Financial Data and Key Metrics Changes - Year-to-date net sales decreased by 21% compared to the previous year, with a 24% decline in toy consumer products and an 8% decline in costumes [7] - For Q3, sales in toys and consumer products dropped 41% to $156.1 million, marking the lowest Q3 in a long time, while costumes saw a smaller decline of 4% to $55.1 million [7][9] - Adjusted EBITDA for the quarter was $36.5 million, down from $74.4 million in the same quarter last year, leading to a trailing 12-month EBITDA of $29 million [10][20] - Gross margin for the quarter was 32%, down from 33.8% the previous year, reflecting the impact of tariff costs [9][19] Business Line Data and Key Metrics Changes - FOB sales were particularly challenged, with 93% of the year-over-year drop in sales attributed to FOB shipments [11] - International business remained roughly flat year-to-date, with a slight decline of 0.3%, but would be up 4% if Canada were excluded from North America reported numbers [12] - The company noted that many of its newer own-brand or private label launches were downgraded to fall soft launches due to delayed planogram sets [15] Market Data and Key Metrics Changes - Retail inventory was up mid-single digits year-to-date, while U.S. POS at the top three accounts was relatively subpar from both dollar and unit perspectives [18] - The company observed that leading manufacturers showed double-digit declines in dollars during the first five weeks of the season compared to last year [23] Company Strategy and Development Direction - The company is focusing on a robust and innovative product pipeline for 2026-2027, emphasizing margin preservation and careful pricing discipline [4][5] - Management is prioritizing international expansion and maintaining low inventory levels in the U.S. to prepare for a stronger 2026 [6][39] - The company is actively engaging with licensors to recalibrate royalty rates to avoid paying royalties on tariff values, which could further increase consumer prices [18] Management's Comments on Operating Environment and Future Outlook - Management highlighted the uncertainty in the retail environment due to fluctuating tariff levels, which has delayed holiday purchase orders [4] - The company is optimistic about the upcoming Super Mario Brothers movie as a potential catalyst for sales normalization [40] - Management expressed confidence in the long-term growth prospects, particularly in international markets, and is preparing for a strong 2026 [50][51] Other Important Information - The company renewed its S-3 shelf registration to maintain flexibility over the next three years, despite having no immediate plans for its use [21] - A cash dividend of $0.25 per share was approved for Q4, payable on December 29 [21] Q&A Session Summary Question: Key drivers for the business model moving forward - Management emphasized the need for certainty at retail and noted that recent tariff adjustments have provided more clarity for retailers [35][36] Question: Impact of the Super Mario Brothers movie - Management expressed excitement about the movie's potential to drive sales and noted that retailers are prepared for its release [40] Question: Normalization of sales and tariff impacts - Management confirmed that the first quarter had nominal impact, the second quarter saw significant cancellations, and the third quarter was heavily affected by tariffs [48][49] Question: Strategic M&A opportunities - Management acknowledged various opportunities for acquisitions but indicated a preference to assess the market post-2025 before making moves [56]

Financial Performance - Q3 2025 - Net sales for Q3 2025 were $211.2 million, a 34% decrease year-over-year[9] - Gross profit for Q3 2025 was $67.6 million, down from $108.8 million in Q3 2024, a 38% decrease[9, 45] - Operating income for Q3 2025 was $29.4 million, compared to $68.1 million in Q3 2024, a 57% decrease[9] - Adjusted EBITDA for Q3 2025 was $36.5 million, compared to $74.4 million in Q3 2024[9] - Adjusted net income attributable to common stockholders for Q3 2025 was $20.6 million ($1.80 per diluted share), compared to $54.0 million ($4.79 per diluted share) in Q3 2024[9] Financial Performance - Year to Date (9 Months) - Net sales year-to-date were $443.6 million, a 21% decrease year-over-year[9] - Gross profit year-to-date was $145.7 million, down 18% compared to $177.5 million in the first nine months of 2024[9] - Operating income year-to-date was $22.8 million, compared to $54.4 million in the first nine months of 2024[9] - Adjusted EBITDA for the first nine months of 2025 was $39.2 million, compared to $69.4 million in 2024[9] - Adjusted net income attributable to common stockholders year-to-date was $20.6 million ($1.79 per diluted share), down from $50.0 million ($4.50 per diluted share) in 2024[9] Sales by Category - Toys/Consumer Products net sales for Q3 2025 were $156.1 million, a 41% decrease year-over-year[13] - Costumes net sales for Q3 2025 were $55.1 million, a 4% decrease year-over-year[17]

Core Viewpoint - JAKKS Pacific, Inc. reported a significant decline in net sales for the third quarter and the first nine months of 2025, attributed to reduced consumer demand and challenges related to tariffs, while emphasizing a commitment to operational efficiency and product innovation for long-term growth [3][5][11]. Financial Performance - Net sales for Q3 2025 were $211.2 million, a decrease of 34% from $321.6 million in Q3 2024 [5][11]. - For the first nine months of 2025, net sales totaled $443.6 million, down 21% from $560.3 million in the same period last year [6][11]. - The Toys/Consumer Products segment saw a 41% decline in global sales to $156.1 million in Q3 2025, while Costumes sales decreased by 4% to $55.1 million [5][11]. - U.S. sales in Q3 2025 were $154.5 million, down 40% from $255.3 million in Q3 2024, and Rest of World sales were $56.7 million, down 15% from $66.3 million [5][11]. Profitability Metrics - Gross profit for Q3 2025 was $67.6 million, down from $108.8 million in Q3 2024, resulting in a gross margin of 32.0%, compared to 33.8% in the prior year [11]. - Adjusted net income attributable to common stockholders for Q3 2025 was $20.6 million, or $1.80 per diluted share, compared to $54.0 million, or $4.79 per diluted share, in Q3 2024 [11]. - Trailing twelve-month EBITDA as of September 30, 2025, was $29.0 million, down from $58.5 million a year earlier [7][11]. Cash and Inventory Management - Cash and cash equivalents totaled $27.8 million as of September 30, 2025, an increase from $22.3 million at the same time last year, but down from $70.1 million as of December 31, 2024 [7]. - Inventory levels rose to $71.5 million compared to $63.5 million a year ago, indicating a need for improved inventory management [7]. Dividend Declaration - The Board of Directors declared a quarterly dividend of $0.25 per share, payable on December 29, 2025, to shareholders of record on November 28, 2025 [8]. Management Commentary - The CEO highlighted the importance of maintaining margins and supporting retail partners while preparing for a strong product pipeline extending into 2026 and beyond [3][4]. - The company remains confident in its long-term trajectory by focusing on operational efficiency, cash generation, and product innovation [5].

Core Insights - Crude Value Insights provides an investment service and community focused on the oil and natural gas sector, emphasizing cash flow and the companies that generate it, which leads to value and growth prospects with real potential [1] - Subscribers have access to a model account with over 50 stocks, in-depth cash flow analyses of exploration and production (E&P) firms, and live chat discussions about the sector [1] Subscription Offer - A two-week free trial is available for new subscribers, allowing them to explore the services related to oil and gas investments [2]

Core Insights - Crude Value Insights provides an investment service and community focused on the oil and natural gas sector, emphasizing cash flow and the companies that generate it [1] - The service includes access to a 50+ stock model account, in-depth cash flow analyses of exploration and production (E&P) firms, and live chat discussions about the sector [1] Offerings - Subscribers can take advantage of a two-week free trial to explore the services related to oil and gas investments [2]

Core Viewpoint - JAKKS Pacific, Inc. will announce its third quarter 2025 financial results on October 30, 2025, after the market closes [1] Group 1: Financial Results Announcement - The company invites analysts, investors, and media to a teleconference on October 30, 2025, at 5:00 p.m. ET to discuss the financial results and future plans [2] - A live webcast of the call will be available on the company's Investor Relations page [2] - Participants are encouraged to join the call ten minutes early to avoid delays [2] Group 2: Company Overview - JAKKS Pacific, Inc. is a leading designer, manufacturer, and marketer of toys and consumer products, headquartered in Santa Monica, California [3] - The company offers popular proprietary brands such as AirTitans®, Disguise®, and Fly Wheels®, among others, and features a range of entertainment-inspired products [3] - JAKKS Pacific aims to make a positive impact on children's lives through its products and charitable donations [3]

Core Insights - JAKKS Pacific, Inc. has launched a new line of The Wizard of Oz products in partnership with Warner Bros. Discovery Global Consumer Products, available exclusively at Walmart, aimed at bringing the classic film's characters and moments to life through imaginative play [1][5] Product Offerings - The Wizard of Oz Dorothy Dress Up Set features the iconic blue and white checked pinafore style dress, priced at $19.97, designed for sizes 4-6X [2] - The Dorothy Accessory Set complements the dress with essential items including a wicker basket, plush Toto, and Ruby Red Slippers, also priced at $19.97 [3] - The Petite Dolls Collection includes six-inch dolls of Dorothy, Tin Man, Scarecrow, and Cowardly Lion, crafted with soft fashions and rooted hair, available for $34.97 [4] Company Background - JAKKS Pacific, Inc. is a leading designer, manufacturer, and marketer of toys and consumer products, headquartered in Santa Monica, California, with a diverse range of proprietary brands and licensed properties [6] - Warner Bros. Discovery Global Consumer Products extends the company's entertainment brands into consumer products, partnering with top licensees globally for various merchandise inspired by major franchises [7]

Core Insights - Disguise, a division of JAKKS Pacific, has won the Best Licensed Dress-Up or Partyware Range award for its Pokémon costume collection in EMEA at the Licensing Awards held on September 16, 2025 [1][2] - The award highlights the quality and variety of costumes offered by Disguise, which has been manufacturing Pokémon costumes in North America since 2019 and expanded into EMEA in late 2024 [2][3] - The addition of Pokémon to Disguise's portfolio has significantly contributed to the company's international growth, leveraging the brand's strong awareness and appeal across various age groups [3] Company Overview - Disguise has been a leader in the dress-up and roleplay industry since 1987, creating innovative costumes and accessories for major licensed brands and its proprietary brands [3] - The company produces millions of costumes annually, catering to a wide range of retailers including specialty and pop-up stores [3] - JAKKS Pacific, the parent company, is a prominent designer and manufacturer of toys and consumer products, headquartered in Santa Monica, California, with a diverse portfolio of proprietary and licensed brands [4]

Core Insights - JAKKS Pacific, Inc. has launched a new baby doll brand called Disney Darlings, aimed at children aged 2-5 years, in collaboration with Disney [1][5] - The Disney Darlings line features beloved Disney characters and includes interactive play modes, enhancing the nurturing experience for children [2][3] Product Details - Disney Darlings dolls celebrate characters like Minnie Mouse, Stitch, Marie, and Winnie the Pooh, and come with a signature wand accessory [2] - Each doll is 13 inches tall, hard-bodied, and includes features such as glittery eyes, removable pajamas, and a birth certificate for personalization [4] - The dolls offer four interactive modes: Sparking the Magic/Waking, Feeding, Playing, and Rocking to Sleep, providing a unique play experience [2][4] Market Position - The launch of Disney Darlings marks a significant milestone for JAKKS Pacific in the nurturing doll category, building on its successful collaboration with Disney [5] - The dolls are available in multiple skin tones, hair, and eye colors, promoting inclusivity [6]

PART I – FINANCIAL INFORMATION This section details the company's financial performance and position for the reported periods [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, segment performance, and financial position for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity at specific points in time Balance Sheet Data | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total Assets | $444,869 | $438,718 | (1.4%) | | Total Liabilities | $204,036 | $201,981 | (1.0%) | | Total Stockholders' Equity | $240,833 | $236,737 | (1.7%) | | Cash and cash equivalents | $69,936 | $38,195 | (45.4%) | | Inventory | $52,780 | $71,811 | 36.0% | | Accounts payable - Meisheng | $13,461 | $0 | (100%) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This statement details the company's revenues, expenses, and net income or loss over specific periods Statements of Operations Data | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (YoY) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Net Sales | $119,094 | $148,619 | (19.9%) | $232,347 | $238,695 | (2.7%) | | Gross Profit | $39,023 | $47,585 | (18.0%) | $78,036 | $68,637 | 13.7% | | Income (loss) from operations | $(2,783) | $7,643 | (136.4%) | $(6,540) | $(13,681) | 52.2% | | Net income (loss) | $(2,319) | $5,266 | (144.0%) | $(4,701) | $(8,959) | 47.5% | | EPS - Basic | $(0.21) | $0.49 | (142.9%) | $(0.42) | $(0.75) | 44.0% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the company's equity accounts, including retained earnings and share capital Stockholders' Equity Data | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Stockholders' Equity | $240,833 | $236,737 | (1.7%) | | Accumulated Deficit | $(39,692) | $(49,965) | (25.9%) | | Share-based compensation expense (6 months) | N/A | $5,740 | N/A | | Cash dividend declared (6 months) | N/A | $(5,572) | N/A | - The company declared and paid two quarterly cash dividends of **$0.25 per share** during the six months ended June 30, 2025, totaling **$5.57 million**, whereas no dividends were declared or paid in 2024[12](index=12&type=chunk)[80](index=80&type=chunk) - In March 2024, the company redeemed all outstanding Series A Senior Preferred Stock for **$20.0 million cash** and **$15.0 million** in common shares[14](index=14&type=chunk)[86](index=86&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by the company across operating, investing, and financing activities Cash Flow Data | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | | Net cash used in operating activities | $(15,931) | $(27,666) | 42.4% | | Net cash used in investing activities | $(6,015) | $(6,174) | 2.6% | | Net cash used in financing activities | $(9,400) | $(20,131) | 53.3% | | Net decrease in cash, cash equivalents and restricted cash | $(31,346) | $(53,971) | 41.9% | | Cash, cash equivalents and restricted cash, end of period | $43,056 | $17,902 | 140.5% | - Cash paid for income taxes significantly decreased from **$13.09 million** in 2024 to **$2.20 million** in 2025 for the six-month period[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides additional information and explanations for the figures presented in the financial statements [Note 1 — Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) This note describes the accounting principles, policies, and new pronouncements adopted by the company - The company adopted ASU 2020-06 (Accounting for Convertible Instruments and Contracts in an Entity's Own Equity) on January 1, 2024, with no material impact[26](index=26&type=chunk) - ASU 2023-07 (Segment Reporting) was adopted as of December 31, 2024, leading to incremental segment disclosures[27](index=27&type=chunk) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2 — Business Segments, Geographic Data and Sales by Major Customers](index=10&type=section&id=Note%202%20%E2%80%94%20Business%20Segments,%20Geographic%20Data%20and%20Sales%20by%20Major%20Customers) This note provides detailed financial information broken down by the company's operating segments, geographic regions, and key customers - The company's two business segments are Toys/Consumer Products (TCP) and Costumes[32](index=32&type=chunk) Segment Performance (3 Months Ended Jun 30) | Segment (3 Months Ended Jun 30, in thousands) | 2025 Net Sales | 2024 Net Sales | Change (YoY) | 2025 Income (loss) from operations | 2024 Income (loss) from operations | Change (YoY) | | :-------------------------------------------- | :------------- | :------------- | :----------- | :--------------------------------- | :--------------------------------- | :----------- | | Toys/Consumer Products | $80,379 | $104,570 | (23.1%) | $(1,668) | $9,710 | (117.2%) | | Costumes | $38,715 | $44,049 | (12.0%) | $(1,115) | $(2,067) | 46.1% | | Total | $119,094 | $148,619 | (19.9%) | $(2,783) | $7,643 | (136.4%) | Segment Performance (6 Months Ended Jun 30) | Segment (6 Months Ended Jun 30, in thousands) | 2025 Net Sales | 2024 Net Sales | Change (YoY) | 2025 Loss from operations | 2024 Loss from operations | Change (YoY) | | :-------------------------------------------- | :------------- | :------------- | :----------- | :------------------------ | :------------------------ | :----------- | | Toys/Consumer Products | $187,817 | $187,480 | 0.2% | $(748) | $(7,500) | 90.0% | | Costumes | $44,530 | $51,215 | (13.1%) | $(5,792) | $(6,181) | 6.3% | | Total | $232,347 | $238,695 | (2.7%) | $(6,540) | $(13,681) | 52.2% | Sales by Major Customer (6 Months Ended Jun 30) | Major Customer (6 Months Ended Jun 30) | 2025 Amount (in thousands) | 2025 % of Net Sales | 2024 Amount (in thousands) | 2024 % of Net Sales | | :------------------------------------- | :------------------------- | :------------------ | :------------------------- | :------------------ | | Target | $66,382 | 28.6% | $68,079 | 28.5% | | Walmart | $60,074 | 25.8% | $56,039 | 23.5% | | Total | $126,456 | 54.4% | $124,118 | 52.0% | [Note 3 — Inventory](index=14&type=section&id=Note%203%20%E2%80%94%20Inventory) This note details the composition of inventory and the related obsolescence reserve Inventory Details | Metric (in thousands) | Jun 30, 2025 | Dec 31, 2024 | Change | | :-------------------- | :----------- | :----------- | :----- | | Finished goods inventory | $71,811 | $52,780 | 36.0% | | Inventory obsolescence reserve | $3,300 | $10,900 | (69.7%) | [Note 4 — Revenue Recognition and Reserve for Sales Returns and Allowances](index=14&type=section&id=Note%204%20%E2%80%94%20Revenue%20Recognition%20and%20Reserve%20for%20Sales%20Returns%20and%20Allowances) This note explains the company's revenue recognition policies and the accounting for sales returns and allowances - Revenue is recognized at the point of sale when control of goods is transferred to customers[52](index=52&type=chunk) - The reserve for sales returns and allowances decreased by **18.7%** from **$35.8 million** at December 31, 2024, to **$29.1 million** at June 30, 2025[57](index=57&type=chunk) Sales Commissions and Shipping Costs | Expense (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Sales commissions | $500 | $300 | $900 | $600 | | Shipping and handling costs | $1,700 | $1,400 | $3,900 | $3,000 | [Note 5 — Credit Facilities](index=16&type=section&id=Note%205%20%E2%80%94%20Credit%20Facilities) This note describes the company's credit arrangements, including new facilities and debt extinguishments - The company terminated its **$67.5 million** JPMorgan ABL Facility on June 24, 2025, with no outstanding borrowings[61](index=61&type=chunk) - A **$0.4 million** loss on debt extinguishment was recorded due to the write-off of unamortized debt issuance costs from the JPMorgan ABL Facility[61](index=61&type=chunk) - A new **$70.0 million** senior secured revolving credit facility with BMO Bank N.A. was established on June 24, 2025, maturing on June 24, 2030, with no outstanding borrowings and **$70.0 million** excess borrowing availability as of June 30, 2025[63](index=63&type=chunk)[66](index=66&type=chunk) [Note 6 — Income Taxes](index=17&type=section&id=Note%206%20%E2%80%94%20Income%20Taxes) This note provides details on the company's income tax expense, benefit, and effective tax rates Income Tax Data | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax benefit (expense) | $(606) (in thousands) | $2,281 (in thousands) | $(1,769) (in thousands) | $(4,447) (in thousands) | | Effective tax rate | 20.7% | 30.2% | 27.3% | 33.2% | - The decrease in the effective tax rate for the three months ended June 30, 2025, was primarily due to a change in the forecasted annual effective tax rate driven by the jurisdictional mix of earnings[71](index=71&type=chunk) [Note 7 — Earnings (Loss) Per Share](index=17&type=section&id=Note%207%20%E2%80%94%20Earnings%20(Loss)%20Per%20Share) This note presents the basic and diluted earnings or loss per share calculations Earnings Per Share Data | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | EPS - Basic | $(0.21) | $0.49 | $(0.42) | $(0.75) | | EPS - Diluted | $(0.21) | $0.47 | $(0.42) | $(0.75) | | Weighted average common shares outstanding - basic (in thousands) | 11,146 | 10,801 | 11,146 | 10,577 | - Potentially dilutive restricted stock units were excluded from diluted loss per share computation for both periods as they were anti-dilutive[75](index=75&type=chunk) [Note 8 — Common Stock and Preferred Stock](index=17&type=section&id=Note%208%20%E2%80%94%20Common%20Stock%20and%20Preferred%20Stock) This note details transactions related to common and preferred stock, including repurchases and dividends - The company repurchased **$3.8 million** of common stock for employee tax withholding in 2025, compared to **$5.1 million** in 2024[78](index=78&type=chunk)[79](index=79&type=chunk) - A quarterly cash dividend of **$0.25 per share** was declared on April 28, 2025, and paid on June 27, 2025, with no dividend declared or paid in 2024[80](index=80&type=chunk) - All outstanding Series A Senior Preferred Stock was redeemed on March 11, 2024, for **$20.0 million cash** and **571,295 common shares** (valued at **$15.0 million**)[86](index=86&type=chunk)[97](index=97&type=chunk) [Note 9 — Goodwill](index=20&type=section&id=Note%209%20%E2%80%94%20Goodwill) This note discusses the company's goodwill and the results of impairment tests - No goodwill impairment was determined for the six months ended June 30, 2025, or June 30, 2024[103](index=103&type=chunk) - An interim quantitative impairment test was conducted as of May 31, 2025, due to macroeconomic developments (rising import costs), confirming that the fair value of reporting units exceeded their carrying amounts[102](index=102&type=chunk) [Note 10 — Comprehensive Income (Loss)](index=20&type=section&id=Note%2010%20%E2%80%94%20Comprehensive%20Income%20(Loss)) This note presents the components of comprehensive income or loss, including foreign currency translation adjustments Comprehensive Income Data | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(2,319) | $5,266 | $(4,701) | $(8,959) | | Foreign currency translation adjustment | $3,637 | $(116) | $4,265 | $(681) | | Comprehensive income (loss) | $1,318 | $5,150 | $(436) | $(9,640) | [Note 11 — Litigation and Contingencies](index=20&type=section&id=Note%2011%20%E2%80%94%20Litigation%20and%20Contingencies) This note outlines the company's legal proceedings and contingent liabilities - The company accrues for losses from legal proceedings when probable and reasonably estimable[105](index=105&type=chunk) - The company provides indemnifications to various parties, including licensors, customers, officers, and directors, with no significant costs for D&O indemnifications in the last five years[106](index=106&type=chunk)[107](index=107&type=chunk) [Note 12 — Share-Based Payments](index=22&type=section&id=Note%2012%20%E2%80%94%20Share-Based%20Payments) This note details the company's share-based compensation expense and unrecognized costs Share-Based Compensation Expense | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Share-based compensation expense | $3,188 | $2,545 | $5,740 | $5,094 | - As of June 30, 2025, total unrecognized compensation cost for non-vested restricted stock units was **$15.9 million**, with a weighted-average recognition period of **1.9 years**[111](index=111&type=chunk) [Note 13 — Fair Value Measurements](index=22&type=section&id=Note%2013%20%E2%80%94%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for financial instruments - Money market funds and investments in employee deferred compensation trusts are measured at fair value using Level 1 inputs[116](index=116&type=chunk) - The preferred stock derivative liability, previously a Level 3 liability, was extinguished on March 11, 2024[117](index=117&type=chunk)[118](index=118&type=chunk) [Note 14 — Related Party Transactions](index=25&type=section&id=Note%2014%20%E2%80%94%20Related%20Party%20Transactions) This note discloses transactions and balances with related parties - Meisheng Cultural Company Limited ceased to be a related party as of December 6, 2024[119](index=119&type=chunk) - Amounts due to Meisheng for inventory decreased from **$13.5 million** at December 31, 2024, to **zero** at June 30, 2025[9](index=9&type=chunk)[120](index=120&type=chunk) [Note 15 — Prepaid Expenses and Other Assets](index=25&type=section&id=Note%2015%20%E2%80%94%20Prepaid%20Expenses%20and%20Other%20Assets) This note provides a breakdown of prepaid expenses and other current assets Prepaid Expenses and Other Assets Details | Metric (in thousands) | Jun 30, 2025 | Dec 31, 2024 | Change | | :-------------------- | :----------- | :----------- | :----- | | Prepaid expenses and other assets | $22,575 | $14,141 | 59.6% | | Income tax receivable | $10,246 | $8,798 | 16.5% | | Prepaid expenses | $5,780 | $2,306 | 150.7% | | Royalty advances | $2,902 | $941 | 208.4% | [Note 16 — Subsequent events](index=25&type=section&id=Note%2016%20%E2%80%94%20Subsequent%20events) This note reports significant events that occurred after the balance sheet date - Changes to the US Tax code were signed into law on July 4, 2025, and will be accounted for in Q3 2025[122](index=122&type=chunk) - A quarterly cash dividend of **$0.25 per common share** was declared on July 22, 2025, payable on September 30, 2025[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year, covering net sales, cost of sales, selling, general and administrative expenses, income taxes, seasonality, and liquidity, highlighting key drivers of performance changes [Disclosure Regarding Forward-Looking Statements](index=26&type=section&id=Disclosure%20Regarding%20Forward-Looking%20Statements) This section cautions readers about forward-looking statements and potential risks - The report contains forward-looking statements, and actual results may differ materially from expectations due to various factors[124](index=124&type=chunk) - The company does not commit to publicly update or revise any forward-looking statements[124](index=124&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) This section highlights the company's significant accounting policies and estimates - Critical accounting policies and estimates did not materially change during the first six months of 2025[125](index=125&type=chunk) [New Accounting Pronouncements](index=26&type=section&id=New%20Accounting%20Pronouncements) This section refers to details on recently adopted or issued accounting standards - Refer to Note 1 for details on new accounting pronouncements[126](index=126&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance over the reporting periods [Comparison of the Three Months Ended June 30, 2025 and 2024](index=27&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's financial results for the three-month periods [Net Sales](index=27&type=section&id=Net%20Sales%20(3%20Months)) This section analyzes net sales performance for the three months ended June 30 Net Sales by Segment (3 Months) | Segment (in thousands) | 2025 Net Sales | 2024 Net Sales | Change (YoY) | | :--------------------- | :------------- | :------------- | :----------- | | Toys/Consumer Products | $80,379 | $104,570 | (23.1%) | | Costumes | $38,715 | $44,049 | (12.0%) | | Total Net Sales | $119,094 | $148,619 | (19.9%) | - Toys/Consumer Products sales decreased due to lower North American demand from higher importation costs, despite a **41.1% increase** in international net sales[129](index=129&type=chunk) [Cost of Sales](index=27&type=section&id=Cost%20of%20Sales%20(3%20Months)) This section analyzes the cost of goods sold for the three months ended June 30 Cost of Sales by Segment (3 Months) | Segment (in thousands) | 2025 Cost of Sales | 2024 Cost of Sales | Change (YoY) | 2025 % of Net Sales | 2024 % of Net Sales | | :--------------------- | :----------------- | :----------------- | :----------- | :------------------ | :------------------ | | Toys/Consumer Products | $53,293 | $67,519 | (21.0%) | 66.3% | 64.5% | | Costumes | $26,778 | $33,515 | (20.0%) | 69.3% | 76.1% | | Total Cost of Sales | $80,071 | $101,034 | (20.7%) | 67.2% | 68.0% | - Gross profit margin improved to **32.8%** in Q2 2025 from **32.0%** in Q2 2024, driven by a favorable product mix in TCP and better pricing/lower reserves in Costumes[127](index=127&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) [Selling, General and Administrative Expenses](index=27&type=section&id=Selling,%20General%20and%20Administrative%20Expenses%20(3%20Months)) This section analyzes SG&A expenses for the three months ended June 30 SG&A Expenses (3 Months) | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (YoY) | 2025 % of Net Sales | 2024 % of Net Sales | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :------------------ | :------------------ | | SG&A Expenses | $41,806 | $39,942 | 4.7% | 35.1% | 26.9% | - The increase in SG&A expenses was attributed to slightly higher selling expenses, salaries and benefits, and professional services[133](index=133&type=chunk) [Benefit From Income Taxes](index=27&type=section&id=Benefit%20From%20Income%20Taxes%20(3%20Months)) This section analyzes the income tax benefit or expense for the three months ended June 30 Income Tax Benefit (3 Months) | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | | Income tax benefit (expense) | $(606) | $2,281 | | Effective tax rate | 20.7% | 30.2% | - The decrease in tax expense was primarily due to a change in the forecasted annual effective tax rate, influenced by the jurisdictional mix of earnings[134](index=134&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=28&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's financial results for the six-month periods [Net Sales](index=28&type=section&id=Net%20Sales%20(6%20Months)) This section analyzes net sales performance for the six months ended June 30 Net Sales by Segment (6 Months) | Segment (in thousands) | 2025 Net Sales | 2024 Net Sales | Change (YoY) | | :--------------------- | :------------- | :------------- | :----------- | | Toys/Consumer Products | $187,817 | $187,480 | 0.2% | | Costumes | $44,530 | $51,215 | (13.1%) | | Total Net Sales | $232,347 | $238,695 | (2.7%) | - Toys/Consumer Products sales were positively impacted by higher sales related to the Sonic 3 Movie product[135](index=135&type=chunk) [Cost of Sales](index=28&type=section&id=Cost%20of%20Sales%20(6%20Months)) This section analyzes the cost of goods sold for the six months ended June 30 Cost of Sales by Segment (6 Months) | Segment (in thousands) | 2025 Cost of Sales | 2024 Cost of Sales | Change (YoY) | 2025 % of Net Sales | 2024 % of Net Sales | | :--------------------- | :----------------- | :----------------- | :----------- | :------------------ | :------------------ | | Toys/Consumer Products | $122,532 | $132,574 | (7.6%) | 65.2% | 70.7% | | Costumes | $31,779 | $37,484 | (15.2%) | 71.5% | 73.2% | | Total Cost of Sales | $154,311 | $170,058 | (9.3%) | 66.4% | 71.2% | - Gross profit margin significantly improved to **33.6%** in H1 2025 from **28.8%** in H1 2024, driven by a favorable product mix (movie-related) and lower inventory reserves in TCP, and improved factory costing in Costumes[127](index=127&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Selling, General and Administrative Expenses](index=28&type=section&id=Selling,%20General%20and%20Administrative%20Expenses%20(6%20Months)) This section analyzes SG&A expenses for the six months ended June 30 SG&A Expenses (6 Months) | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (YoY) | 2025 % of Net Sales | 2024 % of Net Sales | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :------------------ | :------------------ | | SG&A Expenses | $84,576 | $82,318 | 2.8% | 36.4% | 34.5% | - The increase in SG&A expenses was primarily due to slightly higher selling expenses and salaries and benefits[139](index=139&type=chunk) [Benefit From Income Taxes](index=28&type=section&id=Benefit%20From%20Income%20Taxes%20(6%20Months)) This section analyzes the income tax benefit or expense for the six months ended June 30 Income Tax Benefit (6 Months) | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | | Income tax benefit | $(1,769) | $(4,447) | | Effective tax rate | 27.3% | 33.2% | - The decrease in tax benefit for the six months was primarily due to a decrease in benefits from discrete items[140](index=140&type=chunk) [Seasonality and Backlog](index=29&type=section&id=Seasonality%20and%20Backlog) This section discusses the seasonal nature of the company's business and the limited utility of backlog as a sales indicator - The retail toy industry is seasonal, with highest sales in Q2 and Q3, and highest working capital needs in Q2 and Q3[141](index=141&type=chunk) - Orders are generally cancelable, making accurate sales forecasting difficult, and backlog is not an accurate indicator of future sales[142](index=142&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash flows, including working capital, operating activities, and financing arrangements Working Capital | Metric (in millions) | Jun 30, 2025 | Dec 31, 2024 | Change | | :------------------- | :----------- | :----------- | :----- | | Working Capital | $109.1 | $119.3 | (8.6%) | - Net cash used in operating activities decreased to **$15.9 million** for the six months ended June 30, 2025, from **$27.7 million** in the prior year, primarily due to lower net loss and less cash taxes paid[144](index=144&type=chunk) - The company has future aggregate minimum royalty guarantees of **$63.4 million**, with **$48.5 million** due over the next twelve months[144](index=144&type=chunk) - A new **$70.0 million** senior secured revolving credit facility with BMO Bank N.A. was entered into on June 24, 2025, replacing the prior facility and providing **$70.0 million** in available liquidity as of June 30, 2025[148](index=148&type=chunk)[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically interest rate risk related to its revolving credit facility and foreign currency risk from international operations [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) This section discusses the company's exposure to fluctuations in interest rates - The Revolving Facility's interest rates are variable, based on Adjusted Term SOFR or Base Rate plus a margin, exposing the company to interest rate risk[156](index=156&type=chunk) [Foreign Currency Risk](index=31&type=section&id=Foreign%20Currency%20Risk) This section discusses the company's exposure to fluctuations in foreign exchange rates - The company has foreign currency exposure due to operations in multiple countries where local expenses are in local currencies, while sales are primarily in USD[157](index=157&type=chunk) - The company does not currently engage in foreign currency hedging transactions, believing near-term changes will not materially affect financial results[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the period - The CEO and CFO certified the effectiveness of disclosure controls and procedures as of June 30, 2025[158](index=158&type=chunk) - No material changes in internal control over financial reporting occurred during the period[158](index=158&type=chunk) PART II – OTHER INFORMATION This section covers legal, risk, equity, and other miscellaneous disclosures [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines the company's involvement in routine legal proceedings and its policy for accruing losses, also addressing indemnification commitments to various parties - The company is a party to routine legal proceedings and accrues for probable and estimable losses[160](index=160&type=chunk) - Indemnifications are provided to various parties, including officers and directors, with no significant related costs in the last five years[161](index=161&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors, noting that no material changes have occurred since that filing - No material changes to the previously disclosed risk factors in the 2024 Annual Report on Form 10-K have occurred[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered equity sales and the application of their proceeds - No unregistered sales of equity securities or use of proceeds occurred[6](index=6&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports on any defaults related to the company's senior securities - No defaults upon senior securities occurred[6](index=6&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section addresses any required disclosures regarding mine safety - No mine safety disclosures are applicable[6](index=6&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) This section includes any other material information not covered elsewhere - No other information to report[6](index=6&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including credit agreements, security agreements, and various certifications from the company's executive officers - Key exhibits include the new Credit Agreement and Pledge and Security Agreement with BMO Bank N.A., dated June 24, 2025[163](index=163&type=chunk) - Certifications from the CEO and CFO (Rule 13a-14(a)/15d-14(a) and Section 1350) are included as exhibits[163](index=163&type=chunk) [Signatures](index=33&type=section&id=Signatures) This section contains the signature of the duly authorized officer, John Kimble, Executive Vice President and Chief Financial Officer, certifying the report on behalf of JAKKS Pacific, Inc - The report was signed by John Kimble, Executive Vice President and Chief Financial Officer, on August 1, 2025[166](index=166&type=chunk)