Spin Master ((TSE:TOY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Spin Master Reports Strong Revenue Growth Amid Challenges in Entertainment and Digital Games
The recent earnings call for Spin Master painted a picture of robust revenue growth, particularly in the Toy and Digital Games segments, despite facing hurdles in the Entertainment segment and specific underperformances within Digital Games and PAW Patrol. The company’s strategic initiatives and strong free cash flow are expected to support future growth, reflecting an overall positive sentiment.
Record-Breaking Revenue and Growth
Spin Master achieved a remarkable milestone in 2024, with total revenue reaching $2.3 billion, an 18.8% increase from the previous year. The fourth quarter alone saw revenue just shy of $650 million, marking a 29% year-over-year increase. A significant contributor to this growth was Melissa & Doug, which added $375 million to the total revenue.
Strong Toy Segment Performance
The Toy segment showed impressive performance in the fourth quarter, with gross product sales increasing by 31.4%, bolstered by the inclusion of Melissa & Doug. Even excluding Melissa & Doug, sales grew by 1%. The preschool, infant, and toddler plush category saw significant growth, largely driven by Melissa & Doug and Ms. Rachel.
Digital Games Improvement
The Digital Games segment reported a 13.5% revenue increase in Q4, driven by high in-game purchases and subscription growth. Notably, Toca Boca World experienced a 22% sequential revenue increase from the third quarter, highlighting the segment’s potential.
Strong Free Cash Flow and Capital Return
Spin Master generated $175 million in free cash flow in Q4, a substantial increase from $44 million in the same period in 2023. The company returned $82 million to shareholders in 2024, demonstrating a commitment to delivering value to its investors.
Decline in Entertainment Revenue
The Entertainment segment faced challenges, with revenue decreasing by $13.9 million in Q4 and $31 million for the full year. This decline was attributed to fewer content deliveries compared to 2023.
Challenges in Digital Games
Despite improvements in Q4, the Digital Games segment saw a full-year revenue decline of just over $9 million. The underperformance of the Rubik’s Match game led to the wind-down of Nørdlight Studios.
PAW Patrol POS Decline
PAW Patrol experienced a decline in point-of-sale both in Q4 and for the full year 2024. However, it maintained its position as the number one preschool toy property globally.
High Sales Allowances Impact EBITDA
Sales allowances were higher than planned at 13.4% for 2024, impacting EBITDA. Although Q4 saw a decrease in sales allowances compared to the previous year, they remained higher than anticipated.
Forward-Looking Guidance
Looking ahead, Spin Master anticipates a 4% to 5% increase in consolidated Toy gross product sales for 2025, supported by a strong lineup of licensed products and the international expansion of Melissa & Doug. The company expects an adjusted EBITDA margin of 20% to 21%, reflecting ongoing investments in technology and strategic growth initiatives.
In summary, Spin Master’s earnings call highlighted strong revenue growth and strategic initiatives that position the company well for future success. Despite challenges in the Entertainment and Digital Games segments, the company’s robust performance in the Toy segment and strong free cash flow provide a solid foundation for continued growth.