Q1 2025 Spin Master Corp Earnings Call

Good morning, ladies and gentlemen, and welcome to the Spin Master Corp. First quarter 2025 results conference call. At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you required when you do the assistance. Please press star zero for the operator this call is being recorded.

Operator: Good morning, ladies and gentlemen, and welcome to the Spin Master Corp first quarter 2025 results conference. At this time, all lines are in a 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 for the operator.

Operator: This call is being recorded on Thursday, May 1st, 2025.

Speaker Change: On Thursday May 1st 2025, I would now like turn the conference over to Sofia is circus.

Sophia Bisoukis: I would now like to turn the conference over to Sophia Bisoukis. Please go ahead. Thank you, Joelle.

Go ahead.

Speaker Change: Thank you you are welcome to spin master's.

Sophia Bisoukis: Welcome to Spin Master's financial results conference call for the first quarter of 2025. I'm joined this morning by Max Rangel, Spin Master's global president and CEO, and Mark Segal, Spin Master's chief financial officer.

Speaker Change: Results Conference call for the first quarter of 2025 I'm joined this morning by that's 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 consolidated financial statements are available on the Investor Relations section of our website at spin Master data.

Sophia Bisoukis: For your convenience, the press release, MD&A, and consolidated financial statements are available on the investor relations section of our website at spinmaster.com and on Cedar Plus.

Speaker Change: Com and on SEDAR.

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.

Sophia Bisoukis: 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, level of activity, performance, goals or achievements, and any other future events or developments. Forward-looking statements are based on currently available information and assumptions that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such assumptions will prove to be correct, and many factors could cause actual results to differ materially from those expected or implied by the forward-looking statement. As a result, you are cautioned not to place undue reliance on these forward-looking statements.

Speaker Change: Forward looking statements are based on currently available information and assumptions that management believes are appropriate and reasonable in the circumstances.

Speaker Change: However, there can be no assurance that such assumptions will prove to be correct and many factors could cause actual results to differ materially from those expected or implied by the forward looking statements. As a result, you are cautioned not to place undue reliance on these forward looking statements for additional information on these assumptions and risks. Please consult the cautionary statements regarding.

Sophia Bisoukis: For additional information on these assumptions and risks, please consult the cautionary statements regarding forward-looking information in our earnings release dated April 30, 2025. Accept, as may be required by law, Spin Master disclaims any intention to update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

Speaker Change: Forward looking information in our earnings release dated April 30th 2025, except.

Speaker Change: Except as may be required by law spin master disclaims any intention to update or revise any forward looking statements, whether because of new information future events or otherwise. Please note that spin master reports in U S dollars and all other amounts to date are expressed in U S currency unless otherwise noted I would now like to turn the conference call over to Mike.

Sophia Bisoukis: Please note that Spin Master reports in U.S. dollars and all other amounts today are expressed in U.S. currency unless otherwise noted.

Max Rangel: I would now like to turn the conference call over to Max. Good morning, and thanks for joining us. We had a solid start to 2025. And thanks to the efforts of our teams, we drove an increase in total revenue while also delivering increased profitability in the quarter. Our performance reflects the power of our three creative center approach and global appeal of our toy brands, entertainment content, and digital play experiences. We are pleased with our revenue performance from TOYS. Toy gross product sales increased just under 19%, demonstrating our team's commitment to innovation, the expansion of license partnerships, team's commitment to continue momentum of our core brands, including Liz and Doug, which grew year over year.

Speaker Change: Okay.

Mike: Good morning, and thanks for joining us we had a solid start to 2025 and thanks to the efforts of our teams we drove an increase in total revenue while also delivering increased profitability in the quarter.

Mike: Our performance reflects the power of our three creative center approach and global appeal of our toy brands Entertainment content and digital play experiences.

Mike: We are pleased with our revenue performance from toys.

Mike: So a growth spurt of sales increased just under 19% demonstrating our team's commitment to innovation expansion of licensed partnerships team's commitment to continued momentum of our core brands, including leasing dog, which grew year over year.

Mike: Total global theatrical releases for which we have licensed products began to drive revenue in Q1, Superman and how to train your Dragon began shipping and Jurassic World and garbage Dalhouse will ship later this year.

Max Rangel: Several global theatrical releases for which we have licensed products began to drive revenue. In Q1, Superman and How to Train Your Dragon began shipping, and Jurassic World and Gabi's Dollhouse will ship later this year. From a POS perspective, Spin Master's POS was down 6.4% per cercana. In comparison, the industry's POS was up 1.1%. It is important to note that the majority of the industry's growth was driven by adult-targeted building sets, strategic trading cards, and sports trading cards, categories in which Spin Master does not compete. We capture market share in many of the categories we play in, including vehicles, plush, dolls, and infant-toddler preschool.

Mike: From a Pos perspective spin master's P. O S was down six 4% Berkshire County in comparison, the industry was up one 1%.

Mike: It is important to note that the majority of the industry's growth was driven by adult targeted building sets strategic trading cards and sports trading cards categories in which spin master does not compete.

Mike: We capture market share in many of the categories, we play in including vehicles plush dolls and infant toddler preschool in fact, we retained our leadership.

Max Rangel: In fact, we retained our leadership position in the infant-toddler preschool category thanks to the combination of our strong owned NIP license, including Paw Patrol, Liz and Doug, Miss Rachel, and Gabby's Dollhouse.

Mike: Turning to infant daughter preschool category. Thanks to the combination of our strong owned and IP license, including Paw patrol listen dog, Ms, Rachel and goggles dollhouse.

Max Rangel: Let me now address the issue regarding our toy business that I am sure is on everyone's minds, U.S. tariffs on China and other countries. The timing, extent, and enforcement of the potential tariffs on goods entering the U.S. remains very fluid, and we continue to monitor trade policy developments closely.

Mike: Let me now address the issue regarding our toy business that I am sure is on everyone's minds U S tariffs on China I know their countries.

Mike: The timing extent in enforcement of the potential terrorism goods entering the U S remains very fluid and we continue to monitor trade policy developments closely the.

Max Rangel: The industry is working hard to get the message across, which is, very simply put, Save Santa's Supply Chain.

Mike: The industry is working hard to get the message across which is very simply put say.

Mike: Save Santos supply chain, given these complexities and uncertainty related to the implementation of global tariffs, we are withdrawing our 2025 guidance.

Max Rangel: Given these complexities and uncertainty related to the implementation of global tariffs, we are withdrawing our 2025 guidance. Now let me tell you what we are doing to mitigate the impacts of tariffs based on what is within our control. Our actions break down into four primary buckets, procurement, supply chain, pricing, and cost management. Regarding procurement, over the past decade, we have built a diversified global toy supply chain. Since the imposition of tariffs, we have aggressively sought to move more production for the U.S. market out of China for the second half of 2025, primarily by increasing production in Vietnam.

Now let me tell you what we are doing to mitigate the impacts of tariffs based on what is within our control.

Mike: Our actions breakdown into four primary buckets procurement supply chain pricing and cost management.

Mike: Guarding procurement over the past decade, we haven't built a diversified global toy supply chain.

Mike: He is the imposition of tariffs we have aggressively sought to move more production for the U S market out of China for the second half of 2025, primarily by increasing production in Vietnam.

Max Rangel: as well as India, Mexico, and Indonesia. This puts us in a much stronger position than many others in the industry. China source production for 25 will where possible be focused on non US markets. Our major theatrical releases this year are, for the most part, coming in from outside of China. We have been operating in Vietnam for close to 10 years, Mexico, eight years, India, seven years. And as you can tell, we're far more established across these markets and with more capacity than most of our competitors, which represents a potential opportunity for us. From a supply chain perspective, we are actively looking at managing our inventory levels globally by moving non-tariff inventory from Canada, Mexico, and Europe to meet U.S.

Mike: As well as India, Mexico and Indonesia.

Mike: Puts us in a much stronger position than many others in the industry.

Mike: China source production for 25 will where possible be focused on non U S markets.

Mike: Our major theatrical releases this year are for the most part.

Mike: How many from outside of China, we have been upgrading in Vietnam for close to 10 years, Mexico eight years, India seven years and as you can tell we're far more established across these markets and with more capacity than most of our competitors, which represents a potential opportunity for us.

Mike: Yeah.

Mike: From a supply chain perspective, we are actively looking at managing our inventory levels globally by moving non tariff inventory from Canada, Mexico, and Europe to meet U S. Demand. We are also looking at different shipping methodologies to minimize the impact of the terrorists on retailers and ultimately consumers.

Max Rangel: demand. We are also looking at different shipping methodologies to minimize the impact of the tariffs on retailers and ultimately consumers.

Max Rangel: I want to thank our global procurement, supply chain, and IT teams who have been working tirelessly to make this happen. These actions aim to preserve margins where possible, protect and potentially grow the company's market share, and meet consumer demand. And while we are able to leverage manufacturing from other regions in our global supply chain footprint, many companies cannot. We expect that there could be gaps in inventory availability in the fall, and these gaps might create opportunities for us. Now, despite these mitigation efforts, there will still be a negative impact to profitability. Neither we nor our retail partners will be able to fully absorb the higher tariff costs.

Mike: I want to thank our global procurement supply chain and I T teams, who have been working tirelessly to make this happen.

Mike: These actions aimed to preserve margins, where possible protect and potentially grow the company's market share and meet consumer demand.

Mike: While we are able to leverage manufacturing from other regions in our global supply chain footprint. Many of those companies cannot we expect that there could be gaps and inventory availability in the fall and these gaps might create opportunities for us now. Despite this mitigation efforts there will still be a negative impact to profitability.

Mike: Neither we nor our retail partners will be able to fully absorb the higher tariff costs cost increases cannot be upset that cannot be upset will result in higher prices to our customers and will likely be passed on to the end consumers in the U S. We are currently in discussions with retailers regarding price increases.

Max Rangel: Cost increases that cannot be offset will result in higher prices to our customers and will likely be passed on to the end consumers in the US. We are currently in discussions with retailers regarding price increases, and we remain focused on maintaining price competitiveness and delivering strong value propositions across our portfolio, with particular emphasis on lower price Now, regardless of the level of the price increase, we need to aggressively manage costs. We are seeking to manage profitability and liquidity through cost takeout and cap as reduction to protect profitability margins and cashflow.

Mike: He says and we remain focused on maintaining price competitiveness and delivering strong value propositions across our portfolio with particular emphasis on lower price points now regardless of the level of the price increase we need to aggressively manage costs, we are seeking to manage profitability and liquidity through cost stake.

Mike: And cap as reduction to protect profitability margins and cash flow and Mark will comment on this more specifically later.

Max Rangel: And Mark will comment on this more specifically later.

Max Rangel: Within entertainment, we are continuing to develop our third PAW Patrol movie, which will launch in theaters in July 26, as well as new seasons for both PAW Patrol and Rebel and Crew. We are excited to begin showing seasons one and two of PAW Patrol on Netflix in the U.S. for the first time, and it starts in July.

Within entertainment, we are continuing to develop our third perpetual movie, which will launch in theaters in July 26, as well as new seasons for both Paw patrol and rolling through.

Mike: We're excited to begin showing seasons, one and two of Paw patrol on Netflix in the U S.

Mike: The first time and he starts in July.

Max Rangel: Turning to Unicorn Academy, we continue to expand the linear distribution and just dropped the first of two specials planned for 2025. On April 5th on Netflix, which once again, it's entered the top 10 kids show in many markets.

Mike: Turning to Unicorn Academy, we continue to expand the linear distribution and just dropped the first of two specials planned for 2025 on April 5th on Netflix, which once again ex entered the top 10 could show in many markets.

Mike: We spoke to you in February about our strategy in digital games to refocus on toco, Boca and Big Nic in 2025.

Max Rangel: We spoke to you in February about our strategy in digital games to refocus on Toca Boca and Picnic in 2025. That strategic focus and investment has begun to deliver results as we recorded the highest revenue for digital games in the past eight quarters. Within Toca Boca World, our new features and new content are built upon our new and evolving live services tech stack, which is allowing us to release at a faster pace and rapidly testing what resonates with our global player community. We are extremely pleased with some of the metrics that we're seeing, including higher average revenue per paying user.

Mike: The strategic focus and investment has begun to deliver results as we recorded the highest revenue for digital games in the past eight quarters.

Mike: Within took a book our world our new features and new content are built upon our new and evolving life services Tech stock, which is allowing us to reveal at a faster pace and rapidly testing what resonates with our global player community.

Mike: Extremely pleased with some of the metrics that we're seeing including higher average revenue per paying user.

Max Rangel: Within Picnic, we have expanded the app bundle offering to include PAW Patrol Academy, providing even greater value. We have seen solid cost per acquisition metrics from PAW Academy, showing demand for our branded IP.

Mike: Within picnic we have expanded the bundle offering to include Paw patrol Academy, providing even greater value. We have seen solid cost per acquisition metrics from poor academy showing demand for our Brian that IP.

Max Rangel: We remain committed to delivering on our own purpose of creating magical play experiences for kids and families around the world. Our ability to innovate and to broaden our portfolio, supported by our geographic footprint, talented team, and strong financial position, gives us confidence that we can continue to deliver long-term growth and shareholder value.

Mike: We remain committed to delivering on our own purpose of creating magical play experiences for kids and families around the world our ability to innovate and to broaden our portfolio supported by our geographic footprint talented team and strong financial position.

Mike: It gives us confidence that we can continue to deliver long term growth and shareholder value.

Max Rangel: Before I turn it over to Mark, I want to take a moment to recognize his significant contribution to Spin Master. as he looks forward to his retirement as CFO. This will be Mark's final earnings goal, and I want to thank him for helping us grow, expand and mature to the leadership position we hold today. Mark has helped Spin Master build a strong foundation. financial platform that provides us with the stability to weather crisis, such as the one before us, and provides Spin Master with the financial and operational flexibility we need.

Mark Segal: Before I before I turn it over to Mark I wanted to take a moment to recognize the significant contributions of spin master.

Mark Segal: As he looks forward to his retirement.

Speaker Change: CFO. These will be March final earnings call and I want to thank him for helping us grow expand and mature through the leadership position we hold today.

Mark Segal: Mark ourselves to be mastered builds a strong foundation.

Mark Segal: Financial platform that provides us with stability to weather a crisis such as the one before us and provides a measure with the financial and operational flexibility we need.

Max Rangel: On behalf of our founders, our board, and our executive leadership team, thank you, Mark.

Mark Segal: Half of our founders our board and our executive leadership team.

Mark Segal: Thank you Mark.

Max Rangel: I also want to welcome Jonathan Reuter, who will be joining us in mid-May as our new CFO. Jonathan brings a wealth of experience in finance operational leadership, M&A, and capital markets. He has a deep understanding of the consumer packaged goods industry and has a proven track record of supporting the expansion and growth of mid-sized companies.

Mark Segal: I also want to welcome Jonathan Reuter will be joining us in mid may as our new CFO, Jonathan brings a wealth of experience in finance and finance operational leadership, M&A and capital markets. He has deep understanding of the consumer packaged goods industry.

Mark Segal: And has a proven track record of supporting the expansion and growth of mid sized companies.

Mark Segal: You will have an opportunity to meet Jonathan in the coming weeks and with that I will now turn it over to Mark. Thank you, Max, and good morning, everyone. I'm going to discuss the quarter briefly and then add to the topic of tariffs, which is weighing heavily on everyone's minds. Looking back, we're pleased to report a strong start to the year with our Q1 performance reflecting solid execution across our three creative centers in what is typically our seasonally lowest quarter. We generated $359 million in revenue, an increase of 13.6% and adjusted EBITDA of 21.6 million, up 3 million year-over-year.

Mark Segal: You will have an opportunity to meet Jonathan in the coming weeks and with that I will now turn it over to Mark.

Mark Segal: Thank you Max and good morning, everyone.

Mark Segal: I'm going to discuss the quarter briefly and then add to the topic of tariffs, which is weighing heavily on everyone's minds.

Mark Segal: Looking back we are pleased to report a strong start to the with our Q1 performance, reflecting solid execution across our three creative centers in what is typically our seasonally lowest quarter.

Mark Segal: We generated $359 million in revenue an increase of 13, 6% and adjusted EBITDA of $21 6 million up 3 million year over year.

Mark Segal: We continue to focus on delivering shareholder value by investing in our business paying down debt and returning capital to shareholders through our buyback program and dividends.

Mark Segal: We continue to focus on delivering shareholder value by investing in our business, paying down debt, and returning capital to shareholders through our buyback program and dividends.

Mark Segal: I will now turn to the financial performance of each creative center.

Mark Segal: I will now turn to the financial performance of each creative centre. Toy Gross Product Sales in Q1 will up almost $50 million, or 18.8% year-over-year, driven by innovation, growth in our licensed portfolio, and medicine. Several key licenses contributed to the growth, including shipments for the How to Train Your Dragon and Superman movies, along with Miss Rachel. Sales allowances for Q1 were 12.9% compared to 14.5%, reflecting lower markdowns and promotional activity. The result was toy revenue of $273.7 million, a 20.9% increase, which translated to Toys Adjusted EBITDA loss improving by $12 million to $20.5 million. Toys Adjusted EBITDA margin was negative 7.5% compared to negative 14.4% due to operating leverage from higher toy revenue.

Mark Segal: Toy gross product sales in Q1 were up almost $50 million or 18, 8% year over year, driven by innovation growth and our licensed portfolio and Melissa and Doug <unk>.

Mark Segal: Several key licenses contribute to the growth, including shipments for the how to train your Dragon and Superman movies, along with MS. Rachel.

Mark Segal: Sales allowances for Q1, with 12, 9% compared to 14, 5%, reflecting lower markdowns and promotional activity.

Mark Segal: The result was toy revenue of $273 7, million% to 29% increase which translated to toys adjusted EBITDA loss, improving by 12 million to $20 5 million.

Mark Segal: Toys adjusted EBITDA margin was negative seven 5% compared to negative 14, 4% due to operating leverage from higher <unk> revenue.

Mark Segal: Entertainment revenue decreased by $6 million or 13, 7% to $37 8 million due to lower distribution revenue from the pulp control series and movie.

Mark Segal: Entertainment revenue decreased by $6 million, or 13.7%, to $37.8 million, due to lower distribution revenue from the Paw Patrol series and movies. Entertainment Adjusted Operating Income declined by $3 million to $26.1 million, but Adjusted Operating Margin increased to 69% from 66% as a result of lower amortization of production costs and lower marketing expense. Digital games revenue increased by $1.8 million or 3.9% to $47.8 million, driven by increased in-game purchases in Toca Boca World and growth in subscriptions across Picnic and Paw Patrol Academy. The initiatives we outlined at URN to enhance our ability to capitalize on strong player acquisition trends are delivering as expected.

Mark Segal: Entertainment adjusted operating income declined by 3 million to $26 1 million, but adjusted operating margin increased to 69% from 66% as a result of lower amortization of production costs and lower marketing expenses.

Mark Segal: Digital games revenue increased by $1 8 million or three 9% to $47 8 million driven by increased in game purchases and toco Boca world and growth in subscriptions across picnic and pulp code Academy.

Mark Segal: The initiatives, we outlined at year end to enhance our ability to capitalize on strong player acquisition trends are delivering as expected.

Mark Segal: Toka Boka ended Q1 with $58 million now, up 6% compared to the same quarter last year. In PICNIC, we saw a steady continuation in the growth of our subscriber base and we ended Q1 with approximately 488,000 subscribers, up over 13% compared to 430,000 at Q1 2024 and 455,000 at the end of 2024. Digital Games' adjusted operating income declined by $5.7 million. Margin decreased from 33% to 19.9%, primarily from investments in paid user acquisition.

Mark Segal: So kabaka ended Q1, with 58 million MAU up 6% compared to the same quarter last year in.

Mark Segal: In picnic we saw a steady continuation in the growth of our subscriber base and we ended Q1 with approximately 488000 subscribers up over 13% compared to 430000 at Q1 2024 and 455000 at the end of 2024.

Mark Segal: Digital games adjusted operating income declined by $5 7 million margin decreased from 33% to 19, 9% primarily from investments in paid user acquisition.

Mark Segal: Moving back to our consolidated results adjusted gross profit increased by $17 8 million to $194 9 billion driven by higher toy gross product sales and revenue.

Mark Segal: Moving back to our consolidated results. Adjusted gross profit increased by $17.8 million to $194.9 million, driven by higher toy gross product sales and revenue. Adjusted gross margin this quarter decreased by 180 basis points to 54.2% due to the higher proportion of gross profit contributed from the toy segment. adjusted SG&A increased by $12.5 million to $186.1 million. adjusted SG&A's percentage of revenue declined by 310 basis points to 51.8% from operating leverage. We realized $6.5 million in total net cost synergies for Melissa and Doug, bringing our total annualized net cost synergies to $21.6 million against our target of $25 to $30 million in run rate net cost synergies by the end of 2026.

Mark Segal: Adjusted gross margin this quarter decreased by 180 basis points to 54, 2% due to the higher proportion of gross profit contributed from the toy segment.

Mark Segal: Adjusted SG&A increased by $12 5 million to $186 1 million.

Mark Segal: Adjusted SG&A as a percentage of revenue declined by 310 basis points to 51, 8% from operating leverage.

Mark Segal: We realized $6 5 million in total net net cost synergies for Melissa Doug.

Mark Segal: Bringing our total annualized net cost synergies to $21 $6 million against our target of $25 million to $30 million in run rate net cost synergies by the end of 2026.

Mark Segal: Turning to the balance sheet, we ended Q1 with inventory of $180 million.

Mark Segal: Turning to the balance sheet, we ended Q1 with an inventory of $180 million. Given the recently announced tariffs, our inventory level positions us well in the near term as retailers look to replenish stock heading into the second half of 2025. We ended Q1 with $153 million in cash. In Q1, we returned a total of $30 million to shareholders, $21 million through the buyback program, and $9 million in dividends. We also reduced our borrowings by $30 million and ended Q1 with approximately $360 million in net debt and a leverage ratio of 0.8 times, including leases. The combined cash balance and credit facility availability gives us over $500 million of liquidity.

Mark Segal: Given the recently announced tariffs inventory level positions us well in the near term as retailers look to replenish stock hitting into the second half of 2025.

Mark Segal: We ended Q1 with $153 million in cash in Q1, we returned a total of $30 million to shareholders $21 million through the buyback program and $9 million in dividends.

Mark Segal: We also reduced our borrowings by 30 million and ended Q1 with approximately $360 million and net debt and a leverage ratio of <unk> eight times, including leases.

Mark Segal: The combined cash.

Mark Segal: Our cash balance and credit facility availability gives us over $500 million of liquidity.

Mark Segal: The defensiveness of our balance sheet and the installation provided by our strong cash generation gives us a high level of confidence as we navigate these uncertain times.

Mark Segal: The defensiveness of our balance sheet and the insulation provided by our strong cash generation gives us a high level of confidence as we navigate these uncertain times. As we work through various scenarios related to tariffs, our balance sheet strength, coupled with our global footprint and geographically diverse manufacturing and retail partnerships, positions us to be more agile and resilient than many of our competitors.

Mark Segal: As we work through various scenarios related to tariffs our balance sheet strength, coupled with our global footprint and geographically diverse manufacturing and retail partnerships positions us to be more agile and resilient than many of our competitors.

Mark Segal: Regarding tariffs the timing extent in enforcement of tariffs remains fluid as Max described which introduces meaningful uncertainty.

Mark Segal: Regarding tariffs, the timing, extent, and enforcement of tariffs remains fluid, as Max described, which introduces meaningful uncertainty to the remainder of 2025, and which makes forward-looking projections very challenging.

Mark Segal: The remainder of 2025, and which makes forward looking projections very challenging.

Mark Segal: As a result, we are withdrawing our 2025 outlook previously provided on February 24th, 2025. Let me add a few points to the commentary Max provided earlier. Please note that this data is included in the supplemental deck that we have posted to the investor relations section of our website. Our toy segment represents approximately 85% of our total revenue, of which approximately 50% is from the U.S. and 50% from non-U.S. markets. The remaining 15% of our total revenue comes from our entertainment and digital games segment. We want to continue to accelerate the growth of this non-toy part of our business.

Mark Segal: As a result, we are withdrawing our 2025 outlook previously provided on February 24 2025.

Mark Segal: Let me add a few points to the commentary <unk> provided earlier.

Mark Segal: Please note that this data is included in the supplemental deck that we have posted to the Investor Relations section of our website.

Mark Segal: Our choice segment represents approximately 85% of our total revenue of which approximately 50% just from the U S and 30% from non U S markets.

Mark Segal: The remaining 15% of our total revenue comes from our entertainment and digital games segments, we want to continue to accelerate the growth of this non toy part of our business.

Mark Segal: Taking this revenue breakdown into accounts. This means that approximately 57, 5% of spin master's total revenue is not subject to tariffs.

Mark Segal: Taking this revenue breakdown into account, this means that approximately 57.5% of Spin Master's total revenue is not subject to tariffs and, in the case of entertainment and digital games, does not have a physical supply chain at all. This geographic and segment diversification continues to provide revenue and margin protection against global trade pressures on the U.S. toy market. of the approximately 42.5% of our total revenue that is represented by the U.S. market. Approximately 55% of our blended total Spin Master and Melissa & Doug toy production is sourced from China, and 45% from outside of China. When you do the math, this implies that approximately 27.5% of our toy cogs is subject to the 145% tariff.

Mark Segal: And in the case of entertainment and digital games does not have a physical supply chain at all.

Mark Segal: This geographic and segment diversification continues to provide revenue and margin protection against global trade pressures on the U S toy market.

Mark Segal: Of the approximately 42, 5% of our total revenue that is represented by the U S market.

Mark Segal: Approximately 35% of our blended total spin master and Melissa dog toy production is sourced from China, and 45% from outside of China.

Mark Segal: When you do the math this implies that approximately 27, 5% about toy Cogs is subject to the 145% tariff.

Mark Segal: Toys not produced in China are currently sourced from Vietnam, India, Mexico, Indonesia, and the European Union, representing 22, 5% of our toy Cogs, and which is subject to a tariff of 10% presently.

Mark Segal: Toys not produced in China are currently sourced from Vietnam, India, Mexico, Indonesia, and the European Union, representing 22.5% of our toy cogs, and which is subject to a tariff of 10% present. By the end of 2025, our target is to produce approximately 70% of toys for the U.S. market from outside of China. By the end of 2026, we are targeting to have 75 to 80 percent of toys for the U.S. market produced outside of China. This will be a major accomplishment and underscores the strength of our supply network and the agility of our global procurement and supply chain team.

Mark Segal: By the end of 2025, our target is to produce approximately 70% of toys for the U S market from outside of China.

Mark Segal: By the end of 2026, we are targeting to have 75% to 80% of toys for the U S market produced outside of China.

Mark Segal: This will be a major accomplishment and underscores the strength of our supply network and the agility of our global procurement and supply chain teams.

Speaker Change: We are executing against the four strategies that <unk> described to mitigate the impact of the tariffs. We are actively monitoring all developments are taking measured steps to protect the business. While also continue to invest for growth.

Mark Segal: We are executing against the four strategies that Max described to mitigate the impact of the tariffs. We are actively monitoring all developments and are taking measured steps to protect the business while also continuing to invest for growth. Our goal for 2025 is to generate over $100 million in cash flow savings through a combination of cost takeouts and capex reductions.

Speaker Change: Our goal for 2025 is to generate over $100 million in cash flow savings through a combination of cost takeouts and capex reductions.

Speaker Change: To conclude today's my law spin Master earnings call I'm retiring a spin master CFO 10 years after our IPO in 2015, and after 20 years in total.

Mark Segal: To conclude, today is my last Spin Master earnings call. I am retiring as Spin Master CFO 10 years after our IPO in 2015 and after 20 years in total. It has been an honor to work with the founders, Renan, Anton and Ben, and alongside such a talented management team to help guide the company through periods of growth, challenge and transformation.

Speaker Change: It has been an honor to work with the founders remain intolerant, Ben and alongside such a talented management team to help guide the company through periods of growth challenge in transformation.

Mark Segal: I want to thank all of you, our investors, analysts, and all of our stakeholders for your engagement and support over the years. I have full confidence that Max and the new CFO, Jonathan Reuter, will do an outstanding job going forward.

Speaker Change: Want to thank all of you our investors analysts and all of our stakeholders for your engagement and support over the years.

Speaker Change: I have full confidence that Max and the new CFO, Jonathan Reuter will do an outstanding job going forward. Thank you again, and I look forward to sharing and spin master's continued success in the U S at with all of you.

Mark Segal: Thank you again, and I look forward to sharing in Spin Master's continued success in the years ahead with all of you.

Speaker Change: Operator that ends the formal part of the call. Please open the line for questions.

Operator: Operator, that ends the formal part of the call. Please open the line for questions. Thank you.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the wondering your Touchtone phone, you'll hear a prompt that Johan has been raised should you wish to decline from the polling process. Please press star followed by the two if you are using a speaker phone. Please lift the handset before pressing any keys.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone. You will hear promptly your hand has been raised.

Operator: wish to decline from the polling process please press star followed by the If you are using a speakerphone, please lift the handset before pressing. One moment, please, for your first question.

Speaker Change: One moment. Please for your first question.

Speaker Change: Your first question comes from Luke Hannan with Canaccord Genuity. Your line is now open.

Luke Hannan: Your first question comes from Luke Hannan with Canaccord Genuity. Your line is now open. Thanks.

Luke Hannan: Thanks, Good morning, everyone and congratulations Mark and best of luck in your next chapter I think we'll start with the topic de jure being tariff smacks you touched on in your prepared remarks, you have several levers to pull when it comes to being able to mitigate the impact of tariffs maybe just a two part question to start one you.

Luke Hannan: Good morning, everyone. Congratulations, Mark, and best of luck in your next chapter.

Luke Hannan: I think we'll start with the topic that you were being tariffed. Max, you touched on in your prepared remarks, you have several levers to pull when it comes to mitigate the impact of tariffs. Maybe just a two-part question to start. One, you outlined the sort of different buckets that you have, being changing procurement, supply chain management, costs. passing through price, et cetera. Can you give us a rough idea of which of those buckets you intend to rely on more so than others, if so? And then secondly, when we think about the goal that you have of being able to move more of your production, or sourcing rather, outside of China into some of these other jurisdictions.

Luke Hannan: And the sort of different buckets that you have being changing procurement supply chain management cost savings passing through price et cetera can you give us a rough idea of which of those buckets you intend to rely on more so than others. If so and then secondly, when we think about the goal that you have of being able to move more of your production.

Luke Hannan: <unk> rather outside of China into some of these other jurisdictions can you give us an idea of how we should think about the impact on lead times, if any any impact when it comes to therefore be versus domestic et cetera. Some other considerations to think about as you get to that target. Thank you.

Luke Hannan: Can you give us an idea of how we should think about the impact on lead time? any impact when it comes to FOB versus some other considerations to think about as you get to that target.

Luke Hannan: Great.

Luke Hannan: Great.

Speaker Change: Good morning look I think I'm going to start with that.

Max Rangel: Good morning, Luke. I think I'm going to start with the four as follows. Procurement first. And I want to be, as Mark said, very clear about what he what he stated, which is we expect. that by fourth quarter of 2025. 70% of the items coming to the U.S. will be coming from countries outside of China. 70% of items coming into the U.S. in Q4 will be from outside of China. And the good news for us is that if I were to break it down further, it's going to be about close to 100% of items on preschool coming from outside of China by Q4.

Speaker Change: As follows procurement first.

Mark Segal: Would it be as Mark said very clear about what we stated which is.

Speaker Change: We expect.

Speaker Change: By.

Speaker Change: Fourth quarter of 2025.

Speaker Change: 70% of the items coming into the U S.

Speaker Change: We will be coming from countries outside of China.

Speaker Change: 70% of items coming into the U S. In Q4 will be from outside of China.

And the good news for US is that if I were to break it down further is gonna be about close to 100% of items on preschool coming from outside of China by Q4, Wilson actions already out of China at a 100% activities almost 100% and so quite a bit of our items that are the main core bra.

Max Rangel: Wilson Action's already out of China at 100%. Activities, almost 100%. And so quite a bit of our items that are the main core brands are going to be coming from outside of China. Mark touched on the theatricals coming mostly from outside of China as well. We are well-positioned. That's the most important thing we'll do. When it comes to cost control, Mark used a figure, he expressed over $100 million in a combination of cost takeout and of course CapEx. And we are balancing taking those steps to not just continue to drive the business this year in the second half, but of course drive innovation in 26 and beyond and give us optionality as we are well-positioned, as you can tell from a supply chain perspective.

Speaker Change: <unk> are going to be coming from outside of China, Marc touched on the pediatric holes coming mostly from outside of China as well.

Speaker Change: We are well positioned.

Speaker Change: The most important thing we will do.

Speaker Change: When it comes to.

Speaker Change: Cause control Mark used a figure year express over $100 million.

Speaker Change: The combination of cost takeout and of course Capex.

Speaker Change: And we are we're balancing taking those steps to not just continue to drive the business. This year in the second half, but of course drive innovation in 2006 and beyond.

Speaker Change: Give us optionality as we are well positioned as you can tell from a supply chain perspective.

Max Rangel: When it comes to supply chain, we have basically items across Europe, Mexico, Canada that we're able to, given the fact that they're non-tariffed and some of the items are global, basically redirect to the U.S. What it means is that we have items in China that would have actually made their way to America that will now be sent to Europe, Canada, and Mexico. And I think those are the most important, you know, components before I get to the obviously important pricing consideration. So, after doing all that, and you can imagine, you do pricing at a skew level.

Speaker Change: When it comes to supply chain, we have basically items across Europe, Mexico, Canada that we're able to given the fact that theyre non tariffs and some of the items are global basically redirect to the U S. What it means is that we have items in China that would actually make.

Speaker Change: They're way to America that will now be sent to Europe.

Speaker Change: Canada and Mexico.

Speaker Change: And I think those are the most important.

Speaker Change: Components before I get to the obviously important pricing consideration. So after doing all of that and you can imagine you do pricing at a SKU level. So now that we have the ability to source quite a bit of our items from outside of China.

Max Rangel: So, now that we have the ability to source quite a bit of our items from outside of China, the impact of cost increase on those items is less. And so, therefore, we're working with retailers in close partnership to make sure we have great value equation when we get to the C-suite. And so the pricing for us would be an important consideration. And I can tell you with confidence that, you know. Between $0 and $20, close to 50% of our items will be priced in that range. It goes to about 70% when you go to $30.

Speaker Change: The impact of cost increase on those items is less.

Speaker Change: So therefore, we're working with retailers in close partnership to make sure we have great value equation, when we get to the season.

Speaker Change: And so the pricing for us would be an important consideration and I can tell you with confidence that.

Between zero and.

Speaker Change: $20 close to 50% of our.

Speaker Change: Items would be pricing that range. It goes to about 70% when you go to 30 box.

Max Rangel: And between $30 and $50, you know, it's really all about the new wow toys that kids will be asking for and that you got to see for those of you who attended at Toy Fair in New York. I hope that gives you confidence. Luke, there was a second part of the question. What was the second part? The second question was more specifically about the impact of moving from China to some of these other jurisdictions. Obviously, you are going to be saving quite a bit on tariffs, but what should we be thinking about or what should investors be thinking about when it comes to the impact, if any, when it comes to lead times on that product?

Speaker Change: And between 30 and $50 is really all about the new wild toys that kids will be asking for and that you got to see for those of you who attended toy.

Speaker Change: Toy Fair in New York.

Speaker Change: I hope that gives you a context.

Speaker Change: Look there was a second part question what was the second part.

Speaker Change: The second question was more specifically about the impact of moving from China to some of these other jurisdictions. Obviously you are going to be saving quite a bit on tariffs, but what should we be thinking about or what should investors be thinking about when it comes to the impact if any when it comes to lead times on that product and then anything perhaps when it comes to the mix of Fob.

Max Rangel: And then anything, perhaps, when it comes to the mix of FOB versus domestic, if there's anything we should Yeah, no change.

Speaker Change: <unk> versus domestic if theres anything we should be thinking about there.

Speaker Change: Yes, no change.

Speaker Change: Okay great.

Speaker Change: Great and then so for my follow up here and then I'll pass the line so.

Max Rangel: And then, so for my follow-up here, and then I'll pass the line. So, when it comes to, I guess, what it is specifically that you're hearing from retailers today, I mean, you can correct me if I'm wrong, I know that you're in constant dialogue with them, but typically those talks speed up a little bit more closer to the summertime when it comes to thinking about the... back half then. So I mean, what exactly are you hearing from them today? When it comes to either consumer behavior? I don't know if it's possible for you guys to share anything on POS trends today, but if so, that would be great.

Speaker Change: When it comes to I guess the one.

Speaker Change: What it does specifically that youre hearing from retailers today I mean, you can correct me if I'm wrong I know that you are in constant dialogue with them, but typically those talks heat up a little bit more closer to the summer time when it comes to thinking about the assortment in the back half and so I mean, what exactly are you hearing from them today when it comes to either consumer behavior I don't know if its possible for you guys to share.

On Pos trends today, but if so that would be great, but what specifically is it that you are hearing from them when it comes to perhaps the ability to pass through price and also what they're seeing.

Max Rangel: But what specifically is it that you're hearing from them when it comes to perhaps the ability to pass through price and also what they're... so far in April and into May. Sure, I think as it relates to Fall 25 and Christmas specifically, I mean some retailers are in close partnership looking at their plan of run set dates and being agile in basically moving those so that we can actually get, and I'm sure beyond us, people can get them products so they can set those for the holidays. So typically those would have been, if you, I mean you've been with us for a while, typically July, you can expect that those will shift.

Speaker Change: For consumer behavior, specifically for toys, thus far in April and the demand.

Speaker Change: Sure I think as it relates to fall 'twenty, five and Christmas specifically I mean, some retailers are in close partnership looking out their plan around set dates and being agile in basically moving those so that we can actually get and I'm sure of beyond those people can get them products.

Speaker Change: <unk> said those sort of holidays. So typically those would have been if you. If you I mean, you've been with us for a while typically July you can expect that those will shift.

Max Rangel: So that's one key consideration and key action item that's happening. In terms of the consumer demand, you know, consumption, remember, through the year to date, is highly affected by basically the shift of Easter. But I can tell you in every holiday so far this year, we've seen consumption as we would expect. And taken outside the categories where we don't compete, in those we compete, we're seeing good takeaway. Okay, thank you very much.

Speaker Change: So that's one key consideration and key action items, that's happening in terms of the consumer demand.

Speaker Change: Consumption remember through the year to date.

Speaker Change: <unk> highly affected by basically.

Speaker Change: The shift of Easter, but I can tell you in every holiday so far this year, we've seen consumption as we would expect.

Speaker Change: <unk> taken outside the categories, where we don't compete in those recompete.

Speaker Change: We're seeing good takeaway.

Speaker Change: Okay. Thank you very much.

Speaker Change: Your next question comes from Brian Morrison with TD Cowen. Your line is now open.

Brian Morrison: Your next question comes from Brian Morrison with TD Cowan. Your line is now open. Yes, thanks very much. And Mark, it's been a pleasure and congratulations.

Speaker Change: Yes, thanks, very much mark it's been a pleasure.

Speaker Change: Congratulations.

Speaker Change: Thank you <unk> I wanted to circle back to.

Brian Morrison: Max, I want to circle back to the China exposure. It sounds like you're able to mitigate a lot of the sourcing, especially with your primary lines. But the retailers, as the previous question asked, are we seeing some pre-buying? Are the retailers willing to pay up? Are we seeing cancellations, reduced orders? Maybe just what you're seeing in general as it comes to the China exposure. No, I think we're not seeing cancellations, but you, as you have read in the press, would have read that it was halted, you know, a few weeks back. And I think those orders are resuming.

Speaker Change: To the China exposure. It sounds like you are able to mitigate a lot of the sourcing, but especially with your primary lines.

Speaker Change: The retailers as as the previous question asked like are we seeing some pre buying or the retailers willing to pay up are we seeing cancellations reduced orders, maybe just what youre seeing in general as it comes to the China exposure.

Speaker Change: No I think we're not seeing cancellations, but U S. You have reading the press would have read that he was halted a few weeks back and I think those those those orders are resuming.

Brian Morrison: And so that's what we're seeing. And so we're basically very optimistic as we go forward, given our and the Marsification Footprint. But no, no cancellations. Okay, and pull forward, did you see any of that? Pull forwards, no.

Speaker Change: So that's what we're seeing and so we're basically very optimistic as we go forward given our.

Speaker Change: Diversification footprint.

Speaker Change: But no no cancellations.

Speaker Change: Okay.

Speaker Change: And pull forward did you see any of that.

Speaker Change: Pull forward no.

Mark Segal: Okay, and then maybe for Mark just.

Mark Segal: And then maybe for Mark, you've got this encouraging digital game acceleration, but clearly at a cost to do so, what is the strategy here in terms of driving this digital games revenue while managing to wean yourself off the investment to drive operating Or is it simply that you're going to grow this investment over time? Yeah, so Brian, I think you're referring to the increase in paid user acquisition in the digital games. And so, so obviously, let me answer it by saying, you know, let's look at it through the lens of Toka and then through the lens of Sega Mini with Picnic, because it's two different business models.

Speaker Change: You've got this encouraging digital gain acceleration, but clearly at a cost to do so.

Speaker Change: What is the strategy here in terms of driving this digital games revenue, while managing to wean yourself off the investment to drive operating income or is it simply that you are going to outgrow this in <unk>.

<unk> over time.

Speaker Change: Yes, so Brian.

Speaker Change: I think you're referring to.

Speaker Change: The increase in paid user acquisition.

Speaker Change: In the digital games.

Speaker Change: And so so obviously.

Speaker Change: Let me answer that by saying.

Speaker Change: Let's look at it through the lens of Tucker and then through the lens of <unk>.

Speaker Change: <unk>, many with picnic because it's two different business models as you know and Tucker it's in game purchases and what we've seen.

Mark Segal: As you know, in Toka, it's in-game purchases. And what we've seen is that we get a very effective return on investment on paid user acquisition in that space. We've seen higher average revenue per paying user. We've seen higher conversion rates. And so the ROI on that user acquisition spend, I think, is very effective in terms of driving the top line and profitability. In the subscription business, it takes a little bit longer to see the returns being generated. So we are seeing increases in subscription numbers. As you saw, we reported higher increases over the quarter and relative to year end.

Speaker Change: Is that if we get a very effective return on investment on paid user acquisition in that space. We've seen higher average revenue per paying user we are seeing higher conversion rates and so the ROI on net user acquisition spend I think is very effective in terms of driving the topline and profitability.

Speaker Change: In the subscription business it takes a little bit longer to see the returns being generated so we are seeing.

Speaker Change: Increases in subscription numbers as you saw we reported higher increases over the quarter and relative to your in so we've seen growth we have to watch al user acquisition spend to drive those subscribers because you actually get a return over a period of time, which we call our lifetime value or LTV and so did.

Mark Segal: So we've seen growth. We have to watch our user acquisition spend to drive those subscribers because you actually get a return over a period of time, which we call our lifetime value or LTV. And so the model of managing our LTV to the cost of that user acquisition is something that's very live.

Speaker Change: Managing our LTV to the cost of that user acquisition is something that's very live we started getting a little bit more aggressive in Q1 and we can.

Mark Segal: We've started getting a little bit more aggressive in Q1, and we're going to watch that very carefully to make sure that we are balancing both growth with profitability in our subscription business.

Speaker Change: We're going to watch that very carefully to make sure that we are balancing both growth with profitability in our subscription business.

Speaker Change: Okay and your strong balance sheet, you plan to be active with your in CIB.

Mark Segal: And your strong balance sheet, do you plan to be active with your NCI? Yeah, we continue to be active on the NCIB, Brian. We just had the NCIB renewed to March 7th of 2026 for just under 2.5 million shares. We actually bought back 1.2 million shares in Q1 for about $22 million. So we've been pretty active on the NCIB. Our previous NCIB was fully utilized. That was the 24 to 25 one, and then the 25 to 26 one will continue to be active, as I've just described.

Speaker Change: Yes, we continue to be active on the on the NCI be Brian. We just had the NCI be renewed to March 7th of 2026 for just under $2 5 million shares.

Speaker Change: We actually bought back one 2 million shares in Q1 for about $22 million. So we've been pretty active on the N CIB our previous N. CIB was fully utilized that was the 24% to 25 one.

Speaker Change: And then the 25% to 26, one we will continue to be active.

Speaker Change: As I've just described.

Speaker Change: Enjoy your retirement of arc.

Brian Morrison: Enjoy your retirement. Thank you, Brian.

Speaker Change: Thank you Brian.

Speaker Change: Your next question comes from Kylie Copel with Jefferies. Your line is now open.

Kylie Cohu: Your next question comes from Kylie Cohu with Jeffries. Your line is now open. Hey, good morning.

Kylie Copel: Hey, good morning. Thank you so much for taking my questions and congratulations Mark on your retirement.

Kylie Cohu: Thank you so much for taking my questions and congratulations, Mark, on your retirement. I was wondering if you could talk a little bit about, just how you're thinking about elasticities, if you've done any work on that recently that you could share with us. Price elasticity, yeah, so we have done price elasticity work, Kylie, but I think, as you can imagine, and being a student of the industry, I'm sure, there's never been the level of price increase on some of the items at the 145%, you know, tariff rate, so you have to not just use price elasticity.

Speaker Change: Thank you.

Speaker Change: Yes, no question I Wonder if you could talk a little bit about.

Speaker Change: If you've done any work on that recently.

Speaker Change: You could share with us.

Speaker Change: Price elasticity.

Speaker Change: So we have done price elasticity work.

Speaker Change: Hi, Lee.

Speaker Change: As you can imagine being a student of the industry I'm sure. There's never been the level of price increase on some of the items.

Speaker Change: 145% tariff rate. So you have to not just use price elasticity. There is a lot of judgment and theres a lot of retailer input as well.

Kylie Cohu: There's a lot of judgment, and there's a lot of retailer input as well, and so the reason we've been, you know, basically honing in our pen in terms of the price points and the reason we were so aggressive to pivot on our supply chain is because there are certain price points that are going to be really difficult unless you have these wild, very magical toys that everyone's going to want. And even then, I think we have to be very cautious to not go beyond certain price points. And so we're basically trying to get as much done between 50 and below, but really below 30, to be very honest.

Speaker Change: So the reason we've been basically Tony in our Penn in terms of the price points and the reason we were so aggressive.

Speaker Change: To pivot on our supply chain is because there are certain price points that are going to be really difficult unless you have these while very magical toys that everyone's in a want and even then I think we have to be very cautious to know gobioff beyond a certain price points and so we're basically trying to get as much done between 50 and below but really below third be very honest.

Speaker Change: Sure.

Speaker Change: No that's super helpful.

Kylie Cohu: And then on retail inventory, obviously, we've heard comments in the news about, you know, potentially empty shelves. And I think it is encouraging to hear that we haven't seen this big uptick in cancellations. But I was just wondering if you could talk to how inventory levels are currently, both on like a year over year basis, and just like normal season out now. So Kylie, our retail inventory in the U.S. was actually down around 6% for Q1, relative to the industry being slightly up, low single digits. And I think globally our inventory, our retail inventory was down 1 to 2% and the industry was up slightly.

Speaker Change: And then on retail inventory, obviously, we've heard comments in the news about potentially empty shelves and I think it is encouraging.

Speaker Change: Thank you for taking cancellations.

Speaker Change: Just wondering if you could talk to how inventory levels are currently.

Speaker Change: Both on a year over year basis.

Speaker Change: Like normal seasonality.

Speaker Change: So currently all our retail inventory in the U S was actually down around 6%.

Speaker Change: For Q1.

Speaker Change: Relative to the industry being slightly up.

Speaker Change: No single digits, and I think globally, our inventory our retail inventory was down.

Speaker Change: 1% to 2% and the industry was up slightly so I actually think in normal in normal circumstances, we actually have a very healthy inventory position.

Mark Segal: So I actually think in the normal circumstances, we actually have a very healthy inventory position. I think the quality of the inventory at retail is good. And we have $180 million of owned inventory, both from a Spin Master and Melissa and Doug perspective. And we're going to use that inventory strategically in the second quarter, you know, to fulfill demand and beyond. But overall, I think our inventory is in good shape.

Speaker Change: I think the quality of the inventory at retail is good and we have $180 million of owned inventory bus.

Speaker Change: From a spin master and Melissa Duck perspective, and we're going to use that inventory strategically in the second quarter.

Speaker Change: To fulfill demand and beyond.

Speaker Change: But overall I think our inventories in good shape.

Speaker Change: Next you want to add is I think you said it broken.

Max Rangel: Next you want to add anything? I think you said it well. Awesome.

Speaker Change: Awesome well, thank you guys so much.

Kylie Cohu: Well, thank you guys so much.

Speaker Change: Your next question comes from Martin Landry with Stifel. Your line is now open.

Martin Landry: Your next question comes from Martin Landry with Steeple.

Martin Landry: Your line is now open.

Martin Landry: Hey, good morning, guys.

Martin Landry: Good morning, guys. My first question, I want to dig a little bit more into the tariff and impact. You know, you have mitigation measures that you've put in place and you want to offset the remaining impact with price increase So is it fair to say that there's a scenario where you could have set all of the tariff impacts on your costs with with those mitigating measures?

Martin Landry: My first question I wanted to dig a little bit more into the tariff impact.

Martin Landry: You have mitigation measures that you've put in place and you want to offset that.

Martin Landry: Meaning impact with price increases.

Martin Landry: So is it fair to say that there is a scenario where you could offset all of the tariff impacts on your costs with those mitigating measures.

Martin Landry: Yep.

Mark Segal: Hi, good morning, Martin. I think at the end of the day, The four buckets that we described that Max went through in detail, I think at the end of the day, there's still going to be an impact. and we just we don't know exactly what that impact is and obviously due to the fluidity you know it's why we're actually withdrawing guidance because we can't be specific. but overall, they will be an impact. It's unlikely that we'll be able to recover everything. you're gonna be hurting your margins or your dollars. You know, so I think, um...

Speaker Change: Hi, Good morning, Watson I think at the end of the day.

Speaker Change: The four buckets that we described that <unk> went through in detail I think at the end of the day, there's still going to be an impact.

Speaker Change: And we just we don't know exactly what that impact is and obviously due to the fluidity.

Speaker Change: So thats why we are actually withdrawing guidance, because we can't be specific at this point.

Speaker Change: But overall there will be an impact.

Speaker Change: It's unlikely to recover everything.

Speaker Change: Why is it then that you are not passing on all of those costs.

Speaker Change: As price increases why is it that.

Speaker Change: Your U R.

Speaker Change: You're going to have the hurting your margins or your dollars.

Speaker Change: No so I think.

Speaker Change: Good morning, Martin So I think one good morning, most of those so we're able to mitigate out there is still a tariff on non China source item to remember so there's 90 day pass and a 10% tariff whenever the non China those things, we're mitigating quite well.

Max Rangel: Good morning, Martin. So I think on most of the things that we're able to mitigate out, there is still tariff on non-China source items, remember, so there's a 90-day pause and a 10% tariff on everything non-China. Those things were mitigating quite well. And the remaining, you know, percentage would basically be Price increases, we're now working with retailers to pass to them and they will ultimately pass it on to the consumer. So we are doing that. But the just sheer amount is such that, you know, you have to be cautious to not basically Get yourself in a situation where you're not going to supply the market and have basically a brand that you're protecting strategically, not just for this period, but for the future.

Speaker Change: And the remaining you know.

Speaker Change: Percentage would basically be.

Speaker Change: Price increases were now working with retailers to pass to them and they will ultimately pass it on to their consumers. So we are doing that.

Speaker Change: But the just sheer amount is such that you have to be cautious to not basically.

Speaker Change: Get yourself in situations, where you're not going to supply the market and have basically a brand that you are protecting strategically not just reduce theory, but for the future.

Max Rangel: And so, and I think ultimately, you know, as the forecast comes down for a retailer, we're just basically working with them to make sure we come out better positioned than the rest of the market.

Speaker Change: And so and I think ultimately as the forecast comes out for a retailer we just basically working with us to make sure we come out better position than the rest of the market.

Speaker Change: Okay.

Max Rangel: Okay. And, you know, is there a scenario, I mean, the demand in dollars, consumers are going to spend similar amount of dollars on toys this year as they did last year, upset an economic slowdown. So, isn't there a scenario where, yes, you know, volumes are a little bit down, but that's offset by pricing? Isn't that a scenario where your sales could be somewhat stable year-over-year? Yeah, I think there is basically, there will be, given the price increase on some of the items, lower demand for those items, and you're correct, the price increase will basically catch up quite a bit of that lower unit volume.

Speaker Change: Yes.

Speaker Change: Is there a scenario I mean demand in dollars consumers are going to spend a similar amount of dollars on toys. This year as they did last year.

Speaker Change: <unk>.

Speaker Change: Any kind of slowdown so isn't there a scenario where yes.

Speaker Change: No.

Speaker Change: Volumes are a little bit down, but thats offset by pricing isn't that a scenario, where your sales could be somewhat stable year over year.

Speaker Change: Yes, I think there is basically there will be given the price increase on some of the items.

Speaker Change: Lower demand for those items and you're correct. The price increase will basically catch up quite a bit of that lower unit volume. However, there will be certain items and price points that that's not going to be possible. All the way and then on top of that you have consumer discretionary wallets that basically all other inc.

Max Rangel: However, there will be certain items and price points that that's not going to be possible all the way. And then on top of that, you have consumer discretionary wallets that basically have other inflationary pressures. And we just don't know the impact of that fully. So we're being prudent. And so that's really what Mark alluded to. We're not going to, and we don't see recovering 100% of the tariff just through pricing and unit declines. Okay, that's helpful.

Speaker Change: <unk> pressures and we just don't know the impact of that.

Speaker Change: So we're being prudent and so that's really what Marc alluded to we're not going to and we don't see recovering 100% of the tariff.

Speaker Change: Just through pricing and unit declines.

Speaker Change: Okay. That's helpful and Mark Best of luck in your future projects, it's been great working with you.

Martin Landry: And Mark, best of luck in your future projects. It's been great working Thank you, Martin. Appreciate it.

Mark Best: Thank you Martin I appreciate it.

Speaker Change: Your next question comes from Adam Shine with National Bank. Your line is now open.

Adam Shine: Your next question comes from Adam Shine with National Bank. Your line is now open. Thanks a lot.

Adam Shine: Thanks, a lot good morning head of course, Mark happy retirement.

Adam Shine: Good morning. And of course, Mark, happy retirement.

Adam Shine: Maybe we could just start with topics that wasn't touched on container ship fees, it's still unclear exactly what the implications of those are going to be but mark can you just help us a little bit in terms of what your initial thoughts are on freight costs. This year.

Adam Shine: Maybe we could just start with a topic that wasn't touched on, containership fees. It's still unclear exactly what the implications of those are going to be. But, Mark, can you just help us a little bit in terms of what your initial thoughts are on freight costs this year?

Adam Shine: Hi, Adam Thank you.

Mark Segal: Hi Adam, thank you. Yeah, so actually, there's a couple of things to penetrate on that particular topic. The reality is that in Q1, and what we're seeing right now is that rates have actually come down quite dramatically. And so we're actually getting the benefit of lower rates as we currently speak. There is a discussion around some kind of surcharge on Chinese-owned vessels that has been mooted by the current administration, but which has not been firmed up yet. So we don't know where that's going to go, Adam, and we're not really modeling anything on that because we just don't know what it looks like.

Adam Shine: So actually.

Adam Shine: There's a couple of things to penetrate on that particular topic is the reality is that in Q1 and what we're seeing right now is that rates have actually come down quite dramatically.

Adam Shine: And so so we're actually getting the benefit of lower rates as we currently speak.

Adam Shine: There is a discussion.

Adam Shine: <unk> around some kind of surcharge on Chinese owned vessels that has been muted by the current administration, but which has not been firmed up yet. So we don't know where that's going to go at them and we are not really modeling anything on that because we just don't know what it looks like but.

Mark Segal: But the question that we all have to ask ourselves and everyone in the industry is asking the same question is, you know, what is going to happen in the future if the tariff situation becomes more clarified, or tariffs go down, or if they don't go down, because really the ships are potentially going to be in the wrong place, right, if demand picks up suddenly. And that could actually lead to increases similar to what we saw during the COVID years. So that is potentially a threat that is out there. But as things stand right now, rates are significantly down.

Adam Shine: The question that we all have to ask ourselves and everyone in the industry.

Adam Shine: Is asking the same question is what is going to happen in the future. If the tariff situation becomes more clarified or tariffs go down or if they don't go down because really the ships are are potentially going to be in the wrong place right if demand picks suddenly and that could actually lead to.

Adam Shine: Two increases similar to what we saw during the Covid years, so that is potentially a threat that is out there.

Adam Shine: But as things stand right now Reits or Cigna.

Mark Segal: I hope that gives you some No, thanks for that, Mark, and I realize obviously it's very fluid. One of the earlier questions at the start of the call, you know, did address domestic versus FOB. And Mark, you've talked about this in recent years, particularly, you know, some shifts, you know, Hasbro a week ago talked about the presumption that, you know, they would probably have to do more domestic and obviously, you know, deal with inventory that retailers are going to be a bit more conservative around, can you elaborate a little bit further on, on how you're likely to see things shifting?

Mark: Significantly down I hope that gives you some color no. Thanks for that Mark and I realize obviously, it's very fluid.

Mark: One of the earlier questions at the start of the call did address domestic versus F O B and Mark you've talked about this.

Mark: In recent years, particularly some shifts.

Mark: <unk> a week ago talked about the presumption that.

Speaker Change: They would probably have to do more domestic.

Mark: And obviously deal with inventory.

Mark: That retailers are going to be a bit more conservative around can you elaborate a little bit further on on how you're likely to see things shifting because.

Mark Segal: Because I think you kind of said not really earlier, but maybe I misunderstood that. No, let me clarify our position. And firstly, you have to understand Spin Master as a company has actually always been much more FOB orientated than some of our larger competitors. It's just the nature of our business and the way we've operated. So I don't want to compare ourselves too directly to them. They have different business models. We actually are working very closely with our retail partners on different business models. And those business models will be kind of driven towards reducing the impact of tariffs.

Mark: Because I think you kind of said.

Mark: Not really earlier, but maybe I misunderstood that.

Mark: No let me, let me clarify our position and firstly you have to understand spin master as a company is actually always been much more <unk> oriented than some of our larger competitors. It's just the nature of that business and the way we've operated.

Mark: So I don't want to compare ourselves to directly to them. They have different business models. We actually are working very closely with our retail partners on different business models.

Mark: And and and.

Mark: Those business models will be kind of driven towards reducing the impact of tariffs and so we actually think that if.

Mark Segal: And so we actually think that our FOB percentage will be relatively constant, which is somewhere in 55 to 60 percent range, and might even be a little bit higher this year if things actually continue at the rate that they are. But so we don't see a massive shift towards domestic in our particular case, Adam. Okay. No, thanks for that.

Mark: <unk> percentage will be relatively constant, which is somewhere in 55% to 60% range and might even be a little bit higher this year, if things actually continue at the rates.

Mark: The rates that they are.

Mark: But so we don't see a massive shift towards domestic in our particular case setup.

Mark: Okay. Thanks for that and then just maybe lastly.

Mark Segal: And then just maybe lastly, You're pushing very aggressively. This is probably as aggressive as we've seen Spin Master in terms of looking for cost savings and obviously being forced to do so. But when we hear about all the moving pieces with the mitigation efforts, in particular around supply chain and the reality that you're gonna be doing this very much in real time and heading into your seasonally important back half of the year. Can you, Mark or Max, maybe talk to how much work the team has already been doing, either before April 2 or subsequently? And also, how should we think about how much more of the heavy lifting potentially skews into the fall period?

Mark: Yes.

Speaker Change: Youre pushing very aggressively this is probably as aggressive as we've seen spin master in terms of looking for cost savings and obviously being forced to do so.

Mark: Right.

Mark:

Mark: Hear about all the moving pieces with the mitigation efforts in particular around supply chain and the reality that you're going to be doing this very much in real time and heading into your seasonally important back half of the year.

Speaker Change: Thank you Mark or Max maybe talk to how much work the team has already been doing.

Mark: Either before April two or subsequently.

And also how should we think about how much more of the heavy lifting ultimately potentially skus into the <unk>.

Mark: Paul period.

Mark: Okay. So so.

Mark Segal: Okay. So, just to reiterate, Adam, what I said on the call, we have set a target of exceeding over $100 million cost reductions and CapEx. So, one of the things that we did say to you last quarter in February when we released our year-end was that CapEx rates are going to be higher than they were last year. We are looking very hard at CapEx and potentially deferring a fair amount of CapEx into 2026 and beyond, and that's already underway. So, a lot of that's already done. On the sourcing side, as Max described, the amount of progress that we've made already is very significant.

Adam Shine: Just to reiterate Adam what I said on the call and we have set a target of exceeding over 100 million cost reductions and capex.

Mark: So.

Mark: One of the things that we did say to you last quarter in February when we released our year end reserve Capex rates fall going to be higher than they were last show we are looking very hard as capex.

Mark: And potentially deferring a fair amount of capex into 'twenty, six and beyond and that's already underway. So a lot of that's already done on the on the sourcing side as <unk> described the amount of progress that we've made already is very significant.

Max Rangel: And then there are other programs that we're working on in terms of absolute cost reductions, many of which we've actually already started and executed, and others will continue for the balance of the year. So, I would say, Adam, overall, in terms of that $100 million plus cash savings target, I think we're well on our way, but we still have some work to do for sure.

Mark: And then and then there are other programs that we're working on in terms of absolute cost reductions many of which we've actually already started and executed and others will continue for the balance of the so I would say Adam overall in terms of the 100 million plus cash savings target I think we're well on our way, but we still have some work to do for sure.

Max Rangel: I want to just, Adam, good morning, give you a bit more context. So, part of the reason that it's not impossible is that we've been doing this for a while. So, if you take Preschool Paw Patrol, for example, a very important brand for us, we have been dual sourced on the great majority of our line for quite a while. We've been basically doing this for over five years. So, therefore, to shift that sourcing is significantly easier. It's a little bit different when you take something like the BT hamster ball, which would have been made in China, and that will make that in a place other than China, and we'll still do it by Q3, Q4, so we can supply the demand.

Mark: I'm wondering just.

Speaker Change: Adam Good morning, give you a bit more context, so part of the reason that is not.

Mark: Impossible.

Mark: Been doing this for a while so if you say if you take preschool Paw patrol for example, a very important brand for us.

Mark: We have been dual sourced on the great majority of our line for quite a while we've been basically doing this for over five years. So therefore to shift that sourcing is significantly easier.

Mark: Is it a little bit different when you take something like the BT hamster ball, which would have been made in China and that will make that in place other than China, and we will still do it by by Q3 Q4. So we can supply the demand and so that requires incremental word but you can imagine that all the lines were required the same level of work and so to your question.

Max Rangel: And so, that requires incremental work, but you can't imagine that all the lines will require the same level of work. And so, your question is a good question. We are well positioned to absorb that.

Mark: Brian It's a good question, we are well positioned to absorb that.

Speaker Change: Okay. Thank you very much I appreciate it.

Drew Mcreynolds: Thank you very much, I appreciate it.

Speaker Change: Your next question comes from drew Mcreynolds with RBC. Your line is now open.

Drew Mcreynolds: Your next question comes from Drew McReynolds with RBC. Your line is now open. Yeah, thanks very much. And good morning.

Yes, thanks, very much and good morning, and congrats Mark and happy retirement of course.

Drew Mcreynolds: And congrats, Mark, and happy retirement, of course. Two for me. First, maybe over to you, Max. You know, some of your toy peers talk about the lobbying and advocacy effort that's underway for the industry and getting the message through, you know, with respect to the treatment of toys. I'm just just wondering, can you kind of drill down a little bit more on if there's any real progress with that effort? If there's any kind of further steps that are definitive here looking forward.

Speaker Change: Two for me.

Speaker Change: First maybe.

Speaker Change: Over to you Max.

Max: Some of your toy peers talk about the lobbying and advocacy effort that's underway for the industry and getting the message through.

Max: With respect to the treatment of toys I'm, just wondering can you kind of drill down a little bit more on.

Mark: If theres any real progress with that effort if theres any kind of further steps that are definitive here looking forward and then secondly, maybe to you Mark.

Mark Segal: And then secondly, maybe to you, Mark, appreciate all the tariff guidance and perspective you've given us. under the assumption and I know this is a big assumption at this point that the 145% does go down. Have you, are you able to be at a point of when whenever that percentage is put firmer into place? Is it is it kind of a sliding scale of impact where once you get a percentage you can provide us with, you know, enough visibility to provide an update on kind of financial impacts at that percentage or Are there other bigger moving parts here that you're focusing on?

Max: I appreciate all the.

Mark: Tariff guidance perspective, you have given us.

Mark: Under the assumption and I know this is a big assumption at this point that the 145% does go down have you are you able to be at a point of when whenever that percentage is but firmer into place.

Mark: Is it is it kind of a sliding scale of impact where once you get a percentage you can.

Mark: It will provide us with <unk>.

Mark: <unk> ability to provide an update on kind of financial impacts at that percentage or.

Are there other.

Mark: Bigger moving parts here that you're focused on.

Max Rangel: Okay, so the first part of the question, so the U.S. Toy Association is absolutely taking the leadership position to get to zero reciprocal tariffs, and they basically engage with 20-plus global toy associations, including those in Vietnam, China, India, etc., and they've made great strides to basically get to the White House, both the Department of Commerce and the Treasury, which is where a lot of these decisions are being made, and more work is ahead of the group, and we are all participating, to be very clear. Nothing has yet come out of it via President Trump, but it hasn't been for lack of all the different players making great efforts to actually get to the right people in the White House.

Mark: Okay. So the first part of the question so.

Mark: The U S Toy Association use absolutely taken the leadership position.

Mark: To get to Sierra Super both tariffs and they basically engage with 20, plus global toy associations, including dosing, Vietnam, China, India et cetera, and they've made great great strides to basically get to the White house, both the department of Commerce, and the Treasury, which is where a lot of these decisions are being.

Mark: Right.

Mark: And more work is ahead of the group and we are we are all participating to be very clear.

Mark: Nothing has yet come out of it.

Mark: Via President Trump, but he hasnt been for lack of all the different players, making great efforts to actually get to the right people in the White House. So you can expect that that effort continues and is now completely.

Max Rangel: So you can expect that that effort continues, and it's not completely, you know, unknown to everyone in our industry that this group is doing a great job basically getting the voice to those who need to decide. So we'll continue, but that's the effort.

Mark: <unk>.

Mark: A known to everyone in our industry that this group is doing a great job.

Mark: Basically getting the voice to those who need to decide so we will continue but that's the effort.

Mark Segal: So, Drew, just to come back to the tariff, you know, and just to remind you and everyone, when we actually had the call on February the 24th, the tariff rates that were being mooted at that time were between 10 and 20 percent. In fact, it started at 10, then it went to 20, then it went to 54, then it went to 125, and then it went to 145. And so to answer your question, which I think is a very good question, because you're trying to figure out how to model our business going forward, you know, in the 10 to 20% range of tariffs, I would say to you, it would be relatively comfortable for Max and I to to give you forward looking guidance and to and to be relatively specific about how we would handle that.

Speaker Change: So drew just to come back to the tariffs.

Mark: And just to remind you and everyone. When we actually had the call on February the 24th.

Speaker Change: The tariff rates that were being mooted at that time.

Speaker Change: Between 10 and 20% in fact, it's starting to turn and it went to 20 then it went to 54 and then went to $1 25, and then it went to $1 45.

Speaker Change: And so to answer your question, which I think is a very good question because he is trying to figure out how to model this going forward.

Speaker Change: In the 10% to 20% range of tariffs I would say to you it would be relatively comfortable for Max and ought to give you forward looking guidance into and to be relatively specific about how we would handle that right we comfortably in that range.

Mark Segal: Right, we comfortable in that range. In the 54% range, it starts getting a little trickier to do that because they're more unknowns. In the 125 to 145 range, and 145 where we're at now, it becomes very difficult, which is why we really are not comfortable to give guidance at this point. Because to Kylie and Martin's questions earlier about price elasticity and overall demand at 145%, when you have 70% of our product shipping in the second half of the year, it becomes very difficult to model your business because you don't know what your orders are going to be for the second half, and then you don't know the impact on overall demand and price elasticity and volume impacts.

Speaker Change: The 54% range as thoughts getting a little trickier to do that because they they more unknowns in the $1 25 to $1 45 range and 145, where we're at now it becomes very difficult, which is why we we really are not comfortable to give guidance at this point because to Kylie and Martin's questions earlier about pricing.

Speaker Change: This T and overall demand at 145% when you have 70% about our product shipping in the second half of the year becomes very difficult to model. Your business. Because you don't know what your orders are going to be for the second half and then you don't know the impact on overall demand and price elasticity and volume.

Speaker Change: Impacts and so.

Mark Segal: When you're north of 100%, we're in a very difficult place to give forward-looking guidance. I hope that gives you some context. Yeah, it does bark and definitely understood all the other dynamics.

Speaker Change: When you when you are north of 100%. It's we're in a very difficult placed to give forward looking.

Speaker Change: Guidance, So I hope I hope that gives you some context.

Speaker Change: Yes, it does barking.

Speaker Change: Totally understood.

Mark Segal: So thank you both. Thanks.

Speaker Change: All the other dynamics so thank you both.

Thanks, Tim.

Speaker Change: And your last question comes from David Mcfadden with <unk> Securities. Your line is now open.

David Mcfadden: And your last question comes from David McFadden with Cormark Securities. Your line is now open. Okay, thank you.

David Mcfadden: Okay. Thank you yeah. So first of all congratulations Mark all the best in the future.

David Mcfadden: Yeah, so first of all, congratulations, Mark, all the best in the future. Thank you, Brian. And then, and then just on, like, we just focus in on 25. Just given a long lead time in the business, and you probably already got most of the toys produced. you know, they're being produced as we speak. And these tariffs come in, isn't isn't it really difficult to really do anything for 25?

Speaker Change: Thank you Brian.

Speaker Change: And then and then just on <unk>.

Speaker Change: Just focusing on 25.

Speaker Change: Just given the long lead time in that business and now you've probably already.

Most of the time.

Speaker Change: Sure.

Speaker Change: They're being prudent stance and Steve.

Speaker Change: And these tariffs come in isn't isn't that really difficult.

Speaker Change: Difficult to really do anything for 25, and what we're really talking about is 26 and beyond.

David Mcfadden: And what we're really talking about is 26 and beyond? Hi, David. No, I think, as I was just mentioning, we are dual-sourced in quite a few of the items. So, where we are dual-sourced, we're able to pivot with quite agility. Where we have not been dual-sourced in the past, we have great partners in different places like Vietnam and India and Indonesia, whom we work with. And so, we are basically, along with retailers, setting back planet ramps, right, from July to, call it October, able to make that up. So, we have an incredible team in Asia of engineers and designers.

Speaker Change: Hi, David No I think as I was just mentioning we are dual sourced and quite a few of the items. So where we are dual source, we're able to pivot with quite agility, where we have not been dual source in the past we.

Speaker Change: We have great.

Speaker Change: Partners in different places like Vietnam, and India and Indonesia.

Speaker Change: Work with and so we are basically along with retailers setting back planet grants right from July to call. It October able to make that up so we have an incredible team in Asia.

Speaker Change: Engineers and designers and so it's not basically we're not starting from scratch we've been doing this for a while so that's what it allows us the agility to basically go do it.

Max Rangel: And so, it's not, basically, we're not starting from scratch. We've been doing this for a while. So, that's what allows us the agility to basically go do it. But, I mean, you know, we're talking about, you know, very high tariffs on China, but the U.S. is also, you know, putting in very high tariffs on basically all the Asian countries. So, you know, you can try and source it from different Asian countries, but. Maybe they're not at 145%, but they're, I think, in the 30-40% range, which is still quite a bit, no? There are 10% for now in their pause time, which is 90 days, but the arbitrage between some of the places we're going to in 145 is huge.

Speaker Change: But I mean.

Speaker Change: We're talking about very high tariffs on China, but the life.

Speaker Change: There's also plenty in very high tariffs on basically all the Asian countries. So.

Speaker Change: You can chime.

Speaker Change: From different things from countries, but.

Speaker Change: Maybe they're not at 145%, but there I think I'm not already 40% range, which is still quite a bit now.

Speaker Change: They are at 10% for now in their past time, which is 90 days.

Speaker Change: But the arbitrage between some of the places we're going towards 100.

Speaker Change: 45 is huge and so we're taking that we're taking the risk and importantly will be dual source, we already can make it in China. So once again, we are just given ourselves optionality.

Max Rangel: And so we're taking the risk. And importantly, we'll be dual source. We already can make it in China. So once again, we are just giving ourselves optionality.

Speaker Change: Okay Alright, great.

Max Rangel: Okay, all right.

Speaker Change: I think that was the last question operator, let me. Thank you all again and.

Operator: I think that was the last question, Operator, so let me thank you all again and I'll be listening to the call for the second quarter, not participating, but thank you all and the next call will be in July, right, so talk to you then. Take care, thanks.

Speaker Change: I'll be listening to the call for the second quarter not participating but thank you all in the next call will be in.

Speaker Change: In July so talk to you then take care. Thanks.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in assay you. Please disconnect your lines.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your.

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