Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries JAKKS Pacific Reports Second Quarter 2022 Financial Results By: JAKKS Pacific, Inc. via Business Wire July 27, 2022 at 16:05 PM EDT Highest Q2 Net Sales and Operating Income in Company History JAKKS Pacific, Inc. (NASDAQ: JAKK) today reported financial results for the second quarter ended June 30, 2022. Second Quarter 2022 Overview Net sales were $220.4 million, a year-over-year increase of 96.2% Toys/Consumer Products were $148.9 million, a year-over-year increase of 82.6% Costumes were $71.6 million, a year-over-year increase of 132.2% Gross margin of 27.6%, down 77 basis points vs. Q2 2021 Operating income of $23.7 million (10.7% of net sales) vs. $1.8 million (1.6% of net sales) in Q2 2021 Net income attributable to common stockholders of $26.2 million or $2.61 per diluted share, compared to a net loss attributable to common stockholders of $15.4 million or $2.48 per share in Q2 2021 Adjusted net income attributable to common stockholders (a non-GAAP measure) of $21.1 million or $2.10 per diluted share, compared to an adjusted net loss attributable to common stockholders of $2.3 million or $0.38 per share in Q2 2021 Adjusted EBITDA (a non-GAAP measure) of $27.1 million, vs. $5.0 million in Q2 2021 Management Commentary “Our past quarter’s results are extremely gratifying,” said Stephen Berman, CEO of JAKKS Pacific. “The teams collaborated and executed at the highest level – chasing exceptional demand for our product, and relentlessly engaging with our manufacturers, customers and vendors to set everyone up for a great back-part of the year. We’re excited to continue to delight our consumers with a tremendous offering across our toy, consumer product and Halloween ranges, both on-shelf and on-line, and in the US and internationally. “During the quarter we continued to see solid consumer demand across most of our major toy businesses, especially with Disney’s Encanto™ and Sega’s Sonic the Hedgehog®. Our Costume business shipped over $71 million, the highest Q2 shipment level since Disguise joined JAKKS in 2008. Despite the continuation of supply-chain cost pressures, we nonetheless recorded our first profitable second quarter in 10 years. We have also accelerated our importation of product to support the second half of the year and mitigate our traffic at the ports during the peak season. “We’re pleased to share that we utilized some of the proceeds of our recent results to make an optional $10 million pay-down against our long-term debt, mitigating some of the impact rising interest rates have on our cash interest expense.” Second Quarter 2022 Results Net sales for the second quarter of 2022 were $220.4 million up 96% versus $112.4 million last year. The Toys/Consumer Products segment sales were up 83% globally (92% North America; 38% International) and sales of Disguise costumes were up 132% compared to last year (>100% North America; >250% International). Year-to-date Toys/Consumer Products sales were up 61% compared to 2021. Year-to-date the Costumes segment was up 134% compared to 2021. Total shipments for the first-half of the year exceeded $300 million for the first time in the company’s history. Trailing twelve months net income of $55.5 million, compared to a net loss of $18.0 million in the twelve months ended June 30, 2021. Trailing twelve months adjusted EBITDA of $75.7 million (9.9% of net sales) up 54% from $49.1 million (8.7% of net sales) in the trailing twelve months ended June 30, 2021. Balance Sheet Highlights The Company’s cash and cash equivalents (including restricted cash) totaled $62.3 million as of June 30, 2022 compared to $38.3 million as of June 30, 2021, and $45.3 million as of December 31, 2021. Total debt was $84.9 million, compared to $129.3 million as of June 30, 2021, and $95.5 million as of December 31, 2021. Total debt includes the amount outstanding under the Company's term loan, net of unamortized discounts. Working capital (not including cash) totaled $54.4 million, up from $7.5 million a year ago. Inventory was a meaningful driver of the increase, totaling $123.7 million, of which $36.3 million was in-transit to our distribution centers, compared to $60.6 million in total inventory as of June 30, 2021. Use of Non-GAAP Financial Information In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached “Reconciliation of Non-GAAP Financial Information.” “Total liquidity” is calculated as cash and cash equivalents, plus availability under the Company’s $67.5 million revolving credit facility. Conference Call Live Webcast JAKKS Pacific, Inc. invites analysts, investors and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on July 27, 2022. A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at www.jakks.com/investors. To access the call by phone, please go to this link (registration link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors). About JAKKS Pacific, Inc. JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific’s popular proprietary brands include: Creepy Crawlers®, Eyeclops®, Fly Wheel®, Perfectly Cute®, ReDo Skateboard Co.®, WeeeDo™, Xtreme Power®, Disguise®, Maui®, Moose Mountain®, Kids Only!®; a wide range of entertainment-inspired products featuring premier licensed properties; and C’est Moi®, a New Generation of Clean Beauty®. Through JAKKS Cares, the company’s commitment to philanthropy, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkstoys), Twitter (@jakkstoys) and Facebook (JAKKS Pacific). Forward Looking Statements This press release may contain “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that the Recapitalization transaction or any future transactions will result in future growth or success of JAKKS. The “forward-looking statements” contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release. JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2022 2021 2021 (In thousands) Assets Current assets: Cash and cash equivalents $ 62,283 $ 37,511 $ 44,521 Restricted cash - 830 811 Accounts receivable, net 164,020 107,898 147,394 Inventory 123,666 60,580 83,954 Prepaid expenses and other assets 14,519 32,495 10,877 Total current assets 364,488 239,314 287,557 Property and equipment 128,844 118,804 121,945 Less accumulated depreciation and amortization 112,601 104,147 108,796 Property and equipment, net 16,243 14,657 13,149 Operating lease right-of-use assets, net 24,584 20,688 16,950 Goodwill 35,083 35,083 35,083 Intangibles and other assets, net 3,239 5,389 4,308 Total assets $ 443,637 $ 315,131 $ 357,047 Liabilities, Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable $ 86,660 $ 49,206 $ 50,237 Accounts payable - Meisheng (related party) 42,254 19,603 15,894 Accrued expenses 58,189 37,573 47,071 Reserve for sales returns and allowances 45,625 42,282 46,285 Income taxes payable 2,333 703 1,004 Short term operating lease liabilities 10,239 10,481 10,477 Short term debt, net 2,475 33,596 2,104 Total current liabilities 247,775 193,444 173,072 Long term operating lease liabilities 15,406 12,276 8,039 Debt, non-current portion, net 82,453 95,735 93,415 Preferred stock derivative liability 15,898 16,976 21,282 Income taxes payable 215 215 215 Deferred income taxes, net 51 123 51 Total liabilities 361,798 318,769 296,074 Preferred stock accrued dividends 3,771 2,397 3,074 Stockholders' equity: Common stock, $.001 par value 10 7 10 Additional paid-in capital 273,625 241,405 272,941 Accumulated deficit (180,680 ) (236,593 ) (203,431 ) Accumulated other comprehensive loss (15,765 ) (12,124 ) (12,952 ) Total JAKKS Pacific, Inc. stockholders' equity 77,190 (7,305 ) 56,568 Non-controlling interests 878 1,270 1,331 Total stockholders' equity 78,068 (6,035 ) 57,899 Total liabilities, preferred stock and stockholders' equity $ 443,637 $ 315,131 $ 357,047 Supplemental Balance Sheet and Cash Flow Data (Unaudited) June 30, Key Balance Sheet Data: 2022 2021 Accounts receivable, net days of sales outstanding (DSO) 68 87 Inventory turnover (DSI) 71 69 Six Months Ended June 30, Condensed Cash Flow Data: 2022 2021 (In thousands) Cash flows provided by (used in) operating activities $ 36,549 $ (18,531 ) Cash flows used in investing activities (5,274 ) (3,693 ) Cash flows used in financing activities and other (14,324 ) (32,128 ) Increase/(decrease) in cash, cash equivalents and restricted cash $ 16,951 $ (54,352 ) Capital expenditures $ (5,276 ) $ (3,725 ) JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ (%) 2022 2021 Δ (%) (In thousands, except per share data) (In thousands, except per share data) Net sales $ 220,422 $ 112,352 96 % $ 341,303 $ 196,195 74 % Less: Cost of sales Cost of goods 121,850 61,489 98 193,908 105,538 84 Royalty expense 35,704 16,784 113 53,394 29,295 82 Amortization of tools and molds 1,978 2,182 (9 ) 3,194 3,371 (5 ) Cost of sales 159,532 80,455 98 250,496 138,204 81 Gross profit 60,890 31,897 91 90,807 57,991 57 Direct selling expenses 6,838 6,286 9 11,740 13,088 (10 ) General and administrative expenses 29,514 23,193 27 54,667 44,604 23 Depreciation and amortization 578 597 (3 ) 1,174 1,201 (2 ) Selling, general and administrative expenses 36,930 30,076 23 67,581 58,893 15 Intangibles impairment 300 - nm 300 - nm Income (loss) from operations 23,660 1,821 1,199 22,926 (902 ) nm Other income (expense): Other income (expense), net 183 72 154 269 127 112 Change in fair value of convertible senior notes - (3,797 ) (100 ) - (12,844 ) (100 ) Change in fair value of preferred stock derivative liability 6,029 (1,539 ) nm 5,384 (8,914 ) nm Loss on debt extinguishment - (7,351 ) (100 ) - (7,351 ) (100 ) Interest income 6 4 50 9 6 50 Interest expense (2,337 ) (4,370 ) (47 ) (4,539 ) (9,245 ) (51 ) Income (loss) before provision for (benefit from) income taxes 27,541 (15,160 ) nm 24,049 (39,123 ) nm Provision for (benefit from) income taxes 1,334 (100 ) nm 1,751 (12 ) nm Net income (loss) 26,207 (15,060 ) nm 22,298 (39,111 ) nm Net income (loss) attributable to non-controlling interests (353 ) 24 nm (453 ) 59 nm Net income (loss) attributable to JAKKS Pacific, Inc. $ 26,560 $ (15,084 ) nm% $ 22,751 $ (39,170 ) nm% Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) nm% $ 22,054 $ (39,827 ) nm% Earnings (loss) per share - basic $ 2.73 $ (2.48 ) $ 2.30 $ (6.86 ) Shares used in earnings (loss) per share - basic 9,588 6,220 9,588 5,802 Earnings (loss) per share - diluted $ 2.61 $ (2.48 ) $ 2.21 $ (6.86 ) Shares used in earnings (loss) per share - diluted 10,037 6,220 9,978 5,802 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ bps 2022 2021 Δ bps Fav/(Unfav) Fav/(Unfav) Net sales 100.0 % 100.0 % - 100.0 % 100.0 % - Less: Cost of sales Cost of goods 55.3 54.7 (55 ) 56.8 53.7 (302 ) Royalty expense 16.2 15.0 (126 ) 15.6 15.0 (71 ) Amortization of tools and molds 0.9 1.9 104 1.0 1.7 78 Cost of sales 72.4 71.6 (77 ) 73.4 70.4 (295 ) Gross profit 27.6 28.4 (77 ) 26.6 29.6 (295 ) Direct selling expenses 3.1 5.6 249 3.4 6.7 323 General and administrative expenses 13.4 20.7 725 16.1 22.7 672 Depreciation and amortization 0.3 0.5 27 0.3 0.6 27 Selling, general and administrative expenses 16.8 26.8 1,002 19.8 30.0 1,022 Intangibles impairment 0.1 - nm 0.1 - nm Income (loss) from operations 10.7 1.6 911 6.7 (0.4 ) nm Other income (expense): Other income (expense), net 0.1 0.1 - - Change in fair value of convertible senior notes - (3.4 ) - (6.6 ) Change in fair value of preferred stock derivative liability 2.7 (1.4 ) 1.6 (4.5 ) Loss on debt extinguishment - (6.5 ) - (3.8 ) Interest income - - - - Interest expense (1.1 ) (3.9 ) (1.3 ) (4.7 ) Income (loss) before provision for (benefit from) income taxes 12.4 (13.5 ) 7.0 (20.0 ) Provision for (benefit from) income taxes 0.6 (0.1 ) 0.4 - Net income (loss) 11.8 (13.4 ) 6.6 (20.0 ) Net income (loss) attributable to non-controlling interests (0.2 ) - (0.1 ) - Net income (loss) attributable to JAKKS Pacific, Inc. 12.0 % (13.4 )% 6.7 % (20.0 )% Net income (loss) attributable to common stockholders 11.9 % (13.7 )% 6.5 % (20.3 )% JAKKS Pacific, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Information (Unaudited) Reconciliation of GAAP to Non-GAAP measures: This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis. Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ ($) 2022 2021 Δ ($) (In thousands, except per share data) (In thousands, except per share data) EBITDA and Adjusted EBITDA Net income (loss) $ 26,207 $ (15,060 ) $ 41,267 $ 22,298 $ (39,111 ) $ 61,409 Interest expense 2,337 4,370 (2,033 ) 4,539 9,245 (4,706 ) Interest income (6 ) (4 ) (2 ) (9 ) (6 ) (3 ) Provision for (benefit from) income taxes 1,334 (100 ) 1,434 1,751 (12 ) 1,763 Depreciation and amortization 2,556 2,779 (223 ) 4,368 4,572 (204 ) EBITDA 32,428 (8,015 ) 40,443 32,947 (25,312 ) 58,259 Adjustments: Other (income) expense, net (183 ) (72 ) (111 ) (269 ) (127 ) (142 ) Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Adjusted EBITDA $ 27,122 $ 4,983 $ 22,139 $ 29,070 $ 2,535 $ 26,535 Adjusted EBITDA/Net sales % 12.3 % 4.4 % 787 bps 8.5 % 1.3 % 723 bps TTM EBITDA and TTM Adjusted EBITDA TTM Net income (loss) $ 55,521 $ (17,989 ) $ 73,510 Interest expense 9,398 19,717 (10,319 ) Interest income (16 ) (11 ) (5 ) Provision for income taxes 1,989 175 1,814 Depreciation and amortization 10,047 11,047 (1,000 ) TTM EBITDA 76,939 12,939 64,000 Adjustments: Other (income) expense, net (588 ) (374 ) (214 ) Restricted stock compensation expense 3,353 2,102 1,251 Change in fair value of convertible senior notes 3,575 15,057 (11,482 ) Change in fair value of preferred stock derivative liability (1,078 ) 13,812 (14,890 ) Employee Retention Credit/Gov't Employment Support (249 ) (1,900 ) 1,651 Gain on loan forgiveness (6,206 ) - (6,206 ) Loss on debt extinguishment - 7,351 (7,351 ) Pandemic related charges - 145 (145 ) TTM Adjusted EBITDA $ 75,746 49,132 $ 26,614 54 % TTM Adjusted EBITDA/TTM Net sales % 9.9 % 8.7 % 122 bps Adjusted net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) $ 41,624 $ 22,054 $ (39,827 ) $ 61,881 Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Tax impact of additional charges - - - - - - Adjusted net income (loss) attributable to common stockholders $ 21,086 $ (2,345 ) $ 23,431 $ 18,446 $ (11,853 ) $ 30,299 Adjusted earnings (loss) per share - basic $ 2.20 $ (0.38 ) $ 2.58 $ 1.92 $ (2.04 ) $ 3.96 Shares used in adjusted earnings (loss) per share - basic 9,588 6,220 3,368 9,588 5,802 3,786 Adjusted earnings (loss) per share - diluted $ 2.10 $ (0.38 ) $ 2.48 $ 1.85 $ (2.04 ) $ 3.89 Shares used in adjusted earnings (loss) per share - diluted 10,037 �� 6,220 3,817 9,978 5,802 4,176 JAKKS Pacific, Inc. and Subsidiaries Net Sales by Division and Geographic Region (In thousands) QTD Q2 (In thousands) YTD Q2 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Toys/Consumer Products $ 148,860 $ 81,538 $ 56,214 82.6 % 45.0 % Toys/Consumer Products $ 259,983 $ 161,413 $ 118,779 61.1 % 35.9 % Dolls, Role-Play/Dress Up 102,186 49,278 32,821 107.4 % 50.1 % Dolls, Role-Play/Dress Up 164,192 94,433 72,895 73.9 % 29.5 % Action Play & Collectibles 37,170 19,622 10,699 89.4 % 83.4 % Action Play & Collectibles 68,868 36,027 20,353 91.2 % 77.0 % Outdoor/Seasonal Toys 9,504 12,638 12,694 -24.8 % -0.4 % Outdoor/Seasonal Toys 26,923 30,953 25,531 -13.0 % 21.2 % Costumes 71,562 30,814 22,544 132.2 % 36.7 % Costumes 81,320 34,782 26,536 133.8 % 31.1 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 United States $ 192,484 $ 95,265 $ 66,777 102.1 % 42.7 % United States $ 289,534 $ 164,181 $ 118,695 76.4 % 38.3 % Europe 14,447 9,930 5,761 45.5 % 72.4 % Europe 27,836 17,267 13,379 61.2 % 29.1 % Canada 5,537 2,208 2,684 150.8 % -17.7 % Canada 8,916 4,309 5,032 106.9 % -14.4 % Latin America 3,823 1,165 1,082 228.2 % 7.7 % Latin America 6,208 3,620 2,082 71.5 % 73.9 % Asia 2,363 2,164 1,462 9.2 % 48.0 % Asia 4,439 3,579 3,232 24.0 % 10.7 % Australia & New Zealand 1,582 1,249 802 26.7 % 55.7 % Australia & New Zealand 3,073 2,437 2,333 26.1 % 4.5 % Middle East & Africa 186 371 190 -49.9 % 95.3 % Middle East & Africa 1,297 802 562 61.7 % 42.7 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 North America $ 198,021 $ 97,473 $ 69,461 103.2 % 40.3 % North America $ 298,450 $ 168,490 $ 123,727 77.1 % 36.2 % International 22,401 14,879 9,297 50.6 % 60.0 % International 42,853 27,705 21,588 54.7 % 28.3 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005977/en/Contacts JAKKS Pacific Investor Relations (424) 268-9567 Lucas Natalini investors@jakks.net Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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JAKKS Pacific Reports Second Quarter 2022 Financial Results By: JAKKS Pacific, Inc. via Business Wire July 27, 2022 at 16:05 PM EDT Highest Q2 Net Sales and Operating Income in Company History JAKKS Pacific, Inc. (NASDAQ: JAKK) today reported financial results for the second quarter ended June 30, 2022. Second Quarter 2022 Overview Net sales were $220.4 million, a year-over-year increase of 96.2% Toys/Consumer Products were $148.9 million, a year-over-year increase of 82.6% Costumes were $71.6 million, a year-over-year increase of 132.2% Gross margin of 27.6%, down 77 basis points vs. Q2 2021 Operating income of $23.7 million (10.7% of net sales) vs. $1.8 million (1.6% of net sales) in Q2 2021 Net income attributable to common stockholders of $26.2 million or $2.61 per diluted share, compared to a net loss attributable to common stockholders of $15.4 million or $2.48 per share in Q2 2021 Adjusted net income attributable to common stockholders (a non-GAAP measure) of $21.1 million or $2.10 per diluted share, compared to an adjusted net loss attributable to common stockholders of $2.3 million or $0.38 per share in Q2 2021 Adjusted EBITDA (a non-GAAP measure) of $27.1 million, vs. $5.0 million in Q2 2021 Management Commentary “Our past quarter’s results are extremely gratifying,” said Stephen Berman, CEO of JAKKS Pacific. “The teams collaborated and executed at the highest level – chasing exceptional demand for our product, and relentlessly engaging with our manufacturers, customers and vendors to set everyone up for a great back-part of the year. We’re excited to continue to delight our consumers with a tremendous offering across our toy, consumer product and Halloween ranges, both on-shelf and on-line, and in the US and internationally. “During the quarter we continued to see solid consumer demand across most of our major toy businesses, especially with Disney’s Encanto™ and Sega’s Sonic the Hedgehog®. Our Costume business shipped over $71 million, the highest Q2 shipment level since Disguise joined JAKKS in 2008. Despite the continuation of supply-chain cost pressures, we nonetheless recorded our first profitable second quarter in 10 years. We have also accelerated our importation of product to support the second half of the year and mitigate our traffic at the ports during the peak season. “We’re pleased to share that we utilized some of the proceeds of our recent results to make an optional $10 million pay-down against our long-term debt, mitigating some of the impact rising interest rates have on our cash interest expense.” Second Quarter 2022 Results Net sales for the second quarter of 2022 were $220.4 million up 96% versus $112.4 million last year. The Toys/Consumer Products segment sales were up 83% globally (92% North America; 38% International) and sales of Disguise costumes were up 132% compared to last year (>100% North America; >250% International). Year-to-date Toys/Consumer Products sales were up 61% compared to 2021. Year-to-date the Costumes segment was up 134% compared to 2021. Total shipments for the first-half of the year exceeded $300 million for the first time in the company’s history. Trailing twelve months net income of $55.5 million, compared to a net loss of $18.0 million in the twelve months ended June 30, 2021. Trailing twelve months adjusted EBITDA of $75.7 million (9.9% of net sales) up 54% from $49.1 million (8.7% of net sales) in the trailing twelve months ended June 30, 2021. Balance Sheet Highlights The Company’s cash and cash equivalents (including restricted cash) totaled $62.3 million as of June 30, 2022 compared to $38.3 million as of June 30, 2021, and $45.3 million as of December 31, 2021. Total debt was $84.9 million, compared to $129.3 million as of June 30, 2021, and $95.5 million as of December 31, 2021. Total debt includes the amount outstanding under the Company's term loan, net of unamortized discounts. Working capital (not including cash) totaled $54.4 million, up from $7.5 million a year ago. Inventory was a meaningful driver of the increase, totaling $123.7 million, of which $36.3 million was in-transit to our distribution centers, compared to $60.6 million in total inventory as of June 30, 2021. Use of Non-GAAP Financial Information In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached “Reconciliation of Non-GAAP Financial Information.” “Total liquidity” is calculated as cash and cash equivalents, plus availability under the Company’s $67.5 million revolving credit facility. Conference Call Live Webcast JAKKS Pacific, Inc. invites analysts, investors and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on July 27, 2022. A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at www.jakks.com/investors. To access the call by phone, please go to this link (registration link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors). About JAKKS Pacific, Inc. JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific’s popular proprietary brands include: Creepy Crawlers®, Eyeclops®, Fly Wheel®, Perfectly Cute®, ReDo Skateboard Co.®, WeeeDo™, Xtreme Power®, Disguise®, Maui®, Moose Mountain®, Kids Only!®; a wide range of entertainment-inspired products featuring premier licensed properties; and C’est Moi®, a New Generation of Clean Beauty®. Through JAKKS Cares, the company’s commitment to philanthropy, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkstoys), Twitter (@jakkstoys) and Facebook (JAKKS Pacific). Forward Looking Statements This press release may contain “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that the Recapitalization transaction or any future transactions will result in future growth or success of JAKKS. The “forward-looking statements” contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release. JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2022 2021 2021 (In thousands) Assets Current assets: Cash and cash equivalents $ 62,283 $ 37,511 $ 44,521 Restricted cash - 830 811 Accounts receivable, net 164,020 107,898 147,394 Inventory 123,666 60,580 83,954 Prepaid expenses and other assets 14,519 32,495 10,877 Total current assets 364,488 239,314 287,557 Property and equipment 128,844 118,804 121,945 Less accumulated depreciation and amortization 112,601 104,147 108,796 Property and equipment, net 16,243 14,657 13,149 Operating lease right-of-use assets, net 24,584 20,688 16,950 Goodwill 35,083 35,083 35,083 Intangibles and other assets, net 3,239 5,389 4,308 Total assets $ 443,637 $ 315,131 $ 357,047 Liabilities, Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable $ 86,660 $ 49,206 $ 50,237 Accounts payable - Meisheng (related party) 42,254 19,603 15,894 Accrued expenses 58,189 37,573 47,071 Reserve for sales returns and allowances 45,625 42,282 46,285 Income taxes payable 2,333 703 1,004 Short term operating lease liabilities 10,239 10,481 10,477 Short term debt, net 2,475 33,596 2,104 Total current liabilities 247,775 193,444 173,072 Long term operating lease liabilities 15,406 12,276 8,039 Debt, non-current portion, net 82,453 95,735 93,415 Preferred stock derivative liability 15,898 16,976 21,282 Income taxes payable 215 215 215 Deferred income taxes, net 51 123 51 Total liabilities 361,798 318,769 296,074 Preferred stock accrued dividends 3,771 2,397 3,074 Stockholders' equity: Common stock, $.001 par value 10 7 10 Additional paid-in capital 273,625 241,405 272,941 Accumulated deficit (180,680 ) (236,593 ) (203,431 ) Accumulated other comprehensive loss (15,765 ) (12,124 ) (12,952 ) Total JAKKS Pacific, Inc. stockholders' equity 77,190 (7,305 ) 56,568 Non-controlling interests 878 1,270 1,331 Total stockholders' equity 78,068 (6,035 ) 57,899 Total liabilities, preferred stock and stockholders' equity $ 443,637 $ 315,131 $ 357,047 Supplemental Balance Sheet and Cash Flow Data (Unaudited) June 30, Key Balance Sheet Data: 2022 2021 Accounts receivable, net days of sales outstanding (DSO) 68 87 Inventory turnover (DSI) 71 69 Six Months Ended June 30, Condensed Cash Flow Data: 2022 2021 (In thousands) Cash flows provided by (used in) operating activities $ 36,549 $ (18,531 ) Cash flows used in investing activities (5,274 ) (3,693 ) Cash flows used in financing activities and other (14,324 ) (32,128 ) Increase/(decrease) in cash, cash equivalents and restricted cash $ 16,951 $ (54,352 ) Capital expenditures $ (5,276 ) $ (3,725 ) JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ (%) 2022 2021 Δ (%) (In thousands, except per share data) (In thousands, except per share data) Net sales $ 220,422 $ 112,352 96 % $ 341,303 $ 196,195 74 % Less: Cost of sales Cost of goods 121,850 61,489 98 193,908 105,538 84 Royalty expense 35,704 16,784 113 53,394 29,295 82 Amortization of tools and molds 1,978 2,182 (9 ) 3,194 3,371 (5 ) Cost of sales 159,532 80,455 98 250,496 138,204 81 Gross profit 60,890 31,897 91 90,807 57,991 57 Direct selling expenses 6,838 6,286 9 11,740 13,088 (10 ) General and administrative expenses 29,514 23,193 27 54,667 44,604 23 Depreciation and amortization 578 597 (3 ) 1,174 1,201 (2 ) Selling, general and administrative expenses 36,930 30,076 23 67,581 58,893 15 Intangibles impairment 300 - nm 300 - nm Income (loss) from operations 23,660 1,821 1,199 22,926 (902 ) nm Other income (expense): Other income (expense), net 183 72 154 269 127 112 Change in fair value of convertible senior notes - (3,797 ) (100 ) - (12,844 ) (100 ) Change in fair value of preferred stock derivative liability 6,029 (1,539 ) nm 5,384 (8,914 ) nm Loss on debt extinguishment - (7,351 ) (100 ) - (7,351 ) (100 ) Interest income 6 4 50 9 6 50 Interest expense (2,337 ) (4,370 ) (47 ) (4,539 ) (9,245 ) (51 ) Income (loss) before provision for (benefit from) income taxes 27,541 (15,160 ) nm 24,049 (39,123 ) nm Provision for (benefit from) income taxes 1,334 (100 ) nm 1,751 (12 ) nm Net income (loss) 26,207 (15,060 ) nm 22,298 (39,111 ) nm Net income (loss) attributable to non-controlling interests (353 ) 24 nm (453 ) 59 nm Net income (loss) attributable to JAKKS Pacific, Inc. $ 26,560 $ (15,084 ) nm% $ 22,751 $ (39,170 ) nm% Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) nm% $ 22,054 $ (39,827 ) nm% Earnings (loss) per share - basic $ 2.73 $ (2.48 ) $ 2.30 $ (6.86 ) Shares used in earnings (loss) per share - basic 9,588 6,220 9,588 5,802 Earnings (loss) per share - diluted $ 2.61 $ (2.48 ) $ 2.21 $ (6.86 ) Shares used in earnings (loss) per share - diluted 10,037 6,220 9,978 5,802 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ bps 2022 2021 Δ bps Fav/(Unfav) Fav/(Unfav) Net sales 100.0 % 100.0 % - 100.0 % 100.0 % - Less: Cost of sales Cost of goods 55.3 54.7 (55 ) 56.8 53.7 (302 ) Royalty expense 16.2 15.0 (126 ) 15.6 15.0 (71 ) Amortization of tools and molds 0.9 1.9 104 1.0 1.7 78 Cost of sales 72.4 71.6 (77 ) 73.4 70.4 (295 ) Gross profit 27.6 28.4 (77 ) 26.6 29.6 (295 ) Direct selling expenses 3.1 5.6 249 3.4 6.7 323 General and administrative expenses 13.4 20.7 725 16.1 22.7 672 Depreciation and amortization 0.3 0.5 27 0.3 0.6 27 Selling, general and administrative expenses 16.8 26.8 1,002 19.8 30.0 1,022 Intangibles impairment 0.1 - nm 0.1 - nm Income (loss) from operations 10.7 1.6 911 6.7 (0.4 ) nm Other income (expense): Other income (expense), net 0.1 0.1 - - Change in fair value of convertible senior notes - (3.4 ) - (6.6 ) Change in fair value of preferred stock derivative liability 2.7 (1.4 ) 1.6 (4.5 ) Loss on debt extinguishment - (6.5 ) - (3.8 ) Interest income - - - - Interest expense (1.1 ) (3.9 ) (1.3 ) (4.7 ) Income (loss) before provision for (benefit from) income taxes 12.4 (13.5 ) 7.0 (20.0 ) Provision for (benefit from) income taxes 0.6 (0.1 ) 0.4 - Net income (loss) 11.8 (13.4 ) 6.6 (20.0 ) Net income (loss) attributable to non-controlling interests (0.2 ) - (0.1 ) - Net income (loss) attributable to JAKKS Pacific, Inc. 12.0 % (13.4 )% 6.7 % (20.0 )% Net income (loss) attributable to common stockholders 11.9 % (13.7 )% 6.5 % (20.3 )% JAKKS Pacific, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Information (Unaudited) Reconciliation of GAAP to Non-GAAP measures: This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis. Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ ($) 2022 2021 Δ ($) (In thousands, except per share data) (In thousands, except per share data) EBITDA and Adjusted EBITDA Net income (loss) $ 26,207 $ (15,060 ) $ 41,267 $ 22,298 $ (39,111 ) $ 61,409 Interest expense 2,337 4,370 (2,033 ) 4,539 9,245 (4,706 ) Interest income (6 ) (4 ) (2 ) (9 ) (6 ) (3 ) Provision for (benefit from) income taxes 1,334 (100 ) 1,434 1,751 (12 ) 1,763 Depreciation and amortization 2,556 2,779 (223 ) 4,368 4,572 (204 ) EBITDA 32,428 (8,015 ) 40,443 32,947 (25,312 ) 58,259 Adjustments: Other (income) expense, net (183 ) (72 ) (111 ) (269 ) (127 ) (142 ) Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Adjusted EBITDA $ 27,122 $ 4,983 $ 22,139 $ 29,070 $ 2,535 $ 26,535 Adjusted EBITDA/Net sales % 12.3 % 4.4 % 787 bps 8.5 % 1.3 % 723 bps TTM EBITDA and TTM Adjusted EBITDA TTM Net income (loss) $ 55,521 $ (17,989 ) $ 73,510 Interest expense 9,398 19,717 (10,319 ) Interest income (16 ) (11 ) (5 ) Provision for income taxes 1,989 175 1,814 Depreciation and amortization 10,047 11,047 (1,000 ) TTM EBITDA 76,939 12,939 64,000 Adjustments: Other (income) expense, net (588 ) (374 ) (214 ) Restricted stock compensation expense 3,353 2,102 1,251 Change in fair value of convertible senior notes 3,575 15,057 (11,482 ) Change in fair value of preferred stock derivative liability (1,078 ) 13,812 (14,890 ) Employee Retention Credit/Gov't Employment Support (249 ) (1,900 ) 1,651 Gain on loan forgiveness (6,206 ) - (6,206 ) Loss on debt extinguishment - 7,351 (7,351 ) Pandemic related charges - 145 (145 ) TTM Adjusted EBITDA $ 75,746 49,132 $ 26,614 54 % TTM Adjusted EBITDA/TTM Net sales % 9.9 % 8.7 % 122 bps Adjusted net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) $ 41,624 $ 22,054 $ (39,827 ) $ 61,881 Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Tax impact of additional charges - - - - - - Adjusted net income (loss) attributable to common stockholders $ 21,086 $ (2,345 ) $ 23,431 $ 18,446 $ (11,853 ) $ 30,299 Adjusted earnings (loss) per share - basic $ 2.20 $ (0.38 ) $ 2.58 $ 1.92 $ (2.04 ) $ 3.96 Shares used in adjusted earnings (loss) per share - basic 9,588 6,220 3,368 9,588 5,802 3,786 Adjusted earnings (loss) per share - diluted $ 2.10 $ (0.38 ) $ 2.48 $ 1.85 $ (2.04 ) $ 3.89 Shares used in adjusted earnings (loss) per share - diluted 10,037 �� 6,220 3,817 9,978 5,802 4,176 JAKKS Pacific, Inc. and Subsidiaries Net Sales by Division and Geographic Region (In thousands) QTD Q2 (In thousands) YTD Q2 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Toys/Consumer Products $ 148,860 $ 81,538 $ 56,214 82.6 % 45.0 % Toys/Consumer Products $ 259,983 $ 161,413 $ 118,779 61.1 % 35.9 % Dolls, Role-Play/Dress Up 102,186 49,278 32,821 107.4 % 50.1 % Dolls, Role-Play/Dress Up 164,192 94,433 72,895 73.9 % 29.5 % Action Play & Collectibles 37,170 19,622 10,699 89.4 % 83.4 % Action Play & Collectibles 68,868 36,027 20,353 91.2 % 77.0 % Outdoor/Seasonal Toys 9,504 12,638 12,694 -24.8 % -0.4 % Outdoor/Seasonal Toys 26,923 30,953 25,531 -13.0 % 21.2 % Costumes 71,562 30,814 22,544 132.2 % 36.7 % Costumes 81,320 34,782 26,536 133.8 % 31.1 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 United States $ 192,484 $ 95,265 $ 66,777 102.1 % 42.7 % United States $ 289,534 $ 164,181 $ 118,695 76.4 % 38.3 % Europe 14,447 9,930 5,761 45.5 % 72.4 % Europe 27,836 17,267 13,379 61.2 % 29.1 % Canada 5,537 2,208 2,684 150.8 % -17.7 % Canada 8,916 4,309 5,032 106.9 % -14.4 % Latin America 3,823 1,165 1,082 228.2 % 7.7 % Latin America 6,208 3,620 2,082 71.5 % 73.9 % Asia 2,363 2,164 1,462 9.2 % 48.0 % Asia 4,439 3,579 3,232 24.0 % 10.7 % Australia & New Zealand 1,582 1,249 802 26.7 % 55.7 % Australia & New Zealand 3,073 2,437 2,333 26.1 % 4.5 % Middle East & Africa 186 371 190 -49.9 % 95.3 % Middle East & Africa 1,297 802 562 61.7 % 42.7 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 North America $ 198,021 $ 97,473 $ 69,461 103.2 % 40.3 % North America $ 298,450 $ 168,490 $ 123,727 77.1 % 36.2 % International 22,401 14,879 9,297 50.6 % 60.0 % International 42,853 27,705 21,588 54.7 % 28.3 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005977/en/Contacts JAKKS Pacific Investor Relations (424) 268-9567 Lucas Natalini investors@jakks.net
JAKKS Pacific, Inc. (NASDAQ: JAKK) today reported financial results for the second quarter ended June 30, 2022. Second Quarter 2022 Overview Net sales were $220.4 million, a year-over-year increase of 96.2% Toys/Consumer Products were $148.9 million, a year-over-year increase of 82.6% Costumes were $71.6 million, a year-over-year increase of 132.2% Gross margin of 27.6%, down 77 basis points vs. Q2 2021 Operating income of $23.7 million (10.7% of net sales) vs. $1.8 million (1.6% of net sales) in Q2 2021 Net income attributable to common stockholders of $26.2 million or $2.61 per diluted share, compared to a net loss attributable to common stockholders of $15.4 million or $2.48 per share in Q2 2021 Adjusted net income attributable to common stockholders (a non-GAAP measure) of $21.1 million or $2.10 per diluted share, compared to an adjusted net loss attributable to common stockholders of $2.3 million or $0.38 per share in Q2 2021 Adjusted EBITDA (a non-GAAP measure) of $27.1 million, vs. $5.0 million in Q2 2021 Management Commentary “Our past quarter’s results are extremely gratifying,” said Stephen Berman, CEO of JAKKS Pacific. “The teams collaborated and executed at the highest level – chasing exceptional demand for our product, and relentlessly engaging with our manufacturers, customers and vendors to set everyone up for a great back-part of the year. We’re excited to continue to delight our consumers with a tremendous offering across our toy, consumer product and Halloween ranges, both on-shelf and on-line, and in the US and internationally. “During the quarter we continued to see solid consumer demand across most of our major toy businesses, especially with Disney’s Encanto™ and Sega’s Sonic the Hedgehog®. Our Costume business shipped over $71 million, the highest Q2 shipment level since Disguise joined JAKKS in 2008. Despite the continuation of supply-chain cost pressures, we nonetheless recorded our first profitable second quarter in 10 years. We have also accelerated our importation of product to support the second half of the year and mitigate our traffic at the ports during the peak season. “We’re pleased to share that we utilized some of the proceeds of our recent results to make an optional $10 million pay-down against our long-term debt, mitigating some of the impact rising interest rates have on our cash interest expense.” Second Quarter 2022 Results Net sales for the second quarter of 2022 were $220.4 million up 96% versus $112.4 million last year. The Toys/Consumer Products segment sales were up 83% globally (92% North America; 38% International) and sales of Disguise costumes were up 132% compared to last year (>100% North America; >250% International). Year-to-date Toys/Consumer Products sales were up 61% compared to 2021. Year-to-date the Costumes segment was up 134% compared to 2021. Total shipments for the first-half of the year exceeded $300 million for the first time in the company’s history. Trailing twelve months net income of $55.5 million, compared to a net loss of $18.0 million in the twelve months ended June 30, 2021. Trailing twelve months adjusted EBITDA of $75.7 million (9.9% of net sales) up 54% from $49.1 million (8.7% of net sales) in the trailing twelve months ended June 30, 2021. Balance Sheet Highlights The Company’s cash and cash equivalents (including restricted cash) totaled $62.3 million as of June 30, 2022 compared to $38.3 million as of June 30, 2021, and $45.3 million as of December 31, 2021. Total debt was $84.9 million, compared to $129.3 million as of June 30, 2021, and $95.5 million as of December 31, 2021. Total debt includes the amount outstanding under the Company's term loan, net of unamortized discounts. Working capital (not including cash) totaled $54.4 million, up from $7.5 million a year ago. Inventory was a meaningful driver of the increase, totaling $123.7 million, of which $36.3 million was in-transit to our distribution centers, compared to $60.6 million in total inventory as of June 30, 2021. Use of Non-GAAP Financial Information In addition to the preliminary results reported in accordance with U.S. GAAP included in this release, the Company has provided certain non-GAAP financial information including Adjusted EBITDA which is a non-GAAP metric that excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measures. See the attached “Reconciliation of Non-GAAP Financial Information.” “Total liquidity” is calculated as cash and cash equivalents, plus availability under the Company’s $67.5 million revolving credit facility. Conference Call Live Webcast JAKKS Pacific, Inc. invites analysts, investors and media to listen to the teleconference scheduled for 5:00 p.m. ET / 2:00 p.m. PT on July 27, 2022. A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at www.jakks.com/investors. To access the call by phone, please go to this link (registration link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time at (www.jakks.com/investors). About JAKKS Pacific, Inc. JAKKS Pacific, Inc. is a leading designer, manufacturer and marketer of toys and consumer products sold throughout the world, with its headquarters in Santa Monica, California. JAKKS Pacific’s popular proprietary brands include: Creepy Crawlers®, Eyeclops®, Fly Wheel®, Perfectly Cute®, ReDo Skateboard Co.®, WeeeDo™, Xtreme Power®, Disguise®, Maui®, Moose Mountain®, Kids Only!®; a wide range of entertainment-inspired products featuring premier licensed properties; and C’est Moi®, a New Generation of Clean Beauty®. Through JAKKS Cares, the company’s commitment to philanthropy, JAKKS is helping to make a positive impact on the lives of children. Visit us at www.jakks.com and follow us on Instagram (@jakkstoys), Twitter (@jakkstoys) and Facebook (JAKKS Pacific). Forward Looking Statements This press release may contain “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates and projections about JAKKS Pacific's business based partly on assumptions made by its management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements due to numerous factors, including, but not limited to, those described above, changes in demand for JAKKS Pacific's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, or that the Recapitalization transaction or any future transactions will result in future growth or success of JAKKS. The “forward-looking statements” contained herein speak only as of the date on which they are made, and JAKKS undertakes no obligation to update any of them to reflect events or circumstances after the date of this release. JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, 2022 2021 2021 (In thousands) Assets Current assets: Cash and cash equivalents $ 62,283 $ 37,511 $ 44,521 Restricted cash - 830 811 Accounts receivable, net 164,020 107,898 147,394 Inventory 123,666 60,580 83,954 Prepaid expenses and other assets 14,519 32,495 10,877 Total current assets 364,488 239,314 287,557 Property and equipment 128,844 118,804 121,945 Less accumulated depreciation and amortization 112,601 104,147 108,796 Property and equipment, net 16,243 14,657 13,149 Operating lease right-of-use assets, net 24,584 20,688 16,950 Goodwill 35,083 35,083 35,083 Intangibles and other assets, net 3,239 5,389 4,308 Total assets $ 443,637 $ 315,131 $ 357,047 Liabilities, Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable $ 86,660 $ 49,206 $ 50,237 Accounts payable - Meisheng (related party) 42,254 19,603 15,894 Accrued expenses 58,189 37,573 47,071 Reserve for sales returns and allowances 45,625 42,282 46,285 Income taxes payable 2,333 703 1,004 Short term operating lease liabilities 10,239 10,481 10,477 Short term debt, net 2,475 33,596 2,104 Total current liabilities 247,775 193,444 173,072 Long term operating lease liabilities 15,406 12,276 8,039 Debt, non-current portion, net 82,453 95,735 93,415 Preferred stock derivative liability 15,898 16,976 21,282 Income taxes payable 215 215 215 Deferred income taxes, net 51 123 51 Total liabilities 361,798 318,769 296,074 Preferred stock accrued dividends 3,771 2,397 3,074 Stockholders' equity: Common stock, $.001 par value 10 7 10 Additional paid-in capital 273,625 241,405 272,941 Accumulated deficit (180,680 ) (236,593 ) (203,431 ) Accumulated other comprehensive loss (15,765 ) (12,124 ) (12,952 ) Total JAKKS Pacific, Inc. stockholders' equity 77,190 (7,305 ) 56,568 Non-controlling interests 878 1,270 1,331 Total stockholders' equity 78,068 (6,035 ) 57,899 Total liabilities, preferred stock and stockholders' equity $ 443,637 $ 315,131 $ 357,047 Supplemental Balance Sheet and Cash Flow Data (Unaudited) June 30, Key Balance Sheet Data: 2022 2021 Accounts receivable, net days of sales outstanding (DSO) 68 87 Inventory turnover (DSI) 71 69 Six Months Ended June 30, Condensed Cash Flow Data: 2022 2021 (In thousands) Cash flows provided by (used in) operating activities $ 36,549 $ (18,531 ) Cash flows used in investing activities (5,274 ) (3,693 ) Cash flows used in financing activities and other (14,324 ) (32,128 ) Increase/(decrease) in cash, cash equivalents and restricted cash $ 16,951 $ (54,352 ) Capital expenditures $ (5,276 ) $ (3,725 ) JAKKS Pacific, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ (%) 2022 2021 Δ (%) (In thousands, except per share data) (In thousands, except per share data) Net sales $ 220,422 $ 112,352 96 % $ 341,303 $ 196,195 74 % Less: Cost of sales Cost of goods 121,850 61,489 98 193,908 105,538 84 Royalty expense 35,704 16,784 113 53,394 29,295 82 Amortization of tools and molds 1,978 2,182 (9 ) 3,194 3,371 (5 ) Cost of sales 159,532 80,455 98 250,496 138,204 81 Gross profit 60,890 31,897 91 90,807 57,991 57 Direct selling expenses 6,838 6,286 9 11,740 13,088 (10 ) General and administrative expenses 29,514 23,193 27 54,667 44,604 23 Depreciation and amortization 578 597 (3 ) 1,174 1,201 (2 ) Selling, general and administrative expenses 36,930 30,076 23 67,581 58,893 15 Intangibles impairment 300 - nm 300 - nm Income (loss) from operations 23,660 1,821 1,199 22,926 (902 ) nm Other income (expense): Other income (expense), net 183 72 154 269 127 112 Change in fair value of convertible senior notes - (3,797 ) (100 ) - (12,844 ) (100 ) Change in fair value of preferred stock derivative liability 6,029 (1,539 ) nm 5,384 (8,914 ) nm Loss on debt extinguishment - (7,351 ) (100 ) - (7,351 ) (100 ) Interest income 6 4 50 9 6 50 Interest expense (2,337 ) (4,370 ) (47 ) (4,539 ) (9,245 ) (51 ) Income (loss) before provision for (benefit from) income taxes 27,541 (15,160 ) nm 24,049 (39,123 ) nm Provision for (benefit from) income taxes 1,334 (100 ) nm 1,751 (12 ) nm Net income (loss) 26,207 (15,060 ) nm 22,298 (39,111 ) nm Net income (loss) attributable to non-controlling interests (353 ) 24 nm (453 ) 59 nm Net income (loss) attributable to JAKKS Pacific, Inc. $ 26,560 $ (15,084 ) nm% $ 22,751 $ (39,170 ) nm% Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) nm% $ 22,054 $ (39,827 ) nm% Earnings (loss) per share - basic $ 2.73 $ (2.48 ) $ 2.30 $ (6.86 ) Shares used in earnings (loss) per share - basic 9,588 6,220 9,588 5,802 Earnings (loss) per share - diluted $ 2.61 $ (2.48 ) $ 2.21 $ (6.86 ) Shares used in earnings (loss) per share - diluted 10,037 6,220 9,978 5,802 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ bps 2022 2021 Δ bps Fav/(Unfav) Fav/(Unfav) Net sales 100.0 % 100.0 % - 100.0 % 100.0 % - Less: Cost of sales Cost of goods 55.3 54.7 (55 ) 56.8 53.7 (302 ) Royalty expense 16.2 15.0 (126 ) 15.6 15.0 (71 ) Amortization of tools and molds 0.9 1.9 104 1.0 1.7 78 Cost of sales 72.4 71.6 (77 ) 73.4 70.4 (295 ) Gross profit 27.6 28.4 (77 ) 26.6 29.6 (295 ) Direct selling expenses 3.1 5.6 249 3.4 6.7 323 General and administrative expenses 13.4 20.7 725 16.1 22.7 672 Depreciation and amortization 0.3 0.5 27 0.3 0.6 27 Selling, general and administrative expenses 16.8 26.8 1,002 19.8 30.0 1,022 Intangibles impairment 0.1 - nm 0.1 - nm Income (loss) from operations 10.7 1.6 911 6.7 (0.4 ) nm Other income (expense): Other income (expense), net 0.1 0.1 - - Change in fair value of convertible senior notes - (3.4 ) - (6.6 ) Change in fair value of preferred stock derivative liability 2.7 (1.4 ) 1.6 (4.5 ) Loss on debt extinguishment - (6.5 ) - (3.8 ) Interest income - - - - Interest expense (1.1 ) (3.9 ) (1.3 ) (4.7 ) Income (loss) before provision for (benefit from) income taxes 12.4 (13.5 ) 7.0 (20.0 ) Provision for (benefit from) income taxes 0.6 (0.1 ) 0.4 - Net income (loss) 11.8 (13.4 ) 6.6 (20.0 ) Net income (loss) attributable to non-controlling interests (0.2 ) - (0.1 ) - Net income (loss) attributable to JAKKS Pacific, Inc. 12.0 % (13.4 )% 6.7 % (20.0 )% Net income (loss) attributable to common stockholders 11.9 % (13.7 )% 6.5 % (20.3 )% JAKKS Pacific, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Information (Unaudited) Reconciliation of GAAP to Non-GAAP measures: This press release and accompanying schedules provide certain information regarding Adjusted EBITDA and Adjusted Net Income (Loss), which may be considered non-GAAP financial measures under the rules of the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are reconciled to the corresponding GAAP financial measures below, as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures. We define Adjusted EBITDA as income (loss) from operations before depreciation, amortization and adjusted for certain non-recurring and non-cash charges, such as reorganization expenses and restricted stock compensation expense. Net income (loss) is similarly adjusted and tax-effected to arrive at Adjusted Net Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) are not recognized financial measures under GAAP, but we believe that they are useful in measuring our operating performance. We believe that the use of the non-GAAP financial measures enhances an overall understanding of the Company’s past financial performance, and provides useful information to the investor by comparing our performance across reporting periods on a consistent basis. Investors should not consider these measures in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. In addition, because these measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Δ ($) 2022 2021 Δ ($) (In thousands, except per share data) (In thousands, except per share data) EBITDA and Adjusted EBITDA Net income (loss) $ 26,207 $ (15,060 ) $ 41,267 $ 22,298 $ (39,111 ) $ 61,409 Interest expense 2,337 4,370 (2,033 ) 4,539 9,245 (4,706 ) Interest income (6 ) (4 ) (2 ) (9 ) (6 ) (3 ) Provision for (benefit from) income taxes 1,334 (100 ) 1,434 1,751 (12 ) 1,763 Depreciation and amortization 2,556 2,779 (223 ) 4,368 4,572 (204 ) EBITDA 32,428 (8,015 ) 40,443 32,947 (25,312 ) 58,259 Adjustments: Other (income) expense, net (183 ) (72 ) (111 ) (269 ) (127 ) (142 ) Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Adjusted EBITDA $ 27,122 $ 4,983 $ 22,139 $ 29,070 $ 2,535 $ 26,535 Adjusted EBITDA/Net sales % 12.3 % 4.4 % 787 bps 8.5 % 1.3 % 723 bps TTM EBITDA and TTM Adjusted EBITDA TTM Net income (loss) $ 55,521 $ (17,989 ) $ 73,510 Interest expense 9,398 19,717 (10,319 ) Interest income (16 ) (11 ) (5 ) Provision for income taxes 1,989 175 1,814 Depreciation and amortization 10,047 11,047 (1,000 ) TTM EBITDA 76,939 12,939 64,000 Adjustments: Other (income) expense, net (588 ) (374 ) (214 ) Restricted stock compensation expense 3,353 2,102 1,251 Change in fair value of convertible senior notes 3,575 15,057 (11,482 ) Change in fair value of preferred stock derivative liability (1,078 ) 13,812 (14,890 ) Employee Retention Credit/Gov't Employment Support (249 ) (1,900 ) 1,651 Gain on loan forgiveness (6,206 ) - (6,206 ) Loss on debt extinguishment - 7,351 (7,351 ) Pandemic related charges - 145 (145 ) TTM Adjusted EBITDA $ 75,746 49,132 $ 26,614 54 % TTM Adjusted EBITDA/TTM Net sales % 9.9 % 8.7 % 122 bps Adjusted net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders $ 26,209 $ (15,415 ) $ 41,624 $ 22,054 $ (39,827 ) $ 61,881 Restricted stock compensation expense 1,155 383 772 2,025 765 1,260 Change in fair value of convertible senior notes - 3,797 (3,797 ) - 12,844 (12,844 ) Change in fair value of preferred stock derivative liability (6,029 ) 1,539 (7,568 ) (5,384 ) 8,914 (14,298 ) Employee Retention Credit/Gov't Employment Support (249 ) - (249 ) (249 ) (1,900 ) 1,651 Loss on debt extinguishment - 7,351 (7,351 ) - 7,351 (7,351 ) Tax impact of additional charges - - - - - - Adjusted net income (loss) attributable to common stockholders $ 21,086 $ (2,345 ) $ 23,431 $ 18,446 $ (11,853 ) $ 30,299 Adjusted earnings (loss) per share - basic $ 2.20 $ (0.38 ) $ 2.58 $ 1.92 $ (2.04 ) $ 3.96 Shares used in adjusted earnings (loss) per share - basic 9,588 6,220 3,368 9,588 5,802 3,786 Adjusted earnings (loss) per share - diluted $ 2.10 $ (0.38 ) $ 2.48 $ 1.85 $ (2.04 ) $ 3.89 Shares used in adjusted earnings (loss) per share - diluted 10,037 �� 6,220 3,817 9,978 5,802 4,176 JAKKS Pacific, Inc. and Subsidiaries Net Sales by Division and Geographic Region (In thousands) QTD Q2 (In thousands) YTD Q2 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Divisions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Toys/Consumer Products $ 148,860 $ 81,538 $ 56,214 82.6 % 45.0 % Toys/Consumer Products $ 259,983 $ 161,413 $ 118,779 61.1 % 35.9 % Dolls, Role-Play/Dress Up 102,186 49,278 32,821 107.4 % 50.1 % Dolls, Role-Play/Dress Up 164,192 94,433 72,895 73.9 % 29.5 % Action Play & Collectibles 37,170 19,622 10,699 89.4 % 83.4 % Action Play & Collectibles 68,868 36,027 20,353 91.2 % 77.0 % Outdoor/Seasonal Toys 9,504 12,638 12,694 -24.8 % -0.4 % Outdoor/Seasonal Toys 26,923 30,953 25,531 -13.0 % 21.2 % Costumes 71,562 30,814 22,544 132.2 % 36.7 % Costumes 81,320 34,782 26,536 133.8 % 31.1 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 United States $ 192,484 $ 95,265 $ 66,777 102.1 % 42.7 % United States $ 289,534 $ 164,181 $ 118,695 76.4 % 38.3 % Europe 14,447 9,930 5,761 45.5 % 72.4 % Europe 27,836 17,267 13,379 61.2 % 29.1 % Canada 5,537 2,208 2,684 150.8 % -17.7 % Canada 8,916 4,309 5,032 106.9 % -14.4 % Latin America 3,823 1,165 1,082 228.2 % 7.7 % Latin America 6,208 3,620 2,082 71.5 % 73.9 % Asia 2,363 2,164 1,462 9.2 % 48.0 % Asia 4,439 3,579 3,232 24.0 % 10.7 % Australia & New Zealand 1,582 1,249 802 26.7 % 55.7 % Australia & New Zealand 3,073 2,437 2,333 26.1 % 4.5 % Middle East & Africa 186 371 190 -49.9 % 95.3 % Middle East & Africa 1,297 802 562 61.7 % 42.7 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % (In thousands) QTD Q2 (In thousands) YTD Q2 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 Regions 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 North America $ 198,021 $ 97,473 $ 69,461 103.2 % 40.3 % North America $ 298,450 $ 168,490 $ 123,727 77.1 % 36.2 % International 22,401 14,879 9,297 50.6 % 60.0 % International 42,853 27,705 21,588 54.7 % 28.3 % Total $ 220,422 $ 112,352 $ 78,758 96.2 % 42.7 % Total $ 341,303 $ 196,195 $ 145,315 74.0 % 35.0 % View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005977/en/