Mr. Max Rangel reports

SPIN MASTER REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

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

"We delivered a strong third quarter with increased revenue across all our three creative centres," said Max Rangel, Spin Master's Global President & CEO. "Digital Games and Entertainment revenue in particular grew double digits for the quarter, highlighting the strength of our diversified platform. Digital Games revenue has now returned to growth on year-to-date basis. At the box office, our second theatrical release of our preschool powerhouse, PAW Patrol, captured the #1 position globally. We secured a major new toy licence for Paramount's Dora the Explorer. In Digital Games, we launched PAW Patrol Academy to complement the movie launch, while Sago Mini introduced Piknik, our value-added subscription app bundle and we saw increased player engagement in Toca Life World . Just after the quarter, we were very pleased to announce the planned acquisition of Melissa & Doug, a trusted brand and our largest acquisition to date, which is highly strategic and will significantly expand our offering into early childhood play. Looking forward, pressure on the toy industry is expected in the fourth quarter as a result of economic headwinds, which has reduced consumer spend. As macroeconomic pressure continues, we have seen POS and orders for toys slow down, particularly from mid-October. We expect this trend to persist for the remainder of 2023. Our team remains focused on executing our long-term growth strategy and we continue to invest and make significant progress by leveraging our deep expertise in play, well-established global network, and innovation capability to inspire future generations and unlock growth."

"Our results in the third quarter reflect the diversified nature of our three creative centre revenue streams. We executed well across the business and are particularly pleased with our operating profitability in the quarter, delivering Adjusted EBITDA of just under $235 million at a 33% Adjusted EBITDA margin" said Mark Segal, Spin Master's CFO. "Regarding our planned acquisition of Melissa & Doug, by combining two profitable companies, we expect to unlock significant value for our shareholders. The acquisition represents a strategic deployment of our balance sheet while preserving financial flexibility for strategic initiatives and potential future acquisitions. As a result of the macroeconomic pressure we are seeing in Q4, we are lowering our top line outlook for 2023. However, we remain confident in our ability to execute with high levels of operational discipline and navigate retailer and consumer dynamics and we are pleased to raise our outlook for Adjusted EBITDA margin."

Consolidated Financial Highlights for Q3 2023 as compared to the same period in 2022

• Revenue was $710.2 million, an increase of 13.8% from $624.0 million. Constant Currency Revenue1 was $700.3 million, an increase of 12.2%, from $624.0 million.
• Revenue, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 of $15.6 million was $694.6 million, an increase of $70.6 million or 11.3% from $624.0 million.
• Revenue by operating segment reflected a 71.4% increase in Entertainment, a 30.9% increase in Digital Games and an 8.9% increase in Toys.
• Operating Income was $197.2 million compared to $187.4 million.
• Operating Margin was 27.8% compared to 30.0%.
• Adjusted Operating Income1 was $190.2 million compared to $151.8 million.
• Adjusted Operating Margin1 was 26.8% compared to 24.3%.
• Net Income was $155.4 million or $1.45 per share (diluted) compared to $141.4 million or $1.33 per share (diluted).
• Adjusted Net Income1 was $143.6 million or $1.34 per share (diluted) compared to $114.4 million or $1.08 per share (diluted).
• Adjusted EBITDA1 was $234.9 million compared to $167.6 million, an increase of $67.3 million or 40.2%. Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 was $219.3 million, an increase of $51.7 million or 30.8% from $167.6 million.
• Adjusted EBITDA Margin1 was 33.1% compared to 26.9%. Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 was 31.6%.
• Cash provided by operating activities was $144.3 million compared to $207.4 million.
• Free Cash Flow1 was $118.9 million compared to $175.3 million.
• Subsequent to September 30, 2023, the Company declared a quarterly dividend of CA$0.06 per outstanding subordinate voting share and multiple voting share, payable on January 12, 2024.
• On October 11, 2023, the Company announced it reached a definitive agreement to acquire U.S.-based Melissa & Doug for $950 million in cash. Additional contingent consideration of up to $150 million is subject to exceeding certain financial targets for 2024 and 2025. Spin Master plans to finance the $950 million purchase price with approximately $450 million cash and $500 million in debt financing. The acquisition is expected to close early in the first quarter of 2024 subject to customary regulatory approval and closing conditions.
• The Company updates full year 2023 Outlook.

Consolidated Financial Highlights for the nine months ended September 30, 2023 as compared to the same period in 2022

• Revenue was $1,402.3 million, down 9.8% from $1,554.5 million. Constant Currency Revenue1 decreased by 10.2% to $1,395.8 million from $1,554.5 million.
• Revenue, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 of $15.6 million was $1,386.7 million, a decrease of $167.8 million or 10.8% from $1,554.5 million.
• Revenue by operating segment reflected a decline of 15.4% in Toys, partially offset by increases of 54.0% in Entertainment and 5.8% in Digital Games.
• Operating Income was $225.5 million compared to $367.3 million. The decrease in Operating Income was primarily driven by the decrease in Toy revenue.
• Operating Margin was 16.1% compared to 23.6%.
• Adjusted Operating Income1 was $265.5 million compared to $326.7 million.
• Adjusted Operating Margin1 was 18.9% compared to 21.0%.
• Net Income was $181.5 million or $1.72 per share (diluted) compared to $275.1 million or $2.59 per share (diluted).
• Adjusted Net Income1 was $204.7 million or $1.94 per share (diluted) compared to $244.3 million or $2.30 per share (diluted).
• Adjusted EBITDA1 was $353.9 million compared to $377.0 million, a decrease of $23.1 million or 6.1%. Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 was $338.3 million, a decrease of $38.7 million or 10.3% from $377.0 million.
• Adjusted EBITDA Margin1 was 25.2% compared to 24.3%. Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 was 24.4%.
• Cash provided by operating activities was $159.1 million compared to $256.1 million.
• Free Cash Flow1 was $78.6 million compared to $180.0 million.
• During the second quarter of 2023, the Company acquired assets from a games and puzzles company for purchase consideration of $3.3 million. During the first quarter of 2023, the Company acquired certain assets from 4D Brands International Inc. for total purchase consideration of $18.9 million and acquired the HEXBUG brand of toys from Innovation First International, Inc., for total purchase consideration of $14.6 million.
• During the nine months ended September 30, 2023, the Company incurred restructuring expenses of $14.3 million ($0.14 per diluted share) related to a reduction in the Company's global workforce 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.

Liquidity and Capitalization

For the nine months ended September 30, 2023, cash flows provided by operating activities were $159.1 million, compared to $256.1 million in the prior year, the decrease was driven by lower Operating Income and the change in non-cash working capital (increase in trade receivables partially offset by a decrease in trade payables).

For the nine months ended September 30, 2023, Free Cash Flow1 was $78.6 million compared to $180.0 million, primarily due to lower Operating Income, the change in non-cash working capital (increase in trade receivables partially offset by a decrease in trade payables) and higher investment in intangible assets and property, plant, and equipment.

As at September 30, 2023, the Company had unutilized liquidity of $1,159.3 million, comprised of $650.7 million in Cash and cash equivalents and $508.6 million under the Company's credit facilities.

The weighted average basic and diluted shares outstanding as at September 30, 2023 were 103.4 million and 105.3 million, compared to 102.9 million and 106.3 million in the prior year, respectively.

The Company's Board of Directors declared a dividend of C$0.06 per outstanding subordinate voting share and multiple voting share, payable on January 12, 2024 to shareholders of record at the close of business on December 29, 2023. The dividend is designated to be an eligible dividend for purposes of section 89(1) of the Income Tax Act (Canada).

Outlook

The Company now expects 2023 Toy Gross Product Sales1 to be down high single digits compared to 2022, as compared to flat to slightly down announced on August 2, 2023.

The Company now expects 2023 Revenue, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 to be down mid-single digits compared to 2022, as compared to flat announced on August 2, 2023.

The Company now expects 2023 Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Distribution Revenue1 to be up compared to 2022, as compared to flat to slightly up announced on August 2, 2023.

1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios".

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, November 2, 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

Spin Master Corp. (TSX:TOY) 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 best known for award-winning brands PAW Patrol(TM), Bakugan(TM), Kinetic Sand(TM), Air Hogs(TM), Hatchimals(TM), Rubik's Cube(TM) and GUND(TM), 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(TM) and Sago Mini(TM) 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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