Spin Master (TOY) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue rose 25% year-over-year to $886 million, driven by strong toy sales and the inclusion of Melissa & Doug, which contributed $155 million to Q3 revenue.

• Excluding Melissa & Doug, revenue increased 3%, with toys offsetting declines in entertainment and digital games.

• Miss Rachel toy line was a standout, becoming the top new license in the U.S. toy industry for Q3.

• Net income for Q3 was $140.1 million ($1.32 diluted EPS), with adjusted net income at $169.7 million ($1.60 per diluted share).

• Integration of Melissa & Doug is progressing well, with double-digit sales growth and expanded international distribution.

Financial highlights

• Adjusted EBITDA was $277.5 million (31.3% margin), including $49.4 million from Melissa & Doug.

• Adjusted net income was $169.7 million ($1.60 per diluted share), up from $143.6 million ($1.34 per share) last year.

• Gross margin declined to 53% from 54.5% due to Melissa & Doug inventory fair market value adjustment.

• Free cash flow in Q3 was $44.7 million, down from $119 million year-over-year.

• SG&A expenses increased 22.2% in Q3, reflecting integration of Melissa & Doug.

Outlook and guidance

• 2024 guidance reiterated: toy gross product sales and total revenue (excluding Melissa & Doug) expected to be in line with 2023.

• Melissa & Doug 2024 gross product sales expected at $420–$430 million, with revenue of $370–$375 million and EBITDA margin of ~19.5%.

• Net cost synergies from Melissa & Doug integration targeted at $25–$30 million run-rate by end of 2026; $6 million targeted for 2024.

• Net debt to Adjusted EBITDA ratio expected to end 2024 at approximately 1x.

• CapEx expected just under 6% of revenue; effective tax rate at 26%.