JAKKS Pacific (NasdaqGS:JAKK) Q4 2025 Earnings call February 19, 2026 05:00 PM ET Company ParticipantsJohn Kimble - CFOStephen Berman - Chairman, CEO, and Co-FounderConference Call ParticipantsEric Beder - CEO and Senior Research AnalystGerrick Johnson - Managing Director and Senior Equity AnalystModeratorAfternoon, everyone. Welcome to the JAKKS Pacific fourth quarter and full year 2025 earnings conference call with management, who will review financial results for the quarter ended December 31st, 2025. JA ...

Financial Data and Key Metrics Changes - The company reported a total sales decline of 2.8% year-over-year to $127.1 million in Q4 2025, compared to $127.4 million in Q4 2024 [6][8] - Gross margin for the full year improved to 32.4%, up from 30.8% in the previous year, marking the highest level in over 15 years [11][13] - Adjusted EBITDA loss for Q4 was reduced to $3.8 million, compared to a loss of $10.2 million in the same quarter last year [11][12] - Full year adjusted EPS dropped to $1.62 from $3.79 in 2024, with a diluted share count of approximately 11.5 million shares [16] Business Line Data and Key Metrics Changes - The action play and collectibles business saw a 19% year-over-year increase in Q4, driven by the Super Mario Galaxy film [12] - The costume business declined by 10% for the full year, with international sales slightly offsetting U.S. results [8] - The toy and consumer product business experienced a 19% decline for the full year, with all divisions down between 9% and 23% [8] Market Data and Key Metrics Changes - U.S. sales in Q4 decreased by 7.8% to $86.2 million, attributed to higher tariffs and slower sell-throughs [7] - International sales increased by 9.9% to $41 million in Q4, with Europe remaining flat and Latin America showing significant growth [8] - The total rest of world business for the full year was $154.1 million, up 5.5% from the prior year, led by a 14% increase in Europe [8] Company Strategy and Development Direction - The company is focused on long-term value creation despite short-term financial pressures from tariffs, emphasizing margin integrity over top-line growth [4][5] - A significant new initiative is planned for 2027, with ongoing efforts to deepen relationships with factories, licensors, and retail partners [4] - The company aims to expand its market presence in high-growth regions, particularly Eastern Europe and the Middle East, through a unified go-to-market approach [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in 2025 but expressed confidence in the company's adaptability and resilience [10] - The company anticipates a low- to mid-single-digit top-line growth year in 2026, with a continued focus on margin expansion [29] - Management highlighted the importance of maintaining a strong balance sheet to leverage new licensing opportunities and partnerships [41] Other Important Information - The company paid $1 per share in dividends for the first full year as a cash dividend payer, while maintaining a debt-free balance sheet [5] - The company generated over $8 million in cash flow from operations while funding $11.2 million in common dividend payments [18] Q&A Session Summary Question: Discussion on the FOB model and its adjustments - Management confirmed a continued focus on an FOB-first business model, adapting to tariff impacts while maintaining close relationships with retailers [34][35] Question: International opportunities with FOB - The company is expanding distribution centers in strategic areas to support growth in smaller markets, balancing FOB and domestic inventory [37][38] Question: Financial leverage and new licenses - A strong balance sheet has allowed the company to build relationships with licensors, focusing on margin enhancement rather than top-line revenue [40][41] Question: Q1 performance expectations - Management noted that Q1 is typically the smallest quarter, with expectations of momentum from new product launches but not overly fixating on Q1 results [42][43] Question: Retail inventory and promotional activity - Retail inventory levels are tight, with the company avoiding excessive promotional activity to maintain profitability [54][56]

Financial Data and Key Metrics Changes - For Q4 2025, total company sales decreased by 2.8% year-over-year to $127.1 million, roughly flat compared to Q4 2023 sales of $127.4 million [6] - U.S. business sales in Q4 were down 7.8% to $86.2 million, attributed to higher tariff burdens and slower sell-throughs [6] - Gross margin for the full fiscal year was 32.4%, the highest level in over 15 years, up from 30.8% in the previous year [11][13] - Adjusted EBITDA loss for Q4 was reduced to $3.8 million, compared to a loss of $10.2 million in the same quarter last year [11] Business Line Data and Key Metrics Changes - Toy and consumer product net sales were approximately flat in Q4 at $118 million, down 0.2% from the prior year [5] - The costume business was down 10% for the full year, with a slight increase in international sales offsetting U.S. results [8] - Action play and collectibles business saw a 19% year-over-year increase in Q4, driven by the Super Mario Galaxy film [12] Market Data and Key Metrics Changes - Fourth quarter sales in the rest of the world increased by 9.9% to $41 million, with Europe showing a 14% increase to $81.4 million for the full year [7][8] - Retail inventory levels were down 21% year-over-year at one major retailer and down about 4% at another, indicating tight inventory management [52] Company Strategy and Development Direction - The company is focused on long-term value creation despite short-term financial pressures from tariffs, maintaining a disciplined approach to margin integrity [4] - Plans for significant new initiatives launching in 2027 are underway, with a focus on expanding strategic relationships and product offerings [4][10] - The company aims to leverage its strong balance sheet to enhance relationships with licensors and expand its product portfolio [39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2025 as a disappointing year but expressed confidence in the company's adaptability and future growth opportunities [10] - The company anticipates a low- to mid-single-digit top-line growth year in 2026, with a continued focus on margin expansion [28] - Management highlighted the importance of maintaining a cash dividend policy while navigating a challenging operating environment [18] Other Important Information - The company returned $1 per share to shareholders as a cash dividend while preserving a debt-free balance sheet [5] - The first quarter dividend payment of $0.25 per common share has been approved, payable at the end of Q1 [18] Q&A Session Summary Question: Discussion on the FOB model and its adjustments - Management confirmed a continued focus on an FOB-first business model, adapting to tariff impacts while working closely with retailers to mitigate costs [32][34] Question: International opportunities with FOB - The company is expanding distribution centers in strategic areas to support growth in smaller markets, balancing FOB with domestic inventory [35][36] Question: Leveraging a strong balance sheet for new licenses - A strong balance sheet has allowed the company to build relationships with licensors, focusing on margin enhancement without sacrificing top-line revenue [38][39] Question: Conceptual flow of Q1 given last year's strong performance - Management noted that Q1 is typically the smallest quarter, but there is momentum from new product launches, and they are not overly fixated on Q1 results [40][41] Question: POS trends and retail inventory - Management indicated that POS was not as strong as desired, but inventory levels at retail are tight, reflecting a cautious approach to sales and profitability [52][54]