geographic footprint, talented team, and strong financial position gives us confidence that we can continue to deliver long-term growth and shareholder value. Before I turn it over to Mark, I want to take a moment to recognize his significant contribution to Spin Master as he looks forward to his retirement as CFO. This will be Mark's final earnings call, and I want to thank him for helping us grow, expand, and mature to the leadership position we hold today. Mark has helped Spin Master build a strong foundation, financial platform that provides us with the stability to weather a crisis such as the one before us, and provides BinMasher with the financial and operational flexibility we need. On behalf of our founders, our board, and our executive leadership team, thank you, Mark. I also want to welcome Jonathan Reuter, who will be joining us in mid-May as our new CFO. Jonathan brings a wealth of experience in finance, operational leadership, M&A, and capital markets. He has a deep understanding of the consumer packaged goods industry and has a proven track record of supporting the expansion and growth of mid-sized companies. You will have an opportunity to meet Jonathan in the coming weeks. And with that, I will now turn it over to Mark.