JAKKS Pacific (JAKK) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $148.6 million, down 11% year-over-year, mainly due to fewer new film releases and reduced orders from key customers, with both Toys/Consumer Products and Costumes segments declining.

• Gross margin improved by 130 basis points to 32.0%, the best Q2 margin since 2012, despite lower sales.

• Operating income for Q2 was $7.6 million (5.1% of net sales), down from $16.4 million (9.9%) in Q2 2023.

• Net income attributable to common stockholders was $5.3 million ($0.47 per diluted share), compared to $6.1 million ($0.58) in Q2 2023.

• The company redeemed all Series A Preferred Stock in Q1 2024, eliminating related liabilities and future dividend obligations.

Financial highlights

• Adjusted EBITDA for Q2 was $12.3 million (8.3% of net sales), down from $20.7 million (12.4%) in Q2 2023.

• Adjusted net income for Q2 was $7.3 million ($0.65 per diluted share), down from $13.3 million ($1.26) in Q2 2023.

• Trailing twelve-month adjusted EBITDA was $51.2 million (7.6% of net sales), down from $66.9 million (9.2%) a year ago.

• Cash and cash equivalents at June 30, 2024, were $17.9 million, down from $72.6 million at year-end 2023.

• Inventory stood at $51.3 million, down from $65.1 million a year ago and $52.6 million at year-end 2023.

Outlook and guidance

• Management anticipates improved performance in H2 2024, driven by major launches for Disney's Moana 2, Sonic the Hedgehog 3, The Simpsons, and Authentic Brands Group.

• Retail support is strong for upcoming launches, and new evergreen and countercyclical product lines are expected to help smooth seasonality.

• No material changes to risk factors or critical accounting policies were noted for the remainder of 2024.