Mr. Max Rangel reports

SPIN MASTER REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS AND MAINTAINS 2023 OUTLOOK

Spin Master Corp. has released its financial results for the three and six months ended June 30, 2023. The company's full management's discussion and analysis (MD&A) for the three and six months ended June 30, 2023, is available under the company's profile on SEDAR+ and posted on the company's website. All financial information is presented in United States dollars and has been rounded to the nearest hundred thousand, except per-share amounts and where otherwise indicated.

"We delivered a solid second quarter driven by our diverse portfolio of toys, entertainment content and digital games," said Max Rangel, Spin Master's global president and chief executive officer. "We are confident in our plans for the second half of the year including exciting toy innovation, new entertainment content and the continued development of our digital games ecosystem. Our toy portfolio features the breakthrough Bitzee, a digital pet you can actually touch, a toy line inspired by the highly anticipated second PAW Patrol feature film and many more new items that will inspire stimulating play experiences for kids and families worldwide. In entertainment we are launching two new animated TV series, Unicorn Academy and Vida the Vet, and the second feature film in our iconic franchise PAW Patrol: The Mighty Movie, in theaters end of September. In digital games we will deliver engaging new content for Toca Life World, a content bundle for Sago Mini and Paw Patrol Academy, an app launching with the movie. We remain committed to our framework for value creation, underpinned by our formula for innovation and integrated IP-driven growth across all our creative centres."

"Our results for the quarter and year to date, as expected, were challenged in comparison to 2022. However, we are encouraged by the strength and resilience of our global, diversified business platform and our ability to execute on our strategy to drive profitable growth, delivering adjusted EBITDA of over $88-million for the quarter," said Mark Segal, chief financial officer of Spin Master. "The inventory reduction activity at retail resulting from the carryover of inventory from 2022 is complete and we are pleased to maintain our 2023 outlook. Our very solid balance sheet and cash flow generation capabilities provide opportunities to leverage our global platform for both organic growth and acquisitions."

Consolidated financial highlights for Q2 2023 as compared with the same period in 2022

• Revenue was $420.7-million, a decrease of 16.9 per cent from $506.3-million. Constant currency revenue was $419.9-million, a decrease of 17.1 per cent, from $506.3-million.
• Revenue by operating segment reflected a decline of 20.9 per cent in toys, offset by a 19.4-per-cent increase in entertainment and a 0.5-per-cent increase in digital games.
• Operating income was $34.4-million compared with $118.2-million.
• Operating margin was 8.2 per cent compared with 23.3 per cent.
• Adjusted operating income was $62.6-million compared with $97.6-million.
• Adjusted operating margin was 14.9 per cent compared with 19.3 per cent.
• Net income was $28.0-million or 26 cents per share (diluted) compared with $88.1-million or 83 cents per share (diluted).
• Adjusted net income was $48.8-million or 45 cents per share (diluted) compared with $72.4-million or 68 cents per share (diluted).
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $88.4-million compared with $113.7-million.
• Adjusted EBITDA margin was 21.0 per cent compared with 22.5 per cent.
• Cash provided by operating activities was $19.1-million compared with $111.6-million.
• Free cash flow was $(5.9)-million compared with $84.1-million.
• The company acquired assets from a games and puzzles company for purchase considerations of $3.3-million and, through Spin Master Ventures, increased its minority interest in a privately held entity for $2.0-million.
• The company repurchased and cancelled 156,200 subordinate voting shares through the company's normal course issuer bid (NCIB) program for $4.2-million.
• The company incurred restructuring expenses of $9.7-million (seven cents per diluted share) primarily related to the closure of its manufacturing facility in Calais, France, as previously announced.
• Subsequent to June 30, 2023, the company declared a quarterly dividend of six cents per outstanding subordinate voting share and multiple voting share, payable Oct. 13, 2023.
• Subsequent to June 30, 2023, the company implemented a dividend reinvestment plan (the DRIP).
• The company reiterates 2023 outlook.

Consolidated financial highlights for the six months ended June 30, 2023, as compared with the same period in 2022

• Revenue was $692.1-million, down 25.6 per cent from $930.5-million. Constant currency revenue decreased by 25.3 per cent to $695.5-million from $930.5-million.
• Revenue by operating segment reflected declines of 32.5 per cent in toys and 3.7 per cent in digital games, partially offset by a 41.3-per-cent increase in entertainment.
• Operating income was $28.3-million compared with $179.9-million. The decrease in operating income was primarily driven by the decrease in toy revenue.
• Operating margin was 4.1 per cent compared with 19.3 per cent.
• Adjusted operating income was $75.3-million compared with $174.9-million.
• Adjusted operating margin was 10.9 per cent compared with 18.8 per cent.
• Net income was $26.1-million or 25 cents per share (diluted) compared with $133.7-million or $1.26 per share (diluted).
• Adjusted net income was $61.1-million or 58 cents per share (diluted) compared with $129.9-million or $1.22 per share (diluted).
• Adjusted EBITDA was $119.0-million compared with $209.4-million, a decrease of $90.4-million or 43.2 per cent.
• Adjusted EBITDA margin was 17.2 per cent compared with 22.5 per cent.
• Cash provided by operating activities was $14.8-million compared with $48.7-million.
• Free cash flow was $(40.3)-million compared with $4.7-million.
• During Q2 2023, the company acquired assets from a games and puzzles company for purchase considerations of $3.3-million. During Q1 2023, the company acquired certain assets of 4D Brands International Inc. for total purchase considerations of $18.9-million and acquired the HEXBUG brand of toys from Innovation First International Inc., for total purchase considerations of $14.6-million.
• During the six months ended June 30, 2023, the company incurred restructuring expenses of $13.5-million (10 cents per diluted share) related to a reduction in the company's global work force and the closure of its manufacturing facility in Calais, France.
• During the six months ended June 30, 2023, the company repurchased and cancelled 397,700 subordinate voting shares through the company's NCIB program for $10.5-million.

Outlook

The company continues to expect 2023 toy gross product sales to be flat to slightly down compared with 2022.

The company continues to expect 2023 revenue, excluding PAW Patrol: The Mighty Movie Distribution revenue to be in line with 2022.

The company continues to expect 2023 adjusted EBITDA margin, excluding PAW Patrol: The Mighty Movie distribution revenue to be flat to slightly up compared with 2022.

Conference call

Max Rangel, global president and chief executive officer, and Mark Segal, chief financial officer, will host a conference call to discuss the financial results on Thursday, Aug. 3, 2023, at 9:30 a.m. ET.

The call-in numbers for participants are 416-764-8650 or 888-664-6383. A live webcast of the call will be accessible via Spin Master's website.

Following the call, both an audio recording and transcript of the call will be archived on the same website page for 12 months.

About Spin Master Corp.

Spin Master is a leading global children's entertainment company, creating exceptional play experiences through its three creative centres: toys, entertainment and digital games. With distribution in over 100 countries, Spin Master is known for award-winning brands PAW Patrol, Bakugan, Kinetic Sand, Air Hogs, Hatchimals, Rubik's Cube and Gund, and is the global toy licensee for other popular properties. Spin Master Entertainment creates and produces compelling multiplatform content, through its in-house studio and partnerships with outside creators, including the preschool franchise PAW Patrol and numerous other original shows, short-form series and feature films. The company has an established presence in digital games, anchored by the Toca Boca and Sago Mini brands, offering open-ended and creative game and educational play in digital environments. Through Spin Master Ventures, the company makes minority investments globally in emerging companies and start-ups. With over 30 offices in close to 20 countries, Spin Master employs more than 2,000 team members globally.

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