Build-A-Bear Workshop (NYSE:BBW) Q3 2026 Earnings Call December 04, 2025 09:00 AM ET Speaker6Greetings. Welcome to Build-A-Bear Workshop third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Gary ...

Core Insights - Live Nation Entertainment, Inc. (LYV) experienced a 5.6% decline in stock price following a year-over-year decrease in third-quarter 2025 earnings, which also missed the Zacks Consensus Estimate [1][4] - Despite a slight miss in revenue expectations, revenues grew year over year, driven by strong fan spending trends for live events and amphitheaters [2][4] Financial Performance - Adjusted earnings per share (EPS) for Q3 2025 were reported at 73 cents, falling short of the Zacks Consensus Estimate of $1.21 by 39.7%, compared to an adjusted EPS of $1.66 in the same quarter last year [4][9] - Total revenues reached $8.5 billion, slightly below the consensus estimate of $8.55 billion by 0.6%, but reflecting an 11% increase year over year [4][9] Segment Analysis - Concerts segment revenues amounted to $7.28 billion, up 11% year over year, with adjusted operating income increasing to $514.2 million from $474.1 million in the prior year [5] - Ticketing segment revenues were $797.6 million, a 15% increase from the previous year, with adjusted operating income rising to $285.9 million from $235.7 million [6] - Sponsorship & Advertising segment revenues totaled $442.7 million, up 13% year over year, with adjusted operating income increasing to $313.1 million [6] Cash Flow and Financial Position - As of September 30, 2025, Live Nation's cash and cash equivalents totaled $6.75 billion, an increase from $6.1 billion at the end of 2024 [7] - Net long-term debt was reported at $6.11 billion, slightly down from $6.18 billion at the end of 2024 [7] - For the first nine months of 2025, net cash provided by operating activities was $1.45 billion, up from $680.1 million in the same period last year [8] Future Outlook - For 2026, ticket sales for concerts are projected to reach 26 million, indicating double-digit growth from 2025 [3] - The company faces challenges with elevated direct operating expenses due to increased support for stadium shows and higher selling, general, and administrative expenses [3]

Group 1 - Chipotle's CEO attributes weak sales in the fourth quarter to financial struggles among young consumers, particularly those aged 25 to 35, who are facing challenges such as college debt and a competitive job market influenced by AI [2][3] - Approximately 40% of Chipotle's total sales come from households earning below $100,000, which have reduced dining frequency due to economic and inflation concerns [3] - Despite a general perception of consumer stability, Chipotle's sales trends indicate a decline, contrasting with other companies like American Express, which reported strong performance driven by millennial spending [4] Group 2 - American Express reported a strong third quarter, with significant growth attributed to millennial spending and an increase in the annual fee for the Platinum Card, which did not deter sign-ups [4] - Hasbro's CEO noted a 42% increase in revenue from digital games, driven by younger consumers, particularly highlighting the success of "Magic: The Gathering" and licensed digital gaming [4]

Core Insights - Stride, Inc. reported strong first-quarter fiscal 2026 results, with earnings and revenues exceeding the Zacks Consensus Estimate, and both metrics showing year-over-year growth [1][4][8] Financial Performance - Adjusted earnings per share (EPS) reached $1.52, surpassing the Zacks Consensus Estimate of $1.23 by 23.6%, compared to $1.09 in the same quarter last year [4][8] - Revenues totaled $620.9 million, beating the consensus estimate of $615 million by 1% and increasing by 12.7% year over year [5][8] - Total enrollment rose 11.3% year over year, reaching a record 247,700 students, indicating growing demand for alternative education options [5][8] - Average revenue per student increased by 3.7% from the previous year to $2,388 [5] Segment Performance - General Education segment revenues were $363.1 million, up 10.2% from the prior year, with enrollments growing 5.2% to 137,700 students [6] - Career Learning segment revenues for Middle-High School reached $241.5 million, up over 21% year over year, while Adult School revenues were $16.3 million, down from $22.8 million in the prior year [6] Operational Metrics - Stride's gross margin for the fiscal first quarter was 39%, a decrease of 20 basis points from the previous year [9] - Selling, general and administrative (SG&A) expenses totaled $173.1 million, reflecting a 3% year-over-year increase [9] - Adjusted EBITDA was $108.4 million, compared to $83.9 million in the prior-year quarter [10] Balance Sheet - As of September 30, 2025, Stride's cash and cash equivalents and marketable securities amounted to $749.6 million, down from $1,011.4 million reported on June 30, 2025 [11] - Capital expenditures were $21.7 million as of September 30, 2025, an increase from $14.8 million a year earlier [12] Future Guidance - For the second quarter of fiscal 2026, Stride expects revenues between $620 million and $640 million, with capital expenditures projected at $15 million to $18 million [13][14] - For the full fiscal year 2026, the company anticipates revenues in the range of $2.48 billion to $2.555 billion, with capital expenditures expected to be between $70 million and $80 million [15][16]

Core Insights - Build-A-Bear Workshop, Inc. (BBW) is leveraging an asset-light strategy that is driving its growth momentum through a partner-operated retail model, facilitating rapid international expansion without significant capital investment [1][2] Group 1: Growth Strategy - The partner-operated model allows Build-A-Bear to scale efficiently by utilizing local partners' knowledge and operational capabilities, leading to expansion into 32 countries [2] - In Q2 of fiscal 2025, Build-A-Bear added 14 net new global experience locations, with nine being partner-operated, now constituting approximately 25% of total locations [1][8] Group 2: Financial Performance - For the first half of fiscal 2025, Build-A-Bear's EBITDA margin reached nearly 17%, more than tripling from the same period in fiscal 2019 [3] - Pre-tax income increased by 32.7% in Q2 to a record $15.3 million, while gross margin expanded by 340 basis points to 57.6% [3] Group 3: Market Position and Valuation - Build-A-Bear's stock has surged 43.2% over the past year, outperforming the industry growth of 10%, while competitors Walmart and Target have seen different performance trends [5] - The forward 12-month price-to-earnings ratio for Build-A-Bear is 12.81, lower than the industry average of 17.97, indicating a favorable valuation compared to Walmart and Target [6] Group 4: Sales and Earnings Estimates - The Zacks Consensus Estimate indicates year-over-year growth of 7.4% in sales and 6.9% in earnings per share for the current financial year [9] - Current sales estimates for the fiscal year 2026 are projected at $533.26 million, with a year-over-year growth estimate of 7.42% [10]

Core Viewpoint - Hasbro has raised its full-year outlook due to strong sales growth, particularly in its Wizards of the Coast division, which positively impacted third-quarter profit and revenue [1] Group 1 - Hasbro's full-year outlook has been increased, indicating confidence in future performance [1] - Sales are ramping up ahead of the holiday season, suggesting a positive trend in consumer demand [1] - The Wizards of the Coast business continues to show strength, contributing significantly to the company's financial results [1]

Core Insights - Hasbro, Inc. is set to release its third-quarter earnings results on October 23, with expected earnings of $1.63 per share, a decrease from $1.73 per share in the same period last year [1] - The consensus estimate for Hasbro's quarterly revenue is $1.35 billion, an increase from $1.28 billion a year earlier [1] Collaboration and Market Reaction - On September 8, Hasbro announced an expanded collaboration with Disney Consumer Products to integrate Disney characters into Hasbro's PLAY-DOH brand [2] - Following the announcement, Hasbro's shares rose by 0.4%, closing at $75.16 [2] Analyst Ratings and Price Targets - Citigroup analyst James Hardiman maintained a Buy rating and increased the price target from $79 to $91 [5] - JP Morgan analyst Christopher Horvers maintained an Overweight rating and raised the price target from $75 to $94 [5] - Roth Capital analyst Eric Handler maintained a Buy rating and increased the price target from $86 to $92 [5] - Morgan Stanley analyst Megan Alexander maintained an Overweight rating and raised the price target from $83 to $85 [5] - Citigroup analyst James Hardiman also raised the price target from $72 to $79 on June 16, 2025 [5]

Core Insights - The article emphasizes the importance of efficiency levels in assessing a company's potential for profit generation, with a high efficiency level correlating positively with price performance [1] Efficiency Ratios - The article discusses several key efficiency ratios that are useful for stock selection, including Receivables Turnover, Asset Utilization, Inventory Turnover, and Operating Margin [2][3][4][5] - Receivables Turnover measures a company's ability to collect debts, with a higher ratio indicating better credit extension and debt collection capabilities [2] - Asset Utilization assesses how effectively a company converts its assets into sales, with higher values suggesting greater efficiency [3] - Inventory Turnover indicates a company's ability to manage inventory relative to its cost of goods sold, with higher values reflecting better inventory management [4] - Operating Margin evaluates a company's control over operating expenses, with higher ratios indicating more efficient expense management compared to peers [5] Screening Criteria - The screening process incorporates a favorable Zacks Rank (Zacks Rank 1) to enhance profitability, narrowing down the stock universe from over 7,906 to 19 based on efficiency ratios exceeding industry averages [6][7] Top Stocks Identified - The top four stocks identified through the screening process are Wolverine World Wide, Interface, BuildABear Workshop, and Analog Devices, each showing significant earnings surprises over the past four quarters [8] - Wolverine World Wide has an average earnings surprise of 39.1% and is involved in casual and active apparel and footwear [9] - Interface, the largest modular carpet manufacturer, has an average earnings surprise of 33.5% [10] - BuildABear Workshop, known for its interactive stuffed animal retail experience, has an average earnings surprise of 21.3% [11] - Analog Devices, a semiconductor manufacturer, has an average earnings surprise of 5.8% [12]

Core Insights - Investors are focusing on cash-rich stocks with strong returns as attractive opportunities amid economic uncertainties, rather than solely on Federal Reserve policy shifts [1][9] Group 1: Importance of Cash Flow - Cash is essential for business vitality, providing the flexibility to make investment decisions and shielding companies from market turmoil [2] - Positive cash flow indicates an increase in liquid assets, enabling companies to meet obligations, reinvest, and return wealth to shareholders, while negative cash flow suggests declining liquidity [5] - Companies must not only have positive cash flow but also increasing cash flow to ensure future growth and reduce dependency on external financing [6] Group 2: Screening for Investment Opportunities - A screening process was established to identify stocks with increasing cash flow, focusing on those whose latest cash flow is at least equal to the 5-year average [7] - Stocks with a Zacks Rank of 1 (Strong Buy) have a history of outperformance, and brokers' positive ratings further support investment decisions [8] Group 3: Qualified Stocks - Materion Corporation (MTRN) specializes in high-performance engineered materials, with a Zacks Consensus Estimate for current-year earnings improving by 8.2% [10][11] - Willdan Group, Inc. (WLDN) provides consulting services to enhance cost and energy efficiencies, with a current-year earnings estimate up by 27.7% [11][12] - Build-A-Bear Workshop, Inc. (BBW) is a leading retailer of stuffed animals, with a fiscal 2026 earnings estimate revised upward by 3.9% [12][13] - NCS Multistage Holdings, Inc. (NCSM) focuses on engineered products for oil and gas operators, with a current-year earnings estimate improving by 62% [14]

Financial Data and Key Metrics Changes - In Q2 2025, revenues increased by 11% to over $124 million, pretax income rose by 33% to over $15 million, and EPS grew by 47% to $0.94 [5][16][20] - For the first half of 2025, revenues grew more than 11% to over $252 million, pretax income increased over 31% to almost $35 million, and EPS rose approximately 45% to $2.11 [5][16][20] - The first half EBITDA margin rate was nearly 17%, more than tripled compared to 2019 [6] Business Line Data and Key Metrics Changes - Retail segment net sales were $114.6 million, an increase of 10.8%, with strong performance driven by positive traffic trends [17] - Commercial revenue, primarily wholesale sales, grew by 18.3% in the quarter [18] - E-commerce demand increased by 15.1%, benefiting from favorable product launch timing [17] Market Data and Key Metrics Changes - Domestic store traffic rose by 3%, significantly outperforming the national benchmark, which saw a 3% decline [17] - The company ended the quarter with 157 partner-operated units, accounting for 25% of total locations [10] Company Strategy and Development Direction - The company focuses on three strategic pillars: expanding experiential retail footprint, advancing digital transformation, and leveraging brand equity for growth [4][11] - The retail expansion includes opening 14 new experience locations, with 86% being international [8][9] - The digital transformation strategy emphasizes social media initiatives and user-generated content to engage a broader consumer base [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future despite potential economic uncertainties, citing a solid balance sheet and strong cash flow [7] - The company increased its 2025 guidance for revenue and pretax income based on current tariff rates and expectations for new unit growth [7][22] - Management acknowledged challenges from tariffs and inflation but remains focused on controlling internal factors [63][64] Other Important Information - The company returned over $13 million in capital to shareholders during the first half of the fiscal year [5][16] - The balance sheet showed cash and cash equivalents of $39.1 million, a 55.4% increase year-over-year [21] Q&A Session Summary Question: Can you talk about the response from consumers when prices are raised? - Management indicated that price increases are selective and strategic, aimed at maintaining value for consumers, with a focus on entry-level price points [31][32] Question: How should we think about the maturity of partner-operated stores? - Management noted that partner-operated stores are expanding successfully, with significant opportunities in international markets [40][41] Question: Can you provide an update on Mini Beans sales and wholesale distribution? - The Mini Beans collection saw an 80% year-on-year revenue increase, with ongoing discussions for broader wholesale distribution [47][49] Question: What is the outlook for the second half of the year? - Management indicated that while there are tougher comparisons from last year, they remain optimistic about revenue growth despite potential margin pressures from tariffs [61][62] Question: How does the balance sheet impact decisions on expanding company-operated stores? - Management stated that while they are open to considering operating stores, they prefer to leverage partnerships for market entry due to local expertise [74][78]