Q2 2024 Spin Master Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Spin Master Corp, second quarter 2024 results conference call.
Speaker Change: At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
At any time during this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Wednesday July 31, 2024, I would now like to turn the conference over to Sofia.
Speaker Change: MS. <unk>. Please go ahead.
Sofia: Thank you Joelle and good morning, welcome to spin Master's financial results conference call for the second quarter 2024, 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 interim consolidated financial statements are available.
Sofia: On the Investor Relations section of our website at spin Master Dot com and on SEDAR.
Sofia: 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.
Speaker Change: Level of activity performance goals.
Sofia: Or achievements and any other future events or developments.
Sofia: 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 at certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or imply.
Speaker Change: <unk> 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.
Speaker Change: 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.
Speaker Change: Looking information and our earnings release dated July 32024. Please note that spin Master reports in U S dollars and all other amounts to lead.
Speaker Change: Today are expressed in U S currency, unless otherwise noted I would like to turn the call over to Max.
Max: Good morning.
Max: Thank you Sophie thanks for joining US today, we are pleased to report that our second quarter financial results were within our expectations and we are maintaining our full year guidance as expected. Our Q2 revenue declined two 1% to $412 million due to continued pressure on consumer spending which impacted toy.
Speaker Change: Gross product sales and in game purchases within digital games.
Speaker Change: <unk> gross product sales were down to $384 7 million a decrease of one 4% versus 2023.
Speaker Change: Sales were lower for two primary reasons first due to shipments moving from Q2 to Q3 and second as a result of US lapping the initial shipments in Q2 last year related to the launch of the second Paw patrol movie.
Doug: Listen Doug had a strong quarter with revenue of $43 3 million as we invested in in store programs and marketing support we're pleased with the pace of our integration efforts and are realizing cost synergy opportunities across many different areas. Our commercial teams continued to collaborate to help drive penetration of <unk> products at <unk>.
Speaker Change: Retail, primarily in Mexico, Canada, and Europe, where the brand is significantly underrepresented.
Speaker Change: <unk> spending across discretionary categories remains challenged according to serve kind of G. 11th Pos was down four 7% in Q2, while spin Master was down eight 1% and spin master combined with listen Doug in 2024 was up 11, 9% we.
Speaker Change: We maintain our position as the fourth largest manufacturer globally in Q2.
Speaker Change: Our retail inventory, excluding Melissa Doug is down just over 5% the average selling price of our U S. Retail inventory is down 8% compared to 2023 as we have increased our mix of lower priced items.
Speaker Change: Any more or more of these inventory using our key brands with strong Pos as well as new brands.
Speaker Change: <unk> U S inventory is in much healthier state than last year in Europe retail inventory is down nearly 7% and an equally healthy position.
Loosened, our retail inventory in the U S is down double digits versus 2023.
Speaker Change: All this bodes well for toy sales in the back half of 2024.
Speaker Change: Let me review performance by category, beginning with infant toddler and preschool. We finished Q2 as a number two corporate manufacturer in the <unk> 11 per share kind of.
Speaker Change: All from number three previously I know into the inclusion of Melissa Doug We had two of the top 10 items for Q2 and year to date burst or kind of the lower price point items within our line are performing the best reflecting current consumer shopping trends are perpetual jungle pumps vehicle line was the number one new.
Speaker Change: Item in the infant toddler preschool Super category for second quarter 2024.
Ronnen Harary: Spin Master was a number one corporate manufacturer and property in the preschool toys segment year to year in Q2 and year to date Paw patrol is the number one preschool toy property in the <unk> 11 for the 14th straight quarter dating back to the first quarter in 2021, we anticipate some softness in.
Paul: Paul This year following the second movie and are making incremental investments in retail programs and marketing in Q3 and Q4.
Paul: We are also continuing our efforts to grow viewing minutes.
Paul: Across traditional and nontraditional platforms to further drive Tory demand, we are seeing strong international growth for Gabby as dollhouse.
Speaker Change: Dreamworks has a number of experiential events planned in the U S combined with more content releases on Netflix in advance of the Gabby movie launch on September of 2025.
Speaker Change: Listen Doug had a strong quarter in shipments.
Speaker Change: Improve Pos performance.
Speaker Change: Low retail inventory levels at major U S retailers are helping to drive replenishment orders for Mandy earlier in the cycle, which bodes well for the back half of 2024.
Speaker Change: <unk> gained market share in the arts and crafts category in <unk> 11 in the second quarter and year to date driven by the sticker while launch and Melissa also grew share in parcels in the U S.
Speaker Change: After the quarter listen Doug had a strong organic sales growth over last year during Amazon Prime day with USB U S up 40%. This performance was driven by our focus on lower price point items in the range, which resonated well in the current environment.
Speaker Change: <unk> is launching <unk> in the fall.
Speaker Change: An exciting new line of wood based construction toys that allows multi sensory play and which fits well into the growth of the construction and building sets category.
Speaker Change: Finally, Melissa Doug will have two items within our total Ms. Rachel assortment, which has just started shipping for this fall and speaking of MS. Rachel We continue to strengthen our presence in early childhood toys with the launch of the new spin Master and as I, just said Melissa toy lines set to launch in October. This is one of the most.
Speaker Change: <unk> toy launches a default with pent up demand for the property continuing to grow as evidenced by the strong early performance of the MS. Rachel book Presale and initial pajama launch earlier in the year.
Speaker Change: With our huge Youtube viewership Ms. Rachel has captivated and connected with children and parents are toy collection is inspired by the learning approach loved by parents in her show.
Speaker Change: We are thrilled with the line and retailers have responded very positively.
Speaker Change: In dose and interactive.
Speaker Change: Have a host of new introductions, leading into the fall we released our <unk> for our latest innovation in <unk> something magical is coming and how is your most day, which is October 4th when we will have the full reveal of our re managing how channels with new features and expanded interactions for a new generation of kids.
Speaker Change: Since first launching hatcher, most in 2016 over $14 million of the <unk> have been sold the Unicorn Academy Toy line hit shelves in June time, with the new content of Netflix and early reads show very encouraging performance, we have gained share in the youth electronics.
Speaker Change: Category with the continued popularity of bitsy and the introduction of two new iterations BT.
Speaker Change: <unk> and Disney Bitsy, adding to our growth <unk> peanut rooms, the squishy digital bet from Japan in partnership with Takara tell me. While these items just started to set in June they are each off to a very strong start with.
Speaker Change: We increase our market share in arts and crafts in the second quarter and year to date.
Speaker Change: According to <unk> kinetic sand group pass six 6% in the second quarter compared to a 12% decline in the arts and crafts Super category kinetic sand was our number two brand up from number three in 2023.
Speaker Change: Monster Jam continues to have an excellent year in our Pos grew over 33% in the second quarter and over 32% year to date versus your kind of Monster Jam was a number one license in the second quarter and year to date in the Super category and overall was the number two property year to date in the vehicles Super category.
Speaker Change: With families prioritizing experiences the Monster Jam live shows are creating a core of loyal fans. This fall a new line of monster trucks from Marvel featuring popular superheroes, including Spider Man and a new RC vehicles collection in place it will launch and this will help the brands tap into an expanded fan base.
Speaker Change: And encourage them to grow their collection.
Speaker Change: Our entertainment Creative Center had another solid quarter with revenue increasing by over 7%. We released chapter two of Unicorn Academy season, one on Netflix globally. It quickly shot to the top spot for kids and families. In over 90 countries. In addition to the content on Netflix and off platform on Youtube and Tic Toc.
Speaker Change: Our team is also rolling out licensed consumer products, where the franchise, which now has over 35 licensed partners across lifestyle goods publishing and accessories with many more to be announced this fall I am very pleased to announce that we just completed our deal with Netflix for further 16 episodes, which will give.
Speaker Change: Two more seasons in 2026.
Speaker Change: Our patrol continues to reign as the top preschool show.
Speaker Change: Total gross viewing minutes, where depart universe, we're up 24, 5% in the quarter in May we launched a paw patrol short form content series on Youtube as part of our strategic alliance with <unk> to capture additional viewing minutes and deepen engagement with preschoolers. This August we have several <unk>.
Speaker Change: Citing premier's planned for the power universe, including special episode of rubble in crew with Aaron Judge as well as a pocket troll Robl and crew crossover event. In addition to short form content. The team is in production of season 11.
Speaker Change: For 2025, the team is producing several television specials, including a holiday special which will give families chance.
Speaker Change: To co view during the season with their favorite pumps, leading to that re imagine dirt movie in the fall of 2026.
Speaker Change: Within our digital games Creative Center mobile gaming spending slowed at the industry level in Q2 and in App purchases within talk of life World experience the similar decline.
Speaker Change: Overall Q2 digital games revenue declined by just over 14%.
Speaker Change: Picnic subscriptions grew in the quarter driving higher subscription revenue validating that our model of bundling together multiple apps and appealing offering for parents is working Paw patrol Academy will become part of the Bigness subscriptions model in Q1 of next year, we should help grow further bigness subscriptions as well as.
Speaker Change: Expand the user base, despite a declining in app purchases in the toga life World.
Speaker Change: Brand engagement remains near our all time high monthly active users were at 61 million at the end of Q2 up 3% and fans are responding positively to content drops, including our first ever artist collaboration with global Superstar Kannan Gray, which launch in June if you Rick.
Speaker Change: Call last year, we released Spongebob and we saw a halo effect throughout the summer we are seeing similar trends with these strategic collaborations Rubik's match, our new match three game leveraging the brand awareness of the Rubik's Cube continues to roll out in select markets, leading up to the full global release in September the game is now available.
Speaker Change: For preorder on both the App store and Google play.
Speaker Change: The days are multiplayer mobile game continues to rollout on a targeted country by country basis, and we are gathering the learnings and feedback from players players to enhance and fine tune the experience as we ramp up to a global release.
Speaker Change: These space or engage players provides us with real time, kpis and learnings to help us refine the game and maximize results when we launch on a global scale.
Speaker Change: In closing the quarter met our expectations from a revenue perspective, and we are confident that our innovation across toys Entertainment digital games has positioned us well for the second half.
Speaker Change: We are capturing we're encouraged that consumer sentiment appears to be improving and that families intend to prioritize purchases that bring both joy and value for their family, including toys, even though the consumer continues to face many financial headwinds, particularly in the U S. There are reasons to believe that the back half of the year will be positive for <unk>.
Speaker Change: The toy category, our innovations and the introduction of new license brands, such as MS. Rachel will positively impact volume in the fall beyond this year, we have a strong growth potential in 2025 with new licensed properties with a full year of Ms. Rachel and the reintroduction of Dora the explorer the new theatrical toy lines.
Speaker Change: For 2025, including Superman Dragons, and Gabby as dollhouse as well as disruptive innovation in our toy line together with expanding digital games experiences to attract new players. We are in a strong financial position and combined with our diversified portfolio and leadership in the childrens entertainment industry.
Speaker Change: We will deliver our long term strategic and financial goals.
Speaker Change: Before I turn it over.
Speaker Change: We announced that Mark Siegel, our Chief Financial Officer has made the decision to retire in the first half of 2025.
Speaker Change: Mark originally joined spin Master in 'twenty in 2001, and spent 10 years as CFO.
Speaker Change: This wasn't on precedented time of expenditure for spin Master and do did not time, Mark helped to build the infrastructure to enable spin master to continue to grow profitably through international expansion acquisitions.
Speaker Change: Partnerships and innovation.
Speaker Change: Mark left for awhile, but he could not stay away and rejoined spin master in 2015 to lead our IPO and helped build spin master's internal and external capabilities as a public company.
Speaker Change: Mark has steadfastly guide us forward by applying these exceptional financial leadership to preserve a strong balance sheet and generate cash flow, which in turn has helped the company to provide a platform for our future growth ambitions.
Speaker Change: He has been an invaluable advisor to me during my time at the company consistently demonstrating his integrity financial discipline and commitment to our strategic goals, while also establishing a strong finance team we.
Speaker Change: We are fortunate to have mark with us as CFO into the first half of 2025 and following the transition to our new CFO I look forward to working with Mark.
Speaker Change: As a strategic advisor to spin master on behalf of Vernon ends on.
Speaker Change: Ben and the entire team I want to thank mark for his incredible contributions that are further our leadership within the childrens entertainment industry and now with that I will turn it over to Mark.
Mark: Thank you Max and good morning.
Mark: Spin Master is a truly remarkable Canadian and global success story, and it's really been my privilege to have been part of its evolution and growth journey as Max mentioned I will remain as CFO throughout the 2020 full year end and help onboard a new CFO in the first half of 2025, and then look forward to <unk>.
Speaker Change: <unk> to contribute to spin master is our strategic adviser.
Speaker Change: Let me now review, our consolidated and create a sense of results with you briefly.
Speaker Change: We delivered $412 million in revenue in Q2 across all three creative centers.
Speaker Change: Including just over $43 million from Melissa Doug.
Speaker Change: As expected Q2 revenue declined two 1% in comparison to 2023.
Speaker Change: Adjusted EBITDA was $53 6 million an expected decline from last year adjusted.
Speaker Change: Adjusted EBITDA margin was 13% compared to 21% due to the increased proportion of revenue from the toys Creative center in margin dilution from M. N D where profitability is fully weighted to H two.
Speaker Change: Our Q2 gross profit decreased by $31 4 million to $199 6 million and gross margin declined to 48, 4% from 54, 9% primarily due to the impact of the Melissa Doug inventory fair market value adjustment.
Speaker Change: As we explained in Q1 as part of the acquisition of Melissa Doug We acquired just under $180 million of inventory of which approximately 66 million relates to the required fair market value step up adjustments, representing the difference between inventory cost and net realizable value.
Speaker Change: As this inventory is sold a fair market value increment is then recognized in cost of sales.
Speaker Change: In Q2, this inventory fair market value adjustments included in toy cost of sales was $24 $2 million and $44 million year to date.
Speaker Change: At the end of Q2, 'twenty, one $5 million of stepped up inventory remains on hand, which we expect to sell through in Q3.
Speaker Change: Adjusted gross profit, which removes the impact of the M. N D inventory fair market value increments decreased by $7 $2 million to $223 eight minutes.
Speaker Change: Adjusted gross margin was 54, 3% down 60 basis points from 54, 9%, mainly due to product mix in the toy Creative center, partially offset by an increase in distribution revenue from the pole control movies and series in entertainment.
Speaker Change: Let's review each creative Santos performance in a little more detail.
Speaker Change: Toy gross product sales in Q2 were down one, 4%, including Melissa Doug and down 14, 6%, excluding the sundial.
Speaker Change: As <unk> described toy gross product sales excluding M. N D will lower than Q2 'twenty three for two primary reasons.
Speaker Change: Firstly, approximately $32 million of custom orders shifted from Q2 into early Q3, most of which has already shipped.
Speaker Change: In addition, Q2 'twenty three included approximately $35 million of initial shipments from the launch of the second call patrol movie.
Speaker Change: Melissa Doug performed well in Q2, delivering toy gross product sales of $51 $7 million, a double digit growth rate over the same quarter in 2023.
Speaker Change: Preschool infant and toddler in plush gross product sales were flat with a positive impact of including Melissa Doug offset by the shift of customer orders into Q3, and the impact of lapping the $35 million of pole patrol movie shipments from Q2 last year.
Speaker Change: Activities games, <unk> puzzles, and doles and interactive grew $19 6 million or 17, 9% led by Unicorn Academy, let's see and kinetic sand.
Speaker Change: Wilson action declined $25 4 million or 25% due to the declines in Bakugan D C and tik-tik, partially offset by Monster Jam.
Speaker Change: Outdoor was up two 8% to $14 7 million.
Speaker Change: Sales allowances in Q2 were 11, 9% of toy gross product sales slightly elevated compared to 11, 2% as we invested in M. N D retail trade promotions and marketing.
Speaker Change: Excluding Melissa Doug sales allowances were 11, 2% flat to 2023.
Speaker Change: Adjusted EBITDA in Q2 foot toys was $20 9 million or six 1% margin compared to 13, 8%.
Speaker Change: The decrease in adjusted EBITDA margin was driven by the inclusion of Melissa Doug a high proportion of administrative and marketing spend in relation to toy revenue and lower gross margins, partially partially offset by lower selling expenses.
Speaker Change: In Q2 entertainment revenue increased by $2 5 million or seven 4%, we continue to see higher revenue from the distribution of the cold patrol movies and series.
Speaker Change: Offsetting this was a decline in production revenue from fewer content deliveries as we were lapping the delivery of Unicorn Academy and visa the vets in 2023.
Speaker Change: Adjusted operating income increased by $3 7 million or 22, 7% and adjusted operating margin increased to 54, 9% from 48, 1%. The improved margin was due to higher movie distribution revenue and fewer lower margin content deliveries.
Speaker Change: This year.
Speaker Change: Digital games revenue declined by $5 8 million or 14, 3% to $34 $7 million, primarily due to lower in game purchases and telco life World.
Speaker Change: Partially offset by higher subscription revenue for the picnic bundle and pulp patrol Academy.
Speaker Change: As Max mentioned industry level mobile gaming spending has slowed which has led to lowest spending commodity active user in our business.
Max: Engagement remains very high in the number of monthly active users for telco life World was approximately $61 million, a 3% increase sequentially and up 6% compared to 2023.
Max: Our focus is to both increase in App revenue conversion levels in telco life World and increase monthly recurring revenue from our active subscriber base.
Max: On this point subscription monthly recurring revenue or MLR or hit a new high in June.
Max: Since we launched technique, we focused on getting customers to choose the bundle over individual apps.
Max: Currently 90% of new 90% of new Activations for the bundle and these subscribers are staying longer which is a big driver of the MRO or increase.
Max: We are not now starting to focus on getting more customers to choose annual plans of a monthly plans.
Max: Our medium term goal is to get 40% of our subscribers on annual plans up from 15% currently.
Speaker Change: Digital games adjusted operating margin was 17% compared to 31, 6% last year driven by the decline in revenue and higher user acquisition costs.
Speaker Change: Called Academy and picnic.
Max: We have seen a pickup in digital games revenue in July and what is typically the seasonally strongest engagement period when kids are on summer holidays.
Max: Turning back to consolidated results adjusted SG&A increased by 24 million or 14, 7% to $187 5 million.
Max: As a percentage of revenue adjusted SG&A increased to 45, 5% from 38, 9% primarily from the inclusion of Melissa Doug.
Max: This has resulted in deleveraging in Q2 due to the seasonality of Melissa Doug's revenue profile, which is heavily weighted to the second half.
Max: Excluding Melissa Doug adjusted SG&A as a percentage of revenue was 42, 6% compared to just under 39%.
Max: Consolidated adjusted EBITDA for Q2 was $53 6 million compared to $88 4 million.
Max: Adjusted EBITDA margin was 13% compared to 21%.
Max: The decrease in adjusted EBITDA was primarily from the toy and digital game segments.
Max: Adjusted EBITDA, excluding Melissa Doug was $60 6 million compared to $88 4 million a decline of $27 8 million.
Max: Adjusted EBITDA margin, excluding Melissa Doug was 16, 4% compared to 21%.
Max: Adjusted net income was $9 6 million or nine cents per share compared to adjusted net income of $48 8 million or <unk> 47 cents per share.
Speaker Change: Looking at our balance sheet, we continue to improve our inventory position inventory, excluding Millicent, Doug was $145 million down $7 million compared to 2023.
Max: We are continuing to reduce overall A&D inventory levels and flushed the inventory subject to the fair market value step up adjustment through the P&L.
Max: Free cash flow in Q2 was negative $3 6 million compared to negative $5 9 million last year.
Max: Free cash flow increased due to higher cash generated from working capital, partially offset by higher interest paid and lower adjusted operating income we ended Q2 with $154 $6 million in cash.
Max: Our plan to create shareholder value remains consistent in Q2, we maintained a strong cash flow and executed our planned capital allocation initiatives are.
Max: A higher dividend was implemented and a share buyback program continued reflecting our commitment to returning value to shareholders.
Max: At the end of Q2, we had repurchased over one 1 million shares for approximately $25 9 million and after the quarter, we repurchased a further 318200 shares for $6 $9 million.
Max: Please note that these dollar values for the NCI B I just discussed are in U S dollars, but the Canadian dollar equivalent is in the press release.
Max: We repaid $15 million of dates in Q2 and on a year to date basis, we have reduced our borrowings by $65 million to $460 million.
Max: Turning now to our outlook, we are maintaining our full year guidance.
Max: We expect toy gross product sales for 2024, excluding willison, Doug to be in line with 2023.
Max: As a result of the order shift I referred to earlier, we expect Q3 to represent approximately 40% of full year gross product sales compared to 38% in 2023.
Max: As a reminder, at this point in the year, we typically have a significant portion of our Q3 orders locked in.
Max: The outlook for 2024 reflects our view that spin master retail inventories are in good shape, and we have a strong innovative deep and value focused line.
Max: Of course tampered by the reality that consumer behavior is likely to continue to be volatile with five fewer shopping days leading into Christmas 2024.
Max: We continue to expect sales allowances to be approximately 13% of gross product sales.
Max: Total revenue excluding Melissa Doug is also expected to be in line with 2023 with lower revenue from entertainment offset by higher digital games revenue for 2024.
Max: In digital games, we have a large amount of fresh content and telco life World planned for the second half of 2024.
Max: <unk> recurring revenue base, and our subscriptions business and the full introduction of Rubik's mentioned September.
Max: Note that rubik's match will require upfront marketing investments spend and amortization of the capitalized development costs will dilute digital games EBIT margin until they are fully recouped.
Speaker Change: From a cost perspective, we are seeing some inflationary pressures on certain lines of ocean freight due to the rate C and a pull forward in shipments in certain industrial sectors in advance of planned U S tariffs on China.
Max: However, we are managing our cost base very tightly and we continue to expect adjusted EBITDA margin, excluding millicent, excluding Melissa Doug to be inline with 2023.
Melissa Doug: In connection with Melissa Doug for 2024, we continue to expect gross product sales of between 420 and $430 million with revenue of $370 million to $375 million.
Melissa Doug: Melissa Doug retail inventory is in a very healthy position.
Melissa Doug: From a seasonality perspective second half revenues.
Melissa Doug: Melissa Doug will be split roughly equally between Q3 and Q4.
Melissa Doug: For 2020 full we continue to expect Melissa Doug's adjusted EBITDA margin to be approximately 19, 5%.
Melissa Doug: Data integration activities with Melissa Doug are progressing well, we are successfully identifying cost synergies with one $4 million in net cost synergies realized year to date, we continue to expect $6 million of net cost synergies to be generated in 2024.
Melissa Doug: A few specific outlook call lots for 2024.
Melissa Doug: Marketing will remain between nine and 10% of revenue cash interest paid will be around $25 million. Our consolidated effective tax rate estimate remains at approximately 26% cap.
Melissa Doug: Capex is expected to be just under 6% of revenue Dupree.
Melissa Doug: Depreciation and amortization, excluding Melissa Doug is expected to be approximately 105 million of which $65 million will hit Cogs.
Melissa Doug: Melissa Dr depreciation and amortization is expected to be approximately $27 million in.
Speaker Change: In conclusion, we will continue to focus our capital allocation strategy on innovation Entertainment content digital games and M&A. We will then return cash to shareholders through both share buybacks and dividends and will continue to pay down debt with residual cash.
Melissa Doug: We expect to end 2024, with a net debt to adjusted EBITDA ratio of approximately 0.8 times.
Melissa Doug: Overall, we remain on track to achieve our financial targets for 2024 and are confident in our ability to manage our capital effectively.
Melissa Doug: We remain well positioned strategically financially and operationally and are fully committed to continue to execute our strategy for long term growth and shareholder value creation.
Speaker Change: That concludes our prepared remarks, we will now be pleased to take questions. Operator. Please open the line.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear three Tom from acknowledging your request and your questions will be pulled in the order they are received.
Speaker Change: We wish to decline from the polling process. Please press star followed by the Q.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any Keith one moment. Please for your first question.
Speaker Change: Your first question comes from Martin Landry with Stifel. Your line is now open.
Martin Landry: Hi, good morning, guys.
Martin Landry: Good morning, good morning, Walter.
Speaker Change: There's a lot of.
Martin Landry: Noise in your results with with the shipments.
Speaker Change: Into Q3 with the Millicent Doug.
Speaker Change: Acquisition as well so I was wondering if maybe we can take a step back and look at things a bit more higher level.
Melissa Doug: And Max in your opening remarks.
Speaker Change: Youre talking about all.
Max: Your capabilities in toys entertainment and digital games.
Melissa Doug: It will allow you to deliver on your long term financial goals.
Speaker Change: So I was wondering if you could expand a little bit on what are the company's long term financial goals.
Martin Landry: Martin Good morning.
Speaker Change: First of all before we get to the financial goals for the future. We are very committed and confident to deliver this year's guidance. Okay. So let me start with that.
Melissa Doug: And have started Q3 with a really positive tone. So that's the start of my answer. The second thing is we want to continue to basically grow our toy business and beat industry industry growth rates.
Melissa Doug: What we've been doing and that's what we will continue to do and we will lean into innovation building brands and our great and expanding license portfolio that we continue to gain from key license source.
Melissa Doug: When it comes to entertainment, we have now created two new Ips and we will continue to basically bring new white piece to the company while nurturing the IP, we just launch and let's not forget having paw patrol forever.
Speaker Change: And when he turns into our digital games, we are very very committed and have great confidence in continuing to build both our toco Boca property into a very large franchise, including multi player game and including novel.
Speaker Change: Concepts for children dock coming to a digital ecosystem as social broadcasting and our subscription business, which is accelerating and subscribers from Joseph over 300000 about a year ago now closing on how familiar and on our way to $1 million by next year.
Speaker Change: So we're very confident that we have all the tools in place and let's not forget we've brought a beautiful brand like Melissa dog, which has responded very well to marketing earnings toward programming and we have already started Q3 with a very very very positive food forward Prime day was a great. Great example of supporting the <unk>.
Speaker Change: <unk> fully and he has responded beautifully so we have a bright future and I hope that helps answer the question.
Speaker Change: Yes, well it may be.
Speaker Change: Just a follow up on that in the past.
Speaker Change: I believe it was the company communicated.
Speaker Change: That the targets for organic growth.
Speaker Change: Was <unk>.
Speaker Change: Aspirational to.
Speaker Change: To grow in the mid single digit range and to complement that with M&A such a bring your revenue growth in the high single digits and also for your EBITDA margin to expand annually as digital gains would become a larger portion of revenues is that still achievable in.
Speaker Change: Is that still aspirational goals.
Speaker Change: That is a that is nothing's changed versus what you stated.
Mark: I will have mark expand but that is what we're planning against.
Speaker Change: Yes somewhat.
Speaker Change: And as you as you described.
Speaker Change: If you actually look since our IPO, our gross product sales koga CAGR has been around 8% and as we said at the IPO and it continued to say, we expect our organic gross product sales growth to be in the in the mid single digits range.
Speaker Change: We will supplement that with with acquisitions all the time, obviously there'll be some years of higher growth in some years of more modest growth and the other point that we've said publicly.
Speaker Change: Which we continue to drive towards is that we want to 20% of our total revenue to come from the digital games area as well and that's a big part of our margin goals and our gross margin goals are to be north of 50% on gross margins and to be north of 20% on adjusted EBITDA margins.
Speaker Change: Okay.
Speaker Change: That's helpful and then.
Speaker Change: You alluded to to Q3, a little bit and then maybe.
Speaker Change: I was wondering if you could.
Speaker Change: Sure. Some some color you talked about Amazon prime being being strong for Melissa Doug but.
Speaker Change: Is there any other color you can talk about in terms of.
Speaker Change: You know shelf space, adding into Q3.
Speaker Change: At point of sale for July any tidbits, you could share would be helpful.
Speaker Change: Yes, absolutely.
Speaker Change: We started Q3, obviously without well over double digit.
Speaker Change: GPS growth versus year ago, a lot of that and obviously part of our shipments moving forward but.
Speaker Change: Importantly, when you think about Q2 P O S into June and July the Q2 P. O S industry down five was down eight and you look at it sequentially may was better than April and June was better than May and in fact in June we were in line with the industry and in Europe, We were well ahead of industry and so we beat from it we actually.
Speaker Change: Grew three 2% industry was down 2.7 into July that trend continues and we feel very confident.
Speaker Change: I just want to add margin points as we called out in the guidance. We expect Q3 to represent a bigger proportion of sales. This year than we did than we saw in Q3 last year and that's also good news in the sense that it actually puts less pressure on on Q4 for us.
Speaker Change: Because a lot of the shipments coming earlier it gives us more opportunity to get replenishment orders. So we feel good about that.
Speaker Change: Okay. Thank you and Mark Congrats on your accomplishments and good luck in your future endeavors.
Martin Landry: Thanks Martin.
Speaker Change: Operator, do you want to move to the next question. Please.
Speaker Change: One moment please.
Speaker Change: To ask a question please press star one.
Operator: This is the operator, if you would like to ask a question. Please press star one.
Speaker Change: There are no questions at this time. Please proceed.
Speaker Change: Operator, I think Sofia has indicated that some of the questions that were lined up.
Speaker Change: ZIP dropped I'm not sure if that's if you can see any two categories.
Speaker Change: Yes.
Speaker Change: What I see as well.
Speaker Change: Thank you.
Speaker Change #119: Maybe we'll just give the participants a minute or two to actually login again, and if not we'll wrap it up.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: If you would like to ask a question. Please press star one.
Speaker Change: Your next question comes from Luke Hannan.
Speaker Change: With Canaccord Genuity. Your line is now open.
Luke Hannan: Great. Thanks, good morning in all likelihood that congratulations as well mark towards the end of your prepared remarks, you talked about the pull forward of some some orders as it relates to tariffs it sounds like.
Speaker Change: Folks in the industry want to get ahead of some tariff implementations and if I recall correctly that is something thats similar experience that we had witnessed about four or five years ago. So can you just give us a sense, maybe a high level overview of one if that is the case if it is a similar setup to around this time five years ago and if so how much better prepared are you for.
Speaker Change: That sort of scenario compared to back then.
Speaker Change: Alright, Thanks look I'm glad you asked the question because my reference to tariffs actually has nothing to do with the toy industry. There is no impact on tariffs for the toy industry. The reference was to the tariffs that the U S government put on electronic components and solar panels.
Speaker Change: Impacted various technology industries in the U S.
Speaker Change: Effective August one and as a result of that those industries, we're pulling forward.
Speaker Change: Orders into the U S and a lot of containers were actually on the way to the U S and not where they needed to be in China. As a result of that that caused a little bit of volatility in the ocean freight pricing market and it actually caused some of our retail customers to delay some of their deliveries from <unk>.
Speaker Change: Q2 into Q3 with the expectation that the rates within decline again when things settle down.
Speaker Change: I just wanted to be clear that had nothing to do whatsoever with tariffs on twice, but simply was an industry wide issue that affected ocean freight rates in general for the market I Hope that's clear now.
Speaker Change: That's very helpful.
Speaker Change #108: We can maybe switch gears to digital games I'm curious to know when it comes to specifically toga days and Rubik's match House How're you doing so far in the markets where these properties are deployed how are you doing as far as Kpis go across acquisition engagement and monetization notwithstanding the fact that as you called out earlier.
Speaker Change #102: Macro seems to be affecting the monetization element to certain things.
Speaker Change #103: Good morning, Luke, let's start with a rubik's match, we are achieving good soft launch kpis and strong apps stability specifically on the Kpis day, one day through retention are quite healthy or circumvent conversion is also very healthy and we're getting closer to our final monetization soft launch.
Speaker Change: So we feel good about that and we are basically still scheduled to launch in September broadly. So that's basically the sequence on rubik's match.
Speaker Change: When he gets to talk of days actually very positive as well we have short term engagement, which is performing to our expectations would be one retention first time user experience the session lenses outstanding.
Speaker Change: And then we're now basically into the long term retention and app stability and monetization.
Speaker Change: I'll just give you some things that are very encouraging from where we sit.
Speaker Change: One of the most impressive stats is and I'm.
Speaker Change #113: I am happy to share with you our <unk> until good days organically has already crossed 400000 Mou in Q2 and is climbing and these who simply just buy us basically getting into these markets and there are no big markets, we've gone into we're being very cautious.
Speaker Change: And as we look ahead, we're basically working on content social features retention features and building towards a monetization level, we feel very confident with so that's where we are on both games and making strong progress and keeping our commitments to launch.
Speaker Change: Great and then in that 400000 has there been a big migration from took a life worlds into took a days or are these net new organic users.
Speaker Change: They are mostly organic user side. There are some obviously there are some people who are playing both and as we stated our <unk> took a life world actually climbed to an all time high at the same downward launching in these markets.
Speaker Change #100: So obviously, we have <unk> at the market level, and we're encouraged with any cannibalization that we would've expected.
Speaker Change #107: Great. Okay last question from me and then I'll pass the line for Tokio life World I'm curious to know amongst your player cohorts where is it exactly that you are seeing fewer purchases does it with those players that have been part of the player base for.
Speaker Change #110: For a while or is it some of those newer players.
Speaker Change #112: So we actually have increasing ARPA with some of our current players and we needed to get more people to come in so we actually have released some free content, which is driving engagement and this is more towards June look. So we're now beginning to see the effect of that in July.
Speaker Change #100: And so we're seeing a halo effect of players coming into the game and purchasing other items from a reach catalog of content that's number one.
Speaker Change #100: And then second as we look to the back half beyond that we have a lot of interventions to continue to drive the monetization.
Speaker Change #100: One of the more exciting things about the second half on took a life world is we have 37% more content dropping this year than last year and that is very important.
Speaker Change #101: Second we secured a strategic collaboration that he is going to launch in Q4 recall, we did Spongebob last year and the year before with the Hello, Kitty we have a super exciting new coal up for Q4, we look forward to that and we have two new features set to launch in Q4, we haven't had a new feature on cocoa life world in quite some time and that will.
Speaker Change #115: <unk> players and opportunity and value to basically show because what they are paying for it.
Speaker Change #100: Great. Thank you very much.
Drew McReynolds: Your next question comes from drew Mcreynolds with RBC. Your line is now open.
Drew McReynolds: Yeah. Thanks, Thanks, very much and congrats mark.
Drew McReynolds: So just a couple of high level widens.
Drew McReynolds: Just be curious just to see from your perspective, just how the macro environment is evolving.
Speaker Change #100: Thanks, Matt in your prepared remarks, you talked about kind of improving consumer sentiment, but just overall the consumer being volatile yet kind of retailers are cautiously optimistic about kind.
Speaker Change #124: And in the back half of the year here, so kind of it all sounds very confusing to me on this side. So just would love to get.
Speaker Change #100: An update on just how things have evolved and then secondly.
Max: Just with respect and I guess Max for you on the setup for 2025.
Speaker Change #120: Obviously on the macro side Theres things you cant control overall, but it does seem like.
Speaker Change #106: Across each of your three segments the pipeline of whether it's new toys new IP.
Speaker Change #106: Hi.
Max: Is building.
Speaker Change #116: I'd love to get your thoughts on the strength.
Speaker Change #122: Of that pipeline across all three segments relative to where you think you had been in prior years and whether you actually do see it as potentially a much stronger setup here looking looking forward. Thank you.
Speaker Change #100: Great.
Speaker Change #118: Really really good question and very complex question, so I'm going to decompose that for you.
Speaker Change #121: From a retail perspective right.
Speaker Change #104: Retailers have gotten over their inventory situations inventories as we get to the back half are cleaner and that's a really positive thing is both retail inventory our owned inventory costs number one number two.
Speaker Change #104: They've gotten retailers out of us from a profitability drop and just making sure to have the fundamentals cleaned to now looking for growth and so there is an impetus to grow the category and Thats really positive too so theres a lot of enthusiasm to invest in the category.
Speaker Change #104: Third now getting to the consumer from a consumer perspective. The consumer continues to look for deals continues to look for opportunities to actually getting to the new items as well. We have we have in our line address price points and the breadth of our line across different price points to be very competitive and actually.
Speaker Change #104: We're seeing success in Prime day was an example from listen Doug and for Us as well, where we actually hot.
Speaker Change #104: Items, how well that did for the company and as we get into the back half not only do we have the promotional support for our brands and the key price points. We also have an entry into the value channel in the U S, which is going to give us a broader access to the consumer who is looking for or not.
Speaker Change #104: For data deal. So we feel very good about that and then importantly for them. The consumer we're still seeing the consumer truly engage with new items in the category and this year, we have more new GPS percent of our total toy business both.
Speaker Change #105: Both the gross Melissa Doug and spin master than we did a year ago and Im listened look specifically, we have two great innovations in the second half of this year, which they would have not have last year and so we feel really good about that I had mentioned blockable. So is brand new and the Wow innovation platform is doing incredibly well beyond that we have a play Jim that.
Speaker Change #105: <unk> launched and Josef on the initial launch period is doing incredibly well we talk Rachel we talk bitsy all those things are now set.
Speaker Change #114: <unk> gives us confidence because of the early Pos that we will have something to chase as we get to the fourth quarter with replenishment as mark alluded to.
Speaker Change #125: That's because we're getting to the future and I'm sticking with toy we have an incredible portfolio. Both of innovation, we have full year effects of Ms. Rachel a full year effect of <unk>, we have a full year effect some of the big things. We're having just launched this year, which is really positive but on top of that we have the.
Speaker Change #114: Full year effect of channel expansion into the value channel for example, and on top of that we also have.
Speaker Change #105: Great Great set of theatrical studies complementing our brand our core brands and our basically franchises as well as.
Speaker Change #105: Everything we're doing with the channel perspective, so we feel very strongly about 2025 or toy Bolton listen Dawkins spin master.
Speaker Change #105: So when you when he goes beyond that we have a full year effect of Unicorn Academy, which then gets you into a licensing and merchandising for the entertainment business and when we're launching the game's fallout and twenty-five right. We're just a soft launch mode as we basically get into the year and a lot of the interventions I mentioned on Docker like World are just now rolling into market.
Speaker Change #127: So you'll get the full year effect of that as well as the subscription business, which from a monthly recurring revenue as mark alluded to in his remarks is doing incredibly well so all of that bodes well for us in 2025, a year, we feel very confident about.
Speaker Change #117: The last piece on the acquisition of Melissa Doug use we're going to have the full year effect of.
Speaker Change #117: <unk>.
Speaker Change #117: Expansion into Canada, and Mexico, which is happening here, but we're going to have the first year effect of our full international expansion, which I think adds another building block.
Speaker Change #117: And a key component for demolition Dag growth. So I hope that gives you a better picture and we're quite confident.
Speaker Change #165: Yes, that's great Nextera thorough thank you.
Speaker Change #128: Thanks Stuart next question comes from Brian Morrison with TD Cowen. Your line is now open.
Brian Morrison: Okay. Thanks very much.
Speaker Change #135: I'll provide a sense of issues today, so I apologize if theres some repeat here. So Max I wanted to talk about Nielsen dug a little bit more so see some sequential improvement in Q2 relative to Q1, you mentioned some notable success on Amazon Prime.
Speaker Change #123: I understand the seasonality I'm, hoping you can go a little deeper with data points as we move into the second half that convey confidence in the outlook for M&A I think Mark said orders were up double digits. In Q2 is that correct, maybe repeat that data point and then perhaps color on the level of the Q3 order book relative to last year, how much ballpark inventory catch up in the channel is required to normal.
Speaker Change #147: And I think your guidance. This year is not far off last year's revenue from the bar report. So how are you tracking relative to last year through Q2 on listen Doug.
Mark: Great. We're going to this is this is great. Let me get Mark to clarify. The first question you ask and then I'll pick it up from there Mark Yes, sure so Brian what I actually referred to in my prepared remarks was the fact that Melissa Doug shipments in Q2 up double digits relative to Q2 last year on a on a year to date basis.
Mark: Actually Melissa Doug Fir 24 year to date is actually flat with Melissa <unk> 23 to <unk>.
Mark: Right.
Mark: But what all the OLED growth initiatives that mix has referred to actually come in the second half of the year. So let me hand, it back to him to go those points again.
Speaker Change #132: So Brian I think on Melissa Doug we saw a significant improvement in Q2, we also invested to get that improvement and the good news is that the brand is super strong and responded.
Speaker Change #129: Both at retail and in consumption through the increased marketing. So that's the first thing. So we have a proof point on the investment and the return on that investment. So we will continue to invest as we announced started during Q3 Q.
Speaker Change #129: Q3's order book is very strong.
Speaker Change #129: One thing that will give us that has given us confidence and should give you confidence is the fact that some of the orders have now turning to direct import orders. So the retailer also got more confident as they saw the consumption improved and so from an order that we would abroad. Historically now they are bringing because they basically want to get behind it. Okay. That's really important.
Mark: Number three from an order book going into Q4 as we've told you from the day, we actually began to talk about the brand Q4 is massively critical for Melissa. The good news is that we have Q3 order books, reflecting the planning for Q4, why because we have more innovation in Q4 than we would have had.
Mark: Year ago, a year ago, we didn't have blockable a year ago, we didn't have to play gym and a year ago. We would have not had the broad expansion of the sticker wild launch and so on top of that we have Ms. Rachel and it's a synergy play for Melissa Doug as well from an innovation perspective, and you know how important innovation is to the category.
Mark: We feel very strongly about the fact that we have those building blocks, which we didn't have a year ago number four we basically have now Canada shipping with our commercial team at spin Master, which is actually great and we have Mexico, starting as we speak so we're going to have two countries that would have basically just been under distributors.
Mark: Very low levels owned by spin master through our own sales force that also will give us.
Mark: New revenue so.
Mark: For all those reasons, we feel very confident that Melissa Doug in the second half will deliver according to what we've guided and hopefully will push beyond that.
Speaker Change #142: Okay, Matt Thanks.
Speaker Change #136: Thank you that's very thorough I want to go into the digital game segment for a minute I know there was a question on it but can you just maybe go into more detail upon the year over year softness. So just simply industry specific is there a delay in terms of global launch of token days or <unk>.
Speaker Change #130: And then I do have one small follow up in terms of timing if that's okay.
Speaker Change #131: Yes, absolutely.
Speaker Change #144: It was a very fair question and it comes down to talk alive World and it comes down to basically less in App purchases for the consumer segment, we play with.
Speaker Change #131: Right.
Speaker Change #141: And so but on top of that we basically see that as we began to activate we have had conversion improvements on took aligns world. So we have great engagement, Brian we just have to drive conversions. So that we can get the ARPA to their levels. We know produces the revenue that we need so it comes down to <unk>.
Speaker Change #143: Specifically <unk> world by the way subscriptions is doing better than we had planned so that was a really positive thing and from our games New games perspective, they were never intended to be launched and monetize immediately in Q4, we always plan for this to be a long we want to launch them right and we actually had in our planning more of a back half.
Speaker Change #130: Component to the revenue so it's really talking about world and he's really player monetization conversion specifically.
Speaker Change #133: Okay and then my follow up is the timing for a global launch of token as I don't know if you know that yet but also merchandise for Ms. Rachel Unicorn Academy entering the value chain should that also show up in the GPS in Q3.
Speaker Change #133: And Mark you did say that you expect to GPS to be higher in Q3 in the second half this year than it was last year I think it was 57% last year.
Speaker Change #138: Any color on that number.
Speaker Change #137: I'll start and then I'll turn it over to Mark with the numbers.
Speaker Change #148: So the answer to your question on what has already set in Q in the June July and June specifically, the Answer's no Ms. Rachel was not in the second quarter numbers.
Speaker Change #137: What was in the second quarter numbers, Brian is a bit of Unicorn Academy.
Speaker Change #149: <unk> and a bit of.
Speaker Change #149: Non <unk>, yet puny rooms, all of those things give us confidence from a Pos early days right, but those are already began to ship the <unk>.
Speaker Change #149: Majority of the shipments for new is Q3, including these Rachel we have not yet set Ms. Rachel to be clear. So there is a lot ahead of us and from a Q3 versus year ago, we are well positioned to exceed year ago.
Speaker Change #133: <unk> nicely.
Speaker Change #133: And in the value chain.
Speaker Change #133: So value chain is not setting.
Speaker Change #133: Q3, starting in Q3, so that has not yet coming.
Speaker Change #130: Coming to effect.
Brian Morrison: So Brian Justin.
Brian Morrison: Your question on seasonality I'm not sure what numbers you are referencing let me repeat again.
Brian Morrison: For spin Master.
Speaker Change #134: We expect Q3 to represent approximately 40% of the full year guide.
Speaker Change #134: Guidance that we've given you.
Speaker Change #134: Compared to 38% last year.
Speaker Change #134: And then for Melissa Doug Q3 to be about 50% of the year sorry.
Speaker Change #134: Let me repeat this Q3 and Q4 will be roughly equal in size in relation to.
Speaker Change #145: Each other but listen Doug overall seasonality is around.
Speaker Change #145: 80% in the second half so it could represent around $40 40 at Q3, Q4, I hope that clarifies.
Speaker Change #139: I'll take it offline and I had one more but I'll take it offline. Thank you very much.
Speaker Change #139: Okay.
Speaker Change #140: I think we have two more questions.
Speaker Change #140: Your next question comes from Adam Shine with National Bank. Your line is now open.
Adam Shine: Thanks, a lot good morning.
Speaker Change #157: Most of my questions were asked after had to re queue up but.
Speaker Change #140: Maybe one for you Mark.
Mark: Can you give us the split.
Speaker Change #146: You often did in the past in terms of F O b versus direct especially given some of the moving pieces that you alluded to today.
Mark: Yes, historically, Adam if you go back to.
Mark: Earlier days it was typically around 50 or 60% <unk>, 40% domestic in the last few years that shifted down to the mid fifties.
Speaker Change #150: Europe has grown which is much more of a domestic market and now increasingly more so with Melissa Doug because a lot of Melissa Doug's Q4 volume.
Mark: Is actually domestic.
Speaker Change #139: So overall, our F O b versus domestic split for 2024 is estimated to be around 52% F O b, 48% domestic.
Speaker Change #139: Okay.
Speaker Change #139: Okay, great and.
Speaker Change #156: I guess going back to the prior answers a lot of confidence around Q3.
Speaker Change #139: As Max alluded to and outlined.
Speaker Change #152: See some help just in terms of some of the delayed shipments from Q3, sorry Q2 into Q3.
Speaker Change #158: But we think about some of the concerns in prior years, just vis vis the guidance. The issue has not historically been Q3 of course its been sort of the early part of Q4, showing some signs of slowdown and not so much talking about Melissa Doug.
Max: Max because I think you.
Max: Already explained that very clearly, but as it relates to the core business, particularly going into Q4 can you maybe just elaborate a little bit further on some of the confidence is it is it significantly related to the state of inventories and the anticipation of replenishment going into Q4 that.
Max: May have been absent in prior years.
Max: <unk>.
Speaker Change #139: Maybe there's one or two other things that you could allude to.
Speaker Change #139: Yes.
Mark: I will start and then I'll pass it onto Mark from a numbers perspective, but the confidence Adam and good morning is driven by three things number one.
Mark: The percent of new for US this year in spin Master is higher and some of that has not set yet and as we get into Q4. We've also got more marketing for us into late Q3 Q4 than we did a year ago. So we have new with a lot more marketing support which actually bodes well for us number one.
Mark: Why because on some of those we already begin to see some early Pos.
Speaker Change #139: Signs of.
Speaker Change #139: We're going to chase and Thats really positive.
Speaker Change #139: Number two is we basically have.
Speaker Change #139: The expansion into new channels that is going to help us get more revenue as well and so that's very very important and number three unlike last year, where people were not.
Speaker Change #154: Reordering because they had inventory our inventory positions are better and you actually stated that in your question and you are correct not only for replenishment in Q4, but it is actually we said.
Speaker Change #154: The first quarter of 2025, and because we have new things coming in 2025 for dosing to set we have to ship in November December and therefore, we see Q4 from a GPS perspective as opposed to having something we didn't have last year.
Speaker Change #151: Yes, so just a mix I think you've covered most mostly all of it I will say we are confident in our outlook at them.
Speaker Change #161: For all the reasons, we've discussed on the call and we've alluded to in the Q&A. Afterwards, obviously, if you look at it by Creative Center in the toy area. These are the elements of replenishment, which which is very tough to call well ahead of the actual season. So there's always the element of replenishment potentially providing upside or downside.
Speaker Change #162: Depending on what's happening in the market. So just keep that in mind as you well know, but on the entertainment side, we have good visibility into what's happening and on the digital guidance side as mix described.
Speaker Change #151: We have a lot of activity in the second half of the year and for all the reasons when you put that all together together with our cost control.
Speaker Change #151: We feel confident in our outlook for the second half and for the full year.
Speaker Change #163: Okay. Thank you very much appreciate it.
Speaker Change #160: I think the last question I'll ask question operator please.
Speaker Change #160: Your next question comes from David Mcfadden with Caremark Securities. Your line is now open.
David John McFadgen: Great. Thank you.
David John McFadgen: So I don't know if you provided this article I may have missed it but if you can.
David John McFadgen: Look at your Q1 presentation on slide 12, Lantana handy.
David John McFadgen: We are providing us point of sale metrics or some of the key properties and I was wondering if you could provide that for Q2, specifically Papa Terra would be really helpful.
Speaker Change #167: Yeah sure. So on Paw patrol are we were just slightly below and I alluded to in my remarks slightly.
David John McFadgen: Slightly below the infant preschool category.
David John McFadgen: Which was down so we were down a little bit more than that and that is really more because we last year. In Q2 had began to ship and began to see consumption for movie items. So when you exclude that basically you would basically find that we were adjusting line and.
David John McFadgen: And David if there's anything else specific that you want maybe Sofia can can be in touch with you after the call on any particular high.
Speaker Change #159: Okay. Okay.
David: That'd be helpful. Thanks.
David: Okay.
Speaker Change #164: Okay, well I think we're going to wrap it up at that point. Thank you. So much for participating and we'll talk to you again. After Q3 results in early November. So thanks, everyone have a good day.
Speaker Change #166: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
David: Okay.
David: [music].
David: Sure.
David: [music].
David: Yes.
David: [music].