Despite net sales being down 11% compared to Q1 2022 gross profit increases by 5%
• Net sales were $107.5 million, down 11% compared to $120.9 million in Q1 2022
• Back-to-back $100+ million net sales Q1s for the first time since 2008-2009
• Gross margin of 29.2%, up 450 basis points vs. Q1 2022
• Gross profit of $31.4 million, up 5% compared to $29.9 million in Q1 2022
• Higher selling expenses of $7.7 million vs. $4.9 million in Q1 2022, driven by costs associated with temporary warehouse capacity.
• Net loss attributable to common stockholders of $5.7 million compared to a net loss attributable to common stockholders of $4.2 million in Q1 2022
• Adjusted net loss attributable to common stockholders (a non-GAAP measure) of $4.0 million, compared to an adjusted net loss attributable to common stockholders of $2.6 million in Q1 2022
• Adjusted EBITDA (a non-GAAP measure) was negative $1.1 million, compared to positive $1.9 million in Q1 2022
• Trailing twelve month adjusted EBITDA of $73.3 million (9.4% of net sales) up 37% from $53.6 million (8.1% of net sales) in the trailing twelve months ended March 2022
Management Commentary
“We are pleased with our year-to-date performance as we close the first quarter,” said Stephen Berman, JAKKS Pacific Inc.’s Chairman and CEO, “and are excited about the possibilities for the remainder of the year. We shipped over $100 million worth of product in Q1 for the second consecutive year and it is the first time we’ve done that in back-to-back years since 2009. We have challenging revenue comparisons all year, but our significant gross margin improvement lessened the impact in the first quarter. Our Q1 gross profit dollars haven’t been this high since 2015. We managed inventory down further and eliminated most of our temporary warehouse capacity. And, as we previously disclosed, earlier in the quarter we paid down our long-term debt to less than $30 million.
“Our Q1 International business grew, with Toys/Consumer Products increasing 7% to $20.0 million and Costumes increasing 64% to $3.0 million, with Latin American being particularly strong. On a global basis, our Action Play and Collectible business was up 19% or $6.1 million which helped compensate for a decline in our Dolls, Role Play business which was down 23%, or $14.2 million.
“There’s a lot more work to do in the short-term to set us up for a strong holiday season, but the team is engaged and aggressively focused on continuing the positive momentum we’ve generated in recent years. It’s a great time to be at JAKKS Pacific.”
“Our Q1 International business grew, with Toys/Consumer Products increasing 7% to $20.0 million and Costumes increasing 64% to $3.0 million, with Latin American being particularly strong”
Stephen Berman, JAKKS Pacific Inc.’s Chairman and CEO
First Quarter 2023 Results
Net sales for the first quarter 2023 were $107.5 million down 11% versus $120.9 million last year. The decrease was driven primarily by lower sales in North America, which were down 16% to $77.9 million in Toys/Consumer Products and down 17% to $6.6 million in Costumes. Net sales of Disguise costumes were down to $9.6 million from $9.8 million last year, a decrease of 2% globally.
Gross profit in the first quarter of 2023 was $31.4 million or 29.2% of net sales, compared to $29.9 million or 24.7% of net sales in the prior year, driven by drastically reduced container and import-related costs offset by higher royalty and product costs as a percent of sales. SG&A costs were $35.8 million, up from $30.7 million in the prior year, driven in part by higher warehousing expenses. As a percentage of net sales, SG&A costs were 33.3%, up from 25.4% in the prior year.
The net loss attributable to common stockholders was $5.7 million, or $0.58 per basic and diluted share, compared to a net loss attributable to common stockholders of $4.2 million, or $0.43 per basic and diluted share in the first quarter of 2022. The adjusted net loss attributable to common stockholders (a non-GAAP measure) was $4.0 million, or $0.40 per basic and diluted share in the first quarter of 2023 compared to a net loss attributable to common stockholders of $2.6 million or $0.28 per basic and diluted share in the first quarter of 2022.
Adjusted EBITDA (a non-GAAP measure) was negative $1.1 million for the first quarter of 2023, compared to positive $1.9 million a year ago. For the trailing twelve months ended March 31, 2023, adjusted EBITDA was $73.3 million, up 37% compared to $53.6 million for the trailing twelve months ended March 31, 2022. (See note below on “Use of Non-GAAP Financial Information.”)
