JAKKS Pacific Reports Third Quarter 2015 Financial Results

BRANDORA Editorial Staff - November 2015

JAKKS Pacific, Inc. [NASDAQ: JAKK] today reported financial results for the third quarter 2015. Net sales for the quarter ending September 30, 2015 were $337.0 million, compared to $349.4 million reported in the comparable period in 2014. Reported net income for the third quarter was $45.8 million, or $1.12 per diluted share. This compares to net income of $44.1 million, or $1.03 per diluted share, reported in the comparable period in 2014. Adjusted EBITDA for the third quarter was $52.5 million, compared to Adjusted EBITDA of $52.8 million in 2014. See note below on “Use of Non-GAAP Financial Information.”

Third Quarter Highlights

Gross margin improved 390 basis points
Operating margin improved 70 basis points
Diluted EPS increased 8.7 percent

Nine Month Financial Overview

Net sales for the nine months ending September 30, 2015 were $582.3 million compared to $556.0 million in 2014. The reported net income for the nine month period was $32.6 million, or $0.89 per diluted share. This compares to net income for the nine months of 2014 of $18.7 million, or $0.61 per diluted share. Adjusted EBITDA for the nine months of 2015 improved to $53.1 million, compared to $42.4 million for the nine months of 2014.

Also announced today, in addition to responsibilities as Chief Executive Officer, Stephen Berman will also serve as Chairman of the Board.

Berman stated, “We’re very pleased with our performance in the third quarter. Our current momentum continues with margins steadily improving, product innovation across a strong portfolio of brands delivering higher profitability, and more efficient operations. We remain focused on executing our full year plans across all brands this holiday season.”

Domestically, we are pleased with the strong consumer demand for Star Wars Big-Figs™ line of products and other several key drivers such as Sing-A-Long Elsa, XPV® Remote Control Hulk Smash™ and Max Tow Truck Turbo™ which have already received numerous awards from retailers, industry experts and media. These key drivers in the portfolio have been featured on several hot toy lists including Walmart’s Chosen by Kids, Target’s Top Toys, Kmart’s Fab 15, Toys R Us, TTPM’s Most Wanted and the Toy Insider Hot 20. JAKKS Pacific’s line of Frozen and Star Wars products drove much of the success in the International business.

“Looking ahead to 2016, we have a strong pipeline of products, and new licenses, creating a strong entertainment slate for us next year, and in the coming next few years. Building within the categories which we are leaders, coupled with expanded innovation, and hot new and current evergreen licenses, we feel confident in the coming years ahead. We have just finished our Fall 2016 Toy Preview with customers from around the world, and we are also encouraged by the positive response now to both our Spring and Fall product lines,” said Berman.

Working Capital

As of September 30, 2015, the Company’s working capital was $271.6 million, including cash and equivalents and marketable securities of $81.2 million, compared to working capital of $250.4 million including cash and equivalents and marketable securities of $88.8 million as of September 30, 2014.

2015 Guidance

The Company reiterates its previously issued guidance for full year 2015, which estimated net sales in the range of $730 million to $740 million, earnings in the range of $0.71 to $0.75 per diluted share and Adjusted EBITDA in the range of $56 million to $58 million.

Share Repurchase

In June 2015, The Board of Directors authorized the Company to repurchase up to $30 million worth of shares of the Company’s outstanding common stock and/or convertible notes through open market repurchases or in privately negotiated transactions from time to time through March 31, 2016. Approximately 774,000 shares of common stock were repurchased through the end of the third quarter at an aggregate cost of $7.0 million.

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

JAKKS Pacific will webcast its third quarter earnings call at 9 a.m. Eastern Time/6 a.m. Pacific Time today. To listen to the live webcast and access the accompanying presentation slides, go to www.jakks.com/investors and click on the earnings website link under Presentations at least 10 minutes prior to register, download and install any necessary audio software. A replay of the call will be available on JAKK’s website approximately one hour following completion of the call through November 25, 2015 ending at 11:59 p.m. Eastern Time/8:59 p.m. Pacific Time. The playback can be accessed by calling (888) 843-7419 or (630) 652-3042 for international callers, passcode “4101 1483” for both playback numbers.