Hatchimals helps Spin Master crack US$1.15 billion in sales

After a flurry of acquisitions and Hatchimals sales, the Canadian toy company capped off 2016 with Q4 sales of US$338.4 million, and full-year earnings up 28% to US$205.5 million.
March 14, 2017

Spin Master is coming off a happy holiday season, thanks to the runaway success of its Hatchimals toy property. The Toronto, Canada-based toy and entertainment company generated US$1.15 billion in revenue last year, representing an increase of 31.3% over 2015.

That growth was due in part to stellar holiday sales, which saw a 30.9% rise in Q4 2016 revenue to the tune of US$338.4 million.

Hatchimals—the eggs that open to reveal their inner colorful animals—were a top-selling toy last Christmas, helping Spin Master’s Remote Control and Interactive Characters category grow to US$282.8 million in fiscal 2016, an increase of 21.2% over 2015. In Q4 specifically, the category swelled by 85.2% to US$92.6 million.

The Hatchimals property was first introduced in Q3, when sales of the colorful creatures contributed to gross product sales of US$518.6 million (an increase of 18% over 2015).

In addition to Hatchimals, Spin Master’s Q3 acquisition of outdoor and sports toys company Swimways Corporation helped the company’s bottom line in 2016. Spin Master acquired Swimways for US$85 million in cash, and by the end of Q4, the new outdoor category’s gross product sales reached US$19.1 million.

In terms of category growth, Activities, Games & Puzzles and Fun Furniture (up 46% to US$337.8 million) and Pre-School and Girls (up 41.4% to US$460.5 million) took the top two spots.

The Pre-School and Girls category, in particular, saw significant growth in Q4, rising 40.4% to US$125.1 million over 2015. Activities, Games & Puzzles and Fun Furniture grew by 9.2% in Q4 to US$109.5 million.

The growth of these categories was offset by slight declines in the Boys Action and High-Tech Construction category, which was down 19.7% to US$154.4 million in fiscal 2016. The holiday season was even harder for the unit, which was down 27.7% in Q4 to US$34.8 million. Gross product sales in this category dropped due to declines in products based on the Meccano, Star Wars and How to Train Your Dragon properties. These dips were partially offset by the success of goods related to Secret Life of Pets and Angry Birds.

Other Revenue, which reflects third-party merchandising royalty and TV distribution income, as well as app sales from Toca Boca and Sago Mini (acquired in Q2 2016), increased 53.8% to US$12.3 million in Q4 2016. And for fiscal 2016, this division generated a 149.5% increase to US$47.9 million. Notably, adjusted earnings in 2016 rose 28.1% to US$205.5 million, driven by increased licensing and merchandising royalty income from sales of products under the company’s owned brands like Paw Patrol.

Overall, gross profit in Q4 2016 increased 30.7% to US$172.0 million, and net income was US$2.7 million, compared with a loss of US$(13.3) million in Q4 2015.

Geographically speaking, Q4 2016 gross product sales increased 21.9% in North America, 59.4% in Europe and 34.8% for other territories. The company says it’s eyeing significant opportunities in EuropeAsia and Australia as it moves toward a goal of deriving 40% of sales from international customers in the next few years.

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