Q4 2020 JAKKS Pacific Inc Earnings Call
[music].
Good day, everyone and welcome to the JAKKS Pacific fourth quarter earnings Conference call with management, who.
I'll review financial results for the quarter and it.
For the quarter ended December 31, 2020, JAKKS issued its earnings press release earlier today, the earnings release and presentation slides for today's call are available on the company's website and the Investor section on.
On this call. This afternoon are Stephen Berman, Chairman, and Chief Executive Officer, and John Kimble, Chief Financial Officer.
Mr. Berman will first provide an overview of the quarter, along with highlights of product lines and current business trends and a discussion of impact of COVID-19.
And Mr. Kimble will provide detailed comments regarding JAKKS Pacific financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to opening up the call for questions.
And will be placed on mute for the first portion of the call. If you would like to be placed in the queue to ask a question. Please press Star then one on your telephone keypad.
Before we begin the company would like to point out that any comments made about JAKKS pacific's future performance events or circumstances, including the estimates of sales and adjusted EBITDA and 2021 as well as any forward looking statements concerning 2021 and beyond are subject to safe Harbor protection under <unk>.
And a real security laws.
These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected and forward looking statements.
For details concerning these and other such risks and uncertainties you should consult JAKKS. Most recent 10-K and 10-Q filings with the SEC as well as the company's other reports subsequently filed with the SEC from time to time and addition, today's comments by management will refer to non-GAAP financial measures.
Such as adjusted EBITDA.
Unless stated otherwise the most directly comparable GAAP financial and metric has been reconciled to the associated non-GAAP financial measures with the company's earnings press release issued today or previously.
And as a reminder, this conference is being recorded and with that I would now like to turn the call over to Stephen Berman and you may begin.
Yeah.
Good afternoon, and thank you for joining us as we review our performance in 2020 and our plans for 2021.
John will go over the financial results in more detail, but let me start by saying we are very pleased with how the company performed in the fourth quarter and for the whole year and 2020, especially consider the many challenges we faced.
For the last two years, we've been working diligently to improve our profitability, even as we face significant revenue challenges.
We've embarked on a three pronged plan to improve results.
First was to reduce our product costs and operating expenses to allow us to be more profitable on the revenue that comes from our core product categories.
Second we've been working to drop lower margin products and take into account. The total cost of a product not just its product costs.
These two steps have lowered our breakeven level and positioned us well for even stronger profit when we do launch successful promotional products.
Third was to focus on the balance sheet by reducing our high cost debt and stretching out the maturities of our debt. We have already accomplished some of this and 2019 and 2020 and we'll be working on further improvements in 2021.
I am extremely pleased with how well our efforts to improve profitability have paid off and we can see the results of these efforts and many ways. Our fourth quarter gross margin rate was the highest quarterly gross margin rate and nearly a decade.
We posted a fourth quarter operating profit for the first time since 2013, our full year operating income was the highest level since 2016.
Our full year adjusted EBITDA was $28 1 million the highest level since 2016 and up nearly 50% from last year.
And our top three retailers P. O S of our products was up double digits for the year and that is inclusive of the big declines and frozen.
Our inventories ended the year down 29% and stood at the lowest level since 2009.
And our top customers retail inventories were down 25%.
And we ended the year with $93 million and cash and the lowest net debt position since 2013.
We are pleased to have been able to improve our profitability and our balance sheet at a time when we were facing some revenue headwinds as well as the worst global pandemic and over 100 years.
Although our total sales were down for both the fourth quarter and for the year. The decline was the result of a couple of product areas.
Excluding frozen, which we expect it to decline in 2020, our sales were up 16% and the fourth quarter versus the prior year in line with the overall growth of the U S toy industry.
Our disguise sales were up 91% and fourth quarter, but down 26% for the year, which was understandable and expected given the impact that COVID-19 had on the Halloween celebrations.
Excluding growth frozen and disguise, our sales were up 13% and the fourth quarter.
At this time last year, we were heading into 2020 toy fair and we're trying to get a sense of how COVID-19 was going to impact on our world.
Our initial concerns were keeping our supply chain is open and then our focus became working with retailers to help those who are able to stay open and to keep products in stock that consumers were going to want.
The toy industry was one of the few that did not get devastated by the pandemic and fact, NPD recently reported that U S sales of toys rose, 16% and 2020.
Children and suddenly not only had to spend much more time and doors, but most of their after school activities were canceled such as sports dance classes music lessons and other activities.
This caused a dramatic increase in demand for some toys, while conversely, reducing demand for others.
At the same time the money parents might have spent and these activities are on vacations dinners at and restaurants, or even and commuting to work could be diverted and are spending on their kids cash.
Categories, such as games activity toys, and puzzles did quite well.
As collectibles and other product kids get interested and because they hear about them from their friends at school did not do as well.
Movies were postpone cutting demand for toys tied to those movies overall it was a good year for the toy industry with retail sales surging as the pandemic spread.
For us and for the rest of the toy industry 2020 demonstrated the strength of core basic toys, the strategic brands and classic play patterns.
The pandemic force kids and parents to make hard choices about where to spend their money sales indicate that those choose brands and play patterns and they know and love.
JAKKS for example, this boosted sales of our classic brands, such as Disney Princess leading to an increase of over 30% globally for the year and over 45% and the fourth quarter.
And NPD reported that U S toy sales for 2020 were up 16%. They noted that the unit sales were actually flat year over year, and that's a 16% increase was driven entirely by a shift to higher price toys.
We saw this shift to higher price toys to for example, within the Disney Princess brand JAKKS core Raw price segment style collection sold very well and while the entire line contributed to our overall growth toys that offer and extensive play value, including the gourmet smart kitchen $150 retail item.
The license sound Vanity a top rated by Kids Award winner.
And play suitcase top of the line. These are not inexpensive toys, yet they sold well because they offer hours of fun play experiences.
The heart of our Disney offerings have always been the core of large dolls and dress up categories for JAKKS. These two lines were up 32% and 63% respectively as.
As retailers continue to focus on SKU efficiencies and an effort to maximize pickup and store initiatives resulted in more turns and enhanced productivity and.
As a whole our Disney Princess dolls accessories, and play sets were up nearly 33% compared to a year ago.
Other examples of strong sales within a proven play pattern and globally recognizable brands include Nintendo Super Mario Brothers, Sonic the Hedgehog and apex legends.
And a year that saw big increases and sales of video games and accessories. It makes sense at toys tied to video games would do well and Nintendo and sign it together were up nearly 74% year over year and the fourth quarter and were up over 65% for the year.
Within our seasonal business, we saw double and even triple digit increases for both the fourth quarter and full year and brands such as Mickey Mouse, Minnie Mouse Paw patrol and Fisher price and.
Again parents gravitating to the brands, they know and love for products based on classic play patterns.
According to NPD, one of the best performing categories and the whole industry was outdoor and sports toys, which includes skates skateboards and scooters.
This category was up over 30% and the U S.
Sales of our and redo skateboards, and we're up over 300% and the fourth quarter and over six 7% for the year.
One of the other big themes in 2020 for the toy industry as well as all of retailing was the acceleration of the shift to online sales and our top customers online sales of our products were up over 40% and 2020 and represented 25% of our total Pos at these customers.
Up from 19% and 2019.
Yes, it's a with JAKKS Pacific has always been strong at is making good basic toys based on leading global IP targeting proven play patterns.
Despite 2000, twenty's revenue headwinds and rapidly shifting consumer behavior, we've improved our profit potential dramatically and we are poised for considerably better results and 2021 and beyond.
I will now pass the call to John to review, our financial performance after which we will come back with comments on how we see 2021 playing out.
John.
Thank you Stephen and good afternoon, everyone.
Net sales for the 2024th quarter were $128 $3 million down, 16% compared to $152 $5 million last year.
And net loss attributable to common stockholders for the fourth quarter was $11 $7 million from $2 and 55 per basic and diluted share compared to $26 million or $6 and 95 per basic and diluted share and the fourth quarter of last year.
The fourth quarter of 2019 included adjustments related to the impairment of intangibles changes in fair value of convertible senior notes and preferred stock derivative liability restructuring bad debt recovery and other charges totaling $12 $8 million net of taxes.
And the fourth quarter of 2020, such adjustments totaled $8 million, primarily due to changes in fair value of convertible senior notes and preferred stock derivative liability.
<unk> the impact of such adjustments as well as stock compensation expense, our adjusted net loss attributable to common stockholders in the fourth quarter of 2020 was $3 6 million or <unk> 80 per basic and diluted share compared to $7 $8 million or $2 62 per basic and diluted share in the fourth quarter of 2019.
For the full year 2020, adjusted net loss attributable to common stockholders was six.
Point $3 million or $1 72 per basic and diluted share compared to $18 9 million or $7 and 27.
Per basic and diluted share in 2019.
Adjusted EBITDA for the 2024th quarter was $3 9 million compared to $3 $3 million and the fourth quarter of 2019, our full year 2020, adjusted EBITDA was $28 1 million compared to $18 $9 million and 2019, the five 5% of adjusted EBITDA margin is the company's highest full year result since 2016.
And it reported a five 9% adjusted EBITDA margin on an additional $191 million and topline sales.
Compared to last year, our girls targeted business declined in the quarter inclusive of dolls role play dress up and preschool toys and consumer products net sales were $73 million and Q4 down 28% compared to $101 8 million and the prior year.
Big driver of the decline was the strong sales of frozen merchandise as well as the frozen two film was released theatrically and November of last year.
Excluding frozen products sales of girls products were up nearly 25% compared to prior year.
Among the strongest performers were toys, and our Disney Princess and perfectly cute home and baby ranges.
For the full year net sales and our girls targeted business declined 11% to $275 $2 million, excluding frozen products sales of our gross products rose, 2% for the full year 'twenty and 'twenty.
Sales of action figures vehicles role play and electronics products and our boys division for the 2024th quarter were $26 $6 million up 12% compared to $23 $8 million last year positive contributions from our video game related towards continued to be our Nintendo Super Mario Brothers, and Sega Sonic the Hedgehog lines are apex legends launch performed well and.
We'll have expanded retail placement in 2021.
For the full year sales of toys, and our boys category were essentially flat with last year on an annualized basis gains and Nintendo and Sonic were offset by the overhang from sales of Godzilla, Harry Potter TP Blaster, and the Incredibles and we look forward to capitalizing on expanded placement for Nintendo and Sonic and the new year, both in the U S and internationally.
Sales of seasonal products, including licensed ball pits outdoor toys and play structures were $21 $5 million and the 2024th quarter down 7% from $23 $1 million and the fourth quarter of 2019, primarily due to declines of more for it and the impact of frozen two.
For the full year 2020 sales and our seasonal division were down 21% to $71 $4 million. The decline was driven by more forward and are dropping of the fund out of line, but we did see solid growth from redo skateboards and core licenses, such as mini mouse and Mickey mouse.
Other products like our kids only activity tables have also sold extremely well and 2000 and 'twenty and into the new year, given the large numbers of kids at home and she can activities.
Our seasonal business is largely sold domestically, which is made responding to spikes and consumer demand a bit more challenging, but we feel we're catching up a bit heading into 2021, which is great news.
Sales and our Halloween segment disguise increased 91% to $7 $2 million and the fourth quarter of 2020 compared to $3 $8 million last year. The increase was the result of stronger than expected retail sales around Halloween as consumers shopping plans for the holiday were understandably impacted by the uncertainty related to Covid. As a reminder, Q4 is a much lower.
Volume quarter for disguise and Q2 or Q3.
For the full year sales and our disguise segment were down 26% to $88 $8 million driven by retailers, reducing their orders after experiencing the negative impact that COVID-19 had on their seasonal Easter business. The good news is that retail sales were ultimately strong leading inventories relatively clean compared to historical averages.
Looking at sales by business segment fourth quarter sales and our toys and consumer products segment, which includes all markets around the world were down 19% to $121 million compared to $148 $7 million and the fourth quarter of last year. The decrease was driven by the same factors noted above and the product discussion and North America toy CPE was down 13% from.
Quarter, while EMEA, and Latin America, and Asia were each down over 37%.
We already covered our Halloween segment and the earlier comments on disguise.
Looking at the rest of the P&L reported gross margin and the 2024th quarter was 32, 8% compared to 34% and the 2019 and fourth quarter. This brings our full year gross margin to 29.0% to 240 basis point improvement versus prior year and the highest full year level since 2016.
In Q4 royalty expenses significantly lower driven partly by a mix shift towards products with lower royalty rates, but also the exploration of some legacy agreements with less and favorable terms our product margins continue to steadily improve and our product obsolescence expense was also lower than Q4 as well as full year compared to prior year. We're very pleased to have been able to move a lot of product out of existing.
Inventory and Q4, while not adversely impacting our margins.
Towards the end of 'twenty and 'twenty, we did notice that freight cost started rising sharply as the holiday season and approach. In addition, we believe there were COVID-19 related worker shortages and docs and among truckers, which also raised costs, we were able to see an increase and our gross margin. Despite these rising costs and we will be working diligently to mitigate these cost increases in 'twenty and 'twenty one.
Significantly lower expense for SG&A, driven by product development compensation T and E and bad debt expense and the 2024th quarter totaled $40 9 million or 31, 9% of net sales compared to $57 2 million or <unk> 37, 5% of net sales and the fourth quarter of 2019 on an annual basis 2020, SG&A as <unk>.
Six 5% of net sales compared to 29, 6% and 2019, despite net sales being $82 $8 million lower compared to prior year. We remain very pleased with the company's continued success and working both remotely and within our lower cost structure.
These results combined to generate a full year operating profit of $12 9 million or two and 5% of net sales the highest full year operating income margin since 2015, when net sales were $745 million or nearly $230 million higher than 2020.
Our net interest expense in Q4 of this year was $4 $9 million.
Compared to $5 $4 million last year, reflecting a lower overall level of debt for the full year 2020, net interest expense was $21 $5 million with a weighted average effective interest rate of nine 6% compared to $15 $9 million and 2019, and and average interest rate of seven 3%.
Net cash provided by operating activities was $27 $6 million for the fourth quarter of 2020 compared to net cash used of $4 $3 million and the fourth quarter of 2019 for the full year 2020, net cash provided by operating activities was $43 6 million compared to $21 $8 million and 2019, primarily due to a reduction and.
Inventory and royalties advanced in addition to the reduced loss.
Free cash flow was positive $25 5 million and the 'twenty 'twenty fourth quarter compared to a negative $6 $1 million and the 2019 and fourth quarter for the full year free cash flow was $35 3 million compared to $12 $4 million and 2019.
As of December 31, 2020, our cash and cash equivalents, including restricted cash totaled $92 $7 million compared to $66 $3 million at the end of 2019.
Accounts receivable as of December 31, 2020 were $102 $3 million down from $117 $9 million as of December 31, 2019 Dsos.
Dsos for the 2024th quarter increased to 73 days from 71 days reported in the 2019 fourth quarter.
Inventory as of December 31, 2020 was $38 6 million versus $54 3 million at December 31, 2019.
The size and the 2024th quarter were 52 days compared to 62 days and the 2019 and fourth quarter.
By the end of the covered period the company had exhausted the $6 $2 million and funds received under the Paycheck protection program. The company's awaiting the opportunity to file for forgiveness of this loan and the absence of knowing where there any funds will be forgiven and the company presumes a two year loan period with interest beginning to accrue and June 'twenty and 'twenty with payments beginning in September 2021.
As a result, we now reflect zero point $9 million and short term and $5 $3 million and long term debt on our balance sheet related to this loan.
As a result as of December 31, 2020, the company's debt at face value included the aforementioned $6 2 million PPP loan due June 2020 to $23 $8 million of recapitalized convertible senior notes due July 2023, and $124 $5 million owed under our term loan due February 2023.
Both inclusive of Pik interest.
We currently have no outstanding balance under our credit facility aside from $10 $8 million and letters of credit as of December 31.
During the fourth quarter $7.1 million of the July 2023rd convertible senior notes were converted to common shares at $5 65 per share subsequent to December 31st No conversions were done as of January 31, 2021, the face value of the July 2023 convertible notes is $23 8 million.
Including accumulated Pik interest.
Capital expenditures during the fourth quarter of 2020 were $2 1 million compared to $1 $8 million and the fourth quarter of 2019 for the full year 2020 capital expenditures were $8 $3 million compared to $9 $4 million and 2019.
Depreciation and amortization for the fourth quarter of 2020 was $1 $9 million compared to $3 $2 million and the fourth quarter of 2019 for the full year of 2020, depreciation and amortization was $10 9 million compared to $17 $6 million and 2019.
The basic and diluted income per share calculation for the fourth quarter of 2020 was based on a weighted average of 457 and 5 million common diluted shares outstanding up from $2 96, 2 million and the fourth quarter of 2019. This number reflects the impact of our reverse stock split on July 2020, as well as the aforementioned convertible senior notes.
Versions.
And with that.
I'll now hand, the call back over to Stephen for some additional remarks.
Thank you John I'd like to turn to 2021, now and outline how we plan to keep the momentum going the exciting new products that will drive sales.
And efforts to keep costs down and how we can further strengthen our balance sheet.
We came through 2020 with our core business intact and strong our retail inventories at very low levels, our operating costs significantly reduced and very lean and working capital.
We are set up very well for growth and 2021, and we believe that this year will continue to see parents and kids looking for core basic products popular entertainment licenses with proven play patterns for decades, we have been introducing new and innovative products and multiple categories based on the iconic characters from Disney's.
Any pixar Marvel and Star Wars.
Disney announced last week that is Disney plus streaming service has accumulated nearly 95 million subscribers since launching in November 2019.
In addition, Disney is constantly adding new content to its library and to the offering and Disney plus.
What this means for JAKKS is that all of these subscribers have year round access to a great quantity of premium Disney content whenever they want it and we have known for years that what drives demand for license toys and adjust when kids see a movie and a theater, it's when they could bring it into their home and watch it over and over.
And again.
And our girls business, we believe taken advantage of Disney's momentum and building on our own success, we anticipate 2021 to be the third straight year of topline growth on the core Disney Princess brand.
This growth is being driven by several key factors, including the Disney Princess style collection and line of core role play items designed for today's modern girl.
Our core Disney Princess dress up and large doll business as we move into our first full year of the recently launched easy to address large doll line.
And matching girl sized dress up dresses and we expect growth to be driven by both expanded retail distribution as well as an increase in consumption.
And this line include magic and the motion of a puzzle and sing along Elsa we will continue to introduce new products and the frozen franchise with new items, such as Aaron Dell Snow Queen.
Outside of our core Disney Princess Broad line of products 2021, and also brings new theatrical releases extending our Disney portfolio.
Right and the last Dragon releases simultaneously and theaters and our Disney plus with Premier access and the March 5th JAKKS products are already on shelves and include core play patterns of large dolls dress up and role play accessories as well as a feature figurine sections Petite set and a large scale lights and sound features.
<unk> Dragon coming this fall.
This fall JAKKS is extremely excited to launch products inspired by the Walt Disney Animation Studios November release, and console, which tells that tale of and extraordinary family. The madrigals, who live hidden in the mountains of Colombia, and a magical house and a vibrant town and a wonder if.
And as charm place called income, though the film features all new songs by Emmy Grammy and Tony Award, winning composer of Hamilton and Moana Lin Manuel Miranda.
JAKKS line will offer an array of play patterns that our consumers know and love from fashion dolls, and large dolls to dress up and role play toys.
The centerpiece of the line is a collection of small dolls that deliver a magically integrated world of play celebration, the family and the magical house and which they live.
Other growth products. We have for 2021 include extensions to our perfectly cute doll line that target, where we expect growth. This year will also be launching a new line of collectibles and toys based on the hair bow Kandi brand one of the world's most popular line of gummy candies.
In addition, we will be releasing other fun and innovative new girl lines, which will announce later this year.
And our boys Division, we will be leveraging the momentum we have and our video game related products, including apex legend figures Super Mario brothers figures play sets plush RC and more and the Sonic the Hedgehog figures play sets RC and other products.
In addition, we expect our sales of black and Decker play tools to continue to be strong and 2021.
Other new exciting products include ones that we've been working on for years, the rerelease of creepy crawlers, which is our own IP and has been a classic toy brand going back more than 45 years.
In addition, we are launching a brand new fun and innovative item. The SPV blade saw RC vehicle, which is packed full of high performance features and and iconic design.
And seasonal or redo skateboard line continues to perform well with growth at target and Amazon We've acquired various licenses that will enhance and broaden this line this year.
For 2021, JAKKS is jumping into the trampoline business with a new line of licensed and unlicensed trampolines launching this summer.
Our activity tables ball pits play tents and foot to floor ride ons are among our most steady selling categories of core products and we will maintain this momentum with the best in class evergreen licenses, including Mickey Mouse, Minnie mouse frozen Paw patrol and Fisher price, among others and new <unk>.
Licenses based on Paw patrol movie and Blue's clues.
Finally, we have good momentum and our disguise segment retail inventories will less cleaned by better than expected retail sales around Halloween, we are bringing to market and expanded product line and 2021 with new disguise offerings from NBC, Universal and Sony and Nickelodeon amongst others.
And 2021 Halloween lands on a Sunday, which usually gives the industry and lift compared to and Halloween is on a weekday.
Of course, a rebound and Halloween sales assumes that the pandemic is sufficiently under control to allow for more of a normal level of celebration.
In closing I would like to thank our incredible team around the world for all their hard work and the challenging environment, we have today.
We continue to take the steps needed to position the company for profitability growth and we could do it without the dedicated team we have around the world.
With that we will now take questions. Thank you.
Thank you.
Ladies and gentlemen, and as a reminder to ask a question Press Star then one on your telephone to withdraw your question press the pound key.
And again Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from Atlanta step Wissink with Jefferies. Your line is open.
Thank you hi, everyone.
Good afternoon and stuff.
And good afternoon, just a couple of questions here for you and then and Don and I have one for you as a follow up.
And I'm intrigued by some of your comments on Disney Disney plus and I'm wondering if you can just help remind us Stephen what percentage of the business is Disney and then normalized environment and help US think you also the split between domestic and and.
International in terms of how you go to market and what that rollout of Disney plus internationally might mean to the international growth opportunity for that partnership.
And then secondly.
You mentioned in your script the top three retailers were up double digits and Pls and wonder.
And if you can just talk a little bit more about what you might've seen across different channels of retail.
And then the online I think you mentioned was up 40% and Q4. If you can just remind us what that isn't the percentage of the total as well. Thank you.
Alright. Thank you Stephen So if I go right and the Disney plus.
Firstly Disney overall between all the different segments and divisions, and which we have from disguise the seasonal to boys.
Girls and so on it's approximately anywhere from 43% to 50% given the year and.
The split internationally and we'll work on and just a minute for us with the Disney plus initiative.
And couldnt be come at a better time through this pandemic, we've seen a lot more people eat up content more so at home than ever before and it's become a new pattern of watching more at home and you know even though theaters.
And amazing fun and entertainment for families and for children and I think it's much more conducive for people to do things at home and the repetitive watching as it was years ago with VHS to Dvds and Blu rays.
Kids would continually and watch the same episodes, but they would have to put and the DVD and so on now they just go to Disney plus and they could watch new episodes old episodes and these have an abundant amount of content that they can continue to watch and various forums and for us. It just bodes well whether its our current everyday business that we have with Disney or whether it's a theatrical loss.
Like.
And ray of ARIA, which is coming out in March which will be both theater theatrical and Disney plus premium I think as well as win and console comes I believe it's scheduled for theatrical but Disney plus just gives it the carrying forward that we normally don't have when a movie comes out adjusted and theatrical so when a movie comes out you get that image.
Right.
First of sell throughs and so on and then you wait for the streaming version the DVD version, which is usually three or four months later, we have that now $3 65. So when it comes out and it's on a Disney plus or streaming the kids are able to have that content more and more at their hands and allows them and.
And just really be.
Invigorated with the toy products, and which we make because they have the play pattern of the theatrical or whether it's the normal TV version of their content. So for us. It's a dream and we're excited for this year and going forward to the Disney company that while this income itself just really we're lucky to be partners with them as they are.
The kings of content. So for that we're excited about going forward and internationally and it really depends on the launch and the areas in which the content arrives and so it really is by country.
And some content doesn't necessarily work as well and certain countries versus others. So it really is a.
And the country by country basis of how we performed with Disney plus but wherever Disney plus is we will we believe will be performing better with our Disney content and those countries for.
For the top three of John just jump over of the online sales because he is out in front of them.
Yeah, sure Hi, Steph.
For the online and you asked about Pos to there obviously somewhat.
And they're obviously related.
To parse that out and just make sure we're being clear about stuff.
From a year over year perspective, when we talk about double digits were talking specifically about the toy piece of that and our disguise business was down for the year as we've been talking about all year and so.
Similarly, our Halloween Pos was down a little bit year over year. So if you blended the two out from a total company point of view Tos.
At the top three accounts is high single digits.
With the choices being double digits.
And then on the Dot com part of it.
Sorry to be a little bit harder to keep track of is.
And the big accounts, who are both brick.
Brick and mortar and online and start to combine some of that inventory and buying it makes a little bit harder at least for us to segregate. It maybe other people can do it but we're not we're still working our way there.
Whether or not it's the traditional players are online only players we saw that part of the business the online sale piece growing.
40% year over year, and whether or not that was the Halloween piece or the toy piece.
So clearly that becoming a bigger portion of the mix and.
And.
And I could also add that.
So the players who are online only we see them becoming.
And we see them as we look backwards, becoming a bigger portion of the mix.
And presumably that trend will continue.
And especially as.
As the brick and mortar guys keep keep pace with them.
That's helpful and then a follow up for you and John on costs.
And then so much work on the middle of the P&L.
Thank you you mentioned or Stephen mentioned and product costing.
And the products overall, just thinking about the weight and the number of lines that you carry but also on the interior and the operating expense structure and so maybe just help us think trail what's the net threshold in revenue that covers your expense structure or another way to think about it what what's the the top line opportunity in <unk>.
And the incremental margins and thank you grow off of this day.
Should we start to see and incremental margin enhancement above and beyond the cost takeouts that you've done.
Well I certainly think.
And you're talking about the G&A portion of the P&L, and that's where I am always kind of focused on trying to get scale.
We are pleased and we called out that our operating margins were profit profitable on a full year basis, I think thats thats the right kind of corner you want to turn and then it's just a question of of how big can we get that margin given overall, we've got and a certain degree of scale.
Given what our topline is right if our topline had another zero at the end that scale looks a little bit different than where we are but.
I think I think the journey kind of continues in some respects of like flipping over every rock and and revisiting things.
And you can go up and down the P&L to that effect certainly to the extent and we want to be able to put more money back and for things like demand creation.
So it all doesn't drop to the bottom line.
There are a lot of Costa Rica, and 2020 that will have to creep back up in 'twenty, one and someone will probably want to get on an airplane at some point. So incrementally that's more as you know we also kind of.
SaaS stepped up for short term pay cut and 2020, and which we don't plan to anniversary this year, some deferred spending against kind.
And of those usual things trade show spending this year, obviously isn't lined up to be what it used to be but at the same time.
And at least feel good about I think we all do is there is still so areas that we continue to look at that we think we can.
Shave off.
And some penny share and there so to speak and so.
I think it's.
We are hardly out of ideas yet.
As the topic goes.
Okay do you want us to model some level of stability and the collective achieved but maybe a little bit of it.
Just back on some of the let's call it reopening expenses.
Okay.
I think that's right as you think about the back part of the year trying to figure out at what point in time do we start to turn a corner towards something that feels a little bit more familiar I think thats a part of it.
I certainly think you can think about last year in terms of you know we did a significant restructuring in Q2.
So we still have.
And some pickup this year as we kind of lap that period in time and.
And the front part of the year.
But as Jeff also let me add to that is just one more thing we do we do believe and we do see growth both profitability.
And in revenue this year going into through 2021, So we do see it on both sides.
Excellent. Thank you very much I'll hop back in queue.
Thank you.
Thank you.
A reminder, ladies and gentlemen that star one to ask the question.
Our next question comes from the line of Garrick Johnson with BMO capital markets. Your line is open.
Thank you and good afternoon, Hi, Stephen and good afternoon Gary.
Hey.
And I was wondering how youre planning Orion and the last drag and given that it's a hybrid launch.
How do you think about.
And the opportunity there.
Let's say it was a couple of years ago and it was pure theatrical how would you plan. It then.
And how would you plan. It now is it you're planning more conservatively or I'm.
And I'm, just kind of curious about that hybrid model and how how do you think about it okay.
Okay. So for Ryan that's a very good question for Ray and was previously it was going to be launched during November and it was on November 21st or second similar win.
But wanted to occurred and frozen during those tentpole movies, and now because of the pandemic and theatrical releases have changed dramatically its been launched both theatrical and on Disney plus and March. So we originally going to have goods on shelf. During November we pulled that back to have the launch during spring. So now it's not a holiday launch so it changes.
That dynamic because it's not doing caused the Thanksgiving and Christmas period, but normally on a on a spring launch we have actually strong stronger demand on the spring launch because the retailers have been aware of Ryan for a while they've seen the content. The content is absolutely gorgeous and so what we're planning is actually we're planning on a <unk>.
This spring launch with it and we're planning for it to grow throughout the year because of the way it's on Disney plus vs. We'd be planning a lower amount during the first second quarter. If it was theatrical and let it build for the streaming and which would be later and the air. So now that it's all combining with one we believe that the actual push and the retail.
And it.
The retail plans for fall are stronger than we normally would have had based off of streaming. So it really is both Boeing well for.
The retailers and JAKKS and Disney the way that this rollout this going to be a really good test of how products prevail.
It's a blockbuster.
And movie coming out in March I think it's March 5th that comes out and much 12 today, it's might fit.
So yes, so that's it.
And so do you think it could be bigger.
Overall, the way, it's rolling out as a hybrid.
Yes, and again, it's spring versus it being launched.
And remember, it's a different time periods. So I do so as it stands if those day, yes, I do believe based on what we see on the retail commitments and what their plans are even now for fall with that without the movie coming out and it will be a stronger release platform versus the typical way, we used to and the pass.
<unk>.
Interesting okay.
And then I've asked everyone next question and hopefully I'll get finally, a straight answer.
What what do you think the U S and.
And the global toy industry will do in 2020, do you think it'll grow and the U S.
Vs sorry 2021.
Do you think it will grow versus 2020 and.
And two can you give me a ballpark range because no one has been able to give me that kind of number yet.
Okay. So this is again and opinion from myself and.
And going out to retail and understanding what retailers are saying worldwide not just <unk>.
And North America, but if we just talk specifically North America I believe it's going to be mixed I do believe there's going to be pockets of really strong growth.
Low activity areas are still be growth, we're still and the pandemic, we still have spring and summer where I do believe outdoor activities and things will be.
Much more sought after so I do believe segments and that area I think the board game segments, you'll see no you won't see growth based off of the tremendous amount of purchases that were done early and the year and even and the second half girls area I see growth, but I don't see if you put it altogether, we will see growth and Halloween, which is not really considered.
Toy, but we will see growth based off of the cutbacks that occurred worldwide last year with the pandemic and we do know just based off right now and the states things are panning out a lot better.
Around around the U S and around the world. So we believe that there will be a.
Halloween So we will see growth there, but I don't see it at the industry is going to grow and as a whole I say there is pockets that will grow and theres going to be pockets that definitely won't growth. So I don't know on a percentage basis, Garrett and I wish I could give it to you would have to kind of spend a little time, but.
But I don't see when you see like the 16% growth I know JAKKS is growing I know all of our categories. We believe that we are extremely strong and benefit and but I cannot see that the total industry growth as a whole I do believe segments and im not sure the shrinking of the other segments if that offsets growth.
Okay. Okay, I'll ask one more and then I'll cede the floor back to Steph Hey.
How are you feeling about inputs Mattel and called out inputs.
And as a pressure on margin going forward, what are you seeing and.
Input costs.
So we go through this yearly whether there is input costs there.
Oil prices, rather it's everything that goes up and down and that's it's part of the toy business and THQ day, so having that input costs coming you kind of offset it by getting more efficient and logistics.
Getting more efficient of Fob business.
Versus much broader than a domestic so.
Input costs are going to affect some but we've done this for a while so for US we've worked on it.
Throughout the year with cost reducing a lot of our legacy items. So we are picking up our gross margin from that that Avenue.
And part that we see thats been really affecting.
Because the manufacturing world has been the freight.
Container issues and so on but we've mitigated that and dealt with it but the input costs I see it but it's part of our everyday business.
Okay, Alright, thank you Stephen.
Thank you Jack.
Thank you.
We have a follow up question.
From Steph Wissink with Jefferies. Your line is open.
Thanks, everyone. Thanks, Kerry for that Holly back I just had one follow up question for you Stephen and thinking more about Disney plus and clearly that platform is a robust source of data and all.
Also wondering if as you partner with Disney if they're giving you any lead insights into it.
And rising trend, but they're seeing in terms of consumption just given what we've seen happen at retail.
With respect to the takeaway around and she has some of the key content oriented triggers.
Is there anything that Disney is providing you as a partner that gives you a sense of where you might need to lean into inventory and something that is starting to uptrend within Disney plus.
Yes, I think with the Disney plus and then just in general with all the separate divisions that we have there's a tremendous amount of communication going on with the Disney Cup and the Walt Disney Company.
And totality of what's occurring and by what level, what age grade and the content, but on the details of it one of which we would not be able to disclose the details because it's analytics from the Disney side, but everything.
They're doing obviously is winning subscribers and if you look at the subscriber base growth. So quickly that just means more eyeballs are getting that content. So right now.
It's a fact.
Fast bullet train and what Theyre doing with the Disney plus and I believe later in the year, we'll have much more analytics, because theyre getting it daily as it comes as they're launching a lot more content via Disney plus so later and a year, we will have a lot better analytics of kind of the questions youre, asking and it'll be done by the content and category and age grade but they.
Have a lot of analytics that are given out to our staff.
Thank you that's great.
Thank you.
I'm showing no further questions at this time I would now like to turn the call back over to Stephen Berman for closing remarks.
Firstly I hope everyone is well thats on this call and we appreciate everyone's time and we have several follow up calls after this and look forward to speaking to everybody.
During our first quarter review, thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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