JAKKS Pacific Reports Second Quarter 2019 Financial Results
Second Quarter 2019 Overview vs. Same Period Last Year
-
Net sales for the second quarter were
$95.2 million compared to$105.8 million reported in the comparable period in 2018. Sales in the 2019 second quarter were negatively impacted primarily by a decline in sales of Incredibles 2 which more than offset strong growth in Disguise costumes and the introduction of several new toy lines tied to entertainment content. - Gross margin was 18.6%, compared to 26.4% in the second quarter of 2018.
-
Net loss attributable to
JAKKS Pacific was$22.5 million , or$0.96 per diluted share. This compares to a net loss attributable toJAKKS Pacific of$18.6 million , or$0.80 per diluted share, reported in the second quarter of 2018. -
Adjusted EBITDA was negative
$11.5 million , compared to Adjusted EBITDA of negative$8.5 million in the 2018 second quarter. See note below on “Use of Non-GAAP Financial Information.”
Management Commentary
“As expected, our results for the second quarter showed the effect of declines in products that contributed strongly to results in the second quarter of last year,” said
We remain confident that our second half sales will show renewed strength, as the disruptions caused by Toys R Us’ liquidation in
Cash and Cash Equivalents
The Company’s cash and cash equivalents (including restricted cash) totaled
2019 Outlook
Our goal for 2019 is to grow sales by approximately 5% on a year-over-year basis with improved levels of Adjusted EBITDA compared to 2018.
Recapitalization Transaction
As discussed in the Current Report on Form 8-K dated
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.”
Conference Call Live Webcast
A replay of the call will be available on JAKKS’ website approximately one hour following completion of the call through
About
©2019
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, Inc. and Subsidiaries | ||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||
June 30, |
|
December 31, |
||||||||
2019 |
|
2018 |
||||||||
(In thousands) |
||||||||||
ASSETS |
||||||||||
Current assets: | ||||||||||
Cash and cash equivalents |
$ |
32,125 |
|
$ |
53,282 |
|
||||
Restricted cash |
|
4,923 |
|
|
4,923 |
|
||||
Accounts receivable, net |
|
85,119 |
|
|
122,278 |
|
||||
Inventory |
|
53,521 |
|
|
53,880 |
|
||||
Prepaid expenses and other assets |
|
28,523 |
|
|
15,780 |
|
||||
Total current assets |
|
204,211 |
|
|
250,143 |
|
||||
Property and equipment |
|
127,346 |
|
|
128,049 |
|
||||
Less accumulated depreciation and amortization |
|
106,239 |
|
|
107,147 |
|
||||
Property and equipment, net |
|
21,107 |
|
|
20,902 |
|
||||
Operating lease right-of-use assets |
|
35,848 |
|
|
- |
|
||||
Goodwill |
|
35,083 |
|
|
35,083 |
|
||||
Intangibles and other assets, net |
|
32,495 |
|
|
36,713 |
|
||||
Total assets |
$ |
328,744 |
|
$ |
342,841 |
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||
Current liabilities: | ||||||||||
Accounts payable and accrued expenses |
$ |
98,016 |
|
$ |
87,488 |
|
||||
Reserve for sales returns and allowances |
|
24,498 |
|
|
29,403 |
|
||||
Short term operating lease liabilities |
|
9,182 |
|
|
- |
|
||||
Short term debt, net |
|
1,892 |
|
|
27,211 |
|
||||
Total current liabilities |
|
133,588 |
|
|
144,102 |
|
||||
Long term operating lease liabilities |
|
29,829 |
|
|
- |
|
||||
Long term debt, net |
|
160,656 |
|
|
139,792 |
|
||||
Other liabilities |
|
137 |
|
|
4,409 |
|
||||
Income taxes payable |
|
1,471 |
|
|
1,458 |
|
||||
Deferred tax liability, net |
|
1,431 |
|
|
1,431 |
|
||||
Total liabilities |
|
327,112 |
|
|
291,192 |
|
||||
Stockholders' equity: | ||||||||||
Common stock, $.001 par value |
|
30 |
|
|
30 |
|
||||
Additional paid-in capital |
|
218,897 |
|
|
218,155 |
|
||||
Treasury stock |
|
(24,000 |
) |
|
(24,000 |
) |
||||
Accumulated deficit |
|
(179,301 |
) |
|
(127,601 |
) |
||||
Accumulated other comprehensive loss |
|
(14,994 |
) |
|
(15,847 |
) |
||||
Total JAKKS Pacific, Inc. stockholders' equity |
|
632 |
|
|
50,737 |
|
||||
Non-controlling interests |
|
1,000 |
|
|
912 |
|
||||
Total stockholders' equity |
|
1,632 |
|
|
51,649 |
|
||||
Total liabilities and stockholders' equity |
$ |
328,744 |
|
$ |
342,841 |
|
||||
JAKKS Pacific, Inc. and Subsidiaries | ||||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
(In thousands, except per share data) |
|
(In thousands, except per share data) |
||||||||||||||
Net sales |
$ |
95,182 |
|
$ |
105,781 |
|
$ |
166,008 |
|
$ |
198,785 |
|
||||
Less cost of sales | ||||||||||||||||
Cost of goods |
|
60,691 |
|
|
61,059 |
|
|
105,799 |
|
|
114,317 |
|
||||
Royalty expense |
|
14,125 |
|
|
14,344 |
|
|
23,966 |
|
|
29,635 |
|
||||
Amortization of tools and molds |
|
2,620 |
|
|
2,437 |
|
|
4,157 |
|
|
3,933 |
|
||||
Cost of sales |
|
77,436 |
|
|
77,840 |
|
|
133,922 |
|
|
147,885 |
|
||||
Gross profit |
|
17,746 |
|
|
27,941 |
|
|
32,086 |
|
|
50,900 |
|
||||
Direct selling expenses |
|
8,115 |
|
|
9,994 |
|
|
16,343 |
|
|
22,481 |
|
||||
Selling, general and administrative expenses |
|
24,136 |
|
|
27,859 |
|
|
49,477 |
|
|
72,389 |
|
||||
Depreciation and amortization |
|
1,619 |
|
|
1,895 |
|
|
3,316 |
|
|
3,495 |
|
||||
Restructuring charge |
|
22 |
|
|
- |
|
|
270 |
|
|
- |
|
||||
Acquisition related and other |
|
2,503 |
|
|
333 |
|
|
5,370 |
|
|
333 |
|
||||
Loss from operations |
|
(18,649 |
) |
|
(12,140 |
) |
|
(42,690 |
) |
|
(47,798 |
) |
||||
Other income (expense): | ||||||||||||||||
Income from joint ventures |
|
- |
|
|
205 |
|
|
- |
|
|
227 |
|
||||
Other income (expense), net |
|
(242 |
) |
|
31 |
|
|
(159 |
) |
|
81 |
|
||||
Change in fair value of convertible senior notes |
|
(106 |
) |
|
(2,410 |
) |
|
(2,529 |
) |
|
(3,431 |
) |
||||
Interest income |
|
20 |
|
|
14 |
|
|
47 |
|
|
28 |
|
||||
Interest expense |
|
(2,919 |
) |
|
(2,197 |
) |
|
(5,937 |
) |
|
(4,133 |
) |
||||
Loss before provision for (benefit from) income taxes |
|
(21,896 |
) |
|
(16,497 |
) |
|
(51,268 |
) |
|
(55,026 |
) |
||||
Provision for (benefit from) income taxes |
|
589 |
|
|
2,091 |
|
|
344 |
|
|
(245 |
) |
||||
Net loss |
|
(22,485 |
) |
|
(18,588 |
) |
|
(51,612 |
) |
|
(54,781 |
) |
||||
Net income (loss) attributable to non-controlling interests |
|
57 |
|
|
(29 |
) |
|
88 |
|
|
22 |
|
||||
Net loss attributable to JAKKS Pacific, Inc. |
$ |
(22,542 |
) |
$ |
(18,559 |
) |
$ |
(51,700 |
) |
$ |
(54,803 |
) |
||||
Loss per share - basic and diluted |
$ |
(0.96 |
) |
$ |
(0.80 |
) |
$ |
(2.19 |
) |
$ |
(2.37 |
) |
||||
Shares used in loss per share - basic and diluted |
|
23,600 |
|
|
23,106 |
|
|
23,578 |
|
|
23,103 |
|
||||
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
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, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
(In thousands) |
|
(In thousands) |
||||||||||||||
Net loss |
$ |
(22,485 |
) |
$ |
(18,588 |
) |
$ |
(51,612 |
) |
$ |
(54,781 |
) |
||||
Income from joint ventures |
|
- |
|
|
(205 |
) |
|
- |
|
|
(227 |
) |
||||
Other income (expense), net |
|
242 |
|
|
(31 |
) |
|
159 |
|
|
(81 |
) |
||||
Interest income |
|
(20 |
) |
|
(14 |
) |
|
(47 |
) |
|
(28 |
) |
||||
Interest expense |
|
2,919 |
|
|
2,197 |
|
|
5,937 |
|
|
4,133 |
|
||||
Provision for (benefit from) income taxes |
|
589 |
|
|
2,091 |
|
|
344 |
|
|
(245 |
) |
||||
Depreciation and amortization |
|
4,239 |
|
|
4,332 |
|
|
7,473 |
|
|
7,428 |
|
||||
Acquisition related and other |
|
2,503 |
|
|
333 |
|
|
5,370 |
|
|
333 |
|
||||
Restricted stock compensation expense |
|
397 |
|
|
311 |
|
|
1,015 |
|
|
987 |
|
||||
Bad debt write-offs (recoveries) |
|
- |
|
|
(1,326 |
) |
|
- |
|
|
12,468 |
|
||||
Change in fair value of convertible senior notes |
|
106 |
|
|
2,410 |
|
|
2,529 |
|
|
3,431 |
|
||||
Restructuring charge |
|
22 |
|
|
- |
|
|
270 |
|
|
- |
|
||||
Minimum guarantee shortfalls |
|
- |
|
|
- |
|
|
- |
|
|
3,468 |
|
||||
Adjusted EBITDA |
$ |
(11,488 |
) |
$ |
(8,490 |
) |
$ |
(28,562 |
) |
$ |
(23,114 |
) |
||||
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||||
(In thousands, except per share data) |
|
(In thousands, except per share data) |
||||||||||||||
Net loss attributable to JAKKS Pacific, Inc. |
$ |
(22,542 |
) |
$ |
(18,559 |
) |
$ |
(51,700 |
) |
$ |
(54,803 |
) |
||||
Restricted stock compensation expense |
|
397 |
|
|
311 |
|
|
1,015 |
|
|
987 |
|
||||
Bad debt write-offs (recoveries) |
|
- |
|
|
(1,326 |
) |
|
- |
|
|
12,468 |
|
||||
Acquisition related and other |
|
2,503 |
|
|
333 |
|
|
5,370 |
|
|
333 |
|
||||
Change in fair value of convertible senior notes |
|
106 |
|
|
2,410 |
|
|
2,529 |
|
|
3,431 |
|
||||
Restructuring charge |
|
22 |
|
|
- |
|
|
270 |
|
|
- |
|
||||
Minimum guarantee shortfalls |
|
- |
|
|
- |
|
|
- |
|
|
3,468 |
|
||||
Tax impact of additional charges |
|
- |
|
|
162 |
|
|
(15 |
) |
|
(2,185 |
) |
||||
Adjusted net loss attributable to JAKKS Pacific, Inc. |
$ |
(19,514 |
) |
$ |
(16,669 |
) |
$ |
(42,531 |
) |
$ |
(36,301 |
) |
||||
Adjusted loss per share - basic and diluted |
$ |
(0.83 |
) |
$ |
(0.72 |
) |
$ |
(1.80 |
) |
$ |
(1.57 |
) |
||||
Shares used in adjusted loss per share - basic and diluted |
|
23,600 |
|
|
23,106 |
|
|
23,578 |
|
|
23,103 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190809005061/en/
Source:
JAKKS Pacific
Brent Novak, (424) 268-9450
Chief Financial Officer
Rachel Griffin, (424) 268-9553
Vice President, Communications
Gateway Investor Relations
Sean McGowan, (949) 574-3860
Managing Director
smcgowan@gatewayir.com