Q4 2024 Spin Master Corp Earnings Call

No listen only mode. Following the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press Star Zero Party. Operator. This call is being recorded on Tuesday February 25, 2025, I would now like to turn the conference over to Sofia Bcp's. Please go ahead.

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Speaker Change: Thank you and good morning, welcome to spin master's financial results conference call for the fourth quarter and full year 2024, I'm joined this morning by Max Ranga.

Speaker Change: 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 consolidated financial statements are available on the Investor Relations section of our website at spin Master Dot com and on Cedar plus.

Speaker Change: Thank you and good morning, welcome to spin master's financial results conference call for the fourth quarter and full year 'twenty 'twenty four 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 Consol.

Speaker Change: 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.

Speaker Change: Level of activity performance goals or achievements and any other future events or developments.

Holiday did financial statements are available on the Investor Relations section of our website at spin Master Dot com and on SEDAR plus.

Speaker Change: 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.

Speaker Change: Before we begin please note that remarks on this conference call may contain forward looking statements about spin master's current and future plans expectations intentions results levels of activity performance goals or achievements and any other future events or developments forward looking statements are based on information currently available to manage.

Speaker Change: However, there can be no assurance that certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or implied by the forward looking statements.

Speaker Change: And on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances.

Speaker Change: As a result spin master cannot guarantee any forward looking statements will materialize and you are cautioned to not place undue reliance on these forward looking statements.

Speaker Change: But it can be no assurance that certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or implied by the forward looking statements.

Speaker Change: Except as may be required by law spin Master has no obligation to update or revise any work forward looking statements, whether because of new information future events or otherwise.

Speaker Change: As a result spin master cannot guarantee any forward looking statements will materialize and you are cautioned to not place undue reliance on these forward looking statements.

Speaker Change: For additional information these assumptions and risks please consult our cautionary statements regarding forward looking information in our earnings release dated February 24th 2025, and please note that spin Master reports in U S dollars and all other amounts today are expressed in U S currency, unless otherwise noted I would like to turn the call over to Max. Thank you.

Speaker Change: Except as maybe 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.

Max Wrangle: For additional information on these assumptions and risks please consult our cautionary statements regarding forward looking information in our earnings release dated February 24th 2025, and please note that spin Master reports in U S dollars and all other amounts today are expressed in U S currency, unless otherwise noted I would like to turn the call over to Max. Thank you.

Speaker Change: And good morning, and thank all of you for joining us thanks to the collective efforts of our global team across our three creative centers, we delivered several new milestones for the company in 2024, including achieving total revenue of $2 3 billion, an increase of 18, 8%, including incremental revenue of 307.

And good morning, and thank all of you for joining us thanks to the collective efforts of our global team across our three creative centers, we delivered several new milestones for the company in 2024, including achieving total revenue of $2 $3 billion, an increase of 18, 8%, including incremental revenue of 307.

Speaker Change: $5 million.

Speaker Change: From a leasing Doug.

Speaker Change: Fourth quarter revenue was just under a $650 million, an increase of 29%, including $136 million from loosened up.

Speaker Change: We were pleased with <unk> top line performance, where 2024, which was in line with expectations our investment in <unk> deepens, our already strong presence in the key preschool toy category extends our reach pre childhood education in play and supports our vision to re imagine everyday Blake.

Max Wrangle: $5 million from Elisa Doug.

Max Wrangle: Fourth quarter revenue was just under $650 million, an increase of 29%, including $136 million from Lytham dark.

Max Wrangle: We're pleased with M and these topline performance, where 2024, which was in line with expectations our investment in M. N D deepens, our already strong presence in the key preschool toy category extends our reach pre childhood education in play and supports our vision to re imagine everyday play.

Speaker Change: Integration of <unk> is progressing well and we remain focused on revenue growth and cost synergies.

Speaker Change: Let's turn to our Doi Pos performance.

Speaker Change: We started off the fourth quarter with very strong results at retail in the U S growing more than three times faster than the industry in October including double digit growth from Elisa. However, we saw lower than expected consumption in the weeks following black Friday, which reduced sell through and replenishment.

Max Wrangle: The integration of M. N D is progressing well and we remain focused on revenue growth and cost synergies.

Max Wrangle: Let's turn to our Doi Pos performance.

Max Wrangle: It started off the fourth quarter with very strong results at retail in the U S growing more than three times faster than the industry in October including double digit growth for them at least sundog. However, we saw lower than expected consumption in the weeks following black Friday, which reduced sell through and replenishment.

Speaker Change: This past year, we introduced several new lines and expanded our core and license offerings. Some.

Speaker Change: Some of these highlights included the launch of toys for Unicorn Academy, which became the top new gaming property in Europe in 2020 for Berkshire County, and the expansion of our <unk> digital pet with a magical and Disney license additions.

Max Wrangle: This past year, we introduced several new lines and expanded our core and license offerings.

Speaker Change: <unk> was the number two Brian and youth electronics globally for both the fourth quarter in 2024 and was also the number one growth brand for the Super category Mercer County.

Max Wrangle: Some of these highlights included the launch of choice for a Unicorn Academy, which became the top new gaming property in Europe in 2024 at Berkshire counter and the expansion of our bitsy digital pet with a magical and Disney license additions Betsy was the number two brand in youth electronics globally for both the fourth quarter in 2024 and was.

Speaker Change: In 2025, we are further building this exciting play experience with innovative ways to engage and new licenses, including Jurassic World and Wizarding World.

Speaker Change: Licensed products represented 29% of our total portfolio revenue, thanks to Ms. Rachel Monster Jam Wizarding World garbage Dalhouse, among others Monster Jam. It made significant gains in 2024 growing pass by 13, 2% globally pressure kind of.

Max Wrangle: Also the number one growth brand for the Super category, Berkshire County.

Max Wrangle: In 2025, we are further building this exciting play experience with innovative ways to engage and new licenses, including Jurassic World and Wizarding World.

Speaker Change: Licensed products represented 29% of our total portfolio of revenue thanks to Ms. Rachel Monster Jam Wizarding World garbage Dalhouse, among others Monster Jam. It made significant gains in 2024 growing by 13, 2% globally per share count them.

Speaker Change: Monster Jam was a number one license in the vehicles Super category for both the fourth quarter in 2024.

Speaker Change: Q4 was our first quarter with a <unk> ratio toy line on the shelf and the line quickly gained strong traction and becoming the number one new licensing toys within the infant toddler preschool Super category in the U S.

Speaker Change: Monster Jam was the number one license in the vehicles Super category for both the fourth quarter in 2024.

Speaker Change: The spring line is off to a great start supported by curated content from Ms. Rachel as part of our ongoing partnership.

Q4 was our first quarter with administration toward relying on the shelf and the line quickly gained strong traction and becoming the number one new licensing toys within the infant toddler preschool Super category in the U S.

Speaker Change: Emulation of spin Master and F&D has established us as the number one manufacturer for preschool toys versus kind of.

Speaker Change: While patrol Pos declined both in Q4 and 2024, but <unk> remained the number one preschool toy property globally for both periods.

Speaker Change: The spring line is off to a great start supported by curated content from Ms. Rachel as part of our ongoing partnership.

Speaker Change: Our perpetual rescue wheels figure in vehicle assortment was the number one new item in the infant toddler preschool category in both Q4 and $22 four in the U S.

Emulation of spin Master and M. N D has established us as the number one manufacturer for preschool toys Mercer kind of.

Speaker Change: Bob Patrol Pos declined both in Q4 and 2024, but paw patrol remained the number one preschool toy property globally for both periods.

Speaker Change: For 2025, we've introduced a Paul line designed to offer the same play value at lower price points to match the trend towards lower retail price points in this segment.

Speaker Change: Paw patrol rescue wheels figure in vehicle assortment was the number one new item in the infant daughter preschool category in both Q4 and 22 four in the U S.

Speaker Change: Value will be an important driver for consumers in 2025 as they continued to experience pressure on discretionary spending.

Speaker Change: For 2025, we've introduced a poor line designed to offer the same play value at lower price points to match the trend towards lower retail price points in this segment.

Speaker Change: We're continuing our strategic pursuit of the value channel to increase our share of these retailers are valued channel storyline easing now available in thousands of doors across U S, Canada, and Europe, and our SKU count will nearly double in 2025.

Speaker Change: Valley will be an important driver for our consumers in 2025 as they continue to experience pressure on discretionary spending.

Speaker Change: Turning to entertainment revenue decrease was planned by $13 9 million for Q4 and $31 million for 2024 due to a slower pace of content deliveries this year compared to 2023 <unk>.

Speaker Change: We're continuing our strategic pursuit of the value channel to increase our share of these retailers are valued channel storyline easy now available in thousands of stores across U S, Canada, and Europe, and our SKU count will nearly double in 2025.

Speaker Change: <unk> continues to resonate with audiences globally and is maintaining status as one of the top preschool series in the world.

Speaker Change: Turning to entertainment revenue decrease was planned by $13 9 million daughters for Q4, and $31 million for 2024 due to a slower pace of content deliveries this year compared to 2023.

Speaker Change: Later this month, we will announce more details regarding our third perpetual movie.

Speaker Change: Which will launch in theaters in July 2026, and which is starting to build momentum in partnership with Nickelodeon and Paramount. We will also be announcing new seasons for both <unk> and <unk> in Peru.

Speaker Change: Paw patrol continues to resonate with audiences globally and is maintaining status as one of the top preschool series in the world.

Speaker Change: Later this month, we will announce more details regarding our third paw patrol movie.

Speaker Change: Unicorn Academy is winning globally with fans digging the number one spot for gross age six to eight or Netflix September 2024 report.

Speaker Change: Which will launch in theaters in July 2026, and which is starting to build momentum in partnership with Nickelodeon and Paramount. We will also be announcing new seasons for both Bob patrol and rebel and crew.

Speaker Change: We just announced two specials, which will drop on Netflix in 2025, and we will be expanding linear distribution of the serious this year.

Speaker Change: Unicorn Academy is winning globally with fans, taking the number one spot for girls, aged six to eight per Netflix September 2024 report.

Speaker Change: We are continuing to expand our feature film slate with a <unk> live action film in development.

Peyton: Peyton you sign onto direct write and produce.

Speaker Change: We just announced two specials, which will drop on Netflix in 2025, and we will be expanding linear distribution of the serious this year.

Peyton: Our global Multiplatform franchise Bakugan has captured the imagination of millions of <unk> since it launched in 2007, we have co produced nearly 300 bucket on TV episodes in our toy line has generated well over 1 billion in sales worldwide since it first launched.

Speaker Change: We are continuing to expand our feature film slate with the Bakugan live action film in development.

Speaker Change: Peyton you sign onto direct write and produce.

Peyton: We are going to leverage the deep multi generational fan base by bringing the franchise to the big screen.

Speaker Change: Our global Multiplatform franchise Bakugan has scarp should the imagination of millions of kits since it launched in 2007.

Peyton: Turning to digital games revenue for the fourth quarter increased by 13, 5% due to high in game purchases for took a book a world and a growth in subscription for picnic and Paw Patrol Academy.

Speaker Change: Co produced nearly 300, Bakugan and TV episodes in our Toyland has generated well over 1 billion in sales worldwide. Since it first launched we are going to leverage the deep multi generational fan base by bringing the franchise to the big screen.

Peyton: Have continued to transition standalone app subscribers to picnic, which is helping drive up our recurring revenue base.

Speaker Change: Turning to digital games revenue for the fourth quarter increased by 13, 5% due to high in game purchases for Yoga book, a world and a growth in subscription for picnic and Paw Patrol Academy.

Peyton: Quarter improvement and took a book of world from a tough quarter three was anchor in the release of two new features and new content, which increase engagement with our players.

Peyton: I'm pleased to share that these measures are having a positive impact on performance.

Speaker Change: We have continued to transition standalone app subscribers to picnic, which is helping drive up our recurring revenue base.

Peyton: <unk> loved the new features and they were well time for the holiday period during which we typically see kids spending more time under devices.

Speaker Change: The fourth quarter improvement and took a book of world from a tough quarter three was anchor in the release of two new features and new content, which increase engagement with our players.

Peyton: We ended Q4 with $61 2 million monthly active users up from 55% end of Q3 and $62 million and a 2023.

Speaker Change: Pleased to share that these measures are having a positive impact on performance.

Speaker Change: Loved the new features and they were well time for the holiday period during which we typically see kids spending more time under devices.

Peyton: In Q4, we saw a steady continuation in the growth of subscriber base and we ended 2024 with approximately 455000 subscribers.

Speaker Change: We ended Q4 with $61 2 million monthly active users up from 55 end of Q3 and $62 million and a 2023.

Peyton: Up 14% over 2023, we.

Peyton: We have continued to transition standalone app subscribers into big Nick which is helping drive our recurring revenue base.

Speaker Change: In Q4, we saw a steady continuation in the growth of subscriber base and we ended 2024 with approximately 455000 subscribers.

Peyton: Unfortunately, the improvement we saw in Q4 was not enough to offset the declines we experienced earlier in the year, resulting in revenue declined by just over $9 million for the 2024 period.

Speaker Change: Up 14% over 2023.

Speaker Change: We have continued to transition standalone app subscribers into big Nick which is helping drive our recurring revenue base.

Peyton: We are confident that with the continued rollout of new features content and collaborations toco Boca World will continue its upward momentum in 2025.

Speaker Change: Unfortunately, the improvement we saw in Q4 was not enough to offset the declines we experienced earlier in the year, resulting in revenue declined by just over $9 million for the 20th of Newport period.

Peyton: Both <unk> Boca World employ Academy, where just name as winners of the Kids Screen Awards Best alternative gets digital game.

Peyton: And best learning up respectively.

Speaker Change: We are confident that with the continued rollout of new features content and collaborations toco Boca World will continue its upward momentum in 2025.

Peyton: I want to comment on the investment that we made in digital games development pipeline the market is competitive and introducing new titles at scale. These challenging while we developed a high caliber match three game with Rubik's match the cost to acquire new users in this older demographic segment relative to revenue did not generate our expected returns we made the difficult.

Speaker Change: Let's talk about the World employ Academy, where just name as winners of the Kids Screen Awards Best alternative gets digital game and.

Speaker Change: And best learning up respectively.

Speaker Change: I want to comment on the investment that we made in digital games development pipeline the market is competitive and introducing new titles at scale. These challenging while we developed a high caliber match three game with Rubik's match the cost to acquire new users in this older demographic segment relative to revenue did not generate our expected returns we made the difficult.

Peyton: <unk> to wind down the north light studio and will be halting Rubik's match development. This will allow us to focus and maximize our significant growth opportunities. We see both we took our Boca and big Nick.

So it's actually for 2025, there are numerous points of volatility we are watching the two primary ones are the health of the global consumer and potential U S tariffs on China sourced stories.

Speaker Change: <unk> to wind down the north light studio and will be halting Rubik's match development. This will allow us to focus and maximize our significant growth opportunities, we see both with toco Boca and picnic.

Peyton: We are looking at our supply chain options carefully as well as considering pricing in order to mitigate the impact however, our team remains focused on growth.

Conceptually for 2025, there are numerous points of volatility we are watching the two primary ones are the health of the global consumer and potential U S tariffs on China sourced stories.

Peyton: We are very excited about the lineup we are introducing within toy there will be several global theatrical releases driving growth and for which we have licensed products, including Superman how to train your Dragon Jurassic World and <unk> Dollhouse.

Speaker Change: We are looking at our supply chain options carefully as well as considering pricing in order to mitigate the impact however, our team remains focused on growth.

Peyton: 25 will be a foundational year for us to increase listen ducks penetration in key international markets. We will continue to expand our early childhood reach with MS. Rachel beyond toy or entertainment Creative Center has a robust slate for 25 with Paw patrol and relevant crew and he is engaging new audiences with Unicorn Academy and Vito divert.

Speaker Change: We are very excited about the lineup we are introducing with enjoy there will be several global theatrical releases driving growth and for which we have licensed products, including Superman how to train your Dragon Jurassic World and Gabby as Dollhouse 'twenty.

Speaker Change: <unk> 2025 will be a foundational year for us to increase listen ducks penetration in key international markets. We will continue to expand our early childhood reach with MS. Rachel beyond toy or entertainment Creative Center has a robust slate for 25 with Paw patrol and rebel and crew and he is engaging new audiences with Unicorn Academy and beat it.

Peyton: We have strong digital games lineup for 25 with new content and features and took a bulk of world and the integration of <unk> Academy another content into picnic providing.

Peyton: Providing kids and parents with further excitement and value and access to digital learning. These.

Peyton: These combined with improvements in retention and conversion features will drive subscriber growth.

Speaker Change: Beth.

Speaker Change: We have strong digital games lineup for 25 with new content and features and took a book of World and the integration of Barr Academy another content into picnic.

Peyton: 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.

Providing kids and parents with further excitement and value and access to digital learning.

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 drive long term growth and create shareholder value.

Speaker Change: These combined with improvements in retention and conversion features will drive subscriber growth.

Speaker Change: We are highly focused on executing our long term growth strategy and we continue to make significant progress by leveraging our deep expertise in play.

Mark Segal: Now I will turn the call over to Mark.

Speaker Change: 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 drive long term growth and create shareholder value.

Mark Segal: Thank you Max and good morning.

Mark Segal: We are pleased to report our fourth quarter and 2024 financial results.

Mark Segal: We generated Q4 revenue of $649 1 million up 29, 1%, including revenue of $136 million from Millicent Doug.

Mark Segal: Now I will turn the call over to Mark.

Mark Segal: Thank you Max and good morning.

Mark Segal: Excluding the lesson Doug revenue for the quarter increased two 1% with increases in toys and digital games offsetting lower revenue from entertainment.

Mark Segal: We are pleased to report our fourth quarter and 2024 financial results.

Mark Segal: We generated Q4 revenue of $649 1 million up 29, 1%, including revenue of $136 million from Millicent.

Mark Segal: Adjusted EBITDA for Q4 was $117 9 million with a 17, 5% margin, including $49 million from Melissa Doug compared to 12, 9% last year.

Mark Segal: Excluding Melissa Doug revenue for the quarter increased two 1% with increases in toys and digital games offsetting lower revenue from entertainment.

Mark Segal: Adjusted EBITDA, excluding Melissa Doug was $73 million compared to $64 9 million last year.

Mark Segal: Adjusted EBITDA for Q4 was $113 9 million with a 17, 5% margin, including $49 million from Melissa dud compared to 12, 9% last year.

Mark Segal: Looking at our full year, we delivered as expected for both toys gross product sales in revenue, which was up 18, 8% to $2 $2 6 billion.

Mark Segal: Adjusted EBITDA, excluding Melissa Doug was $73 million compared to $64 9 million last year.

Mark Segal: The $2 2 billion revenue highlights our position as a larger more diversified organization with over $320 million of revenue with nearly 15% coming from digital games and entertainment.

Mark Segal: Looking at our full year, we delivered as expected for both toys gross product sales in revenue, which was up 18, 8% to 2.2 dollars 6 billion.

We are excited about the opportunities ahead as we build on this momentum and continue driving sustainable growth.

Mark Segal: The $2 2 billion revenue highlights our position as a larger more diversified organization with over $320 million of revenue with nearly 15% coming from digital games and entertainment.

Mark Segal: Melissa Doug revenue for 2024.

Mark Segal: First year of ownership was $374 7 million in line with expectations.

Mark Segal: We are excited about the opportunities ahead as we build on this momentum and continue driving sustainable growth.

Mark Segal: Excluding Melissa Doug 2020, full revenue was $1 89 billion.

Mark Segal: 90 basis points compared to 2023.

Mark Segal: Melissa Doug revenue for 2024.

Mark Segal: Closing toy revenue, both with and excluding Millicent, Doug was offset by declines in digital games and entertainment revenue compared to last year, which included the pulpit toll movie and other distribution revenue.

Mark Segal: First year of ownership was $374 7 million in line with expectations.

Mark Segal: Excluding Millicent Doug <unk>.

Mark Segal: 2024 revenue was $1 89 billion down 90 basis points compared to 2023.

Mark Segal: Adjusted EBITDA for 2024 was $463 6 million, including Melissa Doug.

Mark Segal: Gross enjoy revenue, both with and excluding Millicent, Doug was offset by declines in digital games and entertainment revenue compared to last year, which included the pulp patrol movie and other distribution revenue.

Mark Segal: Just under $45 million.

Mark Segal: Compared to $418 8 million.

Mark Segal: Adjusted EBITDA margin was 25% compared to a reported 2022%.

Mark Segal: Adjusted EBITDA for 2024 was $463 6 million, including Melissa dug up just under 45 million.

Mark Segal: As a reminder, 2023 adjusted EBITDA included the add back of the $15 6 million Paul.

Mark Segal: Compared to $418 8 million.

Mark Segal: <unk> patrol movie amortization.

Mark Segal: Adjusted EBITDA margin was 25% compared to a reported 20, 22%.

Mark Segal: On an apples to apples basis 2023, adjusted EBITDA margin was 21, 3% and as discussed before should be the basis of all year over year comparisons.

Mark Segal: As a reminder, 2023 adjusted EBITDA included the add back of the $15 6 million dollar Paw patrol movie amortization.

Mark Segal: 2024, adjusted EBITDA dollars and margins reflected both the weaker performance of digital games, especially in the earlier parts of 2024 and higher marketing spend in both spin Master toy and R&D late in Q4, which was not as effective at driving.

Mark Segal: On an apples to apples basis 2023, adjusted EBITDA margin was 21, 3% and as discussed before should be the basis of all year over year comparisons.

Mark Segal: Yes.

Mark Segal: 2024, adjusted EBITDA dollars and margins reflected both the weaker performance of digital games, especially in the earlier parts of 2024 and higher marketing spend in both the master toy and Imondi late in Q4, which was not as effective at driving increased.

Mark Segal: <unk> revenue as we had planned.

Mark Segal: Turning now to create a center performance.

Mark Segal: <unk> gross product sales in Q4 was up 31, 4%, including Melissa Duck, excluding Melissa Doug toy gross product sales grew by 1%.

Mark Segal: As we had planned.

Mark Segal: Melissa Doug delivered toy gross product sales of $152 6 million.

Mark Segal: Turning now to create a center performance.

Mark Segal: <unk> gross product sales in Q4 was up 31, 4%, including Melissa Duck, excluding Melissa Doug toy gross product sales grew by 1%.

Mark Segal: Contributing to the $176 4 million increase in our preschool infant and toddler dolls plush category.

Mark Segal: The other driver of growth was our activities games, <unk> puzzles, and doles and interactive category, which was up five 2%.

Mark Segal: Melissa Doug delivered toy gross product sales of $152 6 million.

Mark Segal: This was offset by slight declines in our Wilson action and outdoor segments.

Mark Segal: Contributing to the $176 4 million increase in our preschool infant and toddler plus category.

Mark Segal: Q4 choice adjusted EBITDA increased by $56 9 million to $76 2 million and an adjusted EBITDA margin of 13, 6% compared to four 7% as a result of the inclusion of Melissa Doug which is revenue more heavily weighted to the second half.

Mark Segal: The other driver of growth was our activities games, <unk> puzzles, and doles and interactive category, which was up five 2%.

Mark Segal: This was offset by slight declines in our wheels in action and outdoor segments.

Mark Segal: Q4 twice adjusted EBITDA increased by $56 9 million to $76 2 million and an adjusted EBITDA margin of 13, 6% compared to four 7% as a result of the inclusion of Melissa Doug which is revenue more heavily weighted to the second half.

Mark Segal: 2024 toy gross product sales increased by $444 million or just under 25%.

Mark Segal: Excluding two.

Speaker Change: <unk> 2020 for Melissa Doug Toy gross product sales of $233 million toy gross product sales grew by $11 million or 1%.

Mark Segal: 2024 toy gross product sales increased by $444 million with just under 25%.

Speaker Change: Please go infants and toddlers plush increased by 53, 6% to $1 1 billion from the inclusion of Melissa Doug and Ms. Rachel.

Mark Segal: Excluding <unk>.

Mark Segal: 2020 for Melissa Doug Toy gross product sales of $433 million toy gross product sales grew by $11 million or 1%.

Speaker Change: Firstly offset by Kevvy storehouse in full control.

Speaker Change: Activities games, <unk> puzzles, and doles and interactive increased by 21% to $710 5 million, mainly due to actuals Unicorn Academy, and Betsy, partially offset by the games and puzzles portfolio.

Mark Segal: Preschool infant and toddler and plush increased by 53, 6% to $1 1 billion from the inclusion of Melissa Doug and this Rachel.

Mark Segal: Firstly offset by Gabby storehouse impulse control.

Speaker Change: Wilson action decreased 11, 8% and outdoor was down 21, 7% for the year.

Activities games, <unk> puzzles, and doles and interactive increased by 21% to $710 5 million, mainly due to actuals Unicorn Academy and Betsy, partially offset by the games and puzzles portfolio wheels, and action decreased 11, 8% and outdoor was down 21.

Speaker Change: Full year sales allowances were 40 basis points lower at 13, 4% compared to 13, 8% in 2023.

Speaker Change: Due to fewer markdowns and a favorable customer mix.

Speaker Change: Our sales allowances rates remained slightly higher than our traditional range of 12% to 13% as we went through some acquired inventory from Melissa Doug and grew our European business.

Mark Segal: One 7% for the year.

Mark Segal: Full year sales allowances were 40 basis points lower at 13, 4% compared to 13, 8% in 2023.

Mark Segal: Due to fewer markdowns and a favorable customer mix.

Speaker Change: <unk> full year adjusted EBITDA increased just under 95 million to $306 8 million from the inclusion of Melissa Doug higher gross profit and lower administrative distribution and selling expenses.

Mark Segal: Our sales allowances rates remained slightly higher than our traditional range of 12% to 13% as we went through some acquired inventory from Melissa Doug and grew our European business.

Speaker Change: 2020 for toys adjusted EBITDA margin was 200 basis points up 15, 8% compared to 13, 8%.

Mark Segal: Toys full year adjusted EBITDA increased just under 95 million to $306 8 million from the inclusion of Melissa Doug higher gross profit and lower administrative distribution and selling expenses.

Speaker Change: Excluding Melissa Doug toys, adjusted EBIT margin was 14, 9% up 110 basis points from lower administrative selling and distribution expenses relative to toy revenue.

Mark Segal: 2020 for toys adjusted EBITDA margin was 200 basis points up at 15, 8% compared to 13, 8%.

Speaker Change: 2020 for adjusted EBITDA for Melissa and Doug was $74 1 million at a 19, 8% margin.

Mark Segal: Excluding Melissa Doug toys, adjusted EBITDA margin was 14, 9% up 110 basis points from lower administrative selling and distribution expenses relative to toy revenue.

Speaker Change: Melissa Doug was accretive to the toy segment from both the gross margin and adjusted EBITDA margin perspective.

Mark Segal: 2024, adjusted EBITDA full Melissa Doug was $74 1 million at a 19, 8% margin.

Speaker Change: Looking at Entertainment Q4 revenue decreased by $13 9 million to $41 3 million due to lower distribution revenue, resulting from fewer content deliveries.

Mark Segal: Melissa Doug was accretive to the toy segment from both the gross margin and adjusted EBITDA margin perspective.

Speaker Change: Positive mix impact of fewer content deliveries contributed to an increase in adjusted operating income of $9 8 million to $20 3 million with adjusted operating margin improving to 49, 2% from 19%.

Mark Segal: Looking at Entertainment Q4 revenue decreased by $13 9 million to $41 3 million due to lower distribution revenue, resulting from fewer content deliveries.

Speaker Change: 2020 for entertainment revenue declined by $31 5 million to $158 6 million, reflecting fewer content deliveries.

Mark Segal: The positive mix impact of fewer content deliveries contributed to an increase in adjusted operating income of $9 8 million to $20 3 million with adjusted operating margin improving to 49, 2% from 19%.

Speaker Change: As I mentioned 2023 included $15 6 million of revenue from the initial release of the second pole patrolled movie as well as Unicorn Academy deliveries.

Mark Segal: 2020 for entertainment revenue declined by $31 5 million to $158 6 million, reflecting fewer content deliveries.

Speaker Change: 2024, adjusted operating income Rose $9 6 million to $19 3 million compared to $80 7 million and adjusted operating margin improved to 56, 9% from 42, 5%.

Mark Segal: As I mentioned 2023 included $15 6 million of revenue from the initial release of the second pole patrol movie as well as Unicorn Academy deliveries.

Speaker Change: Turning to digital games Q4 revenue increased by $5 5 million or 13, 5% to $46 $1 million due to growth in subscription revenue. The cross picnic full control Academy and partnership revenue generated from various properties across toco, Boca and sago mini.

Mark Segal: 2024, adjusted operating income Rose $9 6 million to $90 3 million compared to $80 7 million and adjusted operating margin improved to 56, 9% from 42, 5%.

Mark Segal: Turning to digital games Q4 revenue increased by $5 5 million or 13, 5% to $46 1 billion due to growth in subscription revenue across picnic full patrol Academy and partnership revenue generated from various properties across toco, Boca and sago mini.

Speaker Change: We're pleased to see partnership revenue beginning to grow in our digital games business, reflecting the strength the strength of our strategic collaborations.

Speaker Change: We are excited about the revenue an increase of margin opportunities. These partnerships will generate.

Speaker Change: Digital games adjusted operating income remained relatively flat at $11 5 million, while adjusted operating margin was 24, 9% down from 26, 6% due to increased investments in paid user acquisition.

Mark Segal: We're pleased to see partnership revenue beginning to growing our digital games business, reflecting the strength the strength of our strategic collaborations.

Mark Segal: We are excited about the revenue an increase of margin opportunities. These partnerships will generate.

Speaker Change: Following a challenging Q3 toco Boca World performed significantly better in Q4, both sequentially and against Q4 2023 with improvements in downloads engagement and revenue.

Mark Segal: Digital games adjusted operating income remained relatively flat at $11 5 million, while adjusted operating margin was 24, 9% down from 26, 6% due to increased investments in paid user acquisition.

Speaker Change: Quaintly Toco Boca World revenue increased 22% Q4 compared to Q3.

Mark Segal: Following a challenging Q3 toco Boca World performed significantly better in Q4, both sequentially and against Q4 2023 with improvements in downloads engagement and revenue.

Speaker Change: This improvement is a direct result of the strategic actions implemented including targeted paid user acquisition and high monetization markets. The launch of new features designed to drive installs and a strong content pipeline that delivered revenue growth.

Mark Segal: Sequentially Toco Boca World revenue increased 22% Q4 compared to Q3.

Speaker Change: And picnic we saw a steady continuation in the growth of our subscriber base in Q4, reinforcing the value of the bundled offering.

This improvement is a direct result of the strategic actions implemented including targeted paid user acquisition and high monetization markets. The launch of new features designed to drive installs and a strong content pipeline that delivered revenue growth.

Speaker Change: Yes.

Speaker Change: The improved Q4 performance still resulted in a decline of $9 4 million in 2020 for revenue to $164 5 million, mostly due to lower in game revenue and toco Boca World earlier in the year.

Mark Segal: And picnic we saw a steady continuation in the growth of our subscriber base in Q4, reinforcing the value of the bundled offering.

Mark Segal: Yes.

Speaker Change: The revenue decline in Toco Boca World was partially offset by growth in subscription revenue from both picnic and poor ketamine.

Mark Segal: Improved Q4 performance still resulted in a decline of $9 4 million in 2020 for revenue to $164 5 million, mostly due to lower in game revenue and toco Boca World earlier in the year.

Speaker Change: Our ongoing transition of Standalone app subscribers into the picnic bundle has helped grow our margin accretive monthly recurring revenue.

Mark Segal: The revenue decline at Toco, Boca World was partially offset by growth in subscription revenue from both picnic and poor ketamine.

Speaker Change: 2024, adjusted operating income decreased by $18 2 million to $39 9 million from $58 1 million and adjusted operating margin decreased from 33, 4% to 24, 3% from the revenue decline and increased paid user acquisition costs.

Mark Segal: Our ongoing transition of Standalone app subscribers into the picnic bundle has helped grow our margin accretive monthly recurring revenue.

2024, adjusted operating income decreased by $18 2 million to $39 9 million from $58 1 million and adjusted operating margin decreased from 33, 4% to 24, 3% from the revenue decline and increased paid user acquisition costs.

Max Ranga: As a result of the structural changes in digital games that Max mentioned, we took impairments of $5 5 million on the Rubik's match intangible assets and $2 9 million for goodwill on the north like studio shutdown.

Max Ranga: Many of the resources working on Rubik's match will be reallocated to will can talk about kind of picnic. However, some north light employees were released resulting in restructuring charges.

Max Wrangle: As a result of the structural changes in digital games that Max mentioned, we took impairments of $5 5 million on the Rubik's match intangible asset and $2 9 million for goodwill on the north like studio shutdown.

Max Ranga: Moving back to our consolidated results Q4 gross profit increased by $103 5 million to $365 5 million from operational improvements in the toy segment and the inclusion of Melissa Duck.

Speaker Change: Many of the resources working on Rubik's match will be reallocated to our Kentucky Bugs and picnic. However, some north line employees were released resulting in restructuring charges.

Max Ranga: Gross margin increased 420 basis points to 56, 3% as a result of lower sales analysis as a percentage of toy gross product sales and U S entertainment content deliveries.

Speaker Change: Moving back to our consolidated results Q4 gross profit increased by $103 5 million to $365 5 million from operational improvements in the toy segment and the inclusion of Melissa Duck.

Max Ranga: 2024, gross profit increased $152 5 million to just under $1 2 billion and reported gross margin decreased by 190 basis points to 52, 6%.

Speaker Change: Gross margin increased 420 basis points to 56, 3% as a result of lower sales analysis as a percentage of toy gross product sales and U S entertainment content deliveries.

Max Ranga: However, this included charges of $66 million related to <unk> acquisition related inventory fair value adjustments.

Speaker Change: 2024, gross profit increased $152 5 million to just under $1 2 billion and reported gross margin decreased by 190 basis points to 52, 6%.

Max Ranga: Excluding the $66 million inventory fair value adjustment adjusted gross profit increased by $218 8 million to just over one 5 billion and adjusted gross margin was up 110 basis points to 55, 6% from 54, 5% a strong performer.

Speaker Change: However, this included charges of $66 million related to M. D acquisition related inventory fair value adjustments.

Speaker Change: Excluding the $66 million inventory fair value adjustment adjusted gross profit increased by $218 8 million to just over 1.25 billion and adjusted gross margin was up 110 basis points to 55, 6% from 54, 5% a strong.

Max Ranga: That's due to an increase in toys, partially offset by the decline in digital games.

Max Ranga: 2020 for full year, adjusted SG&A increased by $135 4 million to $861 8 million from the inclusion of Melissa Doug.

Performance due to an increase in toys, partially offset by the decline in digital games.

Max Ranga: However, adjusted SG&A as a percentage of revenue remained flat year over year at 38, 1%.

Speaker Change: Okay.

Speaker Change: 2020 for full year, adjusted SG&A increased by $135 4 million to $861 8 million from the inclusion of Melissa Doug.

Max Ranga: In 2024, we achieved $10 9 million in net cost synergies, which represents an annualized run rates of $14 million towards the target of $25 million to $30 million and run rate net cost net cost synergies by the end of 2026.

Speaker Change: However, adjusted SG&A as a percentage of revenue remained flat year over year at 38, 1%.

Speaker Change: In 2024, we achieved $10 9 million in net cost synergies, which represents an annualized run rates of $14 million towards the target of $25 million to $30 million and run rate net cost net cost synergies by the end of 2026.

Max Ranga: Regarding 2020 for tax we had a onetime tax expense of $8 1 million in Q4, resulting in an increase of six 8% in the final 2024 effective tax rate.

Max Ranga: The one time expense comprises adjustments for the tax impact of foreign currency translations and certain non deductible transaction costs related to the <unk> acquisition.

Speaker Change: Regarding 2020 for tax we had a onetime tax expense of $8 1 million in Q4, resulting in an increase of six 8% in the final 2024 effective tax rate.

Max Ranga: Our effective tax rate. Excluding this one time expense was 24, 4%.

Speaker Change: The one time expense comprises adjustments for the tax impact of foreign currency translations and certain non deductible transaction costs related to the <unk> acquisition.

Max Ranga: Turning to the balance sheet, we finished 2024 with inventory of $184 7 million at nine 4% sorry at 9% of toys revenue. This is higher than the traditional range of 5% to 7% driven by the relatively higher level of Melissa DUC inventory.

Speaker Change: Our effective tax rate. Excluding this one time expense was 24, 4%.

Speaker Change: Turning to the balance sheet, we finished 2024 with inventory of $184 7 million at nine 4% sorry at 9% of toys revenue. This is higher than the traditional range of 5% to 7% driven by the relatively higher level of Melissa DUC inventory.

Max Ranga: Melissa <unk> inventory declined $46 million to $67 million from $113 million at the beginning of 2024, excluding the fair market value adjustment.

Max Ranga: We are continuing to refine the Melissa <unk> inventory levels to improve and optimize working capital and free cash flow.

Speaker Change: Melissa <unk> inventory declined $46 million to $67 million from $113 million at the beginning of 2024, excluding the fair market value adjustment.

Max Ranga: In Q4, we generated $175 million in free cash flow, a very strong performance compared to 44 million in Q4 23.

Speaker Change: We are continuing to refine the Melissa <unk> inventory levels to improve and optimize working capital and free cash flow.

Max Ranga: For the full year, we generated just over $215 million in free cash flow compared to $123 million in 'twenty three.

Speaker Change: In Q4, we generated $175 million in free cash flow, a very strong performance compared to $44 million in Q4 23.

Max Ranga: We are reinvesting that free cash flow. According to the capital allocation priorities. We have described strengthening our balance sheet and returning cash to shareholders.

Speaker Change: For the full year, we generated just over $215 million in free cash flow compared to $123 million in 'twenty three.

Max Ranga: 2024th we returned a total of $82 million to shareholders $54 5 million through the buyback program and $27 5 million in dividends.

Speaker Change: We are reinvesting that free cash flow. According to the capital allocation priorities. We have described strengthening our balance sheet and returning cash to shareholders.

Max Ranga: We also reduced our borrowings by $135 million in.

Speaker Change: In 2024th we returned a total of $82 million to shareholders $54 5 million through the buyback program and $27 5 million in dividends.

Max Ranga: And ended the year with $390 million in debt.

Max Ranga: We have just under $234 million in cash on hand, which put our net debt to adjusted EBITDA ratio at <unk> seven times, including capitalized leases below our guide of nine tons.

Speaker Change: We also reduced our borrowings by $135 million.

Speaker Change: And ended the year with $319 million in debt.

Max Ranga: Let's now turn to our outlook for 2025.

Speaker Change: We have just under $234 million in cash on hand, which put our net debt to adjusted EBITDA ratio at <unk> seven times, including capitalized leases below our guide of <unk> nine times.

Max Ranga: Amongst the challenging macroeconomic environment spin master remains well positioned strategically financially and operationally.

Max Ranga: We also remain fully committed to continuing to execute our strategy for long term growth and shareholder value creation.

Speaker Change: Let's now turn to our outlook for 2025.

Max Ranga: 2025 outlook is on a consolidated basis, which will make year over year comparisons fast simpler.

Speaker Change: Amidst the challenging macroeconomic environment spin master remains well positioned strategically financially and operationally.

Max Ranga: We will no longer be breaking Melissa downs.

Speaker Change: We also remain fully committed to continuing to execute our strategy for long term growth and shareholder value creation.

Max Ranga: We expect 2025 consolidated toy GPS to increase 4% to 5% compared to 2024, driven by innovation and licensed portfolio growth with seasonality in the first half to be between 31% to 33%.

2025 outlook is on a consolidated basis, which will make year over year comparisons fast simpler.

Speaker Change: We will no longer be breaking Melissa downs.

Speaker Change: We expect 2025 consolidated toy GPS to increase 4% to 5% compared to 2024, driven by innovation and licensed portfolio growth with seasonality in the first half to be between 31% to 33%.

Max Ranga: We expect consolidated revenue to increase four 4% to 6% compared to 2024 fueled by growth in toy and digital games revenue.

Max Ranga: We have several key licenses and toy driving gross product sales and revenue growth, including choice for how to train your Dragon Superman and Gab install house movies as well as the relaunch of Dora the explorer and the first full year of Ms. Rachel.

Speaker Change: We expect consolidated revenue to increase four 4% to 6% compared to 2024 fueled by growth in toy and digital games revenue.

Max Ranga: The digital games team is focused on driving growth in total life world and picnic in 2025.

Speaker Change: We have several key licenses and toy driving gross product sales and revenue growth, including choice for the how to train your Dragon Superman and Gabby as Dalhouse movies as well as the relaunch of Dora the explorer and the first full year of Ms. Rachel.

Max Ranga: Picnic, we have an exciting content lineup and with continued improvements in retention and conversion features the inclusion of poor ketamine positions us to drive subscriber growth.

Speaker Change: The digital games team is focused on driving growth and telco life world and picnic in 2025.

Max Ranga: In entertainment, we expect to see a revenue decline of 2024 from lower content distribution revenue, which is in line with our expected content delivery cycle over the next five years.

Speaker Change: But picnic we have an exciting content lineup and with continued improvements in retention and conversion features the inclusion of <unk> positions us to drive subscriber growth.

Max Ranga: Entertainment revenue will grow in 'twenty six as we deliver the third pole movie and other new content.

Speaker Change: In entertainment, we expect to see a revenue decline of 2024 from lower content distribution revenue, which is in line with our expected content delivery cycle over the next five years.

Max Ranga: On a consolidated basis, we expect adjusted EBITDA margin of between 20% to 21% compared to 25% in 2024.

Speaker Change: Entertainment revenue will grow in 'twenty six as we deliver the third pole movie and other new content.

Max Ranga: Our guidance at this point excludes the anticipated impact of U S tariffs on imports from China and Mexico.

Speaker Change: On a consolidated basis, we expect adjusted EBITDA margin of between 20% to 21% compared to 25% in 2024.

Max Ranga: Given that the U S. China tariff situation is fluid we will update you at the end of April when we report Q1 results regarding our actions and the impact if any to our P&L.

Speaker Change: Our guidance at this point excludes the anticipated impact of U S tariffs on imports from China and Mexico.

Max Ranga: We are considering several mitigating factors, including leveraging our geographically diversified supply chain.

Speaker Change: Given that the U S. China tariff situation is fluid we will update you at the end of April when we report Q1 results regarding our actions and the impact if any to our P&L.

Speaker Change: Bob Devers domestic mix shifts and potentially pricing in.

Speaker Change: In parallel we're continuing to diversify our manufacturing footprint in order to reduce our toy volume originating from China from approximately 50% currency to less than 40% by 2027.

Speaker Change: We are considering several mitigating factors, including leveraging our geographically diversified supply chain.

Speaker Change: <unk> domestic mix shifts and potentially pricing in.

Speaker Change: Looking at some details for 2025, we expect depreciation and amortization to be approximately $132 million in 2025 of which around $90 million will hit Cogs.

Speaker Change: In parallel we're continuing to diversify our manufacturing footprint in order to reduce our toy volume originating from China from approximately 50% currency to less than 40% by 2027.

Speaker Change: Cash interest paid net of interest received will be between 22% and $25 $25 million.

Speaker Change: Looking at some details for 2025, we expect depreciation and amortization to be approximately $132 million in 2025 of which around $90 million will hit Cogs.

Speaker Change: With a borrowing rate of approximately five 5%.

Speaker Change: Our effective tax rate is.

Speaker Change: <unk> is expected to be approximately 25% to 26% on a consolidated basis.

Speaker Change: Cash interest paid net of interest received will be between 22% and $25 $25 million with a borrowing rate of approximately five 5%.

Speaker Change: Capital expenditures in 2025 are forecast to be approximately 8% to 9% of revenue up from 5% in 2024, as we continued to invest in creating new entertainment content and digital <unk> content as well as other corporate initiatives.

Speaker Change: Our effective tax rate.

Speaker Change: <unk> is expected to be approximately 25% to 26% on a consult.

Speaker Change: Isis.

Speaker Change: Capital expenditures in 2025 are forecast to be approximately 8% to 9% of revenue up from 5% in 2024, as we continued to invest in creating new entertainment content and digital <unk> content as well as other corporate initiatives.

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

Speaker Change: We are targeting to enter 2025 with a net debt to adjusted EBITDA ratio of approximately 0.6 times, including capitalized leases.

Speaker Change: Okay.

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

Speaker Change: To conclude we look forward to welcoming you to our Investor Day at New York Toy Fair and launch the fourth.

Speaker Change: We're targeting to end 2025, with a net debt to adjusted EBITDA ratio of approximately 0.6 times, including capitalized leases.

Speaker Change: You will then have the opportunity to see our innovative toy lineup in person and hear from Max and all the creative Center presidents.

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

Speaker Change: To conclude we look forward to welcoming you to our Investor Day at New York Toy Fair and launch the fourth.

Speaker Change: You will then have the opportunity to see our innovative toy lineup in person and hear from Max and all the creative Center President's.

Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session to ask a question. Thank you press the star followed by the number one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question you May press star followed by the number thank you.

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

Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session to ask a question. Thank you press the star followed by the number one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw. Your question you May press star followed by the number two thank you.

Speaker Change: Your first question comes from the line of Brian Morrison with TD Cowen. Please go ahead.

Speaker Change: Thank you good morning, Marc Good morning, Matt.

Speaker Change: Good morning, good morning.

Speaker Change: So I wanted to look at digital games here because of the decline year over year was really the shortfall from your guidance and in Q4.

Speaker Change: Your first question comes from the line of Brian Morrison with TD Cowen. Please go ahead.

Speaker Change: So that your investment sequentially starting to yield improvement as Max noted so I want to understand there's a few questions baked in here. So I want to understand these recent investment and initiatives paid user acquisition to talk about and I think you said retention and conversion youre targeting that techniques.

Speaker Change: Thank you good morning, Mark Good morning Max.

Speaker Change: Good morning, good morning.

Mark Segal: So I wanted to look at digital games here because of the decline year over year was really the shortfall from your guidance and in Q4.

Speaker Change: Just provide comfort in writing that ship or 2025, EBITDA growth from the 2024 decline and.

Mark Segal: So that your investment sequentially starting to yield improvement as Max noted so I want to understand there's a few questions baked in here. So I want to understand these recent investments in the initiatives paid user acquisition to talk about and I think you said retention and conversion youre targeting that picnic.

Speaker Change: You said you rolled out new features late in the year, but why was this not implemented earlier in 2024, and then lastly, I think you said rubik's was geared towards more adults.

Mark Segal: You just provide comfort in writing that ship or 2025 EBITDA growth from the 2024 a decline.

Speaker Change: Didn't hit the mark, but so as Kubrick, So why should we expect different results there.

Speaker Change: And then you said you rolled out new features late in the year, but why was this not implemented earlier in 2024, and then lastly, I think you said rubik's was geared towards more adult.

Mark Segal: So I'm going to basically start and so we'll give you more of a strategic context, and then I'll, let mark complement.

Brian Morrison: Brian any in Q3, we spoke about <unk> and the challenges we were facing and we basically were fixing already a few things which include some very structural and fundamental things, we're not just quarter four but for the future and that's what gives us confidence number one we.

Speaker Change: She didn't hit the mark, but so as Kubrick, So why should we expect different results there.

Mark Segal: So I'm going to basically start and so well give you more into strategic context, and then I'll, let mark complement.

Mark Segal: Brian in Q3, we spoke about it took our Boca and the challenges we were facing and we basically worked fixing already a few things which include some very structural and fundamental things, we're not just quarter four but for the future and Thats what gives us confidence number one.

Mark Segal: We have to basically address.

Mark Segal: Technology.

Mark Segal: And so we've been doing that which actually is helping us develop features which we hadn't done in some time faster.

Mark Segal: It's also enabling us to actually get the play value for the players in a way in which they would enjoy the game more which we have now have confidence because we've seen that response from the players number one number two.

Mark Segal: We have to basically address our technology right and so we've been doing that which actually is helping us develop features which we hadn't done some time faster.

Mark Segal: We've stood up and started to be more aggressive with live operations, which is so critical for this audience and is so critical for the future as well those are two really important investments that we began to make they didn't come earlier in the year, because we started to basically make those really in the summer. Okay. So that's basically that is the answer to your question on why.

Mark Segal: It's also enabling us to actually get the play value for the players in a way in which they would enjoy the game more which we have now have confidence because we've seen that response from the players number one number two.

Mark Segal: We stood up and started to be more aggressive with live operations, which is so critical for this audience and it's so critical for the future as well those are two really important investments that we began to make they didn't come earlier in the year, because we started to basically make those really in the summer. Okay. So that's basically that is the answer to your question on why.

Mark Segal: You do not come earlier than that.

Mark Segal: The good news is that not only has that helped us in Q4, but has given us momentum entering 2025 and we're confident.

Mark Segal: And the pace of feature development.

Mark Segal: The allowance of that feature to actually enabled collaborations is really going to help twenty-five beyond what we were able to accomplish in Q4.

Mark Segal: Did it not come earlier than that.

Mark Segal: The good news is that not only has that helped us in Q4, but it has given us momentum entering 2025 and we're confident.

Mark Segal: In terms of the paid user acquisition is really important because what we've actually now being able to do is address cohorts that actually help us increase our monetization and our monetization in this space is critical and is basically what we return or better.

Mark Segal: And the pace of feature development.

Mark Segal: The allowance of that feature Directionally enabled collaborations it's really going to help twenty-five beyond what we were able to accomplish in Q4.

Mark Segal: In terms of the paid user acquisition.

Mark Segal: Dollar and the investment we make and so this is also helping us along with live ops and technology have a better outlook for 2025, including all the features content and everything that we described in the script.

Mark Segal: Really important because what we've actually now being able to do is address cohorts that actually help us increase our monetization and our monetization in this space is critical and it's basically what would return or better.

Mark Segal: Turning to other games, what we basically realize use that.

Mark Segal: Dollar on the investment we make and so this is also helping us along with live ops and technology hub, a better outlook for 2025, including all the features content and everything that we described in the script.

Mark Segal: We have to focus on our core because our core has significantly more upside for us.

Mark Segal: And it was significantly more profitable and quite frankly for us to get and we try that's part of us being an innovative company and trying things and digital that happened to have been rubik's.

Mark Segal: Turning to other games, what we basically realize is that.

Mark Segal: We have to focus on our core because our core has significantly more upside for us.

Mark Segal: Quite frankly disappointed us to not be able to get the returns we were expecting and we pivoted to make sure we've doubled down on core <unk> and <unk>.

Mark Segal: And it was significantly more profitable and quite frankly for us to get and we try that's part of being an innovative company and trying things in digital that happened to have been rubik's.

Mark Segal: Picnic.

Mark Segal: The.

Mark Segal: Picnic focus is critical because it's monthly recurring revenue that is very profitable and has a higher LTV and helps us continue to fund not just dot ecosystem, but the entire digital games. So I hope that gives you.

Mark Segal: But quite frankly disappointed us to not be able to get the returns we were expecting and we pivoted to make sure we've doubled down on core <unk> and <unk>.

Mark Segal: Nick.

Mark Segal: <unk> I'm going to now turn it over to Mark.

Mark Segal: The picnic focus is critical because it's monthly recurring revenue that is very profitable and has a higher LTV and helps us continue to fund not just dot ecosystem, but the entire digital games. So I hope that gives you strategically I'm going to now turn it over to Mark.

Mark Segal: Yes, I think Max you answer that really well all see Brian if you have any follow up questions on that and then I'll take it.

Mark Segal: No I think that pretty.

Mark Segal: Pretty well covered by Max.

Mark Segal: So I guess my second question if I can.

Speaker Change: Yes, I think Max you answer that really well all see Brian if you have any follow up questions on that and then I'll take it.

Speaker Change: I heard what you said about your balance sheet target leverage Mark I think you said, you're going to engineer at <unk> six times.

Speaker Change: No I think thats.

Mark Segal: Pretty well covered by Max.

Evaluation is unfortunately at all time lows right now I think clearly had very strong free cash flow and that drove balance sheet strength and the year.

Speaker Change: So I guess my second question if I can.

Speaker Change: As I heard what you said about your <unk>.

Speaker Change: Why would you not be comfortable of saying one churn, which is where you were after the <unk> acquisition I know you have a small but the question really is are you willing to get more aggressive with your end CIBC here.

Speaker Change: Balance sheet target leverage Mark I think you said you're going to end the year at <unk> six times.

Speaker Change: Your valuation is unfortunately at all time lows right now I think clearly had very strong free cash flow and that drove balance sheet strength and the year.

Speaker Change: Well, Brian just if you look at our capital allocation in 2024.

Speaker Change: Why would you not be comfortable at saying, one churn, which is where you were after the <unk> acquisition I know you have a small but the question really is are you willing to get more aggressive with your N CIBC here.

Speaker Change: We actually returned about $82 million in total to shareholders.

Speaker Change: $54 $5 million of that came from the NCI be the buyback program.

Speaker Change: Well, Brian just even if you look at our capital allocation in 2024.

Speaker Change: That was about.

Speaker Change: Five five cents a share of accretion to EPS as a result of that.

Speaker Change: We actually returned about $82 million in total to shareholders.

Speaker Change: We pretty much maxed out on now on out of buyback in 2024.

Speaker Change: $54 $5 million of that came from the NCI be the buyback program.

Speaker Change: As you know.

Speaker Change: Yes.

Speaker Change: The buyback program works is that you get around a 10% of your public float.

Speaker Change: That was about five.

Speaker Change: 5% five cents a share of accretion to EPS as a result of that.

Speaker Change: And so we we largely bought what we said we were going to buy in in 2024 through that program.

Speaker Change: We pretty much maxed out now.

Speaker Change: A buyback in 2024.

Speaker Change: As you know.

Speaker Change: We also doubled our dividend and we paid $27 <unk> to.

Speaker Change: There's a the way the buyback program works is that you get around 10% of your public float.

Speaker Change: To shareholders. So we really have approached capital allocation I think on a balanced total return basis, we bought shares back we increased the dividend and we paid down debt.

Speaker Change: And so we we largely bought what we said we were going to buy in in 2024 through that program.

Speaker Change: We also doubled our dividend.

Speaker Change: And so I think I think we will continue with a more balanced approach and leaving some room as well for opportunistic M&A that we see emerging I think thats basically the way the board has approached us and what we'll continue to do for 2025.

Speaker Change: We paid $27 billion to shareholders. So we really have approached capital allocation I think on a balanced total return basis, we bought shares back we increased the dividend and we paid down debt.

Speaker Change: And so I think I think we will continue with a more balanced approach and leaving some room as well for opportunistic M&A that we see emerging I think thats basically the way the board has approached us and what we'll continue to do for 2025.

Speaker Change: We should expect you to utilize your NCI being full for 2025 and fair is a fair comment.

Speaker Change: Well look we haven't.

Speaker Change: The NCI be the buyback actually expires on March the third and we'll we'll make an announcement in due course, if the board approves a new in CIB for 'twenty, five 'twenty six but I will.

Speaker Change: So we should expect you to utilize your NCI being full for 2025 is it fair is it fair comment.

Speaker Change: Well look we haven't.

Speaker Change: That to be the case.

Speaker Change: The NCI be the buyback actually expires.

Speaker Change: So much.

In March the third and we'll we'll make an announcement in June course, if the board approves a new in CIB for 'twenty five 'twenty, six, but I will I expect that to be the case.

Speaker Change: And your next question comes from the line of Adam Shine with National Bank Financial. Please go ahead.

Adam Shine: Hi, Good morning, maybe a couple for you market that will pivot to Max just in terms of the guidance.

Speaker Change: Thank you very much.

Speaker Change: Entertainment, you said was going to be down maybe you could help us.

Adam Shine: And your next question comes from the line of Adam Shine with National Bank Financial. Please go ahead.

Speaker Change: Is the rate of decline is are we talking mid single digits are we talking about something a bit more than that because then if we pivot to digital games.

Adam Shine: Hi, Good morning, maybe a couple for you market that will pivot to Max just in terms of the guidance.

Speaker Change: Joe games.

Adam Shine: <unk>, you said was going to be down maybe you can help us.

Speaker Change: This would have to grow somewhere in the vicinity of 15% or more.

Adam Shine: Size the rate of decline is are we talking mid single digits are we talking about something a bit more than that because then if we pivot to digital games.

Mark Segal: Does that make sense mark.

Dan: Hey, Dan.

Speaker Change: After that I'll just go back to Max just with another question.

Adam Shine: Sure. Good morning, Adam So let me let me address your question in terms of the.

Adam Shine: Digital games.

Adam Shine: I guess would have to grow somewhere in the vicinity of 15% or more.

Adam Shine: Segmented elements of the 2025 guide as you know, we don't give specific guidance for each segment, but certainly we will give you some color to help you build your model output for 2025, and what I can say to you is directionally youre accurate.

Mark: Does that make sense mark.

Adam Shine: Dan.

Adam Shine: After that I'll just go back to Max just with another question.

Adam Shine: Sure. Good morning, Adam So let me let me address your question in terms of the segue.

Speaker Change: Segmented element of the 2025 got as you know, we don't give specific guidance for each segment, but certainly we'll give you some color to help you build your model outputs for 2025, and what I can say to you is directionally you're accurate like a mid single digit decline for instance.

Speaker Change: Mid single digit decline for entertainment.

Adam Shine: And in both revenue and EBIT.

Adam Shine: The reality is and Adam you know this very well from your entertainment knowledge is is that we're kind of.

Adam Shine: A bit of an inflection point in the cycle on entertainment, we're actually going to be investing in growing content in 2025, which is why you actually see capex as a percentage of sales pumping up as well because we are putting a fair bit of money into new content, which is going to kick off a new.

Adam Shine: Payment.

Adam Shine: In both revenue and and EBIT.

Adam Shine: <unk>.

Speaker Change: The reality is and Adam you know this very well from Youll Entertainment knowledge is is that we're kind of in a.

Speaker Change: But as an inflection point in the cycle on entertainment, we're actually going to be investing in growing content in 2025, which is why you actually see capex as a percentage of sales popping up as well because we're putting a fair bit of money into new content, which is going to kick off a new.

Adam Shine: <unk> four to five year cycle for the Entertainment segment as you know you cant look at entertainment on a quarterly or an annual basis, because the content delivery cycle is a lot longer than that and so in 2025, we would kind of ending with one cycle and then starting off again and new cycle, which.

Speaker Change: Q4 to five year cycle for the Entertainment segment as you know you cant look at entertainment on a quarterly or an annual basis, because the content delivery cycle is a lot longer than that and so in 2025, we would kind of ending with one cycle and then starting off again and new cycle, which is.

Adam Shine: Is going to drive growth in entertainment over the next four to five years, a 25% is a down year for entertainment digital games on the on the other hand, we see revenue going up as <unk> described very succinctly.

Adam Shine: We're doubling down on toco, Boca and on picnic and cycle, we see some partnership income growing in that area, which is margin accretive and exciting. So we have high hopes for digital games in 2025, and then on the toy side.

Speaker Change: Going to drive growth in entertainment over the next four to five years, but 25 is a is a down year for entertainment digital games on the on the other hand, we see revenue going up as Max described very succinctly.

Speaker Change: We're doubling down on on Toco, Boca and on picnic and say go we see some partnership income growing in that area, which is margin accretive and exciting. So we we have high expect since with digital games in 2025, and then on the toy side, we see gross product sales going up 45.

Adam Shine: We see gross product sales going up 45% driven by a very strong licensed product lineup in spin master as well as.

Adam Shine: International Melissa Doug sales, we've now building Melissa dug into al.

Adam Shine: International platform in Europe, and Australia, and Canada and Mexico.

Speaker Change: <unk> driven by a very strong licensed product lineup in spin master.

Adam Shine: And then Melissa Doug is also focused on growing the base through innovation and building the growing the existing core lines. So that gives you gives you I think a little bit of segmented color on the 25 got does that help them.

Speaker Change: As well as.

Speaker Change: International Melissa Doug sales, we now building Melissa dug into al.

Speaker Change: International platform in Europe, and Australia, and Canada and Mexico.

Speaker Change: Yes, thanks for that.

Speaker Change: Mark in terms of Max digital games.

Speaker Change: And then Melissa Doug is also focused on growing the base through innovation and building the growing the existing core line. So that gives you gives you I think a little bit of segmented colour on the 25 got does that help in them.

Speaker Change: Was.

Speaker Change: A big push obviously going back to your Investor day.

Speaker Change: Two years ago, and then of course, the objective of getting to <unk>.

Speaker Change: 20% of revenues.

Speaker Change: Thanks for that.

Speaker Change: I Wonder if you can just talk to that objective and weather.

Speaker Change: Mark.

Speaker Change: In terms of Max digital games.

Speaker Change: It's been pushed out.

Speaker Change: <unk>.

Speaker Change: Further time is at.

A big push obviously going back to your Investor day.

Speaker Change: Also a function of whether the M&A appetite remains.

Speaker Change: A couple of years ago, and then of course, the objective of getting to <unk>.

Speaker Change: In the space and I would also just add one other question.

Speaker Change: 30% of revenues.

Speaker Change: Wonder if you can just talk to that objective and whether.

Speaker Change: Round one of your peers.

Speaker Change: Recently noted that they were seeing some inflation.

Speaker Change: It's been pushed out.

Speaker Change: Further time is it.

Speaker Change: Both in terms of logistics and labor in the Q4 and into early 2025, and I was hoping if you could just speak to that in terms of how youre seeing things as well from your end.

Speaker Change: Also a function of whether the M&A appetite remains in the space and then I would also just add one other question.

Speaker Change: Just around one of your peers.

Speaker Change: Sure.

Speaker Change: Recently noted.

Speaker Change: That they were seeing some inflation.

Let me just address the last part of your question. So we can focus on the other one for US that's not the case.

Speaker Change: In terms of logistics and labor in the Q4 and into early 2025, and I was hoping if you could just speak to that in terms of how youre seeing things as well from your end.

Speaker Change: Labor and logistics inflation I think we're in a good place. So I just want to make sure. That's the answer to your question on the upfront.

Speaker Change: Turning to digital names, our ambition continues to be to basically get subscribers into picnic and we have high ambitions. So were not backing out of what we actually told you a couple of years ago, and we want to get towards 100 million users in our toco Boca ecosystem, we're not backing away from that and we will be absolutely willing to complement our ecosystems.

Speaker Change: Sure.

Speaker Change: Let me just address the last part of your question. So we can focus on the other one for US that's not the case on on labor and logistics inflation I think we're in a good place. So I just want to make sure. That's the answer to your question on that front okay.

Speaker Change: Turning to digital names, our ambition continues to be to basically get subscribers into picnic and we have high ambitions. So were not backing out of what we actually told you a couple of years ago, and we want to get to where it's 100 million users in our toco Boca ecosystem, we're not backing away from that and we will be absolutely willing to complement our ecosystem.

Speaker Change: Both docker, adding subscriptions with accretive M&A. So that is the short answer to your question and if you actually build the onion and want to go deeper I'm happy to them, we're going to do that when were with you next week, assuming youre joining us.

Speaker Change: But that's basically the answer.

Speaker Change: Okay. Thanks ill queue up again I appreciate it.

Speaker Change: Both in Dhaka, adding subscriptions with accretive M&A. So that is a short answer to your question.

Speaker Change: Okay.

Speaker Change: Okay.

Brian Morrison: Adam I just want to add one sorry, operator, just just one thing on the question you ask Max on 20% of revenue Adam If you recall and everyone that that was a target that we put in place prior to the Melissa Doug acquisition. So obviously that has to come down as a result of the <unk>.

Speaker Change: You actually build the onion and want to go deeper I'm happy to them, we're going to do that when were with you next week, assuming you are joining us.

Speaker Change: But that's basically the answer okay.

Speaker Change: Okay. Thanks ill queue up again I appreciate it.

Speaker Change: Okay.

And I might just add one sorry, operator, just just one thing on the question you ask Max on 20% of revenue Adam If you recall and everyone that that was a target that we put in place prior to the Melissa Doug acquisition. So so obviously that has to come down as a result of the increase.

Brian Morrison: <unk> in the toy based on the overall revenue just just to call that out so that we'll update that in due course.

Brian Morrison: Okay.

Speaker Change: And your next question comes from the line of Martin Landry with Stifel. Please go ahead.

Speaker Change: In the toy based on the overall revenue just just to call that out so that we'll update that in due course.

Martin Landry: Hi, good morning, guys.

Brian Morrison: I'd like to dig into your.

Speaker Change: Toys gross product sales guidance at Max you did.

Speaker Change: Thank you.

Speaker Change: And your next question comes from the line of Martin Landry with Stifel. Please go ahead.

Brian Morrison: <unk> two <unk>.

Speaker Change: <unk> being an important factor in 2025.

Martin Landry: Hi, good morning, guys.

Brian Morrison: Consumers so Ken.

Martin Landry: I'd like to dig into your.

Brian Morrison: Can you.

Speaker Change: Breakdown.

Speaker Change: Toys gross product sales guidance.

Speaker Change: Volume versus price for 2025 for Europe for your growth guidance, and then whats your average price point in toys, and 25% how does that compare to 24.

Max Wrangle: Max you did allude to value being an important factor in 2025.

Speaker Change: And consumers so can.

Speaker Change: Can you.

Speaker Change: Take down.

Martin Good morning.

Speaker Change: Sure.

Speaker Change: So the growth in GBS, that's built into our 25 guidance is driven by three key components.

Speaker Change: Volume versus price for 2025 for your for your growth guidance and then whats your average price point in toys, and 25, and how does that compare to 24.

Speaker Change: First and foremost we have an incredible slate of new theatrical.

Speaker Change: That is making up basically revenue increases over revenue that did not exist in 2024, and that's an important component.

Martin Landry: Martin Good morning.

Martin Landry: So the growth in GPS that's built into our 25 guidance is driven by three key components.

Speaker Change: Think about what that is.

Speaker Change: Two that are most important are basically how to train your dragons and Dora the explorer dose would have not have revenue in 24 to a brand new revenue building blocks in 2025.

Martin Landry: First and foremost we have an incredible slate of new theatrical <unk> that is making up basically revenue increases over revenue that did not exist in 2024, and that's an important component.

Speaker Change: There are other theatrical that are basically helping us and wanting Superman, which is an increase we didn't have any theatrical as NBC. In 2024, we'll have Superman and then we have the Gabby movie, which is coming in late Q3, Q4, which is going to help the <unk> franchise later in the year. So those are the main components of the red.

Martin Landry: Think about what that is.

Martin Landry: Two that are most important are basically how to train your dragons and Dora the explorer dose would have not have revenue in 24 to a brand new revenue building blocks in 2025.

Martin Landry: There are other theatrical that are basically helping us and wanting Superman, which is an increase we didn't have any theatrical in D. C. In 2024, we'll have Superman and then we have the Gabby movie, which is coming in late Q3, Q4, which is going to help the Gaby franchise later in the year. So those are the main components of the red.

Speaker Change: Building blocks of GPS in the guidance for the theatrical slate that we have.

Speaker Change: Separate from that we have the annual location of these.

Mark Segal: <unk> ratio, which was basically a really important building block in terms of growth and then last but not least and mark alluded to we have the expansion of loosening internationally dose or the bigger.

Martin Landry: Building blocks of GPS in the guidance for the theatrical slate that we have separate from that we have the annualized station of.

Volume slash.

Speaker Change: Revenue drivers and GPS that are capturing our guidance from a pricing perspective and getting into your question of how are we 25 versus 24 will likely going to end up with a lower average retail price of our entire portfolio.

Martin Landry: <unk> ratio, which is basically an really important building block in terms of growth and then last but not least and mark alluded to we have the expansion of loosing dark internationally dose or the bigger.

Martin Landry: Volume slash.

Speaker Change: <unk> versus 'twenty four it is driven by and he was part of the script, an intentional effort to get some of our core brands to offer really sharp price points and more value, including obviously the bigger brands like Paw patrol and then third and importantly is to make sure that we continue to.

Speaker Change: Revenue drivers in GPS that are capturing our guidance from a pricing perspective and getting into your question of how are we 25 versus 24 will likely going to end up with a lower average retail price of our entire portfolio.

Speaker Change: Five versus 24, it is driven by and he was part of the script, an intentional effort to get some of our core brands to offer really sharp price points and more value, including obviously the bigger brands like Paw patrol and then third and importantly is to make sure that we continue to.

Speaker Change: Spend the white space that it is for us the value channel and we actually began and grab share in the U S. In the value channel, but that is going to expand beyond the U S. More intentionally 25 into Europe and so those are the components that are capture.

Speaker Change: Span the white space that it is for us the value channel and we actually began and grab share in the U S. In the value channel, but that is going to expand beyond the U S. More intentionally 25 into Europe and so those are the components that are capture.

Speaker Change: In the GPS guidance and then answering your question specifically on pricing.

Speaker Change: Okay, that's helpful and.

Mark: Mark I was wondering if you could.

Mark Segal: Do a bridge for us of your EBITDA margin for 25% versus 24.

Speaker Change: In the GPS guidance and then answering your question specifically on pricing.

Speaker Change: Just so that we have the main buckets that.

Mark: That are at play here.

Speaker Change: Okay, that's helpful and.

Mark I was wondering if you could.

Well.

Mark: We're guiding flat Matson effectively I mean, we have given a range of 20% to 21%. If you take the midpoint of that range its flat.

Speaker Change: Do a bridge for us of your EBITDA margin for 25% versus 24.

Speaker Change: Just so that we have the main buckets.

Mark: Puts and takes going in both directions.

Speaker Change: That are at play here.

Mark: We continue to invest for growth.

Mark: We continue to manage our costs very very tight to your slide $24 23, SG&A was flat year over year on an adjusted basis.

Speaker Change: Well, we're guiding flat matson effectively I mean, we have given a range of 20% to 21%. If you take the midpoint of that range its flat.

Speaker Change: This puts and takes.

Mark: Excluding some one time.

Speaker Change: Going in both directions, we continue to invest for growth.

Mark: Onetime costs.

Mark: If you look at 25.

Mark: We do have some increased selling expenses because of the proportion of sales coming from licensed product.

Speaker Change: We continue to manage our costs very very tied to your slide 24 versus 23, SG&A was flat year over year on an adjusted basis.

Mark: We're going to we are going to increase paid user acquisition costs, but to drive monetization at Tucker and subscriptions and picnic were also going to invest in some technology to build out our integrated platform, particularly to bring Melissa Doug onto our systems, we're putting some money into.

Speaker Change: <unk> some one time.

Speaker Change: One time costs.

Speaker Change: If you look at 25.

Speaker Change: We do have some increased selling expenses because of the proportion of sales coming from licensed product.

Speaker Change: We are going to we are going to increase paid user acquisition costs, but to drive monetization at toga and subscriptions and picnic were also going to invest in some technology to build out our integrated platform, particularly to bring Melissa Doug onto our systems, we're putting some money into.

Mark: AI investments, both operational efficiency and generous of AI.

Mark: And we continue to invest in the line for innovation remember what.

Mark: Our product development in 2025 is effectively driving the 'twenty six 'twenty seven lines and so.

Speaker Change: AI investments, both operational efficiency and generous of AI.

Mark: I think balancing off our investments in growth.

Speaker Change: And we continue to invest in the line for innovation remember what our.

Mark: With a very tight focus on our cost structure and that's effectively why where we're landing.

Speaker Change: Our product development in 2025 is effectively driving the 'twenty six 'twenty seven lines and so.

Mark: Guiding approximately flat.

Speaker Change: Okay. Okay. That's helpful. I know youre guiding flat, but there is always puts and takes right. So I'm just trying to understand.

Speaker Change: I think balancing off our investments in growth.

Speaker Change: With a very tight focus on our cost structure and that's effectively why where we're landing up.

Speaker Change: Do you expect gross margin to increase to the trees do you expect your SG&A as a percentage of sales to be flat to be up just a little bit of color to help us just understand.

Speaker Change: Guiding approximately flat.

Speaker Change: Okay. That's helpful. I know youre guiding flat, but there is always puts and takes right. So I'm just trying to understand do.

Speaker Change: The evolution.

Speaker Change: Overall.

Martin Landry: Martin I would say to you the puts and takes that are giving you on the SG&A side will result in a slight increase in adjusted SG&A as a percentage of revenue and that will be offset by a slightly higher gross margin.

Speaker Change: Do you expect gross margin to increase to the trees do you expect your SG&A as a percentage of sales to be flat to be up just a little bit of color to help us out just to understand.

Speaker Change: The evolution.

Speaker Change: Overall.

Martin Landry: Martin I would say to you the puts and takes that have given you on the SG&A side will result in a slight increase in adjusted SG&A as a percentage of revenue and that'll be offset by a slightly higher gross margin.

Speaker Change: Perfect. Thank you best of luck.

Speaker Change: And your next question comes from the line of Jay Mcknight Mcreynolds with RBC. Please go ahead.

Speaker Change: Yeah. Thanks, Thanks, very much three four for me.

Okay.

Speaker Change: Maybe on just the olefin Doug performance in Q4, a little bit lower than certainly what we had penciled in and.

Speaker Change: Thank you best of luck.

And your next question comes from the line of Jay Mcknight Mcreynolds with RBC. Please go ahead.

Mark: Mark you've talked today, which is kind of the late nature of drop shipments in December and obviously.

Speaker Change: Yes.

Speaker Change: Thanks, very much three four for me.

Shorter.

Speaker Change: Shopping season, but can you just unpack.

Speaker Change: Maybe on just the olefin Doug performance in Q4, a little bit lower than certainly what we had penciled in and Maxim Marc you've talked to David just kind of the late nature of drop shipments in December and obviously.

Mark: What you learned on Melissa and Doug.

Mark: That you'd take forward given it was your first two for owning the asset.

Mark: And then on the housekeeping side, maybe for you Mark.

Speaker Change: A shorter.

Mark: The increase in Capex fully understand okay, well through that content investment is this a new normal as you kind of build for the next five year cycle. As you described door and army running kind of at that higher level for.

Speaker Change: Shopping season, but can you just unpack.

Speaker Change: What you learned on Milleson Doug.

Speaker Change: It take forward given it was your first Q4 owning the asset.

And then on the housekeeping side, maybe for you Mark just the increase in Capex fully understand.

Mark: A couple of years and then <unk>.

Mark: Second on housekeeping just the R&D.

Mark: Synergies what your.

Speaker Change: The flow through that content investment is this a new normal as you kind of build for the next five year cycle. As you described or an army running kind of at that higher level for a couple of years and then second on housekeeping just the F&B.

Mark: Expecting in terms of incremental.

Mark: Realization in 2025, thank you.

Mark: Okay.

Mark: Drew good morning on Monday. The story is as follows in Q4, following a really strong Q2 and Q3 in terms of both in GPS in our net sales and consumption October was really going well and then when the market began to actually go down remember in Q3, I mean you received.

Speaker Change: Energy is what you're.

Speaker Change: Expecting in terms of incremental.

Speaker Change: Realization in 2025, thank you.

Speaker Change: Okay.

Speaker Change: Drew good morning on M. N D. The story is as follows in Q4, following a really strong Q2 and Q3 in terms of both in GPS in our net sales and consumption October was really going well and then when the market began to actually go down remember in Q3, I mean your risk.

Mark: Public data so in Q4, only two weeks of the quarter increased so after black Friday bottom line every week was declining and there was a lot of managing by some retailers, who basically was shut down some skus.

Mark: To preserve their profitability.

Speaker Change: Public data so in Q4, only two weeks of the quarter increased so after black Friday bottom line every week was declining and there was a lot of panicking.

Mark: So that is what affected us the most single handedly.

Mark: And basically drove the performance as we get into Q1 and going forward, we have great programs to basically get back to what we actually saw in Q2 and Q3 in October.

Speaker Change: Some retailers, who basically was shut down some skus to preserve their profitability.

Mark: So drew just to get back to you on the two questions and just correct me if I Miss anything please but you asked around you asked about capex over the next few years.

Speaker Change: So that is what affected us the most single handedly.

Speaker Change: And basically drove the performance as we get into Q1 and going forward, we have great programs to basically get back to what we actually saw in Q2 and Q3 in October.

Mark: The 8% to 9% for 2025 is higher than our historical numbers of around 5% to 6% most of that is coming out of the.

Speaker Change: So drew just to get back to you on the two questions and just correct me if I Miss anything please but you lost around you asked about capex over the next few years.

Mark: I would say and newly created entertainment cycle that I described earlier to Adam's question.

Speaker Change: <unk>.

Speaker Change: The 8% to 9% for for 2025 is higher than our historical numbers of around 5% to 6% most of that is coming out of the.

Mark: So I think we will see some elevated capex for 'twenty, five and 'twenty six 'twenty seven.

Mark: Just keep in mind during that period, where actually.

Speaker Change: I would say.

Mark: We're actually building new content for both Paul.

Adam: Newly created entertainment cycle that I described earlier to Adam's question.

Mark: And rubble for Unicorn and four feet of event, but we're also doing the pole movie three for 2026, so youre going to see Capex for that in 'twenty, five and 26 as well as the Bakugan movie in 'twenty, five 'twenty six and 'twenty seven.

Adam: So I think we will see some elevated capex for 'twenty five 'twenty six 'twenty seven so just keep in mind during that period, where actually we.

We're actually building new content for both Paul and rubble for Unicorn and four feet of events, but we're also doing the pull movie three for 2026, so you're going to see capex for that in 'twenty, five and 26 as well as the Bakugan movie in 25, 26 and 27.

Mark: So you are going to see an elevated.

Mark: Sure.

Mark: Capex on entertainment content during that period as well as some incremental capex on a digital games as we build out.

Mark: Toco, Boca and expand that franchise, we do toco Boca days, we pulled out the the sago mini franchise and with picnic. So overall entertainment and digital games will be driving higher capex levels at least for the 25% to 2007 period toy both spin master and Melissa.

Adam: And so you are going to see an elevated.

Adam: Capex on entertainment content during that period as well as some incremental capex on a digital games as we build out.

Adam: <unk> Boca and expand that franchise, we do toco Boca days, we build out the the sago mini franchise and with picnic. So overall entertainment and digital games will be driving higher capex levels at least for the 25 to 27 period toy post spin Master and Melissa.

Mark: Doug will remain relatively constant at less than 1% of sales.

Mark: And then talking to <unk>, and then cost synergies overall related to the acquisition.

Speaker Change: We generated $10 9 million in 2024 and that equates to around $14 million on an annualized basis for 2025, we expecting around.

Adam: We will remain relatively constant at less than 1% of sales.

Adam: And then talking to M N D and then cost synergies overall related to the acquisition.

Mark: Cumulatively around $17 million to $18 million so.

Adam: We generated $10 $9 million in 2024 and that equates to around $14 million on an annualized basis for 2025, we expecting around.

Speaker Change: Incremental say seven.

Mark: Millions of dollars over the 2024 number and then.

We are well on our path to achieving the 25% to 30 run rate by the end of 2026. So I hope that helps does that answer your question yes.

Adam: Cumulatively around $17 million to $18 million so.

Mark: Yes, It does mark Thats, great. Thank you.

Adam: Incremental say seven.

Adam: Millions of dollars over the 2024 number and then.

Speaker Change: And your next question comes from the line of Jamie Katz with Morningstar. Please go ahead.

Adam: We are well on our path to achieving the 25 to 30 run rate by the end of 2026. So I hope that helps does that answer your question.

Jamie Katz: Hi, Good morning, I wanted to focus on gross margin again, I guess I was.

Speaker Change: Yes, It does mark that's great. Thank you.

Jamie Katz: You guys made it sound like gross margins will be incrementally higher this year and I'm wondering what's holding them back from getting back to maybe like closer to the 2022 and 2023 levels of it.

Adam: Okay.

Adam: And your next question comes from the line.

Adam: Jamie Katz with Morningstar. Please go ahead.

Adam: Hi, Good morning, I wanted to focus.

Jamie Katz: A function of evolving mix or is there something else that we should be thinking about.

Adam: On gross margin again, I guess I was.

Adam: You guys made it sound like gross margins will be incrementally higher this year and I'm wondering what's holding them back from getting back to maybe like closer to the 2022 and 2023 levels is it.

Jamie Katz: So Jamie thanks.

Jamie Katz: Gross margins are actually higher I think it's very important to just call out.

Jamie Katz: Adjustments to reported gross margin because of the inventory fair market value adjustment on the Melissa Doug acquisition. So.

Adam: Function of evolving mix or is there something else that we should be thinking about.

Jamie Katz: So Jamie thanks.

Jamie Katz: If you add that 66 million back which is a one time accounting adjustments, you'll you'll see that our gross margins were actually at 55, 6% for 2024 compared to 54, 5%. So a 110 basis points up year over year.

Jamie Katz: Gross margins are actually higher I think it's very important to just call out.

Jamie Katz: Adjustments to reported gross margin because of the inventory fair market value adjustment on the Melissa Doug acquisition. So.

Jamie Katz: If you if you add that 66 million back which is a one time accounting adjustments, you'll you'll see that's al gross margins were actually at 55, 6% for 2024 compared to 54, 5%. So a 110 basis points up year over year.

Jamie Katz: I'm sorry, I just didn't know if you were guiding for the adjusted or the non adjusted and then.

Jamie Katz: Yes, that's correct. We are because there is no fair market value adjustments in 25 now that's all gone so we'll be in a normalized situation in 'twenty five and we will be comping against the adjusted gross margin from 2024, and we expect gross margins to be slightly up.

Speaker Change: Okay, I'm, sorry, I just didn't know if he were guiding for the adjusted or the non adjusted and then.

Jamie Katz: Sure.

Jamie Katz: Yes, that's correct. We are because there is no fair market value adjustments in 25 now that's all gone so we'll be in a in a normalized situation in 'twenty five and we will be comping against the adjusted gross margin from 2024, and we expect gross margins to be slightly up.

Jamie Katz: And then can you.

Jamie Katz: Maybe if the remaining lift from an increase in Melissa and Doug distribution that you have that you think you have left I guess as you move to a more global footprint for the brand I think that would be helpful to know what has been achieved already and maybe what is the remaining even if it's just flat.

Speaker Change: Perfect and then can you.

Jamie Katz: Size maybe.

Speaker Change: The remaining lift from an increase in Melissa and Doug distribution that you have that you think you have left I guess as you move to a more global footprint for the brand I think that would be helpful to know what has been achieved already and maybe what is the remaining even if it's just sort of a percentage of.

Jamie Katz: Percentage of progress.

Yes, as I say to you Jamie we're not going to give specific <unk> guidance any more but.

Jamie Katz: But what I can tell you is that historically.

Jamie Katz: Melissa Doug was vastly a U S business less than 10% of the sales came out of international markets and in 2024, we did actually get some international growth very small in Canada, and Mexico, We just got going.

Jamie Katz: Progress.

Jamie Katz: Yes, as I say to you Jamie we're not going to give specific <unk> guidance any more.

Jamie Katz: But what I can tell you is that historically.

Speaker Change: Melissa Doug was Vasty, a U S business less than 10% of the sales came out of international markets and in 2024, we did actually get some international growth very small in Canada, and Mexico, We just got going.

Jamie Katz: In those markets in 2025 were actually for the second half of the year. Our international team is picking up the entire European and Australian markets. So we expect to see some.

Jamie Katz: It would be meaningful growth in the international.

Sales area for Melissa Doug in late 'twenty, five and then accelerating into 'twenty six and beyond.

Speaker Change: In those markets in 2025 were actually for the second half of the year. Our international team is picking up the entire European and Australian markets. So we expect to see some meaningful growth needs national.

Jamie Katz: Very helpful. Thank you.

Speaker Change: Your next question comes from the line of Luke Hannan with Canaccord Genuity. Please go ahead.

Speaker Change: Sales area for Melissa Doug in late 'twenty, five and then accelerating in 2006 and beyond.

Luke Hannan: Good morning, everyone I wanted to ask.

Luke Hannan: Apologies, if it's been asked already but I wanted to ask the retail inventory to finish the year and maybe the progression. Thus far into 2025, I know you mentioned mark that corporate inventory I believe it was 9% of sales you guys target of 5% to 7%, but where do things stand from a retail inventory perspective.

Speaker Change: That's really helpful. Thank you.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Luke Hannan with Canaccord Genuity. Please go ahead.

Speaker Change: Yes. Thanks, good morning, everyone I wanted to ask.

Speaker Change: <unk>, if it's been asked already but I wanted to ask the retail inventory to finish the year and maybe the progression. Thus far into 2025, I know you mentioned mark that corporate inventory I believe it was 9% of sales you guys target, 5% to 7%, but where do things stand from a retail inventory perspective.

Speaker Change: So I think retail inventories finished in a relatively good place Luke and good morning.

Speaker Change: For your U S inventory was down <unk> inventory at retail was down 5% year over year.

Speaker Change: Compared to the industry yet.

Speaker Change: So I think retail inventories finished in a relatively good place Luke and good morning.

Speaker Change: 1% down and actually very similar results for four global retail inventories as well. So we were actually down 5% for the year compared to around 1% down. So I think we're in good shape. We're in good shape, both at retail and also on inventory we made some really good <unk>.

Speaker Change: For the your U S inventory was down our U S inventory at retail was down 5% year over year.

Speaker Change: Compared to the industry yet.

Speaker Change: 1% down and actually very similar results for four global retail inventories as well. So we were actually down 5% for the year compared to around 1% down. So I think we're in good shape. We're in good shape, both at retail and also on inventory we made some really good head.

Speaker Change: Wei <unk>.

You saw from my prepared remarks on bringing.

Speaker Change: Melissa DUC inventory down so they came down from about 140 million to $67 million.

Speaker Change: <unk>.

Speaker Change: Spin Master inventory was relatively flat, maybe a little bit but in very good shape in good quality inventory as well.

Speaker Change: Way.

Speaker Change: As you saw from my prepared remarks on bringing Miller.

Speaker Change: Melissa DUC inventory down so they came down from about 140 million to $67 million.

Speaker Change: Okay understood. Thank you and then I wanted to follow up on the Rubik's match discussion as well I think I heard you say that the resources that you had a rubik's match some of them are reallocated internally to be working on toco, Boca and and a picnic as well. So maybe just a clarification on that then are those resources.

Speaker Change: And.

Speaker Change: Spin Master inventory was relatively flat, maybe a little bit.

Speaker Change: But in very good shape in good quality inventory as well.

Speaker Change: Okay I understood. Thank you and then I wanted to follow up on the Rubik's match discussion as well I think I heard you say that the.

Speaker Change: Let's say there are allocated to the toco Boca team are there separate teams within toco Boca one that would be focusing on introducing our focusing on live services or some of the new content or features for telco World and then others that would be focused on talking days or are those two separate teams I guess I'm trying to figure out because we've talked a lot on this call. So far about took a world I don't know if we have necessarily.

Speaker Change: The resources that you had a rubik's match some of them are reallocated internally to be working on toco Boca.

Speaker Change: And our picnic as well so maybe just a clarification on that then are those resources. If let's say there are allocated to the toco Boca team are there separate teams within toco Boca one that would be focusing on introducing our focusing on live services or some of the new content or features for telco World and then others that would be focused on took it as or are those.

Speaker Change: <unk> talked about today is how that's performing and maybe what the growth plans are for 2025, but maybe that's a nice.

Speaker Change: Absolutely.

Speaker Change: Good morning.

Speaker Change: Two separate teams I guess I'm trying to figure out because we've talked a lot on this call. So far about took a world I don't know if we've necessarily talked about took a days how that's performing and maybe what the growth plans are for 2025, but maybe that's a nice segue into that.

Speaker Change: The folks that we brought along from Norway to actually help to OCA.

Speaker Change: Actually people, who are engineers and so it's really more for technology.

Speaker Change: And those are the primary resources, we were able to bring along and are helping with our tech debt that we basically have alluded to and as part of our investment.

Speaker Change: Absolutely.

Speaker Change: Good morning.

Speaker Change: The folks that we brought along from Norway to actually help silica where actually people who are engineers and so it's really more for technology.

Speaker Change: And so and it's basically across both Tokio life World and took a days.

Speaker Change: So that is basically the resource allocation choices, we made and so far that's actually helped us.

Speaker Change: And those are the primary resources, we were able to bring along and are helping with our tech debt that we basically have alluded to and as part of our investment.

Speaker Change: And with regards to talk of days, we are continuing to work with our property to make sure as we expanded in the back half of this year. It is actually meeting the kpis that we need for that property to meet so that's the plan.

Speaker Change: And so and it's basically across both took a life world and took a days. So that is basically the resource allocation choices, we made and so far that's actually helped us.

Speaker Change: How much.

Speaker Change: And with regards to talk of days, we are continuing to work without a property to make sure as we expanded in the <unk>.

David Mccartney: Your next question comes from the line of David Mccartney.

Speaker Change: Cormack Securities. Please go ahead.

Speaker Change: Back half of this year. It is actually meeting the kpis that we need for that property to meet so that's the plan.

David Mccartney: Oh, yes. Thank you a couple of questions for you.

David Mccartney: You said that top off Charles on Pls decline and the wildcard around clients on fibrosis.

Speaker Change: Okay. Thank you very much.

Speaker Change: Your next question comes from the line of David Mccarthy with.

David Mccartney: If you could give us any specifics on that in the amount of the decline in a chronic <unk> process.

Speaker Change: Cormack Securities. Please go ahead.

Speaker Change: Oh, yes. Thank you.

David Mccartney: Hi, David So basically the property decline as we expected recall in 'twenty three we had the movie year.

Speaker Change: A couple of questions.

Speaker Change: So you said that top off Charles on Pls decline and the wildcard around client of ours.

David Mccartney: And so this is basically a decline that we saw as we expected the Pos with decline.

Speaker Change: If you could give us any specifics on that in the amount of the decline on a percentage basis.

David Mccartney: So that is what we have in store and as we actually go into 2025, we have a number of things that we're actually bringing back in terms of the the themes.

Speaker Change: Okay.

Speaker Change: Hi, David So basically the property decline as we expected recall in 'twenty three we had the movie year.

David Mccartney: We have holiday specials, we have a number of things to once again get back on.

Speaker Change: And so this is basically a decline that we saw as we expected the Pos with decline and so that is what we have in store and as we actually go into 2025, we have a number of things that we're actually bringing back in terms of the the themes.

David Mccartney: Getting our Pos to remain where it is remember we're in the 11th season answer where else also dealing with the cyclical nature of a property. That's basically beat every yard, but we're confident with their content slate and the support rehab for the property that we actually have a plan that bridges us to the 2006 period, which is again a movie year.

Speaker Change: We have holiday specials, we have a number of things to once again get back on.

Getting our Pos to remain where it is remember we're on the 11th season answer worlds also dealing with the cyclical nature of a property that's basically beat every yard.

David Mccartney: There are a number of other things that the team has done really nicely for 25%, including the innovation and the quality and then very importantly price points to make sure that we are able to meet customers where they are shopping these days.

Speaker Change: We're confident with their content slate and the support we have for the property that we actually have a plan that bridges us to the 26 period, which is again a movie year.

David Mccartney: Okay.

Speaker Change: There are a number of other things that the team has done really nicely for 2005, including the innovation and the toy quality and then very importantly price points to make sure that we are able to meet customers where they are shopping these days.

David Mccartney: And then a question on the guidance.

David Mccartney: If I look at the low end.

David Mccartney: Guidance range, sometimes on EBITA seem to imply that.

David Mccartney: The business saw a decline.

David Mccartney: Generate the cost savings, you're expecting incremental cost savings you're expecting from my first dog in that we're giving them.

Speaker Change: Okay.

Speaker Change: And then a question on the guidance.

Speaker Change: If I look at the low end.

David Mccartney: Now I'll turn the law and I think Alan triangle is that a fair characterization.

Speaker Change: <unk>, sometimes on EBITDA, it would seem to imply that.

Speaker Change: The business overall would be flat.

David Mccartney: So David the way the way I would characterize the guidance range is that.

Speaker Change: Generate the cost savings, you're expecting incremental cost savings you're expecting from Muslim dog in that we're giving them.

David Mccartney: Take the midpoint of the range that we would kind of be the.

David Mccartney: Target points, but.

Speaker Change: Now I'll turn the law and the accounting change was that a fair characterization.

David Mccartney: Implicitly because of the uncertainty around.

Speaker Change: Okay.

Speaker Change: So David the way the way I would characterize the guidance range is that.

David Mccartney: Tariffs and and we've kind of guided to buzzard downside and upside so when it comes to tariffs. We haven't we haven't articulated a specific impact yet we waiting to Q1 to do that as we figure things out on a number of supply chain and pricing fronts, but our target is to remain neutral.

Speaker Change: Obviously, you take the midpoint of the range that we would kind of be the.

Speaker Change: Target points, but.

Speaker Change: Implicitly because of the uncertainty around.

Speaker Change: Tariffs and and we've kind of guided to buzzard downside and upside so when it comes to tariffs. We haven't we haven't articulated a specific impact yet we waiting to Q1 to do that as we figure things out on a number of supply chain and pricing fronts, but our target is to remain neutral.

David Mccartney: With tariffs, but there might be some downside and and so we want to actually presents a range.

David Mccartney: To help you position your.

David Mccartney: As you actually build your model out and that was the rationale for that.

Speaker Change: With tariffs, but there might be some downside and and so we want to actually presents a range.

David Mccartney: Okay and then just.

David Mccartney: When I look at the sales allowance in the fourth quarter.

Speaker Change: To help you position your.

Down quite a bit I was just saying what was driving that was that primarily.

Speaker Change: Yeah.

David Mccartney: On the platform <unk> kind of on the best effects or some other factors.

Speaker Change: As you actually build your model out and that was the rationale for that.

David Mccartney: No it actually wasn't specifically <unk>.

Speaker Change: Okay and then just.

What I can tell you is that to 2023 sales allowance Q4 2023 was extremely high for was 19 something percent was the highest we've ever seen in the fourth quarter in 2023, and we brought that down significantly in Q4, 2004% to 15%.

Speaker Change: When I look at the sales allowance in the fourth quarter.

Speaker Change: Around quite a bit I was just saying what was driving that was that primarily the.

Speaker Change: Impact from MB coming on the vessel snacks or some other factors.

Speaker Change: No it actually wasn't specifically M D.

Speaker Change: What I can tell you is that 2023 sales allowance Q4 2023 was extremely high it was 19 something percent who is the highest we've ever seen in the fourth quarter in 2023, and we brought that down significantly in Q4 of 2004% to 15%.

David Mccartney: That was from lower markdowns and less promotions and so I think we've managed our sales analysis really well on a year over year basis, but one is the one of the issues that we had in terms of.

David Mccartney: Much to our consensus EBITDA number was that we didn't bring it down we didn't bring sales allowances down as much as we actually hoped. So if you looked at our guidance for 2024, we guided to a range of <unk>.

Speaker Change: That was from lower markdowns and less promotions and so I think we've managed our sales announces really well on a year over year basis, but one is the one of the issues that we had in terms of.

David Mccartney: 12%, 13% at the top end, we actually landed at 13, 4%. So even though we were lower year over year, we actually missed on a number in relation to our guidance and then 40 basis points was around $8 million to $10 million and that was one of the reasons why we actually.

Speaker Change: The Miss to our consensus EBITDA number was that we didn't bring it down we didn't bring sales allowances down as much as we actually hoped. So if you looked at our guidance for 2024, we guided to a range of 12% to 13% at the top end, we actually landed at 13, 4%, so even though we will.

David Mccartney: Missed on our EBITDA number for 2024.

Speaker Change: Lower year over year, we actually missed on a member in relation to our guidance and that 40 basis points was around $8 million to $10 million and that was one of the reasons why we actually missed on our EBITDA number for 2024.

Speaker Change: Okay alright, thank you.

Speaker Change: Thank you. Our next question comes from the line of <unk> with Jefferies. Please go ahead.

Speaker Change: Good morning, everyone and you mentioned in the prepared remarks that the global customer consumer excuse me.

Speaker Change: Okay alright, thank you.

Speaker Change: It's kind of one of the biggest heading into 2020 I just kind of curious what you have been seeing.

Speaker Change: And your next question comes from the line of Kylie Kofu with Jefferies. Please go ahead.

Speaker Change: First market promotions anything else you can kind of lag about what youre seeing now.

Kylie Kofu: Hey, there good morning, everyone and you mentioned in the prepared remarks that the global customer consumer TB.

Speaker Change: Highly youre breaking up.

Speaker Change: <unk>, but we didn't hear your question well can you please repeat it.

Kylie Kofu: It's kind of one of the biggest variable heading into 2020 I just kind of curious what you have been seeing seems to be less responsive to promotions anything else you can kind of flag.

Speaker Change: Yes.

Kylie Kofu: What youre seeing now.

Kylie Kofu: Kylie Youre breaking up we apologize, but we didn't hear your question well can you please repeat it.

Speaker Change: Hi, Kelly, if you're still there would you mind repeating the question didn't come through clearly on our end.

Kylie Kofu: Yeah.

Kylie Kofu: Okay.

Speaker Change: Sorry can you guys hear me now.

Speaker Change: That's better. Thank you okay, yes, sorry about that I was just wondering a little bit on the global consumer.

Kylie Kofu: Okay.

Speaker Change: Hi, Kelly, if you're still there would you mind repeating the question didn't come through clearly on our end.

Speaker Change: Health that youre seeing it seems like there might be less responsiveness promos.

Speaker Change: Just kind of flat that would be helpful.

Kelly: Oh, sorry can you guys hear me now.

Speaker Change: Yeah.

Kelly: That's better. Thank you okay, yes, sorry about that I was just wondering a little bit on the global consumer and the health that youre seeing it seems like there might be less responsiveness promos anythings kind of flagged that would be helpful.

Speaker Change: So I think the consumer was really price sensitive and and deal seeking in the fourth quarter and when a lot of those deals dropped in October people flocked to those deals the promotion depth was actually.

Kelly: Yeah.

Speaker Change: Wider than we would have seen.

Kelly: So I think the consumer was really price sensitive and and deal seeking in the fourth quarter and when a lot of those deals dropped in October people flocked to those deals the promotion depth was actually <unk>.

Speaker Change: And that basically prevented them from going back and buying more later in the quarter, which prevented the replenishment typically we expect.

Speaker Change: So we expect that that continues in 2025 and have adjusted our programs Accordingly.

Kelly: Wider than we would have seen.

Kelly: And that basically prevented them from going back and buying more later in the quarter, which prevented the replenishment that typically we expect so.

Speaker Change: Okay Super helpful and then.

Speaker Change: One I.

Speaker Change: I'm wondering if you could take and give a little bit of color around the margins you can expect for each segment. Obviously I know you don't give it specifically, but just directionally.

Kelly: So we expect that that continues in 2025 and have adjusted our programs Accordingly.

Speaker Change: Similar to the revenue would be helpful. Thank you.

Speaker Change: Gotcha Super helpful and then last one.

Speaker Change: Wondering if you could take and give a little bit of color around the margins you'd expect for each segment. Obviously I know you don't give it specifically, but just directionally.

Speaker Change: Okay Kelly again.

Kelly: I'll give you some color.

Kelly: I think in the toy space.

Kelly: We expect margins to be up over 2024.

Speaker Change: Kind of similar to the revenue would be helpful. Thank you.

Kelly: <unk>.

Kelly: Spin Master and Melissa Doug.

Okay Kelly again.

Kelly: Its attainment will be down.

Speaker Change: I'll give you some color.

Kelly: For the reasons I described earlier and in digital games revenue will be up in EBITDA.

Speaker Change: But I think in the toy space.

Speaker Change: We expect margins to be up over 2024.

Kelly: EBITDA will be flat to down.

Speaker Change: In spin Master and Melissa Doug I think entertainment.

Kelly: Basically depending on the amount of paid user acquisition that we actually spent so we have the ability and digital games two to manage our paid user acquisition spend very tightly and in real time.

Speaker Change: We will be down.

Speaker Change: For the reasons I described earlier and in digital games revenue will be up in EBITDA.

Speaker Change: EBITDA will be flat to down.

Kelly: Based on what's actually happening in based on what Al Al return on investment ratios are looking like so I would I would model digital games.

Depending on the amount of paid user acquisition that we actually spent so we have the ability and digital games to two two.

Kelly: Around flat at this point toy App digital games flatten entertainment down.

Speaker Change: Manage our paid user acquisition spend very tightly and in real time.

Speaker Change: Based on what's actually happened and then based on what Al Al return on investment ratios are looking like so I would I would model digital games.

Kelly: Super helpful. Thank you.

Speaker Change: I think operator, we're at time now so I think we're going to we're going to wrap up at this point that just wanted to thank everybody for for the call today and for your continued interest and we really look forward to seeing you at New York Toy Fair. It's the first time, it's been back in its full form since pre Covid days, and I think youre going to.

Speaker Change: Round flat at this point toy App digital games flatten entertainment down.

Speaker Change: Okay.

Speaker Change: Super helpful. Thank you.

Speaker Change: I think operator, we're at time now so I think we're going to we're going to wrap up at this point that just wanted to thank everybody for for the call today and for your continued interest and we really look forward to seeing you at New York Toy Fair. It's the first time, it's been back in its full form since pre Covid days, and I think youre going to.

Speaker Change: Enjoyed the energy you can enjoy the line and we're looking forward to hosting you. So we will see you then thank you very much everyone.

Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.

Speaker Change: Enjoy the energy you can enjoy the line and we're looking forward to hosting you. So we will see you then thank you very much everyone.

Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.

Speaker Change: Okay.