Mr. Max Rangel reports

SPIN MASTER REPORTS PRELIMINARY 2022 AND Q4 2022 REVENUE

Spin Master Corp. has provided an update on its preliminary unaudited revenue and toy gross product sales for the three months and year ended Dec. 31, 2022. 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.

These preliminary unaudited revenue results for the fourth quarter and full-year 2022 are intended to provide context for Spin Master's performance in line with timing of financial results for the broader industry. Spin Master is scheduled to report its financial results for the three months and year ended Dec. 31, 2022, after the close of business on March 8, 2023.

"We are pleased that we grew both our constant-currency revenue and constant-currency toy gross product sales for 2022," said Max Rangel, Spin Master's global president and chief executive officer. He added: "From a creative centre perspective, in toys, we had an exceptionally strong first half of 2022, driven in part by retailers bringing in toys earlier in the year than normal to minimize anticipated supply chain disruptions going into the fall. As expected, toy revenue in the second half of 2022 was pressured by changes in the macroeconomic environment, particularly from higher inflation compounded by foreign exchange volatility and a carry-over of inventory at retail from the first half of 2022. In entertainment, we grew licensing and merchandising revenue and continued to build our content pipeline with new series introductions. Our digital games creative centre, lapping unprecedented growth during the pandemic, experienced a slight revenue decline in 2022. We continue to pursue our long-term strategy of leveraging our IP [intellectual property] across all three creative centres, making meaningful acquisitions, growing our global footprint, and delivering magical experiences for children and their families, in order to deliver long-term shareholder value."

Preliminary revenue highlights for year ended Dec. 31, 2022, as compared with the same period in 2021

Revenue was $2,020.3-million, a decrease of 1.1 per cent from $2,042.4-million, driven by decreases in entertainment revenue and digital games revenue, offset by a slight increase in toy revenue. Constant-currency revenue was $2,071.1-million, an increase of 1.4 per cent from $2,042.4-million. Constant-currency revenue increased by 2.7 per cent, excluding Paw Patrol: The Movie distribution revenue in 2021.

Toy revenue

An attached table provides a summary of Spin Master's preliminary toy revenue, including by product category, for the year ended Dec. 31, 2022, and 2021.

• Toy revenue increased by $5.8-million, or 0.3 per cent, to $1,737.6-million, driven by growth in preschool, dolls and interactive, and wheels and action, offset by decreases in activities, games and puzzles, plush, and outdoor and an increase in sales allowances as a percentage of toy gross product sales.
• Toy gross product sales increased by $16.4-million, or 0.8 per cent, to $1,978.8-million from $1,962.4-million. Constant-currency toy gross product sales increased by $68.2-million to $2,030.6-million from $1,962.4-million, an increase of 3.5 per cent. The increase was driven by growth in preschool, dolls and interactive, and wheels and action, offset by declines in activities, games and puzzles, plush, and outdoor.
• Toy gross product sales in preschool and dolls and interactive increased by $57.4-million, or 7.1 per cent, to $867-million from $809.6-million, from sales of Gabby's Dollhouse, Purse Pets and Wizarding World, offset in part by a decline in Paw Patrol and Present Pets.
• Toy gross product sales in wheels and action increased by $5.2-million, or 1.2 per cent, to $450.8-million from $445.6-million, led by increases in Tech Deck, DC licensed products and Monster Jam, offset in part by Air Hogs.
• Toy gross product sales in activities, games and puzzles and plush decreased by $26.1-million, or 4.4 per cent, to $561.7-million from $587.8-million, mainly due to lower sales of the games and puzzles portfolio, Kinetic Sand, and Cool Maker, offset in part by Rubik's and Pixobitz.
• Toy gross product sales in outdoor decreased by $20.1-million, or 16.8 per cent, to $99.3-million from $119.4-million primarily driven by SwimWays. Outdoor includes $1.1-million for 2022 and $20.8-million from 2021 related to certain brands associated with the divestiture of manufacturing assets in Q1 2022. Excluding the impact of the divestiture, outdoor decreased by $400,000, or 0.4 per cent, to $98.2-million.
• Sales allowances increased by $10.6-million to $241.2-million from $230.6-million. Sales allowances as a percentage of toy gross product sales were 12.2 per cent, compared with 11.8 per cent, primarily driven by higher markdowns.

Entertainment revenue:

• Entertainment revenue decreased by $17-million, or 12.5 per cent, to $118.8-million, due to lower distribution revenue related to Paw Patrol: The Movie released in 2021, partially offset by higher licensing and merchandising revenue.

Digital games revenue:

• Digital games revenue decreased by $10.9-million, or 6.2 per cent, to $163.9-million, due to lower in-game app revenue in Toca Life World. In constant currency, digital games revenue decreased by $2.9-million, or 1.7 per cent, to $171.9-million, down from $174.8-million.

Preliminary revenue highlights for Q4 2022 as compared with the same period in 2021

Revenue was $465.8-million, down 24.9 per cent from $620.5-million, primarily due to a decrease in toy revenue of 26.8 per cent and digital games revenue of 24.2 per cent, partially offset by an increase in entertainment revenue of 9.5 per cent. Constant-currency revenue was $484.2-million, a decrease of 22.0 per cent.

Toy revenue

An attached table provides a summary of Spin Master's preliminary toy revenue, by product category, for the three months ended Dec. 31, 2022, and 2021.

• Toy revenue decreased by $145.3-million, or 26.8 per cent, to $396.7-million driven by a decrease in toy gross product sales and an increase in sales allowances as a percentage of toy gross product sales.
• Toy gross product sales decreased by $148.3-million, or 23.6 per cent, to $479.2-million from $627.5-million. Constant-currency toy gross product sales decreased by $129.2-million, or 20.6 per cent, to $498.3-million from $627.5-million. The decrease was driven by wheels and action, preschool, dolls and interactive, activities, games and puzzles, and plush, offset by an increase in outdoor.
• The decline in toy revenue and toy gross product sales was driven by lower customer demand in the fourth quarter. In addition, toy gross product sales in the fourth quarter of 2021 included Paw Patrol: The Movie and DC licensed products in advance of The Batman movie.
• Toy gross product sales in wheels and action decreased by $56.1-million, or 38.4 per cent, to $90-million from $146.1-million, due to decreases in DC licensed products, Monster Jam and Bakugan.
• Toy gross product sales in preschool and dolls and interactive decreased by $50.1-million, or 19.9 per cent, to $201.7-million from $251.8-million, primarily from a decrease in sales of Paw Patrol, Hatchimals, Peek-A-Roo and Present Pets, offset by growth in Gabby's Dollhouse.
• Toy gross product sales in activities, games and puzzles and plush decreased by $45.9-million, or 22.2 per cent, to $160.6-million from $206.5-million, mainly due to a decrease in the games and puzzles portfolio and Kinetic Sand, offset by an increase in Rubik's.
• Toy gross product sales in outdoor increased by $3.8-million, or 16.5 per cent, to $26.9-million from $23.1-million.
• Sales allowances decreased by $3-million to $82.5-million from $85.5-million. Sales allowances as a percentage of toy gross product sales were 17.2 per cent, compared with 13.6 per cent, primarily driven by higher markdowns.

Entertainment revenue:

• Entertainment revenue was $31.2-million, an increase of $2.7-million, or 9.5 per cent, driven by higher distribution revenue and licensing and merchandising revenue.

Digital games revenue:

• Digital games revenue was $37.9-million, a decrease of $12.1-million, or 24.2 per cent, from $50-million, due to lower in-app revenue in Toca Life World. Constant-currency digital games revenue decreased by $9.9-million, or 19.8 per cent, to $40.1-million.

Results compared with outlook

Toy gross product sales, in constant currency, increased 3.5 per cent for the year ended Dec. 31, 2022, compared with 2021, consistent with the low-single-digit guidance provided on Nov. 2, 2022.

Revenue, in constant currency, increased 2.7 per cent for the year ended Dec. 31, 2022, compared with 2021 revenue, excluding Paw Patrol: The Movie distribution revenue of $26-million, consistent with the low-single-digit guidance on Nov. 2, 2022.

The company continues to expect 2022 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin to be slightly below 2021 adjusted EBITDA margin, excluding Paw Patrol: The Movie distribution revenue of $26-million, consistent with the guidance on Nov. 2, 2022.

The company continues to expect 2023 toy gross product sales seasonality to return to historical averages of 30 per cent to 35 per cent in the first half of the year, consistent with the guidance on Nov. 2, 2022.

This press release contains certain preliminary unaudited financial metrics for the three months and year ended Dec. 31, 2022. These financial metrics represent the most current information available to the company's management as financial closing procedures for the three months ended Dec. 31, 2022, and the year ended Dec. 31, 2022, are not yet complete. The company's actual consolidated financial statements for such periods may result in material changes to the financial metrics summarized in this press release (including by any one financial metric, or all of the financial metrics, being below or above the figures indicated) as a result of the completion of normal quarter and year-end accounting procedures. Although the company believes the expectations reflected in this press release are based upon reasonable assumptions, the company can give no assurance that actual results will not differ materially from these expectations.

Conference call

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

The call-in numbers for participants are 647-794-4605 or 877-502-9276. A live webcast of the call will be accessible through Spin Master's website. Following the call, both an audio recording and a 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 best known for award-winning brands Paw Patrol, Bakugan, Kinetic Sand, Air Hogs, Hatchimals, Rubik's Cube and Gund, and it 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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