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]