Spin Master sees sales surge in Q3

With demand for Hatchimals products accelerating, the Toronto-based toy and entertainment company posted record-breaking revenues and earnings in its third quarter.
November 8, 2017

Toronto, Canada-based Spin Master saw its revenue and profitability reach an all-time high in Q3 2017, with sales up 27.6% to the tune of US$606.1 million, and earnings rising 27.9% to US$170.3 million.

During the period, Spin Master reported US$660.9 million in gross product sales (up 27.4% compared to 2016), thanks largely in part to continued Hatchimals momentum, as well as outdoor toy sales.

Gross sales for the company’s Remote Control and Interactive Characters segment increased by 78.3% to US$264.1 million, primarily due to sales of Hatchimals, Hatchimals Colleggtibles and Luvabella products. The Outdoor segment also saw significant growth (69.2%), with gross product sales totaling US$8.2 million. (Spin Master acquired outdoor toyco Aerobie at the end of Q2 2017 for US$10.7 million. Moving forward, 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.)

Gross sales for the Pre-School and Girls segment grew by 19% to US$215.7 million, driven by PAW Patrol and Rusty Rivets. The Activities, Games & Puzzles and Fun Furniture segment increased by 2.5% to US$128.2 million, thanks to increases in Kinetic Rock, Dr. Dreadful and Etch A Sketch. Spin Master’s Boys Action and High-Tech Construction segment, however, declined by 24.6% to US$44.7 million. The decrease is primarily due to soft sales for Angry Birds, Teenage Mutant Ninja Turtles and Secret Life of Pets brands. The segment also saw declines in Q2 and in Q1.

In North America, the company’s gross product sales increased by 22.6%, and were up by 37.2% in Europe. Strong sales for properties like Cardinal Games, PAW Patrol and Hatchimals–which recently launched its newest iteration, Hatchimals Surprise–offset declines in brands like Air Hogs and Zoomer.

Spin Master also reported that Other Revenue–primarily merchandising royalty and television distribution income from products marketed by third parties using the company’s owned IP (like PAW Patrol), as well as app revenue from Toca Boca and Sago Mini–was US$17.7 million, marking a slight increase over the US$17.3 million posted in the same period last year.

Net income for the third quarter was US$108.8 million or US$1.07 per share (an increase over US$0.82 per share in Q3 2016). Adjusted net income, meanwhile, increased from US$87.5 million last year to US$111.7 million in Q3 2017 for US$1.10 per share. Following its Q3 2017 results, Spin Master confirmed its outlook for the full-year 2017 and expects its organic gross product sales growth–excluding Swimways–to be in the mid-20% range relative to 2016. Including Swimways, which was acquired by the company in Q3 2016, Spin Master expects gross product sales growth in the low 30% range.

Spin Master did report, however, that its sales, general and administrative expenses increased slightly (26.8% compared to 26.2% in Q3 2016) due to higher warehousing expenses, as well as a US$5.4-million charge from Toys “R” Us’s bankruptcy filing. Spin Master’s growth comes after toymakers like Mattel, Hasbro and Jakks Pacific all reported that TRU’s September bankruptcy protection filing had a negative impact on their quarterly revenues, with Mattel and Jakks both reporting Q3 losses.

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