Q4 2023 Spin Master Corp Earnings Call

Operator: Welcome to the Spin Master Corp fourth quarter twenty twenty three results. At this time, all lines are in listen. And following the presentation, we will conduct a question... If at any time during the call you require immediate assistance, please press star for the operator.

Welcome to the spin Master Corp, fourth quarter 'twenty 'twenty free results conference call. At this time all lines are in listen only mode and following the presentation. We will conduct a question and answer session.

At any time during the call you require immediate assistance. Please press star.

Sorry for the operator on this call is being recorded almost Thursday February 22024.

Operator: This call is being recorded on Thursday, February 29th, 2020. I would now like to hand the conference over to Sophia Bisoukis. Please go ahead. Thank you, Mark, and good morning. Welcome to Spin Master's Financial Results Conference call for the fourth quarter and year-ended December 31, 2023. I am joined this morning by Max Rangel, 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 interim and consolidated financial statements are available on the Investor Relations section of our website at spinmaster.com and on CedarPlus. Before we begin, please note the remarks on this conference call may contain forward-looking statements about Spin Master's current and future plans, expectations, and intentions, results, level of activity, performance goals or achievements, and any other future events or developments. Such statements are based on information currently available to management 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 certain estimates or assumptions will prove to be correct.

I'd now like to hand, the conference over to Sofia.

Please go ahead.

Thank you Mark and good morning, welcome to spin Master's financial results conference call for the fourth quarter and year ended December 31, 2023, I'm 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.

In term and consolidated financial statements are available on the Investor Relations section of our website at spin Master Dot com and on SEDAR part 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 for <unk>.

Norman schools or achievements and any other future events or developments.

Forward looking statements are based on information currently available to management 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 certain estimates or assumptions will provide will prove to be correct. Many factors could cause actual results to differ materially from.

Sophia Bisoukis: Many factors could cause actual results to differ materially from those expected or implied by the forward-looking statement. As a result, Spin Master cannot guarantee that any forward-looking statement 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 info on these assumptions and risks, please consult our cautionary statements regarding forward-looking information in our earnings release dated February 28, 2024. Please note that Spin Master reports in US dollars, and all dollar amounts to be expressed today are in euros unless otherwise noted. I would now like to turn the call over to Max. Thank you, and good morning.

Those expected 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 info on these assumptions and risks please consult our cautionary statements regarding forward looking information in our earnings release dated February 28 2024.

Please note that spin Master reports in U S dollars and all dollar amounts to be expressed today are in U S currency unless otherwise noted I would now like to turn the call over to Max.

Thank you and good morning, thanks, everyone for joining us today.

Max Rangel: Thanks, everyone, for joining us today. Looking at our performance in 2023, we are pleased with how our team negotiated the challenging retail environment and harnessed the power of our three creative centers. Our combination of toys, entertainment, and digital games generated strong revenue growth of just under 8% in Q4. However, as expected, full-year revenue was lower year-over-year, driven by a decline in the toy segment. 2023 was a challenging global marketplace for toys, with the industry declining 7%, according to Circana, as a result of the challenging microeconomic environment and a shift towards services and experiences post-COVID. However, the industry expected that Christmas would arrive late and restore category growth. However, the extra shopping days did not bring about the expected surge.

Looking at our performance in 2023, we are pleased with how our team navigated the challenging retail environment and harness the power of our three creative centers are.

A combination of toys entertainment and digital games and generated strong revenue growth of just under 8% in Q4.

As expected full year revenue was lower year over year, driven by a decline in the toy segment 2023 was a challenging global marketplace, where choice with the industry declining 7%. According to serve kind of.

As a result of the challenging microeconomic environment and a shift towards the services and experiences both COVID-19.

The industry expected that Christmas would arrive late and restore category growth. However, the extra shopping days. Unfortunately did not bring about the expected search retailers were cautious bought less and consumption did not increase as expected despite deep discounting.

Max Rangel: Retailers were cautious, bought less, and consumption did not increase as expected, despite deep discounting. Retailers, for the most part, prioritize profitability rather than growth, and ended the year with a cleaner retail inventory compared to 2022. Our total revenue declined 5.7% for 2023, primarily due to lower toy revenue, which declined 11.3%. However, we experienced growth in both entertainment and digital games. Entertainment had a strong year with a 60% increase in revenue driven by the delivery of new content, including the very successful second Paw Patrol movie and Unicorn Academy. Digital Games saw revenue growth of 6.1% from continued strong engagement in Toggle Live World and the launch of our new subscription service, Picnic.

Taylor's for the most part prioritize profitability, rather rather than growth and ended the year with cleaner retail inventory compared to 2022.

Our total revenue declined five 7% for 2023, primarily due to lower toy revenue, which declined 11, 3% we experienced growth in both entertainment and digital games Entertainment had a strong year with a 60% increase in revenue driven by the delivery of new content, including.

They're very successful second Paw patrol movie and Unicorn Academy.

Digital games, so revenue growth of six 1% from continued strong engagement and talk of life World and the launch of our new subscription service picnic.

Max Rangel: Let me now dive deeper into our toy performance and provide further context regarding the macroeconomic environment. From 2020 to 2022, the toy industry experienced strong growth, especially in the U.S., which was accelerated by the pandemic. Starting in late 2022 and into 23, we saw industry sales decline. A key factor in this decline was a shift in consumer shipping behavior due to increased pressure on consumers' wallets from inflation and rising interest rates, as well as a post-COVID shift to services such as travel, restaurants, concerts, and sporting events. Consumers spent less per child in the toy aisle and traded down from a price point perspective across multiple categories as they had to make more considered spending decisions. Consumers were very price sensitive during the holidays, often waiting to buy on promotion or at a lower price within the portfolio and buying less overall.

Let me now dive deeper into our toy performance and provide further context regarding the macroeconomic environment from.

From 'twenty to 'twenty to 'twenty to 'twenty, two the toy industry experienced strong growth, especially in the U S and accelerated by the pandemic.

Started in late 2022 and into 'twenty three we saw industry sales declined.

A key factor in this decline was a shift in consumer shopping behavior due to increased pressure on consumers' wallets from inflation and rising interest rates as well as opposed to carbon shift to services, such as travel restaurants concerts and sporting events.

Consumers spent less per child in the toy aisle and traded down from a price point perspective across multiple categories as they had to make more considered spending decisions.

Consumers, who are very price sensitive during the holidays, often waiting to buy on promotion or at a lower price within the portfolio and buying less overall in this context, we were very pleased with our doi performance in Q4 with gross product sales growing four 8%.

Max Rangel: In this context, we were very pleased with our toy performance in Q4, with gross product sales growing 4.8%. Now, from a retail point of sale perspective, our global POS increased 1% in Q4, well ahead of the industry, which saw a decline of 7% according to Cercana. Our POS growth was the second fastest of the top five manufacturers globally for the quarter. In Europe, Spin Master was the fastest growing toy company. On a full year basis, our global POS declined 4%, a lower decline than the industry, which declined by 6.5% per cercana.

Now from a retail point of sale perspective, our global Pos increased 1% in Q4, well ahead of the industry, which saw a decline of 7% according to serve kind of.

Our Pos growth was the second fastest with the top five manufacturers globally for the quarter in Europe spin Master was the fastest growing toy company.

On a full year basis, our global Pos declined 4%, a lower decline than the industry, which declined by six 5% Mercer County.

Max Rangel: We retained our position as the fourth largest manufacturer, and we grew market share in 10 of 11 track markets, with the U.S. finishing almost flat. Let me provide some color on our key toy categories. In preschool, we have a robust offering with a combination of Paw Patrol and popular licensed properties such as Gabby's Dollhouse. Paw Patrol remained the number one preschool property globally for Q4, and it has been for Q1 2020, according to Cercana.

We retained our position as the fourth largest manufacturer and we grew market share in 10 of 11 truck markets with a U S, finishing almost flat.

Let me provide some color on our key toy categories in preschool, we have a robust offering with a combination of paw patrol and popular licensed properties such as <unk> dollhouse.

Paw patrol remain the number one preschool property globally for Q4 and he has been since Q1 2020. According to <unk> in Q4 Paw Patrol's Global POS grew just over 4% and grew in most countries in the U S. In Q4 Paw patrol Pos grew 12% and according to.

Max Rangel: In Q4, Paw Patrol's global POS grew just over 4% and grew in most countries. In the U.S., in Q4, Paw Patrol POS grew 12%, and according to Cercana, at 23, we gained share in infant-toddler preschool with POS of 5.3% compared to the industry, which was down just under 8%. For 2023, Paw Patrol was a number nine property globally, up from number 10 in 2022. This is an incredible feat and a testament to our investment in creating refreshed themes, introducing innovation into the line, expanding the POD universe through feature films, and broadening distribution to YouTube and digital apps. Gabby's Dollhouse Perfect Playset was the number one item in the infant-toddler preschool supercategory for both Q4 and for 2023.

We're kind of in 'twenty three we gained share in infant toddler preschool with P. O S. A five 3% compared to the industry, which was down just under 8% for.

For 2023 Paw patrol was a number nine property globally up from number 10 in 2022 D.

This is an incredible feat and a testament to our investment in creating refresh themes introducing innovation into the line expanding the Paul universe through feature films and broadening distribution to Youtube and digital apps.

Copies Dalhouse perfect place. It was the number one item in the infant toddler preschool Super category for both Q4 and for 2023.

Max Rangel: And Gabby's was the fourth preschool toy property globally in Q4 per Circano. Gabby's Dollhouse POS grew triple digits in Q4 and in 2023 internationally. We have much more to come in 24 with a complementary offering from our acquisition of Melissa and Doug and the introduction of Miss Rachel. We are known for creating breakthrough toys, and a great example of this was the launch of Bitsy, the digital pet you can touch. Its disruptive play pattern earned numerous awards for the most innovative tool of the year in several countries.

And Gabby as was the fourth preschool toy property globally in Q4, Berkshire County.

Gary's Dalhouse B O S grew triple digits in Q4 and in 2023 internationally, we have much more to come in 24 with a complementary offering from our acquisition of Melissa and Doug and the introduction of Ms. Rachel.

We are known for creating breakthrough choice and a great example of this was the launch of Betsy the digital pet you can touch.

It's disruptive play pattern and numerous award for most innovative toy of the year in several countries.

Max Rangel: In Dolls and Interactive, Bitsy was named by Sirkana as a top item within the Youth Electronics category, and in Q4, Spin Master continued to gain share, growing POS 9.9 points. We have new Bitsy iterations planned for 2024, including a Disney-licensed Bitsy featuring storied characters and also a Magicals version launching in the fall. Beyond Bitsy, for 2024, we have several exciting launches within Hatchimals and the introduction of the Unicorn Academy toy line based on the TV show. Within Wheels and Action, Monster Jam had another strong quarter, becoming the second property in vehicles from number four last year, with POS up 20% in Q4 and up 11% for 2023 Perser Canna. Monster Jam has been the number one license within the vehicle super category for the 11th straight quarter globally, according to Circana.

In dose and interactive bietz, he was named by certain kind of as a top item within the youth electronics category and in Q4 spin Master continue to gain share growing P. O S nine nine points.

We have new Bitsy iterations plan for 2024, including a Disney license Bitsy, featuring storied characters and also a magical version launching in the fall.

Beyond Bitsy for 2024, we have several exciting launches within hatch malls and the introduction of the Unicorn Academy toy lines based on the TV show.

Within Wilson action Monster Jam had another strong quarter, becoming the second property in vehicles from number four last year with B O S up 20% in Q4 and up 11% for 2023 per share count them.

Monster Jam has been the number one license within the vehicle Super category for the 11th straight quarter globally. According to serve kind of the combination of felt entertainments live shows combined with the innovative new toys allows kids to relive the action from the stadium and this drives consumer demand.

Max Rangel: The combination of Felt Entertainment's live shows combined with the innovative new toys allows kids to relive the action from the stadium, and this drives consumer demand. Within games and puzzles, Rubik's had a very strong finish to 2023, becoming the stocking stuffer of choice for many parents, with a very attractive price point. And Rubik's Cube was the sixth brand within Games and Puzzles for both Q4 and for 2023, with POS up 12% in Q4 and 18% in 2023 for Circana. This momentum sets up nicely to celebrate Rubik's 50th anniversary in 2024, which will include new product launches and collaborations, global celebrations, and the debut of our new digital game, the Rubik's Mask.

Within games and puzzles Rubik's had a very strong finish to 2023, becoming to stocking stuffer for a choice of choice for many parents.

We got very attractive price point, and Rubik's Cube was six brand within games and puzzles for both Q4 and for 2023 with B O S up 12% in Q4 and 18% in 2023 pressure kind of.

This momentum sets up nicely to celebrate Rubik's fifth anniversary in 'twenty 'twenty, four which will include new product launches and collaborations global celebrations and the debut of our new digital game to Rubik's match.

Max Rangel: Anticipating continued pressure on consumer discretionary spending, we will launch a new toy initiative in the second half of 2024 designed and manufactured specifically for the value channel, as we believe there is a large opportunity to grow volume in this channel. As many of you saw in January at our Investor Day, our new value line leverages our strongest brands and licenses, including Paw Patrol, Gabby's Dollhouse, Monster Jam, and DC Comics, with price points as low as $1. Melissa and Doug will further strengthen our position in preschool and allow us to develop a strong beachhead in early learning.

Anticipating continued pressure on consumer discretionary spending we will launch a new toy initiatives in the second half of 2020 for design and manufacturer specifically for the value channel.

As we believe there is a large opportunity to grow volume in this channel.

As many of you saw in January at our Investor Day, our new value line Leverages, our strongest brands and licenses, including Paw patrol copies Dollhouse Monster Jam and DC comics with price points as low as one dollar.

Melissa and Doug will further strengthen our position in preschool and allow us to develop a strong beachhead in early learning. According to serve kind of the combination will make us the market leader in infant toddler and preschool Super category.

Max Rangel: According to Cercana, the combination will make us the market leader in the infant-toddler and preschool supercategory, and teams are working hard on the integration focused on building the platform for revenue growth across mass and specialty, driving international growth and realizing cost synergies. I want to spend a moment talking about Melissa and Doug's financial performance in 2023, and Mark will provide additional detail. In 2023, Melissa and Doug's revenue declined approximately Their adjusted EBITDA margin remained comparable amidst a challenging second half and a decline in the infant-toddler preschool category. Lisa and Doug's previous owner made the choice to protect long-term profitability by prioritizing profit margin over volume. They did not discount or promote significantly in what was a highly promotional environment, and this led to Melissa and Doug experiencing a greater decline in their revenue than the overall category.

Our teams are working hard on the integration focused on building the platform for revenue growth across mass and specialty driving international growth and realizing cost synergies.

I want to spend a moment talking about Melissa Ducks financial performance in 2023, and Mark will provide additional detail.

In 2023, Melissa Ducks revenue decline approximately 25% from 2022.

There are adjusted EBITA margin remained comparable amidst a challenging second half and a decline in the infant toddler preschool category list.

Listen Doug's previous owner made the choice to protect long term profitability by prioritizing profit margin over volume.

They did not discount or promote significantly in what was a highly promotional environment and this led to Melissa Doug experiencing greater decline in the revenue and the overall category.

Max Rangel: Our entertainment creative center launched significant new content in 2023, including our second feature film for the Paw Patrol franchise, which has now surpassed 200 million dollars in global box office revenue. Paw Patrol celebrated its 10th anniversary in 2023, and the release of the second movie had a very positive impact on watch time across all Paw content, including the TV series, helping to fortify Pulse brand equity and health. Earlier in 2023, we launched our first spin-off series, Paw, Rubble, and Crew, which has been renewed for a second season and continues to be one of the top five preschool shows on Nickelodeon in its H category. Building on our vast experience in developing preschool content, we recently launched our newest animated series, Vida the Vet, on BBC in the UK and Chorus Treehouse in Canada.

Our entertainment Creative Center launched significant new content in 2023, including our second feature film for the Paw patrol franchise, which has now surpassed 200 million daughters in global box office revenue Papa.

<unk> celebrated its 10th anniversary in 2023, and the release of the second movie had a very positive impact on watch time across all Paul content, including the T V series help.

Helping to fortify Pas brand equity and health.

Earlier in 'twenty to 'twenty, three we launched our first spinoff series of PA rubble in crude which has been renewed for a second season and continues to be one of the top five preschool shows on Nickelodeon is H category.

Building on our vast experience in developing preschool content, we recently launched our newest and he made it serious veto the vet on BBC in the U K and Corus Treehouse in Canada.

Max Rangel: We have launched our Vita on YouTube channel and have already surpassed 15 million views of our brand new content. And this is ahead of our U.S. Netflix debut on March 18th as we gear up for the toy launch in the fall. A new fantasy adventure series, Unicorn Academy, launched on Netflix on November 2nd and was an instant hit, debuting as the number one kids' show globally.

We have launched our Vida on Youtube channel and have already surpassed 15 million views of our brand new content.

And this is ahead of our U S. Netflix debut on March 18th as weak Europe for the toy launch in the fall.

Our new Fantasy Adventure series Unicorn Academy launched Netflix November 2nd and was an instant hit debuting as a number one keeps show globally.

Max Rangel: With its characters and magical adventures, Unicorn Academy quickly captivated audiences globally and racked up over 40 million hours of watch time in November alone. Unicorn Academy is our first full franchise launch with face-branded offerings and experiences across each of our three creative centers. Thank you for watching.

With X characters and magical Adventures Unicorn Academy quickly captivated audiences globally and racked up over 40 million hours of watch time in November alone.

Unicorn academies are first full franchise launch with phase branded offerings and experiences across each of our three creative centers.

Max Rangel: Unicorn Academy Toys will launch this fall, and the digital game will launch in 2025. In addition to our content, toys, and the digital game, we have been working on a licensing program for a wide range of licensed consumer products in 2024 and beyond to meet demand from fans of the show for deeper engagement with the franchise. Turning now to digital games, 2023 saw the overall mobile digital games market decline by about 2%. However, our digital games creative center outperformed with revenue growth in both Q4 and 23, driven primarily by higher in-game purchases in Toka Live World and subscription growth from the newly launched Picnic Bundle. Toka Live World ended 2023 with approximately 62 monthly active users, up 4.3 million compared to 2022. 2023 was the largest download year for TokaLife World ever, with 98 million downloads, compared to 92 million in 2022 and 90 million in 2021. This shows Talk Alive World's ongoing popularity and engagement with kids. Introducing Q3, Picnic is our subscription bundle that offers unlimited access to a variety of our Sega Mini and Toca Boca digital games.

Unicorn Academy Toys will launch this fall and the digital game will launch in 2025.

In addition to our content toys and the digital game, we have been working on a licensing program for a wide range of licensed consumer products in 2024 and beyond to meet demand from fans of the show for deeper engagement with the franchise.

Turning now to digital games 2023, so the overall mobile digital games market declined by about 2%. However, our digital games Creative center outperformed with revenue growth in both Q4, and 23, driven primarily by higher in game purchases in Tokyo live World and subscription growth from the newly launch.

Picnic bundle.

Tokio life World ended 2023 at approximately 62 monthly active users up $4 3 million compared to 2022.

2023 was the largest download year for Tokio life world ever with 98 million downloads compared to $92 million in 2022 and $90 million in 2021.

These shows talk like worlds ongoing popularity and engagement with kids.

Introducing Q3 picnic he started subscription bundle that offers unlimited access to a variety of our sago mini and toco Boca digital games, one subscription streamlines multiple apps into a simple and affordable service for parents and provides endless ways to play and learn for kids.

Max Rangel: One subscription streamlines multiple apps into a simple and affordable service for parents and provides endless ways to play and learn for kids. The market reacted positively to the bundle when it was launched, and including Paw Patrol and Originator, from Originator, we ended 2023 at just under 400,000 subscribers in total, a growth of 68,000 subscribers over 2022. The subscriber increase is impressive, and we are migrating users to Picnic as we harness the stickiness of the play experience with Sego World, Sego School, First Words, Toca Jr., Hair Salon, and more. In 2024, we will integrate the Originator apps into Picnic to increase bundle value even further. Paw Patrol Academy, which is our first in-house learning app for our powerhouse franchise, is off to a great start.

The market reacted positively to the bundled when he was launch and including Paw patrol and originator from originator. We ended 2023 of just under 400000 subscribers totaled a growth of 68000 subscribers over 2022.

The subscriber increase is impressive and we are migrating users to picnic as we harnessed the stickiness in the play experience with single World Sago School first words, Tylka junior hair Salon and more.

In 2024, we will integrate the originator apps into picnic to increase bundled value even further.

Paul Patrol Academy, which is our first in house and earning up for a powerhouse franchise is off to a great start.

Max Rangel: Due to its high quality and overall depth of play, it has been named Google's best app of 2023 for families and ended 2023 with 34,000 subscribers. The team is now in full service and continues to build the overall experience. We are excited to be launching several new digital games in Q2. This includes Toca Days, our first social multiplayer game that will seek to expand the existing player base of the Toca universe. We are also launching Rubik's Match, our casual mobile game that will deliver a fresh take on the Match 3 game genre, to coincide with Rubik's 50th anniversary.

Due to its high quality and overall depth of play he has been named Google's beds out of 2023 for families and ended 2023 with 34000 subscribers. The team is now in full service and continues to build the overall experience.

We are excited to be launching several new digital games. In Q2. These include Stoker days, our first social multiplayer game that will seek to expand the existing player base. So that took our universe we.

We are also launching rubik's match, our casual mobile game that will deliver a fresh take on the match three game genre to coincide with the rubik's 50th anniversary.

Max Rangel: Our teams are collaborating across creative centers to make this a special moment for Rubik's fans. As more kids are spending their time in the online world and communities, we are expanding our player ecosystem and creating digital play experiences that cater to multiple interests and age levels. Now, looking forward, we expect that 24 will be a challenging year due to the continued economic pressure on consumers and a shorter shopping period during the holiday season. We are developing toys that will spark imagination while also providing the consumer with great value at varied price points. We will focus on the integration of Melissa and Duck, where we have already made progress building a cross-functional team to integrate the businesses and identifying important work streams to accelerate synergy realization.

Our teams are collaborating across creative centers to make these a special moment for Rubik's fans as more kids are spending their time on online in the online world and communities. We are expanding our player ecosystem and creating digital play experiences that cater to multiple interests NH levels.

Now looking forward, we expect that 24 will be a challenging year due to the continued economic pressure on consumers and a shorter shopping period. During the holiday season, we are developing toys that will spark imagination, while also providing the consumer with a great value at various price points.

We will focus on the integration of <unk>, where we have already made progress building a cross functional team to integrate the business and identified important work streams to accelerate synergy realization.

Max Rangel: We see many opportunities for growth by leveraging Melissa and Doug to grow our early childhood play capabilities. We will continue to drive performance for our core brands across our three creative centers, from celebrating Rubik's 50th anniversary with new products and the new mobile digital game to capitalizing on the momentum from the Paw Patrol movie across toy, entertainment, and digital games. We will expand our early childhood reach with the first toy offering for YouTube sensation Miss Rachel.

We see many opportunities for growth by leveraging the leasing Doug to grow our early childhood play capabilities. We will continue to drive performance, where our core brands across our three creative centers from celebrating rubik's, 50th anniversary with new products and the new mobile digital game to capitalizing on the momentum from the Paw patrol movie across toy.

Entertainment and digital games, we will expand our early childhood reach with a first toy offering for Youtube sensation Ms. Rachel.

Max Rangel: And beyond toys, our entertainment creative center has a robust slate for 24 and is engaging new audiences with Unicorn Academy and Vida the Vet. Additionally, our Digital Games Creative Center has invested in designing new mobile digital games intended to expand our reach across a broader ecosystem. Now, we know that newness and innovation win with customers, and we are investing in disruptive innovation to reimagine everyday play. We're highly focused on executing our long-term growth strategy, and we continue to make significant progress by leveraging our deep expertise in play, a well-established global network, and innovation capability to unlock growth and inspire future generations. We're confident in the strength of our diversified portfolio and our ability to create long-term growth and shareholder value. I will now pass it over to our CFO, Mark Segal, to discuss our financial performance in detail and discuss our 2024 financial outlook. Thank you, Max.

And beyond toy or entertainment create a center has a robust slate for 24 and he is engaging new audiences with Unicorn Academy and Vito to vet.

Our digital games Creative Center has invested in designing new mobile digital games intended to expand our reach across a broader ecosystem.

Now, we know that newness and innovation win with customers and we are investing in our disruptive innovation to re imagine everyday play.

We're highly focused on executing our long term growth strategy and we continue to make significant progress by leveraging our deep expertise in play well.

Well established global network, and innovation capability to unlock growth and inspire future generations.

We're confident in the strength of our diversified portfolio and our ability to create long term growth and shareholder value.

I will now pass it over to our CFO Mark Segal to cover our financial performance in detail and discuss our 2024 financial outlook.

Thank you Max.

Mark L. Segal: We delivered a solid fourth quarter with year-over-year growth in both revenue and adjusted EBITDA, despite the challenging macroeconomic backdrop. We generated Q4 revenue of 502.6 million, up 7.9% year-over-year, and adjusted EBITDA of 64.9 million, up 423%. Our toy gross product sales increased by 4.8% to $502.3 million in Q4. The increase was driven by a return to traditional seasonality after 2022, where retailers had bought inventory early in the year and were then focused on reducing inventory on hand in the fourth quarter. On a constant currency basis, gross product sales increased by 2.4%. The Wheels in Action product category had strong Q4 growth product sales growth of up 25.9%.

We delivered a solid fourth quarter with year over year growth in both revenue and adjusted EBITDA. Despite.

Despite the challenging macroeconomic backdrop.

We generated Q4 revenue of $502 6 million up seven 9% year over year, and adjusted EBITDA of $64 9 million up 423%.

Our toy gross product sales increased by four 8% to $502 3 million in Q4.

The increase was driven by a return to traditional seasonality after 2022, where retailers have brought inventory in early in the year and within focused on reducing inventory on hand in the fourth quarter.

On a constant currency basis gross product sales increased by two 4%.

The wheels and action product category had strong Q4 gross product sales growth up 25, 9%.

Mark L. Segal: Q4 toy adjusted EBITDA was up $43.7 million to $19.3 million with a margin of 4.7%, compared to negative 6.2. Higher Adjusted EBITDA was driven by increased gross profit and lower SG&A. Looking at the full year, toy gross product sales decreased by 191.6 million, or 9.7%, to 1.78 billion due to lower order volume across all product categories driven by the macroeconomic pressures on consumer discretionary spending. In constant currency, toy gross product sales declined by 215.7 million, or 10.9%, to $1.76 billion.

Q4 toy adjusted EBITDA was up $43 7 million to $19 3 million with a margin of four 7%.

To negative six 2%.

Higher adjusted EBITDA was driven by increased gross profit and lower SG&A.

Looking at the full year toy gross product sales decreased by $191 6 million or nine 7% to $1 seven 8 billion due to lower order volume across all product categories, driven by the macroeconomic pressures on consumer discretionary spending.

Constant currency toy gross product sales declined by $215 7 million or 10, 9% to $1 76 billion.

Mark L. Segal: As we highlighted during the Q3 call, sales allowances were elevated for 2023 at 13.8% compared to our traditional range of 10-12% from higher markdowns, promotional activity, and market mix. Toy Adjusted EBITDA declined $32.2 million to $212.4 million. Toys' adjusted EBITDA margin for 2023 was 13.8% compared to 14.1% in 2022. The lower adjusted EBITDA margin was due to toy revenues declining faster than marketing, distribution, product development, and administrative expenses. In Q4, entertainment revenue increased by $24 million or 77% to $55.2 million from higher distribution revenue from new content deliveries and from the Paw Patrol movie. Entertainment Adjusted Operating Income was $10.9 million, and Adjusted Operating Margin was 19% compared to 66%. The decrease in adjusted operating margin was driven by the higher amortization of production costs due to content delivery, as well as marketing costs for the launch of Unicorn Academy.

As we highlighted during the Q3 call sales allowances were elevated for 2023 at 13, 8% compared to our traditional range of 10% to 12% from higher Mark downs promotional activity and market mix.

<unk> adjusted EBITDA declined $32 2 million to $212 4 million.

Toy adjusted EBIT margin for 2023 was 13, 8% compared to 14, 1% in 2022.

The lower adjusted EBITDA margin was due to toy revenues declining foster than marketing distribution product development and administrative expenses.

In Q4 entertainment revenue increased by $24 million or 77% to $55 2 million from higher distribution revenue from new content deliveries and from pulp patrol movie.

Entertainment adjusted operating income was $10 9 million and adjusted operating margin was 19% compared to 66%. The decrease in adjusted operating margin was driven by the higher amortization of production cost due to content deliveries as well as marketing costs for the launch of Unicorn Academy.

2023 entertainment revenue increased by $71 3 million or 60% from higher distribution revenue from new content deliveries through the year, including the poll patrol movie Unicorn Academy, Robert <unk> crew and VITAS event.

Mark L. Segal: In 2023, entertainment revenue increased by 71.3 million, or 60%, from higher distribution revenue from new content deliveries through the earth, including the Paw Patrol movie, Unicorn Academy, Rubble and Crew, and Vida the Vet. We also continue to receive distribution revenue from the Paw Patrol series and the first Paw Patrol movie. 2023 Adjusted Operating Margin decreased to a still very healthy 42.5% from 66.6% due to the high amortization of production costs from the additional content delivery. Q4 revenue in digital games grew 7.1% or $2.7 million to $40.6 million due to higher in-game purchases in Toker Life World and subscription revenue from Picnic, our subscription bundle, as well as Paw Patrol Academy. Adjusted operating margin in Q4 was 26.6%, down from 32.5% due to higher upfront marketing costs incurred to launch Paw Patrol Academy.

We also continued to receive distribution revenue from the pulp patrol series and the first pull patrol movie.

2023, adjusted operating margin decreased to a still very healthy 42, 5% from 66, 6% due to the higher amortization of production costs from the additional content deliveries.

Q4 revenue in digital games grew seven 1% or $2 7 million to $40 6 million due to higher in game purchases and Tokio life World and subscription revenue from picnic how subscription bundle as well as pulp patrol Academy.

Adjusted operating margin in Q4 was 26, 6% down from 32, 5% due to higher upfront marketing costs incurred to launch pulp patrol Academy.

Mark L. Segal: Digital Games revenue increased by 6.1% for 2023 to $173.9 million, driven by higher in-app purchases in Toker Life World. Adjusted operating margin of 33.4% was up slightly relative to 2022. On a consolidated basis for 2023, the decline in toy gross product sales and revenue was partially offset, as I just described, by strong performances in our entertainment and digital games creative centers, leading to a full year revenue of just over $1.9 billion, a decline of 5.7%. This reinforces our belief in the value of our three creative centers and the diversification and leverage they provide.

Digital games revenue increased by six 1% for 2023 to $173 9 million driven by higher in App purchases in Tokyo life World.

Adjusted operating margin of 33, 4% was up slightly relative to 2022.

On a consolidated basis for 2023.

The decline in toy gross product sales in revenue was partially offset as I. Just described by strong performances in our entertainment and digital games creative centers leads.

Leading to a full year revenue of just over $1 9 billion a decline of five 7%.

This reinforces our belief in the value of our three creative centers and the diversification and leverage that they provide.

Mark L. Segal: Gross margin in 2023 remained stable at 54.5% compared to 54.6% in 2022, despite the dilutive effect of higher amortization related to more entertainment content delivery, as gross margin was up in the toy segment from lower ocean freight costs and favorable foreign exchange. We demonstrated strong cost control in 2023. Adjusted SG&A, which excludes restructuring costs, share-based compensation, and transaction costs, declined $32.2 million to $726.4 million from lower administrative, selling, marketing, and distribution expenses. Adjusted SG&A as a percentage of revenue increased slightly to 38.1% from 37.5%. Adjusted EBITDA for 2023 was $418.8 million compared to $389.4 million. Adjusted EBITDA margin was 22% compared to 19.3%. Excluding the Paw Patrol movie distribution revenue, adjusted EBITDA was $403.2 million, an increase of $13.8 million from $389.4 million. Adjusted EBITDA margin, excluding the poor movie distribution revenue, was 21.3%, 200 basis points higher compared to 19.3%.

Gross margin in 2023 remained stable at 54.5% compared to 54, 6% in 2022, despite the dilutive effect of higher amortization related to more entertainment content deliveries as gross margin was up in the toy segment from lower Ocean freight.

Costs and favorable foreign exchange.

We demonstrated strong cost control in 2023.

Adjusted SG&A, which excludes restructuring costs share based compensation and transaction costs declined $32 2 million to $726 4 million from lower administrative selling marketing and distribution expenses.

Adjusted SG&A as a percentage of revenue increased slightly to 38, 1% from 37, 5%.

<unk> EBITDA for 2023 was $418 8 million compared to $389 4 million.

Adjusted EBITDA margin was 22% compared to 19, 3%.

Excluding the poll patrol movie distribution revenue adjusted EBITDA was $403 2 million, an increase of $13 8 million from $389 4 million.

Adjusted EBITDA margin, excluding the pole movie distribution revenue was 21, 3% 200 basis points up compared to 19, 3%.

Mark L. Segal: Adjusted EBITDA margin increased due to higher gross margin from toys partially offset by higher adjusted SG&A relative to revenue. Turning now to our balance sheet. We are very pleased with our inventory management this year. We ended 2023 with $98 million in inventory, compared to $105 million in 2022, our lowest year-end inventory position in six years. In 2023, we generated $227 million in operating cash flow and used $135 million in investing activities, mainly for entertainment content and digital games development. Free cash flow for 2023 was just under $123 million compared to just under $150 million, primarily due to lower operating cash flow, excluding transaction costs for the M&E acquisition and restructuring costs, including the Calais shutdown. We generated approximately $150 million in free cash flow.

Adjusted EBITDA margin increased due to higher gross margin from choice, partially offset by higher adjusted SG&A relative to revenue.

Turning now to our balance sheet, we are very pleased with our inventory management. This year, we ended 2023 with $98 million of inventory compared to $105 million in 2022.

Our lowest year end inventory position in six years.

In 2023, we generated $227 million in operating cash flow and used $135 million in investing activities, mainly for entertainment content and digital games development.

Free cash flow for 2023 was just under $123 million compared to just under 150 $550 million, primarily from lower operating cash flow.

Excluding transaction costs for the <unk> acquisition and restructuring costs, including the Calais shut down.

We generated approximately $150 million in free cash flow.

Mark L. Segal: We ended 2023 with nearly 706 million in cash, our highest year in balance to date, compared to just over 644 million at the end of 2022. On January 2nd, we closed the acquisition of Melissa and Doug for a preliminary purchase consideration of $959 million, which represented $950 million base consideration and an estimated $9 million of working capital adjustment. We funded the acquisition with $434 million in cash and $525 million of debt.

We ended 2023 with nearly $706 million in cash our highest year end balance to date compared to just over $644 million at the end of 2022.

On January 2nd we closed the acquisition of Melissa Doug for a preliminary purchase consideration of 959 million, which represented $950 million based consideration and an estimated $9 million of working capital adjustments.

We funded the acquisition with $434 million in cash and $525 million of debt.

Mark L. Segal: Let me provide further details on Melissa and Doug's performance in 2023 in addition to what Max described. Please note that we plan to file our business acquisition report just prior to April 1st, which will include Melissa and Doug's audited 2023 results, but we wanted to share the key numbers with you today in advance of that filing. In 2023, Melissa and Doug generated approximately $412 million in gross product sales and $364 million in net revenue, a 25% decline from 2022. However, adjusted EBITDA margins remain solid at approximately 18.4%, in line with 2022.

Let me provide further details on Melissa <unk> performance in 2023 in addition to what Max described.

Please note that we plan to file a business acquisition report just prior to April the first which will include Melissa Doug's audited 2023 results.

But we wanted to share the key numbers with you today in advance of that filing.

Yes.

In 2023, Melissa <unk> generated approximately $412 million in gross product sales and $364 million in net revenue of 25% decline from 2022.

Adjusted EBITDA margins remained solid at approximately 18, 4% in line with 2022.

Mark L. Segal: Melissa and Doug ended 2023 with significantly lower inventory on hand than 2022. Turning now to our Outlook. 2024 is a more complex outlook statement because of the M&D acquisition. For better comparability, we have provided expectations for the base Spin Master business and then provided a 2024 Outlook for Melissa and Doug, as well as identified expected cost synergies. As Max described, heading into 2024, we expect the toy industry will continue to be under pressure, continuing to face macroeconomic headwinds and market volatility, and is expected to decline, although at a slower rate than in 2023. We expect our toy cross-product sales for 2024, excluding Melissa and Doug, to be in line with 2023. We expect the seasonality of gross product sales to be between 28% and 32% in H1.

Listen Doug ended 2023 with significantly lower inventory on hand than 2022.

Yes.

Turning now to our outlook.

24 is a more complex outlook statement because of the <unk> acquisition.

For better comparability, we have provided expectations for the base spin Master business and then provided 2020 for outlook for Melissa Doug as.

As well as identifying expected cost synergies.

As Max described hitting into 2024, we expect the toy industry will continue to be under pressure continuing to face macroeconomic headwinds and market volatility and is expected to decline although at a slower rate in 2023.

We expect our soy crush product sales for 2024, excluding Melissa Doug to be in line with 2023.

We expect the seasonality of gross product sales to be 28% to 32% in H one.

Mark L. Segal: This outlook reflects our view that we have a strong, innovative, deep, and value-focused line tempered by the reality that consumer behavior in 2024 is likely to continue to be volatile and that there are five pure shopping days leading into Christmas in 2024. We expect our total revenue growth to be in line with 2023, excluding Melissa and Doug, with lower revenue from our Entertainment Creative Center, offset by higher digital games revenue. In 2024, we expect to deliver less entertainment content but with a revenue mix skewed to higher-margin licensing and merchandising revenue. In digital games, we expect an increase in revenue for 2024 from the growth of Toker Life World and Picnic and new game launchers for Toker Days and Rubik's Match.

This outlook reflects our view that we have a strong innovative deep and value focused line tampered by the reality that consumer behavior. In 2024 is likely to continue to be volatile and that they all five fewer shopping days leading into Christmas in 2024.

We expect our total revenue growth to be in line with 2023, excluding Melissa Doug with lower revenue from our entertainment Creative Center.

Set the higher digital games revenue.

In 2024, we expect it to deliver less entertainment content, but with a revenue mix skewed to higher margin licensing and merchandising revenue.

In digital games, we expect an increase in revenue for 2024 from growth of Tokio life World and picnic and and new game launches for <unk> days and Rubik's match.

Mark L. Segal: The new games, however, will be margin dilutive until they hurdle their development costs. Turning to profitability, we will continue to look at toy pricing selectively in relation to market and consumer factors, margin preservation, and cost input levels. We expect sales allowances to be approximately 13% of gross product sales, higher than our typical range, mostly due to market and customer mix.

The new games, however will be margin dilutive until they hurdle their development costs.

Turning to profitability, we will continue to look at toy pricing selectively in relation to market and consumer factors margin preservation and cost input levels.

We expect sales allowances to be approximately 13% of gross product sales higher than our typical range, mostly due to market and customer mix.

Mark L. Segal: In general, inflation is moderating, and COGS input costs are expected to be in line with 2023. Lower entertainment content deliveries will have a positive impact on overall gross margin. We expect marketing costs to be between 9 and 10% of revenue, consistent with 2023. We are focused closely on cost control to ensure we can drive operating leverage.

In general inflation is moderating and Cogs input costs are expected to be in line with 2023.

Lower entertainment content deliveries will have a positive impact on overall gross margin.

We expect marketing cost to be between nine and 10% of revenue consistent with 2023.

We are focused closely on cost control to ensure we can drive operating leverage.

Mark L. Segal: Taking all this into account, we expect 2024 adjusted EBITDA margin to be in line with 2023, excluding Melissa & Doug and Net Cost Synergy. For Melissa and Doug, in 2024, we expect gross product sales of $420 million to $430 million and revenue of $370 to $375 million. We expect the seasonality of Melissa and Doug's gross product sales to be 20% to 25% in H1.

All of this into account, we expect 2020 for adjusted EBIT margin to be in line with 2023, excluding Melissa Doug and net cost synergies.

In 2020 full for Melissa Doug, we expect gross product sales of $420 million to $430 million and revenue of $370 million to $375 million.

We expect the seasonality of Melissa Doug's gross product sales to be 20% to 25% in H one.

Mark L. Segal: We expect Melissa and Doug to achieve adjusted EBITDA margins of approximately 19.5% and an increase over 2023 from supply chain and SG&A efficiency. In addition, we expect to achieve incremental net SG&A cost synergies of approximately $6 million in 2024, toward the target of approximately $25 to $30 million in run-rate net cost synergies by the end of 2026. Melissa and Doug will be accretive in 2024, as previously noted. To report Millicent DiGros' product sales, effective January 1, 2024, we have modified our product category. We have issued an addendum as part of the press release, which shows our 2023 results by quarter in the format that we will present our gross product sales for 2024. Melissa and Doug will be part of a new category, Preschool, Infants, and Toddler, and Plush.

We expect Melissa Doug to achieve adjusted EBITDA margins of approximately 19, 5% an increase over 2023 from supply chain and SG&A efficiencies.

In addition, we expect to achieve incremental net SG&A cost synergies of approximately $6 million in 2024.

Towards the target of approximately 25 to 30 million in run rate net cost synergies by the end of 2026.

Melissa Doug will be accretive in 2024 as previously noted.

To report Melissa <unk> gross product sales effective January one 2024, we have modified our product categories. We have issued an addendum as part of the press release, which shows our 2023 results by quarter in the format that we will present, our gross product sales for 2024.

Melissa Doug will be part of a new category preschool infant and toddler and plush.

Mark L. Segal: The consistent cash flow we've generated gives us confidence in our ability to reduce debt, maintain our dividend, and keep capacity for opportunistic M&A or share buybacks. We expect to end 2024 with a net debt to adjusted EBITDA ratio of approximately 0.5 times. Spin Master's depreciation and amortization is expected to be approximately $120 million in 24, down $10 million from 23 due to less deliveries of entertainment. We expect $30 million in depreciation and amortization for Melissa and Doug. Cash interest paid will be between $20 million and $25 million in 2024. Our effective tax rate is expected to be approximately 26% on a consolidated basis.

The consistent cash flow, we've generated gives us confidence in our ability to reduce debt maintain our dividend and keep capacity for opportunistic M&A or share buybacks.

We expect to end 2024, with a net debt to adjusted EBITDA ratio of approximately 0.5 times.

Spin master depreciation and amortization is expected to be approximately $120 million in 'twenty fall down $10 million from 23% due to less deliveries of entertainment content.

We expect $30 million in depreciation and amortization for Melissa Doug.

Cash interest paid will be between $20 million to $25 million in 2024.

Our effective tax rate is expected to be approximately 20%, 26% on a consolidated basis.

Operator: Capital expenditures are forecast to be approximately 6% of revenue. Finally, we will renew our normal course issuer bid effective on March 24 until March 3, 2025. In conclusion, amidst the challenging macroeconomic environment, we remain well positioned strategically, financially, and operationally. We also remain fully committed to continuing to execute our strategy for long-term growth and shareholder value creation.

Capital expenditures are forecast to be approximately 6% of revenue.

Finally, we will renew our normal course issuer bid effective on March 24 until March three 2025.

In conclusion amidst the challenging macroeconomic environment, we remain well positioned strategically financially and operationally. We also remain fully committed to continuing to execute our strategy for long term growth and shareholder value creation.

That concludes our prepared remarks, we will now be pleased to take questions. Operator. Please open the line.

Operator: That concludes our prepared remarks. We will now be pleased to take questions. Operator, please open the line. Thank you. If you wish to ask a question, please dial star 1 on your telephoned keypad now to end. Once your name has been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial star 2 to cancel.

Thank you if you wish to ask a question. Please dial star one on your telephone keypad mouse entered the queue. Once your name has been announced you can ask a question. If you find it solves it before it still sounds to speak you can dull stall to to cancel so once again not to install wants to ask a question we'll start suits cancel.

Brian Morrison: So once again, that's star number one to ask a question. Our first question comes from the line of: Brian Morrison at TD Securities, please go ahead, your line is open. Thanks very much.

Our first question comes from the line of.

Brian Morrison TD Securities. Please go ahead your line is open.

Thanks, very much good morning.

Mark L. Segal: Good morning. Mark, on guidance, for the base business, you're forecasting slight revenue growth and attractive margin improvement. Is that 22% now a sustainable level? It sounds like the forecast 65 basis point increase from 2023 is due to the mix shift to digital and cost initiatives at TOI, and it did sound like you said the entertainment margin should be higher from licensing revenue, but revenue lower. Is that correct, the way to think about it? And then for Max, does the lower Melissa and Doug forecast take anything away from the potential for synergies, the international growth opportunity, or the ability to penetrate mass midterm? Do you see yourself getting back to 2022 being reasonable over the midterm? Brian, I'll take your first part, and then Max will pick up the second part of your question. So I think you pretty much got it accurate the way you described it.

Marc on guidance ex <unk>.

Actual movie on the base business, you are forecasting slight revenue growth and attractive margin improvement.

That 22% now a sustainable level it sounds like the forecast 65 basis point increase from 2023 is due to mix shift to digital and cost initiatives at toy and it didn't sound like you said E Entertainment margins should be higher from licensing revenue, but revenue lower is that correct. The way to think about it and then.

Sure Matt.

Max is the lower unless and Doug forecast take anything away from the potential for synergies international growth opportunity or the ability to penetrate mass midterm.

See yourself getting back to 2022 is reasonable over the midterm.

Brian I'll take your first part and then Maxwell will pick up the second part of your question. So I think you I think you pretty much got it accurate the way you described it.

Max Rangel: If you actually take out the poor distribution revenue in 2023, we were at 21.3%. And so we are guiding slightly higher when you take that into account in terms of our guidance. And that's going to come from an increase in toy-adjusted EBITDA; it's going to come from entertainment going up slightly, and potentially digital games going down a little bit because of the introduction of the new games. But I think the way you have calculated and the way you articulated it is accurate. Unknown Attendee.

If you actually take out the pool distribution revenue in 2020.

Three we were at 21, 3%.

And so we are guiding slightly up when you take that into account in terms of al in terms of our guidance and that's going to come from.

Increase in toy adjusted EBITDA.

Is going to come from.

Entertainment going up slightly and potentially digital games going down a little bit because of the.

Because of the introduction of the new games, but I think the way you have calculated it and the way you articulated is accurate.

Max Rangel: Good morning, Brian. On Melissa and Doug, we are incredibly excited about the midterm opportunity, as you have well stated. And so I just want to state that for the record and just to get very clear up front. Obviously, the numbers are at a starting lower point.

Good morning, Brian Melissa Doug we are incredibly excited about the mid term opportunity as you well stated it and so I just wanted to state that for the record and just to get very clear upfront.

Obviously the numbers are at a starting lower point and so we're working on synergy we're working on international growth sooner than we would have anticipated. We're working on a lot of different things to bring what we know is an incredible brand towards many children and families as we as we should.

Max Rangel: And so we're working on synergy. We're working on international growth sooner than we would have anticipated. We're working on a lot of different things to bring what we know is an incredible brand to as many children and families as we should. We have already begun to reinvest in the brand as we should invest in the brand and as we would invest in our brands as of the start of this year, and we see immediately the response of what is an incredible strong equity with parents and retailers pretty broadly in the U.S., so we're excited. Okay, and then I guess the second part of that is getting back to 2022 as a reasonable midterm. And then I have one further question. We will get back to the mid-2022 in the midterm. Reasonability is there. And I just think you know, it might just be wise to just set the record straight because I think the question may still come up later.

We have already begun to reinvest on the brightness we should invest on that Brendan is we would invest in our brands.

Start up this year and we see immediately the response of what he's an incredible strong equity with parents and retailers pretty broadly in the U S. So we're excited.

Okay, and then I guess, the second part of that getting back to 2022 is reasonable mid term and then I have one further question.

We will get back to the mid 2022 in the mid term.

Recent abilities there.

And I just think it might just be why Stooges set.

Set the record straight because I think the question may still come up later, so why don't we just do that because I think you guys are going to continue asking I just might as well just address it.

Max Rangel: So why don't we just do that? Because I think you guys are going to continue to ask, and I just might as well just address it. Remember, we signed at the end of early, early, early October. Okay, and then we had the HSR period, and we weren't operating the brand. And previous owners basically stopped investing in this brand in Q4, and therefore the brand saw the decline that you have now seen in the numbers. Q4 is the biggest consumption period, and Melissa & Doug has a higher consumption period than Spin Master's portfolio in Q4. The great news is, you know, if there's a silver lining here it's that inventory positions are lower at the start of 24.

Remember we sign at the end of early early early October and then we had the HSR period.

And we Werent operating.

The brand and previous owners basically stopped investing in these brands in Q4, and therefore the brands. So the decline that you have now seen in the numbers Q4 is the biggest consumption period and Melissa Doug has a higher consumption period, then spin master's portfolio.

In Q4.

Great News use you know if there's a silver lining here is inventory positions are lower.

<unk> 24, we will begin already in house, starting to reinvest in the brand as you see our performance right you'll see our performance. We see you see our market share you see how we operate.

Max Rangel: We will begin already and have already started to reinvest in the brand as you see our performance, right? You see our performance, you see our market share, you see how we operate. And that, in my opinion, is what we have already gotten to do with our integration team and the militia and dog management. And we're very excited. Okay, I appreciate clarifying that, Max. The last question I have, you brought up the value chain in your prepared remarks. You're opening 37,000 new stores. Can you maybe frame the top line potential? I mean, you have to be relevant to gain shelf space.

And that in my opinion is what we have already gotten to do with our integration team and them listen Doc management and we're very excited.

Okay. I appreciate you clarifying that matched the last question I had you brought up the value chain in your prepared remarks, Youre entering 37000, new stores can you maybe frame the topline potential I mean, you have to be relevant to gain shelf space. So if we just think of.

Max Rangel: So if we just think of, you know, $2,500 per store or something like that, it's in the $100 million range. Can you frame, maybe, the top line potential there? Yeah, I'm gonna, I'm gonna just frame the opportunity from our own penetration into that channel. And then I'm going to let Mark, you know, get into the numbers. So, you know, we have an incredible portfolio, and one of the things that, you know, we have an opportunity to do is to play with more items in the 0 to 599 and 599 to 999 segments. And that shopper is in that channel more prevalently, and we necessarily don't have the breadth of offering to meet their needs.

$2500 per store or something like that it's in the $100 million range can you frame, maybe the topline potential there.

I wanted to just frame the opportunity from our own penetration in that channel and then I'm going to let Mark you know getting to the numbers.

So we have an incredible portfolio and one of the things that you know we have an opportunity to do is to play with more.

Items in there.

Zero to 599, and $5 99 to 999 segments and that shopper easing that channel are more prevalent than we necessarily don't have the breadth of offering to meet their needs and that is what our team is addressing and you noticed in my remarks, we are addressing that opportunity with our biggest iconic brands.

Max Rangel: And that is what our team is addressing. And you notice in my remarks, we are addressing that opportunity with our, you know, biggest iconic brands, brought to them with great value, including things that are going to be in the 0 to 599 price point. So the opportunity is, is, very, very, you know, obviously latent for us, and Mark will now give you some color on the numbers. Brian, it's an important point.

And then with great value, including things that are going to be in the zero to 599 price point. So the opportunity is is very very obviously laid in for us and Mark will now give you some color on the numbers.

Brian.

It's an important point and I think Doug Wadley did a great job kind of highlighting that when we had our investor day in L. A in January as you saw I think your numbers are off.

Mark L. Segal: And, you know, Doug Wadley did a great job kind of highlighting that when we had our investor day in LA in January, as you saw, I think your numbers are a little high. Just keep in mind that most of the activity in the value channel initiative is going to be in the second half of the year. These are low-dollar price points in the, you know, the $1 to $5 range. And, and, and even though we're very excited about it for 2024, you should be thinking in the $30 million range, as opposed to anything, you know, over $100 million, as you described that. That would be exceptional. I mean, we'd be happy to be in that zone.

Hi, just keep in mind most of the activity in the in the value Channel initiative is going to be in the second half of the year you saw low dollar price point items in the in the <unk>.

The $1 two to $5 range and.

And even though we're very excited about it for 2024.

You should be thinking in the 30 million dollar range as opposed to anything.

Over $100 million as you described that that would be exceptional I mean, we'd be happy to be in zone, but I think for your models in full planning you should be thinking in the $30 million range for this year and then growing over the next few years as we built the lineup.

Mark L. Segal: But I think for your models and for planning, you should be thinking in the $30 million range for this year and then growing over the next few years as we build the lineup and the margin equivalent to the consolidated average. Yeah, we've actually designed the line in a way that it's consistent with our margins as opposed to dilutable accretion. Thank you both very much.

And the margin equivalent to the consolidated average.

Yeah, we've actually designed to align in a way that it's.

Consistent with our margins as opposed to dilutive or accretive.

Thank you both very much.

Martin Landry: Thank you. Our next question comes from the line of Martin Landry at Stiefel. Please go ahead, your line is open. Hi, good morning, guys. I just want to get back to Millicent Doug quickly.

Thank you. Our next question comes from the line of Martin Landry at Stifel. Please go ahead. Your line is open.

Hi, good morning, guys.

I'd just like.

I'd like to get back to.

No center quickly.

Max Rangel: You know, I understand that the previous owner maybe didn't invest a lot in the back half. That seems a little one-time-only in nature, and I'm wondering why we can't see a bigger jump back in 24? And I was wondering, did the brand lose doors?

Understand that the previous owner maybe.

Tim didn't invest a lot in the back half.

And that seems a little one time in nature and I am wondering why can't we see a bigger jump back in 'twenty four.

Just wondering did the brand lose doors to defend lose shelf space.

Max Rangel: Did the brand lose shelf space relative to 22 levels? So, Martin, it's a great question, and I appreciate your enthusiasm for a quicker recovery. So are we, by the way. So here's a scoop. The brand, if you think about the US, has a great presence and revenue in e-commerce, right? And so does e-commerce and omnichannel broadly. So that is the first place where you're gonna see the return to, obviously, growth. But that's not to say that at Walmart, which was a new distribution opportunity for the brand, they did incredibly well.

Relative to 'twenty two levels.

So it's a great. It's a great question and I appreciate your enthusiasm for a quicker recovery. So are we by the way.

So here's the scoop.

The brand if you think about the U S has a great presence and revenue in e-commerce, right, and so and ecommerce and Omnichannel broadly. So that is a first place where you're going to see the return to obviously growth, but that's not to say that at Walmart, which was a new distribution opportunity for.

Brian they've done incredibly well so it's beyond that but you have to step back and also look at the fact that the segment had decline closer to 8% to 10%. So we're you know we're playing from a segment that was basically below and a lack of investment against that backdrop and so.

Max Rangel: So it's beyond that, but you have to step back and also look at the fact that the segment declined closer to 8 to 10%. So we're playing from a segment that was basically below average and a lack of investment against that backdrop. And so, If you add to the fact that they had to consume inventory from the prior year throughout the year, then you kind of get to the math that leads you to where we ended up. You're not wrong that we can recover, and that is our intent. But that is what the, if you will, point of departure is.

If you add to the fact that they had to consume inventory from the prior year throughout the year, then you kind of get to the mouth that leads you to where we ended up you're not wrong that we can recover and that is our intent but that is what the if you will point of departure is and I just wanted to paint the picture for you. So that you understand that he is not about lack of.

Max Rangel: And I just wanted to paint the picture for you so that you understand that it's not about lack of trying to get back to the levels we know that it's going to get to, but just the hurdles we have to get through between now and getting to the numbers you guys want. So do we, by the way. I'm sure I'm sure you are.

To get back to the levels, we know that.

<unk> is going to get too, but just the hurdles we have to get through between now and getting to that.

The numbers you guys want so do we by the way.

Okay.

Hampshire yard.

I'm wondering.

Mark L. Segal: I'm wondering, Mark, if you can break down a little bit of the assumptions you've used in terms of revenue growth per per your segment, if that's possible, that'd be super helpful. Do you mean the toy entertainment digital games? Yes, yes. Yeah, so, so, look, we're not going to give you individual, creative center guidance numbers. But what I can tell you directionally, Martin, is that we see the toy in line, the margins slightly up in the toy area.

I'm wondering mark if you can break down a little bit of the.

Assumptions your views in terms of revenue growth for your segment, if that's possible that would be super helpful.

You mean, the toy entertainment digital gains yes.

Yes, yes.

Yeah, so so low.

We're not going to give individual crew.

Creative center guidance numbers, but what I can tell you Directionally Matson is that we see toy in line.

Margins slightly up in the toy area Entertainment in 2023 had very strong distribution revenue growth, but as you saw.

Mark L. Segal: Entertainment in 2023 had very strong distribution revenue growth, but as you saw, margins actually came down as a result of that because it's low-margin revenue for the most part. In 2024, we see entertainment revenue declining because there are fewer content deliveries.

Margins actually came down as a result of that because it's low margin.

Revenue for the most part in 'twenty 'twenty four we see entertainment revenue declining because there's less content deliveries.

Mark L. Segal: But the mix of revenue will skew more towards licensing and merchandising revenue, which is much higher-margin. So we'll see entertainment margins going up in that area. In digital games, we actually see top-line growth from continued growth in Toker Life World and in Picnic, in particular, which are already out in the market, plus the introduction of new games in Q2, Rubik's Match first and then Toker Days later in Q2, and those will drive revenue growth, but as we start launching those games in the live market, we have to start amortizing the development costs that have been capitalized up until this point. So Does that help you, Martin? Yeah, no, it's super.

But.

The mix of revenue will skew more towards licensing and merchandising revenue, which is much higher margin. So we will see entertainment margins going up.

And in that area in digital games, we actually see top line growth.

From a continued growth in total life world and in picnic in particular, which already out in the market plus the introduction of new games in Q2.

Rubik's match first.

And then toga days later in Q2.

And those will drive revenue growth, but as we start launching those games in the life market. We have to start amortizing the development costs that had been capitalized up until this point so until those games hurdle those development costs depend.

Depending on the success then.

We will actually see margin dilution in digital games in the overall creative center.

Does that help you Martin.

Yeah, not Super that's exactly what I was looking for and then maybe my last question is on is on M&A.

Mark L. Segal: That's exactly what I was looking for. And then maybe my last question is on M&A. You know, your balance sheet is still in good shape, this post and Melissa and Doug, and I was wondering, are you still looking to beef up your digital games capabilities? In the past, you've talked about digital games as a percentage of revenues going all the way up to maybe 20%. I mean, now with Melissa and Doug, that may be a longer timeframe than before. But like, is this still a big focus of yours, and from an M&A standpoint? The short answer is yes. As you can imagine, we are incredibly excited to integrate and listen to you successfully. That's, you know, priority number one.

Your balance sheet is still in good shape.

Post unnoticed and Doug and I was wondering are you still.

Looking to beef up your digital games capabilities in the past you've talked about.

Digital games as a percentage of revenues going all the way up to maybe 20%.

I realize now with milestones that may be.

A longer timeframe than before but is this still a big focus of yours and from an M&A standpoint.

The short answer is yes.

As you can imagine we are incredibly excited to integrate <unk> successfully.

Priority number one, but we are obviously always.

Max Rangel: But we are obviously always, you know, working with our three different M&A groups, each of which is led by an individual leader for that area, in basically hunting and gathering great targets. And we have not basically walked away from our desire to have more diversification and continue to build out our digital games, our creative center, and entertainment as well. So you can expect that we will continue to be very active. We'll have a great balance sheet and an incredible team, honestly, in gathering and hunting for great targets, and our board will be very supportive. So that's where we stand. Okay, thank you.

Working with our three different M&A groups each of which is led by an individual leader for that area in basically hunting and gathering great targets.

And we have not basically walked away from our desire to have more diversification and continue to build out our digital games on creative Center and entertainment as well.

So you can expect that we will continue to be very active we will have a great balance sheet and an incredible team honestly in gathering and hunting for great targets and our board very supportive so that's where we stand.

Okay. Thank you.

Adam Shine: Thank you. Our next question comes from the line of Adam Shine at the National Bank of Montreal. Please go ahead; your line is open. Thanks a lot.

Thank you Al next question comes from the line of Adam Shine at National Bank of Montreal. Please go ahead. Your line is open.

Thanks, a lot to boarding Max I got to go back to Melissa for a couple of questions. So.

Max Rangel: Good morning, Max. I have got to go back to Melissa and Doug for a couple of questions. So, just elaborating earlier, you said, you know, the segment declined 8 to 10% last year. Melissa and Doug, obviously, as you alluded to, down about 25%. So, was the differential, more specifically, related to the lack of investment and support in Q4, or were there other elements in terms of Melissa and Doug's actions, for example, you know, reducing the number of SKUs as a priority and or other elements related to the incremental Delta to the industry dynamic? We'll start there, please, and good morning. How are you, Adam? Good. How are you?

Just elaborating earlier, you said the segment declined 8% to 10% last year, Melissa Doug obviously as you alluded to down about 25% so was the differential.

More specifically related to the lack of investment in support.

In the Q4 or were there other elements in terms of Melissa Doug actions for example.

Are you seeing the number of Skus.

As a priority and door other elements related to the incremental delta to the industry dynamic we'll start there. Please.

Of course, and good morning, how are you out of it great. How are you. Thank you.

Max Rangel: Thank you. Well, really well. Let's get into this. Melissa and Doug, my favorite topic this morning.

Really well, let's get introduce Melissa.

Melissa Doug My favorite topic. This morning, So I'll tell you if.

Max Rangel: So I tell you, If you think about Q4 and you think about a brand that had all its consumption focused on that one period, now we're going to unpack the fact that we did not support the brand as we should have. Well, the previous owner did not support the brand as the previous owner should have supported the brand, in our judgment. OK, and therefore, when no advertising and significantly less promotional spending, in excess of two-thirds less than the prior year, was applied to the brand in a very competitive environment where consumers, remembering our remarks, were basically flocking to specific shopping days and seeking for the best deal, they, of course, couldn't basically perform as they should have performed.

If you think about Q4, and you think about a brand that has all the consumption focused on that one period now we're going to unpack. The fact that we did not support the brand as we shoot us up well the previous owner did not support the brand as the previous owner shoot a supported the brand in our judgment okay.

And therefore, when no advertising and <unk>.

Significantly less promotional spending in excess of two thirds less than the prior year.

Was applied to the brand in a very competitive environment, where consumers remember in our remarks, we're basically flocking to specific shopping days and seeking for the best deal.

They of course couldn't basically perform as they should have performed.

Max Rangel: When you don't have that performance, it's really difficult for a retailer to get excited to reorder or to begin with because consumption is not leading to an inventory decline in that brand. And therefore, they suffer from both a lack of investment with the consumer and POS not giving retailers the confidence to bring in more, more, more cases because they also have inventory they had to manage. Right. And even though Melissa and Doug, on the strength of the brand, ended the year with lower inventory, obviously, they could have sold more revenue to more consumers. So I'm going to pause here for a second because I hope that helps answer the question for you, but I just want to make sure that was clear.

When you don't have that performance is really difficult for a retailer to get excited to reorder or to order to begin with because consumption is not leading to an inventory declining by brand and therefore, they suffer from both a lack of investment with the consumer and pass no giving retailers the.

To bring more more more cases, because they also also had inventory about to manage right and even though Melissa Doug ultimately on the strength of the brand ended the year with lower inventory, obviously, they could have sold more revenue to more consumers. So I'm going to pause here for a second because I hope not.

Helps answer the question for you, but I just want to make sure that was clear.

Adam Shine: Yeah, I guess, I guess the net net, not to get, you know, overly enthusiastic about things, but going back to Marten's question in the context of, you know, with a little bit of support, presumably in a seasonally important Q4 later this year, one would assume that there would be some degree of pickup more meaningfully on the back of what was delivered in Q4 this year or 2023. The other thing I guess, which I guess I have to ask is, You know, we saw with the January 22 press release that the earn out was eliminated, and the presumption tends to be that when an earn out gets eliminated, the sort of look ahead sort of dynamic becomes a bit less exciting. But as we reflect now on everything that you've talked about vis-a-vis the 2023 performance, one wonders why a more meaningful, you know, recutting of the purchase price didn't materialize. I imagine that's a bit of a naive question and a fair complaint in the scheme of things of a contract.

Yes, I guess I guess net net dot to get overly enthusiastic about fixed but going back to Martin's question in the context of <unk>.

A little bit of support presumably in a seasonally important Q4 later this year, but would assume that there would be some degree of pickup.

More meaningfully on the back of what was delivered in Q4 this year or 2023.

The other thing I guess, which which I guess I have to ask is.

We saw with the January 22 press release that the earn out with.

Was eliminated.

Presumption tends to be what it earn out gets eliminated the sort of look ahead sort of dynamic becomes a bit less exciting, but as you reflect now on everything that you've talked about vis vis the 2023 performance one wonders why aboard meaningful re cutting of the purchase price to materialize.

I imagine thats a bit of a naive question and a fair completely <unk> of a contract but nevertheless.

Max Rangel: But nevertheless, you know, any additional commentary related to that. Yeah, I'll start, and then I'll let Mark finish. You know, listen, we were at that time a strategic buyer; we were and continue to be in the category. So we saw the numbers, but we were completely not in control of the brand. And we were in an HSR quiet period. So as soon as we had the chance to get involved and understand what was happening, we knew that the results would be lower without getting into owning the brand. At the time, we actually made the decision to remove the earn out because we knew that the starting point would be lower. Mark?

Any additional commentary related to that.

Yes, I'll start and then I'll, let mark finish.

Listen, where we were at that time, a strategic buyer, we were and continue to be in the category. So we saw the numbers, but we were completely not in control of the brand and we were we were in an HSR quiet period.

And so as soon as we had the chance to get involved and understand.

What was happening we knew that the results will be lower without getting into owning the brand at the time that we actually made the decision to remove the earn out because we knew that the starting point would be lower mark.

Mark L. Segal: Yeah, I mean, just similar to what you just said there, Max. Obviously, Adam, there were multiple reasons for removing the earn out, one of which was their performance in the late part of 2023, which we've discussed. Also, as you know, earn outs can be complicated in terms of managing the business during the earn out period, and there are usually legal structures that, to some extent, minimize or, you know, sorry, impact on your ability to maximize integration.

I mean, just similar to what you just said the mix I mean, obviously.

There were multiple reasons for removing the earn out one of which was the.

Formats in the late out of 'twenty, three which we've discussed.

So as.

As you know <unk> can be complicated in terms of.

Of managing the business during the earn out period and this usually legal structures that to some extent minimized.

<unk>.

Sorry impact on your ability to maximize integration and so for those reasons. We wanted the other natural moved.

Mark L. Segal: And so for those reasons, we wanted the earn-out removed. You know, our investment base case is still intact. The business is still accretive in 2024. The long-term thesis is very strong, and we're as excited about the acquisition as we ever were. But we have to get over the performance step in Q4 2023. We have to get it back on track, and we will. Okay, I'll leave it there. Thank you very much. Thank you. Our next question comes from the line of David McFadgen of Cormark. Please go ahead.

Our investment base cases to detect the business is still accretive in 2020 for the long term thesis is very strong and and we're as excited about the acquisition as we ever were but we have to get over the performance step in Q4 2023, we have to get it back on.

On track and we will.

Okay I'll leave it there thank you very much.

Okay.

Thank you. Our next question comes from the line of David Mcfadden of call. Marc. Please go ahead. Your line is open.

David John McFadgen: Okay, thank you. I have a couple of questions. So just looking at the EBITDA margin and the guidance, you know, you're forecasting an EBITDA margin of, I mean, you finished last year with a strong EBITDA margin, you're forecasting an EBITDA margin to be equally strong in 2024. But when we look at the past, the history of the company, it's never been at that level; some have sustained that level. So, David, if you go back in time, and you've covered us for many years, you know, when the business was largely a toy business, the EBITDA margins were in the 18, 19% zone, and that was really where we were.

Great. Thank you.

Couple of questions.

Just looking at the.

EBITDA margin on that guidance.

Forecasting EBITDA margin I mean, how much loss.

EBITDA margins are casting EBITDA margin to be.

Equally strong in 'twenty.

<unk>.

We look at the past history of the company and its never.

And at that level, it's never sustain that level of centers just kind of wondering if you could provide any commentary about.

Maintaining that level of EBITDA margin of 25 and beyond.

And beyond.

So David if you go back in time and you've covered us.

For many years when the business was largely a toy business. The EBITDA margins were in the 18, 19% zone and that was really always way we were.

David John McFadgen: But as we've grown and evolved our creative center strategy, we've talked about growing the business – not only diversifying the top line but also enhancing the bottom line. And both the entertainment and digital games creative centers are margin accretive. And so, you know, we're comfortable with guiding to where we have, and we've actually delivered on 23 these margins, so this is not a theoretical exercise. And we continue to believe that as we grow our digital games and entertainment creative centers, we'll keep margins in the low 20s. And our toy business margins have also done very, very well. From a supply chain efficiency perspective, we've increased our gross margins. We continually, from a cost control perspective, are looking at operating leverage.

But as we've grown and evolved our creative center strategy, we've talked about growing the <unk>.

Not only diversifying the top line, but also enhancing the bottom line and in both the entertainment and digital games creative centers are margin accretive and so we are comfortable to guide to where we have and we've actually delivered in.

In 23. These margins. So this is not a theoretical exercise and we continue to believe that as we grow our digital games.

Entertainment creative centers will keep.

<unk> in the low twenties up and our toy business margins have also done very very well.

From a supply chain efficiency perspective, we've increased our gross margins.

We continually from a cost control perspective of looking at operating leverage. So overall the business I would say is running more efficiently and so the margins that we are guiding to I believe are sustainable and and if we if we are successful with our new digital games launches and continue to grow that business and then we could.

Mark L. Segal: Overall, the business, I would say, is running more efficiently. And so the margins that we are guiding to are sustainable. And if we are successful with our new digital games launches and continue to grow that business, then we could potentially even get them higher. Okay, um, thank you. And then just on the toy revenue, so it looks like for 24, the expectation is more or less flat. Can you give us some sort of an idea of direction? Where do you expect Gabby to go?

Potentially even get them higher.

Okay. Thank.

Thank you and then just on the <unk>.

<unk> revenue, so let's say for.

For 'twenty for the expectations.

More or less flat.

Can you give us some.

Sort of an idea of direction, where you should.

Back to Gabby.

David John McFadgen: Unknown Attendee, Adam Shine, Christopher Harrs, Ronnen Harary, Andrew Lopez, Luke Hannan, Mark Segal, Sophia Bisoukis, Luke Hannan, Mark Segal, Unknown Attendee, Adam Shine, Well, we don't give specific guidance on individual lines, as you know, but I'm going to let Max give you some color as to what's happening with the brands, Monster Jam and Gabby' Max, why don't you pick that one up? David, good morning. How are you?

You have to do and Monster Jam Paw patrol and an inquiry I wouldn't imagine gallium arsenide will continue to be up and baseline population on that and what you think Palmer due in 'twenty four.

Well, we don't give specific guidance on individual lines as you know, but I'm going to let <unk> give you some color as to what's happening with the brands Monster Jam and <unk> in particular this content coming Max why don't you pick that one Dave.

David Good morning, how are you I would tell you that the market and the reason for why we're guiding to the revenue growth inventory as we are is because the toy market continues to be in a similar position as it was.

Max Rangel: I would tell you that the market and the reason for why we're guiding to the revenue growth in toys as we are is because the toy market, you know, continues to be in a similar position as it was last year, and the outlook for the year from a market growth perspective is that it will be slightly down versus what it would have been in 2023. So that's a starting point. There are differences between toy segments, but we have a pretty strong program for our infant preschool, obviously, segment.

Last year and the outlook for the year from a market growth perspective. He said he will be slightly down versus what it would've been in 2023. So that's the starting point there are differences between toy segments, but we have a pretty strong program for our infant preschool, obviously segment, we are even though.

Max Rangel: We are, even though we are lapping the toy movie for Paw Patrol, have other things happening on Paw Patrol that are quite exciting. And so Rubble is leaving the U.S. and getting over to Europe, for example. And you know that we have historically been a stronger Paw Patrol franchise from a toy perspective in Europe.

Lapping the toy movie for Paw patrol have other things happening on Paw patrol that are quite exciting and so rubble is leaving the U S and getting over to Europe. For example, and you know that we have historically been stronger Paw patrol franchise from a toy perspective in Europe, and so that gives us a lot of you know.

Max Rangel: And so that gives us a lot of wins in our sale. And so we're excited about that. You are, on Gabby, asking specifically, and Gabby's, you know, from a lifecycle moment in time, getting to year three in the U.S., year two internationally. And so you see some moderation, but we're still having a very strong outlook for Gabby in 2024, before we get to 2025, a year in which she will have a movie.

We can see in our sale and so we're excited about that you are on.

Gabby asking specifically in <unk> from a lifecycle.

Moment in time getting to year, three and the U S. You are two internationally and so youll see some moderation, but we're still having a very strong outlook for Gavin in 2024 before we get to 2025, a year in which Gaby will have a movie and so we're very excited about that and so we will continue to invest in and basically drive the Gabby franchise.

Max Rangel: And so we're very excited about that, and we will continue to invest in and basically drive the Gabby franchise very, very strongly. But separate from that, we have other things in infant preschool that we're excited about. So we have, obviously, Rachel coming towards Q4, and Ms. Rachel is going to be an amazing opportunity for the company because we bring to parents something they truly love already, and we're going to bring that love to them through both our Spin Master execution and Melissa and Doug. And so we're not going to wait and do that later.

Very very strongly but.

But separate from that we have other things in infant preschool that we're excited about so we have obviously rachael coming towards Q4 and Ms. Rachel is going to be an amazing.

In my opinion, an opportunity for the company because we bring to parents something they truly love already and we're going to bring that love to them through both our spin master execution, but also through Melissa and Doug and so we're not going to wait and do that later, we're going to do it this year and I can tell you we're incredibly excited by the way.

Max Rangel: We're going to do it this year, and I can tell you we're incredibly excited. By the way, so is Ms. Rachel.

So as Ms. Rachel.

Max Rangel: Besides that, we have, you know, Vita the Vet. We talked about that property. We're very excited about that property. And that property comes in Q4 as well. So, infant preschool, for us, should be, obviously, a very good business unit this year. Monster Jam is doing incredibly well. I was speaking with the founder and CEO of Felt Entertainment over the weekend. And just last weekend, they had over 100 million attendants at

Besides that we have.

The vet, we talked about that property, we're very excited about that property and that property comes in Q4 as well so infant preschool for us should be obviously, a very good business unit. This year Monster Jam is doing incredibly well.

I was speaking with foundry.

Founder CEO of felt entertainment over the weekend and just last weekend had over 100 million attendance on monster gym, our innovation on Monster Jeremy's incredible and so we have nothing but continued opportunities ahead, and we will continue to seize those opportunities. So you asked specifically at Monster Jam, we're very excited.

Max Rangel: Our innovation for Monster Jam is incredible. And so, we have nothing but continued opportunities ahead. And we will continue to seize those opportunities. So, you asked specifically about Monster Jam. We're very excited. By the way, they're getting stronger acceptance in Europe. And we have an incredible European team.

By the way there theyre getting stronger acceptance in Europe, and we have an incredible European team. We just told you we were the fastest growing European company. So we see a lot of opportunity there as well.

Max Rangel: We just told you we were the fastest growing European company. So, we see a lot of opportunity there as well. At the risk of not going through each one of them and monopolizing the time for others who may want to ask, I'll just leave you with that.

At the risk of not going through each one of them in monopolizing. The time for others, who may want to ask I'll, just leave you with that but happy to follow up with you and get into more details.

Max Rangel: But I'll be happy to follow up with you and get into more detail. Okay, all right. Thanks so much, guys. Thank you. Just as a reminder, if you do wish to ask a question, please dial star 1 now. The next question comes from the line of John Zamparo of CIBC. Please go ahead with your line. Thank you. Good morning.

Okay, alright, thanks, so much guys.

Thank you just as a reminder, if you do wish to ask a question. Please darla stalled one now the next question comes from the line of John Empower of CIBC. Please go ahead. Your line is open.

Thank you good morning.

John Zamparo: My question is around the broader guide. And you have a great deal going on. I will go through all the initiatives as well. But I can understand you're very excited about a lot of plans for this year. But, but given all that, the guide organically is still basically flat year over year.

My question is around the broader guide and you have a great deal going on I won't go through all the initiatives as well but.

Can understand you're very excited about a lot of plans for this year, but.

Given all of that the guide organically, it's still basically flat year over year. So understanding the backdrop of a slight decline in the industry I'm trying to reconcile that what are the areas of the businesses that you expect to slow in 24 versus <unk> 23.

John Zamparo: So understanding the backdrop of a slight decline in the industry, I'm trying to reconcile that what are the areas of the businesses that you expect to slow in 24 versus 23? So John, as I described earlier, we see entertainment coming down on the top line, digital games going up, and toys largely flat. So that's the mix that leads to the Spin Master specific guide.

Yes, So John is as I described earlier.

We see entertainment coming down on the topline.

Digital games going up and toy largely flat. So that's the mix that leads to the spin Master a specific guide.

Mark L. Segal: You know, we gave the details on the Melissa and Doug guide, so you have that. And then, in addition, we gave you the guide on the cost synergies that are on top of the Melissa and Doug guide. So I think when you put that all together, that kind of explains how we actually did overall for the year. Okay, and then just a couple of housekeeping questions. Can you talk about the cadence of synergies at Melissa and Doug beyond 2024? Is it fairly linear through 26?

Dave.

The details on the Millicent <unk> guide. So you have that and then in addition, we gave the guide on the cost synergies that are on top of the Millicent Doug got so I think when you put that altogether that that kind of explains.

How we actually got it.

<unk> for the.

Sure.

Okay, and then just a couple of housekeeping questions can you talk about the cadence of synergies at Moelis and Doug beyond 2024 is it fairly linear through 'twenty six or is more of it in 'twenty five and can you talk about your inventory positions at your retail partners to understand your own inventories that quite <unk>.

John Zamparo: Or is there more of it in 25? And can you talk about your inventory positions at your retail partners to understand your own inventory? Is that quite low?

Mark L. Segal: But how does it look at your retail partner? You know, I can deal with retail inventory. However, retail inventory was down mid-single digits globally and high single digits in the U.S.

Levels, but how does it look at your retail partners.

I can deal with the retail inventory.

Retail inventory was down.

Mid single digits globally, and high single digits in the U S. So I think we're in decent shape on our.

Mark L. Segal: So I think we're in decent shape on a retail channel level and also, as you correctly pointed out, our on-hand inventory is actually at record low levels. So I think we've managed our inventory very, very well. What was the first part of your question, John, that you wanted in addition to that?

Our retail channel level and also as you as you correctly pointed out our on hand inventory is actually at record low levels. So I think we've managed inventory very very well what was the first part of your question Jon that you wanted in addition to that sorry.

Mark L. Segal: Yeah, the cadence of synergies that Melissa and Doug through through 2026. Look, we've built the integration team. I would say that the integration team is doing exceptionally well. We're ahead of our plan in terms of cost synergies for 2024, and I think you're going to start seeing it accelerate in 2025 and 2026. We're still very comfortable with our target of 25 to 30 million run rate by exiting 20

The cadence of synergies.

Doug through 2026 lease right look we've rebuilt the integration team I would say that the integration team is doing exceptionally well.

We're ahead of our plan in terms of cost synergies for 'twenty 'twenty, four and I think youre going to start seeing it accelerate in 2025 and 2026, we're still very comfortable with our target of $25 million to $30 million run rate exiting 2026, So I think youll start seeing a increasing cadence in <unk>.

Mark L. Segal: So I think you'll start seeing an increasing pace in 2025 and 2026 as the momentum builds and as we get to know the business better. But I will tell you that the teams are working exceptionally well together, and I think Max and I are very pleased with the way the integration is going so far.

25, and 26 as the momentum builds and as we get to know the business better, but I will tell you that the teams are working exceptionally well together and and I think maximize very pleased with the way the integration is going so far.

Got it Okay I'll pass it on thank you very much.

John Zamparo: Okay, I'll pass it on. Thank you very much. Thanks, John. I think I think we're pretty much at the time operator.

Thanks, John I think I think we are pretty much at time, operator are there any more questions.

Operator: Are there any more questions? No, there are no further questions. Okay, well, that's good timing. Thank you everyone for attending today, and we look forward to talking to you on May 7th and 8th. Our earnings call will be on May 8th for Q1, and we'll be releasing our results on the evening of May 7th. So, thank you again, and we look forward to talking to you in a few weeks about Q1. Thanks. Thank you. This now concludes the conference. Thank you all very much for attending. You may now disconnect your... Unknown Attendee

No further questions in the queue.

Okay, well thats good timing. Thank you everyone for attending.

Today, and we look forward to talking to you on may 7th and eighth our earnings call will be on May eight for Q1, and we will be releasing our results on the evening of May the seventh so thank you again and we look forward to talking to you in a few weeks for Q1. Thanks.

Thank you. This now concludes the conference. Thank you all very much for attending you may now disconnect your lines.

Okay.