Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sales increased by 26% in the quarter, driven by successful toy lines from popular films and evergreen product lines.
• The dolls role play dress-up business saw a 37% increase in shipments, and action plan collectibles increased by 30%.
• Gross margin improved to 34.4%, a strong result for the first quarter.
• Adjusted EBITDA showed a notable improvement, reaching $354,000 compared to a loss of $17.2 million in the previous year.
• The company is debt-free, with an unrestricted cash balance of $59.2 million, providing financial stability and flexibility.

Negative Points

• Tariff issues remain unresolved, posing a risk to cost structures and pricing strategies.
• Adjusted EPS was a loss of $0.03 per share, although improved from the previous year's loss.
• The company faces challenges in maintaining product innovation due to potential long-term tariffs.
• Higher retail prices due to tariffs could impact consumer demand, particularly for higher-priced items.
• The company is cautious about the US market and is focusing on international growth to offset domestic risks.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with JAKK.

Q: What impact would the current tariff levels have on the holiday season product offerings? A: Steven Berman, CEO, explained that if the China tariff of approximately 144% remains, consumers will see higher prices and more lower-priced products. The tariffs will primarily affect consumers, as prices will increase across retail chains. Jakks Pacific has a strong value line, with over 50% of products retailing under $29.99, which will help mitigate some impacts. The company is also holding inventory and exploring manufacturing in Vietnam, Cambodia, and Indonesia to manage costs.

Q: How is Jakks Pacific planning to offset risks from tariffs in the US market? A: Steven Berman, CEO, stated that the company is focusing on expanding its international markets, particularly in Latin America and EMEA, to offset US risks. They are leveraging domestic inventory and aggressively pursuing international opportunities to enhance market presence and profitability.

Q: What is Jakks Pacific's strategy regarding manufacturing outside of China? A: Steven Berman, CEO, mentioned that while the majority of manufacturing will remain in Asia, particularly China, the company is also working with partners in Vietnam, Cambodia, Indonesia, and Mexico. The focus is on maintaining safety standards and leveraging the expertise of Chinese manufacturers who have expanded to these regions.

Q: How are tariffs affecting Jakks Pacific's licensing and film IP opportunities? A: Steven Berman, CEO, noted that while tariffs pose challenges, they also create opportunities. Jakks Pacific is actively pursuing licensing partnerships and is in a strong financial position to capitalize on opportunities arising from competitors facing difficulties due to tariffs.

Q: Are there new strategic M&A opportunities due to the current market conditions? A: Steven Berman, CEO, confirmed that the current environment is creating M&A opportunities. The company is receiving interest from banks and individuals, and the prolonged tariff situation may lead to more opportunities as companies face challenges.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.