JAKKS Pacific (JAKK) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales reached $321.6 million, up 4% year-over-year, with operating income rising 9% to $68.1 million and net income up 8.6% to $52.3 million.

• Toys/Consumer Products segment grew 7.4% in Q3, while Costumes declined 10% due to lower Halloween demand and recurring customer orders.

• Gross margin for Q3 was 33.8%, down 70 basis points year-over-year, but gross profit increased to $108.8 million.

• Management remains confident in meeting full-year goals and sees strong retail momentum heading into 2025.

• Preferred stock was fully redeemed in Q1 2024, eliminating related derivative liability and dividends.

Financial highlights

• Adjusted net income for Q3 was $54.0 million ($4.79 per diluted share), up from $50.1 million ($4.75 per diluted share) in Q3 2023.

• Adjusted EBITDA for Q3 was $74.4 million, up from $67.1 million in Q3 2023; trailing twelve-month adjusted EBITDA was $58.5 million (8.5% margin), down from $74.5 million (10.4%) a year ago.

• Year-to-date net sales were $560.3 million, down 4% year-over-year; year-to-date adjusted EBITDA was $69.4 million (12.4% margin), down from $86.6 million (14.8%) in 2023.

• Cash and cash equivalents at September 30, 2024, were $22.1 million, down from $96.3 million at year-end 2023.

• Operating cash flow for nine months was $(15.2) million, compared to $89.4 million in 2023, mainly due to working capital changes and higher tax payments.

Outlook and guidance

• Management expects to finish the year as planned, is optimistic about building on retail momentum for 2025, and notes that forward-looking statements are subject to risks and uncertainties.

• Full-year gross margin is expected to be at least 30%, with Q4 being a smaller quarter and subject to variability.