Q3 2021 Spin Master Corp Earnings Call
Good day and welcome to the spin master's third quarter 2021 earnings call. Today's call is being recorded at this time I would like to hand, the call over to Steve Sophie up astute.
Please go ahead.
Thank you Maureen and good morning, everybody and welcome to spin Master's financial results Conference call for the third quarter ended September 30th 2021.
I am joined this morning by Max Wrangle spin master's global President and CEO and Mark Segal spin master's Chief Financial Officer for your convenience the press release, MD&A and condensed consolidated financial statements for the third quarter 2021 are available on the Investor Relations section of our website at spin Master Dot com.
And on SEDAR.
Before we begin please note that remarks on this conference call may contain forward looking statements about spin master's current and future plans expectations intentions results levels of activity performance goals or achievements or any other future events or developments forward looking statements are based on information currently available to me.
<unk> and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expressed or implied by the forward looking statements.
As a result spin master cannot guarantee that any forward looking statements will materialize and you are cautioned not to place undue reliance on these forward looking statements, except as may be required by law spin Master has no obligation to update or revise any forward looking statements, whether because of new information future events or otherwise for additional information on.
These assumptions and risks please consult the cautionary statement regarding forward looking information contained in the company's earnings release dated November three 2021.
Please note that spin Master reports in U S dollars and all dollar amounts to be expressed today are in U S currency I would now like to turn the conference call over to Max Frankel.
Yeah. Good morning, and thank you for joining us before we begin I wanted to take a moment on behalf of spin Master to express our sympathies to Brian Goldner his family and to all employees at Hasbro.
Brian had an incredible impact within the childrens entertainment space and his passion leadership in China's will be missed.
Now turning to our third quarter results. We are pleased with our strong performance, which puts us on very solid footing leading into the holiday season.
This past quarter total revenue climbed by 25% to over $714 million in gross product sales increased by 16%.
One $681 million.
Thanks to the exceptional work of the global spin Master team, we were able to deliver record profitability in a challenging and volatile supply chain environment.
Adjusted EBITDA was just over $217 million up 55% over 2020.
It's rewarding to see that our strategic approach to toy innovation multiplatform engaging storytelling and open ended digital play is driving strong diversified global revenue growth across all three creative centers.
Our digital games and entertainment greatest centers had a strong third quarter growing over 120% on a combined basis compared to last year.
Approximately 15% of our total revenue this quarter stems from digital games and entertainment.
More than double what it was in 2020.
Tabora phrase from our preschool franchise Paw patrol spin master is on a roll during the quarter. We debuted our first feature film Paw patrol the movie, which was released in August in theaters globally and on Paramount plus in the U S to date, he has grossed more than $135 million worldwide and the film landed.
The number one spot on Paramount plus at launch with families watching it on average three times.
The movie release had had a halo effect on our franchise our reach among children has increased from 41% to 60% and awareness of the Paw patrol has risen globally.
There is strong momentum behind the perpetual franchise and yesterday, we were pleased to announce that together with our partners at Paramount and Nickelodeon movies, we have begun production on the theatrical sequel Paw patrol movie too, which will hit theaters in fall 2023. Additionally, we are broadening the paw patrol franchise further and half an hour.
And is that a new pumper drill spinoff series will be coming to Nickelodeon in 2023.
Entertainment created center is committed to producing at least one new property each year.
In addition to the new perpetual movie and spinoff series for 2023. The team has a deep slate of New Entertainment series and feature films in development and we look forward to sharing further announcements in 2022.
From the small screen to the big screen recruiting enduring characters and engaging stories to capture the imagination of kids globally.
Our growth in digital games, which nearly doubled in Q3 continues to be driven primarily by the talk of life World platform.
Can life World currently has over 47 million monthly active users and the entire toco Boca ecosystem as over 65 million monthly active users.
Over 70% compared to $38 million last year.
User growth continues in core markets, including the U S and Western Europe, but also increasingly in countries, such as Russia, Mexico, Brazil and in Eastern Europe as well during Q4, we will be dropping new content in advance of the holidays as we always do including our sanrio furniture pack during the salary event from this.
<unk> 20th to December 31, our first major collaboration with Sun Rio owner of Hello Kitty.
Talk a bulk up provides children with tools to create their own digital world and playgrounds, where children's needs creativity and expression are at the center.
During the pandemic, we saw this need grow and when the world became smaller the digital world expanded an important part of <unk> success has come from the engagement of fans, who create insurer docker light silica life related content across social platforms, such as Youtube and Tic Toc.
On <unk> alone fans of the game have generator content that has a total of over 16 billion views by.
By listening to their feedback and preferences. The studio continues to develop new creative tools and digital play sets leading to incremental revenue inside of the game environment.
Now turning to sago mini they increased our subscription base to 305000 subscribers up over 40% compared to the 215000 last year.
The subscriber base across our digital games and entertainment offerings continues to be an asset that we can leverage and building and deepening our relationships with our fans and their families increasing stickiness within our brand portfolio.
Our new digital games studio in Stockholm, Noyd has now established a core team and has begun to work on digital games leveraging to be masters own IP with two games in development currently.
In Q2, we acquired originator a digital game studio based in San Francisco, and a creator and publisher of Entertainment based education mobile apps for kids and families.
This acquisition is complementary to several minutes edutainment offering as we can leverage our substantial subscription user base to expand the original apps to new audiences.
We've talked to annoying Stockholm, sago mini in Toronto and originator in San Francisco, we are continuing to build and strengthen our global studio model that gives us a strong platform for continued growth in digital games.
Our growth in both entertainment and digital games is complemented by double digit increases in toy gross product sales, which grew by 16% this quarter.
This was a great performance on the very challenging conditions, our supply chain and commercial organizations were very successful in working through global supply chain disruptions with our retail partners to ensure we deliver our goods to stores and digital shelves alike.
We pull forward finished goods production to increase capacity and we invested in more tooling to dual source manufacturing of certain product lines, we leverage our diversified third party manufacturing footprint across China, Vietnam, India, and Mexico to optimize availability and we work with our logistics providers to secure access to additional.
All ports and shipping lanes.
Work, we've done since quarter, four 2019 to restructure our supply chain platform is really paying off we are ready for a strong holiday season, and we will do what we can to meet our strong demand by consumers for our products.
Finally, as mentioned last quarter, we successfully implemented price increases in our fault line effective July which helped to partially offset raw material and ocean freight cost increases.
Now, let me turn to POS performance strong demand for toys continued in Q3. According to MPD. The global toy industry is up single digits through the first three quarters of the year in comparison, our global Pos growth was in line with the industry growth and accelerated versus the industry in the month of September.
Internationally for MPD or Q3, Pos is up 1% year over year pacing ahead of the industry, which was flat on a year to date basis internationally. We are slightly ahead of industry growth at 7%.
Now in the U S. Our Q3 POS was in line with the industry growth of double digits. This is a significant improvement over the last two quarters. This trend accelerated in the months of September when our POS grew nearly three times the industry in both the U S and internationally.
Our share of U S toy sales in September was above both 2020 and 2019 levels per NPD.
We are very encouraged with our turnaround in our Pos trend.
And that we are taking back share much of which is due to getting our inventory back to reasonable levels, delivering exciting innovation and consumer loyalty to our core tour toy lines, such as Bakugan Paw patrol and kinetic sand.
Supporting this growth was growing momentum in the e-commerce space during the third quarter last year much of the world was stealing Covid Lockdown as a result e-commerce sales increased dramatically.
With much of the World now opening MPT has indicated they are seeing a flattening in e-commerce sales growth for total consumer spend although it still remains at 27% of our total sales and we are growing in excess of 20% with an expanded market share across key retailers.
As brick and mortar channels continued to rebound we will benefit from the impactful retail store displays and increased impulse buying complemented by strong omnichannel presence from brick to click.
Now with the inventory levels in a better position through Q3, our innovative approach to marketing began to drive our Pos turnaround. We continue to put the consumer at the center of our marketing strategy and are bolstering our capabilities to drive decisions based on insights. This season, we've built flexibility into our plans to be able to pull different marketing levers based.
On supply and demand.
Many news reports have caution parents by early for the holiday season, and they are responding we are seeing this in our <unk> results and expect our consumer demand will continue to grow throughout the season.
We believe we are well positioned to capture an increasing share of the toy spending with integrated marketing campaigns that leverage digital linear and social paid media advertising supplement it with strong omnichannel activations and robust in store and online presence.
Our key brands and franchises demonstrated broad strength through the FERC third quarter Paw patrol the movie had a positive impact on our shipments were puppet drove toy line and we are seeing a positive response from consumers in both sales and overall brand health.
Paw patrol maintain momentum into Q3 outperforming the preschool category globally and in the U S with a successful movie launch and subsequent toy sales Papa.
<unk> Q3, Pos was up 22% globally and 27% in the U S and 19% globally and 20% in the U S year to date per NPD.
Petroleum is currently the number one character in preschool and was the eighth largest toy property globally in Q3, according to NPD.
Within boys Bakugan continues to post strong Pos and he is the number one item in battling toys in France, Italy, the UK and Belgium per NPD.
Pos for Bakugan in Q3 increased 18% globally and over 38% in the U S.
Back against traction continues to be driven by an innovating digital first marketing plan that immerses gates across roadblocks, Netflix and other touch points.
Bakugan has seen great momentum in roadblocks, and particularly with over 75 million plays of our Bakugan Rich runner games since April and $2 7 million views of our first of its kind Netflix full episode Premier within roadblocks in early September.
Another highlight from our U S performance includes the activities games, <unk> puzzles and plush category.
While we've seen Pos declines in games following a robust period of sales in 2020 during the pandemic, we are experiencing strong Pos growth in kinetic sand, which together with our other items puts us into the second position in the activities category.
Supporting this growth has been the strong performance of <unk>, which we acquired in 2019, and which saw a 70% growth in the U S. In Q3 compared to the arts and crafts Super category that was up 2%.
This was driven in part by our dire viral Orbis challenge activation that has now received over 90 million views on Tictoc.
<unk> also experienced Pos gains both in the infant plush category with floppy the elephant, which is the number one item in the plush preschool category for MPD and with strong performance from our innovative new <unk> line of fashion forward collectible plush.
Speaking of innovation close to 20 spin Master toys have been named to Retailers' holiday top toy list in the U S with many more globally.
Early Pos show strong performance for newly launched items. According to MPD <unk> was the number one item in fashion role play and accessories in September.
We expect to see strong continued momentum on these new brands with an exciting marketing plan in Q4 led by an innovative activation on roadblocks with adopt me the number one game on the platform, where we sold an incredible 2 million virtual first pet accessories through viral and virtual in game currency in just one week.
We've also seen strengthening our new Sonic in football endorsed by NFL quarterback Russell Wilson, which was the number two product in sports activities and games class in the U S. In September.
Our licensed storylines I've also seen strong momentum one of the standouts, either our new toy partnership with Universal Studios for <unk>, Dollhouse, which laundry summer on Netflix According to MPD. The Gabonese Dalhouse toy line was the number one new property in the U S. In Q3, and the number three overall property within the place it.
<unk> category in the U S and growing.
Both our Monster Jam and DC universe lines were performing very well in fact monster Jam is our number two brand in the vehicles category year to date and has gained significant share since 2019.
Spin Master East <unk> number one toy licensee for DC universe for MPD in 2022 we will see for DC Universe franchise movies released and our toys for the upcoming spring 'twenty two Batman movie will be launching in January.
The Wizarding World Toy line in partnership with Warner Brothers is off to a strong start wizarding World has a loyal Multigenerational fund base and he is currently the 16th property in toys for MPD there.
Early performance of the lining is gaining interest among a broad base of retailers and we are developing broad global distribution with strong interest to expand listings and support which should propel the brand forward in 2022.
Spin Master has always been committed to innovating and pushing boundaries in the childrens entertainment space.
This drive push those beyond our initial toy offering into entertainment and eventually digital games.
Last month, we announced the creation of spin Master ventures, an initiative that will focus on making strategic minority investments in early stage companies to further accelerate our growth in our three creative centers.
We've initially allocated $100 million in capital to invest in and entrepreneurs with promising ideas services and products within the childrens entertainment space, giving us access to potentially game changing thinking and concepts.
Our goal is to establish a spin master adventures as the partner of choice for entrepreneurs looking for capital to grow.
We have built a strong team to lead ventures, with an experienced and knowledgeable leader for each creative center venture initiative.
Spin Master ventures will be mutually beneficial for spin master and the portfolio of companies.
Providing them with capital and access to our knowledge and expertise to drive their ideas forward. While also deepening our understanding of emerging technologies trends and ideas as well as augmenting our current research and development activities.
We launched the Master ventures with initial investments in two companies align with our digital games created center the.
Firstly investment using Norte light a mobile game development company based in Stockholm, <unk> team has delivered some of the largest grossing mobile digital games in history.
<unk> will support our global digital games studio network and will help accelerate our strategy of monetizing spin master's owned IP in digital games.
The second investment is in Hood reading and online tutoring service based in Canada that provides children with life 101 reading lessons with experienced teachers the.
The service can executes with real teachers to advanced reading skills through a video chat platform that allows for real time on screen collaboration between the child and teacher.
We feel confident about our performance for the balance of 2021, we are generating positive momentum across all three creating centers, realizing our vision of being a fully integrated children's Entertainment company.
As a result, we are increasing our gross protocols and total revenue outlook for 2021.
To conclude.
As we look to the balance of 2021, we have continued confidence in our strategic initiatives and performance for the fourth quarter. We have built a strong diversified portfolio of products and brands entertainment franchises and digital games that are resonating well with consumers.
Before I turn it over to Mark I want to take this opportunity to thank our employees for their exceptional contributions our teams remain focused.
And we are proud of the results our employees have delivered spin master's commitment to innovation engaging storytelling and playful digital experiences comes from all our people I want to call out the work by our supply chain and commercial teams globally.
Who are putting an extraordinary effort to ensure that our toys get to where they need to go through our pizza to enjoy this coming holiday season.
Truly been a team effort and is evident in our results together, we are delivering profitable growth and creating long term value for shareholders.
With that I will turn the call over to Mark.
Thank you Max.
We delivered very strong financial and operational results in the third quarter.
The momentum we saw in the first half of 2021 continued through the third quarter with excellent year over year performance.
Revenue increased 25% driven by double digit growth and more in the case of entertainment.
All three of our creative centers.
The combination of higher gross product sales in all of our geographies higher entertainment and licensing revenue and the upward trajectory of our digital games business combined with the successful execution of operational improvements we have been working on for the past two years.
Led to record profitability levels.
In addition, we continued to strengthen our balance sheet ending Q3 with net cash of just over $360 million. Despite investing over 17 million in acquisitions. So far this year.
We are pleased to be entering the holiday season, with so much operational and financial momentum.
Gross product sales rose, approximately 94 million or 16% to $681 million with a favorable foreign exchange impact of $3 5 million.
On a constant currency basis gross product sales were up 15, 4%.
We generated strong sales growth in preschool and girls as well as outdoor and saw a solid increase in activities games <unk> puzzles and plush.
Growth occurred across all geographic markets Europe was the strongest region growing 25% the rest of the world was up 16, 7% and in North America gross product sales rose 13, 8%.
International gross product sales represented approximately 40% of total gross product sales up from 38% <unk>.
Including entertainment and licensing revenue and digital games revenue total revenue was $714 5 million up 25% from $571 6 million last year.
Our pre school and girls segment grew by $68 3 million or 28, 1% to $311 million in Q3, driven primarily by strong sales of pulp patrol wizarding world and first pits, which more than offset declines in present pits and had channels.
Whole patrol continues to perform exceptionally well accounting for a significant portion of the growth.
The successful launch of the movie has boosted sales not only of products directly related to the folks at the core line as well.
Gross product sales in the outdoor segment were up 67, 5% to $20 6 million.
Gross product sales in activities games, <unk> puzzles, and plush category rose to eight 2% rose by eight 2% to $195 8 million.
The increase was driven primarily by sales of kinetic sand gun and rubik's offset in part by declines in games and puzzles, which continued to face difficult comparisons against 2020 with sales rose sharply during the pandemic.
Games and puzzles continued to show strong growth relative to 2019 pre pandemic levels.
In voice gross product sales were up one 6% to $153 8 million with higher sales of bonds to Jam RC.
C licensed products and tech deck offset by declines in Ninja bots and Dreamworks Dragons.
Sales allowances in the quarter with 10, 8% of gross product sales down slightly from 10, 9% last year. Despite continued growth in Europe, which has a higher overall sales allowance rate than the global average.
On a year to date basis sales allowance of 10, 9% compared to last year's 11, 7%.
Historically, we have operated in the 10% to 12% range. We continue to expect that for 2021 will be towards the upper end of that range.
A significant contributor to our strong Q3 performance was other revenue, which grew $58 4 million or 121% to $106 7 million.
Both primary components of other revenue entertainment licensing and digital games increased significantly.
Entertainment and losses in <unk>.
Came in in licensing grew 158% to $53 million.
Primarily from distribution revenue related to the pulp control movie.
In Q3 digital games revenue increased 94% to $53 8 million led by growth in telco life World.
We've now seen six consecutive quarters of record revenue growth in our digital games business.
Regarding the pull movie as we described in August we recognized $23 million of distribution revenue from Paramount in Q3, along with 23 million of amortization related to movie production costs, which were previously capitalized.
We are pleased to report that because of the strong box office performance of the movie. We also recognized a box office bonus of $3 million this quarter.
As mentioned in August we may see additional revenue relating to our share of movie distribution revenues in early 2022.
Licensing and merchandising revenue from the movie will continue to flow into Q4 and into 2022.
Outside of licensing and merchandising revenue there will be no further movie income in 2021.
Gross profit for the quarter was $366 million or 51, 2% of total revenue compared to $277 9 million or 48, 6%.
To help understand the improvement in our margins. It is important that we consider all three of al creative centers.
Troy Creative Center had the most significant positive improvement in gross margin due to continued cost reductions, resulting from our operational improvements and productivity initiatives offset in part by inflationary pressures on product costs in ocean freight.
For the quarter, the net negative impact of inflation, partially offset by price increases implemented in Q3 and productivity benefits was around 80 basis points.
Yeah.
In 2020, we estimated that we incurred $2 7 million and additional warehousing costs in Q3 related relating to the Q4 2019 operational issues. We have now anniversaried those issues and our remediation efforts are driving further efficiencies.
Offsetting the improvements in SG&A or higher marketing admin and selling expenses marketing costs increased $9 2 million to four 8% of revenue compared with four 4%. We continue to expect our full year marketing spend to be approximately 10% of revenue.
We will manage marketing strategically to support sell through share growth brand momentum and channel country mix goals.
Selling costs increased due to the higher proportion of licensed product and our mix.
Administrative expenses increased over last year by $13 million or 19, 4% to $80 million.
The increase was primarily from personnel related costs and incentive compensation related accruals due to higher profitability.
However, administrative expenses as a percentage of total revenue dropped to 11, 2% from 11, 7%.
Adjusted administrative expenses as a percentage of total revenue declined to 10, 6% from 11%.
In Q3, we recorded net income of $135 4 million or $1 29 per diluted share compared to net income of $86 8 million or <unk> 83 per diluted share last year.
Adjusted net income in the quarter was $132 6 million or $1 26 per diluted share an improvement of $37 5 million when compared with adjusted net income of $95 1 million or <unk> 91 per share last year.
Adjusted EBITDA was $217 3 million compared to $139 9 million an improvement of $77 4 million.
Adjusted EBITDA margin was 34% up from 24, 5%.
The significant increase in adjusted EBITDA was driven by the contribution of higher gross profit and lower distribution costs, partially offset by higher selling marketing and administrative expenses.
As a reminder included in adjusted EBITDA was $23 million of distribution revenue from the pole patrol movie and $3 million from the box office bonus.
The offsetting $23 million related to the amortization of product production costs for the movie is not included in adjusted EBITDA.
If we were to die.
If we were to deduct the movie amortization, adjusted EBITDA and EBITDA margin for the quarter would be $194 3 million and 27, 2% respectively.
From a tax perspective, we had an income tax expense of $41 8 million in the quarter compared to an income tax expense of $14 7 million last year.
Our effective tax rate for the quarter was 23, 6% compared to 14, 5% last year, which is in line with our historical annual effective tax rate of 25% to 26%.
From a liquidity perspective, we continue to be in a very strong position. We ended the quarter with $365 million in cash up $153 2 million from $207 3 million last year.
Given the cash on hand at the end of the quarter cash flow, we expect to generate in Q4 and the undrawn capacity on our credit facility were very solidly positioned regarding available liquidity.
Our third quarter free cash flow was $65 8 million compared to $96 million 32 point $30 2 million lower as a result of an increase in noncash working capital, partially offset by higher cash flow from operating activities. The.
The change in noncash working capital was primarily driven by increases in inventory and trade receivables.
Inventory ended the quarter at $183 1 million compared to $155 9 million last year up $27 2 million or 17%.
As a result of the global supply chain issues at the end of Q3, we had approximately $59 million of in transit inventory, representing 32% of our total inventory most of which shipped in October in comparison to $32 million, representing 19% at the same time last year.
Trade receivables ended the quarter at $417 3 million compared to $350 1 million at the end of Q3 last year up $67 2 million or 19, 2% and slightly above our sales growth.
Net operating working capital as a percentage of LTM sales was 15, 8% compared to 17, 8% last year.
Late in the quarter, we entered into an agreement to amend and restate our existing $510 million five year revolving credit facility, which is now unsecured matures in Q3, 2026 and contains greater flexibility to make acquisitions and investments as well as improved pricing and financial covenants.
The facility also has an accordion feature which permits us to increase the total amount available by an additional $200 million, if we meet certain criteria.
As Max mentioned earlier, the creation of spend mass adventures will allow us to accelerate growth through strategic minority investments. These investments will have strong correlation with our strategic growth plan across our three creative centers, we have allocated $100 million to the venture initiative, which will be funded from existing.
<unk> internal resources, the investment range will be between $500000 and $10 million at the upper end, but our sweet spot will be around $1 5 million to 3 million per investment the.
Our strategy calls for both early stage of seed investments as well as expansion investments for more mature companies.
We are taking a long term view of this initiative with no need to focus on returning capital within the traditional VC fund timeframe of five to 10 years.
Some of these minority investments may become acquisitions over time, and some may be sold.
Turning now to our outlook for the balance of 2021, we are seeing robust demand for our deepened innovative toy lineup and are increasing our gross product sales growth outlook. We now expect our growth rate for gross product sales for 2021 to be in the mid teens compared to the outlook. We issued in August for growth of high single digits.
From a timing perspective, we are working extremely hard to ensure full product availability during the holiday season, and we do all we can to meet strong demand.
We saw approximately $50 million of orders shift between Q3 and Q4 most of these orders shipped in October and the balance are expected to ship early November.
The elevated inventory levels, we had on hand at the end of Q3 gives us comfort that we have enough domestic inventory to fulfill customer demand for Q4.
This revised outlook considers the strength in our business, we have seen so far but also recognizes that there continues to be potential supply chain risk and cost pressures for the remainder of the year from port disruptions and container availability.
As a result of the increase the gross product sales and continued strength in entertainment and digital games. We now expect growth in our total revenue to be slightly above 20% compared with our prior outlook of mid teens.
Turning to profitability, we have seen increases in input costs, particularly ocean freight accelerate significantly in the latter part of Q2 increased further in Q3 and remain elevated into Q4.
We implemented productivity initiatives and price increases to help us offset these inflationary pressures these inflationary pressures.
Price increases became effective early in Q3, but given the rapid and unexpected rising costs. These increases will not be sufficient to allow us to remain neutral from a margin perspective in our toy business.
Fortunately as a result of our diversified business model the positive mix effect of digital games and entertainment and licensing has helped offset toy margin pressure.
For that reason despite the increased guidance for gross product sales in total revenue we are maintaining our previous EBITDA margin guidance and continue to expect 2021, adjusted EBITDA margin to be towards the higher end of the mid to high teens range.
Okay.
As a reminder for Q4, when we talk about the timing of spending and profitability are significant portion of our annual marketing expenses are incurred in Q4 to maximize the impact on consumer purchases and our ROI.
This typically causes a miss alignment of sales and marketing spending between Q4 and Q3, resulting in adjusted EBITDA margins in Q4 significantly below those in Q3.
Looking ahead to 2022, we will provide gross product sales and total revenue growth expected seasonality and adjusted EBITDA margin guidance for 2022, when we report our fourth quarter and full year 2021 results in early March.
This will allow us to incorporate customer feedback into our outlook from the critical customer previews that started this past September and continue during January and February of 2022.
Yeah.
To conclude we are committed to our long term financial framework for value creation underpinned by a formula for innovation and global growth across toys Entertainment and digital games.
Our strong financial position sets a solid foundation for successful growth for 2021 and beyond.
That concludes our call we will now be pleased to take questions. Operator. Please open the line.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad. Please ensure that the mute function is switched off to allow your signal to reach our equipment and if you find that your question has already been answered you can remove yourself from the queue by pressing star two.
We will now take our first question from.
Adam Shine National Bank financial Please go ahead.
Thanks, a lot good morning, Congratulations obviously, a very strong quarter across the board and I'm glad Mark that you acknowledged that your revised guidance appears conservative because I think again, my math clearly looks like GPS growth to the mid teens plus.
Run rate on entertainment ex movie and the new digital games levels looks like.
Total revenue growth, maybe closer to a 24, 26% growth in the slight above 20, but I'll leave it to you maybe to address that maybe later on but I think acknowledging conservative guidance is.
As appropriate.
The context of marketing spend which was alluded to and I know Max you talked quite a bit about changes afoot that you're going to be doing in regards to our advertising initiatives, but nevertheless.
At a 10% ish of revenue metric, it's certainly reflects somewhere around 40% growth year over year in Q4. So maybe we can start there talk about.
What is going on particularly in this Q4, where there seems to be just massive demand out there inherently in the marketplace and the products are certainly resonating obviously, a marketing push will be incrementally helpful. In that regard and then number two maybe more for mark it looks as though you guys and the rest of the industry are doing.
Great job controlling or at least managing the supply chain issues.
Is there anything in the Q4 beyond the ongoing trend that causes any incremental concern.
Worth highlighting I'll leave it there thank you.
Thank you for the question and let me start with marketing and then I'll turn it over to Mark So what we've done as I was referring on my remarks is basically.
Secure the marketing investment in Q4.
To basically drive a lot of the marketing innovation that is really beginning to pay great dividends for US. We mentioned a few times skips are now basically playing both physically and digitally.
And entertaining themselves with social context that actually allow them to share with friends a marketing plan that is really integrating these two spaces very seamlessly.
And that is coupled with the fact that we have great innovation across a number of our segments and so what we're doing is basically segmenting our portfolio to drive the greatest amount of marketing investment on our franchises and core brands first and foremost and that is really fueling great growth and will continue through quarter four because we have great.
News across our franchises and our core toy.
Brands, but separate from that we have a lot of innovation as well in our license products and then to top it off we have a lot of new items that we brought to market like first pets.
That's just to name one and so we have secure marketing for each and every one of those initiatives. So we can actually secure it clean sell through through the actually.
Holiday period, we feel very confident that our sell through is right now tracking ahead of what it was last year.
They're actually week ago. So we will continue to invest we are working very closely with our supply chain.
Teammates because we have to make sure that the products are on shelf and that has been a very important new activity system that we've instituted this year. So we can actually maximize our investments and not let parents down when they actually go to look for toys on the shelves.
Why not do one more thing, which is to penetrate a bit more new and more efficient and effective ways to invest marketing in our.
E Commerce space and so we actually have built tech stocks.
Basically combined with our search new efforts and the content agility of actually pivoting to where consumers are actually acquiring about our toys.
<unk> seen significant growth on e-commerce. Despite the fact that as I shared in my remarks that that space.
New doors open.
Forecasted to be flat for us has been a source of growth and perrins actually continue to go to the e-commerce sites to actually search first for items and then make still go to purchase in physical stores and we have benefited significantly from that incremental marketing investment in that space.
Mark Thanks.
Thanks, Max Adam to answer the second part of your question in relation to supply chain and new factors I would say to you. If you think about what's been driving the supply chain the macro supply chain issues. This year, you've had covered in China and Vietnam, you've had container availability you've had west coast port delays.
You bet trucking issues in trucking capacity in the U S as well, where there is a lot of macro factors that are actually playing into the supply chain issues.
Say to you that we have not seen any new factors emerge we haven't yet seen a significant improvement in those factors, we've been managing around them and our supply chain team and commercial teams have done an absolutely outstanding job in navigating those choppy waters and Thats been one of the reasons why we've had such strong results in Q3.
To come back to your previous point, it's one of the reasons why we are remaining cautious.
Optimistic, but cautious and that's why we've adopted the tons that we have for our outlook.
Great much appreciated Mexico I, just do a follow up on just on the marketing spend is there anything meaningful to highlight just in terms of advertising directed to the digital games.
Absolutely.
Obviously, we have a growing and very engage monthly active user base, which you're actually also track at the weekly and even daily user base levels and with the content drops that we have upcoming.
Which we feel really strongly about we have a lot of paid user acquisition activity to actually continue to expand that user base and then importantly, there's also marketing activity to drive engagement within those people in the actual ecosystem, which can go to our stores and actually interact with other items as well. So we can increase our engagement and share of heart.
For our basically took a life world in the case of Diaghilev World in the case of <unk>. We also have a lot of great marketing ahead of us as we actually emphasize more the digital gaming aspect of that of that platform. So we have a lot of digital user acquisition marketing spending as well on <unk> and that leads me to originator.
<unk>, which basically we're now trying to transfer our learnings on marketing to that entertainment portfolio, which is really rich and that we have actually got a lot of upside with so we are incredibly encouraged by the marketing activity on our digital gaming.
Platforms and is.
We're going to continue to be a source of growth for us.
Great appreciate it thank you very much.
We will now move onto our next question from Martin Landry Stifel GMP. Please go ahead.
Hi, good morning, everyone.
I would like to get more details on your total revenue guidance for 2021, you're calling for an increase of slightly more than 20%.
If I'm trying to duck, what that means for Q4.
It could suggest that Q4 revenues could be down on a on a year over year basis.
I'm just wondering if you could give us some color as to the driver of this these expectations.
Yes.
Yes, so Martin out our.
Our total revenue guidance as you said was slightly over 20%.
Again, similar to what I responded with Adam we're actually taking a cautious tone overall with not only our toy guidance, but also in connection with digital games and entertainment.
Digital games as in <unk>.
Back to school World now.
Whereas in Q3 it wasn't.
And so we're actually just taking a cautious moderates approach to everything in the fourth quarter and Thats ton.
Ton that we've adopted so there's no issues or concerns there. It's just simply a cautious tone in terms of how we see the year playing out.
Just remember that last year as well Q4, 2020 was a strong quarter as well. So we are comping a much stronger quarter than we had previously up to this point.
Okay. That's helpful and then.
I was wondering if you could just give us some visibility on your inventory situation at retail.
Is there any way for you to quantify you know how many days of <unk>.
Inventory days, you have right now at retail in North America.
We don't actually quantify days inventory on hand.
In terms of retail inventory, but but certainly and Max you can add as well. After this I think our retail inventory levels have improved significantly and that's one of the reasons why we've actually seen a strong Q3 performance. If you remember through the first two quarters of this year, we were significantly behind where we wanted to be at retail relative to demand.
<unk> and <unk> and we've actually now started to catch up in terms of our owned inventory.
We've seen now owned inventory at around $183 million compared to $156 million. We are in good shape on days inventory on hand, they are actually down.
The reason dollars. The App is simply because we've had higher in transit inventory. We've also seen some inflationary costs.
As a result of it.
Inflation driving inventory up even though units have not increased at that same rate and then simply the business has grown if you look at our net overall investment in working capital, though we're actually in the best position we've been at in many years at around 15, 8% compared to 17, 8% last year. So overall I'm very pleased with that.
Working capital management position and Mac.
Is there anything you want to add on retail inventory Martin good morning, as we enter Q3 recall, we have been explicit about we were refilling low inventory levels at retail and so that has helped us with actually our Pos and share performance.
And the really great news is that as we actually replenished and began to activate marketing we have seen the sell through to be very positive. So I would tell you that as you Gotta go brand by brand or franchise by franchise in some franchises our sell through and velocities have been so encouraging that we continue to be in low retail inventory levels, which is positive.
Obviously, we can always and we're bringing more so we had basically leaned into a few of these items and brought safety stock. So we're replenishing as fast as we can.
But by and large we feel very strongly about our positions.
Okay perfect. Thank you.
We will now move onto our next question from <unk> Khan from RBC capital markets.
Okay, great. Thanks, and good morning, just a quick follow up I guess on the inventory side I think Mark mentioned earlier that you have inventory in warehouses to kind of meet demand through Q4, I just want to understand where they.
Regardless of blood supply chain is it just some risk on maybe late quarter replenishment or.
How are you thinking about major products that you need to sell through Q4 are those year versus maybe less important ones are underway. So ill give some context on what you foresee as the risk related to inventory or supply chain.
Good morning.
We like to think of our inventory in three buckets.
Bucket number one it's basically toys that have been coming in basically are basically set for the holiday season.
Bucket number two are basically items that are actually are replenishable items. So basically things that will sell tomorrow. It would basically six months from now and bucket number three will be items that are basically about to ship for the spring season. So we've talked about Batman movie and so those items are going to begin to ship between now and the end of the year. So as you can.
<unk>, we feel very strongly about buckets number two and three being things that we have no risk in fact, we're actually trying to sure we have enough inventory to get the year 2022 off to a phenomenal start. So we have inventory that we brought in lean into so that we can get that youre going in the right direction. Similarly, with our spring 'twenty two.
Innovation, and then bucket number one we've been working very closely with our retail partners to make sure that we brought those earlier so as Dave said, they're planted rooms, or obviously digital shelves, we were able to basically capitalize on the activation for dose more seasonally supported items that were basically meant for these holidays.
So that's the way we're looking at it we feel very strongly about our positions as to where we are and we believe that any risk on bucket number one which are basically our inventory for inventory. This holiday season is very manageable and within the guidance that Mark has provided.
Okay, Great and then following up on the recent announcement I'll spin Master ventures common.
A commentary that some of those opportunities or investments over time could become acquisitions I guess, how are you thinking about your just broader M&A strategy going forward does this become a bigger part of it. The M&A strategy is still in line with what you thought previously so I understand how the two kind of go ahead.
So <unk>. This is an additional strategy that we are going to be working in parallel with al.
The acquisition strategy, our previously announced <unk> acquisition strategy continues to operate we have a full pipeline. We're looking at a lot of opportunities. We just recognized that with the ventures initiative. There is a ton of activity going on out there.
Where companies may not be willing to sell at this point in time, we're not looking to actually sell the anti businesses and where we actually may be able to take positions that are complementary but from the portfolio companies perspective and from Alex in terms of technology in terms of.
Understanding cutting edge developments that are happening and so we really see those strategies working in parallel with each other and being complementary at some point some of the investments in our venture strategy may turn out to be acquisitions. Some may actually be sold and become dispositions and some we may hold and continue to work with.
And longer period of time, but we really see it as complementary to our acquisition strategy.
Okay and then just one quick last one I think the DC comics license or the partnership there is through 2023.
I guess when should we expect maybe here on whether thats renewed and does the pandemic was there some sort of an automatic renewal because it's sort of a loss trend between just kind of want to get an understanding of the timelines for that license.
Yes, so I would expect that by the time that we come back to you guys. In March we would have basically updated news across a number of our.
License license partners. So we're working really hard with them. They are incredibly pleased with our performance and so you can see some in some cases, we have truly eclipsed where these franchises. We're just a couple of years ago since we stepped in.
And so I would just have to tell you things are incredibly positive and we feel very strongly but we also are looking forward to our innovation with them in the next year and a half and so as we actually have presented that there is a lot of excitement mutually so hopefully we can get back to you by the March.
<unk> and then confirm a few things.
Great. Thanks very much.
We will now move on to our next question from Gerrick Johnson BMO capital markets.
Hey, good morning, Thank you very much.
Mark first for you can you just go over a little bit more on the movie economics like what other amortization might be coming through if any.
Hi, Good morning, Garrick Shaw.
So the movie is fully amortized.
There's no more amortization.
The actual production cost coming through that was all taken when we actually delivered the movie.
So really what happened in Q3 was that we had the distribution revenue, which was now recognized we had the amortization which flowed through.
And that impacted gross margin. We also had a box office bonus of $3 million, which flowed through into income and then what youre going to see going forward is essentially licensing and merchandising income flowing through into Q4 and into Q and into Q1 of 'twenty two and beyond.
And potentially if the movie continues to do really well they might be some other.
Distribution related.
Residual income from the movie at some point in 2022, but I wouldn't build it into your model because it's just an unknown at this point.
We're hopeful that it happens, but it's hard to predict at this point.
Okay any idea how big that could be.
No it really depends on the performance of the movie itself and the way that Paramount Recoups all the full expenses against that so it's going to it's going to depend on box office, it's going to depend on download to own in home video and all the other revenue sources, but.
As I say to you it's.
Hopefully as meaningful but we just do not know at this point, Gary can I would be cautious on the 22.
Okay, Great and I just wanted to ask Max one question. Please.
Max you discussed at retail.
See early shopping.
With fears of shortages et cetera, and I completely agree.
What I was wondering as you were very positive and you expected that spending to continue.
Why do you adopt.
Optimistic as you are on retail continuing through.
Through the rest of the season. Thank you.
Yes so.
So the reason that I actually express my optimism on retail specifically is driven by a number of things one is.
So as we replenish some of the new innovation behind the early sell through which we track weekly as we know.
We see that continue.
All through success week on week. So we brought something back in August and we started to support it in September because we had inventory.
I can tell you that now and.
End of October that sell through continues to be very very positive and thats basically new shoppers that are engaging with the franchise or brand who weren't before so we have continued to see continued sell through success across a number of our innovations and pork toy brands. So that's basically what's giving me a lot of a lot of.
Optimism second I mentioned and I referred to our e-commerce platforms. In one particular case, we have very strong predictive analytics, because we're actually getting real time data daily hourly and.
And as we look at that we also see the rate of sales in the velocity has continued to be very positive.
And so as we get more people to basically us months and days go by computer to shop.
Just optimistic regarding we have money in our pockets to continue to support those brands and that is the other piece, which gives me confidence we can actually trigger demand Eric and so it is beginning to and it's proving to work beyond our initial days.
We will now move on to our next question. Please go ahead, Brian Morrison TD Securities.
Yes. Good morning, I just wanted to follow up on the comment about money in your pocket is clearly a high class problem to have I understand your.
Spin Master ventures, and your acquisition strategy, but at some point in time Mark.
How do you think about your balance sheet, and maybe paying out a special or or maybe the introduction of a dividend.
So Brian yes.
We have a great balance sheet, we generate strong cash as you know.
We believe that we have a strategy that will over time allow us to deploy that cash.
In a accretive way for shareholders to create value.
The ventures initiative I think is is one more way to allow us to do that in addition to our acquisition strategy.
The amount that we've allocated agent is an initial amount if we need more certainty. We can think about allocating more dollars to that as well over time, but I would say to you with it.
We're a company that's a growth company, we're in growth mode, and we wanted to deploy our capital if at some point in the future.
And we can't do that we'd have to think about a way of returning capital to shareholders, but that's really not something that's on the radar right now it's not something that we will report all thinking about but it's possible at some point in the future.
I want to follow up on that quickly then it looks like youre going to have north of $400 million $600 million, maybe by the end of next year.
Are the opportunities out there to deploy that much capital.
I think on the acquisition side and on the venture side is a tremendous amount of opportunities just remember on ventures, where we're actually now looking across all three of our creative centers from a venture perspective and also on the acquisition front historically, all the acquisitions that we've done apart from the <unk>.
One acquisition that allows us to get into digital games have been in the toy space. We've never done any acquisitions in the entertainment area and we've done very limited acquisitions and digital games now with originator. The only one that we've added to that portfolio. There is a huge market out there and a huge number of opportunities for us to tap into.
We've put a strong leadership team in place a senior experienced people in each one of our creative centers to lead these initiatives on the acquisition and venture front and we think there are opportunities out there to do that and we're going to try our hardest and if we if we can't do it then we will have to talk about the dividend at some point in time, but that's not where our mind is that net Brian.
Okay. Thank you and then last question Mark in terms of digital.
Maybe you can just comment on the outlook for digital.
Clearly great subscriber traction continues here, but I'm just wondering how you balance that with the economy reopening and perhaps children being allocated less screen time.
Well I think Covid definitely had a positive boost in our digital games business that was part of it and we've certainly seen.
Slight shifting.
Kids' behavior now that they're back at school and so there will be a moderation of that behavior for sure.
But if you think about what we're doing in our digital games business. We have so many exciting initiatives that we believe will continue to drive that business you have.
<unk> days coming at some point in the future, which is our first multi player games, we've got a tremendous amount of potential with originator to expand that business.
Has around 35000 subscribers now and with the whole user base that we have across token Sega this tremendous potential and in addition to that we've got.
The initiative with noise that mix as described before where we're actually going to be monetizing al.
IP and so the investments that we're making across.
The broader studio network.
Globally are really positions us for continued growth in digital games and we're very excited about that mix is there anything you want to add no I wanted to amplify on annoyed and our own IP and obviously, where we're incredibly excited about what they have already begun to shows that we'll be able to tell you more in 2022.
And I wanted to just double click on your entertainment space, where we have significant upside potential, particularly with our originator franchise franchises in that group, so and we're beginning to see some green shoots. So I think we have a very balanced approach to continue to drive beyond that talk of life World platform.
And then I just wanted to say that we have now proven that revenue tracks, our user base, but I think the team is very very engaged on basically moving forward with moving up the engagement levels as well, which is another basically area to drive our revenue in that space and we have some opportunities and the team is doing a lot of experimentation to continue.
To basically enhance our models. So we're very excited with the prospect.
Alright, Thank you and congratulations.
Thanks, Brian.
We will now move onto our next question from Jamie Katz from Morningstar. Please go ahead.
Good morning, Thank you and nice quarter I Hope you can fill us in on what your internal expectations are for inflation and how that plays out over the next few quarters given that you've recently taken price increase.
Jamie good morning.
Certainly as part of our planning for 2022, we're taking a very hard look at all the input factors now that impact out our cost base.
We've seen we've seen resin.
And.
The electronic chips rise they did moderate in Q4, we've seen a continued increase in ocean freight costs from Q3, sorry from Q2 into Q3 and again remained at elevated levels into Q4.
We're actually studying.
What we think is going to happen in 2022.
I would say to you that's one of the top few things that we're looking about looking at when we formulate our budget.
I don't want to give you a numbers will prediction at this point in time I think it would be better if we actually go through the process, we're going through now and provide guidance when we have our customer previews back as well through January and February and we'll come back to you in March with a more articulated view of how we see things playing out but certainly it is a.
Very strategic issue for Us now, which is top of our agenda.
Okay, and then I think there were some comments on working capital efficiency gain during the prepared remarks would you be able to give.
Give us any insight into continued opportunity.
To gain traction on that thanks.
I think managing our working capital is something that we've for the last few years been very heavily focused on it.
If you look at where we were a year ago, we were at 17% 17, 8% networking capital as a percentage of LTM sales that's down now to 215, 8%. So we continue to drive that and I think if you look at that metric relative to the rest of the industry that we operate in we are significantly ahead of our <unk>.
<unk> when it comes to managing networking capital investments. So it's something that we will continue to focus on.
We're looking at technology, we're looking at automation, we're looking at better integration across all of our platforms to drive better information, which will allow us to continue to do that and so that's something that I think we're proud of and we will continue to focus on.
Thank you.
Thank you we will now take our next question from Sabadell.
<unk> from Canaccord Genuity. Please go ahead.
Hi, good morning, and thanks for taking my question I was just wondering could you expand on Coke life and death.
It'll platform and the growth Youre seeing there.
What does your customer acquisition strategy like there and then what is the mix between new users versus new users that are coming from previous games on your platform.
So good morning <unk>.
Over the last year as we are.
Pressing our remarks, we've actually increased our user base materially.
Quite a bit about user acquisition increases come just from basically organic.
<unk> sharing on platforms that basically by other players to come and so we have.
Really wonderful model by where kids are sharing socially.
Platforms like tick tock and that basically basically gets people into their into the into the space.
On top of that we have a user acquisition strategy as well to go and basically source markets to come into the ecosystem.
Then to top it off we have basically other sokha ecosystem.
Properties that actually resource to to kind of bring to our cocoa life world.
<unk> just to use an example.
Now to be clear.
It will continue to go forward into the next few quarters and one thing you actually have to think about it is that we are a global platform and one of the things that is really encouraging for us.
A lot of our growth at the beginning was really North America centric and what we've seen with this game is that he has global appeal. So now we have many other countries who are not basically providing user base.
Bolt into our platform.
As recent as three months ago, and we've seen significant growth in places that perhaps we have been surprised and that is that speaks to the wonderful of deal of these franchise. So we're super encouraged we're going to other places to get more and more users into our ecosystem and the thing now that we're turning our.
<unk> two is precisely what you're hinting which is how do we then engages kids to basically interact with the platform beyond what they see as they actually play in basically hang out.
Say themselves what they are doing so lots of opportunities. We see continued growth. Some geographies are exploding I mean, they are bringing users a very astronomical rates and so we're excited about that and we're just managing this funnel in a very productive way that team's done a terrific job hub has a good model, which we could perfecting <unk>.
Think about 16 billion views just one platform. There is a lot of earning that we're basically now feeding into how we develop new creator tools, which will appeal to geographies and kids, which we may have not appeal to yet.
Think about the <unk>.
Tayo coming up now in December when you look at the user acquisition in Asia. You would argue we have a huge opportunity Hello, Kitty and Asia Victor for 10 plus years, it's a massive property. So we're super excited to basically leading to properties like such to be able to get more people into our ecosystem. So I hope that answers your question.
Yes that was very helpful. Thank you so much.
For me I'll jump back in the queue. Thanks.
I think we have time for one more question.
Pension operator doesn't make us the final question. Please.
Yes, no problem. Our next question comes from David Mcfadden from Cormack Securities. Please go ahead.
Hi, Thanks for squeezing me in.
A couple of questions if I may.
There have been some questions about digital games.
Because obviously the growth has been spectacular.
I'm just wondering.
How easy is it for you to forecast that business.
I'm just wondering how long can you sustain these kind of growth rates obviously.
Hi, and then secondly, just on when you look to 2022 you know it looks like.
2021 is shaping up to be a phenomenal year and I'm just wondering.
It's reasonable to expect growth in 2022, just given how strong 2021 has been.
<unk> is expected to be.
So there are two questions. There so I'll start to address your questions and then pass it over to Mark I think part of your question is digital games growth sustainability.
And then your second question is really more on 2022 overall growth if I if I understood. Your question. So I'll start with the first question.
Our digital games portfolio continues to expand.
The lion's share of the growth right now has been talk of life World and that has driven a significant portion of our total digital games growth.
We're super excited about that and we have great plans to organically continue to basically drive that growth.
Growth as I mentioned has been really following our user acquisition and our user growth and user growth continues to grow which we track daily we expect revenue to follow that revenue to strengthen us we actually get more engagement, which will reflect basically people coming to our <unk>.
Stores in more quantities than they currently do and spending more on our stores than they currently so that's basically a revenue growth algorithm that we're perfect beyond that we've talked about expanding our user base from where we are today and what you still have plenty of geographies to actually be able to help us with that on top of that.
We have line extensions on that property, which is our biggest that we believe will get us into the multi player ecosystem, which is very exciting for us.
He has done a terrific job to get that into 2022, that's localized world on top of that we have single meeting, which basically increase their user base. So over 300000 subscribers, which was a massive increase over a year ago and that number continues to grow up.
We actually look at the subscriber base and we apply the subscriber base to actually get.
Our properties within our originator portfolio and to basically cross sell that platform, we see a huge opportunity for growth as well and then we have now also enter into.
Into an agreement with our partner in Turkey, who is helping us with even further.
Sources of wonderful ways to engage children and help children in areas that are white space for us so.
Last but not least we have significant development within our noise studio to actually get some of our own IP and digitize into basically digital games. So all of these to tell you. We're taking a portfolio approach, we're not letting the gaslog the accelerator on cocoa life World, which has been our driver.
But rather complementing that with other sources of digital games growth opportunities.
And then on top of that our spin Master ventures Digital games group is very active sourcing.
Sourcing candidates to continue to help us with that one example of that is the investment in Norwood, which we have already benefited from as they actually have jumped in and helped us in accelerating the development of one of our IP properties in house, we're Super excited and we'll be able to tell you more when we actually have our next call in March.
Let me turn it to Mark for 2022, which has a great slate of toy innovation and I'll, let him get more into it.
Thanks, just to add David to what Mac said on the digital games front, just some macro points.
Just keep in mind that kids, aged two to 12, 94% of kids in that age category or playing digital games right now, it's a huge market, it's actually bigger than the toy market and we have very small relative to the overall market and we think theres a tremendous amount of white space for us to grow into with Coca originator with Sehgal with.
Noise and so we feel very excited about the future growth potential in that digital games space digital games, now or actually becoming a social destination rather than just the game themselves in its wake cubes actually play. So we are leaning into it we feel very comfortable with it.
We are going to continue to believe that we will see some strong growth in that space.
As it relates to 2022 overall.
Our innovation pipeline continues we have five movies coming on board for 2022, four in the DC Universe franchise, and then is the wizarding world.
Movie, that's coming in 2022, Theres a lot of exciting things happening in 2022 is completely reasonable to believe that we will continue to grow in 2022, David but at this point I would say to you that.
We will come back to you in March with a more formulaic view of how we see that growth.
Manifesting when we've actually been through our customer previews in January and February globally, but we feel good in general about our performance and very good in general about our prospects for 2022 and beyond.
Okay, if I could.
If I can just maybe a question a little bit I mean.
In the past, you've given long term growth targets.
I was just wondering with 2020 to be in line with those long term growth targets or is just too early to say right now.
While our long term growth target is mid to high single digits topline growth.
We haven't changed that and we'll come back to you on 2022 as I said in March.
Okay alright, thank you.
Thank you very much operator, I think we're going to have to end the call at this point. So let me thank everybody for their participation and Max and I look forward to talking to you again in March without fourth quarter and full year 2021 results. Thank you.
Thank you ladies and gentlemen that concludes today's call. Thank you for your participation you may now disconnect.