Spin Master Corp. reported second-quarter revenue of $276.7 million increased 54.2 percent from $179.4 million a year ago. Excluding revenue from Swimways, which was acquired in Q3 2016, Q2 revenue grew 37.4 percent
In constant-currency terms, revenue increased 55.9 percent
Gross Product Sales increased 52.2 percent to $283.2 million, compared to $186.0 million, driven by sales of PAW Patrol, Hatchimals and Swimways, which more than offset declines in Secret Life of Pets and Angry Birds licensed products and Spy Gear.
Net income was $22.1 million, or 22 cents per share, compared with $3.6 million, or 4 cents per share. Adjusted net income1 was $22.2 million, or 22 cents per share, compared to $11.7 million, or 12 cents, a year ago.
Adjusted EBITDA was $43.7 million compared with $25.4 million; Adjusted EBITDA Margins1 increased to 15.8 percent compared to 14.2 percent, primarily due to improved operating leverage
“The second quarter of 2017 was the highest revenue and EBITDA we have ever recorded,” said Anton Rabie, Spin Master’s chairman and co-chief executive officer. “Sales growth, complemented by improved operating leverage, resulted in Q2 Adjusted EBITDA1 increasing over 72 percent from Q2 2016. The quarter was also highlighted by the launch of Hatchimals Colleggtibles, which have been selling out at retail globally; the success of this product demonstrates the strength of Hatchimals as a recognizable global brand. Subsequent to quarter-end, we acquired Aerobie, a leading manufacturer of outdoor flying disks and sports toys. The acquisition underlines our focus on leveraging our strong foundation in the Outdoor business segment, following our 2016 acquisition of Swimways.”
On April 28, 2017, Spin Master acquired certain assets of Marbles, a leader in brain-building and high-quality games, for consideration of $4.7 million, which was paid in Q1 2017 and funded from existing cash resources. The company incurred approximately $1.2 million in transaction related costs. Marbles’ operations are included in the Activities, Games & Puzzles and Fun Furniture business segment
“Spin Master continues to successfully execute on its growth strategies, demonstrated by our exceptional Q2 results,” said Ben Gadbois, Spin Master’s president and COO. “Our 36-month brand innovation pipeline is a key driver in our very strong revenue growth. Our international business continues to expand. During the quarter we launched PAW Patrol and Hatchimals in China, and initial reception to these brands has been very positive. Our acquisition strategy continues to contribute to revenue and earnings growth. Having just closed Marbles and Aerobie, our 6th and 7th acquisitions post our initial public offering, we are maintaining our proven acquisition approach to ensure we leverage Spin Master’s global infrastructure and capitalize on growth opportunities.”
“We continue to see tremendous value in content creation,” said Ronnen Harary, Spin Master’s co-chief executive officer. “Innovative, original and meaningful content represents a valuable proprietary platform from which we are able to develop new products, entertainment franchises and digital properties. We are executing on the strategy of content creation through our internally developed entertainment properties, such as PAW Patrol, Rusty Rivets and a new slate of exciting properties for 2018 and beyond, but also by partnering on new and established licensed content.”
For the full year 2017, excluding Swimways, Spin Master now expects organic Gross Product Sales growth to be higher than the guidance provided in connection with the release of Q1 2017 results in May 2017, with organic Gross Product Sales now expected to grow in the mid 20 percent range, relative to 2016. Previous guidance provided expected organic Gross Product Sales growth to be at the upper end of the company’s mid to high single digit long term organic Gross Product Sales1 growth target range. Including Swimways, Spin Master now expects Gross Product Sales1 growth in the low 30 percent range compared to 2016. Previous guidance expected Gross Product Sales1 growth in the low teens compared to 2016. Over the long term, the growth rate for organic Gross Product Sales1 is expected to converge towards the company’s long-term target of mid-to-high single digit growth. Seasonality for 2017 is expected to be consistent with prior years. Adjusted EBITDA Margins are also expected to increase compared with prior guidance. Including Swimways and Toca Boca, Adjusted EBITDA Margins in 2017 are now expected to increase by approximately 100 basis points over 2016. Previous guidance expected Adjusted EBITDA Margins for 2017 to be in line with 2016.
On July 28, 2017, Spin Master acquired certain assets of Aerobie Inc., a leading manufacturer of outdoor flying disks and sports toys, for $10.65 million. The purchase consideration was financed from internal cash resources. The Aerobie portfolio will be managed by Swimways as part of the Coop family of outdoor leisure products and will be reported in the Outdoor business segment. Aerobie was founded in Palo Alto, CA in 1984 and focuses on creating high performance flying toys, resulting in the ground-breaking flying ring format. The Aerobie portfolio of flying discs includes the Pro Ring, Superdisc and Sprint Ring and the Orbiter Boomerang.
Photo courtesy SwimWays